Topic 3: Contract Law *What is a contract? a legally enforceable agreement; that is, an agreement enforceable in a court *Types of contracts Number of parties: * Unilateral – one party (eg reward case) * Bilateral – two parties, both with mutual obligations * Multilateral – more than two parties, all with obligat0ions Form: Simple Contracts: written; oral; part-written & part-oral * Need all elements of a contract , including consideration * If all elements present, enforceable unless written contract required and not present * Formal Contracts (normally ‘Deeds’): satisfy formality requirements (eg written, signed, sealed & delivered) * No need for ‘consideration’ (that is, mutual promises) Deeds required for: unilateral contracts & where statute requires *When is written contract required? General rule: not normally, simple contract will be sufficient. Exceptions:
LEGISLATIVE EXCEPTIONS: You CANNOT enforce (unless evidenced in writing & signed by the person you are enforcing against): * Contracts for ‘disposition’ (= sale / transfer) of land (Instruments Act (Vic) s 126) * Assignment of copyright (s 196(3) Copyright Act (Cth)) * Transfer of Co securities (eg shares) (Corporations Act (Cth), s 1071B(2)) * Credit contracts regulated by the Consumer Credit Code (Uniform Consumer Credit Code, s 12(1)) * Cheques, bills of exchange, marine & life insurance policies (& mortgages & assignments of them) COMMON LAW ASPECTS: Gifts & trusts (because they are unilateral contracts) Topic 3b: Elements of a simple contract 1. intention to create legal relationship – presumed in commercial but not family/social relationships; rebuttable by evidence 2. Mutual agreement – often proven by identifying separate offer & acceptance; can also be proven by circumstances / conduct 3. Consideration – promises need to be mutual, from each party to the other. Not required for formal contracts such as deeds 4. legal capacity of all parties’ capacity (eg mental state, minors, not-yet-registered Cos) & objects (ie purpose) 5. eal & genuine consent – no mistakes, misrepresentation, duress, non est factum, unconscionable conduct, illegal contracts 3b(1) Intention to create legal relations *presumed to exist in commercial relationships *presumed NOT to exist in family & social relationships *can be ‘rebutted’ (= disproved) by evidence to contrary Case: P13 Rose & Frank Company v Crompton & Bros Ltd: (doc stated no intention to create legally enforceable contract) Carlill v Carbolic Smoke Ball Co – detailed & specific language indicated intention to be legally bound (‘offer to the world’) *Domestic arrangements: Balfour v Balfour Social agreements: presumption: no intention to be legally binding Ermogenous v Greek Orthodox Community of SA; Simpkins v Pays *Commercial agreements: presumption: intended to be binding Nyulasy v Rowan *rebutting presumption(???? ) -International move in reliance on offer of house: binding in Riches v Hughes -Express exclusion of intent in a specific clause: Jones v Vernon’s Pools -Honour clauses (‘binding in honor only’) will rebut the presumption: Rose & Frank Co v JR Crompton & Bros (not binding) *Letter of comfort:
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Kleinwort Benson v Malaysia Mining Corporation: not a binding offer; instead merely confirming a policy. Banque Brussels Lambert SA v Australian National Industries Ltd: Court: sufficient to rebut presumption; letter was binding. Applies equally to ‘heads of agreement’, ‘memo of understanding’ etc Ambiguous language: courts will disregard language & look at circumstances. Eg Edwards v Skyway 3b(2) Agreement: (a) Offers *Offer (made by ‘offeror’ to ‘offeree’): = clear & unequivocal promise to be bound, if accepted Not offers: * an “invitation to treat”: Partridge v Crittendon, newspaper classified ad = invitation to treat, not offer Pharmaceutical Society of Great Britain v Boots Cash Chemists (Southern)Ltd display of items on shelves = invitation to treat, because cashier always there & could stop sale Fisher v Bell: window display = invitation to treat BUT sometimes ads can be offers: Carlill v Carbolic Smoke Ball Co * a supply of information: Harvey v Facey Mere puffery *Other circumstances -Vending machine = offer, accepted by insertion of payment -TENDERS: call for tenders = usually invitation to treat; Tender bid = usually an offer -AUCTIONS: Auctioneer’s call for bids = invitation to treat; Bid at auction = offer *Offer to the world at large: Any statement intended to be an offer to anyone reading it, can be an offer to ‘to the world at large’ Carlill v Carbolic Smoke Ball Co *Other matters regarding offers Offer is only effective once communicated(until it was received) -Language need not be important, eg the word ‘offers’ will not necessarily be offers -If advertisement limits possible number of persons able to accept ‘offer’ then can be an offer -If rain checks are offered if supply runs out, can demonstrate intention to make binding offer to world at large, not merely invitation to treat *Possible responses to an offer: -Reject it terminates it (ends offer permanently) Make counter-offer terminates original offer (Hyde v Wrench) -Ask for more information or clarification before making a final decision whether to accept (Stevenson, Jaques & Co v McLean) =>no effect on offer but offer will lapse within a reasonable time, if not accepted before lapse -Do nothing offer lapses after reasonable time Accept the offer in its full terms creates a valid (simple) contract *Offer cannot be accepted… 1. An offer cannot be accepted after it has lapsed -at a specific time specified in the offer; or If it does not specify a time period, within a reasonable time: (5 months was unreasonable time) Ramsgate Hotel Co Ltd v Montefiore -if a condition in the offer is not satisfied -the death of offeree or offeror causes the offer to lapse: Fong v Cili and Bradbury v Morgan 2. An offer cannot be accepted if withdrawn or revoked prior to acceptance: – & this is communicated to offeree (Byrne & Co v Van Tienhoven) or reliable 3rd source (Dickinson v Dodds) before acceptance An offer ‘to the world at large’ can be revoked by the same means that the offer was made.
Shuey, Executor v United States – if revoking by post, ineffective until received – if offeror & offeree entered into separate contract (option contract) as to how long offer open, offer cannot be revoked in breach of that option contract (Watson v Phipps, Routledge v Grant) Offers can be withdrawn any time until acceptance: Routledge v Grant option contract & binding on A, because of the consideration paid for the promise; There was valid acceptance of the offer: Goldsbrough Mort & Co v Quinn * When will an offer lapse? Offer lapses after any agreed time (eg Dickenson v Dodds) * Time limits can be implied from the circumstances; usually can only be accepted within ‘reasonable time’: Ramsgate Victoria Hotels Co v Montefiore; Ballas v Theophilos (No 2) 3b(2) Agreement: (b) Acceptance Acceptance = unconditional positive response to the offer, by offeree * Must rely on offer: R v Clarke * Must be unconditional, unequivocal, unambiguous & clear: *Masters v Cameron no enforceable contract, Reason: agreement not in final form, needed to be acceptable to C’s lawyers, & they had power to alter terms of eventual contract quite considerably. subject to contract’ could mean: where the parties: (1) have reached final agreement on terms, intend to be immediately bound, but want the terms set out in a more precise but not materially different form; (2) have reached finality & do not intend to alter their agreement, but want to defer performance until all/part is set down in a formal document; (3) do not intend to make a concluded bargain unless and until they sign a formal contract (the situation in Masters v Cameron) Court: (1) & (2) are binding contracts; (3) is not. In (2), each can require the other to execute written doc. Does not need to use the word ‘accept’ (or any words at all) * can be express (by words/ document) or implied (eg by conduct) words ‘in principle’ meant no intention to enter binding agreement: First Church of Christ v Ormlie Trading * must be communicated to the offeror. Exceptions: * If performance = acceptance & offer made it clear communication unnecessary: Carlill v Carbolic Smoke Ball Co * If past dealings / industry custom indicate communication unnecessary * If Offeree’s conduct indicates acceptance: Brogden v Metro Ry * unilateral contracts silence cannot be acceptance: Felthouse v Bindley * rumours cannot communicate acceptance: Powell v Lee * Offeror’s requirements must be met –Method of Acceptance: If offer specifies a communication method: * as the only communication method, acceptance can only occur in accordance with this method * without stating it is the only communication method, acceptance can only occur in accordance with this method or by any means no less advantageous to offeror If offer doesn’t specify communication method, acceptance should normally occur in method similar to offer (or by means no less advantageous to offeror) Cases:
Eliason v Henshaw: wagonmail not valid acceptance thus no contract. Reply was not by stipulated means, & not equally advantageous to offeror. George Hudson Holdings Ltd v French: posthand deliver: ok acceptance as the offeror was more concerned with delivery & receipt than postal method itself –Time of acceptancep17 If parties use instantaneous forms of communication, acceptance must be received / heard by the offeror to be effective (Entores Ltd v Miles Far East Corp) FAXED & EMAIL ACCEPTANCE WILL NOT BE EFFECTIVE UNTIL RECEIVED BY THE OFFEROR * Postal acceptance rule: If parties know post will be used, acceptance occurs when letter is posted, not on delivery: Adams v Lindsell ;Household Fire & Carriage Accident Insurance Co (Ltd) v Grant BUT APPLIES ONLY TO: * ACCEPTANCES, NOT OFFERS WHERE POST IS THE AGREED ACCEPTANCE METHOD (so can avoid rule by an offer requiring acceptance to be received) –Acceptance must rely on offer: R v Clark–claim reward after learning of it, not acceptance –Acceptance must be communicated: Felthouse v Bindley: silence cannot be acceptance –Counter offer destroys original offer and is instead a new offer: Hyde v Wrench –Request for information is not a counter offer: Stevenson v McLean: Revocation of Acceptance –Acceptance can be revoked only if the offeror receives the revocaction before receiving the acceptance –(impossible if postal acceptance rule applies, as contract formed on posting but: If offeror receives revocation before posted acceptance & believing there is no contract, acts inconsistent with that contract, offeree cannot later demand performance because offeree induced that belief) Topic 3b(3): Consideration value one gives in return for the promise/offer from the other party = ‘something for something’ converts an agreement into a contract (Without consideration, a simple contract is unenforceable (but deeds are enforceable because of their form) = “some right, interest, profit or benefit accruing to one party, or some forbearance, detriment, loss or responsibility given, suffered or undertaken by the other”: Currie v Misa = An act or promise in exchange for another act/promise * Requirements for Consideration * Needs to be real, identifiable
Consideration must be tangible, ie definite & specific, and not vague or illusory or nebulous: White v Bluett: promise to stop harassment was too nebulous to constitute consideration * Can be money, or promise to do (or not do) something * Can benefit other party, or a third party specified by other party (Dunlop Pneumatic Tyre v Selfridge & Co Ltd, Coulls v Bagot’s Executor & Trustee Co Ltd) * Need not be adequate (that is, of similar value): Chappell & Co Ltd v Nestle Co Ltd competition where customer could buy 1 record for 3 wrappers & 1 pound.
Thomas v Thomas: rent for 1 pound, enforceable * Must be ‘sufficient’ (at law) (that is, capable of being consideration) * can be ‘executed’ or ‘executory’, but cannot be not ‘past consideration’ or existing duty/obligation –Pass consideration: Eastwood v Kenyon Court: past consideration, no contract Roscorla v Thomas: Promises made after purchase of horse, not binding Anderson v Glass: future wage for past work, unenforceable Re Casey’s Patents: work was done with implicit promise of payment, 1/3 promise quantified it. promise binding because contract existed before promise. -Existing duty under law Collins v Godfrey: testifying in court is an existing duty under subpoena, not sufficient consideration Glasbrook Bros v Glamorgan County Council: police offered more protection than was ordinarily required under their general duty to the public, sufficient consideration — Existing duty under contract Stilk v Myrick: not deserting the ship was part of original contract, not good consideration Cf Williams v Roffey: good consideration, as completion on time meant R avoided penalties & need to hire others
Sufficient Consideration:Consideration needs to come from party promising it * Privity of contract(??????? ) –Consideration must come from promisee(??? ) but need not move to the promisor(??? ) third parties can receive benefits from contract but cannot sue or be sued on it (‘privity of contract’): Beswick v Beswick –joint promisees: consideration only needs to be given by one Coulls v Bagots: A& wife received royalties for use of property in A’s sole name. A’s wife can enforce this after A died –common law & statute exceptions : Existing legal duty / existing duty under contract
Trident General Insurance Co Ltd v McNiece & contracts for the benefit of third parties *Consideration & discharge of obligation part-payment of existing debt cannot be consideration for a contract to vary debt amount: Pinnel’s case, Foakes v Beer Exceptions: –if debtor pays a smaller amount plus something extra of value (another item, or paying debt earlier than due date), new consideration exists and the contract to vary the debt is valid –If a third party (not original debtor) agrees to pay debtor’s debt, courts may accept this as sufficient consideration: Hirachand Punamchand v Temple –promissory estoppel
To avoid unfairness, promissory estoppel doctrine prevents a person going back on their promise, after a third party relied on it: Waltons Stores v Maher ; Commonwealth of Australia v Verwayen , need to prove: –Pre-existing legal relationship (or anticipated) –Representation made by one party (promisor) to another = any conduct (express or implied promise or omission to act) that induces the other to believe something to be true (representation must be clear & unambiguous) –reliance on the representation by the other party -To that person’s detriment –& unconscionable for promisor to depart from the representation, especially where promisor knows promisee relies on it Cases p23 Central London Property Trust v High Trees House Ltd: Although there was a promise to half the rent, but Trust was entitled to raise rent prospectively Combe v Combe: Mr. C promised to pay maintenance to Mrs C, but later reneged. Unwilling to apply promissory estoppel where no contract existed.
No consideration for promise here Je Maintiendrai Pty Ltd v Quaglia: Q would suffer detriment as a result of having relied on promise; JM could not renege on promise after Q had relied on it Legione v Hateley: Purchaser of land asked for extension of settlement date due to finance difficulties; Vendor refused extension & terminated contract Court: Vendor entitled to terminate contract Promissory estoppel applies in Australia, where (1) The promise / representation is clear & unequivocal, and (2) The promisee places themselves in position of material disadvantage if promisor changes their position Walton Stores v Maher: p23
Austotel Pty Ltd v Franklins Self-Serve Pty Ltd: Court refused to apply promissory estoppel because no unconscionable conduct & parties were of equal bargaining power & had advice & expertise Cth v Verwayen: Topic 3(b)(4)Capacity *Persons who lack capacity: –Mentally ill, or persons under the influence of drugs / alcohol, if: They were incapable of understanding the nature of what they were agreeing to. & the other party must / should have been aware of the condition & incapacity.
York Glass Co Ltd v Jubb – other party not aware of mental illness, contract valid Blomley v Ryan: other party aware of intoxication, contract was unenforceable –Minors (Under 18 years of age = a minor) – see following slides –company before it has been registered (& therefore not yet created) –Bankrupts – other party can escape contract with bankrupt if bankrupt breaches legislative requirements to disclose bankruptcy & to use own name in all transactions. –Very few restrictions on foreigners (eg FIRB) *Contracts with minors (ie under age 18) -Contracts for necessary items (eg food, clothing, shelter, taking into account personal needs & standard of living): enforceable-Only reasonable price is enforceable — Contracts for beneficial employment, education, instruction / training are enforceable: McLaughlin v Darcy –Contracts that result in eg a minor having an interest in property or impose an ongoing obligation such as leases are voidable -Before age 18, voidable at the minor’s option (not of the other party) -If minor ratifies contract after becoming 18, contract then binding –Contracts requiring minor to repay money are void & cannot be ratified in Victoria: ss 49-51 Supreme Court Act 1986 (Vic). –Goods transferred under a void contract cannot be repossessed, but the other party may have an action against the minor in tort (conversion, detinue, deceit) and/or restitution. * Co lacking Capacity Co has no capacity until it is registered
Special Rules relating to pre-registration contracts, eg: s131 Corporations Act 3b(5) Real & Genuine consent Contract can be declared VOID(??? ) or VOIDABLE(???? ) if one party lacked true consent due to existence of: a. mistake – 3 types: common, mutual, unilateral mistake (Doctrine applies to mistakes of fact not law, regarding contract operation, not motives) *Common mistake: both make the same, fundamental mistake: –Mistake about existence of subject matter: contract invalid eg Scott v Coulson (Will not apply if one party warrants existence of subject matter: McRae) –Mistake about value of subject matter: contract not invalid Eg Leaf v International Galleries Mutual mistake: parties contracted at cross-purposes about fundamental part of contract –If one party’s interpretation is reasonable & other’s interpretation isn’t, the reasonable interpretation prevails; –If both interpretations are reasonable but difference, contract is void: Raffles v Wichelhaus (two different ships of same name) *Unilateral mistake: one party makes fundamental mistake, other doesn’t: –Mistaken party can avoid contract if other party knows & tries to take advantage of the mistake, eg: -Mistake on a term of contract: Taylor v Johnson (price/acre vs total price) -Mistake as to identity: if X has contracted with Y thinking that Y is another person Z & identity of importance & Y knows of X’s mistake, X can avoid contract. b. misrepresentation (????? ) Misrepresentation = common law right. Person alleging misrepresentation must prove: * False statement was made * It was a statement of fact (not of opinion / intention / law) * addressed to party misled before / at time of contract * It was intended to induce, and induced, the contract * Will not apply if other knew it was false / didn’t rely on it. *Types of misrepresentation –Fraudulent misrepresentation -Involves deliberate untruth, speaker knows it is false or is recklessly careless as to truth: Derry v Peek Innocent party can ‘rescind’ contract & claim damages for any loss under the tort of ‘deceit’ –Negligent misrepresentation: If: 1) speaker holds self out to be competent to give information/advice, (2) realises (or ought to) that they are being trusted to give correct info/advice, & (3) it’s reasonable for another to rely on that info/advice, & (4) due to negligence, advice or info is incorrect, causing loss, Recipient of the info/advice can rescind contract & sue for damages for negligence (Hedley Byrne v Heller) –Innocent misrepresentation = no fraud or negligence. No remedy! –Silence can be misrepresentation if * Distortion of positive representation (eg half-truth) * Failure to correct a past statement if: Statement was thought to be true at time, but was later discovered to be false True statement becomes untrue due to a change in circumstances * Failure to disclose all material facts, if parties are in a ‘fiduciary relationship’ (eg accountant or lawyer – client) *Cases Esso Petroleum v Mardon: sales estimate given that no reasonable expert in the industry could have reached = negligent misrepresentation * L Shaddock & Associates v Parramatta City Council: PCC stated (to future purchaser of land) that it had no intention of compulsorily acquiring the land (later discovered to be false). Court: negligent misstatement * Hedley Byrne v Heller: economic loss resulted from a careless (& false) reference from a banker. No contract or fiduciary relationship existed, but did not prevent recovery for economic loss from negligent misstatement * Note: recovery only if duty of care owed. No duty owed by auditors in Esanda Finance Corporation v Peat Markwick Hungerfords *Remedies for misrepresentation –Contract is voidable at the option of the party suffering from misrepresentation: they can rescind(?? the contract = restores parties to pre-contractual positions -Right to rescind lost if restoration no longer possible, contract was affirmed, excessive delay, or would injure innocent third party –Damages in tort available for fraudulent or negligent misrepresentation, but not for innocent misrepresentation –For innocent misrepresentation, can attempt to claim: * Representation formed part of contract, or collateral contract * Statutory misrepresentation, eg s 52 TPA *Misrepresentation under statute –S 18 ACL(Australian Consumer Law): ‘A person must not, in trade or commerce, engage in conduct that is misleading or deceptive or is likely to mislead or deceive’. -S29(1) ACL: ‘A person must not, in trade or commerce, in connection with the supply or possible supply of goods or services or in connection with the promotion by any means of the supply or use of goods or services make a false or misleading representation: p 27 –false or misleading representations regarding land (s 30 ACL) –misleading conduct relating to employment (s 31 ACL) –S 32 offering of rebates, gifts, prizes –misleading conduct as to the nature of goods (s 33 ACL) or services (s 34 ACL) –Bait advertising (s 35 ACL) *Statutory remedies 1. undertakings given to regulator 2. Public warnings 3. Pecuniary penalties & criminal offences 4. Injunctions 5. Damages 6. Compensation orders c. undue influence (????? ;????? ) Where free will of one person is affected by influence of another person, such that the first person’s consent was not free & voluntary -If special relationship exists, undue influence presumed unless proven otherwise -If no special relationship exists, undue influence not presumed & needs to be proven d. duress (?? ) duress occurs where “one party to a contract is under such pressure as would cause a reasonable person, exercising the ordinary degree of firmness that the law demands of us all, to do something he or she would not otherwise do” Only illegitimate(??? ) pressure = duress. Legitimate commercial pressure (eg refusing to deal) is insufficient. Economic duress is possible but limited to situations of illegitimate / unconscionable pressure. To constitute duress, a threat must (a) be calculated to cause fear & (b) actually cause that fear. *The following are not duress: pressure that is reasonably able to be resisted * A threat that is not capable of being carried out * A threat that would only cause minor inconvenience *The following could be duress: * Actual / threatened violence to a person or their associate * Actual / threatened imprisonment of a person or their associate * Highly unconscionable use of bargaining position where the other party has no reasonable alternative but to submit *Consequences of duress: * If it comes from the other contracting party (or their agent), the contract is VOIDABLE at the option of the party under duress * Damages and/or restitution(???????? ) may also be available. *Cases
Barton v Armstrong: Alleged sale of company due to coercion (murder threats) * Duress existed because coercion was one of the factors leading to sale e. unconscionable conduct (????? ) * At common law a person cannot avoid a harsh clause of a contract merely because it is harsh or unfair * Equity developed principles of ‘unconscionable conduct’: * Difference in respective bargaining positions of the parties * Weaker party was under a ‘special disability’ (eg old age + lack of english + no business background + total reliance on son to explain details of their guarantee & mortgage of their house to support son’s loan from the bank: Commercial Bank of Australia v Amadio) mere commercial disadvantage is insufficient ACCC v CG Berbatis Holdings) * Stronger party knew of this ‘special disability’ * It was unfair or unconscientious for the stronger party to procure this agreement in these circumstances * An unconscionable contract is voidable at the option of the weaker party (subject to limits of equity) * Unconscionability in legislation –S20 ACL “A person must not, in trade or commerce, engage in conduct that is unconscionable within the meaning of the unwritten law from time to time” –S21(1) ACL: “A person must not in trade or commerce, in connection with the supply / possible supply of goods or services to a person, engage in conduct that is, in all the circumstances, unconscionable. ” –S 21(2) ACL: The court may have regard to: a) the relative strengths of the bargaining positions of the supplier & consumer; (b) whether the consumer was required to comply with conditions that were not reasonably necessary for the protection of the legitimate interests of the supplier; (c) whether the consumer was able to understand any relevant documents; (d) whether any undue influence or pressure was exerted on, or any unfair tactics were used against, the consumer; (e) amount for which, & the circumstances under which, the consumer could have acquired identical or equivalent goods or services elsewhere. f. Unfair contracts S23(1) ACL: ‘A term of a consumer contract is void if (a) the term is unfair and (b) the contract is a standard form contract’. S23(2): ‘The contract continues to bind the parties if it is capable of operating without the unfair term. ’ S23(3): ‘A consumer contract is a contract for (a) a supply of goods or services, or (b) a sale or grant of an interest in land, to an in g. non est factum
Signing a document, believing it is entirely different to what was actually signed (proven by evidence to the court’s satisfaction) -Must be mistake as to the class of document & radical difference -Insufficient if mistake is merely as to the details of the document -Will not protect a person capable of reading the document who signs it without reading it -But if signatory was under some disability that prevented them from reading or understanding the document, court will invalidate document Petelin v Cullen h. Illegality *Courts will not enforce illegal contracts – ie contracts which: * Involve illegal acts to perform them * Have an illegal purpose * Are prohibited by legislation * Are contrary to public policy (eg to commit tort / avoid tax) * Courts will not enforce ‘void’ or ‘unenforceable’ contracts: * Contracts which a statute makes void (cf illegal) Eg exclusive dealing by Co * Eg Co contract which substantially lessens competition * Contracts which are void for public policy reasons: * Contract to commit a tort, crime, fraud on third party, corruption * Contracts which are sexually immoral / prejudicial to public safety * Contracts which oust(?? ) the jurisdiction of the courts * Contracts prejudicial to the status of marriage (eg not to marry) * Contracts in restraint of trade Topic 3c: Contents of a contract –Terms & conditions expressly agreed by the parties -If a written doc, presumption it is whole agreement (parole evidence rule) -Exceptions to parole evidence rule Oral contracts are generally enforceable unless formal contract required –Terms & conditions implied by law -Depends on the nature of the contract & contracting parties * Steps to analyse content * What are the facts? What did the parties say? When was contract formed? (background evidence as to how terms are determined) * Was anything signed? What does it say? Is it a term? * Is there any unsigned writing which is incorporated into the contract? (Reasonable notice test: Parker v Sth Eastern Railway) * Any oral representations which parties intended to be terms? * What do the terms mean? Interpret using reasonable person test & parole evidence rule. * Are there any terms implied by statute or the courts? Are there any exemption clauses in the contract? How do they affect the contract? * If there has been a breach of contract, what remedies are available? * Terms & Representations Term(?? ) = part of the contract, the matters that are legally binding. This is the agreement between the parties. Can be ‘implied’ or ‘express’ Representations(?? ) = statements made by the contracting parties (before or at the time of making the contract) about the subject matter of the contract, not terms of the contract & not enforceable Puff (?? )= statements that everyone understood were not to be taken seriously or relied upon Collateral contract(???? = (a) promise made by promisor in consideration for (b) promisee agreeing to enter into main contract, if * All other elements of a binding contract are present * Promisee’s entry into main contract was relying on promisor’s promise * Promise is not inconsistent with main contract *Parole Evidence Rule(???? ) “where a contract is reduced into writing, & appears to be entire, it is presumed that the writing contains all the terms, & evidence will not be admitted of any previous or contemporaneous oral agreement which would have the effect of adding to or varying it in any way” Exceptions: * Partly written/oral contracts * Contracts necessarily subject to some trade custom * Invalid contracts Where a mistake has occurred in reducing the contract to writing * Where parole evidence is required to resolve ambiguity/uncertainty *Conditions & Warranties=‘terms’ * Condition = a more important term of the contract * Warranty = a less important term of the contract Court uses test: does it go to the root of the contract? Would the party have entered contract without promise of performance of this term? CONSEQUENCES OF BREACH: Breach of condition > other party can (1) terminate contract & sue for damages for loss, or (2) continue contract & sue for damages for loss Breach of warranty > other party cannot terminate contract but can sue for damages for any loss suffered as a result *Terms can be implied by: Court, to give the contract ‘business efficacy’, to make sense of it * Or to give effect to parties’ intent: The Moorcock -custom or business usage, to reflect the practice in that industry, trade or business: Hutton v Warren -or from previous course of dealing between those parties: Hillas & Co Ltd v Arcos Ltd -Legislation * Exclusion clauses(???? ) p31 = attempt to limit/negate the liability of one party if they breach contract If in a signed document, other is bound by the clause (L’Estrange v Graucob) unless able to prove that: (1) document contents were misrepresented (Curtis v Chemical Cleaning & Dyeing Co Ltd) (2) the document appeared to be non-contractual; or 3) Non est factum (Gallie v Lee: no non est factum because G was aware of nature of the document; Petelin v Cullen: non est factum as doc different to what P thought) If in an unsigned document (eg receipts & tickets), courts are likely to decide it is not a contractual document and therefore the clause has no contractual effect: Causer v Browne BUT If the court considers it contractual, then it must be proven that the customer was (or ought to have been) aware of the clause. Notice of the clause after the contract is made will mean it is not part of the contract & therefore has no contractual effect. *Are Exclusion clauses part of the contract?
Consider these: –Would a reasonable person think it was contractual? Causer v Browne: dry cleaning docket was a mere receipt for clothing, not part of contract. Thompson v London, Midland & Scottish Railway Co Cheap ticket said ‘for conditions see back’= part of contract. –Or did this person know about the term or condition? Balmain New Ferry Co v Robertson: he had travelled before, was aware of… It was part of the contract. Thornton v Shoe Lane Parking: Not part of contract because no evidence T had been aware that ticket was subject to conditions. Sugar v London, Midland & Scottish Railway: words on ticket ‘for conditions see back’ were not visible due to date stamp.
Not part of the contract –When did the person learn about the clause/condition? Olley v Marlborough Court Ltd: hotel liable for loss because contract made at reception before O saw the notice, thus it did not form part of the contract. * If it’s part of the contract, does it exclude liability for this breach? –Depends on precise limits of words used – according to ‘natural & ordinary meaning’: Darlington Futures Ltd v Delco Australia Pty Ltd –Clause construed strictly: Wallis Son & Wells v Pratt & Haynes –Contra proferentem rule (???????? ) = if more than one meaning, the meaning least favourable to the person relying on the clause, is used * Contents of the contract includes: * Express terms Implied terms * Understood by the parties without formal discussion * eg from past dealings, industry practice, business efficacy * Implied into the contract by statute, eg ACL * Guarantee as to title (s51) & undisturbed possession (s 52) * ‘acceptable quality’ (s 54) * Manufacturer liability Topic 3d: Discharge of contract (???? ) = end of a contract, no more obligations, as a result of: * Performance/Agreement/Breach/lapse of time/Law/the doctrine of frustration * Discharge by performance = where both parties precisely fulfill their contractual obligations: Re Moore & Co and Landaur, Sumpter v Hedges Or where: 1) clear evidence from the agreement that the contract is divisible (2) where partial performance is accepted by the other party (person performing has ‘quantum meruit’ rights (reasonable payment)) (3) if a party willing to perform their contractual obligations, is prevented from doing so by the other party to the contract. (4) a party has substantially, but not completely performed their obligations, court may allow partial/total recovery under the contract * Discharge by agreement = termination by another agreement between original contracting parties(purpose of 2nd agreement is to release each party from 1st agreement) –If one party has already completed their contractual obligations, other can require ‘accord and satisfaction’(????? before agreeing to the release ‘accord & satisfaction’ = agreement that party who has not performed their contractual obligations will provide consideration in return for the release from the other party (who has performed their obligations) –Contract may contain a term allowing 1 or both parties to terminate it. -Abandonment = where both parties abandon the contract (= implied agreement to cancel it). -Waiver(??? ) = where 1 party waives some/all of contractual rights If other party relies on waiver, then person waiving rights may be estopped (?? )from enforcing original rights * Discharge by breach If one party commits an actual breach of a contract condition, other party has the choice to terminate the contract & claim damages for losses incurred as a result of the breach. –anticipatory breach = where one party expressly/impliedly indicates an intention not to complete the contract. Other party can treat this like an actual breach: Foran v Wight) Breach can include: * Failure to perform * refusal to perform (including statement of no intention to perform) * Doing something to make performance impossible * Discharge by lapse of time Limitation of Actions Act 1958 (Vic):Cannot sue for breach of contract more than 6 years after breach(exceptions: minors, non-discovery of breach) * Discharge by law (1) If one party materially alters a contractual document without other’s consent & for purpose of obtaining a benefit, other party can discharge the contract for fraud (2) Bankruptcy – after a period of time, debtor is released & no longer liable for any outstanding debts. 3) If parties later enter into a deed or formal contract dealing with the same matter, deemed to be merger of the docs and first agreement is extinguished & replaced by the second document. * Discharge by frustration = where event after entry into contract, makes completion impossible –Contract cannot be discharged by frustration unless the event: (1) radically(??? )alters contractual position of at least one party; & (2) was not within the parties’ contemplation(?? ) at the time of contract; & (3) was not caused by either party to the contract; & (4) It would be unjust to hold at least one party to the original contract: National Carriers v Panalpina — A contract may become impossible to perform because: 1) the law changes, making performance illegal: Esposito v Bowden (2) the subject matter of the contract is destroyed: Taylor v Caldwell (contract for hire of hall. Hall burnt down before hire date) (3) circumstances on which contract is based, cease: Horlock v Beal (assignment of seaman wages, affected by internship in war) (4) Non-occurrence of event which is the basis of contract: Krell v Henry (5) Contracts for personal service – when ill health/ death/ other makes performance of the contract impossible (6) Government intervention (eg a ban) may prevent performance –Effect of discharge by frustration If money has been paid under the contract but there is no performance by the other party > money is to be reimbursed(?? ). 2) If money is outstanding & there is no performance by other party > outstanding money cannot be claimed (3) contract is valid until the moment of frustration, so rights & obligations accrue until the time of frustration. (4) no right (at common law) to reimbursement of money paid under a frustrated contract unless there is total failure of consideration BUT this has been reformed by statute: Frustrated Contracts Act 1959 (Vic) & Fair Trading Act 1999 (Vic): ss 32ZG Topic 3e: Remedies for breach *Common law—damages= $$ to compensate plaintiff for losses flowing from breach (Only for reasonably foreseeable losses that are not too remote) TEST: ‘the rule in Hadley v Baxendale”: losses must flow ‘in the normal course of things’ from the breach, ie a natural consequence of the breach of contract; if exceptional circumstances exist, defendant is only liable for the damages that flow from circumstances known to the defendant, that is the damages must be in the contemplation of both parties: Victoria Laundry (Windsor) Ltd v Newman industries Ltd General damages compensate the plaintiff for the actual financial losses arising from the breach of contract. Nominal damages may be awarded for the breach but in circumstances where there is no actual loss arising from the breach. –Party is entitled to claim sufficient damages to put them back in the place they would have been, if there had been no breach of contract * Includes expectation damages (= loss of commercial opportunity, loss of profit) * Or alternatively compensation for expense incurred relying on promises –Proportionate liability if loss caused by more than one party –Duty to mitigate liability *Equity Rescission (?? – special kind of termination (‘ab initio’ = from beginning) Specific performance = court order to perform contractual obligations * ordered where property is unique & damages not adequate remedy (eg real estate / unique personal property) * not ordered where damages are an appropriate remedy, or contract for personal services, or if order would cause injustice Injunction (?? )= court order restraining party from doing/continuing to do an act or course of action (eg breach a contract): Lumley v Wagner (restraint of trade clause was enforced by injunction) Mareva order =court order preventing assets from leaving jurisdiction * Only if real risk assets may be moved/sold before judgment * Need substantive claim with likelihood of successful damages claim Good reasons for believing defendant has assets in the jurisdiction