EFB210 Lecture Notes - Lecture 9: City Of Sydney, Collateral Contract, Parol Evidence Rule
Lecture 9: Contract Law – Consent, Terms & Remedies
Enforceability – Lack of consent
- A contract will only be enforceable if both parties have entered into the contract willingly. If
one of the parties have been bullied, pressured, manipulated into entering into the contract,
the contract will be unenforceable because of lack of consent.
- Circumstances where consent can be lacking:
o Mistake
▪ As a general rule, if a party has made a mistake, it does not entitle them to
terminate the contract or argue that the contract is unenforceable: caveat
emptor (buyer beware).
▪ Exceptions to general rule:
▪ Each of these exceptions may make a contract void (ineffective and
unenforceable), provided the mistake relates to a fundamental aspect of the
contract.
▪ The court prefers to protect, where possible, the reliability and
enforceability of contracts.
• Unilateral mistakes
o Unilateral mistake: Only one party is mistaken.
o General rule: a unilateral mistake will not make a contract
void.
o But the courts will refuse to enforce a contract where:
▪ one party makes a serious mistake
▪ about a fundamental aspect of the contract, and
▪ the other party seeks to take advantage of that
mistake.
▪ A contract could be declared void due to unilateral
mistake if this involves the identity of one of the
parties, and the parties are doing business at a
distance. (If business is concluded face-to-face, then
this will not apply).
▪ A written contract could be declared void and
unenforceable if:
1. the party who made the mistake had a good
reason for not reading the contract (e.g.
blindness, illiteracy), and
2. the mistake is about the fundamental
nature of the document they were signing.
▪ This is known as non est factum (not my document).
▪
• Common mistakes
o This occur where both parties make the same mistake.
o A contract will be void for common mistake if:
▪ the agreement between the parties was conditional
upon the truth of a belief held by both parties and
▪ at the time the agreement was formed the belief
was incorrect.
• Mutual mistakes
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o Mutual mistake occurs when the parties to the contract
believe they have reached an agreement but in fact there
has been no meeting of minds because they were both
thinking of different things at the time they made the
agreement.
o Duress
▪ If one party compels the other party to enter into the contract by expressly
or impliedly threatening harm, then there is a lack of consent.
▪ They are said to have engaged in duress and the contract is voidable.
▪ The threat may be:
• to the personal safety of the other party or to that of their loved
ones (Barton v Armstrong)
• to the safety of the other partys goods or property, or
• to the other partys eooi or fiaial elleig, ko as
economic duress
o Undue influence
▪ The parties to the contract may have a pre-existing relationship where one
party has a degree of influence or dominance over the other.
▪ If the stronger party uses this influence such that the weaker party is not
really exercising their independent judgement, the contract will be declared
void on the grounds of undue influence.
▪ Undue influence will be presumed in certain relationships:
• doctor and patient,
• lawyer and client,
• trustee and beneficiary,
• parent/guardian and child, or
• religious leader and follower.
▪ In these relationships, the onus is on the stronger party to show that,
despite the relationship, they did not exert their influence over the weaker
party in making the contract.
▪ If the stronger party cannot do this, the contract will be declared void.
▪ When the relationship between the parties is not one of these recognised
relationships, influence will not be assumed. However, one party may still be
able to show that the other party had a controlling influence over their
decision making.
▪ If the weaker party can show that the stronger party did have a controlling
influence, the onus is then on the stronger party to show that they did not
use that influence.
o Unconscionability
▪ A contract can be set aside on the grounds of unconscionable conduct when
(Commercial Bank of Australia Ltd v Amadio):
▪ one of the parties to the contract has a special weakness or disadvantage
(which could include sickness, illiteracy, lack of education, or even being in
love), and
▪ the other party knows about or should know about the special weakness or
disadvantage and
find more resources at oneclass.com
find more resources at oneclass.com
Document Summary
Lecture 9: contract law consent, terms & remedies. A contract will only be enforceable if both parties have entered into the contract willingly. If one of the parties have been bullied, pressured, manipulated into entering into the contract, the contract will be unenforceable because of lack of consent. In these relationships, the onus is on the stronger party to show that, despite the relationship, they did not exert their influence over the weaker party in making the contract. If the stronger party cannot do this, the contract will be declared void: when the relationship between the parties is not one of these recognised relationships, influence will not be assumed. However, one party may still be able to show that the other party had a controlling influence over their decision making. The ter(cid:373)s of a (cid:272)o(cid:374)tra(cid:272)t are the spe(cid:272)ifi(cid:272) details of the agree(cid:373)e(cid:374)t, that des(cid:272)ri(cid:271)e ea(cid:272)h party(cid:859)s rights and obligations.
