CLAW1001 Chapter Notes - Chapter 7: Geostationary Operational Environmental Satellite, Goodman Fielder, Lawas
CHAPTER 7: CONTRACTS IN BUSINESS
PART 1: ISSUES IN BUSINESS CONTRACTING
A CONCLUDED AGREEMENT?:
• Standard form contracts in business may have opportunity to negotiate terms à battle of the forms
o Reality = business frequently contracts on standard terms = problem when terms aren’t compatible
• Mushroom Composters Pty Ltd v IS & DE Robertson Pty Ltd [2015]
1. Objective test: what each party would have led a reasonable person in position of the other to believe
2. Don’t need to identify precise point of agreement
3. Incomplete agreement can’t be contract if there is not objective consensus on essential terms
4. If price to be agreed on, there can be no contract if it is a supply of goods à independent mechanism ok
• Uncertainty, incompleteness and lack of contractual intent = unenforceable contract
o Uncertainty à courts aim to give contract a meaning based on objective assessment + any written text
§ The Upper Hunter County District Council v Australian Chilling & Freezing Co Ltd [1968]
• Objective test: a “meeting of the minds”
• Contract with 1+ possible meaning is not void for uncertainty à if capable of meaning,
courts decide proper construction
• Pay attention to intention of parties
o Incompleteness à essential term absent from perspective of a reasonable observer = no contract
§ Thorby v Goldberg [1964] à all essential terms must be agreed upon
o Lack of contractual intent à unenforceable if no intention to create legal relations
• Conditional/subject to contracts à requiring something to occur or not occur before contracting
o Masters v Cameron [1954]
1. Parties have reached final agreement on terms, intend to be immediately bound, but want terms
set out in a more precise but not materially different form = enforceable
2. Parties have reached finality, but want to defer performance of part or all of it until it has been
incorporated into a formal document = enforceable
3. Parties do not intend to make a concluded bargain unless and until they sign a formal contract
4. Helmos Enterprises Pty Ltd v Jaylor Pty Ltd [2005] à parties intend to be bound immediately but
also expect to make a further contract in substitution of the current one = enforceable
a. Memorandum of understanding: demonstrate intent in exploring potential relationship
b. Heads of agreement: summarises matters on which parties have agreed, intended to
form basis of later formal contract
i. Lifestyle Appliances Ltd v Autel TV Services Ltd [2005]
1. Agreement to purchase business à HOA for price, renegotiate + sign
based on present financial position
2. 1 supplier wouldn’t continue = reduced value = withdrew
3. HOA binding b/c taken over running of business + binding agreement
• Letters of Comfort: used in lieu of formal guarantee as it may have financial implications
o Banque Brussels Lambert SA v Australian National Industries Limited [1989]
§ “It is our practice to ensure that our affiliate will at all times be in a position to meet its financial
obligations as they fall due” à enforced
§ Held to show intention to enter legal relations unless clearly indicated not to
NEGOTIATING THE AGREEMENT:
• Promissory estoppel: ^^^
o Workplace Safety Australia v Simple OHS Solutions Pty Ltd [2015]
§ Contract contained clause permitting termination if S didn’t meet sales targets
§ W said before + after signed that didn’t expect S to meet targets early on à didn’t = termination
§ Held: W estopped from terminating b/c clear statement + reliance
o Austotel Pty Ltd v Franklins Selfserve Pty Ltd [1989] à hard bargaining
§ Long and hard bargaining à no contract entered into
§ Prospective tenant had expended money on store refit
§ Held: unconscionability not present à parties on equal footing = estoppel not applied
• Without prejudice negotiations:
o “Without prejudice” correspondence = capable of being an offer
o Tallerman & Co Pty Ltd v Nathan’s Merchandise (Vic) Pty Ltd [1957]
§ Offer made without prejudice, which is accepted, creates a contract à “without prejudice”
ceases to have any significance
• Letters of Intent: author intends to conclude formal contract later à not binding until formal documentation
eventuates EXCEPT in exceptional circumstances
o Framework for parties to explore interests, capabilities, possible interactions + availability of resources
Document Summary
Incomplete agreement can"t be contract if there is not objective consensus on essential terms. Incompleteness essential term absent from perspective of a reasonable observer = no contract. Thorby v goldberg [1964] all essential terms must be agreed upon. Letters of comfort: used in lieu of formal guarantee as it may have financial implications: banque brussels lambert sa v australian national industries limited [1989] It is our practice to ensure that our affiliate will at all times be in a position to meet its financial obligations as they fall due enforced. Held to show intention to enter legal relations unless clearly indicated not to. Negotiating the agreement: promissory estoppel: ^^, workplace safety australia v simple ohs solutions pty ltd [2015] Contract contained clause permitting termination if s didn"t meet sales targets. W said before + after signed that didn"t expect s to meet targets early on didn"t = termination.
