LAWS1204 Lecture Notes - Lecture 1: Quid Pro Quo, Bca Marketplace, Well-Order
Lecture one
Lecture One will introduce students to the body of law known as Contracts. There are no
required readings for Lecture One. However, it might well be useful to peruse Chapter One
of Thampapillai, Bozzi and Bruce.
Common law method
Key Points:
(i) The common law is an iterative decision-making system.
(ii) The courts seek to do justice in each case while keeping a body of law intact.
(iii) Judges make law incrementally.
(iv) However, sometimes the common law has to develop via an evolutionary leap.
(v) There is significant tension between keeping the law relevant and just, while also
maintaining a fidelity to its structure, rationale and core principles.
Observations on rules:
•There is a policy rationale behind every legal rule.
•Every legal rule, or set of legal rules, exists in response to a particular type of legal
policy problem.
•A legal rule must have a meaning otherwise it has no utility within a legal system.
•Reasonable minds may differ on the interpretation of a legal rule.
•No legal rule, no matter that it may be expressed in absolute terms, is capable of
unlimited application.
•Every rule may be limited or qualified by other rules.
•Whether one rule takes priority over another depends on the facts at hand.
•The hierarchy amongst certain legal rules is not necessarily fixed.
•Whether a particular rule applies depends on the fact circumstances at hand.
•In interpreting and applying the law judges will inevitably make law.
Theories of contract law
The purpose of theory:
•Sir Anthony Mason has commented that it is an error to view “the law as a discrete
set of principles in a vacuum and without a context.”
•Theory plays the role of fleshing out the context and rationale behind the law.
•However, Contract Law is overrun with theories.
•Unger: “It would be strange if the results of a coherent, richly developed normative
theory were to coincide with … any extended branch of law.”
(i) Classical contract theory
•Classical contract theory views the contract as expressing the will of the parties.
•The classical theory emphasises freedom of contract and autonomy.
•This consensus or will theory sees the contract as a set of self-imposed obligations.
•Classical theory is closely intertwined with the notion of the ‘bargain’ that underpins
much of contract law.
•The will of the parties is now largely judged on an objective basis rather than on a
subjective basis.
(ii) Reliance Theory or Promise theory
•In theory reliance on a promise should be sufficient to make that promise binding
upon the promisor.
•The reliance theory attempts to find a moral framework within the law.
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•Reliance theory also identifies the nature of the risk borne by the promise when they
act in trust of the promisor’s statements.
•Protecting that reliance interest is crucial to facilitating a well-ordered legal and
commercial system.
(iii) Relational Theory of Contract Law
•A contract might be a one-off exchange, alternately it might be a part of an ongoing
commercial relationship.
•Relational theory recognises the economic imperatives underpinning contract law
and contracting in general, but it also recognises the sociological side of contract
law.
•Law and the sanctions it provides does not explain every aspect of contractual
behaviour.
(iv) Economic Perspectives
•The economic perspective judges law by the economic standard of efficiency.
•There are aspects of contract law that correlate with economic efficiency.
•However, evaluating law by the standard of economic efficiency ignores other
essential considerations within the law.
(v) Contract as property
•A contract may be regarded as a property interest.
•In effect, the property lies in the promisor’s future actions.
Lecture two – Topic 1 – OFFER AND ACCEPTANCE
Lecture Two will examine the doctrine of offer. The following concepts will be relevant to
our discussion of the nature of offer and acceptance:
• - Agreement and Formation
• - Defining an Offer
• - Invitations to Treat
• - Mere Puffery
• - Unilateral and Bilateral Contracts
• - Categories of Offer
• - Revocation
1. Agreement and Formation
•What is a contract? – a legally binding agreement between two parties.
•A contract contains obligations and duties.
•A contract invariably involves some form of exchange between the two
parties.
•In essence a contract involves one party conferring a benefit upon the other
party in exchange for some other benefit.
•For example, Party A agrees to pay $X to Party B if the latter builds a house
for the former.
•There are two promises here: (i) the promise to pay $X and (ii) the promise to
build the house. A contract makes these promises legally binding.
•There are six essential elements of a contract:
(i) There must be an offer.
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(ii) There must be an acceptance.
(iii) There must be consideration between the parties.
(iv) The parties must have intended to create legal relations.
(v) The parties must have the capacity to enter into legal relations.
(vi) The agreement must be certain and complete.
•Classical contract theory postulates that there are two parties to a putative contract.
•One party would make an offer.
•The other party would accept the offer.
•Under this model the contract is formed when the acceptance is
communicated.
•This suggests that there is a “magic moment of formation” - Mensch –
Freedom of Contract as Ideology, (1981) 33 Stanford Law Review 753, 760.
•When this happens there is a meeting of the minds and mutually binding
obligations are formed.
•This theory explains the existence of the offer and acceptance doctrines.
•There are two problems with the theory.
•First, the classical theory assumes equality between the parties.
•However, the very existence of the vitiating factors doctrines undermines the
assumption underpinning the theory.
•If the parties were truly equal then we would not need doctrinal laws on
duress, undue influence unconscionable conduct and the like.
•If the assumption underpinning the idea is incorrect or not totally true, then
the idea itself is questionable.
•The existence of the vitiating factors doctrines (i) admits that there is not
always equality between the parties and (ii) sets a standard for contractual
behaviour.
•Second, there are a number of basic transactions that just do not fit the paradigm of
two parties explicitly reaching a bargain.
•There are a number of transactions in normal life which do not involve any
real offer and acceptance.
•For example, buying a train ticket, hiring a taxi, buying a plane ticket on the
internet, your i-Tunes purchases…
•Shrinkwrap, Clickwrap, Browsewrap licenses?
See Pro CD v Zeidenberg ---- How should the law respond?
•Clearly, the rigid offer and acceptance model has limits. There are alternative views.
•Note the views of Lord Denning MR in Gibson v Manchester City Council [1978] 1
WLR 520:
•“To my mind it is a mistake to think that all contracts can be analysed in the form of
offer and acceptance. … You should look at the correspondence as a whole and at the
conduct of the parties.”
•What Lord Denning is suggested is a “global” approach to contract formation. This
has drawn some support in obiter in Australia. In Integrated Computer Services Pty
Ltd v Digital Equipment Corp (Aust) Pty Ltd (1988) 5 BPR 11, 110 at 11,117 McHugh
JA stated “a contract may be inferred from the acts and conduct of parties as well as
or in the absence of their words.” Similarly, in Brambles Holdings Ltd v Bathurst City
Council (2001) 53 NSWLR 153, Heydon JA stated that the framework of offer and
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