LAW2101 Lecture Notes - Lecture 5: The Purchase Price, Australian Art, Forego
LAW2101'CONTRACT'A'-'CASE'SUMMARIES'AND'KEY'POINTS'
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TOPIC'5:'CERTAINTY'
*Note:'Ut#res#magis#valeat#quam#pereat'(i.e.'better'for'there'to'be'an'effect'than'to'be'found'void),'but'
should'obligations'should'be'“voluntary'incurred”'
Essentialities'of'a'contract:'Contract'is'not'complete'until'the'parties'have'agreed'on'all#essential#terms'(i.e.'
price,'parties,'commencement'date'and'subject'matter)'
• Something'the'law'will'not'supply''
• Any'term'which'only'the'parties'can'decide'and'which'the'court'cannot'supply'by'implication'
• A'term'without'which'the'contract'cannot'be'enforced'''
• '
COMPLETENESS'
Whether'the'court'can'enforce'the'contract'in'the'absence'of'the'term'in'question'without'exceeding'its'
role'as'the'interpreter,'rather'than'the'author,'of'the'contract?'(Question'of'fact)'
'
Courts’'approach'to,'and'Consequence'of'incompleteness'depends'on'3'issues:'
1. Importance'or'essentiality'of'the'omitted'term:'Can'result'to'severing'the'terms'
2. The'reasons'for'the'omission:''
o Whether'the'parties'failed'to'agree'on'the'issue:'Can’t'impose'contract'since'the'parties'cannot'
agree'even'with'price'(i.e.'courts'cannot'intervene'if'there'is'no'agreement)'
o Whether'the'parties'deliberately'deferred'agreement'on'the'issue'(‘agreement'to'agree’):'Not'100%'
no'contract,'but'can'be'enforced'
♦ Will'usually'be'treated'the'same'way'as'if'the'agreement'was'silent'on'that'essential'term'(i.e.'
unenforceable'contract'due'to'incompleteness)'
♦ Contract'will'be'unenforceable'even'where'the'court'could'have'otherwise'implied'a'term'(e.g.'
such'as'a'term'to'pay'a'reasonable'price'as'per's13'Goods'Act'(Kirby'J,'Biotech#v#Pace))'
♦ Agreement'to'agree'on'essential'term'may'be'enforceable'if'agreement'has'been'partly'
performed'(Foley#v#Classique)'or'mechanism/machinery'or'formula'is'specified'to'supply'the'
term'if'the'parties'are'unable'to'reach'agreement'
♦ An'agreement'to'agree'on'a'non-essential'term'is'unenforceable,'but'the'contract'remains'valid''
o Whether'it'was'a'simple'case'of'the'parties'not'adverting'their'minds'to'the'issue:'Inadvertent'
omission)'
3. Whether'the'contract'is'executed'or'executory'(refer'to's13'‘Reasonable’'for'executed'contract)'
Case'
Findings'
!"#$%&'&())*+$%,-.%$%+/#&01/23&1956'HCA'
Facts:'
• Edward'Milne'was'a'WWII'veteran'eligible'for'
land'settlement'under'Tasmanian'post-WWII'
war'service'land'settlement'legislation'
• The'government'changed'its'policy'in'relation'to'
rent'valuation'
• Milne'argued'that'the'rent'was'to'be'
determined'in'accordance'with'a'pre-existing'
contract'(established'by'earlier'government'
circulars'–'lower'amount)'not'the'new'
legislation.'
'
Ø High'Court'Findings:'No'contract'
v Circulars'were'not'contractual'documents:''
No'intention'to'create'legal'relations'
(Australian#Woollen#Mills)'(i.e.'no'offer'only'
statements'of'present'government'intention'
or'policy)'
v Contract'not'complete:'“Apart'from'the'fact'
that'the'general'purport'of'the'
communications'in'question'evinces'
anything'but'an'intention'to'affect'legal'
relations,'those'documents'deal'with'some'
only'of'the'terms'which'must'of'necessity'be'
settled'before'a'binding'contract'can'exist.''
This'is'not'really'a'case'at'all'where'parties'
are'negotiating'with'a'view'to'contract,'but,'
even'if'it'be'treated'as'such'a'case,'no'
contract'is'concluded'until'the'parties'
LAW2101'CONTRACT'A'-'CASE'SUMMARIES'AND'KEY'POINTS'
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negotiating'are'agreed'upon'all'the'terms'of'
their'bargain'–'unless'indeed'the'terms'left'
outstanding'are'“such'as'the'law'will'
supply”....'Here'the'transaction'ultimately'
contemplated'was'of'a'very'complex'
character,'and'it'is'clear'that'the'law'cannot'
supply'its'terms”'(i.e.'need'to'settle'on'price)'
(45&'&6+*2)&7*#8"$92&0:;<;3&=">&?(&
• Negotiations'between'Frost'and'ANZ'for'Frost'to'
produce'and'supply'calendars'featuring'
Australian'art.'
• No'specific'agreement'about'the'size,'content,'
quality,'layout'or'number'of'calendars'
• ANZ'pulls'out.''Frost'sues'for'breach'of'contract.'
'
Had'the'essential'terms'of'the'agreement'been'
agreed?''Could'the'Court'fill'the'gap?'
Ø Approach'(Kaye'J)'(Court'of'Appeal):'“It'is'a'first'
principle'of'the'law'of'contracts'that'there'can'
be'no'binding'and'enforceable'obligation'unless'
the'terms'of'the'bargain,'or'at'least'it’s'essential'
or'critical'terms,'have'been'agreed'upon.'So'
there'is'no'concluded'contract'where'an'
essential'or'critical'term'is'expressly'left'to'be'
settled'by'future'agreement'of'the'parties”.'
v Parties'did'not'reach'an'agreement'upon'all'
the'essential'contractual'terms'of'their'
bargain'(i.e.'no'agreement'on'price'per'unit,'
design,'quality'and'size'of'paper,'content'of'
paper'and'number'of'calendars)'
*Note:'Apart'from'quantity'to'be'supplied,'other'
specifications'constituted'the'subject'matter'of'
negotiations'
v S.13'Goods#Act#1958'(Vic)'does'not'save'the'
contract:'s13'will'allow'a'term'as'to'a'
reasonable'price'to'be'implied'to'an'
agreement'where'the'contract'is'silent'as'to'
price,'but'provision'can'only'be'relied'upon'
where'the'parties'have'reached'agreement'
on'all'other'essential'contractual'terms'
6*#%,&'&?#/22"@A%&?*/>B%2&C)8'[1934]'2'KB'1'
• Foley'agreed'to'sell'land'in'exchange'for'promise'
from'CC'to'purchase'petrol'exclusively'from'
Foley’s'petrol'station'on'adjoining'land,'for'the'
term'of'Foley’s'life'at'a'price'and'on'terms'“to'be'
agreed'in'writing'by'the'parties'from'time'to'
time”'(i.e.'an'“agreement'to'agree”)'
• Included'arbitration'clause:'If'any'dispute'arises'
under'the'agreement,'shall'be'resolved'by'
arbitration'“in'the'usual'way'in'accordance'with'
the'Arbitration#Act'1889'(UK)”'
• After'3'years,'CC'wanted'to'purchase'cheaper'
petrol'from'another'source'and'tried'to'argue'
that'the'contract'was'not'enforceable'because'
no'price'or'terms'of'petrol'supply'were'agreed'
Ø Court'of'Appeal'Finding:'Petrol'agreement'was'a'
valid'and'binding'contract'–'Each'case'to'be'
decided'on'its'own'facts'
v Parties'had'obviously'believed'the'contract'
was'binding'and'acted'on'it'for'3'years'
v ''Formal'document'
v Petrol'agreement'was'part'of'the'
consideration'for'the'transfer'of'the'land'
v Implied'term'that'the'petrol'shall'be'
supplied'at'a'reasonable'price'and'be'of'
reasonable'quality'
v Express'term'that'any'dispute'as'to'what'is'
reasonable'is'to'be'settled'by'arbitration'
v Agreement'to'agree'was'not'void'(i.e.'courts'
can'impose'a'reasonable'price)'
v C.f.'Mobil#Oil:'Representation'that'was'relied'
upon'(i.e.'no'detriment,'so'not'
unconscientious)'
*Note:'The'courts'are'less'likely'to'find'an'
LAW2101'CONTRACT'A'-'CASE'SUMMARIES'AND'KEY'POINTS'
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agreement'is'incomplete'if'one'party'has'already'
performed'all'or'some'of'the'contract''
'
Statute'
Interpretation'
.**82&(>)&:;D<&0=">3,'s'13.'Ascertainment'of'price''
(1) The'price'in'a'contract'of'sale'may'be'fixed'by'
the'contract'or'may'be'left'to'be'fixed'in'manner'
thereby'agreed'or'may'be'determined'by'the'
course'of'dealing'between'the'parties''
(2) Where'the'price'is'not'determined'in'accordance'
with'the'foregoing'provisions'the'buyer'must'
pay'a'reasonable'price.'What'is'a'reasonable'
price'is'a'question'of'fact'dependent'on'the'
circumstances'of'each'particular'case'
Ø Can'be'determined'by'a'valuer'or'depend'on'the'
clauses'of'the'agreement'
'
CERTAINTY'
Terms'must'not'be''/9A%'such'that'the'courts'cannot'attribute'sufficiently'precise'meaning'to'them'
'
Elements:'
• No'pedantic'test:'Some'ambiguity'is'acceptable'(Council#of#Upper#Hunter#County#District#v#Aus#Chilling#&#
Freezing)'
• Objective'standard'(where'available)'can'be'relied'on'or'implied'to'save'clause'(courts'often'divided)'
(Biotech#v#Pace;'Whitlock#v#Brew;'Hall#v#Busst;'Meehan#v#Jones)'
• Uncertainty'of'meaning'more'likely'to'affect'validity'if'the'parties'have'yet'to'perform'
• Agreements'to'negotiate'in'good'faith'not'necessarily'too'uncertain'(United#Group#Rail#Services#v#Rail#
Corp#of#NSW)'
Case'
Findings'
?*A$>"#&*E&FGG%+&7A$)%+&?*A$),&'&(A2)+/#"/$&
?B"##"$9&H&6+%%I"$9'
• Council'contracted'to'supply'electricity'to'ACF,'
which'it'purchased'from'a'number'of'generating'
entities.'
• Council'had'right'to'increase'charges'under'
clause'5:'
o “it'is'agreed'that'during'the'term'of'this'
agreement'if'the'supplier’s'costs'shall'vary'in'
other'than'has'been'herein'provided'the'
supplier'shall'have'the'right'to'vary'the'
maximum'demand'charge'and'the'energy'
charge'by'notice'in'writing'to'the'purchaser”'
• Council'gave'notice'under'clause'5'of'increased'
charges.''ACF'argued'clause'5'void'for'
uncertainty'as'it'was'unclear'what'the'term'
“supplier’s'costs”'meant.'
'
Ø High'Court'Finding:'Not'too'uncertain'using'a'
robust'approach'for'interpretation'of'unclear'
terms'(i.e.'large'commercial'contract,'so'that'
parties'could'not'have'foreseen'them)'
Ø Certainty'Test'Approach'(Barwick'J)'(High'
Court):'“so'long'as'the'language'employed'by'
the'parties....'is'not'so'obscure'and'so'incapable'
of'any'definite'or'precise'meaning'that'the'court'
is'unable'to'attribute'to'the'parties'any'
particular'contractual'intention,'the'contract'
cannot'be'held'to'be'void'or'uncertain'or'
meaningless.''In'the'search'for'that'intention'no'
narrow'or'pedantic'approach'is'warranted,'
particularly'in'the'case'of'commercial'
contracts....”'
v 'Contract'is'not'automatically'void'because'it'
has'more'than'one'possible'meaning'(i.e.'will'
bear'the'meaning'which'the'courts'or'in'an'
arbitrator'deem'appropriate)'
v Uncertainties/ambiguities'can'be'sorted'out'
by'“construction....'ascertaining'the'
intention'of'the'parties,'and'applying'it”'
'
CERTAINTY'OF'MEANING:'APPLYING'OBJECTIVE'OR'REASONABLE'STANDARDS'
