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LWB136 Contracts compiled

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Department
Law
Course
JSB171
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All Professors
Semester
Spring

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LWB136 CONTRACTS A CONTENTS: A. Contract formation 1. Agreement page 1 2. Offer page 1 3. Acceptance page 3 4. Certainty page 5 5. Intention to create legal relations page 6 6. Consideration page 7 2. Estoppel page 1 3. Privity page 1 1. Property Law Act 1974 (Qld) s 55 4. Land, Guarantees, Indemnities 1. Sale of land page 1 i. Property Law Act 1974 (Qld) s 59 2. Guarantees (& indemnities) page 4 i. Property Law Act 1974 (Qld) s 56 5. Incorporating terms 1. Written terms page 1 2. Oral terms page 2 i. Flowchart 3. Implied terms page 4 i. Sale of Goods Act 1896 (Qld) ss 15-18, 56 4. Consumer guarantees page 6 i. Competition and Consumer Act 2010 (Cth), Schedule 2 (ACL), Part 3.2 Division 1 6. Classifying terms page 1 1. Sale of Goods Act 1896 (Qld) s 14 7. Interpreting terms 1. Evidence page 1 2. Contingencies page 2 3. Exemption clauses page 3 i. CCA 2010, ACL ss 23-25 8. QA answer plan 1 & 2 CONTRACT FORMATION 1. Agreement a. A concluded agreement will be reached where an offer has been accepted. i. It may be necessary to look at the whole of the relationship in order to determine whether there has been agreement, rather trying to isolate an "offer" and an "acceptance" (Empirnall Holdings v Machon Paul Partners) b. Word ‘agreement’ irrelevant due to the objective and not subjective approach taken by the courts (Taylor v Johnson). c. The same subject matter may be sold to more than one person (Patterson v Dolman). 2. Offer a. Definition: The expression to another of a willingness to be bound by stated terms (Australian Woollen Mills Pty Ltd v Commonwealth) i. While advertisements are often invitations to treat (Partridge v Crittenden), there is no general rule that an advertisement cannot be an offer (Carlill v Carbolic Smoke Ball Co). 1. Invitation to treat: a. Advertising in catalogue (Grainer v Gough) b. Goods displayed in shops (Pharmaceutical Society v Boots Cash Chemists) ii. If advertisement leaves nothing to be negotiated – certain in its terms and not open-ended, it would seem to be an offer; which can also be made to the whole world (Carlill v Carbolic Smoke Ball Co). iii. It is a question of construction whether an offer is capable of acceptance by more than one person (Patterson v Dodman) or only by the first person (Robinson v M’Ewan). iv. Whether something is an offer - Objective test = how the offer is objectively received from the perspective of the recipient of the statement (Carlill v Carbolic Smoke Ball Co). v. Offer is effective when and not until it is communicated to the offeree (Taylor v Laird) vi. Standing offer can be withdrawn or revoked at any time prior to acceptance (Great Northern Railway Co v Witham) vii. Mere statement of price which someone would sell for is not an offer (Harvey v Facey) 1. Statement leaves something to be negotiated, not indicative of a willingness to be bound, not an offer – mere supply of information/invitation to treat (Harvey v Facey) b. Revocation/termination of offer i. Offer can be terminated by: 1. Withdrawal by offeror 2. Rejection by offeree 3. Lapse of time 4. Failure of a condition subject to which the offer was made 5. Death ii. Offer can be terminated/revoked at any time before it is accepted. Once accepted = irrevocable (Great Northern Railway Co v Witham) iii. In an option, offer cannot be terminated before option has expired (Goldsborough Mort v Quinn) iv. Revocation need not be communicated by the offeror or an authorised agent if it is communicated by a reliable third party (Dickinson v Dodds) v. Revocation is not effective until communicated: when received by the offeree (Byrne v Van Tienhoven) c. Revocation of unilateral offer i. Effectively two offers: an express offer and an implied offer not to revoke the express offer if performance of the acts required for acceptance are commenced within a reasonable time (Abbott v Lance) 1. Unilateral offer cannot be withdrawn after promisee has started performing the necessary acts (Abbott v Lance) 2. An attempt to revoke the express offer after performance has commenced within a reasonable time may sound in damages (Mobil Oil Australia v Lyndel Nominees P/L) ii. Where an offer is made to the world at large it may be effectively revoked by using a similar medium; it does not matter if someone who sees/hears the offer does not see/hear the revocation (Shuey v United States) d. Auctions i. Reserve price - call for bids akin to an invitation to treat; each bid represents an offer that may be accepted or rejected by the auctioneer and may be withdraw by the bidder at any time before the bid is ‘knocked down’, at which point the agreement is formed (Payne v Cave). ii. Suggested that in auctions without reserve a contract is made between the auctioneer and the highest bona fide bidder (Warlow v Harrison), until the hammer falls the auctioneer may decline a bid even if there has been a previous indication that the bid is accepted (Seivewright v Brennan). iii. An auctioneer may incur contractual liability for the failure to keep their promise to sell to the highest bidder (AGC (Advances) Ltd v McWhirter). e. Tendering i. A call for tenders is normally construed as only an invitation to treat unless it indicates that the best tender will be accepted (Spencer v Harding). 1. Highest bidder = offer (Spencer v Harding; Harvela Investments Ltd v Royal Trust Company of Canada) 2. Lowest tender – does not automatically mean the offer is accepted. ii. Tender not considered – ground for complaint (not binding contract): where a valid tender is submitted there is an implied contract that the tender will receive due consideration (Blackpool & Flyde Aero Club v Blackpool Council; Hughes Aircraft Systems International Inc v Airservices Australia). Damages for wasted expenditure on preparing the tender. 3. Acceptance a. Definition: Acceptance of an offer is the expression, by words or conduct, of assent to the terms of the offer in the manner prescribed or indicated by the offer (Tinn v Hoffman & Co) i. A person cannot accept an offer which has not been communicated (Taylor v Laird) ii. Acceptance must be unqualified and conform to the terms of the offer (Tinn v Hoffman & Co) iii. To be valid acceptance: 1. Offeree must intend to accept terms of offer; a. Must act with the intention of accepting the offer (R v Clarke) b. Inquiry is not acceptance (Jacques v McLean) c. Conditional assent is not acceptance (Masters v Cameron); “Subject to” = no binding contract until formal contract is executed d. Silence is not acceptance (Felthouse v Bindley) 2. Intention to accept must be communicated to offeror a. Acceptance may be communicated only by the offeree or his or her agent (Powell v Lee) b. General rule is that an acceptance has no effect until it is communicated to the offeror (Byrne & Co v Leon Van Tien Hoven & Co) c. Unilateral offers contemplate acceptance by performance of an act (Carlill v Carbolic Smoke Ball Co) iv. Within the terms of the offer the offeror may expressly or impliedly prescribe the method of communicating acceptance - Failure to adopt that method is at the offeree's risk 1. Offeror may waive need for acceptance to be communicated (Carlill) 2. Postal acceptance rule will apply where it was within the contemplation of the parties that the post would be used (Adams v Lindsell) v. An offer lapses if not accepted within a reasonable/prescribed time (Ramsgate Victoria Hotel Co Ltd v Montefiore) 1. Reasonable time = Q of fact vi. Purported acceptance introducing a new term is a counter-offer (Hyde v Wrench) 1. Counter-offer is not acceptance of original offer (Brogden v Metro) 2. Departure from terms in only a minor, non-material way may be effective and not amount to counter-offer (Turner Kempson v Camm) vii. Offeree cannot accept an offer after notified of offeror’s death (Coulthart v Clementson) viii. If offeree dies, representatives cannot accept offer of the offeree’s behalf (Reynolds v Atherton) b. Instantaneous communication i. General rule of communicated acceptance applies (Entores Ltd v Miles Far East Corporation); the contract formed when and where the offeror receives the communication (Brinkibon Ltd v Stahag Stahl und Stahlwarenhandelsgesellschaft mbH). ii. Real test of contract formation must be ‘resolved by reference to the intentions of the parties, by sound business practice and in some cases by a judgment where the risks should lie’ (Brinkibon Ltd v Stahag Stahl und Stahlwarenhandelsgesellschaft mbH). iii. Exception – Leach Nominees (telex machine = instantaneous, operated by agents/third parties = postal rule applied) c. Email i. International authority indicates that the postal acceptance rule should not apply to email or other electronic communication = such technology is instantaneous (Chwee Kin Keong v Digilandmall.com Pty Ltd; Eastern Power Limited v Azienda Communale Energia and Ambiente). ii. Electronic Transactions (Queensland) Act 2001 (Qld) - time of receipt of email 1. designated information system, unless otherwise agreed between the originator and the addressee, the time of receipt of the communication is the time when it enters the information system of the addressee (s 24(1) ETA) iii. Apply the test in Brinkibon to the facts. 1. Implied intention of the parties to form an agreement via exchange of email = inbox from which the offer was sent can be determined as the ‘designated information system’ d. Postal acceptance rule i. Where it was within the contemplation of the parties that, according to the ordinary usages, the post would be used as a means of communicating acceptance of an offer, acceptance is complete as soon as the letter is properly posted (Adams v Lindsell). ii. It is immaterial that it is later delayed or lost in the post (Henthorn v Fraser). iii. Offer communicated via post + surrounding circumstances – no sense of urgency – suggest post was contemplated as a means of communicating acceptance (Quenerduaine v Cole). iv. Any indication that the offeror will not be bound until actual receipt of the acceptance acts to exclude the postal acceptance rule from operating (Holwell Securities Ltd v Hughes). e. Withdrawal of acceptance i. Once acceptance has been communicated to the offeror, a binding agreement is formed. ii. If acceptance is complete on posting, logically it cannot be withdrawn (Weinkheim v Arndt). iii. Contrary authority permits a withdrawal of acceptance (Dunmore (Countess) v Alexander). iv. If new offer (counter-offer) was being made in letter, retrieval would amount to revocation of the offer (Routledge v Grant). 4. Certainty a. There is no legally binding contract unless what the parties agreed can be determined objectively with a reasonable degree of certainty (G Scammell v Ouston) i. The court will do its utmost to uphold the agreement, so it will imply meanings to make a contract certain wherever it can (Hillas v Arcos) 1. A contract that is uncertain or contains uncertain terms may be upheld if the court is able to use some mechanism to give meaning, or if severance is possible (Fitzgerald v Masters – severance) ii. If law can imply terms = offer; if there are other terms beyond the implication by law, needing further negotiation, statement will be a mere supply of information (Harvey v Facey). b. Agreements to agree can be enforceable if the terms are sufficiently certain (Coal Cliff v Sijehama) i. Agreement to agree is otherwise incomplete (May v R) c. When terms are to be determined by a 3 party, contract is complete (Godecke v Kirwan) d. Sale of Goods: purchaser required to pay a reasonable price, if a price is not otherwise determined (s 11 SGA) e. “Subject to finance” = agreement is certain (Meehan v Jones) f. Four classes of “subject to contract”’ – all except (iii) the parties will be immediately bound (Masters v Cameron) i. Where the parties have reached finality in their negotiations and intend to be bound immediately but propose to restate the terms in a more formalised manner; ii. Where the parties have completely agreed but have made performance of one of the terms conditional upon the execution of a formal document; iii. Where the parties do not intend to be bound unless and until a formal document is entered into; iv. Where the parties are content to be bound immediately by the terms that they have agreed upon while expecting to make a further contract in substitution for the first contract containing, by consent, additional terms (Masters v Cameron; Baulkham Hills Private Hospital Pty Ltd v GR Securities P/L) 5. Intention to create legal relations a. Rule: To create a contract there must be a common intention of the parties to enter into legal obligations, mutually communicated expressly or impliedly (Rose & Frank co v JR Crompton) b. Intention test is objective (Merrit v Merrit) c. Traditional approach: “presumptions” would arise: i. Social and domestic = no intention (Balfour v Balfour) 1. Rebutted easily ii. Commercial = intention (Rose & Frank Co v JR Crompton) 1. Difficult to rebut d. Modern approach: Objectively assess all circumstances to determine intention i. Salient features of the relationship are taken into account (Ermogenous v Greek Orthodox Community of SA Inc), i.e. arms-length transaction in a commercial setting. 1. Salient features: a. Subject matter of the agreement b. Status of parties c. Parties’ relationship to one another d. Language used e. Subsequent conduct f. Context of agreement g. Other surrounding circumstances ii. Clubs seem social in nature – does not mean the transactions are social – commercial premises, rent payable, dealing at arm’s length (Ermogenous v Greek Orthodox Community of SA Inc) 6. Consideration a. Definition: An act or forbearance, or promise thereof which is the price of the promise (Dunlop Pneumatic Tyre Co Ltd v Selfridge & Co Ltd). b. Bilateral contract - consideration = an exchange of promises (Dunlop Pneumatic Tyre Co Ltd v Selfridge & Co Ltd) c. Unilateral contract – the same act may be both the acceptance and the consideration (Carlill v Carbolic Smoke Ball Co) d. Consideration must move from the promisee (Twiddle v Atkinson) i. But it need not move to the promisor e. Joint promisee’s need only have consideration move from one of the parties (Coulls v Bagot’s) f. Consideration must be bargained for (Combe v Combe) i. Consideration must be part of the bargain (Australian Woollen Mills P/L v Commonwealth), however it must be something of value in the eyes of the law (Eastwood v Kenyon). g. Consideration must be sufficient (Thomas v Thomas) i. But it need not be adequate (Chappell & Co v Nestles – intrinsically worthless) h. Generally performance of an existing contractual duty is insufficient (Stilk v Myrick) i. Acting in excess of existing contractual duty is good consideration (Hartley v Ponsonby) ii. Performance of an existing contractual duty owed to a third person is sufficient (NZ Shipping Co v AM Satterthwaite) iii. Performance of public duty is not sufficient unless the duty is exceeded (Collins v Godefroy) iv. Where a promisor receives a benefit in practice or obviates a disbenefit = good consideration (Williams v Roffey Bros) 1. A engages B to provide goods or services; 2. In the course of the contract it becomes doubtful that B will complete performance; 3. A promises B additional payment or makes a concession (i.e. reducing B’s original obligation) in order to secure B’s performance; 4. A thereby gains a practical benefit (or avoids a disbenefit), provided that the benefit (or avoided disbenefit) to A as a result of B’s performance is worth more to A than any likely remedy against B, taking into account the cost to A of the payment or concession (or reciprocally without detriment to A); 5. A’s promise must not be made as a result of economic duress, fraud, undue influence or unconscionable conduct on the part of B nor induced as a result of unfair pressure by B (Musumeci v Winadell P/L) i. Past consideration [consideration which precedes the promise it purportedly supports] is not good consideration (Roscorla v Thomas) j. Exception = services performed at the promisor’s request where: i. Services are rendered at the request of the promisor; ii. It was understood that the services would be paid for; and iii. There is no bar to recovery (Re Casey’s Patents; Stewart v Casey; Pao On v Lau Yiu Long). 1. In such a case the subsequent express promise merely fixes the quantum of the implicit promise to pay. k. Part payment of debt not consideration for promise to forgo the balance (Pinnel’s case) i. Exceptions to this rule: 1. Creditors rd 2. Payment by 3 party 3. Introduction of a new element by P l. A forbearance to sue may amount to good consideration, even where there is a chance that the proposed action would not have succeeded. i. Forbearance – Promisee must establish: 1. Claim was reasonable and not frivolous or vexatious; 2. P honestly believed that he or she had a reasonable chance of success; 3. P did not knowingly conceal from the D any fact that could affect the validity of the claim (Hercules v Schubert). Estoppel 1. “In the event that the preceding avenues cannot be satisfied, X may be able to obtain a remedy by raising an estoppel.” a. Estoppel may be used as a cause of action (a sword) and not just defensively (Waltons v Maher). 2. Unconscionable conduct by the D, including the D knowing of or intending some detrimental reliance on a mistaken expectation by the P (Waltons Stores (Interstate) Limited v Maher) 3. Elements: a. Clear and unambiguous assumption or expectation that a certain state of affairs would exist between D & P; (Legione v Hateley) i. Will not be clear if important info omitted (ACC v Gray) b. Which was encouraged or induced by the D; i. Silence may be sufficient (Waltons) ii. Assumption cannot be based on mere hope (Chellaram & Co v China Ocean Shipping Co) iii. An authorised agent cannot encourage assumption. Encouragement lies in the subsequent failure of D to correct the mistaken impression in the P (Corpers No 664 v NZI Securities) (element d) c. P acted or abstained from acting in reliance on the assumption or expectation; i. reliance must be reasonable (Waltons) d. As the D knew or intended him or her to do; e. P will suffer detriment if the assumption or expectation is not fulfilled; and i. Detriment has been defined as a position of material disadvantage if the departure from the assumption was permitted (Thompson v Palmer) ii. The time for measuring whether there is detriment is at the time of attempted renege of the promise (State Rail Authority (NSW) v Heath Outdoor P/L) f. The D failed to avoid that detriment by fulfilling the assumption or expectation or otherwise (Brennan J in Waltons Stores (Interstate) Limited v Maher). i. Acting “otherwise” includes simply disabusing P of the incorrect assumption before detriment is incurred (Lorimer v State Bank of NSW) ii. There must be a link between the assumption created or encouraged and the detriment suffered (Re Ferdinando) 4. Land: The assumption must not merely be that a contract existed but that it was an enforceable contract (Powercell P/L v Cuzeno P/L) 5. Apply to facts. State whether EE is available. 6. “The remedy yielded by an equitable estoppel is the minimum equity required to do justice.” 7. Remedy is proportionate to the detriment suffered (Commonwealth v Verwayen). Basis for the compensation would be the avoidance of detriment, not the breach of a promise. 8. May be a prima facie entitlement to have the assumption made good, to be reduced as appropriate in the circumstances / unjust (Giumelli v Giumelli). Privity 1. Joint promisees? a. Consideration moving from one joint promisee is deemed to have moved from all joint promisees (Coulls v Bagot’s Executor & Trustee Co Ltd) 2. No = third party a. General privity of contract rule: “At common law, a third party cannot enforce benefits in a contract to which he or she is not privy” (Wilson v Darling Island Stevedoring) 3. Statutory Exceptions: a. Property Law Act 1974 (Qld) s 55(1) i. “A promisor who, for valuable consideration moving from the promisee, promises to do or refrain from doing an act or acts for the benefit of a beneficiary shall, upon acceptance by the beneficiary, be subject to a duty enforceable by the beneficiary to perform that promise.” 1. ‘Benefit’ would need to be interpreted in such a way as to include the benefit of an exemption clause: cf the express provision to that effect in Contracts (Privity) Act 1982 (NZ) ii. s 55(6) defines “acceptance” as assent by words or conduct given by beneficiary (or agent) to promisor (or agent) within the time/manner prescribed, or if none is prescribed, within a reasonable time of the promise coming to his or her notice. 1. Sufficient if the promise comes to the attention of the beneficiary’s solicitors (Re Davies) 2. Not sufficient to merely act consistently with having accepted (Re Davies; Northern Sandblasting Ltd v Harris) iii. Not named /known = an incidental beneficiary cannot claim the benefit (Re Burns Phillip Trustees) iv. Variation: prior to acceptance, the promisor and promisee may without the consent of the beneficiary vary or discharge the promise (s 55(2) PLA) 1. After acceptance, the terms/duty of the promisor may only be varied/discharged with the consent of the promisor & beneficiary (s 55(3) PLA) v. If P is unable to make a claim under the statue, he or she may seek to make a claim under the common law (s 55(7) PLA) b. Insurance Contracts Act 1984 (Cth) s 48 i. A person who is not a party to a contract of general insurance may if they are referred to in the contract, whether by name or otherwise, as person to whom the insurance cover extends, recover the amount of their loss from the insurer in accordance with the contract. 4. P may evade privity by establishing one of the so called ‘exceptions’ at common law (Trident General Insurance Co Ltd v McNiece Bros Pty Ltd) 5. Common law exceptions: a. Agency: If B is an agent for C in a contract with A, then the contract is taken to, in fact, be between A and C (Trident) i. Agent (B) acting with actual authority, or where principal (C) later ratifies unauthorised act of agent (B) ii. Immaterial that A is unaware that B is agent for C if A indicates willingness to contract with anyone authorised by B. This willingness is presumed unless A demonstrates otherwise (Teheran Eurpose v ST Belton). iii. ‘Himalaya clause’ extends exemption clauses to third parties (Lord Reid in Scruttons v Midland Silicones) 1. contract purports to cover the beneficiary; 2. contract makes it clear that the promisee contracted not only on its own behalf, but also on behalf of the beneficiary; 3. promisee had authority from the beneficiary to so contract, although later ratification may do; 4. there are no difficulties associated with consideration moving from the beneficiary (NZ Shipping Co v AM Satterthwaite) b. Trust: If B holds property on behalf of C, C acquires an equitable interest in the promise. C can enforce the promise indirectly by an action in which B is joined as a defendant (Trident). i. Requires requisite intention to create a trust (Trident) 1. Express, implied, or constructive trust where it would be unconscionable to allow the promisor to renege (Cheshire & Fifoot’s Law of Contract) ii. Continuing involvement/presence/relationship may evidence requisite intention to create a trust relationship (Trident) c. Estoppel: Where promisor A’s promise has induced third party C to act or refrain from acting in reliance such that he or she will suffer detriment if A is allowed to resile from the promise (Waltons Stores v Maher). i. Requires unconscionable conduct d. Unjust enrichment: A promisor A who has accepted agreed consideration for a promise to benefit a third party owes an obligation to the third party to fulfil that promise, & that party has a right to bring action to secure the benefit of the promise (per Gaudron J in Trident) 6. Remedies: If A fails to confer benefit on C, nominal damages only (West v Houghton). However, promisee may be entitled to specific performance of the contract (Beswick v Beswick) SALE OF LAND 1. Is there a valid contract? (Masters v Cameron categories) 2. Is the contract of the relevant type? Is it a contract for the sale or disposition of an interest in land? 3. If it is, is it made in writing? 4. Is it formally written and signed? 5. If not, is it sufficiently evidenced in writing? [Is there an enforceable contract?] a. Contracts for the sale or other disposition of an interest in land must be made or evidenced in writing by a sufficient note or memorandum for the contract to be enforceable (s 59 PLA 1974 (Qld)) 6. It must be signed by the party to be charged [or by some person by the party lawfully authorised] (s 59 PLA) a. Identify who the party to be charged is and what that person has signed. i. Signature may be handwritten or even printed/typed, if it is intended to authenticate the document (Durrell v Evans) 1. Inclusion of party’s name in the beginning, middle or end of document, and party (expressly or impliedly) intends it to authenticate the document will be sufficient to satisfy the statutory provision (Pirie v Saunders) ii. Solicitor cannot sign on behalf, unless expressly authorised (Nowrani v Brown) 7. A note/memorandum will be sufficient if it contains all the ‘essential’ terms of the contract? (Harvey v Edwards Dunlop) [parties, property, consideration, special terms] a. Sufficient description of the parties? (Williams v Byrnes) b. Sufficient description of the subject matter? (Pirie v Saunders) i. ‘your land’ is an insufficient description if the P has other land (cf Pirie) c. Consideration? (Burgess v Cox) d. Time of completion, if essential e. And any special terms (which are essential) f. Acknowledgement by the signatory that a concluded agreement has been reached (Tiverton Estates v Wearwell) i. The writing is insufficient if the agreement is made “subject to contract”. (Tiverton) 8. If so = sufficient note or memorandum signed by the party to be charged, s 59 PLA satisfied. 9. If not = is the doctrine of joinder applicable? a. A document may be joined to the signed document where the signed document expressly or impliedly refers to that other document (Harvey v Edwards Dunlop) b. Start with document signed by party to be charged – party denying contract c. Does it refer to a document or transaction? [Or is it physically connected?] i. Physically connected documents are impliedly joined (Pearce v Gardner) 1. It is permissible to join a letter with its envelope since they are physically connected (Pearce v Gardner) ii. Documents executed at the same time are impliedly joined (Timmins v Moreland) 1. Only documents already in existence can be joined (Todrell P/L v Finch) 2. Can join receipt to cheque, but cannot join cheque to receipt , unless executed contemporaneously (Timmins) iii. If document signed by the party to be charged refers to another document, that document can be joined to the writing signed by the party to be charged (Tonitto v Bassal) iv. If document signed by the party to be charged refers to a transaction (or dealing), evidence can be led to explain the transaction and to identify any document relating to it (Harvey v Edwards Dunlop) 1. An express reference to a dealing between the parties amounts also to an implied reference to any written record of that dealing (Harvey v Edwards Dunlop). v. If defendant has other properties, equivocal reference will not satisfy the essential elements (Pirie v Saunders) d. When the document(s) are joined to the document signed by the party to be charged, are the necessary elements satisfied? Is there now a sufficient note or memorandum in writing signed by the party to be charged? i. No = contract unenforceable, however: 1. Contract may be effective to pass title (Maywald v Riedel) 2. Purchaser breach = deposit forfeited; likely that buyer could recover an amount paid to the seller over and above deposit (Freedom v AHR Constructions P/L) 3. Does not prevent claim in restitution for recovery on a quantum meruit basis (Pavey & Matthews P/L v Paul) 10. If not = are there sufficient acts of part performance? a. P may obtain specific performance of a contract not complying with the formalities requirements if the P can show sufficient acts of part performance. b. Are the four elements satisfied? i. The agreement must be concluded so that had the writing been sufficient, it would be specifically enforceable (McBride v Sandland) ii. The acts must be done by the party seeking to enforce the contract iii. Acts must be done in reliance on the agreement and with the knowledge of the other party iv. Acts must be unequivocally referable to some such contract of the kind alleged (Regent v Millet) 11. Yes = specific performance may be available. 12. No = estoppel? a. An assumption or expectation on P part that a certain legal state existed, encouraged or induced by D, relied upon by P as D knew or intended P to do, such that P will suffer detriment if the assumption or expectation is not fulfilled, and that D failed to avoid that detriment by fulfilling the assumption or expectation or otherwise (Waltons Stores v Maher) b. D needed to encourage the belief that the statute had been complied with, ie, the assumption must not merely be that a contract existed but that it was an enforceable contract. E.g. a representation that the defendant will execute a formal contract. (Powercell P/L v Cuzeno P/L) c. Remedy: i. Avoidance of detriment; remedy must be proportionate to the detriment suffered (Commonwealth v Verwayen) ii. Prima facie entitlement to making the assumption good, unless that would be unjust (Giumelli v Giumelli) 13. No = constructive trust? a. Where the defendant is unconscionably denying the plaintiff an interest in the land, an action can be brought even though the creation of the interest is not evidenced in writing. (Baumgartner v Baumgartner; Page 394 textbook) 14. Come to overall conclusion GUARANTEES (& INDEMNITIES) 1. Is there a valid/binding contract? [agreement (acceptance by conduct), intention to create legal relations due to the parties dealing at arm’s length in a commercial context, consideration – promise to pay] 2. Is the contract of the relevant type? Is it a contract of guarantee? a. Guarantee distinguished from: i. Promises of guarantee made by the guarantor to the debtor that the guarantor would pay the debt of the debtor (Eastwood v Kenyon) ii. Situation where one agrees to take over the debt of another (Gray v Pearson) iii. Where no personal liability is imposed upon the guarantor (Harvey v Edwards Dunlop) iv. Some letters of comfort (Banque Brussels v Australian National Industries) 1. Can be escaped by showing no intention to create legal relations (Banque) 3. If it is, is it made in writing? 4. Is it formally written and signed? 5. If not, is it sufficiently evidenced in writing? [Is there an enforceable contract?] a. Contracts of guarantee are unenforceable unless they are in writing and signed by the party to be charged (s 56 PLA) i. Guarantor’s liability is secondary (Yeoman Credit Ltd v Latter) 1. Indemnity = liability is primary and is enforceable, it is not required to be evidenced in writing, even if the head contract is invalid (Lakeman v Mountstephen) a. Ask – primary or secondary liability? i. E.g. ‘see you paid’ = primary liability ii. The head contract must be enforceable or the contract with the guarantor will also be unenforceable (Yeoman) 6. Identify who the party to be charged is and what that person has signed. a. Signature may be handwritten or signed if it is intended to authenticate the document (Durrell v Evans) i. Inclusion of party’s name in the beginning, middle or end of document, and party (expressly or impliedly) intends it to authenticate the document will be sufficient to satisfy the statutory provision (Pirie v Saunders) b. Solicitor cannot sign on behalf, unless expressly authorised (Nowrani v Brown) 7. Does it contain at least all the essential terms of the contract? (Harvey v Edwards) a. Sufficient description of the parties? (Williams v Byrnes) b. Terms of the guarantee (including the actual debt) c. And any special terms (which are essential) d. Document need not state consideration, but unless it is a deed, consideration will be necessary (s 56(2) PLA) e. Acknowledgement by the signatory that a concluded agreement has been reached? (Tiverton Estates v Wearwell) 8. If so = sufficient note or memorandum signed by the party to be charged, s 56 PLA satisfied. 9. If not = is the doctrine of joinder applicable? 10. If not = are there sufficient acts of part performance? 11. No = estoppel? 12. Come to overall conclusion INCORPORATING WRITTEN TERMS Essential issue: can the parties be regarded as having assented to the written terms? (Olley v Marlborough Court Ltd) Signed document 1. Rule: Where a party signs a document, that party is generally bound by its terms (including small print). The signature indicates agreement to the terms contained in it (even if they didn’t read it) (L’estrange v Graucob; Toll (FGCT) P/L v Alphapharm P/L) a. Displaced if circumstances indicate that signature does not signify assent (Olley v Marlborough Court Ltd): i. Person relying on the clause misrepresented its effect (Curtis v Chemical Cleaning & Dyeing Co); 1. Failure to read a clause immaterial when signing a contract unless there is a fraud (L’Estrange v Graucob; Toll (FGCT) P/L v Alphapharm P/L) ii. Document signed thought to have no contractual effect (DJ Hill & Co Pty Ltd v Walter H Wright P/L); iii. Person signing can plead non est factum (Petelin v Cullen) – signatory did not know what they were signing (radically different document); iv. Where the term is unfair within the meaning of the ACL – ss 21-22 ‘unconscionable conduct’; s 23 ‘unfair terms’. Unsigned document (+ signs, notices, websites, etc.) 1. Rule: The party may be bound by a clause on an unsigned document (sign, website or notice), even if unaware of the existence of the term, if reasonable notice was given to the class of whom the recipient belonged, of the existence of the term, and the notice was given on or before contract formation (Parker v South Eastern Railway – tickets; Balmain New Ferry v Robertson – signs, etc.) a. Written terms will be incorporated if the following apply: i. it would be assumed by a reasonable person to be a contractual document (Causer v Brown) ii. reasonable steps are taken to give the class of persons to which the recipient belongs notice of the existence of the clause (Parker v South Eastern Railway Co) iii. these steps are taken before or when the contract was made (Thornton v Shoe Lane Parking Ltd) b. It does not matter that party did not / could not read the term (Thompson v LM&S Railway) c. Terms contained elsewhere can be incorporated by reference to those terms (Smith v South Wales Switchgear Co Ltd) INCORPORATING ORAL TERMS 1. “A statement made before a contract may be a puff, term, representation or form the basis of a collateral contract.” a. 3 separate parties = puff, representation or collateral contract only – no need to discuss Parol Evidence Rule or classification of terms 2. Puffery: There are no common law consequences that arise from such sales talk, however the statement-maker may be in breach of section 18 of the ACL (Cth) *‘misleading or deceptive conduct’+ or ACL (Q). 3. GENERAL TEST: Representation or Term: Whether a statement is a term or representation depends on the intention of the parties viewed objectively as to whether the statement is promissory or merely an inducement to contract (Oscar Chess Ltd v Williams; Heilbut, Symons & Co v Buckleton). a. “Prima facie the statement seems promissory – undertaking that something will occur (or a state of affairs will exist), not merely something to induce contract being formed.” (Dick Bentley Productions v Harold Smith) 4. Subsidiary tests: a. Words & conduct of the parties – if the statement is important in the minds of the parties = probably a term; (Harling v Eddy) b. Long interval of time between the statement and the conclusion of the contract = probably not a term; (Routledge v McKay) c. Oral statement not reduced into writing = probably not a term; d. One party is in a better position to ascertain the truth of the statement = probably a term; e. Statement-maker has control of the information = probably a term. (Hospital Products Ltd v United States Surgical Corporation) 5. Qualitative balance – prima facie conclusion, “statement better viewed as promissory in nature/inducement.” a. Where it is unclear – branch argument by dealing with term/cc first, then return to discuss alternative of representation 6. If representation: a. Breach can result in remedy under legislation (ACL) or common law. i. If common law misrepresentation is: 1. Innocent = rescission; 2. Negligent = rescission & damages in tort; 3. Fraudulent = rescission & damages in tort. 7. If promissory, term or collateral contract? [Q of construction] 8. Collateral contract? a. Statement is promissory, but subject matter distinct from the main contract (De La Salle v Guildford) b. The consideration for the collateral contract was the entry into the main contract (Heilbut Symons & Co v Buckleton) i. Bipartite (2 parties) (Shepperd v The Council of the Municipality of Ryde) ii. Tripartite collateral contract (3 parties) – consideration for the contract = entering main contract with third party (Wells (Mersthan) Ltd v Buckland Sand and Silica Co Ltd) iii. No collateral contract where there is only past consideration (Hercules Motors v Schubert) iv. Collateral contract must be consistent with the main contract (Hoyts Pty Ltd v Spencer) 1. However, in an appropriate case estoppel may apply (Waltons v Maher) c. Three elements must be established: i. Statement made with an intention that it be relied upon; ii. Reliance on the statement; iii. An intention to guarantee the truth of the statement (Savage v Blakney). d. Better test: Was the consideration for the statement entering into the main contract (Shepperd v The Council of the Municipality of Ryde) e. No problems with parol evidence rule because no presumption arises in relation to the conclusiveness of the written document (De La Salle v Guildford) f. Remedy = damages only. Innocent party cannot terminate main contract because it is an entirely different contract. 9. Main contract: a. Written: Parol Evidence rule i. Where there is a written document, it is presumed to contain all the terms, and evidence of oral terms is inadmissible to add to, vary or contradict the written document (Mercantile Bank of Sydney v Taylor) ii. Rule circumvented if it can be shown that the parties intended to contract partly orally and partly in writing (Couchman v Hill) 1. Objective test of intentions of the parties [e.g. standard form – partly oral/writing; amendments to standard form – writing] iii. Exceptions: 1. Evidence of collateral contract (De La Salle v Guildford) 2. Evidence that written contract is not yet in force (Pym v Campbell) 3. Evidence that written contract was later varied or discharged 4. Evidence to imply a term (Summers v The Commonwealth) 5. Evidence necessary for rectification (Maralinga v Major Enterprises) 10. If term, classification of that term [see below] INCORPORATING IMPLIED TERMS 1. Look for express terms (written / oral) above 2. Look for implied terms: “Terms can be implied in a contract to reflect the presumed intention of the parties, or for reasons of public policy.” a. Presumed intention of the parties: i. Business efficacy 1. Conditions necessary in order to imply a term (Codelfa Construction P/L v State Rail Authority of NSW): a. Implication must be reasonable and equitable; b. Implication must be necessary to give business efficacy [desired commercial result]to the contract so that no term will be implied if the contract is effective without it; c. Term must be so obvious that it goes without saying [officious bystander /objective third party test]; d. Term must be capable of clear expression; and e. Term must not contradict any express term of the contract. 2. Evidence can be led to determine whether it is appropriate to imply the term (Codelfa) 3. The more formal the contract, the more reluctant the court is to imply the term (Codelfa) ii. Previous consistent course of dealings 1. Test for implication is based on reasonableness 2. Party relying on term must show: a. a ‘course of dealing’ – the previous occasions must be sufficiently numerous and frequent; (Henry Kendall & Sons v William Lillico & Sons Ltd; cf Hollier v Rambler Motors (AMC) Ltd - 3-4 transactions spread over 5 years = insufficient) b. the course of dealing must be consistent; c. there must be a reasonable expectation that the same terms should be included in the subsequent contract. 3. Different views on actual vs constructive knowledge: Actual knowledge of the implied term may not be necessary, constructive knowledge is sufficient (Henry Kendall & Sons v William Lillico & Sons Ltd, cf Eggleston v Marley Engineers P/L) 4. Parol evidence rule will not apply because it is implied as a presumed intention, so the parties cannot have intended the written contract to form the entire agreement. iii. Custom or usage (Con-Stan Industries) 1. Existence of custom or trade usage = Q of fact 2. Custom or trade usage must be so well known that all parties can reasonably be presumed to have imported that term into the contract a. Must be sufficient evidence custom actually exists b. Must have sufficient degree of notoriety (must be well-known) 3. Term will not be implied if it is contrary to the express terms of the agreement 4. Person may be bound although they had no knowledge of the term (Summers v Commonwealth; Con-Stan Industries of Australia P/L v Norwich Winterhur Insurance (Australia) Ltd) 5. Parol evidence rule will not apply because it is implied as a presumed intention, so the parties cannot have intended the written contract to form the entire agreement iv. Complete the agreement / fill the gaps 1. Court may attempt to construct the contract by implying the necessary term to complete the contract (Hillas v Arcos) b. Public policy i. Legal incident of a particular class of contract 1. Term will be implied as a matter of law, not because the parties intended it (Liverpool City Council v Irwin) ii. General duty of co-operation 1. All contracts have implied term that each party agrees to do all things necessary to enable the other party to have the benefit of the contract (Butt v McDonald) a. Examples: i. Duty to comply with reasonable requests ii. Duty not to impair basis of contract (RDJ International Pty Ltd v Preformed Line Products) iii. Duty to do all things necessary to enable the agreement to be completed (Adelaide Petroleum v Poseidon) iii. Duty of good faith, fair dealing & reasonableness 1. Since comments of Griffith J in Butt v McDonald, it has been suggested that the courts may be prepared to imply a duty for the parties to act in good faith in performing the contract (Renard Constructions v Minister for Public Works) a. No implied term that parties will act reasonably or in good faith in forming contracts (cf USA) iv. Statute 1. A term may be implied into a contract by a statute, eg Sale of Goods Act 1896 (Qld) ss 15, 16, 17 & 18 a. Implication can be negatived by the parties expressly stating that they want to contract out of the implication (s 56 SGA ) 3. Identify the term. a. Must be certain: i. The court will endeavour to assign a meaning to the term (Hillas v Arcos) ii. If no meaning can be attached to the conflicting express term, the clause may be severed (Fitzgerald v Masters) and there will be no possible conflict with the purported implied term 4. Classify the term [see below] CONSUMER GUARANTEES Not implied into contract – stand independently & can be directly enforced as breach of Competition & Consumer Act 2010 Consumer may seek redress from retailer or manufacture – overcomes problems of privity 1. Consumer (ACL s 3(1) goods; (3) services) if: a. Acquired for a price
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