BTF1010 Commercial Law Chapter Summaries
Derry v Peek (1899) 14 App Cas 337
- Year of law report
- Volume of report
- Name of law report
- Page number
Ratio decidendi: reasons that higher courts decided something the way that they did (binding
Obiter Dicta: things said by the way (persuasive force only)
Where there is a question of conflict between parliamentary law and judge-made law,
parliamentary law is always superior.
J after a name indicates ‘Justice’
LJ = Lord Justice (English court of appeal)
MR = Master of the Rolls (English court of appeal)
Plaintiff and defendant in a State Court, applicant and respondent in Federal Court
Trials in a federal court Trials in a state court
• A Smith (Applicant) • A Smith (Plaintiff)
• v • v
• B Jones (Respondent) • B Jones (Defendant)
On appeal, the matter becomes Jones v Smith, Jones is the appellant and Smith the
respondent. Chapter 4: Contract – Offer and Acceptance
What is a contract?
A contract is an agreement between two parties which will be enforced by a court of law.
A contract does not need to be in writing. An oral agreement is enforceable in the same way
as a written agreement. Advantage of a written agreement is proof.
Intention is capable of two constructions:
1- To ascertain subjective intention is to examine a person’s state of mind
2- To ascertain objective intention is to ignore the person’s state of mind and to look
at what they said and did. On the basis of what they said and did, it is possible to
conclude that any reasonable person doing the same things within the same context
must have had a particular intention. This is called the ‘Reasonable Person Test’
Contractual remedies :
- Termination of contract: only available for serious breaches of contract
- Damages: purpose is to give the innocent party monetary compensation for the loss of
contractual benefits. See: Tabcorp Holdings Ltd v Bowen Investments Pty Ltd 
- Specific Performance: an order by the court requiring a party to the contract to
honour his or her contractual obligations: see Goldsborough Mort & Co Ltd v Quinn
- Injunction: an order by the court requiring a person to stop doing something. In
contract terms, to stop acting in breach of the contract. Will only be granted for
serious breaches of contract : (see Lumley v Wagner [1843-60] All ER Rep 368)
- Recovery of the contract price: where a sum of money has become due under a
contract, but has not been paid, the person to whom the money is owed may sue for
recovery of that sum. See Hoenig v Isaacs
- Agreed damages clauses: Contract itself may make provision for the damages to be
paid in the case of breach. This is called an agreed or liquidated damages clause.
Offer: the indication by one party to another of their willingness to enter into a contract with
them on certain terms. OR where one person indicates to another a willingness to enter
into a binding agreement on certain terms (more accepted)
An offer; or an indication of present intention? Harvey v Facey  established that
clarification of information does not constitute an offer.
An offer or an invitation to treat? E.g. an advertisement in a newspaper. It can also be called
an invitation to negotiate (See Partridge v Crittenden  2 All ER 421/ Fisher v Bell
1960). The distinction between an offer and an invitation to treat lies in the objective intention of the person making the offer or invitation to treat. Carlill v Carbolic Smoke
Ball Co.  = offer made and not simply invitation to treat.
At an auction, the offer is made by the bidder and the auctioneer decides whether to accept
or reject. Likewise the tenderer makes the offer not the person calling for the tenders:
Spencer v Harding .
Fate of an offer:
Withdrawal/ revocation of an offer
An offer can be withdrawn subject to the following rules:
- Once an offer is accepted it cannot be revoked (Routledge v Grant )
- Revocation must be communicated to the offeree (Byrne & Co v Van Tienhoven 1880;
postal rule doesn’t apply to revocation)
- Communication of the revocation does not have to be made by the offeror personally
(Dickinson v Dodd’s  2 Ch D 463)
Is it possible to revoke a unilateral offer? (Unilateral = only one party needs to act without
Where the offer involves a unilateral promise and the offeree has acted on the promise, the
offeror will be prevented from withdrawing the offer until the offeree has had a reasonable
opportunity to complete.
An option: is a contract to keep an offer open- the offer cannot be revoked. E.g. if a deposit
had been made to keep the offer open, it cannot be revoked.
Rejecting an offer
- May be rejected explicitly or by implication
- Offer is terminated on rejection and cannot subsequently be accepted: Hyde v Wrench
- An offer is rejected by the offeree doing something that is inconsistent with an
intention to accept
- Counter offer amounts to rejection: an offer is rejected by the offeree making a
counter offer. Any material alteration of the terms of the offer will be a counter offer:
Hyde v Wrench .
- Dissatisfaction with the offer does not amount to rejection i.e. complaining about
terms is not rejection: See Brambles Holdings v Bathurst City Council .
- Asking for clarification of the terms of the offer is not a counter offer! See
Stevenson Jacques & Co v Mclean (1880) 5 QBD 346 AND Turner, Kempson & Co v
Camm  Accepting the offer:
- Only the offeree may accept the offer See Boulton v Jones / Tallerman & Co v
Nathan’s Merchandise 
- Acceptance must be final and unqualified (Masters v Cameron 91 CLR 353)
- Acceptance must be communicated to the offeror unless one of the exceptions applies
(See Felthouse v Bindley  11 CBNS869)
There are 5 exceptions to the rule that acceptance must be communicated:
1) Where the parties have dealt regularly with one another, it may be reasonable to
conclude that a contract exists even though the offeree has not formally accepted
2) Where the offeror alnd offeree are in the same industry and custom within that
industry suggests that formal acceptance is not necessary, a contract may exist even
though the offeree has not communicated acceptance
3) Acceptance may be indicated by conduct: See Empirnall Holdings Pty Ltd v Machon
Paull Partners Pty Ltd .
4) In the case of unilateral contracts (Carlill v Carbolic smoke ball) it is not necessary for
the offeree to advise the offeror of acceptance
5) The postal rule
Where the offeror has expressly or impliedly accepted the ordinary post as the means of
communication (Tallerman & Co v Nathan’s Merchandise  98 CLR 93), acceptance occurs
when the letter is posted, even if the letter is lost in the post - Adams v Lindsell 
- For the postal rule to apply, there must be evidence that the offeror has accepted the
post as the method of acceptance (Bresson v Squires  2 NSWLR 460)
- Can acceptance be communicated by someone other than offeree? Provided the third
person has actual authority to communicate acceptance, or reasonably appears to
have such authority, the acceptance is valid. Otherwise, it is not; Powell v Lee (1908)
Note: Postal rule doesn’t apply to revocation of an offer, only acceptance: Byrne & Co. v Van Tienhoven
& Co .
Lapse of an offer :
The death of either the offeror or offeree terminates an offer (Fong v Cilli  11 FLR
495). The result would differ if an option was involved and the offer did not involve personal
skill or service by the deceased: Carter v Hyde  33 CLR 115
Due to time: Where no time limit is mentioned, the offer remains open for a reasonable time:
(Ramsgate Victoria Hotel Co Ltd v Montefiore  LR 1 Ex 109).
What constitutes a reasonable time depends on the circumstances:
- Method by which the offer was made (e.g. telegram demands quicker response than
- Nature of the transaction (sale of book would demand faster reply than sale of a
- Terms of the contract
- Actions of the parties between making the offer and the acceptance
- Any evidence that the offeror has intimated an appropriate time frame Agreement must be specific and certain in all its essential elements, otherwise it is void.
It cannot contain unclear, ambiguous or contradictory terms: Toyota motor corporation v
Ken Morgan motors  2 VR 106 AND Whitlock v Brew  Chapter 5: Contract – Intention and Consideration
Intention to contract:
- Courts use a reasonable person test to decide whether the parties intended to
contract: See Taylor v Johnson .
- For social/domestic agreements, courts begin with the presumption that parties did
not intend to contract: Balfour v Balfour 
- Social/domestic agreements CAN be contracts if that was the intention of the parties:
Ermogenous v Greek Orthodoc Community of SA Inc .
- For commercial agreements, courts begin with the presumption that the parties
intended their agreement to be legally enforceable: Rose and Franc Co v J R Crompton
and Bros Ltd  – made it clear that they did not want to create legal relations
- Letters of comfort: one party wants to be bound but the other party doesn’t: See
Kleinwort Benson Ltd v Malaysia Mining Corporation  AND Commonwealth
Bank of Australia v TLI Management Pty Ltd .
- Agreements made ‘subject to contract’ (agree with a contract to be created later) are
generally held as non-binding by the courts: See Masters v Cameron 
- Consideration is something of value provided in return for a promise
- If there is no consideration, an agreement is only enforceable in the form of a deed
which requires the marker of the deed to ‘sign, seal and deliver’ the document.
- All simple contracts require consideration to be binding: See Rann v Hughes
- May be:
A promise to do something: See Esso Petroleum Ltd. V Commissioners of
customs & excise 
A promise not to do something
Doing something: See Carlill v Carbolic Smoke ball Co 
Refraining from doing something
- Only a promisee may sue on the contract: See Dunlop Pneumatic Tyre Co Ltd v
Selfridge and Co Ltd [1914-15]
- Privity of contract rule: If the promise is made by the promisor to two or more
persons jointly, only one of the persons needs to provide consideration: See Coulls v
Bagot’s Executor & Trustee Co Ltd 
- Consideration may be present of future but cannot be past: See Roscorla v Thomas
- Consideration does not need to be of equal in value to the promisor’s promise. It does
not have to be adequate: Thomas v Thomas 
- Consideration must be sufficient: e.g. past consideration is not sufficient.
Illusory promises are not consideration: in consideration of love and
affection: Eastwood v Kenyon .
Where the promisee has not agreed to be bound by anything really: See
Francis v South Sydney District Rugby League Football Club Ltd 
Giving up a legal claim can be consideration: See Wigan v Edwards 
Renegotiating Contracts :
- When renegotiating a contract, fresh consideration is necessary: See Mitchell v Pacific
Dawn Pty Ltd .
- A promise to fulfil a contractual duty already owing is not good consideration unless
the party provides something in addition to the existing duty: See Stilk v Myrick
 And Pinnel’s Case . However in some cases the courts may recognise a potentially hidden form of consideration: Williams v Roffey Bros & Nicholls Ltd
- Exceptions to Foakes v Beer = part payment by a third party (see p 209)
- Promising to perform a public duty already owing is not good consideration: See
Collins v Godefroy .
To prevent certain types of unfairness – the courts will use the doctrine of estoppel. Estoppel
is a doctrine based on fairness. A person who represents that a certain situation exists should
not be allowed at a later date to deny the truth of that representation. Promissory estoppel is
different in that it deals with promises about future whereas the original estoppel dealt with
misrepresentation of existing fact.
- A promisee can enforce a promise even though no consideration has been provided,
where it has been relied upon and it would be unfair to allow the promisor to renege.
Central London property trust Ltd v High trees house Ltd  and Walton stores
(interstate) Ltd v Maher  – (where the formalities of making a contract have
not been satisfied) Or when no consideration exists Je Maintiendrai Pty Ltd v
There are 5 requirements to establish promissory estoppel:
1: The assumption – the promisee on reasonable grounds, assumed: a legal relationship
existed (Je Maintiendrai Pty Ltd v Quaglia ) OR would exist (Walton stores (interstate)
Ltd v Maher ) between the promisor and promisee.
2: The promisor was responsible for the assumption – The promisor either: induced the
assumption; or being aware that the promisee had made the assumption, deliberately
remained silent in circumstances where the promisor could reasonably be expected to speak
3: The reliance – the promisee acted (or refrained from acting) on the faith of the assumption
4: Promisor’s intent – the promisor knew or intended the promisee to rely on the
5: The detriment – the promisee will suffer a detriment if the promisor is permitted to
renege on the promise. Chapter 6: Express Terms of Contracts
Three tests for establishing express terms of a contract:
Ascertaining the relevant evidence
- Parol evidence rule: courts presume that the written document contains the entire
agreement, and disallow oral evidence to add to or vary the written document.
- If the court is convinced that the written document is incomplete or an incorrect
record of the parties’ transaction, the court must not apply the rule
Statements made after contract formed are not terms:
- A party cannot be bound by statements, promises or representations made after the
contract has been formed unless fresh consideration is provided: See Roscorla v
- Sellers of packaged products can’t rely on a clause contained in the sealed package
unless it is brought to the buyer’s attention prior to sale: See Hardchrome Engineering
v Kambrook 
- Car Park issued exemption clause after Thornton bought ticket in Thornton v Shoe
Lane Parking Ltd 
- Past dealings can be important where the parties deal with one another on a
regular/consistent basis Importance of signed documents
- General rule: A person who signs a document that has a contractual appearance is
bound by the contents of the document. See Yarkey v Jones  And Wilton v
- Not reading the contract is irrelevant; the person signing is still bound: See L’estrange
- The document didn’t appear to be contractual (reasonable person test): See Le Mans
Grand Prix Circuits Pty Ltd v Iliadis 
- If promissory estoppel applies: a signed agreement may not be enforceable where it is
at odds with terms expressly, but orally, agreed between the parties. See Equuscorp
Pty Ltd v Glengallen Investments Pty Ltd 
- Misrepresentation or deceptive conduct: See Curtis v Chemical Cleaning and Dyeing
- Condition precedent: the signed document will not be binding if the parties have
made it subject to a condition precedent
- The document does not accurately record the agreement: mistake in recording the
terms and one party is unfairly trying to take advantage of the mistake: See Taylor v
- Equitable doctrines: some situations in which the court will not enforce a contract
because it would be inequitable (unfair) to do so. These include: unconscionable
conduct, duress, undue influence and unilateral mistake.
Incorporating unsigned terms into contracts by notice
- Reasonable notice test: if reasonable notice has been given, it does not matter
whether the other party read the clause or not: Parker v South Eastern Railway Co
What constitutes reasonable notice?
It is necessary to look at the facts of the case:
- Whether the document was contractual in nature
- Whether the term sought to be incorporated was unusual for that type of contract
- Whether the parties discussed the matter
Contractual in nature:
Would a reasonable person expect the document to contain terms and conditions? Or just a
docket to be filed away unread or a receipt similar to that in D J Hill and Co Pty Ltd v Walter
H Wright Pty Ltd And Oceanic Sun Line Special Shipping Co Inc. v Fay 
If the unsigned term is particularly unusual, extra notice will have to be given: Interfoto
Picture Library Ltd v Stiletto Visual Programmes Ltd 
Discussed the matter:
Even if sufficient notice is given, the incorporation may be subject to any oral statement to
the contrary; Couchman v Hill 
When are oral statements binding?
Statement must be promissory in nature:
- Only statements promissory in nature become terms.
- Must apply a reasonable bystander test Which statements would a reasonable bystander, aware of the circumstances
of the case, regard as promissory?
Oscar Chess Ltd v Williams : Denning Lj said The question whether a
term was intended depends on the conduct of the parties, on their words and
behaviour, rather than their thoughts. If an intelligent bystander would
reasonably infer that a warranty was intended, that will suffice.
Guidelines to the reasonable bystander test:
- Was the representation included in the written document?
- When in the negotiations was the representation made?
- Did the representation sound promissory
- How objectively important is the representation to the overall deal?
- Did eithe