Contracts A Flashcards
The High Court has indicated that a presumption based approach to intention may be inappropriate in many cases, particularly where the relationships sits somewhere between “personal” and “commercial”.
Ermogenous v Greek Orthodox Community of SA Inc (2002) HCA
Archbishop - claimmed annual and long service leave payments - contract.
Family arrangements traditionally have been presumed to be mere social arrangements.
Balfour v Balfour (1919) EWCA
Husband moved to Sri Lanka - wife remained in England - promised £30/month.
In a domestic context, reliance is a strong factor indicating the parties wished to create legal relations.
Todd v Nicol (1957) SASR
Window - invited sister in law to move from Scotland to Australia - promised house.
Parties can decide only to be ‘honor bound’ and not legally bound.
Jones v Vernon Pools (1938) All ER
Football coupon game - ‘in honour only’ - no intention.
What are the three categories of subject to contract from Masters v Cameron (1954) HCA?
- Bound immediately, restate terms more fully and precisely later.
- Bound immediately, obligation to perform one or more terms depends on written contract
- Not bound until written contract signed.
What is the fourth category of Masters v Cameron (1954)?
Baulkham Hills Private Hospital Pty Ltd v GR Securities Pty Ltd (1986) NSWSC per McLellend J
Bound immediately, but will insert new terms in written contrtact which will replace current agreement.
A party claiming a letter of intent is not binding has the onus of proof, as business people do not just draw up documents for fun.
Banque Brussels Lambert SA v ANI Limited (1989) NSWSC
BBL sought parent guarantee - ‘practice to ensure our subsidiaries debts are paid’ - debtor unable to disprove intention.
What is the latin phrase for “of one mind”?
“Ad ideam” (Ad I-dem)
An offer may be to a particular person, or the world at large.
Carhill v Carbolic Smokeball Company (1883) EWCA
Carbolic Smoke Ball - £100 reward - contract made with those who contract influenza.
Acceptance is tested objectively, except in unilateral contracts.
R v Clark (1927) HCA
£1000 reward - plaintiff provided information - intention to clear name.
Items on a shop shelf are mere “invitations to treat”.
Fisher v Bell [1961] 1 QB 394
Offering for sale an offensive weapon - flick knife in window - no ‘offer’.
A call for tenders is generally an invitation to treat, unless a processes contract can be implied.
Hughes Aircraft Systems International v Air Services Australia (No 3) (1997) FCA
Final two tenderers - signed assessment criteria - criteria later unable to be changed.
Mandatory language (such as “must” or “will”) means it is more likely process contract will be implied in tender process.
IPEX ITG Pty Ltd v State of Victoria [2010] VSC 480
Invitation to tender - installing computer systems at electoral offices - State “must” or “will” do this and consider this.
Price is a essential term of a construction contract.
Courtney and Fairbairn Ltd. v Tolaini Brothers (Hotels) Ltd [1975] EWCA
Hotel - price to be agreed - no contract.
In “battle of forms” last shot prevails, unless Denning MR’s synthesis approach is adopted.
Butler Machine Tool Co Ltd v Ex-Cell-O Corp (England) Ltd [1977] EWCA
Contract for machinery - standard forms exchanged - who fired the last shot.
Silence cannot be mandated as acceptance.
Felthouse v Bindley (1862)
“If I hear no more about him, I consider the horse mine at £30 and 15s.”
Silence plus conduct can constitute acceptance.
Empirnall Holdings Pty Ltd v Machon Paull Partners Pty Limited (1988) NSWSC
Redevelopment of site - “not its practice to sign” - carried out works as if bound.
When acceptance is anticipated by post, acceptance is effective the moment it is posted (the “postal rule”).
Adams v Lindsell (1818)
Sale of wool - P accepted immediately - after posting, but before arriving, D sold elsewhere.
Postal rule does not apply to instantaneous communications (ie fax) - acceptance effective only when received, and contract formed where acceptance received.
Brinkibon v Stahag Stahl und Stahlwarenhandelsgessellschaft mbH [1983] UKHOL
P wanted to sue D for breach in England - accepted by fax - as fax received in Vienna, contract formed there.
Electronic contracts are valid.
s 7 Electronic Transactions (Victoria) Act (Vic) 2000
‘…a transaction is not invalid because it took place wholly or partly by means of one or more electronic communications.’
Performance of an existing legal duty can constitute good consideration where there is a “practical benefit” to the offerree.
Williams v Roffey Bros and Nicholls (Contractors) Ltd [1989] EWCA
Carpentry work - promised extra money to complete on time - ‘practical benefit’.
Part payment of a debt is not good consideration to support discharge of the whole debt.
Pinnel’s Case [1602]
Pinnel sued Cole for the sum of £8 10s - £5 2s 6d already tendered in full satisfaction - no consideration.
For a formal recorded contract, what are the five requirements for an implied term by fact from BP Refinery (Westernport) Pty Ltd v Shire of Hastings (1978)?
- (1) Must be reasonable and equitable
- (2) Must be necessary to give business efficacy to the contract
- (3) It must be so obvious it “goes without saying”
- (4) It must be capable of clear expression
- (5) It must not contradict any express terms of the contract.
For an informal contract, the test for an implied term by fact is whether it is ‘necessary for the reasonable or effective operation of the business contract’.
Bryne v Australian Airlines (1995) HCA
Baggage handler - dismissed for stealing - no implied term in contract that termination would not be “harsh, unjust or unreasonable”.
Extrinsic circumstances can only be used to interpret the contract when there is ambiguity.
The High Court in Mount Bruce made it clear that Codelfa remains good law in Australia and therefore; evidence of the surrounding circumstances will be admissible as an aid to construction only if the relevant term is ambiguous or capable of more than one meaning.
Forebearance of your legal rights can be good consideration.
Hamer v Sidway (1891) NY Court of Appeal
Nephew promised $5000 if forebade from smoking, drinking and gambling before he turned 21.
An offer must indciate a clear intention to be legally bound if it is accepted by the offerree.
Gibson v Manchester City Council [1979] UKHL
Firm offer or step in the negotiations? The corporation may be prepared to sell the house to you at the purchase price of £2,725…
What is a “puff”?
A puff is a wild, unrealistic or meaningless statement that is never intended to have contractual force. See Leonard v Pepsico (1999)
How is an offer normally accpted in a ticket case?
The offer is accepted after the passenger has had a reasonably opportunity to read the terms and conditions on the ticket.
It has been said with reference to this case that the technical requirements of offer and acceptance are artificial and cannot always be applied satisfactorily to everyday transactions.
McRobertson Miller Airline Service v Commissioner of State Taxation (1975) HCA
Wideranging exclusions - no certainty until passenger gets on place - contract only finalised at that point?
Is a call for tenders an offer?
Traditionally, no unless there are some terms the tenderer agrees to be bound by (i.e. sell to highest price).
See IPEX ITG Pty Ltd v State of Victoria [2010] VSC 480.
What is the effect of a counter offer?
A counter offer terminates the original offer.
Can acceptance be conditional?
No. Conditional acceptance (“I accept, but only on these conditions…”) is a counter offer in disguise.
When can an offer be withdrawn?
Any time prior to acceptance, so long as the withdrawal is actually communicated.
Which case discusses the difference between rejecting an offer (thereby terminating it) and enquiring about the terms?
Brambles Holdings Ltd v Bathurst City Council (2001) NSWSC
Waste disposal operator - counsel wanted them to increase rates - “your proposal will only be viable if we can increase our charges” - no rejection - negotiation only.
Which cases discusses the option exception to the freedom of the offeror to withdraw the offer at any time?
Goldsbrough Mort v Quinn (1910) HCA
Promised to keep offer in relation to land open for one week - attempted to withdraw before the end of the week alleging mistake.
Which case discusses the implied contract not to withdraw an offer in respect of a unilaterl contract?
Mobil Oil v Wellcome [1998] FFCA
Mobil withdrew incentive program prior to its scheduled completion - on appeal held allowed to do so - obiter discussion of possible implied anciliary contract not to withdraw.
An offer may be accepted by conduct.
Empiral Holdings v Machon (1988) NSWSC
Architects attempted to have owner sign a contract; but were told owner “does not sign contracts” - owner took benefit of architectual services and acted consistently with terms - acceptance by conduct.
Why is there no need to communicate acceptance under a unilateral contract?
There is an implied waiver.
Why does a promise to give a conditional gift not satisfy the requirements of consideration?
There is no quid pro quo: Australian Woollen Mills Pty Ltd v The Commonwealth (1954) HCA
The Commonwealth Government announced that it would pay a subsidy to manufacturers of wool who purchased IF they used it for local manufacture after 30 June 1946.
An unfettered discretion as to performance is an illusionary promise and cannot be consideration.
Placer Development Ltd v Commonwealth (1969) HCA
Contract between government and PNG timber company -
Commonwealth to pay a subsidy at their discretion to cover the excise import duty charged to import to Australia.
Past consideration cannot be good consideration.
Roscorla v Thomas (1842) 3 QB 234.
After sale, seller promised horse was “free from vice”. Plaintiff had given no consideration for the subsequent promise.
What two propositions does the UK Privy Council case of Pao On v Lau Yiu Long [1979] UKPC stand for?
- Giving a pre-existing promise to a third party is good consideration; and 2. Past consideration is good consideration if understanding would be paid.
A peppercorn can constitute good consideration.
Chappell & Co Ltd v Nestle Co Ltd [1990] AC 87
Royalties to artists caluculted on wrappers having value.
Giving up an honest belief that you had the right to sue is fresh consideration.
Wigan v Edwards (1974) HCA
Defendant agreed to remedy defects as compromise. Renegged. Forbearance to sue good consideration for promise to remedy.
A vaguely defined or indeterminate benefit cannot constitute good consideration - there is insufficient certainty.
Biotechnology Australia Pty Ltd v Pace (1988) NSWSC
Company’s “senior staff equity sharing scheme” - scheme to vague - no details - unable to be enforeced.
A specific act must be performed quid pro quo - in exchange for the promise. Reliance on a promised state of affairs is not the test of consideration.
Beaton v McDivitt (1987) NSWCA
McDivitt promised to transfer land to Beaton when a proposed rezoning occurred if the appellant worked the land in a specified way. Land never rezoned and contract frustrated.
In obiter; Court rejected reliance as the test; though differed on whether there had been quid pro quo. Kirby P said there had been none.
What does s 126 Instruments Act provide?
A guarantee or contract for the sale of land must be in writing; or be evidenced by a memorandum in writing signed by the party charged. (NB: s 126(2) specifically allows the writing component to be electronic.)
The requirement of formality can be overcome in circumstances of part performance ; but only when the performance is unequivically referable to the promise.
Ogilvie v Ryan [1976] NSWSC
Defendant claimed that she had orally agreed with testator that; in return for her looking after him; she’d be able to live in the house for as long as she wished. Could be referrable to love and affection and so no part performance.
Policy offers by government are unlikely to have manifested an intention to be bound.
Administration of Papua and New Guinea v Leahy [1961] HCA
Statement of policy that PNG officers would eradicate ticks infesting the P’s cattle - policy shows no intention to be bound.
What does the parol evidence rule prohibit?
When a contract is reduced to writing, evidence being adduced to intrepret or vary the express words of the contract.
Can you use extrinsic evidence to determine whether the contract is wholly in writing or not?
Arguably yes: State Rail Authority v Heath (1986) NSWSC
Contract for advertising on railway owned billboards - “we only enforce this clause if objectionable advertising content” - contract which appears to be wholly in writing is evidentiary starting point only, cannot exclude evidence of oral terms.
To add additional terms to a wholly in writing contract (subject to the parole evidence rule) you may argue for an oral collateral contract. What are the two requirements?
The statement must:
- Be consistent with the main contract: Hoyts v Spencer (1919) (oral collateral contract not to terminate theatre agreement inconsistent with unfettered right of termination in head contract).
- Representation must be promisory: JJ Sons v Blakney (1970) HCA (D estimated that boat would go 15mph - not sufficiently promisory).
To add addition terms to a wholly in writing contract (subject to the parole evidnece rule); you might want to argue and estoppel. Is this permissable?
Conflicting authorities as to whether permitted or not:
- Yes. Clear and convincing proof is required to derevate from written terms. Whittet v State Bank of New South Wales.
- No. ACF v Narco.
Extrinsic circumstances can only be used to interpret the contract when there is ambiguity.
The High Court in Mount Bruce made it clear that Codelfa remains good law in Australia and therefore; evidence of the surrounding circumstances will be admissible as an aid to construction only if the relevant term is ambiguous or capable of more than one meaning.
What is the test for determining whether a statement made during negtiations was promissory?
“Whether an intelligent bystander would assume that a promise was made.”
Per Denning LJ in Oscar Chess Ltd v Williams [1956] EWCA
The language used is a factor in considering whether a statement was intended to be promissory.
JJ Savage v Blakney (1970) HCA
Blakney entered into a contract with Savage to have a boat built. During the negotiations Savage said that the boat would; when fitted with a particular engine; have an estimated speed of 15 mph.
The timing of a representation in negotiations is a factor in determining whether it was meant to be promissory.
USSC v Hospital Products Pty Ltd (1984) HCA
Representations made earlier in negotiations are less likely to be promissory.
The relative expertise of the parties is a factor in determining whether the representation was promissory.
Oscar Chess v Wilde [1956] EWCA
1948 versus 1939 Morris 10. Sold innocently but unknowingly. Not a term because no reasonable person in buyers position would think a person with no experience in the car market would have guaranteed the truth of the statement.
The importance of the term is a factor in determining whether the representation was promissory.
Van den Esschert v Chappell [1960] WAR (Seller promised house would be free from termites).
If you sign it; you are stuck with it.
L Estrange v F Graucob Ltd [1934] 2 KB
It is unfortunate that the important clause excluding conditions and warranties is in such small print per Maugham LJ.
As an exception to the rule in L Estrange v F Graucob Ltd; you will not be bound by a signed document when there has been fraud or misrepresentation about its contents.
Curtis v Chemical Cleaning & Dyeing Co [1951]
Plaintiff misinformed about scope of exclusion clause - actually covered any damage whatsoever .
“I quite agree that the more unreasonable a clause is; the greater the notice which must be given of it. Some clauses which I have seen would need to be printed in red ink on the face of the document with a red hand pointing to it before the notice could be held to be sufficient.”
J Spurling Ltd v Bradshaw [1956] EWCA per Denning LJ
Contract for storage of orange juice exempted warehousemen for liability for damage.
Consideration need only be sufficient, it need not be adequate.
Thomas v Thomas (1842) 2 QB 851
$1 per rent every year to live in late husbands house and keep house in good repair - clearly inadequate, but sufficient in eyes of law.
A contract must be sufficiently certain and clear for a party to understand their rights.
Whitlock v Brew (1968) HCA
A contract for sale of land, including a Shell petrol station - sold on condition that purchaser would grant lease to Shell (third party) on reasonable terms as commonly govern such a lease - no objective standard - uncertain.
What is common law estoppel?
Common law estoppel is a representation as to an existing state of affairs i.e. the contract is signed.
It can only be used as a shield.
What is equitable estoppel?
(aka promissory estoppel or proprietary estoppel when in relation to land)
Equitable estoppel operates to create representations or assumptions about future conduct i.e. I will sign the contract.
It may be plead as an independent cause of action i.e. an offensive weapon.
It may be a relevant detriment for an estoppel to incur a larger obligation than you were led to believe (even if you still received value).
Je Maintiendrai Pty Ltd v Quaglia (1980 SASCA
Landlord made a representation to tenants that they can have a discount for 18 months - Landlord tried to claim full amount when they left.
An agreement to agree is unenforcable.
May and Butcher Ltd v The King [1934]
May & Butcher wanted to buy surplus tentage from the Disposals Board on these terms:
the Board agrees to sell (and May & Butcher agree to purchase) all old tents, with the price and dates on which payment will be made shall be agreed on by the parties as the tents become available
The longer the parties have operated under an uncertain contract, the less likely the courts will be to find it is void.
Foley v Classique Coaches Ltd [1934]
Defendants agreed to buy petrol supplies from Plaintiff at a price which will be agreed upon in the future. Agreement lasted three years without difficulty. D wanted out and so argued no contract.
Hard to reconcile with May and Butcher Ltd v The King, except for the fact that the contract has been basically completely performed for 3 years.
A contractr may provide an effective mechanism for determining the term if they fail to reach an agreement. However, if the mechanism fails, the clause will be void.
George v Roach [1947] HCA
Sale of newsagent at price to be determined by valuer - Valuer refused to carry out the task - Court held that the courts determining the price would be inconsistent with the intention of the parties - Agreement void.
Agreement to sell land for a reasonable price is unenforcable.
Hall v Busst [1960] HCA
Option to purchase land for original price plus the value of improvements less reasonable sum to cover depreciation - Uncertainty.
The UK position is that an agreement to negotiate is not enforcable.
Walford v Miles [1992] UKHL
Agreement to negotiate for sale of photgraphic processing business. Held not enforcable as agreement to negotiate to vague and inconsistent with inherantly adversarial position of parties contracting.
In Australia, a promise to negotiate (or mediate) in good faith could be enforceable.
Aiton Australia Pty Ltd v Transfield Pty Ltd [1999] NSWSC
Transfield (the contractor) applied for a stay of court proceedings because the contract process for formal negotiation had not been followed. In particular, Transfield said that Aiton had not complied with the requirement ‘to make diligent and good faith efforts to resolve all disputes’ before commencing court proceedings.
Uncertain terms may be severed from the agreement if they are a mere appendage;
AND
Works may be supplied, ommitted or corrected to avoid inconsistency or absurdity.
Fitzgerald v Masters (1956) HCA
Sale of land - terms “inconsistent” with … - corrected and severed.
If one party has a discretion, but it must be exercised in a certain way, there will not be illusionary consideration.
Meehan v Jones (1982) HCA
Agreement to sell land, subject to purchaser receiving enough finance - had to be enough finance to satiffy the purchaser, but purchaser had to act honestly and reasonably - no illusionary consideration.
An obligation to act reasonably may be incorpoated into a contract on an ad hoc basis.
Renard Construction v Minister for Public Works [1992] NSWSC
A building contract contained a clause which provided that upon default, the contractor could be required to show cause as to why the contract should not be terminated - held that Principal was under an obligation to consider the matter reasonably.
Along with Renard Constructions, which has been another Australian case that dealt extensively with the idea of good faith restricting a party’s termination obligations?
Burger King Corporation v Hungry Jack’s Pty Ltd (2001) NSWCA
Burger King breached implied term of good faith by denying financial and operational approval to new resturants, so that Hungry Jacks was in breach of expansion obligations.
Which High Court case has been the only one to deal with the concept of an implied term of good faith, but doubted its existence in all contracts?
Royal Botanic Gardens and Domain Trust v South Sydney City Council [2002] HCA
Exclsuion clauses are interpreted according to their “natural and ordinary meaning, read in light of contract as a whole…due weight to context and where appropriate…contra proferentem”.
Darlington Futures Ltd v Delco Aust Pty Ltd (1986) HCA
Commodity trader - unauthorised transactions - large losses.
If a carrier deviates from the agreed voyage or route, he or she loses the benefit of an exclusion clause.
Thomas National Transport (Melbourne) Pty Ltd v May & Baker (Australia) Pty Ltd (1966) HCA
Driver deviated from route after depot was closed - stored goods in own garage where destroyed by fire that night.
Which case discusses the Four Corners Rule, namely that if the plainiff’s loss is from an act not been authorised or contemplated by the contract then an exclusion clause cannot protect the defendant?
Council of City of Sydney v West (1966) HCA
Car park allowed thief to drive away with duplicate ticket -“The Council does not accept any responsibility for the loss or damage …however such loss, damage or injury may arise or be caused.” - Manner of loss was outside that contemplated by the contract.
Which case discusses the general rule that as a third party beneficiary is not privy to a contract, they cannot enfoce it?
Coulls v Bagot’e Executor & Trustee (1967) HCA
Mr Coulls entered into a contract to allow O’Neil Constructions to quarry part of his land. In exchange, O’Neil was to pay royalties to Mr Coulls and his wife as joint tenants. Following Mr Coulls’ death, his executor (Bagots) sought to determine whether O’Neil was required to pay the royalties to the estate or to Mrs Coulls.
While a third party beneficiary can ask the contracting party to enforce the contract on their behalf, what is the difficulty here?
If specific performance is not available, it is unclear what “damage” the contracting party has suffered.
Which High Court case states that for insurance contracts, there is an exception to the privity rule?
Trident v McNiece [HCA] 1988.
Silence is sufficient for an estoppel, but it must be more than mere silence.
Waltons Stores (Interstate) Ltd v Maher [1988] HCA
Defendant’s promised they had signed / would sign - in relaince, Plaintiff commenced demolition and construction - when 40% complete, Defendant’s advised they didn’t want to proceed.
Generally, clear and unequivical words will be required in to give rise to an estoppel.
Legione v Hateley [1983] HCA
Secretary for the vendor’s solicitors said it should be ok but need to get instructions - Purchaser took that as an extension, tried to make the purchase after the deadline - Rejected by vendor, contract has been withdrawn.
Exceptations based damages are available for estoppel.
Giumelli v Giumelli [1999] HCA
Parents and son partners in family orchard business - Parents promised son that if he stayed and worked on property, he will receive some of the land later - Son gave up opportunity to pursue a different career - A fallout happened, parents refused to transfer property.
There is an implied term that each party will do all necessary for the contract to be performed.
Mackay v Dick (1881)
Novel steam navvy - performance requirements - refused access for testing.
It is the objective words, not subjective intentions, which inform the effect of a legal document.
Byrnes v Kendle [2011] HCA
Declaration of trust - failed to recover rent - argued no intention.
What does a counterparts clause generally allow?
All copies of the contract to be treated as the original copy.
Post contractual conduct accepted as relevant to interpretation, though the debate remains open.
(See Royal Botanic Gardens and Domain Trust v South Sydney Council (2002) HCA per Kirby J)
White & Anor v ANZ Theatres Ltd (1943) HCA
“Sole professional services” - actor or producer - how parties conducted themselves admissable.
Extrinsic evidence is permissable to identify the parties or subject matter of a contract.
Edwards v Edwards (1918) HCA
Deed - transfer property to John Edward - father, brother or nephew.
Can an “entire agreement clause” be conclusive?
No - contract is the agreement, not the document.
It is part of the evidence which shows the entirity of the agreement is captured in the document.
What is the difference between an “implied” and “inferred” term?
An inferred term is a term the parties actually agreed, but did not articulate clearly - the court must infer it from oral communication or correspondence.
‘men of full and competent understanding shall have the utmost liberty of contracting, and that their contracts when entered into freely and voluntarily shall be held sacred and shall be enforced by Courts of Justice.’
Printing and Numerical Registering Co v Sampson (1875) per Lord Jessel MR
What is the first reason the Codelfa need for ambiguity debate often a red herring?
If a contract is litigated, amiguity is likely to be present.
Whilst freedom of contract allow parties to confine remedies to what is contractually provided (i.e. no negligence claims) what are three limitations?
They are:
- Public policy contractual remedies - i.e. fraudulent misrepresentation;
- Statutory rights i.e. misleading and decpeive;
- Exclusion clause will be construed strictly.
A statement that a tennant would be “looked after” was too vague to constitute a collatoral contract or estoppel.
Crown v Cosmopolitan Hotel (Vic) [2016] HCA
5 year lease - major refurbishment - would be “looked after”.
“The true rule is surrounding circumstances [are] admissible if the language is ambiguous or susceptible of more than one meaning. But it is not admissible to contradict a plain meaning.”
Mason J’s True Rule conflates two issues - what are these?
Admissibility and use of evidence.
Terms may be incorporated through a course of dealings.
Balmain New Ferry Co Ltd v Robertson [1906] HCA
Ferry business - penny to leave wharf - false imprisonment.
What is the first step of the “deaggregated” true rule in Codelfa?
(per McDougall JA)
Provisional relevance.
Extrinsic evidence is always admissible in the evidentiary sense; that is, courts may always allow its reception.
After admission, what is the second step of the “deaggregated” true rule in Codelfa?
(per McDougall JA)
Use for limited purposes.
Extrinsic evidence can:
- define a descriptive term;
- explain the genesis of a transaction;
- resolve ambiguity;
but cannot:
- contradict plain language;
- prove subjective intentions.
What is the second reason the Codelfa need for ambiguity debate often a red herring?
Extrinisic material is rarely determinative.
Better to consider language, structure and internal logic of contract.
