Week 6 Everything

Question 1

The terms of the contract

Answer 1

The terms of the contract are the specific details of the agreement, including each party’s rights and obligations. Broadly speaking, there are two types of contractual terms: express terms and implied terms: terms may be implied either by the courts and/or any relevant statutory terms.

Question 2

EXPRESS TERMS: Representations and promisesAt common law

Answer 2

The terms of a contract – what the contract contains - the rights and obligations agreed upon within it – are usually arrived at as a result of negotiations during which much may be said by both parties. The crucial issue here, is then, to determine how much of what was said was intended to be a term of the contract? This gives rise to the need to distinguish between statements which are considered to be part of the contents of a contract [terms] and those statements which were not [representations].

Question 3

REPRESENTATIONS

Answer 3

If the statement is not part of the content of a contract [a term], it is referred to as a ‘mere representation’. A mere representation is a statement which has no contractual impact. It stands outside the contract. That does not mean that that statement cannot form the basis for a remedy under another heading just because it is not a term. It can.

Question 4

That does not mean that that statement cannot form the basis for a remedy under another heading just because it is not a term. It can.

Answer 4

That remedy will lie in ‘Misrepresentation’, which is a statement of fact which is not true, which stands outside the contract and which induces someone to enter into a contract.

Question 5

The misrepresentation may be:

Answer 5

Innocent

Negligent

Fraudulent

Question 6

Misrepresentation

The remedies available are

Answer 6

Innocent misrepresentation: Rescission only

Negligent misrepresentation: Rescission and damages in the tort of Negligent Misrepresentation

Fraudulent misrepresentation: Rescission plus damages in the tort of Deceit

Question 7

PAROL EVIDENCE RULE

Answer 7

As an alternative to possibly constituting a misrepresentation, the statement made can constitute one of the exceptions to the parol evidence rule. This possibility requires the discussion of both the rule and one of the exceptions to it – that the contract was partly written and partly oral. The parol evidence rule provides that if the contract is fully and completely in writing, no oral evidence will be allowed to change the provisions of the written contract

Question 8

If a court determines that the contract is partly written and partly oral, then

Answer 8

that oral statement is considered to be a term of the contract. The next question to be determined is how important was the oral promise which is now a term? Was it a condition or a warranty? The difference between the two types of terms will determine the contractual damages and thus, remedy.

Question 9

COLLATERAL CONTRACTS

Answer 9

The final possibility of what the oral statement may be is that of a collateral contract. A collateral contract is a contract the consideration (payment) for which is the entry into of another contract.

Question 10

There are three prerequisites to the application of a collateral contract argument:

Answer 10

There must be no inconsistency with the main contract

The statement made must be promissory in nature

There must be consideration given for the collateral promise made

Question 11

Apart from these alternative arguments at common law, there may also be grounds for breaching certain statutory provisions of the ACL.

Answer 11

If the other party was tricked or deceived into entering into a contract they can commence a legal action using the statutory provisions in the ACL that prohibit misleading or deceptive conduct, false representations and other unfair practices

Question 12

EXPRESS TERMS: Signed documents

Answer 12

There are two ways by which a term becomes an express term of the contract:

by inclusion in a signed written contract.

by being brought to the attention of the other party by reasonable notice.

Question 13

Signed documents

Answer 13

If a term is in a written contract that has been signed by the parties, it is a binding and enforceable term of the contract, even if one of the parties has not actually read and understood the written contract unless there is fraud or misrepresentation.

Question 14

Situations where a signed contract may be unenforceable include:

Answer 14

cooling off periods

non est factum

Question 15

cooling off periods

Answer 15

It is not uncommon to find a ‘cooling off’ provision in certain contracts today. Where these provisions are contained in a contract, they provide a period for a signatory to the contract in which a party may change his/her mind and not proceed with the contract.

Question 16

Non est factum

Answer 16

A latin phrase which literally means ‘it is not my deed.’ This phrase applies to situations where a party is mistaken as to the nature of the document signed.

Question 17

UNSIGNED DOCUMENTS

Answer 17

If a statement is not contained in a written and signed contract (unsigned document) it will only be an express term of the contract if the other party had reasonable notice of the statement. Unsigned documents are usually referred to as the ‘ticket’ cases – cases where a customer is given a ticket when goods are left in another’s care such as dry cleaners, car parks and boot markers.

Question 18

Tickets

Answer 18

Tickets are generally viewed as ‘vouchers’, ‘dockets’ or ‘receipts’ – a means of identifying the goods left in another’s care and paying for the services rendered in relation to those goods. As a general rule therefore, tickets are not viewed as contractual documents. So any provision (such as an exclusion clause on a ticket) is not viewed as having any contractual significance

Question 19

If however actual notice or reasonable notice is given of the existence of the exclusion clause, prior to the completion of the contract, then the exclusion clause will form part of the contract.

Answer 19

Actual notice exists where a party is advised of the existence of the exclusion clause and given a choice as to whether or not that party wishes to proceed with the transaction

Question 20

Reasonable notice

Answer 20

Reasonable notice occurs when everything that is reasonably required of a party to bring the existence of the exclusion clause to the attention of another party prior to the completion of a contract, has been done. In that case, the exclusion clause will also be considered to be part of the contractual terms

Question 21

Reasonable notice occurs when everything that is reasonably required of a party to bring the existence of the exclusion clause to the attention of another party prior to the completion of a contract, has been done. In that case, the exclusion clause will also be considered to be part of the contractual terms

This necessarily means that

Answer 21

This necessarily means that an exclusion clause brought to the attention of another after the contract has already been formed will not be a term of the contract because reasonable notice was not given prior to the contract’s completion.

Question 22

CONTRA PROFERENTUM RULE

Answer 22

If the exclusion is considered to be part of the contract for either reason, then the wording of that exclusion will be considered by a court in order to determine if the exclusion clause is appropriately worded to cover exclusion from the liability by the defendant for which the plaintiff is suing. If there is ambiguity in the wording, the court will apply the contra proferentem rule and read the exclusion clause down and against the party seeking its application

Question 23

FUNDAMENTAL BREACH

Answer 23

When a party acts outside the contract in this way, usually, they will have committed a ‘fundamental breach’ of contract.To commit a fundamental breach is to do something which is as bad as not performing the contract at all. The court takes the view that if a fundamental breach has been committed by one of the parties, the law will presume (in case of ambiguity in the wording of the exclusion clause), that the exclusion clause was not meant to cover exclusion from that liability. This means the defendant will not be able to rely on the ambiguous exclusion clause when sued by a plaintiff.

Question 24

The court’s view is a presumption only and applies to ambiguously worded exclusion clauses.

Answer 24

That means that if the exclusion clause is carefully and precisely worded so that it leaves no room for doubt that it intends to cover exclusion from liability for a fundamental breach, then the court will give that exclusion clause effect.

Question 25

Fundamental breach then is equal to non-performance of the contract.

Contrast this with the case where a party breaches a term of the contract – either a condition or warranty.

Answer 25

Breaching a condition or warranty occurs when someone is working within the contract and trying to perform it, but doing so, badly. Fundamental breach, on the other hand, is going ‘outside’ the contract and its terms in such a way as not to perform the contract at all.

Question 26

AT COMMON LAW To give the contract legal effect. Courts are frequently willing to imply a term into a settled contract to ‘fill the gaps’, as long as it is:

Answer 26

reasonable and fair,

necessary to make the contract viable,

so obvious that it ‘goes without saying’,

able to be clearly expressed

consistent with the express terms

Question 27

IMPLIED TERMS: At Common law

Prior Dealings

Answer 27

On the basis of prior dealings between the parties:

Question 28

IMPLIED TERMS:Under Statute

UNDER STATUTE: State Legislation

Answer 28

The Sale of Goods legislation is legislation on a State level and implies statutory terms that protect the buyer into contracts for the sale of goods. Similar terms are implied into Consumer contracts by the ACL (Federal legislation). A contract for the sale of goods is a contract where a seller transfers, or agrees to transfer, the ownership of goods to a buyer in return for a monetary price.

Question 29

In the Goods Act 1958 (Vic), in every contract for the sale of goods there is an implied condition that the:

Answer 29

seller has title, i.e. the right to sell those goods to the buyer:

goods will correspond with their description

goods will be of merchantable quality

goods will be fit for their purpose

bulk of the goods corresponds with the sample

Question 30

IMPLIED TERMS: Under Statute

Section 18: Sale by Description

Answer 30

A seller will have breached the statutory implied term regarding sale by description if the goods are sold by description and they have failed to correspond to the description.

Question 31

IMPLIED TERMS: Under Statute

Section 19 (a): Implied Condition of Fitness for Purpose

A seller will have breached the statutory implied term regarding fitness for purpose if:

Answer 31

the contract is for the sale of goods

the seller normally sells goods of that description

the buyer has either expressly or by implication told the seller the purpose for which they were buying the goods

the buyer has relied on the seller’s expertise

the goods are not fit for the stated purpose

the buyer has not requested the particular goods by name.

Question 32

IMPLIED TERMS: Under Statute

Section 19 (b): Implied Condition of Merchantable Quality

A seller will have breached the statutory implied term regarding merchantable quality if:

Answer 32

the contract is for the sale of goods

the buyer has relied upon a description of the goods

the seller normally sells goods of that description

the goods are not of merchantable quality

the buyer has not examined the goods or, if they have examined the goods, the defect is not one that would have been revealed by the examination.

Question 33

The courts will also refuse to enforce a term that is:

Answer 33

An attempt to limit the court’s jurisdiction; e.g. a term that provides that in the event of a breach by one party, the other party is not permitted to commence legal proceedings, or a restraint on trade if the restraint imposed by the term is unreasonable in terms of time, geographical area, and/or scope of business.