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.
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.)
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.
“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.
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.
Which High Court case states that for insurance contracts, there is an exception to the privity rule?
Trident v McNiece [HCA] 1988.
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.
‘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.
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.
