LAWS2111

Question 1

Offers vs. invitations to treat

Answer 1

Offers do have legal effect, whereas invitations to treat do not.

Question 2

Prima facie rules for invitations to treat

Answer 2

Display of goods (Pharmaceutical Society of Great Britain v Boots), requests for tenders/bids (Spencer v Harding), and bilateral advertisements (Partridge v Crittendon), are generally regarded as invitations to treat.

Question 3

Unilateral advertisements

Answer 3

Generally regarded as offers (Carlill v Carbolic Smoke Ball), but it must be evident that they are not a mere puff (Carbolic, per Lindley J).

However, an objective test is also utilised, as this is only a prima facie rule.

Question 4

Termination of offer

Answer 4

An offer must be revoked before it has been accepted by the offeree (Bryne van Tiernhoven).

Offers may expire if there is an unreasonable lapse of time in accepting (Ramsgate) or if a counter offer is made by the offeree (Hyde v Wrench).

Question 5

Rules for acceptance

Answer 5

There must be acceptance for there to be a contract. The acceptance must be given as a direct response to the offer (Tinn v Hoffman), correspond with the offer (Hyde v Wrench), be made by the prescribed method of acceptance (Manchester Diocesan Council v Commercial Investments), and must be communicated to the offeror (Felthouse v Bindley).

Question 6

The Postal Rule

Answer 6

If the post is an appropriate means of acceptance, the acceptance is considered to be communicated the moment the letter is put in the postbox (Henthorn v Fraser), even if the letter never arrives (Household Fire Co v Grant).

Postal Rule can be ousted by words in the offer requiring actual communication (Holdings v Tullamarine Estates).

Question 7

Instantaneous communication

Answer 7

Where the contract is made via instantaneous communication, the acceptance must be genuinely and thoroughly communicated to the offeror (Entores v Miles Far East). The postal rule does not apply here.

Question 8

Cerainty

Answer 8

If a contract is uncertain or vague, it cannot be enforceable (Scammel v Ouston).

However in courts are unlikely to void contracts for uncertainty in regards to commercial contracts (Hillas v Arcas) or if the parties have started performing part of the contract (G Percy Trentham v Archital Luxifer).`

Question 9

Vague terms

Answer 9

If there are terms in the contract that are meaningless/vague, so long as it is not a key part of the contract, the term can simply be severed.

Question 10

Unsettled price

Answer 10

Sale of Goods Act s11(2) when the price isnt determined, buyer must pay a reasonable price, (3) depending on the circumstances.

Question 11

Rules for an agreement to be binding

Answer 11

1) Parties must have intended to create legal intentions; and
2) the agreement must be supported by consideration.

Question 12

What is intention?

Answer 12

Parties must have intended the agreement to attract legal consequences in respect of breach (Ermogenous v Greek Orthodox Community of SA).

Question 13

Domestic agreements vs commercial agreement

Answer 13

Has been historically thought that domestic agreements are not legally binding (Balfour v Balfour), while commercial agreements are (Banque Brussels Lambert SA v Australian National Industries).

However both presumptions can be rebutted with evidence showing otherwise.

Question 14

Examples of binding domestic agreements

Answer 14

Written agreements with clear intention of being legally bound (Merritt v Merritt) or agreements with significant responsibilities or detriment (Todd v Nicol).

Question 15

Rule for intention

Answer 15

Courts must look to the objective intention of the parties,r rather than relying on the presumptions, as established by Ermogenous.

Question 16

What is consideration?

Answer 16

Consideration is founded on the idea of exchange and reciprocity and must be present in all contracts (Currie v Misa).

Question 17

Rules for consideration

Answer 17

Must be causally related to the promise (Australian Woollen Mills v The Cth), must move from the promisee (Trident General Insurance v McNiece Bros), and must not be past consideration (Roscorla v Thomas).

Question 18

What is sufficient consideration?

Answer 18

The consideration does not need to be adequate or of equal value (Chappell v Nestle), so long as it is seen as sufficient , including forbearances to sue (Cook v Wright), going above and beyond legal obligations (Glasbrook v Glamorgan), and performance of a duty owed to a third party (Shadwell v Shadwell).

Question 19

Pre-existing duties

Answer 19

Historically, agreeing to perform a pre-existing duty is not sufficient consideration (Stilk v Myrick), however proof of a practical benefit can rebut this presumption (Williams v Roffey), unless it is regarding a part-payment of an already owed debt (Foakes v Beer).

Question 20

Pre-contractual statements

Answer 20

In order to have legal effect, pre-contractual statements must be declared promissory, rather than mere puffs or representations to be incorporated (Hospital Products v US Surgical Corp, per Gibbs CJ).

Question 21

How to determine promissory statements

Answer 21

Must ascertain if a statement is promissory by an objective test, via examining the language of the terms (JJ Savage v Blakney), any special knowledge the parties had (Oscar Chess v Williams), other factors such as importance of the statement (Couchman v Hill), reliance (Nemeth v Bayswater Road), and verification (Ecay v Godfrey)

Question 22

The signature rule

Answer 22

General signature rule is that parties are bound by whatever they sign, regardless of if they even read or understand it (L’Estrange v Graucob)

Question 23

Exceptions to the signature rule

Answer 23

Fraud, misrepresentation (Curtis v Chemical Cleaning & Dyeing), non-contractual documents (Hill v Wright), non est factum, and unfair contract terms (ACL).

Question 24

Rules for non est factum

Answer 24

Elements:

1) Signer had some form of disability (Petellin v Cullen);
2) Mistake gave rise to a radical difference (Saunders v Anglia Building Society);
3) Signer’s absence of carelessness (Ford v Perpetual Trustees Victoria).

Question 25

Onerous or unusual terms

Answer 25

These types of terms in contracts must have reasonably sufficient notice (Toll v Alphapharm).

Question 26

Parol evidence rule

Answer 26

Extrinsic evidence is generally not incorporated into the contract (Codelfa v State Rail NSW, per Mason J).

Question 27

When the contract in question is not the whole agreement

Answer 27

Can rebut parol evidence rule when the contract is contained in one or more documents; or is party oral, partly written (Equuscorp v Glengallan Investments).

Question 28

'Entire contract' clauses

Answer 28

When the parties agree that all terms of agreement between them are contained in this single written document and no terms not specifically contained here will have any legal effect (Nemeth v Bayswater Road).

Question 29

Inconsistent oral terms

Answer 29

Less likely to rebut parol evidence rule where alleged oral terms contradict the clear terms of the written contract (Equuscorp v Glengallan Investments); more likely to be rebuttable where alleged oral terms are consistent with the terms (Skyrise Consultants v Metroland).

Question 30

Collateral contracts

Answer 30

Can either enforce or circumvent a term (Heilbut Symons v Buckleton, per Lord Moulton), but must be consistent with the main contract (Hoyts v Spencer). Statement must be intended to be relied upon, the party alleging existence must have acted in reliance, and the promissor must have intended to guarantee truth (JJ Savage).

Question 31

Incorporation of written terms

Answer 31

'Reasonably sufficient notice' of the term must be given to the other party (Balmain New Ferry v Robertson).

Question 32

Elements of incorporation of terms

Answer 32

1) Notice of the terms must be given in time before entry into the contract (Olley v Marlborough Court Hotel); 2) The incorporation of the document must be contractual (Chapelton v Barry Council); 3) Reasonable steps must be taken by party alleging the terms to notify other party of these terms (Thornton v Shoe Lane Parking).

Question 33

Notice for exclusion/exemption clauses and unusual clauses

Answer 33

Greater notice must be given for these types of clauses, as the courts have taken a restrictive approach (J Spurling v Bradshaw, per Lord Denning).

Question 34

Incorporation by prior course of dealing

Answer 34

(Barrymores v Harris Scarfe) 1) Previously used terms must be identifiable (often by reference to contractual documents); 2) Those previous occasions must be sufficiently numerous and frequent; 3) Conduct must be consistent enough to constitute a regular course of dealing; 4) Which raises the reasonable expectation that the same terms should be included in the subsequent contract (also Balmain New Ferry v Robertson).

Question 35

Rectification

Answer 35

When the contract fails to accurately record the actual agreement, rectification is an equitable remedy to have the contract rewritten (Pukallus v Cameron).

Question 36

Elements of rectification

Answer 36

(Pukallus v Cameron) 1) Must be convincing proof of defects in the recording of; 2) The actual agreement in the form of a common intention; 3) existing at the time of the contract, which doesn't need to be outwardly expressed (subjective intention suffices).

Question 37

Terms implied by custom

Answer 37

Terms may be implied through custom if there is an established trade custom.

Question 38

Elements of terms implied by custom

Answer 38

(Con-Stan Industries v Norwich Winterthur) 1) Existence of a custom - must be a question of fact; 2) Notoriety - the custom must be so well known that everyone making a contract in that position can reasonably be presumed to have incorporated that term; 3) The custom must not contradict the express terms of the contract.

Question 39

Business efficacy

Answer 39

Terms can be implied only if it is necessary to give business effect to the contract (The Moorcock).

Question 40

Officious bystander test

Answer 40

If it is expected for any officious bystander at the time of the contract to have inserted the term (Shirlaw v Southern Foundries).

Question 41

New test for determining incorporation of implied terms

Answer 41

This is seen to be currently preferred over the business efficacy and officious bystander tests. (BP Refinery v Shire of Hastings, per Lord Simon; approved by Codelfa)To be implied, the term must be: 1) Reasonable and equitable; 2) Necessary to give business efficacy to the contract; 3) Be so obvious that it goes without saying; 4) Be capable of clear expression; 5) Not contradict any express term. (AG of Belize v Belize Telecom) BP's 5 tests are a collection of different ways of answering the question.

Question 42

Terms generically implied in law

Answer 42

Often generic terms are implied automatically in an ascertainable class of contracts, particularly employment and landlord/tenant contracts (Liverpool v Irwin).

Question 43

Rule for generic terms

Answer 43

The implied terms must be necessary for the reasonable or effective operation of a contract on that nature in the circumstances of the case (Byrne v Australian Airplanes).

Question 44

Duty to perform in good faith

Answer 44

Express terms on good faith performance are a matter of interpretation. Important cases: Hughes Aircraft Systems International v Airservices Australia; Burger King v Hungry Jacks; Royal Botanic Gardens and Domain Trust v South Sydney City Council

Question 45

Construction of contracts

Answer 45

Contracts must be objectively construed. The important thing is what each party by words and conduct would have led a reasonable person in the position of the other party to believe (Pacific Carriers v BNP Paribas).

Question 46

Construing the clause according to its natural and ordinary meaning

Answer 46

The interpretation of a contract clause is to be determined by construing the clause according to its natural and ordinary meaning, read in light of the contract as a whole, thereby giving weight to the context of the contract.

Question 47

The literal interpretation

Answer 47

If the words used are unambiguous, the court must give effect to them (ABC v Australasian Performing Right Association).

Question 48

Correction of obvious mistakes

Answer 48

Words may be supplied, omitted or corrected where it is clearly necessary to avoid absurdity or inconsistency (Fitzgerald v Masters), if there is a clear mistake (Chartbrook v Persimmon)

Question 49

Contextual/purposive approach

Answer 49

Contextual/purposive intention is used to construe commercial sense of a contract (Elderslie v Dunn).

Question 50

Contextual/purposive approach elements

Answer 50

(Investors' Compensation Scheme v West Bromwich Building Society, per Lord Hoffman) 1) Objectively ascertain meaning; 2) According to a factual matrix; 3) Excluding subjective intent; 4) Meaning of the document is construed against background; 5) In order to identify linguistic mistakes.

Question 51

Admissibility of evidence

Answer 51

Evidence of surrounding circumstances is admissible to assist in the interpretation of the contract if the language is ambiguous or could have more than one meaning. However not admissible if it contradicts the plain language of the contract (Codelfa Constructions v State Rail Authority).

Question 52

Evidence of pre-contractual negotiations

Answer 52

Pre-contractual negotiations must show subjective intentions (Byrnes v Kendle).

Question 53

Interpreting a contract clause

Answer 53

Interpretation of a contract clause is to be determined according to the natural and ordinary meaning of the clause (Darlington Futures v Delco).

Question 54

Exemption clauses

Answer 54

Generally exemption clauses only protect actions authorised by the contract (Darlington Futures v Delco), and are to be interpreted narrowly as to be consistent with the terms of the contract (Sydney Council v West).

Question 55

Contra proferentem

Answer 55

An ambiguity is resolved against the party seeking to rely upon a contract clause (Canada Steamship Lines v The King).

Question 56

Elements of contra proferentem

Answer 56

(Canada Steamship Lines v The King) 1) express reference to exclusion or liability for negligence is sufficient; 2) where no express reference, can exclude liability if the words are wide enough to be applied to the circumstances; or 3) if the words used are wide enough to cover liability for negligence, but there is some other basis of liability to which the clause can apply, the clause should generally be applied to that other basis. After Darlington, (1) and (2) are still relevant as guides, but (3) would not be applied.

Question 57

Four corners rule

Answer 57

Protection under the rule is only available while the party's conduct is within their performance of the contract (Sydney Council v West).

Question 58

Exemptions for serious breaches

Answer 58

To make an exemption clause more acceptable, clear words should be used for serious breaches, such as wilful breach, renunciation, and breaches that have serious consequences (Nisho Iwai v Malaysian International Shipping).

Question 59

Limits on goods and services

Answer 59

Limits on goods or services not for ordinary personal use are generally permissible (ACL s64A(1)-(2)), however terms that exclude, restrict or modify consumer guarantees and remedies are void (s64(1)).

Question 60

Consumer guarantees - ACL

Answer 60

ACL applies to goods/services less than $40,000 or subjectively (individual use - s23(3)) for personal/domestic use or consumption (s3). Goods must be an acceptable quality (s54), fit for the disclosed purpose (s55), aligning with its description (s56), and that express warranties are complied with (s59). Services are guaranteed as to due care and skill (s60) and fit for a particular purpose (s61). Non-major failures are to be remedied in a reasonable time and major failures give rise to compensation (s260).

Question 61

Consumer guarantees - SGA

Answer 61

Parliament may imply terms: SoGA s16 requires that goods must correspond with their condition and s17 establishes that no implied term exists unless (a) a particular purpose is stated (must be fit for that purpose) and (c) if bought by the description, merchantable quality is implied.

Question 62

Unfair contract terms

Answer 62

Unfair terms in standard form contracts are void (ACL s23). The test of unfair terms differs from the one used in consumer guarantees (s23(3)): the individual and subjective use of the goods/services is considered, rather than the ordinary use. The Grey List of unfair terms in s25 identifies permitting one party being able to terminate/alter terms, vary upfront price without giving the option to terminate, or if one party limits/avoids performance (s25). There must be a significant imbalance between the parties and this must cause detriment (s24(1)), however the upfront price used as consideration cannot be considered ‘unfair’ (s26).

Question 63

Estoppel

Answer 63

The leading Australian authority on promissory estoppel, Waltons Stores v Maher considers the inducement of an assumption, which engenders reliance to the detriment of the promisee, to be the hallmark of promissory estoppel (Brennan J). Unconscionable conduct is also a determinant factor (Verwayen). However, commercial situations are less likely to give rise to promissory estoppel (Austotel v Frankslins Selfserve).

Question 64

Elements of estoppel

Answer 64

Walton Stores v Maher 1) Assumption or expectation for legal relationship 2) P induces assumption 3) D acted in accordance with assumption 4) D intended this to occur 5) P's action will result in detriment if D's promise is unfilled. 6) D failed to prevent P's detriment from occurring