Lecture Content Flashcards

Question

Written law is made up of (3 points):

Answer 1

Constitution, Acts of Parliament (primary legislation) and Delegated legislation (subordinate legislation)

Answer 2

Case law (judge-made law) which consists of the Common law and Equity

Answer 3

Law made by Parliament (Federal, State or Territory) in the form of Acts of Parliament (known as Acts, Statutes, Primary Legislation)

Answer 4

Law which is enacted under delegated powers, such as statutory instruments. An Act can delegate power to make law in form of statutory instruments (legislative instruments) • Regulations • often the technical detail relating to an Act • By-laws • State and Territory local government Acts delegate to local councils power to make by-laws for matters such as use of roads and public land • Only apply within the council boundaries

Answer 5

Australia has nine parliaments • Inconsistency between various state and territory Acts, e.g. building and construction industry security of payment legislation • Harmonisation options: • Council of Australian Governments (COAG) – committee agrees a unified model Act, and each state and territory parliament enacts the model Act, e.g. work health and safety legislation and Australian Consumer Law • States can surrender law-making power in a certain area to Commonwealth, e.g. industrial relations law (except WA)

Answer 6

Case law or judge-made law • Made by judges in courts when they hand down decisions • Example is Dunlop Pneumatic Tyre Co Ltd v New Garage & Motor Co Ltd [1915] AC 79, setting ground rules for distinction between liquidated damages and penalties • Process of adaption and development of existing rules to handle new situations, e.g. law of negligence • Strict constraints on what judges can do: • Courts only decide law in context of resolving a dispute • Courts decide only legal points necessary to resolve the dispute • Can interpret legislation (written law) but not override it • Must follow doctrine of precedent

Answer 7

Case law or judge-made law (also referred to as common law) • Judges must follow doctrine of binding precedent • Courts bound to follow previous decisions of other judges in cases of similar facts • Case law continually evolves as judges issue their judgments • Consistency in decision-making • Court bound by decisions of higher courts in same hierarchy • Decisions of courts at same level in the hierarchy not binding, but generally followed for consistency • High Court not bound to follow its own decisions, but generally will for consistency unless convinced of error in previous decision • Decisions of higher courts in other jurisdictions (other common law countries or other Australian states) not binding but may be persuasive • Only the ratio decidendi (legal reasons supporting the decision) is binding; obiter dicta (sayings by the way) not binding on future cases

Answer 8

The phrase Common Law has various meanings: • Legal system using written and unwritten law • The unwritten law, or case law • One of the two categories of case law, which are common law and equity • Common law concerned with rules, Equity concerned with behaviour • Equity includes additional remedies such as specific performance, injunctions, equitable rescission of contrac

Answer 9

Parliamentary law overrides any case law which is inconsistent with parliamentary law • But sometimes parliament will make new laws to give effect to case law • Mabo v Queensland (No 2) (1992) 175 CLR 1 • High Court of Australia overturned application of legal doctrine of terra nullius to Australia • Established right to native title • Native Titles Act 1993 (Cth) codified right to native title, and established National Native Title Tribunal to administer and make decisions regarding native title claims

Answer 10

• Objective is to punish persons guilty of committing crime • Punishment is monetary fine, community service or imprisonment • Criminal Code Act 1899 (Qld) • Breach of obligations under Work Health and Safety Act 2011 (Qld) is criminal offence • Director of Public Prosecutions (on behalf of state or Commonwealth) prosecutes the defendant • Guilty or not guilty of offence

Answer 11

Objective is to compensate person for loss or damage caused due to wrongful conduct of another • Remedy is monetary damages (or equitable remedies, e.g. injunction) • The person alleging harm initiates civil court action against the defendant • Liable or not liable for harm or damage

Answer 12

An agreement which is enforceable, i.e. which the law will enforce • An agreement between two or more persons - in law can mean “natural persons” and corporations • The persons who enter into the contract are partiesto the contract • Each of the parties to a contract obtains rights and owes obligations under the contract

Answer 13

• A contract does not have to be in writing to be enforceable, unless specifically required by legislation • Can be difficult to prove existence of an oral contract, or what the contract says (the terms of the contract)

Answer 14

Contracts which must be in writing to be enforceable under Queensland law include: • Contracts for the sale of land: Property Law Act 1974 (Qld), s 5 • Domestic building contracts: Queensland Building and Construction Commission Act 1991 (Qld), Sched 1B, s13 & s14 • Non-domestic building contracts: Queensland Building and Construction Commission Act 1991 (Qld), s67G

Answer 15

• If one party to the contract fails to perform (breaches) their obligations under the contract, the other party may take action in court to enforce the contract • In practice this usually means the party who suffered damages or incurred loss as result of the other party’s breach will sue the breaching party for compensation, i.e. damages, i.e. money

Answer 16

A legally enforceable contractual agreement exists between A and B; A term of that contract has been breached by B; The loss or harm suffered by A was caused by B’s breach

Answer 17

Offer (Has an offer been made?) Acceptance (Has the offer been accepted?) Consideration (Was consideration provided?) Intention (to create legal relations) (Did the parties intend to make a contract?)

Answer 18

Capacity - Is the person recognised in law as able to enter into a legal contract? Meeting of minds - Do the parties have the same understanding of the key terms?

Answer 19

An indication made by one person (the offeror) to another (the offeree) of the offeror’s willingness to enter into a contract with the offeree on certain terms • A proposal to which the person making the proposal is prepared to be contractually bound • Most common example: - the offeror promises to perform an act or supply goods or services in return for a sum of money • An offer must be clear and certain • An offer must be communicated to the offeree

Answer 20

* Is the person intentionally communicating the terms on which they are prepared to enter into a contract? * If the offeree ‘accepts’ the offer, is the offeror prepared to be contractually bound?

Answer 21

Offerer may withdraw offer Offeree may reject or accept offer Offer may lapse with time, death, or failure of condition precedent

Answer 22

Communication by the offeree of their unqualified intent to be bound by the precise terms of the offer • If an offer has not been withdrawn or rejected it may be accepted • Once acceptance occurs, the offer comes to an end and an agreement, the contract, exists • Once acceptance has been communicated it cannot be revoked

Answer 23

Generally, an acceptance must meet these rules: Only offeree can accept the offer Acceptance must be absolute, final and unqualified Acceptance must be communicated to offeror, i.e. actually received by offeror, unless one of the exceptions applies Silence cannot generally be acceptance Acceptance can be verbal, written or by conduct If the offer prescribes a particular method of acceptance as the only method, offeree should accept by that method Otherwise, offeree may choose method of acceptance provided it is reasonable

Answer 24

• Each state has passed electronic transactions legislation in line with the Electronic Transactions Act 1999 (Cth) • Electronic Transactions Act 2001 (Qld) s24 specifies deemed time of receipt of electronic communications: unless otherwise agreed between the parties, an electronic communication is received: when it enters an information system which is designated by the addressee as the system for receipt of electronic communications or, if no system is designated, when it comes to attention of the addressee • Therefore, acceptance by email to an email address designated by offeror probably deemed as communicated when it arrives in offeror’s inbox

Answer 25

Some act or forbearance of one party, being the price for which the promise of the other is bought Both parties to a contract must provide something of value in return for the promise made to them: • A promise to do something - e.g. a promise to pay money or carry out building works • A promise to refrain from doing something, i.e. a promise to not do something - e.g. a promise by a person to forgo the right to build on their own land • Actually doing (or refraining from doing) something, under a unilateral contract - e.g. Carlill v Carbolic Smoke Ball Co, where Mrs Carlill provided consideration by following the instructions set out in the advertisement

Answer 26

• Consideration must be legal cannot be an illegal act • Consideration must be real, but need not be adequate must have some real value but not necessarily equal value to the promise given • Consideration may be executory(future consideration) or may be executed(present consideration), but must not be in the past consideration must flow with or after the agreement • Consideration must move from the promissee only the person who gave consideration for a promise (promissee) can enforce the promise • Performance of an existing duty is no consideration performance of an act in return for other party’s promise not valid consideration if the promissee was already under existing public or contractual duty to perform the act

Answer 27

• Did the parties intend their bargain to be enforceable in court? Did they intend to create a legally binding agreement? • Courts use objective test: considering all relevant circumstances, would a reasonable person conclude the parties had intended to contract? • Social or domestic arrangements: presumption that parties did not intend to make a contract unless clear evidence that they did intend to contract • Commercial arrangements: presumption that parties did intend to make a contract unless clear evidence that they did not intend to contract • Letters of intent: generally not binding but depends on the terms

Answer 28

• Parties must have the same understanding of the key terms of the contract • Court not concerned with parties’ own subjective interpretation of the terms • Court applies objective test: what meaning would a reasonable person have given to the terms if placed in the situation of the parties? • If court can give objective meaning to the terms, it will enforce them with that meaning • If court cannot give objective meaning, those terms will be unenforceable as there is no meeting of the minds • Where the disputed terms affect the fundamental nature of the contract, there is no meeting of the minds with respect to the contract, therefore there is no valid contract

Answer 29

Contents of the Contract • Essence of contract is that the parties make their own rules; contract law simply provides a framework that enables this to occur • Contracts contain statements of rights (what the parties will receive) and statements of obligations (what the parties must do or give)

Answer 30

• Express terms statements made, and included in the contract, by the parties may be oral or written • Implied terms inserted into the contract by law exist in contracts even if not expressly stated

Answer 31

• Conditions important or essential term, going to the heart of the contract e.g. a party would not have entered into the contract if it had not contained that term failure to perform it would make performance of the rest of the contract something different in substance from the original contract sometimes called material breach if breached, the other party can sue for damages and terminate the contract • Warranties less important terms if breached, the other party can sue for damages only

Answer 32

• Terms binding contractual terms breach allows injured party to sue for damages under contract law • Representations made to attract party into contract do not become part of contract, so not binding, so cannot sue for breach under contract law (but if misleading or deceptive conduct see Australian Consumer Law s18) • Advertisers’ puffs marketing tactic, fantastic or far-fetched do not become part of contract, so not binding, so cannot sue for breach test is whether a reasonable person would believe them to be true

Answer 33

• Objective test of intention of parties, i.e. would a reasonable person consider the parties intended the statement to be a term having regard to surrounding circumstances in each case? • Factors include: timing of the statement the longer the time between statement and formation of contract, the less likely to be a term form of the statement written statement more likely to be term than oral statement parol evidence rule – difficult to argue that oral term exists where comprehensive written contract entered into importance of the statement if recipient made it clear the statement so significant it would affect decision to enter into contract, more likely to be a term specialist knowledge or skill of one of the parties where maker of the statement in stronger position to know the truth than recipient, more likely to be a term

Answer 34

• General principle that parties should be free to contract • Terms may be implied into a contract to give effect to provisions both parties clearly intended to be included but did not include: on basis of past dealings on basis of trade usage or custom where necessary to give business efficacy to contract (terms implied in fact) where the provision is so obvious should not need to be said officious bystander test by common (unwritten) law • Terms implied where need to protect vulnerable persons, e.g. consumers dealing with corporations, outweighs freedom of contract: by statute, e.g. Australian Consumer Law Sales of Goods Act 1896 (Qld) Queensland Building and Construction Commission Act 1991 (Qld) Building and Construction Industry Payments Act 2004 (Qld)

Answer 35

• Some terms implied by common (unwritten) law into contracts by default unless contracting parties expressly provided otherwise, e.g.: obligation on supplier of goods that goods will be of merchantable quality, i.e. reasonably fit for purpose for which such goods normally used duty to cooperate duty to act in good faith under certain circumstances duty that a professional will exercise reasonable skill and care when performing contractual obligations reasonable level of skill and care is that used by ordinary competent professional can include duty to warn, e.g. building contractor to warn principal about defects in design information provided by principal’s design consultants

Answer 36

• When it is simply an indication of an intention, or possible course of conduct • When it is merely part of a negotiation or discussion • When it is a response to a request for information (Harvey v Facey[1893] AC 552) • When it is an invitation to treat– a communication by a person to other people that the person is willing to enter into negotiations or dealings which may eventually lead to an offer being made, e.g. goods on display in shops goods for sale at auctions requests for tenders Advertisements • What all these have in common: the retailer, auctioneer, person calling for tenders, advertiser etc. is free to accept or reject the offer

Answer 37

* Dispute over a property called Bumper Hall Pen * Facey owned it, Harvey wanted to buy it * Communication by telegram: * H: Will you sell us Bumper Hall Pen? Telegraph lowest cash price * F: Lowest price for Bumper Hall Pen £900 * H: We agree to buy Bumper Hall Pen for the sum of £900 asked by you. Please send us your title deed * Facey refused to proceed and Harvey sued for breach of contract. Harveys argument was that Facey's reply was an offer, which Harvey then accepted Court (Privy Council) rejected Harvey’s argument, said Faceywas merely supplying factual information as requested, and was not making an offer to sell

Answer 38

* Goods displayed, even with price tags, are invitations for customers to treat * Offer is made by the customer when offering to pay at the counter * The shop can accept or refuse the offer • Fisher v Bell [1961] 1 QB 394 displaying flick knives in shop window with price tag was an invitation to treat, not an offer of sale • Pharmaceutical Society of Great Britain v Boots Cash Chemists (Southern) Ltd[1952] 2 QB 795 displaying listed poisons on shop shelves was an invitation to treat, not an offer of sale

Answer 39

• Call for bids by auctioneer is an invitation to treat • Offer is made by a bidder when making a bid • The auctioneer can accept the bid or refuse to accept it • Payne v Cave(1789) 100 ER 502 Bidder withdrew his bid just before the auctioneer banged down the gavel. No contract was formed, because his bid was an offer, made in response to auctioneer’s invitation to treat, and bidder withdrew (revoked) his offer before the auctioneer accepted it

Answer 40

• Requests for suppliers or contractors to submit tenders are generally an invitation to treat • Offer is made by a tenderer when submitting a tender • Person calling for tenders can choose to accept or reject the offer • But, it depends on the terms of the Request for Tenders: Harvela Investments Ltd v Royal Trust Company of Canada(CI) Ltd [1986] 1 AC 207 In the invitation for tenders for the purchase of shares, Royal Trust Company promised to accept the highest complying tender received, so was legally bound to accept Harvela’s tender Hughes Aircraft Systems International v AirservicesAustralia (1997) 76 FCR 151 Conditions in the invitation to tender which set out a process for evaluating the tenders can create a “tender process contract”

Answer 41

• Advertisements generally invitations to treat • Encourages interested parties to contact the advertiser to make an offer • Advertiser can accept or reject the offer • Exception to this general rule: adverts making promises which are conditional on the viewer of the advert doing something set out in the advert (Carlill v Carbolic Smoke Ball Co Ltd[1983] 1 QB 256) This would be a unilateral contract – a contract where only one party to the contract (the offeror) makes a promise to which the offeror is willing to be bound without the other party (the offeree) making a promise in return

Answer 42

Court held that Carbolic had to pay £100 to Mrs Carlill because: • the advertisement was an offer • the promise of a reward was the offer • the offer was made to the whole world • Mrs Carlill accepted the offer when she bought the smoke ball and used it as directed • at that point a unilateral contract was formed • Court rejected Carbolic’sclaim that the promise of a reward was simply an advertiser’s puff - Carbolic had demonstrated its intention to be bound to the promise by depositing £1000 in a separate bank account to meet any claims

Answer 43

• Offeror can withdraw (revoke) an offer. • The rules for revoking an offer: Offer can be revoked prior to acceptance by offeree cannot revoke it once it has been accepted Revocation must be communicated to offeree the revocation must reach offeree, but offeror does not have to do it personally Offeror will not be bound to a promise to hold the offer open for a specified time unless offeree has purchased an option from offeror option is a separate contract in which offeree gives offeror something of value (usually money) in consideration for offeror’s promise to keep the offer open until a specific time Cannot revoke a unilateral offer until the offeree has reasonable opportunity to complete

Answer 44

* Offeree can reject an offer expressly or by implication • Rejection of an offer terminates the offer –it cannot subsequently be accepted * A counter offer is a rejection of the offer * Merely asking for clarification of the terms of the offer is not a counter offer or a rejection * In every case, need to use a reasonable person testand examine all the circumstances, including subject matter of the deal, contents of the offer and the form of offeree’s response

Answer 45

Possible exceptions to rule that acceptance must be communicated to offeror: • regular past dealings between parties or industry custom • unilateral contracts • postal acceptance rule only applies where offeror has accepted post as method of acceptance acceptance occurs when correctly addressed and stamped letter is posted, even if lost in the post does not apply to instantaneous forms of communication such as fax and email • acceptance may be indicated by conduct e.g. by starting work even though the building contract has not been signed (Empirnall Holdings v MachonPaull Partners Pty Ltd (1988) 14 NSWLR 523)

Answer 46

* Exchange of quotations and orders containing (contradictory) standard terms & conditions * What terms & conditions apply to the final contract? * Based on principle that counter offers destroy preceding offers: contract is made on the last set of terms & conditions communicated before acceptance occurred * Offer can be accepted by clear statement or performance * The last shot fired wins the battle

Answer 47

(Offer) 23 May:-Butler quoted price to supply machinery, with terms & conditions printed on its quotation form (Counter offer • extinguished terms of Butler’s offer) 27 May:-Ex-Cello submitted order form to buy machinery, with terms & conditions printed on its order form (Acceptance • took place when Butler signed and delivered tear-off slip) 27 May:-Butler signed tear-off strip on bottom of Ex-Cello’s order form (which said We accept your order on the terms and conditions therein) and returned it to Ex-Cello (Contract already formed • on Ex-Cello’s terms and conditions) 27 May:-Butler sent the signed tear-off strip with a covering letter (which said delivery assumed to be in accordance with Butler’s quotation of 23 May)

Answer 48

``` When the agreement is a deed. • More formality for signing (known as execution) • Examples: bank guarantee performance bond confidentiality deed deed of indemnity ``` • Different limitation of action periods

Answer 49

• Legislation imposes a limit on time period between date when a cause of action accrues and date that action can be brought to court • In contract law, cause of action for breach of contract starts when breach of contract occurs • Limitation of Actions Act 1974 (Qld): Simple contract where no claim for personal injury -6 years from date cause of action arose Deed where no claim for personal injury – 12 years from date cause of action arose Where cause of action is personal injury – 3 years from date cause of action arose • Other states and territories have varying limitation of action periods • All except Qld and WA have long-stop (maximum) limitation period of 10 years for defective building works

Answer 50

• Only parties who enter into the contract are bound by the contractual terms and entitled to enforce them against each other • Third parties (parties who did not enter into the contract) cannot bring a legal action to enforce the terms • Connected to rule that consideration must move from promissee – to be able to successfully bring action to enforce terms of a contract, person must show that: was an intended party to the contract (therefore had privity of contract); and provided consideration • Even where contract between two parties confers a benefit on a third party, the third party cannot enforce the benefit • Interesting facts: Privity of contract is a common (unwritten) law doctrine UK and NZ have passed legislation allowing a third party to enforce a contract where it can demonstrate that it stood to benefit from the contract

Answer 51

• Can be formed as a by-product of precontractual negotiations for another (principal) contract if during negotiations of the principal contract a statement is made which: is promissory (a promise, assurance, guarantee) is intended to be legally binding is not intended to be a term in the principal contract is relied on by recipient of the statement when deciding to enter into the principal contract does not contradict a term of the principal contract • Requires consideration (e.g. agreeing to enter into principal contract)

Answer 52

• After entering into a contract, neither party can change the terms unless: mutual agreement supported by consideration (unless is a deed) contract contains provisions and process for altering terms, e.g. variations clause in construction contract • A party’s rights or obligations under a contract can be transferred to a third party by: Assignment by a party of its contractual rights may be subject to other party’s approval Novation of entire contract replacement of one party with another, who steps into shoes of the original contracting party full rights and obligations of original party transferred to new party

Answer 53

• Each state and territory has enacted a Sale of Goods Act • Does not cover supply of services • Implies terms into business-to-business and business-to-consumer contracts for supply of goods: Seller has right to sell the goods Where sale by description, goods must correspond with description Goods must be of merchantable quality, i.e. fit for usual purpose but if buyer had opportunity to examine goods before purchase, no implied term as to quality for defects buyer ought reasonably to have discovered on examination Goods must be reasonably fit for specific purpose made known to seller by buyer if buyer relying on seller’s skill or judgement Where sale by sample, quality of goods must correspond with quality of sample • Terms can be excluded by express agreement of the parties

Answer 54

• Introduced in 2010 • Contained in schedule 2 to Competition and Consumer Act 2010 (Cth) • States and territories have incorporated it into their laws • e.g. sections 15 and 16 of Fair Trading Act 1989 (Qld)

Answer 55

• Incorporated into the Fair Trading Acts in each state and territory • Implies ‘guarantees’ (terms) into contracts with consumers for supply of goods or services • Implied terms for supply of goods: Supplier has right to supply the goods Where supply by description, goods must correspond with description Goods must be of acceptable quality, i.e. fit for usual purpose, free from defects, safe, durable but if consumer had opportunity to examine goods before acquiring them, no implied term as to quality for defects consumer ought reasonably to have discovered on examination Goods must be reasonably fit for any disclosed purpose, i.e. any specific purpose made known to supplier by consumer if consumer relying on supplier’s skill or judgement Where supply by sample, quality of goods must correspond with quality of sample • Terms cannot be excluded

Answer 56

• Incorporated into the Fair Trading Acts in each state and territory • Implies ‘guarantees’ (terms) into contracts with consumers for supply of goods or services • Implied terms for supply of services: Services will be rendered with due care and skill Services will be reasonably fit for any disclosed purpose, i.e. any specific purpose made known to supplier by consumer if consumer relying on supplier’s skill or judgement Services will be supplied within a reasonable time where no time specified in the contract • Terms cannot be excluded

Answer 57

* A person who acquires serviceswhere the amount payable is $40,000 or less * A person who acquires goodswhere either: * the amount payable is $40,000 or less; or * the goods are of a kind ordinarily acquired for personal, domestic or household use or consumption; or * the goods are a vehicle or trailer for transport of goods on public roads • But if the goods are acquired for re-supply or using or transforming them in trade or commerce, not a consumer

Answer 58

ACL has wide scope, including: Implied terms in consumer contracts for supply of goods or services • Misleading or deceptive conduct (s18) • Unconscionable conduct (s20-21) • Unfair terms of consumer contracts and small business contracts (s23)

Answer 59

When the contract may not be valid

Answer 60

• Conditions where contracts can be vitiated (i.e. legal validity of the contract can be destroyed) include: where formed under duress where formed under mistake where one of the parties entered the contract due to misleading or deceptive conduct by the other where one of the parties entered the contract due to unconscionable conduct by the other where one or more terms of a standard form consumer or small business contract is declared to be unfair under the ACL and the remainder of the contract cannot continue without that term • Only a court can declare contract vitiated: can declare it as either void or voidable

Answer 61

Where a contract is declared void: • Viewed by courts as not existing • Generally will be void ab initio, i.e. void from the beginning, so never came into existence • Cannot enforce, or claim damages for breach under, void contract • But where one party conferred benefit on another (e.g. goods or money), can obtain equitable remedy of restitution to restore those benefits • Restitution based on equitable ground of unjust enrichment – no person should be unfairly enriched at expense of another

Answer 62

Where a contract is declared voidable: • Court recognises formation, validity and binding effect of the contract • Court considers one party not bound by the contract – the unbound party has a ‘window of opportunity’ to elect to avoid (get out of) the contract • If the unbound party chooses to avoid the contract, contract will become void from the beginning • Unbound party can only make a claim for equitable remedy of restitution if it formally rescinds (terminates) the contract by giving notice of rescission (termination) to the other party • Opportunity to avoid the contract will expire if unbound party indicates (expressly or impliedly by conduct) intention to affirm (continue) the contract

Answer 63

Duress (common law) Mistake (common law) Misleading or deceptive conduct (ACL) Unconscionable conduct (common law or ACL) Unfair contract terms (ACL)

Answer 64

One party enters into contract as result of coercion so great it prevented exercise of free will • Where duress occurred, court declares contract voidable, giving victim opportunity to rescind • To be duress must be: coercion such as to cause a reasonable person, exercising ordinary degree of firmness, to do something they would not otherwise do something beyond normal commercial pressure of precontractualnegotiations actual (illegal) physical violence or serious threat of (illegal) physical violence against a person economic duress – illegitimate pressure with effect of compulsion on the victim as significant cause inducing victim to enter into the contract * DSND Subsea v Petroleum Geo-Services [2000] BLR 530 * Carillion Construction Ltd v Felix (UK) Ltd [2001] BLR 1 * Electricity Generation Corporation t/as Verve Energy v Woodside Energy Ltd[2013] WASCA 36

Answer 65

• Where one or both of the parties enters into contract on basis of a mistake • If mistake is fundamental to performance of the contract, or goes to core of the transaction, may be an operative mistake and court may declare the contract void • Three types of mistake at common law: Common mistake Mutual mistake Unilateral mistake

Answer 66

Both parties to the contract make a mistake about the same thing, which is fundamental to performance of the contract • Both making the same mistake • Example: where parties enter into contract in the belief the subject matter of the contract exists, but it does not exist • Renders agreement meaningless, so no contract can come into existence, and is void from the beginning

Answer 67

Parties have a differing understanding about a fundamental aspect of the contract • Both mistaken, but not making the same mistake • Raffles v Wichelhaus (1864) 2 H&C 906 agreement for sale of cotton arriving on ship from Bombay called ‘Peerless’ two ships sailing from Bombay called ‘Peerless’, one leaving in October and one leaving in December Seller thought he was selling cotton from ship sailing in December Buyer thought he was buying cotton from ship sailing in October • If court cannot give objective meaning to the fundamental terms, i.e. reasonable person would not have been able to understand what the fundamental terms of the agreement meant, contract declared void

Answer 68

One party enters into the contract under a mistaken belief as to a fundamental aspect of the contract • Where court can give objective meaning (reasonable person test) to the term in question, unlikely to declare the contract void • But where unilateral mistake resulted in injustice, court has discretion to apply equity law to declare contract voidable, allowing mistaken party to rescind the contract, especially if nonmistaken party knew of the other party’s mistake and took advantage of it • Taylor v Johnson(1983) 151 CLR seller of land mistaken about the price evidence suggested purchaser knew about seller’s misunderstanding and set out to ensure she did not realise her mistake court considered contract voidable in equity law

Answer 69

• Section 18 of ACL: a person must not, in trade or commerce, engage in conduct that is misleading or deceptive or likely to mislead or deceive • This part of ACL applies to business-to-business and business-to-consumer dealings • Can give relief for parties who were induced to enter into contracts based on untrue representations (misrepresentations) made by another party during precontractual negotiations • Objective (reasonable person) test for likely to mislead or deceive • Covers false advertising but not advertisers’ puffs • Strict liability –intentions or belief of person making the representation not relevant • Cannot contract out of s18 • Remedies under ACL include damages, court varying the contract and court declaring part or all of the contract void

Answer 70

* Unconscionable= unfair, unscrupulous, unjust | * Rules against unconscionable conduct in common law (case law) and in statute

Answer 71

• Where one party to the transaction is especially vulnerable (under a special disability) and the other party knows and takes unfair advantage of that vulnerability • Commercial Bank of Australia v Amadio (1983) 151 CLR 447 Bank engaged in unconscionable conduct by allowing elderly migrant couple, with poor English language and business skills, to execute a mortgage and guarantee securing debts of their son’s building company when the bank knew they had a mistaken understanding about the extent of the guarantee they were signing and failed to explain the true position • Common law remedy is rescission of contract, no damages

Answer 72

• Section 20 of ACL: a person must not, in trade or commerce, engage in conduct that is unconscionable, within the meaning of the unwritten law from time to time * Conduct must be unconscionable within case law meaning * ACL offers wider remedies than common law, including damages

Answer 73

Section 21 of ACL: a person must not, in trade or commerce, engage in unconscionable conduct in connection with the supply or possible supply of goods or services to a person, or the acquisition or possible acquisition of goods or services from a person • Section 21 not limited by common law cases

Answer 74

* Section 22 lists factors court can consider including: * Bargaining position of the parties * Undue influence or pressure * Conditions that were not reasonably necessary * Failure to disclose * If customer could understand documents * Good faith * Remedies under ACL include damages, court varying the contract and court declaring part or all of the contract void * This part of ACL applies to business-to-business and business-to-consumer dealings

Answer 75

• Section 23 of ACL (1) A term of a consumer contract or small business contract is void if: (a) the term is unfair; and (b) the contract is a standard form contract * Previously only applied to business-to-consumer contracts; since 12 November 2016 also applies to business-to-small business contracts * Remainder of the contract continues to bind parties if it is capable of operating without the unfair term; otherwise court can declare entire contract void • Small business contract: business employs fewer than 20 people; and either - upfront price payable $300,000 or less; or - contract duration more than 12 months and upfront price payable $1,000,000 or less

Answer 76

Section 24 defines unfair, including where a clause: would cause a significant imbalance in the parties’ rights and obligations arising under the contract; and is not reasonably necessary in order to protect the legitimate interests of the party who would be advantaged by the term; and would cause detriment (whether financial or otherwise) to a party if it were to be applied or relied on • Section 25 gives examples of unfair terms

Answer 77

Discharge (termination) of a contract occurs when the parties are relieved of their obligations to perform under the contract When a contract is discharged it comes to an end

Answer 78

``` Performance Agreement Frustration Breach Repudiation ```

Answer 79

Discharge by performance • Entire contract principle: common law presumption that parties intended for each to carry out all obligations in full before being discharged from contract • Where entire contract exists, party required to fully perform all obligations to satisfactory standard before being paid • Construction contracts usually drafted to vary from common law position: Stage payments Progress payments ``` • Case law also developed exceptions to entire contract rule, allowing courts to discharge a contract even where not fully performed, including: Substantial performance Partial performance Tender of performance Prevention of performance ```

Answer 80

* Contract can be brought to an end before full performance by mutual agreement * Agreement to end the contract is itself a legal agreement, requiring essential elements of a contract – including consideration * Should be treated with caution

Answer 81

Where contract was capable of performance at time of formation (or both parties genuinely believed at formation that it was capable of performance) but contract subsequently becomes impossible to perform for some reason beyond the control of the parties * If contract is frustrated, contract discharged from the moment the frustrating event occurred and rendered further performance impossible * If one party performed its obligation before frustrating event occurred, but the other party not due to perform its obligation until after the event, common law allows recovery of benefits conferred for which there has been a total failure of consideration, e.g. return of deposit * NSW, Victoria and SA also have legislation, e.g. Frustrated Contracts Act 1978 (NSW)

Answer 82

• Taylor v Caldwell(1862) 122 ER 309 Destruction of subject matter of contract • Codelfa Construction Pty Ltd v State Rail Authority of New South Wales (1982) 149 CLR 337 Radical difference: at the time of entering into the contract both parties shared common assumption about something essential to performance of the contract, but that common assumption was mistaken – real situation was radically different • Denny, Mott and Dickson Ltd v Fames B Fraser & Co Ltd [1944] 1 All ER 678 Supervening illegality: purpose of contract legal at time of entering into contract, subsequently rendered illegal by change in law

Answer 83

• A party’s performance under contract has become more difficult due to a reason for which the party took the risk Davis Contractors Ltd v Fareham Urban District Council [1956] 2 All ER 557 • The ‘frustrating’ event is self-induced, not beyond the control of the parties Maritime National Fish Ltd v Ocean Trawlers Ltd [1935] AC 524 • The frustrating event is expressly provided for in the contract force majeure clause care of the work and reinstatement clause (AS 4000 General Conditions of Contract, clause 14.2)

Answer 84

A contract can be discharged if one party acquires the right to terminate and chooses to do so At common law a party may terminate a contract where there has been: - Breach of a condition (essential term) - Breach of a non-essential term which substantially deprives innocent party of the benefit of the contract - Repudiation (renunciation) of the contract • When substantial breach or repudiation occurs, innocent party has the option to terminate (end) or affirm (continue) the contract • Option to terminate will be lost if innocent party impliedly affirms the contract by: continuing to perform contract after right to terminate arises; or unreasonable delay in notifying defaulting party of decision to terminate • Effect of substantial breach or repudiation, once innocent party terminates, is that the contract is terminated as at the date of breach: contractual rights and obligations prior to breach stand parties are discharged from rights and obligations after the breach

Answer 85

* Repudiation of a contract is when a party indicates through actions or words an unwillingness or inability to substantially perform the contract * Objective (reasonable person) test: is conduct of one party such as to convey to a reasonable person renunciation of contract as a whole or renunciation of a fundamental obligation under it? * Anticipatory breach is a form of repudiation: where party indicates to innocent party, before time for performing the contract is due, that they will not perform or will not be able to perform their side of the contract * Innocent party does not have to wait for actual breach (repudiation) to occur, but can terminate immediately for anticipatory breach

Answer 86

• Where breach occurs, innocent party can enforce contract in court • To successfully enforce a contract and recover remedies, plaintiff must establish that: a contract between plaintiff and defendant exists; and breach of one or more terms of the contract has occurred; and that breach was the cause of loss to plaintiff • Most common remedy is damages: Liquidated damages: expressly provided for in contract in form of a preagreed, stipulated amount for a specific type of breach Unliquidated damages: not expressly dealt with in contract, but assessed by court with respect to actual loss or injury suffered

Answer 87

* Aim of unliquidated damages for breach of contract at common law is to put the plaintiff in the position they would have been in if the contract had been properly performed * Purpose is to compensate innocent party, not punish defaulting party • Damages for breach of contract can be claimed for: expectation loss (loss of bargain) reliance loss personal injuries disappointment and distress (in limited circumstances) • Where plaintiff’s negligence contributed to the loss (contributory negligence), courts will reduce damages according to what is fair and equitable in the circumstances

Answer 88

• Expectation loss(loss of bargain) is the primary basis for assessment of damages Benefit lost to plaintiff as consequence of contract not being performed to successful completion Includes cost plus expected profit (or minus expected loss) Sale of goods contract: difference between contract price and market price Construction contract: difference between contract price and cost to contractor of carrying out the works, i.e. profits lost by not being able to carry out the works Must be able to calculate expected profit or loss with some certainty • Reliance losscan be used where expected profit or loss (loss of bargain) cannot be calculated Unrecovered reasonable expenses incurred by plaintiff in performing the contract expenditure incurred as a result of relying on defendant’s promise • Where no actual loss, nominal damages only

Answer 89

Bellgrove v Eldridge (1954) 90 CLR 613 • Builder constructed house with defective foundations • Court said: Should award damages to pay for remedial work so as to place injured party in same position as if contract had been performed properly in the situation where: remedial work is the only practicable method of producing conformity with plans and specifications, and remedial work is a reasonable course to adopt Where remedial works necessary for conformity with plans and specifications but not a reasonable method of dealing with the situation, will use diminution in value of the building works as the measure of damages

Answer 90

* Can recover damages for personal injuries provided: * caused by the breach of contract, and * not too remote * Courts reluctant to award damages for disappointment and distress except where: * distress flows from physical inconvenience * enjoyment or entertainment was an essential feature of the bargain, e.g. contracts for holidays, cruises

Answer 91

• Causation loss must be caused by the breach of contract ‘but for’ test: but for the breach, the loss would not have occurred • Mitigation plaintiff has duty to take reasonable steps to mitigate (minimise) losses arising from breach cannot exploit the breach by sitting back and allowing losses to accumulate • Remoteness Test for remoteness set down in Hadley v Baxendale(1854) 156 ER 145 Test has two ‘limbs’, and damages only awarded if losses fall within one of the two limbs: 1) reasonably foreseeable losses which flow naturally from the breach, or 2) loss would have been within the reasonable contemplation of the parties (at time of formation of the contract) as a probable result of the breach Balfour Beatty Construction (Scotland) Ltd v Scottish Power Plc(1994) 71 BLR 20

Answer 92

• Also called exclusion clauses or disclaimers • Enable a party to protect itself in event of a breach by: excluding a right the other party may have had limiting a party’s liability to a specified amount, e.g. a cap on damages limiting a party’s right by placing conditions on how it can be exercised, e.g. ‘time bar’ clause • Party seeking to rely on clause must give sufficient notice to the other party • Signed contract: signing contract usually taken as receipt of notice (L’Estrange v F Graucob[1934] 2KB 394) unless clause was misrepresented (Curtis v Chemical Cleaning and Dyeing Co[1951] 1 KB 805) • No signed contract: party seeking to rely on clause must give constructive notice to other party, ie must have done all reasonably necessary to bring clause to the attention of a reasonable person (Thornton v Shoe Lane Parking[1971] 1 All ER 686

Answer 93

* Darlington Futures Ltd v Delco Australia Pty Ltd (1986) 161 CLR 500 * Courts will construe the clause: * according to its natural and ordinary meaning • in the light of the contract as a whole * where appropriate, in case of ambiguity, will construe it contra proferentum • Contra proferentum: where confusion or ambiguity arises as to meaning of the clause when read objectively (by the reasonable person), the clause will be interpreted against the interests of the party who proposed the clause in the contract

Answer 94

• Order for injunction or specific performance injunction: restraining a party from doing something, i.e. breaching the contract specific performance: compelling a party to do something, i.e. perform their obligations under the contract Can be instead of damages or in addition to damages Court must be satisfied that damages alone would not provide adequate remedy • Quantum meruit (the amount deserved) Court may order a party who has unfairly benefitted from receiving goods or services supplied by another to pay a quantum meruitto restore value of those goods or services to the supplying party Not intended to compensate for loss, but to give back a fair amount for benefit unfairly gained by the other party Generally assessed on basis of fair commercial rate (reasonable cost of goods or services plus market rate for profit and overheads at time of supply)

Answer 95

• The facts Stevenson manufactured soft drinks and sold them in dark, opaque glass bottles Mrs Donoghue’s friend bought her a bottle of Stevenson’s ginger beer from a retailer Mrs Donoghue drank some of the ginger beer before noticing the decomposing remains of a snail in the bottle Stevenson had carelessly failed to properly wash out the recycled bottle before filling it with ginger beer Mrs Donoghue suffered shock and fell sick with gastroenteritis •The problem Why couldn’t Mrs Donoghue sue the retailer under the law of contract? Why couldn’t her friend sue the retailer under the law of contract? •The problem explained Privity of contract:-Mrs Donoghue couldn’t sue the retailer under the law of contract because she didn’t buy the bottle from the retailer –her friend bought the bottle Loss must be suffered by party to contract:-Her friend couldn’t sue the retailer under the law of contract because she suffered no injury – Mrs Donoghue suffered the injury

Answer 96

* Donoghue v Stevenson case is the origin of the modern law of negligence * Negligence is conduct (or a failure to act) that breaches a duty to take care * A person will be negligent if they fail to take reasonable care to prevent loss, damage or injury to others whom they could reasonably foresee might be harmed if that care was not taken * Negligence is a tort

Answer 97

• A tort is a civil wrong committed by one person (a tortfeasor) which detrimentally affects another • Different from a crime: An action for tort is brought by the person who is affected A crime is prosecuted in court by the state • Tort does not require a contractual relationship • Many categories of tort, including: ``` Tort of negligence Trespass to person Trespass to land Defamation Nuisance Deceit ```

Answer 98

Defendant owed plaintiff a legal duty of care - Did defendant owe a duty to plaintiff to take reasonable care to avoid the injury or harm that occurred? Defendant has breached that duty of care - Did defendant fail to exercise the required standard of care?Defendant has breached? Plaintiff has suffered injury or harm caused by that breach - Was plaintiff’s loss or harm caused by defendant’s negligence and was loss or harm reasonably foreseeable?

Answer 99

A person who brings a case against another in a court of law.

Answer 100

In Donoghue v Stevenson, Lord Atkin established first test at common law to determine whether a person can owe another a duty of care outside a contractual relationship * Neighbour test * You must take reasonable care to avoid acts or omissions which you can reasonably foresee would be likely to injure your neighbour* * Proximity test * Who, then, in law is my neighbour? The answer seems to be … - persons who are so closely and directly affected by my act that I ought reasonably to have them in contemplation as being so affected when I am directing my mind to the acts or omissions which are called in question* * Donoghue v Stevenson [1932] AC 562 at 580 per Lord Atkin

Answer 101

When carrying out a task or activity, we owe a duty of care to those classes of persons we should reasonably have in our minds as being at risk of injury due to our conduct The precise injury or event does not have to be foreseeable –just the type of injury or event To be reasonably foreseeable, the injury or event must not be ‘fanciful’ or ‘farfetched’

Answer 102

* Duty of care owed by manufacturers to consumers Donoghue v Stevenson * Duty of care may be owed by manufacturers to innocent bystanders * Duty of care owed by road users to other road users

Answer 103

Australian Safeway Stores Pty Ltd v Zaluzna (1987) 162 CLR 479 Z slipped on wet floor – floor was wet because it was rainy and customers came in with wet feet all day Court held that normal rules of negligence applied – Safeway operated a store, Z was a lawful customer, relationship between Safeway and Z satisfied neighbour test, so Safeway owed a duty to Z to take reasonable care to avoid a foreseeable risk of injury

Answer 104

• Repairers and installers– treated same as manufacturers Stennett v Hancock and Peters [1939] 2 All ER 572 Repairer liable to pedestrian injured when wheel came off vehicle repaired by defendant Accident due to negligence of defendant in repair of the vehicle • Professionals(engineers, architects, doctors) – duty to take reasonable care not to cause foreseeable injury in providing the service

Answer 105

Where psychological injury is the only injury suffered: • Generally not liable for causing grief, sorrow, hurt, disappointment • Exception - psychiatric shock from fear for own life, or life or safety of close relative Jaensch v Coffey (1984) 155 CLR 549 Court held duty of care may be owed in some circumstances even though plaintiff did not witness the accident Legislation in NSW, SA, Vic, WA, Tas limits duty of care to: Person claiming shock was present at time of the event and witnessed it, or Person claiming shock was close relative of the person killed, injured or in danger in the event

Answer 106

• To establish common law duty of care, courts can refer to relevant legislation Leighton Contractors Pty Ltd v Fox[2009] HCA 35 Duty of care owed by head building contractor to workers on its construction site By reference to occupational health and safety (OHS) regulations in place at the time

Answer 107

• Failure to exercise the required standard of care • Common law standard of care: What a reasonable person, in the position of the defendant, would do in response to the risk to the plaintiff Requires a balancing of risks, consequences and cost Mason J in Wyong Shire Council v Shirt (1980) 146 CLR 40 (at 48): [This involves] consideration of the magnitude of the risk and the degree of the probability of its occurrence, along with the expense, difficulty and inconvenience of taking alleviating action and any other conflicting responsibilities which the defendant may have. It is only when these matters are balanced out that the tribunal of fact can confidently assert what is the standard of response to be ascribed to the reasonable man placed in the defendant’s position. • Common law definition of negligence now formalised in statute

Answer 108

9 General principles (1) A person does not breach a duty to take precautions against a risk of harm unless— (a) the risk was foreseeable (that is, it is a risk of which the person knew or ought reasonably to have known); and (b) the risk was not insignificant; and (c) in the circumstances, a reasonable person in the position of the person would have taken the precautions. (2) In deciding whether a reasonable person would have taken precautions against a risk of harm, the court is to consider the following (among other relevant things)— (a) the probability that the harm would occur if care were not taken; (b) the likely seriousness of the harm; (c) the burden of taking precautions to avoid the risk of harm; (d) the social utility of the activity that creates the risk of harm.

Answer 109

General standard of care 10 Other principles In a proceeding relating to liability for breach of duty… — (a) the burden of taking precautions to avoid a risk of harm includes the burden of taking precautions to avoid similar risks of harm for which the person may be responsible; and (b) the fact that a risk of harm could have been avoided by doing something in a different way does not of itself give rise to or affect liability for the way in which the thing was done; and (c) the subsequent taking of action that would (had the action been taken earlier) have avoided a risk of harm does not of itself give rise to or affect liability in relation to the risk and does not of itself constitute an admission of liability in connection with the risk.

Answer 110

(1) A professional does not breach a duty arising from the provision of a professional service if it is established that the professional acted in a way that (at the time the service was provided) was widely accepted by peer professional opinion by a significant number of respected practitioners in the field as competent professional practice (2) … (3) The fact that there are differing peer professional opinions widely accepted by a significant number of respected practitioners in the field concerning a matter does not prevent any 1 or more (or all) of the opinions being relied on … (4) Peer professional opinion does not have to be universally accepted to be considered widely accepted.

Answer 111

* Where a risk cannot be avoided by the exercise of reasonable care it is an inherent risk * Defendant is not liable in negligence where plaintiff is injured as result of the materialisation of an inherent risk

Answer 112

• Causation To recover damages, plaintiff must prove, on the balance of probabilities, that defendant’s negligence was the actual cause of the damage: Factual causation: court must determine as a question of fact whether defendant’s negligence was a necessary condition of plaintiff’s loss – the ‘but for’ test Scope of liability: court must also determine whether it is appropriate that defendant be responsible for plaintiff’s loss – policy issue, including whether or not (and why) responsibility for the harm should be imposed on the party in breach • Remoteness Losses must not be too remote Specific type of damage must be reasonably foreseeable May not be necessary that extent of damage or manner in which damage occurred was foreseeable

Answer 113

• Purpose Damages in tort are awarded to place the plaintiff in the position they would have been in had the tort not been committed Example - if plaintiff suffers physical injury, award of damages could include: Medical and hospital expenses Loss of earnings (actual and potential) Loss of amenity or enjoyment of life Pain and suffering

Answer 114

• Elements of negligence not proved • Contributory negligence Where defendant can prove damages caused by defendant’s negligence also caused by plaintiff’s failure to take reasonable care to protect self against foreseeable risk of harm Court can reduce damages proportionately to the extent just and equitable having regard to plaintiff’s share of responsibility Court can decide a reduction of 100% (e.g. Civil Liability Act 2003 (Qld) s24) • Plaintiff assumed the risk Defendant not liable where can establish that: Plaintiff knew of the danger Plaintiff appreciated the risk of injury created by the danger Plaintiff voluntarily agreed to accept the risk Where a risk is obvious, plaintiff is presumed to be aware of and to have accepted the risk

Answer 115

* Duty of care in Donoghue v Stevenson only allowed recovery for injury to persons or property caused by negligent act or omission * Loss which arises as a consequence of physical harm to person or property also recoverable * Does defendant owe a duty of care where plaintiff suffers no physical damage or injury? * Loss which arises as consequence of negligence but not as result of physical harm or damage – pure economic loss * Loss in value to negligently manufactured product due to its defective nature not considered at law as damage to property but as economic loss * Traditional approach of common law: pure economic loss not recoverable in tort * Spartan Steel & Alloys Ltd v Martin & Co (Contractors) Ltd[1973] 1 QB 27 Martin negligently damaged electricity power cable supplying Spartan’s steel factory, cutting power to factory for 15 hours