2017 Exam cases - Summary Contract Law PDF

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ESTOPPEL Elements: Walton Stores Ltd v Maher: P negotiated to lease land from D but D must demolish existing building and build new one according to P. D send modifications to P. P told D would let them know if they disagree. No further communication; D signed K but P delayed signing even though D already began demolition. K partly performed by D but P wanted out. Held: Estoppel; an argument estoppel cannot be made if one person assumes that the other party will behave in a way outside the legal relationship. 1. Representation (Assumption and Inducement) - Austotel Pty Ltd v Franklins Selfserve Pty Ltd: P negotiate to lease premise to D. Terms not finalized; D refuse because other more important lease. Parties agreed to further area lease but did not agree on rent to be paid. Store build per D’s request, incurring other liabilities. P sought to withdraw. Held: No estoppel; can only succeed if there is an assumption that K will come into existence or a promise be performed or an interest granted to P by D. - Mobil Oil Australia Ltd v Wellcome International Pty Ltd P told franchises would be rewarded if achieved 90% performance standards. P would extend franchisee’s tenure with no cost. P abandoned scheme after 4 years. Held: No estoppel; there must be an assumption that a legal relationship exists for estoppel to succeed; was not intended to have legal consequences - Legione v Hateley K for sale of land. P wants to extend deadline. D’s secretary said should be fine but need instructions. P assumed as extension, make purchase after deadline. D rejects, K withdrawn. Held: No estoppel; an unequivocal and clear promise or representation has to be made to give rise to estoppel 2. Detrimental Reliance - Sidhu v Van Dyke D rent cottage from P and wife. P and D had affair; P’s marriage ended. P told D property would be subdivided and would possess cottage. P and D’s relationship ended; P went back on promise. Cottage was burned down and was not subdivided. Held: Estoppel; not necessary to find that promise was sole inducement on representee; promise must be significant factor in making decision to her detriment - Commonwealth v Verwayen D soldier claiming damages for negligence by P. P said policy hinders them from defending claims in court. D relied on assumption and pursued claims. P changed policy and defended itself. Held: Estoppel; Relying party must have acted on the assumption that he or she will suffer a detriment if the representor fails to fulfill his end of the agreement. - Commonwealth v Clark Cth said would not use defence against collision that happened. Cth changed its mind causing Clark mental stress because he started proceedings. Held: Estoppel; detrimental reliance when one induces the other to rely on words and act in a way that causes anxiety, depression, stress. - Je Maintiendrai Pty Ltd v Quaglia P told D could pay discounted rents for 18 months because of financial difficulties to get them to continue to stay. D wanted to leave; P tried to claim full amount when they left.

Held: Estoppel; depends on situation of relying party; Detriment must be assessed when the representor wants to abandon the assumption being made. 3. Reasonableness - Austotel v Franklins 4. Unconscionability - Walton Stores v Maher 5. Departure or threatened departure - Walton Stores v Maher Effect of an Estoppel - Walton Stores v Maher - Saleh v Romanous Brother of P own neighboring property. Both obtain approval for developing sites to build tonwhouses. D enter K to purchase P’s property, based on assumption that brother would participate in joint venture with purchasers to develop 2 properties. P said will handle brother and assume responsibility. D unable to agree with brother; tried termination and force P to return deposit. Held: Estoppel as defence; not basis to rescind agreement; cannot refund deposit BUT estoppel prevented P to enforce K so D entitled to order for payment of deposit Unified Estoppel and Estoppel as Cause of Action - WvG Lesbian couple; one party wants children; the other party promise to share responsibility and help raise children; relying party bore children; both separated; relying party sought compensation for loss of financial help Held: estoppel; assumption that legal relationship would arise is no longer requirement; may be used as cause of action and defensive element Promissory estoppel as restraint on rights - Saleh v Romanous - DHJPM Pty Ltd v Blackthorn Resources Estoppel and Contract - Walton Stores v Maher - Austotel v Franklins Selfserve - EK Nominees v Woolworths D negotiate with P for purchase of supermarket site; D assured that interest was genuine; D made formal offer and was approved by board; P incurred expenses when preparing land for development; third party approached D to lease site; D decided not to proceed with development proposal at P’s site. Held: Estoppel

Express Terms Certainty Completeness 1. Essential Terms - May and Butcher Ltd v The King

P wanted to buy surplus tentage from Board; terms of agreement: Board sells old tents, price and dates for payment must be agreed by all parties, delivery taken as agreed upon, disputes submitted to arbitration. P made deposit; referred to verbal nego for extension of agreement; Board members changed and refused P; considered no longer bound by K Held: Incomplete terms; price shall be agreed upon from time to time between parties; If an agreement has been wholly or partly performed, courts are unlikely to find it incomplete. - ANZ Banking Group v Frost Holdings Agreement relating to exhibition of paintings and production of calendars which feature reproductions of those paintings. Essential terms (font size, design, content, style of calendars) were not agreed upon. Held: Incomplete terms; essential terms not agreed on 2. Agreements to agree - Hall v Busst D entered K to sell P land with option for re-purchase; both executed deed which required P or successors to notify and obtain consent of D to transfers, assignment or lease of property for same price; includes value of additions and improvements to property since original sale. Held: option not enforceable because uncertainty of price; additions and improvements not sufficiently certain. - Meehan v Jones D sell land to P subject to obtaining finance on satisfactory terms and conditions by set date. D wants to rescind K for uncertainty and entered K with 3 rd party. P claimed specific performance as conditions fulfilled before that date. Held: K certain; clear K was conditional on term being fulfilled before date - WTE Co-Generation v RCR Energy Contract for co-generation using paper mill residue. Contract included dispute resolution clause that stated that within 7 days a senior exec of each party must meet to resolve dispute or to agree on methods of resolving dispute. Claimed that court should stay litigation because clause not fulfilled/vice versa. Held: unenforceable clause because it was an agreement to agree and to meet, but did not set process of how to decide whether to resolve or agree on methods of resolving. Furthermore, options for methods of resolving dispute not set. 3. Machinery or formula for fixing term - Biotechnology Australia v Pace Pace entered into an employment contract with Biotechnology which provided that he would have ‘the option to participate in the company's senior staff equity sharing scheme.’ There was no such scheme in existence at the time of contract or at any time during Pace’s employment. Pace sued for breach of contract. Held: promise was illusory because it depended entirely on BA to provide equity scheme. BA was successful in defending contract. - Trawl Industries of Aust. Pty Ltd v Effem Foods Pty Ltd Uncle Bens Aus (TIA) got into business with (TI). Purchased fish at price that will provide reasonable commercial profit to P. K pricing formula “Price to UBA= Cost to TIA + percentage profit margin”. Held: complete terms; K included pricing formula; Validity of K depends on whether the court regards the formula or standard as sufficiently certain.

Certainty 1. Reasonableness - Whitlock v Brew Whitlock to sell land to Brew. Sale on condition that Brew would grant lease to third party on reasonable terms. Brew paid deposit but could not complete. Later sought to claim deposit back on the basis that the contract was uncertain. Whitlock claimed that the condition could be severed. Held: K void for uncertainty; reasonable terms not sufficiently certain; void section inseverable from rest of K - Hall v Busst Held: Standard of reasonableness does not extend to contracts on land. Even if a reasonable price has been placed on it, will be unenforceable for uncertainty. 2. Agreements to negotiate - Walford v Miles D nego with P for sale of business. Agreed to terminate nego to other purchaser if P confirmed financially able to proceed with purchase. D decided not to proceed with nego and sold to third party. P sued for breach of K. Held: An agreement to negotiate or negotiate in good faith is not enforceable because they lack certainty. Unless it sets out objective criteria to resolve any disagreements. However, this principle does not apply in Australia. - Coal Cliff Collieries Pty Ltd v Sijehama Pty Ltd P and D entered into ‘heads of agreement’ to jointly develop mining rights. Agreement anticipated execution of joint venture in future. Failed to reach final agreement; nego terminated few years later. D alleged breach. Held: Uncertain terms; no breach because this contract to negotiate had no consideration and the terms of the agreement to negotiate were not sufficiently certain; no consent on terms and agreement was too complex - Aiton Australia Pty Ltd v Transfield D applied for stay of court proceedings because process for formal nego not been followed. D claim P did not comply with requirement 'to make diligent and good faith efforts to resolve all disputes' before commencing court proceedings. P said clauses were void for uncertainty; not required for dispute resolution. Held: Certain; parties promised to negotiate and mediate in good faith; Promises to negotiate and mediate in good faith to resolve disputes in an agreement fulfils the element of certainty in order to enforce an agreement. Illusory Promises - Placer Development Ltd v Cth Commonwealth had a written agreement with Placer with a clause to pay a subsidy ‘of an amount or at a rate determined by the Commonwealth from time to time’ for imports of timber products from Papua New Guinea. After a few years, Placer did not receive any subsidies for the importing of timber products from Papua New Guinea as provided for by the agreement. Held: contract not binding because the contract was of illusory nature since the promise to pay an unspecified amount rested a discretion in the promisor. - Godecke v Kirwan Entered into K for sale of land; clause 6: if D required it, P would execute further agreement containing terms of that agreement and any other as determined by D’s solicitors within reason. D refused to proceed with sale.

Held: No illusory; clause clearly stated no further agreements necessary to conclude K Severance and Waiver - Whitlock v Brew - Grime v Bartholomew Identifying Express Terms Written terms and signature - L’Estrange v Graucob Ltd P signed contract to purchase vending machine without reading that had a clause that excluded the Sales of Goods Act term of fitness for purpose. Machine defective on delivery. P argued that Sales of Good Act term was implied. Held: contract was binding because P had signed contract. Even if not read, once signed P is bound by all terms of the contract even though contract not read. - Toll (FCGT) Pty Ltd v Alphapharm Pty Ltd Credit application form contained onerous exclusion and indemnity clauses signed by P. Misrepresentation argued. Held: if there is no misrepresentation or other grounds to set contract aside, L’Estrange applies and clauses are binding once signed. - Curtis v Chemical Cleaning and Dyeing Receipt for dry cleaning issued to P and signed. Before signing, D explained to P that signature was to exempt D from liability for damage to sequins and beads. P collected dress and found it stained and claimed for damages. D sought to rely on exclusion clause on receipt. Held: D cannot rely on clause because the effect of the clause was misrepresented to P before signing. Incorporation of terms by notice - Causer v Browne Ticket issued for dry cleaning. Dress later damaged. D argued that exclusion clause printed on ticket given for the dry cleaning. Held: exclusion clause ineffective because reasonable person would not have thought ticket was contractual document, only a means of identification. - Baltic Shipping Co v Dillon Cruise ticket contained exclusion clause limiting liability of shipping company for personal injury and effects. Not stated clearly. Full terms could be seen at company office in Greece. Ship later sank. Dillon injured, in shock and lost luggage. Claimed for damages. Company admitted liability but argued clauses to limit liability. Held: scarcely sufficient because terms were not clear on ticket and only place that terms could be viewed was not accessible ordinarily. - Thornton v Shoe Lane Parking – P parked car in D’s carpark. Upon entry, automatic ticket taken from machine and drove it. Ticket stated issued subject to conditions displayed on premises. Conditions including exclusion of liability for personal injury were displayed on sign inside the carpark. P later injured in carpark in an accident. D relied on exclusion clause. Held that exclusion clause not effective because D had not acted reasonably to bring clause to P’s attention before the contract was made. - Parker v South Eastern Railway – P stored luggage with D in D’s cloakroom. Luggage was lost. P claimed compensation. D argued that liability excluded based on ticket issued to P when luggage deposited. P argued that they did not know of such terms.

Held that D liability excluded. Assent to terms not based on knowledge but on the fact that P did not hand ticket back to clerk. o Must consider whether:  P knew there was printing on ticket  P knew ticket contained conditions  D did what was reasonable to notify P of conditions Incorporation of terms by course of dealing - Balmain New Ferry v Robertson Ferry wharf charged persons entering wharf a fee once they entered. Robertson was regular traveler on the ferry there and knew about the fee He entered wharf and missed his ferry. Tried to leave without paying. Unable to leave until payment was made. Argued that payment not required. Held that Robertson had to make payment because it was a term in the contract and there were big signs stating this and Robertson knew about this since he was regular on the ferry. - DJ Hill and Co v Walter H Wright Pty Ltd Verbal contract between D and P to carry machinery for P. First delivery to P made. At that time, D got P to sign documents that excluded liability for loss or damage suffered during carriage. D performed carriage on 10 occasions. During one occasion, machinery damaged. P sought damages. D relied on exclusion clause. Held: exclusion clause not part of contract because on the first dealing between P and D, clear that contract was oral and concluded before the documents were signed. Incorporation of Documents - State Rail Authority (NSW) v Health Outdoor Five-year advertising contract between two parties. K stated SRA may terminate contract at any time with one month’s notice in writing with no claim for compensation on part of advertiser. HO objected because previous agreement did not have such a clause and letter from SRA specified agreement for 5 years. SRA’s representative claimed no authority to make changes and said the only time clause invoked was for non-payment of rent and if advertising content was objectionable. Also said HO does not need to be worried because wouldn’t apply to him. HO said they entered K on that assurance. Later NSW govt banned cigarette advertisements. HO was advertising cigarettes at the time. SRA terminated agreement. HO claimed breach of contract. Held that despite written contract, PER did not apply because D showed that contract was partly oral as well. Onus of proof on D to rebut. - Franklins v Metcash Written supply agreement for D to supply products to P’s supermarkets. Dispute arose regarding the wholesale price Metcash was charging Franklins for the products. Franklins argue that Metcash supposed to pass on all allowance and discounts to Franklins when calculating wholesale price and entitled to inspect prices against Metcash. Metcash sought rectification and argued Franklins was estopped from interpreting the contract in the way it desired because it had represented that it would buy products at a specific price and require the deduction of specific allowances and discounts only. Held: contract rectified to deduct only published allowances and discounts. Decision not based on entire agreement clause however stated that clause cannot be used to overcome estoppel, even if it becomes an obstacle because no other negotiation allowed. Parol Evidence Rule Two-part approaches: 1. Prevents extrinsic evidence to add to, vary or contradict the terms of K 2. Limits evidence to be adduced to explain the meaning of terms in written K - Equuscorp Pty Ltd v Glengallan Investments Pty ltd

When is a statement a term of K? (exception) Oscar Chess v Williams (1957) Williams sold a car that was supposedly a 1948 Morris. Showed a logbook showing registration in 1948. Purchaser found car was actually a 1939 model and claimed for breach. Held: statement of car as 1948 model was not a binding promise, but a innocent misrepresentation. - Lord Denning: if an intelligent bystander would reasonably infer that a term was intended, it will suffice 1. Existence of a Formal K - Equuscorp Pty Ltd v Glengallan Investments Pty ltd Glengallan borrowed money to invest in a crayfish farm. Loan agreement contained terms of repayment which conflicted with an oral agreement between the parties reached just prior to the execution of the written agreement. The borrower was told that the loan would be a ‘limited recourse loan’. The tax department got involved so there was a pulling-back from the agreement. Held: if the execution of the formal agreement is the oral agreement, then there is no collateral agreement, thus, the oral agreement is to be a consideration. If the contract incorporated the oral statement, then it will be a term. - State Rail Authority NSW v Health Outdoor Held: there is no oral contract as a term in the contract contradicted by saying "SRA has unfettered right to terminate". a) Importance of statement - Couchman v Hill Auction sale for a young heifer between D and P. D made statement that heifer was without calf prior to P’s bid when heifer was pregnant. Heifer later died from pregnancy complications. P claimed for breach. D claimed statement not incorporated. Held: statement was incorporated because it was of such importance to the contract that P would not have entered contract without it b) Words used - JJ Savage and Sons v Blakney B bought a boat, and an engine on the recommendation of JJ Savage. Recommendation was in a letter sent during negotiations. B later found engine was not as recommended and claimed breach of contract. B argued that letter was collateral contract. Held: no collateral contract because letter was not promissory. Use of words promise/ agree/ guarantee/warrant indicate promissory intention compared to believe/estimate/speculate c) Expertise of parties - Dick Bentley v Harold Smith Motors Dealer sold car to P. Dealer stated during negotiations that car had only done 20 000 miles since new engine and gearbox installed when it had actually done 100 000 miles. Claimed for breach of contract. Held: statement was part of contract because dealer was in position/had expertise to know or find out history of car. Term was part of contract even if made innocently. 2. Collateral Contracts - Hoyt’s Pty Ltd v Spencer Contract for 4-year sublease contained term that D could terminate sublease at any time by giving four weeks written notice to P. D later relied on clause to terminate. P argued that termination breached collateral contract because D had represented that clause would not be used unless notice of t...