Contract Exam Notes - Summary - lecture 1 - 15 PDF

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1 Contract Notes Contract Formation- A contract is a legally enforceable agreement. (An agreement is traditionally determined by offer and acceptance) Unilateral Contract- A contract is supported by CONSIDERATION in the form of the doing of an act, rather than making of a promise. Eg in the Carlill case the consideration by Ms Carlill was executed in form. She did not promise to use the smoke ball as directed but her use of the smoke ball was an executed consideration enabling her to enforce the smoke ball company’s because it was impliedly requested by the smoke ball company as the price of its promise. Usually where there is one promisor. Bi Lateral Contract- A contract supported by CONSIDERATION in the form of an exchange of promises by two persons. Contract Formation Agreement (Formation of a contract)- For there to be an agreement it must be clear that one party has made an offer and another party has accepted that offer. Problems with the apporoach-(1)Agreements can be problematic because conduct and words may not fit into an offer and acceptance model, (2) Some everyday transactions don’t appear, (3) People drift into a contractual relationship and it’s hard to determine when the precise moment this occurs. The Global Approach- The court determines on an objective basis, whether the parties should be considered to have entered into a contractual relationship Gibson v Manchester City Council.Brambles Holdings Ltd v Bathurst City Council (2001) 53 NSWLR 153 - Brambles managed a waste disposal depot for the Council. Brambles would dispose of liquid waste for 1.1c/L. The council instructed Brambles to increase its fees to 1.3c, then an additional cent every quarter, up to a limit of 6c. Brambles was unwilling to do so, without further remuneration beyond their 1c share. However, Brambles adopted the pricing approach. The Bathurst City Council claimed against Brambles for the extra income.Hussain v O&S Holdings (VIC) Pty Ltd- ‘A manifestation of mutual assent may be made even though neither offer nor acceptance can be identified and even though the moment of formation cannot be determined. Offer- ‘Is an expression of willingness to contract on the terms stated’ established in Australian Woollen Mills Pty Ltd v The Commonwealth (1954) 93 CLR 546 (Is a clear statement of the terms on which an offeror is prepared to be contractually bound). In deciding whether an offer has been made the court employs an objective test. The test is used to determine whether the alleged offeror has stated the terms upon which they are prepared to be bound if the other accepts established in Tooheys v Blinkhorn [2008] NSWC 499. Offers can be made to one person, an identified group of people and the world at large. Carlill v Carbolic Smokeball Co- There was an advertisement for the carbolic smokeball awarding 100 pounds to any person who contracted influenza, the ad also said that 1000 pounds is deposited. Ms Carlill contracted influenza. At 261- ‘was the ad mere puff? No because the ad said that 1000 pounds was deposited in the alliance bank, shewing our sincerity in the matter. Distinguishing an offer from an invitation to treat- Invitation to treat- a statement made to others, inviting them to make you an offer eg an item on a shelf is an invitation to treat Pharmaceutical Society of Great Britain v Boots Cash Chemist [1953] 1 QB 401. - General propositions- 1) a mere statement to the as to the price at which land, goods or services might be sold or provided is not an offer. 2) The display of goods in a retain store is NOT an offer to sell at the price stated even if the goods are being sold on a self serve basis.(the display of items at a self service store is in the nature of an invitation to treat, therefore it is the shopper who is making the offer.)An Offeree’s Options-1) Accept the offer, 2) reject the offer, 3) make a counter offer, 4) Seek more info Harvey v Facey, or 5) do nothing. Counter offer- Rejects the original offer and substitutes a new offer. Hyde v Wrench (1840) 3 Beave 334; 49 ER 132- P and D were haggling over the price of a farm, D offers to sell the farm for 1000 pounds, in reply the P offers 950 pounds, D refuses. The P then agrees to pay 1000 pounds. Forms- Standard form contracts: many companies use standard forms for dealing especially frequent dealings. Each new form is viewed as a counter offer the terms are therefore contained in the last form submitted. Butler Machine Tool Co Ltd v Ex-Cell-O Coporation- the court had to decide whose form prevailed. If B’s form , then B could take advantage of its own condition that allowed it to increase the price. It was held the offer and counter offer , so E’s offer prevailed. Termination of offers-1) revocation by the offeror, 2) rejection by the offeree,3) lapse of time, 4) change of circumstances, 5) failure of a condition,6) death of a party, 7) supervening incapacity. 1) revocation- The offeror can only revoke the offer IF acceptance has not occurred Dickinson v Dodds. Revocation is only effective when it is received by the offeree, notice does not need to be personally given ( Dickinson). Where the offer is made to the world at large the or a large number of people, the revocation should be done in the same manner as the original offer Shuey v United States. 2) Rejection by the offeree- where an offer is expressly or impliedly rejected by the offeree, then the offer terminates, words or conduct are sufficient, rejection good when received. . A rejected offer may remain operative if in the circumstances it should be treated despite its rejection as remaining on foot, available for adoption as the basis of mutual assent manifested by conduct Brambles Holdings v Bathurst City Council. 3) Lapse of time- The offeror imposes a time limit for acceptance and acceptance has not occurred or a reasonable time for acceptance has expired Vicoria Hotel Co v Montefire.4) change of circumstances- Situations where the offeror may not want their offer to continue, it is common for offers to be couched in terms. The offer or offeree can make another offer taking into account the changed circumstances. 5) failure of condition- John agrees to buy Bart’s racehorse providing the horse is sound. If Bart accepts the offer when the horse is no longer sound, the acceptance wll be ineffective, and the offer will be terminated. 6) death of a party- if the offeree knows of the offerors death authority that the offeree cannot accept Fong v Cili. If the offeree does not know of the offeror’s death the offeree might be able to accept Bradbury v Morgan. 7) supervening Incapacity- If something happens such as a mental disability, after the offer is made, but before acceptance that renders the offeror incapable of performance then the offer will terminate. Acceptance of an offer- Acceptance is, a final an unqualified assent of the terms of an offer, made in the manner specified in the offer, or indicated by the offeror.(Compliance with the requirements stated in the offer). Where an offer is made to one party only a valid acceptance will terminate that offer. Brogden v Metropolitan Railway Co. (1877)- The house of lords held that B didn’t accept the offer as it was a counter offer. MRC then accepted by conduct when they took the supply of coal. It was OBJECTIVELY clear from the conduct that the parties had agreed the terms of the contract. Who May Accept- Only those persons; 1) to whom the offer is made; 2) Who have the offer ‘in mind’ at the point of acceptance. Offer in mind- R v Clarke (1927), Williams v Carwardine (1833). What can be accepted- There are two

general principals; 1) Can only accept what was offered- without any deletions, additions or conditions that would affect the terms of the offer; 2) Acceptance must be unequivocal- the offer and acceptance must correspond. Counter offer vs Acceptance- If some detail is added that does NOT affect the terms of the offer, then it may be a valid acceptance- Carter v Hyde (1923). If a detail is added that is purely

2 for the benefit of the offeror then this may be a valid acceptance- Boreland v Docker [2007] NSWCA 94 at [76]-[78] . CommunicationAcceptance must generally be communicated to be effective. Acceptance must be communicated by the acceptor or their authorised agent Powell v Lee (1908) 99 LT 284. Such communication may be in words or actions. Empirnall Holdings v Machon Paull (1988). The offeror is able to specify the manner of acceptance eg. In the Carlill case the terms of the offer made it clear that communication of acceptance was NOT required. Stipulated Silence- Silence cannot be stipulated by the offeror as the required means of acceptance. Eg if I don’t hear from you then ill assume that you have agreed. Felthouse v Bindley- Held, that the nephew had not communicated his acceptance of his uncle’s offer and so the horse had not changed hands (no contract to sell). The uncle had no cause of action because he did not have title to the horse. Waiver- An offeror can waive the right to have the acceptance communicated. Waiver can be express or implied in circumstances. Waiver is assumed in unilateral contracts: Carlill v Carbolic Smoke Ball Co- ‘If the person making the offer , expressly or impliedly intimates in his offer that it will be sufficient to act on the proposal without communicating acceptance of it.. performance of the condition is sufficient acceptance without notification. Waiver & Bilateral contracts- In bilateral contracts the courts are more reluctant to find that waiver of communication of acceptance has occurred. See Latec Finance Pty Ltd v Knight. Rules of Waiver Communication-A waiver of communication of acceptance occurs where: 1) The offeror stipulates a mode of acceptance that does not require communication. 2) The offeree decides to accept, 3) the offeree does something that a) evidences an intention to accept b) conforms to the stipulated mode of evidence Prescribed manner of Acceptance- The offeror can require acceptance in a persccribed manner George Hudson Holdings Ltd v Rudder. The mode of acceptance can be implied from the circumstances eg. Telegram offer and postal reply Howard Smith and Co v Varawa. at 79. No prescribed mode of acceptance- where no mode of communication of acceptance is prescribed, what is a valid acceptance depends on the nature of the offer and the circumstances of its making. Revocation of acceptance- An acceptance can be revoked provided that the revocation comes to the offeror’s attention before he or she receives the acceptance.. The Postal Acceptance Rule- When the parties contemplate acceptance by mail, acceptance will be complete when the letter is posted Henthorn v Fraser [1892]. When the postal Rule does not apply- 1) Where the parties dealings were protracted and contentious; 2) It would produce manifest inconvenience or absurdity; 3) the offeror expressly requires that acceptance be actually communicated; 4) Similar methods of communication be used Entores Ltd v Miles Far East Corp [1955]. Electronic Transactions- All Australian jurisdictions have almost identicale Electronic Transactions Acts… Electronic Transactions Act 2011 (WA), Electronic Transactions Act 2003 (Cth). Acceptance by mail- Olivaylle Pty Ltd v Flottweg GMBH and Co. KGAA (No 4) [2009]- 1) a contract is formed where acceptance is received; 2) Indicates postal acceptance rule does not apply to email. When and where an email is received- Common law principles: Difficult to know where an email is received. 1) The offeree sends an email to the offeror; 2) the email goes through the offeree’s server, the internet, the offeror’s server and to the offeror’s computer. 3) Computer systems of third parties can be involved; 4) an email may be delayed by the offeror’s organisation and not forwarded to the offeror’s computer; 5) The offeror may inadvertently delete the mail without reading it. There is no clear answer at common law, the general view is that an email should be demmed to be received once it is received by the offeror’s server. Any delay in reaching the offeror’s computer will be irrelevant as the contract will already be formed. •

ELECTRONIC TRANSACTIONS ACT 2011 (WA)

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8.

Validity of electronic transactions

(1) For the purposes of a law of this jurisdiction, a transaction is not invalid means of one or more electronic communications.

because it took place wholly or partly by

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ELECTRONIC TRANSACTIONS ACT 2011 (WA)

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13 .

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(1) For the purposes of a law of this jurisdiction, unless otherwise agreed between the originator and the addressee of an electronic communication, the time of dispatch of the electronic communication is —

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(a) the time when the electronic communication leaves an information system under the control of the originator or of the party who sent it on behalf of the originator; or

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(b) if the electronic communication has not left an information system under the control of the originator or of the party who sent it on behalf of the originator, the time when the electronic communication is received by the addressee.

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Note: Paragraph (b) would apply to a case where the parties exchange electronic communications through the same information system.

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(2) Subsection (1) applies even though the place where the information system supporting an electronic address is located may be different from the place where the electronic communication is taken to have been dispatched under section 15.

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14 .

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(1) For the purposes of a law of this jurisdiction, unless otherwise agreed between the originator and the addressee of an electronic communication —

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(a) the time of receipt of the electronic communication is the time when the electronic communication becomes capable of being retrieved by the addressee at an electronic address designated by the addressee; or

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(b) the time of receipt of the electronic communication at another electronic address of the addressee is the time when both —

Time of dispatch

Time of receipt

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(i)

the electronic communication has become capable of being retrieved by the addressee at that address; and

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(ii)

the addressee has become aware that the electronic communication has been sent to that address.

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(2) For the purposes of subsection (1), unless otherwise agreed between the originator and the addressee of the electronic communication, it is to be assumed that the electronic communication is capable of being retrieved by the addressee when it reaches the addressee’s electronic address.

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(3) Subsection (1) applies even though the place where the information system supporting an electronic address is located may be different from the place where the electronic communication is taken to have been received under section 15.

Uncertainty- Uncertain and incomplete agreements will normally not be enforced because courts don’t know what the parties have agreed. However where the agreement contains some method to resolve uncertainty, the courts will try to uphold the agreement. Uncertainty may arise in a number of different ways. 1) More than one meaning and it was not possible to tell which was intended. 2) Impossible to make grammatical sense of words used.3) words use a code for which there is no key.4) application of the words to the circumstances which have occurred produce more than one possible result and it is not possible to tell which was intended. Necessary Terms- An agreement will be uncertain or incomplete if it lacks necessary/essential terms in regards to- 1) the parties; 2) The subject matter; 3) The consideration (price) for each party’s promise; 4) terms that the parties have themselves agreed are essential. Courts will attempt to uphold agreements where possible- steps to resolve uncertainty- 1) Identify the element of uncertainty or incompleteness. 2) Determine significance. It is only uncertainty or incompleteness in relation to an essential term that will void the contract. 3) Can the element of uncertainty or incompleteness be cured? Resolving Uncertainty- Courts will try to resolve uncertainty by one or more of the following: 1) Imply a term; 2) Use procedures provided in the contract to resolve the matter; 3) An external standard imposed by the court; 4) If none of the above steps are possible or resolve the uncertainty consider if severance is possible. Whitlock v Brew (1968)- Agreement contained the following “on such reasonable terms as commonly govern such a lease”. HELD: Void for uncertainty as could find no evidence of such a lease in common use that could be used to clarify the terms. NOTE- . Trawl Industries of Australia Pty Ltd v Effem Foods Pty Ltd Trading as ‘Uncle Ben’s of Australia (1992). Contacts containing words such as ‘average quality’ ay initially appear uncertain but evidence may often be obtained to explain the term in light of an industry standard. Lord Wright in Scammel (G) & Nephew Ltd v Ouston- So long as the language employed by the parties is not ‘so obscure and so incapable of any definite or precise meaning that the Court is unable to attribute to the parties any particular contractual intention’, the contract cannot be void or uncertain or meaningless. ‘in the search for that intention, no narrow or pedantic approach is warranted, particularly in the case of commercial arrangements . Thus will uncertainty of meaning, as distinct from absence of meaning or og intention, be resolved’. Completeness- Is concerned with whether key and essential parts of the agreements have been included in the contract. Booker Industries Pty Ltd v Wilson Parking (Qld) Ltd (1982) 149 CLR 600Wilson leased premises from Booker for a period of three years. Clause 4.01 of lease granted Wilson an option for a further lease for a period of three years. The option clause stipulated that ‘the rental as may be mutually agreed between the Lessor and the Lessee and failing agreement then such rental as may be fi xed by an arbitrator. Nominated in accordance with the provisions of Clause 3.05(b) Clause 3.05(b) provided for the appointment of a single arbitrator to be nominated by the President of the Queensland Law Society. Wilson wanted to renew the lease and Booker argued that the option clause was void for incompleteness as to an essential term, namely the rent. Wilson brought an action for specific performance in relation to the option clause. ISSUE: The issue before the High Court was whether the option clause was sufficiently complete tobe enforceable by a decree of specific performance. DECISION: The High Court (Gibbs CJ, Murphy, Wilson and Brennan JJ) unanimously held in favour of Wilson and ordered specific performance of the option. Gibbs CJ, Murphy, Wilson JJ- ‘If the lease provided for a renewal ‘at a rental to be agreed’ there would clearly be no enforceable agreement. On the other hand, it is also well established that the parties to a contract may leave terms-even essential terms- to be determined by a third person.. in the present case, the lease itself provides the entire mechanism for determining the rental for the renewed term. There is no further agreement required for the parties. The difference between uncertainty and incompleteness.1) certainty is generally concered with whether the meaning of terms in a contract can be said to be certain. 2) Completeness is concerned with whether key and essential parts of the agreement have been included in the contract. 3) Some overalp between certainty and incompleteness. Agreements to agree and agreeing to negotiate in good faith-One cannot ‘agree to agree’’ because a final agreement has not been reached- too uncertain. However one MIGHT be able to agree to ‘negotiate in good faith’.- Not all details are settled, but a pre liminary agreement states that the parties will continue to negotiate in good faith with the aim of reaching a final agreement. Coal Cliff Colleries Pty Ltd v Sijehama Pty Ltd (1991) 24 NSWLR ...