Contract Law Exam Notes PDF

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LAWS 4103 Contract Law

Q1a- 51 mins Q1b- 9 mins Q2a- 9 mins Q2b- 17 mins Q2c- 17 mins Q2d- 17 mins

(2:51pm) (3:00pm) (3:09pm) (3:26pm) (3:43pm) (4:00pm)

Table of Contents: 1. 2. 3. 4. 5. 6. 7. 8.

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Offer (2) Acceptance (5) Consideration (8) Completeness and Certainty (11) Formalities (16) Privity (16) Estoppel (17) Express Terms (23) a. Identification of Terms (23) b. Classification of Terms (24) c. Terms of Contingency (25) d. Incorporation of Terms (27) i. Signature ii. Reasonable Notice iii. Course of Dealing Construction of Express Terms (31) a. Intended Meaning b. Plain Meaning c. Parol Evidence Rule Construction of Exclusion Clauses (33) a. Ordinary Principle b. Contra Preferendum c. Four Corners Rule d. Deviation e. Negligence Implied Terms (37) a. Implied by fact b. Implied by law c. Implied by custom d. Implied by duty of good faith e. Implied by statute and consumer guarantees Discharge of Contract (41) a. By performance b. By agreement c. Failure of Contingent Condition d. By Termination i. Breach of an essential term ii. Serious Breach of an Intermediate Term iii. Repudiation iv. Delay v. Termination Clauses vi. Election (to terminate or to affirm) e. By unforeseeable supervening events (Frustration) Remedies (56) a. Election (remedies in termination/affirmation/discharge) b. Damages c. Action in Debt (which is fixed by the contract) i. Contract Price ii. Agreed Damages and Penalty Clauses iii. Deposits and Installment payments d. Restitution (Unjust Enrichment) i. TFC ii. Quantam Merit e. Specific Performance f. Statutory Remedies Vitiating Factors (68)

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First decide whether a valid offer was made:

Offer The nature of an offer:- An offer is an expression of willingness to enter into a contract on specified terms How to determine whether an offer was made: • Must give offeree the choice between acceptance and rejection • Reasonable Person Test (Intention) o Would it appear to a reasonable person in the position of the offeree that an offer was intended, and that a binding agreement would be made upon acceptance o Does not matter whether the offeror actually intended to make an offer (the court will determine this intention objectively using reasonable person)

Always use this case as authority for an offer: • Carlill v Carbolic Smoke Ball Co: o Facts: ▪ D manufactured and sold a device, which prevented influenza. Placed an advertisement in various newspapers that payment of 100 pounds would be made to anyone if they got influenza and used the product properly. ▪ Said they had deposited 1000 pounds in bank, showing our sincerity in the matter ▪ Carlill used smoke ball used the product and got influenza- Carlill didn't’t want to pay o Legal arguments: ▪ Carlill- said he met all requirements ▪ Def- 5 arguments: • No promise and the advertisement was mere puff • No offer was made to a particular person • Plaintiff had not notified D of acceptance of any offer • Didn't stipulate a period in which the disease had to be contracted • P had no consideration to D promise o First instance (trial judge) held: ▪ Ruled in favor of Carlill- said contract had been formed o Court of Appeal held: ▪ Advertisement was not a puff- by them saying they had deposiyted 1000 pounds in the bank, this showed that this was a promise they intended to keep- company should be bound by it ▪ Offer was made to whole world and would have to pay up for any person who completed the requirements ▪ Although acceptance of an offer must normally be notified to the offeror, the offeror may dispense with that notification. An offer that calls for performance of particular conditions may be accepted by performance of those conditions ▪ Use of smoke ball constituted both a benefit to the defendant and a detriment to the plaintiff, either of would have been enough to constitute consideration for the promise ▪ Unilateral Contract Unilateral Contracts The offeree accepts his or her offer by performing their side of the bargain → This performance is the consideration • Eg In Carlill, acceptance of this unilateral contract was when the P agreed to use the device according to the instructions put forth, and then contracted influenza

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Woollen Mills Pty Ltd v Commonwealth o Facts: ▪ 1946 the Commonwealth announced in a series of letters to manufacturers, that it would pay a subsidiary on all wool purchased for domestic use by Aus manufactures (Woollen Mill=AWMs) ▪ AWM purchased large quantities of wool over the next 2 years ▪ In June 1948, the Commonwealth announced the discontinuance of the scheme ▪ Commonwealth said AWM had too much wool and ordered them to repay the subsidiary which had been paid to them (above subsidiary limit)- AWM repaid the amount, and then later sued for that repayment o Arguments: ▪ AWM claimed that the announcements made by the Commonwealth constituted an offer to pay the subsidy in return for the purchase of wool ▪ AWM claimed that each purchases of wool constituted both acceptance of that offer, as well as consideration for the promise to pay the subsidy o High Court Held: ▪ For unilateral contract to arise, the promise must be made in return for the doing of the act- relation of quid pro quo- this for that- between the offerees act and the offerors promise • 3 ways of stating this requirement: o Whether the offeror has expressly or impliedly requested the doing of the act by the offeree o Whether the offeror has stated the price, which the offeree must pay for the promise o Whether the offer was made in order to induce the doing of the act ▪ AWM failed to establish this relationship of quid pro quo between the Commonwealths promise and their own acts- AWM also failed to establish that, viewed objectively, that the offer was intended to give rise to contractual obligations ▪ Principle shown by case: • An offer is effective only if it identifies a valid consideration and manifests an intention to create a legal obligation

Offer vs a mere supply of information • Mere supply of information- offer is not a mere supply of information • Where a statement is made that is intended only to convey some information to the other party o E.g. Harvey v Facey [1893]

Offers and invitations to treat: Invitation to treat is an invitation to others to make offers or enter into negotiation Types: 1. Shop Sales: • Display of goods in a shop window are generally treated as an invitation to treat, and not an offer. • Even picking up an item off the shelf still isn’t an offer, as customers can return the goods back to where they were (Pharmaceutical Society of Great Britain v Boots Cash Chemists) • Offer would be when the customer places the good on the counter – acceptance is when cashier accepts offer 2. Auctions: • Auctioneer merely puts out invitations to treat, and the bids made by the those present constitutes an offer, with acceptance being the fall of the hammer 3. Tenders: • Each individual party submitting a tender, or a quotation, without knowing the other parties bids • The actual tenders received will constitute offers made by parties

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Exception→ When the call for tenders is announced, and the vendor promised the highest offer would be accepted, this would mean that would be the offer, and the acceptance would be the highest tender submission

Ticket Cases MacRobertson Miller Airline Services v Commissioner of State Taxation (WA) (1975) – Judges give different reasons Barwick CJ- says no agreement Action

Legal implication

Issue of ticket

Receipt for payment of fare

Passenger presents for travel

Offer from passenger- ready and willing, offerring us up for travel

Airline provides seat on plane

Acceptance by airline by conduct (the conduct is the allowance to board)

Stephen J Action

Legal implication

Issue of ticket

Offer from airline (you’ve handed over money)

Upon receipt, passenger taking no action or presenting to board

Acceptance by passenger by conduct (passenger getting ready to board) or failure to reject

Electronic Transactions: Principle→ The new legislation provides, first that a proposal to make a contract through electronic communications which is not addressed to a particular person, but is made generally accessible to people using information systems, is to be treated as an invitation to make offers, unless it clearly indicates an intention to be bound in the case of acceptance • If made to whole world- then invitation to treat Next consider whether the termination of the offer, by the offeree was justified and correct • May have to look at this in conjunction with when acceptance was made

Termination of an Offer Types: 1. Withdrawal • An offer may be revoked at any time before it is accepted o See Dickinson v Dodds (1876) • Common Law – a promise to hold an offer open for a period, is not binding, unless consideration is given • Only effective when communicated to the offeree (no exception via post) 2. Options: • When consideration is given to keep an offer open for a certain period- option holder can then chose whether to exercise their option in the mean time 3. Lapse: • Period in which the offer can be accepted lapses • If no period specified- use reasonable person test o Nature of the subject matter o Means to communicate this offer

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4. Failure of condition an changed circumstances: o Offer may be made conditional upon the happening of a certain event o If the condition is not fulfilled, the offer will lapse ▪ E.g. McCaul (Aust) Pty Ltd v Pitt Club Ltd (1957)- involved an option to renew- can choose to accept or reject ▪ Option to renew - Subject to 2 conditions- hadn't fulfilled one of the conditions, and thus acceptance was not possible 5. Rejection and Counter Offer: • Counter offer technically extinguishes the original offer • Must make the distinction between a counter offer and merely inquiring about more information→ Look at intention 6. Unilateral Contract o Difficulty here is when the offeree begins to perform acts within a unilateral contract which pertain to acceptance, but the offer is withdrawn before the offeree can complete the acts which constitute acceptance. ▪ Principle- held that an offer made in exchange for the doing of an act, cannot be revoked once the offer is partly performed ▪ Mobil v Welcome • Facts: o Incentive scheme by Mobil to improve the performance of its franchise stations → stated that if they could meet performance expectations over a 6 year period, they would be granted a 9 year renewal deal o After 4 years, Mobil abandoned this scheme, however a lot of franchises had spent a lot of money and time trying to adhere to these performance goals • Principle through Held Judgment: o An offer made in return for performance of an act is, like any other offer, revocable at any time. The offeror will only be prevented from revoking the offer where there is an implied contract not to revoke or an estoppel Was correct acceptance made?

Acceptance Conduct constituting an acceptance: Principle→ “If, whatever a mans true intention may be, he so conducts himself that a reasonable man would believe, that he was assenting to the terms proposed by the other party, and that the other party upon that belief enters into the contract with him, the man thus conducting himself would be equally bound as if he had intended to agree to the others terms” → WHERE IS THIS FROM??? Need to have Consciousness of the offer • Have to have that motive of intent to perform the act with the purpose of acceptance • Crown v Clarke o 1000 pound reward for catching the murderers of 2 police officers o Clark was arrested as an accomplice with the murderer→ Clark gave evidence which basically lead to the capture of the murderer, and his acquittal o He tried to claim the reward→ High court held that a unilateral contract will only be made where acts required for acceptance are performed on the faith of the offer ▪ He did this act as a way for his own acquittal- not for the money- therefore he cant claim he accepted this unilateral contract as the intention was not there • Looks at the subjective approach, and not merely the objective approach

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Clark would have been given the reward if he didn't speak up, and we relied purely on the objective approach

Communication of Acceptance General rule: → acceptance MUST be communicated by offered to the offeror → (Byrne v Tienhoven (1880)) (Acceptance can be done by an agent) BUT can be dispensed with by offeror • Offeror can stipulate what constitutes acceptance (i.e. method of acceptance), but cannot impose a contract on the offeree • If the offeror mandates an exclusive mode of communication – then only that mode of communication can be used – all others wont be valid • See Felthouse v Bindley (1862)- Plaintiff wrote to nephew to buy his horse- said if I here no more from him, then I will assume the horse is mine. The auctioneer was the defendant who had sold the horse to a 3rd party. Nephew had instructed the auctioneer not to sell the horse • Issue- had the horse been sold to the plaintiff? • Held- No acceptance, and uncle had no right to impose sale of horse, and nephew had not communicated acceptance (even though nephew actually did intend for uncle to have the horse) (But it was sold to a 3rd party.) •

Other Methods: 1. The Postal Rule o General Rule→ Acceptance is when the post is posted (even if its received some time later, or is lost in the post) ▪ Why should posted acceptances be effective on sending, rather than on receipt? → One of the parties must bear the risk that the letter is lost in the post • Henthorn v Fraser [1892]- taken that post would be a means of communication ▪ Rule that parties must have contemplated that acceptance must through post 2. Modern Electronic Communications: o General Rule→ Acceptance is when the message is received by the offeror from the offeree ▪ This applies to communication through websites and email o If communication has been sent to an address which was not designated by the addressee, then communication is only effective once both: ▪ The communication has become capable of being retrieved by the addressee and ▪ The addressee has become aware that the electronic communication has been sent to that address ▪ Applies to: • Telex- Brinkibon v Stahag Stahl

o Rule: that when the message was sent out of office hours (which this one was done-6pm) and is not intended to be read immediately (is was the start of a long weekend), then it may become effective some time after it is received by the offeror • Fax- Reese Brothers Plastics • Email - Olivaylle Pty Ltd v Flottweg GMBH & Co KGAA 3. Silence as acceptance + Conduct = acceptance ▪ Contract cannot be forced onto the offeree by stipulating silence as the prescribed method of acceptance o Felthouse v Bindley ▪ Horse case- auction ▪ Requires more in depth analysis. Can silence bind you? ▪ → a duty to communicate rejection of offer?

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See Empirnall Holdings Pty Ltd v Machon Paull Partners Pty Ltd (1988) o Lots of apartments are going up- property developers needed. Mcmahon (architect) offered job, - had accepted verbally, then did some work, and after 2 weeks asked for a progress payment and for the execution of a contract to be signed- sent 2 copies to Empirnall o 2 weeks later, the architects sent an email saying “we are proceeding with the understanding that the terms and conditions in the contract are met”- however still no response from Empirnall o Architects continued to work, and then Empirnall became insolvent- Architects wanted payment, despite there being no contract as it wasn't signed Question -was the contract formed? Would a reasonable bystander think Empirnall’s silence was acceptance of the offer?? o Therefore silence with other conduct, MAY EQUAL ACCEPTANCEEmpirnall didn’t say anything + Facts (Empiranll had a reasonable opportunity to reject the offer, and Empirnall took the benefit of what McMachon was providing) therefore reasonable person would believe that Empirnall had accepted the contract on silence o So because Empirnall both had a reasonable time to reject the contracts which were sent to them, and in conjunction with them continuing to be ok with them receiving benefit from McMahon, the silence constituted acceptance.

Battle of the forms: • Where each party uses its own standard form of terms and conditions during negotiations • QUESTION: Who wins the “battle of the forms?” • Two different approaches have emerged: • Conflict approach • Synthesis approach Example: Butler Machine Tool Co v Excell-O Corp (1979) • Facts: • Seller (Butler) – Issues quotation to buyer (Excell) on seller’s standard form • Buyer (Excell-O Corp) – submits order on buyer’s standard form (includes tear off slip) • Seller (Butler) – sends printed slip + letter (entered in accordance with our revised quotation) to buyer (Excell O-Corp) • Dispute: • Seller – relied on price variation clause in standard form (claim $$ for cost increase between date of order and expected date of delivery) • Buyer – rejects excess charge. Relies on buyer’s standard form • Issue: which standard form prevails? • First instance: Seller’s (Butler) form prevails = price variation clause • Original quotation - “these terms and conditions shall prevail over terms and conditions in the buyer’s order” • Appeal – English Court of Appeal: Buyer’s (Excell O-Corp) prevailed • Denning LJ: • Synthesis approach explained • This case: Buyer’s standard terms prevailed (no price variation clause) • Sales office – printing slip + letter = decisive • Lawton LJ: • This case: • Seller (quotation) = offer • Buyers (order) = rejection (materially different, could not be reconciled) and counter offer Agreement without Offer and Acceptance

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Principle→ The essential question in such cases is whether the parties conduct, including what was said and not said and including the evident commercial aims and expectations of the parties, reveals an understanding or agreement or, as sometimes expressed, a manifestation of mutual assent, which bespeaks an intention to be legally bound to the essential elements of a contract • Brambles Case: o Brambles managed a solid waster depot for the council, and charged depositers o Brambles was instructed by the council to increase the rate at which it charges and remit the additional income to the council o Brambles sent letter and said this was not viable- however did so and kept the additional money o Council claimed a contractual entitlement to all the additional income which they had received → Depended on contract o Brambles argued that no offer had been made towards to them (the letter was a command and not a offer which could be accepted or rejected) o Trial Judge said that Brambles had accepted a contract through their conduct by charging the higher rates and adhering to the Terms and Conditions of the contract

Consideration When is consideration required? • The doctrine of consideration requires that something must be given in return for a promise in order to make it binding (an exchange takes place)

Firstly consider the: Elements of Consideration 1. First the promise must incur a detriment or confer a benefit on the promisor (the benefit or detriment requirement o Detriment to the promisee or benefit to the promisor ▪ Detriment can include: performance of services, transfer of some property, or even the promise to do this in the future o Good example is if one party makes a promise in return for another party’s promise ▪ One party will have an enforceable legal right to the promise being fulfilled (benefit), and the other party will have an obligation to perform this promise (detriment) 2. Second, that benefit/detriment must be given in return for the promise (the bargain requirement) o The benefit conferred on the promisor, o...