Contracts Exam Notes PDF

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Contracts Exam Notes I.

Formalities

jurisdictional issue [applies to sales

A. Simple Contracts:

or interest in land] (1) Land: real property

1. Requires consideration to be enforceable

(undeveloped and developed

2. Can be written, oral or both a)

land)

Common law does not require

(2) Interest in land: ownership or

contracts to be in writing, although

leasehold.

it is prudent to record agreements

b) “unless the agreement upon which

in writing.

such action or proceedings is

b) Obligation to record simple

brought, or some memorandum or

contracts in writing is statutory.

note thereof, is in writing” -

(1) Contracts that create or

evidential issue]

transfer an interest in land

(1) agreement: formal contract

(Conveyancing Act 1919

(2) Memorandum or note thereof: could include

(NSW), ss23C, 54A) c)

Reasons for Requirement:

unsigned contract,

(1) To create certainty, reflection

correspondence between

upon obligations and

parties discussing agreements,

prevention of fraud

cheques, forms filled out by parties.

(2) Consequences:

(3) What must be evidence:

(a) Will depend upon the statute that imposes the

essential terms and signature

obligation

of party to be charged (extrinsic evidence may be

(b) Common Outcomes:

used)

contract void or

(4) Essential Terms (sale): Parties,

unenforceable, offence committed/party liable to

property, price and other key

punishment.

promises (5) Essential Terms (lease):

3. Requires at least two parties

parties, property, rent, term,

(consideration)

other key promises

B. Formal Contracts: (Deeds) c)

1. Must be in writing and comply with

changed or by some other party to

legislation 2. Consideration is not required but there

be charged” - evidential issue

are added formalities to make the

d) “no action or proceedings may be

deed binding (“signed, sealed and

brought” - legal consequence

delivered”)

(1) If it doesn’t comply with s54A, it is unenforceable, not void

3. Can be made by 1 person (deed poll) C.

“signed by the party to be

Conveyancing Act 1919 (NSW) 1. S54: contracts for sale etc of land to

D. Sufficiently evidenced in writing if communication took place via email

be in writing

(Electronic Transactions Act 2000 (NSW),

a)

s4

“sale or other disposition of land or any interest in land” -

Contracts Exam Notes 1. Transaction is not invalid if it took

c)

place by means of one or more

could only be explained by an

electronic communications.

agreement alleged existing between the parties

2. Requirements that can be met in electronic form: a)

d) If actions of the plaintiff could reasonably be explained due to

Give information in writing

b) To provide signature

reasons other than the alleged

c)

agreement then part performance

Produce a document

is not made out

d) Record information e) Retain a document

e) NOT show: (Cooney v Burns) (1) Preparatory acts

E. Variations have to be evidence in writing

(2) Payment of money (without

but agreement to terminate a contract

F.

Decide whether those actions

require to be in writing can also be oral

more) - deposits and purchase

(Tallerman & Co v Nathan’s Merchandise)

price (3) Preparation to assignment of

Part Performance:

lease

1. Even though the contract may be

(4) Application for transfer of

unenforceable at law, equity may be

hotel license

able to order specific performance to

(5) Preparation of inventory of

restrain unconscionable conduct

chattels to be included in the

(McBride v Sandland)

sale

2. Part performance will allow a party (“the plaintiff”) to enforce a contract

f)

DO show: (Khoury v Khouri)

that is not sufficiently evidence in

(1) Taking possession of land

writing when:

(2) Making improvements to the

a)

There’s a proved contract that creates or transfers an interest in

(3) Regent v Millett (1976) - part

land, but which is unenforceable

performance successive as

under s54A

they took possession of

b) Plaintiff relies on contract and takes steps to perform it c)

Defendant stands by and allows plaintiff to act in reliance on the unenforceable contract

d) Defendant relies on his/her legal rights and insists that contract is unenforceable under s54A 3. Legal authority: McBridge v Sandland 4. Court’s Approach: a)

land.

Identify the general agreement (sale or lease)

b) Look at the proved actions of the plaintiff

property, repair, renovated and making mortgage repayment

Contracts Exam Notes contract will most likely not be a

II. Express Terms:

term

A. Distinguishing pre-contractual statements from contractual terms

g) Signature (L’estrange v Graucob): signature, in the absence of fraud,

B. Pre-contractual statements can be classified as:

will be binding regardless if you do

1. Puff (red bull gives you wings) [no

not know the contents or have read the agreement.

remedy) 2. Representations - intended to induce

(1) Exceptions:

but not guaranteeing the truth of the

(a) Signed document is not

statement (look at misrepresentation

contractual in nature (b) Signature comes after

‘consent’, can void the contract)

formation of contract (DH

3. Terms - part of the contract (guaranteed) [breach of contract =

Hill v Walter P/L) (c) Misrepresentation (Curtis

remedy] C. Objective Test - was the statement

v Chemical Cleaning &

intended to be promissory (Oscar Chess v

Dyeing Co)

Williams)

(d) Mistakes (non est factum)

1. Factors to identify intention of parties:

(e) Unconscionability: unfair

a)

Language of the statement (Oscar

advantage of superior

Chess v Williams): needs

bargaining power (in

promissory language - promise,

equity)

agree, guarantee, warranty b) Content and importance of

2. Unsigned Documents: a)

car park tickets), vouchers

statement (Van Den Esschert v Chappell): the more important the

c)

b) Would a reasonable person

statement, more likely it will be a

assume ticket is of contractual

term

nature?

Timing of statement (Harling v

c)

Would this document of a kind be

Eddy): more likely a term if there is

in the ordinary course of business

a close proximity of the time of

and expect to contain contractual

making statement and entering

terms? (Causer v Browne)

contract d) Relative knowledge and expertise

d) Did the receiving party know of the statement or did the party

of parties (Dick Bentley

relying on statement take

Productions v Harold Smith)

reasonable steps to bring it to

e) Whole of circumstances approach (Hospital Products v US Surgical

f)

notices, tickets (transport tickets,

notice of the other party? (1) Parker v South East Railway:

Corporation): ‘can only be

court held that railway must

deduced from totality of the

bring it to the attention of the

evidence’

reasonable person of the

Existence of written memo

contractual terms and clause

(Routledge v MvKay): failure to

limiting liability

include representation into written

Contracts Exam Notes e) What constitutes reasonable

E. Reference to other Documents: 1. Terms can be incorporated by

notice? (1) Where the term is reasonable

reference to other documents (Smith v

in the circumstances (Parker v

South Wales Switchgear)

South Eastern Railway Co)

a)

individual terms in full (convenient)

(2) Terms are particularly onerous or harsh (Thornton v Show

b) ‘general conditions of contract… obtainable on request’

Lane Parking), term must have been Brough to attention! HOWEVER, if term was available at the office, this may constitute reasonable notice (Baltic Shipping Co v Dillion) (3) Was reasonable notice actually given to the other party before or at the time of contract (4) Electronic Contracting: (a) Hyperlink to the terms is not reasonable notice (Specht v Netscape Communication Corporation) (b) Requiring offeree to click on icon ‘ I agree: is sufficient (Goldstein v Jumbo Corporation) D. Incorporation of terms by past dealings 1. Balmain New Ferry Co v Robertson: past dealings led to terms of contract being incorporated 2. 3 or 4 contracts over 5 years is not consistent not regular course of dealings (Hollier v Rambler Motors) 3. 3-4 contracts over 3 year period = sufficient to establish consistent course of dealings (Henry Kendall v William Lillico) 4. Still need to establish is the party had done enough to bring it to their attention the first time and if the clause was intended to be part of the contract in the first place (DJ Hill v Walter)!

Avoids the need to set out

c)

Train ticket refers to regulations

Contracts Exam Notes (5) Not contradict any express

III. Implied Terms: A. Rule: express terms overrule implied terms (Bryne v Australian Airlines)

terms of contract b) More formal and detailed, the more reluctant the court to imply a

B. Courts are slow to imply a term… implied term must be so obvious that ‘it goes

term for business efficacy as it is

without saying’ (Codelfa Construction v

harder to prove ‘necessary’ (a

SRA of NSW)

higher standard than reasonably) (Codelfa)

C. Terms can be implied in 4 circumstances: 1. Where there have been past dealings

4. Term is implied by either common law

(presumed intention)

or statute (regardless of intention)

a)

a)

Necessary to show that it is reasonable in circumstances to imply a term based on past contracts (Balmain New Ferry Co v Robertson)

b) consistency, uniformity, regular contracting between parties. 2. Where there is custom or trade usage

Test of necessity (1) Identify the class of the contact (public policy decision) (2) Identify whether it is necessary for this particular contract (Bryne v Australian Airlines)

D. Common law considers certain terms should be normal incident in certain

concerning subject matter of contract

categories of contracts:

(presumed intention)

1. Employment: implied term that the

a)

e.g. bakers dozen is 13

b) Must be evidence that the custom is so well known that a reasonable person would think it is implied into the contract (Con-stan Industries of Australia v Norwich Winterthur Insurance) c)

Not universally accepted but required high level of acceptance

employer will provide a safe system of work for employee 2. But there is not implied term of ‘trust and confidence’ (CBA v barker) 3. Professional services; be rendered with reasonable care 4. Sale of Goods: implied term that goods are fit for their intended purpose.

3. Where it is necessary to give business

E. Statute Law: Competition and Consumer

efficacy (produce desired result) to

Act 2010 & Australian Consumer Law.

contract (presumed intention) a)

Have comprehensively specified

IV. Extrinsic Evidence/Parol Evidence Rule A. Where a contract is wholly in writing

terms (BP refinery (Westernport)

(Masterton Homes v Palm Asset),

v Shire of Hastings)

evidence is not admissible to add to, vary

(1) Must be reasonable and

or contradict the written document

equitable (2) Necessary to give business

(Mercantile Bank of Sydney v Taylor) B. Excludes evidence of:

efficacy to the contract so that

1. Oral variation

contract is ineffective without it

2. Subjective intentions - objective test

(3) Capable of clear expression

3. Prior negotiations

(4) Obvious that it ‘goes without

4. Subsequent conduct

saying’

Contracts Exam Notes C. Purpose: aid in identifying the terms of

10. Construe meaning (including the role

contract and to prohibit use of extrinsic

of ambiguity) [Codelfa v SRA narrow

evidence to interpret/construe meaning of

view - evidence is admissible if the

terms of a contract.

language is ambiguous or susceptible to more than one meaning.

D. Identifying if it is wholly in writing: 1. It has entire agreement clauses (Hope

11. Prove existence of second or collateral

v RCA Photophone of Aus)

contract (contract running side by side

a)

with main contract)

‘all the terms of this agreement are contained in this document’

b) ‘the parties acknowledge that this

F.

Wide view: contracts are made in one vacuum, the court try to receive evidence

document contains the whole

which form part of the factual matrices

agreement and that no other

(Investors Compensation Scheme v West

statements induced the sale’

Bromwich Building Society)

E. Exceptions to Parol Evidence Rule 1. Rectify a mistake (Bacchus March Concentrated Milk v Joseph Nathan and Co) 2. Promissory estoppel in equity (Saleh v Romanous) 3. Conditions precedent - dependent on

1. Use ELECTRICITY GENERATION CORPORATION v WOODSIDE ENERGY (wide approach) 2. The meaning of terms is to be determined by what a reasonable businessperson would have understood the terms to mean

unique special event (Pym v Campbell

(objective approach) and consider:

- where Pym aged that the sale was

a)

subject to inspection of engineer, not

b) Surrounding circumstances known to them

in contract but still admissible because it was precedent to contract) 4. Oral Variation or termination of contract (Narich v Commissioner of Payroll Tax) 5. Sham - to prove true consideration (Esanda v Burgess) 6. Not totally in writing (State Rail Authority of NSW v Health Outdoor) 7. Implied term: custom/trade usage

c)

Commercial purpose

d) Objects to be secured by contract, etc. G. Collateral Contract: 1. Applies when parol evidence rule applies (must wholly be in writing) 2. Collateral Contract: one party makes a promise connected to, but independent of the main contract

(Con-stan Industries of Australia Pty

(wholly in writing) in response to

Ltd v Norwich Winterthur Insurance

consideration of a promise by the

(Aus)) - to produce evidence to explain

other party to enter into main contract.

‘baker’s dozen’ definition

[De Lassalle v Guildford: lease of

8. Identify parties or prove identify of parties (Gilberto v Kenny) 9.

Language used by the parties

house, asked if drain was in order establishing collateral contract]

To demonstrate intention of parties or

3. Breach of collateral contract only gives

true consideration or subject matter of

rise to damages and main contract

contract (Hope v RCA)

remains on foot. !

Contracts Exam Notes 4. Elements: a)

Intended a promise rather than a ‘mere’ representation (JJ Savage and Sons v Blakney)

b) Be intended to induce entry into main contract c)

Relied upon in entering into contract

d) Have separate consideration to the consideration for main contract (Hercules Motors v Schubert) e) Be concluded at the same time or before main contract f)

Not be inconsistent with main contract (Hoyts Pty Ltd v Spencer)

Contracts Exam Notes c)

V. Illegalities

Term served not a substantial part of Consideration (Wyatt v

A. Statutory Illegality: 1. Contracts may be illegal under statute if it is a contract to do with something which the statute forbids. If a contract

Kreglinger (1993)) 5. Expressly Illegal: a)

Statute has clear words that forbid

which is made in order to effect an

the formation of or performance of

unlawful purpose, or if the contract is

a contract

performed in an unlawful manner

b) Olive oil seller -> “buy or sell or

(Yango Pastoral Co Pty Ltd v First

otherwise deal in” -> Re

Chicago Australia Ltd (1978) 139 CLR

Mahmoud and Isphahani (1921) 6. Impliedly Illegal:

410) 2. Statutory Illegality: terms of

a)

Where legislation prohibits certain

legislation itself makes the formation

conduct, but does not in express

or performance of a contract illegal

terms declare illegal a contract that involves one or both of the

3. Legislation must be construed according to the ordinary principles of

parties doing the prohibited

statutory construction to work out what

conduct

Parliament intended. a)

b) 2 types of contracts rendered

Typical Question:

illegal by statute:

(1) What is the policy objective

(1) Illegal as formed

that the Parliament intended to achieve by enacting the

(2) Illegal as performed c)

Ask did the parliament intend that both the prohibited conduct and

legislation

any contracts made in respect of

(2) Did the parliament intend to

that conduct are illegal?

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