Final Exam- Contracts Template PDF

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Leftkowitz v Great Minneapolis Surplus store (offer clear, definite and explicit, and leaves nothing for negotiation) legal intention= OFFER o Carlill v Carbolic Smoke Ball Co. (“offer to the world”= unilateral contract upon performance of conditions- very clear promise from language) o

CONTRACT FORMATION 1. Offer 2. Acceptance (forms agreement) 3. Certainty & Completeness 4. Consideration 5. Intention to Create Legal Relations *If any of these missing= Contact VOID* 1) OFFER Carlill v Carbolic Smoke Ball Co- Expression by one party (offeror) to other party (offeree) of a willingness to be bound by certain terms, if the other party is prepared to accept those terms  Objective Test: How would reasonable addressee interpret the statement? o Look at words and conduct (plain language) as a whole and in circumstances- Gibson v Manchester CC- (no offer using objective test) o Is there serious commitment to be bound?, if yes, there is an OFFER Distinguish Offers from: 1. Mere Puffs- wild praise of the product 2. Supplying information o Harvey v Facey (owner replied 900 was lowest price, buyer agreed=held no offer since no intended contractual obligation, lack of detail between parties.. too much left to negotiate) o Bray CJ in Pattison v Mann (It could be an offer in some circumstances but if the expected details are missing, it is indicated that there is no offer) 3. Invitation to Treat= is an attempt to induce offers or to engage in negotiations- lack legal commitment (see below)

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 Offers vs. Invitation to Treat Starting assumption that following things are NOT OFFER:  Brochures, catalogues, circulars, newspaper ads o Partridge v Crittendon (ad that read: ‘hens are $25 each= held was not an offer but merely an Invitation to treat)   Priced goods on display o Pharmaceutical Soc of GB v Boots Cash Chemists (display was ITT, offer was made by customer at counter) EXCEPTION: above ads could be OFFERS- it is all a matter of construction (look at words, objective test,)  “first come, first served”= OFFER

Courts regard the issue of ticket as an offer, which can be accepted or rejected by the passenger (purchaser) after he/she has had reasonable time consider the conditions. o MacRobertson Miller Airline Services v Commissioner of State Taxation (ticket=offer, acceptance=passenger) [you have until you sit on the seat to revoke offer]

Duration of an Offer Offers can terminate for: 1. Lapse of Time Usual Analysis: ITT a. Fixed duration= automatically on offer o Payne v Cave- Call for bids is ITT, buyer’s bid is expiration OFFER, and Auctioneer accepts or rejects b. Indefinite duration= Barrick v Clark- offer Two Contract Analysis: OFFER must be accepted within reasonable time, o Warlow v Harrison- Promise to sell to highest which depends on circumstances when bidder is a binding unilateral contract but there is no fixed duration (“reasonable” separate from contract of sale depends on circumstances of offer, subject o AGC (Advances) v McWhirter- Without reserve: matter- nature of transaction- and conduct each bidder makes an offer, if successful, there of parties during negotiations) is a contract of the sale of property (fixed 2. Counter Offer bidding), if more $ then highest bid= without a. Hyde v Wrench- offer is terminated once reserve counter offer made; counter offer treated as rejection of original offer Tenders b. Stevenson Jacques & Co v McLean- request Usual Analysis: ITT for clarification or information is not a o Invitation to tender is ITT, submitting tender is counter-offer and does not terminate offer OFFER, receivers can accept or reject c. Powierza v Daley- line between rejecting Two Contract Analysis: OFFER offer and requesting info is fine one, basic o Harvela Investments v Royal Trust Call for test is the effect on reasonable person in tenders is OFFER when there is a process shoes of offeror contract (award to highest/lowest)- willingness 3. Death of Offeror or Offeree to be bound by certain process 4. Failure of Condition o ITT when process is not specified a. Offer made subject to condition (eg: “only while stocks last”), lapses automatically Two Contract Analysis upon failure of condition (eg. when stocks Ballot case: run out) o Markholm Construction Co Ltd v Wellington CC i. (dispose subdivision by ballot; bound by ballot Offers can be REVOKED if: and bound by process of contract= if win, get 1. Communicated to Offeree BEFORE acceptance land) a. Byrne v Van Tienhoven – offer may be o Offer made by ballot, acceptance by entering revoked by the offeror before it is accepted, Referential Bid: provided it is communicated to the offeree o Harvela Investments v Royal Trust Co of (uncommunicated revocation is no Canada Ltd. (referential bids are considered revocation) void; bound by tender and bound by process 2. EXCEPTION: Unless OPTION exists contract) a. Exception to normal revocation rule; option is a binding offer to keep an offer Ticket Cases open for a specified time Auctions

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acceptance; courts require “clear 2) ACCEPTANCE language”  Agreement= offer & acceptance  Latec Finance v Knight- generally clear language o Agreement requires meeting of the minds required to waive communication of acceptance “consensus ad idem”  OTHERWISE acceptance must be communicated 3.  Acceptance= unqualified assent to the terms of an offer: EXCEPTION: PAR OBJECTIVE TEST  Postal Acceptance Rule (PAR)- main exception to o Brings contract into existence general rule that acceptance must be o “objective test by reference to words or actions communicated: of offeree”  Assumptions that: 1) letter correctly addressed and o meeting of the minds stamped; 2) postal services are operating normally  Carlill v Carbolic Smoke Ball- acceptance has affect only at the time when communicated to the offeror because it establishes  Henthorn v Fraser- “where circumstances are such that the minds of 2 parties have come together and that it must have been within the contemplation of formed consensus the parties that, according to the ordinary usages of mankind, the post might be used as a means of Elements: communicating the acceptance of an offer, the 1. Acceptance must be in reliance on offer acceptance is complete as soon as it is posted” 2. Acceptance must be communicated to offeror (every word critical in proving PAR) 3. Acceptance must correspond with offer o Prove through practicality and 4. Effect of Acceptance circumstances in each situation:  Words of offer important (post 1) Reliance on offer: “consciousness of offer” stated?)  R v Clarke- purported acceptance must be on faith  If offer made by post, accept by of the offer (ie- in reliance upon it); can’t accept post or similar means offer that you don’t know about  If party away from office, and post o This can be presumed if there is: only vital means to reach them (iea) knowledge remote location) b) performance of requested acts  Wardle v Agriculture and Rural Finance Pty Ltdo but can be rebutted by evidence (R v PAR rule accepted in Australia Clarke) Unilateral vs. Bilateral Contracts PAR in doubt: o cannot accept in ignorance of the offer Unilateral- when there is only one “promisor”  Tallerman & Co v Nathan’s Merchandise (Victoria)  Tinn v Hoffman- The problem of cross-offers: o Carlill v Carbolic Smoke Ball Co- A promise in Ltd- Posting not acceptance unless “it is inferred o When one party makes an offer without return for a requested action. One party that offeror contemplated and intended that his knowing the other party had made the assumes an obligation and is bound, but not offer might be accepted by the doing of that act exact same offer and they effectively cross, until the requested action is performed (on [of posting]” even though same offer same terms, offers faith of offer)  Wardle v Agricultural and Rural Finance Pty Ltdnot made in reliance on the opposite offer, Bilateral- each party assumes an obligation and both “Until there is a case whose outcome depends on the therefore no agreement because not aware are bound immediately upon exchange of promises present status of the postal acceptance rule it is of the other offer, because it is merely two safer to proceed on the basis that the law as stated Unilateral offers o Party A: “$100 if you find and return my in the English cases…. continues to be the law in Australia” (use Fraser rule not Tallerman) bicycle” 2) Communicated to offeror: o Party B: B, in response, simply finds and  Carlill v Carbolic Smoke Ball- right to PAR Limitations: DOES NOT APPLY when: returns A’s bicycle  Communication implied or expressed: communication may be waived by offeror (expressly Bilateral or impliedly) o Holwell Securities v Hughes- objective o Party A: “I promise to sell my bicycle to you for o Set out clearly what terms of acceptance intention to exclude post by offeror$100. Payment on delivery.” acceptance doesn’t occur when posted but there were; abiding by conditions was valid o Party B: “It’s a deal!” [Signs on the dotted line.] b.

Goldsbrough Mort & Co Ltd. v Quinnconsideration by offeree ($)= price paid for keeping the offer open for period of option (eg. a deposit) Problems with REVOCATION (Different situations to which it applies): a. Dickinson v Dodds- Offeree must have knowledge of revocation, but explicit communication personally is not requiredoffer can be revoked through reliable third party b. Shuey v US- an offer to the world may be revoked by a similar means/forum to which it was made (eg. communicate to world that offer is terminated) c. Veivers v Cordingley- Once the act is commenced you no longer can revoke the contract d. Mobil v Wellcome International- can’t revoke offer once party starts to perform on it; (ASIDE- can sometimes revoke based on intent of offeror (objective); could it be interpreted that there was implicit promise not to revoke upon performance?- if yes= can’t revoke i. Revocation of unilateral contract must be judged case by case- did offeree suffer detriment by performing on offer?

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only when communicated to offeror- (iewhen offeror has knowledge of it) “exercisable by notice in writing to intending vendor” (vendor must receive communication of notice) = communication rule o Bressan v Squires- “exercised by notice in writing addressed to me” Instantaneous Communication: o Entores Ltd v Miles Far East- PAR does not apply where communication is virtually instantaneous as these are similar to face to face negotiations (electronic communications- telephone, emails etc)general rule of acceptance applies here o Electronic Transactions Act:  Defines time of dispatch, time of receipt, place of dispatch and place of receipt in an electronic environment o Brinkibon v Stahag Stahl Mbh- General rule that communication by telex is instantaneous  No universal rule  Need to consider  The parties’ intentions;  Sound business practice; and  Where the risk should lay o

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then what was stipulated by the offeror. For example: offer sent by post, delivered to door step for speedier process, court might still say that’s binding Silence?- NO o Felthouse v Bindley- mere silence and inactivity do not constitute acceptancemere “mental acceptance” is not enoughsomething must be done from which an intention to accept may reasonably be inferred (no contract between uncle and nephew since nephew didn’t communicate acceptance of selling horse) (no binding contract & no conversion)  Offeror cannot compel the offeree to take positive steps to reject an offer Conduct?- YES o Empirnall Holdings v Machon Paull Partners- acceptance by conduct or “implied acceptance”- assent inferred from whole of circumstances and if benefit taken (E verbally engaged M to act as project managers after some work done, M requested progress payment and contract. Was told that the director doesn’t sign contracts)  Conduct constituted contract even though director never signed contracts  Sometimes silence does amount to contract (objective test)- in this case conduct=acceptance

PAR problems: Mischievous consequences  Household Fire & Carriage Accident Insurance v Grant- offeror bound even though they did not know of the acceptance (post sent but not received by 3) Must Correspond with the offer offeror due to fire- still bound since PAR applies)  Acceptance must be unqualified and correspond  Can offeree revoke acceptance by speedier means? with offer; “mirror image rule” o NO, can’t revoke since it was sent by post  Otherwise it is counter-offer as per Hyde v Wrench, UNLESS there is: Method of Acceptance: o Acceptance with offer of additional terms  Specified (reasonable not to change offer- accept 50 o Manchester Diocesan Council for Education but 3 more?) v C&G Investments- offeror can prescribe o Request for information the method (expressly or impliedly) BUT if o Divergence that benefits solely the offeror no method explicitly stated then you can o Divergence a mere error which a accept by any method objectively intended reasonable person would interpret as o Exception: if you can prove that the method unqualified/corresponding of acceptance was purely to benefit the offeror despite being a different method

Battle of the Forms: (when both parties hoping their standard terms and conditions of sale or purchase will prevail) Butler v Ex-Cell-O Corp- “last shot at the bow”- the last person’s terms are usually accepted, however we should objectively look at terms of contract to get what the meaning was.  There are two methods to resolving the battle of the forms: the conflict approach and the synthesis

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4) Effect of acceptance: o Settles fact of agreement o Settles time of agreement - no later unilateral change o settles content of agreement - terms expressed or implied up to that time o settles place of agreement – generally where acceptance is communicated to offeror o Remember: offer & acceptance are not requirements – courts only need to find agreement (but offer & acceptance is on a conventional analysis) conventional analysis=not exclusive 3) Certainty and Completeness Main Test for Certainty & Completeness:  Scammel and Nephew Ltd v HC and JG Ouston- parties have to express themselves with certainty & completeness- “in order to constitute a valid K, parties must so express themselves that their meaning can be determined with a reasonable degree of certainty..unless this can be done it would be impossible to hold that the contracting parties had the same intentions”  Biotechnology Australia Pty Ltd. v Pace- for a K to be valid and binding, it must be complete and sufficiently certain, at least in its essentials (parties, subject matter, principal undertakings, and price) o Burden of Proof: party (P) seeking to rely on K needs to show its validity (that it is complete & certain)  Uncertain o Vague, ambiguous or meaningless language o If uncertainty relates to essential term=void  Incomplete o Missing essential term o Eg: agreement to agree  Essential Term o term without which K cannot be enforced o If uncertain &/or incomplete= void

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Courts not destroyers of bargains: Meaning of agreement must be determined OBJECTIVELY o Courts seek only to give effect to K, not to change it (seek to give effect to parties intentions)- no “pedantic” approach o Courts willing to “fill in the gaps” and solve ambiguity - if “ad idem” then will enforce K even if no term in K More likely to enforce K where there has been performance by one or both parties

Methods used to Render K’s Complete & Certain:  Courts don’t want to be destroyers of bargains so try to find meaning if: 1) K sets MACHINERY 2) K sets FORMULA 3) K refers to EXTERNAL STANDARDreasonableness

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1) Machinery**  Parties can leave terms to be agreed later, if there is an effective mechanism for determining those terms if they fail to reach agreement (ie- by specified valuer or arbitrator)  Breakdown of Machinery:  o K will be incomplete where machinery fails (ie-  valuer or arbitrator not available) o UNLESS machinery is “subsidiary” and “nonessential” (if another means of finding price)  If special/unique price= breakdown o Sudbrook Trading v Eggleton- if “subsidiary” and “non essential” the court can adopt or substitute any means of ascertaining value adapted for the purpose of fulfilling the parties’ expressed intention- substitute another machinery for current one if can  2) Formula  Parties may agree on formula for settling a term or terms of agreement o Eg: renew a lease at X price per annum- to be CPI indexed 3) External Standard  Standard of “reasonableness” can be employed to provide completeness and certainty

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Eg: “party X must pay “reasonable price” Courts to determine “reasonableness” objectively- (market price)  If can’t determine=void

Illusory Promises: Results in K being void because one party has a DISCRETION or choice that renders K incomplete or uncertain o Eg: “I’ll mow lawn, if I feel like it” or “ill pay as much as I believe is appropriate” Agreement to Agree Not binding, so far as it relates to essential term= INCOMPLETE o Eg: “we’ll agree on price when we know how much import duty will be”

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Whether the buyer acted honestly in attempting to obtain finance is subjective. Whether the buyer acted reasonably to obtain finance is objective requirement.

Agreement to Negotiate Coal Cliff Colls v Sijehama- promise to negotiate in good faith IS enforceable- Kirby & Waddell (obiter) noted that in principle, it would be enforceable if enough certainty (if clear promise and part of agreement) Severance of vague part Where severance possible, the uncertain part is ignored and rest of K is enforced Severance possible if: o Agreement on all substantial terms o Severance leaves basis of K intact o Parties (objectively) intended to be bound whether clause operated or not Whitlock v Brew- clause not severable; to sever would be to change the nature of the agreement

Meehan v Jones: When K says “SUBJECT TO FINANCE” use this authority  o A contract for the sale of land was made subject to the purchaser (M) ‘receiving 4) CONSIDERATION approval for finance’. The vendor (J) argues  Consideration makes a promise enforceable that the contract was void for uncertainty  K not binding unless promisee has given something in because the language conferred discretion on return for promise the purchaser as to whether to perform. o If A’s promise to B can be enforced, we must ask Satisfaction Requirement: Illusory Promise? if B has given consideration for that promise (sell bike in return for $250) o RULE: Discretion does NOT = illusory IF its related o Promise of gift not binding to the fulfillment of a something on which performance depends. Ex: subject to finance NOT  Identifying Consideration as issue: 1) What is promise trying to enforce? ILLUSORY o HELD: court held clause required finance to be 2) What has other party given in return? 3) Is this good consideration? (do elements to satisfactory to the purchaser- required to act establish if good consideration) honestly in deciding if finance was satisfactory. Because you can assess purchaser’s honesty the Requirements of Consideration: obligation was enforceable. 1) The benefit/detriment requirement: Was clause uncertain?  Thomas v Thomas- consideration must comprise a o Clause not uncertain since courts able to decide detriment to the promise or a benefit to the if buyer acted honestly or reasonably promisor; the person to whom the promise is made Whether Satisfactory? must ‘give something up or undertake an o Clause for benefit of buyer only; primarily to obligation’ protect buyer; needs to get financing to 2) The bargain requirement purchase land  Australian Woolen Mills v Cth- consideration must Steps taken: be bargained for; must be given in return for the o Must act reasonably or honestly to obtain promise; must be the “quid pro quo” (this for that) finance Su...