Full Example IRAC Answers for Tutorial 3 - Contractual Terms PDF

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Download Full Example IRAC Answers for Tutorial 3 - Contractual Terms PDF

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Tutorial 3: Contractual Terms Example ‘IRAC’ Answers IRAC #1: Incorporation of Term A in Question 1 Issue: Is it an express term of the contract between Sophie and Lawrence that the TV was to be delivered on Friday 30th September? Relevant Law & Application: Pre-contractual statements can form express terms in a contract, but not if they are mere puffs or representations. The delivery date of Friday 30th September may be a representation, which is a statement intended to induce entry into the contract but not to attract contractual liability. A statement of belief as to some aspect of a good that is being exchanged is a representation, not a term: Oscar Chess v Williams. Here, Lawrence stated, ‘I can arrange for the TV to be delivered to your house on Friday 30th September’, which may suggest it is a representation more than if he had said ‘I will’ or ‘I guarantee I can’. However, the closer in time a statement is made to the time of contracting, the more likely it is to be a term: Van Den Esschert v Chappell. Furthermore, the more important a statement, the more likely it is to be a term: Ross v AllisChalmers. On our facts, Lawrence’s statement was made immediately before the contract was made, and it is incredibly important to Sophie that she gets the TV on that date (which Lawrence was made aware of). A second problem here is that the parol evidence rule may apply. This rule provides that where a contract is reduced into writing, and the contract appears to be entirely contained in such writing, it is presumed that this writing contains all the terms of the contract and that other oral agreements or statements will not be admissible as terms: Mercantile Bank. As in Masterton Homes, there may be an argument that the contract is entirely in writing. This may be rebuttable by Sophie stating that she is happy to sign a written contract ‘confirming’ the agreement ‘to ensure [Lawrence has] legal protection’, and the agreement is hastily-drafted and does not contain much information. This would suggest it may not be entirely in writing. In any case, an exception to the parole evidence rule is a collateral contract. This dictates that an oral statement made before contracting can form a second contract if three requirements are present: 1. The statement was promissory and intended to have contractual effect; 2. The statement was not inconsistent with the main contract; and 3. The promisee provided consideration for the second contract. Here, the statement made by Lawrence was, ‘yes, I can arrange for the TV to be delivered to your house on Friday 30th September’. Similar to the assurance in Van Den Esschert, this appears to be promissory (cf Crown Melbourne) – particularly considering Sophie’s explicit need for delivery on that date. There is nothing in this promise inconsistent with the written contract (cf Hoyt’s v Spencer), and Sophie has provided consideration to the second contract by agreeing to the main contract immediately afterwards, and as a result, of this promise (as in Van Den Esschert). Thus, the parol evidence rule will not apply here. Furthermore, it should be noted that this term has been incorporated by oral agreement of the parties in this case. Conclusion: It seems likely that the importance of the statement and its close proximity to the time of the contract being made renders it a term of the contract, rather than a representation.

IRAC #2: Construction of Term A in Question 1 Issue: What type of term is this delivery term (i.e. how would it be constructed)? Relevant Law & Application: In constructing express terms, courts will always give effect to the objective intention of the parties: Codelfa Construction. A term which goes to the root of the matter, such that a failure to perform it would render the performance of the rest of the contract a thing different in substance from what the parties have stipulated for, is a condition: Bettini v Gye. As it is apparent from Sophie’s need for the TV for the AFL Grand Final party that she would not have entered into this agreement without a guarantee that it would be delivered in time, this term is a condition of the contract: as in Associated Newspapers v Bancks. Conclusion: This term is a condition, meaning that a breach of this term entitles Sophie to terminate the contract and sue for damages.

IRAC #3: Incorporation of Term B in Question 1 Issue: Is it an express term of the contract between Sophie and Lawrence that the TV was a 2014 model? Relevant Law & Application: As above, this statement may be a representation. The facts appear similar to Oscar Chess v Williams. In that case, the court held that a statement from a seller that they believed their car was a 1948 model, based upon its registration papers and with no other way of knowing, was a statement of belief and not a term of the contract. Here, Lawrence says, ‘I’m pretty sure it’s 2014’. This indicates a statement of belief. However, unlike Oscar Chess , Lawrence could easily have determined that the TV was a 2008 model by checking the label on the TV (and had the expertise to do so, as opposed to Sophie since she did not yet have the TV: Dick Bentley). However the use of the words ‘I’m pretty sure’ still do not appear promissory enough to make this statement a term: in the end, this statement seems to be intended to induce entry into the contract but not to attract contractual liability. The fact there is not a clear agreement on this (i.e. because Lawrence just says he is ‘pretty sure’ about this) also suggest this was not a term incorporated into the contract. Conclusion: It seems more likely than the statement that the TV was a 2014 model was representation, rather than a term; however a court may instead distinguish this from Oscar Chess and find that Lawrence’s ability to check this information rendered it a term.

IRAC #4: Construction of Term B in Question 1 Issue: If it is incorporated, what type of term is this 2014 model term (i.e. how would it be constructed)? Relevant Law & Application: While this is likely not a term of the contract, we must still determine what type of term it would be if it was incorporated. This term does not appear to go to the root of the contract, because Sophie did not indicate at any stage that she needed a brand new TV nor does this statement appear to have been the motivation for her entering into the contract (since she

inquired further before entering into it). Hence, it will not be a condition. It is likely to be a warranty. In Bettini v Gye, a delay in arriving for opera rehearsals was deemed to be a warranty since, while it was an inconvenience, it did not defeat the purpose of the contract. It may also be an innominate term, since a serious breach of this term may be so severe that the entire purpose of the contract is defeated: e.g. if the TV was a 1990 analogue model and does not have the capacity to be turned on through modern digital reception. In any case, the contract here is for the purchase of a TV to watch the AFL Grand Final: the fact the TV was from 2008 does not greatly impact on this. Conclusion: This term is either a warranty or an innominate term, with the 2008 model TV being a breach that could only lead to damages, not termination.

IRAC #5: Incorporation of Term C in Question 1 Issue: Is it an express term of the contract between Sophie and Lawrence that the TV to be exchanged was the TV advertised at $1000 on Gumtree by Lawrence? Relevant Law & Application: Unlike the first two parts of this question, there is a clear express term incorporated into the contract by signature (L’Estrange; Toll v Alphapharm ), and in writing: that the TV to be exchanged was ‘the TV that Lawrence advertised on Gumtree’. Therefore the only issue is construction: how should this term be construed? Where there is ambiguity, as there is in this clause, surrounding circumstances are admissible as evidence. Furthermore, where there is more than one interpretation, as there is here, courts should prefer a construction that does not lead to capricious or unreasonable results. Lawrence knew he had two TVs on Gumtree: one advertised for $1000 and the other for $200. Sophie offered to pay $1000 for one of his TVs: it is perfectly, and clearly, apparent that this refers to the $1000 TV, not the $200 TV. Why would Sophie offer five times the listing price for the $200 TV? To suggest the term referred to the $200 TV would be completely unreasonable. Conclusion: Yes this is an express term of the contract.

IRAC #6: Construction of Term C in Question 1 Issue: What type of term is this $1000 TV term? Relevant Law & Application: The underlying purpose of this contract is to exchange money for a specific TV which Sophie has seen listed on Gumtree. Of course, Sophie would not agree to the contract if the TV being delivered is one that is of far lower quality and which is worth one fifth of that which she agreed to. Conclusion: This term is a condition.

IRAC #7: Implied Terms by Common Law in Question 2 Issue: Can there be an implied term of this contract, sourced in the common law, that the TV should be able to display ordinary colour pixels? Relevant Law & Application: To imply a term at common law, it must meet five requirements (BP Refinery), such that the implied term is: 1. Reasonable and equitable; 2. Necessary to give business efficacy to the contract, so that no term will be implied if the contract is effective without it; 3. So obvious that it ‘goes without saying’; 4. Capable of clear expression; AND 5. Must not contradict any express term of the contract These must be dealt with in turn. Several of these requirements are easily satisfied. First, there is nothing unreasonable or inequitable in requiring that a TV displays ordinary colour pixels. It is also capable of clear expression: such that the term would be that the TV must be able to display ordinary colour pixels. This also does not contradict any of the express terms of the contract, whether those considered in Question 1 or those in the written agreement between the two parties. This leaves two main issues. First, is this term necessary to give business efficacy to the contract, such that the contract is ineffective without it? Similar to The Moorcock, where the parties must have intended that it be an implied term of the contract that a jetty would be safe for a ship to moor at, surely Lawrence and Sophie would have intended that an almost-new TV for sale can display ordinary colour pixels. Unlike The Moorcock, lacking colour pixels would not render the TV completely unusable. However, Sophie made it clear that she would be using the TV to watch sport, so it must have been in the contemplation of the parties that the colours on the TV would not be unusual. Secondly, is this term so obvious that it ‘goes without saying’? In Codelfa Construction, it was held that because the parties had legal advice that an injunction would not be sought, the fact an injunction was sought and resulted in a delay to work did not allow for an implied term that the deadline could be extended, because this was not so obvious that it ‘goes without saying’. However this case is different. If one is purchasing a TV, it surely does go without saying that it will be able to display ordinary, everyday colours and broadcasts: of which sport is surely a huge part. A person would not purchase a TV to watch sport on if it could not display the colour green: this would significantly ruin the image. Conclusion: It is likely that the common law would imply into this contract the term that the TV is able to display ordinary colour pixels.

IRAC #8: Implied Terms By Statute in Question 2 Issue: Can there be an implied term of this contract, sourced in statute, that the TV should be able to display ordinary colour pixels?

Relevant Law & Application: To imply a term in statute, it must fall under the Sale of Goods Act 1895 (WA) (SGA). The SGA only applies to the contract for the sale of goods – which this sale falls within under since it is the purchase of a TV (section 1(1)). Furthermore, the SGA does not apply if the parties expressly deal with the content of the implied term or exclude it from operation. None of our facts suggest the parties deal with the colour pixels of the TV. Three terms can be implied under the SGA. Firstly, section 13 provides that where goods are sold by description, the goods must be as described. A good is sold by description of the main way it is advertised or expressed is as a description, and there is no way to confirm they match the description before sale. Here, the TV is advertised on Gumtree as ‘top of the range’, and Sophie has no way of confirming this before sale considering the time constraints. Similar to Elder Smith v McBridge, where a bull sold at a ‘stud farm’ was impliedly required to actually be a stud, a ‘top of the range’ TV must be able to perform what its main intention is: to display colour pixels at a high resolution. As such, this term will be implied into the contract between Sophie and Lawrence via section 13. It should be noted that section 13 applies to all sales, including private sales. Section 14(2) requires that goods are reasonably fit for purpose, while section 14(3) requires that goods are of merchantable quality. Considering Sophie makes known to Lawrence the particular purpose for the TV (Priest v Last), and shows reliance on Lawrence’s judgment in providing such goods, this mostly satisfies section 14(2). Similarly, Section 14(3) is mostly satisfied because the goods are bought by description and Sophie did not examine the goods before purchase. However, both of these sections require that the goods be of a description that are ‘in the course of the seller’s business to supply’. This means that both section 14(2) and 14(3) do not apply to private sales: they only apply to commercial sales through a business. The private sale doctrine of ‘caveat emptor’ (i.e. ‘let the buyer beware’) applies to private sales in regards to these two sections, such that it is the buyer’s responsibility to confirm the goods are of the quality required. As such, these two implied terms do not apply to our facts. Conclusion: The term that the TV be able to display ordinary colour pixels will be implied into the contract between Sophie and Lawrence by section 13 of the SGA....