LAWS3040 EXAM Notes - Summary Contracts - Part A PDF

Preview

Summary

My notes for the exam - covers pretty much the entire course. ...

Description

STUDENT NAME: ISOBEL MARSHALL STUDENT NUMBER: C3282272 LAWS3040 EXAM NOTES

Week 1: Introduction Week 2: Formation - Intention Week 3: Formation – Agreement Week 4: Formation – Certainty Week 5: Consideration Week 6 & 7: Estoppel 1 and 2 Week 8: Third Parties Week 9 & 10 & 11: Terms – Express Terms (incorporation and interpretation) – Implied Terms Week 12: Topic Review

STUDENT NAME: ISOBEL MARSHALL STUDENT NUMBER: C3282272 LAWS3040 EXAM NOTES

Week 1: Introduction 

Essential elements of a simple contract: - Agreement - Consideration - Intention to be legally bound - Certainty of terms  -

Formal contract - Deed Formal contract = deed --> it is legally binding because of its form A deed is legally enforceable because it is a deed The difference between a deed and a contract is the form --> the language of the deed will tell you it’s a deed - Mortgages, formal commercial leases, terms of settlement as typically in deeds --> often it’s the element of consideration that is missing.  Formation - overview - To ensure that the rules of contract are workable in a commercial context the court will always be looking at the behaviour of the parties "objectively" i.e. what would an outsider think the parties were trying to achieve. 

-

Bilateral or unilateral contract If it’s a contract by conduct it’s a bilateral contract Unilateral contracts are rare How do you distinguish between unilateral and bilateral contract? Bilateral = exchange and acceptance Unilateral = acceptance and performance are the same thing. An acceptance by performance, acceptance by conduct? Example, dog and reward money. Both parties assume obligation. Unilateral assumption of obligation. Contract that occurs by conduct = only an issue when there is a continuing relationship --> Brambles

STUDENT NAME: ISOBEL MARSHALL STUDENT NUMBER: C3282272 LAWS3040 EXAM NOTES

Week 2: Formation – Intention Required case reading: Masters v Cameron Helmos Enterprises Pty Ltd v Jaylor Pty Ltd Ermogenous v Greek Orthodox Community of SA Additional cases for resident experts: Shortall v White Ashton v Pratt Laidlaw v Hillier Hewitt Elsley Pty Parties must intend for their dealings to be legally enforceable (create legal relations). Commercial dealings

 It used to be said that commercial parties were ‘presumed’ to intend their dealings to be legally enforceable, and it seemed the presumption was a ‘strong’ one. (The High Court judgment in Ermogenous has thrown the status of presumptions in this area into doubt.)  Atco Controls v Newtronics (suggested reading) that the issue of intention may arise in relation to ‘letters of support’ given by a parent company to its subsidiary. 

Issues of intention also arise out of ‘letters of comfort’ (commonly requested by lenders to related companies). They have been held to give rise to legal obligation in some cases, and not in others.

 The other area in which the issue arises commonly in commercial (or commerciallike) dealings is where the parties expressly contemplate the later creation of a further contract document. In characteristic style, the common law prescribes that these cases may be divided into 3 (or 4) categories: see Masters v Cameron, Helmos Enterprises v Jaylor and Laidlaw v Hillier Hewitt Elsley. Family and social dealings  Subject to Ermogenous, there was a widely held view that there was a ‘presumption’ that ‘family and social relations’ are not intended to create contractual relations. But this presumption can be excluded on the facts. 

This kind of case is considered in Shortall v White. The relationship of minister of religion and church is an arguably analogous one. In Ermogenous the High Court was called upon to seriously entertain the argument that the relationship of minister and

STUDENT NAME: ISOBEL MARSHALL STUDENT NUMBER: C3282272 LAWS3040 EXAM NOTES

church was ‘spiritual’ rather than ‘contractual’. Indeed, there was said to be a presumption to this effect.  In Helmos Entreprises the Court of Appeal refers explicitly to “a strong presumption” in commercial cases. These cases suggest that the Delphic pronouncements of the High Court may simply be ignored, at least where they are inconvenient. Dealings with government agencies  Governments can and do enter into contracts. But, as we have already seen, often when governments deal with citizens, they are regarded as doing so in the pursuit of public policy and not private contract.

STUDENT NAME: ISOBEL MARSHALL STUDENT NUMBER: C3282272 LAWS3040 EXAM NOTES

Week 3: Formation – Agreement Required class reading: Brambles Holdings v Bathurst City Council The Crown v Clarke Mobil Oil v Wellcome International Additional cases: Reese Bros Plastics Ltd v Hamon-Sobelco Aust Pty Ltd Empirnall Holdings Pty Ltd v Machon Paull Partners Pty Ltd Cavallari v Premier Refrigeration Co Pty Ltd  The questions of whether, when and where an agreement has been reached has been traditionally analysed by applying a model of ‘offer and acceptance’.  Unless the parties agree otherwise, the law of the place having the ‘closest connection with’ the contract applies, and where the contract was made is an important but not conclusive consideration.  The ‘when question’ arises in two classical situations 1. One is where the issue is whether a statement made or adopted by a party is a term of the contract. Once a contract has been made, neither party can unilaterally alter it. 2. The second situation when the offeror contends that the offer has been accepted too late. If the acceptance is ‘in time’ a contract is formed, and if it is ‘too late’ no contract is formed.  The ‘whether’ question may arise more generally, that is in any variety of situations in which a party wishes to dispute the existence of contractual obligation. The general rule is that the contract arises when the acceptance is communicated to the offeror but notice may be dispensed with by the terms of the offer.  Importantly, modern law recognises that a contract may exist between two parties even though it is not possible to identify either an offer or an acceptance, or even the time when the contract came into existence. If the conduct of the parties sufficiently manifests the existence of an agreement between the parties, and the other requisites of contract, then the parties may be bound by that agreement.

Insert Flow Chart Here

STUDENT NAME: ISOBEL MARSHALL STUDENT NUMBER: C3282272 LAWS3040 EXAM NOTES

Week 4 – Certainty Required case reading: Upper Hunter CDC v Australian Chilling & Freezing Co Ltd Biotechnology Australia Pty Ltd v Pace Placer Development Ltd v Commonwealth Whitlock v Brew Additional cases: Meehan v Jones United Group Rail Services Limited v Rail Corporation New South Godecke v Kirwan Helmos Enterprises Pty Ltd v Jaylor Pty Ltd  1) Cases in which terms are expressed in vague, meaningless or ambiguous language.  Upper Hunter CDC v Australian Chilling & Freezing and Whitlock v Brew illustrate the basic approaches to the issue of certainty. If there is an objective means by which a court can give a meaning to a term (common meaning) - the term will not be ‘void’ for uncertainty. If there is no objective standard that can be applied to resolve issues of meaning, a term of a contract may be held void for uncertainty. 

2) Cases in which there is an omission to deal with some necessary aspect of the contract.  If the court can imply a term, an omission can be remedied. Biotechnology shows that the court will not supply meaning to an agreement unless it can refer to some ‘external standard or reference’ by which an ‘appropriate’ ‘reasonable’ or normative meaning can be established. A court will not remedy an omission by supplying what it may think are ‘fair’ terms – to do so would be to make a contract for the parties that they might have made for themselves but have failed to do so.



3) Cases in which resolution of important detail has been explicitly deferred. - Cases in which matters have been deferred to the decision of a third party  Godecke v Kirwan = important Hight Court case  the principle (vague, meaningless or ambiguous language) is said to apply to deferral even to a solicitor representing one of the parties.

STUDENT NAME: ISOBEL MARSHALL STUDENT NUMBER: C3282272 LAWS3040 EXAM NOTES

- Cases in which matters have been deferred to the decision of one party  These situations are okay unless one party is given a discretion whether to perform of not (illusory). This is introduced in Placer Developments and discussed in Godecke, and Biotechnology. In Meehan v Jones the courts have addressed the problem of illusory undertakings, in some situations at least, by implying obligations attaching to the exercise of discretion, such as a duty to act 'honestly' or 'honestly and reasonably'. - Cases in which the parties have deferred some matter or matters to further agreement between themselves  Discussed in Godecke v Kirwan and Meehan v Jones. An "agreement to agree” is unenforceable. To negotiate in good faith is neither vague or meaningless United Group Rail Services Limited v Rail Corporation New South Wales. In Helmos Enterprises v Jaylor it was determined that if the parties intend to be immediately bound, deferment of agreement on ‘important’ matters will not invalidate their contract, although deferred agreement on ‘essential’ matters will mean that, despite their intention, they have failed to create a binding contract.

STUDENT NAME: ISOBEL MARSHALL STUDENT NUMBER: C3282272 LAWS3040 EXAM NOTES

Week 5 – Consideration Required cases: Beaton v McDivitt Ballantyne v Phillott Wigan v Edwards Musumeci v Winadell Additional cases: Brambles Holdings v Bathurst City Council Thomas v Hollier Ipex Software Services Pty Ltd & Ors v Hosking  Australian Woollen Mills v Commonwealth = Australian law has committed itself to the notion of a ‘bargain’ as the basis of contract.  This conception of bargain involves two distinct components – exchange and value. We have seen that the rules of offer and acceptance are concerned, in part, with establishing exchange.  It can be said that a promise is not legally binding unless the promisee gives something of value in exchange for it (the promise).  a general rule that consideration ‘must move from’ (ie ‘be given by’) the promisee (the person receiving and seeking to enforce the promise).  The law, of course, provides a definition of consideration. But you are likely to find the legal conception of value difficult to comprehend. Explicitly nominal considerations (e.g. the proverbial peppercorn) can be sufficient.  One category is ‘illusory’ promises (promise for promise exchanges normally being sufficient).  Another is the rule that ‘performance of an existing obligation’ is not good consideration and its correlative ‘payment of a lesser sum does not discharge a debt’.  Contract variations require additional consideration (often formally by way of a mutual release of obligations).  Another rule is that ‘past consideration is not good consideration’.

STUDENT NAME: ISOBEL MARSHALL STUDENT NUMBER: C3282272 LAWS3040 EXAM NOTES

 Exchange and agreement must coincide. It is also the case that ‘subsequent’ consideration is not good consideration. (But this requirement does not preclude the parties from making a ‘pre-contractual arrangement’ that specifies the consideration that, when provided, will result in a binding contract).  Consideration = exchange quid pro quo  There are two issues that lie at the centre of any analysis of the presence or the absence or consideration in a simple contract: - Exchange (quid pro quo) - Value (the 'thing' exchanged must be 'sufficient' but need not be 'adequate'.  When a contract is renegotiated, the new conditions must be supported by new consideration; exemplified in Wigan v Edwards (1974) ALR 497.  Consideration has to have some measurable value.  Most remedies are equitable remedies.  Consideration is not sufficient; they can't measure the value of the consideration.  Value and sufficiency linked to intention  The difference between sufficiency and adequacy and the notion of exchange are at the heart of consideration.  Biggest marker for consideration is the variation of a contract  there needs to be new consideration every time a contract is changed.

Week 6 & 7 – Estoppel Required cases:

STUDENT NAME: ISOBEL MARSHALL STUDENT NUMBER: C3282272 LAWS3040 EXAM NOTES

Waltons Stores (Interstate) Ltd v Maher Commonwealth v Verwayen Austotel Pty Ltd v Franklins Selfserve Pty Ltd Delaforce v Simpson-Cook M K & J A Roche Pty Ltd v Metro Edgley Pty Ltd Additional cases: Mobil Oil Australia Ltd v Wellcome International Giumelli v Giumelli Saleh v Romenous Ashton v Pratt [2015] NSWCA 12 Sidhu v Van Dyke (2014) 251 CLR 505 Doueihi v Construction Technologies Australia Pty Ltd TYPES OF ESTOPPEL  Equitable estoppel – equity enlivened by unconscionable conduct by one party that has caused the other to rely on a promise or assumption (including about how things will be in the future) and to allow a departure would cause detriment to that party that equity is prepared to remedy  Proprietary estoppel – referable to a promised or assumed beneficial interest in land. (Sidhu v Van Dyke)  Promissory estoppel – referable to an existing contract (e.g. a variation of contract) or a promise that a contract will be entered into. (Waltons v Maher) ESSENTIAL ELEMENTS OF ESTOPPEL  An estoppel has three essential ingredients:  A representation, promise or assumption  Reliance which must be reasonable in all the circumstances  Detriment suffered if the other party acts inconsistently with the representation, promise or assumption  The onus of proof lies on the person alleging the estoppel.

STUDENT NAME: ISOBEL MARSHALL STUDENT NUMBER: C3282272 LAWS3040 EXAM NOTES

 Equity is only enlivened if the other party’s inconsistent actions are unconscionable once the unconscionability ends the equity no longer exists  Estoppel is extra-contractual. Strictly speaking, it lies outside the field of contract law.  Estoppel is often raised in contractual disputes i.e. when a contract is operative.  However, it can arise even in the absence of a contractual relationship between the parties.  If a contract has failed to form due to lack of agreement, consideration, intention or certainty, or the contract is not enforceable as it is oral when it had to be in writing (eg sale of land), then a party may still have legal rights in estoppel. Reliance and exchange  Since 1954 in Australian Woollen Mills v Commonwealth it has been clear that Australian contract law requires an exchange that is of value as an essential element of contract formation.  HC rejected reliance as an element on formation in Australian Woollen Mills  accepted bargain theory instead.  However, reliance as a source of legal obligation to enforce promises in the doctrine of promissory estoppel, particularly since the Walton Stores v Maher. Basic elements of estoppel  The basic idea behind estoppel is that ‘you cannot blow hot and cold’. It is about inconsistent behaviour, where that inconsistency negatively affects another party (S&B,59).  Some suggest that the doctrine of promissory estoppel operates to undermine the doctrine of contract, as it means that promises may be legally enforced, even though they are outside a contractual (bargain) relationship.  remedy for estoppel is about doing the “minimum to remove the detriment” that arises from the promisee’s reliance.  In some circumstances, the “minimum to remove the detriment” might involve allowing the promisee an expectation loss, but this does not flow automatically. Common Law Estoppel by Conduct (‘estoppel in pais’)  Common law estoppel prevents a person from unjustly departing from an assumption or representation of past or existing fact, relied on by another party, and which if not adhered to will cause that other party to suffer detriment.  The party who is estopped must have created the assumption or representation through their conduct.  Common law estoppel is often referred to as a “rule of evidence” in that it may help establish another cause of action but is not a cause of action itself.  For example, party A creates an assumption that a contract exists between A and B. B could sue on the assumed contract alleging it has been breached (ie that is the

STUDENT NAME: ISOBEL MARSHALL STUDENT NUMBER: C3282272 LAWS3040 EXAM NOTES

cause of action). In that example a common law estoppel would prevent party A from arguing that no contract was in existence. Common Law Estoppel by Convention  This is another type of common law estoppel where A and B have made a mutual assumption that a particular state of affairs exist between them (eg both assume they are in a contractual relationship).  An estoppel by convention may arise where the two parties have made a mutual assumption about a factual or legal matter. Although both parties are labouring under the common assumption it must be unjust for one of the parties to depart from the assumption. Equitable Proprietary Estoppel  This is a type of equitable estoppel relating to interests in land. Proprietary Estoppel prevents an owner of land from denying that another person has rights in the land when the owner has encouraged or allowed that person to expect those rights and the person has acted in a material way upon that expectation.  The owner must have acted unconscionably, however, in these circumstances this may well simply be the denial of the right in the land. The expectation created by the owner of the land may be about transferring an interest (eg ownership) in the future (ie not limited to matters of past or existing fact).  For example see Beaton V McDivitt Kirby J’s judgment (172), the Beaton’s lived there rent free for 7 years and did little of the work promised in making the road. In Kirby J’s view, it was not unconscionable for McDivitt to renege upon an expectation created that an interest in land would be transferred, as it lacked “proportionality”. Equitable Promissory Estoppel  This is an estoppel arising from statements and about future matters (i.e. promises or statements of intention) not concerning land. 

Promissory estoppel was first raised by Denning J in the English case of Central London Property Trust v High Trees (1947) (landlord promised to accept lesser rent if tenant stayed on during the war, landlord later reneged and tried to full rent recover for period).

 The High Court recognised this form of estoppel about future matters in Legione v Hateley (1983).  In Waltons Stores v Maher (1983) the High Court opened up promissory estoppel in Australia so that it can now apply outside an existing legal relationship.  The elements were outlined in Brennan’s J judgment in Waltons Stores:

STUDENT NAME: ISOBEL MARSHALL STUDENT NUMBER: C3282272 LAWS3040 EXAM NOTES

 Assumption  In the decision of Austotel Pty ltd v Franklins Selfserve Pty Ltd the court held that that the creation of an assumption or a promise to be performed satisfied the assumption element.  Reliance  In Waltons v Maher the court held that “mere reliance on an executory promise to do something, resulting in the promisee changing his position or suffering detriment, does not bring promissory estoppel into play. Something more would be required”. However, reliance can be established if “an assumption that a contract will come into existence or a promise will be performed and that the other party relied on that assumption to his detriment to the knowledge of the first party”.  Detriment  To establish a detriment there must be a loss suffered by the promisee. That loss must be a result of the promisor reneging on the promise made to the promisee. In Commonwealth v Verwayen the court held that a loss could be non – financial and could include an increase in stress, anxiety, inconvenience or ill health. The court in Delafor...