Lecture notes, lectures week 1-12 - Full contracts notes going into detail about cases with each topic explained thoroughly PDF

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Formation of a contract: Offer Finding agreement In establishing an agreement between 2 parties is to identify an offer made by one party and an acceptance of the offer by another. Under that analysis an offer is said to come into existence when acceptance of an offer has been communicated to the of...

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Formation of a contract: Offer 1. Finding agreement In establishing an agreement between 2 parties is to identify an offer made by one party and an acceptance of the offer by another. Under that analysis an offer is said to come into existence when acceptance of an offer has been communicated to the offeror. Objective standard: 1.1 The court adopts the view of whether or not particular documentation, conduct, words, circumstances or events may be interpreted as demonstrating an intention to be legally bound (Australian Woollen Mills P/L v Commonwealth) 1.2 “whether it would 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.” - Carlill v Carbolic Smoke Ball Co [1893] 256 at 266. 2. Identifying an offer

 Invitations to treat or negotiate: invitation to others to make offers/ enter into negotiations. Pharmaceutical society of Great Britain v Boots Cash Chemists  Puffery: statements made to induce, are not reasonably believable and are so far fetched that no reasonable person would believe it thus not binding. Carlill v Carbolic Smoke Ball Co  Supply of information: Stephenson, Jackques & Co v Mclean  Counter offers: Stephenson, Jackques & Co v Mclean; MacRobertson Miller Airline Services v Commissioner of State Taxation  Invitation to treat of negotiate  A leading case in this area is Pharmaceutical Society of Great Britain v Boots Cash Chemists (Southern) Ltd [1953] 1 QB 401.  Where a store has items on display this amounts to an invitation to treat rather than an offer. In these situations the store is inviting the customer to make an offer for the goods. Birkett LJ “It is an offer by the customer to buy and there is no sale effected until the buyer’s offer to buy is accepted by the acceptance of price”. 3. Recipients of Offers Dickinson v Dodds (1876) 4. Termination of an offer An offer lasts until a time specified in the offer, it is revoked or it is rejected. 4.1 Revocation o An offer can be revoked by the offeror any time before it is accepted (Dickinson v Dodds) o

Not binding unless the offeree has given consideration for that promise

o

A promise to hold an offer open is binding at common law if consideration has been given in return for that promise, a separate contract is formed (called an option)

o

The withdrawal of an offer is effective only when it has been actually communicated to the offeree (no exception when made by post Bryne & Co v Leon Van Tienhoven & Co (1880))

o

Revocation is not effective until the offeree becomes aware of it

o

Not necessary that the offeror personally communicate the revocation to the offeree as it is sufficient if a reasonable person would be aware that the offer has been withdrawn e.g.

4.2 Rejection o Can be expressed or inferred from offerees actions that are inconsistent with an intention to accept such as counter offers (Stephenson Jacques & Co v Mclean) 4.3 Lapse of time o If there is no time stipulated – the offer ends at the expiration of a reasonable period of time (Farmers Mercantile Union and Chaff Mills Ltd v Coade) 4.4 Non occurrence of a condition o An offer may be subject to an express or implied condition that must be fulfilled before the offer can be accepted. Financings Ltd v Stimson, Meehan v Jones

4.5 Death o When an offer has not been accepted it is automatically terminated on the death of the offeror or the offeree o Death of offeror – offer can be accepted by an offeree who is not aware of the offeror’s death unless the offer requires personal involvement by the deceased person. Fong v Cilli (1968)

Formation of a contract: Acceptance Acceptance: a final and unqualified assent to terms of the offer made in a manner specified by the offeror 1. Finding agreement Acceptance must be unequivocal: by accepting an offer it is clearly understood that there is nothing left to be negotiated by the 2 parties. Acceptance must occur while offer is still in force:  If the offer is only open for a certain amount of time (e.g offeree must accept within 7 days), offeree must accept within that time – (Dickinson v Dodds) Acceptance must be in reliance upon the offer: R v Clarke (1927) 40 CLR 227  Clarke had no knowledge of the reward.  His acceptance of the offer of reward was not valid as he did not accept the offer in reliance of the offer  A party claiming to accept an offer must be conscious of the offer at the time they perform any acts which might be viewed as acceptance. Conduct will not amount to acceptance if it was not carried out in response to an offer. Acceptance must correspond with the offer: any response to an offer that adds additional terms or alters existing terms set out in the offer is not an acceptance but is treated as a counter-offer and therefore a rejection: Turner Kempson & Co Pty Ltd v Camm [1922] VLR 498.  Acceptance that does not coincide exactly with the term of the offer due to some error or misdescription does not necessarily mean there has not been a valid acceptance: Carter v Hyde (1923) 33 CLR 115.  Acceptance may be valid if deviation of terms is solely in favour of the offeror: Boreland v Docker [2007] NSWCA 94. Acceptance can be express or implied:  An offeror cannot stipulate that no response to an offer will be treated as acceptance: Felthouse v Bindley (1862) 142 ER 1037.

BUT: ultimate factual issue is whether a reasonable bystander would regard the conduct of the offeree, including his silence, as signalling to the offeror that his offer has been accepted : Empirnall Holdings v Machon Paull. Acceptance must be communicated: Acceptance is only effective once it has been communicated: Tinn v Hoffman & Co (1873) 29 LT 271. Generally, acceptance must be communicated to the offeror. However, the offeror may dispense with the need for notification of acceptance. An example of a situation where this occurs is where there is a unilateral contract and the offeror considers that the performance of an act constitutes acceptance. It is also possible for the offeror to determine that acceptance will be complete at the moment the acceptance is sent by a particular method, such as by post. Carlill v Carbolic Smoke Ball (1892)  Since communication is for the benefit of the offeror, they are at liberty to dispense with the need for communication.  Such dispensation can be expressed or implied and courts.  Offers that lead to the creation of unilateral offers, courts generally find that there is an implication that need for communication has been dispensed with.

2. Mode of acceptance o To be effective – acceptance must be communicated to the offeror PRIOR to the termination of the offer. o The method of acceptance to be communicated is a matter for the parties & offeror may prescribe a particular mode of acceptance other than silence (Felthouse v Bindley (1862))

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Legislation prevents silence from being considered as acceptance for unsolicited goods: s 40(1) of Schedule 2 of the Competition and Consumer Act 2010 (Cth). Pursuant to this section ‘A person must not, in trade or commerce, assert a right to payment from another person for unsolicited goods unless the person has reasonable cause to believe that there is a right to the payment. Note: A pecuniary penalty may be imposed for a contravention of this subsection.’

Silence as Acceptance Felthouse v Bindley – man wrote to his nephew offering to buy a horse and stated ‘if I hear no more about him, I consider the horse to be mine at £30 15s’. Nephew intended to accept and told auctioneer not to sell but auctioneer sold horse at auction by mistake and uncle sued auctioneer in conversion  A contract cannot be forced on the offer by stipulating silence as the prescribed method of acceptance  No contract between the uncle and nephew had been formed because nephew had not communication acceptance  Uncle therefore held no property in the horse at the time of auction sale – no course of action Exceptions to the mode of acceptance o Where the offeror waives the requirement of communication (unlitaeral contracts) Carlill v Carbolic Smoke Ball Co o Where there is objective manifestation of acceptance it is appropriate to infer acceptance in certain circumstances

Empirnall Holdings v Machon Paull (1988)

2.1 Postal Acceptance rule 

Postal acceptance only applies where it is reasonable, authorised or contemplated that acceptance be by post: Tallerman & Co Pty Ltd v Nathan’s Merchandise (Vic) Pty Ltd.

If parties communication in mail or ‘snail mail’ acceptance is at the time of handing to post office ( Brinkibon)

Brinkibon In the case of instantaneous or near instantaneous communications such as telex, facsimile or email the general rule is that acceptance is not complete until it is received (Brinkibon Ltd v Stahag Stahl [1983] 2 AC 34).

If

after properly posting a letter it fails to arrive, the posting of the acceptance is nevertheless effective so long as the rule applies (Adams v Lindsell). 2.2 Instantaneous communications Telex, facismilie or email: Acceptance is not complete until it is received (Brinkibon Ltd v Stahag Stahl 1983) Electronic transactions act 2000: provisions apply to email communications Revocation of Acceptance: Where acceptance has been notified via the postal acceptance rule and offeree revokes acceptance by means of speedier communication. 2 views: 1. Agreement due to the postal acceptance rule. 2. Postal acceptance only a rule of commercial convenience, agreement does not exist as acceptance is revoked before it is received by the offeror: (Byrne v Leon Van Tienhoven [1880]).

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Byrne v Leon Van Tienhoven: Inapplicable to the case of withdrawal – i.e acceptance cannot be revoked if letter of acceptance has already been sent.

Courts generally take the practical view (2).

CONSIDERATION (2nd) 1. Consideration o Lush J in Currie v Misa (1875) ‘An act or forbearance of one party or the promise therof, as the price for which the promise of other is brought and ‘some right, interest, profit or benefit accruing to one party, or some forbearance, detriment, loss of responsibility given, suffered or undertaken by the other’ o Carlill v Carbolic Smoke Ball: Any act of the plaintiff from which the defendant derives a benefit or advantage, or any labour, detriment or inconvenience sustained by the plaintiff with the consent, either express or implied by the defendant.

Nadum Pactum  An agreement unsupported by consideration on both sides is said to be a ‘naked agreement’ and this label carries with it the idea that the agreement is unenforceable. 

Eastwood v Kenyon (1840) 11 Ad & El 438 - rejected the moral obligation conception of consideration for the idea of the ‘bargain’.

Elements of consideration Consideration is something the law regards as valuable, which is given in return for a promise and can be seen as the agreed price of the promise. 1. Benefit/Detriment Requirement - The promisee must incur a detriment or confer a benefit on the promisor; and 2. Bargain Requirement - That benefit or detriment must be given in return for the promise.

Benefit/Detriment Requirement  The first aspect of valuable consideration is that it must consist of a detriment to the promisee or a benefit to the promisor. 

The promisee must either confer a benefit on the promisor, or must incur a legal detriment, in the sense of giving something up or undertaking an obligation.

Bargain Requirement  The second aspect of the doctrine of consideration is that the benefit conferred on the promisor or the detriment suffered by the promisee must be given in return for the promise, that is, quid pro quo. Bargain versus conditional gift  A promise to pay someone money if they perform an act is a conditional gift. 

A promise to pay someone money in return for performance of the act is capable of giving rise to a contract.

Australian Woollen Mills v Commonwealth (1954) 92 CLR 424  The High Court held that there must be a relationship between the acts performed in return for the promise. There must be a relation of quid pro quo (this for that) 

The High Court suggested that a test may be whether the act was requested, but the Privy Council said that the High Court had overemphasised the importance of this test

Bargains versus reliance  An act performed in reliance on a promise will not constitute good consideration but may give rise to an estoppel. 

Acts performed in reliance on a promise will not constitute consideration for that promise unless those acts can be regarded as having been performed in return for the promise (Beaton v McDivitt).

1.1 Classification of Consideration 1.1.1 Executory Consideration: an act yet to occur (i.e a promise to do something) 1.1.2 Executed Consideration: the act which constitutes the consideration has been performed (i.e Carlill v Carbolic Smokeball)

1.2 Referability Sufficient connection between the promisors promise and the consideration relied on as to constitute on single transaction (Australian Woollen Mills Pty Ltd v Commonwealth). 1.3 Only a party providing consideration can enforce a promise o Consideration must move from the promise although that consideration need not move to the promisor (Coulls v Bagot’s Executor and Trustee Co Ltd (1967). o Promisor may direct that the consideration be provided to a 3rd party 2. THE SUFFICIENCY RULE o Consideration must be sufficient, but need not be adequate o Must be something the law regards as valuable, but need not ‘equal in value or substantial’ o Focus is on response of the promisee to that conduct not the promisors conduct

Roscorla v Thomas (1842) The defendant sold the plaintiff a horse, promising it was ‘sound and free from vice’ Plaintiff sought damages for breach of contract when the hose turned out to be ‘very vicious’. Held: The promise was not enforceable because the plaintiff had given no new consideration. Payment of the purchar was a past consideration which did not support the later promise.

2.1 Past consideration o Not considered sufficient – courts refuse to recognize as consideration acts or promises that predate the promise that is sought to be enforced (Roscorla v Thomas) Exceptions  Act was done at the request of the promisor  It was understood between the parties that some payment would be made 2.2 Illusory or Vague Consideration o Promise or apparent promise is not good consideration if it is too uncertain to be enforced or the promisor has retained discretion on whether to not to perform that promise (Placer Development Ltd v The Commonwealth) 2.3 Public duties o A promise to perform an act that one is already obliged to perform under some public duty is not recognized as good consideration. Collins v Godefroy o If the promise is to do something that exceeds the existing contractual duty, the additional promise may constitue sufficient /good consideration. Glasbrook Bros ltf v Glamorgan County Council (1925)

Glasbrook Bros ltd v Glamorgan County Council (1925) Owners of a colliery sought police protection during a strike. The duty of police to preserve public order would be met, but owner wanted greater protection at exra costs. House of Lords held: the police could sue on the reneged promise as they provided sufficient consideration by doing more than their existing legal duty.

2.4 Existing contractual duties General rule; Neither a promise to perform an existing legal duty, nor the performance of an existing legal duty, is regarded as sufficient consideration to support a contract.  There are five exceptions to this rule: 1. The rule will not apply where the beneficiary is providing fresh consideration; 2. The beneficiary’s promise to perform confers a practical benefit on the modifying party (Musumeci v Winadell Pty Ltd); 3. The promise to perform an existing contractual duty is made by the beneficiary to a third party; 4. A promise made by way of a bona fide compromise of a legal claim will not be covered by the rule (Wigan v Edwards); and 5. The original contract is terminated by agreement and replaced with a new contract

Stilk v Myrick (1809) A ship captain promised to share the wages of 2 deserters among the remaining crew if they agreed to ship the home short handed. Held: Captains promise couldn’t be enforced. The crew was originally employed on the basis that they would ‘do all they could under all the emergencies of the voyage’. The desertion of the screw was such an emergency. The existing obligation didn’t constitute good consideration for promise of extra payment.

o o o

If the promise promises to do something exceeding the existing contractual duty, this may be good consideration. (Hartley v Ponsonby) Where the promiser obtains an additional benefit from the promises continuing performance, this may be good consideration. William v Roffrey Bros and Nicholls Promise to peform an existing contractual duty already owed to a 3rd party may be sufficient consideration for anothers promise. Pao on v Lau Yiu Long

2.5 Part Payment of a debt o Part payment of a debt doesn’t constitute good consideration for an agreement (Pinnel’s Case). Foakes v Beer (1884)

Foakes v Beer A debtor promise to pay a judgement debt in 6 monthly instalment in return for the creditor’s promise not to enforce the judgement. When the debt had been repaid in full, the creditor successfully claimed interest. It was held that, even if the creditor’s promise could be construed as an agreement to forgo interest on debt such a promise was not supported by good consideration.

Pinnels Case doesn’t apply  Where there is fresh consideration  Benefiaciary’s promise to perform confers a practical benefit on the modifying party  Promise made by way of a legitimate compromise of a legal claim  Original contract is terminated by agreement and replaced with a new contract 2.6 Compromise of a claim or forbearance to sue o Not exercising a present right at the request of the promiser can be a valid consideration.

Wigan v Edwards The courts have developed a qualification to the rule that a promise to perform an existing contractual duty is not consideration. If the promisor asserts that he or she is not bound to perform an obligation under an existing contract or alleges that he or she has a cause of action under that contract, then the promise given by way of a bona fide compromise of that dispute may be good consideration (Wigan v Edwards (1973) 47 ALJR 586). Estoppel  Estoppel recognises detrimental reliance on a promise as a basis for enforcing the promise. 

Estoppel operates where non-contractual promises have been relied upon so that A will be estopped from acting inconsistently with A’s promise OR will take steps to ensure B does not suffer harm as a result of B’s reliance on A’s promise.

Formation of a Contract: CAPACITY 1. Capacity Minors Minor’s (Property and Contracts) Act 1970 (NSW) (pg 356)  More protection and commercial certainty for those contracted with minors  Lowered age of legal capacity to 18  S 19 – circumstance which a minor can have capacity to enter into a contract  Ss30-34 requirements for contracts to confirmed or repudiated  S36- adult is allowed to take a minor to court  S37- if the contract is repudiated the other parties of the contract can receive an adjustment (compensation)  S38 – the provisions in ss30-34 expire once someone has there 19th birthday A ‘civil act’ for a minor’s benefit is presumptively binding.  s 17: contract not for the benefit of the minor is voidable, i.e. the minor may be able to void it depending on the facts.  s 18: does not make presumptively binding a civil act where minor participates, while lacking by reason of youth the understanding necessary for his or her participation.  s 19: where a minor participates in a ‘civil ...