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Week 2 Contract Law Khalid telephoned James on the 12th August and offered to sell him his Holden Commodore for James told Khalid that he would buy it for Khalid told James no, worry about it. James told him okay, I accept your offer to buy it for Khalid said no. Can James accept the offer to buy it...

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Week 2 - Contract Law  Khalid telephoned James on the 12th August and offered to sell him his Holden Commodore for $20,000. James told Khalid that he would buy it for $18,000. Khalid told James no, don’t worry about it. James told him okay, I accept your offer to buy it for $20,000. Khalid said no. Can James accept the offer to buy it for $20,000? Is there a valid offer? Yes The 18k is a counter-offer (Hyde v Wrench). It will have the effect of destroying the original offer. Khalid does not accept the counter-offer (no contract). James cannot revive the old offer because it has been destroyed by the counter-offer.

 JT HIFI advertise a 60inch Sona TV for $800 in its catalogue. David goes to JT HIFI and tells the salesperson that he accepts their offer to buy the TV for $800. The salesperson tells him there has been a mistake in the catalogue and the TV is actually $1400. Does JT HIFI have to sell the TV to David for $800?

In order for there to be a valid contract it must be legally formed. It must therefore include: Offer and acceptance Consideration Intention Capacity Formalities (if any) It must further not be illegal. This is related to offer and acceptance. The advertisement is an invitation to treat (PS of GB v Boots). David cannot accept an ITT, as the only response you can make to an ITT is an offer. As it is an ITT, there is no need for JT HIFI to honour the price of $800  Meredith sends a letter to Mandy on the 12th November offering to sell her prized horse for $14,000. Mandy receives the letter on the 14th On the 15th November

Mandy sends a letter to Meredith agreeing to buy the horse for $14,000. In the meantime Meredith has changed her mind and has decided not to sell the horse. Meredith sends a letter to Mandy on the 15th November revoking her offer to sell. Mandy receives this letter on the 17th November. Mandy says they have an agreement. Does Meredith have to sell the horse to Mandy?

In order for there to be a valid contract it must be legally formed. It must therefore include: Offer and acceptance Consideration etc. This is related to offer and acceptance. The initial letter from Meredith is a valid offer (it also may envisage that acceptance by mail is a valid form of acceptance). According to the postal acceptance rule Mandy’s acceptance is valid at the time of posting (Adams v Lindsell), ie the 14th. Meredith’s revocation (Byrne v Van Tienhoven) is too late as the acceptance is deemed to be effective. There is a contract and Meredith is bound. If Meredith states that acceptance cannot be made by post in her offer then there is no contract. Robert and Mary have been married for 25 years and decide their marriage is over. Upon separation, Robert agrees to pay Mary $500 a month for the rest of her life as she earns less money than him. After 6 months Robert meets a new lady and decides to stop paying Mary the $500 a month. Mary wants to enforce the agreement and says they intended for it to be legally binding. Can Mary enforce the agreement?

Q.  Robert and Mary have been married for 25 years and decide their marriage is over. Upon separation, Robert agrees to pay Mary $500 a month for the rest of her life as she earns less money than him. After 6 months Robert meets a new lady and decides to stop paying Mary the $500 a month. Mary wants to enforce the agreement and says they intended for it to be legally binding. Can Mary enforce the agreement? A. In order for there to be a valid contract it must be legally formed. It must therefore include: Offer and acceptance Consideration Intention Capacity Formalities (if any)

It must further not be illegal This appears to be mostly related to intention to create legal relations. The default rule is that married couples do not intent to make legal relations when they make agreements, however this presumption may be rebutted. This case appears to be similar to the case of Balfour v Balfour, however in that case the couple was still together. This case is closer to Merritt v Merritt because they have been separated and the agreement between them was not under the conditions of marriage. In this case the court may deem this to be outside of the presumption and Rober will be forced to pay Mary as promised. Further there may not be consideration provided in this agreement, because nothing is provided in return for the promise to pay It is the week before ANZACday and Ann’s house is robbed.The thieves steal many items, including her Great-Grandfather’s World War I medals.Ann is distraught and puts an advertisement in the local newspaper and offers a reward of $1,000 for whoever finds and returns the precious medals.Donny is a cleaner at the local shopping centre.As he was emptying the bins, the medals fell out of the rubbish.Not knowing whom they belong to,he took them to his local RSL Club, who in turn contacted Ann.Ann was overjoyed at the return of the medals.Donny then reads the paper and sees Ann’s advertisement.Donny now wants to claim the reward of $1,000.00 she promised. Donny argues he performed the required act to accept the offer.Does Ann have to pay him the $1,000.00?

The issue in this question is by finding and returning the medals to Ann, did Donny validly accept Ann’s offer to pay $1,000 reward? The law relating to this issue is an offeree who responds to an offer, and performs the required act, is held to have validly accepted the offer. This was discussed in Carlill v Carbolic Smoke Ballcase.However, common law principles state that there can be no acceptance if the offer is unaware of the offer. When applying the facts to the law, it is clear that Donny's not aware of her advertisement, and did not act in expectation of receiving the $1,000.00.He only found out about the reward AFTER he completed the act. Therefore, Donny did not act in the knowledge of the offer; he only learnt about it afterward, therefore, Ann is not required to pay him the $1,000.00

Week 3 - genuine consent ch 4  Pam entered into an agreement with Denise for the purchase of an antique desk for $400. Pam believed that it was one previously owned by King Ferdinand and thought she was getting a bargain. Denise had made no representations as to the previous history of the desk. Pam later found that it was not owned by the king and wished to return it to Denise. Denise refused. What are Pam’s rights in this matter? Would there be any difference if Denise was an antique dealer and had a sign on the desk: ‘Owned by the great King Ferdinand’? Valid contract. No issue of misrepresentation. It is generally difficult to have a contract set aside for a mistake. (Leaf v Int’l Galeries) Caveat emptor applies. Pam is unilaterally mistaken about the previous owner, but she will be bound unless Denise knows of the mistake. If Denise is an antique dealer and the sign said it was Owned by King Ferdinand then the contract may be vitiated by mistake because it is a term of the contract. (Taylor v Johnson) Further it may be a misrepresentation.  Walter owns and operates a small factory manufacturing plastic piping. He has entered into a contract dated 10 March, to supply Kal Corp Ltd with 200,000 meters of piping for $280,000. Kal Corp is by far the largest user of piping in Walter’s area and he regularly supplies over half his output to that company. However, Kal Corp refused to pay Walter under their contract of 10 March unless he agreed to supply a further 200,000 meters of piping for $1. Walter agreed to do this in order to secure prompt payment of the contract price which was essential to the continuation of his business. Advise Walter The issue is whether Walter has been pressured to enter the second contract under duress or undue influence (these may overlap where a dominant party exerts pressure on a lesser party). This may amount to economic duress which is the illegal pressure applied by one party on another to enter a contract which they otherwise would not. There is no presumed undue influence but there may be actual or express undue influence. Duress or undue influence will make the contract voidable which will allow Walter to reject the contract and/or claim damages. You may also consider unconscionable conduct.  Diego Marrow is in disgrace. He has played for Argentina in the World Cup in 1992 but used steroids and tested positive. He had to leave his beloved country and come to Melbourne. Once here, he signed a contract with Roobok to work as a salesman and endorse their products. Roobok are local manufacturers who sell in the Melbourne area only. He signed a contract which said: On leaving the employment of Roobok Pty Ltd, I covenant not to work or endorse the products of another sporting goods manufacturer in Australia for two years.

After he is rehabilitated Diego decides to leave Roobok and work for Nokee a well-known national sporting goods manufacturer and he agrees to endorse their new range. Advise Roobok whether it can enforce the restraint The issue is whether this is a valid restraint of trade. Restraints of trade will prima facie make a contract void for public policy reasons however the courts will make exception if the restraint is reasonable to protect the interest of the party relying on it. According to Pearson v HRX a restraint can be as long as two years to prevent competition from gaining an advantage. Birdanco v Money also supports the position. Despite this these cases can be distinguished from the facts because they both involved specific issues (namely Pearson in a senior role and Money’s strong links to the clients at Birdanco). Marrow on the other hand was only in sales so would unlikely have been privy to trade secrets. Additionally it could be argued that the restraint is too wide to protect Roobok.  Frank purchased a car from George. During the discussion immediately prior to the agreement George said that the car was an excellent vehicle, one of the best he had ever driven, and that the engine had done only 10,000 km. The engine has recently been cleaned of oil so as not to show a leak from one of the gaskets. When Frank drove it on the open road he found that it would not do more than 50 km per hour and that the brakes did not work properly. A test by a motor engineer has now confirmed that the engine has travelled at least 100,000 km. Frank had repairs made to the brakes but on driving it for a further four days decided that the car was totally unsuitable for his purposes. The issue is whether there has been a misrepresentation. A misrepresentation is a false statement of fact that induced the contract. This is a misrepresentation by George about the km travelled by the car. Is it a fraudulent or innocent misrepresentation? This appears to be a fraudulent misrepresentation if it is made ‘knowingly’ or ‘recklessly’. Consider the elements of misrepresentation on p.61. Importantly the remedies must also be discussed. Frank may wish to rescind the contract and/or claim damages. If the representation becomes a term of the contract, then it may be a breach of contract.

Week 4 - Interpretation of a contrcact  anti decides to order her meals online from Fresh and Go. The delivery driver arrives and asks her to sign a docket, which she does. Yanti opens the box and finds all the food is mouldy, off and out of date. Yanti contacts Fresh and Go who tell her there are terms and conditions in the docket she signed, which exclude them from liability. Yanti thought she was signing a delivery docket. Is Yanti bound by the terms of the docket? Issue: The issue is whether the exclusion clause on the docket is operative. Rule: Exclusion clauses will only be valid if they have been incorporated into a contract either by signature or reasonable notice. Yanti signs the docket believing only that it was for taking of the delivery. Prima facie this clause would be incorporated by signature. (L’Estrange v Graucob). However she signs the docket AFTER the contract is formed – the notice of the term is too late. (Olley v Marlborough Court and Thornton v Shoelane). Additionally, dockets are generally deemed not to form part of the contract (Causer v Browne). Apply: The exclusion clause is not incorporated into the contract either by signature or notice. Conclude: Yanti is not bound by the terms. Please note that the wording of the clause may also be at issue, which is not stated on these facts.  Marco wishes to sell his 5-acre hobby farm. Marco tells Jing that he will include all the pet animals in the contract if Jing buys the farm. Jing tells him on that basis then he will buy the hobby farm. Shortly after that they both sign a written contract, which unfortunately does not mention anything about the pet animals. Marco claims he doesn’t have to sell Jing the pet animals, as they are not in the contract. Advise Jing if he can enforce Marco’s promise to sell the pet animals.

The issue is whether Marco’s promise of including the pet animals has become a term of the contract or a collateral contract. Rule: The general rule is that the court will not enforce any oral promises if it has not been included in the written contract. (The Parole Evidence Rule) (See rules bottom p.68) The court will enforce things said dependent on these factors, which do seem on the balance to be present. (Dick Bentley v Harold Smith) This authority did however take into account the expertise of the seller, arguably not at issue here. A collateral contract can also be formed if the statement was promissory and not inconsistent with the main contract. (Van Den Esschert v Chappell).

Apply: It does seem that the statement was promissory, and it was said right before the contract was formed. Although it was not added to the written contract it was integral to the contract, so on these facts Marco’s promise will be incorporated into the contract. The court may also view the promise as a collateral contract. Conclude: This is likely to be viewed as a term of the contract and/or a collateral contract.  Bruno Moon, a famous rock star, signs a contract with Rear Touring to hold 5 concerts in Melbourne. The contract contains a term that Bruno will arrive one week before the concerts begin to do promotional appearances. Bruno unfortunately gets sick and only arrives one day before the concerts start. Rear Touring wishes to terminate the contract and seek damages for Bruno’s breach. Can they?

Issue: The issue is whether the contract term is a condition or warranty. Rule: If it is a warranty Rear Touring cannot terminate the contract, they can only claim damages. If it is a condition then termination will be a remedy available to Rear Touring. The facts appear similar to Bettini v Gye, where the court held the term to be a warranty. Apply: This is not a condition because it does not go to the heart of the contract, it is thus a warranty. Conclude: Rear Touring cannot terminate they can only seek damages.

Week 5 - Termination + remedies

 Abdul contracts with Michael to build him a shed for $10,000.00. Michael completes the shed however did not ventilate it properly as required. Abdul has to pay Jimmy $2,000.00 to finish the shed. Abdul terminates the contract with Michael and is refusing to pay him any money and claims he did not exactly perform his obligations. Advise Michael if he can claim the $10,000 contract price.

Issue: Can Michael terminate the contract and claim the $10,000 contract price. Rule: A contract must be performed completely and exactly. However, substantial performance may give rise to an obligation to pay. Substantial performance is one of fact, depending on all the circumstances, including the nature of the contract, the nature of the defects and the related costs in rectifying the defects. Further, the court will also enforce payments where there is a small defect in performance of an entire contract, and not treat it as a breach. The plaintiff will be able to claim the contact price less the amount required to finish it exactly. (Hoenig v Isaacs) Apply : On the facts, it does appear that Michael has substantially completed the shed, and as this is an entire contract, not divisible like the case of Tadriani, it is possible that the court may require Abdul to pay for the work done on a quantum meruit basis (ie the $8,000). The value of the work done in accordance with completion, which cost $2,000 for Abdul to secure. Conclude: Michael should be able to claim the value of the work done.

 Trucks Galore entered into a contract to advertise on a large billboard on top of the Renato building in Melbourne over a 5 year period. After the first year a new building was built next door which blocked the view of the billboard. Trucks Galore lost money as not only were they paying for a sign that could not be seen, potential customers were being lost who could not view the sign. Trucks Galore wish to terminate the contract with the Renato building claiming it was an unforeseen event that a building could be build next door blocking the view of the billboard. Can they terminate the contract?

Issue: Can Trucks Galore terminate the contract with Renato because of the sign on the basis of the unforeseen event? Rule: The basis of Truck Galore’s wish to discharge the contract seems to be the doctrine of frustration. The general rule for frustration states the following:

A contract can be said to be frustrated when a supervening (unforeseeable) event occurs between formation and final performance which causes the rights and obligations of the parties to the contract to be impossible to perform, or radically different from what was contemplated by the parties at the time the contract was made. Further: It must not be the fault of either party It must not make the contract merely more diffcult or expensive to perform. Events that give rise to frustration include: Supervening illegality, death or illness, destruction of subject matter, common objective no longer attainable, government or legal intervention, and other radical differences. (See cases p.89-91) Apply: The change in circumstances according to the facts may not amount to frustration. Where the risk is foreseeable then it will not amount to a supervening event. See the case of Ooh! Media Roadside v Diamond Wheels. Truck Galore should have included a clause in the contract to ensure that upon the occurrence of such event they would have contractual rights. Conclude: This is not frustration of contract, the contract will not be discharged. Note: if frustration does occur it is imperative to talk about the effect of frustration from bottom p.91.

 ang is a seafood wholesaler. He contracts with Matthew to purchase a new refrigeration unit for his seafood. At the time of contracting he tells Matthew that the changeover from the old refrigeration to the new one must go smoothly because he has ongoing contracts with many restaurants who will buy their seafood elsewhere if there are any problems. The new refrigeration unit is installed and after a few days the unit breaks down and is no longer cooling. Yang loses $20,000 worth of seafood that goes bad. Yang is also unable to fulfill the orders of the restaurants and they terminate their contracts and he loses a further $200,000 in profit. Yang sues Matthew for damages. Can Yang claim both these losses? ssue: The issue is in relation to remoteness of damages, and whether Yang can claim his loss from Matthew. Rule: Where there is a breach of contract, which leads to a plaintiff’s loss, the court will order common law damages as compensation to remedy that loss. Not all losses can be claimed however. The plaintiff must mitigate their loss, and also only losses that flow naturally form the breach will be claimable (Hadley v Baxendale). The loss must be within the reasonable contemplation of both parties for the plaintiff to be able to claim (H Parsons v Uttley Ingham); and those losses that are not within the reasonable contemplation of the defendant at the time the contract was formed will be too remote. (Day v O’Leary). Apply: On the facts we are told that Yang informs Matthew of the need to get the new refrigeration running smoothly because of his seafood business. Matthew is thus made

explicitly a...