Summary Carter\'s Guide to Australian Contract Law PDF

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Carter Exam Notes Chapter 7 Terms Expressly Agreed  

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Contractual Terms Are Described as…- a) clauses; b) stipulations; c) provisions and d) convenants. Express terms-Are terms that are actually stated by the parties either orally or in writing. Express terms may be terms that are on a documents face, and finding these is only a matter of looking at the document. Implied terms-although also part of the contract will no have been stated. A Promise- when we talk about promises we refer to contractual promisesContractual promises are defined as any term of the contract capable of being breached. This definition includes promissory statements and statements of fact for which the maker has accepted contractual responsibility. Promises must be capable from different terms that are not capable of being breached. o Definitional terms –ie goods means onion seeds o Interpretation clauses o Exlusion clauses o Contingencies- eg contract is subject to review. Statements in a contract are broken up into.. a) puffery; b) mere representations; and d) contract terms… It must be determined which of these statemements are binding. o Puffery and mere representations- Puff is used to describe a statement which is not intended to be taken seriously. Ie refer to Lexmead Ltd v Lewis- a manufacture’s littriture advertising and accompaniying a dual purpose towing switches were advertised to be fool proof. And the English court of appeal held that the advertisements were not intended to be warranties nor were they acted upon to be express warrenties. Representation-is a term statement of fact made to induce a contract but not be contractually binding. Ie saying this machine is only six months old may be a representation. If a representation is untrue the only remedy in contract is to treat the contract as I it never existed=recission. o Contract terms as a term- once a representation is made in a contract…’it is six months old’ Distinguishing Terms from representations-Determining a term from a representation is based on the intention of the parties as is judged objectively. Relevant factors- because the intention of the parties must be inferred from the circumstances the courts rely on factors that infer what the parties as reasonable persons intended. Relevant factors include… o time and when it was made- a statement is more likely t be held a term if it occurred shortly before the time of entry into the contract- Bulloch v Glasson o Content of the Statement- the more intrinsically important the content of the statement the more likely it is that the term was intended to be a term. Hospital products v United States Surgical Corp

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o Knowledge and expertise of the parties- the relative knowledge and expertise of the parties is the most important factor.- Ellul v Oakes- advertising material the Ps relied on advertising material which said a property was sewered when it actually wasn’t. The court held that knowledge of the sewerage was exclusively knowledge of the D. In contrast there is Oscar Chess Ltd v Williams- D lied out the year of a car but was held not to be a term of the contract o Form-Form may be relevant if the statement is one of fact rather than mere opinion. A statement of fact is more likely to be a term. Collateral Contracts- ‘Where the consideration for a promise is entry into another contract(the main contract the contract in which the promise is concontained is termed a collateral contract’. (can arise from statements made in negs) There are two forms of collateral contract-1) a contract between the parties who enter into the main contract; or 2) a contract between one of the parties to the main contract and a third person. A collateral contract must not contradict the min contract. In a two party situation- a collateral contract is between the same people who enter the contract. Ie Savage & Sons Pty Ltd v Blakny- P sought to recover damages from a collateral contract.. D said That a vessel bought would have a max speed of 15 miles per hour. The vessel did not go that fast. The HCA held that no collateral contract existed because there was no intention of the seller to garuntee speed. Problems emerge from collateral contracts like Hoyts Pty Ltd v Spencer- ie where someone rents a house where the contract says pets are expressly prohibited but agrees with the land lord that its ok to keep a pet on the property.. landlord then terminates the lease. The tenant will always fail. Chapter 8 Terms Impliedly Agreed 

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Nearly all contracts contain implied terms as well as express terms. The main reasons for the implication of terms are.. 1) the need to make the contract effective; 2) the nature of the contract; 3) the application of statute. terms implied in fact- The presumption is that without the term the contract is complete. The implication must therefore be proved and; Terms implied in law- the presumption is that without the term the contract is incomplete. It must be proved that the implication should not be made

Terms implied in fact- for a term to be implied in fact there are 5 requirements where the is a formal contract (flat on its face). The term must be o 1) reasonable and equitable o 2) necessary to give ‘business efficicacy’ to the contract.. (meaning necessary to make the contract work) o 3) so obvious that the term goes without saying that the term must be implied o 4) capable of clear expression o 5) the term must not contradict terms of the contract

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Ie codelfa v state rail authority of NSW-a contractor employed to excavate tunnels and to complete work within 130 weeks. Work was delayed because local residents got an injunction. The contractor wanted more money because the work would take longer and alleged there was an implied term. The court refused to imply the term because it was not obvious that the term would have been intended by the parties. Informal contracts- Requirements for implication- Byrne v Australian Airlines P132 o Requirements for implication are it must be apparent the parties have not attempted to spell out the full terms of their contract ‘ o The term sought to be implied must be necessary for the reasonable effective operation of a contract of that nature o The term must be consistent with the express terms of that contract Terms implied in law-terms implied in law embraces two catagories 1) terms implied at common law; and 2) terms implied by statute. 1) terms implied at common law-established incedents occurring contracts include 

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In contracts for the provision of services- that the service provider wil exercise proper reasonable care and skill in the discharge of duties under the contract. Henderson v Merret Syndicates In contracts for the provision of professional services- since there is an element of special skill the implied term requires the professional ie doctor.. to exercise that degree of care and skill reasonably expected of a person having a special skill. Rogers v Whitaker In bailment contracts- that the bailee will exercise reasonable care in relation to the goods, and not convert them Smith v welden In contracts for work and materials- that the contractor will exercise reasonable care in doing the work, and supply materials that are of good quality and reasonably fit for the purpose they are supplied young &marten ltd v mcmanus

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Unjust and unreasonable terms cannot be implied in law. Applicable to all kinds of terms- the implication of all terms must not contradict express terms of the contract An implied term must not deal with a matter already dealt with sufficiently by the contract.p139. Criss v Alexander

Statutory implied terms – refer to pages 135-139

Chapter 9 Incorporated Terms

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The question of incorporation is what has been intended by the parties.    

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Ways of incorporating terms- 1) by signature; 2) by reasonable notice; 3) under the principles established in the ticket cases; 4) by a course of dealing Oral and written contracts- there is a contrast between written contracts and oral contracts evidenced by a document-concept of written includesa a) signed document – a document executed as a contract; b) Unsigned document- a written offer accepted by words or conduct The concept of Oral contract Includes- a) no document- any purely verbal transaction where the contract is performed by conduct and no document is prepared.; and b) any transaction where there is a document (signed or not) which is merely intended to evidence the contract., including a verbal transaction later confirmed in document Signature-If a document is signed the words on the document are incorporated as terms in the contract. Words are incorporated terms even if the person who signed the contract didn’t bother to read it- L’Estrange v F Groucob-the signing party is bound .. whether he has read the document or not. Exceptions-1) The words of a signed contract will not be incorporated as terms of the contract if their effect was misrepresented- this is the plea of Non es factum. Notice- A person can only be bound by terms, notice of which was given. The rule in L’Estrange deems that notice is given where a contract is signed.1)The legal rule is that reasonable notice must be given. 2)Time of notice is to be reasonable notice must be given prior or at entry into the contract. A notice will not be effective if to incorporate terms if it is presented after the contract was agreed. Ticket Cases-Requirements for incorporation of a term by ticket are usually expressed in three questions. o 1) did the recipient of the ticket know there was writing on the ticket o 2) did the person know the ticken contained or referred to the term o 3) did the person relying on the ticket do all what was reasonable to bring notice of the term the the recipient’s attention Macrobertson miler airline services v commissioner of state taxation Picture Library Ltd v Stilletto visual programsP146- P ran a business which involved the hiring of photographs. There was a clause which stated that there would be a 5 pound holding fee per day. The D got a bill of 3000 pounds plus. The court held that the Ps had not done all that was reasonable. Course of dealing- course of dealing refers to a series of contracts between the same persons on similar terms agreed in the same manner. If there is a course of dealing that may have the same effect of incorporating terms into a subsequent contract between them. It is only necessary to have regard to the term in question. A course of dealing is relied upon where o There is no actual knowledge of the term; o Incorporation by notice cannot be relied upon- document is later in point of time than the formation of the contract

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o The in estrange v Graucob does nt apply because there is no signed document and o The ticket cases do not apply - terms are not stated in the written offer. Two requirement for incorporation- 1) a consistent and sufficiently long course of dealing and 2) evidence of assent to the terms , usually in the failure to object the term at issue. D J Hill & Co Pty Ltd v Walter H Wright p150

Chapter 10 Principles of Construction-Construction is the meas by which the intention of the parties is determined. Intention may be actual expressed or imputed.

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o 1) actual intention- the intention is subjectively held by the parties o 2) expressed intention- the intentions of the parties disclosed in the words used by the parties in their contracts. o 3) inferred or imputed intention- the intention which is attributed to the parties by the court when they have no expressed intention. Generally a reasonable person is put in the position to whom the words are addressed and the words are given their plain meaning. The plain meaning rule applies a standard of interpretation. Rules are to necessary to determine both.. 1) what standard of interpretation to apply and 2) where there is more than one possible meaning for the word under the applicable standard of interpretation… the meaning of intended by the parties The general rule-1) is that words are construed according to the standard of interpretation which is that of the community at large, that is ordinary or natural meaning.- This rule comes from Codelfa Construction Pty Ltd v State Rail Authority.2) Depends on the particular circumstances ie the intended meaning of words depends on its actual context. Once the court has given the words a particular meaning the court must determine the legal aspect of the words which is the dynamic aspect of construction. Commercial Construction-there are several aspects of commercial onstruction including.. o The universal approach- the same construction rules apply no matter what the nature of the contract Cehave NV v Bremer- Whether it is being constued as an offer a contract or some communication in reference to a contract. o Construe the contract as a whole- in order to determine the meaning or legal effect of a particular term the whole contract must be construed- Bowler v Hilda Pty Ltd o Common Sense must prevail- even lack of clarity may be ignored in favour of a braod approach and microscopic examination examination which may defeat the purpose of the contract is not appropriate. o Reasonable Results- a presumption is applied which may be displaced that the parties did not intend the terms of their contract to operate in an unreasonable way. Kitchen & Sons Pty Ltd

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Raw material- Construction is based on two rules. 1) presumption of plain meaning; and 2) The objective approach- the meaning conveyed to a reasonable person in the position of the parties. Parol evidence rule-The parol evidence rule applies to party written and partly oral contracts. As a negative rule it determines that raw material cannot be relied on for the purpose of construing a contract. The parol evidence tule has two aspects 1) it restricts the use of extrinsic evidence to prove the terms of the contract and 2) relates to the use of extrinsic evidence of the parties’ intention. The exclusion of evidence of the parties intention gives rise to three specific catagories of extrinsic evidenceo 1) direct evidence of the parties actual intention o 2) evidence of the parties’ negotiations o 3) evidence of the parties subsequent conduct The rule restricts the use of oral and written evidence. The use of the parol evidence rule has no operation until it is first determined that the terms of the contract is in writing. Eg L G Thorne & Co Pty Ltd v Thomas Borthwick & Sons- goods were bought by the P and did not have the same characteristic as a sample. Refer to page 161. For the parol evidence rule to be used the document must be a complete statement of the bargain. A contract can be 1) wholly integrated in writing- all terms of the bargain are expressed in the document; and 2) Partly integrated writing of a distinct part of the document is expressed in the document. Total integration- a document is totally integrated if the if all the terms of the bargain are expressed in documentary form. J Evans & Son (Portsmouth) Ltd v Andrea Mazario- The Ps frequently used ships to carry their goods and the goods and the D assured the P that a moulding machine would be carried below deck but it was not and fell off. The court held that it was entitled to look at all evidence from start to finish in order to see what the bargain was… P 162 Partial integration- for the purposes of construction Scope of the parol evidence rule-The parol evidence rule works to exclude three catagories of evidence o 1) evidence of the parties actual intention o 2) evidence of the parties’ negotiations prior to the contract. o 3) evidence of the parties subsequent conduct. The exclusion applies to the extrinsic evidence of .. 1) one parties intention; 2) the parties common intention; and 3) the object desire of the parties. Prior negotiations- The parol evidence rule excludes evidence or prior negotiationsPrenn v Simmonds P164 Subsequent – The parol evidence rule rule excludes subsequent conduct.- L Schueler AG v Wickman Machine Tool Sales Factual Matrix-The contract should be construed in regard to the context in which the agreement was reached. Context may mean various things o Internal context- the clause in which the words appear as well as the contract as a whole.

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o External context- the factual context of the contract. The factual matrix or ‘surrounding cirumstances o Legal context-prior cases and statute relevant to the issue. GENERAL RULE- When construing a contract the it is legitimate to have regard to its factual context. Prenn v Simmonds - ‘the time has long passed whe agreements even those under seal, were isolated from the matrix of facts on which they were setand interpreted on purely internal linguistic situations. The court must place itself in the factual matrix in which the parties where place when agreeing the contract- Reardon Smith Line Ltd The factual matrix includes- 1) the commercial background I which the parties contracted Inglis; 2) the genesis of the contract DTR Nominees and 3) the commercial purpose or aim of the contract Exceptions to the Parol Evidence Rule-exception to the parol evidence rule is necessary where only extrinsic evidence is relied on 1) to prove an additional term in relation to an agreement or otherwise integrated document; or 2) as an aid to the interpretation to the document o Operation of the contract- The rule Where there are prior negotiations of the contract. The parol evidence rule does not apply until the terms of a bargain have been established. Pynnn v Campbell o Collateral contracts- The proof of one contract does not prevent proof that a second contract exists- L G Thorne &Co Pty Ltd Thomas Borthwick- P169 o Cases of genuine Ambiguity-Mathews v Smallwood o To identify the parties- extrinsic evidence may be given to determine who the parties are- Gilberto v Kenny o Implied terms- the court can imply terms for various reasons.Codelpha o Rectification- if a document (doesn’t have to be a contract) does not conform tto the parties’ agreement evidence of their actual intention may be given.

Chapter 11 Exclusion Clauses-An exclusion clause is an exception or exemption clause, it is a term of a contract that excludes qualifies or limitsthe rights which the party would otherwise enjoy. An exclusion clause may operate by providing a defence to an action for breach of contract. 

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Clauses in relation to matters within its scope excludes liability and can provide a complete defence for breach of contract.- Davis v Pearson Parking Station Pty Ltd- P’s car was stolen and damaged in a carpark. D not liable due to term on receipt that said ‘garage at own risk’. Clauses can qualify or restrict- H &E Van Der Sterren An exclusion clause may exclude liability for particular catagories. Exclusion clauses may limit liability to a money sum Exclusion clauses work to provide possible defences

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Construction at common law-The primary rule is that exclusion clauses operate based on the intention of the parties. Therefore whether an exclusion clause applies to a certain set of facts depends on the construction of the contract.- Darlington Futures v Delco Australia Pty Ltd-Established that an exclusion clause is construed based on its natural and ordinary meaning. The exclusion clause is read in the light of the contract as a whole.P180 Secondary rules- 1)Flight v Booth rule; 2) the main purpose rule; 3) the deviation rule; and 4) four corners rule. Termination- The primary rule of construction is not effected by the fact that the contract may have been terminated for breach- Photo Production ...