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Commercial Law (Monash University)

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Case Summaries

Making the Contract: Offer and Acceptance

1. Harvey v Facey [1893] AC 552 (Pg 163)

Facts:Facey owned a property that Harvey wanted to buy. Telegraphic transaction was

made and Harvey sued Facey and lost. Harvey only supplied information about the lowest

price and did not make an offer.

Decision:Supplying information on request is not making an offer and the information

supplier is not bound by it.

2. Australian Woollen Mills Pty Ltd v Commonwealth [1954] 92 CLR 424 (Pg 164)

Facts:Government announced it would pay subsidies for wool purchases for Australian

manufacturing. AWL purchased wool and claimed the subsidy, but the government refusedto pay

Decision:The government only issued a statement of policy. There was no intention to

make an offer.

3. Harris v Nickerson [1873] LR 8 QB 286 (Pg 165)

Facts:An auction has been advertised to be conducted on a particular day was cancelled.

Nickerson travelled a considerable distance to attend the auction, sued for damages and

breach of contract.

Decision:Advertising an auction was not an offer, but a statement of present information.

4. Kelly v Celedonian Coal Co [1954] 92 CLR 424 (Pg 165)

Facts:Kelly planned to tender for a supply of coal to a government department. Kelly

initially held discussions with the Caledonian Coal Company. Parties agreed on a price to

supply coal at if tender was successful. Caledonian confirmed the prices by letter which also

stated These prices refer to this contract alone. Payment by [promissory note] due at a

month from shipment Kelly was a successful tenderer but when Kelly tried to place an order

with Caledonian, they refused to supply the coal. Kelly sued for breach of contract.

Decision:No contract existed. Caledonians letter was not an offer, but a statement of its

future intentions

5. Colonial Ammunition Co v Reid [1900] 21 LR NSW 338 (Pg 165)

Facts:Colonial had an agreement with the New South Wales government to supply

ammunition from time to time when required. After a time, the government switches its

purchases to other suppliers. Colonial sued for breach of contract.

Decision:No contract existed as it was a standing offer which was converted into a contract

when placed an order.


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6. Partridge v Crittenden [1968] 2 All ER 421 (Pg 167)

Facts:Partridge placed an advertisement for bramble finch.

Decision:A person does not breach the law if he/her makes an invitation to treat.

7. Fisher v Bell [1960] 3 All ER 731 (Pg 168)

Facts:A parliament act made it an offence to offer sale of any weapons. A flick knife was

displayed in the window shop with a price tag clearly attached.

Decision:No offer has been made as the display of an item in a shop window with the price

attached was not an offer to sell, but merely an invitation to treat.

8. Pharmaceutical Society of Great Britain v Boots Cash Chemists (Southern) Ltd [1953] I

QB 401 (Pg 168)

Facts:Pharmaceutical Society of Great Britain (PSGB) thought that Boot Cash Chemists (BCC)had breached the contract by displaying drugs. The question was when the offer was made.

Decision:A person does not breach the law if he/her makes an invitation to treat. Displaying

things is not making an offer.

9. Grainger & Sons v Gough [1896] AC (Pg 169)

Facts:G & S operated a winery and distributed price catalogue. Is it an offer?

Decision:It was an invitation to treat because if it would have been an offer then the seller

would be bound to supply any quantity demanded at the price advertised.

10. Carlill v Carbolic Smoke Ball Co [1893] I QB 256 (Pg 170)

Facts:Carbolic Smoke Ball Co. (CSB) manufactured a medical preparation and advertised

that anyone who uses it will be cured of influenza and if not then they would be paid 100

pounds, for which they deposited 1000 pounds in a bank. Carlill bought it but was not

treated.

Decision:The court decided that offer can be made to the world at large. Also if the offeror

did not intend the offer to be taken seriously, why would he advertise that he had put 100

pounds in the bank.


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11. Hughes Aircraft Systems International v Airservices Australia [1997] 76 FCR 151 (Pg

172)

Facts:The Civil Aviation Authority (CAA) invited Thomson Radar Australian Corporation &

Hughes Aircraft Systems to tender for the contract to supply an advanced air traffic system

for Australia. The CAA sent a Request for Tenders to both parties setting out the terms ofthe tender process Thomson. When Hughes complained, CAA argued that the Request for

Tenders was merely an invitation to treat.

Decision:Request to Tenders was an offer. Once Hughes had submitted a tender in

accordance with the Request for Tenders a contract existed. This is known as the process

contract and the CA breached the contract.

12. Harvela Investments Ltd v Royal Trust Co of Canada Ltd [1985] 3 WLR 276 (Pg 173)

Facts:Shares were being sold to the highest bidder; Royal Trusts bid was an amount of

$101,000 in excess of any other offer.

Decision:If a bidder (accepting the offer) does not comply with the implied terms of the

offer, there is no sale.

13. Smythe v Thomas [2007] NSWSC 844 (Pg 174)

Facts:Thomas & Smythe were registered e-Bay users. Thomas listed an aircraft on sale on

eBay with a minimum reserve price of $150,000 and the auction was open for 10 days.

Smythe bit $150,000 and was successful. Thomas refused to proceed as he argued that the

listing on eBay was an invitation to treat. Smythe argued that it was an offer which he

accepted by being the successful bidder.

Decision:There was a contract as listing it for sale on eBay was an offer to any bidder who

bided within a specific period, made a bid of at least $150,000 and did not qualify or seek to

impose a qualification on his bids in accordance.

14. Routledge v Grant (1828) 4 Bing 653; 130 ER 920 (Pg 177)

Facts:G offers to buy Rs house. Promises to leave the offer open for 6 weeks. R buys a new

house expecting to sell his to G. Before expiration of time, G withdrew his offer. R sues G

Decision:The rule is that an offer may be revoked anytime prior to acceptance.

15. Byrne & Co v Van Tienhoven & Co (1880) LR 5 CPD 342 (Pg 177)

Facts:An offer was sent from London to New York by post. Due to postal delay there were

differences in acceptance and revocation of the offer.

Ratio:An offer cannot be revoked unit it is received by the offeree. In this case acceptance

was cabled before the offer was revoked.


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16. Goldsborough Mort & Co Ltd v Quinn (1910) 10 CLR 674 (Pg 179)

Facts:Quinn paid a sum of five shillings to Goldsborough Mort the rights to purchase the

whole freehold lands within a week at a price of 1.10s per acre. Before the time expired for

acceptance of the offer, Quinn purported to withdraw the offer. Despite this, Golsborough

Mort accepted the offer and when Quinn refused to transfer the land, the company sued forspecific performance.

Ratio:An offer cannot be withdrawn as a consideration of five shillings had been given for

the promise to keep offer open for one week and the offer could not be withdrawn. An

option given for value is non revocable. Since this contract was a sale of land, court ordered

specific performance of the contract.

17. Hyde v Wrench (1840) 3 Beav 334; 49 ER 132 (Pg 180)

Decision:Wrench offered to sell his property to Hyde and Hyde made a counter offer.

Wrench did not accept it and Hyde agreed to accept the earlier offer.

Decision:Once a counter offer has been made by the offeree, the original offer is rejected

and cannot be accepted again.

18. Turner Kempson & Co Pty Ltd v Camm [1922] VLR 498 (Pg 181)

Facts:Turner Kempson (TK) offered raspberry pulp to Camm who changed the offer. TK did

not accept the changed offer so Camm sued him.

Decision:Once a counter offer has been made by the offeree, the original offer is rejected

and cannot be accepted again.

19. Masters v Cameron (1954) 91 CLR 353 (Pg 183)

Decision:Cameron owned a farm and Masters wanted to buy it. Masters paid 1750 pounds

as deposit but did no sign a contract; due to financial difficulties he withdrew the offer. The

agreement included a term that this agreement was subject to preparation of a formal

contract of sale.

Decision:In this case the court decided that an arrangement made subject to contract is

presumed not to be a contract. The deposits belonged to Masters.

There are 3 possibilities in a case like this:

I. There is a contract which is immediately binding, and one of the terms is that formal

documentation is prepared.

II. There is a contract but nothing can happen until a formal document is prepared

III. There is no contract.


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20. Butler Machine Tool Co Ltd v Ex-Cell-O Corp (England) Ltd [1979] 1 All ER 965 (Pg 184)

Facts:On 23 My 1969, Butler sent a quotation to Ex-Cell-O for a sale of machine. The price

and delivery terms were clearly set out. The quotation contained a price variation clause

stating that the final price would be the price prevailing on the delivery date. On 27thMay,

Ex-Cell-O sent back an order form with terms which were completely different from theones stated before but had a tear-off acknowledgement slip which states that the seller

accepted the buyers terms. On 5 June, Butler returned the acknowledgement slip along

with a letter accepting the order in accordance with our revised quotation of 23 May.

Delivery of the machine was delayed so Butler relied on the price variation clause and

increased the price. Ex-Cell-O refused to pay.

Decision:The court decided that the buyersorder form was a counter offer which had been

accepted when the seller returned the acknowledgement slip.

21. Reese Bros Plastics Ltd v Hamon-Sobelco Australia Pty Ltd (1988) 5 BPR 11,106 (Pg 185)

Facts:Hamon-Sobelco placed an order which contained certain terms. Reese Bros Plastics

replied by fax stating that they will confirm order on their official confirmation sheets, over

the next few days and to accept this offer as confirmation in the meantime. The

confirmation which followed contained certain conditions which differed from the original

order.

Decision:Halmon-Sobelcos offer had been accepted by the fax and therefore the

subsequent confirmation containing new terms was irrelevant.

22. Felthouse v Bindley (1862) 11 CBNS 869; 142 ER 1037 (Pg 186)

Facts:Not given

Decision:The contract is not made until acceptance has been communicated to the offeror.

Silence is not acceptance.

22. Tallerman & Co Pty Ltd v Nathans Merchandise (Vic) Pty Ltd(1957) 98 CLR 93 (Pg 186)

Facts:Not given

Decision:Actual communication of acceptance is not necessary where the offeror has

expressly or impliedly accepted the ordinary post as the means of communication betweenparties. Acceptance occurs when the letter is posted, even if the letter is lost in the post, but

it must be properly stamped and addressed (Postal Rule).


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23. Brinkibon Ltd v Stahag Stahl und Stahlwarenhandelsgesellschaft mbH [1983] 2 AC 34

(Pg 188)

Facts:A contract existed between the English company Brinkibon and an Austrian company

Stahag Stahl. In order to sue the Austrian company in England, they had to show that the

offer was made in England. On possible way was that the Austrian company made the offerby private telex which was accepted by the English company also by private telex. Was the

contract made in England or Austria?

Decision:Communications by private telex are instantaneous and consequently the postal

rule did not apply. Therefore, the contract was made when the acceptance was received in

Austria.

24. Powell v Lee (1908) 99 LT 284 (Pg 189)

Facts:The management committee of a school met to discuss application for headmaster.

Powell was first selected and sent a telegram by Lee (committee member) but was later

rejected. Powell sued them and lost.

Decision:An acceptance can be communicated by the third party provided the third party

has been given the actual authority to communicate acceptance. In this case Lee was not

authorised to communicate decision to Powell

25. Ramsgate Victoria Hotel Co Ltd v Montefiore (1886) LR 1 Exch 109 (Pg 190)

Facts:Not given.

Decision:When no time limit is mentioned, the offer remains open for a reasonable time.Reasonable time will depend on each case.


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Making the Contract: Intention and Consideration

26. Balfour v Balfour [1919] 2 KB 571 (Pg 203)

Facts:Mr Balfour promised to pay his wife 30 per month. The couple later separated. Mrs

Balfour claimed 30 per month.

Decision:An agreement existed but held that the parties had not intended it to be legally

binding. Generally, domestic arrangements of this type were not intended to finish up in

courts.

27. Todd v Nichol [1957] SASR 72 (Pg 204)

Facts:Mrs Nichol invited her sister in law and niece to live with her, and that she would

provide free accommodation till the rest of their lives. Due to a fight she wanted them to

leave the house.

Decision:If the agreement is of domestic nature the court begins with the presumption that

the parties did not intend to contract. Presumption can be rebutted if there is evidence to

contrary. The case had commercial flavor.

28. Rose and Frank Co v J R Crompton & Bros Ltd [1923] 2 KB 261 (Pg 204)

Facts:Crompton agreed with Rose and Frank that they will be made their exclusive

distributors. Crompton made it clear that it was not a contract or a legal agreement and

shall not be subject to jurisdiction.

Decision:As the parties made it clear that they did not intend to create a legal relation. Thus

there was no contract.

29. Esso Petroleum Ltd v Commissioners of Customs and Excise [1976] 1 All ER 117 (Pg

205)

Facts:This involves a trade promotion where Esso produced coins depicting the members of

Englands 1970 World Cup Soccer Team Each motorist who purchased four gallons of petrol

received a free coin. Customs and Excise argued that Esso should pay tax on the coins they

produced as they were produced for sale.

Decision:Contract for the supply of coins existed. Everyone who purchased four gallons ofEsso petrol has a contractual right to claim a free coin. Although the coins had little

intrinsic value and Esso used words such as free and gift, this was not sufficient to rebut

the presumption of enforceability.

30. Kleinwort Benson v Malaysia Mining Corp Berhard [1988] WLR 799 (Pg 206)

Facts:MMC wanted a loan from KB and refused to give a formal guarantee, instead wrote a

letter of comfort. They went bankrupt and MMC sued them.

Decision:A letter of comfort is not held binding. The court held that it was merely a

representation and not a promise of future conduct.


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31. Air Great Lakes Pty Ltd v K S Easter (Holdings) Pty Ltd [1985] 2 NSWLR 309 (Pg 208)

Facts:The courts was required to determine the status of the document headed Terms of

Agreement and signed by the parties, but containing the expression proposed agreement

and the other clauses which cast doubt on the parties intention to be legally bound. There

were certain oral statements by the parties that suggested that the document was intendedto stand as an immediate binding contract.

Decision:The court unanimously held that a contract existed.

32. Coal Cliff Collieries Pty Ltd v Sijehama Pty Ltd (1991) 24 NSWLR 1 (Pg 209)

Facts:The parties had a number of discussions concerning a mining joint venture. They

signed a document called a Heads of Agreement, which contained terms and conditions

subject to the joint venture.

Decision:No contract was created between the parties.

33. Plastyne Products v Gall Engineering Co Pty Ltd (1988) NSW (Pg 209)

Facts:The buyer sent a letter to the seller in which the buyer stated that it was prepared to

pay $350,000. The letter concluded: Upon receipt of your signed acceptance, we shall

instruct our solicitors to draw up a formal contract.

Decision:There is a contract which is immediately binding, and one of the terms is that

formal documentation is prepared.

34. Dunlop Pneumatic Tyre Co Ltd v Selfridge and Co Ltd [1915] All ER Rep 333 (Pg 213)

Facts:Dunlop manufactured tyres and entered into agreement with wholesaler (Dew and

Co) regarding selling of Dunlop tyres below list price. Dunlop sued Selfridge (retailer) but

lost.

Decision:Only the promisee could enforce the promise. In this case as Dunlop had not

provided any consideration to Selfridge he lost the case.

35. Coulls v Bagots Executer and Trustee Co Ltd (1967) 119 CLR 460 (Pg 213)

Facts:Mr. Coulls was the sole owner of some land. In an agreement to remove stone from

his property Mr. Coulls authorised ONeil to pay all royalties to himself and his wife jointly.Sometime later Mr. Coulls died and executer asked whether Mrs. Coulls has a legal right to

one-half of the royalties.

Decision:If a promise is made by the promisor to two or more persons jointly, only one of

those persons need provide consideration. In this case the court decided that as the

promise was made only to Mr. Coulls, his wife was not a joint promisee.


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36. Trident General Insurance Co Ltd v McNiece Bros Pty Ltd (1988) 165 CLR 107 (Pg 214)

Facts:Blue Circle Southern Cement Ltd took out an insurance contract with Trident

Insurance. It covered contractors and subcontractors against injuries to members of the

public. McNiece Bros were hired to carry out the work and during a work a member of the

public was injured and McNiece Bros were forced to pay compensation. McNiece tried toclaim the contract but Trident Insurance argued that McNiece was not the party to the

contract and therefore could not sue on the contract.

Decision:Since the contract was intended to cover persons such as McNiece, it was entitled

to sue on the contract despite that fact it was not a party to that contract and had not

provided any consideration.

37. Roscorla v Thomas (1842) 114 ER 496; 3 QB 234 (Pg 215)

Facts:The plaintiff purchased a horse from the defendant for 30 pounds. After the sale,

plaintiff sought assurance that the horse was sound. Assurance was given but the horse was

vicious. Plaintiff sued for breach of contract but lost.

Decision:Any warranties must be given prior to the making of the contract.

38. Re Caseys Patents: Stewart v Casey [1892] Ch 104 (Pg 216)

Facts:Stewart and Carlton jointly owned patent rights. After Casey undertook marketing

activities for them Stewart and Casey gave Casey one-third share of the patents.

Decision:

39. Thomas v Thomas (1842) 2 QB 851 (Pg 217)

Facts: Not given.

Decision:Consideration does not have to adequate, it must be sufficient. In this case the

consideration was$1 for Rolls Royce

40. Eastwood v Kenyon (1840) 11 A&E 438 (Pg 217)

Facts: Not given.

Ratio:Consideration does not have to adequate, it must be sufficient. In this case

consideration wasIn love and affection

41. Dunton v Dunton (1984) 18 VLR 114 (Pg 218)

Facts:Mr Dunton agreed to pay his divorced wife a monthly sum provided that she conducts

herself with sobriety and virtuous manner. Mrs Dunton sued when her ex-husband refused

to pay.

Decision:Consideration does not have to adequate, it must be sufficient. In this case the

wife had to act in a respectable and orderly manner.


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42. Wigan v Edwards (1973) 47 ALJR 586 (Pg 219)

Facts:Mr and Mrs Edwards signed a contract to purchase a house from Wigan. After some

days they gave a list of faults which had to be fixed before they would proceed with the

contract. Edwards sued Wigan when she failed to carry out her promise.

Decision:The high court held that even though the Edwards did not have a good chance of

winning the legal claim. Giving up the claim was a good consideration and so Wigan was

bound by her promise.

43. Mitchell v Pacific Dawn Pty Ltd [2003] QSC 86 (Pg 220)

Facts:A property owner entered into a building contract with Mitchell. Pacific were

supposed to pay a certain sum for Mitchell upon completion of the building, subject to a

retention of 8%. However, on completion, Pacific failed to pay the amount owing and

Mitchell then agreed a new deal where he was paid $300,000 less than the original contract.

They even changed the retention percentage to 2.5%. Having accepting the lesser amount,

Mitchell sued for the balance. Pacific argued that the new contract replaced the original

contract. Mitchell argued that there was no consideration for the new deal and even if the

new deal was a contract, it had been extracted under duress and therefore it wasnt

binding.

Decision:The new deal was a contract. The reduction in the retention percentage meant

that Pacific had provided consideration for Mitchells promise to accept a lesser sum.

44. Stilk v Myrick (1809) 170 ER 1168 (Pg 220)

Facts:Stilk signed on as a seaman for a voyage from London. During the voyage 2 crew

members deserted and the remaining crew were promised the wages of the deserters. After

voyage the captain refused to pay.

Decision:A promise to perform a duty, already under contract will not be a good

consideration unless the promisee provides something in addition to the duty.

45. Williams v Roffey Bros & Nicholls (Contractors) Ltd [1991] I QB 1 (Pg 222)

Facts:Roffey entered into a contract with Williams. Under contract Williams agreed to

provide carpentry, but after getting into trouble he realised he was under payed. Roffey

agreed to pay extra money but did not pay after completion of work. William sued Roffey

and won.

Decision:A promise to perform an existing contractual duty could amount to consideration

if it conveyed a practical benefit to the promisor and there was no element of duress

(threat).

46. Pinnels case (1602) 77 ER 237 (Pg 223)

Facts:Pinnel was owed some money and upon agreement was payed less but before due

date, Pinnel later sued for the remaining amount but lost.

Decision:As the debt was repaid before due date this amounted to something extra.


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47. Foakes v Beer [1881-5] All ER 106 (Pg 224)

Facts:Not given

Decision:If a party provides something of value (consideration), then the party can protect

itself from the contractual obligation.49. Hirachand Punumchand v Temple [1911] All ER 1597 (Pg 225)

Facts:Not given

Decision:If a part payment is made by a third party then the debtor cannot recover the

balance.

48. Collins v Godefroy (1831) 109 ER 1040 (Pg 226)

Facts:Collins was asked to attend court and was promised to be paid by Godefry for

appearing. But Godefroy refused to pay. Collins sued him but failed.

Decision: A promise to perform a public duty, already owing will not be a good

consideration unless the promisee provides something in addition to the duty.

50. Central London Property Trust Ltd v High Trees House Ltd [1947] KB 130 (Pg 227)

Facts:The plaintiff leased a block to the defendant (HTHL) for 2500 pounds, which he

reduced due to World War 2 but again increased after things turned back to normal.

Plaintiff did not claim the back rent.

Decision:Promissory estoppel stopped the defendant from claiming back rent while he was

entitled to return to the original agreement.

51. Legione v Hateley (1983) 152 CLR 406 (Pg 229)

Facts:This case involved a land. The contract provided that the vendor could terminate the

sale if the purchaser had not completed the purchase by the due date. However, the

purchaser was unable to raise finance by the due date and called the legal secretary in the

office and advised that the finance would be available in seven days. The secretary said that

it should be fine but would have to get instructions. Three days later, the vendor terminated

the sale. The purchaser argued that the words of the secretary were sufficient to give rise to

promissory estoppel and the vendor should be estopped from exercising his rights toterminate because of the representation made by the legal secretary.

Decision:Promissory estoppel could be applied in situations like these. However, the

promisors representation mustbe clear and unequivocal and it this situation it wasnt.


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52. Je Maintiendrai Pty Ltd v Quaglia (1980) 26 SASR (Pg 231)

Facts:Quaglia leased a shop for 3 years at $278/month. Due to difficulties the lessor agreed

to accept a lower amount. When Quaglia called quits the lessor sued for arrears.

Decision:The court decided that detriment existed as Quaglia had to pay back the money inlump sum amount whereas the situation would have been different if he had to pay it back

in instalments. Quaglia won the case.

53. Walton Stores (Interstate) Ltd v Maher (1988) 164 CLR (Pg 232)

Facts:Maher owned a property with building on it. He entered into negotiations with

Walton stores to lease the land, tear down the old building, and erect a new one. Maher

signed the contract and forwarded it to Walton stores who did not sign its part of amended

agreement and later refused to deal. Maher sued Walton stores and were awarded

damages.

Decision:The case used promissory estoppel. The court decided that a legal relationship

existed between them, also the defendant induced the plaintiff to adopt the presumption.

The defendant also knew that his actions would detriment plaintiff.

54. Nash v Inman (1908) 2 KB 1 (Pg 234)

Facts:A minor purchased a number of fancy waistcoats from a tailor, then refused to pay.

The tailor sued to recover the contract price.

Decision:The minor was not legally bound by the agreement. Even though waistcoats are a

necessary, he has already purchased an adequate number of waistcoats and therefore, thecontract was not a contract for necessaries.


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Express terms of the contract

55. Thornton v Shoe Lane Parking Ltd [1971] 1 All 686 (Pg 246)

Facts:Thornton took his car to the car park operated by the defendant and outside sign

read Parking at owners risk. The ticket read subject to conditions of the premises. Insidewas an exemption clause for personal injuries. Thornton was injured and claimed the car

park 50% responsible.

Decision:The court held that the contract was made before the ticket was purchased (i.e.

vending machine); also the clause was very wide. Lord Denning MR said that as the clause

was very destructive it had to be painted in red.

56. Olley v Marlborough Court Ltd [1949] 1 All 127 (Pg 246)

Facts:The Olleys booked into the Marlborough Court Hotel and paid for the week board.

When they got to the room, they noticed a sign which had a notice which stated that thehotel was not liable for lost personal property. Mrs. Olleys furs were stolen as result of the

carelessness of the hotel staff. The hotel argued that because of the sign, they could not be

held responsible.

Decision:The contract was made at the reception desk before the Olleys went up to their

room. Therefore, the exclusion clause could not be a term.

57. LEstrange v Graucob [1934] 2 KB 394 (Pg 247)

Facts:LEstrange bought an automatic cigarette machine from Graucob (defendant) and

signed the sales agreement (without reading) which contained the exemption clause.Machine was defective so she sued Graucob.

Decision:As the documents were signed, so they were binding. As the documents did not

contain any implied term, therefore she could not rely on it.

58. Toll (FGCT) Pty Ltd v Alphapharm Pty Ltd [2004] HCA 52 (Pg 248)

Facts:Toll operated a storage and cartage business called Finemores (F) Alphapharm

imported and distributed pharmaceutical products including Fluvirin. Richard Thomson (RT),

which was acting as agent for Alphapharm, sought a quotation from F for the storage and

transport of Fluvirin. F sent their quotation under cover of a letter which required RT to signan application for Credit and Freight Rate Schedule. RT attended the office and signed this

application. Above the place for signing were words Please read Conditions of Contract

(Overleaf) prior to signing RT signed without reading this? The contract included an

exemption clause where F would not be liable for any loss, injury or damage. The Fluvirin

was ruined when F negligently allowed the temperature at which it was stored to drop

below the minimum allowed. Alphapharm sued for negligence.

Decision:Alphapharm were bound by the exemption clause. There was no need for F to

establish that it had taken reasonable steps to bring the clause to RTs attention.


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59. DJ Hill and Co Pty Ltd v Walter H Wright Pty Ltd [1971] VR 749 (Pg 250)

Facts:DJ Hill (Hill) hired a cartage contractor (Wright) to carry some valuable machinery.

The machinery was damaged in transit due to negligence of Wright. On delivery one of Hills

employee signed the exemption clause (damages due to transit). The employee did not read

this form. Prior to this event both have been involved in at least 10 dealings. Hill sued forbreach of contract and won.

Decision:In this case the court decided that the documents did not appear anything but a

delivery docket and so the exemption clause was not a term. The number of past

transactions did not matter in this case. Therefore, the exemption clause was not a term.

(Is the document contractual in nature?)

60. State Rail Authority of New South Wales v Heath Outdoor Pty Ltd (1986) 7 NSWLR 170

(Pg 250)

Facts:Heath and State Rail reached an understanding that for five years, Heath would have

right to erect hoardings, but the written contract stated that the Rail could terminate the

contract with a months notice. On asking about this term he was assured that it had five

years but would be difficult to change the contract.

Decision:In this case Heath was made aware that the contract could not be changed.

Knowing, this he signed the contract. Therefore, the term in the contract was binding. It was

not displaced by any oral agreement to the contrary.


61. Curtis v Chemical Cleaning and Dyeing Co [1971] VR 749 (Pg 250)

Facts:Mrs Curtis took a wedding dress to the defendant drycleaner and was asked to sign a

receipt for disclaiming damage to the beads and sequins. The dress was damaged and Curtis

claimed damages.

Decision:As the assistant had innocently made a false representation, so they could not rely

on the exemption clause except for beads and sequins.


62. Oceanic Sun Line Shipping v Fay (1988) 165 CLR (Pg 255)

Facts:Fay booked a cruise from NSW to Greek on a Greek vessel owned by OSLS. Brochure

showed that cruise was governed by terms on the ticket which stated that all actions against

OSLS be brought in Greece. Fay was injured and brought the case in NSW; the owner argued

that it was a condition of the contract that the case is brought in Greece.

Decision:The court decided that the contract was made in NSW and the brochure did not

amount to reasonable notice because the brochure was not a document which could

reasonably be regarded as contractual in nature. Thus the clause containing Greece was not

a term of the contract.


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63. Interfoto Picture Library v Stiletto Visual Programmes Ltd [1988] 1 All ER 348 (Pg 256)

Facts:Stiletto hired some transparencies from Interfoto. The delivery note contained that a

delivery charge of 5 pounds/day will be charged. Other libraries charge only 3.50 pounds/

week. Stiletto returned the transparencies late. Interfoto sued him but lost.

Decision:If the unsigned term is particularly unusual, extra notice will have to be given. In

this case Interfoto was entitled to 3.50 pounds/week. Also the term was wholly different to

the industrial norm, the condition was not a term of contract.

64. Couchman v Hill [1947] 1 KB 554 (Pg 256)

Facts:Couchman attended the cattle auction at which he purchased a heifer. Prior to

making his successful bid, Couchman sought assurance that the animal was unserved. Both

the owner and the auctioneer gave the necessary assurance. However, the calf died as a

result of the strain of carrying a calf while too young. The auction catalogue contained a

disclaimer stating that all lots taken subject to all faults or errors of description and no

compensation will be paid. It also stated that the seller did not guarantee the accuracy of

the information. Couchman sued for breach of contract.

Decision:The intention of the parties was to contract on the basis of the oral representation

and not on the basis of the conditions set out in the catalogue. Therefore, the oral

representation was intended to be a warranty and prevailed over the written terms.

65. Hospital Products Ltd v United States Surgical Corporation (1984) 156 CLR 41 (Pg 260)

Facts:United States Surgical Corp (USSC) was an American corporation which made surgical

stapling instruments used by hospital. It appointed Blackman as its Australian distributor. He

had previously been a distributor for USSC in New York. He pitched that he is more capable

than the existing distributor in Australia and even though he may further distribute other

non-competing products, he would ensure that it did not interfere with the promotion of

USSCs product. Later Blackman cancelledhis contract and arranged for his own stapling

instruments and grabbed USSCs customers.

Decision:Blackman had promised that he would devote his best efforts to build up sales of

the USSC product and that he would not deal in a competing product. He had breached

those promises based on the promissory.

66. Ven Den Esschert v Chappell [1960] WAR 114 (Pg 261)

Facts:Ven agreed to sell the house to Chappell. Immediately before signing the contract

Ven asked about white ants and the reply was negative. But after taking possession, she

found white ants.

Decision:An oral representation can be added to the written terms if the evidence suggests

that this is what the parties intended. In this case the plaintiff would not have signed the

contract without the assurance.


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67. Oscar Chess Ltd v Williams [1957] All ER 325 (Pg 263)

Facts:Williams sold a Morris car to Oscar. There were some registration issues which

Williams was unaware of. Williams sold the car to Oscar who later realised the difference,

they sued Williams. Cars model year was not stated correctly.

Decision:The court decided that Williams was unaware of the year of manufacture. He

relied on the registration book which was tampered. Denning LJ held that the statement

was mere representation and not a term of the contract.

68. Ross v Allis-Chalmers Australia Pty Ltd (1980) 55 ALJR 8 (Pg 263)

Facts:Ross purchased a new harvester from the agent of Allis-Chalmers Australia Pty Ltd.

Ross pointed out that he wanted to harvest 120-130 acres. The agent was under pressure

and stated that he thought that the machine could harvest 90 acres, stating that this was

based on his own experience with his own machine on his own farm. However, it could not

harvest 90 acres on Rosss property.

Decision:The court decided that the agents statement was not a warranty but merely a

statement of opinion which in the circumstances was not intended to be promissory.

69. JJ Savage and Sons Pty Ltd v Blakney (1970) 119 CLR 435 (Pg 265)

Facts:Blakney entered into a contract with Savage and was told the estimated speed of

the cruiser would be 15mph. The top speed was less and so Blakney sued Savage for

collateral warranty but lost.

Decision: The high court decided that a representation is not a collateral warranty merelybecause it is one of the factors the induced the contract. A collateral warranty must be

promissory.

70. AWB (International) Ltd v Tradesmen International (PVT) Ltd [2006] VSCA 210 (Pg 267)

Facts:Tradesmen International entered into a contract to buy Australian wheat from AWB.

The contract was to deliver wheat to one of the two ports in Pakistan. The shipment was

delivered by AWB but was rejected by the Pakistani Authority and was sent to Indonesia as a

result. The contract contained a arbitration clause where dispute at the final port of

discharge should be given notice within six months. However, when the tradesmen gave

notice of dispute under the arbitration clause. The notice was given more than six months

after the ships arrival in the port of Pakistan but within six months of its arrival in Indonesia.

Decision: This was a commercial contract. The purpose of the clause was to ensure that

AWB had fairly prompt notice of any claims against it. Therefore, a reasonable person would

believe that the final port of discharge referred to one of the ports in Pakistan, not the

actual port in discharge.


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71. Hope v RCA Photophone of Australia Pty Ltd (1937) 59 CLR 348 (Pg 268)

Facts:RCA hired certain sound system to Hope but Hope refused to pay as the system

wasnt new. Agreement did not include this condition. Hope claimed under payroll evidence

but lost.

Decision: As there was no ambiguity in the agreement, parol evidence was not allowed. The

court also refused to accept an implied term, as it would conflict with the express term

contained in the documents.

72. Bacchus Marsh Concentrated Milk Co Ltd (in liq) v Joseph Nathan & Co Ltd (1919) 26

CLR 410 (Pg 269)

Facts:Nathan was a holder of number of patents including a patent to manufacture a

product called Glaxo. Nathan entered into a written agreement with Bacchus Marsh stating

that he shall sell said patent letters, where the patents were not specific. Bacchus Marsh

argued that Glaxo was included whereas Nathan denied that.

Decision: The court permitted Nathan to introduce evidence of the negotiations between

the parties, including some correspondence, which showed that the Glaxo patent was not

included.

73. Insight Vacations Pty Ltd v Young [2011] HCA 16 (Pg 270)

Facts:Mrs. Young bought a European holiday tour package from Insight Vacations Pty Ltd.

The contract had the exemption clause where the passenger occupies a motor coach seat

fitted with seat belt, the operator not the agents or the co-operations will be liable for any

damages if the seat belt wasnt worn properly.While travelling, Mrs. Young got out of her

seat to get something and when the coach suddenly braked, she fell backwards and suffered

injury. The seat was designed with a lavatory at the back.

Decision: The court commented that the clause should be given ordinary meaning. The

words occupies a motor coach seat should be understood as meaning sitting in the seat

and able to wear the safety belt. Mrs. Young was not sitting in her seat when the accident

happened. The exemption clause did not apply.

74. White v John Warwick & Co Ltd [1983] 2 All ER 1021 (Pg 272)

Facts:White hired a tricycle from Warwick and was injured due to some bicycle flaw. He

sued Warwick for breach of contract and tort of negligence. Warwick had an exemption

clause. Warwick lost tort of negligence but was safe for breach of contract as it was included

in the exemption clause.

Decision:The court held that the exemption clause did not relieve Warwick from its liability

under the tort of negligence.


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75. Photo Production Ltd v Securicor Transport Ltd [1980] 1 All ER 556 (Pg 274)

Facts:Photo production studio engaged Securicor to provide a night patrol its factory. The

contract has an exemption clause where Securicor will not be responsible for any injurious

act or default by any employees of the company unless it could been foreseen and avoided.

One night, Securicors employee on duty, deliberately started a fire. The factory wassubstantially damaged as a result.

Decision: Due to the existence of the exemption clause, Securicor could only be liable if the

act of the employee could have been foreseen and avoided. Securicor could not have

anticipated Musgroves arson and therefore, was protected by the clause.

76. Sydney Corporation v West (1965) 114 CLR 481 (Pg 275)

Facts:West parked his car in a car park operated by SC. He was issued a ticket with the

exemption clause in it. A thief used a duplicate ticket and stole Wests car.

Decision:The exclusion clause in the ticket was a term of contract. The court decided that

the exclusion clause was very wide, in the light of the contract it meant excluding damage

by attendant or something like that and not giving a car away.

77. Thomas National Transport (Melbourne) Pty Ltd v May & Baker (Australia) Pty Ltd

(1966) 115 CLR 353 (Pg 277)

Facts:May & Baker engaged TNT to transport certain items. The contract stated that May &

Baker must accept responsibility for any damages during storage or transit of goods under

any circumstances. TNT engaged a self-employed driver to collect and deliver the goods to

TNTs depot for sorting and onward transport. However, the driver collected the goods but

failed to return to the depot before it closed and as a result, he stored the goods at his place

where unfortunately they caught fire and were destroyed.

Decision: The court held that goods should be stored at the TNT depot and not in the

drivers backyard. As the negligent act occurred during an event that was beyond the

contemplation of the contract (4 corners rule) TNT was not protected by the exemption

clause.

78. Director of Consumer Affairs (Vic) v AAPT Ltd [2006] VCAT 1493 (Pg 279)

Facts:AAPT sells mobile telephone service. Its consumer contract contained a number of

terms that the Director of Consumer Affairs regarded as unfair under the Fair Trading Act

1999 (Vic)

Decision: The terms were unfair, and were therefore void under the Fair Trading Act.


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79. Peters (WA) Ltd v Petersville Ltd [2001] HCA 45 (Pg 280)

Facts:Petersville sold its Western Australian process to Peters (WA). As part of the deal,

Peters were granted exclusive license to make and distribute ice cream under the Pauls

trade name in Western Australia for 15 years and the option to extend for another 15 years

along with the fact that Petersville will not sell any ice cream or frozen confection inWestern Australia or to any person if they are ultimately for sale, supply or distribution in

Western Australia. It also promised not to carry on directly or indirectly the business of

manufacturing or distribution of ice cream or frozen confections in Western Australia.

Decision: The courts held that the strain was unlawful. This went beyond being reasonably

necessary to protect the legitimate interest of Peters (WA).


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Implied terms in Contract

80. Burger King Corp v Hungry Jacks PtyLtd [2001] NSWCA 187 (Pg 291)

Facts:Burger King (BK) is a US firm and gave Hungry Jacks(HJ) exclusive right to develop BJ

in Australia, in return HJ promised to open 4 outlets every year. Later BK wanted Australianmarket for itself so secretly started discussions with Shell. BK terminated HJs contract and

HJ sued for breach of good faith.

Decision:The court decided that BK breached its implied obligation of good faith.

81. Reg Glass Pty Ltd v Rivers Locking Systems Pty Ltd (1968) 120 CLR 516 (Pg 292)

Facts:Reg Glass hired Rivers to supply and fit a particular steel-sheeted door and locking

system in his shop. The door was described as burglar-proof. Rivers fitted the door on the

existing wooden door frame. Burglars broke in by forcing the door from the frame.

Decision:This was a contract for work and materials. There was an implied term that the

door would be reasonable fit to keep would-be breakers out of the shop. The door as

fitted was not of that character. Therefore, Rivers had breached its contract.

82. Helicopter Sales (Aust) Pty Ltd v Rotor-Work Pty Ltd (1974) 132 CLR 1 (Pg 293)

Facts:Plaintiff owned a Bell helicopter who had a service contract with the defendant to

service and repair the helicopter, which required the defendant to conform to the

requirements of the manufacturers manual. The manual required to all spare parts to be

acquired from the manufactures authorized distributor and to comply with the

manufacturers design specifications, although the defendant did not have expertise nor theequipment and the plaintiff was aware of this. A spare part was replaced during service

which was acquired from the manufactures authorized dealers. The bolt contained a latent

defect and during a flight, the bolt snapped, the helicopter crashed and all the occupants

were killed.

Decision:Even though this was a contract for work and material, it would not be reasonable

to imply terms where the materials supplied are of good quality and would fit to their

intended purposed as both parties knew that the defendant had no opportunity to ensure

that the parts obtained from Bells authorised dealer were free of latent defects.

83. Costa Vraca Pty Ltd v Berrigan Weed & Pest Control Pty Ltd [1988] FCA 693 (Pg 294)

Facts:Costa Vraca (plaintiff) operated a tomato farm and asked the defendant to spray

insecticides. Following spraying, the crop died and CV sued the defendant.

Decision:The court decided that there was an implied term that the services would be

carried out with reasonable care and skill. As the defendant did not take reasonable care he

was in breach of contract and liable for damages.


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84. Henry Kendall & Sons v Williams Lillico & Sons Ltd [1962] 2 All ER (Pg 296)

Facts:The vendor regularly sold nuts to SAPPA and there were many transactions in the

past. Each time the vendor sent a note confirming the oral contract (the order) and a

dispute arose whether the terms were included in each contract.

Decision:The Court decided that the terms of the sold note were part of the contract on the

basis on consistent past dealings between them. There were on express terms to the

contrary.

85. British Crane Hire Corp Ltd v Ipswich Plant Hire Ltd [1974] 2 WLR 856 (Pg 297)

Facts:Plaintiff (P) hired a crane with a driver from defendant (D). Later D sent a form which

stated that P was liable for all the costs for damages during hire. Crane was damaged

because of the driver. P sued D.

Decision:The term was not an express term as it was sent after the contract, also therewere insufficient past dealings. However, the term in hire-form ought to be implied on the

basis of a trade custom.

86. The Moorcock (1889) 14 PD 64 (Pg 298)

Facts: Plaintiff (P) owned a ship and wanted to berth it on a dock owned by the defendant

(D). D gave permission for a fee and during berthing ship got damaged due to the hard

ground beneath.

Decision:The court decided that it was an implied term that the river is suitable (fit) for the

purpose of use.

87. Codelfa Construction Pty Ltd v State Rail Authority of NSW (1982) 149 CLR 337 (Pg 300)

Facts: State Rail Authority was building a new railway and Codelfa won the tender. Codelfa

worked 24*7 which resulted in noise causing disquiet among locals. Locals took the matter

to court and claimed a ban. All those resulted in reduction of work shifts and increase in

expenses, SRA then appealed to the High Court.

Decision: The court refused to imply a term as the contract did not have a gap which had to

be filled in order to make the contract work. It was simply the case that Codelfa made a

mistake as to the complete date.

88. Varley v Whipp [1900] 1 QB 513 (Pg 304)

Facts:The buyer contracted to buy, without inspection, a reaper described by the vendor as

almost new and only used to cut 50 or 60 acres. When the reaper was delivered, it was

apparent that it was old and had been repaired. The buyer refused to accept the goods

Decision:The buyer was within his rights to refuse to accept the goods as there had been a

breach of the implied condition of correspondence with description.


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89. Beale v Taylor [1967] 1 WLR 1193 (Pg 304)

Facts:A seller advertised to sale a car. The buyer inspected the car before purchase. Later

the buyer took the car to a garage and was told that the car was in fact two cars welded

together, the rear was the model the seller advertised by the front was from an earlier

model. Because of the welding, the car was unroadworthy.

Decision:Even though the buyer inspected the car, it was still a sale by description. As the

car did not match the description, there was a breach of contract.

90. Re Moore & Co Ltd and Landauer & Co (Pg 305)

Facts:The contract called for the sale and delivery of canned fruit packed 30 tins to the

case. About half of the consignment was packed 24 tins to the case. In all other respects the

goods conformed with the contract. The buyer refused to accept delivery of any of the

consignment.

Decision:Since there was a breach of contract, the buyer was entitled to reject the

complete consignment even though there was no evidence that the packing affected the

value of the goods.

90. Harlingdon & Leinster Enterprises Ltd v Christopher Hull Fine Art Ltd [1990] 1 All ER

737 (Pg 305)

Facts:The defendants were Lone art dealers who sold to the plaintiff also art dealers, a

painting said to be by the German artist Munter. The sellers made it known that they were

not experts in German art. The buyer had a special interest in German art, although it

appears to be little expert knowledge. The buyer viewed and purchased the painting for

6000. It turned out to be a forgery.

Decision:The majority of the court held that this was not a sale by description. Here, the

sellers make it known that they were not experts in German paintings. The buyer inspect the

painting and rejected the argument that the goods were not of merchantable.

91. Ashington Piggeries v Cristopher Hill Ltd [1971] I All ER 737 (Pg 306)

Facts:Ashington had a mink farm and ordered mink food from Hill who had never

previously prepared food for minks. Hill got used some meal provided by Norsildmel to

prepare mink food. Some reaction made the food poisonous and minks died. Ashington

sued Hill who in turn sued Norsildmel for breach of contract.

Decision:The court decided that even though the wood could be put to some use, it was

not of merchantable quality. Also price is an important factor of the quality expected.

92. David Jones Ltd v Willis (1934) 52 CLR 110 (Pg 308)

Facts:Willis wanted a pair of walking shoes for her bulged foot in David Jones. After second

use the heels collapsed causing injury to Willis.

Decision:The court decided that the goods were not of merchantable quality and not fit forthe purpose specified.


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93. Atkinson v Hastings Deering (Qld) Pty Ltd (1985) ATPR 40-625 (Pg 308)

Facts:Atkinson purchased a second hand motor from Hastings Deering Pty Ltd. The tractor

proved to be defective in that it was prone to overheating. Atkinson claimed that the tractor

was not fit for the purpose of scrub-pulling which had been made known to Hastings

Deering at the time of sale.

Decision:The court decided that the tractor was reasonable fit having regard to the fact

that it was second-hand and, therefore, more likely to be subject to breakdowns due to

wear and tear. Therefore, Atkinson failed in his claim.

94. Griffiths v Peter Conway Ltd [1939] 1 All ER 685 (Pg 308)

Facts:Griffiths purchased a Harris Tweed coat from Conway, a tailor, which was specially

made for her. Shortly after she began to wear the coat she developed dermatitis, although

evidence showed that nothing in the cloth that would affected a normal person. Griffiths,

however, had abnormally sensitive skin.

Decision:The court held that the purpose was not made known to the seller. The particular

purpose was that the coat be suitable for a normal person with abnormally sensitive skin.

Griffiths had not made her abnormal condition known to the seller. The buyer therefore

failed.

95. Godley v Perry [1960] I All ER 36 (Pg 310)

Facts:A boy purchased a toy and broke when used and caused injury.

Decision:If goods are bought for normal purpose, then the buyer is not entitled to rely onsellers judgement. In this case the good was not of merchantable quality. (The same

principle applied to Preist v Last [1903] 2 KB 148(a hot water bottle) and Frost v The

Aylesbury Dairy Company Ltd [1905] 1 KB 608(milk)).

96. Teheran-Europe Co Pty Ltd v ST Belton (Tractors) Ltd [1968] 2 All ER (Pg 311)

Facts:The seller (Belton) supplied air compressors to the buyer for export to Iran. The

tractors did not satisfy the Iranian import requirements. Buyer lost the case.

Decision:The implied condition of fitness for purpose only applies where it can be said that

the buyer has made the particular purpose known to the seller in such a way that the sellerknows that he or she is being relied upon.

97. Frank v Grosvenor Motor Auctions Pty Ltd [1960] VR 607 (Pg 312)

Facts:Frank purchased a Renault from GMA and was told that there was nothing wrong

with the car except for the clutch. Later he found that there were many defects with the car.

Decision:Pape J outlined that the car was not of merchantable quality and if the buyer

indicated the purpose of purchase were the goods fit for that purpose.


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98. B S Brown & Sons Ltd v Craiks Ltd [1970] 1 VLR 752 (Pg 313)

Facts:The sellers manufactured woven cloth. The buyers ordered a quantity of cloth. The

cloth could be used for dress making or industrial purposes, depending on the quantity. The

contract price was cheap for dress making but expensive for industrial cloth. The buyer

wanted it for dress making but did not tell the seller. When the cloth was delivered, it wascomplied with the contract but was unsuitable for dress-making purposes.

Decision:The buyer failed. The cloth was suitable for industrial purposes and given the

contract, the seller could not be known that the buyer wanted it to be suitable for dress

making.

99. H Beecham & Co Ltd v Francis Howard & Co Pty Ltd [1921] VLR 428 (Pg 314)

Facts:The buyer wanted to buy timber used in making pianos. The buyer selected timber

from sellers yard but the wood was infected with dry rot which is unsuitable for making

pianos but suitable for making boxes.

Decision:The court decided that even though the wood could be put to some use, it was

not of merchantable quality. Also price is an important factor of the quality expected.

100. Bartlett v Sidney Marcus Ltd [1965] 2 All ER 753 (Pg 3145)

Facts:Bartlett purchased a second hand Jaguar motor car from Sidney Marcus. During a test

drive prior to sale, one of Sidney Marcus pointed out to Bartlett that there was something

wrong with the clutch and the oil pressure. Sidney Marcus offered to sell the car for 575 if

Sidney Marcus did the repairs and for 550 if Bartlett took responsibility for the repairs.

Bartlett choose the latter option and drove the vehicle for 4 weeks (about 300 miles) and

then took it to repair. The problem proved to be far more serious than either Bartlett or

Sidney Marcus expected and the repairs cost Bartlett cost 45

Decision:The court of appeal rejected the buyers claim. A car was fit for its purpose as its in

road worthy condition and fit to driven along safely and of merchantable quality if it was in

a usable condition. Bartlett had driven the car for four weeks without any issues.

101. Grant v Australians Knitting Mills [1935] AC 85 (Pg 315)

Facts:Grant suffered from dermatitis after wearing underwear manufactured by AKM as he

did not wash them before use while there were no complaints from other clients. Grant won

the case.

Decision:The court decided that goods may not be of merchantable quality even though the

defect, once detected can be easily remedied.


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101. ANZ Banking Group Ltd v Frost Holding Pty Ltd [1989] VR 695 (Pg 319)

Facts:Frost Holdings submitted a propose to ANZ Bank to print and supply featuring

Australian paintings. ANZ informed Frost that it accepted the proposal in principle, but

would require an upgrading of the quality of the work. Frost submitted a proposal. The ANZ,

however, changed its mind and informed Frost that it did not wish to proceed.

Decision:The court held that no contract existed because there was no agreement as to the

essential elements such as price, quantity, size and design of the calendars. The VGA s 13

applied where there was a contract.


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Remedies in Contract Cases

102. Taylor v Caldwell (1863) 3 B 826; 122 ER 309 (Pg 333)

Facts:Taylor hired a concert hall from Caldwell. Unfortunately, the hall burnt down prior to

performance. Taylor sued Caldwell for damages.

Decision:The contract was discharged for frustration and therefore, Taylor could not get

damages.

103. Davis Contractors Ltd v Fareham Urban District Council [1956] AC 696 (Pg 333)

Facts:Davis Contractors won a tender to build houses in 8 months. There was a shortage of

labour and as a result they took 22 months to finish the project at an additional expense of

17,500. Davis Contractors claimed that the shortage of labour frustrated the contract, which

means he could recovered the additional expense back.

Decision:The court held that the contract had not been frustrated. The delay caused the

labour shortage to be foreseeable. A contract is not frustrated just because one party is

commercially disappointed with the outcome.

104. Tramways Advertising Pty Ltd v Luna Park (NSW) Ltd (1938) 38 SR (Pg 336)

Facts:Not given

Decision:The judge in this case decided that a condition is a term when the promise is of

such importance that the promisee would not have entered into the contract unless he has

been assured that the promise would be kept.

105. Associated Newspapers Ltd v Bancks (1951) 83 CLR 322 (Pg 336)

Facts:Bancks was a leading cartoonist and worked for Associated Newspaper (AN). AN did

not live up to a condition on which the contract was based and so Bancks terminated his

contract. AN brought an action against him and failed.

Decision:The court held that the statement was at the heart of the contract and so breach

of the condition gives the plaintiff the right to terminate the contract.

106. L Schuler AG v Wickman Machine Tool Sales Ltd [1974] AC 235 (Pg 338)

Facts:Schuler, a manufacturer of press, agreed to give Wickman sole selling rights to United

Kingdom. The contract stated that Wickman shall send its representative to visit certain UK

manufactures at least once a week for inspection. Wickman committed some minor

breaches of this clause and Schuler attempted to terminate for breach of contract.

Decision:The clause in question did not give Schuler the right to terminate since the word

condition may have more than one meaning when used in the context of a contract.


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107. Bunge Corp of New York v Tradax Export SA Panama [1981] 1 WLR 711 (Pg 339)

Facts:Tradax agreed to sell soya bean meal to Bunge. Condition required Bunge to give 15

daysnotice, Bunge failed to comply and Tradax terminated the contract and claimed

damages. Tradax won the suit.

Decision:The court held that even though the consequence of the breach was not overly

serious, time stipulations in mercantile contracts are generally regarded as conditions.

Therefore, even a minor breach would give the innocent party the right to terminate. The

seller won the case so was entitled to termination and damages.

108. Bettini v Gye [1874] All ER Rep 242 (Pg 340)

Facts:Bettini performed for Gye at various locations. The contract stated that Mr Bettini

agrees to be in London six days before his engagement. Bettini falls ill and is unable to make

it. Gye terminated the contract but Bettini was right in eyes of court.

Decision:The court decided that termination can only take place if a condition was

breached. In this case the court decided that time was not a condition and so the contract

could not be terminated.

109. Hong Kong Fir Shipping Co Ltd v Kawasaki Kisen Kaisha Ltd [1962] 2 QB 26 (Pg 341)

Facts:Hong Kong Fir is a ship owned by HKFS. Kawasaki hired it under charterparty (hire of

ship with or without crew). Due to lack of engine room crew Kawasaki lost 57 sailing days

and so he terminated the contract. Kawasaki was entitled to rescind the contract. The

contract contained seaworthiness clause.

Decision:The court decided that as Kawasaki was deprived of the whole benefit that it had

contracted for or not. The delay was so serious as to entitle Kawasaki to rescind.

110. Cehave HV v Bremer Handelsgesellschaft mbH (The Hansa Nord) [1976] QB 44 (Pg

342)

Facts:Bremer agreed to sell a quantity of citrus pulp pellets to Cehave to be used in the

animal feed. The contract required the goods to be shipped in good condition and the court

accepted that the goods were not in good condition when shipped and their value have

dropped. However, the goods were still suitable for being used for their original purpose.

Cehave terminated the contract and sought repayment of the purchase price.

Decision:The case was fought on the express term in the contract. There was no dispute

involving the implied terms of merchantable quantity or fitness for purpose.


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111. Rooney v ABB Grain Ltd [2010] FCA 139 (Pg 342)

Facts:Rooney family (R) operated a wheat Farm. R entered into a contract with ABB for

further delivery of wheat. The price was calculated according to a complex formula which

meant the best possible price from day to day. The buyer had a right to fix the base price

any time. This depended on the buyer to have certain information which ABB supplied to Rdaily by email. Before R had selected a base price, ABB stopped sending daily price

information in order to phase out the type of contract they had with R. R sent a letter to

ABB terminating the contract.

Decision:The court held that there was an implied term to supply the daily base price

information. The term was not a condition but an intermediate condition cause the breach

could either be minor or very serious and this cause the breach was sufficiently serious to R

and therefore R was entitled to terminate the contract.

112. Penola Trading Co Pty Ltd v Sunny Springs Pty Ltd [2009] VSCA 161 (Supreme Court ofVictoria) (Pg 343)

Facts:Sunny Springs entered into a contract to sell a hotel with gambling facilities to Penola.

The contract included upon Penola obtaining the necessary licenses and permits to operate

the hotel and a gaming facility. Penola failed to apply for necessary licenses within six

months of signing the contract. As a result Sunny springs terminate the contract and kept

the deposit.

Decision:The appeal was dismissed as there was an implied term to the contract that

Penola had to take reasonable steps to satisfy the license and permit conditions in the

contract within six months which it failed to do so.

113. National Engineering Pty Ltd v Chilco Enterprises Pty Ltd [2001] NSWCA 291 (Pg 346)

Facts:NE agreed to hire a crane from Chilco in June and in March Chilco had difficulty

arranging one. NE became aware of this difficulty and Chilco confirmed the fact. NE

terminated the contract on the basis that Chilco wont be able to supply the crane. NE lost

the case and Chilco was entitled to damages.

Decision:In this case the court decided that the innocent party will not be permitted to

terminate a contract just because the other party has expressed some difficulty in

expressing their contractual obligation. The terminating party must be able to prove that

the other party was wholly and finally incapable of performing. In this case NE failed to

satisfy the test and so Chilco was entitled to damages.


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114. Foran v Wight (1989) 168 CLR 385 (Pg 347)

Facts:Foran entered into a contract to buy property from Wight and 2 days before

settlement Forans had problem arranging finance despite which they informed Wight that

they would proceed with the contract. Wights had some problem as well, so on the same

day they told Forans that they will not be able to complete settlement which stoppedForans from searching for capital. On settlement day neither party attempted to settle.2

days later Forans sued Wight for a return of deposit. The Wights countersued for breach of

contract.

Decision:The court decided that Wights failure was a breach of condition. This was because

the settlement date was of the essence of the contract. So Forans could terminate the

contract, provided they are able to prove that they were ready to carry out their part.

Forans are entitled to the return of their deposit.

115. Hoenig v Isaacs [1952] 2 All ER 176 (Pg 349)

Facts:Hoenig hired Isaacs to renovate his house. The contract price was 750 pounds. Isaacs

did not perform his job well and so Hoenig refused to pay. Issue is what amount he should

be paid.

Decision:Contractual obligations have to be substantially performed in order to sue for the

contract price. In this case the court held that the work was substantially performed and so

Issac was entitled to the contract price less cost of incomplete work.

116. Addis v Gramophone [1909] AC 488 (Pg 350)

Facts:Addis was employed by Gramophone with salary and commission. The contract

required Gramophone to give 6 months noticeof termination. Gramophone did so but

hired replacing manager which prevented Addis from earning commission. Addis sued for

damages and won the case.

Decision:The purpose of an award of damages is to compensate the innocent party, not to

punish the defaulting party. In this case the court first awarded a lump sum amount but

later overturned it. The same principle was applied in Robinson v Harman (1848) I Exch.

117. Tabcorp Holdings Ltd v Bowen Investments Pty Ltd [2009] HCA 8 (Pg 351)

Facts:Tabcorp leased a building from Bowen. A term of the lease provided that Tabcorp was

not to make any substantial alterations or additions to the building without Bowens written

contest. Without informing Bowen, Tabcorp made substantial alterations to the lobby.

Decision:The contract entitled Bowen Investments to have control over whether any

substantial alterations were made to the building and to ensure that Bowen got the benefit

of this promise the measure of damages had to be the cost of reinstating the original lobby.


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118. Reg Glass Pty Ltd v Rivers Locking Systems Pty Ltd (1968) 120 CLR 516 (Pg 352)

Facts:Reg asked Rivers Systems to fit a steel-shitted door and locking system for his shop.

The door was described as burglar-proof door. Thief broke into and stole goods. Reg sued

for damages.

Decision:The plaintiff can only obtain damages for the losses caused by breach of contract.

The breach must not be the only cause but it must be sufficiently important that but for the

breach, the loss would not have occurred. The court decided that goods would not have

been stolen if the correct door had been installed.

119. Koufos v C Czarnikow Ltd [1969] 1 AC 350 (Pg 354)

Facts:Kaofos charted a ship to Czarnikow Ltd carrying load of sugar from Constanza to

Basrah which would normally take 20 days. However, the ship made unauthorized

deviations that caused it to take an extra nine or ten days. Czarnikows original aim was to

sell sugar in Basrah but between the time ship should have arrived and the time it actually

arrived at Basrah the price of sugar fell.

Decision:A reasonable business man would have contemplated that Czarnikow would very

likely suffer loss, and that it would be or would likely to be a loss referable to market price

fluctuations in Basrah. Therefore, it was a foreseeable loss that flowed in the usual course of

events from the breach.

120. Hadley v Baxendale (1854) 9 EX 341 (Pg 355)

Facts:The plaintiff (Hadley) operated a mill and a broken crankshaft caused operations at

mill to shut down. Baxendale was hired to get the shaft changed.

Baxendale was slow which meant mill had to incur losses because of being inoperative.

Defendant won the case.

Decision:If the losses caused by the breach of contract are too remote, then the plaintiff

would not be liable for damages.

121. Victoria Laundry (Windsor) Ltd v Newman Industries Ltd [1949] 1 All ER 997 (Pg 355)

Facts:Victoria Laundry operated a business as launderers and dryers. During that time there

was a shortage of dryers and VL ordered a boiler from Newman. The ordered was deliveredmonths late and so VL sued for loss of profits from day today work and a lucrative dying

contract from Ministry of Supply. Newman did not know of the contract.

Decision:The court held that first lot of lots profit fell within the first limb of Hadley v

Baxendale (losses occurring in the ordinary course of things), so Newman was liable to pay,

but as Newman did not know about the Ministry of supply contract he is not liable for those

losses.


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122. McRae v Commonwealth Disposals Commission (1951) 84 CLR

Facts:CDC called for tenders for salvage and sale of a tanker it thought had gone aground.

McRae won the tender and spent money for searching the tanker which did not exist (CDC

made a mistake). McRae sued for price of tender as well as expense incurred to search for

the tanker.

Decision:It was not possible to estimate whether McRae would have made a profit or a loss

on the operation. However it was reasonable that McRae would incur expenses, so McRae

was awarded damages of a good sum. The case fell under Hadley v Baxendals second limb.

123. Commonwealth v Amaan Aviation Pty Ltd (1991) 174 CLR 64 (Pg 357)

Facts:Amaan won a contract to provide aerial surveillance of Australias northern coastline

and a considerable expense was incurred in setting it up which includes the purchase and

adaption of suitable aircrafts. Amaan failed to comply precisely with the contract and the

Commonwealth served notice of termination. However, it was not done correctly and

amounted to a wrongful repudiation of the contract. Amann then terminated the contract

and sued for damages. Initially they were award the profit being made under the contract

but failed to claim the startup costs and appealed.

Decision:The purpose of damages for breach of contract is to place the plaintiff in the same

position as if the contract had been performed. Since the expected cost plus expect profit

cannot be calculated, the court may award damages on the basis on the reliance cost.

124. Jarvis v Swans Tours Ltd [1973] 1 QB 233 (Pg 358)

Facts:Jarvis booked a skiing holiday with Swans Tours on the basis of a number of attractive

representations made in Swans brochure. Unfortunately for Jarvis, what appears on the

brochure is not always accurate.

Decision:The court awarded Jarvis damages which were approximately twice the cost of the

holiday on the basis of his loss of entertainment and enjoyment.

125. Baltic Shipping Company v Dillon (1993) 111 ALR 289 (Pg 359)

Facts:Mrs. Dillion went on a 14 days cruise which sank after 10 days. Mrs. Dillion suffered

injury, lost belonging, and was distressed and disappointed.

Decision:The high court approved of damages including distress, disappointment, and loss

of enjoyment. However the court decided that Mrs. Dillion will not be returned full fare as

she experienced part of her holiday.


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126. Dougan v Ley (1946) 71 CLR 142 (Pg 360)

Facts:Dougan agreed to sell his taxicab together with his taxi license to Ley as the number

of licenses was strictly limited by NSW Department of Transport. Therefore, it was a sale of

valuable rights attached. Dougan refused to proceed with the sale and Ley sued for special

performance

Decision:Dougan was ordered to submit the necessary documents of transfer to the

Commissioner for Road Transport and tramways for the transfer of registration and license

as damages were not sufficient.

127. Lumley v Wagner [1843-60] All ER Rep 368 (Pg 361)

Facts:Miss Wagner was hired by Lumley, the owner of a theatre to sing for a period of 3

months and agreed not to sing at any other theatre during the period. However, the singer

broke the contract and sang at Gyes theatre which was a rival theatre.

Decision:The court refused to make an order for special performance on the grounds that it

was a contract for personal services but granted an injunction to stop performing at the rival

theatre.

128. Pavey & Mathews Pty Ltd v Paul (1987) 162 CLR 221 (Pg 362)

Facts: Pavey carried out curtained building work for Paul under an oral contract. In NSW, a

building contract of this type was enforceable it was in writing and signed by the parties.

Because the contract did not satisfy these requirements and was unenforceable. Pavey sued

on quantum meruit basis for the work done and material supplied at the request of Paul.

Decision:The court held that the basis of quantum merit was restitution not contract.

Therefore, the court found in favour of Pavey

129. Sumpter v Hedges [1898] 1 QB 673 (Pg 365)

Facts:Sumpter, a builder, was hired by Hedges to build two houses for 565. Sumpter ran

out of money and was unable to complete the job. Hedges finished the building himself.

Sumpter claimed 333 on a quantum meruit.

Decision:Sumpter was not entitled for the money as the unfinished business was on

Hedgess land and Sumpter had repudiated the contract.

130. Blomley v Ryan (1956) 99 CLR 362 (Pg 365)

Facts:Ryan was an old farmer with a drinking problem. Alcohol has impaired his mental and

physical powers. Blomley wanted to buy Ryans property. During a drinking binge, Ryan

agreed to sell his property at a much lower price with only a deposit of 5. Ryan;s real estate

agent was present but was on Blomleys side. The contract was signed at a solicitors office

after the solicitor had read the terms. When Ryan refused to transfer the land, Blomley sued

for special performance

Decision:Ryan is considered under a special disability The contact was set aside on thegrounds of unconscionability.


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131. North Ocean Shipping Co Ltd v Hyundai Construction Co Ltd (Pg 366)

Facts:A ship-owner (North Ocean) entered into a contract with a ship builder (Hyundai) to

build a ship. The contract price was stated in US dollars. When the US dollar devaluated by

10 percent, Hyundai requested to pay an extra 10 per cent. North Ocean agreed as they had

no effective option. Hyundai provided consideration. Later, North Ocean sought an order tohave the extra money returned on the basis that the contract was induced by duress.

Decision:North Ocean paid under compulsion and therefore, the contract to pay the extra

10 per cent was voidable for economic duress. But North Ocean had an unduly delay in

rescinding the contract and could not recover the money.

132. OSullivan v Management Agency & Music Ltd [1984] 3 WLR 448; 3 All ER 351 (Pg 367)

Facts:OSullivan was a young nave pop singer and composer who placed total confidence in

Mills and his management company. They signed a contract where the management would

manage all aspects of his career for a period of 5 years with an option for two more. This

included an assignment of the future copyright in his songs. OSullivan became extremely

successful and challenged the contract.

Decision:OSullivan was young, inexperienced and signed the contract without legal advice.

Because of this inequality in bargaining power, the court held that the agreement was an

unreasonable restraint of trade. The agreement was set aside.

133. Lloyds Bank Ltd v Bundy [1974] 3 WLR 501; 3 All ER 757 (Pg 368)

Facts:Bundy was an elderly farmer, inexperienced in business matters. For many years, he

had been a customer of Lloyds Bank. He relied on the manager of the bank for financial

advice and manager was fully aware of his financial affairs. Bundy agreed to guarantee

certain debts owing by his son to Lloyds Bank. The manager did not ask Bundy to get

individual advice before executing this. The sons business failed and the Bank started legal

proceedings against Bundy.

Decision:Banker-customer is not normally a relationship that gives rise to a presumption of

the undue influence. In this case there was a special relationship which gave rise to the

presumption of undue influence. The bank at failed to rebut that presumption and therefore

the guarantees should be set aside.

134. Taylor v Johnson (1983) 151 CLR 422 (Pg 370)

Facts:Johnson entered into a contract to sell 10 acres of land to Taylor. The contract stated

the price as 15,000. In fact the land was worth 50,000 and if rezoned 195,000. Johnson

though the contract price as 15,000 per acre. The court held that Taylor was aware of his

mistake and took steps to ensure that Johnson did not discover the mistake.

Decision:The court held that Mrs. Johnson was entitled to rescind the contract for

unilateral mistake


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135. Cundy v Lindsay (1873) 3 App as 459; [1874-80] All ER Rep 1149 (Pg 371)

Facts:A rogue ordered goods from Lindsay claiming to be Blenkiron & Co of 37 Wood

Street. In fact, the actual business operated from 123 Wood Street. The rogue sold the

goods to Cundy whom sold it to another person. Cundy was not aware that the seller was a

rogue. Lindsay sued Cundy for selling his property without authority.

Decision:The contract was void and therefore, Lindsay was still the owner of the goods.

136. Petelin v Cullen (1975) 132 CLR 355 (Pg 372)

Facts:Petelin granted an option over his land to Cullen. Cullen failed to exercise the option

wihin the option period. Petelin spoke very little English and could not read it at all. On the

urging of Cullens agent, Petelin signed a document which he believed was a receipt for $50.

The document was, in fact, a renewal option which had lapsed. Cullen then purported to

exercise the option. Petelin refused to transfer his land. Cullen sued for special

performance. Petelin argued the defense of non est factum.

Decision:The court upheld Petelins defence and refused to order special performance.

137. Academy of Health & Fitness Pty Ltd v Power [1973] VR 254 (Pg 374)

Facts:Power, a jockey entered a contract to use appellants gym facilities. Prior to entering

a contract, Power was told that the sauna was available for use of seven days a week. This

was not accurate as men could only use the facilities on alternative days. He never visited

the gym or paid the fees. The academy sued for the fees.

Decision:The court held that Power had validly rescinded the contrcat.

138. Car & Universal Finance Co Ltd v Caldwell [1965] 1 QB 525 (Pg 375)

Facts:Caldwell sold his car in return for a cheque. The buyer disappeared and the cheque

bounced. Caldwell immediately notified the police and the Automobile Association. The

buyer sold the car to the finance company.

Decision:The court decided in favor of Caldwell. He has done all that was reasonable in the

circumstances, which he had, the rescission was Valid. Thus, Caldwell, was not interfering

with any third party rights by demanding the return of the car.

139. Perpetual Trustee Co Ltd v Khoshaba [2006] NSWCA 41 (Pg 376)

Facts:Mr. and Mrs. Khoshba decided to invest in a shopping trolley collection business. The

Khoshabas raised the investment funds ($120,000) by mortgag

case summaries 1 193

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