· web viewpromissory estoppel can apply even if no pre-existing contract [sword]....

UQ Semester 1, 2014

Law of Contracts A: Summary NotesSemester 1, 2014

UQ

LAWS2111 Contract Law 1 Summary Notes

UQ Semester 1, 2014

Offer Capacity to make a contract General rule: any person can make contract (free will, assume all can freely consent). Mental incapacity- a) not capable of understanding contract and b) other party knew. Minors- contracts for supply of necessaries are binding. Remedy- voidable. Corporations- legal persons- wide legal capacity- Corporations Act 2001 (Cth)- ss 124-

126. Unincorporated associations- Associations Incorporation Act 1981 (Qld)- s 28-

contracts binding on association & s 27- restricts liabilities of members. Agency law Agent can have authority to make contracts to bind principle to third party. Agent not

personally bound. Always need to check “actual” or “apparent” authority of agent. Formalities Statute of Frauds was the original. Now many laws eg Property Law Act 1974 (Qld) s

56- Guarantees have to be in writing. Stimulated by fear of perjury. Other similar statutes.

Requests for information Harvey v Favey [AC]- Will you sell me pen? Lowest price $900. We accept. No

contract. Advertisements Fisher v Bell [QB]- Flick knife in window. Invitation to treat. Pharmaceutical Society of GB v Boots- Self-service store. Contract made at cash

register. Partridge v Crittendon- Newspapers. Invitation to treat. Otherwise exposure to risk

of breach. Wallace v Brodribb- Agree with English cases for law. But here parliament- ‘offer’-

not technical sense. Auctions Bid=offer- Payne v Cave or s 59 SOGA. Harris v Nickerson- Advert that auction sale will take place- not offer. Barry v Davis- Recovered for breach when not sold goods at without reserve

auction. Agreed with Warlow. Warlow v Harrison- May have action against auctioneer. Collateral promise which

ought be enforced. Ulbrich v Laidlaw- followed Warlow. Still good law. AGC v McWhirter- Each bid is an offer and auctioneer could accept or reject even if

without reserve. Gaskell thinks Warlow is probably correct, and AGC now comes under further developments of process contracts.


UQ Semester 1, 2014 Tenders Spencer v Harding- Circular inviting tenders is not offer. Only tenders are offers. Blackpool v Blackpool- If submit good tender before deadline, entitled to have it

opened and considered. Hughes Aircraft Systems v Airservices- Signed process contract. Tendering

process had to be on those terms. IPEX v Victoria- Process contract found, but no breach. Other MacRobertson Miller v Commissioner of State Taxation- Issue of ticket is offer.

Keeping is acceptance. Thornton v Shoe Lane Parking- Dicta about automatic ticket machines. Held terms

not part of contract. Baltic Shipping v Dillon- Contract formed when posted/received by her. Formed

before seen nasty terms.

Acceptance Fitness First v Chong- Signed 12 month gym contract. Acceptance. Objective test. Rejection and counter-offers Hyde v Wrench- Counter-offer destroys original offer. Followed in Harris v Jenkins. Stevenson v McLean- Inquiry for information not counter-offer. Rest Sea v APT- Acceptance with queries still acceptance, had sufficient clarity etc. Oriolo v Wolfram- Counter-offer impliedly revokes offer only if inconsistent. Offeree

may ignore and accept. Fact of acceptance: conduct Brogden v Metropolitan Railway- Contract in drawer. All conduct in accordance

with offer. Empirnall v Machon Paul- We know the facts, we know the outcome. Acceptance to be in exchange for offer Fitch v Snedeker- No acceptance if information given in ignorance of reward. R v Clarke- Gave information to clear own name. No causal link between offer and

acceptance. Standing offers Great Northern Railway v Whitham- Acceptance each time order placed. Supplier

obliged to supply. Silence Felthouse v Bindley- Can’t bind offeree through silence. But compare acceptance

by conduct. Fairline Shipping Corp v Adamson- Where offer saying silence as acceptance

offeree cannot accept by silence


UQ Semester 1, 2014 Re Blackstump Enterprises- Insufficient to ask whether offeree has any objections

and treat that as consent. ACL s 41, 42- unsolicited goods offences. Not liable for payment, loss or damage

unless willful. ACL s 18- Misleading & deceptive conduct. Cityrose Trading v Booth- silence may sometimes be intentional conduct. Methods of Acceptance Manchester Diocesan Case- Method prescribed by offeror. Not less advantageous

mode is alright. Brinkibon v Stahag Stahl- General rule: acceptance is communicated when and

where it is received.o Lord Wilberforce: No universal rule can cover all cases, but consider:o 1. Intention of partieso 2. Sound business practice, and in some caseso 3. A judgment of where the risks should lie

Postal rule- letters Adams v Lindsell- Postal rule. Acceptance when posted. Tallerman v Nathan’s Merchandise- Dixon follows but basis: if offerer

contemplated use of post then inference that letter rely put in post is acceptance. Subject to intention of parties. Always.

Wardle v Agricultural & Rural Finance- Must always interpret language used- does it support the inference?

Household Fire v Grant- Letter lost. Held contract already made. Holwell Securities v Hughes- Acceptance by “Notice in Writing”. Meant that

communication to be received. Nunin Holdings v Tullamarine- Postal rule not intended. Letter clearly required

receipt. New forms of communication ETA 2001- unaddressed proposal is invitation to treat, electronically formed contract

not automatically invalid, correcting input errors possible if act quickly. Does not formally decide when contract made, but provisions on time & place of receipt, dispatch. Still a matter of principle for courts (Brinkibon).

Battle of the Forms Butler v Ex-Cell-O- Denning- look at documents as a whole. Lawton & Bridge- offer,

counter-offer etc. Kriketos v CC- Essential question- whether parties’ conduct reveals

understanding/agreement which bespokes an intention to be legally bound to the essential elements of a contract. May look at subsequent conduct.

General rules of revocation Byrne v Van Tienhoven- Can revoke offer any time before acceptance with

communication (no postal rule). Evidence of revocation LAWS2111 Contract Law 4 Summary Notes

UQ Semester 1, 2014 Dickinson v Dodds- Any method as long as “reliable source”. Nature of an option 1) Contract of sale (now)- single contract conditional on exercise of option in stated

period. Laybutt v Amoco, Orchard v Ross Neilson, Boylan v Gallagher. 2) Binding irrevocable offer- O’Halloran v Williamson 3) Sui generis concept? Lock-out agreements Walford v Miles- Lock-out for specified time potentially enforceable. But here too

uncertain. Revocation and unilateral contracts Withdrawing reward offers- give same degree of notoriety (same method)- likely to be

effective. Abbott v Lance- Implied promise not to revoke after performance commenced. Errington v Errington- Lord Denning. Daulia v Four Millbank Nominees- Goff LJ: Implied obligation not to prevent

performance being satisfied. Mobil v Wellcome- Address not an offer; too vague, tentative and preliminary.

Nothing in writing. Not intended [objectively] that there would be an implied ancillary contract here, as 1) what is commencement? 2) performance was for benefit of both and 3) Franchisees already had obligation to perform to standards.

Lapse of offer Manchester Diocesan Case- must accept offer in reasonable time (intended open

only for reasonable time). Bartolo v Hancock- “Here and now” offer intended. Carter v Hyde- Death of offeree. Offeree’s personal representatives can accept,

unless personal contract. Laybutt v Amoco- Death of offeror. Assume offeree cannot accept if knows of death.

But option (as conditional contract) could be enforced against personal representatives, unless personal contract.

Restitutionary remedies Recover costs of preparing contract not eventually agreed? British Steel v Cleveland Bridge- D requests work before contract. Obligation

imposed on D to pay reasonable sum for work. Unjust enrichment claim, not contract. Not a general right to receive expenses. Crucial: request to start, or freely accepted

services. Peet v Richmond- Where work is freely accepted. Pavey & Matthews v Paul- Contract invalid. Unjust enrichment claim- entitled to

reasonable renumeration.


UQ Semester 1, 2014

Certainty of terms and intention to be bound 1. Objective approach- can we ascertain the terms? 2. Uncertainty as to classification of statements- eg offer vs invitation to treat 3. Uncertainty as to identity of parties- one man companies, corporate alter ego,

nominees? 4. Examples of uncertainty- in content (meaning unclear), or in scope (some part

missing- incomplete) 5. Role of the court- distinguish complexity and uncertainty. Try to give effect to

parties’ intention. Upper Hunter v Australian Chilling- Barwick- uncertainty of meaning vs absence

of meaning. Contract which can bear more than one meaning not void for uncertainty- will bear meaning court says is construction.

Reference to non-existent terms Fitzgerald v Masters- Incorporating ‘inconsistent’ terms. Dixon- clearly necessary

to avoid absurdity/inconsistency. Court can remove uncertainty as it does not conform to parties’ intention.

Laybutt v Amoco- Pay deposit to said agent. Name not filled. Severable if meaningless.

Scammell v Ouston- Sale of car on “hire purchase terms”. But many types. Agreement incomplete.

Terms incompletely expressed Whitlock v Brew- B buys land from W. Clause to grant lease to Shell “on such

reasonable terms as commonly govern such a case”. Arbitration for interpretation/operation disputes. Void for uncertainty. Period/rent uncertain. No intent to allow arbitrator to select terms. Severable? Depends on intention- clause 5 not vague or meaningless. No severance as sale was on basis that lease granted. Whole agreement void.

Quarante v Owners Strata Plan- Informal reimbursement conversation. Key issues omitted. Post-contractual conduct relevant to intent to contract. Parties have gone no further than agreeing good idea.

Hillas v Arcos- Option to buy standards of timber. What is a standard? Terms of delivery? Price? Function of court- construe documents clearly and broadly without being too astute/subtle in finding defects. Course of dealing- infer all details from agreement in previous year.

Geebung v Varga- Courts should be upholder not destroyer of bargains and avoid over-nice approach.

Incomplete expression and gap filling See common law and statutory implied terms. Also SOGA s 11(2)- price [reasonable]. Uncertainty and essential terms Geebung- Not law’s purpose to rifle through terms to find unagreed term which can

be relied upon to escape. LAWS2111 Contract Law 6 Summary Notes

UQ Semester 1, 2014 Thompson v White- Simple joint venture. Court didn’t like arguments about

complex terms from big joint ventures. Uncertainty claim requires omission of term “without which the contract cannot be enforced”.

Ormwave v Smith- Guide of terms from previous practice. Complex arguments not good in informal contracts.

Geebung- Important matters on which parties have not reached consensus in informal agreement render it less likely that they intended immediately to be bound before execution of formal document.

Terms left open: general principles May & Butcher v R- Price to be agreed from time to time. So fundamental can’t

have binding contract. Foley v Classique Coahces- Court try to give effect to agreement where

performance. May impose reasonableness formula, or look to previous dealings. Terms left open: choice given [eg Butler- price variation clause] Godeke v Kirwan- Choice given to one party- no uncertainty. Left matter for S’s

solicitor. Reasonableness. Timmerman v Nervina- Repurchase ‘at cost’ or ‘at auction’ or ‘fair price’. Election

possible. Not uncertain. Choice and defective machinery Hall v Busst- Option to repurchase land if possible resale. Price +

additions/improvements – deficiencies/depreciation. Price too indefinite. External standard? Need court action to determine price.

Sudbrook v Eggleton- Sale price to be agreed 2 valuers appointed by LL and T. LL refuses to appoint- uncertain? Held formula would be reasonableness. Machinery- court will operate if necessary.

Booker v Wilson Parking- Brennan: Obiter: time might come to reconsider Hall v Busst.

Negotiations in good faith Walford v Miles- Negotiations subject to contract: lock out agreement? Implied

agreement to negotiate in good faith? Ackner: inherently adversarial process. No implied duty to negotiate in good faith for unspecified period. Court unhappy/unable to decide if good reason to withdraw from negotiations. Entitled to pursue own interests as long as do not make misrepresentations. Can be no such obligation to negotiate until there is a proper reason to withdraw.

No binding obligation requiring good faith during negotiations? But estoppel, misrepresentation, duress?

Contrast good faith during performance/interpretation- see interpretation later. Express agreement to negotiate Walford v Miles- bare agreement to agree invalid for uncertainty. Coal Cliff v Sijehama- Parties to “proceed in good faith to consult together upon the

formulation of a more comprehensive and detailed…agreement.” Held too illusory, vague and uncertain, eg no external arbiter, many issues still to be resolved after 3 years, court ill equipped to fill in BUT


UQ Semester 1, 2014 Kirby P- some agreements to negotiate in good faith can be binding, but needs to be

clear, or part of wider arrangement. External standard may be relevant. Handley JA- more cautious (like Ackner). Negotiations for parties’ discretion. Promise

to negotiate in good faith illusory. Express good faith in negotiation obligation Strzlecki v Cable Sands- MOU- if parties acting good faith unable to conclude sale

contract within 30 days then MOU cease to be of any force. No agreement. Breach by CS? Held good faith meant to act honestly ‘within the framework of fidelity to the bargain’. Not required to act in the interests of the other, or to give in to. Just need to subject themselves to process of negotiation, keep an open mind in the sense of being willing to consider proposals, and put forward options for the resolution of any differences. Must have freedom to engage in self-interested behavior so long as they do so honestly and in a manner allowing negotiations to proceed (presumably not indefinitely). Merely putting up unreasonable proposal not enough, providing they don’t rule out negotiation about it.

No binding HC case on whether there is an obligation to negotiate in good faith even where no express term.

Conditional agreements: theory Factual event not contractual term. Condition precedent- satisfy before contract

comes into existence/force. Condition subsequent- contract binding now, but may be ended (‘determined’) by a

condition/event. Condition precedent to performance- binding now, but performance only triggered by

a condition/event. ‘Subject to contract’ clauses Masters v Camerson [HC]- 3 possible classes of case (4th later added). Class 1: Immediately bound, later written record CBA v Dean- Unequivocal acceptance, no intention to postpone contract. Wanted

clean copy for records. Fuller and more precise but not different in effect. Class 2: Complete agreement: performance conditional Niesmann v Collingridge- Option to buy. Price payable on signing of contract. Held

binding agreement, signing not a condition precedent to agreement but condition precedent to performance.

CBA v Dean- D refusal to sign could be breach. Class 3: No agreement without formal agreement Masters v Cameron- S and B sign document, “this agreement made subject to

preparation of formal contract which shall be acceptable to solicitors on above terms.” Held if use “subject to contract” formula, prima facie creates overriding condition [requirement]- agreement is intended basis for future contract; not as constituting contract already. Reserving formal acceptance until later document.

Class 4: Binding now, later supersede


UQ Semester 1, 2014 Anaconda Nickel v Tarmoola- Document forms HOA which constitutes an

agreement in itself to be replaced by fuller agreement not different in substance/form. Intent to be bound immediately expecting later substitution.

Strzlecki- Binding MOU (with good faith obligation). Later sale if negotiations successful.

Something binding now, later expecting it to be superseded. ‘Subject to finance’ [condition subsequent] Meehan v Jones [HC]- “subject to purchase receiving approval for finance on

satisfactory terms.” Too vague and uncertain? “Satisfactory” to both left matters to be agreed. Rejected uncertain/illusory argument. Condition inserted for benefit of plaintiff- he had choice. Gibbs, Mason Wilson- P at least has to act honestly (objectively reviewable by court). As under obligation to act honestly, P’s promise is not illusory.

Other ‘subjects’ Need to look at it carefully, intention for condition precedent (like Class 3) or condition

subsequent (like Meehan)? Has subject been cleared/lifted? Intention to be legally bound Australian Woollen Mills- Dixon- voluntary assumption of a legally enforceable

duty. Judge intention objectively. Need identifiable parties, certain terms, consideration.

Presumptions (law of evidence)- family/social agreement not meant to be binding, agreements in commercial context intended to be binding.

Presumptions and categories Ermogenous v Greek Orthodox Community of SA- caution in using presumptions

as to parties’ intentions. Merely a burden of proof issue- intent or not? Examine all circumstances.

Shahid v Australasian College of Dermatologists- Ermogenous not considering business contexts but religion. In business context, person proposing that the parties did not intend to create legal relations bears the onus.

Evans v Secretary, Department of Families- Ermogenous had rejected formal presumptions. Did words/conduct objectively evince an intention to assume legally binding contractual obligations to each other? Family/other relationship is one circumstance that is relevant- one factual circumstance.

Family agreements Balfour v Balfour- Most H-W agreements not enforceable. Possible. Burden on W to

show contract. Evans- Need convincing evidence of intent to show contract in family context. Binding family agreements: examples Wakeling v Ripley- More than family agreement. Sister needed definite insurance

before moving. Letter showing intent. Todd v Nicol- D wanted company of sister-in-law and niece. P paid to come from

Scotland. Held intention- permanent future arrangement affecting financial security, not some casual arrangement.


UQ Semester 1, 2014 Popiw v Popiw- “Return and I’ll transfer house into joint venture”. Evidence- visit to

solicitor- more formal. Riches v Hogben- Reasonable people would consider binding, considerable expense,

certain, intention there. Social agreements Clubs and competitions- Clarke v Dunraven- going to race- mutual offer and

acceptance of rules. Lotteries and competitions- split winnings can be binding, consider mutuality,

seriousness, repetition? Simpkins v Pays- Competition entry not a mere friendly arrangement. Commercial agreements Carlill- advertisements. Edwards v Skyways- Pilot made redundant, promised ex gratia pay out. Does not

imply no legal effect. Masters v Cameron- subject to contract Excluding intention in commercial context Rose & Frank v Compton- Burden of proof on person saying there is no contract.

Honorable pledge clause in business agreement- showed intent not to have formal/legal agreement. Unenforceable.

Examples of intent in commercial context HOA Anaconda Nickel- to be replaced by formal agreement (Class 4). Coal Cliff- Was uncertainty- good faith negotiations issue? Hadn’t sorted all issues. Strzlecki- MOA- intention to be bound, although would later be replace by formal

agreement (Class 4) Factory 5 v Victoria- Subject to reaching agreement on legally binding something

or other- Class 4 Letter of intent Pirt Biotechnologies v Pirtferm- Clearly not intending to be bound at this stage.

Same later. Letter of comfort Kleinwort Benson v MMC- no intention to be legally bound on continuous basis.

Merely commercial assurance. Letter of commitment Norman; Re Forest Enterprises- We agree to provide this commitment. Intention

to be bound. Termsheet Maple Leaf v Rouvray- This shall serve as legally binding document until

replacement (Class 4). Financial swaps: Enron “promise” to unwind the deal Raiffeisen v RBS- not intended to be binding. Government Schemes


UQ Semester 1, 2014 Australian Woollen Mills v Cth- Gov’t wool subsidy. P tried to enforce scheme as

contract. Held no intention to make a contract- no statutory authority. Anyway, no bargaining P and Gov. Eg request, invitation to purchase wool. No inducement to buy wool. Was a conditional gift, administrative arrangement only; no ICLR

Unusual categories of agreement Burden on person alleging contract. Ermogenous- Hellenic association appointed Archbishop. Sued for unpaid leave after

20 years. Was there an employment contract? Held: religious minister may have contract to perform spiritual duties. Extensive rights of control exercised.

Shahid- Educational contracts? S applies for training positions and appeals decisions. College appeal proceudres in training handbook and fee. College regarded itself as not bound, eg complete discretion on remedies. Did each appeal application create a contract? Held each lodging of appeal had ICLR. Objective position: handbook detailed and comprehensive [eg formalities, parties, grounds, error of law], and was a commercial relationship [high fees, major commitment of time, energy and money].

Consideration Definitions Currie v Misa- Some right, interest, profit, or benefit or some forbearance,

detriment, loss or responsibility Thomas v Thomas- some of value (to law) moving from promisee; benefit to

promisor or detriment to promise Carlill v Carbolic Smoke Ball- act of P from which D gains benefit or

labor/detriment by P. Dunlop v Selfridge- act/forbearance of one party (or promise of); price for which

promise is bought. Distinguish Motive and Consideration Thomas v Thomas [QB]- In consideration of H’s desire executors would convey

premises to W for life, provided yearly small payment and keep in repair. H’s desire or motive to give effect to it not consideration.

Consideration and conditional gifts Australian Woollen Mills v Cth- A promises to pay on B’s arrival in Sydney.

Conditional gift not consideration. But if A needs B and B expresses concern about costs; infer promise in exchange for performance

Consideration must move from promisee Coulls v Bagot’s Executor [HC]- Promise by N to H and W. H provides

consideration. Good consideration of H provides it jointly with W. Promise made to two people- consideration only needs to come from one.

Consideration in exchange for promise? Australian Woollen Mills- Cth wool subsidy to buyers at auction. AWM bought wool

before end of scheme. Contract? Held act must be done in consideration for the promise. Promise must have really offered as consideration for the doing of the act,


UQ Semester 1, 2014and that the act was really done in consideration of a potential promise. Must be quid pro quo. Here doing act was not part of bargain. Also no ICLR. Administrative.

Beaton v McDivitt [NSWLR]- M owned 25 acres. Worried about increasing rates. Invited B to move onto land rent-free and work it organically. When subdivided M will transfer deeds to one of the four blocks. B constructed strange eco-dwelling. Attempted to work land but poor soil. 7 years rent-free but spent $1000 on shrubs. Falling out, council requires demolition. M bars B from property. Question: was B working the land in exchange for M’s promise to transfer lot? Held- contract- HC had accepted bargain doctrine in Australian Woollen Mills- not enough to show reliance- have to show given in exchange for as part of bargain. McHugh and Mahoney treated as unilateral. M did get benefit (rates reduced if subdivided).

Queensland Example Memery v Trilogy- M signs T’s loan facility on best endeavors basis. Paid

commitment fee of $5k, application fee of $38k also payable. M went with another lender; T sues for $38k. Promise to pay application fee supported by consideration? T’s obligation to use best endeavors was quid pro quo for M’s obligation to pay fee. T’s discretion as to giving loan did not make it illusory- T did not have unqualified right to withdraw.

Past consideration Roscorla v Thomas- Sale of horse. Later warranty. Held: past consideration. Lampleigh v Brathwait- Exception. Services at promisor’s request and later

promise to pay. Raise implication that payment would be made- P would not have done it unless he knew he would be paid. Only fixing amount later.

Pao On v Lau Yiu [AC]- Good consideration if: 1. Act at promisor’s request. 2. Parties understood at start that act was to be remunerated. 3. Payment legally enforceable.

Value of consideration White v Bluett- If son ceases complaining, father will discharge debt. No right to

complain- not consideration. Consideration must be legally sufficient but law will not enquire as to adequacy. Chappell v Nestle- Some commercial value. Held chocolate wrappers part of

consideration- benefit to Nestle. Compromises and forbearances Wigan v Edwards [HC]- Compromise contract. Pays $500k to abandon case. Agree

to forbear. Bona fide compromise of doubtful claim- good consideration. Unless vexatious or frivolous. Same in Musumeci.

Existing Legal Duties owed by law Collins v Godefroy- Paid to appear. Had to appear anyway- subpoena. Bad

consideration. Glasbrook v Glamorgan CC- Police went over and above public duty. Good

consideration.


UQ Semester 1, 2014 Ward v Byham- 1. Find extra consideration over and above any statutory duty? 2.

No rule that promise to perform existing duty cannot be consideration, if there is a benefit to promisor.

Popiw v Popiw- Followed Ward. Consideration- moved back in and had to put up with him. No obligation. Detriment to her; benefit to husband. Can be consideration unless overriding issue- corruption/ extortion.

Existing contract duties to third parties - can be good consideration- confirmed in: Pao On v Lao Yiu and NZ Shipping v Satterthwaite Port Jackson Stevedoring v Salmond & Spraggon- Also issue about

subcontractors and clauses. Contract between cargo owner and shipowner, with exemptions for stevedores. Cargo owner sues stevedores. Steveodres already bound to unload cargo under main contract. Held, discharging goods is consideration.

Existing duty to promisor: asking for more Stilk v Myrick- No consideration if promise to perform existing duty to promisor.

New promise indistinguishable from old; illusory consideration. Ship deserted. Already had to operate it. Also Wigan.

Hartley v Ponsonby- Unless P does more than bound to do. Only half crew- not obliged to as was dangerous.

Practical benefit? Williams v Roffey- D asks for more money for what already contracted to do. P

promises. Is practical benefit consideration? R agreed to build flats for S (penalty clause for delay). W sub-contracted to build. W asks for more $. Held good consideration (as long as no fraud/economic duress)- R obtained practical benefit (or obviated disbenefit)- avoided penalty under main contract.

Musumeci v Winadell- M had 5 year lease of fruit shop in D’s shopping center. D leased units to bigger competitor Duffy. P asked to renegotiate lease. D agrees 1/3 rent. D later insists can terminate offer of rent reduction. Was there consideration for D’s promise of reduced rent? Williams followed with some amendments. Practical benefit. W avoided having empty shopping center, removal of threat of litigation (fruit shop had allegations of misconduct), and did not have to look for new tenants. No extortion.

Schwartz v Hadid- Not appropriate case to discuss principles. Anyway, no practical benefit.

Existing duty to promisor: asking for less Pinnel’s Case- General rule- part payment by debtor of a lesser sum in satisfaction

of larger sum does not discharge debt. No consideration. But look for extra consideration.

Foakes v Beer- not overruled in Australia. SNL v CMA- follows Pinnel/Foakes but finds new consideration.

Economic Duress Sundell v Yannoulatos- Protection against extortion through independent concept

of duress? Obiter.


UQ Semester 1, 2014 North Ocean Shipping v Hyundai- Economic pressure (threat to break contract)

may amount to economic duress. Contract is voidable. Pao On- Coercion of will vitiating consent. Needs illegitimate pressure. Effective no

choice. Alternative courses? Advice? When pressure lifted, what did you do?

Promissory Estoppel High Trees- 99 year lease of flats. Rent reduced in 1940 (bombing threat). 1945- all

flats now let- landlord claims arrears and full rent. D estopped from asserting his strict legal rights under contract. Basis in equity and not common law (would have been no consideration). Two cases:

Hughes v Metropolitan Railway- 6 months to repair property under lease. Meanwhile negotiations about buying out. Tenant assumed time period suspended during negotiations. Negotiation leads one party to believe that strict rights would not be enforced- they cannot be enforced when it would be inequitable.

Birmingham v District Land Case- Lease- tenant building property on land. If not completed by 85, lease would end. Tenant found out railway might be coming- owner said hold off building. Railway bought land- said tenant had no interest. Equity raised against landlord to ensure tenant is not evicted.

Common law estoppel: estoppel by representation/convention D allowed P to rely on a common assumption of existing facts. Cannot deny that-

originally rule of evidence. Proprietary estoppel: property estoppel Estoppel by acquiescence or encouragement. Riches v Hogben; Portland Downs v Great Northern- interest in land may arise

by an equitable estoppel where a party has acted to his detriment in consequence of an expectation created/encouraged by another that the interest in land will be granted. Example: Giumelli v Giumelli.

Promissory estoppel High Trees- words/conduct preventing person from going back on

promise/representation where P has acted in reliance and it would be inequitable to allow D to go back. Key future: promise as to future.

Je Maintiendrai v Quaglia [SASR]- Similar facts to High Trees. Landlord not awarded repayment. Promise operated for future, but could give notice to return to strict rights.

Legione v Hateley- Promissory estoppel accepted by HC. Cautious- shield not sword.

Waltons Stores v Maher- Promissory estoppel can apply even if no pre-existing contract [sword].

Commonwealth v Verwayen- Single unifying doctrine? 5 different answers. Court held State estopped from going back on promise that it would not rely on time bar.

Giumelli v Giumelli- Flexible remedies for estoppel.


UQ Semester 1, 2014 Saleh v Romanous- Can apply to pre-contractual conduct. Trumps restrictive

common law doctrines. Waltons v Maher- Maher suggested amendments. Needed to be sorted quickly so

work could finish on time. LL would not demolish until all lease problems solved. Waltons said we believe approval forthcoming, we shall let you know tomorrow if any amendments are not agreed to. No objections until 19 January. Waltons never sent back lease by exchange. Waltons lawyer said to go slow, keep options open. Building 40% complete. Held Waltons estopped from denying implied promise to complete contract. Waltons knew LL was exposed to detriment on basis of false assumption. UC for Waltons to adopt a course of conduct (inaction) to encourage LL’s assumptions. Brennan restatement influential:

o 1. P assumed that particular legal relationship then existed or expected that it would exist and in the latter case, that D would not be free to withdraw.

o 2. D induced P to adopt that assumption or expectation.o 3. P acts/abstains from acting in reliance on the assumption/expectation.o 4. D knew or intended him to do so.o 5. P’s action/inaction will occasion detriment if the assumption/expectation is

not fulfilled.o 6. D has failed to act to avoid that detriment whether by fulfilling expectation or

otherwise. Examples Waltons- D will complete contract formalities. Equititrust v Franks- D would not insist on high interest rate, so no need for P to

refinance loan. Saleh- If enter sale contract P can end it if linked agreement to buy house next door

does not happen. Whittet v State Bank NSW- Bank will not enforce unlimited mortgage when said it

would limit to $100k. Verwayen- D cannot go back on promise that it would not rely on particular

defences. West v Kennedy- loan to daughter in law for house waived. Giumelli- Work on land and acquire rights. Clear and unambiguous promise- express, implied or by conduct Legione v Hateley- Purhcase price to be payable by set date. B speaks to S’s

secretary who had signed various letters. B requests time extension. Secretary thinks it will be alright, but has to get instructions. Held: no clear representation on which buyer could rely.

Waltons- Promise/assumption was that LL had accepted amendments and exchange would be a formality. Failure to warn if assumption incorrect.

Reliance by promisee Brennan J in Waltons- aspects of reliance- inducement, action, causal link,

detriment.


UQ Semester 1, 2014 What reliance is necessary? Acting on promise or assumption or detrimental reliance

or instead, inequitability of going back on promise/assumption? While is good, concentrate more on UC.

Unconscionability Equity attaches to overall fairness of transaction. Need to consider both parties’

actions. Particularly detriment to P induced by D’s promise. Failure to fulfill a promise of itself is not unconscionable (Mason/Wilson in Waltons).

Waltons- Knowing LL acting to detriment on basis of false assumption, encouraged course of conduct (Mason/Wilson, Brennan, Deane). Retaining lease and keeping quiet (Deane). Failing to tell LL exchange might not occur, allowing LL to think it had (Gaudron).

Portland Downs- Basis of UC is subjective state of mind, ie dishonesty- negligence not enough. Knowledge or encouragement of D’s agent, not D, might not always be enough- fact specific issue.

D&C Builders v Rees- He who comes to equity must come with clean hands. Suspension of Rights- is estoppel merely suspensory? High Trees- LL entitled to return to full rent on giving reasonable notice (Denning). Equititrust- Representation about loan date could be withdrawn on reasonable

notice. Equity may require D be held to promise- Verwayen- have to weigh up factors. EK Nominees v Woolworths- Initially revocable promise becomes irrevocable if

inequitable. Remedies- varies according to case, but flexible Prevent D insisting on strict rights - cannot forfeit lease (Hughes/Birmingham),

cannot increase rent (High Trees), cannot demand back rent (Je Maintinendrai), cannot claim particular interest rate (Equititrust), cannot resist application to enforce lease (Waltons)- specific performances, or damages in lieu.

Positive remedies - trust (hold property as trustee), license to remain in property backed by injunction not to interfere (Saad v Saad Properties), equitable compensation still possible if contract not certain enough for specific performance order (Giumelli/EK Nominees).

Riches v Hogben- Remedy- order to transfer title, but subject to mother living in granny flat.

What is needed to undo the detriment? Brennan in Waltons- may need to specifically fulfill all expectations, grant an injunction to restrict legal rights, give an equitable lien over property to cover expenditure. Only go so far as to prevent UC.

Giumelli- General promise- parents promised son part of property as compensation for working without wages. Second promise- son can build house on larger property, and house would be his. Third promise- promised son larger property would be subdivided to create promised lot which would include house and orchard if he stayed on property and did not work elsewhere. Son later divorced, left property. Brother moved in- improved it etc. Son sued seeking declaration that parents held larger


UQ Semester 1, 2014property on trust to convey the promised lot to him. But what remedy appropriate to disentangle family arrangements?

HC: Did FC go beyond minimum equity necessary? No order to transfer property, as further proceedings relating to family partnership, breakdown in family relations, residence on promised lot by other son, improvements made by other family members. Award some of money to represent value of equitable claim to promised lot + interest + charge (security) on the whole property, valuation flexible, + son’s lost profits for 12 years on lot and rent on house – other son’s improvements. Adjust for settlement of partnership action.

Remedies after Giumelli Equitable compensation- EK Nominees- followed Giumelli, awarded equitable

compensation. LL incurs expenditure at W request in expectation of W contract. LL taken to have accepted certain risks that W might not proceed, but not of W abandoning project for reasons unassociated with bona fide disagreement concerning terms. Conduct led LL to believe W wouldn’t abandon contract on some other reasons.

Minimum equity necessary- Delaforce v Simpson-Cook- Court will not grant relief exceeding what could be justified by the requirements of conscientious conduct, and unjust to the estopped party. Proportionality.

Expectation and Proportionality- Ronowska v Kus- fulfill P’s expectation, or quantify P detriment, or intermediate? P not always entitled to complete satisfaction of expectation.

Flexible equitable remedy Saad v Saad Properties- Must not exceed what would be justified by requirements

of conscionable conduct and would be unjust to the estopped party. Good conscience to enforce expectation, but it is necessary to consider what the reasonable expectation was. Promise was right of occupation, not a life interest or trust, or lease without rent. Irrevocable license terminable on death or ceasing to practice. Not an interest in land, best enforced by final injunction to stop interference with P’s occupation while a solicitor and P continuing to pay reasonable share of outgoings.


UQ Semester 1, 2014

Express Terms Condition (essential)- breach gives right to terminate and damages. Warranty

(inessential)- breach gives right to damages. Innominate/intermediate (inessential)- capable of a variety of breaches (differing in seriousness)- see Hong Kong Fir.

Express Terms: Signature L’Estrange v Graucob [KB]- even if unread, document binding in absence of fraud,

misrepresentation, duress. Toll v Alphapharm [HC]- Flu vaccine. “Please read terms overleaf before signing”.

Same as above. Signature and Incorporation Signature rule possibly applies (no decisive authority). Likely to have to show more-

eg intention that terms were to apply. Ange v First East Auction Holdings [VSCA]- Incorporates standard conditions.

Signed next to statement of incorporation. Copy of similar agreement that she had for 3 weeks. Must have intended them to apply. Prior dealings also relevant. Shows extra evidence helps to conform with ordinary principles (signature).

Misrepresentation- as to effect or extent of document Curtis v Chemical Cleaning [KB]- Sign receipt. “No liability for beads/sequins”.

Actually complete exclusion. Couldn’t rely. Hill v Wright- Signed delivery receipt. Later said it was contract. Not intending to

sign in a binding way. Doctrine of Non Est Factum [not my deed] Petellin v Cullen [HC]- 1. Disability. Available to those a) unable to read or b)

unable to understand through no fault of their own. 2. Signed radically different document. 3. Failure to read and understand was not due to carelessness/P took reasonable care.

Saunders v Anglia Building Soc [AC]- G signs transfer of house to L, thought transfer to N. Knew legal document intended to raise finance for N. Not different enough.

Ford v Perpetual Trustees [NSWCA]- Negligence/lack of reasonableness that of person in position of signer. Care is relative to particular P. No carelessness and manipulated by son.

Terms and Representations Was pre-contractual statement intended to be a term? Or was it merely

negotiation/opinion? Shepperd v Municipality of Ryde [HC]- Pamphlet describing planned

development around house. Term. Factors relevant to intention

o Statement intended to induce P to enter contract?o Reliance by P?o Can content be formulated precisely?


UQ Semester 1, 2014 Savage v Blakney [HC]- Speed of engine. Not enough that P intended to and did

rely on statement to enter. Mere statement of opinion not promise. Court wants strong evidence that statement intended to be binding.

Ross v Allis Chalmers [ALJR]- “My own experience”. Not intended to be promissory. Mere opinion.

Factors (none are decisive/conclusive)o Knowledge of parties- expert?o Time of statement- immediately before may be more persuasive?o Importance of statement- vital issue to parties?o Frequency of statement- was it repeated?o Content of statement- precision?o Reliance- indication of importance?o Relationship to written contract- intent to have entire agreement in

document? Or collateral? “Parol Evidence” Rule “No evidence may be adduced [bring evidence] to subtract from, add to, vary, or

contradict the language of the written instrument”- Codelfa at 347. Starting point: contract intended to be in one document? Or number of them? Or part

oral? Question of interpretation- presumption that document intended to be whole

document- McPherson J. Stoddart Tiles v Alcan [QSC]- May be possible to look outside document to find

intention. Nemeth v Bayswater Road [QFC]- Force of presumption will vary depending on eg

nature, form and content of written contract. Difficulty in determining circumstances to be considered in rebuttal. Contract was particular and comprehensive. Oral statements mere hopes, estimates or expectations. Either cannot a) rebut presumption or b) prove they were intended to be contractual.

Gordon v McGregor [HC]- Legal presumption that document is binding record of contract. Strict.

Thorne v Borthwick [SRNSW]- P (buyer) had oil sample tested. Standard form contract signed. Question of construction. Document was complete and clear; not a sale by sample- document was silent.

Equuscorp v Glengallan [HC]- Modern example where intention clear. Tried to claim oral contract, ignoring later signed agreement. Bound by written document. Objectivity important. Recognized exceptions: 1. Part oral-written contract 2. Collateral contracts 3. Misrepresentation, mistake 4. Rectification.

Contract Partly in Writing The Ardennes [KB]- Oral promise A B. Bill of lading A C B. Document not

contract but evidence of it. Time of issue important. Document issued after loading- must have been contract beforehand.


UQ Semester 1, 2014 County Securities v Challenger Group [NSWCA]- Complex sale of equity swaps.

Written agreement. Separate but linked oral hedge agreement. Extrinsic evidence allowed to identify what terms were intended to be- not the meaning. Overall oral-written contract to be inferred from conduct.

Skyrise Consultants v Metroland [NSWCA]- Easier to say oral-written if prior agreement consistent with later written agreement. If it contradicts- parol evidence rule applies.

Entire Contract Clauses Nemeth v Bayswater Road [QFC]- May be an indication that document meant to

be entire contract. More difficult to rebut parol evidence rule presumption. Skiwing v Trust Co [FCA]- Clause cannot exclude fraud, but combine with

questionnaire? Phrase not as exclusion, but as acknowledgement of what said. Added proof of no reliance on any statement.

Alstom v Yokogawa [SASC]- Parties want to replace/supersede previous agreement.

Legal status- decisive? Hope v RCA Robophone [HC]- Clause conclusive. No evidence of alleged term.

Agreement silent on matter. Nemeth v Bayswater Road- Not referred to as decisive by HC in Hope. MacDonald v Shinko [QCA]- Cannot prevent rectification in equity or

misrepresentation allegation. Better view- clause shows intention, but effectiveness subject to:

o Argument that parties did not intend whole document to be entire (eg part oral)

o Contract affected by misrepresentationo Cannot prevent rectificationo Does not necessarily stop operation of implied termo Clause might be considered attempt to exclude liability in consumer

contractso Contract later varied orallyo Contract subject to promissory estoppel in negotiations (Saleh v

Romanous- promissory estoppel trumps common law rights (including entire contract clause) in written agreement.

Exceptions to Parol Evidence Rule Implied terms (Codelfa) Custom (Hutton v Warren) Condition precedent (Pym v Campbell) Invalidity (eg misrepresentation or mistake) (Curtis, VSAN den Eschert v

Chappell) Rectification (equity will intervene where document is inaccurate recording of earlier

agreement) Collateral contracts


UQ Semester 1, 2014 Estoppel (Saleh v Romanous) Collateral contracts Van Den Eschert v Chappell [WAFC]- “No white ants in house”. (Was also

misrepresentation). Can establish collateral contract. Promise intended to be contractual- a) presence of ants important, b) made immediately before signing, c) specific request to be informed about matter.

Thorne v Borthwick- Retrial on issue. If you enter main agreement, we will guarantee same quality as sample.

Hoyt’s Spencer [HC]- Cannot use collateral contract that would contradict main. Parol evidence rule applied. 2 agreements in direct conflict. Supplementary to main, cannot impinge or alter. Criticised but followed.

Maralinga v Major Enterprises [HC]- If sign an agreement knowing it has inconsistent terms, cannot say agreement does not reflect common intent? Consider now misrepresentation, or estoppel?

Saleh v Romanous- “If Eddie doesn’t want to build you don’t have to buy and you’ll get your money back”. No collateral contract, as contrary to written document. Held pre-contractual promise could support a promissory estoppel. Estoppel trumps common law rights (parol evidence rule and entire contract) in written document.

Incorporation of Terms by Notice Basic principle- not whether P with reasonable care should have read terms, but

whether D has taken reasonable steps to notify P of terms (and where) [question of fact].

Parker v South East Railway- Knowledge of printing on cloakroom ticket (see back). Knowledge that it contained/referred to terms, but not read. Reasonable steps. Incorporated (even if not read).

Balmain New Ferry Co v Robertson- Charges on noticeboard near turnstiles. Difficult to avoid seeing it if gave reasonable attention. Reasonable notice had been given.

Factors - none are conclusive 1. Nature of referring document Chapelton v Barry Council [KB]- Deck chair receipt. Not contract to any

reasonable person. Not incorporated. Causer v Browne- Dry cleaning docket (not signed). Transport Workers Union v K&S Freighters [FCA]- Company employment

handbook. ‘Aspirational, descriptive, advisory, informational, promissory’ useful in assessing contractual nature.

2. Access to incorporated document Smith v South Wales Switchgear [HL]- Available on request. Reference to general

conditions clearly showed that intended to be incorporated and other never objected. Ange- Documents never attached. Were they objectively intended to be

incorporated? P previously been supplied? P knew they existed? P request them? Presumably some limits for reasonable notice- Oceanic Sun Line v Fay [HC]- Fays

booked Greek cruise with NSW agency. No office in Australia. LAWS2111 Contract Law 21 Summary Notes

UQ Semester 1, 2014 Baltic Shipping v Dillon [NSWCA]- NZ cruise for Australian. Terms available at any

office. Kirby- not enough. Notices on Web Ebay v Creative Festival [FCA]- Contract made at web confirmation. Reference to

promoter’s terms on ticket? Not enough [access] to send the term on ticket 6 weeks later where no suggestion of restriction. Did not draw attention unusual or significant terms affecting proposed relationship.

3. Identification of applicable terms Smith v South Wales Switchgear- Use current version of terms. Would need

access-type evidence maybe? 4. Time of incorporation Principle- must incorporate terms before acceptance? Olly v Marlborough Court Hotel- Notice on back of bedroom door. Too late,

contract already made. Ebay v Creative Festival- Old terms on website when booking made applied- not

later ones on ticket. Butler v Ex-cello- Battle of the forms. Thornton v Shoe Lane- Automatic ticket machines. Acceptance by putting money in

slot. Denning- Driving past notice and triggering machine. Was acceptance made before ticket issue?

Oceanic Sun Line v Fay- Paid and received exchange order. Referred to some cancellation terms on ticket. Terms on ticket (Greek jurisdiction) did not form part of contract. Deposit payment/receiving exchange order- contract formed. Notice of terms? Brochure was not contractual. Advertising material, available to anyone. Brennan- unusual clause.

5. Nature of clause- is it unusual? The more unusual the clause the greater notice must be given. Lord Denning- red

hand test. Thornton v Shoe Lane Parking- Automatic ticket at entrance barrier. Injured while

inside. 1. Large notice at entry (own risk)- P might be aware, but probably not covering injury (interpretation). 2. Ticket- “subject to conditions displayed on premises”- in practice impossible to read in queue. 3. Further notice inside building- injury term would require more (reasonable) notice. General words of incorporation effective for car damage, not injury- would need reference to specific term. Conclusion: not enough to give general notice of terms. No reasonable notice was given of exclusion clause.

Interfoto v Stiletto [QB]- Principles apply to any onerous clause, not just exemptions of liability.

Maxitherm Boilers v Pacific Dunlop [VR]- If unusual or onerous terms and P had not read them, special steps were required to bring them to attention.

Ange- 750k fee not unusual on facts. Had been referred to in discussions. Baltic Shipping v Dillon [NSCA]- P saw travel brochure, paid deposit through agent

and received booking acknowledgement. 10 days later- received booking form. “This LAWS2111 Contract Law 22 Summary Notes

UQ Semester 1, 2014is not a travel document”. Box- “contract for carriage made when ticket issues on ticket’s terms. Available at office.” P later paid fare. Received ticket 2 weeks before, contained exclusion clause. Ship sinks. Owner claims entitled to limit liability. CA held: terms had not formed part of contract. Even assuming contract of carriage made when ticket received by P. Unusual limitation terms not drawn to her notice or, she was not given opportunity to decline contract upon those terms. Kirby unimpressed- had difficulty getting hold of ticket.

Implied Terms- Courts Function of court ultimately to give effect to intention of the parties. Codelfa- Compare rectification and implying terms. Not enough that reasonable to

imply term, must be necessary to give business effect to contract. Implication gives effect to presumed intention of parties.

Custom Hutton v Warren- Farm tenant had planted crops; lease ended. Implied term of

reasonable allowance. Was custom for all such leases in area. Not enough that usually- idea is that you don’t have to say it.

Con-Stan Industries v Norwich Winterthur [HC]- C alleges custom or usage [or necessary for business efficacy] that broker to pay premium, or payment to broker discharges insured’s obligation. Held no custom, not enough that ordinarily paid by broker, or that insurer makes first demand from broker. Evidence that some insurers did claim from insured and that not uncommon in industry to look beyond broker. Principles:

o 1) Existence of custom/usage that will justify implication is question of fact.o 2) Must be evidence that the matters relied on so well known and acquiesced in

that everyone making a contract in the situations can reasonably be presumed to have imported term embodying them.

o 3) A person may be bound by custom notwithstanding they have no knowledge.o 4) But a term will not be implied on basis of custom if contrary to express

terms. Course of dealing/Incorporation by practice Need to show a) Consistent course of dealing and b) On the same terms and subject

matter. Must have intended to contract on those terms.


UQ Semester 1, 2014 McCutcheon v MacBrayne- Ferry sank with P’s car. Risk note not always signed on

previous occasions, sometimes not even there. No consistent course of dealings to incorporate terms.

Hill v Wright- Repeatedly signed delivery docket, but non-contractual. Would need knowledge of terms.

Eggleston v Marley [SASR]- D agreed I did know there were terms. But bound by Hill v Wright. HC?

Parol evidence rule- won’t apply here because typically the later contract is an oral one, and the past ones are written. In the alternative, apply the same logic of Mason J in Codelfa regarding implied terms as elsewhere.

Implied in Fact The Moorcock- P shipowner. D wharf owner. Vessel damaged at bottom. Implied

term as to safety? D probably wouldn’t have agreed to such a term. Held implied term that D to take reasonable care to see whether berth is safe, and if not to warn users. No guarantee. Imply term only if necessary to give business efficacy. Have to do minimum necessary.

Officious Bystander Test Shirlaw v Southern Foundries [KB]- If asked by an officious bystander, would

parties have stated that they intended? Was term so obvious it goes without saying? Moral duty not enough- answer would have to be we have already agreed.

AG of Belize v Belize Telecom [UKPC]- Difficulty of expressing term? Does not matter if parties had to ask officious bystander to explain again. Way of finding presumed intent.

BP v Shire of Hastings [PC]- 5 tests approved in Codelfa. Factors necessary to imply a term. Term must:

o 1) Be reasonable and equitable (can term be expressed in way that conforms with presumed intent?) [use BP]

o 2) Be necessary to give business efficacy to contract [use Moorcock and Con-Stan, but also Cth v Ling]

o 3) Be so obvious it goes without saying [officious bystander test, and also Mason in Codelfa used this because it was a standard form contract intended C to take risk?]

o 4) Be capable of clear expression [Shell v Lostock]o 5) Not contradict any express term [Brennan in Codelfa]

AG of Belize- BP test is not 5 separate tests. Collection of ways in which judges have tried to say what contract means. Method of finding intent.

Presumed intent of parties BP v Shire of Hastings- Build a refinery, you get reduced rates. Corporate

restructuring, BP to BP(Aust). Council started charging full rates. So BP(Aust) leased back to BP. Implied term that agreement only lasted while BP occupied and maintained- had to be full legal owner? Held, difficult to say BP would have assented to such an unexpressed term that would operate unreasonably and inequitably


UQ Semester 1, 2014against itself. Bound to have corporate restructuring in 40 years. BP would have rejected officious bystander test.

Codelfa v State Rail NSW- Major rail construction. Both parties assumed 24/6. Residents obtained injunction restricting hours. Contractor claimed extra costs [time]. Implied term that Authority would indemnify C if C injuncted? Held common contemplation not enough. Particular term not obvious. Not an obvious provision overlooked. Negotiations might have produced many solutions. Contract form was Authority’s, not negotiated, may well have intended C to take all risks not expressly provided for. Not necessary to imply, not obvious.

Con-Stan v Industries v Norwich Winterthur- Tried to argue even that if not custom, necessary for business efficacy. No. Capable of sensible operation.

Implied in Law Reluctant to say looking for presumed intent; rather as a matter of law. Liverpool City Council v Irwin [AC]- Piggeries. Defective. No obligations on Council

landlord. Necessary for some obligation. Implied term to take reasonable care to keep in reasonable repair and usability. Not absolute guarantee (see Moorcock). Bedrock- still necessary.

Byrne v Australian Airlines [HC]- Contract lacked the same formality that was present in BP. Imply where necessary for reasonable or effective operation of a contract of that nature in the circumstances of the case. Broader business efficacy test? Concept recognized in Australia.

Lennon v State of SA [SASC]- Employment contract. Term of mutual trust and confidence implied in law. If not, implied in fact in the circumstances (was necessary).

Scally v Southern Health [All ER]- “Necessary incident of a definable category of contractual relationship”. Authority had employment standard contracts. Rules about pension, unknown to doctors. Rights exercisable only within particular period. Nowadays for implied term that authority take reasonable steps to draw the right to the attention of the employees. Because necessary incident of a definable category of contractual relationship. Necessary to make it work.

Can be expressly contracted out of. Universal Terms and Good Faith Eg implied duty to cooperate and perform in good faith, or a broader question of

interpretation? Traditional view- implied duty to cooperate still subject to usual rules of implication (eg necessary to imply a term). Contract may well throw risks on one party (like Codelfa).

Interpretation Mackay v Dick [AC]- Lord Blackburn: If both parties agree that something should be

done and cannot effectively be done unless both concur, construction of the contract is that each agrees to do all necessary for the carrying out of that thing, even though no express words.

Implied term to cooperate in performance Peters v Petersville [HC]- Duty to co-operate in performance is implied in all

contracts. Mason drew distinction between:LAWS2111 Contract Law 25 Summary Notes

UQ Semester 1, 2014o a) acts necessary to perform obligations fundamental to contract [covered by

duty]o b) acts that will entitle other to benefit under contract, but not essential to

performance or fundamental to contract itself [not covered by duty] Secured Income v St Martins [HC]- Party can agree by implication to do all such

things as are necessary on his part to enable the other party to have the benefit of the contract. Can be contracted out of.

Hancock v Wright [WASCA]- Implied term that each party would do all that is possible to transfer property to other after split decided.

Famestock v Body Corporate for No 9 Port Douglas [QCA]- P forgot to renew real estate license for D. Required cooperation from D. Large breach- not required to cooperate. But Court prepared to imply a term that there should be cooperation where necessary.

ACT Cross Country v Cundy [FCA]- Club ran ACT marathon. Deal, fall out, then compromise. Cundy given right to organize marathon subject to Minister approval. Minister not giving permission unless Club agrees. Court held breach following Mackay and Secured Income.

Good faith and performance Renard Constructions v Minister for Public Works [NSWLR]- Duty of good faith

and fair dealing [Priestly] or interpret powers to be exercised reasonably [other judges].

Service Station Association v Berg Bennett [FCR]- Leap of faith? Converting existing equitable doctrines into new term of the quality of contractual performance required by law.

Hughes Aircraft Systems- Duty to deal fairly in performance of contracts (tender process). Implied in fact and law.

Burger King v Hungry Jacks [NSWCA]- BK failing to approve new HJ franchises- wanted to deal with someone else. Exercise powers in good faith and reasonably.

Bytan v BB Australia [VSCA]- Contrast this case. Court has held that a duty of good faith is not indiscriminately implied into all commercial contracts. An obligation not to exercise a contractual power for purposes extraneous to the contract is a major component of good faith. Uncontroversial that this is an incident of the duty of god faith where the duty exists (see BK). Must be necessary to imply though.

Status of good faith in performance Royal Botanic Gardens v South Sydney City Council [ALR]- Open issue left by

HC. Quite clear that could not imply good faith term if contradicts express term. General fairness doctrines? Uncertain- difficult to advise. Alternatives available- ACL,

ss 20-22 (unconscionable conduct in performance). Part 2-3 unfair terms. Implied Terms and Evidence Codelfa- Mason- implication of term illustration of construction of document.

Exception to parol evidence rule- can admit evidence of surrounding circumstances to assist interpretation only if language ambiguous or susceptible of multiple meanings. Cannot contradict where plain meaning. Evidence of prior negotiations (see


UQ Semester 1, 2014interpretation later). Raises question- at which stage can you say that the language of the contract is so unambiguous that it leaves no room for the implication of terms even if you could bring evidence of what the parties assumed before the contract was made. HC authority that can only introduce evidence of surrounding circumstances to assist where language is ambiguous. Perhaps this is dated, and courts are in fact operating much more flexibly at lower level.

Implied Terms- Statute Sale of Goods Act 1896 Applies generally to sale of goods, not services (or hire). Business-Business and

Business-Consumer. Section 15 [TPA s 69]- Title

o Implied condition that S has right to sell goods.o Implied warranty that B will have quiet possession of goods.o Implied warranty that goods free of any charge to a 3rd party.

Nibblet v Confectioner’s Material [KB]- Also includes IP rights. Implied using Moorcock type test. Section 16 [TPA s 70]- Sale by Description

o In contract for sale of goods by description, there is an implied condition that the goods shall correspond with the description.

Grant v Australian Knitting Mills [AC]- Could be general description. Ashington Piggeries v Hill [AC]- “Norwegian herring meal”. Description goes to

identity not quality. Section 17 [TPA s 71]- Quality or Fitness for Purpose

o Default position is caveat emptor- buyer beware. No implied term unless:o a) Particular purpose stated- must be fit for that purposeo c) If simply bought by description from dealer- must be of “merchantable

quality” Strict liability- not based on negligence. Grant- Held no answer that seller not

personally at fault (ie was manufacturer’s fault). Or that contaminants could have been washed out. 17(d) not applicable.

Section 17(a)- reliance on seller’s skill and judgment- usually by implication Section 17(d)- if buyer has examined goods, no implied term for defects which ought

to have been revealed Section 17(c)- General quality- business sales

o If bought by description, from seller who deals in goods of that description, implied condition that goods shall be of a “merchantable” quality. Grant- Clothing not merchantable- can’t wear.

Remedies LAWS2111 Contract Law 27 Summary Notes

UQ Semester 1, 2014 SOGA- breach of conditions, gives right to reject goods (s 14)- unless acceptance of

them (s 37). Breach of warranties, gives right to damages only (ss 3(1), 54). SOGA s 56- parties free to exclude implied terms.

Australian Consumer Law Statutory “Consumer Guarantees”- Part 3-2, Div 1. Replaces implied terms concept.

Now stand-alone statutory remedy. Clearer definitions- eg “acceptability” rather than “merchantability”. Remedies defined by Act, not defined by contract law. New Part 5-4 remedies. Condition and warranty distinction goes. Major failures, minor failures. SOGA terms still stand. Consequences spelled out. Provisions dealing with exclusion and limitation (ss 64, 64A).

Statutory Guarantees- Goods. Part 3-2, Division 1 Supply of Goods to Consumers [inc sale and hire] Section 51- Guarantee as to title Section 52- Guarantee as to undisturbed position Section 53- Guarantee as to undisclosed securities etc Section 54- Guarantee as to acceptable quality Section 55- Guarantee as to fitness for any disclosed purpose etc Section 56- Guarantee relating to the supply of goods by description Section 57- Guarantees relating to the supply of goods by sample or demonstration

model Section 58- Guarantee as to repairs and spare parts Section 59- Guarantee as to express warranties Supply of Services to Consumers Section 60- Guarantee as to due care and skill Section 61- Guarantees as to fitness for a particular purpose etc Section 62- Guarantee as to reasonable time for supply Section 63- Services to which Subdivision does not apply Defendants (suppliers) covered Conduct of corporations (CCA Part XI s 131) Persons protected “Consumers”, but not simply individuals [wider than TPA]. ACL s 3(1)- “consumer” if:

o a) Price of goods/services did not exceed prescribed amount [$40,000] oro b) If higher price, goods were of a kind ordinarily acquired for personal domestic

use or consumption oro c) Vehicle/trailer acquired for use on public roadso and s 3(2)- P did not acquire for re-supply, or using up/transforming them

In trade or commerce Production Manufacture Repairing other goods (or fixtures on land)

Section 54- Guarantee as to acceptable quality [auctions excluded] s 54(2) Goods are of acceptable quality if they are as:


UQ Semester 1, 2014o a) fit for all the purposes for which goods of that kind are common supplied ando b) acceptable in appearance and finish ando c) free from defects ando d) safe ando e) durableo as a reasonable consumer fully acquainted with the state and condition of the

goods (including any hidden defects of the goods), would regard as acceptable having regard to the matters in (3).

s 54(3) The matters for the purposes of subsection (2) are:o a) the nature of the goods ando b) the price of the goods (if relevant) ando c) any statements made about the goods on any packaging or label on the

goods ando d) any representation made about the goods by the supplier or manufacturer of

the goods and o e) any other relevant circumstances relating to the supply of goods

Section 58- Guarantee as to Repairs and Spare Parts o Guarantee that the manufacturer of the goods will take reasonable action to

ensure that facilities for the repair of the goods, and parts for the goods, are reasonably available for a reasonable period after the goods are supplied.

o Unless the manufacturer took reasonable action to ensure that the consumer would be given written notice, at or before the time when the consumer agrees to the supply of the goods

Section 59- Guarantee as to express warranties Guarantee that Manufacturer and Supplier will comply with any express warranty they

give. This is a guarantee and not an implied term, and as such it does not matter that there

is no contract with the manufacturer. Section 60- Guarantee as to due care and skill Services will be rendered with due care and skill ACL s 2 definitions:

o Includes performance of work (eg cleaning, security), provision of facilities (eg parking), entertainment (eg holidays).

o s 63- excludes transportation or storage of goods for businesses Section 61- Guarantee as to fitness for a particular purpose If consumer makes known to the supplier any particular purpose for which the

services are being acquired by the consumer there is a guarantee that the services, and any product resulting from the services, will be reasonably fit for that purpose.

If consumer makes known the result that the consumer wishes the services to achieve there is a guarantee that the services, and any product resulting from the services, will be of such a nature, and quality, state or condition, that they might reasonably be expected to achieve that result.


UQ Semester 1, 2014 Unless consumer did not rely on, or that it was unreasonable for the consumer to rely

on, the skill or judgment of the supplier. Statutory Remedies: Chapter 5-4 Remedies Section 259 sets out remedies relating to guarantees. Later sections (260-270) have

more detail. Non-major failures

o Can ask supplier to remedy failure in a reasonable time, otherwise: Consumer may have failure remedied himself and recover costs or Notify supplier of rejection of goods

Major failureso Consumer can reject, or recover compensation for reduction in value.o Definition s 260- if goods

Would not have been acquired by a reasonable consumer fully acquainted with the nature and extent of the failure or

Depart from description or Substantially unfit for a purpose for which goods of the same kind are

commonly supplied and they cannot, easily and within a reasonable time, be remedied to make them fit for such a purpose or

Goods are unfit for a disclosed purposeo Consequences spelled out

How suppliers may remedy failure to comply with guarantee (s 261) When consumers are not entitled to reject goods (s 262) Consequences of rejecting goods (s 263) When services may be terminated (s 265) Gifts- recipient has right to sue (s 266)

Interpreting Contracts Hillas v Arcos- Court will attempt, as far as possible, to give effect to the bargain. No power to remake/amend contract in order to avoid a result that might be

considered unjust or inconvenient- ABC. Codelfa- Starting point: words construed according to their plain or ordinary or

natural meaning. Pacific Carriers v BNP Paribas [HC] and Toll v Alphapharm [HC]- What a

reasonable person would have understood them to mean, considering text and the surrounding circumstances known to the parties [but if notorious may presume knowledge- Codelfa per Mason], and the purpose and object of the transaction.

Some general rules traditionally applied:o Natural (plain) and ordinary (literal) meaningo Read contract as a whole- in context


UQ Semester 1, 2014o Resolve ambiguity if possibleo Do not isolate agreements from matrix of facts

Finding intention Pacific Carriers v BNP Paribas [HC]- Not subjective beliefs/understandings, but

what each party by words and conduct would have led a reasonable person in the position of the other party to believe. Common intention is what a reasonable person would understand by the language of their agreement.

Codelfa- Mason- What evidence can be used in finding objective intention? Evidence of negotiations? Post-contractual conduct? Normally excluded by parol evidence rule.

Use of extrinsic evidence to interpret Prenn v Symmonds [All ER]- P buys shares in company and parent. S worked for

company and P wantsto secure services- golden handcuffs offered. Share option but only when big profits. “Aggregate profits”. S wanted to refer to negotiations. Held: in principle cannot refer to negotiations. Not technical/convenience- simply unhelpful. Only final document records consensus. Court accepted meaning that corresponded with commercial good sense. Can look at genesis and objective aim in general sense to understand. Liberal?

Reardon Smith v Hansen Tangen [HL but approved in Codelfa]- Future hire of tanker being built at Yard 354 Osaka. Built somewhere else, refused to hire. Held: parties cannot given evidence of intention. But can establish intention objectively, and can establish objective background facts. Court must put itself in same factual matrix as parties. Contract was simply to build a tanker to the description. Yard 354 meaningless.

Codelfa- Mason: consider the commercial background. But to admit evidence the issue/expression must be ambiguous. Can’t allow evidence that directly contradicts. Perhaps being overcautious? Logic- consider matrix

Royal Botanic Gardens v South Sydney [HC]- Follows Mason, but finds ambiguity. Not necessary to decide whether Australian law has the broader view endorsed by Lord Hoffman in Investor’s Compensation Scheme.

Pacific Carriers- Wider view? [See Lord Hoffman in Investor’s Compensation Scheme] Cited in Toll. Requires consideration not only of the text of the documents but also the surrounding circumstances known to the parties, and the purpose and object of the transaction.

Franklins- Not necessary to find an ambiguity in words before court can look at surrounding circumstances. But has to be relevant to a fact in issue and probative- trying to distinguish Codelfa.

HC probably follow Codelfa.o Byrnes v Kendle [HC]- Hayne & Gummow- objective theory.o Western Export v Jireh [ALR]- Gummow, Heydon, Bell- Codelfa is binding.o Great Australian Operations v Copperchem [FCA]- find ambiguity!o Portland Downs v Great Northern [QCA]

Evidence of subsequent conduct


UQ Semester 1, 2014 Codelfa- Cannot take account of later conduct. Follows Schuler v Wickman [AC]-

same as prior negotiations and intent; conduct might indicate what parties meant to say. Also practical difficulties- slippery slope?

Franklins- cannot be used to prove what parties meant by particular terms. County Securities- possible to identify terms but not interpret them. Dawnlite v Riverwalk [QSC]- Confirms in Qld conduct as basis for inferring what

was agreed, as opposed to interpretation. Can show 1. Whether they intended to form a binding agreement. 2. What they agreed. 3. Whether the agreement was subsequently varied.

New approaches to interpretation Investors’ Compensation Scheme v West Bromwich Building Society [HL]-

Lord Hoffman summarizes developments:o 1. Ascertain meaning to reasonable person with background knowledge of

parties at timeo 2. Background is factual matrix- anything affecting understanding of reasonable

person, as long as reasonably available to both parties.o 3. Law excludes previous negotiations and subjective intent (except for

rectification)o 4. Meaning of words- dictionaries, meaning of document- what parties

reasonably understood them to mean against relevant background.o 5. Natural/ordinary meaning is commonsense view that people do not make

linguistic mistakes (especially in formal documents). But background may indicate wrong language was used.

Something wrong with language Use natural (plain) and ordinary (literal) meaning unless absurd. Literal vs purposive

(commercial)? The Antaios [AC]- Owner can withdraw “on any breach”. Literally- includes trivial

breach. Use a meaning to make good commercial sense- breach meant repudiatory (serious) breach- parties cannot objectively have intended to mean trivial breach. Diplock: Reject “detailed semantic and syntactical analysis of words in commercial contract if it leads to result which flouts business common sense”.

ABC v Australian Performing Rights Association [HC]- Court can’t attribute intention words do not provide. But (Gibbs) if language open to 2 constructions, choose the one that avoids the result which is most capricious, unreasonable, inconvenient or unjust, even if not the most obvious or most grammatically accurate.

The Karen Oltman [UK]- Telexes supported one view. Elderslie Property v Dunn [QCA]- Summary of position in Queensland.

o The Starsin [AC]- object of contractual discussion is to ascertain and give effect to parties’ intention.

o Toll- Those intentions (determined objectively) are what a reasonable person would have understood the words to mean. Normally requires consideration of


UQ Semester 1, 2014text and surrounding circumstances known to parties, and purpose and object of transaction.

o Investors Compensation Scheme- Reasonable person has all background knowledge reasonably available to parties at time of contract.

o McCann v Switzerland Insurance [HC]- Commercial contracts shall be given a businesslike interpretation. Requires attention to the commercial circumstances which the document addresses and the objects it is intended to secure. Commercial contracts are to be construed with a view to making commercial sense of them.

o Wickman v Schuler- Construction leading to unreasonable result must be relevant consideration. The more unreasonable, the more unlikely it is that the parties can have intended it, and if they do intend it the more necessary they make it clear.

o The Antaios- If detailed semantic/syntactical analysis of words in commercial contract leads to conclusion that flouts business common sense, it must yield to business common sense.

o Fitzgerald v Masters- Read inconsistent as meaning opposite. Words may generally be supplied, omitted or corrected, where it is clearly necessary in order to avoid absurdity/inconsistency.

Correction of mistakes By Rectification Franklins- Order should do no more than rewrite contract minimally to express

common intent. Elderslie- May be unnecessary to rectify if achieve same result by construction. By Construction Chartbrook v Persimmon [HL]- Lord Hoffmann: Something wrong with language;

ordinary interpretation makes no commercial sense. Correction by construction (not new- Dixon in Fitzgerald). Part of interpretation of agreement in context (factual matrix) to get as close as possible to meaning parties intended. Need clear mistake on face. Must be clear what correction ought to be made to cure mistake. Contrary to ABC?

Specific Rules of Interpretation (just examples of approaches) Expressio unius exclusion alterus- Hare v Horton- factory fixtures. Ejuisdem generis- Tillman v Knutsford- “any other cause”. Give interpretation to make contract valid, not void for uncertainty- Fitzgerald-

certainly while performing. Where conflict between pre-printed clause and typed/handwritten addition, generally

give effect to addition (The Starsin). Good drafting will include “conflicts” clause. Glyn v Margetson [AC]- Interpret contract to avoid defeating main purpose and

intent. Cannot normally rely on own breach to gain benefit- example of common sense approach.

Standard Form Contracts


UQ Semester 1, 2014 Commercial contracts- function of court to provide legal certainty at negotiating

stage. May impact on price. Contracts of adhesion- freedom of contract, reluctance to void clauses if unreasonable

(no such CL doctrine) Types of clause Primary obligations- price, services, goods, time etc Secondary obligations- consequences, such as damages etc Types of consequences clauses Exemption/exception/exclusion clauses- D not liable for consequences of breach. Indemnity clauses- P to pay sums (eg repairs to hire car). Hold harmless clause- combination of both. Limitation of liability clause- eg max liability $1000. Time limit clauses- eg accepts liability, but only if claim brought within 7 days. Liquidated damages clauses- genuine pre-estimates of loss, $100 per day payable Penalty clauses- attempt to force performance by penalizing not compensating. Darlington v Delco [HC]- Interpret exclusion clause according to natural and

ordinary meaning, read in the light of the contract as a whole, thereby giving due weight to the context in which the clause appears including nature and object of contract, and where appropriate, construing contra preferentem if ambiguity. Principles are of sufficient generality to accommodate different considerations that may arise in interpretation of variety of exclusion and limitation clauses, where no question of reasonableness/fairness arises. Approach appropriate for commercial contracts.

Delco (client) and Broker- tax avoidance scheme. Broker authorized for day trading on commodity futures market. Broker undertook longer transactions (without Delco’s specific authorization). Delco now liable to third party. Clear breach of obligation to undertake authorized trades. Exemption clause- “Agent not responsible for any loss should the Client follow any of Agent’s recommendations/suggestions. Also not responsible for any loss arising in any way out of any trading activity undertaken on behalf of Client whether pursuant to agreement or not”. Read in context, can only mean authorized trading activity. Clause did not cover dealing. Another clause: “Any liability in respect of any claim arising out of or in connection with the relationship established by this agreement or any conduct under it limited to $100.”

Ailsa Craig v Malvern [HL]- suggested less strict approach for limitation clauses but not logically possible?

Darlington- Treats exclusions and limitations same way. Application of clause if conduct was outside agreement? Was effective. Claim in respect of unauthorized transaction may have substantial connection.

Ordinary Natural Meaning? Selected Seeds v QBEMM [HC]- Clause covered physical damage to property

including resulting loss of use. Policy exclusion for failure of any product to correctly fulfill its intended use or function. Seed was a weed. McMurdo- exclusion did not apply. CA- broad construction of unambiguous clause; applies. HC- liability not caused


UQ Semester 1, 2014by failure of seeds, but direct effect on land. Intended use/function was about promised yield and therefore clause did not apply.

Denning Doctrine of Fundamental Breach Rule of law (if fundamental breach, D cannot rely on exclusion) vs rule of construction

(whether clause covers breach is a question of interpretation) Karsales v Wallis [WLR]- Court device by Denning. No matter how wide the clause,

only applies when carrying out the contract, not when guilty of breach going to root. Photo Production v Securicor [AC]- Idea rejected. Already rejected by HC in: TNT v May & Baker- Construe language that the parties used, read in context and

with any necessary implications based on their presumed intention. As a matter of interpretation general words of exemption would not apply to alien performance. More serious the breach the less likely it is that general words are intended to exclude it. But technically possible if clear drafting?

Exemptions and negligence Don’t need fault to be liable. After Darlington, still any pre-existing rules about

interpreting exemption clauses? More like application of those principles. (1) Main purpose rule - interpret to try and give effect to main purpose (2) Contra proferentem rule TNT- Construe ambiguities against proferens (person seeking to rely on clause) Wallis v Pratt [AC]- S gives no warranty, express or implied. But haven’t excluded

breach of condition- implied term that goods be of merchantable quality. Beck v Szymanowski- “goods delivered shall be deemed in accordance with

contract unless complaint in 14 days of arrival.” Did not apply to goods lost and never delivered. “No undertaking is given.” Not applied to previous undertakings. If trying to exempt liability- have to do it clearly.

(3) Reading down exemption clause Van der Sterren v Cibernetics [ALJR]- “No D liability unless notify claim within 14

days delivery”. Terms of exception clauses must sometimes be read down if they cannot be applied literally without creating an absurdity or defeating the main object of the contract. Such modification by implication of the language used is not to be made unless necessary to give effect to what parties bust be understood to have intended. Here clause unambiguous, part of bargain. If makes business sense- easier to say not defeating main purpose.

(4) Excluding liability for negligence Canada Steamship Lines v The King [AC]- Three rules governing such clauses:

o (1) Express reference to exclusion of liability for negligence is sufficient.o (2) Where no express reference, clause can exclude negligence liability if words

clear enough to apply to circumstances and any doubt resolved using contra proferentem rule. Commissioner of Railways v Quinn [HC]- “howsoever caused” wide enough. But, “all liability” or “any loss” on its own not sufficient.

o (3) If words are wide enough to cover negligence liability, but there is some other basis of liability to which the clause can apply, the clause should generally be applied to that other basis. Such in Canada Steamship.


UQ Semester 1, 2014 Following Darlington, Australian courts must interpret exemption clauses in context

and according to natural and ordinary meaning, without strained interpretations or abstract rules. While authority that Darlington not inconsistent with Canada Steamship rules, weight of authority contrary- Schenker, Glebe, Glenmont, Brambles.

Rules (1) and (2) reflect interpretation according to natural and ordinary meaning- conform with Darlington.

Rule (3) represents an artificial rule of interpretation- contrary to Darlington. When given opportunity HC has never endorsed rule- Baulderstone Holdings. Do not apply rule (3) in Australia.

(5) Four corners rule and exemption clauses Protection of clause exists only while B is performing contract- within four corners of

contract. TNT- Carry M’s goods from Melbourne. Carry by “any method”. “No responsibility for

loss…for any reason whatsoever”. Depot closed, took truck home. Fire. Implied term to take reasonable care. Breached by keeping house, was not “method”. Carrier had “so far departed from contract” as to preclude reliance on exempting clause.

Sydney Council v West [HC]- Parking attendant gave duplicate to rogue. No acceptance of any responsibility “howsoever it may arise or be caused”. Barwick/Taylor- action of attendant was an unauthorized delivery of the vehicle and not a mere act of negligence authorized by the contract of bailment. Windeyer- had released vehicle from custody without presentation of appropriate ticket. Doing something entirely outside of what was contemplated. The more serious the breach, the more you need express language referring to it.

Exemptions for serious breach? Nisho Iwai v Malaysian International Shipping [HC]- Container stolen after

discharge and after placed in stack by stevedores. No liability for any cause carrier could not prevent by reasonable diligence, after delivery or when goods made available to merchant. Following Darlington, could apply to non-delivery as a matter of interpretation. Carrier meant company itself, only senior management. But mere discharge was not delivery, clause did not cover.

The Antwerpen [NSWCA]- Container thieves allowed in by terminal. No restriction of liability in general terms would cover deliberate breach. Clear wording covered exclusion of any fundamental breach.

Summary (1) Has there been breach? (2) Is there a possible exemption/limitation clause? (3) Was that term incorporated? (4) Interpretation- does the clause cover breach? (5) Application of statutory protection.Statutory Control of Unfair Terms


UQ Semester 1, 2014 Courts had devices to attack incorporation, interpretation etc, but no general power

over unfair terms or conduct. Could not easily develop such a doctrine- many political policy decisions.

TPA- unconscionable conduct. Also unfair practices. But did not deal with term being unfair.

SOGA- filling in- can exclude implied terms (s 56). Not so under TPA (ss 68, 68A) or ACL (ss 64, 64A).

A few specific examples of unfair terms legislation in Australia. Legislative developments in Europe. States try different legislation. Productivity Commission Review we need consistent generic consumer laws ACL

Also recommended unfair terms sections. Parallel development with consumer credit issues (enforced by ASIC)

Control of exclusion of guarantees (in Part 3-2, Division 1) ACL s 64(2)- common law interpretation issue comes first- does clause try eg to

exclude guarantee? ACL s 64(1)- Makes void any term of a contract (including incorporated terms) that

purports to exclude, restrict or modify (or has this effect):o a) application of provisions of Part 3-2 Division 1 (consumer guarantees)o b) exercise of right given by Act (eg remedy)o c) any liability for failure to comply with a statutory guarantee

Clauses struck out: excludes- eg no liability for description, restricts- eg guarantee only available for 7 days, modifies- eg fitness for purpose only if consumer specifies in writing.

Control of limitation of guarantees Should businesses be allowed any restrictions? Potentially great financial loss possible

for small price. ACL s 64A- allows some clauses limiting liability (in business-business contracts) ACL s 64A(1)- Goods: can limit liability to repair/replacement (or equivalent goods), or

money equivalent of either, but nothing greater. Provided not a) guarantee covered by ss 51-53 (title) OR b) for personal,

domestic/household use. ACL s 64A(2)- Services: can limit to repeating the service (or money equivalent). Provided not for personal, domestic/household use. Control of limitation of guarantees How to balance freedom of contract- price issues- and imbalances of power? Safety

net? Residual court power over these limits- certainty v discretion. ACL s 64A(3)- Limits not allowed if buyer proves not fair or reasonable for supplier to

rely on limit. “Fair or reasonable”- s 64A(4)- Take account of all circumstances of case, in

particular:o Strength of bargaining position, inducements, alternatives, goods specially

made/adapted.


UQ Semester 1, 2014 But only relates to the listed guarantees. Need unfair terms provisions to cover other

terms. Unfair contract terms Aims: Consumer inability to negotiate [process] Which contracts: all standard form contracts Level of protection: indicative list and retain court discretion Which terms: exclude certain main terms, eg price Who is protected: Individuals only Method of enforcement: Consumer [Court], or ACCC action only where detriment [ex

post model] Method of enactment: Heavily based on EC directive, but with common law influence.

6 main sections; more coherent than EC/EU version. ACL Part 2-3, ss 23-28 ACL s 23(1)- Term in a consumer contract is void if:

o (a) the term is unfair ando (b) the contract is standard form contract (term not individually negotiated).

ACL s 23(2)- If capable of operating without unfair term(s), continues to bind parties. ACL s 23(3)- Consumer-business contracts only. ACL s 24(1)- Term shall be unfair if it (causes/would cause if applied) [notice no good

faith obligation]o (a) causes significant imbalance in rights and obligations [consumer has to

prove] Question of fact. Not dealing on equal term in relation to particular term.

o (b) is not reasonably necessary to protect D’s legitimate interests [D has to prove]

o (c) cases detriment to consumer (whether financial or otherwise) if applied/relied on [consumer prove]

Ie causative effect- not simply inequality. Difficult to prove? More than hypothetical detriment.

ACL s 24(2)- Factors: court may take into account such matters as it thinks relevant, but must take into account:

o (a) the extent to which the term is transparent (how easy is it to find and read)o (b) the contract as a whole

ACL s 24(3)- Term is transparent [only a factor, not decisive] if it is:o (a) expressed in reasonably plain language and [not many pages of legalese]o (b) legible and [small print]o (c) presented clearly and [paragraphs]o (d) readily available to any party affected by the term [web, head office?]

Even if reasonable notice has been given, and the term is incorporated. ACL s 24(4)- Term presumed not be reasonably necessary for protection of D’s

legitimate interests, unless D proves otherwise.LAWS2111 Contract Law 38 Summary Notes

UQ Semester 1, 2014 ACL s 25- Indicative examples of terms that may be unfair. No absolute prohibitions.

Indicative only.o (a) one party avoids or limits performanceo (b) permit one party to terminate contracto (c) penalizes one party (but not other party for breach or termination)o (d) permits one party to vary termso (e) permits one party to renew or not renew the contracto (f) permits one party to vary the upfront price without the right of other to

terminateo (g) permits one party unilaterally to vary characteristics of

goods/services/interest in lando (h) permits one party unilaterally to determine whether contract breached or to

interpret meaningo (i) limits one party’s vicarious liability for its agentso (j) permits one party to assign contract to the detriment of other without

consento (k) limits one party’s right to sue another partyo (l) limits evidence one party can adduceo (m) imposes evidential burden on one partyo (n) prescribed by regulations [GG can add examples]

ACL s 23(1)- Effect of unfairness: term is void. ACL s 26(1)- s 23 does not cover main terms, ie which

o (a) define the main subject matter of the contract oro (b) set the “upfront price” payable under the contract oro (c) is a term required by Cth/State statute

ACL s 26(2)- upfront price is consideration provided or is disclosed at or before [transparency relevant?] the time contract entered. But does not include any other consideration that is contingent on the occurrence or non-occurrence of a particular event.

OFT v Abbey National- bank charges defined as main subject matter of contract. In Australia- ASIC Act has same provision; may be considered under National

Consumer Credit Scheme? Alternative avenues of attack- competition law provisions (CCA), Andrews v ANZ-

penalties unenforceable? States concurrent legislation giving effect to ACL. Refers to Cth ACL, no reprinting.

Can enforce locally. Persons regulated: Defendants Corporations (constitutional reasons). s 130- restricted to corporation conduct in

interstate trade/commerce. s 2A includes Crown carrying on business. Businesses- FTA 1989 (Qld)- Part 3 (ACLQ). s 4A Application- (a) persons carrying on

business within Queensland or (c) persons ordinarily resident in this jurisdiction.


UQ Semester 1, 2014 Individual consumers- CCA s 130- constitutional restriction. FTA and ACLQ Part 2-3?

Keep it simple here. Persons regulated: Plaintiffs [do not go to ACL s 3 as we did for statutory guarantees] ACL s 23(3)- “consumer contract”- contract for:

o (a) supply of goods or services oro (b) a sale or grant of an interest in lando To an individual whose acquisition of the goods, services or interest is

wholly/predominately for personal, domestic or household use or consumption. If not a consumer contract- UCT does not apply- apply term as at common law

(incorporation/interpretation). Small business protection- Federal Small Business Commissioner, Self-regulation

(voluntary codes of conduct). Contracts regulated ACL s 23(1)(b)- standard form contract (s 23(3)- for supply of goods/services;

sale/grant interest in land) ACL s 27(1)- burden of proof reversal- if allege SFC, then presumed to be unless other

party rebuts ACL s 27(2)- Court unfettered power to decide what is relevant to SFC, but has to

consider:o (a) one party has all/most bargaining powero (b) contract prepared by one party before discussiono (c) required either to accept or reject the terms in form presentedo (d) given effective opportunity to negotiateo (e) terms take into account specific characteristics of party or transactiono (f) any other matter prescribed by regulations

If not SFC, Part 2-3 doesn’t apply. What if slightly altered SFC? Court has discretion to deal with this- s 27.

If SFC, terms not automatically void- need to be unfair. Excluded contracts s 28- Some shipping contracts (charters of whole ships/yachts, carriage of goods). Not

passenger contracts. s 28- company constitutions (dealt with under Corporations Act). CCA s 131A- supply of financial services (dealt with under ASIC Act 2001

amendments). Insurance Contracts Act 1984 retained (s 15(1)). Prevents relief under other Acts

dealing with unfair terms. Enforcement Role of regulators? ACCC- administered TPA along with state regulators. Issues

guidelines & reviews. ACL- enforcement by ACCC and State regulators. Politically difficult to have single Cth

regulator.


UQ Semester 1, 2014 Regulatory powers restrictions- no action unless consumer detriment. Test cases

allowed on this basis. Approaching a question Do we have an agreement? What are its terms or contents?

o Expresso Implied (including SOGA ss 15-17)o Statutory guarantees (ACL)- who is protected (incl some businesses)

Is D in breach of a term or guarantee?o Breach is not simply “fault”o Contract can create absolute obligations (strict)o If promise to do something- may be breach if do not (eg merchantable quality)o If term or guarantee is to use reasonable care- is fault based

Excluding a primary liability by clauseso Is there a liability to be excluded?o Is the clause incorporated into the contract?o Does the clause cover the breach as a matter of construction?

Statutory guarantees and exclusionso SOGA s 56 allowso ACL s 64 prevents exclusions, restrictions, modificationso ACL s 64A some limitations allowed in business-business transactions

Other terms which might be unfair- ACL Part 2-3, ss 23-28o Persons coveredo Contracts coveredo Terms coveredo Unfairness analysis


UQ Semester 1, 2014
