introduction to civil obligations: agreements

INTRODUCTION TO CIVIL OBLIGATIONS:

AGREEMENTS

The law regulates private interactions between citizens in society, both planned (contracts) and unplanned (negligence). The law imposes elements for a contract to be valid and for a negligence claim to be successful. Both the common law and statutory protection provide stakeholders with remedies.

QSA Legal Studies Syllabus 2013

AGREEMENTSContent

In your textbook: pp36-55 Covering topics: Elements of a contract Capacity Promissory estoppel The terms of a contract The form of the agreement Misrepresentations Mistakes Other contractual issues

Week 1 Exercises – all questions 2.1.1 p38 2.1.2 p44 2.1.3 p44 2.1.4 p47 2.1.5 p48 2.1.6 p49 2.1.7 p50 2.1.8 p51 2.1.9 p53 2.1.10 p54

Extension Chapter Review, Q1-7, p56

Agreement: an exchange of promises between two or more parties whereby one promises something in return for something else (goods/services)

Domestic agreement: between family and/or friends, not often legally binding

Commercial agreement: between unknown parties, often legally binding Main differences is in the intention to create a legally binding agreement

ELEMENTS OF A CONTRACT Offer/Invitation to treat Acceptance Consideration Capacity Intention

OFFER/INVITATION TO TREAT Written, oral or through conduct Written: signing a physical document in agreeance with the terms and conditions (such as for a car or house) Oral: verbally agreeing to something (such as the sale of a TV on Gumtree) Conduct: demonstrating agreeance with a contract via what you do or through your actions (such as

purchasing something from a shop) Offerer – the person making the offer Offeree – person accepting the offer Offers can be withdrawn prior to acceptance, as long as it is communicated Offers can be for a certain amount of time Can be made to individuals, groups, or even the whole world Invitation to treat: like an advertisement – trying to get someone to make an offer or accept the invitation through their conduct (such as a price tag on an item on a shop shelf)

ACCEPTANCE General principles of acceptance: Acceptance must actually be communicated, unless accepting through conduct Acceptance must be in full, otherwise it is a counter-offer All conditions stated must be adhered to for acceptance to be legitimate Only those the offer is made to can accept Acceptance cannot be withdrawn without the consent of the offerer Acceptance must be made within a prescribed time, or else a reasonable time You can only accept an offer you know exists

IMPORTANT NOTE: There is more to the section of ‘Acceptance’. As Mr White was absent on Friday 9 October it was left as work for students to continue with the Week 1 work of the Term Overview.

This included reading and completing the tasks on slide 2 of the PowerPoint presentation.

We may cover this again if there is time later in the term, but as senior students it is your responsibility to keep up with the work.

Feel free to email me with any questions: [email protected]

mailto:[email protected]

STATUTORY PROTECTIONContent

In your textbook: pp57-66 Covering topics: The legislation Implied obligations Exclusion clauses Remedies Contemporary issues in relation to agreements

Week 2 Exercises – questions as indicated 2.2.1 Q1-2, p59 2.2.2 Q1-2, p61 2.2.3 Q1-3, p62 2.2.4 Q1-4, p65

Extension 2.2.1 Q3, p59 2.2.2 Q3, p61 2.2.4 Q5, p65 Chapter Review Q1-7, p66

Historically – common law prevailed Government intervention statutes were introduced Provides regulation of common law principles Balances bargaining power between parties = consumer protection

THE LEGISLATION Competition and Consumer Act 2010 (Cth) [CCA] Aims to enhance the welfare of Australians through the promotion of competition and fair trading, and provision for consumer protection

Imposes strict liability on manufacturers of defective goods which may cause injury or damage

Prohibits deceptive or misleading conduct, and misrepresentation Mirrored in Fair Trading Act 1989 (Qld) Applies to people and corporations

Sale of Goods Act 1896 (Qld) [SGA] Applies to individuals and companies Can be contracted out of – by incorporating a clause saying it doesn’t apply

IMPLIED OBLIGATIONS 5 important conditions and warranties for contracts (from CCA and SGA):

1. The seller has the right to sell2. The goods will conform to the description given by the seller3. The goods will be fit for the purpose for which they are intended4. The goods will be of merchantable quality5. The goods will conform to the sample, if one was given

We will look at these individually.

5 important conditions and warranties for contracts (from CCA and SGA):

1. The seller has the right to sell What is being sold to you is permitted to be sold by the seller Ie. If someone sells you a car, it is implied that they own it If they do not, legal action can be taken – you will probably have to return the car to the rightful owner, but you may be able to make a claim against the original seller (most likely a financial claim for your money back, plus legal fees, for example).

An legal restrictions such as ownership must be brought to the attention of the customer before purchasing.


2. The goods will conform to the description given by the sellerThe items should be as described.Important when ordering from catalogues, over the internet or anytime the buyer doesn’t see the item before purchasing itIf you are told it is in ‘excellent condition’, then it should be

5 important conditions and warranties for contracts (from CCA and SGA):3. The goods will be fit for the purpose for which they are intendedGoods should be able to be used for what they are meant to be used for. Ie. If I buy a pair of shoes, it should be safe to assume I can wear them. The retailer can assume that the pair they sell me are suitable for whatever purpose I want them for (presumably walking in).If I tell the store (as long as they are in the business of the selling the item) that I want the item for a different purpose, then they should supply me with something for that purpose.Ie. If I tell the retailer I want to buy a pair of shoes to go long distance running, then the store should supply me with a suitable pair (if they can).Goods should also be fit for their purpose for a reasonable amount of time.Ie. You could return a new car if it broke down after a week, but you couldn’t return a toothbrush after a year if the bristles fall out.


4. The goods will be of merchantable qualityGoods must be of reasonable quality, considering the purpose for which they were bought, the price and all other relevant circumstancesIf goods are sold as ‘high quality’ you should expect high qualityIf goods are expensive compared to similar products then the consumer can expect a higher level of quality

Grant v Australian Knitting Mills (1936) 54 CLR 49

M/S Aswan Engineering Establishment Co v Lupdine [1987] 1 WLR 1 Facts: The defendant supplied buckets to the plaintiff for the transport of liquid material to Kuwait. The material in the buckets was shipped to Kuwait and left on the Kuwait dock, where the ground temperature reached 70 degrees Celsius. The buckets melted, ruining the liquid material.

Issue: Was the supplier of the buckets responsible for the damage because the buckets were not of merchantable quality?

Verdict and Reasons: The court found that the buckets were of reasonable quality and that it was not reasonable to expect that they could be exposed to such extreme weather conditions over a long period of time without damage. The buckets were suitable for most purposes.


5. The goods will conform to the sample, if one was given What you buy must be as good as the sample you are given (if you are given on)

Ie. If you are given a sample of chocolates, and then buy a box because the same was so good, you can expect the box you bought to be good.

QUESTIONS1. In the case of M/S Aswan Engineering Establishment Co, would it

have made any difference if the seller was informed of the use for the buckets?

2. Is it appropriate that the seller should explain to potential customers how products should be used? Even basic products like buckets?

3. Are the following goods of merchantable quality and fit for their purpose (assume all are used correctly):

a) You hire a DVD. It freezes at the climax and you can’t watch the rest.b) After two months a new pair of Nikes lose their sole.c) You buy fries from KFC. You complains that they are too salty.d) You go to a sports store and explain you want shoes with grip for cricket. They

sell you shoes assuring it will give you the grip you need. Two weeks later, playing on damp grass, you slip and break your ankle.

EXCLUSION CLAUSES Terms of a contract are there to ensure an agreement is satisfactory for both parties

Exclusion clauses limit or avoid liability for something that might go wrong in the course of the contract

Courts will usually uphold an exclusion cause: there is an assumption by courts that agreements are negotiated They do however recognise that often there is little or no choice about the presence of an exclusion clause – it must be accepted if you wish to enter the agreement Eg. Online agreements for Facebook, Youtube, etc

Courts will interpret exclusion clauses carefully – if it is unclear, the court will interpret it in favour of the person forced to sign

YouTube users are asked to sign a term of use agreement before uploading video content

https://www.youtube.com/t/terms Read the statements that reduce the liability of YouTube and try to rewrite these in your own words

https://www.youtube.com/t/terms

https://www.youtube.com/t/terms

ERNEST BECK AND CO V SZYMANOWSKI AND CO [1924] AC 43 Plaintiff agreed to a contract with an exclusion clause stating that if the buyer did not return ‘goods delivered’ within 14 days, the buyer lost any right to return the goods.

After the 14 day period, the buyer discovered that the goods received were not the goods ordered.

They tried to return the goods, but the seller tried to rely on the exclusion clause.

What should happen?

Both parties sign agreement

Court ignores clause if...either party signed agreement as something else (e.g. receipt)

effect of clause not explained

party signing didn't understand what was being signed

both parties have not signed agreementreasonable steps must be taken to notify the party of the

existence of the clause ...

before agreement entered

steps required to notify a "normal reasonable person" (objective)

ACTIVITY – IN PAIRSUse pp60-61 to investigate the following requirements of exclusion clauses. Include information on relevant cases detailed in the text.The clause must be contained in a contractual document

Parker v South Eastern Railway Co

The existence of the exclusion clause must be brought to the notice of the other party before or at the time the contract is entered into

Thompson v London, Midland and Scottish Railway Co

Reasonably sufficient notice of the clause must be given

Olley v Marlborough Court

What is reasonable is a question of fact

Thornton v Shoe Lane Parking Ltd J Spurling Ltd v Bradshaw

REMEDIES Competition and Consumer Act 2010 (Cth) In general a wronged party must:

return the goods Give notice of the breach Do so within a reasonable amount of time

Eg. I return a shirt to David Jones the day after I purchase it and I tell them I am return it because of the poorly sewn sleeves – this fulfils the above three requirements

Sale of Goods Act 1896 (Qld) Wrong parties should ‘walk away’ before taking delivery of goods May take reasonable time to inspect goods May reject goods after inspection After delivery, only remedy is to sue

Fair Trading Act 1989 (Qld) Similar remedies as laid out under the CCA above

CAUSATION & REMOTENESS OF DAMAGE A breach of contract must cause financial loss The plaintiff must show that the loss was caused by the defendant

However…

The person not fulfilling the contract is only liable for loss that would reasonably be because of their fault

If financial loss is too remote/far removed from the wrongful act, they are not liable and the plaintiff must cover the damages themselves

TO COMPLETE THE TEXT… Summarise the following headings under 2.2.5 Contemporary Issues in Relation to Agreements: Cooling-off periods (p65) Rescission (p65) Government involvement in contract-related matters (p65)

GOING BACK OVER WEEK ONE TOPICS As you should have taken initiative and done the work, the next few slides are brief overviews/discussions on the following topics from Week 1: Elements of a contract Capacity Promissory estoppel The terms of a contract The form of the agreement Misrepresentations Mistakes Other contractual issues

ELEMENTS OF A CONTRACT Offer/Invitation to treat – done Week 1 Acceptance – done Week 1 (more info pp40-42)

Consideration The payment as promised between the parties I pay you $5,000 for your car – my money is consideration to you, and your car is consideration to me Failure to give as promised can = disputes in court

1. There must be consideration given by the person who wants to enforce the promise (ie. The person who is trying to sue)

2. Consideration doesn’t have to be market value of the promise for which it is given3. Consideration cannot be something that was given in the past4. Consideration cannot be illegal or unlawful5. Refraining from legal action can be considered as consideration Find details and examples of cases of these from your textbook

Capacity The ability to be legally capable of entering a contract or understanding the obligations of a contract

Mental incapacity Minors

Ratification A minor must agree to be bound by a contract on them when they turn 18

Contract for necessities Things that maintain the standard of living are ‘necessities’ – individually decided

Beneficial contract of service A contract of service which benefits the minor can be enforceable – such as apprenticeships

Find details and examples of cases of these from your textbook

Intention The parties must enter into a legally binding contract Courts look at the behaviour and statements of parties to determine if contracts are intended to be legally binding

Domestic contracts/promises are not generally legally binding Find details and examples of cases of these from your textbook

PROMISORY ESTOPPEL A person who makes a promise can be stopped from going back on that promise

Came about because at times agreements can be made that are unfair to one of the parties involved

Most commonly used when consideration has been given by the party trying to enforce the agreement (plaintiff), but there is no legal contract

Generally applied if the person relying on it (defendant) has suffered loss

Not used very often

THE TERMS OF A CONTRACT Express terms: the words that clearly define the items in the contract that are legally binding – ie. Specifics of the car you are buying (blue 1999 Honda Civic for $2000, rather than just ‘a car’)

Main terms are called ‘conditions of the contract’ Implied terms – those that are assumed

Conditions and warranties are considered as terms of a contract Conditions – fundamental aspects of a contract without which the contract probably wouldn’t be entered into Breach = voided contract

Warranty – similar, but less important – the contract would still have been entered into Breach = damages awarded

Condition: get paid $X per hour (without this, I wouldn’t agree to the contract) Warranty: get a 5% discount on store merchandise (without this, I probably would)


THE FORM OF THE AGREEMENT Written agreements are easier to prove No oral evidence can be added to add, change or contradict the terms of the written agreement Courts assume everything is in writing This is called ‘parol evidence rule’ Can be unfair – a party can say things to convince someone else to sign

Statements not in the written contract need to be decided as part of the contract or representation

Terms of contracts and representation need to be separated from sales talk and puff These are exaggerations – ie. Buy this and everyone will be your friend


MISREPRESENTATIONS Any statement of fact by one person to another, either by word or actions, which is not in accordance with the actual facts

To get compensation for misrepresentation, it must be: A false representation of an existing or past fact Addressed to the plaintiff by the person making the representation Made before the contract is entered into Intended to persuade the plaintiff and actually have persuaded the plaintiff Factual information, not opinion

Types of misrepresentation: Innocent Negligent Fraudulent

Find details and examples of these from your textbook

MISTAKES Mistake of law Parties are sometimes mistaken as to the legality of the contract

Mistake of fact Parties can be genuinely mistaken as to certain important facts which are the subject of the contract


OTHER CONTRACTUAL ISSUES Undue influence: Entering into a contract due to pressure brought on by another party

Unconscionable dealing: Taking unfair advantage of someone else’s disadvantages to benefit yourself Usually through lack of education, language difficulties or illness

Duress: Threats or actual violence towards a party to induce them to sign

Lack of ‘good faith’: Information of relevance to the contract must be disclosed

Restraint of trade: Unfairly restricting someone’s ability to earn a living

Frustration: Something happens preventing the contact from being fulfilled, fundamentally changing the nature of what was

contract for Find details and examples of cases of these from your textbook

introduction to civil obligations: agreements

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