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FORMATIONAgreementGibson v Manchester – Identify offer and acceptance, conventional approach.Bilateral or unilateralOfferPerson indicating to another willingness to enter into contract on certain terms.Objective approach – What would reasonable person think (Carlill v Carbolic Smoke Ball Co)Invitation to treat NOT an offer.Store cases – Customer is offeror, shop gives ITT (Boots Cash).Tenders and Auctions – Auctioneer invites bids/offers (AGC v McWhirter).Exceptions: Fixed price tender to highest bidder is offer by auctioneer (Harvela).Tender process promising fair consideration means bid must be reviewed (though not necessarily accepted – Blackpool; Hughes).Ticket cases (MacRobertson – Also illustrates issues with conventional approach)Barwick CJ – Unilateral contract, passenger makes offer and accepted by airline once flight completed.Stephen J – Ticket at airport offer, passenger to accept/reject.Termination of offer – How to doWithdraw anytime before acceptance (Financings Ltd v Stimson), unless option agreement (Goldsborough Mort).Lapse before accept – After time limit/reasonable time, also if offeror dies (Fong v Cili).Condition not satisfied if conditional offer (Stimson – car not in original condition; Hewens – joint vendor wouldn’t sign contract; Laybutt – Contract depended on skill/expertise of deceased).Rejection – express, counter-offer (mere inquiry not rejection though).Unilateral cases: Offeror can terminate offer midway through offeree’s performance, though estoppel option if unjust termination (Mobil v Wellcome).AcceptanceUnqualified assent to terms of the offer.Objective approach – Toll v Alphapharm; Taylor v Johnson (Obj has ‘command’ in field)Outward manifestation of parties conduct important (Taylor)Signing contract implies acceptance from obj view (Fitness First v Chong)Subjective approach – irrelevant to acceptance (Smith v Hughes; Fitness First)Equity can intervene (Taylor)Has been used in past when acceptance not in reliance of offer (Crown v Clarke)Communication of acceptance – Offer not accepted until acceptance received by offeror (Latec Finance v Knight; Felthouse v Bindley; Brinkibon)Silence not acceptance (Felthouse), unless conduct shows otherwise (Empirnall).Exceptions: (i) Unilateral contracts; (ii) postal rule; (iii) offer expressly/impliedly provides acceptance to be comm’d in certain way and clear language present to support this view (Latec).Method of communication – Oral/writing best.Postal rule too, but issues. Parties must contemplate and intend mailing to be appropriate communication (Tallerman).Telex/phone/other instantaneous comms not covered by postal rule (Brinkibon; Reese Bros).Electronic Transactions Act (Vic) has own rules:s 1: information system (IS) means a system for generating, sending, receiving, storing or otherwise processing electronic communications;s 13: (1) Once email leaves IS into another, is comm’d to offeror.(2) If email leaves work server then bounces to Europe and back, dispatch moment is still once it leaves your IS.(3) If offeror asks to send acceptance to tim@, comms only occurs when email enters Bigpond servers.Correspondence between offer and acceptance – Battle of forms (Butler Machine Tool)Conventional approach, Lawton CJ & majority – Buyers’ acceptance counter-offer which seller agreed to (i.e. whoever got in last has their terms agreed to).Synthesis approach, Lord Denning – Look at all documents to ascertain terms.If agreement not clear and conventional approach won’t work, see Brambles:In all circumstances can agreement be inferred? Mutual assent manifested? Would reasonable person think there was a concluded bargain?ConsiderationPrice paid for promisor’s promise (Beaton v McDivett).2 Elements:Bargain/Quid Pro Quo – Price for promise must be in return for promise (Australian Woollen Mills; Beaton v McDivett).Detriment to promisee/benefit to promisor – something of value/significance, dependent on case facts.Ballantyne: Menzies J – Admitting no claim not consideration. Dixon CJ – Even ‘slight’ claims can be consideration, as it is something.Beaton v McDivett: Kirby P – Consideration was ‘illusory’.Adequate vs sufficient considerationAdequate not relevant as too subjective for courts to evaluate (Woolworths v Kelly).Sufficient if something of value given (Thomas v Thomas).Past consideration not adequate consideration (Roscorla v Thomas)Exception if promise to pay for past service (Lampleigh v Brathwait; Ipex v Hosking)Existing legal duty not adequate consideration (Stilk v Myrick); however, 5 exceptions:Fresh consideration given/something more given (Hartley v Ponsonby)Practical benefit by promisee6 stage test from Williams v Roffey Bros (criticised as too broad):If A enters into contract with B to work/perform in return for payment; andThere are doubts that A will complete his obligation; andB promises further payment for A to complete obligations on time; andAs a result, B obtains in practice a benefit or obviates disbenefit; andB’s promise not forced by economic duress/fraud from A; thenA has provided a benefit to B, so consideration, and so legally binding.Re Selectmove Ltd – Doesn’t extend to part payment of debt cases.Musumeci v Winadell modified test:c. Includes modifying party making a concession, such as reducing an original obligation.d. A’s performance is worth more to B than any likely remedy against A.e. B’s promise not given under influence or unconscionable conduct on A’s part.Promise to perform existing legal duty made to third party (Pan On)Bona fide compromise to resolve legal dispute (Wigan v Edwards).Terminate and replace original contract.Part payment of debt not consideration until whole debt paid off (Foakes v Beer).Intention to Create Legal RelationsObjective approach used (Ermogenous).Assess state of affairs between parties, not uncommunicated motives (Ermogenous).More like to be intention if: subject matter important, documents comprehensive, time/commitment elements, business-like content, fees/costs paid, parties at arms length (Shahid for student/academic context).If money paid in consideration, intention quite clear (Shahid).Subjective intentions may be used if same as other party/other party aware of them (Air Great Lakes).PresumptionsNot abolished, for non-comm disputes more for burden of proof and each case on own facts (Ermogenous).Commercial arrangements – Intention presumed (Banque Brussels), but can be rebutted if statement of promises unclear and party alleging contract can demonstrate one exists (Kleinwort Benson Ltd v Malaysia Mining).Social/Domestic – Intention not presumed (Balfour v Balfour), but:Can be rebutted regarding case facts (Salmon LJ in Jones v Padavatton).Intention may be present if onerous consideration (Todd v Nicol).Rebuttable if commercial interest present (Roufos v Brewster).Government – Policy not usually considered a contract, thus no intention (Leahy).Particularly so if (i) no statutory authority sought for making of payments, (ii) announcement done by person who have no power to commit Crown to expenditure, (iii) Cth has no commercial interest in the promise, and (iv) Cth expressly states it can change conditions as it pleases.Language used/commercial character of document can suggest intention present (Windeyer J, dissenting, in Placer Developments Ltd v Commonwealth).Preliminary Agreements3 categories, 2 enforceable, one not (Masters v Cameron):Parties have reached finality, but want to state terms in a more full and formal manner – enforceableParties completely agreed on terms, but one or more terms conditional on execution of formal document – enforceableParties have intended not to make concluded bargain until formal contract made, use of qualifications like ‘subject to…’ – unenforceable4th category: Parties bound to terms agreed, with later contract to be made which substitutes the first contract with additional terms – enforceable (Baulkham Hills).Work out which category by reviewing the use of language by parties (Masters).CertaintyCompletenessAll essential terms finalised or no contract can be formed.Essential terms include price, parties, subject matter.Nature of contract and circumstances to be determined what is ‘essential’ (ANZ v Frost Holdings Pty Ltd).Courts won’t fill essential terms if complex case (Milne v Attorney-General (Tas)), but ‘reasonable price’ can sometimes be determined (e.g. Goods under s 13 Goods Act 1958 (Vic)).Agreements to agreeIf agreement on express term deferred, contract unenforceable (May and Butcher Ltd v The King).Exceptions:Parties already partly performed contract/acted on assumption one exists (Foley v Classique Coaches Ltd).Can use arbitrator/third party or legislation to sort it out, but if mechanism fails then contract void (George v Roach; s 14 Goods Act).Certainty of meaning – if term too vague then contact void for uncertainty.Courts won’t take narrow/pedantic approach, especially for commercial arrangements (Upper Hunter Council – ‘supplier costs’ can be worked out by court).If parties agree to “fair/reasonable/equitable” terms:These words are inherently uncertain, and so:Must be ascertainable and in common use (Whitlock v Brew); orIf price/value, needs external standard to fix it (Hall v Busst; Biotech v Pace).Negotiate in good faith/mediate sufficiently certain terms to be enforceable (Coal Cliff Colieries; Aiton Australia).Illusory Promises – If promisor has unfettered discretion then no contract (Placer Developments; Biotech v Pace).Exceptions:If discretion involves completing a condition in order to actually start the contract (e.g. get finance in order to pay for property, then Placer does not apply (Meehan v Jones).Unfettered discretion sometimes not so – obligation to act honestly/reasonably (Mason J, Meehan v Jones).Not illusory to add further terms if courts can impose requirement that terms are ‘reasonable’ (Godecke v Kirwan).Implied terms of good faith may restrict any discretionary contractual power (see Implied terms).Consequences of uncertainty:Three options:Agreement void – usually if essential term omitted and court can’t/won’t supply replacement terms.Ineffective term severed from agreement – if term not essential, it can be inferred that valid agreement would remain without that termFitzgerald v Masters – ineffective clause severable because simply appendage to agreement as a whole.Whitlock v Brew – Based on facts no agreement would have occurred without term, so contract void.Ineffective term waivered by party receiving benefitBradford v ZahraPrivityEssentially, a person not party to a contract can’t enforce it, or incur obligations. To be part of a contract party must enter into an agreement and provide consideration.Coulls – Even though thid party signed contract, no consideration was given and so privity rule applied preventing her enforcing contract.Circumventing privity (beneficiary):Privity doesn’t apply to insurance contracts, which confer benefits on the insured party’s contractors (Trident v McNiece).If a ‘letter of comfort’ present where one party promises to financially support a related third party (Gate Gourmet).Analysing parties’ legal relationships in a way to allow third party to part of the contract (The New York Star). 4 point test:the bill of lading made it clear that the carrier intended by its terms to protect the stevedore;the carrier by the bill contracted for the stevedore’s protection as well as for his own;the authority of the carrier to act for the stevedore in this respect whether antecedently or by ratification was made out; andthere was consideration moving from the stevedore.Circumventing privity (promisee):Because promisee does not receive benefit, only nominal damages can be awarded (Beswick v Beswick).Best option is to try and obtain an order for specific performance.Alternative courses of action for aggrieved party:Unjust enrichment (Gaudron J, Trident).Law of trusts, where B holds benefit of A’s promise on trust for C (Deane J, Trident).Tort of negligence (Hill v Van Erp – duty of care owed by solicitor to will beneficiary).Estoppel.Statutory rights of action (misleading/deceptive conduct, s 52 Trade Practices Act 1974)FormalitiesCommon law doesn’t require contracts in writing. Exceptions in s 126 Instruments Act 1958, successor to Statute of Frauds.The following contracts must be (i) in writing, or (ii) memo/note of agreement in writing, and signed by party to be charged (sued). If not, they are unenforceable:Contracts of guaranteeSale or disposition of land.Guarantees: A promise to pay another’s debt if they default. Different from indemnity, a promise to prevent a person suffering loss from transaction.Sale of land contracts – 5 elements. Documents:Must contain all essential terms depending on contract type (Pirie v Saunders).Must be made after agreement made (earlier indicates possibility of agreement).Exception: Written offer by one party, verbally accepted by other. Once offer verbally accepted, effectively agreement in writing.Must be signed – liberal interpretation. Instruments Act allows emails to be signatures in accordance with Electronic Transactions Act s 9(1).9(1) Counts as signed if (a) method used to ID person and their approval of info comm’d, (b) the method was reliable in the circumstances, and (c) the person receiving signature consents to this method.Whole document can be electronic, according to IA s 126.Can be joined together if (i) they are physically connected, or (ii) one doc refers to another one. If court unsure, can ask for oral evidence (Tonitto v Bassal).Non-compliance consequences – contract unenforceable. Not void though - therefore equity can be used to enforce rightsPart-performance of agreement allows court to order specific performance. Two tests:Narrow - Acts must be unequivocally referable to an agreement (Maddison v Alderson). Adopted in Ogilvie v Ryan.Broad – Acts considered in circumstances and decided on balance (Steadman v Steadman).Constructive trust (Ogilvie).Estoppel.Express TermsBasically is something expressly stated in words by one or more parties, in writing or orally. Promissory statements are binding, but representations are not.Identifying express termsThey may be:In one contract document with entire agreement clause and formally executed by parties (See Parol Evidence Rule).Derived from number of oral/written statements made by parties during negotiations or displayed on one party’s signs/notices/tickets/etc.Derived from statements made during negotiations (see below).Negotiation statements:If PER applies, can’t rely on statements as contractual terms.If not, statement must be promissory having regard to:Language used in statement:Expression of opinion/conditional language is only representational (JJ Savage; Oscar Chess).Relative expertise of parties:Expert statement to non-expert probably promissory (Dick Bentley; Smythe v Thomas).Non-expert statement to expert less promissory (Oscar Chess).Objective bystander must be in position of parties (Smythe v Thomas).Importance of statement:If statement highly important in transaction then more likely to be promissory (Van den Esschert; Smythe).Timing of statement:If request occurs closer to contract signing, more likely to be promissory (Van den Esschert).Form of written part of contract:Regardless of PER, if written agreements dominate it is harder to argue that oral statements promissory, as written info easier to assess objectively cf oral (Equuscorp).Any other relevant circumstances – ultimately court must be satisfied that reasonable person in parties’ position would consider statement to be a contractual promise (Gibbs CJ, dissenting in Hospital Products).Written terms and effect of signature.Generally, party bound by contract terms if signs contract (L’Estrange v Graucob; Fitness First v Chong; Toll v Alphapharm).General rule applies to internet transactions (eBay v Creative Festival Entertainment).Exceptions: not bound if it’s not reasonable to consider document a contract, or if signature obtained by fraud/mistake/duress/unconscionable conduct (Curtis).Written terms incorporated by notice.Where not signed contract, goods/service supplier may use sign/advert/brochure/ticket/receipt/docket to list terms and conditions.Two essential issues to consider – Time and knowledge/reasonable notice.Timing (Oceanic Sun Line)Terms must be available to other party before contract signed, and;Party must have reasonable time to read them, otherwise can’t be incorporated as terms.KnowledgeIf party actually knows document/sign displayed contains contractual terms, party bound by terms (Parker v South Eastern Railway).Also bound if circumstances suggest that reasonable notice given (Parker).If terms not in document reasonably considered ‘contractual’ in nature, party seeking to incorporate must take reasonable step to bring notice to the other party (Causer v Browne; Thornton v Shoe Lane Parking).If terms onerous/unusual, party enforcing must take special steps to notify (Interfoto v Stiletto; The Mikhail Lermontov).NOTE: Only relevant to unsigned documents. Signed documents generally mean signatory bound by terms (Toll v Alphapharm).Written terms incorporated by course of dealingsTerms of earlier contract can be incorporated into later contract if:Regular and uniform dealing between parties (Balmain New Ferry v Robertson).Doc relied on reasonably capable of being contract document (Rinaldi).Construing express termsCourt must determine exactly what terms mean once identified.Guiding principles (ABC v APRA):Objectively give effect to parties’ intentions.What would reasonable person think term means?If words are unambiguous court will accept their meaning even if it produces an unreasonable/unfair result.If language open to two constructions:Court may regard ‘factual matrix’ (surrounding circumstances, though note PER)And will favour the construction which give a reasonable commercial result.Special case of exclusion clauses (reduce/excludes one party’s liability to other for breaches of contract or wrongs which can cause damages/loss).Generally legal if both parties agree.Legislative restrictions under Trade Practices Act 1974 (Cth):s 68(1) – Any term that excludes/modifies/restricts the provisions of the TPA is void.s 68A(1) – Terms of contract for corporations’ supply of goods/services not void under s 68 because the term limits the liability of the corporation to:(a) replacing/repairing/compensating repair or replacement of goods;(b) supplying services again/paying for services to be repeated.s 68A(2) – (1) won’t apply if party supplied with goods/services establishes that is wasn’t fair/reasonable for corporation to rely on that term of the contract.(3) To establish above, must regard strength of bargaining positions, whether buyer induced, whether buyer knew/ought to have reasonably known existence and extent of term, and whether goods were manufactured/processed/adapted to special order of buyer.If no legislative restrictions, issues becomes whether exclusion clause, on its proper construction, limits liability:High Court stressed that if it clearly excludes liability then this should be upheld (Darlington Futures v Delco).If ambiguous, contra proferentem – courts opt in favour of party relying on clause.Situations where exclusion clause interpreted against party relying on it:Where acts of party not authorised by the contract (Sydney City Council v West).Damage arises where carrier deviates from agreed carriage route (Thomas v May & Baker).Where party claiming protections acted/omitted to act in negligent manner.Where act deliberately breaches contract.Parol Evidence RuleApplies to contracts wholly in writing, stops extrinsic evidence being used in court (i.e. anything but the content of the written contract).Two parts:Precludes extrinsic evidence being given that would add to, subtract from, vary or qualify the written terms of the contract (State Rail Authority v Heath).Limits evidence that can be given to explain meaning of written contract terms.For Part 1, must see if contract is wholly in writing before applying PER:Entire agreement/merger clause present means PER applies.If not present, court has two approaches, neither conclusively approved by HCA (State Rail Authority v Heath):If contract appears on its face to be complete record, PER applies (strict)Can ascertain the presumed intentions of the parties by admitting certain extrinsic evidence (flexible).If PER applies, it may be circumvented:Collateral contract (i.e. separate contract to original, so PER won’t apply). However:Terms must be consistent with main contract – can’t alter rights enjoyed under the main, PER-applicable, contract (Hoyt’s v Spencer); andMaterial elements contracts have must be in present (promissory statements).Estoppel may be argued to stop representor from claiming that extrinsic statement not part of contract. Things to note:Dispute whether estoppel possible, particularly relating to when assumption adopted is inconsistent with written contract.Whittet v State Bank of NSW sets out reasons for/against estoppel:Reasons for PER to apply: No reason why PER shouldn’t extend to pre-contract negotiations, PER policy/security of written contract would be undermined, time consuming and unrewarding, if court identifies pre-contractual estoppel evidence it will introduce uncertainty.Reasons to exclude PER: Unconscionable for person to resile from promise if promisee suffers detriment, State Rail held that pre-contract negotiations can be used for estoppel, won’t ruin PER if clear/convincing proof for estoppel.Ultimately, PER won’t exclude evidence in support of estoppel by convention so long as there is clear and convincing proof.Norce found against Whittet reasoning:If entire agreement/merger clause, estoppel to be rejected.For Part 2, determine the extrinsic evidence used to construe contract:Generally, PER excludes extrinsic evidence being used to explain meanings of terms in written contracts.However, extrinsic evidence is admissible to assist in interpretation of the contract if the language is ambiguous or susceptible of more than one meaning (Codelfa; Royal Botanic Gardens).Evidence of surrounding circumstances to the written contract (‘factual matrix’) admissible to assist interpretation;Court can consider circumstances in which words were used to work out what objective the parties had;The meaning of terms can be ascertained by appreciating: the commercial purpose of a contract/background/context/market in which parties operate.Implied TermsUsed by court to ‘fill gaps’ in contract that express terms have missed, but only for terms implied by custom, law and fact. Take scattergun approach in exam.Essential points:can’t contradict an express term;won’t necessarily be defeated by an entire agreement clause (but if it says “...implied terms are excluded...”, they might be defeated);some statutes which imply terms prohibit such terms being precluded by express agreement (e.g. Trade Practices Act 1974 (Cth) and Goods Act 1958);claims of an implied term are not impeded by the PER.CustomA term may be part of a particular market or context because of custom or usage.However, rarely accepted by court as custom difficult to determine.Principle of implying terms by custom in market/industry (Con-Stan Industries):Existence of custom/usage question of fact.Evidence must shown custom is ‘notorious’ in that everyone presumes it to be part of a contract – note, NOT universally accepted, just known about.Can’t imply if contrary to express term.Person bound by custom even if no actual knowledge – knowledge imputed to parties because of notoriety.FactUnique to each contract, based upon presumed intentions of parties.5-point test to determine (BP Refinery v Hastings). Implied term must be:Reasonable and equitable;Necessary to give business efficacy to contract;The Moorcock – Wharf must be fit form purpose of mooring boats.Re Ronin – Unforeseen situation allows suspension of oblig. to complete. So obvious that “it goes without saying”;Capable of clear expression; andNot contradict any express term.BP test often strictly applied on formal contracts.For informal contracts, efficacy & reasonableness overriding (Hawkins v Clayton).LawImplied in all contracts of particular class, not presumed intentions of parties.Term must satisfy following requirements:Must be applicable to definable class of contractual relationship (Liverpool City Council v Irwin - tenants; Byrne).Must be recognised as suitable to be implied in all contracts by reason of necessity (Liverpool City Council v Irwin).StatuteTrade Practices Act 1974 (Cth) (‘TPA’) implies the following terms in all contracts for supply of goods by corporation to consumer:See TPA OverviewGood Faith as special caseNot determinatively ruled, but good faith implied when parties perform contract.Good faith can be implied in fact, and in law for all commercial contracts (Renard v Minister).Good faith = act reasonably (Renard v Minister).If implied obligation exists, it will oblige parties to:Avoid uncooperative behaviour;Refrain from unjust exercise of contractual rights;Not exercise contractual right for purpose unrelated to contract (Burger King).However, good faith still allows parties to act in their own, legitimate, interests (BK). ................
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