Structure
1. Is there a contract?
• Agreement
• Consideration
• Intention
• Certainty
• Formalities/part-performance 2. If there is a contract who is bound?
• Privity
• Capacity
3. What are the terms of the contract?
• Express terms (statements made during negotiations)
• Incorporation
• Construction
• Implied terms
• Exclusion clauses- privity
4. Does the ACL apply?
• Consumer guarantees
• Unfair terms
5. If no contract, is there Estoppel?
• AIDRUD
• Remedies
If the Q asks whether X/Y has liability in contract? Do not talk about estoppel.
Planning (30 mins)
Question 1 20 marks (40 mins) Question 2a(i) 5 marks (10 mins) Question 2a(ii) 5 marks (10 mins) Question 2a(iiii) 10 marks (20 mins) Question 2b 10 marks (20 mins)
Formation
If the promise between [X] and [Y] for the ______ is to be enforceable at law, then [X] must prove on the balance of probabilities all elements of K formation and formalities in respect of the agreement. [Y] will argue there is no enforceable K since issues arise in relation to ______, ______ & _______.
Offer
[X] must prove that a reasonable person would consider that [Y] made an offer which was sufficiently clear and promissory in nature, and which did not terminate before acceptance occurred (Gibson).
Distinguishable from a mere ITT.
1. Has an offer been made?
2. Was there a termination of the offer?
1. Unilateral or Bi-lateral?
Unilateral
As a unilateral K, [X] accepts the offer at the time he/she performs his/her side of the bargain since ‘only one party is ever under contractual obligation’ (HCA in AWM v Cth). In this instance, [Y] makes a promise to ____ IF [X] _____.
• Entitled to revoke the offer although PP has commenced- problems with certainty or intention? (Mobil)
• Mere puff? (Carbolic Smoke Ball)- too vague?
IIT: an invitation to others to make offers or enter into negotiations. E.g. a wine merchant’s circulation of a price list would mean the merchant would be obliged to supply unlimited quantities of wine at that listed price.
Shop sales Goods displayed on shelves are an ITT. Offer occurs when customer presents their chosen item to the counter at which point the store can choose to accept/reject the offer (Boots Cash Chemists).
Auctions General rule = ITT.
The bid is an offer and the acceptance are the fall of the auctioneers hammer (ACG v McWhirter).
Tenders General rule = request for tenders is an ITT, however depends on the circumstances.
- A call for tenders is normally construed as only an ITT unless it indicates that the best tender will be accepted (Harvela Investments)- ‘we bind ourselves to accept the highest offer’…
- Sometimes the call for tenders itself will create a contract regarding the tender process (Hughes Aircraft Systems)
Online sales S 14 ETA- should be considered an ITT unless the ad clearly indicates an intention to be bound in case of acceptance.
Bi-lateral
As an exchange of promises the obligations of [X] and [Y] remain executory at the time of formation.
2. Was there a termination of the offer?
NB: Consider whether the contract is unilateral or bi-lateral before considering termination.
[Y] will argue the offer was withdrawn/lapsed/rejected before acceptance. Revocation is effective when it communicated to the to the offeree by words or conduct, including via a reliable third party (Dodds- there’s is no consideration for keeping the offer open).
Exception:
• If the offeree has paid to keep the offer open (Goldsborough Mort v Quinn)
For unilateral offers: The law takes the position that if the revocation of a unilateral contract is to be valid, then [X/Y]
must take reasonable steps to bring it to the attention of ____ (the relevant party).
• Revocation should be published through the same means as the offer
• May be revoked after PP subject to an implied term (Mobil)
Lapse: an offer is said to lapse at the end of a specified period, or if there is no period specified it is said to lapse after a reasonable time (circumstantial).
Death: if the offeror dies (or one of multiple offerors- Fong v Cilli), the offer will terminate. Per Gibbs J, since an option is in essence, a conditional contract, it can be enforced against the estate of a guarantor, unlike an ordinary offer (Laybutt).
Changed circumstances: the offer will be terminated if there is a sufficiently fundamental change in circumstances in which the offer was made. High threshold as per Neilson.
Rejection/counter-offer: if the offeree turns down the offer or makes a counter-offer then the K will be terminated.
• A mere inquiry is not a counter-offer (Stevenson, Jaques & Co).
• If a counter-offer is made, then the onus of acceptance is transferred to the initial offeror
Acceptance
[Y] would argue he/she provided unqualified assent to the terms of the agreement through his/her conduct of ______ & ______ (Fitness First). The parties need not be of the same mind, or to have read or understand the terms of an agreement (Fitness First).
Note the relevant test: having regard to external manifestations a reasonable person must consider the parties to have reached an agreement (Fitness First).
1. Conduct 2. Consciousness 3. Communication 4. Correspondence 1. Conduct amounting to acceptance?
• If the contract is unilateral- apply subjective test. The court will not find acceptance where offeree’s performance was not attributable to the offer (Crown v Clarke)
• From the standard of a reasonable person, acceptance may be inferred from offerees conduct, even if the offeree does not formally consent to the terms of the offer (Empirnall) or even if the offeree claims to reject it (Brambles)
• Acceptance cannot be inferred from mere silence (Felthouse v Bindley)- even if the contract stipulates it as the preferred method of acceptance
2. Communication of acceptance?
Generally, acceptance only has effect once it has been communicated to the offeror (Latec Finance) and this is when the contract is formed (Brinkibon).
Exceptions:
1. Postal acceptance rule: where acceptance is delivered via mail as soon as it is posted. Only applies if the offeror INTENDED notice to be communicated via post (Adams)
2. Electronic communications: ETA governs acceptance delivered by email, text, social media (but not phone or voice mail)- s 3 Definition
• Effective once capable of being retrieved by addressee (offeror)-i.e. once delivered- s 13A
retrieved by the addressee (offeror), AND the addressee is aware that it has been delivered- s 13A(1)(b) 3. Does acceptance correspond with the offer made?
The terms that the offeree accepts must be those which were offered. There may be some confusion as to which terms constitute the final agreement where parties the parties have been in negotiations.
Battle of the forms: if both parties attempt to impose their own terms on the contract there are two approaches to determine included clauses (Butler).
• Conflict Approach as per Lawton & Bridge LJJ in Butler: traditional English Approach whereby the “last- shot” prevails and the terms of the last exchanged document rule during disputes
• Synthesis approach (prevailing & uncontested) as per Lord Denning in Butler: the court will synthesis the terms put forward by both parties (analysis of the contract as a whole
Consideration
Consideration is something the law regards as valuable, either the incurrence of a detriment or conference of a benefit, given by the promisee in exchange for the promise. Consideration need not be adequate, but need be sufficient (Beaton v McDivitt).
[Y]/offeror will argue [X]/offeree gave no consideration for the offer.
1. Elements 2. Adequacy 3. Sufficiency 4. Exceptions 1. Elements
The benefit/detriment requirement
The party which the promise is made (promisee) must confer a benefit on someone, or must incur a detriment to themselves, in giving something or undertaking an obligation (Beaton v McDivitt).
Where two parties are joint promisee’s, consideration may be provided by one of them on behalf of the other (Coulls v Bagot).
Bargain requirement- quid pro quo
The benefit/detriment must be given in return for/in exchange for the promise (not some unrelated matter)- AWM v Cth.
Distinguish from requests by promisor 2. Adequacy of consideration
The common law will not inquire into the adequacy of consideration, and thus nominal consideration will be considered adequate (Woolworths v Kelly).
3. Sufficiency of consideration
There are two main forms of insufficient consideration:
I. Past consideration
Something given by the promisee before the promisor makes the promise is not good consideration. The same consideration cannot be used in respect of a subsequent promise (Roscorla).
Exception: promise to pay for past services performed at the request of the promisor (Lampleigh), and there was an ongoing understanding they would be paid for (Ipex).
II. Existing legal duty
A promise to perform an existing legal duty is not good consideration (Stilk v Mylk).
E.g. paying part of a debt is insufficient to discharge the obligation to pay the remainder of the debt (Foakes v Bear).
Exceptions:
• Promisee provides fresh consideration in respect of the promise (Hartley)
• If the promise secures a practical benefit to the promisor, no fresh consideration is required of the promisee (Williams v Roffey Bros)
Test from Musumeci:
1. X has entered into a contract with Y to provide goods/services in exchange for payment 2. Before X completes obligations, their ability to perform comes into question
3. Y promises X extra payment to ensure they can complete performance 4. In doing so, Y gets a benefit or avoids a detriment
5. X did not unduly influence Y into making the new promise
• The promise to perform an existing contractual obligation is made to a third party who is not privy to the relevant contract (Pao On)
• If the parties make a genuine, bona fide promise to resolve a dispute then the promise to perform existing legal duty is good consideration- the courts want to encourage people to comprise and resolve their disputes out of court (Wigan)
Intention
All promises must be underpinned by an intention to create legal relations (ITCLR) which is determined objectively (Shahid). [X] will argue that [Y] manifest an intention to create legal relations by _____.
1. Do any presumptions apply?
Commercial contracts: carry a strong presumption of intention (Shahid).
Social/domestic contracts: traditionally, raised a presumption of no intention (Ermogenous). Currently, the courts take a neutral approach, considering onus of proof (on the party denying existence) foremost, however the r/ship between the parties is still a relevant factor.
2. Objective test
From the perspective of a reasonable person's perspective, consider all relevant factors including:
Suggests Intention Suggests No Intention
• Commercial context (Shahid, Roufos v Brewster, Placer)
• Serious/important (Shahid, Todd)
• Detailed, formal language (Shahid, Placer)
• Employee/employer relationship (Ermogenous)
• Promissory language (Placer, Branque Brussels)
• Parliamentary approval and appropriation of (Placer)
• Vague language (Ashton, CBA v TLI)
• Absence of statutory authority (AWM)
• Lack of commercial interest (AWM)
• Broad discretion under agreement (AWM)
• Provision of gratuitous services (Leahy)
• Party previously refused to enter a binding agreement (Kleinwort)
• Mere state of policy or fact (Kleinwort, AWM)
3. Are there any special circumstances?
Government agreements: likely to be binding if commercial in nature, however the courts are unlikely to find that intention to create legal relations does not exist where the administrative or political activities of governments are concerned (AWM).
Letters of comfort: issued by a parent company on behalf of a subsidiary to demonstrate the subsidiary’s merits to a potential lender. Distinguished from a guarantee since the parent company can avoid liability on the basis of intention.
No general rule:
Banque Brussels- LoC was regarded as a commitment to perform since the creation of a meaningless document in the commercial world is unthinkable.
Klienwort- legal relations are only presumed to be intended if the words used in the document are contractual. Onus on the party alleging the K.
CBA v TLI- LoC was found to contain statements of fact rather than promises = no enforceable agreement.
1. Presumptions 2. Objective Test 3. Special circumstances
prima facie indicate the existence of a PA rather than a binding contract.
Masters v Cameron- 3 categories:
Fourth category from Baulkham Hill: where parties intend to be bound immediately but wish to add to the contract later. This is binding.
Class Binding?
The parties have reached finality with all the terms of their bargain and intend to be immediately bound to the performance of those terms, but at the same time propose to have the terms restated more fully or precisely but not different in effect.
The parties are contractually bound to perform the terms of the preliminary agreement whether or not the formal agreement comes into existence.
Parties have agreed on terms, but one or more are conditional upon the creation of a formal document
The parties are contractually bound to create and execute the formal document.
The Parties do not intend to make a concluded bargain, unless and until they execute a formal contract.
Not binding- parties may wish to negotiate terms later, introduce provisions or retain the right to withdraw
