CONTRACTS EXAM NOTE

(1)

CONTRACTS EXAM NOTE

(2)

OVERVIEW

1. Does (or did) X have a right to A against Y?

a. Does A form part of a contract between X and Y?

i. Has A been incorporated?

1. By signature?

2. By notice

3. By pre-contractual statement

a. Can the PER be circumvented by partly oral contract?

b. Can the PER be circumvented by collateral contract?

ii. Is A the meaning of a term?

1. What evidence is available and potentially relevant?

2. In light of that evidence, what would a reasonable business person understand the term to mean?

iii. Can the contract be rectified to include A?

1. Can the contract be rectified for common mistake?

2. Can the contract be rectified for unilateral mistake?

iv. Is the term providing A void as an unfair term?

v. Does an implied term give X a right to A or constrain A?

1. Is A implied in fact to give business efficacy?

2. Is A implied in law in a class of contracts?

3. Is A encompassed by the duty to cooperate?

4. Is A encompassed, precluded or made available by a duty to act reasonably or in GF?

b. If not, is A enforceable by way of promissory estoppel?

c. Has the contract been terminated (or is Y entitled to terminate it)?

i. By frustration?

1. If yes, what are the consequences?

2. Can X or Y obtain a remedy under the ACL & FT Act 2012?

ii. By non-fulfilment of a condition?

iii. By breach?

iv. Is Y prevented from terminating?

v. Would a court grant relief against forfeiture?

d. Is the contract void, voidable or unenforceable?

i. For mistake?

1. Common?

2. Unilateral?

ii. For duress?

iii. For undue influence?

iv. For unconscionable dealing?

v. Under the rule in Yerkey v Jones?

vi. For illegality or on public policy grounds?

2. Can x obtain a remedy under statute against Y?

a. Has Y breached a consumer guarantee?

b. For unwritten law unconscionable conduct (s 20)?

c. For unconscionable conduct in connection with the supply of goods or services (s 21)?

A could be:

• A promise made by Y to do something (e.g. perform services, transfer property or indemnify X against some loss)

• A promise by Y not to do something (eg, not to sue X, not to enforce a particular term or not to terminate a contract)

(5)

• A limitation or exclusion of X’s liability to Y (in contract or in tort)

• A warranty as to particular fact which has proved not to be true

• A power given X to do something (eg to increase rent under a lease or terminate a contract)

INCORPORATION OF TERMS

IMPORTANT: For a party to enforce a term, it must have been incorporated as part of the agreement between the parties. This can be done through signature, notice or, in some cases, statements made

during negotiations.

Signature 1. Was the term incorporated by signature?

1. RULE: Parties are bound to the agreement if the document is signed, regardless of whether the terms have been read or understood, as long as the document was objectively known to contain contractual terms and there are not vitiating factors at the formation stage (L’Estrange, endorsed by HCA in Toll)

2. Has the document been signed?

2. Was there circumstances in which the effect of signature may be avoided?

1. Misrepresentation

a. RULE: L’Estrange rules WILL NOT APPLY if there is a claim of:

i. Misrepresentation (Curtis) ii. Non est factum

1. Defence that allows signing party to escape performance from contract different from their intention to sign

iii. Equitable grounds for setting aside the contract

b. RULE: When a signature to a condition of a contract, purporting to exempt liability, is obtained as a result of misrepresentation (innocent or otherwise) the party making the representation is disentitled from relying on the exemption (Curtis)

c. Innocent misrepresentation

i. RULE: Intentions of the party making the misrepresentations are irrelevant. There is no distinction between innocent or deliberate misrepresentation (Curtis per Denning LJ)

2. Non-contractual documents

a. RULE: The rule in L’Estrange does not apply where the document could not reasonably be considered a contractual document (Toll)

b. Document title/reasonable expectation

i. Document headed ‘Sales Agreement’ evinces its contractual nature (Toll) ii. A receipt, or a receipt or voucher will not be bound (Curtis)

1. HOWEVER, can be bound if orally reinforced by the worker (Curtis)

Toll v Alphapharm

• Facts: RT agreed with A to deal with flu shot → RT then contracted T to transport the vaccines. RT to complete credit application which said “please read ‘Condition of Contract’ (overleaf) prior to signing. RT signs off without reading. A sues for loss. T did not give ‘reasonable notice’ of the terms RT signed off on.

• Reasoning:

o If you sign document known to contain contractual terms/affect legal relations = bound whether you read terms or not. Notice NOT required.

o Signature here is accompanied by a request to read overleaf – couldn’t be much more obvious.

o T confirms that we should only consider the objective intentions of the parties

(6)

Curtis v Chemical Cleaning & Dyeing Co

• Fact: C took wedding dress for cleaning, given receipt to sign, told by CCD assistant that it was to waive liability for some stuff → innocent misrepresentation where it actually is to waive all liability. Dress was damaged and CCD tried to rely on the blanket liability waiver.

• Reasoning:

o Misrepresentation is enough to escape incorporation by signature even if false impression or innocent.

o Can extend to outer document → the heading receipt may have created it

Notice

EXAM: If we can’t apply signature rule here, then the question is whether there was sufficient notice given on this term in the transaction. Terms appearing on unsigned documents may be incorporated into the contract only if reasonable notice was given to X. This requires an analysis of when notice was given and

whether the X had knowledge of these terms. Y must do all that was reasonably necessary to bring the term to X’s notice (Thornton)

1. Did Y provide notice to X before the contract was formed?

For delivered or displayed terms to be incorporated into a contract, and to therefore be binding, the terms must be made available before contract formation (Oceanic)

1. Only terms made available in a timely manner can be incorporated 2. Notice provided after formation cannot be added to terms (Oceanic) 3. Practicality: must be practicable for X to gain knowledge of the terms

a. Oceanic: not enough reasonable notice to say that the client can go to the office to see the terms

2. Did X have knowledge or proper notice of the term?

1. RULE: Party to be bound must either have actual knowledge of the terms or have been given reasonable notice of those terms

2. Party who knows that a document or a sign displayed before formation contains contractual terms will be bound (Parker)

3. Reasonable notice of contractual document

a. RULE: If the document is one that a reasonable person would expect to contain terms, mere presentation of the document will be sufficient notice

4. Reasonable notice of non-contractual documents

a. If terms not contained in document that is an obvious document, the party seeking to incorporate terms must take reasonable steps to bring those terms to notice

5. If there is merely reference to another document which contains the terms, this is insufficient (Toll)

6. Is the clause peculiar?

a. Peculiarity of the clause may increase the level of notice necessary (Oceanic per Brennan J)

3. Did X have the OPPORTUNITY to accept or reject the terms?

A party will be bound by delivered or displayed terms if the terms have been made available such a form that the party to be bound can be taken to have been given reasonable notice of them and has a

reasonable opportunity to accept or reject the terms (Thornton)

1. Thornton: conditions not visible from entrance and where ticket was issued = not bound 2. Ticket was dispensed from an automatic machine → customer had no chance to refuse

3. Oceanic: purchased an ‘exchange order’ → did not have the opportunity to accept or reject the terms as they were supplied upon receipt of the ticket

(7)

4. Are the terms ONEROUS?

1. RULE: If the terms are particularly onerous/excessive, more may be required for a court to consider the requirement of reasonable notice satisfied (Thornton)

a. If misrepresentation → Toll will not apply 2. UNUSAL TERM

a. Destructive of rights → must be explicit attention drawn to the term (Thornton) b. Prominence of notice must be proportionate to the unusual nature of the term

Oceanic Sun Line Special Shipping Company v Fay

• Fact: F booked and paid for Greek cruise and received exchange order. In Greece, G gets ticket with clause for Greece jurisdiction. F injured and tries to sue in NSW.

• Reasoning:

o Contract formed in NSW NOT in Greece – exchange order obliged the issuing of ticket and couldn’t Fay couldn’t have read the clause in Greece. If trying to incorporate via notice and other party not aware → MUST do what is reasonably necessary

o Term not available in NSW, stating ticket contains further terms not sufficient o IF terms not available at formation → CAN’T be incorporated later

Thornton v Shoe Lane Parking Ltd

• Facts: T parked car at SL lot with terms placed outside. Issued ticket from machine which stated issued subject to other conditions listed on the premises. T injured.

• Reasoning:

o Contract formed when T received the ticket – cannot reject to the machine

o Listing terms on an inaccessible sign was not enough – couldn’t back out of the contract once you find out

Statements made during Negotiation

TRIGGER: Term that is different from what the party agreed/promised to in negotiation

ISSUE: Can the verbal statement that was made prior to contract formation, but is not reflected in the written contract, be incorporated into the written contract?

If the agreement has not been reduced to writing, or the term at issue has not been reduced to writing, the court may incorporate the term if it is a sufficiently promissory term which carried intention to be legally bound (JJ Savage). A court will objectively infer this by considering extrinsic evidence. Therefore evidence

must be admissible through a circumvention of the Parole Evidence Rule.

IF statement was:

• A term of contract (warranty) → proves false → remedy for breach of contract

• NOT a term of contract (mere representation) → proves false → NO remedy for breach of contract

1. Is the statement promissory?

RULE: Statement is a contractual promise when parties objectively intended it to be contractually binding (Oscar Chess).

TEST: Court will ask whether an intelligent bystander would reasonably infer that the promise waws intended to be binding (Oscar Chess).

1. Language

a. Promise: ‘I guarantee’ → likely to be construed as being promissory in nature (e.g. I warrant, I assure; non-promissory: I believe, estimate)

b. HOWEVER: difficult to ascertain its nature from form alone → further consideration of the wider circumstances is required

CONTRACTS EXAM NOTE