LAWS50029 - CONTRACTS
INTERIM NOTES
CONTENTS TERMS
Incorporation of terms………..2 Interpretation of terms………..6 Implied terms………..9
1
STATEMENTS MADE DURING NEGOTIATIONS
WHEN OCCUR? When a statement that is made by a party during a negotiation is different from the term that is agreed upon —> Can a verbal statement that was made prior to the contract formation, but that is not reflected in the written contract, be incorporated into the written contract?
The Court may incorporate the term if it is sufficiently promissory, which carried the intention to be legally binding (JJ Savage)
Considered by looking at extrinsic evidence, therefore evidence has to be admissible through circumventing the parol evidence rule
IF statement was:
• a term of the contract (warranty) —> proves false = remedy for breach of contract
• not a term of contract (mere representation) —> proves false = NO remedy for breach of contract Is the statement promissory?
3
NOTICE
• If no signature, question is about sufficient notice
• terms on unsigned docs can be incorporated if rble notice was given to Y
• analysis of when notice was given & whether Y had knowledge of those terms
• X must do all that is rbly nec to bring the term’s to Y’s notice (Thornton) Did X provide notice to Y before the contract was formed?
Notice must be given before the contract is formed; Brennan J
in Oceanic Notice given after the contract is formed
cannot be added to the terms
Terms printed on ticket not part of the contract if the contract = formed b4 those terms become available
Thornton
Did Y have knowledge or proper notice of the term?
Party = bound if they know the contractual terms, or if other party did what was rbly suff to
give notice Thornton
Extra steps needed when exemption clause
= wide
the exemption clause…is so wide and destructive of rights that the court should not hold any man bound to it unless it is drawn in the most explicit way…in order to give suff notice, it would need to be printed in red ink with a red hand pointing to it - or something equally as startling
Lord Denning in Thornton
Reference to another document which contains the terms = insuff
“insufficiency of opportunity for the passenger who is boarding a vessel to read the conditions printed on the ticket and to elect whether to accept them…could be made only after travelling to Greece and obtaining the ticket”
Toll
If unusual clause “differing steps may be needed to bring an exemption clause to a passenger’s notice, especially if the clause is an unusual one”
Brennan J in Oceanic Did Y have an opportunity to accept or reject the terms?
No opportunity to refuse it, because from an automatic machine
“the customer pays money and gets a ticket. He cannot refuse it” (from an automatic machine)
“committed…[once] he put his money into the machine”
Lord Denning in Thornton The sign with the terms written on it was inaccessible from the carpark entrance Thornton
Is there any available evidence?
Can use: evidence that shows the genesis, objective
aim or meaning of the contract
Heydon JA in Brambles evidence must be known to both parties Codelfa Subjective intention can only be about the
parties refusing to include things that would otherwise be presumed
Ecosse
other parts of the contract - “the meaning of any one part of it may be revealed by other parts”
Gibbs CJ in ABC
Can’t use: evidence of negotiation Codelfa
post-contractual conduct Brambles
evidence of subjective intentions Brambles Exceptions to the true rule
Long est exceptions • local custom
• trade usage
• est unconventional usage between the parties Latent ambiguity
i.e. a legacy to my nephew John, where the testator had two nephews of that name
“exists when a description, evidently meant to apply to one person or thing, is shown to be equally applicable to more than one person or thing”
Latham CJ in Hope
Identification of subject matter “when there is a contract for the sale of a specific subject matter, oral evidence may be received, for the purpose of shewing what the subject matter was, of every fact within the knowledge of the parties before and at the time of the contract”
Mason J in Codelfa quoting Lord Campbell in
Macdonald DETERMINING THE MEANING/EFFECT OF TERMS
The objective approach
Terms of a contract are construed objectively by reference to what a rble person in the position of the parties (not subjective intention) (Toll) would have understood them to mean when read as a whole
Ecosse
EVEN IF parties agree to a subjective meaning, the objective approach is preferred/
prescribed by the Courts Brambles
Applying the objective approach:
Focus on the objective meaning of the words used/what a rble businessperson would
understand it to mean, look at: Woodside
The language used check other clauses/rest of the contract bc
often something there will help Woodside
Genesis (origin) of the transaction Woodside
consider commercial purpose/objects If the result = absurd, courts will move away from this, conclude parties must have made mistake (Jireh)
Woodside
7
• some terms may exist as part of a class of contracts/all contracts by law
• standardised terms that ‘operate as default rules’ (Lord Steyn in Equitable Life Assurance)
• implication in fact/law can overlap - if imp in law fails, could try in fact
Can we imply new terms by law?
VERY DIFFICULT - not for the court to imply but for the
legislature CBA v
Barker
The term must be nec to prevent the enjoyment of rights being rendered nugatory/worthless/seriously undermined
McHugh and Gummow JJ in Byrne Informal (pw or po or o) contracts? —> implying in fact
Where a contract is not fully in writing, BP Refinery criteria may be able to be softened (softens necessity = easier)
The fact that is paramount = “whether the implication of the particular term is necessary for the rble or effective operation of the contract” notion of necessity = crucial
McHugh and Gummow JJ in Byrne
If unusual clause “differing steps may be needed to bring an exemption clause to a passenger’s notice, especially if the clause is an unusual one”
Brennan J in Oceanic DUTY TO COOPERATE (FACT OR LAW)
• implied in every contract
“it is a general rule applicable to every contract that each party agrees, by imp, to do all such things as are necessary to enable the other party to have the benefit of the contract”
Griffith CJ in Butt v McDonald Duty to cooperate stated
too broadly in Butt
“the scope of the duty is defined by what has been promised under the contract; it is not a general duty to ensure another party obtains an anticipated benefit”
Wheelan J in Wolfe
Is the Act necessary for the performance of fundamental obligations under the contract?
duty to coop exists
• you must do the acts nec for the performance of the fundamental obs of the contract
Mason J in Secured Income Is the Act necessary so that the other
party gets a benefit?
may or may not be a duty to coop
• these are not acts that are essential to the performance & not fundamental to the contract
• must interpret the contract - look at intention of the parties that is manifested in the contract DUTY TO ACT IN GOOD FAITH & REASONABLENESS
Most judges seem to take the view that it should only be implied where justified by recognised principles in particular classes of contract or in particular contracts
• HC has not ruled out whether Aus law recognises general duty of GFR
• VIC: term may be implied (from obiter) (Esso)
• NSW: term may be implied by law (Burger King)
LOOK FOR: one part having unfettered discretion to perform one part of the contract, i.e.:
• Promotions, pay rises, award extra annual leave
• Look for words incl: in their sole discretion, from time to time one party may…
• sole discretion (Burger King)