Express Terms
Precontractual oral statements
Is the statement a term or representation?
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Representations are statements made to induce a person to enter into acontract, but which are not sufficiently promissory to be terms.
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Terms binding promises Questions to determine:Would a reasonable person in the recipient of the statement be guaranteeing its truth
● Promissory language used (JJ Savage v Blakney; State Rail v Heath)
● Relative expertise; was the person just saying what they had reasonably believed but not guaranteeing truth (Oscar Chess v Williams) versus Relative expertise; car salesman guaranteeing (Dick Bentley v HS)
● Existence of written contract to invoke Parol evidence rule; is the whole
contract in written terms (rule has no operation till deemed all in writing) (Codelfa Constructions v State Rail) – only invoke in cases where it is ambiguous whether the contract is partly oral
● Existence of entire agreement clause (Saleh v Romanous)
Is the statement a term of a collateral contract? (the above may be relevant) Collateral contract
● Contract comprising an offer which is accepted by entry into another – the main contract
● Consideration for collateral contract is entry into the main contract
● Avoid the issues of parol evidence rule if contract fully written Questions to determine:
● Statement promissory not representational intended to induce entry into the counteract
● Is the statement vague or illusory with sole discretion (Crown Melb v Cosmopolitan Hotel)
● Consistent with the main contract (Hoyts v Spencer; State Rail v Heath Outdoor) = Stand together, supplementary to main contract
● Could it ground an estoppel?
Incorporation of terms in contracts
The relevant test was whether: the party seeking to rely on a term had done what was reasonably sufficient to give the other party notice of the term.
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Signature (Toll v Alphapharm)○ Misrepresentation or ‘nature/extent of terms. (Curtis v Chemical Clean)
● Was it misleading / not contractual doc
○ Only matters whether it was contractual in nature, regardless of the subject matter e.g. application for credit but terms on transport (Toll v Alphapharm)
○ Receipt, invoice or not likely to have terms on it (Causer v Brown)
● ETA (NSW) S 9 NSW Act
● By notice (more unusual more notice of term)
○ Terms immediately available; was the term exchanged after contract formation extra terms excluded (Oceanic Sun Line v Fay)
○ If unusual accessibility of terms is insufficient (Baltic Shipping v Dillon)
○ Sign must be available (Thornton v Shoe Lane)
○ For non contractual documents, D must draw Ps attention to the exclusion clause (Causer v Brown)
● By dealings (Balmain Ferry v Robertson)
○ Previous dealings have to be regular and uniform, reasonable inference indicating acceptance and readiness to the bound (Balmain Ferry v
Robertson)
○ Must be before act (La Rosa v Nudrill)
○ Incorporation by dealings depends on the facts, the degree of the recent and consistent (La Rosa v Nudrill)
Implied Terms
Terms implied in fact (ad hoc implied terms) Onus on party alleging implication
● BP Refinery Test v Shire of Hastings (Privy Council)
○ Reasonable and equitable
○ Necessary to give business efficacy to the contract so that no term will be implied if the contract is effective without it
○ The term must be so obvious it goes without saying
■ If parties overlooked assumption, or the negotiations would have let to multiple reasonable outcomes it is not obvious (Codelfa v State Rail)
○ The term must be capable of clear expression
○ Term must not contradict any express term of the contract Considerations
● Formal and informal contracts (Byrne v Frew v Australian (1995) Informal contracts only necessary for clause for the reasonable or effective operation of the contract – need for flexibility approve in Byrne
○ Do not apply rigidly in informal contracts
Terms implied in law
● Onus on party to show contract does not fit within accepted categories of contract that have implied term – How do you define class (narrowness) important
● A simple test of necessity, is it needed for the contractual relationship to function. Consider inherent nature of the relationship/contract (Liverpool City v Irwin)
● However, differs to business necessity – instead relies on broader
considerations, including policy (UWA V Gray)
● Does it overstep the role of the legislature (Barker v CBA)
Specific terms
● Duty of good faith undetermined (Royal Botantic Garden v Council)
● Do exercise reasonableness/good faith in exercise of a discretionary power in the contract (Renard Constructions v Minister for Public works; Burger King v Hungry Jacks)
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Not to exercise powers in capricious or arbitrary manner for extraneouspurpose (Burger King v Hungry Jacks)
● Duty to cooperate; but doesn’t have to work for benefit of the other (Secured Income Real Estate v Martins Investments)
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Terms implied by custom/usage
Constan industries of Aus v Norwich Insurance Aus Pty Ltd
1. Existence of a custom or usage that will justify the implication of a term into a contract is a question of fact
2. Need not be universally accepted must be evidence that the custom is relied on so well known and acquiesced everyone making a contract can reasonably be presumed to have imported that term into the contract
3. Not be implied where it is contrary to the express terms of the agreement 4. Bound by custom notwithstanding knowledge of it
Intention to create legal relations
Traditional presumptions and modern approach:
Ermogenous v Greek Orthodox Community of SA Inc
● P claimed employed by Greek Orthodox community of SA to serve as Archbishop
● Claim entitlements e.g. accrued annual leave, loing service leave
● Paid as an employee, tax deducted, employer has right to control duties
● P claim employment contract
OUTCOME: E demonstrate legally binding contract (burden) BECAUSE:
● Take into account subject matter of agreement, status of the parties to it, their relationship to one another and other surrounding circumstances [25]
● Against the use of presumptions – presumptions suggest no more than the who has the onus of proof
● ICLR: context specific, depends on so many different factors it would be wrong to formulate general rules that apply
● Doubt the utility of presumptions, HERE no presumption applied in religious context
● Issues: ossify into rule of law → applying to all contracts (wrong) Commercial Transactions:
● The letters were statements of policy with no consideration (privy council)
○ No intention to be bound here
○ Implementation of govenrment policy different to commercial activities undertaken by the govenrment
Preliminary Agreements:
Masters v Cameron (1954)
● Written agreement reached to sell land, in which it was stated that, “this
agreement is made subject to the preparation of a formal contract of sale which shall be acceptable to my solicitors on the above terms and conditions.”
OUTCOME: no contract BECAUSE:
HC observed cases fall into
Categories 1 and 2 enforceable contracts, but category 3 are not enforceable 1. Parties may have finalised all the terms of their bargain and intend to be bound
immediately but propose to restate the terms in a form which is fuller or more precise but not different in effect (Bound whether or not formal document ever signed) 2. Parties may have completely agreed upon all the terms of their bargain and do not
intend to vary those terms but have made performance of one or more terms conditional upon the execution of a formal document (Bound to bring formal document into existence – neither party do anything until formal contract) 3. Parties may not intend to make binding agreement at all unless they execute a formal
document signed (not intended and therefore don’t have binding effect) a. Cases of third have no binding effect
This fell in the third, so they were free to withdraw from the contract
Formalities
Writing and signature:
Harvey v Edwards Dunlop
● Oral contract between three parties evidenced by correspondence
● Necessary according to statute of frauds (s 54A conveyancing Act 1919) complied with
● Claimed D owed money on contract
● Did past correspondence between parties, one of which included the necessary signature qualify
OUTCOME: Qualified, complied with – construing “some memorandum or note” (satisfied statute of frauds)
BECAUSE:
● Sufficient connection, test is pretty broad, all essential terms complete and recorded
● Joinder documents if way to read together
● Does not have to be single document
● Documents are factually connected to one another, refer to each other or some other written transaction they may be read together to satisfy the legislative requirements
● Documents must contain all terms otherwise the agreement half written half oral then it won’t qualify
Signature:
● Only through general reliance on objectively ascertainable assertive conduct can a system of entitlements function coherently, minimise conflicting claims and respect the interests of those who take the conduct of others at face value
● Accordingly: a consent theory specifies that a promisor incurs a contractual obligation the legal enforcement of which is morally justified by manifesting assent to legal enforcement
● A promise does not give rise to legal enforcement
● Objective manifestation of consent > subjective intent
Topic 2: Agreement
Chapter 3: Robertson & Paterson Principles of Contract Law Offer and acceptance
● An offer made by one party and an acceptance of that offer by ht either
● Contract is said to come into existence when acceptance of an offer has been communicated to the offeror
● Courts find difficult to fit offer and acceptance framework to every case even where the parties have clearly reached an agreement
● The traditional offer and acceptance approach is routinely applied when the courts need to decide whether a contract has been formed
● Courts will seek to attach the labels “offer” and “acceptance” to particular actions even where it seems somewhat artificial to do so
● A contract may be established without an identifiable offer and acceptance provider the parties have manifested mutual assent and appear to have reached a concluded bargain
Offer
● Offer: expression of willingness to enter into a contract on specified terms
● A proposal only amounts to offer if acceptance is united
● Brambles case: Heydon JA suggests (obiter) offer must take the form of a proposal for consideration which gives the offeree an opportunity to choose between acceptance and rejection
○ Communication which uses the language of command and peremptorily requests the other party to adopt a particular course of action may not be regarded as an offer
Determining what constitutes an offer
● Appear to a reasonable person in the position of the offeree that an offer was intended and that a binding agreement would be made upon acceptance
● As it is objective it doesn’t matter whether the offeror in fact intended to make an offer
● Court determines the offerors intention objectively according to outward manifestations
Calill v Carbolic Smoke Ball Co Facts
● Claimed to prevent colds and influenza
● Reward would be paid to any person who contracted it, used according to instructions(three times daily for two weeks)
D’s argument
1. No promise was intended, ad a ‘mere puff’: statement to bank deposit clear a promise was intended + ordinary person would think it was intended as opposed to what was actually intended
2. No offer had been made to anyone in particular: offer was made to whole world, could be accepted by any person
3. Not notified of acceptance: An offer that calls for performance of particular conditions may be accepted by performance of those conditions – usually acceptance is formally notified – may dispense with that notification
4. Agreement uncertain failed to stipulate period: smoke ball in use or with use or within a reasonable time after using it
5. Plaintiff supplied no consideration: benefit to the defendant and a detriment to the plaintiff = would have been enough to constitute good consideration for the promise
Unilateral Contracts
● One sided in which the offeree accepts the offer by performing his or her side of the bargain
● Consideration constitutes acceptance of the offer: performance of an act –
● Carlil: P accepted company’s offer by using it in accordance with the instructions + then contracting influenza
● Offer of a reward for a lost dog
○ The finder accepts the offer by returning the dog thereby does all the contract requires of him or her
○ The contract distinguished from bilateral contract formed by an exchange of promises
○ Both parties are executory at the time of formation
● Wool purchased for domestic use by Australian manufacturers AWM purchased large quantities of wool over the next two years including purchases in April, May, June 1948 respect of which subsidy had not been paid
○ June 1948 Cth announced discontinued scheme ensure each manufacturer would have a certain amount of subsidised wool in stock on 30 June 1948
○ AWM exceeded the certain amount so Cth made repaid the amount but sued to recover it
○ AWM claimed: each of announced was a contractual offer giving rise to unilateral contract
● HC held: unilateral contract to arise the promise must be made in return for doing the act
○ Element of quid pro quo
○ 1) Principal test whether the offeror has expressly or impliedly requested the doing of the act by the “offeree”.
○ 2) Look at whether the “offeror” has stated a price which the “offeree” must pay for the promise
○ 3) offer was made to induce the act
● AWM did not prove: quid pro quo, that the offer was a contractual obligation,
○ Statements of police not regarded as contract
○ An offer is only effective if it identifies valid consideration and manifests an intention to create a legal obligation + requirement of certainty
○ An offer can lead to binding agreement only if offer identifies the terms of the proposed agreement with sufficient certainty
Offers and invitations to treat
● An offer is often distinguished from an invitation to treat, which is an invitation to others to make offers or enter into negotiations
○ E.g. owner indicated might sell at certain price – invitation to treat, circulating a price list,
Shop Sales
● Display of goods for sale, ether in shop window or on shelves ordinarily treated as an invitation to treat and not an offer
○ Fisher V bell: owner displayed knife, not offering the knife
○ Pharmaceutical society v Boots: Whether sales took place under the
supervision of a registered pharmacies, Pharmacists supervise transactions at the cash registers but do not supervise customers selection form the shelves
○ P argued display = offer, however, customer can return articles from shelves (which would constitute a breach of contract)
○ Present items to the cashier, not bound until cashier accepts that offer, D complies with sales supervision, acceptance would not be effected even until communicated to the offeror so a sale must take place at checkout
○ Goodwins Newtown v Gurrey: “offering goods for sale” displayed tv sets with marked presents,
Auctions
● Public auction will usually be regarded as an invitation to treat. Auctioneer does not make an offer to sell but merely invites offers from those present at the auction.
● Each bid constitutes an offer and the auctioneer communicates acceptance of the ifnal big by the fall of the hammer.
○ No contractual claim can arise if the auction is cancelled
○ Bidder is entitled to withdraw his or her bid before it is accepted
○ Auctioneer is not obliged to sell to highest bigger
● Auction without reserve
○ AGC V Whirter: Auction without reserve did not constitute an offer and did not bind the vendor to sell to the highest bidder
Tenders
● Tender process: each interested party submitting a single big without knowing what other bids have been made
● Used for property, or government seeking contracts for operation/construction of things
● A call for written tenders: an invitation to treat, each tender constituting an offer
● A person asking for tenders dictates how it will be conducted + any conditions
● Harvela v Royal Trust
○ Call for tenders was held to amount to an offer because the vendor promised to accept the highest bid
○ Invited to submit written tenders, the letter sent by vendors “bind ourselves to accept the highest offer by complying with the conditions of tender.
○ One bid was outright $2.175m, or Outerbridge $2.1m or 101,000 in excess of other offers
○ House of Lords: question whether the invitation allowed referential bids
dependent on the presumed intention of the vendors deduced from the terms of the invitation read as a whole. Those terms were inconsistent with the making of referential bids
● May also impose obligations not to withdraw tenders, implied contractual obligation to give consideration to complying tenders,
Ticket Cases
● In determining when – rather than whether a contract was formed between two parties to identify offer + acceptance
● When a contract entered into between two jurisdictions necessary for court to determine when and where the contract was made so the court can adjudicate on the contract
● If one party gives the other notice of terms after a contract has been formed then those terms cannot form part of the contract.
● Ticket: containing contractual terms is issued after the fare has been paid and it might therefore that contract before ticket issue
● Ticket: is the offer which can be accepted or rejected by he passenger after the passenger has had a reasonable opportunity to consider the conditions on the ticket
○ Macrobertson airline v Commissioner of state taxation
■ Airlines practices was to quote faire, then issue ticket in return for fare
■ Ticket contained condition giving airline the right to cancel a flight or booking without incurring any liability
■ Ticket did not record terms of an agreement, but the terms of an offer which can be accepted by conduct
■ Barwick CJ: exemptions relieved airline from obligation to carry
passenger, uncertainties air travel preclude promise to carry passenger
● The passenger was in effect making an offer, which would be accepted by conduct
● If the airline carried the passenger then the airline is entitled to the fare as a reward. If passenger not carried, airline no obligation other than refund
● No contractual obligation b/w airline + passenger until airline provided the passenger with a seat on the plane
■ CONVENTIONAL APPROACH: Stephen J: ticket constitutes an offer by the airline, which is capable of acceptance of rejection by the passenger once the passenger has had a reasonable opportunity to read the conditions
● Ticket records the terms of an offer.
■ Jacobs J & Barwick: formation of contract could not precede the notification of special conditions, ticket simply recorded the terms of an offer made by an airline
■ Jacobs J: issue of ticket constitute an offer made to passenger, which the passenger can accept by presenting herself or himself for travel
● Issues with offer + acceptance model doctrine of offer and acceptance in everyday contractual situations are iproblematic
● Stephen J noted: passengers were not given the opportunity to negotiate the terms of the contract and any attempt to negotiate would “in any event, usually be pointless”
since the carrier was willing to contract only on its standard terms.
Electronic Transactions
● Electronic transactions – raise issues
● No particular need for legislation to consider offer and acceptance – there is Electronic Transaction acts (ETAs) which provide broader regulatory framework that facilitates and promotes confidence in electronic transactions.
○ ETAs influenced by UN convention on the matter
● Legislation provides:
1. Proposal to make a contract not addressed to person, but made generally to people online is to be treated as an invitation to make offers unless it clearly indicates an intention to be bound in the case of acceptance
a. Intended: to ensure that websites offering goods or services should generally be considered to be making an invitation to treat, rather than an offer
2. Contract formed between natural person + automated system, or bw two automated systems is not invalid merely on the ground that a natural person was not directly involved in the process
3. Natural person makes an input error, the system provides no opportunity to correct the error , then the person is entitled to withdraw the portion of the communication in which the input error was made. Provided it is done as soon as learning of error and they haven’t received benefit from goods or services provided by other party
a. Not a right to rescind contract
b. E.g. accidentally booked a seat to travel on wrong date, no opportunity to correct, withdrawal of that portion of communication would undermine the validity of the contract since the withdrawn communication would have identified the subject matter of the contract