Table of Contents
CONTRACT A NOTES ... 1
INTRODUCTION TO CONTRACTS: ... 2
ELEMENTS OF A CONTRACT ... 3
FORMATION OF A CONTRACT -AGREEMENT ... 3
Agreement: Offer ... 3
Agreement: Acceptance ... 7
Agreement: Correspondence between offer and acceptance ... 10
FORMATION OF A CONTRACT –CONSIDERATION ... 10
FORMATION OF A CONTRACT:INTENTION TO CREATE LEGAL RELATIONS ... 15
FORMATION OF A CONTRACT:CERTAINTY ... 20
CONTRACT FORMATION:FORMALITIES ... 24
PRIVITY ... 28
WHO IS PRIVY TO THE K? ... 28
CIRCUMVENTING THE PRIVITY RULE ... 28
PRIVITY CRITICISM AND REFORM ... 31
CAPACITY ... 31
CONTRACTS BINDING ON A MINOR ... 32
CONTRACTS BINDING UNLESS REPUDIATED (OPT OUT) ... 32
CONTRACTS NOT BINDING UNLESS RATIFIED (OPT IN) ... 32
VOID CONTRACTS ... 33
MENTAL INCAPACITY AND INTOXICATION ... 33
ESTOPPEL ... 33
ELEMENTS OF ESTOPPEL ... 35
EFFECT OF ESTOPPEL ... 37
IDENTIFYING THE EXPRESS TERMS ... 39
INCORPORATION BY SIGNATURE ... 39
INCORPORATION BY NOTICE ... 40
INCORPORATION BY A COURSE OF DEALINGS ... 43
STATEMENTS MADE DURING NEGOTIATIONS ... 44
CONSTRUING THE EXPRESS TERMS ... 48
PER:USE OF EXTRINSIC EVIDENCE IN CONSTRUING THE TERMS OF A K ... 48
PROCESS OF CONSTRUCTION ... 50
CONSTRUCTION OF EXCLUSION CLAUSES ... 51
IMPLIED TERMS – IN FACT, IN LAW, BY CUSTOM, GOOD FAITH ... 52
TERM IMPLIED IN FACT ... 52
TERM IMPLIED IN LAW ... 54
TERM IMPLIED BY CUSTOM ... 56
GOOD FAITH AS AN IMPLIED TERM ... 56
CONSUMER CONTRACTS – AUSTRALIAN CONSUMER LAW (ACL) ... 59
UNFAIR CONTRACT TERMS:PART 2-3ACL ... 64
CONSUMER GUARANTEES:PART 3-2 ... 64
Introduction to Contracts:
What is a contract?
A legally enforceable promise
Party X will argue that they have a contract, being an enforceable and legally binding promise for _, whilst Party Y will argue that this is not a valid contract and thus not enforceable.
Party X must show that there was agreement, consideration, intention, certainty and formalities, as well as address capacity and privity if relevant.
Internationalisation of contract law
UNIDROIT Principles of International Commercial Contracts 2010
• Rules of contract law for international commercial contracts
• Only applies when parties opt in with an express provision in their contract to be governed by these rules
UN Convention on Contracts for the International Sale of Goods 1980 (Schedule to Goods Act 1958 (Vic)) (‘CISG’), Preamble, Articles 1 - 6, Article 7(1)
• An international trade convention
• Rules for international sale of goods
• Has force of law in Victoria (displaces domestic law) – schedule to Goods Act 1958 (Vic)
When does CISG apply?
• Per Article 1, it applies to contracts between private businesses for the international sale of goods
o between parties with places of business in different countries that have ratified CISG; or
o where rules of private international law (conflict of law rules) would apply the law of a country that has ratified CISG as governing the contract; or
o where parties ‘opt in’ and choose CISG to apply (even if their
businesses aren’t in ratifying counties, eg by choosing the governing law of a country that has ratified CISG).
§ 84 Countries, including Australia, have ratified CISG. Also: New Zealand, USA, China, Japan, and Germany (not United Kingdom)
When doesn’t CISG apply?
• Per Article 1, CISG does not apply to domestic contracts for the sale of goods (i.e. both parties in Australia), as this is goverened by Australian domestic law (case law and Goods Act 1958 (Vic)).
• Art 2(a) Not to sales to consumers (personal, family or household use)
• Art 3: Not to sales for services (nor mixed contracts where main part of contract is for labour/services)
• Art 2: Not to sales of certain excluded goods: by auction / stocks, shares or money / ships, vessels, hovercraft or aircraft / electricity.
• Article 6: Not when parties have agreed to exclude the CISG What does CISG cover?
• Per Article 4, it covers formation of a contract, and the rights and obligations of the seller and buyer
• Per Article 4, it does not cover the validity of a contract or the effect of the contract on the property of goods sold (domestic law applies)
Interpreting CISG
• Per Article 7(1), CISG is to be interpreted with regard to its international character and the need to promote uniformity in its application and the observance of good faith in international trade
• Interpret autonomously (without reference to domestic contract law), and can use as aids to interpreting: legislative history, case law (courts around world), scholarship and CISG Advisory Council opinions, where reference to general principles on which CISG based are absent (7(2)).
Elements of a Contract
Formation of a Contract - Agreement
The traditional way to establish agreement is by an offer made by the offeror, and acceptance from the offeree.
This agreement occurs when acceptance is communicated by the offeree to the offeror (except in unilaterial contracts; performance is acceptance; Carlill) Bilateral contracts:
• 2 parties to the K (A and B)
• Both parties exchange a promise/set of promises for each to do something in future (A promises to transfer ownership of car, in return, B promises to pay)
• Both A & B’s promises are executory; to be performed after K formed Unilateral contracts:
• Usually a reward scenario; ‘if you do X then I will do Y (a promise if you do it;
you accept by doing it, rather than a promise in return)
• Still 2 parties to the K (A and B)
• Only 1 promise made
• B accepts A’s offer when B performs the task. K formed at time B performs the obligations under it. No need to give notice of acceptance prior to performance.
• At time K formed, A’s promise is executor and B’s obligation has been executed (already performed)
• E.g. Carlill; Mobil Oil Agreement: Offer
The court takes an objective approach; “An offer is an objective manifestation of willingness to be bound by certain terms, upon the acceptance of those terms by the relevant party” per Lord Denning in Gibson v MCC.
Gibson v MCC is authority for the traditional approach of identifying offer and acceptance objectively, and the need that language be sufficiently certain and promissory.
