Week 1 – Identifying the Express Terms
Identifying the express terms
What have the parties by words (written/oral) promised each other as part of the contract?
• Incorporated into the parties’ contract:
-‐ By signature (L’Estrange v Graucob pg. 386) -‐ By notice (Oceanic Sun Line pg. 399)
-‐ By course of dealings (Balmain New Ferry v Robertson pg. 408)
• Found in statements made by parties during pre-‐contractual negotiations Signature
• Party bound regardless of not reading (L’Estrange) or unusual terms (Toll pg. 386)
• Will not be bound where there has been:
-‐ Fraud or misrepresentation (L’Estrange; Curtis v Chemical Cleaning pg. 397) -‐ Duress, mistake or other vitiating element/statutory relief (Toll)
-‐ Document signed not reasonably be understood to be contractual in character (Curtis v Chemical Cleaning; Rinaldi & Patroni pg. 409)
Notice
• Displaying terms on sign/standard form/ticket/invoice etc
• P accepts where P knew of terms or was aware there were terms -‐ Thornton v Shoe Lane Parking (pg. 402)
• D has done what was reasonable in circumstances to give notice of terms to P -‐ Timing (Olley; Thornton; Oceanic Sun Line)
-‐ Reasonable notice (Thornton; Oceanic Sun Line; Baltic Shipping pg. 405)
Test: Did the party know the document contained terms, or, at the point where acceptance took place, had the offeror done what was reasonable to give notice of the terms?
Incorporation by course of dealing
Test: Whether the party knew or ought reasonably to have known from previous course of dealings that the other party only contracted on basis of particular terms -‐ Balmain New Ferry v Robertson (pg. 408)
• Course of dealing needs to be regular and uniform (Henry Kendall pg. 409)
• Document containing term sought to be incorporated must have been considered as a contractual document and not a mere receipt (Hill v Wright; Rinaldi)
Statements made during negotiations
• Relief available depends on whether defendant’s statement is held to be:
-‐ A term of the contract à damages
-‐ A representation inducing the contract à undo contract or damages in tort -‐ Mere puff – no remedy
Identifying the express terms
1. Is evidence of the pre-‐contractual statement(s) admissible?
-‐ Parol evidence rule à admissible if contract is oral or part oral/part written 2. Is the pre-‐contractual statement a term (JJ Savage pg. 432; Oscar Chess pg. 433)
-‐ Must be promissory, not mere puff or mere representation (JJ Savage)
Parol evidence rule (PER – pg. 415) (State Rail Authority of NSW v Heath Outdoor pg. 416)
• Applies where court satisfied that document intended to be wholly in writing
• Excludes:
-‐ Extrinsic evidence of prior negotiations
-‐ Extrinsic evidence of parties actual subjective intentions -‐ Extrinsic evidence of subsequent conduct of parties
• May avoid the effect by establishing:
-‐ Contract not wholly in writing (e.g. part oral – pre-‐contractual negotiation) Ø SRA v Heath Outdoors
-‐ Collateral contract – Connected to but independent of main contract
Ø In exchange for which other party enters main contract (consideration) Ø Hoyt’s v Spencer (pg. 421)
-‐ Estoppel (Saleh v Romanous pg. 425; Norco pg. 429)
Week 2 – Interpreting the Express Terms
Interpreting the express terms
• Test: Looking for an intention to make a binding promise (JJ Savage)
-‐ Aim to give effect to parties’ intention, to guarantee truth of the statement -‐ Intention to guarantee/warrant the truth is ascertained objectively from the
totality of the evidence (Oscar Chess)
1. What extrinsic evidence is admissible in construing/interpreting the contract?
• Part oral/part written: All evidence admissible
• Written: PER excludes evidence that varies terms of the written contract -‐ E.g. subjective intentions, prior negotiations or subsequent conduct
-‐ Meaning of terms is to be determined in context (writing) of contract as a whole What evidence of surrounding circumstances is admissible?
Evidence of surrounding circumstances is admissible only where the language of the contract is ambiguous or susceptible of more than one meaning (Codelfa).
• Objective framework of facts within which the contract came into existence -‐ Parties presumed intentions within this setting (Codelfa (pg. 515)
Ø Factual background known to both parties before/at date of contract Ø Evidence of genesis/aim/commercial purpose of transaction
2. What is the process by which the court construes the contract?
• Intention is determined objectively – Pacific v BNP (pg. 444)
-‐ What would a reasonable person in position of parties understand by the terms?
• Look to natural and ordinary meaning of the words the parties have used (Delco)
• Consider in light of contract as a whole, giving due weight to context (Delco)
“When there are two constructions, the meaning that will be preferred will be one that avoids consequences that appear capricious, unreasonable, inconvenient or unjust”
(Australian Broadcasting Commission v Australasian Performing Rights Association (1973) 129 CLR 99 at 109-‐10, Gibbs J -‐ pg. 318).
Exclusion clauses
• Exclude liability for breach of contract or other duties arising at law (e.g. negligence) -‐ Darlington v Delco (pg. 447)
• Limit a party’s liability (e.g. to a fixed sum) -‐ Darlington
• Make liability subject to satisfying certain preconditions -‐ NY Star
Must first consider legislative restrictions, and then apply the common law approach:
• As a matter of construction, does the exclusion clause exclude or limit the liability in question (i.e. liability that has arisen on the given facts)?
-‐ Depends on intention of the parties as expressed in their contract -‐ Onus of proof on party who seeks protection of the exclusion clause
• Different rules of construction where ambiguity arises
-‐ Construe the clause according to its natural and ordinary meaning… but where there is ambiguity, construe “contra proferentem” (least favourable to party seeking to rely upon it – ‘against the offeror’)
Ø Darlington v Delco