HOW TO MAKE AN
AGREEMENT A
CONTRACT!
Steve Brown, Partner
Sbrown@normans.com.au

Overview Of Presentation
The difference between agreements and contracts?
Agreements & contracts – how are they the same?
Why have a contract instead of an agreement?
What distinguishes Contracts & Agreements
Types of Contracts
Negotiating a contract or agreement what to watch out for:
Promissory estoppel
Misleading & deceptive conduct
Unconscionable conduct
Steve Brown, Partner
Sbrown@normans.com.au

The Difference Between
Agreements and Contracts?
Agreements are not as a general
rule:
Legally enforceable
Courts will not involve themselves.
Steve Brown, Partner
Sbrown@normans.com.au

The Difference Between
Agreements and Contracts?
Contracts are ALWAYS:
Legally enforceable
Courts will enforce as the law
dictates
Steve Brown, Partner
Sbrown@normans.com.au

Non Enforceable Agreement
If you wash my car
I’ll give you $10
Steve Brown, Partner
Sbrown@normans.com.au

Non Enforceable Agreement
I’ll pick you up for
dinner at 8 o’clock
Steve Brown, Partner
Sbrown@normans.com.au

Contracts & Agreements –
How Are They the Same?
Practical Answer – they are both
Risk Minimization tools that operate
as
Checklists or Rule Books by applying
Performance standards
Steve Brown, Partner
Sbrown@normans.com.au

Contracts & Agreements – How Are
They the Same as Risk Tools
Agreement to meet and discuss a form of long
term supply arrangement
Contract to supply an apple
Contract or agreement to import
coal tare and toll manufacture
chemicals in Australia
Steve Brown, Partner
Sbrown@normans.com.au

Contracts & Agreement - As
Checklists or Rule Books
Who is to do what – who is supply goods or
services; Who is paying for the goods or
services.
When are the servicesgoods to be supplied –
when are they to be paid for.
How are the servicesgoods to be supplied.
Consequences of good or poor performance.
Steve Brown, Partner
Sbrown@normans.com.au

Why have a Contract instead of
an Agreement
Risk
Formality &
Legality
least formal to most formal form
form of Agreement oral contract of written
contract
Steve Brown, Partner
Sbrown@normans.com.au

What Distinguishes Contracts
& Agreements?
Contracts MUST comprise Agreements MAY comprise
An offer An offer
Acceptance of the offer Acceptance of the offer
Consideration Consideration
Between parties that have Between parties that have
capacity to contract capacity to contract
An intention to be legally Agreements ALWAYS lack
bound An intention to be legally bound
Steve Brown, Partner
Sbrown@normans.com.au

Types & Forms of Contracts
Oral
Partly oral / Partly Written - varied by phone
Written
Informal - exchange of letters
Formal
Standard
Negotiated
Steve Brown, Partner
Sbrown@normans.com.au

The Case for Standard Forms
Understood by industry
Legally interpreted (precedent)
Trust in project relationship
Familiarity in administration and making of claims
Steve Brown, Partner
Sbrown@normans.com.au

The Case for One-off
One-off
Contracts
Needs of project
Non-traditional project strategy
“No risk” client /certainty of outcomes?
Addresses particular problems of standard forms
Steve Brown, Partner
Sbrown@normans.com.au

Contractual
Concepts - Offer
An offer must be made
Invitations to treat are not offers
Oral, written or conduct
When does an offer end
Withdrawal
Rejection
Lapse of time
Death of offeror or offeree
Steve Brown, Partner
Sbrown@normans.com.au

Is This an Offer?
Are you interested
in buying Tanalith?
Steve Brown, Partner
Sbrown@normans.com.au

Is This an Offer?
I will sell you 2
tonne of Tanalith
for $5,000.
Steve Brown, Partner
Sbrown@normans.com.au

Contractual Concepts -
Acceptance
An offer must be accepted on exactly the same terms as
offered
Oral
Written
Conduct
Steve Brown, Partner
Sbrown@normans.com.au

Examples of Acceptance
Letter
Telephone
Fax
Face to face
Steve Brown, Partner
Sbrown@normans.com.au

Examples of Acceptance
And even email under the electronic transactions acts
BLUE Co. RED Co.
Email Sender Email Receiver
Worldwide Web
Steve Brown, Partner
Sbrown@normans.com.au

Contractual Concepts -Implied
Terms
Business efficacy
The Moorcock (1889)
Statute
Steve Brown, Partner
Sbrown@normans.com.au

Negotiating What to Look Out
For…promissory Estoppel
What is it?
Cases
Central London Property Trust v.
High Trees House Limited
Waltons Stores v. Maher
Steve Brown, Partner
Sbrown@normans.com.au

Elements Necessary
Elements necessary to enforce a promise under the doctrine
of estoppel
Some form of legal relationship either exists or is
anticipated to exist between the parties.
A representation or promise by one party.
Reliance by the other party on the promise or
representation.
The party relying on the promise must suffer a
detriment.
Unconscionability.
Steve Brown, Partner
Sbrown@normans.com.au

Unconscionably for Promissory
Estoppel
Three elements must be present:
"Special disability"
Exploitation of the weakness
Unfair or "unconscientiously" to procure agreement in the
circumstances
Steve Brown, Partner
Sbrown@normans.com.au

Central London Property Trust
v
High Tree House Limited (1947)
Steve Brown, Partner
Sbrown@normans.com.au

Waltons Stores v Maher (1988)
Steve Brown, Partner
Sbrown@normans.com.au

Negotiating What to Look Out
For…Statutory Impact on
Contract Law
Steve Brown, Partner
Sbrown@normans.com.au

Statutory Impact on Contract
Law
Misleading or deceptive conduct
Trade practices act (Cth) ss 52 & 53 (commerce act (NZ))
Fair trading act (NSW) s. 42
Unconscionable conduct
Trade practices act (Cth) pt IVA
Fair trading act s. 43
Contracts review act (NSW only)
Steve Brown, Partner
Sbrown@normans.com.au

Misleading or Deceptive
Conduct
Strict liability Silence
Actual deception Ambiguity
Overall impression Erroneous assumption
Product puff Half truths
Steve Brown, Partner
Sbrown@normans.com.au

Misleading conduct - s 52 Example
Four principles were established in the case of Taco Co of Australia v
Taco Bell Pty Ltd (1982) ATPR 40-303 as assisting to
determine whether conduct is misleading or deceptive.
1. The relevant section of the public must be identified.
2. All people within that section must be considered including the
intelligent and not so intelligent, the educated and uneducated.
3. Evidence that someone was misled is helpful, but is neither
conclusive nor essential.
4. When a misconception has arisen it is important to determine
why, in order to see if it was the business' conduct that caused
it.
Steve Brown, Partner
Sbrown@normans.com.au

Misleading conduct - s 52
A SECOND PRINCIPLE:
It's the overall impression on the target audience that counts
silence can be misleading
silence can be misleading
--if there is a duty to speak
if there is a duty to speak
a prediction can be
a prediction can be
misleading --if there's no
misleading if there's no
reasonable ground to
reasonable ground to
make it
make it
Steve Brown, Partner
Sbrown@normans.com.au

What Conduct Can Be Misleading?
Misleading conduct can occur in any business communication,
such as:
advertising, brochures, commercials
Tenders
Exclusion clauses
telephone conversations
business proposals
....in fact, just about anywhere
Steve Brown, Partner
Sbrown@normans.com.au

Exclusion Clauses & S 52
You cannot contract out of s 52.
In entering into this agreement the purchaser
acknowledges that it has not relied on any statement,
representation or warranty by or on behalf of the vendor
whether express or implied as to ...
Clarke equipment Australia ltd v Covcat Pty ltd felling
machine, exclusion clause in contract no effect.
Collins Marrickville Pty ltd v Henjo investments Pty ltd.
Steve Brown, Partner
Sbrown@normans.com.au

Tenders & S 52
Representations that a project will take a stated period of
time and it does not or the start is delayed beyond the time
it is represented to commence may amount to misleading
and deceptive conduct.
Section 51A shifts onus of proof for predictions. A
representations as to future action must be made upon
reasonable grounds.
O’Connor & sons Pty ltd v Entact clough Pty ltd.
Steve Brown, Partner
Sbrown@normans.com.au

Tenders & s 52
Inaccurate
Drawings part of a RFT contained inaccurate information
Phillip and Anton Homes Pty Ltd v Cth (1988)
Quantity surveyor’s estimates and certifications leading to
progress claim BFC Ltd v ABW Nominees (1992)
Representation about no asbestos Emmanuele v Chamber
of Commerce & Industry SA Inc (1988)
Steve Brown, Partner
Sbrown@normans.com.au

Tenders & s 52
A RFT that does not indicate that strict
compliance with the terms of the tender is
essential gives to a tenderer not shortlisted to
injunct the tender process (MacMillan’s case)
A tender that is not evaluated in accordance with
how tenders were represented to be evaluated may
be misleading (Hughes Aircraft v Airservices
Australia)
Steve Brown, Partner
Sbrown@normans.com.au

* Pic for illustration purposes only
Steve Brown, Partner
Sbrown@normans.com.au

Whooping Savings!
Steve Brown, Partner
Sbrown@normans.com.au

Negotiating What to Look Out
For…unconscionable Conduct
Prohibits conduct that is
unconscionable within meaning of
unwritten law (51AA)
Protects consumers from conduct that
is, in all the circumstances,
unconscionable (51AB)
Steve Brown, Partner
Sbrown@normans.com.au

What is ‘unconscionable’?
The term ‘unconscionable’ is not specifically defined, allowing
for the courts to develop a wide interpretation.
Generally it may involve:
• exploitation by a stronger party of a weaker party
• going beyond normal hard commercial dealing
• contrary to concepts of good business conscience and
fairness.
May be seen as an abuse of a firm’s market power in its
dealings with disadvantaged or powerless people or
business.
Steve Brown, Partner
Sbrown@normans.com.au

Unconscionable Conduct - Example
Pritchard v Race Cage Productions Pty Ltd
Steve Brown, Partner
Sbrown@normans.com.au

Unconscionable Conduct
[A] person should not be permitted to use or insist
upon his legal rights to take advantage of
another's special vulnerability or misadventure
for the unjust enrichment of himself.
Olex Focas Pty Ltd v Skodaexport Co Ltd 1997
Steve Brown, Partner
Sbrown@normans.com.au

High Risk Situations - Continued
Well we have a deal!
1. Where the stronger party knows, I am not
or
Yes. Of
ought to know, that the weaker party I
sure
course. have read
did not fully understand the transaction
everything
I will give’em
two seconds
to say Yes
Got you..
Steve Brown, Partner
Sbrown@normans.com.au

Aim of Unconscionable Conduct
• Stop the unlawful conduct
• Compensation / Restitution for
Victims
• Future Compliance ie. preventing
future breaches (by same person or
others who might be tempted to
breach)
• Deterrence and/or punishment
Steve Brown, Partner
Sbrown@normans.com.au

Negotiating Contracts &
Agreements Other Things to
Watch…
Letters of intent
Heads of agreement
MOU’s
Steve Brown, Partner
Sbrown@normans.com.au

Checklist to Ensure HoA, MOU
Etc Is a Contract (ie Binding)
the document should be dated and validly executed by both parties
there should be an explicit statement that the document is meant to
be binding
if an essential term is absent or uncertain, the agreement will be
void for uncertainty or construed as incomplete, ie. the parties
should have agreed the terms that are regarded as essential, for
example:
In a simple Heads of Agreement to lease a building the following
matters must have been agreed and should be accurately identified -
the parties, the premises, the term of the lease, the rent or other
consideration payable, review dates and rights of renewal
Steve Brown, Partner
Sbrown@normans.com.au

Checklist to Ensure HoA, MOU
Etc Is a Contract (ie Binding)
If there were any unresolved issues there should be a provision for
agreement to be reached by resort to an expert or an arbitrator or
by another mechanism
You should ensure that all documents that are referred to as
"attached" to the heads of agreement are attached, and that the
parties have initialled all amendments and the foot of each page
If there is a particular form of agreement to be entered into at a
later date (for example, Koppers standard terms of trade), then this
should be attached or clearly identified in the document to avoid
uncertainty
Steve Brown, Partner
Sbrown@normans.com.au

Checklist to Ensure HoA, MOU
Etc Is a Contract (ie Binding)
• The document should be clearly drafted in plain English to
reflect the intention of the parties with all the essential terms and
conditions incorporated so that each other knows:
Who is to supply what or pay for the supply;
When are the goods or services to be supplied and paid for;
How are the goods or services to be delivered; And.
The consequences for none performance.
Set out the checklist.
Steve Brown, Partner
Sbrown@normans.com.au

Open Forum
Steve Brown, Partner
Sbrown@normans.com.au