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Contract How To Make An Agreement A Contract Etienne Lawyers

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Presentation on how not all agreements are contracts

Presentation on how not all agreements are contracts

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  • How to make a contract or not! Steve Brown (sbrown@etiennelaw.com www.etiennelaw.com)
  • How to make a contract or not! Steve Brown (sbrown@etiennelaw.com www.etiennelaw.com)
  • How to make a contract or not! Steve Brown (sbrown@etiennelaw.com www.etiennelaw.com)
  • How to make a contract or not! Steve Brown (sbrown@etiennelaw.com www.etiennelaw.com)
  • How to make a contract or not! Steve Brown (sbrown@etiennelaw.com www.etiennelaw.com)
  • How to make a contract or not! Steve Brown (sbrown@etiennelaw.com www.etiennelaw.com) Clarke Equipment Australia Ltd v Covcat Pty Ltd (1987) ATPR 40-768 Collins Marrickville Pty Ltd v Henjo Investments Pty Ltd (1987) 40-782 See also Steinwall, R, Exclusion Clauses and the Trade Practices Act, Australian Construction Law Newsletter, Issue 12, 39-44.
  • How to make a contract or not! Steve Brown (sbrown@etiennelaw.com www.etiennelaw.com) O ’Connor & Sons Pty Ltd v Entact Clough Pty Ltd (1996) WA S Ct LBC Unreported Judgments
  • How to make a contract or not! Steve Brown (sbrown@etiennelaw.com www.etiennelaw.com) Phillip and Anton Homes Pty Ltd v Cth (1988) ATPR 49-040 Beneficial Finance Corporation Ltd v ABW Nominees (1992)(unrep QG182/92 Fed No. 408/96) Emmanuele v Chamber of Commerce & Industry SA Inc (1988) (unrep. SAG88/88, Fed No 70/94)
  • How to make a contract or not! Steve Brown (sbrown@etiennelaw.com www.etiennelaw.com) JS McMillan Pty Ltd v Cth (1997) 147 ALR 419 Emmett J McMillan responded to a RFT to purchase assets of the AGPS. The RFT did no warn tenderers that a failure to accept the clauses unreservedly would result to automatic disqualification. McMillan submitted a non-conforming tender and was automatically disqualified. Relying upon s. 52 McMillan obtained an injunction under s. 80 to stop the tender. Emmett J held that the Cth who has called for tenders had engaged in misleading and deceptive conduct. BUT the Cth did so not in its capacity of operating a business and as such was not at the time engaging in trade or commerce for the TPA to apply to it. Hughes Aircraft v Airservices Australia (1998) 146 ALR 1 RFT representation that CAA would conduct its tender evaluation fairly and would deal fairly with a tenderer. CAA breached s 52 by failing, amongst other things: to evaluate tenders in accordance with the priorities and methodology in the RFT; to ensure that measures designed to achieve strict confidentiality of information contained in tenderers proposals was maintained; to reject an out of time change to a tenderer ’s tender
  • How to make a contract or not! Steve Brown (sbrown@etiennelaw.com www.etiennelaw.com)
  • How to make a contract or not! Steve Brown (sbrown@etiennelaw.com www.etiennelaw.com)
  • How to make a contract or not! Steve Brown (sbrown@etiennelaw.com www.etiennelaw.com)
  • How to make a contract or not! Steve Brown (sbrown@etiennelaw.com www.etiennelaw.com)
  • How to make a contract or not! Steve Brown (sbrown@etiennelaw.com www.etiennelaw.com) In this case Olex Focas (a subsidiary of Pacific Dunlop) agreed to undertake certain work for Skoda on a pipeline that was being built in India. To ensure Skoda's position in relation to the contract OF provided bank guarantees which were essentially two types: the first type was given to secure mobilisation advances/securement advances; the second type was given to secure the performance of OF's work. A dispute arose about whether the work done by OF fulfilled the obligations despite certain delays. Skoda, in denying that it did, demanded that unless OF agreed to reduce its claim for work done it would make a demand on the bank to pay amounts due under the guarantees. OF alleged that the threats amounted to a breach of the unconscionable conduct provisions of the Trade Practices Act. The judge held that while the calling up of the performance bonds for the full amount was not unconscionable, the conduct relating to the mobilisation or procurement of advance guarantees was unconscionable. In the course of his judgment the judge referred to a number of other judgments in which the term 'unconscionable' was discussed. In particular he was influenced by the comments of Justices Deane and Dawson in Stern v McArthur (1988) 165 CLR 489 at page 527 that: [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. The judge felt that by calling on more than the money that was needed to protect itself Skoda was not acting appropriately. Although within its legal rights in the conpenalties of the terms of the guarantee, this was unconscionable and as such contravened s. 51AA of the TPA. (Olex Focas Fty Ltd v Skodaexport Co Ltd 1997 (ATPR Digest) 46-631.)
  • How to make a contract or not! Steve Brown (sbrown@etiennelaw.com www.etiennelaw.com)

Transcript

  • 1. HOW TO MAKE AN AGREEMENT A CONTRACT! Steve Brown, Partner [email_address] www.etiennelaw.com
  • 2. 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@etiennelaw.com www.etiennelaw.com
  • 3. The Difference Between Agreements and Contracts?
    • Agreements are not as a general rule:
    • Legally enforceable
    • Courts will not involve themselves.
    Steve Brown, Partner sbrown@etiennelaw.com www.etiennelaw.com
  • 4. The Difference Between Agreements and Contracts?
    • Contracts are ALWAYS:
    • Legally enforceable
    • Courts will enforce as the law dictates
    Steve Brown, Partner sbrown@etiennelaw.com www.etiennelaw.com
  • 5. Non Enforceable Agreement Steve Brown, Partner sbrown@etiennelaw.com www.etiennelaw.com If you wash my car I’ll give you $10
  • 6. Non Enforceable Agreement Steve Brown, Partner sbrown@etiennelaw.com www.etiennelaw.com I’ll pick you up for dinner at 8 o’clock
  • 7. 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@etiennelaw.com www.etiennelaw.com
  • 8. Contracts & Agreements – How Are They the Same as Risk Tools
    • Contract or agreement to import coal tare and toll manufacture chemicals in Australia
    Steve Brown, Partner sbrown@etiennelaw.com www.etiennelaw.com
    • Agreement to meet and discuss a form of long term supply arrangement
    • Contract to supply an apple
  • 9. 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@etiennelaw.com www.etiennelaw.com
  • 10. Why have a Contract instead of an Agreement Steve Brown, Partner sbrown@etiennelaw.com www.etiennelaw.com least formal to most formal form form of Agreement oral contract of written contract Risk Formality & Legality
  • 11. What Distinguishes Contracts & Agreements?
    • Contracts MUST comprise
    • An offer
    • Acceptance of the offer
    • Consideration
    • Between parties that have capacity to contract
    • An intention to be legally bound
    • Agreements MAY comprise
    • An offer
    • Acceptance of the offer
    • Consideration
    • Between parties that have capacity to contract
    Steve Brown, Partner sbrown@etiennelaw.com www.etiennelaw.com Agreements ALWAYS lack An intention to be legally bound
  • 12. Types & Forms of Contracts
    • Oral
    • Partly oral / Partly Written - varied by phone
    • Written
      • Informal - exchange of letters
      • Formal
        • Standard
        • Negotiated
    Steve Brown, Partner sbrown@etiennelaw.com www.etiennelaw.com
  • 13.
    • Understood by industry
    • Legally interpreted (precedent)
    • Trust in project relationship
    • Familiarity in administration and making of claims
    Steve Brown, Partner sbrown@etiennelaw.com www.etiennelaw.com The Case for Standard Forms
  • 14.
    • Needs of project
    • Non-traditional project strategy
    • “ No risk” client /certainty of outcomes?
    • Addresses particular problems of standard forms
    Steve Brown, Partner sbrown@etiennelaw.com www.etiennelaw.com The Case for One-off Contracts
  • 15. 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@etiennelaw.com www.etiennelaw.com
  • 16. Is This an Offer? Steve Brown, Partner sbrown@etiennelaw.com www.etiennelaw.com Are you interested in buying Tanalith?
  • 17. Is This an Offer? Steve Brown, Partner sbrown@etiennelaw.com www.etiennelaw.com I will sell you 2 tonne of Tanalith for $5,000.
  • 18. Contractual Concepts -Acceptance
    • An offer must be accepted on exactly the same terms as offered
      • Oral
      • Written
      • Conduct
    Steve Brown, Partner sbrown@etiennelaw.com www.etiennelaw.com
  • 19. Examples of Acceptance
    • Letter
    • Telephone
    • Fax
    • Face to face
    Steve Brown, Partner sbrown@etiennelaw.com www.etiennelaw.com
  • 20. Examples of Acceptance
    • And even email under the electronic transactions acts
    Steve Brown, Partner sbrown@etiennelaw.com www.etiennelaw.com Worldwide Web Email Sender Email Receiver BLUE Co. RED Co.
  • 21. Contractual Concepts -Implied Terms
    • Business efficacy
    • The Moorcock (1889)
    • Statute
    Steve Brown, Partner sbrown@etiennelaw.com www.etiennelaw.com
  • 22. 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@etiennelaw.com www.etiennelaw.com
  • 23. 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@etiennelaw.com www.etiennelaw.com
  • 24. 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@etiennelaw.com www.etiennelaw.com
  • 25. Steve Brown, Partner sbrown@etiennelaw.com www.etiennelaw.com Central London Property Trust v High Tree House Limited (1947)
  • 26. Steve Brown, Partner sbrown@etiennelaw.com www.etiennelaw.com Waltons Stores v Maher (1988)
  • 27. Negotiating What to Look Out For…Statutory Impact on Contract Law Steve Brown, Partner sbrown@etiennelaw.com www.etiennelaw.com
  • 28. 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@etiennelaw.com www.etiennelaw.com
  • 29. Misleading or Deceptive Conduct
    • Strict liability
    • Actual deception
    • Overall impression
    • Product puff
    • Silence
    • Ambiguity
    • Erroneous assumption
    • Half truths
    Steve Brown, Partner sbrown@etiennelaw.com www.etiennelaw.com
  • 30. Steve Brown, Partner sbrown@etiennelaw.com www.etiennelaw.com 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. Misleading conduct - s 52 Example
  • 31.
    • A SECOND PRINCIPLE:
    • It's the overall impression on the target audience that counts
    Misleading conduct - s 52 Steve Brown, Partner sbrown@etiennelaw.com www.etiennelaw.com
    • silence can be misleading - if there is a duty to speak
    • a prediction can be misleading - if there's no reasonable ground to make it
  • 32. 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@etiennelaw.com www.etiennelaw.com
  • 33. 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@etiennelaw.com www.etiennelaw.com
  • 34. 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@etiennelaw.com www.etiennelaw.com
  • 35. 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@etiennelaw.com www.etiennelaw.com
  • 36. 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@etiennelaw.com www.etiennelaw.com
  • 37. Steve Brown, Partner sbrown@etiennelaw.com www.etiennelaw.com * Pic for illustration purposes only
  • 38. Steve Brown, Partner sbrown@etiennelaw.com www.etiennelaw.com Whooping Savings!
  • 39. 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@etiennelaw.com www.etiennelaw.com
  • 40. 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@etiennelaw.com www.etiennelaw.com
  • 41. Unconscionable Conduct - Example Steve Brown, Partner sbrown@etiennelaw.com www.etiennelaw.com Pritchard v Race Cage Productions Pty Ltd
  • 42. 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@etiennelaw.com www.etiennelaw.com
  • 43. Steve Brown, Partner sbrown@etiennelaw.com www.etiennelaw.com High Risk Situations - Continued I will give ’em two seconds to say Yes Well we have a deal! I am not sure I have read everything Yes. Of course. Got you.. 1. Where the stronger party knows, or ought to know, that the weaker party did not fully understand the transaction
  • 44. Steve Brown, Partner sbrown@etiennelaw.com www.etiennelaw.com 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
  • 45. Negotiating Contracts & Agreements Other Things to Watch…
    • Letters of intent
    • Heads of agreement
    • MOU ’s
    Steve Brown, Partner sbrown@etiennelaw.com www.etiennelaw.com
  • 46. 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@etiennelaw.com www.etiennelaw.com
  • 47. 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@etiennelaw.com www.etiennelaw.com
  • 48. 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@etiennelaw.com www.etiennelaw.com
  • 49. Open Forum Steve Brown, Partner sbrown@etiennelaw.com www.etiennelaw.com
  • 50. Steve Brown, Sbrown@etiennelaw.com. www.etiennelaw.com