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Q 1 Lester wanted to sign a lease for 12 months on a large showr.docx

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Lester wanted to sign a 12-month lease for a showroom but was concerned about being able to afford the payments if business was slow. He told the landlord Gabor that he would only sign if Gabor promised Lester could terminate early for financial reasons. Gabor agreed just before signing. After 6 months, Lester's business was struggling but Gabor refused to allow early termination, despite his earlier promise. Lester wants to know if he can enforce Gabor's promise under contract law.

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Q 1 Lester wanted to sign a lease for 12 months on a large showroom in Pyrmont to conduct a series of book sales. However, he was afraid that he would not be able to afford all the monthly repayments if business was slow. He told the landlord Gabor that he would only sign the lease if Gabor promised Lester could terminate the agreement early because of financial pressures. The lease had no express term addressing the possibility of early termination. Gabor agreed just before the lease was signed. After six months, Lester's business was struggling to achieve enough sales but Gabor refused to allow early termination. Advise Lester how he could enforce Gabor’s promise under contract law. {Refer to general law principles only) Q2 Mary and her husband Joseph sign a contract to sell their beautiful suburban cottage to Larry for $750,000. Larry pays $75,000 to their agent by way of deposit. One ofthe terms ofthe contract is that settlement will take place after 12 weeks in order to give Larry time to organise his finance. This is because Larry has told them he has complicated financial holdings through overseas managed funds and he needs a longer period of time to settle. Two days before the settlement date, Larry rings Mary and says he needs extra time because one of the trustees of an overseas company in which he has shares has been ill and failed to organise part of the settlement funds on time. Mary and Joseph reluctantly agree to give Larry extra time. Their solicitor serves Larry with a notice to complete. The notice sets a new time for settlement in 28 days with ‘time of the essence’. On the day before the new settlement date, Larry again rings Mary and asks for more time because an amount ofmoney he was expecting to come from one ofhis investments in the Cayman Islands did not come through on time. Mary speaks with her solicitor who advises her not to agree. The solicitor
attends the scheduled settlement time but no one attends on behalf of Larry. The solicitor waits for 10 minutes and then leaves. Mary and Joseph terminate the contract and claim the deposit. Larry threatens to take them to court. Advise Mary and Joseph about their prospects for claiming the deposit. Q3 Heidi is a young employed solicitor in the law firm Fox & Sly, which has a Sydney city office and branches in two NSW country towns. When she got the job, she signed an employment agreement with the partners. It included a clause in which she promised that, if she left the firm, she would not work as an employed solicitor, or set up her own legal practice: 2 a) for a period of six years from her departure b) in any premises within twenty kilometres of any of the offices of Fox & Sly. Heidi now wishes to quit the firm and get a better job with a legal practice that has an office in a small country town 15 kilometres from one of Fox & Sly’s branches. Discuss whether and to what extent Heidi could be bound by the clause in the employment agreement with Fox & Sly. Q4 Adam signed a contract to build a timber and fibreglass roof over the back porch of Chloe’s inner city terrace house for a total contract price of $ 10,000. When Adam finished the job, Chloe complained that rainwater entered the roof and caused the down lights to short circuit. Chloe engaged another tradesman, Beau, to replace the roof seals and fix the problem with the help of an electrician. She had to pay $2,700 for all the remedial work. Chloe is furious with Adam and tells him he deserves to be paid nothing for all the trouble he caused her. However, she offers him $4,000 on a without prejudice basis to settle his account, adding that she will sue him for damages If he refuses to take the money. Advise Ashton whether, and on what legal basis, he could recover more than $4,000 from Demi. {Refer to general law principles only)
Q5 Zhang and his wife run a fruit and vegetable supermarket at the Western Supacenta. They lease the premises from Mega-Mall Ltd. They have a very poor grasp of English and little business experience. However, they have registered a small private company, of which they are the sole director shareholders, through which they run their business. Although Zhang is up to date with rent, he has been late with the payments on a couple ofoccasions. When it was time to renew the lease, the Supacenta manager Fred came to see Zhang in the company of a security guard. Fred said: “I’ve got your new lease. The rent and outgoings have gone up by 25%. Don’t complain because Mega- Mall have a new property manager and he is upset you have been late with payments. Sign the new lease by tomorrow lunch time.” Zhang replied: “No, this no good. I must have time to see solicitor. I don’t understand this paper.” Fred replied: “Just sign it by tomorrow or you will have to get out - and Mega-Mall will sue you for making late payments. That’s it.” Zhang again protests but at that point the security guard grabbed him by the collar and slammed the envelope containing the lease on the shop counter. Zhang stops talking and takes the envelope. The guard lets go of Zhang’s shirt collar and leaves the shop with Fred. Zhang and his wife are upset but they sign the lease because they are afraid oflosing their shop. After a few months Zhang can no longer afford the high rent and seeks legal advice . On what basis could Zhang seek to set aside the lease? {Refer to statutory provisions and general law principles) Q6 In Trident General Insurance Co Ltd v McNiece Bros Pty Ltd (1988) 165 CLR 107, Brennan J said: “It is submitted that the doctrine of privity sometimes produces unjust results and that this Court should reexamine it in the light ofthe criticisms the doctrine has attracted.” How would you explain the doctrine of privity and what are the unjust results referred to by Brennan J? Describe one way in which the unjust result was circumvented in the Trident case.
Q7 Edward contracted to hire Victoria’s luxurious yacht for use on 19 October. In his letter to Victoria, Edward wrote the following: My whole family loves boats and on 19 October, the world’s largest and most luxurious passenger liner, Titanic IV, arrives in Sydney for the first time. Not only will we have a wonderful day enjoying Sydney’s glorious harbour, but we shall also be witnessing a truly historic event at close range. On 10 October, for reasons unknown, Titanic IV sank as it was making its way across the Pacific Ocean towards Australia. Edward seeks your advice as to what impact, if any, the sinking of Titanic IV has on his contract with Victoria. (Refer to general law principles only) 1 LAWS104EXAM NOTES KEY CASES ....................................................................................... ........................................................................ 2 1 CAPACITY ....................................................................................... .................................................................. 16 Minors – Common Law ....................................................................................... .......................................................................................... 16 Minors – Statute Law ....................................................................................... .............................................................................................. 17 Mental Disability .......................................................................................
............................................................................................... ....... 17 2 THE REQUIREMENT OF WRITING ....................................................................................... ............................... 18 Contracts For Sale Of Land ....................................................................................... ................................................................................... 18 Enforcement In Equity Of Contracts Unenforceable At Law ....................................................................................... ................. 19 3 EXPRESSTERMS ....................................................................................... ........................................................ 19 Representations And Terms ....................................................................................... ................................................................................ 20 Incorporation Of Terms By Signature ....................................................................................... ............................................................. 21 Incorporation By Notice ....................................................................................... ........................................................................................ 22 Incorporation By PriorDealings ....................................................................................... ....................................................................... 22 Parol Evidence Rule ....................................................................................... ............................................................................................... . 23 Collateral Contract ....................................................................................... .......................................................................................... ..... .... 24
4 IMPLIED TERMS ....................................................................................... ........................................................ 24 Written Contracts ....................................................................................... ............................................................................................... ...... 25 Informal, Unwritten Contracts ....................................................................................... ........................................................................... 26 Implication Of Terms By Statute ....................................................................................... ....................................................................... 26 Terms Implied By Common Law ....................................................................................... ....................................................................... 26 Implication By Custom And Usage ....................................................................................... .................................................................... 26 Implied Terms Of Good Faith ..................................................................................... .. .............................................................................. 27 5 CONSTRUCTION OF EXCLUSION CLAUSES ....................................................................................... .................. 27 General Approach To Construction Of Exclusion Clauses ....................................................................................... ...................... 27 Exclusion Clauses And Negligence ............................................................................. .......... .................................................................... 27 Other Relevant Principles ....................................................................................... ..................................................................................... 28
Exclusion Clauses And Legislation ....................................................................................... .................................................................... 28 6 VITIATING FACTORS ....................................................................................... .................................................. 28 Misrepresentation ....................................................................................... ............................................................................................... .... 28 Misleading or Deceptive Conduct ....................................................................................... ..................................................................... 31 Mistake ....................................................................................... ............................................................................................... .......................... 33 Duress ....................................................................................... ............................................................................................... ............................ 34 Unconscionability ....................................................................................... ............................................................................................... ..... 35 Undue Influence ....................................................................................... ............................................................................................... ......... 37 Unjust Contracts ....................................................................................... ............................................................................................... ........ 39 7 DISCHARGE ....................................................................................... ............................................................... 39
Agreement ....................................................................................... ............................................................................................... .................... 39 Performance ....................................................................................... ............................................................................................... ................ 41 Breach ....................................................................................... ............................................................................................... ............................ 42 Frustration ....................................................................................... ............................................................................................... ................... 45 8 ILLEGALITY ....................................................................................... ................................................................ 46 Statutory Illegality ....................................................................................... ............................................................................................... .... 46 Common Law Illegality ....................................................................................... .......................................................................................... 47 Effect Of Illegality ....................................................................................... ............................................................................................... ...... 49 Alternative Causes Of Action ....................................................................................... ............................................................................... 49 9 PRIVITY .......................................................................................
.................................................................... 49 The Privity rule ....................................................................................... ............................................................................................... .......... 49 Privity and consideration ....................................................................................... ..................................................................................... 49 ‘Exceptions’ to Privity ....................................................................................... ............................................................................................ 51 2 KEY CASES Topic Case Name Principle Capacity: When contracts a binding on a minor McLaughlin v Darcy A contract between two parties for which one or more is a minor is binding if the contract is for a necessity of life or a beneficial service
Capacity: Not necessity Bojczuk v Gregorcewicz Minor moving to Australia was not a necessary and the contract was unenforceable. She did not have to pay B back. Capacity: Necessity Scarborough v Sturzaker 17 year old bought a bicycle and couldn’t pay for it. The bicycle was found to be a necessary, the boy was obliged to pay for it Capacity: Beneficial contract of service Hamilton v Lethbridge Lawyer clerkship (article clerk) agreed to be trained by master
solicitor and when he was trained he would not set up his own practice within 50 miles of the master solicitor’spractice. Master solicitor took it to courtto enforce restraint of trade, when article clerkbroke it. The article clerkhad ‘capacity’ because it benefitted him more than restrained him, thus it was enforceable. Capacity: Mental capacity/ Ratification Hart v O’Connor A contract made by a partyof unsound mind – but who appears to be of sound mind – with another party(having no knowledge of the unsoundness) is valid. There is no unfairnessthat can be imputed to the partyhaving no knowledge of the other’s incapacity. The Court also noted that if a person lacking mental capacity subsequently regains capacity (even temporarily) they may ratify a contract entered into when insane. Capacity:
Drunkenness/ Ratification Matthews v Baxter Baxter, while drunk, agreed at an auction to purchase a property. Oncesobriety returned affirmed the contract that had been made while drunk. Sometime later he had a change of mind and he sought to rescind the contract, arguing that he lacked capacity to enterthe contract by reason of intoxication. Such a contract is not void but merely voidable. If the drunken party, upon coming to his senses, ratifies the contract, he is bound by it. The requirement of writing: Requirements to form a binding document Pirie v Saunders The plaintiff relied upon a note of the defendant's instructions written by the defendant's solicitor. The note
referred to the property, and specified the rent and duration of the lease, but therewas no statement of the commencement date, and the note contemplated the formulation of further terms. Document was not recognisable as a note or memorandum of a concluded agreement. The note in this case is merely a notation of instructions for the preparation of a draft leasefor submission to the otherparty. They are not indicative of the existence of any binding contract. Document must identify parties to the contract and essential terms of the contract and cannot contemplate the formulation of further special conditions. The requirement Khoury v The payment of money by is not a sufficient act of part 3 of writing: Part performance Khouri
performance. The requirement of writing: Part performance McBride v Sandland Requirements for Part Performance: 1. The acts could only have been done for the purposes of fulfilling the alleged agreement- therecan be no other reason why they were performed. 2. The partyperforming the acts must have been doing so in reliance on the alleged agreementand the otherparty must have permitted the acts to be done 3. The act must be done by a partyto the agreement 4. There was a completedagreement 5. The acts must have been done in compliance with the terms of th e oral agreement In this case the promise in did not give rise to a contract as
alleged by Sandland and therewere no acts of part performance. Express terms: Difference between a term and a representation Ellul and Ellul v Oakes The Elluls purchased a house from Oakes. In doing so they relied on a statement contained in a real estate agent’s listing form that the property was sewered. This form had been signed by Oakes. The property was not sewered. Elluls claimed damages for breach of contract. The representation was made to induce a purchaser to buy the property and was successful. This provides prima facie evidence that the representation was a term. It was then for Oakes to demonstrate it was not a term. This was not done successfully. Express terms: Difference between a term and a representation
Oscar Chess v Williams Customer went to a car dealer to tradein his car, thinking it was a 1948 model. The dealer later realised it was a 1939 car and it was worth much less, and sued Williams for breach of contract. The statement was not a term and was an innocent misrepresentation. If a representation is made in the course of dealings for the very purpose of inducing the otherpartyto act upon it, and actually inducing him to act upon it, by entering into the contract, that is prima facie ground for inferring that it was intended as a warranty (term). Suffice it that it was intended to be acted upon and was in fact acted upon. Express terms: Parol evidence rule (partly oral) contract) SRA v Heath Outdoor Ltd
The parolevidence rule has 'no operation until it is first determined' that all the terms of the contract are in writing. The parolevidence rule is persuasive and the evidentiary burden is on the partywishing to rebutthe claim that the whole contract was not in writing. Express terms: Representation or term J J Savage and Sons v Blakney The trial judge: the representation was neither a term of the contract nor a collateral warranty. The statement was an estimate only,not an unequivocal promise of a future speed. The Full Court: reversed the decision, holding that it was a collateral warranty. High court: The words indicated ‘an expression of opinion’ only and are only a representation. 4
Express terms: Collateral contracts Hoyt's v Spencer Toll (FGCT) Pty Ltd v Alphapharm Pty Ltd Hoyts argued that a collateral contract operated alongside the main contract which prohibitedthe Defendantfrom terminating the agreement, through consideration for him entering the agreement, Spencer promised Hoyts he will not terminate the agreementduring the term. Collateral contracts involve the entrance into a contract as consideration for a promise. o Argument: However, this also means that a collateral contract cannot contradict a contractual right or obligation in the original contract. It also needs to be made before or at the time of formation.
Express terms: Incorporation by notice (timing) Thornton v Shoe Lane Parking The carpark relied on an exclusion clause. It was not an express term as the offer was accepted before Thornton had notice of the terms. The customer would be bound by those terms as long as they are sufficiently brought to his notice beforehand. He is not bound by the terms printed on the ticket if they differ from the notice, because the ticket comes too late. The contract has already been made. Express terms: Exception to the signature rule (document not known to be a contract) Curtis v Chemical Cleaning and
Dyeing Co The dry cleaner misrepresented the effects of the exclusion clause on a receipt (inferring it only applied to parts of the dress). By failing to draw attention to the width of the exemption, the assistant created the false impression that the exemption only related to the beads and sequins, and that it did not extend to the material of which the dresswas made...it was a sufficient misrepresentation to disentitle the cleaners from relying on the exemption, except in regards to beads and sequins. Express terms: Incorporation by notice (reasonableness) Parker v South Eastern Railway Co Parker and Gabell checked their luggage on a train. They were given tickets with a number on one side, and
small print on the otherside, stating that the railway would not be responsible for bags lost worth more than £10. Both respondents had received the tickets before but had never read the small print. Both respondents were successful; If a plaintiff does not see writing that contains "conditions" of the contract and no reasonable effort was made to ensure he was aware of it, then he is not bound by its terms; if he does see it and either does not read it, or does not thinkthat it contains conditions, then he will be bound by its terms so long as the defendant delivered it in a manner that gave him reasonable notice that therewere conditions on the ticket. If a partyactually knows that the document or sign contains contractual terms then they are bound irrespective of whether they have read it Implied terms: Whether it exists Codelfa Construction v StateRail
Codelfa did non-stop excavation work for the state rail authority and received nuisance complaints from local residents and asked for an injunction to stop the work at night 5 Authority of New South Wales and on Sundays. The courtconcluded that Codelfa was not protected by the immunity of the state rail authority from such complaints, which it was assumed to be. An injunction was imposed and thus the project took longer than initially agreed. Codelfa argued that therewas an implied term that they would be paid for extrahours. The courtwas in favour of the state rail authority because it was not obvious that this would have been the agreementand it would have been more likely that othernegotiations would have been made if it was expected to happen, resulting in an
express term about the subject matter • The more detailed and comprehensive the contract, the less ground thereis for arguing the existence of an implied term • Term must be so obvious that it ‘goes without saying’ Implied terms: Terms implied in law Byrne v Australian Airlines Ltd Terms implied in fact: • The test for terms implied in fact (formal contracts) is stated in BP Refinery Pty Ltd v Hastings Shire Council • In more informal contracts, the test comes from Hawkins v Clayton The term here was not at all so obvious that it goes without saying, or necessary for the operation of the contract. It therefore cannot be implied in fact.
Terms implied in law: • Terms implied by law are implied in all contracts of a particular class For a term to be implied in law, it must be: • Applicable to a defined category of contracts. • Suitable in a way which allows it to be implied in all contracts in that category. • The test of necessity is oftenused - a term can only be implied if its omission would entail that the rights of the parties under the contract were significantly diminished. No necessity here, and therefore no implied term. Implied terms: Implication by custom and usage Con-Stan Industries of Australia P/L v Norwich Winterthur Insurance (Australia) P/L
Con-Stan argued that therewas an implied term in the insurance contract that it was only required to pay the premiums to the broker, and that paying the broker discharged the debt for the insurance premiums. There was no implied term of such in the insurance industry. To establish a term implied by custom or usage we need to keep 3 things in mind 1. Whether a custom exists or not is a question of fact 2. Evidence to establish a custom requires a heavy onus of proof – it must be so well known and acquiest in that the parties must have reasonably been able to assume it was a term 3. Not possible if an express term in a contract contradicts the 6 custom Construction of exclusion clauses:
General principles Darlington Futures v Delco 1. An exclusion clause should be constructed according to its natural and ordinary meaning, read in light of the contract as a whole, thereby giving weight to the context in which it appears including the nature and object of the contract 2. The contra preferentem principle will be applied so that in cases of ambiguity the clause will be construed against the person relying on the exclusion clause Construction of exclusion clauses: Four corners rule Australia Sydney City Council v West West left his car in a car park and liability for any loss was excluded. Thief broke into the car and stole the car, going up to the ticket office and claiming he lost his ticket and they let
him out. West sued. The high courtruledthat the clause was incorporated but it did not exclude liability because it was outside the scope of the contract (if it was a valet and the car was damaged while being moved it would be within the four corners of the contract) but to allow a thief to take off with the car in contravention of the rule to showa ticket, it was way outside the scope and the courtinterpreted the clause against the interest of the carpark. Elements of Misrepresentatio n: Statement of fact/future intention Balfour & Clark v Hollandia Promises or assurances as to the future are not statements of fact for the purposes of misrepresentation. Elements of Misrepresentatio n: Statement of
fact/future intention Edgingtonv Fitzmaurice Company decided to seek public investments and put out a prospectus stating that if you invest in them they will use those funds to expand the business in certain ways, but they used that money to pay off existing debts. The company collapsed, and one investor sued based on the fact that a misrepresentation was made about how the money would be used. It was a statement of future intention. On appeal, it was held that the statement was actually a statement made in fact Elements of Misrepresentatio n: Statement of fact/opinion Smith v Land and House Property
Corp Smith was selling his hoteland he made a statement that the hotelhas a most desirable tenant. This was not true and the property corp rescinded the contract for misrepresentation. It was a misrepresentation, because the facts on which the opinion was based were known only to Smith and not the purchaser Elements of Misrepresentatio n: Principles relating to inducement Redgrave v Hurd When the representee has a chance to check whether the statement was true but did not, then the purchaser may still argue that he relied on the representation Misrepresentatio n: Deceit in Torts
Derry v Peek An action of deceit will only stand in a courtwhen a plaintiff can shownot only misrepresentation, but also that defendants knew they would be unable to follow through with their representations. 7 Misrepresentatio n: Negligent Misstatement in Torts Esso Petroleum v Mardon Future predictions can be warranties if they are given with the intent to induce another partyto enterinto a contract, and they are relied upon in the decision to enterinto the contract The Hedley Byrne principle also applies, and that
damages can be awarded on that basis. This is a negligent misrepresentation because Esso is in a special relationship with Mardon and they are in a position to have special knowledge. Mardon relied on this information which was made negligently, and he suffered loss. Therefore he is entitled to recover damages. Misleading or deceptive conduct Henjo Investments v Collins Marrickville Silence may constitute misleading or deceptive conduct where it is a duty to reveal relevant facts. No remedy under common law as no statement was made, but therewas a remedy under s 18 of the ACL Misleading or deceptive conduct Taco Co of Australia v Taco Bell Pty Ltd
Full courtmentioned guidelinesto succeed an action for misleading and deceptive conduct (conduct only needs to be A cause, not THE cause. Misleading or deceptive conduct Butcher v Lachlan Elder Realty Pty Ltd The issuewas whether by distributing the brochure which did not correctly identify the boundary of the property, amounted to misleading or deceptive conduct. The exclusion clause in the brochure was considered and provided: “All information contained herein is gathered from sources we believe to be reliable. However we cannot guarantee it’s [sic] accuracy and interested persons should rely on their own inquiries”. It was held that the agent did not engage in misleading or deceptive conduct. The agent’s conduct was viewed as a whole. The agent did no more than communicate what the vendor
was representing, without adopting or endorsing it. Tt would be plainto a reasonable purchaser that the agent was not the source of the information which was said to be misleading. The agent did not purport to do anything more than pass on information supplied by another or others. Common Mistake McRae v Commonweal th Disposals Commission In a case where both parties had equal knowledge as to the existence of the subject matter, and it turned out to be false, then it would justify the implication of a condition precedent. In that case, the contract would be void for the failure of the condition precedent, and parties would be restored to their original position. However, in a case where only one partyhas the knowledge, and the othersimply relies on what the first party tells it, than therecould be no condition precedent. The first party promises or guarantees the existence of the subject matter and
will be in breach if it does not exist. Common Mistake Associated Japanese Bank(Int) v Credit du Nord Japanese bank entered into a contract with Bennett for the sale of machinery to then be leased back. Credit du Nord provided a guarantee for the leasepayments. The machines didn’t actually exist and then Bennett declared bankrupt. Credit du Nord argued therewas a common mistake of fact 8 Common Mistake Leaf v International Galleries If thereis a mistake as to an attribute of the subject matter such as quality or value, then thereis no common mistake
Common Mistake: In equity Sollev Butcher Common mistake has to be an important matter, therehas to be not fault on either of the parties, and it has to be unconscionableto not void the contract Common Mistake: In equity Great Peace Shipping Ltd v Tsavliris (Internationa l) Ltd Overturned the Solleruling, however it is still sometimes used in NSW Sollev Butcher – common mistake has to be an important matter, therehas to be not fault on either of the parties, and it has to be unconscionableto not void the contract Mutual Mistake
Raffles v Wichelhaus If one version is more reasonable then the court will enforce that version instead of make the contract void Unilateral Mistake: Identity of a party Cundy v Lindsay The contract was void if therewas a mistake as to the identity of the partywhen they are contracting at a distance Unilateral Mistake: Identity of a party Lewis v Avery The contract is only voidable. A distinction was made where therewas a mistake as to the identity of the parties, but they were dealing face to face, not at a distance. Lewis advertised
his care and a buyer introduced himself as a famous actor, Richard Green. He bought the car and gave Lewis a cheque on the basisthat this was the famous actor. The cheque was dishonoured and then the fraudster sold the car to Averay. Lewis argued that the sale between himself and the fraudster was void for unilateral mistake. Averay argued that it was voidable, and he was an innocent third partywho had received the car before the initial contract was rescinded. Where a transaction is face-to-face then it can’tbe void ab initio, it is voidable only.Averay was protected. Austrlian law follows this distinction Unilateral Mistake: The identity of the parties Shogun Finance Ltd v Hudson The House of Lords was split 3/2 with the majority upholding that thereshould be a distintion between face-to-face
transactions that a voidable and distance transactions that are void. Unilateral Mistake: About the terms of the contract Taylor v Johnson Mrs Johnson was selling her property. There were 10 acres and she granted an option to Taylor to purchase the land. He exercised the option and they agreed for the sale of land. Both the option and the contract for sale of land showed the purchase priceas $15000, however Mrs Johnson insisted that this was a mistake and it was supposed to be $15000 per acre. She refused to carryout the contract so Taylor applied for specific performance for the land to be sold to him. There was evidence that Taylor has deliberately taken stepsto prevent Mrs Johnson from realising therewas the error. High Court held that it could not be void at common law, without duress, misrepresentation, subject to the signature rule.
However it was voidable in equity because of the unconscionableconduct of the purchaser who took stepsto hide the pricefrom the 9 vendor. Unilateral Mistake: Non est factum – it is not my deed Petelin v Cullen Petelin was selling his property, but was only semi literate. He granted an option to Cullen, which ran out and Cullen requested an extension on the option. He sent him $50 and asked him to sign a document that he said was a receipt. But in reality it was confirmation to extend the option. Petelin argued that he was mistaken as to the fundamental nature of the document that he signed. The High Court rendered the signature as inoperative. However they restricted non
est factum to parties with very limited capacity. Duress: To the person Barton v Armstrong Barton (wellknown businessman) and Armstrong (member of the upper house) had a dispute over a property shares deal. Barton accused Armstrong of threatening to kill him. The court held that although Barton had othergood reasons to enterinto the deal, he was subject to what he perceived as death threats, it was voidable at his request. Duress: Economic Crescendo Management Pty Ltd v Westpac Banking Corp A husband and wife were directors of Crescendo management and they had business loans from Westpac, however
the business was troubled. The husband and wife decided to sell their personal home and purchase a new one. Westpac refused to release the money for the purchase of their personal home unless they signed papers to secure further security for their business. They then went to courtseeking to have those documents set asideon the basisthat they signed those documents on the basisof duress. The courtheld that the pressure by Westpac was illegitimate as therewas no legal basis, however therewas no economic duress because the facts of the case showed that the pressure had no impact on their decisions to execute those securities,they would have had to sign them anyway. Duress: Economic North Ocean Shipping Co v Hyundai Pricefor sale was fixedin the US dollar. The dollar was devalued by 10% which meant that Hyundai would receive
10% less than what they bargained for. They then insisted that the pricewould be increased otherwise they would abandon the whole project. North Ocean Shipping were prepared to negotiate, however Hyundai wouldn’t accept it so they agreed to the extrapayment as they had t deliver a ship to another partyand didn’t want to break those contractual relations. They then sued Hyundai on the basisthat the money was extracted due to duress. The courtheld that a threat to breach a contract could amount to economic duress. There was no legal basisfor the additional money that Hyundai insisted upon. However North ocean lost the right to rescind as they had already completedthe contract. Undue influence: Class 2B Johnson v Buttress Undue influence is established on the facts of the case although thereis no special partyat law. There was no special relationship at law however the nature of
Buttress proved that he relied on Johnson and Johnson could not rebutthat. Undue influence: Third parties Yerkey v Jones A wife guaranteed a loan for her husband that she didn’t want to. It fell through and she lost her property as a result. There was no undue influence between a husband and wife,but she was protected through a special equity for providing surety for her husbands debts without fully understanding the effects of 10 his transaction Undue influence: Third parties Garcia v National Australia BankLtd
High courtrelied on thinking in Yerkey v Jones. Husband and wife were both business people, but the wife had little understanding of her husbands business. His business had financial trouble and he wanted the wife to sign mortgages over her share in their matrimonial home. His business collapsed and relied on the guarantee. The high courtset aside her share of the matrimonial home based on Yerkey but limited it. It states that where the wife does not understand the full effect of the transactions and is a volunteer and the other partyto the transaction (the husbands bank) should reasonably know that the wife relies on the husband and they take no reasonable stepsto ensure the wife understands the extent of the transaction, then it can be set aside. i.e. lendors should ensure that wives (and otherparties in similar relationships) seek independent advice Unconscionability : General Law Blomley v Ryan
Ryanwas a sheep farmer and alcoholic. Blomley wated to buy Ryan’s property and they took advantage of his weakness, supplied him with alcohol and got him to sell his property for a very low price. The contract was set aside Unconscionability : General Law Commercial Bankof Australia v Amadio Locked in the Blomley principle. A son took advantage of his elderly parents and they signed over their properties for their son’s business. The bank had acted unconscionably. This case established the 3 elements that are required: 1. One partyis suffering a special disadvantage or disability 2. The otherpartyis aware of the disability 3. The otherpartyexploited that disability Unconscionability
: General Law Louth v Diprose A middle-aged solicitor became infatuated with a woman. She convinced him that she was going to kill herself unless her financial situation was solved. He transferred some property of his to her. Later their relationship broke down and he argued that he was taken advantage of and wanted his property back. The courtagreed – on the facts of the case, the woman has taken advantage of his emotional dependence on her and the transfer was set aside Statutory Unconscionability ACCC v Berbatis Holdings Pty Ltd Just because one partyhas more bargaining power than the other, it doesn't mean it is acting unconscionably.
Furthermore, even if it manages to use this power to procure a bargain which is much better for them than the otherside, this is not unconscionable- it is merely a hard bargain. It is only when a special disability is taken advantage of that a partyis said to have acted unconscionably. In this case, the Appellants had no special disadvantage or disability Discharge by performance: Duty to cooperate on new time Electronic Industries Ltd v David Jones Ltd An agreementwas subject to significant delays and David Jones said the contract was breached. The time for completion was uncertain but the high courtheld that the contract had been varied and David Jones had in fact breached the contract Discharge by performance: Exception to strict porformance –
Cutter v Powell A seaman agreed to serve on a ship and was to be paid when he comes back. After 7 weeks he Cutter died, and his widow sued for 7 weeks worth of payment. Powell refused to pay on the basisthat the contract wasn’t completed. The courtupheld 11 severable and divisible contracts this argument. It was an entire contract with payment on full only on completion of the entire agreement Discharge by performance: Exception to strict performance - Part performance Sumpter v Hedges
A builder did half his job and left materials behind. The owner finished building the house and used the materials that were left. Because the builder had abandoned his work, the owner had no choice but to finish, so they did not have to reimburse the builder for the work done, but had to pay for the materials used Discharge by performance: Accord and satisfaction Hoenig v Isaacs Contract for the renovation of an apartment with payments for successfulinstallments and a final payment upon completion. There was a defect in the work (book shelves the wrong size) so the client refused to pay the final instalment. The renovator sued. It was an entire contract involving work (labour) which can be distinguished from othertypes of entire
contracts. The subject matter of the contract is physical work instead of goods. Lord Denning held that it would be wrong for the worker to receive nothing for their work, and the necessary question was whether the innocent partyhas been denied the essential benefit of the contract (where the work is half done or substantially different from what it was supposed to be). If they have not been deprived then damages are available. The amount that had to be paid to fix the problem could be deducted from the contract price. Discharge by agreement: accord and satisfaction McDermott v Black For unilateral discharge to be effective, thereneeds to be accord and satisfaction Discharge by agreement: Commonweal
th v Verwayen The commonwealth has waived their rights as they had publicly done so for a period of time relating to a certain event Discharge by breach (intermediate terms) HongkongFir Shipping Co v Kawasaki Kisen Kaisha Kawasaki hireda ship from Hong Kong Fir and expected it would be seaworthy (in a term). There were many problems and delays for repairs and maintenance. Kawasaki terminated the contract because of the breach and argued it was a condition. Kawasaki argued it was not a condition. Court of appeal held that it was a wrongful termination. Lord Justice Diplock stated it was not a warranty or a condition – it is somewhere in the middle. It is not immediately obvious as either a condition or warranty – it will depend
on the nature of the breach. Discharge by breach (intermediate terms) Kompahtoo Local Aboriginal Land Council v Sanpine Pty Ltd Affirmed the HongKong Fir Shipping Co case in Australia. Breach of a condition gives rise to the right to terminate. The contract stands until the innocent partyelects to terminate it. The innocent partymay choose to continue the contract for the benefit of both parties, and may be able to enforce the contract by order of specific performance. There was a term stating that the vessel was ‘in every way fitted for cargo service’, and was breached due to incompetent and insufficient engine roomcrew. Resulted in significant
12 delays and inconvenience to the charterers, who terminated for breach. Appeal courtheld that the breach did not justify termination of the contract. Discharge by breach (anticipatory breach) Foran v Wight Contract for sale of land. Purchaser paid 10% deposit. Settlement was to take place after 6 months (contract stipulated that it is a condition). The vendor had problems registering his easement and gave notice to the purchaser 2 days prior to the agreed date, and asked for more time.The purchaser refused – he was also arranging his loan but had not yet finalised it and got it approved, so he called it off with the bank. Following the due date, it was terminated because of the vendor’s actual breach (essential condition). The vendor
contested the termination, got the easement completed and gave a notice to complete. The purchaser refused and the vendor then purported to terminate the contract for breach. The high courtfound in favour of the purchaser – (1) when the vendor gave notice it was an anticipatory breach which amounted to repudiation and gave the purchaser the right to terminate immediately. (2) Any right that the purchaser had to terminated for anticipatory breach lapsed 2 days later and was replaced with a right to terminate for actual breach –the purchaser validly exercised this right. (3) The vendor was estopped from raising the pointabout the purchaser’s lack of readiness because the vendors conduct made it unnecessary for the purchaser to prove he was ready, willing and able, but had to showthat he would have been in a position to complete the contract in the 2 days time. Discharge by breach (restrictions on the right to terminate)
Sargent v ASL Development s Ltd If you affirm a contract then you lose the right to terminate Discharge by breach (relief against forfeiture) Tanwar Enterprises Pty Ltd v Cauchi Completion time camearound and the parties were not ready to settle. A further time was agreed upon (time of the essence). The purchaser then said they needed one extraday and was then ready, however the vendor terminated and took the deposit. The high courtsaid that was validbecause they were protecting their validright Discharge by frustration (effect of frustration) Fibrosa Spolka
Akcyjna v Fairbairn Lawson Combe Barbour Contract between English and polish company. Polish company paid deposit and English company worked on a machine. During the war the English company stopped work on the machine – contract was frustrated. According to common law – the English company would not have to continue work and the Polish company would not have to pay any more but would not get their deposit back. Fibrosa took action to get the deposit back and the House of Lords upheld this, saying therewas a total failure of consideration (the Polish company didn’t get anything for the consideration they had given – the 1000 pounds). It didn’t overcome fully the costsincurred for the English company – this lead to worldwide statutory change o The contract is automatically discharged and obligations
13 that existed prior to the frustrating event are enforced but others are discharges o Problem: if this was the case in Krellv Henry [1903], the deposit would have been kept and the hotelwould not have to give their roomup – unjust outcome o Frustrated Contracts Act 1978 (NSW) Discharge by frustration Taylor v Caldwell First case that established discharge by frustration (the subject matter of the contract had been destroyed – a hall burnt down) o Where the performance of the contract relies on the continued existence of a thingor person o There is an implied condition that performance of that contract will be excused if that thingno longer exists
Discharge by frustration: National Carriers v Panalpina (Northern) Ltd established what the intervening events could be. This is one of them. Codelfa Construction v StateRail Authority of New South Wales If a courtorder prohibits performance of a contract it can be frustrated. Codelfa did non-stop excavation work for the state rail authority and thus received nuisance complaints from local residents and asked for an injunction to stop the work at night and on Sundays. The courtconcluded that Codelfa was not protected by the immunity of the state rail authority from such complaints, which it was assumed to be. An injunction was imposed and thus the project took longer than
initially agreed. Codelfa argued that therewas an implied term that they would be paid more for extrawork (the project took longer). The courtwas in favour of the state rail authority because it was not obvious that this would have been the agreement and it would have been more likely that othernegotiations would have been made if it was expected to happen, resulting in an express term about the subject matter Discharge by frustration: Where therehas been a failure of a condition Krellv Henry A coronation was the sole purpose of the contract, the coronation was called off because Edward the seventh became sick (it was for him) and the courtheld that the contract had been frustrated. Compare to Herne Bay Steam Boat Co v Hutton. Discharge by frustration: Where therehas
been a failure of a condition Herne Bay Steam Boat Co v Hutton Hutton hireda boat to go out on the Thames and watch the coronation among the British fleet. The court held that it was not frustrated because therewas more than one purpose and they could still sail down the Thames among the British fleet Equitable estoppel: Alternative causes of action – Equitable Estoppel Waltons Stores (Interstate) Ltd v Maher If the plaintiff acts to their own detriment,in reliance on the allusions of the unconscionableparty, equity law has the capability to intervene. For estoppel to found an action, the partysued must have acted unconscionably and to
the detriment of the partysuing. Because unconscionability is the basisof the estoppel action, it is an essential requirement that has to be established. When is conduct unconscionable? • Failure to fulfill a promise does not of itself amount to unconscionableconduct. Nor does mere reliance on an executory promise where the promisor changes his 14 position amount to unconscionableconduct. Something more is required. • The fact that having created an assumption that a contract will come into existence or that a promise will be performedor not insisted upon and then remaining silent, while knowing that the otherpartywas relying on the assumption to his detriment,would be sufficient to establish unconscionableconduct. Waltons’ behaviour was unconscionableand that as a
result of that behaviour Maher had suffered detriment while relying upon the assumption that Waltons had created – and, that relying upon the assumption was, in the circumstances, reasonable. Illegality (Contracts illegal under statute): Express illegality Re Mahmoud and Ispahani Statute expressly banned the sale of linseed oil by unlicensed parties. The seller was licensed but the buyer wasn’t licensed and was prohibitedfrom purchasing the oil. The buyer refused to continue buying the oil and the seller sued. The courtheld the contract void for illegality and did not enforce it Illegality (Contracts illegal under statute): Implied illegality Yango Pastoral Co v First Chicago
Australia Yango argued the contract was illegal because First Chicago had not yet obtained the required license to authorise that type of contract. The courtscrutinised the banking act, and found that therewas a penalty of $10,000 per day of no license, and didn’t render it illegal. The contract was not expressly prohibited, so the courthad to discern whether the government intended for such contracts to be void (no, because it provided a fine and did not intend to invalidate any transactions). If it was illegal, all otherdepositors before the bank got the license would have been illegal transactions as well Illegality (Contracts illegal under statute): Effect of illegality/Severin g terms Thomas Brown and Sons v Fazal Dean
Contract for bailment. Fazal Deencould sue for the safe and the gems, and the term about the gold was severed. Illegality (Contracts void on public policy grounds): Restraint of trade Nordenfelt v Maxim Nordenfelt Guns& Ammunition Co Ltd Restrictions of this kind can be enforced as long as they are reasonable. Common law – doesn’t care about the breach, but looks at the reasonableness or unreasonableness of the restraint. Area and time was reasonable but the scope wasn’t. Reasonableness of restraint • Area • Time – 3 years is commonly held to be reasonable, but it
depends on the circumstances • Scope Illegality (Contracts void on public policy Lindner v Murdock’s Garage A restraint upon the employee’s becoming connected with a rival business after he leaves the employment will give the employer’s business reasonable protection against the effects 15 grounds): Restraint of trade of the intimaciesand knowledge. If it is limited to the area or areasin which the employee in fact works within a reasonable time before the termination of his employment; and a restraint which applies indiscriminately to all the areasin
which the employer carries on business will exceed what is reasonable necessary to prevent the injury to his business against which he is justified in guarding. Privity Tweddle v Atkinson The courts ruledthat a promisee cannot bring an action unless the consideration from the promise moved from him. Consideration must move from partyentitled to sue upon the contract. No legal entitlement is conferred on third parties to an agreement. Third parties to a contract do not derive any rights from that agreementnor are they subject to any burdens imposed by it. Privity Dunlop Pneumatic Tyre Co Ltd v Selfridge & Co Ltd Dunlop entered into an agreementwith a wholesaler
for the supply of tyres. One of the terms was that the wholesaler would not sell those tyres to a retailer below a certain price. The wholesaler enters into a contract with a retailer, with the same term. The retailer sold the tyres under that price, breaching the contract. Dunlop then sued the retailer, Selfridge. The House of Lords sued that Selfridge was not liable to Dunlop as therewas no contract directly between them. Dunlop was not privy to the contract between the wholesaler and the retailer. This is authority for Privity and consideration Privity Trident General Insurance Co v McNiece Bros See page 44-45. Privity Coulls v Bagot's Executor and
Trustee Co The third partyprovided no consideration for the promise that had been breached and could therefore not sue. “Where you promise me for consideration supplied by me, where you promise to pay my brother, then I should be able to obtain specific performance of you promise, where the nature of the consideration given would have allowed me to obtain specific performance.” if we have a contract to pay money or transfer property to a third party, theseusually are a type of contract where damages would be an inadequate remedy, especially where the damages would be nominal. But in othertypes of contracts, damages probably would be adequate. When specific performance is given instead of damages, it is where damages are not adequate. 16 1 CAPACITY Minors – Common Law • The common law considered anyone under 21
to be a minor (infant), however under statute it is 18 • A minor lackscontractual ability in most circumstances and any contracts are voidable at the option of the minor, unless they are for necessaries or beneficial contracts of service Contracts for necessaries: • Contracts relating to things necessary for the dailyliving of the minor, e.g. food, clothing, etc. ü McLaughlin v Darcy – “A contract between two parties for which one or more is a minor is binding if the contract is for a necessity of life or a beneficial service” ü Scarborough v Sturzaker – 17 year old bought a bicycle and couldn’t pay for it. Because the bicycle was found to be a necessary, the boy was obliged to find the money and pay for the bicycle ü Bojczuk v Gregorcewicz – Polish minor cameto Australia on the understanding that she would pay back Gregorcewicz, for the airfare she could not and the courtfound that her moving to Australia was not a necessary and the contract was unenforceable
• Question of law: was the subject matter capable of being a necessary? • Question of fact: take into consideration the life of the minor, the reason bought, the price, etc. • Can be enforceable by the minor or against the minor Beneficialcontracts of service: • Apprenticeships, training, cadetships, etc. • Enforceable unless thereis an unfair term ü De Francesco v Barnum - a minor aged 14 years old, had an agreement to train as a dancer on stage, however, the contract had conditions which were considered not beneficial to the minor and therefore, the minor was not bound by the contact ü Hamilton v Lethbridge – lawyer clerkship (article clerk) agreed to be trained by master solicitor and when he was trained he would not set up his own practice within 50 miles of the master solicitor’s practice. Master solicitor took it to courtto enforce restraint of trade, court found that the article clerkhad capacity because it benefitted him more than restrained him
17 Employment Agreements: ü Roberts v Gray (binding) – Minors may be bound by certain employment contracts such as apprenticeships, where they are for the benefit of the minor as long as they don’t contain unusual or prejudicial clauses outweighing the beneficial terms Minors – Statute Law • Minors (Property and Contracts) Act 1970 (NSW) – abolished the application of the common law principles relating to minors’ contracts in NSW and provides that a minor is presumptively bound to a civil act that is made in accordance with the Act ü Lowered legal age of liability to 18 ü s 19 – civil acts (contracts) for the benefit of the minor are presumptively binding on the minor ü s 18 – a minor who lacksthe necessary understanding because of age, is not bound by an act There is no definition or guidance for what a “benefit” is – it is up to judicial discretion § Seems to be a broader concept than what the common law
recognised as necessaries and beneficial contracts of service § Fall back on common law principles to understand what “benefit” means Contracts that are presumptively binding • Acquisition of property where the consideration is not manifestly excessive from the minor, or manifestly inadequate for the minor o s 20 – when the contract relates to property, the consideration given or received by the minor must not be manifestly excessive or manifestly inadequate • Investment in government securities • Any contract not exceeding $10 000 and has been approved by a local courtfor the minor’s benefit • Disposalof property, that was signed before an independent solicitor or the Public Trustee within 7 days of the contract Mental Disability • Mental Health Act 1990 (NSW) • A contract with a person that has been declared legally insane is void • Contracts for the purchase of necessaries may be binding under the sale of goods
legislation – s 7 of Sale of Goods Act 1923 (NSW) • If a person has not been declared mentally insane, yet lacksthe necessary mental capacity to give genuine consent to a commercial transaction (whether permanent or temporary), the courts will not enforce a contract against a party who ‘lacks such soundness of mind as to be capable of understanding the general nature of what he is doing” – Gibbons v Wright (1954) • Party seeking to set asidethe contract must prove 2 things: 18 1. They were mentally impaired at the time of forming the contract 2. The otherpartywas aware or should have reasonably known of their impairment ü Hart v O’Connor [1985] – Hart sold property very cheap then died. His beneficiaries argued that he did not have the capacity due to impaired mental condition, however therewas no evidence to prove that O’Connor knew of the mental condition, so it could not be set asideon the basisof capacity
• Contract cannot be set asideon this basisif the contract was ratified once the mental condition returns to normal ü Matthews v Baxter (1873) – Baxter bought a property at an auction while he was drunk, however once he was sober he ratified the contract through his conduct, so he lost the right to rescind • Note: statute law can provide relief in some situations. If you cannot set asidea contract based on capacity, thereare a number of otherways – e.g. vitiating factors, ACL, equitable principles. 2 THE REQUIREMENT OF WRITING • Not all contracts have to be in writing, however somedo (because of statute or if they are a formal contract) • Written contracts promote certainty • Contracts required to be in writing may be validif they are oral, but are unenforceable • If a contract is in writing, any variation must also be in writing for that variation to be enforceable • Collateral contracts may be oral even if the original contract is in writing
ü Commonwealth Bankof Australia v Serobian – Proof of an oral contract must be highly persuasive to lead a courtto believe legal relations were intended or believed to be intended, the absence of record makes this extremely difficult to prove Contracts For Sale Of Land • Conveyancing Act 1919 (NSW) s 54A o (1) – ‘No action or proceedings may be brought upon any contract for the sale or otherdisposition of land, or any interest in land (e.g. easement, covenant, etc.),unless the agreement, or some memorandum or note about it, is in writing and signed’ o Memorandum or note:letter, receipt, electronic communication, notes written down during discussion (e.g. on napkin). It has to be connected to a document or series of documents, not an event ü Thirknell v Cambi – use of letter ü Dinan v Harper – use of a receipt 19 o Material terms (requirement established through common law):a description sufficient to identify the parties with
certainty, a description of the land/interest in land to sufficiently identify a property with legal certainty, pricehas to be determined; or evidence that the pricewill be determined in a specific way, and acknowledgement of a contract o Signature: does not have to be official signature, it just has to identify you and indicates intention to be bound to the contents of the document - Welsh v Gatchell • An oral contract can exist and be valid, but it is not enforceable • Four stepsfor the performance of the sale of land 1. Pre-contract 2. Contract (exchange) – signing and physical exchange of contracts 3. Post-contract 4. Completion (settlement) • Must contain all essential terms (established by common law not statute) – Harvey v Edwards Dunlop & Co 1. Name of the parties 2. Describe a specific land interest 3. Set out a price • Other essential terms are: date of completion of the contract, if the payment is to be paid in installments, if chattels are included, etc.
Enforcement In Equity Of Contracts Unenforceable At Law • The consequence of unenforceability is not absolute • Equitable principles recognise 2 situations in which a contract that does not comply with the statutory writing requirement will be enforced by an order for specific performance 1. If the reason for a non-compliance is fraud on the part of the defendant, the contract will be specifically enforced 2. Equity will order the remedy of specific performance if the elements of the doctrine of part performance are established ü Penrith Whitewater Stadium Ltd v Lesvos Pty Ltd – Even if part performance has been executed, a courtcannot award damages, only equitable remedies 3 EXPRESS TERMS • Any grouping of words labeled as a term may include more than one term • Terms can be express or implied o Simply reading a document may not showall its terms • Terms can be promissory or not promissory (e.g. fine print, definition clauses – not capable of being breached) • When parties are negotiating a contract,
statements are made that vary in importance 20 o Irrelevant statements (e.g. “you were greatto do business with”) don’t give any effect to the contract o Puffs – a statement used in negotiation in order to induce someone to contract, that no reasonable person would take seriously Representations And Terms • Representations – statements made before a contract is formed, about the subject matter of the contract, intended to induce the otherpartyto enterinto the contract, but are not guaranteed, objectively, by their maker to be true and are not intended to be binding. Descriptive, illustrative, but not promissory. Not a term and not an essential part of the contract. o False representations may amount to a misrepresentation but it’s not part of the contract and you won’t be able to terminate the contract because of it o Remedy for breach: rescission • Terms – essential; goes to the root of the contract and amounts to contractual
undertakings that are intended to be legally binding. o Remedy for breach: termination and damages • Ellul & Ellul v Oakes – 4 criteria to take into account in deciding whether a statement is a term or representation (Australian courts follow thesein deciding whether statements become an express term or representation) 1. Importance of the statement – objective test 2. Timing of the statement 3. Any special skill or knowledge on the part of the maker of the statement 4. Whether the statement was included in any subsequent written document • The crucial consideration for a courtis if thereis any evidence of intention of the statement to be binding ü Oscar Chess Ltd v Williams ü Dick Bentley Productions v Harold Smith Motors – Dick Bentley Productions Ltd wanted a Bentley. Harold Smith (Motors) Ltd found one which they said had done only 20,000 miles sincea replacement engine. It later emerged that the Bentley had done 100,000 sincethe new engine and gear box had been replaced. The statement of how many miles were done was a term of the contract, because the Harold Smith (Motors) Ltd were car dealers and in
a better position to know than the claimant about the truth of the statement.This affects the parties' intention to incorporate a term into a contract. o If a statement is made to induce a party into a contract and it does, this leadsto an inference that the statement was intended as a term, unless the maker of the statement rebuts the term by stating he was innocent Agreements Partially in Writing • The existence of a written agreementthat appears to be complete does not automatically entail that the agreementis wholly in writing. It only serves as a foundation • The parolevidence rule doesn't apply when determining whether the contract is wholly in writing. If the Plaintiff claims that the agreementwas partly oral, the 21 courtwill examine extrinsic evidence to determine whether the contract was wholly or partially in writing • If the courtdetermines, after looking through the extrinsic evidence, that the contract was wholly written, then the parolevidence
rule comes into force • The courtwill look at the extrinsic evidence (letter and statements) to determine whether the contract was wholly in writing. ü State Rail Authority of New South Wales v Heath Outdoor Pty Ltd ü J J Savage & Sons v Blakney Incorporation Of Terms By Signature • Signature will bind a partyto the terms even if the signatory has not read or understood the terms set out in the document ü L’Estrange v Graucob – signed a contract without reading it, didn’t know about an exclusion clause. It didn’t work properly so she tried to replace it however sinceshe signed the contract she wasn’t able to and courts upheld it ü Toll (FGCT) Pty Ltd v Alphapharm Pty Ltd– signature was given by the agent of the party, who didn’t read anything. The high courtheld that the fact that the signatory hasn’t read the document,doesn’t mean the otherpartyhas to give them notice of the terms. Signature has a legal effect of reading and accepting the contract, regardless of whether the partyactually did so.
EXCEPTIONS TO THE SIGNATURE RULE • The general rule to the effect of a signature is that "if the partyaffected signsa written document known to be a contract which governs the relations between them, then his signature is evidence of his assent to the whole contract, including the exempting clauses, unless the signature is shown to be obtained by fraud or misrepresentation.” • Misrepresentation: A misrepresentation is any behaviour "if it is such as to mislead the otherpartyabout the existence of extent of the exemption. If it conveys a false impression, that is enough." "If the false impression is created knowingly, it is a fraudulentmisrepresentation; if it is created unwittingly, it is an innocent representation; but either is sufficient to dis-entitlethe creator of it to the benefit of the exemption" • Document not known to be a contract: The receipt could have thought to have been a voucher which the customer must produce when coming to collect the goods, rather than a contractual document containing conditions. In those circumstances, if the conduct of the Offeror gives the impression that the document contained no conditions, then the Offeror will not be able to rely on the signature as having the effect of reading and accepting (thusthe terms of the document will not have legal force).
ü Curtis v Chemical Cleaning & Dyeing • Non est factum (it is not my deed) – Toll v Alphapharm Pty Ltd o A signing partycan escape their obligations under contract 22 o A claim of non est factum means that the signature on the contract was signed by mistake, without knowledge of its meaning, but was not done so negligently o A successfulplea would make the contract void ab initio. ü Lloyds Bankv Waterhouse - a father acted as a guarantor to his son's debt when purchasing a farm. The father was illiterate and signed the bank document under the belief that he was acting as the guarantor for the farm only,when the contract was actually for all the debt accumulated by the son. As he was illiterate, this was a mistake as to the document signed and the father was successfulin claiming non est factum. Incorporation By Notice • Arises in the form of unsigned documents, signs
and documents that might not appear to be contractual in nature to a regular person • Courts have to decide whether any statement in such documents are terms and therefore binding • 2 essential requirements 1. Timing – notice of the term must be giving at the time or before the forming of the contract ü Olley v Marlborough Court – a sign on the back of a hotelroomdoor stated that a hoteltakesno responsibility for lost items. Court held that it was not an express term of the contract as it was formed well before when they booked the room ü Thornton v Shoe Lane Parking 2. Reasonableness – not that the clause itselfmust be reasonable, but rather that notice must be given reasonably to the partythat will be affected by it, e.g. if they have read it or had the chance to be aware of it without any obstruction. If the document is contractual in nature, giving it to them is reasonable notice, if is not (e.g. a receipt, ticket, sign, etc.) then simply giving the document to them is not reasonable notice, they should explicitly be made aware of it
ü Parker v South Eastern Railway Co ü Causer v Browne – customer left dresswith drycleaner, on the back of the receipt was an exclusion clause. Could not be relied upon as no reasonable person would have considered it to be contractual in nature Incorporation By PriorDealings • A term may be incorporated where it is inserted by a partyover a series of agreements and the otherpartyhas actual or constructive knowledge of it • A courtwill consider the number of past dealings, the nature of those dealings and the consistency of those dealings • If the same previous terms are not expressly incorporated, they may be enforceable. Courts have held terms to be incorporated even if they haven’t been 23 in every transaction – if it is introduced and the otherpartycontinues to contract knowing or should have reasonably known, courts will give effect to it ü Henry Kendall & Sons v William Lillico & Sons Pty Ltd – Depends on the number and consistency of past dealings –
3 contracts per month over a threeyear period for the sale of animal feed was sufficient § ‘Over the course of a long period prior to the threeoral contracts which are now in question SAPPA knew that when Grimsdalesold they did so on the terms that they had continuously made known to SAPPA. In these circumstances it is reasonable to hold that when SAPPA placed an order to buy they did so on the basisand with the knowledge that an acceptance of the order by Grimsdaleand their agreementto sell would be on the terms and conditions set out on their contract notes to the extent to which they were applicable.’ (Lord Morris). ‘The only reasonable inference from the regular course of dealing over so long a period is that SAPPA were evincing an acceptance of, and a readiness to be bound by, the printed conditions of whose existence they were well aware although they had not troubled to read them. Thus the general conditions became part of the oral contract.’ (Lord Pearce)
ü Hollier v Ramble Motors (AMC) Ltd - 3 contracts in 5 years for the repair of a car was not sufficient Parol Evidence Rule • Extrinsic evidence cannot be introduced that will have the effect of adding to, subtracting from, varying or qualifyingthe language of an entirely written contract – Codelfa Construction Pty Ltd v State Rail Authority of NSW o Includes written, oral, otherrelating documents, previous drafts • Unrelated evidence could be what the parties said to each other, otherdocuments outside the contract, or earlier drafts of the contract EXCEPTIONS TO THE PAROL EVIDENCE RULE • Does not apply to contracts that are partly written and partly oral o No effect on contracts that are intended to be partly written and partly oral – Hospital Products Ltd v United Stated Surgical Corp ü L G Thorne & Co v Thomas Borthwick & Sons - Where a formal written document has been created, and appears to be complete, it should be presumed that the parties intended the document to
contain all the terms of the agreement • Courts may allow the use of extrinsic materials to establish that: o The operation of a contract is not to occur until the happeningof a certain event – Pym v Campbell 24 o A written contract incorrectly records the agreementof the parties, leading extrinsic evidence to provide the basisfor the courtto issuean order for rectification of the written contract – Ryledar Pty Ltd v Euphoric Pty Ltd o A prior collateral contract exists, provided that the main contract does not contain an ‘entire agreement’ clause – DKB Investments Pty Ltd v Belcote Pty Ltd Collateral Contract • A statement that does not amount to an express term may amount to an independent contract that is connected to the main contract through consideration (which is the entryinto the main contract) • The collateral contract is connected to the main contract by way of consideration – Heilbut Symons & Co v Buckleton
• Terms can give rise to a contract that is separate and distinct from the main one – De Lassalle v Guildford • It has to be promissory in nature and not merely representational - J J Savage & Sons v Blakney • There must be no inconsistency between the main contract and the alleged collateral contract – Hoyt’s Pty Ltd v Spencer • Entire agreementclauses – Inntrepreneur Pub Co v East Crown o a suitably expressed entire agreementclause is effective to preclude what collateral warranties or additional terms from having contractual effect • Courts may be reluctant to find a collateral contract if the statement made is one that you would find naturally in the principal contract – Shepperd v Council for the Municipality of Ryde 4 IMPLIED TERMS • Categories: o Terms implied to give efficacy to a particular contract based upon the facts and circumstances of a particular case o Terms which the law findsin a certain class of
a contract, either pursuant to common law or statute, although those terms may not find specific expression in the contractual statements or documents of parties o Terms implied into a contract to give effect to a notorious custom or usage in a particular trade, industry or locality • The onus lies on the partyalleging the existence of the implied term – Heimann v The Commonwealth • Courts are reluctant to imply a term in a contract – Roxboroush v Rothmans of Pall Mall Australia Pty Ltd • The more detailed and comprehensive the contract, the less ground thereis for arguing the existence of an implied term - Codelfa Construction Pty Ltd v State Rail Authority of NSW 25 Written Contracts • BP Refinery v Shire of Hastings – established essential elements that need to be satisfied for implied terms to be held: 1. Must be reasonable and equitable – Byrne v Australian Airlines (implied term rejected because it would operate in a biased fashion)
2. Must be necessary to give business efficacy to the contract – Societe Generale, London Branch v Geys (it is not the courts role to improve the contract it is considering by implying a term) 3. Must be so obvious that it ‘goes without saying’ – Codelfa Construction Pty Ltd v StateRail Authority of NSW (whether the parties would have readily agreed on the contract if it had been suggested during negotiations) 4. Must be capable of clear expression - Shell (UK)Ltd v Lostock Garage Ltd (alleged term could not be expressed within sufficient precision) 5. Must not be inconsistent with express terms – Kitching v Phillips § The above are not completely essential, they are used more as a guideline in conjunction with the facts of the case • Codelfa Construction Pty Ltd v StateRail Authority of NSW Codelfa did non-stop excavation work for the state rail authority and received nuisance complaints from local residents and asked for an injunction to stop the work at nightand on Sundays. The courtconcluded that Codelfa was not protected by the immunity of the state rail authority from such complaints, which
it was assumed to be. An injunction was imposed and thus the project took longer than initially agreed. Codelfa argued that therewas an implied term that they would be paid more for extrawork (the project took longer). The courtwas in favour of the state rail authority because it was not obvious that this would have been the agreementand it would have been more likely that othernegotiations would have been made if it was expected to happen, resulting in an express term about the subject matter • Attorney General of Belize v Belize Telecom Ltd o Not binding precedent but persuasive o Whetherto imply a term into the constitution of a business o Lord Hoffman – (1) Where a contract fails to expressly say what ill happen when an event occurs, then nothing will happen. If a loss occurs then that loss lies where it falls.(2) However it may be appropriate to imply a term if a reasonable person is to understand that somethingshould happen because the contract is saying so, even though it is not expressly said in the contract. (3) Where a term should be implied, the courtshould be able to express in reasonable terms what it must be saying even though it fails to expressly. (4) Where a courtdoes imply a term into a contract, the courtis not adding anything to the contract – looking
for the presumed intention of the parties. (5) Those requirements in the PB refinery case do not have to all be satisfied, they are just tools for a courtto explain why a term can be implied and don’t have to all be met o Objective test, although the subjective intention of the parties must be taken into account 26 o A courtmay imply a term if it is satisfied to a reasonable person that that is what the parties intended Informal, Unwritten Contracts • More flexible approach to imply terms • Hawkins v Clayton and Byrne v Australian Airlines Ltd – the courtmust decide whether the implication of the term is necessary for the effective operation of the contract. Includes similar criteria to the BP refinery ones but more flexible Implication Of Terms By Statute • Sale of Goods Acts • ACL ss 51-62 • Less interested in the intention of the parties, e.g. implied in the sale of a TV that the TV will work and if it doesn’t it goes against legislation
• Contracts can expressly exclude the implication of terms by statute Terms Implied By Common Law • 2-part test 1. Determine the type or class of contractual relationship 2. The term must be appropriate for all contracts in that type or class of contract § Test of necessity – University of Western Australia v Gray • Examples o Banker to observe secrecy with respect to a customer’s account – Tournier v National Provincialand Union Bankof England o Employment contracts – implied that they employees will: § Take reasonable care to carryout the terms of their employment – Kashemije Stud Pty Ltd v Hawkes § Faithfully serve the employer – Blyth Chemicals Ltd v Bushnell § Obey lawful and reasonable commands of the employer – R v Darling Island Stevedoring and Lighterage Co Ltd Implication By Custom And Usage • Con-Stan Industries of Australia Pty Ltd v Norwich Winterthur Insurance
o To establish a term implied by custom or usage we need to keep 3 things in mind 1. Whether a custom exists or not is a question of fact 2. Evidence to establish a custom requires a heavy onus of proof – it must be so well known and acquiest in that the parties must have reasonably been able to assume it was a term 3. Not possible if an express term in a contract contradicts the custom 27 Implied Terms Of Good Faith • Implied terms of good faith precludes a partyfrom exercisinga contractual power impulsively for an unnecessary purpose – Wolfe v permanent Custodians Limited • Royal Botanic Gardens & Domain Trust v South Sydney Council – Justice Kirby pointed out that 3 issues need to be resolved 1. What does the obligationof duty of good faith mean? (Justice Mason said extrajudicially it means to cooperate to achieve the objectives of the contract, to act reasonably in the circumstances and to adhere to
honest standards of behaviour) 2. To what types of contracts will it apply? Commercial or other? 3. Can an implied term of good faith be expressly excluded? – Important and unresolved issues • A good faith term will be implied into standard form contracts (contracts that are not subject to negotiation) and ‘relational’ contracts (involve an ongoing relationship between business parties, e.g. franchisee/franchisor agreements) • Pacific Brands Sport & Leisure Pty Ltd v Underworks Pty Ltd – the duty of good faith exists as an incident of all commercial contracts 4 CONSTRUCTION OF EXCLUSION CLAUSES General Approach To Construction Of Exclusion Clauses • The principal task of the courtis to determine the intention of the parties • 2 major principles set out by the high court– Darlington Futures Ltd v Dalco Australia Pty Ltd 1. An exclusion clause should be constructed according to its natural and ordinary meaning, read in light of the contract as a whole, thereby giving weight to the context in which it appears including the nature and object of the contract
2. The contra preferentem principle will be applied so that in cases of ambiguity the clause will be construed against the person relying on the exclusion clause Exclusion Clauses And Negligence • For the tort of negligence to be within the scope of an exclusion clause, it must be clearly intended that the clause covers negligence – Davis v Pearce Parking Station Pty Ltd • Rules in relation to clauses seeking to exclude liability for negligence – Canada SteamshipLines Ltd v The King 1. An express exemption of liability for negligence will exclude liability on the part of the defendant § Includes any synonym of negligence 2. Where thereis no express reference to negligence, the courtneeds to determine if the words used are wide enough to include negligence, without any doubts on this to be resolved by applying the contra preferentem principle 28 § If words include negligence within their scope they will be effective, e.g. ‘howsoever caused’ and ‘under no
circumstances’ – Putter v Palmer 3. If the words used are wide enough to cover negligence but also encompass othergrounds of liability, the clause will be read as applying only to the othergrounds of liability and will not operate to exclude the claim for negligence Other Relevant Principles DEVIATION CASES • If a carrier deviates from the agreed voyage or route, they lose the benefit of an exclusion clause – Thomas National Transport (Melbourne) Pty Ltd v May & Baker (Australia) Pty Ltd • Not an absolute rule – still a matter of construction of the contract FOUR CORNERS (SCOPE OF THE CONTRACT) RULE • Exclusion clause can only be relied upon if the conduct is within the scope/four corners of the contract • If the defendant’s act causing loss to the plaintiff is an act that has not been authorised or contemplated by the contract, then an exclusion clause will not protect the defendant from liability of damages flowing from that cause
ü Council of the City of Sydney v West Exclusion Clauses And Legislation AUSTRLALIAN CONSUMER LAW • S 64 Competition and Consumer Act 2010 (cth) – relates to ss 51-63 • Only applies to a contract for the sale of goods and services to a customer • Photo production Ltd v Securicor Transport Ltd– Securicor was to provide security for Photo Production. Exclusion clause said that Securicor would not be responsible at all for any loss occasioned by any security guards unless it could be reasonably foreseen or avoided by the due diligence of Securicor.The security guard was cold and lit a fire and burnt the premises down. It was not reasonably foreseeable and the courtgave effect to the exclusion clause 5 VITIATING FACTORS Misrepresentation • Representations may be false fraudulently, negligently or innocently • Makes a contract voidable • Remedies o Fraudulent – the wrong information was given deliberately – rescission and damages available at contract law, alternative action may be available in the tort of fraud or deceit
29 o Negligent – the information given was given negligently/carelessly – rescission and damages available in contract, alternative action may be taken in negligence o Innocent – wrong information given innocently – rescission is possible but damages not, and thereis no alternative remedy TO ESTABLISH MISREPRESENTATION 1. Statement of fact – past or present material fact. o Does not include puffs(statements that no reasonable person would take seriously), statements or misstatements of law, promises or predictions of the future, statements about future intention, or opinions (UNLESS the facts that the opinion was based on are not known to both parties – see Smith v Land & House Property Corp) ü Edgington v Fitzmaurice – company decided to seek public investments and put out a prospectus stating that if you invest in them they will use those funds to expand the business in certain
ways, but they used that money to pay off existing debts. The company collapsed, and one investor sued based on the fact that a misrepresentation was made about how the money would be used. It was held that it was a statement of future intention. On appeal, it was held that the statement was actually a statement made in fact ü Smith v Land & House Property Corp – Smith was selling his hotel and he made a statement that the hotelhas a most desirable tenant. This was not true and the property corp rescinded the contract for misrepresentation. The courtheld that it was, because the facts on which the opinion was based were known only to Smith and not the purchaser) 2. Statement must be false – not all facts have to be disclosed – a representee has no legal entitlement to expect information and they must ask for it (common law) o Full disclosure must be made if partial representation has been made ü Dimmock v Hallet – told purchaser all the units were leased, but did not disclose that sometenants had given notice that they were going to leave, which distorted the truth of the statement.The courtheld
that this amounted to misrepresentation o There is an obligation to disclose if the statement was true when it was made but later the circumstances change – may amount to fraudulent misrepresentation. If the representor doesn’t know the circumstances have changed it can amount to innocent or negligent misrepresentation dependingon the circumstances o There is an obligation to disclose information in certain types of contracts – e.g. contracts of utmost good faith, such as insurance contracts 3. Statement must be intended to induce, and must induce (there must be reliance on the representation) – the representee must showthat they reasonably relied on it and it induced them to enterinto the contract o The less material the fact, the less likely the reliance 30 o If reliance is established, then a presumption arises that the statement was intended to induce – then the onus of proof shifts to the representor to rebutthe presumption and prove that the representee
did not rely on the statement (prove on the balance of probabilities that the representee knew it was false) o Principles relevant to inducement – Dadourian Group International Inc v Simms 1. Question of fact 2. If the misrepresentation is of such a nature that it would be likely to ply a part n the decision of a reasonable person to enterinto a contract then it will be presumed that it did so 3. The misrepresentation does not have to be the sole inducement 4. The presumption of inducement is rebutted by the representor, showing that it did not play a substantial part in the decision 5. Decided by the courton the balance of probabilities ü Holmes v Jones – statement made about the numbers of cattle could be held. Purchaser found out the statement was false and went ahead anyway. The courtheld that therewas an intention to induce, but therewas no inducement in fact because the purchaser made his own inquiries and did in fact not rely on the representation
ü Redgrave v Hurd – when the representee has a chance to check whether the statement was true but did not, then the purchaser may still argue that he relied on the representation. o The false statement need not be the only factor, but must only be ONE of the reasons for entering into the contract o At common law – contract voidable (prima facie right to rescission) unless it has already been fully performed • If the representee is aware of the falsity but is not aware of the extent of the falsity, reliance will still be established – Gipps v Gipps • If the representee had the opportunity to inquire as to the accuracy of the statement and didn’t, reliance is still present and a misrepresentation is established – Redgrave v Hurd RESCICCION ANDALTERNATIVES • Law of tort o Derry v Peak o Esso Petroleum Co Ltd v Mardon – petrol station operator had a relationship with esso petroleum. They gave the operator unsubstantiated claims negligently (theydidn’t check the information) he relied on the
information and they induced him to enterinto a contract. He sued in negligence and received damages • Statute o Misleading or deceptive conduct o ACL Part 2(1) s 18 § Very wide and very accessible 31 § “A person shall not, in tradeor commerce, engage in conduct that is misleading or deceptive or is likely to mislead or deceive” § Not all contractual transactions are subject to this section – e.g. not in tradeor commerce § There is no requirement that anyone has to actually be misled or deceived § Intention to mislead or deceive is irrelevant § Liability for misleading or deceptive conduct cannot be excluded under contract § Does not apply to one-off private or charitable transactions o Henjo Investments Pty Ltd v Collins Marrickville
Pty Ltd – restaurant perceived to be licensed for 100 but only licensed for 70, no statement was made about this. No remedy under contract law as no statement was made, but therewas a remedy under s 18 of the ACL o Antoniou v Karedis Enterprises Pty Ltd – prediction/opinion of good business breached s 18 o Gaffikin Marine Pty Ltd v Princes Street MArins Pty Ltd - False statements made during negotiations “we are the only genuine buyers” o Conductaimed at individual ü Butcher v Lachlan Elder Realty Pty Ltd o Conductaimed at public at large ü Taco Company of Australia v Taco Bell Pty Ltd ü Parkdale Custom BuiltFurniture Pty Ltd v Puxu Pty Ltd • Remedies o Injunction to stop behaviour o Damages to compensate for loss Misleading or Deceptive Conduct • One of the most important consumer protection measures of Australian law • ACL s 18 (schedule 2 of the Competition and Consumer Act 2010 (Cth))
(1) A person must not, in tradeor commerce, engage in conduct that is misleading or deceptive or is likely to mislead or deceive. (2) Nothing in Part 3-1 (which is about unfair practices) limits by implication subsection (1). • For a breach to occur under this section, the misleading or deceptive conduct must be by a person engaged in ‘trade or commerce’ • Remedies: injunction, damages, compensatory orders o Not confined to persons who are consumers under s 3 of the ACL – Concrete Constructions (NSW) Pty Ltd v Nelson THE MEANING OF ‘IN TRADE OR COMMERCE’ • S 2 of the ACL – tradeand commerce within Australia or tradeand commerce between Australia and places outside of Australia; and includes any business or professional activity (whether or not carried out for profit) 32 • Definition of the words ‘trade’ and ‘commerce’ have been left up to court discretion
o Re Ku-Ring-Gai Co-Operative Building Society (No 12) Ltd – terms of common knowledge o Larmer v Power Machinery Pty Ltd – very wide meaning • The conduct must be trading or commercial in nature and not merely incidental to tradeor commerce o Concrete Constructions (NSW) Pty Ltd v Nelson – s 18(1) has a restrictive operation; only conduct which is itselfan aspect of activities or transactions, which of their nature, bear a trading or commercial character, i.e. does not constitute a truckdriver failing to give the correct hand signal o O’Brien v Smolonogov – does not cover the private sale of property because it is not ‘in’ tradeor commerce o Argy v Blunts & Lane Real Estate Pty Ltd – the same principal as O’Brien applies even if a real estate agent is concerned, however the agent may be liable for misleading or deceptive conduct THE MEANING OF ‘ENGAGE IN CONDUCT’ • s 2(2) of the ACL – ‘a reference to engaging in conduct shall be read as a reference to do or refusing to do any act’
Q 1 Lester wanted to sign a lease for 12 months on a large showr.docx
Q 1 Lester wanted to sign a lease for 12 months on a large showr.docx
Q 1 Lester wanted to sign a lease for 12 months on a large showr.docx
Q 1 Lester wanted to sign a lease for 12 months on a large showr.docx
Q 1 Lester wanted to sign a lease for 12 months on a large showr.docx
Q 1 Lester wanted to sign a lease for 12 months on a large showr.docx
Q 1 Lester wanted to sign a lease for 12 months on a large showr.docx
Q 1 Lester wanted to sign a lease for 12 months on a large showr.docx
Q 1 Lester wanted to sign a lease for 12 months on a large showr.docx
Q 1 Lester wanted to sign a lease for 12 months on a large showr.docx
Q 1 Lester wanted to sign a lease for 12 months on a large showr.docx
Q 1 Lester wanted to sign a lease for 12 months on a large showr.docx
Q 1 Lester wanted to sign a lease for 12 months on a large showr.docx
Q 1 Lester wanted to sign a lease for 12 months on a large showr.docx
Q 1 Lester wanted to sign a lease for 12 months on a large showr.docx
Q 1 Lester wanted to sign a lease for 12 months on a large showr.docx
Q 1 Lester wanted to sign a lease for 12 months on a large showr.docx
Q 1 Lester wanted to sign a lease for 12 months on a large showr.docx
Q 1 Lester wanted to sign a lease for 12 months on a large showr.docx
Q 1 Lester wanted to sign a lease for 12 months on a large showr.docx
Q 1 Lester wanted to sign a lease for 12 months on a large showr.docx
Q 1 Lester wanted to sign a lease for 12 months on a large showr.docx
Q 1 Lester wanted to sign a lease for 12 months on a large showr.docx
Q 1 Lester wanted to sign a lease for 12 months on a large showr.docx
Q 1 Lester wanted to sign a lease for 12 months on a large showr.docx
Q 1 Lester wanted to sign a lease for 12 months on a large showr.docx
Q 1 Lester wanted to sign a lease for 12 months on a large showr.docx
Q 1 Lester wanted to sign a lease for 12 months on a large showr.docx
Q 1 Lester wanted to sign a lease for 12 months on a large showr.docx
Q 1 Lester wanted to sign a lease for 12 months on a large showr.docx
Q 1 Lester wanted to sign a lease for 12 months on a large showr.docx
Q 1 Lester wanted to sign a lease for 12 months on a large showr.docx
Q 1 Lester wanted to sign a lease for 12 months on a large showr.docx
Q 1 Lester wanted to sign a lease for 12 months on a large showr.docx
Q 1 Lester wanted to sign a lease for 12 months on a large showr.docx
Q 1 Lester wanted to sign a lease for 12 months on a large showr.docx
Q 1 Lester wanted to sign a lease for 12 months on a large showr.docx
Q 1 Lester wanted to sign a lease for 12 months on a large showr.docx
Q 1 Lester wanted to sign a lease for 12 months on a large showr.docx
Q 1 Lester wanted to sign a lease for 12 months on a large showr.docx
Q 1 Lester wanted to sign a lease for 12 months on a large showr.docx
Q 1 Lester wanted to sign a lease for 12 months on a large showr.docx
Q 1 Lester wanted to sign a lease for 12 months on a large showr.docx
Q 1 Lester wanted to sign a lease for 12 months on a large showr.docx
Q 1 Lester wanted to sign a lease for 12 months on a large showr.docx
Q 1 Lester wanted to sign a lease for 12 months on a large showr.docx
Q 1 Lester wanted to sign a lease for 12 months on a large showr.docx
Q 1 Lester wanted to sign a lease for 12 months on a large showr.docx

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  • 1. Q 1 Lester wanted to sign a lease for 12 months on a large showroom in Pyrmont to conduct a series of book sales. However, he was afraid that he would not be able to afford all the monthly repayments if business was slow. He told the landlord Gabor that he would only sign the lease if Gabor promised Lester could terminate the agreement early because of financial pressures. The lease had no express term addressing the possibility of early termination. Gabor agreed just before the lease was signed. After six months, Lester's business was struggling to achieve enough sales but Gabor refused to allow early termination. Advise Lester how he could enforce Gabor’s promise under contract law. {Refer to general law principles only) Q2 Mary and her husband Joseph sign a contract to sell their beautiful suburban cottage to Larry for $750,000. Larry pays $75,000 to their agent by way of deposit. One ofthe terms ofthe contract is that settlement will take place after 12 weeks in order to give Larry time to organise his finance. This is because Larry has told them he has complicated financial holdings through overseas managed funds and he needs a longer period of time to settle. Two days before the settlement date, Larry rings Mary and says he needs extra time because one of the trustees of an overseas company in which he has shares has been ill and failed to organise part of the settlement funds on time. Mary and Joseph reluctantly agree to give Larry extra time. Their solicitor serves Larry with a notice to complete. The notice sets a new time for settlement in 28 days with ‘time of the essence’. On the day before the new settlement date, Larry again rings Mary and asks for more time because an amount ofmoney he was expecting to come from one ofhis investments in the Cayman Islands did not come through on time. Mary speaks with her solicitor who advises her not to agree. The solicitor
  • 2. attends the scheduled settlement time but no one attends on behalf of Larry. The solicitor waits for 10 minutes and then leaves. Mary and Joseph terminate the contract and claim the deposit. Larry threatens to take them to court. Advise Mary and Joseph about their prospects for claiming the deposit. Q3 Heidi is a young employed solicitor in the law firm Fox & Sly, which has a Sydney city office and branches in two NSW country towns. When she got the job, she signed an employment agreement with the partners. It included a clause in which she promised that, if she left the firm, she would not work as an employed solicitor, or set up her own legal practice: 2 a) for a period of six years from her departure b) in any premises within twenty kilometres of any of the offices of Fox & Sly. Heidi now wishes to quit the firm and get a better job with a legal practice that has an office in a small country town 15 kilometres from one of Fox & Sly’s branches. Discuss whether and to what extent Heidi could be bound by the clause in the employment agreement with Fox & Sly. Q4 Adam signed a contract to build a timber and fibreglass roof over the back porch of Chloe’s inner city terrace house for a total contract price of $ 10,000. When Adam finished the job, Chloe complained that rainwater entered the roof and caused the down lights to short circuit. Chloe engaged another tradesman, Beau, to replace the roof seals and fix the problem with the help of an electrician. She had to pay $2,700 for all the remedial work. Chloe is furious with Adam and tells him he deserves to be paid nothing for all the trouble he caused her. However, she offers him $4,000 on a without prejudice basis to settle his account, adding that she will sue him for damages If he refuses to take the money. Advise Ashton whether, and on what legal basis, he could recover more than $4,000 from Demi. {Refer to general law principles only)
  • 3. Q5 Zhang and his wife run a fruit and vegetable supermarket at the Western Supacenta. They lease the premises from Mega-Mall Ltd. They have a very poor grasp of English and little business experience. However, they have registered a small private company, of which they are the sole director shareholders, through which they run their business. Although Zhang is up to date with rent, he has been late with the payments on a couple ofoccasions. When it was time to renew the lease, the Supacenta manager Fred came to see Zhang in the company of a security guard. Fred said: “I’ve got your new lease. The rent and outgoings have gone up by 25%. Don’t complain because Mega- Mall have a new property manager and he is upset you have been late with payments. Sign the new lease by tomorrow lunch time.” Zhang replied: “No, this no good. I must have time to see solicitor. I don’t understand this paper.” Fred replied: “Just sign it by tomorrow or you will have to get out - and Mega-Mall will sue you for making late payments. That’s it.” Zhang again protests but at that point the security guard grabbed him by the collar and slammed the envelope containing the lease on the shop counter. Zhang stops talking and takes the envelope. The guard lets go of Zhang’s shirt collar and leaves the shop with Fred. Zhang and his wife are upset but they sign the lease because they are afraid oflosing their shop. After a few months Zhang can no longer afford the high rent and seeks legal advice . On what basis could Zhang seek to set aside the lease? {Refer to statutory provisions and general law principles) Q6 In Trident General Insurance Co Ltd v McNiece Bros Pty Ltd (1988) 165 CLR 107, Brennan J said: “It is submitted that the doctrine of privity sometimes produces unjust results and that this Court should reexamine it in the light ofthe criticisms the doctrine has attracted.” How would you explain the doctrine of privity and what are the unjust results referred to by Brennan J? Describe one way in which the unjust result was circumvented in the Trident case.
  • 4. Q7 Edward contracted to hire Victoria’s luxurious yacht for use on 19 October. In his letter to Victoria, Edward wrote the following: My whole family loves boats and on 19 October, the world’s largest and most luxurious passenger liner, Titanic IV, arrives in Sydney for the first time. Not only will we have a wonderful day enjoying Sydney’s glorious harbour, but we shall also be witnessing a truly historic event at close range. On 10 October, for reasons unknown, Titanic IV sank as it was making its way across the Pacific Ocean towards Australia. Edward seeks your advice as to what impact, if any, the sinking of Titanic IV has on his contract with Victoria. (Refer to general law principles only) 1 LAWS104EXAM NOTES KEY CASES ....................................................................................... ........................................................................ 2 1 CAPACITY ....................................................................................... .................................................................. 16 Minors – Common Law ....................................................................................... .......................................................................................... 16 Minors – Statute Law ....................................................................................... .............................................................................................. 17 Mental Disability .......................................................................................
  • 5. ............................................................................................... ....... 17 2 THE REQUIREMENT OF WRITING ....................................................................................... ............................... 18 Contracts For Sale Of Land ....................................................................................... ................................................................................... 18 Enforcement In Equity Of Contracts Unenforceable At Law ....................................................................................... ................. 19 3 EXPRESSTERMS ....................................................................................... ........................................................ 19 Representations And Terms ....................................................................................... ................................................................................ 20 Incorporation Of Terms By Signature ....................................................................................... ............................................................. 21 Incorporation By Notice ....................................................................................... ........................................................................................ 22 Incorporation By PriorDealings ....................................................................................... ....................................................................... 22 Parol Evidence Rule ....................................................................................... ............................................................................................... . 23 Collateral Contract ....................................................................................... .......................................................................................... ..... .... 24
  • 6. 4 IMPLIED TERMS ....................................................................................... ........................................................ 24 Written Contracts ....................................................................................... ............................................................................................... ...... 25 Informal, Unwritten Contracts ....................................................................................... ........................................................................... 26 Implication Of Terms By Statute ....................................................................................... ....................................................................... 26 Terms Implied By Common Law ....................................................................................... ....................................................................... 26 Implication By Custom And Usage ....................................................................................... .................................................................... 26 Implied Terms Of Good Faith ..................................................................................... .. .............................................................................. 27 5 CONSTRUCTION OF EXCLUSION CLAUSES ....................................................................................... .................. 27 General Approach To Construction Of Exclusion Clauses ....................................................................................... ...................... 27 Exclusion Clauses And Negligence ............................................................................. .......... .................................................................... 27 Other Relevant Principles ....................................................................................... ..................................................................................... 28
  • 7. Exclusion Clauses And Legislation ....................................................................................... .................................................................... 28 6 VITIATING FACTORS ....................................................................................... .................................................. 28 Misrepresentation ....................................................................................... ............................................................................................... .... 28 Misleading or Deceptive Conduct ....................................................................................... ..................................................................... 31 Mistake ....................................................................................... ............................................................................................... .......................... 33 Duress ....................................................................................... ............................................................................................... ............................ 34 Unconscionability ....................................................................................... ............................................................................................... ..... 35 Undue Influence ....................................................................................... ............................................................................................... ......... 37 Unjust Contracts ....................................................................................... ............................................................................................... ........ 39 7 DISCHARGE ....................................................................................... ............................................................... 39
  • 8. Agreement ....................................................................................... ............................................................................................... .................... 39 Performance ....................................................................................... ............................................................................................... ................ 41 Breach ....................................................................................... ............................................................................................... ............................ 42 Frustration ....................................................................................... ............................................................................................... ................... 45 8 ILLEGALITY ....................................................................................... ................................................................ 46 Statutory Illegality ....................................................................................... ............................................................................................... .... 46 Common Law Illegality ....................................................................................... .......................................................................................... 47 Effect Of Illegality ....................................................................................... ............................................................................................... ...... 49 Alternative Causes Of Action ....................................................................................... ............................................................................... 49 9 PRIVITY .......................................................................................
  • 9. .................................................................... 49 The Privity rule ....................................................................................... ............................................................................................... .......... 49 Privity and consideration ....................................................................................... ..................................................................................... 49 ‘Exceptions’ to Privity ....................................................................................... ............................................................................................ 51 2 KEY CASES Topic Case Name Principle Capacity: When contracts a binding on a minor McLaughlin v Darcy A contract between two parties for which one or more is a minor is binding if the contract is for a necessity of life or a beneficial service
  • 10. Capacity: Not necessity Bojczuk v Gregorcewicz Minor moving to Australia was not a necessary and the contract was unenforceable. She did not have to pay B back. Capacity: Necessity Scarborough v Sturzaker 17 year old bought a bicycle and couldn’t pay for it. The bicycle was found to be a necessary, the boy was obliged to pay for it Capacity: Beneficial contract of service Hamilton v Lethbridge Lawyer clerkship (article clerk) agreed to be trained by master
  • 11. solicitor and when he was trained he would not set up his own practice within 50 miles of the master solicitor’spractice. Master solicitor took it to courtto enforce restraint of trade, when article clerkbroke it. The article clerkhad ‘capacity’ because it benefitted him more than restrained him, thus it was enforceable. Capacity: Mental capacity/ Ratification Hart v O’Connor A contract made by a partyof unsound mind – but who appears to be of sound mind – with another party(having no knowledge of the unsoundness) is valid. There is no unfairnessthat can be imputed to the partyhaving no knowledge of the other’s incapacity. The Court also noted that if a person lacking mental capacity subsequently regains capacity (even temporarily) they may ratify a contract entered into when insane. Capacity:
  • 12. Drunkenness/ Ratification Matthews v Baxter Baxter, while drunk, agreed at an auction to purchase a property. Oncesobriety returned affirmed the contract that had been made while drunk. Sometime later he had a change of mind and he sought to rescind the contract, arguing that he lacked capacity to enterthe contract by reason of intoxication. Such a contract is not void but merely voidable. If the drunken party, upon coming to his senses, ratifies the contract, he is bound by it. The requirement of writing: Requirements to form a binding document Pirie v Saunders The plaintiff relied upon a note of the defendant's instructions written by the defendant's solicitor. The note
  • 13. referred to the property, and specified the rent and duration of the lease, but therewas no statement of the commencement date, and the note contemplated the formulation of further terms. Document was not recognisable as a note or memorandum of a concluded agreement. The note in this case is merely a notation of instructions for the preparation of a draft leasefor submission to the otherparty. They are not indicative of the existence of any binding contract. Document must identify parties to the contract and essential terms of the contract and cannot contemplate the formulation of further special conditions. The requirement Khoury v The payment of money by is not a sufficient act of part 3 of writing: Part performance Khouri
  • 14. performance. The requirement of writing: Part performance McBride v Sandland Requirements for Part Performance: 1. The acts could only have been done for the purposes of fulfilling the alleged agreement- therecan be no other reason why they were performed. 2. The partyperforming the acts must have been doing so in reliance on the alleged agreementand the otherparty must have permitted the acts to be done 3. The act must be done by a partyto the agreement 4. There was a completedagreement 5. The acts must have been done in compliance with the terms of th e oral agreement In this case the promise in did not give rise to a contract as
  • 15. alleged by Sandland and therewere no acts of part performance. Express terms: Difference between a term and a representation Ellul and Ellul v Oakes The Elluls purchased a house from Oakes. In doing so they relied on a statement contained in a real estate agent’s listing form that the property was sewered. This form had been signed by Oakes. The property was not sewered. Elluls claimed damages for breach of contract. The representation was made to induce a purchaser to buy the property and was successful. This provides prima facie evidence that the representation was a term. It was then for Oakes to demonstrate it was not a term. This was not done successfully. Express terms: Difference between a term and a representation
  • 16. Oscar Chess v Williams Customer went to a car dealer to tradein his car, thinking it was a 1948 model. The dealer later realised it was a 1939 car and it was worth much less, and sued Williams for breach of contract. The statement was not a term and was an innocent misrepresentation. If a representation is made in the course of dealings for the very purpose of inducing the otherpartyto act upon it, and actually inducing him to act upon it, by entering into the contract, that is prima facie ground for inferring that it was intended as a warranty (term). Suffice it that it was intended to be acted upon and was in fact acted upon. Express terms: Parol evidence rule (partly oral) contract) SRA v Heath Outdoor Ltd
  • 17. The parolevidence rule has 'no operation until it is first determined' that all the terms of the contract are in writing. The parolevidence rule is persuasive and the evidentiary burden is on the partywishing to rebutthe claim that the whole contract was not in writing. Express terms: Representation or term J J Savage and Sons v Blakney The trial judge: the representation was neither a term of the contract nor a collateral warranty. The statement was an estimate only,not an unequivocal promise of a future speed. The Full Court: reversed the decision, holding that it was a collateral warranty. High court: The words indicated ‘an expression of opinion’ only and are only a representation. 4
  • 18. Express terms: Collateral contracts Hoyt's v Spencer Toll (FGCT) Pty Ltd v Alphapharm Pty Ltd Hoyts argued that a collateral contract operated alongside the main contract which prohibitedthe Defendantfrom terminating the agreement, through consideration for him entering the agreement, Spencer promised Hoyts he will not terminate the agreementduring the term. Collateral contracts involve the entrance into a contract as consideration for a promise. o Argument: However, this also means that a collateral contract cannot contradict a contractual right or obligation in the original contract. It also needs to be made before or at the time of formation.
  • 19. Express terms: Incorporation by notice (timing) Thornton v Shoe Lane Parking The carpark relied on an exclusion clause. It was not an express term as the offer was accepted before Thornton had notice of the terms. The customer would be bound by those terms as long as they are sufficiently brought to his notice beforehand. He is not bound by the terms printed on the ticket if they differ from the notice, because the ticket comes too late. The contract has already been made. Express terms: Exception to the signature rule (document not known to be a contract) Curtis v Chemical Cleaning and
  • 20. Dyeing Co The dry cleaner misrepresented the effects of the exclusion clause on a receipt (inferring it only applied to parts of the dress). By failing to draw attention to the width of the exemption, the assistant created the false impression that the exemption only related to the beads and sequins, and that it did not extend to the material of which the dresswas made...it was a sufficient misrepresentation to disentitle the cleaners from relying on the exemption, except in regards to beads and sequins. Express terms: Incorporation by notice (reasonableness) Parker v South Eastern Railway Co Parker and Gabell checked their luggage on a train. They were given tickets with a number on one side, and
  • 21. small print on the otherside, stating that the railway would not be responsible for bags lost worth more than £10. Both respondents had received the tickets before but had never read the small print. Both respondents were successful; If a plaintiff does not see writing that contains "conditions" of the contract and no reasonable effort was made to ensure he was aware of it, then he is not bound by its terms; if he does see it and either does not read it, or does not thinkthat it contains conditions, then he will be bound by its terms so long as the defendant delivered it in a manner that gave him reasonable notice that therewere conditions on the ticket. If a partyactually knows that the document or sign contains contractual terms then they are bound irrespective of whether they have read it Implied terms: Whether it exists Codelfa Construction v StateRail
  • 22. Codelfa did non-stop excavation work for the state rail authority and received nuisance complaints from local residents and asked for an injunction to stop the work at night 5 Authority of New South Wales and on Sundays. The courtconcluded that Codelfa was not protected by the immunity of the state rail authority from such complaints, which it was assumed to be. An injunction was imposed and thus the project took longer than initially agreed. Codelfa argued that therewas an implied term that they would be paid for extrahours. The courtwas in favour of the state rail authority because it was not obvious that this would have been the agreementand it would have been more likely that othernegotiations would have been made if it was expected to happen, resulting in an
  • 23. express term about the subject matter • The more detailed and comprehensive the contract, the less ground thereis for arguing the existence of an implied term • Term must be so obvious that it ‘goes without saying’ Implied terms: Terms implied in law Byrne v Australian Airlines Ltd Terms implied in fact: • The test for terms implied in fact (formal contracts) is stated in BP Refinery Pty Ltd v Hastings Shire Council • In more informal contracts, the test comes from Hawkins v Clayton The term here was not at all so obvious that it goes without saying, or necessary for the operation of the contract. It therefore cannot be implied in fact.
  • 24. Terms implied in law: • Terms implied by law are implied in all contracts of a particular class For a term to be implied in law, it must be: • Applicable to a defined category of contracts. • Suitable in a way which allows it to be implied in all contracts in that category. • The test of necessity is oftenused - a term can only be implied if its omission would entail that the rights of the parties under the contract were significantly diminished. No necessity here, and therefore no implied term. Implied terms: Implication by custom and usage Con-Stan Industries of Australia P/L v Norwich Winterthur Insurance (Australia) P/L
  • 25. Con-Stan argued that therewas an implied term in the insurance contract that it was only required to pay the premiums to the broker, and that paying the broker discharged the debt for the insurance premiums. There was no implied term of such in the insurance industry. To establish a term implied by custom or usage we need to keep 3 things in mind 1. Whether a custom exists or not is a question of fact 2. Evidence to establish a custom requires a heavy onus of proof – it must be so well known and acquiest in that the parties must have reasonably been able to assume it was a term 3. Not possible if an express term in a contract contradicts the 6 custom Construction of exclusion clauses:
  • 26. General principles Darlington Futures v Delco 1. An exclusion clause should be constructed according to its natural and ordinary meaning, read in light of the contract as a whole, thereby giving weight to the context in which it appears including the nature and object of the contract 2. The contra preferentem principle will be applied so that in cases of ambiguity the clause will be construed against the person relying on the exclusion clause Construction of exclusion clauses: Four corners rule Australia Sydney City Council v West West left his car in a car park and liability for any loss was excluded. Thief broke into the car and stole the car, going up to the ticket office and claiming he lost his ticket and they let
  • 27. him out. West sued. The high courtruledthat the clause was incorporated but it did not exclude liability because it was outside the scope of the contract (if it was a valet and the car was damaged while being moved it would be within the four corners of the contract) but to allow a thief to take off with the car in contravention of the rule to showa ticket, it was way outside the scope and the courtinterpreted the clause against the interest of the carpark. Elements of Misrepresentatio n: Statement of fact/future intention Balfour & Clark v Hollandia Promises or assurances as to the future are not statements of fact for the purposes of misrepresentation. Elements of Misrepresentatio n: Statement of
  • 28. fact/future intention Edgingtonv Fitzmaurice Company decided to seek public investments and put out a prospectus stating that if you invest in them they will use those funds to expand the business in certain ways, but they used that money to pay off existing debts. The company collapsed, and one investor sued based on the fact that a misrepresentation was made about how the money would be used. It was a statement of future intention. On appeal, it was held that the statement was actually a statement made in fact Elements of Misrepresentatio n: Statement of fact/opinion Smith v Land and House Property
  • 29. Corp Smith was selling his hoteland he made a statement that the hotelhas a most desirable tenant. This was not true and the property corp rescinded the contract for misrepresentation. It was a misrepresentation, because the facts on which the opinion was based were known only to Smith and not the purchaser Elements of Misrepresentatio n: Principles relating to inducement Redgrave v Hurd When the representee has a chance to check whether the statement was true but did not, then the purchaser may still argue that he relied on the representation Misrepresentatio n: Deceit in Torts
  • 30. Derry v Peek An action of deceit will only stand in a courtwhen a plaintiff can shownot only misrepresentation, but also that defendants knew they would be unable to follow through with their representations. 7 Misrepresentatio n: Negligent Misstatement in Torts Esso Petroleum v Mardon Future predictions can be warranties if they are given with the intent to induce another partyto enterinto a contract, and they are relied upon in the decision to enterinto the contract The Hedley Byrne principle also applies, and that
  • 31. damages can be awarded on that basis. This is a negligent misrepresentation because Esso is in a special relationship with Mardon and they are in a position to have special knowledge. Mardon relied on this information which was made negligently, and he suffered loss. Therefore he is entitled to recover damages. Misleading or deceptive conduct Henjo Investments v Collins Marrickville Silence may constitute misleading or deceptive conduct where it is a duty to reveal relevant facts. No remedy under common law as no statement was made, but therewas a remedy under s 18 of the ACL Misleading or deceptive conduct Taco Co of Australia v Taco Bell Pty Ltd
  • 32. Full courtmentioned guidelinesto succeed an action for misleading and deceptive conduct (conduct only needs to be A cause, not THE cause. Misleading or deceptive conduct Butcher v Lachlan Elder Realty Pty Ltd The issuewas whether by distributing the brochure which did not correctly identify the boundary of the property, amounted to misleading or deceptive conduct. The exclusion clause in the brochure was considered and provided: “All information contained herein is gathered from sources we believe to be reliable. However we cannot guarantee it’s [sic] accuracy and interested persons should rely on their own inquiries”. It was held that the agent did not engage in misleading or deceptive conduct. The agent’s conduct was viewed as a whole. The agent did no more than communicate what the vendor
  • 33. was representing, without adopting or endorsing it. Tt would be plainto a reasonable purchaser that the agent was not the source of the information which was said to be misleading. The agent did not purport to do anything more than pass on information supplied by another or others. Common Mistake McRae v Commonweal th Disposals Commission In a case where both parties had equal knowledge as to the existence of the subject matter, and it turned out to be false, then it would justify the implication of a condition precedent. In that case, the contract would be void for the failure of the condition precedent, and parties would be restored to their original position. However, in a case where only one partyhas the knowledge, and the othersimply relies on what the first party tells it, than therecould be no condition precedent. The first party promises or guarantees the existence of the subject matter and
  • 34. will be in breach if it does not exist. Common Mistake Associated Japanese Bank(Int) v Credit du Nord Japanese bank entered into a contract with Bennett for the sale of machinery to then be leased back. Credit du Nord provided a guarantee for the leasepayments. The machines didn’t actually exist and then Bennett declared bankrupt. Credit du Nord argued therewas a common mistake of fact 8 Common Mistake Leaf v International Galleries If thereis a mistake as to an attribute of the subject matter such as quality or value, then thereis no common mistake
  • 35. Common Mistake: In equity Sollev Butcher Common mistake has to be an important matter, therehas to be not fault on either of the parties, and it has to be unconscionableto not void the contract Common Mistake: In equity Great Peace Shipping Ltd v Tsavliris (Internationa l) Ltd Overturned the Solleruling, however it is still sometimes used in NSW Sollev Butcher – common mistake has to be an important matter, therehas to be not fault on either of the parties, and it has to be unconscionableto not void the contract Mutual Mistake
  • 36. Raffles v Wichelhaus If one version is more reasonable then the court will enforce that version instead of make the contract void Unilateral Mistake: Identity of a party Cundy v Lindsay The contract was void if therewas a mistake as to the identity of the partywhen they are contracting at a distance Unilateral Mistake: Identity of a party Lewis v Avery The contract is only voidable. A distinction was made where therewas a mistake as to the identity of the parties, but they were dealing face to face, not at a distance. Lewis advertised
  • 37. his care and a buyer introduced himself as a famous actor, Richard Green. He bought the car and gave Lewis a cheque on the basisthat this was the famous actor. The cheque was dishonoured and then the fraudster sold the car to Averay. Lewis argued that the sale between himself and the fraudster was void for unilateral mistake. Averay argued that it was voidable, and he was an innocent third partywho had received the car before the initial contract was rescinded. Where a transaction is face-to-face then it can’tbe void ab initio, it is voidable only.Averay was protected. Austrlian law follows this distinction Unilateral Mistake: The identity of the parties Shogun Finance Ltd v Hudson The House of Lords was split 3/2 with the majority upholding that thereshould be a distintion between face-to-face
  • 38. transactions that a voidable and distance transactions that are void. Unilateral Mistake: About the terms of the contract Taylor v Johnson Mrs Johnson was selling her property. There were 10 acres and she granted an option to Taylor to purchase the land. He exercised the option and they agreed for the sale of land. Both the option and the contract for sale of land showed the purchase priceas $15000, however Mrs Johnson insisted that this was a mistake and it was supposed to be $15000 per acre. She refused to carryout the contract so Taylor applied for specific performance for the land to be sold to him. There was evidence that Taylor has deliberately taken stepsto prevent Mrs Johnson from realising therewas the error. High Court held that it could not be void at common law, without duress, misrepresentation, subject to the signature rule.
  • 39. However it was voidable in equity because of the unconscionableconduct of the purchaser who took stepsto hide the pricefrom the 9 vendor. Unilateral Mistake: Non est factum – it is not my deed Petelin v Cullen Petelin was selling his property, but was only semi literate. He granted an option to Cullen, which ran out and Cullen requested an extension on the option. He sent him $50 and asked him to sign a document that he said was a receipt. But in reality it was confirmation to extend the option. Petelin argued that he was mistaken as to the fundamental nature of the document that he signed. The High Court rendered the signature as inoperative. However they restricted non
  • 40. est factum to parties with very limited capacity. Duress: To the person Barton v Armstrong Barton (wellknown businessman) and Armstrong (member of the upper house) had a dispute over a property shares deal. Barton accused Armstrong of threatening to kill him. The court held that although Barton had othergood reasons to enterinto the deal, he was subject to what he perceived as death threats, it was voidable at his request. Duress: Economic Crescendo Management Pty Ltd v Westpac Banking Corp A husband and wife were directors of Crescendo management and they had business loans from Westpac, however
  • 41. the business was troubled. The husband and wife decided to sell their personal home and purchase a new one. Westpac refused to release the money for the purchase of their personal home unless they signed papers to secure further security for their business. They then went to courtseeking to have those documents set asideon the basisthat they signed those documents on the basisof duress. The courtheld that the pressure by Westpac was illegitimate as therewas no legal basis, however therewas no economic duress because the facts of the case showed that the pressure had no impact on their decisions to execute those securities,they would have had to sign them anyway. Duress: Economic North Ocean Shipping Co v Hyundai Pricefor sale was fixedin the US dollar. The dollar was devalued by 10% which meant that Hyundai would receive
  • 42. 10% less than what they bargained for. They then insisted that the pricewould be increased otherwise they would abandon the whole project. North Ocean Shipping were prepared to negotiate, however Hyundai wouldn’t accept it so they agreed to the extrapayment as they had t deliver a ship to another partyand didn’t want to break those contractual relations. They then sued Hyundai on the basisthat the money was extracted due to duress. The courtheld that a threat to breach a contract could amount to economic duress. There was no legal basisfor the additional money that Hyundai insisted upon. However North ocean lost the right to rescind as they had already completedthe contract. Undue influence: Class 2B Johnson v Buttress Undue influence is established on the facts of the case although thereis no special partyat law. There was no special relationship at law however the nature of
  • 43. Buttress proved that he relied on Johnson and Johnson could not rebutthat. Undue influence: Third parties Yerkey v Jones A wife guaranteed a loan for her husband that she didn’t want to. It fell through and she lost her property as a result. There was no undue influence between a husband and wife,but she was protected through a special equity for providing surety for her husbands debts without fully understanding the effects of 10 his transaction Undue influence: Third parties Garcia v National Australia BankLtd
  • 44. High courtrelied on thinking in Yerkey v Jones. Husband and wife were both business people, but the wife had little understanding of her husbands business. His business had financial trouble and he wanted the wife to sign mortgages over her share in their matrimonial home. His business collapsed and relied on the guarantee. The high courtset aside her share of the matrimonial home based on Yerkey but limited it. It states that where the wife does not understand the full effect of the transactions and is a volunteer and the other partyto the transaction (the husbands bank) should reasonably know that the wife relies on the husband and they take no reasonable stepsto ensure the wife understands the extent of the transaction, then it can be set aside. i.e. lendors should ensure that wives (and otherparties in similar relationships) seek independent advice Unconscionability : General Law Blomley v Ryan
  • 45. Ryanwas a sheep farmer and alcoholic. Blomley wated to buy Ryan’s property and they took advantage of his weakness, supplied him with alcohol and got him to sell his property for a very low price. The contract was set aside Unconscionability : General Law Commercial Bankof Australia v Amadio Locked in the Blomley principle. A son took advantage of his elderly parents and they signed over their properties for their son’s business. The bank had acted unconscionably. This case established the 3 elements that are required: 1. One partyis suffering a special disadvantage or disability 2. The otherpartyis aware of the disability 3. The otherpartyexploited that disability Unconscionability
  • 46. : General Law Louth v Diprose A middle-aged solicitor became infatuated with a woman. She convinced him that she was going to kill herself unless her financial situation was solved. He transferred some property of his to her. Later their relationship broke down and he argued that he was taken advantage of and wanted his property back. The courtagreed – on the facts of the case, the woman has taken advantage of his emotional dependence on her and the transfer was set aside Statutory Unconscionability ACCC v Berbatis Holdings Pty Ltd Just because one partyhas more bargaining power than the other, it doesn't mean it is acting unconscionably.
  • 47. Furthermore, even if it manages to use this power to procure a bargain which is much better for them than the otherside, this is not unconscionable- it is merely a hard bargain. It is only when a special disability is taken advantage of that a partyis said to have acted unconscionably. In this case, the Appellants had no special disadvantage or disability Discharge by performance: Duty to cooperate on new time Electronic Industries Ltd v David Jones Ltd An agreementwas subject to significant delays and David Jones said the contract was breached. The time for completion was uncertain but the high courtheld that the contract had been varied and David Jones had in fact breached the contract Discharge by performance: Exception to strict porformance –
  • 48. Cutter v Powell A seaman agreed to serve on a ship and was to be paid when he comes back. After 7 weeks he Cutter died, and his widow sued for 7 weeks worth of payment. Powell refused to pay on the basisthat the contract wasn’t completed. The courtupheld 11 severable and divisible contracts this argument. It was an entire contract with payment on full only on completion of the entire agreement Discharge by performance: Exception to strict performance - Part performance Sumpter v Hedges
  • 49. A builder did half his job and left materials behind. The owner finished building the house and used the materials that were left. Because the builder had abandoned his work, the owner had no choice but to finish, so they did not have to reimburse the builder for the work done, but had to pay for the materials used Discharge by performance: Accord and satisfaction Hoenig v Isaacs Contract for the renovation of an apartment with payments for successfulinstallments and a final payment upon completion. There was a defect in the work (book shelves the wrong size) so the client refused to pay the final instalment. The renovator sued. It was an entire contract involving work (labour) which can be distinguished from othertypes of entire
  • 50. contracts. The subject matter of the contract is physical work instead of goods. Lord Denning held that it would be wrong for the worker to receive nothing for their work, and the necessary question was whether the innocent partyhas been denied the essential benefit of the contract (where the work is half done or substantially different from what it was supposed to be). If they have not been deprived then damages are available. The amount that had to be paid to fix the problem could be deducted from the contract price. Discharge by agreement: accord and satisfaction McDermott v Black For unilateral discharge to be effective, thereneeds to be accord and satisfaction Discharge by agreement: Commonweal
  • 51. th v Verwayen The commonwealth has waived their rights as they had publicly done so for a period of time relating to a certain event Discharge by breach (intermediate terms) HongkongFir Shipping Co v Kawasaki Kisen Kaisha Kawasaki hireda ship from Hong Kong Fir and expected it would be seaworthy (in a term). There were many problems and delays for repairs and maintenance. Kawasaki terminated the contract because of the breach and argued it was a condition. Kawasaki argued it was not a condition. Court of appeal held that it was a wrongful termination. Lord Justice Diplock stated it was not a warranty or a condition – it is somewhere in the middle. It is not immediately obvious as either a condition or warranty – it will depend
  • 52. on the nature of the breach. Discharge by breach (intermediate terms) Kompahtoo Local Aboriginal Land Council v Sanpine Pty Ltd Affirmed the HongKong Fir Shipping Co case in Australia. Breach of a condition gives rise to the right to terminate. The contract stands until the innocent partyelects to terminate it. The innocent partymay choose to continue the contract for the benefit of both parties, and may be able to enforce the contract by order of specific performance. There was a term stating that the vessel was ‘in every way fitted for cargo service’, and was breached due to incompetent and insufficient engine roomcrew. Resulted in significant
  • 53. 12 delays and inconvenience to the charterers, who terminated for breach. Appeal courtheld that the breach did not justify termination of the contract. Discharge by breach (anticipatory breach) Foran v Wight Contract for sale of land. Purchaser paid 10% deposit. Settlement was to take place after 6 months (contract stipulated that it is a condition). The vendor had problems registering his easement and gave notice to the purchaser 2 days prior to the agreed date, and asked for more time.The purchaser refused – he was also arranging his loan but had not yet finalised it and got it approved, so he called it off with the bank. Following the due date, it was terminated because of the vendor’s actual breach (essential condition). The vendor
  • 54. contested the termination, got the easement completed and gave a notice to complete. The purchaser refused and the vendor then purported to terminate the contract for breach. The high courtfound in favour of the purchaser – (1) when the vendor gave notice it was an anticipatory breach which amounted to repudiation and gave the purchaser the right to terminate immediately. (2) Any right that the purchaser had to terminated for anticipatory breach lapsed 2 days later and was replaced with a right to terminate for actual breach –the purchaser validly exercised this right. (3) The vendor was estopped from raising the pointabout the purchaser’s lack of readiness because the vendors conduct made it unnecessary for the purchaser to prove he was ready, willing and able, but had to showthat he would have been in a position to complete the contract in the 2 days time. Discharge by breach (restrictions on the right to terminate)
  • 55. Sargent v ASL Development s Ltd If you affirm a contract then you lose the right to terminate Discharge by breach (relief against forfeiture) Tanwar Enterprises Pty Ltd v Cauchi Completion time camearound and the parties were not ready to settle. A further time was agreed upon (time of the essence). The purchaser then said they needed one extraday and was then ready, however the vendor terminated and took the deposit. The high courtsaid that was validbecause they were protecting their validright Discharge by frustration (effect of frustration) Fibrosa Spolka
  • 56. Akcyjna v Fairbairn Lawson Combe Barbour Contract between English and polish company. Polish company paid deposit and English company worked on a machine. During the war the English company stopped work on the machine – contract was frustrated. According to common law – the English company would not have to continue work and the Polish company would not have to pay any more but would not get their deposit back. Fibrosa took action to get the deposit back and the House of Lords upheld this, saying therewas a total failure of consideration (the Polish company didn’t get anything for the consideration they had given – the 1000 pounds). It didn’t overcome fully the costsincurred for the English company – this lead to worldwide statutory change o The contract is automatically discharged and obligations
  • 57. 13 that existed prior to the frustrating event are enforced but others are discharges o Problem: if this was the case in Krellv Henry [1903], the deposit would have been kept and the hotelwould not have to give their roomup – unjust outcome o Frustrated Contracts Act 1978 (NSW) Discharge by frustration Taylor v Caldwell First case that established discharge by frustration (the subject matter of the contract had been destroyed – a hall burnt down) o Where the performance of the contract relies on the continued existence of a thingor person o There is an implied condition that performance of that contract will be excused if that thingno longer exists
  • 58. Discharge by frustration: National Carriers v Panalpina (Northern) Ltd established what the intervening events could be. This is one of them. Codelfa Construction v StateRail Authority of New South Wales If a courtorder prohibits performance of a contract it can be frustrated. Codelfa did non-stop excavation work for the state rail authority and thus received nuisance complaints from local residents and asked for an injunction to stop the work at night and on Sundays. The courtconcluded that Codelfa was not protected by the immunity of the state rail authority from such complaints, which it was assumed to be. An injunction was imposed and thus the project took longer than
  • 59. initially agreed. Codelfa argued that therewas an implied term that they would be paid more for extrawork (the project took longer). The courtwas in favour of the state rail authority because it was not obvious that this would have been the agreement and it would have been more likely that othernegotiations would have been made if it was expected to happen, resulting in an express term about the subject matter Discharge by frustration: Where therehas been a failure of a condition Krellv Henry A coronation was the sole purpose of the contract, the coronation was called off because Edward the seventh became sick (it was for him) and the courtheld that the contract had been frustrated. Compare to Herne Bay Steam Boat Co v Hutton. Discharge by frustration: Where therehas
  • 60. been a failure of a condition Herne Bay Steam Boat Co v Hutton Hutton hireda boat to go out on the Thames and watch the coronation among the British fleet. The court held that it was not frustrated because therewas more than one purpose and they could still sail down the Thames among the British fleet Equitable estoppel: Alternative causes of action – Equitable Estoppel Waltons Stores (Interstate) Ltd v Maher If the plaintiff acts to their own detriment,in reliance on the allusions of the unconscionableparty, equity law has the capability to intervene. For estoppel to found an action, the partysued must have acted unconscionably and to
  • 61. the detriment of the partysuing. Because unconscionability is the basisof the estoppel action, it is an essential requirement that has to be established. When is conduct unconscionable? • Failure to fulfill a promise does not of itself amount to unconscionableconduct. Nor does mere reliance on an executory promise where the promisor changes his 14 position amount to unconscionableconduct. Something more is required. • The fact that having created an assumption that a contract will come into existence or that a promise will be performedor not insisted upon and then remaining silent, while knowing that the otherpartywas relying on the assumption to his detriment,would be sufficient to establish unconscionableconduct. Waltons’ behaviour was unconscionableand that as a
  • 62. result of that behaviour Maher had suffered detriment while relying upon the assumption that Waltons had created – and, that relying upon the assumption was, in the circumstances, reasonable. Illegality (Contracts illegal under statute): Express illegality Re Mahmoud and Ispahani Statute expressly banned the sale of linseed oil by unlicensed parties. The seller was licensed but the buyer wasn’t licensed and was prohibitedfrom purchasing the oil. The buyer refused to continue buying the oil and the seller sued. The courtheld the contract void for illegality and did not enforce it Illegality (Contracts illegal under statute): Implied illegality Yango Pastoral Co v First Chicago
  • 63. Australia Yango argued the contract was illegal because First Chicago had not yet obtained the required license to authorise that type of contract. The courtscrutinised the banking act, and found that therewas a penalty of $10,000 per day of no license, and didn’t render it illegal. The contract was not expressly prohibited, so the courthad to discern whether the government intended for such contracts to be void (no, because it provided a fine and did not intend to invalidate any transactions). If it was illegal, all otherdepositors before the bank got the license would have been illegal transactions as well Illegality (Contracts illegal under statute): Effect of illegality/Severin g terms Thomas Brown and Sons v Fazal Dean
  • 64. Contract for bailment. Fazal Deencould sue for the safe and the gems, and the term about the gold was severed. Illegality (Contracts void on public policy grounds): Restraint of trade Nordenfelt v Maxim Nordenfelt Guns& Ammunition Co Ltd Restrictions of this kind can be enforced as long as they are reasonable. Common law – doesn’t care about the breach, but looks at the reasonableness or unreasonableness of the restraint. Area and time was reasonable but the scope wasn’t. Reasonableness of restraint • Area • Time – 3 years is commonly held to be reasonable, but it
  • 65. depends on the circumstances • Scope Illegality (Contracts void on public policy Lindner v Murdock’s Garage A restraint upon the employee’s becoming connected with a rival business after he leaves the employment will give the employer’s business reasonable protection against the effects 15 grounds): Restraint of trade of the intimaciesand knowledge. If it is limited to the area or areasin which the employee in fact works within a reasonable time before the termination of his employment; and a restraint which applies indiscriminately to all the areasin
  • 66. which the employer carries on business will exceed what is reasonable necessary to prevent the injury to his business against which he is justified in guarding. Privity Tweddle v Atkinson The courts ruledthat a promisee cannot bring an action unless the consideration from the promise moved from him. Consideration must move from partyentitled to sue upon the contract. No legal entitlement is conferred on third parties to an agreement. Third parties to a contract do not derive any rights from that agreementnor are they subject to any burdens imposed by it. Privity Dunlop Pneumatic Tyre Co Ltd v Selfridge & Co Ltd Dunlop entered into an agreementwith a wholesaler
  • 67. for the supply of tyres. One of the terms was that the wholesaler would not sell those tyres to a retailer below a certain price. The wholesaler enters into a contract with a retailer, with the same term. The retailer sold the tyres under that price, breaching the contract. Dunlop then sued the retailer, Selfridge. The House of Lords sued that Selfridge was not liable to Dunlop as therewas no contract directly between them. Dunlop was not privy to the contract between the wholesaler and the retailer. This is authority for Privity and consideration Privity Trident General Insurance Co v McNiece Bros See page 44-45. Privity Coulls v Bagot's Executor and
  • 68. Trustee Co The third partyprovided no consideration for the promise that had been breached and could therefore not sue. “Where you promise me for consideration supplied by me, where you promise to pay my brother, then I should be able to obtain specific performance of you promise, where the nature of the consideration given would have allowed me to obtain specific performance.” if we have a contract to pay money or transfer property to a third party, theseusually are a type of contract where damages would be an inadequate remedy, especially where the damages would be nominal. But in othertypes of contracts, damages probably would be adequate. When specific performance is given instead of damages, it is where damages are not adequate. 16 1 CAPACITY Minors – Common Law • The common law considered anyone under 21
  • 69. to be a minor (infant), however under statute it is 18 • A minor lackscontractual ability in most circumstances and any contracts are voidable at the option of the minor, unless they are for necessaries or beneficial contracts of service Contracts for necessaries: • Contracts relating to things necessary for the dailyliving of the minor, e.g. food, clothing, etc. ü McLaughlin v Darcy – “A contract between two parties for which one or more is a minor is binding if the contract is for a necessity of life or a beneficial service” ü Scarborough v Sturzaker – 17 year old bought a bicycle and couldn’t pay for it. Because the bicycle was found to be a necessary, the boy was obliged to find the money and pay for the bicycle ü Bojczuk v Gregorcewicz – Polish minor cameto Australia on the understanding that she would pay back Gregorcewicz, for the airfare she could not and the courtfound that her moving to Australia was not a necessary and the contract was unenforceable
  • 70. • Question of law: was the subject matter capable of being a necessary? • Question of fact: take into consideration the life of the minor, the reason bought, the price, etc. • Can be enforceable by the minor or against the minor Beneficialcontracts of service: • Apprenticeships, training, cadetships, etc. • Enforceable unless thereis an unfair term ü De Francesco v Barnum - a minor aged 14 years old, had an agreement to train as a dancer on stage, however, the contract had conditions which were considered not beneficial to the minor and therefore, the minor was not bound by the contact ü Hamilton v Lethbridge – lawyer clerkship (article clerk) agreed to be trained by master solicitor and when he was trained he would not set up his own practice within 50 miles of the master solicitor’s practice. Master solicitor took it to courtto enforce restraint of trade, court found that the article clerkhad capacity because it benefitted him more than restrained him
  • 71. 17 Employment Agreements: ü Roberts v Gray (binding) – Minors may be bound by certain employment contracts such as apprenticeships, where they are for the benefit of the minor as long as they don’t contain unusual or prejudicial clauses outweighing the beneficial terms Minors – Statute Law • Minors (Property and Contracts) Act 1970 (NSW) – abolished the application of the common law principles relating to minors’ contracts in NSW and provides that a minor is presumptively bound to a civil act that is made in accordance with the Act ü Lowered legal age of liability to 18 ü s 19 – civil acts (contracts) for the benefit of the minor are presumptively binding on the minor ü s 18 – a minor who lacksthe necessary understanding because of age, is not bound by an act There is no definition or guidance for what a “benefit” is – it is up to judicial discretion § Seems to be a broader concept than what the common law
  • 72. recognised as necessaries and beneficial contracts of service § Fall back on common law principles to understand what “benefit” means Contracts that are presumptively binding • Acquisition of property where the consideration is not manifestly excessive from the minor, or manifestly inadequate for the minor o s 20 – when the contract relates to property, the consideration given or received by the minor must not be manifestly excessive or manifestly inadequate • Investment in government securities • Any contract not exceeding $10 000 and has been approved by a local courtfor the minor’s benefit • Disposalof property, that was signed before an independent solicitor or the Public Trustee within 7 days of the contract Mental Disability • Mental Health Act 1990 (NSW) • A contract with a person that has been declared legally insane is void • Contracts for the purchase of necessaries may be binding under the sale of goods
  • 73. legislation – s 7 of Sale of Goods Act 1923 (NSW) • If a person has not been declared mentally insane, yet lacksthe necessary mental capacity to give genuine consent to a commercial transaction (whether permanent or temporary), the courts will not enforce a contract against a party who ‘lacks such soundness of mind as to be capable of understanding the general nature of what he is doing” – Gibbons v Wright (1954) • Party seeking to set asidethe contract must prove 2 things: 18 1. They were mentally impaired at the time of forming the contract 2. The otherpartywas aware or should have reasonably known of their impairment ü Hart v O’Connor [1985] – Hart sold property very cheap then died. His beneficiaries argued that he did not have the capacity due to impaired mental condition, however therewas no evidence to prove that O’Connor knew of the mental condition, so it could not be set asideon the basisof capacity
  • 74. • Contract cannot be set asideon this basisif the contract was ratified once the mental condition returns to normal ü Matthews v Baxter (1873) – Baxter bought a property at an auction while he was drunk, however once he was sober he ratified the contract through his conduct, so he lost the right to rescind • Note: statute law can provide relief in some situations. If you cannot set asidea contract based on capacity, thereare a number of otherways – e.g. vitiating factors, ACL, equitable principles. 2 THE REQUIREMENT OF WRITING • Not all contracts have to be in writing, however somedo (because of statute or if they are a formal contract) • Written contracts promote certainty • Contracts required to be in writing may be validif they are oral, but are unenforceable • If a contract is in writing, any variation must also be in writing for that variation to be enforceable • Collateral contracts may be oral even if the original contract is in writing
  • 75. ü Commonwealth Bankof Australia v Serobian – Proof of an oral contract must be highly persuasive to lead a courtto believe legal relations were intended or believed to be intended, the absence of record makes this extremely difficult to prove Contracts For Sale Of Land • Conveyancing Act 1919 (NSW) s 54A o (1) – ‘No action or proceedings may be brought upon any contract for the sale or otherdisposition of land, or any interest in land (e.g. easement, covenant, etc.),unless the agreement, or some memorandum or note about it, is in writing and signed’ o Memorandum or note:letter, receipt, electronic communication, notes written down during discussion (e.g. on napkin). It has to be connected to a document or series of documents, not an event ü Thirknell v Cambi – use of letter ü Dinan v Harper – use of a receipt 19 o Material terms (requirement established through common law):a description sufficient to identify the parties with
  • 76. certainty, a description of the land/interest in land to sufficiently identify a property with legal certainty, pricehas to be determined; or evidence that the pricewill be determined in a specific way, and acknowledgement of a contract o Signature: does not have to be official signature, it just has to identify you and indicates intention to be bound to the contents of the document - Welsh v Gatchell • An oral contract can exist and be valid, but it is not enforceable • Four stepsfor the performance of the sale of land 1. Pre-contract 2. Contract (exchange) – signing and physical exchange of contracts 3. Post-contract 4. Completion (settlement) • Must contain all essential terms (established by common law not statute) – Harvey v Edwards Dunlop & Co 1. Name of the parties 2. Describe a specific land interest 3. Set out a price • Other essential terms are: date of completion of the contract, if the payment is to be paid in installments, if chattels are included, etc.
  • 77. Enforcement In Equity Of Contracts Unenforceable At Law • The consequence of unenforceability is not absolute • Equitable principles recognise 2 situations in which a contract that does not comply with the statutory writing requirement will be enforced by an order for specific performance 1. If the reason for a non-compliance is fraud on the part of the defendant, the contract will be specifically enforced 2. Equity will order the remedy of specific performance if the elements of the doctrine of part performance are established ü Penrith Whitewater Stadium Ltd v Lesvos Pty Ltd – Even if part performance has been executed, a courtcannot award damages, only equitable remedies 3 EXPRESS TERMS • Any grouping of words labeled as a term may include more than one term • Terms can be express or implied o Simply reading a document may not showall its terms • Terms can be promissory or not promissory (e.g. fine print, definition clauses – not capable of being breached) • When parties are negotiating a contract,
  • 78. statements are made that vary in importance 20 o Irrelevant statements (e.g. “you were greatto do business with”) don’t give any effect to the contract o Puffs – a statement used in negotiation in order to induce someone to contract, that no reasonable person would take seriously Representations And Terms • Representations – statements made before a contract is formed, about the subject matter of the contract, intended to induce the otherpartyto enterinto the contract, but are not guaranteed, objectively, by their maker to be true and are not intended to be binding. Descriptive, illustrative, but not promissory. Not a term and not an essential part of the contract. o False representations may amount to a misrepresentation but it’s not part of the contract and you won’t be able to terminate the contract because of it o Remedy for breach: rescission • Terms – essential; goes to the root of the contract and amounts to contractual
  • 79. undertakings that are intended to be legally binding. o Remedy for breach: termination and damages • Ellul & Ellul v Oakes – 4 criteria to take into account in deciding whether a statement is a term or representation (Australian courts follow thesein deciding whether statements become an express term or representation) 1. Importance of the statement – objective test 2. Timing of the statement 3. Any special skill or knowledge on the part of the maker of the statement 4. Whether the statement was included in any subsequent written document • The crucial consideration for a courtis if thereis any evidence of intention of the statement to be binding ü Oscar Chess Ltd v Williams ü Dick Bentley Productions v Harold Smith Motors – Dick Bentley Productions Ltd wanted a Bentley. Harold Smith (Motors) Ltd found one which they said had done only 20,000 miles sincea replacement engine. It later emerged that the Bentley had done 100,000 sincethe new engine and gear box had been replaced. The statement of how many miles were done was a term of the contract, because the Harold Smith (Motors) Ltd were car dealers and in
  • 80. a better position to know than the claimant about the truth of the statement.This affects the parties' intention to incorporate a term into a contract. o If a statement is made to induce a party into a contract and it does, this leadsto an inference that the statement was intended as a term, unless the maker of the statement rebuts the term by stating he was innocent Agreements Partially in Writing • The existence of a written agreementthat appears to be complete does not automatically entail that the agreementis wholly in writing. It only serves as a foundation • The parolevidence rule doesn't apply when determining whether the contract is wholly in writing. If the Plaintiff claims that the agreementwas partly oral, the 21 courtwill examine extrinsic evidence to determine whether the contract was wholly or partially in writing • If the courtdetermines, after looking through the extrinsic evidence, that the contract was wholly written, then the parolevidence
  • 81. rule comes into force • The courtwill look at the extrinsic evidence (letter and statements) to determine whether the contract was wholly in writing. ü State Rail Authority of New South Wales v Heath Outdoor Pty Ltd ü J J Savage & Sons v Blakney Incorporation Of Terms By Signature • Signature will bind a partyto the terms even if the signatory has not read or understood the terms set out in the document ü L’Estrange v Graucob – signed a contract without reading it, didn’t know about an exclusion clause. It didn’t work properly so she tried to replace it however sinceshe signed the contract she wasn’t able to and courts upheld it ü Toll (FGCT) Pty Ltd v Alphapharm Pty Ltd– signature was given by the agent of the party, who didn’t read anything. The high courtheld that the fact that the signatory hasn’t read the document,doesn’t mean the otherpartyhas to give them notice of the terms. Signature has a legal effect of reading and accepting the contract, regardless of whether the partyactually did so.
  • 82. EXCEPTIONS TO THE SIGNATURE RULE • The general rule to the effect of a signature is that "if the partyaffected signsa written document known to be a contract which governs the relations between them, then his signature is evidence of his assent to the whole contract, including the exempting clauses, unless the signature is shown to be obtained by fraud or misrepresentation.” • Misrepresentation: A misrepresentation is any behaviour "if it is such as to mislead the otherpartyabout the existence of extent of the exemption. If it conveys a false impression, that is enough." "If the false impression is created knowingly, it is a fraudulentmisrepresentation; if it is created unwittingly, it is an innocent representation; but either is sufficient to dis-entitlethe creator of it to the benefit of the exemption" • Document not known to be a contract: The receipt could have thought to have been a voucher which the customer must produce when coming to collect the goods, rather than a contractual document containing conditions. In those circumstances, if the conduct of the Offeror gives the impression that the document contained no conditions, then the Offeror will not be able to rely on the signature as having the effect of reading and accepting (thusthe terms of the document will not have legal force).
  • 83. ü Curtis v Chemical Cleaning & Dyeing • Non est factum (it is not my deed) – Toll v Alphapharm Pty Ltd o A signing partycan escape their obligations under contract 22 o A claim of non est factum means that the signature on the contract was signed by mistake, without knowledge of its meaning, but was not done so negligently o A successfulplea would make the contract void ab initio. ü Lloyds Bankv Waterhouse - a father acted as a guarantor to his son's debt when purchasing a farm. The father was illiterate and signed the bank document under the belief that he was acting as the guarantor for the farm only,when the contract was actually for all the debt accumulated by the son. As he was illiterate, this was a mistake as to the document signed and the father was successfulin claiming non est factum. Incorporation By Notice • Arises in the form of unsigned documents, signs
  • 84. and documents that might not appear to be contractual in nature to a regular person • Courts have to decide whether any statement in such documents are terms and therefore binding • 2 essential requirements 1. Timing – notice of the term must be giving at the time or before the forming of the contract ü Olley v Marlborough Court – a sign on the back of a hotelroomdoor stated that a hoteltakesno responsibility for lost items. Court held that it was not an express term of the contract as it was formed well before when they booked the room ü Thornton v Shoe Lane Parking 2. Reasonableness – not that the clause itselfmust be reasonable, but rather that notice must be given reasonably to the partythat will be affected by it, e.g. if they have read it or had the chance to be aware of it without any obstruction. If the document is contractual in nature, giving it to them is reasonable notice, if is not (e.g. a receipt, ticket, sign, etc.) then simply giving the document to them is not reasonable notice, they should explicitly be made aware of it
  • 85. ü Parker v South Eastern Railway Co ü Causer v Browne – customer left dresswith drycleaner, on the back of the receipt was an exclusion clause. Could not be relied upon as no reasonable person would have considered it to be contractual in nature Incorporation By PriorDealings • A term may be incorporated where it is inserted by a partyover a series of agreements and the otherpartyhas actual or constructive knowledge of it • A courtwill consider the number of past dealings, the nature of those dealings and the consistency of those dealings • If the same previous terms are not expressly incorporated, they may be enforceable. Courts have held terms to be incorporated even if they haven’t been 23 in every transaction – if it is introduced and the otherpartycontinues to contract knowing or should have reasonably known, courts will give effect to it ü Henry Kendall & Sons v William Lillico & Sons Pty Ltd – Depends on the number and consistency of past dealings –
  • 86. 3 contracts per month over a threeyear period for the sale of animal feed was sufficient § ‘Over the course of a long period prior to the threeoral contracts which are now in question SAPPA knew that when Grimsdalesold they did so on the terms that they had continuously made known to SAPPA. In these circumstances it is reasonable to hold that when SAPPA placed an order to buy they did so on the basisand with the knowledge that an acceptance of the order by Grimsdaleand their agreementto sell would be on the terms and conditions set out on their contract notes to the extent to which they were applicable.’ (Lord Morris). ‘The only reasonable inference from the regular course of dealing over so long a period is that SAPPA were evincing an acceptance of, and a readiness to be bound by, the printed conditions of whose existence they were well aware although they had not troubled to read them. Thus the general conditions became part of the oral contract.’ (Lord Pearce)
  • 87. ü Hollier v Ramble Motors (AMC) Ltd - 3 contracts in 5 years for the repair of a car was not sufficient Parol Evidence Rule • Extrinsic evidence cannot be introduced that will have the effect of adding to, subtracting from, varying or qualifyingthe language of an entirely written contract – Codelfa Construction Pty Ltd v State Rail Authority of NSW o Includes written, oral, otherrelating documents, previous drafts • Unrelated evidence could be what the parties said to each other, otherdocuments outside the contract, or earlier drafts of the contract EXCEPTIONS TO THE PAROL EVIDENCE RULE • Does not apply to contracts that are partly written and partly oral o No effect on contracts that are intended to be partly written and partly oral – Hospital Products Ltd v United Stated Surgical Corp ü L G Thorne & Co v Thomas Borthwick & Sons - Where a formal written document has been created, and appears to be complete, it should be presumed that the parties intended the document to
  • 88. contain all the terms of the agreement • Courts may allow the use of extrinsic materials to establish that: o The operation of a contract is not to occur until the happeningof a certain event – Pym v Campbell 24 o A written contract incorrectly records the agreementof the parties, leading extrinsic evidence to provide the basisfor the courtto issuean order for rectification of the written contract – Ryledar Pty Ltd v Euphoric Pty Ltd o A prior collateral contract exists, provided that the main contract does not contain an ‘entire agreement’ clause – DKB Investments Pty Ltd v Belcote Pty Ltd Collateral Contract • A statement that does not amount to an express term may amount to an independent contract that is connected to the main contract through consideration (which is the entryinto the main contract) • The collateral contract is connected to the main contract by way of consideration – Heilbut Symons & Co v Buckleton
  • 89. • Terms can give rise to a contract that is separate and distinct from the main one – De Lassalle v Guildford • It has to be promissory in nature and not merely representational - J J Savage & Sons v Blakney • There must be no inconsistency between the main contract and the alleged collateral contract – Hoyt’s Pty Ltd v Spencer • Entire agreementclauses – Inntrepreneur Pub Co v East Crown o a suitably expressed entire agreementclause is effective to preclude what collateral warranties or additional terms from having contractual effect • Courts may be reluctant to find a collateral contract if the statement made is one that you would find naturally in the principal contract – Shepperd v Council for the Municipality of Ryde 4 IMPLIED TERMS • Categories: o Terms implied to give efficacy to a particular contract based upon the facts and circumstances of a particular case o Terms which the law findsin a certain class of
  • 90. a contract, either pursuant to common law or statute, although those terms may not find specific expression in the contractual statements or documents of parties o Terms implied into a contract to give effect to a notorious custom or usage in a particular trade, industry or locality • The onus lies on the partyalleging the existence of the implied term – Heimann v The Commonwealth • Courts are reluctant to imply a term in a contract – Roxboroush v Rothmans of Pall Mall Australia Pty Ltd • The more detailed and comprehensive the contract, the less ground thereis for arguing the existence of an implied term - Codelfa Construction Pty Ltd v State Rail Authority of NSW 25 Written Contracts • BP Refinery v Shire of Hastings – established essential elements that need to be satisfied for implied terms to be held: 1. Must be reasonable and equitable – Byrne v Australian Airlines (implied term rejected because it would operate in a biased fashion)
  • 91. 2. Must be necessary to give business efficacy to the contract – Societe Generale, London Branch v Geys (it is not the courts role to improve the contract it is considering by implying a term) 3. Must be so obvious that it ‘goes without saying’ – Codelfa Construction Pty Ltd v StateRail Authority of NSW (whether the parties would have readily agreed on the contract if it had been suggested during negotiations) 4. Must be capable of clear expression - Shell (UK)Ltd v Lostock Garage Ltd (alleged term could not be expressed within sufficient precision) 5. Must not be inconsistent with express terms – Kitching v Phillips § The above are not completely essential, they are used more as a guideline in conjunction with the facts of the case • Codelfa Construction Pty Ltd v StateRail Authority of NSW Codelfa did non-stop excavation work for the state rail authority and received nuisance complaints from local residents and asked for an injunction to stop the work at nightand on Sundays. The courtconcluded that Codelfa was not protected by the immunity of the state rail authority from such complaints, which
  • 92. it was assumed to be. An injunction was imposed and thus the project took longer than initially agreed. Codelfa argued that therewas an implied term that they would be paid more for extrawork (the project took longer). The courtwas in favour of the state rail authority because it was not obvious that this would have been the agreementand it would have been more likely that othernegotiations would have been made if it was expected to happen, resulting in an express term about the subject matter • Attorney General of Belize v Belize Telecom Ltd o Not binding precedent but persuasive o Whetherto imply a term into the constitution of a business o Lord Hoffman – (1) Where a contract fails to expressly say what ill happen when an event occurs, then nothing will happen. If a loss occurs then that loss lies where it falls.(2) However it may be appropriate to imply a term if a reasonable person is to understand that somethingshould happen because the contract is saying so, even though it is not expressly said in the contract. (3) Where a term should be implied, the courtshould be able to express in reasonable terms what it must be saying even though it fails to expressly. (4) Where a courtdoes imply a term into a contract, the courtis not adding anything to the contract – looking
  • 93. for the presumed intention of the parties. (5) Those requirements in the PB refinery case do not have to all be satisfied, they are just tools for a courtto explain why a term can be implied and don’t have to all be met o Objective test, although the subjective intention of the parties must be taken into account 26 o A courtmay imply a term if it is satisfied to a reasonable person that that is what the parties intended Informal, Unwritten Contracts • More flexible approach to imply terms • Hawkins v Clayton and Byrne v Australian Airlines Ltd – the courtmust decide whether the implication of the term is necessary for the effective operation of the contract. Includes similar criteria to the BP refinery ones but more flexible Implication Of Terms By Statute • Sale of Goods Acts • ACL ss 51-62 • Less interested in the intention of the parties, e.g. implied in the sale of a TV that the TV will work and if it doesn’t it goes against legislation
  • 94. • Contracts can expressly exclude the implication of terms by statute Terms Implied By Common Law • 2-part test 1. Determine the type or class of contractual relationship 2. The term must be appropriate for all contracts in that type or class of contract § Test of necessity – University of Western Australia v Gray • Examples o Banker to observe secrecy with respect to a customer’s account – Tournier v National Provincialand Union Bankof England o Employment contracts – implied that they employees will: § Take reasonable care to carryout the terms of their employment – Kashemije Stud Pty Ltd v Hawkes § Faithfully serve the employer – Blyth Chemicals Ltd v Bushnell § Obey lawful and reasonable commands of the employer – R v Darling Island Stevedoring and Lighterage Co Ltd Implication By Custom And Usage • Con-Stan Industries of Australia Pty Ltd v Norwich Winterthur Insurance
  • 95. o To establish a term implied by custom or usage we need to keep 3 things in mind 1. Whether a custom exists or not is a question of fact 2. Evidence to establish a custom requires a heavy onus of proof – it must be so well known and acquiest in that the parties must have reasonably been able to assume it was a term 3. Not possible if an express term in a contract contradicts the custom 27 Implied Terms Of Good Faith • Implied terms of good faith precludes a partyfrom exercisinga contractual power impulsively for an unnecessary purpose – Wolfe v permanent Custodians Limited • Royal Botanic Gardens & Domain Trust v South Sydney Council – Justice Kirby pointed out that 3 issues need to be resolved 1. What does the obligationof duty of good faith mean? (Justice Mason said extrajudicially it means to cooperate to achieve the objectives of the contract, to act reasonably in the circumstances and to adhere to
  • 96. honest standards of behaviour) 2. To what types of contracts will it apply? Commercial or other? 3. Can an implied term of good faith be expressly excluded? – Important and unresolved issues • A good faith term will be implied into standard form contracts (contracts that are not subject to negotiation) and ‘relational’ contracts (involve an ongoing relationship between business parties, e.g. franchisee/franchisor agreements) • Pacific Brands Sport & Leisure Pty Ltd v Underworks Pty Ltd – the duty of good faith exists as an incident of all commercial contracts 4 CONSTRUCTION OF EXCLUSION CLAUSES General Approach To Construction Of Exclusion Clauses • The principal task of the courtis to determine the intention of the parties • 2 major principles set out by the high court– Darlington Futures Ltd v Dalco Australia Pty Ltd 1. An exclusion clause should be constructed according to its natural and ordinary meaning, read in light of the contract as a whole, thereby giving weight to the context in which it appears including the nature and object of the contract
  • 97. 2. The contra preferentem principle will be applied so that in cases of ambiguity the clause will be construed against the person relying on the exclusion clause Exclusion Clauses And Negligence • For the tort of negligence to be within the scope of an exclusion clause, it must be clearly intended that the clause covers negligence – Davis v Pearce Parking Station Pty Ltd • Rules in relation to clauses seeking to exclude liability for negligence – Canada SteamshipLines Ltd v The King 1. An express exemption of liability for negligence will exclude liability on the part of the defendant § Includes any synonym of negligence 2. Where thereis no express reference to negligence, the courtneeds to determine if the words used are wide enough to include negligence, without any doubts on this to be resolved by applying the contra preferentem principle 28 § If words include negligence within their scope they will be effective, e.g. ‘howsoever caused’ and ‘under no
  • 98. circumstances’ – Putter v Palmer 3. If the words used are wide enough to cover negligence but also encompass othergrounds of liability, the clause will be read as applying only to the othergrounds of liability and will not operate to exclude the claim for negligence Other Relevant Principles DEVIATION CASES • If a carrier deviates from the agreed voyage or route, they lose the benefit of an exclusion clause – Thomas National Transport (Melbourne) Pty Ltd v May & Baker (Australia) Pty Ltd • Not an absolute rule – still a matter of construction of the contract FOUR CORNERS (SCOPE OF THE CONTRACT) RULE • Exclusion clause can only be relied upon if the conduct is within the scope/four corners of the contract • If the defendant’s act causing loss to the plaintiff is an act that has not been authorised or contemplated by the contract, then an exclusion clause will not protect the defendant from liability of damages flowing from that cause
  • 99. ü Council of the City of Sydney v West Exclusion Clauses And Legislation AUSTRLALIAN CONSUMER LAW • S 64 Competition and Consumer Act 2010 (cth) – relates to ss 51-63 • Only applies to a contract for the sale of goods and services to a customer • Photo production Ltd v Securicor Transport Ltd– Securicor was to provide security for Photo Production. Exclusion clause said that Securicor would not be responsible at all for any loss occasioned by any security guards unless it could be reasonably foreseen or avoided by the due diligence of Securicor.The security guard was cold and lit a fire and burnt the premises down. It was not reasonably foreseeable and the courtgave effect to the exclusion clause 5 VITIATING FACTORS Misrepresentation • Representations may be false fraudulently, negligently or innocently • Makes a contract voidable • Remedies o Fraudulent – the wrong information was given deliberately – rescission and damages available at contract law, alternative action may be available in the tort of fraud or deceit
  • 100. 29 o Negligent – the information given was given negligently/carelessly – rescission and damages available in contract, alternative action may be taken in negligence o Innocent – wrong information given innocently – rescission is possible but damages not, and thereis no alternative remedy TO ESTABLISH MISREPRESENTATION 1. Statement of fact – past or present material fact. o Does not include puffs(statements that no reasonable person would take seriously), statements or misstatements of law, promises or predictions of the future, statements about future intention, or opinions (UNLESS the facts that the opinion was based on are not known to both parties – see Smith v Land & House Property Corp) ü Edgington v Fitzmaurice – company decided to seek public investments and put out a prospectus stating that if you invest in them they will use those funds to expand the business in certain
  • 101. ways, but they used that money to pay off existing debts. The company collapsed, and one investor sued based on the fact that a misrepresentation was made about how the money would be used. It was held that it was a statement of future intention. On appeal, it was held that the statement was actually a statement made in fact ü Smith v Land & House Property Corp – Smith was selling his hotel and he made a statement that the hotelhas a most desirable tenant. This was not true and the property corp rescinded the contract for misrepresentation. The courtheld that it was, because the facts on which the opinion was based were known only to Smith and not the purchaser) 2. Statement must be false – not all facts have to be disclosed – a representee has no legal entitlement to expect information and they must ask for it (common law) o Full disclosure must be made if partial representation has been made ü Dimmock v Hallet – told purchaser all the units were leased, but did not disclose that sometenants had given notice that they were going to leave, which distorted the truth of the statement.The courtheld
  • 102. that this amounted to misrepresentation o There is an obligation to disclose if the statement was true when it was made but later the circumstances change – may amount to fraudulent misrepresentation. If the representor doesn’t know the circumstances have changed it can amount to innocent or negligent misrepresentation dependingon the circumstances o There is an obligation to disclose information in certain types of contracts – e.g. contracts of utmost good faith, such as insurance contracts 3. Statement must be intended to induce, and must induce (there must be reliance on the representation) – the representee must showthat they reasonably relied on it and it induced them to enterinto the contract o The less material the fact, the less likely the reliance 30 o If reliance is established, then a presumption arises that the statement was intended to induce – then the onus of proof shifts to the representor to rebutthe presumption and prove that the representee
  • 103. did not rely on the statement (prove on the balance of probabilities that the representee knew it was false) o Principles relevant to inducement – Dadourian Group International Inc v Simms 1. Question of fact 2. If the misrepresentation is of such a nature that it would be likely to ply a part n the decision of a reasonable person to enterinto a contract then it will be presumed that it did so 3. The misrepresentation does not have to be the sole inducement 4. The presumption of inducement is rebutted by the representor, showing that it did not play a substantial part in the decision 5. Decided by the courton the balance of probabilities ü Holmes v Jones – statement made about the numbers of cattle could be held. Purchaser found out the statement was false and went ahead anyway. The courtheld that therewas an intention to induce, but therewas no inducement in fact because the purchaser made his own inquiries and did in fact not rely on the representation
  • 104. ü Redgrave v Hurd – when the representee has a chance to check whether the statement was true but did not, then the purchaser may still argue that he relied on the representation. o The false statement need not be the only factor, but must only be ONE of the reasons for entering into the contract o At common law – contract voidable (prima facie right to rescission) unless it has already been fully performed • If the representee is aware of the falsity but is not aware of the extent of the falsity, reliance will still be established – Gipps v Gipps • If the representee had the opportunity to inquire as to the accuracy of the statement and didn’t, reliance is still present and a misrepresentation is established – Redgrave v Hurd RESCICCION ANDALTERNATIVES • Law of tort o Derry v Peak o Esso Petroleum Co Ltd v Mardon – petrol station operator had a relationship with esso petroleum. They gave the operator unsubstantiated claims negligently (theydidn’t check the information) he relied on the
  • 105. information and they induced him to enterinto a contract. He sued in negligence and received damages • Statute o Misleading or deceptive conduct o ACL Part 2(1) s 18 § Very wide and very accessible 31 § “A person shall not, in tradeor commerce, engage in conduct that is misleading or deceptive or is likely to mislead or deceive” § Not all contractual transactions are subject to this section – e.g. not in tradeor commerce § There is no requirement that anyone has to actually be misled or deceived § Intention to mislead or deceive is irrelevant § Liability for misleading or deceptive conduct cannot be excluded under contract § Does not apply to one-off private or charitable transactions o Henjo Investments Pty Ltd v Collins Marrickville
  • 106. Pty Ltd – restaurant perceived to be licensed for 100 but only licensed for 70, no statement was made about this. No remedy under contract law as no statement was made, but therewas a remedy under s 18 of the ACL o Antoniou v Karedis Enterprises Pty Ltd – prediction/opinion of good business breached s 18 o Gaffikin Marine Pty Ltd v Princes Street MArins Pty Ltd - False statements made during negotiations “we are the only genuine buyers” o Conductaimed at individual ü Butcher v Lachlan Elder Realty Pty Ltd o Conductaimed at public at large ü Taco Company of Australia v Taco Bell Pty Ltd ü Parkdale Custom BuiltFurniture Pty Ltd v Puxu Pty Ltd • Remedies o Injunction to stop behaviour o Damages to compensate for loss Misleading or Deceptive Conduct • One of the most important consumer protection measures of Australian law • ACL s 18 (schedule 2 of the Competition and Consumer Act 2010 (Cth))
  • 107. (1) A person must not, in tradeor commerce, engage in conduct that is misleading or deceptive or is likely to mislead or deceive. (2) Nothing in Part 3-1 (which is about unfair practices) limits by implication subsection (1). • For a breach to occur under this section, the misleading or deceptive conduct must be by a person engaged in ‘trade or commerce’ • Remedies: injunction, damages, compensatory orders o Not confined to persons who are consumers under s 3 of the ACL – Concrete Constructions (NSW) Pty Ltd v Nelson THE MEANING OF ‘IN TRADE OR COMMERCE’ • S 2 of the ACL – tradeand commerce within Australia or tradeand commerce between Australia and places outside of Australia; and includes any business or professional activity (whether or not carried out for profit) 32 • Definition of the words ‘trade’ and ‘commerce’ have been left up to court discretion
  • 108. o Re Ku-Ring-Gai Co-Operative Building Society (No 12) Ltd – terms of common knowledge o Larmer v Power Machinery Pty Ltd – very wide meaning • The conduct must be trading or commercial in nature and not merely incidental to tradeor commerce o Concrete Constructions (NSW) Pty Ltd v Nelson – s 18(1) has a restrictive operation; only conduct which is itselfan aspect of activities or transactions, which of their nature, bear a trading or commercial character, i.e. does not constitute a truckdriver failing to give the correct hand signal o O’Brien v Smolonogov – does not cover the private sale of property because it is not ‘in’ tradeor commerce o Argy v Blunts & Lane Real Estate Pty Ltd – the same principal as O’Brien applies even if a real estate agent is concerned, however the agent may be liable for misleading or deceptive conduct THE MEANING OF ‘ENGAGE IN CONDUCT’ • s 2(2) of the ACL – ‘a reference to engaging in conduct shall be read as a reference to do or refusing to do any act’