Contract A Sketchnotes - Monash Law Students` Society
Transcription
Contract A Sketchnotes - Monash Law Students` Society
Monash Law Students’ Society ! STUDENT TUTORIAL PROGRAM 2015 ! Contracts A SKETCH NOTES ! ! ! ! ! DISCLAIMER – PLEASE READ BEFORE CONSULTING THESE NOTES ! 1. The following SketchNotes have been prepared and provided by a law student as a skeleton or sketch of the course material for this unit; ! 2. It is the responsibility of users to make note of any changes to course content; ! 3. SketchNotes may exclude some topics, cases and legislation and may therefore be inconsistent with current Faculty of Law course content or recent developments in the law; ! 4. Neither the Law Students' Society nor its sponsors endorse or take responsibility for the quality or accuracy of these SketchNotes; ! 5. SketchNotes should not be solely relied upon; ! 6. SketchNotes are to provide users with a basis from which they can create individual and extensive notes for their own assessments; ! 7. SketchNotes are not to be replicated, either in part or in full, during Faculty of Law assessments for this unit; ! 8. SketchNotes are designed to be used as a teaching aid in the Student Tutorial Program; ! 9. For copyright reasons, SketchNotes are not to be printed or altered by users; ! 10.It is against the Monash Law Students' Society's policy to provide further materials to law students in relation to course content for this subject. Student may not make any such request to the Monash Law Students' Society or it its student tutors; ! 11.It is against the Monash Law Students’ Society’s policy for students to contact tutors directly via email. Any requests for further assistance outside of tutorials must be made to Pearl Jin at [email protected]. Questions regarding course content should be made to the relevant Faculty lecturers or tutors; ! 12.The aim of the Student Tutorial Program is to facilitate collaborative learning and increase student exposure to practice problems. It's role is not to substitute Faculty teaching or provide a way for students to pass assessments without engaging in course content; ! 13.If you have any questions, please do not hesitate to contact Pearl Jin at [email protected] ! ! ! Tutor Name: Anthony Hadjiantoniou. ! Year of study: 2012, Semester 1. ! Cases not on the 2015 reading guide: • Maddison v Alderson HL 1883 ! Cases/Legislation/Journals not on the 2012 reading guide: ! • • • • • • • • • • ! ! ! ! ! ! CISG, Article 16 [enacted by Goods Act 1958 (Vic), sch to section 85] CISG, Article 19 [enacted by Goods Act 1958 (Vic), sch to section 85] Guide to Enactment of the UNCITRAL Model Law on Electronic Commerce (1996) E Jenks, The History of the Doctrine of Consideration in English Law (Cambridge University Press, London, 1892), pages 81-82 Laybutt v Amoco Australia Pty Ltd (1974) 132 CLR 57 Popiw v Popiw [1959] VR 197 Pavey & Matthews v Paul (1987) 162 CLR 221 Interfoto Picture Library Ltd v Stiletto Visual Programs Ltd [1989] QB 433 Corbin on Contracts, 1950, vol. 3, pp. 215-216 ! ! ! ! ! ! ! ! ! ! ! ! ! ! ! ! ! ! ! ! ! ! ! ! 1. Offer: • An offer is an indication of a party’s willingness to enter into a contract on specific terms. • The offer itself must be sufficiently clear for it to be capable of giving rise to legally binding obligations. The obligation itself can be both an obligation to do something and an obligation to reframe from doing something. Invitation An invitation to treat is an invitation to others to make offers to treat: or enter negotiations. Unlike offers, an invitation to treat does not contain obligations (Pharmaceutical Society of Great Britain v Boots Cash Chemists). For example, goods found in a supermarket. Puffery: A statement will be a puff when the obligations are uncertain or the parties did not intend to create a legally binding offer. For example “if you are unsatisfied, we’ll give you the store”. ! In Carlill the ct found that a pledge to give 100 dollars if the customer was not satisfied with their product was not a puff. There is overlap with this element and intention to create legal relations (parties do not intend puffs to be legally binding). Unilateral A unilateral offer is an offer that is ‘made to the world’. The Offer: offer is accepted through performance (therefore, acceptance and consideration are satisfied simultaneously). ! Note: Government subsidies do not constitute offers (Australian Woollen Mills v Commonwealth). ! ! ! ! ! ! ! ! 1.1.Is there still a live offer? • If the plaintiff successfully establishes that there is an offer, the court will inquire as to whether the offer was still live and therefore, capable of being accepted. The following may be relevant: Rejection: When a party rejects an offer, they remove their ability to accept the offer in the future. Counter offer: Counter offers attempt to modify the initial offer. For example, “I’m not willing to pay 10 dollars, but I’ll pay 5”. A counter offer has the same effect as rejecting an offer. Contrast to “would you consider any price below 10 dollars” (which would be a ‘mere inquiry’ and keep the offer alive). Complex situations may arise where there have been several offers and counter offers. Therefore, making the actual terms of the contract unclear. The court will resolve this issue through the ‘battle of the forms’ where the ‘last shot fired’ aka the latest offer will form the basis of the contract. Contrast to synthesis approach. ! ! Revocation: An offer can be revoked at any time before the offeree accepts. So long as the mode of communication is appropriate. Generally, acceptance of a unilateral contract will take place when obligations have been performed, there may however, be grounds for an equitable estoppel in circumstances of part performance (see Mobil Oil and later discussion). An offer will be irrevocable if the offeror has been given consideration to keep the offer alive (Goldsborough Mort). Death: The death of the offeror will nullify the offer as soon as the offeree becomes aware of said death (Fong v Cilli). Change in Fundamentally changed circumstances will serve to kill circumstance: an offer (Dysart). ! 2. Acceptance: • Acceptance of an offer is an unqualified assent to the terms of the offer. • Acceptance is viewed objectively. Therefore, arguing that you did not subjectively understand the terms of the contract, or did not read it will not absolve you of your obligations under the contract (Fitness First Australia & Smith v Hughes). • The court takes a very common sense orientated approach to assessing whether assent has taken place. Therefore, Acceptance can be inferred through conduct (Felthouse). For example, in Felthouse, accepting the benefit of the contract without formally signing the contract, constituted acceptance. In Brambles, Heydon JA concluded that agreeing to pay additional costs (without reserving the right to sue in the future) for liquid waste constituted acceptance (despite initial protest). • Circumstances where the court will not be satisfied that there has been ! ! acceptance: ❖ Acceptance cannot be inferred from silence (Empirnall). Silence, when accompanied with actions, may be valid consent. ❖ Acceptance must be in response to the offer (or in reliance of the offer). For example, in Crown v Clarke, the P made statements to clear his name. His acceptance was not in reliance of the offer (having no knowledge of the offer). Therefore, acceptance did not take place, as he never intended to give the information to demonstrate acceptance. 2.1.Method of Acceptance: • Generally, acceptance does not take place until acceptance has been communicated. • The postal rule is an exception to this rule. Acceptance takes place as soon as the letter enters the mailbox (Brinkibon Ltd v Stahag Stahl). The postal acceptance rule is not necessarily justified by logic. It does however, provide a solution, to the question “who bares the risk in contracts where acceptance takes place via post”? • If contract explicitly acknowledges email as a mechanism for communicating acceptance, acceptance will take place when the email enters the ‘information system’. If the contract is silent on the matter, acceptance will take place when the email has been read. ! 3. Consideration • In layman terms consideration is payment. Given this simple definition, it is no surprise that ordinarily payment will be money (but can also be the exchange of goods/services). • In legal terms, consideration is a ‘detriment or liability voluntarily incurred by the promisee or a benefit conferred on the promisor by the promisee for the exchange of a promise as evidence of a bargain’. • The consideration requirement will still be met if the obligation has not ! ! been executed. For example, a contract for the payment of money will satisfy this requirement even if the money has not passed to the other party (hence consideration is “the exchange of promises”). • A contract that is not supported by consideration is unenforceable or “Nudum Pactum” ! 3.1.The elements: • Consideration does not need to be adequate, but it must be valuable. In other words, the contract must contain something considered valuable in the ‘eyes of the law’, but it is not the courts job to consider whether there has been a ‘fair transaction’ (Woolworths v Kelly). • The “quid pro quo” requirement must be met. “This for that”. There must be an exchange of obligations. ! 3.2.The Exceptions: • Past Consideration: If Party A performs tasks for Party B, Party A cannot impose obligations on Party B to pay (Roscorla v Thomas). The best example would be if someone gave someone else a gift and then retrospectively required payment for the gift. • Performing an existing legal duty will not constitute “good consideration”. For example, in Stilk v Myrik, the captain of the crew offered additional money to sailors as the ship was understaffed. This was not an enforceable obligation as the sailors were already bound by contract to complete their duties as sailors. Therefore, it was impossible to demonstrate an additional benefit conferred to the Captain (benefit/ detriment element left unsatisfied). • Part Payment of a debt will not be considered good consideration. This follows from the existing legal duty rule, as part payments of debt, will never confer an additional benefit on the person receiving the money (Pinnel’s case). Note: if the debt is paid earlier (at the request of the ! ! loaner) the benefit/detriment requirement will be satisfied. This is because money has a time value (the sooner it is paid, the more valuable it is). ! 3.3.Exceptions to Existing Legal Duty Rule: • Practical Benefit: 1. The benefit derived from modifying the contract is worth more than the remedy available. 2. The modification is not a result of economic duress. Consider: Does the person threatening breach have knowledge of the economic hardship that will be caused by the breach and is that evidence enough to create an inference of economic duress? Most likely not, but should definitely be mentioned in an exam to demonstrate analysis. 3. The benefit/detriment is capable of being regarded as consideration. ! 3.1.Explanatory Structure: 1. State whether there is adequate consideration. 2. State whether there is an existing legal duty to perform obligations. 3. Consider whether any of the exceptions apply. ! ! ! ! ! ! ! ! ! ! ! 4. Intention to Create Legal Obligations: • Both parties to the contract must manifest an intention to be legally bound. The presence of this intention is demonstrated objectively based on the conduct of the parties (“It is not a search for uncommunicated subjective motives or intentions of the parties.” – Ermogenous per Gaudron, McHugh, Hayne, and Callinan JJ”). 4.1.Presumptions: (Presumptions have the effect of placing the burden of proof on the party disproving the presumption). • Traditionally, there has been a presumption against an ICLO in the context of social relationships. • The most favorable reading of Ermogenous suggests that this presumption no longer exists. • Traditionally, there has been a presumption towards an ICLO in the context of business relationships. It is unclear whether Ermogenous has affected this presumption, irrespective of whether it has these are both factors that should be considered in an exam (whilst they may no longer create a presumption, they certainty contextulise the nature of the transaction and can be used as evidence to demonstrate intent or a lack of intent). Note: Banque Brussels, Kleinwort Benson suggests that the presumption exists in Commercial transactions. • Traditionally, the courts have found that government policy announcements do not demonstrate an ICLO. Per Kitto in PNG, binding governments to policy announcements would create a disincentive for governments to be generous and could unnecessarily bind successive governments. Consider: o Has the government established a statutory authority for making payment? ! ! o Does the Cth have a commercial interest? o Has the Cth expressly reserved the right to vary the amount of the subsidy or revoke the policy? (If such is the case, the promise is illusory as it was in PNG). • Consider: There is a distinct difference between relationships formed as a consequence of policy announcements and formal contracts entered into by the government and members of the public. The latter will be like any commercial transaction and more than likely demonstrate an ICLO. Note: On one hand, a policy announcement could be characterised as a ‘unilateral offer’ whereas, a contract between the Cth and a contracting party would be a bilateral contract and almost definitely binding. ! ! 4.2.Factors to be considered: Ct will consider the “Salient Features” • Actions and words of the parties. In Carlill, the court drew attention to the D’s action of putting 1,000 dollars in the bank, to pay unsatisfied customers. This demonstrated a willingness to pay and in-turn, suggested an ICLO. • The subject matter of the agreement and its substance. In Shahid, the obligation imposed on the P was onerous (upwards of 1,000 dollars) and the guide itself was comprehensive. • The status of the parties to the agreement. • The relationship between the parties. • In Shahid, the ct considered the ‘administration fee’ (consideration provided) and the college had a handbook (worded legalistically) that provided for an appeal mechanism. In an exam, outline the contract price and how it is unlikely parties would pay substantial amounts if the obligations were unenforceable. ! ! ! 4.3.Structure: • Outline nature of relationship. • Discuss whether the presumptions still exist. Err on the side of safety and say they do not. That being said, the Pratt case, implicitly suggests the presumption does exist (this might be an error by the judge as he fails to discuss Ermogenous). • Consider the aforementioned factors or “salient features”. ! 5. Certainty Requirement: • A contract must be sufficiently certain and sufficiently complete: ! 5.1.Completeness: A contract must contain all essential terms to be enforceable: • Importance or essentiality (An essential term is a term of without which, the contract cannot be enforced) of the term. o Leases: parties, subject matter, commencement date, price payable. o Sale of land: parties, subject matter, price. o Sale of goods: parties, subject matter. ! • Why the term has been left out i.e. did the parties fail to reach agreement on the issue, deliberately defer agreement or simply fail to put their minds to the issue? • Where the agreement remains wholly executory or has been wholly or partly performed on one side (executed). ! 5.2.Certainty (must be certain and clear in meaning): ! ! • A contract must be expressed in sufficiently clear and precise language. Unclear language will not necessarily be fatal given the prevalence of poorly drafted contracts (especially given the prevalence of contracts drafted by the layman). • The term “reasonableness” is not necessarily ambiguous. For example “a reasonable time to perform obligations” would be sufficiently certain in most circumstances. In Whitlock v Brew, reference was made to terms that would ‘ordinarily and reasonably govern a lease’. The ct found this to be ambiguous and unsalvageable as there is no standard for assessing reasonableness in that instance. If faced with a clause that uses the word “reasonable” say at a prima facie level, it could be valid. Then consider whether the court has established criteria for assessing ‘reasonableness’ (in the context of the clause). If it does not, the clause will be unsalvageable. ! 5.3.Illusory promises • An illusory promise is a clause that gives one party an option, or sole discretion as to whether they perform. o In PNG, the ct found that the government’s ability to vary the subsidy (with the ability to make the subsidy zero) was illusory). • The court may import a reasonableness standard to give the illusory clause meaning (Meehan v Jones). ! 5.4.Remedying Uncertainties: • After going through whether the term is sufficiently certain students will then discuss whether the fault can be remedied. • Remember, the courts aim to preserve the doctrine “pacta sunt servanda”. That is agreements are made to be kept. Therefore, courts will do all that they can to keep the contract alive. This includes removing non-essential terms. • Sophisticated answers will consider whether the ambiguous term benefits ! ! the party seeking to enforce the contract. If it does, they will recommend waiver as a solution that could keep the contract alive. Alternatively, if one party is arguing for a favorable reading (and your client is happy to make a concession to keep the contract alive) you might offer to amend the contract so the ambiguity is resolved against you (the other party gets their clause, you get your contract). ! 6. Capacity • Minors are people who are younger than 18 years old (Age of Majority act 1977 s(3)(1)). • There are four categories of contracts with minors: 6.1.Prima facie, contracts with minors are ‘voidable’. The exception is ‘necessities’. Necessities are assessed on a case-to-case base and are determined by reference to the minors living style. An accompanying adult must ratify other contracts entered into by minors. 6.2.Void Contracts: S49 makes certain contracts voidable • Contracts for the repayment of a loan • Contracts for goods • Accounts stated ! 7.Doctrine of Privity • In layman terms, privity simply means that if you are not a party to a contract then you cannot incur liability and you cannot enforce obligations under the contract. • Privity will be an issue in an exam if you have someone who is not a party to the contract, but wishes to enforce obligations (because the contract is specifically designed to benefit them). The classic example is an insurance contract, or something analogous. ! ! • Whilst a signature will generally demonstrate that an individual is a party to the contract, it will not necessarily be conclusive (Coulls v Bagot). 7.1.Exceptions to Doctrine of Privity • In an exam, don’t be afraid to offer a common sense solution, for example Party A should ask Party B to sue on his/her behalf. Or alternatively, assign him/her his rights and liability under the contract. 7.1.1.Insurance Contracts: In Trident Mason CJ & Wilson J made an exception for insurance contracts. They were also unconvinced that there was any practical justification for the doctrine. Gaudron, Toohey, and Dean JJ all arrived at similar conclusions with slightly different reasoning (Gaudron on the basis of unjust enrichment, Dean JJ on the basis of trusts). Note: The original exception was for transportation contracts, this case seems to demonstrate a wiliness to expand the doctrine further. 7.1.2.Agency: if an agent enters into a contract for a principle, the principle is a party to the contract. The following test must be made out: 1. The contract makes it clear that a benefit is to be conferred on the beneficiary. 2. The contract makes it clear that a benefit is to be conferred on the beneficiary. 3. The promisee has the authority from the beneficiary to act as an agent. 4. The beneficiary has provided consideration. Sophisticated answers would consider whether consideration could be attached to some other obligation (for example, if it is a transportation contract limiting liability, the act of paying for the transport could potentially be consideration for the clause limiting liability). Compare analysis in Salmond to analysis in Scruttons. • Agency can be inferred from circumstance. • Policy Flag: In Trident the ct dentified the following: o Preventable double recovery ! ! o Limits the chain of liability o If you have not given consideration you have not bought the right to enforce the contract. Conversely, if the purpose of the contract is to benefit you, then your inability to enforce the contract undermines the intent of the parties. o Conclusion: Reform privity to allow beneficiaries to sue (widen agency rule) – very similar model to WA where parties who are conferred a benefit can enforce contracts. 5. Formalities: • By this stage of the course, it is well and truly evident that there is no requirement at common law for contracts to be in writing. There are however, certain exceptions. Contracts pertaining to land (lease, sale or mortgage) and guarantees (not indemnities). • S126 of the instruments act establishes the following requirements: 1. The contract must outline the Price, Parcel of land, Parties and the time of settlement. 2. The contract must be signed for it to be enforced against that party. A written signature is not necessary, nor is it a requirement for the signature to be written/typed by the person who is “signing”. For example, I can ask my brother to write my name and that would suffice. ! 2.1.Joinder of documents • In circumstances where all of the aforementioned requirements cannot be found on one document it may be possible to join(der) the documents together so they can be read as one (in turn, satisfying the elements necessary). 2.1.1.Physical Joinder: ! ! • Documents, which are physically attached, make the joinder process extremely easy. 2.1.2.Documents which refer to one another: • There is a strict and broad approach. The strict approach requires explicit reference to the other document. “This document refers and incorporates…signed on the 6th of January” (Thompson v McInnes). • The broad approach requires ‘mere reference’ to the earlier document (Harvey v Edwards). • Two conflicting HC cases – make a decision about which is more preferable. As a matter of commercial efficiency, the broad approach seems to afford the courts greater flexibility, which is preferable. In an exam, reach your own justifiable conclusion. ! 2.2.Contract enforceable in Equity: • The first step is to explore whether the contract is enforceable at common law. The second step is to explore whether the contract is enforceable in equity. Equity will enforce the contract if there are “sufficient acts of part-performance that are unequivocally referable to the existence of a contract”. • This is an extremely high threshold test. For example, in Maddison v Alderson the ct found that personal care could not satisfy this requirement because the person performing the acts may have been doing it out of love (despite there being evidence of a defective will that would have entitled her to the land). Compare to the Broad Approach in UK: Acts, “if they pointed on a balance of probabilities to some contract between the parties, and either showed the nature of, or were consistent with, the oral agreement alleged, then there was sufficient part performance.”—House of Lords in Steadman v Steadman. • Note: Payment can never be unequivocally referable to the existence of a contract. This is because money can theoretically be given for any number of things. That being said, in an exam if Person A hands Person B ! ! 500,000, suggest that it is highly unlikely that it payment would be for any reason other than purchasing the property (and question the basis for this long standing rule). ! ! ! ! ! ! ! ! ! ! ! ! ! ! ! 3.Estoppel: • In layman terms, the word estoppel can be replaced with ‘stop’. It is used to stop parties from departing from common assumptions or denying facts. • After attempting to establish a claim in contracts students are encouraged to establish a claim in Equity. There are two different kinds of estoppel: Common Law Estoppel: ! ! Equitable Estoppel: • Common law operates in r e l a t i o n t o representations or assumptions about existing facts. For example, “I signed the contract” (According to the minority in Walton Stores the D’s actively induced such an assumption). • Promissory estoppel operates in relation to representations or assumptions as to future conduct. As opposed to “I signed the contract” Equitable estoppel would operate if the D induced the P into believing the contract would be signed in the future. • Acts as a shield. Therefore, it can only be u s e d d e f e n s i v e l y. Estoppel in the example used above, would be used to “estopp” the other party from denying the existence of the signature itself. In the context of Walton stores it would only affect damages. • Acts as a sword. • This was a point of divergence in Walton Stores, the majority believed that the D had been induced to believe that the contract would be signed in the future. In contrast, the minority made their decision on the basis of common law estoppel because they believed that the assumption was that the contracts had already been signed. ! 3.1. Elements of Estoppel: 1. Assumption • The relying party must have adopted an assumption. This requirement is straightforward. For example “The assumption in this instance was that ! ! the contract was going to be signed” 2. Inducement • The relying party must have been induced into relying on the assumption. In Walton Stores the D used ambiguous correspondence and silence to err the P into the belief that the contracts they had dropped off to their office had been signed. In this instance, the D did similar acts of…. 3. Detrimental Reliance • The relying party must have suffered. In an exam, point to financial suffering (and in some circumstances psychiatric). In Walton Stores the D had already begun construction of the shopping center. In this instance, the D had already begun preparing the report/etc, therefore it is similar… 4. Reasonableness • The assumption must be reasonable. Very similar inquiry when assessing whether an offer is a puff. Consider: Who made the representation? If for example, the secretary induced the assumption, would be unreasonable to rely on the assumption? What language was used? Were there explicit statements, or vague comments? What is the relationship of the parties involved? If for example, there had been past dealings that induced the assumption, it would be far more reasonable to rely on said statements. 5. Unconsionability • It must be unconscionable to depart from the promise. In layman terms, what they did must be must be really bad/immoral. The best way to structure this is to refer to previous factual scenarios that have been considered unconscionable. For example, Walton Stores where they waited for construction to occur, despite changing their strategic direction purely to keep the option open (to their commercial advantage). 6. Departure or threatened departure • This should always be present. If there is no departure or threatened departure there is no need to litigate. ! ! ! ! ! 6.1.Remedies: • “Minimum equity to do justice”. • The court can calculate damages in two ways: o Reliance loss aims to place parties in the position they would in had the assumption never been relied on. o Expectation loss aims to place the parties in the position they would be in had the promise been fulfilled. o In Walton Stores reliance loss would have been the cost of building the property itself. Expectation loss would have been the contract price itself (the profit, as opposed to the money spent). In most circumstances, expectation loss will out value reliance loss (except for unprofitable contracts). • Remember: Equity is discretionary. ! 7.Express Terms • Express terms are terms that have been explicitly stated either orally or in writing. 7.1.Statements made in Negotiation - The following questions will be asked: • The language of the term and whether it is promissory (JJ Savage “estimations” are vague and not promissory). • The importance of the term (JJ savage & Son) • The relative expertise of the person making the representation (Dick Bentley). Or the relative expertise the person holds himself or herself out as having. ! ! 7.2.The Rule in L’Estrange Case • If you sign a contract, you are bound by the contract – irrespective of whether you have read it. Unless you have been mislead into signing the contract (Curtis Cleaning). ! 7.3.Incorporating Terms by Notice: • Term must be delivered in a way that is accessible. The promisee must have actual knowledge of the terms or a reasonable time to access the terms. The level of notice requires increases if the term is particularly onerous. • NB: Consider when offer and acceptance took place the terms must be available before the contract is formed. In Thorton Denning noted that the contract was established upon purchasing the ticket (the sign itself was in the car park). Therefore, any sign in the car park could not be incorporated as the contract had already been formed. 7.4.Incorporation of terms by dealings: • Where parties have had a history of dealings, contractual terms introduced in earlier transactions may be incorporated into a subsequent contract even though the ordinary requirements for the incorporation of terms have not been meet in relation to that subsequent contract. • The course of dealings must however be frequent and uniform, and the document in question must be capable of reasonably being considered a contractual document (Rinaldi & Patroni v. Precision Mouldings). ! 7.5.Construing the terms: • The court will always construe terms objectively, disregarding subjective intent (Heydon JA in Brambles). • The parole evidence rule limits the extrinsic evidence that may be brought ! ! to add or vary the terms of the written contract. • Where there is one plain interpretation, the courts are bound to follow it, even if it is clearly not what the parties intended (Brambles). ! 7.6.Can Extrinsic Evidence be tendered? • The Parole Evidence rule only applies in circumstances where the parties intended the contract to contain all terms. Agreements that are only partly in writing will require extrinsic evidence to be given proper meaning. Consider: How comprehensive is the agreement? Is there a clause specifically stating the contract is wholly in writing? Is the absence of such a provision telling? • In an exam identify the relevant extrinsic evidence and who it benefits. The party seeking to rely on the extrinsic evidence will argue in favor of the broad approach discussed below. Broad Approach: Narrow Approach: The flexible approach utilises extrinsic evidence in determining whether the contract is wholly or partly in writing (State Railway Authority). Under the narrow approach evidence extrinsic evidence can only be tendered in circumstances of ambiguity. In Brambles for example, extrinsic Therefore, allowing greater evidence demonstrated that they flexibility in adding terms that are never contemplated the sale of not expressly written in the ‘liquid waste’. The contract stated contract. to the contrary, but as a consequence of the PE rule the meaning of the contract could not be varied. ! • Estoppel cannot be relied on if there is an entire agreement clause in the contract (at least according to Saleh v Romanous). In an exam discuss the ! ! tension that exists between Saleh v Romanous and Walton Stores. Does Saleh narrow the ratio of Walton Stores? Does it ignore Walton Stores? Or is it simply a different factual scenario that was not considered in Walton Stores. ! 7.7.Exceptions to PE rule: Collateral Contracts: JJ Savage v. Blakney: 1. A statement made with an intention it would be relied upon. • Consider: When was the statement made? If it was made just before the contract was signed, the P will argue that it was being used as inducement. Moreover, it is likely to prove that it was relied on. 2. Reliance on the statement. • A classic argument is “the D would have always entered the contract as it was a good deal”. Particularly pertinent if the good was sold under market value. 3. An intention to guarantee the truth of the statement. 4. The collateral contract cannot conflict with the terms of the main contract. • Do not be too quick to find conflict. Also offer creative arguments like “the collateral contract could be construed narrowly as to avoid conflict”. Analysis is everything. • A collateral contract is an independent contract (finding its origin in the original contract). Therefore, it is not bound by the PE rule (uniquely, consideration is linked with the original contract). ! 4.1.Construing Clauses: • Parties frequently use exclusion clauses to limit tortious liability. There used to be two approaches used by the courts. The “four corners rule” and the “contra proferentum rule”. ! ! • The contra proferentum rule is simple. In circumstances of ambiguity, the clause should be construed against the person relying on the clause. In an exam begin by discussing why the clause is ambiguous (provide two separate readings of the contract) and then use this rule to demonstrate how it would benefit one of the parties (in turn, resolving the ambiguity). ! 5. Implied Terms: • Implying terms is an issue that could easily be missed in an exam. That is why it is essential to always turn your mind to the question of whether you can imply a term, to the advantage of your client. • It is important to acknowledge that parties cannot contemplate every term; therefore, the court may need to imply terms to make the contract functional. ! 5.1.Terms implied in Fact: • These are terms that are implied ad hoc to improve/promote business efficacy. The following elements must be made out: 1. Reasonable and equitable: It does not create imbalance. 2. It must be necessary to give business efficacy to the contract. No term will be implied if the contract is effective without the addition of that implied term. It must be essential for the contract to function. NB Codelfa seems to demonstrate that merely running the contract at a loss will not be sufficient, especially if contractual obligations can still be performed (but simply at a loss). This is part and parcel of the risk allocation inherent in all contracts. In an exam distinguish between an unworkable contract and a commercially unviable contract. 3. It must be so obvious that it goes without saying. This is an extremely high threshold test. 4. It must be capable of clear expression. In an exam, state the obligation in ! ! a clear and concise way. In Codelfa Mason J notes that there could have been any number of remedies to the issue at hand. Therefore, it was unclear which ‘remedy’ the parties would have chosen. Therefore the court would have effectively been writing the contract for the parties. 5. It must not contradict any express term of the contract (Codelfa Construction v. State Rail Authority of NSW). ! 5.1.Terms implied by Custom or Usage: • Everyone in the industry (of that category) or trade must know (or ought to know) that there are certain trade assumptions. • The term must be so well known that it is ‘notorious’. This is an extremely high threshold test and will not be satisfied by ‘mere trends’. • The term must not conflict with the contract. • A person can be bound by custom despite not having knowledge of the custom. ! 5.2. The Role of Good Faith: Should a duty of good faith be recognised? • Under a duty of goof faith or reasonableness, a party exercising a contractual discretion must act in an unbiased way and perhaps also make an attempt to verify the information on which the decisions is to be based (Renard Constructions v. Minister for Public Works). • What does good faith require? o Good faith is a general rule applicable to every contract that each party agrees, by implication, to do all such things as are necessary on his part to enable the other party to have the benefit of the contract (Secured Income Real Estate v. St Martins Investments). o A franchisor’s discretion in relation to approvals for the franchise is subject to an implied duty of ! ! good faith, which precludes the franchisor from exercising discretion for a purpose extraneous to the contract (Burger King Corporation v. Hungry Jack’s). o A duty of good faith will not operate to restrict the legitimate interests of the supplier (Garry Rogers Motors v. Subaru). Acting opportunistically should not be conflated with acting in bad faith. ! 6.Australian Consumer Law: Unfair Terms • The ACL is designed to provide a degree of balance to an otherwise inequitable distribution of bargaining power between consumers and businesses. • The ACL cannot be contracted out of: o Contract clauses which purport to exclude, restrict, or modify guarantees under the ACL are void, per s 64. o Liability under consumer guarantees in ss 51-53 cannot be limited by contract, per ss 64 and 64A. 6.1.Who is a consumer? • The first step is to establish whether the legislation is applicable. A consumer contract is a contract for the supply of goods or services ‘to an individual whose acquisition…is wholly or predominately for personal, domestic or household use or consumption’. Therefore, a commercial oven used in a fancy house, could theoretically come within the scope of this definition. 6.2.What is an unfair term? • This is an assessment of a series of different factors (s24). o Is there an imbalance in bargaining power? Consider the size of the company and the amount it produces. If it is a large company the consumer has virtually zero negotiating power (consider whether there was negotiation on price). ! ! o Is the term reasonably necessary to protect the producer’s legitimate interests? o Would it cause financial detriment if applied? • What is the effect of a term being unfair? o The unfair term is void per s 23(1). o Remedies available to the consumer (per Part 5-2): ▪ Injunction (s 232). ▪ Compensation order in favour of injured party (s 238). ▪ Order to redress loss suffered by non-party consumers (s 238). o The contract will continue to be binding if it can operate without the unfair term s 23(2). ▪ If it cannot operate, it will become void. 7.Australian Consumer Law: Consumer Guarantees • Note: consumer is defined differently in schedule 3. • Price of goods/services is 40, 000 or • Goods/services are of a kind ordinarily acquired for personal, domestic and household use or consumption or • Vehicle or trailer is acquired for use principally in the transport of goods on public roads. 7.1.Having established the individual is a consumer. Consider whether the good was ‘rendered with due skill and care (s60)’, whether it was ‘fit for purpose (s61)’ ! !