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Law Full Final Exam Study Notes

Business Law Contract Law
Study Notes

Comprehensive unit study notes as per Victoria
University
...

Elements of a contract
There are six essential elements necessary for legally binding contract formation:
(1) an agreement (offer and acceptance);
(2) consideration (generally, the supply of money, property or services however anything will
suffice as consideration be it money, or a promise to undertake, or not undertake a particular
act);
(3) Capacity to enter legal relations
...
g
...

(6) Certainty
...
(there are exceptions) (Hyde v Wench)

An offeree does not reject an offer or make a counter offer, merely by requesting further
information about the offer
...
Depends also on
intent Seppelt v Commissioner

The offerer must be unequivocal – the offer and the acceptance must correspond
...


Isaacs J has stated that the only feature that distinguishes an option for a mere offer is the
consideration
...
The consideration merely ensures its continuance,
by creating a relation in which the law forbids the offeror retracting it
...
The person
responsible is the executor of the

Revocation

Revocation – an offer may be revoked at any time by the offeror prior to acceptance – even if a
time frame has been given, and that time frame has not expired
...


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Law Full Final Exam Study Notes

For an acceptance:
1
...

3
...


The offerer may stipulate what is necessary for an offer to be accepted'
Offer and acceptance must exactly correspond
Acceptance need not be express: it may be inferred from a party’s conduct
Only the entity to 'whom the offer is made may accept it

An offeror can not deem an offer to be accepted by mere silence
...


Is a contract formed by the exchange of a promise for an act or an offer is an expression of
willingness to contract on the terms stated in the offer – Carlill v Carbolic Smoke Ball Co
...
Butler
Machine Tool v Ex-Cell O Corp

Postal Acceptance – Acceptance is concluded when the acceptance is sent
...
Bressan v Squires
...


Postal Rejection – are effective when they are received
...


An offeror is entitled to specify the manner of acceptance – Carlil v Carbolic Smoke Bomb

Telephone and instantaneous communication acceptance – acceptance is complete only when
heard by the offeror
...


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Law Full Final Exam Study Notes
Agreements to Negotiate are not, generally, considered binding - Coal Cliff Collieries v
Sijehama

Subject to finance clauses are for the protection of the purchaser – and are valid - Meehan v
Jones

Conditional Acceptance -preliminary agreements, requiring analysis of the case of
Masters v Cameron

Masters v Cameron [1954] 91 CLR 353
Facts:

Cameron and Masters had an agreement for the selling of Cameron’s farm worth
17,500 pounds
...

Another detail, considered as provision in the agreement, is that the agreement first
signed by the parties is pre-contract for the final contract for the sale which will be
accepted by the solicitor of Cameron if the terms and the conditions are not altered
...

Analysis:

The reasoning behind the ruling of the court is anchored on the following, which will still
depend on the circumstances of the case
...

Second, the intention to be legally binding can be carried so long as the current
agreement does not indicate that a suspension of a term or condition will be made once
a formal document has been signed
...

With this on hand, considering that a term in the pre-contract of Cameron and Masters
indicating that is subjected to preparation, therefore, Cameron does not consider the
contract to be legally binding
...
therefore the deposit had to be returned
...
Concluded contract and the purpose of the document is simply formal – the contract is
not conditional
2
...

3
...
Neither party is bound to
proceed with the transaction since formation of the contract is conditional on execution
of the document

Consideration -existing contractual duty as in Stilk v Myrick, Williams v Roffey Bros
& Nicholls and past consideration
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Law Full Final Exam Study Notes
existing contractual duty:

Case: - Williams v Roffey Bros and Nicholls (Contractors) Ltd (1990) 1 All ER 512

Summary:
P contracted to perform carpentry work for D
...
D would incur liability to a third party if the work was not completed on
time
...
per Glidewell LJ - If
(1) A enters into a contract with B for the supply of goods or services in return for payment
by B; and
(2) Prior to completion B has reason to doubt whether A will complete; and
(3) B then promise A additional payment in return for B promising to perform on time; and
(4) As a result of this promise B obtains a benefit or obviates a dis-benefit [eg, liability to
third party]; and
(5) B’s promise is not given as a result of A’s economic duress or fraud
Then - (6) The benefit to B (or obviation of disbenefit) is capable of being good
consideration for B’s promise

Case: - Stilk v Myrick - 1809 2 Camp 317; [1809] EWHC KB J58, 170 ER 1168

Summary:
Before the start of a voyage, plaintiff contracted to work as one of 11 seaman for the voyage for
$5 a month
...


Plaintiff sued for his share of the wages of the two deserters
...

(2) The remaining crew were already bound to work the vessel back to London
...

(i) This case is authority for the proposition that promising or performing a duty
you are already bound to the other party to perform is not good consideration for
any promise he makes you
...


Consideration

Consideration is an act of forbearance or promise therefore, which is the price for the promise
Dunlop Pneumatic v Selfridge & Co

Consideration needs to be given for a contract to be completed – Australian Woollen Mills Pty
Ltd v Cth
"that it should be made to appear that the statement or announcement which is relied on as a
promise was really offered as consideration for the doing of the act, and that the act was really
done in consideration of a potential promise inherent in the statement of announcement"

Contracts in the form of deeds do not require consideration

Consideration must be related to the promise – Australian Woollen Mills v Cth

Promises for which consideration has been given are contracts – but they have to be related –
see above
...
For that reason, even if
one party has, in performing the compromise agreement, in fact done exactly what it was
contractually bound to do there is still consideration – contract of compromise
...


A concluded agreement will not be effective if what the parties agreed upon cannot be
determined objectively with a reasonable degree of certainty
...
Importance of clause has to be
determined first - Whitlock v Brew

Estoppel

Two areas: 1) where there's a contract and something not working and 2) where there's no
contract (Hightree Case)

Estoppel relies on (Walton Stores v Maher & Legione v Hateley)
1) a promise – which must generally be both clear and unequivocal (Legione v Hateley)
2) Reasonable and detrimental reliance by the person claiming the estoppel
3) Unconscionable conduct – circumstances which make it unequitable, unconscionable or
unconscientious for the person who made the promise to retract it
Estoppel can occur with and without contract

Estoppel was used as a sword in Waltons v Maher

(b)

Estoppel

Traditional estoppel is a long established legal concept whereby a person will be prevented
from denying the factual truth in a previously made statement that has led the other party to act
on the statement in the legal relations between them
...


(c)

Promissory Estoppel

In 1947 Lord Denning established the principle of promissory estoppel in the High Trees
Case
...
” Implicit in the concept is also
that the promisee must act on the promisor’s promise to his financial disadvantage or detriment
...

However, the Australian cases have expanded the concept
...

In Waltons v Maher, the High Court relied heavily on the element of unconscionability to
find that, in a pre-contractual situation where the promisor had remained knowingly silent
thereby inducing the promisee to act on the assumption of a concluded contract to his
detriment, the promisor would be estopped from the implied promise to complete the contract
...
That relationship can be contractual (HighTrees) or pre-contractual
(Waltons) or simply a relationship that exists between the parties (Verwayen);

2)
A clear promise (express or implied) by one party that he will not insist on his legal
rights;

3)
That promise must be given in circumstances that raise in the other party’s mind an
expectation that the promise will be honoured – even though it is not supported by
consideration;

4)
Actual reliance by the other party on the promise in that his subsequent actions show
that he has assumed that the promise will be honoured;

5)
An element of actual or potential financial detriment or disadvantage (Quaglia’s Case) in
that, because he acts on the assumption that the promise will be honoured, (when in fact it will
not), the promisee is placed in a worse position than he would have been if the promise had
never been made at all
...


Intention -to create legal relations
General rules
For a contract to exist the parties to an agreement must intend to create legal relations
...
Intention remains, however, an independent requirement and must be
separately demonstrated and there are cases in which consideration has been present but no
contract found to exist because this pre-condition has not been fulfilled
...


If there's consideration, there's intention

Usually, family agreements are not considered to be contracts
...
However, in Banque Brussels v
Australian National Industries it was found to be binding
Exclusion Clauses

Generally means that the party admits it's liable – but there is this clause as a defence
...
Statutes have been introduced to
limit the exclusion clause
Nowadays, the courts tend to assume there is statute to protect the consumer, therefore except
in major commercial contracts, the main permitted use of exclusion clauses today is in relation
to the breach of express contractual terms

Main principles (Darlington Futures v Delco Australia):
1
...
When there is ambiguity – read it contra-proferentum – read it against the person who is
trying to protect themselves – courts lean towards making people liable
3
...
The four corners rule: When a clause is very broad, you tend to interpret it in a
way that is inside the contract – the exclusion clause doesn't apply outside the
contract (City of Sydney v West)

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Law Full Final Exam Study Notes
b
...
Exclusion clause works when you're following the agreed
route, but not if you deviate from it
...
if a clause expressly excludes liability for negligence (or an appropriate synonym ) then
effect is given to that
...
ask whether the words are wide enough to exclude negligence and if there is doubt that
is resolved against the one relying on the clause
...
ask whether the clause could cover some alternative liability other than for negligence,
and if it can it covers that
...
First – meaning of the words is the meaning a reasonable person in the position of the
party to whom the words are addressed would place on them
2
...
Third – extrinsic evidence is not generally admissalbe in the interpretation
4
...


Exception – was made to apply to liability insurance (Trident Insurance v McNiece)

Car

A

$$

B

Bike

Each of the ways to do this doesn't break the privity rule:
1
...

3
...


Argue that C is a party, C sues
B sues A for breach
Specific performance
trust – trustee B sues on C's behalf

Contracts that attempt to burden a third party –
Himalaya Clause – the carried excludes liability, this also extends to stevedores –

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Law Full Final Exam Study Notes

Consignor

Carrier

Stevedores

The Eurymedon – an exclusion clause that worked
...

2
...

4
...
The offer to perform is treated as equivalent to performance to the
extent that the party refusing to co-operate will be liable in damages (McKay v Dick)

Severable Contract

Payment obligations are apportioned in accordance with performance
...


Discharge by Performance

Where there is a lump sum payment, there has to be complete performance by the other side to
be paid (Cutter v Powell) and (Sumpter v Hedges)

Substantial Performance can sometimes be used to recover full or part of the price of the part
(Hoenig v Isaacs) and (Bolton v Mahadeca)

Breach
Any failure to discharge a contractual obligation is potentially a breach

For a breach to occur, two preconditions must be met:
1
...
The innocent party must elect to discharge the breach
Negligence and intention are irrelevant (unless accounted for in contract)

Types of terms: conditions, intermediate, warranties

Terms are classified by the construction of the agreement
...


Intermediate – terms that can be breached in a number of ways and sometimes it can be
serious and sometimes not
...
If the breach is serious or continuing, the innocent party
has the right to end the contract
...


Tripariate system of conditions comes from Ankar v National Westminster Finance

A court will not construe a term as a condition if that would produce an unreasonable result
unless that result was clearly intended by the party (Ankar v National Westminster)

A condition is a term, the failure to perform which entitles the other party to treat the
contract as at an end
...
Lord Roskill (Bunge v
Tradax)
Always get damages if there's a breach other damages depends
...
(Luna Park v Tramway Advertising)

Can't sue for warranties
...


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Law Full Final Exam Study Notes
Only way to terminate a time clause is to be late (Bunge v Tradax)

The question to consider is whether a court will allow a party to rely on an exclusion clause that
excludes or limits liability for a fundamental breach
...


Has to be fit for purpose (Greaves & Co v Baynham Meikle)

Breach for Late Performance

If the contract doesn't specify when something has to be done, then it can be done in a
reasonable time

Look at industry standard

Courts err on the generous side because if you get it wrong, then the consequences can be
very great

If time clause is put in contract, then time is considered to be of the essence
...


Two kinds:
1) Inability – harder to prove
2) Words or Conduct
It's anticipatory if one of the parties calls it off before the other one has a chance to perform
...


Just repudiation does nothing, the other party has to accept it
...


One party is not going to perform obligation x, and obligation x is a condition of the contract –
then it's repudiation
...

Ie, not going to perform contract at all (Federal Commerce v Molena Alpha)

Intention is not important but some courts do not talk about it
...


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Law Full Final Exam Study Notes
Wholly and Finally disabled – Devlin J (Universal Cargo Carrier v Citati) It's about the facts, not
what a reasonable person would thing
...
By the party not complying with that time, it's a repudiation by the other person, so
then the innocent party can terminate (Louinder v Leis)

If a party does not terminate/repudiate/discharge, they lose the right to
...


Giving extra time after an election, is not an affirmation
...
(Tropical Traders v Goonan)

Termination

Termination:
1) The parties are discharged from performance in the future
2) Rights that have accrued unconditionally remain
Legitimate interest – If the defaulting party can prove the innocent party had no legitimate
interest in performing, then damages can be limited (White & Carter Council v McGegor)

Legitimate interest – can only be applied in extreme cases, it's a hard argument to make

Can do termination in a way that has not been communicated – A agrees to sell to B, B
repudiates, A sells house to C
...
There are some exceptions, like arbitration clauses
...


Discharge by Frustration

Frustration

Discharge by Frustration
In some cases a contract will be brought to an end because of a supervening event that
is beyond the control of the parties; for example, a contract between A and B, whereby B
agrees to hire A's theatre on a particular night may be frustrated if, as a result of a terrorist
act the theatre is destroyed prior to the date for performance of the contract (see Taylor
v Caldwell(1863) 3 B & S 826)
...
The courts are likely to be unsympathetic if the event
could have been anticipated and therefore provided for by the parties in their contract
...

Statutory modification
Statutory modification means that in most cases the harshness that might result from that
common law rule is avoided (see eg, Fair Trading Act 1999 (Vic) Part 2C)

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Law Full Final Exam Study Notes
The event brings the contract to an end
...


From Davis: Frustration occurs whenever the law recognises that without default of either party
a contractual obligation has become incapable of being performed because the circumstances
in which performance is called for would render it a thing radically different from that which was
undertaken by the contract ratified in Codelfa v State Rail
The technique is two fold:
a
...
The factual circumstances which are alledged to amount to frustration must e
considered
...


Sometimes, terms provide for termination on the occurrence of events which might frustrate the
contract
...
However, this is not frustrating, rather, it's termination by the
terms of the contract
...


If, when reading the contract, one party took the risk, by adding something in the terms, then
frustration does not apply
...
(Maritime National Fish v
Ocean Trawlers)

Consequences: Frustration discharges the whole contract automatically
...


Frustration is stopping the contract;, the rights that have accrued automatically still remain

Common Law – people paid money in advance – want money back – people used restitution –
total failure of consideration – Restitution – did you actually get what you bargained for – it the
answer is no – you can get money back

Damages
As soon as someone breaches, the innocent party has right to damages

Put party in position they would have been if the contract had been completed (Robinson v
Harman (1848))

Plaintiff is not entitled to be placed in a superior position to what they would have been in, if the
contract had been performed (Albert v Armstrong Rubber)

Whether an action is brought in tort or contracts, the damage will be assessed in the most
favourable test (Parsons v Utley Ingham)

Nominal Damages
Damage a party gets because the law recognizes someone has been wrong – it's pidly – if no
loss is proved as in Luna Park v Tramways (1938)
...
Today we use common sense
...


The question asked is if the defendants breach was connected with the plaintiff's loss that "as a
matter of ordinary common sense and experience it should be regarded as a cause of it" (March
v E & M H Stramare Pty Ltd)

Causation is a question of fact

If there are concurrent causes, it is sufficient that only one of these is the cause of the breach
(Simonius Vischer & Co v Holt (1979))

Remoteness
It's about drawing a line (can't lose a kingdom over a lost horse nail)

In remoteness of damage there is a difference between contract and tort
...
In tort the court has to consider whether
consequences were of such a kind that a reasonable man, at the time the tort was committed
would forsee them as being of a much lower degree of probability
...
(Koufas v Czarnikow (1969))

Probability: Lord Reid "loss needs to be not unlikely"
...

(Koufas v Czarnikow (1969))



Whichever test it can be less than 50$ - this standard is higher than in tort "not farfetched or fanciful"
It was not unlikely that they would onsell the sugar, so relevant degree of probability
was there (Koufas v Czarnikow (1969))

Terms v Misrepresentations -as in Oscar Chess Ltd v Williams and related cases
Case: - Oscar Chess Ltd v Williams [1957] 1 WLR 370 Court of Appeal
Sumamry:- Mrs Williams purchased a second hand Morris car on the basis that it was a 1948
model
...
The following year her
son used the car as a trade in for a brand new Hillman Minx which he was purchasing from
Oscar Chess
...
Without this discount Williams would not
have been able to go through with the purchase
...
They brought an action for
breach of contract arguing that the date of the vehicle was a fundamental term of the contract
thus giving grounds to repudiate the contract and claim damages
...
The
representee, Oscar Chess ltd as a car dealer, had the greater knowledge and would be in a
better position to know the age of the manufacture than the defendant
...
In Australia we go with Lord Denning, implied
term and equitable mistake – this allows for leeway for the court and is more generous
...
Later cases have added an element of unconscionability in
Taylor v Johnson
...


Mutual Mistake
The two parties are mistaken about the same matter
...
The parties are so mistaken as to a fundamental part of the contract that
there is no meeting of the minds, there is no agreement between the parties and thus there can
be no contract
...

(Raffles v Wichelhaus)

We interpret things objectively
...
It was not possible to say that a reasonable person may have interpreted one side of the
deal differently, therefore, definitely mutual mistake and contract was void ab initio

Goldsbrough Co Ltd v quinn – NOT mutual mistake
...
Accordingly the court found that mutual mistake did not operate and the
contract did exist
...


One person is right, and they know they're right and one person is wrong
...


As a general rule, one person being wrong is not enough – so have to look for something else –
look for wrongdoing by one of the parties

Mistake as to identity: you thought they were x and they turn out to be y (they know the truth
and you don't)– seller sells to the 2nd buyer and disappears from sight (the rogue) , once the 3rd
party acquires the rights it's too late for the seller to recind

Lewis v Averay – case parties met face to face – remedy – voidable
...


Cundy v Lindsay – parties distant – contract void
...


Common Law – contract are void
...


Equity – you can only get the contract voidable and not void
...
There needs to be 1) written contract; 2)
a party is under a serious mistake; 3) about a fundamental term;

From Wayne: In Taylor, the particular aspects were expressed as being (1) awareness that the
party was mistaken; and (2) deliberately setting out to ensure that the mistaken party does not
realise the mistake
...


Non est factum
Used historically by people who didn't know what they were signing
...


It's very narrow – allows people to get out of something they didn't really understand

Applies when the following can be satisfied: 1) class of people is very limited – blind, illiterate ,
or though no fault of their own they fail to understand the nature of the document 2) The error
must be big – there must be a radical difference between what the plaintiff thought they were
signing and what they signed; 3) Carelesness – it is for the defence to show that they weren't
careless

This doesn't apply to drunkenness, it's about inherent characteristics
...
As such, non est factum operates as an exception to the rule
that a party is bound to a contract that they have signed
...
If it was a term of the
contract, it would be a breach
...
Assumption is that it really is your
opinion
...
You're expected to do your own work to
verify things However there are some exceptions (duty of disclosure): 1) Special relationship
between parties where the other person is expected to speak (insurance – if you've had lots of
accidents); 2) half-truths or literal truths, where half of the story has been told – ex: yes it's fully
tenantable, but fail to mention that tenant has given notice

Inducement: to what extent must that statement have influenced the person to enter into
the contract:

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Law Full Final Exam Study Notes






Was the statement a real inducement, material inducement, play a part to enter
into the contract (words used by HC) – the false statement need not have been the
only, or even decisive inducement (Edington v Fitzmaurice (1885))
In theory, the plaintiff bears the burden of proof – but often presumption plays a
part (Holmes v Jones)
Carelessness or failure to investigate does not negate the inducement element
(Redgrave v Hurd)
Jessel J (Redgrave v Hurd) talks about the presumption – if the P was drawn into
the contract can show (1) and (3) then the court can infer or presume that P was
induced
...
There
must be a misstatement of an existing fact: but the state if a man's mind is as much a fact as
the state of his digestion
...
A
misrepresentation as to the sate of a man's mind is, therefore, a misstatement of fact
...
(Alati v Kruger)

HC does things financially, so they'll hand back money, but they'll deduct for goods, losses, rent,
etc
...
The longer the wait, the more it will appear that the contract was
affirmed and therefore, the less likely the restitution
...
But if B
gives it as a gift, then court will usually rescind
...
Be aware of estoppel with this, court found no
estoppel arose because the vendor was not prejudiced in any way
...
In
Seddon's case, the judge expanded the application, but judges currently don't like it and try to
distinguish it so that Seddon's case only applies to land
...


It is most inconvenient in practice to hold a contract is void as it is difficult to unravel what has
already been done and usually leaves an unsatisfactory outcome (Textbook 20-17)

If the subject mater of the contract never existed or perished prior to the contract being agreed,
the issue is whether the parties made a mistake
...


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Law Full Final Exam Study Notes
Innocent – Negligence – get damages in negligence tort

Fraudulent – where it's fraudulent misrepresentation you can get damages and also sue in the
tort of deceit

In all cases you should be able to rescind – then it's a matter of damages

Fraud – if it doesn't fall in the following three, you're innocent of misrepresentation
1
...
You make the statement not believing it's true
3
...
Let's say the misrep is fraudulent
...

Option 1) Buyer can rescind the contract – gets 100K because all you care about is reversing
the contract
Option 2) I'll affirm – sues in contract (zoning is a term in the contract) – Damage 70K
Option 3) keep land and sue in tort of deceit – get 20K as if the tort had not occurred
...


Statutory Prohibition of Misleading Conduct

Statute – Fair Trading Act (NSW) s42 this is wider because it applies to conduct, not just trade
or commerce
...


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Law Full Final Exam Study Notes

In the context of future maters, s51A provides that where a corporation makes a representation
with respect too any future matter and the corporation does not have reasonable grounds for
making the representation, the representation shall be taken to be misleading
...


Concrete Construction v Nelson – HC says they don't know the boundaries as to what
misleading and deceptive conduct is
...


Contracts Review Act 1980 (NSW)
S7 of the Act gives the court the power to review contracts, make specific orders where a
contract or where a term of a contract is found to be unjust
...
Does not apply to corporations, the crown or public
authority/council, a person who enter for the purpose of their business , trade or profession
...
The other
remedies that may be available following contractual breach are for debt or liquidated
damages
...
Punitive damages are not available
...



Damages are available for mental distress in some circumstances: see Baltic Shipping

NB: damages might also be available for certain pre-contractual conduct (misleading
conduct, duress etc - in other areas, such as tort or pursuant to statute - here we are
focussing on damages for contractual breach)

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Law Full Final Exam Study Notes
Liquidated damages
Liquidated damages will be available where a clause int he contract between the parties
provides that a particular sum of money will be payable upon breach; provided that the
sum specified does not constitute a 'penalty', the non-breaching party may sue for this
'liquidated' sum rather than for unliquidated damages
...


Collateral Contracts

Can use the same consideration as long as the consideration moves from the promisor

Car

A

$$

B

Bike

Contracts requiring written evidence

Contracts require written evidence if legislature requires it
...
A note or
memorandum is sufficient notice to be considered 'writing', document must be signed, but this is
a loose interpretation
...
The note must contain all the material terms of
the contract and the failure to include a material term in the oral contract will mean the note is
insufficient
...
Harvey v Edwards
...


Restitution or Unjust Enrichment

Elements Pavey v Mathews:
1) Benefit received by the defendant (has to be a legal benefit, courts will often see what
the benefit would be if there was a contract)
2) At expense of the plaintiff
3) Unjust factor""
What does it matter if contract is unenforceable v void:



If the contract is unenforceable – the money goes back
If the contract is void no contract

Capacity

Parties must have legal capacity
Minors have limited capacity, only to buy necessities
Mentally ill people may have limited capacity
Corporations have legal capacity

Representations

Pre-contractual statements can be puffs, representations or terms
...
If a statement is a puff, it has no legal effect
2
...
If a statement becomes a contractual term, the remedy depends on what kind of term it
is
Express Terms

Express terms are the terms that are written

Express terms are objective – a reasonable person in the position hearing the statement will
understand it

Representations are like terms, but are not guaranteed
...


Lord Denning's thoughts are that there has to be intention and it has to be acted upon for it to
be a warranty

Defendant said that in my opinion, the cabin cruiser could do 15 MPH, though it could not
...
JJ Savage

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Law Full Final Exam Study Notes

Collateral Contracts

Collateral contract is a contract where the same consideration is used as the consideration for
the main contract

It must be proved that the statement was held out as a promise to guarantee or assurance the
consideration for which is entry in the main contract

Even in cases about land, the collateral part does not have to be in writing (Sheppard v Ryde
Corp)

The collateral term has to be consistent with the main contract (Hoyts v Spencer)

Contract

Sign a document and you're bound – regardless of you haven't read them (Léstrange v
Garucob)

Reasons why one may not be bound
1
...

3
...


Contract is unfair
If there's fraud
Misrepresentation
Non est factum

A & B have an alleged contract
...
Would a
reasonable person in B's position understand that A was only contracting on the bases that the
term was part of the contract?

Ticket Cases:

The person proffering the ticket was making an offer based on the T&Cs on the ticket
...
Did the party taking the ticket know that there was writing on it?
a
...
If yes – go to 2 & 3
2
...
If yes – they are bound
b
...
Did the person issuing the ticket do what was reasonable to bring to the attention of the
taker that there were T & Cs?
a
...
If no – not bound
The words of a contract will not e incorporated as terms of the contract if there is
misrepresentation (Curtis v Chemical Cleaning)

Sometimes receipts handed over – are actually notice boards (Causer v Browne)

In order for ticket cases to apply, the document relied on must be one which a reasonable
person would regard as contractual in nature
...
Different principles developed
a
...
A consistent and sufficiently long course of dealing
b
...

b
...

d
...


Term is reasonable & equitable
Term is necessary for business efficacy (Moorcock)
Term must be obvious (Codelfa v State Rail)
Term must be able to be precisely expressed (Codelfa v State Rail)
It can't contradict express terms

Characteristics for informal contract – much lower
A term can be implied if you can prove that it's reasonable or necessary for the contract
(Byrne v Australian airlines)

45

Law Full Final Exam Study Notes
In terms implied by law – for a class, you only have to prove to something that already exists
(sale of goods, employment contracts), then it's up to the other party to disprove If you can't
prove to a class, then you have to show that it's necessary for contracts of that kind

Gummow JJ brings up in necessity in that if a term is so unusual and different from their current
contract, and that they had to behave in a certain manner to obtain the benefit, and the
employee would not know about the term unless they were made aware of it - the employer has
an obligation to bring it to the attention of the employee (Scally)

Plaintiff has to prove that there's a breach of the implied terms (Liverpool City Council v Iriwin)

Good Faith – in the last 15-20 years courts have been willing to imply terms that the parties
must act in good faith in relationships to exercise rights of performing obligations under the
contract
...


Construction of Contract

It will be about interpreting the contract
...

a
...
When the parties have not dealt with issue, but its arisen – the courts will try to infer
what the parties would have intended
c
...
What material can the court look at?
Courts treat the interpretation of spoken words as raising an issue of fact, but treat the
interpretation of written words as raising an issue of law

The words are construed according to their ordinary or natural meanings

Commercial construction
a
...
Construe contract as a whole – in order to determine the meaning or legal effect of a
particular term, the whole contract must be construed

46

Law Full Final Exam Study Notes

Parole Evidence Rule

This is about what the contract is and what it means

If A + B put their agreement in writing, then we assume that's the whole agreement
...


Proper approach is to determine what the contract is and then, when all the agreed terms are
known, to ignore evidence relating to other terms
...
Direct evidence of the parties actual intention
b
...
Evidence of the parties conduct after the contract was concluded (L Schuler v Wickman
Machine Tool Sales)
...

This includes:
a
...
External context – the factual context of the contract
c
...
In all cases it is permissible for a court to take the factual matrix into account prior to
construing the contract
b
...
HC approved this in Royal Botanic
Gardens and Domain Trust v Sourth Sydney City Council
c
...
A has lost dog and offers $100 to B if they find the dog
...


Option is the example of the developer and options to buy the apts in the apartment block
...
This will help you
sort through the facts you have been given and determine which facts are relevant and how you are going to use
them
...
This will tell you what you are supposed to be doing and it
will help you determine which facts are relevant
...




This could include, but is not limited to the following bodies of law


o

Contract law (be specific about which part)

o

Trade practices (e
...
misleading conduct)

o

A company law issue (e
...
breach of director’s duty)

o

Negligence Criminal Law

o

Constitutional Law

o

Partnership Law



Assignments generally relate to one area of law but the assignment will usually raise a number of issues within that
general area
...
You are not expected
to go outside the content of the unit but you are expected to explore it

Rules and relevant Law


Set out the legal principles that will be used to address the problem
...

Note: Make sure you are specific when stating the relevant law/rules that apply, and always make sure to support
propositions with case authority
...




How will this law be used by each party to argue their case?



Use relevant precedent cases or Legal Principles to support each answer
...




There are often several Plaintiffs involved
...




Legal Principals and precedent cases are used in each analysis, even if there is overlap among Plaintiffs (the same
precedent can be applied to both parties, if appropriate
...




It is acceptable to refer the reader to another point in the paper, rather than rewriting it word for word, if the situation
calls for the same legal recommendation
...


Conclusion


Stand back and play ‘the judge
...




State who is liable for what and to what extent
...


50

Law Full Final Exam Study Notes

ONE
John put an advertisement in the paper
and it stated ‘This car is the fastest in
Melbourne!’ The buyer later complained
that ran like a clapped out ‘oldsmobile’
...

The company's advertised (in part) that:
“100 pounds reward will be paid by the Carbolic Smoke Ball
Company to any person who contracts the increasing epidemic
influenza… After having used the mothballs three times daily for 2
weeks
...
There was a unilateral
contract comprising the offer (by advertisement) of the Carbolic
Smoke Ball company) and the acceptance (by performance of
conditions stated in the offer) by Mrs Carlill
...
Kim told
Adam to pay the $100 to Dave, her
neighbour (he was also Adam’s best
mate), because Kim owed Dave $100
...
Here, it
was implicit that the offeree (Mrs Carlill) did not need to
communicate an intention to accept; rather acceptance
occurred through performance of the requested acts
(using the smoke ball)
There was consideration; the inconvenience suffered by
Mrs Carlill in using the smokeball as directed was sufficient
consideration
...


Dave can’t sue anyone because he was not a party to the
contract between Adam and Kim – Dunlop Pneumatic Tyre Co
v Selfridge
...


Case: Dunlop Pneumatic Tyre Co Ltd v Selfridge and Co Ltd

Law Full Final Exam Study Notes
Adam took the mower from Kim but he
did not pay Dave
...
Jemima told
Lisa that if Lisa gave up working at Target
on Sundays, then Jemima would pay Lisa
to spend her Sundays taking Jemima
shopping, cleaning Jemima’s house and
helping Jemima to pay her internet bills
online
...
They did not put the
agreement in writing
...
If you were
a lawyer, just on these facts, how would
you advise Lisa?

[1915] AC 847

Lisa could argue that even though there was a contract
made, she could claim an equitable estoppel because
Jemima made a clear promise, it was reasonable that Lisa
relied upon it, Lisa suffered loss/detriment and it was
unfair/unconscionable that Jemima did not live up to her
promise: Walton’s Stores v Maher
...

Intention -to create legal relations
General rules
For a contract to exist the parties to an agreement must intend to
create legal relations
...
Intention remains, however,
an independent requirement and must be separately
demonstrated and there are cases in which consideration has been
present but no contract found to exist because this pre-condition

52

Law Full Final Exam Study Notes
has not been fulfilled
...


If there's consideration, there's intention
Usually, family agreements are not considered to be contracts
...
Mika
WAS going to sue Tze because Tze had
previously sold Mika a car that was a real
lemon and was worthless (even though
Mika had paid Tze $3,000 for that old
lemon)
...
The court
will uphold this agreement because promising not to sue
(forbearance) is good consideration from Mika’s side and
also, the court is not concerned with the value of the old
Landrover because consideration doesn’t need to be
‘adequate’: Thomas v Thomas
...
Thomas (1842) 2 Q
...
851, 114 E
...
330
...

Georgio had a café and after talking with
Carmelo he said he would take up
Carmelo’s offer to lease a machine for a
year
...
Carmelo also told Georgio that
he must agree with all of the terms stated

53

Because the order form stated that the acceptance could
ONLY be made by post, the postal rule (Henthorn v
Fraser) means that the acceptance WAS made by Georgio
on the day that he posted it – on the Wednesday BEFORE
Caffeine City and Carmelo made their contract on the
Thursday
...
Georgio can now sue for breach of contract
...
Georgio
received the order form in the snail mail
post on Monday which was quite unusual
because Georgio was very tech savvy
...
Georgio did that two days later on
the following Wednesday
...
Georgio
was furious and he comes to you for
advice
...
The
negotiations went on for months and
months while they were doing ‘due
diligence’ and deciding what would and
would not be included in the final contract
that they all agreed would be put in
writing at some stage in the future
...
They
paid Elias the deposit and after a while
they just started taking over the business
and forgot about finalising the written
agreement and getting it signed
...
Dax and Toula come to you very

Theme: Breach of contract
Action:
Damages are available following a breach of contract as a matter of
right
...

Damages
Damages for breach of contract are viewed as a 'substitute' for
performance - consequently, they are designed to put the plaintiff
in the position they would have been in had the contract been
performed properly
...
The loss
claimed must not be too remote from the breach and the nonbreaching party must do what is reasonable to reduce (mitigate) the
damage they suffer
...
Therefore the contract was formed at
that time (of agreeing the relevant oral terms) and there
has already been some performance on the contract
including the fact that the deposit has been paid
...

Case:
Conditional Acceptance -preliminary agreements, requiring
analysis of the case of Masters v Cameron

Masters v Cameron [1954] 91 CLR 353
Facts:

54

Law Full Final Exam Study Notes
upset because they realise they forgot
about the written agreement so they are
concerned that they might lose everything
they have done and put into the business
over the preceding months
...
In the agreement between
the two parties, a detail description of the farm was included
...


Issue(s):
The issue of the Masters v Cameron (1954) was whether or not the
pre-contract can already be considered as the final contract since
the terms and the conditions were not altered
...
therefore the deposit had
to be returned
...
Lesedi wanted to buy Agra’s
beauty salon
...
One of the items that
they did have a big argument about was
the liposuction machine
...
It was claimed that the
machine redistributed body fat from one
body part to other body parts! One
customer was trying it because he wanted
to get the fat from his double chin up into
his cheeks!
The argument about this machine went on
for some time, but Lesedi remembered
that Agra had finally agreed that the
liposuction machine was part of the deal
and was included in the sale price of the

55

The parole evidence rule will apply as the starting point
...
This is the case here because the oral promise
was made not too long before the written agreement
was made and because the liposuction machine term
was of relative importance in the whole contract (this
can be argued because of the revenue it generated)
...
The
lawyer will also clarify for Lesedi that the promise was a
term that was a warranty rather than a condition
...


Parole Evidence Rule

Law Full Final Exam Study Notes
salon and that it would remain in the
salon when Lesedi was to take over
...

They were relieved that the arguments
had stopped and that they finally, some
weeks later finalised and signed the
comprehensive contract for the sale of the
business to Lesedi
...

The liposuction machine had vanished
...
In fact, Agra stated ‘the
liposuction machine was never part of the
deal – go and check the contract- it is not
in there’
...

Lesedi remembered however that Beau
Maker had heard the argument and Agra’s
promise
...
What do you think are the best
arguments from the following? Chose the
most correct answer
...
However, the court also figures out if the
contract is capturing the whole agreement
...

Whatever boundary is drawn, the court accepts no other evidence
Negative rule – the parol evidence rule determines what evidence
is extrinsic evidence and prohibits the admission of such evidence
for the purpose of construing a contract
Extrinsic (excluded) evidence maybe include:
d
...
Evidence of the parties negotiations (Prenn v Simmonds)
f
...

This was also re-affirmed in Codelfa

Case: Schuler v Wickman Tools [1974] AC 235 House of
Lords
Summary:
Schuler were manufacturers of certain tools and Wickman
were a sales company granted the sole right to sell
certain tools manufactured by Schuler
...
This imposed an obligation to
make 1,400 visits in total
...


Outcome:
Despite the fact the contract had expressly stated the term was a
condition, the House of Lords held that it was only a warranty
...
In January

56

Due to the rule in Pinnels’ Case and as confirmed in
Foakes v Beer, Glynn is entitled to claim the remaining

Law Full Final Exam Study Notes
Glynn won a large amount of money
gambling
...
Davo was thrilled as that meant
he could send his daughter to private
school
...

This meant that the money he was saving
to pay back Glynn was nowhere near
enough and that he would never be able
to pay it back
...
On that same day Davo rang
Glynn and explained the situation
...
Glynn did agree
that Davo could pay just that amount on
that day by personal cheque and that
would satisfy the debt in full
...

Davo was very relieved
...

Davo is devastated and comes to you for
advice as you are now a lawyer
...
This is because Davo has not paid the
full consideration in regard to the original debt
...

Theme:
Part payment of a debt - the rule in Pinnel's case
As a general rule part payment of a debt is not good
consideration for the creditor’s promise to forgo the
balance
...

This rule, that payment of a lesser sum on the day
cannot be satisfaction for the whole – known as the rule
in Pinnels case – was finally established by Foakes v
Beer
...

(b) Payment is made with something else
The additional factor provides consideration
...
However, payment of
$10 plus book worth $5 will be good consideration
(provided stipulated by the promisor) for the promise to
forgo the balance of $990)
(c) Where it arises from a composition Agreements
Where a debtor agrees with all his creditors and they
agree to accept a dividend, payment will discharge the

57

Law Full Final Exam Study Notes
debtor from further liability to the creditors
...

(d) Where payment is made by a third party
This exception is explained on the basis that it would be
a fraud on the 3rd party to allow the creditor’s claim
(e) Where the claim is unqualified
Rule does not apply to unliquidated or disputed claims
...
Benzola was buying
Gibbo’s petrol station business
...
There
was a special requirement that, of course,
the petrol station business would not be
of any value whatsoever if the main petrol
supplier refused to continue filling the
tanks once Benzola took over
...
Gibbo said that he had
‘cleared it all with the petrol company’
...
Gibbo made his assurance again
...

However, one week before Benzola was
due to take over, the petrol company gave
them notice that they would not continue
to fill the tanks
...

Benzola is more upset because Gibbo is
threatening to sue because Benzola is
walking away from the deal
...
As per De Lassalle v Guildford (1901)
the rules that must be applied are that: firstly, the main
reason that Benzola entered into the contract was
because Gibbo made that promise
...
The
promise made by Gibbo was sufficiently related to the
main contract and Benzola would not have entered in to
the main contract without that promise
...

Theme: Collateral Contracts

Collateral contract is a contract where the same consideration is
used as the consideration for the main contract
It must be proved that the statement was held out as a promise to
guarantee or assurance the consideration for which is entry in the
main contract
Even in cases about land, the collateral part does not have to be in
writing (Sheppard v Ryde Corp)

Case: Shepperd v The Council of the Municipality of Ryde
(1952) 85 CLR 1, High Court of Australia
Summary

Law Full Final Exam Study Notes
Plaintiff purchased house from defendant
...
P made clear to D
how important this was to them
...
P sought an
injunction to stop them using the land from anything other than a
park
...
It was their intention that
P should rely on these documents and he had done so
...
The plaintiff's action succeeded
...
There was only
one place left and that was in the
expensive car park with the automatic
boom gate
...
She
turned into the carpark driveway
...

There was no attendant
...
She
briefly looked at the ticket and all it had
typed on the front side was ‘Proceed to
Level 5 and pay on your way out’
...
By entering
the car park you are agreeing to the
contractual terms and this is a contractual
agreement’
...
This
means that the court will then look at whether the
carpark took reasonable steps to notify Akira of the
exclusion clause that it ‘accepts no liability for any loss
or damage whatsoever’
...
A party cannot unilaterally add or change
terms of a contract once it has been entered into
...


Akira was worried about this because she
had heard that many new Mercedes had

Theme : Exclusion Clause

59

Facts: Akira Entered a car park, the carpark was dark so
she couldn’t see any terms of contract
...
Her
car was smashed and the terms where displayed after
event occurred
...

She was concerned about damage to her
new car because she had not yet got it
insured
...
On the way up and
whilst she walked back down to the street
via the pedestrian exit she was looking for
any signs that displayed the terms and
conditions
...
It was dark
and there was nobody around
...
Historically, there have been really big
exclusion clauses
...
She called the police
...


Main principles (Darlington Futures v Delco Australia):
4
...
When there is ambiguity – read it contra-proferentum –
read it against the person who is trying to protect
themselves – courts lean towards making people liable
6
...
The four corners rule: When a clause is very
broad, you tend to interpret it in a way that is
inside the contract – the exclusion clause
doesn't apply outside the contract (City of
Sydney v West)
Deviation rule – old principle – comes from shipping cases
and carrying goods for someone else
...
(Thomas National Transport v May &
Baker)

Could Akira be successful in suing the
carpark for loss and damage to her car?

Case: - Thornton v Shoe Lane Parking Co [1971]
...
This ticket referred to certain ‘conditions of
issue' which could be found inside the premises
...

However, the defendant denied liability because of the
terms of an exclusion clause displayed on a pillar inside
the car park
...

Outcome: The Court of Appeal found that the exclusion
clause did not form part of the contract and, therefore,
did not protect the defendant
...
e
...


The result on the contract is that it is voidable
...


3) In Barton v Armstrong, what points did the court make with regards to duress as a motivating
factor?

Answer: The court held that the threats or acts need to be a contributing factor
...

The onus of proof lies with the plaintiff to establish that the threats or acts took
place
...
The
defendant must prove that the threats or acts had no effect, i
...
, that they were
not a contributing factor
...
The threat may be directed against the plaintiff or a person closely
related (connected) to the plaintiff; Seear v Cohen
5) In which case did Kerr J make it clear that duress to goods was sufficient to set aside a
contract?

Answer: The Sibeon and The Sibotre [1976] 1 Lloyd’s Rep 293

6) Does the victim of a threat to person or goods need to protest or resist on order to succeed in
claiming duress?

Answer: No
...
of Monrovia v
International Transport Workers’ Federation (The Universe Sentinel)
[1983]: “The classic case of duress is, … not the lack of will to submit, but the
victim’s intentional submission arising from the realisation that there is no other
practical choice open to him”
7) What is ‘economic duress’?

Answer: Economic Duress occurs when actual or threatened advantage is taken of a
contracting party’s economic circumstances
...


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Law Full Final Exam Study Notes
9) Give examples of what would constitute ‘illegitimate pressure’ and what would amount to
overwhelming, but not illegitimate pressure?

Answer: An example of illegitimate pressure can be seen in Universe Tankships Inc
...

Overbearing, but not illegitimate pressure is illustrated in Smith v William
Charlick Ltd [1924] where a supplier with a monopoly threatened not to deal
with any retailers who did not comply with their demands was held by the High
Court not to constitute duress
...
2
Undue Influence
1) Define the term ‘undue influence’
...
The effect is that the acts of the person influenced are not truly
voluntary
...

In a relationship where one person is in a position of ascendancy or dominance
is alleged to have used that position to gain an unfair advantage; Union Bank
of Australia Ltd v Whitelaw, Watkins v Combs

2) What are the two recognised types of undue influence?
Answer: 1) Presumed undue influence; Johnson v Butress (1936), Lloyd’s Bank Ltd
v Bundy [1974]
2) Actual undue influence; Mutual Finance v John Wetton and Sons [1937]

3) What is a ‘special’ or ‘fiduciary’ relationship’? Give some examples
...

Categories of fiduciary relationships include, but are not limited to:
• parent and child
• guardian and ward
• trustee and beneficiary
• solicitor and client
• physician and patient
• religious minister and devotee

4) What does ‘presumed’ undue influence mean? Which party bears the onus of proof if
there is presumed undue influence?
Answer: In this type of undue influence, the presumption that the fiduciary/dominant party
has abused their position to obtain an advantage for him/herself or another
party is triggered
...

The onus of proof is on the ascendant/dominant party to prove that undue
influence did not occur; Johnson v Buttress (no), Westmelton (Vic) P/L v
Archer & Schulman (yes)

5) In the absence of a special/fiduciary relationship, which party bears the onus of proving
that the undue influence occurred?
Answer: In the absence of a special/fiduciary relationship, the onus of proof is on the party
alleging the undue influence; Mutual Finance v John Wetton & Sons

64

Law Full Final Exam Study Notes

6) What are the factors that the court considers in determining whether a contract should
be set aside due to undue influence?
Answer: In cases of presumed undue influence, in determining whether the defendant has
rebutted the presumption, the courts consider:
 The condition of the party who was allegedly influenced, i
...
, how
vulnerable/frail/dependant on the dominant party they are
...

In general, the courts will consider factors such as:
 The relative bargaining power of the parties, e
...
, consider whether the weaker
party has experience negotiating business agreements
 Whether there was any impropriety on the part of the dominant party; see
Westmelton (Vic) Pty Ltd v Archer and Schulman [1982]
 Whether the party allegedly influenced received independent professional
advice; see Garcia v NAB

Exercise 11
...


Rules:

Undue influence entails improper or unconscionable use of an ascendency
acquired by one person over another for the benefit of him/herself or another
person
...

The remedy is that the victim of the undue influence may rescind the contract
...
g
...

Presumed undue influence occurs where there is a special/fiduciary relationship
between the parties, actual undue influence occurs in the absence of such a
relationship between the parties
...
The defendant bears the onus of rebutting the
presumption
...


In the absence of a special/fiduciary relationship, the plaintiff bears the onus of
proof to establish that the undue influence actually occurred; Mutual Finance v
John Wetton and Sons
If a plaintiff has obtained independent professional advice there is a strong
defence against the allegation of undue influence; see Garcia v NAB
...
This is one of the established categories of undue influence and
therefore the presumption of undue influence is triggered
...

Maria is quite vulnerable and dependent on Paul
...
She is very religious and believes she does not have long to
live, therefore she would be fearful of not going to heaven and quite susceptible
to Paul’s advice
...


Conclusion: It is highly likely that the transfer would be set aside as sought by Raymond
...
2
Unconscionable Conduct
1) In your own words, briefly explain Denning L’s summary of unconscionable conduct
...
It does not require wrongdoing or malice on the part
of the stronger party
...
e
...

2) Briefly explain the facts of CBA v Amadio in your own words
...
Their son,
Vincenzo, ran some businesses that had extensive debts to the CBA
...
Vincenzo asked his parents to go guarantors, explain
to them that this was to be for $50,000 for a period of 6 months (in fact it
could be much more and was not limited to that timeframe)
...

Vincenzo and the local CBA bank manager met with the Amadios at their
home to sign the agreement
...

The Amadios signed the agreement
...
The bank sought to
recover this from the Amadios by exercising their power of mortgage under
the guarantee
...


3) What are the elements set out by the court in CBA v Amadio?
Answer: The 4 elements are:
1
...
It must have substantially affected their ability to protect themselves
3
...
The actions of the defendant were unconscionable (unfair or unjust)

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Law Full Final Exam Study Notes
4) What should a party, such as a bank, do to ensure that a contract is not set aside for
unconscionable conduct?

Answer: The bank, or party in that position should ensure that the other party receives
independent professional advice prior to entering into a contract or transferring
property
...


Issue:

Does Mark’s behaviour constitute unconscionable conduct?

Rules: Unconscionable conduct occurs where there is an inequality of bargaining power
and the weaker party’s bargaining power is seriously impaired by reason of things
such as need, ignorance, infirmity, illiteracy, etc
...

According to the High Court in CBA v Amadio the 4 elements required are:
1
...

3
...


The plaintiff was in a position of special disadvantage
It must have substantially affected their ability to protect themselves
The defendant must have, or ought to have known of the plaintiff’s disability and
taken advantage of it
The actions of the defendant were unconscionable (unfair or unjust)

In order to defeat the allegation, the party with the dominant bargaining position
should ensure that the other party receives independent professional advice prior
to entering into a contract or transferring property; see Garcia v NAB
...
A
shop owner should know more about the products they sell than a normal
customer and be in a position to protect themselves in any negotiation
...

Conclusion: It is extremely doubtful that Mark’s behaviour satisfies the requirements and
therefore would not be considered unconscionable conduct

---