Contract Law Exam Notes

Contract Law Notes

Contracts ‘A’

Offer

-Bilateral contracts

-Unilateral contracts

-Offers to the public at large

What is an offer?

-Mere puff

-Supply of information

-Invitation to treat

Categorizing transactions

-Advertisements

a)Advertisements in a catalogue or a curricular

b)Advertisements in newspapers or magazines

c)Advertisements appearing on the internet

d)Display of goods

-Auctions

a)Advertisement of auction

b)Auctions with reserves

c)Auctions without a reserve

-Tendering

-Standing offers

Options

Communication of an offer

Termination of an offer

-An offer may be terminated by

a)Revocation by the offeror

b)Rejected by the offeree

c)Lapse of time

d)Failure of a condition subject to which the offer was made

e)Death

Acceptance

Requirements of acceptance

Acceptance must correspond to offer

-Offeree must have knowledge of and act in reliance to an offer

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-A counter offer is not acceptance

-Acceptance must be unqualified

-Mere enquiry does not constitute acceptance

Notification to the offerer of the fact of acceptance

-Method of acceptance

a)Method of acceptance stipulated by offer

b)Acceptance by silence

c)Acceptance by conduct

-Instantaneous communication: Acceptance must be communicated

a)General rule

b)Meaning of instantaneous communication

-Postal acceptance rule

a)Statement of the rule

b)Policy behind the rule

c)To what communication does the rule extend

d)Where is the rule displaced

e)Revocation of acceptance prior to receipt

Acceptance in unilateral contracts

-Acceptance commonly by conduct

-Withdrawal of an offer after acceptance has commenced

Who may accept an offer?

Contract formation: time and place

-Instantaneous communication

-Post

Certainty and Completeness

Statement of the rule

-Facets to the principal

Ambiguity and uncertainties

-Individual terms

-Agreements to negotiate

Saving ambiguous, uncertain or meaningless terms

-Link to external standard

-Link to reasonableness standard

-Severance

-Waiver or removal of certainty

Incomplete agreement

-Agreement contains mechanism to complete

a)Reference to a third party

b)Discretion retained by contracting party

-Breakdown of mechanism to complete

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Saving incomplete agreements

-Incompletion of terms

-Failure to specify a price

a)Contract silent on price

b)Contract provides for parties to agree in the future

c)Contract make provisions for mechanism to complete

d)Contract provides for payment of a reasonable price

-Subject to agreements

Subject to finance agreements

a)Satisfactory finance

b)Steps to be taken to obtain finance

Subject to contract

Intention to create legal relations

Statement of rule

Domestic and social relationships

-Presumption

-Rebutting the presumption

a)Husband and wife

b)Separated husband and wife

c)Other family relationships

d)Social relationships

Commercial agreement

-Presumption

-Rebutting the presumption

Government activities

-Commercial agreements

-Policy initiatives

Voluntary associations

Circumstances indicating absence of intent

-Honour clause

-Promotional puff and free gifts

-Ex gratia payments and without prejudice offers

-Letter of comfort

-Letter of intent and understanding

Consideration

Nature of consideration

-Consideration in bilateral contracts

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-Consideration in unilateral contracts

-Executed and executory consideration

Rules governing consideration

-Consideration must move from the promisee

a)Benefit need not move to the promisor

b)Joint promises

c)Overlap with Doctrine of privity

-Consideration must be bargained for

-Consideration must be sufficient

a)General principal

b)Consideration need not be adequate

c)Consideration can be nominal

-Consideration must not be past

a)General principal

b)Past consideration distinguished from executed consideration

Consideration and formal agreements

-Deeds

Consideration: specific examples

-Moral consideration

-Performance of existing duties

a)Performance of existing contractual duties

b)Performance of a public duty

c)Where promise is made to a third party

- Payment of a debt

a)Rule in Pinnel’s case

b)Circumstances in which the rule will not operate

Parties enter into a deed
Accommodation to benefit the creditor
Amount owing is disputed
Payment by a third party
Composition with creditors

-Forbearance to sue

-Bargain for conduct already performed

Equitable Estoppel

Elements of estoppel

-Assumption of expectation

-Encouraged or induced

-Reliance

-Knowledge or intention

-Detriment

-Failure to avoid detriment

Remedies

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Privity

General rule

Statutory abrogation of rights

-Queensland

a)Promisor

b)Beneficiary

c)Promise

d)Acceptance

e)Defences

f)Variation and rescission of promise

g)Imposition of burdens

h)Common law still applicable

-Commonwealth

-Insurance Contracts Act 1984 (Cth) s 48

Entitlement of a named person to claim

-Maritime contracts of carriage

a)Servants or agents of sea carriers

b)Consignees and endorsees

So called exemption at common law

-Agency

Definition

Exemption clauses and third parties

Trusts

Unjust enrichment

Formalities

Guarantees

-Nature of guarantees

-Transaction which are not guarantees

a)Contracts of indemnity

b)Promise of guarantee made to the debtor

c)Person agrees to take over the debt of another

d)The agreement imposes no personal liability on the person

e)Letters of comfort

-Requirements of writing: content

a)Information particular to the guarantee

b)Acknowledgement of the agreement

-Requirements of writing: signed by party to be charged or agent

Contracts relating to land

-Nature of contract needing writing

-Requirements of writing: content

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a)Information particular to the guarantee

b)Acknowledgement of the agreement

-Requirements of writing: signed by party to be charged or agent

Joinder of document

-Reference to a document

a)Documents that are physically connected

b)Documents that are executed at the same time

-Reference to a transaction

Effect of statutory non-compliance: common law

-Contract valid to pass title

-Recovery of money paid under unenforceable contract

a)Recovery of deposit

b)Recovery of amount more than deposit

-Other restitutionary claim may still be available

Effect of statutory non-compliance: equity

-Doctrine of part performance

a)Acts are unequivocally referable to some such contract

b)Acts done in reliance on the agreement and with knowledge of the other party

c)Acts done by the party seeking to enforce the contract

d)Oral contract must be otherwise enforceable

-Estoppel

-Constructive trust

Establishing contractual terms

Incorporation by signature

a)General rule

b)When the rule is displaced

Incorporation by notice: unsigned document

a)Reasonable steps taken by the defendant

b)Reasonable steps must be taken on or before contract formation

Incorporation by notice: signs

c)Reasonable steps taken by the defendant

d)Reasonable steps must be taken on or before contract formation

Incorporation of notice: website

Incorporation by reference

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Incorporating oral terms

-Mere puff

-Representation or term

a)Words or conduct of parties

b)Knowledge and expertise of statement maker

c)Statement maker has control in relation to information

d)Oral statement not reduced to writing

e)Interval of time

-Collateral contracts

a)Nature of a collateral contract

b)Bipartite and tripartite collateral contracts

c)Consistency with the main contract

Parole evidence rule

-Statement of the rule

-When the rule applies

-Exceptions of the rule

a)Evidence of a collateral contract

b)Evidence that the written contract is not yet in force

c)Evidence that the written contract was later varied or changed

d)Evidence to imply a term

e)Evidence necessary for rectification

Implied terms

-Terms implied to give effect to the presumed intention of the parties

a)Term implied on the basis of business efficiency

b)Term implied from previous consistent course of dealings

c)Term implied from custom or usage

d)Term implied to complete an agreement

-Terms implied irrespective of parties intentions

e)Term implied as a legal incident of a particular class of contract

f)General duty of co-operation

g)Implication of duties of good faith, fair dealings and reasonableness

h)Term Implied by statute

Construction of terms

Interpreting the meaning of terms

-General approach

-Admissible evidence

a)The parole evidence rule

b)Factual matrix

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c)Exceptions to the parole evidence rule

Ambiguity

Identification of subject matter

Identification of parties and their relationship

Identification of the real consideration

Custom or usage

Rectification

-Inadmissible evidence

a)Subjective intention

b)Prior negotiation

c)Subsequent conduct

Legal effect of words: types and terms

-Promissory terms

a)Conditions

The statutory position

b)Warranties

The statutory position

c)Intermediate or innominate terms

Contingencies

-Conditions precedent

-Conditions subsequent

Exemption clauses

-Specific rules of construction

a)The contra proferentem rule

b)Attempts to exempt negligence

The rules regarding attempts to exempt negligence

c)The four corners rule

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Contract Law Exam Notes

Offer:

An offer is an expression to another of a willingness to be bound by the stated terms

Australian Woollen Mills Pty Ltd v The Commonwealth

Bilateral Contracts

Under Bilateral Contracts each party undertakes to the other party to do or to refrain from doing something, and in the event of his/her failure to preform his/her undertaking, the law provides the other party with a remedy.

United Dominions Trust Ltd v Eagle Aircraft Services Ltd

Unilateral Contracts

Under unilateral contracts the promisor undertakes to do or to refrain from doing something if another party, the promisee, does or refrains from doing something, but the promisee does not at the time of the offer undertake to do or to refrain from doing that thing.

United Dominions Trust Ltd v Eagle Aircraft Services Ltd

The position in such cases is simply that the consideration on the part of the offeree on the part of the offeree is completely executed by the doing of the very thing that constitutes acceptance of the offer.

Australian Woollen Mills Pty Ltd v The Commonwealth

Offers to the Public at Large

An offer can be made to the public at large.

Carlill v Carbollic Smoke Ball Company

What is not an Offer?

Mere Puff

Sometimes statements can be regarded only as ‘mere puffery’- the claims are made only for advertising purposes and mean nothing.

Carlill v Carbollic Smoke Ball Company

Supply of Information

The supply of information is not an offer.

A request for information must be discerned from a contractual offer. A clearer indication of a preparedness to enter into a contract, than merely providing terms or information upon which a party maybe prepared to enter into such a contract, is needed.

Harvey v Facey

Invitation to Treat

An invitation to treat is an indicator of a parties willingness to negotiate entry into a contract. It is a technique used by a party who desire another party to make an offer and cannot be construed or the terms be accepted as if it were a valid legal offer in itself.

Carlill v Carbollic Smoke Ball Company

The display of goods in a store is an invitation to treat.

Pharmaceutical Society of Great Britain v. Boots Cash Chemists (Southern) Ltd

An advertisement that gives information about goods for sale and their price will generally be an invitation to treat rather than an offer.

Partridge v Crittenden

Categorizing Transactions

Harris v Nickerson

The auctioneer may withdraw various lots from the auction or cancel the auction altogether without incurring any liability from potential bidders.

Harris v Nickerson

b)Auctions with Reserve

Each bid represents an offer, which the auctioneer may reject or accept. Acceptance of an offer occurs, and an agreement is formed, when the auctioneer knocks down the property to the successful bidder.

Because the agreement is not formed until the bid is knocked down, the bidder can withdraw a bid (offer) before this time.

Payne v Cave

c)Auction without a Reserve

Even in an auction without a reserve, each bid represents an offer that could be accepted or rejected by the auctioneer.

AGC Ltd v. McWhirter

Tendering

An advertisement for tenders will generally be the same as an advertisement for an auction, which is akin to an invitation to treat. Therefore no liability will be incurred if the person does not accept any of the tenders or even consider them in a bona fide way. Each tender will be considered an offer, which can be accepted or rejected.

Spencer v. Harding

Standing Offers

A standing offer is an indication by one party of his/her willingness to provide goods over a specified period of time.

A standing offer is accepted every time an order is placed. If the goods are not delivered or are refused the offending party will be in breach of contract.

Great Northern Railway Co v. Witham

An offeror may withdraw the offer, anytime, before acceptance of the offer is made in the form of an order.

Further, unless the parties agree to the contrary, there is no obligation of the offeree to order goods only through the offeror, (eg. the offeree may choose not to accept the standing offer)

Colonial Ammunition Co v Reid

Options

The standing offer may be revoked at anytime before acceptance by the offeree. However, if the offeree provides consideration (eg paying money) to the offeror to keep the offer open for some period, the offer cannot be withdrawn during this period.

Routledge v Grant

Communication of an Offer

For an offer to be valid it must be communicated to the offeree by the offeror, or someone authorised by the offeror.

Cole v Cottingham

An offer becomes effective once it is communicated to the offeree

Taylor vLaird

Acceptance must take place in reliance upon an offer. If the offeree performs a particular act that corresponds to the terms of the offer without knowledge of the offer, there is no agreement, and no contract comes into existence.

Tinn v Hoffman & Co

If it is an offer to the world at large, the offer could be accepted by any fulfilling the requirements of the offer.

Carlill v Carbolic Smoke Company

Termination of an Offer

An offer may be terminated at any time before it is accepted. However, once an offer is accepted it becomes irrevocable.

Goldsbrough Mort & Co Ltd v Quinn

An offer may be terminated by

a)Revocation by the offeror

Revocation is the formal withdrawal of the offer by the offeror. Before acceptance, an offer can be freely revoked

Goldsbrough Mort & Co v Quinn

Veivers v Cordingly

Unless there is a promise, supported by consideration or under seal,by the offeror to keep it open for a fixed period.

Routledge v Grant

A revocation will only be effective once it has been communicated to and received by the offeree

Bryrne v Leon Van Tien Hoven

In unilateral contracts, the offer cannot be withdrawn after the offeree has begun to perform the necessary conditions of acceptance of the offer and completion of the contract.

Abbot v Lance

b)Rejected by the offeree

The rejection must be communicated to the offeror before it is effective. Once rejected, an offer cannot be later accepted. If an offeree attempts to accept the offer but introduces new terms, the offeree is rejected the offer and is deemed to be making a counter offer

Stevenson Jaques & Co v McLean

c)Lapse of time

An offeror may stipulate that his or her offer must be accepted within a certain period of time, and if the offeree fails to accept, the offer will lapse. If no time is prescribed, the offer must be accepted within a reasonable time.

Ramsgate Victoria Hotel Co v Montefiore

d)Failure of a condition subject to which the offer was made

If a condition upon which the offer is made is not fulfilled the offer will lapse

McCaul Pty Ltd v Pitt Club Ltd

e)Death

If the offeror dies and the offeree has not been notified of that death, it is still possible for the offeree to accept the offer, thus binding the offeror’s estate. If the offeree has been notified of the death he/she cannot accept the offer.

Coulthart v Clementson

Nor can a representative of the offerors estate accept the offer on their behalf therefore the offer lapses

Reynolds v Atherton

Acceptance:

Requirements of Acceptance

Acceptance of an offer is the expression, by words or conduct, of assent to the terms of the offer in the manner prescribed or indicated by the offer. Thus acceptance may be expressed or implied

HBF Dalgety v Morton

There are two requirements to satisfy for valid acceptance to occur:

The offeree must agree to accept the terms of the offer
This information must be communicated to the offeror.

Acceptance must correspond to Offer

Offeree must have knowledge of and act in reliance to an offer

The offeree must have knowledge of the terms of the offer at the time of purported acceptance. Acceptance is not valid if two identical offers are made or if a party performs the act of acceptance without knowledge of the offer.

Tinn v Hoffman

A Counter Offer is not Acceptance

If a counter offer is made, the original offer is rejected and the counter offer can then itself be accepted or rejected. Once a counter offer is made and the original offer rejected, the offeree can no longer accept the original offer

Hyde v. Wrench

A purported acceptance that departs from the terms of the offer but only in a minor non-material way may be effective and not amount to a counter offer

Turner Kempson v Camm

Acceptance must be Unqualified

If there is an agreement on all terms of the offer, and the parties intend to be bound immediately, this would be considered unqualified acceptance of the offer.

Masters v Cameron

Mere Inquiry does not Constitute Acceptance