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LAWS104 EXAM NOTES

KEY CASES ............................................................................................................................................................... 2 1 CAPACITY ......................................................................................................................................................... 16 Minors – Common Law ................................................................................................................................................................................. 16 Minors – Statute Law ..................................................................................................................................................................................... 17 Mental Disability ............................................................................................................................................................................................. 17 2 THE REQUIREMENT OF WRITING ...................................................................................................................... 18 Contracts For Sale Of Land .......................................................................................................................................................................... 18 Enforcement In Equity Of Contracts Unenforceable At Law ........................................................................................................ 19 3 EXPRESS TERMS ............................................................................................................................................... 19 Representations And Terms ....................................................................................................................................................................... 20 Incorporation Of Terms By Signature .................................................................................................................................................... 21 Incorporation By Notice ............................................................................................................................................................................... 22 Incorporation By Prior Dealings .............................................................................................................................................................. 22 Parol Evidence Rule ....................................................................................................................................................................................... 23 Collateral Contract .......................................................................................................................................................................................... 24 4 IMPLIED TERMS ............................................................................................................................................... 24 Written Contracts ............................................................................................................................................................................................ 25 Informal, Unwritten Contracts .................................................................................................................................................................. 26 Implication Of Terms By Statute .............................................................................................................................................................. 26 Terms Implied By Common Law .............................................................................................................................................................. 26 Implication By Custom And Usage ........................................................................................................................................................... 26 Implied Terms Of Good Faith ..................................................................................................................................................................... 27 5 CONSTRUCTION OF EXCLUSION CLAUSES ......................................................................................................... 27 General Approach To Construction Of Exclusion Clauses ............................................................................................................. 27 Exclusion Clauses And Negligence ........................................................................................................................................................... 27 Other Relevant Principles ............................................................................................................................................................................ 28 Exclusion Clauses And Legislation ........................................................................................................................................................... 28 6 VITIATING FACTORS ......................................................................................................................................... 28 Misrepresentation .......................................................................................................................................................................................... 28 Misleading or Deceptive Conduct ............................................................................................................................................................ 31 Mistake ................................................................................................................................................................................................................ 33 Duress .................................................................................................................................................................................................................. 34 Unconscionability ........................................................................................................................................................................................... 35 Undue Influence ............................................................................................................................................................................................... 37 Unjust Contracts .............................................................................................................................................................................................. 39 7 DISCHARGE ...................................................................................................................................................... 39 Agreement .......................................................................................................................................................................................................... 39 Performance ...................................................................................................................................................................................................... 41 Breach .................................................................................................................................................................................................................. 42 Frustration ......................................................................................................................................................................................................... 45 8 ILLEGALITY ....................................................................................................................................................... 46 Statutory Illegality .......................................................................................................................................................................................... 46 Common Law Illegality ................................................................................................................................................................................. 47 Effect Of Illegality ............................................................................................................................................................................................ 49 Alternative Causes Of Action ...................................................................................................................................................................... 49 9 PRIVITY ........................................................................................................................................................... 49 The Privity rule ................................................................................................................................................................................................ 49 Privity and consideration ............................................................................................................................................................................ 49 ‘Exceptions’ to Privity ................................................................................................................................................................................... 51

KEY CASES Topic Case Name Principle Capacity: When contracts a binding on a minor

McLaughlin v Darcy

A contract between two parties for which one or more is a minor is binding if the contract is for a necessity of life or a beneficial service

Capacity: Not necessity

Bojczuk v Gregorcewicz

Minor moving to Australia was not a necessary and the contract was unenforceable. She did not have to pay B back.

Capacity: Necessity

Scarborough v Sturzaker

17 year old bought a bicycle and couldn’t pay for it. The bicycle was found to be a necessary, the boy was obliged to pay for it

Capacity: Beneficial contract of service

Hamilton v Lethbridge

Lawyer clerkship (article clerk) agreed to be trained by master solicitor and when he was trained he would not set up his own practice within 50 miles of the master solicitor’s practice. Master solicitor took it to court to enforce restraint of trade, when article clerk broke it. The article clerk had ‘capacity’ because it benefitted him more than restrained him, thus it was enforceable.

Capacity: Mental capacity/ Ratification

Hart v O’Connor

A contract made by a party of unsound mind – but who appears to be of sound mind – with another party (having no knowledge of the unsoundness) is valid. There is no unfairness that can be imputed to the party having no knowledge of the other’s incapacity. The Court also noted that if a person lacking mental capacity subsequently regains capacity (even temporarily) they may ratify a contract entered into when insane.

Capacity: Drunkenness/ Ratification

Matthews v Baxter

Baxter, while drunk, agreed at an auction to purchase a property. Once sobriety returned affirmed the contract that had been made while drunk. Sometime later he had a change of mind and he sought to rescind the contract, arguing that he lacked capacity to enter the contract by reason of intoxication. Such a contract is not void but merely voidable. If the drunken party, upon coming to his senses, ratifies the contract, he is bound by it.

The requirement of writing: Requirements to form a binding document

Pirie v Saunders

The plaintiff relied upon a note of the defendant's instructions written by the defendant's solicitor. The note referred to the property, and specified the rent and duration of the lease, but there was no statement of the commencement date, and the note contemplated the formulation of further terms. Document was not recognisable as a note or memorandum of a concluded agreement. The note in this case is merely a notation of instructions for the preparation of a draft lease for submission to the other party. They are not indicative of the existence of any binding contract. Document must identify parties to the contract and essential terms of the contract and cannot contemplate the formulation of further special conditions.

The requirement Khoury v The payment of money by is not a sufficient act of part

of writing: Part performance

Khouri

performance.

The requirement of writing: Part performance

McBride v Sandland

Requirements for Part Performance: 1. The acts could only have been done for the purposes of

fulfilling the alleged agreement - there can be no other reason why they were performed.

2. The party performing the acts must have been doing so in reliance on the alleged agreement and the other party must have permitted the acts to be done

3. The act must be done by a party to the agreement 4. There was a completed agreement 5. The acts must have been done in compliance with the

terms of th e oral agreement In this case the promise in did not give rise to a contract as alleged by Sandland and there were no acts of part performance.

Express terms: Difference between a term and a representation

Ellul and Ellul v Oakes

The Elluls purchased a house from Oakes. In doing so they relied on a statement contained in a real estate agent’s listing form that the property was sewered. This form had been signed by Oakes. The property was not sewered. Elluls claimed damages for breach of contract. The representation was made to induce a purchaser to buy the property and was successful. This provides prima facie evidence that the representation was a term. It was then for Oakes to demonstrate it was not a term. This was not done successfully.

Express terms: Difference between a term and a representation

Oscar Chess v Williams

Customer went to a car dealer to trade in his car, thinking it was a 1948 model. The dealer later realised it was a 1939 car and it was worth much less, and sued Williams for breach of contract. The statement was not a term and was an innocent misrepresentation. If a representation is made in the course of dealings for the very purpose of inducing the other party to act upon it, and actually inducing him to act upon it, by entering into the contract, that is prima facie ground for inferring that it was intended as a warranty (term). Suffice it that it was intended to be acted upon and was in fact acted upon.

Express terms: Parol evidence rule (partly oral) contract)

SRA v Heath Outdoor Ltd

The parol evidence rule has 'no operation until it is first determined' that all the terms of the contract are in writing. The parol evidence rule is persuasive and the evidentiary burden is on the party wishing to rebut the claim that the whole contract was not in writing.

Express terms: Representation or term

J J Savage and Sons v Blakney

The trial judge: the representation was neither a term of the contract nor a collateral warranty. The statement was an estimate only, not an unequivocal promise of a future speed. The Full Court: reversed the decision, holding that it was a collateral warranty. High court: The words indicated ‘an expression of opinion’ only and are only a representation.

Express terms: Collateral contracts

Hoyt's v Spencer Toll (FGCT) Pty Ltd v Alphapharm Pty Ltd

Hoyts argued that a collateral contract operated alongside the main contract which prohibited the Defendant from terminating the agreement, through consideration for him entering the agreement, Spencer promised Hoyts he will not terminate the agreement during the term. Collateral contracts involve the entrance into a contract as consideration for a promise.

o Argument: However, this also means that a collateral contract cannot contradict a contractual right or obligation in the original contract. It also needs to be made before or at the time of formation.

Express terms: Incorporation by notice (timing)

Thornton v Shoe Lane Parking

The carpark relied on an exclusion clause. It was not an express term as the offer was accepted before Thornton had notice of the terms. The customer would be bound by those terms as long as they are sufficiently brought to his notice beforehand. He is not bound by the terms printed on the ticket if they differ from the notice, because the ticket comes too late. The contract has already been made.

Express terms: Exception to the signature rule (document not known to be a contract)

Curtis v Chemical Cleaning and Dyeing Co

The dry cleaner misrepresented the effects of the exclusion clause on a receipt (inferring it only applied to parts of the dress). By failing to draw attention to the width of the exemption, the assistant created the false impression that the exemption only related to the beads and sequins, and that it did not extend to the material of which the dress was made...it was a sufficient misrepresentation to disentitle the cleaners from relying on the exemption, except in regards to beads and sequins.

Express terms: Incorporation by notice (reasonableness)

Parker v South Eastern Railway Co

Parker and Gabell checked their luggage on a train. They were given tickets with a number on one side, and small print on the other side, stating that the railway would not be responsible for bags lost worth more than £10. Both respondents had received the tickets before but had never read the small print. Both respondents were successful; If a plaintiff does not see writing that contains "conditions" of the contract and no reasonable effort was made to ensure he was aware of it, then he is not bound by its terms; if he does see it and either does not read it, or does not think that it contains conditions, then he will be bound by its terms so long as the defendant delivered it in a manner that gave him reasonable notice that there were conditions on the ticket. If a party actually knows that the document or sign contains contractual terms then they are bound irrespective of whether they have read it

Implied terms: Whether it exists

Codelfa Construction v State Rail

Codelfa did non-stop excavation work for the state rail authority and received nuisance complaints from local residents and asked for an injunction to stop the work at night

Authority of New South Wales

and on Sundays. The court concluded that Codelfa was not protected by the immunity of the state rail authority from such complaints, which it was assumed to be. An injunction was imposed and thus the project took longer than initially agreed. Codelfa argued that there was an implied term that they would be paid for extra hours. The court was in favour of the state rail authority because it was not obvious that this would have been the agreement and it would have been more likely that other negotiations would have been made if it was expected to happen, resulting in an express term about the subject matter • The more detailed and comprehensive the contract, the

less ground there is for arguing the existence of an implied term

• Term must be so obvious that it ‘goes without saying’

Implied terms: Terms implied in law

Byrne v Australian Airlines Ltd

Terms implied in fact: • The test for terms implied in fact (formal contracts) is

stated in BP Refinery Pty Ltd v Hastings Shire Council • In more informal contracts, the test comes from Hawkins v

Clayton The term here was not at all so obvious that it goes without saying, or necessary for the operation of the contract. It therefore cannot be implied in fact. Terms implied in law: • Terms implied by law are implied in all contracts of a

particular class For a term to be implied in law, it must be: • Applicable to a defined category of contracts. • Suitable in a way which allows it to be implied in all

contracts in that category. • The test of necessity is often used - a term can only be

implied if its omission would entail that the rights of the parties under the contract were significantly diminished.

No necessity here, and therefore no implied term.

Implied terms: Implication by custom and usage

Con-Stan Industries of Australia P/L v Norwich Winterthur Insurance (Australia) P/L

Con-Stan argued that there was an implied term in the insurance contract that it was only required to pay the premiums to the broker, and that paying the broker discharged the debt for the insurance premiums. There was no implied term of such in the insurance industry. To establish a term implied by custom or usage we need to keep 3 things in mind 1. Whether a custom exists or not is a question of fact 2. Evidence to establish a custom requires a heavy onus of

proof – it must be so well known and acquiest in that the parties must have reasonably been able to assume it was a term

3. Not possible if an express term in a contract contradicts the

custom

Construction of exclusion clauses: General principles

Darlington Futures v Delco

1. An exclusion clause should be constructed according to its natural and ordinary meaning, read in light of the contract as a whole, thereby giving weight to the context in which it appears including the nature and object of the contract

2. The contra preferentem principle will be applied so that in cases of ambiguity the clause will be construed against the person relying on the exclusion clause

Construction of exclusion clauses: Four corners rule

Australia Sydney City Council v West

West left his car in a car park and liability for any loss was excluded. Thief broke into the car and stole the car, going up to the ticket office and claiming he lost his ticket and they let him out. West sued. The high court ruled that the clause was incorporated but it did not exclude liability because it was outside the scope of the contract (if it was a valet and the car was damaged while being moved it would be within the four corners of the contract) but to allow a thief to take off with the car in contravention of the rule to show a ticket, it was way outside the scope and the court interpreted the clause against the interest of the carpark.

Elements of Misrepresentatio n: Statement of fact/future intention

Balfour & Clark v Hollandia

Promises or assurances as to the future are not statements of fact for the purposes of misrepresentation.

Elements of Misrepresentatio n: Statement of fact/future intention

Edgington v Fitzmaurice

Company decided to seek public investments and put out a prospectus stating that if you invest in them they will use those funds to expand the business in certain ways, but they used that money to pay off existing debts. The company collapsed, and one investor sued based on the fact that a misrepresentation was made about how the money would be used. It was a statement of future intention. On appeal, it was held that the statement was actually a statement made in fact

Elements of Misrepresentatio n: Statement of fact/opinion

Smith v Land and House Property Corp

Smith was selling his hotel and he made a statement that the hotel has a most desirable tenant. This was not true and the property corp rescinded the contract for misrepresentation. It was a misrepresentation, because the facts on which the opinion was based were known only to Smith and not the purchaser

Elements of Misrepresentatio n: Principles relating to inducement

Redgrave v Hurd

When the representee has a chance to check whether the statement was true but did not, then the purchaser may still argue that he relied on the representation

Misrepresentatio n: Deceit in Torts

Derry v Peek

An action of deceit will only stand in a court when a plaintiff can show not only misrepresentation, but also that defendants knew they would be unable to follow through with their representations.

Misrepresentatio n: Negligent Misstatement in Torts

Esso Petroleum v Mardon

Future predictions can be warranties if they are given with the intent to induce another party to enter into a contract, and they are relied upon in the decision to enter into the contract The Hedley Byrne principle also applies, and that damages can be awarded on that basis. This is a negligent misrepresentation because Esso is in a special relationship with Mardon and they are in a position to have special knowledge. Mardon relied on this information which was made negligently, and he suffered loss. Therefore he is entitled to recover damages.

Misleading or deceptive conduct

Henjo Investments v Collins Marrickville

Silence may constitute misleading or deceptive conduct where it is a duty to reveal relevant facts. No remedy under common law as no statement was made, but there was a remedy under s 18 of the ACL

Misleading or deceptive conduct

Taco Co of Australia v Taco Bell Pty Ltd

Full court mentioned guidelines to succeed an action for misleading and deceptive conduct (conduct only needs to be A cause, not THE cause.

Misleading or deceptive conduct

Butcher v Lachlan Elder Realty Pty Ltd

The issue was whether by distributing the brochure which did not correctly identify the boundary of the property, amounted to misleading or deceptive conduct. The exclusion clause in the brochure was considered and provided: “All information contained herein is gathered from sources we believe to be reliable. However we cannot guarantee it’s [sic] accuracy and interested persons should rely on their own inquiries”. It was held that the agent did not engage in misleading or deceptive conduct. The agent’s conduct was viewed as a whole. The agent did no more than communicate what the vendor was representing, without adopting or endorsing it. Tt would be plain to a reasonable purchaser that the agent was not the source of the information which was said to be misleading. The agent did not purport to do anything more than pass on information supplied by another or others.

Common Mistake

McRae v Commonweal th Disposals Commission

In a case where both parties had equal knowledge as to the existence of the subject matter, and it turned out to be false, then it would justify the implication of a condition precedent. In that case, the contract would be void for the failure of the condition precedent, and parties would be restored to their original position. However, in a case where only one party has the knowledge, and the other simply relies on what the first party tells it, than there could be no condition precedent. The first party promises or guarantees the existence of the subject matter and will be in breach if it does not exist.

Common Mistake

Associated Japanese Bank (Int) v Credit du Nord

Japanese bank entered into a contract with Bennett for the sale of machinery to then be leased back. Credit du Nord provided a guarantee for the lease payments. The machines didn’t actually exist and then Bennett declared bankrupt. Credit du Nord argued there was a common mistake of fact

Common Mistake Leaf v International Galleries

If there is a mistake as to an attribute of the subject matter such as quality or value, then there is no common mistake

Common Mistake: In equity

Solle v Butcher

Common mistake has to be an important matter, there has to be not fault on either of the parties, and it has to be unconscionable to not void the contract

Common Mistake: In equity

Great Peace Shipping Ltd v Tsavliris (Internationa l) Ltd

Overturned the Solle ruling, however it is still sometimes used in NSW Solle v Butcher – common mistake has to be an important matter, there has to be not fault on either of the parties, and it has to be unconscionable to not void the contract

Mutual Mistake

Raffles v Wichelhaus

If one version is more reasonable then the court will enforce that version instead of make the contract void

Unilateral Mistake: Identity of a party

Cundy v Lindsay

The contract was void if there was a mistake as to the identity of the party when they are contracting at a distance

Unilateral Mistake: Identity of a party

Lewis v Avery

The contract is only voidable. A distinction was made where there was a mistake as to the identity of the parties, but they were dealing face to face, not at a distance. Lewis advertised his care and a buyer introduced himself as a famous actor, Richard Green. He bought the car and gave Lewis a cheque on the basis that this was the famous actor. The cheque was dishonoured and then the fraudster sold the car to Averay. Lewis argued that the sale between himself and the fraudster was void for unilateral mistake. Averay argued that it was voidable, and he was an innocent third party who had received the car before the initial contract was rescinded. Where a transaction is face-to-face then it can’t be void ab initio, it is voidable only. Averay was protected. Austrlian law follows this distinction

Unilateral Mistake: The identity of the parties

Shogun Finance Ltd v Hudson

The House of Lords was split 3/2 with the majority upholding that there should be a distintion between face-to-face transactions that a voidable and distance transactions that are void.

Unilateral Mistake: About the terms of the contract

Taylor v Johnson

Mrs Johnson was selling her property. There were 10 acres and she granted an option to Taylor to purchase the land. He exercised the option and they agreed for the sale of land. Both the option and the contract for sale of land showed the purchase price as $15000, however Mrs Johnson insisted that this was a mistake and it was supposed to be $15000 per acre. She refused to carry out the contract so Taylor applied for specific performance for the land to be sold to him. There was evidence that Taylor has deliberately taken steps to prevent Mrs Johnson from realising there was the error. High Court held that it could not be void at common law, without duress, misrepresentation, subject to the signature rule. However it was voidable in equity because of the unconscionable conduct of the purchaser who took steps to hide the price from the

vendor.

Unilateral Mistake: Non est factum – it is not my deed

Petelin v Cullen

Petelin was selling his property, but was only semi literate. He granted an option to Cullen, which ran out and Cullen requested an extension on the option. He sent him $50 and asked him to sign a document that he said was a receipt. But in reality it was confirmation to extend the option. Petelin argued that he was mistaken as to the fundamental nature of the document that he signed. The High Court rendered the signature as inoperative. However they restricted non est factum to parties with very limited capacity.

Duress: To the person

Barton v Armstrong

Barton (well known businessman) and Armstrong (member of the upper house) had a dispute over a property shares deal. Barton accused Armstrong of threatening to kill him. The court held that although Barton had other good reasons to enter into the deal, he was subject to what he perceived as death threats, it was voidable at his request.

Duress: Economic

Crescendo Management Pty Ltd v Westpac Banking Corp

A husband and wife were directors of Crescendo management and they had business loans from Westpac, however the business was troubled. The husband and wife decided to sell their personal home and purchase a new one. Westpac refused to release the money for the purchase of their personal home unless they signed papers to secure further security for their business. They then went to court seeking to have those documents set aside on the basis that they signed those documents on the basis of duress. The court held that the pressure by Westpac was illegitimate as there was no legal basis, however there was no economic duress because the facts of the case showed that the pressure had no impact on their decisions to execute those securities, they would have had to sign them anyway.

Duress: Economic

North Ocean Shipping Co v Hyundai

Price for sale was fixed in the US dollar. The dollar was devalued by 10% which meant that Hyundai would receive 10% less than what they bargained for. They then insisted that the price would be increased otherwise they would abandon the whole project. North Ocean Shipping were prepared to negotiate, however Hyundai wouldn’t accept it so they agreed to the extra payment as they had t deliver a ship to another party and didn’t want to break those contractual relations. They then sued Hyundai on the basis that the money was extracted due to duress. The court held that a threat to breach a contract could amount to economic duress. There was no legal basis for the additional money that Hyundai insisted upon. However North ocean lost the right to rescind as they had already completed the contract.

Undue influence: Class 2B

Johnson v Buttress

Undue influence is established on the facts of the case although there is no special party at law. There was no special relationship at law however the nature of Buttress proved that he relied on Johnson and Johnson could not rebut that.

Undue influence: Third parties

Yerkey v Jones

A wife guaranteed a loan for her husband that she didn’t want to. It fell through and she lost her property as a result. There was no undue influence between a husband and wife, but she was protected through a special equity for providing surety for her husbands debts without fully understanding the effects of

his transaction

Undue influence: Third parties

Garcia v National Australia Bank Ltd

High court relied on thinking in Yerkey v Jones. Husband and wife were both business people, but the wife had little understanding of her husbands business. His business had financial trouble and he wanted the wife to sign mortgages over her share in their matrimonial home. His business collapsed and relied on the guarantee. The high court set aside her share of the matrimonial home based on Yerkey but limited it. It states that where the wife does not understand the full effect of the transactions and is a volunteer and the other party to the transaction (the husbands bank) should reasonably know that the wife relies on the husband and they take no reasonable steps to ensure the wife understands the extent of the transaction, then it can be set aside. i.e. lendors should ensure that wives (and other parties in similar relationships) seek independent advice

Unconscionability : General Law

Blomley v Ryan

Ryan was a sheep farmer and alcoholic. Blomley wated to buy Ryan’s property and they took advantage of his weakness, supplied him with alcohol and got him to sell his property for a very low price. The contract was set aside

Unconscionability : General Law

Commercial Bank of Australia v Amadio

Locked in the Blomley principle. A son took advantage of his elderly parents and they signed over their properties for their son’s business. The bank had acted unconscionably. This case established the 3 elements that are required: 1. One party is suffering a special disadvantage or

disability 2. The other party is aware of the disability 3. The other party exploited that disability

Unconscionability : General Law

Louth v Diprose

A middle-aged solicitor became infatuated with a woman. She convinced him that she was going to kill herself unless her financial situation was solved. He transferred some property of his to her. Later their relationship broke down and he argued that he was taken advantage of and wanted his property back. The court agreed – on the facts of the case, the woman has taken advantage of his emotional dependence on her and the transfer was set aside

Statutory Unconscionability

ACCC v Berbatis Holdings Pty Ltd

Just because one party has more bargaining power than the other, it doesn't mean it is acting unconscionably. Furthermore, even if it manages to use this power to procure a bargain which is much better for them than the other side, this is not unconscionable - it is merely a hard bargain. It is only when a special disability is taken advantage of that a party is said to have acted unconscionably. In this case, the Appellants had no special disadvantage or disability

Discharge by performance: Duty to cooperate on new time

Electronic Industries Ltd v David Jones Ltd

An agreement was subject to significant delays and David Jones said the contract was breached. The time for completion was uncertain but the high court held that the contract had been varied and David Jones had in fact breached the contract

Discharge by performance: Exception to strict porformance –

Cutter v Powell

A seaman agreed to serve on a ship and was to be paid when he comes back. After 7 weeks he Cutter died, and his widow sued for 7 weeks worth of payment. Powell refused to pay on the basis that the contract wasn’t completed. The court upheld

severable and divisible contracts

this argument. It was an entire contract with payment on full only on completion of the entire agreement

Discharge by performance: Exception to strict performance - Part performance

Sumpter v Hedges

A builder did half his job and left materials behind. The owner finished building the house and used the materials that were left. Because the builder had abandoned his work, the owner had no choice but to finish, so they did not have to reimburse the builder for the work done, but had to pay for the materials used

Discharge by performance: Accord and satisfaction

Hoenig v Isaacs

Contract for the renovation of an apartment with payments for successful installments and a final payment upon completion. There was a defect in the work (book shelves the wrong size) so the client refused to pay the final instalment. The renovator sued. It was an entire contract involving work (labour) which can be distinguished from other types of entire contracts. The subject matter of the contract is physical work instead of goods. Lord Denning held that it would be wrong for the worker to receive nothing for their work, and the necessary question was whether the innocent party has been denied the essential benefit of the contract (where the work is half done or substantially different from what it was supposed to be). If they have not been deprived then damages are available. The amount that had to be paid to fix the problem could be deducted from the contract price.

Discharge by agreement: accord and satisfaction

McDermott v Black

For unilateral discharge to be effective, there needs to be accord and satisfaction

Discharge by agreement:

Commonweal th v Verwayen

The commonwealth has waived their rights as they had publicly done so for a period of time relating to a certain event

Discharge by breach (intermediate terms)

Hongkong Fir Shipping Co v Kawasaki Kisen Kaisha

Kawasaki hired a ship from Hong Kong Fir and expected it would be seaworthy (in a term). There were many problems and delays for repairs and maintenance. Kawasaki terminated the contract because of the breach and argued it was a condition. Kawasaki argued it was not a condition. Court of appeal held that it was a wrongful termination. Lord Justice Diplock stated it was not a warranty or a condition – it is somewhere in the middle. It is not immediately obvious as either a condition or warranty – it will depend on the nature of the breach.

Discharge by breach (intermediate terms)

Kompahtoo Local Aboriginal Land Council v Sanpine Pty Ltd

Affirmed the HongKong Fir Shipping Co case in Australia. Breach of a condition gives rise to the right to terminate. The contract stands until the innocent party elects to terminate it. The innocent party may choose to continue the contract for the benefit of both parties, and may be able to enforce the contract by order of specific performance. There was a term stating that the vessel was ‘in every way fitted for cargo service’, and was breached due to incompetent and insufficient engine room crew. Resulted in significant

delays and inconvenience to the charterers, who terminated for breach. Appeal court held that the breach did not justify termination of the contract.

Discharge by breach (anticipatory breach)

Foran v Wight

Contract for sale of land. Purchaser paid 10% deposit. Settlement was to take place after 6 months (contract stipulated that it is a condition). The vendor had problems registering his easement and gave notice to the purchaser 2 days prior to the agreed date, and asked for more time. The purchaser refused – he was also arranging his loan but had not yet finalised it and got it approved, so he called it off with the bank. Following the due date, it was terminated because of the vendor’s actual breach (essential condition). The vendor contested the termination, got the easement completed and gave a notice to complete. The purchaser refused and the vendor then purported to terminate the contract for breach. The high court found in favour of the purchaser – (1) when the vendor gave notice it was an anticipatory breach which amounted to repudiation and gave the purchaser the right to terminate immediately. (2) Any right that the purchaser had to terminated for anticipatory breach lapsed 2 days later and was replaced with a right to terminate for actual breach –the purchaser validly exercised this right. (3) The vendor was estopped from raising the point about the purchaser’s lack of readiness because the vendors conduct made it unnecessary for the purchaser to prove he was ready, willing and able, but had to show that he would have been in a position to complete the contract in the 2 days time.

Discharge by breach (restrictions on the right to terminate)

Sargent v ASL Development s Ltd

If you affirm a contract then you lose the right to terminate

Discharge by breach (relief against forfeiture)

Tanwar Enterprises Pty Ltd v Cauchi

Completion time came around and the parties were not ready to settle. A further time was agreed upon (time of the essence). The purchaser then said they needed one extra day and was then ready, however the vendor terminated and took the deposit. The high court said that was valid because they were protecting their valid right

Discharge by frustration (effect of frustration)

Fibrosa Spolka Akcyjna v Fairbairn Lawson Combe Barbour

Contract between English and polish company. Polish company paid deposit and English company worked on a machine. During the war the English company stopped work on the machine – contract was frustrated. According to common law – the English company would not have to continue work and the Polish company would not have to pay any more but would not get their deposit back. Fibrosa took action to get the deposit back and the House of Lords upheld this, saying there was a total failure of consideration (the Polish company didn’t get anything for the consideration they had given – the 1000 pounds). It didn’t overcome fully the costs incurred for the English company – this lead to worldwide statutory change o The contract is automatically discharged and obligations

that existed prior to the frustrating event are enforced but others are discharges

o Problem: if this was the case in Krell v Henry [1903], the deposit would have been kept and the hotel would not have to give their room up – unjust outcome

o Frustrated Contracts Act 1978 (NSW)

Discharge by frustration

Taylor v Caldwell

First case that established discharge by frustration (the subject matter of the contract had been destroyed – a hall burnt down) o Where the performance of the contract relies on the

continued existence of a thing or person o There is an implied condition that performance of that

contract will be excused if that thing no longer exists

Discharge by frustration: National Carriers v Panalpina (Northern) Ltd established what the intervening events could be. This is one of them.

Codelfa Construction v State Rail Authority of New South Wales

If a court order prohibits performance of a contract it can be frustrated. Codelfa did non-stop excavation work for the state rail authority and thus received nuisance complaints from local residents and asked for an injunction to stop the work at night and on Sundays. The court concluded that Codelfa was not protected by the immunity of the state rail authority from such complaints, which it was assumed to be. An injunction was imposed and thus the project took longer than initially agreed. Codelfa argued that there was an implied term that they would be paid more for extra work (the project took longer). The court was in favour of the state rail authority because it was not obvious that this would have been the agreement and it would have been more likely that other negotiations would have been made if it was expected to happen, resulting in an express term about the subject matter

Discharge by frustration: Where there has been a failure of a condition

Krell v Henry

A coronation was the sole purpose of the contract, the coronation was called off because Edward the seventh became sick (it was for him) and the court held that the contract had been frustrated. Compare to Herne Bay Steam Boat Co v Hutton.

Discharge by frustration: Where there has been a failure of a condition

Herne Bay Steam Boat Co v Hutton

Hutton hired a boat to go out on the Thames and watch the coronation among the British fleet. The court held that it was not frustrated because there was more than one purpose and they could still sail down the Thames among the British fleet

Equitable estoppel: Alternative causes of action – Equitable Estoppel

Waltons Stores (Interstate) Ltd v Maher

If the plaintiff acts to their own detriment, in reliance on the allusions of the unconscionable party, equity law has the capability to intervene. For estoppel to found an action, the party sued must have acted unconscionably and to the detriment of the party suing. Because unconscionability is the basis of the estoppel action, it is an essential requirement that has to be established. When is conduct unconscionable? • Failure to fulfill a promise does not of itself amount to

unconscionable conduct. Nor does mere reliance on an executory promise where the promisor changes his

position amount to unconscionable conduct. Something more is required.

• The fact that having created an assumption that a contract will come into existence or that a promise will be performed or not insisted upon and then remaining silent, while knowing that the other party was relying on the assumption to his detriment, would be sufficient to establish unconscionable conduct.

Waltons’ behaviour was unconscionable and that as a result of that behaviour Maher had suffered detriment while relying upon the assumption that Waltons had created – and, that relying upon the assumption was, in the circumstances, reasonable.

Illegality (Contracts illegal under statute): Express illegality

Re Mahmoud and Ispahani

Statute expressly banned the sale of linseed oil by unlicensed parties. The seller was licensed but the buyer wasn’t licensed and was prohibited from purchasing the oil. The buyer refused to continue buying the oil and the seller sued. The court held the contract void for illegality and did not enforce it

Illegality (Contracts illegal under statute): Implied illegality

Yango Pastoral Co v First Chicago Australia

Yango argued the contract was illegal because First Chicago had not yet obtained the required license to authorise that type of contract. The court scrutinised the banking act, and found that there was a penalty of $10,000 per day of no license, and didn’t render it illegal. The contract was not expressly prohibited, so the court had to discern whether the government intended for such contracts to be void (no, because it provided a fine and did not intend to invalidate any transactions). If it was illegal, all other depositors before the bank got the license would have been illegal transactions as well

Illegality (Contracts illegal under statute): Effect of illegality/Severin g terms

Thomas Brown and Sons v Fazal Dean

Contract for bailment. Fazal Deen could sue for the safe and the gems, and the term about the gold was severed.

Illegality (Contracts void on public policy grounds): Restraint of trade

Nordenfelt v Maxim Nordenfelt Guns & Ammunition Co Ltd

Restrictions of this kind can be enforced as long as they are reasonable. Common law – doesn’t care about the breach, but looks at the reasonableness or unreasonableness of the restraint. Area and time was reasonable but the scope wasn’t. Reasonableness of restraint • Area • Time – 3 years is commonly held to be reasonable, but it

depends on the circumstances • Scope

Illegality (Contracts void on public policy

Lindner v Murdock’s Garage

A restraint upon the employee’s becoming connected with a rival business after he leaves the employment will give the employer’s business reasonable protection against the effects

grounds): Restraint of trade

of the intimacies and knowledge. If it is limited to the area or areas in which the employee in fact works within a reasonable time before the termination of his employment; and a restraint which applies indiscriminately to all the areas in which the employer carries on business will exceed what is reasonable necessary to prevent the injury to his business against which he is justified in guarding.

Privity

Tweddle v Atkinson

The courts ruled that a promisee cannot bring an action unless the consideration from the promise moved from him. Consideration must move from party entitled to sue upon the contract. No legal entitlement is conferred on third parties to an agreement. Third parties to a contract do not derive any rights from that agreement nor are they subject to any burdens imposed by it.

Privity

Dunlop Pneumatic Tyre Co Ltd v Selfridge & Co Ltd

Dunlop entered into an agreement with a wholesaler for the supply of tyres. One of the terms was that the wholesaler would not sell those tyres to a retailer below a certain price. The wholesaler enters into a contract with a retailer, with the same term. The retailer sold the tyres under that price, breaching the contract. Dunlop then sued the retailer, Selfridge. The House of Lords sued that Selfridge was not liable to Dunlop as there was no contract directly between them. Dunlop was not privy to the contract between the wholesaler and the retailer. This is authority for Privity and consideration

Privity

Trident General Insurance Co v McNiece Bros

See page 44-45.

Privity

Coulls v Bagot's Executor and Trustee Co

The third party provided no consideration for the promise that had been breached and could therefore not sue. “Where you promise me for consideration supplied by me, where you promise to pay my brother, then I should be able to obtain specific performance of you promise, where the nature of the consideration given would have allowed me to obtain specific performance.” if we have a contract to pay money or transfer property to a third party, these usually are a type of contract where damages would be an inadequate remedy, especially where the damages would be nominal. But in other types of contracts, damages probably would be adequate. When specific performance is given instead of damages, it is where damages are not adequate.

1 CAPACITY Minors – Common Law

• The common law considered anyone under 21 to be a minor (infant), however under statute it is 18

• A minor lacks contractual ability in most circumstances and any contracts are voidable at the option of the minor, unless they are for necessaries or beneficial contracts of service

Contracts for necessaries:

• Contracts relating to things necessary for the daily living of the minor, e.g. food, clothing, etc.

ü McLaughlin v Darcy – “A contract between two parties for which one or more is a minor is binding if the contract is for a necessity of life or a beneficial service”

ü Scarborough v Sturzaker – 17 year old bought a bicycle and couldn’t pay for it. Because the bicycle was found to be a necessary, the boy was obliged to find the money and pay for the bicycle

ü Bojczuk v Gregorcewicz – Polish minor came to Australia on the understanding that she would pay back Gregorcewicz, for the airfare she could not and the court found that her moving to Australia was not a necessary and the contract was unenforceable

• Question of law: was the subject matter capable of being a necessary? • Question of fact: take into consideration the life of the minor, the reason bought, the price, etc.

• Can be enforceable by the minor or against the minor Beneficial contracts of service:

• Apprenticeships, training, cadetships, etc. • Enforceable unless there is an unfair term

ü De Francesco v Barnum - a minor aged 14 years old, had an agreement to train as a dancer on stage, however, the contract had conditions which were considered not beneficial to the minor and therefore, the minor was not bound by the contact

ü Hamilton v Lethbridge – lawyer clerkship (article clerk) agreed to be trained by master solicitor and when he was trained he would not set up his own practice within 50 miles of the master solicitor’s practice. Master solicitor took it to court to enforce restraint of trade, court found that the article clerk had capacity because it benefitted him more than restrained him

Employment Agreements: ü Roberts v Gray (binding) – Minors may be bound by certain employment contracts such as apprenticeships, where they are for the benefit of the minor as long as they don’t contain unusual or prejudicial clauses outweighing the beneficial terms

Minors – Statute Law • Minors (Property and Contracts) Act 1970 (NSW) – abolished the application of the common law principles relating to minors’ contracts in NSW and provides that a minor is presumptively bound to a civil act that is made in accordance with the Act

ü Lowered legal age of liability to 18 ü s 19 – civil acts (contracts) for the benefit of the minor are presumptively binding on the minor

ü s 18 – a minor who lacks the necessary understanding because of age, is not bound by an act There is no definition or guidance for what a “benefit” is – it is up to judicial discretion

§ Seems to be a broader concept than what the common law recognised as necessaries and beneficial contracts of service

§ Fall back on common law principles to understand what “benefit” means

Contracts that are presumptively binding

• Acquisition of property where the consideration is not manifestly excessive from the minor, or manifestly inadequate for the minor

o s 20 – when the contract relates to property, the consideration given or received by the minor must not be manifestly excessive or manifestly inadequate

• Investment in government securities • Any contract not exceeding $10 000 and has been approved by a local court for the minor’s benefit

• Disposal of property, that was signed before an independent solicitor or the Public Trustee within 7 days of the contract

Mental Disability • Mental Health Act 1990 (NSW) • A contract with a person that has been declared legally insane is void • Contracts for the purchase of necessaries may be binding under the sale of goods legislation – s 7 of Sale of Goods Act 1923 (NSW)

• If a person has not been declared mentally insane, yet lacks the necessary mental capacity to give genuine consent to a commercial transaction (whether permanent or temporary), the courts will not enforce a contract against a party who ‘lacks such soundness of mind as to be capable of understanding the general nature of what he is doing” – Gibbons v Wright (1954)

• Party seeking to set aside the contract must prove 2 things:

1. They were mentally impaired at the time of forming the contract 2. The other party was aware or should have reasonably known of their impairment

ü Hart v O’Connor [1985] – Hart sold property very cheap then died. His beneficiaries argued that he did not have the capacity due to impaired mental condition, however there was no evidence to prove that O’Connor knew of the mental condition, so it could not be set aside on the basis of capacity

• Contract cannot be set aside on this basis if the contract was ratified once the mental condition returns to normal

ü Matthews v Baxter (1873) – Baxter bought a property at an auction while he was drunk, however once he was sober he ratified the contract through his conduct, so he lost the right to rescind

• Note: statute law can provide relief in some situations. If you cannot set aside a contract based on capacity, there are a number of other ways – e.g. vitiating factors, ACL, equitable principles.

2 THE REQUIREMENT OF WRITING

• Not all contracts have to be in writing, however some do (because of statute or if they are a formal contract)

• Written contracts promote certainty • Contracts required to be in writing may be valid if they are oral, but are unenforceable

• If a contract is in writing, any variation must also be in writing for that variation to be enforceable

• Collateral contracts may be oral even if the original contract is in writing ü Commonwealth Bank of Australia v Serobian – Proof of an oral contract must be highly persuasive to lead a court to believe legal relations were intended or believed to be intended, the absence of record makes this extremely difficult to prove

Contracts For Sale Of Land • Conveyancing Act 1919 (NSW) s 54A

o (1) – ‘No action or proceedings may be brought upon any contract for the sale or other disposition of land, or any interest in land (e.g. easement, covenant, etc.), unless the agreement, or some memorandum or note about it, is in writing and signed’

o Memorandum or note: letter, receipt, electronic communication, notes written down during discussion (e.g. on napkin). It has to be connected to a document or series of documents, not an event ü Thirknell v Cambi – use of letter ü Dinan v Harper – use of a receipt

o Material terms (requirement established through common law): a description sufficient to identify the parties with certainty, a description of the land/interest in land to sufficiently identify a property with legal certainty, price has to be determined; or evidence that the price will be determined in a specific way, and acknowledgement of a contract

o Signature: does not have to be official signature, it just has to identify you and indicates intention to be bound to the contents of the document - Welsh v Gatchell

• An oral contract can exist and be valid, but it is not enforceable • Four steps for the performance of the sale of land

1. Pre-contract 2. Contract (exchange) – signing and physical exchange of contracts 3. Post-contract 4. Completion (settlement)

• Must contain all essential terms (established by common law not statute) – Harvey v Edwards Dunlop & Co 1. Name of the parties 2. Describe a specific land interest 3. Set out a price

• Other essential terms are: date of completion of the contract, if the payment is to be paid in installments, if chattels are included, etc.

Enforcement In Equity Of Contracts Unenforceable At Law • The consequence of unenforceability is not absolute • Equitable principles recognise 2 situations in which a contract that does not comply with the statutory writing requirement will be enforced by an order for specific performance

1. If the reason for a non-compliance is fraud on the part of the defendant, the contract will be specifically enforced

2. Equity will order the remedy of specific performance if the elements of the doctrine of part performance are established ü Penrith Whitewater Stadium Ltd v Lesvos Pty Ltd – Even if part performance has been executed, a court cannot award damages, only equitable remedies

3 EXPRESS TERMS • Any grouping of words labeled as a term may include more than one term • Terms can be express or implied

o Simply reading a document may not show all its terms • Terms can be promissory or not promissory (e.g. fine print, definition clauses – not capable of being breached)

• When parties are negotiating a contract, statements are made that vary in importance

o Irrelevant statements (e.g. “you were great to do business with”) don’t give any effect to the contract

o Puffs – a statement used in negotiation in order to induce someone to contract, that no reasonable person would take seriously

Representations And Terms • Representations – statements made before a contract is formed, about the subject matter of the contract, intended to induce the other party to enter into the contract, but are not guaranteed, objectively, by their maker to be true and are not intended to be binding. Descriptive, illustrative, but not promissory. Not a term and not an essential part of the contract.

o False representations may amount to a misrepresentation but it’s not part of the contract and you won’t be able to terminate the contract because of it

o Remedy for breach: rescission • Terms – essential; goes to the root of the contract and amounts to contractual undertakings that are intended to be legally binding.

o Remedy for breach: termination and damages • Ellul & Ellul v Oakes – 4 criteria to take into account in deciding whether a statement is a term or representation (Australian courts follow these in deciding whether statements become an express term or representation)

1. Importance of the statement – objective test 2. Timing of the statement 3. Any special skill or knowledge on the part of the maker of the statement 4. Whether the statement was included in any subsequent written document

• The crucial consideration for a court is if there is any evidence of intention of the statement to be binding

ü Oscar Chess Ltd v Williams ü Dick Bentley Productions v Harold Smith Motors – Dick Bentley Productions Ltd wanted a Bentley. Harold Smith (Motors) Ltd found one which they said had done only 20,000 miles since a replacement engine. It later emerged that the Bentley had done 100,000 since the new engine and gear box had been replaced. The statement of how many miles were done was a term of the contract, because the Harold Smith (Motors) Ltd were car dealers and in a better position to know than the claimant about the truth of the statement. This affects the parties' intention to incorporate a term into a contract.

o If a statement is made to induce a party into a contract and it does, this leads to an inference that the statement was intended as a term, unless the maker of the statement rebuts the term by stating he was innocent

Agreements Partially in Writing • The existence of a written agreement that appears to be complete does not automatically entail that the agreement is wholly in writing. It only serves as a foundation

• The parol evidence rule doesn't apply when determining whether the contract is wholly in writing. If the Plaintiff claims that the agreement was partly oral, the

court will examine extrinsic evidence to determine whether the contract was wholly or partially in writing

• If the court determines, after looking through the extrinsic evidence, that the contract was wholly written, then the parol evidence rule comes into force

• The court will look at the extrinsic evidence (letter and statements) to determine whether the contract was wholly in writing.

ü State Rail Authority of New South Wales v Heath Outdoor Pty Ltd ü J J Savage & Sons v Blakney

Incorporation Of Terms By Signature • Signature will bind a party to the terms even if the signatory has not read or understood the terms set out in the document

ü L’Estrange v Graucob – signed a contract without reading it, didn’t know about an exclusion clause. It didn’t work properly so she tried to replace it however since she signed the contract she wasn’t able to and courts upheld it

ü Toll (FGCT) Pty Ltd v Alphapharm Pty Ltd– signature was given by the agent of the party, who didn’t read anything. The high court held that the fact that the signatory hasn’t read the document, doesn’t mean the other party has to give them notice of the terms. Signature has a legal effect of reading and accepting the contract, regardless of whether the party actually did so.

EXCEPTIONS TO THE SIGNATURE RULE • The general rule to the effect of a signature is that "if the party affected signs a written document known to be a contract which governs the relations between them, then his signature is evidence of his assent to the whole contract, including the exempting clauses, unless the signature is shown to be obtained by fraud or misrepresentation.”

• Misrepresentation: A misrepresentation is any behaviour "if it is such as to mislead the other party about the existence of extent of the exemption. If it conveys a false impression, that is enough." "If the false impression is created knowingly, it is a fraudulent misrepresentation; if it is created unwittingly, it is an innocent representation; but either is sufficient to dis-entitle the creator of it to the benefit of the exemption"

• Document not known to be a contract: The receipt could have thought to have been a voucher which the customer must produce when coming to collect the goods, rather than a contractual document containing conditions. In those circumstances, if the conduct of the Offeror gives the impression that the document contained no conditions, then the Offeror will not be able to rely on the signature as having the effect of reading and accepting (thus the terms of the document will not have legal force).

ü Curtis v Chemical Cleaning & Dyeing • Non est factum (it is not my deed) – Toll v Alphapharm Pty Ltd

o A signing party can escape their obligations under contract

o A claim of non est factum means that the signature on the contract was signed by mistake, without knowledge of its meaning, but was not done so negligently

o A successful plea would make the contract void ab initio. ü Lloyds Bank v Waterhouse - a father acted as a guarantor to his son's debt when purchasing a farm. The father was illiterate and signed the bank document under the belief that he was acting as the guarantor for the farm only, when the contract was actually for all the debt accumulated by the son. As he was illiterate, this was a mistake as to the document signed and the father was successful in claiming non est factum.

Incorporation By Notice • Arises in the form of unsigned documents, signs and documents that might not appear to be contractual in nature to a regular person

• Courts have to decide whether any statement in such documents are terms and therefore binding

• 2 essential requirements 1. Timing – notice of the term must be giving at the time or before the forming of the contract

ü Olley v Marlborough Court – a sign on the back of a hotel room door stated that a hotel takes no responsibility for lost items. Court held that it was not an express term of the contract as it was formed well before when they booked the room

ü Thornton v Shoe Lane Parking 2. Reasonableness – not that the clause itself must be reasonable, but rather that notice must be given reasonably to the party that will be affected by it, e.g. if they have read it or had the chance to be aware of it without any obstruction. If the document is contractual in nature, giving it to them is reasonable notice, if is not (e.g. a receipt, ticket, sign, etc.) then simply giving the document to them is not reasonable notice, they should explicitly be made aware of it

ü Parker v South Eastern Railway Co ü Causer v Browne – customer left dress with drycleaner, on the back of the receipt was an exclusion clause. Could not be relied upon as no reasonable person would have considered it to be contractual in nature

Incorporation By Prior Dealings • A term may be incorporated where it is inserted by a party over a series of agreements and the other party has actual or constructive knowledge of it

• A court will consider the number of past dealings, the nature of those dealings and the consistency of those dealings

• If the same previous terms are not expressly incorporated, they may be enforceable. Courts have held terms to be incorporated even if they haven’t been

in every transaction – if it is introduced and the other party continues to contract knowing or should have reasonably known, courts will give effect to it

ü Henry Kendall & Sons v William Lillico & Sons Pty Ltd – Depends on the number and consistency of past dealings – 3 contracts per month over a three year period for the sale of animal feed was sufficient

§ ‘Over the course of a long period prior to the three oral contracts which are now in question SAPPA knew that when Grimsdale sold they did so on the terms that they had continuously made known to SAPPA. In these circumstances it is reasonable to hold that when SAPPA placed an order to buy they did so on the basis and with the knowledge that an acceptance of the order by Grimsdale and their agreement to sell would be on the terms and conditions set out on their contract notes to the extent to which they were applicable.’ (Lord Morris). ‘The only reasonable inference from the regular course of dealing over so long a period is that SAPPA were evincing an acceptance of, and a readiness to be bound by, the printed conditions of whose existence they were well aware although they had not troubled to read them. Thus the general conditions became part of the oral contract.’ (Lord Pearce)

ü Hollier v Ramble Motors (AMC) Ltd - 3 contracts in 5 years for the repair of a car was not sufficient

Parol Evidence Rule • Extrinsic evidence cannot be introduced that will have the effect of adding to, subtracting from, varying or qualifying the language of an entirely written contract – Codelfa Construction Pty Ltd v State Rail Authority of NSW

o Includes written, oral, other relating documents, previous drafts • Unrelated evidence could be what the parties said to each other, other documents outside the contract, or earlier drafts of the contract

EXCEPTIONS TO THE PAROL EVIDENCE RULE

• Does not apply to contracts that are partly written and partly oral o No effect on contracts that are intended to be partly written and partly oral – Hospital Products Ltd v United Stated Surgical Corp

ü L G Thorne & Co v Thomas Borthwick & Sons - Where a formal written document has been created, and appears to be complete, it should be presumed that the parties intended the document to contain all the terms of the agreement

• Courts may allow the use of extrinsic materials to establish that: o The operation of a contract is not to occur until the happening of a certain event – Pym v Campbell

o A written contract incorrectly records the agreement of the parties, leading extrinsic evidence to provide the basis for the court to issue an order for rectification of the written contract – Ryledar Pty Ltd v Euphoric Pty Ltd

o A prior collateral contract exists, provided that the main contract does not contain an ‘entire agreement’ clause – DKB Investments Pty Ltd v Belcote Pty Ltd

Collateral Contract • A statement that does not amount to an express term may amount to an independent contract that is connected to the main contract through consideration (which is the entry into the main contract)

• The collateral contract is connected to the main contract by way of consideration – Heilbut Symons & Co v Buckleton

• Terms can give rise to a contract that is separate and distinct from the main one – De Lassalle v Guildford

• It has to be promissory in nature and not merely representational - J J Savage & Sons v Blakney

• There must be no inconsistency between the main contract and the alleged collateral contract – Hoyt’s Pty Ltd v Spencer

• Entire agreement clauses – Inntrepreneur Pub Co v East Crown o a suitably expressed entire agreement clause is effective to preclude what collateral warranties or additional terms from having contractual effect

• Courts may be reluctant to find a collateral contract if the statement made is one that you would find naturally in the principal contract – Shepperd v Council for the Municipality of Ryde

4 IMPLIED TERMS • Categories:

o Terms implied to give efficacy to a particular contract based upon the facts and circumstances of a particular case

o Terms which the law finds in a certain class of a contract, either pursuant to common law or statute, although those terms may not find specific expression in the contractual statements or documents of parties

o Terms implied into a contract to give effect to a notorious custom or usage in a particular trade, industry or locality

• The onus lies on the party alleging the existence of the implied term – Heimann v The Commonwealth

• Courts are reluctant to imply a term in a contract – Roxboroush v Rothmans of Pall Mall Australia Pty Ltd

• The more detailed and comprehensive the contract, the less ground there is for arguing the existence of an implied term - Codelfa Construction Pty Ltd v State Rail Authority of NSW

Written Contracts • BP Refinery v Shire of Hastings – established essential elements that need to be satisfied for implied terms to be held: 1. Must be reasonable and equitable – Byrne v Australian Airlines (implied term rejected because it would operate in a biased fashion)

2. Must be necessary to give business efficacy to the contract – Societe Generale, London Branch v Geys (it is not the courts role to improve the contract it is considering by implying a term)

3. Must be so obvious that it ‘goes without saying’ – Codelfa Construction Pty Ltd v State Rail Authority of NSW (whether the parties would have readily agreed on the contract if it had been suggested during negotiations)

4. Must be capable of clear expression - Shell (UK) Ltd v Lostock Garage Ltd (alleged term could not be expressed within sufficient precision)

5. Must not be inconsistent with express terms – Kitching v Phillips § The above are not completely essential, they are used more as a guideline in conjunction with the facts of the case

• Codelfa Construction Pty Ltd v State Rail Authority of NSW Codelfa did non-stop excavation work for the state rail authority and received nuisance complaints from local residents and asked for an injunction to stop the work at night and on Sundays. The court concluded that Codelfa was not protected by the immunity of the state rail authority from such complaints, which it was assumed to be. An injunction was imposed and thus the project took longer than initially agreed. Codelfa argued that there was an implied term that they would be paid more for extra work (the project took longer). The court was in favour of the state rail authority because it was not obvious that this would have been the agreement and it would have been more likely that other negotiations would have been made if it was expected to happen, resulting in an express term about the subject matter

• Attorney General of Belize v Belize Telecom Ltd o Not binding precedent but persuasive o Whether to imply a term into the constitution of a business o Lord Hoffman – (1) Where a contract fails to expressly say what ill happen when an event occurs, then nothing will happen. If a loss occurs then that loss lies where it falls. (2) However it may be appropriate to imply a term if a reasonable person is to understand that something should happen because the contract is saying so, even though it is not expressly said in the contract. (3) Where a term should be implied, the court should be able to express in reasonable terms what it must be saying even though it fails to expressly. (4) Where a court does imply a term into a contract, the court is not adding anything to the contract – looking for the presumed intention of the parties. (5) Those requirements in the PB refinery case do not have to all be satisfied, they are just tools for a court to explain why a term can be implied and don’t have to all be met

o Objective test, although the subjective intention of the parties must be taken into account

o A court may imply a term if it is satisfied to a reasonable person that that is what the parties intended

Informal, Unwritten Contracts • More flexible approach to imply terms • Hawkins v Clayton and Byrne v Australian Airlines Ltd – the court must decide whether the implication of the term is necessary for the effective operation of the contract. Includes similar criteria to the BP refinery ones but more flexible

Implication Of Terms By Statute • Sale of Goods Acts • ACL ss 51-62 • Less interested in the intention of the parties, e.g. implied in the sale of a TV that the TV will work and if it doesn’t it goes against legislation

• Contracts can expressly exclude the implication of terms by statute

Terms Implied By Common Law • 2-part test

1. Determine the type or class of contractual relationship 2. The term must be appropriate for all contracts in that type or class of contract

§ Test of necessity – University of Western Australia v Gray • Examples

o Banker to observe secrecy with respect to a customer’s account – Tournier v National Provincial and Union Bank of England

o Employment contracts – implied that they employees will: § Take reasonable care to carry out the terms of their employment – Kashemije Stud Pty Ltd v Hawkes

§ Faithfully serve the employer – Blyth Chemicals Ltd v Bushnell § Obey lawful and reasonable commands of the employer – R v Darling Island Stevedoring and Lighterage Co Ltd

Implication By Custom And Usage • Con-Stan Industries of Australia Pty Ltd v Norwich Winterthur Insurance

o To establish a term implied by custom or usage we need to keep 3 things in mind 1. Whether a custom exists or not is a question of fact 2. Evidence to establish a custom requires a heavy onus of proof – it must be so well known and acquiest in that the parties must have reasonably been able to assume it was a term

3. Not possible if an express term in a contract contradicts the custom

Implied Terms Of Good Faith • Implied terms of good faith precludes a party from exercising a contractual power impulsively for an unnecessary purpose – Wolfe v permanent Custodians Limited

• Royal Botanic Gardens & Domain Trust v South Sydney Council – Justice Kirby pointed out that 3 issues need to be resolved

1. What does the obligation of duty of good faith mean? (Justice Mason said extra judicially it means to cooperate to achieve the objectives of the contract, to act reasonably in the circumstances and to adhere to honest standards of behaviour)

2. To what types of contracts will it apply? Commercial or other? 3. Can an implied term of good faith be expressly excluded? – Important and unresolved issues

• A good faith term will be implied into standard form contracts (contracts that are not subject to negotiation) and ‘relational’ contracts (involve an ongoing relationship between business parties, e.g. franchisee/franchisor agreements)

• Pacific Brands Sport & Leisure Pty Ltd v Underworks Pty Ltd – the duty of good faith exists as an incident of all commercial contracts

4 CONSTRUCTION OF EXCLUSION CLAUSES General Approach To Construction Of Exclusion Clauses

• The principal task of the court is to determine the intention of the parties • 2 major principles set out by the high court – Darlington Futures Ltd v Dalco Australia Pty Ltd

2. The contra preferentem principle will be applied so that in cases of ambiguity the clause will be construed against the person relying on the exclusion clause

Exclusion Clauses And Negligence • For the tort of negligence to be within the scope of an exclusion clause, it must be clearly intended that the clause covers negligence – Davis v Pearce Parking Station Pty Ltd

• Rules in relation to clauses seeking to exclude liability for negligence – Canada Steamship Lines Ltd v The King 1. An express exemption of liability for negligence will exclude liability on the part of the defendant

§ Includes any synonym of negligence 2. Where there is no express reference to negligence, the court needs to determine if the words used are wide enough to include negligence, without any doubts on this to be resolved by applying the contra preferentem principle

§ If words include negligence within their scope they will be effective, e.g. ‘howsoever caused’ and ‘under no circumstances’ – Putter v Palmer

3. If the words used are wide enough to cover negligence but also encompass other grounds of liability, the clause will be read as applying only to the other grounds of liability and will not operate to exclude the claim for negligence

Other Relevant Principles DEVIATION CASES

• If a carrier deviates from the agreed voyage or route, they lose the benefit of an exclusion clause – Thomas National Transport (Melbourne) Pty Ltd v May & Baker (Australia) Pty Ltd

• Not an absolute rule – still a matter of construction of the contract FOUR CORNERS (SCOPE OF THE CONTRACT) RULE

• Exclusion clause can only be relied upon if the conduct is within the scope/four corners of the contract

• If the defendant’s act causing loss to the plaintiff is an act that has not been authorised or contemplated by the contract, then an exclusion clause will not protect the defendant from liability of damages flowing from that cause

ü Council of the City of Sydney v West

Exclusion Clauses And Legislation AUSTRLALIAN CONSUMER LAW

• S 64 Competition and Consumer Act 2010 (cth) – relates to ss 51-63 • Only applies to a contract for the sale of goods and services to a customer • Photo production Ltd v Securicor Transport Ltd– Securicor was to provide security for Photo Production. Exclusion clause said that Securicor would not be responsible at all for any loss occasioned by any security guards unless it could be reasonably foreseen or avoided by the due diligence of Securicor. The security guard was cold and lit a fire and burnt the premises down. It was not reasonably foreseeable and the court gave effect to the exclusion clause

5 VITIATING FACTORS Misrepresentation

• Representations may be false fraudulently, negligently or innocently • Makes a contract voidable • Remedies

o Fraudulent – the wrong information was given deliberately – rescission and damages available at contract law, alternative action may be available in the tort of fraud or deceit

o Negligent – the information given was given negligently/carelessly – rescission and damages available in contract, alternative action may be taken in negligence

o Innocent – wrong information given innocently – rescission is possible but damages not, and there is no alternative remedy

TO ESTABLISH MISREPRESENTATION 1. Statement of fact – past or present material fact.

o Does not include puffs (statements that no reasonable person would take seriously), statements or misstatements of law, promises or predictions of the future, statements about future intention, or opinions (UNLESS the facts that the opinion was based on are not known to both parties – see Smith v Land & House Property Corp)

ü Edgington v Fitzmaurice – company decided to seek public investments and put out a prospectus stating that if you invest in them they will use those funds to expand the business in certain ways, but they used that money to pay off existing debts. The company collapsed, and one investor sued based on the fact that a misrepresentation was made about how the money would be used. It was held that it was a statement of future intention. On appeal, it was held that the statement was actually a statement made in fact

ü Smith v Land & House Property Corp – Smith was selling his hotel and he made a statement that the hotel has a most desirable tenant. This was not true and the property corp rescinded the contract for misrepresentation. The court held that it was, because the facts on which the opinion was based were known only to Smith and not the purchaser)

2. Statement must be false – not all facts have to be disclosed – a representee has no legal entitlement to expect information and they must ask for it (common law)

o Full disclosure must be made if partial representation has been made ü Dimmock v Hallet – told purchaser all the units were leased, but did not disclose that some tenants had given notice that they were going to leave, which distorted the truth of the statement. The court held that this amounted to misrepresentation

o There is an obligation to disclose if the statement was true when it was made but later the circumstances change – may amount to fraudulent misrepresentation. If the representor doesn’t know the circumstances have changed it can amount to innocent or negligent misrepresentation depending on the circumstances

o There is an obligation to disclose information in certain types of contracts – e.g. contracts of utmost good faith, such as insurance contracts

3. Statement must be intended to induce, and must induce (there must be reliance on the representation) – the representee must show that they reasonably relied on it and it induced them to enter into the contract

o The less material the fact, the less likely the reliance

o If reliance is established, then a presumption arises that the statement was intended to induce – then the onus of proof shifts to the representor to rebut the presumption and prove that the representee did not rely on the statement (prove on the balance of probabilities that the representee knew it was false)

o Principles relevant to inducement – Dadourian Group International Inc v Simms

1. Question of fact 2. If the misrepresentation is of such a nature that it would be likely to ply a part n the decision of a reasonable person to enter into a contract then it will be presumed that it did so

3. The misrepresentation does not have to be the sole inducement 4. The presumption of inducement is rebutted by the representor, showing that it did not play a substantial part in the decision

5. Decided by the court on the balance of probabilities ü Holmes v Jones – statement made about the numbers of cattle could be held. Purchaser found out the statement was false and went ahead anyway. The court held that there was an intention to induce, but there was no inducement in fact because the purchaser made his own inquiries and did in fact not rely on the representation

ü Redgrave v Hurd – when the representee has a chance to check whether the statement was true but did not, then the purchaser may still argue that he relied on the representation.

o The false statement need not be the only factor, but must only be ONE of the reasons for entering into the contract

o At common law – contract voidable (prima facie right to rescission) unless it has already been fully performed

• If the representee is aware of the falsity but is not aware of the extent of the falsity, reliance will still be established – Gipps v Gipps

• If the representee had the opportunity to inquire as to the accuracy of the statement and didn’t, reliance is still present and a misrepresentation is established – Redgrave v Hurd

RESCICCION AND ALTERNATIVES

• Law of tort o Derry v Peak o Esso Petroleum Co Ltd v Mardon – petrol station operator had a relationship with esso petroleum. They gave the operator unsubstantiated claims negligently (they didn’t check the information) he relied on the information and they induced him to enter into a contract. He sued in negligence and received damages

• Statute o Misleading or deceptive conduct o ACL Part 2(1) s 18

§ Very wide and very accessible

§ “A person shall not, in trade or commerce, engage in conduct that is misleading or deceptive or is likely to mislead or deceive”

§ Not all contractual transactions are subject to this section – e.g. not in trade or commerce

§ There is no requirement that anyone has to actually be misled or deceived

§ Intention to mislead or deceive is irrelevant § Liability for misleading or deceptive conduct cannot be excluded under contract

§ Does not apply to one-off private or charitable transactions o Henjo Investments Pty Ltd v Collins Marrickville Pty Ltd – restaurant perceived to be licensed for 100 but only licensed for 70, no statement was made about this. No remedy under contract law as no statement was made, but there was a remedy under s 18 of the ACL

o Antoniou v Karedis Enterprises Pty Ltd – prediction/opinion of good business breached s 18

o Gaffikin Marine Pty Ltd v Princes Street MArins Pty Ltd - False statements made during negotiations “we are the only genuine buyers”

o Conduct aimed at individual ü Butcher v Lachlan Elder Realty Pty Ltd

o Conduct aimed at public at large ü Taco Company of Australia v Taco Bell Pty Ltd ü Parkdale Custom Built Furniture Pty Ltd v Puxu Pty Ltd

• Remedies o Injunction to stop behaviour o Damages to compensate for loss

Misleading or Deceptive Conduct • One of the most important consumer protection measures of Australian law • ACL s 18 (schedule 2 of the Competition and Consumer Act 2010 (Cth))

(1) A person must not, in trade or commerce, engage in conduct that is misleading or deceptive or is likely to mislead or deceive. (2) Nothing in Part 3-1 (which is about unfair practices) limits by implication subsection (1).

• For a breach to occur under this section, the misleading or deceptive conduct must be by a person engaged in ‘trade or commerce’

• Remedies: injunction, damages, compensatory orders o Not confined to persons who are consumers under s 3 of the ACL – Concrete Constructions (NSW) Pty Ltd v Nelson

THE MEANING OF ‘IN TRADE OR COMMERCE’

• S 2 of the ACL – trade and commerce within Australia or trade and commerce between Australia and places outside of Australia; and includes any business or professional activity (whether or not carried out for profit)

• Definition of the words ‘trade’ and ‘commerce’ have been left up to court discretion

o Re Ku-Ring-Gai Co-Operative Building Society (No 12) Ltd – terms of common knowledge

o Larmer v Power Machinery Pty Ltd – very wide meaning • The conduct must be trading or commercial in nature and not merely incidental to trade or commerce

o Concrete Constructions (NSW) Pty Ltd v Nelson – s 18(1) has a restrictive operation; only conduct which is itself an aspect of activities or transactions, which of their nature, bear a trading or commercial character, i.e. does not constitute a truck driver failing to give the correct hand signal

o O’Brien v Smolonogov – does not cover the private sale of property because it is not ‘in’ trade or commerce

o Argy v Blunts & Lane Real Estate Pty Ltd – the same principal as O’Brien applies even if a real estate agent is concerned, however the agent may be liable for misleading or deceptive conduct

THE MEANING OF ‘ENGAGE IN CONDUCT’

• s 2(2) of the ACL – ‘a reference to engaging in conduct shall be read as a reference to do or refusing to do any act’

o Henjo Investments Pty Ltd v Collins Marrickville (No 1) – the act will consist of some oral or written statement

§ – a failure to provide information can be construed as misleading or deceptive, only if it is done deliberately

o Commonwealth Bank of Australia v Mehta – silence is NOT misleading ONLY where there is a duty to disclose at common law or in equity

• Cases involving silence fall into 2 categories: Miller & Associates Insurance Broking Pty Ltd 1. Mere silence, or ‘silence in isolation’ 2. The silence is part of a broader set of circumstances where what is said or done may be true at face value, but is nevertheless misleading or deceptive because of the silence

THE MEANING OF MISLEADING OR DECEPTIVE • ‘Misleading or deceptive conduct’ is not defined in the ACL • A summary of the principles set out in Equity Access Pty Ltd v Westpac Banking Corporation 1. For conduct to be misleading or deceptive the conduct must convey in all circumstances of the case a misrepresentation

2. The will…be no contravention… unless error or misconception results from the conduct f the corporation and not from the circumstances for which the corporation is not responsible

3. Conduct will be likely to mislead or deceive if there is a ‘real or not remote chance or possibility’ of misleading or deception regardless of whether it is more than 50% … the question of whether conduct is misleading or deceptive or likely to mislead or deceive is an objective question which the

court must determine for itself. Hence, evidence that persons in the relevant class have been misled will, although admissible, not be determinative. In some cases, however, such evidence will be very persuasive …

4. Conduct of a corporation causing mere confusion or uncertainty in the minds of the public is not necessarily coextensive with misleading or deceptive conduct … Since actual deception need not be shown the court must consider whether a reasonably significant number of potential purchasers would be likely to be misled or deceived

• To mislead is to lead or induce a person into error: Parkdale Custom Built Furniture Pty Ltd v Puxu Pty Ltd

WHEN CONDUCT IS MISLEADING OR DECEPTIVE

• It is a ‘question of fact to be answered in the context of the evidence as to the alleged conduct and as to relevant surrounding facts and circumstances: Taco Co of Australia Inc v Taco Bell Pty Ltd

Mistake • Very limited legal scope • Recognises mistakes of fact and mistakes of law • Courts are reluctant to find mistake as they mean contracts are completely void

COMMON MISTAKE

• Both parties have made the same mistake about a material fact • Renders contract void ab initio

ü Pritchard V Merchant’s & Tradesman’s Mutual Life Assurance Society – life insurance contract taken out over a third party. That person was already dead. This was a common mistake

ü Associated Japanese Bank Ltd v Credit du Nord SA – Japanese bank entered into a contract with Bennett for the sale of machinery to then be leased back. Credit du Nord provided a guarantee for the lease payments. The machines didn’t actually exist and then Bennett declared bankrupt. Credit du Nord argued there was a common mistake of fact

ü Leaf v International Galleries – if there is a mistake as to an attribute of the subject matter such as quality or value, then there is no common mistake

ü McRae v Commonwealth Disposals Commission Common mistake in equity

ü Solle v Butcher – common mistake has to be an important matter, there has to be not fault on either of the parties, and it has to be unconscionable to not void the contract

ü Great Peace Shipping Ltd v Tsavliris Salvage Ltd – overturned the Solle ruling, however it is still sometimes used in NSW

Mutual mistake

• Raffles v Wichelhaus – mistake because 2 ships had the same name. buyer had in mind the first ship and the seller had in mind the second ship, arriving at different times months apart

o If one version is more reasonable then the court will enforce that version instead of make the contract void

Duress • The pressure must be significant enough to be labeled ‘illegitimate’ - may include unlawful threats, unlawful coercion or the absence of a lawful basis for the pressure

• It doesn’t require that a person’s will is totally overcome by the duress • It doesn’t have to be the sole factor for inducing a party • Once illegitimate pressure is established, the onus of proof shifts to the defendant who must then show that any duress that did take place had no impact on the plaintiff’s decision to enter into the contract

• Three types of duress: o Duress to person – illegitimate pressure of harm to the person, including actual physical harm, threats, bodily detention, death threats

ü Barton v Armstrong – Barton (well known businessman) and Armstrong (member of the upper house) had a dispute over a property shares deal. Barton accused Armstrong of threatening to kill him. The court held that although Barton had other good reasons to enter into the deal, he was subject to what he perceived as death threats, it was voidable at his request.

o Duress to goods – pressure that goods will be destroyed, damaged or detained

o Economic duress – pressure targeted at one’s economic interests § Contract can be rescinded or damages awarded under statute

ü North Ocean Shipping Company Ltd v Hyundai Construction Company Ltd – price for sale was fixed in the US dollar. The dollar was devalued by 10% which meant that Hyundai would receive 10% less than what they bargained for. They then insisted that the price would be increased otherwise they would abandon the whole project. North Ocean Shipping were prepared to negotiate, however Hyundai wouldn’t accept it so they agreed to the extra payment as they had t deliver a ship to another party and didn’t want to break those contractual relations. They then sued Hyundai on the basis that the money was extracted due to duress. The court held that a threat to breach a contract could amount to economic duress. There was no legal basis for the additional money that

Hyundai insisted upon. However North Ocean lost the right to rescind as they had already completed the contract.

ü Crescendo Management Pty Ltd v Westpac Banking Corporation – a husband and wife were directors of Crescendo management and they had business loans from Westpac, however the business was troubled. The husband and wife decided to sell their personal home and purchase a new one. Westpac refused to release the money for the purchase of their personal home unless they signed papers to secure further security for their business. They then went to court seeking to have those documents set aside on the basis that they signed those documents on the basis of duress. The court held that the pressure by Westpac was illegitimate as there was no legal basis, however there was no economic duress because the facts of the case showed that the pressure had no impact on their decisions to execute those securities, they would have had to sign them anyway.

Unconscionability Common law

• Originated in equity and well established in Australian law • Doesn’t require any antecedent relationship between the parties • Mostly about the abuse of power

ü Blomley v Ryan ü Commercial Bank of Australia v Amadio –established the 3 elements that are required

1. One party is suffering a special disadvantage or disability, including

o Poverty o Physical illness o Mental illness o Old age – Blomley v Ryan; Amadio o Inexperience in business matters o Illiteracy or semi literacy o Substance abuse – Blomley v Ryan o Dependant personality o Lack of language skills - Amadio o Lack of independent advice – Amadio o Emotional dependence – Louth v Diprose

2. The other party is aware of the disability 3. The other party exploited that disability

• It is not designed to protect people from exercising poor judgement or to protect people from an unequal bargaining position

Under statute

• Australian Consumer Law (ACL) Pt 2-2

o Section 20 (unwritten law) - “A person must not in trade or commerce engage in conduct that is unconscionable within the meaning of the unwritten law from time to time”

§ Enunciates the principles of Blomley and Amadio § Special disadvantage, knowledge of disadvantage and exploitation of that disadvantage

o Section 21 (consumer and business transactions)- “A person must not in trade or commerce in connection with the supply...or acquisition of goods or services engage in conduct that is...unconscionable” § Can apply to any conduct or behaviour even if there is no special disadvantage

§ Court looks to the contract in itself to see if there is anything unfair within the contract, or the way in which it was formed

§ Don’t have to take 3 general law principles into consideration o Section 22 (factors for court to take into account)

• Remedies are much wider than common law o Statutory damages s 236 o Injunctions s 232 o Ancillary orders s 243 (setting aside terms in contracts, refund of money, etc.)

• Unfair Contract Terms (ACL Pt 2-3) o Sections 23-28 o Where the contract is a standard form contract and there are unfair terms o Standard form contracts (s 27) that are ‘unfair’ (s 24)

§ The ACL provides that unfair terms in consumer contracts are void. A ‘consumer contract’ is a standard-form agreement for the supply of goods or services which is wholly or predominantly for personal, domestic or household use or consumption.

§ A term is ‘unfair’ when it: Ø Causes a significant imbalance in the parties' rights and obligations arising under the contract; and

Ø Is not reasonably necessary to protect the legitimate interests of the supplier; and

Ø Causes financial or non-financial detriment to a party. § A court must have regard to the transparency of the term and the contract as a whole in determining whether a term is ‘unfair’.

o Examples of terms that may be unfair (s 25) § a term that permits one party (but not the other) to avoid or limit performance of the contract;

§ a term that permits one party (but not the other) to terminate the contract;

§ a term that penalises one party (but not the other) for a breach or termination of the contract;

§ a term that permits one party (but not the other) to vary the terms of the contract;

§ a term that permits one party (but not the other) to renew or not renew the contract;

§ a term that permits one party to vary the upfront price payable without the right of the other to terminate the contract;

§ a term that permits one party unilaterally to vary the characteristics of the goods or services to be supplied, the interest in land to be sold or granted, or the financial products or services to be supplied;

§ a term that permits one party unilaterally to determine whether the contract has been breached or to interpret its meaning;

§ a term that limits one party’s vicarious liability for its agents; § a term that permits one party to assign the contract to the detriment of the other without the other’s consent;

§ a term that limits one party’s right to sue another party; § a term that limits the evidence one party can adduce in proceedings relating to the contract; and

§ a term that imposes the evidential burden on one party in proceedings relating to the contract.

o S 23 – sections/terms can be void although the whole contract is not – orders and injunctions

o A contract term which is declared to be unfair is void and a person has access to any remedies which may apply under the common law.

o For the purposes of the ACL, certain other remedies are made available, namely:

§ Injunctions § Compensation orders § Orders for the provision of redress to non-parties.

Undue Influence • Has its roots in equity • A contract may be vitiated if the nature of the personal relationship between the parties has somehow impaired the quality of the consent given, so one party dominates the other party to the point of inequality or unfairness or abuse of trust or abuse of power

• Very narrow scope – mostly limited to situations where there is an existing presumption of undue influence and there has to be an existing relationship between the parties

• Can render a contract voidable, making rescission the main remedy Actual undue influence • Relatively rare, there is no antecedent relationship but one party dominates over the other in some way

• Generally decided on the grounds of unconscionability Presumed undue influence

• Presumes undue influence on the basis of the nature of the existing relationship between parties

• Special relationship at law – Class 2A o Overlaps with fiduciary relationships o Parent/child

ü Tillett v Varnell Holdings Pty Ltd - The relationship between parent and child is one of presumed influence, but only for so long as the child is yet to be “emancipated” from the control of their parent. Emancipation is to be determined by reference to the ongoing nature of the relationship between parent and child. However, where the parent is elderly and the child is in middle age — having left home years before — it is unlikely that there will be an ongoing relationship of undue influence.

o Solicitor/client o Doctor/patient o Can be rebutted if the innocent party clearly knew what they were doing and they were emancipated (liberated) from the stronger party

• Class 2B – undue influence is established on the facts of the case although there is no special party at law

ü Johnson v Buttress – there was no special relationship at law however the nature of Buttress proved that he relied on Johnson and Johnson could not rebut that

ü Bester v Perpetual Trustee Co Ltd – Bester relied on her 2 uncles for advice and one was a lawyer. They encouraged her to invest in a property for her own good. The investment led to an income but one of the uncles received a long-term residual benefit. Bester wanted to rescind the investment and had to establish that she was unduly influenced. On the facts of the case the court held that she was influenced as the deal was not in her best interests but in the interests of her uncles

Emancipation • If the weaker party has obtained independent professional advice before the transaction is finalised

• By demonstrating that the transaction was not improvident (making an unwise decision in haste that is commercially unsound

Undue influence and third parties

• Arises in loan guarantees etc, where people entered into the contract as a result of the influence of a third party

• It can be set aside if the other party to the contract knows that the third party has influence on the innocent party

ü Yerkey v Jones - equity ü Garcia v National Australia Bank

Remedies

• Recission • Damages (statute law) • Equitable compensation (statute law)

Unjust Contracts Contracts Review Act 1980 (NSW)

• ‘Unjust contracts’ • ‘Harsh, oppressive or unconscionable’

o Section 7 – power to make a variety of orders § Refuse to enforce a contract; declare a contract void; vary a contract; ancillary relief, where the contract is unjust (harsh, oppressive or unconscionable)

o Section 9 – factors to take into account ü Sharman v Kunert – court applied the Contract Review Act. Under s 9 it was held as harsh, oppressive or unconscionable, and therefore unjust

6 DISCHARGE Agreement Implied agreement to discharge

• Abandonment – both parties have abandoned the agreement and both parties don’t do anything

• Courts ask whether an inordinate (excessive) amount of time has elapsed during with neither party has performed and neither have called for performance

Express agreement to discharge

• A valid agreement to discharge may be achieved through the original contract itself or through a subsequent agreement

• Discharge by original contract o Contractual right to terminate (express term) o Condition precedent to formation – e.g. contract for sale of car will only come into force is finance is approved

o Condition precedent to performance – a term that states that a party’s obligation to perform doesn’t arise unless a certain event occurs

o Condition subsequent – a term that states that the contract may be terminated by one or both parties, or it automatically comes to an end if a specific event occurs after the contract has been formed

• Discharge by subsequent agreement o Consideration for the discharge is seen as a mutual promise by the parties not to sue each other for non-performance of the original contract

o Contracts that have to be evidenced in writing may be discharged orally, but must be varied in writing for the variation to be enforceable

o Whether parties have discharged or varied will depend on their true intention – and the degree of the variation

o Consideration for this is a mutual promise to not sue each other for non- performance

o If the original contract was in writing, there is no requirement that the discharge has to be in writing – s 54A of the Conveyancing Act, unless it is stated in the act

• Novation agreement: the parties clearly manifest the intention that a new agreement is made that terminates the original contract

• Merger: the parties execute a deed, substantially with the same terms as the original contract, but the old contract has merged into a new contract

• Accord and satisfaction o Accord=agreement to surrender cause of action o Where parties in dispute agree to surrender a disputed cause of action o Classification as accord and satisfaction determines when cause of action is surrendered or “satisfied”

o Analysis applies to settlements involving variations and novations o Party surrenders their potential cause of action in exchange for mere promise of performance

o Original cause of action immediately “satisfied” or discharged: McDermott v Black

o Settlement takes effect immediately o If promise not performed, promisee must sue to enforce terms of settlement (whether part of variation or novation) - Because the old cause of action has already been discharged.

o It is effectively a bilateral promise ü McDermott v Black: for unilateral discharge to be effective, there needs to be accord and satisfaction

Alternative causes of action • Equitable estoppel

ü Waltons v maher • Misleading or deceptive conduct (if the original contract was in trade or commerce) – s 18 of the ACL

Doctrine of waiver

• If a party has waived a right or remedy, they will lose the right to later pursue that right or remedy

o Can be done through conduct ü Commonwealth v Verwayen

Performance Time for performance

• Obligations need to be performed in accordance with the terms of the contract. This includes time restrictions

• A failure to perform as agreed will constitute breach, generally seen as a breach of warranty and gives rise to damages

• If the contract does not specifically stipulate a time, a court will imply a reasonable time

• Duty may arise to cooperate on new time ü Electronic Industries Ltd v David Jones Ltd

Order of performance

• Who has to perform first? Dependent on the true intention of the parties, objectively decided by looking at the contract

• Obligations can be dependent or independent o Independent obligations need to be performed regardless of whether the other party has performed – the order of performance is not an issue and either party may call on the other to perform at any time

o Dependent obligations require the other party to perform their obligations first. So one party failing to perform excuses the obligations of the other

Level of performance

• Courts expect strict performance of the terms as expressed in the contract – exact performance rule

• Any deviation amounts to breach of contract Exception to strict performance: Severable and divisible contracts

• If the contract is severable or divisible, or if it can be implied that is can be performed in separate parts (e.g. with payment after each case)

ü Cutter v Powell Exception to strict performance: De minimus rule

• The law does not concern itself with trivial matters ü Shipton Anderson & Co v Weil Bros & Co Ltd – the purchaser chose to reject a shipment of wheat as there was 25kg too much. The court upheld the contract and said the contract had been performed and the extra wheat was a trivial difference

Exception to strict performance: Substantial performance

• Whether the innocent party has been denied the essential benefit of the contract ü Hoenig v Isaacs ü Williams v Roffey brothers

Exception to strict performance: Part performance

• Partial performance has no exact measure but lies somewhere between no performance and substantial performance

• Generally part performance is a breach of contract, and payment is not required, unless the innocent party has accepted the part performance

ü Sumpter v Hedges

Breach Failure To Perform Contractual Obligations

• A term must be classified as a condition, warranty or intermediate term Condition

• A condition is an essential term • Breach of a condition gives rise to the right to terminate: Koompahtoo Local Aboriginal Land Council v Sanpine

o The contract stands until the innocent party elects to terminate it: Automatic Fire Sprinklers Pty Ltd v Watson

o The innocent party may choose to continue the contract for the benefit of both parties, and may be able to enforce the contract by order of specific performance: Peter Turnbull & Co Pty Ltd v Mundus Trading Co (Australasia) Pty Ltd

• Tramways Advertising Pty Ltd v Luna Park (NSW) Ltd set out the test for determining whether a term is a condition

o Whether it appears from the general nature of the contract considered as a whole, or from some particular terms, that the promise is of such importance that the promisee would not have entered into the contract unless he was assured of strict performance of that promise

§ Associated Newspapers Ltd v Bancks – Bancks entered into a contract for the publishing of his comic strip on the front page of the comic section, this was breached by publishing it on the third page and was upheld by the court because Bancks would not have entered into the contract without that term

o The above has to be apparent to the promisor o The promisee had to have acted in reliance of that promise

Warranty

• There is no right to terminate for breach of a warranty: Bettini v Gye; Koompahtoo Local Aboriginal Land Council v Sanpine

• The remedy can be damages or specific performance

Termination V Recission ü Koompahtoo Local Aboriginal Land Council v Sanpine Pty Ltd

• Actual breach: one party fails to perform their obligations under the contract exactly as they agreed to do o Bettini v Gye – opera singer case. Breach of a warranty and the promoter was not entitled to termination, only damages

o Tramways Advertising Pty Ltd v Luna Park – condition allowed Luna park to terminate the contract and sue for damages

o Associated Newspapers Ltd v Bancks – breach of condition for being published on the third page and not the first

• The default position is a breach of warranty, unless the contract makes it obvious that the parties intended a particular term to operate as a condition, all contractual terms should be treated as warranties: Ankar Pty Ltd v National Westminster Finance (Aust) Ltd

Intermediate Terms

• Hong Kong Fir Shipping Co Ltd v Kawasaki Kisen Kaisha Ltd – Kawasaki hired a ship from Hong Kong Fir and expected it would be seaworthy (in a term). There were many problems and delays for repairs and maintenance. Kawasaki terminated the contract because of the breach and argued it was a condition. Kawasaki argued it was not a condition. Court of appeal held that it was a wrongful termination. Lord Justice Diplock stated it was not a warranty or a condition – it is somewhere in the middle. It is not immediately obvious as either a condition or warranty – it will depend on the nature of the breach.

o The delay was clearly a breach, but in the context of a 2 year contract, Kawasaki could not say that they were deprived of the essential benefit of the contract – they still had the ship and a year and a half of the contract. The consequences of the breach were not so serious as to allow Kawasaki to terminate for breach

o Endorsed by the house of lords o Endorsed in Australia: Kompahtoo Local Aboriginal Land Council v Sanpine Pty Ltd

• Depending on the circumstances, this type of term can be dealt with as a condition or a warranty

• They prevent the injured party from terminating on grounds that are technical or unmeritorious

Repudiation

• A failure to be ready, willing or able to perform part of a contract, but it is not actually a breach

• Types: o One party displays an intention to not fulfill the contract in entirety, or in the way stipulated

o One party gives notice they are not going to or cant perform (anticipatory breach – innocent party has the right to terminate without actual breach occurring, however it is often not terminated for commercial efficacy)

§ Anticipatory breach: Foran v Wright Termination For A Breach Of Time Stipulations

• Historically: o At common law – a time stipulation was seen as an essential term of the contract, giving rise to termination

o At equity – only permit termination: 1. If the contract expressly declared time to be of essence 2. If the contract implied that time was of essence: Summers v Cocks 3. If time was made of the essence by service of a notice to complete on a party who breached the time stipulation: G R Mailman & Associates Pty Ltd v Wormald International (Aust) Pty Ltd

• Legislation resolved the historical issue by assuming a time stipulation is a warranty only: Conveyancing Act 1919 (NSW), unless the contract makes it clear that the parties intended for it to be essential

• A time stipulation is now seen to be an intermediate term, which may or mat not give rise to terminate

• The circumstances which will give rise to the right to terminate are those that have always been permitted in equity (above): Zaccardi v Caunt

• Time can be of essence with perishable goods, where a property is subject to a volatile price market, and for the payment of a deposit for the sale of land

• Where the contract contains a term that will punish if you don’t complete on time (such as a forfeiture clause) then you wont be able to terminate for breach, but set a new time

• Dee-tech Pty Ltd v Neddam Holdings Pty Ltd – it has to be clearly expressed that the party will be terminating

Restirctions On The Right To Terminate

• Sargent v ASL Developments Ltd – if you affirm a contract then you lose the right to terminate

Relief Against Forfeiture

• In the past courts were more prepared to forfeit something of value because of breach (give relief for forfeiture)

• Stern v McArthur – its not enough just to grab the deposit, relief against forfeiture requires evidence of unconscionability before relief is given

• Tanwar Enterprises Pty Ltd v Caushi o Union Eagle Ltd v Golden Achievement Ltd – deposit was kept by the vendor because it was 10 mins late and

Frustration • The effect of an ‘intervening event’ that radically impacts a contract – meaning is cannot be performed at all, or as agreed

• Originally courts didn’t allow frustration, unless certain circumstances were specified

• Taylor v Caldwell – first case that established discharge by frustration (the subject matter of the contract had been destroyed)

• National Carriers v Panalpina (Northern) Ltd – established what the intervening events could be (has to radically change the rights and obligations under the contract)

o Where the subject matter is destroyed (Taylor v Caldwell) o If a court order prohibits performance of a contract - Codelfa Construction v Stat Rail Authority of NSW

o Where the contract is subject to a change in the law that makes the activity illegal

o Where there is incapacity or death of one of the parties (only applies generally in contracts of personal service

o Where there has been a failure of a condition § Krell v Henry § Herne Bay Steam Boat Co v Hutton

o Government intervention in cases of emergency – Metropolitan Water Board v Dick, Kerr & Co [1918] – WW1 broke out and the government intervened

• The intervening event must not have been caused by the parties • The intervening event can’t have been contemplated by the parties – was not anticipated by the contract

o Metropolitan Water Board v Dick, Kerr & Co [1918] – anticipated that time for performance could be extended by 6 months if there was a delay for any reason (House of Lords held that the government intervention due to war could not have been reasonably foreseen, such as weather, labour shortages, etc.)

• It has to be unjust to enforce the contract

EFFECT OF FRUSTRATION • Common law: Fibrosa Spolka Akcyjna v Fairbairn Lawson Combe Barbour Ltd [1943] –lead to worldwide statutory change

o The contract is automatically discharged and obligations that existed prior to the frustrating event are enforced but others are discharges

o Problem: if this was the case in Krell v Henry [1903], the deposit would have been kept and the hotel would not have to give their room up – unjust outcome

• Statute: Frustrated Contracts Act 1978 (NSW) o Doesn’t apply to certain types of contracts (specificied) o Parties in commercial contracts can exclude the operation of this act o If the act applies, the common law is completely irrelevant

o Where there is a frustration, the parties can apportion their loss – parties must set out a schedule of adjustment and they can share as equally as possible the costs of the frustration

o S 13 overcomes the injustice in the Fibrosa Spolka case

7 ILLEGALITY • The circumstances in which an otherwise valid contract is tainted by an illegal purpose or offend public policy

• Wetherall v Jones (1832) – Illegality of purpose: “where a contract is being seeked to enforced is expressly or by implication forbidden by statute or the common law, no court will lend its assistance to give affect

o Statutory illegality o Common law illegality

• A contract could be rendered illegal because of the conduct of one party, both parties or neither of the parties (the term could be rendered illegal)

• Illegal on formation – rendered illegal due to the parties’ intention from the beginning

• Illegal in performance – the way in which the contract is performed breaches the law

• Illegal after formation – changes of the law or government intervention (frustration might apply)

• Illegality may be pleaded by the parties, by one or both parties, or it may be raised by the court of its own motion

• An agreement to terminate an illegal contract is not illegal and could be a valid discharge

VOID FOR ILLEGALITY

• Nelson v Nelson (1995): 3 ways in which a contract may be void for illegality 1. A statute might expressly prohibit the making of a certain type of contract (uncommon)

2. A statute might, by implication, render a contract illegal – either on formation or in its performance (very common)

3. It might be invalid at common law, even if its not prohibited by statute, if it offends the public policy or public interest

Statutory Illegality EXPRESS STATUTORY ILLEGALTY

• Statute expressly prohibits the formation of a type of contract, or that a term is illegal

o E.g. contract for drug trafficking (type of contract) o S 64 ACL – any term that excludes liability is void

• Contract as a whole, or particular term, are unenforceable • Re Mahmoud and Ispahani

IMPLIED STATUTORY ILLEGALITY

• The statute doesn’t express illegality, but through statutory interpretation, illegality can arise by implication

• It is possible for a contract to be illegal by implication but still be enforceable o The formation of a contract may be illegal but its acting out may not be illegal, and may be enforceable

• 3 key factors in applying statutory interpretation in decided the illegality of a contract

1. The words of the statute 2. The purpose of the statute and secondary documents to find that (e.g. 2R speech, hansard, etc.). If there are penalties, then they will be imposed and the contract will probably not be unenforceable

3. Consequences for the parties – of making it unenforceable • Yango Pastoral Co Pty Ltd v First Chicago Australia Ltd • Anderson Ltd v Daniel [1924] – information required by law for a sale was not included on an invoice. The court of appeal held that it rendered the contract as a whole unenforceable

Common Law Illegality • Contracts to commit a crime, tort or fraud • Contracts made with the intention of acting unlawfully – not illegal in themselves but are made with the intention to make use of the subject matter of the contract for an unlawful purpose

• Contracts aimed at defrauding the state of tax revenue o Alexander v Rayson [1963] – a residential lease where council rates were partly determined by the amount of rent. The nominal lease agreement disguised the true amount of rent to pay less to the council. Both agreements – the original lease and the secondary one – were illegal and unenforceable

• Contracts prejudicial to the administration of justice – e.g. agreement to give false evidence

o Public Service Employees Credit Union Cooperative Ltd v Campion (1984) – employee in the credit union was using their position to steal money. The credit union said they would go to the police unless they agreed to repay the stolen funds, with a guarantee by the father. He defaulted and the credit union tried to enforce it in court and it was rendered illegal

• Contracts to oust the jurisdiction of the courts o ‘Scott v Avery’ clauses – agreement to use arbitration before going to court (exception of ousting the jurisdiction)

• Contracts that promote sexual immorality – e.g. contract to lease premises for the purpose of prostitution (old law)

o Upfill v Wright [1911] – plaintiff leased a flat to the defendant, knowing she was a mistress. The rent was provided through her selling herself to a particular man and the court held it was sexual immorality

o Seidler v Schallhofer [1982] – tried to argue sexual immorality to override a preenup. The court held it was not because de facto couples are accepted in public polivy

o Ashton v Pratt (No 2) [2012] – Ashton was a professional escort and claimed she was Pratt’s mistress. The court accepted that he has probably made a number of promises before he died, that she acted upon after his death on his estate. It was not a business contract, with a presumption that there was no intention to be legally binding. (1) A mistress relationship is a social relationship and it was no obvious that ashton relied on the promises made. (2) The parties also did not seek any legal advice which indicated that it was not a business arrangement. (3) There was nothing in writing. (4) He would not have been able to claim damages. Therefore there was no binding agreement. Justice Brenan stated that even if it was enforceable, it would be illegal for sexual immorality because it was against public policy

• Contracts that impose a restraint on trade o Restrictions of this kind can be enforced as long as they are reasonable o Common law – doesn’t care about the breach, but looks at the reasonableness or unreasonableness of the restraint

§ Nordenfelt v Maxim-Nordenfelt Guns Co Ltd – area and time was reasonable but the scope wasn’t

§ Amoco Australia Pty Ltd v Rocca Bros Motor Engineering Co Pty Ltd (1973) – restraints in sale of business are more likely to be upheld than employment restraints, and in employment contracts, senior management is more likely to be held to their restraint than a junior employee

§ Bridge v Deacons [1984] – a partner left a law form and it was held that they are more likely to be restrained than a junior solicitor

o Reasonableness of restraint § Area § Time – 3 years is commonly held to be reasonable, but it depends on the circumstances

§ Scope o Statute – Restraint of Trade Act 1976 (NSW) (will only come into play if the court finds it is unreasonable)

§ Allows a court to amend an unreasonable restraint § Section 4(1) – a court can sever an unreasonable part of a restraint § Section 4(3) – a court can enforce a clause after changing it and making is reasonable

§ The court then looks at the breach to see if a breach of the reasonable new restraint has been made

§ KA & C Smith Pty Ltd v Ward - In order for a restraint to be reasonable, the party seeking to enforce the clause must establish an identifiable interest that they need to protect. In the case of a

franchise arrangement, such recognised interest includes the interest of a franchisor in protecting patronage built up through the operation of the franchise, as well as the preservation of confidentiality of information provided to a franchisee, which could be used by the franchisee to compete with the franchisor.

Effect Of Illegality • Illegal upon formation – Re Mahmoud Case

o No parties held to any requirements • Illegal upon performance

o The innocent party can bring an action o Severance of a term o Thomas Brown & Sons Ltd v Fazal Deen – severable contract

Alternative Causes Of Action • Tort of deceit – e.g. in Re Mahmoud, the innocent party could have argued that the buyer lied about the license and sued for damages for deceit

• Misleading or deceptive conduct – s 18 ACL • Collateral contract

o Strongman Ltd v Sincick – one party falsely promised that they were legally authorised to form the contract, and the promise was held to be a collateral contract

o Controversial and may not work in many situations • Equitable estoppel

o Waltons Stores (Interstate) Ltd v Maher • You can proceed with any of these alternative contracts (despite collateral contracts) even if the contract is illegal and void

8 PRIVITY The Privity rule

• Only the parties to a contract may sue or be sued ü Tweddle v Atkinson ü Dunlop Pneumatic Tyre Co Ltd v Selfridge & Co

• Under statute: if you buy something from a retailer and it causes you injury you can sue the manufacturer directly

ü Coulls v Bagot’s Executor & Trustee Co Ltd

Privity and consideration • The measure of damages – the difference between ones position at the time the contract was formed and what the position would be given the contract. Given the Privity rule, if a third party was part of an agreement and they were to be paid for my work, and I sued for breach of contract, I could only get nominal

damages because my position is the same. Damages require that I can only sue for my own loss not someone else’s

• The adequacy of damages – o Specific performance is an equitable remedy and can only be awarded if damages are inadequate

ü Beswick and Beswick [1968] – a party to a contract died, and the third party (nephew) refused to continue making payments as contracted to do so (to the widow). The widow sued seeking specific performance of the contractual term to continue making payments. In such cases where damages are nominal, the measure of damages is inadequate from the perspective of justice. The result is unfair. It would be unjust to refuse an order for specific performance.

Trident General Insurance Co Ltd v McNiece Bros Pty Ltd (1988)

ü A company (Blue Circle) was doing a large building project and they had an insurance policy with Trident insurance to cover any injuries or deaths working on this project to the employees of blue circle as well as other associated companies, contractors and suppliers engaged in that building project. One of the contractors was McNiece. They knew about the insurance policy and relied on it. An employee of McNiece brothers was seriously injured and he sued McNiece brothers for negligence and recovered damages. McNiece sought to be indemnified under the Trident insurance policy. Trident argued that the policy was unenforceable by McNiece brothers because of the Privity rule. Although it was to obtain a benefit, it could not sue for failure to provide that benefit. The majority of the court found in favour of McNiece brothers as a result of the exceptions to Privity.

o A third party can circumvent the rules of Privity to enforce the benefit of a contract

o Conservative argument: Privity is a fundamental common law doctrine and courts shouldn’t abolish it, it is up to the parliament

o Radical argument: The doctrine of Privity had been excluded by legislation and outlived its purpose and should be abolished and argued for the complete abolition of the Privity rule, or limit it to certain cases. Because of the Privity rule, damages were completely inadequate as they reflected Blue Circle’s nominal loss instead of McNiece’s substantial loss.

o Third argument: acknowledged the importance of Privity, but found in favour of McNiece brothers on the exception of unjust enrichment

o Majority (for McNiece) § Mason CJ, Wilson J, Toohey J (Privity does not apply) § Deane J (Privity applies – but ‘trust’ exception) § Gaudron J (Privity applies – but ‘unjust enrichment’ exception)

o Dissenting minority (for Trident) § Brennan J, Dawson J (Privity prevails)

‘Exceptions’ to Privity • “Not really an exception, its really the third party relying on other legal principals to get around Privity”

Statutory exceptions • Bills of exchange and cheques • Insurance Contracts Act 1984 (Cth) – s 48(1) third parties in insurance claims can overcome privity

• Motor vehicle insurance – green slip CTP insures for damage to a third party and allows that third party to sue you even though they are not a party to your contract

• State property law legislation o Restrictive covenant

• ACL – customer can sue wholesaler directly Agency • A relationship between two parties (agent and principal) and the agent is authorised to do certain acts on behalf of the principal, binding the principal to a third party through their agency authority

• Express, implied or apparent authority • Agent or principle may take legal action

Trusts • Property is held on trust for the benefit of another • Although the trustee has full legal title, they can only use it for the benefit of the beneficiary

o E.g. parents’ trustees, with legal title to money, and children are the beneficiaries with an equitable interest in the money. The trustee has obligations to the beneficiaries and if they use the money, the children can seek an equitable remedy in court for the money

• Can be set up expressly, by implication, or it can exist without parties knowing • For a trust to arise, there has to be a trustee, beneficiary, property and proof of an obligation from the trustee to the beneficiary

o Trust property may include trust of a covenant (promise) • Intention to form a trust is required

o Intention may be found in express or implied term o Trident General Insurance Co Ltd v McNiece Bros Pty Ltd (1988) 165 CLR 107 (Deane J) – intention can be found by looking at the contract itself. Blue Circle was said to be a trustee, with McNiece Brothers as a beneficiary. Thus, if Blue Circle didn’t sue Trident Insurance, McNiece Bros

can sue Trident directly for non-nominal damages for the loss of trust property