IDENTIFICATION OF THE TERMS

1. Distinguishing pre-contractual stateents !ro contractual ters

(i) puffs no reasonable person would believe
(ii) mere representations
(iii) terms
FACTORS "to #eterine a$o%e&'
Language of the statement: promise, agree, guarantee, warrant vs. estimate, guess.
JJ Savage v Blakney (1970)' purchaser of motor boat sued seller on letter statement that estimated speed
was 1miles!hr. "othing about speed in written contract. #$: speed of boat was mere representation, an
e%pression of opinion.
&ime of the statement: closer to contract formation more li'el( to be a term.
Harling v Eddy [1951]: sold cow that died of tuberculosis, which it must have had at time of sale.
$ontent and importance of the statement: more significant more li'el( to be a term
Van Den Esscer! v "a##ell [19$0]' )urchaser of house before signing contract as'ed vendor if there
were an( white ants. *endor assured there weren+t. &ermite is of great significance to purchase a house.
,elative -nowledge and e%pertise of the parties: more e%pertise more li'el( to be term.
%scar "ess v &illia's [1957]: . sold car to car dealer /$ for part pa(ment of new car. 0aid car was
1123 model, date on car+s registration boo'. 4ound later to be other model and worth less. #eld: /$ should
have 'nown . had no personal 'nowledge of car+s (ear and onl( got it from registaration.
Dick Bentley v Harold Smith [1965]
5%istence of a written memo
,outledge v 6rant
0ignature: part( bound to terms contained in contract that the( sign (general rule).
()Es!range v *ra+c,- [19./]' 5 bought cigarette vending machine from 6. 5 signed form headed 0ales
7greement and when delivered, machine did not wor' satisfactoril(. 7rgued breach of implied warrant(. 6
relied on clause in agreement that e%cluded all implied conditions!warranties. #eld: clause was effective.
Toll v Alphapharm [200]
.hole of circumstances approach: to be ta'en into account.
H,s#i!al 0r,d+c!s v 12S S+rgical ",r# (193/): 800$ contracted with 9lac'man as e%clusive distributor in
7us for 800$ of its surgical stapling products. 9 later got 800$ demonstration product sand sold them in
competition with!in substitution of compan(+s products. Later copied and sold products through own
compan(. 5arlier had made statements at meeting (would not compete, there was great mar'et etc) held to
be terms.
1. E()RESS TERMS
*ritten stateent !ors part o! contract IF there has $een notice o! stateent to other part+'
)ar,er % S.E Rail-a+'
1. .ould reasonable person assume document containing the written notice is of a contractual nature so
as to form part of contract:
;. <id the recei%ing part+ ,no- of the statement (alleged term) or did the part( rel(ing on the statement
(alleged term) ta'e reasona$le steps to $ring it to the notice o! the other part+.
=. .as reasonable notice of the statement actuall( given to the other part( $e!ore or at the tie o! the
a,ing o! the contract.
1
A. /NSI0NED DOCS'
(a) notices
(b) tic'ets
1no-le#ge'
>f part( 'nows doc!sign contains contractual terms bound ()ar'er v 0.5 ,ailwa().
<oes not matter if the( actuall( read terms onl( that part( has been given reasonable notice
(&hornton v 0hoe Lane )ar'ing, 9altic 0hipping v <illon).
*oul# a reasona$le person assue that the tic,et2receipt2notice is o! a contractual nature.
Reasona$le Notice in Contractual Docs'
>f doc is one that reasonable person in circumstances would e%pect to contain terms mere
presentation of doc will suffice to ma'e it terms ()ar'er v 0.5 ,ailwa( eg. bill of lading in
shipping).
Di# part+ ta,e reasona$le steps to $ring it to the notice o! the other part+.
Reasona$le Notice in Non-Contractual Docs.
)art( must ta'e reasonable steps to bring terms to notice of part(:
!a"#er v Bro$n% $ too' wife+s dress to dr( cleaning. .hen collected found to be damaged. 9 argued that
there was e%clusion clause printed on doc'et handed to $ when he left dress.
"ot reasonable. /nl( reasonable to thin' it as a voucher to collect goods.
Thornton v Shoe &ane 'arkin(: 5%clusion clause of liabilit( of in?ur( to customers. & issued a tic'et with
small print that tic'et was sub?ect to conditions as displa(ed on premises. $onditions were displa(ed inside
car par' and no visible either from entrance or place tic'et issued.
$ustomer did not 'now, and car par' had not been reasonable in giving notice.
/nusual or Onerous Ters
)nterphoto v Stiletto% > sent 0, on re@uest, 2A transparencies with deliver( note of date of dispatch, return
and conditions. 0 'ept transparencies and charged a fee that was much larger than usual!e%pected.
#eld not liable. >f terms are unusual!onerous must ta'e reasonable steps to ensure notice,
even if doc is of contractual nature.
Baltic Shippin( v Dillon
Tiing o! Notice'
Bust be given 954/,5 contract is made (&hornton v 0hoe Lane )ar'ing)
3. SI0NED DOCS'
6eneral rule C bound to what (ou sign, even if unread (L+5strange v 6raucob)
5%ceptions:
0igned document is not contractual in nature
< D #ill v .right: $ might reasonabl( hold doc to be receipt to be presented for dress, and
not contractual.
0ignature comes after formation of contract (< D #ill v .right)
Bisrepresentation
$urtis v $hemical <r( $leaning: $ too' dress to < for cleaning. 0igned receipt, told b( shop
assistant that < would not accept liabilit( for damage to beads!se@uins on dress. >n fact was
e%clusion term of 7"E damage. Later came bac' with stain. #eld: $ won.
"on est factum mista'e
8nconscionabilit( ($ontracts ,eview 7ct, &rade )ractices 7ct)
C. INCOR)ORATION 34 )AST DEA5IN0S'
>f histor( of dealings, contractual terms introduced in earlier trans ma( be incorporated in
subse@uent contract.
)art(, b( continuing to deal with part( see'ing to impose contract, shows willingness to be bound.
;
Balmain *e$ +erry !ompany v ,o-ert#on: ferr( wharf had turnstiles which passengers had to pa( penn( to
officer. "otice board near turnstiles said that penn( must be paid entering!leaving wharf no e%ception,
whether or not passenger has traveled b( ferr( or not. , paid fare and missed ferr(, then tried to leave
without pa(ing fare. #eld: , had to pa( having used ferr( man( times and paid fare, must have 'nown
terms.
D. REFERENCE TO OTHER DOCS
6. IM)5IED TERMS
5%press terms overrule implied. Byrne v A"#tralian Airline#. Breen v /illiam#
7 CATE0ORIES
1. .here there has been past dealings between the parties
;. .here there is a custom or trade usage concerning the sub?ect matter of the contract
=. .here it is necessar( to give business efficienc( to the contract
2. .here a term is implied b( law (either common law or statute)
Ters Iplie# $+ )ast Dealings'
9almain "ew 4err( v ,obertson
reasonableness.
consistenc(
uniformit(
regular contracting between the parties
Ters Iplie# $+ Custo or Tra#e /sage'
!on Stan )nd"#trie# v *or$ich /interth"r )n#"rance% < paid insurance premium to bro'er. 9ro'er went
into li@uidation before passing pa(ment to ) insurers. < argued that where contract insurance was arranged
b( bro'er, the bro'er, not insured part(, was liable to pa( premium to insurers. 4ailed. ,e@uirements are
strict.
&he e%istence of a custom or usage is the @uestion of fact
$ustom must be well 'nown (notorious) that a reasonable person would thin' it implied into the
contract (this does not mean universall( accepted but obviousl( re@uires a high level of acceptance).
<oes not appl( when term is contrar( to the e%press terms of the contract
7 person ma( be bound b( a custom notwithstanding the fact that he had no 'nowledge of it.
Ters Iplie# For 3usiness E!!icac+'
Foral Contracts: to ascertain intentions and impl( terms
B ' ,e0inery v Ha#tin(# Shire !o"ncil 1all 5 re2"irement# m"#t -e met3:
1. >t must be reasonable and e@uitable
;. >t must be necessar( to give business efficac( to the contract so that no term will be implied if the
contract is effective without it 1the 4oorcock3
=. >t must be capable of clear e%pressionF
2. >t must be so obvious that it goes without sa(ing+ (!odel0a v S , A3
. >t must not contradict an( e%press term of the contract.
In!oral Contracts' much more fle%ible than formal re@uirements.
Byrne v A"#tralian Airline#. Breen v /illiam#
1. it must be necessar( (business efficac() for reasonable!effective operation of contract
Ters Iplie# 3+ 5a-
>mplied in all contracts of particular class or description:
Bust be a definable class of contractual relationship
Bust be suitable for recognition as implied in all contracts of that class.
&est of necessit( (Byrne v A"#tralian Airline#3
=
5g. doctor!patient (no implication to share files), solicitor!client (implied competent advice),
emplo(er!emplo(ee (safe wor'ing conditions).
common law (e5(5 to cure omissions, condition to coCoperate, reasonable @ualit( of performance)
statute law (e5(5 T'A ss G1, AH, A1, A;, A2 but note s G3F also note S67A ss 1AC;H but note sG2)
8. E(TRINSIC E9IDENCE 2 CONSTR/CTION OF THE TERMS
A. )ARO5 E9IDENCE R/5E
>f there be a contract which has been reduced into writing, verbal evidence is not allowed to be given of
what passed between the parties, either before the written document was made, or during the time that it was
in a state of preparation, so as to add to or subtract from, or in an( manner to var( or @ualif( the written
contract. (7o## v &ord *"(ent5
.here a contract is reduced into writing, where the contract appears in the writing to be entire, it is
presuming that the writing contains all the terms of it, and evidence will not be admitted of an( previous or
contemporaneous agreement which would have the effect of adding to or var(ing it in an( wa( (4ercantile
Bank o0 Sydney v Taylor)
E:clu#es e%i#ence o!:
oral variation
sub?ective intention
prior negotiations
subse@uent conduct
The parol e%i#ence rule ser%es 6 purposes'
1. to aid in identif(ing the terms of the contract
;. to aid in interpreting the meaning of the words in the contract
Entire contract clauses' this doc contains 5"&>,5 contract: 5%amples
7ll the terms of this agreement are contained in this document
&he parties ac'nowledge that this document contains the whole agreement and that no other
statements induced the sale.
&his contract represents the entire agreement between the parties and no other terms ands
conditions are enforceable outside of this contract or
no warrant( is given e%cept as e%pressed herein.
Briti#h 4ovietone$# &td v &ondon and Di#trict !inema#: contract to suppl( short news before
movie. $an terminate in 2 wee's. <uring war, 6ov limit news. Bade new contract that lasts until
6ov changes. 6ov does not change after war and 9B see's to terminate in 2 wee's. 4ailed.
E:ceptions ; )urpose 1' I#enti!+ Ters
"ot wholl( written: rule does not appl(, until determined that parties intended written doc to be all of
contract
State ,ail A"thority o0 *S/ v Heath 6"tdoor
,ectification: e@uitable power to rectif( contract in writing where mista'e is made in recording agreement.
Bacch"# 4ar#h !oncentrated 4ilk v 8o#eph *athan
)romissor( estoppel:
$ondition precedent: e%trinsic evidence ma( be admitted to establish that written contract sub?ect to
contingent condition that must be satisfied before contract becomes effective.
'ym v !amp-ell% ) (inventor) contract with $ (mar'etor). /rall( said contract not go ahead until $
got engineer to loo' at invention and approve it.
2
&rue consideration, e.g., contract is a sham: prove real consideration, where none!nominal!ambiguous in
doc, and where additional consideration e%ists.
9#anda &td v B"r(e##
>mplied terms: ma( refer to e%trinsic evidence to consider whether a term should be implied.
Briti#h !rane Hire v )p#$ich 'ant Hire
)rove e%istence of collateral contract: below
E:ceptions; )urpose 6' Interpret eaning
4actual matri%:
bac'ground, the conte%t, the mar'et in which the parties are operating C ,eardon Smith &ine &td v
Han#en:Tan(en [19;6] /&, 9<9
"arrow approach: onl( admit 55 if language is ambiguous or susceptible to more than one meaning
C !odel0a v S , A
9roader approach: 55 of surrounding circumstance should generall( be admissible C )nve#tor#
!ompen#ation Scheme v /e#t Brom$ich B"ildin( Society [199<] 1/&, <96
!odel0a approach approvedF not a ver( high standard of ambiguit( needed C ,oyal Botanic 7arden v
So"th Sydney !o"ncil
$larif( ambiguous language: must genuinel( be uncertaint( about meaning of doc.
!odel0a v S , A
,oyal Botanic 7arden v So"th Sydney 7arden
>nsufficient that words did not mean what one of parties hoped: Hope v ,!A 'hotophone o0
A"#tralia (e@uipment did not stipulate old or new).
>dentif( parties: e%trinsic evidence ma( be admitted to identif( parites.
6iliberto v -enn(: contract of sale of land described purchaser as Brs - and then Br - in other
parts. <oc signed b( Brs -. #$: held 55 admissible to show Brs - acting both for herself and
agent for husband.
3. CO55ATERA5 CONTRACTS
<efinition: contract made when )1 ma'es a promise, connected but independent of main contract, and for
consideration of promise, ); agrees to enter into main contract (Heil-"t Symond# v B"ckleton)(De &a##alle
v 7"il0ord3
Criteria' Stateent ust'
9e intended as a promise, that is, as a term rather than as a mere representation (D 0avage v
9la'ne()
9e intended to induce entr( into the main contract ()
9e relied upon in entering into main contract
#ave separate consideration (#ercules Botors v 0chubert)
9e consistent with terms of main contract (#o(ts v 0pencer: lease sa( lessor ma( terminate lease at
an( time giving lessee 2 wee's notice. .hen lessor sought to terminate, lessee argued that in
consideration of ta'ing lease, lessor had agreed not to give such notice e%cept in certain
circumstances. #$ held: inconsistent.)
C. C5ASSIFICATION OF TERMS
1. 0ome terms are more important than others
;. different remedies appl( for breach of t(pes of terms
Three categories:
conditions (essential term)
warranties (nonCessential term)

intermediate terms
De!inition o! Con#ition
goes to the root of the matter so that a failure to perform it would render the performance of the rest of the
contract a thing different in substance from what the defendant has stipulated for (Bettini v 7ye)
<&he test of essentialit( is whether it appears from the general nature of the contract considered as a whole,
or from some particular term or terms, that the proise is o! such iportance to the proisee that he2she
-oul# not ha%e entere# into the contract unless he2she ha# $een assure# o! a strict or su$stantial
per!orance o! the proise, as the case ma( be and that this ought to have been apparent to the
promisor. (Tram$ay# Adverti#in( v &"na 'ark)
De!inition o! *arrant+
>t is a term which is subsidiar( to the main purpose of the contract, a nonCessential term.
Deterine i! con#ition or -arrant+ "o%erall criterion is intention o! parties& Heil-"t Symond v
B"ckleton
1. Designation $+ the parties' e%pressed that term is condition eg. an( breach will give rise to a right to
terminate. 8se of word condition is not conclusive of its status. <esignation does not necessaril( ma'e
that term a condition, other circumstances still relevant, though less important. (A*= Bank v Bene0icial
+inancial !orp)
6. )re%ious #ecisions on a similar term, e.g., to pa( the price has been held to be a condition rather than a
warrant(.
8. Nee# !or certaint+: >n some t(pes of contracts parties need the contract to be performed strictl( to get the
benefit, e.g., mercantile (commercial sale of goods contracts) so it is more li'el( the terms will be construed
as a condition (B"n(e !orporation v Trada> 9>port SA)
2. 5anguage: clear and precise language suggest a condition rather than a term which is vague, e.g.,
guarantee v soon as possible. (&"na 'ark v Tram$ay Adverti#in(: contract to advertise L) for at least 3 hrs
ever(da( using we guarantee, &7 argued that it was an average of 3 hrs #$ held for L)), )oussard v
0piers, 7ssociated "ewspapers v 9anc's
=. Conte:t of a term within the whole contract: eg. if parties grant right to some terms, but not one in
@uestion, then suggests that the term in @uestion was not sufficientl( important to be condition.
>. 5i,el+ character o! the $reach' if ever( breach of term is li'el( to be serious (condition), it breached in
trivial to serious wa(s (less li'el( to be condition) (Hon( ?on( +ir Shippin( v ?a$a#aki ?i#en ?ai#ha:
clause re@uiring ship to be seaworth( was not condition, could be breached b( slightest failure of ship to be
fitted in ever( wa( for service). >f damages would not ade@uatel( compensate aggrieved part( on that term
or would be difficult to prove more li'el( to be condition.
De!inition o! Intere#iate ters "innoinate ters&
Ba( operate either as a condition or as a warrant( depending on the effect of the breach.
&o entitle aggrieved part( to terminate: breach must be:
6rave, serious (Ankar 'ty &td v *ational /e#tmin#ter +inance 1A"#tralia3 &td)
6oes to root of contract, and frustrates commercial purpose of contract (Hon( ?on( +ir Shippin(
!o5 &td v ?a$a#aki ?i#en ?ai#ha &td)
<eprive innocent part( of substantiall( the whole benefit which it was intended that he or she
should obtain from the contract ()
Hon( ?on( +ir Shippin( !o5 &td v ?a$a#aki ?i#en ?ai#ha &td% breach resulted in ship being unavailable
for some A months out of ;= months total hire period. #eld not to ?ustif( termination.
G
Right to terinate #epen#s on 14aple +lock v @niver#al3'
how serious is the breach in relation to contemplated performance and
degree of probabilit( that the breach will be repeated.
4aple +lock !o &td v @niver#al +"rnit"re 'rod"ct# 1/em-ley3 &td% B ma'es furniture stuffing. $ontract to
deliver 1HH tonnes. /ne deliver( was smell( (too much chlorine). 8 argued breach of condition to get out of
contract. #eld: 9reach was not &#7& severe, and unli'el( to be repeated.
Other classi!ications
promises and contingencies
o condition precedent an e%ternal event that must occur before either (7eor(e v ,oach [192]):
(a) 7 contract comes into e%istenceF or
(b) )erformance under an e%isting contract is re@uired.
o condition subse@uent C an e%ternal event which, when it occurs, brings the contract to an end
definitional terms: defines words in contract
procedural terms: dictates procedure (eg. method of post etc).
7. E(C5/SION C5A/SES
De!inition
7n e%clusion clause or term is a clause that e%cludes the liabilit( of a part( for the wrongful conduct
specified in that clause. &his t(pe of clause is also called an e%emption clause, e%ception clause, limitation
clause or a disclaimer.
T+pes o! clauses
e%clude Ia right+ of other part(
L+5strange v 6raucob
limit liabilit( to a specified amount
Darlin(ton +"t"re# v Delco% although was liable onl( limited to certain amount of mone(
place conditions on e%ercise of Ia right+.
T-o stage process:
does the clause form part of contract:
(if (es) what is the legal effect of the clause:
CONSTR/CTION AND INTER)RETATION R/5ES OF E(C5/SION C5A/SES
O%erall'
appl( ordinar( meaning unless the word is technical, customar( of defined
loo' at the internal conte%t
promote validit(
Mo#ern Approach
7ppl( ordinar( meaning: according to its natural and ordinar( meaning, read in the light of the contract as
a whole, thereb( giving due weight to the conte%tJ
Darlin(ton +"t"re# v Delco A"#t
*i##ho )$ai A"#t &td v 4alay#ian )nternational Shippin( !orp Berhad
$ommercial realit( ris' allocation mechanism
'hoto 'rod"ction &td v Sec"ricor Tran#port &td
*i##ho )$ai A"#t &td v 4alay#ian )nternational Shippin( !orp Berhad
&i0e Saver# 1A"#trala#ia3 &td v +ri(mo-ile 'ty &td
A
Si: rules o! construction'
"i& Contra )ro!erente Rule (contra proferens)
>n cases of ambiguit(, e%clusion clause will be construed strictl( 767>"0& interest of part( rel(ing on
clause for protection.
/hite v 8ohn /ar$ick A !o &td: hired bi'e, which e%cluded liabilit(. 9i'e not properl( maintained and led
to in?ur(.
Darlin(ton +"t"re# &td5 v Delco A"#tralia 'ty5 &td% <a bu(s shares on behalf of <e. <a (without authorit()
pla(ed mar'et and incurred losses on <e. <a tried to defend with e%clusion clause.
#eld: <e win 5$ onl( applies when in authoriKed situation.
/alli#. Son and /ell# v 'ratt and Hayne#: contract of sale of bean. 0ellers delivered inferior bean and
bu(ers sued under breach of condition in legislation. 0ellers sought to rel( on e%clusion clause that the(
give no warrant( e%pressed or implied as to growth, description, or an( other matter. .ord warrant(
ma( be used to mean term in contract or to be "/& term (different from condition).
#/L: held not term in contract.
&B9#tran(e v 7ra"co-
"ii& Fun#aental 3reach Rule
5$ can prevent liabilit( for a fundamental breach >4 clause is clear and unambiguous and where the $ourt
in viewing the circumstances of the particular case determines that the intention of the parties was to agree
to an e%clusion clause covering the particular breach alleged.
S"i##e Atlanti2"e Societe dBArmement 4aritime Sav *C ,otterdam#che ?olen !entrale%
5$ does not appl( if breach root of contract (condition) @uestionable.
'hoto 'rod"ction &td v Sec"ricor Tran#port &td% ) contracts for 0 to get securit( to patrol around. 0ecurit(
ma'es fire to 'eep warm and burns down factor(. ) argues breach of fundamental term. #/L: words of 5$
are cr(stal clear and thus effective.
5$ does not appl( if breach is fundamental onl( presumption (not a rule).
5$ ma( prevent if detailed etc.
!o"ncil o0 the !ity o0 Sydney v /e#t%
$onfirmed above.
"iii& Four Corners Rule
5%clusion clause will not protect acts outside 2 corners of contract (unauthoriKed).
!o"ncil o0 the !ity o0 Sydney v /e#t% . got tic'et when leaving car in $+s car par'. &ic'et said it must be
presented for time stamping and pa(ment. $ar stolen b( thief that claimed he had lost tic'et, permitted to
drive awa( with .+s car. . sued $ for implied promise to ta'e care of car and return it. $ sought to rel( on
e%clusion clause that $ does not ta'e responsibilit( of loss!damage of car.
#$: held . win clause does not appl( to negligence of $ emplo(ees that are not
authoriKed!permitted in contract.
Davi# v 'earce 'arkin( Station 'ty &td% < gives 'e(s to par'ing attendant, who ma( shuffle cars around.
6ets receipt. 7ttendant temporaril( moves <+s car out onto street. $ar stolen.
#eld: 5$ covers.
"i%& Main )urpose Rule
5$ will not protect a part( if the breach was outside the main purpose of the contract.
7lynn v 4ar(et#on and !o% contract to deliver oranges. 9ecause of dela(, oranges became rotten.
$arrier won.
*i##ho )$ai A"#t &td v 4alay#ian )nternational Shippin( !orp Berhad%
7pproved above.
"%& De%iation Rule
5%clusion clause will not protect from liabilit( if it occurs during a deviation from contractuall( agreed
vo(age!route.
3
Thoma# *ational Tran#port 14el-o"rne3 'ty &td v 4ay and Baker 1A"#tralia3 'ty &td: contract for
transport of )+s goods from Belb to 0(d. 6oods collected b( <+s subcontractor to ta'e to <+s depot before
being ta'en to 0(d. 0ubcontractor unable to deliver to depot before it closed and thus too' it home where
destro(ed b( fire. < tried to rel( on e%clusion clause that protect from liabilit( for loss!damage of goods in
transit!storage. #$: ) won.
"%i& Negligence Rule'
/ld ,ules: !anada Steam#hip &ine# &td v The ?in(
,ule 1: an e%press e%clusion of liabilit( for negligence will e%clude liabilit(
,ule ;: if not, the clause ma( still be effective if the words are broad enough to cover negligence
(but beware of the contra proferentem rule if ambiguous)
,ule =: if alternate ground for a cause of action, words interpreted to cover that other cause of action
and not cover negligence
"ew ,ule:
Davi# v 'earce 'arkin( Station 'ty &td% clear words are necessar(
Darlin(ton +"t"re# &td5 v Delco A"#tralia 'ty5 &td
5E0IS5ATION
&rade )ractices 7ct 11A2:
ss G3: voids terms which purport to e%clude, restrict, modif( terms implied and certain rights conferred
under the legislation, or which have that effect.
ss G37: limit liabilit( ma( be allowed if fair and reasonable
ss G39: limit liabilit( ma( be allowed for recreational services if pertaining to death or personal in?ur(
ss A2-: limit liabilit( is void
0ales of 6oods 7ct
ss G2: limit liabilit( in consumer sales is void
$ontracts ,eview 7ct 113H "0.
1