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Lecture 1

Concerned with the range of binding agreements between people.

Structure of the Course
1. Formation of a contract, how did they actually come into being? What type of forms can
2. Content of the contract: who is actually bound by the contract? What (promises) are in the
3. Events unfolding in the performance of the contract.
What is contract law?
Determining what sort of agreements the law enforces and deciding how those
agreements are enforced. Agreements in the sense of consensual arrangements (b/w
natural persons and companies).
Agreements being a promise or set of promises between two or more persons. However,
this raises the issue of what agreements the law supports and does not support.
o E.g. Should we allow contracts with children? Should they be treated the same as
adults with regards to enforceability.
o Should we enforce contracts with those of mental incapacity?
o Lying to a person to induce them into a contract.
o Can a government favour a contract to a party that would provide them with
o Contracts involving prostitutes, are they illegal? Law must make a value
How the law uses institution of contract? Why does the law even bother about contracts?
This stems from the inherent morality that involves holding people, within reason, to a
promise that they make (moral value in compelling someone to engage in a promise).
2. Contracts are a tool/mechanism to facilitate commerce within a society -> that is an
inherent and necessary good -> therefore we need contracts for that reason.
3. Society does not function well in society if there was no method with which to bind
people to promises. Prevents vigilante enforcement.
o People unsatisfied with the performance of a contract have the ability to seek
Offeror = The person making the offer. Offeree = Person whom the offer is being made
An offer involves one person (offeror) indicating that they are willing to be bound
without further negotiation on the terms proposed.
o 1. Without further negotiation meaning that there is finality. Was there an element
of finality? Or is it merely just a part of interchange during the determination of
the contract?
o 2. Perspective Contracts are objective. Primarily concerned with how a reasonable
person would have understood the action or conduct.
Do not say did you really mean it.

Standing in the shows of the offeree, would that person really have
understood the offer within the definition described.
The use of the word offer and acceptance is insufficient make it a legally viable.
o A says to B, will you do this for $4? What constitutes the it (a contract to buy a
coffee, clothes, house, space ship). Depends, to a certain extent, to what you are
negotiating about.
Presumptions: There are certain situations where there exists a presumption.
Auction: Is the offer made 1. By the seller when they advertise the option. 2. By the
buyer when they make a bid or 3. When the auctioneer bangs the hammer.
o Usually when a buyer makes an offer during step 2 (the bid).
o Consider the legal test (Finality), was the seller willing to negotiate further? Seller
says make an offer and I will negotiate whether it is an acceptable price.
Judges were unanimous in regarding the advertisement as an offer. Advertisement = a
unilateral contract (a promise in return for an act) and plaintiffs acceptance occurred by
the plaintiffs conduct without any direct contact with the company prior to her lodging
the claim for 100 pounds.
Advertisment states that 1000 pounds had already been deposited
Invitation to Treat: That statement is not an offer, but is instead, an invitation.
o Tenders: A process (often conducted by governments and large companies) when
goods and services are needed. Government makes an offer for a new fighter
plane and suppliers compete for the contract and make offers. This is merely an
invitation to treat.
Withdrawal: Withdrawing an offer before there is acceptance.
o Online Purchases: Withdrawing offers from online purchases. There is no contract
until the end of the auction. The seller has the power of acceptance and can
withdrawal the offer before the end of the auction.
Ebay has T & C that state it is not an auctioneer, instead, it merely acts as
an online venue to allow members to offer, sell and buy using an auctionstyle format?
Generally speaking, listing items in an advertisement (bait advertising),
brochure is not an offer. It is instead, an invitation to treat.

Offeree manifesting their consent to the terms of the offered by the offeror.
1. Only an offeree can accept an offer.
2. Acceptance must match precisely the offer. Accept the precise terms.
Machine Company? Sellers?
Seller put forward a letter on certain terms These terms will prevail over any later
Buyer agrees to terms and writes Please sign and return to signal acceptance.
Two approaches to this case:

o Lord Denning Buyer prevails. Must analyse case in terms of circumstanves

(offer/acceptance is limited).
o Other Judges Buyer ters did not match. Buyer disagreed and provided a counteroffer. Seller did in fact give into buyers terms.
What must the offeree do to accept the offer?
2 different issues
1. Act of acceptance
2. Communication of acceptance.
1, Act of acceptance: Carlill and Carbolic Case How did Carlill accept the offer? Was
she liable to communicate this acceptance?
o Typical of a reward case, find pet give money.
o In this cases, offeree must perform to accept the offer i.e. performing the act
requested by the offeror (using the smoke ball -> contracting the flu).
2. Communications of acceptance: Offeror is not aware whether or not offeree has been
done as required. This offeree must notify the offeror that the offer has been accepted.
This created issues during the Carlill case as there had been no direct contact (notify)
between herself and Carbolic.
o Court found that there were two possible ways around this:
It is possible for the offeror to dispense with the requirements that were
notified. Therefore no obligation for Carlill to communicate.
Alternatively: acceptance was required, but Carlill did provide this notice
by writing to Carbolic to claim the reward. This constitutes an acceptance
+ a claim at the same time.

Time in which contract effective with respects to acceptance: When is an acceptance

An acceptance is effective when it is received and comprehended by the offeror (or
someone who represents them on their behalf).
Exception (Post): Contract is deemed to be accepted as soon as and mails acceptance (not
when offeror receives mail).
o Rule applies 1. Whenever the parties reasonably contemplate that post might be
used as a means for acceptance. 2. When the offeree does use the post as a means
of acceptance.
i.e. Must be contemplated that both parties might use post.
Possible to displace the exception to the postal acceptance rule: Bessan v Squires [1974].

Charity controlling reward: You didnt even know that the reward existed when you
found the cure, therefore we do not give you the reward.
o Law when a person doesnt act in response to an offer, they must be intending to
accept the offer by performing the act.
R v Clarke (1927) 40 CLR 227 3-34:

o Clarke gave evidence to police that led to successful conviction. Led to reward.
o At the time Clarke gave info, he was not responding to reward, principle desire
was to exonerate himself.
o Is Clarke entitled to the reward given these circumstances?
In order to accept the offer, the offeree must be acting pursuant or on the
faith of or upon reliance on the offer. Act is responsive partly replying on
or partly in an attempt to activate the offer made.
There exists a legal presumption: court will presume that by doing the act
with knowledge of the offer, the court will presume that it was a response
to the act.
Held Clarke was not acting pursuant or reliance on the offer for reward.
Principle concern was to save his own skin.

Can make an offer and revoke the offer prior to any time before acceptance.
Dickinson v Dodds (1876): Revocation can occur at any time prior to acceptance of offer.
o Dodds made an offer to Dickinson to sell a property. Dodds said I will keep offer
till 9am till Friday. Dickinson finds that Dodds is selling house to someone else.
Dodds finds Dickinson and writes an acceptance only to find out that house is
already sell.
o Was there a contract formed and binding when Dickinson gave acceptance to
Although Dodds said he would keep offer open, an offeror is not obliged
to honour the statement. Can retract at any time. Has no binding legal
How was the offer revoked? Revoked by the third person telling Dickinson
about Dodds other intentions. Therefore notices of revocation can come
from a 3rd person.
No specific formula for revocation.
o Consider shortcomings of the case:
1. No discussion whether the 3rd party was a reputable source. May not
have been sanctioned by offeror.
2. Did the seller really believe the deal was off? (? Not sure about this?)

(a) Generally
Uncertainty Unable to give parties language a sufficiently precise and clear meaning in
order to identify scope of rights and obligations agreed to. Differs from ambiguity. If no
meaning can be attributed to a certain clause/term uncertain.
Distinction between a term of a contract that is ambiguous and uncertain.
Upper Hunter County District Council v Australian Chilling Freezing Co Ltd (1968)

o Ambiguous = When it can be interpreted in different ways. But, it is possible for

the court to select a particular interpretation of the term. Allows the establishment
of a definite meaning.
o Uncertainty = Impossible to give any particular meaning to what has been said or

The lease is to be upon such reasonable terms as commonly govern such a lease
Therefore becomes necessary to determine whether the condition is severable from the
rest of the provision of the contract or whether the whole contract fails.
o When a contract contains a number of number of stipulations one of which is void
for uncertainty whether contract is void depends on the intention of the parties
to be gathered from the whole contract. If the contract is dividable, clause which is
void may be separated and it does not affect the contracts validity.

o Contract to sell land. Contract stipulated that part of land had to be leased to Shell.
However, there was an uncertain clause about the lease stating that the buyer had
to give Shell a lease for that part of land on such reasonable terms as commonly
governed such a lease. Clause was uncertain (lacked content) as there was no
standard lease which such a lease could be compared (it was not ambiguous
because there was no meanings at all).
Does the uncertainty of the clause affect the rest of the contract?
Severance: Process of assessing severance.
Must figure out what the parties have intended. Would the parties
have intended the contract still exist even in the absence of the
uncertain term?
If the parties intention was to continue, uncertainty is severed and
the rest of the contract plays through.
Not what parties intended term is not severable Entire
agreement fails no contract.
Lecture 3
Finding a lost dog on the promise of $100 conditional promise. There is no binding
offer and acceptance until a party performs the act of finding the dog and returning it and
claiming the reward (= a contract)
o Promise + Act = unilateral contract
(difference) Owner promises to pay fee and then you promise to find dog.
o Promise + Promise= bilateral contract
3 conditional elements (for contract formation)
1. Condition precedent to contract (CP) unless and until that contract is satisfied, there
is no contract (party can pull out any time).
o Enter a contract to purchase a car, there is a condition precedent that the car must
be registered.

2. Condition precedent to performance There is a binding contract, but part/all of it

does not get activated until the requirement or condition is met/satisfied.
o Entered contract to by car, payment of the balance owing on the car is conditional
upon the car being delivered.
3. Condition subsequent There is a binding contract, but it may fail at a later day when
the event/condition occurs.
o Engage a builder to engage a work, it is a condition of this contract that the
builder maintains a builders license under the necessary statutory conditions.

Definition: An act or forbearance or the promise thereof that is provided to purchase
another persons promise or act.
o Necessary element in creating a legally enforceable contract.
Law does not enforce all promises that people make, only makes selects a few promises
to enforce.
o Consider whether there was an exchange or bargain reached when the promise
was given. Law will enforce bargained for promises, but not gratuitous
E.g. if you do well in the HSC, I will buy you a guitar as a reward. Are
these contractual promises that the law can enforce? (Law only enforces
promises that are bargained for).
o Are these contracts enforceable?
E.g. I promises on Friday I will give you me iPad.
E.g. If you get a D average in law I will give you an iPad.
E.g. If youI will give you an iPad.
o Dog reward example:
Member of the pubic provides consideration Consideration is the act of
finding the dog.
Owners consideration is the promise of reward.???
Bilateral Contract: Investigator provides consideration by promising to find the
dog.???What is the consideration of the owner?
Is there a consideration in return for the other sides consideration.

Gov offers a reward if you fulfil contracts.

o Woolenmills
*Australian Woollen Mills Pty Ltd v Cth (1954) 92 CLR 424 6-07:
o Consideration on the part of the offeree is completely executed by the doing of the
very thing which constitutes acceptance of the offer (as seen in Carlill v Cabolic
Smoke Ball Co.).
Was it intended to be accepted?
o Held Letters merely contained a statement of government policy and their
proposed subsidy scheme. It was not an offer capable of acceptance by the

Impossible to hold that any contract was constituted at any stage binding
the Commonwealth to pay a subsidy to the plaintiff in consideration of a
purchase of wool for local manufacture.
Only promises which have been purchased may be enforced. A promise
not supported by consideration is a gratuitous promise not enforceable by
o High court considered it a case of consideration. Was there a matching
consideration between gov and what woollen mills did.
Must take a look at bargain.
Consideration to give wool for gun?
HC found that gov was not actually trying to purchase/buy wool. No
exchange or bargain b/w the two departments.
When you arrive in Sydney tomorrow, I will pay you $1,000 With only that
knowledge it is not a contract. There is no contract as there is no possible pri quo, no
enough prior infor??
o 1. You borrow $1000 forum your friend now come to see you. (No bargain, just a
o 2. Person is a good friend, they come to visit you for your bday (Just a gift,
gratuitous promise).
o 3. Friend comes to fix your macbook, would not come to Sydney otherwise
[elements of bargain + contract].
Benefit from getting macbook.
Detriment for friend to come over to Sydney.
Is it necessary to show a benefit to another party?
o I ask you to support a charity. I will sing a song and you pay money to charity
Binding contract as there I an exchange of consieraiton.
(My consideration is to perform song)
(your consideration is to pay money)
Carlill v Carbolic
o Carlill consideration = 1. She uses the smokeball, others follow and therefore it is
marketed. 2. It is enough that Carlill suffered a detriment when fulfilling contract
as she had to snif ball (she didnt have to somke it, but she did).
Sometimes there are contracts to multiple people.
o E.g. With a group of friends, busker says they will sing song for $5, 1 person
gives money. not binding contract as not everyone had consideration.
o E.g. Agree to pay KISS to sing a song, only Paul sings. Q: What happens if you
give a promise to multiple people? Band is a joint-promisee it is enough that
only one person gives consideration to form a binding contract.
Quarry land case Hed wife does not need to do anything more, dead
husband already gave consideration, that is sufficient.
Value of Consideration
Consideration need not be sufficient, but only needs to be adequate.

Law does not look into whether it is a fair deal. Only interested in whether it is
technically correct.
However, this leads to absurdities.
o Nestle v Chuckle Music (Rockin shoes)
Was the consideration the x shillings and chocolate wrappers or were the
chocolate wrappers just for eligibility.
Argued wrappers are worthless, not necessary.
Held wrapper was consideration as owner had detriment in
parting with wrapper.
Past Consideration
What you have done in the past does not constitute consideration.
What you do in response to a consideration = a promise??
o B finds As dog. A, I will pay you $1,000 tomorrow. A does not pay.
There is no contract as there is no consideration. At first, there was
consideration, but when B asks for money there is no contract.
o A puts sign reward for finding dog. B finds dog and says pay me $1,000 =
binding contract that matches up with promise.
When I first performed those services, t was understood that there wuld be renumeration
for those serices (sm is not discussed, but is implicit). You are beneficiary, I promse to
pay you x dollars. How to use these 2 arguments?
o 1. Paying x sum is reasonable amount.
o 2. When you nominated a sum later, that is evidence of what a reasonable sum is.
???????? WTF???
Illusory Consideration
Parties can make contracts that have substance superficially, but they are so
discretionary that in reality they promise little.
o X engaged in exporting goods, Gov promised to pay a subsidy to the
company. Subsidy described of an amount or at a rate as determined by the
gov from time to time. Gov ended up reneging from the promise.
o Does the contract have any content?
o HCA (majority) Contract lacks content, can we fill in the gaps? Courts
could not fill the gaps
Can gov just pay a reasonable sum?
Does not necessarily mean the court will provide a n objectionably
reasonable price.
Difficult to give a value to the subsidy.
o HCA (minority) Gov should have at least fulfilled its promise. Should have
made an attempt to make a value etc.
Meehan Jones
3. I agree to buy land provided I have satisfactory finance
o Held It is not true to state that it was at the purchasers absolute discretion.
The small promise of acting honestly/reasonably saves the contract??

People may already by bound to do certain things.

o Shooters party fan, we need your support, we will give you a gun. You vote,
you ask for gun, did not give a gun.
You are already obliged by law to vote.
You are already obliged by law to attend jury duty.
Already obliged by law to act as a witness.
If you promise to do an act already obliged to do by law, it is not sufficient
consideration. However, if you promise to do an act that goes above and beyond the
legal obligation, it may constitute sufficient consideration.
o E.g. CASE Coal strike, coal company wants police. They agree to pay police
money if they station police officers at the coal company. Can the police claim
Held If the police thought that being stationed was simply part of
their duty, then they were not entitle to extra payment. But, if they
believe that being stationed at the coal mine constituted going above
and beyond their obligation = entitled to payment. On the facts, police
did go above and beyond, got payment.
o E.g. CASE Ward v Byham: Unmarried parents of the child split, given to
someone else to look after. Mum promises to make sure child is looked after
Father pays in return Mother remarries father stops providing funds.
Held (Lower Court) It is mothers duty to look after child in English
law Therefore mother could not get paid by father as she was doing
her obligation by law.
Held (Court of Appeal) Denning finds that the child is a bastard.
Wants to abolish the existing rule?? Who care about duty, they made a
o E.g. CASE Poppy v Popiv: Husband and Wife relationship deteriorated
Wife left Husband begs to come back Wife states I will come back if
you agree to give half of the share of the house Wife leaves again and sues
for half of the house. Can the wife enforce the contract?
Held Although it was the married womans obligation by law to live
with the husband, the reality is that the duty is not enforceable.
Therefore, by voluntarily moving back into the home, she had gone
above and beyond her legal obligation.
Lecture 4
2nd half of consideration.
Duties People who are already under because of contracts.
Non-contractual legal duties vs. contractual legal duties.
Someone is in a contract already, then they promise the same thing again Does this
constitute consideration?
Changing an existing contract involves creating a new contract (variation).

o If there is variation, change must make way for a new, additional contract. What
has changed in the new contract (for both parties)? Are they doing what they
already obligated to do?
Pay to get car fixed for $300. Repair car Mechanic finds it took more
labour changes price to $400 or else he will not replace. Price change,
mechanic did what they were already obliged.
Underperformance: There is a change in contract. One party does what they were already
obliged to do, the other underperforms. Is the 2nd contract binding?
o If you promise or under promise what you are already obliged to do not good
consideration, new contract is not binding.
If someone asks for more money for the same service/promise, the new
contract is not binding.
CASE: Stilk v Myrick

Pay Rises + Duties

Depending on the arrangement, probably fixed with an employment on a
Promises about bonuses are not contractual obligations as worker is working the same
amount, not above and beyond. However, once your contract expires for working, you are
doing more??????
C promises to B to do what A has already promised to do to B.
o Guarantee = contract
A promises to C and promises the same thing to B.
o A promise to C is valid.
E.g. A agrees to marry to B, U (As uncle) promises to give a house when
they marry. U does not provide house A sues. A can sue U because As
promises to marry B. A is not under an obligation to marry A just for U.
E.g. CASE/TEXTBOOK Privity = benefit of 3rd party exclusion clauses.
New Zealand Shipping p. 28
You owe friend $500, debt is due 9am on Friday. Meet friend at 9am, say
do not have $500, will you accept $450 and cancel contract. Following
Friday, friend sues for $50 for not.
Paying for part of the balance is not good consideration. Friend is
entitled to sue.
Exceptions to Consideration:
o 1. Will you take $450 + a coffee cup Good consideration no matter what it is
worth. Have gone above and beyong legal obligations and provided a cup.
o 2. Friend comes at 8am, = good consideration ,gone above and beyond by an hour
o Foakes v Beers Debt of 2000 pounds. Debtor paid off by instalments, creditor
now sues for interest on the debt they just paid off. By obliging to pay.
Qualificaiton/exception to the rule
o 1. Williams v Woffey Brothers:
Avoidance of a practical disbenefit Contractor was on tight schedule, if
subcontractor pulled out, contractor would have been put in chaos.

Therefore, subcontractor provided good consideration and thus, were

entitled to more pay.
Controversial case as now it is easier to argue about practical benefits.
Musunichi Case
Argument over contract, reach a compromise. Once you settle dispute about contract, can
you reopen it? Builder was already obliged by law (it was their existing duty) to do what
they were meant to, I want my extra $500 back.
o Difference is that there was a dispute before this. Courts are reluctant to reopen
cases/settlements of a dispute.
Qualification: 1. Dispute must be legitimate. 2. Dispute must be serious
and non-trivial.
Wiggan v Edwards Contractors sell land.
o Entry in contract Dispute I will give extra 5 year
warranty for any defects.
o Held it was a genuine dispute and resolving. Period. No
need to argue about consideration.
An agreement that is in a special form.
Deed Pole
When you quite a deed, consideration requirement disappears.

Defendant has reason to expect that if its bid proved the lowest it would be used by
plaintiff. This induced actionof a definite and substantial character on the part of the
Reasonable reliance holds the offeror in lieu of consideration ordinarily required to make
the offer binding.

Can reasonable, justifiable, and foreseeable reliance render an offer binding?


What is the test for applying promissory estoppel?

Holding and Rule (Traynor)


Yes. An offer that the promissor should reasonably expect to induce action or forbearance of a
definite and substantial character by the promisee, and which does induce such action or
forbearance, is binding if injustice can be avoided only by enforcing the promise. See Restatement
(2d) of Contracts 90.

The court turned to Restatement (2d) of Contracts 45; merely acting in justifiable reliance on a unilateral
offer is sufficient to make that offer irrevocable for a reasonable period of time to complete performance.

Public Policy

Remedy for estoppel

o E.g. Plaintiff wants to sue the commonwealth, but believe that Cth will raise
statute of limitations. Cth ok sue us, but come case, cth raise statute of limitations
Plaintiff states estoppel
Hold the promise for everything i.e. compensation and suing.
Hold the promise in a more limited state, only compensate plaintiff for
waste in legal costs.
HCA STATES MINIMUM EQUITY remedy for estoppel. Do as
little as possible to undo the harm that the plaintiff has suffered.
o Jimmely v jimmely: proprietary estoppel (land). Family dispute.
Either make promise come true = Give son compensation for house on
Reliance loss = money for building house on land or money lost for
foresaking jobs.
Estoppel summary
Can I use contractual solutions to solve problem? Incompleteness etc.
If you pursue estoppel, Must fulfil elements of what type of estoppel? (Is it 1, 2 or 3)
What is the x factor (e.g. unconscionability)
What type of remedy?
o Simply compensate for minimum equity.
o Hold them to their promise.

Common law, contracts do not necessarily need to be in writing.

o Exception statutory provisions need to be in writing.
Two exceptions for writing (written contracts):
o Guarantees (not in NSW)
o Contracts involving land.
Sale and other disposition in land or..?????????
Signed by the party to be charged
o If it is not in writing, contract is not void, simply unenforceable.
Whats the difference? Actually asymmetrical

Morris v Baron: In 1914 contract, M sells goods to B. 1915: Enter a new

contract that a) agrees to settle dispute in relation to1914 contract, b) nw
agreement M will supply rest of goods to B [Provided in letter signed by
M sues B [over 1914 agreement].
B sues M [over 1914 + 1915 agreement].
o Can B sue M over the 1915 agreement? NO. Only B signed
letter. If B wants to sue, B must hold a document that M has
o Can B sue M over 1914 agreement? Apply the variation
rule 1915 does not work, 1914 does work. [Another pov,
1915 cancels out 1914 degree].

Held No one can sue anyone. [Why????] They believed it was a

Lecture new
Contract dealing with land
Note and memorandum.
o Popu and Popu Case
o Wife left the husband, husband promised her half share of the house
Husband say: consideration argument, Half share of the house (tha is a
disposition of the land) you need it in writing which wife does not have
Therefore, there is no contract.
Person can give written evidence. Mr, Popu wrote evidence and described
did not give an open memorandum but you did sign a document
saying that you will give evidence = written memoranda.
What you can look at as an issue
o A writes to B Im interested in buying property B writes to A, I will pay for
this price A writes to A etc. etc.
No single document tells the whole picture. However, can aggregate
documents. Each document must at least refer to a prior letter (e.g. Refer
to prior letter = suggests that there were past documents).
How much of an agreement must be in writing? All of the essential terms must be in
o E.g. Period v Saunders Essential term was not in document. Was not described
in sufficient detail.
Oral Variations
You have a contract in writing for selling hosue for 1 million. Orally agree to change
contract for 1.5milllion Have already agreed to a contract, but the variation is oral.
o Oral part of the agreement is unenforceable. Written part continues on.
Orally agreeing to end a written contract
o In thi ase, ending/rescinding the contract and can, by oral agreement, end a written
contract. Cannot have an oral change for a written contract.
Morris v Baron: In 1914 contract, M sells goods to B. 1915: Enter a new
contract that a) agrees to settle dispute in relation to1914 contract, b) nw
agreement M will supply rest of goods to B [Provided in letter signed by
M sues B [over 1914 agreement].
B sues M [over 1914 + 1915 agreement].
o Can B sue M over the 1915 agreement? NO. Only B signed
letter. If B wants to sue, B must hold a document that M has
o Can B sue M over 1914 agreement? Apply the variation
rule 1915 does not work, 1914 does work. [Another pov,
1915 cancels out 1914 degree].

Held No one can sue anyone. [Why????] They believed it was a

Distinction b/w cancellation and variation

Were parties trying to cancel original contract to make variations for a new one.
Wee parties just putting variations on top of a new contract????

Contract Content - Terms of a contract

What is in the contract?
There may be written terms in the contract. Can a person be linked/bound to certain terms
of a contract?
Not possible for everyone to write all the terms of a contract therefore there are holes
in the contract Can we fill in gaps/silences in the contract?
Identifying terms in a contract
Negotiating to sell a car. Tell us that it is a 1. 2010 Porsche 2. Prince Harry had a ride in it
3. Will make you cool + famous.
o In reality 1. It is a 2010 Kubelwagen 2. Prince Harry never rode in it 3. Still
How to distinguish what is just marketing and what are genuine terms.
Distinguish 3 sort of requirements.
1. Advertising nonsense with no real consequence (Mere Puff).
2. Representation Two qualities. (i) Person who makes
representation (A) intends to draw other person (B) into the
contract. (ii) (B) is actually induced into the contract i.e. B relies on
representation to enter the contact.
3. When something actually becomes a term of the contract. There
is an intention objectively the promise was just assured or
What a reasonable person would understand objectively about the statement.
o 1. Content of the statement and how important was it to the person it was made?
o 2. Relative knowledge and skill + expertise of the party.
o 3. Was there a written document and what statement was included in it?
The more significant the statement the more likely it is a reasonable person would say
that it is guaranteed.
o Couchman v Hill Woman goes to auction to buy a cow that is advertised as
served (pregnant or not). [advertisement states that it holds no liability over
advertisement/description of the cow]. Farmer says cow is not pregnant. Buy cow.
Cow is pregnant, gives birth and dies.
Is cow being pregnant a part of the contract?
Held It was part of the contract.
o Who has the expertise in the contract?
Oscar Chess Case v Williams About model of the car (differences in
model). It was a misstatement of the car because parts differed.

These statements = reasonably important.

Seller was selling mothers car Was relying on a log book about
the car to make a statement about its model.
Buyer was an actual car dealer.
o Held Statement not held to be part of the contract because
seller was an average person with no expertise knowledge.
Nievta Case
Statement made by car dealer selling to ordinary member of the
o Held Statement was held to seller because he was an
expert on cars.
o Lord Denning If you can fulfil elements 1 & 2, 3 can be
presumed unless it can be proven that the person making
the statement did so innocently and other party should not
reasonably rely on it. Makes it easier to determine a
If parties have been negotiating about certain things, tend to assume that what was
important is in the written contract is in??? Court is reluctant to consider an oral part of
the contract as a term. [if it was important it would have been written anyway].

Collateral Contract [Side/additional contract]

E.g. [3 person collateral contract] Want to go on holiday, do not have sufficient funds. U
says to parents, if you pay for my overseas trip, U promises to give back money.
o Constitutes 2 contracts Principle contract b/w travel agent and parents.
Side Contract b/w parents and U.
A makes a promise to B in return for a promise for something
E.g. U intend to enter agreement to buy panzer from Friend (F).
o Principle contract Agree to buy panzer from F
o Collateral contract (extra promise) F promises that Wittman is associated with
panzer. Based on this, U decides to enter principle contract.
Shepard v Ryde Corporation Rude sells Sheperds land, there is a contract for this
arrangement. Before Sheperd enters contract, Council displays plans about land (There is
parkland). Shepard buys land (enters contract), Council develops on parkland. Shepard
o Was Councils promise part of the contract?
Held HCA Circumstances where a Collateral contract is applied.
Councils ad is not usually put in a contract.
How to prove a collateral contract? Elements
o JJ Savge Case 1. Intention to induce contract, 2. Actual intention? 3. .?

Buyer inquires about what engine goes fast? Seller says using this engine,
boat goes at 15mph. Buyer buys boat with that particular engine boat is
too slow buyer sues.
Held Buyer failed. Seller did draw buyer in, but seller stated that
estimated speed was 15mph. This is different from seller saying I
promise/guarantee that boat will go at 15mph. On the facts, it was not
Collateral contract cannot have a conflict b/w collateral contract and Main contract. If
there is, MAIN CONTRACT PREVAILS over collateral.
o Spencer Case
Estoppel can be used to solve collateral contracts. (Use sparingly)
Trend, there is a main contract then other promies about the quality.

Different ways for someone to be bound to terms i.e. order of priority.

Preference of (i) signed documents over (ii) not signed.
(ii) Not signed
o (a) Tickets
o (b) Other cases
(iii) Course of dealing