Part 2 Consideration, Privity & Terms of Contract

CONSIDERATION (a requirement for simple contracts only)

Morris & Parker LJJ: Mother had undertaken to do
more than was required under her duty as mother
Definition of Consideration
good consideration.
Pre-existing contractual duty between the same parties:
The promisee must provide consideration for the promisors
Stilk v Myrick: A promise to perform a pre-existing
promise for it to be enforceable (under the law of contract).
contractual duty is not good consideration.
An act or forbearance of one party, or the promise thereof,
*Two sailors deserted, and were not replaced by
is the price for which the promise of the other is bought
Captain.
(Pollock).
*Captain therefore promised extra wages to the
In unilateral contracts, consideration is the doing of, or
remaining sailors if they worked the ship back to
forbearance from, an act.
London.
In bilateral contracts, consideration is a promise.
*In original contract, the sailors promised to do all
that they could under emergencies during the
Consideration must be legally sufficient
voyage.
Desertion of a part of the crew is an emergency of
Illegal, love or concern Not legally sufficient.
the voyage remaining crew were bound by
Adequacy.
original contract to perform the additional work
Consideration must be sufficient, but need not be
anyway not good consideration.
adequate Courts will not inquire into the adequacy
Hartley v Ponsonby: If the additional performance went
of consideration.
beyond that originally contracted for, it is good
Chappel & Co Ltd v Nestle & Co Ltd: Consideration
consideration for the fresh promise.
need not be a commercially equivalent exchange for the
*17 of the 36 sailors deserted, leaving a crew of 19.
promise.
*Captain promised some remaining sailors extra
*Nestle, in an attempt to boost sales, offered to sell
payment if they assisted in sailing back
records for 1s 6d plus 3 of its chocolate wrappers.
*Hartley was already contractually bound by the
*Wrappers were worthless to Nestle.
original contract to do all he could in emergencies.
The wrappers constituted part of the consideration.
The pre-existing contractual duty did not extend to
Pre-existing duties.
sailing an unseaworthy vessel The additional
Pre-existing public duty:
performance went beyond that originally contracted
General rule: A promise to perform (or performance of)
for, and so was good consideration.
a pre-existing public duty is not good consideration.
Williams v Roffey Bros: Even where there is a pre Glasbrook Bros Ltd v Glamorgan CC: An act/promise
existing contractual duty between the parties, a
that exceeds the pre-existing public duty is good
practical benefit to the promisor will suffice.
consideration.
*Builder agreed to pay Contractor to renovate flats.
*Glasbrook promised extra money to police in
*Contractor went into financial difficulty and could
exchange for extra protection.
not finish in time.
*Police provided greater protection than was
*Builder would suffer penalties if the project was
reasonably required under their public duty.
finished late.
The police did not have a pre-existing duty to
*Builder therefore promised Contractor an extra
provide the extra protection their action was
sum payable per flat, to finish renovating in time.
good consideration for the promised payment.
*Contractor finished 8 more flats before
Popiw v Popiw: A public duty that cannot be enforced is
abandoning the job.
not a pre-existing duty.
*Can Contractor recover the extra sum for the 8
*Husband promised his wife title to the house if she
flats?
returned home to cohabitate.
In exchange for its promise to pay the Contractor
*Wife was already under a duty to return to
an additional sum, the Builder obtained (from
cohabitation.
Contractors continuance of the work) the practical
Since the law neither could or would force the wife
benefit of (1) possibly avoiding penalties for the
to return home, the wifes return was good
delay, (2) avoiding the trouble and expense of
consideration.
finding another subcontractor, and (3) avoiding
Hudson J accepted Lord Dennings statement in
bringing Contractor to court Contractors
Ward v Byham.
continued work was sufficient consideration for the
Ward v Byham: Traditional view is challenged by Lord
Builders promise of additional payment.
Existing duty rule in Stilk v Myrick does not
Denning MR.
*Father promised to pay mother for looking after
satisfy commercial needs, practices & expectations.
Court was refining, not overruling, the rule in Stilk
the child.
*Mother was already under statutory duty to
v Myrick.
Pre-existing contractual duty with a third party
maintain the child.
The Eurymedon: A promise to perform (or the actual
Lord Denning MR: A promise to perform (or
performance of) a pre-existing contractual duty to a
performance of) an existing duty is good
third party, is sufficient consideration.
consideration, because it is a benefit to the person
*Consignee promised that the Stevedores are not
to whom it is given.
liable for negligence.

Part 2 Consideration, Privity & Terms of Contract

*Stevedores unloaded goods, and negligently
*Musumeci leased a fruit shop in a shopping centre
damaged Consignees goods.
from Winadell.
*Stevedores were already contractually bound by a
*Musumeci claimed that they could not compete
contract with a TP (Shipowner) to unload the
against another store in the shopping centre.
goods.
*Winadell promised to reduce Musumecis rent by
*Did the Stevedores unloading constitute sufficient
1/3, if they stayed.
consideration for the Consignees promise that the
No difference in principle between promise of
Stevedores are not liable?
additional payment (Williams v Roffey case) and
The Stevedores unloading was an existing
promise of reduced payment (Musumeci case)
contractual duty to a TP (Shipowner), but was
Follow Williams v Roffey & apply practical
nevertheless
good
consideration
for
the
benefit test.
Consignees promise of exemption because the
In exchange for its promise to accept a reduced rent
Consignee obtained the benefit of a direct
from Musumeci, Winadell received the practical
obligation which he can enforce.
benefit of (1) a successful-looking, fully-let
Forbearance.
shopping centre, (2) a good reputation, and (2) not
Dunton v Dunton: Forbearance may be sufficient
having to find another lessee Musumecis
consideration.
payment of a lesser sum was sufficient
*Husband promised to pay wife monthly, provided
consideration for Winadells promise.
she conduct herself with sobriety, and in a Consideration must be in return for the promise of the
respectable, orderly and virtuous manner.
other party.
Wife was legally entitled to conduct herself in any
Australian Woollen Mills Pty Ltd v The Commonwealth:
way she liked.
There must be a connection between consideration and
Wifes promised forbearance of her liberty to
the alleged promise it supports.
conduct herself is good consideration.
*Govt promised to pay manufacturers a subsidy on
Part payment of debt.
wool purchased for domestic consumption.
The rule in Pinnels Case: Payment of a lesser sum on
*Alleged consideration is manufacturers promise
the day in satisfaction of a greater, cannot be any
to purchase wool.
satisfaction for the whole.
Test: Whether there is a promise (express or
A promise to pay a lesser sum is not, by itself,
implied) offered in consideration of the doing of an
sufficient consideration for relinquishing the
act.
greater sum because the payer is already obliged to
Nothing in the facts suggests that the payment of
pay the lesser sum, plus more.
subsidy was put forward in order to induce any
However, acceptance of something other than the
manufacturer to purchase wool not good
money owing will be sufficient consideration for
consideration.
the promise to relinquish the whole sum.
Consideration may be executory or executed, but not past.
Note: Payment of a lesser sum can be sufficient
Roscorla v Thomas: An act that precedes the promise
consideration for satisfaction of the greater sum, if
cannot be in return for it, and therefore cannot be
the debt is paid:
consideration for the promise.
In a different manner (eg. by 3rd party),
*Pl purchased Defs horse.
*After the deal was completed, Def promised that
At a different time, or
the horse was sound and free from vice.
In a different place.
The purchase had already happened, and so was
Foakes v Beer: Application of rule in Pinnels Case.
past consideration for Defs promise Pl had
(Note: can ignore words in brackets)
given nothing for Defs promise no
*Beer promised not to take further proceedings on
consideration.
Foakes (for interest), if Foakes paid off the full
Lampleigh v Brathwait: If the past act was requested,
amount of his debt (without interest) to Beer.
and it was reasonably implicit that there will be
*Foakes paid full amount (without interest), but
payment for the past act at the time of request, then the
Beer sued Foakes for interest on the debt.
past act is consideration for a subsequent promise to
Foakes was already obliged to fully repay his debt
pay.
(with interest) Foakes did no more than he was
*Def, having committed murder, asked Pl to obtain
contractually and legally obliged to do not
a royal pardon.
sufficient consideration for Foakes promise not to
*Pl made journeys at his own expense to find the
sue.
pardon.
Re Selectmove Ltd: Williams v Roffey principle is not
*Def afterwards promised him money for his
extended.
trouble.
A promise to do something is the same as a promise

*Consideration appears to be past.

to pay something.

A mere voluntary courtesy will not be

However, to extend Williams v Roffey to a practical
consideration, but this is not the case here.
benefit derived from a promise to accept a lesser
The Defs request for assistance carried an implied
sum for a larger debt, would contradict Foakes v
promise that the Pl will ultimately be paid for his
Beer, a House of Lords case Court of Appeal
services the request and promise to pay were
could not extend Williams v Roffey.
part of the one transaction Pls consideration
Musumeci v Winadell:

Part 2 Consideration, Privity & Terms of Contract

was not past Defs promise to pay was
D&C Builders Ltd v Rees: Someone behaving
enforceable.
unconscionably cannot rely on estoppel.
Re Caseys Patents: Where a service is performed at
*Def owed the Pls money.
anothers request, and a subsequent promise to pay is
*Def knew that the Pls needed the money to stave
made, then that promise will be enforceable if, when the
off bankruptcy, and insisted a lesser sum in
request was made, it was reasonable to assume that in
satisfaction of the debt.
the circumstances, the service performed would
*Pl reluctantly agreed to accept the lesser sum in
ultimately be paid for.
satisfaction of the debt.
*Promoter promoted an invention commercially.
*Pl later sued for balance of the account.
*After the promotion, the Inventor promised to
Pl not estopped from going back on the promise to
give the Promoter a 1/3 interest in the patents.
accept a lesser sum, because the Def had held the
*Inventor decided not to pay anymore, alleging that
Pls to ransom.
the consideration was past.
Legione v Hately: The representation must be (expressly
At the time the past service was requested and
or implicitly) clear and unequivocal (but it does not
performed, there was an implied promise that it
have to be so in entirety).
would be reasonably paid for.
*Vendors gave Purchasers notice that the purchase
Subsequent promise to pay a stipulated amount
contract will be rescinded if the default was not
serves as evidence of what is the reasonable
remedied by 10th August.
amount.
*Purchasers on 9th rang Vendors solicitors and
Since the second promise is part and parcel of the
asked secretary if they could settle on 17th.
first, consideration for the first promise extended to
*Secretary replied I think thatll be alright but Ill
the second promised payment is enforceable.
have to get instructions.
Consideration must move from the promisee, but it need not
*On 14th, Vendors solicitors notified Purchasers
move to the promisor.
that the purchase contract was rescinded.
Coulls v Bagots Executor and Trustee Co Ltd: If a
Secretarys statement indicated that she was not in
promise is made to promisees jointly, consideration
a position to agree Secretary had not made a
need only move from one of them.
clear and unequivocal representation that the
*Coulls owned property that ONeil wishes to
Purchasers could disregard the expiry no basis
quarry.
for promissory estoppel.
*Parties entered a contract, which provided that
Waltons Stores (Interstate) Ltd v Maher: 1) Promissory
ONeil was to pay royalties to both Coulls and his
estoppel can be used to defend or create an action, 2) It
wife as joint tenants.
can be applied even if there is no pre-existing contract,
*Coulls provided consideration, but not his wife.
3) Unconscionability satisfied by (a) a creation or
*Coulls died.
encouragement by the party estopped of an assumption,
If wife is a party of the contract, she is a joint
that either (i) a contract will come into existence or (ii)
promisee entitled to royalties even though the
a promise will be performed; and (b) that the other party
relied on that assumption (c) to his detriment (d) to the
consideration was provided only by the deceased.
knowledge of the party estopped.
Options.
*Maher proposed to reconstruct a building for
Goldsbrough Mort & Co Ltd v Quinn: A promise to
Waltons to lease.
keep an offer open for a fixed period (an option) will be
*During negotiations, Waltons solicitors were
enforceable only if there is consideration for that
advised that the final agreement had to be settled
promise.
in the next day or two otherwise it will be
impossible for Maher to complete the rebuilding
PROMISSORY ESTOPPEL
on time.
*Waltons solicitors then forwarded to Mahers
Even in the absence of consideration, the promisor may be
solicitors a new lease document incorporating
liable to make good a detriment incurred by the promisee in
amendments, with covering letter stating that they
reliance on the promise.
believed Waltons approval is forthcoming, and that
Je Maintiendrai Pty Ltd v Quaglia: Detrimental reliance
we shall let you know tomorrow if any
is essential.
amendments are not agreed to.
*Pl agreed to reduce rent paid by Def.
*4 days later, Mahers solicitor having heard
*When the Def later proposed to vacate, the Pl sued
nothing further, returned the documents duly signed
for the accumulated arrears.
by way of exchange.
The detriment of the promisee is measured only at
*Maher assumed that Waltons would had executed
the moment when the promisor proposes to resile
contract, and began reconstruction.
from his promise.
*Waltons knew this and told its solicitors to go
Implicit that the Def had conducted its affairs
slow on the Maher contract.
differently as a result of the promised reduction. It
*Waltons later told Maher that it did not wish to go
spent the money elsewhere, and so did not have it
with the agreement.
readily available to meet the alleged lump sum.
No contract was concluded.
If the Pl were allowed to recover the arrears, the
Detrimental reliance: Waltons induced and
Def would suffer a detriment Unjust to allow
encouraged Maher to act to their detriment, by
recovery.
remaining silent when they knew that Maher was

Part 2 Consideration, Privity & Terms of Contract

acting on the false assumption that they had a
Property law regarding easements and covenants on land
concluded contract.
Tulk v Moxhay (?): Easements and covenants restrictive
Unconscionable
conduct:
Waltons
was
of the use of land, if appropriately created, benefit and
unconscionable because they chose to remain silent
burden not only the immediate parties of their creation,
while knowing that Maher was relying on the false
but also TP successors in title.
assumption to his detriment.
Statutory Exceptions
The Commonwealth v Verwayen
Insurance Contracts Act 1984 (Cth) s48
*Verwayen, a navyman, was injured in ship
Manufacturers Warranties Act 1974 (SA) s4(1): Where
collision, and sued under negligence.
any manufactured goods are (a) sold by retail in SA, or
*Cth promised not to rely on a defence.
are (b) delivered, upon being sold by retail, to a
purchaser in SA, the manufacturer warrants (c) that the
*Cth later pleaded the defence to defeat Verwayens
goods are of merchantable quality, and (d) where the
claim.
goods are of a kind that are likely to require repair or
Cths representations led Verwayen to believe that
maintenance, that spare parts will be available for a
the defence would not be used, and he had relied on
reasonable period after the date of manufacture.
those statements to his detriment Cth estopped

Remedies.
from going back on what it said.
Privity doctrine: Only contracting parties are entitled to
Mason CJ: Detriment was the added legal fees,
sue for damages or specific performance, exercise
incurred between the time of the statement and the
remedies provided by the contract itself, or terminate
time the Cth sought to resile from them.
for breach or repudiation.
Damages is appropriate, not specific performance.
Beswick v Beswick: Specific performance is an
Difference between 2 forms of detriment:
appropriate remedy for breach of a contract to benefit a
Detriment required to establish good consideration
TP.
is a detriment of the promisee requested by the
*Man sold business to nephew, in consideration of
promisor.
the nephews promise to pay the mans wife a
Detriment required to establish promissory estoppel
weekly amount for life after the death of the man.
is something which follows naturally from the

*The wife was not a party to the contract.

promisee acting on reliance of the promisors

*After mans death, the wife sued the nephew for

promise.
the annuity in both her personal capacity and as
administrator of the deceaseds estate.
PRIVITY OF CONTRACT
Wife has no right to sue in her personal capacity
because she was not a party to the contract.
Doctrine of privity: A contract can neither confer rights nor

Wife, in her capacity as administrator (and

impose obligations on any person except the parties to it.
therefore legal representative of the deceased), was
Dunlop Pneumatic Tyre Co Ltd v Selfridge & Co Ltd: If
entitled to enforce the contract.
A promises B to pay a sum of money to TP, the doctrine

Specific performance ordered because nominal

of privity prevents TP from suing for that sum.
damages would be unjust Wife benefited in fact
Wilson v Darling Island Stevedoring & Lighterage Co
in her capacity as third party beneficiary.
Ltd: If a contract between A and B contains a term

Coulls
v Bagots Executor and Trustee Co Ltd
purporting to exempt TP from tortious liability to A, the
(Windeyer J): If the promisee suffers loss through the
doctrine of privity may prevent TP from relying on that
promisors failure to benefit the TP, the promisee can
term.
recover more than nominal damages.
Trident General Insurance Co Ltd v McNiece Bros Pty
Exemption clauses for the benefit of TP.
Ltd: Future of the privity rule in Australia is uncertain.
Scruttons Ltd v Midland Silicones Ltd (Lord Reid): TP
Exceptions to the privity doctrine.
servants, agents and independent contractors can take
Agency
advantage of the contracts exemption clause if:
When an agent enters a contract on behalf of a
Contract made it clear that the clause was intended
principal, the principal, not the agent, is a party to the
to protect TPs;
contract.
Carrier was clearly contracting not only on its own
Doctrine of the undisclosed principal: A third party can
behalf, but also as an agent for the TPs that the
enforce (and be bound by) a contract if he can show that
clause will apply to the TPs;
a contracting party was acting as TPs agent, even
Carrier had authority from the TPs to do that, or the
though this was unknown to the other contracting party.
Trusteeship
TP later ratified it; and
Where A promises B that A will confer a benefit on TP,
There is consideration moving from the TP (for the
B holds the benefit of As promise on trust for TP
promise of exemption).
The Eurymedon: Lord Reids 4 requirements in Midland
B is a trustee for the TP.
Silicones apply.
The TP beneficiary may, by proceedings in equity
Lord Reids 4 requirements in Midland Silicones
against the trustee B, compel the trustee to enforce
were satisfied Stevedores entitled to the benefit
the contract for the benefit of the beneficiary.
of the exemption clause.
Whether a contracting party has constituted himself
The New York Star
as a trustee is a question of that persons intention
*Contract between Shipowner and Consignee
(Trident v McNiece).
contained the exclusion clause that TP Stevedores
is not liable for negligence.

Part 2 Consideration, Privity & Terms of Contract

*Stevedores finished unloading the goods.
*Contract for sale of land contained the term
*Stevedores
then
negligently
misdelivered
subject to the purchaser receiving approval for
finance on satisfactory terms and conditions.
Consignees goods to an unauthorised person.
Subject to finance clause performance of the
Contract containing the exclusion clause ended
sale contract, rather than its existence, is
when unloading was completed.
conditional on the obtaining of finance
Since the loss occurred after the unloading was
agreement not void for uncertainty.
completed, the exclusion clause no longer covered
satisfactory meant satisfactory to the purchaser
the Stevedores.
Life Savers (Australasia) Ltd v Frigmobile Pty Ltd:
(subjective test) no uncertainty.
Principles adopted in The Eurymedon can be extended
Incomplete agreements: Omission of essential terms.
from carriage of goods by sea to carriage of goods by
Whitlock v Brew (reasonable terms)
land.
*A lease agreement upon such reasonable terms as
*Contract for carriage contained a clause excluding
commonly govern such a lease.
liability for negligence of Subcontractor.
*The clause did not specify a means for
*Subcontractor negligently damaged goods.
determining the period or rent payable of the lease.
Lord Reids 4 requirements were satisfied:
No reasonable terms which govern such a lease
Contract made it clear that the Subcontractor
exist agreement void for uncertainty.
was intended to be protected.
Hall v Busst: A contract for the sale of land will be void
Contract made it clear that the Carrier
if a specific price is omitted.
contracted on behalf of the Subcontractor.
*Contract for sale of land at a reasonable price.
Subcontractor accepted the goods for carriage
Reasonable price falls within a very big range for
upon the basis that he was exempted from
land Void for incompleteness.
liability Carrier had the necessary authority.
Illusory promise: Leads to uncertainty & lack of
Subcontractors ratification was sufficient
consideration.
anyway.
Placer Development Ltd v The Commonwealth: Where a
Subcontractors carriage constituted good
promise is accompanied by words showing that the
consideration for the Consignors promise of
promisor has a discretion of whether he will carry it out,
exemption from liability.
there is no contract.
London Drugs Ltd v Kuehna & Nagel International Ltd
*Cth promised to pay a subsidy to be at a rate
(Supreme Court of Canada): Third party employees are
determined by the Cth from time to time.
directly entitled to the benefit of an exemption clause.
No specified amount or basis of calculation, and no
*Contract limited liability of the warehouseman
standard of a reasonable subsidy amount
for damage of a transformer to $40.
promisor has complete discretion of the amount
*2
Employees
negligently
damaged
the
Cths promise is meaningless No contract.
transformer.
Booker Industries Pty Ltd v Wilson Parking (Qld) Pty
Employees only liable for $40, because:
Ltd: A contract providing that a term is to be determined
warehouseman was clearly intended to refer
by a named 3rd party arbitrator is sufficiently certain to
not only to the employer, but also to employees
render the contract valid.
(because the equipment could only be moved
Promise to negotiate in good faith.
by several people); and
Coal Cliff Collieries Pty Ltd v Sijehama Pty Ltd
Even though the clause did not mention
*The parties will forthwith proceed in good faith
agency, a specific exception should be made to
to consult together upon the formulation of a more
privity: Employees clearly intended to be
comprehensive and detailed joint venture
included by a clause are allowed to rely on it,
agreement.
when (1) the damage they have caused was
Kirby P & Waddell A-JA: A promise to negotiate in
done in the course of their employment, and
good faith may be enforced.
(2) they were carrying out the very services for
Handley JA: A promise to negotiate in good faith is
which the Pl had contracted with their
illusory and cannot be binding, since there are no
employer.
identifiable criteria of how negotiation in good faith
is determined.
Walford v Miles (House of Lords): An agreement to
negotiate in good faith is unenforceable, because it is
TERMS OF A CONTRACT
inherently inconsistent with the position of a negotiating
party.
UNCERTAINTY
The unenforceable part of an agreement may be severed to
make the rest of the agreement enforceable.
Courts are unwilling to declare agreements void for
Whitlock v Brew: If the uncertain clause is a material
uncertainty.
and inseverable part of the consideration, the whole
Subject to finance & Ambiguity
contract is void.
Meehan v Jones: (1) Subject to finance clause is not
uncertain; (2) If 2 or more meanings are possible, the INCORPORATION
court determines the meaning intended.
EXPRESS TERMS

Part 2 Consideration, Privity & Terms of Contract

(i) Contracts not in writing Oral statements
indicates to a reasonable person in his position that
it contained terms).
Whether an oral statement is incorporated as a term depends Factors that determine reasonable notice:
on the objective test of intention.
Type of document
If a reasonable person in the position of the representee
Causer v Browne
would conclude that the representor intended to
*A docket containing an exclusion clause was
guarantee his statements truth, it is a term (regardless
given when a dress was left for cleaning.
of actual intention).
Def did not prove that the docket would be
Factors that determine intention:
reasonably understood as containing terms terms
Relative knowledge and expertise of the parties
on docket are not incorporated.
Oscar Chess Ltd v Williams
Timing of statement
*Def sold car to the Pl, a car dealer.
Thornton v Shoe Lane Parking Ltd: If there is no
*Registration book showed that it was a 1948
opportunity to see the statement until after the contract
model, which the Def orally confirmed in good
is concluded, then it is too late to be incorporated.
faith.
Prior course of dealing
*Pl later discovered it was a 1939 model.
Henry Kendall & Sons v William Lillico & Sons Ltd: A
Pl, not the Def, possessed the special knowledge
prior course of dealing between the parties may
establish notice for the later deal.
and skill to discover the true age of the car Pl
*Pl orally bought contaminated food from Def.
not justified in relying on the Defs statement as a
*Def later sent to the Pl a sold note containing an
guarantee Not a term.
exclusion clause.
Dick Bentley Productions Ltd v Harold Smith (Motors)

*The parties previously had 3 dealings a month for

Ltd
3 years, with each dealing followed immediately by
*Def, a car dealer, sold a car to Pl.
the sold note containing the same exclusion
*Def said during negotiations that the car had
clause.
travelled only 20,000 miles.

*Pl never read any of the sold notes, but knew

*Car actually travelled nearly 100,000 miles.
they contained terms.
The Def had superior knowledge and expertise

By continuing to conduct their business with the

both parties knew that the buyer would rely on the
Def and not objecting to the terms on the sold
statement a term.
note, the Pl must be taken to have assented to the
Ellul v Oakes
incorporation of these terms in the contract.
*Def advertised his property for sale, stating that
DJ Hill & Co Pty Ltd v Walter H Wright Pty Ltd: Where
the property has been sewered.
a prior course of dealing exists, if the Pl was previously
*Pl relied on the statement to purchase it.
unaware that the form contained contractual terms,
Whether the property was sewered was within the
these terms cannot be imported as terms of the
knowledge of the Def, but not the Pl Pl justified
subsequent contract.
in regarding the statement as a term.
Content of statement
Content of the statement
Thornton v Shoe Lane Parking Ltd (Denning MR): A
The more important the content of the statement, the
condition may be so wide and destructive of rights that
more likely that the parties intended it to be a term.
the court should not hold anyone bound by it, unless it
Timing of the statement
is drawn to his attention in the most explicit way.
The shorter the interval between the statement and the
Interfoto Picture Library Ltd v Stiletto Visual
entry into the contract, the more likely that the parties
Programmes Ltd
intended it to be a term.
*Pl sent 47 transparencies to Def with a delivery
Evidence of written memorandum
note.
Oscar Chess Ltd v Williams: If an oral statement is
*Across the bottom, under a prominent heading
recorded in writing, that is good evidence that the
CONDITIONS, were 9 conditions.
statement was intended to be a term.
*Condition 2 specified that a holding fee of 5
pounds a day would be charged for each
(ii) Contracts not in writing Displayed statements
transparency held longer than 14 days.
*Def did not use any of the transparencies, and
Whether a displayed statement is incorporated as a term
never dealt with Pl before.
depends on notice.
Def could not have known, if their attention was
For a displayed statement to be a term, the Def must
not drawn to the clause, that the Pl was charging
show that he did all that was reasonably necessary to
such a high holding fee.
bring the statement to the attention of the Pl.
Pl did not draw the Defs attention to the particular
Parker v The South Eastern Railway Co
clause it is a term of the contract.
If a person receiving a ticket did not know that it
Def only liable for 3.5 pounds per week, assessed
contained writing, he is not bound by the terms on
on a quantum meruit.
the ticket.

Notice
is
irrelevant when the document forming part of the
If a person receiving a ticket knew that it contained
contract
is
signed.
writing, he is bound by the terms on the ticket if

LEstrange
v Graucob Ltd: When a document
there is actual notice (he knew or believed that the
containing
contractual
terms is signed, then, in the
writing contained terms) or constructive notice (the
absense
of
fraud
or
misrepresentation,
the party signing
ticket was delivered to him in a manner that

Part 2 Consideration, Privity & Terms of Contract

it is bound, regardless of whether it has been read or
*Lease contract contained a term that the Lessor
not.
can terminate the lease anytime by giving at least 4
Curtis v Chemical Cleaning and Dyeing Co: If the
weeks notice.
person relying on the term (or his agent or servant)
*Lessee alleged that Lessor orally promised not to
misrepresents it, its effects will be restricted to that
terminate the lease unless required by his head
which it was expressly stated to be.
lessors to do so, and sought to use the promise as a
*Pl asked why her signature was required on the
basis for a collateral contract.
receipt.
The alleged collateral contract was inconsistent
*Assistant replied that it exempted the Defs from
with the main contract (one allowed termination at
certain specified risks, including damage to beads
Lessors free choice, while the other does not)
and sequins on the dress.
no collateral contract inferred by court.
*Document in fact stated that the company is not
JJ Savage & Sons Pty Ltd v Blakney: Collateral
liable for any damage, however arising.
contracts must be promissory in form, not merely
*Pl signed, and the dress was returned stained.
representational.
The assistant created the false impression that the
*Pl entered contract to buy motor cruiser from Def.
exemption only related to beads and sequins, which
*Prior to agreement, Def represented by a letter of
was sufficient misrepresentation to disentitle the
recommendation that the vessels estimated speed
Defs from relying on the exemption, except in
was 15mph.
regard to beads and sequins.
*In fact, its maximum speed was 12mph.
estimated speed 15mph indicates an opinion of
(iii) Contracts in writing
the approximate speed no element of guarantee
no promise no collateral contract.
Parol evidence rule: Where a contract is entirely in writing,
evidence is not admissible to add to or vary it.
IMPLIED TERMS
Exceptions to the parol evidence rule:
Evidence that there was no contract at all
Terms implied in fact terms needed to give business
Pym v Campbell: The rule does not exclude evidence
efficacy to a contract.
that a written agreement was not intended to be a
BP Refinery (Westernport) Pty Ltd v Hastings Shire
contract at all.
Council: To imply a term in fact, (1) it must be
*Evidence of an oral agreement that the written
reasonable and equitable, (2) it must be necessary to
contract will not operate until approval of the
give business efficacy to the contract, (3) it must be so
invention had been obtained from a third party
obvious that it goes without saying, (4) it must be
This oral evidence was admissible.
capable of clear expression, and (5) it must not
Evidence that the parol evidence rule does not apply
contradict any express term of the contract.
State Rail Authority of NSW v Health Outdoor Pty Ltd:
However, in informal contracts, these elements of
Rule only operates when the terms of the agreement are
implication are not as rigid. (Byrne v Australian
determined to be wholly in writing Oral evidence
Airlines Ltd)
is admissible to show that an agreement is not wholly in
[Note: onus of proof is on the party alleging the implication]
writing.
Terms implied in law obligations that the law imposes on
Collateral contracts
particular types of contracts, in the absence of a contrary
A collateral contracts consideration is entry into
intention from the parties.
another contract.
Liverpool City Council v Irwin: There is a necessary
Shepperd v Ryde Corp: The collateral contract must be
implication in tenancy agreement that the council was
truly collateral to the subject matter of the main contract
obliged to take reasonable care in keeping the essential
(ie. the collateral promise should not naturally be found
means of access in reasonable repair.
in the principal contract).
Terms implied by statute
*Pl entered into a contract for sale of land because
TPA ss69-72, 74 [CB 6.134 141].
the Council orally promised that it would maintain
Consumer Transactions Act 1972 (SA) ss8, 9.
the land opposite as a park.
Sales of Goods Act 1895 (SA) ss12-15.
*Council later chose to subdivide the land for
Also see Misrepresentation Act 1971 (SA) s8.
housing.
[Note: onus of proof is on the other party to show that the
Since the Pl would not had entered the contract but
implied term hasnt been breached]
for the oral promise, consideration for the Councils Terms implied by custom or usage
promise was the Pls entry into the contract of sale
Con-Stan Industries of Australia Pty Ltd v Norwich
prima facie collateral contract.
Winterthur (Australia) Ltd: Four propositions on
Natural that the parties would treat the principal
implying terms by custom or trade usage:
contract as devoted to the purchase of the lot, not
Implication is a question of fact.
the stability of the project promise was truly
Custom relied on must be so well known and
collateral to the subject matter of the written
acquiesced that everyone making a contract in that
contract.
situation can reasonably be presumed to have
Hoyts Pty Ltd v Spencer: A collateral contract cannot be
imported that term into the contract.
inconsistent with the main contract.
Implied term cannot be contrary to the express
terms of the contract.

Part 2 Consideration, Privity & Terms of Contract

A person may be bound by a custom even though
loss by negligence (because it would lacking
content otherwise).
he has no actual knowledge of it.
White v John Warrick & Co Ltd: If the words of an
exemption clause are wide enough to cover 2 possible
INTERPRETATION
heads of liability, it will be construed as exempting the
Def from liability in contract, but not from liability in
General
tort. The reason is that if a clause attempts to exempt
liability which the law imposes, it must do so in words
A contract is construed to give effect to the intention of the
that are clear beyond the possibility of
misunderstanding.
parties. Intention is assessed objectively What would a
*Contract for hire of bicycle provided that the Defs
reasonable person in the position of the parties would have
were not liable for any personal injuries to the
taken as their intended meaning?
riders of the machines hired.
For contracts not entirely in writing, evidence of
*Bicycle seat was defective and Pl was injured.
intention is at large.
*Pl sued for both breach of contract and in the tort
For contracts entirely in writing, evidence of intention is
of negligence.
not admissible (Parol evidence rule).
Since the clause did not expressly refer to
Rules of construction:
negligence, the Def is taken not to have intended it
Words in a written contract are given their ordinary
to cover negligence it exempted liability in
literal meaning in context.
contract only, not in tort.
The literal meaning can be departed from if it involves
Davis v Pearce Parking Station Pty Ltd: If the ordinary
absurdity or would create inconsistency with the rest of
meaning of the exemption clause (interpreted in light of
the document.
the circumstances of the case) fairly covers negligence,
A meaning resulting in the contract being effective is
then it is effective to do so.
preferred to one which would render the contract
*Pl parked car at Defs parking station.
ineffective.
*Pl paid a fee and received a receipt, containing a
If the context shows that words are used in a special
term that the car was garaged at owners risk, and
sense (technical, commercial or customary), then that
that the Def would not be responsible for loss or
will prevail over the ordinary meaning (Smith v Wilson).
damage of any description.
Ambiguity in a written contract can be resolved by looking

*Def negligently placed car near a public street

at the surrounding circumstances.
without removing the ignition key.
Prenn v Simmonds: Evidence of prior negotiations

*Car was stolen, and later found damaged.

(which reflect the parties actual intentions and

(1) Def would not normally be liable for loss or

expectations) cannot be used to aid interpretation of
written contracts (unless they establish objective
damage occurring without negligence, and (2) Def
background facts that are known to both parties and the
was making a small charge for custody of goods
subject matter of the contract).
with great value Both parties would have
Codelfa Construction Pty Ltd v State Rail Authority of
intended exemption from heavy liability arising
NSW: Notwithstanding the parol evidence rule,
through negligence Exemption clause covered
evidence of surrounding circumstances is admissible to
negligence.
assist in the interpretation of the contract if the language
Four Corners rule - An exclusion clause does not cover
is ambiguous or susceptible of more than one meaning.
conduct performed outside the four corners of the contract.
Sydney Corp v West: Unless the exclusion clause
Exclusion Clauses
expressly states otherwise, it has no application where
the defendant, as bailee, had negligently dealt with the
Darlington Futures Ltd v Delco Australia Pty Ltd: The
plaintiffs goods in a way that was neither authorised
exclusion clause is interpreted by construing the clause
nor permitted by the contract.
according to its natural and ordinary meaning, read in light
*Pl parked car at Defs car park, and received a
of the contract as a whole, and construing the clause contra
ticket which stated that it must be presented before
proferentem in case of ambiguity.
taking the car away.
Contra proferentem rule: An exclusion clause is construed
*Ticket had terms excluding liability of the Defs
strictly against the party relying on the clause.
for the loss or damage to any vehicle however
No express reference to negligence.
such loss, damage or injury may arise or be
Alderslade v Hendon Laundry Ltd: If negligence is the
caused.
only basis of the Defs liability, then general words of
*Rogue used a duplicate ticket to drive Pls car
exemption will cover liability for negligence.
away.
*Pl left 10 handkerchiefs for Def to wash.
*Car was later found damaged.
*Def negligently lost them.
Attendants delivery of the car to a rogue upon
*A clause of the contract provided: The maximum
presentation of a fake ticket was unauthorised.
amount allowed for lost or damaged articles is 20
Def, as bailee, negligently dealt with the Pls goods
times the charge made for laundering.
in a way that was neither authorised nor permitted
*Pls loss was much more than that.
by the contract performance was outside the 4
Since the Defs only obligation (as bailee) is to take
corners of the contract exclusion clause does not
reasonable care, the clause is construed to cover
cover the loss caused by that performance.

Part 2 Consideration, Privity & Terms of Contract

Deviation Departures from a carriers geographical route,
or radical breaches of his contract.
TNT Pty Ltd v May v Baker Ltd: A carrier cannot rely on
an exemption clause for loss occurring during or after
the deviation from the contract (unless the same loss
would had occurred anyway).
*Pl contracted with TNT (carrier) for carriage of
goods.
*TNTs subcontractor collected Pls goods and
stored them in his garage overnight because TNTs
depot was closed (this was in accordance with
TNTs practice).
*The shed caught fire that night, damaging the
goods.
TNT implicitly undertook to exercise reasonable
care for the safety of the goods during the journey.
Implicit in the contract that such valuable goods
would be stored in TNTs depot, not in a
subcontractors home Subcontractors act was
an unauthorised departure from the terms of the
contract.
*Clauses in the contract provided that the Pl
accepts all responsibility for any damage or loss of
any goods while in the carriers custody; and that
no responsibility was accepted by the carrier for
any loss of, or damage to the goods either in
transit or in storage for any reason whatsoever.
These clauses did not exclude liability for the
damage which occurred after the breach by
deviation.
Statutory controls on exemption clauses
Misrepresentation Act 1971 (SA) s8 [CB 10.111]
Fair Trading Act 1987 (SA) s96
TPA ss68+68A [CB 7.157-160]
Consumer Transactions Act 1972 (SA) s10(1)