Contract Law: Terms
>Types: Express Terms: Written & Oral express terms
>Structure
1. What are terms? (common law)-> written or oral?
1.1 Is the oral statement capable of being an oral term (as per
Oscar Chess v Williams)-> Reasonable Bystander Test
1.1.1 What is the statement to be examined?
1.1.2 Was the representation included in a written
document?
1.1.3 Timing? 1.1.4 Promissory? 1.1.5 Important to the deal?
1.1.6 Special knowledge? Sub conclusion
1.2 Is there a signed written contract? (as per L’Estrange v F
Graucob and Toll v Alphapharm)
1.2.1 Parol Evidence Presumption (PER) can the oral term be
enforced if it is not a signed written document?
1.2.1.1 a) Argue 1 -> partly written and oral terms (PER X) (as
per Van Den Esschert v Chappel) b) how to avoid PER? Argue
2 -> one written and one collateral oral (PER V) (as per JJ
Savage and Sons v Blakney) 3 Elements to consider for
arguing there is collateral contract 1) consideration 2)
promissory 3) cannot be inconsistent with the main contract
2. Has one party breached the terms? (look at the term/facts)
3. Is there an exemption clause? (express or incorporated)
3.1 Is the exemption clause a term of the contract?
3.1.1 Signed documents – signature rule (as per L’Estrange v
F Graucob Ltd). Exceptions: mispresented & mistaken
contract
3.1.2 Unsigned documents (as per Causer v Browne) is there
any unsigned writing which has been incorporated into the
contract (Reasonable Test)
3.1.2.1 Is the document contractual in nature?
3.1.2.2 Has the person who is trying to rely on the exemption
clause given reasonable notice?
3.1.3 Timing issue? (as per Olley v Malborough Court) must
be brought to attention to party at the time contract is made
4. What are the remedies if the terms have been breached?
Type of damages available: loss of profit, personal injuries
>Types: Implied Terms: under Common law
>Structure
1.1 RL: Matter of Law – it is an implied term that parties must
have co-operation and act in good faith (as per Burger King
Corp v Hungry Jack’s Pty Ltd)
1.2 RL: Contract of a certain class
1.2.1 RL: Professionals must carry out service with reasonable
care and skill (as per Costa Vraca v Berrigan Weed & Pest
Control)
1.2.2 RL: Work and materials must be fit for the purpose (as
per Reg Glass v Rivere Locking System)
>Types: Implied Terms: under ACL
Have not been agreed by between parties, but which are
implied or added into the contract
1. Issue (put theory) a consumer is a person who is taken to
have acquired particular goods/services as a consumer if, and
only if (a) the amount paid or payable for the goods/services
as worked out under subsection; did not exceed (i) $40,000 (ii)
if it is greater amount is prescribed for the purposes
>Structure
1.1 Is the contract for goods or services? Under section 2
>Goods are defined under s2 to include items normally
regarded as goods
>Services are defined under s2 include any rights, benefits,
privilege or facilities that are, or are to be provided in trade or
commerce
1.2 Is the contract in trade or commerce? p.360
ACL does not apply if goods or services are provided through
private sale or sale by auction
1.3 Is the contract a consumer contract? Under section 3 (as
per Crago v Multicorp Pty Ltd)
For Goods
>Section 3(1) you are consumer if (i) goods cost $40,000 or
less (ii) they are type or ordinary acquired for PDH (iii) goods
are commercial road vehicle
>Section 3(1) you are not consumer if (i) to be used trade or
commerce (ii) repair
For Services
>Section 3(3) you are a consumer if (i) value of services
$40,000 or less (ii) where more than $40,000, but for PDH
“Ordinary Acquired” – is the goods/ services normally
purchased for personal, domestic or household purposes?
1.4 Which statutory guarantees apply? p.360 Goods (s54-57),
p.373 Services (s60-62)
For Goods
I. s54: Guarantee of acceptable quality - s54 (1) there is
guarantee that the goods are of acceptable quality. S54 (2)
Acceptable quality means that good must be: fit for purposes,
acceptable of appearance, free from defects, safe and durable
II. s55: Guarantee of Fitness for any Disclosed Purpose – s55
(2) Consumer must make known purpose of which the goods
will be used (as per Dawson v Pacific Chase Investments).
Disclosure can be made: directly, through implication, pre-
contractual negotiations
III. s56: Guarantee that goods correspond with description –
s56 (1) the goods sold will correspond to that description (as
per Beale v Taylor)
IV. s57: Guarantee that goods correspond with sample – s57
(1) the goods sold will correspond to with the sample in
quality, state and condition
For Services
I. s60: Guarantee of Due Care and Skill – services will be
provided with due care and skill (as per Read v Neerey)
II. s61: Guarantee as to fitness for purposes – where the buyer
makes known to the service provider for purposes service is
required, the service must be reasonably fit for purpose (as
per Zhang v United Auctions)
III. s62: Where no time for the supply of service is fixed, a
guarantee that they will be supplied within a reasonable time
1.5 Is the breach a major failure? s260 and s268
For Goods
If there is a breach, the remedies to consumers are set out in
the ACL s260. Remedies depend on whether it is a major
failure or not, factors: a) goods would not have been acquired
by a reasonable consumer fully acquired with the nature &
extent. b) goods are substantially unfit for either normal,
disclosed purpose. c) cannot be easily and within a reasonable
time be remedied to make them fit. d) goods are not of
acceptable quality because they are unsafe.
For Services
If there is a breach, the remedies to consumers are set out in
the ACL s268. Remedies depend on whether it is a major
failure or not, factors: a) services would not have been
acquired by a reasonable consumer fully acquired with the
nature & extent. b) services are substantially unfit for either
normal, disclosed purpose. c) cannot be easily and within a
reasonable time be remedied to make them fit. d) services and
any product resulting are not such a nature, condition or
quality. They might reasonably be expected to achieve the
purpose so cannot easily be remedied to make them fit for
purpose. e) supply of services create in unsafe situation
1.6 Is the exemption clause operative? S64 & s64A
>Exclusion clauses – contracts term that excludes, restricts
the statutory guarantees for supply of goods or services is
void (not effective) s64
>Limitation clauses – Remedies may be limited under s64A:
a) good or service is NOT normally PDH. b) limitation must be
fair and reasonable. For goods: limited to repair or
replacement. For services: limited to supplying the service or
paying services to be supplied again
1.7 What remedies are available? p.368 and p.376
Remedies depends whether it is a major failure
For Goods, remedies are listed in s260
>Consumers may choose to reject the goods if the breach is
a major failure. If the goods are rejected: 1. Consumer must
return the goods and may require supplier to provide refund
or replacement with the same goods. 2. Any replacement are
subject to the statutory guarantees. 3. There are time limits
on the right to reject goods. 4. The rejection should on the
same day of the goods supplied and received.
Consumer can also sue for damages.
Rejection of goods – If the breach is NOT a major failure the
supplier may remedy by a) repairing b) replacing c) providing
a refund (a person remedies may be limited if s64A applies)
For Services, remedies are listed in s268
>Consumer can choose to terminate or end the contract if
the breach is a major failure. 1. Termination is made known
to supplier. 2. Following termination, consumer may demand
a refund or any other consideration provided. 3. Where
goods are supplied with the service, if it is terminated, the
goods will be rejected.
Consumer can also sue for damages or loss or damage caused
by the breach. If s64 applies, remedies will be limited even if
it is a major failure.
>Types: Vitiating Factors – Misleading and Deceptive
When the statement is untrue called misleading
>Structure (Statue Law)
1.1 Test Section 18 – A person must not, in trade or
commerce, engage in conduct that is misleading or
deceptive, or likely to mislead or deceive
1.1.1 RL: Person – corporation and natural persons
1.1.2 RL: Was the representation made in trade or commerce
1.1.3 RL: The conduct must be misleading or deceptive.
Under section 18, conducts that can be considered
misleading or deceptive include: a) False statement of fact is
misleading, b) passing on information that has been prepared
by others (as per Yorke v Ross Lucas Pty Ltd), c) Silence? (as
per Collins Marrickville Pty Ltd v Henjo Investments Pty Ltd),
d) Opinion? (as per RAIA Insurance Brokers Ltd v FAI General
Insurance Co), e) Promises and predictions? (as per Wheeler
Grace & Pieruci Pty Ltd v Wright), f) Mere puff?
1.2 RL: Has the person breach section 18 – what did they do
that was misleading or deceptive?
1.3 RL: Loss caused by misleading conduct (as per Dalton v
Lawson Hill)
1.4 RL: What remedy is available for misleading and deceptive
conduct under ACL
>Types: Vitiating Factors – Unconscionable Conduct
A contract may also be vitiated if it would be unfair to enforce
it. Unconscionable means the conduct or statement is unfair.
>Structure (Statue Law)
Section 20, 21 and 22 prohibit unconscionable conduct:
1.1 Section 20 (within the meaning of the unwritten law)
1) A person must not in trade or commerce, engage in
conduct that is unconscionable, within the meaning of the
unwritten law from time to time (as per CBA v Amadio)
1.2 Section 21 (transaction between a business & a
consumer)
1) A person must not in trade or commerce, in connection
with the supply or possible supply of goods or services to
another person.
Factor to consider in Business to Consumer: a) relative
strength of parties. b) conditions reasonably necessary. c)
understanding of document. d) unfair tactics. e) amount paid
to others.
1.3 Section 22 (transaction between a business & a business)
1) A person must not in trade or commerce about other
person or company
Factor to consider in Business to Business: a) understanding
of documents. b) unfair tactics. c) amount have to pay to
acquire goods or services from an alternative source. d)
conduct consistent with other transactions. e) any industry
code to guide the parties. f) willingness to negotiate. g) good
faith. h) strength of bargaining positions. i) conditions which
are reasonably necessary to protect interests.
1.4 Statutory Remedies
Remedies to breach of s21 or 22 may include:
a) Damages (s236), b) Injunctions (s232), c) Compensation
Orders (s237), d) Adverse Publicity Order (s247), and e)
Disqualification Order (s248)
>Structure (Common Law)
1.1 P is under a ‘special disability’ special disability can include:
(as per Commercial Bank v Amadio) a) poor language skills, b)
age, c) illness, d) financial stress, e) economic pressure, f)
superior bargaining power, g) infatuation
1.2 Did D takes advantage of P’s special disability in term
where the taking is unconscionable (that is morally wrong)
1.3 How D took advantage of the special disability for its
commercial benefits as per Amadio test
1.4 What are the remedies available?
Remedies may include:
a) Injunction – it is another equitable remedy. It is a court an
order by the court to do something restraining them from
doing something. It is discretionary remedy
b) Specific Performance – It is an order by the court requiring
one party to carry out their contractual obligations
c) Damages – the purpose is to compensate innocent party.
The plaintiff can only receive if: 1. The defendant caused the
breach of the contract (Reg Glass v Rivers Locking Systems),
2) The losses are reasonable foreseeable (first limb) - would a
reasonable person in the position who breached the contract
expect the losses (Koufos v C Czarnikow Ltd); (second limb) –
if the losses are not expected, did both parties discuss the
matter or loss at that time the contract was made (Victoria
Laundry v Newman Industries), 3) Damages may be reduced
if the injured party does not minimise the loss .
d) Termination - a contract may be terminated (discharged):
1. For a breach of condition (Associated Newspapers Ltd v
Bancks), 2. For a repudation of a contract (Penola Trading Co
Pty Ltd v Sunny Springs Pty Ltd), 3. For an anticipatory breach
(National Engineering v Chilco Enterprises)
Corporation Law: Partnership
>Structure: Creation of Partnership
1.1 RL: What is a partnership? Two or more people carrying on
a business under section 5
1.2 RL: Carrying on business (as per Ferguson v Federal
Commissioner of Taxation) – this entails regular acts done in
trade, occupation or profession (not hobby), systematic and
organised activities, profit motive, commercial flavour,
business already started
1.3 RL: In common (as per Re Ruddock), people have mutual
rights and responsibilities – the business must be carried out
on behalf of all the partners. There must be mutuality
(sharing) rights and obligations
1.4 RL: With a view to profit – must aim to make a profit as
the main purposes of the business
1.5 RL: Sharing of profits under section 6 is prima facie
evidence that the person is partner (s6(3):(a-e)) include a)
payment of debt from profits (as per Cox v Hickman), b)
payment of a salary from profits (as per Plummer v Thomas),
c) payment to a wife or husband or child , etc. or a deed
partner from profits, d) payment for a loan from profits (as
per Re Megevand), e) payment for goodwill of the business
from profits
>Structure: Liabilities of Partners
1.1 RL: Rules relating to the partners under a partnership
agreement or under Partnership Act, section 28,29 (fiduciary
relationship)
Only apply if there is no partnership agreement
Includes: s28(1) share profit equally, s28(2) firm indemnifies
all partners, s28(3) extra capital with interest 7%, s28(4) no
interest on original capital invested, s28(5) right to take part
in management, s28(6) no right to remuneration, s28(7) no
new partner without the consent of all existing partners,
s28(8) decision can be made by a majority partners, s28(9) all
partners can inspect the books, s29 no partner can be fired
unless there is an agreement dealing with that issue
>Structure: Liabilities of Partners (Statue)
Jointly liable for partnership debts and obligations to 3rd
parties (s9 & s13)- section 9 means in matter that include
carrying in the usual way of business and of the kind carried
on by the partnership. This describe the partner’s apparent
authority. S9 will not apply if the partner had no authority to
do so and third party knew this or third party did not know
the partner was a partner. If s9 applies, then all partners
jointly liable under s13
Even in a partner has no actual or apparent authority, the
partnership still can be liable if the other partners ratified the
act (as per Re Oppenheim)
1.1 RL: Is the transaction relate to kind of a business done by
partnership (as per Young v Lamb) Under s9 and s13
To prove that all partners are jointly liable
1.2 RL: Is the transaction done within the usual way that the
partnership conduct as business (as per Goldberg v Jenkins)
To prove that only the partner is liable because not do it
within the usual business
Jointly liable for wrongful acts to 3rd parties (s14 & s16)- s14
states partners who committed wrongful acts by a partner in
the ordinary business makes the other partners liable. It
includes torts (negligence, fraud & defamation) and breach
of statutory duty.
s16: if s14 applies, then all partners will be jointly liable
1.1 RL: Do all partners carry liability for a wrongful act
performed by another partner? (as per Polkinghorne v Holland
& Whittington)
To prove that all partners are jointly liable
Liability for holding out (s18)
A non-partner may be liable for partnership debts if the non-
partner has acted in such a way that people dealing with the
partnership believe them to be a partner (as per D&H Bunny
Pty Ltd vs Atkins)
>Structure: Partnership Property (s24 & s48)
Partners have no title to specific property owned by
partnership, but each have a beneficial interest in every asset
(FCT v Everett), partners have right to use partnership
property for that business. Section 48 sets out rules for the
distribution of assets following the dissolution of a
partnership.
1.1 RL: What happens with the partnership property (as per
Harvey v Harvey)
Partnership property is owned by the firm not the partners.
The partnership is to be applied to pay off the debs and if
there is any surplus to be distributed to the partners
>Structure: Duties of Partners (s32,33,34)
The Fiduciary Relationships between partners. Partners have
responsibilities to one another-duties to behave with good
faith towards each other
1.1 RL: What duties do partners have to each other under
s32,33,34 (as per Chan v Zacharia)
s32-Duties to render accounts for use of property, s32-Duties
to make disclosure of information affecting the partnership,
s33-Duties to account for private profits or use of assets, s34-
Duties to avoid competition & not to compete with
partnership.
>Structure: Liability for Retiring Partners (s40)
Any person who deals with firm after change in its
membership
is entitled to treat all apparent partners as still being partners
until they receive notice of the retirement.
1.1 RL: What happen when partners leave the partnership (as
per Tower Cabinet Co) section 40
Corporation Law: Corporations and Directors (Statue)
>Structure director duties under the corporation act
1.1 RL: Duty to exercise reasonable care and skill s180(1) (as
per South Australia v Clark)
Directors must do their jobs with the degree of care and skill
that a reasonable person would exercise. If a director has
special skill or knowledge, it is expected to bring their special
skills into use when making decisions that affect the
company. Two elements must be satisfied: wrongful or
inappropriate act by the company and the company was
caused by a lack of skill or care by the director. Note: Not
apply for non-managing director
1.1.1 RL: Business Judgement Rule s180(2)- provide a defence
for breach of s180(1) if it includes: a) make the business
judgement in good faith for a proper purpose, b) have no
personal interest in the subject matter, c) inform themselves
about the subject matter to the extent they reasonably
believe is appropriate, d) rationally believe that the business
judgement is in the best interests of the corporation.
Important notes: a) how often should directors attend
meetings, b) should the director know everything about
company’s affairs, c) can director rely on information from
others? Sub conclusion:
1.2 RL: Duty to good faith and for a proper purpose s181(1) (as
per Walker v Winborne)- directors must exercise their powers
and discharge their duties in: a) good faith: act honestly in the
best interests for the company not for their personal
interests, b) for a proper purpose: exercise powers for benefit
of the company
1.3 RL: Duty not to misuse position s182(1) (as per Cummings
v Claremont Petroleum)- directors must not improperly use
their position to: a) gain an advantage for themselves or
someone else, b) cause detriment to the corporation
1.4 RL: Duty not to use information improperly s183(1) (as per
Cranleigh v Bryant)- directors must not improperly use
information to: a) gain advantage for themselves or someone
else, b) cause detriment to the corporation. Information
cannot be used improperly such as: company inventions,
customer and supplier information, marketing strategies,
information about finance, information regarding to
company negotiations, and information created by a director
while carrying out their duties as a director.
1.5 RL: Remedies and sanctions – consequences of a breach of
the director duties s184- For civil consequences of breach
s180,181,182 or 183: a) civil penalty up to $200,000, b)
prohibition from managing companies in future, c) orders to
compensate the company. For criminal consequences: a) if
the director any of duties carelessly or was intentionally
dishonest, the breach may amount to a criminal offence
under s184, fine up to $360,000 and/or five years’
imprisonment.
1.6 RL: Duty to disclose personal interest in subject the matter
of a decision by the directors s191- director should tell the
others that they have a personal interest in the matter being
discussed.
1.7 RL: Duty to avoid insolvent trading s588G- it imposes a
duty on the director to prevent insolvent trading by the
company
Insolvent is defined under s95A: A company is regarded as
being insolvent when it is unable to pay its debts as they
become due.
Following factors strongly indicate insolvency: failure to pay
creditors, inability to provide funds to cover small cheques,
failure to meet demands for payment on essential services
1.7.1 RL: Duty to avoid insolvent trading s588G (1)
1.7.1.1 RL: A person is a director of a company at the time
when the company incurs a debt
1.7.1.2 RL: The company is insolvent at that time or become
insolvent by incurring that debt
1.7.1.3 RL: At that time, there are reasonable grounds for
suspecting that the company is insolvent or would become
insolvent
Sub conclusion
1.7.2 RL: Duty to avoid insolvent trading s588G (2)
1.7.2.1 RL: The person is aware at that time that there are
such grounds for suspecting
1.7.2.2 RL: A reasonable person in a like position in a company
in the company’s circumstances would be so aware
Sub conclusion
1.8 RL: Defences s588H (as per Metropolitan Fire Systems v
Miller)- four possible defences for directors who have
breached s588G. At that time when the debt was incurred the
director must establish: a) 588H (2)- that there were
reasonable grounds to expect that the company would
remain solvent even with the new debts, b) 588H (3)- that the
director had reasonable grounds to rely on information
provided by a competent or reliable person that the company
was insolvent. For sizeable companies: rely on report
provided by accounting staff or auditors; For small
companies: the director is reliable and competent to know
company solvency, c) 588H (4)- that the director did not take
part in management owing to illness or other good reason
(serious illness). To decide whether it is a good reason or not
check in s180(1) such as not attend a meeting where the
decision is made is not a good reason, d) 588H (5)- that the
director took all reasonable steps to prevent the company
from incurring debt such as place the company under
voluntary administration. This means a third-party
administrator will take over the company in order to assess
the best options for company and creditors (auctions-buy
back)
1.9 RL: Remedies and sanctions – consequences for breach of
duty- a) Civil liability: the director must pay the money owed
by the company, b) Civil Penalty: $200,000 fine- civil
sanctions apply when the director is incompetent, c)
Criminal: $220,000 and/or prison for up to 5 years – criminal
sanctions apply when the director is dishonest or reckless
Why study business law?

First, it is important for business owners, managers, and

other professionals to have a basic understanding of business
law to help them make better decisions. Of course, we cannot
possibly cover every legal rule. Therefore, businesses need
these basic laws for the same reasons that people do such as
to define unacceptable behaviour, to provide certainty and
stability, to protect the public, and to provide a mechanism
for businesses to resolve disputes. In general, business law
helps to shape how business is conducted and how
commercial problems in business are solved.

Throughout a business sectors, it can do most things that a

person can do, and we need laws to maintain those activities.
For instance, a business can buy and sell property, sue and be
sued, enter contracts, hire and fire employees, and even
commit crimes.

The study of business involves learning about how to deal

with risk and uncertainty. For example, a restaurant who
introduce new foods does not know for certain that their new
product will be successful. There is no prototype testing or
consumer surveys that can guarantee the product will
success. This is the competitive risk, whereby drives in
modern business. It is the risk that lies in the market and
commercial industry that cannot be entirely removes from
their existence.

Study of business law encourages people to address the

competitive risk problem by constantly improve their
products, prices and service. This is the area of studying law
which learn on how to manage the risk by applying new and
appropriate techniques.

However, there are also other risk such as systematic risk. It

is related to two fundamental examples of systematic risk
which are product liability laws (which deal with harmful
products) and contract law (which deals with promises). The
law goes to preventing the systematic risks. Because business
operate within the legal framework, business people have to
recognize that they are affected by the law. They must know
that their decisions will have a legal contract and further
consequences. Their act may can lead to become a legally
liable to clients, customers, suppliers and third parties.

In conclusion, the importance of studying business law is

about managing the risk of doing business. An understanding
of business law can reduce the risk inherent in doing business