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Agreements The traditional approach to establishing an agreement between two parties is to identify an offer made by one party and

an acceptance of that offer by the other. A contract is said to come into existence when acceptance of an offer has been communicated to the offeror. The offer and acceptance theory identifies a magic moment of formation when the parties are ad idem of one mind. Offer An offer is the expression of willingness to enter into a contract on certain terms. A proposal is only considered an offer if the person making it indicates that an acceptance is invited and will conclude the agreement between the parties. Puff Representation, statement, or conduct that clearly over-exaggerates the attributes or characteristics of some product or service and is not intended to be an offer to be relied upon. Puffery consists of statements commending particular subject matter and not statements of fact or promissory statements. The non-specific language of a puff fails to satisfy the criteria of contractual obligation for the reason n that no contract was intended. (Encyclopaedic Australian Legal Dictionary) Invitation to treat An invitation to treat is an invitation to others to make offers or enter into negotiations. The display of goods in a shop is traditionally considered an invitation to treat (Pharmaceutical Society of Great Britain v Boots Cash Chemists Ltd). Auctions are also considered invitations to treat. Tenders are also traditionally considered invitations to treat. Counter-offers A counter-offer is a retaliatory offer to an initial proposal, in which the terms of the initial proposal are modified. A counter-offer renders the initial offer void. A battle of the forms Battle of the forms refers to a situation in which both parties agree to standard form contracts with inconsistent terms. Common law dictates that the last shot fired prevails, or the last form will be considered a counter-offer, from which a contract may be formed if acceptance may be construed as to have occurred. (Butler Machine Tool Co Ltd v Ex-Cell-O-Corp England Ltd) Revocation of an offer An offer may be revoked at any time until acceptance has been communicated, as long as revocation is also communicated. Extension of time limit - If consideration has occurred in order to maintain the continuation of the offer, then the offer cannot be revoked. However, if a promise is made to perpetuate the offer, but no consideration exists, then the offeror is allowed to revoke the offer, as long as revocation is communicated prior to acceptance of the offer. Goldsborough Mort v Quinn

Counter Offer A counter-offer may be considered to revoke the terms of the initial offer, and consequently, terminates the initial offer, and no contract may exist. (Wrench v Hyde) Death - offers may still be accepted as long as news of the death has not been communicated to the offeree. If death is communicated, the offer is terminated, and no contract may exist. Fong v Cilli BUT CONSIDER Laybutt v Amoco Lapse an offer lapses after a reasonable period of time and may be decided by a judge. A reasonable period of time may be determined objectively by comparison to the nature of the contract. Unilateral an offer can be revoked until performance of the conditions contract have been executed. Mobil Oil Australia Ltd v Wellcome International Pty Ltd

Acceptance Acceptance is unqualified assent to the terms of an offer. The necessity of a meeting of the minds depends upon a subjective or objective approach towards formation. Under a subjective approach, no contract was formed unless there was a real consensus between the two parties. Under an objective approach, a contract exists if external manifestations of consent are apparent. Smith v Hughes shows that both these approaches may reach same result. Communication of Acceptance A contract is formed when the offerees acceptance is received by the offeror. (Latec Finance Pty Ltd v Knight) The Postal Rule indicates that acceptance may be effective as soon as communication of it is posted. In Tallerman & Co Pty Ltd v Nathans Merchandise, Dixon CJ and Fullagar J indicated that a finding that a contract is completed by the posting of a letter of acceptance cannot be justified unless it is to be inferred that the offeror contemplated and intended that his offer might be accepted by the doing of that act. Also see Brinkibon Ltd v Stahag Stahl und Stahlwarenhandelsgesellschaft mbH. Silence cannot be construed as acceptance (Felthouse v Bindley). Acceptance may be inferred from conduct (Empirnall Holdings Pty Ltd v Machon Paull Partners Pty Ltd)

Consideration Consideration is something the law regards as valuable, which is given in return for a promise and can be seen as the agreed price of the promise. Two aspects: 1. The promisee must incur a detriment or confer a benefit on the promisor 2. That benefit/detriment must be given in return for the promise

Consideration must to some extent move from the promisee, but may move to a third party. Interestingly, a detriment does not necessarily have to be incurred on the promisee if the promisor has in someway benefited. (Currie v Misa) Adequacy of Consideration Consideration must be of some value, but the courts need not inquire as to whether it is of an equivalent value to the incoming consideration. Does not need to be adequate because: 1. no way of assessing the relative value placed on the consideration 2. a requirement of adequacy would render the enforceability of all contracts uncertain 3. the courts protect economic freedom (Woolworths Ltd v Kelly) (Thomas v Thomas) While inadequacy does not negate a contract, it may contribute to allegations of procedural unfairness. (Blomley v Ryan) Past Consideration Past consideration is consideration given before the forming of the contract. Something given before a promise is made cannot constitute good consideration. This is relevant when a contractual transaction has been completed and one party makes a promise, which the other seeks to enforce. (Roscorla v Thomas) When services are performed at the request of the promisor with an implication that said services will be paid for, performance of the services constitutes good consideration. (Ipex Software Services Pty Ltd v Hosking) (Lampleigh v Brathwait) Existing Legal Duty Rule Neither the promise nor the performance of an existing legal duty constitutes good consideration. Stilk v Myrick Hartley v Ponsonby Williams v Rofey Bros established an exception to the rule in that if:
(1) A enters into a contract with B for the supply of goods or services in return for payment by B; and (2) Prior to completion B has reason to doubt whether A will complete; and (3) B then promise A additional payment in return for B promising to perform on time; and (4) As a result of this promise B obtains a benefit or obviates a disbenefit [eg, liability to third party]; and

(5) Bs promise is not given as a result of As economic duress or fraud Then (6) The benefit to B (or obviation of disbenefit) is capable of being good consideration for Bs promise

Agreement/Contract Distinction A contract is an agreement in which a desire to create legal relations is a fundamental aspect of that agreement. Legal Relation Presumptions Agreements made in a commercial contract are presumed to be of a contractual nature. Contrariwise, agreements made in a domestic or friendly relational environment are presumed to not be legally binding. Ermogenous v Greek Orthodox Community of SA raised problems with these presumptions. Illusory Promises An illusory promise exists when the promisor has an unfettered discretion in relation to performance. (Placer Development Ltd v Commonwealth) Uncertain Promise An uncertain promise exists when the essential aspects of that promise are uncertain. Incomplete Contract An incomplete contract exists when certainty regarding essential aspects of the contract is not present. Formalities As a general rule contracts do not need to comply with any sort of formalities. Thus, while it is more difficult to prove contracts that are entirely or partly oral, this is a matter of evidence and procedure only and is not relevant to the validity of a contract. There are, however, some exceptions to the general rule, so that some contracts require essential terms to be recorded in writing and signed. These requirements generally derived from the Statute of Frauds 1677 (UK) (which still applies in WA) and were principally designed to reduce fraudulent contractual claims. In some cases more modern statutes impose formalities to protect consumers by ensuring that they receive copies of their contract and all its terms or to make proof of certain contracts easier. Statute of Frauds (1677) Parliament passed the Statue of Frauds to discourage fraudulent contractual dealings. It is the basis of the legislated requirement for formalities within certain contracts.

Contracts that must be in writing Land Contracts for the sale of other disposition of an interest in land are required to be evidenced in writing and signed by the person against whom the action is brought. In Victoria, this is provided for in the Instruments Act 1958 (Vic) (s. 126) This includes trusts contracts. Guarantee Contracts of guarantee are generally subject to the same formalities rules as those relating to the sale of disposition of interests in land, discussed above - in Victoria, they are brought within s 126 of the Instruments Act 1958 (Vic). Necessary Elements The Statue of Frauds and successor legislation provides that an action shall not be brought on a contract of a particular type unless the agreement, or a memorandum or note of the agreement, is in writing and signed by the party to be charged on the contract. The statute contemplates reliance on two different types of document. First, where the contract is made in writing, the plaintiff may rely on the written contract. Secondly, where the contract is made verbally, the plaintiff may rely on a memorandum or note of the agreement, ie, a document that provides evidence of the existence of the verbal agreement. 5 Primary Issues 1. the amount of detail a document must contain to be considered a memorandum or note of the contract 2. when the document came into existence 3. when separate documents can be joined to satisfy the statue 4. when a document is taken to be signed for the purpose of the statute 5. whether an electronic document may satisfy the statute. Express Terms In some cases, it is difficult to ascertain which terms are part of a contract. When a court applies its reasoning to determine the terms of a contract, it applies an objective test: what would a reasonable person, hearing or reading the statement in question, have concluded as to its status? Estoppel by conduct The principles of estoppel by conduct are concerned with inconsistent conduct by one party that causes or threatens to cause harm to another as a result of the second partys reliance on that conduct. An estoppel arises where one person (the representor) induces another person (the relying party) to adopt and act upon an assumption of fact

(common law estoppel) or an assumption as to the future conduct of the representor (equitable estoppel). Common Law Estoppel If A and B negotiate the terms of a contract, for example, a common law estoppel may arise if the representor induces the relying party to believe that the representor has signed the contract. This is an assumption of existing fact. Equitable Estoppel An equitable estoppel may arise if the representor induces the relying party to believe that the representor will sign the contract. This is an assumption relating to future conduct. Equitable estoppel encompasses promissory estoppel and proprietary estoppel. Proprietary Estoppel This operates where the relying party acts to his or her detriment on the faith of an assumption that the relying party has or will be granted an interest in land. Promissory Estoppel This operates in any instance of estoppel not involving land. The Elements of Equitable Estoppel The leading case in Australia is Waltons Stores v Maher. The uni 1. 2. 3. 4. 5. 6. Assumption: relying party adopted an assumption about a past, present or future state of affairs. Inducement: assumption was induced by conduct of representor/promisor. Detrimental reliance: relying party acted on assumption such that he/she will suffer detriment if representor does not adhere to assumption. Reasonableness: relying party acted reasonably by adopting and acting upon the assumption in the way that he/she did Unconscionability: in the circumstances it is unconscionable for representor to depart from the assumption. Departure: representor has departed or threatened to depart from assumption

Parol Evidence Rule The PER concerns contracts that are recorded wholly in writing, and precludes oral statements made prior to contract formation/negotiations (i.e. evidence that extrinsic to what is contained in the final written contract)

Discussions or correspondence about negotiated terms should be treated as superseded by a written agreement that appears to be final and complete (consistent with the objective approach taken in contracts) Strict Approach? Flexible Approach? Reasonable person test? Estoppel as an exception? The High Court has affirmed the PER conditionally, declaring that it might be possible to use extrinsic evidence to establish that a contract was partly written and partly oral. (Obiter from Equuscorp v Glengallan). It is possible to distinguish evidence that would be dismissed by PER by establishing it as a collateral contract. Tests of Statements Contractual Merit The language used may connote a statements contractual merit. Definite statements are more likely to be considered promissory, while more subjective, ambiguous statements are not. (JJ Savage & Sons v Blakney) The relative expertise of parties is considered in determining the promissory nature. Ie, statements from the party with the greater level of expertise are more likely to be considered promissory, while vice versa, the statements are more likely to be considered representational. (Oscar Chess v Williams) The importance of the statement; a statement that is significant to the nature of the contract is more likely to be promissory (Dick Bentley Productions Ltd V Harold Smith, Van Den Esschert v Chappell). The timing of the statement may indicate the more promissory nature of the statement. (same case)

Signature of Contracts A well-entrenched traditional rule: a party will be bound by the terms contained in a contractual document which he/she has signed. (LEstrange v Graucob, Fitness First v Chong, Toll (FGCT) Pty Ltd v Alphapharm Pty Ltd). Rule also applies to contracts made via email or over the internet (e.g. click to accept agreements eBay v Creative Festival Entertainment) But the rule will not apply where: the document in question could not reasonably be considered a contractual document; or the consent to be bound (by virtue of the signature) has been vitiated by factors such as misrepresentation, mistake, duress, fraud, undue influence or unconscionable dealing. (Curtis v Chemical Cleaning and Dyeing Co) Two Main Factors to Determine the Eligibility of Terms 1. For the written terms to form part of the contract, they must be made available before the contract is made. (Oceanic Sun Line Special Shipping Co v Fay) 2. A party, who actually knows that a delivered document or sign displayed before or at the time the contract made contains contractual terms, is bound by those terms. This will be so even if the party has not actually read the terms. Alternatively, if a party has no actual knowledge, he/she will be bound if the delivered or displayed terms have been made available such that reasonable notice of them can be taken to have been given. (Parker v South Eastern Railway Company)