Agreement

A contract is a legally binding promise or agreement.(carter) Therefore, in the abscence of agreement there is no contract. (carter) Agreement can be reached via 1) written/oral contract 2) conduct Agreement is proven by analytical tools of OFFER and ACCEPTANCE. Offer: Is an indication by one person of their willingness to enter into a contract on certain terms without further negotiation. (carter) Test: would a reasonable person in the position of the offeree construe those statements as an offer.(carter) Australian Woolen Mills: wool subsidy scheme ends, gov requests return of subsidy amts unused. Woolen claimed Cth promised the pay subsidy. For a contract to be found require 1) the statement was intended as an offer of a promise 2) the promise was offered as the consideration for the doing of the act ) that doing on the act was at once acceptance of that offer and the providing of executed consideration for a promise In the abscence of an intention, actual or imputed the alleged offer cannot lead to contract and therefore no true offer. ( no intent on side of cth) Invitation to treat : where a person indicates a willigness to negotiate or a request for offers to be made. (carter) Test: would a reasonable person in the position of the offeree construe those statements as an invitation to treat. (carter) Inferences: 1) price lists are invitation to treat- if price lists an offer stores would be bound by them 2) advertisements usually not offers- sometimes can be however (Carbolic) 3) statement of price not construed as an offer, only invitation to treat 4) an agreement on price along does not constitute contract- can be first thing negotiatedlook at type of deal. Seppelts & Sons v Com for Main Rd: was agreement on price enough to constitute agreement? Offer and acceptance depend directly upon intentions Sale of land- unlikely parties would form ag in terms so general Words lke offer, agree and accept when used in relation to price are not to be read as indicating an intention to make a contractual offer. Auctions: 1) person making bid makes offer 2) ad to hold auctions is merely invitation to treat Tenders/calls of tender:

1) ad that calls for tenders is invitation to treat 2) tenders are the offers 3) occasionally can be offer in ad to consider all tenders Goods in Self-service store: considered to be invitation to treat. Pharm Soc v Boots Cash Chemists: drugs must be sold under chemist supervision. Pharm Soc claimed slef service breached legislation. Pharm soc claimed goods in self-service with price constituted an offer, thus customer picking it up is acceptance, chemist cannot deny item unless breach of contract The mere fact that a customer picks up a bottle of medicine from the shelves in this case does not amount to acceptance of an offer to sell. It is an offer by the cust to buy. Statements of price- invitation to treat. Bait Advertising: shops knowing prices are invitations to treat advertise small q of low price items to attract cust. In breach of Trade Prac Act. Shops must have reasonable stocks for reasonable amt of time. Offers can be made to the entire world: it is possible to make such an offer which can be accepted by anoyone. Th contract is not with the entire world, only with those that accept. Carlill v Carbolic Smoke Ball: ad for smoke ball guarenteed would not contract latest epidemic. Offered 100pds reard, show sincerity deposited 1000pds in bank. Mrs Carlill followed instr and contract epidemic. Court placed emphasis on bank deposit to show statement not mre puff- there was intention Ad not a contract to whole world- offer It is an offer to become liable to anyone who peforms the condition, limited to the portion of the public who came forward and performed the condition on the faith of the ad. Ordinary rule of acceptance of an offer states offeror ought to be notified. If person making offer expressly/impliedly inimates in offer that it will be sufficient to act on proposal without communicating acceptance of it, performance of condition is sufficient notification of acceptance Such is this case, and in terms of consideration- Carbolic rec benefit, use of the product would promote their sales.

Acceptance
Where an offer as been made a contract binding the parties will result only when the offeree has clearly accepted the offer. (carter) Acceptance not effective until 1) it is communicated 2) corresponds with offer 3) unequivocal, nothing further to be left for negotiation 4) acceptance can be expressly/impliedly communicated through conduct (carter) 1)Communicaton of acceptance required: A) offer can only be accepted by offeree, and offeree is not bound if unathorised person communicates acceptance

B) Acceptance generally effective only when acceptance is communicated to offeror. Until such time the offeror is free to withdraw the offer. C) offeror may dispence with need for communication (Carlill) performance may be enough. D) if offeror prescribes method of acceptance and offeree accepts in some other wa. Generally no acceptance. If offeree uses a mthod just as effective as method prescribed then generally acceptance is effective. E) Silence cannot be acceptance, sometimes it can amt to acceptance when some other conduct demonstrates objectively that acceptance has ocurred. (Empirnall Holdings v Machon Paul Partners) F) offerer canot state silence is deemed as consent and therefore impose upon offeree obligation to refect an offer. ( Felthouse v Bindley) 2)Correspondence with Offer: Mirror Image Rule1) must accept terms of offer exactly. Acceptance must be mirror image of offer. 2) therefore, acceptance mirror image- unequivocal, no further negotiation 3) by making counter offer, first offers becomes void 4) mere inquiry does not kill an offer 5) if you state I am considering your offer, will you consider lowering the price- this is a counter offer without killing first offer because it is within an inquiry. Butler Machine Tool Co v Ex-Cell-O-Corp: contract for sale of machinery, seller sent standard contract with terms and price vartion clause. Buyer responsed with own standard form with no such claudse. Sellers filled out acceptance slip and ret to buyers. Raw material $P increased. Buyers standards form redefined contract terms- was a counter offer which killed original offer by sellers. Denning MR; one should examine all documents passings between parties and glean from them or from conducts of parties whether they have reached an agreement on all material pts even though they mey be a difference between forms and conditions printed on back of them. Standing Offer: possible to make an offer acceptance fomr time time (Colonial Ammunition v Reed) Postal Acceptance Rule: 1) if offeree accepts offer by post- the acceptance occurs soon as letter is posted (carter) Only applied to acceptance, not revocation of offers. When does rule apply? When it is within the contemplation of the parties that the post may be used for acceptance of offers. (Bressan v Squires) When does the rule not apply? 1) if offeror expressly excludes use of post as manner of acceptance 2) can be excluded by inference (Bressan Squires) 3) if it creates some manifest absurdity- sale of land- issues with trusteeship of land. (Bressan v Squires) 4) instantaneous modes of communication- rule is applied to post/telegrams but not telex phone, no ruling on email.

3)Knowledge of Acceptance required: 1) you can only accept an offer if you have knowledge of it. R v Clarke: WA Gov offered rward for info leading to arrest and conviction of persons who murdered 2 policemen. Clarke arrested, made statement which led to arrest and conviction. Claimed reward. Info for which clarke claimed reward was given to clear himself of false charge of murder and was not in pursuance or reliance of offer. A person accepting and performing must act on offer Clarke admitted as such he was acting to clear himself and not upon offer. Therefore not intention to acceptance There cannot beassent without knowledge of offer and ignorance of offer is same thing whether it is due to never hearing offer or forgetting it after hearing. Duration of Offers Revocation: 1) an offeror can revoke an offer anytime prior to acceptance (Stevenson Jaques v Mc Lean) 2) intention to revoke must be communicated to offeree or someone authorised to receive it (Stevenson Jaques v Mc Lean) 3) communication of revocation need not come from offeror- as long as offeree hears about it that is enough (Dickinson v Dodds) Revocation of offers to entire world? Must put out ad revoking offer. Options: if you promise to pay me $1 I will keep the offer for the purchase of this pen open until Friday. Consideration is provided- $1 paid. Can offeror withdraw offer? NO Option is therefore consideration to make a contract; to keep an offer open. Theories of Option 1) Irrevocable Theory: offer coupled with a contract not to revoke it. No firm contract, only contract to keep offer opn. Can still revoke offer but breach of contract. 2) Conditional Contract Theory: there is a contract of sale for pen which gives buyer a discretion as to whether or not the contract will utlimately go ahead. Offeror cannot revoke a contractof sale when it is in place- cannot unilaterally end contract. Can say not going to perform contract and therefore breach it however. In Aust law both have been acceptance. Construction of offers defines whether it is irrevocable for conditional. What happens if offer made and then offeror dies? Generally offer dies with offerors death. If offeree accepts prior to death or without knowledge of death contract is formed. If oferror grants option and then dies then offer remains alive because theire is a contract in place. Theoretically if irrevocable then option lapses on death. Unilateral contract: an offer made in return for an act (Carlill v Carbolic) Bilateral: exchange of promises with assumed legal obligation.

Revocation of Unilateral contracts: acceptance is only when whole performance of act is complete. Theoretically revocation can occur when offeree is halfway through act of acceptance. Mobil Oil v Lydnel: franchiser said improve targets and you get bonus. Halfway through improvement franchiser revoke offer. An offer can always be revoked prior to act of acceptance- act must be complete performance (unliateral revocation) Rejection, Lapse, Non-Occurence of condition, death: 1) if you reject offer the offer is killed 2) inquiry does not reject offer (Stevenson Jacques v Mclean) 3) if someone makes an offer for 3 days it lapses at the end of 3 days-no need to communicate lapse 4) if offer is made with no time period- offer is open for reasonable amount of time, construction of fact 5) offer generally dies with offeror unless offeree accepts prior to having notice of death 6) if offeree dies, no one else can accept offer, not even estate. (carter) Stevenson Jaques v Mclean: offer open until Monday for purchase of steel warrant. Offeree made and enquiry and then acceptance only to find offeror had sold them to someone else. Uncertainty and Incompleteness Uncertainty: if the language used by the parties may be such that the court is unable to attribute to it a sufficiently precise and clear meaning in order to identify the scope of rights and the obligations agreed to the contract will be held void for uncertainty. (carter) Incompleteness: even though the language used is perfectly clear in its meaning, if some important part of the transaction is yet to be agreed upon there is, despite appearances no completed agreement and the contract will fail for incompleteness. (carter) Therefore, if parties have reached an agreement which is nevertheless uncertain or incomplete it cannot be enforced. In a commercial context courts bend over backwards to give certainty to a contract. External Standards: provisions which are vague or uncertain can be given substance of there is some external standard by appeal to which the content of the agreement can be more precisely defined. (Placer Developments) Whitlock v Brew: sale of land on condition land leased back to seller. Contract had lease attached to it which would be governed by terms usually in such a lease- to run a petrol station. When a contract contains a number of stipulations one of which is void for uncertainty the question whether the whole contract is viod depends on the intentions of the parties to be gathered from the instrument as a whole External standard must exist- no such external standard : upon such terms as commonly govern such a lease

Sandard of Reasonableness: used to provided certainty to some uncertain terms within a contract Hillas v Arcos: contract for sale of goods- Russian softwood of fair specification with option to purchase more standards. Option did not specify quality, timber, delivery dates etc. Argued option to uncertain. The court however could fill gaps with standard of reasonableness The court wrote in fair specifications from previous contract. Deliveyr? What is reasonable in the circumstance. Implying a term: used for incomplete agreements.Terms may be implied under rule of law relating to the type of transaction in question or may be implied from the particular facts. May & Butcher v R: Contract with price to be agreed upon. Courts cannot imply price. Foley v Classique Coaches: vendor sells purchaser land on basis that all petrol requirements are to be purchased from vendor for an agreed price from time to time. Contract performed for 3 years. Court implied a reasonable price- contrary to May & Butcher Court also implied reasonable quality. Ruling seems inconsistent with agreement- contract appears to be an agreement to agree. Court influenced by the fact the contract was performed for 3 yrs. The existence of an arbitration clause may render an agreement complete. Severance of unenforceable clauses: where a clause is uncertain or incomplete and therefore void the court can sever the clause and enforce the rest of the contract. If the severance is not possible the contract fails. Whitlock v Brew: the severance of the clause must not turn the contract into a different sort of contract which the parties had not contemplated. Agreements to negotiate: generally an agreement whereby the parties agree to negotiate in the future on some fundamental matter will not be enforced, either on basis that agreement is uncertain or consideration is illusory. (carter) Coal Cliff Collieries v Sijehama: heads of agreement written up, clause that parties will proceed in good faith to consult together upon the formulation of a jt venture agreement. Appellants withdrew. Modern courts will not enforce an incomplete agreement or an agreement to agree Kirby J, with whom Waddel JA agreed with generally thought agreements to agree could be enforced- considered it a matter of construction 1) the nature of the matter negotiated 2) the extent to which negotiations have progressed 3) the issues remaining for resolution 4) the existence of a dispute resolution mechanism If the above satisfied an agreement to agree was enforceable, concern though that the court may be left to fill in too many gaps. Negotiatioms are conducted at discretion of parties, they can withdraw, counter offer , reject- these considerations demonstrate that a promise to negotiate in good faith is illusory. Subject to clauses: agreements which are subject to- what does this mean? Masters v Cameron: document for sale of land stated agreement subject to formal contract of sale Subject to clauses can mean

 1) it may be that the parties have reached finality in arranging all terms of bargain and intend to be immediately bound to the performance of those terms but at the same time propose to have terms restated in a form which will be more precise but not different in effect 2) it may be a case in which the parties have completely agreed upon all the terms of their bargain and intend no departure from or addition to that which their agreed terms express or imply, but nevertheless have made performance conditional upon execution of contract 3) the intentions of the parties is not to make a concluded bargain at all, unless and until they execute a formal contract. For 1st case as soon as their is mutual consent there is contract, 2nd cases can be enforced by specific performance, 3rd cases parties may wish to reserve the rights to withdraw at any time until the formal document is signed- therefore matter remains in negotiation until contract signed To ascertain the definition of subject to- it is a question of intentions disclosed by the language the parties have employed. 4th category of subject to: parties reach an agreement which they intend to be immediately binding but which will at some further date be replaced by another agreement. (Tolhurst, Peden, Carter) Subject to finance clauses: usually arises in contract for sale of land. Make an offer subject to finance. Does such clauses render uncertainty? Meehan v Jones: purchase of property subject to satisfactory finance. Gibbs CJ: the intention of such a clause is to leave it to the purchaser to decide whether the terms and conditions on which finance is available are satisfactory. The party must act honestly in deciding whether the finance is satisfactory but need not act reasonably. Promissory expressions reserving an option as to the performance do not create a contractthis pricinple does not apply here because the discretion of the parties relates not to the performance of the contractual obligations themselves but only the fulfillment of a condition upon which the contract depends. Mason J: the party must act honestly and reasonably in determining whether the finance is satisfactory. Consideration What promises are legally enforceable? An agreement is not a contract unless consideration is present. Consideration therefore determines whether an agreement is a contract and therefore enforceable (carter) It is not the sole criterion of enforceability (carter) RULE: A person is bound to perform a promise only if consideration was given for it. (carter) Definition: some act or forbearance involving legal detriment to the promisee, or the promise of such an act or forbearance, furnished by the promisee as the agreed price of the promise. (carter)

Executory consideration: promise is exchange for a promise- the promise of the party becomes binding at the time it was made rather than when the performance of promise occurs. (promise as consideration) Executed consideration: a promise is exchange for an act- the promisor signifies consent to be bound by the promise upon the doing of the act or giving forbearance but not before. (act or forbearance as consideration) Conditional Gifts and Contractual Promises A promise in the form of- I will do act A if and when act B occurs is not coverted into a contract merely by the fact that the person whom the promise is made to had the capacity to bring about act B. RULE: the question in each case is whether the event was stipulated for as the price of the promise or merely as a condition precedent on fulfillment of which the promise, still gratuitious, was to operate. 1)Consideration must be referrable to the promise: there must be a connection between a promise which is sought to be enforced and the consideration which is alleged to support the promise. Australian Woolen Mills v Cth: For a contract to be est is should be made to appear that the statement or announcement which is relied upon as a promise was really offered as consideration for doing of the act, and that the act was really done in consideration of the potential promise inherent in the statement or announcement 2) Consideration must move from the promisee (but not necessarily to the promisor): Consideration must move from the promisee but could go to a 3rd party. A promised B that they will mow Cs lawn. The consideration is mowing Cs lawn. This flows from A - but does not go to B- rathe ra 3rd party C. Coulls v Bagots Executor and Trustee: Mr Coulls granted right to enter land and quarrypayment to enter land plus royalty to be paid to Mr and Mrs Coulls as joint tenants. Argued Mrs Coulls gave no consideration for promise. Mr Coulls provided it- went to HCA Agreed that Mrs Coulls provided no consideration- issues over construction however. Barwick and Windeyer dissenting: construed promise to be made jointly to Mr and Mrs Coulls and therefore only needed consideration from one of them- the fact that Mrs Coulls hadnt provided consideration was immaterial. If you can convince the court you are a jt promisee with someone else yo only need to provide 1 lot of consideration. 3) Consideration must be sufficient but need not be adequate: The rule that consideration must be sufficient requires that what is put forward as consideration must reach a threshold of legal recognition. Once this threshold it met no inquiry is required into how valuable the consideration is. (carter) Sufficient consideration is often described as good or valuable. For consideration to be sufficient- must be legal. Consideration need not be adequate- legal sufficiency is all that is required Therefore, nominal consideration will suffice. (Thomas v Thomas-transfer property to wife of deceased for $1 year)

Chappel v Nestle: nestle ran add campaing- send us shilling plus 3 wrapper and we will send you a CD. Copyright fee must be paid- usually % of selling fee goes to owners. Nestle gave % of wrapper- Chappel argued not sufficient consideration- must be % of wrappers as well. House of Lord concluded that although wrappers had no intrinsic value- Nestle was using campaign to boost sales- therefore for consideration to be sufficient the % of wrappers must be calculated. Dissenting- Keith LJ and Viscount Simmonds- believed wrappers were simply qualification to purchase CD 4) Past Consideration is not good consideration: if you do someone a favour and one week later they promise to pay you for the act and they dont- can you enforce the promise to pay? NO- you cannot use a past act to purchase a current promise. Re Caseys Patents: Casey promoted patents- the inventors sent letter - in consideration for your promotion we give you 1/3 rights to patents. Claimed this was past consideration. If the plaintiff performed the service at the request of the defendent who subsequently promises to pay the promise will be enforceable if it was assumed at the time of the request that the services would be paid for. (based off Lampleigh v Brathwait decision) Roscorla v Thomas: P bought horse of D. D had promised P afterwards that horse was free of vice. P claimed this untrue. No consideration for promise that horse was free of vice- the purchase of the horse was past consideration. No fresh consideration for promise that the horse was free of vice. Distinguishing between Executed Consideration and Past Consideration: Executed considertion: the act of forbearance supplied is a part of the same transaction as the promise sought to be enforced. That is a promise is made and then the act. Past consideration: the promise is made after and independently of the act. That is an act and then a promise is made. 5) Consideration must not be illusory: consideration must not be discretionary in nature or uncertain in nature otherwise it will be considered illusory. Placer Developments v Cth: Cth to pay subsidy which was an amt to be determined by gov from time to time. Promise by gov held to be illusory consideration- the gov had complete discretion to pay. 3-2 Majority. There was promise to pay- it was only the amount that was not decided. The Majority argued that because Gov has discretion to decide amt the whole promise was therefore illusory Minority considered that there was a promise to pay and the determination of price at gov discretion did not render consideration illusory. Performing Existing Legal Duties: generally the performance of existing legal duty is not good consideration. Duties imposed by law: RULE: Generally, performance of a duty imposed by law is not good consideration. One must go beyond their pre-existing legal duty for performance to be considered good consideration. Ward v Byham: father of extra marital child promised to pay amt p/w maintenance provided mother could prove well being of child. Refused to pay- argues no consideration because duty to care for child an existing legal duty.

 Court agreed mother under existing legal duty. However she is doing more than that- she is proving that the child is well looked after. Consideration need only be sufficient- therefore she has exceeded her existing legal dutyshe has done enough to purchase the promise. Denning J: thought that a promise to perform an existing legal duty if other party gets something out of it is good consideration. Is this the case? Yes. Father benefiting. Popiw v Popiw: Helen Popiw left husband- he made her promise to return for the transfer of the property into jt names. She comes back and he refuses to do so. His defence- she is under a preexisting legal duty to cohabit with husband. Promised to do no more than that- therefore no consideration. Hudson J: If that was the law- no longer the law. Therefore promise to live is good consideration. If I am wrong- she has promised to to more anyway- evidence he beat her- she was returning despite legal obligation to leave him. Therefore good consideration. Glasbrook Bros v Glamorgan County Council: P owns mine. Workers gone on strike, P fearing demonstration requests council to provide extra police. Council agrees- no strikers riots. Council asks for money promised- P claims all they did was perform existing legal duty. Court took view that police had gone beyond the existing legal duty. Police and council formed view that only a few officers would be required however when asked they provided a garrison. Performance was greater than the existing legal duty to provide 3-4 officers. Therefore consideration sufficient. Contractual Duties: RULE : Generally, a promise to perform pre-existing contractual duties is not good consideration. Only a promise to perform beyond pre-existing contractual duties is good consideration. (Stilk v Myrick) Williams v Roffey Bros: D hired by owner of land to refurbish flats. D contracts with P (carpernter) for all carpentry work. At some pt it comes to attention of D that P is in financial difficulties and cannot perform without some help. D offers P some money to help the P finish contract in time. P does work- wanted payment of extra sum. D claimed promise not enforceable because all P did was promised to perform existing contractual duties. English Court of Appeal: gives judgement for P the carpenter. RULE : If you have contractual situation and 1 party comes to conclusion that other party is not going to perform and makes a promise of extra payment(consideration) to induce them to perform then performance of existing contractual duties will be good consideration if the 1st party obtains a practical benefit from the performance. Must be a benefit in fact- link this to Denning J in Ward v Byham. D received a practical benefit- P finished in time and therefore D finished in time and did not breach contract with owner of land. RULE: promise to perform existing contractual duty to a third party is good consideration (Shadwell v Shadwell) RULE: Part payment for debt is not good consideration for a promise to discharge the debt

Foakes v Beer: Dr Foakes indebt to Mrs Beer for $2000. Judgement debt immediately payable and interest rate accrual. Foakes arranged to pay $500 upfront, rest in installments. Once all paid off she sued him for interest rate accrued. Beer won- the part payment of $500 was not consideration for a promise to discharge the debt. Musumeci v Winadell: dispute between landlord and tenant. Landlord leased space to supermarket which competed with tenants- grocery store. Want to leave- landlord says- ill reduce rent by 1/3- tenant stays and landlord didnt reduce rent. Was the part payment of 2/3 of the rent consideration for the promise to discharge the further 1/3 rent? Applied Williams v Roffey Bros principle to part payment of debt. If you promise to pay part payment and it is agreed upon it is good consideration if they get a factual benefit or aviod a factual disbenefit. Yes- landlord got fractual benefit- maintain a full shopping centre. Is this ruling correct? Only in NSW- NSW Court of Appeals Ruling- single judge which applied the benefit/detriment rule of consideration which is on contract to HCA rulings. When is part payment is good consideration? 1) Composition of Creditors: P facing bankruptvcy. Owes $1mil to creditors. Only has 800,000. Scheme is put together- where that payment discharges total $1mil debt- to keep ppl out of bankruptcy courts 2) Part payment of debt by third party is good consideration

Forbearance to sue or compromise of a dispute claim Forbearance: entered into conreact- toher person breached contract and you have right to sue for breach. If breacher says- dont sue me Ill do something- your promise not to sue is good consideration for the promise. Compromise: A & B enter contract- under contract A thinks they must do act X while B thinks A should do act Y. Dispute: A and B agree that A should perform act Z as a compromise. B later finds out that correct construction means a should do act Y. Can A enforce compromise with B or must they perform act Y? Compromise of a dispute claim is enforceable. Estoppel and its effect on Consideration Estoppel: to say that a person is estopped is to say that a person is precluded. Promissory Estoppel operates if the D induces P to assume that a contract would come into existence, the P relied on this assumption to their detriment, and it would be unconscionable for the D to fail to fulfill such an assumption. (Waltons Stores v Maher) The high court recently fused the different types of estoppel into 1 in Waltons v Maher. This can occur within a pre-existing legal relationship or where no pre-existing legal relationship exists. The operation of estoppel does not depend on the prescence of consideration. Elements to Prove estoppel

1) Unambiguous and equivocal: Representation must be clear, unequivocal- can express or implied (Legione v Hateley) It can be a represenation of present or future fact (Waltons v Maher) Silence may be taken into consideration as conduct implying a promise (Waltons v Maher) 2) Reliance causing detriment: Detriment must be directly related to reliance (Guimelli v Giumelli) If promisor were allowed to withdraw the promise would the promisee who relied upon the promise or representation suffer a material disadvantage? (Legione v Hatley) Must prove actually suffered detriment or would in future. 3) Unconscionable Conduct: Relief will be granted to the promisee if it is unconscionable for the promisor to go back on their representation or promise. (Waltons v Maher) Must prove that the promisor knew the promisee was relying on their representation to their detriment and encouraged such an assumption. (Waltons v Maher) Urgency may also be considered in determining unconscionable conduct. (Waltons v Maher) Waltons v Maher: parties not in pre-existing legal relationship, Maher used promissory estoppel as a course of action rather than a defense. Traditionally estoppel only used as a defense. Waltons changed that- estoppel is not considered a course of action. Neg for lease of commecial property. Maher owned land- Waltons going to lease and operate store only on condition that Maher build new complex. No contract, neg well advanced. Maher commenced demolition, sent contract to lawyers for look over and execution. Maher said vital we know asap, we are beginning construction. Lawyers said if you dont hear from us, assume contract fine. No contact. Maher went ahead. Waltons talk to lawyers, tell them to go slow, may have a better deal in the works. Eventually after construction nearly complete pull out claiming no contract. Clear and uneqivocal representation of future contract- neg well advanced, silence taken as conduct of implying promise Reliance causing detriment- relied on representation, exp sig costs in demolition and construction- suffered material disadvantage Waltons knew Maher undergoing costs, told lawyers to go slow- encourage assumption that contract would come into existence- unconscionable conduct. Excaberated by situation of urgency Remedy: HCA ruled Waltons estopped from going back of representation. Remedies in Estoppel Generally- remedy will be proportionate to the detriment suffered in reliance of representation. 1) allow promisor to resile from representation- promisee is granted remedy-usually sum of money under general rule. 2) may be appropriate to hold promisor to assumption generate by promise. Promisee is granted relief equivalent to enforcement of the promise. (Guimelli v Guimelli- transfer of land title- 1st option more appropriate because other children had interest in land title as heirs as well.)

3) suspension and termination of promisors rights. Promisrroyr estoppel may achieve termination of rights only where a) a permanent abrogation has been promised b) such detriment has been suffered it is impossible for promisee to resume their position. (Central London v High Trees and Legione v Hateley) 4) enforcement of a equity: Waltons considered that it was not a promise that was enforced, rather a promisees equity. A court will determine the minimum equity and such relief as is necessary to protect the promisee. 5) giving effect to the assimption: Cth v Verwayen Intention to create legal relations 1) Family and social situations: weak presumption that parties intend to contract Balfour v Balfour: Husband promised wife $30 a week the stay in England. Was it enforceable? No: agreements like this were like agreements between couples to go for a walk- no intention to contract. Jones v Padvatton: Mother and daughter- daughter 34yo, lived in Washington. Mother said come to England, read for the bar and I will pay costs. Was it enforceable? NO: family relationship, no intent to create legal relations. 2) Commercial Situations: strong presumption parties intend to contract Esso Petroleum v Com for Customs and Excise: Esso makes promise- if you buy 4 gallons from us you get 1 promotion world cup coin. Tax case. Went to House of Lords. If you produce something for sale it attracts sale tax- were they selling coins or was it a gift. Turned on pt was there intention to contract? Strong presumption intent to contract in commcerial sit- however this case- no intent to contract. Coin was a gift. 3) Letters of Comfort: to enforce a letter of comfort must prove intention to contract. (Banque Brussels v Aus Nat Industries) Contract Requiring Written Evidence Most contracts created are oral. But some require writen evidence. Stature of Frauds 1677: req whole lot of contract to be evidenced in writing. Adopted in Aus Conveyencing Act 1919 (NSW) s54A: only applies to contracts dealing in sale of land. 1) Does not require contract to be in writing only requires contract to be evidenced in writing. Evidence can come into existence after formation. (Popiw v Popiw) 2) Document must be signed- loosely interpreted. Printed name enough as long as it is authenticated. Both parties must sign. 3) Can read documents together to constitute note or memorandum- if doc refers to another transaction and this has terms of your agreement it is enough (Harvey v Edwards Dunlop) 4) Document must contain all material terms of the contract (Pirie v Saunders) Effect of Non-compliance: Common Law: A contract not complying with s54A is not void, but unenforceable. However, parties who have done work under such a contract can sue for reasonable remuneration. (Pavey v Matthews)

Equity: doesnt like ppl using statute as technacility to get out of enforcing a contract. Developed part performance- contract meant to be evidenced inwriting- 1 partly performed obligations- then contract is enforceable. It is the equity that is being enforced. Discharge of contracts required to evidenced in writing Contract must be evidenced in writing- oral discharge of such a contract is effective. Variation of terms however must be evidenced in writing. (Morris v Baron)

Terms and parties

Express Terms Terms and Mere Representations Puff: no reasonable person would consider this statement to be a promise Representation: is a statement of fact which is made to induce a person to enter into contract and succeeds in inducing entry. Truth is not guaranteed my maker of statement- not a term of contract, just a representation. If it is false- under law of misrepresentation. Term: same as representation however maker guarantees truth. How do you determine whether a statement is a representation or a term?

Reasonable person test- would a promissee reasonably interpret the truth of the statement as guaranteed? Construction of facts. Take into consideration the following. 1) Timing of statment- if made shortly after parties enter into contract it is more likely a term. 2) Content of statement- more important more likely to be taken as a term Couchman v Hill: C purchased heffer from H. Auctioneer said heffer unserved. Also said seller/auctioneer not liable for any representation made in cat. Usually bound by terms of cat. C asked H and Auct if heffer was unserved- both said yes, C bought H then found out heffer was pregnant. Argued statement was a term of contract- not bound by cat. By asking H and Auct C showed how important the term was- vital to the agreement. By going and asking this quest he was asking seller/Auct to guarantee the truth of the statement- therefore term of contract and breach found. 3) Existence of written memo- if you document agreement then go to court and claim other terms in agreement- v/ dif to prove- if it was important it would have been documented. 4) Knowledge and expertise of parties Oscar Chess v Williams: Williams sells mothers car to O believing it to be 1948 Morris Minor. Seems to be confirmed by cars logbook. Car is in fact 1939 model which is worth $115 less. Misrep fact- O would have remedy in misrep. Wanted $115 instead. To do this needed to prove Model was term of contract- therefore damages for breach Denning J: No 1948 model not term of contract- placed emphasis on expertise of partiesWilliams knew nothing, O was a car dealer. Reasonable person test in light of expertiseWilliams statement was an opinion. Morris J: dissented- invoice passed between parties said 1948 model- written statement, guarantee- term of contract. Dick Bentley v Harold Smith: Harold car dealers claim car fitted with replced motor/gear box, only travelled 20,000kms. Fact- covered 100,000kms. Purchaser sues claiming breach. Must est that this was term of contract. Case emphasised knowledge/expertise. Reasonable person would expect car yard to know correct details about car. Reasonable to rely that statement is guaranteed and therefore a term. Statement forms a collateral contract? Enter into a contract- something was said in the negotiations not in the conteact- you can argue that a collateral contract was formed. Must prove that my consideration for one contract is entry into another- collateral contract comes first- it is the consideration for entry into the other contract. Must prove that statement was promissory innature and maker intended to guarantee truth. JJ Savage Blakney: Purchase ofboat- parties enter into sale contract. Seller before purchase said if you fit boat with particular engine it will do 15knots. Only did 12 knots. Purchaser wanted to sue seller- had to argue collateral contract. Failed, it was an opinion, not reasonable to rely on it and it was not promissory in nature. Shepperd v Ryde Co: S purchased land. Ryde Co pointed to adj prop- we intend to maintain this as parkland. S purchased land on basis of statement. Ryde co then wanted to develop land. S wanted to sue- argued collateral contract. HC- yes, v. Imp statement- you would construe it as promissory in nature. Consideration? Entering into contract to buy land.

Incorporation of terms 1) Signing 2) Notice and Acceptance of ticket 3) course of dealing 4) reference 1) Signed contract RULE: if you execute written contract you are bound by its terms whether you read them or not. (Lestrange v Graucob) RULE: oral contract- enter into written contract- written terms take precedence RULE: if you sign written contract after contract performed to is too late for it to take precedence (DJ Hill v Walter Wright) RULE: if you get someone to sign a document but you misrepresent the terms of the document you cannot rely on those terms, They are not incorporated into the document. (Curtis v Chemical Cleaning- dry cleaning case- exclusion clause on receipt that was signed- incorrectly notified of terms) 2) Unsigned ContractsNotice RULE: you must give reasonable notice of all terms, not necessary to prove person read them, must give reasonable notice prior to formation (Parker v Sth Eastern Railway Co) What is a ticket? Must be contractual in nature, must be promissory in nature, expressly or implied Tickets RULE: if you take a document that is a ticket you are generally deemed to be assenting to the terms of that ticket. (below) Parker v Sth Eastern Railway Co: Parker left luggage in cloak room- given ticket excluding liability-luggage lost by railway- had to prove exclusion clause incorp into contract. RULE: 1) Did person receiving ticket know there was writing on it? If answer Yes 2) Did that person know that the writing referred to terms? If answe Yes- ticket holder bound. If NO 3) did party who was relying on terms do what was reasonable to bring the terms to the notice of the ticket holder? Even if 1 and 2 are satisfied you cannot rely on a harsh term- nor can you rely on 3 alone. Causer v Brown: person put dress in dry cleaning- given a docket which contain exlcusion clause. Dress damaged, dry cleaners rely on exclusion clause. Must prove it was incorp into contract. No written contract, no signing- relyed on ticket cases. Must ask whether document was a ticket- no reasonable person would construe docket as contractial in nature RULE: accept ticket and you are bound- if circum are such that you cannot reject it and cannot negotiate its terms then ticket cases do not apply Onus is on D to prove P aware of terms.

Thornton v Shoe Lane Parking: Thornton drives to parking lot, above lot, sign- park at own risk, not liable for damage, Thornton drives in, machine spits out ticket- if he read ticket it referred to terms and condition on board somewhere in lot- with a broad exclusion clause. Thornton gets run over- Shoe lane want to rely on exclusions clause- had to rely on ticket cases. Denning J: says Thornton not bound for no. Of reasons 1) thornton drives ins ees exclusion clause to dam to car- contract formed on acceptance of ticket- cannot incorp terms after he has driven in 2) you cant neg with a ticket machine- therefore not a ticket, cant rely on these cases 3) if you could rely on ticket cases- still cannot rely on exclusion clause- it was part harsh RULE: reasonable notice must be given of terms if they are to be incorp into contract Interphoto v Stilleto: Stilleto hires files- sent with note of terms and conditions in small but visible writing. Stilleto did not ret files and rec bill. Could this be enforced- was it incorp in contract? RULE: when you have a harsh clause extra steps must be taken to bring that term to notice 3) Incorporation by course of dealing DJ Hill v Walter Wright: Contract for carriage of goods, oral contract made over phone, courier pick up goods and delivers. At pt of delivery courier prod document- evid of rec of goods which has terms and conditions. Course of dealing like this est. Then goods get dam and courier wants to rely on exclusion clause in doc. Client argued not incorp in contract. Could not rely on course of dealing to incorp a term- the exclusion clause was never incorp over course of dealing RULE : if you produce a doc after contract discharge by perfomance it is not contractual in nature. A reasonable person would not construe a rec of good note as contractual doc. 4) Incorporation of terms by reference Incorp terms by reference to another doc which states all the terms of your agreementcommon in building contracts. Implied Terms A court will imply terms to cover a sit in 4 ways. 1) implied in fact 2) implied in law 3) custom 4) Good Faith 1) Terms implied in Facts: BP Refinery Western Port v Shire of Hastings: RULE: 1) reasonable and equitable- alone however is not sufficient 2) necessary to give business efficacy to contract 3) so obvious it goes without saying 4) capable of clear expressions 5) not contradictory to any express terms

Codelfa Constructions v State Rail Auth: Eastern sub railway- idea, not expressed in contract, codelfa work 24hrs day. Sate rail though Codelfa could use their immunity. Residents got injuction to prevent 24hr work. Codelfa cant complete in time, argue implied term for extension. RULE: 1) Must be reasonable and equitable to imply term 2) Must be necessary for business efficacy 3) Must be so obvious it goes without saying Did not satisfy these- only factor satisfied was fair and reasonable. 2) Terms Implied in Law: Liverpool City Council v Irwin: Irwins lived in apartment- buildings mess, Irwins took action against council claiming term implied in landlord/tenant ag that landlord must keep common areas in reasonable state of care. House of Lords: did not believe a term could be implied in law on basis on reasonableness RULE: test is one of NECESSITY. Was it necessary to impose such an obligation on landlord- yes because whole entire pt oflease would be rendered useless if this was not the case. 3) Terms implied in Custom: If you contract with certain trade, you are presumed to know and contract on customs of that trade. (Con Stan Industries of Aus v Norwich Winterthur (Aus) ) 4) Good Faith: HC have adopted the view that there is an obligation to perform a contract in good faith. It is an implied term- in fact. It exists in all contracts though. It cannot be expresly contract out ofis it simply a dut to co-operate? Construction of Contracts Parole Evidence Rule: excludes extrinsic evidence in determining meaning or legal effect of words in a document which parties have adopted as evidence of a contract. Prevents recourse to extrinisic evidence to imply a term, vary a document or construe a document. LG Thorne v Thomas Borthwick: contract for ale of goods- buyer showed a sample, met specifications- put in order, rec order and did not meet spec from sample. Contract in written form, nothing in doc that said order had to comply with sample. Buyer argued implied terms. Seller argued sample was extrinisc evidence. Majority: buyer could not have recourse to smaple to imply term because it was extrinisic evidence (Parole Evidence Rule This rule only applies to written contract- if contract not fully written you can have recourse to extrinisic evidence to ascertain intentions of parties Minority: HERON J: RULE: parole evidence rule is strictly a rule about construction. Therefore it does not apply to implying terms. Therefore you can imply a term with recourse to extrinisic evidence This is thought to be correct view of parole evidence rule. What is extrinisic evidence? 1) evidence of actual (subjective) intentions of the parties)

2) prior neg of parties ( can be used if it informs you of commercial object of contract) 3) subseqent conduct of parties to interpret contract Exception: youmay have regard to factual matric- facts know by both parties, or facts ought to have been known. Codelfa v State Rail Auth: HC allowed the assumption of parties as extrinisc evidence to consture the meaning of contract - limits recource to factual matrix to resolve ambiguity in written contract Exeception-you can have recourse to extrinisic evidence to 1) to identify subject matter 2) imply a term 3) to indetify parties Prenn v Simmonds: Extrinisic evidence is prior neg written or oral- cannot have recourse to these to construct document under Parole Evidence Rule/ Classification of terms Breach of contract- liale for damages. Are you able to terminate contract? Need to classify term that has been breached. 1) Condition: any breach of such a term gives rights to damages and a right to terminate contract 2) warranty: term any breach of gives right to damages 3) Intermediate term: any breach of which gives right to damages and a right to terminate if consequences of breach are sufficiently serious Definition of such terms is a matter of construction of presumed intentions of parties. Exclusion Clauses Darlington Futures v Delco: Delco rades against wishes of client- lost 20,000. Was Delco covered by exlcusion and limitations clauses? Not covered by exclusions clause, coveredby limitation clause. RULE: interepretation of an exclusions clause is to be determined by 1) construing the clause according to its natural and ordinary meaning read in light of the contract as a whole 2) where appropriate construing the clause contra proferentem in case of ambiguity. Wallis v Pratt: exlcusions clause for quality of seeds. RULE: if exclusion clause is ambigious construe it against person taking advantage of it (contra preferentum) Fundamental Breach Rule: you may exclude all liability under contract- may not exclude liability for fundamental breach. Never Adopted by HC. Photo Production v Securicor: securicor provided patrol service to Photo for $8p/w. Contract on Secruricor standard form with exclusion clause- not liable for damage by their employees unless it could have been avioded by Securicor. Employee burns down Photo factory. Securircor rely on exclusion clause. Court of Appeal: Securicor hired to protect- fundamental breach- therefore exclusion clause does not apply.

 House of Lords: reject Fundamental Breach. Award for securiroc- construed clause in context of document. Only $8 week rate, factory owner could have insured against riskclause construed to read Securiror would take reasonable care in hiring employees. Four Corners Rule: adopted by HCA. Court operate from presumption that parties did not intend to exclude liability for damage which results from an act one of the parties not authorised by the contract. Rule of construction of presumed intentions Council of City of Syd v West: West parked car in Domain parking st- conditions with reasonable notice- exclusion clause- excluding all liability. Must deliver ticket to retrieve car. While away, thief retrieved car on tricking parking attendent. West sued for damages. Act of attendent was not authorised by contract- therefore exclusion clause does not cover act under Four Corners Rule Kitto and Menzies JJ dissented: construed clause on basis of bailment and considered it did exclude liaility. Darlington v Declo: Brokers actions were unauthorised by contract- therefore could not realy on exclusion clause because of Four Corners Rule. Broker could rely on limitations clause because although the act was not authorised it was connected with the relationship est by the agrrement. Deviation Rule: if carriage of goods deviates and goods are damaged after or during deviation the bailee is strictly liable and cannot rely on any exclusion clauses. Negligence: exlcusions clauses relating to negligence are covered by Canada SS: 1) if clause expressly excludes negligence if protects the D 2) if words are construed in contract asa whole are wide enough to include negligence then prima facie liability for negligence is excluded 3) if D could be held liable on any other grounds other than negligence then clause will be read down so that it excludes that other cause of action rather than negligence.

Privity
Basic Rule 1) only a person party to a contract can get a benefit out of that contract 2) only a person party to a contract can get a burden out that contract. Two things must be satisfied to sue: 1) privity 2) consideration General Rule: only parties to a contract can enforce benefits or be subject to burdens arising under it. (see below) Dunlop Pneumatic Tyre Co v Selfridge: Dunlop sold tyyes and wanted to fix prices so clause included so that sellers had to sell tyres for $X. Selfridge sells tyes to another party, who sells below price Dunlop wanted. Could Dunlop a 3rd party sue the seller? NO: because Dunlop were not privy to the contract between Selfridge and the sellers. Haldane LC held that privity was separate to consideration.

Exceptions to the Rule: Trident Gen Insurance v McNiece Bros: Case involved 3 parties. Blue Circle entered into contract of insurance with Trident. McNiece becomes one of Blue Circles contractors- one of McNieces workers is injured and brings an action against McNiece. McNiece wants benefit of insurance contract. Question: Could McNiece sue Trident for the benefit of the insurance contract. According to General Rule: NO- he was a 3rd Party and not privy to contract b/w Blue Circle and Trident. On appeal to HCA McNiece suceeded: was held he could sue Trident for benefit of insurance policy despite being a 3rd party. Majority Judgements: Mason CJ and Wilson J (jt judgement): Based on intention- held Blue Circle intended to protect someone like McNiece. Privity rule prevents this but JJ considered this would give an unjust result- the court should enforce the intentions of the parties. Blue Circles intention was to protect McNiece Deane J: used equity. In a trust you have a trustee who does the actions and a beneficiary. A trustee can make a contract for a beneficiary. Blue Circle was contracting with Trident for the benefit of McNiece. McNiece is the beneficiary, Blue Circle the trustee. Question of construction- was trust scenario intended? Toohey J: held that there was a special exception for insurance contracts. Based on Insurance Constract Act 1984 (Cth). Gaudron J: used law of resitution. Held that 3 requirements must be satisfied. A benefit 1) at the expense 2) of an unjust factor (3). Trident rec benefit (insurance contract) at the expense of McNiece. Therefore it was unjust that Trident did not pay. Minority Judgements: Brennan and Dawson J: argued McNiece failed due to general law pf privity. How to get around general privity rule? 1) Intention- Mason and Wilson JJ- not strong authority, use it as analogy. 2) Trust - Deane J 3) Unjust enrichment -Gaudron J 4) Agency Contracts for the benefit of a 3rd party 1) parties to a contract for the benefit of a 3rd party can obtain an order for specific performance 2) parties to a contract for the benefit of a 3rd party can sue if a breach is made- damages is contentious- Beswick v Beswick suggests only nominal, Jackson v Horizon Holidays suggests otherwise- Denning ruling which has been heavly criticised. 3) parties to a contract for the benefit of a 3rd party can by agreement between themselves vary and discharge the contract without reference to the 3rd party. 4) a contract construed as being made to B and C jointly by A only requires 1 lot of consideration and thus C can enforce contract against A even if B provided consideration. (Coulls v Bagots Executor) Beswick v Beswick: Peter B coal merchant who owned few utensil, over 70. Peter in poor health and wanted to sort out affairs leaves provisions to wife. Peter transfered business to John, his nephew. Agreement stipulated that John as consideration was to employ Peter as a

consultant and provide an annuity payable to Peters wife, Ruth on Peters death . Peter dies, Jon pays Ruth only once. Ruth wants to sue John for arrears. Issues: Was Ruth a party to the contract? No. Did she provide consideration? No. Could she sue? No. B/c of general law of privity. Wills: an executor of an estate deals with deceased affairs. Ruth was Peters executor. She could sue in this respect. But the problem is what should the remedy be? (remedy in contract aims to put the wronged person in a position as if the contract had been fulfilled. Majority: ruled that because Peter had suffered no monetary loss any damages awarded to his estate would be nominal for Johns breach of contract. Therefore ordered specific performance. RULE : a party in a contract for the benefit of a 3rd person can obtain specific performance order when damages awarded would be inadequate.

Contracts that attempt to burden a 3rd party Not enforceable- exception for sale of land. Third Parties and the benefit of exclusion clauses Bill of Lading: cosignor and consignee. Consignor puts goods on ship, in return for good gets biill of lading. The consignor will give good to consigness, who gets the rights of consignor, the contracting party had. Cases usually involved consignee suing consignor. Scuttons v Midland Silicones: A was in contract with carrier to ship goods. At the other end goods to be unloaded. Carrier had exclusion clause of limited liability. Stevedors unload goods and breaks them- A is unhappy and wants to sue- stevedores try to rely on carriers exclusion clause. Due to privity rule protection of exclusion clause in a bill of lading to a stevedore was denied. Term carrier did not include stevedores. Lord Reid: argued agency. Four Points Test: 1) The Bill of lading has a clear intention to protect stevedores Carrier must make it clear they are stevedores agent Carrier needs auth or to agree afterwards from the stevedore to act as its agent 4) consideration moved from the stevedore This Four Pts test was applied in New Zealand Shipping v Satterthwaite (The Eurymedon): drilling machine was shipped to NZ under bill of lading that excluded liability of carrier and employees or agents. This exclusion cluase had a statute of limitations for actions for 1 yr. Stevedores neg damage good and action is brought after 1 yr passed. Privy Council stated rule of Privity but used FOUR PTS test. 1) clear intention? Yes exclusion clause included employees 2) the stevedore was the parent company 3) it did give authority for the carrier to enter the contract 4) stevedores consideration? This had created a contract b/w carrier and the stevedore. Privy council held stevedores act of unloading was the consideration. Therefore when the good was unloaded, the stevedore got the benefit of the contract, and received the benefit of the exclusion clause. Legislation and Reform

Provisions of the Property Law Act 1974, Insurance Contract Act 1984, Trade Practices Act 1974 and Sale of Goods Act allow consumers to bring actions against the manufacturer despite not being privy to contract.

Breach and Frustration

The order of performance: Time and order of performance under contract decided by reference to intention of parties as expressed in contract intention is an issue of construction Time: time may be fixed by the contract1) If a contract stipulates time then non-performance by the time stipulated is a breach of contract 2) If time is of the essence- that is time is a condition, a breach of a time provision may give rise to a right to terminate 3) if time is not stipulated- performance must be within a reasonable time period. Order: usually order of performance fixed by contract. If not work order out by dependent and independent obligations. 1) Dependent obligation: where one partys performance depends on performance by the other party, unless parties have agreed to perform at the same time condition precedent 2) Independent Obligation: one partys obligation to perform has no relationship to others obligation to perform; order of performance is immaterial

RULE: presumption that obligations are dependent.

When a concurrent set of obligations exists, parties have to be ready, willing and able to perform Eg. SOG legislation states that seller must be ready and willing to give possession of the goods in exchange for the price and buyer must be ready and willing to pay the price in exchange for possession Automatic Fire Sprinkler v Watson: Watson employed by Auto fire. Some dispute break out and Auto breach contract and fire watson. Nevertheless watson turns up to work for 8 hrs sits at desk and then sue for wages. Presumption of dependent obligations. Although Watson was ready, willing and able to perform, the contract for AFS to pay him was dependent on him doing work Watson did not work- therefore AFS not liable to pay wages. Prevention of Performance RULE: when a party(A) cannot perform without the co-op of the other(B) [concurrent obligations] and the other party(B) refuses to co-op the offer of performance(A) is treated as performance and the party refusing to perform(B) will be liable in damages. Discharge by performance RULE: Once all obligations are performed then the contract is discharged- it ceases to exist. These obligations must be performed strictly. Entire Contracts: A a contract where parties have agreed, expressly or impliedly, that complete performance by the promisor is a condition precedent to enforcement of the contract Whether or not a contract is entire depends on construction of the contract Cutter v Powell: sailor signs on for voyage for wages- which where in excess of going market rate. Died midway through voyage. Family estate sued for part wages earned. This sailor was under an entire obligation- he hadnt completed the obligation- (the whole journey) and therefore could not call upon the owner of the ship to pay for wages. RULE: if under an entire obligation cannot request for performance of other party or claim wages until entire obligation performed. Sumpter v Hedges: P- builder was hired to construct house and stables for money. Paid in installments - not related to work done. Builder abandons contract- buildings are half doneleaves loose building materials on site. These are eventually used in the completion of construction. Builder sues for remuneration for work done and for building materials. Lost for remuneration for work completed- ruled that he was under an entire obligation and could not call for payment until his obligation had entirely been performed

 Received reasonable remuneration for loose materials- the owners had a choice to use the items or not.

Substantial Performance RULE: As long as you have substantially performed your obligations despite being under an entire obligation you can recover the contract price. Still liable for damages for breach- but can recover price. When has a party substantially performed? Hoenig v Isaacs: contract to decorate flat for $750 paid in installments. Installments paid to $350. Builder thinks work is complete and claims rest of contract price. Employer refuses to pay due to faulty design and workmanship- total cost fo repairs $55. Court of appeals come to conclusion that builder under entire obligation and this obligation hasnt been entirely performed. However- has substantially performed- builder gets remaining fee minus $55. Denning J: TEST FOR SUBSTANTIAL PERFORMANCE: ask the Q?- if the breach is one that will allow the innocent party to terminate the contract then there is no substantial performance. But if breach only gives rise to a claim in damages then that would amount to substantial performance. Therefore1) if breach is of a condition no substantial performance 2) if breach for is of an intermediate term which is sufficiently serious then no substantial performance 3) If breach is of a warranty, then substantial performance. Severable Contracts 1) A contract which is not entire may be referred to as a severable/divisible contract where obligations are severable from one another. 2) usually used for contracts with payment to be made in installments according to work. 3) each separate or divisible obligation may be an entire obligation and therefore, substantial performance can apply Discharge for breach of a term Breach by failure to perform: failure to perform contractual obligations on time or to the standard specified in the contract. Three Types of Breach 1) late performance: performance tendered late- if other party does not accept, and terminates contract this amounts to non-performance 2) non-performance: no attempt to perform, or if performance is not to stipulated quality may be non-perfomance 3) defective performance: where performance is not to required standards of contractual obligations

Standard of Contractual Duty : In order to establish a breach by failure to perform, promisee must establish that the promisor has failed to perform a contractual obligation in accordance with the standard of duty applicable to that obligation. There are two types of standard (determined by construction of contract): 1)Absolute or strict liability 2) Standard requiring the exercise of care 1) Strict Liability: Usually liability is strict- and failure to perform results in a breach despite reasonable care in performance. 2) Reasonable care in performance: Personal contract may contract for performance with reasonable care. To prove breach you must prove that performance did not meet resonable care standards. Effect of Failure to Perform If a breach occurs due to non performance, late performance or defective performance the innocent party has a right to damages and depending on the term breached a right to terminate This right to terminate depends directly classification of term breached. Condition: gives right to a right to damages and a right to termination (test of essentialityTramways) Warranty: gives right to damages Intermediate term: serious breach gives rise to damages and right to terminate Question of construction set out in the following cases. Condition: Luna Park v Tramways: luna park wanted to advertise on trams. They were guaranteed that ads be on tracks for at least 8 hrs a day throught the season. Tramways argued they had only promised that the ads be on the tracks for an avg of 8 hrs a day. Luna park disputed this and terminated contract for breach of condition. Went to HC on breach of condition issue Jordan CJ: came up with test to classify conditional term. TEST OF ESSENTIALITY: if it appears from the contract as a whole that the person would not have entered in contract if term wasnt to be strictly performed and the other party ought to have known this then it is a conditional term. Looks at motivations of parties- objective test. Latham CJ-Majority: looked at word quaranteed- is a word that lay ppl use to emphasise importance. Essential to contract and therefore a condition. Looked at payment obligations- entire obligation for all 53 ads to be placed. This shows how important term was to 2 parties. Assoc Newspapers v Bancks: Bancks was a cartoonist who wrote Ginger Meggs. Contract 2 write comic for each Sunday paper. Full page comic, Paper has obligation to publish it weekly on front page of comic section. For 3 weeks running, published it on 3rd page. He sought to terminate contract for breach of condition. Newspaper tried to get injunction to stop him from terminating. Q- whether it was a condition went to the HC?

 Ruled it was a condition- straight forward constructioon issue.Banck had to write comicconditional term, therefore it stands to reason newpapers obligation was to publish it and therefore it is a conditon Look at motivation- why is it so important to be on page 1? Draw analogy to performer not good simply to be paid but needs exposure, vital for profession. Carton- front page is important to career therefore essential Intermediate term: Hong Kong Shipping v Kawasaki Kisen: hire of ship for 24months - owner of ship obligation to keep ship in good repair. For 7 months of hire period the ship was off- hire, in dry dock for repairs. Charter terminated thinking breach of contract. English court: found that terms of good repair was neither a condition or a warranty but: intermediate term RULE: Hallmark of intermediate term is a term breached in a no of different ways some trivial and some fundamental Obligation to keep ship in good repair is such a term that can be breached numerous ways In cicum- can inncocent party terminate contract? How serious must consequence of breach be? TEST: consequences must be such that they deprive innocent party of substantially the whole benefit of the contract. No breach is not sufficiently serious. Can a breach of a timed provision be classified as an intermediate term? NO. Bunge Co v Tradax Exports: charter contract- need to nomiate part port- timed provision for nominating port for shipment. 4 days late- could owner of ship terminate for breach of time provision. It was argued that- time provision should be characterized as intermediate termpure technical breach. House of Lords: Wilberforce LJ: he says time provision can never be characterized as an intermediate term because it cannot be breached in a number of different ways. Either performed or not. Charactered time prov in this case as a condition.

Discharge for Repudiation Where a party evidences an absence of readiness and willingness to perform you may discharge the contract for repudiation. I. Anticipatory repudiation = occurs before arrival of time for performance: need not be an express statement II. If repudiation can be proven, innocent party has right to terminate contract Requirements to prove repudiation 1) Show absence of readiness or willingness by words or conduct of other party: a) Express refusal to perform even if in fact able to perform (so not required to prove factual inability)

b) Refusal to perform in accordance with the contract (Eg. Bancks v Associated Newspapers still performed, but not in accordance with contract) thus RW determined by contract c) Refusal may also be implied by conduct or words to abandon and altogether to refuse performance of the contract: Freeth v Burr d) One party adopts an erroneous construction of the contract which evidences not ready and willing to perform (eg. Luna Park v Tramways): must satisfy element of seriousness ntl (below) e) Wrongful termination purports to terminate when wrongly believing that they have right to do so = repudiation 2) Show absence of ready and willingness by other partys factual inability to perform a) Other party is wholly and finally disabled from performing (Universal Cargo) emphasis is on their actual ability b) Promisor may expressly declare inability, or it can be reasonably inferred from their words or conduct (but this is uncertain) 3) Both must also satisfy a requirement of seriousness: (1) absence of Ready and Willingness extends to all obligations, or (2) absence of Ready and Willingness clearly indicates that the innocent party will be deprived of substantially the whole of the benefit of the other partys promised performance. (Federal Commerce v Molena) (3) to prove seriousness of factual inability must establish that is frustrated the commercial venture of the contract- must be wholly and finally diabled (Universal Cargo Carrier v Citati) Therefore- to satisfy seriousness- repudiation must be of a 1) condition- which gives right to termination 2) intermediate term which satisfied issue of seriousness. 3) a warranty, coupled with evidence conduct or factual inability that whole obligation will be repudiated 4) abscence of ready and willingness to perform whole of obligations Federal Commerce v Molena: Three charter parties clause in charter party that said captain was to operate under instructions of charterer (who hired ship for use from owner). Charterer then hired out parts of ship for others to use people who wished to use area of ship would approach captains agent, who issued them with bill of lading, on behalf of charterer. Owner said to charterer that if they didnt agree with certain condition, owner would tell captain not to sign bills of lading: this was threatened breach of charter party. Question: could the charterer terminate for the threatened breach? This indicated absence of readiness or willingness to perform by conduct or words an anticipatory breach Looked at nature of term to see whether satisfied seriousness so the threat could be repudiatory (go to root of contract)

it was an intermediate term (admits of being breached in a number of ways), and likely consequences were sufficiently serious that if there was an actual breach, innocent party would have right to terminate being deprived of substantially the whole benefit of the contract therefore also a right to termination for anticipatory breach (repudiation) per Lord Wilberforce

Universal Cargo Carrier v Citati: Ship came into port, ready to load. Charterer had difficulty in finding a cargo. Before laytime [time within which charterer obliged to load cargo] expired, captain left, saying seller had repudiated contract (based on factual inability) instead of waiting for demurrage [fixed sum penalty for detention of vessel]. However difficult for captain/owner of ship to prove contract covered rest of laytime, as well as demurrage Devlin J. cannot expect captain to wait in harbour collecting demurrage, on possibility that seller finds goods: seller had repudiated contract Test in order for repudiation based on factual inability, must determine that commercial venture has been frustrated If party is wholly and finally disabled from performing obligation so as to frustrate the contract: happening of a supervening event which frustrates the object of the venture Discharge for delay and time stipulations 1) Common Law: time is considered to be of the essence of a contract- that is time is a condition which any breach gives right to termination. 2) Common law: when time is not of the essence- express or implied by parties, time is only a warranty. If a party breaches such a term it gives rise to damages- and usually notice is given for extra period of time for performance. If party fails to perform in this period, then there is a right to terminate contract - must give reasonable time, this depends on facts of case 3) Common Law: even if time not of the essence, if other partys act in breaching that time period amounts to a repudiation of contract, you can terminate immediately. (factual inability, repudation of performance by words or conduct) 4) If there is not stated time period of performance, then performance is required within a reasonable time 5) Equity: takes view that time is not of the essence in contract. Performance of contract is a condition but performance in time is not. 6) Which prevails in conflict? Common Law v Equity? Equity prevails because of section 25 of the Judicature Act. This provision in general terms states- when the rules of equity and common law conflict, the equitable rule will prevail. Encompassed in Section B of the Conveyancing Act. Such rules only conflict however when equity provides a remedy.

When will equity order specific performance of a contract? There is a contract- time is of the essence. 1 party doesnt perform in time, innocent party terminates. Other party goes to equity courts which orders specific performance- then equity prevails in conflict with common law. Specific performance is always ordered for sale of land. 7) As a rule: equity generally follows the law. This means that if parties clearly express intention that time is of the essence, then equity will generally not interfere with it and give effect to parties intentions. (contract for sale of land- time is not of the essence) 8) Equity recognises the notice procedure - even if time not of the essence, notice issued, equity will usually recognise this and give effect to it Termination Innocent party has right to ELECT to terminate: done by communicating election to the other party by words or conduct NOT automatic right II. Usually question of termination arises where innocent party presented with two inconsistent rights: (1) to terminate, or (2) to affirm breaching party may claim that innocent party has already elected to affirm the contract (by words or conduct) thus there must be a breach (before breach, may only be an action in estoppel) III.Requirements of election to terminate 1. 1) In common law: unequivocal words or conduct evincing an election to terminate 2. 2) Terms of the contract specify requirements eg. notice 3. 3) Some statutory provisions I. To prove innocent party elected to affirm, requires proving 1. Innocent party had knowledge of the facts which gave rise to their right to terminate (not necessarily knowledge of right to terminate) 2. With knowledge of facts, must have communicated (or conduct) evidence of intention to affirm contract with some unequiovocal act A. Whether or not there has been an election or not is a question of FACT B. Once an election is made it is FINAL: although does not mean that later breaches of same contract may not give rise to right to terminate C. Generally election to terminate must be made within reasonable time otherwise may give rise to an estoppel 1. Question of fact on circumstances of the case
I.

Tropical Traders v Goonan: contract for sale of land, price payable in installments- specified dates, time of the essence. Purchaser makes deposit- pays 3 installments 12 months apart. Each installment is a few days late, seller nevertheless accepts each installment. 4th installment paid early. Last installment due on 6th Jan- Sunday. Monday 7th- purchaser pays all outstanding interest by reason of all other late payments ans asks for an extension of time for last payment. Vendor solicitor replies for $50 you can have an extension until 14th Jan. Letter had clause- this offer is without prejudice to strict rights under the contract. Purchaser failed to pay on 14th and vendor terminated contract. Issues: 1) was vendor estopped from relying on time is of the essence provision? 2) had vendor elected not to terminate for breach? 1) arguement of purchasers- in accepting late payments (conduct) you are estopped from relying on time of the essence clause. This arguement failed- no evidence before court of circum of that acceptance To prove estoppel- no evidence of reliance on representation that time is not of the essence In granting extension did that amt to an estoppel? No because of the clause- without prejudice to our strict legal rights. Not unequivocal, cant reasonably rely on it- therefore no estoppel. 2) purchasers argument- in accepting each late payment seller had elected to affirm the contract- failed KittoJ: every time late payment wad made vendor was faced with two inconsistent rightselection- to terminate or affirm. They affirmed each individual late installment- each late payment stands on its own. An election made did not stand for the future You cannot make an election in futuro- you can only make an election when you are actually faced with the two inconsistent rights Each breach gives rise to an election but only in respect to that breach In granting a 7 day extension was that an election not to terminate on time of the essence clause? NO- all that was was a promise not to elect until the 14th. In accepting all interest payments had seller elected to affirm contract? No- because that interest was related to past breaches. Estoppel as restriction to right to terminate A party can engage in conduct such that an estoppel arises preventing them from terminating. Eg- party gives a representation that they wont terminate for breach- and then do terminate. Can be estopped. Legione v Hateley Facts: contract for sale of land, purchaser did not turn up to settlement, vendor issues notice to complete- 14days to get money. Purchaser spoke to a secretaty who said she would need to get further instructions regarding further extension. Purchaser relied on it and didnt turn up to settlement. Vendor terminated. Purchaser argued vendor estopped from right to terminate because of representation made Failed- RULE: Estoppel requires clear and unambiguous promise to be made otherwise representation which may preclude innocent party from electing one way is not sufficient to give rise to an estoppel

Effect of termination

I. Election to terminate the performance of a contract discharges the parties from their obligation to perform II. If primary obligation breached (that which is required to be performed under contract), court will replace obligation with second obligation to pay damages III. If there is a breach of contract prior to termination, obligation to pay damages (secondary obligation) and the right to damages always survives termination IV. Procedural provisions in contracts also survive termination (eg. arbitration clauses) V. Rights that have acrrued unconditionally surivive termination (McDonald v Denny Lascelles)

McDonald v Dennys Lascelles: Test: An obligation will survive termination if that obligation has unconditionally accrued at the time of discharge: A right that has unconditionally acrrued is right that has been earnt: To determine whether earned is a question of construction (what was required to earn performance of right/obligations) Enforcement of this right must not be inconsistent with the discharge of the contract (eg. not the reason for termination) Shevill v Builders Licensing Board: innocent party terminated and sues for damage- ask for type- loss of bargain damages which will put you in the position if the contract had been performed. RULE: if you terminate a contract and you base that termination on express termination right under contract then you may not recover loss of bargain damages unless you can prove that you would have had a right to terminate at law (that is the breach was of a condition anyway) Discharge by Frustration Definition: frustration ocurrs whenever the law recognises that without default of either party a contractual obligation has become incapable of being performed because the circumstances in which performance is called for would render it a thing radically different from that which was undertaken by the contract. ( Davis Contractors v Fareham) Requirements of Frustration 1) must be an unforseen event 2) must radically change or effect the contract 3) question of construction Must ask what is the contemplated performance and compare this to what the parties must do after the event. If there is a radical change then the contract is frustrated. 4) the event must occur after formation of contract

(Impossibility) Destruction of Subject Matter of a Contract Taylor v Caldwell: Hall hired for an event. The day before the event the hall burnt down in fire. The fire was held to frustrate the contract because of the destruction of the subject matter of the contract RULE: must ask- Did one of the parties accept the risk that the subject matter may be destroyed? If they did, they must still produce or be held for breach. (Frustration of purpose) Non-occurrence of an event which is the basis of the contract Krell v Henry: coronation cases, coronation of Edward 7th- fell sick and it was cancelled for 3 weeks. Someone had hired room in Pall Mall that overlooked route Prince would take to Westminister. Hired it for 2 days- not for the nights. Coronation cancelled- tenant claimed contract frustrated and refused to pay. Held correct- although performance was possible, the court looked at the basis of the contract and said that the event that had occurred had destroyed the purpose of the contract The whole purpose of the contract was to watch the coronation, and both parties knew this was the purpose of the contract Heavily criticised case- narrow doctrine: only applies when contract rendered pointless or substantially pointless because of the frustrating event. (watch rules of construction- parole evidence rule.) Delay:would a reasonable person in the position of the parties conclude that delay would frustrate the contract? Frustration of the commercial venture RULE: if the burden of the contract increases in a radical way then that will be held a frustrating event. Codelfa Construction v State Rail: injuction against Codelfa meant they couldnt operate 24/7claimed the event frustrated the contract. Sets out mordern Aus doctrine of frustration 1) question of construction 2) main investigation- compare performance as contemplated by contract with that performance required after frustrating event Injuction led to a substantative delay in performance and a substantative increase in burdern on Codelfa. That is the increased costs to complete work in time, and the fact they had no contractual rights to recoup those costs- this radically altered the burden Davis Contractors v Fareham: contract to build 78 homes at fixed price in 8 months. Because of weather conditions, but mainly labour shortage took 22months. Builders argued that by reason of labour shortage the contract was frustrated. Builders lost- was considered not to be a frustrating event

 1) shortage of labour was a forseeable event- after WW2 2) labour shortage made contract more onerous but not in a way which radically altered performance RULE: frustrating event must not be an event forseen as a likely occurrence. Leases and contracts for sale of landRULES: 1) if you have an option to purchase/lease land then doctrine applied 2) if it is a contract for sale of land the doctrine does apply, although rarely- need landslide or resumption by gov. Where frustration was forseen but not provided for in contract General Rule: doctrine relates to unforseen events. Must Ask the following Questions. 1) Was the event in fact forseen? If answer NO. Doctrine of frustration may apply unless it ought to have been forseen. 2) If parties did in fact forsee the event, then ask- Did one party accept the risk of that occurring? If answer NO, then theoretically the doctrine of frustration may apply- however more likely loss lies where it falls. 3) What if event ought to have been forseen? If answer YES, doctrine of frustration does Not apply. The event must ought to have been forseen and a LIKELY consequence ( Davis Contractors) Where contract provides for the consequences of frustration - a party can contract out of rights to doctrine of frustration. Courts rarely construe contract to give up common law right. Simmons v Hay: Hay emplyed by Simmons on a 3yr contract- the contract could be terminated with 3 months notice. Contract stated Hay had to work normal business hours except in the case of illness. Soon after Hay commenced employment, he fell ill and off work for 7 weeks, came back and then got sick again- never returned, illness permanently rendered him unfit for work. Simmons, the employer argued that contract had been frustrated. Hay argued contract not frustrated because it dealt with matter of illness. Nsw court: this illness rendered the contract fundamentally different from that which was envisaged. Could not read word illness in contract of employment as to include illness that permanently rendered an employee unfit for work. Complicating factor: Evidence that Simmons knew of illness that Hay had before formation. Was it then not forseeable? Court ruled- not forseeable as a likely consequence that illness would lead to Hay perm being unable to work. Self-induced frustration RULE: cannot rely on doctrine if you are responsible for the event that led to the frustration of the contract. (Maritime National Fish v Ocean Trawlers-chartered boat out to ppl and then didnt give fishing licence- self induced and Super Servant 2) Consequences of Frustration I. When frustration occurs, it automatically discharges the parties from the obligation to perform their contractual duties however where frustration self-induced, not automatically discharged; rather may give rise to right to terminate (eg. for repudiation)

Frustrating event discharges the contract in futuro, not ab initio - therefore unconditionally accrued rights and obligations survive III. Frustration does not give rise to right to damages however if cause of action for damages accrues unconditionally, this will survive discharge due to frustration
II. Frustrated Contracts Act 1978 I. Attempts to apportion loss caused by frustration, so that the effects of a frustrating event are not as harsh as they otherwise would be II. Generally applies to things done, or required by contract to be done, before frustration

Discharge by Agreement RULE: parties can discharge any contractual obligations by agreement

REMEDIES
Damages
RULE: principle is to compensate for loss- to put the party in the position they would have been if the contract had been performed 3 Main elements 1)Loss -strictly speaking every breach gives right to damaes. Therefore dont need to prove loss. If you dont prove loss however you only can receive niminal damages RULE: must prove extent to loss to receive more than nominal damages (Luna Park v Tramways) 2) Causation Necessary for P to prove that loss suffered was caused by the breach. NB: only has to be A cause Causation is the factual control on loss that is recoverable for breach. Can apply the but fortest. HC said not exhaustive tst- must approach questions of causation on basis of common sense which may involve making value judgements. Reg Glass v Rivers Locking Systems Facts: Rivers provide security door to Reg Glass. Thieves break intop shop and steal $10,000 worth stock by breaking security door. Trial judge held breach of warranty in relation to the door and that Rivers were liable for value of goods stolen.Went to HC Majority: Barwick CJ, McTiernan J and Menzies J seemed to presume causation State- breach of warranty, thieves got in through door, therefore Rivers liable for the loss. Dissent Windeyer J: hed not been proven that the loss flowed from the breach because it was not clear that if the warranty had been complied with the thieves would not have broken in Owen J: concluded no breach of warranty to begin with, when you provide security system very rarer promise given that thieves will not get in. Idea of system- discourage thieves or to slow them down. The door did slow thieves down- took them an hour to get intherefore no breach. Considered even if it complied couldnt say that thieve wold not have got in Seems maj correct: thieves entering to steal through the door in breach of warranty is A cause, doesnt have to be the cause.

3)Remoteness I. Ps loss or damage must not be too remote

II. A control over amount of damages that can be awarded a policy limitation on damages III. Loss must have been reasonably foreseeable at the time the contract was formed Hadley v Baxendale: Two limbs of damages in contract 1. General damages: losses that flow as a natural consequence of the breach (RF), according to the usual course of things 2. Special damages: where the breaching party at formation accepted a risk which was not a natural consequence, after the innocent party put them on notice that they were likely to suffer the loss [reflects the nature of contract] Victoria Laundry v Newman Industries: D was a boiler maker, and had to deliver boiler to VL delivered it 20 weeks late. As a result, the laundry lost profits on a day-to-day basis; it also lost an opportunity to take on a valuable government contract . Clear BOC, and clear evidence of loss question before court was whether the loss was reasonably foreseeable Loss of profits fell under first limb of H v B a natural consequence of the breach: reasonably foreseeable loss, or loss likely to result or on the cards D could not reasonably contend that they could not foresee that loss of profit would be liable to result to purchaser from long delay in delivery Government contract would not have been RF at the time of formation; there was not evidence before the court that the boiler maker had been placed on notice that loss was likely to be incurred with BOC therefore could not fall into second limb of H v B 4) Forseeability Koufos v Czarnikow: D contracted to carry load of of sugar to Baxra. P intended to sell sugar. D 10days late and in the meantime price of sugar dropped and P lost money. Q was the D liable for the loss of profits? Yes: all judges say reasonable forseeability not the test. It is muhc narrower Each judge expresses the test differently RULE: some say lost must be seen as a real danger, others say loss must be forseen as a serious possibility and others say loss must not be unlikely D knew P was sugar merchant. He knew Bazra was major sugar market. D should have then had in his contemplation that P was going to sell sugar with contemplation of making profits. The D being late- it was not unlikely that such a loss as Ps would be suffered Rules of forseeability/remoteness applied at formation

Measure of Damages Expectation Damages

I. Primary measure of damages those to place the innocent party in the position they would have been in had the contract been performed; protect the Ps expectation of receiving the Ds performance II. Contract for sale of goods 1. Goods accepted, and then revealed that goods quality amounted to BOW = quantifying damages: difference between value of goods (market price) at time of delivery less the value they would have had if they fulfilled the contract (market price) 2. Non-delivery, followed by increase in market price: damages = contract price minus market price A. Date of assessment usually the date of breach: one exception is when terminating for an anticipatory breach (where damages assessed as at the date fixed for performance of the contract) (Hoffman v Cali) B. Courts will not refrain from assessing damages simply because it is difficult to do so Howe v Teefy: Racehorse trainer, leased horse- idea was for 3 yr would train it race it and bet on it. Breach of contract- owner took back horse after 3 months. Trainer sued for loss of chance of earning prizemoney and loss of chance of winning money for betting on horse which had been the purpose of the lease. Court gave damages of $250- toss of a coin, but court must evaluate damages for chance.

Reliance Damages Court may award these to compensate for wasted expenditure in performing the contract Cth v Amman Aviation: AA hired to conduct aerial surveillance in Northern Australia. Amman spent about $6.6M modifying their planes to fulfil contract. Contract had a 12 month duration however expected that contract would be renewed. Modifications took longer than expected govt terminated contract because of delay. Later determined that govt had no right to terminate: AA treated this as repudiation, and terminated, suing the govt for damages. Trial judge awarded AA $410,000 expectation damages . AA appealed, wanting money for expenditure incurred in preparing for contract HC made three major statements of principle 1) Normal measure of damages is expectation loss this will usually cover expenses in performing contract, plus expected profits 2) If contract was going to make a loss, then expectation measure of damages would not include wasted expenditure: only what would have been earned under contract 3) Where it is impossible to assess an expectation measure of damages, then the court may at its discretion, award a sum to compensate for wasted expenditure as

reasonably incurred in reliance on the Ds promise court assumes that the expenditure would have been recovered McRae v Cth Disposals Commission: Cth govt puts out offer for tenders to salvage oil tanker on reef. McRae won tender, put a salvage team together to reclaim ship. Later revealed that ship and reef did not exist sued govt for BOC (breached implied promise that tanker existed). Impossible to determine expectation loss because ship didnt exist (so potential profits indeterminable) Due to impossibility, appropriate way to compensate P was to award damages based on money thrown away in searching for the tanker Amount to be awarded was agreed purchase price together with wasted expenditure in reliance on the promise that there was an oil tanker in the locality given

Restitution Damages Where P confers a benefit on D due to BOC, P may recover damages based on value of benefit obtained by D (restitution of benefit) Particular Issues 1) P must prove the extent of the breach Where P suffers loss or damage as a result of BOC, the onus of proving the extent of the damage or breach lies on them 2) Effect of termination Accrued right to damages survive termination

Shevill v BLB: I. Issue: whether expectation damages should be awarded where there is an express right to terminate RULE: if you terminate a contract and you base that termination on express termination right under contract then you may not recover loss of bargain damages unless you can prove that you would have had a right to terminate at law 3) Late payment of money

Used to be a rule that if money withheld, action would be for payment of money this has now generally been overturned (Hungerfords)

4) Injured Feelings Damages cannot be awarded for loss of enjoyment or injured feelings: only exceptions are where the contract is one to provide the P with enjoyment Jarvis v Swan Tours: J paid money upfront for package holiday to Switzerland to go skiing brochure suggested there would be a house party at Swiss resort, afternoon tea and cakes for 7/15 days, and a Yodeller evening Did not meet expectations in first week there were 13 people at resort, and in second week J was the only one all elements promised were not as expected. J sued for BOC. P entitled to be compensated for disappointment and distress at the loss of the entertainment and facilities for enjoyment which was contracted with D The general rule against the award of damages for injured feelings or disappointment does not apply where there is a breach of a contract to provide entertainment or enjoyment Baltic Shipping Co v Dillon: Dillon signed up for 2 week cruise on ship; after 8 days the ship sank as a result of negligent navigation. Dillon suffered disappointment, distress and severe emotional trauma. Contract was naturally characterised as one to provide for enjoyment and relaxation thus her distress was caused by a breach of contract and not too remote General rule that damages for Distress not to be awarded for BOC does not apply where there was a breach of a contract under which D agreed to provide pleasure, entertainment or relaxation

5) Reinstatement costs I. Usually arises in construction contracts the amount of money required to remedy a mistake made by a builder, and put structure in condition it would have been in had contract been complied with court will generally award costs of remedying to reinstate the P (rather than diminishment of value) Limit reinstatement costs will only be granted if reasonable 6) Effect of Contributory Negligence I. Issue can innocent partys damages be reduced if it has contributed to its own loss? Legislation in every state has stated that Cont Neg is a defence to a claim for damages

Mitigation P is required to take reasonable steps to mitigate their loss: steps which they do, or reasonable out to do to minimise loss or at least not to increase it II. This requirement only applies to AN ACTION FOR DAMAGES FOR A BOC not for an action for a debt or sum of money under contract (White & Carter Council v McGregor- garbage bin ads) III. Onus of proof on D to prove that P didnt mitigate their loss
I.

Sums Fixed by the Contract 1) Damages distinguished from a debt due I. Payment of debt a primary obligation II. To sue for breach of contract, that is enforcing a secondary obligation: an action in damages III. Usually the actions are combined, however an action to recover a contract debt is not a claim for damages

2) Liquidated damages clause distinguished from a penalty I. Liq Dam clause often incorporated into a commercial contract quantifies the amount of damages to be paid upon breach II. If an Liq Dam clause is incorporated, loss need not be proven to sue for these damages III. Fixes the amount recoverable without the need for litigation (unless D contests that a breach occurred) IV. Difficulty can never be compensated for more than loss, so if Liq Dam figure amounts to more than loss, court will hold that it is a penalty = unenforceable V. Test determine whether clause is true Liq Dam clause or a penalty at the time of formation: is it a genuine pre-estimate of loss that is likely to flow from the breach? (Dunlop) VI. If not a genuine pre-estimate of loss, the clause is void for all purposes VII. Termination of contract does not itself prevent operation of LD clause: generally survive because presumed to be parties intention

Dunlop Pneumatic Tyre Co v New Garage: P manufactured motor tyres and sold them under terms which required D, as purchasers 1. Not to alter or tamper with markings on tubes or tyre covers 2. Not to sell or offer for sale at prices below price lists 3. Not to supply to suspended customers of P

4. Not to export without P consent Payment of 5l for every tyre sold/offered in breach of agreement Test to determine whether Liq Dam or penalty (as above) Clause would be a penalty if the sum stipulated for is extravagant and unconscionable in amount in comparison with the greatest loss that might conceivably be proved to have followed from the breach per Lord Dunedin 1 Damages for breach by D would have been difficult to assess, and sum stipulated was not extravagant pre-estimate of Ps loss Clause would be penalty if breach consists only in not paying sum of money, and sum stipulated as Liq Dam is greater than sum that would otherwise have been paid

3) Continuation of Performance After Breach Breach gives right to election to innocent party as to whether to terminate Tramways held that innocent party cannot be compelled by breaching party to terminate, but can go on performing if he chooses II. Question as to whether law may ever force innocent party to elect to terminate
I.

White & Carter Councils Ltd v McGregor : Mc purported to cancel the contract on the day it was signed, White Carter manufactured contracted plates, advertised the business, and claimed payments from Mc (they elected to affirm) Lord Reid innocent party may elect to affirm or terminate, but can only elect to affirm if they have a legitimate interest in doing so 1. ought not to be allowed to penalise the other party by taking one course when another is equally advantageous to him 2. Referred to a hypothetical situation in illustrating this did not actually apply to facts of case, because M counsel did not set out to prove this 3. [was this his intention to introduce Good Faith into election process?] 4. [this may possibly apply to principles of the case] Majority P is not bound by reasonableness when making an election; no need to mitigate loss, because claim was for a debt due under contract, not damages

4) Recovery after termination of payments due previously

I.

If payment falls due prior to contract being terminated, and is unpaid when terminated, it may be recovered if unconditionally accrued prior to termination (McDonald v Denny Lascelles per Dixon J)- was it earnt? Matter of intention of parties.

Restitution I. P may recover a money sum equal in value to a benefit obtained by D at Ps expense II. Remedy for an unjust enrichment is always restitution III. Elements to satisfy a prima facie claim in unjust enrichment 1. Defendant must have received a benefit 2. Benefit must be received at the expense of the plaintiff 3. It must be unjust for the defendant to retain that benefit Benefit usually calculated at date of receipt Pavey & Mathews PL v Paul: Adopted Unjust Enrichment in Australian law as the basis for restitution UE a unifying legal concept which explains why the law recognises an obligation on part of the D to make a fair and just restitution for the benefit derived at the expense of the P An action on quantum meruit rests, not on implied contract, but on a claim to restitution or one based on unjust enrichment: Deane J, Mason and Wilson JJ. Arises from respondents acceptance of the benefits accruing to the respondent from the appellants performance of the unenforceable oral contract

Unjust Enrichment Elements Defendant must receive a benefit I. Claims 1. Recovery of Money 2. Reasonable remuneration for services rendered Monetary Benefits A. Ds receiving money is always an enrichment B. Money is considered an incontrovertible benefit, because no person receiving money would reasonably deny that they had been enriched [an objective test this is rare, because usually a subjective test is applied for UE] Non-Monetary Benefits

A. Just because a service is provided (and it has a market value), does not mean that D has been enriched: the law of restitution generally takes a subjective approach B. The D can subjectively devalue the work done C. Circumstances where subjective devaluation is rebutted 1. Free acceptance (Ds choice to accept a benefit which could have been rejected) P must prove: a) Defendant had an opportunity to reject the work b) D had to know that P expected to be paid for the work c) D failed to reject the work 1. Where there is an incontrovertible benefit: no reasonable person would deny that they have been enriched

Sumpter v Hedges: D resorted to terms of contract to subjectively devalue work of contractor: incomplete construction was of no value to D, so they were not unjustly enriched Enrichment must be at the expense of the plaintiff I. For the purposes of this course, this claim is always made out It must be unjust for D to retain benefit Monetary Benefits I. There must be total failure of consideration = total failure of performance (if D has been enriched, and totally fail to perform = UE) Non-Monetary Benefits I. Free acceptance also a test of whether D would unjustly retain benefit

Claims for Recovery of Money after Discharge for Breach or Repudiation I. Principles apply regardless of whether or not party breached II. Three elements that must be made out by P 1. Money paid 2. D enriched at Ps expense 3. Unjust for D to retain total failure of consideration/performance on part of D: a question of construction [what was the promised performance?]

a) If any part of promise performed, no recovery of payment however if an act merely in reliance on contract will not overcome total failure of consideration (eg sale of goods, performance constitutes delivery of goods) b) If a collateral benefit is received (not flowing from performance), will not overcome total failure of consideration (eg. use of car collateral benefit to gaining title of car) c) Fault is irrelevant to failure of consideration (guilty party can still recover money)

Claims for Reasonable Remuneration (quantum meruit) for Services Rendered After Discharge (Breach or Repud) I. This form of claim arose in response to shortcomings of action in debt: necessity of liquidated sum

Benefit or enrichment P in Breach of Contract I. Plaintiff would be in breach of contract bringing a counter-claim for reasonable remuneration for their services (eg. contractor claiming RR had breached contract by abandoning construction) II. P in breach must prove that D freely accepted the work Steele v Tardiani: Italian internees during WW2 (in camp). A person on adjoining property offered some of the men some work men came onto property and cut wood, but did not cut any in accordance with contract. Ntl, owner of property stood next to workers and watched them noticed they were doing work incorrectly, but did nothing except reaffirmed his promise to pay them at the end of the day. When work complete, owner on-sold wood and profited Owner freely accepted work must reasonably remunerate workers for it, despite their breach

P not in BOC I. P will usually win II. Doctrine of limited acceptance: D would have accepted full performance; the only reason full performance wasnt accepted was because they repudiated contract therefore in a limited sense, must be deemed to have accepted performance that has been given (therefore innocent party is enriched) Valuation of claims I. If a claim for payment of money, whatever is paid is recoverable II. If a claim for RR of services, the market value of the services at the time they are rendered is awarded The contract price for those services does not set a ceiling on the amount the P can recover (if under market value) Equitable Remedies Specific performance I. Only awarded where damages are an inadequate remedy to protect the P equitable remedy II. D required to execute the contract in specie (unlike damages, which is a substitute for actual performance III. Limitations on availability of remedy 1. A discretionary remedy 2. Court will look at Ps conduct in considering whether to give remedy (must have clean hands) 3. Need for mutuality SP must be available to both parties 4. Court will not grant SP if it will constantly require court to supervise performance: JC Williamson 5. SP will not be granted for a contract of personal services Injunctions I. An injunction is an equitable order to prevent a breach of negative stipulation of a contract (promise not to do something) = prohibitory Injunction usually granted to restrain BOC which D has threatened to commit, or continuance/repetition of breach already committed

UNFAIR DEALING [vitiating factors] Looks at conduct of parties during negotiation of contract (pre-formation anything after formation is in the real of breach and repudiation If Vit Fact established, innocent party has right to elect to rescind contract: put back into position they were in at time of formation Misrepresentation MR = a partys false statement of material fact which induced the other party to enter into a contract and which is intended to induce entry into the contract

 If relied on, a fact is considered material Does not prevent contract coming into being (wont void contract) rather, representee may treat contract as if it never existed (rescind) Establishing Misrepresentation 1) Statement of Material Fact A statement of opinion or a puff is not a statement of fact II. An unreasonably held opinion may be a misrepresentation by expressing an opinion which is not held, one is misrepresenting a statement of fact III. Whether or not an opinion is held is an issue of fact a question of substance or effect
I.

2) Representation must be false I. Does not accord with the true facts (past or present, but not future [as above]) II. Usually not difficult to prove III. As a general rule, silence cannot give rise to a misrepresentation [non-disclosure of facts usually not MR] where silence can amount to a misrepresentation is where a half-truth is given (the part kept silent is false) IV. When a representation is given, and later becomes false, party who gave representation is under a duty to correct it otherwise silence amounts to MR (With v OFlanagan)

3) Statement must induce entry into contract I. Representor must have intended representation to reach, and induce to contract, the representee II. Must be AN inducing factor a question of fact III. Overriding requirement of reasonableness and context (eg. proximity) IV. If a statement made is false, and party is given opportunity to check the veracity of the statement and fails to do so, then it can still amount to MR (dont have to check): Redgrave v Hurd V. If P finds out that statement is false (before formation), cannot rely it as MR to rescind contract VI. Onus of proof usually on person making out MR, unless statement by its nature was calculated to induce representee to contract: here onus is on representor to defend against claim

Rescission

I. Victim of MR can elect to rescind the contract (void ab initio), or affirm the contract II. Rescission requires unequivocal conduct (overt) III. Ab initio causes any property which has passed or vested by reason of the contract to re-vest in the pre-contract owner IV. A self-help remedy: dont need to go to court to do so (unlike claiming damages) however may have to go to court to have an order forcing other party to rescind V. Cannot go back on the election- aim to put parties is original positions Affirmation I. Following MR, decision to rescind rests with representee - entitled to affirm contract, but mutually exclusive from rescission (affirmation is a bar to rescission) II. Question as to when a court can hold a person to have affirmed a contract where the issue involves a vitiating factor (as opposed to rescind) III. Person must have knowledge of their right to rescind or affirm; then must unequivocal conduct required that evidences that person has elected to affirm conduct Coastal Estates v Melevende: Purchaser of land entered into contract by reason of a fraudulent MR. Had knowledge of this and continued payments under contract, but didnt see lawyer for about 18mths, where he later discovered that he had a right to rescind now sued for money paid under contract on basis that it had been rescinded . Question as to whether purchaser affirmed contract by conduct ? P could not be held to have affirmed the contract until they had knowledge of right to affirm D was unable to prove that after this knowledge gained, P had elected to affirm Restitutio in integrum Impossible CL rule: Rescission is only possible if the parties can be placed in their original position exactly (at the time of formation): otherwise, cannot elect to rescind II. Equitable rule which prevails: rescission allowed if parties can be placed into position they were in substantially at the time of contract this now governs the requirement of restitutio in integrum
I.

Third Parties I. If there is a right to rescind, but prior to exercising right an innocent third party obtains an interest in the subject matter of the contract, then right to rescind is lost

Lapse of Time

I. Right to rescind can be lost through lapse of time can be evidence of affirmation II. Length of time required depends on facts of case III. Time starts from knowledge of facts, not when given knowledge of right to rescind Rule in Seddons Case I. After contract discharged for performance, right to rescind for innocent MR is lost applies to sale of any interest in land and to some sales of shares II. Does not apply where a mere partial execution Damages I. The right of damages differs according to whether MR is fraudulent, negligent or innocent any of these gives right to rescind II. For F or N MR, there is also a right to damages in an election to rescind and sue for damages, damages wont be substantial: however may be if electing to affirm contract

Fraudulent Mis Rep I. Must prove one of three things 1. Statement was made with knowledge of its falsity 2. Made without an honest belief in its truth 3. Made recklessly not caring whether true or false A. Enquiry always to subjective state of representors mind B. Usually has intention to defraud/cause loss but not an essential element C. If rescinding, and also suing for damages, reliance damages (wasted expenditure) will be granted D. If affirmed and only suing for damages, damages will be difference between actual value of subject matter and price paid (due to MR) E. If false statement made and truth guaranteed, the difference is between the actual value, and the value the subject matter would have had if true

Negligent Mis Rep I. After Mis Rep proven, must make out elements of negligence 1. Duty of care (imposed by law): to ensure representation is true and reliable a) Realisation that statement will be relied upon b) Usually found in more formal occasions 1. Breach of that duty by D: representor failed to take such care

2. Loss or damage caused breach: loss or damage caused by falsity of representation Shaddock & Associates PL v PCC: Solicitor for company who wished to purchase land for redevelopment asked unidentified officer of council if there were any road widening proposals affecting the land officer said there werent. Solicitor applied for certificate under Local Government Act and in application asked again whether there were any road widening proposals. Usually if so, they would be stated at bottom of certificate however when certificate granted, there were no road widening proposals mentioned. Relying upon certificate, purchased land. Later discovered that council had approved road widening proposals Council owed duty to take reasonable care to ensure info given on the certificate was correct Erroneous information provided breached that duty: failure to mention road widening proposals Measure of damages for neg MR was that sufficient to restore P to position in before statement (tort measure) subject to loss being foreseeable same position had they not made the purchase Innocent Mis Rep Damages cannot be awarded for innocent MR that which is neither fraudulent or negligent Statutory Prohibition on Misleading and Deceptive Conduct I. MR law is rarely used today, due to existence of S52 of Trade Prac Act (Cth) relied on Cth corporations power under Constitution (thus requires Corp engaging in MisDecp conduct) 1. A corporation shall not, in trade or commerce, engage in conduct that is misleading or deceptive, or likely to mislead or deceive: if not abiding, corp has contravened S52 I. Equivalent state legislation exists under Fair Trading Acts (NSW S42) complements S52 Trade Prac Act in respect of, inter alia, matters outside the legislative competence of the Cth parliament II. May be brought instead of MisRep where wanting damages innocent MR doesnt allow for these Henjo Investments PL v Collins: Sale for business called New York Deli, licensed to seat 84 people. Potential buyer came to view property, and counted 124 seats, assuming this was reflective of license. During negotiations, vendor gave card to potential buyer which stated on it licensed for 124 people. After purchase, purchaser discovered it was only licensed for 84 people however did not close restaurant until much later. Contract had an entire

agreements clause buyer warranted that they had not relied on any representation other than what was included in contract . Question: was there misleading conduct? Vendor had misled purchaser into thinking that property was licensed did not matter that purchaser had capacity to check this In assessing whether there is loss caused (for S52 purposes), common sense test is appropriate Not all losses should be attributable to representations rather regard should be had to degree of connection between loss suffered and contravening conduct, as well as mitigation Entire agreements clause was invalid: cannot contract out of S52

Mistake I. Three types of mistake 1. Common mistake: where both parties are mistaken, making the exact same mistake 2. Mutual mistake: both parties are mistaken, but making different mistakes 3. Unilateral mistake: one party is mistaken A. Mistake will only vitiate a contract if operative 1. Common law: renders the contract void a) Mistake at Common Law is the only vitiating factor which can void a contract 1. Equity: renders the contract voidable gives innocent party a right to rescission a) [where if third party benefits before election to void, for value without notice, they will gain title: so as to not be unjust] Mistake must relate to a past or existing fact mistake at law is no ground for relief

1)Common Mistake The parties are under a common misapprehension make the same mistake Most usual type of common mistake parties are mistaken as to existence of contract subject matter Several ways to approach (subject matter) in different parts of contract law 1. Express provision to deal with ceased existence of subject matter? 2. Was there an implied term that a party accepted a risk as to existence of subject matter? 3. Was the contract frustrated? 4. Was there a common mistake as to existence of subject matter? CL common mistake = voids contract [very hard to prove in Aust] if mistake causes offer and acceptance, there is no agreement

McRae v Cth Disposals Commission: Non existence of ship. Mc sued Cth for BOC. Govt claimed that common mistake made as to existence of subject matter so fundamental, that contract should be voided. Therefore no contract formed to be sued upon no meeting of the minds Dixon J 1. First question to ask: did one of the parties promise that the goods existed (not whether there was a mistake) if so, they breached contract 2. The Cth did promise ship existed, and therefore BOC 3. The case was not one of a purported contract nullified by a mistake; even if it was a mistake, the Cth could not rely on the mistake because it was induct by fault of Cth recklessly, without any reasonable grounds to assert existence of tanker SOGA applicable only where goods once existed and then perished Svanosio v McNamara: D agreed to sell P land together with the licensed premises erected thereon. Later discovered that hotel stood partly on Crown land. P claimed that there was a common mistake as to the existence of a fundamental fact, that the D were the owners of the whole land upon which the hotel was erected Dixon and Fullagar JJ. contract was not void for mistake To prove that a contract is void at Common Law, must prove that there is a failure of some condition on which the existence of the contract depends [which will occur if there is a total failure of consideration]: transfer of the license was the principal part of the consideration, thus contract not discharged for failure of consideration [is this setting up a doctrine of mistake, or rather discussing condition precedent]

Solle v Butcher: Dispute between lessor and lessee rent contracted at about 250l/year: both felt that Rent Restriction Acts didnt apply (which would have limited rent at about 140l/year) due to alterations made to war-damaged house. However, Acts did apply thus lessee claimed contract was voidable for mistake, thus money should be returned. Lessor claimed that contract was void for mistake, thus contract never existed and no money should be returned (contentious) Rule Lord Denning Common Law mistake rendering contract void would exist where there is no consensus ad idem (when rules governing formation of contract are not made out) Equity can render a contract voidable (liable to be set aside on such terms as the court thinks fit) when there is a common mistake as to the facts or the respective rights of the parties, provided that the mistake is fundamental and the party relying on it is not at fault [didnt create misapprehension] Equity may apply where injustice would occur if third party gained title

 Common mistake was one of fact, and Lessor was entitled to have the contract set aside in equity on such terms as the court felt fit Mutual Mistake The parties are at cross-purposes about the contract both are mistaken, but mistakes differ II. Where there is insoluble ambiguity and evidence shows parties meant different things III. Consensus ad idem is only apparent parties mean different things IV. But, if evidence shows that the only reasonable interpretation to be placed upon the words/conduct was that contended for by one party, there will be a contract conforming to this construction V. A claim of Mut Mistake is rarely, if ever successful VI. When dispute before court is merely a dispute as to meaning of a term of the contract, this cannot prove an operative mistake: Goldsborough Mort v Quinn (1910)
I.

Unilateral Mistake I. Where one party enters contract under a mistake which the other party knows (unconscionable) Mistake to terms of contract Taylor v Johnson: J gave T an option to purchase some land contract price $15000. J later refused to go ahead with deal, because she believed it was $15000/acre Contract was voidable for an operative unilateral mistake Taylor knew J was operating under a mistake, and took positive steps to ensure J never found out about this Basis of reasoning was unconscionable conduct person claiming fundamental mistake will be entitled to equity where the other party was aware that circumstances existed which indicate that the first party is entering the contract under a mistake as to content/subject matter of a term, and deliberately sets out to ensure that first party does not become aware of mistake calculated to do justice to parties = equitable

Unilateral Mistake as to Identity I. A makers an offer to B, thinking B is C usually, B receives goods, and on-sells them to innocent D (and B disappears)

II. A must convince the court that contract is void court makes distinction between parties being in face-to-face conversation [inter praesentes], and being at a distance Lewis v Averay: L persuaded to sell Mini Cooper to a man representing himself as Richard Greene, the famous TV actor in Robin Hood. Presumed he was wealthy let him have the car in return for a cheque. Rogue on-sold car to Averay cheque bounced . Lewis sueAveray for conversion had to prove that contract between L and rogue was void Denning J: found for Averay contract was not void, but voidable When dealing face to face, there is a presumption of intention to deal with the person physically present before you: not the person they represent themselves as being there was nothing to rebut this presumption This dispute should be resolved by asking who is the most culpable in this case, L was most culpable for handing over a car and taking a cheque in return Because Averay bought the car bona fide, without notice (before L failed to avoid contract), he acquired good title to the car Rectification of Documents I. If oral contract entered into, and later written on paper and signed (with mistaken transcription), an equitable order for rectification of that document (so as to accord with what was actually agreed) may be granted II. Limitation rectification cannot be used when problem is one of construction (eg. meaning of terms): document cannot be changed to reflect what is meant (will only rewrite where term actually differs from oral agreement) Non est factum I. This is not my deed claimant under disability which went to understanding the content of the signed document II. Mind of the person signing did not go with the signature Duress I. Duress is a threat of a wrongful act which forces another to agree to a demand an illegitimate threat II. A CL doctrine if successful in claiming duress, have a right to rescind contract: must be able to place parties in position they would have substantially been in had contract not been entered thus contract is voidable III. It is open to party to affirm contract and thus to become unconditionally bound by it IV. Physical and economic duress

Duress to the Person A contract is not enforceable against a party whose assent was procured by actual or threatened violence to their person/deprivation of liberty includes their parent, spouse or child

Duress to Goods Unlawful taking, detention, damaging or destruction of persons goods money paid for release usually recoverable under claim for restitution; if it induces entry into contract, this will be voidable Economic Duress I. Usually arises in negotiations for contract question as to whether economic pressure in negotiations as to amount to duress: courts have recognised the existence of economic duress, however where to draw the line is extremely difficult II. Where threat is illegitimate, will constitute duress: thus mere commercial pressure which may affect the other partys mind may not constitute duress III. Where a contract exists, and one party says they will breach contract unless another contracted entered into, this is a classic case of economic duress however threatened breach will not always amount to economic duress: depends on facts IV. Economic duress may also arise where economic survival depends on entering another contract depends on circumstances: Atlas Express v Cafco V. Practical choice threat may be rendered illegitimate if no other practical choice but to enter contract VI. If the person making the threat has no other interest into entering contract except pecuniary benefit, this may indicate that threat is illegitimate North Ocean Shipping Co Ltd v Hyundai: Shipbuilding contract for a price expressed in USD (without a currency fluctuation clause) USD dropped builder requested more money (10% payment increase), stating that unless more money paid, ship would not be completed. Person buying the ship had no other choice so agreed to pay extra amount. Later attempted to set contract aside on basis of duress Companys threat to break the contract without any legal justification unless the owners increased payments amounted to economic duress, and accordingly, the latter agreement was voidable Ntl, buyer still lost waited 8 months to rescind, making final payments prior to this: thus could be taken that contract was affirmed by conduct of owners

Undue Influence I. Equitable doctrine if proven, the contract is voidable II. Two categories 1. Presumed undue influence 2. Actual undue influence

Presumed Undue Influence Certain relationships, as a matter of law, raise presumption of Undue Influence: parent/child, guardian/ward, priest/members of parish, solicitor/client, doctor/patient II. If these parties enter into contract, court will presume that contract is tainted by undue influence III. Thus, onus is on party supporting transaction to prove that contract was entered into independently (free exercise of the will) IV. Do not include husband/wife, banker/customer, teacher/student
I.

Presumption of UE on basis of facts of the case I. Claiming party can prove Undue Influence if proving relationship of trust and confidence in which one of the parties could exercise dominion over the other Johnson v Buttress: B a 67yo man, of ordinary intelligence: illegitimate. B transferred his house for free to Mrs J, who had established a relationship of trust and confidence with B. No legal advice given in this transferral Where the relation between donor and donee is such that the latter is in a position to exercise dominion over the former by relation of trust and confidence, presumption of undue influence is raised to rebut presumption, must be affirmatively shown that gift was pure, voluntary, well understood act in the mind of the donor A special relationship of influence was established thus presumption of Undue Influence had not been rebutted

Actual Undue Influence Evidence must establish the actual influence at the time of contract in absence of the presumption

Bank of Commerce v ABoody- husband as agent of bank gets wife to sign guarantee for company she was only a director in name. Actual undue influence.)

Unconscionability I. Focuses on the conduct of the D II. Special disability vis a vis the other party a crucial element of unconscionability: Blomley v Ryan III. Rescission is the usual remedy for unconscionability Common Law Commercial Bank of Australia v Amadio: P elderly Italians, with little command of English language relied on son in all matters of business. Sons business was insolvent, and overdraft account was closed: would only be reopened of account was secured by mortgage on parents property Sons business had already been in trouble It was clear that bank manager had known the company was insolvent, and agreed to selectively honour cheques to give appearance of solvency Bank had given son all documents for parents to sign in presence of branch manager son read the documents to parents over kitchen table as father read newspaper, lying to them about extent of guarantees (didnt tell them it covered all money owed by the company) parents executed deed of mortgage by signing. Bank was aware that parents had been misinformed about contents of deed. Company went into liquidation, and bank demanded $240 000 from parents, who sought a deed of release. Deane J (leading judgement, agreed by Wilson J, Mason J) applied Blomley 1. Parties must meet on reasonably unequal terms so that one is under a special disability vis a vis the other party [usually age, education, health etc.] a) Blomley: poverty, sickness, age, drunkenness, illiteracy, lack of education 1. Disability must be sufficiently evident: The stronger party must be aware of this disability, or reasonably should have been aware of it, and unconscientiously/unfairly procures or accepts weaker partys assent to transaction 2. Thus the stronger party obtains a bargain which it is unconscionable to retain 3. P must prove first two; after this, the onus of proof shifts to the D to prove that the bargain was fair, just and reasonable [This case was important in restating principles relating to unconscionable contracts, and making it clear that actual knowledge by stronger party is not essential] The parents were under a special disability, which was sufficiently evident to the bank, making the bargain unfair/unconscientious to retain the onus of proof was on the bank to prove otherwise

Statute I. There are several pieces of legislation which allow courts to set aside contracts on the basis of unconscionability 1. Contracts Review Act 1980 (NSW) 2. Trade Practices Act 1974 (Cth)