Download LAWS2111-Notes-20131-1

Offer .................................................................................................................................................. 3
1. Negotiation ............................................................................................................................................................................................... 3
2. Offers or invitations to ‘treat’ ........................................................................................................................................................... 3
Acceptance ......................................................................................................................................... 5
1. Rejection and Counter Offers ............................................................................................................................................................ 5
2. Conduct ...................................................................................................................................................................................................... 5
3. Methods of Acceptance (prescribed by offeror ) ...................................................................................................................... 5
Legislation ..................................................................................................................................................................................................... 6
Termination of offer ........................................................................................................................... 7
1. General Rules of Revocation ............................................................................................................................................................. 7
2. Evidence of revocation ........................................................................................................................................................................ 7
3. Options ....................................................................................................................................................................................................... 7
4. Revocation and Unilateral Contracts ('Walking to York‘ problem) ...................................................................................... 7
5. Lapse of Offer .......................................................................................................................................................................................... 7
6. Restitutionary Remedies .................................................................................................................................................................... 8
Certainty and agreement .................................................................................................................... 9
1. Terms .......................................................................................................................................................................................................... 9
2. Negotiations in Good Faith? ........................................................................................................................................................... 10
3. Conditional Agreements: Theory ................................................................................................................................................. 10
Intention to Create legal Relations .................................................................................................... 11
1. Family Agreements ............................................................................................................................................................................ 11
2. Social Agreements/Agreements ................................................................................................................................................... 11
3. Commercial Agreements ................................................................................................................................................................. 11
4. Government Schemes ....................................................................................................................................................................... 12
5. Difficult Categories ............................................................................................................................................................................. 12
Consideration ................................................................................................................................... 13
1. Test for Bargain and Practical Benefit ....................................................................................................................................... 13
2. Past Consideration ............................................................................................................................................................................. 13
3. Value of Consideration ..................................................................................................................................................................... 13
4. Economic Duress................................................................................................................................................................................. 13
Promissory Estoppel ......................................................................................................................... 15
1. Shield ....................................................................................................................................................................................................... 15
2. Sword ....................................................................................................................................................................................................... 15
5. Suspension of Rights? ....................................................................................................................................................................... 16
6. Remedies ................................................................................................................................................................................................ 16
Capacity and Formalities................................................................................................................... 17
1. Capacity: ................................................................................................................................................................................................. 17
2. Formality (linked to express terms and intention): ............................................................................................................. 17
Express Terms .................................................................................................................................. 18
1. Signature ................................................................................................................................................................................................ 18
2. Term/collateral contract or mere representation/opinion.............................................................................................. 18
3. Parol Evidence Rule (presumption written doc whole contract) ................................................................................... 18
4. Incorporation of Terms into Contract ........................................................................................................................................ 19
Implied terms ................................................................................................................................... 21
A. Terms Implied by the Courts ......................................................................................................................................................... 21
1. Implied by Custom (bakers dozen, rarely used) .................................................................................................................... 21
2. Terms Implied in Fact (specific) ................................................................................................................................................... 21
3. Implied in Law (generic terms always implied in particular types of contract) ............................................................. 21
4. ‘Universal Terms’ and Good Faith? (universal) ...................................................................................................................... 21
B. Terms Implied By Statute ............................................................................................................................................................... 22
1. Sale of Goods Act 1896 (Qld) (general application to sale between businesses)..................................................... 22
2. TPA supplemented SOGA covering lease, hire and services. regularly amended, focus: national contract
regulation between businesses & consumers. Div 1 unfair practises. Div 2 ‘conditions and warranties’–
implied terms: ss 68 clauses excluding implied terms void, 69: title, 70: description, 71: fitness for purpose
or merchantability, 74: supply of services .................................................................................................................................... 22
3. CCA 2010 TPA amended and renamed to solve federalism problems, Div 2 significantly changed:
provisions grouped together, replaced implied term concept (now stand alone remedy), clearer
(merchantability replaced with acceptability), defined remedies (major and minor), prevented clauses
excluding it ................................................................................................................................................................................................. 22
Exemption Clauses – common law .................................................................................................... 26
Unfair Terms - statute....................................................................................................................... 28
Offer
1. Negotiation
 *Carbolic: would a reasonable person in the position of the offeree consider an offer was intended and
meant to be binding on acceptance? (objective test)
 Heydon in Brambles Holdings v Bathurst: ‘must give offeree an opportunity to choose between
acceptance and rejection’ ‘commanding language may not be regarded as an offer’.
 Harvey v Facey [1893] A.C: Supplying information not an offer
2. Offers or invitations to ‘treat’
2.1 advertisements
 Fisher v. Bell [1961] Q.B: acceptance takes place at till not at window
 Pharmaceutical Society of G.B. v. Boots [1953]: in self service store customers picking up goods did not
amount to acceptance, could still return and subject to supervision - Birkett and Sommervell LJ
2.2 Newspapers
 Partridge v. Crittendon [1968] E.R:
 Cf. *Carlill v. Carbolic Smoke Ball Co. [1893]: Carbolic reward/unilateral contract while the others bilateral.
Advertisments usually invitations to treat. Bowen:
1. Bank deposit made the offer more than mere puff in any reasonable persons objective opinion
2. Offer was made to the whole world and could be accepted by any person who performed the
conditions
3. Reward type of offer so offeror dispensed notification
4. Enough restriction and certainty was given: any person who contracted the disease during the
epidemic, while using the smoke ball and within a reasonable time after using it.
o Result changed if: less specific, set out terms of acceptance (through letter), proof required, time
limits
2.3 Auctions (buyer makes contract with seller though auctioneer facilitates)
 Sale of Goods Act 1896 (Qld), s.59 1b) acceptance on oral acceptance or fall of hammer. c) seller bidding
is fraudulent. d) unless seller reserves the right to bid
 AGC v. McWhirter (1977): Seller not bound to accept highest bid, even if “sale without reserve”
 Payne v Cave no claim if the auction is cancelled or bid withdrawn before acceptance
2.4 Offers and Tenders
 Spencer v. Harding (1870) Distinguish between invitation to submit a “tender” and actual tenders. Tender
is an invitation to treat unless it indicates highest bid will be accepted. Invitation to tender in absence of
any specific wording such as "and we undertake to sell to the highest bidder" per Wiles J
 *Blackpool & Fylde Aero Club v. Blackpool ENGLAND [1990]: If submit conforming tender before deadline
then should be entitled to have opened and considered. Failed to check mail. The more formalised the
tender process, the more likely obligation is expected
2.5 Tenders and Process Contracts
 Hughes Aircraft Systems v Airservices AUSTRALIA (1997) FCR: CAA sends letter detailing process which
specifies fairness and that an auditor will be hired, all sign. CAA breached process contract. Guidelines = v.
likely a process contract exists
 IPEX v. State of Victoria [2010]: court not to decide the merit of the process contract
2.6 Passenger Tickets
 MacRobertson Miller v. Cmr. of State Taxation (1975): Ticket was offer, contract acceptance was by
conduct and not returning ticket after a reasonable opportunity to read the terms per Stephens J
 Thornton v. Shoe Lane Parking [1971]: Lord Denning: ‘contract concluded before ticket came out of
machine when contract could not be recinded on seeing terms.
 *Baltic Shipping v Dillon (1991) NSWL: ship sank and passengers claimed damages
o Contract of carriage on ticket recipt and P was not bound by the terms on the ticket  not drawn
to her notice or given an opportunity to decline to contract upon those terms.
o Gleeson and Kirby: acceptance not on purchase of ticket, but on issue. Didn't do all reasonably
necessary to draw attention to terms and give P and opportunity to decline. Therefore limitation
o
clauses not included. Cf. Hood v Anchor: acceptance if a passenger chooses not to
examine terms when everything reasonable has been done
 Kirby P: availability at offices did not amount to notice. no capacity to change terms.
Mahoney JA, dissent: Knowledge of potential contract existed on deposit; clear there would be a
contract issued with ticket. Booking material alerted buyer of brochures with contract and
perusal expected. Changed result: attention drawn to terms, terms weren’t unusual, brochures
posted with booking form
Contractual Classical Theory based upon “freedom of contract.”
 Underpinned US and English development of contract law
 Free will of parties protected: government best when it governs least: sir George Jessel: ‘men if full age
and competentcy should have the utmost liberty in contracting, and when contracts are enetered into
freely they should be upheld by courts’
 Not necessarily morally just to give effect to parties intent, assumes full negotiation (standard forms,
online aren’t), courts reluctant to give effect to non-contractual obligations, only binding through courts
(not true freedom)
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Acceptance
*Brinkibon: agents can be used to when they have actual or apparent (ostensible authority)
an objective test disregarding parties actual state of mind and considering only external manifestations is
used (Fitness First v Chong, where acceptance is on signature).
Paterson v dolman: capacity of more than one acceptance
1. Rejection and Counter Offers
 Hyde v. Wrench (1840 UK): Counter offer destroyed original offer: ‘must be simple acceptance of terms’
 Stevenson v Maclean (1880): Inquiry for information not counter offer
 Rest Sea v APT [2010] NSWCA: “attempt at acceptance with insufficient clarity” not counter offer,
acceptance or rejection
 Oriolo v Wolfram [2011] NSW: offeree may ignore counter offer and accept.
2. Conduct
 Brogden v. Metropolitan Railway (1877): Acceptance by conduct. Commercial reality is that business
parties will begin project before finishing contract and will need to find retrospective acceptance.
‘consensus short of complete expression, discovered from docs of an incomplete description’
 *Empirnall v. Machon Paul (1988): E requests work from M, oral contract is formed for regular process
payments. M requests E signs contract, told E does not sign. M replied “proceeding on understanding
conditions are accepted by you, and works are conducted in accordance”. Held: Kirby: objective test,
silence never acceptance. McHugh Samuels: silence in conjunction with other circumstances can indicate
acceptance
o Took benefit of offer with knowledge of terms (and made process payments according to it)
o Commercial understanding
o Offeror indicated he was willing to be bound by an oral contract (objection to manner not terms)
 Kriketos v Livschitz [2009] NSWCA: Allsop P: subsequent conduct may manifest intent to be bound
2.1 rewards: Fitch v Snedeker (1868, US): info given in ignorance of reward doesn't = acceptance
 R. v. Clarke (1927): motive relevant  no legal claim if act to prevent a criminal charge per Issacs J
2.2 Standing Offers: Great Northern Ry. v. Witham (1873) LR: could revoke standing offer for future.
2.3 Silence and Acceptance by Conduct
 Felthouse v Bindley (1862) cant impose acceptance by silence.
 Latec Finance v. Knight [1969]: to waive rule of acceptance must exhibit intent to do so. Cf carlil. Contract
between two parties through another, not signed by one for TV finance. Tv kept. actions not evidence
offer was accepted.
2.4 Consumer Protection Legislation
 Credit (Commonwealth Powers) Act 2010 (Qld). s. 14(1) Offer in writing, signed by debtor and credit
provider. s.14(2) Accept by drawing down credit or other act satisfying offer
 ACL: S39 prohibits unsolicited cards, S40 prohibits the assertion of a right to payment for unsolicited
goods or services, Ss 41, 42 no liability for reciept of unsolicited goods or services, S43 prohibits assertion
of right to payment for unauthorized ads
 PADMA 2000 (Qld): s369 5 business days starting on day buyer receives contract. Can be waived
3. Methods of Acceptance (prescribed by offeror )
 Manchester: may use any ‘not less advantageous mode’. Consider: speed, security, reliability, record
3.1 Instantaneous Methods
 Brinkibon v. Stahag Stahl [HL 1983]: General Rule: Acceptance is communicated when and where it is
received. Lord Wilberforce: consider Intentions of the parties, Sound business practice", and in some
cases a judgment where the risks should lie
 Entores v. Miles Far East [Eng. CA,1955]: communication need be merely virtually instantaneous
3.2 Correspondence between offer and acceptance/Battle of the forms
 *Butler Machine v Ex-Cell: 23 May S quotes price, terms (price variation clause) on back of quote: ‘orders
subject to our conditions which shall prevail’. 27 may. B replies with order, rejects price variation clause
and provide own terms but accept order on S terms. 5 June S replies and returns slip but
cover latter on delivery said ‘in accordance with our revised quotation of 23 May.
o Acknowledgement was an acceptance. Lord Denning: docs should be considered as a whole,
letter on 5 june is decisive.
o Appeal judge: s should prevail as were most forceful C18 conflict replaced with synthesis…
3.3 PAR
 Acceptance not effected until it’s communicated to the offeror (Byrne v Tienhoven), but if parties
contemplated use of post its complete as soon as letter is posted per Dixon (Tallerman v Nathans). The
contact is not precluded if the letter is lost or another contract made (Household Fire v. Grant).
 Adams v. Lindsell [1818]: genesis of PAR. First to post accepts risk as they implied post reply was
acceptable. too circular if receipt required
 This presumption may be rebutted by requesting written notice (Holwell Securities v. Hughes) or receipt
(Nunin Holdings Pty Ltd v Tullamarine)
 Vienna Convention on International Sales Art 24: PAR Does not apply to international trade: acceptance
will be effective when an indication of assent reaches the offeror.
 Gardiner: acceptance rule heavily favours offeree and may outweigh unfairness of an offeror being able
to cancel at any time.
3.4 New Forms of Communication (no set of rules yet)
 Ebay v. Creative Festival [2006] FCA 450, #48-49: analogous to ticket cases Rares J
o eBay argues the contract was signed electronically  change in terms was ‘misleading and
deceptive conduct’. Reasonable person would fund online steps to amount to contract.
o Creative argued it upon receiving and considering ticket  but terms precliuded refund
 Brinkibon, per Lord Wilberforce: PAR is justified by a ‘substantial interval’ - no such interval with email.
Legislation
 UNCITRAL Model law (1996):
o Art 11: In the context of contract formation, unless otherwise agreed by the parties, an offer and
the acceptance of an offer may be expressed by means of data messages.
 not intended to interfere with formation of contracts but promote international trade by
providing increased legal certainty
 uncertainty in a number of countries as no human interaction or hard copy
o Art 15:
 dispatch when it enters an info system outside senders control
 Dispatch and receipt is in place of business or habitual residence. (because not
uncommon to not know where info system is, and receipt and retrieval might be in
different locations to addressee)
 Do not “designate” merely by giving an email address.
 Deemed to receive when “retrieved” by A (not to A’s “attention”),
 Electronic Transactions Act 2001 (Qld)
o 14 Allows electronic signatures
o 23 Time of dispatch: when communication enters info system outside originators control unless
otherwise agreed
o 24 Time of receipt: (1) if the addressee has a designated system to receive electronic
communications the time of receipt when it enters the information system unless otherwise
agreed. (2) if the addressee has no such system receipt is when it comes to their attention
o s 25- communication occurs at the originator’s and receiver’s place of business, unless otherwise
mentioned.
 2005 UN convention: Improves s24(2) ETA by stating receipt occurs ‘when capable of being retrieved’.
 Vienna Convention 1986, Art 24: an offer, acceptance or declaration of intent reaches the addressee
when it is made orally to him or delivered to him personally
 Vienna Convention Art 19: 1) an ‘acceptance’ that contains additions, limitations or other modifications is
a rejection. 2) can accept if there is no material difference
Termination of offer
1. General Rules of Revocation
 Byrne v. Van Tienhoven (1880): Can revoke offer any time before acceptance provided its communicated
to offeree.
2. Evidence of revocation
 Dickinson v Dodds (1876: Evidence necessary. Any method of communication possible including reliable
source. promise to keep offer open not binding
3. Options
3.1 Nature of an Option (standing controversy)
 contract of sale now (single contract conditional on exercise of option in stated period) Laybutt v Amoco
(1974) CLR or binding irrevocable offer (for a sale contract later) O'Halloran v. Williamson (1979) VR
3.2 Firm Offers: International Solutions
 Vienna Convention enacted in Sale of Goods Act 1986 (Qld)
o Art 16(1) revoke before acceptance is dispatched
o Art 16(2) Cannot revoke offer if offer indicates it is irrevocable (e.g. fixed time)
o U.S. Uniform Commercial Code (UCC) S. 2-205: Binding if signed writing, time stated or
reasonable time (Max = 3 months)
3.3 Lock-out Agreements (binds vendor to deal with one purchaser for fixed time, does not oblige contract).
 Walford v. Miles [1992]: S decides to sell business. S says to P S will not deal with any 3rd party if P
provides a “comfort letter” from P’s Bank. S later refuses P’s offer and sells to X. Held lord Akner
o Lock-out for specified time (eg 2 weeks) potentially enforceable
o Lock-in agreement to negotiate for unspecified period was not enforceable – too uncertain
 parties entitled to withdraw from negotiations at any time and for any reason, Lord Akner
o Australian case law may not go so far, eg if express clause to negotiate in good faith
4. Revocation and Unilateral Contracts ('Walking to York‘ problem)
 Abbott v Lance (1860 NSWSC): implied promise not to revoke after performance commenced
 Daulia v. Four Millbank Nominees [1978], Goff LJ: Implied obligation not to prevent
 *Mobil v Wellcome (1998 FC): 1991 sales conference address + later video, magazine and brochure make
statements to potential franchises that if the reach a performance level 0f 90% for 6 years in sicle of
excellence they would find a way to extend franchise with no cost. But mobil stopped duding circle of
excellence, making it impossible. Held: address not an offer to tentative and preliminary. Implied ancillary
contract not intended objectively and no estoppel  Not unjust to allow revocation:
1. Knowledge offeree has commenced performance
2. Offeree may know of risk of revocation
3. If commencement” is unclear (All 6 consecutive years, reaching it once or working towards it?)
4. Act may be of benefit to both (here) or only detriment of offeree (no detriment for estoppel
purposes)
5. Offeree not bound to continue; offeror does not know (franchises already had obligation to
perform to high standards)
6. May be evidence of an intent
5. Lapse of Offer
 Lapse of time if no express limit
o Manchester Diocesan Case: Must accept offer in reasonable time
o Bartolo v Hancock [2010]: “Here and now offer”. Doyle J determined by context. Offer made at
beginning of trial to settle litigation on the basis parties would discontinue claims
 Death of Offeree: Carter v Hyde (1923) CLR: Offeree’s Personal Representatives (PRs) can accept. Unless
“personal” contract, particular skill or discretion needed
 Death of Offeror: Laybutt v Amoco (1994): Assumed that offeree cannot accept if knows of death? Unless
option/conditional cotract cab enforced against PR’s (Gibbs)
6. Restitutionary Remedies
 British Steel v. Cleveland Bridge [1984] ER: Not a general right to receive expenses but where there is a
request to start crucial there is an obligation to pay reasonable sum work  Unjust enrichment not
Contract claim
 Peet v Richmond [2011] VSCA contract repudiated before work finshed
o Quantum meruit claim [amount work is worth to R]
 Pocket expenses plus part increase in value
 Agreed price in unenforceable contract evidence of services worth
o Not for expectation: point of the action is to recover just compensation for work which has been
done not to recover damages for the loss of the opportunity
 Pavey & Matthews v Paul (1987) CLR: builder incurs expenditure on work, contracter doesn't have to pay
as builder didn't put it in writing
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Certainty and agreement
it is better for a thing to have effect than be found void  Judges are willing to fill in gaps and will do
utmost to uphold the agreement (Hillas v Arcos)
Distinguish complexity and uncertainty. Upper Hunter v Australian Chilling (1968) CLR, Barwick CJ
1. Terms
 Geebung v Varga (1995) BPR Kirby P: Courts should be the upholders of bargains and not their destroyers,
and should avoid ‘over-nice approach’ which results in a disharmony between the parties’ reasonable
expectations and what the law provides.
1.1 Reference to Non Existent Terms
 Scammell v. Ouston (1941): Sale of car on “hire purchase terms”- but many types of HP terms. incomplete
 Fitzgerald v Masters (1956) CLR: Dixon: absurd to nullify for typo when everything essential agreed - sever
 Laybutt v Amoco (1974): blanks severable
1.2 Terms Incompletely Expressed
 Whitlock v Brew (1968 HC): agreement “on such reasonable terms as commonly govern such a case”.
Arbitration for “interpretation or operation” disputes. Held (3-1) void for uncertainty as to period of rent.
Arbitration can be for meaning of agreed terms, not selection of terms. Kitto: reference to ‘reasonable
terms’ would have been apt had there been a set of such terms in common use
 Quarante v Owners Strata Plan [2008] NSWCA: “Reimbursement conversation” on refurbishment costs
but key issues omitted from discussion  post contractual conduct building not sufficient
 cf. Hillas v. Arcos (1932), Lord Wright: course of dealing considered were contract repeated
1.3 Incomplete Expression and Gap Filling
 implied terms may fill necessary gaps in existing contract but cant be used to create a contract
 Statutory gap filling
o Sale of Goods Act 1896 (Qld): implied terms: S.11(2) price, S.16 sale by description and S.17
goods shall be reasonably fit for purpose
o Competition and Consumer Act 2010: statutory guarantees: S. 56 supply by description and S. 54
goods to be of acceptable quality
1.4 Uncertainty and Essential Terms
 Whether term is essential depends on what parties not courts deem important (Pagnan v Feed Products)
 Geebung Investments v Varga Group Investments (1995) Kirby P:
o “If business people have agreed upon essential terms common law should uphold it. It should not
rifle through the terms to find some particular which has not been agreed, in order for one party
to escape its bargain.”
o Existence of matters of importance in which the parties have not reached consensus make it will
less likely they intend to be bound
 In simple, straightforward, cases Courts may see if agreement on essential terms
o Ormwave Pty Ltd v Smith [2007] NSWCA: P was a chef on cruise boat. Ship renamed and moved.
pay could be determined with wage, hours and duties of previous employment
1.5 Terms Left Open
 contract now that provides formula (i.e. test) and machinery (e.g. arbitration) for resolving terms later
 May & Butcher v R [1934] KB: contract to later determine pay
 Foley v. Classique Coaches (1934) KB: Courts will try to give effect to an agreement where there is
performance. Formula: reasonableness considering past dealings (3 years selling oil, consider past prices)
 Godeke v Kirwan (1973): no uncertainty if choice given to one party. “we will execute other conditions as
vendor may reasonably require”. Held B left matter to V’s solicitor to choose [mechanism].
o Walsh J: limited by reference to reasonableness (formula) conditions not inconsistent with offer.
o Gibbs: without objective standard of reasonableness unlikely contract would stand
1.6 terms left open - defective Machinery
 Hall v Busst (1960) HC: Option for S to repurchase land if later resale by B. clause included formula of
price plus value of improvement, less depreciation. Price too indefinate. reasonable price principle not
extendable to sale of land. To extreme to be upheld now?
o Dixon J – no external standard to decide actual additions

o Fullagar J – would need court action to determine price
Sudbrook v. Eggleton [1983] AC: Sale price to be agreed by 2 valuers appointed by LL and T LL refuses to
appoint. Held: Formula is reasonableness. Court can operate ‘machinery’ to appoint valuer. Cf Lord
Russell (traditional view) (thought it wasn't up to court to decide)
2. Negotiations in Good Faith?
 Walford v. Miles [1992] HL, Lord Ackner: Inherently adversarial process, no implied duty to negotiate in
“good faith”. Court unable to decide if good reason to withdraw from negotiations. D must not make
positive misrepresentations
 cf: must perform terms in good faith.
2.1 Can there be an express agreement to negotiate?
 Coal Cliff v Sijehama (1991) NSWCA: joint venture, heads of agreement signed, but parties to “proceed in
good faith to consult together upon the formulation of a more comprehensive and detailed agreement”.
Language was vague and provisional. Held: obligation to negotiate in good faith was too vague without
external arbitrator. Court ill equipped to fill many unresolved issues.
o Kirby P: Some agreements to negotiate in good faith can be binding. Must be clear, or part of
wider arrangement. External standard may be relevant (doctrine of freedom of contract)
o Handley JA: Negotiations are for parties’ discretion. promise to negotiate in good faith is illusory
 Aiton Australia Pty Ltd v Transfield (1999) FLR: dispute resolution procedure clause: “shall make good
faith efforts to resolve disputes” (manager meetings, mediation and expert resolution). Not uncertain as
certain procedure established for resolution.
 * Strzelecki Holdings v Cable Sands [2010] WACA): remediation needed for radioactive tailings. ‘If the
parties acting in good faith are unable to conclude a contract for the sale and purchase of the Land
between themselves within 30 days then MOU will cease”. no breach for not reaching agreement:
o Good faith meant to act honestly 'within the framework of fidelity to the bargain‘
o Not required to act another’s interest, must have freedom for self interested behaviour provided:
 Subject themselves to the process of negotiation
 Keep an open mind in the sense of being willing to consider proposals
 Put forward options for the resolution of any differences
2.2 Good Faith Internationally
 Vienna Convention: Art 7 “regard is to be had to…the observance of good faith in international trade”
 European law: liable for loss caused if you break off negotiations contrary to good faith. Contrary to good
faith if your negotiate with real intention of agreement
 Dutch law: compensation for expectation if there is a reasonable expectation negotiations will conclude
3. Conditional Agreements: Theory
 Condition precedent: Contract cannot come into existence until condition is first satisfied
 Condition subsequent: Contract binding now, but may be ended by a condition happening
 condition precedent to performance: contract binding but performance triggered by condition happening
 Meehan v Jones (1982) HC: “Subject to Finance” Not uncertain, inserted for benefit of P; P has choice
 *Masters v. Cameron: 3 classes (attempt to prevent being bound too early)
1. CBA v Dean (1983): Immediately Bound. later written record for file e.g MOU . Most common
2. Niesmann v Collingridge (1921): complete Agreement, performance conditional on later doc
3. Masters v. Cameron (1954): No intention to conclude bargain unless or until formal contract drawn
up (to reserve right to withdraw OR in recognition some matters aren’t yet covered)
o sum a deposit upon signing contract but should not become vendors property meanwhile
4. Anaconda Nickel v Tarmoola (2000): intend to be bound now, but intention to supersede by later
agreement. ‘heads of agreement which constitutes an agreement in itself to be replaced by a fuller
agreement not different in substance or form”.
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Intention to Create legal Relations
Principle independent of offer and acceptance: “Voluntary assumption of a legally enforceable duty”
Dixon J Australian Woollen Mills: “Intention” always judged objectively.
o merit v merit, per Lord Denning: ‘court does not try to discover the intention by looking into the
minds of the parties. It looks at the situation in which they were placed and asks itself: would
reasonable people regard the agreement as intended to be binding?’
SA v Cth (1962) Windeyer J: “circumstances may show parties did not intend to subject their agreement
to the adjudication of the courts”
*Ermogenous v Greek Orthodox Community of SA Inc. (2002 HC): Caution in using ‘presumptions’ as to
parties intentions. Merely burden of proof issue. take salient features of relationship into account, were
parties in a commercial transaction and dealing at arms length?
1. Family Agreements
 Old presumption that family and social agreements are not meant to be binding
 Balfour v. Balfour (1919) Husband moved to Africa with wife, she returned but they did not separate.
made oral agreement for £30 p.m. maintenance.
o Most H-W ‘agreements’ not enforceable: bound in honour not contract, ‘where parties share love
and natural affection courts unlikely to be enforceable. More likely if breakdown atkin LJ
o Possible to be binding but depends on (objective) intention
1. Would W have accepted obligations/consideration?
2. Huge burden on spouse to rebut presumption
 Family Law Act 1975 (Cth) (court now has power to split resources). Agreement is binding if it is signed by
both parties and includes a certificate that they have both received independent legal advise VIII.
Family Cases were presumption was rebutted
 Todd v. Nicol [1957] S.A.S.R: Letters to sister in law and niece for company: 'Come and live with me rent
free’, ‘if I die yours for life’. Fell out. Was intention, permanent arrangement affecting financial security
(sold belongings, moved from Scotland, resigned employment). Cf. balfour didn’t keep evidence of letters
 Popiw v. Popiw [1959] V.R. 197: H - W living apart husband is physically abusive. H promise. 'Return and
I'll transfer house into joint names'. H argued she did no more that here obligation as wife. not a love and
affection case, returning was against her interest. Sufficient intention/consideration to be bound.
 *Riches v Hogben [1986]: son agrees to come to Australia to look after mother. She will buy a house in his
name. ejects him. binding as reasonable people would regard it so and considerable expense by son
2. Social Agreements/Agreements
 Clarke v. Dunraven [1897] A.C: clubs & competitions. Yatch race rules: contract for damage w/ each other
 Simpkins v. Pays [1955]: binding lotteries, consider mutuality, seriousness of statements and repetition
 Trevey v. Grubb (1982) ALR: Enforceable agreement in proportion of pay
3. Commercial Agreements
 Presumption commercial agreements intended to be binding. Rarely rebutted Helmos enterprises v Jaylor
 Edwards v. Skyways [1964] ER: Ex gratia payments. pilot made redundant, promised without liability
redundancy pay-out. Does not imply agreement of no legal effect
3.1 Excluding ‘Intention’ in Commercial Context (beware of label and examine content)
 Rose & Frank v. Compton [1925] AC: 'honour' clauses and 'gentleman's agreements‘. Burden of proof on
person saying there is no contract. no reason why parties may not decide to ‘rely on each others good
faith and honour’ and exclude outside intervention in dispute settlement’
 Factory 5 Pty Ltd v State of Victoria [2010]: “Heads of Agreement”. Type 4 masters v Cameron, heads
where comprehensive and contained details about future negotiation. Intent to be bound in future.
 Pirt Biotechnologies v Pirtferm [2001] WASCA: “Letter of Intent” included clause: 'at this stage parties do
not seek a contractual obligation', indicated parties still negotiating. Murray j: “if there is ambiguity or
omission of important terms, there was no intention to form a binding legal agreement.”
 Kleinwort Benson v. MMC [1989] WLR: “Letter of Comfort”.
 Norman; Re Forest Enterprises [2011] FCAFC: “Letter of commitment”. Stated it was not binding, did not
create legal relations, not supported by consideration and was uncertain and incomplete
4. Government Schemes
 Australian Woollen Mills v Commonwealth [1954]: Government wool subsidy scheme in wartime. Held:
No intention to make a contract, No statutory authority and no bargain (Cth had no commercial interest
in purchase, only to help glut). Was omly a conditional gift/administrative arrangement.
5. Difficult Categories
 Burden on person alleging contract
 Ermogenous v Greek Orthodox Community (2002): Hellenic association (not church) appointed
Archbishop. Archbishop sued for unpaid leave. Held: was an employment contract to perform spiritual
duties and extensive rights of control exercised
o Kirby: must be house, eat, be clothed… spiritual vocation does not remove need
o Joint: had to adhere to their will in the running of the church
 Shahid v Australasian College of Dermatologists [2008] per Jessup. student failed, all passes got jobs.
o Each lodging of appeal was intended to create legal relations
o Objective assessment used: Handbook detailed and comprehensive
o Commercial relationship: S major commitment of time energy and money  Fees for seminars,
sitting exam, appeals. Jessup J: parties not at arms length where payment is made



Consideration
Currie v Misa (1875) LR 10 Ex, Lush J :“A valuable consideration, in the sense of the law, may consist either in
some right, interest, profit, or benefit accruing to the one party, or some forbearance, detriment, loss, or
responsibility, given, suffered, or undertaken by the other.” (bargain principle)
Thomas v. Thomas (1842) QB, Patteson J: “Consideration means something which is of some value in the eye
of the law, moving from the [promisee]; it may be of some benefit to the [promisor] or some detriment to the
[promisee], but at all events it must move from the promisee.”
Carbolic: in unilateral contracts the same act may be both consideration and acceptance
1. Test for Bargain and Practical Benefit
*Beaton v McDivitt (1987) NSW: M invited B to move onto land rent free and work it, would transfer deeds on
subdivision. B accepts offer as is having difficulties with current LL, constructs residence spent $1000 over 7 years.
Fell out, council required demolition of home. LL barrs B from property. No subdivision. Contract held, worked
land for promise
 Mahoney: intention of parties and discussion required - increased rates meant subdivision benficial
 Mchugh: need some exchange (reaffirmed curie v misa) bargain was working the land infor transfer
o ex post facto consideration plus reliance on unconditional gift sufficient
 Kirby in dissent: required sufficient quid pro quo
o No QPQ. Appellant had financial difficulties, rent free occupation was of considerable benefit to
him. all LL got was congenial neighbour (more like a social arrangement) – not substantial
promise in return for rent.
o Consideration was promise to maintain private road (after)
2. Past Consideration
 Roscorla v. Thomas [1842] QB: consideration and promise must be linked. sale of horse, later warranty
not binding.
 Lampleigh v. Brathwait (1615) E.R: Easy “exception” to past consideration allegation, implication to pay
(as opposed to mere voluntary courtesy). where services are provided at request a later promise to pay
will be binding because the promise ‘couples itself’ with earlier request
 Pao On v. Lau Yiu [1980] AC: Good consideration if
a. Act at promisor's request
b. Parties understood at start that act was to be remunerated
c. Payment legally enforceable
3. Value of Consideration
 Consideration must be sufficient enough to be recognised, but law will not enquire as to its adequacy
Chappell v. Nestle [1960] AC: ‘commercial’ value. posting wrappers, benefited as required purchase
 Thomas v. Thomas (1842): Motive and Consideration. Honouring motive to look after wife not enough.
 Curie v misa: Compromises and forbearances. Priest gives man $500 to stop drinking and smoking,
forbeared right to
4. Economic Duress
 Sundell v Yannoulatos (1955): Y demands more under existing contract. No consideration if X agrees
 North Ocean Shipping v Hyundai Construction (The Atlantic Baron) [1979] QB: threat to break contract
may amount to economic duress
 Pao On v. Lau Yiu (1980): Duress is Coercion of will vitiating consent, illegitimate pressure required.
Commercial pressure is not enough. Consider if:
o Coerced or did not protest
o Alternative course of action such as an adequate legal remedy
o Took steps to avoid
5. Existing Legal Duties
5.1 Owed by Law

Collins v. Godefroy (1831): Important law doesn't encourage public officials and
administrators of justice to be influenced by promises of extra rewards for discharging their
responsibilities
 Glasbrook v. Glamorgan County Council [1925] A.C: when subject needs more protection and hasn't
increased risk, shouldn’t have to pay. individuals who desire extra services should pay
5.2 Bound to another contract for same act
 N.Z. Shipping v. Satterthwaite [1975] AC: law not concerned with whether it's a good deal
5.3 Agreement to pay more for same act
 General Rule: No consideration if promise to perform existing duty to promisor
 1) define obligation under contract 2) assess whether promisee has exceeded or received extra benefit 3)
economic duress?
 Stilk v. Myrick (1809) Sailors wouldn't get back on boats after delivery due to goldrush. Told they’d be
payed more for continuing but weren’t. originally employed on the basis the would ‘do all that they could
under all the emergencies’. Dissertation was such an emergency.
 Wigan v Edwards (1973) ALR after contract to buy E became concerned about defects, gave list of them
to W and said would not finalise contract until these were fixed. Got half done. Bona fide compromise
 Hartley v. Ponsonby (1857) ER entitled to more so many sailors left trip was unsafe
 Williams v Roffey (1991): must be a practical benefit. contracted to refurbish a block of 27 flats.
contractor asked for more to do the same thing, agreed. practical benefit in avoiding expense of finding
new contractor and paying fine for late completion. Risks fraud
 * Musumeci v Winadell (1994): M had lease of fruit shop in D’s Shopping centre. D leased units to bigger
competitor. P asked to renegotiate lease. D agrees to 1/3 rent reduction, but later terminates this.
Consideration or revocable?
o Followed Williams v Roffey with some amendments
1. If A entered into a contract with B to do something for B in return for the payment by B
2. before A has performed obligations under contract B has reason to doubt completion
3. B thereupon promises A a concession in return for A's promise to perform this
4. a. as a result B obtains a benefit, or obviates a disbenefit provided that A's performance,
is capable of being viewed by B as worth more to B than any likely remedy against A, OR
b. A suffers a detriment in foregoing the opportunity of not performing the original
contract, in circumstances where performance is worth more than remedy
5. B's promise is not given as a result of economic duress, fraud, undue influence, undue
pressure or unconscionable conduct
6. benefit to B or the detriment to A is capable of being consideration for B's promise
o practical benefit: M was in a position to carry out lease obligations, despite bigger competitor, W
avoided having a shopping Centre with empty Units [= benefit], Practical removal of threat of
litigation and no element of extortion
o Practical detriment: risking co-existence with competitor and forfeiting ability to risk breach
o Coote: after Roffey its inconceivable that any agreement to vary contract would ever fail
consideration. This risks exploitation, but protection will have to come from duress, fraud ect.
5.4 Agreement to pay less
 Part payment of a debt or promise thereof is not good consideration (but peppercorn consideration is)
 Pinnels Case (1602) if a debator owes creditor $100 and creditor agrees to accept $50 in satisfaction of
the debt this agreement will not be binding.
 Foakes v Beer (1884) AC: Instalments payed instead, beer then asked for interest. Upheld.
 where a creditor is prepared to accept less a deed will be binding. Property Law Act 1974 s45 outlines
formalities, s46 allows deed execution on behalf of a corporation


Promissory Estoppel
Better to rely on consideration as it doesn't have discretion and supplementary nature of equity
o Riches v Hogben (approved in Giumelli): Estoppel principle applies not because of the promise (or
contract would apply), but the expectation which it creates
Discretionary equitable doctrine
1. Shield
 High Trees: In 1940 threats of bombing depressed market and rent was reduced. In 1945 landlord
claimed arrears and full future rent. Where P has acted in reliance and it would be inequitable to allow D
to go back on the promise. Denning: D estopped from asserting his strict legal rights under the contract.
 Je Maintiendrai v. Quaglia (1980) SASR: Similar to High Trees: LL agreed to indefinitely lower rent, but
claimed arrears on vacation. Held: promise operated for future and tenant suffered detriment
o King CJ: must alter position on the faith of promise and suffer detriment (accumulation of debt).
financial hardship and embarrassment if money spent elsewhere would have strengthened case.
o White j: choosing to pay rent and relying on assurances a lesser rent would be accepted was an
alteration of tenants position as he gave up opportunity to risk breach of contract
 Legione v. Hateley (1983): should use cautiously in varying contractual rights and not create new rights
2. Sword
 *Waltons Stores v Maher (1988): can apply even if no pre-existing contract. lease negotiations for
department store if it building demolished and rebuilt. T lawyer said approval was oral and formal doc
would be sent through later: ‘no instructions re amendment, we believe approval will be coming’ ‘we’ll
let you know tomorrow if amendments not agreed to. Nothing. T changes mind and requests lawyer ‘go
slow’ to keep options open. T learns of demolition. Nothing. Building 40% when T says no contract.
o Brennan J for equitable estoppel P must prove:
1. P assumed that a particular legal relationship then existed between him and D or expected that a
particular legal relationship would exist between them and, in the latter case, that D would not be
free to withdraw from the expected legal relationship;
 Assumption by LL that T had duly completed the exchange: Gaurdron
 Assumption of binding contract whether or not an exchange had been completed: Mason,
Wilson and Brennan
2. D induced P to adopt that assumption or expectation;
 Does not have to be active inducement if there is knowledge of other parties reliance and
detriment and fails correct
 Silence will constitute equitable estoppel if it would be inequitable to assert a legal
relationship different to what they knew the other party assumed or expected
 Must be a clear and unambiguous promise: Legione v Hateley (1983): B requests time
extension from S’s secretary who had previously signed letters, secretary says: “I think
that’ll be all right. I’ll have to get instructions”. No clear representation
 EK Nominees v Woolworths: need some degree of certainty. Negotiations didn't progress
as far as Walton
3. P acts or abstains from acting in reliance on the assumption or expectation;
4. D knew or intended him to do so;
5. P's action or inaction will occasion detriment if the assumption or expectation is not fulfilled; and
6. D has failed to act to avoid that detriment whether by fulfilling the assumption or expectation or
otherwise.
 silence induced LL continue, unconscionable for T to withdraw after substantial
completion of work leaving LL to bear detriment without freedom to withdraw.
 Unconscionability
o Waltons
 Equity attaches to the overall fairness of transaction, in consideration of both parties
 Failure to fulfil a promise of itself is not unconscionable (Mason/Wilson) more required:

o
o
o
reasonable expectation that promise will induce action, urgency and
refusal to start until agreement, inaction encouraging continued action, retaining
lease and keeping quiet (Deane), failing to tell LL exchange might not occur,
“he who comes to equity must come with clean hands” D & C Builders v. Rees
Commonwealth v. Verwayen (1990): Member of navy was injured in combat practise. Groves
defence provided cth wasn't liable for injuries during practice. Cth waived this and admitted
liability. Then changed and relied. Deane J:
 Unconsionability determined using conduct in all circumstances (Mr V obtained benefit of
limited costs, cth would be acting unconscionably if it disputed its liability at late stage)
(a) induced assumption by express or implied representation
(b) entered into contractual relations on conventional basis of assumption
(c) exercised against other party rights existing only if the assumption were correct
(d) knew other party laboured under the assumption and refrained from correction
 not an independent cause of action but may be used defensively or aggressively
 equitable estoppel doctrine should be unified  common law and equity makes
it more flexible
 mason: should have prevented reliance. Pre-existing relationship and consideration not
limitations
 dawson: departure from assumption unconscionable
*Saleh v Romanous [2010]: “Trumps” common law doctrines. S said: “I’m taking responsibility for
Eddie. If Eddie doesn’t want to build you’ll get your money back.” (pre-contract conduct allowed)
5. Suspension of Rights?
 High Trees: landlord entitled to return to full rent on giving reasonable notice
 Equity may require that D be held to promise
o Verwayen: Deane J: is departure from assumption unconscionable?
o EK Nominees v. Woolworths: initially revocable promise becomes irrevocable if inequitable
6. Remedies
 flexibility: Riches v Hogben: remedy was order to transfer title, but subject to mother still living in flat
 *Giumelli v Giumelli (1999): No order to transfer property, as: there were further proceedings on family
partnership, residence by anther son on promised lot, improvements made by other family members and
would cause a BREAKDOWN IN FAMILY RELATIONS
o Award sum of money to represent value of equitable claim to promised lot (plus interest)
o Valuation flexible (included R’s lost profits, less other sons improvements)
 after Giumelli (recent NSW cases)
o EK Nominees v. Woolworths: Equitable compensation awarded for expenditure which Woolworths
encouraged LL to incur prior to lease.
o Delaforce v Simpson-Cook: Minimum equity necessary and proportionality. Won’t grant relief that
exceeds and is unjust to the estopped party.
o Ronowska v Kus: Expectation and Proportionality. wont always be entitled to complete satisfaction
of expectation but will quantify detriment. (life interest not legal interest)
Capacity and Formalities
1. Capacity:
 Minors: Binding on minor for necessaries, unless repudiated/ void on option of minor
 Mentally disabled (intoxicated similar): voidable if they can prove they were incapable of understanding
contract at the time and other party new or ought to have know this
 Companies, Corporations Act 2001 Cth
o s124 a company has the legal capacity of both and individual (both inside and out of jurisdiction),
corporation and body corporate
o s125 constitution of a company may not limit legal powers
o s126 agent may exercise a companies power regarding contracts
2. Formality (linked to express terms and intention):
 Common law has few formal requirements
 makes identification of terms easier, promotes caution by drawing attention to potentially serious
consequences, protects vulnerable parties and channels making certain types
 Lord Wright: statue creates rather than prevents injustice as parties can avoid requirements
 Statute of Frauds 1677 (Imp)
o No action on certain contracts unless agreement is in writing and signed
o Vestiges remain in common law world.
o Differences within Australian State law
o Many technicalities.
 Property Dealers and Motor Agents Act 2000 (Qld),
o S133: (1) real estate agent must be appointed in writing, (3) must state service and fees
o s300: used motor vehicles: (3) dealer must give statement including: identification, names, cooling
off period, amount non-refundable, (4) must be signed, (5) before contract to buy
 Domestic Building Contracts Act 2000 (Qld)
o S26: building contractor must ensure contract is written as soon as practicable (within 5 days) and
before work is carried out
o S30: must be signed
 Electronic Transactions Act 2001 (Qld)
o S.8: Transaction not invalid because it took place by electronic means
o S.14: electronic signature requirements
Express Terms
Sanctity of written doc v. evidence other of terms (undermines certainty of common law).
1. Signature
 L'Estrange v. Graucob [1934] KB: binding in absence of fraud or misrepresentation even if unread.
 *Toll v Alphapharm (2004 HC): immaterial whether doc was read. Terms on reverse included as signature
below ‘please read overleaf prior to signing’. Exclusion clauses with less clarity can be read down.
 Curtis v. Chemical Cleaning: receipt excluded all liability, but when questioned cleaner said it was for
beads only  exchange limited exclusion. Denning: reasonably thought it was just a receipt.
1.1 Doctrine of Non Est Factum (it is not his deed, historic use, heavy onus of proof)
 Petelin v Cullen [1975 HC]: could not read or speak English, signed contract. Upheld. Limitations:
1. unable to read or have any understanding of a doc through no fault of their own
2. signed doc believing it was radically different OR failure to understand was not due to carelessness
3. Should take reasonable precautions to ascertain character of doc before signing
 Saunders v. Anglia Building Soc. [1971] AC: Mrs G glasses broken and signs transfer of house to wrong
person. Held: G new it was a legal doc. Should have got glasses or assumed risk herself.
o DOC: BOP on signer. Mrs G not physically or mentally incapable. busy, lazy or relied on trusted
person insufficient. Could have asked it to be read or got glasses.
2.2 online signatures: Elizabeth Macdonald:
 EU and UNCITRAL define and allow online signatures
 Clicking I agree should not amount to signature and incorporate l’estrange were unjustness outweighed
by certain as not reading online is more common and lacks significance and alerting power.
2. Term/collateral contract or mere representation/opinion
 Shepperd v. Municipality (1952) CLR: BOP on person alleging term, why wasn’t term in main contract:
o Was statement intended to induce P to enter contract? Puffery?
o Was there reliance by P?
o Can content of term be formulated precisely, e.g. In the form of a guarantee?
 Savage v Blakney [1970 HC]: mere statement of opinion ‘approximate calculation based on probability’.
 *Ross v. Allis Chalmers (1987) ALJR: merely an opinion to help estimate risk: “My own experience”
 Factors indicating statement meant as a term
o Esso v Mardon: Knowledge of parties, Hospital Products v US Surgical Corp: Time of statement
o Importance, frequency, precision, reliance and relationship to written ‘contract’, intent
3. Parol Evidence Rule (presumption written doc whole contract)
 Stoddart Tiles v. Alcan (1983) SCQld: May be possible to look outside doc to find intention
 Nemeth v Bayswater Road [1988] FC Qld (obiter): “presumption will vary according to a variety of
circumstances, including the nature, form and content of the written instrument”
 Old cases strict application: Gordon v McGregor (1909) CLR: presumption doc is binding record of contract
3.1 Exceptions to PER
 Equuscorp Pty Ltd v Glengallan CLR: Extrinsic evidence is admissible for “exceptions”
 Ambiguity and Implied terms Codelfa (1982), if both parties want to rectify, Custom Hutton v Warren
(1836), Condition precedent Pym v. Campbell (1856), Invalidity (eg misrepresentation or “mistake”)
Curtis v. Chemical Cleaning & Dyeing (drycleaning), Rectification (equity intervention), Estoppel Saleh v
Romanous [2010]
 Collateral contracts (independent contract connected to main contract, one consideration for other)
o Van Den Eschert v Chappell (1960) WAFC: P bought house after being answered there were no
white ants. Signed contract did not mention ants. Promissory: immediately before contract signed,
tipped him over the line and ants a big problem in aust.
o Hoyt's v. Spencer (1919) CLR: Knox, Rich and Issacs: where written contract is contradicted by
collateral PER applies. lease said terminable on 4 weeks, but landlord promised beforehand.
o cf: Ferguson and Maralinga: not court function to determine parties agreements, cant say
agreement doesn't reflect intent when there is knowledge and a signature
3.2 Contract Partly In Writing

The Ardennes [1951] KB: oral promise cargo would sail direct, once loaded doc issued
allowing detour. Doct not contract but evidence of it.
 County Securities v Challenger Group (2008) NSWCA: Extrinsic evidence of conversations could be
admitted. Spigelman CJ: ‘subject matter determined using surrounding circumstances including
conversations, docs and conduct ’. Important to distinguish oral contract from negotiations
 Skyrise Consultants v Metroland [2011] NSWCA: Easier to say part oral/part in writing if consistent.
3.2 “Entire Contract” Clauses
 Nemeth v Bayswater Road [1988] FC Qld: indication that doc meant to be entire contract in exclusion
clause. McPherson: pre-contractual oral exchange expressed hope.
 Skiwing v Trust Co [2011] FCA: Sensible use, clause cannot exclude fraud. clause combined with
questionnaire effective in acknowledging what has been agreed rather than excluded
 Alstom v Yokogawa Australia: to supersede earlier agreement
 Hope v RCA Robophone (1937) CLR: Clause conclusive Cf. Nemeth v Bayswater Road: Not decisive
 MacDonald v Shinko Australia [1999] QCA: Clauses show intent but are subject to: rectification,
misrepresentation, implied terms, later oral variation, attempts to excluded liability - CCA 2010,
4. Incorporation of Terms into Contract
 Parker v. South East Railway (1877): reasonable steps taken to incorporate are a question of fact.
 Balmain New Ferry Co. v. Robertson (1906): Charges on noticeboard near ferry turnstiles. Pay on
entering/leaving wharf. Difficult to avoid seeing. Reasonable notice given. Consider:
1. Nature of referring doc
2. Access to incorporated doc
3. Identification of applicable terms
4. Time of incorporation (before acceptance)
o Olly v. Marlborough Court Hotel: Notice on back of door  Too late
5. Nature of clause: is it unusual?
o Thornton v. Shoe Lane Parking: the more unusual the clause the greater notice must be given of it
 Lord Denning’s “red hand” test.
1. Large notice at entrance warning of car damage not liability for injury
2. Ticket “subject to conditions…displayed on premises”. impossible to read in queue
3. Further notice inside building as to no injury liability. This required more notice
 Interfoto v Stiletto [1989] QB: Principles apply to any onerous clause, not just exemptions
 *Oceanic Sun Line v Fay CLR (1988): booking in NSW for Greece cruise. Glossy brochure included terms.
Invoice sent and fair paid in return for exchange order for ticket. Ticket included more terms: Greek
courts had jurisdiction and complete agreement. P injured on cruise, sued in NSW.
o terms on ticket not part of contract, contract on payment and exchange order issue
o Toohey and Wilson jj: brochure not contractual in nature but advertising material
o Brennan J: Exchange order = contract, terms in ticket to late. Did not do all reasonably necessary
to bring attention to clause
 *Baltic Shipping v. Dillon (1991) NSCA: saw travel brochure, paid deposit through travel agent. then
received a booking form: “this is not a travel doc” and “contract for carriage will be made at time of
issuing of tickets and subject to those terms. These are available at offices.” paid fare and received ticket
2 weeks before cruise. tickets limited liability for injury and loss.
o terms had not formed part of contract, even if they did, P was not bound by terms
o Gleeson: All reasonably necessary to give her opportunity to decline contract not done
o Kirby: once contract was created new terms could not be added. unless passenger took initiatives
of her own, she would have had no knowledge, or opportunity to influence, the conditions availability at office not sufficient. “units of account” meaningless compared to $. would not have
read terms ‘only bored lawyers actually read the fine print of terms ’
o Mahoney: thought passengers would understand terms, they where plan, and should be
expected to peruse (not judges place to say they wouldn't)
 Causer v. Browne [1952]: incorporating doc must be contractual: unsigned dry cleaning docket
 Oceanic Sun Line v Fay and Baltic Shipping v. Dillon: Access to terms
Implied terms
A. Terms Implied by the Courts
Parties don’t expressly provide for everything. Courts limited in capacity to fill gaps. Evidence of surrounding
circumstances is admissible if language is ambiguous and it doesn't contradict express terms (codelfa).
1. Implied by Custom (bakers dozen, rarely used)
 Con-Stan Industries v Norwich [1986 HC]: Strict requirements:
1. Existence of a custom is a question of fact not law
2. Evidence matters relied on so well known and acquiesced uses it (knowledge not required)
3. term will not be implied where it is contrary to the express terms of the agreement.
 Course of Dealing: McCutcheon v. MacBrayne [1964]: 'risk note’ sometimes signed not sufficient
2. Terms Implied in Fact (specific)
B.P. (Refinery) v. Shire of Hastings (1978) (PC): (use of abstract test over intent criticised)
(1) Be reasonable and equitable (can term be expressed to conform with presumed intent?)
(2) Be necessary to give business efficacy to contract (According to reasonable persons)
(3) Be so obvious it goes without saying (Codelfa, mason: injunction cost not obvious - common assumption)
(4) Be capable of clear expression
(5) Not contradict any express term
1. Presumed intent of parties: Moorcock (1889): Vessel damages bottom at wharf. Held: implied term
necessary to give business efficacy
 B.P: unlikely BP presumed intent to operate against itself so that only its Aus branch would get discount
 Codelfa v State Rail Authority [1974 HC]: parties assumed continuous 24/6 working based on their lawyers
saying they’d have immunity from nuisance injunction. Residents obtained injunction restricting hours.
Contractor claimed extra cost. No implied term of indemnity. Mason:
o rectification = term omitted was agreed upon. implied term = not actually agreed. General
reluctance to imply. Legal advise proves contemplation, if asked both parties would have said intent
was to put liability on the other. Obvious provision not omitted, parties made common assumption
which masked need to make provision for event which negotiation would have yielded.
2. Officious Bystander: Shirlaw v. Southern Foundries: If asked by “Officious Bystander” what would parties have
stated they intended? term “So obvious it goes without saying”? parties may argue that was never intention
3. Implied in Law (generic terms always implied in particular types of contract)
 Liverpool City Council v. Irwin [1977] AC: Council flats had defective lifts and rubbish chutes. No express
terms bound LL though it was necessary he have some obligation ‘to take reasonable care to keep in
reasonable repair and usability’. Essential to make contract work
o decision by court to imply term in one-off contract lays down general rule for all - Lord Cross
o Wilberforce: business efficacy or officious bystander test would not result in term’s implication, but
asking what the relationship required would. very common where there is established usage. courts
spell out what both parties would unhesitatingly agree to be part of the bargain.
 Byrne v Australian Airlines (1995) CLR: Imply where necessary for the reasonable or effective operation of
a contract of that nature in the circumstances of the case. Implied term not to steal baggage
4. ‘Universal Terms’ and Good Faith? (universal)
 Mackay v Dick (1881), L Blackburn: If both parties agree that something should be done and cannot
effectively be done unless both concur, construction of contract is that each agrees to do all necessary for
the carrying out of that thing, even though no express words.
 Secured Income v St Martins (1979): Implied term to cooperate in performance? Party agree by
implication to do all such things as are necessary to enable other party to have the benefit of the contract
 ACT Cross Country Club v Cundy [2010] FCA 782: application of construction and implied term approach
 Implied term of good faith in performance
o Renard: Duty of good faith and fair dealing, or to interpret powers to be exercised reasonably
o Hughes v. Airservices (1997) ALR: Duty to deal fairly in performance of contracts (tender process)


o Burger King v Hungry Jacks: engineered breach against implied obligation of good faith.
Royal Botanic Gardens v South Sydney [2002] ALR: status of good faith in performance is an open issue.
Cant imply good faith term if contradicts express term.
ACL s20-22 unconscionable conduct in performance and unfair terms
B. Terms Implied By Statute
1. Sale of Goods Act 1896 (Qld) (general application to sale between businesses)
 Title: s15: right to sell a), possess as B b) and be free of charge to 3rd party c)
o Nibblet v. Confectioners' Materials [1921] Also includes intellectual property rights
 Description: s16 goods shall correspond with the description
o Grant v. Australian Knitting Mills [1936]: general description
o Ashington Piggeries v. Hill [1972] AC: identity rather than quality
 Quality or Fitness for Purpose s17: default is buyer beware, no implied term unless a) particular purpose
stated, c) bought on description (must be of merchantable quality)
o Grant: Fitness: strict liability. Quality: clothing not merchantable, couldn't be worn
 s.56 parties free to exclude (warranties not conditions) under that Act. (TPA and CCA don't allow)
2. TPA supplemented SOGA covering lease, hire and services. regularly amended, focus: national contract
regulation between businesses & consumers. Div 1 unfair practises. Div 2 ‘conditions and warranties’– implied
terms: ss 68 clauses excluding implied terms void, 69: title, 70: description, 71: fitness for purpose or
merchantability, 74: supply of services
3. CCA 2010 TPA amended and renamed to solve federalism problems, Div 2 significantly changed: provisions
grouped together, replaced implied term concept (now stand alone remedy), clearer (merchantability replaced
with acceptability), defined remedies (major and minor), prevented clauses excluding it
 Statutory Guarantees CCA 2010 Part 3-2, Division 1: for supply goods
o *51 title (ownership rights pass on purchase, unless this was not intent or in hire/lease agreement)
o 52 undisturbed possession (no further charges) 53 undisclosed securities etc. (unless disclosed)
o *54 acceptable quality (fit for all purposes commonly supplied, acceptable in appearance and finish,
free from defects, safe and durable. reasonable consumer acquainted with condition would regard
as acceptable with regard to nature, price, statements made on packaging, representations made by
suppliers and manufacturers. not applicable if attentions was drawn to unacceptability, consumer
causes it to become of unacceptable quality or examines before purchase)
o 55 fitness for any disclosed purpose etc. (if you explain why you want it and seller can be trusted)
o 56 supply of goods by description (verbal or writing)
o 57 supply of goods by sample or demonstration model
o *58 repairs and spare parts (Guarantee manufacturer will take reasonable action to ensure facilities
for repair are reasonably available for a reasonable period, unless reasonable notice given)
o *59 express warranties (verbal or written)
 Statutory guaranties to replace implied conditions and warranties - services
o *60 due care and skill:
o *61 fitness for a particular purpose etc (if consumer makes known a particular purpose or result
there is a guarantee unless it was not relied on or unreasonable to rely on judgement of supplier)
o 62 reasonable time for supply
o 63 services to which subdivision does not apply: a) transportation for business or b) insurance
 *64 cant contract out (aimed at exclusion clauses)
 ACL consumer if (s3) definition varies
o Price did not exceed prescribed amount [$40,000], OR were of a kind ordinarily acquired for
personal domestic use or consumption, OR Vehicle/trailer acquired for transport use on public
roads AND P did not acquire for re-supply
 CCA 2010 Chapter 5-4 S.259 sets out remedies relating to guarantees. 246 punative orders (corrective
ads), 232 injuctions (stop ads), 236 damages.
 “Major failures”: Consumer can reject, or recover compensation s260 if goods: wouldn’t been acquired if
failure known, depart from description, substantially unfit for purpose or are unfit for disclosed purpose.

Nonmajor: ask supplier to remedy failure in reasonable time, self remedy cost, notify
supplier of rejection
Interpretation of Terms and Exemption Clauses
Begin with natural and ordinary meaning, then read contract as a whole - in context of matrix of facts and resolve
ambiguities if possible
1. Finding ‘Intention’
 Pacific Carriers: “it is not the subjective beliefs that matter but what each party by words and conduct would
have led a reasonable person in the position of the other party to believe.” Statements are subjective
 *Franklins v Metcash [2009] NSWCA, Allsop P: HC clear on objective approach
2. Extrinsic Evidence
 Prenn v Symmonds [1971] ER: buys shares giving right to acquire % subject to “aggregate profits” Dispute:
“Profits” of PC alone, or including subsidiaries. S wanted to refer to negotiations. Held: Can look at genesis and
objective aim, can’t refer to negotiations (drafts and intention changes), final doc records consensus (Metcash
Giles JA: Contract has life after negotiators leave, accepted meaning corresponding with commercial good sense,
“Time has passed when agreements were isolated from matrix of facts and interpreted on linguistics”
 Codelfa: Cant consider later conduct (slippery slope), prior negotiations or intent
 County Securities v Challenger [2008] NSWCA: conduct possible to identify terms not interpret them
 *Franklins v Metcash (2009) ALR: conduct cant be used to prove what parties meant by terms
 Bayley: negotiations and post contract conduct should be admitted. exclusion creates injustice. Wont increase
costs. Estoppel and rectification aren’t enough (higher threshold, inefficient and creates abnormalities).
3. Factual Matrix
 Reardon Smith v. Hansen Tangen [1976] WLR: Currently being built in 'Yard 354 Osaka'. Identical ship built in
another yard. Refused to accept. Can use objective background facts  Court must put itself in “factual matrix”
 Codelfa: “Must be susceptible to more than one meaning’  Mason J thought this was over-cautious.
 Royal Botanic Gardens v South Sydney [2002] HC: Follows Mason, but finds ambiguity. clause provided rental
MAY be varied in regard to additional costs (lists costs). Joint majority found ambiguity: limitation was unclear.
invented ambiguity to use surrounding circumstances AND prior negotiations.
 Pacific Carrier: Wider view: “….requires consideration not only of the text of the docs but also the surrounding
circumstances known to the parties, and the purpose and object of the transaction”
o ‘subjective intentions not important. letters were intended to be given to carrier who had no idea of
subjective intent’
 *Franklins v Metcash (2009): Not necessary to find an ambiguity but has to be relevant and probative
 HC probably still follow Codelfa: Words construed according to their “plain”, “ordinary” or “natural” meaning
o Byrnes v Kendle (2011) CLR: actual state of mind relevant only for non est factum or duress
o Western Export v Jireh (2011) ALR: court is not justified in disregarding unambiguous language simply
because the contract would have a more commercial operation
4. New Approaches to Interpretation?
 Investors’ Compensation v. West Bromwich [1998] L Hoffmann summarises developments:
 Ascertain meaning of doc to reasonable person with background knowledge of parties at time
 Background is “factual matrix”: “anything which would have affected the way in which the language of the doc
would have been understood by a reasonable person”
 Law excludes previous negotiations and subjective intent (except for rectification)
 Meaning of words (dictionary) v. meaning of doc (what parties reasonably understood them to mean)
 Natural and ordinary meaning is commonsense view that people do not make linguistic mistakes, especially in
formal docs. But background may indicate wrong language was used.
Absurdity or Multiple interpretations
 The Antaios [1984] ER: Use natural (plain) and ordinary (literal) meaning unless absurd. Owner can withdraw
hired vessel “on any breach”. Literal = trivial breach. good commercial sense  meant repudiatory
o L Diplock: Reject “detailed semantic and syntactical analysis of words in commercial contract if leads to
result which flouts business common sense”
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
ABC v Australian Performing Rights Association [1973]: Not court function to attribute to the
parties an intention to do something which their express words do not provide (Gibbs J). But if 2 constructions
should choose the one isn’t unreasonable, inconvenient or unjust, even if not the most obvious or most
grammatically accurate
The Karen Oltman [1976]: Option to redeliver “after 12 months trading subject 3 months notice”. Q. after 9
months only, or at any time after 12 months (eg 15 months). Previous telexes supported former
Commercial Interpretation: Queensland CA Summary
 *Elderslie Property Investments v Dunn [2008] QCA: Commercial business/sensible result test
1.
What would reasonable person have understood using surrounding circumstances known
to parties (Investors Compensation v West Bromwich)
2.
Commercial contracts must be construed in interest of making commercial sense
(McCann v Switzerland Insurance)
3.
The more unreasonable the result the more unlikely it was intent (Wickman v Schuler L
Reid: unless intent made abundantly clear)
4.
If detailed semantic and syntactical analysis flouts commonsense they must be made to
yield to business common sense (Antaios v Salen, Diplock)
o The Starsin [2004] AC: object to “ascertain and give effect to the intentions of the contracting parties”.
o Toll: intentions, to be determined objectively, are 'what a reasonable person would have understood
words to mean. 'to ascertain that “requires consideration of surrounding circumstances and purpose.”
 Certainty: oral agreements can be disputable, time consuming, expensive and problematic.
 Contradicts classical or rights based theories that conceive contracts as self-imposed obligations
o Fitzgerald v Masters (1956) CLR: court read the word "inconsistent" as meaning the precise opposite.
Dixon CJ and Fullagar J: “Words may generally be supplied, omitted or corrected, in an instrument, where
it is clearly necessary in order to avoid absurdity or inconsistency”
Correction of Mistakes – limits on courts (rectification and construction)
 *Franklins v Metcash: rectification shouldn't do more than rewrite the contract to minimum extent necessary to
express common intention of parties
 Elderslie: May be unnecessary to rectify if achieve same result by construction
 Chartbrook v Persimmon [2009] AC: Read literally owed millions with regard to commercial purpose only 1000’s.
L Hoffmann: to correct by construction must be clear mistake and clear cure for correction. interpretation in
accordance with ordinary rules of syntax makes no commercial sense. “What a reasonable person having all
background knowledge available would have understood”. (contrary to HC principles, ABC)
Specific “Rules” of Interpretation (not strict)
 express mention of one thing, excludes other similar things Hare v Horton (1833)]: Sale of factory and houses
(along with fixtures in houses). Held: sale excluded fixtures in factory.
 “Of a like kind” Tillman v Knutsford: exclusion for “war, disturbance or any other cause” referred to hostilities
 Give interpretation to make contract valid not void for uncertainty (Fitzgerald v Masters)
 generally give effect to additions where there is conflict with preprinted clauses
o The Starsin [2004]: Good Drafting: Include “conflicts” clause. Giving priority to different parts of contract
o Glyn v. Margetson [1893] AC: Interpret contract to avoid defeating main purpose and intent of contract
Exemption Clauses – common law
Collins: freedom to allocate risks can reduce cost, but big companies can take advantage of individuals
1. Australia (mordern approach)
 *Darlington v Delco [1986 HC]: interpretation of exclusion clause determined by:
1. construing it according to its natural and ordinary meaning,
 Selected Seeds v QBEMM: consider contract as a whole, using other clauses
2. in the light of the contract as a whole,
3. giving weight to the context including the nature and object
4. construe clause contra proferentem in case of ambiguity (state regardless of application)
 Broker undertook some transactions with longer exposure than authorised. Losses.
 Cl 1, exemption: “Agent not responsible for any loss resulting from advise or trading on
clients behalf”. Deliberately disregarded instructions to make bigger profit. Clause did not
cover dealing
 cl 2, limitation: “liability in connection with relationship established shall not in any event
exceed one hundred dollars." Clause effective: Unauthorised action still in connection
with relationship
 Ailsa Craig v Malvern: less strict approach for limitations (England), but varying strictness not possible?
2. Secondary “rules” of interpretation (still relevant caution if involving a strained interpretation) (mention all
even if only to discount)
2.1 ‘fundamental breach’
 Karsales v. Wallis [1956] WLR: L Denning: no matter how wide the clause, it only applies when carrying
out contract, not when guilty of breach going to root
 Photo Production v. Securicor [1980] AC: rejected – question of construction.
2.2 Negligence
 TNT v May & Baker (1966) [HC]: Delivery agreement, depot closed, kept goods at own house over night,
destroyed in fire. rejected “fundamental breach”. Question of construction. The more serious a breach
the less likely general words are intended to exclude it.
 Cl9 TNT can carry by any method. Cl 6 ‘no responsibility for any reason whatsoever’
 Protection of clause exists only when B is performing contract (cf darlington).
2.3 Serious Breach
 Nisho Iwai v. Malaysian International Shipping (1989) [HC]: Container of prawns Malaysia –Sydney. Stolen
after discharge and after placed in stack by stevedores employed by carrier. Bill of Lading clause: In effect,
no liability. Cl.1 for any cause “Carrier” could not prevent by reasonable diligence, Cl.2 after delivery or
when goods made available to merchant
 Followed Darlington: 1) could apply to non-delivery, 2) couldn't. Mere discharge was not delivery.
 Antwerpen [1993] NSWCA: Container terminal allows thieves to collect whisky without bill of lading.
restriction of liability in general terms wouldn’t cover deliberate breach but clear wording would?
2.4 Contra Proferentem (leads to courts making longer clauses just in case)
 TNT v May: Construe ambiguities against proferens (person relying on clause)
 Wallis Son & Wells v. Pratt & Haynes [1911] AC: S gives no “warranty, express or implied”, S sold defective
seed, Held not protected against breach of condition
 Beck v. Szymanowski [1924]: “Goods delivered shall be deemed in accordance with contract unless
complaint in 14 days of arrival”. Did not apply to goods lost and never delivered
2.5 “Four Corners”: Protection of clause exists only while B is performing contract
 Sydney Council v West [HC 1965]: Car park ticket. Needed time stamp and payment before delivery.
Attendant gave duplicate parking ticket to rogue. “Council does not accept any responsibility for the loss
or damage to any vehicle… howsoever [it] may arise or be caused”. Held (3-2) could not rely on clause:
 beyond contemplation of parties on creating the contract
 Barwick C.J. and Taylor J: Action of attendant was an unauthorized and not merely negligent
 Windeyer J: terms required presentation of ticket, allowed release without
2.6 “Reading Down” Exemption Clauses
 Van der Sterren v. Cibernetics (1970) [HC]: “No D liability unless notify claim within 14 days delivery”.
Walsh J: "terms of exception clauses must sometimes be read down if they can’t be applied literally
without creating an absurdity or defeating the main object of the contract .... But such a modification by
implication of the language which the parties have used in an exception clause is not to be made unless it
is necessary to give effect to what the parties must be understood to have intended.“
 Here clause unambiguous. Part of bargain, P assumed risk when buying from P and selling on
 Reading down exemption clauses will ONLY occur if the clause is absurd, and it is necessary to give
effect to it – not in the interests of ‘fairness’
2.7 Excluding Liability for Negligence
 Canada Steamship Lines v The King [1952] AC. 3 “rules”:
o an express reference to exclusion of liability for negligence is sufficient
o where no express reference, clause must be clear enough to apply to circumstances which
occurred. doubt resolved by contra proferentem rule.
 Quinn: “all liability howsoever caused” – wide enough to cover negligence
o if words are wide enough to cover liability, but there is some other basis of liability to which
the clause can apply, the clause should generally be applied to that other basis
 Lease of cargo shed. Tenant shall “Not have any claim... for damage to [T’s] goods”.
Two possible claims: Strict liability of occupier (Canadian law), Negligence. Held:
Exemption applies to strict liability only (unless fanciful).
Unfair Terms - statute
Legislating Against “Unfair Terms”
 Common law was inadequate, courts couldn't easily develop criteria (political policy decisions and diff
treatment of business and consumers)
 Legislative developments about abuse of power generally, e.g.
 Trade Practices Act 1974 (Cth): Part IVA (unconscionable conduct), Part V Div 1 (s52 unfair
practises, s56 bait advertising, s65 unsolicited goods), Part V Div 2 (implied conditions and
warranties as to title , description and quality)
 Fair Trading Act 1989 (QLD) mirrored much of this
 Exclusion of implied terms
 Pre-TPA, SOGA Qld: s56 allowed exclusion by express agreement or course of dealing
 Meant business had freedom of contract, consumers disadvantaged. Result:
 In business sale contracts, freedom of contract prevailed
 For consumers, was nearly always better to rely on TPA
 Vienna Convention (Qld)
 Art.6 parties may exclude application of convention
 TPA: S.68 made void any term that excluded, restricted or modified rights conferred by Act
 S.68A allowed limitation of liability in some circumstance. e.g. to repair/replacement
 CCA 2010 Australian Consumer Law s.64 and s.64A (must know)
 Legislative developments on exemption clauses in Europe, UK
Change in Australia
 2008 Productivity Commission review found recommended a single generic consumer law as there was a
disparate national framework with diff definitions and objects. Based on TPA, but wide reform to create
consistency and improvement (generic terms to protect consumers)
 Oct 2008 COAG (Council of Australian Government) agreed with productivity commission and enforced it
through ACCC (Australian Competition and Consumer Commission)
 Feb 2009 MCCA (Ministerial Council on Consumer Affairs) encouraged this to create confident consumers
and created first doc
 May 2009 SOCA (Standing Committee of Officials of Consumer Affair) oversaw drafting of ACL
 July 2009 COAG signs IGA (intergovernmental Agreement for the Australian Consumer Law)
 TPA (ACL) Bill 2010: Introduced ACL, deals with application, admin and amendment and contains
unfair terms provisions
 TPA (ACL) Bill (No. 2) 2010: moved fair trading and consumer protection provisions to ACL, new
national schemes for statutory consumer guarantees, amended other legislation to conform with
ACL and changed name of TPA to CCA, CCA 2010 Part XI and Schedule 2 contains complete ACL
 National Consumer Credit Protection Bill 2009
 December 2009 MCCA Agreed some further changes to ACL. Both passed. ACL to commence on 01/01/11
Statutory Guarantees CCA 2010 Part 3-2, Division 1: for goods and services
 Exclusion: ACL s.64: Makes void any term of a contract that excludes, restricts or modifies: application of
provisions, exercise of right given by act or any liability for failure to comply.
 Limitation: Should businesses not be allowed any restrictions: (cheap software = great financial loss).
 s.64A(1) Goods: can limit to repair/replacement (or money equivalent)
 s.64A(2) Services: can limit to repeating the service (or money equivalent)
 Provided not ordinarily acquired for personal, domestic/household use of guarantee (ss51-53)
 residual power for court to determine power imbalances v freedom of contract
 S.64A(3): limits not allowed if buyer proves it was not fair or reasonable for supplier to rely on
 s.64A(4): consider all circumstances, strength of bargaining position, inducements,
alternatives and goods specially made/adapted
 strong protection, to courts discretion s64A(3). Only relates to exclusion of listed new guarantees,
what about exclusion of other express or implied obligations?
ACL
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Productivity Commission’s concern: having generic provisions dealing with unfair practises and conduct,
but no generic measures to deal with unreasonable and one-sided contracts, esp. SFC
Reform choices: Consumer inability to negotiate, or weakness? all standard form contracts, or nonnegotiated contracts only? absolute prohibitions of certain clauses, or indicative list and retain court
discretion? all terms/obligations covered or exclude certain main terms, eg price? individuals only or
Small businesses also? action on detriment or pre-emtive? Create new afresh or use existing models.
recommendation: heavily based on the EC Directive, but with common law influence, 6 main sections
reads much more coherently
o EC: Civil law influence, broad general provisions. If term not individually negotiated shall be unfair
if: contrary to “good faith”, causes significant imbalance, to detriment of consumer. Indicative list
of unfair terms in annex (plain intelligible language requirement). not binding if unfair
Enacted CCA 2010, ACL, Part 2-3 (possible gaps)
State concurrent legislation to give effect to ACL, uniform law applicable from 01/01/11
o FTA, ACL 2010 (Qld) does not reprint the ACL but refers directly to it, ensuring there is no
difference in wording and allowing for future amendments in ACL. Allows local administrations.
Persons Regulated:
 23) 1) Term in a consumer contract is void if term is unfair, and SFC (term not individually negotiated)
 23) 2) contract continues is it is capable of operation without the unfair term
 Plaintiffs: ACL Part 2-3 (UCT) s.23(3) “Consumer contract” protected
o contract type – e.g. corporation, supples of goods/services; grant of interest in land
o To an individual only (small businesses not included, unless eg sole trader)
o Individual use must be wholly or predominantly for personal, domestic, or household
use/consumption. Reference to subjective intention in acquisition rather than nature.
o if not consumer contract ACL Part 2-3 (UCT) does not apply. Apply term as at common law.
 Defendants
o Corporations: s130 CCA restricted interstate trade or commerce by constitution.
o Businesses: FTA, part 3 ACL (Qld) s4A (1) applies to and in relation to (a) persons carrying on
business within Qld; or (c) persons ordinarily resident in this jurisdiction
Contracts Regulated – ACL Part 2-3 (UCT)
 S23(1)(b) “SFC”, s2(3) for supply of goods/services; sale grant of interest in land
 S. 27 definition
o 1) Burden of proof reversed: Consumer alleges SFC, corporation has burden of showing not
o 2) Court unfettered power to decide what is relevant to SFC, but must take into account:
 (a) one party has all/most bargaining power; (elderly, unable to speak English, first home
buyer, related/fiduciary party. can neutralise by negotiation through an independent
legal representative)
 (b) contract prepared by one party before discussion;
 (c) required either to accept or reject the terms in form presented;
 (d) given effective opportunity to negotiate;
 (e) terms take into account specific characteristics of party or transaction;
 (f) any other matter prescribed by regulations.
 Which Contracts Are Regulated?
 If not STF, does not apply (even if STF is only slightly altered). If it is SFC its not automatically void, term
must be unfair.
 Some Contracts excluded completely: s. 28 some shipping contracts and company constitutions, CCA
s131A supply of financial services and Insurance contracts (own act)
Protection Given – Unfairness ACL Part 2-3 (UCT)
 If one term void, rest of contract can stand – s.23(2)
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S24 no express good faith obligation, PC has recommended good faith but COAG rejected it
s.24(1) Unfairness of term requires (court duty to take 2 factors into account, but discretion as to others)
o Significant imbalance in rights/obligations [fact] (Consumer to show) (consider: other terms
benefiting consumer, legible and easy to understand, meaning readily apparent, brought to
consumers attention at time of contract, common within industry, essential to bargain
o Reasonably necessary to protect D’s legitimate interest (Defendant to show use to courts
discretion) (nature of subject matter, price, terms as a whole, industry norms, state of market,
financial positions of parties)
o Detriment (financial or otherwise) if applied/relied on (Consumer to show). Difficult to prove,
esp now “Substantial likelihood of detriment” dropped from Bill (Actual detriment not necessary
if there is threat, no requirement to quantify detriment, not to third party, disadvantaged has
onus, failure to provide evidence probably fatal. Broad discretion to consider other elements)
Court may consider what it thinks relevant, but must consider: s.24(2)a) Extent to which term
“transparent”, b) contract as a whole
o 24(3) transparent if: reasonably plain language, legible, presented clearly, readily available
o if not transparent: court cannot ignore, but not automatically unfair.
examples of unfair terms, s.25 (gov can add more) no black list like germany, just grey list of examples
o (a) one party avoids or limits performance (e.g right to terminate contract for defects, excluding
liability for failure to perform)
o (b) permit one party to terminate contract (where right to termination was disproportionate to
breach of other party (e.g. breach for not notifying of changed address) (Eldersie Test)
o (c) penalises one party (but not another party) for breach or termination (liquidated damages,
exit fees ect. Cant be extravagant and unconscionable in comparison with the greatest loss
conceivably resulting from breach)
o (d) permits one party to vary terms (esp when no notice given, could be ok when: circumstances
are clearly expressed in contract or consumer has right to cancel contract without penalty)
o (e) permits one party to renew or not renew contract (as above)
o (f) permits one party to vary the upfront price without the right of other to terminate;
o (g) permits one party unilaterally to vary characteristics of goods/services/interest in land (ok if
option to terminate)
o (h) permits one party unilaterally to determine whether contract breached or to interpret
meaning (fairer for independent assessment)
o (i) limits one party’s vicarious liability for its agents;
o (j) permits one party to assign contract to the detriment of other without consent (allows trader
to assign contracts to another party without consent)
o (k) limits one party’s right to sue another party; (reversing onus of proof, limiting remedies
available, requiring consumer sue in another jurisdiction)
o (l) limits evidence one party can adduce (restricting evidence to terms of contract, oral
representations denied)
o (m) imposes evidential burden on one party
o (n) prescribed by regulations
Consequences if term within list: not automatically unfair, some variation clauses necessary (bank
interest rates)
Terms Regulated
 Which terms are regulated
o Vic FTA covered all obligations, including price
o Conceptual difficulty
 What is left of freedom of contract
 Parties to decide who does what
 If regulate price and other key terms, courts rewrite contracts?
 You get what you pay for
 Cf. you did not get what you did pay for
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S.26(1): s.23 does not cover main terms, ie which
o a)define the main subject matter of the contract; or
 Falcon has no SatNAv, but Hyundai has
 Mobile contract: Nokia “free”, Iphone $300
 Whether builder clears up afterwards
o b)set the “upfront price” payable under the contract; or
o c)is a term required by Commonwealth/State statute
s. 26 (2) “upfront price” is consideration
o (a) provided for the supply, sale or grant under the contract; and
o (b) is disclosed at or before the time contract is entered into
Consequences
o Cannot complain that price is unfair
 BMW too expensive compared to another dealer
o Provided notified at start “Upfront” price
 Includes future instalments
 Transparency relevant
o Unfair provisions do cover
 Additional future charges (eg if CPI increases), or
 Unilateral variations
OFT v Abbey National [2009] UKSC 6
o Bank charges defined main subject matter of the contract
o So not subject to review under EC Directive
Relevant to Australia?
o Competition law could apply
 If concerted action by all banks
o Upfront price (part 2-3 not to apply to fees)
o Alternative avenues of attack
 Competition law provisions of CCA 2010 could apply - if concerted action by all banks
o Cf. Andrews v ANZ Banking Group (2012) 86 ALJR 1002
Enforcement of ACL
 2008 Productivity Commission Review
o Enforcement of ACL by
 Australian Competition and Consumer Commission (ACCC) and State regulators
 Politically difficult to have single Cth regulator
o Restriction on regulatory powers
 No regulator action unless consumers had already suffered detriment (an ex post model)
 Cf. Victorian and UK approach allowing pre-emptive control of contract terms (an ex ante
model)
 Test cases?
 2009 Bill amendments to allow ACCC and consumer to ask for Court declaration
that term unfair
 But must still have been detriment?
ACL and Unfair Contract Terms
 Preliminary Common law matters
o Is there a liability to be excluded?
o Is the clause incorporated into the contract?
o Does the clause cover the breach as a matter of construction?
 Common law techniques
o Presumably less significant in consumer cases
o Now substantive protection
 ACL
o
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New positive obligations (guarantees)
 Are there attempts to exclude these?
 Ss.64, 64A may
 Prevent exclusions, restrictions, modifications
 Apply to assist some “business consumers”
o Other terms which might be unfair - Part 2-3
 Persons covered
 Contracts covered
 Terms covered
 Unfairness analysis
Flow diagram?
o Necessarily simplistic
o Cannot be completely accurate
o But gives idea of possible approach
ACL and Unfair Contract Terms 1
 Do we have an agreement?
 What are its terms?
o Express
o Implied [including SOGA ss.15-17]
o Statutory guarantees [ACL]: Who protected (incl some businesses)
 Is D in breach of a term or guarantee?
o Breach is not simply “fault”
o Contract can create absolute obligations
 If promise to do something – may be breach if do not (merchantable quality)
 If term or guarantee is to use reasonable care – is fault based
ACL and Unfair Contract Terms 2
 Excluding a primary liability by clauses
o [Is there a liability to be excluded?]
o Is the clause incorporated into the contract?
o Does the clause cover the breach as a matter of construction?
 Statutory guarantees and exclusions
o SOGA s.56 allows exclusion of warranties (not conditions)
o ACL s.64 prevents exclusions, restrictions, modifications
o ACL s. 64A some limitations allowed in business - business transactions
 Other terms which might be unfair - ACL Part 2-3 ss.23-28
o Persons covered
o Contracts covered
o Terms covered
o Unfairness analysis
Preparing for exam:
One compulsory problem and one essay question
problem
 Identified difficulties
o Introduction to problem answer  4 main issues…
o State specific legal problem for which answer is needed
o Proposition of law
o Authority
o Not necessary to state facts unless they are distinguishable
o Headings should be legal/factual issues not IRAC (as if it's for a legal opinion)
 Specified extra facts needed
o Check that you’ve used all facts
o May be deliberately vague – prompt to say what is needed to decide
 Discuss legal issues
o Structure
o Don't look at simplistic issues
o Facts may be similar without problem
o Onsider alternatives if you conclude no offer in first para
o Common sense  make a judgment on relevance
 Suggested solutions
o Come to a conclusion, not it will be up to the judge.
o Can say there are two outcomes… but the better view is…
Essay
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Read tips
Policy discussion
Will need to state principles
Highlight legal uncertaintues
May be asked to be critical
o Is law coherent
o …
answer question set  identify particular focus of question
credit for more analysis rather than memory of list of cases
structure, clarity and using given facts