Revision

1. Revision

2. Acceptance • Final & Unqualified • Communication of acceptance • Postal Rule

3. Consideration • What is it? • Privity of Contract • Value of consideration • Past Consideration • Part Payment of a debt • Promise to perform an existing contract • Certainty • Courts will uphold a bargain if possible

4. Terms of the Contract

5. What are the Terms • Terms can be • Express • In writing • Oral • Partly in writing and partly oral • Implied • By the Courts • By legislation

6. Express Terms • The terms of the contract are ascertained by examining the evidence • Not all pre-contractual statements become terms of the contract

7. Express Terms (cont.) • Meaning of the terms may not be clear • Where the parties have used language that is incapable of any precise meaning the contract may be void for uncertainty • It is not the role of the Court to make a bargain for people • However, the Courts are reluctant to destroy a bargain

8. Pre-Contract Representations • An oral statement can be a term • Only promissory statements become terms • All other statements are mere representations • A statement does not have to be in the form of a promise to be promissory • Remedies • Term of contract – Remedy for breach of contract • Representation – law of misrepresentation • Mere puff – no remedy

9. Reasonable Bystander Test • Which statements and representations would a reasonable bystander, aware of the circumstances of the case, regard as promissory? • The test is objective • Parties actual intention is irrelevant

10. Reasonable Bystander Test (cont) • Guidelines • Was the representation included in a written document • When, in the negotiations, was the representation made • Did the representation sound promissory • How objectively important is the representation to the whole deal • Did either party have special knowledge about the subject matter of the representation

11. Was There a Written Document? • If the statement was included in a document drawn up by the parties then this is good evidence that the parties regarded the statement as sufficiently important to be a term • Alternatively, if it is left out, that indicates that the parties did not intend it to be a term. • State Rail Authority of NSW v Heath Outdoor Pty Ltd (S&OR p131) • This is not conclusive of itself, it is merely one matter to be considered

12. When was the statement made? • How much time elapsed between the representation and the making of the contract? • Statements made only once early in negotiations are less likely to become terms. • Van Den Esschert v Chappel (S&OR p132)

13. How Important was the Statement • Must be judged in the context of the negotiations • Van Den Esschert v Chappel (S&OR p132) • Hospital Products v United States Surgical (S&OR p134) What words were used • The more precise the language, the more likely it is a term • Ross v Allis-Chalmers Australia (S&OR p133)

14. Did a Party have Special Knowledge? • Did one party rely on the other’s expertise or special knowledge rather than form its own judgement • Oscar Chess v William (S&OR p130) • Esso Petroleum v Mardon (S&OR p134)

15. Parol Evidence Rule • Courts presume that written formal contracts that appear to be a complete record of the agreement, contain the whole agreement • Courts will not let a party ‘subtract from, add to or contradict the language of the written agreement’

16. Implied Terms Terms implied by Statute Terms implied by the Courts Implied as a matter of law Implied as a matter of fact Trade Custom Business efficacy Past Dealings

17. Terms Implied by the Courts • Cannot conflict with express terms • Must not be unreasonable or unjust in the circumstances • Implied as a matter of law • Common situations which are so settled that terms “go without saying” • Implied as a matter of fact • Arise out of the particular facts of the case

18. Terms Implied as a Matter of Law • Professionals and Clients • Professional must use reasonable care and skill • Service Contracts • Provider must take reasonable care and skill in providing the service • Service must be reasonably fit for the purpose for which it was acquired • Costa Vraca v Berrigan Weed & Pest Control (S&O p159)

19. Terms Implied as a Matter of Law (cont.) • Work and Materials • Contractor must use reasonable care • Services must be fit for the purpose for which they were acquired • Materials must be of good quality • Reg Glass v Rivers Locking Systems (S&O p158) • Helicopter Sales v Rotor Work (S&O p158)

20. Terms Implied as a Matter of Law (cont.) • Hire Contracts • Goods are reasonably fit for the purpose for which they are hired • Landlord & Tenant • Landlord must give the tenant ‘quiet enjoyment’ of the premise • Tenant must • Pay rent • Act in “tenant-like” manner

21. Terms Implied as a Matter of Law (cont.) • Employment Contracts • Employer must • Provide a safe system of work • Not require employee to do an unlawful act • Employee must: • Obey reasonable instructions • Use reasonable level of skill and competence • Act in good faith to employer • Keep employer’s trade secrets confidential

22. Terms Implied as a Matter of Fact • Past dealings • Custom or trade usage • To make the contract effective

23. Past Dealings • Term is clearly identifiable • Previous dealings are numerous and consistent • Present dealing fits into the course of dealing • No conflict between implied term and an express term • Henry Kendall v William Lillico (S&O p181)

24. Custom or Trade Usage • Can state term with precision • Custom is so well known & widespread that all contracts can be said to have the term • Custom is reasonable • No conflict with an express term • British Crane Hire v Ipswich Plant Hire (S&O p161)

25. To Make a Contract Effective • Term is capable of clear and precise expression • The term is necessary to make the contract effective not just reasonable • The term is obvious (“officious bystander test”) • The term is fair & equitable to both parties • No conflict with an express term • The Moorcock (S&O p162) • Codelfa Constructions v State Rail Authority (S&O p163)

26. Exemption Clauses • A clause that limits or excludes the consequences of a breach of a party’s obligations • Courts are biased against them • Bias is less noticeable in commercial contracts • Courts adopt a 2 step process • Has the exemption clause become a term of the contract? • If so, does it cover the breach in question?

27. Is It a term of the contract? • Essentially the same test as for all terms • An exclusion clause cannot be incorporated after the contract has been made (e.g. parking ticket) • Past dealings may imply an exemption clause but the Courts are reluctant to do this • Signed documents will usually be binding even if the party was unaware of the term unless • Signed document could not reasonably be regarded as likely to contain contractual terms • Estoppel exists • Exemption clause has been misrepresented • See Curtis v Chemical Cleaning Co (S&OR p142)

28. Is It a term of the contract? • Unsigned exemption clauses will be binding if • The innocent party was aware of it; or • reasonable notice of it has been given to the innocent party before the contract is made.

29. What is reasonable notice (cont) • What is reasonable notice depends on: • The nature of the document; • The nature of the transaction; and • The nature of the exemption clause. • Would it be reasonable to expect the document to contain an exemption clause (e.g. a receipt)

30. What is reasonable notice • Is the transaction one where you would expect an exemption clause to exist • The wider the exemption the greater the steps to be taken to bring it to the attention of the other party • Cases • Thornton v Shoe Lane Parking (p144) • Parker v South Eastern Railway (p126) • Oceanic Sun Line Special Shipping v Fay (p127) • DJ Hill & Co v Walter H Wright Pty Ltd (p124)

31. Does the Clause Cover the Breach? • Courts will examine the clause carefully to determine its effect and limit its scope where possible • Generally, the Courts will give effect to the parties intentions as evidenced by the natural and ordinary meaning of the words • There are 3 rules that courts use to limit exemption clauses: • The Contra Preferendum rule • Negligence Clauses • The Four Corners Presumption

32. Contra Preferendum Rule • Any ambiguities in the exemption clause will be construed against the party seeking to rely on the clause • Andrews Bros v Singer Car Co (S&OR p145) • Alex Kay v General Motors Acceptance Corp & Hartford Fire Insurance (S&OR p145)

33. The Negligence Rule • Liability for negligence may be expressly or impliedly excluded but if the words could reasonably be applied to protect against some ground of liability other than negligence, then liability for negligence will not be excluded • White v John Warick & Co (S&OR p146) • To exclude liability for negligence, clear words are required • Tech Pacific v Air Pacific (S&OR p146)

34. The 4 Corners Presumption • The exemption clause will only cover matters within the 4 corners of the contract • Whether an event falls outside the contract depends on the reasonable person test – would a reasonable person aware of the terms of the contract conclude that the parties must have had the relevant event in mind in drawing up the contract. • Sydney Corporation v West (S&OR p148) • TNT v May & Baker (S&OR p149) • Darlington Futures v Delco Australia (S&OR p149)

35. Statutory Reforms • In many cases, it is Illegal to attempt to exclude terms implied by statute e.g. Trade Practices Act • Attempting to exclude statutory liability (where not permitted) may be misleading and deceptive conduct contrary to section 51 of the Trade Practices Act