Week 2

1

• Week 2
• Law of Contract
• Revision

2

• Revision
• Sources of Law
• Separation of Powers
• Division of Powers
• Court Hierarchy

3
Sources of Law
Parliament
The Courts
Federal
State
Equity
Common Law
Contract Law
Unconscionable Conduct
Promissory estoppel
Trade Practices Act
Fair Trading Act
4
Privy Council
FEDERAL COURTS
VICTORIAN COURTS
Appeals Abolished
High Court
Court of Appeal
Federal Court
Family Court
Supreme Court
County Court
Federal Magistrates Service
Magistrates Court
5

• Revision (cont.)
• Precedent
• 2 types
• Describe
• 2 parts of a decision
• Rule of Law
• Citing decisions
• Smith v Jones (2001) 145 CLR 203, 207
• Smith v Jones 1945 2 All ER 203, 207
• Smith v Jones (2001) HCA 203, 20

6

• Revision (cont.)
• Statutory Interpretation
• 3 approaches
• Current approach
• Why
• Aids to interpretation
• Rules of interpretation
• Proof
• Burden of proof
• Presumptions

7

• Week 2
• Law of Contract
• Development, Intention Offer

8

• Development of Contract Law
• Developed in England pre 1900
• Laissez faire economic environment
• Underlying common law principles
• Freedom of Contract
• Equality of bargaining power
• Courts reluctant to interfere unless
• Duress
• Illegal

9

• Recent Developments
• Equal bargaining power is a myth
• Courts developed equitable principles
• Unconscionable conduct
• Unjust enrichment
• Economic Duress
• Promissory estoppel

10

• Recent Developments (Cont.)
• Consumer protection legislation
• Trade Practices Act 1975
• Fair Trading Acts
• Insurance Contracts Act 1987
• Credit Codes
• Licensing Acts (e.g. Builders Licensing Act)
• Amendments to Sale of Goods Act

11

• Contract
• An agreement between two or more persons that
  will be enforced by law
• May be
• In writing
• Oral
• Partly in writing and partly oral

12

• Writing
• Contracts need not be in writing
• Exceptions
• Sale of Land
• Guarantees
• Credit contracts
• Other statutory requirements

13

• Analysing a Contract

Is there a contract?
What are the terms?
Is it valid enforceable?
Has it been discharged?
Has there been a breach?
14

• Six Elements
• Contractual Capacity
• Offer
• Acceptance
• Intention to create a contract
• Consideration
• Certainty
• The elements are not always clear

15

• Intention to Contract
• Parties must intend their agreement to be legally
  binding i.e. enforceable by a court
• An intention to be morally binding is not enough
• Objective test
• Distinction between
• Social/domestic agreements
• Commercial agreements

16

• Intention
• Subjective intention
• The persons actual state of mind
• Objective intention
• Concludes, on the basis of what a person said
  and did, what a reasonable person in the same
  circumstances would have intended
• Contract law uses objective tests

17

• Domestic Agreements
• Court presumes that parties did not intend to
  contract
• Presumption may be rebutted
• Todd v Nicholls (SO p94)
• Roufos v Brewster (SO p94)

18

• Domestic Agreements (cont.)
• Court will look at
• Terms of agreement
• Circumstances surrounding the agreement
• Effect of the agreement on the parties
• Parties conduct subsequent to agreement

19

• Commercial Agreements
• Courts presume that the parties intended to
  contract
• Clear words are needed to rebut the presumption
• Onus is on party seeking to disprove the contract
• Rose Frank v J R Crompton (SO p95)
• Edwards v Skyways (SO p95)

20

• Commercial Agreements (Cont.)
• Contrast with Clauses excluding courts
  jurisdiction which are are invalid
• Letters of Comfort
• Kleinworth Benson v Malaysia Mining (SO p96)
• Banque Brussels Lambert v Australian National
  Industries (SO p97)

21

• Commercial Agreements (Cont.)
• Heads of Agreement/Letters of Intent
• Air Great Lakes v K S Easter (SO p98)
• Coal Cliff Collieries v Sijehama (SO p98)
• Without prejudice documents

22

• Offer
• Specific legal meaning
• An offer exists only where a reasonable person
  would conclude on the facts that the person was
  willing to be bound in a court of law
• Distinguish
• Indication of future conduct
• Invitation to treat
• Negotiations

23

• Indication of Future Conduct
• A mere statement of a present intention to do
  something in the future is not an offer
• Harvey v Facey (SO p 70)
• Australian Woollen Mills v Commonwealth (SO p71)
• Harris v Nickerson (SO p71)
• Kelly v Caledonian Coal Co (SO p71)

24

• Invitation to Treat
• An invitation to
• Negotiate
• Make an offer
• is not an offer but an Invitation to Treat
• The distinction lies in the objective intention
  of the person making the offer or invitation to
  treat.

25

• Invitation to Treat
• Retail Displays
• Catalogues
• Advertisements
• Auctions
• Tenders

26

• Retail Displays
• Fisher v Bell (SO p72)
• Pharmaceutical Society v Boots (SO p73)
• In most circumstances the retailer does not make
  an offer by displaying goods for sale, even where
  the goods are marked with a price

27

• Catalogues
• Grainger v Gough (SO p73)
• If the catalogue publisher was making an offer
  then it would be bound by every acceptance even
  if their stock was exhausted.

28

• Advertisements
• Depends on circumstances
• Carlill v Carbolic Smoke Ball Co (SO p74)
• But note legislative restrictions e.g. Trade
  Practices Act

29

• Auctions
• Bidder makes the offer
• Auctioneer accepts
• S64 Sale of Goods Act (Vic)
• Auctioneer announces terms at start
• Anyone who bids then accepts the auctioneers
  offer as to terms

30

• Tenders
• Person submitting the tender makes the offer
• Body calling for tenders accepts any tender
• Not bound to accept lowest
• BUT, the request for tenders may be an offer to
  deal with tenders in a certain manner
• Hughes Aircraft v Aeroservices Australia (SO
  p76)
• Harvela Investments v Royal Trust Co of Canada
  (SO p76)

31

• Negotiations
• An offer will not arise merely because parties
  have reached agreement on one aspect of the deal
• Implied (or express) understanding that parties
  not bound until formal contract executed
• Heads of Agreement

32

• Fate of An Offer
• Withdrawn by offeror
• Accepted by offeree
• Rejected by offeree
• Lapse due to passing of time
• Lapse due to death of offeror or offeree
• Lapse due to failure of condition precedent

33

• Withdrawing an Offer
• Cannot be withdrawn after accepted
• A contract is made when the offer is accepted
• The withdrawal of the offer must be communicated
  to the offeree
• Special cases
• Unilateral offers
• Options cannot be withdrawn

34

• Withdrawing an Offer Before Acceptance
• Generally, an offeror may withdraw an offer at
  any time before acceptance
• Routledge v Grant (SOR p78)
• But, options cannot be withdrawn
• an option is a separate enforcable obligation and
  cannot be withdrawn
• Exists where the offeree has given consideration
  to keep an offer open
• Goldborough Mort v Quinn (SOR p 80)

35

• Withdrawal Must be Communicated
• Offeror must let the offeree know that the offer
  is withdrawn
• Byrne Co v Tienhoven Co SOR p79)
• Offeror does not have to communicate withdrawal
  personally
• Would a reasonable person in the position of the
  offeree conclude that the offer had been
  withdrawn?

36

• Withdrawing a Unilateral Offer
• Involves a unilateral promise e.g. Carllil v
  Carbolic Smoke Ball Co (SO p74)
• If offeree has acted on the promise then offeror
  cannot withdraw until offeree has had a
  reasonable opportunity to complete

37

• Rejecting an Offer
• Once rejected, an offer cannot be accepted
• May be rejected expressly or by implication
• Implied
• Offerees actions are inconsistent with an
  intention to accept

38

• Rejecting An Offer (Cont.)
• A counter offer is a rejection
• Hyde v Wrench (SO p81)
• Any material alteration is a counter offer
• Restating the offer when accepting is not a
  counter offer
• Turner Kempson v Camm (SO p81)

39

• Rejecting An Offer (Cont.)
• A counter offer is a rejection (cont.)
• Asking for clarification is not a counter offer
• Reasonable person test
• examine all circumstances

40

• Lapse of Offer
• Due to death of either party unless
• An option and
• Does not involve personal skill or service by the
  deceased
• Due to failure of condition precedent
• Due to time
• Express time limit
• Otherwise, offer remains open for a reasonable
  time

41

• Lapse of Offer (Cont.)
• Due to time (Cont.)
• What is reasonable time depends on
• Method by which offer made
• Nature of the transaction
• Terms of Proposed Contract
• Actions of parties between offer purported
  acceptance
• Intimations as to time by offeror