Contract How To Make An Agreement A Contract Etienne Lawyers

Steve Brown, PartnerSbrown@etiennelaw.com www.etiennelaw.com

HOW TO MAKE AN HOW TO MAKE AN AGREEMENT A AGREEMENT A

CONTRACT!CONTRACT!

Steve Brown, Partnersbrown@etiennelaw.com www.etiennelaw.com

Overview Of PresentationOverview Of Presentation The difference between agreements and contracts?

Agreements & contracts – how are they the same?

Why have a contract instead of an agreement?

What distinguishes Contracts & Agreements

Types of Contracts

Negotiating a contract or agreement what to watch out for:

Promissory estoppel Misleading & deceptive conduct Unconscionable conduct

The Difference Between The Difference Between Agreements and Contracts?Agreements and Contracts?Agreements are not as a general

Legally enforceable

Courts will not involve themselves.

The Difference Between The Difference Between Agreements and Contracts?Agreements and Contracts?Contracts are ALWAYS:

Legally enforceable

Courts will enforce as the law dictates

Non Enforceable AgreementNon Enforceable AgreementIf you wash my carI’ll give you $10

Non Enforceable AgreementNon Enforceable AgreementI’ll pick you up fordinner at 8 o’clock

Contracts & Agreements – Contracts & Agreements – How Are They the Same?How Are They the Same?Contracts & Agreements – Contracts & Agreements – How Are They the Same?How Are They the Same?Practical Answer – they are both

Risk Minimization tools that operate as

Checklists or Rule Books by applying

Performance standards

Contracts & Agreements – How Contracts & Agreements – How Are They the SameAre They the Same as Risk as Risk ToolsTools

Contract or agreement to import coal tare and toll manufacture chemicals in Australia

Agreement to meet and discuss a form of long term supply arrangement

Contract to supply an apple

Contracts & Agreement - As Contracts & Agreement - As Checklists or Rule BooksChecklists or Rule BooksContracts & Agreement - As Contracts & Agreement - As Checklists or Rule BooksChecklists or Rule Books

Who is to do what – who is supply goods or services; Who is paying for the goods or services.

When are the services\goods to be supplied – when are they to be paid for.

How are the services\goods to be supplied.

Consequences of good or poor performance.

Why have a Contract Why have a Contract instead of an Agreement instead of an Agreement Why have a Contract Why have a Contract instead of an Agreement instead of an Agreement

least formal to most formal form form of Agreement oral contract of written

contract

RiskRisk

Formality &Formality &LegalityLegality

What Distinguishes Contracts & Agreements?Contracts MUST comprise

An offer

Acceptance of the offer

Consideration

Between parties that have capacity to contract

An intention to be legally bound

Agreements MAY comprise

An offer

Acceptance of the offer

Consideration

Between parties that have capacity to contract

Agreements ALWAYS lack

An intention to be legally bound

Types & Forms of ContractsTypes & Forms of Contracts Oral

Partly oral / Partly Written - varied by phone

Written

Informal - exchange of letters

Formal Standard

Negotiated

Understood by industry

Legally interpreted (precedent)

Trust in project relationship

Familiarity in administration and making of claims

The Case for Standard The Case for Standard FormsFormsThe Case for Standard The Case for Standard FormsForms

Needs of project

Non-traditional project strategy

“No risk” client /certainty of outcomes?

Addresses particular problems of standard forms

The Case for One-off The Case for One-off ContractsContractsThe Case for One-off The Case for One-off ContractsContracts

Contractual Contractual Concepts - OfferConcepts - OfferContractual Contractual Concepts - OfferConcepts - Offer An offer must be made

Invitations to treat are not offers Oral, written or conduct

When does an offer end

Withdrawal

Rejection

Lapse of time

Death of offeror or offeree

Is This an Offer?Is This an Offer?

Are you interestedin buying Tanalith?

Is This an Offer?Is This an Offer?

I will sell you 2 tonne of Tanalith for $5,000.

Contractual Concepts -Contractual Concepts -AcceptanceAcceptanceContractual Concepts -Contractual Concepts -AcceptanceAcceptance An offer must be accepted on exactly the same terms

as offered

Written

Conduct

Examples of AcceptanceExamples of AcceptanceExamples of AcceptanceExamples of Acceptance Letter

Telephone

Face to face

Examples of Acceptance And even email under the electronic transactions acts

Worldwide Web

Email Sender Email Receiver

BLUE Co. RED Co.

Contractual Concepts -Implied Terms Business efficacy

The Moorcock (1889)

Statute

Negotiating What to Look Out For…promissory Estoppel What is it?

Central London Property Trust v. High Trees House Limited

Waltons Stores v. Maher

Elements NecessaryElements Necessary Elements necessary to enforce a promise under the

doctrine of estoppel

Some form of legal relationship either exists or is anticipated to exist between the parties.

A representation or promise by one party.

Reliance by the other party on the promise or representation.

The party relying on the promise must suffer a detriment.

Unconscionability.

Unconscionably for Unconscionably for Promissory EstoppelPromissory EstoppelUnconscionably for Unconscionably for Promissory EstoppelPromissory EstoppelThree elements must be present:

"Special disability"

Exploitation of the weakness

Unfair or "unconscientiously" to procure agreement in the circumstances

Central London Property Trust v

High Tree House Limited (1947)

Waltons Stores v Maher (1988)

Negotiating What to Look Out For…Statutory Impact on Contract Law

Statutory Impact on Contract Statutory Impact on Contract LawLawStatutory Impact on Contract Statutory Impact on Contract LawLaw Misleading or deceptive conduct

Trade practices act (Cth) ss 52 & 53 (commerce act (NZ))

Fair trading act (NSW) s. 42

Unconscionable conduct

Trade practices act (Cth) pt IVA

Fair trading act s. 43

Contracts review act (NSW only)

Misleading or Deceptive Misleading or Deceptive ConductConductMisleading or Deceptive Misleading or Deceptive ConductConduct Strict liability

Actual deception

Overall impression

Product puff

Silence

Ambiguity

Erroneous assumption

Half truths

Four principles were established in the case of Taco Co of Australia v Taco Bell Pty Ltd (1982) ATPR 40-303 as assisting to determine whether conduct is misleading or deceptive.

1. The relevant section of the public must be identified.2. All people within that section must be considered including the

intelligent and not so intelligent, the educated and uneducated.3. Evidence that someone was misled is helpful, but is neither

conclusive nor essential.4. When a misconception has arisen it is important to determine

why, in order to see if it was the business' conduct that caused it.

Misleading conduct - s 52 Example

A SECOND PRINCIPLE:

It's the overall impression on the target audience that counts

silence can be misleading - if there is a duty to speak

a prediction can be misleading - if there's no reasonable ground to make it

silence can be misleading - if there is a duty to speak

a prediction can be misleading - if there's no reasonable ground to make it

Misleading conduct - s 52Misleading conduct - s 52

What Conduct Can Be Misleading?

Misleading conduct can occur in any business communication, such as:

advertising, brochures, commercials

Tenders

Exclusion clauses

telephone conversations

business proposals

....in fact, just about anywhere

Exclusion Clauses & S 52 You cannot contract out of s 52.

In entering into this agreement the purchaser acknowledges that it has not relied on any statement, representation or warranty by or on behalf of the vendor whether express or implied as to ...

Clarke equipment Australia ltd v Covcat Pty ltd felling machine, exclusion clause in contract no effect.

Collins Marrickville Pty ltd v Henjo investments Pty ltd.

Tenders & S 52Tenders & S 52 Representations that a project will take a stated

period of time and it does not or the start is delayed beyond the time it is represented to commence may amount to misleading and deceptive conduct.

Section 51A shifts onus of proof for predictions. A representations as to future action must be made upon reasonable grounds.

O’Connor & sons Pty ltd v Entact clough Pty ltd.

Tenders & s 52Inaccurate

Drawings part of a RFT contained inaccurate information Phillip and Anton Homes Pty Ltd v Cth (1988)

Quantity surveyor’s estimates and certifications leading to progress claim BFC Ltd v ABW Nominees (1992)

Representation about no asbestos Emmanuele v Chamber of Commerce & Industry SA Inc (1988)

Tenders & s 52 A RFT that does not indicate that strict

compliance with the terms of the tender is essential gives to a tenderer not shortlisted to injunct the tender process (MacMillan’s case)

A tender that is not evaluated in accordance with how tenders were represented to be evaluated may be misleading (Hughes Aircraft v Airservices Australia)

* Pic for illustration purposes only

Whooping Savings!

Negotiating What to Look Out For…unconscionable Conduct Prohibits conduct that is

unconscionable within meaning of unwritten law (51AA)

Protects consumers from conduct that is, in all the circumstances, unconscionable (51AB)

What is ‘unconscionable’?

The term ‘unconscionable’ is not specifically defined, allowing for the courts to develop a wide interpretation.

Generally it may involve:

• exploitation by a stronger party of a weaker party

• going beyond normal hard commercial dealing

• contrary to concepts of good business conscience and fairness.

May be seen as an abuse of a firm’s market power in its dealings with disadvantaged or powerless people or business.

Unconscionable Conduct - Example

Pritchard v Race Cage Productions Pty Ltd

Unconscionable Conduct

[[A] person should not be permitted to use or insist upon his legal rights to take advantage of another's special vulnerability or misadventure for the unjust enrichment of himself.

Olex Focas Pty Ltd v Skodaexport Co Ltd 1997

High Risk Situations - Continued

I will give’emtwo secondsto say Yes

Well we have a deal!I am notsure I

have readeverything

Yes. Ofcourse.

Got you..

1. Where the stronger party knows, or ought to know, that the weaker party did not fully understand the transaction

Aim of Unconscionable Conduct

• Stop the unlawful conduct

• Compensation / Restitution for Victims

• Future Compliance ie. preventing future breaches (by same person or others who might be tempted to breach)

• Deterrence and/or punishment

Negotiating Contracts & Agreements Other Things to Watch… Letters of intent

Heads of agreement

MOU’s

Checklist to Ensure HoA, MOU Etc Is a Contract (ie Binding)

the document should be dated and validly executed by both parties

there should be an explicit statement that the document is meant to be binding

if an essential term is absent or uncertain, the agreement will be void for uncertainty or construed as incomplete, ie. the parties should have agreed the terms that are regarded as essential, for example:

In a simple Heads of Agreement to lease a building the following matters must have been agreed and should be accurately identified - the parties, the premises, the term of the lease, the rent or other consideration payable, review dates and rights of renewal

If there were any unresolved issues there should be a provision for agreement to be reached by resort to an expert or an arbitrator or by another mechanism

You should ensure that all documents that are referred to as "attached" to the heads of agreement are attached, and that the parties have initialled all amendments and the foot of each page

If there is a particular form of agreement to be entered into at a later date (for example, Koppers standard terms of trade), then this should be attached or clearly identified in the document to avoid uncertainty

The document should be clearly drafted in plain English to reflect the intention of the parties with all the essential terms and conditions incorporated so that each other knows:

Who is to supply what or pay for the supply;

When are the goods or services to be supplied and paid for;

How are the goods or services to be delivered; And.

The consequences for none performance.

Set out the checklist.

Open Forum

Steve Brown, Sbrown@etiennelaw.com. www.etiennelaw.com

Contract How To Make An Agreement A Contract Etienne Lawyers

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