1

Agreement- Offer and Acceptance

Offer Essential Terms

Intention to be legally bound o Mere Puffery (Carlil v Carbolic Smoke Ball) o Invitation to treat (Pharmaceutical Society v Boots Cash Chemist) o Auctions (AGC v McWhirter; Payne v Cave) o Negotiations

Battle of the Forms (Butler Machine Tool Co v Ex-Cell-O Corp) Correspondence- How to identify offer amongst invitations to treat (Gibson

v Manchester City Council; Brambles Holdings v Bathurst City Council) o Ticket Cases (MacRobertson Miller Airlines v Commissioner of State Taxation) o Duration

Lapse – offer to remain open for specified period/time limit may be specified or implied by the court. Offer lapses automatically once time expires.

Revocation/withdrawal- Unilateral Offer (Mobil Oil v Wellcome) Rejection (including counter-offer) – Once rejected, offer terminates.

Offeree can’t accept unless offer is renewed. A counter offer acts as a rejection to the offer (Hyde v Wrench) – Request for information or clarification is not a counter-offer (Stevenson Jaques v McLean)

Conditional Offers-Offer stays open as long as conditions are met Options (Goldsborough Mort V Quinn)

Acceptance Must correspond with offer (Butler Machine Tool Co v Ex-Cell-O Corp)

Must be unequivocal – no terms left to negotiate

Can be express or implied – can accept through conduct (especially if parties have had previous dealings); Unilateral – acceptance through performance.

Not effective unless communicated – decision to accept is insufficient, communication to 3rd party is too, until communicated to offeror offer can be withdrawn; are exceptions to this.

Should be in mode prescribed (Bressan v Squires; Machester Diocesan Council v Commercial and General)

Silence isn’t a mode (Felthouse v Bindley) Exception – (Empirnall Holdings Pty Ltd v Machon Paull Partners Pty Ltd)

Can dispense with notice – the offeror can dispense with the requirement of notice.

Postal Acceptance Rule – If applies, acceptance is at time of posting. Applies when it is within the comtemplation of parties that post might be used to communicate acceptance (Henthorn v Fraser); Does not extend to fax or telephone (Entores), (Brinkibon) Argument that modern business practices might delay relevant person receiving acceptance. See Electronic Transactions Act 2000 (NSW) S13A for email/internet.

Only offeree can accept

Acceptance not valid unless reliant on offer – (R v Clarke)

2

Consideration

Must be given on the request of the promisor (Australian Woollen Mills v Cth)

Must move from the promisee (Price v Easton)

Must be sufficient (Woolworths v Kelly; Chappel v Nestle)

Does not need to be adequate – see Woolworths v Kelly

Must not be illusory (Placer Development v Cth); Uncertain or uneforeable (Dunton)

Past consideration is no consideration (Roscorla v Thomas)

Promise to perform and existing duty is not consideration (Stylk v Myrick), Part payment of a debt is not good consideration (Foakes v Beer)

o Exceptions Fresh Consideration (Glasbrook, Hartley V Ponsonby) Practical Benefit (Williams v Roffey Bros; Musemeci v Winadell)

Does not apply to part payment of a debt (Re: Selectmove) Promises made to third parties (Shadwell v Shadwell; Pau On v Lau Yiu Ling) Compromise and Forbearance to sue (Wigan v Edwards)

3

Intention to Create Legal Relations

Presumptions should be treated with caution – (Ermogenous v Greek Orthodox Community of SA)

Social/Domestic/Family arrangments outside realm of contracts law – (Placer Development Ltd v Commonwealth (1969) 121 CLR 353 at 367); simply because the parties to them must be regarded as intending that the mutual promises whether kept or broken are not to land them in court.

Scoial/Family/Domestic agreement have no intention – (Balfour; Cohen; Jones v Padvaton)

Social/Family/Domestic presumption easy to rebut – (Todd v Nicol; Merrit v Merrit; Wakeling v Ripley; Dunton v Dunton)

Commercial Agreements have intention – (Edwards v Skywards Ltd; Esso Petroleum; Barque Brussels Lambert)

Commercial Agreement intention presumption difficult to rebut – (Rose and Frank Co v Crompton; Masters v Cameron)

Weighing nature of context – (Rofous v Brewster)

Presumption to be bound can be displaced in favour of gentleman’s clauses – (Rose and Frank Co v J R Crompton & Bros Ltd); agreement not formal but carried through in mutual loyalty and friendly co-operation. As formal agreement displaced in a specific clause, courts must respect this as the intention of both parties.

Government Schemes – (The Administration of the Territory of Papua New Guinea v Leahy; Australian Woollen Mills) – Generally held that government schemes are not contractual obligations

Certainty Overall two competing principles – Courts try to uphold agreements (should adopt reasonable interpretation or insert terms by implication) or Only terms which parties voluntarily agree to should be enforced (should not impose terms on parties unless clearly adopted by them). However wide discretion held with courts

Completeness – An Agreement must contain all the essential terms o Essentiality of terms missing -

Familiar Contracts – Conveyance of land, sale of goods etc essential terms have been identified by courts

Sale of land – parties, land, price

Lease – commencement date, rental

Sale of goods – price not essential Unfamiliar Contracts –

The threshold question is not whether the expressly agreed terms are sufficient in themselves to constitute a contract, but whether the parties have specifically agreed all the terms that only the can decide.

o Why are the essential terms omitted - Parties may attempt to agree to agree – not enforceable Parties may have overlooked an issue – court may supply a term by

implication, but with reluctance Parties may have failed to agree on the issue – not enforceable

o Is the contract wholly executory, partially executed or wholly executed

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Wholly executory – courts will be reluctant to ‘read in’ missing terms Partially executed – courts will be more read to ‘read in’ missing terms by

implication Wholly executed – what’s the problem guy’s? The contract is finished.

Certainty o Imprecise, vague or meaningless term

Upper Hunter Country District Council v ACR Language is deficient in expression, semantic or conceptual difficulties,

language is clear by application to facts doesn’t make sense. Eg no facts fit description or more than one set of facts fit.

“Subject to finance” (Mehan v Jones); “Upon reasonable terms as commonly govern such a lease” (Whitlock v Brew); “Value of land fixed but less depreciation” (Hall v Burst); Option to participate in company equity sharing scheme but no such thing existed (Biotechnology v Pace).

o Terms Upheld – promises to pay Handsomely, a substantial sum, a substantial cut on workd done, a bonus, a

fair and equitable price, current bank overdraft rates, supplier’s cost. o Terms not upheld- promise to

Well reward (employee) o Reasonableness

Operates as a standard by which courts can interpret vague or imprecise terms

Cannot help if there are several reasonable interpretations of the term (Whitlock v Brew; Hall v Busst)

o Illusory Promises – (Mehan v Jones; Biotechnology v Pace; Placer Developments v Cth)

o Agreements to negotiate – Can be enforced as has been (Coal Cliff Collieries v Sijehama; Alton v Transfield)

o Severance – If a contract contains an uncertain term which is not essential, court may ‘sever’ the term from the contract and enforce the balance. This is only available if the severance does not change the nature of the agreement overall

5

Formalities – Week 4

Is there a binding agreement?

Is that type of agreement required to be in

writing under a statute?

Is the agreement in writing as required by statute?

Is there a memorandum of the agreement?

Is the agreement for memorandum signed by the party

to be charged or an authorised agent

Has there been any part performance?

Unenforceable contract Enforceable contract

Yes

Yes

Yes

Yes

No

No

No

No

Yes

Yes

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Note – s541A Convenycing Act 1919 (Nsw) is what designates that sale of land contracts must be in writing

Do any documents contain details of the agreement?

If more than one document can they be joined? o Do they refer to each other? o Physically connected

Do they contain the essential terms o Sale of land - Price (Burgess v Cox), parties (first and last name), property (Price v

Saunders)

Part Performance o Performance – Must be unequivocally and by their nature referable to a contract of

that kind (Ogilvie v Ryan, Regant v Millet, McBride v Sandland) o Referability

Electronic Transactions Act s 9 – name on email is enough for a signature.

Contracts of Guarantee o In New South Wales, such contracts are not required to be in writing o However, many other Australian jurisdictions require such contracts to be in writing

(e.g. the Property Law Act 1974 (QLD))

Contracts in Consideration of Marriage o Such contracts deal not with the promise to marry, but the promise to do something

in consideration of marriage e.g. to pay a sum of money as an allowance in consideration of marriage

o This is not required to be evidenced in writing in New South Wales

Contracts for the Sale of Land or an Interest in Land o All Australian jurisdictions require such contracts to be evidenced in writing o Conveyancing Act 1919 (NSW), s 54A:

No action or proceedings may be brought upon any contract for the sale or other disposition of land or any interest in land, unless the agreement upon which such action or proceedings is brought, or some note or memorandum thereof, is in writing, and signed by the party to be charged or by some other person thereunto lawfully authorised by the party to be charged

Sale of Goods o This generally concerns s 17 from the Statute of Frauds o In Tasmania and Western Australia, a contract for the sale of goods above a certain

value must be reflected in writing o In New South Wales however, this provision has been repealed by the Sale of Goods

(Amendment) Act 1988 (NSW) s3 and Sch 1, Cl 2

Compliance with the Requirements o Recall s 54 of the Conveyancing Act 1919 (NSW)

No action or proceedings may be brought upon any contract for the sale or other disposition of land or any interest in land, unless

the agreement upon which such action or proceedings is brought, or some note or memorandum thereof, is in writing, and

signed by the party to be charged or by some other person thereunto lawfully authorised by the party to be charged

These are the elements to be satisfied in meeting the requirements

Note or Memorandum o Essential terms of the contract

The parties The property - Pirie v Saunders The price - Burgess v Cox

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Signed by the Party to be Charged o Signed by the party to be charged ie the person against whom the contract is

alleged. o Name can appear anywhere on document, as long as it has been ‘authenticated’ o Does not need to be an actual signature – may be printed, handwritten, digital. o See Electronic Transactions Act NSW (2000) s9

Joinder of Documents o physically connected eg a letter and the envelope in which it is posted; or o a reference in one document to the other document. o Harvey v Edwards Dunlop & Co Ltd

Oral contract was reflected in a number of letters.

Effect of Non-Compliance o A contract which fails to comply with the requirement of writing is not void

But it is unenforceable o Parties cannot sue or be sued upon it o Severance?

This is probably of limited use in most cases – what else can be done to avoid injustice?

Effect of Non-Compliance o Claim ‘dehors(foreign too, or outside the agreement) the contract’…

Pavey & Matthews v Paul

The builder completed the work, and also supplied materials but Mrs Paul refused to complete the contract

However, there was nothing preventing a claim dehors the contract, or claim independent of the contract

o The builder was able to bring a claim in restitution, known as a quantum meruit

o A quantum meruit is a claim for reasonable remuneration for work done and materials supplied, on the basis that the other party would be unjustly enriched if the party who had performed their obligations was not compensated

Effect of Non-Compliance o Doctrine of Part Performance

Equity will intervene to allow a plaintiff who has partially performed their obligations under a contract to enforce the contract

An equitable remedy at the court’s discretion If proved, the court will enforce the contract – may be a better option than

restitution Two key elements :

Referability o To what extent is the part performance being claimed

actually in reliance of the contract? o Maddison v Alderson (1883) 8 App Cas 467 o “acts relied upon as part performance must be unequivocally

and in their own nature, referable to some such contract as that alleged”

o Contrast with Steadman v Steadman [1976] AC 536

Performance o Ogilvie v Ryan o McBride v Sandland

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o The Acts must be done by the party to the contract seeking to rely on the doctrine or their agent.

o Preparatory acts are not sufficient o The acts done by the plaintiff must be permitted by the

contract but not necessarily required by it. o In New Zealand acts done in reliance on the contract cannot

be taken into account.

Variation o Variation

Where a contract is not required to be in writing, any variation to the terms need not be reflected in writing. However, where a contract is required to be evidenced in writing, any variation to the terms must also be written

Capacity Minors

o Can a minor enter into an agreement? Minors (Property and Contracts) Act 1970 (NSW)

Age of majority is 18 s9(1)

S19 minor can enter for their benefit- “civil acts” - burden of proof on minor (is the minor getting what they want?)

o S6(1) civil acts include contracts

Do any other presumptions apply? o S18 – Age of Understanding – when a minor participates etc

in a contract – while lacking by reason of youth, the understanding necessary for their participation in the act

o S20 – if too expensive or they do not receive enough consideration

o S21 – Gifting – if a minor gifts property, thought must be given to whether it is reasonably, if so it is binding on the minor.

Can they repudiate? o S31 – can repudiate any time they are a minor before they

turn 19. Only if the civil act was not for benefit of minor S33 (proper notice of repudiation) and 35

(restriction on repudiation) requirements

Intoxication/Mental Disability o Moulton v Camroux (1849) 4 Ex 17

2 factors

The degree of influence on the mind

The knowledge thereof of the other party

Ratio stemmed from Beverly’s Case (1603) 4 Co Rep 123b; 76 ER 1107 - impossible for a person of full age to establish capacity; the same principle applied to ‘unsoundness of mind’

o Gibbons v Wright (1954) 91 CLR 423

Parties must have ‘such soundness of mind as to be capable of understanding the general nature what he is doing by his participation’

o Void or Voidable? Non est factum - signature on the contract was signed by mistake, without

knowledge of its meaning, but was not done so negligently.

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The Common Law Position o Necessaries

Nash v Inman [1908] 2 KB 1 Peters v Fleming (1840) 6 M & W 42

o Benefit alone is insufficient Bojczuk v Gregorcewicz [1961] SASR 128

o Necessaries are displaced where there is no benefit De Francesco v Barnum (1890) 45 Ch D 430

o What if a minor borrows money in order to purchase goods or services which are necessary?

o Contracts not for necessaries voidable – and binding unless repudiated

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Week 6 – Estoppel Central London Property Trust v High Trees

o First major case to establish the principle of estoppel Tenant relied on promise of landlord that they didn’t have to pay full rent

for duration of the war Tenant relied on the promise Landlord did not try to deviate from his promise but if he did he would have

been estopped o Principle adopted in Australia by Walton v Maher

Types of Estoppel o Common Law Estoppel (in pais) – applies where representation is about an existing

fact (since Jordan v Money). party A leads party B to adopt an assumption of fact party B relies on the assumption the reliance means that B will suffer detriment if A subsequently denies the

truth of the assumption party A tries to deny the truth of the assumption party A is estopped.

o Equitable Estoppel Proprieotry Estoppel

Can apply to representations about future conduct

Only applies to transfers of interest in land o party A leads party B o to adopt an assumption that A will transfer interest in land

to B o party B relies on the assumption o the reliance means that B will suffer detriment if A

subsequently denies the truth of the assumption o party A tries to deny the truth of the assumption o party A is estopped.

Promissory

Concernced exclusively with promises not to enforce legal rights

Parties must be in a pre-existing legal relationship

Current Elements of Estoppel – Post Waltons v Maher o Brennan J sets out a list of criteria in Waltons v Maher (Prove all 6, but last 2 are not

as necessary) An assumption by the rely party (Assumption)

Traditional Approach o Existing Fact – Common Law o Future Conduct – Equitable

Post Waltons v Maher o Distinction between the two blurred but not abandoned o If future conduct, no longer confined to pre-existing legal

relationship or transfer of land. The assumption is induced by the representor’s conduct (Inducement)

Does not have to be express

But does need to be clear and unambiguous

Can be by silence (all Waltons v Maher)

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The relying party relies on the assumption and will suffer detriment if the assumption is not fulfilled (Reliance and Detriment)

Central Element

Detriment must be serious, more than a mere inconvenience (Je Maintiendrai v Quaglia)

Detriment must be more than just acting on the promise or representation

Detriment can be alleviated by adequate notice of intention to depart from assumption

The relying party has been reasonable in adopting and acting on the assumption (Reasonableness)

Did party act reasonably in adopting the assumption?

Did party act reasonably in incurring detriment by relying on the assumption

Murphy v Overton – not reasonable to act on the assumption and incur detriment

It would be unconscionable for the representor to depart from the assumption (Unconscionability)

Mostly discussed in contracts II

‘The use of or insistence upon legal entitlement to take advantage of another’s special vulnerability or misadventure in a way that is unreasonable and oppressive to an extent that affronts ordinary minimum standards’ - Grundt v Great Boulder Mine

Reasonableness focuses on conduct of representee

Unconscionability focuses on conduct of representor The representor threatens to depart or does depart from the assumption.

(Departure).

Unless assumption departed from, nothing unconscionable in representor’s conduct

Remedies o Traditional approach

Common law estoppel - expectation approach

Enforce the assumption

Akin to enforcing the promise in contract

person in fault must put the injured party in the position they would have been in if the promise had been fulfilled.

Associated with common law estoppel

Waltons v Maher - enforce the lease, or damages to the amount of full rental

Equitable estoppel - reliance approach

Identify detriment caused by reliance

Compensate only to prevent the detriment

Waltons v Maher - costs of demolishing old building and constructing new building

Often will be less than expectation damages o Practical impact may be the same o Expectation approach impinges on contract doctrines o Commonwealth v Verwayen

Assumption - Commonwealth would not plead the defences. Inducement - The Commonwealth had induced that by stating its policy and

by not pleading the defences at the outset.

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Detrimental Reliance Mr Verwayen had relied on the assumption and had commenced proceedings. The detriment suffered was at least the cost of the proceedings to date. In addition, Mr Verwayen argued he had also suffered increased stress and anxiety, which exacerbated his medical condition.

Reasonableness - It was reasonable for Mr Verwayen to act on the assumption.

Unconscionability - It would be unconscionable to allow departure from the assumption without further redress for the detriment.

Departure - The application to amend the defence indicated an intention to depart from the assumption.

o Guimelli v Guimelli – Parents estopped from denying promise to transfer land to son Argued decisions in Verwayen required reliance approach - monetary

compensation rather than transfer of land Court rejected the argument BUT ordered monetary compensation rather

than transfer of land Expectation approach would not do justice re third parties Reliance approach not necessarily correct ie do not have to limit remedy to

minimum necessary o The extent of unification of the different categories of estoppel is not yet settled.

Adopting an expectation approach tends to support the innocent party as it places them in the position they were before

o Important to remember it can be used as a sword and a shield

W v G can be used to found a cause of action in the absence of any other recognised legal right (lesbian relationship)

13

Privity of Contract

Contract between A and B

B to pay C

C is not a party

C cannot sue B if B fails to pay

The Privity Doctrine o Dunlop Pneumatic Tyre Co Ltd v Selfridge & Co Ltd [1915] AC 847

Only a person who is a party to a contract can sue on it Dunlop contracts with Dew, Dew contracts with Selfridges, Dunlop cannot

sue Selfridges o Coulls v Bagot’s Executor and Trustee Co Ltd (1967) 119 CLR 460

Australian acceptance of Dunlop - ‘A person not a party to a contract may not himself sue upon it so as directly to enforce its obligations’

o Trident General Insurance Co Ltd v McNiece Bros Pty Ltd (1988) 165 CLR 107 Trident therefore established that in insurance contracts, a third party who

was an intended beneficiary can have a contractual remedy against one of the contracting parties if a benefit promised to the third party was not conferred.

Follows s48 Insurance Contracts Act 1984 (Cth) but the facts arose before the legislation had been enacted

Exception to the doctrine of privity

Exceptions o Agency – the contracting party acts as an agent for the beneficiary. The beneficiary

is legally a party to the contract. o Trusts - If there is evidence of intention to create a trust, the third party beneficiary

may compel the trustee in equity to enforce the contract. (Trident) o Estoppel o Unjust enrichment o Assignment of Contractual Rights o Choses in action

Ownership of the right to sue someone could not be transferred until Judicature Act 1873 (UK)

Now a chose in action is a transferrable right, and the recipient can sue directly on a contract.

o Misleading and Deceptive Conduct Will consider in more detail in LAW272

Legal Effect of contracts for the Benefit of third Parties

o Contracts for third party benefit alone

Beswick v Beswick [1968] AC 58

Privity doctrine is firm

A B

C

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Third party beneficiary cannot sue, the other benefactor of the contract can sue however as they are part of the contract

o Contracts for benefit of joint promisees

Coulls v Bagot’s Executor and Trustee Co Ltd (1967) 119 CLR 460

Joint promisee can sue (minority judgment – Barwick CJ and Windeyer J)

Plurality of parties

Exclusion Clauses

o Elder Dempster & Co v Patterson Zochonis & Co [1924] AC 522

If the third party is part of the contract containing the exclusion clause, then they are immune from suit – they are a part of the contract and PROTECTED by the privity doctrine

o Wilson v Darling Island Stevedoring & Lighterage Co Ltd (1956) 95 CLR 43

The plaintiff sued the stevedores, and the stevedores claimed that they

were the agents of the carrier and therefore protected by the exemption

clause. The High Court held however that the clause protected the carrier

but not the stevedoring company, as it had not been a party to the contract

and could therefore not take the benefit of it.

o Scruttons Ltd v Midland Silicones Ltd [1962] AC 446

If the third party is not a party to the contract then they cannot rely on the

exclusion clause – privity PREVENTS them from relying on it

It was held by Lord Reid in Midland Silicones that if the stevedores had been

clearly expressed as an intended party in the bill of lading, and that the

carrier had been clearly expressed as an agent for the stevedores, then the

protection would apply. As this was not made clear in both cases the

stevedores were found not to be parties or agents.

Agents can benefit from exclusion clauses if: Lord Reids Test

The contract of carriage makes it clear that the clause was intended to protect third parties

it was clear that the carrier was contracting not only on its own behalf but as an agent for third parties

the carrier had authority from the third parties to make the contract on their behalf

any difficulties about consideration moving from the third party was overcome (in other words, that the third party is paying fresh consideration for the promise of exemption before it is enforced)

o New Zealand Shipping Co Ltd v A M Satterthwaite & Co Ltd (The Eurymedon) [1975]

AC 154

Cargo was damage due to defendants negligence

Barwick CJ – Agent was defined

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In the bill of lading the carrier claimed exemption for itself and its agents

from liability for any loss or damage or delay of whatsoever kind. All persons

working for the carrier (including independent contractors) were classed as

agents and were thus deemed to be parties to the contract.(what they call a

‘Himalaya Clause’)

IN relation to the fourth element of Lord Reid’s test, the unloading of the

goods was said to amount as consideration for the clause – in other words,

they were doing something for the promise of exemption. Thus they could

take the benefit of the clause.

o Port Jackson Stevedoring Pty Ltd v Salmond & Spraggon (Aust) Pty Ltd (The New York

Star) (1978) 139 CLR 231

a lengthy exclusion clause was held to cover the stevedores, when goods

were stolen while being stored by the stevedore.

The Privy Council approved the decision in The Eurymedon, and applied Lord

Reid’s test from Midland Silicones, which was held to be satisfied.

In both cases that the carrier company had the authority to act in such a

manner where the stevedore was concerned. In The Eurymedon, the

stevedore was in fact a wholly owned subsidiary of the carrier, and in The

New York Star, the stevedore had worked closely with the carrier for many

years and was aware of the contents of the bill of lading. In both The issue of

consideration was satisfied through the performance of the contemplated

act – that is, the delivery of goods in return for the protection under the

clause. As in both cases the stevedore was held to be a principle contracting

party, with the contracting party acting as agent.

Attempts to Impose Contractual Burdens on Third Parties

o Land

Tulk v Moxhay (1848) 41 ER 1143

In certain circumstances, a restrictive covenant may bind third

parties who later acquire the land

it was held that if a purchaser knows of a restriction imposed by

covenant before purchasing land from a vendor (which they would

know through title searches), they would be bound by that

restriction and therefore liable

Third party knowledge of the covenant is required

o Goods

Lord Strathcoma SS Co v Dominion Coal Co [1925] All ER Rep 87

Restrictive covenants can be applied to goods

the plaintiffs chartered a ship from the owners, and the owners

subsequently sold it to the defendant. The Privy Council upheld the

validity of an injunction preventing the new owners from using the

ship in such a way that impacted upon the charter company’s use of

the ship. What was significant here is that the new owner knew of

the charter party’s requirements when they bought the ship.

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The key issue is whether the purchaser, whether it be of goods or

land, knows of the covenant or obligation at the time of purchase.

Remedies

o Damages

Contract between A and B. B to pay money or do work for C

B fails to pay or do the work

C cannot sue because of privity rule

A can sue

What is A’s loss? Arguably nothing, because it is C who has suffered

loss – nominal damages

Can A recover C’s loss? If so, does A have to give the damages to C?

o Specific Performance

Very rare for courts to order specific performance

there is a presumption that damages are sufficient except in extraordinary

circumstances – third party beneficiaries would be that kind of excpetion

Beswick v Beswick

When looking at questions of privity therefore, your task is to determine whether the third

party in question is one that can be readily construed as an actual party to the contract, and

if not, whether any of the ‘apparent exceptions’ to the privity doctrine apply, such as agency,

trust, or one of the special situations we explored like joint promisees, or bill of lading

exclusion clauses. Also bear in mind that as a result of Trident, the need to establish a direct

contractual relationship may not be required. Remember that commercial necessity and

intention was sufficient in Trident to create a link for the third party to be able to recover. If

you are analysing a privity problem, be sure to note the growing flexibility to displace the

privity doctrine by reference to either the ‘exceptions’ or other legal relationships.

17

Express Terms Terms of the contract – 4 Essential Elements

o Terms

o Identification

o Constuction

o Implied terms

Express Terms

o Oral

o Written

Intention of the Parties

o Objective approach to intention

Bramble Holdings Ltd v Bathurst City Council

“general commercial waste’ – does this include liquid waste?

Both parties believed it did not

Court said both were wrong, looked at what an onlooker would

think the parties intended.

Express Terms – 4 Areas of Special concern

o Pre- contractual negotiations – this topic

o Standard form contracts – not covered

o Parol evidence rule – next topic

o Exclusion clauses – this topic and next

Pre-contractual negotiations

o Puffery

o Misrepresentation

o Contractual Term

Dependant on intentions of parties –

Determined objectively (Dick Bentley Productions) –

If an intelligent bystander would reasonably infer that a warranty

was intended, that will suffice. (Dick)

Everyone knows what a man [sic] means when he says ‘I guarantee

it’ or ‘I warrant it’ or ‘I give you my word on it.’ He means that he

binds himself to it - Oscar Chess v Williams

Timing (Ellul and Ellul v Oakes) – short lapse / long lapse

Language - Promissory v Opinion (JJ Savage & Sons v Blakney)

Importance –

Objective Importance (Couchman v Hill)

statement was important to contract – Term

Knowledge/Expertise –

Relates to knowledge of the parties (Oscar Chess v Williams, Leaf v

International Galleries)

Both parties expert – less likely to be a term

One party holds more expertise or knowledge – more likely to be a

term

Written Memorandum

Expectation that all the terms included

Statement not included - less likely to be a term.

Statement included - more likely to be a term

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If an oral representation is afterwards recorded in writing, it is good

evidence that it was intended as a warranty. If it is not put in

writing, it is evidence against a warranty being intended. But it is by

no means decisive… - Oscar Chess v Williams

o Collateral Contracts

In a collateral contract the statement or promise made during pre-

contractual negotiations is supported by consideration in the form of the

other party entering into the main contract.

Good things about collateral contracts - Where the main contract is illegal.

Where the main contract must be evidenced in writing. Where the privity

rule (see week 9) prevents someone from enforcing the main contract.

Where the parol evidence rule excludes evidence of an oral statement or

promise – a collateral contract may be formed

Criteria – JJ Savage v Blakney

That the statement was intended to be relied on

Reliance by the party alleging the existence of the contract

An intention, on the part of the maker of the statement, to

guarantee its truth.

Cannot be inconsistent with any term of the main contract – Hoyt’s

v Spencer

Collateral can be with a third party to the main contract - Wells (Merstham)

Ltd v Buckland Sand and Silica

Breach of collateral contracts is damages only, no specific performance – not

necessarily breach of main contract if collateral is breached.

Incorporation of Express Terms

o Incorporation by Signature

a signature will bind a party to the terms of a contractual document,

regardless of whether or not the party has read and understood the terms –

L’Estrange v Graucob. – Objective Approache

Exceptions

Misrepresentation of the terms - Curtis v Chemical Cleaning and

Dyeing - Assistant told Mrs. Curtis that her signature was required

on the ‘receipt’ to exclude liability for damage to beads and sequins

on dress – terms not included

Non Contractual Document - Le Mans Grand Prix Circuit v Iliadis -

Document appeared to be a registration form rather than one that

would contain contractual terms

Document signed after the contract terms have been orally agreed

– DJ Hill v Wright – more likely to apply exception if the contract has

been performed at the time the terms are signed

Onerous or unusual terms

o Incorporation by notice – Where terms not signed the party can incorporate them

by giving other party sufficient notice – has the party taken reasonable steps to

bring the terms to the attention of the other party .

Timing – notice must precede agreement – Olley v Marlborough Court –

Unlike incorporation by signature, notice after the contract is agreed will not

result in incorporation of terms.

19

Knowledge –

actual knowledge of the terms OR knowledge that the document

contains terms OR knowledge that the document contains writing

and a reasonable person would expect that sort of document to

contain terms

Parker v SE Railway Co

o The railway company, as it seems to me, must be entitled to

make some assumptions respecting the person who

deposits luggage with them: I think they are entitled to

assume that he can read, and that he understands the

English language, and that he pays such attention to what

he is about as may be reasonably expected from a person in

such a transaction as that of deposition luggage in a

cloakroom. The railway company must, however, take

mankind as they find them, and if what they do is sufficient

to inform people in general that the ticket contains

conditions, I think that a particular plaintiff ought not to be

in a better position than other persons on account of his

exceptional ignorance or stupidity or carelessness.

Is the document contractual in nature?

Causer v Brown – document was dry-cleaner’s docket

Could be assumed to be a voucher – needed to claim clothing

not widely understood to be contractual in nature

Not sufficient notice to incorporate as a term.

Chapelton v Barry - ‘We respectfully request the public to obtain a

receipt for their money.’

Onerous or unusual clauses

Interfoto Picture Library v Stiletto Visual Programmes - term was

very onerous – not enough notice

In order to give sufficient notice, it would need to be printed in red

ink with a red hand pointing to it – or something equally startling –

Thornton v Shoe Lane Parking

Ticket Cases – A specific category

When a party accepts a ticket without demur (raise objection or

show reluctance), then that indicates assent to the contractual

terms written on the ticket - Parker v SE Railway

ticket must be of a kind that is usually contractual in nature

o Otherwise, party must take extra steps to draw it to

attention of other party - Chapelton v Barry

The customer pays his money and gets a ticket. He cannot refuse it.

He cannot get his money back. He may protest to the machine,

even swear at it. But it will remain unmoved. He is committed

beyond recall. – Thornton – Raises some issues with tickets.

o Incorporation by Course of Dealing

Balmain New Ferries v Robertson – Criteria

Regularity and Uniformity

20

Documents relied on from previous transactions must obviously be

contractual (such as incorporation by notice (timing) means that for

course of dealing, the previous documents must have always been

correctly timed, tut 18.)

Consistency in the dealings

o Incoporation by Reference

Parties seek to incorporate standard terms in every contract

refer to the terms in a memorandum of a contract, or other document

Terms may be drafted by party or may be developed by trade or

professional associations etc.

21

Week 9 – Construction of Terms and Extrinsic Evidence Parol Evidence Rule

o Two main criteria

(i) the exclusion of extrinsic evidence that would add to, subtract from or

vary the terms of a written contract; and

(ii) the exclusion of extrinsic evidence that would otherwise have assisted

the court in interpreting or construing the contract.

o Two main reasons for the rule

‘The very purpose of a formal contract is to put an end to the disputes which

would inevitably arise if the matter were left upon verbal negotiations or

upon mixed communing partly consisting of letters and partly of

conversations.’

‘where there is a dispute about the terms on which the contract was made

the application of the rule narrows the issues and keeps the dispute within

reasonable bounds.’

o Only applies to contracts wholly in writing

o How can we tell if a contract is wholly in writing?

Applying the law re pre-contractual statements etc and finding that there

are no oral terms

Clause stating that it is wholly in writing

o P.E.R. does not apply when identifying the terms

o P.E.R. is mainly used to limit evidence when interpreting the terms

o What Does it Exclude?

Oral Evidence and Documentary Evidence –

eg letters, memoranda, conversations, emails, earlier drafts of the

written contract, correspondence between the parties, evidence

about the commercial purposes of the contract or any of its terms.

o Prior Negoatiations

Prenn v Simmons

‘If the previous documents use different expressions, how does

construction of those expressions, itself a doubtful process, help on

the construction of the contractual word? If the same expressions

are used, nothing is gained by looking back.’

Codelfa Constructions v SRA

Prior negotiations can be admitted to establish the contract’s

surrounding circumstances

o Subsequent Conduct

Also not admissible

Carter - ‘an affirmation of the rule that a contract must…be determined

once and for all at the time of agreement.’

Exceptions to the Parol Evidence Rule

o Unclear whether exceptions will only apply if there is ambiguity

o Codelfa – Mason CJ - The true rule is that evidence of surrounding circumstances is

admissible to assist in the interpretation of the contract if the language is ambiguous

or susceptible of more than one meaning. (emphasis added)

o Maggbury v Hafele; court quoted from a leading UK Case (UK always allow external

evidence as relevant to construing a contract)

22

Interpretation of a written contract involves, as Lord Hoffman has put it:

“the ascertain-ment of the meaning which the document would convey to a

reasonable person having all the background knowledge which would

reasonably have been available to the parties in the situation in which they

were at the time of the contract.

Consequently, it is unclear whether and to what extent a court can admit

extrinsic evidence to prove the background knowledge or factual matrix if

there is no ambiguity to open the door to that.

o International Air Transport Association v Ansett

Gleeson CJ the court looked at the surrounding circumstances in the

absence of any noted ambiguity.

o 5 Major Exceptions

Ambiguity – must be something more than mere theoretical ambiguity

Patent Ambiguity

o Ambiguity or uncertainty apparent on the face of the

document

o MacDonald v Longbottom - ‘your wool’ - did that mean wool

from the buyer’s farm only, or could it include wool

acquired by buyer from another source?

o Cameron v Slutzkin - ‘Matchless 2475’ - not a phrase used in

the industry.

o Matthews v Smallwood - ‘of the covenant hereinbefore

contained’ - there were multiple covenants - the scribe

forgot to add an ‘s’.

Latent Ambiguity

o Ambiguity that appears due to extrinsic facts or evidence

o Hope v RCA Photophone - did ‘equipment’ include both new

and used? - court said there was no latent ambiguity

o Eg - ‘my nephew John’ where testator had more than one

nephew called John.

o Raffles v Wichelhaus - two ships called ‘Peerless’

o Bacchus Marsh Concentrated Milk Co Ltd (in Liquidation) v

Joseph Nathan - patents for dried milk formula. Did they

include ‘Glaxo’ - dried milk infant formula?

To Identify Parties or Subject Matter

Gilbert v Kenny - contract referred to party as ‘Mrs Kenny’, and later

as ‘Mr Kenny’ – extrinsic evidence showed it was Mrs Kenny was

contracting for herself and as an agent for her husband

White v ANZ Theatres - ‘sole professional services’ - does that

include producing a revue for the stage?

Factual Matrix

The contract must be interpreted by adopting the perspective of the

parties within the factual matrix of the contract

In other words, the court should receive evidence which will help

them to construct the background against which the contract was

made.

23

In Codelfa, Mason J suggests that evidence of factual matrix may

only be admitted to resolve ambiguity i.e. when the expression or

word in issue is susceptible of more than one meaning, but the cases

seem to suggest that the factual matrix evidence is admissible even

where there is no overt ambiguity.

In Codelfa parties had adopted a common assumption that the work

would be able to proceed on the basis of three eight-hour shifts per

day.

Royal Botanic Gardens v South Sydney Council

o Trustee wished to increase rent as rental prices in the area

had risen significantly since lease was signed, the council

(the tenant). Clause in their lease which stated “additional

costs and expenses which they may incur in regard” in

relation to increasing the rent. Majority of HC found clause

to be ambiguous. Accordingly, the court looked at the

surrounding circumstances the nature of the parties, the

purposes of the transaction, and so on. They then

interpreted the clause to mean that only the matters

outlined in clause 4(b)(iv) could be taken into account when

determining annual rental.

Pacific Carriers v PNB Paribas

Reardon Smith v Yngvar Hansen-Tangen

o extrinsic evidence was used to show the purpose of the

contract, which in turn was relevant because it showed that

an expression used in the contract for charter of a ship, that

the ship would be one ‘to be built by Osaka Shipbuilding Co’,

had no particular significance to the purpose of the

contract, and therefore it did not take effect as a contractual

term.

Trade Usage

Exclusion Clauses – Construing

o 3 Main forms of exclusion clauses

Excludes the legal rights of one party to sue the other party – extent of

exclusion defined eg all negligence, or for loss caused by any means etc.

Restricts the legal rights of one party eg by providing that only specific type

of breach will give right to terminate.

Qualifies a party’s rights by providing eg time limits or specific procedure to

be followed.

o 3 Main Factors

Contra Proferentum

This expression means that a term will be construed against the

party by whom it was formulated.

an exclusion clause which party A incorporated into the contract

should be construed so that any ambiguity is resolved in favour of

the customer, Party B

24

However, in Darlington v Delco, the court noted that construction of

an exclusion clause will involve a contra proferentem approach only

‘where appropriate.’

John Dorahy’s Fitness Centre v Buchanan, a clause which excluded

liability ‘for personal injury’ and provided that a customer used the

premises ‘entirely at his own risk’ was held to be ambiguous as to

whether it covered liability in tort or contract or both. It was read to

cover only liability in tort.

Wallis Son & Wells v Pratt & Haynes - the sellers ‘give no warranty

express or implied as to growth, description or any other matters.’ -

deemed not to extend to conditions, but only to warranties.

4 Corners Rule - loss etc incurred while they were acting within the ‘4

corners’ of the contract - i.e. for conduct which the contract authorised.

Council of City of Sydney v West

o Exclusion clause - ‘The council does not accept any

responsibility for the loss or damage to any vehicle or for

loss of or damage to any article or thing in or upon any

vehicle or for any injury to any person however such loss,

damage or injury may arise or be caused.’

o ‘rogue’ obtained duplicate ticket and used it to take Mr

West’s Car

o Exclusion clause only excludes liability for loss etc caused by

conduct authorised by the contract.

TNT v May & Baker - driver deviated from agreed delivery route -

parked truck containing goods in his garage, which caught on fire -

exclusion clause did not apply.

Negligence

Gillespie Bros v Roy Bowles Transport - clear words are necessary to

allow a party to exclude liability for negligence

Canada SS Lines v The King - term likely to cover negligence if:

o Term expressly excludes liability for negligence.

o The language used is wide enough to extend to negligence.

‘howsoever caused’ and ‘whatever its cause’

‘all liability’ and ‘all loss’

o There are no other possible grounds for liability.

25

Week 10 – Implied Terms and Duty of Good Faith

Parties can expressly exclude terms being implied into the contract. Where the parties want to

avoid any terms being implied into their contract, they can do so by expressly stating that in

the contract itself. This will prevent the courts from implying any extra terms into the

contract – either in common law or under statute.

Implied Terms Terms can be implied by law, fact or custom

o LAW

Statute

Precedent

Two primary issues when new implied term adopted

Term must be applicable to definable class of contractual

relationship

o such as employment contracts, bailment contracts,

insurance contracts, contracts for the sale of goods or

contracts for work and materials, leases.

The term must be suitable – the courts use the criteria of

“Necessary”

o Liverpool City Council v Irwin – [such facilities as lifts and

stairways] are essentials of the tenancy without which life in

the dwellings, as a tenant, is not possible. – Term implied

that landlord responsible for maintaining them.

o Helicopter Sales v Rotor-Work - term implied by law into

contracts for work and materials was excluded from this

contract.

o FACT

Where a term is implied in fact, this is a term which is specific to that

contract i.e. not to all contracts of that kind. As the textbook notes, terms

implied in fact are tailored to the circumstances of the individual contract.

The criteria for implying terms in fact differ depending on the level of

formality of the express contract.

Formal Contracts – 5 criteria identified by Privy Council

It must be reasonable and equitable

o Not enough that a term is reasonable, must be equitable as

well

o If a term would impose a significant detriment on one party

and benefit the other, then it would not be deemed

equitable to imply the term - BP v Shire of Hastings

It must be necessary to give business efficacy to the contract, so

that no term will be implied if the contract is effective without it

o The Moorcock – court implied a term that the Jetty owners

were required to take reasonable care to ascertain the

conditions of the berth and ensure it was fit for that

purpose, or inform the other party if not.

26

o Codelfa is the leading Aus Case- court did not imply term in

this case but raised points as to implying terms into

contracts.

The courts will be slow to imply a term

The more detailed and comprehensive the express

contract the less grounds to imply terms.

The fact that an assumption was a matter of

common contemplation between the parties is not

enough to justify the implication of a term.

Where the contract is a ‘contract of adhesion’ it will

be more difficult to imply a term. A contract of

adhesion is one where the terms are not negotiated,

except for the price, but are provided in a standard

form contract.

The court can not add a clause just because it thinks

it would be reasonable or fair or prudent.

It must be so obvious that ‘it goes without saying’

o In Codelfa, Justice Mason found that the term proposed was

not ‘so obvious it goes without saying.’ Therefore the terms

should not be implied:

o This is not a case in which an obvious provision was

overlooked by the parties and omitted from the contract.

Rather, it was a case in which the parties made a common

assumption which masked the need to explore what

provisions should be made to cover the event which

occurred. – Codelfa (Mason J)

o Prima facie that which in any contract is left to be implied

and need not be expressed is something so obvious it goes

without saying; so that, if, while the parties were making

their bargain, an officious bystander were to suggest some

express provision for it in their agreement, they would

testily suppress him with a common ‘Oh, of course!’ –

Shirlaw v Southern Foundries (Mackinnon LJ)

It must be capable of clear expression

o In BP Refinery v Shire of Hastings one criterion the court

adopted was that an implied term must be capable of being

expressed in a clear or precise manner. This criterion is also

alluded to in Mason J’s judgement in Codelfa: “In ordinary

circumstances negotiation about the matter might have

yielded any one of a number of alternative provisions, each

being regarded as a reasonable solution.”

It must not contradict any express term

o Consistency as a rule was clearly established in BP Refinery.

Informal Contracts

Essential test for implying term in an informal contract – “In a case

where it is apparent that the parties have not attempted to spell out

the full terms of their contract, the court should imply a term by

reference to the imputed intention of the parties if, but only if, it

27

can be seen that the implication of the particular term is necessary

for the reasonable or effective operation of a contract of that nature

in the circumstances of the case.” – Hawkins v Clayton (Deane J)

In Byrne v Australian Airlines, McHugh and Gummow JJ indicated

that obviousness is also an important element in implied terms in

informal contracts.

o CUSTOM

The criteria for implying terms by custom were authoritatively stated in Con-

Stan Industries of Australia v Norwich Winterthur Insurance:

The existence of a custom or usage justifying the implication of a

term is a question of fact.

There must be evidence that the custom is so well known and

acquiesced in that everyone making a contract in that situation can

reasonably be presumed to have imported that term into their

contract

The term can not be inconsistent or contrary to the express terms of

the contract

A person may be bound by the custom even if he or she had no

knowledge of it.

In Nelson v Dahl, it was said that the custom must be notorious, uniform,

reasonable and certain. The requirements are applied strictly, and so there

are few examples where terms have been implied by custom.

Duty of Good Faith As is apparent on even a cursory reading of the materials on this topic, there is little consensus on

the nature or extent of the duty of good faith. A common thread is that the duty of good faith is less

concerned with procedural fairness in the formation of contract or substantive fairness of the terms

agreed between the parties. Good faith is focussed on the way in which parties perform the

contract and exercise powers conferred by the terms of the contract.

Two Major content aspects of Duty of Good Faith: Cooperation and Fairness

o Cooperation

Butt v M’Donald (1896) 7 QLJ 68, 70-71.

It is a general rule applicable to every contract that each party

agrees, by implication, to do all such things as are necessary on his

part to enable the other party to have the benefit of the contract

A duty to cooperate is well-established in Australian contract law. The duty

requires that parties must go beyond adherence to the strict letter of the

contract. They must take whatever steps are necessary in performing the

contract to advance the intended purpose of the contract. In his 1993

Cambridge Lecture Mason J described this as ‘loyalty to the promise itself’.

o Fairness

Wesoky v Village Cinemas International Pty Ltd [2001] FCA 32.

The duty of cooperation can be seen to operate in an employment

contract whereby the employer should not exclude an employee

from activity which might increase their remunerations

Exercise of contractual power should be undertaken honestly and

reasonably

28

Duty of Good Faith

o common obligations

not to take advantage of a party’s own wrong

not to hinder or prevent the fulfilment of the other party’s purpose

to do all such things as are necessary to allow the other party to have the

benefit of the contract

not to prevent the other party from performing the contract

to act honestly

to have regard to the legitimate interests of the other party

o Renard Construction v Minister for Public Works – leading case on this issue

Minister had right to terminate conditional upon serving notice to Renard

‘show cause’ notice

‘to the satisfaction of the principal’

Renard responded correctly to the Notice given and responded to

Termination of agreement

Decision made based on misinformation

There was an implied duty to act in good faith

That duty was breached because the power to terminate was not exercised

in a reasonable way

o Burger King v Hungry Jack’s

Contract required HJ to open 4 new restaurants a year Subject to

operational, financial and legal approval from BK

BK decided to operate directly in Aust and Withheld approvals

Placed a Freeze on 3rd party franchisees

HJ unable to meet the 4 new restaurant requirement

BK terminated the agreement

Acting in pursuit of extraneous purposes can be a breach of duty of good

faith

BK had ulterior motive

Breached the duty when withheld approval

Breached the duty when froze new franchises

Breached the duty when terminating.

Limitations

o Overlook v Foxtel

A party is precluded from cynical resort to the black letter. But no party is

fixed with the duty to subordinate self-interest entirely which is the lot of

the fiduciary…The duty is not a duty to prefer the interests of the other

contracting party. It is, rather, a duty to recognise and to have due regard to

the legitimate interests of both the parties in the enjoyment of the fruits of

the contract as delineated by its terms.

o Not required to subordinate own interests to those of the other party

o Must preserve the benefit of the contract, not the benefit of the other party

o Only a duty to act reasonably

Secured Income v St Martins

29

Frustration

There is an enforceable contract

Is there a disruptive event?

Is the contract frustrated?

Apply test from Codelfa - 1,2,4,3 (order they appear in the case)

o 1.) Have a contract

o 2.) Event happened after formation

o 3.) Performance of either party is radically different after the occurrence of the

event

(HOW) – Impossibility

Destruction of subject matter (Taylor v Caldwell)

Unavailability (Jackson v the Union Marine)

Availability of source (Hawell v Copeland)

Death or incapacity (duration and extent of the illness)(Simons

limited v Hay)

Contemplated method of performance not possible –

Codelfa – contract was frustrated as the mode of performance

was ‘radically different’

Tsakrioglou & Co LTd v Noblee THori GmbH –contract was not

frustrated as a similar mode of perforamce could be contemplated,

though at a considerable expense.

Frustration of Purpose – Krell v Henry – entire purpose must be frustrated

Illegality – scanlans New Neon LTd v Tooheys Ltd, Fibrosa

Delay – Does the delay render performance radically different from what

was originally contemplated

Jackson v Union, Embiricos v Sydney

War – Kodros

Contracts involving land

o 4.) Are there any limitations

Foresight

Serious possibility (Simmons v Hay, Codelfa)

o if this is true, then no frustration, because it should have

been considered

Is there provision for the event in the contract

o Claude Neon v Hardie – if there is then no frustration

Was the event caused by the fault of one of the parties

o Maritime National Fish Ltd v Ocean Trawlers Ltd – if yes

then no frustration

o What is the effect?

Frustration

NSW- Frustrated Contracts Act

30

Common Law – loss falls where it lies

No Frustration – can another action be persued

Breach

Negligence

Frustrated Contracts Act 1978 NSW

Part 3 – Adjustment on frustration of contract

Division 1 – Adjustment where performance (excluding payment of money) received

9 Definitions

In this Division "performance" in relation to a contract does not include:

(a) performance, wholly or in part, of a promise in the contract to pay money, or

(b) fulfilment, wholly or in part, of a condition of or in the contract that money be

paid.

10 Adjustment where whole performance received

Where a contract is frustrated and the whole of the performance to be given by a party under

the contract has been received before the time of frustration, the performing party shall be

paid by the other party to the contract an amount equal to the value of the agreed return for

the performance.

11 Adjustment where part performance only received

(1) In this section:"attributable cost", in relation to performance received under a

frustrated contract, means:

(a) where there is no incidental gain to the performing party, and except as

provided by paragraph (c)--an amount equal to the reasonable cost of the

performance,

(b) where there is an incidental gain to the performing party, and except as

provided by paragraph (c)--such part of the reasonable cost of the performance

as is equal to an amount calculated by deducting from the reasonable cost of

the performance the value of that incidental gain, or

(c) where the amount referred to in paragraph (a) or (b) exceeds the

proportionate allowance for the performance--such part of the reasonable cost

of the performance as is equal in amount to that proportionate allowance.

"attributable value", in relation to performance received under a frustrated contract,

means an amount equal to the value of the proportionate allowance for that

performance reduced by the lost value of that performance."incidental gain", in

relation to a party to a contract who suffers a detriment referred to in the definition of

"reasonable cost", means any property or improvement to property acquired or

derived by that party as a consequence of doing or suffering the acts or things that

caused that party to suffer the detriment, except to the extent that the property or

improvement so acquired or derived is comprised in any performance given by that

party under the contract or is expended or disposed of in giving any such

performance."lost value", in relation to performance received under a frustrated

contract, is a reference to the amount (if any) by which the value of that performance

31

was reduced by reason of the frustration of the contract, that value being assessed as

at the time immediately before the frustration of the contract and on the basis that the

contract would not be frustrated."proportionate allowance", in relation to

performance received under a frustrated contract, means such part of the value of the

agreed return for complete performance of the contract by the performing party as is

appropriate to be charged to the other party for the performance received, having

regard to the extent to which the performance received is less than the whole of the

performance contracted to be given by the performing party."reasonable cost", in

relation to performance received under a frustrated contract, is an amount that would

be fair compensation to the performing party for any detriment suffered by that party

in reasonably paying money, doing work or doing or suffering any other act or thing

to the extent to which the detriment was suffered for the purpose of giving the

performance so received.

(2) Where a contract is frustrated and part, but not the whole, of the performance to be

given by a party under the contract has been received before the time of frustration,

the performing party shall be paid by the other party to the contract:

(a) an amount equal to the attributable value of the performance, except where

the attributable cost of the performance exceeds its attributable value, or

(b) where the attributable cost of the performance exceeds its attributable

value--an amount equal to the sum of:

(i) the attributable value of the performance, and

(ii) one-half of the amount by which the attributable cost of the

performance exceeds its attributable value.

Division 2 – Other adjustments

12 Return of money paid

Where a contract is frustrated and a party to the contract has paid money to another person

(whether or not a party to the contract) as, or as part of, an agreed return for performance of

the contract by another party (whether or not that other party is the person to whom the

payment was made and whether or not there has been any such performance) that other party

shall pay the same amount of money to the party who made the payment.

13 Adjustment of certain losses and gains

(1) Where a contract is frustrated and, by reasonably paying money, doing work or

doing or suffering any other act or thing for the purpose of giving performance under

the contract (not being performance which has been received) the performing party

has suffered a detriment, the performing party shall be paid by the other party to the

contract an amount equal to one-half of the amount that would be fair compensation

for the detriment suffered.

(2) Where a performing party referred to in subsection (1) has, as a consequence of

doing or suffering the acts or things that caused that party to suffer the detriment so

referred to, acquired or derived any property or improvement to property, the

performing party shall pay to the other party so referred to one-half of the value of the

property or improvement so acquired or derived.

Division 3 – Recovery of money payable

14 Recovery of money as a debt

A person entitled under Division 1 or 2 to be paid an amount of money by another person

may recover the amount from that other person as a debt in a court of competent jurisdiction.

Division 4 – Adjustment by the court

15 Adjustment by court

32

(1) Where the court is satisfied that the terms of a frustrated contract or the events

which have occurred are such that, in respect of the contract:

(a) Divisions 1 and 2 are manifestly inadequate or inappropriate,

(b) application of Divisions 1 and 2 would cause manifest injustice, or

(c) application of Divisions 1 and 2 would be excessively difficult or

expensive,

the court may, by order, exclude the contract from the operation of Divisions 1 and 2

and, subject to subsection (8), may, by order, substitute such adjustments in money or

otherwise as it considers proper.

(2) Orders which the court may make under subsection (1) include:

(a) orders for the payment of interest, and

(b) orders as to the time when money shall be paid.

(3) In addition to its jurisdiction under subsections (1) and (2), the Supreme Court or

the District Court may, for the purposes of this section, make orders for:

(a) the making of any disposition of property,

(b) the sale or other realisation of property,

(c) the disposal of the proceeds of sale or other realisation of property,

(d) the creation of a charge on property in favour of any person,

(e) the enforcement of a charge so created,

(f) the appointment and regulation of the proceedings of a receiver of property,

and

(g) the vesting of property in any person.

(4) Sections 78 and 79 of the Trustee Act 1925 apply to a vesting order, and to the

power to make a vesting order, under subsection (3).

(5) Section 78 (2) of the Trustee Act 1925 applies to a vesting order under subsection

(3) as if subsection (3) were included in the provisions of Part 3 of that Act.

(6) In relation to a vesting order of the District Court, sections 78 and 79 of the

Trustee Act 1925 shall be read as if "Court" in those sections meant the District Court.

(7) Subsections (2) to (6) do not limit the generality of subsection (1).

(8) This section does not authorise the Local Court to give a judgment otherwise than

for the payment of money.

33

Week 9 – Construction of Terms and Extrinsic Evidence

Enforceable Contract

Is it in writing?

Any oral pre-

contractual

statements?

Wholly Written – PER

APPLY

Is it incorporated? –

consider intention tests

from week 8

Partially written/oral

contract

PER DOESN’T APPLY

Can we apply an Exclusion?

Ambiguity (Codelfa)

o Latent

o Patent

Parties/Subject

matter

Factual Matrix

Trade Usage

Can Use Extrinsic

Evidence

Is there an exclusion clause?

Is it incorporated? Week 8 – notice-

signature – course of dealing –

reference

Does it cover the loss?

Contra Preferentum –

capable of more than one

meaning – construed in

favour of the plantiff – D v D

4 Corners – Was the act

committed authorised

under the contract? (Sydney

v West, TNT)

Negligence

o Is it express

o Broadly expressed

(all liability/all loss

BAD!) (However so

cause – GOOD! –

more likely to cover

more)

o Canada SS Lines

Liable for negligence or breach No Liability