Week 3 – Introduction to Contract Law

Formal Contracts – deeds, wills, trusts (mortgage) effectiveness from form ‘signed, sealed & delivered’

o Used in situations where the parties would otherwise have no contractual obligation due to no consideration

Simple Contracts – primary form of contracts; can be oral or written (no required formality); Bi or Unilateral

A contract is an agreement concerning promises made between 2 or more parties (promisor & promise) with the intention

of creating certain legal rights & obligations upon the parties to that agreement which shall be enforceable in a court of law.

Intention to Enter into a Legally Binding Contract – there must be evidence (express or implied by words or conduct)

Agreement – Offer & Acceptance

Consideration/Price – sticks the offer & acceptance together – x for y

Legal Capacity – >18

Genuine Consent – of your own free will (what was actually agreed)

Legality of Purpose

Satisfy Any Formal/Procedural Requirements

The Offer: Rules

An offer is an undertaking by the offeror made with the intention that it will bind the offeror once accepted. There must be;

1. A Meeting of the Minds (on the same page showing intention or willingness to be bound) Clarke V Earl of Dunraven

2. A Firm Promise – all parties are in agreement & that the offer exists

3. Communication of the Offer – in writing, orally or by conduct, only be accepted by those who it was intended for

a. To 1 person; a group of people or the world at large Carlill v Carbolic Smoke Ball Co

Statements That Are Not Offers

❖ Counter Offer –rejection of the original offer Hyde v Wrench

❖ Invitation to Treat – is an offer to consider an offer (not an offer). Auctions, Ads, Goods on Display. Pharmaceutical

Society of Great Britain v Boots Cash Chemists (Southern) Ltd

❖ Tender – not usually an offer unless the tender states exact needs – usually is an invitation to treat Spencer v Harding

❖ Requests For Information –not firm promises/offers, doesn’t destroy offer; only attempt to get info Harvey v Facey

Acceptance: Rules

1. Acceptance must be Strictly in Response to the Offer; R v Clarke Doing sth w/o knowing of an offer is not acceptance

2. Acceptance must be Communicated by Words (expressed) or by Conduct/Performance (implied)

a. Silence is not acceptance Felthouse v Bindley 5-310

b. Acceptance can be inferred by conduct Empirnall Holdings Pty Ltd v Machone Paul Partners Pty Ltd; Brogden v

Metropolitan Railway Company

3. Acceptance must be Unqualified, Absolute & Unconditional (otherwise a C/O) – show meeting of the minds

4. Conditional Assent is NOT Acceptance unless Offeror agrees to Conditions Masters v Cameron

5. Acceptance must be Clear & Certain, Scammell & Nephew Ltd v Ouston

The Postal Rule; if using the post as a medium of exchange of promises, the rules to the time of acceptance are as follows

▪ An offer by letter is not effective until received by the offeree; Acceptance is effective as soon as it is posted

▪ Revocation requires a cancellation notice to be received by the offeree before their letter of acceptance is posted

Consideration – “Something for Something”

Consideration is a concept of value; it is what the promisor gives in exchange for the return promise or the return action

from the promisee – it turns an agreement into a contract. No consideration usually makes an agreement unenforceable.

1. Consideration is Essential to the Validity of every Simple Contract – Either something given or done or not done

a. Coulls v Bagot’s Executor & Trustee Co Ltd B & C jointly promise to A. Hence C could enforce.

b. Dunlop Pneumatic Tyre Co Ltd v Selfridge & Co Ltd A didn’t give consideration for C’s promise to not discount

2. Consideration must not be Past – where a promise is given after an act is performed (usually unenforceable)

a. UNLESS – act was done at promisor’s request, parties understood the act would be remunerated & promise would

have been enforceable if it had been promised in advance of the actLampleigh v Braithwait,

b. Re Casey’s Patents, Stewart v Casey it was implied that C would be later paid by A & B

3. Consideration must have Value but need not to be Adequate Chappell & Co v Nestle Co

4. Consideration must be Sufficient – it must have legal value, adequacy is no concern

5. Consideration must be Possible of Performance

6. Consideration must be Definite

7. Consideration must be Legal

8. Consideration must be Referable to the other Party’s Promise

9. Practical Benefit can be Good Consideration – Musumeci v Winadell lower rate & non-vacant shop are benefits

a. Williams v Roffey Bros & Nicholls Mutual benefits exchanged under new contract was sufficient consideration

Insufficient Consideration

1. Moral Obligation &/or Love/Affection will NOT convert a Promise into Good Consideration Eastwood v Kenyon

2. Part Payment is Insufficient Consideration – except if a creditor agrees to reduce debt Pinnel’s Case; & Foakes v Beer

Consideration & Promissory Estoppel (Stoping From Going Back on a Promise)

Promissory estoppel allows a promise to be enforced even though the promisee has not provided good consideration for

that promise. It is operational where it would be inequitable/unconscionable for the promisor to not be held to their

promise/word. ‘The law will not permit unconscientious departure by 1 party from the subject matter or an assumption

which has been adopted by the other party as the basis of some r/ship, course of conduct, act or omission which would

operate to the other party’s detriment if the assumption would be not adhered to.’

▪ Central London Property Trust Ltd v High Trees House Ltd relied on the promise to an extent that going back on it would = hardship

▪ Legione v Hateley – Doctrine failed (facts) “I think it is ok but I will go get instructions” (not unequivocal, no authority

▪ Waltons Stores Ltd v Maher Brennan J’s 6 point test for when the promisor can’t go back on their word

o Promisee (Maher = P) assumes existence of particular legal r/ship

o Promisor (Waltons = D) responsible for this assumption

o Promisee acted/did not act in reliance on that assumption

o Promisor knew what promisee would do or intended for the promisee to act in this way

o Promisee will suffer loss/harm if the assumption/expectation is not fulfilled

o Promisor did not take any steps to warn promisee s/he may not fulfil expectation

Week 4 – Terms of a Contract

Intention to Create Legal Relations (To Be Legally Bound) – Determined Objectively

Subject to Contract – Expressly No Intention – ‘Until Conditions are Met’ e.g. final prep of doc Masters v Cameron

Non-Commercial Social, Family, Domestic, Voluntary Presumed No Intention (Rebuttable By Evidence)

o Domestic Agreements – agreements between family members Cohen v Cohen; Balfour v Balfour

▪ If agreement is intended to be legally binding, the intention should be made clear – note/memorandum

o Social Agreements – made between friends & acquaintances

o Voluntary Agreements – where the parties may volunteer their services Teen Ranch v Brown

▪ Ermogenous v Greek Orthodox appointed voluntarily, received payments & LSL – allowed for a rebuttal

o Other Domestic Arrangements – the courts may look at the words & conduct of the parties & the seriousness of the

consequences Wakeling v Ripley 5-090 . Found legal intention due to ECONOMIC seriousness

Commercial Presumed Intention to be Legally Bound

The Contract – The Contents (What has been agreed to, what are the rights/obligations)

Representation – non contractual statements, not intended to be legally binding, if false it is a misrepresentation

o It is made pre-contract during negotiations to encourage you to enter the deal; cannot be sued upon but rescission

▪ Oscar Chess Ltd v Williams innocent misrepresentation

Term – contractual statement, intended to be legally binding, breach of term gives rise to action for breach of contract

▪ Bentley (Dick) Productions Ltd v Harold Smith (Motors) Ltd breach of warranty (1,2, 7 fulfilled)

Importance of truth of the representation; reliance of innocent part on representation; time period between representation & final

agreement; was the innocent party asked to check the statement; intention behind making representation; omission of representation

from written contract; consider any special knowledge/skills of person who made representation.

Parol (Oral) Evidence Rule; if a contract is in writing & appears to contain the whole contract, it is presumed that the writing

contains all of the terms of the contract. Courts are reluctant to admit evidence of words/representations made earlier.

Terms Can Be:

➢ Express (simple) – oral and/or written

➢ Implied (behaviour/intention) – give the contract business efficacy, from custom, business usage or previous dealings,

by intention of the parties or the courts (to define uncertain/meaningless/ambiguous terms)

o The Moorcock & BP Refineryterms implied if: reasonable & equitable; Be necessary to give business efficacy; Be so

obvious it goes without saying; Be capable of clear expression; Not contradict an express term of the contract

Types of Terms

Condition – an essential term going to the root/heart of the contract (would not have entered contract without it)

o Allows injured party to rescind (end – get accrued rights) the contract &/or sue for damage (+ affirm contract)

o Poussard v Spiers –– root of contract

Warranty – a non-essential term of lesser importance (inessential to the main purpose of the contract)

o Allows the injured party only to recover damages (requires continued performance of the contract)

o Bettini v Gye Requirement did not go to the root of the contract – breach of warranty

Uncertain Terms – Ct may imply appropriate terms if prior dealings; if not contract may be void for uncertainty (V4U)

Meaningless Terms – will be severed if possible, leaving the rest of the contract valid; if it can’t be it will be V4U

Ambiguous Terms – if term has > 1 meaning, contract won’t necessarily be void as long as term can be given a meaning

Terms & Collateral Contracts Collateral contracts (separate) arise from a promise in the main contract; it is not a term of

the main contract; it has an independent existence to the main contract.

Changing the Terms of a Contract

❖ Completely discharging existing contract & substituting it with a new contract (finish & start anew)

❖ Adding/Changing terms in existing contract – requires full agreement of all parties

Week 5 – Exclusion Clauses, Elements (c), Privity & Vitiating Elements

Exclusion/Exemption Clauses

Exclusion/Exemption/Exception/No Liability Clauses purpose is to exclude or limit the liability of the person inserting them.

Their effectiveness depends on the construction of the contract as a whole, taking into account the bargaining position of

the parties. There are 2 tests to work out whether an exclusion clause will work:

1. Is the exclusion clause a term of the contract?

2. Does the exclusion clause cover the loss or damage that has happened?

You Are Bound by What You Sign; A person who has signed a document, knowing that it contains contractual terms is

bound to the document, even if you don’t know (or read) what you have signed. L’Estrange v Graucob Ltd.

Unsigned Documents – Vouchers, Receipts & Tickets are Non Contractual