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Contracts - Rules

Contracts - Rules

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Published by Baxterbailey

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Published by: Baxterbailey on Aug 21, 2012
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Contracts: Basic RulesFormation
Is there a K?
If your answer is yes, consider whether there is a reason that the K must bein writing. (e.g. Transfer of an interest in land (lease agreement), Ks for thesale of land, etc.) If the K must be in writing but it is not, it is not a K.3.
If yes, and it is in writing, consider terms.4.
If you find that there is not a K, consider estoppel (
Brennan‟s six
step test. Essential.)
Is the K written?
If yes, has the K been signed?
If so, signing parties are bound by the terms, whether they have read them ornot (
 L’Estrange v Graucob
), except where there has been fraud ormisrepresentation.
If not signed, go to steps for interpreting Ks that are not written.
Is there a collateral K? (Can be oral.) If there is a collateral K, you need tolook at the terms of the K.
If the K is wholly written, you may only take the terms of the K (as written)into account (parol evidence rule).
Ambiguity? Look at extrinsic material (
If the K is not written, consider:
What were the representations made?
Terms can be incorporated into a K by reference (you are subject to theterms and conditions on our website) or notice (sign at dry cleaner saying
we‟re not liable…)
Incorporation by course of dealing
Once you have determined express terms, decide whether there are impliedterms. Terms can be implied by law (
 Liverpool City Council v Irwin
), fact(
 BP; Codelfa
if written K
. Byrne
if not written), or custom (
Con Stan Industries
You will need to know the terms that might be implied bythe Australian Consumer Law.Performance and Breach
Has performance occurred?2.
If yes, parties are discharged from further performance. There may becircumstances where substantial performance is sufficient (
Tramways Advertising v Luna Park 
Has performance been frustrated? (
relieved of obligations)4.
Has there been a breach of a term? Warranty? Damages/No termination.Condition? Damages (loss of bargain) and right to terminate. Intermediate?Serious breach gives rise to right to terminate (
 Hongkong Fir 
; accepted asgood law in
Koompahtoo Local Aboriginal Land Council v Sanpine Pty Ltd 
)and damages.5.
Has the K been repudiated? Not ready and willing to perform? Are thereother factors that excuse liability?6.
Exclusion clauses? (Negligence must be expressly referred to.)7.
Four Corners Rule.8.
Privity? Is the party who is enforcing/relying able to enforce the K?
Measure of damages is K is the amount that a party would have gotten if the K had been fulfilled.
In estoppel, the remedy is the minimum amount necessary to remedy theinjustice (not to be confused with putting the person in the position theywere in prior to the K).
 Note: Good faith is not implied by law, by can be implied by K on an ad hocbasis. Good faith does not require one party to subvert their interests to theother.
The fact that the word “offer” is used
does not in and of itself conclusively suggestan offer:
Seppelt & Sons Ltd v Commission for Main Roads
An offer, an extension of a promise with the intention to be legally bound, serves
as an indication of a party‟s willingness to enter a bargain on particular 
Gibson v Manchester City Council
 A counter-offer extinguishes an offer:
 Hyde v Wrench
 Once an offer is rejected by an offeree that offer is no longer open to be accepted.
Rather, it is “killed”:
Stevenson, Jaques & Co v McLean
A counteroffer is a rejection of original offer:
 Butler Machine Tool Co v Ex-Cello-o
A counter-
offer must be distinguished from a “mere inquiry”:
Stevenson, Jaques &Co v McLean
 When it comes to standard form Ks, when the last form is sent and receivedwithout objection being raised, there is a K:
 Butler Machine Tool v Ex-Cell-o
Unquestionably, as a general proposition, where an offer is made, it is necessary inorder to make a binding K, not only that it should be accepted, but that the
acceptance should be notified…I apprehend that [unilateral offers to the world] are
an exception to the rule, or, if not an exception, they are open to the observationthat the notification of acceptance need not precede performance. One who makesa unilateral offer for the sale of goods by means of an advertisement impliedlywaives notification (through language and the nature of the offer) of acceptance if his purpose is to sell as much product as possible:
 Notification of acceptance is not required; an offeror can dispense with thatrequirement:
Acceptance of the offer, another vital component of a K, must be „unequivocal‟and must „precisely correspond‟ with the offer:
Gibson v Manchester City Council

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