Contract Law Notes Contracts ‘A’

Offer
Bilateral contracts Unilateral contracts Offers to the public at large Page 9 Page 9

What is an offer? - Mere puff - Supply of information - Invitation to treat Categorizing transactions - Advertisements a) Advertisements in a catalogue or a curricular b) Advertisements in newspapers or magazines c) Advertisements appearing on the internet d) Display of goods - Auctions a) Advertisement of auction b) Auctions with reserves c) Auctions without a reserve - Tendering - Standing offers  Options Communication of an offer Termination of an offer - An offer may be terminated by a) Revocation by the offeror b) Rejected by the offeree c) Lapse of time d) Failure of a condition subject to which the offer was made e) Death

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Acceptance
Requirements of acceptance Acceptance must correspond to offer - Offeree must have knowledge of and act in reliance to an offer

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A counter offer is not acceptance Acceptance must be unqualified Mere enquiry does not constitute acceptance

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Notification to the offerer of the fact of acceptance - Method of acceptance a) Method of acceptance stipulated by offer b) Acceptance by silence c) Acceptance by conduct - Instantaneous communication: Acceptance must be communicated a) General rule b) Meaning of instantaneous communication - Postal acceptance rule a) Statement of the rule b) Policy behind the rule c) To what communication does the rule extend d) Where is the rule displaced e) Revocation of acceptance prior to receipt Acceptance in unilateral contracts - Acceptance commonly by conduct - Withdrawal of an offer after acceptance has commenced Who may accept an offer? Contract formation: time and place - Instantaneous communication - Post

Bre akd own of mec hani sm to com plet e

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Certainty and Completeness
Statement of the rule - Facets to the principal Ambiguity and uncertainties - Individual terms - Agreements to negotiate Saving ambiguous, uncertain or meaningless terms - Link to external standard - Link to reasonableness standard - Severance - Waiver or removal of certainty Incomplete agreement - Agreement contains mechanism to complete a) Reference to a third party b) Discretion retained by contracting party

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Saving incomplete agreements - Incompletion of terms - Failure to specify a price a) Contract silent on price b) Contract provides for parties to agree in the future c) Contract make provisions for mechanism to complete d) Contract provides for payment of a reasonable price - Subject to agreements  Subject to finance agreements a) Satisfactory finance b) Steps to be taken to obtain finance  Subject to contract

Intention to create legal relations
Statement of rule Domestic and social relationships - Presumption - Rebutting the presumption a) Husband and wife b) Separated husband and wife c) Other family relationships d) Social relationships Commercial agreement - Presumption - Rebutting the presumption Government activities - Commercial agreements - Policy initiatives Voluntary associations

Circumstan ces indicating absence of intent - Hon our clau se - Pro moti onal puff and free gifts - Ex grati a pay men ts and with out prej udic e offe rs - Lett er of com fort - Lett er of inte nt and und erst andi ng

Consider ation

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Nature of consideration .Con side ratio n mus t mov e fro m the pro mis ee Page 32 4 .Consideration in bilateral contracts Page 23 Page 32 Con side ratio n in unil ater al cont ract s Exe cute d and exec utor y cons ider atio n - Page 27 Page 27 Page 27 Page 29 Page 30 Page 30 Page 30 Rules governing considerati on .

Bargain for conduct already performed Page 35 Page 35 Equitable Estoppel Elements of estoppel .Encouraged or induced .Performance of existing duties a) Performance of existing contractual duties b) Performance of a public duty c) Where promise is made to a third party .Reliance .Assumption of expectation .Failure to avoid detriment Remedies Page 38 Page 39 Page 41 5 .Payment of a debt a) Rule in Pinnel’s case b) Circumstances in which the rule will not operate • Parties enter into a deed • Accommodation to benefit the creditor • Amount owing is disputed • Payment by a third party • Composition with creditors .- - a) Benefit need not move to the promisor b) Joint promises c) Overlap with Doctrine of privity Consideration must be bargained for Consideration must be sufficient a) General principal b) Consideration need not be adequate c) Consideration can be nominal Consideration must not be past a) General principal b) Past consideration distinguished from executed consideration Page 33 Consideration and formal agreements .Moral consideration .Deeds Consideration: specific examples .Forbearance to sue .Detriment .Knowledge or intention .

Commonwealth Insurance Contracts Act 1984 (Cth) s 48  Entitlement of a named person to claim .Transaction which are not guarantees a) Contracts of indemnity b) Promise of guarantee made to the debtor c) Person agrees to take over the debt of another d) The agreement imposes no personal liability on the person e) Letters of comfort .Nature of guarantees .Requirements of writing: signed by party to be charged or agent Contracts relating to land Page 45 Page 47 Page 47 6 .Privity General rule Statutory abrogation of rights .Agency  Definition  Exemption clauses and third parties  Trusts  Unjust enrichment - - Nat ure of cont ract nee ding writ ing Req uire men ts of writ ing: cont ent Page 42 Page 42 Page 42 Formalities Guarantees .Requirements of writing: content a) Information particular to the guarantee b) Acknowledgement of the agreement .Maritime contracts of carriage a) Servants or agents of sea carriers b) Consignees and endorsees So called exemption at common law .Queensland a) Promisor b) Beneficiary c) Promise d) Acceptance e) Defences f) Variation and rescission of promise g) Imposition of burdens h) Common law still applicable .

Estoppel .Recovery of money paid under unenforceable contract a) Recovery of deposit b) Recovery of amount more than deposit .Establish ing contr actua l terms Incorporati on by signature a) Gen eral rule b) Wh en the rule is disp lace d Incorporati on by notice: unsigned document a) Rea sona ble step s take n by the defe nda nt Page 50 a) Information particular to the guarantee b) Acknowledgement of the agreement Requirements of writing: signed by party to be charged or agent - Joinder of document .Reference to a document a) Documents that are physically connected b) Documents that are executed at the same time .Contract valid to pass title .Doctrine of part performance a) Acts are unequivocally referable to some such contract b) Acts done in reliance on the agreement and with knowledge of the other party c) Acts done by the party seeking to enforce the contract d) Oral contract must be otherwise enforceable .Other restitutionary claim may still be available Effect of statutory non-compliance: equity .Constructive trust 7 .Reference to a transaction Effect of statutory non-compliance: common law .

Rep rese ntati on or term a) W ord s or co nd uct of par tie s Page 52 Page 53 Page 55 Page 56 Page 56 Page 57 8 .b) Reasonable steps must be taken on or before contract formation Incorporation by notice: signs c) Reasonable steps taken by the defendant d) Reasonable steps must be taken on or before contract formation Incorporation of notice: website Incorporation by reference Page 58 Page 59 Page 59 Incorporati ng oral terms .Mer e puff .

Exceptions of the rule a) Evidence of a collateral contract b) Evidence that the written contract is not yet in force c) Evidence that the written contract was later varied or changed d) Evidence to imply a term e) Evidence necessary for rectification Implied terms .- b) Knowledge and expertise of statement maker c) Statement maker has control in relation to information d) Oral statement not reduced to writing e) Interval of time Collateral contracts a) Nature of a collateral contract b) Bipartite and tripartite collateral contracts c) Consistency with the main contract Page 61 Parole evidence rule .General approach .When the rule applies .Terms implied to give effect to the presumed intention of the parties a) Term implied on the basis of business efficiency b) Term implied from previous consistent course of dealings c) Term implied from custom or usage d) Term implied to complete an agreement . fair dealings and reasonableness h) Term Implied by statute Page 62 Construction of terms Interpreting the meaning of terms .Admissible evidence a) The parole evidence rule b) Factual matrix Page 59 Page 66 Page 66 9 .Terms implied irrespective of parties intentions e) Term implied as a legal incident of a particular class of contract f) General duty of co-operation g) Implication of duties of good faith.Statement of the rule .

Promissory terms a) Conditions  The statutory position b) Warranties  The statutory position c) Intermediate or innominate terms Contingencies .Specific rules of construction a) The contra proferentem rule b) Attempts to exempt negligence  The rules regarding attempts to exempt negligence c) The four corners rule Page 69 Page 72 Page 73 Contract Law Exam Notes Offer: An offer is an expression to another of a willingness to be bound by the stated terms Australian Woollen Mills Pty Ltd v The Commonwealth 10 .Conditions subsequent Exemption clauses .Conditions precedent .- Exceptions to the parole evidence rule  Ambiguity  Identification of subject matter  Identification of parties and their relationship  Identification of the real consideration  Custom or usage  Rectification Inadmissible evidence a) Subjective intention b) Prior negotiation c) Subsequent conduct c) Legal effect of words: types and terms .

is needed. A clearer indication of a preparedness to enter into a contract.the claims are made only for advertising purposes and mean nothing. the promisee. United Dominions Trust Ltd v Eagle Aircraft Services Ltd The position in such cases is simply that the consideration on the part of the offeree on the part of the offeree is completely executed by the doing of the very thing that constitutes acceptance of the offer. Harvey v Facey 11 . United Dominions Trust Ltd v Eagle Aircraft Services Ltd Unilateral Contracts Under unilateral contracts the promisor undertakes to do or to refrain from doing something if another party. A request for information must be discerned from a contractual offer. than merely providing terms or information upon which a party maybe prepared to enter into such a contract. Carlill v Carbollic Smoke Ball Company Supply of Information The supply of information is not an offer. and in the event of his/her failure to preform his/her undertaking. does or refrains from doing something.Bilateral Contracts Under Bilateral Contracts each party undertakes to the other party to do or to refrain from doing something. but the promisee does not at the time of the offer undertake to do or to refrain from doing that thing. Carlill v Carbollic Smoke Ball Company What is not an Offer? Mere Puff Sometimes statements can be regarded only as ‘mere puffery’. the law provides the other party with a remedy. Australian Woollen Mills Pty Ltd v The Commonwealth Offers to the Public at Large An offer can be made to the public at large.

12 . c) Advertisements appearing on the Internet. It is a technique used by a party who desire another party to make an offer and cannot be construed or the terms be accepted as if it were a valid legal offer in itself. are regarded as invitations to treat. Circulars. they would be in breach of contract for anyone who accepted such an offer as they could not provide stock Grainger v Gough b) Advertisements in Newspapers and Magazines. d) Display of Goods. If it were regarded as an offer and the manufacturer ran out of stock. Partridge v Crittenden Categorizing Transactions Advertisements Most advertisements are considered invitations to treat but some may be regarded as offers depending on language used in the advertisement and other relevant factors. which provide information about items for sale and their prices. The application of the same principle as newspapers and magazines is used. Carlill v Carbollic Smoke Ball Company The display of goods in a store is an invitation to treat. Boots Cash Chemists (Southern) Ltd An advertisement that gives information about goods for sale and their price will generally be an invitation to treat rather than an offer. a) Advertisements in a catalogue or in a curricular. These are also considered invitations to treat unless the advertisement is couched in terms which indicate the retailers willingness to be bound if the specified terms are accepted (eg.Invitation to Treat An invitation to treat is an indicator of a parties willingness to negotiate entry into a contract. there is a promise (Carlill) rather than a mere invitation (Partridge v Crittenden). Pharmaceutical Society of Great Britain v.

The auctioneer may withdraw items from the auction or cancel the auction all together without incurring any liability from potential bidders. Each tender will be considered an offer. which the auctioneer may reject or accept. Harding Standing Offers 13 . McWhirter Tendering An advertisement for tenders will generally be the same as an advertisement for an auction. which is akin to an invitation to treat. Because the agreement is not formed until the bid is knocked down. even if the price is attached. each bid represents an offer that could be accepted or rejected by the auctioneer. Harris v Nickerson b) Auctions with Reserve Each bid represents an offer. and an agreement is formed.Items appearing in retail outlets. Payne v Cave c) Auction without a Reserve Even in an auction without a reserve. which can be accepted or rejected. Pharmaceutical Society of Great Britain v Boots Cash Chemists. Acceptance of an offer occurs. Therefore no liability will be incurred if the person does not accept any of the tenders or even consider them in a bona fide way. Auctions a) Advertisement of Auctions The advertisement of an auction is considered an invitation to treat on the part of the auctioneer. are regarded as an invitation to treat. when the auctioneer knocks down the property to the successful bidder. the bidder can withdraw a bid (offer) before this time. Spencer v. AGC Ltd v. Harris v Nickerson The auctioneer may withdraw various lots from the auction or cancel the auction altogether without incurring any liability from potential bidders.

unless the parties agree to the contrary. Further.A standing offer is an indication by one party of his/her willingness to provide goods over a specified period of time. (eg. before acceptance of the offer is made in the form of an order. the offeree may choose not to accept the standing offer) Colonial Ammunition Co v Reid Options The standing offer may be revoked at anytime before acceptance by the offeree. If the offeree performs a particular act that corresponds to the terms of the offer without knowledge of the offer. Routledge v Grant Communication of an Offer For an offer to be valid it must be communicated to the offeree by the offeror. the offer could be accepted by any fulfilling the requirements of the offer. there is no agreement. However. and no contract comes into existence. if the offeree provides consideration (eg paying money) to the offeror to keep the offer open for some period. Carlill v Carbolic Smoke Company Termination of an Offer 14 . or someone authorised by the offeror. Great Northern Railway Co v. anytime. A standing offer is accepted every time an order is placed. Tinn v Hoffman & Co If it is an offer to the world at large. Witham An offeror may withdraw the offer. there is no obligation of the offeree to order goods only through the offeror. Cole v Cottingham An offer becomes effective once it is communicated to the offeree Taylor vLaird Acceptance must take place in reliance upon an offer. the offer cannot be withdrawn during this period. If the goods are not delivered or are refused the offending party will be in breach of contract.

However. an offer can be freely revoked Goldsbrough Mort & Co v Quinn Veivers v Cordingly Unless there is a promise. the offeree is rejected the offer and is deemed to be making a counter offer Stevenson Jaques & Co v McLean c) Lapse of time An offeror may stipulate that his or her offer must be accepted within a certain period of time. once an offer is accepted it becomes irrevocable. the offer will lapse. by the offeror to keep it open for a fixed period. the offer cannot be withdrawn after the offeree has begun to perform the necessary conditions of acceptance of the offer and completion of the contract. Routledge v Grant A revocation will only be effective once it has been communicated to and received by the offeree Bryrne v Leon Van Tien Hoven In unilateral contracts. If no time is prescribed. supported by consideration or under seal. Ramsgate Victoria Hotel Co v Montefiore d) Failure of a condition subject to which the offer was made 15 . Goldsbrough Mort & Co Ltd v Quinn An offer may be terminated by a) Revocation by the offeror Revocation is the formal withdrawal of the offer by the offeror. Once rejected. the offer must be accepted within a reasonable time.An offer may be terminated at any time before it is accepted. Before acceptance. Abbot v Lance b) Rejected by the offeree The rejection must be communicated to the offeror before it is effective. an offer cannot be later accepted. and if the offeree fails to accept. If an offeree attempts to accept the offer but introduces new terms.

The offeree must agree to accept the terms of the offer 2. thus binding the offeror’s estate. This information must be communicated to the offeror. Coulthart v Clementson Nor can a representative of the offerors estate accept the offer on their behalf therefore the offer lapses Reynolds v Atherton Acceptance: Requirements of Acceptance Acceptance of an offer is the expression. If the offeree has been notified of the death he/she cannot accept the offer. it is still possible for the offeree to accept the offer. Acceptance must correspond to Offer Offeree must have knowledge of and act in reliance to an offer The offeree must have knowledge of the terms of the offer at the time of purported acceptance. of assent to the terms of the offer in the manner prescribed or indicated by the offer. Tinn v Hoffman A Counter Offer is not Acceptance 16 . Thus acceptance may be expressed or implied HBF Dalgety v Morton There are two requirements to satisfy for valid acceptance to occur: 1.If a condition upon which the offer is made is not fulfilled the offer will lapse McCaul Pty Ltd v Pitt Club Ltd e) Death If the offeror dies and the offeree has not been notified of that death. by words or conduct. Acceptance is not valid if two identical offers are made or if a party performs the act of acceptance without knowledge of the offer.

Stevenson Jaques v McLean Notification to the Offeror of the Fact of Acceptance The offeree must communicate acceptance of the offer to the offeror and agreement is not complete until such communication is affected. Masters v Cameron Mere Inquiry does not Constitute Acceptance After receiving an offer. If acceptance does not occur in this way. return post etc. an offeree may want further clarification of one or more terms. or if it is not stipulated. and the parties intend to be bound immediately. the appropriate method of acceptance will depend on the intention of the parties as derived from the particular facts. Whether acceptance has occurred depends on whether the offeree has complied with the requirements for the method of acceptance for the particular situation. Powell v Lee Soares v Simpson Method of Acceptance What is an appropriate method of acceptance in any given situation will depend on each situation. only communicate interest but not acceptance nor rejection of an offer. the performance of an act. generally there is no agreement. Wrench A purported acceptance that departs from the terms of the offer but only in a minor non-material way may be effective and not amount to a counter offer Turner Kempson v Camm Acceptance must be Unqualified If there is an agreement on all terms of the offer.). the original offer is rejected and the counter offer can then itself be accepted or rejected.If a counter offer is made. the offeree can no longer accept the original offer Hyde v. a) Method of Acceptance Stipulated by Offeror The offeror may stipulate how acceptance should take place (eg. This inquiry can at most. Once a counter offer is made and the original offer rejected. this would be considered unqualified acceptance of the offer. 17 . whether the offeror has outlined a specified method of acceptance with in the offer.

on the true construction of the terms in the offer. the offeree should perform stipulated acts waiving the need to communicate acceptance. Trade Practices Act 1974 (cth) s. the general rule of law is that the contract will be formed when acceptance of the offer is communicated to the offeror and that communication is received. Felthouse v Bindley Empirnall Holdings Pty Ltd v Machon Paul Partners Pty Lty Braund v Mutual Life & Citizens’ Assurance Co Ltd The technique of delivering a product with a notice stating that unless the goods are returned within a stated period (or rejection communicated in a different way).53 c) Acceptance by Conduct An offeror may stipulate the manner of acceptance by advising the offeree that if he/she wishes to accept the offer. then the acceptance will be valid Tinn v Hoffman Also. the buyer will be taken to have agreed to buy the product on the stated terms is now prohibited by statute. Acceptance can be express or implied. if the method of acceptance was inserted for the convenience of the offeree. Brogden v The Director of the Metropolitan Railway Company Carlill’s case Instantaneous Communication: Acceptance must be communicated a) General Rule When the mode of acceptance is instantaneous communication. the offeree may wave the benefit of the clause and accept in a different way Or even if a manner of acceptance is prescribed in the offer.52 & s. this may not be the only method of acceptance that will be effective Manchester Diocesan Council for Education v Commercial & General Investments Ltd b) Acceptance by Silence The offeror cannot stipulate silence to constitute consent under any circumstances. if the offeree accepts in a manner that is more advantageous for the offeror.Although.65 Fair Trading Act 1989 (qld) s. 18 . 64 & s.

according to the ordinary usages of mankind. Henthorn v Fraser The rule operates only where the post is an acceptable method of communication between the two parties (eg. If the offeror says or implies that actual notification is required before an agreement if formed the postal acceptance rule will be displaced. telephone conversations and telex messages are all considered forms of instantaneous communication. the acceptance is completed as soon as it is posted. 19 . the offer was made by post or it is stipulated in the offer that the post is an acceptable method of communication) Adams v Lindsell b) Policy behind the rule The postal rule promotes contractual certainty.Entores L D v Miles Far East Corporation Brinkibon Ltd v Stahag Stahl und Stahlwarenhandels-Gesellshaft mbH b) Meaning of instantaneous Communication Face to face communication. the post might be used as a means of communicating the acceptance of an offer. c) To what communication does the rule extend The postal acceptance rule applies to forms of communication that are akin to mail but does not extend to any form of instantaneous communication. a) Statement of the rule Where the circumstances are such that it must have been within the contemplation of the parties that. Entores L D v Miles Far East Corporation Reese Bros Plastics Ltd v Hammon-Sabelco Australia Pty Ltd Postal Acceptance Rule The postal acceptance rule is the exception to the general rule that acceptance occurs when it is communicated to the offeror. even if that communication bears some similarities to communication by post. Whether the postal rule is displaced turns the intention of the offeror. Coot Pty Ltd v Admin Management Pty Ltd d) Where is the rule displaced? The rule is displaced if the court decides that it was not within the contemplation of the parties that the post was an accepted method of communication.

it is likely to be too late for the offeror to withdraw the offer and claim there has been no contract formation. only the first person to come forth will be eligible). In Carlill’s Case the offer was capable of acceptance by anyone who qualified under the terms of their offer (eg. Acceptance is affected by the offeree by performing the requirements that are specified by the offeror. There is still no definitive Australian authority on the issue. Abbot v Lance Who may accept an offer? An offer can only be accepted by the person to whom it was made. A subsequent purported withdrawal of that acceptance will be ineffective. anyone who purchased a smoke ball. 20 . in the case of a reward. only early New Zealand dicta that’s suggests that it cannot be withdrawn in this way and an even earlier Scottish authority to suggest that it can!! Weinkheim v Arndt (NZ) Dunmore (Countess) v Alexander (Scottish) Acceptance in Unilateral Contracts Acceptance commonly by conduct The requirement for acceptance to be communicated is often impliedly waived. Carlill v Carbollic Smoke Ball Company Withdrawal of an offer after acceptance has commenced Generally. once an offeree has begun to accept the offer by performing the acts stipulated.Bressan v Squires e) Revocation of the acceptance prior to receipt The offer is formed when the letter of acceptance is posted. while many people may have the information which qualifies them for the reward. however. Reynolds v Atherton Acceptance may be communicated only by the offeree or his or her agent Powell v Lee If an offer is made to the public at large it can sometimes be accepted by a number of people.

it is unlikely to be a valid offer in legal terms. if the terms of the offer are vague and uncertain. Henthorn v Fraser The Postal Rule can be excluded {Covered earlier in “The postal Acceptance Rule” at (d)} Holwell Securities Ltd v Hughes Bressan v Squires Certainty and Completeness: Concepts of uncertainty or vagueness are relevant to a determination of whether there has been an offer made which is capable of acceptance. If an offer is so vague that the respective obligations of the parties on acceptance are unclear. it may indicate that the parties lack intention. Hampstead Meats Pty Ltd v Emerson & Yates Pty Lty Entores L D v Miles Far East Corporation Post If the postal acceptance rule applies. not having yet reached the stage of negotiations at which each intends to be legally bound to the other party. It is plain that unless this can be done it would be impossible to hold that the contracting parties had the same intentions. the letter of acceptance is posted. Statement of the Rule In order to constitute a valid contract the parties must so express themselves that their meaning can be determined with a reasonable degree of certainty. and whether the parties could have had the requisite intention to enter into legal relations.Carlill’s case Contract formation: time and place Instantaneous communication A contract is formed when and where the offeror receives and accepts the acceptance communicated. in other words the consensus ad idem would be a matter of mere conjecture G Scammell and Nephew Ltd v HC and JG Ouston 21 . Similarly. and at the place that. the contract is formed when.

A number of different terms have been used to describe clauses that are struck down for want of certainty. the clause is void. particularly where the circumstance indicate that the parties intended to be bound by the agreement. Sometimes the court will label a term meaningless or illusory. ambiguous or uncertain matters little. the contract is an agreement to agree. instead agreeing to finalise such matters at a later time. Whether the clause is said to be vague. therefore it is incomplete and will not be enforced. The modern approach appears to emphasise the courts willingness to uphold an agreement entered into by the parties. 22 .Facets to the principal There are a number of facets to this principle: • A contract containing language that is so obscure and so incapable of any definite or precise meaning that the court is unable to attribute to the parties any particular contractual intention will be unenforceable The uncertainty may relate to one of the pivotal terms of the agreement or may go to the very heart of the agreement. G Scammell and Nephew v HC & JG Ouston • Even where uncertain or ambiguous language is not used. the contract will be unenforceable. Loftus v Roberts • A contract will be unenforceable if it reserves a discretion for one party not to carry out his or her obligations Thorby v Goldberg Ambiguity and Uncertainty Individual Terms There can be no contract unless what the parties agreed can be determined objectively with a reasonable degree of certainty. Lend Lease Financial Planning Ltd v Southcap Pty Ltd Agreements to Negotiate If parties do not reach final agreement on essential terms. if the parties have not agreed on all of the essential terms of the agreement. An illusory clause has an identifiable meaning but will be treated as uncertain as it promises an illusory term. A meaningless clause is one to which a meaning cannot be attributed and will be treated the same way as an uncertain clause.

machinery or formula designed by the parties to take the place of their own agreement”. to adopt principles of reasonableness to make certain something that. that in appropriate circumstances. Hawthorn Football Club v Harding The reference may be made in a direct way for example. it to will be unenforceable Coal Cliff Collieries Pty Ltd v Sijehama Pty Ltd However. Recourse may also be made to external standards. an agreement to negotiate could be enforceable. on its face. it was suggested. appears uncertain.Booker Industries Pty Ltd v Wilson Parking Qld Pty Ltd If an agreement to negotiate is regarded as an agreement to agree. in some circumstances. even where the contract itself does not expressly provide such a link. the clause will be valid. is not. the contract may provide for one or more terms to be inserted by a third party. may be enforceable if a meaning can be given to it by reference to an external standard. Saving Ambiguous. One mechanism to make an agreement to negotiate more certain. He concluded that if the parties provided good consideration and the terms of the agreement to negotiate were sufficiently certain. Sometimes. uncertain or meaningless contracts Link to External Standard A clause in a contract. would be to include a provision referring matters in dispute to a third party. Hawthorn Football Club v Harding Godecki v Kirwan Link to reasonableness standard The court may be willing. (In a fashion. The parties may provide for “a standard. If such a set of standard hire purchase terms exists. incorporating standard hire purchase terms used by the particular hiring company. on its face. which. this is also a link to an external standard). 23 . it was contemplated by Kirby P (in Coal Cliff Collieries Pty Ltd v Sijehama Pty Ltd). such agreement might be enforceable. Hillas and Co Ltd v Arcos Ltd Specifications agreed in the original contract could be regarded as an external standard.

Whitlock v Brew Waiver or Removal of Uncertainty If a clause is inserted in a contract for the benefit of one party only. Generally. the clause can be severed and the remainder of the contract is enforceable Fitzgerald v Masters If the offending clause forms a pivotal part of the contract. Booker Industries Pty Ltd v Wilson Parking Qld Pty Ltd Agreement contains mechanism to complete It may suit the needs of contracting parties not to finalise various aspects of their agreement. even essential terms. In some circumstances the invalid term can be severed and the remainder of the contract will be enforceable. a) Reference to a third party Parties to a contract may leave terms of the contract to be decided by a third party.‘The implication of what is just and reasonable to be ascertained by the court as a matter of machinery where the contractual intention is clear but the contract is silent on some detail’ Hillas and Co Ltd v Arcos Ltd Severance The invalidity of one term will not necessarily mean that the whole contract will be unenforceable. if the parties would have intended to be bound in the absence of an uncertain clause. Godecke v Kirwan Hawthorn Football Club Ltd v Harding 24 . that party can choose to waive the benefit of the clause and have the remainder of the contract specifically enforced. severance of the particular clause is not possible. Whitlock v Brew Incomplete agreement The courts will not lend their aid to the enforcement of an incomplete agreement. but is drafted in such vague terms as to make it void. but rather to insert in a mechanism for determining one or more terms at a later date for example external standard or third party. so that without out it the parties could not have intended to be bound. being no more than an agreement for the parties to agree at some time in the future.

the court will not substitute it’s own view and complete the agreement. if a subsidiary matter was left to the determination of one of the parties such as how the contractual obligations are carried out by that party. “the subject matter” and 25 . and not to regard that determination as completing the agreement for the parties. as for instance. Rent). It is not for the court to make the contract for the parties. Hillas v Arcos However. the court may not rewrite the agreement for parties where the parties themselves have failed to agree on essential terms. the less inclined the court will be to exercise its discretion to imply a term. A contract that leaves essential matter for later determination by one of the contracting parties will be unenforceable as it is either incomplete or uncertain or because the promises contained in the agreement are illusory. the implication of what is just and reasonable to be ascertained by the court as matter of machinery where the contractual intention is clear but the contract is silent on some details.b) Discretion retained by a contracting party It is uncertain that a contract that leaves minor terms to be determined by one of the contracting parties is enforceable. it may be enforceable. Godecke v Kirwan Breakdown of Mechanism to Complete If the parties a mechanism for determining a term and that mechanism fails. or to go outside the words they have used. except insofar as there are appropriate implications of law. a court may be prepared to determine a fair and reasonable price. Coal Cliff Collieries Pty Ltd v Sijehama Pty Ltd However. Milnes v Gery If the disputed issue is one of something such as the “price” of something (eg. The greater the number of terms not finally agreed upon by the parties. Booker Industries Pty Ltd v Wilson Parking Qld Pty Ltd Sudbrook Trading Estate Ltd v Eggleton Saving Incomplete Agreements Implication of Terms There is a willingness of the courts to imply terms into an agreement. A contract could only be regarded as concluded if the parties agreed on the three essential elements: “the parties”.

and would not be upheld by the court. Foley v Classique Coaches Ltd 26 . For the sale of goods. if the contract has between partly executed. the court will be more minded to imply a term and enforce the agreement. this means that if there is no agreement on price stipulated in the contract. in some instances. then the contract is not complete. This intention is demonstrated for example. However. if it is clear that the parties have gone beyond the state of negotiation and intend to be contractually bound. the court will seek to imply a term necessary for the validity of the agreement Hall v Busst Failure to specify price a) Contract silent on price The general principle is that a contract will only be regarded as valid if the parties to it agree on price (as this is one of the essential terms). Hall v Busst However. Hall v Busst In addition. and related to the first. the court is sometimes prepared to imply a term that the purchaser will pay a reasonable price for the goods. there are exceptions. where the contract is partly executed and property in the goods has passed. for example in a contract for the sale of goods. there are two other factors that may be relevant in the courts determination. A court will not imply a term for payment at a reasonable price into a contract for the sale of land Hall v Busst b) Contract provides for parties to agree in future An agreement to agree in the future also offends against the general principle of completeness. in contracts for the sale of goods the court may imply a reasonable price and the contract will be upheld.“the price” and if these elements have been agreed upon with sufficient certainty the court will provide the rest. There is a distinction between the sale of land and sale of goods with respect to the implication of terms by a court. property has been delivered and title has passed. Hillas v Arcos Secondly. First.

In these circumstances parties may decide to enter into agreements subject to the happening of a particular event. A contract for the sale of goods at a reasonable price is likely to be valid. or on rental in an option to renew a lease. Subject to finance agreements Contracts for sale may contain a clause stating that the contract is subject to the purchaser receiving approval for finance on satisfactory terms and conditions. It is not uncommon for such a mechanism to be used in relation to setting a price. the court can assess the price to be attributed to the goods. and damages can be awarded accordingly. If one party breaches the agreement. clauses to attribute reasonable price to the sale of land will generally be uncertain or for the sale of goods if they are unique or of very special character eg original painiting Hall v Busst Subject to agreements: Sometimes parties may be ready to sign a contract but not able or not prepared to commit to one or more aspects of the agreement. if the contract is to sell land. Sale of Goods Act 1896 (Qld) Reasonable price is an objective standard that can be determined without further agreement between the parties. The contract is immediately binding on the parties but will come to an end if the purchaser is unable to obtain finance and terminates the contract pursuant to its terms.However. it is unlikely to be upheld) and will be treated as such matters which are silent on price. Godecke v Kirwan d) Contract provides for payment of a reasonable price Whether the agreement is upheld as being sufficiently certain may turn on the nature of the subject matter in dispute. Stocks &Holdings Pty Ltd v Arrowsmith c) Contract makes provision for mechanism to complete A contract that contains a mechanism for setting a term at a later time is likely to be valid. Meehan v Jones a) Satisfactory Finance 27 . British bank of Foreign Trade Ltd v Novinex Ltd However.

the determination of whether the finance was satisfactory was left to the purchaser Meehan v Jones b) Steps to be taken to obtain finance The finance clause in most standard land contracts imposes an obligation on the purchaser to take all steps reasonably necessary to obtain finance approval. Masters v Cameron The category a particular case falls into turns on the intention of the parties. Meehan v Jones Subject to Contract For agreements that are formed subject to contract.It has been argued that a clause that provided for finance to be obtained on ‘satisfactory terms’ is either to uncertain to be valid or gave the purchaser such a wide discretion that it was illusory. 28 . the contract will fall into one of the first two categories. The parties intend to be bound immediately thus a binding contract is formed. The intention of the parties is not to make a concluded bargain at all. but have made performance of one or more of those terms conditional upon the execution of a formal document. and stated that as the clause was inserted for the benefit of the purchaser. An offer in such a case is not expressed to be subject to or conditional upon a formal execution of a contract and all essential terms have been agreed upon thus a binding contract is formed. but at the same time propose to have the terms restated in a form which will be fuller or more precise but not different in effect. the case could fall into one of three categories: 1. Masters v Cameron Branca v Corbarro 2. Masters v Cameron Niesmann v Collingridge 3. unless and until they execute a formal contract. The High Court disagreed. The parties have reached finality in arranging all terms and intend to be immediately bound to perform those terms. The parties have completely agreed upon all terms and intend no departure from or addition to those terms. Parties in such a case do not intend to be bound until they entered into a formal document thus no binding contract is formed. If the parties intend the agreement to be binding on them even before entry into the final contract.

In making an objective determination of the parties intention. Heslopv Burns Balfour v Balfour Jones v Padavatton Rebutting the presumption The presumption can be easily rebutted for example if parties who are in a familial relationship are contracting in a business context or if a husband and wife enter into an agreement in circumstances in which they are no longer living in harmony. mutually communicated expressly or impliedly. Rose and Frank Co v JR Crompton & Bros Ltd The courts use an objective test in making a determination about the intention of the parties. Case Examples: a) Husband and Wife Parties involved in a domestic relationship. Intention to create legal relations: Statement of the Rule To create a contract there must be a common intention of the parties to enter into legal obligations.Masters v Cameron. Similarly. if the words used in the contract indicate a legal intention. Given many couples now choose to cohabit without marrying. the court looks at the surrounding circumstances and asks if a reasonable person would regard the agreement as intended to be binding. the same presumption 29 . will generally not have intended legal consequences to follow their arrangement thus a contract will not be enforceable. Merritt v Merritt Domestic and social relationships Presumption The presumption is that domestic and social agreements are not intended to have legal force. the presumption that may otherwise have arisen may be rebutted.

separated. The bond of natural love and affection is likely to weaken according to the remoteness of the tie and will subsequently be easier to rebut.should apply where an agreement is entered into between a couple living in a de facto relationship. those cases where the court finds that the presumption has been rebutted. even when the arrangement is clearly made between friends or a relative in a social setting. Balfour v Balfour b) Separated husband and wife Where parties are divorced. or agreements made between friends. and it is presumed that they do not intend to cerate legal relationships as the agreements made in this context are based on natural love and affection. Heslop v Burns However. or in the process of separating. a court will not always find that the parties lacked legal intention. one or more of the following factors are often relevant • The seriousness of the conduct involved (such as moving countries or giving up full time employment) • The expense involved. the negotiation do not take place in the context of natural love and affection therefore there is no room left for the application of such a presumption and the court will generally find that the requisite contract intent existed. especially if the relevant party is not wealthy • Whether there is or has been a degree of hostility in the relationship • The closeness of the family ties • Whether the subject matter of the agreement is business or commercial in nature Examples Jones v Padavatton Wakeling v Ripley Roufos v Brewster d) Social Relationships The presumption of lack of legal intent can extend beyond familial relationships to agreements entered into in a social context. (eg. Jones v Padavatton In fact. Merrit v Merrit c) Other familial relationships Parties in other familial relationships are considered the same as married or de facto couples. parties who pool funds to enter a competition in one person’s name may intent 30 .

the agreement may contain an express clause that no legal consequences flow from the document. the usual contractual principles apply to determine whether a contract has been formed. For other types of contracts. While this is fair. increased formality may be required to demonstrate the necessary legal intent when one of the contracting parties is the government. Esso Petroleum Co Ltd v Customs & Excise Rebutting the Presumption The intention not to create legal relations may be evident in a number of different ways. Coogee Esplanade Surf Motel Pty Ltd v Commonwealth of Australia 31 . it is doubtful that parties who participated in syndicate intended their action to have legal consequences).that arrangement to have legal consequences. it is assumed that the parties intended the agreement to have legal consequences. Rose and Frank Co v JR Crompton & Bros Ltd Government Activities Commercial Agreements If a government contract arises out of the commercial need for the operation of government. For example. Therefore. the party alleging that an agreement relating to business matter is of no legal effect has the heavy onus of demonstrating that to be the case. for example the order of stationary or contracts to purchase vehicles. Edwards v Skyways It can sometimes be difficult determining whether a transaction has taken place in a business setting. if the person wins. a broad approach to what constitutes a business setting must be adopted. action can be brought to force that person to share the winnings with the other members of the groups. The court may be more likely to uphold such a decision if large amounts of money are involved. or the overall tenor of the particular document may indicate that the parties had no intention to enter into legal relations. Simpkins v Pays Commercial Agreement Presumption Where parties negotiate and agree in a business setting. Therefore.

Rose and Frank Co v JR Crompton and Bros Ltd Jones v Vernon’s Pools Ltd Promotional puff and free gifts Where language such as ‘free gift’ is used. but also at the entire context in which the advertising takes place. Australian Woollen Mills v The Commonwealth Administration of PNG v Leahy Voluntary associations Unless there was some clear positive indication that the members contemplated the creation of legal relations inter se. Esso Petroleum Co Ltd v Customs & Commissioners of Customs & Excise Similarly. Cameron v Hogan Circumstances indicating absence of intention Honour Clauses The presumption that arises in a commercial context is that the parties intended to create legal relations by entering the agreement. there may be a tendency to think that a person who acts in response to the advertisement may not intend legal consequences to follow. the rules adopted for their governance would not be treated as amounting to an enforceable contract. the court will look not only at the words used. Cameron v Hogan The parties could possess requisite legal intent if the member has a proprietary interest in the club. if the language used conveys intention. or an apparently extravagant claim is set out in an advertisement. open for the parties to form a contrary. Carlill v Carbolic Smoke Ball Co 32 . It is however.Policy Initiatives Where the government activity relates to a policy initiative a court may be less likely to find that the parties intended to enter contractual relations. such as the deposit of $1000 in a bank for the purpose of payment. it would have legal consequences. The presence of an honour clause in contracting parties agreements will indicate by express words that they did not intend the agreement to have legal consequences. To determine whether the requisite intention exists.

whether the promisee has given consideration for the promise. To determine this. Generally. Edwards v Skyways. . implication that the agreement is to be without legal effect . . a letter of intent or an understanding will represent something short of an intention to enter a concluded agreement. A related issue arises in the area of letters or documents of intent. • The letter was part of a commercial transaction in which there is a presumption that legal relations were intended. The words ex gratia do not carry a necessary. Banque Brussels Lambert SA v National Industries Ltd Letter of intent and understandings Parties sometimes conduct their affairs on the basis of an understanding between them. • Intention is deduced from the document as a whole seen against the background of the practices of the particular trade or industry. are still seen to posses the intention to create legal relations. Letter of Comfort Central to the determination of whether a letter of comfort gives rise to legal intent is whether the parties intended to create legal obligations by the giving and receiving of the letter. the terms were sufficiently promissory in nature. which may arise orally or be put in writing. the courts look at the construction of the document and the circumstances surrounding its sending. Edwards v Skyways. Question about its contractual standing may arise where one party no longer wishes to be bound. The following points were considered by the authority in assigning legal intent to the letter of comfort: • On a construction of the letter.Ex gratia payments and without prejudice offers Parties who offer to make an ex gratia payment or who write a ‘without prejudice’ letter which is accepted. Consideration is perhaps best understood as an act or promise of an act which is the 33 . Coogee Esplande Surf Motel v Commonwealth Milner & Son v Percy Bilton Ltd Consideration: Whether or not a promise that is part of an agreement can be enforced depends on. a party is certainly not seeking to include the legal enforceability of the settlement itself by describing the contemplated payment as ex gratia. among other things. or even a probably.

The common law will only enforce a promise for which a price is paid. the consideration is “executed”. Rules governing consideration 34 . the act or forbearance itself. or the promise there of. In bilateral contracts each party exchange promises with the other to do or refrain from doing an act. The only promise is the one made by the promisor to do or refrain from doing an act if the other party does or refrains from doing an act. If the promisee chooses to and does perform the specified acts. the consideration is considered executory. Thus.price paid for the other's promise. United Dominions Trust (Commercial) Ltd v Eagle Aircraft Services Ltd Consideration in Unilateral Contracts Unlike bilateral contracts. Waltons v Maher Nature of Consideration An act or forbearance of one party. Dunlop Pneumatic Tyre Co v Selfridge & Co The development of the Doctrine of Promissory Estoppel. constitutes the consideration. a unilateral contract does not constitute an exchange of promises. This means that the obligation to perform has not yet fallen due. rather than the promise. Each party promises to do an act or refrain from doing an act. Dunlop Pneumatic Tyre Company v Selfridge & Company Ltd Consideration in Bilateral Contracts A bilateral contract is formed where the parties exchange promises. each party makes a promise. Consideration for the promise is not executory because the act has not been promised by the promisee. United Dominions Trust (Commercial) Ltd v Eagle Aircraft Services Ltd Executed and executory consideration In bilateral contracts. and the promise thus given for value is enforceable. Only one party will make the promise and an obligation will only arise if the other party carries out the specified acts. therefore the consideration is “executory”. is the price for which the promise of the other is bought. In unilateral contracts the parties do not exchange promises. At the time agreement is reached. under which a promise that has been relied upon to another’s detriment may be enforced by that other despite the lack of consideration. The price paid for that promise – the consideration – is the other party’s promise.

Tweddle v Atkinson Consideration must be bargained for The act of forbearance must be done in reliance of the promise and at the request of the promisor and not done for other reasons (that are unrelated to the contract in question). consideration must be sufficient in that it is ‘something which is of value in the eyes of the law’. it is enough if consideration is given by one on behalf of all because it is then deemed to have moved from all. Coulls v Bagot’s Executor & Trustee Co Ltd c) Overlap with doctrine of privity The doctrine of privity provides that only a person who is a party to a contract can sue on it. Dunlop Pneumatic Tyre Company v Selfridge & Company Ltd Trident General Insurance Company Ltd v McNiece bros Pty Ltd Tweddle V Atkinson a) Benefit need not move to promisor It will generally be the case that consideration moves from the promisee to the promisor. Thomas v Thomas 35 . Consideration may be valid although it cannot be given monetary equivalent. consideration must move from the promisee. b) Joint promisees When a promise is made to joint promisees.Consideration must move from the promisee For there to be a contract between the promisor and the promisee. However. Combe v Combe Australian Woollen Mills Pty Ltd v The Commonwealth Consideration must be sufficient a) General principle To be valid. A promisee is only able to sue on a promise if the promisee has given consideration for the promise. or do or forbear from doing an act. it is sufficient if consideration moves from the promisee to a third party at the direction of the promisor. whether the promisee promises to pay money.

Chappell & Co v Nestle Co Ltd A moral obligation or worthy motive does not constitute consideration. Simple agreements are agreements other than formal agreements. (Eg. forbearance or promise that is claimed to be consideration has already occurred or been given before the agreement is entered into. the consideration is past not executed. and are more commonly referred to as deeds. Eastwood v Kenyan Thomas v Thomas White v Bluett c) Consideration can be nominal Consideration will be regarded as valid even if it is nominal only. Roscorla v Thomas b) Past consideration distinguished from executed consideration If the act. the common law has recognized these agreements as valid even if consideration has not been provided. which are oral or written and require consideration to be valid.b) Consideration need not be adequate Consideration must be sufficient but need not be adequate. The court will not enquire into the adequacy or value of the consideration. Token gesture) Thomas v Thomas Lennox v Cameron Niesmann v Collingridge Consideration must not be past a) General Principle The consideration will be regarded as being past if it has already flowed from the promisee to the promisor prior to the agreement being entered into. Consideration and formal agreements Deeds Formal agreements are signed under seal. Because of the solemnity or seriousness of the manner of execution of such documents. Consideration: specific examples 36 .

or that the promisor has for the promisee is not legally recognized (without consideration) White v Bluett Performance of existing duties a) Performance of existing contractual duties Generally a promise by one party (the promisee) to perform an existing contractual duty owed to another party (the promisor) does not constitute good consideration for the promisor’s promise. Hartley v Ponsonby The court may be willing to accept performance of an existing contractual duty as good consideration where it provides a benefit to the promisor. performance of that duty will not amount to sufficient consideration to support a further promise made by the promisor. Glasbrook Bros v Glamorgan County Council c) Where promise is made to a third party A promise to perform an existing contractual duty owed to another party can be good consideration for a promise. performance of that duty is insufficient consideration for the defendants promise unless the duty is exceeded. 37 . Wigan v Edwards Where the plaintiff is bound by an existing contractual duty to the defendant.Moral Consideration A promise made because of a sense of moral obligation to the promisee will not be sufficient consideration to support that promise. Eastwook v Kenyon A promise made because of the love and affection that the promisor and promisee have for each other. unless the duty is exceeded. Williams v Roffey Bros b) Performance of a public duty Where a public duty is imposed upon the plaintiff by law. Stilk v Myrick A court may be prepared to find that the parties have agreed to abandon their original agreement and enter a new one.

Pao On v Lau Yiu Long New Zealand Shipping Co Ltd v AM Satterthwaite & Co Ltd Part Payment of Debt a) Rule in Pinnel’s Case A promise to pay part of a debt cannot constitute consideration for a creditor’s promise to forgo the balance (commonly referred to as the ‘rule in Pinnel’s case’). and those parties enter into a subsequent agreement that the creditor will accept a lesser amount in full satisfaction of the amount. Foakes v Beer b) Circumstances in which the rule will not operate • Parties enter into a deed Consideration is not required. If the parties enter into a deed under which the creditor forgoes part of the amount owing. for specialty agreements (formal agreement under seal). Pinnel’s rule will not apply. Therefore. the later amount agreement will generally not be binding because the debtor has not provided consideration for the creditor’s promise to forgo the balance due. • Amount owing is disputed 38 . • Accommodation to benefit the creditor If a debtor provides consideration for the creditor’s promise. Van Burgen v St Edmonds Properties Examples of how the arrangement could be altered by the creditor: • Payment on an earlier than scheduled date • Payment at a location more convenient to the creditor • Payment in a currency more desirable to the creditor Payment made at a different place for the debtor's convenience does not evade the rule. Pinnels case If an amount of money is owing by a debtor to a creditor. that arrangement will be enforceable despite the absence of consideration. even if the debtor acts on this agreement by paying the lesser sum agreed – and the sum is accepted by the creditor – the creditor will generally be able to sue the debtor for the balance due. however.

provided: . the creditors all agree to accept payment of something less than the full amount owing by the debtor. The fact that payment is by a third party and not the debtor takes the case outside the operation of the rule in Pinnel’s case. H B F Dalgety LTd v Moreton • Payment by a third party If a debtor is unable to meet his debt to the creditor and obtains assistance from a third party to do so. The debtor has agreed to pay an amount more than the debtor believes to be due.The claim was reasonable and not frivolous or vexatious .The plaintiff honestly believed the claim would succeed .The plaintiff did not conceal from the defendant any facts that to the plaintiff’s knowledge might affect the validity of the claim. they may wish to enter into a compromise agreement. As the third party is not indebted to the creditor. in exchange for giving the debtor a full release. In the case of a compromise. Hercules Motors Pty Ltd v Schubert Bargain for conduct already performed The exception to the rule that past consideration will be ineffective to support a promise is that if the services would only have been provided on the basis of payment. although the creditor promises to accept an amount less than what the creditor contends is the account of the debt in full settlement of the debt. his/her promise to pay an amount should be good consideration for the creditor’s promise to forgo the balance of the debt. the third party to placate the creditor may offer a lesser some than the full amount owed to bring the matter to an end. the debtor has provided consideration for the creditor’s promise. This is good consideration even if the creditor is in fact correct and the amount claimed by the creditor is actually due.The rule in Pinnel’s case will only operate when there is no dispute between the parties as to the amount owed. Creditors may agree to such an arrangement if it appears that this is the most likely avenue to recover any amount from the debtor In the Estate of Whitehead Forbearance to sue A forbearance to sue or to refrain from exercising some legal right may constitute consideration. 39 . Hirachand Punamchand v Temple • Composition with creditors Under a composition with creditor’s agreement. even if the plaintiff would have been unsuccessful in the original claim. If the parties cannot agree on an amount owing.

payment. the promisee must be able to demonstrate that 1. a different result may apply where the parties subsequently execute a formal contract that is expressed to constitute the whole of the contract between the parties. Re Casey’s Patents Lampleigh v Braithwaite Pau On v Lau Yiu Long In all cases where a promisee seeks to enforce a promise made after the provision of the services. An estoppel may arise from pre-contractual negotiations Waltons Stores (Interstate) Ltd v Maher For equitable estoppel to apply there must be unconscionable conduct by one party. or the conferring of the benefit. and a subsequent promise merely fixes the amount of payment. must have been legally enforceable had it been promised in advance Pau On v Lau Yiu Long Equitable Estoppel The Doctrine of Equitable Estoppel states that a promise not supported by consideration could give rise to rights in circumstances where it would be unconscionable conduct for the promisor to renege on the promise.In some cases it is possible to infer that a certain sum would be paid. but where one party asserts that the other is estopped from relying on rights created by the written contract due to an assumption formed during negotiations Skywest Aviation Pty Ltd v Commonwealth The elements of estoppel must be positively proved and will rarely if ever be inferred Chellaram & Co v China Ocean Shipping Co 40 . Waltons Stores (Interstate) Ltd v Maher Milchaus Investments Pty Ltd v Larkin However. or other conduct relied upon. (Unconscionable conduct denotes a creation or encouragement by the defendant in the other party of an assumption that a contract will come into existence or a promise will be performed and for the other party to have relied upon that assumption to his or her detriment to the knowledge of the first party). the parties must have understood that the act was to be remunerated either by payment or the conferment of some other benefit 3. the act must have been done at the promisor’s request: 2.

Elements of Estoppel
Assumption or Expectation
There must be a clear and unambiguous assumption or expectation by Party A that a contract will come into existence or that a promise will be fulfilled. Waltons Stores (Interstate) Ltd v Maher

Encouraged or Induced
A clear and unambiguous representation may be implied from words used or be adduced from a failure to speak, where there was a duty to speak, or from conduct. Thompson v Palmer Waltons Stores (Interstate) Ltd v Maher If a party acts upon mere hope rather than a belief induced or encouraged by the other party, it will not be sufficient grounds for estoppel Lorimer v State Bank of New South Wale Chellaram & Co v China Ocean Shipping Co If an unauthorized statement is made to the knowledge of the principle in circumstances where the principal knows or ought to know that the statement is being relied upon, a failure to deny the statement is in fact authorized and may reasonably be relied upon by the other party. Corpers (No. 664) Pty Ltd v NZI Securities Australia Ltd

Reliance
The party claiming estoppel must act or abstain from acting in reliance upon the assumption or expectation. Australian Securities Commission v Marlborough Goldmines Ltd The parties reliance upon an assumption must be reasonable. Waltons Stores (Interstate) Ltd v Maher The characteristics of the plaintiff in assessing the reasonableness of the reliance, are relevant. (Eg. if the parties are stockbrokers and merchant banker experienced in commerce with the intention of their solicitor to prepare formal documentation or are large commercial entities represented by solicitors). Austotel Pty Ltd v Franklins Self Serve Pty Ltd Capital Market Brokers Pty Ltd v Hamelyn UPC Ltd

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Knowledge or Intention
The party who induced the adoption of an assumption or expectation must know or intend the other party to act or abstain from acting on reliance on the assumption or expectation. Waltons Stores (Interstate) Ltd v Maher

Detriment
The relevant detriment is that of the plaintiff, not the defendant. Gobblers Inc Pty Ltd v Stevens There must be a link between the assumption or expectation created and the detriment suffered. Gobblers Inc Pty Ltd v Stevens Australia & New Zealand Banking Group v PA Wright & Sons Pty Ltd Re Ferdinando The party claiming estoppel must suffer detriment in the sense that ‘as a result of adopting the assumption as the basis of action or inaction, the plaintiff will have placed himself in a position of material disadvantage if departure from that assumption is permitted Thompson v Palmer The detriment is determined as at the date the defendant seeks to resile from the assumption or expectation he or she has encouraged or induced, and upon which the othe party has acted Lorimer v State Bank of NSW

Failure to avoid detriment
The object of the equity (equitable estoppel) is not to compel the party bound to fulfil the assumption or expectation; it is to avoid the detriment which, if the assumption or detriment goes unfulfilled , will be suffered by the party who has been induced to act or to abstain from acting on it Waltons Stores (Interstate) Ltd v Maher The party encouraging or inducing the assumption must fail to avoid the detriment suffered by the party claiming estoppel, by failing to fulfil the assumption or encouragement. Waltons Stores (Interstate) Ltd v Maher

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Depending on the circumstances, the defendant may be required to do no more than warn the plaintiff that the assumption or expectations mistaken before the plaintiff incurs irreversible detriment Lorimer v State Bank of NSW It may be possible to show the relevant detriment where the defendant has made an attempt to avoid detriment being suffered by the plaintiff but the attempt proves to be inadequate. Silovi Pty Ltd v Barbaro

Remedies
The object of equitable estoppel is not necessarily to enforce promises but to avoid the detriment suffered by a party who relies on a promise. Therefore the remedy for equitable estoppel is the minimum equity to do justice between the parties (Commonwealth v Verwayen However, in some circumstances the enforcement of a promise may be the only means of avoiding the detriment. Waltons Stores (Interstate) Ltd v Maher The remedy should be proportionate to the unconscionability. Normally this will be reliance loss rather than expectation loss, (Eg. compensation for loss incurred in reliance on the assumption rather than making good the expectation of the parting invoking estoppel). Commonwealth v Verwayen There may, however, be a prima facie entitlement to have the expectation made good where the relief to reliance would exceed what could be granted by enforcing the expectation. Also, where the nature or likely extent of the detriment cannot be accurately or adequately predicted, it may be necessary in the interest of justice that the assumption be made good to avoid the possibility of detriment. Conversely, if the enforcement of the expectation is shown to be too great a remedy it will not be enforced. Giumelli v Giumelli

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be subject to a duty enforceable by the beneficiary to perform that promise. the promise is not binding upon a new party who merely stands in the shoes of the promisor who makes the promise. is subsequently replaced by a new trustee. Re Burns Philp Trustees Northern Sandblasting Pty Ltd v Harris (c) Promise 44 . upon acceptance by the beneficiary. promises to do or to refrain from doing an act or acts for the benefit of a beneficiary shall.Privity General rule A third party to a contract is unable to acquire rights or benefits under the contract. (a) Promisor The relevant promisor under the statue is the party who actually makes the promise for the benefit of the beneficiary. where the promise is made by a trustee of a trust who. (Eg. for a valuable consideration moving from the promisee. the promise will not be binding on the new trustee). Wilson v Darling Island Stevedoring Co Price v Easton Tweddle v Atkinson Statutory Abrogation of Privity Queensland The Property Law Act 1974 (Qld) s55 (1) provides that: A promisor who. a party is clearly a beneficiary if they are expressly named in a contract as receiving the benefit of performance of work under a contract Re Burns Philp Trustees A person who is not named in the promise but is incidentally benefited by the promise generally cannot enforce the promise in reliance of s55. In the absence of an assignment. in turn. Re Davies (b) Beneficiary For the purpose of s55.

Promise is defined in s55 (6) as being a promise: • Which is or appears to be intended to be legally binding and • Which creates or is intended to create a duty enforceable by a beneficiary A contractual term that merely regulates the relationship between promisor and promisee will not be enforceable by a third party if it does not amount to a promise to benefit the third party and create an enforceable duty Davis v Archer Park Newsagency Rockhampton (d) Acceptance Section 55(6) defines ‘acceptance’ as an assent by words or conduct communicated by or on behalf of the beneficiary to the promisor – or to a person authorised on his or her behalf – in the manner (if any) specified in the promise and within the time specified in the promise. (f) Variation or Rescission of Promise Under s 55 (2). Hyatt Australia Ltd v LTCB Australia Ltd (e) Defences Section 55(4) provides that any matter that would otherwise be relied on as rendering a promise void. it is immaterial if in fact the purported acceptance precedes the promise to benefit the beneficiary thus an anticipatory acceptance may suffice. Re Davies Provided the beneficiary’s assent purports to accept the promise. Stature of Frauds and Statue of Limitations etc. before acceptance. voidable or unenforceable will be available by way of defence in proceedings for the enforcement of a duty under s 55. It is insufficient for there to be words or conduct that is merely consistent with acceptance. their terms of the promise and the duty of the promisor or beneficiary may be varied or discharged only with consent of the promisor and the beneficiary. The intended object of this subsection provides that defences such as mistake. fraud. which may be available to the promisor against the promisee are also available to the former against the beneficiary. It seems that an acceptance must on its face be an assent. Re Davies It may be sufficient if the promise comes to the notice of the beneficiary’s solicitor. 45 . s 55(3) provides that after acceptance. However. misrepresentation. the parties to the contract may vary or rescind the promise.

as a person to whom the insurance cover provided by the contract extends. Such a clause makes the carrier the agent for its servants. that person has a right to recover the amount of the person's loss from the insurer in accordance with the contract notwithstanding that the person is not a party to the contract. Section 48 of the Insurance Contracts Act 1984 Maritime contracts of carriage (a) Servants or agents of sea carriers If the privity rule were to be applied. insurance cases are the subject of legislation to overcome the Privity rule. Consequently. whether by name or otherwise. An obligation may be imposed upon the beneficiary but only as part of a promise that confers a benefit upon him/her. or stevedores who are entrusted with loading and unloading the goods. Commonwealth Insurance Contracts Act 1984 (Cth) s48 Today in Australia. a beneficiary who is unable to make out a case under the statute would be left to rely on an exception to the privity doctrine if one were available in the circumstances. 46 . The clause has been held effective to exempt from liability third parties to the contract of carriage such as the master. crew. This has. then the usual exemption from liability that appear in contracts of carriage exempting the carrier from liability to the owner of goods for loss or damage to the goods could be simply evaded by. been avoided by the inclusion of a bill of lading evidencing the contract of carriage a provision known as a ‘Himalaya Clause’.(g) Imposition of Burdens Section 55(3)(b) states that the beneficiary will be bound by any promise or duty that is imposed as part of the promise that benefits him or her. agents or independent contractors in relation to an exemption of liability for loss or damage to the goods. for example. (h) Common Law Still Applicable Section 55(7) saves the common law so that where the statue cannot be applied. Entitlement of named persons to claim Where a person who is not a party to a contract of general insurance is specified or referred to in the contract. the common law still does. suing instead the servants or agents of the carrier. in the past. Section 48 of the Insurance Contracts Act 1984 has provided a third party with a right to recover directly from an insurer the amount of his or her loss.

Effectively. Carriage of Goods by Sea Act 1991 (b) Consignees and indorsees All rights in the original contract of carriage are transferred to a third party buyer as from the time of consignment or indorsement. give to the other. he is one of the parties. therefore. Thus. a consignee or indorsee may now enforce rights under a contract to which he or she was a third party. Sea Carriage Documents Act Secondly. the agent. Trident General Insurance Co Ltd v McNiece Brothers Pty Ltd Teheran Europe Co Ltd v St Belton Ltd Definition The principal is not a stranger to a contract made by the agent. parties such as the master and crew – but not individual contractors such as Stevedores – may now rely on the exemptions contained in a contract entered into between the carrier and the owner of the goods shipped by sea. the authority to create legal relations between the principal and the third party. either express or implied. the principal. If the agent acts within his or her actual authority. or within his or her ostensible authority.Now by force of law rather than by provisions in a contract. such act will bind the principal: that is the principal can take action in his or her own name to enforce the contract made by the agent or become personally liable should the contract be breached. all outstanding liabilities under the original contract of carriage are transferred to a third party buyer when he or she demands or takes delivery of the goods. such willingness may be assumed by the agent. 47 . it is possible to impose a burden on a consignee or indorsee despite the fact that he or she was a third party to the original contract of carriage. Sea Carriage Documents Act. Harvester Co of Aust Pty Ltd v Carrigans Hazeldene Pastoral Co The principles of agency may also apply where the agent does not disclose to the other contracting party that he or she is acting on behalf of a principal if the other party is willing to contract with anyone on whose behalf the agent acts. the agent being the medium by which the contract is made. So called exceptions at common law Agency Agency is a legal relationship between two people where one of them.

Unless an intention to create a trust is clearly to be collected from the language used and the circumstances of the case. although later ratification by the stevedores will do. can nevertheless rely on an exemption from liability contained in that contract. The trustee holds the legal title to such property subject to the interest of the beneficiary in such property. An exclusion clause in a document like a bill of lading may be drafted so at to effectively protect third parties such as stevedores if four conditions are met: 1. any difficulties concerning consideration moving from the stevedores are overcome. In deriving intention from the language that the parties have employed the courts may look to the nature of the transaction and the circumstances. the bill of lading must also make it clear that the carrier is contracting not only on its own behalf but also as agent for the stevedores in relation to the exemption. including the commercial necessity of the arrangement.Teheran – Europe Co Ltd v St Belton (Tractors) Ltd Exemption clauses and third parties The issue of whether a party who is not party to a contract. the carrier-promisor effectively contracts as agent for the stevedore-beneficiary. Scruttons v Midland Silicones Trusts A trust is created where a trustee holds property on behalf of a beneficiary. 3. A promisee will be regarded as a trustee of a promise if it was the clear intention of that party at the time of the contract was entered into. If these four conditions are satisfied. Re Schembsman Trident v McNiece Whether a trust is created will depend on a true construction of the terms of the contract and the intention of the parties. Trident v McNiece 48 . particularly for the carriage of goods. and 4. 2. the carrier was so authorised by the stevedores. the relevant bill of lading must make it clear that the stevedore is intended to be protected. the courts will be reluctant to infer such a trust exists.

Yoeman Credit Ltd v Latter Transactions which are not guarantees 49 . the third party may take action on the principles of unjust enrichment. or by some other person by the party lawfully authorised”. is in writing. Formalities Provided a contract is validly formed and there are no vitiating factors. “No action may be brought upon any promise to guarantee any liability of another unless the promise upon which such action is brought.The intention required to create a trust need not be held by both parties. But this issue remains whether the benefit retained by the defendant is the premium paid or the promised benefit. Guarantees A contract of guarantee must be in writing and signed by the party to be charged in order to be enforceable. Notwithstanding this general proposition however. Trident v McNiece Unjust Enrichment If an insurer is paid and refuses to offer benefit to a third party on the ground that they are not party to the contract. it is sufficient if the promisee alone holds the intention. default or miscarriage of another who is primarily liable to the promisee. action can usually be brought to enforce a verbal contract. a limited number of contracts must be evidenced by writing for them to be enforceable. Section 56(1) of the Property Law Act 1971 (Qld) Nature of Guarantee A contract to answer for the debt. and signed by the party to be charged. Trident v McNiece The key element of unjust enrichment is the unconscionability of the defendant’s conduct in retaining a particular benefit at the expense of the plaintiff. or some memorandum or note of the promise. An argument could be made that the defendant has been unjustly enriched only to the extent of the premium paid to it.

Frequently the issue is whether there was an intention by the parties. As the promise is not made to the person with whom the principal obligor contracts. or some ‘memorandum or not’ of the promise is 50 . the surety undertakes primary liability. the contract is not one of guarantee Eastwood v Kenyon c) Person agrees to take over the debt of another Where a debtor and creditor have entered into a contract of loan. it could occur that a third party agrees with the creditor to take over the debt of the debtor. rather than the creditor. namely the third party and the lender. Dunlop & Co Ltd e) Letters of comfort Whether the letter of comfort is binding as a contractual document. to create legal relations. but instead proffers his or her property as security to the promisee under the principal transaction it is not a guarantee. that he or she will pay the debt of the debtor. Such an arrangement is not a contract of guarantee and therefore need not comply with the statutory requirement of formality. Banque Brussels Lambert SA v Australian National Industries Ltd Requirement of writing: content For a contract of guarantee to be enforceable the relevant statutory provision requires either the promise is to be in writing. Harvey v Edwards. depends on the construction of the document. meaning that the surety will be liable notwithstanding that the principal transaction is unenforceable Yeoman Credit Ltd v Latter b) Promise of guarantee made to the debtor It is possible for a person to promise the principal obligator (the debtor). so that he third party may be called upon to pay. a) Contracts of indemnity In an indemnity.Transactions that are not guarantees ‘will not’ have to comply with the statutory requirements of formalities. rather than secondary liability. Gray v Pearson d) The agreement imposes no personal liability on the person If a person does not undertake personal liability.

if the term is for the benefit of the lender. Rosser v Austral Wine & Spirit Co Secondly. It may happen that the guarantee makes reference to a party without expressly identifying them. Authorities suggest that even if a party is not expressly identified. Pirie v Saunders Tiverton Estates Ltd v Wearwell Ltd 51 . Property Law Act 1974 (Qld) Guidance from case law. the nature of that consideration will not be required to be contained in the guarantee. a) Information particular to the guarantee First. First. This would generally require the amount of debt being guaranteed must be specified. The provision does not. in Harvey v Edwards Dunlop & Co. provides that the document must contain ‘all essential terms of the agreement’. ‘the guarantee must contain the names of the relevant parties: the lender. while the lender must provide valuable consideration to the guarantor for a valid contract of guarantee to be formed. however. the interest payable by the debtor should also be specified.to be in writing. where a material term has been omitted from the guarantee. ‘a description of the party will be sufficient if the description used can be explained by extrinsic evidence without having to resort to evidence to prove the intention of the author. If the guarantee is given of the amount advanced by the lender together with interest on that amount. the lender will be entitled to waive the benefit of the oral term not reduced to writing to enforce the guarantee as modified (Eg. elaborate on precisely the information that must be contained in the writing to satisfy the statutory requirement. A waiver to collect interest on the amount owed if details of the interested are omitted) Hawkins v Price b) Acknowledgement of the agreement The writing must contain an acknowledgement of a concluded agreement. ‘the relevant terms of the guarantee must be stated’. there may be limited circumstances in which the guarantee will still be enforceable against the guarantor for example. There are two other important caveats to the general proposition that a guarantee must contain all of these essential terms. the debtor and the guarantor’. Property Law Act 1974 (Qld) s 56(2) Second.

it is the guarantor who is the party to be charged within the meaning of the provision. Durrell v Evans Contracts relating to land No action may be brought upon any contract for the sale or other disposition of land or any interest in land unless the contract upon which such action is brought. is in writing. Property Law Act (Qld) s 59 Nature of contract needing writing The requirement of formality applies to a contract for the sale of land or any interest in land as well as a contract for the other disposition of land or any interest in land. is also relevant to land. Property Law Act (Qld) s 59 Requirement of writing: content As was the case for guarantees the document must contain ‘all the essential terms’. the lender will seek to enforce the guarantee against the guarantor.Requirement of writing: signed by party to be charged or agent To satisfy the statutory provision. or by some person by the party lawfully authorised. and signed by the party to be charged. Property Law Act 1974 (Qld) To apply this principle in the context of a guarantee. Harvey v Edwards. or by some other person by the party lawfully authorised’. if the guarantor’s name appears on the guarantee. therefore. it will be sufficient to satisfy the statutory requirement. Twynam Pastoral Co v Anburn 52 . the guarantee must be signed by the guarantor). (Upon the debtor’s default. the promise or note or memorandum of the promise must be ‘signed by the party to be charged. and it is the guarantor’s intention that the name authenticates the document. Therefore. or some memorandum or note of the contract. Dunlop & Co a) Information particular to the contract There are four matters that must be recorded to satisfy the statutory requirement in a contract involving land. To satisfy the formalities requirement.

that condition should be included in the contract). namely the price. Such acknowledgement may be expressed or implied in the writing. there is authority to suggest that the property is sufficiently described even if there is no reference to the lease. if freehold property is sold subject to an existing leasehold and the leasehold interest is known to the purchaser.1. must be recorded Burgess v Cox Wain v Walters 4. Rosser v Austral Wine & Spirit Co 2. (Eg. The consideration for the promise. If the parties require time to be of the essence. The document must contain the parties to the contract Williams v Byrnes As with guarantees. as long as the intention of the parties is clear. Petrie v Jensen b) Acknowledgment of agreement The writing must contain an acknowledgment of agreement as well as the terms of the agreement. Failure to include in the document all essential terms might not necessarily be fatal to the plaintiff. extrinsic evidence may be introduced to establish the identity of the parties. Timmins v Moreland Street Property Co 3. Pirie v Saunders Tiverton Estates Ltd v Wearwell Ltd 53 . Pirie v Saunders In contrast. The property must be adequately described. if the term omitted is for the benefit of the plaintiff they may waive the benefit of clause and seek enforcement of the contract without it. Pirie v Saunders South Coast Oils v Look Enterprises If the property the subject of the sale is part only of a particular lot. The principal terms of the contract must be disclosed. care must be taken to specifically identify the portion being sold.

Pirie v Saunders Joinder of documents It is possible to satisfy the statutory requirement of writing even if all of the relevant information is not contained in the one document. Tonitto v Bassal As the document joined in this way is referred to in the document signed by the defendant. a) Documents that are physically connected 54 . to another document or to a transaction. joinder of that document is permitted. the seller will be the party to be charged for the purposes of any action brought. Similarly. express or implied. A person may have been taken to sign a document if the signature is absent as long as the name of the party is placed on the document and that party expressly or impliedly indicates that he or she recognizes the writing as being an authenticated expression of the contract. Property Law Act (Qld) (If there is purported contract for the sale of the land and the seller claims not to be bound by the agreement. Dunlop and Co Reference to a document Where the document signed by the defendant makes reference to another document. Harvey v Edwards. A document may be able to be joined if there is a reference.There will be insufficient writing where a contract is made ‘subject to contract’ in the sense of a condition made before the formation of the contract. Tiverton Estates Ltd v Wearwell Ltd Darter v Molloy Requirement of writing: signed by party to be charged or agent The document must be signed by the party to be charged. It is sufficient if a person who is duly authorised by the party to be charged signs the document. if the buyer claims not to be bound. the buyer will be the party charged). There are two exceptions to this general position. it follows that the joined document will be in existence at the same time the document is signed by the defendant.

In this way. Joinder is allowed and parol evidence may be given to explain the transaction. M’Ewan v Dynon Where a letter is signed by the defendant and sent to the plaintiff. is found to have come second in the order of preparation and signing. Therefore if one of the parties refuses to complete a contract. namely the name of the plaintiff. on its own. the court will allow the envelope to be joined to the letter. Fauzi Elias v George Sahely & Co Effect of statutory non-compliance: common law Under common law principles. Timmins v Moreland Street Property Co 55 . the document signed by the party to be charged should not be treated as incapable of referring to the other document merely because the latter. on a minute investigation of the order of events at the meeting. if a contract fails to comply with statutory provisions ‘no action can be brought’.A document physically connected to the document signed by the defendant may be joined. but the letter does not. Pearce v Gardner b) Documents that are executed at the same time . no action can be taken by the other party to enforce the contract… Property Law Act (Qld) …Action cannot be brought for specific performance… Tiverton Estates Ltd v Wearwell Ltd …Or for damages for breach. contain the necessary information. ‘Where two documents relied on as a memorandum are signed and exchanged at one and the same meeting as part of the same transaction. so that they may fairly be said to have been to all intents and purposes contemporaneously signed. and to identify any document relating to it. Where the writing signed by the party to be charged refers to a transaction (rather than a document). Timmins v Moreland Street Property Co Reference to a transaction. there will be a note or memorandum of the information on the envelope.

The action is one brought in restitution. Freedom v AHR Constructions Other restitutionary claim may still be available If the contract is unenforceable. if the contract is performed by the parties. Fullbrook v Lawes b) Recovery of amount more than deposit If the purchaser breaches the contract and refuses to complete the purchase. This means that. where the consideration for which it was paid is the conveyance or transfer that has not taken place. it will not usually prevent a claim in restitution for recovery on a quantum meruit (so much money as the plaintiff deserves to have) basis. This is the position if the contract is one that complies with or fails the statutory requirements of formality. any deposit paid may be forfeited. it is likely that any amount over and above that which is deemed to be the deposit could be recovered. it will be effective to pass good title. the deposit is recoverable by the buyer as money had and received upon a total failure of consideration. If the sale is not completed due to the buyer’s default. However. the deposit is liable to forfeiture to the vendor.Contract valid to pass title Although a contract failing to comply with statutory requirements will be unenforceable. Freedom v AHR Constructions Where an enforceable contract for the sale of land is not completed because of the seller’s default. it will be a valid contract. Maywald v Riedel Recovery of money paid under unenforceable contract a) Recovery of deposit A deposit paid by a buyer is considered to be ‘an earnest to bind the bargain’. Pavey & Mathews Pty Ltd v Paul Effect of statutory non-compliance: equity Doctrine of part-performance 56 . not on the contract.

The agreement must be concluded and satisfy the usually contractual requirements for enforceability. Steadman v Steadman b) Acts done in reliance on the agreement and with knowledge of other party The plaintiff must show that the acts were done in reliance on the agreement and with the knowledge of the other parties. the courts may be prepared to grant that person specific performance of the contract if four conditions are satisfied. a) Acts are unequivocally referable to some such contract The acts relied upon by the plaintiff must unequivocally referable to some such agreement as is alleged between the parties. Maddison v Alderson. Steadman v Steadman Cooney v Burns Giving instructions and the ensuing preparation of documents are unlikely to be considered sufficient acts of part performance. 57 . relying on that contract. King v Grimwood d) Oral contract must be otherwise enforceable The plaintiff must be able to show that the contact would have been enforceable had it satisfied the statutory requirement of writing. Regent v Miller c) Acts done by the party seeking to enforce the contract The acts of part performance must be by the party who is seeking to enforce the contract. Regent v Miller Maddison v Alderson. The payment of money alone cannot be regarded as a sufficient act of part performance. McBride v Sandland It is not necessary that the acts be required by the contract but the fact that they were done voluntarily is sufficient.If parties enter into an oral contract for the sale of land and. one party does certain acts.

Curtis v Chemical Cleaning & Dying Co • The document signed is thought to have no contractual effect.McBride v Sandland Estoppel Alternatively. It is immaterial whether the signing party has read the document or not. in the absence of fraud or misrepresentation. the crucial issue is whether the parties can be regarded as having assented to the written terms. a person can claim an interest in land on the basis of creation of a constructive trust although there is no writing. L’Estrange v F Groucob Ltd b) When the Rule is Displaced The party may not be bound by the terms even though the contract is signed if the circumstances indicate that the signature does not signify assent. This may be the case if: • The person relying on the clause misrepresented its effect. in appropriate circumstances a party may be estopped from relying on the Property Law Act Walton Stores v Maher Constructive trust In an appropriate situation. Baumgartner v Baumgartner Establishing Contractual Terms: In determining whether written terms form part of the contract the parties. DJ Hill & Co Pty Ltd v Walter H Wright Pty Ltd 58 . the party signing the document is bound by its terms. Olly v Marlborough Court Ltd Incorporation by Signature a) General Rule When a document containing contractual terms is signed.

or at the time of. Causer v Browne Mendelssohn v Normand Ltd If reasonable steps are taken it does not matter if the recipient of the notice did not read the terms or that he or she were unable to read them. Parker v The South Eastern Railway Co Mendelssohn v Normand Ltd In determining whether reasonable steps were taken it may be relevant whether the document was one that would be assumed by a reasonable person to be contractual in nature. Thornton v Shoe Lane Parking Ltd Effect of Person not being able to Read or Understand Terms 59 . but as a contractual document. The onus will be on the defendant to demonstrate that the document was not delivered to the plaintiff as a voucher or receipt.• The person signing can plead non est factum (The mind did not accompany the signature…no intent). a) Reasonable Steps must be Taken by Defendant Reasonable steps must be taken to give the class of person to which the recipient belonged. notice of the existence of the term. Thompson v London Midland & Scottish Railway Co. contract formation. (The person relying on the defence must show that the document is radically different from the one he/she thought they were signing. and this notice was given before or upon contract formation. Usually used for blind or illiterate people). Petelin v Cullen Incorporation by Notice: Unsigned Document A person is likely to be bound the terms in a written document (not signed by him or her) if reasonable notice of the existence of the terms has been given. Causer v Browne b) Reasonable steps taken before or upon contract formation Reasonable steps must be taken to bring terms to the attention of the plaintiff before. (This is a question of fact).

Parker v The South Eastern Railway Co Incorporation by Notice: Signs A person is likely to be bound the terms in a sign if reasonable notice of the existence of the terms has been given. Thompson v London Midland & Scottish Railway Co. b) Reasonable steps taken before or upon contract formation Reasonable steps must be taken to bring terms to the attention of the plaintiff before. Reasonable steps must still be taken and these steps must have occurred prior to or upon contract formation. and does not know that a particular document will contain contractual terms. and does not know that a particular document will contain contractual terms. Balmain New Ferry Co Ltd v Robertson Olly v Marlborough Court Ltd If reasonable steps are taken it does not matter if the recipient of the notice did not read the terms or that he or she were unable to read them. or at the time of. Thornton v Shoe Lane Parking Ltd Effect of Person not being able to Read or Understand Terms A person who is particularly unworldly. and this notice was given before or upon contract formation. will still be bound by those terms. providing the issuer took reasonable steps to bring that fact to the notice of people in general. a) Reasonable steps taken by the defendant Reasonable steps must be taken to give the class of person to which the recipient belonged. (This is a question of fact). notice of the existence of the term. Parker v The South Eastern Railway Co Incorporation by Notice: Website The issue is yet to be encountered by the courts by it is likely it will apply the same principles as the incorporation of terms in an unsigned document or on a sign.A person who is particularly unworldly. providing the issuer took reasonable steps to bring that fact to the notice of people in general. Incorporation by Reference 60 . contract formation. will still be bound by those terms.

regardless of whether the document incorporating those terms is signed by the parties or is a ticket or a sign. Harling v Eddy b) Knowledge or expertise of the statement maker If the party who made the statement is in a better position than the other party to ascertain the accuracy of the statement. However. an excessive or exaggerated claim/s can now be a breach of statute. Trade Practices Act 1974 (Cth) Representation or Term A statement will be a term of a contract if it is intended to be promissory in nature. Mihaljevic v Eiffel Tower Motors Pty Ltd c) Statement maker has control in relation to information A person who has control over the subject matter will be in the position to guarantee the truth of the statements. it is probably a term. Hospital Products Ltd v United States Surgical Corporation d) Oral statement not reduced to writing 61 . Smith v South Wales Switchgear Co Ltd Incorporating oral Terms Mere Puff A “puff” is an exaggerated claim about the subject matter that is not intended to be taken seriously. Oscar Chess Ltd v Williams Hospital Products Ltd v United States Surgical Corporation a) Words and conduct of the parties The words and conduct of the parties can give an indication of intention. A statement will be promissory in nature if the statement maker warrants its truth.Terms contained elsewhere can be incorporated into a contract by reference to those terms. There is no common law consequences that arise from such sales talk. (It is relevant whether the words are promissory in nature as well as the conduct of the parties that indicate the importance of the statement).

it is likely it was intended to form part of the contract. JJ Savage & Sons Pty Ltd v Blakney Where the main contract precedes the collateral contract there can be no contract as past consideration is not good consideration. it is probably not a part of the contract. Heilbut Symons & Co v Buckleton De Lassalle v Guildford Three elements must be established: • • • A statement must be made to induce entry into the contract The statement must be relied upon The statement relied upon must be promissory in nature. Routledge v Mckay All of the previous factors are indicators of intention only.A statement that is made orally but not included when the contract is reduced to writing may be an indication that the parties did not intend it to be contractual in nature. Hercules Motors v Schubert b) Bipartite and tripartite collateral contracts 62 . As illustrated in: Hospital Products Ltd v United States Surgical Corporation If an oral statement later becomes part of the written contract. Routledge v Mckay Collateral contracts a) Nature of a collateral contract A collateral contract is one in which the consideration for a promise is the making of another contract. Failure to reduce an oral statement to writing is not determinative of the matter. Oscar Chess Ltd v Williams e) Interval of time If there is a long interval between making the statement and the conclusion of a contract.

A collateral contract is bipartite where the parties to it are the same as those who enter the main agreement. Waltons Stores v Maher Parole evidence rule Statement of the rule When a contract is reduced into writing. When the rule applies The rule does not apply when the parties intend a contract to be partly in writing and partly oral. which would have the effect of adding to or varying the contract in any way. vary or contradict the writing. Couchman v Hill Regarding the content of the contract: If the parties intended the contract to be wholly in writing. Hoyt’s Pty Ltd v Spencer (There has been criticism of this rule as it does not give effect to the actual intention of the parties) In an appropriate case estoppel may apply. Wells (Merstham) Ltd v Buckland Sand & Silica Co Ltd c) Consistency with the main contract The courts will only recognise a collateral contract if it is consistent with the terms of the main contract. the interpretation of contracts…Here the rule applies to the content). Mercantile Bank of Sydney v Taylor (The rule applies to two aspects: 1. Shepperd v The Council of the Municipality of Ryde A collateral contract may be tripartite where the parties to it are different from the parties in the main contract. it is presumed that the writing contains all the terms of it and evidence will not be admitted of any previous or contemporaneous agreement. 63 . the content of the contract and 2. and the contract appears in the writing to be entire. parole evidence is not admissible to add to.

Narich Pty Ltd v Commissioner of pay-roll Tax (The parole evidence rule prevents the introduction of evidence regarding what happened “before” the agreement was reduced to writing. Maralinga v Major Enterprises NSW Medical Defence Union Ltd v Transport Industries Insurance Co Ltd 64 . even if the parties have signed the agreement. not evidence that the parties “later” agreed to change or end it). (This will depend on why the term is sought to be applied). therefore the rule preventing evidence being led to effect the main contract does not apply to it. Couchman v Hill Exceptions to the rule a) Evidence of a collateral contract The collateral contract is a separate contract. d) Evidence to imply a term The court may hear evidence regarding a term that is one that is implied by the common law. Summers v The Commonwealth e) Evidence necessary for rectification Extrinsic evidence may be allowed to rectify a contract where the agreement can not be regarded as reflecting the common intention of the parties or a mistake in the writing of the contract (such as the wrong price recorded unintentionally). Pym v Campbell c) Evidence that the written contract was later varied or discharged Evidence can be led demonstrating that the agreement has been varied or discharged.Robertson v Kern Land Pty Ltd The intention of the parties is construed objectively. De Lassalle v Guildford b) Evidence that the written contract is not yet in force Evidence that the contract has not yet commenced operation is admissible.

The term must be so obvious that “it goes without saying”. The implication must be necessary to give business efficacy to the contract so that no term will implied if the contract is effective without it.Implied Terms Terms implied to give effect to the presumed intention of the parties a) Term implied on the basis of business efficacy A term that is either so obvious there was no need to express it. The term must not contradict any express term of the contract. it is difficult to suggest that the term omitted is so obvious that it goes without saying. Henry Kendall & Sons v William Lillico & Sons Ltd Relevant to the assessment are . or not thought of by the parties may be implied by the courts in order to successfully carry out the contract.The consistency of the dealings between the parties. The term must be capable of clear expression. and then they make another without expressly without expressly referring to those conditions it may be that those conditions ought to be implied. BP Refinery (Westernport) Pty Ltd v Shire of Hastings Codelfa Constructions Pty Ltd v State Rail Authority of NSW If the parties have gone to some length to reduce their agreement to writing and to ensure it reflects their intentions. • • • • • The implication must be reasonable and equitable. Ansett Transport Industries v Commonwealth b) Terms implied from previous consistent course of dealings If two parties have made a series of similar contracts each containing certain conditions.The number of dealings between the parties. 65 . The Moorcock The following elements must be satisfied before a court will imply a term on the basis of business efficiency. and .

Hillas (WN) & Co Ltd v Arcos Ltd Term implied Irrespective of parties intention e) Term implied as a legal incident of a particular class of contract Terms may be implied as a matter of law in contracts of a particular class.Horrier v Rambler Motors (AMC) Ltd Henry Kendall & Sons v William Lillico & Sons Ltd Chattis Nominees Pty Ltd v Norman Ross Homeworks c) Term implied from custom or usage A term can be implied if there is existence of a particular custom or usage that is recognised as giving effect to the intentions of the parties. Liverpool City Council v Irwin Samuels v Davis Derbyshire Building Co Pty Ltd v Becker Although terms of this kind are implied through necessity.The existence of the custom or trade usage is a question of fact. The term will not be implied if it is contrary to the express terms of the agreement. 66 . the parties may expressly agree to the contrary. (Examples of some of these classes are given at p256 of text). Con-Stan Industries of Australia Pty Ltd v Norwich Winterhur Insurance (Aust) Ltd d) Term implied to complete an agreement A court may attempt to construct the contract by implying the necessary term in order to fill in the gaps and complete an agreement. A person may be bound although they had no knowledge of the term provided the requirements of the second element are established. Sagar v Ridehalge Con-Stan Industries of Australia Pty Ltd v Norwich Winterhur Insurance (Aust) Ltd The following elements must be satisfied before a court will imply a term on the basis of custom or usage: . The custom or trade usage must be so well known that all parties can reasonably be assumed to have imported that term into the contract.

RDJ International Pty Ltd v Preformed Line Products • There is a duty to do all thing necessary to enable the agreement to be completed. Adelaide Petrolium v Poseidon g) Implication of duties of good faith.Byrne v Australian Airlines Ltd Gemmel Power Farming Co Ltd v Nies Derbyshire Building Co Pty Ltd v Becker f) General duty of co-operation It is an implied term of all contracts that each party agrees to do all things necessary to enable the other party to have the benefit of the contract. Sale of Goods Act 1896 (Qld) Trade Practices Act 1974 (Cth) Consumer Credit Code 1994 Hire Purchase Act 1959 (Qld) Insurance Contracts Act 1984 (Cth) Etc. Renard Constructions v Minister for Public Works Butt v McDonald h) Terms implied by statute A term may be implied into a contract by a relevant statute. Butt v McDonald The parties may expressly agree to the contrary. However these terms may be negatived or varied by express agreement. 67 . fair dealing and reasonableness It has been suggested that the courts may be prepared to imply a duty for the parties to act in good faith in preforming a contract. Secured Income Real Estate (Aust) Ltd v St Martins Investments Pty Ltd • There is a duty not to impair the basis of the contract. Butt v McDonald Examples: • There is a duty to comply with reasonable requests.

Secondly. Life Insurance Co of Australia Ltd v Phillips A document is read as a whole. determining the legal effect of those words (Question of law). Hillas & Co Ltd v Arcos Ltd York Airconditioning & Refrigeration (Australasia) Pty Ltd v Commonwealth In giving effect to the agreement: The court will endeavour to be neither to astute nor too pedantic. Hillas & Co Ltd v Arcos Ltd Upper Hunter County District Council v Australian Chilling & Freezing Co Ltd The court will steer clear of meanings that are commercially unworkable or inconvenient.Construction of Terms Interpreting the meaning of terms General approach Construction of contracts may be seen as involving two activities. Hospital products Ltd v United States Surgical Corporation Taylor v Johnson 68 . rather than the subjective or actual intentions of the parties. Hide & Skin Trading Pty Ltd v Oceanic Meat Traders Ltd The court takes an objective approach to interpretation as that of a reasonable third parties view point. George v Cluning Amalgamated Television Services Pty Ltd v Television Corporation Ltd The purpose is to construe the document as to produce what it was ultimately intended for. ascertaining the meaning of the words used (Question of fact). Firstly. Hume v Rundell Lloyd v Lloyd The court does its best to give effect to the parties’ bargain.

its meaning can only be determined by reference to words in that document. Mercantile Bank of Sydney v Taylor (The rule applies to two aspects: 1.Admissible evidence a) The Parole Evidence rule When a contract is reduced into writing. the interpretation of contracts…Here the rule applies to interpretation). Codelfa Construction Pty Ltd v State Rail Authority of NSW In a commercial contract it is appropriate for the court to have reference to the commercial purpose of the contract. Gordon v McGregor Allen v Carbone b) Factual matrix When determining the parties intentions. although if facts are notorious the court may presume knowledge of them. 69 . which would have the effect of adding to or varying the contract in any way. the court may take into account not only the words recorded in the document but also the evidence of the surrounding circumstances Allen v Carbone DTR Nominees Pty Ltd v Mona Homes Pty Ltd The evidence of the surrounding circumstances must be known to both parties. which in turn presupposes knowledge of the way the transaction started. its background. it is presumed that the writing contains all the terms of it and evidence will not be admitted of any previous or contemporaneous agreement. the content of the contract and 2. and the contract appears in the writing to be entire. When a formal document is conclusive of a contract. and the context and market in which in parties are operating. Reardon Smith Line Ltd v Yengvar Hansen-Tangen Codelfa Construction Pty Ltd v State Rail Authority of NSW c) Exceptions to the parole evidence rule • Ambiguity Cases of obvious or underlying ambiguity. It may not always be safe to assume that the words of a document will simply carry their plain or ordinary meaning.

Edwards v Edwards GR Securities Pty Ltd v Baulkham Hills Private Hospital It may also be used to resolve an ambiguity concerning the capacity or the relationship between the parties. Hope v RCA Photophone of Australia Pty Ltd • Identification of parties or their relationship Extrinsic evidence is admissible to resolve an ambiguity concerning the identity of the parties of the agreement. industry or region). Maralinga v Major Enterprises Bacchus Marsh Concerntrated Milk Co Ltd v Joseph Nathan & Co Ltd 70 . even if there is no patent ambiguity. evidence of that meaning is admissible. Gilberto v Kenny • Identification of real consideration Extrinsic evidence is admissible in order to prove/identify the real consideration under a contract. In the appropriate circumstances the document may be rectified so that it accords with the parties’ actual agreement. Pau On v Lou Yiu Long Yaroombe Beach Development Co v Coeur De Lion Investments Pty Ltd • Custom or Usage Where the language used has a particular meaning (eg. White v Australian & New Zealand Theatres Ltd Cf. Summers v Commonwealth Thornley v Tilley • Rectification Extrinsic evidence may be admitted to show that a parties’ intention was not accurately recorded in the written instrument. By custom or usage in a particular trade.White v Australian & New Zealand Theatres Ltd Hope v RCA Photophone of Australia Pty Ltd • Identification of subject matter Extrinsic evidence is admissible to resolve ambiguity about the subject matter of the contract.

Inadmissible Evidence In particular the following extrinsic evidence is inadmissible: a) Subjective intention Evidence of the actual. Prenn v Simonds Cf. that party will have breached the term. taking into account their words and conduct. c) Subsequent conduct Anything that the parties’ say or do after the contract can not be used in order to aid in the construction of the contract Administration of Papua & New Guinea v Daera Guba Codelfa Construction Pty Ltd v State Rail Authority of NSW Legal effect of words: types of terms Promissory terms A promissory term is one pursuant to which a party makes a promise to another party regarding events that will or will not occur in accordance with the agreement. Bowes v Chaleyer Associated Newspapers Ltd v Bancks a) Conditions A condition is a term that is essential to the performance of the contract. or an intermediate term. If the party fails to carry out the promise. Associated Newspapers Ltd v Bancks 71 . Determination of the appropriate term is an objective test of the parties intention. a warranty. The promise is of such importance to the promisee that he would not have entered into the contract without assurance of the performance of the promise. The effect of the breach depends upon whether the term is classified as a condition. subjective intentions of the parties is not admissable Life Insurance Co of Australia Ltd v Phillips DTR Nominees Pty Ltd v Mona homes Pty Ltd b) Prior negotiations The negotiations that preceded the agreement are not permitted as it is only the final document that properly reflects a consensus between the parties. Codelfa Construction Pty Ltd v State Rail Authority of NSW per Mason J. and this ought to have been apparent to the promisor.

Any breach of this type of term will allow the innocent party to terminate further performance of the contract and to claim damages for the breach. L Schuler AG v Wickman Machine Tool Sales Ltd The fact that a term is described in an agreement as a condition. it is implicit in the drafting that a breach of condition in a contract for the sale of goods will have the same effect as a breach of condition under the common law.3 It has also been suggested that this test might also apply at common law. Ankar Pty Ltd v National Westminster Finance (Australia) Ltd Associated Newspapers Ltd v Bancks (Regarding essentiality) The courts may be influenced to construe a term as a condition if a particular construction leads to an unreasonable result. In legislation relating to the sale of goods. the breach of which gives rise to a claim for damages but not the right to reject the goods and treat the contract as repudiated. the courts may be persuaded to construe a term as a condition.14 (2) b) Warranties A warranty is a term that is subsidiary to the main purpose of the contract. 72 . Bettini v Gye Ellul v Oakes  The statutory position. L Schuler AG v Wickman Machine Tool Sales Ltd Associated Newspapers Ltd v Bancks (Regarding essentiality)  The statutory position. Sale of Goods Act 1896 (Qld) s. Sale of Goods Act 1896 (Qld) s. is persuasive not conclusive. An agreement with reference to goods which are the subject of a contract of sale but collateral to the main purpose of such contract. L Schuler AG v Wickman Machine Tool Sales Ltd If damages alone seem to be an inadequate remedy. a breach of which only entitles the innocent party to damages.

Attitude and conduct of the party in breach including the likelihood of the breach persisting Hong Kong Fir Shipping Co v Kawasaki Kisen Kaisha Ltd 73 . Ankar Pty Ltd v National Westminster Finance (Australia) Ltd Hong Kong Fir Shipping Co v Kawasaki Kisen Kaisha Ltd It may be defined as a term capable of a variety of breaches. some serious some trivial. If the breach deprives the innocent party of substantially the whole of the benefit of the contract. Whether damages will adequately compensate the lost expectations of the innocent party. If the court decides it is an intermediate term it then determines the gravity of the breach Bunge Corporation New York v Tradax Export SA (Panama) In order to determine the seriousness of the breach a number of matters may be taken into account: The degree of performance up to the breach compared to the performance required under the contract. Whether the expectations of the party in breach would be unfairly prejudiced by terminating the contract. then the innocent party will be entitled to terminate the contract. the innocent party will only be able to claim damages Associated Newspapers Ltd v Bancks Hong Kong Fir Shipping Co v Kawasaki Kisen Kaisha Ltd The court must first ascertain the intentions of the parties in order to categorise the term.Associated Newspapers Ltd v Bancks c) Intermediate or innominate terms An intermediate term is once that stands between a condition and a warranty and cannot be satisfactorily classified as either. If the effect of the breach is not significantly serious. Bunge Corporation New York v Tradax Export SA (Panama) The remedy for the breach of an intermediate term varies according to the severity of the breach.

Meehan v Jones A party may waive a condition subsequent that is solely for their own benefit Meehan v Jones If the clause is for the benefit of both parties. Perri v Coolangatta Investments Pty Ltd Condition subsequent A condition subsequent is a condition within a contract that has taken effect. the contract may be automatically ended if the event occurs. Raysun v Taylor Where a clause provides for the a contract to be rendered void on the occurrence or non-occurrence of an event. Condition precedent A condition precedent is a condition that will prevent a contract from coming into existence until such time as the condition is fulfilled. “subject to rezoning” or “subject to town planning approval” are conditions subsequent. Meehan v Jones Clauses such as “subject to finance”. and the event is out the control of both parties. Such a clause may only be waived with the consent of both parties.The decision in Hong Kong Fir Shipping case also applies to a contract for sale of goods. either may be able to terminate. However the performance of the contract is prevented until the condition is fulfilled. 74 . Cehave NV v Bremer Handelgesellschaft mbH Contingencies Since a contingency clause may be able to be construed as either a condition precedent or a condition subsequent the essential question is what effect does the contingency have on the contract. Perri v Coolangatta Investments Pty Ltd Under appropriate circumstances a party may be estopped from relying upon a contingency.

A limitation to the extent of liability to a particular maximum amount. such as the commencement of any suit or the giving of notice of a default within a certain time. Darlington Futures Ltd v Delco Australia Pty Ltd Specific rules of construction There are also a number of specific rules of construction that help to interpret an exemption clause. on the true construction of the clause it covers the liability that has arisen. Darlington Futures Ltd v Delco Australia Pty Ltd Exemption clauses may involve the determination of two separate issues: • Whether the clause forms part of the contract (This is covered earlier in “Incorporating Written Terms”).Carpentaria Investments Pty Ltd v Airs A clause such as “subject to contract” is usually categorised as a condition precedent but it will depend on the intention of the parties Exemption clauses There are three main types of exemption clauses: 1. Darlington Futures Ltd v Delco Australia Pty Ltd 3. Liability may be subject to certain preconditions. Eg. Thomas National Transport (Melb) Pty Ltd v May & Baker (Aust) Pty Ltd 2. An exemption clause is determined by construing the clause according to its natural and ordinary meaning. New Zealand Shipping Co Ltd v A N Satterthwith & Co Ltd The court must apply the same rules of interpretation regardless of the kind of exclusion. • Whether. Thomas National Transport (Melb) Pty Ltd v May & Baker (Aust) Pty Ltd a) The Contra Proferentem rule 75 . read in light of the contract as a whole. Eg. A complete exclusion of a parties liability Eg.

if it expressly or impliedly covers such liability. Thomas National Transport (Melb) Pty Ltd v May & Baker (Aust) Pty Ltd • Rules regarding attempts to exempt negligence The Privy Council in stated the following rules in: Canada Steamship Lines Ltd v The King i) Express exclusion is effective. that were intended to protect them. Thomas National Transport (Melb) Pty Ltd v May & Baker (Aust) Pty Ltd Darlington Futures Ltd v Delco Australia Pty Ltd b) Attempts to exempt negligence A clause will relieve a party of liability for negligence of their own or the servants or agents.An exemption clause will be construed according to which parties benefit the clause was inserted for in case of ambiguity. White v John Warwick & Co Ltd For the first rule to apply it there would have to be the use of the word negligence or a close synonym. the clause will be read as applying only to that other ground of liability and will not operate to exclude the claim for negligence. Thomas National Transport (Melb) Pty Ltd v May & Baker (Aust) Pty Ltd Council of the city of Sydney v West Davis v Pierce Parking Station Pty Ltd 76 . A term will cover such liability if there can be no ground of liability other than negligence to which it could refer. Smith v South Wales Switchgear Ltd c) The four corners rule A person can only rely on the conditions of a contract. Alderslade v Hendon Laundry Ltd iii) If the words used in the clause are wide enough to cover negligence. ii) Where the “only” possible cause of action against the defendant is an action for damages based on negligence. then the court will interpret a “wide” clause to cover the defendant’s liability for negligence. but there is some other ground of liability other than negligence. if they have carried out the contract in the way that they had contracted to do.

Faramus v Film Advertises’ Association 77 .In Queensland the court has no power to disallow an exemption clause on the basis that it is unreasonable.

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