EXPRESS TERMS

Express terms are those terms that are clearly and obviously stated in a written or spoken form
within an agreement.
An oral agreement is just as much a binding agreement as a written one, but may be harder to
prove if there is a dispute.
In an oral or verbal contract, the court has to determine objectively from the evidence what was
said by each party and which party's account more accurately indicates what transpired, and,
thus, what can be said as to their agreement."
Example: Buckenara v Hawthorn Football Club Ltd [1988) VR 39.
FACTS:
• Buckenara (a professional footballer) under contract to the Hawthorn Football Club [the
club] for the 1985 and 1986 league football seasons. At the end of the 1986 season, he
sought, for family reasons, to return to his home state of Western Australia to play for the
newly formed West Coast Eagles.
• The club's chief executive officer [CEO) had earlier orally exercised an option in the
contract for Buckenara to play exclusively for the Hawthorn Football Club.
• Buckenara claimed that he verbally agreed with the CEO of the club that he would be
released to return to Western Australia.
• The club refused to release him, so Buckenara brought an action alleging breach of
contract and restraint of trade.
HELD:
• The court accepted the recollection and oral evidence of the CEO as to the valid exercise
of the option in the contract; it did so after considering the circumstances and conduct of
the parties involved. Buckenara could not play for any other AFL club.
Effect of contracts that are evidenced in writing:
• As this case shows, verbal arrangements can create evidentiary problems for the court,
which must, if the evidence is conflicting, decide which version of the facts is to be
preferred.
• These problems could be eliminated if the contract - or, in this case, the option - is put in
writing, and the terms are stated expressly in a considered fashion.
• Where the contract is stated in writing, it will be a matter of identifying those terms and
then construing the meaning of those terms to determine the parties' intentions.
PAROL EVIDENCE RULE AND EXCEPTIONS
If a contract is in writing, then a court is likely to apply the parol evidence rule and assume that
all terms of the contract are contained in the written document.
Thus, neither party to a written contract is then able to suggest, or seek to introduce extrinsic
evidence, that there are further written or oral terms that have not been included.
EXAMPLE: The judge in Mercantile Bank of Sydney v Toylar, specifically outlined the parol
evidence rule:
HELD: [W]here a contract is reduced into writing, where the contract appears in the writing to
be entire, it is presumed that the writing contains all the terms of it, and evidence will not be
admitted of any previous or contemporaneous agreement which would have the effect of adding
to or varying it in any way.
If there is a written contract between the parties, neither party can give verbal evidence
calculated to add extra written terms or clauses to the agreement, or modify its terms.
Parol evidence, however, is not confined only to oral evidence and is extended to cover other
extrinsic materials such as draft agreements, letters or memoranda that may add to, vary or
contradict the written agreement.
In more recent times, the courts have exercised greater flexibility in their approach to the parol
evidence rule, as shown in Equuscorp Pty Ltd v Glengallen Investments Pty Ltd.
The High Court took an objective approach to the facts of the case and considered the parties
pre-contractual conduct. The court found the conduct was contrary to the written documents,
and concluded that the signed contract superseded the previous inconsistent oral agreement.

EXCEPTIONS TO THE PAROL EVIDENCE RULE

Exception 1:
A court will allow evidence to show that customary or trade usage is part of a contract, even
though it is not included in its express terms.
This applies in commercial transactions, where the parties often sign very brief documentation,
though other rules may be inferred into the transaction.
This first exception to the rule was confirmed in the case of Hutton v Warren where an evicted
tenant succeeded in establishing a right, accepted in local custom, to be reimbursed for the cost
of seed and labour incurred in farming the land, notwithstanding the absence of any such
provision in the lease.
Exception 2:
If the written agreement is subject to a verbal agreement amounting to a 'condition precedent'
previous to the operation of the agreement, evidence to prove the preexisting verbal agreement
is admissible.
Pym v Campbell (1856) 6 EI & BI 370
FACTS:
• Pym orally negotiated to sell an interest in a machine he had invented. The parties were to
meet and Pym was to explain the operation of the machine; if the machine was approved by two
of Campbell's engineers, Campbell would buy an interest. Pym did not attend the meeting and
only one engineer approved the machine.
• The parties then signed, but the agreement would only become a binding contract if the other
engineer approved the machine, otherwise there was no contract. The other engineer did not
approve the machine."
• Pym claimed there was a binding contract and the earlier oral evidence could not be used to
disprove this.
ISSUE:
• Whether the earlier oral evidence could be used to determine whether the parties had a binding
contract.
HELD:
• Despite the condition precedent concerning approval, the court allowed evidence of the verbal
condition to be adduced, and held that the written contract was not to apply until the condition
was satisfied. Following acceptance of the oral evidence, the court found in favour of Campbell
who was able to repudiate the written contract.

Exception 3
If the written agreement does not contain all of the terms agreed to by the parties, verbal
evidence of other (oral) terms might be allowed.
A court must decide whether the written contract is complete, or whether there is some other
term missing from the written document.
The party seeking to rely on a verbal promise or warranty that is not included in the written
contract is essentially claiming that the contract is partly written and partly oral.
Example:
Van Den Esschert v Chappell [1960] WAR 114
FACTS:
• Before signing a contract to purchase a house, Ms. Chappell asked the vendor for an assurance
that the house was free from white ant infestation. The seller assured Chappell that the house
was free of white ants.
• Chappell signed the contract, and completed the purchase. Some months after she moved into
the house, she discovered that there were white ants in the house. She sued Van Den Esschert
for the cost of eradicating them.
• Van Den Esschert pleaded the parol evidence rule, pointing out that the contract contained no
terms referring to assurances as to an absence of white ants, with the result that his assurance
was not a term of the contract, and he was, therefore, not liable.
ISSUE:
• Whether the oral assurance as to the house being free of white ants formed part of the contract.
HELD:
• The court held that the statement did form part of the transaction. A term of the contract had
been breached by the vendor the court ordered him to pay the costs of rectification.
In Von Den Esschert v Chappell, two critical factors were apparent in the judgment in this case.
1. The timing of the relevant statement (promise) made by the vendor; it was made
immediately before signing, thus limiting the buyer's opportunity to include the term in
the written contract. The purchaser would have included the term in the written contract,
except for the vendor's promise about the absence of white ants.
2. The relative importance of the statement in the context of the transaction. The purchaser
asked a question about the structural integrity of the house that she was about to buy, not
some rather inconsequential matter such as the frequency of garbage collection.
The inference was that if either of these factors (timing and importance of the statement) had
been absent, the exception to the parol evidence rule would not have been applied.
Exception 4:
If the terms of the written contract are ambiguous, oral evidence can be given to remove such
ambiguity.
Exception 5:
Similar to the fourth exception, if there is a clear mistake in the written contract, oral evidence
will be allowed to rectify the mistake and show the intention of the parties and the correct nature
of the contract.
Exception 6:
Oral evidence will be allowed to properly identify the parties to the contract. In Giliberto v
Kenny, in a contract for the sale of land, the purchaser was described as 'Mrs Kenny and Mr
Kenny', though the contract was signed 'Mrs Kenny'.
The court permitted admission of extrinsic evidence to show whether Mrs Kenny was acting for
herself as well as acting for her husband. Another example where this situation can occur is if
one of the parties is a company and the parties are negotiating a pre-registration contract for the
company that is not yet registered.

Statements or representations may form part of the contract.

Representations that are terms of the contract are binding on the parties. If a representation is a
term and is false, then another party may sue for breach of contract.
A court may need to decide which representations are part of a contract and which are not.
Where there is a false representation that becomes part of the contract, the breach of contract
will allow the party suffering the breach to seek a remedy.
Whether a representation becomes a term of the contract depends on the words and conduct of
the parties,
Oscar Chess Ltd v Williams [1957] l WLR 370
FACTS:
• Williams owned a Morris 10 car and was negotiating with Oscar Chess Ltd, a car dealer, to
trade in his car on the purchase of a new Hillman. During discussions, Williams said that his
Morris was a 1948 model. He based this belief on the car's logbook, which he produced to the
salesman.
• It later transpired that the logbook had been interfered with by one of several previous owners
and the car was a 1939 model, but Williams was unaware of this fact.
• The contract for the purchase of the new car was completed and Williams was given the
appropriate trade-in allowance on a 1948 Morris.
• Sometime later, the dealer discovered the error, realised it had overvalued the traded vehicle,
and sued Williams for breach of warranty (as to the age of his trade-in).
ISSUE:
• Whether a statement as to the age of the vehicle was a term of the contract or a mere
representation that did not form part of the contract.
HELD:
• The court held that a statement as to the age of the vehicle was a mere representation and not
a term of the contract. Damages could not be awarded for breach of warranty, since it was not
a warranty.
The judges in Oscar Chess Ltd v Williams, in a split decision, decided that the statement by
Williams was not part of the contract because:
• his representation was correct according to the known facts at that time;
• the statement was never reduced to writing; and
• Williams had little skill or knowledge in relation to automobiles.
The statement was an opinion and not a promise or assurance; the dealer, in fact had greater
experience and knowledge and should have checked.
In Dick Bentley Productions Pty Ltd v Harold Smith (Motors) Pty Ltd, which also involved
the sale of a motor vehicle, the court held that the incorrect statement as to the miles done by
the vehicle, though innocently made, was a term of the contract. The court was of the view that
the car dealer was in a position to know or find out the history of the car.
In Ellul v Oakes, the plaintiffs purchased a house from Oakes after having relied on the real
estate agent's listing form, signed by Oakes, which stated that the property was sewered, when
it was not. The Elluls were successful in an action for breach of contract, arguing that the
statement was a term of the contract and that it induced them to purchase the property.
Summary: The courts, when deciding if a statement forms part of an overall contract, will look
at:
• the timing of the statement;
• whether a written contract was prepared
• whether an oral statement was included with the written contract;
• the skill and knowledge of the person making the statement;
• the skill and knowledge of the person receiving the statement; and
• the relative importance attached to the statement by the parties.
COLLATERAL CONTRACTS
A collateral contract is a contract that is separate from, but related to, the main contract, the
consideration for which is the making of the main contract.
A collateral promise is made by one party, and the other party enters into the main contract
because that collateral promise has been made to them.
The concept, application and requirements of collateral contracts can be seen in:
De Lassalle v Guildford [1901] 2 KB 215
FACTS:
• The plaintiff and defendant entered into a lease of certain premises. Just before exchange of
contracts (the point in time when written contracts are formed), the tenant asked the landlord
for, and was duly given, an assurance that the drains of the property were in good working order.
• On the basis of that assurance, the tenant exchanged contracts and took possession of the
property. It transpired that the drains were, in fact, defective.
• The landlord relied on the parol evidence rule: the lease was silent on the question of the
condition of the drains. The tenant argued that there was a collateral contract, an untruthful
promise that was accepted as an agreement, before the entering of the main contract.
• The collateral promise (contract] had been breached, and the plaintiff, as a tenant, was entitled
to dam ages for breach of the collateral contract.
• The landlord claimed there was no consideration for the collateral promise moving from
himself to the promisee [the tenant).
• The tenant claimed the consideration for the collateral promise was provided by the tenant
entering into the main contract (the lease). He entered into the main contract (the lease) only
because the landlord made the collateral promise. If the promise had not been made, he would
not have leased the premises.
ISSUE:
• Was the collateral promise about the drains binding?
HELD:
• The court held that the defendant's assurance about the state of the drains was a collateral
contract. The consideration for the promise was demonstrated by entering into the lease. The
court awarded dam ages for breach of collateral contract.
The courts impose limitations on the use of the collateral contract argument, requiring that the
collateral contract must be consistent with the main contract to which it is collateral, and also
that the making of the collateral promise was the reason, not one of the reasons, why the main
contract was entered into.
Inconsistency between the collateral contract and main contract will negate the collateral
contract. In Gates v City Mutual Insurance Society Ltd, the court held that a statement made
about occupational disability coverage of an insurance policy was not consistent with the
express provisions in the contract that only covered total disability.

The need for consistency is also illustrated in:

Hoyt’s Pty Ltd v Spencer (1919) 27 CLR 133
FACTS:
• Spencer leased premises which he then sublet to Hoyt's for four years under a written sublease,
which provided, inter alia, that Spencer could terminate the sublease by giving four weeks'
notice to Hoyt's Pty Ltd (Hoyt's).
• The parties had agreed verbally that Spencer would not exercise this right of early termination,
unless he (Spencer] was given notice to terminate the lease under his own lease with the owner
of the premises.
• Spencer gave four weeks’ notice to Hoyt’s without himself having received notice (of early
termination] from the owner. Hoyt's claimed Spencer could not terminate the lease, arguing they
had a collateral contract.
ISSUE:
• Would a previous agreement with a different term overrule what was in the written contract?
HELD:
• The High Court rejected Spencer’s argument because the collateral contract that Hoyt’s was
seeking to enforce was inconsistent with the term in the written lease, which contained terms
that gave Spencer the clear right to terminate on four weeks' notice to Hoyt's.

In the recent High Court case of Crown Melbourne v Cosmopolitan Hotel (Vic) Pty Ltd, the
High Court, by a majority, held that the there was no collateral contract created by Crown
Melbourne (Crown), the landlord of leased premises, by the statement that the tenants would be
'looked after', during the course of renewal of lease negotiations. The court found that the
statement could not be understood to bind Crown to offer a further five-year lease. This was
because the statement did not have the quality of a contractual promise as Crown clearly retained
discretion to decide new terms at the renewal, and there was no evidence about Crown's future
conduct.

While the general rule is that the collateral contract must be consistent with the (relevant term
of the) main contract, there appears to be a qualification to this rule if the term of the main
contract is an exclusion clause, as shown in:
J Evans and Son (Portsmouth) Ltd v Andrea Merzario Ltd [1976] 2 All ER 930
FACTS:
• J Evans and Son (Portsmouth) Ltd [Evans], an importer of merchandise, retained Andrea
Merzario Ltd (Merzario] as its sea carrier of goods. When Merzario converted to containers, it
promised Evans that all goods transported for Evans in containers would be stowed below decks.
This was a collateral agreement for Evans giving Merzario the business of carrying its goods at
sea.
• Goods being shipped by Merzario for Evans were stowed on deck and lost at sea. Evans sued
Merzario and sought to rely on an exclusion clause in its main contract that effectively exempted
Mezario from liability for loss, and gave Mezario total control over the location [on the vessel]
of goods being shipped for Evans. There appeared to be a direct conflict between the collateral
promise in this case and the exclusion clause in the main contract.
ISSUE:
• If the general rule requiring consistency were applied, whether Evans would be unable to rely
on the collateral promise, or the promise constituting the collateral contract.
HELD:
• The court found in favour of Evans, holding that, if it rejected Evans's claim, the collateral
promise would be totally meaningless. This was the view taken by Lord Denning, which is not
easy to reconcile with the approach taken by the High Court in Hoyt's Pty Ltd v Spencer, except
on the basis that exclusion clauses should be treated differently from other clauses in the main
contract. The other two judges also found in favour of Evans, but for a different reason, namely
that the verbal promise to Evans formed part of the main contract (as distinct from being
collateral to it), and Evans was entitled to damages.

Lord Denning had previously adopted a similar approach in Mendelssohn v Normand Ltd, a
case involving valuables stolen from a car in a car park. The attendant had assured the owner of
the vehicle that it would be locked, then left the car unlocked. The owner recovered damages,
despite the existence of an exclusion clause in the parking contract.
A party seeking to enforce a collateral promise must also show that they entered into the main
contract on the basis of the collateral agreement; that is, the collateral promise (or undertaking]
was their motivation (and consideration) to enter the main contract.
Example: J J Savage & Sons Pty Ltd v Blakney (1970) 44 ALJR 123
FACTS:
• Blakney entered into a contract to purchase a motor cruiser from J J Savage & Sons Pty Ltd
(Savage], a Williamstown boatbuilding company.
• A cruiser was to be built to Blakney's specifications. Before signing the contract, Blakney had
discussions with Savage concerning the choice of a marine engine to be fitted to the cruiser,
pointing out that he wanted the cruiser to be capable of maintaining a defined maximum cruising
speed.
• Savage did not manufacture marine engines, but, in response to Blakney's enquiry, wrote to
him listing three alternative engines, all of which would, in its judgment, satisfy Blakney's
specific requirements. Blakney chose an engine based on the advice of Savage.
• The completed cruiser proved to be incapable of maintaining the speed nominated by Blakney.
He sued Savage alleging breach of collateral contract. The main contract for the building and
sale of the cruiser to Blakney was silent on the question of maximum speed. The letter
containing the engine recommendations was received by Blakney some time before the contract
[for the cruiser purchase) was entered into by Blakney.
ISSUE:
• Was the opinion of Savage regarding the different engines a collateral promise?
HELD: • Blakney's action failed in the High Court. Having examined the facts, the High Court
took the view that Blakney could have:
- made it a condition of the contract that the desired speed was achievable, entitling him
to sue for dam ages for breach of condition when it emerged that it was not achievable
- extracted a promise from Savage that the desired speed was achievable, which clearly
would have entitled him to sue for breach of collateral contract; or
- made his own judgment on the question of engine selection based on Savage’s
recommendations. This was the option that the High Court decided he had exercised.
• Having decided that he acted on a recommendation, as distinct from a promise by Savage, the
High Court rejected the collateral contract argument.
UNCERTAIN TERMS
If a term of a contract is capable of different interpretations, it is said to be uncertain.
If a term is unclear, then it may be meaningless and the contract void for uncertainty. Courts
will first attempt to uphold a contract.
Courts faced with an uncertain term will first attempt to make an objective assessment of the
intentions of the parties.
In C N W Oil [Australia] Pty Ltd v Australian Occidental Pty Ltd, the High Court was called
on to interpret a term of a written agreement that was theoretically capable of two
interpretations, with different interpretations being adopted by each of the two parties to the
contract.
In the English case of G Scommell & Nephew Ltd v H C and J G Ouston, and the Australian
case of Whitlock v Brew, the courts were unable to save the contracts involved in those cases,
because the terminology used by the parties in the written contracts was so vague that the court
could not ascribe any sensible meaning to the words used by the parties.
G Scammell & Nephew Ltd v H C and J G Ouston [1941] AC 251
FACTS:
• Ouston ordered a truck from Scammell and the contract stated that after the allowance for the
trade-in, 'the balance of purchase price can be had on hire-purchase terms over a period of two
years'. At the time, 'hire-purchase' was a new concept and unusual.
• The dealer wanted to escape its obligations under the contract, and claimed that the words
'hire-purchase terms' were not sufficiently clear, and that the contract was therefore void for
uncertainty. The buyer, however, wished to proceed with the purchase of the truck under the
contract.
ISSUE:
• Could the contract be ended on the grounds that the term 'hire-purchase' was uncertain?
HELD:
• The contract was void for uncertainty.
• The House of Lords found the words incapable of precise definition, in the sense that the words
were vague and unintelligible, and the court noted that a 'startling diversity of explanations' had
been put to the court by the parties themselves (by their respective counsel) as to what the actual
bargain was.
• Lord Wright said in his judgment: The law has not defined and cannot of itself define what
are the normal and reasonable terms of a hire-purchase agreement. Though the general character
of such an agreement is familiar, it is necessary for the parties in each case to agree upon the
particular terms.

In Whitlock v Brew, the appellant agreed to sell land to the respondent. Special condition 5 of
the agreement provided that the respondent would lease the petrol station situated on the land
to Shell Co 'on such reasonable term s as com m only govern such a lease'. The High Court held
the agreement was void because the special condition central to the agreement was uncertain
and could not be severed from the agreement to order to try and save the contract.

The principles of uncertainty can extend to contracts containing terms to negotiate in good faith;
that is, to negotiate honestly or without bad faith. The House of Lords in Walford v Miles held
that these terms are uncertain and unenforceable.

If agreement can be established despite the uncertain or meaningless term, the court might sever
the term from the contract, leaving the balance of the contract intact. In Fitzgerald v Masters,
the High Court decided that the offending clause in the contract was indeed severable from the
contract, leaving the remainder of the contract intact. The courts generally see the preservation
of a contract as preferable to declaring the entire contract void for uncertainty - especially in
commercial transactions. Severance, however, is not always possible. The court will only sever
the offending clause if the remainder of the contract makes sense without it, though this may
not always be possible.

CONDITIONS, WARRANTIES AND INTERMEDIATE TERMS

Generally, once a statement is a term of a contract, it is up to the court to consider the term and
decide the importance of the term in the context of the contract.
The terms of a contract can be divided basically into two categories, conditions and warranties,
though there is said to be a third category, innominate terms.
The Trade Practices Amendment (Australian Consumer Law) Act (No 2) 2010 [Cth] 'conditions'
and 'warranties' implied under the Australian Consumer Law (ACL) refer to implied 'guarantee
of acceptable quality' or 'consumer guarantee'.
• CONDITIONS
A condition is an important term of the contract and central or fundamental to the essence
of the contract. A term that is a condition gives essential meaning to the agreement. If a
 condition is breached (not completed), then the party suffering the breach can rescind
(end) the contract as well as seek damages for any losses suffered.

• WARRANTIES
A warranty is a term of the contract, but is less important than a condition. If a warranty
is not fulfilled, the contract would still have meaning. If a warranty is breached, a party
cannot rescind the contract and can only seek damages for losses suffered.

• INNOMINATE TERMS
An innominate term is one that is an intermediate type of term that falls somewhere
between a condition and a warranty. An innominate term is determined by analysing the
consequences of the breach of the term. A court may allow a party to either rescind the
whole contract or seek damages, depending on how severe the effect of the breach of the
innominate term is.
Cases that illustrate the distinction between a condition and a warranty are:
1. Bettini v Gye (1876) 1 QBD 183
FACTS:
• A contract was formed between an opera singer (Bettini) and a promoter (Gye), under
which Bettini was to perform in a number of productions over a period of approximately
three months

• A term of the contract required that Bettini would arrive in London six days before the
date of the first performance for rehearsals.

• Due to illness, Bettini in fact arrived only two days before the date of the first
performance.

• Gye refused to complete the contract, which he could do validly only if the term
requiring Bettini to arrive six days before production was a condition.

ISSUE:
• Whether the term represented a warranty or condition.

HELD:
• The court, after examining all aspects of the transaction, held the requirement of six
days was a term that was a warranty, taking the view that the term was of lesser
significance than a condition, and was not central to the contract.
 • Gye could not repudiate the contract, but was entitled to damages.

2. Poussard v Spiers & Pond (1876) 1 QBD 410

FACTS:
• Madam Poussard was an opera singer, who was contracted to sing in a performance due to
commence on 28 November 1874. Due to illness, she did not attend until 4 December 1874.
• The promoters engaged a replacement singer who took Poussard's place and received a
contract to perform her part.
ISSUE:
• Was the later arrival, after the performance date, a breach of condition allowing for the ending
of the contract?
HELD:
• A judge, Blackburn J, who had also adjudicated in the case of Bettini v Gye, found that the
term of the contract specifying the date of the first performance was a condition, not a warranty.
The promoters were therefore entitled to repudiate the contract and engage another singer.
Attendance on the commencement of the concert season to sing was a fundamental term of the
contract and, therefore, a condition.

Another case that illustrates the problem with the distinction between a condition and a
warranty is:
Associated Newspapers Ltd v Bancks (1951) 83 CLR 332
FACTS:
• Bancks was the creator of the cartoon character 'Ginger Meggs', and was retained by
Associated Newspapers to complete a series of the cartoon for insertion in the comic section of
a Sunday newspaper.
• It was a term of the contract that Ginger Meggs would appear on the front page of the lift-out
comic section of the paper.
• Because of industrial problems resulting in a newsprint shortage, the design of the comic
section was changed; for several weeks, Ginger Meggs appeared on pages other than the front
page.
• An angry Bancks refused to have anything further to do with the contract.
• Bancks could only rescind the contract if the term was a condition which entitled him to
repudiation, otherwise it was a warranty entitling him to dam ages only.
ISSUE:
• Had the newspaper breached a condition by not placing the cartoon on the front page of the
lift-out comic section?
HELD:
• The High Court found that the term was a condition, and that Bancks was entitled to repudiate
the contract. The court's motivation in coming to this decision was that, in the context of the
contract, the requirement of page one publication was critical to Bancks and a factor that
induced him to agree to the contract in the first place. Without this term, he would not have
accepted the offer.

'Innominate' or 'intermediate' terms refer to a term that does not simply fit categorisation as a
warranty or condition per se, but must be assessed rather from the perspective of their breach in
different situations.
Innominate terms are explained in the judgment of Lord Diplock in Hong Kong Fir Shipping
Co Ltd v Kawasaki Kisen Kaisha Ltd.
Fact: the plaintiff chartered a ship to the defendants for 24 months.
The contract provided that the ship be fitted for ordinary cargo service. The ship and its engine
were old and run by incompetent staff.
Significant time was lost due to engine trouble and the defendants repudiated the contract.
Lord Diplock essentially took the view that it was too simplistic to limit the categories of terms
to only two - conditions and warranties - and that the limitations imposed by this simplistic
approach can be largely removed by allowing for a third category of terms lying somewhere
between conditions and warranties, such terms having the characteristics of conditions at certain
times, and of warranties at other times. The court found that the defendants had wrongfully
repudiated the contract and they should have sought remedy by way of damages. The plaintiffs
were entitled to damages for the defendant's wrongful repudiation.

CONDITIONS PRECEDENT AND SUBSEQUENT

A condition precedent is a term in a contract that means the contract is not intended to come
into existence until an external event specified in the term occurs.
An example would be if a lessee [tenant] entered into a lease of commercial premises, but the
lease was expressed to be subject to the issue by the relevant planning authority of a permit for
the use of the premises required by the tenant.
A condition subsequent, on the other hand, is an external event that, if and when it occurs,
brings the contract to an end. It could be, for example, a condition in a contract for the sale of
goods specifying that the buyer may return the article and obtain a refund of the purchase price
should the product be unsatisfactory.
Example: Head v Tattersall (1871) LR 7 Exch 7
FACTS:
• The plaintiff (Head) entered into a contract to buy a horse from the defendant. The horse was
sold with a warranty, included in the contract, that it had hunted with the Bicester and Grafton
hounds.
• The warranty provided that, if this proved to be untrue, the buyer could return the horse and
obtain a refund of the price, provided he did so within a defined time.
• The buyer (Head) established that the warranty was not true, and returned the horse within the
time specified in the contract.
• When the seller refused to treat the contract as terminated by the condition subsequent and
refund the purchase price, the buyer sought a declaration from the court that the contract had
been terminated by operation of the condition subsequent.
ISSUE:
• The skills possessed by the horse were, in effect, a condition subsequent. Could the contract
be cancelled once the buyer had established the term was not true?
HELD:
• The court granted the declaration sought and held that Head was entitled to the return of the
money because the seller's warranty, a condition subsequent, had the effect of terminating the
contract.

Subject to finance clauses are used to protect the purchaser, who can seek to rely on the clause
and avoid contractual liability where they have been unable to obtain finance. The High Court
of Australia examined the question of 'subject to finance' in the case of Meehon v Jones;
however, in this case it was the vendor (seller] who sought to invoke the clause to avoid
contractual liability to the purchaser so as to onsell the property to another party.
Meehan v Jones (1982) 149 CLR 571
FACTS:
• Meehan purchased land at Roma in Queensland from members of the Jones family. The
contract was expressed to be subject to Meehan or his nominee receiving approval for finance
‘on satisfactory terms and conditions in an amount sufficient to complete the purchase
hereunder'.
• The contract, which was also subject to other conditions, was to be null and void and at an end
if the conditions were not satisfied by 31 July 1979.
• The finance clause did not specify the amount of loan required and the other data usually
thought to be essential in such a term.
• Meehan notified the vendors on 30 July 1979 that finance had been approved, but on 13 July
1979, Jones attempted to rescind the contract by relevant notice of rescission. On 23 July 1979,
Jones signed a contract to sell the land to an alternative purchaser.
• Meehan's action for specific performance of the contract with Jones failed both in the first
instance and then on appeal in the Supreme Court of Queensland. He appealed to the High Court
on the grounds that the finance clause W3S void for uncertainty.
ISSUE:
• Was the condition subsequent so vague that the contract was void for uncertainty so that Jones
could rescind?
HELD:
• The High Court concluded that the finance clause was not void for uncertainty; that Meehan
had obtained the finance that he required within the time specified in the contract; and that he
was, therefore, not in breach of the terms of the contract.
• The attempted rescission was, therefore, invalid. The court concluded that the primary object
of a finance clause is to benefit or protect the purchaser by ensuring that they are not under a
binding contract to complete if unable to obtain finance.

EXCLUSION CLAUSES： EXEMPTION AND LIMITATION CLAUSES

An exclusion clause is a term in a contract that has the purpose of either excluding totally, or
limiting in some way, the liability of one of the parties to the contract if they should breach the
contract.
Within the broad category of exclusion clauses, there are exemption clauses (which exempt one
party totally from liability] and limitation clauses (which limit such liability to a specified
amount).
Exclusion clauses generally attempt to diminish the rights of certain parties under the contract.
The courts will generally 'read down' an exclusion clause against the party relying on it. The
courts use the contra proferentem rule, which means that the clause is interpreted against the
party relying on it.
Courts tolerate the use of exclusion clauses to a certain extent because of the doctrine of
‘freedom of contract’.
However, exclusion clauses by their very nature are often quite destructive of rights, and parties
(usually customers] make the discovery - often too late - that their rights have been significantly
eroded by a limitation clause or even totally removed by an exclusion clause.
In addition, there is often a power imbalance whereby a party may have to agree to unreasonable
terms or they are unable to access goods and services.

EFFECT OF SIGNATURE
When a person signs a contract, they are presumed to have read and understood the contract and
are bound by all the terms, including any exclusion clause, whether or not the document was
actually read.
Example: L’Estrange v F Graucob Ltd [1934] 2 KB 394
FACTS:
• Mrs L'Estrange purchased a vending machine from Graucob and signed a standard form sales
agreement that was countersigned by Graucob and constituted the written contract relating to
the purchase.
• The contract contained a number of clauses that she had not read.
• The contract contained a clause that amounted to a waiver of her rights under the Sale of
Goods Act 1893 [UK] (Goods Act] and stated: 'This agreement contains all the terms and
conditions under which I agree to purchase the machine specified above, and any express or
implied condition, statement or warranty statutory or otherwise is hereby expressly excluded'.
• The implied terms under the Goods Act that would have applied to the sale of the machine,
providing that goods would be of merchantable quality and fit for their purpose, were expressly
excluded. A machine was duly delivered, but was defective.
• The buyer sued the seller, seeking to rely on the Goods Act's implied terms. The seller's
defence was that the implied terms could not apply since the contract specifically excluded their
application.
• The buyer claimed the exclusion clause did not apply because she did not read the contract
before signing.
ISSUE:
• Was the exclusion clause valid when the party signing had not actually read the agreement?
HELD:
• The court held that the purchaser was bound by the exclusion clause, notwithstanding the fact
that she had not read it before signing the contract.
In the words of Scrutton LJ:
... [T]he plaintiff having put her signature to the document and not having been induced
to do so by any fraud or misrepresentation, cannot be heard to say that she is not bound
by the terms of the document because she has not read them.

An exemption clause in a signed contract may not be enforceable if there has been fraud or
misrepresentation regarding the nature of the exemption clause. If the nature, scope or effect of
the exclusion clause is misrepresented by the party seeking to invoke the protection of the
clause, they may be prevented from relying on the clause.
Example: Curtis v Chemical Cleaning & Dyeing Co [1951] 1 KB 805
FACTS:
• Mrs Curtis took a satin wedding dress to be cleaned by the defendant, and was asked by the
shop assistant to sign a slip of paper headed ‘receipt’.
• Mrs Curtis did not read the paper, but asked the assistant why her signature was required. To
this, the assistant replied that the cleaning company did not accept responsibility for damage to
beads and sequins.
• Mrs Curtis signed the form. When she returned to collect the dress, it had been irreparably
damaged in the cleaning process.
• Mrs Curtis claimed the value of the dress, but it then emerged that the form that she had signed
was not limited to damage to beads and sequins, but absolved the cleaner from responsibility
for any damage to clothing, however it was caused.
• The cleaner relied on the rule in L'Estrange v Graucob and, further, on the exclusion clause,
which Mrs Curtis had chosen not to read.
• Mrs Curtis claimed the exception to the rule contemplated by Scrutton LJ in his judgment in
that case, namely misrepresentation of the effect of the clause.
ISSUE:
• Was Mrs Curtis bound by the exemption clause that she had signed but not read?
HELD:
• The Court of Appeal held that Mrs Curtis was entitled to damages, and that the exclusion
clause did not assist the company because it was accompanied by an oral misrepresentation.

The only other method of escaping the operation of the signature rule, apart from
misrepresentation, is by invoking the legal doctrine of non est foctum.
Non est foctum requires that the party signing a document show they were under the mistaken
impression that they were signing a document of a totally different character.
Non est foctum is difficult to invoke, since the party claiming the doctrine must prove the
document they signed is substantially different in its very nature, not just in detail; and, further,
that by signing they were not just being careless.
The difficulty of establishing non est foctum can be seen in the case:
Gallie v Lee [1971] AC 1004
FACTS:
• Mrs Gallie, a 78-year-old widow, was convinced by her nephew to transfer to him her
leasehold interest in her house. Mrs Gallie knew that her nephew, and his friend Lee, intended
to use the property as security in order to borrow on behalf of their business.
• Lee produced a document of transfer, and asked her to sign it. She could not read it as her
spectacles were broken. She asked what the document was for. Lee told her that it was a deed
of gift to the nephew, so she signed it.
• The document, in fact, was a transfer to Lee, witnessed by the nephew.
• Lee then borrowed £3000 from the Anglia Building Society on the security of the property
and used the money to pay his personal debts.
• Lee defaulted on his payments; the building society foreclosed under the mortgage, and sought
to evict Mrs Gallie from the house so that it could sell the property to repay the mortgage debt.
• Mrs Gallie argued non est factum, contending that it was her intention to transfer the house to
her nephew, not to Lee.
ISSUE:
• Mrs Gallie argued non est factum, that the agreement was different to what she believed she
was signing.
HELD:
• Mrs Gallie failed. The court held that the document she signed was not markedly different, in
terms of outcome, from the effect of the document that she had intended to sign, given her
knowledge that the property was to be used as security for a loan to be used in the business of
her nephew and Lee. The building society was an innocent third party; it had, without any
knowledge of any irregularity in the transfer, genuinely loaned money to the new owner.

The High Court of Australia considered the decision in Gallie v Lee in the case of Petelin v
Cullen below, where the plea of non est foctum succeeded subject to certain conditions.
Petelin v Cullen (1975) 49 AL JR 239
FACTS:
• Petelin, an illiterate who could not read or write English, signed an extension of an option in
favour of Cullen to whom he was selling his property.
• Petelin believed, on justifiable grounds, that he was signing a receipt for payment of part of
the option consideration that, contrary to the usual practice, was payable in two instalments.
• Cullen had sought to exercise his extended option under the contract.
• Petelin did not want to allow Cullen the extension, since he had not intended to sign an
extension to the option and believed that he was simply signing a receipt.
ISSUE:
• Whether Petelin could plead non est factum.
HELD:
• The High Court accepted Petelin’s plea of non est factum , noting that he was not careless or
negligent in signing the document and that there was no third party involved.
• The court laid down three conditions that had to be met to successfully plead non est factum:
1. the plaintiff has to be in a class of persons who have to rely on others for advice in signing
documents because of their inability to read, blindness or other reasonable clause;
2. the plaintiff has to show that documents they signed were radically different from what they
thought they were; and
3. the failure to read and understand the documents must not be due to carelessness where
innocent third parties are involved.
While the result in the Australian case of Petelin v Cullen was quite different from the result in
the English case of Gallie v Lee, the two cases are not inconsistent. The High Court of Australia
effectively agreed with the English decision, but noted that there were differences in the two
cases that justified different outcomes.

UNSIGNED DOCUMENTS
Where no document has been signed by either party to a contract, it is still possible for an
exclusion clause to be incorporated into the contract.
This can be done by including the exclusion clause in a document either when the contract is
made, usually by means of a docket or ticket given to the party, or before the contract is made.
Sometimes a combination of these two methods is used.
In these cases, the courts apply two basic tests:
(1) the 'nature of the document test’: involves the court examining the facts and deciding
whether or not the exclusion clause is located on a piece of paper that the other party
would expect to contain contractual terms.

If the court concludes that the document does have some legitimate function, other than
to notify the customer of the terms of the contract, the business operator will be unable
to rely on the clause.

(2) the 'reasonable notice' test: If, and only if, the court concludes that, objectively tested,
the document was a contractual document, then it will apply the second test, the
'reasonable notice' test, to ascertain whether reasonable steps, in all the circumstances,
were taken to notify the customer of the existence of the clause.
The purpose of both tests is to ascertain whether a reasonable customer would have been aware
of the existence of the clause and consented to its inclusion in the contract. If so, they will be
bound by it. If not, they will not be bound, since one party to a contract cannot unilaterally
impose contractual terms on the other, especially those terms that impact adversely on the rights
of that other party.
The cases of Couser v Browne and Chapelton v Barry Urban District Council, illustrate how
the courts determine whether an unsigned document is of a contractual nature.

Causer v Browne [1952] VLR 1

FACTS:
• Causer's husband took some garments to a dry-cleaning agency. The shop assistant filled in
and handed to Causer a docket that contained the name of the cleaner, the name of the customer,
a brief description of the garments left for cleaning, and provision for details of the cleaning
cost to be inserted.
• At the foot of the docket was a number in red ink and the following clause in very small, but
still legible print:
NOTE - The above articles are received on condition that no responsibility is accepted
for loss or damage to any article through any cause whatsoever.
• The garments were stained and slightly damaged in a fire at the cleaning factory and Causer
sued, alleging breach of contract.
• The cleaner contended that liability was excluded by the clause on the docket.
ISSUE:
• Was the exclusion clause effectively brought to the notice of the customer?
HELD:
• The court found in favour of Causer, concluding that a reasonable customer would regard the
docket as a voucher identifying the garments owned by that particular customer. Browne, the
drycleaner, thus failed to satisfy the nature of the document test - that is, that it was a contractual
document - and was liable to pay damages to Causer.

Chapelton v Barry Urban District Council [1940] l KB 532

FACTS:
• The council rented deckchairs to beach visitors, and Chapelton, who was visiting the beach,
went to a stack of deckchairs besides which there was a notice specifying the hiring charge,
followed by a request for members of the public to obtain tickets from the attendants, and retain
their tickets for inspection if required.
• Chapelton took two chairs from an attendant, paid the hiring charge and was given two tickets,
which he put in his pocket without reading. When he sat on one of the hired deckchairs, the
canvas tore and he was injured.
• When he sued the council for damages, the council relied by way of defence on an exclusion
clause printed on the tickets handed to customers at the time of payment, which stated: ‘The
council will not be liable for any accident or damage arising from the hire of chairs'.
ISSUE:
• Was the issue of the ticket sufficient to bring to the notice of patrons the exclusion clause?
HELD:
• The Court of Appeal concluded that the clause did not protect the council, since a reasonable
person would not have expected the ticket to contain contractual terms, but would have regarded
it merely as a receipt. • Lord Justice Slesser concluded in his judgment:
I think the object of the giving and the taking of this ticket was that the person taking it
might have evidence at hand by which he could show that the obligation he was under to
pay 2d. for the use of the chair for three hours had been duly discharged ...

While it is useful to separate cases involving signed and unsigned documents, this is one area
where the law might overlap. This possibility was foreshadowed by Lord Denning in his
judgment in Curtis v Chemical Cleaning & Dyeing Co, and arose for consideration in two
Australian cases, namely Hill & Co Pty Ltd v Walter H Wright Pty Ltd [Hill v Wright] and
Rinaldi & Patroni Pty Ltd v Precision Mouldings Pty Ltd.
Both these cases involved damage to goods during transportation and attempted reliance on an
exclusion clause contained in a signed delivery docket. In each case, the party seeking to rely
on the exclusion clause was held to be unable to do so, despite the fact that the clause was, in
each case, incorporated into a document that was signed by the other party.
In Hill v Wright, the Supreme Court of Victoria held that the document signed by the customer
was not a contractual document, since it was signed by the customer in the belief that it was a
delivery docket after completion of performance of the contract. This conclusion was not altered
by the fact that the parties had contracted with each other on a number of previous occasions
when the same document was signed (on completion of the contract) in each case.
The facts in Rinaldi & Patroni v Precision Mouldings were very similar, and the Supreme
Court of Western Australia arrived at the same conclusion.
The High Court of Australia considered this issue in the case:
Toll (FGCT) Pty Ltd v Alphapharm Pty Ltd (2004) 219 CLR 165 [2004] HCA 52
FACTS:
• An exclusion clause was placed on the rear page of a double-sided printed form, the front of
which was headed 'Application for Credit'.
• Immediately above the place where the agent signed (at the foot of the front page) were the
words 'Please read "Conditions of Contract" (overleaf) prior to signing'. The agent did not read
the conditions before signing.
ISSUE:
• Was sufficient notice given of the exclusion clause?
HELD:
• The High Court of Australia had to decide whether the clauses in the contract signed by the
respondent's agent were binding on the respondent.
• The court gave detailed consideration to the cases where customers have signed contracts
containing exclusion clauses, including the case of L'Estrange v F Groucob Ltd [L'Estrange v
Graucob) and many Australian cases.
• The High Court observed that the reasoning of the trial judge, accepted by the Appeals Court,
was that it was necessary for the appellant to establish that it had done what was reasonably
sufficient to give the agent notice of the terms and conditions and that the appellant had not
done so. The High Court rejected this argument, noting that this was precisely what L'Estrange
v Graucob did not decide. In the words of the High Court justices: 'L'Estrange v Groucob Ltd
explicitly rejected an attempt to import the principles relating to ticket cases into the area of
signed contracts. It was not argued, either in this Court or in the Court of Appeal, that
L'Estrange v Graucob Ltd should not be followed'.
• The High Court applied the principle in L'Estrange v Groucob and held that the agent was
bound by what it had signed.

The Victorian Court of Appeal had occasion to consider the question of the signature of a
document intended to exempt the owner of a go-kart track from any liability for damages for
personal injury to persons visiting the track in the case:
Le Mans Grand Prix Circuits Pty Ltd v Iliadis [1998] 4 VR 661
FACTS:
• lliadis fractured his arm while racing a go-kart at the appellant's racing track. Iliadis attended
with his girlfriend and her colleagues; his girlfriend's employer, a radio station, had booked the
racing track for a night of entertainment for employees, friends and family members.
• lliadis signed a document at the request of the appellant, in which he agreed to assume all risks
associated with the use of the facilities. He warranted not to sue for dam ages and indemnified
the appellant against all claims for loss, damage or injury.
• lliadis did not read the form before signing it, and stated in evidence that he had perceived it
as a 'marketing or registration type form'.
• Le Mans Grand Prix Circuits Pty Ltd (Le Mans] relied on the document signed by lliadis and
denied liability for damages, lliadis argued that the agreement was not an agreement for hire
because he did not pay for the hire of the go-kart, and he was the guest of his girlfriend's
employer.
ISSUE:
• Was the document signed a contractual document so that the injured party was aware that it
contained terms, including an exclusion clause?
HELD:
• The court held that Le Mans was liable. The judge found that Le Mans was negligent in
allowing lliadis to engage in an inherently dangerous pastime without sufficient instruction or
experience.
• The court found that lliadis had contributed to the damage by his own contributory negligence,
and reduced the dam ages awarded by a factor of 75 per cent on that account.
• The Appeals Court, by a 2:1 majority, dismissed the appeal by Le Mans against this finding.
It concluded that there was no contract of hire between lliadis arid Le Mans.
• lliadis was entitled to treat the form he signed as a prerequisite to obtaining a licence to drive
a go-kart, and not a hiring agreement between himself and Le Mans.
• The exclusion clauses contained in the document did not bind lliadis and did not, therefore,
prevent him from suing Le Mans for negligence.

If a customer is not successful under the ‘nature of the document’ test in claiming that the
document would not normally hold contractual terms, they might still be successful under the
'reasonable notice' test, which considers whether a customer's attention was drawn to the
existence of contractual terms [exclusion clauses).
If the evidence is that the customer did know of the clause, the clause will naturally be included
in the contract and the customer will be bound by it.
If contract terms are unknown, the court will apply an objective test, asking whether a
reasonable person would (or should) have known of the clause.
Example: Parker v South Eastern Railway Co (1877) 2 CPD 416
FACTS:
• Parker left his luggage in a railway cloakroom and was handed a ticket that, by use of the
words 'See back' on the face of the ticket, referred to terms printed on the reverse side of the
ticket, one of which sought to limit the liability of the railway company to £10 if luggage was
lost.
• The luggage was lost and Parker claimed the value of £24 10s; he was not prepared to accept
the lesser amount offered by the railway company.
ISSUE:
• Was the plaintiff, under the circumstances, under any obligation, in the exercise of reasonable
and proper caution, to read, or to make himself aware of the condition?
HELD:
• The jury awarded the full amount to Parker, but this result was set aside by the appeals court
when it ordered a retrial because the judge had given the wrong direction to the jury. The
question was whether the railway company had given sufficient notice to Parker of the
condition.
• The outcome was never reported however, the case is still cited as an example of a court
applying an objective test.

If any inference can be validly drawn from Porker v South Eastern Railway Co, it would be
that the fact that the exclusion, or limitation, clause is printed on the reverse side of a ticket
is not, of itself, fatal to the effectiveness of the clause, provided that the customer's
attention is drawn to this fact in a sufficiently clear way.
In his judgment on appeal, Mellish LJ summarised the position as follows:
“ I am of opinion, therefore, that the proper direction to leave to the jury in these cases is,
that if the person receiving the ticket did not see or did not know that there was any
writing on the ticket, he is not bound by the conditions that if he knew there was writing,
and knew or believed that the writing contained conditions, then he is bound by the
conditions that if he knew there was writing on the ticket, but did not know or believe
that the writing contained conditions, nevertheless he would be bound, if the delivering
of the ticket to him in such a manner that he could see there was writing upon it, was, in
the opinion of the jury, reasonable notice that the writing contained conditions.

A rather unsatisfactory conclusion (from the customer's point of view) was reached by the
court in the case:
Thompson v London, Midland & Scottish Railway Company [1930] l KB 41
FACTS:
• Mrs Thompson travelled on the company's train from Manchester to Darwen (Lancashire),
and was injured when leaving the train in circumstances where her injuries were caused by the
(acknowledged) negligence of the company's employees.
• When she sued the company for damages, it sought to rely on an exclusion clause in the
following terms:
 Excursion tickets and tickets issued at fares less than the ordinary fares are issued subject
to the condition that neither the holders or any other person shall have any right of action
against the company in respect of injury (fatal or otherwise), loss damage or delay
however caused.
• The company, in relying on the exclusion clause, had a number of difficulties to overcome.
• First, the ticket was not purchased by Mrs Thompson, but by a relative using her money and
acting on her behalf.
• Second, the exclusion clause was not printed on the ticket, but on the company's timetable
displayed at the station. On the ticket itself were printed, on the front, the words 'Excursion. For
conditions see back'. On the reverse side were printed the words 'Issued subject to conditions
and regulations in the company's timetable'.
• Third, Mrs Thompson was illiterate, and nothing was said to her about the conditions.
ISSUE:
• Whether the railway company could rely on the exclusion clause.
HELD:
• The court held that the company could rely on the clause and thus escape liability. Lord
Hanworth MR80 placed considerable emphasis on the fact that the ticket in this case was an
excursion ticket. He said:
It appears to me to be important to bear in mind that we are dealing with a special contract
made for a special transit by an excursion train. We are not dealing with the ordinary
schedule of trains available to everyone at the usual rate. We are dealing with a particular
transit, in respect of which the father (of the niece) went down to the station to know if
and when such transit was available, and ascertained both the time and the price; and he
could have learned all the conditions if he had been so minded. That consideration, that
it was an excursion train and a special contract, must be borne in mind; for there are (sic)
a number of cases which, if you do not bear that in mind, might be taken as applying and
applying in a contrary sense to the present case.
• Lord Hanworth considered, but distinguished, Parker v South Eastern Railway Co, on the
basis that, in a cloakroom transaction, there might well not be any conditions at all governing
the transaction, whereas it is common knowledge that a ticket must be carried by every train
traveller.
• If that ticket contains, or adequately refers to, conditions governing the travel, that will be
sufficient to justify reliance on those conditions, which detailed the exclusion clause.
• Lord Hanworth pointed out that 'illiteracy is a problem - not a privilege', a comment that on
first reading sounds unduly harsh, but which, on reflection, can be justified by asking the
question whether a person who cannot read (by reason of illiteracy, sight defect or ignorance of
the language) should be in a better position than one who can read.

A more satisfactory result, from the customer's point of view, was achieved in the case:
Thornton v Shoe Lane Parking Ltd [1971] 2 QB 163
FACTS:
• The company operated a new, automatic car park that Thornton was entering for the first time.
Outside the car park, there was a sign that detailed the charges and indicated that cars were
‘parked at owner’s risk’.
• Thornton entered the car park after paying the appropriate parking fee by inserting coins into
an automatic ticketing machine, which then dispensed a ticket and simultaneously activated
lights authorising entry into the car park; his car was then parked by a mechanical process.
• When he returned to retrieve his car, Thornton was injured and claimed damages from the car
park operator.
• The company claimed that Thornton was precluded from claiming because of an exclusion
clause. The ticket dispensed from the machine had printed on it the words 'issued subject to
conditions ... displayed on the premises'.
• On a pillar opposite the ticketing machine was a printed sign containing a number of
conditions, one of which purported to exclude liability for personal injuries caused to customers.
ISSUE:
• Whether the defendant had given reasonable notice to Thornton and, thus, whether it could
rely on the exclusion clause.
HELD:
• At first instance, the court awarded dam ages to Thornton and the company appealed. The
Court of Appeal rejected the appeal, concluding that the company could not rely on the clause
since it had not done what was reasonably necessary to bring it to Thornton's notice.
• The court further held that the nature of the intended exclusion is a factor to be taken into
account in deciding the reasonableness of what has been done to bring it to the notice of the
customer. In his judgment, Lord Denning MR made a number of useful points on a variety of
issues:
 - First, he pointed out that where ticketing machines issue tickets after payment by the
customer, the contract is concluded at that point in time. The customer is thus bound only by
such conditions as have been then brought to their notice, since the company cannot afterwards
unilaterally add further terms to the contract. The ticket is no more than a voucher or receipt for
the money that has been paid (as in Chapelton v Barry Urban District Council) on terms that
have been offered and accepted before the ticket is issued.
- Second, the only notice that had been given to Thornton at that time (when the contract was
made] was the external notice concerning parking at the owner's risk, which logically referred
to property damage only, and not to personal injuries sustained by customers. The clause on
which the company sought to rely (personal injury to customers) was 'so wide and destructive
of rights that the court should not hold [anyone] bound by it unless it is brought to his attention
in the most explicit way'.
- Third, although the conventional ticket cases (ie, those not involving automatic ticketing
machines] did not apply, Thornton would not have been bound by the exclusion clause even
under the criteria that would then have applied.
• The effect of the three questions raised by Lord Mellish in Porker v South Eastern Railway
Co was that: The customer is bound by the exempting condition if he knows that the ticket
is issued subject to it: or, if the company did what was reasonably sufficient to give him
notice of it'.
• Lord Denning MR concluded his judgment by saying:
... the whole question is whether the exempting condition formed part of the contract. I
do not think that it did. Mr Thornton did not know of the condition, and the company did
not do what was reasonably sufficient to give him notice of it. I do not think the garage
company can escape liability by reason of the exemption condition. I would, therefore,
dismiss the appeal.

The impact of past dealings between parties can invoke the 'reasonable notice’ test to a
contract, as seen in the case:
FACTS:
• Robertson intended to travel on a ferry owned and operated by the plaintiff company. Entry to
the wharf was obtained by using turnstiles, where the fare was paid.
• The turnstiles were located only at one wharf, so that the fare was payable before travelling in
one direction, and after travelling in the other direction. Above the wharf entrance was a notice:
A fare of one penny must be paid on entering or leaving the wharf. No exception will be
made to this rule whether the passenger had travelled by ferry or not.
• Robertson paid the fare and entered the wharf but missed the ferry. When he attempted to
leave the wharf without paying a second time, he was restrained by an employee, and a fight
ensued. Robertson sued the company for assault and false imprisonment.
• The company pleaded the notice, arguing that all ferry passengers were aware of the conditions
of travel and that, accordingly, the employee’s actions were justified.
ISSUE:
• Was the display of a notice sufficient to inform Robertson of the terms of the contract?
HELD:
• The High Court held that, since the sign was prominently displayed, Robertson knew, or ought
reasonably to have known, of the terms of travel. The court's reasoning was that Robertson had
travelled on the ferry a number of times before and, therefore, was aware of the terms of entry
and exit on the wharf; thus, he was bound by the terms.

Contractual terms, therefore, may be communicated validly by the process of displaying

them to the public, and this would apply equally to exclusion clauses. If customers are under
some disability that makes it impossible for them to read the sign, a court would probably
conclude similarly to Lord Hanworth, in Thompson v London, Midland & Scottish Railway
Company, that illiteracy is (and, presumably, other disabilities are) a problem, not a
privilege.
In Thornton v Shoe Lone Parking Ltd, the court pointed out that if any condition is to be
included in a contract, the parties must be aware of that condition at the time when the
contract is made. Neither party can afterwards add a further term - much less an exclusion
clause - without the agreement of the other party.
A party cannot rely on an exclusion clause if notice of the clause is given after the contract
is made.
EXAMPLE: Olley v Marlborough Court Ltd [1949] 1 KB 532
FACTS:
• Mr and Mrs Olley registered as guests at the reception of a hotel owned by the defendant
company, and paid the tariff in advance.
• The contract between the hotel company and the Olleys was concluded at this point.
• Valuables belonging to Mrs Olley were stolen from their room in the hotel, due to the
carelessness of a staff member. The Olleys then sued the hotel company.
• The hotel company argued that it could rely on an exclusion clause on a notice displayed in
every hotel room that provided that the company would not be liable for such losses unless the
articles were 'handed to the manageress for safe custody'.
ISSUE:
• Whether the hotel could rely on the exclusion clause in the notice and whether the notice was
incorporated into the contract at the time of the making of the contract.
HELD:
• The King's Bench rejected the company's defence, holding that it would be inappropriate
to allow the company to rely on a term of the contract of which the guests did not have notice
when the contract was made. A party cannot incorporate terms into a contract after the contract
is made.

Another Example of this principle: eBay International AG v Creative Festival

Entertainment Pty Ltd.
The organisers of the Big Day Out tried to cancel tickets where they were resold on eBay for a
profit. Some tickets were sold online and other over the counter, and not all tickets had the
exclusion clause. As the buyers of the online tickets would not see the tickets until they were
delivered, buyers would not have notice of the clause until after the contract was made.

There have been cases where the court has allowed evidence of previous dealings to be used
successfully by the party seeking the protection of the exclusion clause.

Example: J Spurting v Brodshow,

An exclusion clause was included in a document sent out after the contract was formed, but
the defendant was able to rely on the clause, as it was contained in documentation sent to the
plaintiff on many previous occasions.
The plaintiff admitted that he had received identical documentation in connection with those
previous dealings, although he stated that he had never read the documents.
The court arrived at an opposite conclusion in the case:
Hollier v Rambler Motors (AMC) [1972] 1 All ER 399
FACTS:
• Hollier took his car for repairs to the defendant.
• There was a fire at the premises of Rambler Motors and Hollier’s car was damaged, which he
claimed against the company.
• The evidence was that Hollier had taken his car to the same premises three or four times in the
previous five years. On each previous occasion, Hollier had signed a document that included a
clause excluding liability for damage caused by fire, but he did not do so on the day in question.
ISSUE:
• Whether the defendant could rely on the previous dealings to prove the plaintiff’s knowledge
of the exclusion clause.
HELD:
• The motor company could not rely on the small number of previous dealings, spread over a
lengthy time frame; these did not constitute a course of dealing that would lead to the term (the
exclusion clause) being implied into an oral contract.

INTERPRETING EXCLUSION CLAUSES

Because exclusion clauses can be very destructive of the rights of unsuspecting parties, and
also due to the fact that some business operators try to impose exclusion or limitation clauses
on their customers by stealth, the courts will usually interpret these clauses in a very
restrictive and limiting fashion. Courts may read down an exemption clause against the party
relying on it, so that its operation is limited.
The rule applying to the interpretation of exclusion clauses is referred to as the contra
proferentem rule. This means if there is some uncertainty as to the meaning of the words
used in the clause itself, the uncertainty will inevitably be resolved unfavourably to the
party seeking to rely on the clause.
Such uncertainty might arise from a lack of clarity in the words used or ambiguity as to their
intended meaning. In Alex Kay Pty Ltd v General Motors Acceptance Corporation & Hartford
Fire Insurance Company, the Supreme Court of Victoria had to interpret an exclusion clause
in a motor vehicle insurance policy. Justice Sholl concluded that, since the clause itself was
capable of three different interpretations, he was entitled (if not required) under the contra
proferentem rule to apply to the clause the meaning which was least helpful to the party seeking
to invoke it, namely the insurance company.
Courts will apply the most restrictive interpretation to exclusion clauses, particularly where a
party is seeking to use the clause to limit or exclude liability for negligence. This is
illustrated in the case:
White v John Warwick & Co Ltd [1953] 1 WLR 1285
FACTS:
• White hired a bicycle from the defendant company to deliver newspapers.
• White was injured when the seat collapsed, throwing him onto the roadway. White sued the
company for breach of contract (the implied condition that the bicycle was fit for its purpose]
and also in negligence, contending that the company had breached the duty of care owed to
hirers requiring that equipment hired be in a sound and safe condition.
• The company sought to rely on an exclusion clause contained in the hiring agreement as a
defence for both breaches.
ISSUE:
• Would the exclusion clause exempt the company from all liability?
HELD:
• The court concluded that: ...
the liability for breach of contract is more strict than the liability for negligence. The
owners may be liable in contract for supplying a defective machine, even though they
were not negligent... In these circumstances, the exemption clause must be construed as
exempting the owners only from their liability in contract, and not from their liability for
negligence.

Similarly, a clause excluding liability for navigation errors was held not to exclude liability
for negligent navigation in the case: Industrie Chimiche Italio Centrale (SA) v Neo Ninemieo
Shipping Co (SA).

In the recent case of Insight Vacation Pty Ltd v Young, the High Court of Australia had to
construe the wording of an exclusion clause.
• Young was injured in a bus accident while on a tour of Europe.
• She had taken off her seat belt to retrieve an item from the baggage compartment when the
accident occurred.
• The exclusion clause sought to exclude the tour operator from liability if the seat belt was
not being worn when the injury arose.
• The High Court interpreted the clause as covering injury only while the passenger Young
was sitting in the seat. The court said that there was no requirement to be seated at all times
and, as there was a toilet on the bus, the operator expected passengers would get out of their
seat.
The High Court said:
The words "occupies a motorcoach seat" should be understood as meaning sitting in the
seat and able to wear the safety belt. Mrs Young was not sitting in her seat when she fell.
The exemption clause did not apply'. Accordingly, the operator could not rely on the
clause.

In the Australian case of Darlington Futures Ltd v Delco Australia Pty Ltd," losses arising out
of unauthorised trading in futures were claimed by the appellant from the respondent,
attempted reliance being placed on an exclusion clause in the agreement between the parties
stating:
The client finally acknowledges that the agent will not be responsible for any loss arising
in any way out of any trading activity undertaken on behalf of the client whether pursuant
to this agreement or not ...
The High Court held that this clause afforded no protection to the futures broker where the
trading was unauthorised.

Darlington Futures v Delco Australia distinguishes Australian law from English law. The
English courts have been inclined to make a distinction between exemption clauses, on the
one hand, and limitation clauses, on the other, interpreting limitation clauses less stringently
(because of their less stringent consequences) than exemption clauses.

Fundamental breach of contract

Fundamental breach of a contract is the breach of a very important condition of the contract
that allows the party suffering the loss to end the contract. If the contract is fundamentally
breached, then an innocent party can claim they are not bound by the exclusion clause
contained in the contract. There is some difference between English and Australian law.
The English approach can be seen in:
Karsales (Harrow) Ltd v Wallis [1956] 1 WLR 936
FACTS:
• Wallis agreed to purchase a used Buick motor car from a dealer. He required finance, which
was arranged on hire-purchase terms with the plaintiff company.
• Problems arose when the motor car was delivered to Wallis, as it was quite different from the
car that he had previously inspected and agreed to buy. The tyres had been replaced, accessories
had been removed, and the motor damaged so extensively that the car had to be towed to
Wallis’s home. Wallis returned it to the dealer for repair, but this was never done.
• The plaintiff sued for payments, which Wallis had understandably refused to make pending
repair of the motor car. The plaintiff attempted to rely on a clause in the hire-purchase contract
excluding any liability for the condition of the car.
ISSUE:
• Was Wallis bound by the exclusion clause?
HELD:
• The court held that the contract had been fundamentally breached, since Wallis had
contracted to buy a useable motor car and had not received one. Lord Denning observed that:
A breach which goes to the root of the contract disentitles the party from relying on the
exempting clause. In the present case the lender was in breach. That breach went, I think,
to the root of the contract and disentitles the lender from relying on the exempting clause.

Further development occurred in the case of Suisse Atlontique Societe d'Armement Maritime
SA v Rotterdomsche Kolen Centrale NV, usually called the Suisse Atlontique case. That case
produced the conclusion that a proper analysis of the fundamental breach doctrine turns on the
question of how the exclusion clause is to be construed, or interpreted. If the exclusion
clause, properly interpreted, is broad enough in its terms to cover the particular breach
of contract, it will protect the party seeking to invoke the protection of the clause.
Conversely, if the exclusion clause is not sufficiently broad, no such protection will be
available to that party.
The English courts struggled with the fundamental breach doctrine for many years, but clear
definition of the law emerged in 1980 with the decision in the case:
Photo Production Ltd v Securicor Transport Ltd [1980] AC 827
FACTS:
• The plaintiff, which owned a large factory, contracted with the defendant to supply security
services on site. The detailed contract for security services contained an exclusion clause,
equally detailed, in the following terms:
Under no circumstances shall Securicor be responsible for any injurious act or default by
an employee of the company unless such act or default could have been foreseen and
avoided by the exercise of due diligence on the part of the company as his employer; nor,
in any event, shall the company be held responsible for any loss suffered by the customer
through burglary, theft, fire or any other cause except in so far as such loss is solely
attributable to the negligence of the company's employees acting in the course of their
employment.
• Musgrove, an employee of Securicor Transport Ltd (Securicor), lit a fire to keep warm while
on duty. The fire got out of control and totally destroyed the factory, causing a loss exceeding
one million dollars.
• The plaintiff sued to recover the loss, and the exclusion clause was pleaded in defence to the
claim. The plaintiff then argued fundamental breach, contending that, since the contract had
been fundamentally breached by Securicor, no reliance could be placed on the exclusion clause.
ISSUE:
• Could the defendant rely on the exclusion clause in the circumstances?
HELD:
• The court rejected the argument based on fundamental breach and further held that the
exclusion clause did, in fact, apply.
• The clause, properly interpreted, relieved Securicor of what would otherwise have been its
responsibility; the plaintiff could not succeed in an action for breach of contract.
• The House of Lords pointed out that it is a question of construction whether an exclusion
clause covers a fundamental breach [as it did in this case), not a rule of law.

The Australian courts looked at the issue of fundamental breach of contract not as a rule of
law but rather as a question of the construction of the exclusion clause. The High Court
approach can be seen in:
Sydney City Council v West (1965) 114 CLR 481
FACTS:
• West drove his car into a car park owned and operated by the council. He was given a ticket,
on the reverse side of which was an exclusion clause absolving the council from any
responsibility for loss, damage or injury however such loss, damage or injury may arise or be
caused.
• A person masqueraded as the owner of West's car, saying that he had lost his ticket, and even
gave an incorrect version of West's registration number. He was given a duplicate ticket by the
attendant and allowed to drive away in the car, which was later found damaged.
• West sued the council. The council sought to rely on the exclusion clause.
ISSUE:
• Whether the council could rely on the exclusion clause.
HELD:
• The High Court closely examined and interpreted the exclusion clause itself. The court took
the view that the exclusion clause, widely drafted as it was, did not extend to protect the council
in cases where the action of its employees was unauthorised, as was clearly the case here.
• The unauthorised action of the employee - delivering the car to a thief and allowing him to
leave the car park - was not contemplated by the agreement between the parties, and thus fell
outside the protection given to the council by the exclusion clause.

Four corners' rule

Under the four corners’ rule, an exclusion clause will only cover a loss when the party is
carrying out (completing) their obligations within the four corners of the contract.
‘Bailment’ refers to the legal relationship between bailor and bailee, whereby there is a legal
assumption that goods are delivered on condition (either expressed or implied) that they will be
returned by the bailee to the bailor (or at their direction) when the period of bailment elapses,
or when the purpose of the bailment has been fulfilled.
In contracts of bailment, it is common for an exclusion clause to be included, the objective of
which is to protect the bailor if damage occurs to the goods that are the subject of the
bailment contract.
The impact of the four corners rule is similar to the contra proferentem rule, in that it is
applied against the party seeking to exclude their liability, as in the case of Sydney City Council
v West.
In Thomas National Transport (Melbourne) PtyLtd v May & Baker (Australia) Pty Ltd,
Justice Windeyer of the High Court summarised the rule in the following terms:
...a condition absolving a party from liability for the loss of goods in his care, is construed
as referring only to a loss which occurs when the party is dealing with the goods in a way
that can be regarded as an intended performance of his contractual obligations. He is not
relieved of liability if, having obtained possession of the goods, he deals with them in a
way that is quite alien to his contract.

A bailee cannot escape liability under an exclusion clause if they engage in conduct that is
beyond the scope of the contract. A court will examine all aspects of the intended contract
(hence, the name 'four corners"), and will only allow the operation of the exclusion clause if
the parties had actually contemplated (and intended) its operation.

EXCLUSION CLAUSES UNDER STATUTE

The Australian and English Sale of Goods Acts (in Victoria, Goods Act 1958 (Vic)) allow
for a term in a contract to specifically remove the implied terms under that legislation; this is
what occurred in L'Estronge v Graucob.
Legislation in Australia now restores that protection by providing that, in most 'consumer'
transactions, it is impossible for the seller, hirer or service provider to escape the implied terms.
In the case of sale of commercial goods or services, the seller may limit their liability to the cost
of repair or replacement of the goods or services.
The Australian Consumer Law (ACL) (Sch 2 of the Competition and Consumer Act 2010
(Cth)] S 64 prohibits exclusion clauses that attempt to limit the consumer guarantees that apply
under the Act.
S 23 of the ACL makes a term of a contract void if it is unfair.
Section 24 of the ACL defines the meaning of 'unfair', while S 25 of the ACL gives examples
of unfair terms.
An example of an unfair term under S 25[a] is 'a term that permits, or has the effect of
permitting, one party (but not another party) to avoid or limit performance of the contract'.
This suggests that where the ACL applies to a particular consumer contract, an exclusion clause
that would otherwise prevent a consumer from relying on a statutory implied term will be void
if it is deemed unfair.
IMPLIED TERMS
Implied terms are terms that, while unspoken or unwritten, are inferred by various means
to be included in a contract whether or not the parties had actually considered them. An
implied term exists outside the actual contract and is read into the contract by implication.
A term may be implied into a contract by a court through:
• industry convention, trade usage or custom;
• reference to previous dealings between the same parties;
• 'business efficacy' (common sense) to make it commercially sensible and realistic; and
• reference to consumer law (Australian Consumer Law, Sale of Goods Acts), which imposes
terms into certain contracts, irrespective of what the parties intended.
EXAMPLE:
British Crane Hire Corporation Ltd v Ipswich Plant Hire Ltd [1975] QB 33
FACTS:
• An urgent contract for crane hire was made by telephone, with no specific terms being
discussed. The owner later sent out to the hirer a standard form for crane hire used in the
industry, but this form was neither read nor signed by the hirer.
• The crane sank in marshy ground, and a dispute arose as to which party should pay the cost of
salvaging or recovering the crane.
• British Crane Hire sued for the cost of recovery pursuant to the terms of hire form.
• When the matter was being heard in court, the hirer acknowledged that it had previously hired
cranes from the owner, and that it had used the industry standard hiring form sent to it by the
owner. That form made it the responsibility of the hirer to pay salvage costs.
ISSUE:
• Did the terms of hire form part of the contract?
HELD:
• The court decided that trade usage had been established by industry standard terms and that a
term should be implied into the contract. The contract between the parties was subject to that
usage or standard: therefore, the hirer was liable for the salvage expenses.
INDUSTRY CONVENTION OR CUSTOM
For an industry practice to be implied, it must be well entrenched, and certain and reasonable
by custom or convention, such that everyone contracting in that industry could be taken
to have intended the clause to apply.
The term must not contradict any relevant legislation, or the intention of such legislation,
and will apply even where a party is unaware of industry practice.
A court will examine the constructive or general knowledge of those in the industry, rather than
the actual knowledge of the party claiming not to be aware of an industry practice.
EXAPMLE:
Summers v Commonwealth (1918) 25 CLR 144
FACTS:
• Summers contracted to supply a quantity of marble for use in the construction of Australia
House in London. The marble blocks were to meet certain specifications. Some of the marble
blocks supplied by Summers were larger than what had been specified in the contract.
• Summers argued that it was the convention in the industry for oversized blocks to be supplied,
on the understanding that they could satisfactorily be reduced in size to meet the specifications.
ISSUE:
• Could custom and trade usage be implied into the contract?
HELD:
• The court rejected Summers's claim on the basis that the term he was seeking to imply into the
contract conflicted with an express term of the contract, namely the term containing the
specifications as to block size. No implication can be made based on trade usage when the
contract contains a specific written clause that is inconsistent with trade custom.

PAST DEALINGS
If the parties have had past dealings on certain contractual terms, a court may imply the same
terms in the present contract where such terms have been omitted.
In Hillas & Co Ltd v Arcos Ltd, an option clause in a contract for the supply of timber was very
brief and uncertain, but the contract itself referred to past dealings. The court was prepared to
imply the terms of the previous contract into the current contract to explain the current option
clause, which evidenced a binding contract.
Previous dealings were referred to in the case of Bolmoin New Ferry Co Ltd v Robertson,
where the evidence was that Robertson had used the wharf on many previous occasions. Despite
that fact, he contended that the term that payment (to exit the wharf) was required should not be
implied into his contract with the ferry operator.
The High Court found that the term was implied into the contract by reference to the admitted
previous dealings. Note also Hollier v Rambler Motors (AMC), where Rambler Motors failed
in its attempt to have the exclusion clause implied into the relevant contract by referring to
previous dealings.

BUSINESS EFFICACY
A court can imply a term into a contract if its absence from the contract makes the contract
nonsensical from a commercial standpoint.
Terms can be implied to give business efficacy to the contract and the parties' intentions,
possibly because custom and trade usage or previous dealings cannot be relied on.
Terms will be implied into a contract to give business efficacy when it is necessary to overcome
an oversight that the parties would have contemplated but which was overlooked, and, if left
uncorrected, would defeat the parties' intended agreement.
Terms may also be sought to be implied where the parties assumed it was so obvious that it
went without saying.

EXAMPLE:
The Moorcock [1886-90] All ER Rep 530
FACTS:
• The owners of a wharf agreed with the owners of The Moorcock to berth the barge at their
wharf in consideration of the owners of the vessel agreeing to pay to the wharf owners a fee for
unloading it.
• The wharf was in the River Thames, and both parties knew that at low tide, the vessel would
touch the bottom of the riverbed. The contract did not refer to this contingency.
• The bottom of the ship struck the riverbed at low tide and was extensively damaged, basically
due to turbulence under the water that had exposed rocks [rather than mud and silt] on which
the vessel grounded.
• The owners of The Moorcock sued the wharf owners, arguing that there was an implied term
that the wharf owners had warranted the safety of the riverbed.
ISSUE:
• Whether such a term could be implied into the contract.
HELD:
• The owners of the ship successfully sued, as the court found that the term should be implied
into the contract. The plaintiff relied on the principle that it was necessary, for reasons of
business efficacy, to imply a term into the contract that the riverbed was safe for the plaintiff’s
barge, at least to the extent that reasonable care could provide.

Terms may also be sought to be implied where the parties assumed it was so obvious that it
went without saying.
EXAMPLE:
Codelfa Construction Pty Ltd v State Rail Authority (NSW) (1982) 149 CLR 337
FACTS:
• Codelfa Construction Pty Ltd [Codelfa) contracted with the State Rail Authority (NSW) [the
authority] to build part of the Eastern Suburbs railway in Sydney. When it tendered its price for
the construction, Codelfa assumed [wrongly, as it transpired] that it would be able to work
around the clock on the construction for six, and, if necessary, seven days a week. The basis of
this assumption was that Codelfa believed that it would have the benefit of the authority's
immunity from prosecution by private citizens for committing a nuisance.
• Due to complaints by neighbours, Codelfa was legally restricted to working between the hours
of 6 am and 10 pm each day, a restriction that impacted quite dramatically on the cost of the
project.
• Codelfa argued in this case, which proceeded to the High Court on appeal, that the additional
costs resulting from the successful intervention of objectors should be borne by the authority
under a term that should be implied into the contract to that effect.
ISSUE:
• Could the builder claim an implied term since the immunity provision had been inadvertently
left out of the contract?
HELD:
• The High Court concluded that a proper analysis of the facts revealed that a mistaken
assumption had been made by the parties (that the immunity would avail Codelfa), and this was
not a case where a relevant provision had been inadvertently omitted from the contract and
should be implied into it.
• In so deciding, the High Court reversed the decision of the Supreme Court of New South
Wales and the New South Wales Court of Appeal, both of which had held that the condition
sought by Codelfa should be implied.

In Australia, there are five conditions that need to be satisfied in order for terms to be
implied into a contract based on the decision in B P Refinery (Westernport) Pty Ltd v
Hastings Shire Council. These conditions include that a term must:
1. be reasonable and equitable, which means it essentially must be fair to both parties;
2. be necessary to give business efficacy to the contract and give effect to the parties’
intentions;
3. be so obvious that it goes without saying
4. be capable of clear expression, that is capable of expressing what the parties have agreed
to; and
5. not contradict any express term in the contract as it would then be contrary to the parties'
intentions.

TERMS IMPLIED BY STATUTE

These are terms that the supplier cannot exclude or exempt from the contract; statutory
implied terms are imposed irrespective of the wishes of the contracting parties.
The purpose of these terms is to ensure that goods and services are safe, of good quality and
will achieve the purpose they were designed for.
Contracts in which terms are implied include agreements for employment, health and safety,
hire-purchase and tenancy; on an everyday basis, statute implies terms as to quality and fitness
into each sale of goods and services.
The ACL implies terms into consumer contracts and, in particular, provides the guarantees in
relation to the supply of goods.
These guarantees include that:
• the supplier has a right to sell the goods (ACL s 51) - noting that when ownership passes, so
does the risk;
• goods are free from any undisclosed security (ACL s 53);
• the consumer will have undisturbed possession of the goods (ACL s52];
• the goods are of acceptable quality (ACL s 54);
• the goods are fit for the purpose that the consumer makes known to the supplier (ACL s 55);
• the goods match their description or sample (ACL ss 56, 57);
• spare parts and facilities for repair are reasonably available for a reasonable period
(ACL s 58); and
• any express warranty is complied with (ACL s 59).

The ACL also provides guarantees in relation to the supply of services, including that services
are:
• carried out with due care and skill (ACL s 60);
• fit for the purpose that the consumer makes known to the supplier (ACL s 61); and
• provided in a reasonable time (ACL s 62).

AUSTRALIAN CONSUMER LAW

The uniform consumer legislation is known as the 'Australian Consumer Law' (ACL), which
each state and territory has enacted. The ACL is contained in Sch 2 of the Competition and
Consumer Act 2010 (Cth).
The ACL was introduced in a two-stage process and came into effect on 1 July 2010. The ACL
is administered by the Commonwealth and state consumer agencies.

Definition of a 'consumer' under the ACL

A 'consumer' is defined in s 4B of the Competition and Consumer Act 2010 (Cth) (CCA) and
under s 3 of the ACL (CCA Sch 2), essentially adopting the previous TPA definition.
A person is deemed to be a consumer if:
• the price of the goods or services does not exceed $40,000 (or any greater amount prescribed
in the future]; or
• the goods were of a kind ordinarily acquired for personal, domestic or household use or
consumption [even if purchased for more than $40,000); or
• the goods consisted of a vehicle or trailer acquired for use principally in the transport of goods
on public roads.
However, for the Act to apply, the goods must not be for the purpose of:
• resupply; or
• 'using them up or transforming them, in trade or commerce, in the course of:
- a ‘process of production or manufacture; or
- ‘repairing or treating other goods or fixtures on land’
ACL is not restricted to new goods, and thus applies to second-hand goods (as do the state and
territory Sale of Goods Acts]. The courts do not, however, expect the same standard of
merchantable quality and fitness for purpose in the case of second-hand goods as they would
impose in the case of new goods.
Importantly, the ACL expands the definition of 'person' to include not just natural (human]
persons, but also other legal persons such as companies and business entities. This means the
ACL applies to purchasers who are companies or partnerships.

Meaning of 'goods' under the ACL

Goods are defined widely in s 2 of the ACL, and follow previous law to include crops, electricity
and products, as long as they are moveables and not fixed to the land, so that they cannot be
readily made into a moveable.
'Supply' includes supply by sale, exchange, lease, hire or hire-purchase. The sale and supply of
goods must be in the course of a business and not by an auction.
Under s 63 of the ACL, contracts for some forms of transportation and storage of goods or
insurance are excluded.
Similarly, under s 65 of the ACL, contracts for the supply of gas, electricity and
telecommunications services are also excluded.

EXAMPLE:
Carpet Call Pty Ltd v Chan (1987) ATPR (Digest) 46-025
FACTS:
• Chan, acting on the recommendation of the seller, purchased for $68,839 a quantity of carpet
for use in his nightclub. When it proved unsatisfactory, he sued the seller for alleged breach of
the implied condition of fitness for purpose in the Sale of Goods Act 1896 (Old) and in the TPA.
• The company contended that the TPA did not apply since the price paid for the goods exceeded
$40,000. The threshold price in the TPA having been exceeded, this brought into question the
issue of whether the goods were ordinarily acquired for personal, domestic or household use or
consumption [in which case the TPA would apply] or not (in which case the TPA would not
apply).
ISSUE:
• Were the goods ordinarily acquired for personal, domestic or household use or consumption
(in which case the TPA would apply] or not (in which case the TPA would not apply)?
HELD:
• The contract was a consumer contract because the goods were of a type ordinarily acquired
for personal, domestic or household use or consumption. They did not lose that character by
being bought for commercial use in this particular case.
• ‘Carpet’, the judge held, ‘is a commodity or goods ordinarily acquired for domestic
consumption, and it did not lose that description by reason of a commercial rating or some
quality which makes it last longer than other carpet normally supplied for use in a domestic
setting'.
• Although this point was decided in favour of the purchaser, he failed in his claim for other
reasons.

Implied terms (consumer guarantees)

The ACL replaces the traditional dichotomy of ‘conditions and warranties’ under
Commonwealth, state and territory consumer provisions with 'consumer guarantees'.
A new guarantee applies in relation to compliance with any 'express warranties’ that have been
given by the supplier or manufacturer.
‘Express warranties’ are defined very broadly in s 2 of the ACL, and will include many pre-
contractual representations and statements that are made in connection with the supply or
promotion of goods. It will not be possible to exclude liability for those representations.

Guarantee as to title to goods

Section 51 of the ACL states that:
'If a person (the supplier) supplies goods to a consumer, there is a guarantee that the
supplier will have the right to dispose of the property in the goods when that property is
to pass to the consumer'.
EXAMPLE:
FACTS:
• The purchaser agreed to buy cartons of frozen kidneys that had been taken out of storage ready
for the purchaser. The purchaser took some time to load the frozen goods, which thawed before
they were put into appropriately cool conditions and thus were unfit for human consumption.
ISSUE:
• When did ownership of the goods pass to the purchaser?
HELD:
• The goods were in a deliverable state and had been taken (unconditionally appropriated) by
the purchaser who, therefore, took ownership and the risk.

Guarantee as to undisturbed possession of goods

Section 52 of the ACL states:
'If a person (the supplier) supplies goods to a consumer and the supply is not a supply of
limited title there is a guarantee that the consumer has the right to undisturbed possession
of the goods'.
Note that this does not apply if any 'security, charge or encumbrance' was disclosed to the buyer
before they purchased the goods.

Guarantee as to acceptable quality

Section 54 of the ACL states that:
‘If a person (the supplier) supplies goods to a consumer 'and the supply does not occur by way
of sale by auction, there is a guarantee that the goods are of acceptable quality’.
Section 54(2) of the ACL defines 'acceptable quality' as goods 'if they are as fit for all the
purposes for which goods of that kind are commonly supplied', and 'acceptable in appearance
and finish', 'free from defects', ‘safe’ and ‘durable’ as ‘a reasonable consumer fully acquainted
with the state and condition of the goods (including any hidden defects of the qoods) would
regard as acceptable having regard to the matters' in s 54(3) of the ACL.
An example of the implied term of merchantable quality, and may serve to show how a court
may consider the new consumer guarantee of acceptable quality:
David Jones Ltd v Willis (1934) 52 CLR 110
FACTS:
• Willis asked the salesperson for a pair of walking shoes. She described a bunion on her foot
and the need for an appropriate pair of shoes. After being shown a number of pairs of shoes, she
picked one pair. After wearing the shoes three times, the heel came off and she fell and broke
her leg.
• Willis claimed that the retailer was liable for selling an inappropriate pair of shoes.
ISSUE:
• Was the retailer liable for selling an inappropriate pair of shoes?
HELD:
• The High Court found that the retailer was liable for damages because the shoes were not of
merchantable quality nor reasonably suitable for their purpose.

Guarantee as to fitness for any disclosed purpose

A ‘disclosed purpose’ is defined under s 55(2) of the ACL as the ‘particular purpose’ for
which the goods are purchased; that is, if the consumer made this purpose known to the seller,
or if it was obvious what purpose the goods would be used for.
Note that 'fitness for purpose' will not apply if the consumer did not rely on the skill and
judgment of the seller; that is, if they used their own judgment and did not make known to the
supplier or manufacturer any special purpose for which they required the goods.
EXAMPLE:
Grant v Australian Knitting Mills (1935) 54 CLR 49
FACTS:
• Dr Grant purchased underpants, which he used at a later point in time. The underpants
contained chemical residues that caused dermatitis to appear on his skin.
• Dr Grant claimed dam ages resulting from defective goods.
ISSUE:
• Could Dr Grant claim the goods were defective?
HELD:
• The High Court decided the goods were not of merchantable quality; they were further not fit
for their purpose.
Guarantee as to repairs and spare parts
Under s 58 of the ACL, there is a guarantee that a manufacturer of goods ‘will take reasonable
action to ensure that facilities for the repair of the goods’ and spare parts ‘are reasonably
available for a reasonable period after the goods are supplied'. The guarantee does not apply if,
before the supply of the goods, the consumer is given written notice by the manufacturer that
'facilities for the repair of the goods' or spare parts would not be available at all or 'after a
specified period’.
In Jillawarra Grazing Co v John Shearer Ltd, the applicants’ claim that the defendant did not
maintain adequate repair facilities and spare parts for the maintenance of agricultural equipment
was not proven.

Guarantee of due care and skill in the supply of services

Under s 60 of the ACL, there is a guarantee that, where 'a person supplies, in trade or
commerce, services to a consumer', 'the services will be rendered with due care and skill'.
EXAMPLE:
Kovacevic v Holland Park Holdings Pty Ltd [2010] QDC 279
FACTS:
• Kovacevic signed a contract with the defendant’s gymnasium, but fractured her ankle during
a class.
• A court found that Kovacevic had impliedly notified Holland Park Holdings Pty Ltd (HPH)
that her purpose in taking the classes was to exercise in a supervised, safe and healthy manner,
and, in doing so, had relied on the skill and judgment of HPH.
ISSUE:
• Is the supplier of a service liable for an injury, the risk of which had not been agreed on by the
parties at the time of making the contract?
HELD:
• The implied warranty under s 74 of the then TPA was breached by failure to recognise and
allow for the risks involved with slipping when exercising on a timber floor. The Queensland
District Court held that the exclusion clauses in the contract were ineffective, and awarded
$82,000 in damages to Kovacevic.
MISLEADING OR DECEPTIVE CONDUCT
The Australian Consumer Law (ACL) includes a provision to replace the prohibition on
misleading or deceptive conduct that was previously set out in s 52 of the Trade Practices Act
1974 (Cth) (TPA).
There are no significant changes, except that the ACL applies the prohibition to 'a person’ rather
than to ‘a corporation', which gives it a broader application.
Section 18(1] of the ACL provides that 'a person must not, in trade or commerce', engage in
misleading or deceptive conduct, or conduct that 'is likely to mislead or deceive'.

There are many cases that have dealt with misleading or deceptive conduct.
The case of Taco Co of Australia Inc v Taco Bell Pty Ltd, below illustrates that s 18 of the
ACL would also apply as a form of statutory ‘passing off’ by sellers; that is, pretending to be
another business, or supplying products other than their own.
Taco Co of Australia Inc v Taco Bell Pty Ltd (1982) ATPR 40-303
FACTS:
• The defendant had opened a Mexican restaurant for business using the name Taco Bell', which
was a similar name to Taco Bell's Casa on Bondi Beach' used by the plaintiff. Evidence
established that the plaintiffs Bondi restaurant had used the name for some time, while the
defendant’s restaurant was part of a US chain and had changed the name of its restaurant.
ISSUES:
• Whether this use of a similar name by the defendant was misleading and deceptive, and
prohibited under the TPA s 52(1). • Whether the plaintiff could retain the use of the name.
HELD:
• The Bondi restaurant was allowed to keep its name.
• The other restaurant had breached s 52 of the TPA by using a similar name to an established
business.

Misleading conduct can be in the form of advertisements, representations or promotions; in

fact, anything that creates a misleading impression regarding price, quality or the origin of the
goods and services supplied to the consumer concerned.
EXAMPLE:
Australian Competition and Consumer Commission v Telstra Corporation Ltd (2007) 244
ALR 470; [2007] FCA 1904
FACTS:
• Telstra produced a number of advertisements, brochures and websites claiming that the Telstra
Next G mobile phone coverage was available to any purchaser, though, in fact, this was
dependent on where the user was located (which was stated somewhat in the advertising). In
fact, many purchasers were in areas where the phone would not work.
ISSUE:
• Was the attached warning in the advertisement sufficient to alert a consumer that the preceding
comments were not true for certain consumers [who would make a judgment according to where
they lived]?
HELD:
• While Telstra included some notice of potential lack of coverage, the Federal Court found that
the warning in the advertisement was insufficient to alert an ordinary or reasonable member of
the class of mobile phone users of the qualification the advertisement was misleading.
UNCONSCIONABLE CONDUCT
Section 20 of the Australian Consumer Law (ACL) replaces the unconscionable conduct
provisions contained in s 51AA of the Trade Practices Act 1974 (Cth) (TPA).
Section 20 of the ACL states that:
'A person must not, in trade or commerce, engage in conduct that is unconscionable
within the meaning of the unwritten law from time to time’.
This section of the ACL essentially applies common law unconscionability principles as seen
in cases like Commercial Bank of Australia Ltd v Amadio.

A recent case that considered s 20 of the ACL was Kokavos v Crown Melbourne Ltd. Kakavas
was a problem gambler who had previously been excluded from Crown, but, years later, was
permitted to return after giving assurances that he no longer suffered from a gambling problem.
In the course of a little over a year, he turned over and lost almost $1.5 billion.
Kakavas claimed Crown Melbourne Ltd (Crown) engaged in unconscionable conduct, first by
exploiting his gambling problem and entrapping him into becoming a regular visitor, and,
second, by unconscientiously allowing and encouraging him to gamble at Crown while it knew
- or ought to have known - he would be required to forfeit winnings by virtue of an interstate
exclusion order.
The High Court, rejecting the appeal, held that it did not accept that the appellant's pathological
interest in gambling was a special disadvantage that made him susceptible to exploitation by
Crown. He was able to make rational decisions in his own interests, including deciding, from
time to time, to refrain from gambling altogether. Crown did not knowingly victimise the
appellant by allowing him to gamble at its casino.

Recently, in Australian Competition and Consumer Commission v Lux Distributors Pty Ltd,
the ACCC appealed against a decision by Jessup J, in the Federal Court, dismissing the ACCC's
allegations that Lux Distributors Pty Ltd (Lux) engaged in unconscionable conduct in relation
to the sale of vacuum cleaners to five consumers in contravention of s 51AB of the TPA and s
21 of the ACL.
The ACCC had alleged that, between 2009 and 2011, Lux sales representatives called on five
elderly women in their homes under the premise of a free vacuum cleaner maintenance check,
and that each of the women was subjected to unfair pressure and sales tactics to induce them to
purchase a current model Lux vacuum cleaner valued in excess of $2000.

Unconscionable conduct in contracts against small businesses

Section 21(1) of the ACL states that:
a person must not, in trade or commerce, in connection with
[a] the supply or possible supply of goods and services to a person (other than a listed
public company); or
[b] the acquisition or possible acquisition of goods and services from a person (other than
a listed public company’ engage in conduct that is, in all the circumstances,
unconscionable.

Example of a finding of unconscionable conduct.

Australian Competition and Consumer Commission (ACCC) v Simply No-Knead
(Franchising) Pty Ltd (2000) 104 FCR 253
FACTS:
• A franchisor had signed on a number of franchisees, and the franchisees depended on the
franchisor's advertising, marketing and provision of services.
• The franchisees complained about the conduct of the franchisor for example, in competing
with its own franchisees and introducing new terms that were onerous.
ISSUE:
• Whether the franchisee could use s 51AC of the TPA to complain about the behaviour of the
franchisor.
HELD:
• The Federal Court decided that the franchisor did bully and use unfair tactics against the
franchisees and this amounted to unconscionable behaviour under s 51AC.

MENTALLY ILL PERSONS:

In order to prevent people avoiding contracts by pretending to be mentally ill, the law will treat
such persons as being contractually liable, unless they can show that they did not have the
capacity to understand what they were doing at the time the contract was made, and the other
party they were dealing with was aware of their impaired mental state.
The burden of proof of showing lack of capacity is on the mentally ill person. If the mentally
ill person can establish these two requirements, the contract is voidable at the option of the
mentally ill person - otherwise the mentally impaired party will be bound by the contract.
Lord Esher MR stated this proposition in Imperial Loan Co v Stone, when he said:
When a person enters into a contract and afterwards alleges that he was so insane that at
the time he did not know what he was doing, and proves the allegation, the contract is
binding on him in every respect whether it is executory or executed, as if he had been
sane when he made it, unless he can prove further that the person with whom he
contracted knew him to be so insane as not to be capable of understanding what it was
about.

Problems can occur in the case of persons who occasionally experience mental incapacity
that is not always apparent to others with whom they deal.
EXAMPLE:
York Glass Co Ltd v Jubb [1925] All ER 285
FACTS:
• Jubb was suffering a mental illness when he purchased a business. He was later put in hospital.
Jubb's guardian repudiated the contract of purchase. The vendor was unaware of Jubb's
condition and refused to accept the repudiation.
ISSUE:
• Whether the vendor was entitled to refuse to accept the repudiation of the contract.
HELD:
• The court agreed the contract could not be repudiated since the vendor was not aware of Jubb's
insanity and did not take advantage of him.

INTOXICATED PERSONS
The law makes little distinction between persons who are mentally ill and those who are
intoxicated, since the effect of serious intoxication on legal capacity is not dissimilar to the
effect of mental derangement. A contract made by an intoxicated person is voidable by that
person, but, as with mental illness, the onus of proving the condition and the other party's
knowledge of the condition rests on the intoxicated person.
EXAMPLE:
Blomley v Ryan (1956) 99 CLR 362
FACTS:
• Blomley entered into a contract to purchase Ryan's farming property near Goondiwindi, which
was signed by Ryan when he was drunk.
• The contract Ryan signed was for an amount well under the value of the property and
extremely generous to Blomley.
• Ryan sought to repudiate the contract made by him. Blomley sought to enforce the contract,
which was clearly most advantageous to him seeing as the purchase price was a substantial
undervaluation of the property.
ISSUE:
• Whether Ryan could repudiate the contract due to his lack of capacity due to his intoxication.
HELD:
• Blomley's action failed. The court held that Ryan was, to the plaintiff’s knowledge, incapable
of forming a rational judgment as to the terms of the transaction, although he did comprehend
the general nature of the transaction.
COMPANIES
A company can be created by royal charter, an Act of parliament or registration under the
Corporations Act 2001 (Cth). Most companies are created by registration under the
Corporations Act 2001 (Cth). On registration, a company becomes a separate legal entity; that
is, a legal person separate from the persons who own or manage the company.
Under s 125 of the Corporations Act 2001 (Cth), a company will still be liable for agreements
entered into that are in breach of or outside the company’s constitution or internal rules as such
contracts are not rendered invalid.
A contract made by a promoter of a company on behalf of the company but before it has been
formed is void at common law; however, under s 131(1] of the Corporations Act 2001 (Cth), it
will be enforceable provided that the company, once formed, ratifies that preregistration
contract within an agreed or a reasonable time: see Aztech Science Pty Ltd v Atlanta Aerosfoace
(WoyWoy)PtyLtd.
If the company does not form or ratify the contract, the individual responsible for making the
contract on its behalf may also be liable; Corporations Act 2001 (Cth)s 131(2).

UNINCORPORATED ASSOCIATIONS
An unincorporated association is an association or group of persons who freely associate
together to further some common end or interest that does not include the making of
profit, and have no legal status at common law.
The difficulties of unincorporated associations in making contracts is illustrated by Carlton
Football and Cricket Club v Joseph. In this case, the contract was unenforceable because it did
not refer to all current members of the club. The court made reference to the constantly changing
nature of associations’ membership.
However, there have been instances where committee members of unincorporated associations
have been held to be personally liable for contracts made on behalf of the unincorporated
association.

NECESSARIES:
The courts have adopted a two-stage analysis to assist in deciding whether goods are
necessaries in a particular case.
• First, a decision must be made whether the relevant item is capable of being a necessary
at all.
• Second, can the thing be properly regarded as a necessary for the particular minor?
The first question is a legal one, and if answered in the negative, makes the second question
unnecessary. The question, then, is What are necessaries?
A legal definition of 'necessaries' emerged in the case:
Chappie v Cooper (1844) 153 ER 105
FACTS:
• A widowed minor refused to pay for the funeral expenses incurred in burying her deceased
husband. She defended the claim for payment on the basis that the service was not a 'necessary'.
ISSUE:
• Whether the contract for the provision of funeral services was a necessary.
HELD:
• The court determined that necessaries are those things without which an individual cannot
reasonably exist, such as food, clothing, transport and the like. This can include requirements
for the proper cultivation of the mind and can include provision of instruction in art and trade,
and intellectual, moral and religious life.
• Determining the type and standard of necessaries depended on the 'station in life' of the
particular minor. The court held that articles of mere luxury are always excluded, but luxurious
articles of utility are sometimes allowed. However, the court held, predictably, that funeral
expenses are necessarily incurred and entered judgment for the funeral director.

The first stage of the test of necessaries failed in Ryder v Wombwell, where a minor bought as
gifts, for a friend at whose house he had been staying, a pair of cufflinks made of crystals
decorated with diamonds and rubies and a silver antique goblet.
Although the son of a baron with a substantial income, the court held that such items could
never be properly classified as necessaries, the onus of proving that they are necessaries being
on the supplier. The seller's claim for the price of the goods accordingly failed.
Similarly, if the minor is already sufficiently supplied with the commodity that they are buying,
the claim that they are necessaries will be weakened. Such was the outcome in Nash v Inman
where Inman, a university undergraduate, ordered clothes from a tailor but the evidence was
that he already had an adequate supply of clothing.
Nash's claim accordingly failed. For the plaintiff to prove there was a binding contract for
necessaries, they would have to prove that the contract was for goods reasonably necessary for
the minor, depending on their station in life, and that the minor did not already have sufficient
supply of those goods.
The definition of ‘necessaries’ clearly suggests that necessaries can include the provision of
services, as in Chapple v Cooper. Educational and other services, like medical and dental
services, can be classified as necessaries.
In Roberts v Gray, the defendant minor, Gray, as a minor and billiards professional, agreed to
go on a joint tour with the plaintiff. When Gray repudiated the contract before the tour began,
the court found the extensive provision of education or instruction provided by Roberts to Gray
was a necessary and was to Gray's benefit.

Necessaries can include goods purchased for a minor’s immediate family. Persons who lend
money to minors so the minor can buy the necessary are not always recoverable by the lender
based on the decision in Earle v Peale.

Trading contracts, even those that are demonstrably for the benefit of a minor, are not
enforceable. However, there can be a fine line between a trading contract for services and a
beneficial contract of service, as seen in the case of Proform Sports Management Ltd v
Proactive Sports Management Ltd.
In 2000 at the age of 15, Wayne Rooney had a two-year management agreement, which was
terminated by his parents.
The court held the management contract was not a contract for necessaries, nor a beneficial
contract of service. In holding that the only contracts that are binding are contracts for
necessaries, Hodge J defined the term as either necessary goods/services or contracts for the
minor's benefit, such as contracts for an apprenticeship or education.
Note that if a minor falsely represents that they are an adult, there is no available remedy for the
other party under the common law, which will not enforce an unenforceable contract.
Equity, on the other hand, will order restitution by compelling the minor to restore the goods to
their rightful owner.

In assessing whether a contract is beneficial, the court will look at the entire contract, not
simply at an isolated detrimental feature of the contract.
The court will, however, find that a contract can be enforceable against a minor even if not all
terms of the contract are advantageous to the minor, in Homilton v Lethbridge, the defendant,
while a minor, entered into a clerkship that contained a restraint of trade clause prohibiting him
from practising as a lawyer for a certain distance from the plaintiff’s practice in Toowoomba.
The court, despite Lethbridge's plea of infancy, enforced the clause.

LEGISLATION APPLYING TO MINORS

There has been no general legislation enacted in Victoria concerning minors and their
contractual rights, although, as noted, the provisions of the Goods Act 1958 (Vic) define
necessaries as goods suitable for the condition in life of the minor and deal with the price to be
paid for them.
Further, in Victoria certain contracts made with minors are void under provisions of the
Supreme Court Act 1986 (Vic). These contracts include contracts for the repayment of money
lent or to be lent; contracts for payment for goods supplied or to be supplied, other than
necessaries; and contracts on account stated.
An example of the last can be seen in Horworth v Commonwealth Bank where a child of the
Horvaths was a party to a mortgage loan taken out with the defendant. The loan was in arrears
and the plaintiff argued it was void as against their child under s 49 of the Supreme Court Act
1986 (Vic).
The court agreed however, it was not prepared to remove the mortgage from the Land Title
Register and the child had no defence action to gain possession of the property and sell it.
The Supreme Court Act 1986 (Vic) also provides that no legal proceeding can be brought
against a person who ratifies a minor's contract at the age of majority and makes void contracts
to repay loans made by a minor and ratified after reaching majority age.