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Week!4!Summary!

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Key!Information!

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• Agreement!=!offer!+!acceptance!!

• Formation!=!agreement!+!consideration!

Deeds:!

6Must!be!written,!names!of!parties,!attested!to!by!a!witness,!sealed!and!delivered!

6Do!not!require!consideration;!Ballantyne(v(Phillot!

6Required!for!

Agreements!for!gratuitous!promises!(not!supported!by!consideration)!and!

Contracts!appointing!an!agent!whose!authority!involves!contracting!by!deed!on!behalf!of!the!principal!!

Contracts!which!must!be!in!writing!

6Sale!of!goods!by!instalments!

6Transfers!of!shares!in!a!company!

6Sale!of!land!(Conveyancing!Act!1919!NSW)!s54A!

6Bills!of!exchange,!cheques!and!promissory!notes!

6Contracts!for!marine!insurance!

6Assignments!of!copyright!and!patent!

Elements!of!a!Contract!6Offer!

6Acceptance!

6Consideration!(other!than!deeds)!

6Intention!to!be!bound!

6Capacity!to!contract!

6Certainty!

Statute!Competition(and(Consumer(Act(2010!(Cth)!replaced!Trade(Practices(Act(1974!(Cth)!

Battle!of!Contracts!6The!sending!of!the!last!form!will!usually!be!considered!the!final!counter!offer!and!will!thus!prevail!as!in!Butler(

Machine(Tool(Co(Ltd(v(ExBCellBOBCorp((England)(Ltd!

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Offer!

!

6The!crucial!issue!is!whether!it!would!appear!to!a!reasonable!person!in!the!position!of!the!offeree!that!an!offer!was!

intended!and!a!binding!agreement!would!be!made!on!acceptance;!Lark(v(Outhwaite!

6An!offer!is!an!indication!of!a!willingness!to!be!bound!by!certain!terms;(Australian(Woollen(Mills(Pty(Ltd(v(

Commonwealth(

6Advertisements!offering!rewards!are!offers!to!anybody!who!performs!the!conditions!named!in!the!advertisements!

and!anybody!who!does!perform!the!conditions!accepts!the!offer;!Carlill!

Scope!of!Offers!6An!offer!does!not!need!to!be!directed!to!an!identified!person,!it!can!be!made!to!a!particular!person,!a!class!of!

persons!or!the!whole!world;!Carlill(v!Carbolic(Smoke(Ball(Co!

6The!scope!of!an!offer!will!be!limited!by!the!words!used!but!may!be!to!!

the!exclusion!of!a!specific!category!of!persons;!Westminster(Estates(Pty(Ltd(v(Calleja!

the!public!at!large;!Carlill(v(Carbolic(Smoke(Ball(Co!

Termination!of!Offers!There!is!a!revocation!of!the!offer!

6Any!time!before!acceptance,!any!words!or!conduct!that!convey!the!intention!

6Only!effective!where!communicated;!Byrne(v(van(Tienhoven!

6Revocation!is!effective!when!it!reaches!the!recipient!

Lapse:!

6Where!there!is!no!express!end!to!an!offer,!it!will!lapse!after!a!reasonable!time;!Ramsgate(Victoria(Hotel(Co(Ltd(v(

Montefiore!(1866) !

6What!is!reasonable!is!a!matter!of!fact,!but!the!acceptance!must!be!prompt;!Ballas(v(Theophilos!

!

There!is!a!rejection!of!the!offer!

6Once!rejected!an!offer!cannot!be!revived,!a!new!offer!must!be!made!

There!is!a!counter!offer!

The!offeree!does!not!accept!in!time!

There!is!the!death!of!the!offeree!or!offeror!!

However!the!offer!will!not!lapse!until!the!offeree!has!been!notified!of!the!death!of!the!offeror!

There!is!a!failure!of!condition!

6If!an!offer!is!made!to!terminate!on!the!occurrence!or!non6occurrence!of!an!event,!it!cannot!be!accepted!after!that!

event!

Offers!need!to!be!distinguished!from!Statements!of!fact;!Harvey(v(Facey!

!

Invitation!to!Treat!6No!more!than!a!request!for!others!to!make!an!offer;!Pharmaceutical(Society(of(Great(Britain(v(Boots!

6Advertisements!will!sometimes!be!considered!an!invitation!to!treat;!Partridge(v(Crittenden(

6There!is!no!general!rule!that!an!advertisement!cannot!be!an!offer;!Carlill!

6Advertisements!are!a!common!form!of!offers!for!unilateral!contracts;!Carlill(

Options:!A!promise!to!hold!an!offer!open!for!a!period!of!time.!Binding!where!consideration!has!been!given!in!exchange!for!

that!promise.!!!

6An!agreement!between!an!option!holder!and!a!grantor,!where!the!option!holder!is!entitled!to!enter!into!a!contract!

with!the!grantor!under!specified!terms!either!at!a!specific!time!or!in!a!specific!period.!The!option!holder!is!free!to!

decide!whether!they!will!exercise!that!option!

Acceptance!

!

6The!courts!use!an!objective!approach!to!determine!if!an!agreement!has!taken!place.!They!ask!what!a!reasonable!

person!would!draw!from!the!behaviour!of!the!parties;!Smith(v(Hughes(

6In!subjective!approach!there!must!be!meeting!of!the!minds!Consensus(ad(item,(The(Crown(v(Clarke!!

6Signing!an!agreement!is!agreeing!to!the!terms!regardless!of!whether!there!was!true!consensus;!Fitness(First(

(Australia)(Pty(Ltd(v(Chong(

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Communication!of!Acceptance:!6The!General!rule!

A!contract!is!formed!when!the!offeree’s!acceptance!is!received!by!the!offeror;!Latec(Finance(Pty(Ltd(v(Knight!

6The!Postal!rule!

Where!acceptance!is!expected!to!be!sent!by!post!acceptance!is!effective!as!soon!as!it!is!posted!and!the!contract!is!

formed!at!the!place!it!is!posted;!Nunin(Holdings(Pty(Ltd(v(Tullamarine(Estates(Pty(Ltd!

6The!postal!rule!has!been!found!not!to!apply!to!instantaneous!forms!of!communication!such!as!telephone!or!telex,!

as!in!Brinkibon(v(Stahag(Stahl(Und(Stahlwarenhandelsgesellschaft!

6Silence!is!not!acceptance;!Felthouse(v(Bindley!

6Acceptance!may!be!expressed!by!conduct;!Compare(Integrated(Computer(Services(Pty(Ltd(v(Digital(Equipment(Corp(

(Aust)(Pty(Ltd!

6Communication!of!acceptance!is!not!necessary!for!a!unilateral!offer!(Carlill(v(Carbolic(Smoke(Ball(Co)!

6The!offeror!may!stipulate!the!form!in!which!the!offer!is!to!be!accepted.!Where!this!is!just!a!suggestion!any!equally!

expedient!form!may!suffice!

Tenders!!6Standing!offers!

Where!tenders!are!invited!if!and!when!they!are!required.!A!separate!contract!comes!each!time!an!order!is!placed!

6Fixed!tenders!

For!a!fixed!amount!

Vendors!of!tenders!are!bound!by!their!own!stipulations;!Harvela(Investments(Ltd(v(Royal(Trust(Co(of(Canada((CI)(Ltd!

Unilateral!Contract:!BMobil(Oil(Australia(v(Wellcome(International!

Part!performance!of!the!requirements!of!a!unilateral!offer!may!or!may!not!be!sufficient!as!acceptance,!this!will!turn!

on!the!facts!of!the!case!

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Consideration!

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6Must!be!sufficient!but!not!adequate;!Chappel(and(Co(Ltd(v(Nestle(Co(Ltd![1960]!AC87!

6Consideration!is!an!act!or!forbearance,!or!promise!which!is!the!price!of!the!promise:!Dunlop(Pneumatic(Tyre(Co(Ltd(v(

Selfridge(&(Co(Ltd!

6Often!referred!to!in!terms!of!benefit!and!detriment!

Must!move!from!promisee!to!promisor;!Coulls(v(Bagot’s!Executor&(Trustee(Ltd(Co(Ltd(

!

6Illusory!Consideration!is!not!sufficient!

Illusory!where!promise!is!too!uncertain,!is!illegal!or!is!discretionary,!

If!words!that!by!themselves!constitute!a!promise!are!accompanied!by!words!showing!the!promisor!has!discretion!or!

option!as!to!whether!he!will!carry!out!the!promise,!there!is!no!contract;!Placer(Development(Ltd(v(Commonwealth!

Past!consideration!6Not!good!consideration;!Roscorla(v(Thomas!

6Exception!

Pao(On(v(Lau(Tiu(Long!!

Past!consideration!can!be!good!consideration!where!

the!act!was!done!with!the!promisor’s!request!

the!parties!understood!the!act!would!be!remunerated!and!

the!promise!would!have!been!enforceable!if!it!had!been!promised!in!advance!of!the!act!

Consideration!with!an!existing!duty!6Neither!a!promise!to!perform!an!existing!legal!duty!nor!the!performance!of!an!existing!legal!duty!is!regarded!as!

sufficient!consideration;!Stilk(v(Myrick!

6Exception!where!the!beneficiary!is!providing!fresh!consideration,!!

such!as!undertaking!more!than!what!was!required!under!the!previous!contract;!Hartley(v(Ponsonby(

or!where!the!beneficiary’s!promise!to!perform!confers!a!practical!benefit!on!the!modifying!party;!Williams(v(Roffey!

Executory!Consideration!

6Consideration!yet!to!be!executed!

Executed!Consideration!

6Consideration!which!passes!at!the!time!of!formation!

Condition!Precedent!v!Consideration!

6An!act,!undertaking!or!other!thing!requested!by!the!promisor!will!only!be!consideration!if!it!amounts!to!something!

given!in!exchange;!Australian(Woollen(Mills(Pty(Ltd(v(The(Commonwealth!

Promises!Without!Consideration!

6Only!enforceable!in!a!deed!

6May!have!some!action!under!doctrine!of!promissory!estoppel!

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Intention!to!be!Bound!

!

6Intention!describes!what!would!objectively!be!conveyed!by!what!was!said!and!done,!not!a!search!for!

uncommunicated!motives!or!intentions;!Ergomenous(v(Greek(Orthodox(Community(of(SA!

Where!action!could!not!be!brought!against!the!religious!institution!

Presumptions!6Social/domestic!agreement!

No!intention!to!be!bound;!Jones(v(Padavatton!

6Commercial!contracts!

Intention!to!be!bound;!Equuscorp(Pty(Ltd(v(Glengallan(Investments(Pty(Ltd!

6Must!adduce!that!shows!clear!evidence!to!the!contrary!to!rebut!

Social!or!domestic!6Includes!interactions!between!close!friends!and!members!of!a!family!

6Most!cases!between!husband!and!wife!

Cohen(v(Cohen(

100!Pound!allowance!annually!for!dresses,!upon!separation!wife!sued!for!money!

Held!the!parties!did!not!intend!to!be!bound!

Rebuttal!of!Presumption!

6Mcgregor(v(Mcgregor!

A!contract!was!found!to!exist!in!arrangements,!because!the!agreement!had!been!made!in!separation,!not!in!

marriage!

6Todd(v(Niclol!

The!significance!of!the!requirements!of!moving!countries!and!selling!possessions!to!take!up!an!offer!to!live!with!their!

aunt!was!found!to!be!sufficient!to!be!binding!

Often!more!easily!rebutted!where!family!is!engaged!in!some!kind!of!business;!Roufos(v(Brewster!

Domestic!relationships!extend!further!than!family,!to!friends!and!colleagues!

Further!Considerations!

6What!was!said/represented!

6Context!of!statements!

6How!the!parties!conducted!themselves!in!the!particular!situation!

6How!grave!the!consequences!of!a!breach!will!be!

Commercial!agreements!6Banque(Brussels(Lambert(v(Australian(National(Industries!

The!whole!thrust!of!the!law!today!is!to!give!proper!effect!to!commercial!transactions!

Letter!of!comfort!was!held!to!be!binding!

Government!Agreements:!6For!administrative!or!political!activities!of!government,!usually!an!intention!to!create!legal!relations!does!not!exist;!

Australian(Woolen(Mills(Pty(Ltd(v(Commonwealth;(Administration(of(Papua(and(New(Guinea(v(Leahy;!where!an!

agreement!with!the!government!was!more!analogous!to!a!social!service!and!was!not!contractual!

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Capacity!to!Contract!

General!position!6Only!normal,!sane,!sober!adults!have!the!capacity!to!enter!into!a!contract!

6Required!to!have!the!ability!to!understand!what!is!being!entered!into!

6A!contract!made!with!a!person!lacking!capacity!may!be!challenge!on!the!grounds!of!unconscionable!conduct!

Minors!6Under!18!years;!Age!of!majority!act!1974,!s5,!ACT!

6Bound!to!agreement!where!they!pay!cash!

6Where!there!is!money!to!be!paid,!the!general!rule!is!that!minors!are!only!liable!for!

Contracts!for!necessaries!and!beneficial!contracts!of!service!

Necessaries:!!

Things!that!are!essential!to!the!existence!and!the!reasonable!advantage!and!comfort!of!the!individual.!Items!of!

luxury!are!always!excluded,!however!items!of!utility!are!sometimes!allowed;!Chapple(v(Cooper!

Sale!of!Goods!Act!1954!(ACT)!s7!

6Necessaries’!means!goods!suitable!to!the!condition!and!life!of!the!infant!...and!to!his!or!her!actual!requirements!at!

the!time!and!sale!of!delivery!

A!person!lacking!mental!capacity!to!contract!will!only!be!required!to!pay!a!reasonable,!as!opposed!to!the!contract,!

price!for!necessaries,!Sale(of(Goods(Act(1954((ACT),!s7(2)!

6The!provider!bears!the!burden!of!proof!that!what!was!supplied!was!appropriate!bearing!in!mind!the!minor’s!life!

situation!

6Scarborough(v(Sturzaker!

Minor!purchased!bike!from!supplier.!Contract!was!binding!because!bike!was!necessary!to!both!the!M’s!station!in!life!

and!at!the!time!of!delivery!

Minors!will!be!liable!to!contracts!for!necessaries!where:!

6They!are!being!charged!a!reasonable!price!(statutory!resolution!if!unreasonable);!

6The!terms!of!the!contract!are!not!harsh!or!onerous!on!the!M!(otherwise!the!contract!would!be!void).!

Where!the!items!are!not!necessaries!the!M!will!not!be!bound!

6Cannot!be!sued!for!the!price!owing!or!indirectly!under!tort!of!conversion!!

6Unless!the!goods!were!obtained!by!fraud!(regarding!age)!the!minor!does!not!have!to!return!it!

Contracts!which!are!binding!unless!repudiated!

6Contracts!for!lease!of!land!

6Contract!for!purchase!of!shares!

6Contracts!of!partnership!

Mentally!Ill/Intoxicated!Contract!is!voidable!at!the!option!of!the!party!who,!by!reason!of!mental!disability!or!intoxication!

6Was!unable!to!understand!the!nature!of!the!contract!made!and!

6The!other!party!knew!or!ought!to!have!known!about!the!disability!

(two!part!test!with!the!onus!of!proof!on!the!party!claiming!the!illness)!

Contracts!made!by!a!person!of!unsound!mind!are!not!voidable!if!the!other!party!believed!they!were!dealing!with!a!

person!of!sound!mind;!Imperial(Loan(Co(v(Stone!

What!Constitutes!sufficient!Incapacitation!

6There!is!not!fixed!standard!of!sanity!required!for!transactions.!Each!party!needs!to!have!the!soundness!of!mind!to!

understand!what!they!are!participating!in;!Gibbons(v(Wright!

Where!a!person!does!not!understand!they!are!signing!a!contract!document,!this!will!allow!a!plea!of!non(est(factum(

Where!a!person!is!mentally!ill,!they!may!escape!their!obligations!under!the!contract!where!the!courts!hold!that!this!

was!unfair!in!the!circumstances;!Hart(v(O’Connor![1985]!AC!1000!

Option!to!buy!a!house!from!an!elderly!man,!was!set!aside!on!the!grounds!that!the!elderly!man!lacked!mental!

capacity!and!the!plaintiff!ought!to!have!known!that;!Lamprepoulos(v(Kolnik(

Intoxication!If!a!party!confirms!the!contract!at!any!point!after!regaining!sobriety!after!receiving!the!relevant!information!the!right!

to!avoid!the!contract!is!lost;!Matthews(v(Baxter!

Corporations!6A!separate!legal!entity!whose!personality!and!existence!is!separate!from!those!people!who!work!within!it!

6Can!do!almost!anything!a!person!can!do!

6s124(1),!Corporations(Act(2001((Cth),!“company!has!the!legal!capacity!and!powers!of!an!individual”!

Position!Under!the!Corps!Act!

6An!act!done!by!a!C!will!not!be!invalid!simply!because!it!is!contrary!or!beyond!the!objects!of!that!entity!

6A!person!acting!with!express!or!implied!authority!may!bind!a!C!(without!the!use!of!the!C’s!seal)!

6A!person!dealing!with!a!C!is!entitled!to!assume!that!the!person!held!out!by!the!C!has!been!properly!appointed!and!is!

authorised!to!make!such!bargains!for!the!C!

Bankrupts!6Maintains!the!capacity!to!enter!into!contracts!during!bankruptcy,!subject!to!conditions!

6s126!of!bankruptcy(Act(1966!allows!a!bankrupt!to!enter!into!contracts!regarding!property!acquired!after!bankruptcy!

and!this!will!be!valid!providing!

The!agreement!is!entered!into!for!valuable!consideration!and!

The!trustee!in!bankruptcy!does!not!intervene!

s269!of!bankruptcy(Act(1966!states!that!an!undischarged!bankrupt!may!not:!

6Obtain!credit!of!$3000!or!more;!

6Obtain!G!or!S!by!the!payment!of!a!negotiable!instrument!worth!$3000!or!more;!

6Enter!a!hire6purchase!agreement!worth!$3000!or!more;!

6Obtain!services!worth!$3000!or!more;!or!

6Promise!to!supply!G!or!S!worth!$3000!or!more,!without!informing!the!other!party!they!are!an!undischarged!

bankrupt!

6Further,!s!269(1)(b)!states!that!they!may!not!carry!on!business!under!an!assumed!name!without!disclosing!the!

bankruptcy!

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Certainty!

!

6Terms!must!be!sufficiently!certain!and!clear!that!the!parties!can!understand!their!rights!and!obligations!and!the!

courts!can!enforce!them!

6If!an!agreement!is!uncertain!in!a!material!respect,!it!cannot!constitute!a!binding!contract!

Too!vague!or!ambiguous!to!be!enforceable!!

6If!definite!meaning!cannot!be!given!to!words!in!an!agreement!a!binding!contract!cannot!result;!Raffles(v(Wichelhaus(

Incomplete!(crucial!matters!unresolved)!

The!parties!must!at!least!reach!agreement!on!all!terms!they!intended!to!fix!by!agreement!

What!is!essential!depends!on!the!subject!matter;!!

Hall(v(Busst!

for!agreements!involving!the!sale!of!land,!the!price!must!be!settled!before!the!agreement!will!be!enforceable.!The!

price!need!not!be!fixed!–!but!can!instead!leave!this!to!a!third!party.!It!is!not!sufficient!to!say!“reasonable!price”!or!

the!“value!of!the!land”!

Three!factors!must!be!taken!into!account!in!determining!if!an!omission!from!an!agreement!is!fatal!to!formation;!

Thorby(v(Goldberg!

6Importance!or!essentiality!of!the!term!

6Why!it!has!been!left!out!

6Whether!the!agreement!has!already!been!performed!on!one!side!

Where!an!agreement!for!the!sale!of!goods!has!been!silent!on!price,!an!obligation!for!to!pay!a!reasonable!price;!Sale(

of(Goods(Act(1954!(ACT),!s!13(2)!

However!this!has!no!application!where!the!parties!deliberately!deferred!agreement!on!price;!May(and(Butcher(Ltd(v(

The(King!

It!also!does!not!extend!to!land!

Agreement!to!contract!in!the!future!(3!types)!6Agreements!to!reach!an!agreement!in!the!future!

Contracts!to!contract!are!not!binding;!Coal(Cliff(P/L(Sijehame!

6Agreements!to!enter!into!negotiations!

6Lock!out!agreements!(to!not!deal!with!a!third!party)!

Lock!out!agreements!are!binding;!Walford(v(Miles!

A!contract!that!is!uncertain!can!be!saved!by!one!of!two!ways:!

6Severance!if!the!uncertain!part!is!not!essential.!Essential!depends!on!whether!the!parties!still!would!have!entered!

into!the!contract!without!it!

6Waiver,!where!an!uncertain,!incomplete!or!illusory!provision!has!been!inserted!for!the!benefit!of!one!party!

Severance/!Waiver!6A!meaningless!clause!can!be!severed!and!the!rest!of!the!agreement!can!remain;!Fitzgerald(v(Masters!

6An!uncertain!clause!cannot!be!severed!if!it!would!turn!the!sale!into!a!different!type!to!what!was!contemplated;!

Whitlock(v(Brew!!

6A!party!cannot!waive!an!uncertain!clause!that!is!essential!to!the!contract;!Grime(v(Barthlomew!

Illusory!Promise!6A!promise!is!illusory!if!a!party!is!given!unfettered!discretion!as!to!performance!of!the!promise!

6The!promise!to!pay!an!unspecified!amount!is!illusory;!Placer(v(Commonwealth!

6Where!a!promise!has!an!exemption!clause!so!sweeping!that!it!deprives!the!promise!of!any!force,!it!will!be!illusory;!

MacRobertson(Miller(Airline(Services(v(Commissioner(of(Taxation!

6A!contract!will!not!be!illusory!if!important!matters!are!left!to!be!determined!by!a!third!party!or!if!subsidiary!matters!

are!left!to!be!determined!by!one!party;!Godecke(v(Kirwan(

6Discretion!will!not!render!promises!illusory!if!it!relates!to!the!fulfilment!of!a!condition!which!the!performance!of!the!

contract!depends!or!if!it!is!exercised!according!to!objective!criteria;!Meehan(v(Jones!

(subject!to!finance,!is!objective)!!

Parties!may!make!a!valid!contract!that!defers!agreement!on!an!essential!term!if!they!provide!an!effective!

mechanism/formula!for!supplying!the!term!in!the!event!they!fail!to!reach!agreement!

If!agreement!to!sell!goods!includes!that!the!price!will!be!fixed!by!valuation!of!a!certain!person!and!they!refuse/cant,!

the!agreement!is!avoided;!George(v(Roach!

For!‘reasonable!terms’!to!be!a!sufficiently!certain!term!there!must!be!such!a!set!of!terms!in!common!use;!Whitlock(v(

Brew!

A!contract!which!can!have!more!than!one!possible!meaning!or!which!when!construed!can!produce!in!its!application!

more!than!one!result!is!not!necessarily!void!for!uncertainty;!Council(of(the(Upper(Hunter(County(District(v(Australian(

Chilling(and(Freezing;!As!long!as!it!is!capable!of!a!meaning!it!will!ultimately!bear!meaning!which!the!courts!believes!is!

its!proper!construction!

A!promise!to!negotiate!in!good!faith!may,!in!particular!circumstances,!be!enforceable,!Coal(Cliff(Collieries(Pty(Ltd(v(

Sijehama(Pty(Ltd!

Conditional!Contracts!6When!parties!reach!an!agreement!they!may!not!want!to!be!immediately!bound!

6The!contract!may!be!suspended!till!a!particular!condition!is!fulfilled!!

The!effect!of!conditions!will!depend!on!the!words!used!

Important!considerations!

6Is!it!a!condition!precedent!or!subsequent?!

Condition!precedent!is!a!condition!which!must!be!fulfilled!before!the!obligations!of!the!parties!become!binding!

Condition!subsequent!is!a!condition!which!will!end!the!contractual!rights!and!obligations!if!not!fulfilled!

6To!what!extent!are!the!parties!bound,!prior!to!the!condition!being!fulfilled?!

6Are!the!conditions!sufficiently!certain!to!be!enforceable?!

6To!what!extent!are!the!parties!(or!one!party)!bound!to!take!steps!to!see!that!the!condition!is!fulfilled?!

6Can!the!condition!be!waived,!and!if!so,!by!whom?!

!

!

!

!

!

!

!

!

!

!

!

!

!

!

!

Express!Terms!

! !

!

Oral!Statements!6May!be!about!existing!facts!or!may!be!statements!about!the!future!

6If!these!statements!prove!to!be!false,!the!party!to!whom!it!was!made!may!wish!to!seek!redress!

There!are!different!remedies!available!according!to!which!of!the!following!types!the!statement!is.!These!terms!are!

not!mutually!exclusive!

6Terms!

6Collateral!Contract!

6Representation!

Cannot!give!rise!to!an!action!for!breach!of!contract,!statutory!rules!applying!to!misleading!and!deceptive!conduct,!

common!law!relating!to!misrepresentation!can!be!used!for!remedies!

6Sales!Puff!

Mere!exaggerated!sales!talk,!not!intended!to!have!legal!effect,!no!remedy!available!

Importance!of!the!Statement!6A!statement!that!the!circumstances!show!was!highly!significant!or!important!to!the!transaction!is!more!likely!to!be!

regarded!as!a!promise!than!a!statement!of!lesser!significance;!!

Van(den(Esschert(v(Chappell,!!

the!purchaser!of!a!house,!before!signing!the!written!contract!of!sale!asked!the!vendor!if!the!house!had!any!white!

ants.!The!vendor!assured!the!purchaser!there!were!none.!The!court!held!this!was!a!term!

The!Words!Used!

The!words!used!and!whether!they!are!promissory!words!like!‘promise,!agree,!guarantee!or!warrant’!or!words!like!“I!

would!estimate,!or!I!guess!it!is!about”!indicate!they!are!merely!expressing!an!opinion!will!determine!if!they!are!a!

promise!or!mere!representation;!!

JJ(Savage(&(Sons(Pty(Ltd(v(Blakney!

Sale!of!a!motor!boat.!Statement!by!the!seller!the!“estimated!speed”!was!15!MPH.!The!written!record!of!contract!

contained!no!reference!to!boat’s!speed.!High!Court!concluded!the!statement!about!the!speed!was!not!a!promise,!

but!a!mere!representation!

!

! !

Collateral!Contracts!

6A!collateral!contract!is!a!contract!for!which!the!consideration!is!the!making!of!another!contract;!Heilbut(Symon(&(Co(

v(Buckleton(

To!establish!a!collateral!contract!there!must!be!3!preconditions!

!

1)!Must!be!promissory,!not!intended!to!be!a!mere!representation;!JJ(Savage(and(Sons(v(Blakney!

Must!have!been!intended!to!be!collateral!to,!and!not!part!of,!the!main!contract(

!

2)!The!statement!must!not!contradict,!and!must!be!consistent!with,!the!main!contract;!Hoyt’s(Pty(Ltd(v(Spencer!

Exception,!where!the!inconsistency!arises!from!an!exclusion!clause!in!the!main!contract,!the!collateral!promise!will!

override!the!exclusion!clause;!J(Evans(and(Son((Portsmouth)(Ltd(v(Andrea(Merzario(Ltd(

!

3)!A!collateral!contract!is!a!separate!contract!and!therefore!there!must!be!consideration!provided!for!the!collateral!

promise;!Heilbut(Symon(&(Co(v(Buckleton!

Often!the!consideration!is!the!promise!entering!into!the!contract!

!

6Often!held!to!exist!where!statements!have!been!made!and!intended!as!a!promise!to!induce!the!main!contract;!

Heilbut(Symon(&(Co(v(Buckleton,!!

6The!buyer!may!avoid!the!parol!evidence!rule!by!showing!that!there!were!two!separate!contracts;!De(Lassale(v(

Guildford!

6For!a!pre6contractual!oral!statement!to!take!effect!as!a!collateral!contract,!it!must!be!to!induce!entry!into!the!

contract;!JJ(Savage(&(Sons(Pty(Ltd(v(Blakney!

Collateral!Contracts!with!a!Third!Party!

6‘Tripartite!collateral!contract’!

In!these!contracts!the!consistency!rule!from!Hoyt’s(v(Spencer!does!not!apply!

6If!A!makes!a!promise!to!B!who,!in!reliance!on!that!promise,!enters!into!a!contract!with!C,!the!contract!with!C!

constitutes!the!main!contract!and!is!effective!as!consideration!for!the!collateral!contract!between!A!and!B.!This!is!as!

long!as!the!contract!between!B!and!C!provides!a!benefit!to!A;!Andrews(v(Hopkinson!

Where!A!(a!car!dealer),!made!assurances!to!B!the!purchaser!in!relation!to!a!car!that!B!subsequently!purchased!from!

C,!a!finance!company.!The!assurances!constituted!a!contract!between!A!and!B!that!was!collateral!to!the!main!

contract!between!B!and!C.!The!benefit!to!A!was!the!sale!of!the!car!he!concluded!to!B!!

! !

Terms!Displayed!or!Delivered!

Two!part!test!where!exclusion!clauses!are!included!by!such!means!

1)!Have!the!terms!been!incorporated!into!the!contract?;!

2)!Are!the!terms!sufficient!to!protect!the!defendant!against!any!claim!by!a!plaintiff;!

Thornton(v(Shoe(Lane(Parking(Ltd!

1)!Incorporation!

Whether!terms!can!be!incorporated!into!a!contract!by!a!ticket,!receipt!or!sign!will!particularly!depend!on!!

1.1.!The!time!the!contract!was!concluded!relative!to!the!issue!of!the!notice!and!!

1.2.!The!nature!of!the!notice!given!the!party’s!appreciation!of!the!nature!of!the!document!involved!

1.1.!Timing!6An!exemption!clause!will!only!be!incorporated!where!notice!was!given!before!the!contract!was!made.!Particularly!

for!a!ticket,!receipt!or!sign;!Thornton(v(Shoe(Lane(Parking(Ltd!

6Notice!of!a!term!must!be!given!at!or!before!the!entering!into!of!a!contract;!!

Olley(v(Malborough(Court(Ltd(

Where!the!hotel!sought!to!rely!on!an!exclusion!clause!located!in!a!hotel!room.!The!argument!failed!as!the!contract!

had!been!formed!before!Olley!set!foot!in!the!room!

6Oceanic(Sun(Line(Special(Shipping(Co(Inc(v(Fay!

Exclusion!clauses!printed!for!a!cruise!in!the!Greek!islands!were!not!incorporated!into!the!contract!because!the!

contract!was!made!in!Australia,!sometime!before!the!issue!of!ticket!in!Greece!

1.2.!Reasonable!Notice!6The!terms!of!the!ticket,!receipt!or!sign!will!only!be!incorporated!if!the!party!seeking!to!rely!on!those!terms!gives!

adequate!notice!of!their!existence!and!their!contractual!nature!to!the!other!party;!Pondicil(Pty(Ltd(v(Tropical(Reef(

Shipyard(Pty(Ltd!

(

6General!principle!is!that!notice!must!be!in!such!a!form!that!is!likely!to!come!to!the!attention!of!the!party!to!be!

bound;!Thornton(v(Shoe(Lane(Parking(Ltd!

6Different!steps!may!be!needed!to!bring!the!exclusion!clause!to!a!passenger’s!notice!particularly!if!it!is!an!unusual!

one;!Oceanic(Sun(Line(Special(Shipping(Co(Inc(v(Fay!

6(Thornton(v(Shoe(Lane(Parking(Ltd!

Customer!entered!car!park!and!was!issued!ticket!that!showed!time!he!entered!and!stated!the!ticket!is!subject!to!

conditions!displayed!on!the!premises.!Conditions!were!not!visible!from!the!entrance!or!where!the!ticket!was!issued.!

Court!held!the!customer!was!not!bound!by!the!clause.!Customer!did!not!know!the!ticket!was!subject!to!the!

exempting!condition!and!the!car!park!had!not!given!reasonable!notice!of!it!

Reference!to!Terms!not!Readily!Available!6Giving!customers!notice!of!terms!in!another!document!not!immediately!or!readily!available!is!typically!insufficient!

to!satisfy!reasonable!notice;!Thornton(v(Shoe(Lane(Parking(Ltd!

6Baltic(Shipping(Co(v(Dillon((The(Mikhail(Lermontov)!

Prior!to!the!issue!of!the!ticket,!the!terms!were!available!at!the!offices!of!the!provider.!The!court!stated!this!scarcely!

amounted!to!sufficient!compliance!

Incorporation!of!Terms!by!Prior!Dealings!6If!parties!have!had!regular!dealings!with!each!other!in!the!past,!over!an!appreciate!period,!this!may!be!sufficient!to!

incorporate!into!their!most!recent!contracts,!terms!not!specifically!agreed!to;!Balmain(New(Ferry(Co(Ltd(v(Robertson!

Robertson!had!previous!dealings!with!the!Balmain!New!Ferry!Co!Ltd!which!made!clear!his!knowledge!and!

acceptance!of!the!terms!being!incorporated!

Unusual!Terms!6Where!the!terms!to!be!incorporated!are!unusual,!special!notice!must!be!given;!Thornton(v(Shoe(Lane(Parking(Ltd!

6Interfoto(Picture(Library(Ltd(v(Stiletto(Visual(Programs(Ltd!

Interfoto!did!not!do!what!was!reasonably!necessary!to!draw!the!unreasonable!clause!fairly!to!the!attention!of!

Stiletto!

6Baltic(Shipping(Co(v(Dillon((The(Mikhail(Lermontov)!

For!conditions!on!the!ticket!to!be!incorporated!the!passenger!must!have!been!given!notice!of!them.!The!mere!

availability!of!the!conditions!at!the!company’s!office!was!not!adequate!

Reasonable!steps!must!be!taken!to!give!notice!of!an!exemption!clause!for!it!to!be!incorporated;!Parker(v(South(

Eastern(Railway(Co!

Exclusion!Clauses!in!Unsigned!Documents!6A!court!must!first!determine!whether!the!document!is!contractual!in!nature!

6Must!then!determine!whether!reasonable!notice!(ie!both!timing!and!actual!notice)!was!given!of!the!existence!of!the!

exclusion!clause!

6A!reasonable!person!must!regard!the!ticket!handed!to!them!as!contractual;!Causer(v(Browne!

The!exclusion!clause!on!the!receipt!at!a!dry!cleaner!was!not!effective!because!a!reasonable!person!would!not!regard!

the!document!as!being!contractual.!The!docket!would!be!reasonably!understood!to!just!be!for!collecting!the!goods!

and!not!understood!to!contain!exemption!clauses!

Exclusion!Clause!on!a!sign!in!the!Premises!6Party!has!to!establish!that!the!other!party!either!knew!of!the!clause!or!was!at!least!given!reasonable!notice!of!its!

existence!before!the!contract!was!entered!into;!Thornton(v(Shoe(Lane(Parking(Ltd(

( (

Exclusion!Clauses!Construction!

2)!

6Exclusion!clauses!should!be!analysed!according!to!ordinary!principles!of!construction;!Darlington(Futures(Ltd(v(Delco(

Aust(Pty(Ltd!

Contra!Proferentem!Rule!6In!cases!of!ambiguity!an!exclusion!clause!may!be!construed!contra!proferentem,!meaning!construed!strictly!against!

the!party!seeking!to!rely!on!the!clause;!Darlington(Futures(Ltd(v(Delco(Aust(Pty(Ltd!!

6Resolves!any!ambiguity!against!the!party!relying!on!the!clause!and,!where!possible,!gives!it!the!narrowest!possible!

interpretation:!White(v(John(Warwick(&(Co(Ltd!

6Wallis(Son(&(Wells(v(Pratt(&(Haynes!

Contract!for!sale!of!seed!specified!as!specific!type.!Sellers!delivered!a!different,!inferior!seed.!Sellers!sought!to!rely!

on!exemption!clause!providing!that!sellers!give!no!warranty!as!to!growth,!description!or!any!other!matter.!The!word!

warranty!may!be!used!to!mean!any!term!in!a!contract!or!terms!that!are!not!conditions!to!a!contract.!House!of!Lords!

construed!the!clause!strictly!to!refer!to!a!warranty!in!a!legal!sense.!Thus!the!clause!did!not!exclude!liability!

Liability!for!Negligence!6To!be!protected!against!actions!of!negligence!the!language!must!refer!specifically!to!negligence!or!language!which!

can!only!refer!to!this:!Davis(v(Pearce(Parking(Station(Pty(Ltd(

BWords!like!“howsoever!caused”!and!“under!no!circumstances”!will!generally!be!said!to!incorporate!negligence:!

Rutter!v!Palmer!

6The!words!“all!liability”!were!held!to!be!capable!of!embracing!negligence!in!DNFS(Pty(Ltd(v(De(Neefe(Signs(Pty(Ltd(

6Darlington(Futures(Ltd(v(Delco(Australia(Pty(Ltd!

The!scope!of!the!clause!should!be!determined!by!construing!according!to!its!natural!and!ordinary!meaning!

Deliberate!Breach!6Clear!words!are!required!for!an!exclusion!clause!to!be!construed!as!excluding!liability!for!a!deliberate!breach!of!

contract;!Davis(v(Pearce(Parking(Station(Pty(Ltd(

Deviation!Cases!6If!a!carrier!deviates!from!an!agreed!route!of!voyage,!the!benefit!of!the!exclusion!clause!is!lost;!Thomas(National(

Transport((Melbourne)(Pty(Ltd(v(May(and(Baker((Australia)(Pty(Ltd,!!

Four!Corners!Rule!6Where!the!defendant’s!action!causes!loss!to!the!plaintiff!and!this!has!not!been!authorised!or!contemplated!by!the!

contract,!the!exclusion!clause!will!generally!not!protect!the!defendant;!Council(of(the(City(of(Sydney(v(West!

6Exclusion!clause!is!unlikely!to!have!been!intended!to!apply!to!acts!unauthorised!or!outside!the!four!corners!of!the!

contract;!Thomas(National(Transport((Melbourne)(Pty(Ltd(v(May(&(Baker((Australia)(Pty(Ltd!

6Gibaud(v(Great(Eastern(Railway(Co,(

If!you!undertake!to!do!something!in!a!specific!way!and!do!not,!you!cannot!rely!on!conditions!which!were!only!

intended!to!protect!you!if!you!carried!out!the!contract!in!the!way!you!contracted!to!do!it!

6(Council(of(the(City(of(Sydney(v(West!

West!left!car!at!council’s!car!park.!As!he!entered!was!handed!a!ticket.!On!ticket!were!the!words!“ticket!must!be!

presented!for!time!stamping!and!payment!before!taking!delivery!of!the!vehicle”.!West’s!car!was!taken!by!thief!who!

claimed!he!had!lost!ticket!and!obtained!a!duplicate!from!the!attendant.!Thief!was!then!permitted!to!drive!the!car!

away.!High!Court!held!the!exclusion!clause!did!not!apply!to!protect!the!council!from!liability!for!the!loss!of!the!car.!

Influenced!by!the!attendant!allowing!the!car!to!be!taken!contrary!to!the!conditions!on!the!car!park’s!own!ticket.!The!

clause!had!no!application!in!the!performance!of!acts!neither!authorised!nor!permitted!by!the!contract!

Doctrine!of!Fundamental!Breach!6Strong!but!rebuttable!presumption!that!an!exclusion!clause!will!not!confer!protection!against!a!fundamental!breach!

(ie!a!breach!which!goes!to!the!root!of!the!contract)!

(

!

! !

Parol!Evidence!Rule!

6Where!contract!is!entirely!written,!courts!will!usually!presume!that!the!document!contains!all!the!terms!of!that!

contract;!Mercantile(Bank(of(Sydney(v(Taylor(

6Rule!only!applies!to!exclude!intrinsic!evidence!of!a!term!supplement!in!a!written!contract,!where!a!contract!is!

wholly!in!writing;!Hoyt’s(Pty(Ltd(v(Spencer(

(

!Two!Approaches!

6Strict!Approach!

Accords!primacy!to!written!document!that!appears!on!its!face!to!be!the!complete!record!of!the!parties’!contract;!L(G(

Thorne(&(Co(Pty(Ltd(v(Thomas(Borthwick(&(Sons((Australasia)(Ltd!

6Flexible!Approach!

Focuses!on!ascertaining!the!presumed!intentions!of!the!parties!

High!Court!has!not!exclusively!determined!which!approach!should!be!taken!

Equuscorp(Pty(Ltd(v(Glengallan(Investments(Pty(Ltd!

High!Court!held!a!subsequent!written!contract!superseded!any!prior!oral!agreement.!However!recognised!possibility!

of!a!partly!oral!and!partly!written!contract!and!did!not!dismiss!the!possibility!of!oral!or!other!extrinsic!evidence!being!

brought!to!establish!the!parties’!intentions(

(

Exceptions!to!the!Rule!6Where!parties!have!used!language!in!their!written!record!of!a!contract!that!has!a!special!meaning!in!the!parties’!

particular!trade!or!industry,!extrinsic!evidence!of!that!meaning!may!be!admitted;!Appleby(v(Pursell,!!

however!the!trade!meaning!must!be!well!known,!uniform!and!certain;!Homestake(Australia(Ltd(v(Metana(Minerals(

NL!

(

6If!there!are!plausible!competing!interpretations!of!a!clause,!extrinsic!evidence!may!be!admitted;!Royal(Botanic(

Gardens(and(Domain(Trust(v(South(Sydney(City(Council!

(

6To!identify!the!parties!to,!or!subject!matter!of,!the!contract!where!these!features!are!not!revealed!by!the!written!

contract;!Edwards(v(Edwards!

!

6A!court!may!have!regard!to!extrinsic!evidence!when!considering!whether!or!not!a!term!should!be!implied!in!a!

contract;!Codella(Construction(Pty(Ltd(v(State(Rail(Authority(of(NSW!

!

6In!determining!the!terms!of!a!contract!that!is!partly!written!and!partly!oral,!surrounding!circumstances!may!be!used!

as!an!aid;!Stones(v(Dowler!

!

6Evidence!of!prior!negotiations!will!be!admissible!to!establish!objective!background!facts!which!were!known!to!both!

parties!and!the!subject!matter!of!the!contract;!Codelfa(Construction(Pty(Ltd(v(State(Railway(Authority(of(NSW!

!

6Is!admissible!to!show!that!due!to!a!mistake!of!the!parties!their!agreement!has!been!inaccurately!expressed;!Mannai(

Investment(Co(Ltd(v(Eagle(Star(Assurance!

Existence!of!a!Formal!Written!Contract!

6Equuscorp(Pty(Ltd(v(Glengallan(Investments(Pty(Ltd!

A!formal!written!contract!superseded!any!prior!oral!agreement!particularly!where!the!oral!agreement!is!inconsistent!

with!that!contract!

6State(Rail(Authority(of(NSW(v(Heath(Outdoor(Pty(Ltd!

Contract!granted!State!Rail!Authority!power!to!terminate!contract!at!any!time!with!one!month’s!written!notice.!

Heath!argued!contract!had!been!qualified!by!statements!made!before!the!contract!was!signed!to!the!effect!that!the!

right!to!terminate!would!only!be!exercised!in!exceptional!circumstances.!Court!held!the!parol!evidence!rule!did!not!

exclude!the!court!from!considering!conversations,!however!the!submission!that!the!contract!was!partly!oral!and!

partly!in!writing!should!be!rejected!

6The!parol!evidence!rule!applies!only!to!contracts!that!are!wholly!in!writing!and!thus!has!no!scope!to!operate!until!it!

has!first!been!ascertained!that!the!contract!is!wholly!in!writing;!Turner(v(Forwood!

!

6A!separate!type!of!contractual!agreement!to!a!partly!written!partly!oral!contract!is!a!contract!wholly!in!writing!and!

an!oral!collateral!contract;!J(Evans(&(Son(v(Anthony(Merzario!

! !

Signing!a!Written!Document!

6By!signing!the!document,!the!signatories!represent!that!they!intend!to!be!bound!by!the!terms!of!that!contract;!

L’Estrange(v(F(Graucob!

!

Exceptions!The!rule!in!L’Estrange(v(Graucob!will!not!apply!where!the!party!signing!has!been!misled,!where!the!plea!of!non!est!

factum!would!apply!or!where!there!are!equitable!grounds!for!setting!aside!the!contract!

6Curtis(v(Chemical(Cleaning(and(Dyring(Co!

Where!an!exemption!clause!is!misrepresented!it!cannot!be!relied!on!even!where!it!is!signed.!Even!if!the!clause!is!not!

represented!a!customer!may!not!be!bound!by!signing!a!receipt!!

Mistake!as!to!nature!of!the!document!

6A!person!will!not!be!bound!by!signing!a!document!that!reasonably!appears!to!be!

a!timesheet;!Grogan(v(Robin(Meredith(Plant(Hire!

or!a!receipt!or!voucher;!Chapleton(v(Barry(Urban(District(Council(

Allied(Van(Lines(v(Bratton!

The!plaintiff’s!had!signed!the!forms.!They!had!not!read!the!provisions.!They!were!still!bound!by!what!they!had!

signed.!!

!

!

!

! !

Meaning!of!Terms!

!

6Court!will!attempt!the!give!effect!to!the!intention!of!the!parties;!Pioneer(Shipping(Ltd(v(B(T(P(Tioxide(Ltd!

6Objective!test!

The!parties!cannot!give!direct!evidence!of!what!their!intention!was,!it!is!to!be!determined!by!what!the!reasonable!

person!in!the!situation!of!the!parties!would!have!thought;!Reardon(Smith(Line(Ltd(v(Yngvar(HansesBTangen!

Uncertain!Terms!6Courts!will!endeavour!to!overcome!vague!and!uncertain!terms.!If!it!can’t!it!will!declare!the!contract!void!for!

uncertainty.!This!is!a!last!resort!as!they!do!not!want!to!act!as!the!destroyer!of!bargains!

6!“As(long(as(it(is(capable(of(a(meaning,(it(will(ultimately(bear(that(meaning(which(the(court…decides(is(its(proper(

construction:(Thus(will(uncertainty(of(meaning,(as(distinct(from(absence(of(meaning(or(of(intention,(be(resolved.”(

Barwick!J!in!Upper(Hunter(County(District(Council(v(Australian(Chilling(and(Freezing(Co(Ltd!at!43667!

Meaningless!Terms!6Nicolene(Ltd(v(Simmonds(!

A!clause!that!is!meaningless!may!be!able!to!be!ignored!while!keeping!the!contract!good.!However!a!clause!that!is!yet!

to!be!agreed!on!is!likely!to!mean!there!is!no!contract!because!the!parties!have!not!agreed!on!all!the!essential!terms.!

Importance!of!an!Express!Term!

6Remedies!available!for!breach!of!a!term!vary!according!to!the!significance!of!the!term!

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Categories!of!Terms!

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Condition!6Goes!to!the!root!of!the!matter.!Failure!to!perform!it!renders!the!rest!of!the!contract!different!in!substance!to!what!

was!agreed;!Bettini(v(Gye!

6A!promise!will!be!a!condition!where!the!promise!is!of!such!importance,!that!the!promisee!would!not!have!entered!

the!contract!without!the!performance!of!that!promise!and!this!ought!to!have!been!apparent!to!the!promisor;!

Tramways(Advertising(Pty(Limited(v(Luna(Park(

6Because!a!condition!is!fundamental!to!the!contract,!any!breach!of!a!condition!will!entitle!the!innocent!party!to!

rescind!the!contract:!L(Schuler(AG(v(Wichman(Machine(Tools(Sales(Ltd(

Warranty!6A!warranty!is!a!term!that!does!not!go!to!the!heart!of!the!contract;!Bettini(v(Gye!

6Breach!only!allows!the!innocent!party!to!sue!for!damages.!It!is!not!a!ground!for!terminating!/!rescinding!the!

contract;!Sale(of(Goods(Act((ACT)(1954,(s2(

Intermediate!or!innominate!6Takes!the!character!of!either!a!condition!or!a!warranty!depending!on!the!seriousness!of!the!breach;!Ankar(Pty(Ltd(v(

National(Westminster(Finance((Aust)(Ltd!

6Several!consequences!may!flow!from!their!breach!and!the!consequence!which!actually!flows!will!determine!the!

seriousness!of!the!breach;!Ankar(Pty(Ltd(v(National(Westminster(Finance((Aust)(Ltd!

6Therefore!the!remedies!available!for!the!breach!can!only!be!determined!following!an!assessment!of!the!magnitude!

of!the!consequences!that!flowed!from!the!breach!

Condition!or!Warranty?!

Considers!

6The!general!nature!of!the!contract!considered!as!a!whole;!

6The!wording!used;!

6Other!relevant!terms;!

6The!effect!of!the!breach;!

6The!importance!attached!to!the!term!by!the!parties;!

6The!motives!of!the!innocent!party!seeking!to!terminate!the!contract;!and!

6Whether!the!award!of!damages!will!provide!a!suitable!remedy!

Conditions!Precedent!6An!external!event!that!must!occur!before!

1)!A!contract!comes!into!existence!or!

2)!Performance!under!an!existing!contract!is!required;!Perri(v(Coolangatta(Investments(Pty(Ltd!

Conditions!Subsequent!6An!external!event!which,!when!it!takes!place,!brings!the!contract!to!an!end:!Head(v(Tattersall(

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Implied!Terms!

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Implied!Terms!

6Terms!that!would!have!been!put!into!a!contract,!had!the!parties!turned!their!minds!to!it!

6The!court!will!apply!a!term!where!it!truly!reflects!the!intentions!of!the!parties!

6Some!terms!are!implied!by!legislation!

1)!Universally!Implied!Terms!6Implied!because!they!are!considered!to!be!a!normal!incident!of!that!contract!

6However!there!cannot!be!any!term!in!the!contract!that!is!contrary!to!the!implied!term!

for!example!it!must!be!fit!for!purpose!

2)!Implied!by!Trade!or!Custom!

6Implied!where!it!is!necessary!to!give!full!effect!to!the!intention!of!the!parties!

6A!term!may!be!implied!where!it!is!a!custom!or!is!commonly!used!in!the!trade!or!industry;!Hawkins(v(Clayton(

6If!a!custom!was!well!known!and!acquiesced!it!can!be!reasonably!presumed!to!have!been!imported!into!the!contract;!

ConBStan(Industries(of(Australia(Pty(Ltd(v(Norwich(Winterthur((Australia)(Ltd!

6The!existence!of!a!custom!or!usage!is!a!question!of!fact!

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A!term!will!not!be!implied!on!the!basis!of!a!custom!that!is!contrary!to!the!express!terms!in!the!agreement;!Summers(

v(Commonwealth!

3)!Ad!Hoc!Implied!Terms!6Codelfa(Construction(Pty(Ltd(v(State(Rail(Authority(of(NSW!

Conditions!for!implying!a!term!

1)!Must!be!reasonable!and!equitable,!!

2)!Must!be!necessary!to!give!business!efficacy!to!the!contract,!so!that!no!term!will!be!implied!if!the!contract!is!

effective!without!it,!!

3)!It!must!be!so!obvious!that!it!goes!without!saying,!!

4)!It!must!be!capable!of!clear!expression!and!!

5)!Does!not!contradict!any!express!term!

Examining!the!Meaning!of!Words!6Words!are!given!their!plain!meaning;!Codelfa(Construction(v(State(Rail(Authority((NSW)(

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Performance!and!Breach!

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Actual!Performance!6The!parties!will!be!discharged!where!the!performance!corresponds!as!closely!as!practicable!with!the!promise;!Re(

Moore(&(Co(Ltd(v(Landauer(&(Co(!

6If!a!variation!is!trivial!generally!the!courts!will!not!worry!about!it;!Shipton(

(

PartTPerformance!Payment!will!not!automatically!follow!part!performance!unless;!

6There!are!express!provisions!that!this!will!be!the!case;!and!

6The!contract!is!divisible!

!Where!part!performance!has!been!accepted!

6There!must!be!free!and!willing!acceptance!

6If!there!is!no!option!but!to!accept!partial!performance!then!it!is!not!free!and!willing!acceptance!

6Parties!agree!to!abandon!the!original!contract!and!substitute!a!new!agreement!

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Substantial!performance!!6Hoenig(v(Issacs;!!

Work!was!substantially!completed,!but!needed!some!rectification.!Worker!was!entitled!to!work!done!minus!cost!of!

rectification!

Actions!by!other!party!prevent!performance!

Non6Acceptance!of!Delivery!

Startup(v(Macdonald;!!

Delivery!at!8:30!PM!was!held!to!be!acceptable,!!

However!now,!Sale!of!Goods!Act!1954!(ACT)!s33,!rules!of!delivery,!(5)!Demand!or!tender!of!delivery!may!be!treated!

as!ineffectual!unless!made!at!a!reasonable!hour!

Time!for!performance!may!be!specified!in!specified!date,!time!period,!agreed!event,!or!no!express!provision!which!

would!require!in!a!reasonable!time!

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Time!is!of!The!Essence!Conveyancing!Act!1919!(NSW)!s13;!Where!time!is!not!of!the!essence,!a!party!may!not!rescind!!

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Time!is!only!of!the!essence!where!

6It!is!stated!expressly!in!the!agreement!(Foran(v(Wright)!

6The!circumstances!indicate!time!is!of!the!essence!

6A!party!gives!notice!that!time!is!of!the!essence;!Canny(v(Temby!

Where!a!specific!date!is!mentioned!in!the!contract!

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Divisible!or!Severable!Contract!6Opposite!of!entire!contracts!

6Cutter(v(Powell!

Voyage!from!one!place!to!another!was!entire!and!could!not!be!divided!

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Methods!of!Discharge!!Breach!

Burden!lies!with!person!alleging!breach!of!contract;!Hobbs(v(Petersham(transport(Co(Pty(Ltd!

Anticipatory!Breach!

6Where!one!party!makes!a!clear!statement!that!they!will!not!do!what!is!required!under!a!contract!when!it!becomes!

due!(distinct!from!a!threat),!Hochster(v(De(La(Tour!

6One!party!intimates!that!they!will!not!do!what!is!required!when!it!becomes!due;!Lovelock(v(Franklyn,!!

where!agreement!to!sell!land!in!a!specified!period!of!time.!Seller!then!sold!to!another!person.!Was!held!this!was!an!

implied!repudiation!

3!Elements!

6Promisor!repudiated!

6Repudiation!occurred!before!time!stipulated!and!

6Promisee!has!treated!the!repudiation!as!an!anticipatory!breach!by!terminating!the!contract!

Foran(v(Wright,!

Contract!for!sale!of!land!included!time!of!the!essence!clause.!Before!settlement,!seller!advised!they!would!have!to!

postpone.!Notice!given!by!the!seller!of6non6performance!of!an!essential!term!amounted!to!an!anticipatory!breach!

and!the!purchasers!were!entitled!to!rescind.!

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Failure!to!Perform!

6Late!Performance!

Where!a!contract!states!that!time!is!of!the!essence!it!is!a!condition,!otherwise!it!is!a!warranty!

6Defective!Performance!

Party!has!promised!to!bring!about!a!result!(strict!duty)!or!

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Party!has!promised!to!use!due!skill!and!care;!Grieves(&(Co((Contractors)(Ltd(v(Baynham(Meikle(&(Partners!

The!promisor!must!exceed!the!standard!of!care!of!a!reasonable!person!in!their!position;!Transfield(Properties(Pty(Ltd(

v(Arlo(International(Limited!

6Non6Performance!‘actual!breach’!breach!of!terms’!

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Remedies!for!breach!6Rescission!

Equitable,!contract!set!aside!

6Restitution!

Based!on!principle!of!unjust!enrichment!

6Damages!

Normal!common!law!remedy!

6Specific!Performance!

Equitable,!where!damages!are!inadequate!

6Injunction!!

Stop!a!party!from!breaking!a!contract!

6Anton!Pillar!Order!

Stop!party!from!destroying!evidence!

6Quantum!Meruit!

Arises!in!case!of!part!performance!

Pay!reasonable!amount!for!what!has!been!provided!

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Discharge!

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Discharge!by!Performance!

6Where!each!party!has!done!all!that!was!required!by!them!under!the!contract!

6General!rule!of!performance!

Performance!must!be!exactly!what!was!required!under!the!contract,!otherwise!this!party!is!in!breach!

6Actual!exact!performance!!

Re(Moore(&(Co(Ltd(v(Landauer(&(Co!

An!order!was!placed!for!tins!of!canned!fruit!to!be!delivered!in!cases!of!30!tins!per!case.!When!delivered!there!were!

24!tins!per!case.!The!court!held!that!the!buyer!could!reject!all!of!the!tins!if!they!wished.!Because!the!court!held!that!

the!method!in!which!the!fruit!was!packed!was!an!essential!part!of!the!contract!and!performance!was!not!exactly!as!

agreed.!!

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Exceptions!to!Exact!Performance!1)!Severable!(divisible)!contracts!

2)!de!minimis!rule!

3)!Substantial!performance!

4)!Acceptance!of!partial!performance!

5)!Obstruction!of!performance!!

1)!Severable/Divisible!Contracts!6Cutter(v(Powell!

Powell!agreed!to!pay!Cutler!to!sail!a!voyage.!En!route!Cutter!died.!Court!held!the!contract!was!for!the!entire!voyage!

and!could!not!be!divisible.!He!did!not!perform!the!entire!contract,!there!was!no!entitlement!of!the!widow!

2)!De!minimis!non!curat!lex!6Shipton,(Anderson(&(Co(v(Weill(Bros(&(Co!

De(minimis(non(curat(lex!‘the!law!does!not!concern!itself!with!trifles’!

The!seller!agreed!to!supply!tons!of!wheat!to!the!buyer.!Upon!delivery!there!was!a!very!minor!variation!from!what!

was!agreed.!They!refused!to!accept!delivery.!The!court!held!the!buyer!could!not!reject!the!delivery!because!the!

shortfall!was!not!significant!

3)!Substantial!Performance!6Hoenig(v(Isaacs!

H!was!employed!to!decorate!and!furnish!I’s!apartment.!Payment!of!750!pounds!was!to!be!‘as!the!work!proceeds!and!

balance!on!completion’.!The!work!was!poorly!done!and!the!rectification!was!60!pounds.!The!court!held!that!H!could!

recover!690!pounds!(the!costs!of!the!work!minus!the!rectification)!because!the!contract!had!been!substantially!

performed.!

4)!Acceptance!of!Partial!Performance!6‘The!rule!that!performance!must!be!exact!is!really!for!the!benefit!of!the!party!who!is!to!receive!the!benefit!of!that!

performance.!Consequently,!should!a!party!be!prepared!to!accept!something!less!than!exact!performance!that!

should!be!permitted.’!Graw!(2002)!

5)!Obstruction!of!Performance!Two!forms!

6Prevention!of!Performance!

e.g.!where!one!party!prevents!access!to!the!place!of!work,!access!to!materials!or!access!to!equipment!or!plant!

required!to!carry!out!the!work!

Where!prevented!that!party!may!regard!the!contract!as!at!an!end,!will!be!released!from!further!obligations!and!may!

sue!for!damages!(breach)!or!quantum!meruit!(if!part!performed)!

Planche(v(Colburn!

A!writer!was!wrongly!prevented!from!completing!a!book!because!of!the!publishers!abandonment!of!the!project.!The!

writer!was!granted!half!of!the!agreed!fee!for!the!work!completed!to!that!point!in!time!

6Refusal!of!tender!or!performance!

e.g.!refusing!to!accept!delivery!of!goods!

Startup(v(Macdonald!

The!plaintiff!entered!a!contract!to!sell!the!defendant!10!tons!of!oil,!to!be!delivered!‘within!the!last!14!days!of!March’.!

Delivery!occurred!at!8:30!pm!on!the!31st!of!March.!The!defendant!sued.!The!court!held!that!the!defendant!was!liable!

for!damages!for!non6acceptance.!The!tender!had!been!valid!and!made!within!the!time!provided.!Consequently,!the!

plaintiff!was!under!no!further!obligation!to!attempt!delivery!and!could!sue!immediately!for!damages!

Exception;!If!payment!is!offered!and!is!refused,!the!debtor!is!not!released!from!future!liability!to!make!payment!(it!

must!still!be!paid)!

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Where!Personal!Performance!is!Necessary!6Always!depends!on!the!facts!of!the!case!

6Where!work!requires!particular!expertise!or!skill!it!is!likely!delegation!was!not!contemplated!and!a!delegation!will!

provide!grounds!for!the!other!party!to!discharge!the!contract!

6Where!delegation!is!possible!the!delegator!will!remain!personally!liable!!

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Discharge!by!Breach!

1)!Anticipatory!Breach!!

No!actual!failure!to!perform!

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Three!elements!

6Promisor!must!repudiate!the!contract!

6Repudiation!occurred!before!the!time!stipulated!in!the!contract!for!performance!and!

6The!promisee!has!treated!the!repudiation!as!an!anticipatory!breach!by!terminating!the!contract!

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When!either!!

6One!party!makes!a!clear!statement!that!they!will!not!do!what!is!required!under!a!contract!when!it!becomes!due;!

Hochster(v(De(La(Tour!

In!April!De!La!Tour!engaged!Hochster!as!a!courier,!appointment!commencing!1!June.!Three!weeks!prior!to!the!start!

date,!De!La!Tour!wrote!to!Hochster!telling!him!that,!despite!their!agreement,!his!services!would!not!be!required.!

Hochster!sued.!Court!held!that!De!La!Tour’s!express!repudiation!was!a!clear!anticipatory!breach!entitling!Hochster!to!

claim!damages!

or!

6One!party!intimates!that!they!will!not!do!what!is!required!under!a!contract!when!it!becomes!due;!

Lovelock(v(Franklyn!

Dell!agreed!to!sell!Lovelock!land!for!140!pounds6to!be!paid!within!7!years!of!the!agreement.!Before!a!payment,!but!

still!within!the!7!years,!Dell!sold!the!land!to!Williamson6precluding!the!sale!of!land!to!Lovelock.!Lovelock!sued!Dell’s!

executors.!Court!held!Dell’s!sale!implied!repudiation!of!the!agreement!to!sell!to!Lovelock6this!sale!being!impossible!

after!the!first!sale6!Lovelock!was!able!to!sue!for!damages!

Failure!to!Perform!

Foran(v(Wright!

Contract!for!sale!of!land!included!a!‘time!is!of!the!essence’!clause.!Two!days!before!settlement,!the!vendor’s!solicitor!

advised!the!settlement!would!have!to!be!postponed.!On!the!settlement!day,!the!purchaser!signed!a!rescission.!The!

seller!sued!for!breach!of!contract.!The!court!held!that!the!notice!given!by!the!seller!of!non6performance!of!an!

essential!term!amounted!to!an!anticipatory!breach!and!the!purchasers!were!entitles!to!rescind!the!contract.!

6Late!performance!

Important!to!distinguish!between!cases!where!time!is!or!is!not!of!the!essence!

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2)!Defective!Performance!or!‘Actual!breach’!or!‘breach!of!terms’!Depends!on!standard!of!the!contractual!duty!

The!standard!will!be!determined!based!on!the!construction!of!the!contract.!However!this!will!only!provide!a!clear!

answer!where!the!parties!have!dealt!with!the!matter!expressly!

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2.1.!Where!it!has!not!been!expressly!addressed!!

6Party!promised!to!bring!a!result!(strict!duty);!

Reg(Glass(Pty(Ltd(v(Rivers(Locking(Systems(Pty(Ltd!

A!contract!between!the!P!and!the!D!for!a!‘rear!single!door’!at!the!P’s!shop.!The!purpose!of!the!door!was!to!provide!

security!from!theft.!However,!thieves!broke!into!the!shop!and!stole!stock.!The!P!sought!damages!for!the!loss.!It!was!

estimated!it!took!at!least!45!minutes!to!break!through!the!door.!The!court!awarded!damages!to!the!P.!This!is!

because!the!door!had!a!specific!purpose.!!

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6Party!promised!to!use!due!care!and!skill!(reasonable!person);!

Greaves(&(Co((Contractors)(Ltd(v(Bayham!

“It!seems!to!me!that!in!the!ordinary!employment!of!a!professional!man,!whether!it!is!a!medical!man,!a!lawyer!or!an!

accountant,!an!architect!or!an!engineer!his!duty!is!to!use!reasonable!care!and!skill!in!the!course!of!his!employment”!

Lord!Denning!at![1101]!

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2.2.!The!implication!from!a!term!stating!the!duty!Generally!

6A!promise!to!pay!money!is!assumed!to!attract!a!strict!duty!

6An!employee!or!professional!skill6!assumed!to!be!due!care!or!skill!

6The!seller!of!goods!is!strictly!liable!for!defects!

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The!burden!of!proving!breach!of!contract!rest!with!the!person!alleging!the!breach!

This!applies!to!both!failure!to!perform!and!anticipatory!breaches;!Hobbs(v(Petersham(Transport(Co(Pty(Ltd!

Strict!Liability!

6Promises!to!pay!money!

6Contracts!to!the!supply!in!general!

6Contracts!for!supply!of!goods!

Frost(v(Aylesbury(Dairy(Co(Ltd!

Where!the!supplier!of!milk!was!held!responsible!for!the!implied!term!that!it!was!fit!for!human!consumption!because!

it!contained!typhoid!fever!germs.!These!could!have!been!detected!if!due!care!or!skill!was!exercised!

Effect!of!Breach!6Where!one!party!fails!to!perform!their!obligations!or!breaches!a!condition,!the!innocent!party!can!treat!the!contract!

as!ended!from!the!time!of!the!terminating!event!and!may!be!able!to!sue!for!damages!

6Where!there!is!an!anticipatory!breach,!the!innocent!party!can!treat!the!contract!as!at!an!immediate!end!and!sue!for!

a!breach!of!contract.!There!is!no!need!to!wait!till!there!is!an!actual!breach!

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6Non6Performance!

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Discharge!by!Agreement!

1)!Prior!Agreement!!

6Condition!Subsequent!

Head(v(Tattersall!

H!bought!a!horse!from!T.!The!contract!warranted!that!the!horse!hunted!with!the!Bicester!and!Duke!of!Grafton’s!

hounds!and!expressly!provided!that!if!this!were!not!the!case,!the!horse!could!be!returned!within!a!specified!time!and!

the!price!paid!would!be!refunded.!The!horse!had!not!done!what!was!provided!and!was!returned!within!the!requisite!

time!period!with!the!demand!of!a!refund.!The!Court!held!that!H!was!entitled!to!a!refund.!The!contract!of!sale!was!

valid,!but!was!subject!to!a!condition!subsequent!which!terminated!the!contract!and!entitled!a!refund!

!

6Condition!Precedent!

A!condition!may!have!to!be!completed!within!a!reasonable!period!of!time;!Perri(v(Coolangatta(Investments(Pty!

Parties!contracted!for!the!sale!of!a!block!of!land!“subject!to!the!purchasers!completing!a!sale!of!their!property!at!no!

9!Lorokan!Rd,!Lilli!Pilli”.!Several!months!later,!LP!property!remained!unsold!and!finally!the!vendor!advised!that!they!

were!terminating!the!contract.!P!disputed!CI’s!right!to!do!this.!Court!held!that!the!contract!was!valid!but!could!not!

be!settled!until!LP!property!was!sold!(which!it!had!not).!If!that!sale!did!not!occur!within!a!reasonable!time6!CI!could!

bring!the!contract!to!an!end!

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6Where!a!condition!subsequent!occurs!or!a!condition!precedent!is!not!fulfilled,!the!contract!will!be!discharged!either!

immediately!or!at!the!election!of!one!of!the!parties!

2)!Subsequent!Agreement!This!subsequent!agreement!is!contractual,!so!it!must!be!supported!by!consideration!or!be!in!a!deed!

Discharge!by!subsequent!agreement!can!take!two!forms!

6Unilateral!Discharge!

6Bilateral!or!mutual!discharge!

2.1.!Unilateral!Discharge!6Arises!where!only!one!party!had!outstanding!obligations!under!the!contract.!There!must!be!consideration!or!be!

under!seal.!!

Where!abandonment!is!bought!the!agreement!is!called!an!‘accord’!and!the!consideration!is!called!‘satisfaction’.!

Once!complete!it!is!called!accord!and!satisfaction!or!a!release!under!a!deed.!!

2.2.!Bilateral!(Mutual)!Discharge!6Both!parties!have!outstanding!obligations!under!the!agreement!and!mutually!agree!to!relinquish!their!respective!

rights!to!demand!further!performance.!

This!can!take!3!forms!

6A!complete!discharge!of!the!contract!and!a!termination!of!the!agreement!between!the!parties!(rescission)!

6A!complete!discharge!of!the!agreement!replaced!with!a!new!agreement6!“rescission!and!substitution”!or!‘Novation’!

6A!partial!discharge,!through!an!agreement!to!vary!the!terms!of!the!agreement!without!discharging!it!altogether!

6A!bilateral!discharge!can!occur!by!implication!of!action!or!inaction;!Pearl(Mill(Co(v(Ivy(Tannery(Co!

!

Waiver!6Occurs!where!one!party!indicates!that!although!strict!performance!can!still!be!demanded,!it!will!not!be!insisted!on!

6Because!waiver!does!not!involve!any!variation!of!rights,!the!contract!does!not!need!to!be!varied!

6A!waiver!will!need!to!be!honoured6!at!least!until!the!other!party!receives!adequate!notice!of!any!change!in!position;!

Hartley(v(Hymans!

! !

Discharge!by!Time!Lapse!

!

Time!is!of!the!essence!where!1)!It!is!stated!expressly;!or!

2)!The!subject!matter!dictates!that!the!parties!would!have!intended!time!to!be!of!the!essence;!or!

3)!Party!has!served!a!‘notice!to!complete’!

!

Notice!to!Complete!6Notice!from!one!party!to!another!to!finalise!performance!within!a!stated!time!and!serving!a!notice!that!failure!to!do!

so!will!be!regarded!as!a!breach!

!

Four!requirements!for!a!valid!notice!to!complete!

1)!The!recipient!is!in!default!(already!late)!

2)!The!issuing!party!is!ready,!willing!and!able!to!complete!

3)!The!time!for!performance!must!be!reasonable!and!

4)!The!notice!must!leave!the!recipient!in!no!doubt!that!performance!is!required!and!of!the!potential!consequences!

of!any!failure!to!complete!within!the!stipulated!period!

! !

Discharge!by!Frustration!

6Starting!point!is!Paradine(v(Jane!

Where!P!leased!land!to!J,!during!which!J!was!deprived!of!use!of!the!land!by!an!army!in!the!war.!J!stopped!paying!the!

rent!and!P!sued.!Court!held!that!parties!who!voluntarily!enter!into!agreements!are!absolutely!liable!irrespective!of!

whatever!happens.!J!was!liable!for!the!rent.!

!

6Where!performance!becomes!impossible!without!fault!of!either!party,!there!should!be!an!automatic!mutual!

discharge;!Taylor(v(Caldwell!

Where!C!hired!a!performance!venue!to!T.!Before!T!could!make!use!of!the!venue,!it!burnt!down.!T!claimed!damages!

under!the!agreement.!Court!held!that!the!destruction!of!the!venue!occurred!without!fault!from!either!party!and!as!

such!both!were!excused!from!future!performance.!There!was!an!implied!term!that!if!the!contract!became!impossible!

because!of!a!supervening!event!without!fault,!both!parties!would!be!discharged!from!their!obligations!

Doctrine!of!Frustration!6A!contract!will!only!be!frustrated!where!performance!becomes!impossible.!Impossible!contracts!arise!where!there!is!

one!of:!

1)!Absolute!impossibility!

2)!Radical!difference!

3)!Supervening!illegality!or!

4)!Futility!

1)!Absolute!Impossibility!6Caldwell(v(Taylor!

6E.g.!contract!for!personal!service!and!person!becomes!deceased,!seriously!ill!or!incapacitated.!!

Or!external!interference!such!as!imprisonment!

2)!Radical!Difference!6Where!performance!is!possible!but!is!radically!different!from!what!the!parties!contemplated;!Codelfa(Construction(

Pty(Ltd(v(State(Rail(Authority((NSW)!

Parties!entered!into!a!contract!where!CC!was!to!carry!out!excavation!for!an!underground!railway.!To!be!completed!

in!a!particular!timeframe.!Local!residents!received!injunctions!limiting!the!work!times.!Court!held!the!injunctions!

made!the!work!radically!different!to!what!had!been!contemplated.!The!contract!was!frustrated!and!CC!could!claim!

for!payment!on!quantum!meruit!

Radical!Difference!for!Delay!or!Interruption!

6Generally!mere!delay!or!interruptions!are!not!sufficient!to!render!it!radically!different!

6This!is!particularly!if!its!main!purpose!can!still!be!substantially!achieved,!or!the!delay!was!within!the!commercial!

risks!of!the!contract;!National(Carriers(Ltd(v(Panalpina!

Where!the!Ds!leased!a!warehouse!from!the!P!for!10!years.!After!5!years!the!local!council!closed!the!only!road!which!

provided!access6!estimated!to!be!for!well!over!a!year.!It!ended!up!being!closed!for!20!months.!The!Ps!sued!for!

unpaid!rent!and!the!Ds!argued!the!contract!had!been!frustrated!by!the!road!closure.!Court!held!the!lease!was!not!

frustrated.!Given!the!length!of!the!lease!the!purpose!could!still!be!substantially!achieved.!It!was!not!radically!

different!because!the!leasee!still!got!largely!what!they!contracted!for!

6However!if!the!delay!or!interruption!is!such!that!performance!will!be!radically!different,!the!contract!will!be!

frustrated;!FC(Shepherd(&(Co(v(Jerrom!

Where!FCS!hired!J!as!an!apprentice!plumber!under!a!4!year!agreement.!Less!than!two!years!later!J!was!convicted!of!

affray!and!conspiracy!and!sentenced!to!6!months!to!2!years!borstal!training.!On!release!FCS!refused!to!take!him!

back.!He!sued!for!unfair!dismissal.!Court!held!that!he!had!not!been!unfairly!dismissed.!The!significant!interruption!

meant!that!the!4!year!training!contract!had!been!frustrated!

6Whether!a!delay!makes!something!radically!different!from!what!was!agreed!is!determined!at!the!time!that!the!

interruption!occurs.!

This!means!it!will!depend!on!the!anticipated!time!of!delay!rather!than!the!actual!time!of!delay;!Embiricos(v(Sydney(

Reid(&(Co(!

3)!Supervening!Illegality!6A!contract!which!is!legal!at!the!time!it!is!entered!into!may!subsequently!become!illegal!by!declarations!of!war!or!

passage!of!legislation!

6In!either!case!the!emerging!illegality!will!frustrate!the!contract!

6Illegality!is!not!confined!to!under!Australian!law;!C(Czarniow(Ltd(v(Rolimpex!

6In!order!to!frustrate,!govt!interference!need!not!go!as!far!as!making!performance!illegal.!Any!form!of!intervention!

which!would!make!the!performance!of!the!contract!radically!different!will!suffice;!Metropolitan(Water(Board(v(Dick,(

Kerr(&(Co(Ltd!

where!DK!and!Co!agreed!to!construct!a!reservoir!and!complete!it!within!6!years.!Two!years!later,!the!Ministry!of!

Munitions!ordered!them!to!cease!work.!The!WB!contended!that,!despite!this,!the!contract!was!still!on!foot!and!that!

it!had!to!be!completed!(with!an!appropriate!time!extension).!DK!and!Co!claimed!the!contract!was!frustrated.!Court!

held!that!the!interruption!made!the!contract!radically!different!from!what!had!been!agreed.!Delay!was!two!years!

and!would!not!likely!be!recommenced!till!after!the!end!of!the!war.!As!such,!it!was!utterly!impossible!to!meet!the!

terms!of!the!original!K.!

4)!Futility!6Covers!situation!where!although!the!contract!could!be!performed,!it!would!be!futile!because!the!mutually!

understood!purpose!could!no!longer!be!achieved;!Krell(v(Henry!

6Frustrating!event!must!render!the!entire!underlying!purpose!impossible.!Where!part!of!the!purpose!can!still!be!

achieved,!the!agreement!will!not!be!frustrated;!Herne(Bay(Steam(Boat(Co(v(Hutton!!

Where!H!hired!a!steamship!from!HBSB!Co!for!the!purpose!of!viewing!the!Royal!Naval!Review!and!to!cruise!around!

the!fleet.!The!coronation!was!cancelled,!so!was!the!review.!However,!it!was!still!possible!to!cruise!around!the!fleet!

which!was!at!anchor.!Court!held!that!H!was!liable!to!pay.!The!review!was!not!the!sole!basis!for!the!K,!it!was!also!to!

cruise!around!the!fleet.!Performance!was!therefore!not!entirely!futile!and!the!K!was!not!frustrated!

! !

NonTFrustrating!Events!

6Pleas!of!frustration!will!not!succeed!in!the!following!instances:!

1)!Performance!has!not!become!impossible!

2)!Where!specific!provision!has!been!made!for!the!event!

3)!Where!the!frustrating!event!should!have!been!foreseen!

4)!Where!the!frustrating!event!was!self6induced!and!

5)!Where!the!contract!is!merely!delayed!or!interrupted!

1)!Where!performance!has!not!become!impossible!6Where!performance!is!merely!more!onerous,!expensive,!inconvenience!or!difficult;!Tsakiroglou(&(Co(v(Noblee(Thorl(

GmbH!

Where!the!closure!of!suez!canal!and!the!additional!costs!of!freight!to!bring!produce!from!Sudan!to!Hamburg!around!

the!Cape!of!Good!Hope6!did!not!frustrate!a!K!

2)!Where!specific!Provision!has!been!made!for!the!Event!6The!outcome!will!be!determined!by!what!has!been!agreed!to;!Claude(Neon(Ltd(v(Hardie!

The!K!prescribed!that!if!a!lease!on!a!premise!on!which!a!neon!sign!was!installed6!any!remaining!rent!for!the!5!year!

licence!would!become!due.!The!lease!was!terminated!with!3!years!remaining!on!the!agreement.!The!outstanding!

rent!for!the!sign!had!to!be!paid!

3)!Where!the!Frustrating!Event!Should!Have!been!Foreseen!6Plea!for!frustration!will!not!succeed!where!the!frustrating!event!should!have!been!foreseen!by!the!party!pleading!

frustration!but!was!not;!Walton(Harbey(Ltd(v(Walker(and(Homfrays(Ltd!

6Less!certain!is!an!event!that!both!parties!should!have!foreseen.!Obiter!from!some!cases!suggest!this!may!result!in!a!

frustrated!K;!Ocean(Tramp(Tankers(Corp(v(V/O(Sovfracht((“the(Eugenia”)!

4)!Where!the!Frustrating!Event!was!selfTinduced!6Where!a!party!elects!a!course!of!action!that!makes!performance!impossible6this!will!be!seen!to!be!self6induced!

frustration;!Maritime(National(Fish(Ltd(v(Ocean(Trawlers(Ltd!

6Where!self6induced!frustration!is!pleaded,!the!onus!of!proving!self6inducement!rests!with!the!party!making!the!

allegation;!Joseph(Constantine(Steamship(Line(Ltd(v(Imperial(Smelting(Corp(Ltd!

5)!Where!K!is!Merely!Delayed!or!Interrupted!6Will!be!insufficient!unless!radically!different!

!

!

!

!

!

!

!

Effect!of!Frustration!6K!automatically!discharged!

6Whole!K!comes!to!an!end,!meaning!neither!party!can!be!held!to!performance!

6However!rights!and!obligations!accrued!before!this!point!remain!on!foot!

This!has!2!results!

1)!Payment!for!work!performed!after!the!K!has!been!frustrated!is!not!governed!by!the!contract!and!as!such!any!

recovery!will!be!on!a!quantum!meruit!basis,!not!what!was!agreed!to!

2)!Payments!already!made!at!the!point!of!frustration!generally!cannot!be!recovered!and!payments!that!have!accrued!

generally!remain!payable;!Chandler(v(Webster!

However!

Fibrosa(v(Fairbairn(Lawson(Combe(Barbour(Ltd!

Where!deposit!was!paid.!Then!war!broke!out!and!delivery!was!impossible.!Court!held!that!party!was!entitled!to!get!

the!deposit!back!because!there!was!a!total!failure!of!consideration!

!

Frustration!and!Statute!6Legislation!has!been!passed!in!some!jurisdictions!to!modify!the!application!from!common!law!that!‘losses!lie!where!

they!fall’!

Frustrated(K(Act(1978((NSW)!

! !

Discharge!by!Operation!of!Law!

!

Merger!

6Where!an!inferior!right!is!merged!with!a!superior!right,!the!inferior!right!loses!its!separate!character!and!where!this!

right!is!derived!from!the!K!that!inferior!contractual!right!will!be!discharged!

1)!Alteration!of!a!Written!K!!

Where!a!K!is!altered!without!authorisation!and!the!alteration!was!

6Deliberate!

6Without!consent!of!other!party!and!

6Material!

The!Pigots!Case!Rule!will!operate!

6Pigot’s!Case!

Where!a!deed!or!contract!is!materially!altered!whilst!in!the!obligee’s!custody!without!the!consent!of!the!obligor!the!

deed!is!voidable!!

6Does!not!operate!where!the!alteration!is!non6fraudulent!or!where!documents!are!partially!completed,!to!be!filled!in!

by!someone!else!

!

6In!such!cases!the!‘filling!in’!of!K’s!will!not!be!unauthorised!even!where!this!was!unauthorised!or!improper;!

Warburton(v(National(Westminster(Finance(Aus(Ltd!

2)!Bankruptcy!!6Relieves!the!personal!liability!of!that!person!under!the!K,!Ks!are!not!automatically!discharged!

3)!Company!Liquidation!6A!company!does!not!automatically!discharge!its!Ks!upon!entering!liquidation!

4)!Limitation!Periods!6Limitations!act!

6Simple!Ks!=!6!years,!s11!Limitation!Act!

6Deeds!=!12!years,!s13!Limitation!Act!

!

!

!

!

!

!

!

!

!

!

!

!

!

!

!

!

Mistake!

! !

Rescission!

6A!right!to!treat!the!contract!as!if!it!never!existed!

6To!put!parties!back!to!their!position!before!the!contract!

6Differs!from!termination!or!repudiation!where!parties!are!discharged!from!performance!

6Damages!for!breach!of!contract!are!not!available!

Will!be!used!where!there!was!no!real!or!properly!informed!consensus!between!the!parties,!or!where!obligations!

were!not!fulfilled!or!if!it!would!be!against!public!policy!to!enforce!the!agreement;!Clarke,!Gamble,!Brebber!(2000)!

p141!

Vitiating!Elements!

6Unless!there!is!an!express!right!in!the!contract!a!party!must!look!to!pre6contractual!circumstances!in!order!to!justify!

a!rescission!

!

Where!there!is!a!vitiating!Element!the!contract!may!become!

6Void!

Completely!ineffectual!

Neither!party!can!recover!damages!

May!give!rise!to!other!claims!such!as!restitution!

“Nemo!dat!quod!non!habet”!nobody!can!give!what!they!don’t!have!

6Voidable!!

Able!to!rescind!or!affirm!the!contract!

rescission!will!return!parties!to!their!pre6contractual!position!

Title!can!pass!prior!to!rescission!because!the!contract!was!operative!until!this!point!

6Unenforceable!!

E.g.!sale!of!land!must!be!in!writing!

! !

Mistake!

6Undermines!genuine!consent!

6No!distinction!between!mistakes!of!facts!and!law;!David(Securities(Pty(Ltd(v(Commonwealth(Bank(of(Australia!

For!common!mistake!it!must!be!a!mistake!of!fact!and!a!mistake!that!existed!at!the!time!the!contract!was!entered!

into.!The!mistake!cannot!be!to!the!expectations!of!parties;!Amalgamated(Investement(&(Property(Co(Ltd(v(John(

Walker(&(Sons(Ltd!

Where!each!party!thought!land!could!be!redeveloped.!On!the!day!of!the!agreement!the!property!was!listed!as!being!

of!historical!significance!and!could!not!be!redeveloped.!P!could!not!avoid!the!K.!!

People!must!rely!on!stipulations!of!the!contract!to!protect!them!from!facts!not!known!to!them.!A!person’s!motives!

are!not!usually!a!consideration;!Bell(v(Lever!

All!contracts!entered!into!under!a!mistake!of!fact!are!considered!void!ab!initio.!

!

Mistake!at!Common!law!6Fundamental!Issue!

If!a!mistake!is!fundamental!this!will!nullify!consent!and!K!is!avoided!

!

6Non6Fundamental!issue!

If!a!mistake!does!not!go!to!the!heart!of!the!agreement!the!K!cannot!be!voided!

Test!for!Fundamental!Mistake!Psaltis(v(Shultz!

A!mistake!goes!to!the!heart!where!

6It!is!to!the!physical!identity!of!the!person!you!are!contracting!with!

6The!mistake!goes!to!the!heart!of!the!subject!matter!of!the!agreement!or!

6The!nature!of!the!agreement!

A!mistake!is!not!fundamental!where!it!regards!

6Attributes!of!the!person!they!are!contracting!with!

6Qualities!of!the!subject!matter!

6Individual!terms!of!the!agreement!as!opposed!to!the!whole!scope!of!the!agreement!

Mistake!at!Equity!Where!mistake!is!not!fundamental!

Equity!may!

6Declare!the!contract!voidable!

6Order!rectification,!if!the!mistake!has!been!reduced!to!writing!

6Refuse!to!order!specific!performance!where!it!would!cause!undue!hardship!

! !

Mutual!Mistake!

!

6Each!party!has!agreed!about!a!different!thing!

6Critical!question:!have(the(parties(genuinely(consented(to(the(same(thing?!

6Contract!will!be!void!

Common!Law!

6Where!an!offer!is!ambiguous!and!the!offer!and!acceptance!do!not!coincide!there!is!no!genuine!consent!and!the!

contract!is!void;!!

Raffles!v!Wichelhaus!

Parties!entered!into!a!K!for!purchase!of!cotton!wool.!Two!vessels!matched!the!same!description.!The!buyer!intended!

the!October!shipment,!the!seller!intended!the!December!one.!Buyer!refused!delivery!for!the!December!delivery.!

Court!held!the!agreement!was!ambiguous.!The!offer!and!acceptance!did!not!coincide!therefore!there!was!no!

genuine!consent!and!buyer!was!not!liable!for!delivery.!

6Where!the!agreement!is!not!ambiguous!it!will!be!enforceable!not!void;!!

Goldsborough!Mort!&!Co!v!Quinn!

Q!held!land!under!Crown!leasehold!which!could!be!converted!to!freehold,!but!at!a!cost.!Land!was!sold!to!GM!for!30!

shillings!per!acre!“calculated!on!a!freehold!basis”.!Q!did!not!convert!the!land!–!and!claimed!this!was!not!his!

intention,!although!it!was!GM’s!understanding.!Held:!Q!was!liable!to!bear!the!costs!of!converting!the!land.!The!phrase!“calculated!on!a!freehold!basis”!was!not!ambiguous!and!an!objective!assessment!indicated!that!this!land!

would!be!converted!prior!to!sale.!The!contract!was!enforceable,!not!void!

Equity!In!exceptional!cases!equity!may!intervene!to!prevent!undue!hardship!or!injustice!

!

6Where!there!is!no!misrepresentation!and!no!ambiguity!in!the!terms,!the!defendant!cannot!avoid!performance!

because!they!made!a!mistake;!

Tamplin!v!James!

J!purchased!an!inn!under!the!mistaken!belief!it!included!a!garden!at!the!back!of!the!inn.!This!was!even!though!the!

description!and!plans!stated!/!showed!otherwise.!When!the!mistake!was!realised,!J!refused!to!complete.!T!sued!for!

specific!performance.!Held:!Specific!performance!was!granted.!(

!

6Where!the!plaintiff!has!misrepresented!important!terms,!specific!performance!may!be!refused;!

Denny!v!Hancock!

D!bid!at!auction!for!a!property!that!he!had!inspected.!Using!a!plan!supplied!by!H!he!had!come!to!understand!the!

boundaries!extended!beyond!its!true!limit.!When!this!was!discovered!he!served!a!notice!of!rescission.!H!sued!for!

specific!performance.!Held:!Specific!performance!was!refused.!H!had!engendered!a!mistake!by!supplying!a!

misleading!plan.!

! !

Common!Mistake!

!

6Both!parties!make!the!same!mistake!

6Renders!the!contract!void!at!CL!and!equity!

6Damages!will!not!be!awarded!because!the!contract!is!deemed!never!to!have!existed!

Contracts!Voidable!for!Common!Mistake!A!contract!may!be!voidable!where;!Solle(v(Butcher!

6There!must!be!a!common!misapprehension!

6It!must!have!been!of!a!fundamental!nature!

6The!party!seeking!to!have!the!K!set!aside!must!not!be!at!fault!

6It!must!be!unconscionable!to!allow!the!other!party!to!benefit!from!the!mistake!

6There!must!be!no!possibility!of!3rd!parties!being!unjustly!prejudiced!

Two!Types!

6Res!extincta!(The!thing!has!perished)!The!agreement!is!void!if!the!article!has!perished!before!the!date!of!sale.!Even!though!the!parties!were!agreed,!the!

consent!is!nullified!because!the!transfer!of!something!non6existent!is!useless;(Bell(v(Lever(Bros(Ltd!

If!there!is!a!contract!for!sale!of!specific!goods,!which!without!the!knowledge!of!the!seller!perish!at!the!time!when!the!

K!is!made,!the!K!is!void;!S11!Sale!of!Goods!Act!!

Where!an!assumption!of!fact!is!mistaken!and!this!underlies!the!K,!res!extincta!will!apply;!Gallloway(v(Galloway;!

Deed!of!separation.!Deed!was!void!on!the!grounds!that!the!marriage!never!existed,!so!Mrs!G!could!not!sue!under!it.!

6Res!sua!(The!thing!was!already!his)!Where!one!party!agrees!to!buy!or!otherwise!deal!with!property!that!is!subsequently!discovered!to!have!been!that!

party’s!in!the!first!place!the!contract!will!be!a!nullity;!Cooper(v(Phibbs(

C!contracted!with!P!when!his!uncle!died!to!lease!a!fishery!which!all!parties!believed!to!have!been!bequeathed!by!C’s!

uncle!to!P.!When!C!entered!into!the!lease,!he!owned!the!fishery.!Court!held!the!lease!was!a!nullity.!!

Relief!in!Equity!6The!court!may!order!rectification!by!ordering!the!mistaken!portion!to!be!struck!out!and!replaced!with!words!that!

reflect!that!which!the!parties!actually!agreed;!Baird(v(BCE(Holdings!

Common!Mistake!Induced!by!Reckless!Assertion!6McRae(v(Commonwealth(Disposals(Commission!

Mistake!cannot!be!used!to!avoid!a!contract,!where!it!is!by!your!own!fault!

! !

Unilateral!Mistake!

One!contracting!party!cannot!rely!on!the!other!to!look!after!his!or!her!interests;!Smith(v(Hughes!

However!!

!

6Where!one!party!to!the!contract!is!mistaken!and!the!other!party!is!aware,!or!should!be!aware!of!that!mistake!but!

proceeds!with!the!contract!anyway!there!is!unilateral!mistake;!Hartog(v(Colin(and(Shields!

6Common!Law!Only!gives!relief!where!the!mistake!is!fundamental!to!the!contract!

!

1)!UM!as!to!the!terms!of!the!agreement!!

Taylor!v!Johnson;!Objective!test,!exploitation!

A!unilateral!mistake!as!to!the!terms!of!an!agreement!will!not!make!the!contract!void!unless!there!is!a!failure!of!a!

condition!or!fraud!

2)!Um!as!to!the!identity!6Arise!where!the!offeror!intends!to!make!an!offer!to!A,!but!mistakenly!makes!it!to!B,!and!B!knows,!or!ought!to!have!

known!that!the!offer!was!intended!for!someone!else!

Void!where!3!conditions!are!met;!Boulton(v(Jones!

6Offer!was!only!intended!for!A!and!A’s!identity!was!of!vital!importance!

6That!the!offeror!took!reasonable!steps!to!ensure!that!A!was!the!person!being!dealt!with!and!

6B!was!aware!or!should!have!been!aware!of!the!offeror’s!true!intention!

!

Mistakes!as!to!attribute!have!no!effect!at!common!law!and!at!best!equity!may!offer!some!relief!in!such!instances;!

Cundy!v!Lindsay!!

!

Kings!Norton!Metal!Co!v!Edridge!Merret!&!Co!Ltd!

The!P!received!an!order!from!Hallam!&!Co!for!the!supply!of!a!large!quantity!of!wire.!The!letterhead!of!the!order!

pictured!a!large!factory!and!make!references!to!having!branches!in!several!cities.!In!fact,!Hallam!&!Co!was!a!

fabrication!invented!by!a!rogue!named!Wallis.!The!P’s!relying!on!the!impression!engendered!by!the!letterhead,!

supplied!the!wire.!Wallis!then!on6sold!them!to!the!D’s.!He!then!disappeared.!The!P’s!then!sued!the!D’s!in!conversion.!

Held:!The!D’s!were!not!liable,!The!P’s!had!intended!to!contract!with!the!writer!of!the!letter!and!that!was!Wallis.!

Wallis!had!obtained!good!(and!voidable)!title!and!this!good!title!could!pass!to!the!D’s.!As!such,!the!D’s!were!not!

liable!in!conversion!

Mistake!as!to!identity!can!make!a!contract!void,!but!only!where!the!identity!is!of!vital!importance;!Citibank(NA(v(

Brown(Shipley(&(Co(Ltd!

!

! !

NonTest!Factum!

!

3)!UM!as!to!the!nature!of!the!document!

General!rule,!bound!by!what!you!sign;!Lestrange!v!Graucob!

Non!est!Factum!

Prove!3!things;!Petelin(v(Cullen!

1)!Claimant!belongs!to!class!of!people!who!have!to!rely!on!others!for!advice!on!what!they!are!signing!because!of!an!

inability!to!read!because!of!blindness,!illiteracy,!or!because!of!no!fault!of!their!own!they!are!unable!to!have!any!

understanding!of!a!particular!document;!

2)!Document!was!radically!different!in!character!or!effect!from!what!the!signer!thought!they!were!signing!and!

3)!Signer!was!not!careless!in!signing!without!checking!its!contents!

Equitable!Relief!6Specific!performance,!will!be!refused!where!it!will!cause!undue!hardship;!Webster(v(Cecil(

6Rescission,!mistaken!party!can!rescind!the!K!(it!is!voidable!so!cannot!be!sued);!Taylor(v(Johnson!

6Rectification;!A(Roberts(&(Co(Ltd(v(Leistershire(County(Council!

! !

!

!

!

!

!

!

!

Misrepresentation!

! !

!

Misrepresentation!

!

6[A](false(statement(of(fact(made(by(one(party((the(representor)(to(the(other(party((the(representee)(during(preB

contractual(negotiations,(which(induces(the(latter(to(enter(the(contract.(It(may(be(by(words(or(conduct.!Clarke,!

Gamble!and!Brebner!(2000)!

Must!be!distinguished!from!!

6Puffery!

6Collateral!contract!

6A!contractual!term!

Elements!of!Misrepresentation!1)!Party!makes!a!false!representation!

2)!Representation!is!one!of!existing!fact!(not!opinion,!prediction!etc)!

3)!The!representation!must!be!made!to!the!other!contracting!party!

4)!The!representation!must!induce!the!contract!

1)!False!Representation!Can!be!written!words!or!conduct;!Krakowski(v(Eurolynx!

In!which!negotiations!to!sell!an!investment!property!took!place!on!the!basis!that!it!would!return!10%!per!annum.!

Implied!representation!that!the!lease!was!unaffected!by!any!other!contractual!arrangement.!In!fact!there!was!a!

separate!agreement!with!the!lessee!which!significantly!reduced!the!rent.!This!should!have!been!brought!to!the!

buyer’s!attention!and!it!wasn’t.!Therefore!the!implied!representation!was!false.!Court!held!that!in!deciding!whether!

a!representation!was!false,!the!court!should!consider!“the!sense!in!which!the!representation!would!be!understood!

by!a!reasonable!person!in!the!position!of!the!representee”!

The!representation!can!be!implied!by!conduct.!However!silence!does!not!amount!to!a!representation!unless!there!is!

a!duty!to!disclose.!!

Half6truth!is!still!a!misrepresentation!if!it!gives!a!false!impression!

Change!in!circumstances!must!be!disclosed!if!any!change!falsifies!the!representation!

False!is!factual!matter.!Must!be!false!at!the!time!the!representation!was!made!

2)!Existing!Fact!A!misrepresentation!must!be!about!an!existing!(ie!past!or!present)!fact;!Balfour(&(Clark(v(Hollandia(Ravensthorpe(NL!

A!statement!of!prediction!or!opinion!will!normally!not!be!sufficient!to!make!out!an!action!of!misrepresentation!

Exceptions!

6Where!the!speakers!knows!the!statement!to!be!false!

6Where!speaker!implies!the!statement!is!founded!on!existing!facts!when!it!is!not;!Balfour(&(Clark(v(Hollandia(

Ravensthorpe(NL!

3)!Made!to!other!party!

Can!only!be!relied!on!if!representation!is!made!too!that!person!or!class!of!persons!to!which!they!are!a!member;!

Edgington(v(Fitzmaurice!

4)!Induce!the!Contract!Representation!must!produce!a!misunderstanding!and!must!be!at!least!one!of!the!reasons!the!contract!was!entered!

into!

The!representation!must!be!a!reason!for!entering!the!contract.!It!is!not!necessary!to!show!that!the!representation!

was!the!sole!reason!for!entering!the!K;!Holmes(v(Jones!

If!the!representation!was!an!inducement!it!is!not!relevant!that!the!truth!could!have!been!discovered!by!taking!

proper!care,!exercising!due!diligence;!Redgrave(v(Hurd!

Where!the!mere!opportunity!to!investigate!was!insufficient!to!prevent!reliance!on!a!misrepresentation!

Remedy!6Rescission!of!K!(and!some!forms!may!provide!action!for!damages)!

6Damages!only!available!where!the!misrepresentation!constitutes!a!tort!

6Even!where!misrepresentation!is!established!there!are!some!limits!on!rescission!

! !

Types!of!Misrepresentation!

!

1)!Fraudulent!

2)!Innocent!

3)!Negligent!

All!three!of!these!types!of!misrepresentation!creates!the!opportunity!for!the!representee!to!rescind!the!K!

1)!Fraudulent!Misrepresentation!A!false!statement!of!facts!made!by!a!person!who!does!not!believe!the!truth!of!the!statement!or!is!recklessly!

indifferent!to!whether!it!is!true,!to!another!person!with!the!intention!that!the!other!person!will!rely!on!it;!Pendlebury(

v(Colonial(Mutual(Life(Assurance(Society(Ltd!

Derry(v(Peek!

“First,(in(order(to(maintain(an(action(of(deceit,(there(must(be(proof(of(fraud,(and(nothing(short(of(that(will(suffice.(

Secondly,(fraud(is(proved(when(it(is(shown(that(a(false(representation(has(been(made((1)(knowingly((2)(without(belief(

in(its(truth,(or((3)(recklessly,(careless(whether(it(is(true(or(false”!

To!prove!what!is!fraud,!must!demonstrate!

6Actual!knowledge!(that!they!knew!the!statements!to!be!false)!or!

6Reckless!indifference!(did!not!care!if!representation!was!true!or!false)!

Mere!carelessness!is!not!fraud;!Derry(v(Peek!

where!there!was!an!honest!belief!by!the!director!of!the!company!that!the!information!contained!in!the!prospectus!

was!true.!It!may!have!amounted!to!negligence!but!not!misrepresentation!

Remedies!for!Fraudulent!Representation!

6Rescind!K!and!

6Claim!for!damages!

2)!Innocent!Misrepresentation!6A!false!statement!of!conduct!which!induces!a!party!to!enter!a!K!but!which!is!not!made!or!done!with!the!intention!to!

deceive.!!

6Equity!permits!the!party!misled!to!rescind!the!K!ab!initio,!as!long!as!the!parties!can!be!restored!to!their!pre6

contractual!positions!

6Damages!are!not!available!at!common!law!

6Damages!are!available!under!statute!!

!

A!statement!of!fact!advice!or!opinion,!made!in!a!business!context!which!is!inaccurate!or!misleading;!Hedley(Byron(

and(Co(Ltd(v(Heller(&(Partners(Ltd!

!

!

!

3)!Negligent!Misrepresentation!A!statement!of!fact,!advice,!or!opinion!made!in!a!business!context!which!is!inaccurate!or!misleading:(Headley(Byrne(

and(Co(Ltd(v(Heller(&(Partners(Ltd!

Duty!of!Care!

6Where!the!representor!knew!or!ought!to!have!known!that!the!representation!would!be!relied!upon,!the!

representor!owes!the!representee!a!duty!of!care:!Mutual(Life(&(Citizens’(Assurance(Co(Ltd(v(Evatt!

6People!whose!business!or!profession!it!is!to!provide!information!or!advice!of!a!kind!requiring!a!degree!of!skill!or!

knowledge,!owe!a!special!duty!of!care!persons!they!know!will!rely!on!that!information!or!advice:!Headley(Byrne(and(

Co(Ltd(v(Heller(&(Partners(Ltd!

Carelessness!in!making!a!statement!in!making!a!statement!may!give!rise!to!a!claim!for!damages!for!negligence;!

Hedley(Byron(and(Co(Ltd(v(Heller(&(Partners(Ltd!

Negligent!Misrepresentation!has!3!elements!

6Duty!of!care!

6Breach!of!duty!and!

6Loss!or!damage!caused!by!the!breach!

General!Principle!

6In!general!there!is!no!duty!to!prevent!economic!loss;(Woolcock(Street(Investments(Pty(Ltd(v(CDG!

Exception!

6Headley(Byrne(and(Co(Ltd(v(Heller(&(Partners(Ltd!

which!states!that!a!duty!of!care!is!established!if!the!maker!of!a!statement!occupied!a!position!involving!professional!

or!special!care!or!skill,!or!represented!its!possession!

L(Shaddock(&(Associates(v(Parramatta(City(Council!

6Plaintiff!asked!a!council!employee!whether!a!property!was!affected!by!a!council!road!widening!proposal.!The!

employee!said!it!was!not.!The!plaintiff!acted!on!this!and!bought!the!property.!The!property!was!affected!and!the!

plaintiff!suffered!loss.!

Although!the!council!was!under!no!statutory!duty!to!supply!the!information!the!High!Court!held!that!once!it!decided!

to!provide!the!information!the!council!owed!the!plaintiff!a!duty!of!care!

6the!Hedley(Bryne(principle!is!not!confined!to!those!who!have!or!profess!special!skill!or!expertise!

6“Whenever!a!person!gives!information!or!advice!to!another…upon!a!serious!matter,![in]!circumstances![where]!the!

speaker!realises!….or!ought!to!realise!that!he!is!being!trusted…to!give!the!best!of!his!information!or!advice!as!a!basis!

for!action!on!the!part!of!the!other!party!and!it!is!reasonable!in!the!circumstances!for!the!other!party…to!act!upon!

that!information!or!advice”!

Shaddock!Supports!principle!for!courts!to!inquire!into!

6Occasion!

Whether!the!occasion!is!serious!is!relevant,!and!no!duty!of!care!is!likely!to!be!found!if!info!or!advice!is!provided!in!an!

informal!setting;!

6Knowledge!

A!duty!of!care!may!be!found!if!there!is!knowledge!or!understanding!that!the!info!or!advice!will!be!relied!on;!and!

6Reliance!

Is!crucial.!Whether!it!is!reasonable!to!rely!on!the!info!is!relevant!to!whether!there!is!a!duty!of!care!and!reliance!

establishes!the!necessary!loss!of!damage!

! !

!

!

!

!

!

Duress!

!

! !

Improper!Pressure!

!

Duress!6Pressure!which!vitiates!consent!

6Rescission!under!common!law!

Undue!Influence!6Conclusion!based!on!the!fact!that!the!parties!stood!in!a!particular!relation/position!with!respect!to!one!another!

6Gives!right!to!equitable!right!to!approach!the!court!for!an!order!setting!aside!the!K.!Similar!to!a!right!to!rescind!

Neither!gives!rise!to!a!claim!for!damages!

Duress!and!Undue!Influence!do!not!only!apply!to!contract!

6Also!apply!to!other!benefits!such!as!gifts!

In!Contractual!Circumstances!6The!person!subject!to!the!improper!pressure!will!have!given!something!of!value!and!

6Rescission!is!necessary!to!remove!the!contract!

In!NonTContractual!Circumstances!6An!order!for!restitution!is!sufficient!to!recover!the!money!handed!over!under!duress!

! !

Duress!

!

6Illegitimate!pressure!or!threats!exerted!by!one!party!to!force!another!party!to!consent!to!a!contract!against!that!

latter!party’s!will;!Radlan!and!Gooley!(2010)!

6Allows!the!oppressed!party!to!rescind!the!contract!

6The!contract!is!voidable!and!not!void!ab(initio;!Radlan!and!Gooley!(2010)!

6Duress!may!be!because!of!threats!of!physical!injury,!threats!relating!to!property!and!where!economic!pressure!is!

exerted;!McIntyre,(Campbell(&(Smythe(being(the(Trustees(of(the(Gladwen(Frances(McIntyre(Family(Trust(v(Nemesis(

DBK(Ltd(and(Stallard(&(Cook(being(the(Executors(of(the(Estate(of(Alec(Hastwell!

Elements!for!K!to!be!Voidable!1)!Illegitimate!Pressure!that!vitiates!consent!and!

2)!Pressure!must!have!induced!the!K!(at!least!one!of!the!reasons!why!the!weaker!party!entered!the!contract);!

Universe(Tankships(of(Monrovia(v(ITWF!

1)!Illegitimate!Pressure!Universe(Tankships(of(Monrovia(v(ITWF;!

To!determine!what!is!legitimate!must!consider!

6The!nature!of!the!pressure!(usually!decisive)!

6The!nature!of!the!!

It!is!not!necessary!to!prove!that!an!individuals!will!has!been!overborne;!Crescendo(Management(Pty(Ltd(v(Westpac(

Banking(Corporation!

Illegality!

Thornes(v(Motor(Trade(Association!

“The(ordinary(blackmailer(normally(threatens(to(do(what(he(has(a(perfect(right(to(do(–(namely(communicate(some(

compromising(conduct(to(a(person(whose(knowledge(is(likely(to(affect(the(person(threatened...(What(he(has(to(justify(

is(not(the(threat,(but(the(demand(of(money.”!

Generally,!any!form!of!unlawful!action!will!be!considered!to!be!illegitimate!pressure,!however!the!fact!that!the!

threat!is!lawful!does!not!make!the!pressure!legitimate;(Thorne(v(Motor(Trade(Association!

Pressure!which!vitiates!consent!may!Include!

6Actual!or!threatened!violence!towards!a!person;!Barton(v(Armstrong!

Parties!entered!K!after!A!threatened!B!with!death.!However!the!main!reason!B!entered!the!K!was!because!it!was!

commercially!necessary.!Privy!Council!held!the!contract!was!voidable!as!A’s!actions!constituted!‘a’!reason!why!B!

entered!the!contract!

Types!of!Pressure!6Pressure!via!goods;!Where!one!party!seizes,!detains,!damages!or!destroys!the!goods!of!another,!this!may!constitute!duress!of!goods:!

Hawker(Pacific(Pty(Ltd(v(Helicopter(Charter(Pty(Ltd!

Can!lead!to!restitution!or!rescission!

6Pressure!via!refusal!to!perform!a!contract;!A!threat!not!to!perform!an!existing!contract!with!the!weaker!party,!or!a!third!party,!unless!the!WP!pays!money!or!

agrees!to!another!contract;!T(A(Sundell(&(Sons(Pty(Ltd(v(Emm(Yannoulatos(Pty(Ltd!

(

re(Hooper(and(Grass’(Contract;!

A!vendor!and!purchaser!of!land!in!dispute!concerning!who!was!responsible!for!water!rates.!The!vendor!refused!to!

settle!unless!the!purchaser!paid!these!rates.!The!purchaser!paid!under!protest.!The!vendor!should!have!borne!these!

costs.!Held:!The!vendor’s!conduct!constituted!a!threat!to!breach!the!contract!unless!he!was!paid!money!to!which!he!

had!no!entitlement.!As!such!the!money!was!recoverable!

6Pressure!by!threatening!to!commit!an!unlawful!act!If!a!bank!threatened!to!withhold!money!rightfully!that!of!a!customer,!unless!the!customer!signed!a!mortgage!in!the!

bank’s!favour,!this!would!constitute!the!requisite!pressure!and!conduct:!Crescendo(Management(Pty(Ltd(v(Westpac(

banking(Corporation!

6Pressure!by!threatening!to!prosecute;!!K!is!voidable!where!it!has!been!induced!by!a!threat!to!prosecute!the!WP!or!a!related!party!for!an!offence!they!did!

not!commit!

6Pressure!by!threatening!to!take!legal!proceedings!A!contract!induced!by!a!threat!to!take!legal!proceedings!is!not!voidable!on!the!ground!of!duress!where!the!action!is!

bona!fide!and!the!agreement!is!seen!as!compromise!of!the!DP’s!claim.!This!is!so!even!if!the!action!then!fails!

However,!if!the!threat!is!not!bona!fide,!the!agreement!may!be!voidable:!Westpac!banking!Corporation(v(Cockerill!

!

A!threat!not!to!deal!is!seen!as!commercial!pressure!and!is!not!illegitimate;!Smith(v(William(Charlick(Ltd!

Where!the!Wheat!Board!(represented!by!Smith)!was!the!sole!supplier!of!wheat.!It!sold!and!delivered!a!small!

quantity!of!wheat!to!a!miller!–!and!demanded!an!additional!payment!for!the!wheat!–!stating!that!if!not!paid,!it!

would!not!deliver!wheat!in!the!future.!Held!–!that!the!money!was!not!recoverable!because!the!weaker!party!was!not!

bound!to!pay!

!

!

!

!

!

!

2)!Inducing!the!Contract!

Where!a!party!would!have!executed!the!agreement!without!threats,!but!the!threats!pressured!their!decision!to!sign!

the!agreement,!this!was!sufficient!as!inducing!the!contract;!Barton(v(Armstrong!!

Where!pressure!is!unlawful,!but!it!does!not!contribute!to!the!execution!of!a!mortgage!signed!and!it!was!signed!freely!

and!voluntarily,!this!was!not!sufficient!as!inducement;!Crescendo(Management(Pty(ltd(v(Westpac(banking(

Corporation(!

!

Economic!Duress!6An!implied!threat!is!sufficient.!

6A!threat!to!breach!is!not!usually!sufficient.!

6Knowledge!of!precise!consequences!not!required;!!

North(Ocean(Shipping(Co(Ltd(v(Hyundai(Construction(Co(Ltd((The(Atlantic(Baron)!

Hyundai!agreed!to!build!a!ship!for!North!Ocean.!!The!price!was!fixed!in!US!dollars.!After!a!devaluation!of!that!

currency!Hyundai!demanded!that!the!price!be!increased.!There!was!no!threat!but!it!was!clear!that!delivery!of!the!

vessel!would!be!delayed!if!North!Ocean!didn’t!agree!to!pay!more!money.!There!was!no!contractual!right!to!an!

increase.!North!Ocean!resisted!even!though!they!had!agreed!to!lease!the!vessel!to!Shell!in!anticipation!of!delivery.!

Under!protest!North!Ocean!agreed!to!a!10%!increase!and!the!agreement!was!supported!by!consideration.!Held:!The!court!said!that!North!Ocean!was!entitled!to!rescind!the!renegotiation!contract!and!enforce!the!original!contract!

The!demand!and!threat!not!to!perform!was!wrongful!in!the!sense!that!there!was!no!contractual!justification;!!

Given!the!agreement!with!Shell,!North!Ocean!had!no!choice!but!to!agree!to!the!renegotiation;!and!

If!North!Ocean!had!not!agreed,!it!would!have!breached!its!contract!with!Shell,!with!serious!consequences!for!its!

commercial!reputation.!

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!

!

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!

!

!

Undue!Influence!

! !

Undue!Influence!

!

6Concerned!with!presumed!pressure!rather!than!actual!pressure!

Remedy!

6UI!is!an!equitable!doctrine!

6The!remedy!for!undue!influence!is!to!approach!the!court!for!an!order!to!set!aside!the!contract…in!other!words!a!

right!to!rescind!

6Damages!for!breach!of!contract!are!not!awarded!for!undue!influence!

2!Types!

Presumed!Undue!Influence!!

6By!virtue!of!their!relationship!one!party!is!presumed!to!exercise!undue!influence!over!the!other!

Actual!Undue!Influence!

6Must!be!shown!that!the!decision!to!enter!into!the!transaction!was!not!freely!made.!In!other!words!it!was!only!made!

because!of!the!other!party’s!influence!

6Arises!where,!even!though!there!was!no!special!antecedent!relationship!between!the!parties,!the!DP!was!

nevertheless!able!to!exert!such!influence!over!the!WP!that!the!WP!could!not!exercise!independent!judgment!

Presumed!Undue!Influence!

Established!Classes!

6Parent!or!person!in!loco!parentis!and!child;!

6Guardian!and!ward;!

6Solicitor!and!client;!

6Religious!adviser!and!advisee;!

6Physician!and!patient;!and!

6Trustee!and!beneficiary!

The!automatic!presumption!does!not!arise!between:!

6Husband!and!wife;!Yerkey!v!Jones!and!

6Engaged!persons;!Zamet!v!Hyman!

To!rebut!the!presumption,!the!DP!must!establish:!

6That!the!WP!acted!voluntarily:!Allcard!v!Skinner;!and!

6That!the!fiduciary!obligation!was!not!breached;!lloyd’s!Bank!Ltd!v!Bundy!

Evidence!Rebutting!the!Presumption,!must!consider;!Johnson!v!Buttress!!

6Whether!independent!legal!advice!was!taken;!

6The!price!payable!or!received;!

6Capability;!

6Strength!of!the!presumption;!and!

6Nature!and!extent!of!the!transaction!

Other!Relationships!

6Husband/wife!

Engaged!persons!

Agent!and!Principal!

6In!such!instances,!undue!influence!can!be!pleaded!–!but!it!will!not!automatically!be!presumed!

Johnson!v!Buttress!

J!had!been!given!a!cottage!by!B’s!father.!At!the!time!of!B’s!father!death,!he!was!elderly,!illiterate,!recently!widowed!

and!heavily!dependent!upon!J!–!a!long!time!family!friend.!On!her!father’s!death,!B!sought!to!have!the!gift!set!aside!

for!UI.!Held:!because!of!the!special!relationship!of!trust!and!dependence,!the!presumption!arose.!J!could!not!rebut!

the!presumption!and!so!the!gift!could!be!set!aside!

O’Sullivan!v!Management!Agency!and!Music!Ltd!

O’Sullivan!was!a!successful!songwriter!in!1970s.!He!trusted!Mills!as!his!manager!and!had!complete!confidence!in!

him.!Mills!controlled!various!companies!and!O’Sullivan!trusted!Mills!so!much!that!he!paid!little!attention!to!the!

financial!side!of!his!career.!For!some!time!O’Sullivan!lived!in!a!cottage!and!was!given!10!pounds!a!week!for!pocket!

money.!O’Sullivan!then!wanted!to!have!greater!control!but!failed.!On!Mills’!advice!O’Sullivan!signed!contracts!

without!reading!them!and!without!taking!legal!advice.!Held:!The!Court!found!undue!influence.!!The!presumption!was!

not!rebutted!and!the!transactions!were!set!aside.!But!it!was!done!on!terms!allowing!Mills!to!retain!some!of!the!

benefits!he!had!received!under!the!contracts!

Actual!Undue!Influence!

Elements!

1)!Actual!Coercion!

2)!General!Domination!

1)!Actual!Coercion!

6Occurs!where!one!party!is!able!to!exploit!(what!is!usually)!a!temporary!position!of!strength!to!gain!an!advantage!–!

which!they!are!not!entitled!–!by!bringing!irresistible!pressure!to!bear!on!the!other!

6Williams!v!Bayley!

B!had!given!the!appellant!bankers!(W)!a!number!of!promissory!notes!on!which!he!had!forged!his!father’s!signature.!

When!this!was!discovered,!the!bank!called!B!and!his!father!and!intimated!that!unless!a!suitable!outcome!could!be!

achieved,!they!would!have!to!seek!a!criminal!prosecution!of!B.!B’s!father!subsequently!signed!an!equitable!mortgage!

to!his!property!as!security.!Held:!!The!action!was!successful!and!the!agreement!was!set!aside.!The!pressure!exerted!

at!the!time!was!such!that!he!had!not!freely!and!voluntarily!agreed!to!the!contract.!The!bankers!had!taken!advantage!

of!this!vulnerability!

6The!bulk!of!cases!are!concerned!with!veiled!threats!

2)!General!Domination!

6Occurs!where!one!party,!over!time,!is!able!to!gain!influence!

6Would!equally!be!possible!to!argue!these!cases!as!an!abuse!of!a!special!relationship!

6Often!involved!spiritualists!and!religious!groups!

6Lyon!v!Home!

L!was!a!75!year!old!widow.!H!was!a!‘spiritual!medium’!who!told!L!he!could!communicate!with!her!deceased!husband.!

H!sought!to!exploit!this6!and!told!L!of!her!husband’s!wish!for!L!to!adopt!H!and!place!him!in!an!appropriate!position!

for!a!member!of!the!‘family’.!She!did!this,!transferring!near!60,000!pounds!to!him.!H!came!undone!when!L,!through!

another!spiritualist,!was!told!by!her!husband!that!H!was!an!imposter.!Held:!H!had!clearly!dominated!L’s!mind!and!so!

the!onus!was!on!him!to!show!that!the!gifts!were!voluntary,!well6understood!acts!of!the!donor.!He!could!not!do!this,!

so!the!gifts!were!set!aside.!H!was!ordered!to!return!L’s!property!to!her.!

!

6Morley!v!Loughnan!

L,!a!member!of!a!religious!sect!known!as!the!Exclusive!Bretheren,!had!been!employed!by!M’s!family!to!act!as!M’s!

travel!companion.!Over!time,!M!fell!under!the!spell!of!L’s!religious!influence,!and!M!eventually!cut!off!all!contact!

with!his!family.!!M!lived!for!the!last!7!years!of!his!life!with!L.!During!this!time!L!obtained!140,000!pounds!from!M.!On!

M’s!death,!M’s!executors!sought!to!recover!this!amount!from!L,!alleging!that!the!payments!were!made!under!

influence.!Held:!The!money!had!been!obtained!under!actual!influence!amounting!to!general!domination!of!M!–!and!

thus!an!order!was!made!for!the!money!to!be!repaid!

Third!Parties!

6Where!the!parties!to!a!contract!are!not!the!WP!and!a!DP!!6!but!a!WP!and!a!third!party!

6Commonly!this!occurs!where!a!husband!(DP)!in!order!to!get!capital!for!a!business!venture,!exerts!influence!on!his!

wife!(WP)!in!order!for!her!to!guarantee!/!secure!the!loans!with!the!financial!institution!(TP)!

6Agreements!will!be!voidable!if!the!TP!was!aware,!actually!or!constructively,!of!the!UI!exerted!by!the!husband!–!or!

had!entrusted!the!husband!to!get!the!wife’s!signature!

Yerkley!Principle!

6Yerkey!v!Jones!

Held:!If!the!other!party!(the!creditor)!to!a!contract!6!is!secured!by!a!married!woman!guaranteeing!the!debts!of!her!

husband!!6!did!not!deal!personally!with!the!wife,!she!is!presumed!to!be!entitled!to!have!the!guarantee!contract!set!

aside!against!the!creditor!if:!!

6Her!consent!was!obtained!by!the!husband;!and!

6She!did!not!understand!the!effect!of!the!contract.!

Garcia!v!National!Australia!bank!

Mrs!G!was!asked!to!guarantee!the!debts!of!a!company!which!she!and!her!husband!were!directors.!The!bank!was!the!

beneficiary!of!the!guarantee.!It!took!no!steps!to!explain!the!transaction!to!Mrs!G.!She!did!not!benefit!from!the!loan!

but!the!company!did!for!a!time.!The!company!defaulted!and!Mrs!G!was!asked!to!honour!her!guarantee.!!Mrs!G!

argued!she!was!not!bound!by!the!guarantee!because!she!did!not!fully!understand!the!guarantee!and!thought!it!was!

risk!proof.!Using!the!Yerkey!principle!Mrs!G!argued!she!could!rescind!the!agreement.!Held:!The!Court!said!that!

normally!the!mere!fact!a!guarantor!does!not!understand!the!contract!is!not!sufficient.!But!if!the!guarantor!is!the!wife!

of!the!debtor!the!position!is!different.!The!majority!said!that!because!of!the!trust!and!confidence!in!the!ordinary!

sense!that!existed!between!the!marriage!partners!it!may!be!unconscionable!for!the!creditor!to!enforce!the!

guarantee!

Garcia!v!National!Aust!bank!

What!makes!the!contract!unconscionable!

6The!wife!does!not!in!fact!understand!the!purport!and!effect!of!the!transaction;!

6The!transaction!is!voluntary,!ie!the!wife!receives!no!benefit!from!the!contract!the!performance!of!which!she!has!

guaranteed;!

6The!creditor!is!taken!to!have!understood!that!as!the!debtor’s!wife!the!guarantee!may!repose!trust!and!confidence!

in!her!husband!in!matters!of!business!and!therefore!to!have!understood!that!the!husband!may!not!fully!and!

accurately!explain!the!purport!and!effect!of!the!transaction!to!his!wife;!and!

6The!creditor!does!not!itself!take!steps!to!explain!the!transaction!to!the!wife,!or!determine!that!a!stranger!has!

explained!it!to!her!

Scope!and!Operation!

6Notice!is!not!required.!It!is!not!necessary!for!the!creditor!to!have!notice!of!facts!indicative!of!impropriety!by!the!

husband!

6Not!limited!to!husband’s!personal!debts.!In!Garcia!the!debt!was!that!of!the!company!of!which!the!husband!was!the!

director!

6The!principle!will!not!apply!if!there!is!a!real!benefit!to!the!wife!

6Trust!and!confidence!between!husband!and!wife!must!exist!or!the!principle!will!not!apply!

6The!Yerkey!principle!is!not!confined!to!husband!and!wife.!It!may!apply!to!other!cases!where!there!is!a!personal!

relationship!of!trust!and!confidence!and!!

6In!order!to!avoid!the!principle!the!creditor!it!must!explain!the!transaction!to!the!wife!or!find!out!that!a!stranger!has!

explained!it!to!the!wife!

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Promissory!Estoppel!

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Promissory!Estoppel!

!

6An!equitable!doctrine!which!will!allow!a!promise!to!be!enforced!in!some!situations!even!though!there!is!an!absence!

of!consideration!and!which!applies!where!it!would!be!inequitable!for!the!promisor!to!be!able!to!resile!from!a!

promise!

6Central(London(Property(Trust(v(High(Trees(House!

Plaintiff!agreed!to!reduce!the!rent!paid!for!a!block!of!flats!to!attempt!to!keep!High!Trees!in!the!flats!during!the!war.!

Then!sought!later!to!seek!the!additional!rent!in!the!period!of!the!lower!payment.!

Introduction!to!Australia!6Walton(Stores((Interstate)(Ltd(v(Maher!

Agreed!that!Maher!would!build!a!purpose!built!building!for!Walton!Stores.!Required!demolishing!the!previous!

building!first!to!clear!the!space.!Walton!gave!a!tentative!acceptance,!but!did!not!entirely!accept.!Maher!demolished!

and!started!building!with!the!knowledge!of!Waltons.!Then!during!the!construction!Walton!told!Maher!they!did!not!

want!to!go!through!with!the!contract.!

High!Court!held!that!the!lower!courts!were!correct!in!finding!for!Maher.!In!order!to!establish!an!action!on!

promissory!estoppell!it!must!be!established!that!the!party!being!sued!acted!unconscionably!and!the!party!suing!

acted!to!its!detriment!in!reliance!on!that!unconscionable!conduct!

There!must!be!!

6Unconscionable!conduct!and!

detrimental!reliance!(Both!Waltons)!

It!is!enough!to!show!that!the!promisee!will!suffer!a!detriment!(It!does!not!need!to!have!happened!yet);!

Commonwealth(of(Aus(v(Clarke!

Prerequisites!for!Promissory!Estoppell!!6An!assumption!of!a!legal!relationship!or!an!expectation!of!one!in!which!the!second!party!would!not!be!free!to!

withdraw!

6Second!party!induced!the!first!party!to!expect!or!assume!the!relationship!

6The!first!party!acts!or!abstains!from!acting!in!reliance!of!the!assumption!or!expectation!

6The!second!party!knew!or!intended!that!the!first!party!to!rely!

6The!first!party!will!suffer!detriment!as!a!result!of!the!failure!of!the!second!party!to!fulfil!the!expectation!or!

assumption!and!

6The!second!party!fails!to!avoid!the!detriment!by!not!fulfilling!the!expectation!or!assumption!

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