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1 70211:&CONTRACTS&NOTES& & Table&of&Contents& INTRODUCTION)TO)THE)LAW)OF)CONTRACT...4! WHAT!IS!A!CONTRACT?...4! HISTORICAL!DEVELOPMENT...4! LEGAL!THEORIES!THAT!INFORM!CONTRACT!LAW...4! THEMES!IN!CONTRACT!LAW...5! THE!IDEOLOGIES!OF!CONTRACT!LAW...5! SOURCES!OF!CONTRACT!LAW...6! THE!ELEMENTS!OF!A!CONTRACT...6! MINI!LEGAL!DICTIONARY...7! CONTRACTUAL)OFFERS...9! RULES!OF!AN!OFFER...9! HOW!AN!OFFER!ENDS...13! ACCEPTANCE)OF)AN)OFFER... 15! MAY!BE!EXPRESS!OR!IMPLIED...15! WHO!CAN!ACCEPT?...15! COUNTER!OFFER!!ACCEPTANCE...16! MULTIPLE!ACCEPTORS...16! ACCEPTANCE!MUST!BE!COMMUNICATED...16! SILENCE!CANNOT!BE!DEEMED!AS!ACCEPTANCE...18! CORRESPONDENCE!BETWEEN!OFFER!AND!ACCEPTANCE...18! CLEAR!OFFER!AND!ACCEPTANCE...18! CONSIDERATION... 19! RULES!OF!CONSIDERATION...19! EQUITABLE)ESTOPPEL... 23! DEVELOPMENT!OF!PROMISSORY!ESTOPPEL...24! THE!ELEMENTS!OF!EQUITABLE!ESTOPPEL...27! THE!RELIEF!AVAILABLE...27! LIMITATIONS!TO!ESTOPPEL...27! INTENTION)TO)CREATE)LEGAL)RELATIONS... 28! INTENT!CAN!BE!EXPRESS!OR!IMPLIED:...28! PRESUMPTIONS!OF!INTENT...29! CERTAINTY)/)COMPLETENESS)/)CONDITIONAL)CONTRACTS... 31! THE!CONTRACT!MUST!BE!SUFFICIENTLY!COMPLETE...31! THE!AGREED!TERMS!MUST!BE!SUFFICIENTLY!CERTAIN...33! THE!CONSIDERATION!MUST!NOT!BE!ILLUSORY...33! RESULTS!OF!UNCERTAINTY...34! CONTRACTS)REQUIRING)WRITING... 35! GENERAL!RULE!AND!EXCEPTIONS...35!
2 EFFECTS!OF!NONKCOMPLIANCE...38! DOCTRINE!OF!PART!PERFORMANCE...39! VARIATION!OF!CONTRACTS...39! CAPACITY... 40! MINORS...40! MENTALLY!ILL...43! INTOXICATED!PERSONS...43! ALIENS...43! BANKRUPTS...44! CONVICTS...44! CORPORATIONS...44! PREKINCORPORATION!CONTRACTS...44! INCORPORATED!ASSOCIATIONS...44! UNINCORPORATED!ASSOCIATIONS...44! PARTNERSHIPS...45! BUSINESS!NAMES...45! PRIVITY)OF)CONTRACTS... 46! THE!GENERAL!RULE...46! CRITICISMS...46! EXCEPTIONS...47! COMMON!LAW!AND!STATUTORY!BACK!UP...48! COMMON!LAW! EXCEPTIONS!(OR! EVASIONS )...50! ABOLTIION!OF!THE!PRIVITY!RULE?...52! SUGGESTED!REFORMS...53! ILLEGALITY... 54! CONTRACTS!ILLEGAL!AT!COMMON!LAW...54! CONTRACTS!VOID!AT!COMMON!LAW...56! CONTRACTS!ILLEGAL!BY!STATUTE...60! CONTRACTS!VOID!BY!STATUTE...62! EFFECT!OF!FINDING!A!CONTRACT!ILLEGAL...62! MISREPRESENTATION... 66! DEFINITION...66! ELEMENTS!OF!MISREPRESENTATION...67! REMEDIES...71! TYPES!OF!MISREPRESENTATION...72! AFFIRMATION!AFTER!MISREPRESENTATION...75! STATUTORY!INTERVENTION...75! MISTAKE... 77! Common!Mistake...78! Mutual!Mistake...81! Unilateral!Mistake...81! DURESS... 83! Elements...83!! 70211:&Contracts&Notes& Page!2!of!136!
3 Duress!to!the!Person...83! Duress!of!Goods...83! Economic!Duress...83! Third!Party!Advantage...84! Effect!of!Finding!Duress...84! Statutory!Impact!on!Duress...84! UNDUE)INFLUENCE... 85! Presumed!Undue!Influence...85! Actual!Undue!Influence...87! Rebuttal!of!Presumed!/!Actual!UNDUE!influence...87! Effect!of!Finding!Undue!Influence...87! CONTRACT)TERMS) )EXPRESS)TERMS... 88! PreKContractual!Statements...92! Written!Statements!(Memo!in!Detail)...94! Parol!Evidence!Rule...96! Collateral!Contracts...97! CONTRACT)TERMS) )IMPLIED)TERMS... 98! Terms!implied!by!Fact...98! Terms!Implied!by!Law...99! INTERPRETATION)/)CONSTRUCTION)OF)CONTRACTUAL)TERMS ! Intrepreting!the!meaning!of!words!(Fact)...100! Determining!the!Legal!Significance!of!words!(LAW)...101! NonKPromissory!terms...105! EXCLUSION)CLAUSES ! DISCHARGE)OF)CONTRACT ! Discharge!By!Performance...110! Discharge!By!Agreement...112! Discharge!by!operation!of!Law...113! Termination!Due!to!Breach...114! Discharge!by!Frustration...119!! 70211:&Contracts&Notes& Page!3!of!136!
4 CONSIDERATION) Consideration:!an!act!or!forbearance!by!one!party!that!is!the!price!for!the!other!party s!promise! (Dunlop&Pneumatic&Tyre&Company&Ltd&v&Selfridge&&&Company&Ltd&[1915]!AC!847)! o NB:!in!unilateral!contracts!the!act!or!forbearance!itself!(rather!than!a!promise)!constitutes!the! consideration! The!doctrine!of!consideration!applies!only!to!simple!contracts!!formal!contracts!do!not!require! consideration! CONSIDERATION!IS!NOT!NECESSARY!FOR!CONTRACTS!MADE!IN!DEED! RULES!OF!CONSIDERATION! MUST!FLOW!FROM!PROMISEE! See!Dunlop&Pneumatic&Tyre&Company&Ltd&v&Selfridge&&&Company&Ltd&[1915]!AC!847,!where!it!was!held! that!a!third!party!was!not!bound!by!the!original!contract!as!no!consideration!had!flowed!from!the! promisee!to!the!third!party! NB:!However!the!consideration!need!not!flow!to!the!promisor! DOCTRINE!OF!PRIVITY:!A!PERSON!WHO!IS!NOT!PARTY!TO!A!CONTRACT!MAY!NOT!SUE!ON!IT! This!is!independent!of!the!doctrine!of!consideration,!although!there!may!be!overlap!between!the!two! A!person!must!be!made!a!joint!promisee!in!order!to!be!party!to!the!contract!(see!Coulls&v&Bagot s& Executor&&&Trustee&Co&Ltd&(1967)!119!CLR!460,!where!it!was!held!that!a!woman!who!had!signed!a! contract!with!her!husband!was!not!deemed!a!party!to!the!contract!due!to!the!wording!of!the!contract)! NB:!There!are!some!exceptions!to!the!doctrine!of!privity!! o e.g.!agency,!trusts,!etc.! o e.g.!insurance!law:!see!trident&general&insurance&co<d&v&mcniece&bros&pty<d!(1988)!165!clr! 107! QUID!PRO!QUO:!MUST!BE!BARGAINED!FOR! The!action/forbearance!must!be!done!in!reliance!on!the!promise,!and!must!be!done!at!the!promisor s! request! o See!Australian&Woollen&Mills&Pty&Ltd&v&The&Commonwealth&(1954)!92!CLR!424! CONSIDERATION!MUST!BE!SUFFICIENT! Sufficient!is!something!of)some)value)in)the)eye)of)the)law!(Thomas&v&Thomas&(1842)!2!QB!851)!!it!is! different!to!adequate)consideration! o See!Chappell&&&Co&Ltd&v&Nestle&Co&Ltd&[1960]!AC!87!where!chocolate!wrappers!were!considered! sufficient!consideration! This!is!because!the!courts!cannot!embark!upon!an!examination!of!the!adequacy!of!consideration! (Woolworths&Ltd&v&Kelly&(1991)!22!NSWLR!189,!per!Kirby!J)!! 70211:&Contracts&Notes& Page!19!of!136!
5 CONSIDERATION!MUST!BE!LAWFUL!(SEE!WYATT&V&KREGLINGER!(1933))!! CANNOT!BE!ILLUSIONARY!OR!DISCRETIONARY! Placer&Development&Ltd&v&Commonwealth&(1969)!121!CLR!353! o The!general!principle!is!that!wherever!words!which!by!themselves!constitute!a!promise!are! accompanied!by!words!showing!that!the!promisor!is!to!have!a!discretion!or!option!as!to! whether!he!will!carry!out!that!which!purports!to!be!the!promise,!the!result!is!that!there!is!no! contract!on!which!an!action!can!be!brought!at!all.! MUST!BE!DEFINITE! Shields&v&Drysdale&(1880)!6VLR!Eq!126! o A!daughter!promised!to!look!after!her!elderly!mother!and!father!for!as!long!as!they!lived.!!In! consideration!for!the!daughter s!promise,!the!father!promised!to!transfer!to!her!his!interest!in! some!of!his!property.! o Held:!The!court!held!that!this!agreement!was!void!because!the!consideration!was!not!definite.! No!particular!property!was!indicated!in!the!agreement!and!therefore!it!was!too!vague!and!not! legally!enforceable! PAST!CONSIDERATION!IS!NO!CONSIDERATION! Different!to!executory!consideration!!part!consideration!occurs!where!the!act!or!forbearance! predates!the!promise! See!Roscorla&v&Thomas&(1842)!3!QB!234!where!the!seller!added!that!the!horse!was!free!from!vice!after! the!sale!had!been!made,!and!that!this!promise!was!not!held!to!be!part!of!the!contract! However:! o The!rule!in!Re&Casey s&parents&(re&casey s&parents;&stewart&v&casey&[1892]!1!ch!104)!allows!for! recognition!of!past!services!as!good!consideration:!! If!the!act!is!done!at!the!promisor s!request!! The!parties!understood!the!act!was!to!be!renumerated!! And!payment!would!have!been!legally!enforceable!had!it!been!promised!in!advance! o Also!see!Lampleigh&v&Braithwaite&(1615)80!ER!255!and!Pao&On&v&Lau&Yiu&Long&[1980]!AC!614!! 70211:&Contracts&Notes& Page!20!of!136!
6 PERFORMANCE!OF!EXISTING!DUTIES!IS!NO!CONSIDERATION! The!rule!in!Stilk&v&Myrick!(Stilk&v&Myrick&(1809)!170!ER!1168)!says!that!the!performance!of!a!preK existing!obligation!cannot!be!good!consideration! Where!there!are!two!parties!already!in!a!contractual!relationship! o Forbearance!to!sue:!! If!there!is!some!bona!fide!grievance!or!some!disagreement!of!what!a!promisor!agreed! to!under!the!contract,!the!completion!of!this!disputed!duty!will!be!good!consideration! (Wigan&v&Edwards&(1973)!47!ALJR!586)!! Rules:!Hercules&Motors&Pty&Ltd&v&Schubert&(1953)!SR!(NSW)!301! o claim!must!be!reasonable! o there!is!an!honest!belief!in!a!good!chance!of!success! o no!concealment!of!fact!that!could!affect!the!validity!of!the!claim! o the!promise!must!be!bargained!for! o Where!there!is!some!additional!risk!or!forbearance!undertaken,!this!will!act!as!good! consideration!(hartley&v&ponsonby&(1857)!119!er!1471)! o Practical)benefit)cases)are)the)exception)to)this)rule!! If!it!can!be!found!that!ensuring!the!completing!of!an!existing!contract!is!of!some! practical!benefit,!or!will! avoid!substantial!practical!disbenefit,!then!completing!the! original!contract!will!be!good!consideration!(williams&v&roffey&bros&&&nicholls& (Contractors)&Ltd![1990!1!All!ER!512)!! This!was!applied!in!Australia!in!Musumeci&v&Winadell&Pty&Ltd&(1994)!34!NSWLR!723!! However,!there!are!a!few!important!caveats!to!practical!benefit!cases:! The!benefit!of!maintaining!the!contract!must!outweigh!the!benefit!of!another! remedy!(e.g.!suing!for!breach)! The!promise!is!not!given!by!way!of!duress,!fraud,!undue!influence!or! unconscionable!conduct! Where!there!are!three!parties,!two!of!whom!are!in!a!contractual!relationship! o This!will!constitute!valid!consideration! o Shadwell&v&Shadwell![1860]!EWHC!CP!J88!! P!entered!contract!to!marry,!and!D!promised!to!pay!him!an!annual!allowance!until!his! salary!reached!a!certain!amount!as!congratulations!! The!court!held!the!marriage!was!an!object!of!interest!to!D!and!that!be!benefited!by!its! taking!place,!and!was!therefore!good!consideration! Where!there!is!some!duty!owed!under!the!general!law!rather!than!because!of!a!contract! o Not!good!consideration!(Collins&v&Godefroy&(1831)!109!ER!1040!where!testifying!in!court!was! not!good!consideration!when!also!subpoenaed)! o However!going!beyond!this!duty!will!be!good!consideration!(Glasbrook&Brothers&Ltd&v& Glamorgan&County&Council&[1925]!AC!270!where!extra!police!presence!was!deemed!good! consideration)!! 70211:&Contracts&Notes& Page!21!of!136!
7 PART!PAYMENT!IS!NOT!GOOD!CONSIDERATION!(PINNEL S&CASE&(1602)!77!ER!237!AND!AFFIRMED!BY! FOAKES&V&BEER!(1884)!9!APP!CAS!60)! Exceptions:! o Settlement!of!a!dispute!(HBF&Dalgety&Ltd&v&Moreton&[1987]!1!NZLR!411)! o Material!alteration!in!the!mode!of!payment!:!pay!earlier!or!at!a!different!place!(falls!outside!of! the!rule!in!pinnel s&case)! o 'Composition'!agreements!! These!occur!when!the!debtor!is!insolvent/bankrupt,!and!the!creditors!agree!to!a!lesser! amount!in!payment!for!debts!owed!when!the!debtor!is!being!liquidated!! Precludes!the!creditor!from!going!behind!the!agreement!as!this!would!amount!to!a! fraud!on!other!creditors.!(bankruptcy&act!1966!(cth))! o Third!party!payment!(as!the!third!party!was!not!indebted!to!the!creditor,!so!any!payment!from! them!is!good!consideration)!(hirachand&punamchand&v&temple&[1911]!2!kb!330)! o Something!other!than!money!! e.g.! the!gift!of!a!horse,!hawk!or!robe...!might!be!more!beneficial!to!the!creditor!(as! stated!in!pinnel s&case)! o Equitable!estoppel! o The!use!of!a!deed!(as!no!consideration!is!required)! Whether!or!not!part!payment!of!a!debt!is!of!practical!benefit!to!the!creditor!is!a!difficult!area!in!the! law:! o Re&Selectmove&Ltd&[1995]!2!All!E.R.!531!indicated!that!partial!payment!of!debt!fell!outside!of! the!rule!in!williams&v&roffey! o However,!Musumeci&v&Windadell&has!challenged!this!decision!as!held!that!the!partial!payment! of!rent!was!of!practical!benefit!to!the!landlord!(the!case!was!not!decided!in!equity/promissory! estoppel)!! 70211:&Contracts&Notes& Page!22!of!136!
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