LAW2101
CONTRACT A
SEMESTER ONE, 2012
READING GUIDE
IMPORTANT NOTES:
1. This Reading Guide should be read in conjunction with the Contract A
Unit Guide 2012.
2. The numbers in the right column refer to the pages in J Paterson, A
Robertson and A Duke, Contract: Cases and Materials (Lawbook Co, 12th
edition, 2012), which is a Required Resource for this unit (see Unit Guide).
3. Most of the cases listed in this Reading Guide are extracted in J Paterson,
A Robertson and A Duke, Contract: Cases and Materials (Lawbook Co, 12th
edition, 2012). You can access the other cases online and/ or in the library.
To access a case online, you may download the Library Reading List from
Blackboard and click the link that will take you to the relevant database.
4. A copy of this document will be provided to you in the closed-book exam.
You must not take your own copy into the examination hall.
2
WEEK ONE
INTRODUCTION TO CONTRACT LAW 3
OFFER 42
Gibson v Manchester City Council [1979] 1 WLR 294 42
Carlill v Carbolic Smoke Ball Co [1893] 1 QB 256 45
MacRobertson Miller Airline Services v Commissioner of State Taxation (WA)
(1975) 133 CLR 125
50
OFFERS DISTINGUISHED FROM INVITATIONS TO TREAT 54
Shop sales
Pharmaceutical Society of Great Britain v Boots Cash Chemists (Southern) Ltd
[1953] 1 QB 401
54
Auctions
AGC (Advances) Ltd v McWhirter (1977) 1 BPR 9454
Tenders
Harvela Investments Ltd v Royal Trust Co of Canada (CI) Ltd [1986] 1 AC 207 Hughes Aircraft Systems International v Airservices Australia (1997) 76 FCR
151
TERMINATION OF AN OFFER
Revocation 56
Goldsbrough Mort & Co Ltd v Quinn (1910) 10 CLR 674 56
Mobil Oil Australia Ltd v Wellcome International Pty Ltd (1998) 81 FCR 475 59 Lapse and death of offeror
Fong v Cilli (1968) 11 FLR 495
Laybutt v Amoco Australia Pty Ltd (1974) 132 CLR 57
Failure of condition and changed circumstances
Dysart Timbers Ltd v Nielson [2009] NZSC 43; [2009] 3 NZLR 160
3
WEEK TWO
ACCEPTANCE 70
CONDUCT CONSTITUTING AN ACCEPTANCE
Smith v Hughes (1871) LR 6 QB 597 Taylor v Johnson (1983) 151 CLR 422
Fitness First (Australia) Pty Ltd v Chong [2008] NSWSC 800
CONSCIOUSNESS OF THE OFFER
The Crown v Clarke (1927) 40 CLR 227 70
SILENCE AND ACCEPTANCE INFERRED FROM CONDUCT 73
Felthouse v Bindley (1862) 11 CBNS 869; 142 ER 1037 73
Empirnall Holdings Pty Ltd v Machon Paull Partners Pty Ltd (1988) 14 NSWLR
523
74
Brambles Holdings v Bathurst City Council [2001] NSWCA 61; (2001) 53
NSWLR 153
76
COMMUNICATION OF ACCEPTANCE
General rule
Latec Finance Pty Ltd v Knight [1969] 2 NSWR 79
Brinkibon Ltd v Stahag Stahl und Stahlwarenhandelsgesellschaft mbH [1983] 2
AC 34
91
Postal acceptance rule 91
Adams v Lindsell (1818) 1 B & Ald 681; 106 ER 250
Electronic communications 93
Electronic Transactions (Victoria) Act 2000 (Vic) ss 3(1), 13A
Guide to Enactment of the UNCITRAL Model Law on Electronic Commerce (1996)
96
CORRESPONDENCE BETWEEN OFFER AND ACCEPTANCE 98
Butler Machine Tool Co Ltd v Ex-Cell-O Corporation (England) Ltd [1979] 1
WLR 401
4
WEEK THREE
CONSIDERATION 103
E Jenks, The History of the Doctrine of Consideration in English Law (Cambridge University Press, London, 1892), pages 81-82
103
THE ESSENTIAL ELEMENTS 104
The benefit/ detriment requirement The “bargain” requirement
Australian Woollen Mills Pty Ltd v Commonwealth (1954) 92 CLR 424 104
Beaton v McDivitt (1987) 13 NSWLR 162 107
Atco Controls Pty Ltd (in liq) v Newtronics Pty Ltd (receivers and managers appointed) (in liq) [2009] VSCA 238; (2009) 25 VR 411
ADEQUACY OF CONSIDERATION 115
Woolworths Ltd v Kelly (1991) 22 NSWLR 189 116
SUFFICIENCY OF CONSIDERATION 117
Past consideration 117
General rule: Roscorla v Thomas (1842) 3 QB 234; 114 ER 496 117
Promise to pay for past services performed at the request of the promisor
Ipex Software Services Pty Ltd v Hosking [2000] VSCA 239 Lampleigh v Brathwait (1616) Hob 105; 80 ER 255
Existing legal duty 118
Foakes v Beer (1884) 9 App Cas 605 119
Williams v Roffey Bros & Nicholls (Contractors) Ltd [1991] 1 QB 1 121
Musumeci v Winadell Pty Ltd (1994) 34 NSWLR 723 124
Re Selectmove Ltd [1995] 1 WLR 474 129
Pao On v Lau Yiu Long [1980] AC 614 129
Wigan v Edwards (1973) 1 ALR 497
cf. Ballantyne v Phillott (1961) 105 CLR 379
5
WEEK FOUR
INTENTION TO CREATE LEGAL RELATIONS 139
THE OBJECTIVE APPROACH
Shahid v Australasian College of Dermatologists [2008] FCAFC 72; (2008) 168
FCR 46
Atco Controls Pty Ltd (in liq) v Newtronics Pty Ltd (receivers and managers appointed) (in liq) [2009] VSCA 238; (2009) 25 VR 411
PRESUMPTIONS 140
Ermogenous v Greek Orthodox Community of SA Inc [2002] HCA 8; (2002) 209
CLR 95
140
COMMERCIAL TRANSACTIONS 145
Banque Brussels Lambert SA v Australian National Industries Ltd (1989) 21
NSWLR 502
145
cf. Kleinwort Benson Ltd v Malaysia Mining Corp Bhd [1989] 1 WLR 379
DOMESTIC AND SOCIAL AGREEMENTS 150
Ashton v Pratt (No 2) [2012] NSWSC 3
Todd v Nicol [1957] SASR 72 151
GOVERNMENT AGREEMENTS 156
Administration of Papua and New Guinea v Leahy (1961) 105 CLR 6 156
cf. Placer Developments Ltd v Commonwealth (1969) 121 CLR 353
PRELIMINARY AGREEMENTS 159
Masters v Cameron (1954) 91 CLR 353 159
Baulkham Hill Private Hospital Pty Ltd v GR Securities Pty Ltd (1986) 40
6
WEEK FIVE
CERTAINTY 163
COMPLETENESS 164
Milne v Attorney-General for the State of Tasmania (1956) 95 CLR 460 ANZ v Frost Holdings Pty Ltd [1989] VR 695
Foley v Classique Coaches Ltd [1934] 2 KB 1
CERTAINTY 164
Council of the Upper Hunter County District v Australian Chilling and Freezing Co Ltd (1968) 118 CLR 429
164
Implying objective standards 166
Biotechnology Australia Pty Ltd v Pace (1988) 15 NSWLR 130 166
Whitlock v Brew (1968) 118 CLR 445 174
Hall v Busst (1960) 104 CLR 206 177
Agreements to negotiate 179
United Group Rail Services Ltd v Rail Corporation New South Wales [2009]
NSWCA 177; (2009) 74 NSWLR 618
179
ILLUSORY PROMISES 192
Meehan v Jones (1982) 149 CLR 571 192
Godecke v Kirwan (1973) 129 CLR 629 199
7
WEEK SIX
FORMALITIES 209
THE STATUTE OF FRAUDS AND ITS AUSTRALIAN EQUIVALENTS 209
Instruments Act 1958 (Vic) s 126 213
Guarantee vs. indemnity
Yeoman Credit Ltd v Latter [1961] 1 WLR 828
THE FORMALITIES REQUIRED 214
Joinder of documents
Tonitto v Bassal (1992) 28 NSWLR 564
Signature 215
Pirie v Saunders (1961) 104 CLR 149 216
Documents in electronic form
Electronic Transactions (Victoria) Act 2000 (Vic) ss 7, 9
THE CONSEQUENCES OF NON-COMPLIANCE 218
Unenforceability 218
Popiw v Popiw [1959] VR 197
Part performance: Ogilvie v Ryan [1976] 2 NSWLR 504 219
CAPACITY 227
Age of Majority Act 1977 (Vic) s 3(1)
BINDING CONTRACTS: NECESSARIES 227
Goods Act 1958 (Vic) s 7 227
CONTRACTS BINDING UNLESS REPUDIATED 228
CONTRACTS REQUIRING RATIFICATION 228
Supreme Court Act 1986 (Vic) s 50 230
VOID CONTRACTS 228
8
WEEK SEVEN
ESTOPPEL 243
INTRODUCTION 243
THE DEVELOPMENT AND ELEMENTS OF EQUITABLE ESTOPPEL 245
Je Maintiendrai Pty Ltd v Quaglia (1980) 26 SASR 101 245
Waltons Stores (Interstate) Ltd v Maher (1988) 164 CLR 387 251
Legione v Hateley (1982) 152 CLR 406
Mobil Oil Australia Ltd v Wellcome International Pty Ltd (1998) 81 FCR 475
Commonwealth v Verwayen (1990) 170 CLR 394 263
THE EFFECT OF AN ESTOPPEL 278
Giumelli v Giumelli (1999) 196 CLR 101 278
ESTOPPEL AS A CAUSE OF ACTION 285
W v G (1996) 20 Fam LR 49 285
PRIVITY 339
IDENTIFYING THE CONTRACTING PARTIES 340
Coulls v Bagot’s Executor & Trustee Co Ltd (1967) 119 CLR 460 340
NON-APPLICATION OF THE PRIVITY RULE: AGENCY 349
Port Jackson Stevedoring Pty Ltd v Salmond & Spraggon (Aust) Pty Ltd (The ‘New York Star’) (1978) 139 CLR 231
349
CIRCUMVENTING THE PRIVITY RULE: TRIDENT V MCNIECE 359
Trident General Insurance Co Ltd v McNiece Bros Ltd (1988) 165 CLR 107 359
Gate Gourmet Australia Pty Ltd (in liq) v Gate Gourmet Holding AG [2004]
NSWSC 149
Hill v Van Erp (1997) 188 CLR 159
9
WEEK EIGHT
EXPRESS TERMS
IDENTIFYING THE EXPRESS TERMS 385
Written terms and the effect of signature 386
L’Estrange v F Graucob Ltd [1934] 2 KB 394 386
Toll (FGCT) Pty Ltd v Alphafarm Pty Ltd [2004] HCA 52; (2004) 219 CLR 165 388
Curtis v Chemical Cleaning & Dyeing Co [1951] 1 KB 805 397
Incorporation of terms by notice 399
Oceanic Sun Line Special Shipping Company Inc v Fay (1988) 165 CLR 197 399
eBay International AG v Creative Festival Entertainment Pty Ltd [2006] FCA
1768; (2006) 170 FCR 450
Parker v South Eastern Railway Co (1877) 2 CPD 416 Causer v Brown [1952] VLR 1
Thornton v Shoe Lane Parking Ltd [1971] 2 QB 163 402
Baltic Shipping Co v Dillon (The Mikhail Lermontov) (1991) 22 NSWLR 1 405
New South Wales Lotteries Corp Pty Ltd v Kuzmanovski [2011] FCAFC 106 Interfoto Picture Library Ltd v Stiletto Visual Programs Ltd [1989] QB 433
Incorporation by a course of dealings 407
Balmain New Ferry Co Ltd v Robertson (1906) 4 CLR 379 408
Rinaldi & Patroni v Precision Mouldings (1986) WAR 131 409
Statements made during negotiations 414
Relevance of the parol evidence rule 415
Corbin on Contracts, 1950, vol. 3, pp. 215-216 415
State Rail Authority of New South Wales v Heath Outdoor Pty Ltd (1986) 7
NSWLR 170
416
Hoyt’s Pty Ltd v Spencer (1919) 27 CLR 133 421
10
WEEK NINE
EXPRESS TERMS (cont’d)
IDENTIFYING THE EXPRESS TERMS (cont’d)
When is a statement a term of a contract 430
Equuscorp Pty Ltd v Glengallan Investments Pty Ltd [2004] HCA 55; (2004) 218
CLR 471
430
Van den Esschert v Chappell [1960] WAR 114
JJ Savage & Sons Pty Ltd v Blakney (1970) 119 CLR 435 432
Oscar Chess Ltd v Williams [1957] 1 WLR 370 433
Dick Bentley Productions Ltd v Harold Smith (Motors) Ltd [1965] 1 WLR 623 435
CONSTRUING THE TERMS 437
Extrinsic evidence in construing a contract 437
Western Export Services Inc v Jireh International Pty Ltd [2011] HCA 45 439 cf. Investors Compensation Scheme Ltd v West Bromwich Building Society
[1998] 1 WLR 896
440
Process of construction 441
Royal Botanic Gardens and Domain Trust v South Sydney City Council [2002]
HCA 5; (2002) 240 CLR 45
441
Pacific Carriers Ltd v BNP Paribas [2004] HCA 35; (2004) 218 CLR 451 444
Australian Broadcasting Commission v Australasian Performing Right Association Ltd (1973) 129 CLR 99
Quirke v FCL Interstate Transport Services Pty Ltd [2005] SASC 226; (2005) 92
SASR 249
Exclusion Clauses 446
Darlington Futures Ltd v Delco Aust Pty Ltd (1986) 161 CLR 500 447
Thomas National Transport (Melbourne) Pty Ltd v May & Baker (Australia) Pty Ltd (1966) 115 CLR 353
451
Davis v Pearce Parking Station Pty Ltd (1954) 91 CLR 642
cf. Council of the City of Sydney v West (1965) 114 CLR 481
11
WEEK TEN
IMPLIED TERMS 461
TERMS IMPLIED IN FACT 461
Formal contracts 462
Byrne v Australian Airlines Ltd (1995) 185 CLR 410 462
The Moorcock (1889) LR 14 PD 64 Re Ronim Pty Ltd [1999] 2 Qd R 172
Codelfa Construction Pty Ltd v State Rail Authority of NSW (1982) 149 CLR 337
Informal contracts: Hawkins v Clayton (1988) 164 CLR 539 469
TERMS IMPLIED IN LAW 469
University of Western Australia v Gray [2009] FCAFC 116; (2009) 179 FCR 346 469
Liverpool City Council v Irwin [1977] AC 239 Breen v Williams (1996) 186 CLR 71
TERMS IMPLIED BY CUSTOM 471
Con-Stan Industries of Australia Pty Ltd v Norwich Winterthur Insurance (Australia) Ltd (1986) 160 CLR 226
471
THE ROLE OF GOOD FAITH 474
Should a duty of good faith be recognised? 474
Renard Constructions (ME) Pty Ltd v Minister for Public Works (1992) 26
NSWLR 234
474
Service Station Assoc’n Ltd v Berg Bennett & Assoc’s Pty Ltd (1993) 45 FCR 84 488
Hughes Aircraft Systems International v Airservices Australia (1997) 146 ALR 1
What should good faith require? 492
Secured Income Real Estate (Australia) Ltd v St Martins Investments Pty Ltd
(1979) 144 CLR 596
492
Burger King Corporation v Hungry Jack’s Pty Ltd [2001] NSWCA 187; (2001)
69 NSWLR 558
496
12
WEEK ELEVEN
CONSUMER CONTRACTS
UNFAIR CONTRACT TERMS 535
Competition and Consumer Act 2010 (Cth), Schedule 2 (“Australian Consumer
Law”), Parts 2-3 and 5-2
Australian Securities and Investments Commission Act 2001 (Cth), Part 2,
Division 2, Subdivisions BA and G
Standard form contracts
Robert A Hillman and Jeffrey J Rachlinski, “Standard-Form Contracting in the
Electronic Age” (2002) 77 New York University Law Review 429 at 435-454 535 The scope of the unfair contract terms law
The test of an unfair term
Director of Consumer Affairs v AAPT Ltd [2006] VCAT 1493
Effect of a term being unfair
CONSUMER GUARANTEES 543
Competition and Consumer Act 2010 (Cth), Schedule 2 (“Australian Consumer
Law”), Part 3-2, Division 1, and Part 5-4
Australian Competition and Consumer Commission, Consumer guarantees – a
13
WEEK TWELVE
REVISION
The lectures in week 12 are reserved for revision. Students will have the opportunity to discuss in class the 2011 Contract A exam, which is set out below. In preparation for that discussion, it is strongly recommended that you sit down under exam conditions,
give yourself 30 minutes reading and noting time (during which you should be identifying the relevant issues, thinking about the relevant case law and so on) and then spend 2 hours writing out an answer to the exam as if you were in the examination hall.
You should then compare your own answer to the answer developed through class discussion in the revision lecture. This exercise will provide valuable law exam practice and allow you to self-identify areas in which you could benefit from additional revision.
QUESTION ONE
Armstrong Jones (AJ) owns and manages Pace Suites (PS), a hotel and serviced apartments in Melbourne. In June 2010, AJ tendered for, and won, a contract to host the Melbourne Motor Racing (MMR) events scheduled for 28 March to 3 April 2011.
A condition of AJ’s contract with MMR Corporation (MMRC) was that a wide range of specified facilities within PS was to be refurbished and a new show room built to be ready by 28 February 2011. If the work was not completed by the scheduled date, AJ was to pay to MMRC liquidated damages of $25,000 for each week, or part thereof, until completion.
AJ invited tenders for the refurbishment and construction work. Ian Crap (IC), who owns and manages a construction business called Quality Constructions, won the contract. The price for the works, incorporated into a detailed contractual document between AJ and IC, was $15 million. The contract, which was signed by AJ and IC, also contained the following clauses:
Clause 8: The contractor (IC) may use the services of sub-contractors as he deems fit. IC does not guarantee the quality of the workmanship or any materials used by any such sub-contractors. Neither is IC liable for any loss or damage that may flow from the work of any sub-contractor.
Clause 20: The contractor must complete all work no later than 15 February 2011.
On 15 December 2010, IC, who (by himself and through sub-contractors) had completed about 70% of the work required under the contract, wrote an email to AJ stating that he would have to stop work because he had “already spent $15 million dollars on the project and there is still a lot to be done”. He stated further that the only way out is for AJ to agree to an additional payment of $8 million, as costs have been much higher than he (IC) anticipated.
AJ, who thought that IC’s tender price of $15 million was on the low side, responded that he understood the market, and would pay the additional money if he could afford to do so. He continued:
14
“Unfortunately, I am in serious financial difficulty, and I am counting on my hosting the MMR events to save me. I may still have to sell some assets. I am confident you can propose a solution that suits us both; I see in you unmatched ingenuity. This has to resolve quickly so the project can get back on schedule, otherwise I will go under, for sure”
On 20 December 2010, IC sent AJ an email proposing that he can finish the work with borrowed funds in exchange for the new showroom and the land on which it is situated being transferred to him (IC) straight after the MMR events. AJ phones IC and says, “I agree with your proposal. Please move fast to complete the work on time; the paperwork for the showroom will be done later”.
Required:
Advise the specified parties as to their legal rights and/or liabilities in the following scenarios. Each scenario is separate and does not follow on from the other.
A.
IC completed the work on time. MMRC was pleased with the facilities at PS, and has extended PS’s hosting contract for another 5 years. However, AJ has refused to transfer the showroom to IC, although he (AJ) has done well financially from hosting the MMR events. AJ says that the Showroom is crucial to his hosting of the MMR events in the future, it is the newest of all of his PS facilities and, besides, he does not think he is legally obliged to transfer the showroom to IC.IC seeks your advice as to his legal position relating to his contract with AJ
(30 Marks)
B.
IC completed the work on time. However, before final inspection could take place, faulty electrical work done by Sparky Plus, the sub-contractor used by IC, caused fire and damage to a large part of the refurbished buildings. AJ is unable to host the MMR events. While both IC and Sparky Plus have insurance, IC disclaims liability, referring to Clause 8 of his contract with AJ.AJ seeks your advice as to whether he has a contractual claim against IC and/or Sparky Plus
(12 Marks)
C. Should Victoria legislate to reform the Common Law rule on Privity?
Discuss this question in the context of cases and secondary texts with which you have become familiar in your study of Contract A this year
(8 marks)
15 QUESTION TWO
Emma runs a dry cleaning business. One of her regular customers is George, who has used her services many times. One day, George hands in his designer suit for dry cleaning. Emma gives him a receipt. During the dry cleaning process, Emma fails to handle the suit with reasonable care, and the suit gets spoiled with irremovable stains. George is furious and demands that Emma pay him $1,000 to purchase another suit of similar quality. Emma refuses, pointing to the clauses printed on the back of the receipt. She has printed these clauses on the back of receipts since she started the business. Clause 3 on the back of the receipt reads:
“All articles are received and treated entirely at the owner’s risk. No liability is accepted for loss of, or damage to, articles through any cause whatsoever.”
Meanwhile, Emma intends to upgrade her dry cleaning equipment. In particular, her current shirt pressing machine can only process 10 shirts per hour, which is too slow. Emma meets with Bob, who is a representative of SEC Pty Ltd, a company importing and selling dry cleaning machinery. Emma tells Bob that she needs a shirt pressing machine that can process at least 20 shirts per hour. Bob says that SEC’s new FastPress66, which costs $10,000, is exactly what she needs. Emma replies that she would like to buy one FastPress66. Bob takes a document with several pages out of his suitcase and says to Emma that this document contains the terms of their agreement. On the first page of the document, Bob enters the details of Emma’s business, FastPress66 as the subject matter and $10,000 as the price. He then hands the document to Emma and tells her that she needs to sign it if she wants to purchase a FastPress66. Emma signs the document without reading it.
Two weeks later, Emma receives a FastPress66. It turns out that it can only process 15 shirts per hour. When Emma complains to SEC Pty Ltd, she is referred to the following clauses in the document she signed:
Clause 5: SEC Pty Ltd does not give any guarantee as to the amount of shirts that the machine can process per hour.
Clause 6: This document contains all terms of the contract. No oral terms form part of the contract.
In order to relax from the stress of her business, Emma decides to become a member of her local gym operated by FIT Pty Ltd. She goes to the counter of the gym and says that she would like to become a member. She is handed a document which states that the membership is initially for one year, and that the membership fee is $50 per month. It also says that the contract is subject to the standard terms and conditions of FIT Pty Ltd, which are set out in a brochure available at the counter. Emma sees the brochure but does not read it. She signs the document and pays the fee for the first month. Two weeks later, Emma receives a letter from FIT Pty Ltd informing her that her membership fee will increase to $75 per month from the following month. When Emma contacts FIT Pty Ltd to complain, she is referred to clause 4 in the terms and conditions of FIT Pty Ltd, which reads: “FIT Pty Ltd is entitled to increase the fee by up to 50% at any time.”
Required:
Advice Emma on her rights and obligations under her contracts with George, SEC Pty Ltd and FIT Pty Ltd.
