#19980 - Law1116 Notes 2 Updated - Contract Law

MODULE 1

• Pre-understanding via pre-recorded lectures & course materials.

• Quiz (20%) 20 minutes (weeks 1-4 content)

• Problem-Solving Exercise (30%) -

ILAC/IRAC

ISSUE > LAW/RULE > APPLICATION > CONCLUSION

• Exam (50%).

PRINCIPLES OF AUSTRALIAN CONTRACT LAW: CASES AND MATERIALS (CHAPTER 1):

• ‘Basically, a contract is an agreement or set of promises that the law will enforce.’ Such agreements create obligations between the parties. This means that if such agreement/promise is breached the law will provide a remedy.

• As such, the role of contract law can, for example, be thought of as one that:

• provides a basis of consistency and certainty (so persons can plan their business and personal affairs with confidence), and

• provides a basis for the resolution of ‘contract-related’ disputes.

• The definition of a contract is based on the concept of enforceable promises.

• Important role in shaping the functioning of society.

• ‘A contract is a promise or a set of promises for the breach of which the law gives a remedy, or the performance of which the law in some way recognises of duty.’

&

• ‘An agreement or set a promises that the law will enforce.’

• The law does not generally compel the performance of a contract; it merely gives a remedy, normally damages for the breach.

KEY ELEMENTS:

• (a) need for set of promise(s),

• (b) 2+ capable people (parties),

• (c) creates an obligation &

• (d) obligation must be enforceable by law.

THE COURT LOOKS AT:

• (a) whether the agreement is a contract, if so, is it legally valid/enforceable &

• (b) if yes, what are the rights, duties and obligations of the parties.

SOURCES OF CONTRACT LAW:

• (a) common law & equity i.e., early British law & Courts of Chancery

&

• (b) statute law.

CONTRACTS CAN BE CLASSIFIED BY SEVERAL PARTIES:

• (a) unilateral i.e., reward for finding a dog, one person is not obligated but will be rewarded

• One-sided contracts;

• (b) bilateral (2 parties - both exchange promises to perform) &

• (c) multilateral (2+ parties)

TYPE OF CONTRACT:

• (a) simple (i.e., oral, written, implied by conduct)

• To be legally binding, contracts regarding buying or selling land must be in writing, &

• (b) formal (deeds).

CONSIDERATION (LAW DEF):

• between the promise and promiser; there has to be an exchange of something of value i.e., money, a promise to do something. Some form must be present in a simple contract.

DEFECTS:

• (a) void contracts; no legal effect; ab initio i.e., illegal contracts

&

• (b) voidable; repudiated (the person not in breach can affirm the contract or void it and get compensation) i.e., may be reputed due to a mistake.

ILAC:

• Structure on how to think & problem-solve.

• Is it a clue, information, context, or something I can use in an argument?

ISSUE > LAW (case law) > APPLICATION (of case law) > CONCLUSION (answers the issue & concludes what it is i.e., how does the application of law treat the issue)

I - whether the winter dress labelled as being $50 not $500 is an invitation to treat or an offer.

Is Anna able to buy the dress for $50?

L - Pharmaceutical v Boots Chemist…. held the display of pharmaceutical goods at a self-service pharmacy was an invitation to treat and not an offer.

A - On the facts, Anna has selected a winter dress on the rack labelled as summer dresses, all dresses on the rack being $50, however Anna’s dress is tagged as $500. In Pharmaceutical v Boots Chemist, it was held that the pharmaceutical goods of their self-service pharmacy, including those that need to be served by a chemist, were not deemed to be offers to the customers, merely invitations to treat. The offer was not made until the customer presented the item at checkout. Here, an offer was not made until Anna presented $50 at the checkout, therefore the dresses on the rack were merely invitations to treat rather than offers. When Anna was advised of the mix-up, that was the offer being rejected.

C - As explained, Anna is not entitled to purchase the dress at $50 as the dresses were invitations to treat rather than offers.

CONTRACT THEORY

Promissory Theories:

• Regards contractual obligations as obligations that have been created between the parties through promises or a related kind of self-imposed obligation, such as an agreement.

• Reflection of parties’ intent.

• Voluntary.

• Consistent with the notion that parties to a contract have the freedom to determine the content of contractual obligations.

Reliance Theories

• Based upon the consequences of a promise; binding if it includes reasonable reliance.

• Breach of contract = failure to reimburse the promisee rather than failure to carry out contract.

Transfer Theories

• Based upon the idea of contracts effecting a transfer of rights.

• When a contract is entered into from the moment of contracting, an existing tangible right is transferred to the other party i.e., the right to performance.

• ‘the transfer of an existing performance right.’

Utilitarian Theories

• Not just ‘the greatest good for the greatest number of people’ rather the ‘good’ elements of a contract include efficiency, distributive justice, special relationships and autonomy.

Efficiency Theories

• This can be achieved when both parties are better off due to a transaction and when entered voluntarily.

• Voluntary and mutually beneficial agreements.

• ‘Efficient breach’ means in some cases it that it may be more efficient for the contract not to be performed.

Distributive Justice Theories

• Promotes a fair division of wealth and power among individual members of society.

• Promotes the welfare of poor segments of society.

Autonomy Theories

• Expanded range of options to individuals.

Rights-based Theories

• The right to compensation for losses suffered.

CHAPER 3(2): FORMATION OF A CONTRACT

THE TERMS OF AGREMMENT:

Modahl v British Athletic Federation Ltd [2002] provided for there to be a contract there must be:

• (a) agreement (offer & acceptance) > (b) consideration > (c) intention to create legal relations.

• Identifiable offer & identifiable acceptance.

• The existence of a contract is objectively determined.

CONDUCT:

• Are the rights and obligations of parties; what the parties are actually doing (their actions).

• Must know this to build an argument (i.e., an offeror presents a salesman with $50).

• ‘Meeting of minds’ = understanding/mutual agreement of parties.

OFFER:

• Is a clear statement of the terms of which an offeror is prepared to be contractually bound; the promise by the offeror to do or refrain from doing something (usually) upon the condition the other party (offeree) agrees to do or refrain from doing something in return.

OFFERS MUST INCLUDE:

• (a) a statement of express (written) or implied terms (partly written & partly oral),

• (b) must be promissory &

• (c) communicated to another person.

THE OBJECTIVE TEST:

• Is it promissory in nature?

• What would a reasonable person think?

STATEMENTS THAT ARE NOT PROMISSORY:

• (a) mere puffery i.e., over-exaggeration/outrageous (no reasonable person would believe it),

• Leonard v Pepsico Ltd (1996).

• (b) mere supply of information i.e., asking the price of water does not mean they’ve promised to buy it &

• Harvey v Facey [1893].

• (c) invitation to treat i.e., bid, advertisement, auctions, eBay; Pharmaceutical Society (GB) v Boots Cash Chemists (Southern) Ltd [1952] 2 QB 795 (this is the actual precedent for the displays of goods in shops) & Fisher v Bell [1961] 1 QB 394.

• Examples include (a) calls for bids (auctions), (b) calls for tenders (tender = the person taking offers i.e., potential house-buyers in Canada have to put in a tender of how much they’re willing to give).

THE FORMATION OF AN OFFER:

Offers must be communicated:

• (a) if the offeror is not directly communicating the offer, it must be a direct representative.

• Carbolic Smoke Ball Co [1893] 1 QB 256: found to be an offer, not an invitation to treat.

Offers with Limitations:

• i.e., no rainchecks, available for first 50 people, only for next week etc.

Cross-offers:

• when negotiating you are counter-offering (which rejects the original offer); this does not form a contract.

THE OFFEREE CAN:

• (a) accept the offer,

• (b) counter-offer (Hyde v Wrench (1840) 49 ER 132),

• (c) request further information - neither acceptance nor rejection,

• (d) reject the offer &

• (e) do nothing - offer eventually lapses.

TERMINATION OF AN OFFER:

• (a) revocation i.e., at any time before acceptance (Payne v Cave (1789) 100 ER 502), unless the offeror has contracted to keep the offer open (Goldsborough Mort & Co Ltd v Quinn (1910) 10 CLR 674),

• (b) rejection;

• (c) lapse of time;

• (d) failure of condition;

• (e) death of a party (depends on who dies);

• (f) change in circumstances &
  (g) incapacity.

WAYS TO REVOKE AN OFFER (REVOCATION):

• (a) rejection terminates an offer

• Express or implied;

• (b) must be communicated &

• (c) by counter-offers.

Lapse of time:

• (a) time limits can be express of implied (a ‘reasonable time’) i.e., Dencio v Zivanovic (1991); Manchester Diocesan Council for Education v Commercial & General Investments Ltd [1970] &

• (b) Failure of a condition: if a condition is not fulfilled i.e., McCaul (Aust) Pty Ltd v Pitt Club Ltd [1959].

Death of a Party:

• (a) offeror dies - notice of death terminates the offer &

• (b) offeree dies

REMEDIES FOR CONTRACT BREACHES:

• Order for specific performance: court order against the breaching party to fulfil one or more specific terms of the contract in question.

• Damages: $$$

• Injunction: court order...