This website uses cookies to ensure you get the best experience on our website. Learn more

Law Notes Contracts 2 Notes

Identifying Express Terms Casebook Summary Notes

Updated Identifying Express Terms Casebook Summary Notes

Contracts 2 Notes

Contracts 2

Approximately 189 pages

Detailed notes (primarily case notes) on the topics of Incorporation of terms and construction, factors vitiating a contract and damages and included are super summaries ideal to take into an open book exam....

The following is a more accessible plain text extract of the PDF sample above, taken from our Contracts 2 Notes. Due to the challenges of extracting text from PDFs, it will have odd formatting:

Case Book Summary (Identifying Express Terms)

Terms and Communication of the Parties

  • Normally terms of a contract will be express (expressly agreed between the parties)

    • These can also be supplemented by implied terms – terms that are implicit in the contract and hence recognized by law

  • Express terms can be found in the communications by which a contract is made (negotiations/documents)`

  • In identifying the terms of a contract, courts attempt to give effect to the intentions of the parties, objectively assessed

Standard Form Contracts (contracts of adhesion) (SFCs)

Standard-form contracting in the electronic age (2002) NYULR 429

  1. Basic issues in SFCs

  1. The Paper Paradigm

    • Standard forms are common to both infrequent (land lease) and frequent transactions (hire car)

    • Hillman cites a number of factors (consumers inability to understand SFCs, comparable terms, un-authoritative agent etc.) which together, after a reasonable cost-benefit analysis often leads to the consumer dispensing with reading the SFC.

    • Additionally there may be pressure by the business’ agent to sign quickly – downplaying the significance of the SFC

  2. Costs and Benefits of Enforcing Standard-Form Contracts

    • Courts generally consider that enforcing SFC terms as appropriate, a clear rule being that all parties should read and understand terms before signing.

    • The economy provide by the SFC allows businesses to best allocate risks between themselves and the consumer and thus minimize the costs of goods or services that business offer

    • Often a competitive industry will lead to similar SFCs – also because junior entrants will follow senior firms

    • If an SFC allocates risks efficiently, renegotiations aren’t required, however the characteristics of SFCs allow firms to exploit consumers by making them accept contracts that inefficiently shift risks to consumers

    • This creates a dilemma for courts because failing to enforce SFC terms may undermine efficient allocation of resources – resulting in a socially inefficient net loss to the business and consumer (higher prices). But on the other hand it may ratify business’ efforts to take unfair advantage of consumers

  3. The Role of Competition

    • Theoretically it is the consumer’s acumen and vigilance that should lead to efficient SFCs. Aggregate decisions of consumers who refuse to transact inefficient SFCs pressure businesses into providing efficient SFC terms

    • And even if most consumers lack the skill and time – even a small percentage of savvy consumers will create incentives for business to make SFCs competitive.

    • But if the number of savvy consumers is too small – businesses don’t find it worthwhile to compete. They may also isolate the savvy consumers (Telstra)

    • Reputation provides another barrier to exploitation, also allowing consumers to protect themselves (search)

    • This may also be insufficient since the market might be managed by short-term players unconcerned with reputation

    • Courts are generally mindful of business reputation and competition and their inability to distinguish exploitation from sensible business practices

  1. Market Failures and Standard Form Contracts

    • Imperfect markets can fail to sufficiently protect consumers because consumers can reach an incorrect conclusion in cost-benefit analysis, social pressures (arranged by businesses) and irrational reaction to exploitative terms

  • ‘Rational’ Market Failures

    • Legal jargon, small print and a general understanding of important terms (price and quantity) and a recognition by the consumer of an inability of the agent to negotiate, business reputation and a belief that courts will strike down unreasonable terms of the SFC are all contributing factors to consumers simply signing SFCs (“free-rider problem”)

  • Social Forces

    • Business induce consumers to sign SFCs quickly without reading, reading can seem confrontational and businesses can also manipulate consumers by making concessions in social exchange which encourage consumers to sign the “boilerplate”.

  • Cognitive Factors

    • Consumers engage in satisficing (relying on partial information sufficient to make them comfortable with their choice),

    • Consumers have difficulty in engaging in a complex cost-benefit analysis of many factors (some people say this is preferred – simple models are always better than complex models [parsimony principle]),

    • Consumers engage in motivated reasoning based on the price and quality which will lead them to believe that the boilerplate is reasonable,

    • Consumers underestimate adverse risks they voluntarily take (safely discounting low probability risky terms in the SFC)

Statements made during negotiations

  • Parties negotiation contracts make many statements relating to the contract – if one is false a party may seek a remedy

    • If the statement was promissory –the appropriate remedy will be a remedy for breach of contract

    • If the statement was a representation – relief would be sought under the law of misrepresentation

  • The first issue is whether or not the term is admissible in court

  • Then the intentions of the parties as to the status of the statement must be considered – here written statements are accorded with considerable significance Equuscorp Pty Ltd v Glengallan Investments Pty Ltd (2004) 219 CLR 165

  • But it is possible for negotiations to have contractual force – relevant factors include: the language use, the relevant expertise of the parties, the importance of the statement, the timing of the statement and the form of the written contract

JJ Savage & Son Pty Ltd v Blakney (1970) 119 CLR 435

Relevant Facts: The respondent (B) contemplated buying a motor boat from the appellant (J). During the course of negotiation B requested J to produce in writing his views on various engine: fuel consumption, estimated speed etc. – the latter of which was 15mph. Relying on J’s advice, B placed a formal order for the boat which was executed. Nothing in the contract stipulated its maximum speed. The boat wasn’t capable...

Buy the full version of these notes or essay plans and more in our Contracts 2 Notes.