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Leon Terrill
Principles of Private Law LAWS1150
Nexus Notes UNSW
Page 1 of 260
Table of Contents
Introduction to Contract Law .......................................................................................................................................... 12
Logistics .................................................................................................................................................................. 12
Essentials ................................................................................................................................................................. 12
Discussion Questions .................................................................................................................................................. 12
Classical Contract Theory ........................................................................................................................................... 12
The Concept of Private Law & the Place of Contract Law Within It ......................................................................... 14
What is Private Law ................................................................................................................................................ 14
The Sources of Private Law .................................................................................................................................... 14
The Law of Obligations .............................................................................................................................................. 15
The Law of Obligations .......................................................................................................................................... 16
Agreement: Offer ............................................................................................................................................................ 18
Agreement ................................................................................................................................................................... 18
Offer ............................................................................................................................................................................ 18
The nature of an offer .............................................................................................................................................. 18
Elements of an offer ................................................................................................................................................ 19
Unilateral and Bilateral Contracts ........................................................................................................................... 20
Revocation of Offers ............................................................................................................................................... 21
Executory/Executed Contracts ................................................................................................................................ 23
Ticket Cases ............................................................................................................................................................ 24
Agreement: Acceptance .................................................................................................................................................. 26
Acceptance .................................................................................................................................................................. 26
Theory ..................................................................................................................................................................... 26
Communication ....................................................................................................................................................... 30
Rejection of Offer ................................................................................................................................................... 31
Implied Conduct ...................................................................................................................................................... 31
Correspondence ........................................................................................................................................................... 32
Counter-offers ......................................................................................................................................................... 32
Unilateral Contracts ................................................................................................................................................ 34
Postal-Acceptance Rule .......................................................................................................................................... 35
Instantaneous Communication ................................................................................................................................ 35
Consideration .................................................................................................................................................................. 37
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Discussion Questions .................................................................................................................................................. 37
Introduction ................................................................................................................................................................. 37
Origins ..................................................................................................................................................................... 38
The Essential Elements ............................................................................................................................................... 38
Bargains and Reliance ............................................................................................................................................. 40
Adequacy of Consideration ......................................................................................................................................... 41
Consideration: Part 2 ................................................................................................................................................... 41
Discussion Questions .................................................................................................................................................. 41
Sufficiency of Consideration ...................................................................................................................................... 42
Past Consideration................................................................................................................................................... 42
The Existing Legal Duty Rule (Performance of Existing Duties) .......................................................................... 44
Practical Benefit ...................................................................................................................................................... 46
Bona Fide Compromise .......................................................................................................................................... 48
The Purpose of Consideration ..................................................................................................................................... 49
Criticism of the Doctrine of Consideration ............................................................................................................. 49
Reform .................................................................................................................................................................... 49
The Function of Consideration ............................................................................................................................... 50
Intention .......................................................................................................................................................................... 51
Discussion Questions .................................................................................................................................................. 51
Presumptions ............................................................................................................................................................... 51
The Objective Approach ......................................................................................................................................... 53
Commercial Transactions ........................................................................................................................................... 54
Presumption of Legal Enforceability ...................................................................................................................... 54
Non-binding Commercial Agreements ................................................................................................................... 54
Letter of Comfort .................................................................................................................................................... 54
Domestic and Social Agreements ............................................................................................................................... 55
Government Agreements ............................................................................................................................................ 56
Preliminary Agreements ............................................................................................................................................. 57
The three categories in Masters v Cameron ............................................................................................................ 58
A “fourth category”? ............................................................................................................................................... 59
Certainty .......................................................................................................................................................................... 60
Discussion Questions .................................................................................................................................................. 60
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Certainty ...................................................................................................................................................................... 60
1. Completeness .......................................................................................................................................................... 61
Severance ................................................................................................................................................................ 62
2. Unclear .................................................................................................................................................................... 64
Implying Objective Standards – Reasonableness ................................................................................................... 64
Agreements to Negotiate ............................................................................................................................................. 68
3. Illusory .................................................................................................................................................................... 71
Privity .............................................................................................................................................................................. 76
Discussion Questions .................................................................................................................................................. 76
Introduction ................................................................................................................................................................. 76
Non-application of the Privity Rule ........................................................................................................................ 79
Circumventing the Privity Rule .................................................................................................................................. 82
Trust ........................................................................................................................................................................ 82
Estoppel ................................................................................................................................................................... 83
Tort .......................................................................................................................................................................... 83
Misleading or Deceptive Conduct ........................................................................................................................... 83
Remedies ..................................................................................................................................................................... 84
Damages .................................................................................................................................................................. 84
Specific Performance .............................................................................................................................................. 84
Statutory Modification ................................................................................................................................................ 85
Reformation ................................................................................................................................................................ 85
Reasons for Abolishing ........................................................................................................................................... 85
Reasons for Retaining ............................................................................................................................................. 85
Questions..................................................................................................................................................................... 86
The Concept of Property ................................................................................................................................................. 88
Discussion Qs .............................................................................................................................................................. 88
Introduction ................................................................................................................................................................. 88
What is Property? ........................................................................................................................................................ 89
The Right to Use or Enjoy ...................................................................................................................................... 90
The Right to Alienate .............................................................................................................................................. 90
The Right to Exclude .............................................................................................................................................. 91
Property Rights and Contractual Rights ...................................................................................................................... 91
Page 4 of 260
Licences: Bare, Contractual or Coupled with an Interest........................................................................................ 92
Discussion Qs .............................................................................................................................................................. 95
Licences and Third Parties ...................................................................................................................................... 96
Problem Question .................................................................................................................................................. 100
Property Rights and the Rights of Persons ................................................................................................................ 100
Problem Question .................................................................................................................................................. 103
Privacy .......................................................................................................................................................................... 104
Discussion Qs ........................................................................................................................................................ 104
Property Rights and Privacy ..................................................................................................................................... 104
Property Rights and Human Rights .......................................................................................................................... 108
Fixtures ......................................................................................................................................................................... 111
Discussion Qs ............................................................................................................................................................ 111
Traditional Classification and Terminology ............................................................................................................. 111
Land or Realty ....................................................................................................................................................... 112
Boundaries of Land ............................................................................................................................................... 112
Chattels or Personalty ........................................................................................................................................... 113
Boundaries btwn Diff Types of Property .................................................................................................................. 113
The boundary btwn land and chattels: Fixtures .................................................................................................... 113
Tenant’s Fixtures ...................................................................................................................................................... 119
Right to remove ..................................................................................................................................................... 119
Problem Q ................................................................................................................................................................. 121
The Possessory Torts: Trespass, Detinue & Conversion .............................................................................................. 122
Chattels ..................................................................................................................................................................... 122
Actual Possession .................................................................................................................................................. 123
Right to Immediate Possession ............................................................................................................................. 123
Right to Future Possession, or Reversionary Interest ........................................................................................... 123
Ownership ............................................................................................................................................................. 123
Bailment ................................................................................................................................................................ 124
Actions in Tort to Protect Proprietary Interests in Chattels ...................................................................................... 125
Trespass ................................................................................................................................................................. 125
Conversion ............................................................................................................................................................ 127
Detinue .................................................................................................................................................................. 128
Page 5 of 260
Negligence ............................................................................................................................................................ 128
Title to Sue Summary ........................................................................................................................................... 129
Overlapping of Remedies.......................................................................................................................................... 129
The jus tertii Defence ............................................................................................................................................ 129
Exception – Perma Dmg to Reversionary Interest ................................................................................................ 131
Self-Help ............................................................................................................................................................... 134
Possession of Land ........................................................................................................................................................ 135
Recovery of Possession of Land ............................................................................................................................... 135
Court Order ........................................................................................................................................................... 135
Self-Help ............................................................................................................................................................... 137
Who is entitled to possession? .................................................................................................................................. 138
Adverse Possession ................................................................................................................................................... 138
Title in Actions to Recover Possession of Land ....................................................................................................... 139
Summary of Possessory Interest ........................................................................................................................... 140
Relativity of Titles .................................................................................................................................................... 140
Relativity of Titles under the Torrens System ...................................................................................................... 142
Assignment of the Interest of a Person Dispossessed by a Squatter ..................................................................... 142
The Nature of Possessory Title ................................................................................................................................. 142
Adverse Possession ....................................................................................................................................................... 144
Discussion Questions ................................................................................................................................................ 144
Limitation of Actions ................................................................................................................................................ 145
How Possessory Title Extinguishes Documentary Title with the Passage of Time .............................................. 145
Length of Limitation Period .................................................................................................................................. 146
Commencement of the Limitation Period ............................................................................................................. 146
The Elements of Adverse Possession .................................................................................................................... 147
Part Parcels Adjacent to Boundaries ..................................................................................................................... 150
Future Interests ...................................................................................................................................................... 150
Equitable Estates ................................................................................................................................................... 151
Adverse Possession by a Co-owner ...................................................................................................................... 152
Successive Adverse Posessors .............................................................................................................................. 152
Stopping Time Running ........................................................................................................................................ 152
Extension of Time ................................................................................................................................................. 152
Page 6 of 260
The Effect of Effluxion of Time ............................................................................................................................... 153
Tenancies .............................................................................................................................................................. 153
Revision .................................................................................................................................................................... 153
Property Transfer .......................................................................................................................................................... 154
Discussion Questions ................................................................................................................................................ 154
Equitable Property .................................................................................................................................................... 154
Acquisition Through Taking Possession ................................................................................................................... 155
Chattels ................................................................................................................................................................. 155
Manufacture or Creation of Objects ...................................................................................................................... 155
Consensual Transactions with Proprietary Interests – Legal and Equitable ............................................................. 155
Sale ........................................................................................................................................................................ 155
Formal Requirements for Contracts for the Sale of Land; Equitable Interests Arising out of Enforceable Contracts
.................................................................................................................................................................................. 157
Damage During the In-Between Period ................................................................................................................ 163
Problem Q ............................................................................................................................................................. 164
Part Performance ........................................................................................................................................................... 165
Discussion Questions ................................................................................................................................................ 165
The Doctrine of Part Performance ............................................................................................................................ 165
The Test for Demonstrating Part Performance ......................................................................................................... 165
The Approaches .................................................................................................................................................... 167
Consequence of Demonstrating Part Performance ................................................................................................... 168
Exceptions to the General Rule ................................................................................................................................. 168
Estoppel......................................................................................................................................................................... 169
Introduction ............................................................................................................................................................... 170
Proprietary Estoppel .................................................................................................................................................. 171
Promissory Estoppel ................................................................................................................................................. 173
Elements .................................................................................................................................................................... 178
Assumption ........................................................................................................................................................... 178
Inducement ............................................................................................................................................................ 178
Detrimental Reliance ............................................................................................................................................. 179
Reasonableness/Unconscionability ....................................................................................................................... 179
Part 2 ............................................................................................................................................................................. 180
Elements ................................................................................................................................................................ 181
Page 7 of 260
Remedy ..................................................................................................................................................................... 182
Agency .......................................................................................................................................................................... 187
The Concept of Agency ............................................................................................................................................ 187
Practical Methodology .............................................................................................................................................. 188
The Sources of an Agent’s Authority........................................................................................................................ 189
Actual Authority ....................................................................................................................................................... 189
Ostensible Authority ................................................................................................................................................. 191
Representation by the principal ............................................................................................................................. 191
Possession of Property for the Purposes of Sale ................................................................................................... 194
Occupancy of a Particular Position ....................................................................................................................... 194
Consequences of Agency .......................................................................................................................................... 196
Problem Questions on Contracts ................................................................................................................................... 196
Parties ........................................................................................................................................................................ 197
Jane – George ................................................................................................................................................................ 197
Offer .......................................................................................................................................................................... 197
Rules ..................................................................................................................................................................... 197
Application ............................................................................................................................................................ 197
Acceptance ................................................................................................................................................................ 197
Rules ..................................................................................................................................................................... 198
Application ............................................................................................................................................................ 198
Consideration ............................................................................................................................................................ 198
Rules ..................................................................................................................................................................... 199
Application ............................................................................................................................................................ 199
Intention .................................................................................................................................................................... 199
Rules ..................................................................................................................................................................... 199
Application ............................................................................................................................................................ 200
Certainty .................................................................................................................................................................... 200
Rules ..................................................................................................................................................................... 200
Application ............................................................................................................................................................ 200
Jane – Eddy ................................................................................................................................................................... 200
Rules ..................................................................................................................................................................... 201
Application ............................................................................................................................................................ 201
Page 8 of 260
Jane – Dora ................................................................................................................................................................... 202
Class Notes ................................................................................................................................................................ 202
Problem Questions on Agency ...................................................................................................................................... 204
Sem 2 2013 Exam ......................................................................................................................................................... 205
Donald ................................................................................................................................................................... 205
Rupert .................................................................................................................................................................... 205
Dorothy ................................................................................................................................................................. 207
Paolo ..................................................................................................................................................................... 208
Li Pty Ltd – Contract Law .................................................................................................................................... 208
Problem Questions on Estoppel .................................................................................................................................... 209
Advise George....................................................................................................................................................... 209
General Comments ........................................................................................................................................................ 211
Problem Questions ........................................................................................................................................................ 213
Possible Issues .......................................................................................................................................................... 213
Contract Law ............................................................................................................................................................. 214
Licences ........................................................................................................................................................................ 215
Property Rights & the Rights of Persons ...................................................................................................................... 218
Privacy .......................................................................................................................................................................... 219
Fixtures ......................................................................................................................................................................... 222
Possession of Goods ..................................................................................................................................................... 226
Bailment .................................................................................................................................................................... 226
Torts .......................................................................................................................................................................... 228
Trespass ................................................................................................................................................................. 228
Conversion ............................................................................................................................................................ 229
Detinue .................................................................................................................................................................. 229
Remedy ................................................................................................................................................................. 230
Recovery of Possession of Land ................................................................................................................................... 232
Adverse Possession ....................................................................................................................................................... 234
Property Transfer .......................................................................................................................................................... 237
Part Performance ........................................................................................................................................................... 239
Estoppel......................................................................................................................................................................... 242
How it Works ............................................................................................................................................................ 242
Page 9 of 260
The elements ............................................................................................................................................................. 242
1. Assumption (by the relying party) .................................................................................................................... 242
2. Inducement ........................................................................................................................................................ 243
3. Detrimental reliance .......................................................................................................................................... 243
4. Supplemented by ............................................................................................................................................... 245
Agency .......................................................................................................................................................................... 249
Go through the 3 authorities...................................................................................................................................... 250
Actual Express Authority ...................................................................................................................................... 250
Actual Implied Authority ...................................................................................................................................... 250
Ostensible Authority ............................................................................................................................................. 251
Consequences of Agency .......................................................................................................................................... 253
Essay Questions ............................................................................................................................................................ 254
S1 2013 ................................................................................................................................................................. 254
S2 2013 ................................................................................................................................................................. 254
Key Words ................................................................................................................................................................ 254
Essay Plans .................................................................................................................................................................... 256
Definitions ............................................................................................................................................................. 256
Clinchers ............................................................................................................................................................... 256
Right to Privacy .................................................................................................................................................... 256
Bailment at Will .................................................................................................................................................... 256
Possession ............................................................................................................................................................. 257
Possession of Land ................................................................................................................................................ 257
Adverse Possession ............................................................................................................................................... 258
Constructive Trust ................................................................................................................................................. 258
Equity v CL ........................................................................................................................................................... 258
Equitable Interests ................................................................................................................................................. 259
Estoppel ................................................................................................................................................................. 259
Page 10 of 260
Page 11 of 260
CONTRACT LAW
1. Agreement: offer
2. Agreement: acceptance
3. Consideration
4. Intention
5. Certainty
6. Privity
Page 12 of 260
Introduction to Contract Law
Logistics
Contact @ [email protected]
Read ‘actively’
Look at judges, how they differ. Not just principles. Criticism of the law + diff perspectives
Essentials
Promisor – Person who makes the promise
Promisee – Person to whom the promise is made
Discussion Questions
1. What is classical contract theory, and what is the philosophy that underlies it? What are some criticisms of
classical contract theory?
2. What is equity? What are its historical origins?
3. What are the sources of private law?
4. What are the main categories of the law of obligations and how are they distinguished? What does Atiyah say
about these distinctions?
Classical Contract Theory
What is classical contract theory, and what is the philosophy that underlies it? What are some criticisms of classical
contract theory?
Mainstream contract theory = neoclassical contract
Within private law, contract law embodied dichotomy btwn individual/community by imagining realm of
private agreement in which individual freedom protected from state coercion
Isolated bargain btwn independent, self-interested individuals
Liability voluntarily assumed by individual through his making of a promise – unlike in tort, where liability
imposed by legal system without regard for the individual’s consent
o Contract doctrines – narrow formation rules / bargain consideration followed logically from these
principles + assured that individual actually consented to a bargained-for exchange
Judicial commentary
o Contractual liability did not arise solely from individual’s choice but from court’s imposition of legal
obligation as a matter of public policy
o Binding bcos serves societal interests
o Courts had to interpret, fill gaps, impose pre-contractual liability, to make contract meaningful + serve
social interests other than individual choice such as fairness
Neoclassical ConLaw balances individualist ideals of classical contract with communal standards of
responsibility to others
Core is principle of ‘freedom of contract’ (distinguishing from tort) but this principle is “tempered both within
and without [contract’s] formal structure by principles, such as reliance and unjust enrichment, that focus on
fairness and the interdependence of parties rather than on parties actual agreements.” (Hillman, “The Crisis in
Modern Contract Theory” (1988) 67 Texas Law Review 103 at 104)
Page 13 of 260
o Courts weight classical values of liberty, privacy and efficiency against values of trust, fairness and
cooperation
In contrast to classical law, neoclassical tempers rigid logic by use of policy analysis, empirical inquiry and
practical reason
o General standards > mechanical rules
o Enough discretion in hard cases to reach just, socially desirable results
o Flexible, neoclassical contract, serves important social goal of supporting/regulating economic
transactions
o 1. Provides framework for parties who engage in business planning helps create legal relations, to
determine content, avoid them altogether, sort out difficulties when planning goes awry
o 2. Provides background set of norms for fair market relations
Market Individualist
Consensus ad idem – will theory
Contract is expression of will of parties; freely entered; voluntary obligations (will theory)
o Should be respected/enforced by courts
o Little intervention + neutrality
o Subjective + objective meeting of the minds
RoL facilitates freedom of parties to create own private law
Contract provides mechanism under which parties to a definite arrangement can regulate their relationship
o Predictable, certainty, convenience otherwise destabilised marketplace
o ‘Contract is the central concept on which commercial law is founded’ (Schmitthoft)
Freedom of contract: parties regarded as self-interested individuals who created own private law thru
agreement individuals should have autonomy to enter into beneficial bargains, courts should facilitiate that
freedom by enforcing bargains individuals choose to make
Criticisms
Against will theory:
o Rights and obligations of contracts do not necessarily represent the will of the parties
o Problems arise from miscommunication or lack of agreement; these cannot be solved by treating the
agreement as will of parties.
o Courts resolve by objectively determining parties’ rights and obligations
CT assumes contracts are fully negotiated btwn parties
o Today most written contracts based on standard form terms generally not negotiable + often not
holistically read/understood by non-drafting party undermines idea that contract represents
consensus (rather imbalance in bargaining power)
Fails to take into account:
o complexities of social behaviour
o distribution of economic power
o inequality of bargaining power
Individual autonomy of contract from state is untrue:
o Courts play a decisive role in enforcement and formation of contracts
o Contract is only “binding” because of the state.
Page 14 of 260
The Concept of Private Law & the Place of Contract Law
Within It
What is Private Law
It’s the law regulating relationships between people
o Exists to assist citizens in disputes that involve private matters
o More specific scope than public law
Public law regulating people and the state
o Within realm of private law
o Acting under their independent legal entity
The Sources of Private Law
Constitution
Common law
o The unwritten law derived from the traditional law of England as developed by judicial precedence,
interpretation, expansion and modification: Dietrich v R (1992) HC
o U don’t need a statute behind it
Equity
o Separate jurisdiction, developed alongside CL, designed to deal with gaps in CL
o That body of principles developed by the Court of Chancery prior to 1873, as modified since by
courts administering that jurisdiction (From Evans)
o While a fix to CL, it has been complex area been trying to fix
o Equity is not just a collection of legal rules or principles
o In many ways it is better understood as a jurisdiction – a jurisdiction in which certain types of claims
will be heard and certain forms of relief granted
o It is its own body of law, own claims, does not just tinker the CL
o 3 situations where modern day lawyer encounters equity in practice
Fiduciary duties
Injunction equitable remedy
Specific performance
Equitable estoppel cause of action
Trust (CL did not recognise)
o Equity in popular usage is the quality of fairness
Statute
o Plays a significant role in the field of private law
Customary law
Examples
Contract law – Governs the rights and obligations of those entering into contracts
Tort law – Governs rights, obligations, remedies provided to someone who has been wronged by another
individual
Property law – Governs forms of property ownership, transfer and tenant issues
Succession law – governs the transfer of an estate btwn parties
Family law – governs family and domestic related issues
Page 15 of 260
The Law of Obligations
What are the main categories of the law of obligations and how are they distinguished? What does Atiyah say about
these distinctions?\
The Law of Obligations encapsulates:
Tort + contract + unjust enrich
(Property is also under umbrella of private but not law of obligations)
Contracts, Promises and the Law of Obligation
PS Atiyah, “Contracts, Promises and the Law of Obligations” (1978) 94 Law Quarterly Review 193
The Distinction btwn Voluntary and Imposed Obligations
Conceptual framework governing law of obligations
o Distinction is btwn obligations which are voluntarily assumed (contract), obligations imposed by law
(tort)
o Law of quasi-contract – law of restitution
Arose from positive rules of law (not voluntary acts of the will)
Thus takes its place alongside tort law along great divide, contract is alone on other shore
Contractual obligations treated as being exclusively about promises, agreements, intentions, acts of will
When contract is made, binds each party to performance, to a liability to pay damages in lieu
Whole model suffused with idea that fundamental purpose of contract law is to give effect – to intentions of
the parties
Their free choice which makes contract binding, and determines its interpretation, and its result in event of
breach
Law of contract consists of power-conferring rules
Those who wish to create legal obligations have only to comply with simple set of rules and result will be
recognised by law
Role of free choice
o Courts may impose solutions for interests of justice
Intentions rather than actions
Classical model assumes contract law is about what parties fundamentally intend, not about what they do
o Manifestation of intention, not actual intention that matters most
o Classical contract theory assumes that contractual obligations are created by intention of parties and
not by actions
o Concerned with executor arrangements, with forward-looking planning
o They are created first, performed thereafter – contractual obligations diff from rest of great divide
Contract as a thing
Contract is a thing, which has some kind of objective existence prior to any performance or any act of the
parties (tort is a not a thing)
o Thing which is ‘made’ ‘broken’ ‘discharged’
o Contract signifies both legal relations + piece of paper
o Within this parameter, concepts such as fairness, justice, reasonable have far less room to operate than
with diffuse concepts such as tort/quasi-contract
o Easier to see relationship within defined parameters
Page 16 of 260
The deterrent role played by the courts
Axiomatic that in principle, judicial process serves 2 important social ends
1. Threat of penalties or promise of rewards to encourage citizenry to comply with socially desired standards
of behaviour
2. Provide machinery for settlement of disputes by peaceful/fair means
Classical model presupposes first of these 2 goals is primary function of the courts in dealing with contractual
litigation
Purpose of [198] contract law is to encourage ppl to pay debts, keep promises, generally be truthful in
dealings with each other
Other parts of law of obligations more likely to be dominated by dispute-settlement functions of the courts,
rather than by deterrent or horatory functions
o Modern law of torts – importance of deterrent function has declined
o Now primarily involved with compensation, not deterring future defendants
A single model of contract
There is one model, useful to think still in terms of general principles of contract
Based on economic free market
Co-operate with others in seeking their goals, not let down their fellows
Classical model so unified, embodies it with power
Founded upon ‘broad and general principles of universal law’ – Addison in Treatise on Contracts 1847
o Adaptable, founded upon great/fundamental principles of right/wrong
What does Atiyah argue is mistaken about this approach to distinguishing tort/contract?
In Tort - restoring to position they were in b4 the tort $150 vase
o Standards that all people must comply with
In Contract – remedy position u would be had been not for the breach $500 vase
o A set of ‘power-conferring rules’
Meeting of minds, taken on an obligation, you should be held to that
2 step model of contract – formation / execution
In practice, they all overlap
We rely on externally imposed norms
The Law of Obligations
The law of obligations owed by individuals to each other (relationship w/ Tort, Restitution, Equity and Statute)
Tort Law
The duty is imposed by law (in contract obligation is self-imposed)
Contractual context eg. false statements induce party to contract – tort of deceit/negligence – if promisor
careless in believing truth of statement
Concurrent liability in torts/contracts exists if one party had contractual obligation + owed DoC
o No duplication of dmgs, but choice
Restitution
Obligation to restore unjust gains
Recover sum for goods/services
Page 17 of 260
Equity
System of doctrines/remedies developed as means of remedying defects in CL
Equitable estoppel creates rights where promises/representations have been relied upon
Fiduciary obligations these are owed in situations where one person (fiduciary) undertakes to act in
interests of a second person (principal or beneficiary)
Obligations of confidence duty arises in contractual negotiations where confidential info is disclosed
Statutory Obligations
Statutory obligations are connected with contract
Trade Practices Act 1974 (Cth)
Fair Trading Act
Sale of Goods Act
o Deal with aspects of transactions such as implied terms, misleading/deceptive conduct &
unconscionable conduct
Page 18 of 260
Agreement: Offer
There are four essential elements necessary for contract formation: agreement, consideration, certainty and
intention to create legal relations
Agreement
NB: the rules of offer and acceptance are merely “an aid to analysis” (Greig and Davis, The Law of Contract, 1987,
p246) – they sometimes prove inconclusive or artificial – a contract can be made without an identifiable offer and
acceptance, provided the parties have manifested their mutual assent
The “acid test” according to Cooke J in Meates v Attorney-General [1983] NZLR 308, 377 is ‘whether, viewed as a
whole and objectively from the point of view of reasonable persons on both sides, the dealings show a concluded
bargain.”
Heydon JA concluded at 179 in Brambles Holdings Ltd v Bathurst City Council [2001] NSWCA 61 that in
circumstances where the traditional approach cannot be applied it is relevant to ask:
Whether in all the circumstances an agreement can be inferred
Whether mutual assent has been manifested and
Whether a reasonable person in the position of each of the parties would think there was a concluded bargain
Court will examine communication btwn them + other conduct: Empirnall Holdings Pty Ltd v Machon Paull Partners
Pty Ltd (1988)
If based on facts, objective bystander would consider concluded bargain reached, agreement satisfied
o This is ‘global’ approach to contractual analysis
Consistent with global approach, ‘not necessary…to identify either a precise offer or a precise acceptance, nor
a precise time at which an offer or acceptance could be identified’: Ormwave Pty Ltd v Smith [2007]
Offer
The nature of an offer
An offer is the expression to another of a willingness to be legally bound by the stated terms: Australian Woollen Mills
Pty Ltd v Commonwealth (1954)
An offer is a communication, having sufficient definiteness to eliminate the need for further negotiation, and
creating the impression of manifest intent to enter into a K.
Conveys to other party, that you are willing to be bound by acceptance
Proposal only amounts to an offer if person making it indicates acceptance is invited + will conclude the
agreement btwn the parties
In Brambles Holdings Ltd v Bathurst City Council, Heydon JA suggested in obiter that an offer must take the
form of a proposal for consideration which gives the offeree an opportunity to choose btwn acceptance and
rejection: (2001) 53 NSWLR 153, 171
On this view, a communication which ‘uses the language of command’ and ‘peremptorily requests’ the other
party to adopt a particular course of action may not be regarded an offer
Page 19 of 260
In determining whether offer has been made, crucial issue is whether it would appear to a reasonable person in
the position of the offeree that an offer was intended, and that a binding agreement would be made upon
acceptance
Does not matter subjective intent, court determines intention objectively: Carlill
Elements of an offer
A valid offer:
Must be communicated by the offeror to the offeree
May be made to a particular person, a group or persons, or to the entire world
Must be clear and unequivocal
Must be distinguished from ‘mere puffs’, a request for further information and ‘invitations to treat’
Carlill v Carbolic Smoke Ball Co [183] 1 QB 256
FACTS:
D was manufacturer of product called Smoke Ball. Advertisement in newspaper that a reward will be paid to
any person who contracts influenza after having used the ball 3 times daily for 2 weeks
Carlill had satisfied conditions, thus accepted offer
£100 pound reward paid to any person who contracted a cold after having used the device, in accordance with
directions supplied
ISSUE
Whether the plaintiff had supplied any consideration, which enabled her to enforce the defendant’s promise
o Established ads can be an offer
o Notification of acceptance is not always necessary
o As unilateral – acceptance occurs at time of performance (also constitutes consideration)
Lindley LJ at [261]
‘distinct promise expressed in language which is perfectly unmistakable’
1. First question is whether this was intended to be a promise or whether it was a mere puff which meant
nothing
o Deposit to aid sincerity
o Court held statement relating to bank deposit made it clear that a promise was intended at 261-2, 268,
273-4.
o Court construed ad objectively, according to what ordinary person reading docu would think was
intended
2. Argued it was contract with whole world, no offer was made to any particular person
o It was an offer to the whole world, not a contract
o Ads are offers to anybody who performs the conditions, and those who perform accept the offer:
Williams v Carwardine (1833) 5 C&P 566
3. No notification of acceptance
o Contended not binding
o An offer that calls for performance of certain conditions may be accepted by performance of those
conditions. UNILATERAL CONRACT.
o Offer that calls for performance of particular conditions may accepted by performance of those
conditions
Page 20 of 260
4. Ad is so vague cannot really construe as promise. Agreement was uncertain (does not stipulate period
within which disease must be contracted).
o Reasonable construction made on ad, which made it sufficiently certain
o Vagueness of language shews legal promise never intended
o Paid to any person who contracts the increasing epidemic after using 3x daily for 2 weeks
o When are they to be used?
o Construe construction against person who has made offer
o Prefers meaning ‘reward is offered to any person who contracts the epidemic , or colds or other
diseases caused’
5. Did not supply consideration for D’s promise
o Use of smoke ball constituted benefit to defendant and detriment to plaintiff – hence consideration.
Unilateral contract – one in which offeree accepts the offer by performing his/her side of the bargain
Offer is accepted by performing an act, and the performance of that act is all that the contract requires of the
offeree
o Accordingly, by time the contract is formed, offeree has alrdy performed all his/her obligations
o In this case, P accepted offer by using instructions in accordance with instructions.
When does a proposal or suggestion become an offer?
An offer is ineffective until it is communicated by the offeror to the offeree. If the offeree is unaware of the offer
then it would be impossible to accept it
How is an offer distinguished from an invitation to treat?
An invitation by one party to commence negotiations, which may or may not lead to an offer
The person that responds to the invitation to treat is the one making the offer and this can be
accepted/rejected
Difference btwn an offer and an ItT depends upon the objective intention of the parties
Display of goods for sale
Goods displayed in shops for sale are invitations to treat, notwithstanding that a price tag is attached
Pharmaceutical Society of Great British v Boots Cash Chemists (Southern) Ltd [1953]
Self-service pharmacy
Issue of whether they were offering the medicines or just inviting them to buy
Courts the drugs were an ItT and it is purchaser who makes the offer and the seller is the one who
accepts the offer
Customer is able to change their mind after picking up a product
Consideration
o An act for an act, no promises
o Pay money, get goods, instantaneous thing
Unilateral and Bilateral Contracts
What is a ‘unilateral contract’? What is its opposite or counterpart?
Bilateral = each party undertakes to do or to refrain from doing something. Mutual promises.
Unilateral = party undertakes to do or refrain from doing something if the other party does or refrains from doing so
(there is no obligation other party to do or refrain from doing anything) eg. offers of reward
Page 21 of 260
Mobil Oil Australia v Wellcome International (1998) 81 FCR 475 FCA
A unilateral contract is one in which the act of acceptance of the offer is also an executed consideration
for the promise offered
o In bilateral, both obliged to do something
Act of acceptance, once completed by offeree, leaves contract executor only on the part of the offeror
Nine-for-six promise was offer of a reward (9 yrs free tenure) in return for an act (attaining of >90% in
Circle of Excellence judging over six yrs from 1992-97)
The difference
Unilateral – only one party bound by contract to promise at point of formation, other party enters only after
fulfilling the act
Bilateral – both parties duties/rights on either side
Revocation of Offers
Lapse of time
An offer remains open until offeree accepts it or it lapses
o After lapsing, it no longer legally exists and offeree can no longer accept it
If offeror has specified a date/time that offer will lapse, once this has passed, offer ends and offeree is unable
to accept it to form an agreement
If not date/time specified, offer will lapse after a ‘reasonable’ time
o What is reasonable depends on the circumstances
o Objective test what is ‘reasonable’
o Ramsgate Victoria Hotel Co Ltd v Motefiore (1866)
P was buying shares and waited for 5 mins for price to drop
Court held offer had lapsed
Telina Developments Pty Ltd v Stay Enterprises Pty Ltd (1984)
Held in calculating reasonable time, needed to look at
o Circumstances at time of offer
o Foreseeable dangers to circumstances
o What actually happened and how circumstances changed
Termination of an offer
An offer can be withdrawn at any time before acceptance: Goldsbrough Mort & Co Ltd v Quinn (1910) 10 CLR 674
Goldsbrough Mort & Co Ltd v Quinn (1910) 10 CLR 674
o Grantor gave option holder option to purchase certain land at a specified price at any time within a
week of the agreement in return for sum of 5 shillings
o Grantor’s attempt to repudiate will be held to be ineffective
o Chris exercised the option within the specified period and should be able to force grantor for SP, just
like how in Goldsborough was able to force grantor to sell the land as agreed.
o Griffith CJ and O’Connor J regarded an option to purchase a property as a contract for the sale of that
property, conditional upon the option being exercised within the specified period (678-9, 685)
o Treat agreement as conditional sale, which enforceable by SP once condition satisfied.
The law does not enforce every promise
Page 22 of 260
Offer was kept open with just 5 shillings, bcos consideration does not need to be equal, it just needs to be
sufficient
Goldsbrough were compelling for specific performance of land
Question of contract for sale of land
Was there 2 contracts or one
Quinn argued that yes I have breached an agreement. withdrew offer, meaning they weren’t able to accept,
thus no ever sale of land, no options. They can sue of dmgs, but still sale of land
All three of the judges found contract was specifically enforceable.
Could get sale of land, enforceable
To be a valid withdrawal of offer, there needs to be actual communication of the withdrawal to the offeree.
Revocation is ineffective until communicated to offeree: Bryne & Co v Leon Van Tien Hoven & Co (1988)
Mobil Oil Australia v Wellcome International [1998] FCA 205
FACTS:
Mobil represented to dealers that any dealer who performed at set level would be given franchise at no further
cost for 9 yrs. Incentive scheme. 1994, before 6 years is up, Mobil discontinued scheme and dealers alleged
breach of contract.
ISSUE: was there an offer for a unilateral contract? did his speech amount to it
TJ held once offer made, requiring performance as act of acceptance, offeror could not revoke once offeree
has embarked upon acceptance. Full Court disagreed.
HELD:
Offer – Mobil has not made offer to franchisees – uncertain and vague terms of reward meant there was no
certainty and scheme was merely in developmental stage his speech not a legally enforceable offer of a
promise
o Given qualified nature/context of General Manger’s statement, could not reasonably said to be
misleading or deceptive conduct under s52 of Trade Practices Act.
o If Mobil did not make a contractual offer, it did not make an ancillary promise not to revoke the offer
once franchisees embarked upon performance of the act of acceptance.
Mobil has not made an offer to the franchisees – the uncertain and vague terms of the reward
meant that there was no certainty and the scheme was merely in a developmental stage.
o Conduct of Mobil was not sufficiently specific and unqualified to attract application of equitable
estoppel, and none of the franchisees established detriment proportional to the relief they sought.
o Held: “We do not accept it to be a universal principle that it would be unjust for an offeror to revoke
an offer once the offeree has embarked upon performance of an act which is both the sought act of
acceptance of offer & executed consideration”.
o Full Court
This proposition is usually stated as if its truth were self-evident and universal
We do not think that it is either
The respective positions of offeror and offeree vary greatly from the case of one unilateral
contract to another
Factors
o Ambiguity in acceptance
o Beneficial for both parties
o Onerous obligation, that Mobil would have been required to undertake
In the circumstances of a particular case
o It may be appropriate to find that the offeror has entered into an implied
ancillary contract not to revoke
Page 23 of 260
o Or that the offeror is estopped
Unilateral contracts and revocation – no universal rule with regards to revocation of unilateral. Franchisees
did not suffer a detriment by improving own performance, there no real consideration.
Estoppel – necessary that D encouraged an assumption that a particular legal relationship would arise. No
element of assumption
Although in some cases there may be an ‘implied ancillary unilateral contract’ in which the ‘offeror promises
not to revoke once the offeree’ commences performance, that is not the same as saying that the original offer
cannot be revoked - and there is no ‘universal proposition that an offeror is not at liberty to revoke the offer
once the offeree ‘commences’ or ‘embarks upon’ performance of the sought act of acceptance …'
o Basically, they can revoke if they want, no rules saying cannot once started
Indirect communication may suffice
The offeror does not have to specifically communicate the revocation. It is sufficient if the offeree learns of the
revocation from a third party where a reasonable person would treat the communication from a 3rd party seriously
Dickinson v Dodds (1876)
FACTS:
Agreed to sell farm to Dickenson, however, Dickenson heard the day before the offer was due to expire that
Dodds had agreed to sell the farm to another party. Dickenson tried to submit an acceptance
Courts found that this form of revocation will suffice.
There does not need to be an express or actual withdrawal of the offer – 3rd party communication suffices
Options
A form of offer which also contains a promise not to withdraw it for a certain time.
The crucial feature of an option is that the offeree must have provided a consideration for the benefit of being given
the exclusive right to accept for a certain period. This consideration usually consists of a nominal sum of money, for
example, $1 = i.e. an exchange of promises, giving the money is the performance.
Offeror may revoke offer at any time before it is accepted. Even if offeror promises to keep offer open for a time:
Routledge v Grant (1828)
However, if offeree provides consideration – eg. paying money – for offeror to keep offer open, this arrangement
becomes one under which offeree is granted an option.
Seller who fails to keep offer open for agreed period and sells to another party will be in breach of contractual
obligation
Executory/Executed Contracts
Executory – Where all parties have done exchange of promises.
Executed – Where a party has performed their promise.
Bilateral contract formed when parties exchange promises. Consideration is regarded as executory.
Unilateral, no exchange of promises, obligation to pay arises only if B carries out specified acts. Consideration for A’s
promise is not executory bcos B has not promised to perform.
All about act or forbearance
Page 24 of 260
Ticket Cases
Why can it be difficult to establish when an offer has been made in ticket cases?
A ticket may be an offer but is not evidence of a contract.
In MacRobertson Miller Airline Services v Commissioner Of State Taxation (WA) (1975) (see case summary
above) Stephens J ruled that in relation to the formation of contracts in ticket cases, the ticket is considered to
be the offer. The passenger accepted the offer on the terms in the ticket either by conduct (boarding the plane)
or by not returning the ticket after having a reasonable opportunity to read the terms.
Automatic vending machines:
o The presence of the machine ready to accept the money constitutes the offer, and the passenger
accepts the offer by inserting coins.
o After this point, it is too late for terms to be introduced to govern the transaction.
o Any terms appearing on the ticket issued by the machine that were not drawn to the passenger’s
attention beforehand could not be regarded as forming part of the contract.
MacRobertson Miller Airline Services v Commissioner of State Taxation (WA) (1975)
Process
Passenger enquiries + told fare + availability
Ticket issued, pay paid fare
Airline issued ticket (inc condition saying we may not fly) agreement here, if contract formed before this
point)
Passenger turns up and presents ticket
Airline offers a seat
Passenger gets on plane
FACTS:
Taxation department in WA trying to levy tax on airline tickets. Did they have to pay tax on ticket, that
depended on whether the ticket was an agreement.
A passenger bought a ticket from an airline company.
A condition printed on the ticket provided that the airline reserved the right to abandon the flight at any stage
and that the airline was under no liability other than providing a refund.
HELD:
Three High Court judges used entirely different reasoning concerning offer and acceptance in such an
everyday transaction as buying an airline ticket
o Ultimately held that an airline ticket is NOT a contract; at best it is a voucher.
Barwick CJ: The airline does not by issuing the ticket offer to assume any obligation (as the terms of the ticket
assume). The exemption occupies the entire area of possible obligation leaving no room for any contract of
carriage. The airline accepts no obligation until the passenger is given a seat on the aeroplane hence the ticket
is not subject to the provisions of the Stamp Act 1921 WA.
Stephen J: Ticket constitutes only an offer and not an agreement subject to Stamp Duty; therefore there is no
completed agreement.
o Acceptance is by conduct of the passenger. Paying for the ticket is not yet acceptance, bcos conditions
haven’t been read yet
o Not immediately accepted, bcos passenger has to have opportunity to read conditions and reject them
o Or when reasonable time elapses, and not rejecting the offer.
Page 25 of 260
Jacobs J: adopted complex interpretation involving 2 contracts (in neither case however does the ticket
constitute an agreement making it liable to stamp duty):
o Ticket was an offer to be accepted or rejected at some later time by the passenger
o Carriers offer is accepted by passenger accepting the ticket and paying the price, forming an
executory contract between carrier and purchaser.
o Ticket also constitutes an offer of carriage to the proposed passenger capable of acceptance by
presentation of ticket.
Stephen J from [136]
Concerns with mishaps occurring during transportation, with the effect, if any, which conditions, sought to be
imposed upon the passenger by the ticket issued to him, may have upon his rights against the carrier
Central Q of whether or not conditions on ticket have been incorporated as terms of contract
o Precise time at which carrier’s offer is accepted is relevant here
In absence of particular conduct on part of passenger, acceptance of offer which a carrier makes when a ticket
is issued does not occur immediately upon its receipt by the passenger; whole concept of a passenger’s
acceptance of ticket conditions and of the need adequately to draw those conditions to his attention (Balmain
New Ferry Co Ltd v Robertson (1906) 4 CLR 379) is dependent upon this
At [498]
An offer of a promise to ‘find a way’ to ‘extend [unspecified period]’ a dealer’s tenure if the dealer
‘consistently [over some undefined period]’ achieved 90% or better in Circle of Excellence judgings is
simply too vague and uncertain to be capable of giving rise to contractual obligation
Persons who did not attend Convention – impossible to construe what they heard/saw as an offer of a
nine-for-six promise
Gibson v Manchester City Council (1979) HofL
FACTS:
1970, council wrote a letter to tenants, we are selling our houses and you are eligible to apply – home
ownership scheme
Nov 1970, Gibson wrote back, expressing interest, asked how much?
10th Feb 1971, this is the price, here is the process
5th Mar 1971, Gibson wrote back, on application form, price was blank, saying the path needs fixing, can you
reduce the price
12 Mar 1971, Council said no, price takes into account
18 Mar 1971, carry on per my application, as per the price you offered
No more correspondence, change in membership of Council. Want to maintain houses as public houses. Only
want to sell houses if contractually obliged to. Lots of people at different stages, had there been a concluded
bargain here
Lord Diplock took the conventional approach, said no offer was accepted, no reference to any agreement in
any of the documents
o Lord Denning took the unconventional approach
Page 26 of 260
Agreement: Acceptance
Acceptance
Communication to the offeror of an unqualified, unconditional assent to the terms of the offer, either expressly or
implied.
Unilateral Contracts
Notice of performance is notice of acceptance: Carlill v Carbolic Smokeball Co [1983]
Bilateral Contracts
The acceptance must correspond with an offer: Evans (1984) and Clarke (1927)
RULES
1. Must be communicated by the offeree
2. Must be made in response to an offer
o Act done in ignorance of the offer cannot be accepted
3. Must be made while offer is still on force
4. Must correspond with the offer
5. May be express or implied from conduct
Theory
Issue: whether acceptance must result from actual consensus between parties (meeting of minds).
With respect to offer and acceptance, do we look to the objective or subjective intention of the parties?
We look to the objective.
Subjective theory: no contract is formed unless there was real consensus between parties.
o Coupled with principle of estoppel: person conducts herself in such a way that a reasonable person
would believe that she was assenting to terms of contract
o Not that different from objective theory
Objective theory: external manifestations of consent, disregarding offeree’s actual state of mind.
Smith v Hughes. Blackburn J:
o If, whatever a man’s real intention may be, he so conducts himself that a reasonable man would
believe that he was assenting to the terms proposed by the other party, and that other party upon that
belief enters into the contract with him, the man thus conducting himself would be equally bound as if
he had intended to agree to the other’s terms.
Consciousness of the offer
The offer must be present in the mind of the acceptor when the acceptance occurs
o In Clarke, was not responding to offer
For bilateral contracts, very nature of acts of offer/acceptance = contract
For unilateral contract, not always clear whether acts presented as acceptance of offer were done in response
to offer or for independent reason
R v Clarke (1927)
FACTS:
Page 27 of 260
£1000 reward for information regarding murder of two police officers. Clarke and Treffene arrested and
charged. Clarke gave statement to release himself and arrest Coulter, and gave evidence to convict them. Tried
to claim reward, but refused because Clarke did not make statement/give evidence with view of claiming
reward, but to clear himself of murder. Consideration of reward not until after men were convicted.
o Provided information but under different circumstances
In giving info, acting on or in pursuance to clear himself from false charge of murder –
specific crim charge against himself, not general request by community for info
‘Not acting bcos he was asked to do so’
CJ at [232] held that ‘Clarke never accepted or intended to accept the offer in the
proclamation’ and ‘without such intention…there was neither “acceptance” nor
“performance” and therefore there was no contract.
o TJ found he had not acted on faith or in reliance on offer, or with any intention of entering into
contract, but acted to save himself from charge of murder
HELD:
Though Clarke performed, he did not accept the contract
Issacs ACJ at [231]
o ‘the controlling principle, then, is that to establish the consensus without which no true contract can
exist, acceptance is as essential as offer, even in a case of the present case where the same act is at
once sufficient for both acceptance and performance. But acceptance and performance of
condition…involve that the person accepting and performing must act on the offer’
o Must distinguish btwn instances where precisely same act done with reference to an offer against
‘reference to a totally distinct object’ would not be such performance
Offer of $100 to swim 100 yards in harbour, swimming to save life after accidently thrown
overboard
Higgins at [241]
o In Carlill, the P bought on the faith of the advertisement
o Clarke did not act on the faith of, in reliance upon the proclamation
o He did it with a different intention
Starke J at [244]
o The true principle applicable to this type of case is that unless person performs conditions of the
offer, acting upon its faith or in reliance upon it, he does not accept the offer and the offeror is not
bound to him
o Prima facie, any person who knows of offer and performs its conditions accepts it
o Statements or conduct of party himself uncommunicated to the other party may supply whether they
were induced to act
o Inference of fact, whether one who has offer before him, acts as one would naturally be induced to
act, and is deemed to have acted on the faith or in reliance upon the offer
o Ordinarily, law judges intention by outward expression
o The statements or conduct of the party himself uncommunicated to the other party, or circumstances
of case supply this.
o When offeror dispensed with any prev communications to himself of the acceptance of the offer, law
is deprived of element in judging intention and performance of conditions not conclusive for they
may have been performing by one ‘who never intended to accept it’
o Hence the statements/conduct of the party himself uncommunicated to the other party are admissible
to show the circumstances under which an act, seemingly within the terms of the offer, was done and
the inducement which [245] led to the act
o In the present case the statements himself satisfied that did not act on faith/reliance
RATIO:
Performance of requested act will not give rise to unilateral contract if the evidence establishes that the offeree
was not in fact acting on faith of the offer.
Subjective method: looked at actual intentions over apparent ones.
Objective: reasonable bystander, what has been communicated to the offeror
Gibson v Manchester City Council (1978)
Need to look at the correspondence and conduct as a whole on material terms
Page 28 of 260
Global approach: look at everything to decide on the existence of a binding contract
Butter Machine v Ex-Cell-O Corp (England) Ltd (1979)
Standard form of quotation
Variation Clause “ these terms will prevail over the terms of the buyer”, “subject to our terms and conditions”
Does agreement always require offer and acceptance? If not, what is the test?
Courts do not always rely on offer / acceptance theories
o Identification of offer and acceptance conventional approach to establishing agreement of contract
formation
o A manifestation of mutual assent may be made even though neither offer nor acceptance are identified and
even though moment of formation cannot be determined.
o Branir Pty Ltd v Owston Nominees (No 2) Pty Ltd: Full Court of the Federal Court – The essential question
in such cases is whether the parties’ conduct, including what was said and not said and including the evident
commercial aims and expectations of the parties, reveals an understanding or agreement or, as sometimes
expressed, a manifestation of mutual assent, which bespeaks an intention to be legally bound to the essential
elements of a contract.
Brambles Holdings v Bathurst City Council (2001) 53 NSWLR 153
FACTS:
Land owned by council, wanted someone to manage the waste facility. Engaged Brambles, they would charge
customers a fee for disposing of waste, Council set the rate.
o 1982 Contract began
o 1985 began accepting liquid waste
o 1989 Contract expires, began negotiating a new contract
o 12 July 1990 New contract reached, confusion over new contract contents
o 19th September 1991 Council wrote a letter, proposing new arrangement for liquid waste, new fee
structure.
o The council instructed Brambles to increase its fees to 1.3c from 1.1c/L, then an additional cent every
quarter, up to a limit of 6c. Brambles was unwilling to do so, without further remuneration beyond
their 1c share. However, Brambles adopted the pricing approach, retained increased fees for
themselves. The Bathurst City Council claimed against Brambles for the extra income, saying
contractually obliged to give us that money.
ISSUES:
Heydon JA
o The second relevant principle is that post-contractual conduct is admissible on the question of whether
a contract was formed
3 Issues
Whether the 19 Sept 1991 letter was an offer
Ipp JA agree with Heydon that 19 Sept 1991 was treated as contractual offer
Heydon
o Letter was not an offer because it ‘uses the language of command’
o On other hand, letter is less peremptory in relation to keeping of records, and issuing of dockets
Page 29 of 260
o ‘[the argument that an offer, once rejected, can no longer be accepted depends] heavily on the view
that offer and acceptance analysis must invariably be employed in reaching decisions about the
formation of contracts’
o However…
o What then is the test for agreement in the absence of offer/acceptance?
o The Acid Test
o If offer/acceptance analysis is not always necessary/sufficient
o Principles such as general principle that a rejection of an offer brings it to an end cannot be universal
o If they wanted to retain the whole of the higher fees, ‘it was incumbent on it to inform the Council’
Had Brambles expressly accepted the proposal contained in the 19 Sept 1991 letter?
o No not express
o But implied acceptance
Whether it had been rejected by 3 Oct 1991 letter
Brambles reply was a rejection – Ipp JA held it was not rejection but part of negotiation.
Ipp JA
o Question of whether rejection involves a matter of construction: Quadling v Robinson
o Read in context/whole
o Letter expressed dissatisfaction with offer of 11 Sept 1991 and set out A’s argument for higher fees,
but did not amount to a rejection. The A was attempting to create a platform for further negotiation
while leaving the offer of 11 Sept 1991 open for acceptance.
o It was in the form of an inquiry ‘there was nothing specific by way of offer or rejection’
o Offer is not knocked off the table, adopts the synthesis approach
Whether Brambles through their conduct had accepted the offer
Brambles took advantage of commercial benefits being offered by Council knowing the terms. This would
lead reasonable bystander to conclude that Brambles was assenting to Council’s conditions.
Fact A charged higher fees is conclusive evidence it agreed to conditions.
A accepted benefits proposed, namely, charging of higher fees using the Council’s land
Those benefits could not be severed from obligations proposed
By accepting those benefits, accepted the Councils offer.
HELD:
Contract was binding/enforceable
Majority approach was more orthodox approach, the Ipp approach, as Mason agrees
Main ratio: acceptance by conduct
Limits of “offer and acceptance” theory.
o Although we know the rules there are still a number of cases where the conventional offer and acceptance has
not been required. Australia has followed America in recognising that :
o ‘A manifestation of mutual assent may be made even though neither the offer nor acceptance can be identified
and even though the moment of formation cannot be determined.’ (Restatement of Contracts)
o Brambles Holdings Ltd v Bathurst City Council (2001)
o Although the offer and acceptance formulation is a useful tool in most circumstances and is the
conventional approach ‘ it is neither sufficient to explain all cases nor necessary to explain all cases’.
Haydon JA
Page 30 of 260
Communication
Does acceptance always need to be communicated? What are the ways in which acceptance can be communicated?
Can silence amount to acceptance?
General rule is that offeree must communicate acceptance of offer to offeror, and agreement not complete until such
communication is effected: Powell v Lee (1908) LT 284
This notification is required bcos it establishes minds of two parties have come together and formed a
consensus
However, special rules can apply depending on method of communicating the acceptance to the offeror – dispense
with the need for actual communication
1. Method of acceptance is specifically stipulated
2. Treat doing of an act as effective acceptance – unilateral contracts
3. Postal exception rule
Method of acceptance stipulated by offeror
Offeror may stipulate how acceptance should occur. Eg. can accept by performing the terms of the offer
requirement for communication acceptance is impliedly waived
Silence as Communication
Silence does not generally constitute acceptance of an offer: Felthouse v Bindley (1862)
Felthouse v Bindley (1862)
Uncle Felthouse cabled nephew saying he will purchase his horse and consider it sold if he hears no reply
o Nephew writes to uncle, no more than £30 30s’
o Uncle is like na, let’s compromise n meet halfway. In a written offer ‘if I hear no more about him, I
consider the horse mine at £30 15s’.
o Nephew instructed auctioneer, Bindley not to sell. He mistakenly does. Felthouse sues for conversion,
saying u sold my horse.
o Felthouse needed to demonstrate he owned horse at time of sale, thus needed to prove there was a
contract btwn himself/nephew for sale of horse
Statute of Frauds – if contract in relation to sale of land, must be in writing
Court affirmed that an offeror cannot compel an offeree to take positive steps to reject an offer by stating that
silence will amount to acceptance
o There was no communication of acceptance before the sale, thus nephew not bound to sell horse
o Willes J
o On that date the auctioneer was told by the nephew that the horse had already been sold and it was
therefore clear that 'the nephew in his own mind intended his uncle to have the horse at the price
which he (the uncle) had named'. But this intention had not been communicated to his uncle and he
had done nothing to bind himself. As a result, at this time nothing had been done to 'vest the property
in the horse in the plaintiff' at the time the horse was sold.
Consideration
o Promise to pay
o Promise to transfer ownership of horse
Duty to communicate rejection of offer
There are some circumstances where court will imply silence as acceptance: Empirnall Holdings Pty Ltd v Machon
Paull Partners Pty Ltd (1988)
Page 31 of 260
Building contract where there was no acceptance, but the money was paid
Court stated there is a duty to speak if you do not accept when the other party is about to start performance
D had such a duty, acceptance was implied
Rejection of Offer
Where an offer has been rejected, is it still available for acceptance?
Offers terminate upon rejection and cannot be accepted.
A request for information about an offer is not a contract.
o Stevenson Jacques v McLean (1880)
Implied Conduct
Acceptance can be inferred from conduct
Can post-formation conduct be relevant to the question of whether a contract was formed?
Farmers’ Mercantile Union and Chaff Mills Ltd v Coade: respondents applied in 1913 to buy £25 share in
appellant company. Company did not communicate within reasonable time but retained the £1 paid by
respondents and entered names into register. Company intimated acceptance only after reasonable time had
expired, by making calls for payment of further instalments of £5 in 1916 and 1918. Respondents ignored
calls.
o Knox CJ: agreement inferred by respondents inaction once they became aware of names on register of
shareholders
o Starke J: respondents’ silence could equally be regarded as a refusal to do anything with the company
since their offer had lapsed and matter was ended.
Empirnall Holdings Pty Ltd v Machon Paull Partners Pty Ltd (1988) NSW CofA
Empirnall (property developer) verbally engaged architects Machon Paull to act as project managers for
particular development. They agree to do that. Submit invoice + the contract, invoice is paid. Contract was not
signed/returned. Second invoice sent. 19th . Two weeks later, architects wrote letter to E: “we are proceeding
on the understanding that the conditions of the contract are accepted by you and works are being conducted in
accordance with those terms and conditions”. Architects continued to work and receive progress payments but
contract never signed. Empirnall became insolvent and thus necessary determine effectiveness of clause of
unsigned contract charging architects fees on the land being developed.
o Property developer made payments, architects continued
o No doubt as to contract, issue was related to terms
o Were the terms of the written contract the terms btwn the parties?
ISSUE: Had EH accepted the terms of the written contract?
o More acceptance by conduct, failure
o Normally silence is regarded as rejection, however
o McHugh J ‘nevertheless, the silence of an offeree in conjunction with the other circumstances of the
case’ may indicate that he has accepted the offer
Offeree may be under duty to communicate his rejection of an offer – if fails, silence regarded
as acceptance of offer sufficient to form a contract
Distinguished from other cases, such as Laurel Race Course Inc v Regal Construction Co Inc
333 A 2d 319 (1975)
And Empirnall
Page 32 of 260
‘Where offeree with reasonable opportunity to reject offered services takes the benefit of
them under circumstances which would indicate to reasonable person that they were offered
with the expectation of compensation’
o The ultimate issue is whether a reasonable bystander would regard the conduct of the offeree,
including his silence, as signalling to the offeror that his offer has been accepted
Not acceptance by silence, but taking benefit with knowledge of its terms the receiving of
benefit
Objective bystander conclude accepted offer on terms/conditions
o NSW Court of Appeal: accepted principle of Felthouse v Bindley.
o Expressed, was communicated, not expressly, through silence + benefit of services by architect and
that they were to be paid in accordance to offer.
o Objectively, the conduct signalled acceptance
o McHugh JA: where an offeree with a reasonable opportunity to reject the offer of goods or services
takes the benefit of them under circumstances which indicate that they were to be paid for in
accordance with the offer, it is open to the tribunal of fact to hold that the offer was accepted
according to its terms.
Correspondence
Acceptance must correspond with the offer. If the offeree attempts to vary the terms or add additional terms,
this amounts to a counter offer: Butler Machine Tool [1979]
Counter-offers
A counter offer is a response from the offeree, that indicates willingness to contract, but on diff terms from the
original offer
What is the legal effect of a counter-offer?
An offer is terminated if offeree makes a counter offer
Hyde v Wrench (1840)
FACTS:
Seller offered to sell farm for 1000 pounds, buyer replied he would buy for 950 pounds. Seller refused. Buyer
later purported to accept seller’s original offer for 1000 pounds
HELD:
Buyer had made a counter-offer, which terminated offer by seller to sell farm for 1000 pounds – thus no offer
to accept, thus no contract
Courts determined had expired
A request for information is not a counter-offer: Stevenson Jacques v McLean (1880)
Stevenson Jacques v McLean (1880)
FACTS:
D (McLean) made an offer to sell iron for cash to P (Stevenson)
P responded by asking if sale of iron at a price could be paid in instalments, D believed offer rejected, bcos no
cash, sold to another party. D was liable, bcos a contract had been formed, and P had merely requested further
information
Court issue whether mere inquiry as to existence of credit terms represented rejection of offer
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HELD:
Court found for P, bcos credit was merely an inquiry (request for info), not rejection
Battle of Forms
BoF – occurs when parties transact business on the basis of their respective standard form. While parties may agree on
basics of sale (eg. subject matter) other terms may differ
Fixed set of terms, when there is a clash btwn the two forms.
Butler Machine Tool Co Ltd v Ex-cell-o Corporation (England) Ltd [1979]
FACTS:
Seller of machinery quoted a price on a standard form, containing a clause entitling the seller to vary that price
Buyer placed a counter-offer, using own order form, wiv diff standard conditions. had a detachable receipt
Seller acknowledged order by returning the detachable receipt with a notation, that they assumed it was on
their terms
o 23 May 69: BMT provides quote to E corp. terms on back ‘these T&Cs shall prevail over any T&Cs
in the buyers order’
o 27 May 69: E Corp replies, adds £3100 for installation, changes delivery date, ‘lease supply on T&C’s
overleaf’
o 5 June 69: BMT Co replies. Signs E Corp’s tear off slip. Letter refers to ‘revised quotation of 23 May’
HELD
There was an offer, then a counter-offer, then the counter-offer was accepted because the detachable form was
SIGNED, notwithstanding their reference to the original terms.
CoA held seller not entitled to rely on that price variation clause as it did not form part of the contract
Buyer’s order constituted a counter offer, bcos it contained diff terms. This C-O was accepted when seller
returned receipt.
o Best required of 3
First shot
Last shot
Combination of both
Lord Denning MR noted that:
‘In many of these cases our traditional analysis of offer, counter-offer, rejection, acceptance and so forth is out-of-
date. … The better way is to look at all the documents passing between the parties and glean from them, or from the
conduct of the parties, whether they have reached agreement on all material points, even though there may be
differences between the forms and conditions printed on the back of them. … Applying this guide, it will be found that
in most cases when there is a “battle of the forms” there is a contract as soon as the last of the forms is sent and
received without objection being taken to it. … The difficulty is to decide which form, or which part of which form, is
a term or condition of the contract. In some cases the battle is won by the man who fires the last shot. He is the man
who puts forward the latest terms and conditions: and, if they are not objected to by the other party, he may be taken to
have agreed to them. … In some cases, however, the battle is won by the man who gets the blow in first. If he offers
to sell at a named price on the terms and conditions stated on the back and the buyer orders the goods purporting to
accept the offer on an order form with his own different terms and conditions on the back, then, if the difference is so
material that it would affect the price, the buyer ought not to be allowed to take advantage of the difference unless he
draws it specifically to the attention of the seller. There are yet other cases where the battle depends on the shots fired
on both sides. …’
Who wins in a ‘battle of forms’? Are there different views?
Page 34 of 260
In Hyde v Wrench, no contract was formed because there had been a rejection by the offeree of a fundamental
term of the contract – the price.
BUT, the current Australian position is that even if there is agreement on the fundamental terms of the
transaction, if the offeree adds an additional term, a counter-offer is made. A contract will not be formed until
the counter-offer is accepted. (the Conflict approach)
Two approaches suggested in Butler Machine Tool Co v Ex-Cell-O Corp [1979]:
o Synthesis approach: per Denning preferred the view that the “documents were to be considered as a
whole, and the important factor was finding the decisive document”.
Better tailor to the requirements of justice, at cost of predictability
o Conflict approach: Lawton and Bridge LJJ preferred traditional offer-acceptance analysis, and
considered that the last counter-offer killed all preceding offers (“Last shot” approach).
More predictable
These forms are inevitable
Orthodox approach
English Approach
Butler Machine Tool Co Ltd v Ex-Cell-O-Copr (England) Ltd: seller of machine provided price quotation
with terms/conditions. Sellers form stipulated orders would only be accepted subject to terms/conditions.
Buyer request supply on its own terms/conditions. Attached to buyer’s form was tear off acknowledgement
form (agree to buyer’s term/conditions). Seller signed and returned with letter stipulating that machine would
be supplied in accordance with seller’s quotation.
o Issue: would seller’s original quotation prevail?
o Trial judge – went with seller.
o English Court of Appeal went with buyer:
o Lawton and Bridge LJJ: seller’s quotation constituted offer, buyer’s order as counter-offer (which
would have killed seller’s original offer), which seller accepted by signing tear off. Reference to
seller’s letter to original quotation taken to refer to price/identity of machine and not to terms on back
of quotation.
o Lord Denning MR: look at all documents as a whole and ascertain terms from them. He suggest that
terms of both parties be construed together and if contradictory, scrapped and replaced by reasonable
implication.
Conflict and Synthesis:
o Synthesised contract made up of consistent terms along with terms from one set that appeared to be
accepted by the other party.
o Gaps filled with terms implied by the court.
o Allows court to take account of a party’s willingness to accept some terms but not others (not all or
nothing).
Legislative Solutions:
o United States article 2-207 of the Uniform Commercial Code (US) (UCC): acceptance that states
additional/different terms will still be an effective acceptance. Additional terms construed as
proposals for additions to contract. Except where terms materially alter the offer, the offer precludes
the adding of terms or the offeror objects to additional terms within reasonable time.
o Subsection (3) of that : contract formed where parties have agreed on principal terms and have begun
performance.
Unilateral Contracts
How does acceptance occur for a unilateral contract? Must there be an intention to accept?
Acceptance can be communicated through performance: Carlill
Possible for person to perform act necessary to accept without actually being aware of offer/contract eg. person
returning lost dog without knowing there is reward
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Performance of requested act will not form unilateral contract when it is clear that offeree was not performing the act
on the faith of the offer: Crown v Clarke
Postal-Acceptance Rule
What is the postal acceptance rule and when does it apply?
PAR is an exception to general rule that a contract is formed when offeree’s acceptance is communicated to offeror.
It operates only when the post was contemplated by the parties as a possible way of communicating acceptance of the
offer: Henthorn v Fraser [1892] (broader rule)
A contract is formed once the letter is posted (when and where)
It does not matter if letter takes longer than usual to reach offeror, or is completely lost in the post.
Offeror bears this risk
Once letter of acceptance is posted, it is also too late to withdraw his/her offer
Exceptions
Intention: For the rule to apply, acceptance by post MUST have been contemplated by the parties (Henthorn
v Fraser [1892]). It may be excluded by the offeror either expressly or impliedly.
Revocation: rule only applies to acceptance – i.e. cannot use for revocation of OFFER (see Byrne and Co v
Leon Van Tienhoven and Co (1880)).
Postal rule can be negated by requiring actual communication instead of constructive (postal) communication
(Elizabeth City Centre v Corralyn (1994)).
Instantaneous communication: The rule does not apply to means of instantaneous communication such as
telex (Entores v Miles Far East Corp [1955]), telephone or facsimile transmission (Reese Bros Plastics v
Hamon (1988)).
Telegrams have been treated as ordinary mail.
Instantaneous Communication
Where mode of acceptance is ‘instantaneous communication’ general rule is that contract will be formed when
acceptance of offer is communicated to offeror when/where offeror receives that communication
Instantaneous communication exists where negotiations take place:
o Btwn parties in each other’s presence
o By telephone
o By telex msgs
o By facsimile
o Communication by email
Electronic Communication
When is the contract formed?
Email communication treated as instantaneous communication and contract should be regarded as formed when
acceptance is received by the offeror.
Alternative approach recognises email communication not instantaneous and there are some similarities btwn
email and regular post – eg. email may not be received by offeror. On that basis, formation should not be
dependent on communication of the acceptance and may occur sometime earlier.
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