TABL 1710 Lecture 4 Semester 1 2014

11

LEGT 1710Business and the Law

Lecture 4 Contract Law (Contd)

Promissory estoppel, Intention, Terms of a Contract

Lecturer: Dr Leela Cejnar

2014 The University of New South Wales

Sydney 2052 Austral ia

The original material prepared for this guide is copyright. Apart from fair dealing for the purposes of private study, research, criticism or review, as permitted under the Copyright Act, no part may be reproduced by any process without written permission.

Enquiries should be addressed to the Head of School, Taxation and Business Law, UNSW, Sydney

2

In-Class Exercise

on Lecture Topics 1 and 2

In tutorials this week Closed Book Worth 5%

3

Major Assignment

Available from Week 5 (next week) On Moodle Due 5pm, Monday 5 May (Week 9)

Discussion Forum

Available from this week Separate Discussion Forum for each tutorial Contributions to the Discussion Forum will be worth

5% of overall Course Participation Mark Tutors will provide details about how to use the

Discussion Forum for your tutorial class

Discussion Forum

Marks will be awarded for the QUALITY of contributions over the semester. It is not just about the number of comments or

contributions you have but: whether you have "engaged" or "collaborated" with peers online

by commenting on their contributions, answering or attempting to answer a peer's query, directing a peer to some interesting case/website/article you have found etc how you have reflected on your learning

For example, tutors will consider how well you have thought about the issues by looking at the level of analysis in your contributions/comments

Discussion Forum

NOTE:

This is NOT INSTEAD OF class participation, as there is still at 5% mark for participation in class discussions

This mark will be awarded IN ADDITION TO YOUR IN-CLASS CONTRIBUTIONS .

Your Tutors

NOTE: YOUR TUTORS ARE YOUR PRIMARY POINT OF CONTACT Make the most of your tutor!

Work closely with your tutor and communicate with your tutor

All queries should go to your tutor in the first instance Your tutor will let you know if your query needs to be referred

to me or to a member of the administrative team

Tutorial Attendance

Reminder: you can only attend the tutorial you are enrolled in!

Tutors will refuse your attendance in a class where you are not on the roll, unless prior arrangements have been made (eg: due to illness, unavoidable absence because of a job interview etc)

Remember there is an 80% attendance requirementdont miss your tutorials!

999

Lecture 3: Summary

Essential elements of a contract: Intention to enter into a legally binding contract (to

be covered today) Agreement Offer Acceptance

Consideration (or price)

101010

Lecture 3: Summary

Other elements for a valid contract: Legal capacity Genuine consent Legality of purpose Any formal/procedural requirements must be satisfied(See Latimer at 5-510 to 5-570)

111111

Lecture 3: Summary

Essential elements of contract

1.The Offer Must be

Firm promiseCommunication: Notice of Offer (Carlill v Carbolic Smoke

Ball)Revocation of offer to occur before acceptance

Invitation to treat (Pharmaceutical Society of Great Britain v Boots): offer to make an offer

Counter -Offers (Hyde v Wrench) Requests for Information (Harvey v Facey)

121212

Lecture 3: Summary

2. The Acceptance Must be in response to Offer (R v Clarke)

Communicated (note: silence is not acceptance: Felthouse v Bindley)

Express or implied (eg by conduct: Brogden v Metrop RwayCorp; Empirnall Holdings)

Absolute, unqualified

Any conditions must be fulfilled Clear and certain Postal Rule/Instantaneous communications

131313

Lecture 3: Summary

3. ConsiderationMust be:

Essential Present or Future, NOT past (unless act done at promisor s request

and parties understood act to be renumerated later: Lampleigh v Braithwait and Re Caseys Patents)

Something of value but need not be adequate (Chappell & Co Ltd v Nestle Co Ltd)

Sufficient Possible of performance Definite Legal Referable to the other partys promise

141414

Lecture 3: Summary

3. Consideration Can be:Practical benefit (Williams v Roffey; Musumeci

v Winadell)

1515

Lecture 3: Summary

Note: Consideration cannot be:

Moral obligation (Eastwood v Kenyon) Part payment (Pinnels case; Foakes v Beer

some exceptions, such as creditors)

15 161616

Todays lecture

Consideration and promissory estoppel exception to the rule Intention to enter into legal relations Terms of a contract Representation vs terms Parol evidence rule Express vs implied terms Collateral contracts Conditions and warranties Uncertain terms Meaningless terms Ambiguous terms

171717

Overview - Lecture 4Terms of a Contract

On completion of this lecture you should be able to: Explain what is meant by promissory estoppel Clarify the roles of intention in contract law Set out the legal requirements for a valid contract Clarify the role of intention in contract law Explain the difference between terms and

representations Explain what is a collateral contract Identify different types of terms (condition, warranty

etc)

1818

Consideration and Promissory Estoppel: the exception to the rule

Promissory estoppel will allow a promise to be enforced even though the promisee has not provided good consideration for that promise

It operates where it would be inequitable, or unconscionable, for the promisor not to be held to their promise

You cant go back on your word! See Latimer at 5-485

1919

Promissory estoppel

Cases:Central London Property Trust Ltd v High Trees

House LtdLegione v HateleyWaltons Stores (Interstate) Ltd v MaherSee Latimer at 5-485

2020

Promissory estoppelBrennan Js ( Waltons v Maher ) six- point test for when the promisorcannot go back on his/her word:

Promisee (Maher = P) assumes existence of particular legal relationship

Promisor ( Waltons = D) responsible for this assumption Promisee acted/did not act in reliance on that assumption Promisor knew what promisee would do or intended for

promisee to act in this way Promisee will suffer loss or some detriment or harm if the

assumption/expectation is not fulfilled Promisor did not take any steps to warn promisee s/he may not

fulfil expectation etc

See Latimer at 5-485

21

Promissory estoppel

The central principle of the doctrine is that the law will not permit an unconscionable or, more accurately, unconscientious departure by one party from the subject matter or an assumption which has been adopted by the other party as the basis of somerelationship, course of conduct, act or omission which would operate to the other partys detriment if the assumption be not adhered to.

Deane J in Commonwealth of Australia v Verwayen [1990] HCA 39See Latimer at 5-485

222222

Intention to create legal relations

There must be evidence that the parties

INTENDED to make a legally enforceable

contract

232323

Subject to contract

Expressly NO intention Subject to contract clausesDocument not in its final formSubject to preparation of written document

Case:Masters v Cameron: see Latimer at 5-250

242424

Implied intention

The courts have to determine objectively whether the parties intended the agreement to be legally enforceable

To assist, consider two categories:Social, family, domestic, voluntaryCommercial or business

252525

Implied intention

Traditionally:

Social, family, domestic, voluntary

PRESUMED NO INTENTION

Commercial or business

PRESUMED INTENTION TO BE BOUND

262626

Implied intention

Traditionally:

Apply the relevant presumption

The presumption could be rebutted by evidence

272727

Intention: Non-commercial

Non-commercial agreements Three types:

1. Social agreements - ones made between friends or acquaintances

2. Domestic agreements - ones made between family members and relatives

and3. Voluntary agreements - where the parties may

volunteer their services

282828


Under the traditional approach no intention is presumed to exist, though this is rebuttableby the evidence produced by the plaintiff

292929


Domestic - Agreements between husband and wife Traditionally in domestic situations:Where the husband and wife are living together at

the time of the agreement, no intention:Case: Balfour v Balfour

No intention to create legal relationsCase: Cohen v Cohen


303030


Other domestic arrangements In the case of other domestic situations the courts

may look at the words and conduct of the parties as well as the seriousness of the consequences:

Case: Wakeling v RipleySee Latimer at 5-090

313131


Voluntary agreements

In cases of voluntary agreements, such as where a person volunteers their services, the parties do not normally intend to create legal relations:

Cases: Teen Ranch Pty Ltd v Brown

Ermogenous v Greek Orthodox Community of SA Inc


323232

Intention: Commercial/Business

In business and commercial agreements the courts assume that there is an intention to create legal contractual relations

The parties may agree that their agreement is binding in honour or in principle only

Case: Rose & Frank Company v JR Crompton &Bros Ltd


333333

The contract

What have the parties agreed to? What is the extent of the rights and

obligations that the parties have entered into? The answer is found in the contents of the

contract

343434

Contents of a contractContents of a contract can be classified intotwo categories:(1) a representation:

non-contractual statement made pre-contract during negotiations not intended to be legally binding if false, it is a misrepresentation

(2) a term: contractual statement intended to be legally binding breach of term gives rise to action for breach of

contract

353535

Representations

Importance of truth of the representation Reliance of innocent party on representation Time period between representation and final

agreement Intention behind making of representation Omission of representation from contract Consider any special knowledge or skills of person

who made representation


363636

Representation

Cases: Oscar Chess Ltd v Williams Bentley (Dick) Productions Ltd v Harold Smith (Motors) Ltd

(Compare these two decisions)


373737

Representations and the parol evidence rule

Parol = oral, spoken If a contract is in writing and if the writing

appears to contain the whole contract, it is presumed that the writing contains all of the terms of the contract


383838

Representations and the parol evidence rule

Courts are generally reluctant to admit evidence of words, acts or representations made prior to the execution of the contract that might add to, vary or contradict the written contract


393939

Terms of the contract

Terms include both: express terms implied terms

404040

Terms of the contract

(1) Express can be: oral written oral and written

(2) Implied can be: to give the contract business efficacy ( ie: to help make sense of

the contract) from custom or business usage from previous dealings

by the intention of the parties by the courts ( ie: to define uncertain/meaningless/ambiguous

terms)

41

Implied Terms

Case: The Moorcock


42

Implied Terms

For terms to be implied into a contract, they must: be reasonable and equitable be necessary to give business efficacy be so obvious it goes without saying be capable of clear expression not contradict an express term of the contract

See Latimer at 6-110 at footnote 16: BP Refinery Case

434343

Statutory Implied Terms

Some statutes imply (add) terms to contracts where consumers are involved For example, concerning fitness for purpose, merchantable

(acceptable) quality, compliance with description/sample etc

See: Australian Consumer Law , which is Schedule 2 of the Competition

and Consumer Act, 2010 (Cth)


444444

Types of terms

1. Condition an essential term going to the root of the contract

allows injured party option of rescinding ( i e ending) the contract and/or suing for damage

2. Warranty a non-essential term of lesser importance

allows the injured party only to recover damages (and requires continued performance of the contract)

See Latimer at 6-050 to 6- 090

454545

Condition or Warranty

Cases:Bettini v GyePoussard v Spiers

(Compare these two decisions)

Gumland Property Holdings Pty Ltd v Duffy Bros Fruit Market


464646

Uncertain terms

If there have been prior dealings, courts may imply appropriate terms

Where there are no past dealings, courts may be forced to find contract void for uncertainty


474747

Meaningless terms

If the term has no meaning, the courts will sever it if possible and leave the rest of the contract valid

If this is not possible, the contract will be void for uncertainty


484848

Ambiguous terms

If a term has more than one meaning, the contract will not necessarily be void for uncertainty, so long as the term can be given a meaning


Exclusion Clauses

Limitation of liability clauses To be discussed next week

49 5050

The FIVE STEP PLAN to answering a legal problem

1. Identify relevant facts

What are the key facts that are relevant to the problem?

2. Identify key, relevant statutory provisions and case law principles

Ask: (a) does a statutory provision apply to this situation and does it provide a specific answer to the problem? (b) are there any cases which have dealt with a similar fact situation to the one you are considering and/or which have interpreted any relevant statutory provisions?

NOTE: you should provide the name/section of any relevant legislation and the names of any relevant cases in your answer

5151


3. Note similarities to (follow) or differences from (distingui sh) prior cases

Jot down the names of cases that you have studied, where the facts were similar, if not identical to the ones in the problem you are considering

Note any factual differences from previous cases and state whether or not you consider that the differences matter to your problem

Often the facts of a problem may be similar to but a little different to those in a decided case: think about whether any factual differences matter

Whether or not any differences matter will depend on the scope of the legal principle that the relevant case stands for

5252


4. Apply the relevant statutory provisions and case law principles to the facts

Key aspect of answering legal problem question After identifying the relevant facts, and referring to the relevant

statutory provisions and case law, you then have to apply the relevant statutory and/or case law principles to the facts of your problem

This step involves saying what the legal principles you have identified mean to the facts of your problem and what the effect of these legal principles will be on the rights and obligations of the parties in your problem

Key part of the process of reasoning that leads to a conclusion both in a legal problem question and in an actual court case

5353


5. Reach a conclusion based on the application of the statutory provisions and case law principles to the facts

You need to reach a conclusion

The fact that a subsequent court can overrule the decision of a previous court demonstrates that there is no absolutely correct answer to legal problem questions

More important than the conclusion you reach is the process of reasoning that led you to that conclusion

5454

How to answer a legal problem

Remember:

In your discussion/answer, you must include references to relevant statutory provisions(legislation name and, where possible, section numbers) and case names

555555

Next lecture

Exclusion Clauses Collateral contracts Changing terms of a contract Capacity Privity Agency Vitiating elements (eg mistake, misrepresentation, unconscionable

conduct etc)

Read: Latimer Ch 5 5-610-5-810; Ch 6 6-180-6-275; Ch 11

Documents

TABL 1710 Lecture 4 Semester 1 2014