Rule of Law (ROL)

• Legal principle that law should govern a nation (None is above the law)

• Characteristics of legal system complying with ROL:

o Law applied equally to all

o Courts uphold legal rights of citizens

o Nobody punished unless conduct expressly illegal

• Generally, legal system that complies with ROL has:

o Separation of powers

o No double jeopardy (tried 2 times for same crime)

o Procedural fairness

Types of Justice

• Retributive – Proper response to wrongful act

• Restorative – Restoring victim and reintegrating perpetrator

• Procedural – fair trial, timely, evidence

• Distributive – Dividing where it is going (when economic resources & power are

divided)

Ratio Decidendii

R v Dudley & Stevens (1884)

• Necessity does not give you a defence to commit a crime

Precedent

• Permits court to apply current community standards with fairness & flexibility

Ratio Decidendi & Obiter Dictum

• Ratio decidendi = legal proposition essential to case

o Stare decisis = let decision stand

o Binding on Lower courts

• Obiter Dictum = opinions, words not essential to decision (not binding on

lower courts [may be persuasive])

Establishing Precedent

Balmain New Ferry Co Ltd v Robertson (1906) 4 CLR 379

• Person presumed to be aware of terms of contract from previous dealings

o If had previous dealings before, assumed you know T&C

Criminal & Civil Law

• Criminal Law – wrongs against society

o Prosecuted by state

o Punishable by imprisonment

▪ Murder, treason, rape, theft

o Presumption of innocence (until proven guilty)

▪ Standard of proof is ‘beyond reasonable doubt’

o Fagan v Metropolitan Police Commissioner (1969) 1 QB 439

▪ Criminal act requires:

• Actus reus (guilty act) – committing the crime

• Mens rea (guilty mind) – intention to commit crime

• Civil Law – wrongs between private individuals

o State provides a forum but does not interfere

▪ Breach of contract, trespass, nuisance, negligence

▪ Standard of proof is ‘balance of probabilities’

Common Law & Statutory Law

• Common = legal principles deriving from cases decided by courts

• Statutory = law from Parliaments (Acts)

o Laws made Parliament = Statutes

o Legislation overrule a court decision because parliament is sovereign

Statutory Interpretation – Literal & Golden Rule

• Literal Rule = Giving words their technical/dictionary meaning

• If results are absurd apply Golden Rule

o Golden Rule provides an escape

o Use only when Literal Rule fails

Statutory Interpretation – Common Law Rule

1. Ejusdem Generis Rule (The Class Rule)

a. General words preceded by specific words

2. Noscitur a sociis

a. Words take their meaning from their context

3. Leges Posterirors Priores Contrarias Abrogant

a. Later legislation overrules earlier inconsistent legislation

4. Generalia Specialibus Non Derogant

a. Specific provisions override the general

5. Expression Unius Est Exclusio Alterius

a. E.g. all cars, utilities, panel vans, motorcycles & buses would exclude

trucks

Equity

• Body of rules that evolved over time to alleviate harshness of common law

o Arose in ecclesiastical courts which became courts of chancery

▪ Courts of chancery & common law courts = merged

Principles of Equity

1. Equity follows the law

2. Person seeking equity needs clean hands – equity will not help guilty person

3. Equity does nothing in vain

4. Equity aids the vigilant

5. Equity will not suffer wrong without a remedy

Separation of Power

1. Exclusive Powers – Federal Parliament only

2. Concurrent Powers – Federal & State Parliaments

3. Residual Powers – State Parliaments only

• If State parliament has made law in relation to on matter, that conflicts with law

made by Federal Parliament

o Federal law will prevail over State law

• Types:

o Formal – signed, sealed & delivered

▪ Deed – type of binding contract

• Written document shows terms of an agreement made

between 2 parties

• No Consideration needed but formalities must be followed

• Generally, needs a witness

o Simple – written/oral

• Role of Equity in contract law = Remedies, promissory estoppel, unconscionable

conduct

Types of Contract

Number of Parties

• Unilateral – 1 party

• Bilateral – 2 parties (both with mutual obligations)

• Multilateral – < 2 parties, all with obligations

Form

• Simple Contracts

o Written, oral, part-written & part-oral

o Need all elements of a contract (incl. consideration)

o Enforceable

• Formal Contracts (Deeds)

o Satisfy formality requirements

▪ No need for consideration

o Deeds required for:

▪ Unilateral contracts

▪ Where statute requires

• Simple verbal contract will be legally valid; but:

o If in writing → court presumes entire contract & will not allow oral evidence

to change/contradict written doc (Parole Evidence Rule [PER])

▪ Exception: oral evidence allowed if clear ambiguity/uncertainty in

the document

Equity may sometimes allow a contract to be enforced if it would

be unfair not to

Regent v Millet (1976)

Held: - claim part-performance (doctrine of equity) because had carried out the contract,

so contract enforceable

Elements Required for Contract Formation

1. Intention to create legal relationship (ICLR) ☼

a. Presumed in commercial (business)

i. General presumption that it is legally bound

ii. Commercial Agreements

1. Presumed to have been intended to be legally binding

2. Presumption that parties ICLR is very strong

a. Can be rebutted: -

i. Rose & Frank Co v JR Cromption & Bros Ltd

1. Parties had dealing over many years

2. “honour clause”- mutual trust & loyalty

3. Expressly stated agreement not to be

legally binding

b. Not in family/social relationship

i. Court presume no intention to be legally bound

c. Can be disproved

d. Court applies “objective test” → reasonable bystander, considering for

all circumstances of the case

i. Someone thinking from an external perspective

• Rebuttable Presumptions (Family/Social)

o Assumption made by court, one that is taken to be true unless

someone comes forward to contest it & prove otherwise

o Social & Domestic Agreements; presumption against legal obligation

▪ Balfour v Balfour (1919)

o Presumption is rebuttable

▪ Merritt v Merritt (1970) – separating spouses

• Held: There was ICLR so there was a contract.

Husband & wife were separated, so outside domestic

context

▪ Wakeling v Ripley (1951)

▪ Riches v Hogben (1986)

• Held: More than social arrangement (due to security).

ICLR for social relationship was successfully rebutted

2. Mutual Agreement ☼

a. Offer & Acceptance ☼

i. Agreement = offer + acceptance of offer

1. Offer

a. Can be made verbally, writing, internet, post or email

b. Must be clear & unambiguous

c. Can only be accepted to party whom it is made

to(offeree)

d. Accepted in manner specified

e. Can be revoked at any time before acceptance

2. Sufficient precision is needed to eliminate further negotiation

3. Power of Acceptance → acceptance is necessary to

make contract binding

4. Can be to individual or to world

5. Communicated effectively

6. Language need not be important

a. Catalogues ads with offers will be invitation to

treat not offer (Treat = Trade)

b. Offer or Invitation to Treat

i. Pharmaceutical Society (GB) v Boots Cash Chemists

1. Held: Offer was made by customer when customer presents

item at register. Acceptance when vendor accepts money.

ii. Fisher v Bell (1961)

1. Held: Display of goods is invitation to treat, not offer

iii. Carlill v Carbolic Smoke Ball Co (1893)

1. Held: Language of ad was precise & clearly detailed the

means of acceptance. There was an offer to the world at

large, therefore the contract was binding.

c. Not offer because supply of information

i. Does not mean an offer – Nexus = where actual offer is

ii. Harvey v Facey

1. Held: No Contract

a. Was request for info, not offer

b. Supply of new info, not offer/acceptance

d. Possible responses to an offer:

i. Reject it – terminates contract

ii. Make counter-offer – terminates original offer

iii. Ask for more information/clarification – no effect on offer but offer

will lapse within reasonable time, if not accepted before lapse

iv. Do nothing – offer lapse after reasonable time

v. Accept offer in full terms – creates valid (simple) contract

e. Acceptance

Rule 1: Acceptance must be clear

1. Be clear, unambiguous

2. Positive decision, leaves no doubt

3. Must mirror the offer

4. Counter-offer destroys original offer

a. Rule of Masters v Cameron

i. If parties sign preliminary agreement subject to

some condition, there is no binding final

agreement

Offeror’s Requirements must be met

1. Exclusive method of acceptance must be used

2. May be accept by alternative efficient method (Eliason v

Henshaw)

3. Offeree can use same communication method as offeror

4. Acceptance is communicated only when received by offeror

Postal Rule

1. Adams v Lindsell

a. Parities know post will be used, acceptance

occurs when letter is posted, not on delivery

b. postal service acts as agent for offeror

c. rule can be avoided by specifying condition

Rule 3: Acceptance be given in reliance on offer

1. R v Clarke (1927)

a. Held: No, because Clarke gave info to clear himself,

he had forgotten about the reward

Rule 4: Acceptance must be communicated

1. Felthouse v Bindley

a. Held: B’s silence did not constitute acceptance

ii. To be effective, acceptance needed to be

communicated to F

2. Acceptance may be communicated by offeree’s agent

a. Powell v Lee

iii. Held: 3rd party was not authorised to

communicated acceptance, no agreement

3. Brogden v Metropolitan Railway Company (1887)

a. Held: Draft agreement was offered by M to B.

Completed contract was counter-offer to M by B.

There was implied acceptance by M because M acted

per completed contract.

Terms of Contract: Issues

Parol Evidence Rule (PER)

• Parol = oral

o When contract is presumed to be in writing, that it contains all the terms.

• Exceptions:

o Parol evidence may be admitted in court if:

▪ Contact is void/voidable

▪ Explains ambiguous language

▪ Concerns prior course of dealings/course of performance between

parties

▪ Fills in gaps of contract

▪ Corrects obvious clerical error/typo

o Void = no legal effect (as if contract had never existed)

o Voidable = only void when party entitled to rescind the contract

applies to court to set it aside

Implied Terms (Imposed by Law) [term is assumed to be known to all]

o Legislation (consumer/employer law)

o Non-statutory (case law & custom)

• Reasonable & Equitable – fair to both

• Necessary to give contract – ‘business efficacy’

o Business efficacy – The Moorcock (1886)

▪ Held: Yes – business efficacy was implied into contract to maintain

intentions of parties

• Obvious to everyone – does not need to be mentioned

o i.e. industry practice

• Not contradicting express terms

Consumer Guarantees (under Aus. Consumer Law[ACL])

• Guarantee as title (s51)

• Undisturbed possession (s52)

• ‘Acceptable quality’ (s54)

o Fit for all purpose

o Acceptable in appearance & finish

o Free from defects

o As reasonable consumer, would regard as acceptable

Express Terms (Agreed by Parties)

• Warranty

• Condition

• Writer/Oral

• Model contract/specially drafted

Representation or Term

• Puff = no reasonable person would believe

o Carbolic Smoke Ball Case

• Mere Misrepresentation = non-contractual statements of fact

• Opinion = non-contractual

• Terms = contractual (binding)

▪ Van Den Esschert v Chappell [1960]

o Ratio = Content & Importance of statement

▪ More significant = more likely to be term

▪ Harling v Eddy (1951) (Time of Statement)

o Ratio Decidendi: Factor is time of statement

▪ Closer contract formation = more likely to be term

▪ JJ Savage v Blakney (1970) (Language of Statement)

o Decision: Speed of boat was mere rep – “expression of opinion”

o Ratio: Factor is language of statement = “promise, agree, guarantee,

warrant” vs “estimate, guess”

▪ Oscar Chess Ltd v Williams (1957) 1 WLR 370 (Relative Knowledge &

Expertise of Parties)

o Decision: Mere representations as reps will not become terms of

contract unless can be inferred from circs that statement was

intended to be legally binding

o Ratio: Factor determine whether term/representation is relative

knowledge & expertise of parties

▪ More expertise = more likely to be term

▪ Routledge v McKay (1954) (Reduction into Writing)

o Ratio: When contract is put into writing, previous spoken terms is

omitted from written contract

Importance of Terms

• Term = Can enforce contract

o Condition: - can terminate, sue or continue contract & sue

o Warranty: - cannot terminate but can sue for damages

• Bettini v Gye (1876) [Warranties]

o Held: Warranty not condition because it did not go” to the root” of K

because attendance at rehearsals did not vitally affect K. G not entitle to

terminate K. K would have to expressly stipulate not turning up for

rehearsals would entitle G to terminate.

• Poussard v Spiers & Pond (1876) [Conditions]

o Held: She was sick, not breach of contract. But her absence did excuse the

theatre company from continuing to employ her and contract could be

terminated as absence was breach of condition.

• Breach of condition – other party can:

o Terminate contract & sue for damages for loss

o Continue contract & sue for damages for loss

• Breach of warranty – other party:

o Cannot terminate contract

▪ But sue for damages for any loss suffered as result of breach

• Condition Precedent (CP)

o Something specific must happen before specified rights/obligations are

triggered

• Condition subsequent (CS)

o Condition must occur to bring an end to something else

• Collateral Contract – side contract that happens next to main contract

o Consideration is entry into another contract

▪ Contract co-exists side by side with main contract

o Requirements:

▪ Parties must have intended promise would be legally binding

▪ Promisee must have entered main contract on basis of promise &

relied upon it

▪ Promise must not be inconsistent with terms of main contract

o De Lassalle v Guildford

▪ Held: Breach of collateral contract, consideration was entering main

lease contract

Exclusion Clauses/Disclaimers

• For EC to be enforceable terms must be:

o Clear & precise

o Properly brought to attention of other party

• If EC is ambiguous, it is interpreted against interest of party relying on it

o Ambiguous words are interpreted narrowly

• L’Estrange v Graucob

o Held: When you sign an agreement & been not been induced by

fraud/misrepresentation to sign, then you are bound even though you

have not read the contract

o Ratio Decidendi: If EC is contained in signed document plaintiff will be

bound by clause even if the person hasn’t read the document

• Toll v Alphapharm (2004) HCA 52

o Held: Agent was bound by what it had signed

What if there is fraud or deception?

• Exceptions being bound by signed documents include:

o Non est factum (I did not do it)

▪ Hard to prove

▪ Petelin v Cullen (1975)

• Held:

o P had to rely on others

o Signed documents were radically different to what he

thought they were

o Failure to read was not due to carelessness

o Misrepresentation

▪ If extent of EC was misrep then they cannot rely on it

• Curtis v Chemical Cleaning & Dyeing Co

o Held: Misrepresentation by CCD & C could claim

ECs & Unsigned Contracts

Courts will consider 2 approaches:

1. Nature of Doc Test

a. Caser v Brown (1952)

i. Decision: docket did not appear to C to be contractual doc

1. Reasonable for C to assume it was only identifying doc.

Thus, C did not agree to exempt B from liability for

negligence

2. Reasonable Notice Test

a. Was customer given sufficient notice of EC before contract was entered?

b. Olley v Marlborough Court Hotel (1949)

i. Decision: EC was not communicated before or at the time K was

made (@ front desk). Hotel was liable for loss.

c. Thornton v Shoe Lane Parking (1971)

i. Held:

1. Contract was concluded after coins inserted, customer only

bound by terms already brought to notice of customer

2. Only notice was external which referred only to property

damage

3. More onerous the clause, the more attention should be

drawn to it

d. Balmain Ferry v Robertson (1906)

i. Held: Sign was prominently displayed & R had travelled on ferry

before & was aware of terms

Interpreting ECs

Courts do not view ECs favourably: contra proferentum rule

• Ambiguities in EC will be constructed against party who inserted it

• Sydney City Council v West (application of contra proferentum)

o Held: negligence of staff of SCC was not excluded & so SCC liable

• Generally, read EC per:

o Natural & ordinary meaning

o Considering contract as a whole

• Courts will be narrow in their interpretation (contra proferentum)

o White v John Warick

▪ Held: Did not apply when breach was breach of negligence

• Insight Vacations Pty Ltd v Young

o Held: Clause did not apply, because she was not ‘occupying a seat’ at the

time, also expected that passengers get up to go to toilet

Topic 4 – Ending the Contract

Misrepresentation

• Mistakes that are made in the contract

o Induces party to purchase something, due to the facts given

• Mere representation – not part of the contract because parties do not regard

these as binding

• To succeed in action for misrepresentation person must show that:

o Statement was false

o Statement induced them to enter the contract

• Derry v Peek (1889)

o Held: statement was not fraudulent but made honest belief that approval

was forthcoming.

• Fraudulent misrepresentation where statement made is:

o Knowing it to be false

o Without belief in its truth

o Recklessly, carelessly as to whether it be true or false

• To be misrepresentation, must be mis-statement of fact

o Bisset v Wilkinson (1927)

▪ Silence does not constitute misrepresentation but exceptions:

• Half truths

• Change of circumstances

• Fiduciary relationship

• Contracts where full disclosure is required

Remedies for Misrepresentation (1)

• Contract is voidable @ option of misrepresentee

o Voidable = Cancelling/terminating contract – Both parties return to pre-

contract terms positions

• Right to rescind (terminate) contract can be easily lost by:

o Affirmation of contract (deliberately leave it there)

o By delay

o Where total restoration of parties to their positions pre-contract is

not achievable

Remedies for Misrepresentation (2)

• If right to rescind(terminate) is lost:

o Aggrieved party might try & prove statement formed part of contract rather

than being misrepresentation

▪ Could then sue for breach of condition

▪ Oscar Chess v Williams

o Aggrieved party could argue that statement constitutes collateral promise

▪ Enabling them to argue breach of collateral K

Discharge by Breach

• 1 part commits actual breach of contract condition; other party has choice to

terminate contract & claim damages for losses incurred as result of breach

• Breach can include:

o Failure to perform

o Refusal to perform

o Doing something to make performance impossible

• Anticipatory breach = 1 party expressly/impliedly indicates intention not to

complete contract

Discharge by Frustration

• Unforeseen events make it impossible to carry out contract

o Taylor v Caldwell

▪ Held: Destruction of building not fault of either party &

therefore loss frustrated performance of contract

o Codelfa v Construction Pty Ltd v State Rail Authority of NSW

▪ Held: contract had been frustrated so contract came to end once

injunction was granted