Understanding Contract Law_ 7th ed by Khoury and - Legal .rtf

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Understanding Contract Law_ 7th ed by Khoury and - Legal .rtf Powered By Docstoc
					                    Reading Guide

Preface                                                       xxxii
Acknowledgments                                              xxxiii
Table of Cases                                               xxxiv
Table of Statutes                                               xlv
1 Contract Law in Australia                                      1
The Australian legal system                                      1
What is a legal system?                                          1
The legal system in Australia                                    2
Sources of law in Australia                                      4
Parliaments as a source of law                                   5
  Recognising a statute                                          7
Judges as a source of law                                        8
The hierarchy of courts in contractual matters                   9
Types of judge-made law                                         11
  The courts of common law                                      11
  The courts of equity                                          11
  Recognising a case                                            12
The relationship between statute and judge-made law             14
The law of contract                                             15
‘Contract’ defined                                              15
The significance of contracts and contract law in business      16
Freedom of contract                                             17
  Example of a standard form contract                           18
Main points                                                     20
Suggested further reading                                       20
Questions                                                       21
2 Agreement                                                    23
Introduction                                                 24
        Brambles Holdings Ltd v Bathurst City Council        24
        Clarke v The Earl of Dunraven: The Satanita          26
        Australian and New Zealand Banking Group Ltd v Frost
        Holdings Pty Ltd                                     27

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                  Understanding Contract Law 7th ed
What is an offer?                                                     28
          Harvey v Facey                                              28
The rules as to offer                                                 29
  Offers must be distinguished from invitations to treat              29
  Overcoming the difficulties                                         30
  Contractual impact of an invitation to treat                        30
          Blackpool and Fylde Aero Club Ltd v Blackpool Borough
          Council                                                     31
          Harvela Investment Ltd v Royal Trust Company of
          Canada
          (CI) Ltd                                                    32
     (a) Circulars, catalogues and newspapers                         32
          Grainger and Son v Gough                                    33
     (b) Display of goods                                             34
          Pharmaceutical Society of Great Britain v Boots Cash
          Chemists (Southern) Ltd                                     34
     (c) Auctions                                                     35
          Harris v Nickerson                                          37
     (d) Tenders                                                      37
          Colonial Ammunition Co v Reid                               38
An offer may be made to a particular person or persons, to a class of
persons or to the whole world                                         38
          Carlill v Carbolic Smoke Ball Company                       39
  The offer must be communicated to the person or persons for
  whom it was intended                                                40
  An offer may be revoked at any time prior to its acceptance         40
          Routledge v Grant                                           40
          Galvin v Klimpsch                                           41
          Commonwealth of Australia v Antonio Giorgio Pty Ltd 41
Responses to an offer: acceptance or rejection                        42
The rules as to acceptance                                            42
  Acceptance must be absolute and unqualified                         42
     (a) Tampering with the terms of the offer                        43
     (b) Conditional acceptance                                       44
          Masters v Cameron                                           44
          Todbern Pty Ltd v R B Kerr (Group) Pty Ltd; Super Centre
          Development Corporation Pty Ltd v R B Kerr (Group) Pty
          Ltd 46
          Branca v Cobarro                                            46
          GR Securities Pty Ltd v Baulkham Hills Private Hospital
          Pty Ltd                                                     47
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            Air Great Lakes Pty Ltd v KS Easter (Holdings) Pty Ltd 49
  Any conditions as to the method of acceptance imposed by the
  offeror must be complied with                                       49
     (a) Where the offeror prescribes a mode of acceptance as the
     only method of accepting the offer, acceptance must be made
     accordingly                                                      50
     (b) If the offeror indicates a particular mode of acceptance
     without specifying it as the only method of accepting the offer,
     acceptance by any other method will only be legally effective
     if it in fact proves to be equally or more advantageous to the
     offeror. Any delay, however caused, will defeat the offeree      50
            Eliason v Henshaw                                         50
     (c) Where no mode of acceptance is prescribed, the presumption
     is that acceptance is to take same form as offer                 51
     (d) Where communication between parties is instantaneous,
     agreement is only concluded when the offeror receives the
     acceptance                                                       51
            Entores Ltd v Miles Far East Corporation                  52
            Leach Nominees Pty Ltd v Walter Wright Pty Ltd            52
     (e) Where the parties contemplate the postal service as the
     medium of exchange of offer and acceptance, acceptance is
     deemed to occur immediately the letter of acceptance is posted:
     the postal acceptance rule                                       55
            Nunin Holdings Pty Ltd v Tullamarine Estates Pty Ltd 56
  Acceptance must be made in reliance on the offer                    57
            R v Clarke                                                57
  Except where the offeror has dispensed with the right to be told of
  acceptance, acceptance must be communicated                         58
            Felthouse v Bindley                                       58
            Brogden v Metropolitan Railway Company                    61
            Empirnall Holdings Pty Ltd v Machon Paull Partners Pty
            Ltd 61
            Powell v Lee                                              62
            Northern Territory of Australia v Skywest Airlines Pty Ltd
                62
The rules as to rejection                                             63
  What is a counter-offer?                                            63
            Hyde v Wrench                                             63
            Stevenson Jacques & Co v McLean                           64
Lifespan of an offer                                                  65
Revocation                                                            65

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                    Understanding Contract Law 7th ed
  An offer may be revoked at any time prior to its acceptance             65
  To be effective, notice of the revocation must actually reach the
  offeree prior to his or her acceptance of the offer                     65
          Byrne and Co v Van Tienhoven and Co                            65
          Tenax Steamship Co Ltd v The Brimnes (Owners), The
          Brimnes                                                        66
  Notice of the revocation must be brought to the knowledge of the
  offeree                                                                 66
          Dickinson v Dodds                                              66
  Revocation and unilateral contracts                                     67
Death of the offeror or offeree                                           69
  Death of the offeror                                                    69
          Fong v Cilli                                                   69
  Death of the offeree                                                    69
          Carter v Hyde                                                  70
Lapse of time                                                             70
          Ramsgate Victoria Hotel Co Ltd v Montefiore                    70
Non-fulfilment of a condition attaching to the offer                      71
  If an offer is made subject to a condition and that condition is not
  satisfied, the offer cannot be accepted by the offeree. If, for example,
  A offers to buy B’s house, subject to A being able to obtain finance
  for the purchase, and such finance is not granted, A’s offer is
  terminated because the condition which attached to that offer was
   not fulfilled.                                                         71
  Contracts subject to the United Nations Convention on Contracts
  for the International Sale of Goods 1980 (the Vienna Convention) 71
Main points                                                               72
Suggested further reading                                                 72
Questions                                                                 73
3 Consideration                                                         78
Introduction                                                             79
What then is ‘consideration’?                                            79
The rules relating to consideration                                      80
Consideration must be present in every ‘simple’ contract                 80
Consideration may be ‘executory’ or ‘executed’ — it cannot
be ‘past’                                                                81
Past consideration                                                       81
          Roscorla v Thomas                                              82
          Anderson v Glass                                               82
          Lampleigh v Braithwait                                         83
          Re Casey's Patents: Stewart v Casey                            84
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  Exceptions to past consideration rule                              84
     (a) A promise by an adult to pay a debt incurred while a minor  85
     (b) An acknowledgment or part payment of a debt the recovery
      of which is ‘statute-barred’                                   85
     (c) Liability to pay on a negotiable instrument                 85
Consideration must move from promisee                                85
          Dunlop Pneumatic Tyre Co Ltd v Selfridge & Co Ltd          86
          Coulls v Bagot’s Executor and Trustee Co Ltd               87
Consideration need not necessarily move to the promisor              88
          Official Trustee in Bankruptcy v Arcadiou                  88
Consideration need not be adequate                                   89
          Thomas v Thomas                                            89
          Chappell & Co Ltd v Nestlé Co Ltd                          90
Consideration must not be so vague as to be illusory                 91
          White v Bluett                                             91
          Placer Development Ltd v Commonwealth                      92
Consideration must be sufficient in the eyes of the law              93
Promise to perform a moral obligation                                93
          Eastwood v Kenyon                                          93
Promises not to sue and compromise agreements                        94
          Newton, Bellamy and Wolfe v State Government
          Insurance
          Office (Qld)                                               94
          Wigan v Edwards                                            95
Performance of a public duty imposed by law                          97
          Collins v Godefroy                                         97
           Glasbrook Bros Ltd v Glamorgan County Council             97
Performance of an existing contractual duty owed to the promisor     98
          Stilk v Myrick                                             98
           Hartley v Ponsonby                                        98
          Williams v Roffey Bros & Nicholls (Contractors) Ltd        99
          Musumeci v Winadell Pty Ltd                               101
  The rule in Pinnel’s case                                         104
          Pinnel’s case                                             104
          Foakes v Beer                                             104
     Exceptions to the rule in Pinnel’s case                        105
        Promissory estoppel                                         107
          Central London Property Trust Ltd v High Trees House
          Ltd 107
        Conditions on the use of promissory estoppel                109
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                   Understanding Contract Law 7th ed
        Contract existed between parties and subsequent promise
        affected original rights                                       109
        Promissory estoppel only to be used as a ‘shield’, not a ‘sword’
                                                                       110
          Combe v Combe                                               110
          D & C Builders Ltd v Rees                                   111
          Je Maintiendrai Pty Ltd v Quaglia                           112
          Legione v Hateley                                           113
     What, then, is detriment?                                         114
     A new way to use promissory estoppel                              114
          Waltons Stores (Interstate) Ltd v Maher                     114
     Changes to the doctrine of promissory estoppel                    116
          Austotel Pty Ltd v Franklins Selfserve Pty Ltd              118
          Commonwealth of Australia v Verwayen                        118
          Commonwealth of Australia v Clark                           120
          Mortgage Acceptance Nominees Ltd v Australian
          Thoroughbred Finance Pty Ltd & Darvall                      123
     Fraud on a third party                                            125
          Hirachand Punamchand v Temple                               125
Performance of an existing contractual duty between the promisee
and a third party                                                      127
          Shadwell v Shadwell                                         127
General comment                                                        128
Main points                                                            128
Suggested further reading                                              129
Questions                                                              130
4 Intention to be legally bound                                      136
Introduction                                              137
Social or domestic arrangements                           137
Application of the presumption                            137
          Balfour v Balfour                               137
Application of the rebuttal of the presumption            139
          McGregor v McGregor                             139
          Wakeling v Ripley                               139
          Riches v Hogben                                 141
Specific Arrangements                                     143
     (a) Arrangements involving religious bodies          143
          Spyridon Ermogenous v Greek Orthodox Community of
          SA Inc                                          143
     (b) Arrangements within a political context          145
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                           Reading Guide


Commercial agreements                                            145
Application of the presumption                                   145
Application of the rebuttal of the presumption                   146
         Australian Woollen Mills Pty Ltd v Commonwealth of
         Australia                                               146
         ABC v XIVth Commonwealth Games Ltd                      147
Honour Clauses                                                   147
         Jones v Vernon’s Pools Ltd                              147
         Rose & Frank Co v J R Crompton & Bros Ltd               148
Main points                                                      149
Suggested further reading                                        149
Questions                                                        149
5 Contents of the Contract                                      152
The express terms of a contract                                   153
What statements did the parties make to each other?               153
  Oral contracts                                                  153
         Buckenara v Hawthorn Football Club Ltd                   154
  Written contracts                                               155
         British Movietonews Ltd v London & District Cinemas Ltd
         155
    Exceptions to the parol evidence rule                         156
    Custom or trade usage is part of the contract                 156
         Hutton v Warren                                          157
    Operation of the contract to be suspended until happening of
    certain event                                                 157
         Pym v Campbell                                           157
    Written document represents only part of agreement            158
         L G Thorne & Co Pty Ltd v Thomas Borthwick & Sons
         (A'sia) Ltd                                              158
          Van Den Esschert v Chappell                             159
    Extrinsic evidence of surrounding circumstances is admissible
    to clarify ambiguous language in the written contract         159
         Bacchus Marsh Concentrated Milk Co Ltd (in Liquidation)
         v
         Joseph Nathan & Co Ltd                                   160
    Due to a mistake of the parties, their agreement has been
    inaccurately expressed in the written contract                160
    Extrinsic evidence is admissible to prove the parties to the
    contract                                                      161
         Giliberto v Kenny                                        161

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                   Understanding Contract Law 7th ed
Were the statements intended to become part of the express terms
of the contract?                                                      161
           Hopkins v Tanqueray                                        162
           Oscar Chess Ltd v Williams                                 163
            Dick Bentley Productions Ltd v Harold Smith (Motors) Ltd
                164
Collateral contracts                                                  165
           De Lassalle v Guildford                                    166
           Shanklin Pier Ltd v Detel Products Ltd                     166
      Limits on the use of collateral contract                        167
      (a) The alleged collateral contract must be consistent with the
      main contract                                                   167
           Hoyt’s Pty Ltd v Spencer                                   167
           Esanda Ltd v Burgess                                       167
           J Evans and Son (Portsmouth) Ltd v Andrea Merzario Ltd
           168
           Mendelssohn v Normand Ltd                                  168
      (b) The representation was promissory                           169
           J J Savage and Sons Pty Ltd v Blakney                      169
      (c) There must be separate consideration for the collateral
      contract                                                        170
   Arguing ‘in the alternative’                                       170
What does the term mean?                                              171
           CNW Oil (Australasia) Pty Ltd v Australian Occidental Pty
           Ltd 172
   Uncertain terms                                                    172
           G Scammell and Nephew Ltd v H C and J G Ouston 173
           Whitlock v Brew                                            174
   Meaningless terms                                                  174
           Fitzgerald v Masters                                       175
            Nicolene Ltd v Simmonds                                   175
What importance should be attached to the express term?               176
   Conditions and warranties                                          176
      How do the courts determine whether a term is a ‘condition’
      or a ‘warranty’?                                                176
           Bettini v Gye                                              177
           Donut King Australia Pty Ltd v Wayne Gardner Racing Pty
           Ltd 177
            Poussard v Spiers & Pond                                  178
           Associated Newspapers Ltd v Bancks                         179
   Intermediate or innominate terms                                   180
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                              Reading Guide


         L. Schuler AG v Wickman Machine Tool Sales Ltd                 181
Common express terms                                                    181
  Conditions precedent and subsequent                                   181
    (a) Conditions precedent                                            182
         Perri v Coolangatta Investments Pty Ltd                        182
         Blacktown Municipal Council v Doneo                            182
    (b) Conditions subsequent                                           183
         Head v Tattersall                                              183
    Conditions precedent and subsequent — are they really
    different?                                                          183
Exclusion clauses                                                       184
  The courts’ view of exclusion clauses                                 184
  Rules relating to exclusion clauses                                   185
    (a) Exclusion clause in a signed contractual document               186
         L'Estrange v F Graucob Ltd                                     186
         D J Hill & Co Pty Ltd v Walter H Wright Pty Ltd                187
         Rinaldi & Patroni Pty Ltd v Precision Mouldings Pty Ltd
         187
         Le Mans Grand Prix Circuits Pty Ltd v Iliadis                  188
         Curtis v Chemical Cleaning & Dyeing Co                         189
    (b) Where the exclusion clause is contained in an unsigned
    document                                                            189
    Is the document of a contractual nature?                            190
         Causer v Browne                                                190
         Chapleton v Barry Urban District Council                       190
    If the document is ‘contractual’, was reasonable notice given
    to draw the recipient’s attention to the existence of the exclusion
    clause?                                                             191
         Parker v South Eastern Railway Co                              191
         Thompson v London Midland & Scottish Railway
         Company                                                        192
         Thornton v Shoe Lane Parking Ltd                               192
    (c) Where the exclusion clause is in a sign displayed on the
    premises                                                            193
    (d) If notice of the exclusion clause is not given until after the
    contract has been completed                                         194
         Olley v Marlborough Court Ltd                                  194
    (e) If the party subject to the clause has had previous dealings
    with the party relying on it, knowledge of the exclusion clause
    is easier to infer.                                                 195
         J Spurling Ltd v Bradshaw                                      195
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                    Understanding Contract Law 7th ed
    (f) The contra proferentem rule                                      196
          White v John Warwick & Co Ltd                                 196
          Darlington Futures Ltd v Delco Australia Pty Ltd              197
    (g) Where adhering to the exclusion clause renders a collateral
    promise illusory, the promise will override the exclusion clause 198
    (h) Exclusion clauses may protect a party whose actions
    constitute a fundamental breach of contract                          198
          Council of the City of Sydney v West                          199
          Suisse Atlantique Societe d’Armement Maritime SA v NV
          Rotterdamsche Kolen Centrale                                  199
          Photo Production Ltd v Securicor Transport Ltd                200
    (i) The ‘four corners’ rule                                          201
  Statutory initiatives relating to exclusion clauses                    202
Implied terms                                                            203
Terms implied by the courts in the absence of legislation                204
        (i) Universal implied terms                                      204
           (a) An implied term that parties to a contract should do all
           such
           things as are necessary on their own part to enable the other
           party
           to have the benefit of the contract.                          204
          Bournemouth & Boscombe Athletic Football Club Co v
          Manchester United Football Club,                              204
           (b) An implied term that the parties should act in good faith.
                                                                         205
          Esso Australia Resources Pty Ltd v Southern Pacific
          Petroleum
          NL (Receivers and Managers Appointed) (Administrators
          Appointed)                                                    206
          Burger King Corp v Hungry Jack's Pty Ltd                      207
           (c) An implied term that the parties will act reasonably in the
           performance and enforcement of the contract.                  207
           (d) An implied term that the parties will act in accordance with
           the objectives of the contract.                               207
           (e) An implied term that actions of the parties should not
           impair
           the basis of the contract.                                    207
           (f) An implied term that where a contract does not specify a
           time
           for performance, performance must be made within a
           reasonable
           time.                                                         208
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                              Reading Guide


           (g) An implied term that where the contract fails to specify a
           price,
           a reasonable price should be paid.                            208
        (ii) Generic implied terms                                       208
     Generic terms implied from custom or trade usage                    208
          British Crane Hire Corporation Ltd v Ipswich Plant Hire Ltd
                208
          Con-Stan Industries of Australia Pty Ltd v Norwich
          Winterthur Insurance (Australia) Ltd                          209
          Techno Developers Pty Ltd v The Homes Corporation of
          Australia                                                     210
        (iii) Specific implied terms                                     211
           (a) Terms implied by reference to past dealings between the
           parties                                                       211
          Hillas & Co Ltd v Arcos Ltd                                   211
          Balmain New Ferry Co Ltd v Robertson                          212
          Hollier v Rambler Motors (AMC)                                212
           (b) Terms implied to give a contract business efficacy        213
          The Moorcock                                                  213
          BP Refinery (Westernport) Pty Ltd v Shire of Hastings 214
          Codelfa Construction Pty Ltd v State Rail Authority of New
          South Wales                                                   215
          Ikin v The Danish Club 'Danneborg' Inc                        215
Statutory implied terms                                                  216
  Statutory implied terms — when can they be used?                       216
  Consumer contracts for the sale of goods                               216
           (a) To which contracts does the TPA apply?                    216
           (b) The implied terms                                         218
Application of Part V Div 2 of the TPA to Contracts for
the Sale of Goods                                                        220
Main points                                                              222
Suggested further reading                                                223
Questions                                                                224
6 Formalities                                                          227
Effect of non-compliance                                               228
Contracts which must comply with certain formalities                   229
Contracts which must be made by deed                                   229
  The modern requirements for a deed                                   231
Contracts which must be in writing                                     232
Contracts which must at least be evidenced in writing                  232
Current application of the Statute of Frauds in Australia              233
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                   Understanding Contract Law 7th ed
Scope of ss 4 and 17 of the Statute of Frauds                           234
           (a) Special promise by executor/administrator to satisfy
           liability
           of deceased out of executor’s/administrator’s own money      236
           (b) Promise to answer for debt, default or miscarriage of
           another
           person                                                       236
          Birkmyr v Darnell                                             236
          Kirkham v Marter                                              237
           (c) Agreements made in consideration of marriage             237
           (d) Contracts for sale or other disposition of land or any
           interest
           in land                                                      238
           (e) Agreements not to be performed within one year from
           making
           thereof                                                      238
           When the statute of frauds does not apply                    238
          Gibb v Sell                                                   239
           Donellan v Read                                              239
          Michelmore v Breen                                            239
           When the statute of frauds does apply                        240
          Hanau v Ehrlich                                               240
          Boydell v Drummond                                            240
          Reeve v Jennings                                              241
          Clarke v Tyler                                                241
  Section 17                                                            241
Formalities required by ss 4 and 17                                     242
The writing required by ss 4 and 17                                     242
           (a) What is a note or memorandum?                            243
          Ram Narayan v Rishad Hussain Shah                             244
           (b) Must the note or memorandum be one document?             244
           (c) When must the note or memorandum exist?                  245
           (d) What is a signature for these purposes?                  245
Effect of non-compliance with ss 4 and 17                               246
  At common law                                                         246
  In equity                                                             246
          White v Neaylon                                               247
Summary of a promisee’s position                                        248
Main points                                                             248
Suggested further reading                                               249
Questions                                                               249

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                               Reading Guide


7 The right to contract                                                 251
Introduction                                                              252
Minors                                                                    252
The position of minors at common law                                      252
   Valid contracts                                                        253
     (a) Contracts for the supply of ‘necessaries’                        253
           What are ‘necessaries’?                                        253
           Is the thing capable of being a necessary?                     254
          Scarborough v Sturzaker                                        254
          Bojczuk v Gregorcewicz                                         254
           Liability of minors in such contracts                          255
     (b) Beneficial contracts of service                                  256
           Contracts of service or apprenticeship                         256
          Mercantile Union Guarantee Corporation Ltd v Ball              257
           Contract must be beneficial to the minor                       257
          Hamilton v Lethbridge                                          257
          De Francesco v Barnum                                          257
   Voidable contracts                                                     258
     (a) Those which are binding unless repudiated                        258
           Repudiation and its effects                                    259
          Rain v Fullarton                                               259
          Steinberg v Scala (Leeds) Ltd                                  260
     (b) Those which are not binding unless ratified                      260
           Legislative intervention in regard to the ratification of such
           contracts                                                      260
The position of minors under statute                                      261
   Torts and contracts                                                    264
     The tort of deceit                                                   265
Mentally ill persons                                                      266
          Imperial Loan Co v Stone                                       266
          O’Connor v Hart
                267
Intoxicated persons                                                       269
          Matthews v Baxter                                              269
Nationals of foreign countries                                            269
Corporations                                                              270
Married women                                                             272
The position at common law and in equity                                  272
Restraint on anticipation                                                 272
The position under statute                                                273
Married women contracting as agents of their husbands                     274
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                  Understanding Contract Law 7th ed
Bankrupts                                                    274
Imprisoned persons                                           274
Main points                                                  275
Suggested further reading                                    275
Questions                                                    275
8 Rights and Liabilities under a Contract                   277
The doctrine of privity of contract                           278
         Price v Easton                                       278
         Tweddle v Atkinson                                   279
         Beswick v Beswick                                    279
         Taddy & Co v Sterious & Co                          280
         Jackson v Horizon Holidays Ltd                       281
Exceptions to the doctrine                                    281
  Radical reform is the role of the legislature               283
  Judicial circumvention of the doctrine.                     283
          Trust principles                                    284
         Re Schebsman (dec’d); Ex parte Official Receiver v Cargo
         Superintendents (London) Ltd and Schebsman           284
         Royal Exchange Assurance v Hope                      284
          Property law principles                             285
         Smith & Snipes Hall Farm Ltd v River Douglas Catchment
         Board                                                285
          Agency principles                                   285
          Negligence principles                               286
          Assignment principles                               286
          Estoppel principles                                 286
          Unjust enrichment principles:                       287
         Trident General Insurance Co Ltd v McNiece Bros Pty Ltd
         287
         Midland Silicones Ltd v Scruttons Ltd                288
         New Zealand Shipping Co Ltd v AM Satterthwaite & Co
         Ltd
         (‘The Eurymedon’)                                   289
  Legislative intervention to repeal the doctrine             291
Assignment of contractual rights and liabilities              292
Assignment by the parties                                     292
Assignment of contractual liabilities                         292
  Assignment of contractual rights                            293
    At common law                                             293
    In equity                                                 293
    Under statute                                             295
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                              Reading Guide


    Non-assignable contractual rights                    296
         The British Waggon Company and the Parkgate Waggon
         Company v Lea and Co                            296
Assignment by the operation of law                       296
  On the death of a contracting party                    296
  On the bankruptcy of a contracting party               297
  Assignment distinguished from negotiation              297
Main points                                              298
Suggested further reading                                298
Questions                                                299
9 Genuine Agreement                                                   300
Mistake                                                                 301
Introduction                                                            301
Types of mistake                                                        302
          (a) Until recently, the law only ever assisted if the mistake
          made
          was one of fact, not law.                                     302
          Holt v Markham                                                302
          David Securities Pty Ltd v Commonwealth Bank of
          Australia                                                     303
          (b) In those situations where the distinctions between fact and
          law still hold and the mistake made still needs to be one of fact
          in order to found an action in mistake, not only must the
          mistake
          be one of fact, it must also relate to some underlying or
          fundamental fact. Only matters of vital importance will have
          any
          effect on the validity of the contract.                       303
          (c) Mistake must be distinguished from misrepresentation,
          which is discussed later in the chapter. Misrepresentation has
          its own legal consequences and, although both mistake and
          misrepresentation may be found in the one situation, where
          possible, the assumption will be that the mistake was not
          induced by misrepresentation.                                 303
          (d) A successful plea of mistake will allow the mistaken party
          to bring an action to recover any money paid to the other party
          pursuant to the void contract.                                303
          (e) Errors of judgment or mistaken motives are not normally a
          ground for an action in mistake.                              303
Common mistake                                                          303
Common mistake at common law                                            304
   Common mistake as to the existence of the subject matter             304
                                    15
                  Understanding Contract Law 7th ed
         Scott v Coulson                                          304
         McRae v Commonwealth Disposals Commission                304
  Common mistake involving disposition of property to person who
  already owns it                                                 305
         Cooper v Phibbs                                          306
  Common mistake as to the quality, nature or value of the
  subject matter                                                  306
         Bell v Lever Brothers Ltd                                306
         Leaf v International Galleries                           306
Common mistake in equity                                          307
  Agreements that may be set aside                                307
         Solle v Butcher                                          308
  Rectification                                                   309
         Frederick E Rose (London) Ltd v William H Pim & Co Ltd
         309
         Pukallas v Cameron                                       310
Summary of common mistake                                         310
Mutual mistake                                                    311
Mutual mistake at common law                                      311
         Goldsborough Mort & Co Ltd v Quinn                       311
         Raffles v Wichelhaus                                     312
Mutual mistake in equity                                          312
Summary of mutual mistake                                         312
Unilateral mistake                                                313
Unilateral mistake at common law                                  313
     Unilateral mistake involving mistaken identity               313
  Mistaken identity in face-to-face dealings                      314
         Phillips v Brooks Ltd                                    314
         Lewis v Averay                                           314
         Ingram v Little                                          315
  Mistaken identity — contracting at a distance                   316
         Cundy v Lindsay                                          316
         Boulton v Jones                                          316
     Unilateral mistake not involving identity                    317
         Hartog v Colin & Shields                                 317
         Watkin v Watson-Smith                                    317
     Unilateral mistake as to the document signed: non est factum 318
         Saunders (Executrix of the Estate of Gallie, deceased) v
         Anglia Building Society                                  319
         Petelin v Cullen                                         319
Unilateral mistake in equity                                      320
                                 16
                            Reading Guide


          Taylor v Johnson                                       320
Summary of unilateral mistake                                    322
Misrepresentation                                                322
Introduction                                                     322
Misrepresentation under the general law                          323
What is a representation?                                        323
Types of representation                                          323
Requirements of a representation                                 324
(1) The representation must be a statement of fact               324
   Statements of law                                             324
   Statements as to future intention                             324
          Edgington v Fitzmaurice                                325
   Statements of opinion                                         325
          Bissett v Wilkinson                                    325
          Smith v Land & House Property Corporation              326
(2) The representation must be communicated to the other party   326
     (a) Contracts uberrimae fidei                               327
     (b) Distortions of the truth                                327
          R v Kylsant                                            327
          Krakowski v Eurolynx Properties Ltd                    328
     (c) Fiduciary relationships                                 328
(3) The inducement                                               329
          Attwood v Small                                        329
          Sinclair v Preston                                     329
          Redgrave v Hurd                                        329
Types of misrepresentation under the general law                 330
Fraudulent misrepresentation                                     330
          Derry v Peek                                           330
          Peek v Gurney                                          331
Innocent misrepresentation                                       331
Negligent misrepresentation                                      332
          Hedley Byrne and Co Ltd v Heller and Partners Ltd      332
          Esanda Finance Corporation Ltd v Peat Marwick
          Hungerfords                                            333
          Esso Petroleum Company Ltd v Mardon                    334
General law remedies for fraudulent, innocent and negligent
misrepresentation                                                334
   Rescission                                                    335
     Rescinding the contract                                     335
          Car & Universal Finance Co Ltd v Caldwell              335
     Object of rescission                                        336
                                 17
                  Understanding Contract Law 7th ed
     Restrictions on the right to rescind                       336
          Leason Pty Ltd v Princes Farm Pty Ltd                 338
   Damages                                                      338
          Whittington v Seale-Hayne                             339
Misrepresentation under statute                                 340
Legislation relating to remedies                                340
Broadening the scope of misrepresentation                       341
          51A Interpretation                                    341
          52 Misleading or deceptive conduct                    341
          53 False or misleading representations                341
   Effect of these provisions                                   342
Case examples of statutory misrepresentation                    344
     Section 51A                                                344
     Section 52                                                 344
     Section 53                                                 345
Duress and undue influence                                      346
Introduction                                                    346
Duress                                                          347
Duress under the general law                                    347
Duress defined                                                  347
     (a) Illegitimate pressure                                  347
     (b) The inducement                                         348
          Barton v Armstrong                                    348
Categories of general law duress                                348
           (a) Duress of the person                             348
           (b) Duress of goods                                  349
          Hawker Pacific Pty Ltd v Helicopter Charter Pty Ltd   349
           (c) Economic duress                                  350
          Cockerill v Westpac Banking Corporation               350
Remedies for the victim of general law duress                   351
Duress under statute                                            351
          Offensive conduct in relation to land                 351
          Harassment and coercion                               351
Undue influence                                                 351
Undue influence defined                                         351
Undue influence presumed in certain instances                   352
          Lloyds Bank Ltd v Bundy                               353
Actual undue influence                                          353
Remedies for undue influence                                    354
          Allcard v Skinner                                     354
Unconscionable contracts                                        355
                                 18
                               Reading Guide


Unconscionability under the general law                                  355
         Commercial Bank of Australia Limited v Amadio                   355
  What is a special disadvantage?                                        356
  Taking unfair advantage of the other party’s special disadvantage      356
  Inequality of bargaining power — is it a special disadvantage?         357
Remedy for general law unconscionability                                 357
Unconscionability under statute                                          358
  Contracts Review Act 1980 (NSW)                                        358
  Fair Trading Act 1999 (Vic)                                            359
  Trade Practices Act 1974                                               360
Main points                                                              361
Suggested further reading                                                361
  Mistake                                                                361
  Misrepresentation                                                      362
  Duress                                                                 362
  Undue influence                                                        363
  Unconscionable conduct                                                 363
Questions                                                                364
10 Illegality                                                            369
Contracts rendered illegal by statute                                     370
Express prohibition                                                       371
          Re Mahmoud and Ispahani                                         371
Implied prohibition                                                       371
          Smith v Mawhood                                                 372
          Cope v Rowlands                                                 372
          Yango Pastoral Co Pty Ltd v First Chicago Australia Ltd
                372
          Anderson Ltd v Daniel                                           373
          Fitzgerald v FJ Leonhardt Pty Ltd                               373
Consequences of statutory illegality                                      374
  (1) Contracts illegal as formed                                         374
          Joe v Young                                                     374
  Property or money transferred under a contract illegal under
  statute                                                                 375
           (a) If the plaintiff/transferor can base the claim on a legal right
           completely independent of the illegal contract.                375
          Bowmakers Ltd v Barnet Instruments Ltd                          375
          Sajan Singh v Sardara Ali                                       376
           (b) If the object of the legislature in declaring the contract
           illegal

                                      19
                    Understanding Contract Law 7th ed
           is to protect a class of persons and the plaintiff/transferor is a
           member of that class.                                           376
          Kiriri Cotton Co Ltd v Dewani                                   376
           (c) If the plaintiff/transferor has been a victim of fraud, duress
           or undue influence by the defendant/transferee in relation to
           the
           contract.                                                       377
           (d) If the defendant/transferee stands in a fiduciary
           relationship
           to the plaintiff/transferor.                                    377
  (2) Contracts illegal as performed                                       377
          Marles v Philip Trant and Sons Ltd, Mackinnon Third
          Party                                                           377
Contracts rendered void by statute                                         378
The right of recovery                                                      378
The extent of the invalidity                                               379
Collateral contracts                                                       380
Void contracts made by agents                                              380
Contracts rendered illegal at common law                                   380
General policy of the courts                                               380
Contracts rendered illegal at common law                                   382
  Contracts to commit a crime, a tort, or a fraud on a third party         382
  Contracts which promote sexual immorality                                382
  Contracts which prejudice public safety or good relations with
  other states                                                             382
  Contracts which are prejudicial to the administration of justice         383
          Public Service Employees Credit Union Co-operative Ltd
          v
          Campion                                                         383
  Contracts that tend to promote corruption in public life                 384
          Wilkinson v Osborne                                             384
          Parkinson v College of Ambulance Ltd & Harrison                 384
  Contracts to defraud the revenue                                         385
          Alexander v Rayson                                              385
The consequences of illegality at common law                               385
Contracts illegal at inception                                             385
Contracts which are lawful per se but are exploited for an unlawful
purpose                                                                    386
Contracts rendered ‘void’ at common law                                    386
Contracts to oust the jurisdiction of the courts                           386
          Baker v Jones                                                   387
Contracts prejudicial to the status of marriage                            387
                                      20
                             Reading Guide


Contracts in restraint of trade                                      387
          Nordenfelt v Maxim Nordenfelt Guns and Ammunition Co
          Ltd 388
Common restraints                                                    389
     (a) Contracts of employment                                     389
          A Schroeder Music Publishing Co Ltd v Macauley             390
  Restraints to protect an employer's trade secrets and confidential
  information                                                        391
          Drake Personnel Ltd v Beddison                             391
  Restraints to protect an employer’s customer list                  392
           Buckley v Tutty                                           392
      (b) Contracts for the sale of a business                       393
      (c) Contracts to regulate trade                                393
          McEllistrim v Ballymacelligott Co-operative Agricultural
          and
          Dairy Society Ltd                                          394
          English Hop Growers Ltd v Dering                           394
          Esso Petroleum Company Ltd v Harper’s Garage
          (Stourport)
          Ltd                                                        395
The consequences of a contract that is void at common law            395
          Goodinson v Goodinson                                      396
          Attwood v Lamont                                           396
          Price v Green                                              397
Main points                                                          397
Suggested further reading                                            398
Questions                                                            398
11 Discharge of a contract                                         401
Introduction                                                  402
Discharge by performance                                      402
Actual performance                                            402
          Australian National Airlines Commission v Commissioner
          of
          Stamp Duties                                        402
Exact Performance Rule                                        403
          Re Moore & Co and Landauer & Co                     403
          Sumpter v Hedges                                    404
   Exceptions to the general rule                             404
     (a) Where the contract is ‘divisible’                    404
     (b) The doctrine of substantial performance              405
          Hoenig v Isaacs                                     405
                                   21
                    Understanding Contract Law 7th ed
          Bolton v Mahadeva                                               406
     (c) Prevention of complete performance by the other party            406
     (d) Acceptance of the part performance by the other party            406
  Actual performance involving the payment of money                       407
  Time for performance                                                    408
          British and Commonwealth Holdings Plc v Quadrex
          Holdings
          Inc                                                             408
Attempted performance                                                     409
          Startup v MacDonald                                             410
Discharge by express agreement between the parties                        410
   Discharge by agreement may take the form of:                           411
Bilateral discharge                                                       411
  Bilateral discharge simpliciter                                         411
  Bilateral discharge accompanied by a new agreement                      411
  Partial bilateral discharge                                             411
  Formal requirements of the contract being discharged                    412
     (a) Formal requirements in relation to bilateral discharge
     simpliciter                                                          412
     (b) Formal requirements in relation to bilateral discharge
     accompanied by a new agreement                                       412
     (c) Formal requirements in relation to partial bilateral discharge   413
  The concept of waiver                                                   413
Unilateral discharge                                                      415
Discharge by virtue of a term in the contract                             415
Discharge by operation of law                                             416
Merger                                                                    416
Bankruptcy                                                                416
Alteration of a document in a material way                                417
          Croockewit v Fletcher                                           417
          Birrell v Stafford                                              417
Discharge by frustration                                                  418
The rule as to absolute contracts                                         418
Modification of the rule as to absolute contracts                         418
          Taylor v Caldwell                                               418
Elements of Frustration                                                   419
        1. The supervening event must cause a radical change to
        the nature of the contractual rights and obligations              419
        2. Neither party should have caused or brought about the
        supervening event                                                 421
        3. The supervening event must be such that it was not
        contemplated by the parties when they entered the contract        421
                                     22
                               Reading Guide


           (a) Does the above statement mean that if provision is
           made in the contract for the frustrating event, then that event
           must
           have been ‘contemplated’ by the parties, and that therefore,
           frustration cannot be argued?                                    421
           (b) If the supervening event must not have been ‘contemplated’
           by
           the parties, what is the position if the event is foreseen, or
           should
           have been foreseen, but provision is not made for it by the
           parties?
           Can it be said in these circumstances, that the supervening
           event
           was not ‘contemplated’ by the parties because no provision has
           been made for it in the contract and that therefore frustration
           cannot be argued?                                                422
        4. It must be unjust to hold the parties to the contract to its
        terms as originally agreed upon                                     423
Application of the doctrine                                                 423
           (a) Performance of a contract is rendered illegal                423
          Esposito v Bowden                                                423
           (b) Where a particular thing ceases to exist                     424
           (c) A particular set of circumstances cease to exist             424
          Horlock v Beal                                                   424
           (d) Where an event does not take place                           424
          Krell v Henry                                                    424
           (e) Where the party falls ill, dies, is interned or is called up for
           military service                                                 424
           (f) Government interference renders a contract entirely
           different                                                        425
  Delay                                                                     425
          Metropolitan Water Board v Dick Kerr & Co                        425
  Interference or Interruption                                              425
          Cricklewood Property & Investment Trust Ltd v Leighton's
          Investment Trust Ltd                                             425
  Expense and Onerousness                                                   426
          Tsakiroglou & Co Ltd v Noblee & Thorl GmbH                       426
The effect of frustration                                                   426
          Fibrosa Spolka Akcyjna v Fairbairn Lawson Combe
          Barbour Ltd                                                      427
  The position under statute law                                            427
Discharge by breach                                                         428
                                      23
                 Understanding Contract Law 7th ed
Total breach                                                  428
          White and Carter (Councils) Ltd v McGregor          429
          Avery v Bowden                                      430
Partial breach                                                430
Main points                                                   431
Suggested further reading                                     431
Questions                                                     432
12 Remedies for breach                                       435
Introduction                                                   436
Remedies for total breach and breach of condition              436
   Election: discharge or affirmation?                         436
          Green v Sommerville                                 437
          Zucker v Straightlace Pty Ltd                       437
          Spencer v Cali                                      438
          Peyman v Lanjani                                    439
Effect of Discharge                                            441
     (a) Release from further liability                        442
          Foran v Wight                                       442
     (b) Suing the defaulting party                            443
Statutory remedies for breach of condition                     444
Remedies for breach of warranty                                444
Types of damages                                               444
           (a) Expectation loss                                444
           (b) Reliance loss                                   444
           (c) Restitution                                     445
The object and assessment of damages                           446
Remoteness of damage                                           446
   The rule in Hadley v Baxendale                              447
          Hadley v Baxendale                                  447
          Victoria Laundry (Windsor) Ltd v Newman Industries Ltd
               448
          Hungerfords v Walker                                449
          Commonwealth of Australia v Amann Aviation Pty Ltd 450
          Baltic Shipping Co v Dillon                         451
Measure of damage                                              452
          Maredelanto Compania Naviera SA v Bergbau-Handel
          GmbH:
          The Mihalis Angelos                                 452
          Radford v de Froberville                            453
   Difficulty in assessing damages                             454

                                24
                             Reading Guide


          Howe v Teefy                                               454
  The date for assessment of damages                                 455
  Other points to note in regard to the measure of damages           455
           (a)(i) Damages for discomfort, inconvenience, anxiety and
           injured feelings                                          455
          Jarvis v Swans Tours Ltd                                   456
           (a)(ii) Damages may be available for loss of reputation   457
           (b) The injured party has a duty to mitigate the loss     457
          Koutsonicolis v Principe (No 2)                            458
Mitigation and Anticipatory Breach                                   459
           (c) Liquidated and unliquidated damages                   459
           (d) Penalties                                             460
          Dunlop Pneumatic Tyre Co Ltd v New Garage & Motor Co
          Ltd 461
          Ford Motor Co (England) v Armstrong                        461
          Esanda Finance Corporation Limited v Plessnig              462
          Acron Pacific Limited v Offshore Oil NL                    463
Equitable remedies                                                   463
     (a) Specific performance                                        463
          Lumley v Wagner                                            464
     (b) Injunction                                                  465
Loss of the remedies for breach                                      466
     (a) Equitable doctrine of laches                                466
     (b) Statutes of limitation                                      466
Main points                                                          467
Suggested further reading                                            468
Questions                                                            468
13 Quasi-contract                                                  472
Introduction                                                       472
Claims on a quantum meruit                                         473
   Contract subsequently declared void                             473
           Craven-Ellis v Cannons Ltd                              473
           Sabemo Pty Ltd v North Sydney Municipal Council         474
   Contract treated as discharged                                  474
   Personal default under a contract                               475
Money paid pursuant to an ineffective contract                     475
           Plytarias v Andrews                                     475
Money paid at the request of one party and for that party’s use
(that is, benefit)                                                 476
   Payment must have been made under compulsion                    476
           Exall v Partridge                                       476
                                   25
                  Understanding Contract Law 7th ed
   The payment made was in respect of moneys for which the party
   defending the action is or might be made liable                 476
         Brook’s Wharf & Bull Wharf Ltd v Goodman Bros             477
Claims in respect of moneys paid to wrongdoers                     477
         Maskell v Horner                                          477
Money owed to a third party which he or she directs to be paid
to another                                                         478
         Shamia v Joory                                            478
Money paid under a mistake of fact                                 478
         Kelly v Solari                                            479
         Commercial Bank of Australia Ltd v Younis                 479
Main points                                                        480
Questions                                                          480
Contractual Terms and Concepts                                     482
Glossary                                                           482
Index                                                              488




                                  26

				
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