1. Revision

2. Acceptance
Final & Unqualified
Communication of acceptance
Postal Rule

3. Consideration
What is it?
Privity of Contract
Value of consideration
Past Consideration
Part Payment of a debt
Promise to perform an existing contract
Certainty
Courts will uphold a bargain if possible

4. Terms of the Contract

5. What are the Terms Terms can be Express In writing Oral
Partly in writing and partly oral
Implied
By the Courts
By legislation

6. Express Terms
The terms of the contract are ascertained by examining the evidence
Not all pre-contractual statements become terms of the contract

7. Express Terms (cont.) Meaning of the terms may not be clear
Where the parties have used language that is incapable of any precise meaning the contract may be void for uncertainty
It is not the role of the Court to make a bargain for people
However, the Courts are reluctant to destroy a bargain

8. Pre-Contract Representations
An oral statement can be a term
Only promissory statements become terms
All other statements are mere representations
A statement does not have to be in the form of a promise to be promissory
Remedies
Term of contract – Remedy for breach of contract
Representation – law of misrepresentation
Mere puff – no remedy

9. Reasonable Bystander Test
Which statements and representations would a reasonable bystander, aware of the circumstances of the case, regard as promissory?
The test is objective
Parties actual intention is irrelevant

10. Reasonable Bystander Test (cont)
Guidelines
Was the representation included in a written document
When, in the negotiations, was the representation made
Did the representation sound promissory
How objectively important is the representation to the whole deal
Did either party have special knowledge about the subject matter of the representation

11. Was There a Written Document?
If the statement was included in a document drawn up by the parties then this is good evidence that the parties regarded the statement as sufficiently important to be a term
Alternatively, if it is left out, that indicates that the parties did not intend it to be a term.
State Rail Authority of NSW v Heath Outdoor Pty Ltd (S&OR p131)
This is not conclusive of itself, it is merely one matter to be considered

12. When was the statement made?
How much time elapsed between the representation and the making of the contract?
Statements made only once early in negotiations are less likely to become terms.
Van Den Esschert v Chappel (S&OR p132)

13. How Important was the Statement
Must be judged in the context of the negotiations
Van Den Esschert v Chappel (S&OR p132)
Hospital Products v United States Surgical (S&OR p134)
What words were used
The more precise the language, the more likely it is a term
Ross v Allis-Chalmers Australia (S&OR p133)

14. Did a Party have Special Knowledge?
Did one party rely on the other’s expertise or special knowledge rather than form its own judgement
Oscar Chess v William (S&OR p130)
Esso Petroleum v Mardon (S&OR p134)

15. Parol Evidence Rule
Courts presume that written formal contracts that appear to be a complete record of the agreement, contain the whole agreement
Courts will not let a party ‘subtract from, add to or contradict the language of the written agreement’

16. Implied Terms Terms implied by Statute Terms implied by the Courts
Implied as a matter of law
Implied as a matter of fact
Trade Custom
Business efficacy
Past Dealings

17. Terms Implied by the Courts
Cannot conflict with express terms
Must not be unreasonable or unjust in the circumstances
Implied as a matter of law
Common situations which are so settled that terms “go without saying”
Implied as a matter of fact
Arise out of the particular facts of the case

18. Terms Implied as a Matter of Law
Professionals and Clients
Professional must use reasonable care and skill
Service Contracts
Provider must take reasonable care and skill in providing the service
Service must be reasonably fit for the purpose for which it was acquired
Costa Vraca v Berrigan Weed & Pest Control (S&O p159)

19. Terms Implied as a Matter of Law (cont.)
Work and Materials
Contractor must use reasonable care
Services must be fit for the purpose for which they were acquired
Materials must be of good quality
Reg Glass v Rivers Locking Systems (S&O p158)
Helicopter Sales v Rotor Work (S&O p158)

20. Terms Implied as a Matter of Law (cont.)
Hire Contracts
Goods are reasonably fit for the purpose for which they are hired
Landlord & Tenant
Landlord must give the tenant ‘quiet enjoyment’ of the premise
Tenant must
Pay rent
Act in “tenant-like” manner

21. Terms Implied as a Matter of Law (cont.)
Employment Contracts
Employer must
Provide a safe system of work
Not require employee to do an unlawful act
Employee must:
Obey reasonable instructions
Use reasonable level of skill and competence
Act in good faith to employer
Keep employer’s trade secrets confidential

22. Terms Implied as a Matter of Fact
Past dealings
Custom or trade usage
To make the contract effective

23. Past Dealings Term is clearly identifiable
Previous dealings are numerous and consistent
Present dealing fits into the course of dealing
No conflict between implied term and an express term
Henry Kendall v William Lillico (S&O p181)

24. Custom or Trade Usage Can state term with precision
Custom is so well known & widespread that all contracts can be said to have the term
Custom is reasonable
No conflict with an express term
British Crane Hire v Ipswich Plant Hire (S&O p161)

25. To Make a Contract Effective
Term is capable of clear and precise expression
The term is necessary to make the contract effective not just reasonable
The term is obvious (“officious bystander test”)
The term is fair & equitable to both parties
No conflict with an express term
The Moorcock (S&O p162)
Codelfa Constructions v State Rail Authority (S&O p163)

26. Exemption Clauses
A clause that limits or excludes the consequences of a breach of a party’s obligations
Courts are biased against them
Bias is less noticeable in commercial contracts
Courts adopt a 2 step process
Has the exemption clause become a term of the contract?
If so, does it cover the breach in question?

27. Is It a term of the contract?
Essentially the same test as for all terms
An exclusion clause cannot be incorporated after the contract has been made (e.g. parking ticket)
Past dealings may imply an exemption clause but the Courts are reluctant to do this
Signed documents will usually be binding even if the party was unaware of the term unless
Signed document could not reasonably be regarded as likely to contain contractual terms
Estoppel exists
Exemption clause has been misrepresented
See Curtis v Chemical Cleaning Co (S&OR p142)

28. Is It a term of the contract?
Unsigned exemption clauses will be binding if
The innocent party was aware of it; or
reasonable notice of it has been given to the innocent party
before the contract is made.

29. What is reasonable notice (cont)
What is reasonable notice depends on:
The nature of the document;
The nature of the transaction; and
The nature of the exemption clause.
Would it be reasonable to expect the document to contain an exemption clause (e.g. a receipt)

30. What is reasonable notice
Is the transaction one where you would expect an exemption clause to exist
The wider the exemption the greater the steps to be taken to bring it to the attention of the other party
Cases
Thornton v Shoe Lane Parking (p144)
Parker v South Eastern Railway (p126)
Oceanic Sun Line Special Shipping v Fay (p127)
DJ Hill & Co v Walter H Wright Pty Ltd (p124)

31. Does the Clause Cover the Breach?
Courts will examine the clause carefully to determine its effect and limit its scope where possible
Generally, the Courts will give effect to the parties intentions as evidenced by the natural and ordinary meaning of the words
There are 3 rules that courts use to limit exemption clauses:
The Contra Preferendum rule
Negligence Clauses
The Four Corners Presumption

32. Contra Preferendum Rule
Any ambiguities in the exemption clause will be construed against the party seeking to rely on the clause
Andrews Bros v Singer Car Co (S&OR p145)
Alex Kay v General Motors Acceptance Corp & Hartford Fire Insurance (S&OR p145)

33. The Negligence Rule
Liability for negligence may be expressly or impliedly excluded but if the words could reasonably be applied to protect against some ground of liability other than negligence, then liability for negligence will not be excluded
White v John Warick & Co (S&OR p146)
To exclude liability for negligence, clear words are required
Tech Pacific v Air Pacific (S&OR p146)

34. The 4 Corners Presumption
The exemption clause will only cover matters within the 4 corners of the contract
Whether an event falls outside the contract depends on the reasonable person test – would a reasonable person aware of the terms of the contract conclude that the parties must have had the relevant event in mind in drawing up the contract.
Sydney Corporation v West (S&OR p148)
TNT v May & Baker (S&OR p149)
Darlington Futures v Delco Australia (S&OR p149)

35. Statutory Reforms
In many cases, it is Illegal to attempt to exclude terms implied by statute e.g. Trade Practices Act
Attempting to exclude statutory liability (where not permitted) may be misleading and deceptive conduct contrary to section 51 of the Trade Practices Act