TERMS AND THE COMMUNICATING OF THE PARTIES 9

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1 Contracts TERMS AND THE COMMUNICATING OF THE PARTIES 9 WRITTEN TERMS AND THE EFFECT OF SIGNATURE 10 L ESTRANGE v GRAUCOB [1934] 2 KB TOLL (FGCT) v ALPHAPHARM [2004] HCA Circumstances in which the effect of signature may be avoided 12 CURTIS v CHEMICAL CLEANING & DYEING [1951] 1 KB INCORPORATION OF TERMS BY NOTICE 13 Timing 13 OCEANIC SUN LINE SPECIAL SHIPPING COMPANY v FAY (1988) 165 CLR Knowledge or notice 14 THORNTON v SHOE LANE PARKING [1971] 2 QB Unusual terms 15 BALTIC SHIPPING CO v DILLON (THE MIKHAIL LERMONTOV) (1991) 22 NSWLR 15 INCORPORATION BY A COURSE OF DEALINGS 16 BALMAIN NEW FERRY v ROBERTSON (1906) 4 CLR RINALDI & PATRONI v PRECISION MOULDINGS 16 STATEMENTS MADE DURING NEGOTIATIONS 17 Entire Agreement Clauses 18 The Parol Evidence Rule 18 STATE RAIL AUTHORITY OF NSW v HEATH OUTDOOR (1986) 7 NSWLR Exceptions to the Parol Evidence Rule in Identifying Terms 19 (1) Collateral Contracts 19 HOYT S PTY LTD v SPENCER (1919) 27 CLR 133 HCA 20 (2) Estoppel 20 SALEH v ROMANOUS [2010] NSWCA AUSTRALIAN CO-OPERATIVE FOODS v NORCO CO-OPERATIVE [1999] NSWSC WHEN IS A STATEMENT A TERM OF A CONTRACT 21 EQUUSCORP v GLENGALLAN INVESTMENTS [2004] HCA JJ SAVAGE & SONS v BLAKNEY (1970) 119 CLR 435 HCA 22 OSCAR CHESS v WILLIAMS [1957] 1 WLR 370 Court of Appeal 22 DICK BENTLEY PRODUCTIONS v HAROLD SMITH (MOTORS) [1965] 2 All ER CONSTRUCTION 24 EXTRINSIC EVIDENCE IN CONSTRUING A CONTRACT 24 Evidence Excluded 24 Evidence of the Surrounding Circumstances 24 1

2 WESTERN EXPORT SERVICES v JIREH INTERNATIONAL [2011] HCA MOUNT BRUCE MINING PTY LTD v WRIGHT PROSPECTING PTY LTD [2015] HCA THE PROCESS OF CONSTRUCTION 26 ROYAL BOTANIC GARDENS and DOMAIN TRUST v SOUTH SYDNEY CITY COUNCIL [2002] HCA 5 26 The Objective Approach 26 PACIFIC CARRIERS v BNP PARIBAS [2004] HCA Exclusion Clauses 27 Legislature Restrictions on Exclusion Clauses 27 The Common Law Approach to Exclusion Clauses 27 Construing an Exclusion Clause 27 Ordinary Principles of Construction and Contra Proferentem 28 DAVIS v PEARCE PARKING STATION (1954) 91 CLR 642 HCA 29 WHEN WILL TERMS BE IMPLIED? 29 TERMS IMPLIED IN FACT 30 BP Refinery 30 BYRNE v AUSTRALIAN AIRLINES; FREW v AUSTRALIAN AIRLINES (1995) 185 CLR TERMS IMPLIED BY LAW 31 The test of necessity 31 TERMS IMPLIED BY CUSTOM 32 CON-STAN INDUSTRIES OF AUST v NORWICH WINTERTHUR INS (AUST) (1986) 160 CLR Excluding Implied Terms 33 TERMS IMPLIED IN FACT 33 Nature of Terms Implied In Fact 33 Formal Contracts 33 Informal Contracts 34 TERMS IMPLIED IN LAW 34 Requirements for Implying Terms in Law For the First Time 34 The Relationship between business efficacy and necessity 34 TERMS IMPLIED BY CUSTOM 35 FRUSTRATION AS AN EXCUSE FOR NONPERFORMANCE 35 WHEN IS A CONTRACT FRUSTRATED? 36 The Test for Frustration 36 Destruction of Subject Matter 36 Disappearance of the basis of the contract 36 2

3 BRISBANE CITY COUNCIL v GROUP PROJECTS (1979) 145 CLR HCA 37 CONSEQUENCES OF FRUSTRATION 39 Common Law 39 Illustrations of When A Contract May be Frustrated 39 LIMITATIONS ON THE DOCTRINE OF FRUSTRATION 41 THE PERFORMANCE REQUIRED BY THE CONTRACT 42 ORDER OF PERFORMANCE 42 CATEGORIES OF AGREEMENT TO TERMINATE 42 TERMINATION UNDER THE ORIGINAL CONTRACT 43 Express powers to terminate 43 Implied right to terminate a contract of otherwise indefinite duration 43 TERMINATION BY SUBSEQUENT AGREEMENT 43 Express agreements 43 Formal requirements 44 Termination inferred from subsequent agreement 44 Termination by abandonment 45 DIFFERENT USES OF THE WORD CONDITION 46 Contingent and promissory conditions 46 Contingent conditions precedent and subsequent to performance 46 THE DUTY TO CO-OPERATE 46 NON-FULFILMENT 47 When will a contingent condition not be fulfilled? 47 Objective or subjective test? 47 THE CONSEQUENCES OF NON-FULFILMENT OF A CONTINGENT CONDITION 47 Non-fulfilment excuses performance 47 Void or voidable 47 Notice 48 WAIVER OF A CONTINGENT CONDITION 48 RESTRICTIONS OF THE RIGHT TO TERMINATE FOR NON-FULFILMENT OF A CONTINGENT CONDITION 48 Prevention 48 Other restrictions 49 WHEN IS THERE A RIGHT TO TERMINATE FOR BREACH AT COMMON LAW? 49 TERMINATION FOR BREACH OF A CONDITION 50 TERMINATION FOR BREACH OF AN INTERMEDIATE TERM 52 3

4 HONGKONG FIR SHIPPING CO v KAWASAKI KISEN KAISHA [1962] 2 QB 26 COA 52 ANKAR v NATIONAL WESTMINSTER FINANCE (AUST) (1987) 162 CLR 549 HCA 53 KOOMPAHTOO LOCAL ABORIGINAL LAND COUNCIL v SANPINE [2007] HCA THE CONCEPT OF REPUDIATION 55 Repudiation and anticipatory breach 55 THE ABSENCE OF WILLINGNESS OR ABILITY 55 CONDUCT AMOUNTING TO REPUDIATION 56 Express statement 56 Repudiation based on words or conduct 56 Conduct showing an inability or unwillingness to perform 56 Repudiation inferred from a combination of events 57 PROGRESSIVE MAILING HOUSE v TABALI (1985) 157 CLR 17 HCA 57 Instalment contracts 58 MAPLE FLOCK v UNIVERSAL FURNITURE PRODUCTS (WEMBLEY) [1934] 1 KB Repudiation and an erroneous interpretation of the contract 59 DTR NOMINEES v MONA HOMES (1978) 138 CLR 423 HCA 59 AT WHAT TIME IS PERFORMANCE REQUIRED? 60 TIME IS OF THE ESSENCE 60 When is time of the essence? 60 WHERE TIME IS NOT OF THE ESSENCE 60 NOTICE 60 LOUINDER v LEIS (1982) 149 CLR 509 HCA 61 LAURINDA v CAPALABA PARK SHOPPING CENTRE (1989) 166 CLR 623 HCA 62 THE RIGHT TO ELECT 63 WHERE THE CONTRACT IS AFFIRMED 64 Consequences of affirmation for the aggrieved party 64 Consequences of affirmation for the non-performing party 64 BOWES v CHALEYER (1923) 32 CLR 159 HCA 64 WHERE THE CONTRACT IS TERMINATED 65 Consequences for termination for the aggrieved party and for the non-performing party 65 READINESS AND WILLINGNESS 65 ELECTION 66 TROPICAL TRADERS v GOONAN (1964) 111 CLR 41 HCA 67 IMMER (No 145) v UNITING CHURCH IN AUSTRALIA PROPERTY TRUST (NSW) [1993] 182 CLR 26 HCA 68 ESTOPPEL 68 4

5 WAIVER 69 AGRICULTURAL AND RURAL FINANCE PTY LTD v GARDINER [2008] HCA THE RIGHT TO DAMAGES 71 THE COMPENSATION PRINCIPLE 72 COMMONWEALTH v AMANN AVIATION (1991) 174 CLR 6 72 EXPECTATION DAMAGES 73 Damages for breach of an obligation to build or repair 73 BELLGROVE v ELDRIDGE (1954) 90 CLR TABCORP HOLDINGS v BOWEN INVESTMENTS 75 DAMAGES FOR LOSS OF A CHANCE 76 HOWE v TEEFY (1927) 27 SR (NSW) Mitigation and subsequent transactions 77 MCRAE v COMMONWEALTH DISPOSALS COMMISSION 79 COMMONWEALTH v AMANN AVIATION (1991) 174 CLR 6 79 GAINS-BASED DAMAGES 81 DATE FOR ASSESSING DAMAGES 81 CAUSATION AND REMOTENESS 82 Remoteness of Damage 82 STUART v CONDOR COMMERCIAL INSULATION [2006] NSWCA 334 COA of the SCNSW 85 MITIGATION OF DAMAGE 86 Reasonable Steps in Mitigation and the Impecunious Plaintiff 87 BURNS v MAN AUTOMOTIVE (AUST) (1986) 161 CLR 653 HCA 87 Attempts at mitigation which increase loss? 88 CLARK v MACOURT (2013) 253 CLR 1 89 BALTIC SHIPPING v DILLON (1993) 176 CLR Contributory negligence 93 Loss of bargain damages and termination under a term 93 SHEVILL V BUILDERS LICENSING BOARD (1982) 149 CLR THE PENALTIES DOCTRINE 95 THE PENALTIES DOCTRINE AND TERMS PROVIDING FOR THE PAYMENT OF MONEY IN THE EVENT OF BREACH 95 Liquidated damages and penalties 95 Relevant considerations in identifying a penalty 95 Illustrations of the courts approach in assessing whether a liquidated damages clause imposes a penalty 96 PENALTIES AND TERMS PROVIDING FOR THE PAYMENT OF MONEY ON THE OCCURRENCE OF EVENTS NOT INVOLVING A BREACH OF CONTRACT 97 5

6 DEBTS AND LIQUIDATED SUMS 98 REQUIREMENTS OF AN ACTION FOR DEBT 98 Entire obligations 98 Divisible obligations 99 STEELE v TARDIANI (1946) 72 CLR Legislation 100 Substantial performance 100 HOENIG v ISAACS [1952] 2 All ER BOLTON v MAHDEVA [1972] 1 WLR Payment independent of performance 102 DEPOSITS 104 BOT v RISTEVSKI [1981] VR RESCISSION 105 RESTITUTIO IN INTEGRUM 106 BROWN v SMITT (1924) 34 CLR VADASZ v PIONEER CONCRETE (SA) (1995) 184 CLR BARS TO RESCISSION 109 COASTAL ESTATES v MELEVENDE [1965] VR POSITIVE MISREPRESENTATION OF FACT 110 Misrepresentation of fact 110 SMITH v LAND & HOUSE PROPERTY CORP (1884) 28 Ch D FITZPATRICK v MICHEL (1928) 28 SR (NSW) PUBLIC TRUSTEE v TAYLOR [1978] VR Positive misrepresentation 113 DAVIES v LONDON & PROVINCIAL MARINE INSURANCE CO (1878) 8 Ch D MCKENZIE v McDONALD [1927] VLR RELIANCE BY THE REPRESENTEE 115 MISLEADING OR DECEPTIVE CONDUCT 117 CONCRETE CONSTRUCTIONS (NSW) v NELSON (1990) 169 CLR O BRIEN v SMOLONOGOV (1983) 53 ALR HOUGHTON v ARMS [2006] HCA ACCC v TPG INTERNET PTY LTD [2013] HCA BUTCHER v LACHLAN ELDER REALTY 121 MISLEADING CONDUCT 122 Some terminology: types of mistakes 123 How should the law respond to mistake 123 Remedy: rescission or rectification 124 6

7 COMMON MISTAKE 124 Common law: the constructionist approach 124 BELL v LEVER BROTHERS [1932] AC Rescission in equity 127 SOLLE v BUTCHER [1950] 1KB GREAT PEACE SHIPPING v TSAVLIRIS SALVAGE (INTERNATIONAL) LTD [2002] EWCA CIV SVANOSIO v McNAMARA (1956) 96 CLR RECTIFICATION FOR COMMON MISTAKE 131 MARALINGA v MAJOR ENTERPRISES (1973) 128 CLR PUKALLUS v CAMERON (1982) 180 CLR MUTUAL MISTAKE 134 UNILATERAL MISTAKE AT TO TERMS: COMMON LAW VOID AND EQUITY (RESCISSION) 135 SMITH v HUGHES (1871) LR 6 QB TAYLOR v JOHNSON (1983) 151 CLR UNILATERAL MISTAKE AS TO TERMS: RECTIFICATION 137 MISTAKENLY SIGNED DOCUMENTS: NON EST FACTUM 137 PETELIN v CULLEN (1975) 132 CLR MISTAKE AS TO IDENTITY 139 Parties not face to face 139 Parties face to face 140 LEWIS v AVERAY [1972] 1 QB 198 COA 140 ELECTRONIC TRANSACTIONS 141 BASIC ELEMENTS OF DURESS 142 UNIVERSE TANKSHIPS OF MONROVIA v INTERNATIONAL TRANSPORT WORKERS FEDERATION [1983] 1 AC DURESS AND COERCION OF THE PERSON 143 RELATIONSHIPS OF INFLUENCE 145 REBUTTING THE PRESUMPTION 147 Blomley v Ryan 149 Commercial Bank of Australia v Amadio 149 THE ELEMENTS OF THE DOCTRINE 150 Mental disorder 151 Drunkenness 151 Emotional dependence 151 Inequality of bargaining power 152 7

8 KNOWLEDGE OF THE DISABILITY 152 Knowledge and wrongdoing 152 The degree of knowledge required 152 Predatory State of Mind? 153 REBUTTING THE PRESUMPTION 153 RELIEF RESCISSION 154 BLOMLEY v RYAN 154 COMMERCIAL BANK OF AUSTRALIA v AMADIO 155 LOUTH v DIPROSE 157 PART 2-2 OF THE ACL 159 Scope of the prohibition on unconscionable conduct 159 Trade and Commerce 159 Financial Services 159 Redress and Remedies 159 ACCC v CG Berbatis Holdings 159 8

9 IDENTIFYING THE EXPRESS TERMS (PT. 1) Reading: Written terms and signature: From notice: From a course dealing: TERMS AND THE COMMUNICATING OF THE PARTIES Contract terms can be found in: Written and signed contractual documents Unsigned documents Signs Notices Web pages Hypertext links s Statements made during negotiations In identifying the terms of a contract, courts seek to give effect to the intention of the parties. Objective approach is used to assess the parties intentions. Not what parties actually intended, but the intention which reasonable persons would have had if placed in parties situation : Pacific Carriers CLASS NOTES Terms can be: Written or unwritten Express or implied How to get out of a contract: Exclusion clause Plea of Non est factum this is not my deed (this however, was signed) Vitiating factors (affecting consen t ) Document is non-contractual (receipt, memorandums) Legal capacity of the parties (minor) Agency issue (beyond my authority) No such terms in the contract Defence of frustration (changed circumstances due to natural disasters) Distinguish terms from mere representations/negotiation statements Signing is a manifestation of intention to be legally bound. It is not about what you think, but what other people think of your signature (relying on your signature as binding) Provided no inconsistency, you can incorporate external oral terms into a signed contractual document. Agreement Offer and acceptance (not legally binding yet); needs intention to be legally bound Contract Legally binding (intention to be legally bound as the main difference). Contractual document importance of being a contractual document before it could be considered to a subsequent contract: Rinaldi 9

10 WRITTEN TERMS AND THE EFFECT OF SIGNATURE General rule: A party will be bound by the terms contained in a contractual document which she or he has signed, whether or not she or he has read the document : L Estrange v Graucob [1934] 2 KB 394. There are exceptions to this general rule. L ESTRANGE v GRAUCOB [1934] 2 KB 394 The form was an order form and contained printed terms of the sale. It was signed. The machine did not work satisfactorily. L estrange said Graucob was in breach of an implied warranty (in the sense that the machine has a warranty). D relied upon an exclusive agreement clause in the signed document. Excluded any express or implied condition or warranty not in the document. P said he had no knowledge of its contents except for the price. SCRUTTON LJ: The Court came to the decision by analysing ticket cases In cases where the contract is contained in an unsigned document (e.g. railway ticket and other ticket cases), it is necessary to prove that an alleged party was aware, or ought to have been aware, of its terms and conditions (reasonable notice required). When a document containing contractual terms is signed, then, in the absence of fraud or misrepresentation, the party signing it is bound, and it wholly immaterial whether he or she has read the document or not : Parker v South Eastern Ry Co (1877) 2 CPD 416 Held: Judgement in favour of D. Effective EAC because plaintiff signed it. Misrepresentation or fraud as exception to the rule of signing CLASS NOTES Entire Agreement Clause (EAC) entire agreement clause (exclude all oral agreements in the contract) Reasonable notice is a sign for assent (Rationale: Notice constitutes consent ) Used objectivity test in determining contractual document (language used in the contract) - to determine if it is binding - entitled Sales Agreement Signature is objectively construed as intent to be bound 10

11 TOLL (FGCT) v ALPHAPHARM [2004] HCA 52 Alphapharm asked Richard Thomson to look after a vaccine. The vaccines required constant refrigeration at particular temperatures. RT employed Finemores/Toll (appellant). Finemores provided a quotation to RT under cover of a letter. The letter stated that cartage (rate charges for moving) was subject to the conditions on the reverse side of the consignment note. No consignment note was attached. The letter also contained a credit application and required RT to sign a rate schedule accepting certain rates and conditions. The representative of RT (Mr Gardiner-Garden) signed without reading the conditions of the contract. The credit application form, located immediately above the place for the customer s signature, provided: Please read Conditions of Contract prior to signing. Clause 5 provided that the customer entered into the contract on its own behalf and also as agent for the customer s associates persons having an interest in the goods ( clause 3(b )). Clause 6 : In no circumstances would the carrier be responsible to the customer for loss and damage in relation to the goods ( exemption clause) The goods were damaged: The 1st and 2nd consignments of the vaccine were rejected by a regulatory authority as the temperature dropped below the minimum during transit and while in storage. Alphapharm sued Finemores for damages for breach of duty as bailee and negligence. Finemores relied on clause 6. Alphapharm argued that conditions on the reverse side of the application for credit were not part of the contract and that RT had not contracted as agent for Alphapharm. L Estrange v Graucob [1934] 2 KB 394: 3 possible circumstances in which the party who signed the document might not have been bound by its terms: 1. If document signed was not a contract but merely a memorandum of a previous contract which did not include the relevant term. 2. Case of non est factum It is not my deed ; established when a party is mistaken about the nature of the document they are signing - essentially that, through no fault or neglect of their own, they were unable to understand the meaning or significance of the document they were signing. 3. Case of misrepresentation. General rule: Where there is no vitiating element, without equitable and statutory relief, a person who signs a document which is known by that person to contain contractual terms, and to affect legal terms, is bound by those terms, and it is immaterial that the person has not read the document. Held: Alphapharm is bound by Clause 6 of the Conditions of Contract. Judgement in favour of Finemores. This case affirms L Estrange v Graucob [1934] 2 KB 394. The Court spent some time talking about the signature, because the trial judge was so wrong 11

12 Because it was signed, the question of notice was irrelevant. (Error of the trial judge). - Attention on subjective intention of the parties and he required reasonable notice which was not needed as long as it is signed. Extended Lestrange because it added equitable or statutory relief as an exception to the parties being bound by the signature. SIGNATURE important party relying on it, it is unique to a person, and an objective person would believe that signature is legally binding. Protection of the parties. Doesn t matter if there is an onerous or unusual clause as long as it is signed. Plea of non est factum Applies to illiterates, persons with disabilities (blind) Circumstances in which the effect of signature may be avoided The rule in L Estrange v Graucob will not apply where: The signature was induced by misrepresentation or fraud, mistake. Where the document cannot reasonably be considered a contractual document (e.g. it appears to have another function receipt). Statutory protection: ACL Non est factum (applies only to persons with vulnerabilities hard to prove). CURTIS v CHEMICAL CLEANING & DYEING [1951] 1 KB 805 Mrs Curtis (plaintiff) took a white satin wedding dress to Chemical Cleaning & Dyeing Co (defendant) for cleaning. The shop assistant handed P a paper headed Receipt and was asked to sign it. P asked why she had to sign. The shop assistant told her that the cleaners would not accept liability for certain risks, including the risk of damage by or to the beads and sequins which the dress was trimmed. P signed the receipt, which in fact contained a different clause with complete indemnity: This or these articles is accepted on condition that the cleaners are not liable for any damage howsoever arising, or delay. The dress was returned to P with a stain on it. P brought an action claiming damages. Cleaners relied on the exemption from liability contained in the signed receipt. Cleaners appealed against the finding of misrepresentation. DENNING LJ: Exception to L Estrange v Graucob [1934] 2 KB 394 Any behaviour, by words or conduct, is sufficient to be a misrepresentation if it is such as to mislead the other party about the existence or extent of the exemption. If it conveys a false impression, that is enough. Even if there was no misrepresentation, D would still be liable because whatever was signed was not a contractual document. So the signing rule would not apply. A signature will not have effect on a non-contractual document. A reasonable man would not regard a receipt as a contractual document. 12

13 Case for misrepresentation (vitiating factor) and signing of non-contractual document as exception INCORPORATION OF TERMS BY NOTICE Incorporation can be by many ways (signature, notice, and course of dealings) Whether or not the other party will be bound depends upon whether: a. Timing The terms were made available to the party to be bound by those terms before the contract was made. b. Reasonable steps were taken to bring the terms to the notice of the party to be bound. Or actual notice. Timing For delivered or displayed terms to form part of a contract they must be made available to the party to be bound before the contract is made. OCEANIC SUN LINE SPECIAL SHIPPING COMPANY v FAY (1988) 165 CLR 197 Dr Fay (P), made a booking for a cruise on a vessel owned by a Greek company, Oceanic Sun Life (D). On payment of the fare, P was given an exchange order stating that it would be exchanged for a ticket when he would board the vessel. P obtained his ticket in Athens where clause was printed. That the courts of Greece should have exclusive jurisdiction in any action against the owner (jurisdiction clause). While taking part in trap shooting, P received serious injuries. P sued D for negligence in SCNSW. D appealed to HC. BRENNAN J: Whether jurisdiction clause is incorporated? D s submission No contract was made in Sydney is based on the endorsement on the exchange order which reserved to D the right to cancel any cruise. The reservation on that right makes any promise of carriage illusory and denies the existence of a contract of carriage. If contract is made when the fare is paid, the ticket cannot alter the parties contractual rights and obligations. The contract was formed in Sydney. Held: Timing The offer was accepted and the contract was concluded in NSW on payment of fare. Could not incorporate terms after the contract was formed unless there was notice of jurisdiction clause before the payment/contract in NSW or P has knowledge of the terms. Reasonable notice 13

14 No reasonable notice given of the terms. No chance of accepting or rejecting the alleged offer unless by travelling all the way to Greece. The conditions on the ticket did not form part of the contract. The ticket was merely voucher or certificate of entitlement to be carried on terms already agreed. Appeal dismissed. Judgement in favour of P. One cannot rely on a term that was incorporated after the contract was formed. Knowledge or notice If the timing requirement is satisfied, a party will be bound by delivered or displayed terms if he or she has either knowledge or reasonable notice of the terms. If a party knows that the relevant document contains contractual terms, he or she will be bound by those terms regardless of whether he or she has read them. In the absence of knowledge, a party will be bound by delivered or displayed terms if he or she had reasonable notice of the terms. What amounts to reasonable notice will depend on: Type of contract Nature of the terms Circumstances of the case THORNTON v SHOE LANE PARKING [1971] 2 QB 163 Mr Thornton (P), parked his car at a car park owned by D. A notice outside headed Shoe Lane Parking. It gave the parking charges. At the bottom: All Cars Parked At Owner s Risk This was not considered by the court. The sign pertains to cars. Thornton was injured personally. There was also a pillar opposite of the ticket machine which had the printed conditions in a panel. When Mr Thornton returned to collect his car there was an accident and he was severely injured. Trial judge awarded Mr Thornton d. LORD DENNING MR: Ticket was headed Shoe Lane Parking. Below was a box that recorded the time when the car went into the garage. There was a notice alongside: Please present this ticket to cashier to claim your car. Below the time, there was some small print in the left which said: The ticket is issued subject to the conditions of issue as displayed on the premises. Mr Thornton did not read the ticket. In an automatic ticket machine case, the contract is concluded at the very moment the money is put into the machine. Offer: When proprietor of machine hold it out as being ready to receive the money. Acceptance: When customer puts money into the slot. SIR GORDON WILLMER: 14

15 No locus poenitentiae (opportunity to withdraw from a contract or obligation) in the case of a ticket which is pre-offered by an automatic machine. HELD: Appeal dismissed. Judgement in favour of P. The company did not do what was reasonably sufficient notice (red hand rule) to P of the exempting condition. As it would require him to step out of the vehicle and walk around to see the terms on the pillar. No reasonable notice given. No chance to accept or reject the obligation: Oceanic Sun Line The conditions (outside the parking garage) only exempted damage to the cars. Unusual terms BALTIC SHIPPING CO v DILLON (THE MIKHAIL LERMONTOV) (1991) 22 NSWLR This case is about a cruise which sank and the plaintiff (Dillon) suffered physical injuries, shock, and loss of belongings. Upon payment, Dillon received the booking form, it said that a contract of carriage was made only the time of issuing tickets and which contained details of penalties for cancellation of booking. 2 weeks before the cruise, Dillon received her ticket. The ticket contained terms and conditions limiting the liability of the company for personal injury and personal effects. Limitation of liability was expressed not in a dollar sum, but in units of account KIRBY P: The contract between the parties Daly v General Steam Navigation Co Ltd ( Dragon ) [1979] 1 Lloyd s Rep 257 : Once the contract was entered, it was not possible, without novation (conception of a new contract) and the agreement of the passenger, to add further terms. The mere availability of the conditions at the company s office was not adequate notice of unusual terms. She did not have reasonable opportunity to see and agree to the terms and conditions which the appellant sought subsequently to impose on her. Carrier could have done more to bring the unusual provisions to the notice of the passenger. A number of unusual conditions were present in the terms and conditions. Reference to units of account by IMF. Liability expressed not in dollar amounts, but by units of account. Held: Limitation clauses did not form part of the contract of carriage. Appeal dismissed. Judgement in favour of P. Any terms that are to be incorporated need to be given before or while contract is formed, with reasonable notice. The burden of notice is higher for unusual terms. 15

16 If unusual terms are provided on notice during the contract formation/upon payment, limitation clause would have been incorporated. INCORPORATION BY A COURSE OF DEALINGS Where parties have had a history of dealings, contractual terms introduced in earlier contracts may be incorporated into a subsequent contract. BALMAIN NEW FERRY v ROBERTSON (1906) 4 CLR 379 Company placed over the entrance to the wharf a notice stating that a fare of one penny must be paid by all persons entering or leaving the wharf, whether they had travelled by the company s boats or not. Robertson (P) paid the fare and was let in the wharf through a turnstile. He missed the boat and attempted to go back out without paying. The company s officers endeavoured to detain him. O CONNER J: Wharf was not a public place; it was private property. No one had a right to enter there without company s permission, and they could impose on the members of the public any terms they thought fit as a condition of entering or leaving the premises. Having travelled on many occasions, P must have been aware of company s method of conducting business. Disregards notice board as it is immaterial whether the company did what was reasonable to direct public attention to it There was a contract. The case here is not about giving notice but about the course of dealings between P and D which incorporated terms of the contract. The course of dealings must be regular and uniform : Henry Kendall & Sons v William Lillico & Sons Ltd [1969] 2 AC 31 Objective test and depends on the facts and circumstances of the case in determining whether it is regular and uniform constituting course of dealings. RINALDI & PATRONI v PRECISION MOULDINGS FACTS The respondent hired the appellant to transport a fishing vessel which became damaged during performance of the contract. The appellants relied on condition 5 Protects them from a claim of damage done to the boat by their own negligence Similar contracts on 9 of 10 occasions. They were agreed on phone orally and the appellant's driver prepared cart notes to be signed by the the consignee. Cart notes were delivered after delivery. As it was given after performance, it does not amount to a contractual document, but merely a record of dealings, acknowledgement of receipt. 16

17 HELD If the documents containing terms and conditions are not considered contractual documents, they cannot be implied into a current or later contract through course of dealing A document nothing more than acknowledgment of the delivery of goods is not contractual (a request to accept a delivery, not to carry goods). Uniform and regular McCutcheon v MacBrayne An oral contract after previous written contracts could not impliedly contain the earlier term as there was no established constant course of dealings Must find an earlier contract or contracts containing that term Hardwick Game 100 previous dealings all regular meant they were well aware although they had not troubled to read them Hollier v Rambler Motors Three or four transactions over 5 years did not establish a course of dealings The previous documents must be considered contractual documents in order to be implied into a current or later contract through course of dealing. A mere receipt or docket will in most cases not be contractual. You must ask: What is the function of the document? In this case, the exemption clause was presented for signature after the contract had been formed. Objective test after performance it is likely to be a receipt If it is given during the contract then it could be a contractual document which could be incorporated to subsequent contracts in course of dealings. IDENTIFYING THE EXPRESS TERMS (PT. 2) Reading: Parol Evidence Rule: From Statements Made: STATEMENTS MADE DURING NEGOTIATIONS Negotiating parties may make statements about matters relating to the contract. Legal remedies for false statements: 1. If a promissory statement (thus term of a contract) relief under breach of contract 2. If a mere representation (not part of the contract) relief under law relating to misrepresentation (equity) 17

18 - Important to know if term or representation since it will determine the relief of the parties How to determine whether an oral or other statement forms part of a written contract: 1. Consider whether evidence of the purported terms is admissible to the court. Parol evidence rule limits the extent to which extrinsic evidence is available to add or vary the terms of a contract. 2. Courts determine whether the parties would have intended the statement to form part of the contract ( intention ). CLASS NOTES CAN YOU ADMIT EXTRINSIC EVIDENCE IN CONTRACTS? 1. Overcome parol evidence rule, some are considered as terms of contract subject to damages 2. Mere representation not considered terms of contract but subject to equity Wholly in writing parol evidence rule applies. If partly oral, and partly in writing the oral contract must be consistent with the written contract. You need to establish the contract type first before resorting to parol evidence rule. Parol evidence rule is not absolute. CORBIN broader view (since issues will arise which cannot be determined solely by mere inspection of written document) WILLISTON narrow/strict view. When a document appears on its face to be a complete record of the parties contract, it is conclusively presumed to be a contract. PAROL EVIDENCE RULE does not apply in contracts that are partly oral and written. Entire Agreement Clauses Parties may expressly clarify their intention for a contract to be wholly in writing. States that the written contract contains the entire agreement of the parties. But you still need to apply construction to the clause. The Parol Evidence Rule Prevents extrinsic evidence being given to add to, vary or contradict the terms of the contract as they appear in the document (incorporation). Limits the evidence that might be given to explain the meaning of those terms ( construction). ONLY applies to contracts wholly in writing (construction). Excludes evidence extrinsic to contract: Oral conversation, letters, early drafts of the contract 18

19 STATE RAIL AUTHORITY OF NSW v HEATH OUTDOOR (1986) 7 NSWLR 170 P, Heath Outdoor, entered into numerous contracts with the State Rail Authority regarding the placing of advertising material on the land of State Rail. Clause 6 of 1981 contract provided: The Authority may terminate this contract at any time upon giving to the advertiser one calendar month s notice in writing of its intention to do so, but such action shall not give rise to any claim for compensation whatsoever on the part of the advertiser. P contracted with a cigarette manufacturer to display ads on SRA s land for 5 years. NSW government announced that it would phase out cigarette ads on government property. SRA terminated the agreement. Mr Giles (SRA) said something to Mr Low (Managing Director of Heath Outdoor) to the effect of Mr Low not needing to worry about the clause because it was difficult to remove from the document. HELD: As a matter of contract, clause 6 was one of the contractual terms and its effect was to provide D an unfettered right to terminate the contract. Giles made it clear that he had no authority to change any condition in the contract. Low actually accepted this and signed which made him no The discussion between Giles and Low did not add to the terms of the contract. Cannot be a collateral contract as the terms of the assurances contradict with terms of clause 6. Contract in dispute was a wholly-written contract. Application of PER but introduced an avenue of non-application of PER: - Main contract can be the consideration for the collateral only when the terms of the collateral contract do not alter the rights created by the main contract. Exceptions to the Parol Evidence Rule in Identifying Terms Collateral contracts, equitable relief, partly oral and partly written contracts, fraud and misrepresentation, and ratification. It appears that you can imply terms. (1) Collateral Contracts Contract made when one party makes a promise, connected to but independent of the main contract. Used in consideration for that promise, the party agrees to enter into the main contract. The statement must be made as a promise and must be intended to induce entry into the contract: JJ Savage & Sons Pty Ltd v Blakney (1970) 119 CLR 435 The statement must be consistent with the terms of the main contract: Hoyt s Pty Ltd v Spencer (1919) 27 CLR 133. CLASS NOTES Parol evidence does not apply to collateral contract because there are two separate contracts. It does not offend the parol evidence rule, since it is partly oral and partly written. 19

20 HOYT S PTY LTD v SPENCER (1919) 27 CLR 133 HCA FACTS: Landlord agrees with tenant that tenant will have lease. Landlord has a right to bring the contract to an end early. Landlord terminates early. Tenant (Hoyts) says that they were promised orally that Spencer would not exercise that term, unless requested and required to do so by the head lessor. ISAACS J: A collateral contract (antecedent or contemporaneous) being supplementary only to the main contract, cannot impinge on it, or alter its provision or the rights created by it. It can only add, but not alter. A collateral contract must be consistent with the main contract. Literal approach was taken. Equity arising from property. (2) Estoppel Courts remain divided as to whether the parol evidence rule prevents the admissibility of extrinsic evidence for the purpose of establishing an estoppel. SALEH v ROMANOUS [2010] NSWCA 274 The respondents entered into a contract to purchase land from the appellants and paid them a deposit. They entered the contract on the assumption that Edmond would participate in a joint venture to develop the two properties. The appellants promised the purchasers that they would get their money back if Edmond does not build. Edmond did not want to build. There was an entire agreement clause. HANDLEY AJA: A promissory estoppel is not enforced as a contract, but as an equitable restraint on the exercise or enforcement of the promisor s rights. Enforcement of a pre-contractual promissory estoppel is not barred by Hoyt s case. HELD: Promissory estoppel entitled the purchasers to rescind and recover their deposit. Common law cannot be used to prevent an equitable estoppel. Even though the new promise was inconsistent with the main contract, estoppel could still apply as an exception (unlike Hoyt s which bars inconsistency) 20

21 WHEN IS A STATEMENT A TERM OF A CONTRACT For an oral statement: The statement must have been made as a promise and intended by the parties to be part of their contractual agreement. Intention is judged objectively. In assessing, courts will consider relevant factors: Significance of a written contract Language used ( Savage) Relevant expertise of the parties ( Oscar; Dick Bentley) Importance of the statement ( Vans v Chappell) Timing of the statement ( Baltic) Form of the written contract EQUUSCORP v GLENGALLAN INVESTMENTS [2004] HCA 55 Investors asserted that earlier oral loan agreements between them and lender limited recourse (legal right to demand compensation or payment) to the prepaid interest and 2 capital payments. HELD: Written terms override oral terms if oral terms contradict the written agreement. JJ SAVAGE & SONS v BLAKNEY (1970) 119 CLR 435 HCA Motorboat case. Respondent sued for breach of warranty. R alleged that the representation of the estimated boat speed was a condition or warranty of the contract. Or that it was a collateral warranty to the contract for the construction and sale. - HC The actual words of the A should be considered Estimated speed 15 mph. When letter was written, the negotiations for the construction and delivery of the boat were incomplete. R had 3 courses of action upon receipt of the letter: a. Require the speed to be inserted in the specifications as a condition of the contract. b. He could have sought a promise from A (as an assurance, guarantee, etc.) that the boat would attain the speed as a prerequisite to the boat order. c. He could be content to form his own judgment as to the suitable power unit for the boat relying upon the expert opinion of A. Respondent took the third course Only b would give rise to a collateral warranty. Statement of A in the letter was not promissory in nature estimated General principle of promissory statements (language used) Inability to establish a Collateral contract 21

22 OSCAR CHESS v WILLIAMS [1957] 1 WLR 370 Court of Appeal Both parties were mistaken that the car was a 1948 model. P asserts that they are entitled to damages for breach of warranty. DENNING LJ: Both parties mistakenly assumed that the car was a 1948 model. In the case of a common mistake, the contract may be set aside to be dealt with in equity. To recover damages, P must prove a warranty ( binding promise ). Dispute over the meaning of the word warranty. Ordinary meaning binding promise (Only damages) Technical meaning condition (Termination of contract Damages for breach of contract) Lord Holt s test: Was it intended as a warranty or not? The question of whether a warranty was intended depends on the conduct of the parties, on their words and behaviour, rather than on their thoughts. Objective standard. Precise words used are crucial. If seller says: I believe it is a 1948 Morris No warranty. If seller says: I guarantee that it is a 1948 Morris Clear warranty. Seller had no personal knowledge of the year when the car was made. He just relied on the registration book. The trial judge erred because he jumped to the issue of whether it was a warranty. He should have first considered if it was a term. CLASS In determining that the warranty here is a term of contract already, the real question is if that statement is a warranty/promise or not or part of the terms. DICK BENTLEY PRODUCTIONS v HAROLD SMITH (MOTORS) [1965] 2 All ER 65 Dick Bentley purchased a second hand Bentley from Smith (car dealer). Before purchasing, Smith told him that the car had a mileage of 20,000 since being fitted with a replacement engine and gearbox. Statement about mileage was untrue. Bentley sought damages for breach of warranty and succeeded at first instance. Smith appealed. LORD DENNING MR: If a representation is made in the dealings for a contract for the purpose of inducing the other party to act on it, and the other party does act on it by entering into the contract, that is prima facie ground for inferring that the representation was intended as a warranty. Maker of representation can rebut if he can show that it was really an innocent misrepresentation. However, due to his position of power, and ability to check, his statement is 22

23 considered promissory. Thus, relevant expertise of a party makes a difference to whether statements are promissory or representational. CLASS NOTES Remedies for mere representation: Estoppel Unjust enrichment but only in very unique/specific cases Deceptive and misleading conduct ACL Section 18 Ratification principal s approval of an agent s act Rectification recovery and fixing it back to the original position Equitable remedy Usually occurs where parties make a mutual mistake. Collateral Contract vs. Estoppel Collateral Contractual remedies apply (has to be a promise + not a mere statement). Expectation interest/reliance Estoppel Remedy: Damages (Detrimental reliance) CONSTRUING THE TERMS Reading: The Use of Extrinsic Evidence The Process of Construction Exclusion Clauses CONSTRUCTION Start with incorporation. Then find the normal and ordinary meaning. If ambiguous, consider surrounding circumstances. The objective approach is used to determine the meaning of the words used. By reference to what a reasonable person having all the background knowledge 23