PRINCIPLES OF CONTRACTUAL LIABILITY 1. FORMATION OF CONTRACT:... 2 1.1. AGREEMENT TEMPLATE:... 2 1.2. CAPACITY TEMPLATE:... = Error! Bookmark not defined. 1.3. INTENTION TEMPLATE: (objective test)... Error! Bookmark not defined. 1.4. CERTAINTY TEMPLATE:... Error! Bookmark not defined. 2. CONSIDERATION, ESTOPPEL & PRIVITY... Error! Bookmark not defined. 2.1. CONSIDERATION TEMPLATE:... Error! Bookmark not defined. 2.2. ESTOPPEL TEMPLATE:... Error! Bookmark not defined. 2.3. PRIVITY TEMPLATE:... Error! Bookmark not defined. 3. TERMS IN THE CONTRACT:... Error! Bookmark not defined. 3.1. FINDING CONTRACTUAL TERMS TEMPLATE:... Error! Bookmark not defined. 3.2. CONDITION/ WARRANTY TEMPLATE:... Error! Bookmark not defined. 3.3. EXCLUSION CLAUSES TEMPLATE:... Error! Bookmark not defined. 4. DISCHARGE OF THE CONTRACT... Error! Bookmark not defined. 4.1. TERMINATION BY AGREEMENT TEMPLATE... Error! Bookmark not defined. 4.2. TERMINATION BY PERFORMANCE TEMPLATE:.. Error! Bookmark not defined. 4.3. TERMINATION BY BREACH TEMPLATE: Error! Bookmark not defined. 5. REMEDIES... Error! Bookmark not defined. 1
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1. FORMATION OF CONTRACT: 1.1. AGREEMENT TEMPLATE: An agreement differs from contract in that agreements are only at the offer and acceptance level. Agreement: an agreement depends on the existence of consensus ad idem (a meeting of the minds), which manifests itself through the coincidence of an offer addressed by [P1] to [P2], expressing a willingness to be bound on certain terms, and a precisely corresponding acceptance of that offer by [P2]: British Guiana Credit Corp v Da Silva 1) [Element 1]: OFFER- objective- look at intention An offer is a manifestation by [P1] to [P2], by words or conduct, of [P1 s] willingness to be legally bound by certain terms if [P2] is willing to be bound by those same terms: Carlill v Carbolic Smoke Ball Co. (to a person, class of persons or to the whole world) Test 1: Intention: Can the alleged offer, using a reasonable person test, be regarded as being accompanied by an intention on the part of [P1] to be contractually bound, (Carlill v Carbolic Smoke Ball Co) as such it is necessary to look at the surrounding circumstances: AMW v Cth. Is [P1 s] statement (look for specific conditions): (1) Mere puff: An extravagant claim made to induce a contract, but is so far fetched that none would reasonably believe it or expect to be bound by it (Dimmock v Hallet) (2) A mere supply of information: Harvey v Facey: where a price was supplied in response to a query about what the lowest price was; held that if the supply of information (such as price) is not accompanied by a willingness to be bound, it is not an offer (3) An invitation to treat: a) advertisement (Partridge v Crittenden and Carlill v Carbolic Smoke Ball Co); or b) goods displayed in a shop (Pharmaceutical Society v Boots Cash Chemists where it was held that displaying medicines with price tags on shelves in a supermarket was a mere invitation to treat, and the customer made the offer when taking the goods to the check- out; or c) Auctioneer s request for bids is only an invitation to treat, the buyer s bid os the offer, and the auctioneer accepts or rejects the offer. Payne v Cave d) If the auction does not have a reserve there is no difference between one without (obiter) AGC Advances Ltd v McWhirter e) Tender documents: treated as an invitation to treat, but if strict terms apply then it may be considered to be an offer as opposed to inviting an offer. Hughes Aircraft Systems v Airservices Australia f) Distribution of a price list does not amount to an offer as there may be more acceptors than can be supplied: Grainger v Gough 3
(4) An option to buy property For a nominal sum paid to owner in return for sole legal right to purchase within specific period. Liable for damages if breach. Tentative Conclusion: Based on the above, it is [unlikely/likely] that [P1 s] statement was [an invitation to treat, a mere supply of information or mere puff]. As such, [P1] [could/could not] be deemed to have intended to be bound. Test 2: Communication: [P2 s] motive for accepting the offer is immaterial (Williams v Carwardine). [his/her] acceptance must have been in response to and as a result of knowledge of the offer s existence and terms: Fitch v Snedaker. By [apply facts], [P1 s] offer to [P2], [was/was not] communicated. - an offer becomes effective once it is communicated to offeree or his agent. Cole v Cottingham - Offeree must be aware of offer and intend to accept it (R v Clark) i.e Reward- can t claim if become aware later. Test 3: Withdrawal: An offer cannot be accepted by [P2] if [he/she] knows it has been withdrawn: Dickinson v Dodds [P1 s] offer can be terminated by: (1) Lapse of Time: there can be an express time limitation or it can be implied by what is reasonable in the circumstances: Dencio v Zivanovic; (2) Death of an offeror: usually impossible to make an agreement, but if the acceptance is made before notice of the offeror s death, the offeror s estate may be bound by the agreement: Bradbury v Morgan; (3) Death of the offeree: usually an offer cannot be accepted by the offeree s executors: Reynolds v Atherton; (4) Failure of a condition: to which the offer was subject: Masters v Cameron (a) Document of offer contained clause, this agreement is made subject to the preparation of a formal contract of sale which shall be acceptable to my solicitors on the above terms and conditions. (b) Dixon CJ, McTiernan and Kitto JJ, [if] the case [is] one in which the intention of the parties is not to make a concluded bargain at all, unless and until they execute a formal document the terms of agreement are not intended to have, and therefore do not have, any binding effect of their own. The parties may have so provided either because they have dealt only with major matters and contemplate that others will be regulated by provisions to be introduced into the formal document or simply because they wish to reserve 4
to themselves a right to withdraw at any time until the formal document is signed. (c) If it is NOT of this kind, it must be one of two other kinds: (i) Where parties have reached finality and intend to be immediately bound, but at the same time propose to have the terms restated in a form which will be more precise but not different in effect- if so, it is BINDING; or (ii) Where the parties have agreed on all the terms, but nevertheless have made performance conditional on the execution of a formal document if so, it is BINDING. (5) Change of Circumstances: Financings Ltd v Stinson; (6) Rejection by the offeree: Hyde v Wrench: a rejection is irrevocable; but this can be distinguished from a mere enquiry: Stevenson Jacques v McLean: where there was an enquiry as to what the limits of the offer were; (7) Counter- offer: see [Element 2] (8) Revocation: occurs when the offer has been withdrawn: Payne v Cave. (a) Even if a promise has been made to keep the offer open, it can be revoked: Routledge v Grant, unless it is an option: (i) (ii) Where consideration has been given to keep the offer open, an irrevocable option has been purchased: Goldsborough Mort v Quinn. Revocation must be communicated to be effective; the offeree can accept the offer at any time before becoming aware of the revocation: Byrne v van Tienhoven. Communication of revocation: (i) Should be done in similar manner to what offer was made in. (ii) Third Party: Can be by any means, it does not need to be done personally, if the offeree becomes aware through a reliable third party it will suffice: Dickinson v Dodds (a) Where the defendant had offered to sell a house to the plaintiff and promised to keep the offer open until Friday, the plaintiff then heard on Thursday that the house had been sold and he immediately accepted the offer and subsequently sued for damages. The Court found that even without the express revocation, the plaintiff knew the offer was terminated just as surely as if the defendant had told him, therefore he could not accept it. (ii) World- at- large: If the offer is to the world- at- large, revocation must be communicated by the same channels: Shuey, Executor v United States 5
(iii) Unilateral Contract: If there is a unilateral contract where the offer can only be accepted by completing performance of an act (Carlill v Carbolic) Performance of the act with the intention of accepting the offer constitutes both acceptance and consideration by offeree (R v Clark). There is some authority to support the proposition that once performance has begun, there is an implied subordinate promise to keep the offer open until performance is complete, where consideration for the subordinate promise is commencing the act: Veivers v Cordingley (a) Veivers v Cordingley: where there was a contract for the sale of land, and an ancillary offer to pay an extra amount if the land was rezoned. Once V undertook to get approvals for rezoning, C purported to revoke, but the court held he could not do so because the acceptance of his ancillary offer was already underway. (b) Mobil v Wellcome International: The offer can be stopped, but the offeror may be liable to separate damages. Eg injunctive relief to stop the revocation of the offer. iii) In cases of unilateral contracts, such as reward, the courts have taken the approach that the offer is accepted by the first person that performs the act: Robinson v M Ewan. Tentative Conclusion: Based on the above it can be concluded that [P1 s] offer [is/not] capable of being accepted by [P2]. [Element 2]: ACCEPTANCE A final and unqualified indication of assent in response to an offer that is still open which brings into existence the contract by creating consensus ad idem. An expression, by words or conduct, of [P2] of assent to the terms of the offer in the manner prescribed by the offer: Carlill v Carbolic Smoke Ball Co Generally acceptance can only be made by [P2] or by [his/her] agent: Reynolds v Atherton Actual or Apparent: Smith v Hughes- If whatever a mans real intention may be, he so conducts himself that a reasonable man would believe that he was assenting to the terms proposed by the other party, then he is bound. Rules of Acceptance: 1. By a person to whom the offer was made: Boulton v Jones, or there can be an offer to the world at large: Carlill v Carbolic Smoke Ball Co 2. The offeree must be aware of the offer and intend to accept it: R v Clarke. An act done in ignorance of an offer cannot be acceptance of it as consensus ad idem: Fitch v Snedecker.: 3. Acceptance must be unqualified and correspond with the offer: Test 1 4. Acceptance must usually be communicated: Test 2 6