CONTRACTS Miscellaneous applications of ACL for Contracts:! 6 PROMISSORY ESTOPPEL! 7 1. Assumption!... 7 2. Detrimental Reliance!... 7 3. Unconscionability!... 8 Remedy of Promissory Estoppel!... 8 PRIVITY! 9 AGENCY ARRANGEMENTS!... 10 ENFORCEMENT BY THE PROMISEE (Specific Performance)!... 10 INFERRING A TRUST!... 11 ESTOPPEL!... 12 IN LINE WITH US!... 12 ASSIGNMENT OF OBLIGATIONS AND NOVATION!... 12 INCORPORATION OF TERMS! 14 EXPRESS TERMS!... 14 A. SIGNATURE GIVEN... 14 B. NO SIGNATURE GIVEN... 15 IMPLIED TERMS!... 18 1.TERMS IMPLIED IN FACT... 18 1.1 WHOLLY IN WRITING... 18 1.2 NOT WHOLLY IN WRITING... 19 2. TERMS IMPLIED IN LAW... 19 2.1 COMMON LAW... 19 2.1 STATUTE... 20 BY CUSTOM... 20 Page 1
INTERPRETATION! 21 INTERPRETATION OF TERMS!... 21 1. Parol Evidence Rule... 21 2. Factual Matrix:... 22 3. Subsequent conduct... 22 INTERPRETATION OF EXCLUSION CLAUSES!... 23 General Principle... 23 1) Exclusion of liability for serious breach of contract... 23 2) Exclusion of liability for negligence... 24 Statutory Controls (SEE PAGE 6)... 24 PERFORMANCE & TERMINATION! 25 PERFORMANCE!... 25 STANDARDS... 26 A. Implied duty of co operation... 26 B. Fiduciary Duties... 26 C. Utmost Good Faith... 27 D. Duty of Good Faith... 27 ORDER OF PERFORMANCE... 28 CONDITIONAL OBLIGATIONS... 28 1. Presumption of entirety... 28 2. Doctrine of Substantial Performance... 28 Quantum Meruit claims... 29 MUTUAL AGREEMENT!... 30 FRUSTRATION!... 31 UNILATERAL TERMINATION!... 32 Statutory right to terminate... 32 -look for statute in PQ that gives right to terminatebreach OF ESSENTIAL TERM... 32 Express... 32 Implied... 32 FUNDAMENTAL BREACH OF INTERMEDIATE TERM... 33 Page 2
REPUDIATION... 34 Anticipatory Breach... 35 EXERCISE OF THE RIGHT TO TERMINATE... 35 Rights of termination... 35 Doctrine of Election... 36 Consequences of Termination:... 37 MISINFORMATION! 40 BREACH OF CONTRACT!... 40 Parole Evidence Rule:... 41 b) Entire Agreement clauses... 42 c) Getting around the Parol Evidence Rule: Collateral Contract... 42 ESTOPPEL!... 42 Entire Agreement Clause... 43 MISREPRESENTATION (Common Law)!... 43 REMEDY OF RECESSION... 44 DAMAGES IN TORT!... 46 1) Negligent misstatement... 46 2) Tort of deceit for fraudulent misrepresentation... 46 3) Misrepresentation Act 1972 (SA)... 46 MISLEADING OR DECEPTIVE CONDUCT!... 47 MISTAKE!... 50 1. COMMON MISTAKE... 50 2. MUTUAL MISTAKE... 50 3. UNILATERAL MISTAKE... 51 RECTIFICATION!... 51 NON EST FACTUM!... 51 UNCONSCIONABILITY & UNFAIRNESS! 52 COMMON LAW!... 53 STATUTORY PROVISIONS-ACL PT 2-2!... 55 Page 3
UNFAIR TERMS-ACL PT 2-3!... 57 OTHER VITIATING FACTORS! 58 NON COMPLIANCE WITH REQUIREMENTS OF WRITING (FORMALITIES)!... 59 INCAPACITY!... 59 1. Minors (younger than 18yrs)... 59 2. Intoxication and physical/mental disability... 59 3. Company... 59 DURESS!... 60 UNDUE INFLUENCE!... 60 ILLEGALITY AND PUBLIC POLICY!... 61 RESTRAINT OF TRADE!... 62 CONTRACTUAL REMEDIES! 64 SELF HELP!... 64 Withholding performance... 64 ENFORCEMENT!... 64 Equitable remedy of Specific Performance: (e.g. sale of land)... 64 Equitable remedy of Injunction: (awarded at courts discretion)... 65 Action for debt/money due: money owed & P performed contractual obligations... 65 COMPENSATION (DAMAGES)!... 66 Limitation of Action... 66 General Principle for Calculation of Damages... 66 Difficulties in Assessment/Loss of Chance... 67 Reliance Loss... 67 Consequential/Indirect loss (e.g. if defective product explodes and injures P)... 67 Non-pecuniary loss... 68 Nominal Damages (P can t prove loss)... 68 Contributory Negligence-Reduction on damages... 68 Mitigation of loss-reduction on damages... 68 Date of assessment... 69 Page 4
Punative Damages... 69 Liquidated damages and penalty clauses... 69 Rectification Damages:... 70 RESTITUTION!... 71 Quantum Meruit claims... 71 Quantum Valebat... 73 Action for money had and received... 73 Page 5
Miscellaneous applications of ACL for Contracts: Schedule 2 of the Competition and Consumer Act 2010 (Cth) (The Australian Consumer Law) -The following provisions act on all parts/components of Contracts: Goods: -A consumer of goods: people who pays less than $40,000 for the goods or if greater, were of a kind for personal/domestic or household use or a vehicle for transport of goods on public roads " -s 3(1) of the Australian Consumer Law -With the supply of goods there is a guarantee that the goods will be of acceptable quality. " -s 54(1) of the Australian Consumer Law " -They are acceptable if: " " -fit for the purposes " " -acceptable in appearance and finish " " -safe and durable " " " - s 54(2) of the Australian Consumer Law Services: -A consumer of services: people who pay less than $40,000 for the services or if greater, were of a kind for personal/domestic or household use. " S 3(3) of the Australian Consumer Law -With the supply of services there is a guarantee that the services will be rendered with due care and skill! -s 60 of the Australian Consumer Law NOTE: none of the guarantees can be contracted out of. i.e. to exclude/restrict/ modify a guarantee " -s 64 of the Australian Consumer Law Page 6
PROMISSORY ESTOPPEL 1. Assumption: A encourages B to adopt assumption: Legione v Hatleley 2. Detrimental Reliance:P acted on that belief, such that P would be worse of if D departed from that assumption: Je Maintiendrai v Quaglia 3. Unconscionability: It is unconscionable for D to depart from the assumption: Austotel v Franklins 4. The Remedy of Promissory Estoppel P would seek to satisfy the test for promissory estoppel as per Brennen J in Walton Stores v Maher Walton Stores c Maher WS negotiated & signed an agreement to lease on condition that M demolish and rebuild. Sent it to M and they said they would let them know by tomoz if they disagree. No further communication was made thus they started construction to WS s knowledge after 40% WS backs out of agreement 1. Assumption P would argue that argue that D made a clear and unambiguous and unequivocal representation that (insert representation and evidence): Legione v Hatleley! -Representation may be by conduct: Waltons Secretary said that an extension on payment should be okay HC found secretary s statements not clear & unequivocal Legione v Hateley representation that P could not rely on to disregard expiry not estopped from rescinding contract 2. Detrimental Reliance P would argue that (he/she) acted on the belief that (insert belief) in such a way that P would be worse of if D (insert departure from that assumption): Je Maintiendrai v Quaglia Je Maintiendrai v Quaglia D(shop tenant) told P(landlord) having difficulty paying rent P accepted reduced rent for 1.5 yr D decided to vacate, P claimed payment of difference King CJ and White J found that it would be detriment to the tenants to be forced to pay the arrears in lump sum Page 7
3. Unconscionability P would argue that it is against good conscience for D to (insert departure from assumption that D encouraged P to believe): Austotel v Franklins Factors: (Austotel v Franklins) Did D have knowledge of the reliance/assumption? Is it reasonable for P to go away with that assumption? Austotel v Franklins A was negotiating to lease premises to F as a supermarket. F issued out a set of terms but refused to finalise the terms on the basis of other important leases. Parties finally agreed to a 9% increase in area to F, but did not negotiate extra rent. F started to fit out store to their specifications when A withdrawal from the transaction Kirby P found that the parties were substantial enterprises involved in a commercial transaction, who had failed to reach agreement on a crucial element of the transaction (rent) and were who each deliberately refusing to commit themselves. Therefore it was not unconscionable for one of the parties to withdrawal from the transaction Remedy of Promissory Estoppel If successful, (insert P) will be remedied by the minimum equity to do justice to the (insert plaintiff) in the circumstances of the case (Crabb v Arun District Council) which is at the full discretion of the courts and is not necessarily limited to reversal of detriment (Walton Stores v Maher) Page 8
PRIVITY A-Promisee: other party to contract B-Promisor: person making contractual promise to benefit 3rd party C-3rd Party: not a party to the contract PROBLEM QUESTION STRUCTURE: B would argue that a third party (C) cannot enforce a promise (insert relevant case) -Coulls v Bagots as per Barwick CJ (promise to pay money to a 3 rd party) " -Wilson v Darling Island (exempt a 3 rd party from libability in negligence) However there are several ways to get around the doctrine: 1. Agency arrangements: Make 3rd party part of contract 2. Enforcement by the promisee: Promisee (A) may obtain order for specific performance against promisor (B) in favour of 3 rd party (C) 3. Inferring a trust: Damages (C s loss) A holds benefit of B s promise on trust for C 4. Estoppel 5. In line with US? Coulls v Bagots Wilson v Darling Island Trident v McNiece Examples of Privity B had a contract with Mr C to perform quarrying on his land Contract term was to pay royalties to Mrs C. if Mr C died Mr C died Mrs C sues B for not paying HC rejects 3-2 on the facts that she s a 3 rd party could not enforce contract, not entitled to benefits of royalties under contract Contract between owner of goods and carrier contained an exclusion clause, Stevedores unloaded goods and damaged them then sought to rely on the clause. Found that this was not possible as doctrine of Privity applied. The contract was between owner and carrier, stevedores were not a party to the contract so could not rely on the clause. Site owner had an insurance policy with an insurer to insure any contractors/subcontractor. McNiece was a 3 rd party & got injured. Applying the strict law of privity you can t sue BUT HC invented rule that a person named/intended in the contract can enforce it in insurance claims Page 9
1. AGENCY ARRANGEMENTS AGENCY ARRANGEMENTS C may argue that A contracted with B as an agent for C and that the (insert contract) is really between A and C 1. C must prove that A had authority to contract on behalf of C -Must be either be: " " a) Actual authority " " b) Ostensible: It is likely to be found pursuant to Sandberg J s decision in Pola v Cth Bank that a reasonable man would understand B to have C s authority and act on (his/her) behalf. The (insert contract) is between A & C. 2. C must have provided consideration Harris v Burrel & Family Company director signed a contract which indicated he was the company director entered into contract with D to borrow $2mil signed by Mr Harris as director tried to argue he was a mere agent of the company contract had clause saying Harris had to be personally responsible for loan as well as company found that intention of companies that contract be made personally and with company 2. ENFORCEMENT BY THE PROMISEE (Specific Performance) ENFORCEMENT BY THE PROMISEE (Specific Performance) A may seek to obtain an order for specific performance against B in favour of C: Beswick v Beswick Beswick v Beswick Uncle (A) and nephew (B) arrangement where Uncle sells business to nephew nephew promises to give money to both uncle and wife (C+A) nephew pays until Uncle dies then stops aunt sues for specific performance in two capacities; by herself (as C) (not allowed) and on behalf of her husband s estate (as A) -BUT any damages (not specific performance) for failure to confer benefit must reflect promisee s (A) lost and not the 3 rd parties (Coulls v Bagots) Page 10
3. INFERRING A TRUST INFERRING A TRUST 3rd party (C) as beneficiary of a trust can force trustee/promisee (A) to sue promisor (B). If A sues B and recovers damages, damages are measured by C s loss not A s (different to usual rule regarding 3rd party, where damages are measured on A) A would hold damages on trust for C until C demands they are handed over. If A won t sue B on behalf of C: it is a breach of trust, C can sue B (with A as codefendant) e.g. A agrees to deal with property on behalf of C, if there is a trust, C can force A to sue B. Otherwise C can sue A & B for breach of trust. Measure of damages=c s loss C would seek to establish that there is a trust whereby A as trustee made a contract with B which was intended to confer a benefit on C, if this is found C can force A to sue B: Trident v Mc Niece Dean J in Trident v Mc Niece held that the court will infer an intention to create a trust of contractual right if the contract expressly or impliedly manifests that intention as the joint intention of both promisor and promisee: a)express: C would argue that (insert statement) expressly confers an intention to create a trust of contractual right. b)impliedly: C would argue that (insert evidence) implies an intention to create a trust of contractual right. " -Deane J: intention to create a trust is a question of construction of the contract in its context " -Mason CJ and Wilson J: the courts will recognise the existence of a trust when it appears from the language of the parties, construed in its context including the matrix of circumstances, that the parties so intended c) Other issues: Constructive trusts (live with someone in de-facto relationship. Partner buys house but you contribute to upkeep, in effect have some interest in property. Law implies CONSTRUCTIVE TRUST. Page 11
Fiduciary obligation i.e company director has obligation to perform duty to company over their own interests. If abuse the position, and gain money, then implied trust would be used to get the money back. Only one party expresses intent: -Suggested that if only one party has intention is sufficient (Deane J in Trident v McNiece)- The creation of a third party trust rests on the ascertaining the intention of the promisee (B), rather than the intention of the contracting parties. The promisee (B) must intent to contract as the trustee for the beneficiary. Insurance Contracts: Dean J in Trident held that in a contract of liability insurance there is an intention that the relevant contractual right should be held on trust for the assured in question C could also claim under s 48 Insurance Contracts Act 1984 (Cth) which ensures that doctrine of privity does not apply to contracts for insurance 4. ESTOPPEL ESTOPPEL Promisor (B) may be Estopped from relying on lack of privity: Trident v Mc Niece P must prove the 3 elements of estoppel: Waltons v Maher 1. P would argue that D encouraged (him/her) to adopt (insert assumption) by (insert how): Legione v Hateley 2. P would argue that (he/she) acted on the belief that (insert belief) such that (he/she) was worse off than if (he/she) had departed from that assumption: Je Maintiedrai v Quaglia 3. P would argue that it was unconscionable for D to depart from the assumption: Austotel v Franklins mention why 5. IN LINE WITH US IN LINE WITH US C may argue to the courts to further the doctrine in Trident v McNiece to be in line with the US where intended beneficiaries are entitled to sue. However, the current High Court Justices are rather conservative and would unlikely be willing to extend the doctrine. ASSIGNMENT OF OBLIGATIONS AND NOVATION ASSIGNMENT OF OBLIGATIONS AND NOVATION Assignment: Where a party to a contract transfers their rights under the contract to another person. The privity rule does not preclude the substituted party from enforcing the contract. Basic structure: A has entered into contract with B. A assigns rights under the contract to C. Privity not violated C has taken A s place. Whether contract is assignable is a matter of construction. Novation: A 2 nd form of transfer of contractual rights and obligations. A enters contract with B, A and B agree with C that in consideration of B discharging A from A s obligations under the contract, C will undertake A s obligations to B. C then obliged to perform in place of A. The agreement terminates the original contract and replaces it with a new Page 12