CONTRACT LAW IN THE SOUTH PACIFIC Jennifer Corrin Care Senior Lecturer TC Beirne School of Law University of Queensland Cavendish Publishing Limited London Sydney
CONTENTS Preface Table of Cases Table of Legislation v xv xli 1 INTRODUCTION 1 INTRODUCTION 1 Definition of a contract and the law of contract 2 SOURCES OF CONTRACT LAW IN THE SOUTH PACIFIC REGION 2 Common law and equity in the South Pacific region 3 Statute law 6 Customary law 12 THE RELATIONSHIP BETWEEN CONTRACT LAW AND OTHER AREAS OF LAW 18 CLASSIFICATION OF CONTRACTS 21 Simple contracts and contracts under seal 22 Bilateral and unilateral contracts 22 Executed and executory contracts 23 Unenforceable, void, voidable, and illegal contracts 24 2 FORMATION OF AN AGREEMENT 25 INTRODUCTION 25 AGREEMENT 25 THE OFFER 27 Definition 27 Distinction between an offer and other dealings 28 Communication of the offer 34 Prescription of the mode of acceptance 35 Termination of the offer 36 ACCEPTANCE 40 Definition 40 Who can accept an offer? 41 Fact of acceptance 42 Communication of acceptance 44 Revocation of acceptance 49 3 UNCERTAIN AND INCOMPLETE AGREEMENTS 51 INTRODUCTION 51 VAGUE OR AMBIGUOUS AGREEMENTS 51 Severance of a meaningless clause 52 INCOMPLETE AGREEMENTS 53 Missing terms as to price 54 An agreement to agree in the future 56 SUMMARY 60
Contract Law in the South Pacific 4 INTENTION TO CREATE LEGAL RELATIONS 61 INTRODUCTION 61 DOMESTIC AND SOCIAL AGREEMENTS 61 COMMERCIAL AGREEMENTS 63 REBUTTING THE PRESUMPTIONS 65 Honour clauses 65 5 CONSIDERATION 67 INTRODUCTION 67 Definition of consideration 67 PRINCIPLES OF CONSIDERATION 68 Consideration must move from the promisee 68 Consideration must not be past consideration 70 Consideration must be bargained for 73 Consideration need not be adequate, but must be sufficient 73 Estoppel 79 6 ESTOPPEL 81 INTRODUCTION 81 Definition 81 THE DEVELOPMENT OF THE PRINCIPLE OF ESTOPPEL 81 OBJECTIONS TO THE PRINCIPLE OF ESTOPPEL 83 Promissory estoppel and consideration 83 Promissory estoppel and the rule in Pinnel's Case 87 FURTHER RESTRICTIONS ON THE PRINCIPLE OF ESTOPPEL 88 Estoppel cannot restrict a statutory discretion 88 CAN A CUSTOMARY SETTLEMENT CREATE AN ESTOPPEL? 88 CONCLUSION 89 7 PRIVITY OF CONTRACT 91 INTRODUCTION 91 LIMITS AND EXCEPTIONS 93 Exceptions which allow a third party to take a benefit 94 Exceptions which allow liability to be placed on a third party 99 THE POSITION BETWEEN THE ORIGINAL PROMISOR AND PROMISEE 100 SHOULD THE PRINCIPLE BE ABANDONED? 102 8 TERMS 105 INTRODUCTION 105 EXPRESS TERMS 105 Terms or representations 105
Contents COLLATERAL CONTRACTS 108 Parol evidence rule 109 Parol evidence as to interpretation 114 Classification of express terms 115 EXEMPTION CLAUSES 120 Incorporation of a clause 120 Interpretation of exemption clauses 126 Statutory regulation of exemption clauses 131 IMPLIED TERMS 137 Introduction 137 Terms implied by common law 138 TERMS IMPLIED BY STATUTE 143 Sale of goods 144 Hire purchase and supply of goods and services 145 Leases 146 Carriage of goods by sea 147 9 FORMALITIES 149 INTRODUCTION 149 CONTRACTS UNDER SEAL 149 CONTRACTS REQUIRED TO BE MADE IN WRITING 150 Bills of Exchange 150 Contracts of marine insurance 151 Consumer credit 151 Bills of sale 152 Hire purchase 153 CONTRACTS TO BE MADE OR EVIDENCED IN WRITING 153 The form required 155 Part performance 157 10 INCAPACITY 161 INTRODUCTION 161 A MINOR'S CAPACITY TO CONTRACT 161 Who is a minor? 161 The effect of minority 163 Liability of a minor in tort 171 Mental disability and intoxication 172 Corporations 174
Contract Law in the South Pacific 11 MISREPRESENTATION 177 INTRODUCTION 177 THE ELEMENTS OF ACTIONABLE MISREPRESENTATION 177 A false statement of existing or past fact 178 The representation must induce the contract 181 THE DIFFERENT TYPES OF MISREPRESENTATION 183 Fraudulent misrepresentation 183 Negligent misrepresentation 184 Innocent misrepresentation 186 REMEDIES FOR MISREPRESENTATION 186 Rescission 186 Damages 188 Summary of available remedies 190 EXEMPTION FROM LIABILITY FOR MISREPRESENTATION 191 FAIR TRADING LEGISLATION 191 The Fair Trading Decree 191 Marshall islands Consumer Protection Act 192 Solomon islands Consumer Protection Act 193 12 DURESS, UNDUE INFLUENCE AND UNCONSCIONABILITY 195 INTRODUCTION 195 THE COMMON LAW DOCTRINE OF DURESS 195 What will constitute sufficient pressure? 196 What will constitute illegitimate pressure? 199 Remedies 199 THE EQUITABLE RULES OF UNDUE INFLUENCE 200 Presumed undue influence 201 Actual undue influence 204 Remedies 204 UNCONSCIONABILITY 205 Remedies 207 STATUTORY PROTECTION 207 Cook Islands 207 Niue 207 Fiji Islands 207 Papua New Guinea 208 13 MISTAKE 211 INTRODUCTION 211 The meaning of 'mistake' 211 MISTAKE AT COMMON LAW 211 Common mistake 212 Mutual mistake 216 Unilateral mistake 216
Contents CONSEQUENCES OF MISTAKE AT COMMON LAW 219 MISTAKE IN EQUITY 219 Rescission 219 Rectification 220 Refusal of equitable remedies 221 14 ILLEGALITY 223 INTRODUCTION 223 CONTRACTS CONTRARY TO LAW 223 Agreements contrary to common law 223 Agreements contrary to statute 223 Contracts contrary to customary law 229 CONTRACTS CONTRARY TO PUBLIC POLICY 229 A contract to oust the jurisdiction of the court 229 A contract to indemnify against criminal acts or deliberate civil wrongs 230 Contracts in restraint of trade 230 Contracts which promote immoral conduct 232 Contracts promoting corruption 232 Contracts tending to pervert the course of justice 233 Contracts prejudicial to public safety 233 EFFECTS OF ILLEGALITY 233 Common law 233 The Illegal Contracts Act 1987 235 Severance 236 15 FRUSTRATION 237 INTRODUCTION 237 REQUIREMENTS 238 General 238 Subsidiary requirements 239 EXAMPLES OF CIRCUMSTANCES AMOUNTING TO FRUSTRATION 242 Supervening illegality 242 Destruction of something essential for performance of the contract 243 Unavailability of thing or person essential for performance 243 Method of performance impossible 244 An event which renders the common purpose fruitless 244 EFFECTS OF FRUSTRATION 245 The effect at common law 245 The effect under statute law 246
Contract Law in the South Pacific 16 DISCHARGE BY AGREEMENT 249 INTRODUCTION 249 CONTRACTUAL DISCHARGE 249 Bilateral discharge 249 Unilateral discharge 250 Variation 250 Formalities 251 NON-CONTRACTUAL DISCHARGE 252 Estoppel 252 Waiver 252 17 DISCHARGE BY PERFORMANCE 255 INTRODUCTION 255 PERFORMANCE MUST BE EXACT 255 Entire contracts 256 Time for performance 257 EXCEPTIONS TO THE GENERAL RULE 257 Divisible or severable contracts 257 Substantial performance 258 Tender of performance 259 Acceptance of partial performance 260 18 TERMINATION FOR BREACH 261 INTRODUCTION 261 FORMS OF BREACH 261 TERMINATION FOR BREACH 262 FORMS OF REPUDIATION 263 Actual breach 263 Anticipatory breach 264 THE EFFECT OF BREACH 265 The manner of election 266 Election to treat the contract as discharged 266 Failure to elect 267 Election to affirm the contract 267 19 REMEDIES 271 INTRODUCTION 271 LIMITATION 271 Disability 273 Cause of action concealed 273 Acknowledgment or part payment 274
Contents DAMAGES 274 Introduction 274 Purpose of damages 274 Causation 275 Intervening causes 276 Remoteness 277 MITIGATION 279 The general principle 279 Limitations on the mitigation principle 279 ASSESSMENT OF DAMAGES 280 Expectation loss 281 Reliance loss 284 Date of assessment of damages 287 Agreed damages clauses 287 SPECIFIC PERFORMANCE AND INJUNCTIONS 288 Introduction 288 Specific performance 289 Injunction 289 Restrictions on the right to specific performance and injunctions 290 RESTITUTION 294 Introduction 294 Recovery of money paid 295 Recovery for services rendered 299 20 E-COMMERCE 303 INTRODUCTION 303 PROBLEM AREAS 304 Formation of contracts 304 Other aspects of a legally binding agreement and its terms 306 Breach of contract and remedies 308 Formalities 308 RESOLVING THE LEGAL ISSUES INVOLVED IN E-COMMERCE 311 Overseas developments 311 Regional developments governing e-commerce 314 THE FUTURE 315 Index 317