MANAGEMENT & LEGAL IMPLICATIONS OF eCOMMERCE Week 2 Law of Contract Revision

MANAGEMENT & LEGAL IMPLICATIONS OF eCOMMERCE Revision  Sources of Law  Separation of Powers  Division of Powers  Court Hierarchy

MANAGEMENT & LEGAL IMPLICATIONS OF eCOMMERCE Sources of Law ParliamentThe Courts EquityCommon Law Contract LawUnconscionable Conduct Promissory estoppel Trade Practices Act Fair Trading Act FederalState

MANAGEMENT & LEGAL IMPLICATIONS OF eCOMMERCE High Court Federal CourtFamily Court Federal Magistrates Service Court of Appeal County Court Magistrates Court Supreme Court FEDERAL COURTSVICTORIAN COURTS Privy Council Appeals Abolished

MANAGEMENT & LEGAL IMPLICATIONS OF eCOMMERCE Revision (cont.)  Precedent  2 types  Describe  2 parts of a decision  Rule of Law  Citing decisions  Smith v Jones (2001) 145 CLR 203, 207  Smith v Jones [1945] 2 All ER 203, 207  Smith v Jones (2001) HCA 203, [20]

MANAGEMENT & LEGAL IMPLICATIONS OF eCOMMERCE Revision (cont.)  Statutory Interpretation  3 approaches  Current approach  Why  Aids to interpretation  Rules of interpretation  Proof  Burden of proof  Presumptions

MANAGEMENT & LEGAL IMPLICATIONS OF eCOMMERCE Week 2 Law of Contract Development, Intention & Offer

MANAGEMENT & LEGAL IMPLICATIONS OF eCOMMERCE Development of Contract Law  Developed in England pre 1900  Laissez faire economic environment  Underlying common law principles  Freedom of Contract  Equality of bargaining power  Courts reluctant to interfere unless  Duress  Illegal

MANAGEMENT & LEGAL IMPLICATIONS OF eCOMMERCE Recent Developments  Equal bargaining power is a myth  Courts developed equitable principles  Unconscionable conduct  Unjust enrichment  Economic Duress  Promissory estoppel

MANAGEMENT & LEGAL IMPLICATIONS OF eCOMMERCE Recent Developments (Cont.)  Consumer protection legislation  Trade Practices Act 1975  Fair Trading Acts  Insurance Contracts Act 1987  Credit Codes  Licensing Acts (e.g. Builders Licensing Act)  Amendments to Sale of Goods Act

MANAGEMENT & LEGAL IMPLICATIONS OF eCOMMERCE Contract  An agreement between two or more persons that will be enforced by law  May be  In writing  Oral  Partly in writing and partly oral

MANAGEMENT & LEGAL IMPLICATIONS OF eCOMMERCE Writing  Contracts need not be in writing  Exceptions  Sale of Land  Guarantees  Credit contracts  Other statutory requirements

MANAGEMENT & LEGAL IMPLICATIONS OF eCOMMERCE Analysing a Contract Is there a contract? What are the terms? Is it valid & enforceable? Has it been discharged? Has there been a breach?

MANAGEMENT & LEGAL IMPLICATIONS OF eCOMMERCE Six Elements 1.Contractual Capacity 2.Offer 3.Acceptance 4.Intention to create a contract 5.Consideration 6.Certainty The elements are not always clear

MANAGEMENT & LEGAL IMPLICATIONS OF eCOMMERCE Intention to Contract  Parties must intend their agreement to be legally binding i.e. enforceable by a court  An intention to be morally binding is not enough  Objective test  Distinction between  Social/domestic agreements  Commercial agreements

MANAGEMENT & LEGAL IMPLICATIONS OF eCOMMERCE Intention  Subjective intention The person’s actual state of mind  Objective intention Concludes, on the basis of what a person said and did, what a reasonable person in the same circumstances would have intended  Contract law uses objective tests

MANAGEMENT & LEGAL IMPLICATIONS OF eCOMMERCE Domestic Agreements  Court presumes that parties did not intend to contract  Presumption may be rebutted  Todd v Nicholls (S&O p94)  Roufos v Brewster (S&O p94)

MANAGEMENT & LEGAL IMPLICATIONS OF eCOMMERCE Domestic Agreements (cont.)  Court will look at  Terms of agreement  Circumstances surrounding the agreement  Effect of the agreement on the parties  Parties conduct subsequent to agreement

MANAGEMENT & LEGAL IMPLICATIONS OF eCOMMERCE Commercial Agreements  Courts presume that the parties intended to contract  Clear words are needed to rebut the presumption  Onus is on party seeking to disprove the contract  Rose & Frank v J R Crompton (S&O p95)  Edwards v Skyways (S&O p95)

MANAGEMENT & LEGAL IMPLICATIONS OF eCOMMERCE Commercial Agreements (Cont.)  Contrast with Clauses excluding courts jurisdiction which are are invalid  Letters of Comfort  Kleinworth Benson v Malaysia Mining (S&O p96)  Banque Brussels Lambert v Australian National Industries (S&O p97)

MANAGEMENT & LEGAL IMPLICATIONS OF eCOMMERCE Commercial Agreements (Cont.)  Heads of Agreement/Letters of Intent  Air Great Lakes v K S Easter (S&O p98)  Coal Cliff Collieries v Sijehama (S&O p98)  “Without prejudice” documents

MANAGEMENT & LEGAL IMPLICATIONS OF eCOMMERCE Offer  Specific legal meaning  An offer exists only where a reasonable person would conclude on the facts that the person was willing to be bound in a court of law  Distinguish  Indication of future conduct  Invitation to treat  Negotiations

MANAGEMENT & LEGAL IMPLICATIONS OF eCOMMERCE Indication of Future Conduct  A mere statement of a present intention to do something in the future is not an offer  Harvey v Facey (S&O p 70)  Australian Woollen Mills v Commonwealth (S&O p71)  Harris v Nickerson (S&O p71)  Kelly v Caledonian Coal Co (S&O p71)

MANAGEMENT & LEGAL IMPLICATIONS OF eCOMMERCE Invitation to Treat  An invitation to  Negotiate  Make an offer is not an offer but an “Invitation to Treat”  The distinction lies in the objective intention of the person making the offer or invitation to treat.

MANAGEMENT & LEGAL IMPLICATIONS OF eCOMMERCE Invitation to Treat  Retail Displays  Catalogues  Advertisements  Auctions  Tenders

MANAGEMENT & LEGAL IMPLICATIONS OF eCOMMERCE Retail Displays  Fisher v Bell (S&O p72)  Pharmaceutical Society v Boots (S&O p73)  In most circumstances the retailer does not make an offer by displaying goods for sale, even where the goods are marked with a price

MANAGEMENT & LEGAL IMPLICATIONS OF eCOMMERCE Catalogues  Grainger v Gough (S&O p73)  If the catalogue publisher was making an offer then it would be bound by every acceptance even if their stock was exhausted.

MANAGEMENT & LEGAL IMPLICATIONS OF eCOMMERCE Advertisements  Depends on circumstances  Carlill v Carbolic Smoke Ball Co (S&O p74)  But note legislative restrictions e.g. Trade Practices Act

MANAGEMENT & LEGAL IMPLICATIONS OF eCOMMERCE Auctions  Bidder makes the offer  Auctioneer accepts  S64 Sale of Goods Act (Vic)  Auctioneer announces terms at start  Anyone who bids then accepts the auctioneers offer as to terms

MANAGEMENT & LEGAL IMPLICATIONS OF eCOMMERCE Tenders  Person submitting the tender makes the offer  Body calling for tenders accepts any tender  Not bound to accept lowest  BUT, the request for tenders may be an offer to deal with tenders in a certain manner  Hughes Aircraft v Aeroservices Australia (S&O p76)  Harvela Investments v Royal Trust Co of Canada (S&O p76)

MANAGEMENT & LEGAL IMPLICATIONS OF eCOMMERCE Negotiations  An offer will not arise merely because parties have reached agreement on one aspect of the deal  Implied (or express) understanding that parties not bound until formal contract executed  Heads of Agreement

MANAGEMENT & LEGAL IMPLICATIONS OF eCOMMERCE Fate of An Offer  Withdrawn by offeror  Accepted by offeree  Rejected by offeree  Lapse due to passing of time  Lapse due to death of offeror or offeree  Lapse due to failure of condition precedent

MANAGEMENT & LEGAL IMPLICATIONS OF eCOMMERCE Withdrawing an Offer  Cannot be withdrawn after accepted  A contract is made when the offer is accepted  The withdrawal of the offer must be communicated to the offeree  Special cases:  Unilateral offers  Options cannot be withdrawn

MANAGEMENT & LEGAL IMPLICATIONS OF eCOMMERCE Withdrawing an Offer Before Acceptance  Generally, an offeror may withdraw an offer at any time before acceptance  Routledge v Grant (S&OR p78)  But, options cannot be withdrawn  an option is a separate enforcable obligation and cannot be withdrawn  Exists where the offeree has given consideration to keep an offer open  Goldborough Mort v Quinn (S&OR p 80)

MANAGEMENT & LEGAL IMPLICATIONS OF eCOMMERCE Withdrawal Must be Communicated  Offeror must let the offeree know that the offer is withdrawn  Byrne & Co v Tienhoven & Co S&OR p79)  Offeror does not have to communicate withdrawal personally  Would a reasonable person in the position of the offeree conclude that the offer had been withdrawn?

MANAGEMENT & LEGAL IMPLICATIONS OF eCOMMERCE Withdrawing a Unilateral Offer  Involves a unilateral promise e.g. Carllil v Carbolic Smoke Ball Co (S&O p74)  If offeree has acted on the promise then offeror cannot withdraw until offeree has had a reasonable opportunity to complete

MANAGEMENT & LEGAL IMPLICATIONS OF eCOMMERCE Rejecting an Offer  Once rejected, an offer cannot be accepted  May be rejected expressly or by implication  Implied  Offeree’s actions are inconsistent with an intention to accept

MANAGEMENT & LEGAL IMPLICATIONS OF eCOMMERCE Rejecting An Offer (Cont.)  A counter offer is a rejection  Hyde v Wrench (S&O p81)  Any material alteration is a counter offer  Restating the offer when accepting is not a counter offer  Turner Kempson v Camm (S&O p81)

MANAGEMENT & LEGAL IMPLICATIONS OF eCOMMERCE Rejecting An Offer (Cont.)  A counter offer is a rejection (cont.)  Asking for clarification is not a counter offer  Reasonable person test  examine all circumstances

MANAGEMENT & LEGAL IMPLICATIONS OF eCOMMERCE Lapse of Offer  Due to death of either party unless  An option; and  Does not involve personal skill or service by the deceased  Due to failure of condition precedent  Due to time  Express time limit  Otherwise, offer remains open for a reasonable time

MANAGEMENT & LEGAL IMPLICATIONS OF eCOMMERCE Lapse of Offer (Cont.)  Due to time (Cont.)  What is reasonable time depends on:  Method by which offer made  Nature of the transaction  Terms of Proposed Contract  Actions of parties between offer & purported acceptance  Intimations as to time by offeror