1. Week 3
Law of Contract

2. 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
The parties were free to make a contract if they wanted to
It was not for the courts to adjudicate on
the fairness of the contract
The adequacy of the consideration

3. Recent Developments Equal bargaining power is a myth
Courts developed equitable principles
Unconscionable conduct
Unjust enrichment

4. 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

5. Recent Developments (Cont.)
Mainly affect Business to Consumer agreements
Business to Business agreements
Largely unaffected
Traditional Contract Law applies

6. Analysing a Contract
Is there a contract?
What are the terms?
Is it valid & enforceable?
Has it been discharged?
Has there been a breach?

7. 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

8. Five Elements Contractual Capacity Offer Acceptance
Intention to create a contract
Consideration
The elements are not always clear
Offers must be distinguished from invitations to treat
Acceptance is only valid when it has been properly communicated
Parties must have intended that their arrangement be legally enforceable
Generally, courts will only enforce an agreement if both sides have given something of value
Capacity – minors, mentally incompetent etc
Discuss difficulties with elements
Catching a bus
Buying a plane ticket
Buying a snack from a vending machine
Online store

9. Writing Contracts need not be in writing Exceptions Sale of Land
Guarantees
Credit contracts
Other statutory requirements

10. 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

11. Remedies Termination Damages Monies due Agreed damages clause
Specific Performance
Injunction

12. Some Terms Formal contracts Simple contracts Void Voidable
Unenforceable
Illegal
Executed
Unexecuted
Express
Implied
Rescission
Repudiate

13. Law of Contract
Offers

14. 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

15. Indication of Future Conduct
A mere statement of a present intention to do something in the future is not an offer
Harvey v Facey
Australian Woollen Mills v Commonwealth
Harris v Nickerson
Kelly v Caledonian Coal Co
Pp 70 & 71
Harris v Nickerson – no offer
Kelly v Caledonian Coal Co – no offer

16. Invitation to Treat An invitation to Negotiate Make an offer
Partridge v Crittenden (note this concerned criminal liability)

17. Invitation to Treat Common cases Retail Displays Catalogues
Advertisements
Auctions
Tenders

18. Retail Displays Fisher v Bell Pharmaceutical Society v Boots
In most circumstances the retailer does not make an offer by displaying goods for sale, even where the goods are marked with a price
Pp 72 & 73
Fisher v Bell (this case concerned criminal liability)
Pharmaceutical Society v Boots (this case concerned criminal liability)

19. Catalogues Grainger v Gough
The distinction lies in the objective intention of the person making the offer or invitation to treat.
If the catalogue publisher was making an offer then it would be bound by every acceptance even if their stock was exhausted.
pp 73 & 74

20. Depends on circumstances Carlill v Carbolic Smoke Ball Co
Advertisements
Depends on circumstances
Carlill v Carbolic Smoke Ball Co
But note legislative restrictions e.g. Trade Practices Act
pp 74 & 75
Carlill v Carbolic Smoke Ball Co
The defendant intended the offer to be taken seriously, why else would it deposit 1,000 pounds?
The defendant did not have a final “right of refusal” in the sale

21. S64 Sale of Goods Act (Vic) Auctioneer announces terms at start
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
P 75
S64 Sale of Goods Act (Vic) provides that sale of goods by auction takes place at the fall of the hammer
No such legislation for sale of land
Cases go each way

22. Tenderer makes the offer Body calling for tenders accepts any tender
Not bound to accept lowest
Must give proper consideration to each tender
Hughes Aircraft v Aeroservices Australia
Harvela Investments v Royal Trust Co of Canada
The request for tenders is an offer to deal with tenders in a certain manner
Pp 75 & 76
Hughes Aircraft n Aeroservices Australia
The request for tenders is an offer to deal with tenders in a certain manner
Note tendering can be an expensive business
Harvela Investments v Royal Trust Co of Canada
Found for plaintiff
An implied term that each tender must be for a definite amount

23. 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