Contract Law: Intention, Consideration, and Genuine Consent Issues, Lecture notes of Business

Download Contract Law: Intention, Consideration, and Genuine Consent Issues and more Lecture notes Business in PDF only on Docsity! CLAW1001 SUMMARY GUIDE SUMMARY GUIDE SAMPLE à THIS DOCUMENT CONTAINS A FEW EXTRACTS OF WHAT THE SUMMARY GUIDE COVERS. THE FULL VERSION CONTAINS ALL ISSUE AREAS OF ALL TOPICS. CONTRACTS ISSUE 2: INTENTION TO CREATE LEGAL RELATIONS In order for a contract to exist, the parties must have intended to create legal relations. 1. Onus lays on party seeking to have contract dismissed a. This is true for commercial agreements which have a presumption that parties did intend to create an enforceable agreement. Banque Brussels b. However – for social agreements there is a presumption that parties did not intend to create a legally enforceable agreement Balfour v Balfour (married couple – presumption when domestic in nature) – onus lays with party seeking to enforce contract. And Ashton v Pratt (Escort goes into agreement with rich guy to stop sleeping with others) i. This presumption was rebutted in Todd v Nicol (family agreement) and Wakeling v Ripley (family agreement – sold house and moved in reliance) and Ermogenous v Greek Orthodox (religious context – employment contract) and McKeand v Thomas (social agreement – were neighbours agreement was in an informal manner) 2. Objective appearance not the subjective intention. What their words and conduct would have led a reasonable person in the position of the other party to believe. Toll v Alphapharm 3. Parties may also expressly state their intention e.g. stipulate that there is ‘no intention to be legally binding’ a. Jones v Vernons’ Pools – Coupons for a sales promotion that had ‘binding in honour only’ and ‘did not give rise to any legal relations’. Rebutted commercial assumption. Acceptance by email is capable of establishing legal relations. La Forrest v Ford ‘Without prejudice negotiations’ (generally used when party doesn’t want their statement to be admissible in court) these negotiations are capable of being an offer (Tallerman & Co v Nathan’s Merchandise) – Needlework Warehouse v Chansonette – Intention to be bound in the circumstances – terms of settlement were sufficiently certain to constitute an offer. ISSUE 3: CONSIDERATION Consideration is ‘an act or forbearance of one party, or the promise thereof, is the price for which the promise of the other is bought’ Dunlop v Selfridge Quid pro quo (this for that) A consideration is a detriment or liability voluntarily incurred by the promisee or a benefit conferred on the promisor at the instance of the promisee in exchange for the promise. Is not required for formal contracts – as opposed to simple. 1. Must move from the promisee/offeree (but not necessarily move to the promisor) 2. Past consideration is invalid Roscorla v Thomas CLAW1001 SUMMARY GUIDE a. Exception à Performance of services at request of promiser who subsequently promises to pay is good consideration if it was assumed at the time of the request that services would be paid for. Recipient of the benefit may be obliged to make restitution. Re Casey’s Patients b. Exception à if act done at promisor’s request, parties understood it would be remunerated in some way and promise had been given in advance of the act Pao On v Lau Yiu Long 3. Consideration must be sufficient (must have some value) but need not be adequate (‘price’ is actual value). A party can stipulate whatever consideration it chooses. a. Chappel & Co v Nestle – Nestle offered song in exchange for chocolate wrappers. Despite that they were of no value – it was stipulated as consideration. b. Consideration must be clear – not illusory i. White v Bluett – Consideration was to ‘stop complaining’ is too vague. ii. Dunton v Dunton – agreed to pay his wife for her to remain ‘sober’ – 2/3 judges held this was sufficient 4. NB: Not good consideration a. Existing duty i. Existing legal duty 1. Glasbrook Bros v Glamorgan County Council paying for additional police protection – did the police provide fresh consideration rather than duty to serve – found yes they did go above – public duty exceeded. 2. If the promise is to do something that goes beyond the obligations imposed by law, the additional performance may constitute sufficient consideration. 3. Stilk v Myrick pay additional wages if crew sailed ship home shorthanded – shortage of staff more an emergency they were all bound to do under original contract b. Existing contractual duty i. Can’t threaten to break an existing obligation Wignan v Edwards ii. Where continuing to do what you are obligated to provides a commercial benefit to the other side such as remaining as a tenant by them paying reduced rent – valid consideration. Musumeci v Windadell iii. May be valid if paying more for something that requires a party to do something different to the original agreement Harltey v Ponsonby c. Part payment of debt Foakes v Beer (similar to existing contractual duty) ISSUE 4: GENUINE CONSENT For a contract to be enforceable, the parties must have intended to enter the contract. Genuine consent must be given, so that it is a real expression of their intentions. Void à Never came into existence Voidable à Contract valid in every respect except one party has the right to rescind the contract. Unenforceable à Contract treated as valid in every respect except one party (or sometimes both) cannot be sued in court for breaking the contract. Consider one of the following: 1. Misrepresentation A false statement of fact (past or present) made by the representor to the representee during pre- contractual negotiations, which induces the representee to enter into the contract. • Action depends on whether the misrepresentation was: CLAW1001 SUMMARY GUIDE c. Good faith i. Implied term of parties to act in good faith for business efficacy. Not just by fact of business efficacy but by law as a necessary incident of the contract. 1. Burger King Corp v Hungry Jacks: In contract new stores needed approval, one went ahead without approval with a selfish intent. Withholding of approval was a breach of implied duty of good faith. 2. Overlook v Foxtel: No breach if acting in their legitimate commercial interest as expressly provided for in contract. Foxtel changed price on Overlook’s content because of poor ratings. d. Custom/trade usage i. A custom must be sufficiently well known so that it could be objectively assumed that all persons in the industry would consider themselves bound by it. ii. Con-stand Industries of Australia v Norwich Winterthur Insurance 1. Existence of custom is a question of fact 2. Custom is well known and generally acquiesced 3. Custom must not contradict express terms 4. Party may be bound by a custom even if it had no knowledge of it (Actual knowledge not required) ISSUE 12: CONTRACTUAL REMEDIES Common Law Damages à To place the plaintiff in the position they would have been in had the contract been performed (includes actual loss, reliance damages loss of profit, expectation loss). It is to compensate and not punish. Plaintiff must prove 1. The breach caused the loss (causation) and the damages claimed are not too remote (remoteness). Plaintiff bears the legal burden of proving causation. a. Types of damages claimed Hadley v Braxendale i. 1. Loss that arises naturally from the breach according to the usual course of things. Compensates the innocent party for losses that are reasonably foreseeable. ii. 2. Loss that may reasonably have been in the contemplation of the D at the time when the contract was made, as a probable result of the breach. Compensates the innocent party for a loss attributable to special circumstances known to the defendant at the time of contracting. b. E.g. Victoria Laundry v Newman Industries: Delivery of a boiler was late. Plaintiff claimed lack of boiler meant they were unable to undertake general business and a number of lucrative contracts for a government department. Awarded damages for general loss of business because this is reasonably expected but not for contracts as D did not know about the,. 2. They took all reasonable steps to minimise the loss suffered (mitigation). a. Plaintiff can’t claim for loss that reasonably could have been avoided. b. E.g. Burns v MAN Automotive i. Driver caused further loss to engine which broke down because he kept driving it. Damages awarded until the defect was discovered but not after this because it falls into the second limb of Hadley v Baxendale – there was a duty to mitigate. CLAW1001 SUMMARY GUIDE Difficulty in assessing damages does not mean they won’t be assessment, the award will merely be a rough estimate of the likely loss. Howe v Teefy. • Reliance damages o McRae v Commonwealth Disposal Commission:…. TORTS ISSUE 2: BREACH OF DUTY (STANDARD OF CARE) Once a duty has been established, in order to be liable, the defendant’s actions must fall below the standard of care of a reasonable man. Standard of care is the response of a reasonable person to a foreseeable risk. To be determined objectively - what would the reasonable person do? • Weigh up a range of factors. • The defendant need only take precautions against not insignificant risks that a reasonable person would take precautions to avoid. 1. Seriousness of the risk – the more serious the likely injury, the more significant the risk and greater precautions the defendant must take. The practicability of precautions is measured in terms of expense, difficulty and inconvenience. • Paris v Stepney Borough Council: Defendant had been negligent in not providing the plaintiff with goggles which would have protected him against injury to his good eye. The duty to take reasonable precautions against injury is on which is owed by the employer to every individual employee. But where to employer’s knowledge, an employee has a particular condition that increases the seriousness of the risk, it is the duty to take additional precautions for the safety as may be reasonable. NEGLIGENT MISSTATEMENTS/ACTS AND PURE ECONOMIC LOSS PEL refers to financial loss that is not consequential (a result of direct physical injury or property damage) and is more commonly associated with business and commercial activities. General rule à Can’t recover for loss that is purely economic. Courts have initially been reluctant to compensate for this due to the ‘flood gates’ argument/issue of indeterminate liability. They have also upheld that this is largely the function of contract law and you can contract to prevent this loss. 1. Economic loss caused by negligent misstatement is recoverable where: Hedley Byrne a. A special relationship exists between the parties i. ‘If someone possessed of a special skill undertakes (irrespective of contract) to apply that skill for the assistance of another person who relies on such skill, a duty of care will arise’ Lord Morris Hedley Byrne ii. The HCA in MLC v Evatt (and then in Shaddock) widened this scope that the relationship doesn’t require the speaker to possess special skill or judgement just that the speaker must have realised it was being trusted by the recipient in respect of something that was serious or special in nature. iii. This is not limited to professional advisers Shaddock v Parramatta City Council (Council was accustomed to providing advice to the public concerning road widening proposals) b. Knowledge:…. CONSUMER LAW ISSUE 1: is the person in question a Consumer? (for the purposes of ACL) s3 CLAW1001 SUMMARY GUIDE 2. A person is a consumer if: a. the goods were less than $40,000 OR b. the goods were a kind ordinarily acquired for personal, domestic or household use or consumption; OR i. Test à What the goods and services are ordinarily used for rather than what they are actually used for. 1. E.g. Crago v Multiquip Pty Ltd (1998) not egg incubator ii. This may include business-to-business transactions involving goods or services which households might commonly acquire. 1. E.g. Carpet Call Pty Ltd v Chan domestic carpet to a nightclub fell within definition because it was a good ‘ordinarily acquired’ for domestic consumption. 2. E.g. Bunnings c. The goods were a vehicle or trailer acquired for principal use in the transport of goods on public roads. d. BUT: Above does not apply if……