Contracts Week 1: Offer, Acceptance, Consideration, and Promissory Estoppel, Exercises of Law

Download Contracts Week 1: Offer, Acceptance, Consideration, and Promissory Estoppel and more Exercises Law in PDF only on Docsity! 70211 Contracts Week 1: (a) Offer & (b) Acceptance; (c) Consideration & (d) introduction to promissory estoppel Lecture 1: (a) Offer & (b) Acceptance The elements of contract Valid contract: agreement between two or more parties à whereby legal rights and obligations created à which the law will enforce (all 6 essential elements must be in place) • All definitions stress the importance of an agreement + enforceability • Key elements: o Promise o Capable persons o Obligation o Enforceable • There needs to be: 1. Offer and acceptance 2. Consideration 3. Intention • Which can be affected by: 4. Capacity 5. Legality 6. Consent • The parties make the rules à the law of contract is just a mechanism to define, arrange and regulate the contractual transaction o It provides a framework à sets parameters, ‘rules’ and guiding principles (e.g. freedom of contract and objective principle of the reasonable person making the contract) • Uncertainty à may invalidate the contract • Background o Increasing trade and industrial revolution à led to clearer enunciation of rules and need for compliance § Increasing acceptance of the idea of freedom and sanctity of contract o Substantial inroads and the increasing role of Equity (i.e. ‘unfair’) o Increasing statutory intervention • Sources o Primarily common law o Statutory law à both federal and state § Statute > common law o Equity and equitable principles also apply § Concerned with preventing unconscionable conduct (i.e. conduct not based on good conscience) § Provides remedies (relief) even where contract law would not § In contract law problem solving à go to the common law first, then equity o International obligations and influences The theories • Classical theory o “contract is the central concept on which commercial law is founded” (Schmitthoft) § Commercial law could not exist without contract law o Contract law provides a mechanism under which parties to a definite agreement can regulate their relationship o Contract law is in place for: § Predictability § Certainty § Convenience o Market individualism § Freedom of contract: embracing partner freedom and term freedom à parties who are capable should be freely able to enter into a contract § Sanctity of contract: embracing the inviolability of contracts à parties should be held to their bargains • i.e. the court will not interfere provided you followed the rules of contract § è these terms reinforce the purpose of contract law = certainty • Economic efficiency o Provides rules to facilitate economic exchange and efficiency o It would be inefficient to enter into contracts that might be decided by the court at a later time o This aligns with the classical theory • Critical legal scholars o Claims it conceals politics à supports the existing economic and social order • Feminist o Women are physically, socially and psychologically and politically different from men à those differences need to be taken into account o The law reflects a masculine viewpoint e.g. intention and ‘domestic arrangement’ (i.e. wives entering into a contractual agreement with their husband) à there is no intention to be legally bound to their husband • Relational theory o i.e. contract as a social relationship à most people don’t usually use the contract laws • Australian authority: Toll (FGCT) Pty Ltd v Alphapharm Pty Ltd (2004) o “It is not the subjective beliefs or understandings of the parties about their rights and liabilities that govern their contractual relations à What matters is what each party by words and conduct would have led a reasonable person in the position of the other party to believe” Offer Offer: an expression of willingness à to enter into contract on specified terms The nature of an offer • OVERVIEW: Rules as to offer: o Must be definite o Must be made to a single person or a class of persons o Must be communicated à cannot be accepted without knowledge of existence o All terms of the offer must be brought to the notice of the offeree o Must be distinguished from an invitation to treat § i.e. an invitation or enticement to others to make an offer à no offer actually made o May be revoked any time prior to acceptance o May have conditions of acceptance o May lapse through non-acceptance o Reasonable person test: would it appear, to a reasonable person in the position of the offeree, that an offer was intended and that a binding agreement would be made upon acceptance • A proposal only amounts to an offer if: o the person making it indicates that an acceptance is invited; and o will conclude the agreement between the parties • Bramble Holdings Ltd v Bathurst City Council o Obiter à an offer must take the form of a proposal for consideration which gives the offeree an opportunity to choose between acceptance or rejection o Therefore, a communication which uses “the language of command” and “peremptorily requests” the other party to adopt a particular course of action may not be regarded as an offer i.e. there needs to be a choice • Reasonable person test: In determining whether an offer has been made, the crucial issue is whether it would appear to a reasonable man in the position of the offeree, that an offer was intended and a binding agreement would be made upon acceptance o Thus, it does not matter whether the offeror intended to make an offer à the court determines the offeror’s intention objectively, according to outward manifestations • Carlill v Carbolic Smoke Ball Company (1893) o Defence: refused to pay, claiming: 1. No promise was intended à the advertisement was a ‘mere puff’ 2. No offer had been made to any particular person 3. The plaintiff had not notified her acceptance of any offer 4. The agreement was uncertain because it failed to stipulate a period within which the disease might be contracted 5. The plaintiff has supplied no consideration for the defendant’s promise o Held: rejected all defence arguments § Claimed a contract had been formed § First argument: the statement relating to the bank deposit à made it clear that a promise was intended • Court looked at the advertisement objectively, according to what an ordinary person reading the document would think was intended à rather than a reference to what the defendant actually intended § Second argument: the offer was made to the whole world à could be accepted by any person who performed the conditions on the faith of the advertisement § Fifth argument: the use of the smoke ball by the plaintiff constituted both a benefit to the defendant and a detriment to the plaintiff, either of which would have been enough to constitute consideration for the promise Unilateral contracts • Carlill v Carbolic Smoke Ball Company (1893) o Unilateral contract à the offeree accepts the offer (formation) by performing his or her side of the bargain (i.e. accepts by performance) o In this case, the plaintiff accepted the company’s offer to pay the reward à by using the smoke ball (in accordance with the instructions and then contracting influenza) o “the consideration on the part of the offeree is completed executed by the doing of the very thing which constitutes acceptance of the offer” o i.e. the offer is accepted by performing an act à and the performance of that act is all that the contract requires of the offeree o Thus, by the time the contract is formed à the offeree has already performed all his or her obligations • This contrasts from a bilateral contract à where the obligations of both parties remain to be performed o The obligations of both parties are therefore executory at the time of formation i.e. they remain to be executed • Australian Woollen Mills Pty Ltd v Commonwealth o This case highlights the inextricable connection between the requirement of offer and acceptance, intention, consideration and certainty o Facts: § The plaintiff claimed that a unilateral had arisen out of the Commonwealth Government’s wools subsidy scheme à wool scarce after WWII à therefore Commonwealth subsidised purchases of wool by manufacturers of woollen products to enable the manufacturers to supply the products at low prices § Commonwealth sent the plaintiff a letter to subsidised the woold they purchased § The stockpile of wool of the plaintiff exceeded the amount the Commonwealth claimed it would pay à requiring the plaintiff to repay the subsidy paid on that excess o Procedural history: § Plaintiffs claimed that each of the announcements by the govt. constituted a contractual offer to pay the subsidy in return for them purchasing wool à this is a unilateral contract § Plaintiffs claimed that each purchase constituted acceptance of the offer and consideration for the promise to pay the subsidy § Unilateral contract because they accepted it on the basis of the offer o Held: no contract (no consideration or intention) § For a unilateral contract to arise à the promise must be made à in return for the doing of the act § Consideration: There must be a relation of quid pro quo (this for that) between the offeree’s act and the offeror’s promise à the doing of the act must be based upon the promise – not merely coinciding with it • Tests for determining this: o Whether the offeror has expressly or impliedly requested the doing of the act by the offeree o Whether the offeror has stated a price which the offeree must pay for the promise o Whether the offer was made in order to induce the doing of the act • This differs from a conditional gift à therefore an offeree must establish that money was to be paid by the offeror in return for the offeree travelling to Sydney § Intention: It is government policy à not an offer • They needed to have said something much more contractually binding • There must have been a voluntary assumption of a legally enforceable duty à so that the offer would have given rise to a legal obligation • E.g. through statutory authority o Commentary § An offer is effective only if it identifies a valid consideration and manifests intention to create a legal obligation Offers and invitations to treat Invitation to treat: invitation to others to make offers or enter into negotiations à i.e. no offer actually made • Whether particular conduct amounts to an offer is a question to be decided on the facts of each case à no firm rules à however courts generally take a consistent approach to the identification of offer and acceptance in common transactions Shop sales • The display of goods for sale (shop window, shelving etc) à treated as an invitation to treat i.e. not an offer • Pharmaceutical society of Great Britain v Boots cash chemists Ltd (1953) o Facts: § Plaintiff submitted that a sale had occurred in a self-service pharmacy under the supervision of a registered pharmacist § The pharmacist supervised the transaction, but not the selection of goods of the shelves § The plaintiff submitted that the display of goods should be regarded as an offer à which is accepted when the customer takes the good off the shelf o Issue: whether an offer was made when items on shelves or when paid for at cashier à to determine whether supervisor requirements were legal (i.e. supervisor at cashier but not at selection of items) o Held: § Rejected the plaintiff’s argument à as customers must be entitled to return and substitute articles they have chosen from shelves § Therefore, customers are regarded as making an offer when they present these items to the cashier and are not bound until the cashier has accepted that offer (i.e. when the acceptance is communicated to the offeror [store]) § Therefore, the defendant was held to have complied with the supervising requirements of the sale • Goodwin’s of Newstown Pty Ltd V Gurrey (1959) o In Australia, the courts have tended to take a less technical approach when deciding whether goods have been “offered for sale” for the purpose of determining whether a statutory provision has been breached o Facts: § Defendant displayed television sets with market prices + provided info to prospective customers § Prospective customers were told that the sets on display were not for sale à but an equivalent set could be purchased from the defendant at the market price o Held: § Defendant held to be “offering goods for sale” in breach of the Early Closing Act 1926 (SA) à although the defendant’s conduct amounted to no more than an invitation to treat • Wallace v Brodribb (1985) o Unnecessary difficulties introduced by drawing distinctions between offers and invitations to treat and the expression of “offer to supply” should be given its ordinary meaning • The ticket constitutes an offer by the airline à capable of acceptance of rejected by the passenger, once the passenger has a reasonable opportunity to read the conditions • Therefore, the ticket records the terms of an offer Electronic transactions • No need for legislation regarding offer and acceptance as the common law rules continue to apply à Electronic Transaction Acts (ETAs) have been enacted anyway • A proposal to make a contract through electronic communications à which is not addressed to a particular person, but is made generally accessible to people using information systems à is to be treated as an invitation to make offers à unless it clearly indicates an intention to be bound in the case of acceptance (s 14B NSW) o E.g. ecommerce companies à websites offering goods and services should generally be considered to be making an invitation to treat (rather than an offer) (no difference from normal communication as in Grainger v Gough (1896))’ • A contract formed between a natural person and an automated system (or between two automated systems) à not invalid merely on the grounds that a natural person was not directly involved in the process (s 14C NSW) • Where a natural person makes an ‘input error’ in the course of a transaction and the system provides no opportunity to correct that error à then the person making the error is entitled to “withdraw the portion of the communication in which the input error was made” o This is provided he or she does so as soon as possible after learning of the error + provided he or she has not received any material benefit from goods or services provided by the other party o The right to withdraw à not a right to rescind the contract o However, most websites provide an opportunity to correct input errors Termination of an offer • An offer will cease to be available to be accepted à when it is: o Withdrawn by the offeror (person making the offer) o Lapses o Rejected by the offeree (person accepting/rejecting the offer) Withdrawal General rule • An offer may be revoked at any time before it is accepted • Common law à a promise to hold an offer open for a specified period is not binding unless the offeree has given consideration for that promise (option – discussed below) o Therefore, if the offer has not been accepted/considered à the offeror can revoke the offer before the specified period has lapsed • The withdrawal is only effective when it has been actually communicated to the offeree • No exception is made for a withdrawal set by post Options • A promise to hold an offer open is binding at common law à if consideration has been given in return for that promise o The agreement is then described as an option o i.e. it contains a promise not to withdraw the offer for a certain time (because consideration for the benefit of being given the exclusive right to accept for a certain period - e.g. through money - was present) • An option is an agreement between an option holder and grantor under which the option holder is entitled to enter into a contract with the grantor on specified terms, either at a specified time or within a specified period o The option holder is then free to choose whether to exercise the option at that time or within that period • Goldsbrough Mort & Co Ltd v Quinn 1910 o Facts: § The grantor gave the option holder an option to purchase certain land a specified price at any time within one week of the agreement à in return for the sum of the shilling paid to the grantor § The grantor then attempted to withdraw the offer before acceptance o Held: § The grantor attempting to repudiate the offer before acceptance was held to be ineffective § The option holder exercised the option within the specified period à and was able to force the grantor to sell the land as agreed § A contract for the sale of the property à is condition upon the option being exercised Lapse • An offer expressed to be available for a particular period à will lapse at the end of the period • If no period is stipulated à the offer will lapse after a reasonable time has passed o What time is reasonable will depend on the circumstances e.g. the nature of the subject matter and the form in which the offer was made o E.g. a verbal offer to buy a car is likely to lapse after a short period; a written offer to purchase a substantial parcel of land will be open for acceptance for a relatively longer period • Reasonable person test: useful in determining the duration of an offer o Bartolo v Hancock (2010) § Facts: offer was made at the beginning of a five day trial to settle the litigation on the basis the parties would discontinue their claims against each other § Held: the offer was a “here and now” offer à aiming to dispose of the case “then and there” à therefore an attempt to accept the offer on the fifth and final day of the trial was unsuccessful • Death: o Fong v Cilli (1968) § Held: an offeree could not accept an offer after the offeror’s death à where the offeree knew of the death before the purported acceptance o Carter v Hyde (1923) § In the case of an option à there is a presumption that the death of the option holder à does not prevent the option from being exercised by the option holder’s personal representatives § However, if the offer is personal to the option holder à the option lapses Failure of condition and changed circumstances • An offer may be made subject to: o Express/implied condition that must be fulfilled before the offer can be accepted o Express/implied condition that it should lapse upon the happening of a certain event • Financings ltd v stimson (1962) o Facts: § Defendant signed an offer to purchase a car on hire-purchase terms from a finance company à given to him by the car dealer § The document contained a clause stating that the agreement contained would not be binding until it had been accepted by the finance company § Before the company signed it, the defendant took possession of the car but later returned it à car was then stolen and recovered in a badly damaged condition § The finance company accepted the defendant’s offer without knowing this à then sued the defendant for breach of the hire-purchase agreement o Held: § The defendant’s offer was subject to an implied condition that the car should continue in the condition it was in when the offer was made § On the failure of that condition, the defendant’s offer lapsed Rejection and counter offer • Once an offer has been rejected à it is no longer available for acceptance o A rejected offer may however be revived or may form the basis of an agreement which is inferred in the absence of a valid offer and acceptance o The making of a counter offer à rejection of the original offer • Courts draw a distinction between a counter offer and inquiry relating to an alteration of the terms (request of information – obtaining some guidance in deciding whether to accept/reject) o The label ‘inquiry’ into information à signifies that the buyer has not manifested an intention to reject o Therefore, the seller’s original offer should be treated as remaining open until an intention to reject is implied Unilateral contract • Difficulty arises where the offeree has begun to perform (and thereby accept the offer) à but has not completed the acts that constitute acceptance à and the offeror revokes o E.g. the offeror offered to pay $100,000 to the first person to swim backstroke across Bass Strait à it might seem unfair if the offer could be revoked when a swimming was halfway across • Veivers v Cordingly (1989) o Held: an offer made in exchange for doing of an act become irrevocable once the act has been partly performed § This is because the offeror is subject to an implied obligation not to revoke the offer after the offeree has started to perform § Further, the offeror has power to stipulate the terms on which he or her offer is made à and can expressly reserve the right to withdraw the offer • Mobile Oil Australia Ltd v Wellcome International Pty Ltd (1998) o Held: § An offer made in return for performance of an act is, like any other offer, revocable at any time § The offeror will only be prevented from revoking the offer where there is an implied contract not to revoke or an estoppel § An estoppel will arise only where the offeree is induced to adopt the assumption that the offer will not be revoked and relies on that assumption in such a way that he or she will suffer determinant if the offer is revoked Acceptance § However the court held that clear language would be required to support such a construction of the document because, if signing without notification were enough, it would give the company power to “keep the form in their office unsigned, and then play fast and loose as they pleased” The exception à the postal rule • When the offeree has placed his acceptance in the post à there is a fictional meeting of minds à which concludes the offer and gives effect to the acceptance (Adams v Lindsell (1818) (even if received some time later/lost) • “A finding that a contract is completed by the posting of a letter of acceptance cannot be justified unless it is to be inferred that the offeror contemplated and intended that his offer might be accepted by the doing of that act” (tallerman v Nathan’s merchandise (1957) o This is a more narrow view o In this particular case however, it was said that “actual communication would be regarded as essential to the conclusion of agreement on anything” because the issue was a “highly contentious correspondence” • Burden of the risk that the acceptance might be lost à placed on the offeror o Where actual communication is involved à burden is placed on the offeree, who has no way of knowing whether the acceptance has reached the offeror and therefore no way of knowing whether a contract has been formed Scope of the postal rule • Postal rule was extended to telegrams à as telegrams were given to the post office and delivered to the recipient in essentially the same way as posted letters (Cowan v O’Connor 1888) • Entores v Miles Far Eastern Corp (1955) à The postal rule does not apply to instantaneous forms of communication (telephone or telex) o Australian authority: Aviet v Smith and Searls Pty Ltd (1956) • Brinkibon Ltd v Stahag Stahl und stahl (1983) o Facts: § Buyer sought to enforce a contract in the English courts à between themselves and an Austrian seller § Contract was made by an exchange of telex messages between the buyers in London and the sellers in Vienna § The buyers sent a telex to Vienna à accepting the terms of sale offered o Issue: whether or not an English company could sue an Austrian supplier in an English court à through deciding whether the contract had been made in England o Held: § Contract was made in Vienna à as this is where the acceptance was received § The postal rule does not apply because telex is considered instantaneous communication à therefore a contract is formed when acceptance is communicated to the offeror (general rule) § The situation may differ where: • the message is sent or received through a third party • where it is sent out of office hours • where the message is not intended to be read immediately Modern electronic communications • Reese Bros Plastics Ltd v Hamon-Sobelco Australia Pty Ltd (1988): facsimile are treated as instantaneous communication à therefore acceptances sent by fax are governed by the general rule that an acceptance is only effective when received by the offeror • However, the Brinkibon principle may apply where the message is: o Sent or received through a third party o Sent out of office hours o Not intended to be read immediately • Internet messaging à also treated as instantaneous communication à acceptance only effective when received by the offeror • Email à o May be technical problems at the third of third parties à where the email message may be delayed or never reach the addressee o However, email is far quicker than post à even though messages need to pass through the hands of third parties o Even if email were considered to be analogous to post à the postal rule would only apply if it were thought to have been within contemplation of the parties that an acceptance sent by email should be effective on sending o Therefore, acceptance would only be effective when received by the offeror Method of acceptance • Many ways including: o If an offer stipulates an exclusive method for communication à only acceptance via that method will be effective e.g. only through written notice o Offeror expressly or impliedly dispenses the need for communication à e.g. unilateral contract à doing of the stipulated act Silence as acceptance • A contact cannot be forced on the offeree by stipulating silence as the prescribed method of acceptance • Felthouse v Bindley (1862) o Facts: § P – Uncle (Felthouse) offered to buy a horse from his nephew – he stated "If I hear no more about him I shall consider the horse mine at £30 15s 0d" § The nephew never replied and uncle took the horse. Later an auctioneer mistakenly sold the horse and the uncle then sued the auctioneer in the tort of conversion. § The basis of this claim was that the horse belonged to the uncle – tort of conversion would have only succeeded if there was a valid contract between the nephew and the uncle. o Held: § It was held that there could not be a contract in circumstances where the offeror had purported to impose contract by saying "If I hear nothing, I shall assume that you have accepted" – even if the nephew was willing to accept it under those terms. § Mere “mental acceptance” is not enough. An offeror cannot compel to take positive steps to reject an offer by stating that silence will amount to acceptance Acceptance inferred from conduct • In some cases à courts will accept an agreement has been formed even though the offeree has not effectively communicated his or her acceptance to the offeror • Farmers’ Mercantile Union and Chaff Mills Ltd v Coade (1921) o Facts: § Respondent’s applied to buy a share in the appellant company à company did not communicate its acceptance of the offer within a reasonable time, but retained money paid by the respondents and entered their names on the register § The company intimated its acceptance only after a reasonable time had expired by making calls for payment of further instalments à however the respondents ignored the calls o Held: § An agreement to buy the share could be inferred from the respondents’ inaction once they became aware their names were on the register à i.e. agreement to take the shares inferred from their failure to respond – silence was acceptance through conduct § Starke j (dissent) à respondent’s silence could equally be regarded as a refusal to have anything to do with the company since its offer had lapsed and the matter was at an end • Empirnall Holdings Pty Ltd V Machon Paull Partners Pty Ltd (1988) o Facts: § Involved comprehensive negotiations between the parties concerning a building project. § P architects (Machon) commenced work on the project and then forward to D (Empirnall) a contract and progress payment claim. § P’s covering letter stated that ‘we are proceeding on the understanding that the conditions of the contract are accepted by you and works are being conducted in accordance with those terms and conditions’. § D, who subsequently acknowledged that the proposed contract was “fine”, paid the claim but never signed the contract. o Held: § The court, after restating the general rule that silence is not acceptance, held that in some situations there may be a duty on the offeree to communicate a rejection of the offer. • The objective theory of contract requires an objective manifestation of assent to an offer • The ultimate issue therefore was whether a reasonable bystander would regard the offeree’s conduct, including the offeree’s silence, as signalling acceptance of the offer § In this case, Empirnall did more than remain silent à it took the benefit of the services provided by the architects, knowing they were to be paid for in accordance with the offer and having had a reasonable opportunity to reject the offer § Therefore, an objective bystander would conclude that Empirnall had accepted the offer on the terms proposed • “when the offeree with a reasonable opportunity to reject the offer of goods or services takes the benefit of them under circumstances which indicate that they were to be paid for in accordance with the offer, it is open to the tribunal of fact to hold the offer was accepted according to its terms” (535) Correspondence between offer and acceptance • It is often said that an acceptance must correspond precisely with the offer i.e. the offer empowers the offeree to do no more than accept or reject the terms proposed by the offer o The problem arises where two parties (e.g. buyer and seller of goods) à exchange inconsistent standard forms during contract negotiations à reaching agreement on the principal terms without deciding whose standard form should prevail à “battle of the forms” The English approach • The sending of the last form is the counter-offer à the “last shot” will therefore prevail à provided the recipient of the counter-offer can be taken to have accepted the terms proposed by the other sender • Butler Machine Tool Co Ltd v Ex-cell-o Corporation (England) Ltd • Facts: o The seller of machinery quoted a price on a standard form. The form contained a clause entitling the seller to vary that price (increase) where the seller’s costs increased during the period of manufacture § Brambles took advantage of commercial benefits being offered by the council à knowing the basis on which the council was prepared to allow the higher fees to be charged § This would lead a reasonable bystander to conclude that Brambles was assenting to the Council’s conditions Non-contractual obligations • The classical approach to contract formation is based on the idea of a moment of formation when enforceable contractual rights arise o Prior to that moment à no contractual obligations o Once that moment arrives à each party becomes liable for the other party’s full contractual expectation o This however is no longer of decisive importance à because the modern law recognises numerous non-contractual obligations between negotiating and contracting parties where the parties owe obligations to each other even if a contract is never formed Lecture 2: (c) Consideration and (d) Introduction to promissory estoppel Consideration Consideration: requires that something must be given à in return for a promise (e.g. money, an act – something of value) à that is sufficient and actionable Promisor: the person making the promise sought to be enforced Promisee: the person seeking to enforce the promise • “A valuable consideration in the sense of the law may consist either in some right, interest, profit or benefit accruing to one party or some forbearance, detriment, loss or responsibility given, suffered or undertaken by the other.” (Currie v Misa (1875)) • A contract may involve: o Immediate exchange of things: e.g. exchange of money for goods o Exchange of a thing for a promise: e.g. A pays $1000 to B à in return for B’s promise to build a fence for A o Exchange of promises: e.g. A promise’s to pay $1000 to B à in return for B’s promise to build a fence for A • Consideration must be identified where A (promisor) has made a promise to B (promisee) à which B wishes to enforce à and there is some doubt at to whether B has given anything in return o i.e. there must always be something given in return • Consideration is a requirement of the enforceability of promises o When a contract is made by an exchange of promises à each party’s promise provides consideration to support the promise made by the other o An agreement not supported by consideration on both sides à nudum pactum (naked agreement) à enforceable Origins of consideration • Originally concerned with the motivation for making a promise o 16th century à the legal effect of a promise depended on the ‘considerations’ or factors motivating the making of the promise § ‘good consideration’ à provided evidence that a promise had in fact been made and indicated that it would be just to enforce the promise o 18th century à the fact that the promisor was under a moral obligation to the promisee à taken to be sufficient consideration for a promise • Eastwood v Kenyon (1840) o Overthrew moral obligation as sufficient consideration o ‘bargain’ concept à consideration came to be seen as something of legal value given in exchange for a promise à ‘price of the promise’ The essential elements • Consideration includes: o The promisee incurring a detriment or the promisor receiving a benefit o That benefit/detriment must be given in return for the promise The benefit/detriment requirement • This includes: o Promisee (person enforcing the promise – doing the promise asked) à incurring a detriment (e.g. an act, property) o Promisor (the person who offered the promise – wanting the promise performed – either asked for it to be performed on paid the promisee to do it) à receiving a benefit (e.g. an act, property that benefits them – often gives money/promises to give money) • Consideration “may consist in some right, interest, profit or benefit accruing to the one party, or some forbearance, detriment, loss or responsibility, given, suffered or undertaken by the other” (Currie v Misa (1875) • Example: o Billy (promisee) wishes to enforce Amy’s (promisor) promise to pay him $1000 o The consideration given by Billy may be the transfer of property (e.g. his car), the performance of his services (building a fence for Amy) or the making of a promise to transfer property or for him to perform services in the future o Billy may also make a promise not to do something (e.g. to not sue Amy in respect of a tort or breach of contract committed by her or not to trade in competition with her) o à the consideration given by Billy is a detriment to him and a benefit to A (she gets his property or a fence built; no suing or competition à in return for her money) • It is important to recognise that mutual promises will provide good consideration for each other o E.g. if Billy makes a promise in return for Amy’s promise, this is: § Benefit for Amy à because she will have an enforceable right to have the promise performed § Detriment to Billy à because he will come under an obligation to perform the promise The bargain requirement • The benefit conferred on the promisor or the detriment suffered by the promisee à must be given in return for the promise o i.e. the act relied on the consideration must be performed as the agreed price of the promise • Australian Woolen Mills Pty Ltd v Commonwealth (1954) o Facts: § The plaintiff claimed that a unilateral had arisen out of the Commonwealth Government’s wools subsidy scheme à wool scarce after WWII à therefore Commonwealth subsidised purchases of wool by manufacturers of woollen products to enable the manufacturers to supply the products at low prices § Commonwealth sent the plaintiff a letter to subsidised the wool they purchased § The stockpile of wool of the plaintiff exceeded the amount the Commonwealth claimed it would pay à requiring the plaintiff to repay the subsidy paid on that excess § i.e. AWM claimed that by purchasing wool à it provided consideration for the commonwealth’s promises to pay the subsidies o Held: no contract (no consideration) § For a unilateral contract to arise à the promise must be made à in return for the doing of the act § There must be a relation of quid pro quo (this for that) between the offeree’s act and the offeror’s promise à the doing of the act must be based upon the promise – not merely coinciding with it • i.e. the act must be performed as a result of the promise • Tests for determining this: o Whether the offeror has expressly or impliedly requested the doing of the act by the offeree o Whether the offeror has stated a price which the offeree must pay for the promise o Whether the offer was made in order to induce the doing of the act • This differs from a conditional gift à therefore an offeree must establish that money was to be paid by the offeror in return for the offeree travelling to Sydney § The acts of purchasing wool à satisfied the test outlined in Currie v Misa (1875): • Legal detriment to AWM • Benefit to the Commonwealth § HC held: “No relation of quid pro quo between a promise and an act can be inferred”. • At best it was a conditional promise of a gift that could not be legally enforced à no bargain; government should have requested something to be done. Woollen relied on government scheme and suffered reliance = not good consideration. Bargain would have occurred if a request was made by the Commonwealth. • PC: Simply an administrative arrangement. § è Therefore, the “bargain” aspect of consideration will be satisfied if the acts which are said to amount to consideration à have been performed at the request or implied request of the person making the promise • In this case, the statements by the commonwealth were in the nature of policy announcements à no ‘request’ to purchase wool could be implied • It was therefore irrelevant that AWM had acted to their detriment in reliance on the commonwealth’s promise • It is possible for an act to satisfy the bargain aspect of consideration (i.e. the act is done as a result of a express/implied request or price) à but not the benefit/detriment requirement: Ballantyne v Phillott (1961) o Facts: § Phillot had commenced proceedings against Ballantyne (his formed mistress) à to recover a substantial sum of money he had lent to her § Some evidence that Ballantyne had asserted that she had lent money to Phillot and had claimed she could sue him for defamation à although it seems doubtful that she had, or even believed she had, an enforceable claim against him on either ground § At the instigation of a third party à the two signed a written document in which Phillot agreed to discontinue the proceedings and release all claimed he may have had against her § Ballantyne then relied on the agreement to institute fresh proceedings to recover the debt § As consideration for Phillot’s promises (i.e. to discontinue proceedings) à Ballantyne relied on a statement in the signed document that she had no right or claim against Phillot in respect of the action for debt or otherwise o Held: § Ballantyne had not given consideration for Phillot’s promises § Ballantyne did not promise to give up a claim against Phillot and no promise could be implied in the circumstances • On the other hand, the terms of the promise may stipulate that the consideration pass to a third party, rather than to the promisor à e.g. where two or more parties to a contract are regarded as joint promisees, consideration may be provided by one of them on behalf of both or all of them: Coulls v Bagont’s Executor & Trustee Co Ltd (1967) o Facts: § Mr Coulls (the deceased) entered into an agreement with O’Neil Construction giving the latter the right to quarry part of his land. § The company was authorized to pay royalties to Mr Coulls and his wife as joint tenants. § O’Neil and Mr and Mrs Coulls signed the document evidencing this agreement. § After Mr Coulls death, his executor sought a determination of whether O’Neil was bound to pay to royalties under the agreement to Mrs Coulls. o Held: § In the HC, it was held by the majority that the agreement constituted a contract between O’Neil and Mr Coulls alone so that the royalties were payable to his estate and not to Mrs Coulls. § BUT there is an exception to the rule that a person who seeks to enforce a promise must, as a promisee, establish that consideration was given for the promise à Where a promise is made to two or more persons jointly, and only one of them provides consideration, the person not providing the consideration directly can still enforce the promise. • “If A, B and C are parties to a contract and A promises B and C that he will pay C $1000 if B will erect a gate for him, C cannot compel A to carry out his promise, because, though a party to the contract à C is a stranger to the consideration” o i.e. C has not given consideration for the promise à he is not doing anything, it is B who is doing something and incurring detriment o The above example shows how it is possible to be a party to a contract in which a promise is made, but still be a stranger to the consideration given in return for that promise o A party to a contract who has not provided consideration will be able to enforce a promise only if she can be regarded as a joint promisee o However, whether a person is regarded as a joint promisee and therefore as a party to consideration given by another, involves a question of interpretation Sufficiency of consideration • Consideration must be sufficient (legally enforceable) à but doesn’t need to be adequate o It must be something which is of value in the eye of the law o If consideration of some value exists à the courts will not be concerned with its adequacy • Woolworths Limited v Kelly (1991) o General principle is that courts do not enquire into the adequacy of consideration. o Thus a nominal consideration will be adequate consideration. o If adequacy was a term of a contract all contracts would be uncertain o This is because the courts have no way of assessing the value a particular person places on the consideration he or she has contracted to receive o The courts’ stance protects economic freedom, even though “that liberty extracts a price in social terms” § Economic efficiency is best pursued through voluntary exchanges § The role of the courts therefore is simply to ensure that a bargain has been struck and an exchange made • The refusal of the courts to consider the the adequacy of consideration means that a promise to give a peppercorn is good consideration for a promise to pay $1m o Parties can effectively avoid the requirement of consideration through the use of nominal consideration o Thomas v Thomas (1842) § Facts: a woman’s promise to pay 1 pound towards the ground rent and to keep the house in good repair in exchange for a promise by her husband’s executors to give her the right to occupy the house for life § Held: this was good consideration à “motive is not the same thing with consideration. Consideration means something which of some value in the eye of the law, moving from the plaintiff” • Although inadequacy of consideration does not itself invalidate a contract à it may be taken into account as evidence of procedural unfairness in the formation of a contract o Where a party under a special disability has received inadequate consideration à this will provide evidence that the other party has unconscionably taken advantage of that disability Discretion as to performance • A promise will not constitute good consideration if the promisor retains an unfettered discretion as to performance o If the promisor is not bound to perform, then the promise will constitute an illusory consideration • ‘A promise cannot constitute consideration if it is too uncertain to be enforced, or if the promisor has reserved an absolute discretion on whether or not to perform that promise.’ • Placer Development Ltd v Commonwealth (1969) o Facts: § P entered into a contract with D (Commonwealth) to establish a timber company in Papua New Guinea to produce plywood for import to Australia. § A clause in the agreement stated that D would subsidise the cost of import customs duty into Australia à “an amount or at a rate determined by the Commonwealth from time to time” § The subsidy was paid for some years and then later withdrawn o Held: § The agreement imposed no obligation on the Commonwealth to pay any subsidy § Therefore, the Commowealth’s promise was illusory consideration à they could determine whether they wanted to perform the promise à bad consideration à clause not enforceable § “The general principle… is that wherever words which by themselves constitute a promise are accompanied by words showing that the promisor is to have a discretion or option as to whether he will carry out that which purports to be the promise, the result is that there is no contract on which an action can be brought at all.” Past consideration General rule • Past consideration is not considered sufficient consideration o Executory if the act or forbearance has still to occur. o Once the act that constitutes the consideration has been performed it is executed. o Past consideration occurs where the act or forbearance pre dates the promise. § i.e. something given before a promise is made cannot constitute good consideration • The thing may have been given gratuitously. For example: o A gives B a dog and B subsequently promises to pay A $50 for it o A cannot rely on the giving of the dog as consideration for B’s promise à the giving of the dog is past consideration • Another common example is where, after a contractual transaction has been completed, one of the parties makes a promise which the other seeks to enforce: Roscorla v Thomas (1842) o Facts: § P (Roscoria) purchased a horse from D (Thomas). § After the sale was concluded, D promised P that the horse was in good health and was not vicious. § The horse was vicious and P sued for breach. o Held: § The court held that the promise was not binding as it was made independently of the sale (i.e. after the sale concluded) § D’s subsequent promise was not supported by a return promise from P (i.e. no consideration by P) à and therefore it could not be enforced. Promise to pay for past services • Exception to the past consideration rule à An act done before a promise can be good consideration if: o The act was done at the promisor’s request. o The parties understood that the act was to be remunerated by the conferring of a benefit such as a payment (The act must have required some performance and can’t be an act done out of friendship or generosity). o The payment, if it had been promised in advance, would have been legally recoverable. • i.e. an exception to the past consideration rule is made in the case of a promise to pay for past services o Where services are performed at the request of the promisor, in circumstances that raise an implication that they are to be paid for à then performance of the services by the promisee will constitute good consideration for a subsequent promise to pay for them • Ipex Software Services Pty ltd v Hosking (2000) o Facts: respondent transferred to a corporate group a compute software business of which he was part owner on the understanding that he would receive shares in the restructured group o Held: the transfer was good consideration for a subsequent promise to transfer 5% of the equity in the group to the respondent • Lampleigh v Brathwaite (1615) o Facts: § D had committed murder. § He asked P (Lampleigh) to obtain a pardon for him from the King. § P agreed and in the process incurred considerable expense. § Subsequently, D promised to P 100 pounds to cover costs. § D failed to make the payment and the P sued. § D argued that the subsequent promise was unsupported by consideration. o Held: § The court disagreed and held that D’s request for assistance included an implied promise that P would ultimately be paid for his services. § The request for assistance and the promise to pay 100 pounds were part of the same transaction. § It is arguable that, where past services are rendered at the request of the promisor, then a subsequent promise to pay is enforceable. • Re Casey’s Patents: Stewart v Casey [1892] o If there’s initial discussion and no price is mentioned, and later discussion mention price à it may be argued that the later discussions were making definite the terms of the contract, not being part of the past consideration rule. o Court held subsequent promise to pay can be construed as an admission of the act or as a means of making definite or fixing the terms of the contract (through fixing the amount of reasonable remuneration for the act). The existing legal duty rule • A promise to perform an existing legal duty or the performance of an existing legal duty is not sufficient consideration to support a contract • The issue is often raised in relation to one sided variations to contracts à where one party either assumes an additional obligation or agrees to release the other party from an obligation o Beneficiary: the person who promises to perform an existing legal duty à claims the benefit of the contractual modification o Modifying party: the person who assumes an additional obligation or releases the beneficiary from an obligation o Held: § The court held that P had done more than he was contractually bound to do and, therefore, had provided consideration § The remaining crew were under no obligation to go to sea in dangerous conditions à therefore providing fresh consideration by agreeing to continue the voyage § The captain’s promise of extra wages was therefore enforceable • Therefore, the existing legal duty rule can be avoided, if parties are aware of it, by the beneficiary giving nominal fresh consideration in return for the promise or concession made by the modifying party o E.g. in Stilk v Myrick the remaining crew could have agreed to work longer shifts 2. Practical benefit • Where the modifying party obtains a practical benefit from the beneficiary’s promise to perform an existing obligation • Williams v Roffey Brothers & Nicholls (Contractors) Ltd (1991) – UK o Facts: § A enters into a contract with B for the supply of goods or services in return for payment by B. § Prior to completion B has reason to doubt whether A will complete. § B then promises A additional payment in return for B promising to perform on time. § As a result of this promise B obtains a benefit or obviates a disbenefit (didn’t have to go to court, didn’t have to find other carpenters, met deadline etc). § B reneged on promise. o Held: § The court held that the general rule will not apply if the promisor benefits from the promise or its performance (of the existing obligation). § General rule will also not apply if ‘the promisor avoids a disbenefit’ which might have resulted from the promisee’s failure to perform the existing obligation. • Musumeci v Winadell Pty Ltd (1994) - Aus o Facts: § P conducted a fruit shop as a tenant of D in a local shopping centre. § When D allowed another fruit shop business to commence trading in the centre, P sought a reduction in rent as the competition created financial difficulties. § D agreed to this reduced rent but later resiled from its promise and claimed the full amount. o Held: § Santow J modified the rule from Williams by allowing the rule to operate if a party suffered a practical detriment; that it should only apply if there has been no unfair pressure to induce the promise and that the practical benefit/practical detriment is worth more to the promising party than any remedy against the promisee. § The landlord, in exchange for the promise of allowing the tenant to pay a reduced rent, received the practical benefit - a fully let shopping centre. § The tenants suffered a detriment by staying on at a reduced rent and the exposure to the risk of competing with the large retailer. § Tenant gave up the option of walking away from the lease an action that could have resulted in proceedings for breach however they could have defended that claim (legally no inhibition on lessor to introduce new competition). § *Added to the rule introduced in Williams v Roffey: • The benefit needs to outweigh the benefit of another remedy eg: suing for breach. • The promise is not given by way of economic duress or fraud or undue influence or unconscionable conduct nor as result of any unfair pressure. 3. Promises made to the third parties • A promise to perform an existing contractual obligation does not amount to good consideration if it is made to a person who was not a party to the contract • Pao On v Lau Yiu Long [1980 o Facts: § In February 1973 Pao On agreed to sell shares to Fu Chip, a public company controlled by Long as the majority shareholder. § To protect the value of the shares, Pao On and Fu Chip agreed that the former would retain 60% of the shares acquired until 1974. § In April 1973, Pao On refused to proceed with the sale unless Long agreed to indemnify him against the value of the shares he retained falling below a certain sum. § Long agreed to this demand because of fear that delay caused by litigation would threaten public confidence in the company. § The sale proceeded and at some time later Pao On sought to enforce the indemnity. Pao On failed in HC court of appeal, appealed to Privy Council. o Held: § Lord Scarman noted the following requirements for the exception to apply: • The act must have taken place at the promisor’s request; • Objectively, the parties must have understood that the act was to be remunerated or compensated; and • The remuneration or compensation must have been legally enforceable. 4. Compromise and forbearance to sue • A promise to perform an existing legal obligation will constitute good consideration where it is made by the beneficiary as part of a bona fide compromise of a disputed claim • Wigan v Edwards (1973) o Facts: § Wigan sold land to Mr and Mrs Edwards on which he had recently erected a house. § The contract sale did not contain any warranty that the house had been constructed in a proper manner. However, the Edwards gave Wigan a list of matters that they said required attention before they would finalise the sale. § In response, Wigan promised to “fix minor defects within one week of finance being approved + any major faults in construction 5yrs from purchase date”. § Settlement then took place. § Wigan did not remedy the defects as promised. Edwards took proceedings to recover the costs of the work. P argued that D’s failure to do so was breach of contract. o Held: § HC held that a promise made as part of a bona fide compromise constituted an exception to the existing legal duty rule § In order to fall within this exception, it was not necessary for the Edwards to establish that they had a valid legal entitlement to refuse to perform the contract à it was enough that the intimated that they did not consider themselves bound to perform and that their claim was honestly made 5. Termination and replacement • Where parties have terminated their original contract and entered into a new contract • This is so even if the obligations of one party (modifying party) are more onerous than those in the original contract and the obligations of the other (beneficiary) are identical to those in the original contract • Since the original contract is brought to an end, the promise made by the beneficiary is seen as a ‘new’ promise à which provides consideration for the promises undertaken by the modifying party The purpose of consideration Criticism of the doctrine of consideration The function of consideration Promises under seal • Aka ‘deed’ à recorded in a particular form, traditionally involved sealing and delivery (this since been modified through common law) • A promise which is not supported by consideration will nevertheless be enforceable at common law à if it is made under seal o Dixon Cj in Ballantyne v Phillott (1961) à if the plaintiff had overcome his prejudice against solicitors, then a seal would have been affixed to the agreement and the consideration point would not be available to him • The solemnity (seriousness) of that form is recognised by the courts as a justification for enforcing a promise in the absence of consideration o Contracts which are not under seal and which therefore require consideration to be binding = simple/informal contracts • In Australia, deeds are commonly used to ensure the enforceability of promises where there is some doubt as to whether consideration is being provided by the promisee, such as a guarantee or an agreement to compromise a disputed claim Promissory Estoppel Estoppel: an equitable claim à that prevents a party from denying the existence of an assumption as to a state of affairs (which assumption the other party has relied and acted upon) à in circumstances where the denial would be unconscionable • It is important to emphasise the need for unconsciousability before estoppel will apply; it is not available as a back-up submission in every case where the parties have failed to establish a binding contract. • ‘…there must …be the creation of encouragement by the defendant in the mind of the plaintiff of an assumption that a contract will come into existence, or a promise be performed, or a transaction carried out between the plaintiff and the defendant, and reliance on that by the plaintiff in circumstances where departure from the assumption by the defendant would be unconscionable.’ - Austotel (1989) 16 NSWLR 582 at 585 per Kirby P • Estoppel can provide: o Enforceable rights where none are provided in contract law. o Prevent one party from enforcing contractual rights against another. • Fundamental distinction between estoppels and misrepresentation/ misleading/ deceptive conduct: o Estoppel is only concerned with inconsistent conduct. o Misrepresentation and misleading or deceptive conduct also involves loss arising from reliance upon representations but the protection arises from the representation proving untrue. § Estoppel = protection that arises from inconsistent conduct not related to representations being true/untrue. o Misrepresentation will not lead to an action in estoppel. Forms of estoppel • Estoppel by record = prevents further proceedings. • Estoppel by deed = facts stated in deed cannot be denied. • Estoppel by representation and equitable estoppel common features: o Both estoppels are founded on assumptions induced by the conduct of another person o Both are essentially concerned to prevent detriment resulting from action taken on the faith of the assumption if the assumption is not adhered to o Both operate only where it is unjust or unconscionable to depart from the assumption § The English courts were reluctant to allow promissory estoppel to be used for the positive enforcement of a promise à fearing that the enforcement of relied-upon promises would undermine the doctrine of consideration and thus the law of contract • Je Maintiendrai Pty Ltd v Quaglia (1980) - SA o Facts: § Tenant of shopping centre negotiated a reduction in rent on the basis that most of the shops were vacant. § After approx 18 months a dispute arose and the owner sued for the arrears of the rent owing. o Held: § It was clear to the court that the owners had made a promise and that the tenant would suffer harm (in having to incur a lump sum liability) as a result of the promise being going back on, thus rendering an injustice. § SA Supreme Court found in favour of tenant. Stated that they agreed to allow promissory estoppel to be used as a course due to the ‘detriment’ that would be suffered by the tenant. § Therefore for promissory estoppel to apply, detriment had to be established. • Legione v Hateley (1983) – HC o Facts: § Written contract for the purchase of land stipulated the date that the parties were to settle the contract. § Clause in contract stated that if not settled on that date notice to complete would be issued. § The day before the date arrived the solicitor of the purchaser called the vendor and stated that they were having difficulties and the contract would be settled a few days late. § Spoke to the secretary who stated ‘I think that’ll be alright but I’ll have to get instructions.’ § A few days later the contract was rescinded by the vendor on the basis that settlement was late. § This went to the High Court where the question was whether the comments by the secretary estopped the purchaser from doing this. o Held: § Held that the secretary’s statement did not raise an estoppel for P, as it was not a clear representation or promise. § Mason and Deane JJ stated that there are 2 conditions for promissory estoppel to apply: • Promise must be clear and unequivocal (this can be express or implied from conduct). • There must be a material loss through reliance on the promise if there is a departure from the promise. Stage 3: 2nd Development of Promissory estoppel – ‘Walton’s Store’ • Walton Stores (Interstate) Ltd v Maher (1988) o Facts: § P owned a commercial property that D commenced negotiations to lease. As part of their agreement, P was to construct a building according to D’s plans and specifications. § An existing building had to be demolished before construction of the new store could commence. On 21 October, a draft agreement for lease was sent to P’s solicitors. They requested amendments. On 7 November, P’s solicitors informed D’s solicitors that P needed the agreement signed, otherwise they could not build the new store within the time required. P did not want to demolish the existing building until it was clear there were no problems with the proposed agreement. § D’s solicitors forwarded a new agreement incorporating the requested amendments with a letter stating “we have not yet obtained our client’s specific instructions to each amendment…but we believe approval is forthcoming…we will let you know tomorrow if any are not agreed to”. The agreement was signed by P and returned to D’s solicitors by way of exchange. P heard nothing further – assumed nothing wrong – commenced work by demolishing the existing building (fact known by defendants). § D changed their minds – instructed solicitors to “go slow” and chose not to execute the agreement. In early January the following year, P began constructing the new building. 19 January, 1984 (building 40% complete) – D finally informed P they would not be proceeding with the agreement. P sought, inter alia, a declaration that a binding agreement existed. o Held: § HC allowed promissory estoppel to be used as an offence rather than just a defence. The result was that now promissory estoppel can be used as a sword, to commence a course of action in Australia in limited circumstances (this is not the case in England). § Brennan J: • P assumed a legal relationship existed or would come to exist between P and D. • D induced P to adopt assumption/expectation. • P acted/abstained from acting in reliance on assumption/expectation. • D knew of P’s action, or intended P to do so. • P action/inaction will cause P to suffer detriment if assumption/expectation not fulfilled. • D has failed to act to avoid detriment, whether by fulfilling promise or otherwise. § Remedy (per Brennan J): • The unconscionable conduct is the element which ‘shapes the remedy’ and this controls the wider objective of avoiding detriment. • The equity could only be satisfied by ‘treating Waltons as though it had done what it had induced the Mahers to expect that it would do, namely, by treating Waltons as though it had [entered a binding agreement].’ o Commentary: Principles abstracted from this case: § Allowed promissory estoppel to be used as a sword; § Recognised promissory estoppel as a general principle which could operate in any circumstances of legal relations, not just existing contractual relations. § Remedy should meet the equity. § The HC also attempted to draw together the various strands of estoppel into one overarching doctrine. OVERVIEW: Elements 1. Some form of pre-existing relationship • There is generally some form of pre-existing legal relationship (e.g. Legione v Hately (1983)) but it is not required (Waltons (1988), W v G (1996), Acc v Gray (2003)). 2. A promise by one party that they will not insist on their strict legal rights • A person promised that contractual rights would not be enforced à and that promise was relied upon by the promisee • The effect of the estoppel was to prevent the promisor from asserting those rights. 3. An adopted assumption • An adopted assumption (can be of fact or future conduct, may be of fact or law) (Waltons; Silovi (1998)), but note Austol (1989) can apply even if the precise terms of the agreement could not be ascertained. • Assumption must be clear and unambiguous. Important information cannot be missing but does not necessarily need to be precise but has to be constrained by reasonableness (ACC v Gray (2003)). • There is a failure to fulfil the assumption. 4. Inducement • An adopted assumption (can be of fact or future conduct, may be of fact or law) (Waltons; Silovi (1998)), but note Austol (1989) can apply even if the precise terms of the agreement could not be ascertained. • Assumption must be clear and unambiguous. Important information cannot be missing but does not necessarily need to be precise but has to be constrained by reasonableness (ACC v Gray (2003)). • There is a failure to fulfil the assumption. 5. An actual reliance by the other party on the promise • An actual reliance by P on the assumption (Waltons; Austotel (1989)). • Wishful thinking is not good enough. Mere hope rather than a consequence of words or conduct will not create an estoppel (Lorimer v State Bank NSW (1991)). 6. Reasonability and Unconscionability • Reliance needs to be reasonable (Murphy v Overton (2001), Ausotel (1989)). • D knew of or intended the reliance (Ampol v Mathews (1991)). • A degree of unconscionability by D – the behaviour must be unfair (Waltons). • Departure would be unconscionable à needs to be unfair to move away from alleged promise (Waltons). o Ausotel (1989) involved a ‘fair fight’ between two large corporations where there was no real risk of unfair advantage being taken by one over the other. 7. An element of detriment • The most difficult and potentially troublesome element in estoppel is the element of detrimental reliance. In some of the estoppel cases in which Lord Denning had a say he would argue that it is sufficient if the promisee has acted on the promise. He de-emphasised the requirement of detriment. • It is probably safe to assume that in Australia the courts require detrimental reliance (Verwayen). 8. Unauthorised representations • Representations that are not authorised generally do not create an estoppel but if the principle knew or should have known of the representation and fails to deny, may create an estoppel (Corpers v NZI (1989)). Relief available • The effect of an equitable estoppel is to raise equity in favour of the relying party. o Brennan J (Waltons): The object is to avoid the detriment which will be suffered, not to compel the other party to fulfil the assumption. • Equals an entitlement to some equitable relief within the courts discretion. P needs to persuade the court to fashion a remedy to suit the particular case. • Traditionally equitable estoppel has been preclusionary – stop one from denying something. The unifying approach to estoppel has meant that equitable relief became more flexible (Giumelli v Giumelli (1999)). • Approach to determine remedy between (i) minimum necessary to make good the assumption and (ii) an approach precluding the departure from the assumption (Verwayen). o Expectation based relief = simply the loss of benefit you would expect to receive (the rent). o Reliance based relief = the amount of expenditure incurred in reliance on the promise (the cost of demolishing the building). Limitations Estoppel as a cause of action: • Does not override consideration – still need unconscionable behaviour. o If consideration is in place, can’t move to estoppel because common law will give you a remedy - if there is a contract then pursue contractual remedies. • We no longer need to rely on estoppel supporting another cause of action; it can create an independently enforceable right. • But do you still need a cause of action independent of the plea? à probably not (W v G (1996); Gray v National Crime Authority (2003)).