1 An Introduction to Commercial Law.docx

+-----------------------------------------------------------------------+ | **1 An Introduction to Commercial Law** | +=======================================================================+ | **What is law?** | |...

+-----------------------------------------------------------------------+ | **1 An Introduction to Commercial Law** | +=======================================================================+ | **What is law?** | | | | The law is a body of enforceable rules, made by the state - the | | parliaments and the courts - that are enforceable by the state. | | | |   | | | | Defining features: source (parliaments and courts), enforceability by | | the state | | | |   | | | | Differentiated from other types of rules: | | | | Differentiated from other types of enforceable rules | | | |   | | | | **What are the functions of law?** | | | | Role of law in society | | | | - Provides rules and structures for dispute resolution | | | | - Reinforces basic community values | | | | - Promotes stability and cohesion | | | | - Promotes equality and the rule of law | | | | - Regulatory function (what we can do, mustn\'t do and must do) | | | |   | | | | **The rule of law** | | | | A structure of a legal system where people including the government | | should be ruled by the law and obey it. | | | | The content of the law is such that people will be able and willing | | to be guided by it. | | | |   | | | | Note the rule of law is a general theory that underpins our legal | | system but does not mean that the same laws apply to everyone, | | regardless of differences between them. | | | |   | | | | A strong rule of law is essential for the orderly conduct of business | | and society in general. However there are limits to what the rule of | | law means and what it can do. | | | |   | | | | **The Australian legal system** | | | | Businesses - even foreign business - operate within and interact with | | the Australian legal system. | | | | - So for foreign businesses it is important to understand key | | principles of conduct expected by businesses by the Australian | | legal system. | | | |   | | | | Understanding the Australian legal system is important because | | knowing what the law requires will help us manage legal risks and | | seize upon business opportunities in order to make good business | | decisions. | | | |   | | | | Australia\'s very legal system itself is in a constant state of | | incremental change: business operate within this changing | | environment. | | | | - As the legal system changes overtime, those changes affect | | society as a whole and that also affects the conduct of business | | in Australia and the conduct of business overseas. | | | |   | | | | The Australian constitution is the legal instrument that caused the | | nation of Australia to exist in an international sense. | | | | \'Australia\' as its own country emerged on 1 January 1901, via | | coming into force of the Australian Constitution, establishing | | Australia as a constitutional monarchy. | | | |   | | | | 1900, the Imperial Parliament passed the constitution. | | | |   | | | | The constitution: established a federal system of government made up | | of State and Territory governments, and a central government (Federal | | or Commonwealth government) | | | |   | | | | Each \'jurisdiction\' has its own parliament and courts, with the | | Constitution allocating areas of responsibility between them. | | | | King is our head of state (despite being a limited constitutional | | role) | | | |   | | | | **The separation of powers** | | | | The \'government\', in each \'jurisdiction\', comprises three | | separate branches: the Parliament, the Executive and the Judiciary. | | | |   | | | | Each exercise different governmental powers and their separation | | operates as a system of checks and balances | | | |   | | | | -\> Alexandar v Minister for Home Affairs | | | |   | | | | Legislative powers are divided between the State and Commonwealth | | Parliaments via the Australian Constitution | | | | - Exclusive powers (can only be exercised by the Commonwealth | | Parliament) | | | | - Concurrent powers (Commonwealth Parliament, states and | | territories can make legislation on) | | | | - Residual powers (fall exclusively to the competence of state | | parliaments to pass laws on) | | | |   | | | | Resolving conflicts (s 109) where there is a conflict between state | | and territory laws and Commonwealth laws, It is the Commonwealth law | | that prevails to the extent of any inconsistency | | | |   | | | | Amendments (s 128) | | | |   | | | | **The separation of powers and relevance to the business world** | | | | **Parliament** exercises legislative power- it has the power to make | | and change the law, and those laws may directly affect the conduct of | | business. | | | | **Executive government** has the power to put law into action through | | exercise of the executive power and executive government decisions | | around the application of the law do directly affect business. | | | | **Judiciary** determine disputes arising under the law, they may | | involve businesses and business relations while also setting | | precedents that can govern business activities in the future. | | | |   | | | | **Sources of law** | | | | Parliament: Statutes, Acts, legislation (formerly Bills) | | | | Courts: Common law, case law, precedent, judge-made law | | | | At State and Territory, and also Commonwealth, level | | | |   | | | | Compare primary sources of law and secondary sources of law | | | | Primary: contain the law | | | | Secondary: describe the law or comment on the law but do not contain | | the law | | | |   | | | | Statues: bring new laws into existence, repeal old laws (statutes or | | common law), and codify law (bring statutory and common law together) | | | | Statutes may be amended by later statutes | | | | Statutes are interpreted by the courts, with decisions on statutory | | interpretation setting precedent (judge-made law) | | | | Parliament is \'sovereign\', statute prevails over precedent | | | |   | | | | **Statutory interpretation** | | | | Australian Consumer Law s 18(1): \'A person must not, in trade or | | commerce, engage in conduct that is misleading or deceptive or is | | likely to mislead or deceive.\' | | | |   | | | | When courts apply these words to business conduct, how do they work | | out what misleading or deceptive conduct means? | | | | Case law defining what is misleading or deceptive now sets precedent | | that applies to future cases. | | | |   | | | | Statutory and common law rules guide courts when interpreting | | legislation. | | | |   | | | | Primary rule: Acts Interpretation Act 1901 (Cth) s 15AA (and State | | and Territory equivalents): | | | |   | | | | \'In interpreting a provision of an Act, the interpretation that | | would best achieve the purpose or object of the Act (whether or not | | that purpose or object is expressly states in the Act) is to be | | preferred to each other interpretation.\' | | | |   | | | | Consider intrinsic and extrinsic materials | | | |   | | | | Preambles, purpose or objects clauses, second reading speeches, | | explanatory memoranda. | | | |   | | | | **Sources of law** | | | | Courts: Common law, case law, precedent, judge-made law | | | |   | | | | Still governs significant areas of business activity (including | | contract law), despite the primacy of legislation | | | |   | | | | Developed through the courts\' resolution of real-world disputes | | involving real-world individuals and companies, including business | | people and businesses | | | |   | | | | Note importance of court hierarchies, law reports, ratio decidendi | | and obiter dicta, and the different between binding and persuasive | | precedent | | | |   | | | | Judge-made law operates both prospectively and retrospectively | | | |   | | | | **Australian courts** | | | |  | | | |   | | | | **Understanding case law and its relevance to business** | | | | Case law gets made because actual legal disputes involving real | | people (including real business) require resolution before the courts | | | |   | | | | Note: most business disputes don't reach court, with litigation being | | time consuming, expensive and a distraction from the business of | | doing business | | | |   | | | | Understand the real world dispute and why it arose, the legal issues | | involved, the argument that were or could be made for each side, the | | decision, and why the decision was made | | | |   | | | | Also understand the implications of appeals, and that either the | | plaintiff or the defendant may be an appellant. | | | |   | | | | **Classing the law and legal proceedings** | | | | - Public law and private law | | | | - Substantive law and procedural law | | | | - Civil law and criminal law | | | | - Domestic and international law | | | |   | | | | Solicitors and barristers, ad their interactions with business | | | | Alternative dispute resolution options, and their relevance to | | business disputes: arbitration, negotiation, mediation, conciliation | | | |   | | | | **[Business Ethics]** | | | |   | | | | **The law, and justice and ethics** | | | |   | | | | Justice and ethics are subjective concepts | | | |   | | | | Action might be: legal and ethical, legal but not ethical, not legal | | but ethical, or not legal and not ethical | | | |   | | | | Making good business decisions might require not only bare minimum | | compliance with the law, but also a consideration about whether the | | decision is also \"right\" (amongst more general behavioural science | | considerations) | | | |   | | | | **[Australian Law and the Real World of Business]** | | | |   | | | | Real world examples of the law\'s impact on business | | | |   | | | | - BrewDog\'s response to its solid gold\' beer can promotion | | | | - The Australian competition and consumer commission\'s settlement | | with Retail Food Group in relation to its relationship with | | franchisees | | | | - Sorting out the fall-out from Banksy\'s intentional | | self-destruction of an artwork immediately after its action | | | |   | | | | The law has a role to play in all these situations: even without | | these matters necessarily reaching court | +-----------------------------------------------------------------------+ | **2 Contract Formation 1 (Agreement and Certainty)** | +-----------------------------------------------------------------------+ |  **Definition of a contract** | | | | - Every contract involves an element of agreement; however not | | every agreement is a contract | | | | - **A contract is an agreement between two or more parties under | | which legal rights and obligations are created which can be | | enforceable in the courts** | | | | - The possibility of enforcement distinguishes a contract from | | other kinds of agreements | | | |   | | | | - A contract is defined by law, not our intuition based upon our | | personal experiences or the media | | | | - \"sets of legally binding promises\" | | | | - Agreement that is legally enforceable | | | | - Contracts do not require any particular form | | | |   | | | | **Functions of the law of contract** | | | | - To promote certainty - there is an understanding that contractual | | promises must be honoured or if not the innocent party will be | | compensated | | | | - To facilitate planning - knowing what is expected of them and | | what they can expect of the other party | | | | - To establish market value for goods and services | | | | - To provide for a formal dispute-resolution process, if and when | | required | | | | - To allocate risk - the risk of circumstances changing are | | allocated by the parties when they enter into the contract. | | Thereafter the contract must be performed as promised and the | | fact that buyers and sellers have \"remorse\" is *prima facie*, | | irrelevant | | | |   | | | | **Essential elements of a contract -** contracts exist when all the | | requirements for contract formation are satisfied | | | | a. **An offer by one party and its acceptance by the other | | indicating the parties have concluded an agreement** (Offer, | | acceptance & **certainty** = agreement) | | | | | | | | a. **Intention of the parties to create legal relations** | | | | b. **Valuable consideration** | | | | | | | | a. Legal capacity of the parties to act | | | | b. Genuine consent by the parties | | | | c. Legality of the objects of the agreement | | | |   | | | | - Note in the absence of one or more of these elements, the | | agreement between the parties will not constitute a contract and | | will not be enforced by the courts | | | |   | | | | - In the event of a dispute as to whether an agreement has been | | made, the court considers whether a reasonable person looking | | objectively at what the parties have said/done would say that | | they have made an agreement | | | | - The law will not enforce a promise for which nothing is given or | | promised in return | | | | **Classification of contracts** | | | | - Any contract that is not under seal | | | | - May be oral, may be wholly or partly in writing or may even be | | implied by the conduct of the parties | | | | - Every simple contract must be supported by consideration | | | | | | | | - **Must be wholly in writing**, it must be signed by the person(s) | | executing the deed and must be witnessed | | | | - There is no requirement that consideration be provided in an | | agreement like there is in a deed | | | | | | | | - **Express contract:** where the intentions of the parties are | | stated in explicit terms, either orally or in writing (all the | | terms are agreed upon and expressed in the written contract) | | | | - **Implied contract**: where the terms of the contract are | | inferred from the conduct of the parties and the surroundings | | circumstances | | | | | | | | - **Bilateral contract:** (between two parties) exchange of mutual | | promises | | | | - **Unilateral contract:** an offer is made inviting acceptance by | | actual performance rather than by a promise | | | |   | | | | - **Valid contract:** a contract in which all the essential | | elements are present and as a result it is enforceable against | | both parties | | | | - **Voidable contract:** a contract which a party may avoid (get | | out of) if that party wishes to do so | | | | - **Void contract:** a contract that never existed at all. It is of | | no legal effect between the parties and thus does not create | | legal rights or obligations | | | | - **Unenforceable contract:** a contract which is prima facie a | | valid contract but which by reason of some technical defect is | | not capable of being enforced by action by one both of the | | parties (not in writing) | | | | **Offer and Acceptance** | | | | An offer is an expression by one party (known as the offeror) that is | | communicated to another party (known as the offeree), to enter into a | | legally binding agreement. | | | |   | | | | Offer + Acceptance + Certainty = Agreement | | | |   | | | | - An offeror can be the buyer or seller | | | | - If the other party accepts the offer, an agreement is made (and a | | contract may be made) | | | | - Offers are the starting point for forming a legally binding | | contract: as a result, only offers can be accepted | | | |   | | | | - May be made to one or more people (A particular class of persons, | | a group of persons or the world at large) | | | | - Must be distinguished from mere puff, invitations to treat and | | statements supplying info | | | | - All major terms must be included | | | | - May specify conditions to be followed | | | | - Must be communicated to offeree | | | | - May be revoked or lapse | | | |   | | | | - Puffs are not regarded as offers, and have no contractual | | significance | | | | +--------------------------------+--------------------------------+ | | |   | Carlill v Carbolic Smoke Ball | | | | | Co | | | +================================+================================+ | | | Facts | - Co\'s advertisement | | | | | claimed their product | | | | | prevented influenza and | | | | | offered to pay £100 to any | | | | | customer who despite using | | | | | the ball caught influenza | | | | | | | | | | | | | | | | | | | | - - - - - | | | +--------------------------------+--------------------------------+ | | | Issue | Did the advertisement | | | | | constitute an offer or a puff, | | | | | was it too indefinite, and had | | | | | any offer been accepted? | | | +--------------------------------+--------------------------------+ | | | Held | - Advertisement was not | | | | | engaging in mere puffery - | | | | | there was a contract under | | | | | which Carlill was entitled | | | | | to claim £100 | | | | | | | | | | - Co made a serious offer to | | | | | the whole world that could | | | | | be accepted by anyone | | | | | coming forward and | | | | | satisfying the conditions | | | | | | | | | | - The advertisement is an | | | | | offer to pay £100 to | | | | | anyone who will perform | | | | | these conditions, and the | | | | | performance of these | | | | | conditions is the | | | | | acceptance of the offer | | | +--------------------------------+--------------------------------+ | | | |   | | | | +--------------------------------+--------------------------------+ | | |   | Leonard v PepsiCo | | | +================================+================================+ | | | Facts | - PepsiCo advertisement | | | | | campaign encouraged | | | | | consumers to collect | | | | | \"Pepsi Points\" from | | | | | Pepsi | | | | | | | | | | - A television commercial | | | | | displayed a series of | | | | | products with \"Pepsi | | | | | Points\" required to | | | | | purchase them | | | | | | | | | | - The commercial featured | | | | | \"HARRIER FIGHTER | | | | | 7,000,000 POINTS\" | | | | | | | | | | - Leonard decided to | | | | | purchase a jet fighter by | | | | | \"buying\" the 7,000,000 | | | | | points | | | | | | | | | | - Leonard sent a cheque for | | | | | \$700,008.50 to PepsiCo | | | | | | | | | | - PepsiCo returned | | | | | Leonard\'s cheque | | | | | | | | | | - Leonard sought specific | | | | | performance of alleged | | | | | unilateral contract | | | +--------------------------------+--------------------------------+ | | | Held | - Due to the comical nature | | | | | of the commercial, a | | | | | reasonable person would | | | | | not conclude the PepsiCo | | | | | was offering a Harrier Jet | | | | | to anyone who collected | | | | | 7,000,000 points | | | | | | | | | | - Advertisement was a mere | | | | | puff | | | +--------------------------------+--------------------------------+ | | | |   | | | | - Invitations to treat are not regarded as offers, and have no | | contractual significance, but may lead to an offer being made | | | |   | | | | +--------------------------------+--------------------------------+ | | |   | Gibson v Manchester City | | | | | Council | | | +================================+================================+ | | | Facts | - Council adopted a policy | | | | | that allowed its housing | | | | | tenants to purchase their | | | | | flats | | | | | | | | | | - Gibson (tenant) was sent a | | | | | letter by Council saying | | | | | they \"may be prepared to | | | | | sell\" him the flat for a | | | | | particular price. It went | | | | | on, \"If you would like to | | | | | make a formal application | | | | | to buy your Council house | | | | | please complete the | | | | | enclosed application form | | | | | and return it\" | | | | | | | | | | - Gibson completed the | | | | | application form | | | | | | | | | | - Before formal contracts | | | | | were signed, the Council | | | | | policy changed and it only | | | | | processed with those | | | | | contracts that had already | | | | | been executed. | | | | | | | | | | - Gibson argued that the | | | | | letter was an offer and | | | | | his response was an | | | | | acceptance of that offer | | | | | | | | | | - Council argued that the | | | | | letter was an invitation | | | | | to treat and that | | | | | Gibson\'s response was an | | | | | offer that had not been | | | | | accepted by the Council | | | +--------------------------------+--------------------------------+ | | | Held | - The letter was an | | | | | invitation to treat, not | | | | | an offer | | | | | | | | | | - The words \"may be | | | | | prepared to sell\" and the | | | | | invitation to \"make a | | | | | formal application to | | | | | buy\" make it a letter | | | | | setting out the financial | | | | | terms on which the Council | | | | | would be prepared to | | | | | consider a sale | | | +--------------------------------+--------------------------------+ | | | | - Window displays, catalogues, circulars, web store product | | listings, email newsletter are generally considered as | | invitations to treat and not offers | | | | +--------------------------------+--------------------------------+ | | |   | Pharmaceutical Society of | | | | | Great Britain v Boots Cash | | | | | Chemists (Southern) Ltd | | | +================================+================================+ | | | Facts | - Boots opened first | | | | | self-service pharmacy in | | | | | England | | | | | | | | | | - Pharmaceutical supplies | | | | | were displayed on shelves | | | | | for customers to select | | | | | and take to the cash | | | | | register where a qualified | | | | | pharmacist was always in | | | | | attendance near the cash | | | | | registers | | | | | | | | | | - The Society objected to | | | | | rejected the new method of | | | | | retailing pharmaceuticals | | | | | and attempted to close | | | | | down the self-service part | | | | | of Boots, prosecuting | | | | | Boots the *Pharmacy | | | | | Poisons Act 1933* | | | | | | | | | | - The Society argued that an | | | | | offer was made when the | | | | | chemist placed the drugs | | | | | on the shelves and the | | | | | offer was accepted and a | | | | | contract was made when the | | | | | customer placed the drugs | | | | | in the basket | | | | | | | | | | - Boots argued that its | | | | | placing of the goods on | | | | | the shelf was an | | | | | invitation to treat and | | | | | the customer made the | | | | | offer by taking it to the | | | | | cashier who accepted the | | | | | offer under the gaze of a | | | | | registered pharmacist | | | +--------------------------------+--------------------------------+ | | | Held | - Boots argument was | | | | | accepted | | | | | | | | | | - It is an offer by the | | | | | customer to buy and there | | | | | is no sale effected until | | | | | the buyer\'s offer to buy | | | | | is accepted... the sale | | | | | takes place under the | | | | | supervision of a | | | | | pharmacist | | | +--------------------------------+--------------------------------+ | | | |   | | | | +--------------------------------+--------------------------------+ | | |   | Partridge v Crittenden | | | +================================+================================+ | | | Facts | - Crittenden advertised a | | | | | number of cocks and hens | | | | | | | | | | - Under the *Protection of | | | | | Birds Act 1945*, it was a | | | | | criminal offence \"to | | | | | offer for sale\" any wild | | | | | live bird | | | | | | | | | | - RSPCA bought a prosecution | | | | | against Crittenden for | | | | | breach of act | | | | | | | | | | - At trial, Crittenden was | | | | | convicted of making an | | | | | offer to sell | | | +--------------------------------+--------------------------------+ | | | Held | - On appeal, the | | | | | advertisement was deemed | | | | | an invitation to treat | | | | | | | | | | - The advertisement had | | | | | appeared in the | | | | | \"classified | | | | | advertisements\" section | | | | | of the magazine and there | | | | | was no specific info about | | | | | there being an \"offer for | | | | | sale\" | | | | | | | | | | - It is interesting to | | | | | observe that the Court | | | | | ignored the intention of | | | | | the Parliament to ban the | | | | | trafficking of wild | | | | | animals in the UL and | | | | | instead gave the phrase | | | | | \"offer for sale\" its | | | | | limited contractual | | | | | meaning - that it, that an | | | | | advertisement is an | | | | | invitation to treat | | | +--------------------------------+--------------------------------+ | | | |   | | | | - An advertisement may be regarded as an offer if sufficiently | | definite in its terms and is communicated in a way that | | reasonable person would say the advertiser intends to enter into | | a contract if the response from the person receiving the | | communication is positive | | | |   | | | | - Parties negotiating contracts or advertising goods and services | | should be aware of the broad reach of the misleading and | | deceptive provisions of the Australian Consumer Law 2010 | | | | - The effect of the legislation is that a representation that may | | have been regarded as mere puffery or as part of non-binding | | pre-contractual negotiations may now be considered or be | | misleading or deceptive conduct or constitute false | | representation. | | | |   | | | | - When the auctioneer calls for bids this an invitation to treat | | | | - When bidders call out their bids this is an offer | | | | - When the seller/auctioneer \"knocks down\" the property to the | | successful bidder this is the acceptance | | | | - a binding contract is created | | | | +--------------------------------+--------------------------------+ | | |   | Harris v Nickerson | | | +================================+================================+ | | | Facts | - Advertised auction at a | | | | | stated time and place | | | | | | | | | | - P travelled and items for | | | | | auction withdrawn | | | | | | | | | | - P argued advertisement was | | | | | an offer and travelling | | | | | was acceptance by conduct | | | +--------------------------------+--------------------------------+ | | | Held | - Advertisements was not | | | | | deemed to be an offer | | | | | | | | | | - Advertisement was merely | | | | | an invitation to treat | | | +--------------------------------+--------------------------------+ | | | |   | | | | - In auctions \"without reserve\" an auctioneer is able to reject | | the bidder\'s offer where they sought the bid was too low or the | | bidder undesirable | | | |   | | | | +--------------------------------+--------------------------------+ | | |   | Barry v Davies | | | +================================+================================+ | | | Facts | - Davies put up two machines | | | | | for auction without a | | | | | reserve price | | | | | | | | | | - Barry bid \$200 for each | | | | | machine, but Davies | | | | | refused to accept the bids | | | | | and sold them privately | | | | | for \$750 each | | | | | | | | | | - Barry sued Davies arguing | | | | | that at an auction without | | | | | a reserve price the | | | | | auctioneer was bound to | | | | | accept the highest bid | | | +--------------------------------+--------------------------------+ | | | Held | - Court held that there was | | | | | a contract | | | | | | | | | | - Davies made an offer | | | | | (because the auction was | | | | | \"without reserve\") that | | | | | Barry accepted by making | | | | | the highest bid | | | +--------------------------------+--------------------------------+ | | | |   | | | | +--------------------------------+--------------------------------+ | | |   | Smythe v Thomas | | | +================================+================================+ | | | Facts | - Thomas listed a aircraft | | | | | on eBay with an effective | | | | | disclosed reserve of | | | | | \$150,000 | | | | | | | | | | - Smythe made a bid of | | | | | \$150,000, and was the | | | | | highest bidder | | | | | | | | | | - Both parties received | | | | | notification that Smythe | | | | | had won the auction | | | | | | | | | | - Thomas refused to complete | | | | | the transaction, arguing | | | | | that there were only | | | | | contracts between eBay and | | | | | the buyer and eBay and the | | | | | seller (arguing no | | | | | contract had been made | | | | | between Smythe and | | | | | himself) | | | +--------------------------------+--------------------------------+ | | | Held | - When Thomas listed the | | | | | aircraft on eBay he agreed | | | | | to be bound by eBay\'s | | | | | T&C, of which he was | | | | | obliged to enter into a | | | | | contract with the highest | | | | | bidder | | | +--------------------------------+--------------------------------+ | | | | - An advertisement calling for tenders is regarded an invitation to | | treat | | | | - A party submitting a tender makes the offer and there is no | | contract until the person who called for tenders accepts the | | tender | | | | - The person calling for tenders is not obliged to accept the | | lowest (or any) tender | | | |   | | | | - The person (s) for whom the offer was intended are the only ones | | who can accept it. | | | | | | | | - The offer must be communicated, brought to the notice of the | | person to whom it is made. | | | | - If there is no communication, there can be no acceptance in the | | response to the offer, and no agreement (and therefor no | | contract) | | | | +--------------------------------+--------------------------------+ | | |   | R v Clarke | | | +================================+================================+ | | | Facts | - A proclamation offered a | | | | | reward of \$10000 for info | | | | | leading to the arrest and | | | | | conviction of the person | | | | | who has murdered two | | | | | policemen | | | | | | | | | | - Clark and associate were | | | | | arrested and charged with | | | | | the murder of one | | | | | policeman | | | | | | | | | | - Clark gave evidence that | | | | | led to the conviction of | | | | | two men for the murder | | | | | | | | | | - Clarke was released from | | | | | custody and claimed \$1000 | | | | | | | | | | - Clark volunteered the info | | | | | in order to clear himself | | | | | of a false charge of | | | | | murder | | | +--------------------------------+--------------------------------+ | | | Held | - As Clarke did not act in | | | | | reliance upon the offer, | | | | | there was no acceptance of | | | | | the offer and therefore no | | | | | contract between the | | | | | parties | | | | | | | | | | - Clarke was unable to claim | | | | | the reward | | | +--------------------------------+--------------------------------+ | | | | - An offer can be revoked (revocation= when the offeror withdraws | | the offer) at any time before acceptance | | | | - To be effective, the revocation of an offer must be communicated | | to the offeree | | | | - On revocation, an offer is \"killed off\" and cannot be accepted | | | | - Until the time the offeree becomes aware of the revocation, they | | can accept the offer and creating a binding contract | | | | - Any method of communication is sufficient provided revocation | | actually comes to the offeree\'s notice | | | |   | | | | +--------------------------------+--------------------------------+ | | |   | Byrne & Co v Leon Van | | | | | Tienhoven & Co | | | +================================+================================+ | | | Facts | - Van wrote on 1 Oct | | | | | offering to sell 1000 | | | | | boxes of tin plates to | | | | | Byrne via letter | | | | | | | | | | - Van posted a letter | | | | | seeking to revoke the | | | | | offer on 8 Oct | | | | | | | | | | - Byrne received the offer | | | | | letter on 11 Oct and | | | | | accepted it by telegram on | | | | | the same day and by letter | | | | | on 15 Oct | | | | | | | | | | - The revocation letter did | | | | | reached Byrne on the 20 | | | | | Oct | | | +--------------------------------+--------------------------------+ | | | Issue | Which came first, revocation | | | | | or acceptance? | | | +--------------------------------+--------------------------------+ | | | Held | - The revocation of the | | | | | offer was ineffective | | | | | | | | | | - While an offer could be | | | | | revoked at any time before | | | | | its acceptance, a | | | | | revocation of the offer | | | | | was not effective until it | | | | | had been communicated to | | | | | the offeree | | | | | | | | | | - A contract binging both | | | | | parties had been entered | | | | | on 11 Oct when Byrne | | | | | accepted by telegram the | | | | | offer of 1 Oct | | | +--------------------------------+--------------------------------+ | | | |   | | | | - Under the option agreement, the offeree provides consideration | | (something of value) to the offeror in exchange for the promise | | to keep the offer open | | | | - An option is a promise to keep an offer open for a set period | | of time supported by consideration which make that promise | | legally binding | | | | - An exception to revocation: a valid option contract prevents | | revocation before a stated time | | | | - An option is a contract not to revoke another offer to contract | | | | - The price of the option is neither refundable nor is it included | | in the sale price as a deposit | | | |   | | | | +--------------------------------+--------------------------------+ | | |   | Goldsborough Mort & Co, Ltd v | | | | | Quinn | | | +================================+================================+ | | | Facts | - Quinn promised Mort that | | | | | it would have the right to | | | | | purchase certain property | | | | | within one week at an | | | | | agreed price | | | | | | | | | | - Goldsborough paid Quinn 5 | | | | | shillings in consideration | | | | | for this option | | | | | | | | | | - Before the week expired, | | | | | Quinn purported to revoke | | | | | the offer | | | | | | | | | | - Goldsborough accepted the | | | | | offer within the week and | | | | | sued for specific | | | | | performance of the | | | | | contract of sale of | | | | | property at the agreed | | | | | price | | | +--------------------------------+--------------------------------+ | | | Held | - The Court held the option, | | | | | having been given for | | | | | value 5 shillings could | | | | | not be revoked and that | | | | | acceptance of the offer by | | | | | Goldsborough constituted a | | | | | binding contract | | | | | | | | | | - The Court made an order of | | | | | specific performance, | | | | | forcing Quinn to transfer | | | | | title to the land | | | +--------------------------------+--------------------------------+ | | | |   | | | | a. If not accepted within the time stated | | | | b. If not accepted within a reasonable time, where no time for | | acceptance has been stated | | | | c. If a counteroffer is made | | | | d. On the dead of either party before acceptance | | | | e. By loss of contractual capacity by either party | | | | - A counteroffer functions as both: a rejection of an offer to | | enter into a contract and a new offer that materially changes the | | terms of the original offer (because the counteroffer serves as a | | rejection of the original offer, the original offer can no longer | | be accepted) | | | | - A counteroffer changes or seeks to change one or more of the | | material or important terms of the offer (eg quantity or quality) | | | | - For there to be a contract, the (new) counter-offer has to now be | | accepted | | | |   | | | | +--------------------------------+--------------------------------+ | | |   | Hyde v Wrench | | | +================================+================================+ | | | Facts | - Wrench offered to sell | | | | | land to Hyde for \$1200 | | | | | | | | | | - Hyde rejected the offer | | | | | and Wrench offered to sell | | | | | it for \$1000 | | | | | | | | | | - Hyde responded to purchase | | | | | the land for \$950 but | | | | | Wrench refused to sell at | | | | | this price | | | | | | | | | | - Hyde then said he would | | | | | accept his earlier offer | | | | | to sell at \$1000 | | | | | | | | | | - When Wrench refused to | | | | | sell, Hyde bought an | | | | | action for specific | | | | | performance | | | +--------------------------------+--------------------------------+ | | | Issue | Offered a new price, can the | | | | | offer apply? | | | +--------------------------------+--------------------------------+ | | | Held | - The Court decided there | | | | | was no agreement - the | | | | | earlier offer to sell at | | | | | \$1,000 was terminated by | | | | | Hyde\'s counteroffer of | | | | | \$950 | | | | | | | | | | - Note Wrench was free to | | | | | reject the counteroffer | | | +--------------------------------+--------------------------------+ | | | |   | | | | - The offeree may want to clarify or seek more info about the terms | | of the offer | | | | - It is a question of fact in each case whether the offeree\'s | | response is a counteroffer or whether it is a reasonable attempt | | to clarify or seek additional info about the offer | | | | +--------------------------------+--------------------------------+ | | |   | Stevenson Jaques & Co v McLean | | | +================================+================================+ | | | Facts | - McLean offered to sell | | | | | Jaques iron for \"40 | | | | | shillings net cash\" | | | | | | | | | | - McLean promised that the | | | | | offer would remain open | | | | | until Monday | | | | | | | | | | - Jaques responded by asking | | | | | whether McLean would | | | | | accept 40 shillings \"for | | | | | delivery over two months | | | | | or if not the longest | | | | | limit you would give\" | | | | | | | | | | - On Monday, upon not | | | | | receiving any response, | | | | | Jaques purported to accept | | | | | the offer but discovered | | | | | that McLean had sold the | | | | | iron elsewhere | | | | | | | | | | - Jaques sued McLean for a | | | | | breach of contract | | | +--------------------------------+--------------------------------+ | | | Issue | Was the initial response a | | | | | request for info or | | | | | counteroffer? | | | +--------------------------------+--------------------------------+ | | | Held | - The response were seeking | | | | | to clarify the terms of | | | | | the offer, not impose new | | | | | or different terms | | | | | | | | | | - McLean was in breach and | | | | | liable in damages for its | | | | | non-delivery of the iron | | | +--------------------------------+--------------------------------+ | | | |   | | | | - Must be communicated unless waived or unless postal rule applies | | | | - Must be in response to the offer | | | | - Must be unconditional | | | | - Must follow any methods/conditions set out in offer | | | | - Can only be accepted by the person to whom offer directed | | | | - Special rules: postal acceptance and electronic communication | | | | - May be by conduct but cannot be imposed by silence | | | |   | | | | - Accepting= saying \'yes\' (indicating assent) to an offer, and | | therefor reaching \'agreement\' | | | | - An agreement is concluded when the offeree communicates a clear | | and unconditional acceptance of the offer to the offeror | | | | - Acceptance can be communicated by express words or in writing, by | | conduct or by performance of an act requested by the offeror | | | |   | | | | +--------------------------------+--------------------------------+ | | |   | Brinkibon Ltd v Stahag Stahl | | | | | GmbH | | | +================================+================================+ | | | Facts | - Brinkibon was a London | | | | | company that bought steel | | | | | from Stahag, a seller | | | | | based in Austria | | | | | | | | | | - Brinkibon sent their | | | | | acceptance to a Stahag | | | | | offer by telex to Vienna | | | | | | | | | | - A dispute arose and | | | | | Brinkibon wanted to use a | | | | | writ against Stahag and | | | | | applied to serve a party | | | | | that was outside the | | | | | jurisdiction of the Court | | | | | | | | | | - English law would only | | | | | apply if the contract has | | | | | been formed in England | | | +--------------------------------+--------------------------------+ | | | Held | - Court decided that the | | | | | contract was formed in | | | | | Vienna | | | | | | | | | | - In the case of | | | | | instantaneous | | | | | communication the | | | | | formation of a contract | | | | | generally occurs in the | | | | | place where the acceptance | | | | | is received | | | +--------------------------------+--------------------------------+ | | | |   | | | | +--------------------------------+--------------------------------+ | | |   | Empirnall Holdings Pty Ltd v | | | | | Machon Paull Partners Pty Ltd | | | +================================+================================+ | | | Facts | - Property developer | | | | | Empirnall hired architects | | | | | Machon to obtain permits | | | | | for a property development | | | | | | | | | | - Paull forwarded a contract | | | | | for signature and sent a | | | | | progress payment claim to | | | | | Empirnall, which paid on | | | | | the claim and asked Machon | | | | | to submit further progress | | | | | claims | | | | | | | | | | - Empirnall did not sign the | | | | | contract because its | | | | | director \"does not sign | | | | | contracts\" | | | | | | | | | | - Machon sent another | | | | | progress claim, again | | | | | forwarded a contract for | | | | | signature | | | | | | | | | | - Again the contract was not | | | | | signed | | | | | | | | | | - Two weeks later, Machon | | | | | wrote to Empirnall \"we | | | | | are processing 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\" | | | | | | | | | | - A dispute arose | | | | | subsequently and Empirnall | | | | | denied that the written | | | | | contract had ever been | | | | | accepted | | | +--------------------------------+--------------------------------+ | | | Held | - The Court decided that | | | | | because Empirnall had | | | | | taken the benefit of the | | | |