Contract A Exam Script PDF

lOMoARcPSD|44086083 lOMoARcPSD|44086083 OFFER EXCEPTION In order for there to be a valid contract, the court will need to...

lOMoARcPSD|44086083 lOMoARcPSD|44086083 OFFER EXCEPTION In order for there to be a valid contract, the court will need to determine if there was an  Op琀椀on: A promise to hold an o昀昀er open is binding at common law if considera琀椀on have o昀昀er. An o昀昀er is an indica琀椀on by one party (the o昀昀eror) to another (the o昀昀eree) of a been given in return for that promise (Goldsborough) willingness to contract on a par琀椀cular set of terms (Australian Woollen Mills).  Unilateral Contract: - Generally, a unilateral o昀昀er can be revoked before acceptance, however a remedy may be available (Mobil Oil) The court will use an objec琀椀ve test to determine if there was an o昀昀er. The court will decide, would a reasonable person in the o昀昀eree’s posi琀椀on consider there to have been an o昀昀er LAPSE OF TIME  An o昀昀er may be open for speci昀椀ed period- will lapse at end of speci昀椀ed 琀椀me made? (Carbolic) On the facts, it is likely made out that there was/was not an o昀昀er because  If no 琀椀me prescribed a昀琀er a reasonable 琀椀me [insert facts] o What is “reasonable” will depend on the context - Apply objec琀椀ve test 1. DEFINITION DEATH OF OFFEROR  WHERE OFFEREE KNOWS: O昀昀er lapses on death of o昀昀eror An o昀昀er may be described as the indica琀椀on by one-person (the o昀昀eror) to another (the o昀昀eree)  WHERE OFFEREE DOES NOT KNOW: No clear authority - depends on par琀椀es’ inten琀椀ons of a willingness to contract on certain (disclosed) terms.” (Australian Woollen Mills) and circumstances of each case 2. OBJECTIVE TEST OPTION CONTRACTS Would a reasonable person in the o昀昀erees posi琀椀on consider an o昀昀er to have been made?  Remain enforceable against deceased estate unless (Carbolic) o Personal services of deceased required or o Intent of op琀椀on was that it not be exercisable a昀琀er death (Laybu琀琀) 3. DISTINGUISH FROM: NON-PROMISSORY LANGUAGE DEATH OF OFFEREE  If a statement uses non-promissory language – this is not an o昀昀er  No clear authority- likely depends on the par琀椀es and the circumstances of each case EXAMPLES OF NON-PROMISSORY LANGUAGE FAILURE OF CONDITION  If you would like to make a formal applica琀椀on (Gibson) EXPRESS  May be prepared to sell (Gibson)  Where the contract speci昀椀cally states circumstances where: o An o昀昀er will stay open; or MERE PUFF o That must be sa琀椀s昀椀ed before an o昀昀er can be accepted  An overexaggerated statement that is obviously untrue IMPLIED INVITATION TO TREAT  In circumstances where it would be obvious to an objec琀椀ve observer that the failure of  An invita琀椀on to others to make an o昀昀er or enter into nego琀椀a琀椀ons that condi琀椀on would lead to termina琀椀on of the contract EXAMPLES REJECTION BY OFFEREE  Catalogues  Rejec琀椀on must be communicated  Goods displayed in shops (Pharmaceu琀椀cal Society)  Once an o昀昀er has been rejected it is no longer available for acceptance  Goods for tenders - some琀椀mes – Harvela Investments  A mere inquiry is not a counter o昀昀 (Stevenson, Jacques)  Goods o昀昀er for sale online (ETA s 14B)  A countero昀昀er (e.g., I’ll give you $x instead) is treated as rejec琀椀on  Public auc琀椀ons (ACG) 5. UNILATERAL OFFERS  Excep琀椀on: a promise to follow certain protocol in the tender process may be binding (Harvela)  Can be made to world at large (Carbolic)  If you do X I will do Y 4. TERMINATING AN OFFER WITHDRAWAL OR REVOCATION  Can occur any 琀椀me before acceptance by words/ac琀椀on inconsistent with the con琀椀nuance of the o昀昀er  The termina琀椀on is e昀昀ec琀椀ve when it reaches the o昀昀eree  O昀昀ers to the public at large can be revoked in the same way that the o昀昀er was made Downloaded by Hailey Ranasinghe ([email protected]) Downloaded by Hailey Ranasinghe ([email protected])  lOMoARcPSD|44086083 lOMoARcPSD|44086083 ACCEPTANCE Electronic Communica琀椀on (s 3)  Covers: text, online communica琀椀on, fax, voice mail converted into text A valid contract with an o昀昀er will also have acceptance, which is ‘unquali昀椀ed assent to the  Does not Cover: Ordinary oral communica琀椀on- e.g., telephone, voicemail terms of an o昀昀er’ (Paterson, Robertson & Duke). The court will apply an objec琀椀ve test to decide if there is valid acceptance, being that: would a reasonable person consider the Time of Receipt (s 13A) par琀椀es to have reached an agreement having regard to their external manifesta琀椀ons (Fitness  Sent to designated address are e昀昀ec琀椀ve when capable of being retrieved by addressee First v Chong). It has been se琀琀led that acceptance must be communicated to the o昀昀eror by (13A(1)(a))  Not sent to designated address are e昀昀ec琀椀ve when both capable of being retrieved by the o昀昀eree. (Latec Finance) It is also been established that a contract forms when addressee and the addressee is aware that the electronic communica琀椀on has been sent acceptance is communicated to the o昀昀eror. to that address (13a (1) (b))  Par琀椀es may agree otherwise On the facts, it is made out that acceptance is cons琀椀tuted by [insert facts] 4. CORRESPONDENCE BETWEEN OFFER AND ACCEPTANCE 1. DEFINITION GENERAL RULE “Unquali昀椀ed assent to the terms of an o昀昀er” (Pa琀琀erson, Robertson & Duke) Acceptance must correspond exactly with the o昀昀er.  Unquali昀椀ed: Same terms as the o昀昀er  Assent: There has to be an indica琀椀on of the assent BATTLE OF THE FORMS  Last shot in PREVAILS in Australia 2. TEST  Other Views o First shot Would a reasonable person consider the par琀椀es to have reached an agreement having regard to o Synthesis approach (construe terms together to give harmonious result their external manifesta琀椀ons (Fitness First (Australia)) 3. COMMUNICATION OF ACCEPTANCE Where buyer and seller terms con昀氀ict, op琀椀ons are:  There may be no contract THE NEED TO COMMUNICATE  There may have been acceptance by conduct GENERAL RULE  There may be non-contractual relief available (i.e. estoppel)  Acceptance must be communicated to the o昀昀eror by the o昀昀eree (Latec Finance) 5. AGREEMENTS WITHOUT OFFER AND ACCEPTANCE EXCEPTIONS  This is a last resort  Acceptance inferred from conduct - E.g., party says they are proceeding on basis of  Test comes from Heydon J in Brambles - “It is relevant to ask: acceptance and other party makes no objec琀椀ons (Empirnall)  In all circumstances can an agreement be inferred? o However, no acceptance from silence alone (Fedley)  Has mutual assent been manifested?  Dispensing from the need to communicate acceptance (Carbolic)  What would a reasonable person in the posi琀椀on of the plain琀椀昀昀 and a reasonable person in the posi琀椀on of the defendant think there was a concluded bargain? TIMING OF COMMUNICATION GENERAL RULE 6. TICKET CASES  A contract is formed when acceptance is communicated to the o昀昀eror- when (i.e. 琀椀me) and where (i.e. place) the acceptance was received (Brinkibon)  The “conven琀椀onal analysis” is that the 琀椀cket is an o昀昀er which the purchaser can accept or reject a昀琀er her or she has had reasonable opportunity to accept or EXCEPTIONS reject  The conven琀椀onal approach isn’t always taken - There is no one size 昀椀ts Postal Acceptance Rule  Acceptance occurs when le琀琀er posted (Adams) all approach  the par琀椀cular facts need to be carefully considered  Applicable to non-instantaneous communica琀椀on (Brinkibon)  Unlikely to apply to instantaneous communica琀椀on Time of Dispatch (Electronic Transac琀椀ons Act s 13)  This sec琀椀on is likely to apply where the postal rule applies to electronic communica琀椀on  OR if the informa琀椀on did not leave under control of originator when the electronic communica琀椀on is received Downloaded by Hailey Ranasinghe ([email protected]) Downloaded by Hailey Ranasinghe ([email protected])  lOMoARcPSD|44086083 lOMoARcPSD|44086083 CONSIDERATION  Applies where: o A makes a request to B that he perform services; and Considera琀椀on is made out in a contract when something of value is given in exchange for a o B then performs the services request of him; and promise. For there to be valid considera琀椀on, there is also a bene昀椀t/detriment requirement. o A then promises to pay B for the performed services, B’s performance of the This means that there must be a detriment incurred by the promisee, or a bene昀椀t conferred services is good considera琀椀on for A’s promise. on the promisor at the instance of the promise. On the facts, the bene昀椀t/detriment requirement is likely made out by [insert facts]. EXISITING LEGAL DUTY PUBLIC DUTIES  Duty to a琀琀end court to give evidence pursuant to a subpoena It is se琀琀led that the considera琀椀on that is paid must be given in exchange for the received  Duty to obey the law bene昀椀t, otherwise known as in quid pro quo (Australian Woollen Mills). It is likely made out that the considera琀椀on is made out in quid pro quo because [insert facts]. CONTRACTUAL DUTIES General Rule: promise to perform an exis琀椀ng obliga琀椀on is not good considera琀椀on (S琀椀lk) It is also se琀琀led common law that the considera琀椀on does not need to be ‘adequate’ (Woolworths v Kelly), and therefore nominal considera琀椀on will be su昀케cient considera琀椀on. Excep琀椀ons: a. Fresh considera琀椀on/termina琀椀on and replacement (Hartley; Ponsonby) 1. DEFINITION b. Promise made to a third party (Pao on) c. Genuine, bona 昀椀de promise to resolve a dispute (Wigan) Something of value must be given in exchange for a promise  There is a contract (In Wigan contract to sell the house)  There was a complaint (In Wigan that there were defects in the house) 2. BENEFIT/DETRIMENT REQUIREMENT  There was an extra promise (In Wigan to 昀椀x the defects)  Extra promise was broken (In Wigan, the defects were not repaired) There must be:  A detriment incurred by the promisee or d. Prac琀椀cal bene昀椀t (Williams, Musumenci)  A bene昀椀t conferred on the promisor at the instance of the promise  If the promise secures a prac琀椀cal bene昀椀t to the promisor, no fresh considera琀椀on  Bene昀椀t may be conferred on a third party is required of the promise (Musumenci) 3. BARGAIN REQUIREMENT Musumenci Test: 1. A enters a contact with B to provide goods/services for payment DEFINITION: 2. Before A completers their obliga琀椀ons, their ability to perform comes in ques琀椀on The considera琀椀on paid must be given in exchange for the bene昀椀t received (quid pro quo) (AWM) 3. B promises A extra payment to ensure they can complete performance 4. In doing so, B gets a bene昀椀t or avoids a detriment REQUEST: 5. A did not unduly in昀氀uence B into making the new promise is relevant but not determinate (AWM; McDivi琀琀)  Does the excep琀椀on apply in Aus? - View is that it does apply but not binding HC cases  Does it e昀昀ec琀椀vely negate the rule in S琀椀lk – Yes DISTINGUISH FROM:  Promisee’s reliance on the promise (Beaton) e. Par琀椀es terminate original contract and form a new one which recycles previous  Condi琀椀onal gi昀琀s (AWM) obliga琀椀ons (Hartley) 4. CONSIDERATION NEED NOT BE 'ADEQUATE' ILLUSORY CONSIDERATION?  the Courts will not inquire into the adequacy of considera琀椀on (Woolworths v  A promise that is illusory (has no real content) is not good considera琀椀on Kelly)  This means Nominal considera琀椀on will be su昀케cient considera琀椀on 5. CONSIDERATION MUST BE SUFFICIENT PAST CONSIDERATION GENERAL RULE: Something already done by the promisee is not good considera琀椀on (Roscola) EXCEPTION:  Payments for past services (Lampleigh) Downloaded by Hailey Ranasinghe ([email protected]) Downloaded by Hailey Ranasinghe ([email protected])  lOMoARcPSD|44086083 lOMoARcPSD|44086083 INTENTION SUGGESTS INTENTION DOES NOT SUGGEST INTENTION In order to ascertain a valid contract, the par琀椀es must express an inten琀椀on to create legal  Commercial context  No language of obliga琀椀on, rela琀椀ons. (Shahid; Roufos; vague language (Ashton; CBA v Placer) TLI) It is likely made out on the facts that  Serious/important  Lack of commercial interest subject (Shahid; Todd) (AWM)  Detailed, formal  Party previously refused to 1. RULE language (Shahid; enter a binding agreement  For there to be a contract, the par琀椀es must manifest an inten琀椀on to create legal Placer) (Kleinwort) rela琀椀ons  Promissory language  Statement of policy/fact (Placer; Banque (Kleinwort; AWM) 2. WHAT TYPE OF AGREEMENT IS IT? Brussels)  Arms’ length par琀椀es  Commercial agreement (Shahid)  Social/domes琀椀c  Government 5. SPECIAL CIRCUMSTANCES 3. ANY PRESUMPTION? LETTER OF COMFORT SOCIAL/DOMESTIC & OTHER NON-COMMERCIAL AGREEMENTS Issued by a parent company on subsidiary’s behalf to demonstrate the subsidiary’s merits to a  Tradi琀椀onally presump琀椀on against inten琀椀on lender  Non presump琀椀on either way a昀琀er Ermogenous  Overall trend is that they are not meant to be binding but depends on circumstances  Arrangements of a commercial nature between par琀椀es in domes琀椀c/social rela琀椀onship are more likely to indicate intent eg. Roufos GOVERNMENT AGREEMENTS  A contact where one party is a local/state/federal government PRESUMPTIONS AND ONUS OF PROOF  Likely binding if commercial in nature  Current approach (no presump琀椀on either way)  Plain琀椀昀昀 bears the onus of establishing that their agreement was intended to be legally DISTINGUISH FROM binding.  Implementa琀椀on of policy (AWM)  Gratuitous provision of services (LEAHY) COMMERCIAL TRANSACTIONS  There remains a strong presump琀椀on that the par琀椀es intend a legally binding contract RELEVANT FACTORS TO CONSIDER (Shahid)  Commercial interest/lack thereof (AWM)  The courts presume that the par琀椀es intended the contract to be legally binding  Presence of statutory authority (AWM) o A party denying inten琀椀on bears the heavy onus of establishing that there was no  Parliamentary approval or funding (Placer) such inten琀椀on  Mere statement of policy (AWM)  Broad discre琀椀on under the agreement (AWM) 4. OBJECTIVE TEST PRELIMINARY AGREEMENTS  Would a reasonable person regard each party as having intended to create legal A party may argue that a preliminary agreement was intended to have immediate and binding rela琀椀ons (Shahid) e昀昀ect. Consider Masters v Cameron categories:  Look at all the circumstances  What they said or did 1. Par琀椀es decided on 昀椀nal terms and wish to restate them in a formal document = binding  The circumstances in which they said or did it (Ermogenous) 2. Par琀椀es agreed on terms, but one or more are condi琀椀onal upon the crea琀椀on of a formal  The subject ma琀琀er of the agreement (Ermogenous) document = par琀椀es are bound to create and execute the formal document  The status of the par琀椀es to the agreement (Ermogenous) 3. Par琀椀es have nego琀椀ated some terms but do not wish to be bound un琀椀l a formal document  The party’s rela琀椀onship with one another (Ermogenous) is created = not binding  Not concerned with whether the par琀椀es actually/subjec琀椀vely intended to be 4. Baulkham Hills iden琀椀昀椀ed a possible fourth category where par琀椀es intend to be bound legally bound immediately but wish to add to a contract later = binding  PER does not apply. Can look at all the circumstances Downloaded by Hailey Ranasinghe ([email protected]) Downloaded by Hailey Ranasinghe ([email protected])  lOMoARcPSD|44086083 lOMoARcPSD|44086083 CERTAINTY HAS AGREEMENT BEEN PARTLY EXECUTED? 1. DEFINITION  Courts less likely to 昀椀nd an agreement is incomplete if one party has partly performed the contract (Foley) An agreement must be su昀케ciently certain and complete for a contract to be formed  Note: Parole Evidence Rule does not apply to certainty IS THERE A MECHANISM/FORMULA THAT CAN FILL THE GAP?  Par琀椀es may make a valid contract that defers agreement on an essen琀椀al term if they 2. COMPLETENESS provide an a昀昀ec琀椀ve mechanism of supplying the term if they fail to reach agreement HOW ESSENTIAL IS THE TERM?  The contract must not be missing any essen琀椀al terms (ANZ v Frost) 3. CERTAINTY OF MEANING  Every case to be decided on its own facts (Foley v Classique) RULE  A contract must be expressed in su昀케ciently clear and precise terms for it to be given WHAT IS AN ESSENTIAL TERM? meaning by a court  Ul琀椀mately it is a ques琀椀on of fact to be determined by reference to the inten琀椀on of the  NOTE: uncertainty or meaning more likely to impact validity if par琀椀es are yet to perform par琀椀es NOT A PEDANTIC TEST SETTLES CATEGORIES OF ESSENTIAL TERMS  If language is not so obscure and incapable of any de昀椀nite meaning, K will be certain (Aus All contacts: in general subject ma琀琀er & par琀椀es = always essen琀椀al Chilling & Freezing)  Some ambiguity is acceptable Lease of land  Par琀椀cularly no pedan琀椀c approach in commercial contracts Essen琀椀al: commencement date & term, rental, property, par琀椀es (Whitlock v Brew) APPLYING OBJECTIVE/REASONABLE STANDARDS Sale of land  Reasonableness & similar concepts are some琀椀mes employed as terms of a K expressly by Essen琀椀al: subject ma琀琀er(i.e the land), par琀椀es, price (Hall v Busst) par琀椀es or implied by courts to interpret a term Not essen琀椀al: se琀琀lement dateand other conveyancing stepscan be implied  Such concepts = inherently imprecise, but courts will endeavour to give them meaning in order to uphold a contract (Meehan v Jones) Sale of goods  But what is 'reasonable'/'fair' can some琀椀mes be impossible to work out as there may be Essen琀椀al: the goods no available objec琀椀ve standard (Whitlock v Brew) Not essen琀椀al: price(a reasonable price can be implied via s 13 Goods Act 1958 (Vic))  Courts o昀琀en divided as to whether uncertainty can be resolved (Hall v Busst; Biotech v Pace) IMPLYING TERMS TO FILL IN THE GAPS  'Reasonable' price for sale of goods is not applicable to sale of land and improvements  Courts may imply a reasonable or objec琀椀ve standard to 昀椀ll a gap (Foley v Classique (Hall v Busst) Coaches)  Courts may also imply other types of terms to 昀椀ll a gap AGREEMENTS TO NEGOTIATE  Context: agreements to 'nego琀椀ate in good faith' are common in alterna琀椀ve dispute DEFERRED AGREEMENT - 'AGREEMENTS TO AGREE' resolu琀椀on clauses in complex commercial transac琀椀ons; aim to provide a mechanism to  Some琀椀mes par琀椀es will expressly agree to defer agreement on a term un琀椀l future point in avoid li琀椀ga琀椀on 琀椀me, aka 'agreement to agree'  Also common in preliminary agreements  'agreement to agree' on an essen琀椀al term:  Can be enforceable: United Group Rail Services v Rail Corp of NSW o Will usually be treated the same way as if the agreement was silent on that essen琀椀al term - both result in an unenforceable contract due to incompleteness 4. ILLUSORY PROMISES o Contract will be unenforceable even where the court could have otherwise TEST implied a term (eg. such as a term to pay a reasonable price per s 13 Goods Act)  A promise is illusory is promisor has an unfe琀琀ered discre琀椀on in rela琀椀on to performance (Biotech v Pace) (Placer Developments v Cth; Biotech v Pace)  Agreement to agree on a non-essen琀椀al term is unenforceable, but contract remains valid EFFECT  However, agreement to agree on essen琀椀al term may be enforceable if: o Agreement has been partly performed (Foley v Classique)  Not enforceable (Placer Developments) o Mechanism/machinery or formula is speci昀椀ed to supply the term if the par琀椀es Whether or not whole contract fails depends on whether the illusory promise can be severed are unable to reach agreement (Whitlock v Brew)  If contract fails - two ways of conceptualising this: Downloaded by Hailey Ranasinghe ([email protected]) Downloaded by Hailey Ranasinghe ([email protected])  lOMoARcPSD|44086083 lOMoARcPSD|44086083  No considera琀椀on - an illusory promise is no promise CAPACITY  Incomplete contract - an essen琀椀al term has been le昀琀 to be determined by one MINORS party WHO IS A MINOR? PROMISES THAT ARE NON ILLUSORY S3(1) of the Age of Majority Act 1977 (Vic) : Someone under 18 years of age A term will not be illusory where:  Party is given la琀椀tude of choice, which does not amount to complete and unfe琀琀ered BINDING CONTRACTS ON A MINOR discre琀椀on (Meehan v Jones, Biotech v Pace)  Contracts of employment  Party must act honestly or honestly & reasonably (Meehan v Jones, Placer  Appren琀椀ceship contracts Developments (minority), Biotech v Pace (Hope J in minority)  Contracts for necessary goods  Can be saved by implying objec琀椀ve standard that is available (Biotech v Pace)  Discre琀椀on relates to the ful昀椀llment of a condi琀椀on upon which the performance of the contract depends IS IT BINDING UNLESS REPUDIATED?  Discre琀椀on is to be exercised by a third party (Godecke v Kirwan) RULE: Generally, K for ongoing obliga琀椀ons are binding unless the minor repudiates (disavows)  It is a subject to 昀椀nance clause (Meehan v Jones) the K prior to them turning 18 OR within a reasonable period of them turning 18 CONSEQUENCES OF UNCERTAINTY EFFECT OF REPUDIATION: Minor is generally not be bound by future obliga琀椀ons, but is bound by obliga琀椀ons accrued before repudia琀椀on If an agreement is incomplete, or terms are uncertain or illusory, consequences include:  Whole agreement is void (always happens in incompleteness) VOID  Ine昀昀ec琀椀ve term can be severed from rest of argument Such agreements are not void in the ordinary sense:  Ine昀昀ec琀椀ve term can be waived by the party for whose bene昀椀t that term was s琀椀pulated  Minor is not bound by the contract (adult party can’t enforce the contract)  Minor may sue: minor can s琀椀ll enforce contract  Property in goods passes to the minor under the contract  Money paid by minor irrecoverable unless total failure of considera琀椀on:  Generally, minor is not required to return goods MENTAL INCAPACITY & INTOXICATION RULE Voidable if Person seeking to set aside the contract shows that:  He/she was incapable of understanding the contract at the 琀椀me it was made; and  The other party to the contract knew or ought to have known of the incapacity EXCEPTION  SECTION 7 GOODS ACT 1958: "Capacity to buy and sell is regulated by the general law concerning capacity to contract and to transfer an acquired property: Provided that where necessaries are sold and delivered to a minor or to a person who by reason of mental incapacity or drunkenness is incompetent to contract he must pay a reasonable price therefore" CORPORATIONS  Companies can enter into contracts in wri琀椀ng, orally or by conduct Downloaded by Hailey Ranasinghe ([email protected]) Downloaded by Hailey Ranasinghe ([email protected])  lOMoARcPSD|44086083 lOMoARcPSD|44086083 FORMALITIES CONTENT GENERAL RULE (COMMON LAW)  Must contain at least all essen琀椀al terms (Pirie v Saunders; Pipikos v Trayans)  Contracts do not have to be in par琀椀cular form TIMING  Oral contracts are enforceable  Note/memorandum of agreement must be evidence of a prior agreement (Pirie)  Instruments Act s 126 - certain contracts need to abide by certain formali琀椀es  Excep琀椀on: Where there has been a wri琀琀en o昀昀er that is subsequently accepted orally (Pirie) IS IT A S 126 AGREEMENT? INTERESTS IN LAND JOINDER  Contracts for the sale and purchase of land If there is a joinder situa琀椀on courts will permit joinder where:  Leases (Pirie v Saunders)  The documents are physically connected (e.g. two documents stapled together)  Mortgages  One document refers to another document  Op琀椀ons to purchase, lease, or mortgage or to acquire another interest in land (Tonito v  If it is unclear whether a document refers to another document oral evidence can be Bassal) used (Toni琀琀o v Bassal)  Agreements to transfer land that a party intends to acquire in the future  A promise to leave land in a will SIGNATURE WHO MUST SIGN? GUARANTEE  By the defendant, but not necessarily the plain琀椀昀昀  Secondary obliga琀椀on to protect a creditor from loss arising from a speci昀椀c party FORM OF SIGNATURE INDEMNITY  Signature need not take a par琀椀cular form, ini琀椀als or an ‘x’ su昀케ce (Moore)  Promise to ensure that a person su昀昀ers no loss arising out of a transac琀椀on (indemni昀椀er's  Authen琀椀cated Signature: if a party recognised their signature as acceptance, it counts as liability is primary, not secondary to debtor's) (Yeoman Credit Ltd v La琀琀er) such (Pirie) ELECTRONIC COMMUNICATION WRITING REQUIREMENT  Sec琀椀on 7(1) of ETA - dismisses any sugges琀椀on that electronic communica琀椀ons are to be regarded in a legally “nega琀椀ve” light because they are not hard-copy/paper documents  Sec琀椀on 126(2) of the Instruments Act 1958 (Vic) states that its requirements ‘may be met in accordance with the Electronic Transac琀椀ons (Victoria) Act 2000’ SIGNATURE  Sec琀椀on 9 of Electronic Transac琀椀ons Act: Produces similar results to authen琀椀cated signature 昀椀c琀椀on CONSEQUENCES OF NON-COMPLIANCE UNENFORCEABILITY  it is unenforceable - no ac琀椀on can be taken to enforce the contract in a court of law REQUIRED FORMALITIES  But the dealings between the par琀椀es may, in some circumstances, s琀椀ll give rise to Agreement enforceable rights:  The wri琀琀en contract PART PERFORMANCE Memorandum or note of the agreement  Developed to avoid the harshness of the Statute of Frauds  May be made with respect to an oral agreement  Operates where party has performed some acts that unequivocally referable to some  Must be produced a昀琀er the agreement is completed such agreement as that alleged - and explicable on no other basis (Pipikos v Trayans)  Most cases deal with a memorandum or note of the agreement o Preparatory acts not su昀케cient o Payment of money alone not su昀케cient Formali琀椀es - agreement/note/memorandum of agreement must be: o Possession and other acts on the land may be su昀케cient  In wri琀椀ng o Acts need to be done 'pursuant to the contract' (but need not necessarily be  Signed by 'person to be charged' required by the contract) Downloaded by Hailey Ranasinghe ([email protected]) Downloaded by Hailey Ranasinghe ([email protected])  lOMoARcPSD|44086083 lOMoARcPSD|44086083 PRIVITY GENERAL PRINCIPLES: 1. RULE  Where one of the par琀椀es to a K has partly performed his/her obliga琀椀ons under the contract, it may be fraudulent or unconscionable for the other party to rely of the Statute  Prima facie, contractual rights and obliga琀椀ons are only binding on those who are of Frauds/Instruments Act a party to the K  Operates only where party has performed acts that are unequivocally referable (Pipikos v 2. IDENTIFYING THE PARTIES Trayans)  Apply an objec琀椀ve test – Who were intended to be the par琀椀es to the contract? ESTOPPEL SEE WEEK 7 IF THERE ARE JOINT PROMISEES  A remedy may be available under estoppel where there is an unenforceable contract due  Considera琀椀on may be provided by one joint promisee on behalf of other joint to a lack of formali琀椀es promisees (Coulls)  Doctrines of equitable estoppel and part performance overlap, but are dis琀椀nct, with di昀昀erent criteria and relief (Pipikos) 3. CAN THE PRIVITY RULE BE CIRCUMVENTED? 1. Enforcement by a party (non applica琀椀on) NO ORAL MODIFICATION CLAUSES?  A promisee can sue a promisor to enforce a contractual promise to  These are invalid in Australia confer a bene昀椀t on a third party  However, remedies available may not be su昀케cient to ensure that the FORMALITIES RED FLAGS third party obtains the promised bene昀椀t o Damages - quantum based on loss su昀昀ered by party to the  Agreement for sale of lease of land (or op琀椀on) contract - therefore only nominal damages may be available  Guarantee - a promise to 'answer for' the liability of another where loss is su昀昀ered by third party bene昀椀ciary o Speci昀椀c performance - many limits on when it is available (eg. personal services)  Requires a promisee that is able and willing to enforce on behalf of the third party 2. Agency (non applica琀椀on)  A party not directly involved in contract forma琀椀on (C) can show that they are a party to a contract if one of the par琀椀es directly involved (acts as C’s agent at the 琀椀me the contract was entered into o If an agent, ac琀椀ng as agent of the principal, enters into K with B, then par琀椀es to the contract are the principal and B  In this case, a party not involved in the acts of contract forma琀椀on (the 'principal') is nevertheless a party to the contract  O昀琀en arises in rela琀椀on to Himalaya clauses – Test (New York Star, Barwick CJ): 1. The contract must provide that a bene昀椀t is to be conferred upon a bene昀椀ciary. 2. The contract must provide that the promise is ac琀椀ng as the bene昀椀ciary’s agent. 3. The promise must be authorised to contract on behalf of the bene昀椀ciary or the bene昀椀ciary must subsequently ra琀椀fy the agreement. 4. The bene昀椀ciary provided considera琀椀on for the promise 3. Crea琀椀ng a special excep琀椀on for insurance contracts & le琀琀ers of comfort/indemnity  Privity does not apply to avoid injus琀椀ces (Trident v McNeive)  Principle in Trident could be extended to le琀琀ers of guarantee (Gate Gourmet Australia) 4. Estoppel Downloaded by Hailey Ranasinghe ([email protected]) Downloaded by Hailey Ranasinghe ([email protected])  lOMoARcPSD|44086083 lOMoARcPSD|44086083  Where a non party bene昀椀ciary has been induced by a promisor to  That the UNIDROIT Principles abolishes privity and allows third par琀椀es upon assume that he or she will bene昀椀t under a K with promisee, and whom the contract expressly or impliedly confers a bene昀椀t to bring a contractual bene昀椀ciary has relied on that assump琀椀on in such a way that he/she will claim su昀昀er a detriment if it is not ful昀椀lled, then the bene昀椀ciary may be en琀椀tled to assert an estoppel against the promisor  May operate to impose a burden on a non-party if the requisite elements are made out 5. Assignment or nova琀椀on of rights  One may become a party to a K through assignment or nova琀椀on, where it replaces the original promisee o Assignment = the transfer of some or all of the contractual rights owed to one contractual party to a third party o Nova琀椀on = termina琀椀on of the original K and the forma琀椀on of a new K between one of the original contrac琀椀ng par琀椀es and a subs琀椀tuted (third) party Context: o As part of a sale of a business - material contract need to be transferred from the vendor to the purchaser - eg. premises leases, contracts with key suppliers, trade mark licenses o Debt collec琀椀on - businesses having di昀케culty ge琀 ng payment from a customer may assign or sell their right to payment under the relevant contract to a debt collec琀椀on agency who will then take the risk of pursuing the debt General principles: o Only contractual rights may be assigned, no burdens  Eg. K for supply of services - supplier could assign the right to collect payment to a third party, but could not assign its obliga琀椀on to provide services  In order to transfer obliga琀椀ons, consent of promisee is required - new contract, not nova琀椀on  As a result assignments tend to involve situa琀椀ons where the assignor has completely performed and is awai琀椀ng agreed counter performance Rights which can be assigned: o Only non-personal rights can be assigned Therefore rights to personal service cannot be assigned generally  A right is personal is the iden琀椀ty of the [assignor] is material to the  contractual rela琀椀onship or to the contractual performance to be rendered o Whether or not rights can be assigned without consent is a ma琀琀er of construc琀椀on of the contract  It is common in commercial contracts to see express clauses prohibi琀椀ng assignment of rights - valid and enforceable  In absence of such a clause - generally possible to assign rights (unless personal) without the consent of the promisor CISG & PRIVITY  That the CISG is silent on the ques琀椀on of privity Downloaded by Hailey Ranasinghe ([email protected]) Downloaded by Hailey Ranasinghe ([email protected])  lOMoARcPSD|44086083 lOMoARcPSD|44086083 ESTOPPEL  Par琀椀cular legal rela琀椀onship?  Some cases have held it to be a requirement (Mobil v Wellcome; A party may be able to make a claim on estoppel if they have relied on representa琀椀ons made Se琀琀lement Group) by another party, only for that party to contradict their agreements.  Se琀琀led that it is not a requirement for proprietary estoppel (W v G) Eg. M assumed W was bound by the lease or expected W would execute and deliver the ESTOPPEL lease as a ma琀琀er of obliga琀椀on Provides protec琀椀on to someone who has relied on the truth of representa琀椀ons made to another to their detriment such that it would be unconscionable for the representor to then resile 2. Inducement  The assump琀椀on must have been induced by the conduct of the representor Estoppel = stopped/blocked/not allowed  Must be “clear, precise and unambiguous”: (Crown v Cosmopolitan Hotels) Doctrine of estoppel is not part of contract law; runs alongside it:  Inducing conduct may be express (eg. express statement) or implied (eg. through  Contract law = upholding a bargain silence)  Estoppel = ^ Eg. W induced M to adopt that assump琀椀on by its silence When might estoppel be invoked? O昀琀en argued where a claim for breach of contract not available, and the plain琀椀昀昀 relied on the 3. Detrimental reliance promise to their detriment  Relying party must have acted on the assump琀椀on in such a way that they will su昀昀er detriment if the representor does not adhere to the assump琀椀on DIFFERENT VIEWS  Onus: The person claiming the estoppel has the onus of proving detrimental reliance: Sidhu v Van Dyke  Narrow – a restraint on rights (shield)  Promissory estoppel can only be used defensively (Saleh) eg. as a defence  Change of posi琀椀on test: The relying party should have CHANGED THEIR POSITION on the basis of the assump琀椀on to a claim for breach of contract  Assess at 琀椀me of departure: Detriment should be assessed at 琀椀me of the  In between – the “legal rela琀椀onship” model  Par琀椀cular legal rela琀椀onship needed for estoppel to be used o昀昀ensively represen琀椀ng party’s departure or threatened departure  Detriment need not only be 昀椀nancial: Cth v Verwayen Walton)  Assump琀椀on adopted must be that a 'par琀椀cular legal rela琀椀onship' would  Recall: Detrimental reliance not established in Mobil v Wellcome; or Crown v Cosmopolitan exist - then the estoppel can be used o昀昀ensively to establish a cause of ac琀椀on under the par琀椀cular legal rela琀椀onship eg. breach of contract Eg. M acts in reliance on assump琀椀on by star琀椀ng to demolish old building & construc琀椀ng  Broad – an independent source of rights (sword)  The dominant view a昀琀er Waltons Eg. W v G new one in accordance with W's requirements  De昀椀nitely the scope for proprietary estoppel - if this is the scope of  M su昀昀ers detriment if assump琀椀on that the lease would proceed is not ful昀椀lled (M destroys perfectly good building they own, incurs costs of construc琀椀ng a new one promissory estoppel then there is a single merged doctrine of equitable in accordance with W's plans estoppel TYPES OF ESTOPPELS 4. Knowledge  Represen琀椀ng party must know or intend that relying party will rely on  Common law estoppel – estoppel by representa琀椀on, estoppel in pais assump琀椀on  Equitable estoppel –  Actual knowledge or inten琀椀on to induce  Proprietary estoppel – assump琀椀ons of a grant of an interest in land  Construc琀椀ve knowledge/ought to have known would induce  Promissory estoppel – representa琀椀ons that lead to an assump琀椀on about  Likely that construc琀椀ve knowledge will be su昀케cient, except in the case of future conduct; promise that contractual rights would not be enforced inducement by silence ELEMENTS OF ESTOPPEL - AIDKDRU Eg. W knew that M were ac琀椀ng on assump琀椀on (at the latest on 11 Dec when learnt about *Apply 7 part test to determine estoppel demoli琀椀on works) 1. Assump琀椀on 5. Departure  The relying party must have adopted an assump琀椀on, either of fact or about  Representor has departed or threatened to depart from the assump琀椀on adopted future conduct and acted upon by the relying party  If current fact: common law estoppel  Will usually be obvious  If future conduct: equitable/promissory estoppel Downloaded by Hailey Ranasinghe ([email protected]) Downloaded by Hailey Ranasinghe ([email protected])  lOMoARcPSD|44086083 lOMoARcPSD|44086083 Eg. W has clearly departed from assump琀椀on EXPRESS TERMS 6. Reasonableness Express terms in a contract  Court considers:  Whether the relying party acted reasonably in adop琀椀ng the relevant 1.Express terms of a contract will be incorporated when the signing party has signed the assump琀椀on; and contract. They will be bound by the terms of the contract, regardless of if they have read it  Whether they acted reasonably in taking the detrimental ac琀椀on because or not. (L’Estrange) of the assump琀椀on 2.Terms included in a document that has not been signed may be incorporated if the Eg. reasonable in the circumstances for M to make assump琀椀on and to take ac琀椀on they following elements are made out. took in reliance on them 7. Unconscionability No琀椀ce of the term must be given to the person bound by the term before the contract is  It would be unconscionable in the circumstances for the representor to depart formed (Ebay). On the facts, it is made out that [insert facts] from the assump琀椀on  Factors to consider: Next, the court will decide if there was reasonable knowledge by the person of the terms in  The nature of the inducement – ques琀椀on. The court will look at if the document is not reasonably thought to be contractual,  The reasonableness of the relying party’s ac琀椀ons there should have been reasonable steps taken to bring the terms to the a琀琀en琀椀on of the  The representors knowledge of other party. (Causer v Brown) On the facts, it is likely made out that [insert facts]  Extent of the detrimental reliance The court will also take into account how readily available the terms were (Thornton v Shoe Eg. the urgency that pervaded that nego琀椀a琀椀on of the terms of the lease  M executed counterpart lease and forwarded it to W's lawyer on Nov 11 - M Lane Parking). On the facts [insert facts] acted on assump琀椀on that comple琀椀on of necessary exchange was a formality  W knew M was ac琀椀ng in reliance on assump琀椀on (at latest Dec 10 when it learnt It will also be considered if the term is onerous or unusual. (Bal琀椀c Shipping) On the facts it is of demoli琀椀on works) likely that [insert facts]  Accordingly, W had to communicate with W within reasonable 琀椀me a昀琀er receiving signed counterpart lease, and also when it learnt about demoli琀椀on 3.The court will consider various elements to determine if statements made during  It was unconscionable for W to subsequently seek to withdraw and not ful昀椀l nego琀椀a琀椀ons can be incorporated in a contract. expecta琀椀on EFFECTS OF ESTOPPEL 1. INCORPORATION BY SIGNATURE Common Law Estoppel RULE  Equates to the “expecta琀椀on” interest – as if fact is true  When a contract is signed, then, in the absence of fraud, or, misrepresenta琀椀on, the party  Representor is prevented from asser琀椀ng facts contrary to the representa琀椀on signing it is bound, and it is immaterial whether he has read the document or not (L’Estrange)  Rights of par琀椀es are then determined by reference to that assumed state of a昀昀airs o Rule also applies to contracts ‘signed’ by electronic means (eBay)  Eg. 'X signed contract' - could not rely on Statute of Frauds EXCEPTIONS Equitable Estoppel 1. The document could not reasonably be considered contractual eg. receipt (Cur琀椀s v Chemical  Raises an 'equity' in favour of the relying party (en琀椀tlement to equitable relief) Cleaning)  This may be the reliance loss or the expecta琀椀on loss 2. The signing has been vi琀椀ated by factors such as misrepresenta琀椀on (Cur琀椀s v Chemical  Star琀椀ng point – relying party has prima facie en琀椀tlement to have their assump琀椀on made Cleaning) good  Relief is discre琀椀onary Typically arises in cases where party has signed a document containing a broad exclusion of liability clause without reading the document - RED FLAG S 9 Electronic Transac琀椀ons (Victoria) Act 2000 provides that where a law requires a person's signature, that requirement is taken to have been met if an appropriately reliable method has been used to iden琀椀fy the person and show their inten琀椀on in rela琀椀on to the informa琀椀on communicated 2. INCORPORATION BY NOTICE (terms contained in documents which have NOT been Downloaded by Hailey Ranasinghe ([email protected]) Downloaded by Hailey Ranasinghe ([email protected])  lOMoARcPSD|44086083 lOMoARcPSD|44086083 signed)  When one party makes a promise, connected to, but independent of, a main contract and, as considera琀椀on for that promise, the other party agrees to enter into the main 1. TIMING contract  No琀椀ce of the term must be given before the contract is formed: Oceanic  Separate agreement to the main agreement, PER does not apply Sun Line; Ebay Interna琀椀onal Requirements for a collateral contract: 2. ACTUAL KNOWLEDGE OR REASONABLE NOTICE a. The statement is promissory (apply test below) – JJ Savage; Van den Esschert RELEVANT FACTORS b. The statement was made to induce entry into the main contract – JJ Savage  If the document/sign is not reasonably thought to be contractual, reasonable steps c. The statement is consistent with the main contract – Hoyts v Spencer; SRA v Heath must be taken to bring the terms to the other party’s no琀椀ce: Causer v Brown d. All the elements eg. certainty – Crown v Cosmopolitan  Whether terms referred to are readily available: Thornton v Shoe Lane Parking; Bal琀椀c Shipping Estoppel  Whether the term is onerous or unusual - For these terms, special steps must be  Claim may be brought on estoppel if party has detrimentally relied on statement taken to bring them to the other party’s a琀琀en琀椀on: Interfoto; Bal琀椀c Shipping v Dillon;  Apply AIDKDRU test Thornton v Shoe Lane Parking  Estoppel unsuccessfully argued in this context in: o State Rail v Heath (not unconscionable) 3. INCORPORATION OF TERMS BY COURSE OF DEALINGS o Crown v Cosmo (not su昀케ciently clear representa琀椀on) RULE  En琀椀re agreement clause does not preclude a claim based on estoppel (Saleh v  The course of dealings must have been regular and uniform Romanous) Where par琀椀es to a K have a history of dealings: NO  Terms of an earlier K can be held to be terms incorporated into later K Stricter approach: if a wri琀琀en document appears on its face to be the complete extrinsic  This is so even though par琀椀es may not explicitly incorporate old terms into later K and evidence will not be admissible to add to, vary or contradict the terms of the contract; or principles of 琀椀ming, reasonable no琀椀ce and drawing a琀琀en琀椀on to onerous terms is not complied with Flexible approach (prevails): court focuses on presumed inten琀椀ons of the par琀椀es – can admit extrinsic evidence to consider whether the wri琀琀en document was intended to be the Jus琀椀昀椀ca琀椀ons: exclusive record (State Rail v Heath)  Party to be bound has, by con琀椀nuing to deal with party seeking to impose contractual term, evidenced a willingness to be bound by that term b. Is the statement 'promissory'? (assuming PER doesn’t apply)  E昀케ciency Overriding general test – would a reasonable person in all the circumstances consider the statement to be a contractual promise? LIMITATIONS  Lack of similarity between each transac琀椀on Suggests promissory Suggests not promissory  Document relied upon in previous transac琀椀ons could not reasonably be considered contractual:  Statement is important (Van  Par琀椀es have a formal, den Esschert; Oscar Chess) wri琀琀en contract 4. INCORPORATION OF STATEMENTS MADE DURING NEGOTIATIONS  Statement was made close to (Equuscorp) Does Parol Evidence Rule (PER) apply? the 琀椀me of signature (Van den  Vague, non-promissory PER prevents extrinsic evidence being given to add to, vary or contradict of a contract Esschert) language (JJ Savage; Oscar wholly in wri琀椀ng  Promissory language (JJ Chess) Savage; Dick Bentley; Oscar  Represen琀椀ng party has no a. Is the contract wholly in wri琀椀ng? Chess) relevant exper琀椀se (Oscar PER only applies to Ks made wholly in wri琀椀ng  Represen琀椀ng party has Chess) relevant exper琀椀se (Dick Is there an En琀椀re Agreement Clause? Bentley) YES  Usually indicate that the contract is wholly in wri琀椀ng and therefore PER applies YES  SDN may be incorporated into possible collateral contract - PER does not apply Excep琀椀ons to PER: Collateral Contract NO Downloaded by Hailey Ranasinghe ([email protected]) Downloaded by Hailey Ranasinghe ([email protected])  lOMoARcPSD|44086083 lOMoARcPSD|44086083  Contract wholly in wri琀椀ng - PER applies INTERPRETATION OF EXPRESS TERMS 1. LOOK AT THE CONTRACT AS A WHOLE Contractual provision must be read in light of the instrument as a whole 2. PAROLE EVIDENCE RULE Construing the terms: limits evidence being given by par琀椀es to explain the meaning of the terms of a contract wholly in wri琀椀ng. PER is likely to apply unless there is ambiguity surrounding a contractual provision. E昀昀ect of PER: Excludes evidence of the par琀椀es' nego琀椀a琀椀ons about the terms, whether it be oral or contained in some other piece of wri琀椀ng eg. notes or earlier dra昀琀s EXCEPTIONS: SURROUNDING CIRCUMSTANCES What is it?  The purpose of the K, the genesis of the transac琀椀on, the background, the context, and the market in which the par琀椀es operate When can the surrounding circumstances be referred to? Broach approach: always - words convey meaning according to the circumstances in which they are used, so the context or surrounding circumstances should be taken into considera琀椀on Narrow approach: ambiguity is a 'gateway' requirement - evidence as to the surrounding circumstance should be considered only to resolve ambiguity, which must be iden琀椀昀椀ed without regard to those circumstances True Rule in Codelfa  Prevents reliance on extrinsic evidence that contradicts the plain meaning of a contractual provision Controversy surrounding Codelfa There is judicial disagreement surrounding what an applica琀椀on of Codelfa truly looks like 3 op琀椀ons:  Narrow – full gateway – if language plain on its face cannot look at surrounding circumstances  Half gateway – can look at surrounding circumstances to determine whether or not ambiguous  Broad – no gateway – can always look at surrounding circumstances but there are limits on extent to which gramma琀椀cal meaning can be displaced by contextual considera琀椀ons When looking at Australian cases, the trend seems to be that a half or broad approach applies AMBIGUITY Provides an excep琀椀on to the exclusionary PER  Patent ambiguity – ambiguous on its face –  Latent ambiguity – ambiguous by reference to further facts - not ambiguous on its face but ambiguity is raised upon reference to extrinsic evidence – Downloaded by Hailey Ranasinghe ([email protected]) Downloaded by Hailey Ranasinghe ([email protected])  lOMoARcPSD|44086083 lOMoARcPSD|44086083  Low threshold – if a provision is “suscep琀椀ble of more than one meaning”: (Royal Botanic Gardens) IMPLIED TERMS 3. PROCESS OF CONSTRUCTION Implied terms are used as a means of 昀椀lling gaps in contracts, and therefore cannot Objec琀椀ve approach: the inten琀椀ons which a reasonable person would have had if placed in the contradict express terms. par琀椀es posi琀椀on 1.Implied terms in fact may apply if the elements can be sa琀椀s昀椀ed. Making use of surrounding circumstances The court will apply the 昀椀ve-step test from BP Re昀椀neries to determine if there is an implied  Consider (where admissible) the commercial purpose of the transac琀椀on, the background, term in a formal contract. the context and the market in which the par琀椀es are opera琀椀ng: Royal Botanic Gardens and Domain Trust v SCSS; Paci昀椀c Carriers v BNP Paribas IMPLIED TERMS Purposive approach: Apply a purposive approach to the interpreta琀椀on of ambiguous provisions: BASIC POINTS Paci昀椀c Carriers v BNP Paribas; Royal Botanic Gardens v SCSS  Implied terms cannot contradict an express term (昀椀ll a gap only)  Surrounding circumstances can be referred to, to determine if an implied term Reasonable commercial construc琀椀on exists  If words give rise to more than one interpreta琀椀on, courts favour the interpreta琀椀on which  Implied terms will not necessarily be defeated by an en琀椀re agreement clause produces a reasonable commercial result: ABC v APRA  Overlap between process of implying a term and construing a contract  But if the words are clear in their ordinary and natural meaning, Court will give e昀昀ect to  Some琀椀mes may be possible to argue for a par琀椀cular result on basis of that meaning even if it may produce an unreasonable or unfair result: Quirke v FCL; ABC construc琀椀on of express terms or implied term v APRA 1. TERMS IMPLIED IN FACT (CONTRACT) 4. EXCLUSION CLAUSES (CONSIDER INCORPORATION AND PRIVITY FIRST)  Tailored to the par琀椀cular contract in ques琀椀on - therefore unique to speci昀椀c GENERAL PRINCIPLES contract High Court has stressed (Darlington Futures v Delco) that:  Based on the presumed inten琀椀ons of the par琀椀es - had the par琀椀es no琀椀ced the  exclusion clauses should be analysed according to ordinary principles of construc琀椀on gap, they would have 昀椀lled it with an express term to the e昀昀ect of the term now  in the case of ambiguity - exclusion clause can be construed contra proferentem (strictly said to be implied against the party seeking to rely on it)  TEST: higher threshold for implying terms into formal contracts than into informal OTHER PRINCIPLES OF STRICT CONSTRUCTION contracts  Four corners rule (Sydney City Council; Darlington)  Formal contracts: o Where acts of the party claiming protec琀椀on under the exclusion clause were not o Strict applica琀椀on of 5 step test (Codelfa, Re Ronim) authorised or are outside the 'four corners' of the contract  Informal contracts:  Negligence (Davis) o 5 step test is less rigidly applied o Where the acts or omissions of the party claiming protec琀椀on under the exclusion o Must be necessary for reasonable or e昀昀ec琀椀ve opera琀椀on of a clause cons琀椀tute negligence and exclusion clause does not use clear words to contract of that nature in the circumstances of the case (Hawkins exclude liability or negligence v Clayton; Breen v Williams)  Deliberate breach (Davis; Sydney City Council) o 'obviousness' also relevant (Byrne v Aus Airlines) o Very clear words are required to avoid liability for a deliberate breach 5 STEP TEST FROM BP REFINERIES LEGISLATIVE REGULATION 1. REASONABLE AND EQUITABLE Is there any legisla琀椀on that a昀昀ects the opera琀椀on of the par琀椀cular exclusion clause?  Reasonableness alone is not a su昀케cient reason for implying a term INTERNATIONAL CONTRACT LAW  However, a term must be reasonable and equitable to be implied  A term that is bene昀椀cial to one party, but imposes a signi昀椀cant detriment  PER does not apply within the CISG and UNIDROIT Principles (UNLESS ENTIRE or burden on the other party is unlikely to be reasonable and equitable AGREEMENT CLAUSE)  CISG Arts 8(3), 11, UNIDROIT Principles Art 4.3 2. NECESSARY TO GIVE BUSINESS EFFICACY (THE MOORCOCK; RE RONIM)  That interpreta琀椀on of terms under the CISG and UNIDROIT is to be aided by  No term will be implied if the contract could operate e昀昀ec琀椀vely without it extrinsic evidence  E昀昀ec琀椀ve is key word here (Re Ronim) Downloaded by Hailey Ranasinghe ([email protected]) Downloaded by Hailey Ranasinghe ([email protected])  lOMoARcPSD|44086083 lOMoARcPSD|44086083  Would par琀椀es have put it in the contract had they thought about it? (Re services intended purpose Ronim)  TEST: Would a reasonable person consider that the term was n