University of Papua New Guinea Contracts Law 1, Semester 1, 2024 Lecture Notes PDF

THE UNIVERSITY OF PAPUA NEW GUINEA SCHOOL OF LAW Semester 1, 2024 Contracts Law 1 ( 5.10704 ) Lecture 1 Moral basis for Contract Law 1. Genesis Raised them out of the dust A man ( Adam ) and a woman ( Lilith ) Made them in his image  Respect and honour 2. Law in the garden Do the things you are all...

THE UNIVERSITY OF PAPUA NEW GUINEA SCHOOL OF LAW Semester 1, 2024 Contracts Law 1 ( 5.10704 ) Lecture 1 Moral basis for Contract Law 1. Genesis Raised them out of the dust A man ( Adam ) and a woman ( Lilith ) Made them in his image  Respect and honour 2. Law in the garden Do the things you are allowed Do not do the things you are not allowed.  Penalties 3. Violation of God’s law 4. Expulsion  Nothing  Idea of law  Sustained and ensured survival 5. Idea of law  Relationships  Valid  Binding  Enforcable  Commerce 6. Covenants – Yahova > Chosen 7. ‘ Do unto others what others do unto you ‘ 8. Mark 10:9  Judaeo/ Christianty Eg Leviticus  Islam - Jihad  Hindu  Other major world religions THE UNIVERSITY OF PAPUA NEW GUINEA SCHOOL OF LAW Semester 1, 2024 Contracts Law 1 ( 5.10704 ) Lecture 2 Contract: An agreement between two or more parties which confers rights and imposes obligations which the legal system will enforce 1. Agreement:. freely entered into agreement. freely agreed to terms. freely agreed to be bound. suffer penalties for breach PNG – Three national languages: a) English b) Pidgin c) Motu  Agreement ? a) English – agreement ?  Consensus ad idem. Latin legal maxim. 3 words  meeting of the minds. 4 words b) Pidgin – agreement?  Numi wan bel laka?. 4 words c) Motu – agreement?  Mauro. 1 word 2. Two or more:. cannot contract with self 3. Persons:.Human beings. Excludes non-human species  Horse drawn carriage  Horse racing  Cow milk  Chicken eggs. ET - non-human  Change our definition? 4. Rights:  Right to receive a benefit Eg. Pay – overtime – hda - etc. Uniform. Vehicle/allowance. Accommodation/allowance. School fees. Annual leave. Long service. Pension. Etc 5. Obligations:  Duty to do something. Positive duty  Duty to not do something. Negative duty Eg-Moonlighting 6. Enforcability:  Must be enforceable in a court  Not enforceable  not a contract:. Domestic. Social THE UNIVERSITY OF PAPUA NEW GUINEA SCHOOL OF LAW Semester 1, 2024 Contracts Law 1 ( 5.10704 ) Lecture 3 Elements of contract 1. Offer and Acceptance 2. Intention to create legal relations 3. Capacity to contract 4. Consideration 5. Legality of the objects of contract 6. Formalities 1. Offer and Acceptance Offer A ------------------offer----------------------------> B < ---------------- acceptance--------------------- A – Offeror B - Offeree Offer A proposition by the offeror to the offeree coupled with an intimation by the offeror that he/she is willing to enter into a contract should the offeree accept the terms of the offer A. To whom? i) A particular person. identifiable person  Perform  Subject matter. eg Coffee – Buai etc ii) A group of persons Eg Accountants Lawyers iii) World at large Carlill v Carbolic Smoke Ball Co ( 1892) 2 QB 484 CSBC-----Advertisement Medicinal drug –influenza Take as prescribed Still contract influenza  500 pounds Mrs C---took -influenza Claimed 500--refused CSBC---Defence:  No offer to Mrs C  No acceptance  No communication Court:  World at large  Mrs C accepted by purchase  No requirement to communicate acceptance  CSBC waived that requirement Not an offer: a) Invitations to treat. Supermarket Pharmaceutical Society of GB v Boots ( 1953 ) 1 QB 256 b) Auctions c) Advertisements d) Statement of price e) Tenders f) Memorandum seeking attention of interested buyers g) Draft Agreements Communication of offer a) Effective communication after b) Effect-----Offeree: 1) Accepts > K 2) Rejects > Destroys 3) Nothing 4) Cross – offer 5) Counter – Offer  Destroys offer  Legal positions B. Termination - Offer : i) Termination  Before receipt  Before acceptance Byrne v Van Tienhoven ( 1880 ) 5 CPD 344 ii) Rejection iii) Counter-offer  Destroys offer  Change positions A-------------B A B < ---------------- acceptance--------------------- A – Offeror B - Offeree Offer A proposition by the offeror to the offeree coupled with an intimation by the offeror that he/she is willing to enter into a contract should the offeree accept the terms of the offer R v Clark ( 1927 ) CLR 227 Leana v PNG Power Ltd ( 2005 ) N3085 A. To whom? i) A particular person. identifiable person  Perform  Subject matter. Egs: Coffee Buai Car Aircraft,etc ii) A group of persons Egs: Accountants  Specialist skills Egs: Company auditors Doctors  Specialist skills Egs: Surgeons Lawyers  Specialist skills Eg: Contract law lawyers iii) World at large Carlill v Carbolic Smoke Ball Co ( 1892) 2 QB 484 CSBC-----Advertisement Medicinal drug –influenza Take as prescribed Still contract influenza  500 pounds Mrs C---took -influenza Claimed 500--refused CSBC---Defence:  No offer to Mrs C  No acceptance  No communication Court:  World at large  Mrs C accepted by purchase  No requirement to communicate acceptance  CSBC waived that requirement Not an offer: a) Invitations to treat. Supermarket  Shopper offers to buy  Store owner accepts Payne v Cave ( 1789 ) 3 Term Rep 148 Pharmaceutical Society of GB v Boots ( 1953 ) 1 QB 256 Fisher v Bell ( 1961 ) 1 QB 304 b) Auctions i) Property owner ii) Auctioneer. agent of owner. duty – highest bid iii) Bidder – makes offer Payne v Cave ( 1789 ) 3 Term Rep 148 Harris v Nickerson ( 1873 ) LR 8 c) Advertisements i) Property owner or agent ii) Employer or agent iii) Newspaper/radio iv) Owner of building v) Owner of notice board vi) Interested buyer/seller/emplo yee Carlill v Harding ( 1870 ) LR 5 Cp 561 Patridge v Crittenden ( 1968 ) 2 ALL ER 421 d) Statements of price i) ii) Property owner or agent  Eg: Selling - K20,000.00 ono Buying - K20,000.00 per metric ton Interested buyer/seller Harvey & Ano v Facey & Ors ( 1893 ) UKPC 1 Gibson( AP) v The Council of the City of Manchester ( 1979 ) 1 All ER 972 e) Tenders i) Property owner  Sell property  No price  Reserve price ii) Interested buyer  Nominates price Harvela Investments v Royal Trust Co of Canada ( 1985 ) 2 All ER 966 Blackpool Aero Club v Blackpool Borough Council ( 1990 ) 3 ALL ER 25 f) Memorandum seeking attention of interested buyers Mcdonald and McDonald v Papuan Constructions Ltd ( 1964 ) PNGLR 22 Maip Pty Ltd v Ambra Coffee Estate ( 1995 ) N1368 Hohore Suve v Bromley & The Rural Development Bank of PNG ( 1997 ) PGNC 68 g) Draft Agreements  Records future intention of parties  Non-binding  MOUs  MOAs Seafreights Pty Ltd v Bishop Shipping Services Pty Ltd ( 1996 ) PNGLR 22 THE UNIVERSITY OF PAPUA NEW GUINEA SCHOOL OF LAW Semester 1, 2024 Contracts Law 1 ( 5.10704 ) Lecture 4 Elements of contract 1. Offer and Acceptance 2. Intention to create legal relations 3. Capacity to contract 4. Consideration 5. Legality of the objects of contract 6. Formalities 1. Offer and Acceptance Offer Communication of offer a) Effective communication after R v Clark ( 1807 ) 40 ER 1101 Williams v Cawardine ( 1833) Fitch v Snedaker 38 NY ( 1868 ) b) Effect-----Offeree: 1) Accepts  K 2) Rejects  Destroys offer 3) Nothing  Presumed to reject  Circumstances 4) Cross – offer  Coffee  Drying equipment  Workers Tinns v Hoffman & Co ( 1873 ) 29 LT 271 5) Counter – Offer  Destroys offer  Legal positions Hyde v Wrench ( 1841 ) 49 ER 132 6) Makes an inquiry Stevenson v McLean ( 1881 ) 5 QBD 346 A. Termination - Offer: i) Termination  Before receipt  Before acceptance Dickenson v Dodds ( 1867 ) 2 Ch D 463 Byrne v Van Tienhoven ( 1880 ) 5 CPD 344 Luxor ( Eastbourne ) v Cooper ( 1941 ) 1 ALL ER 33 Errington v Errington and Woods ( 1952 ) 1 KB 290 McDonald and McDonald v Papua Construction Ltd ( 1964 ) PNGLR 22 ii) Rejection iii) Counter-offer  Destroys offer  Change legal positions A-------------B A In good and working order After K------tractor----beyond repair S-----breach of warranty---lesser term MIPL-------Mere representation Court:    Condition of tractor----warranty Not a mere representation Damages---breach of contract THE UNIVERSITY OF PAPUA NEW GUINEA SCHOOL OF LAW Semester 1, 2024 Contracts Law 1 ( 5.10704 ) Lecture 13 Topic 2 Ascertaining the Terms of the contract Terms of contract  Express  Implied Implied terms Term implied or ‘read into ‘ a contract: A) Previous conduct Ascertaining intention----court:  Past dealing  Explain present conduct Hillas v Arcos ( 1932 ) 147 LT 503 Hollier v Rambler Motors ( AMC ) ( 1972 ) 1 ALL ER 399 Implied terms B) Custom or trade usage K------background------particular trade Customs or trade usages  Implied in K However: i) Notorious ( well known ) ii) Certain iii) Reasonable iv) Not contrary to express term British Crane Hire Corp Ltd v Ipswich Plant Hire Ltd ( 1974 ) 2 WLR 856 Both P & D----earth moving equipment D-------------dragline crane-------------P K-------------phone Only charges--------no other terms Crane------------sank in swamp ( marsh ) P-------------- D - liable for recovery D-------------- P - liable for recovery Court:  Customs and trade usages  D------liable for recovery C) “ Business efficacy “ to the contract Term implied---obvious oversight Uncorrected  Defeat presumed intentions Oversight:  Inadvertence  Drafting incompetence Term sought to be implied-reasonable and: i) Reasonable and equitable ii) Business efficacy iii) So obvious – “ goes without saying “ iv) Clear expression v) Not contradict express terms BP Refinery ( Westernport ) Pty Ltd v Shire of Hastings ( 1977 ) 16 ALR 363 Yarlett v New Guinea Motors Pty Ltd ( 1985 ) PNGLR 14 Kimbe International Primary School v Narpal ( 1987 ) PNGLR 442 N----------------------raffle ticket Ticket------silent----------way prizes allocated Announcement-----3rd draw---1st prize N’s ticket--------------1st draw---3rd prize N sued KIPS-----------1st prize Court:  Term implied if contract silent as to an obviously essential matter  Term implied---1st ticket---1st prize  KIPS breach of contract THE UNIVERSITY OF PAPUA NEW GUINEA SCHOOL OF LAW Semester 1, 2024 Contracts Law 1 ( 5.10704 ) Lecture 14 Topic 2 Ascertaining the Terms of the contract Terms of contract Terms implied by statute  Term implied by statute  Read into the contract 1. Merchant Shipping Act ( MSA ) S 110 ( 4 ) Implied condition:  Seaworthy  Waive---- void and of no effect 2. Goods Act ( GA ) S 13  Sale--------right to sell  Agreement----will have right to sell  Quiet possession  Free from charges or encumbrances S 14 Description  correspond with description S 15 Quality-------particular purpose  Fit for that purpose S 16 Sale by sample  Bulk correspond in quality Hire Purchase Act ( HPA ) S 11 Implied warranties and conditions: a) Enjoy quiet possession b) Right to sell goods c) Free of charges or encumbrances d) Merchantable quality THE UNIVERSITY OF PAPUA NEW GUINEA SCHOOL OF LAW Semester 1, 2023 Contracts Law 1 ( 5.10704 ) Lecture 15 Terms of the contract – Parole Evidence Rule K wholly in writing---terms---written doc Parole ( oral ) or extrinsic ( outside ) evidence— inadmissable:  Add to  Subtract  Qualify  Vary  Contradict New Guinea Co Ltd v Thomason ( 1978 ) PNGLR 33 Curtain Bros ( Qld ) Pty Ltd & Anor v PNG SC 450 ( 1993 ) Extrinsic evidence: i) Instructions ii) Drafts iii) Conditions of sale iv) Preliminary agreements Exceptions---parole---extrinsic: A) Custom or trade usage i) Existence----Fact----Court ii) Not terms inconsistent---express Smith v Wilson ( 1832 ) Hutton v Warren ( 1836 ) New Britain Entertainments v Webb No 89 of 1956 Nelson v Dahl ( 1879 ) 12 Ch D 568 at 575 per Jessel MR: “ …must be so notorious that everyone in the business enters into a contract with that usage as an implied term. It must be be uniform as well as reasonable and it must have quite as much certainty as the written document itself.” British Crane Hire Corp Ltd v Ipswich Plant Hire Ltd ( 1974 ) 2 WLR 856. Both---earth moving equipment. D-------large dragline crane------P. K-----telephone---hire & transport. No other conditions. Crane sank in swamp or marsh.Who was liable---cost of recovery.P------------ D. D----------- P Court:  Customs and usages  Defendant B) Parole evidence i) Suspend operation----written K Pym v Campbell ( 1856 ) ii) Rescind written K Morris v Baron ( 1918 ) AC 1 iii)  Not binding Fraud  Duress. Threats of violence iv) Undue influence. Improper pressure C) Written K not whole contract  K partly oral  partly written D) Ambiguity  Surrounding circumstances i) Subject-matter ii) Consideration Pau On v Lau Yiu Long ( 1980 ) AC 614 iii) Identity of the parties Gilberto v Kenny ( 1983 ) 57 ALJR 283 THE UNIVERSITY OF PAPUA NEW GUINEA SCHOOL OF LAW Semester 1, 2024 Contracts Law 1 ( 5.10704 ) Lecture 16 Exemption Clauses Party to K 1. Liability -----------Breach  Express term  Implied term 2. Liability------independently of K  Negligence – performance of K – defective performance Egs: i) Too narrow ii) Too low White v John Warwick & Co Ltd ( 1953 ) 1 WLR 1285 Exemption clauses Standard provisions of Ks Two types: 1. Exclusion clauses  Exclude liability altogether 2. Limitation clause  Limits liability Exemption clauses  ‘ Standard form contracts ‘ ( SFCs )  SFCs: i) Printed form ii) One party----- other iii) ‘ take it or leave it ‘ iv) v) No freedom to negotiate Only freedom---walk away—not viable. monopolies. near monopolies Examples----------------SFCs: 1. Insurance a) Are you sexually active? b) Do you have suicidal tendencies? 2. Hire – purchase 3. Car rentals 4. Air carriage – two: i) Perishable goods – not liable ii) Injury/death----K30,000.00 5. Laundering Others: 1. Park your vehicle at your own risk Even if:  You are in our yard  You are shopping with us  You are dining here  You are having your hair done by us EC or LC? 2. Choose carefully  Too small – too big  Damaged  Rotten EC or LC? – See Goods Act 3. Wet and slippery floor  Cannot read EC or LC? 4. Fierce dog  Too young to understand  Cannot read EC or LC Exemption clauses construing of EC > not defeat main purpose of K Suisse Atlantique Kolon Societe d’Armament Maritime SA v NV Rotterdamsche Kolon Centrale ( 1967 ) AC 361 Glynn v Margetson & Co ( 1983 ) AC 351 THE UNIVERSITY OF PAPUA NEW GUINEA SCHOOL OF LAW Semester 1, 2024 Contracts Law 1 ( 5.10704 ) Lecture 19 Privity of contract Contract An agreement between two or more parties which confers rights and imposes obligations which the legal system will enforce K party------legal relationship-----K party  Privity of contract Privity of contract:  Acquire rights  Incur liabilities Types of contracts: a) Employment b) Sale & Purchase of Goods Crops Vehicles Aircraft Ships c) Buildings – material - labor d) Roads – Bridges etc – material - labor e) Land & improvements i) Land with improvements already thereon ii) Land with improvements to be built Rights: ( Contract of Employment ). Pay. Uniforms & equipment. Access to premises. Vehicles & utilities. ARL – LSL – Retirement. School fees. Dental & Medical Liabilities: ( Contract of employment ). Qualification – aptitude etc. Work 8am – 4:06 pm plus OT. Such places directed by other party. Fidelity & loyalty. Protect assets & information. Not compete. Not divulge information Therefore person not party to K cannot:  Acquire rights  Incur liabilities Price v Easton ( 1833 ) 4 B & AD 433 B--------borrowed