02 what are the terms?

02 what are the terms?

written termsterms incorporated by noticefrom a course of dealingstatements made during negotiations

does the parol evidence rule apply?what do the terms mean? construing the terms.

extrinsic evidence?process of constructionexclusion clauses and limiting clausesACL

can courts imply a term?in factin lawby custom

written termssignature:

- party will be bound by the terms contained in a contractual document they have signed, regardless of whether or not they have read or understood the terms L’estrange v Graucob,, affirmed in Toll v Alphapharm

- unless there has been fraud or misrepresentation per Scrutton LJ

- rule does not apply where party signing the contract has been mislead Curtis v Chemical Cleaning and Dyeing Co

- sufficient misrep = any behaviour by words or conduct conveys a false impression

- failure by party to draw attention to existence or extent of exemption clause may convey impression there is no exception or not so wide an exemption

- where document could not reasonably be considered a contractual document

- timesheet Grogan v Robin Meredith Plant Hire- receipt or voucher Chapleton v Barry Urban District

Council- test is objective, what a reasonable person would have ‘understood them

to mean’, do not take into account the subjective intention of the parties, consider

- not only the text but- the surrounding circumstances known to the parties- and the purpose and object of the transaction- Toll v Alphapharm

- signature is representation that the person who signed has either read and approved of the contents, or is willing to take the chance of being

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02 what are the terms?bound (esp where signature appears below request to read the document Toll v Alphapharm

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terms incorporated by notice(1) timing:

- only terms available to the party to be bound before the contract is made can be incorporated Oceanic Sun Line Special Shipping Co Inc v Fay, eBay International v Creative Festival Entertainment

(2) knowledge/notice:- party to be bound must have either

- (1) actual knowledge OR- someone who actually knows of the terms is bound regardless of

whether they actually read the terms Parker v Southern Eastern Railway Co

- (2) been given reasonable notice of terms- if contractual document, if document is one that a reasonable

person in the circumstances would expect to contain the terms of a contract, mere presentation of the document is sufficient notice Parker v South Eastern Railway Co

- if not contractual document, if delivered or displayed terms are not contained in what is obviously a contractual document, party seeking to incorporate the terms must take reasonable steps to bring those terms to the notice of the party to be bound Causer v Brown

- must be likely to come to the attention of the party to be bound Interfoto Picture Library v Stiletto, Thornton v Shoe Lane Parking

- terms should be readily available Thornton v Shoe Lane Parking, Baltic Shipping v Dillon

- terms must be unambiguous NSW Lotteries Corporation v Kuzmanovski

- unusual terms - duty to bring out unusual conditions at least to the notice before they are bound.

- test: ask the qn of ‘could there have been more done to bring the unusual terms to the attention of the party?’ Baltic Shipping v Dillon

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from a course of dealinghistory of dealings:

- where parties have had a history of dealings, contractual terms introduced in earlier contracts may be incorporated into a subsequent contract Balmain New Ferry Co Ltd v Robertson

must be regular and uniform:- Henry Kendall & Sons v WIlliam Lillico & Sons, Chattis Nominees v Norman

Ross Homeworks

document relied upon from previous transactions must also reasonably be considered a contractual document rather than appearing to be a mere receipt or docket Rinaldi v Patroni v Precision Mouldings e.g. cart notes

- where party does not know and has no reason to know words contain conditions applicable to the agreement, not contractual document Hill’s Case

to rely on previous contracts, must first find an earlier actual contract Rinaldi Patroni v Precision Mouldings

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statements made during negotiationsentire contract/agreement clauses will exclude statements made during negotiations Salah v Romanos

- is a common law concept, does not apply to equity- does NOT necessarily exclude implied terms Hart v MacDonald

does the parol evidence rule apply?

applies where the contract is wholly in writing or only to the part in writing does not apply to contracts only partly in writing

does not operate until it has been ascertained that the contract is wholly in writing, will not exclude evidence of oral terms if the other party asserts that such terms were agreed, if proved, then contract not wholly in writing SRA of NSW v Health Outdoor

-

effect- (1) excludes extrinsic evidence from being used to add to, vary or contradict

the terms of the written contract (ambit)- (2) limits evidence that might be given to explain the intention (meaning) of

the terms

exceptions- (1) collateral contract

- does not apply to exclude evidence of a collateral contract (contract where consideration for a promise is to enter into the main contract)

- to establish this exception- must be a contract- where statement made as a promise, intended to induce entry

into the contract JJ Savage & Sons v Blakney- where statement is consistent with the terms of the main

contract, does not vary or change the written agreement Hoyt’s Pty Ltd v Spencer, SRA v Health Outdoor

- (2) estoppel- equitable remedies for CL and equity fraud, for innocent misrep and

mistake, trump legal rules about parol evidence and entire contracts Salah v Romanous

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is a statement a term of a contract?overcome the PER

must - have been made as a promise- intended by the parties to part of their contractual agreement

consider- the significance of a written contract- language used- the relevant expertise of the parties- timing of the statement- form of the written contract

intention judged objectively- whether or not the statement would reasonably be considered a binding contractual

promise by a person placed in the situation of the parties

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what do the terms mean? construing the terms.extrinsic evidence?parol evidence rule part 2: applies to exclude evidence extrinsic to a contract in writing from being used to explain the meaning of the contract

● evidence of conversations between the parties in the process of negotiating the contract

● written material e.g. letters or earlier drafts

process of constructionprimary rule: construe the words to read them in their natural and ordinary meaning against the whole of the contract (type of contract)

secondary rule: if language is ambiguous, context or surrounding circumstances may be used Codelfa, confirmed in Jireinb, can always have regard to surrounding circumstances in England.

context or surrounding circumstances is● commercial background● genesis of the contract (how it came to being)● commercial purpose● aim or object of contract

context is limited to facts actually known by both parties or facts that are notorious● notorious is known by everyone, hence presumed to be known by parties

evidence of...pre contractual negotiations?

● NOT for proving subjective intention of parties Codelfa● but CAN be used to establish objective background facts known to both parties, to

establish subject matter of the contract Codelfasubsequent conduct?

● NOT to aid construction● can be used to decide whether contract has been entered into Sagacious Procurement v

Symbion or to identify subject matter of contract County Securities Pty Ltd v Challenger Grouptrade usage?

● must be ‘well-known, uniform and certain’ Homestake Australia v Metana Mineral

use objective approach of a reasonable person in the situation of, and with the background knowledge of the parties Pacific Carriers v BNP Paribas

if unambiguous, courts must give effect even if unreasonable or capricious

If ambiguous, courts will favour interpretation which avoids unreasonable or uncommercial consequences, gives commercial meaning ABC v Australasian Performing RIghts Assoc, Electricity Generation v Woodside will avoid consequences which appear to be capricious, unreasonable, inconvenient or unjust

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02 what are the terms?exclusion clauses and limiting clausesexclude or limit liability for conduct that would otherwise be breach of contract or constitute a tort e.g. negligence.

consider1. what is the nature of the claim being made?2. is the term properly part of the contract? (see ‘what are the terms’?)3. as a matter of construction, does the clause apply to exclude/reduce the

liability○ to be determined by ordinary process of construction: natural and

ordinary meaning, in the light of the contract as a whole including nature and object Darlington Futures v Delco, Nissho Iwai v Malaysian Shipping

○ in cases of ambiguity exclusion clause to be construed contra proferentem against the interests of the proferens party seeking to rely on the clause Darlington Futures

○ if ambiguous, also consider■ four corners rule - exclusion clause unlikely to have been intended to

apply to acts unauthorised or outside the four corners of the contract Thomas National Transport

■ deviation rule - exclusion clause does not exclude liability for loss during deviation from contractually agreed voyage or route, where route is expressly stipulated or by implication, by sea or land Thomas National Transport

■ negligence - clear words generally necessary to exclude liab for negligence Davis v Pearce Parking Station BUT still natural and ordinary meaning approach Darlington

■ deliberate breach - requires strongly worded clause Davis v Pearce pArking Station, Photo Production v Securicor

4. does legislation apply? see ACL

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ACL

Unfair contract terms ss23-2823 Unfair terms of consumer contracts(1) A term of a consumer contract is void if: (a) the term is unfair; and (b) the contract is a standard form contract.(2) The contract continues to bind the parties if it is capable of operating without the unfair term.(3) A consumer contract is a contract for: (a) a supply of goods or services; or (b) a sale or grant of an interest in land;to an individual whose acquisition of the goods, services or interest is wholly or predominantly for personal, domestic or household use or consumption.24 Meaning of unfair(1) A term of a consumer contract unfair if: (a) it would cause a significant imbalance in the parties’ rights and obligations arising under the contract; and (b) it is not reasonably necessary in order to protect the legitimate interests of the party who would be advantaged by the term; and (c) it would cause detriment (whether financial or otherwise) to a party if it were to be applied or relied on.(2) In determining whether a term of a consumer contract is unfair under subsection (1), a court may take into account such matters as it thinks relevant, but must take into account the following: (a) the extent to which the term is transparent; (b) the contract as a whole.(3) A term is transparent if the term is: (a) expressed in reasonably plain language; and (b) legible; and (c) presented clearly; and (d) readily available to any party affected by the term.(4) For the purposes of subsection (1)(b), a term of a consumer contract is presumed not to be reasonably necessary in order to protect the legitimate interests of the party who would be advantaged by the term, unless that party proves otherwise.

25 Examples of unfair terms(1) may be unfair if allows one part but not another to(a) avoid or limit performance(b) terminate contract(c) be penalised for breach or termination(d) to vary the terms(e) to renew/ to not renew(f) vary upfront price of terminating contract(g) to unilaterally vary the characteristics of goods/services/land to be sold(h) to determine the meaning of contract, or whether contract has been breached(i) limit vicarious liability for agents(j) assign contract to detriment of another party w/o consent(k) limit right to sue(l) limit evidence they can adduce in proceedings(m) impose evidential burden(n) something prescribed by regulation(2) to make (1)(n) term, GG must consider

a. detriment a termcould cause to consumersb. impact on business generallyc. public interest

28 Contracts to which this Part does not apply(1) This Part does not apply to:(a) a contract of marine salvage or towage; or(b) a charterparty of a ship; or(c) a contract for the carriage of goods by ship.

Void if term is s23(1)● unfair s23(1)(a),

○ unfair if s24(1) (a)-(c)○ (a) significant imbalance AND○ (b) not reasonably necessary to

protect interests AND● onus on party advantaged by term s24(4)

○ (c) could cause detriment if relied upon

○ court must take into account s24■ transparent s24(2)(a)

● reasonably plain s24(3)(a)● legible (b)● presented clearly (c)● readily available (d)

■ contract as a whole s24(2)(b)● standard form contract s23(1)(b)

○ standard form unless another party proves otherwise s27(1)

○ court should take into account s27(2)(a)-(f)■ whether one party has all bargaining

power■ contract prepared before any

discussion■ whether a party was required to just

accept/reject■ whether other party given opportunity

to negotiate■ whether terms take into account

specific char of party or transaction■ by regulation

● consumer contract s23(3)○ (a) supply of goods or

services OR○ (b) sale/grant of interest in

land to individual○ for personal, domestic or

household use or consumption

s25 examples of unfair termss26 s23 does not apply to terms that

● (1)(a)define main subject matter● (1)(b)sets upfront price payable

○ (2)(a) = consideration provided for contract and (2)(b) disclosed at or before entering contract

● (1)(c)are required or expressly permitted by law

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Consumer guarantees ss3, 51-64AAcquiring goods/services as consumerperson is a consumer IFF s3(1)

● (a) did not exceed 40k OR● (b) goods/services of a kind

ordinarily acquired for personal, domestic or household use or consumption

● (c) goods = vehicle or trailer principally for transport of goods on public roads

but not if goods for s3(2)● resupply● for using/transforming in trade or

commerce in the course of○ production/manufacture○ repairing or treating other

goods, fixtures on land

price paid = price paid s4 unless

s 5 mixed supply, then price=- price from that supplier- price from other supplier- or value of goods/services

or s6, not $ paid, then price could have paid, or value of g/s s8

Credit is acquisition of service, price includes amount of increase s9

s10 presumed that person is consumer in relation to goods/services

3 Meaning of consumerAcquiring goods as a consumer(1) A person is taken to have acquired particular goods as a consumer if, and only if: (a) the amount paid or payable for the goods, as worked out under subsections (4) to (9), did not exceed: (i) $40,000; or (ii) if a greater amount is prescribed for the purposes of this paragraph—that greater amount; or (b) the goods were of a kind ordinarily acquired for personal, domestic or household use or consumption; or (c) the goods consisted of a vehicle or trailer acquired for use principally in the transport of goods on public roads.(2) However, subsection (1) does not apply if the person acquired the goods, or held himself or herself out as acquiring the goods: (a) for the purpose of re-supply; or (b) for the purpose of using them up or transforming them, in trade or commerce: (i) in the course of a process of production or manufacture; or (ii) in the course of repairing or treating other goods or fixtures on land.Acquiring services as a consumers3(a), (b) same as s1(a), (b) for servicesAmounts paid or payable for purchases(4) For the purposes of subsection (1) or (3), the amount paid or payable = price paid or payable by the person for the goods or services, unless subsection (5) applies.(5) mixed supply price is price if possible to buy not mixed supply or similar mixed supply from other supplier, or finally, value of goods/services at the time.(6) Price paid or payable for goods or services acquired by a person other than by way of purchase = price at which, at the time of the acquisition, the person could have purchased the goods or services from the supplier, unless subsection (7) or (8) applies.(7) For the purposes of subsection (1) or (3), if: (a) goods or services acquired by a person other than by way of purchase could not, at the time of the acquisition, have been purchased from the supplier, or could have been purchased only by a mixed supply; but (b) at that time, goods or services of the kind acquired could have been purchased from another supplier other than by a mixed supply;the amount paid or payable for the goods or services is taken to be the lowest price at which the person could, at that time, reasonably have purchased goods or services of that kind from another supplier.(8) same as (5) for servicesAmounts paid or payable for obtaining credit(9) If: (a) a person obtains credit in connection with the acquisition of goods or services by him or her; and (b) the amount paid or payable by him or her for the goods or services is increased because he or she so obtains credit;obtaining the credit = servicePresumption that persons are consumers(10) If it is alleged that a person was a consumer in relation to particular goods or services, it is presumed, unless the contrary is established, that the person was a consumer in relation to those goods or services.Mixed supplies(11) A purchase or other acquisition of goods or services is made by a mixed supply if the goods or services are purchased or acquired together with other property or services, or together with both other property and other services.

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Consumer Guarantees ss51-64AGOODSs51 Guarantee as to Title supplier has right to dispose of the property in the goods when the property passes to consumer

s52 Guarantee to undisturbed possession unless supply of limited title

s53 Guarantee to undisclosed securities

s54 Guarantee to acceptable qualityGoods are acceptable if (2)

● (a) fit for all purposes goods of that kind commonly supplied● (b) appearance and finish● (c) free from defects● (d) safe● (e) durable

as a reasonable consumer acquainted with state and condition would regard as acceptable wrt

● (3)(a) nature● (b) price● (c) statements made about goods/labels/packaging● (d) representations made about goods by supplier/manufacturer

unless reasons specifically drawn to consumer’s attention (4) (specifically drawn if disclosed on written notice with goods)(5)

unless consumer causes/fails to take reasonable steps to prevent AND damages by abnormal use (6)

unless consumer examines before agreement AND examination ought reasonably to have revealed reasons (7)

s55 guarantee to fitness for disclosed purposeif not auction, guarantee reasonably fit for any disclosed purpose and purpose for which supplier representsdisclosed purpose = purpose for which consumer is acquiring and makes known expressly or by implication to supplier/person with whom negotiations are made/manufacturer

s56 guarantee relating to supply of goods by descriptionguarantee that goods correspond with description, even if selected by consumer

s57 guarantee to supply of goods by sample or demonstration modelif not auction, goods correspond with sample in quality, state or condition AND if sample, reasonable opportunity to compare goods with sample AND goods free from defect that would not be apparent on reasonable examination of the sample and would cause goods to not be acceptable quality

s58 guarantee to repairs and spare partsmanufacturer will take reasonable action ensure facilities and parts, unless written noticeSERVICESs60 guarantee as to due care and skill

s61 guarantee as to fitness for particular purposeservices and any product resulting from the services will be reasonably fit for the purpose the consumer expressly or by implication makes known to the supplier

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Remedies ss 232 236-9, 243, 259-263, 266-268s232 may grant injunction if court satisfied contravention of any of these provisionson application by regulator or any other personcan

● restraining person from carrying on busi for period or on t&cos● require person to refund money, transfer property, honour promise, destroy or

dispose of goods

s236 may grant damages, 6 year limitation date

s237/s238 compensation orders on application by injured person or regulator/out of other proceedings

s239 can make orders against non-party consumers whoengaged in contravening conduct and advantaged by a term

s243 types of orders that may be made● order declaring whole or part of contract void, void ab initio or void after certain

date● order varying contract, and specifying date it has effect● refuse to enforce any or all provisions● order resp to refund money or return property● order directing injured person amount of loss/damage● to supply specified services to injured person● order resp to execute land instrument certain way

Remedies against Guaranteess259 action against suppliers of goods (s67 services equivalent)may take action if guarantee not complied with

if failure to comply with guarantee not major failure● consumer may require supplier to remedy failure● and if supplier refuses/fails, can

○ recover all reasonable costs or○ notify supplier that goods have been rejected

if major failure,● inform supplier of rejection or● recover compensation for any reduction in value of goods

may recover damages for failure to comply with guarantee if reasonably foreseeable loss/damage

s260 major failure if (s268 services equivalent)● would not have been acquired by reasonable consumer OR● departs significantly from description or sample OR● substantially unfit for purpose (either for which goods of that type usually supplied,

or disclosed purpose) and cannot easily and reasonably be remedied to make fit for such a purpose

● unsafe

s261 supplier may remedy failure to comply with guarantee by repairing, replacing, refunding

266 Rights of gift recipients

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If a consumer acquires goods from a supplier and gives them to another person as a gift, the other person may, subject to any defence which would be available to the supplier against the consumer:(a) exercise any rights or remedies under this Subdivision which would be available to the other person if he or she had acquired the goods from the supplier; and(b) any reference in this Subdivision to a consumer includes a reference to the other person accordingly.

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can courts imply a term?NOT necessarily excluded by entire contract clauses

● an entire agreement clause excludes what is extraneous to the written contract: but it does not in terms exclude implications arising on a fair construction of the agreement itself, and in the absence of definite exclusion, an implication is as much a part of a contract as any term couched in express words Har v MacDonald

in facttailored and specific to the contract, seek to give effect to the presumed intention of the parties concerned, therefore not addition, but further construction process

in formal contracts,BP Refinery Test

1. reasonable and equitable2. necessary to give business efficacy

○ would objective person consider proposed term necessary for contract to operate in businesslike manner

○ Moorcock - found implied term to take reasonable care since only owners of jetty could determine state of jetty

○ Re Romin - found implied term that obligation to settle sale suspended until search Title Office

○ Breen v Williams - doctor/patient contract did NOT contain term entitling patient to retain record

3. must be so obvious it goes without saying○ officious bystander, ‘oh of course’ Shirlaw v Southern Foundries○ Codelfa - contract didn’t take into account delayed construction due to local

residents injunction since negotiation would have yielded a number of alt provisions, was not an obvious provision overlooked by parties

○ Gwam - that contract to build health unit implied term that package was roadworthy weight

4. capable of clear expression. clarity○ Ansett Transport v Cth - ‘don’t do anything to change status quo in market’

too wide and lacks precision5. must not contradict any express term of the contract

in informal contracts where parties clearly reached an agreement but not attempted to spell out the terms e.g. doctor/patient, legal practitioner/client

1. identify actual terms, based on kind of relationship2. consider implied terms, using flexible approach

○ where implication of the particular term is necessary for the reasonable or effective operation of a contract of that nature in the circumstances of the case Hawkins v Clayton

○ consider also obviousness Byrne v Australian Airlines

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02 what are the terms?in lawimplied on all contracts of a particular class or description, NOT based on intentions of parties but rather bc of policy

existing classes● implied conditions of reasonable fitness and merchantable quality on a contract for

the sale of goods● payment and delivery of goods are concurrent conditions● condition of seaworthiness● condition on the letting of a furnished house that it is reasonably fit for habitation● promise by one who agrees to build a house that the house will be reasonably fit for

habitation● promise by servant not to disclose secret processes, hand over to a rival written work

completed for the master and not to solicit the master’s customers to transfer their custom to himself

● promise by an employer (in some cases) to furnish work● duty of care in the carriage of passengers and in looking after bailed goods● promise by a banker not to disclose the state of his customer’s account

classes not closed, for new class1. term must be application to definable class of contractual relationship Scally v

Southern Health and Social Services Board2. Term must be suitable to be recognised as implied in all contracts of the class

○ Test of necessity - where unless such a term be implied, enjoyment of rights conferred by the contract would/could be rendered nugatory worthless, seriously undermined

○ e.g. case of landlords, found landlord under implied obligation to take care of common areas, but not absolute obligation since that would go beyond reasonable Liverpool City v Irwin

○ e.g. found no implied term that doctor give patient access to records since enjoyment of rights (medical care) not rendered worthless or seriously undermined Breen v Williams

by customsomething so well known and done so often over a long period of time, so notorious that people do not question it, such that everyone who enters into that type of contract would intend the term be part of the contract

Principles Con-Stan Industries of Australia Pty Ltd v Norwich Winterthur Insurance1. existence of custom that justifies the implication of term is a qn of fact2. must be evidence that the custom relied on is so well known and acquiesced in

that everyone making a contract in that situation can reasonably be presumed to have imported that term into the contract

3. term is not implied if contrary to express terms of the agreement4. person can be bound if no knowledge of the custom

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02 what are the terms?

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