tabl1710 lecture wk3 - intro to contract law

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TABL 1710Business and the Law

Lecture 3 Introduction to Contract Law

Lecturer: Dr Leela Cejnar

2015 The University of New South WalesSydney 2052 Australia

The original material prepared for this guide is copyright. Apart from fair dealing for the purposes of private study, research, criticism or review, as permitted under the Copyright Act, no part may be reproduced by any process without written permission.

Enquiries should be addressed to the Head of School, Taxation and Business Law, UNSW, Sydney

The Fridge: DIY Self- Management Program

School of Psychology research project on self-management skills

See Moodle for details Voluntary program Life-long skills Think about doing it!


Aim: to provide you with evidence-based tools designed to provide you with tools to help you manage your academic workload

Tasks: Some activities are in class Some activities will be done by way of an OPTIONAL online program that

will involve you receiving weekly emails, reviewing short (1-2 mins) videos and completing short worksheets

See TABL 1710 Moodle under The Fridge, DIY Self-Management Program SIGN UP ASAP!

If you are interested in this VOLUNTARY program, please engage ASAP (enrolments open for a limited time only) by signing up to the program on TABL 1710 Moodle

Program funded by the Deputy Vice Chancellor (Academic) and run by Associate Professor, Dr Jacquelyn Cranney, from the SCHOOL OF PSYCHOLOGY


First activity: Videohttps://vimeo.com/120112496

Second activity: Define Your Goals worksheet - to be done in tutorials

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IN-CLASS EXERCISE ON LECTURE TOPICS 1 and 2

In tutorials in week of 23 March (ie NEXT WEEK) CLOSED BOOK Revise using lecture slides and questions in Tutorial

Program Students will be allowed to collaborate but no

materials will be allowed Worth 10%

TUTORIAL DISCUSSION FORUM

Discussion ForumOne for each tutorialAvailable from week 4 (Week commencing 23

March)Your tutor will provide you with details

MAJOR ASSIGNMENT

Will be uploaded on Moodle next week Due in week 9 (Monday 4 May) Contract Law Problem

TUTORIAL ATTENDANCE

No further changes to tutorials are allowed 80% attendance requirement ALL STUDENTS MUST ATTEND THE TUTORIAL

THEY ARE ENROLLED IN - you will be asked to leave if your name is not on the roll

Almost all classes are full and it is not possible to exceed maximum capacity requirements

If you are sick or not able to attend your normal tutorial, then contact the LiC and your tutor do not just go along to another class!

TUTORIAL ATTENDANCE

Especially dont miss the contract law tutorials!

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Course Readings

Refer to the readings set out in the Course Schedule of the Course Outline (Note: these readings cover both the key points raised in lectures AND some additional background materials that may not be discussed in lectures but that will be beneficial)

Key points (or cases) will be emphasised in the lectures (and in the PDF slides)

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Todays lecture Role of contract law in business Formation of contracts Elements of a valid contract Offer: rules for offer Acceptance: rules for acceptance The Postal rule Consideration: what is it? Promissory estoppel

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Overview Lecture 3Contract: Formation and Intention

On completion of this lecture you should be able to:9 Identify the sources of contract law in Australia9 Distinguish between the different types of contracts9 Identify the elements of a contract9 Identify the rules for offer and acceptance9 Explain what is an invitation to treat9 Explain what the postal rule is9 Explain what is consideration and identify the rules for

consideration9 Explain what is promissory estoppel

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Contracts

Contracts are a fundamental part of peoples daily lives

They form the basis of commercial law and dealings

Some basic examples:Sales contracts buying foodEmployment contracts going to workRental contracts leasing a flat

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Sources of contract law in Australia

Contract law in Australia is derived from:

Judge-made law: developed in the English common law courts: that is, decisions from the cases

and

Legislation/Acts of Parliament: which have amended or supplemented the case law

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Sources of contract law in Australia

The study of contract law involves an examination of common law principles and the extent to which they have been affected by legislation

For an example, later in the course we will look at the impact of s 18 of the Australian Consumer Law (in the Competition and Consumer Act, 2010) prohibiting misleading or deceptive conduct

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Types of contracts

Formal contract: deeds

Simple contracts: oral or written

Simple contract: bilateral or unilateral

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Simple contract

Primary form of contracts No required formality May be unilateralOnly one party under any obligation

May be bilateralBoth parties have obligations

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Formal contract

Special form of contract Contracts under deed or seal Used in particular circumstances where the parties

would otherwise have no contractual obligations due to absence of considerationDeedsWillsTrusts

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Contract defined

A contract can be defined as:

An agreement concerning promises made between two or more parties with the intention of creating certain legal rights and obligations upon the parties to that agreement which shall be enforceable in a court of law.

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The law of contracts

Therefore, a contract: Contains promises Between two or more parties

- Promisor: person who makes promise- Promisee: person to whom promise is made- Who intend to be legally bound

Making it enforceable by law

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Contract and Agreement

Terms contract and agreement are often used to mean the same thing

Traditional definition of contract is: a legally enforceable agreement that is legally binding

See Latimer 5-010

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An agreement is NOT necessarily legally binding An agreement is not necessarily a contract

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Q: When does an agreement become a contract?A: When it becomes LEGALLY ENFORCEABLE.

BUT: when does this occur?

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Essential elements of a contract

Intention to enter into a legally binding contract

Agreement Offer Acceptance

Consideration (or price)

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Other elements for a valid contract

Legal capacity

Genuine consent

Legality of purpose

Any formal/procedural requirements must be satisfied

See Latimer at 5-510 to 5-570

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Intention to create legal relations

There must be evidence that the parties INTENDED to

make a legally enforceable contract: to be discussed

further in next lecture

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The Offer:Rules in relation to Offers

There must be:

1. A firm promise

2. Communication of the offer Can be communicated to a specific person or more

broadly, to a class or persons/the whole world

Communication of the offer can be in writing, orally or by conduct

3. Revoked (cancelled) at any time BEFORE acceptance

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Communication of the Offer

The offer may be directed to: one person, a group of people, or the world at large

Case:Carlill v Carbolic Smoke Ball Co offer to anyone who performed the condition was there an intention to be bound to the offer? deposit of 1000 into bank account to show sincerity in the

matter see Latimer at 5-080 and 5-212

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Counter-offers

Counter-offers

A counter-offer is a rejection of the original offerCase: Hyde v Wrench, Latimer at 5-300

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Statements that are not offers

Invitation to treat

An offer must be distinguished from an invitation to treat

An invitation to treat is an offer to consider offersand cannot create an agreement

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Invitation to treat

Look at intention of the parties ASK: Is it an offer to consider an offer? Case: Pharmaceutical Society of Great Britain v Boots Cash

Chemists (Southern) Ltd, Latimer at 5-180 Invitation to treat: when you select goods from shelf you

are considering whether to make an offer to purchase Offer: at time you go to counter to pay Acceptance: when cashier accepts payment

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Invitation to treat can include:AuctionsAdvertisementsCataloguesPrice listsAnnouncementsGoods on display in shop windows and shelves

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Requests for Information A request for information is not a firm promise and so is not

an offer It does not destroy the offer as it is only an attempt to obtain

information Case: Harvey v Facey, Latimer at 5-200

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What can you do with an offer?

Accept the offer Reject the offer Make a counter-offer: destroys the 1st offer Ask for further information Take no further action on the offer

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The Acceptance:Rules in relation to Acceptance

1. Acceptance must be made strictly in response to the offer

Case: R v Clarke, Latimer at 5-230

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Rules in relation to Acceptance

2. Acceptance must be communicated Acceptance must be communicated to the offeror This can be done either by words (expressed) or by

conduct (implied)Cases: Felthouse v Bindley (Silence not acceptance: see

Latimer 5-310 ) Empirnall Holdings Pty Ltd v Machon Paull Partners Pty Ltd

(Acceptance inferred by conduct: see Latimer at 5-310) Brogden v Metropolitan Railway Company (Acceptance

inferred by conduct: see Latimer at 5-270)

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Rules in relation to Acceptance

3. Acceptance must be unqualified, absolute andunconditional or it may amount to a counter-offerSee Latimer 5-240

4. Conditional assent is NOT acceptanceCase: Masters v Cameron, Latimer at 5-250

5. Acceptance must be clear and certainCase: Scammell and Nephew Ltd v Ouston, Latimer at 5-260

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The postal rule

Where the parties contemplate the use of the post as a medium of exchange of promises, the rules as to the time of acceptance change as follows:An offer by letter is not effective until received by

the offereeAcceptance is effective as soon as it is posted If the offer is to be cancelled/revoked, notice of

the cancellation must be received by the offeree before their letter of acceptance is posted

See Latimer 5-330

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Instantaneous communications

In cases of agreements communicated by means of telephone, fax or email, the contract is formed when and where the offeror hears or receives the offereesacceptance

The Electronic Transactions Act 1999 (Cth) provides guidance on times for receipt and dispatch

See Latimer at 5-335

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Consideration: what is it?

See Latimer 5-400 - 5-485 Something for something

Concept of VALUE

BUT can be broader than just price

Can include acts, promises etc

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Consideration: what is it?

It is what the promisor gives in exchange for the return promise or the return action from the promisee

Consideration turns an agreement into a contract

Failure of consideration can make an agreement unenforceable

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Rules for Consideration

1. Consideration is essential to the validity of every simple contract

It may be: something the promisee gives the promisor the carrying out of some actor the refraining from doing something that the promisee had a

legal right to do Cases: Dunlop Pneumatic Tyre Co Ltd v Selfridge and Co Ltd; Coulls v Bagots Executor and Trustee Co Ltd

See Latimer 5-405

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2. Consideration must not be past Past consideration: occurs where a promise is given after an act has been

performed

is generally not enforceable Case: Roscorla v Thomas, Latimer 5-410

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BUT: past consideration can be good consideration IF:

the act was done at the promisors request the parties understood that the act would be remunerated the promise would have been enforceable if it had been promised

in advance of the act

Cases: Lampleigh v Braithwait Re Caseys PatentsSee Latimer at 5-410

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Therefore:

Consideration must be Present (executed) consideration which is an act done now

in return for a promise when the act is completed: see Latimer at 5-430

Or

Future (executory) consideration where the parties agree to exchange promises to do something in the future: see Latimer at 5-420

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3. Consideration must have value but need not be adequate

Consideration must have value but need not be adequate as this is something only the parties to the contract can decide

Case: Chappell & Co Ltd v Nestle Co LtdSee Latimer at 5-440

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4. Consideration must be sufficient

This means that it must have some legal value

If not, it may be considered insufficient and no consideration at all

As long as consideration exists, the courts will not be concerned about its adequacy

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5. Consideration must be possible of performance

6. Consideration must be definite

7. Consideration must be legal

8. Consideration must be referable to the other partys promise

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9. Practical benefit can be good consideration

Cases: Musumeci v Winadell Pty Ltd Williams v Roffey Bros & Nicholls (Contractors) Ltd See Latimer at 5-470

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Insufficient Consideration

1. Moral obligations as well as natural love and affection will NOT convert a promise into good consideration

Case: Eastwood v Kenyon See Latimer at 5-471

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Insufficient Consideration

2. Part payment is insufficient consideration Part payment is NOT good consideration Exception: if creditor agrees to accept smaller amount (or

something different), a debt is considered discharged. Cases: Pinnels case; Foakes v Beer

See Latimer at 5-4803. Promise to perform a duty already imposed by contract is

not good consideration Cases: Stilk v Myrick; Hartley v Ponsonby


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Consideration and Promissory Estoppel: the exception to the rule

Promissory estoppel will allow a promise to be enforced even though the promisee has not provided good consideration for that promise

It operates where it would be inequitable, or unconscionable, for the promisor not to be held to their promise

You cant go back on your word! See Latimer at 5-485

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Promissory estoppel

Cases:Central London Property Trust Ltd v High Trees

House LtdLegione v HateleyWaltons Stores (Interstate) Ltd v MaherSee Latimer at 5-485

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Promissory estoppelBrennan Js (Waltons v Maher) six-point test for when the promisorcannot go back on his/her word:

Promisee (Maher = P) assumes existence of particular legal relationship

Promisor (Waltons = D) responsible for this assumption Promisee acted/did not act in reliance on that assumption Promisor knew what promisee would do or intended for

promisee to act in this way Promisee will suffer loss or some detriment or harm if the

assumption/expectation is not fulfilled Promisor did not take any steps to warn promisee s/he may not

fulfil expectation etc


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Promissory estoppel

The central principle of the doctrine is that the law will not permit an unconscionable or, more accurately, unconscientious departure by one party from the subject matter of an assumption which has been adopted by the other party as the basis of somerelationship, course of conduct, act or omission which would operate to the other partys detriment if the assumption be not adhered to.

Deane J in Commonwealth of Australia v Verwayen [1990] HCA 39See Latimer at 5-485

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Next lectureContract Law (continued): Intention to create legal relations Terms of a contract Conditions and warranties Exclusion clauses Read: Latimer Ch 6, 6-010 to 6-250 DO NOT MISS ANY CLASSES ON THIS TOPIC!

tabl1710 lecture wk3 - intro to contract law

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