Contract a Reading Guide 20120

LAW2101 CONTRACT A SEMESTER ONE, 2012

READING GUIDE IMPORTANT NOTES: 1. This Reading Guide should be read in conjunction with the Contract A Unit Guide 2012.

2. The numbers in the right column refer to the pages in J Paterson, A Robertson and A Duke, Contract: Cases and Materials (Lawbook Co, 12th edition, 2012), which is a Required Resource for this unit (see Unit Guide).

3. Most of the cases listed in this Reading Guide are extracted in J Paterson, A Robertson and A Duke, Contract: Cases and Materials (Lawbook Co, 12th edition, 2012). You can access the other cases online and/ or in the library. To access a case online, you may download the Library Reading List from Blackboard and click the link that will take you to the relevant database.

4. A copy of this document will be provided to you in the closed-book exam. You must not take your own copy into the examination hall.

WEEK ONE INTRODUCTION TO CONTRACT LAW

3

OFFER

42

Gibson v Manchester City Council [1979] 1 WLR 294

42

Carlill v Carbolic Smoke Ball Co [1893] 1 QB 256

45

MacRobertson Miller Airline Services v Commissioner of State Taxation (WA) (1975) 133 CLR 125

50

OFFERS DISTINGUISHED FROM INVITATIONS TO TREAT

54

Shop sales Pharmaceutical Society of Great Britain v Boots Cash Chemists (Southern) Ltd [1953] 1 QB 401

54

Auctions AGC (Advances) Ltd v McWhirter (1977) 1 BPR 9454 Tenders Harvela Investments Ltd v Royal Trust Co of Canada (CI) Ltd [1986] 1 AC 207 Hughes Aircraft Systems International v Airservices Australia (1997) 76 FCR 151 TERMINATION OF AN OFFER Revocation

56

Goldsbrough Mort & Co Ltd v Quinn (1910) 10 CLR 674

56

Mobil Oil Australia Ltd v Wellcome International Pty Ltd (1998) 81 FCR 475

59

Lapse and death of offeror Fong v Cilli (1968) 11 FLR 495 Laybutt v Amoco Australia Pty Ltd (1974) 132 CLR 57 Failure of condition and changed circumstances Dysart Timbers Ltd v Nielson [2009] NZSC 43; [2009] 3 NZLR 160 Rejection and counter-offer: Stevenson, Jaques & Co v McLean (1880) LR 5 QBD 346

2

WEEK TWO ACCEPTANCE

70

CONDUCT CONSTITUTING AN ACCEPTANCE Smith v Hughes (1871) LR 6 QB 597 Taylor v Johnson (1983) 151 CLR 422 Fitness First (Australia) Pty Ltd v Chong [2008] NSWSC 800 CONSCIOUSNESS OF THE OFFER The Crown v Clarke (1927) 40 CLR 227

70

SILENCE AND ACCEPTANCE INFERRED FROM CONDUCT

73

Felthouse v Bindley (1862) 11 CBNS 869; 142 ER 1037

73

Empirnall Holdings Pty Ltd v Machon Paull Partners Pty Ltd (1988) 14 NSWLR 523

74

Brambles Holdings v Bathurst City Council [2001] NSWCA 61; (2001) 53 NSWLR 153

76

COMMUNICATION OF ACCEPTANCE General rule Latec Finance Pty Ltd v Knight [1969] 2 NSWR 79 Brinkibon Ltd v Stahag Stahl und Stahlwarenhandelsgesellschaft mbH [1983] 2 AC 34 Postal acceptance rule

91 91

Adams v Lindsell (1818) 1 B & Ald 681; 106 ER 250 Electronic communications

93

Electronic Transactions (Victoria) Act 2000 (Vic) ss 3(1), 13A Guide to Enactment of the UNCITRAL Model Law on Electronic Commerce (1996) CORRESPONDENCE BETWEEN OFFER AND ACCEPTANCE Butler Machine Tool Co Ltd v Ex-Cell-O Corporation (England) Ltd [1979] 1 WLR 401

3

96 98 98

WEEK THREE CONSIDERATION

103

E Jenks, The History of the Doctrine of Consideration in English Law (Cambridge University Press, London, 1892), pages 81-82 THE ESSENTIAL ELEMENTS

103 104

The benefit/ detriment requirement The “bargain” requirement Australian Woollen Mills Pty Ltd v Commonwealth (1954) 92 CLR 424

104

Beaton v McDivitt (1987) 13 NSWLR 162

107

Atco Controls Pty Ltd (in liq) v Newtronics Pty Ltd (receivers and managers appointed) (in liq) [2009] VSCA 238; (2009) 25 VR 411 ADEQUACY OF CONSIDERATION

115

Woolworths Ltd v Kelly (1991) 22 NSWLR 189

116

SUFFICIENCY OF CONSIDERATION

117

Past consideration

117

General rule: Roscorla v Thomas (1842) 3 QB 234; 114 ER 496

117

Promise to pay for past services performed at the request of the promisor Ipex Software Services Pty Ltd v Hosking [2000] VSCA 239 Lampleigh v Brathwait (1616) Hob 105; 80 ER 255 Existing legal duty

118

Foakes v Beer (1884) 9 App Cas 605

119

Williams v Roffey Bros & Nicholls (Contractors) Ltd [1991] 1 QB 1

121

Musumeci v Winadell Pty Ltd (1994) 34 NSWLR 723

124

Re Selectmove Ltd [1995] 1 WLR 474

129

Pao On v Lau Yiu Long [1980] AC 614

129

Wigan v Edwards (1973) 1 ALR 497

136

cf. Ballantyne v Phillott (1961) 105 CLR 379 4

WEEK FOUR INTENTION TO CREATE LEGAL RELATIONS

139

THE OBJECTIVE APPROACH Shahid v Australasian College of Dermatologists [2008] FCAFC 72; (2008) 168 FCR 46 Atco Controls Pty Ltd (in liq) v Newtronics Pty Ltd (receivers and managers appointed) (in liq) [2009] VSCA 238; (2009) 25 VR 411 PRESUMPTIONS

140

Ermogenous v Greek Orthodox Community of SA Inc [2002] HCA 8; (2002) 209 CLR 95 COMMERCIAL TRANSACTIONS

140 145

Banque Brussels Lambert SA v Australian National Industries Ltd (1989) 21 NSWLR 502

145

cf. Kleinwort Benson Ltd v Malaysia Mining Corp Bhd [1989] 1 WLR 379 DOMESTIC AND SOCIAL AGREEMENTS

150

Ashton v Pratt (No 2) [2012] NSWSC 3 Todd v Nicol [1957] SASR 72

151

GOVERNMENT AGREEMENTS

156

Administration of Papua and New Guinea v Leahy (1961) 105 CLR 6

156

cf. Placer Developments Ltd v Commonwealth (1969) 121 CLR 353 PRELIMINARY AGREEMENTS

159

Masters v Cameron (1954) 91 CLR 353

159

Baulkham Hill Private Hospital Pty Ltd v GR Securities Pty Ltd (1986) 40 NSWLR 622

5

WEEK FIVE CERTAINTY

163

COMPLETENESS

164

Milne v Attorney-General for the State of Tasmania (1956) 95 CLR 460 ANZ v Frost Holdings Pty Ltd [1989] VR 695 Foley v Classique Coaches Ltd [1934] 2 KB 1 CERTAINTY

164

Council of the Upper Hunter County District v Australian Chilling and Freezing Co Ltd (1968) 118 CLR 429 Implying objective standards

164 166

Biotechnology Australia Pty Ltd v Pace (1988) 15 NSWLR 130

166

Whitlock v Brew (1968) 118 CLR 445

174

Hall v Busst (1960) 104 CLR 206

177

Agreements to negotiate

179

United Group Rail Services Ltd v Rail Corporation New South Wales [2009] NSWCA 177; (2009) 74 NSWLR 618 ILLUSORY PROMISES

179 192

Meehan v Jones (1982) 149 CLR 571

192

Godecke v Kirwan (1973) 129 CLR 629

199

Placer Development Ltd v The Commonwealth (1969) 121 CLR 353

201

6

WEEK SIX FORMALITIES

209

THE STATUTE OF FRAUDS AND ITS AUSTRALIAN EQUIVALENTS

209

Instruments Act 1958 (Vic) s 126

213

Guarantee vs. indemnity Yeoman Credit Ltd v Latter [1961] 1 WLR 828 THE FORMALITIES REQUIRED

214

Joinder of documents Tonitto v Bassal (1992) 28 NSWLR 564 Signature

215

Pirie v Saunders (1961) 104 CLR 149

216

Documents in electronic form Electronic Transactions (Victoria) Act 2000 (Vic) ss 7, 9 THE CONSEQUENCES OF NON-COMPLIANCE

218

Unenforceability

218

Popiw v Popiw [1959] VR 197 Part performance: Ogilvie v Ryan [1976] 2 NSWLR 504

219

CAPACITY

227

Age of Majority Act 1977 (Vic) s 3(1) BINDING CONTRACTS: NECESSARIES

227

Goods Act 1958 (Vic) s 7

227

CONTRACTS BINDING UNLESS REPUDIATED

228

CONTRACTS REQUIRING RATIFICATION

228

Supreme Court Act 1986 (Vic) s 50

230

VOID CONTRACTS

228

Supreme Court Act 1986 (Vic) ss 49, 51 7

230

WEEK SEVEN ESTOPPEL

243

INTRODUCTION

243

THE DEVELOPMENT AND ELEMENTS OF EQUITABLE ESTOPPEL

245

Je Maintiendrai Pty Ltd v Quaglia (1980) 26 SASR 101

245

Waltons Stores (Interstate) Ltd v Maher (1988) 164 CLR 387

251

Legione v Hateley (1982) 152 CLR 406 Mobil Oil Australia Ltd v Wellcome International Pty Ltd (1998) 81 FCR 475 Commonwealth v Verwayen (1990) 170 CLR 394 THE EFFECT OF AN ESTOPPEL

263 278

Giumelli v Giumelli (1999) 196 CLR 101

278

ESTOPPEL AS A CAUSE OF ACTION

285

W v G (1996) 20 Fam LR 49

285

PRIVITY

339

IDENTIFYING THE CONTRACTING PARTIES

340

Coulls v Bagot’s Executor & Trustee Co Ltd (1967) 119 CLR 460 NON-APPLICATION OF THE PRIVITY RULE: AGENCY Port Jackson Stevedoring Pty Ltd v Salmond & Spraggon (Aust) Pty Ltd (The ‘New York Star’) (1978) 139 CLR 231 CIRCUMVENTING THE PRIVITY RULE: TRIDENT V MCNIECE Trident General Insurance Co Ltd v McNiece Bros Ltd (1988) 165 CLR 107

340 349 349 359 359

Gate Gourmet Australia Pty Ltd (in liq) v Gate Gourmet Holding AG [2004] NSWSC 149 Hill v Van Erp (1997) 188 CLR 159 REFORM

380

8

WEEK EIGHT EXPRESS TERMS IDENTIFYING THE EXPRESS TERMS

385

Written terms and the effect of signature

386

L’Estrange v F Graucob Ltd [1934] 2 KB 394

386

Toll (FGCT) Pty Ltd v Alphafarm Pty Ltd [2004] HCA 52; (2004) 219 CLR 165

388

Curtis v Chemical Cleaning & Dyeing Co [1951] 1 KB 805

397

Incorporation of terms by notice

399

Oceanic Sun Line Special Shipping Company Inc v Fay (1988) 165 CLR 197

399

eBay International AG v Creative Festival Entertainment Pty Ltd [2006] FCA 1768; (2006) 170 FCR 450 Parker v South Eastern Railway Co (1877) 2 CPD 416 Causer v Brown [1952] VLR 1 Thornton v Shoe Lane Parking Ltd [1971] 2 QB 163

402

Baltic Shipping Co v Dillon (The Mikhail Lermontov) (1991) 22 NSWLR 1

405

New South Wales Lotteries Corp Pty Ltd v Kuzmanovski [2011] FCAFC 106 Interfoto Picture Library Ltd v Stiletto Visual Programs Ltd [1989] QB 433 Incorporation by a course of dealings

407

Balmain New Ferry Co Ltd v Robertson (1906) 4 CLR 379

408

Rinaldi & Patroni v Precision Mouldings (1986) WAR 131

409

Statements made during negotiations

414

Relevance of the parol evidence rule

415

Corbin on Contracts, 1950, vol. 3, pp. 215-216

415

State Rail Authority of New South Wales v Heath Outdoor Pty Ltd (1986) 7 NSWLR 170

416

Hoyt’s Pty Ltd v Spencer (1919) 27 CLR 133

421

Saleh v Romanous [2010] NSWCA 274

425 9

WEEK NINE EXPRESS TERMS (cont’d) IDENTIFYING THE EXPRESS TERMS (cont’d) When is a statement a term of a contract

430

Equuscorp Pty Ltd v Glengallan Investments Pty Ltd [2004] HCA 55; (2004) 218 CLR 471

430

Van den Esschert v Chappell [1960] WAR 114 JJ Savage & Sons Pty Ltd v Blakney (1970) 119 CLR 435

432

Oscar Chess Ltd v Williams [1957] 1 WLR 370

433

Dick Bentley Productions Ltd v Harold Smith (Motors) Ltd [1965] 1 WLR 623

435

CONSTRUING THE TERMS

437

Extrinsic evidence in construing a contract

437

Western Export Services Inc v Jireh International Pty Ltd [2011] HCA 45

439

cf. Investors Compensation Scheme Ltd v West Bromwich Building Society [1998] 1 WLR 896

440

Process of construction

441

Royal Botanic Gardens and Domain Trust v South Sydney City Council [2002] HCA 5; (2002) 240 CLR 45

441

Pacific Carriers Ltd v BNP Paribas [2004] HCA 35; (2004) 218 CLR 451

444

Australian Broadcasting Commission v Australasian Performing Right Association Ltd (1973) 129 CLR 99 Quirke v FCL Interstate Transport Services Pty Ltd [2005] SASC 226; (2005) 92 SASR 249 Exclusion Clauses

446

Darlington Futures Ltd v Delco Aust Pty Ltd (1986) 161 CLR 500

447

Thomas National Transport (Melbourne) Pty Ltd v May & Baker (Australia) Pty Ltd (1966) 115 CLR 353

451

Davis v Pearce Parking Station Pty Ltd (1954) 91 CLR 642

454

cf. Council of the City of Sydney v West (1965) 114 CLR 481 10

WEEK TEN IMPLIED TERMS

461

TERMS IMPLIED IN FACT

461

Formal contracts

462

Byrne v Australian Airlines Ltd (1995) 185 CLR 410

462

The Moorcock (1889) LR 14 PD 64 Re Ronim Pty Ltd [1999] 2 Qd R 172 Codelfa Construction Pty Ltd v State Rail Authority of NSW (1982) 149 CLR 337 Informal contracts: Hawkins v Clayton (1988) 164 CLR 539

469

TERMS IMPLIED IN LAW

469

University of Western Australia v Gray [2009] FCAFC 116; (2009) 179 FCR 346

469

Liverpool City Council v Irwin [1977] AC 239 Breen v Williams (1996) 186 CLR 71 TERMS IMPLIED BY CUSTOM

471

Con-Stan Industries of Australia Pty Ltd v Norwich Winterthur Insurance (Australia) Ltd (1986) 160 CLR 226

471

THE ROLE OF GOOD FAITH

474

Should a duty of good faith be recognised?

474

Renard Constructions (ME) Pty Ltd v Minister for Public Works (1992) 26 NSWLR 234

474

Service Station Assoc’n Ltd v Berg Bennett & Assoc’s Pty Ltd (1993) 45 FCR 84

488

Hughes Aircraft Systems International v Airservices Australia (1997) 146 ALR 1 What should good faith require?

492

Secured Income Real Estate (Australia) Ltd v St Martins Investments Pty Ltd (1979) 144 CLR 596

492

Burger King Corporation v Hungry Jack’s Pty Ltd [2001] NSWCA 187; (2001) 69 NSWLR 558

496

Garry Rogers Motors (Aust) Pty Ltd v Subaru (Aust) Pty Ltd [1999] FCA 903

504

11

WEEK ELEVEN CONSUMER CONTRACTS UNFAIR CONTRACT TERMS

535

Competition and Consumer Act 2010 (Cth), Schedule 2 (“Australian Consumer Law”), Parts 2-3 and 5-2 Australian Securities and Investments Commission Act 2001 (Cth), Part 2, Division 2, Subdivisions BA and G Standard form contracts Robert A Hillman and Jeffrey J Rachlinski, “Standard-Form Contracting in the Electronic Age” (2002) 77 New York University Law Review 429 at 435-454

535

The scope of the unfair contract terms law The test of an unfair term Director of Consumer Affairs v AAPT Ltd [2006] VCAT 1493 Effect of a term being unfair CONSUMER GUARANTEES

543

Competition and Consumer Act 2010 (Cth), Schedule 2 (“Australian Consumer Law”), Part 3-2, Division 1, and Part 5-4 Australian Competition and Consumer Commission, Consumer guarantees – a guide for consumers, 2011

12

WEEK TWELVE REVISION The lectures in week 12 are reserved for revision. Students will have the opportunity to discuss in class the 2011 Contract A exam, which is set out below. In preparation for that discussion, it is strongly recommended that you sit down under exam conditions, give yourself 30 minutes reading and noting time (during which you should be identifying the relevant issues, thinking about the relevant case law and so on) and then spend 2 hours writing out an answer to the exam as if you were in the examination hall. You should then compare your own answer to the answer developed through class discussion in the revision lecture. This exercise will provide valuable law exam practice and allow you to self-identify areas in which you could benefit from additional revision.

QUESTION ONE Armstrong Jones (AJ) owns and manages Pace Suites (PS), a hotel and serviced apartments in Melbourne. In June 2010, AJ tendered for, and won, a contract to host the Melbourne Motor Racing (MMR) events scheduled for 28 March to 3 April 2011. A condition of AJ’s contract with MMR Corporation (MMRC) was that a wide range of specified facilities within PS was to be refurbished and a new show room built to be ready by 28 February 2011. If the work was not completed by the scheduled date, AJ was to pay to MMRC liquidated damages of $25,000 for each week, or part thereof, until completion. AJ invited tenders for the refurbishment and construction work. Ian Crap (IC), who owns and manages a construction business called Quality Constructions, won the contract. The price for the works, incorporated into a detailed contractual document between AJ and IC, was $15 million. The contract, which was signed by AJ and IC, also contained the following clauses: Clause 8:

The contractor (IC) may use the services of sub-contractors as he deems fit. IC does not guarantee the quality of the workmanship or any materials used by any such sub-contractors. Neither is IC liable for any loss or damage that may flow from the work of any sub-contractor.

Clause 20:

The contractor must complete all work no later than 15 February 2011.

On 15 December 2010, IC, who (by himself and through sub-contractors) had completed about 70% of the work required under the contract, wrote an email to AJ stating that he would have to stop work because he had “already spent $15 million dollars on the project and there is still a lot to be done”. He stated further that the only way out is for AJ to agree to an additional payment of $8 million, as costs have been much higher than he (IC) anticipated. AJ, who thought that IC’s tender price of $15 million was on the low side, responded that he understood the market, and would pay the additional money if he could afford to do so. He continued: 13

“Unfortunately, I am in serious financial difficulty, and I am counting on my hosting the MMR events to save me. I may still have to sell some assets. I am confident you can propose a solution that suits us both; I see in you unmatched ingenuity. This has to resolve quickly so the project can get back on schedule, otherwise I will go under, for sure” On 20 December 2010, IC sent AJ an email proposing that he can finish the work with borrowed funds in exchange for the new showroom and the land on which it is situated being transferred to him (IC) straight after the MMR events. AJ phones IC and says, “I agree with your proposal. Please move fast to complete the work on time; the paperwork for the showroom will be done later”. Required: Advise the specified parties as to their legal rights and/or liabilities in the following scenarios. Each scenario is separate and does not follow on from the other.

A. IC completed the work on time. MMRC was pleased with the facilities at PS, and has

extended PS’s hosting contract for another 5 years. However, AJ has refused to transfer the showroom to IC, although he (AJ) has done well financially from hosting the MMR events. AJ says that the Showroom is crucial to his hosting of the MMR events in the future, it is the newest of all of his PS facilities and, besides, he does not think he is legally obliged to transfer the showroom to IC.

IC seeks your advice as to his legal position relating to his contract with AJ (30 Marks)

B. IC completed the work on time. However, before final inspection could take place, faulty electrical work done by Sparky Plus, the sub-contractor used by IC, caused fire and damage to a large part of the refurbished buildings. AJ is unable to host the MMR events. While both IC and Sparky Plus have insurance, IC disclaims liability, referring to Clause 8 of his contract with AJ. AJ seeks your advice as to whether he has a contractual claim against IC and/or Sparky Plus (12 Marks)

C. Should Victoria legislate to reform the Common Law rule on Privity? Discuss this question in the context of cases and secondary texts with which you have become familiar in your study of Contract A this year (8 marks)

14

QUESTION TWO Emma runs a dry cleaning business. One of her regular customers is George, who has used her services many times. One day, George hands in his designer suit for dry cleaning. Emma gives him a receipt. During the dry cleaning process, Emma fails to handle the suit with reasonable care, and the suit gets spoiled with irremovable stains. George is furious and demands that Emma pay him $1,000 to purchase another suit of similar quality. Emma refuses, pointing to the clauses printed on the back of the receipt. She has printed these clauses on the back of receipts since she started the business. Clause 3 on the back of the receipt reads: “All articles are received and treated entirely at the owner’s risk. No liability is accepted for loss of, or damage to, articles through any cause whatsoever.” Meanwhile, Emma intends to upgrade her dry cleaning equipment. In particular, her current shirt pressing machine can only process 10 shirts per hour, which is too slow. Emma meets with Bob, who is a representative of SEC Pty Ltd, a company importing and selling dry cleaning machinery. Emma tells Bob that she needs a shirt pressing machine that can process at least 20 shirts per hour. Bob says that SEC’s new FastPress66, which costs $10,000, is exactly what she needs. Emma replies that she would like to buy one FastPress66. Bob takes a document with several pages out of his suitcase and says to Emma that this document contains the terms of their agreement. On the first page of the document, Bob enters the details of Emma’s business, FastPress66 as the subject matter and $10,000 as the price. He then hands the document to Emma and tells her that she needs to sign it if she wants to purchase a FastPress66. Emma signs the document without reading it. Two weeks later, Emma receives a FastPress66. It turns out that it can only process 15 shirts per hour. When Emma complains to SEC Pty Ltd, she is referred to the following clauses in the document she signed: Clause 5:

SEC Pty Ltd does not give any guarantee as to the amount of shirts that the machine can process per hour.

Clause 6:

This document contains all terms of the contract. No oral terms form part of the contract.

In order to relax from the stress of her business, Emma decides to become a member of her local gym operated by FIT Pty Ltd. She goes to the counter of the gym and says that she would like to become a member. She is handed a document which states that the membership is initially for one year, and that the membership fee is $50 per month. It also says that the contract is subject to the standard terms and conditions of FIT Pty Ltd, which are set out in a brochure available at the counter. Emma sees the brochure but does not read it. She signs the document and pays the fee for the first month. Two weeks later, Emma receives a letter from FIT Pty Ltd informing her that her membership fee will increase to $75 per month from the following month. When Emma contacts FIT Pty Ltd to complain, she is referred to clause 4 in the terms and conditions of FIT Pty Ltd, which reads: “FIT Pty Ltd is entitled to increase the fee by up to 50% at any time.” Required: Advice Emma on her rights and obligations under her contracts with George, SEC Pty Ltd and FIT Pty Ltd. (50 Marks) 15