Term
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Definition
Facts: Johnson offered in writing to sell 10 acres of land to Taylor for $15,000. Taylor must have known that the price was too good to be true but he said nothing and quickly accepted the offer. Johnson then said she had been mistaken about the terms of the offer. She said she had intended to offer the land for sale at $15,000 per acre, not $15,000 for the whole 10 acres. She was mistaken about what was contained in the written offer she sent to Taylor.
Issue: Did Johnson’s mistake justify setting aside the contract?
Decision: In the circumstances the contract should be set aside
Reason: This was a case of unilateral mistake, which on its own does not make a contract void. However, if one party enters a contract under a serious mistake in relation to a fundamental term, the contract will be made void if the other party was aware of the circumstances that indicate the first party does not discover their error until it is too late.in such cases, it is contrary to good conscience for the party who deliberately ignored the signs and acted to prevent discovery of the error to hold the mistaken party to the contract. The court found that Taylor has acted in this way. |
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Term
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Definition
Facts: A builder owed money to Price but did not have the money to pay what he owed. Easton agreed with the builder that if the builder did some work for Easton, Easton would pay Price the money that the builder owed to Price. The builder did the work, but Easton failed to pay Price. There was no point in Price suing the builder for what the builder owed him because the builder still had no money. The builder had no reason to enforce the contract against Easton, because Easton had not promised to pay any money to the builder. Price therefore brought an action against Easton to enforce the promise that Easton had made to the builder that Easton would pay Price.
Issue: Was Price entitled to enforce Easton's promise to the builder that Easton would pay Price?
Decision: Price was not entitled to enforce the promise.
Reason: Price was not a party to the agreement between Easton and the builder and, under the doctrine of privity of contract, Price did not acquire legally enforceable rights under that contract. |
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Term
| coulls v bagot's executor and trustee co lt |
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Definition
Facts: In a contract entered into between Mr Coulls and the O'Neil Construction Company, Mr Coulls gave O'Neil the right to dig up and remove stone from his property. In exchange, O'Neil promised to pay royalties for the stone. The contract authorised O'Neil to pay the royalties to Mr Coulls's wife. Some time later, Mr Coulls died. This contract for quarrying stone did not involve services of a personal nature and accordingly it was not terminated by his death. The contract remained enforceable against the estate. This meant that O'Neil could continue to quarry the stone and the royalties would continue to be payable. The executor of Mr Coulls's estate wanted to know if Mrs Coulls had a contractual right to receive these royalties.
Issue: Did Mrs Coulls herself have a legally enforceable right to the payment of the royalties?
Decision: O'Neil owed no contractual obligations to Mrs Coulls because she was not herself a party to the contract.
Reason: Although Mrs Coulls was present and had put her signature on the contract when it was made, the majority of the court held that she had not signed it as a party to the agreement. In particular, she had not provided any consideration to make the agreement contractually binding between herself and O'Neill. Because she was not a party to the contract, she had no contractual right to sue on or enforce the terms of the contract. The royalties should therefore be paid to Mr Coulls's estate, to be distributed to his beneficiaries. |
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| placer development ltd v cth |
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Definition
Facts: The Commonwealth government said that it would pay a subsidy to companies that imported timber products into Australia. The subsidy was to be 'of an amount or at a rate to be determined by the Commonwealth from time to time'. The government made some initial payments to importers, but then stopped. Placer, who had imported timber, wanted to enforce payment of the subsidy.
Issue: Was what the government said about paying a subsidy to importers a legally enforceable promise?
Decision: In a majority decision, the court held that what the government had said was not a legally enforceable promise. What was said may have appeared to be a promise, but on proper analysis it was not actually a promise at all.
Reason: Taylor and Owen JJ said (at [7]): "A promise to pay an unspecified amount of money is not enforceable where it expressly appears that the amount to be paid is to rest in the discretion of the promisor and the deficiency is not remedied by a provision that the promisor will, in his discretion, fix the amount for payment. Promises of this character are treated not as vague and uncertain promises - for their meaning is only too clear - but as illusory promises."
The element of agreement- Offers and displays not generally offers |
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Term
| carlill v carbolic smoke ball co |
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Definition
Facts: During an influenza epidemic in England in 1891 the Carbolic Smoke Ball Company produced patented 'smoke balls' made from certain chemicals. The company marketed these smoke balls as an effective means of preventing influenza. In particular, the company published an advertisement in a newspaper, offering to pay a reward of Ł100 to anyone who purchased the smoke balls, used them according to the instructions provided, but who nevertheless caught influenza. To demonstrate the seriousness of their offer, the company deposited Ł1000 in a bank account from which to pay the rewards. Elizabeth Carlill saw the advertisement. She bought and used a smoke ball as directed. When she nevertheless caught influenza she claimed the Ł100 reward promised by the company. The company refused to pay her, denying that an enforceable contract with Carlill had been created in these circumstances. The case raised various issues.
Intentionally to be legally bound
Issue 1: Could it be inferred from the circumstances that the promise to pay the advertised reward was intended to be legally binding?
Decision: There were sufficient circumstances from which it could be inferred that the promise was intended to be contractually binding.
Reason: The advertisement was unlike other advertisements. The fact that it stated that Ł1000 had been deposited in a bank by the company expressly for the purposes of making the promised payments demonstrated that the promise was intended to be legally binding.
Offers made to the world at large
Issue 2: Could an offer made to everyone in the world at large be validly accepted by a specific individual who knew of the offer?
Decision: An offer made to "the world at large" is capable of acceptance by any member of the public who learns of it.
Reason: In the circumstances, the advertisement amounted to an offer that was capable of acceptance. Although offers are usually made to specified persons, or to members of a specified groups of persons, there is no reason why they should not be addressed to anyone in the whole world if that is the offeror intends. The valid acceptance of such an offer by any person will create an enforceable contract with the company.
Performance of an act as consideration
Issue 4: Had Carlill provided consideration in exchange for the company's promise, sufficient to create a legally binding agreement?
Decision: The act of buying and using the smoke ball provided the necessary consideration to make the promise to pay the reward enforceable.
Reason: An act performed in expectation of a known promise may constitute the consideration given in exchange for that promise, even though the act is necessarily performed before the said promise becomes legally binding. In this case, the company promised to pay a reward in exchange for the act of buying and using the smoke ball, provided the user then caught influenza. |
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Term
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Definition
Conditional agreement
Masters v Cameron (1954) 91 CLR 353
Contract; formation; intention to be legally bound; conditional intention.
Facts: Cameron agreed to sell her farm to Masters for Ł17,500. Both parties signed a written agreement which described the property and set out other details of the agreement. One of the provisions in the document was the following: "This agreement is made subject to the preparation of a formal contract of sale which shall be acceptable to my [Cameron's] solictors on the above terms and conditions..."
Issue: Since the essential terms of a contract had been agreed by the parties when they signed their initial agreement, was a contract created even before the preparation of a formal contract by Cameron's solicitors?
Decision: In the circumstances it was clear that Cameron had not intended to be bound until a formal contract was prepared and signed.
Reason: The effect of making an agreement subject to a condition is not always the same. Depending on the circumstances, the facts may show that the parties intended one of the following: (1) to be immediately bound by the agreement and required to perform it, the written contract being only to restate the agreed terms more fully or precisely; or (2) to be immediately bound by the agreement, but to suspend any performance until formal documents are signed; or (3) not to be legally bound by the agreement at all unless and until the formal documents are prepared and signed.
In the present case the words 'subject to' the preparation of a formal contract were sufficient to indicate an intention not to be legally bound by the agreement at all until a formal contract was prepared and signed. |
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Term
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Definition
Acceptance of an offer by post
Henthorn v Fraser [1892] 2 Ch 27
Contract; contract formation; offer and acceptance; acceptance by post.
Facts: Fraser offered to sell certain houses to Henthorn for a sum of Ł750, giving Henthorn 14 days in which to accept the offer. The day after receiving the offer, Henthorn posted a letter to Fraser, accepting it. After this letter of acceptance had been posted, but before it was received by Fraser, Fraser was offered a higher price for the houses by another buyer and he attempted to withdraw his offer to Henthorn. He relied on the principle that an offer may be withdrawn at any time before acceptance, arguing that acceptance by post had not been authorised, and that Henthorn's acceptance was therefore not effective before it was delivered.
Issue: Had Henthorn already accepted the offer made by Fraser before Fraser's attempt to withdraw it?
Decision: Acceptance of the offer was effective as soon as the letter of acceptance was posted by Henthorn, and this took place before Fraser's attempt to withdraw the offer.
Reason: Acceptance by post need not be specifically authorised for it to be effective as soon as the letter is posted. Lord Herschell said (at 33): "Where the circumstances are such that it must have been within the contemplation of the parties that, according to ordinary usage of mankind, the post might be used as a means of communicating the acceptance of an offer, the acceptance is complete as soon as it is posted." The contract was therefore completed as soon as the letter of acceptance was posted to Fraser. |
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Term
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Definition
Acceptance by fax or telex
Brinkibon Ltd v Stahag Stahl und Stahlwarenhandelsgesellschaft mbH
[1983] 2 AC 34
Contract; formation; agreement; acceptance by telex.
Facts: Brinkibon, a company based in London, England wished to purchase steel from Stahag, a company based in Vienna, Austria. In the course of negotiating their contract, a number of telexes were exchanged by the parties. One of these telexes, sent by Brinkibon to Stalag, constituted the acceptance of an offer from Stalag. Some time thereafter a dispute between the parties arose and, for procedural reasons, it became important to determine whether the contract for the purchase of the steel had been made in England or in Austria.
Issue: In the case of an acceptance sent by telex from London and received in Vienna, where was the contract made?
Decision: The acceptance took effect when the telex was received by Stalag in Vienna. The contract was therefore made in Vienna.
Reason: Lord Wilberforce said (at 296): "Since 1955 the use of telex communications has been greatly expanded... The senders and recipients may not be the principals to the contemplated contract... The message may not reach, or be intended to reach, the designated recipient immediately: messages may be sent out of office hours, or at night, with the intention, or on the assumption, that they will be read at a later time... There may be some error or default at the recipient's end which prevents receipt at the time contemplated or believed in by the sender... No universal rule can cover all such cases... The present case is...the simple case of instantaneous communication between principals, and, in accordance with the general rule, involves that the contract (if any) was made when and where the acceptance was received..." |
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Term
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Definition
Agreements between family members
Balfour v Balfour [1919] 2 KB 571
Facts: Balfour was employed in Ceylon. He and his wife travelled to England for a visit. When it as time to return to Ceylon, Ms Balfour was unwell and her doctor advised her to remain in England and rejoin her husband only when se was better. To provide for her while she remained in England, Mr Balfour promised to pay her 30 euro each month until she rejoined him. However, Mr and Ms Balfour later separated and divorced. Ms Balfour brought an action again Mr Balfour to enforce the payment of the promised maintenance.
Issue: Was an agreement of this type, made between married persons, legally enforceable?
Decision: The agreement was not legally enforceable because, in the circumstances, it could not be inferred that it was intended to be legally enforceable.
Reason: Spouses make many domestic agreements, but these agreements so not become legally enforceable because the parties did not intend that they should be attended by legal consequences. The courts would be swamped if such agreements could be sued on. Such agreements are not sued upon, not because the parties are reluctant to enforce their legal rights when the agreement is broken, but because the parties, in the inception of the arrangement, never intended that they should be sued upon |
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Term
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Definition
Cohen v Cohen (1929) 42 CLR 91
Contract; formation; intention to be legally bound; agreements between spouses.
Facts: Ms Cohen alleged that, before she married the defendant in 1918, he had promised to pay her Ł100 a year as a dress allowance. The money was to be paid in quarterly instalments of Ł25. The money was paid until early 1920. In 1923 the parties separated. Ms Cohen then claimed that Mr Cohen owed her Ł278, being unpaid instalments of the promised dress allowance.
Issue: Was the promise to pay a dress allowance intended to create a legally enforceable agreement?
Decision: Dixon J concluded that in the circumstances it could not be inferred that legally enforceable relations were intended.
Reason: On an arrangement between a couple engaged to be married, Dixon J said (at 96):
"But these matters only arise if the arrangement which the plaintiff made with the defendant was intended to affect or give rise to legal relations or to be attended with legal consequences (Balfour v Balfour [1919] 2 KB 571; Rose & Frank Co v J R Crompton & Bros Ltd [1923] 2 KB 261). I think it was not so intended. The parties did no more, in my view, than discuss and concur in a proposal for the regular allowance to the wife of a sum which they considered appropriate to their circumstances at the time of marriage…"
Note: In different circumstances, it may well be inferred that agreements between married persons are intended to be legally enforceable. |
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Term
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Definition
Merritt v Merritt [1970] 2 All ER 760
Contract; formation; intention to be bound; agreements between spouses.
Facts: After getting married in 1941, Mr and Ms Merritt borrowed money from a bank to build a house. They lived in it over the years while jointly contributing to paying off the loan. The house was originally owned by Mr Merritt alone but in 1966 it was put into joint ownership with Ms Merritt. Some time thereafter Mr Merritt began an extramarital relationship with another woman and left his wife. Having separated, Mr and Ms Merritt met to discuss their financial position. Ms Merritt agreed to finish paying off the loan on the house and in return Mr Merritt promised that when the loan was completely repaid, he would transfer the house to Ms Merritt's sole ownership. He signed a letter to this effect but, when the time came, he refused to transfer the house to Ms Merritt. Ms Merritt brought a legal action to enforce it.
Issue: Was the promise to transfer the house to Ms Merritt intended to be a legally enforceable one, despite the parties being spouses?
Decision: It could be inferred from the circumstances that the agreement was intended to be legally enforceable.
Reason: Whether or not an agreement is intended to be legally enforceable is something that is decided objectively. The court asks what intention can reasonably be inferred from the circumstances at the time of the agreement. Lord Denning MR said (at 762): "In all these cases the court does not try to discover the intention by looking into the minds of the parties. It looks at the situation in which they were placed and asks itself: would reasonable people regard the agreement as intended to be binding?" In the present case, the court decided that when the goodwill between married persons has broken down, it can be inferred that they no longer rely on honourable understandings, and that they intend their agreements to create legal obligations. |
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Term
| esso petroleum co ltd v commissioners of customers and excise |
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Definition
Agreements reached in a commercial context
Esso Petroleum Co Ltd v Commissioners of Customs and Excise [1976] 1 All ER 117
Contract; formation; intention to be legally bound; commercial agreements.
Facts: Esso Petroleum produced a set of commemorative coins. The coins were collectors' items - they had no value as money. To promote sales of its petrol, Esso promised to give motorists a 'free' coin with every four gallons of Esso petrol purchased. The Commissioner of Customs and Excise argued that the 'free' coins were 'produced in quantity for general sale' and were therefore subject to a purchase tax.
Issue: Did Esso have the intention to be legally bound by the offer to give the coins to motorists who purchased its petrol?
Decision: In a majority decision, the House of Lords held that the terms of the promotion were intended to be a legally binding promise. The coins were therefore subject to the purchase tax.
Reason: The offer of commemorative coins was a commercial promotion from which Esso and its station operators stood to gain, and the coins were only offered to its customers. Thus, although the offer of the coins was described as a 'gift', it could be inferred from the commercial circumstances that it was a promise made with an intention to be legally bound. |
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Term
| ermogenous v greek orthodox community of sa |
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Definition
Agreements between friends
Ermogenous v Greek Orthodox Community of SA Inc (2002) 209 CLR 95
Contract; formation; intention to be legally bound; relevant factors.
Facts: The Greek Orthodox Community of SA, an incorporated association which organised the cultural, social, sporting and religious activities for its members, invited Ermogenous, then in America, to become the head of the Greek Orthodox Church in Australia. He accepted the offer and came to Australia where he served as archbishop for 23 years. During this time he was paid a salary by the Community. At the end of his appointment the Community refused to pay him for the accumulated leave that Ermogenous would have been entitled to under a legally binding contract of employment. The Community argued that their agreement with Ermogenous was not intended to be legally binding.
Issue: Could it be inferred from the circumstances that the appointment of the archbishop was intended to be a legally binding contract of employment?
Decision: The agreement was intended to be legally binding and Ermogenous was entitled to payment for accumulated leave.
Reason: The existence of an intention to be legally bound is judged on the basis of all the relevant available facts. The notion of 'presumptions' operating against such an intention in particular types of case can easily distract from the true task of properly evaluating the particular circumstances. An agreement with a minister of religion does not in itself mean the agreement is not intended to be legally binding if other circumstances indicate otherwise, such as when an incorporated non-religious body makes the agreement and it provides monetary and economic benefits to the minister. Compare Teen Ranch Pty Ltd v Brown (1995) 87 IR 308. |
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Term
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Definition
Consideration must be of some value
Thomas v Thomas (1842) 114 ER 330
Contract; formation; token consideration sufficient.
Facts: Before he died, Mr Thomas expressed the desire that, if his wife survived him, she should be allowed to live in his house until her death. After his death, Mr Thomas's executors took account of this wish and entered into an agreement with Ms Thomas, allowing her to occupy the house in return for her promising to pay Ł1 a year (which would go towards the ground rent) and a promise to keep the house in good repair.
Issue: Had sufficient consideration been provided by Ms Thomas to make the agreement with the executors legally enforceable?
Decision: Ms Thomas was entitled to enforce the agreement.
Reason: The promise to pay Ł1 each year and keep the house in good condition was not in any sense equivalent in value to the benefit that Ms Thomas received under the agreement with the executors. However, there is no requirement that consideration be of equivalent value: it is enough that it be of some value, even if relatively small. Ms Thomas's promises were therefore sufficient consideration for the promise to let her occupy the house for life. |
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Term
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Definition
Types of consideration
Stilk v Myrick (1809) 170 ER 1168
Contract; formation; insufficiency of past consideration.
Facts: While on a voyage in the Baltic, two seamen deserted from their ship. The captain made a promise to the remaining crew that they would share the deserters' pay if they worked extra hard to get the ship safely back home. When the ship got back to England, the ship-owner refused to honour the captain's promise. The crew wished to enforce the promise, saying there was an enforceable contract for the extra pay.
Issue: Had the crew given consideration for the captain's promise, so as to create a binding contract?
Decision: The crew had given nothing of value in exchange for the captain's promise. Accordingly, no binding contract for extra pay was created.
Reason: When they had originally signed on for the voyage, the crew had made a promise to do whatever was necessary in case of any emergencies to bring the ship home safely. The desertion of two crew members was an emergency and the crew was therefore already bound to do the extra work that was needed. When the captain promised extra pay, the crew promised nothing in return beyond what they were already legally bound to do.
Note: The result in this case may seem unfair to the sailors but the decision is clearly based on the established requirements of consideration. |
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Term
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Definition
A practical benefit as consideration
Musumeci v Winadell Pty Ltd (1994) 34 NSWLR 723
Contract; formation; consideration; practical benefit or detriment as consideration.
Facts: Musumeci leased a shop in a mall from Winnadell. Musumeci sold fruit and vegetables in his shop. Some time later, Winnadell leased another shop in the mall to a competing fruit and vegetable retailer and Musumeci's business declined. Musumeci told Winnadell that his shop was no longer viable and asked Winnadell to reduce the rent. Rather than lose Musumeci as a tenant, Winadell agreed to a 30% reduction of rent. However other issues between Musumeci and Winadell were not resolved and in the end Winadell decided that he would rather not have Musumeci as a tenant. In an effort to evict Musumeci from the mall, Winadell argued that the new lease at a reduced rental was not legally binding.
Issue: Had Musumeci given sufficient consideration in exchange for Winadell's promise to reduce the rental, so as to create a binding agreement?
Decision: The promise to reduce the rent was properly supported by consideration and therefore legally binding. The consideration obtained by Winadell was the practical benefit of keeping Musumeci as a tenant and the mall full of operating shops.
Reason: Noting that there has been a continuing trend to side-step the artificial results of a strict doctrine of consideration, Santow J explained the present state of Australian law (at 747). He said suppose that A enters into a contract with B, to supply work, goods and services to B, in return for payment. However, before A completes the contract, B begins to doubt that A will in fact do what he has promised. To ensure performance by A of his original undertaking, B promises A some additional payment, or makes some concession to A, by means of which B obtains the benefit of being in a better practical position than if he were to bring an action against A for breach of contract. Or it may be that, by promising actual performance in exchange for B's additional promise, A puts himself in a worse practical position than if he were to breach the contract by non-performance. Either way, the practical benefit to B, or the detriment to A, is sufficient consideration to make B's promise of additional payment legally binding, as long as B's promise was not the result of any economic duress, fraud, undue influence, unconscionable conduct or unfair pressure on A's part. |
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Term
| van den esschert v chappell |
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Definition
Displacing the presumptions that a contract is wholly written
Van den Esschert v Chappell [1960] WAR 114
Contract; contents; terms; proving orally agreed terms of partly written and partly oral contracts.
Facts: Immediately before agreeing to buy van den Esschert's house, Chappell asked if it was free from infestation by white ants. Van den Esschert said it was, but this assurance was not included in the written contract of sale that Chappell then signed. Chappell sued van den Esschert for breach of contract when the house turned out to be infested with white ants.
Issue: Was Chappell entitled to lead evidence of a term, orally agreed, that the house was free of white ants?
Decision: The court was of the view that, taking all the circumstances into account, the contract was partly written and partly oral. In such circumstances the parol evidence rule does not exclude evidence of additional orally agreed terms.
Reason: Wolff CJ said (at 116): "I would think that on the purchase of a house in this country an inquiry regarding the presence of white ants was most important: when (as in this case) the prospective purchaser immediately before signing the contract makes a specific request to be informed about that matter and gets an affirmative answer such as the purchaser got in this case, it was intended to be made a part and parcel of the contract and was to be regarded as a term." Chappell was therefore entitled to lead evidence to prove the existence of the oral term in addition to the terms contained in the written portion of the contract. |
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Term
| LG thorne & co pty ltd v thomas borthwick and son aus |
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Definition
Generic terms regarding sales “by sample”
LG Thorne & Co Pty Ltd v Thomas Borthwick & Sons (A/asia) Ltd (1955) 56 SR (NSW) 81
Contract; contents; proving orally agreed terms; sale by sample; parol evidence rule.
Facts: Thorne bought 50 drums of Neatsfoot oil from Thomas Borthwick. The sale came about after considerable discussion and after Thorne requested and was given a sample of oil to test. To complete the agreement, Borthwick sent a document to Thorne to sign. Describing itself as a contract, the document set out quite detailed particulars about the oil but made no mention of the sample. When the oil was delivered, Thorne found that the oil in the 50 drums did not have the same qualities as the sample he had tested. Thorne claimed it was a term of the contract that it should have been the same.
Issue: Had the sale been made by reference to the sample provided?
Decision: The parties had not included any reference to the sample in their agreement and the sale was not 'by sample'.
Reason: The buyer needed to show the sale was agreed to be 'by sample'. However, the written contract contained no reference to a sample. Furthermore, the written contract appeared, on its face, to be a complete and workable agreement, providing for all matters necessary for such a transaction. In these circumstances the court will apply the parol evidence rule and exclude evidence of orally agreed terms. |
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Term
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Definition
Representation distinguished from terms
Oscar Chess Ltd v Williams [1957] 1 All ER 325
Contract; contents; terms and representations.
Facts: Williams's mother owned a second-hand Morris Minor motor car which she believed was a 1948 model. In 1955, at his mother's request, Williams took the car to a used-car dealer to trade it in. The documents that Williams showed to the dealer contained a statement that the car was a 1948 model. In fact it was a 1939 model. When the dealer discovered the true age of the car, he sued Williams for breach of contract. The dealer claimed that the statement about the age of the car in the document was a promise and was intended to be contractually binding.
Issue: Was the statement in the documents regarding the age of the car a term of the contract?
Decision: Denning and Hodson LJJ held that the statement as to the age of the car was a mere representation rather than a contractually binding promise.
Reason: Because the dealer had special knowledge of and expertise in cars and Williams did not, it could not be inferred that the parties intended Williams's statement to be a legally binding promise. A dealer would be expected to verify the age of a vehicle if he was in any doubt.
Note: Morris LJ dissented, saying the statement as to age was vitally important and therefore became a term of the contract. The different views of the judges in this case show that it is not always easy to decide when a statement is intended to be legally binding as a term of the contract. |
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Term
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Definition
Identifying the terms of a contract
Handbury v Nolan (1977) 13 ALR 339
Contract; contents; representations and terms.
Facts: An auctioneer offered a cow, the Glen Nola, for sale at an auction. Before the sale, the auctioneer announced that a pregnancy test had been done on the cow, and that the result of the test was 'positive'. The buyer bid $3,200 to buy the cow. However, the cow was not pregnant, and worse, she proved to be infertile.
Issue: Was it an expressly agreed term of the contract of sale that the cow was fertile and pregnant when sold?
Decision: The auctioneer's statement was an express term of the contract.
Reason: The announcement of the test result was not a mere opinion. It was a statement of fact that the cow had been tested and was pregnant. In deciding whether this statement was intended to be contractually binding as a promise, the court took account not only of the statement itself, but also of the circumstances in which it was made. In particular, the statement was made at a breeders' sale where higher prices would be paid for a cow that was pregnant. Furthermore, the statement was made just before bids were invited. These circumstances all suggested that the statement was intended to be a legally binding promise, and it therefore became an express term of the contract.
Importantly, because the term in question was an express term, the court held that another clause in the contract, which excused the seller from liability for breach of implied terms, did not apply. This is an example of interpretation 'contra proferentem'. |
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Term
| associated newspapers ltd v banks |
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Definition
The relative importance of particular terms in a contract
Associated Newspapers Ltd v Bancks (1951) 83 CLR 322
Contract; contents; terms; conditions and warranties; breach of contract; remedies; termination of performance.
Facts: Bancks, a cartoonist, agreed to produce a weekly full-page drawing for Associated Newspapers. Associated Newspapers agreed to pay Bancks a salary and to publish the drawing on the front page of the newspaper's comic section. However, for three weeks, because of paper shortages and consequent production problems, Bancks's drawings appeared on page 3 of the comic section. Bancks protested but Associated Newspapers ignored him. Bancks then decided to terminate further performance of the contract.
Issue: Was the promise to publish Bancks's drawings on the front page of the comic section an essential term, such that a breach would justify terminating further performance of the contract?
Decision: The term was an essential one (a condition) and Bancks was therefore justified in terminating further performance.
Reason: The court said (at [7]): "The test was succinctly stated by Jordan C.J. in Tramways Advertising Pty. Ltd. v. Luna Park (N.S.W.) Ltd…. The decision was reversed on appeal…, but his Honour's statement of the law is not affected. He said … : "The test of essentiality is whether it appears from the general nature of the contract considered as a whole, or from some particular term or terms, that the promise is of such importance to the promisee that he would not have entered into the contract unless he had been assured of a strict or a substantial performance of the promise, as the case may be, and that this ought to have been apparent to the promisor..." " In this case, it was clear that Bancks would not have agreed to the contract without the promise that his cartoons would be published on the front page of the comic section. That promise was therefore an essential term (condition) of the contract. |
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Term
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Definition
Bettini v Gye (1876) 1 QBD 183
Contract; contents; terms; conditions and warranties; breach of contract; remedies; damages.
Facts: Bettini, a singer, contracted to sing for Gye, a promoter, at various events over a 15-week period. It was a term of the contract that Bettini arrive six days before the first engagement and attend rehearsals. Being ill, Bettini arrived late and missed four days of rehearsals. Because of this breach Gye wanted to terminate the future performance of the contract.
Issue: Was the term requiring attendance at rehearsals for six days a condition, breach of which would justify terminating performance of the contract, or a mere warranty?
Decision: The term was a warranty, not a condition, and Gye was not entitled to terminate further performance of the contract in response to Bettini's breach.
Reason: Bettini had been engaged to sing at a number of events over a long period. The requirement of attending rehearsals did not go "to the root" of the contract because, in view of the number of performances over a long period of time, attendance at initial rehearsals would not vitally affect the whole contract. |
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Term
| l'estrange v f'gracoub ltd |
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Definition
Objective agreements to terms
L'Estrange v F Graucob Ltd [1934] 2 KB 394
Contract; contents; assent to express terms in signed document.
Facts: Graucob Ltd agreed to sell a cigarette vending machine to L'Estrange. To complete the transaction, Graucob gave L'Estrange a document to sign. The document had the heading 'Sales Agreement' and it included a clause that expressly excluded any implied warranties or conditions from the agreement. L'Estrange signed the document without reading it. After delivery, the vending machine proved unsatisfactory. L'Estrange brought an action for breach of contract against Graucob, alleging breach of an implied condition that the machine would be reasonably fit for the purpose for which it was bought. Although such a condition would normally have become part of the contract by virtue of the relevant sale of goods legislation, Graucob argued that the agreed terms of the 'Sales Agreement' excluded any such condition from becoming part of their contract.
Issue: Was L'Estrange bound by the provision in the contract that excluded any additional implied warranties or conditions, even though she had not read the contract before signing it?
Decision: L'Estrange was bound by the terms of the document she had signed.
Reason: When a person signs what is clearly a contractual document, and they have not been induced to do so by any fraud or misrepresentation, they cannot later say that they did not agree to be bound by the terms of that document, even if they did not read them before signing. The reasonable inference in these circumstances is that they have agreed to be bound by the terms contained in the document they have signed. |
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Term
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Definition
Agreement to terms contained in a written document
Causer v Browne [1952] VLR 1
Contract; contents; express terms in a non-contractual document; unsuccessful attempt to include terms.
Facts: Causer took his wife's dress to Browne for dry cleaning. When he gave the dress to Browne, Causer was handed a 'docket' on which the following statement was printed: 'No responsibility is accepted for loss or injury to articles through any cause whatsoever'. Causer did not read what was written on the docket and the statement was not specifically drawn to his attention. During dry cleaning the dress was stained. Causer claimed damages from Browne to compensate for the ruined dress. Browne defended the claim, relying on the statement printed on the docket.
Issue: Had the statement on the docket that excluded Browne's liability become a term of the contract?
Decision: In the circumstances, the statement had not become a term of the contract.
Reason: The document handed to Causer did not appear to be a contractual document, or a document that was likely to contain contractual terms. It was reasonable in the circumstances for Causer to assume that the document was only an identifying docket which he would have to produce to collect the goods after cleaning. It could not be inferred, therefore, that Causer was agreeing to exempt Browne from liability for negligence. The result would have been different if Causer's attention had been drawn to the fact that the docket contained contractual terms. |
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Term
| codelfa construction pty ltd v stat railway authority of new |
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Definition
Limitations on the evidence that may be led to prove terms implied ad hoc
Codelfa Construction Pty Ltd v State Rail Authority of NSW (1982) 149 CLR 337
Contract; contents; terms implied ad hoc; frustration.
Facts: Codelfa Construction agreed to build two tunnels in Sydney for the State Rail Authority for an agreed price. When contracting, both parties believed that nothing could prevent construction from continuing 24 hours a day. In particular, they thought that state legislation protected Codelfa against the possibility of injunctions for nuisance. However, the high levels of noise disturbed the local residents who managed to obtain an injunction placing limits on the hours during which Codelfa could work. Having to do the work more slowly would cost Codelfa extra money. Codelfa therefore claimed extra payment from the State Rail Authority.
Issue 1: Was a term implied into the contract in the circumstances, obliging the State Rail Authority to pay Codelfa for extra costs associated with the limited construction hours?
Decision: Applying the principles laid down by the Privy Council in BP Refinery (Westernport) Pty Ltd v Hastings Shire Council (1977) 180 CLR 266, the court held that no such term was implied.
Reason: Because the parties had believed when contracting that nothing could prevent the construction from continuing 24 hours a day, it could not be inferred that they intended to include a term in the contract regarding extra costs caused by limited work hours. Nor was it clear what particular provision the parties might have agreed on in the changed circumstances. Further, the necessity for implied terms must be inferred from the expressly agreed terms and not from any extrinsic evidence. Brennan J said (at [17], [18], [20]): "...where the term propounded is said to be implied in a contract, that term must inhere in its express terms, and reference to extrinsic circumstances is permissible only to construe the contract and to understand its operation... The meaning and operation of the express terms, thus established, are the sole foundation for implying a term which the parties have not expressed. ... [The case of] BP Refinery should not be regarded as authorizing an extension of the role of extrinsic evidence..." |
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Term
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Definition
Facts: Partridge put an advertisement in a magazine saying: 'Bramblefinch cocks and hens, 25/- each.' He was prosecuted by the RSPCA for the statutory offence of unlawfully 'offering' wild birds for sale.
Issue: Was the advertisement an 'offer' in the legal sense, capable of 'acceptance' by any interested person (in which case an offence would have been committed) or was the advertisement merely an 'invitation to treat' (negotiate) which did not amount to an 'offer' within the meaning of the relevant statute?
Decision: The court decided that, in the circumstances of this case, the advertisement did not amount to an offer in the full legal sense, capable of acceptance to create a binding contract. It was only an invitation to enter into negotiations with interested buyers who might themselves offer to buy the advertised birds.
Reason: Lord Parker CJ said (at 424): "I think that when one is dealing with advertisements and circulars, unless they indeed come from manufacturers, there is business sense in their being construed as invitations to treat and not offers for sale." |
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Term
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Definition
Terms agreed to by implication ad hoc
Moorhead v Brennan (t/as Primavera Press) (1991) 20 IPR 161
Contracts; contents of a contract; agreed terms, terms implied ad hoc.
Facts: Moorhead, author of the book 'Remember the Tarantella', entered into a contract with a publisher, Brennan. The contract gave Brennan the exclusive right to produce and sell the book, and to licence other publishers to do so. Moorhead was to receive 50% of the receipts from editions published by other publishers under licence. The contract also allowed Moorhead to terminate the contract if Brennan failed to rectify any failure to comply with the terms of the agreement within a period of 90 days. Brennan wrote an explanatory introduction to the book which Moorhead agreed could be included in the Australian edition of the book. An overseas publisher, The Women's Press, offered to publish the book in England under licence, provided Brennan's explanatory introduction was dropped from their edition. This was because The Women's Press had a strict policy of only publishing writing by women. When Brennan refused to allow the book to be published without his introduction, The Women's Press withdrew their offer and Moorhead lost the opportunity to earn royalties. Moorhead sued Brennan for breach of a term implied into their contract ad hoc.
Issue: Was a term implied into the contract ad hoc that Brennan would not obstruct opportunities for Moorhead to receive royalties from persons publishing the book under licence?
Decision: The suggested term, or one with equivalent effect, was implied into the contract in the circumstances of the case. By refusing to drop his introduction from the overseas edition, Brennan had breached the term. Moorhead was therefore justified in terminating her contract with Brennan.
Reason: The only way that the parties could have contemplated that Brennan might pursue commercial opportunities outside Australia was by licensing an overseas publisher. And having given Brennan the sole right to produce, publish and licence the book, Moorhead had no other way of exploiting her copyright in the book. In these circumstances, the court held that all the requirements for establishing a term implied ad hoc were satisfied: the term was reasonable and equitable; it was necessary to give business efficacy to the contract; it was sufficiently obvious to 'go without saying'; it was capable of clear expression; and it did not contradict any express terms. |
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Term
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Definition
BP Refinery (Westernport) Pty Ltd v Hastings Shire Council (1977) 180 CLR 266
Contract; contents; terms implied ad hoc.
Facts: The State Government of Victoria entered into an agreement with BP Refinery (Westernport) for the development of an oil refinery on a site within the Shire of Hastings. The Shire of Hastings also entered into an agreement with BP Refinery (Westernport) granting that company the right to pay lower than normal municipal rates on the refinery site (a preferential rating agreement). The reduced rates were intended to reduce the costs of the new development. Sometime later BP Refinery (Westernport) underwent a restructure and as a result the refinery site was transferred to a subsidiary company called BP Australia. The Shire of Hastings charged BP Australia the full municipal rates on the site. The Shire of Hastings argued that, although not expressly agreed, it was an implied term of the contract that the preferential rating agreement would come to an end if BP Refinery (Westernport) ceased to occupy the site itself.
Issue: Was a term implied ad hoc into the preferential rating agreement that the lower rates would be payable only while BP Refinery (Westernport) itself occupied the refinery site?
Decision: A majority of the Privy Council held that no such term was implied ad hoc into the contract.
Reason: For a term to be implied ad hoc into a contract the following conditions (which may overlap) must be satisfied on the facts of the case: (1) The suggested term must be reasonable and equitable; (2) it must be necessary to give business efficacy to the contract, meaning no term will be implied if the contract is effective without it; (3) it must be so obvious that "it goes without saying"; (4) it must be capable of clear expression, and; (5) it must not contradict any express term of the contract. The Privy Council found that the suggested term was not needed to give business efficacy to the contract; nor was it fair and equitable; nor could it be inferred from the circumstances that the parties obviously intended to include any such term. In fact, it was more likely, from the known circumstances, that a term with the opposite effect would have been intended. The "officious bystander" test is used to decide whether it was obvious that the suggested term was intended by the parties to be included in the contract. The court asks what the parties would have replied if an officious bystander had asked them at the time of their agreement whether the suggested term was part of their agreement. Only if it can be inferred from the circumstances that the parties would have replied "of course" will it be obvious that the suggested term was intended to be included in the contract. |
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Term
| perri v coolangatta investments |
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Definition
Universally implied terms
Perri v Coolangatta Investments Pty Ltd (1982) 149 CLR 53
Contract; formation; agreement; conditional agreement; universal terms; duty to co-operate; reasonable time for fulfilment of condition.
Facts: In April 1978, Perri agreed to buy a property in Cronulla from Coolangatta Investments (CI). The performance of this contract was made subject to the condition that Perri should first find a buyer for a property in Lilli Pilli that he owned. Finding a purchaser for the Lilli Pilli property proved difficult, especially since Perri initially wanted a high price. In July 1978, CI asked Perri to complete the purchase of the Cronulla property before August 8. When Perri failed to do so, CI told him that they were terminating performance of the contract. CI then sought a declaration from the court that they had validly terminated performance. Perri said he still wanted to complete the purchase of the Cronulla property, even though his Lilli Pilli property was not yet sold.
Issue: Had CI validly terminated further performance of their contract with Perri?
Decision: In the circumstances, performance of the contract had been validly terminated by CI, because Perri had failed to sell his Lilli Pilli property within a reasonable time, thereby unduly delaying the completion of the Cronulla sale.
Reason: Perri had not promised to sell his house in Lilli Pilli within any specified time, but the court held that it was an implied condition of the agreement that Perri would do all that was reasonable to bring about the sale of the Lilli Pilli property, and would do so within a reasonable time, thereby allowing the Cronulla contract to be completed. What is a reasonable time is treated as a question of fact and depends on what is fair to both parties in the circumstances. In this case, in which the seller could not deal with the Cronulla property while it remained subject to the sale of the Lilli Pilli property, the court held that a reasonable time had passed and that CI had therefore been entitled to terminate the contract. |
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Term
| secured income real statement v st martins investments pt ltd |
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Definition
Secured Income Real Estate (Australia) Ltd v St Martins Investments Pty Ltd (1979) 144 CLR 596
Contract; contents; universal terms; duty to co-operate.
Facts: St Martins purchased property from Secured Income (SI) for a price that would be determined in part by the extent to which space in the building could be successfully let to tenants during a specified period. Towards the end of this period, when it was apparent that fewer tenants had signed leases than expected, and anxious to maximise the purchase price, SI itself applied to lease the remaining space. St Martins rejected this offer. SI sued for breach of an implied term that St Martins should cooperate in securing tenants, and should therefore not have rejected SI's offer to lease the remaining space in the building.
Issue: Was the rejection of SI's offer a breach of contract?
Decision: There was an implied term of the contract to cooperate, but St Martins had not breached this term.
Reason: Mason J said (at [25], [26]): "[T]he contract imposed an implied obligation on each party to do all that was reasonably necessary to secure performance of the contract ... As Griffith C.J. said in Butt v. M'Donald ..: 'It is a general rule applicable to every contract that each party agrees, by implication, to do all such things as are necessary on his part to enable the other party to have the benefit of the contract.' "
Since St Martins had not acted 'capriciously or arbitrarily' in rejecting the offer, but only after properly evaluating SI's merits as a tenant, there had been no breach of this duty. |
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Term
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Definition
Good faith
Alcatel Australia Ltd v Scarcella (1998) 44 NSWLR 349
Contract; contents; universal terms; duty of good faith; pursuit of legitimate interests.
Facts: Alcatel Australia leased a new seven-storey building from Scarcella for 50 years. The lease stipulated that Alcatel should maintain the building and pay for any work on the building required by order of the local government authority. After some years, Scarcella asked the local authority to inspect the building for fire safety and, as a result of the inspection, the local authority ordered that the stairwell in the building be insulated against fire. Alcatel believed that it was not obliged to meet the costs of complying with this order because, Alcatel argued, Scarcella had caused the local authority to impose unreasonable safety requirements.
Issue: Was a term implied into the contract by law, requiring Scarcella to act in good faith and ensure Alcatel was not subjected to the expense of an unreasonable fire order?
Decision: A duty of good faith may be implied by law as part of a contract. Such a duty prevents a contractual power being exercised in a 'capricious or arbitrary manner or for an extraneous purpose'. However, seeking a fire safety inspection was not an unreasonable exercise of Scarcella's power and there was no breach of the duty.
Reason: In a commercial context it is not contrary to good faith for a lessor to take steps to ensure that fire safety requirements are carried out. Scarcella had a legitimate right to ensure the building was properly protected against fire, and Alcatel had no grounds for avoiding its obligations under the lease. |
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Term
| burger king corp v hungry jack's pty ltd |
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Definition
Burger King Corp v Hungry Jack's Pty Ltd (2001) 69 NSWLR 558
Contract; contents; universal terms; duty of good faith; dishonest use of contractual power.
Facts: Hungry Jack's (HJ) was a large Australian franchisee of Burger King Corp (BK). However, over the years, difficulties emerged in the relationship between the two companies. BK decided to force HJ to sell out of its franchising rights. To achieve this, BK exercised certain of its contractual powers in a way that made it impossible for HJ to perform its franchise obligations. In particular, BK refused to approve new sub-franchise outlets that, in terms of the franchise agreement, HJ was obliged to open each year. BK then gave HJ notice that it was terminating HJ's franchise rights because of HJ's failure to open the required sub-franchise outlets.
Issue: Among other issues, the court considered whether BK owed a duty of good faith to HJ, and had breached that duty.
Decision: A duty of good faith was implied by law into this contract and had been breached by the refusal to approve the sub-franchise outlets.
Reason: There are now numerous Australian cases recognising an implied duty of good faith in appropriate contracts - perhaps in all commercial contracts. The duty will exist if, without it, the rights conferred by a contract would be made worthless or seriously undermined. In the light of this duty, BK was obliged to exercise its contractual powers (such as the power to approve sub-franchise agreements) honestly and reasonably, and not for a purpose outside the contract - e.g. to thwart HJ's contractual rights. |
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Term
| expo alunminimum vs wr paternan pty ltd |
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Definition
Generic terms regarding the suitability of goods for a buyer’s purpose
Expo Aluminium (NSW) Pty Ltd v WR Pateman Pty Ltd (1990) ASC 55-978
Contract; contents; terms implied by legislation; sale of goods; duty to deliver goods suitable for buyer's purpose.
Facts: Expo Aluminium asked WR Pateman, a manufacturer of window frames, if Pateman could supply some aluminium windows which Expo needed to install in a client's house. When ordering the windows, Expo told Pateman: "There is nothing between this job and the South Pole". This was an informal and indirect way of telling the manufacturer that the house would be fully exposed to strong winds and rain. When the windows were installed in the client's house they were found to leak. Expo alleged there was a term in their contract with Pateman that the windows would be suitable to withstand strong winds and driving rain.
Issue: Had Expo sufficiently indicated the purpose for which the windows were required, and shown that they were relying on Pateman to supply something suitable to withstand exposure to strong wind and rain?
Decision: Taking account of what Expo had said to Pateman when ordering the window frames, s 19(1) of the Sale of Goods Act 1923 (NSW) implied a term in the contract that the goods would be suitable for the buyer's purpose. This required the windows to be weatherproof in an exposed situation. This implied term had been breached by supplying windows that leaked.
Reason: The buyer had sufficiently indicated the purpose for which the goods were required by saying "There is nothing between this job and the South Pole" because this statement could only have meant that the windows would need to be sufficiently weatherproof to withstand strong winds and driving rain. The buyer's reliance on the seller to supply suitable goods can often be established by inference and the necessary inference can often be drawn from the buyer having stated his or her purpose. The court held that this was so in the present case. |
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Term
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Definition
Baldry v Marshall [1925] 1 KB 260
Contract; contents; terms implied by legislation; sale of goods; implied condition requiring delivery of goods suitable for buyer's purpose; sale by trade name.
Facts: Marshall asked Baldry, a seller of Bugatti cars, for information about "the eight cylinder Bugatti". Baldry said the car was available and offered to supply information. Marshall then explained why he wanted the car - he said he needed a fast, easily managed and comfortable car, suitable for touring. Baldry and Marshall then entered into a contract for "an eight cylinder Bugatti car fully equipped and finished to standard specification as per the car inspected". The car delivered proved defective and Marshall claimed that it was not in fact suitable for his stated purposes. Baldry argued that he was not obliged to deliver goods suitable for Marshall's purposes because the car had been bought under its trade name.
Issue: Was it an implied term of the contract that the car be suitable for the buyer's purpose, even though it had been bought under its trade name?
Decision:: It was clear on the facts that the buyer had relied on the seller to supply suitable goods, and this gave rise to an implied term requiring the car to be suitable for the buyer's purpose, regardless of the use of the trade name to describe it.
Reason: The mere fact that goods are described by trade name does not necessarily exclude the implied term regarding suitability of purpose. The test is: Did the buyer themselves, in purchasing the goods by name, form the judgment that the goods would be suitable for their own purpose, without reliance on the seller? |
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Term
| aus knitting mills ltd v grant |
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Definition
The meaning of merchantable quality
Australian Knitting Mills Ltd v Grant (1933) 50 CLR 387
Contract; contents; terms implied by legislation; sale of goods; implied condition requiring delivery of goods of merchantable quality.
Facts: Grant purchased some woolen underwear manufactured by Australian Knitting Mills. When he wore the underwear, Grant developed an itchy rash which became acute general dermatitis. The skin condition was caused by small particles of sulphur in the wool from which the underwear was made. As well as suing Australian Knitting Mills in tort, Grant sued the retailer in contract for breach of a condition requiring the goods sold to be of merchantable quality, as implied into the contract of sale by s 14(2) of the Sale of Goods Act 1895 (SA).
Issue: Was the underwear of merchantable quality?
Decision: The court held that the underwear was merchantable.
Reason: Dixon J said (at 418): "The condition that goods are of merchantable quality requires that they should be in such an actual state that a buyer fully acquainted with the facts and, therefore, knowing what hidden defects exist and not being limited to their apparent condition would buy them without abatement of the price obtainable for such goods if in reasonably sound order and condition and without special terms." Sulphur particles showed up in all specimens of woollen underwear that were analysed. This same underwear was being sold as underwear in the market in large quantities to people who were not affected by the sulphur. Therefore, despite the 'defect', the goods were merchantable as underwear. Note: The decision that the underwear was merchantable was later reversed by the Privy Council (a court to which there is no longer a right of appeal from the High Court of Australia). Since then, Dixon J has confirmed his test, and other judges have applied similar, though differently worded, tests to determine whether goods are merchantable. See David Jones Ltd v Willis (1934) 52 CLR 110 and George Wills & Co Ltd v Davids Pty Ltd (1957) 98 CLR 77. |
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Term
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Definition
Frustration
Codelfa Construction Pty Ltd v State Rail Authority of NSW (1982) 149 CLR 337
Contract; contents; terms implied ad hoc; frustration.
Facts: Codelfa Construction agreed to build two tunnels in Sydney for the State Rail Authority for an agreed price. When contracting, both parties believed that nothing could prevent construction from continuing 24 hours a day. In particular, they thought that state legislation protected Codelfa against the possibility of injunctions for nuisance. However, the high levels of noise disturbed the local residents who managed to obtain an injunction placing limits on the hours during which Codelfa could work. Having to do the work more slowly would cost Codelfa extra money. Codelfa therefore claimed extra payment from the State Rail Authority.
Issue 2: Had performance of the contract become frustrated by the changed circumstances in which construction now had to take place?
Decision: In a majority decision, the court held that performance as originally agreed had become frustrated.
Reason: It was clear, from what was said when negotiating the contract, that both parties believed Codelfa would be able to work continuously. The unforeseen injunction made performance possible only in a way that was fundamentally different (and much more expensive) than what was originally contemplated. The court took the view that it would be unfair to enforce the original agreement in these changed circumstances and the contract was discharged by frustration. Codelfa was therefore not obliged to do the work for payment as originally agreed and it was open to the parties to negotiate a new agreement. |
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Term
| maritime national fish ltd vs ocean trawlers |
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Definition
Maritime National Fish Ltd v Ocean Trawlers Ltd [1935] AC 524
Contract; performance; frustration; fault.
Facts: Maritime National chartered the St Cuthbert, a trawler, from Ocean Trawlers. To use the trawler for fishing, as was intended, it had to be licensed, but the government issued only three licences to Maritime National, and that company had five boats needing licences. Maritime National allocated licences to three of their other boats, and asked Ocean Trawlers to take back the St Cuthbert, claiming the contract had been frustrated by the lack of a licence.
Issue: Did the unavailability of a licence for the St Cuthbert frustrate the contract?
Decision: The plaintiff was not entitled to rely on frustration in these circumstances.
Reason: It was Maritime National's own decision not to allocate one of their available licences to the St Cuthbert. In seeking to avoid the contract, Maritime National was not entitled to rely on a situation they had deliberately brought about. For frustration to discharge the contract, the changed situation must arise without any fault or deliberate act by the party who is seeking relief. |
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Term
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Definition
Non-Performance
Varley v Whipp [1900] 1 QB 513
Contract; contents of a contract; terms implied by legislation; sale of goods; duty to deliver goods as identified.
Facts: Varley and Whipp met in the town of Huddersfield. Varley offered to sell a second-hand reaping machine to Whipp for Ł21. Varley said the machine was in the town of Upjohn. He said the machine was a year old and had only been used to cut 50 or so acres of crops. Whipp had not seen the machine, but agreed to buy it. When delivered, the machine proved to be a very old one which had obviously been broken and mended. Whipp returned it and refused to pay the price.
Issue: Had the seller delivered what was promised, so that he was entitled to be paid the agreed price?
Decision: The seller had not delivered what had been promised.
Reason: The thing sold was a specified machine, but it was bought unseen and it was identified by description. The description was "a nearly new reaping machine then in Upjohn". The machine delivered was not "a nearly new machine" and the court held that it was not in the same class or category of goods as had been described. The seller had therefore failed to deliver the particular goods as identified in the contract. This was a breach of the condition, implied into sale contracts by law, that a seller must deliver the goods as identified by description in the contract. Failure to deliver goods as identified meant that the buyer did not become the owner of what had been delivered. Whipp was therefore entitled to reject the machine and was not obliged to pay for it. |
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Term
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Definition
Substantial performance
Hoenig v Isaacs [1952] 2 All ER 176
Contract; breach of contract; substantial performance; remedies for breach.
Facts: Hoenig contracted to paint Isaacs's apartment, and supply some furniture, for Ł750. After painting the apartment and supplying the furniture, Hoenig claimed payment in full. Isaacs complained that the work had been badly done. It cost Ł55 to have another workman rectify the defects. In view of the imperfect work, Isaacs paid only Ł400 to Hoenig. Hoenig sued Isaacs for the balance of the agreed price.
Issue: Was Isaacs obliged to pay the agreed price in full?
Decision: Isaacs was not obliged to pay the full price, but was only entitled to deduct the actual cost of the necessary repairs (Ł55).
Reason: Payment of the agreed price by Isaacs was due in exchange for the performance by Hoenig of his obligations under the contract. Although Hoenig had not performed perfectly, the faults in his work were easily fixed at modest cost. In the circumstances, he had performed substantially.Where substantial performance has taken place, the failure to render complete performance, while still a breach of contract, will be treated as a breach of a warranty rather than a breach of a condition (unless the parties have expressly agreed otherwise). The substantial performance must be accepted and paid for proportionately. Isaacs was therefore required to pay the agreed price, less the amount needed to rectify the defects. |
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Term
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Definition
Connor v Stainton (1924) 27 WALR 72
Contract; performance of a contract; substantial performance; breach of contract.
Facts: Connor entered into a contract with Stainton, a fencer, in terms of which Stainton agreed to erect just over 3 miles of fencing with posts 12 feet apart. When the fence was erected, many of the posts were found to be more than 12 feet apart, in some cases up to 18 feet apart. When Stainton claimed the promised payment for the fence Connor refused to pay, on grounds that Stainton had not substantially carried out the contract. Stainton did not deny that the posts were further apart than promised, but claimed that, by adding 'droppers' between some of the posts, the fence would be just as effective as if the posts were all 12 feet apart.
Issue: Was Stainton entitled to payment of the agreed price, less any expenditure required to add droppers to the fence as required to make it effective?
Decision: Stainton had not substantially performed the contract and was not therefore entitled to claim the agreed payment.
Reason: A contract to complete a whole task involves an obligation to do everything necessary for the completion of the work and, except for trivial shortcomings, to do it fully as described. Anything less is not substantial performance. It is not sufficient to do something that is materially different, even if it can be argued that what was done is just as good as what was promised. In the present case, the fence that was erected was, and always would be, of an entirely different character from the one that had been promised. Putting droppers in would not make the fence the same as that agreed to in the contract. Stainton's failure to render substantial performance meant that he was not entitled to claim any agreed payment from Connor. |
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Term
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Definition
Partial performance
Steele v Tardiani (1946) 72 CLR 386
Contract; breach; partial performance; acceptance of partial performance; duty to pay pro rata for accepted performance.
Facts: Tardiani and others were employed by Steele to cut firewood. The agreement provided that payment would be made at the rate of six shillings per ton of wood cut in six foot lengths and split six inches in diameter. Tardiani and the others cut 1,500 tons of timber but split it into pieces ranging from six to fifteen inches in diameter.
Issue: Was Tardiani entitled to payment for the work done?
Decision: Although performance was incomplete, Steele did not choose to reject the work done. Having accepted it, he had to pay for the value of the work.
Reason: The contract was not substantially completed: it was only partly performed. However, Steele was obliged to pay for the value of the work done by the woodcutters. This was because, knowing that the woodcutters were splitting some of the wood to a diameter of more than six inches, Steele had nevertheless said he would pay the woodcutters when the wood was eventually sold to customers. He had also allowed Tardiani to finish working without requiring him to split the thicker logs properly. Accordingly, the court decided that Steele had chosen to dispense with his right to insist on complete performance. Furthermore, because Steele had accepted the benefit of the partial performance, he was bound to pay the woodcutters on a quantum meruit basis, that is, payment for the actual value of the work they had done (as distinct from the agreed price). |
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Term
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Definition
Late performance
Holland v Wiltshire (1954) 90 CLR 409
Contract; breach of contract; late performance; remedies; termination of performance.
Facts: Wiltshire sold some land to Holland for Ł3,750. The written agreement provided for payment to be made 'on the day fixed for settlement namely January 14th 1952'. At Holland's request Wiltshire agreed to an extended deadline, but Holland failed to meet the extension. Holland then informed Wiltshire that he did not intend to proceed with the sale at all. Wiltshire did not immediately terminate performance of the contract but said that, if Holland did not settle by March 28, he (Wiltshire) would commence legal action for breach of contract.
Issue 1: Was Wiltshire entitled, failing payment by March 28, to terminate further performance of the sale, resell the land to a third party, and claim any loss from Holland?
Decision: Wiltshire was entitled to these remedies.
Reason: There were two breaches of contract by Holland. The first occurred when Holland failed to perform at the agreed (extended) time. On the facts of this case, the court held that the time of performance was agreed to be of essential importance. This meant that Holland's failure to perform on time amounted to a breach of condition and entitled Wiltshire to terminate the contract immediately. Wiltshire chose not to end performance of the contract immediately. It was only after a second breach occurred, when Holland said he would not proceed with the sale at all, that Wiltshire gave him a deadline for performance and then terminated the contract when that deadline passed. Wiltshire then resold the property to a third party, but at a lower price. He was entitled to claim as damages the difference between the lower price on resale and the original contract price. |
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Term
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Definition
Anticipatory breach
Hochster v De la Tour (1853) 118 ER 922
Contract; anticipatory breach; immediate right to sue.
Facts: In April, De la Tour engaged Hochster as a courier, to accompany him on a tour. Hochster was to only commence work on June 1, 1852. However, three weeks before that date, De la Tour informed Hochster that he no longer required a courier. De la Tour refused to compensate Hochster for cancelling the agreement. On May 22, a week before his employment was due to begin, Hochster sued De la Tour for breach of contract.
Issue: Had there been a breach of contract by De La Tour on 22 May, giving Hochster an immediate right to sue?
Decision: The court held there had been an anticipatory breach of contract by De la Tour on 22 May, and that Hochster was immediately entitled to sue.
Reason: Where a contract is yet to be performed, and the time for performance has not yet arrived, but one party expressly announces that they are not going to perform their future obligations, the non-defaulting party is entitled to accept this repudiation of the contract and sue immediately for damages on grounds of anticipatory breach. |
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Term
| phillips v ellison brothers pty ltd |
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Definition
Performance of divisible contracts
Phillips v Ellinson Brothers Pty Ltd (1941) 65 CLR 221
Contract; performance; divisible contracts.
Facts: Phillips was employed to work as a manager for Ellinson Brothers for a period of two years. At the end of his employment, he was to be paid a percentage of the profits made by the company during that period. Under the agreement, Phillips was obliged to spend 160 hours each month working for Ellinson Brothers. However, after an initial period, Phillips reduced his work for Ellinson Brothers to 60 hours per month. This was done by informal arrangement between the parties, but the original contract was not varied. At the end of the two year period, Phillips claimed the agreed payment.
Issue: Was Phillips entitled enforce the contract and claim payment?
Decision: Phillips was not entitled to claim payment by enforcing the contract because he had not performed his obligations as specified under the contract.
Reason: The court treated the agreement as a single, indivisible contract for a period of two years, during which Phillips was required to work 160 hours each month. His failure to work these agreed hours for the whole period meant that he had not performed his obligations. Starke J said (at 233 - 4): "It is a principle of English law that parties having contracted to do an entire work for a specific sum can recover nothing unless the work be done or it can be shown that it was the other party's fault that the work was incomplete or that there is something to justify the conclusion that the parties have entered into a fresh contract.... If the contract be indivisible and not severable, then nothing can be recovered under the contract unless it be completed according to its terms or a new contract is made or is to be implied from the acts of the parties, giving rise to new rights."
Note: This does not mean that Phillips was not entitled to any payment at all, only that he could not claim the amount as specified in the original contract. |
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Term
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Definition
Innominate terms
Cehave NV v Bremer Handelsgesellschaft mbH [1976] QB 44
Contract; breach of contract; innominate terms; breach; remedies; termination of performance.
Facts: Bremer sold a quantity of citrus pellets to Cehave. The contract required the pellets to be shipped 'in good condition'. Bremer shipped pellets that were not in good condition, and their value was accordingly less. However, the pellets were still good enough to use for animal feed, which is how Cehave intended to use them. Cehave alleged that, by not shipping pellets that were in good condition, Bremer was in breach of contract. Relying on this breach, Cehave wanted to reject the pellets that had been delivered to him.
Issue: In these circumstances was Cehave entitled to reject the goods and terminate performance of the contract?
Decision: There was no right to reject the goods and terminate performance.
Reason: The term that had been breached was an innominate term (or intermediate term). Only a serious breach of such a term justifies rejecting performance, that is, a breach that deprives the non-defaulting party substantially of the benefit for which they entered the contract. Since the pellets were good enough for the buyer's purpose, Cehave was obliged to accept and pay for them, and would have only a claim for damages to the extent that they were worth less than pellets of the promised quality. |
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Term
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Definition
Koompahtoo Local Aboriginal Land Council v Sanpine Pty Ltd (2007) 233 CLR 115
Contract; breach of contract; remedies for breach; the right to terminate performance.
Facts: The Koompahtoo Council and Sanpine entered into a joint venture agreement to develop an area of land owned by the Council, with the objective of then reselling that land for residential purposes. Sanpine was to manage the project. The council and Sanpine each had a 50% interest in the venture. The Council's contribution to the venture consisted only of the land: the costs of the development were to be funded by borrowings. The joint venture agreement contained numerous other provisions, for example, requiring Sanpine to seek funding, apply for approvals, provide progress reports and so on. In particular, clause 16.5 of the contract required Sanpine to keep proper books of account sufficient to allow the affairs of the joint venture to be assessed from time to time. In fact, Sanpine failed to keep proper books of account, or to provide progress reports, or to arrange adequate funding. The Council, relying on these breaches, terminated the joint venture agreement.
Issue: Had there been a breach of the joint venture contract sufficient to justify the Council's decision to terminate further performance of the agreement?
Decision: Termination of the joint venture was justified because the consequences of Sanpine's breaches, particularly of clause 16.5, went to the root of the contract and deprived the Council of a substantial part of the benefit for which it had contracted.
Reason: The majority of the court held that, on the evidence, clause 16.5 could well have been treated as an essential term (condition) of the contract, but in fact decided the case on the basis that the term was 'intermediate' rather than being either a condition or warranty. Accordingly, the right to terminate depended on the seriousness of the effects of the breach. The court reviewed the approach of Australian law to deciding when termination is justified and said [at para 68]: "The focus of attention should be the contract, and the nature and seriousness of the breaches… the intention that is relevant is the common intention of the parties, at the time of the contract, as to the importance of the relevant terms and as to the consequences of failure to comply with those terms. This is a question of construction of the contract to be decided in the light of its commercial purpose and the business relationship it established." |
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Term
| government of newfoundland v newfoundland railway co |
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Definition
Government of Newfoundland v The Newfoundland Railway Co (1888) 13 App Cas 199
Contract; performance; discharge; divisible contracts.
Facts: The Newfoundland government contracted with the railway company for the company to build a railway that was intended to eventually extend for a substantial distance. Among the various terms, it was agreed that the government would grant the company 25,000 acres of land on the completion of each five-mile section of railway. The project came to an unexpected end after just seven sections (35 miles) of railway had been constructed.
Issue: Was the company entitled to the 25,000 acres of land for each of the seven sections that had been completed, even though the complete railway would not now be built?
Decision: The company was entitled to the grants of land for each of the seven completed sections.
Reason: The wording of the contract made it clear that the grants of land were dependent only on the completion of each five-mile section of the railway, and not on the completion of the entire railway. As each section was completed, therefore, each grant of 25,000 acres of land became enforceable as a separate completed contract |
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Term
| associated newspapers v barracks (2) |
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Definition
The availability of termination
Associated Newspapers Ltd v Bancks (1951) 83 CLR 322
Contract; contents; terms; conditions and warranties; breach of contract; remedies; termination of performance.
Facts: Bancks, a cartoonist, agreed to produce a weekly full-page drawing for Associated Newspapers. Associated Newspapers agreed to pay Bancks a salary and to publish the drawing on the front page of the newspaper's comic section. However, for three weeks, because of paper shortages and consequent production problems, Bancks's drawings appeared on page 3 of the comic section. Bancks protested but Associated Newspapers ignored him. Bancks then decided to terminate further performance of the contract.
Issue: Was the promise to publish Bancks's drawings on the front page of the comic section an essential term, such that a breach would justify terminating further performance of the contract?
Decision: The term was an essential one (a condition) and Bancks was therefore justified in terminating further performance.
Reason: The court said (at [7]): "The test was succinctly stated by Jordan C.J. in Tramways Advertising Pty. Ltd. v. Luna Park (N.S.W.) Ltd…. The decision was reversed on appeal…, but his Honour's statement of the law is not affected. He said … : "The test of essentiality is whether it appears from the general nature of the contract considered as a whole, or from some particular term or terms, that the promise is of such importance to the promisee that he would not have entered into the contract unless he had been assured of a strict or a substantial performance of the promise, as the case may be, and that this ought to have been apparent to the promisor..." " In this case, it was clear that Bancks would not have agreed to the contract without the promise that his cartoons would be published on the front page of the comic section. That promise was therefore an essential term (condition) of the contract. |
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Term
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Definition
Cehave NV v Bremer Handelsgesellschaft mbH [1976] QB 44
Contract; breach of contract; innominate terms; breach; remedies; termination of performance.
Facts: Bremer sold a quantity of citrus pellets to Cehave. The contract required the pellets to be shipped 'in good condition'. Bremer shipped pellets that were not in good condition, and their value was accordingly less. However, the pellets were still good enough to use for animal feed, which is how Cehave intended to use them. Cehave alleged that, by not shipping pellets that were in good condition, Bremer was in breach of contract. Relying on this breach, Cehave wanted to reject the pellets that had been delivered to him.
Issue: In these circumstances was Cehave entitled to reject the goods and terminate performance of the contract?
Decision: There was no right to reject the goods and terminate performance.
Reason: The term that had been breached was an innominate term (or intermediate term). Only a serious breach of such a term justifies rejecting performance, that is, a breach that deprives the non-defaulting party substantially of the benefit for which they entered the contract. Since the pellets were good enough for the buyer's purpose, Cehave was obliged to accept and pay for them, and would have only a claim for damages to the extent that they were worth less than pellets of the promised quality. |
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Term
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Definition
Hidden defects
Finch Motors Ltd v Quin (No 2) [1980] 2 NZLR 519
Contract; breach of contract; delivery of defective goods; hidden defects; opportunity to discover hidden defects.
Facts: Quin bought a car that she wanted to use to tow a boat. The car was sold as suitable for that purpose. Before the sale, Quin's husband took the car for a short test drive and looked under the bonnet at the engine. He saw nothing wrong. Quin made payment by cheque and took the car. Soon thereafter she discovered that a defective radiator had caused the car to overheat when towing the boat. She stopped payment on the cheque and returned the car to Finch Motors.
Issue: Since she had inspected the vehicle, accepted delivery and used the vehicle for towing, was it too late for Quin to reject it?
Decision: Quin was entitled to reject the car.
Reason: The defect was a serious one that made the car unsuitable for towing. If the defect had been obvious at the time of the sale, it would have been too late to reject the car after inspecting it, taking delivery and driving it. However, the defect was hidden (latent) and was not discoverable merely by looking at the car or driving it without towing. In such cases, to delay in rejecting the goods until the defect is discovered does not necessarily amount to an unconditional acceptance of the goods as fulfilling the contract. Whether any delay is reasonable is a question of fact which depends on the nature of the article sold and the nature of the defects alleged. |
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Term
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Definition
Late performance
Holland v Wiltshire (1954) 90 CLR 409
Contract; breach of contract; late performance; remedies; termination of performance.
Facts: Wiltshire sold some land to Holland for Ł3,750. The written agreement provided for payment to be made 'on the day fixed for settlement namely January 14th 1952'. At Holland's request Wiltshire agreed to an extended deadline, but Holland failed to meet the extension. Holland then informed Wiltshire that he did not intend to proceed with the sale at all. Wiltshire did not immediately terminate performance of the contract but said that, if Holland did not settle by March 28, he (Wiltshire) would commence legal action for breach of contract.
Issue 1: Was Wiltshire entitled, failing payment by March 28, to terminate further performance of the sale, resell the land to a third party, and claim any loss from Holland?
Decision: Wiltshire was entitled to these remedies.
Reason: There were two breaches of contract by Holland. The first occurred when Holland failed to perform at the agreed (extended) time. On the facts of this case, the court held that the time of performance was agreed to be of essential importance. This meant that Holland's failure to perform on time amounted to a breach of condition and entitled Wiltshire to terminate the contract immediately. Wiltshire chose not to end performance of the contract immediately. It was only after a second breach occurred, when Holland said he would not proceed with the sale at all, that Wiltshire gave him a deadline for performance and then terminated the contract when that deadline passed. Wiltshire then resold the property to a third party, but at a lower price. He was entitled to claim as damages the difference between the lower price on resale and the original contract price.
Issue 2: Had Wiltshire done what was required to terminate further performance of the contract?
Decision: The contract had been effectively terminated.
Reason: When faced with a breach that justifies termination, the non-defaulting party has a choice: to continue with the contract, or to terminate further performance. The decision does not have to be made immediately, but once made and communicated to the other party, the choice is binding. In this case, Wiltshire had kept the contract alive for a short time after Holland's repudiation, but made it clear that any further failure would result in an action for breach. The eventual decision to treat the contract as terminated was communicated sufficiently by re-advertising and reselling the land. |
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Term
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Definition
The purpose of damages
Radford v de Froberville [1978] 1 All ER 33
Contract; remedies for breach; objective of damages.
Facts: Radford owned two adjacent blocks of land. He sold one to de Froberville on the condition that she build an expensive brick wall on the boundary. She failed to build the wall, and resold her property to a third party. Radford sued de Froberville for damages for breach of contract. He claimed the cost of actually constructing the promised brick wall. De Froberville argued that Radford was only entitled to the amount by which her failure to build the wall had decreased the value of Radford's property. This was less than the cost of actually building the wall.
Issue: What was the appropriate measure of damages?
Decision: Radford was entitled to claim damages equal to the cost of actually constructing the wall.
Reason: The objective of an award of damages is to put the non-defaulting party in the position he would have occupied had the breach of contract not occurred. If de Froberville had performed the contract, the wall would have been built, and it was the cost of this that Radford was entitled to claim. |
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Term
| tabcorp holdings v bowen investments |
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Definition
Tabcorp Holdings Ltd v Bowen Investments Pty Ltd (2009) 236 CLR 272
Contract; breach of contract; remedies for breach; claim for damages; objective of damages.
Facts: Bowen Investments Ltd (Bowen) leased a building to Tabcorp Holdings Pty Ltd (Tabcorp) for 10 years. It was a term of the lease that the tenant would not make any substantial alteration or addition to the building without first obtaining the landlord's written consent. Six months into the lease, and without first obtaining the landlord's consent, the tenant demolished the foyer of the building and rebuilt it in a way they preferred. The landlord sued for the cost of restoring the foyer to its previous state, which amounted to just over $1.3 million. The trial judge held the tenant in breach of contract but only awarded damages of $34,820, being the difference between the value of the building with the old foyer and the value of the building with the new foyer. On appeal Bowen claimed that they were entitled to the higher amount.
Issue: Was the landlord entitled, on grounds of the tenant's breach of contract, to claim the full cost of restoring the foyer to its previous state?
Decision: The appropriate measure of damages was the cost of restoring the foyer to its previous state.
Reason: The ruling principle is that, when a party suffers a loss because of a breach of contract, damages may be claimed to put that party in the same position as if the contract had been performed, so far as money can do it. This does not mean simply in the same 'financial' position, but in the same actual position, so that the party has or can acquire what was actually contracted for. In this case, that meant the cost of actually restoring the foyer to its original state, because this is the position the landlord would have been in if the contract had not been breached. There may be exceptional cases where to award such damages becomes unreasonable, but that was not so in the present case. |
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Term
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Definition
Damages for immediate direct loss
Koufos v C Czarnikow Ltd (The Heron II) [1969] 1 AC 350
Contract; remedies for breach; damages; immediate loss.
Facts: Czarnikow entered into a contract with Koufos, chartering Koufos's ship to carry a cargo of sugar from Constanza in Romania to Basrah in Iraq. This journey normally took about 20 days. However, because the ship made some unauthorised deviations from its route, the trip took 10 days longer than normal. During this additional 10 days, the price of sugar in Basrah dropped significantly, so that when Czarnikow's sugar arrived it was worth less than it would have been worth if delivered 10 days earlier. In view of the later delivery, Czarnikow brought an action for breach of contract against Koufos, claiming damages to compensate for the drop in the market price of sugar.
Issue: Was Czarnikow entitled to claim damages from Koufos to compensate for losses caused by the drop in the market price of sugar?
Decision: Damages could be claimed to compensate for the loss caused by the drop in price.
Reason: Following a breach of contract, damages can be claimed to compensate for direct (immediate) losses suffered by the plaintiff. Direct losses are those that are fairly and reasonably considered to arise naturally (according to the usual course of things) from the breach of contract itself. The court found that Koufos must "as a reasonable businessman have contemplated that [Czarnikow] would very likely suffer loss, and that it would be, or would be likely to be, a loss referable to market price fluctuations at Basrah." The loss was therefore foreseeable as a loss flowing in the usual course of events from the breach, and constituted direct (or immediate) loss for which Koufos was entitled to claim damages. This was one of the principles laid down in Hadley v Baxendale (1854) 2 CLR 517 and is often referred to as the first principle or 'limb' of that case. |
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Term
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Definition
Damages for consequential loss
Hadley v Baxendale (1854) 2 CLR 517
Contract; remedies for breach; damages; consequential loss.
Facts: The crankshaft of Hadley's mill broke, bringing milling operations to a complete halt. The manufacturers of the shaft said that they could make a replacement, but they needed the broken shaft to copy it. Hadley consigned the broken shaft to Baxendale, a carrier, telling him it was the broken shaft of a mill, and instructing him to take it to the manufacturer. Baxendale said he would deliver it to the manufacturer the next day, but then he carelessly delayed for several days before transporting it. During this whole period the mill stood idle. Hadley claimed damages for breach of contract from Baxendale, to compensate for the loss of profits caused by the delay.
Issue: Was Hadley entitled to compensation for the lost profits?
Decision: In the circumstances, Hadley was not entitled to such damages.
Reason: A plaintiff who establishes a breach of contract is not restricted to claiming damages only for direct (immediate) losses. In appropriate circumstances they may also claim damages to compensate for more remote (or consequential) losses. However, damages for consequential loss can only be claimed if the losses may reasonably be supposed to have been in the contemplation of both parties, at the time they made the contract, as a probable result of such a breach. The court decided that Hadley's loss of profits were not direct loss because normally it would be expected that a mill would have, or could acquire, a spare shaft and so it was not reasonably forseeable that a broken shaft would cause a complete halt of production. The court also decided that the lost profits could not be claimed as consequential loss because Baxendale had not been told that the mill would remain completely out of operation until the shaft was replaced. This meant that the loss of profits was not something both parties would have contemplated at the time of contracting. |
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Term
| mcrare v commonwealth disposal commission |
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Definition
Damages for wasted expense
McRae v Commonwealth Disposals Commission (1951) 84 CLR 377
Contract; remedies for breach; damages for wasted expenses.
Facts: The Commonwealth Disposals Commission asked interested persons to bid for the purchase of an oil tanker that the commission said was lying wrecked on a reef called Jourmand Reef. McRae's bid of Ł285 was accepted, and McRae spent considerable sums of money searching for the reef and tanker, but it turned out that neither of them actually existed. On discovering these facts, McRae sued the commission for breach of contract. McRae claimed damages calculated to include both the price paid for the tanker and the much larger expenses that had been wasted searching for it.
Issue: Was McRae entitled to claim the wasted expenses as damages in addition to the price paid for the tanker?
Decision: McRae was entitled to claim the wasted expenses.
Reason: The parties must have known when contracting that expenses would be incurred searching for the tanker and McRae had a right to claim these as damages unless the commission could prove that the expenses would have been wasted even if the contract had not been breached. McRae was awarded damages of Ł3,285.
Note: This case involves the sale of a non-existent thing, and such agreements are not normally enforceable. However, in this case, the commission had in effect guaranteed the existence of the tanker they sold to McRae. |
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Term
| baltic shipping co v dillion |
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Definition
Damages for distress or disappointment
Baltic Shipping Company v Dillon (The Ship Mikhail Lermontov) (1993) 176 CLR 344
Contract; remedies for breach; damages; distress and disappointment.
Facts: Dillon booked and paid for a 14-day cruise on a passenger ship. Eight days after the cruise began, the ship struck a rock and sank. Apart from physical injuries and psychological trauma, Dillon suffered from disappointment and distress when her planned holiday ended in catastrophe. She sued Baltic Shipping for damages to compensate for this.
Issue: Was Dillon entitled to damages for distress and disappointment flowing from a breach of contract?
Decision: The damages should be awarded.
Reason: This type of case provides an exception to the general rule that a plaintiff cannot claim damages for disappointment, distress or injured feelings by reason of a breach of contract. Where the defaulting party has expressly or impliedly agreed to provide pleasure, relaxation, and entertainment, or to prevent molestation or vexation, then damages of this type are recoverable following a breach. The same is true in cases of a breach of contract that causes a physical injury, and a breach that causes physical inconvenience. |
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Term
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Definition
Injunctions and specific performance
Contracts requiring the performance of personal services
Lumley v Wagner (1852) 42 ER 687
Contract; remedies for breach; injunctions; prevention of threatened breach of contract.
Facts: Wagner contracted to sing in Lumley's theatre for a fixed period. She also promised that, during this period, she would not to perform anywhere else. After a breach by Wagner, Lumley wished to enforce both of these promises through an order of specific performance.
Issue (1): Would the court enforce specific performance of Wagner's promise to sing in Lumley's theatre?
Decision (1): Actual performance of this promise would not be ordered.
Reason (1): The courts will not normally enforce positive promises to render personal services because it is difficult to ensure that the performance of such promises will be properly carried out in the absence of genuine goodwill.
Issue (2): Would the court order Wagner not to sing elsewhere during the period of her contract with Lumley?
Decision (2): The court would issue an order (an injunction) to stop Wagner singing elsewhere.
Reason (2): An injunction will be issued in appropriate circumstances to prevent a likely breach of the law, including a breach of contract. However, an injunction will not be issued if it has the indirect effect of enforcing a contractual promise that the court would not enforce directly, by means of an order of specific performance. In this case, the court was satisfied that the injunction sought would not indirectly force Wagner to sing in Lumley's theatre, because she was able to make a living in other ways. |
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Term
| jc williamson ltd v lukey and another |
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Definition
Contracts requiring performance over an extended perod
JC Williamson Ltd v Lukey & Mulholland (1931) 45 CLR 282
Contract; remedies for breach; specific performance; discretionary nature of remedy; adequacy of damages.
Facts: Williamson operated a theatre in Melbourne and owned a confectionery shop right next door to the theatre. Williamson leased this shop to Lukey for five years. As part of the deal Williamson granted Lukey an exclusive right to sell sweets in the theatre itself. Lukey exercised this right for three years. Then Williamson allowed another person to sell sweets in the theatre, claiming that it had not been agreed how long Lukey would have an exclusive right to do so. Lukey sued Williamson for breach of contract, asking for various remedies, including an order of specific performance of his exclusive right.
Issue: Would the court order specific performance of the exclusive right to sell sweets in the theatre?
Decision: Specific performance would not be ordered in these circumstances.
Reason: Reason: In bilateral contracts, where both parties owe repeated duties of performance, one party will not be ordered to perform specifically if the performance they are owed in return cannot also be guaranteed without continued supervision by the court. The exclusive right to sell sweets in the theatre involved repeated acts by both parties and this would have required constant supervision. The courts cannot efficiently provide such supervision. Accordingly, specific performance was refused and Lukey had to be satisfied with a claim for damages for breach of contract. |
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Term
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Definition
Contracts for things that are freely available
Dougan v Ley (1946) 71 CLR 142
Contract; remedies for breach; orders of specific performance; damages not an adequate remedy.
Facts: Dougan sold a taxi cab, together with its operating licence, to Ley for Ł1,850. But after agreeing to the sale, Dougan changed his mind and refused to perform the contract. Ley sued for specific performance. Dougan argued that he was only liable to pay damages for his failure to perform the contract.
Issue: Was an order of specific performance an available remedy in these circumstances?
Decision: Ley was entitled to an order of specific performance.
Reason: Normally, the courts will not decree specific performance if damages are an adequate remedy. Damages are adequate where ordinary goods are purchased because equivalent goods can easily be purchased elsewhere. Specific performance will be ordered if the goods purchased are in some way unique, or have a special or particular value. The same is true of goods of unusual beauty, rarity or distinction, or where goods are sold as part of the equipment of a business. In the present case what was bought was not just a car but a specially adapted car together with the operating licence. At the time taxi licences were issued in limited numbers and were not readily available on the market, even to those with the money to pay for them. Accordingly, an award of damages was not an adequate remedy for breach of contract and an order of specific performance was appropriate. |
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Term
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Definition
Injunctions to enforce negative promises
Buckenara v Hawthorn Football Club Ltd [1988] VR 39
Contract; remedies for breach; injunction to prevent threatened breach.
Facts: Buckenara was a football player contracted to play for the Hawthorn Football Club. As part of the agreement, Buckenara promised not to play for any competing club while contracted to play for Hawthorn. When it seemed that Buckenara intended to play for a competing club, Hawthorn sought an injunction to prevent the threatened breach of contract.
Issue: Would the court issue an injunction to prevent a breach of contract?
Decision: The court issued an injunction ordering Buckenara not to play for any other club that was in competition with Hawthorn.
Reason: An injunction is an order issued to prevent a likely breach of the law, including a threatened breach of contract. However, an injunction will not be issued if it has the indirect effect of enforcing a contractual promise that the court would be reluctant to enforce directly by an order of specific performance (e.g., performance of a promise to render personal services). In this case, the court was prepared to issue the injunction sought because preventing Buckenara from playing for competing clubs would not indirectly force him to actually play football for Hawthorn - he could earn his living in some other way if he wished to.
Note: The same principle was applied in Warner Bros Pictures Inc v Nelson [1937] 1 KB 209. |
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Term
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Definition
Presumption of a general controlling influence
Allcard v Skinner (1887) 36 Ch D 145
Contract; vitiating circumstances; undue influence; presumption of undue influence; effect of delay in seeking relief.
Facts: Allcard joined a religious order and took a vow of poverty. The vow required her to give away all her property and she gave it to the religious order she had joined. Allcard left the order in 1879, and five years after that she decided that she wanted to get back the property she had given away. She claimed that she had made the gift as a result of undue influence on the part of the order and that accordingly the transaction should be set aside as void.
Issue: Could the transaction be avoided on grounds of undue influence?
Decision: Although the circumstances gave rise to a presumption of undue influence, Allcard had ratified the transaction after ceasing to be under that influence and could not recover her property.
Reason: The relationship between Allcard and the religious order was that of devotee and religious adviser, one of the relationships giving rise to a presumption of undue influence. If Allcard had sought to recover the gift while she was still a member of the order, or shortly after leaving it, the presumption would have applied and, unless the order could prove that the transaction was not the result of undue influence, the contract would have been set aside as void. But Allcard had waited too long after leaving the order before asking to get her property back. The court held that, by failing to avoid the transaction within a reasonable time, Allcard had in effect affirmed (ratified) the transaction when she was no longer under any undue influence. |
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Term
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Definition
Proof of a general controlling influence
Johnson v Buttress (1936) 56 CLR 113
Contract; vitiating circumstances; undue influence; proof of general undue influence.
Facts: Buttress was an elderly man, excitable, emotional, unable to read or write, and very dependent on the help of others. After his wife's death, Buttress began to rely on Johnson. She cooked his meals and gave him advice about renting his house. When he said he wanted to make a will in her favour, Johnson took him to her own solicitor for this purpose. Later, after Buttress moved in to live with the Johnson family, she again took him to her solicitor and he transferred ownership of his house to her. After Buttress died, his son asked the court to set aside as void the transfer of the house to Johnson.
Issue: Could the transfer of the house be set aside on grounds of undue influence?
Decision: In the circumstances, the transfer was voidable on grounds of undue influence.
Reason: Buttress was an ignorant man who had come to confide in and depend on a person he regarded as having the advantages of education and position. The degree to which he trusted Johnson was shown by the fact that he was prepared to make over his sole property to her. His affairs were managed by her or under her supervision. In these circumstances a relationship of confidence and trust existed sufficient to establish a presumption of a general controlling influence. To avoid having the contract set aside as void, Ms Johnson had to prove that the transfer of the house was an exercise of Buttress's free will, and she was not able to do so. The visit to the lawyer did not constitute independent legal advice to Buttress because it was Johnson's lawyer that they had been to see. |
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Term
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Definition
Cases where there is no objective agreement because of a mutual mistake
Raffles v Wichelhaus (1864) 2 H&C 906
Contract; vitiating circumstances; mistake; effect of errors on consensus.
Facts: Wichelhaus agreed to buy some bales of cotton from Raffles. The cotton was in India and it was a condition of the agreement that the seller would put the cotton on board the ship Peerless for transport from Bombay to the buyer. After this agreement was entered into, the parties discovered that there were two ships called Peerless, both due in Bombay but at different times. When contracting, Raffles had one of these ships in mind, Wichelhaus the other. The result was mutual mistake, each party believing that the particular ship they had in mind was the only ship by that name.
Issue: Was there a binding contract between Raffles and Wichelhaus?
Decision: No binding contract existed.
Reason: Because two ships had the same name, the word Peerless was latently ambiguous and could be a reference to either ship. It could not therefore be said that, objectively judged, the parties had reached agreement on which ship was to be used. If there is no objective agreement because of mutual mistake, the contract will be void in common law. Compare Goldsbrough Mort & Co Ltd v Quinn (1910) 10 CLR 674. |
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Term
| leafe v internatoinal galleries |
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Definition
The test of “objective conditionality”
Leaf v International Galleries [1950] 2 KB 86
Contract; vitiating circumstances; common mistake; objective unconditional agreement.
Facts: Leaf saw a painting of Salisbury Cathedral that International Galleries had for sale. Leaf offered to buy this painting. When he bought it, both Leaf and the seller believed the painting was the work of famous artist John Constable. After buying it, Leaf discovered that the painting had been done by another artist. Leaf wanted the sale made void on the grounds that both he and the seller had been mistaken about who had done the painting.
Issue: Could the contract be avoided on grounds of the parties' mistaken belief that the painting was the work of John Constable?
Decision: In the circumstances, the mistake did not justify setting the contract aside as void.
Reason: Basing the decision on the objective facts of the case, it was clear that the subject matter of the contract was agreed simply as 'this painting of Salisbury Cathedral'. There was no objective evidence that the agreement had been for 'a painting by John Constable'. Thus the error as to the artist was irrelevant and the contract was binding despite the common error. Put another way, the agreement between Leaf and International Galleries was not objectively conditional on the truth of their belief that the artwork was painted by John Constable. |
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Term
| great peace shipping v tsavliris |
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Definition
Common mistake going to the quality of the subject matter
Great Peace Shipping Ltd v Tsavliris Salvage (International) Ltd [2003] QB 679
Contract; vitiating circumstances; mistake; conditionality of agreement; mistakes regarding quality; special rules.
Facts: A ship, the Cape Providence, was in danger of sinking and her owners contracted with Tsavliris Salvage to send a tug and tow her to safety. The tug would take five to six days to reach the Cape Providence and Tsavliris was worried that the Cape Providence might sink before then. He looked to find a nearby ship that could stand by and rescue the crew if necessary. A ship called Great Peace was in the area. Thinking it was the closest available ship, Tsavliris contracted with the owners of the Great Peace for the ship to stand by and render assistance. Then Tsavliris discovered that the Great Peace was further away than he and its owners had thought. He also found that another ship could get to the Cape Providence more quickly. Accordingly Tsavliris tried to cancel his contract with the owners of the Great Peace. They refused to agree to the cancellation. Tsavliris then claimed that the contract was void or voidable because of both parties' mistaken belief when contracting that the Great Peace was the closest available ship.
Issue: Did the error make the contract void or voidable?
Decision: The contract was not void in common law, nor voidable in equity.
Reason: The common law takes a strict approach to the effect of mistake on contracts because it is important to preserve the reliability of agreements. Accordingly, a contract will only be made void if a mistake as to the quality of the thing contracted for 'makes the thing contracted for essentially different from the thing that it was believed to be'. In this case, although the Great Peace was further from the Cape Providence than the contracting parties had believed, it was close enough to perform the task it was engaged to do (rescue the crew) and was not therefore something 'essentially different from the thing that it was believed to be'. The contract was therefore valid despite the error. Further, although the case of Solle v Butcher [1950] 1 KB 671 had suggested 50 years earlier that equity might set aside a contract on grounds of an error as to a 'fundamental' quality of the thing contracted for, the court held that this earlier decision was not based on sound principle and should no longer be followed. |
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Term
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Definition
Unilateral mistakes
Taylor v Johnson (1983) 151 CLR 422
Contract; vitiating circumstances; unilateral mistake; effect of unconscionability.
Facts: Johnson offered in writing to sell 10 acres of land to Taylor for $15,000. Taylor must have known that the price was too good to be true but he said nothing and quickly accepted the offer. Johnson then said she had been mistaken about the terms of the offer. She said she had intended to offer the land for sale at $15,000 per acre, not $15,000 for the whole 10 acres. She was mistaken about what was contained in the written offer she sent to Taylor.
Issue: Did Johnson's mistake justify setting aside the contract?
Decision: In the circumstances the contract should be set aside.
Reason: This was a case of unilateral mistake, which on its own does not make a contract void. However, if one party enters a contract under a serious mistake in relation to a fundamental term, the contract will be made void if the other party was aware of circumstances that indicate the first party is mistaken, and deliberately sets out to ensure that the first party does not discover their error until it is too late. In such cases it is contrary to good conscience for the party who deliberately ignored the signs and acted to prevent discovery of the error to hold the mistaken party to the contract. The court found that Taylor had acted in this way. |
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Term
| commercial bank pf aid v amadio |
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Definition
Knowledge of the weaker party’s disadvantage
Commercial Bank of Australia Ltd v Amadio (1983) 151 CLR 447
Contract; vitiating circumstances; unconscionable dealing.
Facts: Vincenzo Amadio owned a building company which was experiencing financial difficulties, a fact well known to his bank. The Commercial Bank of Australia froze Amadio's overdraft facilities. Amadio told the bank that his parents would guarantee his debts by mortgaging their property in favour of the Bank. The bank agreed to give Amadio an overdraft of $270,000 if the mortgage was provided. Amadio asked his parents to provide the mortgage. Amadio's parents believed that Amadio's business was successful, and Amadio told them their liability under the mortgage was limited to an amount of $50,000, neither of which fact was true. The parents agreed to provide the security and the bank manager brought the mortgage documents to their house to sign. He did not explain these documents to the parents before they signed them, nor did he check that they understood the full extent of their risk and liability. Months later, Amadio's company became insolvent and the bank sought to enforce the mortgage against Amadio's parents. They faced financial ruin.
Issue: Could the mortgage be set aside on grounds of unconscionable dealing?
Decision: The mortgage should be set aside.
Reason: Amadio's parents were in a position of special disadvantage because they did not know of their son's true indebtedness, nor were they told of the real extent of their liability under the mortgage, which was potentially ruinous for them. They were elderly and spoke little English. Their age, background and reliance on their son added to their inability to judge what was in their own best interests. The bank knew enough about these circumstances to be put on inquiry, and should have taken steps to ensure that the Amadios appreciated the nature and extent of the mortgage and the risk before deciding to enter into the security agreement, perhaps by obtaining independent advice |
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Term
| garcia v national aus bank ltd |
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Definition
The disadvantage of a spouse who guarantees a partner’s debt
Garcia v National Australia Bank Ltd (1998) 194 CLR 395
Contract; vitiating circumstances; unconscionable dealing.
Facts: Mr Garcia owned a gold trading company. He wanted to borrow money from the National Australia Bank to finance his business operations. The bank required Garcia to find security for the loan. Garcia asked his wife to provide the security by executing a mortgage in favour of the National Australia Bank over a house she owned. Garcia assured his wife that there was no real risk involved because the loans would be covered by gold purchased with the borrowed money. Ms Garcia went with her husband to the bank and signed the necessary papers giving the bank a mortgage over her property. The bank did not explain the transaction, or the extent of her liability, to Ms Garcia, who appeared as 'a capable and presentable professional'. Garcia's business failed, the loan was not repaid and the bank wished to enforce the mortgage.
Issue: In these circumstances, could the mortgage be avoided on grounds of unconscionable dealing?
Decision: The mortgage should be set aside as void.
Reason: Although it is now accepted that women are not necessarily subservient or emotionally vulnerable to their husbands, the relationship between spouses is one of trust and confidence. For this reason, one spouse is likely to leave business judgments to the other, and make decisions without consultation or full and accurate explanation. Therefore, if a spouse giving a guarantee did not understand its effect; and gained no financial benefit from the undertaking; and the creditor failed to ensure that the transaction had been properly explained and understood, then the transaction will be set aside as void. This is because it would be unconscionable to enforce the security in such circumstances. |
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Term
| lindner v murdock's garage |
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Definition
Illegality on grounds of public policy
Lindner v Murdock's Garage (1950) 83 CLR 628
Contract; vitiating circumstances; illegal contracts; restraint of trade.
Facts: Murdock's Garage operated its business of selling and repairing cars in two towns, Crystal Brook and Wirrabara, which were about 10 miles apart. Murdock's Garage employed Lindner as a mechanic in its repair workshop in Crystal Brook. To prevent Lindner from using his knowledge of the business if he left this employment, the contract contained terms that would restrain Lindner from working in either Crystal Brook or Wirrabara for a year after leaving Murdock's employment. When Lindner stopped working for Murdock's garage, Murdock's wanted to enforce this restraint.
Issue: Was the restraint clause enforceable?
Decision: In a majority decision, the restraint clause was held to be unreasonable in extent, making it contrary to public policy and therefore unenforceable.
Reason: In the course of his employment Lindner might acquire knowledge and information that Murdock's would reasonably wish to prevent him from using in competition with it after leaving its employment. However, for a geographical limitation on employment to be reasonable, it must relate to the information (eg the customers, their creditworthiness, peculiarities etc) that the employee is actually likely to learn. The restraint clause in this contract extended to two towns, whereas Lindner had been employed only in one. He was unlikely to have contact with, or acquire information about, customers in the other. The extent of the restraint was therefore unreasonable. |
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Term
| fitzgerald v FJ leondhardt |
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Definition
Statutory illegality
Fitzgerald v FJ Leonhardt Pty Ltd (1997) 189 CLR 215
Contract; vitiating circumstances; illegal contracts; effect of penalties and prohibition.
Facts: Fitzgerald employed Leonhardt to drill boreholes on Fitzgerald's land. The Water Act 1992 (NT) required a permit to be acquired in advance of drilling any borehole. Fitzgerald was supposed to obtain the permits before Leonhardt began drilling, but failed to do so. When Leonhardt had drilled seven holes, Fitzgerald refused to pay him, arguing that, in the absence of the required permits, the contract was performed illegally and was therefore unenforceable. Leonhardt brought an action to enforce payment for the seven holes that he had drilled.
Issue: Was the contract unenforceable against Fitzgerald because the necessary permits had not been obtained prior to the drilling?
Decision: The contract was enforceable despite the lack of permits because although the Water Act penalised such conduct it did not prohibit it.
Reason: When a statute penalises (punishes) conduct but does not expressly prohibit it, the courts will consider whether prohibition was impliedly intended by the legislature. If penalties are provided for a breach, good reason must exist before a court will find that prohibition of the offending conduct was also implied, and that associated contracts should be treated as unenforceable. Such reason may be found if, without prohibition, the objectives of the Act would be frustrated. However no such reason existed in the circumstances of this case, where the penalties alone appeared sufficient to achieve the purposes of the Act. |
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Term
| mcwilliams wines v mcdonalds system |
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Definition
facts - mcwilliams advertised a large cask of wine under name big mac - like hamburger
issue - was mcwilliams conducts likely to mislead customers to believe something untrue?
- not likely - might think there is a business connection but did not in any way did the advertisement suggest such a connection |
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Term
| campomar sociedad ltd v nike international ltd |
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Definition
word nike registered trade mark - spanish company launched new performed coal led nike spot frgancne + ADIDAS made a performance
-mislead or deceive public
- yes - b/c adidas - in same area of pharmacies believe it was nike |
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Term
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Definition
yorke entered negitoations to purchase a record shop from treasure way stores - some of info given by treasure away and passed on to yorks by ross lucs wrong- revenue
- were they liable for breach of s52 ?
- no defence to claim that the misleading info was given to yorks without negligence and in the belief that it was true - pay damages to exert of misleading |
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Term
| butcher v lachland elder realty ptd ltd |
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Definition
intention as evidence of misleading conduct
- discalimers
-waterfront prodder for sale by elder
-brochure had survey diagram - all info believed to be reliable discalimered
- inaccurate surevey diagram
- it was clear and legible disclaimer - survey diagram could therefore not be relied upon by butcher - not a source of info which was said to be misleading - agent did not purport to do anything more than pass on info supplied by another or others - disclaimer any belief in the truth or falsity of that info - it did no more than state a belief in the reliably of sources |
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Term
| concrete consturctions pty ltd v nelson |
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Definition
conduct must take place in trade or commerce
- concert constructions was a company engaged in constructing building in sydney - misleading info to nelson - nelson fell down shaft and was injured - no party of companies commercial or trading actives
- conduct in question did not take part in trade or commerce
- conduct itself an aspect or element of activities or transactions which, of their nature, bear a trading or commercial character
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Term
| garry rogers motors v subara (aus) |
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Definition
additional circsumatances giving rise to unconciosnable conduct- ACL prohibits unconscionable conduct in trade or commerce - they exist alongside the general law doctrine and to a certain extent, they depend on a continued existence and development of the general law
-grm appinted under franchise agrrement - unwillingness to comply with new agreements- suburu terminated contract
- then gem said it would comply but suburu wouldn't change its mind - no unconscionable conduct
- suburu had not provided written reasons - however despite reasons for the termination not being put into writing they were well known to the parties - while and aspect of the industry code had not been complied with, this was insufficient in the cristumances to amount to unconscionable conduct by suburu
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Term
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Definition
-establishing a breach of duty of care
- rogers v whitaker (1992)
- whitaker blind - he did not warn her of any risks associated with the operation
- operation also caused her to develop a rare condition and eventually led to blindness in her other eye
- duty of care, required him to warn his patient of the possible risks invovled in treatment which he had failed todo |
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Term
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Definition
hawkins as executor and principal beneficiary
-clayton knew of her death, he did not contact hawkins until six weeks later
- main estate house had lost value
- clayton was liable in negligence
- solicitor owed hawkins a duty to find him without delay and inform him that he was executor and principal beneifciary of the will |
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Term
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Definition
- plaintiff subsequently suffered brain haemorrhage and brain damage and hameoorhage - but medical evidence showed the haemoorahage would have happened anyway
- driver could not be held responsible for something that would have occurred even if he had not been ngeleigent
- entitled to damages for prd in repsect of which haemoorhage was acceleterted - for extent to which the haemoorrhage was more severe than it mgiht have otherwise been |
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Term
| waverley council v ferreira |
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Definition
altnerative proceedings under ACL - establishing a breach of duty of care
- martin ferreira play in park controlled by waverly council
- toy got stuck on roof, - light fell killed him
- a defednent must do what a reasonable person in the position of the defendent would do to prevent forseeable harm - council had failed to do what was rqruied - a person is not negligent in failing to take precautions againast a risk of harm unless forseeable, not insigificant and anotherr reasonable person
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Term
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Definition
a duty of care to prevent purely economic loss - it must be shown that the plaintiff and defendent were in relationship which made the plaintiff vulnerbale, dependent or powerless while the defendent was in a position of power or control
-perre, potato farmer SA - noramlly exported most of his crops to buyers in Wa
- to protect against the spread of potatoes grown anywhere w/in 20km of outbreak prevented importation
- sparnon planted seeds infected with disease - near perre
- acrquired these from apand - who had grown seeds in an area of victoria which he knew was prone to disease
-therefore perre could not export his crop to WA
- apand was held to owe a duty of care to Perre
-Perre belonged to a limited class of identifable persons who might suffer harm - dependent on apand acting responsbility and was vulnerable - + apand could have very easily forseen the potential harm |
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Term
| woolcock st invesmtnets pty ltd v CDG pty ltd |
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Definition
CDG firm of consulting engineers, designed foundations for a warehouse, and an office complex which was built for the owner of a block of land - owenr decided against doing oil tests
- did have problems - woolcock alleged CDG failture to design adequate foundations for the site had caused loss
- CDG did not owe a duty of care to woolcock
- rahter vulnerbability is to be understand as a reference to the plaintiff's inability to protect itself from consequences of a defendent's want of reasonable care, either entirely or at least in a way which would cast the consqequences of loss on the defednent - woolcock could have taken independent steps to avoid the risk of harm |
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Term
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Definition
forseeability of some kind of harm - reasonably forseeable that harm of some kind would result from the conduct in question - it need not be forseeable exactly what type of harm wil be caused, nor exactly how it will occur
- gigner bear - decomposed snail - remains - ill - damages neglgience on basis that he supplied contaminated food - casued harm - consumer of that food - stevenson owed donoghue a duty of care - such a form as to show that he intends them to reach ultimate consumer i form they left them - |
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Term
| shaddock & associates pty ltd v parramatta city council no1 |
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Definition
- wnated to redevelop - solicitor phoned counci lsaid no widening - loss
- no duty of care b;c arose over phone - informal - if written would be liable for loss
- shoudnt rely on this info unless council knew that they would rely on info!! |
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Term
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Definition
establishing a brech of duty of care
-imbree licnsed driver allowed mcneilly 16yo unlicsnesed to drive
- injured - negligence
- standard of care properly determined to reference to standard licensed driver, even though particular driver was inexpeirneced
--b/c any motorist subject to duty of care to avoid causing injury to the person or property of another
+imbrees negligence had contributed to his injuries by his own negligence- shouldnt have mneillyto drive - contributory negligence |
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Term
| freemand & lockyer v buckhurst park properties |
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Definition
express grants of authority
- burkhurt - one member took kappoor took it upon himself to assume role of managing director - hired freeman & lockyer
- claimed payment, but did kapoor have necessary authority without any formal appropriate to engage with company - no actual authority - no evidence that he had an power - net on to establish apparent authority |
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Term
| aus and new zealand bank td v ateliers de constructions electriques de charleroi |
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Definition
acec appointed a belgium manufacturer helios giving them express powers to sell equipment on its behalf
- sold electrical equipment to various aux companies - had to pay for import licenses, customs duties - sent payables to acec after they paid for acec
- helios fell into liquidation
- helios had no express authority to pay checks, in could be implied from necessity to make the contract commercially workable - implied authority was necessary to give business efficacy to the trasnactions!! |
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Term
| keighley, maxted and co v durant |
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Definition
no ratification by an undisclosed principal
-keihlyu authorised a corn merchant, roberts, to buy wheat at certain price
- roberts purchased wheat at a higher pice from durant under his own nice
- always intended to purchase for keighly
- durant didnt get paid and sued keigly - keigly could not validly ratify the contract
- roberts never told urant that he acting on behalf - b/c undisclosed principal is stranger, cannot become a party - unless informed at time of agreement - |
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Term
| bertram, armstrong co & gofray |
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Definition
an agents duties to do their principal - must do so in accordance with the principal's indsutrctions
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-godfray instructed bertram,ac to sell strockl if reached 85% - brertram believed would sell further
- no dissection to wait for the higher price - required to carry out instruction - damages for difference! |
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Term
| lintrose nominees pty ltd v king |
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Definition
duty to exercise care and skill
lint rose wished to sell some strata title units
- king appointed john hopksins as his agent for investment advice - w/o disclosing that it was also acting for lint rose, john hopkins advised king to purchase one of the lint rose units
- entitled to avoid contact - breached duty to avoid an undisclosed conflict with his own interests - will derogate his duty to do what is best for his principal
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Term
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Definition
liability of principal and agent for misleading conduct
-treasureawa stores - lucas misleading info
- no defence to claim that misleading info was give not yorks w/o negligence and in the belief that it was true - rendered liable to be restrained by injunction and to pay damages, if its conduct has in fact mislead or deceived or is likely to mislead or deceive |
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Term
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Definition
- Vitiating factors (factors that invalidate contracts)
The effect of duress
Barton v Armstrong [1973] 2 NSWLR 598
Contract; vitiating circumstances; duress; threats of physical harm.
Facts: Barton purchased shares in a company from Armstrong. Barton then tried to avoid the contract, saying that he had bought the shares because Armstrong had threatened the life and safety of himself and his family. It was proved that the alleged threats had been made, but the court found that Barton also had business reasons for buying the shares.
Issue: Could the contract be set aside on grounds of duress even though the threats made were not the only reason for entering into the transaction?
Decision: On appeal, the Privy Council held that the threats had contributed to Barton's decision to enter into the contract. This was sufficient for the contract to be set aside as void.
Reason: Once Barton had proved that Armstrong had made the threats, the onus was upon Armstrong to show that the threats had not contributed to Barton's decision to enter the contract. The court found that even though there were other reasons for agreeing to buy the shares, Armstrong had been unable to show that his threats had not contributed to Barton's decision. Barton could therefore avoid the contract if he wished. |
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Term
| North Ocean Shipping Co Ltd v Hyundai Construction Co Ltd [1979] QB 705 |
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Definition
Economic harm
North Ocean Shipping Co Ltd v Hyundai Construction Co Ltd [1979] QB 705
Contract; vitiating circumstances; duress; threats of economic harm.
Facts: Hyundai agreed to build a tanker for North Ocean Shipping (NOS) for an agreed price that was fixed in US dollars. However, after a contract was created on these terms, there was a 10% devaluation of the US dollar and to build the ship at the agreed price would no longer be profitable for Hyundai. Hyundai said they would not build the ship unless NOS agreed to a 10% increase in the contract price. NOS urgently needed the tanker in order to perform another contract and would suffer financial losses if the tanker was not built on schedule. They therefore agreed to pay the additional sum demanded by Hyundai. Hyundai gave consideration for this promise, creating a binding contract for the increased price.
Issue: Could the contract to pay the higher price be avoided on grounds of duress?
Decision: NOS had agreed to pay the higher price because of unlawful threats of economic harm and this amounted to duress.
Reason: The threat by Hyundai to terminate the contract was unlawful. Furthermore, the unlawful threat was made in circumstances that compelled NOS to agree to Hyundai's demands. This meant that NOS's consent was given not voluntarily but rather under duress. In such circumstances, the party who was forced to enter the contract can choose to have it set aside as void and recover any money paid. However, this choice must be made within a reasonable time and the court found that NOS had delayed unreasonably in seeking to set aside the agreement and could not therefore recover the additional 10% they had paid. Relief was denied. Compare Pao On v Lau Yiu Long [1980] AC 614. |
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