MANAGEMENT & LEGAL IMPLICATIONS OF eCOMMERCE
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MANAGEMENT & LEGAL IMPLICATIONS OF eCOMMERCE
 Acceptance
 Final & Unqualified
 Communication of acceptance
 Postal Rule
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 Consideration
 What is it?
 Privity of Contract
 Value of consideration
 Past Consideration
 Part Payment of a debt
 Promise to perform an existing contract
 Certainty
 Courts will uphold a bargain if possible
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Terms of the Contract
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What are the Terms
 Terms can be
 Express
 In writing
 Oral
 Partly in writing and partly oral
 Implied
 By the Courts
 By legislation
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Express Terms
 The terms of the contract are ascertained by
examining the evidence
 Not all pre-contractual statements become
terms of the contract
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Express Terms (cont.)
 Meaning of the terms may not be clear
 Where the parties have used language that is
incapable of any precise meaning the
contract may be void for uncertainty
 It is not the role of the Court to make a
bargain for people
 However, the Courts are reluctant to destroy
a bargain
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Pre-Contract Representations
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An oral statement can be a term
Only promissory statements become terms
All other statements are mere representations
A statement does not have to be in the form of a
promise to be promissory
 Remedies
 Term of contract – Remedy for breach of contract
 Representation – law of misrepresentation
 Mere puff – no remedy
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Reasonable Bystander Test
 Which statements and representations would
a reasonable bystander, aware of the
circumstances of the case, regard as
promissory?
 The test is objective
 Parties actual intention is irrelevant
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Reasonable Bystander Test (cont)
 Guidelines
 Was the representation included in a written
document
 When, in the negotiations, was the representation
made
 Did the representation sound promissory
 How objectively important is the representation to
the whole deal
 Did either party have special knowledge about the
subject matter of the representation
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Was There a Written Document?
 If the statement was included in a document drawn
up by the parties then this is good evidence that the
parties regarded the statement as sufficiently
important to be a term
 Alternatively, if it is left out, that indicates that the
parties did not intend it to be a term.
 State Rail Authority of NSW v Heath Outdoor Pty
Ltd (S&OR p131)
 This is not conclusive of itself, it is merely one matter
to be considered
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When was the statement made?
 How much time elapsed between the
representation and the making of the
contract?
 Statements made only once early in
negotiations are less likely to become terms.
 Van Den Esschert v Chappel (S&OR p132)
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How Important was the Statement
 Must be judged in the context of the
negotiations
 Van Den Esschert v Chappel (S&OR p132)
 Hospital Products v United States Surgical
(S&OR p134)
What words were used
 The more precise the language, the more
likely it is a term
 Ross v Allis-Chalmers Australia (S&OR
p133)
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Did a Party have Special Knowledge?
 Did one party rely on the other’s expertise or
special knowledge rather than form its own
judgement
 Oscar Chess v William (S&OR p130)
 Esso Petroleum v Mardon (S&OR p134)
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Parol Evidence Rule
 Courts presume that written formal contracts
that appear to be a complete record of the
agreement, contain the whole agreement
 Courts will not let a party ‘subtract from, add
to or contradict the language of the written
agreement’
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Implied Terms
Terms implied by Statute
Terms implied by the Courts
Implied as a matter of law
Trade Custom
Implied as a matter of fact
Business efficacy
Past Dealings
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Terms Implied by the Courts
 Cannot conflict with express terms
 Must not be unreasonable or unjust in the
circumstances
 Implied as a matter of law
 Common situations which are so settled that
terms “go without saying”
 Implied as a matter of fact
 Arise out of the particular facts of the case
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Terms Implied as a Matter of Law
 Professionals and Clients
 Professional must use reasonable care and skill
 Service Contracts
 Provider must take reasonable care and skill in
providing the service
 Service must be reasonably fit for the purpose for
which it was acquired
 Costa Vraca v Berrigan Weed & Pest Control (S&O
p159)
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Terms Implied as a Matter of Law (cont.)
 Work and Materials
 Contractor must use reasonable care
 Services must be fit for the purpose for which
they were acquired
 Materials must be of good quality
 Reg Glass v Rivers Locking Systems (S&O
p158)
 Helicopter Sales v Rotor Work (S&O p158)
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Terms Implied as a Matter of Law (cont.)
 Hire Contracts
 Goods are reasonably fit for the purpose for
which they are hired
 Landlord & Tenant
 Landlord must give the tenant ‘quiet
enjoyment’ of the premise
 Tenant must
 Pay rent
 Act in “tenant-like” manner
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Terms Implied as a Matter of Law (cont.)
 Employment Contracts
 Employer must
 Provide a safe system of work
 Not require employee to do an unlawful act
 Employee must:
 Obey reasonable instructions
 Use reasonable level of skill and competence
 Act in good faith to employer
 Keep employer’s trade secrets confidential
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Terms Implied as a Matter of Fact
 Past dealings
 Custom or trade usage
 To make the contract effective
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Past Dealings
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Term is clearly identifiable
Previous dealings are numerous and consistent
Present dealing fits into the course of dealing
No conflict between implied term and an express
term
 Henry Kendall v William Lillico (S&O p181)
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Custom or Trade Usage
 Can state term with precision
 Custom is so well known & widespread that all
contracts can be said to have the term
 Custom is reasonable
 No conflict with an express term
 British Crane Hire v Ipswich Plant Hire (S&O
p161)
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To Make a Contract Effective
 Term is capable of clear and precise expression
 The term is necessary to make the contract
effective not just reasonable
 The term is obvious (“officious bystander test”)
 The term is fair & equitable to both parties
 No conflict with an express term
 The Moorcock (S&O p162)
 Codelfa Constructions v State Rail Authority
(S&O p163)
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Exemption Clauses
 A clause that limits or excludes the
consequences of a breach of a party’s
obligations
 Courts are biased against them
 Bias is less noticeable in commercial
contracts
 Courts adopt a 2 step process
 Has the exemption clause become a term
of the contract?
 If so, does it cover the breach in question?
MANAGEMENT & LEGAL IMPLICATIONS OF eCOMMERCE
Is It a term of the contract?
 Essentially the same test as for all terms
 An exclusion clause cannot be incorporated after the
contract has been made (e.g. parking ticket)
 Past dealings may imply an exemption clause but the
Courts are reluctant to do this
 Signed documents will usually be binding even if the
party was unaware of the term unless
 Signed document could not reasonably be
regarded as likely to contain contractual terms
 Estoppel exists
 Exemption clause has been misrepresented
 See Curtis v Chemical Cleaning Co (S&OR p142)
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Is It a term of the contract?
 Unsigned exemption clauses will be binding if
 The innocent party was aware of it; or
 reasonable notice of it has been given to
the innocent party
before the contract is made.
MANAGEMENT & LEGAL IMPLICATIONS OF eCOMMERCE
What is reasonable notice (cont)
 What is reasonable notice depends on:
 The nature of the document;
 The nature of the transaction; and
 The nature of the exemption clause.
 Would it be reasonable to expect the
document to contain an exemption clause
(e.g. a receipt)
MANAGEMENT & LEGAL IMPLICATIONS OF eCOMMERCE
What is reasonable notice
 Is the transaction one where you would
expect an exemption clause to exist
 The wider the exemption the greater the
steps to be taken to bring it to the attention of
the other party
 Cases
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Thornton v Shoe Lane Parking (p144)
Parker v South Eastern Railway (p126)
Oceanic Sun Line Special Shipping v Fay (p127)
DJ Hill & Co v Walter H Wright Pty Ltd (p124)
MANAGEMENT & LEGAL IMPLICATIONS OF eCOMMERCE
Does the Clause Cover the Breach?
 Courts will examine the clause carefully to determine
its effect and limit its scope where possible
 Generally, the Courts will give effect to the parties
intentions as evidenced by the natural and ordinary
meaning of the words
 There are 3 rules that courts use to limit exemption
clauses:
 The Contra Preferendum rule
 Negligence Clauses
 The Four Corners Presumption
MANAGEMENT & LEGAL IMPLICATIONS OF eCOMMERCE
Contra Preferendum Rule
 Any ambiguities in the exemption clause will
be construed against the party seeking to rely
on the clause
 Andrews Bros v Singer Car Co (S&OR
p145)
 Alex Kay v General Motors Acceptance
Corp & Hartford Fire Insurance (S&OR
p145)
MANAGEMENT & LEGAL IMPLICATIONS OF eCOMMERCE
The Negligence Rule
 Liability for negligence may be expressly or impliedly
excluded but if the words could reasonably be
applied to protect against some ground of liability
other than negligence, then liability for negligence will
not be excluded
 White v John Warick & Co (S&OR p146)
 To exclude liability for negligence, clear words are
required
 Tech Pacific v Air Pacific (S&OR p146)
MANAGEMENT & LEGAL IMPLICATIONS OF eCOMMERCE
The 4 Corners Presumption
 The exemption clause will only cover matters within
the 4 corners of the contract
 Whether an event falls outside the contract depends
on the reasonable person test – would a reasonable
person aware of the terms of the contract conclude
that the parties must have had the relevant event in
mind in drawing up the contract.
 Sydney Corporation v West (S&OR p148)
 TNT v May & Baker (S&OR p149)
 Darlington Futures v Delco Australia (S&OR p149)
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Statutory Reforms
 In many cases, it is Illegal to attempt to
exclude terms implied by statute e.g. Trade
Practices Act
 Attempting to exclude statutory liability (where
not permitted) may be misleading and
deceptive conduct contrary to section 51 of
the Trade Practices Act
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Fundamentals of Law (BL502)