“Inconvenience sustained by one party at the request of the other is enough to create a consideration. I think, therefore, that it is enough that [Mrs Carlill] took the trouble of using the smoke ball. But I think also that the [Carbolic Smoke Ball Company] received a benefit from this user, for the use of the smoke ball was contemplated by
[them] as being indirectly a benefit to them, because the use of the smoke balls would promote their sale”.
Carlill v Carbolic Smoke Ball Bowen LJ at 271


A promise asked for, or relied upon, as an aspect of a bargain between the parties to the contract

Dunlop Pneumatic Tyre Company v
Selfridge & Company
[1915] AC 847

Australian Woollen Mills v The
Commonwealth
(1954) 92 CLR 424

Sir Frederick Pollock, adopted by the House of Lords in Dunlop Pneumatic Tyre Company
Ltd v Selfridge & Company Ltd at 855

“Between the statement or announcement, which is put forward as an offer capable of acceptance by the doing of an act, and the act which is put forward as the executed consideration for the alleged promise there must subsist, so to speak, the relation of a quid pro quo…The necessary connection or relation between the announcement and the act is provided if the inference is drawn that [the promisor] has requested [the promise] to [do the act].”
Australian Woollen Mills v The Commonwealth at 456-7


Must be bargained for

Must be performed in return for a promise –

Is a required element in the formation of a contract
 except deeds



SO, only a party providing consideration can enforce a promise
Consideration must move from the promisee

But, it need not move to the promisor
Joint promissee exception- Coulls v Bagots
Executor and Trustee Co
(1967) 119 CLR 460

Dunlop Pneumatic Tyre Company v
Selfridge & Company
[1915] AC 847
“… in the law of England certain principles are fundamental. One is that only a person who is a party to a contract can sue on it. Our law knows nothing of a jus quaesitum tertio arising by way of contract. Such a right may be conferred by way of property, as, for example, under a trust, but it cannot be conferred on a stranger to a contract as a right to enforce the contract in personam. A second principle is that if a person with whom a contract not under seal has been made is to be able to enforce it consideration must have been given by him to the promisor or to some other person at the promisor’s request.”
Viscount Haldane LC at 853

Consideration may be


 executory executed
BUT, not past.
If what is done is not done as a reaction to the promise, it cannot be good consideration

Roscorla v Thomas
(1842) 3QB 234

Eastwood v Kenyon
(1840) 113 ER 482

Dunlop Pneumatic Tyre Co Ltd v
Selfridge & Co
Lord Haldane at 853

“It must be accepted that, according to our law, a person not a party to a contract may not himself sue upon it so as directly to enforce its obligations.
For my part, I find no difficulty or embarrassment in this conclusion.
Indeed I would find it odd that a person to whom no promise was made could himself in his own right enforce a promise made to another”.
Barwick CJ at 478


Tweddle v Atkinson
[1861] 121 ER 762

Beswick v Beswick
[1966] 1 Ch 538.

For a contract to be formed there must be:

An Offer

Which has been Accepted
 by parties who intended to create legal relations

And bargained or paid for their mutual promises in the form of Consideration

And only these parties may enforce the contractual promises (Privity)




Objective test of intention

“reasonable man”
Hospital Products Ltd v United States Surgical Corp (1984) 156 CLR 41
Indicative factors include
1.
2.
Importance of statement
Time between statement and contract
3.
4.
Special knowledge or skill or access to truth of one party
Inclusion of statement in any subsequent document

Ellul &Ellul v Oakes (1972) 3 SASR 377


Oscar Chess Ltd v Williams
[1957] 1 AllER 325

Dick Bentley Productions v Harold Smith Motors
[1965] 2 AllER 65

“[I]t seems to me that if a representation is made in the course of dealings for a contract for the very purpose of inducing the other party to act upon it, and it actually induces him to act upon it by entering into the contract, that is prima facie ground for inferring that it was intended as a [term of the contract]. …But the maker of the representation can rebut this inference if he can show…that he was in fact innocent of fault in making it, and that it would not be reasonable in the circumstances for him to be bound by it.”
Lord
Denning MR at 67




A term may be either: a Condition

Essential term

Breach – entitlement to terminate/or damages a Warranty

Ancillary term

Breach – damages, but no termination an Innominate term

Intermediate term

Breach – termination if sufficiently serious

Test: how essential was the promise?
“The question whether a term in a contract is a condition or a warranty, i.e. an essential or a nonessential promise, depends upon the intention of the parties as appearing in or from the contract.
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….
Jordan CJ in Tramways Advertising v Luna Park


Tramways Advertising
Pty Ltd v Luna Park
(NSW) Ltd (1938) NSWLR 633

Associated Newspapers Limited v Bancks
(1951)
83 CLR 322


Bettini v Gye
(1876) 1QBD 183 per Blackburn J said at 188:
“[a condition is] a stipulation [which] goes to the root of the matter, so that a failure to perform it would render the performance of the rest of the contract a thing different in substance from what the defendant has stipulated for.”

Innominate terms: Hong Kong Fir
“There are, however, many contractual undertakings of a more complex character which cannot be categorised as being “conditions” or “warranties”….Of such undertakings, all that can be predicated is that some breaches will, and others will not, give rise to an event which will deprive the party not in default of substantially the whole benefit which it was intended that he should obtain from the contract; and the legal consequences of a breach of such an undertaking, unless provided for expressly in the contract, depend on the nature of the event to which the breach gives rise and do not follow automatically from a prior classification of the undertakings as a “condition” or a “warranty”.”
Diplock LJ
69/70

Terms may be implied by:

Trade usage or custom

Statute

Courts, based on facts and circumstances of contract

Austral Pacific Group Ltd (in liq) v
Airservices Australia
(2000) 203 CLR 136

E.g. TRADE PRACTICES ACT 1974 - SECT
52
Misleading or deceptive conduct
(1) A corporation shall not, in trade or
commerce, engage in conduct that is misleading or deceptive or is likely to mislead or deceive.


Corporation

In trade or commerce

Engage in conduct

Misleading or deceptive

Defined by legislation (definitions section) or by courts (case law.)


Sale of Goods Act 1923 (NSW)

Contract for the sale of goods (not services)

Trade Practices Act 1947 (Cth)

Contract for supply of goods or services by a corporation to a consumer

6 Sale and agreement to sell
(1) A contract of sale of goods is a contract whereby the seller transfers or agrees to transfer the property in goods to the buyer for a money consideration called the price. There may be a contract of sale between one part owner and another.

e.g. - s 70 Supply by description
(1) Where there is a contract for the supply
(otherwise than by way of sale by auction) by a
corporation in the course of a business of
goods to a consumer …

(1) … (a) a person shall be …a consumer if, and only if:
(i) the price of the goods did not exceed the prescribed amount; [$40,000]or
(ii) where that price exceeded the prescribed amount--the goods were of a kind ordinarily acquired for personal, domestic or household use or consumption or the goods consisted of a commercial road vehicle; and the person did not acquire the goods, or hold himself or herself out as acquiring the goods, for the purpose of re-supply or for the purpose of using them up or transforming them, in trade or commerce, in the course of a process of production or manufacture or of repairing or treating other goods or fixtures on land; and
(b) a person shall be taken to have acquired particular services as a consumer if, and only if:
(i) the price of the services did not exceed the prescribed amount; or
(ii) where that price exceeded the prescribed amount--the services were of a kind ordinarily acquired for personal, domestic or household use or consumption.



 s6 TPA
Corporation
 foreign, trading or financial corporation
Persons

 in trade or commerce between either of the States or territories or between Australia and places outside
Australia using post or telephonic services
 active within a territory

Where there is a contract for the sale of goods by description, there is an implied condition that the goods shall correspond with the description; and if the sale be by sample as well as by description, it is not sufficient that the bulk of the goods corresponds with the sample if the goods do not also correspond with the description.

SGA s18: Sale by description
Where there is
 a contract
 for the sale of goods
 by description,
 there is an implied condition
 that the goods shall correspond with the
description; …

Ashington Piggeries v
Christopher Hill
[1971] 1AllER847
Grant v Australian Knitting Mills
(1936) 54 CLR 49


Viscount Dilhorne:
“ Did the presence of DMNA merely affect the quality of the herring meal or did it make a difference in kind? If the former, then there was no failure to deliver in accordance with the description. If the latter, there was.”

TRADE PRACTICES ACT 1974(Cth)s 70 Supply by description
(1) Where there is a contract for the supply
(otherwise than by way of sale by auction) by a corporation in the course of a business of goods to a consumer by description, there is an implied condition that the goods will correspond with the description, and, if the supply is by reference to a sample as well as by description, it is not sufficient that the bulk of the goods corresponds with the sample if the goods do not also correspond with the description.

SGA s19(1) Fitness for purpose
(1)
Where the buyer expressly or by implication makes known to the seller the particular purpose for which the goods are required so as to show that the buyer relies on the seller’s skill or judgment, and the goods are of a description which it is in the course of the seller’s business to supply (whether the seller be the manufacturer or not), there is an implied condition that the goods shall be reasonably fit for such purpose:
Provided that in the case of a contract for the sale of a specified article under its patent or other trade name there is no implied condition as to its fitness for any particular purpose.

Purpose made known?

Obvious purpose?

Underpants – Grant v Australian
Knitting Mills
Reliance on seller’s judgement?

Ashington Piggeries v
Christopher Hill.


David Jones Ltd v Willis
(1934) 52 CLR 110

Ashington Piggeries v Christopher Hill

Reliance, not reputation

Implied undertakings as to quality or fitness
Where a corporation supplies … goods to a consumer in the course of a business and the consumer, expressly or by implication, makes known to the corporation or to the person by whom any antecedent negotiations are conducted any particular purpose for which the goods are being acquired, there is an implied condition that the goods supplied under the contract for the supply of the goods are reasonably fit for that purpose, whether or not that is a purpose for which such goods are commonly supplied, except where the circumstances show that the consumer does not rely, or that it is unreasonable for him or her to rely, on the skill or judgment of the corporation or of that person.


Similar to s18

Consumer requirement

Purchase by trade name not a bar


E v Australian Red
Cross Society (1992)
Provision of services

– not supply of goods .

Sale of Goods Act s19(2)
(2) Where goods are

bought by description from a
 seller who deals in goods of that description
(whether the seller be the manufacturer or not),
 there is an implied condition that
 the goods shall be of merchantable quality…

S64(3) of the Sale of Goods Act, defines merchantable quality with respect to a consumer sale as follows:
(3) Without limiting the meaning of the expression
"merchantable quality", goods of any kind which are the subject of a contract for a consumer sale are not of merchantable quality if they are not as fit for the purpose or purposes for which goods of that kind are commonly bought as is reasonable to expect having regard to their price, to any description applied to them by the seller and to all other circumstances.

(1) Where a corporation
 supplies…

goods to a
 consumer

in the course of a business,
 there is an implied condition that
 the goods supplied under the contract for the supply of the goods are of merchantable
quality,…

Carpet Call Pty Ltd v Chan
(1987)
ATPR 41-025
Rasell v. Garden City Vinyl and
Carpet Centre Pty Ltd
(1991) ATPR 41-152

Mavis was particularly interested in flooring as she had difficulties keeping her slate tiles clean. She searched for low maintenance flooring and after extensive shopping decided on single sheet vinyl flooring. She saw just the thing at Discount Lino
Barn, close to Kylie’s home. Kylie indicated that she didn’t share her mother’s preference for vinyl flooring as it was cold underfoot and had suggested kitchen carpet. Kylie and Mavis spoke to Mike at Discount
Lino Barn who suggested under-floor heating could address Kylie’s temperature issues. Kylie provided details of the under floor heating options while her mother left the conference room to offer slices of her coffee cake to the other staff….

She is also angry about the flooring she has had installed. Despite Kylie’s protests she went with the single sheet vinyl, and did not have under floor heating installed. The vinyl, while easier to clean than the slate, is marking and scuffing badly however. She has only had it down 6 months, and already there are a number of wear marks. Her cupcake classes – which she runs 5 times a week and more often in school holidays – are now so popular that she has at least 20 students per class. Because of her renovations she has room for them all around her lovely new island bench, but the vinyl around the island bench almost looks like a race track.

It is as if her students have worn a path around the bench – and in only 6 months.
The vinyl was quite expensive – as she had heavy grade domestic installed – but Mavis is very unhappy. She hasn’t yet paid the bill for the vinyl as she has been arguing with the company. They are, according to Mavis, now getting nasty, and want their $45,000 immediately.

She also advised that her mother was having problems with Whitegoods World from which she had bought her fridge. Kylie advised that her mother required a “French door” fridge with freezer drawers underneath to accommodate the large baking trays she used for her cakes. She had ordered the fridge she needed from
Whitegoods World but had experienced delivery problems.

Her oven purchase was much more successful than her fridge which, on the very day it was due to be delivered – not only did not arrive, but the shop called her to advise that delivery was delayed for one month. Mavis said to the shop keeper:
“Well that’s no good to me. I ordered that fridge for today. I need that fridge today. I told you when I needed the fridge. The only reason I ordered from you was that you told me I could have it today. If you can’t give it to me today, you can just keep your fridge!! I don’t want it anymore.” Mavis then rang Quick Fridge and ordered and received another fridge that afternoon– suitable for her requirements.

However, one month later, Whitegoods
World delivered the fridge originally ordered and demanded payment. Mavis refused to accept the fridge or to pay, and advised them that the order had been cancelled. They are threatening to sue Mavis for the price of the fridge -
$5,500.

Mavis returned to the conference room. She advised that she had had to make a large coffee cake that morning, even though her preference would have been to make cupcakes. In fact, one of her legal problems was her cup-cake oven. Cake Cookers is a specialist retailer which sells products designed for those who like to cook cakes. It retails a number of specialist pans and other baking utensils – many imported from
America and not readily available in Australia
- as well as a special range of cake ovens.

They are located in Broome – and
Mavis lives in NSW, but Cake
Cookers sells throughout Australia by catalogue. Mavis wanted a special cake oven in her new kitchen. She saw an oven that looked perfect for her in their catalogue – the picture showed 8 slide out patty pan trays instead of oven trays – exactly what she wanted.

She rang the store and spoke to Cathy. She told
Cathy all about her cupcakes, her favourite recipes, and her interest in the patty pan oven in their catalogue. Cathy told her that the patty pan oven had eight slide out patty pan holders – instead of oven racks – and that each patty pan holder would take one dozen patty pans. Even better, they came with self cleaning silicone inserts. Mavis was delighted about the self cleaning but concerned that each tray would only take one dozen patty pans. Although after discussion with Cathy, she was convinced that the overall capacity of the oven was appropriate, and so she placed an order….

Mavis advised that even if she had known about the cake order she would have had difficulty fulfilling it because of problems with her newly installed cake oven. When the oven arrived she saw that instead of
Australian sized delicate patty pan holders, the cake trays were American size muffin holders – and two trays were even jumbo sized Texas muffin size holders. This is not what Mavis wanted at all.
Mavis rang Cathy and told her the oven was not what she had wanted at all, and not suitable for the cakes in which she specialised. Cathy said she was sorry that
Mavis was disappointed, but there is nothing that they can do about it now. Mavis wants to know if she still
has to pay the $8,000 for the special cake oven.