DIPLOMA IN LAW
LEGAL PROFESSION
ADMISSION BOARD
LAW EXTENSION COMMITTEE
LAW EXTENSION COMMITTEE SUBJECT GUIDE
04 CONTRACTS
SUMMER SESSION 2015-16
This Guide includes the Law Extension Committee’s course information and teaching program and the
Legal Profession Admission Board’s syllabus. The syllabus is contained under the heading “Prescribed
Topics and Course Outline” and has been prepared in accordance with Rule 27H(a) of the NSW
Admission Board Rules 2015.
Course Description and Objectives
Lecturers
Assessment
March 2016 Examination
Texts and Materials
Lecture Program
Weekend Schools 1 and 2
Compulsory Assignment
Assignment Questions
Prescribed Topics and Course Outline
Problem Questions
Extracts from Legislation:
Civil Liability Act 2002 (NSW)
Australian Consumer Law
Contracts Review Act 1980
1
1
1-2
2
3
3-4
5-6
6
6
7-15
16-29
30-33
34-40
41-50
1
LAW EXTENSION COMMITTEE
SUMMER 2015-16
04 CONTRACTS
COURSE DESCRIPTION AND OBJECTIVES
The law relating to contracts is one of the pillars of the common law system. An understanding of the
basic elements of contract law is thus a critical pre-requisite for the study of a number of later subjects,
including Conveyancing, Commercial Transactions and Industrial Law. The course aims to provide
students with an understanding of the basic principles of contract law which apply to nearly all
contracts. In fulfilling this aim, the course focuses primarily on a study of relevant case law and statute
law. The course covers the elements of formation of contracts, terms of a contract, matters affecting
consent to a contract, discharge of contracts, remedies, and third party rights.
Special principles that apply to specific types of contracts are dealt with in later courses.
The objectives of the course are:
(a)
to provide students with an understanding of basic principles of contract law; and
(b)
to develop in students an ability to analyse fact situations and correctly identify the relevant
principles of contract law that are applicable to the resolution of problems raised by particular
factual situations.
LECTURERS
Greg Tolhurst, (DipLaw) SAB, LLM (Sydney), Phd (UNSW)
Greg Tolhurst is a Professor of Commercial Law at the Faculty of Law, University of Sydney. He is
also a consultant at Herbert Smith Freehills.
Elisabeth Peden, BA Hons (Sydney), LLB Hons (Sydney), Phd (Cambridge)
Elisabeth Peden is a Barrister and Professor of Law at the Faculty of Law, University of Sydney.
Alexander Kuklik, BJaps (ANU), LLB (Hons) (ANU), LLM (Sydney), Grad Dip Military Law (M)
(ANU)
Alexander is a Barrister at Wentworth Chambers, Sydney practising in contract and commercial law.
ASSESSMENT
To be eligible to sit for the Board’s examinations, all students must complete the LEC teaching and
learning program, the first step of which is to ensure that you have registered online with the LEC in
each subject for which you have enrolled with the Board. This gives you access to the full range of
learning resources offered by the LEC.
To register with the LEC, go to www.sydney.edu.au/lec and click on the WEBCAMPUS link and follow
the instructions. Detailed guides to the Webcampus are contained in the material distributed by the
LEC, in the Course Information Handbook, and on the Webcampus.
Eligibility to Sit for Examinations
In accordance with the Legal Profession Admission Rules, the LEC must be satisfied with a student’s
performance in a subject in order for the student to be eligible to sit for the examination, conducted by
the Legal Profession Admission Board (LPAB). Assignments are used to assess eligibility.
Students are expected to achieve at least a pass mark of 50% in assignments to be eligible to sit for
examinations. However, a category of “deemed eligible” has been introduced to offer students whose
assignment mark is between 40-49% an opportunity to sit for the examination. In these circumstances
students are often advised not to sit. A mark below 40% means a student is not eligible to sit for the
examination.
2
Assignments as part of the Board’s Examinations
Assignment results contribute 20% to the final mark in this subject.
The Law Extension Committee (LEC) administers the setting and marking of assignments. The LEC
engages the LPAB’s Examiners to assess or supervise the assessment of assignments.
Submission
Assignments must be received by 11:59pm on the due date unless an extension has been granted.
Extensions must be requested by email prior to the due date. Specific supporting evidence must be
provided. Assignments that are more than ten days late will not be accepted. Late assignments attract
a penalty of one mark out of 20, or 5% of the total marks available, per day.
Assessment
Assignments are assessed according to the “Assignment Grading and Assessment Criteria” outlined
in the Guide to the Presentation and Submission of Assignments. Prior to the examination,
assignments will be returned to students and results posted on students’ individual results pages of
the LEC Webcampus. Students are responsible for checking their results screen and ascertaining their
eligibility to sit for the examination.
Review
Where a student’s overall mark after the examination is between 40-49%, the student’s assignment in
that subject will be included in the Revising Examiner’s review. The final examination mark is
determined in accordance with this review. Assignment marks will not otherwise be reviewed.
MARCH 2016 EXAMINATION
Candidates will be expected to have a detailed knowledge of the prescribed topics. A detailed outline
of the prescribed topics is set out below under the heading ‘Prescribed Topics and Course Outline’.
Candidates will be expected to have made a study of the prescribed materials in relation to those
topics, and to have analysed the cases and statutory provisions referred to in the Law Extension
Committee's course outline.
The examination will consist of three questions. Students will have to complete all three of the
questions. All questions will be of equal value.
Questions will either be problem-type questions or short essay questions based around the
case law or legislation studied.
The examination will constitute 80% of the final mark in this subject.
The examination will be a closed book examination. A case list will appear in the examination. The
legislation appearing at the back of this outline will also be reproduced in the exam.
Please note: All questions in relation to the examination should be directed to the Legal
Profession Admission Board, not the Law Extension Committee.
3
TEXTS AND MATERIALS
Course Materials

Guide to Presentation and Submission of Assignments (available on the LEC Webcampus)
Prescribed Materials

Radan, Gooley & Vickovich, Principles of Australian Contract Law, 3rd ed. LexisNexis, 2013

Radan, Gooley & Vickovich, Principles of Australian Contract Law, Cases and Materials, 3rd ed.
LexisNexis, 2014
Cases underlined in the Prescribed Topics do not appear in the case book and students will need
to obtain a copy of those cases.
Note those cases in the prescribed topics marked * are NOT compulsory cases, however,
students will be expected to know the general principles of contract law that those cases stand
as authority for.
Reference Materials







Carter, Contract Law in Australia, 6th ed. LexisNexis, 2012
Carter, Cases and Materials on Contract Law in Australia, 6th ed. LexisNexis, 2011
Corones, The Australian Consumer Law, Thomson Reuters, 2011
Paterson, Robertson & Duke, Principles of Contract Law, 4th ed. Thomson Reuters, 2011
Paterson, Robertson & Duke, Contract: Commentary and Materials, 12th ed. Thomson Reuters,
2011
Seddon, Bigwood and Ellinghaus, Cheshire and Fifoot's Law of Contract, 10th Australian ed.
LexisNexis, 2012
Journal of Contract Law
The cases and legislation listed under the heading ‘Prescribed Topics and Course Outline’ should be
read as a minimum for students to gain a grounding in the basic principles of contract law.
Students are encouraged to read beyond these materials, and in this respect the other cases
mentioned in the textbook and casebook serve as a starting point.
LEC Webcampus
Once you have registered online with the LEC, you will have access to all the facilities on the LEC
Webcampus including the problem questions for each class, plus any other materials that the lecturer
may make available to students. These course materials as well as links to relevant cases and
legislation can be found in the Course Materials section of the LEC Webcampus.
LECTURE PROGRAM
The first of 12 lectures will be held on Monday 9 November 2015.
Lectures will be held on Mondays during each week of the session as set out on the next page.
All lectures will be for 3 hours and will start at 6.00pm.
The venues for the lectures are set out in the lecture program on the next page.
For details as to the location of these venues, refer to p.53 of the Course Information Handbook for a
map of the University of Sydney main campus.
4
WEEK
1
DATE
Mon
9 Nov
ROOM
ChLT1
LECTURE
1
Professor
Tolhurst
2
Professor
Tolhurst
TOPICS
Introduction
Fact of Agreement
2
Mon
16 Nov
ChLT1
3
Mon
23 Nov
ChLT1
3
Professor
Tolhurst
Consideration
4
Mon
30 Nov
ChLT1
4
Professor
Tolhurst
Estoppel
Intention to Create Legal Relations
Writing Requirements
5
Mon
7 Dec
ChLT1
5
Mr Kuklik
Express terms
Implied Terms
6
Mon
14 Dec
ChLT1
6
Mr Kuklik
Meaning of Terms
Construction of Exclusion Clauses
Privity
Fact of Agreement
Certainty and Completeness
STUDY BREAK: Friday 18 December 2015 – Sunday 10 January 2016
Mon
11 Jan
New LSLT
101
7
Mr Kuklik
Misrepresentation
Mistake
Duress
Mon
18 Jan
New LSLT
101
8
Mr Kuklik
Undue Influence
Unconscionable Conduct
Rescission
Statutory Unconscionability and Unjust Contracts
Misleading or Deceptive Conduct
Unfair terms
Mon
25 Jan
New LSLT
101
9
Professor
Peden
Discharge by Performance
Discharge by Agreement
Breach of Contract
Discharge by Breach of Contract
Discharge by Repudiation
10
Mon
1 Feb
New LSLT
101
10
Professor
Peden
Termination
Discharge by Frustration
11
Mon
8 Feb
New LSLT
101
11
Professor
Peden
Damages
12
Mon
15 Feb
New LSLT
101
12
Professor
Peden
Actions for Fixed Sums and Debt
Rectification
Restitution
7
8
9
5
WEEKEND SCHOOLS 1 AND 2
Classes in Contracts are held at both Weekend Schools 1 and 2. The focus of these classes is the
external students. Lecture students may attend on the understanding that weekend classes aim to
cover the topics covered in weekly lectures and are principally for the benefit of external students.
It will not be possible to cover the entire course at the weekend schools. These programs are a
general guide, and may be varied according to need. Readings are suggested to introduce you to the
material to be covered in the lecture, to enhance your understanding of the topic, and to encourage
further reading. You should not rely on them alone.
WEEKEND SCHOOL 1
TIME
MAJOR TOPICS
KEY READING
Friday 27 November 2015: 5.00pm – 9.00pm in Carslaw Lecture Theatre 275 (CLT 275)
Carlill v Carbolic Smoke Ball Co
5.00pm-6.20pm
Fact of Agreement
Stevenson, Jacques & Co v McLean
Bressan v Squires
Australian Woollen Mills Pty Ltd v Cth
Waltons Stores (Interstate) v Maher
Williams v Roffey Bros and Nicholls
(Contractors)
Byrne v Australian Airlines Ltd (1995) 185
7.45pm-8.45pm
Express and Implied Terms
CLR 410
Oscar Chess v Williams
Toll (FCGT) v Alphapharm
Saturday 28 November 2015: 8.00am – noon in Carslaw Lecture Theatre 275 (CLT 275)
Darlington Futures v Delco Australia
8.15am-9.25am
Construction of Exclusion
Trident General Insurance v McNiece
Clauses
Privity
Edgington v Fitzmaurice
9.30am-10.40am
Misrepresentation
McRae v C’th Disposals Commission
Mistake
Duress
Undue Influence
Unconscionable conduct
Rescission
Statutory Unconscionability
and Unjust contracts
Misleading or deceptive
conduct
Unfair terms
Questions on Course Outline
10.45am-11.55am Problem Solving
6.30pm-7.40pm
Consideration and Estoppel
WEEKEND SCHOOL 2
TIME
MAJOR TOPICS
KEY READING
Friday 29 January 2016: 5.00pm – 9.00pm in Carslaw Lecture Theatre 373 (CLT 373)
5.00pm-6.20pm
Discharge by performance, Associated Newspapers Ltd v Bancks (1951)
agreement and breach
83 CLR 322
6.30pm-7.40pm
Discharge by repudiation
Federal Commerce & Navigation Co Ltd v
Molena Alpha Inc [1979] AC 757
6
7.45pm-8.45pm
Tropical Traders Ltd v Goonan (1964) 111
CLR 41
Termination
Saturday 30 January 2016: 8.00am – noon in Carslaw Lecture Theatre 373 (CLT 373)
Commonwealth v Amann Aviation
8.15am-9.25am
Damages
Victoria Laundry v Newman Industries
9.30am-10.40am
10.45am-11.55am
Damages
Actions for Sums Fixed by the
Contract
Restitution
Problem Solving
Dunlop Pneumatic Tyre Co v Selfridge
Pavey and Mathews v Paul
Questions on Course Outline
COMPULSORY ASSIGNMENT
In Contracts, there is only ONE ASSIGNMENT. This assignment is compulsory and must be
submitted by all students. Students must submit the assignment by the due date. A pass mark
is 50%. Refer to the Guide to the Presentation and Submission of Assignments for the
assignment grading and assessment criteria. Students who fail to satisfy the compulsory
requirements will be notified through the Results screen on the Webcampus before the
examination period of their ineligibility to sit the examination in this subject. The maximum
word limit for the assignment is 2000 words (inclusive of all footnotes but not bibliography).
The rules regarding the presentation of assignments and instructions on how to submit an assignment
are set out in the LEC Guide to the Presentation and Submission of Assignments which can be
accessed on the LEC Webcampus. Please read this guide carefully before completing and submitting
an assignment.
Completed assignments should be lodged through the LEC Webcampus, arriving by 11:59pm on the
following date:
Compulsory Assignment
Thursday 7 January 2016
(due in study break)
The assignment will constitute 20% of the final mark in this subject.
ASSIGNMENT QUESTIONS
To obtain the Contracts assignment questions for the Summer Session 2015-16, please follow
the instructions below:
1.
Register online with the LEC (see page 27 of the Course Information Handbook for detailed
instructions). Once you have registered, you will have access to all the facilities on the LEC
Webcampus.
2.
Then go into the Webcampus, select the Course Materials section and click on the link to
the assignment questions for this subject.
7
PRESCRIBED TOPICS AND COURSE OUTLINE
LECTURE 1 (9 November 2015)
Aims and Objectives
At the end of this lecture students should understand the following:
(a) the definition of contract;
(b) the sources of contract law;
(c) the various classifications of contracts;
(d) the basic principles relating to answering problem questions;
(e) the nature of an offer and the circumstances in which an offer is made
Introduction to Contract Law
Text: Radan & Gooley, Chapter 1 (see generally chapters 2, 3, 9, 26, 27, 28)
The introduction to the subject of Contracts looks at the following issues:
(a) The definition of contract;
(b) The sources of contract law;
(c) The classification of contracts.
(d) Freedom of contract
a. Capacity – who can enter into a contract
b. Illegality and restraints of trade
Formation of Contract
The Fact of Agreement: Offers
Text: Radan & Gooley, Chapter 4 (paras 4.1-4.73)
Australian Woollen Mills Pty Ltd v Cth (1954) 92 CLR 424
Carlill v Carbolic Smoke Ball Co [1893] 1 QB 256
Pharmaceutical Society of Great Britain v Boots Cash Chemists (Southern) [1953] 1 QB 401
*Barry v Davies [2001] 1 All ER 944
*Blackpool and Fylde Aero Club v Blackpool BC [1990] 1 WLR 1195
LECTURE 2 (16 November 2015)
Aims and Objectives
At the end of this lecture students should understand the rules of acceptance, the duration of
offers and the concepts of certainty and completeness.
The Fact of Agreement: Acceptance
(a) Acceptance generally
Text: Radan & Gooley, Chapter 4 (paras 4.74-4.121)
R v Clarke (1927) 40 CLR 227
*Household Fire & Carriage Accident Insurance Co v Grant (1879) LR 4 Ex D 216
*Brinkibon v Stahag Stahl [1983] 2 AC 34
*Bressan v Squires [1974] 2 NSWLR 460
(b) Alternatives to Offer & Acceptance
Butler Machine Tool Co v Ex-Cell-O Corporation [1979] 1 All ER 965
(c) Termination of Offers
Stevenson, Jacques and Co v McLean (1880) 5 QBD 346
Dickinson v Dodds (1876) 2 Ch D 463
*Mobil Oil v Lyndell Nominees (1998) 153 ALR 198, at 222-228
8
Certainty and Completeness
Text: Radan & Gooley, Chapter 5
Booker Industries v Wilson Parking (Qld) (1982) 149 CLR 600
Whitlock v Brew (1968) 118 CLR 445
United Group Rail Services Limited v Rail Corporation New South Wales [2009] NSWCA 177
Masters v Cameron (1954) 91 CLR 353
Meehan v Jones (1982) 149 CLR 571
LECTURE 3 (23 November 2015)
Aims and Objectives
At the end of this lecture students should understand the concepts and rules relating to the
doctrine of consideration.
Consideration
Text: Radan & Gooley, Chapter 6
The element of consideration refers to the requirement that a contract is a bargain in the sense that there is
an exchange between the parties of promises or an exchange of a promise for an act for the agreement to
amount to a contract at law. The requirement of consideration is reflected in the major rule that unless a
promisee has given consideration he or she cannot enforce the promisor’s promise. In such a case the
promisee would be held not to have given consideration. The use of a deed allows for the enforcement at
common law (but not in equity) of a promise for which no consideration has been given.
Australian Woollen Mills v The Commonwealth (1954) 92 CLR 424
Coulls v Bagot's Executor and Trustee Co (1967) 119 CLR 460
*Pao On v Lau Yi Long [1980] AC 614
Williams v Roffey Bros and Nicholls (Contractors) [1991] 1 QB 1
Foakes v Beer (1884) 9 App Cas 605
LECTURE 4 (30 November 2015)
Aims and Objectives
At the end of this lecture students should have an understanding of the doctrine of promissory
estoppel and its relationship to contract. In addition students should have an understanding of
the requirement of an intention to contract as a necessary requirement to contract formation
and a general understanding of writing requirements.
Equitable Estoppel
Text: Radan & Gooley, Chapter 36
Waltons Stores (Interstate) Ltd v Maher (1988) 164 CLR 387
*Je Maintiendrai v Quaglia (1980) 26 SASR 101
*Giumelli v Giumelli (1999) 196 CLR 101
Formation of a Contract - Intention to Create Legal Relations
Text: Radan & Gooley, Chapter 7
An integral element of a contract at law is that the parties to it must intend their agreement to have legal
force in the sense that each party can take legal action to enforce it. Unless there is an express statement in
the agreement on this matter, there is a presumption that agreements of a family, social or domestic
character are not intended to have legal effect. In all other agreements (commercial agreements) the
presumption is that the parties did intend it to have legal intent. In both situations the presumptions can be
rebutted by evidence to the contrary.
Balfour v Balfour [1919] 2 KB 571
Jones v Padavatton [1969] 2 All ER 616
Esso Petroleum Ltd v Commissioners of Customs & Excise [1976] 1 All ER 117
Ermogenous v Greek Orthodox Community of SA Inc (2002) 209 CLR 95
9
The Requirement of Writing – Do Contracts Have to be in Written Form?
Text: Radan & Gooley, Chapter 8
At common law there is no requirement that any contract has to be in written form. However, statute imposes
such a requirement in certain types of contract, a significant example being contracts involving land or
interests in land. However, oral contracts for the sale of land can in some circumstances be enforced.
Conveyancing Act 1919 (NSW), s 54A
*Pirie v Saunders (1961) 104 CLR 149
*Khoury v Khouri (2006) 66 NSWLR 241
LECTURE 5 (7 December 2015)
Aims and Objectives
At the end of this lecture students should understand the following:
(a) the circumstances in which pre-contractual statements amount to terms of a contract;
(b) the formation of collateral contracts;
(c) the principles for the incorporation of contractual terms; and
(d) the principles by which terms are implied into a contract.
Terms of a Contract
(a) Express Terms
Text: Radan & Gooley, Chapter 10
This topic is concerned with establishing the express terms of the contract between the parties to the
contract. It needs to be established whether the parties intended pre-contractual statements to be
express terms and were not merely representations. Alternatively such statements may amount to
collateral contracts – contracts that are collateral to the main contract between the parties. Even in
situations where one party intends a statement to be a part of the contract, questions arise as to whether
that party has done enough to have the term incorporated into the contract.
*Ellul and Ellul v Oakes (1972) 3 SASR 377
Oscar Chess v Williams [1957] 1 All ER 325
J J Savage and Sons v Blakney (1970) 119 CLR 435
*Hoyt's v Spencer (1919) 27 CLR 133
*SRA v Heath Outdoor Ltd (1986) 7 NSWLR 170
Toll (FGCT) Pty Ltd v Alphapharm Pty Ltd (2004) 79 ALJR 129
Curtis v Chemical Cleaning and Dyeing Co [1951] 1 KB 805
Thornton v Shoe Lane Parking [1971] 2 QB 163
Parker v South Eastern Railway Co (1877) 2 CPD 416
D J Hill & Co Pty Ltd v Walter H Wright Pty Ltd [1971] VR 749
(b) Implied Terms
Text: Radan & Gooley, Chapter 11
Terms may also arise by implication, either under common law principles or pursuant to statute.
Furthermore, terms can also be implied because of the existence of a custom in a particular industry,
trade or locality.
*Attorney General of Belize v Belize Telecom Ltd [2009] 2 All ER 1127
Codelfa Construction v State Rail Authority of New South Wales (1982) 149 CLR 337
Byrne v Australian Airlines Ltd (1995) 185 CLR 410
*Con-Stan Industries of Australia P/L v Norwich Winterthur Insurance (Australia) P/L (1986) 160
CLR 226
*Commonwealth Bank of Australia v Barker [2014] HCA 32
10
LECTURE 6 (14 December 2015)
Aims and Objectives
At the end of this lecture, students should understand the rules and principles by which terms
of a contract, especially exclusion clauses, are construed or interpreted. Students will have an
understanding of the parol evidence rule.
In addition, at the end of this lecture students should have an understanding of the operation
of the doctrine of privity of contract. In relation to the doctrine of privity of contract the principle
issues that arise include:
(a) the meaning of the doctrine of privity of contract;
(b) the relationship of the privity doctrine to the consideration rule that consideration must
move from a promisee;
(c) the remedies available at common law and equity to a promisee when enforcing a
contractual promise by a promisor to benefit a person who is not a party to the contract;
and
(d) the ‘exceptions’ by which a person not a party to a contract can take enforcement action
in relation to a contractual promise for his or her benefit.
The Meaning of Terms
Text: Radan & Gooley, Chapter 12
Codelfa Construction Pty Ltd v State Rail Authority of NSW (1982) 149 CLR 33
The Construction of Exclusion Clauses
Text: Radan & Gooley, Chapter 13
Darlington Futures v Delco Australia (1986) 161 CLR 500
*Alderslade v Hendon Laundry Ltd [1945] KB 189
*White v John Warwick & Co [1953] 2 All ER 1021
Sydney City Council v West (1965) 114 CLR 481
Competition and Consumer Act 2010 (Cth) Sch 2 (Australian Consumer Law) ss 64 and 64A
Privity of Contract
Text: Radan & Gooley, Chapter 39
Coulls v Bagot's Executor and Trustee Co (1967) 119 CLR 460
Trident General Insurance Co v McNiece Bros (1988) 165 CLR 107
New Zealand Shipping Co v A M Satterthwaite and Co (The Eurymedon) [1975] AC 154
LECTURE 7 (11 January 2016)
Aims and Objectives
This lecture deals with the topic of vitiating factors. This topic relates to factors that affect the
quality of the consent given to the entry into a contract. In most cases the consequence of the
relevant factor is that the contract is voidable. In some situations, such as of mistake at
common law, the contract will be void as from the very beginning (ab initio). The distinction
between voidable and void ab initio has particular consequences for the rights of third parties
to the contract who have innocently acquired property that has in the meantime passed
between the parties to the contract. This lecture deals with three vitiating factors,
misrepresentation, Mistake and Duress.
Vitiating Factors
(a) Misrepresentation
Text: Radan & Gooley, Chapter 14
*Balfour & Clark v Hollandia (1978) 18 SASR 241
*Edgington v Fitzmaurice (1885) 29 Ch D 459
*Smith v Land and House Property Corp (1884) 28 Ch D 7
*Redgrave v Hurd (1881) 20 Ch D 1
*Nicholas v Thompson [1924] VLR 554
11
(b) Mistake
Text: Radan & Gooley, Chapter 16
(1) Common Mistake
McRae v Commonwealth Disposals Commission (1951) 84 CLR 377
Bell v Lever Brothers [1932] AC 161
(2) Mutual Mistake
(3) Unilateral Mistake
Taylor v Johnson (1983) 151 CLR 422
Cundy v Lindsay (1878) 3 App Cas 459
Lewis v Averay [1972] 1 QB 198
(c) Duress
Text: Radan & Gooley, Chapter 17
Universe Tankships Inc of Monrovia v International Transport Workers Federation [1983] 1 AC
366
Barton v Armstrong [1976] AC 104
Crescendo Management Pty Ltd v Westpac Banking Corp (1988) 19 NSWLR 40
North Ocean Shipping Co v Hyundai [1979] QB 705
LECTURE 8 (18 January 2016)
Aims and Objectives
This lecture continues the topic of vitiating factors and considers, Undue Influence, Unjust
Contracts, Misleading and Deceptive Conduct and Unfair Terms. It also considers the remedy
of rescission.
(d) Undue Influence
Text: Radan & Gooley, Chapter 18
Johnson v Buttress (1936) 56 CLR 113
*Yerkey v Jones (1939) 63 CLR 649
Garcia v National Australian Bank Ltd (1998) 194 CLR 395
(e) Unconscionable conduct
Text: Radan & Gooley, Chapter 19 (19.1-19.58)
Commercial Bank of Australia v Amadio (1983) 151 CLR 447
*Kakavas v Crown Melbourne Limited [2013] HCA 25
*Louth v Diprose (1992) 175 CLR 621
(f) Rescission
Text: Radan & Gooley, Chapter 35
Alati v Kruger (1955) 94 CLR 216
(1) Affimation
*Coastal Estates v Melevende [1965] VR 433
(2) Restitutio impossible
*Vadasz v Pioneer Concrete (1995) 130 ALR 570 or (1995) 184 CLR 102
(3) Third parties
*Car and Universal Finance Co Ltd v Caldwell [1965] 1 QB 525
(4) Lapse of time
(g) Statutory Unconsionability
Text: Radan & Gooley, Chapter 19 (paras 19.59-19.94)
(1) Application of the Australian Consumer Law
Part XI (particularly s 131) and Sch 2 of the Competition and Consumer Act 2010 (Cth).
(2) Unconscionable conduct
Part 2-2 of the ACL: s 20 (general), s 21 (supplies to consumers) and s 22 (supplies to or
acquisitions from certain businesses).
ss 232 (injunction), 236 (damages), 237, 238 and 243 (orders to compensate for loss or to
prevent or reduce loss).
*Pritchard v Racecage Pty Ltd & Ors (1997) ATPR 41-554
*ACCC v CG Berbatis Holdings Pty Ltd (2003) 197 ALR 153, PRD 38.35
12
(3) Application of the Australian Securities and Investments Commission Act 2001 (Cth) ss 12BA,
12BAB, 12BD, 12CA, 12CB, 12CC
(h) Contracts Review Act 1980 (NSW)
Text: Radan & Gooley, Chapter 20
*Baltic Shipping Company v Dillon [1991] 22 NSWLR 1
*Ford v Perpetual Trustees Victoria Limited (2009) 257 ALR 658
(i) Misleading or Deceptive Conduct
Text: Radan & Gooley, Chapters 15
Competition and Consumer Act 2010 (C’th), Schedule 2 (referred to as Australian Consumer Law)
ss 2, 4, 18, 232, 236, 237, 238, 243. (*see also Australian Securities and Investments Commission
Act 2001 (Cth) s 12DA)
*Henjo Investments v Collins Marrickville (1988) 79 ALR 83
*Taco Co of Australia v Taco Bell Pty Ltd (1982) 42 ALR 177
* Contributory negligence and proportionate liability (Part VIA (ss 87CB-87CI) of the Competition and
Consumer Act 2010 (Cth). Section 137B of the Competition and Consumer Act 2010 (Cth). Part 4 (ss
34-39) of the Civil Liability Act 2002 (NSW). See also Perpetual Trustee Company Ltd v Milanex Pty
Ltd (in liq) [2011] NSWCA 367 at [84]ff (Macfarlan JA); Henville v Walker (2001) 206 CLR 459.
(j) Unfair Terms
Text: Radan & Gooley, Chapter 21
Competition and Consumer Act 2010 (C’th), Schedule 2 (referred to as Australian Consumer Law)
ss 23-28, 232(3), 237, 250) (*see also Australian Securities and Investments Commission Act 2001
(Cth) ss 12BF, 12BG, 12BK)
*Jetstar Airways Pty Ltd v Free [2008] VSC 539
* Director-General of Fair Trading v First National Bank [2002] 1 AC 481; [2002] UKHL 52
*Office of Fair Trading v Abbey National plc [2010] 1 All ER 667; [2009] UKSC 6
LECTURE 9 (25 January 2016)
Aims and Objectives
At the end of this lecture students should, as part of the broader topic of discharge, have an
understanding of the following:
(a) the order of performance in relation to contractual obligations;
(b) the meaning of performance at common law and qualifications to its applications;
(c) the discharge of contract by agreement; and
(d) the discharge of contract by breach or repudiation.
Discharge
(a) Discharge by Performancce
Text: Radan & Gooley, Chapter 22
Cutter v Powell (1795) 101 ER 573
Sumpter v Hedges [1898] 1 QB 673
Hoenig v Isaacs [1952] 2 All ER 176
Bolton v Mahadeva [1972] 1 WLR 1009
(b) Discharge by Agreement
Text: Radan & Gooley, Chapter 23
*Crawford Fitting Co v Sydney Valve & Fitting P/L (1988) 14 NSWLR 438
*Perri v Coolangatta Investments Pty Ltd (1982) 149 CLR 537
*McDermott v Black (1940) 63 CLR 161 at 183-184
(c) Breach of Contract
(d) Discharge by Breach of Contract
Text: Radan & Gooley, Chapter 24
Luna Park (NSW) Ltd v Tramways Advertising Pty Ltd (1938) 61 CLR 286
Associated Newspapers Ltd v Bancks (1951) 83 CLR 322
Hongkong Fir Shipping Co Ltd v Kawasaki Kisen Kaisha Ltd [1962] 2 QB 26
13
Koompahtoo Local Aboriginal Land Council v Sanpine Pty Limited (2007) 233 CLR 115
*Louinder v Leis (1982) 149 CLR 509
*Sargent v ASL Developments Ltd (1974) 131 CLR 634
Foran v Wight (1989) 168 CLR 385
*Tanwar Enterprises Pty Ltd v Cauchi (2003) 217 CLR 315
(e) Discharge for Repudiation
Federal Commerce & Navigation Co Ltd v Molena Alpha Inc [1979] AC 757
Universal Cargo Carrier Corporation v Citati [1957] 2 QB 401
LECTURE 10 (1 February 2016)
Aims and Objectives
This lecture considers the rules governing an election to terminate a contract for breach of
repudiation as well at the effect of termination.
The lecture also covers the doctrine of frustration. At the end of this lecture students should,
as part of the broader topic of discharge, have an understanding of the following:
(a) the discharge of contractual obligations by frustration;
(b) the effect of frustration.
Termination
Text: Radan & Gooley, Chapter 24 (paras 24.69-24.105)
(a) Requirement of an election
Tropical Traders Ltd v Goonan (1964) 111 CLR 41
(b) Estoppel as a restriction on the right to terminate
Foran v Wight (1989) 168 CLR 385
(c) Effect of termination
McDonald v Dennys Lascelles Ltd (1933) 48 CLR 457
Discharge by Frustration
Text: Radan & Gooley, Chapter 25 (paras 25.1-25.49 only)
Codelfa Construction v State Rail Authority of New South Wales (1982) 149 CLR 337
Taylor v Caldwell (1863) 122 ER 309
Krell v Henry (1903) 2 KB 740
Fibrosa Spolka Akcyjna v Fairbairn Lawson Combe Barbour [1943] AC 32
*Frustrated Contracts Act 1978 (NSW)
LECTURE 11 (8 February 2016)
Aims and Objectives
Common law damages involve the innocent party accepting a breach of contract and being
compensated for losses suffered as a result of such breach. Upon proof of a breach, an
innocent party is entitled to an award of damages. The principles relating to common law
damages are fundamentally concerned with assessment of the amount of compensation to be
awarded to the innocent party. Equitable damages can also be awarded.
At the end of this lecture students should have an understanding of the following:
(a) the compensation principle as the basis for the recovery of damages;
(b) the nature of interests protected in an award of damages;
(c) the requirement that the breach must cause the losses sought to be recovered;
(d) factors that affect the quantum of damages awarded;
(e) the principles governing the recovery of equitable damages.
14
Remedies
(1) Damages
Text: Radan & Gooley, Chapter 29
(a) Common Law Damages
*Johnson v Perez (1988) 166 CLR 351
*Howe v Teefy (1927) 27 SR (NSW) 301
Baltic Shipping Co v Dillon (1992) 176 CLR 344
The Commonwealth v Amann Aviation (1991) 174 CLR 64
Tabcorp Holdings Ltd v Bowen Investments Pty Ltd (2009) 236 CLR 272
Victoria Laundry (Windsor) v Newman Industries [1949] 2 KB 528
*Simonius Vischer & Co v Holt & Thompson [1979] 2 NSWLR 322
Koufos v Czarnikow Ltd [1969] 1 AC 350
Civil Liability Act 2002, (NSW), ss 5D, 11A, 16, 27-33
*Insight Vacations Pty Ltd v Young (2010) 241 FLR 125; [2010] NSWCA 137 (See note at end of the
extract for Flight Centre Ltd v Louw)
*Flight Centre v Louw [2011] NSWSC 132
(b) Equitable Damages
Text: Radan & Gooley, Chapter 33
*Supreme Court Act 1970, s 68
*Johnson v Agnew [1980] AC 367
LECTURE 12 (15 February 2016)
Aims and Objectives
Apart from an action in damages at common law, a plaintiff may be able to recover sums of
money by way of actions for the recovery of fixed sums and in debt.
At the end of this lecture students should have an understanding of the following:
(a) the principles governing the validity of the parties’ contractual agreement as to the
measure of damages in the event of a breach; and
(b) the principles for the recovery of debts.
As an alternative to common law damages, equitable remedies to enforce the contract may
be available to a plaintiff. At the end of this lecture students should also have an
understanding of the following the equitable remedy of rectification.
Finally this lecture also considers remedy of restitution insofar as that remedy is relevant to
ineffective contracts.
(c) Actions for Fixed Sums and Debt
Text: Radan & Gooley, Chapter 30
Dunlop Pneumatic Tyre Co v New Garage [1915] AC 79
*Ringrow Pty Ltd v BP Australia Pty Ltd (2005) 224 CLR 656
McDonald v Dennys Lascelles Ltd (1933) 48 CLR 457
White & Carter (Councils) Ltd v McGregor [1962] AC 413
*Andrews v Australia and New Zealand Banking Group Ltd (2012) 290 ALR 595, [2012] HCA 30
(d) Rectification
Text: Radan & Gooley, Chapter 34
*Ryledar Pty Ltd v Euphoric Pty Ltd (2007) 69 NSWLR 603
*George Wimpey UK Ltd v V I Construction Ltd [2005] EWCA Civ 77
(e) Restitution
Text: Radan & Gooley, Chapter 38
Pavey and Mathews v Paul (1987) 162 CLR 221
*Fibrosa Spolka Akcyjna v Fairbairn Lawson Combe Barbour Ltd [1943] AC 32
*Lumbers v W Cook Builders Pty Ltd (in liquidation) (2008) 232 CLR 635
15
Sumpter v Hedges [1898] 1 QB 673
*David Securities P/L v Commonwealth Bank of Australia (1992) 175 CLR 353
16
Problem Questions
Formation Questions
1. Greg visited the local supermarket and took from the shelf a bottle of cleaning fluid. Immediately after he
placed the bottle in the trolley provided, it exploded, severely injuring him. He sued the supermarket
alleging a breach of contract. Advise Greg.
2. The XYZ Furniture Store advertises that as it is ceasing business, it is holding a closing down sale. It
states that "all goods must be sold. No reasonable offer refused." Jones sees a rocking chair which is
labelled as priced at $200. When he says that he will buy the chair at that price, he is told that the
manager of the store has decided to keep the chair for himself. Advise Jones.
3. Bill advertised that he would pay $100 to anyone supplying him with information as to the whereabouts
of his lost bull. Jim went to Bill's home and told him he had seen it grazing on Sally's property. Before Bill
could set out to recapture the animal, Sally telephoned Bill and informed him of the whereabouts of the
bull. Advise Sally.
4. The following communications passed between NZ Imports Ltd, a New Zealand company, and NSW
Exports Ltd, a company carrying on business in NSW:
a. Fax dated 1 November from NZ Imports Ltd: “Please quote us price per tonne of canned
peaches”.
b. Letter dated 6 November, delivered 10 November from NSW Exports: “We can supply
canned peaches at $500 per tonne. Cans are in 150g, 400g and 850g and your order would
consist of a fair distribution between these sizes. Delivery would be in equal monthly
shipments commencing February 1.”
c. Fax dated 11 November from NZ Imports: “Your offer to supply one tonne canned peaches
accepted. Formal order follows.”
d. Order form dated 12 November, delivered 17 November from NZ Imports ordering one
tonne, setting out the terms given in paragraph (b) and containing the following condition
printed at the bottom of the form: “All orders subject to the standard form contract terms of
the International Fruit Trading Association”.
e. Fax dated 14 November from NSW Exports: “Thank you for your order. We note your
acceptance of our terms”.
What is the effect of each communication?
Is there a concluded contract between the parties, and if so, on what terms?
5. Connie writes to Debbie offering to sell her a rare book for $500. Debbie replies: “I’m quite happy to pay
$500, but it may take me some time to find the money. However, I have $350 in the bank, and if you
want a quick sale I’m prepared to buy it straight away for $350. If that’s OK, post it to me as soon as you
can”. Connie writes in reply: “I’m in no hurry for the money; so the book is yours at $500. But since you
are so keen to have it at once, I’ll post it to you later today’. She posts the letter and then a parcel
containing the book. The parcel, which is correctly addressed, reaches Debbie the following day. Debbie
decides that she does not like the book, and sells it on the same day to Edward. The letter, however, is
addressed with the wrong postcode, and does not reach Debbie for a week. How much must Debbie pay
Connie?
Would the position be different if Connie’s letter bore the correct postcode, but was nevertheless delayed
for a week in the post?
6. An electronics store has a sale on and advertises “On the spot credit! NO DEPOSIT! Interest free for 12
months (on approval)”. You select a stereo, fill in the loan forms and receive approval from the manager,
who gives you a copy of the documentation. When you go to collect the stereo the next day, they refuse
to give it to you. They claim that the agreement was without consideration. Did you give consideration?
How does this differ from Australian Woollen Mills?
7. Sybil is an eccentric 92-year-old matriarch with full possession of her mental faculties and considerable
property holdings. She wishes to dispose of her assets before her death, since she wants nothing to do
with “wills and those leeches in the legal profession”. At a family gathering she announces her plans.
The family home is to be auctioned. The proceeds of the sale and the rest of her property are to be
distributed amongst the family, except for her jewellery, paintings and wine.
The jewellery is to go to the first of her grandchildren “who brings a member of the Richards family to
justice”. The Richards have been sworn enemies of Sybil’s family since one of their number killed her
fourth husband in a squabble over mining rights. The present members are believed to be engaged in
various criminal activities. The paintings are to go to Polly, her eldest daughter “in recognition of her
17
devoted service to me”. Polly has been Sybil’s unpaid secretary and housekeeper for the past 45 years.
As for the wine, Sybil promises it to Basil, her biographer. Basil has nearly completed work on the book
and Sybil, who is pleased with the draft chapters she has seen, intends the wine as a bonus over and
above the remuneration originally agreed.
Sybil has now undergone a change of heart and wishes to revoke these arrangements. Two of her
grandsons have succeeded in apprehending members of the Richards family. First Manuel, a police
officer, arrested a Richards during a police raid on a gambling den in Sydney. Then two days later Terry
was mugged while walking through Hyde Park. In self-defence he overcame his attacker and handed
him over to the authorities, the assailant turning out to be a Richards. Both those arrested are now
awaiting trial. Meanwhile Basil has spent a considerable sum of money investing in wine-racks to hold
the wine he was expecting to receive. There is no prospect of reselling them to recoup the expenditure.
Basil, Terry and Polly come to you for advice. They wish to know whether they are entitled to the benefits
promised to them by Sybil and specifically, what arguments they might use to overcome any perceived
difficulties in their claims. What is your advice?
18
8. Read the following extract from the judgment of Lindley LJ in Carlill’s case and then answer the
questions that follow. This exercise is aimed at showing you how you should be going about dissecting a
case.
Carlill v Carbolic Smoke Ball Co
[1893] 1 QB 256
(English Court of Appeal)
Facts. The defendants were the proprietors and vendors of a medical preparation called ‘The
Carbolic Smoke Ball’. They inserted in a number of newspapers the following advertisement:
£100 reward will be paid by the Carbolic Smoke Ball Company to any person who contracts the
increasing epidemic influenza, colds, or any disease caused by taking cold, after having used the
ball three times daily for two weeks according to the printed directions supplied with each ball.
£1000 is deposited with the Alliance Bank, Regent Street, shewing our sincerity in the matter.
During the last epidemic of influenza many thousand carbolic smoke balls were sold as
preventives against this disease, and in no ascertained case was the disease contracted by those
using the carbolic smoke ball.
One carbolic smoke ball will last a family several months, making it the cheapest remedy in the
world at the price, 10s, post free. The ball can be refilled at a cost of 5s. Address, Carbolic Smoke
Ball Company, 27, Princes Street, Hanover Square, London.
The plaintiff, on the faith of this advertisement, bought a smoke ball at a chemist’s shop and used it
as directed, three times a day, for over eight weeks, when she was attacked by influenza. She sued
the defendants to recover the £100 and Hawkins J held she was entitled to recover (see [1892] 2 QB
484). The defendants appealed.
Lindley LJ. … <261> We must first consider whether this was intended to be a promise at all, or
whether it was a mere puff which meant nothing. Was it a mere puff? My answer to that question is
No, and I base my answer upon this passage: ‘£1000 is deposited with the Alliance Bank, shewing
our sincerity in the matter’. Now, for what was that money deposited or that statement made except
to negative the suggestion that this was a mere puff and meant nothing at all? The deposit is called
in <262> aid by the advertiser as proof of his sincerity in the matter — that is, the sincerity of his
promise to pay this £100 in the event which he has specified. I say this for the purpose of giving
point to the observation that we are not inferring a promise; there is the promise, as plain as words
can make it.
Then it is contended that it is not binding. In the first place, it is said that it is not made with anybody
in particular. Now that point is common to the words of this advertisement and to the words of all
other advertisements offering rewards. They are offers to anybody who performs the conditions
named in the advertisement, and anybody who does perform the condition accepts the offer. In point
of law this advertisement is an offer to pay £100 to anybody who will perform these conditions, and
the performance of the conditions is the acceptance of the offer. That rests upon a string of
authorities, the earliest of which is Williams v Carwardine (1833) 4 B & Ad 621; 110 ER 590, which
has been followed by many other decisions upon advertisements offering rewards.
But then it is said, ‘Supposing that the performance of the conditions is an acceptance of the offer,
that acceptance ought to have been notified’. Unquestionably, as a general proposition, when an
offer is made, it is necessary in order to make a binding contract, not only that it should be accepted,
but that the acceptance should be notified. But is that so in cases of this kind? I apprehend that they
are an exception to that rule, or, if not an exception, they are open to the observation that the
notification of the acceptance need not precede the performance. This offer is a continuing offer. It
was never revoked, and if notice of acceptance is required — which I doubt very much, for I rather
think the true view is that which was expressed and explained by Lord Blackburn in the case of
Brogden v Metropolitan Ry Co (1877) 2 App Cas 666 at 691 — if notice of acceptance is required,
the person who makes the offer gets the notice of acceptance contemporaneously with his notice of
the performance of the condition. If he gets notice of the acceptance before his offer is revoked, that
in principle is all you want. I, however, think that the true view, in a case of this kind, is that the
person who makes the offer shews by his language and from the nature of the transaction that he
<263> does not expect and does not require notice of the acceptance apart from notice of the
performance.
19
We, therefore, find here all the elements which are necessary to form a binding contract enforceable
in point of law, subject to two observations. First of all it is said that this advertisement is so vague
that you cannot really construe it as a promise — that the vagueness of the language shews that a
legal promise was never intended or contemplated. The language is vague and uncertain in some
respects, and particularly in this, that the £100 is to be paid to any person who contracts the
increasing epidemic after having used the balls three times daily for two weeks. It is said, When are
they to be used? According to the language of the advertisement no time is fixed, and, construing
the offer most strongly against the person who has made it, one might infer that any time was meant.
I do not think that was meant, and to hold the contrary would be pushing too far the doctrine of taking
language most strongly against the person using it. I do not think that business people or reasonable
people would understand the words as meaning that if you took a smoke ball and used it three times
daily for two weeks you were to be guaranteed against influenza for the rest of your life, and I think it
would be pushing the language of the advertisement too far to construe it as meaning that. But if it
does not mean that, what does it mean? It is for the defendants to shew what it does mean; and it
strikes me that there are two, and possibly three, reasonable constructions to be put on this
advertisement, any one of which will answer the purpose of the plaintiff. Possibly it may be limited to
persons catching the ‘increasing epidemic’ (that is, the then prevailing epidemic), or any colds or
diseases caused by taking cold, during the prevalence of the increasing epidemic. That is one
suggestion; but it does not commend itself to me. Another suggested meaning is that you are
warranted free from catching this epidemic, or colds or other diseases caused by taking cold, whilst
you are using this remedy after using it for two weeks. If that is the meaning, the plaintiff is right, for
she used the remedy for two weeks and went on using it till she got the epidemic. Another meaning,
and the one which I rather prefer, is that the reward is offered to <264> any person who contracts
the epidemic or other disease within a reasonable time after having used the smoke ball. Then it is
asked, What is a reasonable time? It has been suggested that there is no standard of
reasonableness; that it depends upon the reasonable time for a germ to develop! I do not feel
pressed by that. It strikes me that a reasonable time may be ascertained in a business sense and in
a sense satisfactory to a lawyer, in this way; find out from a chemist what the ingredients are; find
out from a skilled physician how long the effect of such ingredients on the system could be
reasonably expected to endure so as to protect a person from an epidemic or cold, and in that way
you will get a standard to be laid before a jury, or a judge without a jury, by which they might
exercise their judgment as to what a reasonable time would be. It strikes me, I confess, that the true
construction of this advertisement is that £100 will be paid to anybody who uses this smoke ball
three times daily for two weeks according to the printed directions, and who gets the influenza or
cold or other diseases caused by taking cold within a reasonable time after so using it; and if that is
the true construction, it is enough for the plaintiff.
I come now to the last point which I think requires attention — that is, the consideration. It has been
argued that this is nudum pactum — that there is no consideration. We must apply to that argument
the usual legal tests. Let us see whether there is no advantage to the defendants. It is said that the
use of the ball is no advantage to them, and that what benefits them is the sale; and the case is put
that a lot of these balls might be stolen, and that it would be no advantage to the defendants if the
thief or other people used them. The answer to that, I think, is as follows. It is quite obvious that in
the view of the advertisers a use by the public of their remedy, if they can only get the public to have
confidence enough to use it, will react and produce a sale which is directly beneficial to them.
Therefore, the advertisers get out of the use an advantage which is enough to constitute a
consideration.
But there is another view. Does not the person who acts upon this advertisement and accepts the
offer put himself to some inconvenience at the request of the defendants? Is it nothing <265> to use
this ball three times daily for two weeks according to the directions at the request of the advertiser?
Is that to go for nothing? It appears to me that there is a distinct inconvenience, not to say a
detriment, to any person who so uses the smoke ball. I am of opinion, therefore, that there is ample
consideration for the promise.
It appears to me, therefore, that the defendants must perform their promise, and, if they have been
so unwary as to expose themselves to a great many actions, so much the worse for them.
Questions on Lindley LJ's Judgment in Carlill's
(1)
Does the ratio of Lindley LJ's judgment allow you to speculate what his opinion would have been if
the advertisement did not refer to the deposit of £1000.
20
(2)
Why did he need to rely on that evidence to negative the suggestion that the advertisement was no
more than a puff when he clearly concludes without that evidence that there was a 'promise' to pay
£100.
(3)
What has he got to say about communication of acceptance being a necessary requirement?
(4)
Who does Lindley LJ say has the onus of proof to prove that the advertisement is too uncertain or
vague to be the basis of a legal agreement?
(5)
Do you think he confuses an issue of uncertainty with that of ambiguity?
(6)
Do you think he is right when he construes the advertisement from the position of a reasonable
business person and for the purposes of certainty asks whether it makes business sense?
(7)
Does Bowen LJ take a different view: check it when you get home?
(8)
How do you think Lindley LJ came to the conclusion that the advertisement contained a request to
use the smoke ball?
(9)
Why was this important?
(10)
Do you not think the case really applies a reliance model of contract to bind a person to what was
otherwise a gratuitous promise; given that she had to use the ball as instructed over a period of time
before she accepted the offer? Moreover does it not appear as if the contractual obligation in fact
matured over time during her acts of reliance? If so there is no formal point of formation and would
not that have repercussions for the view that you can revoke an offer prior to acceptance?
(11)
Do you think the case suggests a third model of contract that of reasonable expectation? That is,
what the case really did was hold the Carbolic Smoke Ball Co to a gratuitous promise because of the
reasonable expectation it engendered in Mrs Carlill.
(12)
If that is correct, should we really have a problem accepting the legitimacy of Williams v Roffey?
(13)
Given all the above what do you think of Lindley LJ suggesting that the consideration for the
Company's promise was either the benefit of increased sales or the detriment she suffered in using it
as instructed?
21
9. Read through the following question. After you have read it consider how you might answer it in point
form and in terms of structure. You should then read through the answers to the questions contained on
the following pages. These answers will give you an idea of different quality answers. Discuss in class
what distinguishes these answers.
Question
Following lengthy negotiations for the acquisition of cable television rights to the 2012 Olympics, Alice and
Bruce sign the following document:
Heads of Agreement - Cable Television Rights
This document records the completion of negotiations of the Heads of an Agreement by virtue of which Alice
and Bruce agree to execute a formal contract which gives effect to each of the terms set out below.
1. Alice agrees to acquire from Bruce, and Bruce agrees to grant, the exclusive right to exploit the licence
which Bruce holds to televise the 2012 Olympics.
2. Alice agrees to televise all events at the 2012 Olympics and to provide facilities sufficient to enable
appropriate overseas telecasts.
3. Alice agrees to pay a sum of $3 million on the signing of the formal contract.
4. Alice agrees to pay such sum as Bruce considers to be sufficient in respect of the revenue obtained from:
(a) approved sponsors; and
(b) overseas telecasters.
5. Such other terms as may be agreed between the parties, acting in good faith and in a spirit of co-operation
appropriate to the event to which the Agreement relates. All such terms to be:
(a) necessary for the efficacy of the venture; and
(b) of a kind normally found in contracts of this type.
January 1, 2010
Alice decides that the price is too high and refuses to comment on a draft of the formal contract prepared by
Bruce's solicitors. The draft in fact contains a large number of additional terms, including an obligation that
Alice spend no less than $2 million in promoting the telecast and obtaining sponsors.
Advise Bruce whether he has any contractual rights against Alice.
22
PASS WITH MERIT UNDER EXAM CONDITIONS
Mostly answers the question
 Contains no significant errors and highlights main issues fairly well.
 Attempts a critical approach to the issues.
 Demonstrates independent research and thought appropriate to addressing the main issues.
 Has a clear structure and reasonably clear expression.
For B to have contractual rights against A it is necessary to prove there is a contract. For there to be a
contract it is necessary for the parties to have reached an agreement. This can be proven by using the tools
of offer and acceptance or by conduct. In this case the parties express the document to represent the
completion of negotiations for the Heads of Agreement. From this it is reasonable to infer that an agreement
has been reached with the offer and acceptance being the promises made in the document that has been
signed.
Although the parties may have reached an agreement this will not be upheld by a court unless it can be
said to be certain and complete. Whether or not it is certain and complete is determined objectively from the
position of the parties. In this case the ultimate purpose of the transaction is the televised coverage of a
sporting event which will require detailed drafting. That detailed drafting is not in the heads of agreement and
the issue is whether the heads of agreement can stand on its own.
The agreement is expressed to made subject to the execution of a formal contract. The meaning of
such a provision was dealt with by the High Court in Masters v Cameron. The court held that such a clause
can have one of three meanings, first, that the parties intend to be immediately bound, second that the
parties intend to be immediately bound but performance is suspended until execution and third, the parties
do not intend to be bound at all until execution. There is a presumption that the latter applies. It is suggested
that in this case the agreement falls into this third category as it is expressed in terms that the formal contract
will be the contract that gives effect to clauses 1-5. The reference to the word ‘terms’ should not be taken to
suggest that parties intend the heads of agreement to contain statements to truth of which is guaranteed as
that is giving to the term a technical legal meaning that the parties would not have envisaged.
In addition to the above it can be seen that not even the price has been finalised; the final price is left up
to the discretion of B. This renders the agreement too uncertain. Moreover, the agreement cannot be saved
by severing this term as the price for the right is crucial to the transaction. Severance would result in A being
prima facie liable to only pay a 3 million dollar upfront payment for the rights.
Clause 5 also gives rise to uncertainty. It reads like an agreement to agree which cannot be given effect
to as it is illusory. The placing of a duty of good faith, which is a developing doctrine in Australian contract
law, cannot save an agreement to agree as it does not provide a criterion to make the parties agree. Even if
the provision was construed as being no more than an agreement to negotiate in good faith towards a final
contract it would not be upheld as negotiations for a final contract are not in evidence and the mechanism to
resolve a break down in negotiations is uncertain in its operation, see Coal Cliff Collieries Pty Ltd v Sijehama
Pty Ltd.
DISTINCTION UNDER EXAM CONDITIONS
Completely answers the question in an original or unanticipated way
 Contains striking originality or creativity of approach or analysis.
 Demonstrates exhaustive or innovative research.
 Exceptionally well written.
 Is otherwise exceptional in some way.
Whether or not B will have a cause of action for damages for breach of contract depends on whether the
Heads of Agreement is itself an enforceable contract. Since A and B have executed the Heads of Agreement
they themselves may have come to an agreement, and execution excuses the need to go through an offer
and acceptance analysis to find an agreement. Moreover, the language of the document reflects this
conclusion; it records the completion of negotiations for the ‘Heads of Agreement’. Nevertheless, as a matter
of law, the parties must have reached a certain and complete agreement R. Under the objective theory of
contract; it cannot be concluded that the parties have reached an agreement if it is impossible to ascertain
the meaning and legal effect of the terms agreed. Moreover, despite the execution of a document, there will
be no enforceable agreement if the contents of that document evidence a positive intention not to contract. In
this case, the determining factor will be the efficacy of the good faith provision. To reach and understand that
point it is necessary to investigate some of the earlier provisions of the agreement.
Clauses 1-3 of the agreement set out the basic obligations of the parties. The transaction involves the
granting of rights to televise the Olympic Games. Such a transaction would ultimately require the settling of
complex provisions under a formal contract. The parties have at most concluded an important part of their
negotiations from which they intimate they will not go back on: they have agreed on a basic pricing structure
and have agreed to negotiate exclusively with each other to finalise the deal, see Seppelt & Sons Ltd v
Commissioner for Main Roads. Although that does not evidence a concluded contract to televise the games,
it may be enough for B at this point if there is an effective agreement to continue to negotiate. That is, the
23
Heads of Agreement impose no present duty unless it requires a commitment to negotiation, as it merely
expresses an agreed expectation.
Clause 4 raises a problem for B as it shows that the ultimate price A must pay is at the discretion of B,
with no obvious controls on that discretion. From the aspect of valuable consideration this is the reverse of
the situation in Placer Development Ltd v Commonwealth. A has promised to pay but the amount is at the
discretion of B, not A. Arguably, it is not a case of A promising to do nothing nor a case of B promising to do
nothing, the ultimate consideration lying in the mutual promises contained in clause 1. Nonetheless, there is
a strong argument that A’s consideration consists not only in the promises contained in clause 1 but also in
clauses 2, 3 and 4, and that clause 4 provides illusory consideration even though it is B who must determine
the amount, and not A, because there is no mechanism for working out the figure; it is equivalent to A
promising nothing. If these clauses do reflect the intended consideration then it would not be possible to
sever clause 4 from the more certain promises in clauses 1, 2 and 3 as that does not represent the intention
of the parties. Moreover, the granting this discretion to B may evidence a lack of intention to contract with B.
However, that lack of intention may only relate to the final transaction and does not negate the possibility of
an intention to contract on the terms of the Heads of Agreement.
The entire agreement is expressed to be subject to the execution of a ‘formal contract which gives
effect to each of the terms’. The effect of such provisions depends on construction, that is, the reasonable
intention of the parties, see Masters v Cameron. Such provisions may evidence an intention to immediately
contract, in some cases with performance being suspended until such execution, or they may evidence a
lack of an intention to immediately contract. The provision states that the formal contract is for the purposes
of giving effect to the terms set out in the Heads of Agreement. So it is arguable that the parties intend that
the clauses are to have no effect until such a document is executed or at least performance is suspended
until such time. Despite this, the subject to provision may also be simply referring to the more detailed
contract, it being a document that will include the obligations agreed under the Heads of Agreement.
Moreover, concluding that the subject to provision implies a lack of intention to contract until execution
appears at odds with clause 5, which at least impliedly requires the further negotiations of the parties which
must take place prior to the execution of the formal contract. It is at least arguable that the ‘subject to’
provision does not inhibit the Heads of Agreement taking immediate effect.
Despite the above, clause 5 does introduce the principal difficulty for B. First, it is drafted in terms of an
agreement to agree. Generally, such agreements are considered illusory; see May & Butcher Ltd v R, Coal
Cliff Collieries Pty Ltd v Sijehama Pty Ltd. The rare instances in which they have been upheld are where the
parties have evidenced a commitment to the transaction by partly performing and, in particular, by
performing those obligations that are now being claimed by one party to render the contract void for
uncertainty, see Foley v Classique Coaches. Perhaps such cases are now best seen are examples of
estoppel, but in any case there is no evidence of reliance by either party in this case.
There is then an issue as to whether an express obligation of good faith and co-operation can save
what would otherwise be an agreement to agree. It is submitted that it cannot; one cannot agree to negotiate
to agree. If I am wrong on that point there is still an issue as to whether the good faith provision can save the
uncertainties raised by the other clauses. At present in New South Wales a good faith negotiation provision
can only be used to uphold the bargain if the negotiations for the agreement are well advanced and if there is
a mechanism for resolving disputes should negotiations break down, see Coal Cliff Collieries Pty Ltd v
Sijehama Pty Ltd. The Heads of Agreement expresses the ultimate intent of the parties but lacks any detail in
what would be a complex transaction. It is irrelevant that negotiations may in fact be well advanced; this must
be reflected in the terms of the Heads of Agreement as that is the transaction that B wants upheld as a
contract.
The mechanism provided to resolve negotiation breakdowns will not save the situation. Terms
‘necessary’ for the venture only captures those terms that are obvious. This mechanism will not allow for the
implication of the complex terms that are necessary for this transaction. Reference to an external standard
only helps if it exists; the Olympics are a rare event and the parties vary each time and technology varies
between games. It is doubtful that one could produce a set of standard terms for such a contract, see
Whitlock v Brew; nor that there is a trade in such contracts, see Three Rivers Trading Co Ltd v Gwinear &
District Farmers Ltd.
Finally, B might argue that clause 5 could be upheld as a contract in its own right on the basis that it
constitutes an agreement to negotiate. However, the language itself does not reflect such an agreement so
as to sever it, and at present such clauses have only been considered are being relevant to the efficacy of
the entire agreement on the principles discussed above. It follows that B has no contractual rights against A.
24
Construction
10. Helen owns a suburban parking station. At the entrance to the station, an automatic machine issues
customers a ticket as they drive in and printed on the front is “Customers are kindly requested to note
that vehicles are parked only subject to the conditions displayed on the premises.” The conditions are
displayed on a notice attached to the wall of the office to which customers go to pay the parking fees
prior to leaving the parking station. The notice reads:
Conditions of Parking
The station is open from 6am to 12pm midnight. Charges are $2 per hour or part thereof; for vehicles left
overnight an additional fee of $200 is payable. Helen regrets that she cannot accept any responsibility
for any harm, loss or damage whatsoever.
When customers pay the parking fees they are given a document headed “Receipt” which indicates the
amount paid and also repeats the words of the notice on the wall.
Andrew, Joan and Peter all recently parked their cars in the parking station. They had each used the
station about once a month over the past year, but had never read the ticket, the notice or the receipt (all
of which have been used in exactly the same form throughout the period).
Andrew’s car was stolen when a thief persuaded Helen that he was the owner of the car and had lost his
ticket, and Helen allowed him to take the car away. The car has not been recovered.
When Joan came to collect her car, Helen was assisting another customer who had trouble parking his
car. Helen carelessly drove over Joan’s foot causing her considerable injury.
Peter had too much to drink after work at the pub, forgot about his car until the station had closed and
was outraged the next morning when the cashier demanded payment of $200 in addition to the normal
parking fee. He refused to pay the $200.
Helen is threatening to sue Peter for $200. Andrew is threatening to sue Helen for the value of his car
and Joan is threatening to sue Helen for compensation for her injuries.
What would your advice be to all the parties?
Answer this question by reference to general principle; you need not consider statutory provisions.
11. John owned a truck and operated a business carrying goods within the Sydney metropolitan area. He
sometimes drove the truck himself but often employed casual drivers to do this work.
Tom operated a small business manufacturing high quality clothing. In October he needed several
cartons containing clothing to be delivered to a customer and, as the carrier he usually used could not do
the job for several days, he telephoned John who agreed to deliver the goods that day at a price of $50.
On that day John employed Bill (who had not worked for him before) to drive the truck. When he arrived
at Tom’s premises to pick up the cartons, Bill handed to Tom a printed document headed ‘Invoice’. It
contained handwritten details of Tom’s name and address and that of the firm to which the cartons were
to be delivered, and of the price for the job. The invoice contained a printed statement that the price must
be paid within 7 days and also contained, at the bottom, the following printed statement:
Important
All goods are accepted on the basis that the carrier is not liable for more than two times the contract
price in the event of any loss or damage whatsoever. The benefit of this clause extends to all
servants, agents and sub-contractors of the carrier, for whom the carrier contracts as agent.
Tom had dealt with John 10 times over the previous three years. On each occasion the agreement for
the job was made over the telephone and the driver (who was sometimes John but often another driver)
handed an invoice to Tom when the goods were picked up. On each occasion the invoice was (except
for the handwritten details) identical to that handed over on this occasion. On none of these occasions
did Tom read the notice at the bottom of the invoice.
The goods, valued at $5,000 were stolen when Bill stopped at a hotel for a drink while on the way
to the destination.
John has paid Tom $100 but refuses to pay any more. Bill refuses to pay anything to Tom. Advise
Tom.
Answer this question by reference to general principle; you need not consider statutory provisions.
25
Performance and breach
12. Dim agrees to pay Clever $20 an hour for ten one hour tutorials in contract. Clever concludes each
tutorial 5 minutes early. Dim argues that he is under no obligation to pay for the tutorials. Is he right?
What if the tutorials had finished 15 minute early?
13. Anna agrees to build a new kitchen for Robert. The contract provides that the kitchen cupboards are to
be made of ‘oak’. Robert insists that the cupboards be constructed out of English oak but Anna claims
that she is entitled to use Tasmanian oak. Robert maintains his position and Anna refuses to do the
work. Advise Anna.
14. Betty is having a house built. She employs Allen to install electrical wiring. The contract specifies Emu
brand wiring and requires four double power points to be installed in every room. Betty agrees to pay
$10000 for the work.
Because Emu brand wiring is not available, Allen uses Koala wiring, knowing that it made by the same
manufacturer as Emu. In fact the only difference between the two types of wiring is that they are
distributed by different retailers. He does not tell Betty of the change. Due to an oversight Allen installs
four single power points in each room.
Betty refuses to pay for the work. To replace the power points with double power points will cost
$400. The cost of replacing the Koala wiring with Emu wiring which is now available is $5000. Allen is
willing to replace the power points without cost to Betty but refuses to bear the cost of rewiring.
Advise Betty.
15. On 1 June Michael agrees in writing to manufacture three machines for Betty and to deliver them by
three separate deliveries on 1 July, 1 August and 1 September. Michael delivers the first machine on 20
July and Betty accepts it. On 22 July Betty learns that Michael’s factory is behind in its work and that
delivery of the second machine will be delayed. Advise Betty? What if Michael ceased to carry on
business on 22 July?
16. Lady Imogen consults Hugo, a celebrated and popular artist, to paint a portrait of her husband Sir Jasper
for $10,000. The finished picture is to be presented to Kudos College, of which Sir Jasper is a Senior
Fellow. Soon after the painting is begun, Lady Imogen discovers that Sir Jasper has been having an
affair with his secretary. She declares that she will have nothing further to do with him, and instructs
Hugo to stop work immediately. But Hugo, encouraged by Sir Jasper who continues to come for sittings,
finishes the portrait and delivers it to Kudos College. The master and fellows receive it with great
pleasure. When Lady Imogen receives Hugo's bill for $10,000, her indignation knows no bounds. Advise
her.
17. James enters into a contract with Bruce for the construction of a swimming pool in Bruce's garden for
$5,000. Of this, $2,000 is to be paid when the excavation is complete; $2,000 when the concreting has
been done; and the balance "on final and satisfactory completion" of the work. The contract provides that
the excavation is to be completed by April 1; that the concreting is to be done by May 1; and that the
pool is to be finished and ready for use on June 1. It also provides that Bruce is to be entitled to cancel if
at any stage James is more than 2 weeks behind schedule with the work. Soon after James has started
to do the excavation, some of his workers fall ill, with the result that the work is delayed and the
excavation is not completed until April 21. Bruce is aware of these delays but does not exercise his right
to cancel until May 16 when James (by dint of great efforts to speed up the work) has nearly finished the
concreting. On May 16, a reasonable person in Bruce's position would have concluded that it was
impossible for James to finish the work before June 7 at the earliest. Bruce has paid James the $2,000
due on completion of the excavation, but has made no further payment. Advise James, as at May 17th.
18. On January 2 Seller in Sydney and Buyer in Melbourne enter into a written contract for the sale of wheat
which includes the following terms:
1 Price - $100 per tonne
2 Payment - Cash on delivery at Buyer’s warehouse
3 Quantity - 1000 tonnes
4 Description - Grade A wheat
5 Quality - Wheat to be of tiptop quality on arrival
6 Delivery - March
On 12 January Buyer faxes to Seller: “Stocks of wheat too great refuse to honour contract with you”.
Seller receives this fax but makes no reply. On April 2 Seller tenders to Buyer a consignment of
1000 tonnes of Grade A wheat. Due to the wheat not being of ‘tiptop quality’ its value is 10% less than
that of wheat of tiptop quality. Buyer rejects the wheat.
Assuming the contract is governed by NSW law, what right, if any, do Buyer and Seller have
against each other? If you consider that either (or both) of the parties has a right to damages, explain the
basis on which those damages would be quantified.
26
Would your answer differ if Seller had failed to deliver any wheat at all because its stocks of wheat
had been destroyed by a gale? Would it be relevant to know that stocks of A grade wheat were available
from South Australia at $250 per tonne?
19. For the purpose of advertising its chocolate products the Deadly Delicacy Co Ltd entered into a contract
with Plainwords Advertising Agency Ltd. The contract which was in writing and dated October 1
contained the following terms:
A. Plainwords will at its own expense prepare posters advertising the chocolate products of Deadly.
B. The posters will be displayed on billboards having a minimum height of 3m.
C. The billboards will be erected outside the University of Sydney and display of the advertisements
will commence no later than November 1.
D. The advertisements will remain on display for 3 months and will be at all times and remain the
property of Plainwords.
E. Deadly will pay to Plainwords a fee of $1000 per month payable on December 1, January 1 and
February 1.
The following events have taken place. On October 15 Deadly decided that chocolate is harmful to
health and discontinued manufacturing chocolate products. On the same day Deadly notified
Plainwords that it was cancelling the contract. Plainwords refused to agree to the cancellation of the
contract. However, no advertisements were displayed by Plainwords until November 3 due to a
delay in the printing of the advertisements. When displayed the advertisements appeared on
billboards measuring 2.8m in height.
Advise Deadly of what rights, if any, it has against Plainwords.
Would your advice differ if the contract had contained a term requiring Plainwords to obtain
the approval of Deadly to the format of the advertisements and no such approval had been sought?
20. Construction Ltd was employed by Jock to construct some apartments on property owned by Jock. The
agreed price was $1 million. This was to be paid by 10 equal $100,000 instalments which fell due under
the contract on the first day of each month - payments therefore were not necessarily apportioned to
work done. Construction Ltd had been told by Jock that it was imperative that the apartments be
completed by the end of that 10 month period as he had already entered into lease agreements with
tenants for the apartments and those tenancies were to commence soon after the 10 month period had
elapsed.
On the fifth day of the eighth month the manager of Construction Ltd approached Jock and said
'the eighth instalment fell due on the first of the month, why have you not paid it? And by the way there is
no chance of me being able to complete these apartments on time unless you agree to pay an extra
$100,000 on top of the agreed contract price'.
At the time the manager made this statement, they had in fact completed 80% of the works.
However, if Jock were to get a new builder to complete the works it would cost him 40% of the original
contract price.
(a) What rights may Jock have against Construction Ltd in the above scenario?
(b) If the contract were to be discharged, can Construction Ltd sue for the 8 th instalment that
remains unpaid at this point?
What would you consider to be the rights of the parties if Jock agreed to pay the extra $100,000
requested by Construction Ltd and if Construction Ltd then completed all the building work on time?
21. The terms of a contract for sale of steel dated 21 February 2008 between Sally and Bruce provide:
1.
Quantity: 100 tonnes.
2.
Quality: Grade A.
3.
Delivery: Two equal instalments in May and June.
4.
Price: $100,000 (in total).
5.
Payment: Cash, $50,000 on each instalment delivery.
On 1 May Bruce accepts delivery of (and pays for) the first instalment. The steel is Grade B, an inferior
grade. On 8 May he emails Sally in the following terms:
“First instalment not of contract quality. I claim compensation. Please confirm June
instalment will conform to contract.”
Sally replies, on 11 May:
“Under our contract I am under no obligation to respond to your 8 May email.
However, I suggest an additional payment of $20,000 if you require absolute
protection in relation to June instalment.”
On 13 May Bruce telexes Sally:
“Your conduct under this contract justifies termination. I hereby exercise that right.”
Advise Bruce whether he is justified in terminating the contract, and whether he may claim
compensation from Sally.
27
Would your answer differ if Bruce had discovered on 14 May that Sally had sold her entire stock of
steel to Zena on 10 May?
What would Bruce's position have been if, instead of accepting the first instalment, Bruce had
rejected it and also purported to terminate the contract?
Remedies and Vitiating Factors
22. Alf, a poultry farmer, discovers a fault in the motor powering the ventilation system of his largest poultry
house. He telephones the manufacturers, Bifco, explaining his predicament and places an urgent order
for a replacement motor to be sent. Bifco mistakenly sends a motor of the wrong specifications and Alf,
carelessly failing to notice this, installs it. The motor is too powerful and the entire system is damaged as
the fan mechanism disintegrates. Advise Alf in the following alternative circumstances:
(i)
The house contains an exotic strain of young peacocks which Alf has been rearing for Cliff
under an exceptionally lucrative contract; the peacocks die of suffocation.
(ii)
The house contains chickens which die after being infected by a rare virus to which poultry are
susceptible only in very hot conditions.
23. Ian and Jo have worked together successfully for some years as professional dancing partners and are
engaged to be married. Ian books a holiday for them both with Midi Tours Ltd, explaining to the manager
that they are exhausted after a long tour of exhibition dancing and are in need of a good break before
their wedding. The price of $500 each, which Ian pays, is inclusive of all travel and meals and
accommodation at the Seaview Luxury Hotel, St Tropez. When they arrive at St Tropez, the Seaview
Hotel has not been built and the Midi representative puts them instead in the Pension Pis-Aller, a thirdrate hotel some miles inland, where they have a miserable time for the first few days and then succumb
to food-poisoning after eating a meal prepared in the Pension's unhygienic kitchen. This causes Jo to
have a nervous breakdown which lasts for three months after their return home. The wedding has to be
postponed and Ian is unable to earn any income without his dancing partner. Advise Ian and Jo as to
their possible actions against Midi Tours Ltd. Would it affect the position if Jo had given Ian the $500 to
pay for her own share of the holiday?
24. Jack is a retired airline pilot who owns a valuable executive jet aeroplane, which he charters to
companies and individuals with himself as pilot.
On 1 September Jack entered into a contract with Ajax Ltd for the complete overhaul of the
aeroplane, at a cost of $500,000. The contract provided that the work would commence on 20
September and had to be completed no later than 1 October. Jack had told Ajax that he was anxious
that there be no delays as the aeroplane was his only source of income and “I have some very special
deals coming up”.
On 28 September only about half of the work had been completed. Jack expressed alarm, but Ajax
assured him that the work would be completed on time. In fact the work was not completed until 5
October. As a result of the unavailability of the plane, Jack was unable to fulfil a contract he had to fly
Magdalena, a famous American rock star, on a whirlwind concert tour of Australia.
Had Jack been able to perform his contract, he would have been paid at twice his usual rate for
charter work. As a result of losing this contract, Jack became depressed as he had been an ardent
admirer of Magdalena for many years and was devastated at not being able to get to know her during
the tour.
Jack seeks your advice as to what rights he may have against Ajax.
In addition, discuss what Jack’s position would be in the following alternative situations:
(a) Contrary to all expectations, Ajax completed the work on time and on 2 October Jack agreed
that the following day he would fly Julie from Sydney to Bali. Julie told Jack that she had to be
in Bali the next day because she was one of the favoured contestants in the world yodelling
championships, the first prize for which was $1million. Jack was reluctant to undertake the trip
because he disliked flying overseas, but he relented when Julie agreed to pay him at the rate of
$3000 per flying hour (his usual rate being $1000 per hour). Due to navigational error, Jack
ended up landing the plane in Jakarta instead of Bali, as a result of which Julie was so late she
was disqualified from the competition. She seeks damages from Jack.
(b) The reason why Jack had contracted with Ajax was that he had entered a contract to perform
aerial stunts at a series of airshows throughout Australia. The overhaul was special
performance tuning needed only for this unusual type of work and was quite unnecessary for
normal operations. Ajax’s work was completed on time but Bill, the entrepreneur organising the
airshows, cancelled his contract with Jack on the day before the first show. When he entered
the contract with Jack, Bill was aware that Jack would be entering into the contract for the
overhaul with Ajax and knew also the cost of this work. Jack wants to recover the cost of Ajax’s
work from Bill. Bill says Jack would probably have made less than that amount had the contract
gone ahead. This was because Jack’s remuneration was to be according to a formula based on
the number of tickets sold at the airshows and despite wide publicity, so little interest had been
shown by the public that Bill had decided to cut his losses by cancelling all of the shows.
28
25. Fine Building Pty Ltd contracted on 30 January with Jill to construct a large toy warehouse and adjoining
store in Wollongong for five instalment payments of $1million each by 10 July. Fine Building did not finish
the building until 10 October.
Jill:
(a)
refuses to pay Fine Building the final instalment of $1million due on completion;
(b)
claims damages of $100,000 from FB for the increased price of a shipload of Japanese toys
ordered on 30 February. Jill was unable to accept the shipload on 10 July due to lack of
storage space. By 10 October the price of another shipment had risen by $100,000;
(c)
claims damages for sleepless nights, anxiety and nervous exhaustion induced by attempting
to encourage FB to complete the building on time.
FB states that Jill should have opened on 10 July in one of the other large warehouses available for
rental in the Wollongong area.
Advise Jill in relation to all of these matters.
26. Anna alleges that she was induced to buy a block of land from Robert by the representation of Charles,
Robert’s agent, that the Education Department planned to build a school within 200 yards of the land.
The Department had no such plans and Charles based the statement on something his wife had been
told by a neighbour. Charles did not make enquiries to check this information. Advise Anna.
27. Inge bought a hotel from Tim. Inge claims that Tim misrepresented the liquor purchases. Tim alleges he
did state a figure to Inge but added “Don’t take my word for it, check at the licensing court”. The records
of the court show the license fee paid by a licensee and from this the purchases can be calculated. Inge
checked but miscalculated the purchase figure. Advise Inge.
28. Smith, the owner of an art gallery, while dining at Jones’ home, offered to buy a painting hanging on the
wall for $50000. Jones collected paintings as a hobby. Both believed the painting was by Dobell and
Jones described it as such. In fact it was a copy worth $100. The next day Smith paid for the painting,
took it home and discovered the truth a week later. Advise both parties.
29. Blands, a large Sydney law firm, have just moved into a new office block. Wishing to impress their
clientele, they contact Connie Laurel, the local business identity and long time patron of the firm, with a
request that she loan them some of the priceless paintings from her private collection for display in the
magnificently ornate lobby of the new building. She agrees, but only on condition that Blands organise
for the paintings to be closely guarded. Blands accordingly enter into an agreement with Safehouses Inc
(SI). Under this agreement, which is to subsist for 2 years, SI is to supply guards who will be stationed in
the lobby round the clock. The agreement makes no mention of the paintings as such, though SI is quite
aware of the arrangement with Connie and charge a fee which is twice their normal rate, reflecting what
the SI representative claims are the “unusual” circumstances involved.
On the day before the paintings are to be delivered and the SI guards are to commence work,
word comes that Connie’s entire collection, including the paintings earmarked for Blands, have just been
destroyed by fire. Blands inform SI that the “deal is off”. SI responds by claiming that Blands have
repudiated the contract and commences an action for damages. Advise Blands as to any defence they
may have to this action.
Would your answer be different if:
(a)
it turned out that, unknown to either party, the paintings had been destroyed before
Blands and SI had entered into their agreement
(b)
SI had been aware at the time of the agreement that the paintings had already been
destroyed but had remained silent?
30. In 2004, Lydia went to Anne's antique shop, where she saw some chairs which she thought were
genuine Chippendale. She inspected them for woodworm, and bought them for $8,000. Anne, too,
thought that they were Chippendale, but had failed to check a catalogue, well-known in the trade, which
would have shown conclusively that they were in fact late Victorian reproductions. Lydia's friends were
all invited to view the chairs; one very knowledgeable one, Tom, told Lydia that they were reproductions
and unlikely to be worth even $500. However, Lydia did not believe him. In 2005, Lydia sold the chairs to
her friend Therese; she told Therese that both she and Anne believed them to be Chippendale, though
she could not guarantee that they were. She did not mention Tom's comment. On delivery, Therese
discovers the truth, and claims her money back. Advise Lydia.
31. On 1 April 2004 Joy signed a contract with Health and Dance Studios Ltd. She made an initial payment
of $3000 and agreed to pay a further amount of $12000 over the next two years. In return she was to
attend fitness classes twice a week.
The next day Susan signed a contract with the same company. She made an initial payment of
$2000 and agreed to pay a further amount of $8000 in instalments over the next 3 years for the right to
attend a weekly “dance and self-confidence” class.
Each contract contained the following clause:
29
I fully understand that if I desire to withdraw from the classes for any reason whatsoever
(including physical disability or medical conditions) no cancellation of the contract or
repayment of moneys is possible. All instalments must continue to be paid whether or not
classes are attended. However, if you are satisfied that I have ceased attendance because of
a physical disability or medical condition, you will extend the availability of classes to me until
such time as I can resume continuous tuition.
One month after signing her contract Joy was diagnosed as suffering from an incurable rare
disease which makes physical exercise dangerous to her life. At the same time Susan was injured in
a motor car accident. She will be unable to resume classes for at least 2 years.
Joy is a solicitor working in a large city firm. She read the contract carefully before signing it.
She thought the price seemed rather high but she did not make enquiries of competing studios
because she was too busy, and her employer would in any event reimburse her for the cost of
classes. Susan, now aged 18, left school at the earliest possible date because of her poor scholastic
results. She worked ever since leaving school as a machinist in a local factory. She undertook the
course contract without reading it “because I am not too clever at reading and those forms never
make much sense to me”. She had thought of showing the form to her father before signing it, but
did not do so because the salesman told her that there was a heavy demand for these classes and
he could not guarantee to hold the price if she did not sign immediately.
Health and Dance Studios Ltd refuse to cancel either contract or to refund any moneys
already paid. It recently received letters from solicitors acting for Joy and Susan threatening to seek
relief. Studios admits that its charges for tuition are approximately three times as high as those of
competing studios but states that it has never claimed to be the cheapest.
Studios seeks your advice as to the likelihood of Joy and Susan obtaining relief and, if relief
is likely to be given, what form that relief might take.
32. Dither agrees with Loader, a removal contractor, to pack and remove his furniture from Melbourne to
Sydney on April 1 for an all-in cost of $7500; he has sold his house to Mumbler and is bound to give
vacant possession at 3pm on that day. On the morning of 1 April, before any packing has begun, Loader
tells Dither that he will not go ahead with the job unless Dither promises to pay him an extra $2500, and
also $500 each to his packers, Hurly and Burly. Dither says "You know that all the other carriers are
booked up for weeks and I have no option," and signs a note promising to pay them the $3500. Loader
then finds Dither's wife Witter alone in the drawing room and says to her that he cannot guarantee that
Hurly and Burly will handle her husband's porcelain collection safely unless she promises to pay Loader
another $1000. Very frightened, she signs a promise to pay this sum, saying "This is blackmail".
Everything is safely delivered and on time. Loader, Hurly and Burly demand the additional sums
promised.
Advise Dither and Witter.
33. Lou, a sales assistant whose husband has recently died, was very concerned about how she would be
able to manage without his income. She discussed her worries with Matt, a friend of the family who is a
successful businessman, and matt suggested that Lou sell her six-bedroom house and move into a small
flat. Later he offered to buy the house for $250,000 and Lou accepted this offer and entered into a
written contract to sell the house to Matt. Lou has now discovered that the house is worth over $500,000
and seeks your advice.
30
CIVIL LIABILITY ACT 2002 (NSW)
Part 1 Preliminary
3A Provisions relating to operation of Act
(1) A provision of this Act that gives protection from civil liability does not limit the protection from liability
given by another provision of this Act or by another Act or law.
(2) This Act (except Part 2) does not prevent the parties to a contract from making express provision for their
rights, obligations and liabilities under the contract with respect to any matter to which this Act applies and
does not limit or otherwise affect the operation of any such express provision.
(3) Subsection (2) extends to any provision of this Act even if the provision applies to liability in contract.
Part 1A Negligence
Division 1
5.
Preliminary
Definitions
In this Part:
harm means harm of any kind, including the following:
(a)
personal injury or death,
(b)
damage to property,
(c)
economic loss.
negligence means failure to exercise reasonable care and skill.
personal injury includes:
(a)
pre-natal injury, and
(b)
impairment of a person’s physical or mental condition, and
(c)
disease.
5A
Application of Part
This Part applies to any claim for damages for harm resulting from negligence, regardless of whether the
claim is brought in tort, in contract, under statute or otherwise. …
Division 3
Causation
5D General principles
(1) A determination that negligence caused particular harm comprises the following elements:
(a) that the negligence was a necessary condition of the occurrence of the harm ("factual causation"), and
(b) that it is appropriate for the scope of the negligent person’s liability to extend to the harm so caused
("scope of liability").
(2) In determining in an exceptional case, in accordance with established principles, whether negligence that
cannot be established as a necessary condition of the occurrence of harm should be accepted as
establishing factual causation, the court is to consider (amongst other relevant things) whether or not and
why responsibility for the harm should be imposed on the negligent party.
(3) If it is relevant to the determination of factual causation to determine what the person who suffered harm
would have done if the negligent person had not been negligent:
(a) the matter is to be determined subjectively in the light of all relevant circumstances, subject to paragraph
(b), and
(b) any statement made by the person after suffering the harm about what he or she would have done is
inadmissible except to the extent (if any) that the statement is against his or her interest.
31
(4) For the purpose of determining the scope of liability, the court is to consider (amongst other relevant
things) whether or not and why responsibility for the harm should be imposed on the negligent party.
PART 2 - PERSONAL INJURY DAMAGES
Division 1 - Preliminary
11 Definitions
In this Part:
"injury" means personal injury and includes the following:
(a) pre-natal injury,
(b) impairment of a person’s physical or mental condition,
(c) disease.
"personal injury damages" means damages that relate to the death of or injury to a person.
11A Application of Part
(1) This Part applies to and in respect of an award of personal injury damages, except an award that is
excluded from the operation of this Part by section 3B.
(2) This Part applies regardless of whether the claim for the damages is brought in tort, in contract, under
statute or otherwise.
(3) A court cannot award damages, or interest on damages, contrary to this Part.
(4) In the case of an award of damages to which Part 2A (Special provisions for offenders in custody)
applies, this Part applies subject to Part 2A.
Division 3 - Fixing damages for non-economic loss (general damages)
16 Determination of damages for non-economic loss
(1) No damages may be awarded for non-economic loss unless the severity of the non-economic loss is at
least 15% of a most extreme case.
(2) The maximum amount of damages that may be awarded for non-economic loss is $350,000, but the
maximum amount is to be awarded only in a most extreme case.
(3) If the severity of the non-economic loss is equal to or greater than 15% of a most extreme case, the
damages for non-economic loss are to be determined in accordance with the following Table:
Table
Severity of the non-economic loss (as a Damages for non-economic loss (as a proportion of the
proportion of a most extreme case)
maximum amount that may be awarded for non-economic loss)
15%
1%
16%
1.5%
17%
2%
18%
2.5%
19%
3%
20%
3.5%
21%
4%
22%
4.5%
23%
5%
24%
5.5%
25%
6.5%
26%
8%
27%
10%
32
28%
14%
29%
18%
30%
23%
31%
26%
32%
30%
33%
33%
34%-100%
34%-100% respectively
(4) An amount determined in accordance with subsection (3) is to be rounded to the nearest $500 (with the
amounts of $250 and $750 being rounded up).
The following are the steps required in the assessment of non-economic loss in accordance with this section:
Step 1: Determine the severity of the claimant’s non-economic loss as a proportion of a most extreme case.
The proportion should be expressed as a percentage.
Step 2: Confirm the maximum amount that may be awarded under this section for non-economic loss in a
most extreme case. This amount is indexed each year under section 17.
Step 3: Use the Table to determine the percentage of the maximum amount payable in respect of the claim.
The amount payable under this section for non-economic loss is then determined by multiplying the
maximum amount that may be awarded in a most extreme case by the percentage set out in the Table.
Where the proportion of a most extreme case is greater than 33%, the amount payable will be the same
proportion of the maximum amount.
Part 3 – Mental harm
27 Definitions
In this Part:
"consequential mental harm" means mental harm that is a consequence of a personal injury of
any other kind.
"mental harm" means impairment of a person's mental condition.
"negligence" means failure to exercise reasonable care and skill.
"personal injury" includes:
(a) pre-natal injury, and
(b) impairment of a person's physical or mental condition, and
(c) disease.
"pure mental harm" means mental harm other than consequential mental harm.
28 Application of Part
(1) This Part (except section 29) applies to any claim for damages for mental harm resulting
from negligence, regardless of whether the claim is brought in tort, in contract, under statute
or otherwise.
(2) Section 29 applies to a claim for damages in any civil proceedings.
(3) This Part does not apply to civil liability that is excluded from the operation of this Part
by section 3B.
29 Personal injury arising from mental or nervous shock
In any action for personal injury, the plaintiff is not prevented from recovering damages merely
because the personal injury arose wholly or in part from mental or nervous shock.
30 Limitation on recovery for pure mental harm arising from shock
(1) This section applies to the liability of a person ("the defendant") for pure mental harm
to a person ("the plaintiff") arising wholly or partly from mental or nervous shock in
connection with another person ("the victim") being killed, injured or put in peril by the act
33
or omission of the defendant.
(2) The plaintiff is not entitled to recover damages for pure mental harm unless:
(a) the plaintiff witnessed, at the scene, the victim being killed, injured or put in
peril, or
(b) the plaintiff is a close member of the family of the victim.
(3) Any damages to be awarded to the plaintiff for pure mental harm are to be reduced in the
same proportion as any reduction in the damages that may be recovered from the defendant
by or through the victim on the basis of the contributory negligence of the victim.
(4) No damages are to be awarded to the plaintiff for pure mental harm if the recovery of
damages from the defendant by or through the victim in respect of the act or omission would
be prevented by any provision of this Act or any other written or unwritten law.
(5) In this section:"close member of the family" of a victim means:
(a) a parent of the victim or other person with parental responsibility for the victim,
or
(b) the spouse or partner of the victim, or
(c) a child or stepchild of the victim or any other person for whom the victim has
parental responsibility, or
(d) a brother, sister, half-brother or half-sister, or stepbrother or stepsister of the
victim.
"spouse or partner" means:
(a) a husband or wife, or
(b) a de facto partner,
but where more than one person would so qualify as a spouse or partner, means only the last
person to so qualify.
31 Pure mental harm--liability only for recognised psychiatric illness
There is no liability to pay damages for pure mental harm resulting from negligence unless the harm
consists of a recognised psychiatric illness.
32 Mental harm--duty of care
(1) A person ("the defendant") does not owe a duty of care to another person ("the
plaintiff") to take care not to cause the plaintiff mental harm unless the defendant ought to
have foreseen that a person of normal fortitude might, in the circumstances of the case,
suffer a recognised psychiatric illness if reasonable care were not taken.
(2) For the purposes of the application of this section in respect of pure mental harm, the
circumstances of the case include the following:
(a) whether or not the mental harm was suffered as the result of a sudden shock,
(b) whether the plaintiff witnessed, at the scene, a person being killed, injured or put
in peril,
(c) the nature of the relationship between the plaintiff and any person killed, injured
or put in peril,
(d) whether or not there was a pre-existing relationship between the plaintiff and the
defendant.
(3) For the purposes of the application of this section in respect of consequential mental
harm, the circumstances of the case include the personal injury suffered by the plaintiff.
(4) This section does not require the court to disregard what the defendant knew or ought to
have known about the fortitude of the plaintiff.
33 Liability for economic loss for consequential mental harm
A court cannot make an award of damages for economic loss for consequential mental harm
resulting from negligence unless the harm consists of a recognised psychiatric illness.
34
AUSTRALIAN CONSUMER LAW
2 Definitions
trade or commerce means:
(a) trade or commerce within Australia; or
(b) trade or commerce between Australia and places outside Australia;
and includes any business or professional activity (whether or not carried on for profit).
(2)
…(a) a reference to engaging in conduct is a reference to doing or refusing to do any act, including:
(i)
the making of, or the giving effect to a provision of, a contract or arrangement; or
(ii) the arriving at, or the giving effect to a provision of, an understanding; or
(iii) the requiring of the giving of, or the giving of, a covenant; and
(b)
a reference to conduct, when that expression is used as a noun otherwise than as
mentioned in paragraph (a), is a reference to the doing of or the refusing to do any act,
including:
(i)
the making of, or the giving effect to a provision of, a contract or arrangement; or
(ii) the arriving at, or the giving effect to a provision of, an understanding; or
(iii) the requiring of the giving of, or the giving of, a covenant; and
(c) a reference to refusing to do an act includes a reference to:
(i) refraining (otherwise than inadvertently) from doing that act; or
(ii) making it known that that act will not be done; and
(d)
a reference to a person offering to do an act, or to do an act on a particular condition,
includes a reference to the person making it known that the person will accept applications,
offers or proposals for the person to do that act or to do that act on that condition, as the
case may be.
4 Misleading representations with respect to future matters
(1) If:
(a)
a person makes a representation with respect to any future matter (including the doing of, or
the refusing to do, any act); and
(b)
the person does not have reasonable grounds for making the representation;
the representation is taken, for the purposes of this Schedule, to be misleading.
(2)
For the purposes of applying subsection (1) in relation to a proceeding concerning a representation
made with respect to a future matter by:
(a)
a party to the proceeding; or
(b)
any other person;
the party or other person is taken not to have had reasonable grounds for making the representation,
unless evidence is adduced to the contrary.
(3) To avoid doubt, subsection (2) does not:
(a)
have the effect that, merely because such evidence to the contrary is adduced, the person
who made the representation is taken to have had reasonable grounds for making the
representation; or
(b)
have the effect of placing on any person an onus of proving that the person who made the
representation had reasonable grounds for making the representation.
(4) Subsection (1) does not limit by implication the meaning of a reference in this Schedule to:
(a) a misleading representation; or
(b) a representation that is misleading in a material particular; or
(c) conduct that is misleading or is likely or liable to mislead;
and, in particular, does not imply that a representation that a person makes with respect to any
future matter is not misleading merely because the person has reasonable grounds for making the
representation.
Part 21—Misleading or deceptive conduct
18 Misleading or deceptive conduct
(1)
A person must not, in trade or commerce, engage in conduct that is misleading or deceptive or is
likely to mislead or deceive.
(2) Nothing in Part 31 (which is about unfair practices) limits by implication subsection (1).
Part 22—Unconscionable conduct
35
20 Unconscionable conduct within the meaning of the unwritten law
(1) A person must not, in trade or commerce, engage in conduct that is unconscionable,
meaning of the unwritten law from time to time.
Note: A pecuniary penalty may be imposed for a contravention of this subsection.
(2) This section does not apply to conduct that is prohibited by section 21.
within the
21 Unconscionable conduct in connection with goods or services
(1)
A person must not, in trade or commerce, in connection with:
(a) the supply or possible supply of goods or services to a person (other than a listed public
company); or
(b) the acquisition or possible acquisition of goods or services from a person (other than a listed public
company);
engage in conduct that is, in all the circumstances, unconscionable.
(2) This section does not apply to conduct that is engaged in only because the person engaging in the
conduct:
(a) institutes legal proceedings in relation to the supply or possible supply, or in relation to the
acquisition or possible acquisition; or
(b) refers to arbitration a dispute or claim in relation to the supply or possible supply, or in relation to
the acquisition or possible acquisition.
(3) For the purpose of determining whether a person has contravened subsection (1):
(a) the court must not have regard to any circumstances that were not reasonably
foreseeable at the time of the alleged contravention; and
(b)
the court may have regard to conduct engaged in, or circumstances existing, before the
commencement of this section.
(4) It is the intention of the Parliament that:
(a)
this section is not limited by the unwritten law relating to unconscionable conduct; and
(b)
this section is capable of applying to a system of conduct or pattern of behaviour, whether or
not a particular individual is identified as having been disadvantaged by the conduct or
behaviour; and
(c)
in considering whether conduct to which a contract relates is unconscionable, a court’s
consideration of the contract may include consideration of:
(i) the terms of the contract; and
(ii) the manner in which and the extent to which the contract is carried out;
and is not limited to consideration of the circumstances relating to formation of the contract.
22 Matters the court may have regard to for the purposes of section 21
(1)
Without limiting the matters to which the court may have regard for the purpose of determining
whether a person (the supplier) has contravened section 21 in connection with the supply or
possible supply of goods or services to a person (the customer), the court may have regard to:
(a)
the relative strengths of the bargaining positions of the supplier and the customer; and
(b)
whether, as a result of conduct engaged in by the supplier, the customer was required to
comply with conditions that were not reasonably necessary for the protection of the
legitimate interests of the supplier; and
(c)
whether the customer was able to understand any documents relating to the supply or
possible supply of the goods or services; and
(d)
whether any undue influence or pressure was exerted on, or any unfair tactics were used
against, the customer or a person acting on behalf of the customer by the supplier or a
person acting on behalf of the supplier in relation to the supply or possible supply of the
goods or services; and
(e)
the amount for which, and the circumstances under which, the customer could have
acquired identical or equivalent goods or services from a person other than the supplier; and
(f)
the extent to which the supplier’s conduct towards the customer was consistent with the
supplier’s conduct in similar transactions between the supplier and other like customers; and
(g)
the requirements of any applicable industry code; and
(h)
the requirements of any other industry code, if the customer acted on the reasonable belief
that the supplier would comply with that code; and
(i)
the extent to which the supplier unreasonably failed to disclose to the customer:
(i)
any intended conduct of the supplier that might affect the interests of the customer;
and
36
any risks to the customer arising from the supplier’s intended conduct (being risks
that the supplier should have foreseen would not be apparent to the customer); and
(j)
if there is a contract between the supplier and the customer for the supply of the goods or
services:
(i)
the extent to which the supplier was willing to negotiate the terms and conditions of
the contract with the customer; and
(ii)
the terms and conditions of the contract; and
(iii)
the conduct of the supplier and the customer in complying with the terms and
conditions of the contract; and
(iv)
any conduct that the supplier or the customer engaged in, in connection with their
commercial relationship, after they entered into the contract; and
(k)
without limiting paragraph (j), whether the supplier has a contractual right to vary unilaterally
a term or condition of a contract between the supplier and the customer for the supply of the
goods or services; and
(l)
the extent to which the supplier and the customer acted in good faith.
Without limiting the matters to which the court may have regard for the purpose of determining
whether a person (the acquirer) has contravened section 21 in connection with the acquisition or
possible acquisition of goods or services from a person (the supplier), the court may have regard to:
(a)
the relative strengths of the bargaining positions of the acquirer and the supplier; and
(b)
whether, as a result of conduct engaged in by the acquirer, the supplier was required to
comply with conditions that were not reasonably necessary for the protection of the
legitimate interests of the acquirer; and
(c)
whether the supplier was able to understand any documents relating to the acquisition or
possible acquisition of the goods or services; and
(d)
whether any undue influence or pressure was exerted on, or any unfair tactics were used
against, the supplier or a person acting on behalf of the supplier by the acquirer or a person
acting on behalf of the acquirer in relation to the acquisition or possible acquisition of the
goods or services; and
(e)
the amount for which, and the circumstances in which, the supplier could have supplied
identical or equivalent goods or services to a person other than the acquirer; and
(f)
the extent to which the acquirer’s conduct towards the supplier was consistent with the
acquirer’s conduct in similar transactions between the acquirer and other like suppliers; and
(g)
the requirements of any applicable industry code; and
(h)
the requirements of any other industry code, if the supplier acted on the reasonable belief
that the acquirer would comply with that code; and
(i)
the extent to which the acquirer unreasonably failed to disclose to the supplier:
(i)
any intended conduct of the acquirer that might affect the interests of the supplier;
and
(ii)
any risks to the supplier arising from the acquirer’s intended conduct (being risks
that the acquirer should have foreseen would not be apparent to the supplier); and
(j)
if there is a contract between the acquirer and the supplier for the acquisition of the goods or
services:
(i)
the extent to which the acquirer was willing to negotiate the terms and conditions of
the contract with the supplier; and
(ii)
the terms and conditions of the contract; and
(iii)
the conduct of the acquirer and the supplier in complying with the terms and
conditions of the contract; and
(iv) any conduct that the acquirer or the supplier engaged in, in connection with their
commercial relationship, after they entered into the contract; and
(k)
without limiting paragraph (j), whether the acquirer has a contractual right to vary unilaterally
a term or condition of a contract between the acquirer and the supplier for the acquisition of
the goods or services; and
(l)
the extent to which the acquirer and the supplier acted in good faith.
(ii)
(2)
22A Presumptions relating to whether representations are misleading
Section 4 applies for the purposes of sections 21 and 22 in the same way as it applies for the purposes of
Division 1 of Part 31.
Part 23—Unfair contract terms
23 Unfair terms of consumer contracts
37
(1)
A term of a consumer contract is void if:
(a)
the term is unfair; and
(b)
the contract is a standard form contract.
(2) The contract continues to bind the parties if it is capable of operating without the unfair term. (3) A
consumer contract is a contract for:
(a)
a supply of goods or services; or
(b)
a sale or grant of an interest in land;
to an individual whose acquisition of the goods, services or interest is wholly or predominantly for
personal, domestic or household use or consumption.
24 Meaning of unfair
(1) A term of a consumer contract is unfair if:
(a)
it would cause a significant imbalance in the parties’ rights and obligations arising under the
contract; and
(b)
it is not reasonably necessary in order to protect the legitimate interests of the party who
would be advantaged by the term; and
(c)
it would cause detriment (whether financial or otherwise) to a party if it were to be applied or
relied on.
(2)
In determining whether a term of a consumer contract is unfair under subsection (1), a court may
take into account such matters as it thinks relevant, but must take into account the following:
(a)
the extent to which the term is transparent;
(b)
the contract as a whole.
(3)
A term is transparent if the term is:
(a)
expressed in reasonably plain language; and
(b)
legible; and
(c)
presented clearly; and
(d)
readily available to any party affected by the term.
(4)
For the purposes of subsection (1)(b), a term of a consumer contract is presumed not to be
reasonably necessary in order to protect the legitimate interests of the party who would be
advantaged by the term, unless that party proves otherwise.
25 Examples of unfair terms
(1)
(2)
Without limiting section 24, the following are examples of the kinds of terms of a consumer contract
that may be unfair:
(a)
a term that permits, or has the effect of permitting, one party (but not another party) to avoid
or limit performance of the contract;
(b)
a term that permits, or has the effect of permitting, one party (but not another party) to
terminate the contract;
(c)
a term that penalises, or has the effect of penalising, one party (but not another party) for a
breach or termination of the contract;
(d)
a term that permits, or has the effect of permitting, one party (but not another party) to vary
the terms of the contract;
(e)
a term that permits, or has the effect of permitting, one party (but not another party) to renew
or not renew the contract;
(f)
a term that permits, or has the effect of permitting, one party to vary the upfront price
payable under the contract without the right of another party to terminate the contract;
(g)
a term that permits, or has the effect of permitting, one party unilaterally to vary the
characteristics of the goods or services to be supplied, or the interest in land to be sold or
granted, under the contract;
(h)
a term that permits, or has the effect of permitting, one party unilaterally to determine
whether the contract has been breached or to interpret its meaning;
(i)
a term that limits, or has the effect of limiting, one party’s vicarious liability for its agents;
(j)
a term that permits, or has the effect of permitting, one party to assign the contract to the
detriment of another party without that other party’s consent;
(k)
a term that limits, or has the effect of limiting, one party’s right to sue another party;
(l)
a term that limits, or has the effect of limiting, the evidence one party can adduce in
proceedings relating to the contract;
(m)
a term that imposes, or has the effect of imposing, the evidential burden on one party in
proceedings relating to the contract;
(n)
a term of a kind, or a term that has an effect of a kind, prescribed by the regulations.
Before the Governor General makes a regulation for the purposes of subsection (1)(n) prescribing a
kind of term, or a kind of effect that a term has, the Minister must take into consideration:
38
(a)
(b)
(c)
the detriment that a term of that kind would cause to consumers; and
the impact on business generally of prescribing that kind of term or effect; and
the public interest.
26 Terms that define main subject matter of consumer contracts etc. are unaffected
(1)
(2)
Section 23 does not apply to a term of a consumer contract to the extent, but only to the extent, that
the term:
(a)
defines the main subject matter of the contract; or
(b) sets the upfront price payable under the contract; or
(c)
is a term required, or expressly permitted, by a law of the Commonwealth, a State or a
Territory.
The upfront price payable under a consumer contract is the consideration that:
(a)
is provided, or is to be provided, for the supply, sale or grant under the contract; and
(b) is disclosed at or before the time the contract is entered into;
but does not include any other consideration that is contingent on the occurrence or nonoccurrence
of a particular event.
27 Standard form contracts
(1)
(2)
If a party to a proceeding alleges that a contract is a standard form contract, it is presumed to be a
standard form contract unless another party to the proceeding proves otherwise.
In determining whether a contract is a standard form contract, a court may take into account such
matters as it thinks relevant, but must take into account the following:
(a)
whether one of the parties has all or most of the bargaining power relating to the transaction;
(b)
whether the contract was prepared by one party before any discussion relating to the
transaction occurred between the parties;
(c)
whether another party was, in effect, required either to accept or reject the terms of the
contract (other than the terms referred to in section 26(1)) in the form in which they were
presented;
(d)
whether another party was given an effective opportunity to negotiate the terms of the
contract that were not the terms referred to in section 26(1);
(e)
whether the terms of the contract (other than the terms referred to in section 26(1)) take into
account the specific characteristics of another party or the particular transaction;
(f)
any other matter prescribed by the regulations.
28 Contracts to which this Part does not apply
(1)
(2)
(3)
This Part does not apply to:
(a)
a contract of marine salvage or towage; or
(b)
a charterparty of a ship; or
(c)
a contract for the carriage of goods by ship.
Without limiting subsection (1)(c), the reference in that subsection to a contract for the carriage of
goods by ship includes a reference to any contract covered by a sea carriage document within the
meaning of the amended Hague Rules referred to in section 7(1) of the Carriage of Goods by Sea
Act 1991.
This Part does not apply to a contract that is the constitution (within the meaning of section 9 of the
Corporations Act 2001) of a company, managed investment scheme or other kind of body.
Part 52—Remedies
Division 2—Injunctions
232 Injunctions
(1)
A court may grant an injunction, in such terms as the court considers appropriate, if the court is
satisfied that a person has engaged, or is proposing to engage, in conduct that constitutes or would
constitute:
(a)
a contravention of a provision of Chapter 2, 3 or 4; or
(b)
attempting to contravene such a provision; or
(c)
aiding, abetting, counselling or procuring a person to contravene such a provision; or
(d)
inducing, or attempting to induce, whether by threats, promises or otherwise, a person to
contravene such a provision; or
39
(e)
(2)
(3)
(4)
being in any way, directly or indirectly, knowingly concerned in, or party to, the contravention
by a person of such a provision; or
(f)
conspiring with others to contravene such a provision.
The court may grant the injunction on application by the regulator or any other person.
Subsection (1) applies in relation to conduct constituted by applying or relying on, or purporting to
apply or rely on, a term of a consumer contract that has been declared under section 250 to be an
unfair term as if the conduct were a contravention of a provision of Chapter 2.
The power of the court to grant an injunction under subsection (1) restraining a person from
engaging in conduct may be exercised:
(a)
whether or not it appears to the court that the person intends to engage again, or to continue
to engage, in conduct of a kind referred to in that subsection; and
(b)
whether or not the person has previously engaged in conduct of that kind; and
(c)
whether or not there is an imminent danger of substantial damage to any other person if the
person engages in conduct of that kind.
Division 3—Damages
236 Actions for damages
(1) If:
(a)
(2)
a person (the claimant) suffers loss or damage because of the conduct of another person;
and
(b)
the conduct contravened a provision of Chapter 2 or 3;
the claimant may recover the amount of the loss or damage by action against that other person, or
against any person involved in the contravention.
An action under subsection (1) may be commenced at any time within 6 years after the day on which
the cause of action that relates to the conduct accrued.
Division 4—Compensation orders etc. for injured persons and orders for nonparty consumers
Subdivision A—Compensation orders etc. for injured persons
237 Compensation orders etc. on application by an injured person or the regulator
(1)
(2)
(3)
A court may:
(a)
on application of a person (the injured person) who has suffered, or is likely to suffer, loss
or damage because of the conduct of another person that:
(i)
was engaged in a contravention of a provision of Chapter 2, 3 or 4; or
(ii)
constitutes applying or relying on, or purporting to apply or rely on, a term of a
consumer contract that has been declared under section 250 to be an unfair term; or
(b)
on the application of the regulator made on behalf of one or more such injured persons;
make such order or orders as the court thinks appropriate against the person who engaged in the
conduct, or a person involved in that conduct.
The order must be an order that the court considers will:
(a)
compensate the injured person, or any such injured persons, in whole or in part for the loss
or damage; or
(b)
prevent or reduce the loss or damage suffered, or likely to be suffered, by the injured person
or any such injured persons.
An application under subsection (1) may be made at any time within 6 years after the day on which:
(a)
if subsection (1)(a)(i) applies—the cause of action that relates to the conduct referred to in
that subsection accrued; or
(b)
if subsection (1)(a)(ii) applies—the declaration referred to in that subsection is made.
238 Compensation orders etc. arising out of other proceedings
(1)
(2)
If a court finds, in a proceeding instituted under a provision of Chapter 4 or this Chapter (other than
this section), that a person (the injured person) who is a party to the proceeding has suffered, or is
likely to suffer, loss or damage because of the conduct of another person that:
(a)
was engaged in a contravention of a provision of Chapter 2, 3 or 4; or
(b)
constitutes applying or relying on, or purporting to apply or rely on, a term of a consumer
contract that has been declared under section 250 to be an unfair term;
the court may make such order or orders as it thinks appropriate against the person who engaged in
the conduct, or a person involved in that conduct.
The order must be an order that the court considers will:
40
(a)
(b)
compensate the injured person in whole or in part for the loss or damage; or
prevent or reduce the loss or damage.
243 Kinds of orders that may be made
Without limiting section 237(1), 238(1) or 239(1), the orders that a court may make under any of those
sections against a person (the respondent) include all or any of the following:
(a)
(b)
(c)
(d)
(e)
(f)
(g)
(h)
an order declaring the whole or any part of a contract made between the respondent and a person
(the injured person) who suffered, or is likely to suffer, the loss or damage referred to in that
section, or of a collateral arrangement relating to such a contract:
(i)
to be void; and
(ii)
if the court thinks fit—to have been void ab initio or void at all times on and after such date
as is specified in the order (which may be a date that is before the date on which the order is
made);
an order:
(i)
varying such a contract or arrangement in such manner as is specified in the order; and
(ii)
if the court thinks fit—declaring the contract or arrangement to have had effect as so varied
on and after such date as is specified in the order (which may be a date that is before the
date on which the order is made);
an order refusing to enforce any or all of the provisions of such a contract or arrangement;
an order directing the respondent to refund money or return property to the injured person;
except if the order is to be made under section 239(1)—an order directing the respondent to pay the
injured person the amount of the loss or damage;
an order directing the respondent, at his or her own expense, to repair, or provide parts for, goods
that had been supplied by the respondent to the injured person;
an order directing the respondent, at his or her own expense, to supply specified services to the
injured person;
an order, in relation to an instrument creating or transferring an interest in land, directing the
respondent to execute an instrument that:
(i)
varies, or has the effect of varying, the first mentioned instrument; or
(ii)
terminates or otherwise affects, or has the effect of terminating or otherwise affecting, the
operation or effect of the first mentioned instrument.
Division 5—Other remedies
250 Declarations relating to consumer contracts
(1)
A court may, on the application of a party to a consumer contract or on the application of the
regulator, declare that a term of such a contract is an unfair term.
(2)
Subsection (1) does not apply unless the consumer contract is a standard form contract.
(3)
Subsection (1) does not limit any other power of the court to make declarations.
Competition and Consumer Act 2010 (Cth) – provisions related to the ACL
41
CONTRACTS REVIEW ACT 1980
PART 1 – PRELIMINARY
4 Definitions
"unjust" includes unconscionable, harsh or oppressive, and "injustice" shall be construed in a corresponding
manner.
6 Certain restrictions on grant of relief
A person may not be granted relief under this Act in relation to a contract so far as the contract was entered
into in the course of or for the purpose of a trade, business or profession carried on by the person or
proposed to be carried on by the person, other than a farming undertaking (including, but not limited to, an
agricultural, pastoral, horticultural, orcharding or viticultural undertaking) carried on by the person or
proposed to be carried on by the person wholly or principally in New South Wales.
PART 2 – RELIEF IN RESPECT OF UNJUST CONTRACTS
7 Principal relief
Where the Court finds a contract or a provision of a contract to have been unjust in the circumstances
relating to the contract at the time it was made, the Court may, if it considers it just to do so, and for the
purpose of avoiding as far as practicable an unjust consequence or result, do any one or more of the
following:
it may decide to refuse to enforce any or all of the provisions of the contract,
it may make an order declaring the contract void, in whole or in part,
it may make an order varying, in whole or in part, any provision of the contract,
it may, in relation to a land instrument, make an order for or with respect to requiring the execution of an
instrument that:
(i) varies, or has the effect of varying, the provisions of the land instrument, or
(ii) terminates or otherwise affects, or has the effect of terminating or otherwise affecting, the operation
or effect of the land instrument.
Where the Court makes an order under subsection (1) (b) or (c), the declaration or variation shall have effect
as from the time when the contract was made or (as to the whole or any part or parts of the contract) from
some other time or times as specified in the order.
The operation of this section is subject to the provisions of section 19.
8 Ancillary relief
Schedule 1 has effect with respect to the ancillary relief that may be granted by the Court in relation to an
application for relief under this Act.
9 Matters to be considered by Court
In determining whether a contract or a provision of a contract is unjust in the circumstances relating to the
contract at the time it was made, the Court shall have regard to the public interest and to all the
circumstances of the case, including such consequences or results as those arising in the event of:
(a)
compliance with any or all of the provisions of the contract, or
(b)
non-compliance with, or contravention of, any or all of the provisions of the contract.
Without in any way affecting the generality of subsection (1), the matters to which the Court shall have
regard shall, to the extent that they are relevant to the circumstances, include the following:
(a)
whether or not there was any material inequality in bargaining power between the parties to the
contract,
(b)
whether or not prior to or at the time the contract was made its provisions were the subject of
negotiation,
(c)
whether or not it was reasonably practicable for the party seeking relief under this Act to negotiate
for the alteration of or to reject any of the provisions of the contract,
(d)
whether or not any provisions of the contract impose conditions which are unreasonably difficult to
comply with or not reasonably necessary for the protection of the legitimate interests of any party to
42
the contract,
whether or not:
(i) any party to the contract (other than a corporation) was not reasonably able to protect his or her
interests, or
(ii) any person who represented any of the parties to the contract was not reasonably able to protect
the interests of any party whom he or she represented, because of his or her age or the state of his or
her physical or mental capacity,
(f)
the relative economic circumstances, educational background and literacy of:
(i) the parties to the contract (other than a corporation), and
(ii) any person who represented any of the parties to the contract,
(g)
where the contract is wholly or partly in writing, the physical form of the contract, and the intelligibility
of the language in which it is expressed,
(h)
whether or not and when independent legal or other expert advice was obtained by the party seeking
relief under this Act,
(i)
the extent (if any) to which the provisions of the contract and their legal and practical effect were
accurately explained by any person to the party seeking relief under this Act, and whether or not that
party understood the provisions and their effect,
(j)
whether any undue influence, unfair pressure or unfair tactics were exerted on or used against the
party seeking relief under this Act:
(i) by any other party to the contract,
(ii) by any person acting or appearing or purporting to act for or on behalf of any other party to the
contract, or
(iii) by any person to the knowledge (at the time the contract was made) of any other party to the
contract or of any person acting or appearing or purporting to act for or on behalf of any other party to
the contract,
(k)
the conduct of the parties to the proceedings in relation to similar contracts or courses of dealing to
which any of them has been a party, and
(l)
the commercial or other setting, purpose and effect of the contract.
(e)
For the purposes of subsection (2), a person shall be deemed to have represented a party to a contract if the
person represented the party, or assisted the party to a significant degree, in negotiations prior to or at the
time the contract was made.
In determining whether a contract or a provision of a contract is unjust, the Court shall not have regard to any
injustice arising from circumstances that were not reasonably foreseeable at the time the contract was made.
In determining whether it is just to grant relief in respect of a contract or a provision of a contract that is found
to be unjust, the Court may have regard to the conduct of the parties to the proceedings in relation to the
performance of the contract since it was made.
PART 3 – PROCEDURAL AND OTHER MATTERS
12 Interests of non-parties to contract
Where in proceedings for relief under this Act in relation to a contract it appears to the Court that a person
who is not a party to the contract has shared in, or is entitled to share in, benefits derived or to be derived
from the contract, it may make such orders against or in favour of that person as may be just in the
circumstances.
The Court shall not exercise its powers under this Act in relation to a contract unless it is satisfied:
that the exercise of those powers would not prejudice the rights of a person who is not a party to the
contract, or
that, if any such rights would be so prejudiced, it would not be unjust in all the circumstances to exercise
those powers,
but this subsection does not apply in relation to such a person if the Court has given the person an
opportunity to appear and be heard in the proceedings.
14 Fully executed contracts
The Court may grant relief in accordance with this Act in relation to a contract notwithstanding that the
contract has been fully executed.
PART 4 – MISCELLANEOUS
43
17 Effect of this Act not limited by agreements etc
A person is not competent to waive his or her rights under this Act, and any provision of a contract is void to
the extent that:
(a)
it purports to exclude, restrict or modify the application of this Act to the contract, or
(b)
it would, but for this subsection, have the effect of excluding, restricting or modifying the application
of this Act to the contract.
A person is not prevented from seeking relief under this Act by:
(a)
any acknowledgment, statement or representation, or
(b)
any affirmation of the contract or any action taken with a view to performing any obligation arising
under the contract.
This Act applies to and in relation to a contract only if:
(a)
the law of the State is the proper law of the contract,
(b)
the proper law of the contract would, but for a term that it should be the law of some other place or a
term to the like effect, be the law of the State, or
(c)
the proper law of the contract would, but for a term that purports to substitute, or has the effect of
substituting, provisions of the law of some other place for all or any of the provisions of this Act, be
the law of the State.
This Act does not apply to a contract under which a person agrees to withdraw, or not to prosecute, a claim
for relief under this Act if:
(a)
the contract is a genuine compromise of the claim, and
(b)
the claim was asserted before the making of the contract.
Without affecting the generality of subsection (1), the Court may exercise its powers under this Act in relation
to a contract notwithstanding that the contract itself provides:
that disputes or claims arising out of, or in relation to, the contract are to be referred to arbitration, or
that legal proceedings arising out of, or in relation to, the contract are justiciable only by the courts of some
other place.
18 Offence
Where a person submits a document:
that is intended to constitute a written contract,
that has been prepared or procured by the person or on the person's behalf, and
that includes a provision that purports to exclude, restrict or modify the application of this Act to the
document,
to another person for signature by that other person, the person submitting the document is guilty of an
offence and liable to a penalty not exceeding 20 penalty units.
(2) Proceedings for an offence against subsection (1) shall be disposed of summarily before a Local Court
and may be commenced at any time within 2 years after the offence was committed.
21 Application of Act to certain contracts of service and to existing contracts
This Act does not apply to a contract of service to the extent that it includes provisions that are in conformity
with an award that is applicable in the circumstances.
In subsection (1), "award" means a State industrial instrument, or an award or industrial agreement made
under the Conciliation and Arbitration Act 1904 of the Commonwealth.
Schedule 2 has effect.
Schedule 1 Ancillary relief
(Section 8)
1
Where the Court makes a decision or order under section 7, it may also make such orders as may be just in
the circumstances for or with respect to any consequential or related matter, including orders for or with
respect to:
the making of any disposition of property,
44
the payment of money (whether or not by way of compensation) to a party to the contract,
the compensation of a person who is not a party to the contract and whose interest might otherwise be
prejudiced by a decision or order under this Act,
the supply or repair of goods,
the supply of services,
the sale or other realisation of property,
the disposal of the proceeds of sale or other realisation of property,
the creation of a charge on property in favour of any person,
the enforcement of a charge so created,
the appointment and regulation of the proceedings of a receiver of property, and
the rescission or variation of any order of the Court under this clause,
and such orders in connection with the proceedings as may be just in the circumstances.
2
The Court may make orders under this Schedule on such terms and conditions (if any) as the Court thinks fit.
3
Nothing in section 6 limits the powers of the Court under this Schedule.
4
In this Schedule:
"disposition of property" includes:
a conveyance, transfer, assignment, appointment, settlement, mortgage, delivery, payment, lease, bailment,
reconveyance or discharge of mortgage,
the creation of a trust,
the release or surrender of any property, and
the grant of a power in respect of property,
whether having effect at law or in equity.
"property" includes real and personal property and any estate or interest in property real or personal, and
money, and any debt, and any cause of action for damages (including damages for personal injury), and any
other chose in action, and any other right or interest.
Australian Securities and Investments Commission Act 2001
Division 2—Unconscionable conduct and consumer protection in relation to financial
services
Subdivision B—Interpretation
12BA Interpretation
(1) In this Division, unless the contrary intention appears:
conduct has the meaning given by subsection (2).
consumer has the meaning given by section 12BC.
consumer contract has the meaning given by subsection 12BF(3).
contract has the meaning given by section 12BE.
engage in conduct has the meaning given by subsection (2).
financial service has the meaning given by section 12BAB.
supply:
(a) includes provide, grant or confer when used as a verb in relation to services; and
(b) has a corresponding meaning when used as a noun;
and supplied and supplier have corresponding meanings.
supply of services has the meaning given by section 12BD.
45
trade or commerce means trade or commerce within Australia or between Australia and places
outside Australia.
(2) In this Division:
(a) a reference to engaging in conduct is a reference to doing or refusing to do any act,
including:
(i) making, or giving effect to a provision of, a contract or arrangement; or
(ii) arriving at, or giving effect to a provision of, an understanding; or
(iii) requiring the giving of, or giving, a covenant; and
(b) a reference to conduct, when that expression is used as a noun otherwise than as
mentioned in paragraph (a), is a reference to doing or refusing to do any act, including:
(i) making, or giving effect to a provision of, a contract or arrangement; or
(ii) arriving at, or giving effect to a provision of, an understanding; or
(iii) requiring the giving of, or giving, a covenant; and
(c) a reference to refusing to do an act includes a reference to:
(i) refraining (otherwise than inadvertently) from doing that act; or
(ii) making it known that that act will not be done; and
(d) a reference to a person offering to do an act, or to do an act on a particular condition,
includes a reference to the person making it known that the person will accept
applications, offers or proposals for the person to do that act or to do that act on that
condition, as the case may be.
12BAB Meaning of financial service
When does a person provide a financial service?
(1) For the purposes of this Division, subject to paragraph (2)(b), a person provides a financial
service if they:
(a) provide financial product advice (see subsection (5)); or
(b) deal in a financial product (see subsection (7)); or
(c) make a market for a financial product (see subsection (11)); or
(d) operate a registered scheme; or
(e) provide a custodial or depository service (see subsection (12)); or
(f) operate a financial market (see subsection (15)) or clearing and settlement facility (see
subsection (17)); or
(g) provide a service (not being the operation of a derivative trade repository) that is otherwise
supplied in relation to a financial product (other than an Australian carbon credit unit or an
eligible international emissions unit); or
(h) engage in conduct of a kind prescribed in regulations made for the purposes of this
paragraph.
(1A) Subject to paragraph (2)(b), the provision by a trustee company of a traditional trustee company
service constitutes the provision, by the company, of a financial service for the purposes of this
Division.
Note:
Trustee companies may also provide other kinds of financial service mentioned in
subsection (1).
(1B) The regulations may, in relation to a traditional trustee company service of a particular class,
prescribe the person or persons to whom a service of that class is taken to be provided or
supplied for the purposes of this Division. This subsection does not limit (and is not limited by)
subsection (2).
(2) The regulations may set out:
(a) the circumstances in which persons facilitating the provision of a financial service (for
example, by publishing information) are taken also to provide that service; or
(b) the circumstances in which persons are taken to provide, or are taken not to provide, a
financial service.
(4) For the purposes of this section, a person is not operating a registered scheme merely
because:
(a) they are acting as an agent or employee of another person; or
46
(b) they are taking steps to wind up the scheme.
Meaning of financial product advice
(5) For the purposes of this section, financial product advice means a recommendation or a
statement of opinion, or a report of either of those things, that:
(a) is intended to influence a person or persons in making a decision in relation to a particular
financial product or class of financial products, or an interest in a particular financial
product or class of financial products; or
(b) could reasonably be regarded as being intended to have such an influence;
but does not include anything in:
(c) a document prepared in accordance with requirements of Chapter 7 of the Corporations
Act, other than a document of a kind prescribed by regulations made for the purposes of
this paragraph; or
(d) any other document of a kind prescribed by regulations made for the purposes of this
paragraph.
(6) Advice given by a lawyer in his or her professional capacity about matters of law, legal
interpretation or the application of the law to any facts is not financial product advice.
Meaning of dealing
(7) For the purposes of this section, the following conduct constitutes dealing in a financial product:
(a) applying for or acquiring a financial product;
(b) issuing a financial product;
(c) in relation to securities or managed investment interests—underwriting the securities or
interests;
(d) varying a financial product;
(e) disposing of a financial product.
(8) Arranging for a person to engage in conduct referred to in subsection (7) is also dealing in a
financial product, unless the actions concerned amount to providing financial product advice.
(9) A person is taken not to deal in a financial product if the person deals in the product on their
own behalf, unless:
(a) the person is an issuer of financial products; and
(b) the dealing is in relation to one or more of those products.
(10) The regulations may prescribe conduct that is taken to be, or not to be, dealing in a financial
product. Regulations made for the purposes of this subsection have effect despite anything else
in this section.
Meaning of makes a market for a financial product
(11) For the purposes of this section, a person makes a market for a financial product if:
(a) either through a facility, at a place or otherwise, the person regularly states the prices at
which they propose to acquire or dispose of financial products on their own behalf; and
(b) other persons have a reasonable expectation that they will be able to regularly effect
transactions at the stated prices; and
(c) the actions of the person do not, or would not if they happened through a facility or at a
place, constitute operating a financial market because of the effect of paragraph (16)(a).
Meaning of provide a custodial or depository service
(12) For the purposes of this section, a person (the provider) provides a custodial or depository
service to another person (the client) if, under an arrangement between the provider and the
client, or between the provider and another person with whom the client has an arrangement,
(whether or not there are also other parties to any such arrangement), a financial product, or a
beneficial interest in a financial product, is held by the provider in trust for, or on behalf of, the
client or another person nominated by the client.
(14) However, the following conduct does not constitute providing a custodial or depository
service:
47
(a) the operation of a clearing and settlement facility;
(b) the operation of a registered scheme, or the holding of the assets of a registered scheme;
(c) the operation of a regulated superannuation fund, an approved deposit fund or a pooled
superannuation trust (within the meaning of the Superannuation Industry (Supervision) Act
1993);
(d) the provision of services to a related body corporate;
(e) any other conduct of a kind prescribed by regulations made for the purposes of this
paragraph.
Meaning of financial market
(15) For the purposes of this section, a financial marketis a facility through which:
(a) offers to acquire or dispose of financial products are regularly made or accepted; or
(b) offers or invitations are regularly made to acquire or dispose of financial products that are
intended to result or may reasonably be expected to result, directly or indirectly, in:
(i) the making of offers to acquire or dispose of financial products; or
(ii) the acceptance of such offers.
(16) However, the following conduct does not constitute operating a financial market for the
purposes of this section:
(a) a person making or accepting offers or invitations to acquire or dispose of financial
products on the person’s own behalf, or on behalf of one party to the transaction only;
(b) conducting treasury operations between related bodies corporate;
(c) conducting an auction of forfeited shares;
(d) any other conduct of a kind prescribed by regulations made for the purposes of this
paragraph.
12BD Acquisition, supply and re-supply
In this Division, unless the contrary intention appears:
(a) a reference to the supply or acquisition of services includes a reference to agreeing to
supply or acquire services; and
(b) a reference to the supply or acquisition of services includes a reference to the supply or
acquisition of services together with property or other services, or both; and
(c) a reference to the re-supply of services (the original services) acquired from a person
(the original supplier) includes a reference to:
(i) a supply of the original services to another person in an altered form or condition;
and
(ii) a supply to another person of other services that are substantially similar to the
original services and could not have been supplied if the original services had not
been acquired by the person who acquired them from the original supplier.
Subdivision C—Unconscionable conduct
12CA Unconscionable conduct within the meaning of the unwritten law of the States and Territories
(1) A person must not, in trade or commerce, engage in conduct in relation to financial services if
the conduct is unconscionable within the meaning of the unwritten law, from time to time, of the
States and Territories.
(2) This section does not apply to conduct that is prohibited by section 12CB.
12CB Unconscionable conduct in connection with financial services
(1) A person must not, in trade or commerce, in connection with:
(a) the supply or possible supply of financial services to a person (other than a listed public
company); or
(b) the acquisition or possible acquisition of financial services from a person (other than a
listed public company);
engage in conduct that is, in all the circumstances, unconscionable.
48
(2) This section does not apply to conduct that is engaged in only because the person engaging in
the conduct:
(a) institutes legal proceedings in relation to the supply or possible supply, or in relation to the
acquisition or possible acquisition; or
(b) refers to arbitration a dispute or claim in relation to the supply or possible supply, or in
relation to the acquisition or possible acquisition.
(3) For the purpose of determining whether a person has contravened subsection (1):
(a) the court must not have regard to any circumstances that were not reasonably
foreseeable at the time of the alleged contravention; and
(b) the court may have regard to conduct engaged in, or circumstances existing, before the
commencement of this section.
(4) It is the intention of the Parliament that:
(a) this section is not limited by the unwritten law of the States and Territories relating to
unconscionable conduct; and
(b) this section is capable of applying to a system of conduct or pattern of behaviour, whether
or not a particular individual is identified as having been disadvantaged by the conduct or
behaviour; and
(c) in considering whether conduct to which a contract relates is unconscionable, a court’s
consideration of the contract may include consideration of:
(i) the terms of the contract; and
(ii) the manner in which and the extent to which the contract is carried out;
and is not limited to consideration of the circumstances relating to formation of the
contract.
(5) In this section:
listed public company has the same meaning as it has in the Income Tax Assessment Act
1997.
12CC Matters the court may have regard to for the purposes of section 12CB
(1) Without limiting the matters to which the court may have regard for the purpose of determining
whether a person (the supplier) has contravened section 12CB in connection with the supply or
possible supply of financial services to a person (the service recipient), the court may have
regard to:
(a) the relative strengths of the bargaining positions of the supplier and the service recipient;
and
(b) whether, as a result of conduct engaged in by the supplier, the service recipient was
required to comply with conditions that were not reasonably necessary for the protection
of the legitimate interests of the supplier; and
(c) whether the service recipient was able to understand any documents relating to the supply
or possible supply of the financial services; and
(d) whether any undue influence or pressure was exerted on, or any unfair tactics were used
against, the service recipient or a person acting on behalf of the service recipient by the
supplier or a person acting on behalf of the supplier in relation to the supply or possible
supply of the financial services; and
(e) the amount for which, and the circumstances under which, the service recipient could
have acquired identical or equivalent financial services from a person other than the
supplier; and
(f) the extent to which the supplier’s conduct towards the service recipient was consistent
with the supplier’s conduct in similar transactions between the supplier and other like
service recipients; and
(g) if the supplier is a corporation—the requirements of any applicable industry code (see
subsection (3)); and
(h) the requirements of any other industry code (see subsection (3)), if the service recipient
acted on the reasonable belief that the supplier would comply with that code; and
(i) the extent to which the supplier unreasonably failed to disclose to the service recipient:
(i) any intended conduct of the supplier that might affect the interests of the service
recipient; and
49
(ii) any risks to the service recipient arising from the supplier’s intended conduct (being
risks that the supplier should have foreseen would not be apparent to the service
recipient); and
(j) if there is a contract between the supplier and the service recipient for the supply of the
financial services:
(i) the extent to which the supplier was willing to negotiate the terms and conditions of
the contract with the service recipient; and
(ii) the terms and conditions of the contract; and
(iii) the conduct of the supplier and the service recipient in complying with the terms and
conditions of the contract; and
(iv) any conduct that the supplier or the service recipient engaged in, in connection with
their commercial relationship, after they entered into the contract; and
(k) without limiting paragraph (j), whether the supplier has a contractual right to vary
unilaterally a term or condition of a contract between the supplier and the service recipient
for the supply of the financial services; and
(l) the extent to which the supplier and the service recipient acted in good faith.
(2) Without limiting the matters to which the court may have regard for the purpose of determining
whether a person (the acquirer) has contravened section 12CB in connection with the
acquisition or possible acquisition of financial services from a person (the supplier), the court
may have regard to:
(a) the relative strengths of the bargaining positions of the acquirer and the supplier; and
(b) whether, as a result of conduct engaged in by the acquirer, the supplier was required to
comply with conditions that were not reasonably necessary for the protection of the
legitimate interests of the acquirer; and
(c) whether the supplier was able to understand any documents relating to the acquisition or
possible acquisition of the financial services; and
(d) whether any undue influence or pressure was exerted on, or any unfair tactics were used
against, the supplier or a person acting on behalf of the supplier by the acquirer or a
person acting on behalf of the acquirer in relation to the acquisition or possible acquisition
of the financial services; and
(e) the amount for which, and the circumstances in which, the supplier could have supplied
identical or equivalent financial services to a person other than the acquirer; and
(f) the extent to which the acquirer’s conduct towards the supplier was consistent with the
acquirer’s conduct in similar transactions between the acquirer and other like suppliers;
and
(g) the requirements of any applicable industry code (see subsection (3)); and
(h) the requirements of any other industry code (see subsection (3)), if the supplier acted on
the reasonable belief that the acquirer would comply with that code; and
(i) the extent to which the acquirer unreasonably failed to disclose to the supplier:
(i) any intended conduct of the acquirer that might affect the interests of the supplier;
and
(ii) any risks to the supplier arising from the acquirer’s intended conduct (being risks that
the acquirer should have foreseen would not be apparent to the supplier); and
(j) if there is a contract between the acquirer and the supplier for the acquisition of the
financial services:
(i) the extent to which the acquirer was willing to negotiate the terms and conditions of
the contract with the supplier; and
(ii) the terms and conditions of the contract; and
(iii) the conduct of the acquirer and the supplier in complying with the terms and
conditions of the contract; and
(iv) any conduct that the acquirer or the supplier engaged in, in connection with their
commercial relationship, after they entered into the contract; and
(k) without limiting paragraph (j), whether the acquirer has a contractual right to vary
unilaterally a term or condition of a contract between the acquirer and the supplier for the
acquisition of the financial services; and
(l) the extent to which the acquirer and the supplier acted in good faith.
(3) In this section:
50
applicable industry code, in relation to a corporation, has the same meaning as it has in
subsection 51ACA(1) of the Competition and Consumer Act 2010.
industry code has the same meaning as it has in subsection 51ACA(1) of the Competition and
Consumer Act 2010.