Week 6
An Outline of Contract Law
continued…
CLAW1001 Foundations of Business Law
Semester 1 2025
Written by Professor Andrew Terry
Updated for Semester 1, 2025 by
Dr Mathew Leighton-Daly
Discipline of Accounting, Governance and Regulation
University of Sydney Business School
Defects in the Contract: Vitiating Factors
and the Absence of Genuine Consent
2
Consent – factors affecting consent
•
•
•
•
•
•
Misrepresentation
Mistake
Non est factum
Duress
Undue influence
Unconscionable conduct
How do these factors affect the contract?
– contract may be void, or
– contract may be voidable
3
A ‘void’ contract
A ‘voidable’contract
contract does not exist and has no legal effect
contract ineffective with no need for parties to
take any further action
contract does exist but one of the parties has
the legal right to ‘avoid’ or not perform
(contract is capable of being rescinded)
contract is effective until one party takes action
to terminate/rescind the contract
No rights and obligations;
neither party can recover damages for breach;
neither party can enforce the promises
Timing of rescission may be importantright to rescind may be lost if:
Alternative remedies may arise independently
The
of Sydney
ofUniversity
the contract
•
•
•
innocent third parties affected
restitution not possible
delay
Page 4
4
Misrepresentation
– a false statement of fact (but not opinion), past or present, made by one
person (representor) to another person (representee) during precontractual negotiations which induces the representee to enter into the
contract.
–
is NOT a term or part of the contract (therefore no action for damages in
contract)
– makes the contract voidable not void (but bars to rescission usually means
no remedy) .
5
Different types of misrepresentation – the type determines the remedy
– Fraudulent – rescission + action for damages in the tort of deceit
– Negligent –action for damages in tort of negligent misstatement
– Innocent – rescission but no action for damages
– Statutory - action for misleading or deceptive conduct under s18
Australian Consumer Law
6
Mistake
Common mistake
– both parties make the same mistake
Mutual mistake
– both parties are mistaken but about different things:
misunderstand each other and deal at cross-purposes
Unilateral mistake
– only one party is mistaken and the other party is aware of the
mistake and tries to take advantage of that mistake
Non est factum
– mistake as to the nature of the document signed
7
Common mistake
Both parties make the same mistake about the existence or identity of the subject
matter of the contract
Contract is void ab initio
But - contract will not be void for common mistake if the goods never existed but one
party promised the goods existed
8
McRae v Commonwealth Disposals Commission [1951] HCA 79
The Commission invited tenders for the purchase of a submerged oil tanker lying on
a reef near New Guinea.
McRae won the tender and was given the co-ordinates to locate the tanker.
McRae incurred considerable expense in fitting out a salvage vessel but
found no oil tanker at the location
McRae sued for damages for breach of contract. Commission in seeking
to escape liability argued that the contract was void due to common
mistake as to the existence of the tanker
Held:
The Commission cannot rely on the mistake in avoiding the contract because any mistake was
induced by the serious fault of their own servants, who asserted the existence of a tanker
recklessly.
9
A contract will not be void for commonmistake if the mistake is about a quality or
attribute of the subject matter
Leaf v International Galleries [1950] 2 KB 86
Leaf bought a painting of Salisbury Cathedral from Defendant.
Both honestly believed painting was an original Constable.
5 years later, Leaf tried to resell and discovered painting was not
an original.
Leaf wanted refund of money paid; argued common
ab initio.
mistake rendering the contract was void
HELD:
no mistake about subject matter - a painting of Salisbury Cathedral
mistake was about quality of subject matter – the artist – which does not avoid the
contract.
Note: innocent misrepresentation by gallery would allow Leaf to terminate contract BUT
too late to do so after 5 years
10
Mutual mistake
Both parties are mistaken and have a different view of what has been
“agreed” – dealing at cross-purposes
Contract is void ab initio
Raffles v Wichelhaus (1864) 159 ER375
Plaintiff sold 125 bales of cotton to
defendant to 'arrive ex “Peerless” from
Bombay'
Problem: two ships named “Peerless” and both had sailed
from Bombay carrying bales of cotton – one sailing in October
and the other sailing in December.
11
Unilateral mistake about a term in a contract
•
•
•
•
contract is not void but may be voidable in equity if:
written contract
serious mistake about a fundamental term
knowledge: the other party is aware that circumstances exist which indicate that the
first party is entering the contract under some serious mistake or misapprehension
about either the content or subject matter of that term,
unconscionable conduct: the other party deliberately sets out to ensure that the first
party does not become aware of the existence of the mistake or misapprehension
Taylor v Johnson [1983] HCA 5
Contract for the sale of 10 acres of land for price of $15,000
Johnson thinks contract price is $15,000 per acre
Taylor knows Johnson is mistaken and takes steps
to ensure Johnson does not discover the mistake.
12
Unilateral mistake about the identity of one of the parties
In exceptional circumstances, where the identity is of vital
importance to the mistaken party, and intention only to enter
contract with that person, unilateral mistake as to the identity
of the other party may render the contract void (especially if
there is no face-to-face meeting between the parties; meet at
arms length)
Cundy v Lindsay (1878) 3 App Cas 459
If the parties do meet face-to-face, mistaken identity
will not void contract as seller is entering contract
with the person physically present.
Contract not void for mistake but may be voidable
for other reason such as fraudulent misrepresentation
- in practice not a viable remedy
Phillips v Brooks [1919] 2 KB 243
Lewis v Averay [1972] 1 QB 198
13
non est factum = ‘it is not my deed’
Party signing a document is mistaken as to the nature of the document
eg person signs a document believing it is a receipt when it is really an extension of an
option to purchase land
A successful claim of non est factum renders the contract void ab initio (ineffective from
the beginning) BUT it operates within it very narrow limits:
Claimant must prove that:
•
•
•
s/he belonged to class of persons who have to rely on others for advice as to what they are signing (
e.g. because illiterate or blind) so unable to read or understand the document
document actually signed was radically different from document s/he thought s/he was signing
failure to read and understand the document was not due to carelessness on part of claimant
Petelin v Cullen [1975] HCA 24
14
Duress
–
Illegitimate pressure to contract exerted by one party over, and against the will of, another
party – renders contract voidable
Duress of the person: threat to injure, imprison person
Barton v Armstrong [1976] HCA 104
–
Economic duress: illegitimate commerce
North Ocean Shipping Co Ltd v Hyundai Construction Co Ltd [1979] QB 705 threat to
break contract but lost right to get a remedy because of delay in taking legal action
was implied affirmation of contract
Customary and maybe overwhelming commercial pressure is not necessarily duress:
Crescendo Management Pty Ltd v Westpac (1988) 19 NSWLR 40
Australia and New Zealand Banking Group Ltd v Karam [2005] NSWCA 344
Independent legal advice may counter claim of economic duress
15
Statutory duress
Australian Consumer Law - undue harassment or coercion prohibited
s 50 (1) A person must not use physical force, or undue harassment or
coercion, in
connection with:
(a) the supply or possible supply of goods or services; or
(b) the payment for goods or services; or
(c) the sale or grant, or the possible sale or grant,
of an interest in land; or
(d) the payment for an interest in
land.
16
Undue Influence
• The absence of full, free, informed consent – for example where
dominant/stronger party abuses influence over the will of the
subservient/weaker party in order to obtain some undue benefit
• Undue influence = abuse of a relationship or position of trust and
confidence
• Presumed in cases of a ‘Special relationship’ (eg doctor and patient:
Bar-Mordecai v Hillston), solicitor and client, religious leader and devotee:
Allcard v Skinner) but the presumption is rebuttable.
• May be proved in other relationships (eg person and carer) where a high
degree of trust and confidence has developed between the parties. Once
established, the onus of proof is on the dominant party to prove that the
contract was voluntary (Johnson v Buttress)
• Independent advice a key factor
• Undue influence makes the contract voidable – but the opportunity to
avoid the contract may be lost if there is delay (Allcard v Skinner)
17
Allcard v Skinner (1887) 36 Ch D 145
Miss A. joined a religious order in 1867 and made vows of poverty chastity
and obedience.
2 years later, she made gifts of money and shares to the
mother superior.
Miss A. left the religious order in 1879 and in 1885 took legal action to
recover the gifts.
HELD: in circumstances, undue influence was presumed so the transactions
were voidable
Page 18
BUT
Miss A. was not entitled to recover because of the delay she lost the right to set aside the gift because she took no action for 6 years
18
Johnson v Buttress [1936] HCA 41
Mr B. elderly, illiterate widower who relied
on Mrs J. to help with day to day things.
Mr B. transfers property to Mrs J as a gift.
Mr B. dies and his son brings legal action to have
gift set aside on basis that relationship between Mr B
and Mrs J was one of trust and dependence.
Court found that relationship of influence did exist so
the onus of proof on Mrs J. and she failed to rebut
the presumption of undue influence/ failed to show
she did not unduly influence his decision.
19
Unconscionability
Unconscionable dealing looks to the conduct of the stronger
party in attempting to enforce, or retain the benefit of, a dealing
with a person under a special disability in circumstances where it
is not consistent with equity or good conscience that he should do
so.
Per Deane J in Commercial Bank of Australia v Amadio [1983]
HCA 14
20
Unconscionable conduct = conduct “showing no regard for conscience; irreconcilable
with what is right or reasonable”
Equity will intervene when stronger party takes unfair and improper advantage of
another party’s special disability)
Equity will intervene to grant relief from unconscionable conduct in circumstances where:
• one party is under a special disability
• the other party knew or ought to have known of that special disability
• the conduct was in the circumstances not consistent with good conscience
Commercial Bank of Australia Ltd v Amadio [1983] HCA 14
What is the effect of unconscionable conduct on the contract?
Unconscionable conduct does not prevent the formation of a contract but will render the
contract voidable entitling the innocent party to rescind the contract
(
21
Commercial Bank of Australia Ltd v Amadio [1983] HCA 14
Mr & Mrs Amadio executed a guarantee and mortgage (as security for the guarantee) in favour of
the appellant bank. The purpose was to guarantee debts of their son's company.
Mr & Mrs Amadio were Italian migrants in their 70 with limited English skills, little formal education and
little to no business experience. Son appeared to be successful but his company had
significant debts.
Son told his parents the guarantee would be for $50,000 and about 6 months but in fact not limited in
this way.
Bank manager visited Mr & Mrs Amadio at home and got
them to sign the mortgage but did not give them any
explanation about the documents.
V’s company soon goes into liquidation and the bank
demands payment from Mr & Mrs A. on the guarantee.
22
Examples of a ‘special disability’ include:
o
o
o
o
o
o
o
o
Ignorance of material facts known to the other party
Illiteracy or lack of education
Poverty or need of any kind
Age
Infirmity of body or mind
Drunkenness
Lack of assistance or explanation where these are necessary
Infatuation and emotional dependence
Blomley v Ryan [1956] HCA 81
23
Louth v Diprose [1992] HCA 61
Mr D. was infatuated with Ms L. and gave her many gifts. He proposed to her; she refused.
Subsequently Ms Ltold Mr D she was depressed and was going to be evicted and, if this
happened, she would commit suicide. In response D. agreed to buy her a house and, at her
insistence, put it in her name. Years later, when their relationship deteriorated, D. asked L. to
transfer the house into his name. She refused and he brought proceedings seeking to recover the
house.
“ …the relationship…was plainly such that the respondent was under a special
disability in dealing with the appellant. That special disability arose not
merely from the respondent’s infatuation. It extended to the
extraordinary vulnerability of the respondent in the
false ‘atmosphere of crisis’ in which he believed that
the woman with whom he was…completely
emotionally dependent was facing eviction… and
suicide…
24
How does the doctrine of undue influence differ from unconscionable conduct ?
“The equitable principles relating to relief against unconscionable dealing and the
principles relating to undue influence are closely related. The two doctrines are, however,
distinct. Undue influence ... looks to the quality of the consent or assent of the weaker
party ... Unconscionable dealing looks to the conduct of the stronger party in attempting
to enforce, or retain the benefit of, a dealing with a person under a special disability in
circumstances where it is not consistent with equity or good conscience that he should do
so.”:
Deane J in Commercial Bank of Australia Ltd v Amadio
25
• Equitable unconscionability prohibited under s20
Australian Consumer Law
• Limitations of equitable unconscionability
• More liberal unconscionability provision under
s21Australian Consumer Law
26
Parties: the Doctrine of Privity
of Contract
27
General rule: only the parties to the contract can have rights and
obligations under the contract + only the parties to the contract
can enforce the contract in a court
Tweedle v Atkinson [1861] 121 ER 762
28
contracts where benefits conferred on family members who are strangers to
the contract:
Beswick v Beswick [1966] 1 Ch 538
Uncle transfers his coal merchant business to his nephew.
Nephew promises to pay uncle agreed annuity for life and on his
uncle’s death, to pay a smaller annuity to his aunt.
Uncle dies. Nephew does not make payments to aunt.
Aunt is a beneficiary under the contract BUT is she a party
to the contract? Can she sue to enforce nephew’s promise?
Aunt cannot enforce the promise in her personal capacity
BUT she is also executor of her husband’s estate and can sue in that
capacity
29
Joint promisees exception:
where a promise is made to 2 or more persons jointly, if consideration is
provided by one of the promisees, the other promisee is still entitled to sue on
the contract:
Coulls v Bagot’s Executor and Trustee Co Ltd [1967] HCA
Insurance exception:
Trident General Insurance Co Ltd v McNeice Bros Pty Ltd [1985] HCA
s48 Insurance Act 1984 (Cth)
30
The Terms of the Contract
31
The Contents of the Contract – the Terms
Terms of the contract encapsulate what the parties have agreed to.
Terms are either:
• Express: those agreed to by the parties orally or in writing – the terms
and their agreement being objectively determined.
• Implied: those implied by the courts OR by statute.
32
Express Terms
Term or mere representation
– In relation to oral statements made during negotiations of the contract
it is necessary to distinguish between :
– statements made to induce entry into the contract (mere
representations) and
– statements meant to be obligations under the contract (terms)
– Why this distinction is important?
– The test for distinguishing term v misrepresentation?
– The impact of s18 Australian Consumer Law in this context?
33
Oralcontractsandpre-contractualstatements: Termorrepresentation?
Pre-contractual statements may or may not be terms – it depends on the objective
intention of the parties
Objective test: would a “reasonable person” consider that the statement was intended to
become part of the contractual obligation?
Factors to consider include:
i. Importance of the statement;
ii. Time between the statement and the contract;
iii. Special knowledge/skill or access to truth of one party; and
iv. Inclusion of the statement in any subsequent document.
34
Oscar Chess Ltd v Williams [1957] 1 All ER325
W sold his car described as a1948 Morris Minor to car dealer.
The vehicle’s log book indicated that the car was registered in 1948 BUT
the car dealer later discovered it was a 1939 model
(little difference in the models and W honestly
believed that the statement was true).
Car dealer sued.
Was the statement that the car was a 1948 model a promise or term
in the contract?
No - W had no specialist knowledge or expertise to determine
year/model of car. Statement of his belief not a promise that it was
true.
35
Dick Bentley Productions v Harold Smith Motors [1965] 2 AllER 65
Plaintiff buys a luxury car from defendant car dealer.
During negotiations before the contract of sale, car dealer states that
car had done 20,000 miles since a new engine and gearbox were fitted.
The plaintiff later discovers that the car had done about 100,000 miles.
Is the statement a term?
Dealer has special knowledge and and the statement is important to decision of the buyer
.
36
Incorporating terms into the contract
How can terms be incorporated into the contract?
1. By signature
2. By notice
3. By prior dealings
37
incorporating termsinto thecontract: signature
Signature rule: parties are bound by terms in a signed document, even if
the document has not been read
L’Estrange v F Graucob Ltd [1934] 2 KB 394
“This agreement contains all the terms and conditions under which I agree to purchase the
machine specified above and any express or implied condition, statement or warranty,
statutory or otherwise, not stated herein is hereby excluded”.
Mrs L. signed “Sales Agreement” without reading it.
Was she bound by this clause?
38
To sign a document known and intended to affect legal relations is an act which itself
ordinarily conveys a representation to a reasonable reader of the document. The
representation is that the person who signs either has read and approved the contents of
the document or is willing to take the chance of being bound by those contents,…
whatever they might be. That representation is even stronger where the signature
appears below a perfectly legible written request to read the document before signing
it.
Toll (FGCT) Pty Ltd v Alphapharm Pty Ltd [2004] HCA52
39
BUTthere are exceptions to the general rule:
•
•
•
•
•
•
fraud
misrepresentation
duress
undue influence
unconscionable conduct
non est factum
40
incorporating termsinto thecontract:reasonablenotice
•
•
examples: tickets, receipts etc
If an unsigned document contains a term it will be binding if reasonable notice
is given
1. Is the document ‘contractual’?
would a reasonable person expect the document to contain terms and conditions or would
it be regarded merely as a receipt or delivery document or something else?
Causer v Browne [1952] VLR 1
Oceanic Sun Line Special Shipping Co Inc v Fay [1988] HCA
2. Has reasonable and sufficient notice of the term been given before the
contract is made?
Olley v Marlborough Court Ltd [1949] 1KB 532
Thornton v Shoe Lane Parking Ltd [1971] 2QB 163
NOTE: reasonable notice of contractual
terms not of the actual term
41
Is the document ‘contractual’?
If the term is on an unsigned document, the document must be ‘contractual’(i.e
understood to contain terms of contract)
Causer v Browne [1952] VLR 1
Is a dry cleaning receipt a contractual document?
OR Is a dry cleaning receipt a mere voucher to produce when
collecting goods?
Dry cleaner had to prove customer had notice of exclusion clause
that was on the receipt. Failed.
The document could be understood as a mere receipt to produce
when collecting the dress and not notice of the contract or the
exclusion clause
42
Has reasonable and sufficient notice of the term been given before the
contract is made?
Notice of the term must be given before or at the time of formation of the contract;
notice after the contract has been made is ineffective
Olley v Marlborough Court Ltd [1949] 1KB 532
Hotel guests paid for room in advance.
Notice on back of door of their room excluded liability for safety of articles left in room.
Guests' property stolen because of negligence of hotel.
Is the exclusion clause part of the contract?
When was the contract made?
When did guests have notice of the exclusion clause?
43
Thornton v Shoe Lane Parking Ltd [1971] 2QB 163
Tgoes to car park for first time..
Ttakes ticket from machine at entry. Small print on ticket:
“subject to conditions as displayed on the premises”.
Sign on pillar inside car park states:
“Carpark accepts no liability”.
T injured when he returned to his car.
Can the carpark rely on exclusion
clauses in the displayed notices?
44
The customer pays his money and gets a ticket. He cannot refuse it. He cannot get
his money
back. He may protest to the machine, even swear at it. But it will remain unmoved.
He is
committed beyond recall. He was committed at the very moment when he put his
money
into the machine. The contract was concluded at that time. It can be translated into
offer and
acceptance in this way: the offer is made when the proprietor of the machine holds
it out as
being ready to receive money. The acceptance takes place when the customer puts
his money
into the slot. The terms of the offer are contained in the notice placed on or near the
machine
stating what is offered for the money. The customer is bound by those terms as long
as they
are sufficiently brought to his notice beforehand, but not otherwise. He is not bound
by the
terms printed on the ticket if they differ from the notice, because the ticket comes
too late. The
45
contract has already been made.
incorporating termsinto thecontract:priordealings
Balmain New Ferry Co v Robertson [1906] HCA 83
Rwas regular passenger on ferry between Circular Quay and Balmain.
Entry to ferry wharf was through a turnstile that required payment of one penny. A sign above
the turnstile stated:
“Notice: A fare of one penny must be paid on entering
or leaving the wharf. No exception will be made to this rule
whether the passenger has travelled by ferry or not”.
R missed the ferry and tried to leave the wharf
without paying another penny. He was detained by
the attendants and sued the ferry company for false
imprisonment.
Page 46
Was the ferry company justified in detaining R for nonpayment?
Did R know of the conditions of entry to the wharf?
46
The problem of pre-contractual representations and
written contracts – the parol evidence rule
“…Where a contract is reduced into writing, where the contract appears in
the writing to be entire, it is presumed that the writing contains all the terms
of it, and evidence will not be admitted of any previous or contemporaneous
oral agreement which would have the effect of adding to or varying it in
any way…”
Mercantile Bank of Sydney v Taylor (1891) 12 LR (NSW) 252
47
Exceptions to the parol evidence rule
– Partly written/partly oral contracts
Van den Esschert v Chappell
– Collateral warranty/contract
Savage v Blakeney
But “entire agreement” or ‘four corners” clauses common in SFCs
48
Evidence that the contract is not ’entire’; that it is partly written and partly oral
As parol evidence rule applies only to written contracts agreed to be complete and entire, the rule will
not apply to contracts that are partly written and party oral.
Van den Esschert v Chappell [1960] WAR114
Agreement for the sale of a house. Immediately before signing
the written contract, the purchaser specifically asks about ‘white
ants’.
The seller gives verbal assurance that the property is free of white ants.
The purchaser signed the contract and the statement later proves to be incorrect.
There was nothing in the written document about white ants.
Is the seller’s statement a term of the contract?
The court found that the contract was partly written and partly oral . The
Statement was in respect to a specific request about an important matter immediately prior to
the signThienUgnivoerfsitythofeSycdnoeyntract by the parties and was a contractual term
49
collateral contact
What is a collateral contract?
• An oral contract subsidiary to the main written contract
– ( really just a way for the court to give contractual effect to pre-contractual oral
statements when the principal is in contract is in writing) and the parol evidence rule
would otherwise preclude it.
What are the requirements for a collateral contract?
1. The statement must be promissory in nature (intended as a promise):
JJ Savage & Sons v Blakney [1970 ] HCA
2. The promisee entered the main contract on the basis of the promise and in reliance
upon it (the consideration for the collateral contract is entry into the main contract
between the parties).
2. The collateral promise must not be inconsistent with the terms of the main contract:
Hoyts Pty Ltd v Spencer[1919] HCA– a collateral contract cannot be inconsistent
with the terms of the principal contract.
50
Statement must be promissory in nature (intended as a promise):
JJ Savage & Sons v Blakney
Contract for purchase of a boat found in series of letters and conversations. In one of the letters, the
seller gave several estimated speeds of motors that could be fitted to the boat. When the boat did
not reach those estaimated speeds, the buyer sued for breach of the main contract or alternatively
breach of a collateral contract
HCA held that the representation was neither a term of the
main contract nor a term of a collateral contract.
On receipt of the letter there were three courses open to B. He
could have required the attainment of the speed to be inserted
in the specification as a condition of the contract; or he could
have sought from [JJ] a promise ... that the boat would attain
the speed as a prerequisite to his ordering the boat;
or he could be content to form his own judgement as to the
suitable power unit for the boat relying upon the opinion of
[JJ] of whose reputation and experience in the relevatn field
he had... a high regard.
Page 51
51
The promise must not be inconsistent with the terms of the main contract
Hoyts Pty Ltd v Spencer
S leased a building and granted a 4 year sub-lease to Hoyts.
Term in sub-lease allowed termination with 4 weeks notice.
During negotiations, S told Hoyts that S would not terminate
the sublease unless the owner terminated S’s lease.
S gave notice of termination to Hoyts. And Hoyts sues for breach of oral/collateral contract not to
terminate unless owner terminated S’s lease.
Held–as written lease gives unqualified right to terminate there was no requirement for 4 weeks
notice of termination
52
‘Entire Agreement’ ‘4-Corners’ clauses
Common in written contracts and SFCs.
Effectively limit the contract to the written terms
Significance of the s18 Australian Consumer Law misleading conduct action in relation
to pre-contractual negotiations in business
53
Implied Terms
Terms implied by the courts
– Past dealings
Hillas v Arcos
– Custom or trade usage
Con-Stan Industries of Australia Ltd v Norwich Winterthur Insurance
(Australia) Ltd
– Business efficacy
– The Moorcock
–
54
Terms implied by reference to past dealings
an uncertain or incomplete agreement is unenforceable but if possible, the Court will
enforce the agreement by reference to previous dealings between the parties;
question of fact based on particular circumstances of the parties in each case:
Hillas & Co Ltd v Arcos Ltd [1932] All ER494
55
Terms implied by custom or trade usage
Con-Stan Industries of Australia Ltd v Norwich Winterthur Insurance (Australia) Ltd
[1986] HCA
–
–
–
–
Existence of custom is question of fact
Custom is well known and generally acquiesced in
(reasonable presumption term part of contract)
Custom must not contradict express terms
Party may be bound by a custom even if had no knowledge of it
56
Terms implied for ‘business efficacy’
In business transactions such as this, what the law desires to effect by the implication is to
give such business efficacy to the transaction as must have been intended at all events by
both parties who are business men; not to impose on one side all perils of the transaction,
or to emancipate one side from all the chances of failure, but to make each party promise
in law as much, at all events as it must have been in the contemplation of both parties that he
should be responsible for in respect to those perils.
The Moorcock (1889)14 PD 64 Bowen LJ
57
Requirements set out in BP Refinery (Westernport) Pty Ltd v Shire of Hastings
(1977) 16 ALR 363:
The term:
•
Must be reasonable and equitable
•
Must be necessary in order to give business efficacy to the contract so that no
term will be implied if the contract is effective without it
•
Must be so obvious that “it goes without saying”
•
Must be capable of clear expression
•
Must not contradict any express term of the contract
58
Requirement of being so obvious that “it goes without saying”
Codelfa v State Rail Authority NSW[1992] HCA
–
Contract to build Eastern suburbs railway. Work to be done
3x 8hour shifts per day, 6 days a week. SRAcould not be sued for
nuisance etc BUTresidents got injunction to stop Codelfa working
24hours per day – so work could not be completed within time
specified in the contract.
–
Codelfa argues: implied term that if it could not work as planned
any additional costs would be paid by SRA.
–
Court refuses to imply this term. Why? Because if parties had
thought about what would happen in this circumstance, there would
be a number of options and court cannot select option for partiesmust be “so obvious that it goes without saying”
BUT -alternative ground for relief: frustration of contract
59
Terms implied by legislation
eg Sale of Goods Act 1923 (NSW)
implied terms as to title: section 17
implied terms in sale by description: section 18
implied terms as to quality or fitness: section 19
implied terms in sale by sample: section 20
Cannot be excluded in consumer contracts
Note: if a term is implied into the contract, action lies for breach of contract not
for breach of SGA: contrast Australian Consumer Law consumer guarantees
60