The New South Wales Young Lawyers Civil Litigation Committee and Business Law
Committee (the Committees) are each comprised of young lawyers, either under the age of 36 or in their first five years of practice and law students, all of whom practice or have an interest in civil litigation or business law, respectively.
Inquiries may be directed to the President of New South Wales Young Lawyers, Heidi
Fairhall (president@younglawyers.com.au), the Chair of the Civil Litigation Committee,
Elias Yamine (civillit.chair@younglawyers.com.au), or the Chair of the Business Law
Committee, Tom O’Callaghan (buslaw.chair@younglawyers.com.au).
The Committees have had the opportunity to read and consider the Australian
Government Review of Australian Contract Law Discussion Paper entitled ‘Improving
Australia’s Law and Justice Framework: A discussion paper to exploring the scope for reforming Australian contract law’ released in May 2012 ( Discussion Paper ).
The Committees note that the law of contract in Australia is by and large a robust and well-functioning body of law. Furthermore, to reform the law of contract in any way would be an onerous process which would no doubt take some years to transition. Whilst the
Committees have noted various issues which require address within Australian contract law, it is possible that substantial reform might be both difficult and unnecessary.
Accordingly, there may be some benefit gained from restating some of the more settled and simple areas of contract law in the form of legislation.
In this submission, the Committees will respond generally to Questions 1-8 in the
Discussion Paper, following the format under ‘Questions for Consultation’ on page iii of the Discussion Paper, being:
Question 1: What are the main problems experienced by users of Australian contract law? Which drivers of reform are the most important for contract law? Are there any other drivers of reform that should be considered?
Question 2:
Question 3:
What costs, difficulties, inefficiencies or lost opportunities do businesses experience as a result of the domestic operation of Australian contract law?
How can Australian contract law better meet the emerging needs of the digital economy? In what circumstances should online terms and conditions be given effect?
Question 4:
Question 5:
Question 6:
Question 7:
Question 8:
To what extent do businesses experience costs, difficulties, inefficiencies or lost opportunities as a result of differences between Australian and foreign contract law?
What are the costs and benefits of internationalising Australian contract law?
Which reform options (restatement, simplification or substantial reform of contract law) would be preferable? What benefits and costs would result from each?
How should any reform of contract law be implemented?
What next steps should be conducted? Who should be involved?
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The Committees believe accessibility and uniformity are the main problems experienced by uses of Australian contract law, and should be the most important drivers of reform.
With so many different sources of law (contract law and equitable doctrines arising from case law; various statutes such as the Sale of Goods Act 1923 (NSW), parts of the
Conveyancing Act 1919 (NSW), the Competition and Consumer Act 2010 ( ACL ), the
Australian Securities and Investments Commission Act 2001 (Cth) ( ASIC Act ); the
Contracts Review Act 1980 (NSW)) it is difficult for users to know and understand the content of the law governing their contract at various points in time. Those points in time include the following: a) formation; b) performance; c) termination or other conclusion of the contract.
Misunderstanding as to the principles that apply to formation of contracts include: a) Whether a contract has been formed (the “ Masters v Cameron ” question):
In Masters v Cameron (1954) 91 CLR 353, the High Court set out three
“categories” of case where the question is whether a contract has been formed, however it is now accepted that there are four “ Masters v Cameron categories”
(see Baulkham Hills Private Hospital Pty Ltd v GR Securities Pty Ltd (1986) 40
NSWLR 622 at 628). b) The requirement for consideration:
Some of the technicalities surrounding what type of consideration is good consideration make it difficult at times for parties to know whether they have
“done enough” for a contract to come into existence and be enforceable. This issue also arises in relation to variation of contracts – where the parties have agreed that the contract should be performed differently to their original intention, will that variation be binding? c) Is there a need for the contract to be in writing? Is there a need for it to be in any particular form? For example, for an assignment of a chose in action, many parties – and, at times, their lawyers – are unaware that they must comply with section 12 of the Conveyancing Act for the contract to be effective. If those formalities have not been complied with, it often is difficult for parties (and sometimes their lawyers) to know and understand how the various doctrines of estoppel may apply, and to what effect (see below).
There are aspects of the law of contract relating to performance where technicalities frequently either are misunderstood by parties, or missed completely. Three examples are: a) The need for consideration, and what constitutes good consideration – in particular, where parties seek to vary a contract;
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b) Oral variation of a contract required to be in writing – this has in the past given rise to the courts fashioning distinctions to avoid injustice (see Contract Law in
Australia (5th Edition, 2007, Carter, Peden and Tolhurst) at [9-27] for a brief discussion of this issue). In circumstances where a technicality of this kind is relief upon and the courts are able to draw distinctions that may seem obscure, there is less prospect of the parties being able to resolve the dispute without determination by a court.
Relevant to creation, performance and enforcement of contracts is the multi-layered and confusing position in relation to how doctrines such as unconscionability and undue influence apply. In particular, similar concepts (or at least concepts that may provide relief in similar fact situations to those where these doctrines apply) arise under legislation such as the Contracts Review Act , the Australian Securities and Investments Commission Act and the Australian Consumer Law. The multiplicity of sources of law relevant in the types of circumstances to which these doctrines are directed means that in an enforcement situation (by way of court proceedings): a) Additional costs are likely to be incurred by reason of the need to obtain advice on, and plead, a number of different causes of action or defences which in any event substantially overlap; b) If the dispute is across State/Territory borders, there may be slightly different law in one jurisdiction to the next. As with any litigation in which more than one forum may be the appropriate forum, legal costs are likely to be increased by: i) The parties (or, at least, the plaintiff) obtaining advice on the operation of both sets of law (to identify the more favourable legislation); and ii) Engaging in interlocutory processes to determine where the litigation should be conducted (and subject to what law).
Implied terms are another difficult area of contract law that calls out for clarification. It often is difficult to predict what terms will be implied because they are necessary to give business efficacy to the contract. A specific area of confusion in relation to implied terms is the implied duty of good faith. This raises the questions: when will such a duty be implied? What is the content of the duty if it is implied? What is the remedy if it is breached?
Businesses, small and large, with operations in multiple Australian states and/or territories, are hampered by state-by-state variations in contract law, including differing interpretations of the law by the various state superior courts that are yet to be resolved by the High Court. The state-by-state variations can increase the cost of doing business.
For example: a) Businesses may have to engage lawyers in more than one state to advise on a transaction across state borders; b) Businesses may need to create and maintain multiple versions of their standard form contracts to accommodate differences in contract law across the states in which they operate; c) Compliance programs aimed at complying with a business’ contractual obligations may require state by state variations, increasing the cost and complexity of compliance.
State by state variations in contract law can also be a challenge for the legal profession.
Generalist practitioners may not have the time or resources to keep up to date with variations in contract law across multiple states, and smaller firms may not have offices in
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other states to provide short answers on local laws at little or no cost where required. This may create a need to brief firms in multiple states, which can increase the cost to the client.
In the performance of a contract, particularly where the contract is to be performed over a long period of time, parties often will not regularly review and amend the written contract
(particularly where the parties are not big businesses with legal departments or external solicitors at their disposal). This can give rise to gaps during which the terms of the contract will not have “caught up” with the manner of performance. Also relevantly, there are times when the written terms simply are not clear. The courts, however, are not permitted to look at post-contractual conduct as an aid to construction of a written contract (see, for example, Franklins Pty Ltd v Metcash Trading Ltd [2009] NSWCA 407 at [306]-[328]). This is a principle that is removed from the practical reality of the performance of many contracts. Thought should be given to allowing courts to take account of post-formation conduct. This would perhaps be best achieved by courts being permitted to focus on mutually agreed post-formation conduct, rather than unilateral changes to performing the obligations of a contract.
Generally there currently is no room in Australian contract law for adaptation for hardship where that hardship that arises after the contract has been formed. There would be utility in amending the law to enable modification or termination of a contract in a case where, for example, the contract runs for a long period of time and circumstances change in a way that is beyond the control of either party and could not have been predicted, so that the risks the parties have taken on substantially changed. A change to Australian law of this kind would need to balance: a) parties’ freedom to contract and allocate known or foreseeable risks, on the one hand; and b) the need to allow parties to adapt to changed circumstances in a way that avoids unduly harsh consequences, such as insolvency of one party at the expense of another party getting the benefit of their bargain.
The main drivers for reform broadly cover the main problems identified above. Those main drivers are accessibility and the need for uniformity. Those who use contract law need to be able to find it and understand it, preferably without having to frequently call on lawyers and the courts to explain its application.
As described above, certain problems in contract law can be broadly grouped within the issue of accessibility (with some overlap with uniformity). In summary, the following accessibility goals would address some of these problems: a) A single clear source of guidance for the principles and rules governing formation of contracts is desirable; b) Clarification and a clear and accessible statement of some of the technicalities within contract law (such as what constitutes good consideration to make a contract variation binding and enforceable, and what is required to vary a contract);
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c) Creation of a single source of law for users to look to in relation to unconscionable conduct and conduct of a similar kind would reduce complexity in enforcement of contracts, by reducing the need to plead causes of action from a number of sources, and may reduce forum-shopping expenses (if uniformity is achieved at the same time); d) Clarification of when terms will be implied and, in particular, when a duty of good faith will be implied and to what affect.
National uniformity in contract law is an achievable goal that would immediately benefit the Australian economy. State by state variations in contract law no longer make sense in light of the integrated nature of the Australian economy in present times, the ease of doing business across state borders due to the internet and other advances in electronic communications, and the number of business that do operate across state borders.
Australian business and legal professionals have long benefited from national uniformity in corporations law in the form of the Corporations Act 2001, and more recently in the area of personal property securities with the Personal Property Securities Act 2009. For corporate transactions and transactions involving the taking of security, uniform national legislation enables businesses to take advice from one law firm, simplify the transaction documents, register the security interests on a single register, and reduce the costs of the transaction generally. Reducing the costs of business transactions and contractual compliance will benefit the economy generally by freeing up business funds for investment.
Uniformity will also provide greater certainty to businesses and their advisors when they consider expanding operations into a new state, or when entering into a transaction across state borders. Over time businesses and legal professionals will become familiar with the national uniform contract law, and can save the time previously spent analysing state by state variations.
The American experience with the Uniform Commercial Code, which has been adopted by most US states with limited variation, should be considered by the Australian
Government. Businesses operating in the US have a high degree of certainty the “ground rules” for commercial transactions will be the same or similar across each state in which they operate. US business also benefit from having one code covering multiple topics that Australian states instead cover in separate legislation. For example, the Uniform
Commercial Code covers sale of goods, leasing, commercial paper / bills of exchange, and personal property securities in the one code. This also enhances accessibility, which we believe to be the other most important driver for reform.
Room for improvement in the way contract law operates and is applied. For example: a) making evidence of post-formation conduct admissible in construing contracts; and b) making room within the law of contract for adaptation based on hardship (as, for example, provided for in the International Institute for the Unification of Private
Law ( UNIDROIT ) Principles).
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The Committees submit that the interrelationship between common law rules, equitable doctrines and statute has diminished the clarity of Australian contract law. Likewise, the differences in contract law between Australian jurisdictions have lessened predictability.
Centrally, the Committees submit there is a friction between:
•
Contract law and equitable principles,
•
Contract law and the Australian Consumer law ( ACL ),
•
Contract law and the Personal Properties and Securities Act 2011 (Cth), and
•
Contract Law and other statutes.
The overlapping nature in these areas of the law has left contracting parties engaging in a substantial amount of guesswork. In essence, the Committees submit that the contract, and the contract alone, should fully regulate the relationship between the parties. That being said, the Committees do recognise there are safeguards provided in other statutes for less sophisticated parties.
The Committees submit that reforms should improve the certainty around the operation of contract law and fiduciary relationships in business. This area of law affects many manufacturer/distributorship transactions, both domestically and internationally.
Often distributors face legal action for acting against the interest of the manufacturer
1 when they supply the products on their own terms or when they exploit the product goodwill of the manufacturer. Although the current position of the courts prefers to focus on the contractual breaches in these commercial dealings, the operation of fiduciary obligations existing in these dealings is not closed.
Mason J in Hospital Products Ltd v USSC
2 proposed that fiduciary obligations may be operable in commercial arrangements that are partially fiduciary. Hence, distributors would be subjected to contractual and fiduciary obligations. This may be problematic for distributors who may engage in numerous responsibilities that have contractual and fiduciary implications with the manufacturer.
The overlap between fiduciary and contractual responsibilities would generate uncertainty in identifying the contractual responsibilities that are separate from fiduciary obligations.
This creates an issue for distributors who decide to engage in conduct that would be acceptable under the contractual terms, to be only restrained by fiduciary obligations, as a result of the failing to identify the overlapping nature of the terms.
Additionally, in UDC v Brian
3
, the High Court determined that two parties who have yet to formalise their contractual relationship with an executed joint venture agreement were
1
C Shirt Pty Ltd v Barnett Marketing Pty Ltd (1996) 37 IPR 31, Hospital Products Ltd v USSC (1984)
156 CLR 41
2
Hospital Products Ltd v USSC (1984) 156 CLR 41
3
United Dominions Corporation Ltd v Brian Pty Ltd (1985) 157 CLR 1
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nevertheless in a fiduciary relationship. The fact that a contract does not necessarily need to be executed before a legal relationship can arise between the parties further diminishes the clarity of Australian contract law.
Legal certainty needs to be addressed in closing the operation of some equitable principles in commercial dealings, such as fiduciary obligations. In doing so, individuals and businesses may make informed choices, reduce legal and economic costs, and allocate risk more efficiently so as to exploit the correct opportunities.
The Committees submit the existence of equitable estoppel continues to undermine the certainty of contracts. Ever since the High Court decision in Waltons v Maher
4
, equitable estoppel has been used as a last resort by businesses and individuals in enforcing a contract.
The purpose of the submission is not to criticise the appropriateness of equitable estoppel. The doctrine has become a reasonable alternative in resolving the harshness of contract law in circumstances where individuals and businesses fail to find a way of redress.
It is important to note that equitable estoppel is to target the unconscionable conduct within business dealings
5
. However, the Committees submit that the task in identifying unconscionable conduct may not always be simple, especially in circumstances that involve hard commercial bargaining. At times, it is difficult to discern whether it is the behaviour of the stronger party or the plight of the weaker party that is at fault
6
. However, it is important to note that in some instances, the court will consider the bargaining powers of the contracting parties when determining a case for equitable estoppel
7
.
Rather than simply having to refer to the contract itself to determine the rights and obligations of the parties, the doctrine of equitable estoppel adds a further layer of complexity to Australian contract law. This leads to inefficiencies and higher costs for some contracting parties as they will need to consider whether their conduct could lead to an estoppel claim by a counterparty.
The Committees submit that the application of the Australian Consumer Law ( ACL ) in business-to-business contracts could influence the certainty of contract law governing business dealings.
The interrelationship between contract law and the ACL has given rise to common law and statutory claims in disputes between contracting parties, for example the general prohibition on misleading or deceptive conduct in trade or commerce. The option in making a case out of misleading and deceptive conduct above the general contract law and tort law rules on misrepresentation has been costly in the litigation side of things.
There have also been circumstances where businesses are found liable under section 18 of the ACL in relationships that never involved a contractual agreement or relationship.
This is notable in cases where a party is found to have engaged in misleading or deceptive conduct through failing to disclose relevant information to a plaintiff over the
4
Waltons Stores (Interstate) Ltd v Maher (1988) 164 CLR 387
5
Waltons Stores (Interstate) Ltd v Maher (1988) 164 CLR 387
6
A Duggan, 'Trade Practices Act 1974 (Cth) s 52A and the law of Unjust Contracts' (1991) Sydney
Law Review 138, 167
7
Austotel Pty Ltd v Franklins Selfserve Pty Ltd (1989) 16 NSWLR 582
8

course of the dealing
8
. The potential for the ACL to apply in business relationships that hold no contractual force would continue to impose uncertainty in the legal position of many commercial contractors.
The Committees submit that the different approaches applied in interpreting contractual terms may add technicality and complication for businesses and legal practitioners.
For instance, with regard to unfair contract terms in the ACL, section 24(2) requires a consideration of the term's transparency whenever a court determines a term's unfairness in section 24(1). However, under section 24(1) it is unclear how exactly a term's transparency impacts upon the requirement(s) of unfairness, or makes transparency an independent requirement of a term's validity
9
. A term's transparency is only one of several factors to be considered in determining a term's fairness. Section 24(1) fails to specify when a term's transparency is a relevant consideration
10
.
Likewise in contract law, what remains unclear is the issue concerning when evidence of surrounding circumstances is admissible in assisting the interpretation of a contract.
Mason J in Codelfa Construction Pty Ltd
11 stated that evidence of surrounding circumstances is only admissible to assist in the interpretation of a contract when the language is ambiguous. Whereas, some recent High Court decisions indicated that in construing commercial contracts, the surrounding circumstances may be considered even if the language is not ambiguous
12
.
To some degree, the uncertainty around the different approaches available in interpreting contractual terms in contract law and the ACL complicates matters. In circumstances where there is an unfair term that is ambiguous or not transparent, legal practitioners will be faced with a dilemma in deciding whether to investigate the transparency of a term under the ACL or to consider the “factual matrix” approach under contract law principles.
The failure to draw boundary lines between contract law and the ACL in the interpretation of terms would increase technicality and complication for businesses and practitioners.
Individuals and businesses must have access to quality legal advice in understanding their position to develop long-term plans, whilst allocating risk more efficiently. Reforms should be made in drawing boundary lines to the extent of the application of contract law principles and ACL rules in the interpretation of contractual terms.
The Committees submit there are implications from the operation of the Personal
Properties and Securities Act 2011 (Cth) ( PPS Act ) with contract law. Some contracts now can give rise to security interests such as the retention of title ( ROT ) clauses.
Before the operation of the PPS Act , a retention of title clause, like any contractual term, must be incorporated into the contract. This also needs to be in writing under section
20(2)(a) of the PPS Act . However the courts have previously demonstrated a willingness to incorporate an unwritten ROT term under the "course of dealing" argument, where
8
See Nagy v Masters Dairy Limited (1997) 150 ALR 273 and Arbest v State Bank of NSW [1996]
ATPR 41-481
9
Sirko Harda, 'Problems in interpreting the unfair contract terms' (2011) 34 Australian Bar
Review 206,319
10
Ibid, 317
11
Codelfa Construction Pty Ltd v State Rail Authority of New South Wales (1982) 149 CLR 337, 352
(Mason J)
12
See Pacific Carriers Ltd v BNP Paribas (2004) 218 CLR 451; Toll (FGCT) Pty Ltd v Alphapharm Pty
Ltd (2004) 219 CLR 165
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there have been repeat dealings and invoices or other contractual documents containing such terms issued during the course of the relationship
13
.
The Committees submit the common law argument is out of date in the context of the current writing and registration requirement that is needed in enforcing ROT clauses against third parties under the PPS Act . Reforms may need to address the contemporary value of some contract law principles.
Despite the PPS Act not applying to land, the Committees submit it will nevertheless impact on the leasing of real estate. For instance, with regard to security deposits for leases, a security interest could arise in favour of both a vendor and purchaser where the vendor holds the deposit (on trust) under a contract of sale. The PPS Act excludes the security interests relating to deposits “in connection with land”. However, whether the words “in connection with land” capture security interests relating to deposits under a contract of sale of land and personal property is unclear
14
.
The Committees agree with paragraph 3.6 of the Discussion Paper, which notes that the clarity of Australian contract law is diminished by the fact that legislative provisions affecting general contract law are not in a centralised location. The differences in contract law and statutes enacted have made matters rather complex.
For instance, the specific requirements set out in s 24(1) of the ACL to what is an "unfair" contract differs in wording to the specific requirements set out in section 9(2) of the
Contracts Review Act 1980 (NSW) to what is an "unjust" contract. Likewise, in other areas such as the capacity of minors to contract, the common law position that contracts are enforceable on minors is in contrast to the presumption set out in the Minors
(Property and Contract) Act 1970 that contracts are binding on minors when they are deemed to be beneficial to the minor.
In addition, foreign contracting parties may find it surprising that the assignment of debt under Australian law is not governed by banking or financial legislation. Rather, it is governed by the Property Law Act , Conveyancing Act 1919 (NSW) or the equivalent in all states and territories. Additionally, parties seeking relief through a contractual claim often find that there are multiple overlapping remedies available to them through common law, statute and the contract itself. Contracting parties may also be unaware of which statutory provisions cannot be excluded by contract (for example, section 18 of the ACL).
These differences add a further layer of complexity to Australian contract law. This makes it difficult for contracting parties, especially foreign contracting parties, to fully ascertain their rights under contracts which are governed by Australian law or have an Australian counterparty.
13
Re Bond Worth Ltd [1979] 3 WLR 629
14
The PPSA and Real Estate Transactions (2012) Allens Linklaters http://www.allens.com.au/pubs/re/cure6mar12.htm at 5 March 2012
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The digital economy is the global network of economic and social activities that are enabled by platforms such as the internet, mobile and sensor networks
15
.
The Committees submit there may be need for harmonisation of various Electronic
Transactions Acts ( ETA ) across different jurisdictions in Australia
16
. It should be noted that traditional contract law might be unsuitable in its applications to the ETA . Such harmonisation may lead to simplification and clarification of law, which may cause interstate trade to become easier, with reduced costs for clients
17
.
Drafting a national code for all contract law might be difficult to realise and would involve enormous complexity. Nonetheless, a national code would benefit the emerging needs of the digital economy. Any reformed contract law in the area of digital economy should ensure that is accessible to business and consumers, efficient in its operation, and effective as a vehicle for advice and enforcement
18
.
As there has been and continues to be an increase of online retail internationally, problems occur due to different contract law systems in different countries. The
Committees suggest internationalisation of this area of law may remove trading barriers.
There are many benefits of a digital economy, and legislation has been introduced to give an impetus to e-commerce. The Australian business community is still resistant to change regarding the use of e-signature
19
.
One of the factors influencing this resistance is a lack of understanding of the law governing electronic signatures
20
. The ETA do not provide a definition of electronic signature, and it is recommendation that the ETA incorporate the definition of electronic signature and digital signature
21
into legislation. Clarity in legislation can lead to enhancement of business confidence in using e-signature technology
22
. It is recommended that the ETA are to be amended in line with the Model
Law on Electronic Signatures 2001 ( MLES ) and the United Nations Convention on the use of Electronic Communications in International Contracts 2005 ( the 2005
Convention ) drafted by the United Nations Commission on International Trade Law
( UNCITRAL )
23
.
There were recent changes to section 10 of the Electronic Transactions Act 1999 (Cth) to implement the Commonwealth version of the model amendment provisions developed by the Parliamentary Counsels' Committee of the United Nations Convention on the Use of
Electronic Communications in International Contracts 2005. Nevertheless, section 10 of
ETA (Cth) still imposes vague and ambiguous terms and provides little guidance,
15
Department of Broadband, Communications and the Digital Economy, What is the Digital
Economy? < http://www.dbcde.gov.au/digital_economy/what_is_the_digital_economy>.
16
Electronic Transactions Acts 1999 (Cth); Electronic Transactions Acts 2000 (NSW); Electronic
Transactions (Victoria) Acts 2000 (Vic); Electronic Transactions Acts 2001 (Qld); Electronic
Transactions Acts 2003 (WA); Electronic Transactions Acts 2000 (SA); Electronic Transactions Acts
2000 (Tas); Electronic Transactions Acts 2011 (ACT); Electronic Transactions Acts 2000 (NT).
17
Alex Boxsell, ‘Roxon to Unravel Contract Law’, The Australian Financial Review , 22 March 2012.
18
Ray Steinwall, ‘Contract Code Worth Embracing’, The Australian Financial Review, 20 April
2012.
19
Aashish Srivastava, ‘Resistance to Change: Six Reasons why Businesses don’t use e-signature’,
(2011) 11 Electronic Commerce Research 357, 358.
20
Ibid 363.
21
Ibid 378.
22
Ibid.
23
Srivastava, above n 5, 379.
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therefore causing difficulties for legal practitioners to properly advise businesses on the use of e-signatures
24
.
There is no worldwide accepted definition of electronic signature
25
; and, whilst there is no proof that this may have any influence on international trading, different legislation in different jurisdictions may cause problems due to enforceability across the jurisdictions.
The digital economy presents many new challenges for contract law. Electronic commercial relationships are increasingly becoming heavily relied upon as are new electronic commercial relationships. Accordingly, the Committees have considered that electronic contracts and in particular agreement to online terms and conditions could be treated as a sub-component of contract law.
The law regarding digital contracting is complex and comes from a variety of unclear sources. If the principles concerning contract law are brought into one place, this may reduce the time spent searching through the principles and precedents that may be applicable, and could achieve certainty in trade. It may also reduce the number of contract-related disputes.
Technology has dramatically transformed consumer behaviour, including the look and feel of contracts. With the vast majority of transactions occurring on the internet, it is often unclear which jurisdiction applies. Harmonisation of the laws specifying which jurisdiction is to apply could help eliminate ambiguity to this extent.
Part 2.7 of the Discussion Paper states:
“[e]nsuring that Australian contract law adapts to innovations in technology is one way in which participation in the digital economy can be better facilitated. Businesses and consumers may, for example, have greater confidence in the digital economy if legal doctrine evolves to remain applicable and relevant to new ways of conducting business online.”
In the context of online contracts, the place and time of acceptance if often difficult to identify, and varies according to email or other web formation methods including “clickwrap, browse–wrap and web-wrap”. Most websites incorporate a “terms and conditions” page which generally covers copyright, trade mark permissions, privacy, security and limitations of liability.
There has been little consideration by the courts in Australia as to when terms and conditions are enforceable and when they meet the requirements of a contract under
Australian law.
In eBay International AG v Creative Festival Entertainment Pty Ltd [2006] FCA 1768, the
Federal Court clarified clicking “I accept” in response to a set of online terms and conditions will generally be acceptable and equivalent to electronically signing the relevant conditions under Australian law. However, there is no single set of rules or requirements for businesses and consumers to follow to ensure online or otherwise automated terms and conditions (including their format) are enforceable under Australian law.
As such, it is arguable the law could be adapted with particular reference to online terms and conditions to ensure businesses and consumers have greater confidence in the applicable ways to conduct business online.
24
Ibid and Jay Forder, ‘The Inadequate Legislative Response to e-Signatures’, (2010) 26 Computer
Law & Security Review 418,421.
25
Stephen Mason, ‘Electronic Signature in Practice’, (2006) 6 Journal of High Technology Law
148, 158.
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The Committees submit Australian contract law could be reformed so as to provide a specific set of requirements which online terms and conditions should meet in order to be valid under Australian law. This could include the following:
Requirement
Terms and conditions must always be accessible before acceptance and must not be hidden. The terms and conditions must be displayed on the same page as the
“I accept”.
User must scroll down through the terms and conditions before they are able to proceed to the “accept” button.
Legal basis and reasoning
Unfortunately often the consumer is not required to access a hyperlink and view the terms and conditions in browse wrap agreements. This means that they are allowed to proceed with the contract and the form of the agreement is less likely to be enforceable as a contract under the current contract law.
Requiring that terms and conditions must be accessible and displayed on the same page as the acceptance button ensures the user has reasonable notice of the terms and conditions.
There must be an option for the user to
“accept” or “decline” the terms and conditions.
The “accept” box should be left blank as a default; alternatively the “decline” box should be present and set to default.
Often terms and conditions may be available somewhere on that site (often under a hyperlink) but the user is not expressly required to assent to them.
If the website is has a separate window containing the terms and conditions and the accept button at the bottom of the window, the user must read all the conditions before they are able to proceed.
This ensures the user has considered all terms and conditions prior to accepting the offer. It also establishes reasonable notice of the terms and conditions. This means that the user has the opportunity to check the acceptance they choose to make. It also requires positive action to be taken by the browsing party in order to accept them.
This means that the user has the opportunity to check the acceptance they choose to make. It also requires positive action to be taken by the browsing party in order to accept them. It also controls the point at which the contract is formed.
If the law requires that this box by default is left blank, the user has to take a proactive and additional role in accepting the terms and conditions when entering into an online contract.
If unusual or onerous, provisions they should be highlighted by bold text, coloured text, underlined or drawn to the user’s attention in some other way.
The terms and conditions must be in concise, plain, clear and unambiguous language.
This draws attention to unusual, important and critical clauses, establishing reasonable notice, and ensures the user has considered those terms in the absence of formal contract negotiation.
Many websites suffer from an overload of contractual terms and conditions about the transaction, causing the consumer to feel overwhelmed about the information received. In some instances this can cause tendencies for consumers to disregard the terms.
Short, clear language promotes the likelihood the user will consider the terms and intend to create legal relations based on their understanding of those terms.
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Terms must identify that they are terms and conditions that are contractual in nature and identify a difference between merely advisory terms often included as warning about existing laws and security measures.
The terms and conditions must expressly state which jurisdiction applies.
An Australian Competition and Consumer Commission ( ACCC ) survey of Australian websites found that of the sites with online terms and conditions, more than 50% included disclaimers as to responsibility for accuracy of information or of warranties, or clauses limiting liability. As a result, it was concluded that while
‘some of these clauses are not unlawful and often fall short of best practice’
26
.
By incorporating a requirement to identify the difference between terms and conditions of the contract and warranties, it promotes and supports and evidences an intention to create legal relations.
The internet is often described as “borderless” and, in the case of cross-border internet transactions, it is often unclear what legal system is the governing law. Such a requirement would establish which jurisdiction and laws are applicable.
However, the Committees submit that defining how and when terms and conditions meet general contract principles including offer and acceptance is not an easy task. Whilst harmonised legislation could cater for increased legal certainty, legislation establishing a set of formal rules may in fact create more confusion. This is particularly true in the context of the digital economy which is rapidly and continuously changing. It begs the question: how is one to draft a set of transient and transparent rules for arguably the fastest moving and unpredictable environment in existence?
While the internet is an open and broad medium where the ability to hyperlink terms and conditions is often the key to success, it does not mean it should function separately from traditional contract law principles. In fact, the requirements outlined in the table above are created in the context of meeting general principles of contract law including offer, consideration, intention to create legal relations and acceptance. The manner of contracting has changed to meet the digital economy however this does not mean the law of contract necessarily be changed within this new context.
Contract rules originally formatted over a century ago have been applied to this “digital age” and have been sufficient to date. Online contracting occurs every day and depending on the circumstances, the current law has been sufficient to determine when online terms and conditions may give may be given effect and when they are adequate to form a valid contract.
International neighbours have codified contract law systems including China, Japan and the USA, and several international projects have been incorporated to address problems associated with transacting across borders including the United Nations Convention on
Contracts for the International Sale of Goods and the UNIDROIT Principles of
International Commercial Contracts. However it is questionable and yet to be seen whether there is a fundamental legal benefit attached to any of these systems.
If Australia were to implement a harmonised set of rules for enforceable terms and conditions, it could also mean that businesses will look to one set of rules and no longer consider the common law rules or those laws applicable to other contracting parties jurisdictions. This in turn could in fact increase the number of disputes.
Accordingly, although it may be time for Australia to prepare a regulatory environment to enable them to cope with consumer needs in the digital economy, harmonised legislation for enforceable terms and conditions may not necessarily foster strong consumer confidence or encourage better cross-border consumer electronic transactions for conducting business online.
26
ACCC Shopping online: Rights and Obligations when Trading over the Internet June 2004 at www.accc.gov.au/content/item.phtml?itemId=513872&nodeId=file4230c4af8139b&fn=Shopping
%20online.pdf at p 4.
14

The Committees submit that Australian and foreign contract law needs to adapt to the expansion of the Asian economies. Additionally, our ongoing relationship with the United
States and the European Union often require Australian parties to accommodate differences in contract laws in these jurisdictions in order to maintain a sustainable and efficient relationship.
The Committees agree that a codification or restatement of contract law would clarify any ambiguities for contracting parties, especially in relation to issues which have been unsettled by inconsistent judicial decisions. For example, the concept of consequential, special or indirect loss is one which parties often disagree upon. Contracting parties in
Australia often seek to carve out any liability for losses which are “reasonably within the contemplation of the parties” (that is, the second limb of damages under Hadley v
Baxendale
27
) through the use of an exclusion clause. This essentially allows the parties to limit their liability to 'direct losses' which usually excludes any loss of profit, goodwill or reputation. However, the controversial decision in Peerless subsequent Supreme Court decisions
29
28 and various other
have unsettled this area of law by including losses usually within the first limb of Hadley into the second limb, thereby expanding the operation of exclusion clauses beyond what was perhaps intended by the parties. It is areas of contract law such as this which would benefit most from codification or restatement.
The Committees suggest that it is misleading to suggest that a codification or restatement of contract law allows the parties to treat the contract as the single document which governs their obligations and rights. The Discussion Paper notes that one of the difficulties with Australian contract law is that there is not centralised location to which the parties can turn in order to ascertain their rights and obligations. Multiple statutes such as the Personal Property Securities Act 2009 (Cth), the Consumer and Competition Act
2010 (Cth), the National Consumer Credit Protection Act 2009 (Cth) and the state
Property and Conveyancing Acts all overlap with general contract law to impose further obligations and grant further rights upon parties.
The Committees submit that this is not a problem which is unique to Australia and is vital to any system of law as statutes provide consumers and counterparties with protection and remedies which cannot be contractually excluded. This is especially relevant where the parties are mismatched in bargaining/market power. For example, the Discussion
Paper mentions both the United States Restatement of the Law (Second) Contracts and the Uniform Commercial Code which promote uniformity in United States contract law.
This codification and restatement does not however, override the obligations of contracting parties under United States statute. For example, for parties dealing with derivatives and financial products, the Dodd–Frank Wall Street Reform and Consumer
Protection Act remain relevant.
A difficult problem arises though when a contracting party is seeking a representation or warranty based on their local statutory rules for which there is no foreign equivalent. For example, an English contracting party may give an Australian counterparty a
27
Hadley v Baxendale (1854) 9 Exch 341
28
Environmental Systems Pty Ltd v Peerless Holdings Pty Ltd [2008] VSCA 26
29
Allianz Australia Insurance Ltd v Waterbrook at Yowie Bay Pty Ltd [2009] NSWCA 224
15

representation that they have not engaged in conduct which is materially misleading or deceptive. The materiality qualifier in that representation is a result of there being no statutory prohibition on misleading or deceptive conduct. The Australian counterparty will seek to remove this qualifier given that there is no materiality qualifier under the
Australian Consumer Law, leading to protracted negotiations between the parties.
As such, the Committees submit that whilst a codification or restatement would clarify some controversial areas of Australian contract law, an absence of codification or restatement is not necessarily a barrier for Australian and foreign trade, nor does it result in higher cost, difficulties, inefficiencies or lost opportunities. Evidence of this was raised in the Discussion Paper which noted that English law remains the most popular law of choice for many high-value international contracts despite not having codified contract laws. Additionally, it is not uncommon for contract law to be supplemented by statute and common law in many of the jurisdictions which Australia trades with, including the United
States and the United Kingdom.
One possible solution to disparities between Australian and foreign contract law is through the use of a standardised international agreement. An example of this is the
International Swaps and Derivatives Association ( ISDA ) Master Agreement. This Master
Agreement is commonly used to govern any swaps, derivatives, or financial products entered into between counterparties, it and contains a number of standard provisions including representations and warranties, events of default and termination rights.
The use of a document such as the ISDA Master Agreement is meant to significantly reduce the time required to negotiate an agreement to govern the rights of swap counterparties. An international approach such as this may increase the efficiency and reduce the costs of negotiating contracts between international parties.
However, it is arguable that this approach is not as efficient as it could be, given that parties using the ISDA Master Agreement often negotiate a Schedule to modify the terms of the ISDA Master Agreement. This essentially transfers the negotiation of one document to another document.
The Committees submit that whilst a standardised international agreement to govern contractual relationships may be advantageous in some instances, a balance between certainty as compared with flexibility and elasticity is required but difficult to achieve.
One of the difficulties with achieving a consistent outcome with the law of contract is that it is often governed by market practice and hence subject to fluctuations. Additionally, what might be market practice in a particular jurisdiction or industry may not necessarily be market practice in another jurisdiction or industry. Market practice is difficult to define due to its fluid nature and within the Australian market alone, contracting parties often negotiate over whether certain clauses are market practice.
For example, contracting parties in some jurisdictions may be less reliant upon a formalised contract with a full suite of representations and warranties. Contracting parties in some jurisdictions may also seek representations, warranties and indemnities which are uncommon in other countries. Cultural differences may play a large part in how parties negotiate the terms of a contract. Additionally, it is not uncommon for the semantics of a contract to be inconsistent with what actually occurs in practice. These problems add layers of complexity to both Australian and foreign contract law.
The occurrence of the global financial crisis ( GFC ) also arguably caused a significant shift in market practice for many high-value transactions as contractual parties seek to increase their protection against significant shifts in market conditions through additional termination and walk-away rights. This shift towards greater protection for the parties has resulted in another layer of complexity to contract law. For example, in recent years, post-
16

GFC, takeover deals appear to have a higher level of conditionality
30
. Additionally, a larger number of deals allow a bidder to walk away from a deal due to a target material adverse change
31
.
As such, the Committees submit that any reforms to Australian contract law will have little impact at an international level. In order for any major reform to be successful, it needs to occur at a global level rather than a local one.
30
http://www.claytonutz.com/publications/audio/top_manda_trends_in_2011_and_2012.page
31 http://www.claytonutz.com/publications/edition/15_march_2012/20120315/the_mac_is_back.p
age
17

Whether Australian contract law should be internationalised, and if so, what form that should take, will almost certainly be dependent upon the final shape of any other contract law reform options taken by the Australia Government. It is desirable that any steps to internationalise Australian contract law fit within the broader framework of contract law reform, so that parallel systems do not develop for domestic and international contracts.
If steps are taken to 'internationalise' Australian contract law, those steps will differ markedly based on whether reform is by way of restatement, codification or harmonisation of Australian law with international law. By way of example, reform by way of harmonisation presents wider opportunities for the incorporation of international developments into Australian law, but may result in significant changes to domestic contracting.
Yes. However, a critical factor will be the choice of what international laws or standard(s)
Australia has recourse to in undertaking any contract law reform. If the aim of contract law reform is to improve business efficiency, or to help Australian businesses to gain a competitive advantage as against international competitors, it would be beneficial to consider not just how changes to the law might impact on dealings with historically important trading partners (such as the US and UK), but also with potentially important future trading partners (such as Indonesia and the Middle East).
It is abundantly clear from the diversity of Australia's trading partners that any attempts to internationalise Australian contract law may have the effect of drawing Australian businesses closer to certain trading partners (with whom laws are now more concordant) and pushing them further away from other trading partners (with whom laws are now more disparate). Careful consideration should be given to the possibility that important trade opportunities may be rendered more difficult, not less, due to well-intentioned reform measures. The adoption of international 'standards' such as the UNIDROIT
Principles may go some way to ameliorating those concerns.
The broad costs and benefits of internationalising Australian contract law have been identified in the Discussion Paper and relevant infolets. Some additional considerations include: a) Differing interpretations of 'internationalised' laws across international jurisdictions may give rise to a large body of conflicting case law, leading to greater uncertainty. b) Codification or restatement favouring a particular internationalised approach may remove the flexibility currently enjoyed by parties contracting internationally.
Parties may no longer enjoy the same freedoms in choosing the applicable law and venue for disputes. c) An internationalised approach to contract law may give Australia an advantage in international contracting, particularly by making it more attractive to trading
18

partners as a choice of law venue. It is noted that this may have flow-on effects in terms of workload for Australian courts and arbitral bodies.
It is also noted that if reform takes place by way of codification, the benefits of internationalisation might be limited. That is because the systematic nature of a codified system means that the benefits of internationalisation may only be realised to the extent that practices based on international rules can operate with national legal rules.
19

The Committees note that the law of contract in Australia is by and large a robust and well-functioning body of law. Furthermore, to reform the law of contract in any way would be an onerous process which would no doubt take some years to transition. Whilst the
Committees have noted various issues which require address within Australian contract law, it is possible that substantial reform might be both difficult and unnecessary.
Accordingly, there may be some benefit gained from restating some of the more settled and simple areas of contract law in the form of legislation.
The primary benefit of a restatement of the law of contract is an increase in the accessibility of the law of contract to non-lawyers across Australia. Unlike many other areas of the law, the law of contract is ubiquitous in modern Australia increasing the benefit gained as a result of better access to the law. To be of real benefit to non-lawyers, these provisions would need to drafted in clear, concise and plain English, and be published in an accessible format, for example online together with other legislation.
This easily digestible restatement of the law would be in stark contrast to contract law based in case law, which is not easily navigable by non-lawyers as it requires access to expensive online subscriptions, case-searching skills and expertise and experience in reading often voluminous and complex case law. This is without even mentioning the additional challenges of precedent, the juxtaposition of case law with legislation and other subtleties that lawyers take for granted in knowing about.
On the other hand, a potential cost or disadvantage of restatement of contract law in the form of legislation is the reduction in precision and loss of flexibility afforded by the common law system. The system of contract law in Australia, following case law and previous precedent, has evolved incrementally; gradually and sensibly adapting to an ever-changing commercial world. This flexibility and ability to react in real time to a current dispute requiring a change in the law is a benefit which would be lost if this change occurred (it is noted that the Committees presume case law would still exist, but that those cases would sit underneath a codified set of contract laws. Accordingly, the cases should provide precision and continual refinement of contract law concepts).
Another potential disadvantage depends on the success of selecting which areas of contract law are sufficiently simple and settled now and into the future so as to be suitable for restatement. Such predictions may be difficult given the rapid pace of change in commercial dealings and the fact that while basic concepts, such as offer and acceptance, might be thought appropriate, even these concepts have intricacies which may be difficult to accurately express in the black and white of legislation.
Put simply, if executed correctly, there are definite benefits to be gained from a restatement in legislation of some of the more simple and settled areas of the law of contract, particularly for non-lawyers. However, there are also significant risks which may come to fruition if the process is not perfect.
20

The Committees submit that it is certainly too ambitious and costly to reform the entire
Australian contract law system to meet international principles. While international contract law principles contradict traditional Australian laws in several key areas such as the parole evidence rule and requirement of consideration
32
, changing those rules will cause significant confusion and inconsistency. It is also uncertain whether current international contract laws are entirely suitable for the Australian community.
A ‘two systems’ approach is relatively easier. For instance, there are in fact two systems which exist in New South Wales: a domestic system and an international one, embodied in the Sale of Goods (Vienna Convention) Act 1986 (NSW), which adopts the United
Nations Convention on Contracts for the International Sale of Goods (Vienna, 11
April,1980). However, in the past two years, the effect of this international contract law system has been very limited. This may be because it is limited to sale of goods contracts only but perhaps due to a high opt-out rate, globally caused by unfamiliarity of legal practitioners
33
. Neither the Vienna Convention nor principles of private law unification are part of mandatory legal training programs in Australia. Therefore, Australian lawyers are reluctant to choose this framework to negotiate international contracts. Judges and counsel may also be reluctant to apply international contract law principles exclusively to examine international contracts
34
.
Another potential problem of a two systems approach is the difficulty in defining international contracts. It is harder than ever to determine geographic characteristics of a contract in the digital age. The Vienna Convention applies to contracts between “parties whose places of business are in different States
35
”. However, it is certainly possible for two non-Australian companies to conduct a purely domestic transaction in Australia. This would allow parties to shop for the most favourable system and create uncertainty when the applicable law is not clearly stated in the contract.
It is the Committees’ view therefore that a single uniform contract law system is needed.
The domestic contract law system must be reformed according to international principles gradually. This would maximise the benefits of international contract laws with acceptable conversion costs. It would also provide incentives for Australian legal practitioners and educators to equip themselves with sound knowledge of international contract laws.
Reform of Australian contract law is a great opportunity for what can be termed
‘internationalisation’. Any reform of Australian contract law should aim towards consistency with the rules of relevant international contract law
36
.
In particular, attention should suitably be given to the rules found in the United Nations
Convention on Contracts for the International Sale of Goods ( CISG )
37
. Internationalisation in this form has several benefits. For example, where Australian law is in line with international contract law, Australian businesses obtain a competitive advantage when
32
United Nations Convention on Contracts for the International Sale of Goods (Vienna, 11 April,
1980).
33
L Spagnolo, ‘The last out post: Automatic CISG opt-outs, misapplications and the costs of ignoring the Vienna Sales Convention for Australian Lawyers” (2009) 10(1) Melbourne Journal of
International Law 141, 159-60.
34
Perry Engineering Pty Ltd v Bernold AG [2001] SASC 15.
35
United Nations Convention on Contracts for the International Sale of Goods (Vienna, 11 April,
1980), Article 1.
36
Dan J B Svantesson, ‘Codyfing Australia’s Contract Law – Time for a Stocktake in the Common
Law Factory’, (2008) 20(2) Bond Law Review 1, 10.
37
United Nations Convention on Contracts for the International Sale of Goods (Vienna, 11 April,
1980).
21

engaging in international transactions in that they already operate under those rules
38
.
Further, Australia could lead the way towards a universal contract code by ensuring the contract law of Australia is in harmony with international contract law practices. To a much more limited degree, internationalisation can also be achieved through gap filling.
The Committees submit that the implementation of an opt-in model should not be utilised.
Such an approach would certainly minimise any risks that may be involved with the reforms and adheres to the concept of the freedom of contracts. It could follow the approach undertaken by UNIDROIT in its Principles of International Commercial
Contracts, which only apply if the contract between the parties expressly consents to the application of the Principles. Ultimately, the pathway that would be used inevitably depends upon the extent of the reforms in which the Australian Government wishes to enact. An opt-in model requires users to adopt a ‘new’ set of rules that may differ from the orthodox rules that usually govern their contracts. As a result, it relies upon them observing and believing that this system is beneficial – hence, they would be more likely to utilise them as time progresses.
However, if the Australian Government wished to enact comprehensive reforms, an opt-in model may present difficulties. The inherent risk is that individuals and companies may be reluctant in ‘taking the plunge’ by adopting these rules due to unfamiliarity and perceived uncertainty. A lack of supporting education or awareness accompanying such rules may result in a low rate of users who may be aware or be willing to adopt them. In saying this, to adopt a mandatory model on the other hand in a short period of time may present difficulty issues in relation to implementation. To impose a mandatory model without the requisite consensus from most if not all sectors of society may result in a system that does not have the support or confidence of key business actors, thus undermining the effectiveness of the model. It is envisaged that transition into such a scheme would be lengthy.
As a result, it is the Committees’ submission that an opt-out model should operate. As noted by the Discussion Paper, awareness of the new rules and its benefits must be promoted to ensure that a high opt-out rate is avoided. While it may infringe upon the notion of freedom of contract – that is, that contracting parties should be free to agree to whatever agreement and with whomever they please – the incursion of existing statutes demonstrate that this concept is not absolute. For instance, section 7(1) of the Contract
Review Act 1980 (NSW) deals with unjust contracts while Schedule 2, section 24(1) of the Competition and Consumer Act 2010 (Cth) touches upon unfair provisions. In any case, any accompanying awareness campaign of the opt-out model would have its own benefits. The topic of contract law reform may suddenly become important in societal debate, with parliamentary and media participation also possibly being prominent. Any such discussion about contract law reform within the wider public is to be welcomed.
While there is no direct head of power pursuant to section 51 of the Australian
Constitution, the Commonwealth Parliament would still be able to enact reforms in relation to contract law. This can be undertaken by relying on one or more heads of power, with the most notable examples being the corporations power (section 51(xx)) and trade and commerce power (section 51(i)).
In respect to the former, the wording of section 51(xx) demonstrates that the head of power extends to trading, financial and foreign corporations. The High Court’s decision in the WorkChoices case
39
suggests that the ambit of section 51(xx) is quite wide. The
38
Dan J B Svantesson, ‘Codyfing Australia’s Contract Law – Time for a Stocktake in the Common
Law Factory’, (2008) 20(2) Bond Law Review 1, 10.
39
New South Wales v Commonwealth [2006] HCA 52 per Gleeson CJ, Gummow, Hayne, Heydon and Crennan JJ.
22

majority adopted Gaudron J’s obiter dicta in Re Pacific Coal Pty Ltd; Ex parte
Construction, Forestry, Mining and Energy Union
40
, where her Honour stated that:
“the power conferred by section 51(xx) of the Constitution extends to the regulation of the activities, functions, relationships and the business of a corporation described in that subsection, the creation of rights, and privileges belonging to such a corporation, the imposition of obligations on it and, in respect of those matters, to the regulation of the conduct of those through whom it acts, its employees and shareholders and, also, the regulation of those whose conduct is or is capable of affecting its activities, functions, relationships or business.
41
”
Reliance could be placed on the implied incidental power to allow the Commonwealth to legislate with respect to matters which are ancillary to section 51(xx)
42
. However, section
51(xx) would most likely not be able to confer power to legislate on areas such as the process of incorporation
43
.
In situations where individuals are purely involved, the Commonwealth may also rely upon the trade and commerce power (section 51(i)). However, the main issue would be that the head of power could only be utilised in respect to contracts that involved interstate, but not intrastate, trade only. Circumstances involving mixed interstate and intrastate trade may also present problematic issues for Parliament. Recourse would have to be made to the implied incidental power; however, as pure economic considerations have been found to be not a sufficient justification in legislating Acts in these circumstances, Parliament may have to utilise other means. As the driving factors for national reform primarily comprise of providing business certainty and maximising productivity in the economy, this would be a troublesome issue.
In any case, Parliament has recourse to a number of heads of power to ensure that any
Act is constitutionally valid. As stated in the Discussion Paper, this would include telecommunications (section 51(v)); banking (section 51(xiii)); insurance (section 51(xiv)); bills of exchange (section 51(xvi)); copyright, patents and trademarks (section 51(xviii)); external affairs (section 51(xxix)); and territories (section 122).
Reform models covering all contracts could involve the cooperation of States and
Territories under section 51(xxxvii). However, any referral would require the cooperation of States as a law enacted pursuant to this power would only extend to consenting
States. There is a plethora of legislation in each State and Territory relating to contract law, with consumer law and sale of goods being notable examples. Cooperation between
States and Parliament would require political will and bipartisan support. The Council of
Australian Governments ( COAG ) or the Standing Council on Law and Justice ( SCAG ) could be vehicles to ensure that cooperation be garnered and the reform process streamlined.
Nevertheless, it must be noted that any enactment of an Act by Parliament must conform to any express or implied limitations found in the Constitution. These can include, but are not limited to, the implied right of political communication
44
and implied intergovernmental immunities
45
.
It is the Committees’ further submission that a non-binding restatement of the present contract law in Australia is the least attractive option. It is acknowledged that Courts may find a restatement as highly persuasive, especially if it is drawn by eminent judges, practitioners and academics. This is evidenced by the fact that the United States’
Restatement (Second) on Contracts is drawn up by the American Law Institute.
Additionally, the non-binding nature of a restatement may mean that inferior courts may not have to apply laws which are considered as anachronistic or flawed. Nonetheless, it is
40
Re Pacific Coal Pty Ltd; Ex parte Construction, Forestry, Mining and Energy Union (2000) 203
CLR 346.
41
Ibid at at 375.
42
Fencott v Muller (1983) 152 CLR 570
43
New South Wales v Commonwealth ( Incorporation Case ) (1990) 169 CLR 482
44
Australian Capital Television Pty Ltd v Commonwealth (1992) 177 CLR 106.
45
Melbourne Corporation v Commonwealth (1947) 74 CLR 31; Austin v Commonwealth (2002)
215 CLR 185.
23

submitted that the undertaking of comprehensive reforms in relation to codification or simplification of the existing law would be best met through legislation, which would be binding. Accessibility of the law may be jeopardised if parts of the restatement are sporadically applied. Further, as shown in the US example, work on the restatement occurred in 1962 and only finished in 1979. The same time and effort could be utilised to create a reform model that would be similarly comprehensive but still binding on contracts.
24

Any level of review and/or reform of Australian contract law will be a lengthy process, which will involve a slow and drawn-out transition. The Committees recommend ongoing consultation with the legal profession, judicial officers, academics, courts and tribunals, relevant government departments and the public generally, in order to focus the most important issues ripe for review and reform. One such method of consultation may be via the survey regarding the proposed contract law reviews currently available via link on the
Federal Attorney-General Department website. This survey should remain open for an indefinite period of time, to allow further feedback from the legal profession and the public.
Any reforms to Australian contract law will affect a much broader group than the legal profession alone. As articulated in this submission, the Committees note that the main areas identified for review affect the Australian population generally, and therefore time and effort should be invested in ensuring the needs of the population are met.
25