CONTRACTS(A(EXAM(2008(
“A(contract(is(a(promise(or(a(set(of(promises(that(the(law(will(enforce.”!
SIMPLE CONTRACTS
A simple contract may be oral, written or a combination of both.
FORMAL CONTRACTS (Specialty Contracts)
Is an agreement that gives rise to legally enforceable rights and obligations and are usually set out in the
form of a deed. A deed is executed under seal and special rules apply to them. They must be in writing
and signed by the parties to be bound and the signatures need to be witnessed by a person who is not
party to the contract. Consideration is not necessary for a contract under seal. It is the solemn nature of
the form that a contract under seal takes that justifies the enforcement of a such a contract in the absence
of consideration.
CONTRACTS THAT REQUIRE WRITING
Land Contract – s62
A contract for the sale of disposition of an interest in land must comply with the statutory writing
requirements. S62 - Law of Property Act 2000 (NT) requires that:
No proceeding may be commenced on a contract (wherever made) for the sale or other
Disposition of land unless the contract on which the proceeding is commenced, or some
Memorandum or note of the contract is in writing and signed by the party to be charged
or by a person lawfully authorized by the party.
For the purpose of the statute a memorandum or note must contain:
• All the essential terms of the agreement [Harvey v Edwards] (eg. sufficient description of the
parties [Williams v Byrne], subject matter of the contract [Pirie v Saunders], nature of the
consideration [Burgess v Cox])
• Document must be signed by the person against whom it is to be enforced [Pirie v Saunders],
although initials have been held to be sufficient.
The memorandum or note may consist of several documents (joinder of documents) as long as it appears
from the face of the documents themselves that the two are connected [Commonwealth v John White &
Sons.]. The memorandum or note needs to be in existence at the time of proceedings but the
memorandum needs not to have been in existence at the time the contract was entered into: Popiw v
Popiw [1959] VR 197
Requirements
At common law, a contract that fails to comply with the requirements of the Statute of Frauds [or
equivalent] is not void (that is, it is still in existence and has the nature of a contractual agreement) but is
unenforceable.
That distinction has some important consequences.
(a)
(b)
(c)
A defendant may waive the requirements of the statute and proceed on the basis of the
agreement as reached. If a defendant wishes to rely on the requirement for writing they must
specifically plead it.
The contract may operate to pass property.
Where work has been performed under an unenforceable contract, a claim on a quantum
meruit for reasonable remuneration may be sustained: Pavey & Matthews Pty Ltd v Paul
(1987).
The six requirements of a valid contract = IACCCL
1.
2.
3.
4.
5.
6.
Intention to be legally bound
Agreement (offer and acceptance)
Valuable consideration (“quid pro quo”)
Legal capacity (“sui juris”)
Genuine voluntary consent
Legality of purpose of contract
1.
INTENTION TO CREATE LEGAL RELATIONS
(Unless parties intend to create legal relations their agreement will not be binding)
Paragraphs
Intention to create legal relations is an objective question Merritt v Merritt and depends on an
objective assessment of the state of affairs between the parties, such as the subject matter of the
agreement, the status between the parties, their relationship to one another and other surrounding
circumstances Ermogenous v Greek Orthodox Com of SA Inc.
SOCIAL = COMMERCIAL OK (presumption)
In Balfour v Balfour it was stated that in the case of commercial arrangements an intention to create
legal relations is presumed, whereas in social or domestic arrangements, like [name] and [name], the
presumption is that legal relations are not intended. However, presumptions can be rebutted
Roufous v Brewster and the onus of proof will be on [person seek to rebut] to do so.
By analysing the facts it would not be too hard for [name] rebut the presumption. The fact that
[name] was insistent on entering into a contract (at least for the decking work) intimates that their
agreement was more of a commercial arrangement. It could also be assumed that due to Lenora’s
previous relationship with Paul she specifically wanted to enter into a contract because she did not
want to rely on an “honourable understanding” between them. Merritt v Merritt
OR = OK COMMERCIAL CONTRACT
There would appear to be no difficulty in establishing the requisite intention. The parties each have a
commercial interest and are dealing at arms length. There was therefore objectively an intention to
have legal consequences. Only rarely will a commercial presumption be rebutted and the onus of
establishing that a commercial agreement was not to create legal relations will lie on the party so
contending.
COMFORT LETTER = NO CONTRACT
However, sometimes as in this instance, some business people write letters and make agreements
without making it clear whether they intend to be legally bound. In [Kleinwort Benson v Malaysia
Mining] it was held that a comfort letter was not a legally binding contract because there was no
intention to create legal relations. The comfort letter contained no words of promise and while it may
have been morally binding, it was not legally binding. Therefore, on the facts presented………
Presumptions
SOCIAL
Marriage
The presumption in Balfour v Balfour applies when couples live together in amity, however it is
altogether different when parties are not living in amity but are separated, or about to separate.
Merritt v Merritt.
Substantial sacrifice made
2.
AGREEMENT (OFFER AND ACCEPTANCE)
OUTLINING OFFER AND ACCEPTANCE
To ascertain whether [name] and [name] concluded negotiations and reached agreement there has to
have been both offer and acceptance. An offer must be clear and unambiguous and capable of being
construed as an offer Harvey v Facey as well as indicate a willingness by the offeror to be bound on
particular terms without further negotiation.. The offeree’s acceptance must be unequivocal in that
nothing is left to be negotiated between the parties and must clearly convey a decision by the offeree
to be bound by the terms of the offer Ballas v Theophilos (No.2). Any departure from the offer will
result in the purported acceptance being ineffective.
OFFER CLEAR
NAME’S original email is clear and concise and able to be construed as an offer Grainger v Gough.
Chris has conveyed his acceptance, by return email as per Paul’s prescribed method of acceptance
Gilbert J McCaul v Pitt Club. The general principle is that a contract is formed at the time and place
an acceptance is communicated to the offeror Tallerman & Co Pty Ltd v Nathans Merchandise .
However, the point in time at which an email acceptance will be effective is yet to be considered by
the Australian courts.
ACCEPTANCE = PROBLEM
Although [name] believed that he had permission from Lenora to start gardening work at her practice
from their conversation on 4/05/05, Lenora at no time conveyed her unequivocal acceptance for
Paul to proceed. It would be difficult to interpret her statement “I’m not sure, I’ll get back to you” as an
indication of a willingness to be bound Carlill v Carbolic Smoke Ball Co, thereby finding further
difficulty in saying there was a valid agreement for the payment for Paul’s work and the cost of the
plants. This is a matter which, objectively, one would expect the parties to have reached firm
agreement on, had there been any deal between them.
ACCEPTANCE = CLEARLY CONVEYED
[names] offer on 16/05/05 to install decking at the practice has clearly been accepted by [name].
[name] has been unequivocal in her verbal acceptance to his offer and by her conduct Empirnall v
MacMahn of wanting to enter into a written contract. From their discussions the essential terms
(price, starting date) have been determined. Although Lenora was yet to sign the contract, it would
appear that they had verbally entered into a contract.
ENQUIRY
NAME’S original email to NAME appears to be an inquiry Stevenson v Jacques v Mclean as
essential terms of the lease have not been outlined. Tom’s return telephone appears to constitute the
offer as he has verbally outlined essential terms, such as the rent payable and availability of the
premises.
ESSENTIAL TERM MISSING
However, an agreement will not be enforceable if it is incomplete in the sense that a vital matter
connected with the subject matter of that agreement has yet to be determined by the parties. The fact
that a fixed lease term has not been agreed between [name] and [name] may mean that agreement
has not been reached. Whitlock v Brew.
OFFER (ascertain whether actual offer, puff, statement or ITT)
A puff is a non-promissory statement that may be made as part of negotiations to advertise a product
and induce another to enter into a contract. Puffs may otherwise be known as sales talk. They are
exaggerated statements that no reasonable person would believe to be true. Leonard v Pepsico
Where a statement is made that is intended only to convey some information to the other party, it
cannot be construed as an offer. Harvey v Facey.
A request for information or enquiry is not considered to be an offer. In Stevenson v Jacques buyer
telegraphed the seller to provide credit terms. Held to be an enquiry
An invitation to treat is not an offer but an invitation to other person to make an offer. Invitations to
treat may appear in the form of advertisements for goods or services. An invitation to treat cannot be
accepted. A person who responds to an ITT is in fact making an offer, which may be accepted or
rejected.
-
Goods displayed in a shop are considered an ITT [Pharmaceutical Society v
Boots] – where commercially inconvenient
-
Announcements inviting tenders, each tender submitted is an offer Spencer v
Harding
-
Advertisements in catalogue for sale are ITTs. Once customer places order that
becomes the offer that may be accepted or rejected by the owner Grainger v Gough
An offer may be made to a particular person/s, a class or to the world: Carlill v Carbolic Smoke
Ball Co [1893] 1 QB 256
When does the offer expire?
•
•
•
•
•
By failure of a condition subject to which the offer was made (subject to finance)
By revocation by offeror
By lapse of time Ballas v Theophilos (1957) 98 CLR 193
By death Bradbury v Morgan (1862) 1 H & C 249
Upon rejection of the offer Hyde v Wrench
REVOCATION OF THE OFFER
As a general principle an offer may be revoked at any time before acceptance:
Dickinson v Dodds (1876) 2 Ch D 463 / Byrne v Van Tienhoven [1874-1880] All ER 1432
Communication of revocation: The offeree must clearly know that the offer has been revoked:
Financings Ltd v Stimson (1962) 3 All ER 386 / Shuey v United States (1875) 92 US 73
There are two exceptions to the general principle that offers may be revoked at any time before
acceptance
(i)
An OPTION may not be revoked – (if consideration has been provided to keep the offer open
for a certain time, making the offer an option, it may not be revoked until the time has expired
Goldsborough Mort v Quinn. A conditional contract – one contract that comes into being
immediately the offeree pays or promises to pay the sum of money and that contract is subject
to a condition subsequent to the formation that if the condition is not satisfied the contract
terminates.
(ii)
an irrevocable offer – mini contract to keep the offer open for a certain time and the main
contract comes into being when the offer is accepted.