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CONTRACT LAW – Notes
Topics:
1. Introduction to Contracts pg 1
2. Contractual Remedies pg 2-8
3. Estoppel pg 9 - 10
4. Privity, Agency and Assignment pg 11 - 14
5. Terms and Interpretation pg 15 - 21
6. Performance and Termination pg 22 - 31
7. Misinformation pg 32 - 42
8. Unconscionability pg 45 - 47
9. Other Vitiating Factors pg 48 - 51
Topic 1 – Intro to Contracts
A contract is a legally enforceable agreement that involves one or more promises,
given for something in return (consideration).
Examples of contracts:
 Business contracts
 Financial contracts
 Employment contracts
 Insurance contracts
 Internet contracts
 Phone contracts etc
NOT contracts (lack of intention to be legally binding):
 Social agreements
 Gifts
 Most family agreements
Generally enforceable by common law of contracts – not necessarily statutory
regulation – but does exist for insurance, employment, sale of land/goods
contracts (Australian Consumer Law)
Judge made law in common law of contracts – two main categories:
 Equity – rules and principles deriving from old Chancery Court
 Common law – rules deriving from all other courts
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Topic 2 – Contractual Remedies
Types of remedies:
a) Self Help
b) Enforcement
c) Compensation
d) Restitution
e) Liquidated Damages and Penalty Clauses
f) Rectification Damages
g) Gains-based Damages
A. SELF HELP
The process of preventing/rectifying any wrong’s done by the other party
before/without resorting to legal proceedings.
*Before addressing a court/lawyer the party MUST have exhausted ALL self-help
options
Examples of self-help:
 Withholding performance of contract
 Termination of contract
 Deposits and advance payments
B. ENFORCEMENT
Examples of enforcement:
1. Specific performance
2. Injunction
3. Action for debt or money due
1. Specific Performance
Order that contract be performed by other party
*Granted at discretion of the court, but very rarely – with the exception of sale of
land contracts.
Refusals for specific performance:
 Damages would be adequate remedy
 Continuing obligations for the court (ie. supervision by the court to
ensure correct performance of contract – sale of land, one off transaction,
nothing further needed from the court)
 Obligation is one of personal service
2. Injunction
Used to enforce negative stipulations – ie. promise not to do something.
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*Also discretionary remedy, but granted more often than specific performance
(no need for potential supervision)
3. Action for debt or money due
Used to recover any sums due under contract – obligation for money due
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Generally successful and widely available as a remedy as there is no need
to prove loss, merely that money is owed and has not been paid.
Not an equitable remedy – part of the common law
NOT discretionary
a. Appellant establishes money owed
b. Court has no choice (except in certain circumstances)
c. Respondent ordered to pay money
NB: money due is debt NOT damages
C. COMPENSATION
Damages - Any breach of contract entitles the injured party to seek damages.
Damages will be nominal unless the plaintiff can prove they have suffered loss
Where a party sustains loss by reason of a breach of contract, they are, so far as
money can do it, to be placed in the same situation as if the contract had been
performed (Robinson v Harman)
Common law remedy, NOT equitable
1. Suffering loss:
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Plaintiff must prove they have suffered loss
If no loss proven  nominal (token amount) damages will be awarded
Examples of quantifying loss:
 Uncompleted work (cost of having someone else complete it) –
reasonable amount
 Undelivered goods, additional cost (if any) of buying replacement goods –
contract price v market price, if market price is lower than the contract
price  nominal damages. If opposite  difference between figures
o Sale of Goods Act 1895 (SA) s 50
 Defective goods, compare value of goods as promised and as supplied.
NOT value of getting it fixed, another comparison of price (as with
undelivered goods)
o Sale of Goods Act 1895 (SA) s52
Difficulties in assessment:
 Must be assessed no matter how difficult
 COMPENSATION FOR LOST CHANCE – Chaplin v Hicks
 If expectation loss cannot be ascertained – reliance loss can be awarded –
McRae v CDC  VERY rarely used, extreme cases
Consequential loss:
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Besides loss of promised benefits, may claim consequential loss
Eg physical injury caused by defective goods, or loss of profits caused by
not having goods/services supplied on time  good obtained elsewhere if
price increases, period between when material was expected and
received, profit that could have been made  consequential loss
MUST establish causal link (but for test)
Must assess remoteness
2. Remoteness of damage:
Hadley v Baxendale – loss is not too remote if it is either – two limbs:
 1st limb – kind of loss arising naturally according to the usual course of
things – ie. kind of loss to be reasonably expected in the contract type
 2nd limb – loss reasonably contemplated by parties at the time of the
contract as a probable result of this kind of breach – ie. unusual loss is
recoverable if contemplated
3. Mitigation of loss:
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No recovery for loss actually avoided
No recovery for loss that defendant proves could reasonably have been
avoided by taking appropriate steps – NB: BoP on defendant
4. Date of Assessment:
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Generally date of breach, but can be varied – ie. date of original work
being done poorly, not the date the loss becomes apparent – Johnson v
Agnew
Interest in judgment sum – Supreme Court Act 1935 (SA) s30c
o Amount out of date, position that applied is years/months before
judgment in intervening period. Value of money is rising, all courts
empowered (and do) award interest. Rate worked out at rate in
statute
5. Limitation of Actions
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Limitation of Actions Act 1936 (SA) s35
‘actions founded upon any simple contract express or implied’ must be
commenced within 6 YEARS of cause of action accruing
Equitable doctrines
Undue delay in seeking equitable remedy, left too long to bring a claim
NB: COURTS DO NOT AWARD EXEMPLARY (punitive) DAMAGES FOR BoC –
Hospitality Group v ARU
D. RESTITUTION
Non-pecuniary loss
 Damages for mental distress or suffering recoverable if consequent upon
physical injury – given it’s not too remote
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OR if specific aim of promise breached is to create happiness/avoid
distress – Baltic Shippping v Dillon – RARELY applies
Contributory negligence:
 Damages may be reduced under Law Reform (Contributory Negligence
and Apportionment of Liability) Act 2001 (SA) to the extent that the
plaintiff has contributed to their own loss
 Breach of contractual obligation to take care – implied term of any
contract that services be performed with reasonable due care and skill
(also tort (negligence))
 Conduct can be both tort and breach of contract
 However CANNOT RECOVER DOUBLE DAMAGES – has to be either tort
(negligence) or breach of contract, can technically sue twice but can only
recover once
E. Liquidated Damages and Penalty Clauses:
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Parties may stipulate sum be paid in event of particular breach
But unless a genuine pre-estimate of likely loss, provision
unenforceable as a ‘penalty’
o Dunlop v New Garage
 Distinguished b/w two types of provisions
 If sum of money is arbitrary, then fine/penalty –
unenforceable
 If liquidated damages clause that estimates how
much loss suffered by breach – can be enforceable
Rule against penalties may also apply to other types of promises triggered
by breach
o Ringrow v BP
 Sale of Service Station. Agreement to operate certain way, if
operated different way then Ringrow has to sell back to BP
and gets money back (same as original sale). Ringrow
argued penalty clause as it didn’t take into account any
growth in value by the service station. HC  could be
penalty provision, but Ringrow failed to show that service
station was worth any more than when it was sold to then
o Ie. Doesn’t necessarily have to be certain sum of money (can be
property etc)
And also, it appears in some instances where a ‘sanction’ is applied for
something other than a breach
o Andrews v ANZ
 Class action against ANZ. Acct holders claim contingent fees
(overwithdraw/credit card etc) presented to be fines. Bank
claims fee is for service provided, not penalty. Amount
charged doesn’t reflect loss bank suffers. Argument #1 – not
penalty – for accessing new service. #2 – even if they were
penalties, amount reflects bank’s loss. HC – doesn’t just
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apply at BoC, applies where payments purpose is to
encourage performance of obligations under contract
o Paciocco v ANZ
 Same as Andrews. One ANZ fee was penalty (credit card)
but other fees not punitive in nature
F. Rectification Damages:
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For uncompleted work, measure is usually cost of completion
(rectification)
But suppose cost is much higher than different in (objective) value
between uncompleted work and completed work?
Plaintiff can insist on getting what they contracted for, unless cost
unreasonable
o Bellgrove v Eldridge
 House built, contract for certain cement – wrong cement
used. Wanted damages measuring cost of demolishing
house and rebuilding. “completely unreasonable” – builder.
Court – wasn’t unreasonable in these circumstances as
different cement meant house was structurally unstable
o Ruxley v Forsyth
 Swimming pool. Built incorrectly to dimensions, few inches
shorter than desired. BoC  damages for cost of making
pool deeper, meant taking pool out excavating deeper and
putting new pool in. Excessive damages, didn’t make
difference to value of house. Therefore unreasonable for
work to be done
o Tabcorp Holdings v Bowen Investments
 Building leaser out. Provisions – lessee not to make any
alterations to buiding. After lease, lobby completely
remodeled without permission. BoC – cost of rectifying
breach. HC agreed – landlord entitled to damages
NB: does not matter if plaintiff does not spend damages on rectification
Related situation in which primacy of expectation interest affirmed
o Clark v Macourt – failure to supply frozen sperm TabCorp principle
G. Gains-based Damages:
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Purpose of damages generally to compensate rather than recover profits
o Economist theory – “efficient breach”
o Advising breach – ethical issue for lawyers
o Generally difference between contract price and market price –
not price that other party has sold for
Recovery of defendant’s gains in exceptional circumstances (sometimes
called restitutionary damages)
o A-G (UK) v Blake
 British intelligence double agent. Exiled, lived in Soviet.
After – published book about time. AG sue publishing
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company because of ‘secrets’ which had already been
revealed by others doing same thing. Publisher – GVT
hadn’t suffered any loss from book. Awarded damages
according to gains (questionable)
o Hospitality Group v ARU
 Rugby Union gave tickets to HG – onsold for profits by HG.
Wanted to sue for damages for profit HG gained. Law?
Is the remedy really damages or account of profits?
RELEVANT CASES:
Chaplin v Hicks: compensation for lost chance
 FACTS: Competition with prize being acting work with theatrical
company. Put in application, not properly considered
 ISSUE: what is her loss?
 OUTCOME: she may not have won the comp, but lost the chance to win.
Awarded arbitrary sum of money
McRae v CDC (commonwealth disposals committee): reliance loss
 FACTS: McRae – marine salvage business. Entered into contract with CDC
to salvage supposed wreckage, given coordinates. When arrival at site, no
oil tanker (wreck), has never been there, located on a non-existant reef,
spent money attempting to salvage tanker
 ISSUE: argued by CDC, there was no contract because of mistake (rejected
by judges), CDC argued McRae not entitled to damages b/c what was to be
salvaged was unknown (volatile business, would money even be made?)
in order to work out loss  must assess site (site never existed)
 OUTCOME: breach of contract was found. CDC couldn’t prove McRae
wouldn’t have made profit. Therefore reliance loss  cost of going to
location & back (waste and expenditure)
Hadley v Baxendale: remoteness of damage
 FACTS: Hadley - flourmill. Component of flourmill breaks down, needs
replacement. Contract with Baxendale to take piece to repairer and back.
Too slow, as result breach of contract (loss of profit). Argument fails
because not reasonably expected that plaintiff didn’t have replacement
part. Doesn’t fall within 1st limb.
 ISSUE: was loss too remote? 2nd limb – did D know critical to get shaft
back in time, no knowledge of no replacement shaft (as is usual). Could D
be held liable for damage he did not know would be incurred from
breach?
 OUTCOME: Had P told D of special circumstances under which contract
was being performed, then P could recover, but loss was that which
neither arose naturally, nor could be reasonably contemplated by D,
therefore too remote.
Victoria Laundry v Newman: remoteness
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FACTS: Victoria Laundry orders new boiler for business (bigger than
current – would allow more washing to be put through hence bigger
profits). Not delivered on time (5 months late), lost lucrative deal with
Ministry of Supply. Successful in recovering ordinary profit that it forwent
not having boiler on time.
ISSUE: Could they claim extraordinary loss from missing lucrative deal?
OUTCOME: could only recover ordinary, reasonable person wouldn’t
expect big loss, not a naturally arising event. Second limb – D didn’t know
of deal with Ministry of Supply
Baltic Shipping v Dillon: non-pecuniary loss
 FACTS: Cruise ship. Plaintiff went on holiday, ship hit NZ and sank. Sued
for BoC.
 ISSUES: could P recover money paid for holidays? Ie. sue for damages for
distress/disappointment for not getting cruise?
 OUTCOME: Successful in suing for damages because point of contract was
to create happiness, and avoid distress – ship sinking caused distress and
unhappiness – because of specific aim to create happiness
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Topic 4 – Estoppel
Nature of Estoppel
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Can be pleaded to preclude (‘estop’) one party from denying truth of, or
acting inconsistently with, an assumption which the other party has been
encouraged to adopt
If not for the estoppel, party would be entitled to bring a legal action
Ie. you can’t sue me because you lead me to believe you wouldn’t etc
Can be argument/plea during litigation to stop
Types of Estoppel:
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Estoppel by record
o Inc res judicia, issue estoppel
Estoppel by conduct
o At common law
 Inc estoppel by convention, estoppel by representation
o In equity
 Proprietary estoppel (inc estoppel by encouragement and
estoppel by acquiescence)
 Promissory estoppel
EQUITABLE ESTOPPEL:
Common law estoppel limited to assumptions or representations as to present fact
– Jorden v Mosey
BUT in equity, estoppel could be founded on representation as to the future – eg
proprietary estoppel used to enforce gratuitous promises to grant an interest in
land – Riches v Hogben
Development:
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Originally confined to representations that a party would not enforce
existing rights
o Je Maintiendrai v Quaglia
o Legione v Hateley
Extended to enforce a promise to create rights (estoppel as a sword, not
just a shield)
o Waltons Stores v Maher
Elements of Equitable Estoppel:
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A encourages B to adopt an assumption – Legion v Hateley
B relies on that belief, such that B would be worse off if A departed from
that assumption – detrimental reliance – Je Maintiendrai v Quaglia
Unconscionable for A to depart from assumption – Austotel v Franklins
Notes:
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Flexibility and discretion – minimum equity
Not necessarily limited to reversal of detriment – Waltons Stores v Maher
Can be used as alternative to contract
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o To enforce promises that might otherwise be unenforceable (lack
of consideration)
o Drawbacks:
 Must prove detrimental reliance
 At court’s discretion, not available as of right
 Relief may be limited to extent of reliance
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Topic 5 - Privity, Agency & Assignment
1. CONTRACTS BENEFITING A THIRD PARTY
A. The Doctrine of Privity of Contract:
PROBLEM:
 A & B have a contract
 B & C may have potential contract
 C benefits from promise between A & B
 Essentially: can C enforce B’s promise? NO
RULE:
 Third party cannot enforce the promise
o Coulls v Bagot
o Wilson v Darling Island
 Rule in doubt
o Trident v McNiece
 US – intended beneficiaries can sue, incidental beneficiaries can’t
 NB refer to slides for diagram referring to case law
B. Getting Around The Doctrine:
AGENCY ARRANGEMENTS:
 If B contracts with A, A acting as an agent for C, then the contract is really
between B and C
o A must have authority to contract on behalf of C – the principal
o Authority may be actual or ostensible
o Harris v Burrell & Family
ENFORCEMENT BY THE PROMISEE:
 Promisee (A) may obtain order for specific performance against promisor
(B) in favour of C
o Beswick v Beswick
 BUT damages for failure to confer benefit must reflect A’s loss, not C’s
o Coulls v Bagot’s
INFERRING A TRUST:
 Trust? Person (trustee) looks after certain property on behalf of another
(beneficiary)
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o Express trusts
o Other types of trust (eg constructive, resulting)
Promisee may hold the benefit of a contractual promise on trust for a
third party (right to sue as BoC is property right – ie can be owned)
How a trust works (see diagram below):
o Where A is trustee
o B is beneficiary
o A contracts with B
o Trust exists between A & C
o C can’t sue B
o C has equitable interests in property on hold
o C can require A to sue B
o A can sue B, if legally required to do so and refuses then C can sue
both A and B
Advantages of inferring a trust
o 3rd party can require promise to enforce promise
o Promisee can obtain damages measured by third party’s oss
When should trust be inferred?
o Trident v McNiece – is it possible to infer a trust?
1. (strict) suggesting an intention to create a trust
without the language  rare
2. if discussion between B and A that C was intended to
have right to hold B to their promise, which would
give C right to sue B  liberal (in this case, privity
not an issue)
ESTOPPEL:
 Promisor may be estopped from relying on lack of privity
o Trident v McNiece
 B has encouraged C to rely on trust – unconscionable
C. Statutory Reform:
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Insurance Contracts Act 1984 (Cth) ss 48, 49, 51
Property Law Act 1969 (WA) s 11
Property Law Act 1974 (Qld) s 55
Law of Property Act (NT) s 56
WA + QLD + NT effectively re-write privity doctrine to match US rules
2. CONTRACTS IMPOSING A BURDEN ON A THIRD PARTY
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Contracts may not impose burdens on non-parties (ie. cannot impose
obligations on non-parties to contract)
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Exception for restrictive covenants (promises) affecting land use
o Ie. promise that succesors in title will use land in certain way that
may be problematic –ANY succession in title
o Tulk v Muxhay
3. TRANSFER OF CONTRACTUAL RIGHTS
Assignment of rights:
 Law of Property Act 1936 (SA) s15
 Equitable assignments
Assignment of obligations and novations:
 NB: not all obligations can be transferred
 Obligations not rights
 Must have consent of other party and assignee (person who is taking
over)
 Outstanding rights/obligations transferred to successor
Involuntary assignment on death or bankruptcy
Negotiable Instruments:
 Cheque; promise that whoever has your money will pay whoever holds
the cheque, can go into a bank and demand the payment from them
RELEVANT CASES:
Beswick v Beswick: enforcement by the promise
 FACTS: aunt/uncle/nephew agreement for money. Pass on business to
nephew, in return continue to pay himself and his wife (not party to
contract but mentioned). Paid wife once, then husband died. Stopped
paying wife, saying she was not party to contract so he didn’t have to.
Wife was also executor of husband’s will.
 ISSUE: can Mrs Beswick sue as herself as she is not party to the contract?
 OUTCOME: sued in two capacities – herself, and executor of will. Was
unsuccessful suing as herself, was able to, and successful at, suing as
executor of husband’s will (executor retains right to sue for breach of
contract). Was awarded specific performance, ie nephew had to continue
paying money until she passed (as damages was not adequate remedy)
Coulls v Bagot’s: third party cannot enforce promise
 FACTS: P grants company ability to take quarry stone from property for
royalties. Signed by P and wife, wife not mentioned as party though.
Agreement authorized payments to be made to P and wife as joint
tenants.
 ISSUE: did company have contractual obligation to the wife as she was
not party to contract?
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OUTCOME: no contractual obligation to wife as, although she signed
agreement, she was not mentioned as party to contract. Company made
no promise to pay wife.
Trident v McNiece:
 FACTS: Insurance case. Company signed with trident insurance, worker
got injured tried to claim insurance for injury from Trident. Trident
claimed McNiece couldn’t claim as they weren’t party to the contract.
 ISSUE: Was McNiece party to the contract?
 OUTCOME: McNiece was able to claim as there are exceptions for
insurance contracts, otherwise it goes against the very point of them.
Insurance Contracts Act came out after, allows person covered under
insurance but not party to it to be able to recover (although not applicable
in this case as judgment was made before Act was created, but judgment
reflected Act’s purpose)
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Topic 6 - Terms and Interpretation:
1. EXPRESS TERMS
A. Nature of Express Terms:
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Expressly agreed by parties
Oral or written
Negotiated or in standard form (ie. prepared by one party, other party can
take it or leave it)
B. Incorporation of Written Terms:
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Issue: standard terms contained in a document that one party wishes to
make part of the contract
Methods of incorporation:
1. Signed Acceptance
2. Display or Delivery
3. Prior course of dealing
Oral statements:
o Is a statement a warranty or mere representation?
o What is the statement is omitted from or conflicts with a written
document
 Misinformation
1. Signed Acceptance:
 Signature conclusive evidence of acceptance even if terms aren’t read
o ie. signature means other party is taken to have agreed to terms
whether or not they’ve read/understood them (in lieu of misrep.)
o L’Estrange v Graucob
 Unless terms have been misrepresented
o Curtis v Chemical Cleaning and Dyeing
 Rule in L’Estrange reaffirmed by Toll v Alphapharm
 Can be incorporated by reference
o Agreeing to terms not only in signed document but also in any
document referred to in contract
 Does electronic acceptance count as signature?
o eBay v Creative
2. Display or delivery of terms:
 General rule: reasonable notice required
o Where document given, would recipient reasonably expect it to
contain terms?
 Causer v Browne
o How do you overcome this?
 Notify customer to read docket – say it contains terms
 Highlight terms – the more unusual/harsh/destructive
term is the more specific and clear it needs to be made
 Reasonable notice:
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o Notice must be give BEFORE contract made
 Oceanic Sun Line v Fay
 eBay v Creative
o Where terms onerous or unusual, clear and specific notice
required
 Interfoto Picture Library v Stiletto Visual Programmes
3. Prior Course of Dealing:
 Reasonable notice can come through repeated dealings
 Doesn’t matter that terms are provided after formation of each contract
 Must still be sufficient notice
o La Rose v Nudrill
2. IMPLIED TERMS
Types of Implied Terms:
A. In fact (ad hoc)
B. In law
C. By custom
A. Terms Implied in Fact:
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Terms implied in circumstances of particular transaction
TEST - BP Refinery, term must be (hard to prove):
o Reasonable and equitable
o Necessary to give business efficacy (ie. needed to make contract
workable)
o So obvious it goes without saying
o Capable of clear expression
o Consistent with express terms (can’t contradict agreed terms)
Examples
o The Moorcock
o Codelfa v State Rail Authority
Modified test for contracts not wholly in writing
o Byrne v Australian Airlines
o Term must be ‘necessary for the reasonable or effective operation’
of the contract
B. Terms Implied in Law:
Terms implied into all contracts, or particular types of contracts
 At common law (unless specifically excluded by parties)
o Implied where necessary
 Liverpool City Council v Irwin
o Narrow view of necessity
 Enjoyment of rights conferred by contract would
otherwise be rendered nugatory, worthless or
seriously undermined (Byrne)
o Breen v Williams
o Commonwealth Bank v Barker
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By statute
o Statute may imply terms into particular type of contract
 Eg Sale of Goods Act 1985 (SA) ss12-15
 Implied terms as to title, sale by description
or sample, merchantable quality, fitness or
purpose
o Where parties can exclude such terms depends on statute
o Consumer guarantees in ACL (see slides for more detail)
C. Terms Implied by Custom:
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Based on established custom and practice in industry/market/location
Relevant principles (Con-Stan)
o Question of fact in each case
o Custom must be so well known all affected parties presumed to
have included it
o Must not be contrary to express terms
o Party may be bound even if ignorant of custom
NB: Harder to imply with changing business practices
3. INTERPRETATION
Task: To ascertain what parties must reasonably be taken to have intended
(objective)
GENERAL PRINCIPLES:
A. Parol Evidence Rule:
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Rule: Where parties reduce a contract to writing, extrinsic evidence is
inadmissible to add to, vary or contradict the document
o NB: parol evidence may be oral or written
Effect on interpretation of contractual documents
o Evidence or prior negotiations excluded
o BUT extrinsic evidence admissible to identify subject-matter of
contract or resolve ambiguity
 White v ANZ Theatres
Ie. Generally once agreement in writing, courts won’t look at what was
said during negotiations ie emails/drafts/behavior unless ambiguities or
identification of subject matter
B. Factual Matrix:
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Evidence of surrounding circumstances
o Admissible to determine whether terms should be implied or
contract frustrated
 Codelfa v SRA
o But admissible to interpret written terms only where terms are
ambiguous
o Narrow/traditional view – Parol Evidence
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o Broad view: always look at surrounding circumstances when
interpreting (relevant to both parties) ie. who the parties are, what
kind of contract, interpretation within the context of agreement
C. Subsequent Conduct:
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Evidence as to post-contractual conduct and statements generally NOT
admissible to interpret contract
o Franklins v Metcash Trading
BUT can be admitted in relation to existence of contract, estoppel etc
EXCLUSION CLAUSES:
D. Exclusion Clauses:
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Types and function:
o Exemption clauses
o Limitation clauses
o Indemnities
Principles for interpretation
o Ambiguities resolved contra proferentem
 Where term is ambiguous, the preferred meaning should be
the one that woks against the interests of the party who
provided the wording
o Special rules
 Exclusion for liability for serious breach of contract
 Exclusion for liability for negligence
 Generally not applicable to insurance contracts (bill of
lading)
E. Liability for Serious Breach:
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Courts willing to ‘read down’ or render ineffective exclusion clauses
o George Mitchell Ltd v Finnley Lock Seeds
o Sydney Council v West
A change in approach – giving clauses their ‘natural and ordinary
meaning’
o Photo Production v Securior
o Darlington v Delco
F. Liability for Negligence:

Liability for negligent conduct only excluded if
o Clause expressly mentions negligence or a synonym
o Clause uses general words which could not have been intended to
cover another form of liability
 Davis v Pearce Parking Station
G. Statutory Controls:

Express restrictions on exclusion clauses
o ACL ss64, 64A
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o NB: Competition and Consumer Act 2010 (Cth) s139A, Fair
Trading Act 1987 (SA) s 42
More general controls on unfair terms
o Unconscionability
RELEVANT CASES:
Curtis v Chemical Cleaning and Dyeing – signature, misrepresented
 FACTS: wedding dress cleaned. Signed document, were told std t&c’s. ie.
can’t sue for beads/sequins damaged etc. Dress came back stained.
Wanted to sue, breach of obligation to take reasonable care.
 ISSUE: was it misrepresented that damage was only to beads and
sequins?
 OUTCOME: could sue as innocent misrepresentation that exclusion clause
covered any type of damage, not just a certain type of damage.
L’estrange v Graucob – effect of signature
 FACTS: Slot machine bought by L’Estrange. Defective on delivery, wanted
to sue for BoC. Had signed contract but had not read it, contained
exclusion clause.
 ISSUE: was it misrepresented that there was no liability on Graucob?
 OUTCOME: clause was valid, she had not read terms. Bound by terms
even if not aware they have agreed to them because not read
Causer v Browne – reasonable notice, reasonable expectation of terms
 FACTS: dry cleaning exclusion clause. Customer asked to sign, given
document. Exclusion clause on back of docket.
 ISSUE: Did the company give reasonable notice of terms enough to render
term invalid?
 OUTCOME: customer could not reasonably expect to know that docket
contained terms, looked like receipt. Term not valid.
Oceanic Sun Line v Fay – reasonable notice before contract made
 FACTS: travel contract through travel agent. Customer booked and paid
for holiday, then sent tickets. Tickets had terms on back, any disputes to
be worked out in Greek courts.
 ISSUE: was reasonable notice given before?
 OUTCOME: tickets with term were received AFTER contract was made 
invalid clause
eBay v Creative – reasonable notice
 FACTS: BDO festival, Creative organisers. Ticket scalping on eBay,
Creative made new term dealing with scalping preventing profitable
ticket sales, automatically cancelling tickets. eBay brought ticket for
breach of s52 of Trade practices Act (now ACL) creative  misleading
purporting to deny entry. New term was not part of contracts at all. Didn’t
change from old term.
 ISSUE: was there reasonable notice?
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OUTCOME: clicking I agree was signature. Reasonable notice of terms was
not given
Interfoto Picture Library v Stiletto Visual Programmes – reasonable notice
(onerous terms)
 FACTS: business wanted to use images for advertising. Paid money for
negatives – run off prints. Given document indicating charge if customer
late returning negatives 5p p/day p/photo  unusually high charge
 ISSUE: reasonable notice given term unusual/onerous?
 OUTCOME: term void as there was no notice given as to unusual term
La Rose v Nudrill – prior course of dealing, sufficient notice
 FACTS: contract to transport drill. Driver drove too fast and drill came off.
P sued D for neg. carrier wanted to rely on exclusion clause given when
transporting goods. Never had nay reason to think there was terms on the
invoice.
 ISSUE: Did the prior course of dealing mean the company could rely on
exclusion clause?
 OUTCOME: Had given invoice many times before, didn’t matter that on
each individual time that the notice had come too late, notice was
cumulative, customer comes to have sufficient notice. Must be such that
through repeated dealing customer comes to know the terms.
The Moorcock - terms implied in fact
 FACTS: agreement allowing boat tied at wharf on Thames b/w owner and
wharf. River went down as boat was tied, boat sank. Settled on river bed,
boat’s hull punctured.
 ISSUE: was there an implied term that the mooring should be safe for the
boat?
 OUTCOME: implied term that boat should be safe to be moored as it is
necessary for business efficacy
Codelfa v State Rail Authority – terms implied in fact
 FACTS: construction for railway in suburban Syd. Disruptive, asked
residents if opposed to noise – no objection. Scheduled, assumed that
during schedule Codelfa could conduct very disruptive work around
clock. Residents upset, sought injunction against work – granted. Project
was severely delayed. No BoC  extension. Codelfa out of pocket as
they’d allowed specific amount of time – extra loss of $$. Action against
SRA for reasonable remuneration of work done over and above that
which was described in contract. Not money due. Argued, frustration and
implied term.
 ISSUE: was there an implied term that if delayed money should be paid to
remunerate?
 OUTCOME: argument that implied term existed was rejected on basis that
it wasn’t so obvious it goes without saying. Other ways to resolve issue
other than that
White v ANZ Theatres – parol evidence rule, extrinsic evidence ambiguities
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FACTS: contract to put on theatrical review. P  husband/wife
contracted to supply ‘sole professional services’. Understood to mean
services as performers AND producers, owner wanted to argue only
professional services as performers. Wanted to bring in another
producer.
ISSUE: Can the court look at extrinsic evidence in order to resolve
ambiguities
OUTCOME: To resolve dispute court looked at negotiations, which in this
case was admissible
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Topic 7 - Performance and Termination
1.
2.
3.
4.
5.
How a contract can end
Performance and dependency of obligations
Termination for breach
Termination by frustration
Termination by agreement
1. How a Contract Can End:




By performance
By mutual agreement
Automatically, by operation of law, eg. Frustration
Unilaterally (by one party)
o In response to certain types of breach where contract/statute
expressly/impliedly confers right to terminate with or without
cause
2. Performance and Dependency of Obligations:
A. Standards of Performance:


Variability of contractual obligations
o Strict/exact performance required – or just reasonable effort/care
o Method of performance may be stipulated – or left to performer’s
discretion
Everything depends on construction
B. Time of Performance:


Time may be specified expressly
If not, implied obligation to perform within a reasonable time (contract
dependent)
C. Good Faith:
Fiduciary Duties and Utmost Good Faith:
 Nature of fiduciary duties:
o Requirement to act in another’s best interests
o Duty to avoid conflicts of interest
o Enforceable in equity
 Remedies for breach may include account of profits or
constructive trust over any property obtained
 Examples of fiduciary relationships
o Vertical relationships
 Duties go one way
o Horizontal relationships
 Each owe one another fiduciary duties – joint best interests
 When is a contractual relationship also a fiduciary relationship
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o Hospital products v US Surgical Corp
 Distributor & surgical supplies company. Distributor
distributing other companies goods. US Surgical corp
‘should have only promoted their goods’. Implied term and
relationship carried
Contracts of Utmost Good Faith
o Common law, some contracts treated as aberrime fidei (requiring
utmost good faith)
 Insurance contracts
 Now enshrined in statute – Insurance Contracts Act 1984
(Cth) s 13
Duty of Co-Operation:
 Implied by law into all contracts
o Each party must do all that is necessary to enable the other party
to have the benefit of the contract – Butt v McDonald
o Includes obligation not to hinder or prevent fulfillment of
contractual purpose – Shepherd v Felt
Discretionary Powers:
 Where contract confers discretionary power on one party, courts general
require it to be exercised honestly and reasonably
o Renard Constructions v Minister for Public Works
 “show cause notice” – reason why contract shouldn’t be
terminated. Renard given SCN, Gvt rejected. Renard argued
not absolute power, dependent on reasonable and honest
reflection of Renard’s work. Renard showed evidence that
although building was slow, it was for reasons exacerbated
by Govt. decider was unaware of that fact. Therefore 3
judgments agreed Govt had not exercised discretion
honestly and reasonably
General Duty of Good Faith in Performance of Contracts:
 Burger King v Hungry Jack’s
o HJ’s Aus franchise of BK. BK wanted to terminate contract with
HJ’s. used loophole in contract “HJ under obligation to open up
certain number of franchises per year”. BK wanted to terminate
b/c HJ hadn’t met quota BK hadn’t given permission to open
new stores. Judgement “implied duty of BK to deal in good faith,
had not done so”
 Contrary views
o Service Station Associat v Berg Bennett
 Controls on exercise of powers and discretions grounded in
construction, not implied terms
o Esso v Southern Pacific
 Doubtful whether commercial contract are a suitable class
for implied term in law
 But may be appropriate to imply term in fact, to protect
‘vulnerable party’ from exploitive conduct
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Therefore, there are four views:
1. No need to recognize any principle of good faith and fair
dealing
2. Principle is party of Aus law, but based on construction
rather than implied term
3. Term implied in fact, but only where necessary
4. Term implied by law into all contract, all commercial
contracts, or some classes of contract
What is Good Faith:
 Barrett J in Overlook v Foxtel:
o Requires conduct that is both honest and reasonable having regard
to the parties interests
o But not the fiduciary duty to subordinate self-interest entirely
o Underwrites the spirit of the contract by precluding cynical resort
to the black letter
D. Order of Performance:
Who has to perform first?
 Classification in Kingston v Preston:
1. Mutual and independent covenants
a. But now presumption of dependence
2. Covenants which are conditions and dependent
3. Mutual conditions to be performed at the same time
E. Conditional Obligations:
Presumption of Entirety:
 Lump sum contracts and the presumption they create
o Phillips v Ellinson Bros
 Express terms may rebut presumption
 Even where contract is divisible, it may still be divided into entire
obligations (eg. Building contracts, employment contracts)
Substantial Performance:
 What constitutes entire performance?
o De minimis rule – disregard minor defects
o Substantial performance may suffice – Bolton v Mahadeva
 Contract to install hot water heating system. Installed
machine but when turned on noxious fumes filled house.
Cost to fix = 1/3 of total price. Installer sued for amount less
1/3. Court  not substantial performance b/c hot water
heating/cooling system not installed properly, it cannot
perform its only function, that is NOT substantial
performance. Therefore householder ends up with hot
water system for 1/3 price.
 Action for debt/money due for work, then sue for damages assessing loss
for reasonable cost of paying someone else to complete work
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Quantum Meruit Claims:
Restitutionary remedy seeking a reasonable sum for services provided
Function of restitutionary remedies:
 To prevent defendant being unjustly enriched by retaining benefit gained
at plaintiff’s expense
o Pavey v Matthews v Paul
 But cannot be used to upset or redistribute allocation of risks under a
contract
o Lumbers v W Cook
General rule – no recovery on quantum meruit for partial performance of entire
obligation
 Cutter v Powell
o Sailor signed on for voyage, regular wages, lump sum. Sailor died
through voyage. Widow brought action for party of lump sum 
ships owner benefited from part of the work done. Couldn’t sail for
full amount/substantial performance. Cannot recover benefit for
partial performance
Exceptions where performer may recover:
 ‘free acceptance’ of benefit (choose to accept benefit of work done)
o Sumpter v Hedges
 Half built houses on property, not free acceptance.
Completing houses was not a choice, only logical thing to
do. BUT when builder #1 left site, left materials etc behind.
Used by builder #2, brought action for cost of those
materials  ‘ Quantum Valebat’
 New contract implied
o Steele v Tardiani
 Aus residents, Italian background – wartime. Lock up as
alien residents. Able to do work and earn money, sent to
work cutting firewood. Contract – had to cut firewood into
certain size. Didn’t do so, landowner- wood not cut right
therefore no payment. Contract divisible into set of
obligations. I.e each bundle if cut correctly is worth amount
of money. Not substantial performance. Landowner aware
that wood was not cut right. HC – original contract
varied/replaced under which, paid for each bundle –
reasonable amount for services
 Full performance wrongly prevented
o Sopov v Kane Constructions
 Performers wrongfully prevented in performing
obligations, ie haven’t been able to substantially/entirely
perform. Can bring action in QM – reasonably sum. Can also
sue in damages – BUT can’t recover double, unless different
actions. Can choose most favourable.
o NB: contract price doesn’t cap sum that may be recovered
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F. Concurrent Obligations:

Where obligations dependent and concurrent, parties must be, and
remain, ready and willing to perform
o Eg buyer’s obligation to pay price and seller’s to give possession of
goods
 Sale of Goods Act 1895 (SA) s28
3. Termination for Breach
A. Why terminate?
1. To escape from a contract and be relieved of unperformed obligations
2. To claim loss of bargain damages

NB:
o Only relevant when party has obligation that is not yet fallen due
for performance
o Contract for termination of performance can’t terminate when all
relevant obligations of contract have already fallen due
o Loss of bargain damages:
 Want to sue other party for damages associated with no
longer having contract. For loss occurring with BoC and
BoC leading to contract termination
B. Common Law Rights of Termination:
Parties can terminate for:
 Breach of an essential term (condition)
 Fundamental breach of an intermediate term
 Repudiation
Conditions, Warranties, and Intermediate Terms:
 Condition (essential term) – any breach justifies termination
 Warranty (non-essential term)– no breach justifies termination
 Intermediate term – only fundamental breach permits termination
o Fundamental breach?  breach so serious/significant so as to
substantially deprive other party of benefit of contract
o Hongkong Fir v Kawasaki Kisen Kaisha
 Charter ship under contract, owner obliged to make sure
ship was seaworthy – wasn’t. took months to repair.
Charterer – BoC, contract termination. Did this breach
create right to terminate? Was seaworthy condition or
warranty? Could be either. Where term able to be breached
in lots of different ways  intermediate term. If
serious/fundamental breach, then can terminate
o Koompahtoo v Sanpine
 aboriginal community contract with business responsible
for managing affairs. Community concerned about what
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business up to re: affairs. Asked to see companies books –
wouldn’t produce them. Were they entitled to do so?
Obligations to keep books/records  not essential term.
Had breach been so serious as to breach intermediate term
Identifying an Essential Term:
Parties free to designate any term as essential, regardless how fundamental it is
– Gumland v Duffy Bros
Where no expressed intention, court must infer whether termination intended
for any breach
 Tramways Advertising v Luna Park
o TEST: Was it apparent innocent party would not have entered into
contract unless assured of strict compliance of this term?
 Associated Newspapers v Bancks
 Gough v South Sky Investments (SEE LECTURE NOTES FOR CASES)
 Value of certainty in commercial transactions – Bunge Corp v Tradax
Time Stipulations:
 Presumed by statute not to be conditions
o Law of Property Act 1936 (SA) s 16
 UNLESS ‘time is of the essence’ either expressly/impliedly
o Bunge v Tradax
 NB: if not completed obligations in time can either
1. Sue for damages, BoC, reflecting loss sustained as result of delay
2. Terminate  sue for loss of bargain damages (better result)
 Where time not of the essence, notice may be served to complete within
reasonable time
o Louinder v Leis
o Laurinda v Capalaba
 Therefore three options
1. Can terminate if time is of the essence
2. Can terminate if notice served and not completed
3. Can terminate if delay is such that constitutes fundamental breach
Repudiation:
 Serious refusal or inability to perform – Laurinda v Capalaba
 Wrongful termination usually amounts to repudiation
o Not necessarily, where based on good faith misinterpretation of
contracts
 DTR Nominees v Mona Homes – mutual abandonment (SEE
LECTURES SLIDES)
 Breach of condition or fundamental breach may also be repudiation
o But no overlap where refusal before performance due
(anticipatory breach)
 Hochster v De La Tour
o Or where series of minor breaches- persistent refusal to perform
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C. Express/Implied Rights of Termination:

Where contract apparently indefinite, law may imply right for either party
to terminate on reasonable notice
o Standard implication for employment contracts
 Byrne v Australian Airlines
o May also be implied for other contracts
 Crawford Fitting & Sydney Valve
Exercise of the right to terminate:
 Finding basis for termination
 Doctrine of Election
 Unfair termination
 Unfair Affirmation
Finding Basis for Termination:
 May be justified by any available ground, whether known to terminating
party or not
o Concut v Worrell
 GM sacked, company didn’t like performance. Found out
after GM had been using company’s products & employees
to build house  BoC  basis of termination. Tried to sue
for unfair dismissal, rejected
D. The Doctrine of Election:


Party with right to terminate must elect whether to affirm or terminate
either expressly or impliedly
o Failure to act rarely implies
o Affirming party must know of circumstances creating right to
terminate
Affirmation means right of termination is lost
o Possibility of new rights
 Tropical Traders v Goonan
 Continuous breach. Sale of land. Not enough money.
Each time vendor gave purchaser more time. Time of
the essence. Vendor ran out of patience, purported
to terminate, did not lose right of election as
previous times were gone but current rights can
create right of termination
E. Unfair Termination/Affirmation:

Equitable relief against unconscionable termination
o Estoppel
 Legion v Hateley
o Relief against forfeiture of property interest
 Legion v Hateley
 Purchaser acquired equitable interest in land.
Vendor terminated before completion. Would result
in loss/forfeiture of equitable interest in property 
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sufficient to create power for court to intervene and
restrain conract termination & prevent forfeiture &
loss of property interest (unconscionability) HC - yes
 Tamwar v Cauchi
 Sale of land. Depost paid. Has money exchange
problems  cannot find money in time due to
foreign currency. Good for vendor  terminates
contract. Will be able to keep property and sell for
higher price. Vendor had not acted unconscionably
b/c he had not caused any of the misfortune,
however unfair it might be  not unconscionable
NB- UNCONSCIONABLE: against good conscience, NOT unfair
Implied duty of good faith used to create broad doctrine of unfair
termination?  BK v HJ
Unfair affirmation
o Unfettered right to affirm, provided other’s cooperation not
required
 White & Carter v McGregor
 Advertising on bins. Renewal of contract, attempt to
cancel, repudiation. Couldn’t claim because all
advertising material was already up from 1st
contract, no cooperation needed. Legitimate interest
in keeping contract alive
o Except where no legitimate interest in keeping contract alive
 Alaskan Trader
 Charter  ship repairs, left ship in port for 7 months
with full crew, earn money by making ship available.
Did not mitigate damages. Couldn’t claim loss, only
damages. Unreasonable for owner to keep ship in
port with crew.
F. Consequences of Termination:
Effect of Termination:
 Future obligations discharged – comparison to rescission ab initio (as
though contract never existed, retrospective aspects too)
o McDonalds v Dennys Lacelles
 But some terms intended to continue
o Photo Production v Securicor
 Burn down factory. Exclusion clause – guards not liable
except negligence. b/c Securicor fundamentally breached
contract – termination therefore clause no longer valid.
REJECTED – clause existed to protect before and after
Recognition/Enforcement of Accrued Rights:
 Accrued rights to performance still enforceable
o Bot v Ristevski
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Restitution – Money Claims:
 Action for money had and received
o Allows recovery of money in certain cases where payee would be
unjustly enriched if allowed to retain
o Where money paid under mistake
o Or where total failure of consideration (eg money paid under void
contract)
o Money paid under contract not recoverable unless total failure of
considerations
 Baltic Shipping v Dillon
 Had some part of holiday ie not total failure of
consideration b/c had enjoyed cruise prior to crash
and sinking of ship
o Deposits not recoverable (except where payee in default)
 10% treated as reasonable deposit – Luu v Sovereign
Developments
 ie. 6 payments  60% then reneg, can recover 50% (all but
10%) unless clause that states money may be kept (unless
unconscionable)
o Other instalment payments
 May be recovered if TFC established
 Contract may stipulate retention of payments, subject to
equitable relief against forfeiture
 McDonald v Dennys Lascelles
4. Termination by Frustration:
Where contract is frustrated, automatically terminates
TEST: Supervening event for which neither party is responsible must deprive
parties of substantial benefit of contract
 Codelfa v State Rail Authority
o Contract carried out during night. Injunction on incorrect legal
advice. Took longer, needed more money. Sued for extra money.
Contract frustrated  injunction delay was event that frustrated
contract. New implied contract  Quantum Meruit – ‘reasonable
sum of money’
 Ooh! Media Roadside v Diamond Wheels
o Contract for ad space on billboard. DW had contracted in Melb, at
time billboard seen from main road. After contract, building
erected in vacant block, blocked sight of ad. Argued frustration –
court “so obvious risk that could be foreseen”
 EG: performance becomes illegal. I.e. contract for sale in Russia, war starts
with Russia, contract frustrates b/c illegal to trade with enemy alien
 TYPE OF EVENT – if event is one of the type that could occur – clause in
contract (ie. Supply of goods and delays etc)
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Consequences of frustration:
 Frustrated Contracts Act 1988 (SA)
5. Termination by Agreement:


Parties make contract, then agree to end it
o Requirement of consideration from each party (accord and
satisfaction) distinguishing between termination and variation
 Concut v Worrell
o Ie. If one party has complete obligations but other hasn’t
o Token consideration (deed), same as formation consideration
o If agreed, no need for consideration, ie. I agree to stop working,
you agree to stop paying
Inferred abandonment
o DTR Nominees v Mona Homes
 10 yrs, both thought other had breached. Left for so longinferred that parties have effectively abandoned contract
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Topic 8 – Misinformation
The Issue


A enters into contract with B under misapprehension
After discovering the truth, what can they do about it?
The Possibilities (some or all may apply):
1. A can sue B for breach of contract if
 Before entering into the contract, B promised or guaranteed
to A that something was true
 The warranty became part of contract (or collateral
contract)
 Statement turned out to be false
2. A can argue that B is estopped from resiling from, or denying the
truth of, an assumption B has encouraged A to adopt
3. A can rescind contract at common law on basis that contract
induced by misrepresentation from B
4. A can sue B for damages in tort, under Misrepresentation Act
5. A can seek relief against misleading/deceptive conduct under
ACL
6. A can argue that contract is either void/voidable for mistake
7. A can seek rectification of written contract, on basis that contract
doesn’t correctly record parties’ agreement
1. Breach of Contract:
Elements:
 Before entering into contract, B promised/guaranteed to A something
was true
 Warranty became part of contract (or collateral)
 Statement turned out to be false
A. Warranty or Representation?


If B makes statement of fact/opinion  ‘mere representation’ unless
something to suggest B was promising something true
o JJ Savage & Sons v Blakney
 Sale of boat. When potential buyer asked top speed, told
~1500mph, turned out boat couldn’t reach speed. BoC 
denied. Was mere representation not warranty.
o TEST: would reasonable person think they were being guaranteed
something or just being told a fact? (can look at language)
More likely to be treated as warranty where:
o B is more knowledgeable than A on matter
 Oscar Chess v Williams
 Private car sale – 1948, was 1939. Easy to mistake in
era. Vendor had papers etc genuinely thought it was
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1948. No BoC  mere representation, private
individual
 Dick Bentley Productions v Harold Smith (Motors)
 Mileage, odometer tampered with. Treated as
warranty  professional sale, car dealer had special
knowledge on cars. Purchaser reasonably expect
warranty being made
o Statement is on important matter, and/or made just before
contract concluded
 Van den Esschert v Chappell
 House sale – asks about termite right before sale.
Told no. Had termites. Important matter, can impact
severely on house. Reasonable person would
understand they being promised no termites
B. Parol Evidence Rule:




Rule in classic form:
o Where parties reduce contract to writing, extrinsic evidence is
inadmissible to add to, vary, or contradict document
So if parties reach oral agreement, and reduce to writing, term that is
omitted in process cannot be enforced
o Esquuscorp v Glengallan Investments
 Negotiated contract. Agreed verbally on terms, put into
writing. Change during process, key term taken out. COULD
have argued rectification of mistake – instead argued
written contract and outside term. HC  original oral
agreement ok but hten made into writing, clearly meant to
be agreement – bound by written not verbal
Rule in extreme form:
o If there is document that appears to be a complete record of
contract, no evidence is admissible to suggest there was an
additional oral term
 L G Thorne v Thomas Borthwick & Sons
 Sale of oil – before purchase P wanted sample.
Argued sale by sample (ie. Had to match sample
viewed). Was not in signed contract. Since written
document existed, no extras added  rejected
Modern View:
o Rule only applied once established contract is in writing
o An apparently complete document creates presumption of
integration, but can be rebutted by sufficiently strong evidence
 State Rail Authority of NSW v Heath Outdoor
 Nicolazzo v Harb
 Series of sales, lots of documents to reflect
agreements. Didn’t reflect/make sense. Bad
contract- real contract mixture b/w verbal & written
Entire Agreement Clauses:
 Written agreements can contain entire agreement clauses
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Strengthen presumption but may not bar evidence of additional term
o Exception in L’Estrange v Graucob
Such clauses do not usually block implication of additional terms
o Hart v McDonald (If consistent with contract)
C. Collateral Contracts:

To get around parol evidence rule, may argue separate collateral contract
o Ie. B promises statement is true, in return A promises to enter into
main contract
 Shepperd v Ryde
 Land sale. Multiple blocks, asked council to see plans
for land. Showed parks around land. Definitely
parks?  yes, then changed after agreement – no
parks. BoC, collateral contract, promised parks to
developed  plaintiff agreed to enter into main
contract for that . HC  upheld, not in original
contract b/c not relevant to that contract
2. Estoppel:


Even if promise does not have contractual force, may be enforceable in
equity through doctrine of promissory estoppel
o State Rail Authority of NSW v Heath Outdoor
 Ad space. (gvt generally gets way) terms containing
authority allowing them to terminate before date. Issue was
raised, said wouldn’t normally. Exercised power. 2
arguments : 1 – verbal evidence, doesn’t supervene. 2 –
estoppel – not unconscionable, not negotiators
Estoppel may be established even in face of written contract with entire
agreement clause
o Saleh Romanous [2010] NSWCA 274
 Development venture. P agreed to involve their property in.
contract only related to their property. Led to believe that
contract terminated, other partners didn’t agree.
3. Rescission for Misrepresentation:

At common law – voidable if:
o There has been representation of present fact
o Turns out to be untrue
o And that induced other party to enter into contract
A. Representation of Fact:

Must be representation of existing fact and not:
o Puff – obviously exaggerated statement not meant to be taken
seriously
 Mitchell v Valherie
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
Real estate sale. Ad says “cosy, immaculate” “perfect
presentation, nothing to spend”. Rescission of
contract as house is seriously structurally faulty.
REA: puffs – real estate language. Majority – nothing
to spend on presentation – misrepresentation
o Mere failure to disclose information
 W Scott Fell v Lloyd
 Not misinformation. Refused sale as they had other
arrangements. Purchaser did not reveal they
wouldn’t sell coal. No misrepresentation, failed to
tell of SA selling restrictions.
B. Inducement:

Where there is misstatement of material fact, inducement will be
presumed
o Unless B can show that A did not rely on statement
 Holmes v Jones
 Pastor property. Inaccurately told stock, wrong.
Purchaser knew this. Still went ahead with sale.
Therefore no reliance on misrepresentation
C. Rescission:




Where contract is voidable (for misrepresentation or otherwise) one
party has right to rescind or avoid it - UNLESS bar to recission exists
Cancels everything done under contract
Requires restitutio in integrum – restitution of any benefits conferred
under contract
Parties essentially go back to the position they were in before the contract
was made
D. Bars to Rescission:



A elects to affirm contract, after discovering truth
Where impossible to restore parties to the position they were in before
contract was made
o But at equity, substantial restoration suffices, court may make
orders adjusting parties rights to achieve that
 Alati v Kruger
 Series of order designed to facilitate parties to get
back to position they were in befreo
Property has been acquired for value by a third party acting in good faith
and without notice of ground for rescission
o Time of rescission crucial – Car and Universal Finance v Caldwell
 Owner of car sells, given cheque  bounces. Purchaser is
rogue (vanishes + cannot be sued). Rogue sells car onto 3rd
party who buys in good faith. Fraud discovered – went to
police, showed rescission b/c rogue never seen again.
 Timing important – if cheque bounces and rescission is
shown before car is sold to 3rd party then 3rd party owns
car, if not then property of vendor as 1st contract rescinded
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4. Damages in Tort under Misrepresentation Act:
Tort of deceit, for fraudulent misrepresentation
 B must know that statement in untrue, or be reckless as t the truth
o Derry v Peek
Tort of negligence, for negligent misstatement
 B must owe, and breach, a duty to take reasonable car as to the accuracy
of information provided
 Can apply to pre-contractual statements
o Esso Petroleum v Mardon
A. Misrepresentation Act 1972 (SA):



Where misrepresentation induces entry into contract, representee can
sue for damages in tort, as if it were fraudulent (s (7))
o Extends to innocent misrepresentation
o But defence of reasonable belief in truth of statement (s 7(2)(a))
Court may also award damages in lieu of rescission if fair and reasonable
(s 7(3))
Contractual provision excluding or restricting liability or remedy for
misrepresentation only enforceable if fair and reasonable (s 8)
5. Misleading and Deceptive Conduct under ACL:
Australian Consumer Law s 18(1):
 A person must not, in trade or commerce, engage in conduct that is
misleading or deceptive, or is likely to mislead and deceive
Uses:
 Can be used to challenge commercial conduct inc. false advertising
 Also extends to pre (and post) contractual conduct
 Despite ‘consumer protection’ context, can be invoked by one business
against another (rarer and more difficult)
A. “Person”:


Under Competition and Consumer Act 2010 (Cth)
o ACL generally applies only to conduct by trading, financial, or
foreign corporations (s 131) – ‘LEGAL PERSON’
o Can include conduct by natural person in various situations (s 6)
 International or interstate trade
 Using postal/telephonic services
Applies to any person in SA through FTA 1987 Pt 3
B. “In Trade or Commerce”:

Excludes private sales, even when publicly advertised
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o O’Brien v Smolonogov
o BUT – does includes agents (ie. Real estate agents etc)
Includes commercial dealings by businesses but not necessarily internal
affairs
o Concrete Constructions (NSW) Pty Ltd v Nelson
C. “Misleading or Deceptive”:

Gibbs J in Parkdale v Puxu:
1. Not confined to conduct intended to mislead or deceive, or that
involves failure to take reasonable care
2. Conduct is misleading or deceptive if it leads a person into error,
though not if it merely causes them to wonder about something
3. Intended to protect the inexperienced as well as the experienced,
and the gullible as well as the astute, though not those who fail to
take reasonable care of their own interests
D. Representation as to the Future:

ACT s 4
o Where a representation is made as to future matter, without
reasonable grounds, it is taken to be misleading (ie. Financial
advice etc) (NB: BoP on defendant)
o Unless representor adduces evidence to contrary, deemed not to
have had reasonable grounds for such representation
SEE NOTES FOR CASE LAW ON:
 Byers v Dorotea
 Henjo Investments v Collins Marrickville
 Demagogue v Ramensky
o Reasonable expectations test for non disclosure
 Butcher v Lachlan Elder Realty
 Slinger v Southern White
E. Specific Prohibitions:

‘Unfair practices’ specifically prohibited by ACL Pt 3-1 inc:
o Various types of false/misleading representation about
goods/services supplied (ss 29,33,34)
o False/misleading conduct re sale or grant of land (s 30)
o False/misleading conduct in offering employment (s 31)
o Fraudulent offers of rebates, gifts, prizes, etc (s 32)
o Bait advertising (s 35)
o Accepting payment without ability to supply (s 36)
o Misleading representations about profitability, risk, etc of business
activities (s 37)
F. Criminal Liability:

Can apply for breach of specific prohibitions, but not the general
prohibition on misleading or deceptive conduct
o ACL Pt 4-1 Div 1
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G. Injunctive Relief:


Court may restrain actual/proposed conduct in breach of any of above
provisions
o ACL ss 232-235
Injunction may be sought by
o ACCC (CCA) or Commissioner for Consumer Affairs (FTA)
o Or ‘any other person’
H. Pecuniary Penalties:

Courts may impose pecuniary penalties (ss 224-228)
o But not for breach of s 18
o Not where criminal liability imposed
o Court required to prioritise compensation of victims
o NB: not assessed – need to show that if you suffer loss you can
claim damages – pecuniary/non-pecuniary loss but only
compensatory damages
I. Damages:



Person who suffers loss/damage as result of breach may recover ‘the
amount of the loss or damage’
o ACL s 236
NB: problem of determining appropriate measure of damage
o Not covered
Awards are compensatory only, no exemplary/punitive damages
J. Other Orders:


General power to make any other order court deems appropriate to
compensate/prevent/reduce actual/likely loss or damage
o ACL ss 237-245
Can include order
o Setting aside/varying of contract
o Directing refund of money/return of property
o Directing repair of goods/supply of services
o For payment of compensation
NB: for exam – need to know remedies exist – what type of loss they cover, don’t
need to go further and go through what they would be
K. Liability:
As an accessory:
 Orders may be sought against person ‘involved’ in a contravention
 This includes (“involved”) (AC s 2(1)):
o Aiding/abetting/counseling/procuring a contravention
o Inducing, by threats/promises/otherwise, a contravention
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o Directly/indirectly, being knowingly involved in/party to
contravention
NB: can only be found as being liable if you KNEW about contravention
Excluding Liability:
 As matter of public policy, liability for misleading/deceptive conduct
under ACL cannot be excluded/limited
o IOOF Australia Trustees v Tantipech
 But a disclaimer/acknowledgment clause may prevent liability where it in
fact helps avoid any error or deception
o Butcher v Lachlan Elder Realty
 IE: you cannot validly agree to exclude misleading/deceptive conduct in a
contract
6. Mistake:
Narrow view of mistake. Distinction to be made between mistakes as to subject
matter/terms of contract, and mistakes as to value/benefit of contract.
3 Types of Mistake:
1. Parties are in agreement, but equally mistaken about something –
common mistake
2. Parties are at odds about something – may have different beliefs or
intentions, but are unaware of discrepancy – mutual mistake
3. Parties are at odds about something – may be mistaken about
something, while the other party is not – unilateral mistake
NB: 2 & 3 are very often interchangeable
A. Common Mistake:

Query whether some mistakes are sufficiently fundamental to render
contract void
o Not in any event where 1 party has expressly/impliedly warranted
its existence
 McRae v CDC
 Marine Salvage. HC  in circumstances CDC had
superior knowledge. Impliedly promising that
tanker existed. Risk implicitly allocated. CDC in
position to know if info was accurate
 Sale of Goods Act 1895 (SA) s 6 – timing
o NB: Timing crucial – if before contract is formed  common
mistake. IF after contract formed  frustration
B. Mutual Mistake:

In some cases, parties may be at odds to such extent that no agreement is
reached (and therefore no contract existed in first place)
o Raffles v Wichelhaus
 Ship sale – 2 ships same name. Each party thought contract
was about other ship  no contract
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But, if parties objectively appear to have reached agreement, fact that
parties may have had different beliefs/intentions will not preclude
contract being formed
o Taylor v Johnson
 Sale of land. Vendor though $15,000 p/acre ($150,000),
signed agreement stating $15,000 total. Market price closer
to $150,000. Reasonably apparent vendor had agreed to
terms of sale – written in contract. Would have been found
to be $15,000 had purchaser not known about mistake.
Where known – if unconscionable (equity) court can
intervene & rescind contract
 Serious mistake as to fundamental term & other party
aware & deliberately sets out to prevent uncovering 
equitable unconscionability
TEST: what is reasonably apparent to the reasonable person
C. Unilateral Mistake:


Court has power in equity to rescind contract where
o Contract is in writing
o One party makes serious mistake as to content/subject matter of
fundamental term
o Other party is aware of mistake and sets out to prevent it being
discovered
 Taylor v Johnson
Has 1 party unconscionably taken advantage of another parties mistake?
7. Rectification:


Court can order rectification of written contract
o Where satisfied document doesn’t accurately record parties
common intention
 Maralinga v Major Enterprises
 Pukallus v Cameron
o Or Where one party is aware of mistake in recording and
unconscionably seeks to take advantage of other’s ignorance
 Leibler v Air New Zealand
NB: Can’t use recitification to rectify mistake that’s not about the
RECORDING of the agreement (ie. How contract is written, NOT subject
matter)
Non est Factum:
 Plea that signed document has not been made and is thus void
o By person who cannot understand at all what they are signing
(blind/mentally disabled/illiterate)
o Makes fundamental mistake as to its terms
o And (if other party ignorant of disability) has not been careless
 Petelin v Cullen
o Hard to prove
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Misinformation checklist:
1. Sue for breach of contract
a. made a promise (warranty) as opposed to mere representation
i. AND warranty is part of contract
ii. OR collateral contract
2. Estoppel
3. Rescind
a. Must be voidable (conditions for rescind must be present)
b. No bar to rescission
4. Seek relief from misleading and deceptive conduct under ACL (*usually
most relevant)
5. Sue for damages
a. Tort of deceit – fraudulent misrepresentation
b. Tort of negligence – negligent misrepresentations
c. Misrepresentation Act
6. Argue void/voidable for mistake
7. Seek rectification of written contract
Identifying a warranty
 TEST: Whether a reasonable person in the circumstances understand
they were being promised something?
o Language
o Knowledge of representor
o On an important matter
o Statement just before contract concluded
Is warranty part of contract?
 Parol evidence rules
o Presumption that apparently complete written content is complete
 Can be rebutted
Collateral Contracts
 Easier to establish if promise concerns an incidental matter
 Cannot be inconsistent with main contract
Voidable for misrepresentation:
Requirements:
 Misrepresentation of existing facts
 Untrue
 Induce other party to enter the contract
Therefore contract  voidable
BUT – bars to recission
 Elected to affirm
 Impossible to restore pre-contract position (equity – substantial
restoration suffices)
 Property acquired by 3rd party in good faith without notice
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Deceit:
 False representation is made
o Knowingly OR
o Recklessly
 Intention that other party relies
 Damage
Negligent misrepresentation
 Party making representation owes (and breaches) duty to take
reasonable care as to accuracy of statement
Misrepresentation Act
 Even where innocent misrepresentation and no duty can claim damages
 BUT – defence of reasonable belief in statement
ACL – misleading or deceptive conduct
 Person
o s131 competition and consumer law  Federal Act
o otherwise operate as State Act
 In trade or commerce
o Excludes private sales between individuals who aren’t carrying on
a business
o Internal affairs of business
 Misleading and deceptive, or likely to be misleading and deceptive
Future statements
 Taken to be misleading if no reasonable grounds
Faliure to disclose
 Can be misleading and deceptive
 Whether there is reasonable expectations in circumstances that
information would be disclosed
Exclusion
 Generally cant exclude liability under ACL
 BUT disclaimer may prevent liability where actually avoids error
Mistake
 Common mistake – both mistaken
 Mutual mistake
 Unilateral mistake (Taylor v Johnson)
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Topic 9 - Unconscionability
1. Unconscionability at Common Law:
A. Conscience in Equity:




Central to variety of equitable doctrines
Examples
o Equitable estoppel
o Relief against forfeiture
o Unilateral mistake
But no general equitable power to grant relief against unconscionable
conduct/exercise of rights – each case must fall within established
category
o Tenth Vandy v Natwest Markets
Ie. Not form of wrongdoing that will itself generate cause of action
B. Doctrine of Unconscionable Bargains:
Equitable doctrine allowing contract to be set aside where:
 Weaker party has special disability preventing them from making
judgments in their best interest
 Strong party knows or ought to know of disability, so unconscionable
to take advantage of it
 Stronger party cannot show transaction is fair and reasonable
Special Disability:
 Examples of disability:
o Ill healthy from persistent intoxication
 Blomley v Ryan – Drunkard
o Age and lack of English
 Commercial Bank v Amadio
 Amadio guaranteeing business debts incurred by
another member of family. Relied heavily on bank,
spoke very little English
o Emotional dependence
 Louth v Diprose
 Lawyer, intelligent. Relationship with younger
woman. Shower in gifts etc, gave house. Went to
court – claimed she’d taken advantage of him
emotionally – so caught up in relationship
 Inequality of bargaining power is not special disability, nor desperation
o ACCC v Berbatis
 Shopping centre lease expiry. Wanted to sell, desperate for
lease renewal. Made deal – will renew if drop legal
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proceedings against shopping centre (not blackmail). ACCC
– s 20 ACL. NC – not unconscionable, no special disability
o ANZ Banking Group v Karam
 Business renegotiated existing loans. Bank loan more
money. Tried to enforce debts when company went under.
No special disability  desperation, not a reason
Nor is voluntarily engaging in lawful but risky activity
o Kakavas v Crown Melbourne
 High roller & problem gambler. Welcome, free
accommodation etc. Ran up $$$million of gambling debt.
Tried to enforce debt, claimed unconscionability – known to
be problem gambler. Rejected. No special disability,
voluntarily engaging in lawful risky activity.
Defences:
 Strong party unaware of disability
o ANZ v Alirezai
 Guaranteed business debts. Two friends, very close cultural
custom bond. Bank knew they were friends, not how close.
Friend had helped other out, meaning that he owed him
anything, no choice but to say yes. Successful to show
disability, BUT not that bank knew
o NB: constructive notice not enough, must be ‘wilful ignorance’
 Kakavas v Crown Melbourne
o NB: can still be liable if they should have known about disability
but didn’t
 No exploitation of disability
o Eg by allowing/requiring access to independent legal advice
o Or otherwise establishing the terms of the contract were fair
o IE. Refuse to enter into contract without seeking legal advice prior
C. Separate Doctrine – ‘Special Equity’ for Married Women:


Married Women’s Equity:
o Held in Garcia v NAB to be distinct from Amadio – type
unconscionability
o Wife able to have guarantee of husband’s business debts set aside
where:
 She didn’t understand transaction
 Transaction was voluntary (no gain to her)
 Bank knew she was married and must have expected trust
and confidence in husband
 Bank did not ensure transaction explained to her
o (unconscionable to take advantage of marriage vows)
Support for expanding doctrine to other relationships of trust/confidence
o ANZ v Alirezai
o Kirby J in Garcia
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2. Statutory Prohibitions on Unconscionable Conduct:
ACL Pt 2-2:
 Prohibits two forms of unconscionable conduct IN TRADE OR COMMERCE
o S 20 – unconscionable under the common law
o S 21 – unconscionable conduct in supply or acquisition of goods or
services
 N/A to supply or financial services (ASIC Act)
 Remedies – same as misleading/deceptive conduct
A. Section 20 of ACL:
“Prohibits conduct that is unconscionable within the meaning of the unwritten law
(common law) from time to time”


Confers broader remedies than just rescission
Unclear whether is applies only where special disability or in broader
range of cases
o Not resolved by HC in ACCC v Berbatis
B. Section 21 of ACL:




Prohibits conduct in trade or commerce by a person
o That is, in all the circumstances, unconscionable
o But only n relation to supply/acquisition of goods/services
to/from a person that is NOT a listed publicly company
o No limit on value of transaction (ie. Not <40,000/>40,000)
Factors to which court may have regard include (s22)
o Relative bargaining strengths of parties
o Whether recipient/supplier must comply with conditions not
reasonably necessary to protect other party
o Whether recipient/supplier able to understand documents
o Whether any use of undue influence or pressure, or unfair tactics
o Price/availability of similar goods or services
o Whether recipient/supplier treated same as others
o Requirements of any industry code
o Any unreasonable failure to disclose intended conduct that might
affect recipient/supplier
o Willingness to negotiate terms and conditions
o Compliance with terms of any contract
o Post-contractual conduct
o Any unilateral power to vary terms
o Extent to which parties acted in good faith
But not unconscionable merely to institute legal proceedings/refer
dispute to arbitration (s 21(2))
No regard to circumstances not reasonably foreseeable at the time of
alleged contravention (s 21(3)(a))
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C. “Unconscionable”:





Section 21 (4) added in 2012 to confirm
o S 21 not limited by common law
o Can apply to system of conduct/pattern of behavior, whether or
not particular individual is identified as having been
disadvantaged
 ASIC v National Exchange
 Took advantage of new share holders. Told them
offering at fair price, actually below market value.
Relying on fact that someone offering money for
shares they paid nothing for. Unconscionable, even
though each one was not necessarily disadvantaged
as they didn’t all take up offer
o Where contract is involved, court may consider terms and
performance, not just formation
According to case law unconscionability means:
o ‘serious misconduct, or something clearly unfair or unreasonable
… actions showing no regard for conscience, or that are
irreconcilable with what is right or reasonable’ (Hurley v
McDonald’s)
Not enough that conduct is unfair/unreasonable – must be moral
tainting/immoral/seriously wrong or lack of ethics involved. Deliberate
rather than merely negligent wrongdoing
o Director of Consumer Affairs Victoria v Scully
Examples of unconscionable treatment
o ACCC v Lux Distributors
 Door to door vacuum sales. Say free vacuum check. Once in
house tell customer how much better new model etc was
than current. Wasn’t conduct in house that was problemwas how they got in
o ACCC v Excite Mobile
 Aggressive enforcement of mobile phone contracts on
indigenous communities
Courts generally more reluctant to find unconscionability in dealings
between business parties
o ACCC v Simply No-Knead (bullying & thuggish treatment of
franchisees)
3. Broader Controls on Contractual Unfairness:


Some states prohibited unjust/unfair terms in consumer contracts
o Contracts Review Act 1980 (NSW)
o Fair Trading Act 1999 (Vic) Pt 2B
Now ACL pt3 does likewise on national basis
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A. ACL Controls:



Any unfair term in consumer contract in standard form void (ACL s 23(1))
Consumer contract – supply of goods, services, land to an individual,
wholly or predominantly for their personal, domestic, or household use
or consumption (s 23(3))
No definition of standard form though relevant factors include lack of
negotiating power (s 27)
B. When is a Term Unfair?




Unfair if (s 24(1)):
o It would cause a significant imbalance in the parties’ rights and
obligations, and
o It is not reasonably necessary to protect a party’s legitimate
interests
o It would cause detriment (financial or otherwise) if applied or
relied upon
Court must take into account (s 24(2))
o Transparency of term (whether in plain language, legible,
presented clearly, readily available: s 24(3))
o Contract as a whole
Examples of terms that may be unfair (s 25(1))
o Permitting one party only to avoid or limit performance, vary
terms, terminate or renew
o Penalising one party only for breach/termination
o One party can vary upfront price without other being able to
terminate
o One party can vary characteristics of goods, services or land
o One party can determine meaning of contract or whether breached
o Limit on vicarious liability for agents’ wrongdoing
o One party can assign contract to other’s detriment without their
consent
o Limit on one party’s right to sue another
o Limit on evidence that can be adduced, or imposition of evidential
burden, in proceedings relating to contract
o Term prescribed by regulations
Terms cannot be challenged if it (ACL s 26)
o Identifies main subject matter
o Sets up front price, or
o Is required or permitted by legislation
C. Effect of Term Being Unfair:


Term is void, but rest of contract continues to bind parties if capable of
operating without unfair term (ACL s 23(2))
Party/regulator may seek declaration from court that term is unfair (s
250)
o If granted – subsequent attempt to rely on/apply term attracts
usual range of remedies
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o Finding that term is unfair is not itself contravention (s 15)
Topic 10 - Other Vitiating Factors
1. Non-compliance with Requirements of Writing:
Generally:
 Contracts do not have to be in writing to be enforceable (can be verbal)
 However, written contracts easier to prove (evidence)
 BUT statute may say otherwise
o Statute of Frauds 1677 (Imp) s 4
o Law of Property Act 1936 (SA) s 26(1) – Land contracts must be
 Where writing required, electronic equivalent usually sufficient
o Electronic Transactions Acts 1999 (Cth), 2000 (SA)
o NB: exceptions in Electronic Transactions Regulations 2002 (SA)
2. Incapacity:
Minors (<18 y/o):
 Very young children not bound by agreements
 Contracts for ‘necessaries’ (objective – reasonable person) usually
enforceable
o Sale of Goods Act 1895 (SA) s 2
 Other contracts not binding unless ratified by minor after turning 18
o Minors Contracts (Misc Provisions) Act 1979 (SA)
 NB: are enforceable against other party
Intoxication and Physical/Mental Disability:
 Contract may be voidable under doctrine of unconscionable bargains
 Or (extreme) void under non est factum doctrine
Company:
 Has legal capacity of individual, but must act through agency of a person
with express/implied authority
o Corporations Act 2001 (Cth) ss124-126
3. Duress:


Contract voidable if procured by coercion
o NB: contract that is voidable is not necessarily void (bars to
rescission etc)
Applies to:
o Threats of physical harm
 Barton v Armstrong – threat need not be only reason for
making contract
o Duress of goods
o Economic duress
 North Ocean Shipping v Hyundai Construction
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


Ship builder. “either pay more or won’t finish ship”
threat. Made contract voidable BUT bar to rescission
was that customer left too long to complain –
implied affirmation
Doctrine requirements:
1. An illegitimate threat
2. That overbears the will in the sense that the victim feels no
practical other than to submit
NB: “Some suggestion that a threat may be illegitimate if what is
threatened is merely unconscionable, rather than unlawful” – ANZ v
Karam
o Ie. If you want to complain under unconscionability than do it in
unconscionability rather than duress
4. Undue Influence:
Contract voidable where one party’s hold over the other is such they lack the
capacity to reach an independent judgment
Two Categories of undue influence:
1. Actual – burden of proof on weaker party
2. Presumed – burden of proof on stronger party to show weaker
party was able to reach free and independent decision
 Johnson v Buttress
o Weaker party – man whose wife had died. Relied
heavily on friend of late wife’s. agreed to give
away property – undue influence? Didn’t fall
under usual relationship category, had to prove.
Sufficient evidence to suggest relationship was
one of influence. Once proved that relationship
was one of influence – BoP shifted to stronger
party to prove decision was made freely &
independently – WASN’T.
 Influence presumed where parties are in relationship necessarily
involving repose of trust and confidence
o Eg. Parent & young child, solicitor and client, doctor and patient
 BUT even where not automatically presumed, presumption may still arise
in particular circumstances
o Eg between banker and client, husband and wife, family
relationships – Johnson v Buttress

Relationship with doctrine of unconscionable bargains
o Deane J in Amadio
 Principles are ‘closely related’ but distinct
 Undue influence, like duress, looks to the quality of the
consent or assent of the weaker party (ie.
Free/independent decision)
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Whereas unconscionable dealing looks to the conduct of the
stronger party in attempting to benefit from a dealing with
a party under a special disability
Ie. Undue influence usually has to be close relationship
between parties – personal influence
5. Illegality and Public Policy:
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Some contracts declared void/expressly prohibited by statute
o Eg:
 Lottery and Gaming Act 1936 (SA) ss 50, 50A
 Competition and Consumer Act 2010 (Cth) s 45
Broader principle:
o ‘No court will lend its aid to a man who founds his cause of action
upon an immoral or illegal act. If, from the plaintiff’s own stating or
otherwise, the cause of action appears to arise ex turpi causa, or
the transgression of a positive law of this country, there the Court
says he has no right to be assisted.’
 Lord Mansfield in Holman v Johnson
 Held up carriages. Dispute over sharing of profitstook to court. When it became apparent what
business was – case stopped, police summoned, both
hanged
o May apply whether contract directly involved illegal/immoral
conduct, or is for objectionable purpose
Court may, on public policy grounds:
o Deny liability for what would otherwise be breach of contract
o Reject a restitutionary claim for the return of, or recompense for,
benefits transferred under the contract
o Or reject a claim brought ‘independently’ of the contract, such as
for tortious misrepresentation or for wrongful dealings with
property
Conduct may offend public policy where it is
o A crime, tort, or otherwise illegal
o Injurious to good government or foreign relations
o Injurious to the proper working of justice
o An attempt to oust the jurisdiction of the courts
o Inconsistent with prevailing sexual mores
Important qualification
o Where breach of statute is involved, contract will only be treated
as illegal and unenforceable if that is consistent with policy
underlying statute
 Fitzgerald v F J Leonhardt
Restraint of Trade:
 Agreement may be unenforceable as contrary to public policy where it
operates in unreasonable restraint of trade
o But agreement NOT otherwise treated as unlawful
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o And may be possible to sever an unlawful restraint
Covenants in restrain of trade are presumed to be unenforceable unless
o The covenantee has a legitimate interest to protect
o And can establish the covenant is not unreasonable in scope
Examples of legitimate interest
o Purchaser of business may protect investment by securing
promise from vendor not to compete
o Employer may restrain ex-employee from working for or as
competitor, where employee
 Had access to confidential information
 Developed a personal relationship with clients
 Or (perhaps) is in a position to recruit former colleagues
But covenant must always be no wider than reasonably necessary to
protect that interest
o Lindner v Murdock’s Garage
 Garage worker, remote location. Couldn’t work in other
areas – distance from each other meant clientele
changeover very unlikely – therefore unreasonable
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CONTRACT LAW ISSUES - CHECKLIST
1. Who initiates proceedings and who are the parties?
2. What type of action and remedy are they seeking?
a. Breach of contract
i. Enforcement:
1. Specific Performance –
a. Sale of land?
b. Refusals  Damages adequate remedy?
Continuing obligations?
2. Injunction – not to do something?
3. Action for debt/money due –
a. Money due under contract that hasn’t been paid?
Establish money owing
ii. Compensation
1. Damages:
a. Prove loss suffered (Robinson v Harman)
i. Uncompleted work/undelivered or
defective goods (sale of goods act)
ii. Compensation for lost chance – chaplin v
hicks
iii. Reliance loss – McRae v CDC
iv. Consequential loss – but for test
b. Remoteness? Hadley v Baxendale
i. Kind of loss arising naturally
ii. Loss reasonably contemplated
c. Mitigation? BoP on defendant
d. Date of assessment? Date of breach
e. Limitations? 6 years
f. Contrib neg?
iii. Restitution
1. Non-pecuniary loss
a. Mental distress on physical injury –remote
b. Specific aim creating happiness – Baltic shipping
v Dillon – rare
iv. Liquidated damages?
1. Arbitrary? Or estimated? Ringrow v BP/Andrews v ANZ
v. Rectification damages
1. Is cost unreasonable? Belgrove v Eldridge/Ruxley v
Forsyth/Tabcorp v Bowen
b. Estoppel (NB minimum equity – Walton stores)
i. Inducement – legion v hateley
ii. Detrimental reliance – je maintiendrai v quaglia
iii. Unconscionability – autotel v franklins
3. Privity
a. 3rd party cannot benefit – coulls v bagot
b. insurance contracts – trident v mcniece
c. agency? Harris v burrell & family
d. Enforcement by promise – beswick v beswick
e. Estoppel
f. NB stat reform
4. Terms
a. Express
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6.
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b. Incorporation – signed acceptance/display delivery/prior course of
dealing
c. Implied – in fact/law/custom
d. Parole evidence rule/exclusion clauses
Performance
a. Standard of performance
b. Time of performance
c. Good faith obligations
d. Order of performance
e. Conditional obligations (presumption of entirety/substantial
performance/quantum meruit/quantum valebat)
f. Concurrent obligations
Termination
a. Right to terminate
i. Breach of essential term – was term essential? Luna park
ii. Fundamental breach of intermediate term hongkong fir
iii. Repudiation – laurinda v capalaba
iv. Election (don’t forget time stipulations)
v. Express/implied rights of termination
b. Termination by frustration
i. Supervening act/neither party responsible/deprive parties
ii. Codelfa v SRA
c. Termination by agreement
Misinformation
a. BoC –
i. Damages. Warranty/representation/Parole evidence
rule/collateral contracts
b. Estoppel – equity, promissory
i. Rescission at common law
1. Representation of fact/puff/failure to disclose info
2. Inducement – reliance (holmes v Jones)
ii. Rescission UNLESS bars to rescission
c. Damages in tort
i. Deceit –know fraudulent info/reckless to truth
ii. Negligence – negligent misstatement
d. Misrepresentation Act 1972 (SA) ss 7 & 8
i. Innocent misrepresentation inc.
ii. Remember defence of reasonable belief in truth
e. Misleading/deceptive conduct under ACL s 18
i. Person – trade/commerce
ii. unless international/interstate personal trade using
postal/telephonic/internet services
iii. Natural person as accessory liability to public trading company
f. Mistake (remember overlap)
i. Common – mcrae v cdc/sale of goods act
ii. Mutual mistake (does contract exist)– raffles v wichelhaus
iii. Unilateral mistake – taylor v johnson – equitable relief against
unconscionable conduct
g. Rectification – about recording of agreement (mistake)
h. Non est factum
Unconscionability
a. Common law
i. Unconscionable bargains
1. Special disability weaker party
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2. Strong party knows/ought to know
3. Strong party can’t show transaction fair/reasonable
a. Defences
i. Strong party unaware of disability
ii. No exploitation - sought legal advice
ii. Married women doctrine- Garcia v NAB
b. Statutory provisions
i. ACL Pt 2-2 ss 20,21
c. Unfair terms – imbalance/not necessary to protect interests/cause
detriment
i. Term – void/ can seek court declaration
9. Other vitiating factors
a. Writing requirements – land sale/statute of frauds
b. Incapacity
i. Minors u18 – except necessities – sale of goods 1895
ii. Intoxication/mental disability (or non est factum)
iii. Company
c. Duress
i. Procured by coercion
ii. Physical harm/duress of good/economic duress
iii. Illegitimate threat/overbears will
d. Undue influence
i. Actual – BoP on weaker
ii. Presumed – BoP on stronger – show free/independent decision
1. NB: relationship & bars to rescission
e. illegality and public policy
i. restraint of trade – unless legit interest/not unreasonable
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