Revision
Copyright Guy Harley 2008
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Separation of Powers
Designed to avoid concentration of power
 Government functions divided into
 legislative,
 Executive
 judicial
 Different organs carry out each function
 Parliament
 Executive
 Courts
 Functions are kept separate
Copyright Guy Harley 2008
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Separation of Powers (cont.)
 Executive cannot
 make laws or
 adjudicate on contraventions of the law
 Parliament cannot
 adjudicate on contraventions of the law
 Courts
 Hears disputes between parties
 Cannot make policy decisions
Copyright Guy Harley 2008
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The Australian Constitution
 Establishes 3 Branches of Government:
 Chapter I - Federal Parliament
 House of Representatives
 The Senate
 Chapter II – Executive
 The Governor-General (Queen’s rep)
 Government departments
 Ministers
 Chapter III - The Courts
 High Court (s71)
 Power to establish other federal courts
Copyright Guy Harley 2008
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Responsible Government
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Voters elect members of parliament
Major party in Parliament selects ministers
Ministers appoint the public servants
Public servants are responsible to their Minister
Ministers are responsible to parliament
Parliament is responsible to the voters
Copyright Guy Harley 2008
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Australian Separation of Powers
Strict Separation of Powers does not exist
• Ministerial responsibility
• Judiciary can invalidate legislation as
unconstitutional
• Legislature can dismiss judges (joint sitting of
parliament)
• Executive can dissolve Parliament and call new
elections
Copyright Guy Harley 2008
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Stare Decisis
 Where a court has decided a case in a particular
way, then subsequent cases involving similar
facts should be decided in the same way
 Precedent
 Binding - Courts must follow a decision of a
higher court in the same hierarchy
 Persuasive - Courts will consider decisions of
other courts
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Precedent
 Two Types
 Mandatory
 Persuasive
 Persuasiveness depends on
 quality of decision
 jurisdiction of the court that gave the decision
Copyright Guy Harley 2008
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Rules of Precedent
 Lower courts must follow decisions of higher
courts in the same hierarchy
 A judge does not have to follow decisions of
Judges at the same level. However, will be
persuasive.
 Judge does not have to follow decisions of
higher court in a different hierarchy although
they will be persuasive
 Highest court in hierarchy can overrule its
previous decisions
Copyright Guy Harley 2008
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The Court’s Decision
 Ratio Decidendi
 Consists of those parts of the decision that
were necessary to decide that particular case
 Obiter Dictum
 Statements made by Judge that are not
necessary to decide the case
 Remarks in passing
Copyright Guy Harley 2008
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Duress
 A contract entered into due to coercion or force
can be rescinded
 Coercion can be:
 To the person;
 To goods; or
 Economic duress
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Duress (cont.)
 Duress to the Person
 Threats of physical punishment or
imprisonment to the person, his family or
friends
 Duress to Goods
 Threats that are made against a person’s
property
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Undue Influence
 The unconscionable use by one person of power
possessed by him over another in order to
induce the weaker party to enter into a contract
 Mitchell v Pacific Dawn
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Undue influence
 Presumed in pre-existing special relationships
where one party is in a position of trust and
confidence
 Called a “fiduciary relationship”
 Cases
 O’Sullivan v Management Agency (Graw
13.10.3)
Copyright Guy Harley 2008
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Fiduciary Relationships
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Parent & Child
Guardian & ward
Principal & Agent
Trustee & Beneficiary
Doctor & Patient
Lawyer & Client
Religious advisor & Follower
More
Copyright Guy Harley 2008
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Where No Fiduciary Relationship
 Weaker party must show that there is a
relationship of dependence, trust & confidence
 Stronger Party exerted undue influence to the
extent that the weaker party could not exercise
an independent judgment
 There must be more than mere reliance or
influence
 Weaker party must show that the contract would
not have been made without the undue influence
Copyright Guy Harley 2008
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Where No Fiduciary Relationship
 Court will look at:
 The equality of the bargain
 The weaker party’s ability to make free and
independent choices
 Domination by one party
 Dependency on another
 Need for guidance, advice and support
 Low intelligence, weak mindedness, illiteracy
 Age & Health
 Lack of independent financial or legal advice
Copyright Guy Harley 2008
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Rebutting Undue Influence
 Party in weaker position made an independent
decision of their own free will
 No pressure or influence as weaker party
encouraged to seek independent advice
 Weaker party was paid market price
Copyright Guy Harley 2008
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Unconscionable Conduct
 One party takes advantage of the other parties
special disability to the extent that the contract is
unfair or unconscionable
 Blomley v Ryan (Graw 7.8.2)
 Commercial Bank v Amadio (Graw 13.11.4)
 Elements
 Special disability
 Absence of any equality between the parties
 Disability evident to other party
Copyright Guy Harley 2008
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Mistake
 A party cannot get out of a contract because
they made a mistake
 Exceptions:
 Mistake due to other party’s
misrepresentation, unconscionable conduct
etc.
 Common mistake
 Mutual mistake
 Unilateral mistake
 Mistake as to nature of document
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Mistake
 Mistake at Common Law makes contract void
 Mistake at equity makes contract voidable
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Unilateral Mistake - Equity
 One party is mistaken as to a fundamental term;
and
 Other party is aware, or should be aware, of the
mistake
 Mistaken party will suffer detriment if not allowed
to rescind
Taylor v Johnson (Graw 11.5.3)
Copyright Guy Harley 2008
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Unilateral Mistake – Common Law
 Mistake as to Identity
 If Third Party rights involved, identity must be
important
 Ingram v Little (Graw 11.5.4)
 Mistake as to nature of document
 Non est factum
Copyright Guy Harley 2008
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Rescission
 Available for:
 Misrepresentation
 Undue influence
 Unconscionable conduct
 Duress
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Rescission
 Effect
 Contract is terminated ab initio (i.e. it is as
though there never was a contract)
 cancels the contract from the point of
termination
 Procedure
 Innocent party rescinds by giving notice to the
other party
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Notice of Rescission
 Innocent party must give notice of rescission to
other party
 Notice can be implied from conduct
 Academy of Health & Fitness v Power
Copyright Guy Harley 2008
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Bars to Rescission
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Third Party rights adversely affected
Substantial restitution not possible
Innocent party affirms contract
Party wishing to rescind does not have “clean
hands”
 Lapse of time
Copyright Guy Harley 2008
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Third Party Rights
 Rescission is not permitted if the legal rights of
an innocent third party will be adversely affected
 For example, where goods have been on sold in
good faith and for value to a purchaser
 But, rescission will be effective where it occurs
before the third party gains an interest
 Car & Universal Finance Co v Caldwell (Graw
12.7.3)
Copyright Guy Harley 2008
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Restitution
 The parties must be capable of being restored to
substantially the position they were in before the
contract was entered into
 Known as “Restitution”
 Court can make consequential orders
 Precise restitution is not necessary
 Alati v Kruger
 Brown v Smitt
 Not possible where services already supplied
pursuant to a contract of service
Copyright Guy Harley 2008
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Affirming the Contract
 Rescission is not permitted if the contract has
been affirmed
 After discovering misrepresentation, innocent
party does any act which indicates that he is
treating contract as still running
 A delay in rescinding can amount to an
affirmation
Copyright Guy Harley 2008
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Clean Hands
 Rescission will not be permitted if party seeking
to rescind has also done something wrong under
the contract
 E.g.
 One party makes misrepresentation
 Other party has breached the contract by not
carrying out their obligations
Copyright Guy Harley 2008
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Lapse of Time
 Lapse of time will not normally deprive innocent
party of right to rescind except if long period
 Leaf v International Galleries (Graw 12.8.4)
Copyright Guy Harley 2008
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Anticipatory Breach
 Before time for performance, one party indicates
intention not to perform contract Anticipatory
breach
 Hochster v De La Tour (Graw 15.5.1)
 Contract not automatically discharged
 Innocent party may:
 Treat contract as repudiated and claim
damages, or
 Perform the contract and claim contract price
 If contract remains on foot still subject to law of
frustration
 Avery v Bowden (Graw 15.5.4)
Copyright Guy Harley 2008
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Types of Remedy
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Termination
Rescission
Recovery of Contract Price
Damages
Equitable Remedies
 Specific Performance
 Injunction
 Rectification
 Restitution
Copyright Guy Harley 2008
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Liquidated Damages
 Available where price, or mechanism for fixing
price, is stated in the contract
 Called “liquidated damages”
 Preferable to damages because there are no
problems with establishing the amount claimed
 Can claim if there has been substantial
performance of the contract unless there is a
term in the contract to the contrary
Copyright Guy Harley 2008
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Calculating Damages
 The amount of damages should place the
innocent party in the same position that he
would have been in had the contract been
properly performed
 The court cannot refuse to award damages just
because they are difficult to calculate
 Damages can include
 Expectation loses
 Personal injuries
 Disappointment, distress and discomfort
Copyright Guy Harley 2008
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Expectation Losses
 Expectation losses include loss of profits
 Loss of a promised chance or commercial
opportunity may be claimed
 Damages will be awarded by “reference to the
degree of probabilities, or possibilities,
inherent in the plaintiff’s succeeding had the
plaintiff been given the chance which the
contract promised” – Sellars v Adelaide
Petroleum (S&O p275)
Copyright Guy Harley 2008
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Mitigation of Damages
 Plaintiff has a duty to mitigate losses
 Cannot claim losses which could have been
reduced or avoided by the taking of reasonable
steps
Copyright Guy Harley 2008
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Elements of Promissory Estoppel
1. Relationship
A relationship (usually contractual or pre-contractual)
exists between the parties
2. Promise
A promise not to assert legal rights
3. Expectation
Promisee expects promise to be kept
4. Reliance
Promisee acts in reliance on promise
5. Detriment
Promisee alters its position to its detriment
6. Unconscionable
Unconscionable to allow promisor to break promise
Copyright Guy Harley 2008
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The Promise
 One party either
 Made a promise; or
 Being aware that the other party was acting
on an assumption, deliberately remained
silent in circumstances where the they could
reasonably have been expected to speak
Copyright Guy Harley 2008
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Expectation
 The promisee on reasonable grounds assumed
that a particular legal relationship
 Existed; or
 Would exist
 Legal relationship includes:
 A right to something
 Release from an obligation
 For the promisee or someone else
 Now or in the future
Copyright Guy Harley 2008
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Detriment
 The promisee will suffer a detriment if the
promisor fails to perform the promise
 Mere failure by the promisor to carry out the
promise will not of itself amount to detriment
 Central London Property Trust v High Trees
(Graw 6.6.2)
Copyright Guy Harley 2008
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Remedy
 Minimum orders to prevent detriment
 Not necessarily the same remedy as for breach
of contract
 Not a new cause of action
Copyright Guy Harley 2008
43
Agency
 A person cannot always act personally
 Agencies are usually created for the making of
contracts in commercial situations
 It is a fiduciary relationship
Copyright Guy Harley 2008
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Agency - Contracts
 Two contracts
 Between agent & principal
 Between Principal and Third Party
 A principal is liable for the acts of an agent that
are committed within his authority
Copyright Guy Harley 2008
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Types of Agency
 Actual agency
 Express
 Implied
 Agency by Necessity
 Apparent Agency (Ostensible agency)
 Agency by Ratification
Copyright Guy Harley 2008
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Apparent\Ostensible Authority
 Agent has no actual authority but Principal’s
actions lead Third Party to believe that Agent
has authority
 4 conditions
 A representation made by Principal to Third
Party
 No actual authority
 Third Part is induced to enter into contract
 Principal had capacity to enter contract
Copyright Guy Harley 2008
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Duties of Agent
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To follow Principal’s instructions
To use reasonable care & skill
Not to make a secret profit
Not to disclose confidential information
To keep proper accounts
Breach of duty = breach of contract
Copyright Guy Harley 2008
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Not to Make a Secret Profit
 Agent must not take advantage of position to
obtain extra benefit from Third Party of which
Principal is not aware
 Reiger v Campbell-Stuart (Study Materials)
Copyright Guy Harley 2008
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Not to Disclose Confidential Information
 Fiduciary relationship
 Duty to disclose facts material to Principal’s
decision to contract with Third Party
 Must act in Principal’s best interests
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