LAWS 4103 Contract
LAWS4103 – Contract
LAWS 4103 Contract
SAMPLE EXTRACT
1|Page
LAWS4103 – Contract
CONTENTS
2|Page
Formation of Contracts
Page 3
Formalities
Page 12
Estoppel
Page 13
Terms of a Contract
Page 16
Implied Terms
Page 26
Termination
Page 30
Remedies
Page 36
Misrepresentation, Misleading & Deceptive Conduct
Page 39
LAWS4103 – Contract
Estoppel Estoppel = when a person is stopped (legally prevented) from denying an assumption that has been relied upon by another person to the latter’s detriment. ➢ ➢ ➢ ➢
Non-contractual promises & representations. Bargain requirement not satisfied (quid pro quo). Pre-contractual negotiations. Differences between contract & “equity” are created by estoppels.
Estoppel by Conduct = principles concerned with inconsistent conduct by one party that causes/threatens to harm to another as a result of the other party’s reliance on that conduct. Estoppel by Representation = (common law estoppel) where a representor leads a relying party to adopt an assumption of fact & to act upon it to their detriment if the former denies truth, the representor can be estopped from denying the truth of the assumption. ➢ ➢
Example: party A assumes contract signed by representation from party B & incurs costs as a result. May be used defensively or offensively.
Equitable Estoppel = encompasses promissory & proprietary estoppel. ➢
Proprietary estoppel = where relying party acts to their detriment on the faith of an assumption that the relying party has/will be granted an interest in land.
➢
Promissory estoppel = any application of equitable estoppel that does not relate to an interest in land.
➢
Waltons Stores v Maher (1988) 164 CLR 387 – P negotiated lease from D that required D to demolish building, D received copy of lease, P told D they would be told of any rejection next day, nothing heard, lease signed by D & returned, P aware of demolition commencement by D, P informed D of no intent to proceed. Court treated P as if they had signed the lease. Assumption of future conduct = application of equitable estoppel. HCA recognised unity between proprietary & promissory estoppel under equitable estoppel, principle that equity will come to the relief of a plaintiff who has acted to their detriment on basis of assumption induced by defendant’s conduct.
Elements of Estoppel ➢
Assumption. • •
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Fact (estoppel by representation) or future conduct (equitable estoppel). Assumption of a legal relationship? o
Waltons Stores v Maher (1988) – Brennan J: necessary for plaintiff to prove they assumed a particular legal relationship existed or would exist with the defendant (suggests a legal relationship context must exist).
o
Settlement Group v Purcell Partners – held: lack of potential for a legal relationship to ever exist denied use of equitable estoppel.
o
Mobil v Wellcome (1998) 81 FCR 475 – held: necessary that defendant created/encouraged assumption that a legal relationship or interest would arise.
LAWS4103 – Contract o
➢
Inducement. •
•
➢
Austotel Pty Ltd v Franklins Selfserve Pty Ltd – Priestly JA: observed equitable estoppel could operate in relation to assumption that a contract will come into existence, or a promise be performed, or an interest be granted.
Assumption must have been induced by conduct of the representor. o
Waltons Stores v Maher (1988) – implied promise to complete due to no rejection.
o
Where assumption is induced by silence it may be necessary to show representor intended, was aware of, or reasonably expected reliance.
Question of requirement of unequivocal promise or representation required. o
Legione v Hateley (1983) 152 CLR 406 – comment of a secretary as an inference of abeyance of contract held to not be suitable grounds for equitable estoppel (knowledge of her status & lack of authority). Could be said that no reasonable inference could be drawn from her comment.
o
Only reasonable assumption in Walton Stores v Maher.
Detrimental Reliance. •
Relying party must have acted on the assumption in such a way as to suffer detriment if representor allowed to depart from that assumption.
•
Expectation loss = loss of benefit relying party assumed to have or expected.
•
Reliance loss = suffered due to the relying party’s reliance on an assumption. o
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Walton Stores v Maher – D’s expectation loss was rent expected from lease & reliance loss was the cost of demolition/devalue of land based on assumption.
•
Expenditure, time, energy, inactivity (loss of opportunity).
•
Je Maintiendrai v Quaglia (1980) 26 SASR 101 – landlord allowed tenants to pay reduced rent due to financial difficulties, demanded remaining amount unpaid when tenants sought to leave. Held: promissory estoppel prevented recovery of rent, asserted payment of lump sum would be detriment to tenants, some argument that tenants remaining in premises lost other opportunities, dissent argued tenants had not proved adequate detriment as a result of reliance. Note until landlord attempted to resile, tenants received benefit from reduced rent.
•
Commonwealth v Verwayen (1990) 170 CLR 394 – D involved in navy ship collision, commenced prosecution and continued on representations that P would not use certain defences, use of defences by P caused D to claim detrimental reliance (cost of proceedings, stress etc.). Held: financial loss the only reliance loss, stress only expectation loss. Deane & Dawson JJ argued action continued by D on assumption increased stress & damage to health.
•
Hawker Pacific v Helicopter Charter (1991) 22 NSWLR 298 – Handley JA: observed a loss of a single peppercorn is sufficient detriment to constitute valuable consideration, but not sufficient to establish estoppel (i.e. travel by couriers during negotiations does not constitute sufficient detriment).
LAWS4103 – Contract
➢
•
Prospective detriment = where a party threatens to depart from an assumption, question if that departure would/will cause detriment.
•
A conjectural/speculative possibility of detriment is not sufficient.
Reasonableness. •
➢
➢
Concerned with whether relying party is deserving of protection. o Whether relying party acted reasonably in adopting assumption. o Whether relying party acted reasonably in taking detrimental action.
Unconscionable Conduct. •
Concerned with whether the representor is deserving of blame.
•
Representor’s knowledge of assumption/intention to induce reliance relevant.
•
Commonwealth v Verwayen (1990) 170 CLR 394 –Deane J: unconscionable conduct must be determined in context of reasonableness of relying party to adopt assumption & take detrimental action on that assumption.
Departure or Threatened Departure. •
Estoppel cannot arise until departure/threatened departure from an assumption relied upon.
•
Some argue estoppel comes into effect once assumption induced & reasonably relied upon.
Estoppel & Contract ➢
Formation – equitable estoppel may arise if offeror leads offeree to believe that offer will not be revoked & offeree acts to their detriment in reliance of that assumption.
➢
Privity – a person not party to a contract but who has been led to believe that they are a party to, or will receive a benefit under, a contract may be able to establish an estoppel if they have acted in detrimental reliance (Trident General Insurance v McNiece Bros (1988) 165 CLR 107).
➢
Formalities – where a party has acted to their detriment on the faith of an expectation that a written contract will come into existence, that party may be able to obtain relief through equitable estoppel.
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LAWS4103 – Contract
Misrepresentation/Misleading/Deceptive Conduct Misrepresentation (Common Law) ❖ Fraudulent (rescission, damages available). ❖ Negligent (rescission, damages available). ❖ Innocent (rescission, no damages). ❖ Must be separate from contract. ❖ Must be actionable. ❖ Must be a statement of fact. ➢ Not a statement of law. ➢ Not a statement of intention (Edington v Fitzmaurice). ➢ Not a statement about the future (Balfour v Hollandia Ravensthorpe). ➢ Not a statement of opinion (Bisset v Wilkinson; Smith v Land & House Property). ❖ Silence. ➢ Needs to be positive misrepresentation. ➢ Half-truth (rent payed but not that represented; Awaroa Holdings v Commercial Securities). ➢ Change in circumstances (With v O’Flanagan; Jones v Dumbrell). ❖ Reliance. ➢ Must be reliance on representation (Holmes v Jones). ➢ No obligation to check truth (Redgrave v Hurd). ➢ Need not be sole reliance (Edgington v Fitzmaurice). ➢
Gould v Vaggelas – representee has onus of proof of reliance, representor may have evidentiary onus to contrary, inducement inferred from facts where statement calculated to induce followed by entry into contract.
❖ Rescission. ➢ Only contractual remedy open to a representee. ➢ Act & choice of the party (need clear words or conduct). ➢ Contract is said to be voidable (parties restored to pre-contract conditions). ➢
Car & Universal Finance v Caldwell – communication unnecessary where representation is fraudulent.
➢
If contract rescinded for misrepresentation, then all consideration & promise returned (termination would mean accrued rights/obligations do not need to be returned).
➢
Bars to rescission. o Impossibility of restitution (Alati v Kruger – must be able to substantially return). o Affirmation by election or imputation (Coastal Estates v Melevende – must have known a right to rescind, but only applies to fraudulent misrepresentation).
❖ Damages. ➢ Causation of misrepresentation. ➢ To put plaintiff in position before there was any reliance on the representation.
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LAWS 4103 Contract
SAMPLE EXTRACT
1|Page
LAWS4103 – Contract
CONTENTS
2|Page
Formation of Contracts
Page 3
Formalities
Page 12
Estoppel
Page 13
Terms of a Contract
Page 16
Implied Terms
Page 26
Termination
Page 30
Remedies
Page 36
Misrepresentation, Misleading & Deceptive Conduct
Page 39
LAWS4103 – Contract
Estoppel Estoppel = when a person is stopped (legally prevented) from denying an assumption that has been relied upon by another person to the latter’s detriment. ➢ ➢ ➢ ➢
Non-contractual promises & representations. Bargain requirement not satisfied (quid pro quo). Pre-contractual negotiations. Differences between contract & “equity” are created by estoppels.
Estoppel by Conduct = principles concerned with inconsistent conduct by one party that causes/threatens to harm to another as a result of the other party’s reliance on that conduct. Estoppel by Representation = (common law estoppel) where a representor leads a relying party to adopt an assumption of fact & to act upon it to their detriment if the former denies truth, the representor can be estopped from denying the truth of the assumption. ➢ ➢
Example: party A assumes contract signed by representation from party B & incurs costs as a result. May be used defensively or offensively.
Equitable Estoppel = encompasses promissory & proprietary estoppel. ➢
Proprietary estoppel = where relying party acts to their detriment on the faith of an assumption that the relying party has/will be granted an interest in land.
➢
Promissory estoppel = any application of equitable estoppel that does not relate to an interest in land.
➢
Waltons Stores v Maher (1988) 164 CLR 387 – P negotiated lease from D that required D to demolish building, D received copy of lease, P told D they would be told of any rejection next day, nothing heard, lease signed by D & returned, P aware of demolition commencement by D, P informed D of no intent to proceed. Court treated P as if they had signed the lease. Assumption of future conduct = application of equitable estoppel. HCA recognised unity between proprietary & promissory estoppel under equitable estoppel, principle that equity will come to the relief of a plaintiff who has acted to their detriment on basis of assumption induced by defendant’s conduct.
Elements of Estoppel ➢
Assumption. • •
3|Page
Fact (estoppel by representation) or future conduct (equitable estoppel). Assumption of a legal relationship? o
Waltons Stores v Maher (1988) – Brennan J: necessary for plaintiff to prove they assumed a particular legal relationship existed or would exist with the defendant (suggests a legal relationship context must exist).
o
Settlement Group v Purcell Partners – held: lack of potential for a legal relationship to ever exist denied use of equitable estoppel.
o
Mobil v Wellcome (1998) 81 FCR 475 – held: necessary that defendant created/encouraged assumption that a legal relationship or interest would arise.
LAWS4103 – Contract o
➢
Inducement. •
•
➢
Austotel Pty Ltd v Franklins Selfserve Pty Ltd – Priestly JA: observed equitable estoppel could operate in relation to assumption that a contract will come into existence, or a promise be performed, or an interest be granted.
Assumption must have been induced by conduct of the representor. o
Waltons Stores v Maher (1988) – implied promise to complete due to no rejection.
o
Where assumption is induced by silence it may be necessary to show representor intended, was aware of, or reasonably expected reliance.
Question of requirement of unequivocal promise or representation required. o
Legione v Hateley (1983) 152 CLR 406 – comment of a secretary as an inference of abeyance of contract held to not be suitable grounds for equitable estoppel (knowledge of her status & lack of authority). Could be said that no reasonable inference could be drawn from her comment.
o
Only reasonable assumption in Walton Stores v Maher.
Detrimental Reliance. •
Relying party must have acted on the assumption in such a way as to suffer detriment if representor allowed to depart from that assumption.
•
Expectation loss = loss of benefit relying party assumed to have or expected.
•
Reliance loss = suffered due to the relying party’s reliance on an assumption. o
4|Page
Walton Stores v Maher – D’s expectation loss was rent expected from lease & reliance loss was the cost of demolition/devalue of land based on assumption.
•
Expenditure, time, energy, inactivity (loss of opportunity).
•
Je Maintiendrai v Quaglia (1980) 26 SASR 101 – landlord allowed tenants to pay reduced rent due to financial difficulties, demanded remaining amount unpaid when tenants sought to leave. Held: promissory estoppel prevented recovery of rent, asserted payment of lump sum would be detriment to tenants, some argument that tenants remaining in premises lost other opportunities, dissent argued tenants had not proved adequate detriment as a result of reliance. Note until landlord attempted to resile, tenants received benefit from reduced rent.
•
Commonwealth v Verwayen (1990) 170 CLR 394 – D involved in navy ship collision, commenced prosecution and continued on representations that P would not use certain defences, use of defences by P caused D to claim detrimental reliance (cost of proceedings, stress etc.). Held: financial loss the only reliance loss, stress only expectation loss. Deane & Dawson JJ argued action continued by D on assumption increased stress & damage to health.
•
Hawker Pacific v Helicopter Charter (1991) 22 NSWLR 298 – Handley JA: observed a loss of a single peppercorn is sufficient detriment to constitute valuable consideration, but not sufficient to establish estoppel (i.e. travel by couriers during negotiations does not constitute sufficient detriment).
LAWS4103 – Contract
➢
•
Prospective detriment = where a party threatens to depart from an assumption, question if that departure would/will cause detriment.
•
A conjectural/speculative possibility of detriment is not sufficient.
Reasonableness. •
➢
➢
Concerned with whether relying party is deserving of protection. o Whether relying party acted reasonably in adopting assumption. o Whether relying party acted reasonably in taking detrimental action.
Unconscionable Conduct. •
Concerned with whether the representor is deserving of blame.
•
Representor’s knowledge of assumption/intention to induce reliance relevant.
•
Commonwealth v Verwayen (1990) 170 CLR 394 –Deane J: unconscionable conduct must be determined in context of reasonableness of relying party to adopt assumption & take detrimental action on that assumption.
Departure or Threatened Departure. •
Estoppel cannot arise until departure/threatened departure from an assumption relied upon.
•
Some argue estoppel comes into effect once assumption induced & reasonably relied upon.
Estoppel & Contract ➢
Formation – equitable estoppel may arise if offeror leads offeree to believe that offer will not be revoked & offeree acts to their detriment in reliance of that assumption.
➢
Privity – a person not party to a contract but who has been led to believe that they are a party to, or will receive a benefit under, a contract may be able to establish an estoppel if they have acted in detrimental reliance (Trident General Insurance v McNiece Bros (1988) 165 CLR 107).
➢
Formalities – where a party has acted to their detriment on the faith of an expectation that a written contract will come into existence, that party may be able to obtain relief through equitable estoppel.
5|Page
LAWS4103 – Contract
Misrepresentation/Misleading/Deceptive Conduct Misrepresentation (Common Law) ❖ Fraudulent (rescission, damages available). ❖ Negligent (rescission, damages available). ❖ Innocent (rescission, no damages). ❖ Must be separate from contract. ❖ Must be actionable. ❖ Must be a statement of fact. ➢ Not a statement of law. ➢ Not a statement of intention (Edington v Fitzmaurice). ➢ Not a statement about the future (Balfour v Hollandia Ravensthorpe). ➢ Not a statement of opinion (Bisset v Wilkinson; Smith v Land & House Property). ❖ Silence. ➢ Needs to be positive misrepresentation. ➢ Half-truth (rent payed but not that represented; Awaroa Holdings v Commercial Securities). ➢ Change in circumstances (With v O’Flanagan; Jones v Dumbrell). ❖ Reliance. ➢ Must be reliance on representation (Holmes v Jones). ➢ No obligation to check truth (Redgrave v Hurd). ➢ Need not be sole reliance (Edgington v Fitzmaurice). ➢
Gould v Vaggelas – representee has onus of proof of reliance, representor may have evidentiary onus to contrary, inducement inferred from facts where statement calculated to induce followed by entry into contract.
❖ Rescission. ➢ Only contractual remedy open to a representee. ➢ Act & choice of the party (need clear words or conduct). ➢ Contract is said to be voidable (parties restored to pre-contract conditions). ➢
Car & Universal Finance v Caldwell – communication unnecessary where representation is fraudulent.
➢
If contract rescinded for misrepresentation, then all consideration & promise returned (termination would mean accrued rights/obligations do not need to be returned).
➢
Bars to rescission. o Impossibility of restitution (Alati v Kruger – must be able to substantially return). o Affirmation by election or imputation (Coastal Estates v Melevende – must have known a right to rescind, but only applies to fraudulent misrepresentation).
❖ Damages. ➢ Causation of misrepresentation. ➢ To put plaintiff in position before there was any reliance on the representation.
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