Contract law : principles, cases and legislation [Third edition.] 9780455237176, 0455237174

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CONTRACT LAW: PRINCIPLES, CASES AND LEGISLATION

Thomson Reuters (Professional) Australia Limited 19 Harris Street Pyrmont NSW 2009 Tel: (02) 8587 7000 Fax: (02) 8587 7100 [email protected] http://www.thomsonreuters.com.au For all customer inquiries please ring 1300 304 195 (for calls within Australia only)

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CONTRACT LAW: PRINCIPLES, CASES AND LEGISLATION compiled by

SIMON KOZLINA

from work by Jeannie Paterson, Andrew Robertson and Arlen Duke

THIRD EDITION

LAWBOOK CO. 2016

Published in Sydney by Thomson Reuters (Professional) Australia Limited ABN 64 058 914 668 19 Harris Street, Pyrmont, NSW

ISBN: 9780455237176 © 2016 Thomson Reuters (Professional) Australia Limited This publication is copyright. Other than for the purposes of and subject to the conditions prescribed under the Copyright Act, no part of it may in any form or by any means (electronic, mechanical, microcopying, photocopying, recording or otherwise) be reproduced, stored in a retrieval system or transmitted without prior written permission. Inquiries should be addressed to the publishers. Product Developer: Vickie Ma Editors: Nikki Savvides, Nick Jewlachow Printed by Ligare Pty Ltd, Riverwood, NSW

PUBLISHER’S NOTE

This publication has been prepared for students of Western Sydney University by drawing upon material from the following Thomson Reuters (Professional) Australia titles: • Paterson, Robertson and Duke, Principles of Contract Law (5th ed, Lawbook Co., 2016) • Paterson, Robertson and Duke, Contract: Cases and Materials (13th ed, Lawbook Co., 2016) • Paterson, Unfair Contract Terms in Australia (Lawbook Co., 2012) The content of this book has been repaginated and reparagraphed to run consecutively. Footnoting has also been renumbered to run chronologically within each chapter. Where a reference is made to text not contained within this publication, the original reference remains, with an indication of its origin, ie (Paterson Textbook), (Paterson Casebook) and (Paterson Unfair Contracts).

v

vi

TABLE OF CONTENTS Publisher’s Note................................................................................................................................. v Table of Cases .................................................................................................................................. ix Table of Statutes ......................................................................................................................... xxxix

1

Contract Law Theory ......................................................................................... .. 1

2

Agreement (Offer and Acceptance) .............................................................. .. 33

3

Consideration ................................................................................................. .. 133

4

Intention ............................................................................................................ 185

5

Certainty ............................................................................................................ 209

6

Formalities ...................................................................................................... .. 267

7

Capacity ........................................................................................................... .. 281

8

Privity ................................................................................................................. 293

9

Express Terms ................................................................................................ .. 357

10

Implied Terms ................................................................................................... 443

11

Consumer Contracts ........................................................................................ 479

12

Performance and Breach .............................................................................. .. 515

13

Termination – Breach, Contingent Condition, Agreement ..................... .. 519

14

Termination – Repudiation, Frustration, Delay ........................................ .. 563

15

Termination – Consequences and Restrictions ......................................... .. 633

16

Vitiating Factor – Mistake ............................................................................ .. 671

17

Vitiating Factor – Misrepresentation/Misleading and Deceptive Conduct .............................................................................................. .. 727

18

Vitiating Factor – Duress/Undue Influence ............................................... .. 815

19

Vitiating Factor – Unconscionability ............................................................. 837

20

Vitiating Factor – Illegality .......................................................................... .. 887

21

Remedies ......................................................................................................... .. 939

22

Estoppel ........................................................................................................... 1025

Index (Combined) ........................................................... .. ........................................................ 1089

vii

TABLE OF CASES A A v Hayden (1984) 156 CLR 532 ................................................................................... 20.60, 20.95 A Schroeder Music Publishing Co Ltd v Macaulay [1974] 3 All ER 616 ...................................... 11.15 ABC v XIVth Commonwealth Games Ltd (1988) 18 NSWLR 540 .............................................. 9.285 AGC (Advances) Ltd v McWhirter (1977) 1 BPR 9454 ................................................................. 2.75 AMC Commercial Cleaning (NSW) Pty Ltd v Coade (No 3) [2010] NSWSC 1428 ..... 10.130, 10.132, 10.150 AMEV-UDC Finance Ltd v Austin (1986) 162 CLR 170 ......... 21.270, 21.305, 21.320, 21.360, 21.500 ANZ Executors and Trustees Ltd v Humes Ltd [1990] VR 615 .................................................. 21.625 APF Properties Pty Ltd v Kestrel Holdings Pty Ltd (No 2) [2007] FCA 1561 .............................. 17.335 ASA Constructions Pty Ltd v Iwanov [1975] 1 NSWLR 512 ...................................................... 21.280 Aberfoyle Plantations Ltd v Cheng [1960] AC 115 .................................................................... 13.85 Abigroup Contractors Pty Ltd v Sydney Catchment Authority (No 3) [2006] NSWCA 282; (2006) NSWLR 341 ............................................................................................................ 17.380 Accounting Systems 2000 (Developments) Pty Ltd v CCH Australia Ltd (1993) 42 FCR 470 ..... 8.120, 17.255 Acorn Consolidated Pty Ltd v Hawkslade Investments Pty Ltd [1999] 21 WAR 425 .................... 9.133 Acron Pacific Ltd v Offshore Oil NL (1985) 157 CLR 514 ........................................................ 21.530 Actall Pty Ltd v Pacific Bay Development Pty Ltd [2006] NSWCA 190 ..................................... 15.220 Actionstrength Ltd v International Glass Engineering In.Gl.En SpA [2003] 2 AC 541 ............... 22.235 Adams v Lindsell (1818) 1 B & A 681; 106 ER 250 ......................................................... 2.200, 2.300 Addis v Gramophone Co Ltd [1909] AC 488 .......................................................................... 21.210 Adelaide City Corp v Jennings Industries Ltd (1985) 156 CLR 274 ............................................ 10.20 Adicho v Dankeith Homes Pty Ltd [2012] NSWCA 316 ............................................................. 9.165 Adler v Dickson (The Himalaya) [1955] 1 QB 158 ....................................................................... 8.60 Administration of Territory of Papua and New Guinea v Guba (1973) 130 CLR 353 .................. 9.130 Administration of Territory of Papua and New Guinea v Leahy (1961) 105 CLR 6 ....................... 4.65 Administrative and Clerical Officers Association v Commonwealth (1979) 26 ALR 497 ............ 21.690 Aerial Advertising Co v Batchelors Peas Ltd (Manchester) [1938] 2 All ER 788 ......................... 21.215 Agricultural and Rural Finance Pty Ltd v Gardiner [2008] HCA 57; (2008) 238 CLR 570 ........... 9.130, 15.185 Ailakis v Olivero (No 2) [2014] WASCA 127; (2014) 100 ACSR 524 ........................................... 3.195 Air Great Lakes Pty Ltd v KS Easter (Holdings) Pty Ltd (1985) 2 NSWLR 309 ............................... 4.05 Aiton Australia Pty Ltd v Transfield Pty Ltd [1999] NSWSC 996; (1999) 153 FLR 236 ..... 1.100, 5.110 Akron Securities Ltd v Iliffe (1997) 41 NSWLR 353 ..................................................... 17.345, 17.350 Albazero, The [1977] AC 774 .................................................................................................... 8.165 Alcatel Australia Ltd v Scarcella (1998) 44 NSWLR 349 ...... 10.130, 10.132, 10.140, 10.150, 10.155, 10.160, 10.165, 11.75 Alecos M, The [1991] 1 Lloyd’s Rep 120 ................................................................................. 21.180 Alexander v Cambridge Credit Corporation Ltd (1987) 9 NSWLR 310 .......... 21.135, 21.155, 21.165 Alexander v Rayson [1936] 1 KB 169 ...................................................................................... 20.115 Alfred McAlpine Construction Ltd v Panatown Ltd [2001] 1 AC 518 ......................................... 8.165 Alivar v Calandra & Co Pty Ltd (Unreported, Supreme Court of Victoria, 21 February 1988) .... 13.140 Allcard v Skinner (1887) 36 Ch D 145 ...................................................................................... 18.75 Alley v Deschamps (1806) 13 Ves Jun 225; 33 ER 278 ............................................................. 22.265 Allied Van Lines Inc v Bratton 351 So 2d 344 (Fla 1977) ............................................................. 9.45 Allphones Retail Pty Ltd v Hoy Mobile Pty Ltd [2009] FCAFC 85; (2009) 178 FCR 57 ..... 14.20, 15.70 Almond Investors Ltd v Kualitree Nursery Pty Ltd [2011] NSWCA 198 ...................................... 15.80 Amalgamated Investment & Property Co Ltd (in liq) v Texas Commerce International Bank Ltd [1982] 1 QB 84 ........................................................................................................... 22.250 American Mart Corp v Joseph E Seagram & Sons 824 F 2d 733 (9th Cir, 1987) ...................... 10.150 Amoco Australia Pty Ltd v Rocca Bros Motor Engineering Co Pty Ltd (1973) 133 CLR 288 ...... 20.165 Anaconda Nickel Ltd v Edensor Nominees Pty Ltd [2004] VSCA 167 ............ 13.125, 15.175, 22.245, 22.260 ix

Contract Law: Principles, Cases and Legislation

Anaconda Nickel Ltd v Tarmoola Australia Pty Ltd [2000] WASCA 27; (2000) 22 WAR 101 ....... 4.105, 5.15 Andar Transport Limited v Brambles Limited (2004) 217 CLR 424 ............................................ 9.310 Anderson v McPherson (No 2) [2012] WASC 19 ....................................................................... 18.85 Anderson Ltd v Daniel [1924] 1 KB 138 .................................................................................... 20.25 Andre & Cie v Ets Michel Blanc & Fils [1979] 2 Lloyds LR 427 .................................................. 17.25 Andrews v Australia and New Zealand Banking Group Ltd [2012] HCA 30; (2012) 247 CLR 205 ............................................................................................. 21.325, 21.330, 21.350, 21.530 Andrews v Parker [1973] Qd R 93 ........................................................................................... 20.105 Androvitsaneas v Members First Broker Network [2013] VSCA 212 ......................................... 10.132 Ange v First East Auction Holdings Pty Ltd [2011] VSCA 335 ....................................................... 9.65 Ankar Pty Ltd v National Westminster Finance (Australia) Ltd (1987) 162 CLR 549 ....... 9.310, 13.20, 13.40, 13.50 Ansett Transport Industries v Commonwealth (1977) 139 CLR 54 ............................................ 10.40 Antons Trawling Co Ltd v Smith [2003] 2 NZLR 23 .................................................................. 3.160 Anya Holdings Pty Ltd v Idohage Pty Ltd [2006] FCA 1531 ..................................................... 17.310 Aotearoa International Ltd v Scancarriers A/S [1985] 1 NZLR 513 ............................................... 5.15 Appleby v Pursell [1973] 2 NSWLR 879 ......................................................................... 9.131, 9.133 Archbolds (Freightage) Ltd v S Spanglett [1961] 1 QB 374 ....................................................... 20.80 Arcos v Ronaasen [1933] AC 470 ............................................................................................ 15.240 Argy v Blunts (1990) 26 FCR 112 ............................................................................... 17.190, 17.395 Arnison v Smith (1889) 41 Ch D 348 ................................................................................................ Arnold v Britton [2015] UKSC 36 .............................................................................................. 9.260 Arnott v American Oil Co 609 F 2d 873 (8th Cir 1979) ........................................................... 10.125 Arthur Young & Co v WA Chip & Pulp Co Pty Ltd [1989] WAR 100 ......................................... 21.255 Ashdown v Kirk [1999] 2 Qd R 1 ............................................................................................ 21.495 Ashton v Australian Cruising Yacht Co Pty Ltd [2005] WASC 192 ................................................ 8.90 Ashton v Pratt [2015] NSWCA 12; (2015) 318 ALR 260 ................................................. 4.45, 20.105 Ashton v Pratt (No 2) [2012] NSWSC 3 .................................................................................. 20.105 Associated Newspapers Ltd v Bancks (1951) 83 CLR 322 .............................................. 13.20, 13.35 Associated Portland Cement Manufacturers Ltd v Tigland Shipping A/S (“The Oakworth”) [1975] 1 Lloyd’s Rep 581 ................................................................................................... 21.625 [2014] EWCA Civ 1350 ............................................................................................................... 7.35 Astley v Austrust Ltd [1999] HCA 6; (1999) 197 CLR 1 ........................... 1.10, 2.385, 21.250, 21.255 Astley v Reynolds (1731) 2 Str 915; 93 ER 939 ......................................................................... 18.45 Atco Controls Pty Ltd (in liq) v Newtronics Pty Ltd (recs & mgrs apptd) (in liq) [2009] VSCA 238; (2009) 25 VR 411 .......................................................................................................... 3.35 Athens-Macdonald Travel Service Pty Ltd v Kazis [1970] SASR 264 ......................................... 21.215 Atkinson v Denby (1861) 6 H & N 778; (1862) 7 H & N 934 ................................................. 20.260 Attica Sea Carriers Corp v Ferrostaal Poseidon Bulk Reederei GmbH [1976] 1 Lloyd’s Rep 250 .................................................................................................................................... 21.520 Attorney-General (NSW) v World Best Holdings Ltd [2005] NSWCA 261; (2005) 63 NSWLR 557 .................................................................................................................................... 19.130 Attorney-General (UK) v Blake [2001] 1 AC 268 .............................................. 21.10, 21.100, 21.105 Attorney-General of Belize v Belize Telecom Ltd [2009] UKPC 10; [2009] 1 WLR 1988 ............. 2.130, 10.15, 10.50, 10.55 Attorney-General of Hong Kong v Humphreys Estate (Queen’s Gardens) Ltd [1987] AC 114 .... 22.225 Attorney General (NSW) v World Best Holdings Ltd [2005] NSWCA 261; (2005) 63 NSWLR 557 .................................................................................................................................... 19.130 Attorney General for NSW v Australian Fixed Trusts [1974] 1 NSWLR 110 ................................... 2.70 Attorney General for NSW v Mutual Home Loans Fund of Australia Ltd [1971] 2 NSWLR 162 ..... 2.70 Austotel Pty Ltd v Franklins Selfserve Pty Ltd (1989) 16 NSWLR 582 ............................ 22.70, 22.225 Austral Standard Cables Pty Ltd v Walker Nominees Pty Ltd (1992) 26 NSWLR 524 ....... 15.20, 15.85 Australia Estates Pty Ltd v Cairns City Council [2005] QCA 328 ................................................ 16.95 Australia and New Zealand Banking Group Ltd v Frost Holdings Pty Ltd [1989] VR 695 .............. 5.15 Australia and New Zealand Banking Group Ltd v Westpac Banking Corporation (1988) 164 CLR 662 ............................................................................................................................. 20.255 Australian Bank Ltd v Stokes (1985) 3 NSWLR 174 ................................................................. 19.150 Australian Broadcasting Commission v Australasian Performing Right Association Ltd (1973) 129 CLR 99 .......................................................................................................................... 9.260 x

Table of Cases

Australian Co-operative Foods Ltd v Norco Co-operative Ltd [1999] NSWSC 274; (1999) 46 NSWLR 267 .............................................................................................. 9.195, 22.255, 22.260 Australian Competition and Consumer Commission v 4WD Systems Pty Ltd [2003] FCA 850 .... 19.130 Australian Competition and Consumer Commission v Allphones Retail Pty Ltd (No 2) [2009] FCA 17 ............................................................................................................................... 19.130 Australian Competition and Consumer Commission v Avitalb Pty Ltd [2014] FCA 222 ............ 11.205 Australian Competition and Consumer Commission v Baxter Healthcare Pty Ltd [2007] HCA 38; (2007) 232 CLR 1 ........................................................................................................ 20.190 Australian Competition and Consumer Commission v Breast Check Pty Ltd [2014] FCA 190 .... 17.210 Australian Competition and Consumer Commission v CG Berbatis Holdings Pty Ltd [2000] FCA 2; (2000) 96 FCR 491 ................................................................................................... 19.90 Australian Competition and Consumer Commission v CG Berbatis Holdings Pty Ltd [2003] HCA 18; (2003) 214 CLR 51 .................................................................................... 19.90, 19.95 Australian Competition and Consumer Commission v Camavit Pty Ltd [2013] FCA 1397 ........ 11.205 Australian Competition and Consumer Commission v Google Inc [2012] FCAFC 49; (2012) 201 FCR 503 ...................................................................................................................... 17.295 Australian Competition and Consumer Commission v Gordon Superstore Pty Ltd [2014] FCA 452 ............................................................................................................................. 11.205 Australian Competition and Consumer Commission v HP Superstore Pty Ltd [2013] FCA 1317 .................................................................................................................................. 11.205 Australian Competition and Consumer Commission v Hewlett-Packard Australia Pty Ltd [2013] FCA 653 ................................................................................................................. 11.205 Australian Competition and Consumer Commission v Kaye [2004] FCA 1363 ......................... 17.220 Australian Competition and Consumer Commission v Launceston Superstore Pty Ltd [2013] FCA 1315 ........................................................................................................................... 11.205 Australian Competition and Consumer Commission v Lux Pty Ltd [2004] FCA 926 ................. 19.130 Australian Competition and Consumer Commission v Mandurvit Pty Ltd [2014] FCA 464 ...... 11.205 Australian Competition and Consumer Commission v Radio Rentals Ltd [2005] FCA 1133 ...... 19.130 Australian Competition and Consumer Commission v Samton Holdings Pty Ltd [2002] FCAFC 4; (2002) 189 ALR 76 ............................................................................................. 15.220 Australian Competition and Consumer Commission v Simply No-Knead (Franchising) Pty Ltd [2000] FCA 1365; (2000) 104 FCR 253 ........................................................... 15.225, 19.130 Australian Competition and Consumer Commission v TPG Internet Pty Ltd [2011] FCA 1254 .... 17.205 Australian Competition and Consumer Commission v TPG Internet Pty Ltd [2013] HCA 54; (2013) 250 CLR 640 ................................................................................ 17.205, 17.375, 17.390 Australian Competition and Consumer Commission v Universal Sports Challenge Ltd [2002] FCA 1276 ........................................................................................................................... 17.240 Australian Consolidated Investments Ltd v England (Unreported ............................................ 22.250 Australian Consolidated Press Ltd v Morgan (1965) 112 CLR 483 ........................................... 21.600 Australian Crime Commission v Gray [2003] NSWCA 318 ...................................................... 22.215 Australian Mutual Provident Society v Landsa Ltd [1997] 1 VR 564 ........................................... 13.85 Australian Protective Electronics Pty Ltd v Pabflow Pty Ltd [1996] ATPR 41-524 ...................... 17.385 Australian Securities and Investments Commission v National Exchange Pty Ltd [2005] FCAFC 226; (2005) 148 FCR 132 .......................................................................... 19.130, 19.135 Australian Steel & Mining Corp Pty Ltd v Corben [1974] 2 NSWLR 202 .................................. 17.130 Australian Woollen Mills Pty Ltd v Commonwealth (1954) 92 CLR 424 ........... 2.50, 2.55, 3.25, 3.30, 3.40 Australian Woollen Mills Pty Ltd v Commonwealth (1955) 93 CLR 546 .................... 2.50, 3.25, 3.40 Australis Media Holdings Pty Ltd v Telstra Corporation (1998) 43 NSWLR 104 ............. 10.85, 10.140 Automasters Australia Pty Ltd v Bruness Pty Ltd [1999] WASC 39 ............................................ 10.160 Automatic Fire Sprinklers Pty Ltd v Watson (1946) 72 CLR 435 .................................... 15.05, 21.520 Avery v Bowden (1855) 5 E&B 714; 119 ER 647 ....................................................................... 15.25 Aviet v Smith and Searls Pty Ltd (1956) 73 WN (NSW) 274 ...................................................... 2.205 Axelsen v O’Brien (1949) 80 CLR 219 ......................................................................................... 5.30 Aysun Pty Ltd v Cregan [2011] NSWCA 203 ............................................................................. 9.260

B B & B Constructions (Aust) Pty Ltd v Brian A Cheeseman & Associates Pty Ltd (1994) 35 NSWLR 227 .............................................................................................................. 9.110, 9.133 xi

Contract Law: Principles, Cases and Legislation

B Seppelt and Sons Ltd v Commissioner for Main Roads (1975) 1 BPR 9147 .............................. 2.55 BB Australia Pty Ltd v Karioi Pty Ltd [2010] NSWCA 347 ......................................................... 20.160 BGC Residential Pty Ltd v Fairwater Pty Ltd [2012] WASCA 268 .............................................. 21.225 BICC plc v Burndy Corporation [1985] Ch 232 ....................................................................... 15.195 BMD Major Projects Pty Ltd v Victorian Urban Development Authority [2009] VSCA 221 ........ 17.405 BP Refinery (Westernport) Pty Ltd v Shire of Hastings (1977) 180 CLR 266 ........ 10.15, 10.20, 10.25, 10.55, 10.60, 10.80 BT Australia Ltd v Raine & Horne Pty Ltd [1983] 3 NSWLR 221 ............................................... 17.105 Bacon v Purcell (1916) 22 CLR 307 ........................................................................................ 21.425 Badman v Drake [2008] NSWSC 1366 .................................................................................... 18.100 Bahr v Nicolay (No 2) (1988) 164 CLR 604 ............................................................................ 21.660 Bailey v Bullock [1950] 2 All ER 1167 ...................................................................................... 21.215 Baillieu Knight Frank (Gold Coast) Pty Ltd v Susan Pender Jewellery [1997] ATPR 41-542 ........ 17.390 Bain v Fothergill (1874) LR 7 HL 158 ...................................................................................... 21.280 Bains Harding Construction and Roofing (Aust) Pty Ltd v McCredie Richmond & Partners Pty Ltd (1988) 13 NSWLR 437 ........................................................................................... 21.250 Bak v Glenleigh Homes Pty Ltd [2006] NSWCA 10 ...................................................... 21.90, 21.180 Bakarich v Commonwealth Bank of Australia [2007] NSWCA 169 ........................................... 19.165 Baker v Jones [1954] 2 All ER 553 ........................................................................................... 20.180 Baldry v Marshall [1925] 1 KB 260 .......................................................................................... 11.160 Balfour v Balfour [1919] 2 KB 571 .............................................................................................. 4.45 Balfour v Hollandia Ravensthorpe NL (1978) 18 SASR 240 ........................................................ 17.20 Ballantyne v Phillott (1961) 105 CLR 379 ........................................................................ 3.25, 3.235 Baltic Shipping Co v Dillon (1991) 22 NSWLR 1 ......................................... 9.65, 9.80, 9.85, 19.170 Baltic Shipping Co v Dillon (1993) 176 CLR 344 ...... 9.80, 14.180, 21.160, 21.210, 21.215, 21.220, 21.225, 21.410, 21.415 Banco de Portugal v Waterlow & Sons Ltd [1932] AC 452 ......................................... 21.180, 21.190 Bank Line Ltd v Arthur Capel and Co Ltd [1919] AC 435 ............................... 14.135, 14.150, 14.160 Bank of Credit and Commerce International SA v Ali [2001] UKHL 8; [2002] 1 AC 251 ............ 9.255, 9.260 Bank of Credit and Commerce International SA v Ali (No 2) [2002] EWCA Civ 82; [2001] 3 All ER 750 .......................................................................................................................... 21.135 Bank of Queensland Ltd v Chartis Australia Insurance Ltd [2013] QCA 183 ............................... 9.260 Banque Brussels Lambert SA v Australian National Industries Ltd (1989) 21 NSWLR 502 .......... 1.100, 4.30 Barbudev v Eurocom Cable Management Bulgaria EOOD Walford v Miles [1992] 2 AC 128 ..... 5.110 Barclays Bank plc v Fairclough Building Ltd [1995] QB 214 .................................................... 21.260 Barry v Davies [2000] 1 WLR 1962 .............................................................................................. 2.75 Bartolo v Hancock [2010] SASC 305 ......................................................................................... 2.125 Barton v Armstrong [1976] AC 104 ............................................................................... 18.25, 18.30 Bastard v McCallum [1924] VLR 9 .............................................................................................. 6.25 Bathurst Regional Council v Local Government Financial Services Pty Ltd (No 5) [2012] FCA 1200 .................................................................................................................................. 17.210 Batt v Onslow (1892) 13 LR (NSW) Eq 79 ................................................................................. 2.195 Battie v Fine [1925] VLR 363 .................................................................................................... 5.175 Baulkham Hills Private Hospital Pty Ltd v GR Securities Pty Ltd (1986) 40 NSWLR 622 .............. 4.105 Beach Petroleum NL v Johnson (1993) 43 FCR 1 ........................................................... 17.20, 17.40 Beaton v McDivitt (1985) 13 NSWLR 134 ................................................................................... 3.35 Beaton v McDivitt (1987) 13 NSWLR 162 .................................................... 3.20, 3.35, 3.50, 14.155 Beckham v Drake (1841) 9 M & W 79; 152 ER 35 ...................................................................... 6.05 Beerens v Bluescope Distribution Pty Ltd [2012] VSCA 209; (2012) 39 VR 1 ................ 10.160, 18.65 Bell v Lever Brothers Ltd [1932] AC 161 ............................................................. 16.10, 16.45, 16.50 Bellgrove v Eldridge (1954) 90 CLR 613 ............................................................. 21.30, 21.35, 21.50 Bellmere Park Pty Ltd v Benson [2007] QCA 102 ...................................................................... 13.90 Bence Graphics International Ltd v Fasson UK Ltd [1998] QB 87 ............................................. 21.202 Beneficial Finance Corporation Ltd v Karavas (1991) 23 NSWLR 256 ...................................... 19.165 Benlist Pty Ltd v Olivetti Australia Pty Ltd [1990] ATPR 41-043 ................................................ 17.410 Bergl (Australia) Ltd v Moxon Lighterage Co Ltd (1920) 28 CLR 194 ........................................ 9.267 Beswick v Beswick [1968] AC 58 ....................................................................... 8.165, 8.170, 21.625 Bevanere Pty Ltd v Lubidineuse (1985) 7 FCR 325 .................................................................. 17.190 xii

Table of Cases

Bhasin v Hrynew [2014] SCC 71 ............................................................................................. 10.132 Biotechnology Australia Pty Ltd v Pace (1988) 15 NSWLR 130 .................... 5.05, 5.55, 5.175, 10.50 Birmingham and District Land Company v London and North Western Railway Co (1889) 40 Ch D 268 ........................................................................................................................ 22.05 Bisset v Wilkinson [1927] AC 261 .............................................................................................. 17.15 Blackpool and Fylde Aero Club v Blackpool Borough Council [1990] 1 WLR 1195 ....................... 2.80 Blay v Pollard & Morris [1930] 1 KB 628 ..................................................................................... 9.40 Blomley v Ryan (1956) 99 CLR 362 ............................................ 3.100, 18.85, 19.05, 19.10, 21.670 Bobux Marketing Ltd v Raynor Marketing Ltd [2001] NZCA 348 .............................................. 1.100 Body Bronze International Pty Ltd v Fehcorp Pty Ltd [2011] VSCA 196; (2011) 34 VR 536 ...... 17.260 Bolton v Mahdeva [1972] 1 WLR 1009 ...................................................................... 21.430, 21.440 Boncristiano v Lohmann [1998] 4 VR 82 ................................................................................. 21.215 Bond Corp Pty Ltd v Thiess Contractors Pty Ltd (1987) 14 FCR 215 ........................................ 17.195 Bondlake Pty Ltd v Owners – Strata Plan No 60285 [2005] NSWCA 35; (2005) 62 NSWLR 158 ...................................................................................................................................... 20.85 Bonnett v Barron & Dowling Property Group [2006] NSWSC 975; (2006) 67 NSWLR 475 ..... 17.320 Booker Industries Pty Ltd v Wilson Parking (Qld) Pty Ltd (1982) 149 CLR 600 .......... 5.05, 5.20, 5.30, 5.45, 10.140, 13.80 Borzi Smythe Pty Ltd v Campbell Holdings (NSW) Pty Ltd [2008] NSWCA 233 ....................... 17.295 Bot v Ristevski [1981] VR 120 .................................................................................... 21.485, 21.495 Bowen Investments Pty Ltd v Tabcorp Holdings [2008] FCAFC 38; (2008) 166 FCR 494 .......... 21.35, 21.50 Bowes v Chaleyer (1923) 32 CLR 159 ................................................................ 15.20, 15.25, 15.30 Bowler v Hilda Pty Ltd (1998) 80 FCR 191 ................................................................. 17.290, 17.410 Bowmakers Ltd v Barnet Instruments Ltd [1945] KB 65 .......................................................... 20.285 Bradburn v Great Western Railway Co (1874) LR 10 Exch 1 .................................................... 21.195 Bradford v Zahra [1977] Qd R 24 ............................................................................................. 5.245 Bradshaw v Gilbert’s (Australasian) Agency (Vic) Pty Ltd (1952) 86 CLR 209 ............................ 20.15 Braganza v BP Shipping Ltd [2015] UKSC 17; [2015] 1 WLR 1661 .......................................... 10.155 Braithwaite v Foreign Hardwood Co (1905) 2 KB 543 .............................................................. 15.30 Brambles Holdings Ltd v Bathurst City Council [2001] NSWCA 61; (2001) 53 NSWLR 153 ........ 2.10, 2.20, 2.135, 2.220, 2.390 Branir Pty Ltd v Owston Nominees (No 2) Pty Ltd [2001] FCA 1833; (2001) 117 FCR 424 ...... 2.390, 9.200, 22.260 Brattleboro Auto Sales Inc v Subaru of New England Inc 633 F 2d 649 (2nd Cir 1980) ........... 10.150 Brauer & Co (Great Britain) Ltd v James Clark (Brush Materials) Ltd [1952] 2 All ER 497 ......... 10.140 Breen v Williams (1996) 186 CLR 71 ........................................................ 10.30, 10.60, 10.80, 10.85 Brennan v Bolt Burdon [2004] EWCA Civ 1017; [2005] QB 303 ................................................ 17.25 Bressan v Squires [1974] 2 NSWLR 460 ......................................................................... 2.200, 2.300 Brewarrina Shire Council v Beckhaus Civil Pty Ltd [2006] NSWCA 361 ...................................... 21.35 Bridge v Campbell Discount [1962] AC 600 ........................................................................... 21.325 Bridgestone Australia Ltd v GAH Engineering Pty Ltd [1997] 2 Qd R 145 .................................. 11.75 Bridgewater v Leahy [1998] HCA 66; (1998) 194 CLR 457 ........................................... 19.05, 19.45 Brien v Dwyer (1978) 141 CLR 378 ........................................................................................ 21.480 Bright v Sampson and Duncan Enterprises Pty Ltd (1985) 1 NSWLR 346 ....................... 9.315, 9.340 Brinkibon Ltd v Stahag Stahl und Stahlwarenhandelsgesellschaft mbH [1983] 2 AC 34 .............. 2.85, 2.205, 2.305, 2.310 Brisbane City Council v Group Projects Pty Ltd (1979) 145 CLR 143 ...................................... 14.110 British & Beningtons Ltd v North Western Cachar Tea Co Ltd [1923] AC 48 ............................ 13.165 British Car Auctions Ltd v Wright [1972] 1 WLR 1591 ................................................................. 2.75 British Road Services Ltd v Arthur V Crutchley & Co Ltd [1968] 1 Lloyd’s Rep 271 .................... 2.360 British Russian Gazette & Trade Outlook Ltd v Associated Newspapers Ltd [1933] 2 KB 616 .... 13.150 British Westinghouse Electric and Manufacturing Co Ltd v Underground Electric Railways Co of London Ltd [1912] AC 673 ............................................................................... 21.195, 21.202 Brogden v Metropolitan Railway Co (1877) 2 App Cas 666 ...................................................... 2.195 Brooks v Burns Philp Trustee Co Ltd (1969) 121 CLR 432 .................. 20.60, 20.135, 20.180, 20.215 Brooks v Wyatt (1994) 99 NTR 12 .......................................................................................... 21.695 Brown v Avemco Investments Corp 603 F 2d 1367 (9th Cir, 1979) ......................................... 15.235 Browning v Morris (1778) 2 Cowp 790; 98 ER 1364 .............................................................. 20.260 Bruner v Moore [1904] 1 Ch 305 ............................................................................................. 2.205 xiii

Contract Law: Principles, Cases and Legislation

Bryan v Maloney (1995) 182 CLR 609 ........................................................................... 1.120, 8.115 Buckenara v Hawthorn Football Club Ltd [1988] VR 39 .......................................................... 21.690 Buckley v Tutty (1971) 125 CLR 353 ...................................................................................... 20.130 Burger King Corporation v Family Dining Inc 426 F Supp 485 (Ed Pa, 1977) .......................... 15.235 Burger King Corporation v Hungry Jack’s Pty Ltd [2001] NSWCA 187; (2001) 69 NSWLR 558 .... 10.125, 10.130, 10.132, 10.135, 10.150, 10.155, 10.160, 10.165, 11.75, 15.230, 15.235 Burger King Corporation v Hungry Jack’s Pty Ltd [2001] NSWCA 187; (2001) 69 NSWLR 558 .................................................................................................................................... 10.135 Burke v Forbes Shire Council (1987) Aust Torts Reps 80-122 ................................................... 17.105 Burns v MAN Automotive (Aust) Pty Ltd (1986) 161 CLR 653 ....................... 21.145, 21.150, 21.185 Burton v Palmer [1980] 2 NSWLR 878 ...................................................................................... 12.15 Butcher v Lachlan Elder Realty Pty Ltd [2004] HCA 60; (2004) 218 CLR 592 ............... 17.10, 17.200, 17.205, 17.210, 17.215, 17.400, 17.405 Butler v Fairclough (1917) 23 CLR 78 ....................................................................................... 21.10 Butler Machine Tool Co Ltd v Ex-Cell-O Corp (England) Ltd [1979] 1 WLR 401 ............ 2.360, 2.375 Butt v McDonald (1896) 7 QLJ 68 .......................................................................................... 10.140 Butts v O’Dwyer (1952) 87 CLR 267 ............................................................................ 10.140, 13.80 Byers v Dorotea Pty Ltd (1986) 69 ALR 715 ............................................................... 17.220, 17.410 Byrne v Australian Airlines Ltd (1995) 185 CLR 410 .......... 10.10, 10.15, 10.20, 10.60, 10.65, 10.80, 10.85, 10.100, 21.640 Byrne & Co v Leon Van Tienhoven & Co (1880) LR 5 CPD 344 ................................................. 2.100 Byrnes v Kendle (2011) 243 CLR 253 ....................................................................................... 9.267

C C Czarnikow Ltd v Koufos [1969] 1 AC 350 ..................................... 21.150, 21.155, 21.160, 21.165 CAN 007 528 207 Pty Ltd v Bird Cameron (2005) 91 SASR 570 ................................................. 8.60 CBFC Ltd v Edwards [2001] SADC 40 ..................................................................................... 10.125 CCP Australian Airships Ltd v Primus Telecommunications Pty Ltd [2004] VSCA 232 .............. 17.235, 21.485 CG Mal Pty Ltd v Sanyo Office Machines Pty Ltd [2001] NSWSC 445 ..................................... 22.260 CGU Workers Compensation (NSW) Limited v Garcia [2007] NSWCA 193; NSWLR 680 ........ 10.130, 10.132 CIBC Mortgage plc v Pitt [1994] 1 AC 200 ............................................................................... 18.85 CNW Oil (Australasia) Pty Ltd v Australian Occidental Pty Ltd (1984) 55 ALR 599 ..................... 9.133 CSS Investments Pty Ltd v Lopiron Pty Ltd (1987) 16 FCR 15; 76 ALR 463 ...... 10.140, 13.80, 15.220 Caboche v Ramsay (1993) 119 ALR 215 ................................................................................. 22.250 Cadoks Pty Ltd v Wallace Westley & Vigar Pty Ltd [2000] VSC 167; [2000] 2 VR 531 ................ 21.85 Callaghan v O’Sullivan [1925] VLR 664 ....................................................................... 20.95, 20.260 Callander v Ladang Jalong (Australia) Pty Ltd [2005] WASC 159 ............................................. 17.320 Cambee’s Furniture v Doughboy Recreational Inc 825 F 2d 167 (8th Cir 1987) ...................... 10.125 Cameron v Murdoch [1983] WAR 321 .................................................................................... 22.182 Cameron v UBS AG [2000] VSCA 222 ..................................................................................... 21.530 Cameron & Co v Slutzkin Pty Ltd (1923) 32 CLR 81 ................................................................. 9.132 Campbell v BackOffice Investments Pty Ltd [2008] NSWCA 95 ............................................... 17.350 Campbell v Backoffice Investments Pty Ltd [2009] HCA 25; (2009) 238 CLR 304 ...... 17.205, 17.210, 17.255, 17.375, 17.400, 17.415 Campomar Sociedad Limitada v Nike International Ltd [2000] HCA 12; (2000) 202 CLR 45 .... 17.200, 17.205 Canada Steamship Lines Ltd v The Crown [1952] AC 192 ......................................................... 9.340 Canberra Advance Bank Ltd v Benny (1992) 38 FCR 427 ........................................................ 15.230 Candler v Crane Christmas [1951] 2 KB 164 ........................................................................... 17.140 Canon Australia Pty Ltd v Patton [2007] NSWCA 246 ............................................................. 19.130 Caparo Industries plc v Dickman [1990] 2 AC 605 .................................................................. 17.140 Cargill Australia Limited v Cater Oil Company Pty Ltd [2011] VSC 126 ................................... 21.200 Carlill v Carbolic Smoke Ball Co [1893] 1 QB 256 ..................... 1.10, 2.10, 2.25, 2.55, 2.195, 2.340 Carminco Gold & Resources Ltd v Findlay & Co Stockbrokers (Underwriters) Pty Ltd [2007] FCAFC 194 ............................................................................................................................ 8.60 Carr v JA Berriman Pty Ltd (1953) 89 CLR 327 ................................................. 14.40, 15.05, 15.125 Carrington Slipways Pty Ltd v Patrick Operations Pty Ltd (1991) 24 NSWLR 745 ........................ 8.60 xiv

Table of Cases

Carter v Hyde (1923) 33 CLR 115 .................................................................................. 2.105, 2.125 Casey’s Patents, Re; Stewart v Casey [1892] 1 Ch 104 ................................................... 3.115, 3.195 Castle Constructions Pty Ltd v Fekala Pty Ltd [2006] NSWCA 133; (2006) 65 NSWLR 648 ...... 21.180 Castlemaine Tooheys Ltd v Carlton & United Breweries Ltd (1987) 10 NSWLR 468 ....... 10.10, 10.85 Cavallari v Premier Refrigeration Co Pty Ltd (1952) 85 CLR 20 ................................................... 5.15 Cavendish Square Holding BV v Talal El Makdessi [2015] UKSC 67 ......................................... 21.305 Cedar Meats (Aust) Pty Ltd v Five Star Lamb Pty Ltd [2014] VSCA 32 .......... 13.170, 21.325, 21.330, 21.340, 21.350 Celthene Pty Ltd v WKJ Hauliers Pty Ltd [1981] 1 NSWLR 606 ........................................... 8.60, 8.85 Central Coast Leagues Club v Gosford City Council (Unreported, 1998) ................................... 21.40 Central Exchange Ltd v Anaconda Nickel Ltd [2002] WASCA 94; (2002) 26 WAR 33 .............. 10.125, 10.130, 10.132, 10.165 Central London Property Trust v High Trees House [1947] 1 KB 130 ......................................... 22.05 Central Trust Co v Rafuse [1986] 2 SCR 147 ............................................................................. 1.120 Challenge Bank Ltd v VL Cooper & Associates Pty Ltd [1996] 1 VR 220 ................................... 21.180 Champtaloup v Thomas [1976] 2 NSWLR 264 ....................................................................... 15.135 Chand v Commonwealth Bank of Australia [2015] NSWCA 181 ................................. 21.135, 21.180 Chandros Developments Pty Ltd v Mulkearns [2008] NSWCA 62 ............................................. 15.75 Chapleton v Barry Urban District Council [1940] 1 KB 532 ......................................................... 9.25 Chaplin v Hicks (1911) 2 KB 786 ................................................................................... 21.15, 21.85 Chapman v Hearse (1961) 106 CLR 112 ................................................................................. 21.140 Chapman v Taylor [2004] NSWCA 456 ................................................................................... 14.165 Chappel v Hart [1998] HCA 55; (1998) 195 CLR 232 ............................................................. 17.380 Chartbrook Ltd v Persimmon Homes Ltd [2009] UKHL 38; [2009] AC 1101 ................... 1.100, 9.260 Charter Reinsurance Co Ltd v Fagan [1997] AC 313 ................................................................. 9.267 Chint Australasia Pty Ltd v Cosmoluce Pty Ltd [2008] NSWSC 635 ............................ 17.350, 22.260 Christopher Hill Ltd v Ashington Piggeries Ltd [1972] AC 441 ................................................... 9.285 Chwee Kin Keong v Digiland.com Pte Ltd [2005] SGCA 2; [2005] 1 SLR 502 .......................... 16.135 Ciavarella v Balmer (1983) 153 CLR 438 .................................................................... 15.200, 21.655 City and Westminster Properties (1934) Ltd v Mud [1959] Ch 129 ........................................... 9.165 Clark v Macourt [2013] HCA 56; (2013) 253 CLR 1 .......................................... 21.10, 21.25, 21.202 Clark Equipment Australia Ltd v Covcat Pty Ltd (1987) 71 ALR 367 ......................................... 17.415 Clea Shipping Corp v Bulk Oil International Ltd (The “Alaskan Trader”) (No 2) [1984] 1 All ER 129; [1983] 2 Lloyd’s Rep 646 ......................................................................... 21.515, 21.520 Clegg v Wilson (1932) 32 SR (NSW) 109 ............................................................................... 20.275 Cloud Top Pty Limited v Toma Services Pty Limited [2008] NSWSC 568 ................................. 21.500 Co-operative Insurance Society Ltd v Argyll Stores (Holdings) Ltd [1998] AC 1 ....................... 21.635 Coal Cliff Collieries Pty Ltd v Sijehama Pty Ltd (1991) 24 NSWLR 1 ....................... 5.15, 5.110, 21.85 Coates v Sarich [1964] WAR 2 ................................................................................................. 21.500 Codelfa Construction Pty Ltd v State Rail Authority of NSW [1982] HCA 24; (1982) 149 CLR 337 ............. 9.100, 9.110, 9.125, 9.129, 9.255, 9.265, 9.267, 9.285,10.15, 10.20, 10.35, 10.50, 14.90, 14.95, 14.115, 14.150, 14.135, 14.155, 15.35 Coghlan v SH Lock (Australia) Ltd (1985) 4 NSWLR 158 ......................................................... 22.250 Collier v Electrum Acceptance Pty Ltd (1986) 66 ALR 613 ....................................................... 17.225 Collier v Morlend Finance (Vic) Corporation Pty Ltd [1989] ASC 55-716 ................................. 19.165 Collier v P & MJ Wright (Holdings) Ltd [2007] EWCA Civ 1329; [2008] 1 WLR 643 ........ 3.160, 3.190 Collin v Holden [1989] VR 510 ............................................................................. 6.80, 6.90, 22.235 Collins v Godefroy (1831) 1 B & Ad 950; 109 ER 1040 ............................................................. 3.125 Commercial Bank of Australia Ltd v Amadio (1983) 151 CLR 447 ........... 1.160, 17.70, 19.05, 19.15, 19.90 Commercial Banking Co of Sydney Ltd v RH Brown & Co (1972) 126 CLR 337 ......... 17.100, 17.140 Commonwealth v Amann Aviation Pty Ltd [1991] HCA 54; (1991) 174 CLR 64 ............ 21.10, 21.15, 21.55, 21.60, 21.65, 21.75, 21.80, 21.85, 21.90, 21.135, 21.145, 21.150 Commonwealth v Verwayen (1990) 170 CLR 394 ......... 1.160, 15.185, 17.25, 22.75, 22.80, 22.220 Commonwealth Bank of Australia v Barker [2014] HCA 32; (2014) 253 CLR 169 ...... 10.125, 10.132, 10.140 Commonwealth Bank of Australia v Renstel Nominees Pty Ltd [2001] VSC 167 ........ 10.130, 10.132, 11.75, 15.230 Commonwealth Bank of Australia Ltd v Spira [2002] NSWSC 905; (2002) 174 FLR 274 ......... 10.165, 11.75 xv

Contract Law: Principles, Cases and Legislation

Commonwealth Homes and Investment Co Ltd v Smith (1937) 59 CLR 443 .......................... 20.255 Como Investments Pty Ltd v Yenald Nominees Pty Ltd [1997] ATPR 41-550 .............. 17.370, 17.375, 17.385, 17.390 Con-Stan Industries of Australia Pty Ltd v Norwich Winterthur Insurance (Australia) Ltd (1986) 160 CLR 226 ............................................................................... 10.100, 10.105, 22.250 Concrete Constructions (NSW) Pty Ltd v Nelson (1990) 169 CLR 594 .................................... 17.190 Concrete Constructions Group Ltd v Litevale Pty Ltd (2002) 170 FLR 290 .............................. 17.260 Concrete Pty Ltd v Paramatta Design & Development [2006] HCA 55; (2006) 229 CLR 577 .... 10.05 Concut Pty Ltd v Worrell [2000] HCA 64 .................................................................... 13.165, 15.245 Consolidated Bearing Co (SA) Pty Ltd v Molnar Engineering Pty Ltd [1994] ATPR (Digest) 46-122 .............................................................................................................................. 17.215 Continental C & G Rubber Co Pty Ltd, Re (1919) 27 CLR 194 ................................................ 14.180 Coombs v Bahama Palm Trading Pty Ltd (1991) ASC 56-097 ................................................. 19.150 Cooney v Burns (1922) 30 CLR 216 ................................................................................... 6.65, 6.75 Corbridge v Bakery Fun Shop Pty Ltd [1984] ATPR 40-493 ...................................................... 17.310 Corcoran v O’Rourke (1888) 14 VLR 889 .................................................................................... 6.25 Cordon Investments Pty Ltd v Lesdor Properties Pty Ltd [2012] NSWCA 184 ............ 10.125, 10.160, 21.40 Corporate Affairs Commission (SA) v Australian Central Credit Union (1985) 157 CLR 201 ..... 20.255 Costa Vraca Pty Ltd v Berrigan Weed & Pest Control Pty Ltd (1998) 155 ALR 714 ................... 17.235 Couchman v Hill [1947] KB 554 ............................................................................................... 9.150 Couldery v Bartrum (1881) 19 Ch D 394 .................................................................................. 3.130 Coulls v Bagot’s Executor & Trustee Co Ltd (1967) 119 CLR 460 ........ 3.95, 8.15, 8.20, 8.40, 8.165, 8.170, 21.625, 22.265 Council of the City of Sydney v Goldspar [2006] FCA 472 ...................................................... 10.140 Council of the City of Sydney v West (1965) 114 CLR 481 ............................................. 9.325, 9.350 Council of the Upper Hunter County District v Australian Chilling and Freezing Co Ltd (1968) 118 CLR 429 .............................................................................................................. 5.50 County Securities Pty Ltd v Challenger Group Holdings Pty Ltd [2008] NSWCA 193 ...... 9.110, 9.130 Courtney v Powell [2012] NSWSC 460 ................................................................................... 18.100 Cowan v O’Connor (1888) 20 QBD 640 .................................................................................. 2.205 Cowcher v Cowcher [1972] 1 WLR 425 .................................................................................. 15.220 Cowley v Watts (1853) 22 LJ Ch 591 .......................................................................................... 6.25 Cox & Coxon Ltd v Leipst [1999] 2 NZLR 15 .......................................................................... 17.320 Crabb v Arun DC [1976] Ch 179 ............................................................................................ 22.245 Crawford Fitting Co v Sydney Valve & Fitting Pty Ltd (1988) 14 NSWLR 438 .......................... 13.140 Crescendo Management Pty Ltd v Westpac Banking Corporation (1988) 19 NSWLR 40 .......... 18.20, 18.40, 18.65 Crown, The v Clarke (1927) 40 CLR 227 ........................................ 2.175, 2.180, 2.195, 2.385, 8.60 Cullen v Bickers (1878) 12 SALR 5 ............................................................................................ 2.355 Cundy v Lindsay (1878) 3 App Cas 459 .................................................................................. 16.185 Current Images Pty Limited v Dupack Pty Limited [2012] NSWCA 99 ....................................... 9.260 Currie v Misa (1875) LR 10 Ex 153 ........................................................................... 3.20, 3.25, 3.95 Curro v Beyond Productions Pty Ltd (1993) 30 NSWLR 337 ................................................... 21.690 Curtis v Chemical Cleaning & Dyeing Co [1951] 1 KB 805 .................. 9.05, 9.25, 9.35, 9.45, 17.60 Cutter v Powell (1795) 6 Term Rep 320; 101 ER 573 .............................................................. 21.415

D DH MB Pty Ltd v Manning Motel Pty Ltd [2014] NSWCA 396 .................................................. 9.165 DIB Group Pty Ltd v Ventouris Enterprises Pty Ltd [2011] NSWCA 300 .................................... 17.240 DJ Hill & Co Pty Ltd v Walter H Wright Pty Ltd [1971] VR 749 ..................................................... 9.25 DPN Solutions Pty Ltd v Tridant Pty Ltd [2014] VSC 511 ......................................................... 10.165 DPP (Victoria) v Le [2007] HCA 52; (2007) 232 CLR 562 .......................................................... 3.160 DTR Nominees Pty Ltd v Mona Homes Pty Ltd (1978) 138 CLR 423 .... 13.20, 13.170, 14.45, 14.70, 15.75, 15.80 Dalecoast Pty Ltd v Guardian International Pty Ltd [2004] WASC 82 ....................................... 17.320 Darlington Borough Council v Wiltshier Northern Ltd [1995] 1 WLR 68 .................................... 8.165 Darlington Futures Ltd v Delco Australia Pty Ltd (1986) 161 CLR 500 ..... 9.290, 9.305, 9.310, 9.315, 9.320, 9.325 xvi

Table of Cases

Daulia Ltd v Four Millbank Nominees Ltd [1978] Ch 231 ......................................................... 2.140 David Securities Pty Ltd v Commonwealth Bank of Australia (1992) 175 CLR 353 ......... 17.25, 17.50, 20.255 Davies v London & Provincial Marine Insurance Co (1878) 8 Ch D 469 ......................... 17.60, 17.75 Davis v Pearce Parking Station Pty Ltd (1954) 91 CLR 642 ................................. 9.340, 9.345, 9.350 Davis Contractors Ltd v Fareham Urban District Council [1956] AC 696 .......... 14.90, 14.95, 14.135, 14.155 Dayan v McDonald’s Corp 466 NE 2d 958 (Ill Ct App, 1984) .................................... 10.125, 15.235 De Cesare v Deluxe Motors Pty Ltd (1996) SASR 28 ................................................................. 21.45 De Lassalle v Guildford [1901] 2 KB 215 ................................................................................... 9.165 De Pasquale v The Australian Chess Federation Incorporated [2000] ACTSC 94 ......... 10.130, 10.132 Delaforce v Simpson Cook (2010) 78 NSWLR 483 ............................................................................. Demagogue Pty Ltd v Ramensky (1992) 39 FCR 31 ............ 17.215, 17.230, 17.235, 17.355, 17.410 Denmark Productions Ltd v Boscobel Productions Ltd [1969] 1 QB 699 ................................. 14.165 Derby & Co Ltd v Weldon (No 9) [1991] 1 WLR 652 ................................................................ 9.127 Derry v Peek (1889) 14 App Cas 337 ........................................................................... 17.25, 17.100 Devefi v Mateffy Perl Nagy Pty Ltd (1993) 113 ALR 225 ............................................................ 10.10 Dewhurst (WA) and Co Pty Ltd v Cawrse [1960] VR 278 ........................................................... 2.205 Di Biase v Rezek [1971] 1 NSWLR 735 ........................................................................................ 6.25 Diagnostic X-ray Services Pty Ltd v Jewel Food Stores Pty Ltd [2001] VSC 9; (2001) 4 VR 632 .......................................................................................................... 21.625, 21.635, 21.690 Dick Bentley Productions v Harold Smith (Motors) Ltd [1965] 2 All ER 65 ................................ 9.160 Dickinson v Dodds (1876) 2 Ch D 463 ............................................................... 2.100, 2.125, 2.385 Dickson Property Management Services Pty Ltd v Centro Property Management (Vic) Pty Ltd [2000] FCA 1742 ......................................................................................................... 10.130 Digi-Tech (Aust) Pty Ltd v Brand [2004] NSWCA 58 ............................................................... 17.245 Dillwyn v Llewelyn (1862) 4 De GF & J 517; 45 ER 1285 .................................... 3.35, 22.05, 22.182 Dimmock v Hallett (1866) LR 2 Ch App 21 ............................................................................... 17.60 [2001] UKHL 52; [2002] 1 AC 481 ................................................ 11.35, 11.50, 11.60, 11.65, 11.90 Director of Consumer Affairs Victoria v AAPT Ltd [2006] VCAT 1493 ....... 11.55, 11.60, 11.80, 11.100 Director of Consumer Affairs Victoria v Backloads.com Pty Ltd (Civil Claims) [2009] VCAT 754 ........................................................................................................................... 11.50, 11.80 Director of Consumer Affairs Victoria v Trainstation Health Clubs Pty Ltd (Civil Claims) [2008] VCAT 2092 .................................................................................................... 11.65, 11.80 Director of War Service Homes v Harris (1968) Qd R 275 .......................................................... 21.45 Dixon v Totara Coatings (1993) Ltd (NZ High Court, 2005) ................................................... 11.170 Domed Stadium Hotel v Holiday Inns 732 F 2d 480 (5th Cir, 1984) ....................................... 15.235 Donaldson v Bexton [2006] QCA 559 ..................................................................................... 13.100 Donis v Donis (2007) 19 VR 577 ............................................................................................. 22.182 Donoghue v Stevenson [1932] AC 562 ........................................................................ 1.115, 17.105 Dormer v Solo Investments Pty Ltd [1974] 1 NSWLR 428 ......................................................... 17.80 Dougan v Ley (1946) 71 CLR 142 .......................................................................................... 21.625 Douglas v Hill [1909] SALR 28 ................................................................................................ 21.640 Downey v Carlson Hotels Asia Pacific Pty Ltd [2005] QCA 199 ................................................ 17.220 Dowsett v Reid (1912) 15 CLR 695 ............................................................................ 21.600, 21.665 Driveforce Pty Ltd v Gunns Ltd (No 3) [2010] TASSC 38 ............................................ 10.130, 10.132 Dudgeon v Chie (1955) 92 CLR 342 ...................................................................................... 21.640 Dunlop v Lambert (1839) 6 Cl & F 600; 7 ER 824 .................................................................... 8.165 Dunlop Pneumatic Tyre Co Ltd v New Garage and Motor Co Ltd [1915] AC 79 ....... 11.100, 21.305, 21.310, 21.340, 21.500 Dunlop Pneumatic Tyre Co Ltd v Selfridge and Co Ltd [1915] AC 847 ............................... 3.95, 8.05 Dura (Aust) Constructions Pty Ltd v Hue Boutique Living Pty Ltd (No 3) [2012] VSC 99 ......... 10.165 Durham Tees Valley Airport Ltd v BMI Baby Ltd [2009] All ER 233 ............................................. 10.50 Dyck v Manitoba Snowmobile Association Inc (1981) 5 WWR 97 ............................................... 8.60 Dyno Rod Plc v Reeve [1999] FSR 148 .................................................................................... 20.160

E EBay International AG v Creative Festival Entertainment Pty Ltd [2006] FCA 1768; (2006) 170 FCR 450 ............................................................................................................... 9.65, 12.40 xvii

Contract Law: Principles, Cases and Legislation

EK Nominees Pty Ltd v Woolworths Ltd [2006] NSWSC 1172 ......................... 2.395, 17.230, 22.225 Earney v Australian Property Investment Strategic Pty Ltd [2010] VSC 621 ............................... 14.05 Eastwood v Kenyon (1840) 11 Ad & El 438; 113 ER 482 ............................................................. 3.10 Edensor Nominees Pty Ltd v Anaconda Nickel Ltd [2001] VSC 502 ......................................... 13.125 Edgington v Fitzmaurice (1885) 29 Ch D 459 .................................................. 17.20, 17.40, 17.120 Edwards v Edwards (1918) 24 CLR 312 .................................................................................... 9.132 Elders Rural Finance Ltd v Smith (1996) 41 NSWLR 296 ............................................ 19.165, 19.170 Electric Appliance Pty Ltd v Doug Thorley Caravans (Australia) Pty Ltd [1981] VR 799 .............. 20.75 Electricity Generation Corporation v Woodside Energy Ltd [2014] HCA 7; (2014) 251 CLR 640 .............................................................................................................. 9.267, 10.140, 18.65 Electricity Generation Corporation t/a Verve Energy v Woodside Energy Ltd [2013] WASCA 36 ........................................................................................................................................ 18.65 Elesanar Constructions Pty Ltd v Queensland [2007] QCA 208 ................................................. 9.129 Elias v George Sahely & Co [1983] 1 AC 646 .............................................................................. 6.35 Elitegold Pty Ltd v CM Holdings Pty Ltd [1995] ATPR 41-422 .................................................. 17.370 Elkofairi v Permanent Trustee Co Ltd [2002] NSWCA 413 ....................................................... 19.165 Ellison v Vukicevic (1986) 7 NSWLR 104 ................................................................................. 19.150 Ellul v Oakes (1972) 3 SASR 377 ............................................................................................. 17.105 Elvidge Pty Ltd v BGC Construction Pty Ltd [2006] WASCA 264 ................................................ 20.85 Empirnall Holdings Pty Ltd v Machon Paull Partners Pty Ltd (1988) 14 NSWLR 523 ...... 2.215, 2.350 Entores v Miles Far Eastern Corp [1955] QB 327 ....................................................................... 2.205 Environmental Systems Pty Ltd v Peerless Holdings Pty Ltd [2008] VSCA 26; (2008) 19 VR 358 ......................................................................................................................... 21.25, 21.140 Equuscorp Pty Ltd v Glengallan Investments Pty Ltd [2004] HCA 55; (2004) 218 CLR 471 ....... 9.110, 9.135, 9.156 Equuscorp Pty Ltd v Haxton [2012] HCA 7 ............................................................... 20.255, 20.285 Ermogenous v Greek Orthodox Community of SA Inc [2002] HCA 8; (2002) 209 CLR 95 ........ 2.170, 2.385, 4.05, 4.10, 4.45 Esanda Finance Corp Ltd v Plessnig (1989) 166 CLR 131 ........................................... 21.320, 21.345 Esanda Finance Corp Ltd v Peat Marwick Hungerfords (1997) 188 CLR 241 ........................... 17.140 Eslea Holdings Ltd v Butts (1986) 6 NSWLR 175 ..................................................................... 22.250 Esso Australia Resources Ltd v Plowman (1995) 183 CLR 10 ..................................................... 10.85 Esso Australia Resources Pty Ltd v Southern Pacific Petroleum NL [2005] VSCA 228 ............... 10.125, 10.132, 10.135, 11.75 Esso Petroleum Co Ltd v Harper’s Garage (Stourport) Ltd [1968] AC 269 ............................... 20.165 Esso Petroleum Co Ltd v Mardon [1976] QB 801 .................................................................... 17.105 Etna v Arif [1999] VSCA 99; [1999] 2 VR 353 ............................................................... 13.80, 13.110 Eudunda Farmers Co-operative Society Ltd v Mattiske [1920] SALR 309 ..................................... 5.15 European Bank Limited v Evans [2010] HCA 6; (2010) 240 CLR 432 .......................... 21.145, 21.150 Evans v Secretary, Department of Families, Housing, Community Services and Indigenous Affairs [2012] FCAFC 81; (2012) 289 ALR 237 ............................................................... 4.05, 4.45 Evans Marshall & Co Ltd v Bertola SA [1973] 1 WLR 349 ........................................................ 21.690 Eveready Australia Pty Ltd v Gillette Australia Pty Ltd (No 4) [1999] FCA 1824 ............. 17.15, 17.220 Experience Hendrix LLC v PPX Enterprises Inc [2003] EWCA Civ 323; [2003] 1 All ER (Comm) 830 ..................................................................................................................... 21.100 Express Airways v Port Augusta Air Services [1980] Qd R 543 .................................................... 2.205

F F & G Sykes (Wessex) Ltd v Fine Fare Ltd [1967] 1 Lloyd’s Rep 53 .............................................. 5.25 F C Shepherd & Co Ltd v Jerrom [1987] 1 QB 320 .................................................... 14.165, 14.170 FAI Traders Insurance Co Ltd v Savoy Plaza Pty Ltd [1993] 2 VR 343 ......................................... 9.130 Far Horizons Pty Ltd v McDonalds Australia Ltd [2000] VSC 310 ..... 10.125, 10.130, 10.132, 10.135, 10.155 Farah Constructions Pty Ltd v Say-Dee Pty Ltd (2007) 230 CLR 89 ......................................... 20.255 Farley v Skinner [2001] HKHL 49; [2002] 2 AC 732 ................................................................. 21.215 Farmer v Honan (1919) 26 CLR 183 ......................................................................................... 9.130 Farmers Mercantile Union and Chaff Mills Ltd v Coade (1921) 30 CLR 113 ................... 2.125, 2.350 Farmstock Pty Ltd v Body Corporate for No 9 Port Douglas Road Community Title Scheme 24368 [2013] QCA 354 ..................................................................................................... 10.140 xviii

Table of Cases

Farrant v Leburn [1970] WAR 179 ................................................................. 21.480, 21.485, 21.495 Farrelly v Hircock [1971] Qd R 341 ............................................................................................. 6.40 Felsink Pty Ltd v City of Maribyrnong [2010] VSC 110 ............................................... 10.130, 10.132 Felthouse v Bindley (1862) 11 CB (NS) 869; 142 ER 1037 ............................................ 2.210, 2.345 Felton v Mulligan (1971) 124 CLR 367 ................................................................................... 20.180 Fercometal SARL v Mediterranean Shipping Co SA [1989] 1 AC 788 ......................................... 15.20 Ferguson v Wilson (1866) LR 2 Ch App 77 .............................................................................. 21.675 Fibrosa Spolka Akcyjna v Fairbairn Lawson Combe Barbour Ltd [1943] AC 32 ......................... 14.175 Fightvision Pty Ltd v Onisforou [1999] NSWCA 323; (1999) 47 NSWLR 473 .................... 8.90, 21.90 Financings Ltd v Stimson [1962] 1 WLR 1184 ................................................................ 2.130, 17.60 Fink v Fink (1946) 74 CLR 127 ..................................................................................... 21.15, 21.210 Fisher v Bell [1961] 1 QB 394 ..................................................................................................... 2.70 Fitness First (Australia) Pty Ltd v Chong [2008] NSWSC 800 .......................................... 2.170, 2.385 Fitzgerald v FJ Leonhardt Pty Ltd (1997) 189 CLR 215 ...... 20.30, 20.55, 20.65, 20.70, 20.85, 20.90, 20.195 Fitzgerald v Masters (1956) 95 CLR 420 ......................................................... 5.240, 13.170, 21.650 Fitzgerald v Penn (1954) 91 CLR 268 ..................................................................................... 21.135 Fitzpatrick v Michel (1928) 28 SR (NSW) 285 ............................................................... 17.15, 17.35 Flight Centre Ltd v Louw [2011] NSWSC 132; (2011) 78 NSWLR 656 .................................... 21.225 Flightvision Pty Ltd v Onisforou [1999] NSWCA 323 ............................................................... 13.165 Flinn v Flinn [1999] 3 VR 712 ................................................................................................. 22.182 Flureau v Thornhill (1776) 2 W Bl 1078; 96 ER 635 ................................................................. 21.280 Foakes v Beer (1884) 9 App Cas 605 ............................................................................. 3.130, 3.135 Foley v Classique Coaches Ltd [1934] 2 KB 1 ..................................................................... 5.05, 5.25 Fong v Cilli (1968) 11 FLR 495 ................................................................................................. 2.125 Foran v Wight (1989) 168 CLR 385 .......... 12.15, 13.120, 14.20, 15.10, 15.20, 15.25, 15.65, 15.75, 15.80, 15.85, 15.90, 15.185, 15.220, 21.285, 21.490, 22.275 Ford v Perpetual Trustees Victoria Ltd [2009] NSWCA 186; (2009) 75 NSWLR 42 .......... 7.35, 16.175 Ford Motor Company of Australia Ltd v Arrowcrest Group Pty Ltd [2003] FCAFC 313; (2003) 134 FCR 522 .......................................................................................................... 17.370 Forrest v Australian Securities and Investments Commission [2012] HCA 39; (2012) 247 CLR 486 .................................................................................................................................... 17.290 Forsikringsaktieselskapet Vesta v Butcher [1989] 1 AC 852 ...................................................... 21.260 Fragomeni v Fogliani (1968) 42 ALJR 263 ............................................................................... 21.670 Franich v Swannell (1993) 10 WAR 459 .................................................................................. 17.190 Franklins Pty Ltd v Metcash Trading Ltd [2009] NSWCA 407; (2009) 76 NSWLR 603 .............. 1.100, 9.130, 9.260, 9.265, 16.110, 22.250, 22.260 Fraser v NRMA Holdings Ltd (1995) 55 FCR 452 ..................................................................... 17.205 Fraser River Pile & Dredge Ltd v Can-Drive Services Ltd [1999] 3 SCR 108 ........... 8.45, 8.155, 8.175, 8.205 Freedom v AHR Constructions Pty Ltd (1987) 1 Qd R 59 ............................................. 13.90, 21.500 Frost v Knight (1872) LR 7 Ex ................................................................................................... 15.30 Fry v Lane (1888) 40 Ch D 312 ................................................................................................ 19.05 Fullers’ Theatres Ltd v Musgrove (1923) 31 CLR 524 .............................................................. 21.600 Futuretronics Pty Ltd v Gadzhis [1992] 2 VR 217 .......................................... 17.240, 17.250, 17.260

G G&A Lanteri Nominees Pty Ltd v Fishers Stores Consolidated Pty Ltd [2007] VSCA 4 ................ 21.95 GEC Marconi Systems Pty Ltd v BHP Information Technology Pty Ltd [2003] FCA 50; (2003) 128 FCR 1 ................................................................................................ 10.165, 21.420, 22.265 GSA Group Pty Ltd v Siebe plc (1993) 30 NSWLR 573 ............................................... 10.130, 10.132 Galafassi v Kelly [2014] NSWCA 190; (2014) 87 NSWLR 119 ..................................... 15.105, 15.145 Gallant v Larry Woods Used Cars Ltd (1982) 38 NBR (2d) 262 ................................................ 11.150 Gange v Sullivan (1966) 116 CLR 418 ............................................... 13.80, 13.100, 13.110, 13.115 Garcia v National Australia Bank Ltd [1998] HCA 48; (1998) 194 CLR 395 .................................. 1.95 Gardiner v Agricultural and Rural Finance Pty Ltd [2007] NSWCA 235 ...................................... 9.310 Garnac Grain Co Inc v HNF Faure & Fairclough Ltd [1968] AC 1130 ...................................... 21.295 Garraway Metals Pty Ltd v Comalco Aluminium Ltd (1993) 114 ALR 118 ................................ 21.275 Garry Rogers Motors (Aust) Pty Ltd v Subaru (Aust) Pty Ltd [1999] FCA 1710 ........................... 11.75 xix

Contract Law: Principles, Cases and Legislation

Garry Rogers Motors (Aust) Pty Ltd v Subaru (Aust) Pty Ltd [1999] FCA 903 ............. 10.150, 10.155, 10.160, 15.225, 15.230 Gate Gourmet Australia Pty Ltd (in liq) v Gate Gourmet Holding Ag [2004] NSWSC 149 ........... 8.45, 8.100, 8.155 Gates v City Mutual Life Assurance Society Ltd (1986) 160 CLR 1 ...... 9.165, 17.310, 17.315, 21.115 Gateway Realty Ltd v Arton Holdings Ltd (1991) 106 NSR (2d) 180 .......................... 10.130, 10.132 General Newspapers Pty Ltd v Telstra Corporation (1993) 45 FCR 164 ...................... 17.220, 17.230 George v Greater Adelaide Land Development Co Ltd (1929) 43 CLR 91 .............................. 20.280 George v Roach (1942) 67 CLR 253 ................................................................... 5.30, 5.245, 13.115 George Hudson Holdings Ltd v Rudder (1973) 128 CLR 387 .................................................... 2.340 George Mitchell (Chesterhall) Ltd v Finney Lock Seeds Ltd [1983] 2 AC 803 ............................. 9.290 George Mitchell (Chesterhall) Ltd v Finney Lock Seeds Ltd [1983] QB 284 ............................... 11.15 Geraghty v Minter (1979) 142 CLR 177 ................................................................................. 20.155 Gibaud v Great Eastern Railway Co [1921] 2 KB 426 ................................................................ 9.325 Gibbons v Wright (1954) 91 CLR 423 ......................................................................................... 7.35 Gibson v Manchester City Council [1979] 1 All ER 972; [1979] 1 WLR 294 ..................... 2.15, 2.390 Gilberto v Kenny (1983) 48 ALR 620 ........................................................................................ 9.132 Gillespie Bros & Co Ltd v Roy Bowles Transport Ltd [1973] 1 QB 400 ....................................... 9.340 Gillett v Holt [2001] Ch 210 ................................................................................................... 22.182 Gipps v Gipps [1978] 1 NSWLR 454 ....................................................................................... 17.120 Gissing v Gissing [1971] AC 886 ............................................................................................... 9.285 Giumelli v Giumelli [1999] HCA 10; (1999) 196 CLR 101 .............. 22.155, 22.160, 22.182, 22.220, 22.270 Given v Pryor (1979) 39 FLR 437 .............................................................................................. 17.10 Gladstone Area Water Board v AJ Lucas Operations Pty Ltd [2014] QSC 311 ............................. 9.270 Glasbrook Bros Ltd v Glamorgan County Council [1925] AC 270 .............................................. 3.125 Glencore Grain Rotterdam BV v Lebanese Organisation for International Commerce [1997] 4 All ER 514 ......................................................................................................................... 15.45 Glenfed Financial Corporation v Penick Corporation 276 A 2d 163 (NJ, 1994) ........................ 15.235 Global Sportsman Pty Ltd v Mirror Newspapers Pty Ltd (1984) 2 FCR 82 .................. 17.275, 17.290 Godecke v Kirwan (1973) 129 CLR 629 ............................................................. 5.175, 5.180, 5.210 Godfrey Constructions Pty Ltd v Kanangra Park Pty Ltd (1972) 128 CLR 529 ............. 15.220, 21.280 Golden Key Ltd, Re ([2009] EWCA Civ 636 ............................................................................... 9.267 Golden Oceans (NSW) Pty Ltd v Evewall Pty Ltd [2009] NSWSC 674 ...................................... 21.500 Golden Strait Corporation v Nippon Yusen Kubishika Kaisha [2007] UKHL 12; [2007] 2 AC 353 ........................................................................................................................... 21.20, 21.95 Goldsbrough, Mort & Co Ltd v Quinn (1910) 10 CLR 674 ....... 2.100, 2.105, 2.110, 21.600, 21.670 Gollin & Co Ltd v Karenlee Nominees Pty Ltd (1983) 153 CLR 455; [1983] HCA 38 ................. 9.267 Goodman Fielder Consumer Foods Ltd v Cospak International Pty Ltd [2004] NSWSC 704 .... 10.100 Goodridge v Macquarie Bank Ltd [2010] FCA 67 .................................................................... 21.185 Goodwin v National Bank of Australia Ltd (1968) 117 CLR 173 ................................................. 17.70 Goodwin’s of Newtown Pty Ltd v Gurrey [1959] SASR 295 ........................................................ 2.70 Google Inc v Australian Competition and Consumer Commission [2013] HCA 1; (2013) 249 CLR 435 ............................................................................................................................. 17.295 Gordon v Macgregor (1908) 8 CLR 316 ................................................................................... 9.110 Goss v Lord Nugent (1833) 5 B & Ad 58; 110 ER 713 ............................................................... 9.100 Gough Bay Holdings Pty Ltd v Tyrwhitt-Drake [1976] VR 195 ................................................. 13.115 Gould v Vaggelas (1985) 157 CLR 215 ............................... 17.120, 17.130, 17.310, 17.375, 17.385 Grainger v Gough [1896] AC 325 ...................................................................................... 2.55, 2.90 Gray v Motor Accident Compensation Commission (1998) 196 CLR 1 ..................................... 21.10 Gray v National Crime Authority [2003] NSWSC 111 .............................................................. 22.215 Gray v Pastorelli [1987] WAR 174 ............................................................................................ 20.115 Greasley v Cooke [1980] 1 WLR 1306 ..................................................................................... 22.182 Great Peace Shipping Ltd v Tsavliris Salvage (International) Ltd [2002] EWCA Civ 1407; [2003] QB 679 .............................................................................................. 16.05, 16.12, 16.65 Greco v Bendigo Machinery Pty Ltd [1985] ATPR 40-521 ........................................................ 17.215 Green v Sommerville (1979) 141 CLR 594 .............................................................................. 21.660 Grieve v Enge [2006] QCA 213 ............................................................................................... 13.120 Grime v Bartholomew [1972] 2 NSWLR 827 ............................................................................. 5.245 Grogan v Robin Meredith Plant Hire [1996] CLC 1127 ............................................................... 9.25 xx

Table of Cases

Grundt v Great Boulder Pty Gold Mines Ltd (1937) 59 CLR 641 ............................................... 22.05 Gumland Property Holdings Pty Limited v Duffy Bros Fruit Market (Campbelltown) Pty Limited [2008] HCA 10; (2008) 234 CLR 237 .................................................................... 21.270 Gwam Investments Pty Ltd v Outback Health Screenings Pty Ltd [2010] SASC 37; (2010) 106 SASR 167 ......................................................................................................... 10.35, 21.190

H H Parsons (Livestock) Ltd v Uttley Ingham & Co Ltd [1978] QB 791 .......................... 21.155, 21.165 HIH Casualty and General Insurance Ltd v Chase Manhattan Bank [2003] UKHL 6; [2003] 1 All ER (Comm) 349 ............................................................................................................ 17.100 HTW Valuers (Central Qld) Pty Ltd v Astonland Pty Ltd [2004] HCA 54; (2004) 217 CLR 640 .... 17.310 Hadgelias Holdings Pty Ltd v Seirlis [2014] QCA 177 .............................................................. 17.240 Hadley v Baxendale (1854) 9 Exch 341; 156 ER 145 ..................................... 21.145, 21.165, 21.275 Hall v Busst (1960) 104 CLR 206 ..................................................................... 5.05, 5.15, 5.45, 5.95 Hamblin v Marjoram (1878) 12 SALR 62 .................................................................................... 6.65 Hamilton Jones v David & Snape [2003] EWHC 3147 (Ch); [2004] 1 WLR 924 ....................... 21.215 Hammersley v De Biel (1845) 12 Cl & F 45; 8 ER 1312 ............................................................. 22.05 Hampstead Meats Pty Ld v Emerson and Yates Pty Ltd [1967] SASR 109 ................................... 2.205 Hanave Pty Ltd v LFOT Pty [1999] FCA 357 ............................................................................ 17.375 Hancock Prospecting Pty Ltd v Wright Prospecting Pty Ltd [2012] WASCA 216 ....................... 13.170 Hardy v Motor Insurers’ Bureau [1964] 2 QB 745 ..................................................................... 20.60 Harris v Jenkins [1922] SASR 59 ................................................................................................ 2.135 Harris v Nickerson (1873) LR 8 QB 286 ....................................................................................... 2.75 Harris v Sydney Glass & Tile Co (1904) 2 CLR 227 .................................................................... 9.105 Harris v Watson (1791) Peake 102; 170 ER 94 ........................................................................... 3.125 Hart v MacDonald (1910) 10 CLR 417 ...................................................................................... 10.10 Hart v O’Connor [1985] 1 AC 1000 .......................................................................................... 18.05 Hartigan v International Society for Krishna Consciousness Incorporated [2002] NSWSC 810 .... 18.85 Hartley v Ponsonby (1857) 7 El & Bl 872; 119 ER 1471 ............................................................ 3.150 Harvela Investments Ltd v Royal Trust Co of Canada (CI) Ltd [1985] 1 Ch 103 ........................... 2.80 Harvela Investments Ltd v Royal Trust Co of Canada (CI) Ltd [1986] 1 AC 207 ........................... 2.80 Harvey v Edwards, Dunlop & Co Ltd (1927) 39 CLR 302 ................................................... 6.25, 6.35 Harvey v Facey [1893] AC 552 .................................................................................................... 2.55 Harvey v Pratt [1965] 1 WLR 1025 .............................................................................................. 5.15 Hatt v Magro [2007] WASCA 124; (2007) 34 WAR 256 .............................................. 17.240, 17.275 Havenbar Pty Ltd v Butterfield (1974) 133 CLR 449 ................................................................ 13.100 Havyn Pty Ltd v Webster [2005] NSWCA 182 ..................... 17.190, 17.280, 17.305, 17.395, 17.405 Hawker Pacific Pty Ltd v Helicopter Charter Pty Ltd (1991) 22 NSWLR 298 .............................. 18.50 Hawkes v Saunders (1782) 1 Cowp 289; 98 ER 1091 ................................................................. 3.10 Hawkins v Clayton (1988) 164 CLR 539 ........................................................................ 10.60, 12.10 Hawkins v Pender Bros Pty Ltd [1990] 1 Qd R 135 .................................................................... 13.80 Haydon v McLeod (1901) 27 VLR 395 ........................................................................................ 6.30 Haye v CML Assurance Soc Ltd (1924) 35 CLR 14 ................................................................... 17.100 Hayes v Cable [1962] SR (NSW) 1 ............................................................................................ 20.65 Haywood v Roadknight [1927] VLR 512 ................................................................................... 17.75 Head v Kelk (1963) 63 SR (NSW) 340 ......................................................................................... 6.55 Hedley Byrne & Co Ltd v Heller & Partners Ltd [1964] AC 465 .................................. 17.105, 17.140 Heidelberg Graphics Equipment Ltd v Andrew Knox & Associates Pty Ltd [1994] ATPR 41-326 .............................................................................................................................. 17.225 Heilbut Symons & Co v Buckleton [1913] AC 30 ......................................................... 9.165, 17.105 Heine Bros (Aust) Pty Ltd v Forrest [1963] VR 383 .................................................................. 21.690 Heisler v Anglo-Dal LD [1954] 1 WLR 1273 ............................................................................... 15.45 Henderson v Amadio Pty Ltd (1995) 62 FCR 1 ........................................................................ 17.380 Henjo Investments Pty Ltd v Collins Marrickville Pty Ltd (1988) 39 FCR 546 ............. 17.215, 17.225, 17.230, 17.350, 17.375, 17.385, 17.395, 17.400, 17.410, 17.415 Henry v Birch (1804) 9 Ves 357; 32 ER 640 ............................................................................. 21.675 Henthorn v Fraser [1892] 2 Ch 27 ................................................................................. 2.200, 2.300 Henville v Walker [2001] HCA 52; (2001) 206 CLR 459 ...... 17.310, 17.320, 17.335, 17.365, 17.385, 17.395 xxi

Contract Law: Principles, Cases and Legislation

Heppingstone v Stewart (1910) 12 CLR 126 ...................................................................... 6.30, 6.40 Heritage Clothing Pty Ltd trading as Peter Jackson Australia v Mens Suit Warehouse Direct Pty Ltd trading as Walter Withers [2008] FCA 1775 ............................................................ 17.205 Heywood v Wellers [1976] 1 QB 446 ...................................................................................... 21.215 Highmist Pty Ltd v Tricare Ltd [2005] QCA 357 .............................................. 13.95, 15.140, 15.145 Hill v Van Erp (1997) 188 CLR 159 ........................................................... 1.115, 1.130, 1.145, 8.115 Hillas & Co Ltd v Arcos Ltd (1932) 147 LT 503 ......................................................... 2.80, 5.05, 5.40 Hirachand Punamchand v Temple [1911] 2 KB 330 .................................................................. 3.130 Hirsch v Zinc Corp Ltd (1917) 245 CLR 43 ............................................................................. 20.120 Hiscox v Outhwaite [1992] 1 AC 105 ..................................................................................... 22.250 Hobartville Stud Pty Ltd v Union Insurance Co Ltd (1991) 25 NSWLR 358 .............................. 21.275 Hodgson v Johnson (1858) EB & E 685; 120 ER 666 ................................................................... 6.90 Hodgson & Hodgson v Morella Pastoral Co Pty Ltd (1975) 13 SASR 51 .................................... 9.131 Hoenig v Isaacs [1952] 2 All ER 176 ........................................................................... 21.425, 21.430 Hoffman v Cali [1985] 1 Qd R 253 ......................................................................................... 21.290 Holdcroft v Market Garden Produce Pty Ltd [2000] QCA 396; [2000] 2 Qd R 381 ....... 20.85, 20.115 Holland v Wiltshire (1954) 90 CLR 409 ........................................................................ 15.35, 15.155 Hollier v Rambler Motors (AMC) Ltd [1972] 2 QB 71 ................................................................ 9.340 Holman v Johnson (1775) 1 Cowp 341 .................................................................................... 20.10 Holmes v Jones (1907) 4 CLR 1692 ........................................................................................ 17.120 Holt v Biroka Pty Ltd (1988) 13 NSWLR 629 ........................................................................... 17.250 Homburg Houtimport BV v Agrosin Private Ltd [2004] 1 AC 715 .............................................. 9.267 Homestake Australia Ltd v Metana Minerals NL (1991) 11 WAR 435 ......................................... 9.131 Hongkong Fir Shipping Co Ltd v Kawasaki Kisen Kaisha Ltd [1962] 2 QB 26 ...... 13.15, 13.20, 13.40, 13.45 Hoobin, Re [1957] VR 341 ...................................................................................................... 21.500 Hope v RCA Photophone of Australia Pty Ltd (1937) 59 CLR 348 ................................... 9.110, 10.10 Hortico (Aust) v Energy Equipment Co (Aust) Pty Ltd (1985) 1 NSWLR 545 ............................ 15.220 Horton v Jones (1935) 53 CLR 475 ............................................................................................. 6.90 Horwood v Millar’s Timber and Trading Company Ltd [1917] 1 KB 305 ................................. 20.110 Hosmer Holdings Pty Ltd v CAJ Investments Pty Ltd (1995) 57 FCR 45 ................................... 17.190 Hospital Products Ltd v United States Surgical Corp (1983) 151 CLR 447 ................................. 17.75 Hospital Products Ltd v United States Surgical Corporation (1984) 156 CLR 41 ............ 1.165, 10.20, 10.60, 10.140 Hospitality Group Pty Ltd v Australian Rugby Union Ltd [2001] FCA 1040; (2001) 110 FCR 157 .................................................................................................................................... 21.105 Houghton v Arms [2006] HCA 69; (2006) 225 CLR 553 .......................................................... 17.190 Houndsditch Warehouse Co Ltd v Waltex Ltd [1944] KB 579 .................................................. 21.180 Hounslow London Borough Council v Twickenham Garden Developments Ltd [1971] Ch 233 .................................................................................................................................... 21.520 Hourigan v Trustees Executors and Agency Co Ltd (1934) 51 CLR 619 ................................... 21.650 Household Fire and Carriage Accident Insurance Co Ltd v Grant (1879) LR 4 Ex D 216 ............ 2.200 Howard Marine & Dredging Co Ltd v A Ogden & Sons (Excavations) Ltd [1978] QB 574 ....... 17.105 Howe v Smith [1884] 27 Ch D 89 ............................................................................. 21.480, 21.485 Howe v Teefy (1927) 27 SR (NSW) 301 .................................................................................... 21.85 Howtrac Rentals Pty Ltd v Thiess Contractors (NZ) Limited [2000] VSC 415 ........................... 10.140 Hoy Mobile Pty Ltd v Allphones Retail Pty Ltd (No 2) [2008] FCA 810 ...................................... 20.50 Hoyt’s Pty Ltd v Spencer (1919) 27 CLR 133 ..................................................... 9.110, 9.165, 9.167 Hughes v Metropolitan Railway Co (1877) 2 App Cas 439 ........................................... 15.180, 22.05 Hughes Aircraft Systems International v Airservices Australia (1997) 76 FCR 151 ............. 1.100, 2.80, 10.90, 10.120, 10.125, 10.130, 10.132 Humphries v “Surfers Palms North” Group Titles Plan 1955 (1994) 179 CLR 597 ................... 20.135 Hungerfords v Walker (1989) 171 CLR 125 ................................................................ 21.145, 21.275 Hurley v McDonald’s Australia Ltd [1999] FCA 1728 ............................................................... 19.130 Hurst v Vestcorp Ltd (1988) 12 NSWLR 394 ............................................................................ 20.255 Husain v O & S Holdings (Vic) Pty Ltd [2005] VSCA 269 .................................................. 2.390, 5.25 Hutchinson v Scott (1905) 3 CLR 359 ....................................................................................... 20.80 Hyatt Australia Ltd v LTCB Australia Ltd [1996] 1 Qd R 260 ....................................................... 8.200 Hydarnes Steamship Co v Indemnity Mutual Marine Assurance Co [1895] 1 QB 500 ................ 9.267 Hyde v Wrench (1840) 3 Beav 334; 49 ER 132 .............................................................. 2.135, 2.355 xxii

Table of Cases

Hyundai Heavy Industries Co Ltd v Papadopoulos [1980] 1 WLR 1129 ...................... 21.420, 21.445

I I & L Securities Pty Ltd v HTW Valuers (Brisbane) Pty Ltd [2002] HCA 41; (2002) 210 CLR 109 .......................................................................................................... 17.335, 17.360, 17.395 IOOF Australia Trustees (NSW) Ltd v Tantipech (1998) 156 ALR 470 ....................................... 17.415 ITO – International Terminal Operators Ltd v Miida Electronics Inc [1986] 1 SCR 752 ................. 8.60 Iannello v Sharpe [2007] NSWCA 61; (2007) 69 NSWLR 452 ................................................. 21.500 Idameneo (No 123) Pty Ltd v Ticco Pty Ltd [2004] NSWCA 329 ............................................. 15.125 Immer (No 145) Pty Ltd v Uniting Church in Australia Property Trust (NSW) [1993] HCA 27; (1993) 182 CLR 26 .................................................................................. 15.120, 15.135, 15.160 Inn Leisure Industries Pty Ltd v DF McCloy Pty Ltd (1991) 28 FCR 151 ................................... 17.285 Insight Vacations Pty Ltd v Young [2010] NSWCA 137; (2010) 78 NSWLR 641 ....................... 21.225 Insight Vacations Pty Ltd v Young [2011] HCA 16; (2011) 243 CLR 149 ....................... 9.305, 21.225 Integral Home Loans Pty Ltd v Interstar Wholesale Finance Pty Ltd [2009] HCA Transcript 87 .... 21.325 Interfoto Picture Library Ltd v Stiletto Visual Programs Ltd [1989] 2 QB 433 ........... 9.60, 9.80, 11.65 International Air Transport Association v Ansett Australia Holdings Ltd [2008] HCA 3; (2008) 234 CLR 151 ............................................................................................................. 9.265, 9.267 Interstar Wholesale Finance Pty Ltd v Integral Home Loans Pty Ltd [2008] NSWCA 310 ......... 21.305, 21.325 Investors Compensation Scheme Ltd v West Bromwich Building Society [1997] UKHL 28; [1998] 1 WLR 896 ............................................................................................................... 9.260 Investors Compensation Scheme Ltd v West Bromwich Building Society [1998] 1 WLR 896; [1998] 1 All ER 98 ..................................................................................................... 9.267, 9.285 Ipex Software Services Pty Ltd v Hosking [2000] VSCA 239 ....................................................... 3.115 Isabella Shipowner SA v Shagang Shipping Co Ltd (The “Aquafaith”) [2012] EWHC 1077 ...... 21.520 Italform Pty Ltd v Sangain Pty Ltd [2009] NSWCA 427 ........................................................... 17.265

J J Aron & Co v Comptoir Wegimont [1921] 3 KB 435 ................................................................ 15.30 J Lauritzen AS v Wijsmuller BV (The “Super Servant Two”) [1990] 1 Lloyd’s Rep 1 ...... 14.160, 14.165 J Spurling Ltd v Bradshaw [1956] 1 WLR 461 .............................................................................. 9.80 JC Williamson Ltd v Lukey (1931) 45 CLR 282 ............... 6.60, 6.75, 21.605, 21.635, 21.645, 21.690 JJ Savage & Sons Pty Ltd v Blakney (1970) 119 CLR 435 .................................... 9.152, 9.157, 9.165 JM Allan (Merchandising) Ltd v Cloke [1963] 2 QB 340 ............................................... 20.70, 20.105 Jackson v Horizon Holidays Ltd [1975] 3 All ER 92 ......................................................... 8.165, 8.170 James Miller & Partners Ltd v Whitworth Street Estates (Manchester) Ltd [1970] AC 583 .......... 9.130 Janos v Chama Motors Pty Ltd [2011] NSWCA 238 .................................................................. 21.95 Janssen-Gilag Pty Limited v Pfizer Pty Limited (1992) 37 FCR 526 ........................................... 17.305 Je Maintiendrai Pty Ltd v Quaglia (1980) 26 SASR 101 ......................... 3.190, 22.05, 22.10, 22.265 Jefferys v Jefferys (1841) Cr & Ph 138; 41 ER 443 ................................................................... 21.615 Jeffrey v Anderson [1914] St R Q 66 ............................................................................................ 6.15 Jetstar Airways Pty Ltd v Free [2008] VSC 539 ............................... 11.45, 11.50, 11.55, 11.75, 11.80 Jireh International Pty Ltd v Western Exports Services Inc [2011] NSWCA 137 ................ 9.260, 9.265 John Grimes Partnership Ltd v Gubbins [2013] EWCA Civ 37 .................................................. 21.150 Johnson v Agnew [1980] AC 367 ............................................................................................ 21.695 Johnson v Buttress (1936) 56 CLR 113 ..................................................................................... 18.80 Johnson v Perez (1988) 166 CLR 351 ....................................................................................... 21.20 Johnson v Unisys Ltd [2001] UKHL 13; [2003] 1 AC 518 ......................................................... 21.210 Johnson & Johnson Pacific Pty Ltd v Unilever Australia (No 2) [2006] FCA 1646 ...................... 17.275 Johnson Matthey Ltd v AC Rochester Overseas Corp (1990) 23 NSWLR 190 ............... 10.10, 22.255, 22.260 Johnson Tiles Pty Ltd v Esso Australia [1999] FCA 477 ............................................................. 17.235 Jones v Dumbrell [1981] VR 199 ............................................................................................... 17.60 Jones v Padavatton [1969] 1 WLR 328 ........................................................................................ 4.45 Jorden v Money (1854) 5 HLC 185; 10 ER 882 ............................................................ 22.05, 22.182 Joseph v National Magazine Co Ltd [1959] Ch 14 .................................................................. 21.635 xxiii

Contract Law: Principles, Cases and Legislation

Joseph Constantine Steamship Line Ltd v Imperial Smelting Corp Ltd [1942] AC 154 ............ 14.145, 14.165, 14.170 Jospin Pty Ltd v Copulos Venture Capital Pty Ltd [1994] ATPR 41-295 ..................................... 17.315

K K & K Real Estate Pty Ltd v Adellos Pty Ltd [2010] NSWCA 302 .................................... 15.20, 15.105 KMC Co v Irving Trust Co 757 F 2d 752 (6th Cir, 1985) ............................................ 10.150, 15.235 Kadissi v Jankovic [1987] VR 255 .............................................................................................. 17.80 Kamil Export (Aust) Pty Ltd v NPL (Australia) Pty Ltd [1996] 1 VR 538 ........................... 9.325, 9.350 Kayserian Nominees (No 1) Pty Ltd v J R Garner Pty Ltd [2008] NSWSC 803 .......................... 15.220 Keen Mar Corporation Pty Ltd v Labrador Park Shopping Centre Pty Ltd [1989] ATPR (Digest) 46,048 ................................................................................................................. 17.415 Kellas-Sharpe v PSAL Ltd [2012] QCA 371; [2013] 2 Qd R 233 ................................................. 19.55 Kenneth Allison Ltd v AE Limehouse & Co [1992] 2 AC 105 .................................................... 22.250 Kenny & Good Pty Ltd v MGICA (No 2) Ltd [1999] HCA 25; (1999) 100 CLR 413 .................. 21.135 Kerridge v Simmonds (1906) 4 CLR 253 ................................................................................... 20.95 Kewside Pty Ltd v Warman International Ltd [1990] ATPR (Digest) 46-059 .............................. 17.405 Kham & Nate’s Shoes No 2 Inc v First Bank of Whiting 908 F 2d 1351 (7th Cir, 1990) ........... 15.235 Khoury v Government Insurance Office of New South Wales (1984) 165 CLR 622 .................. 15.115 Khoury v Khouri [2006] NSWCA 184; (2006) 66 NSWLR 241 ............................................ 6.15, 6.75 Khoury v Sidhu [2011] FCAFC 71 ........................................................................................... 17.360 Kimberley NZI Finance Ltd v Torero Pty Ltd [1989] ATPR (Digest) 46-054 .................. 17.230, 17.235 King v Poggioli (1923) 32 CLR 222 ......................................................................................... 21.695 King’s Norton Metal Co Ltd v Edridge Merrett & Co (1897) 14 TLR 98 .................................. 16.185 Kingswood Estate Co Ltd v Anderson [1963] 2 QB 169 .............................................................. 6.75 Kizbeau Pty Ltd v WG & B Pty Ltd (1995) 184 CLR 281 .......................................................... 17.310 Konstantinidis v Baloglow [2000] NSWSC 1229 ......................................................................... 6.40 Koompahtoo Local Aboriginal Land Council v Sanpine Pty Ltd [2007] HCA 61; (2007) 233 CLR 115 .................................................................................. 1.100, 13.40, 13.60, 14.05, 14.45 Kostopoulos v GE Commercial Finance Australia Pty Ltd [2005] QCA 311 ..... 15.170, 15.185, 15.200 Kowalczuk v Accom Finance Pty Ltd [2008] NSWCA 343; (2008) 77 NSWLR 205 ....... 19.55, 19.130, 21.325 Krakowski v Eurolynx Properties Ltd (1995) 183 CLR 563 ............................... 17.10, 17.100, 17.120 Krell v Henry [1903] 2 KB 740 .................................................................................. 14.105, 14.155

L L G Thorne & Co Pty Ltd v Thomas Borthwick & Sons (Australasia) Ltd (1956) SR (NSW) 81 .... 9.110 L Shaddock & Associates Pty Ltd v Parramatta City Council (No 1) (1981) 150 CLR 225 .......... 1.130, 17.105, 17.130 L’Estrange v F Graucob Ltd [1934] 2 KB 394 ............................................................ 9.05, 9.15, 9.45 Lachlan v HP Mercantile Pty Ltd [2015] NSWCA 130 .............................................................. 21.530 Lam v Austotel Investments Australia Pty Ltd (1989) 97 FLR 458 ............................................. 17.230 Lampleigh v Brathwait (1616) Hob 105; 80 ER 255 .................................................................. 3.115 Lampropoulos v Kolnik [2010] WASC 193 ................................................................................... 7.35 Lantry v Tomule Pty Ltd [2007] NSWSC 81 .................................................................... 15.60, 15.75 Larkin v Girvan (1940) 40 SR (NSW) 365 .................................................................................. 3.150 Larking v Great Western (Nepean) Gravel Ltd (in liq) (1940) 64 CLR 221 ................................ 15.105 Larrikin Music Publishing Pty Ltd v EMI Songs Australia Pty Ltd [2010] FCA 29 ....................... 17.305 Larrikin Music Publishing Pty Ltd v EMI Songs Australia Pty Ltd (No 2) [2010] FCA 698 .......... 17.305 Latec Finance Pty Ltd v Knight [1969] 2 NSWR 79 .................................................................... 2.195 Laurelmont Pty Ltd v Stockdale & Leggo (Queensland) Pty Ltd [2001] QCA 212 ...................... 11.75 Laurinda Pty Ltd v Capalaba Park Shopping Centre Pty Ltd (1989) 166 CLR 623 ........ 14.20, 14.215, 14.220, 14.235 Laybutt v Amoco Australia Pty Ltd (1974) 132 CLR 57 ................................................... 2.105, 2.125 Le Mans Grand Prix Circuits Pty Ltd v Iliadis [1998] 4 VR 661 ..................................................... 9.25 Leach Nominees Pty Ltd v Walter Wright Pty Ltd [1986] WAR 244 ............................................ 2.205 Lee v Chai [2013] QSC 136 ...................................................................................................... 18.85 xxiv

Table of Cases

Legione v Hateley (1983) 152 CLR 406 ..... 15.170, 15.200, 15.205, 15.215, 15.220, 21.655, 22.30, 22.275 Leibler v Air New Zealand Ltd (No 2) [1991] 1 VR 1 .............................................................. 16.160 Lemura v Coppola [1960] Qd R 308 ....................................................................................... 21.430 Leroux v Brown (1852) 12 CB 801; 138 ER 1119 ........................................................................ 6.50 Leveraged Equities Ltd v Goodridge [2011] FCAFC 3; (2011) 191 FCR 71 ...................... 8.90, 19.130 Lewarne v Momentum Productions Pty Ltd [2007] FCA 1136 ................................................. 17.240 Lewis v Averary [1972] 1 QB 198 ........................................................................................... 16.190 Lexmead (Basingstoke) Ltd v Lewis [1982] AC 225 ................................................................. 21.240 Lezam Pty Ltd v Seabridge Australia Pty Ltd (1992) 35 FCR 535 ............................................. 17.410 Liberty Grove (Concord) Pty Ltd v Yeo [2006] NSWSC 1373 ................................................... 15.125 Life Insurance Co of Australia Ltd v Phillips (1925) 36 CLR 60 ................................................... 5.240 Life Savers (A/asia) Ltd v Frigmobile Pty Ltd [1983] 1 NSWLR 431 .............................................. 8.85 Lindner v Murdock’s Garage (1950) 83 CLR 628 ....................................................... 20.130, 20.150 Lintel Pines Pty Ltd v Nixon [1991] VR 287 ............................................................................. 13.135 Lipohar v The Crown [1999] HCA 65; (1999) 200 CLR 485 ...................................................... 19.90 Lister v Romford Ice and Cold Storage Co Pty Ltd [1957] AC 555 ............................................. 10.90 Liverpool City Council v Irwin [1977] AC 239 ................................................................ 10.50, 10.85 Livingstone v Roskilly [1992] 3 NZLR 230 ................................................................................... 9.80 Lloyd’s Ships Holdings Pty Ltd v Davros (1987) 17 FCR 505 ................................................... 20.140 Lobb v Vasey Housing Auxiliary (War Widows Guild) [1963] VR 239 ........................................ 14.165 Locke v Dunlop (1888) 39 Ch D 387 ........................................................................................ 9.260 Lockyer Investment Co Pty Ltd v Smallacombe (1994) 50 FCR 358 ........................................ 17.380 Lombardo v Morgan [1957] VR 153 ......................................................................................... 13.80 London Chatham and Dover Railway Co v South Eastern Railway Co [1893] AC 429 .............. 21.275 London Drugs Ltd v Kuehne & Nagel International Ltd [1992] 3 SCR 299 ............ 8.45, 8.155, 8.175 Long v Millar (1879) 4 CPD 450 ................................................................................................. 6.35 Lord Buddha Pty Ltd v Harpur [2013] VSCA 101; (2013) 41 VR 159 ....................................... 17.375 Louinder v Leis (1982) 149 CLR 509 ............................................................ 14.210, 14.220, 14.225 Louth v Diprose (1992) 175 CLR 621 ........................................................................... 18.05, 19.30 Lowe v Hope [1970] Ch 94 .................................................................................................... 21.495 Lucas Stuart Pty Ltd v Hemmes Hermitage Pty Ltd [2010] NSWCA 283 .................................. 21.690 Lumbers v W Cook Pty Ltd (in liq) (2008) 232 CLR 635 .............................................................. 8.45 Lumley v Wagner (1852) 1 De GM & G 604; 42 ER 687 ......................................................... 21.690 Luna Park (NSW) Ltd v Tramways Advertising Pty Ltd (1938) 61 CLR 286 ................................. 21.15 Luong Dinh Luu v Sovereign Developments Pty Ltd [2006] NSWCA 40; (2006) 12 BPR 98,203 ............................................................................................................................... 21.500 Lyndel Nominees Pty Ltd v Mobil Oil Australia Ltd (1997) IPR 599 ............................................ 2.140

M MBF Investments Pty Ltd v Nolan [2011] VSCA 114 .................................................................. 9.265 MFM Restaurants Pte Ltd v Fish & Co Restaurants Pte Ltd [2010] SGCA 36; [2011] 1 SLR 150 ....................................................................................................................... 21.145, 21.150 MK & JA Roche Pty Ltd v Metro Edgley Pty Ltd [2005] NSWCA 39 ................ 13.100, 15.175, 22.250 MK & JA Roche Pty Ltd v Metro Edgley Pty Ltd [2006] NSWSC 810 ........................................ 13.100 MWH Australia Pty Ltd v Wynton Stone Australia Pty Ltd [2010] VSCA 245; (2010) 31 VR 575 ......................................................................................................................... 9.340, 17.375 MacDonald v Longbottom (1860) 1 El & El 977; 120 ER 1177 ................................................. 9.133 MacRobertson Miller Airline Services v Commissioner of State Taxation (WA) (1975) 133 CLR 125 ................................................................................................... 2.05, 2.35, 2.85, 5.175 Mackay v Dick (1881) 6 App Cas 251 ....................................................................................... 13.80 Macquarie International Health Clinic Pty Ltd v Sydney South West Area Health Service [2010] NSWCA 268 ........................................................................ 10.135, 10.150, 11.75, 15.80 Madden v Kevereski [1983] 1 NSWLR 305 .............................................................................. 21.695 Madden v Seafolly Pty Ltd [2014] FCAFC 30 .......................................................................... 17.190 Maddison v Alderson (1883) 8 App Cas 467 ...................................................................... 6.50, 6.75 Maggbury Pty Ltd v Hafele Australia Pty Ltd [2001] HCA 70; (2001) 210 CLR 181 ......... 9.260, 9.267 Mahmoud and Ispahani, Re [1921] 2 KB 716 ........................................................................... 20.25 Mahoney v Lindsay (1980) 33 ALR 601 .................................................................................... 15.75 xxv

Contract Law: Principles, Cases and Legislation

Mainline Investments Pty Ltd v Davlon Pty Ltd [1969] 2 NSWR 392 ........................................... 6.15 Mainteck Services Pty Ltd v Stein Heurtey SA [2014] NSWCA 184 ............................................ 9.270 Majik Markets Pty Ltd v S & M Motor Repairs Pty Ltd (No 1) (1987) 10 NSWLR 49 ................ 15.165 Malec v J C Hutton Pty Ltd (1990) 169 CLR 638 ....................................................................... 21.90 Malhotra v Choudhury [1980] Ch 52 ..................................................................................... 21.280 Mahmud v Bank of Credit and Commerce International SA (in liq) [1998] AC 20 ................... 21.210 Mallesons Stephen Jaques v Trenorth Ltd [1999] 1 VR 727 ..................................................... 21.135 Manchester Diocesan Council v Commercial & General Investments Ltd [1970] 1 WLR 241 ..... 2.125 Mangrove Mountain Quarries Pty Ltd v Barlow [2007] NSWSC 492 ....................................... 15.235 Manna v Manna [2008] ACTSC 10 ........................................................................................... 16.95 Mannai Investments Co Pty Ltd v Eagle Star Life Assurance Co Ltd [1997] AC 749 .................... 9.260 Manning Motel Pty Ltd v DH MB Pty Ltd [2013] NSWSC 1582 ................................................ 9.165 Manufacturers’ Mutual Insurance Ltd v Withers (1988) 5 ANZ Insurance Cases 60-853 ............ 9.133 Maple Flock Co Ltd v Universal Furniture Products (Wembley) Ltd [1934] 1 KB 148 ................. 14.65 Maralinga Pty Ltd v Major Enterprises Pty Ltd (1973) 128 CLR 336 ........................................ 16.115 March v E & MH Stramare Pty Ltd (1991) 171 CLR 506 ............................................ 17.380, 21.135 Mardorf Peach & Co Ltd v Attica Sea Carriers Corporation of Liberia [1977] AC 850 ............... 15.135 Maritime National Fish Ltd v Ocean Trawlers Ltd [1935] AC 524 ............................................ 14.165 Marks v GIO Australia Holdings Ltd (1996) 63 FCR 304 .......................................................... 10.120 Marks v GIO Australia Holdings Ltd [1998] HCA 69; (1998) 196 CLR 494 ...... 1.145, 17.315, 17.320, 17.325, 17.350, 17.355, 17.380, 17.395 Martel Building Ltd v Canada [2000] 2 SCR 800 ......................................................................... 2.80 Master Education Services Pty Ltd v Ketchell [2008] HCA 38; (2008) 236 CLR 101 ...... 20.30, 20.45, 20.50 Masters v Cameron (1954) 91 CLR 353 ..................................................................................... 4.80 Masterton Homes Pty Ltd v Palm Assets Pty Ltd [2009] NSWCA 234 ................... 9.110, 9.130, 9.145 Materials Fabrication Pty Ltd v Baulderstone Pty Ltd [2009] VSC 405 ...................................... 20.180 Maxitherm Boilers Pty Ltd v Pacific Dunlop Ltd [1998] 4 VR 559 ................................................ 9.80 May and Butcher Ltd v The King [1934] 2 KB 17n ...................................................................... 5.20 Maybury v Atlantic Union Oil Co Ltd (1953) 89 CLR 507 .......................................................... 9.165 Maynard v Goode (1926) 37 CLR 529 ......................................................................... 13.75, 13.115 McBride v Sandland (1918) 25 CLR 69 .............................................................................. 6.60, 6.75 McCann v Switzerland Insurance Australia Ltd (2000) 203 CLR 579 .......................................... 9.267 McCourt v Cranston [2012] WASCA 60 .................................................................................... 9.270 McCrohon v Harith [2010] NSWCA 67 ..................................................................................... 21.95 McDermott v Black (1940) 63 CLR 161 .................................................................... 13.150, 13.160 McDonald v Dennys Lascelles Ltd (1933) 48 CLR 457 ....................... 15.35, 21.410, 21.445, 21.485 McFarlane v Daniell (1938) 38 SR (NSW) 337 ......................................................................... 20.135 McGrath Motors (Canberra) Pty Ltd v Applebee (1964) 110 CLR 656 ..................................... 17.100 McHugh v Australian Jockey Club Ltd [2014] FCAFC 45 .......................................................... 20.130 McKenzie v McDonald [1927] VLR 134 ......................................................................... 17.75, 17.80 McMahon v National Foods Milk Ltd [2009] VSCA 153 .......................................................... 10.140 McRae v Commonwealth Disposals Commission (1951) 84 CLR 377 ..... 9.310, 16.10, 16.35, 16.45, 21.15, 21.60, 21.65, 21.75 McTier v Haupt [1992] 1 VR 653 .............................................................................................. 13.65 Medical Benefits Fund of Australia v Cassidy [2003] FCAFC 289; (2003) 135 FCR 1 ................ 17.405 Meehan v Jones (1982) 149 CLR 571 ............................. 5.180, 5.185, 10.140, 13.75, 13.80, 13.90 Mehmet v Benson (1965) 113 CLR 295 ........................................... 14.255, 21.600, 21.655, 21.660 Melachrino v Nickoll and Knight [1920] 1 KB 693 ..................................................... 21.290, 21.295 Meriton Apartments Pty Ltd v McLaurin & Tait (Developments) Pty Ltd (1976) 133 CLR 671 .... 14.150 Merrell Associates Ltd v HL (Qld) Nominees Pty Ltd [2010] SASC 155 ......................................... 8.45 Mersey Steele and Iron Co Ltd v Naylor Benzon & Co (1884) 9 App Cas 434 ......................... 21.420 Mertens v Home Freeholds Co [1921] 2 KB 526 ..................................................................... 14.165 Metcalfe v NZI Securities Australia Ltd [1995] ATPR 41-418 .................................................... 17.385 Metropolitan Water Board v Dick Kerr & Co [1918] AC 119 .................................................... 14.150 Miba Pty Ltd v Nescor Industries Group Pty Ltd (1996) 141 ALR 525 ...................................... 17.245 Mid Density Development Pty Ltd v Rockdale Municipal Council (1992) 39 FCR 579 ............. 17.190 Mid Essex Hospital Services NHS Trust v Compass Group UK and Ireland Ltd [2013] EWCA Civ 200 .............................................................................................................................. 10.125 Miles v Genesys Wealth Advisors Ltd [2009] NSWCA 25 .......................................................... 20.150 xxvi

Table of Cases

Miles v New Zealand Alford Estate Co (1886) 32 Ch D 266 ........................................................ 6.55 Miller v Miller (2011) 242 CLR 446 ............................................................................ 20.255, 20.285 Miller & Associates Insurance Broking Pty Ltd v BMW Australia Finance Ltd [2010] HCA 31; (2010) 241 CLR 357 ............................................................................................... 17.05, 17.230 Milne v Attorney-General (Tas) (1956) 95 CLR 460 ..................................................................... 5.15 Mitchell v Valherie [2005] SASC 350; (2005) 93 SASR 76 .......................................................... 17.15 Miwa Pte Ltd v Siantan Properties Pte Ltd [2011] NSWCA 297 ...................................... 9.260, 9.265 Mizzi v Reliance Financial Services Pty Ltd [2007] NSWSC 37 .......................................... 8.45, 8.100 Mobil Oil Australia Ltd v Wellcome International Pty Ltd (1998) 81 FCR 475 .... 2.140, 2.145, 22.225 Molton v Camroux (1848) 2 Exch 487; 154 ER 584 .................................................................... 7.35 Moorcock, The (1889) LR 14 PD 64 ............................................................................... 10.30, 10.55 Morris (dec’d), Re (1943) 43 SR (NSW) 352 ............................................................................. 20.60 Munchies Management Pty Ltd v Belperio (1988) 58 FCR 274 ............................................... 17.395 Munkenbeck & Marshall v Harold [2005] EWHC 356 ............................................................... 11.45 Murphy v Overton Investments Pty Ltd [2000] FCA 801 ......................................................... 17.355 Murphy v Overton Investments Pty Ltd [2001] FCA 500; (2001) 112 FCR 182 .......... 17.320, 17.355, 22.280 Murphy v Overton Investments Pty Ltd [2004] HCA 3; (2004) 216 CLR 388 ............. 17.310, 17.320, 17.355 Murphy v Zamonex Pty Ltd (1993) 31 NSWLR 439 .................................................................. 15.20 Murray Irrigation Ltd v Balsdon [2006] NSWCA 253; (2006) 67 NSWLR 73 .............................. 21.85 Musca v Astle Corp Pty Ltd (1988) 80 ALR 251 ....................................................................... 17.325 Musumeci v Winadell Pty Ltd (1994) 34 NSWLR 723 ......................................... 3.125, 3.160, 3.175 Mutual Life & Citizens’ Assurance Co Ltd v Evatt (1968) 122 CLR 556 .................................... 17.105 Mutual Life & Citizens’ Assurance Co Ltd v Evatt [1971] AC 793 ............................................. 17.105

N NLS Pty Ltd v Hughes (1966) 120 CLR 583 ............................................................... 21.480, 21.500 NSW Cancer Council v Sarfaty (1992) 28 NSWLR 68 ................................................................ 9.110 NSW Rifle Association Inc v The Commonwealth of Australia [2012] NSWSC 818 ................... 10.165 NT Power Generation Pty Ltd v Power and Water Authority [2001] FCA 334 ........................... 10.165 Nagy v Masters Dairy Ltd (1996) 150 ALR 273 .......................................................... 17.230, 17.235 National Westminster Bank v Ross 130 BR 656 (SDNY ............................................................ 15.235 National Westminster Bank plc v Morgan [1985] 1 AC 686 ....................................................... 18.85 Nav Canada v Greater Fredericton Airport Authority Inc (2008) 290 DLR (4th) 405 .................. 3.160 Naylor Benzon & Co v Krainische Industrie Gesellschaft [1918] 1 KB 331 ................................. 20.60 Nea Pty Ltd v Magenta Mining Pty Ltd [2007] WASCA 70 .......................................... 17.405, 17.410 Neale v Ancher Mortlock & Woolley Pty Ltd [2014] NSWCA 72 ................................................ 9.270 Neill v Hewens (1953) 89 CLR 1 ...................................................................................... 2.130, 6.40 Neilsen v Dysart Timbers Limited [2009] NZSC 43; [2009] 3 NZLR 160 .................................... 2.130 Nelson v Nelson (1995) 184 CLR 538 .................................................. 20.70, 20.90, 20.255, 20.285 Nemeth v Bayswater Road Pty Ltd [1988] 2 Qd R 406 ................................................. 9.110, 21.425 Nesbit v Porter [2000] 2 NZLR 465 ......................................................................................... 11.190 Network Ltd v Lynton Ainsley Speck [2009] VSC 235 .............................................................. 10.155 Nevanas & Co v Walker [1914] 1 Ch 413 ............................................................................... 20.235 New South Wales Lotteries Corporation Pty Ltd v Kuzmanovski [2011] FCAFC 106; (2011) 195 FCR 234 ............................................................................................................. 9.65, 17.325 New Zealand Pelt Export Company Ltd v Trade Indemnity New Zealand Ltd [2004] VSCA 163 .................................................................................................................................... 22.265 New Zealand Shipping Co Ltd v AM Satterthwaite & Co Ltd (The Eurymedon) [1975] AC 154 ........................................................................................................................................ 8.60 New Zealand Shipping Co Ltd v Société des Ateliers et Chantiers de France [1919] AC 1 ........ 13.100 Newbon v City Mutual Life Assurance Society Ltd (1935) 52 CLR 723 .................................... 22.182 Newey v Westpac Banking Corporation [2014] NSWCA 319 .......................................... 9.260, 9.270 Newmont Pty Ltd v Laverton Nickel NL [1983] 1 NSWLR 181 .................................................. 13.80 News Ltd v Australian Rugby Football League Ltd (1996) 58 FCR 447 ........................ 10.130, 10.132 Newtronics Pty Ltd (recs & mgrs appd) (in liq) v Atco Controls Pty Ltd (in liq) [2008] VSC 566 ........................................................................................................................................ 3.35 Nguyen v Taylor (1992) 27 NSWLR 48 ................................................................................... 19.165 xxvii

Contract Law: Principles, Cases and Legislation

Nicholas v Thompson [1924] VLR 554 ...................................................................... 17.130, 17.135 Nicolazzo v Harb [2009] VSCA 79 ............................................................................................. 9.110 Nikolich v Goldman Sachs JB Were Services Pty Ltd [2006] FCA 784 ....................................... 17.320 Nissho Iwai Australia Ltd v Malaysian International Shipping Corporation, Berhad (1989) 167 CLR 219 ............................................................................ 9.290, 9.305, 9.310, 9.315, 9.325 Nixon v Philip Morris (Australia) Ltd [1999] FCA 1107; (1999) 95 FCR 453 ............................. 17.325 Nordenfelt v The Maxim Nordenfelt Guns and Ammunition Company Ltd [1894] AC 535 .... 20.130, 20.155 North v Marra Developments Ltd (1981) 148 CLR 42 .................................................. 20.65, 20.195 North East Equity Pty Ltd v Proud Nominees Pty Ltd [2010] FCAFC 60 ...................... 17.240, 17.310 North Ocean Shipping Co Ltd v Hyundai Construction Co Ltd [1979] QB 705 .............. 3.190, 3.215 Northern Sandblasting Pty Ltd v Harris (1997) 188 CLR 313 .................................................... 8.200 Norton v Angus (1926) 38 CLR 523 ............................................................. 21.665, 21.675, 21.695 Norwegian American Cruises A/S v Paul Mundy Ltd (The Visafjord) [1988] 2 Lloyd’s Rep 343 .... 22.250 Norwest Refrigeration Services Pty Ltd v Bain Dawes (WA) Pty Ltd (1984) 157 CLR 149 ............ 17.85 Noske Bros Pty Ltd v Leys [1930] SASR 43 .................................................................................. 6.55 Nosske v McGinnis (1932) 47 CLR 563 ................................................................................... 21.280 Nunin Holdings Pty Ltd v Tullamarine Estates Pty Ltd [1994] 1 VR 74 ....................................... 2.200 Nyhuis v Anton [1980] Qd R 34 .................................................................................. 13.70, 13.120

O O’Brien v MGN Ltd [2001] EWCA Civ 1279 ................................................................................ 9.80 O’Brien v Smolonogov (1983) 53 ALR 107 ............................................................................. 17.190 O’Connor v SP Bray Ltd (1936) 36 SR (NSW) 248 .................................................................. 15.135 O’Dea v Allstates Leasing System (WA) Pty Ltd (1983) 152 CLR 359 ............ 21.305, 21.320, 21.500, 21.530 O’Meara v Dominican Fathers [2003] ACTCA 24; (2003) 153 ACTR 1 ..................................... 21.255 O’Young v Walter Reid & Co Ltd (1932) 47 CLR 497 .................................................................. 6.30 Occidental Worldwide Investment Corps v Skibs A/S Avanti (The “Siboen” and The “Sibotre”) [1976] 1 Lloyd’s Rep 293 .................................................................................... 18.60 Ocean Tramp Tankers Corp v V/O Sovfracht (The Eugenia) [1964] 2 QB 226 ......................... 14.165 Oceanic Sun Line Special Shipping Co Inc v Fay (1988) 165 CLR 197 ...................... 2.45, 2.85, 9.55 Office of Fair Trading v Ashbourne Management Services Ltd [2011] EWHC 1237 ......... 11.50, 11.65 Office of Fair Trading v MB Designs [2005] CSOH 85 ............................................................... 11.40 Ogilvie v Ryan [1976] 2 NSWLR 504 .................................................................................. 6.75, 6.80 Ogle v Comboyuro Investments Pty Ltd (1976) 136 CLR 444 .................................... 14.255, 15.145 Olivaylle Pty Ltd v Flottweg AG (No 4) [2009] FCA 522; (2009) 255 ALR 632 ........................... 2.310 Olsson v Dyson (1969) 120 CLR 365 .......................................................................................... 8.90 On Demand Information plc v Gerson (Finance) Plc [2001] 1 WLR 155 .................................. 15.195 Onesteel Manufacturing Pty Ltd v Bluescope Steele (AIS) Pty Ltd [2013] NSWCA 27; (2013) 85 NSWLR 1 ........................................................................................................................ 9.260 Ontario v Ron Engineering & Construction Eastern Ltd (1981) 1 SCR 111 .................................. 2.80 Ooh! Media Roadside Pty Ltd (formerly Power Panels Pty Ltd) v Diamond Wheels Pty Ltd & Anor [2011] VSCA 116; (2011) 32 VR 255 .......................................................................... 14.155 Ormes v Beadel (1860) 2 Giff 166; 45 ER 649 ........................................................................... 18.25 Ormwave Pty Ltd v Smith [2007] NSWCA 210 ........................................................................... 5.15 Oscar Chess Ltd v Williams [1957] 1 WLR 370 ......................................................................... 9.158 Overlook Management BV v Foxtel Management Pty Ltd [2002] NSWSC 17 ............. 10.130, 10.132 Overseas Private Investment Corporation v Industria de Pesca NA Inc 920 F Supp 207 (DC Cir, 1996) .......................................................................................................................... 15.235 Owners of SS “Mediana” v Owners etc of SS “Comet” [1900] AC 113 ..................................... 21.15

P PSAL Ltd v Kellas-Sharpe [2012] QSC 31 .................................................................................. 19.55 Paal Wilson and Co A/S v Partenreederei Hannah Blumenthal (The Hannah Blumenthal) [1983] 1 AC 854 ............................................................ 13.170, 14.135, 14.155, 14.160, 14.165 xxviii

Table of Cases

Pacific Brands Sport & Leisure Pty Ltd v Underworks Pty Ltd [2005] FCA 288 ........... 10.125, 10.135, 15.230 Pacific Brands Sport & Leisure Pty Ltd v Underworks Pty Ltd [2006] FCAFC 40; (2006) 149 FCR 395 ....................................................................................................... 8.90, 10.125, 10.135 Pacific Carriers Ltd v BNP Paribas [2004] HCA 35; (2004) 218 CLR 451 ............. 9.265, 9.267, 9.275, 9.285 Pacific Dunlop Ltd v Hogan (1989) 23 FCR 553 ...................................................................... 17.215 Paciocco v Australia and New Zealand Banking Group Ltd [2015] FCAFC 50 ............ 10.150, 19.165, 21.305, 21.310, 21.330, 21.350 Page One Records Ltd v Britton [1968] 1 WLR 157 ................................................................. 21.690 Pagnan SpA v Feed Products Ltd [1987] 2 Lloyd’s Rep 601 ......................................................... 5.15 Pakallus v Cameron (1982) 180 CLR 447 ............................................................................... 16.120 Paltara Pty Ltd v Dempster [1991] 6 WAR 85 .......................................................................... 10.140 Pan Foods Company Importers & Distributors Pty Ltd v Australia and New Zealand Banking Group Ltd [2000] HCA 20 .................................................................................................. 13.135 Pankhania v London Borough of Hackney [2002] EWHC 2441 ................................................. 17.25 Pao On v Lau Yiu Long [1980] AC 614 ............................................................... 3.190, 3.200, 18.65 Park v Brothers [2005] HCA 73 .................................................................................. 13.120, 15.145 Parkdale Custom Built Furniture Pty Ltd v Puxu Pty Ltd (1982) 149 CLR 191 ............. 17.205, 17.215 Parramatta Design & Developments Pty Ltd v Concrete Pty Ltd [2005] FCAFC 138; (2005) 144 FCR 264 ........................................................................................................................ 10.05 Patrick Stevedores Operations No 2 Pty Ltd v Maritime Union of Australia [1998] HCA 30; (1998) 195 CLR 1 .............................................................................................................. 21.635 Pau On v Lau Yiu Long [1980] AC 614 ...................................................................................... 3.195 Pavey & Matthews Pty Ltd v Paul (1987) 162 CLR 221 .................................................... 1.150, 6.85 Payne v Cave (1789) 3 TR 148; 100 ER 502 ................................................................................ 2.75 Pearce v Gardner [1897] 1 QB 688 ............................................................................................. 6.35 Pearse, Re [1905] VLR 446 ........................................................................................................ 3.130 Pearson v HRX Holdings Pty Ltd [2012] FCAFC 111; (2012) 205 FCR 187 ............................... 20.150 Pedashenko v Blacktown City Council (1996) 39 NSWLR 189 ................................................... 17.80 Perpetual Executors & Trustees Association of Australia Ltd v Russell (1931) 45 CLR 146 .... 6.10, 6.55 Perpetual Trustee Co Ltd v Khoshaba [2006] NSWCA 41 ........................................... 19.165, 19.170 Perpetual Trustees Australia Ltd v Schmidt [2010] VSC 67 .............................................. 8.60, 19.130 Perpetual Trustees Victoria Ltd v Ford [2008] NSWSC 29; (2008) 70 NSWLR 611 ................... 16.175 Perri v Coolangatta Investments Pty Ltd (1982) 149 CLR 537 .... 13.70, 13.75, 13.80, 13.85, 13.100, 13.105, 13.110, 13.115 Petelin v Cullen (1975) 132 CLR 355 ..................................................................................... 16.170 Peter Bodum A/S v DKSH Australia Pty Ltd [2011] FCAFC 98 .................................................. 17.205 Peter Smythe v Vincent Thomas [2007] NSWSC 844 .............................................................. 11.135 Peter Turnbull & Co Pty Ltd v Mundus Trading Co (Australasia) Pty Ltd (1954) 90 CLR 235 .... 15.20, 15.85 Peters (WA) Ltd v Petersville Ltd [2001] HCA 45; (2001) 205 CLR 126 .................................... 20.165 Peters American Delicacy Co Ltd v Champion (1928) 41 CLR 316; 34 ALR 317 ....................... 20.235 Peters American Delicacy Co Ltd v Patricia’s Chocolates and Candies Pty Ltd (1947) 77 CLR 574 .................................................................................................................................... 20.235 Peters Ice Cream (Vic) Ltd v Todd [1961] VR 485 ...................................................... 20.230, 20.235 Peterson v Merck Sharpe & Dohme (Aust) Pty Ltd [2010] FCA 180 ......................................... 11.160 Pethybridge v Stedikas Holdings Pty Ltd [2007] NSWCA 154 .................................................... 9.130 Petrofina (Gt Britain) Ltd v Martin [1966] Ch 146 ................................................................... 20.145 Petromec Inc v Petroleo Brasileiro SA [2005] EWCA Civ 891 ..................................................... 5.110 Petty v Penfold Wines Pty Ltd (1994) 49 FCR 282 ................................................................... 17.220 Pharmanceutical Society of Great Britain v Boots Cash Chemists (Southern) Ltd [1953] 1 QB 401 .............................................................................................................................. 2.60, 2.70 Phillips v Ellinson Brothers Pty Ltd (1941) 65 CLR 221 ............................................... 21.415, 21.435 Photo Production Ltd v Securicor Transport Ltd [1980] AC 827 ..................................... 9.290, 9.350 Picwoods Pty Ltd v Panagopoulos [2004] NSWSC 978 ............................................................... 8.60 Pierce Bell Sales Pty Ltd v Frazer (1973) 130 CLR 575 ............................................................. 15.220 Pilmer v The Duke Group Ltd (in liq) [2001] HCA 31; (2001) 207 CLR 165 ............................... 17.75 Pinnel’s case (1602) 5 Co Rep 117a; 77 ER 237 ........................................................................ 3.130 Pioneer Container, The [1994] 2 AC 324 .................................................................................... 8.50 xxix

Contract Law: Principles, Cases and Legislation

Pioneer Park Pty Ltd v ANZ Banking Group Ltd [2006] NSWSC 883 .......................................... 11.75 Pioneer Shipping Ltd v BTP Tioxide Ltd (The Nema) [1982] AC 724 ....................................... 14.155 Pirie v Saunders (1961) 104 CLR 149 ........................................................................ 6.25, 6.30, 6.40 Placer Development Ltd v The Commonwealth (1969) 121 CLR 353 ....... 3.105, 4.60, 5.220, 5.175, 22.265 Placer (Granny Smith) Pty Ltd v Thiess Contractors Pty Ltd [2003] HCA 10; (2003) 196 ALR 257 ...................................................................................................................................... 21.15 Plimer v Roberts (1997) 80 FCR 303 ....................................................................................... 17.190 Pola v Commonwealth Bank of Australia (unreported, 1997) ...................................................... 8.60 Port Jackson Stevedoring Pty Ltd v Salmond & Spraggon (Australia) Pty Ltd [1978] HCA 8; (1978) 139 CLR 231 .................................................................................................... 8.60, 8.65 Port Jackson Stevedoring Pty Ltd v Salmond & Spraggon (Australia) Pty Ltd (1980) 144 CLR 300 ........................................................................................................................................ 8.60 Porter v Latec Finance (Qld) Pty Ltd (1964) 111 CLR 177 ....................................................... 16.196 Poseidon Ltd v Adelaide Petroleum NL (1991) 105 ALR 25 ..................................................... 17.230 Posgold (Big Bell) Pty Ltd v Placer (Western Australia) Pty Ltd [1999] WASCA 217; (1999) 21 WAR 350 .............................................................................................................................. 9.130 Pottinger v George (1967) 116 CLR 328 ................................................................................. 21.675 Poulet Frais Pty Ltd v The Silver Fox Company Pty Ltd [2005] FCAFC 131 .................. 17.400, 17.405 Powell v Jones [1968] SASR 394 ............................................................................................... 5.175 Powercell Pty Ltd v Cuzeno Pty Ltd [2004] NSWCA 51 ........................................................... 22.235 Powys v Brown (1924) 25 SR (NSW) 65 ................................................................................. 21.280 Prestia v Aknar (1996) 40 NSWLR 165 .................................................................................... 17.195 Pricom Pty Ltd v Sgarioto [1994] ATPR (Digest) 46-135 .......................................................... 17.190 Principal Properties Pty Ltd v Brisbane Broncos Leagues Club Ltd [2013] QSC 148; [2014] 2 Qd R 132 ........................................................................................................................... 13.100 Printing and Numerical Registering Co v Sampson (1875) LR 19 Eq 462 .................................... 1.10 Progressive Mailing House Pty Ltd v Tabali Pty Ltd (1985) 157 CLR 17 .............. 14.20, 14.50, 15.10, 21.270, 21.285 Pryor v Given (1980) 30 ALR 189 .............................................................................................. 17.15 Public Trustee v Taylor [1978] VR 289 ........................................................................... 17.25, 17.45 Purcell v Bacon (1914) 19 CLR 241 ........................................................................................ 21.425 Purkess v Crittenden (1965) 114 CLR 164 .............................................................................. 22.182 Putsman v Taylor [1927] 1 KB 637 .......................................................................................... 20.235

Q Qin v Smith (No 2) [2013] VSC 476 ....................................................................................... 15.105 Quadramain Pty Ltd v Sevastapol Investments Pty Ltd (1976) 133 CLR 390 ............................ 20.165 Quinn Villages Pty Ltd v Mulherin [2006] QCA 433 ................................................................ 13.100 Quirke v FCL Interstate Transport Services Pty Ltd [2005] SASC 226; (2005) 92 SASR 249 ........ 9.260

R R v Judges of the Federal Court of Australia; Ex parte Western Australian National Football League (1978) 143 CLR 190 ................................................................................................ 1.185 R & C Products Pty Ltd v SC Johnson & Son Pty Ltd [1994] ATPR 41-364 ............................... 17.205 R (Westminster City Council) v National Asylum Support Service [2002] UKHL 38; (2002) 1 WLR 2956 ............................................................................................................................ 9.265 Radford v De Froberville [1977] 1 WLR 1262 ............................................................... 21.35, 21.200 Raffles v Wichelhaus (1864) 2 H&C 906; 159 ER 375 .............................................................. 16.130 Rail Corporation of New South Wales v Fluor Australia Pty Ltd [2008] NSWSC 1348 ................... 8.45 Railways (NSW), Commissioner for v Quinn (1946) 72 CLR 345 ............................................... 9.340 Rainy Sky SA v Kookmin Bank [2011] 1 WLR 2900; [2012] 1 All ER 1137 ................................... 9.267 Ramsden v Dyson (1866) LR 1 HL 129 ......................................................................... 22.05, 22.182 Ramsey v Vogler (1999) 44 IPR 153 ........................................................................................ 17.140 Randazzo v Goulding [1968] Qd R 433 ...................................................................................... 5.15 Rasch Nominees Pty Ltd v Bartholomaeus [2012] SASC 70; (2012) 114 SASR 448 .................. 13.100 Rasell v Cavalier Marketing (Aust) Pty Ltd (1990) 96 ALR 375 ................................................. 11.160 xxx

Table of Cases

Rawson v Hobbs (1961) 107 CLR 466 ........................................................................... 15.45, 15.80 Reardon v Morley Ford Pty Ltd (1980) 33 ALR 417 ..................................................................... 2.70 Reardon Smith Line Ltd v Hansen-Tangen ([1976] 1 WLR 989; [1976] 3 All ER 570 ........ 9.267, 9.285 Redgrave v Hurd (1881) 20 Ch D 1 ............................................................. 17.120, 17.125, 17.395 Reese Bros Plastics Ltd v Hamon-Sobelco Australia Pty Ltd (1988) 5 BPR 11,106 ....................... 2.310 Regazzoni v KC Sethia (1944) Ltd [1958] AC 301 ................................................................... 20.120 Regent v Millett (1976) 133 CLR 679 ................................................................... 6.70, 6.75, 21.620 Rehins Pty Ltd v Debin Nominees Pty Ltd (No 2) [2011] WASC 168 ........................................ 13.100 Reid v Key Bank 821 F 2d 9 (1st Cir, 1987) ............................................................................. 15.235 Relwood Pty Ltd v Manning Homes Pty Ltd [1990] 1 Qd R 481 .................................................. 5.20 Renard Constructions (ME) Pty Ltd v Minister for Public Works (1992) 26 NSWLR 234 ............ 1.100, 10.120, 10.125, 10.130, 10.132, 10.150, 13.90, 13.95, 15.220, 15.230, 15.235 Renowden v Hurley [1951] VLR 13 ............................................................................ 21.640, 21.675 Reynolds v Atherton (1921) 125 LT 690 .................................................................................... 2.125 Rhone v Stephens [1994] 2 AC 310 ............................................................................................ 8.50 Rhone-Poulenc Agrochimie SA v UIM Chemical Services Pty Ltd (1986) 12 FCR 477 .............. 17.230, 17.235 Richardson v Mellish (1824) 2 Bing 229 ................................................................................... 20.60 Riches v Hogben [1985] 2 Qd R 292 ............................................................ 22.220, 22.235, 22.270 Riches v Hogben [1986] 1 Qd R 315 ................................................................................. 6.15, 6.80 Ricochet Pty Ltd v Equity Trustees Executor & Agency Co Ltd (1993) 41 FCR 229 .................. 17.375 Rinaldi & Patroni Pty Ltd v Precision Mouldings Pty Ltd (1986) WAR 131 ................................... 9.90 Ringrow Pty Ltd v BP Australia Pty Ltd [2005] HCA 71; (2005) 224 CLR 656 ............. 11.100, 21.305, 21.315 Ritter v North Side Enterprises Pty Ltd (1975) 132 CLR 301 ...................................................... 17.15 Riviera Holdings Pty Ltd v Fingal Glen Pty Ltd [2013] SASC 77; (2013) 120 SASR 450 ............ 15.215 Roadshow Entertainment Pty Ltd v (ACN 053 006 269) Pty Ltd (Receiver & Manager appointed) (1997) 42 NSWLR 462 ....................................................................................... 15.75 Robinson v ANZ Banking Group Ltd [1990] ASC 55-979 ............................................ 19.165, 19.170 Robinson v Harman [1848] EngR 135; (1848) 1 Exch 850; 154 ER 363 .............. 21.10, 21.30, 21.85 Robophone Facilities Ltd v Blank [1966] 1 WLR 1428 .................................................. 2.195, 21.150 Romanos v Pentagold Investments Pty Ltd [2003] HCA 58; (2003) 217 CLR 367 .................... 15.200 Ronim Pty Ltd, Re [1989] 2 Qd R 172 ....................................................................................... 10.30 Ronnoc Finance v Spectrum Network Systems Ltd (1997) 45 NSWLR 624 ................... 21.20, 21.290 Roscorla v Thomas (1842) 3 QB 234; 114 ER 496 ......................................................... 3.110, 3.120 Rosser v Austral Wine and Spirit Co Pty Ltd [1980] VR 313 .......................................................... 6.25 Roxborough v Rothmans of Pall Mall Australia Ltd (2001) 208 CLR 516 .................................. 20.255 Royal Botanic Gardens and Domain Trust v South Sydney City Council [2002] HCA 5; (2002) 240 CLR 45 .................................................... 9.133, 9.265, 9.275, 9.280, 9.285, 10.125 Ruddock v Taylor [2003] NSWCA 262; (2003) 58 NSWLR 269 ................................................ 17.380 Russell v Adwon Pty Ltd [2000] ACTSC 90; (2001) 144 ACTR 1 .............................................. 21.495 Ruxley Electronics and Constructions Ltd v Forsyth [1996] 1 AC 344 ............................. 21.35, 21.50

S S v W & N Ltd [2010] NZ Disp T 33 ....................................................................................... 11.180 SWF Hoists and Industrial Equipment Pty Ltd v State Government Insurance Commission [1990] ATPR 41-043 ........................................................................................................... 17.285 Sacher Investments Pty Ltd v Forma Stereo Consultants Pty Ltd [1976] 1 NSWLR 5 ................ 21.180 Sagacious Procurement Pty Ltd v Symbion Health Ltd (formerly Mayne Group Ltd) [2008] NSWCA 149 ........................................................................................................................ 9.130 St George Bank Ltd v Trimarchi [2004] NSWCA 120 ............................................................... 19.165 St John Shipping Corp v Joseph Rank Ltd [1957] 1 QB 267 ........................................... 20.30, 20.40 St Martin’s Property Corporation Ltd v Sir Robert McAlpine Ltd [1994] 1 AC 85 ....................... 8.165 Saleh v Romanous [2010] NSWCA 274; (2010) 79 NSWLR 453 ....... 9.190, 22.185, 22.250, 22.255, 22.260 Sanderson Motors (Sales) Pty Ltd v Yorkstar Motors Pty Ltd [1983] 1 NSWLR 513 ................... 21.690 Sandra Investments Pty Ltd v Booth (1983) 153 CLR 153 ....................................................... 13.115 Sargent v ASL Developments Ltd (1974) 131 CLR 634 ......... 15.95, 15.115, 15.120, 15.130, 15.135, 15.180, 15.185 xxxi

Contract Law: Principles, Cases and Legislation

Savoy Investments (Qld) Pty Ltd v Global Nominees Pty Ltd [2008] QCA 282 ........................ 15.115 Scally v Southern Health and Social Services Board [1992] 1 AC 294 ............................. 10.85, 10.90 Schneider v Norris (1814) 2 M & S 286; 105 ER 388 .................................................................. 6.40 Schwartz v Hadid [2013] NSWCA 89 ........................................................................................ 9.260 Scolio Pty Ltd v Cote (1992) 6 WAR 475 ................................................................................... 18.25 Scotson v Pegg (1861) 6 H & N 295; 158 ER 121 .................................................................... 3.195 Scott v Avery (1856) 5 HL Cas 811; 10 ER 1121 ...................................................................... 20.180 Scott v White [1938] VLR 188 ..................................................................................................... 6.70 Scott Carver Pty Ltd v SAS Trustee Corporation [2005] NSWCA 462 ......................................... 21.45 Scott Motorcycle Supply Inc v American Honda Motor Company Inc 976 F 2d 58 (1st Cir, 1992) ................................................................................................................................ 10.150 Scruttons Ltd v Midland Silicones Ltd [1962] AC 446 ................................................................. 8.60 Seaton v Heath [1899] 1 QB 782 .............................................................................................. 17.70 Secured Income Real Estate (Australia) Ltd v St Martin’s Investments Pty Ltd (1979) 144 CLR 596 ......................................................................................................................... 10.20, 10.140 Seidler v Schallhofer [1982] 2 NSWLR 80 ................................................................................ 20.105 Sekisui Rib Loc Australia Pty Ltd v Rocla Pty Ltd [2012] SASCFC 21 ........................................... 10.30 Selectmove Ltd, Re [1995] 1 WLR 474 .......................................................................... 3.160, 3.185 Sellars v Adelaide Petroleum NL (1994) 179 CLR 332 ....................................... 17.315, 21.85, 21.90 Semelhago v Paramadavam [1996] 2 SCR 415 ....................................................................... 21.625 Sensis Pty Ltd v McMaster-Fay [2005] NSWCA 163 .................................................................. 21.90 Service Station Association Ltd v Berg Bennett & Associates Pty Ltd (1993) 45 FCR 84 ........... 10.120, 10.130, 13.80 Shahid v Australasian College of Dermatologists [2008] FCAFC 72; (2008) 168 FCR 46 ........... 2.170, 2.385, 4.05, 17.195 Sharjade Pty Ltd v Commonwealth [2009] NSWCA 373 ........................................................... 15.80 Sharma v Simposh [2011] EWCA Civ 1383; [2013] Ch 23 ...................................................... 21.445 Sharman v Kunert (1985) 1 NSWLR 225 ................................................................................. 19.165 Shaw v Applegate [1977] 1 WLR 970 ...................................................................................... 21.695 Shelanu Inc v Print Three Franchising Corp (2003) 226 DLR (4th) 577 ...................... 10.130, 10.132 Shell Oil Co v Marinello 294 A 2d 253 (NJ Super Ct, 1992) ..................................................... 10.125 Shepherd v Felt & Textiles of Australia Ltd (1931) 45 CLR 359 .................................................. 15.45 Sheppard v Warner (1895) 1 ALR 168 ......................................................................................... 6.65 Shevill v Builders Licensing Board (1982) 149 CLR 620 ................................... 14.20, 21.270, 21.345 Shiloh Spinners Ltd v Harding [1973] AC 691 ............................................................ 15.200, 15.215 Shirlaw v Southern Foundries (1926) Ltd [1939] 2 KB 206 ............................................. 10.35, 10.55 Shogun Finance Ltd v Hudson [2003] UKHL 62; [2004] AC 919 ............................................. 16.185 Shrimp v Landmark Operations Ltd [2007] FCA 1468; (2007) 163 FCR 510 ........................... 17.340 Sidhu v Van Dyke [2014] HCA 19; (2014) 251 CLR 505 ......................................................... 22.182 Silovi Pty Ltd v Barbaro (1988) 13 NSWLR 466 ......................................................................... 22.70 Silver v Dome Resources NL (2007) 62 ACSR 539 ............................................................ 8.45, 8.155 Simmons Ltd v Hay (1964) 81 WN (Pt 1) (NSW) 358 ............................................................. 14.155 Simon v Metivier (1766) 1 Wm Bl 599; 96 ER 347 ...................................................................... 6.10 Simonius Vischer & Co v Holt & Thompson [1979] 2 NSWLR 322 ..... 10.80, 21.135, 21.175, 21.190 Sinclair, Scott & Co Ltd v Naughton (1929) 43 CLR 310 ............................................................ 6.25 Sirius International Insurance Co (Publ) v RAI General Insurance Ltd [2004] 1 WLR 3251 .......... 9.255 Skeate v Beale (1841) 11 Ad & El 983; 113 ER 688 ................................................................... 18.45 Sky Petroleum Ltd v VIP Petroleum Ltd [1974] 1 WLR 576 ...................................................... 21.690 Skyrise Consultants Pty Ltd v Metroland Funds Management Ltd [2011] NSWCA 406 ............. 9.110, 9.135, 9.145 Skywest Aviation Pty Ltd v Commonwealth (1995) 126 FLR 61 .................................. 22.255, 22.260 Slater v Hoyle & Smith Ltd [1920] 2 KB 11 ............................................................................. 21.202 Slee v Warke (1949) 86 CLR 271 ............................................................................................. 21.670 Slinger v Southern White Pty Ltd [2005] SASC 267; (2005) 92 SASR 303 ............................... 17.320 Smith v Bromley (1760) 2 Doug 696 n; 99 ER 441 ................................................................. 20.260 Smith v Chadwick (1882) 20 Ch D 27 .................................................................................... 22.182 Smith v Chadwick (1884) 9 App Cas 187 ............................................................................... 22.182 Smith v Cuff (1817) 6 M & S 160; 105 ER 1203 ..................................................................... 20.260 Smith v Hughes (1871) LR 6 QB 597 ....................................... 2.170, 2.385, 16.135, 16.140, 17.55 Smith v Jones (1924) 24 SR (NSW) 444 .................................................................................. 21.425 xxxii

Table of Cases

Smith v Land & House Property Corp (1884) 28 Ch D 7 .............................................. 17.15, 17.30 Smith v Pisani [2001] SASC 21; (2001) 78 SASR 548 ................................................................ 5.205 Smith v Smith [2004] NSWSC 663 ......................................................................................... 16.152 Snowlife Pty Ltd v Robina Land Corporation Ltd (No 2) [1993] 1 Qd R 584 ............................ 15.230 Snyman v Cooper (1990) 24 FCR 433 .................................................................................... 17.305 Solle v Butcher [1950] 1 KB 671 ............................................................. 16.10, 16.58, 16.60, 16.95 Soper v Arnold [1889] 14 AC 429 ........................................................................................... 21.480 South Kensington Co-operative Stores, Re (1881) 17 Ch D 161 ............................................. 21.425 South Sydney District Rugby League Football Club Ltd v News Ltd [2000] FCA 1541; (2000) 177 ALR 611 .............................................. 10.30, 10.80, 10.125, 10.130, 10.132, 10.160, 11.75 South Wales Miners’ Federation v Glamorgan Coal Co Ltd [1905] AC 239 .............................. 22.265 Southcott Estates Inc v Toronto Catholic District School Board 2009 CanLII 3567 ................... 21.625 Specialist Diagnostic Services Pty Ltd v Healthscope Ltd [2012] VSCA 175 .............................. 10.132 Spiers Earthworks Pty Ltd v Landtec Projects Corporation Pty Ltd (No 2) [2012] WASCA 53 .... 21.310 Spira v Commonwealth Bank of Australia [2003] NSWCA 180; (2003) 57 NSWLR 544 .......... 10.165, 11.75 Spiro v Glencrown Properties Ltd [1991] Ch 536 ...................................................................... 2.105 Stamp Duties, Commissioner of v Carlenka Pty Ltd (1995) 41 NSWLR 329 ............................. 16.128 Starlink International Group Pty Ltd v Coles Supermarkets Australia Pty Ltd [2011] NSWSC 1154 ........................................................................................................ 10.130, 10.132, 10.165 State Rail Authority of New South Wales v Heath Outdoor Pty Ltd (1986) 7 NSWLR 170 .......... 9.110, 9.135, 9.140, 9.145, 22.255 State Superannuation Board v Trade Practices Commission (1982) 60 FLR 165 ......................... 1.185 Steadman v Steadman [1976] AC 536 ........................................................................................ 6.75 Steele v Tardiani (1946) 72 CLR 386 ................................... 21.410, 21.415, 21.420, 21.430, 21.435 Steggles Ltd v Yarrabee Chicken Company Pty Ltd [2012] FCAFC 91 ........................................ 9.260 Stephenson, Jacques & Co v McLean (1880) 5 QBD 346 .......................................................... 2.135 Stern v McArthur (1988) 165 CLR 489 .................. 15.195, 15.200, 15.205, 15.210, 15.215, 15.220 Stilk v Myrick (1809) 2 Camp 317; 170 ER 1168 ................................................ 3.125, 3.150, 3.155 Stilk v Myrick (1809) 6 Esp 129; 170 ER 851 ............................................................................. 3.125 Stocks & Holdings (Constructors) Pty Ltd v Arrowsmith (1964) 112 CLR 646 .............................. 5.15 Stocznia Gdanska SA v Latvian Shipping Co [1996] 2 Lloyd’s Rep 132 .................................... 21.520 Stokes v Whicher [1920] 1 Ch 411 ............................................................................................. 6.35 Storer v Manchester City Council [1974] 1 WLR 1403 ................................................................ 2.10 Stratton Finance Pty Ltd v Webb [2014] FCAFC 110 ................................................................. 9.270 Stuart Pty Ltd v Condor Commercial Insulation Pty Ltd [2006] NSWCA 334 ............. 21.150, 21.155, 21.165 Sudbrook Trading Estate Ltd v Eggleton [1983] AC 444 .............................................................. 5.30 Suisse Atlantique Société d’Armement Maritime SA v NV Rotterdamsche Kolen Centrale [1967] 1 AC 361 ....................................................................................................... 9.290, 9.330 Sullivan v Sullivan (2006) 13 BPR 24,755 ................................................................................ 22.182 Summers v Commonwealth (1918) 25 CLR 144 ..................................................................... 13.170 Sumpter v Hedges [1898] 1 QB 673 ....................................................................................... 21.415 Sumy Pty Ltd v Southcorp Wines Pty Ltd [2004] NSWSC 1000 ............................................... 17.320 Sunbird Plaza Pty Ltd v Maloney (1988) 166 CLR 245 .................................... 15.45, 15.220, 21.270 Sunset Vineyard Management Pty Ltd v Southcorp Wines Pty Ltd [2008] VSCA 96 ................... 9.129 Supershield Ltd v Siemens Building Technologies FE Ltd [2010] 1 Lloyd’s Rep 349 ................. 21.150 Surrey County Council v Bredero Homes Ltd [1993] 1 WLR 1361 ........................................... 21.100 Suttor v Gundowda Pty Ltd (1950) 81 CLR 418 ...................... 13.75, 13.80, 13.100, 13.110, 13.155 Svanosio v McNamara (1956) 96 CLR 186 ............................................................... 16.100, 16.105 Sydney City Council v West (1965) 114 CLR 481 ...................................................................... 9.290 Sykes v Reserve Bank of Australia (1998) 88 FCR 511 ................................................. 17.245, 17.395 Sylvia Shipping Co Ltd v Progress Carriers Ltd [2010] EWHC 542 ........................................... 21.150

T TA Sundell & Sons Pty Ltd v Emm Yannoulatos (Overseas) Pty Ltd (1955) 56 SR (NSW) 323 .... 3.125, 18.65 TC Industrial Plant Pty Ltd v Robert’s Queensland Pty Ltd (1963) 180 CLR 130 ......... 13.165, 21.180 TCN Channel 9 Pty Ltd v Hayden Enterprises Pty Ltd (1989) 16 NSWLR 130 ............................ 21.95 xxxiii

Contract Law: Principles, Cases and Legislation

TCN Channel Nine Pty Ltd v Ilvariy Pty Ltd [2008] NSWCA 9; (2008) 71 NSWLR 323 ............. 17.190 Ta Ho Ma Pty Ltd v Allen [1999] NSWCA 202; [1999] 47 NSWLR 1 ........................................ 17.130 Tabcorp Holdings Ltd v Bowen Investments Pty Ltd [2009] HCA 8; (2009) 236 CLR 272 ......... 21.10, 21.30, 21.35, 21.45, 21.50, 21.120, 21.690 Taddy and Co v Sterious and Co [1904] 1 Ch 354 ...................................................................... 8.50 Tai Hing Cotton Mill Ltd v Kamsing Knitting Factory [1979] AC 91 ......................................... 21.290 Tait v Bonnice [1975] VR 102 .................................................................................................. 13.115 Take Harvest Ltd v Liu [1993] AC 552 ......................................................................................... 6.55 Tallerman & Co Pty Ltd v Nathan’s Merchandise (Vic) Pty Ltd (1957) 98 CLR 93 ............ 2.05, 2.200, 2.205, 2.300, 6.95, 13.150, 13.155, 13.165 Tan Hung Nguyen v Luxury Design Homes Pty Limited [2004] NSWCA 178 ............................. 1.100 Tanwar Enterprises Pty Ltd v Cauchi [2003] HCA 57; (2003) 217 CLR 315 ................ 15.195, 15.200, 15.215, 15.220, 21.655 Tasman Capital Pty Ltd v Sinclair [2008] NSWCA 248; (2008) 75 NSWLR 1 .............................. 4.105 Tatem v Gamboa [1939] 1 KB 132 ......................................................................................... 14.155 Taxation, Federal Commissioner of v Sara Lee Household & Body Care (Australia) Pty Ltd [2000] HCA 35 .................................................................................................................. 13.165 Taxation, Federal Commissioner of v Taylor (1929) 42 CLR 81 .................................................. 2.130 Taylor v Caldwell [1863] EWHC QB J1; (1863) 3 B & S 826; 122 ER 309 ............................... 14.100 Taylor v Johnson (1983) 151 CLR 422 ............... 1.160, 2.170, 2.385, 16.05, 16.58, 16.105, 16.135, 16.150, 17.75 Technomin Australia Pty Ltd v Xstrata Nickel Australasia Operations Pty Ltd [2014] WASCA 164 ...................................................................................................................................... 9.270 Tefbao Pty Ltd v Stannic Securities Pty Ltd (1993) 118 ALR 565 .............................................. 17.380 Tenji & Associates v Henneberry Pty Ltd [2000] FCA 550; (2000) 98 FCR 324 ............ 17.345, 17.350 Tenth Vandy Pty Ltd v Natwest Markets Australia Pty Ltd [2012] VSCA 103 ............................. 15.220 Tepko Pty Ltd v Water Board [2001] HCA 19; (2001) 206 CLR 1 ................................ 17.105, 17.130 Texaco Inc v Appleget 307 A 2d 603 (NJ Sup Ct, 1973) .......................................................... 10.125 Thomas v Brown (1876) 1 QBD 714 ........................................................................................... 6.55 Thomas v Thomas (1842) 2 QB 851; 114 ER 330 ............................................................ 3.95, 3.100 Thomas Brown and Sons Ltd v Fazal Deen (1962) 108 CLR 391 ............................... 20.220, 20.285 Thomas National Transport (Melbourne) Pty Ltd v May & Baker (Australia) Pty Ltd (1966) 115 CLR 353 ...................................................................................... 9.325, 9.330, 9.335, 9.350 Thompson v Palmer (1933) 49 CLR 507 ................................................................................... 22.05 Thomson v McInnes (1911) 12 CLR 562 ..................................................................................... 6.35 Thomson v White [2006] NSWCA 350 ........................................................................................ 5.15 Thong Guan Plastic and Paper Industries SDN BHD v Vicpac Industries Australia Pty Ltd [2010] VSC 11 ...................................................................................................... 10.130, 10.132 Thorby v Goldberg (1964) 112 CLR 597 ............................................................... 5.10, 5.175, 5.180 Thorner v Major [2009] UKHL 18; [2009] 1 WLR 776 ............................................................. 22.225 Thornton v Shoe Lane Parking Ltd [1971] 2 QB 163 ....................................... 9.60, 9.65, 9.70, 9.80 Tim Barr Pty Ltd v Narui Gold Coast Pty Ltd [2010] NSWSC 29 ....... 10.165, 15.200, 15.230, 22.250 Ting v Blanche (1993) 118 ALR 543 ........................................................................... 17.240, 17.245 Tinn v Hoffman & Co (1873) 29 LT 271 ................................................................................... 2.135 Tinyow v Lee [2006] NSWCA 80 ............................................................................................... 3.160 Tipperary Developments Pty Ltd v Western Australia [2009] WASCA 126 ................................. 22.235 Tito v Waddell (No 2) [1977] Ch 106 ........................................................................... 21.50, 21.100 Todd v Nicol [1957] SASR 72 ..................................................................................................... 4.50 Toll (FGCT) Pty Ltd v Alphapharm Pty Ltd [2004] HCA 52; (2004) 219 CLR 165 ........... 2.170, 2.385, 8.60, 8.85, 9.05, 9.25, 9.267 Tomlin v Ford Credit Australia [2005] NSWSC 540 ................................................................. 15.235 Tone Tasmania Pty Ltd v Garrott [2008] TASSC 86; [2008] 17 Tas R 320 ................................. 10.125 Tonitto v Bassal (1992) 28 NSWLR 564 ....................................................................................... 6.35 Tooth & Co Ltd v Bryen (No 2) (1922) 22 SR (NSW) 541 ........................................................... 6.25 Tote Tasmania Pty Ltd v Garrott [2008] TASSC 86 ................................................................... 10.132 Tradition Australia Pty Ltd v Gunson [2006] NSWSC 298; (2006) 152 IR 395 ............. 21.640, 21.690 Tramways Advertising Pty Ltd v Luna Park (NSW) Ltd (1938) 38 SR (NSW) 632 ............ 13.20, 13.25 Trans Petroleum (Australia) Pty Ltd v White Gum Petroleum Pty Ltd [2012] WASCA 165 ......... 10.165 Transfield Shipping Inc v Mercator Shipping Inc [2008] UKHL 48; [2009] 1 AC 61 ....... 1.10, 21.150, 21.170 xxxiv

Table of Cases

Transglobal Capital Pty Ltd v Yolarno Pty Ltd [2005] NSWCA 68 ............................................. 17.370 Travel Compensation Fund v Tambree [2005] HCA 69; (2005) 224 CLR 627 .......................... 17.380 Trawl Industries of Australia Pty Ltd v Effem Foods Pty Ltd trading as “Uncle Ben’s of Australia” (1992) 27 NSWLR 326 ................................................................................ 5.15, 9.133 Trident v McNiece (1988) 165 CLR 107 ............................ 8.100, 8.105, 8.165, 8.170, 8.200, 8.215 Trident General Insurance Co Ltd v McNiece Bros Pty Ltd (1988) 165 CLR 107 ..... 3.95, 8.45, 8.100, 8.125, 8.165, 8.175, 8.185, 8.200, 22.230 Trollope & Colls Ltd v Atomic Power Constructions Ltd [1962] 1 WLR 333 ................................. 5.15 Tropical Traders Ltd v Goonan (1964) 111 CLR 41 ........................... 14.255, 15.100, 15.140, 21.445 Tulk v Moxhay (1848) 2 Ph 774; 41 ER 1143 .............................................................................. 8.50 Turner v Bladin (1951) 82 CLR 463 ........................................................................... 21.610, 21.625 Twidale v Bradley [1990] 2 Qd R 464 ..................................................................................... 21.180 Tymshare v Covell 727 F 2d 1145 (DC Cir .............................................................................. 15.235

U Ulbrick v Laidlaw [1924] VLR 247 ............................................................................................... 2.75 Union Fidelity Trustee Co v Gibson [1971] VR 573 .................................................................... 18.90 Unique Building Pty Ltd v Brown [2010] SASC 106 ................................................................... 21.50 United Group Rail Services Limited v Rail Corporation New South Wales [2009] NSWCA 177; (2009) 74 NSWLR 618 ..................................................................................... 5.110, 5.115 Universal Cargo Carriers Corporation v Citati [1957] 2 QB 401 ................................................. 14.25 Universe Tankships of Monrovia v International Transport Workers Federation [1983] 1 AC 366 ..................................................................................................................................... 18.15 University of Western Australia v Gray [2009] FCAFC 116; (2009) 179 FCR 346 ............ 10.85, 10.90, 10.95 Upper Hunter County District Council v Australian Chilling & Freezing Co Ltd (1968) 118 CLR 429 ........................................................................................................................ 5.05, 5.40

V Vadasz v Pioneer Concrete (SA) Pty Ltd (1995) 184 CLR 102 .................................................... 17.05 Van den Esschert v Chappell [1960] WAR 114 ........................................................................... 9.150 Vaswani v Italian Motors (Sales and Service) Ltd [1996] 1 WLR 270 .......................................... 14.80 Veivers v Cordingly [1989] 2 Qd R 278 ..................................................................................... 2.140 Venerdi Pty Ltd v Anthony Moreton Group Funds Management Ltd [2015] QSC 219; [2015] 1 Qd R 214 ........................................................................................................................ 17.415 Verduci v Golotta [2010] NSWSC 506 .................................................................................... 19.165 Vero Lenders Mortgage Insurance Ltd v Taylor Byrne Pty Ltd [2006] FCA 1430 .......... 17.335, 17.360 Vickers v Taccone [2005] NSWSC 514 ...................................................................................... 17.10 Vickery v Woods (1952) 85 CLR 336 ....................................................................................... 13.165 Victoria v Tatts Group [2014] VSCA 311 .................................................................................... 9.270 Victoria Laundry (Windsor) Ltd v Newman Industries Ltd [1949] 2 KB 528 ................ 21.150, 21.165 Visic v State Government Insurance Co Ltd (1990) 3 WAR 122 ................................................. 8.200 Vitol SA v Norelf Ltd [1996] AC 800 ........................................................................... 15.150, 15.165 Vodafone Pacific Ltd v Mobile Innovations Ltd [2004] NSWCA 15 .... 10.130, 10.132, 10.155, 10.165 Vroon BV v Foster’s Brewing Group Ltd [1994] 2 VR 32 ................................................... 2.390, 5.15

W W v G (1996) 20 Fam LR 49 ..................................................................................... 22.185, 22.190 W & R Pty Ltd v Birdseye [2008] SASC 321; (2008) 102 SASR 477 ......................................... 15.170 W Scott Fell and Co Ltd v FH Lloyd (1906) 4 CLR 572 .............................................................. 17.55 WA Pines Pty Ltd v Registrar of Companies [1976] WAR 149 ....................................................... 2.70 WM Johnson Pty Ltd v Maxwelton (Oaklands) Pty Ltd [2000] NSWCA 286 ............................. 11.150 WWF-World Wide Fund for Nature v World Wrestling Federation Entertainment Inc [2007] EWCA Civ 286; [2008] 1 WLR 445 ..................................................................................... 21.100 Wakefield Trucks Pty Ltd v Lach Transport Pty Ltd [2001] SASC 168; (2001) 79 SASR 517 ...... 17.315 Walford v Miles [1992] 2 AC 128 .............................................................................................. 5.110 xxxv

Contract Law: Principles, Cases and Legislation

Walker v Citigroup Global Markets Australia Pty Ltd [2006] FCAFC 101; (2006) 233 ALR 687 .... 21.85, 21.95 Walker v Citigroup Global Markets Pty Ltd [2005] FCA 1678; (2005) 226 ALR 114 ..... 17.315, 17.325 Wallace v Brodribb (1985) 58 ALR 737 ....................................................................................... 2.70 Wallace-Smith v Thiess Infraco (Swanston) Pty Ltd [2005] FCAFC 49 ........... 13.165, 15.130, 15.180, 15.245 Wallis Son & Wells v Pratt & Haynes [1911] AC 394 .................................................................. 9.310 Walters v Morgan (1861) 3 De GF & J 718; 45 ER 1056 ............................................................ 17.60 Waltip Pty Ltd v Capalaba Park Shopping Centre Pty Ltd [1989] ATPR 40-975 ........................ 17.415 Waltons Stores (Interstate) Ltd v Maher (1988) 164 CLR 387 ......... 1.160, 3.35, 6.80, 17.50, 21.620, 22.30, 22.35, 22.185, 22.225, 22.235 Wardley Australia Ltd v Western Australia (1992) 175 CLR 514 ................................................ 17.365 Warlow v Harrison (1859) 1 El & El 295; 120 ER 920 .................................................................. 2.75 Warwick Entertainment Centre Pty Ltd v Alpine Holdings Pty Ltd [2005] WASCA 174; (2005) 224 ALR 134 ......................................................................................................... 17.320, 17.390 Waterman v Gerling Australia Insurance Co Pty Ltd [2005] NSWSC 1066; (2005) 65 NSWLR 300 .......................................................................................................... 13.100, 15.175, 15.185 Waterways Authority of NSW v Coal and Allied (Operations) Pty Ltd [2007] NSWCA 276 ........ 21.605 Watson v Healy Lands Limited [1965] NZLR 511 ..................................................................... 21.480 Wedgewood Road Hallam (No 1) v Diamond [2013] VSC 447 ................................................ 17.265 Weir v Hoylevans Pty Ltd [2001] WASCA 23 ................................................................. 8.105, 22.230 Wenham v Ella (1972) 127 CLR 454 ..................................... 21.20, 21.150, 21.160, 21.180, 21.695 Wenkart v Pitman (1998) 46 NSWLR 502 ............................................................................... 21.180 Wenning v Robinson (1964) 64 SR (NSW) 157 .................................................................. 5.15, 5.45 Wentworth Shire Council v Bemax Resources Ltd [2013] NSWSC 1047 .................................. 17.190 Wenzel v Australian Stock Exchange Ltd [2002] FCA 95 ............................................................ 11.75 West v AGC (Advances) Ltd (1986) 5 NSWLR 610 ...................................................... 19.165, 19.170 West London Commercial Bank v Kitson (1884) 13 QBD 360 ................................................... 17.25 Western Exports Services Inc v Jireh International Pty Ltd [2011] HCA 45 ................................. 9.265 Westmelton (Vic) Pty Ltd v Archer and Schulman [1982] VR 305 .............................................. 18.95 Westminster Properties Pty Ltd v Comco Constructions Pty Ltd (1990) 5 WAR 191 ................. 15.230 Westpac Banking Corporation v Tanzone Pty Ltd [2000] NSWCA 25 ......................................... 9.260 Westpac Banking Corporation v Robinson (1993) 30 NSWLR 668 ............................................. 17.70 Westpoint Management Ltd v Chocolate Factory Apartments Ltd [2007] NSWCA 253 ............. 21.40, 21.45, 21.50 Westralian Farmers’ Co-operative Ltd v Southern Meat Packers Ltd [1981] WAR 241 ................. 8.200 Westralian Farmers Ltd v Commonwealth Agricultural Service Engineers Ltd (in liq) (1936) 54 CLR 361 ........................................................................................................................ 21.410 Wheeler v Ecroplot Pty Ltd [2010] NSWCA 61 .......................................................................... 21.35 Wheeler Grace and Pierucci Pty Ltd v Wright [1989] ATPR 40-940 .......................................... 17.290 White v Australian and New Zealand Theatres Ltd (1943) 67 CLR 266 ........................... 9.130, 9.132 White v Jones [1995] 2 AC 207 ...................................................................................... 8.115, 8.165 White and Carter (Councils) Ltd v McGregor [1962] 2 AC 413 ........... 15.05, 15.15, 21.510, 21.515, 21.520 Whitehouse v BHP Steel Ltd [2004] NSWCA 428 ...................................................................... 8.110 Whitlock v Brew (1968) 118 CLR 445 .................................................................... 5.45, 5.85, 5.240 Whittet v State Bank of New South Wales (1991) 24 NSWLR 146 ........................................... 22.250 Wigan v Edwards (1973) 1 ALR 497; 47 ALJR 586 .............................................. 3.125, 3.220, 3.225 Wight v Haberdan Pty Ltd [1984] 2 NSWLR 280 ......................................................................... 6.30 Wilkie v Gordian Runoff Ltd [2004] HCA 52 .............................................................................. 9.265 Wilkinson v Osborne (1915) 21 CLR 89 .......................................................... 20.60, 20.100, 20.195 Williams v Hedley (1807) 8 East 378; 103 ER 388 ................................................................... 20.260 Williams v Roffey Bros & Nicholls (Contractors) Ltd [1991] 1 QB 1 .................... 3.125, 3.155, 3.165 Williamson v Murdoch (1912) 14 WALR 54 ............................................................................. 21.430 Willing v Baker (1992) 58 SASR 357 ....................................................................................... 22.275 Wilson v Anderson (2002) 213 CLR 401 ................................................................................... 9.285 Wilson v Best Travel Ltd [1993] 1 All ER 353 ............................................................................ 11.170 Wilson v Darling Island Stevedoring and Lighterage Co Ltd (1956) 95 CLR 43 ........ 8.15, 8.60, 8.100 Wilson v Northhampton and Banbury Junction Railway Co (1874) 9 Ch App 279 ................... 21.625 Wiluszynski v Tower Hamlets London BC [1989] ICR 493 ........................................................ 21.430 xxxvi

Table of Cases

Winks v W H Heck & Sons Pty Ltd [1986] 1 Qd R 226 ............................................................ 16.128 Winterton Constructions Pty Ltd v Hambros Australia (1993) 39 FCR 97 ................................. 17.230 Wood v Little (1921) 29 CLR 564 ........................................................................................... 20.100 Wood Factory Pty Ltd v Kiritos Pty Ltd (1985) 2 NSWLR 105 .................................................. 15.165 Woodar Investment Development Ltd v Wimpey Construction (UK) Ltd [1980] 1 WLR 277 ..... 8.165, 14.75 Woolworths Ltd v Kelly (1991) 22 NSWLR 189 ......................................................................... 3.100 Workers Trust and Merchant Bank Ltd v Dojap Investment Ltd [1993] AC 573 ........................ 21.500 Wright v TNT Management Pty Limited (1989) 15 NSWLR 679 .............................................. 17.260 Wroth v Tyler [1974] Ch 30 .................................................................................................... 21.695 Wrotham Park Estate Co Ltd v Parkside Homes Ltd [1974] 1 WLR 798 .................................... 21.100

Y Yam Seng Ltd v International Trade Corporation Ltd [2013] EWHC 111 .................................. 10.125 Yango Pastoral Co Pty Ltd v First Chicago Australia Ltd (1978) 139 CLR 410 ..... 20.30, 20.35, 20.80, 20.255 Yara Nipro P/L v Interfert Australia P/L [2010] QCA 128 .......................................................... 14.145 Yardley v Saunders [1982] WAR 231 .......................................................................... 21.480, 21.500 Yeoman’s Row Management Ltd v Cobbe [2008] UKHL 55 ........................................ 22.225, 22.235 Yerkey v Jones (1940) 63 CLR 649 ............................................................................................ 18.75 York Air Conditioning and Refrigeration (Australasia) Pty Ltd v Commonwealth (1949) 80 CLR 11 .......................................................................................................................... 5.05, 5.40 Yorke v Lucas (1985) 158 CLR 661 ............................................................................ 17.295, 17.305 Yoshimoto v Canterbury Golf International [2000] NZCA 350; [2001] 1 NZLR 523 ................... 1.100 Young v Queensland Trustees Ltd (1956) 99 CLR 560 ............................................................. 21.400

Z Zachariadis v Allforks Australia Pty Ltd [2009] VSCA 258; (2009) 26 VR 47 ................. 21.305, 21.320 Zhu v Treasurer of New South Wales [2004] HCA 56; (2004) 218 CLR 530 ............................... 9.267 Zieme v Gregory [1963] VR 214 ............................................................................................... 13.90

xxxvii

TABLE OF STATUTES COMMONWEALTH

s 23(3): 11.15 s 24(1): 11.25 s 24(1)(a): 11.30 s 24(1)(b): 11.70 s 24(1)(c): 11.85 s 24(4): 11.70 s 25(1): 11.45, 11.100 s 25(1)(b): 11.45 s 26(1): 11.20 s 26(2): 11.20 s 27(1): 11.15 s 27(2): 11.15 s 28: 11.20 s 29: 11.200, 11.205, 17.335 s 29(1): 11.200 s 29(1)(m): 11.200, 11.245 s 29(1)(n): 11.180 s 35: 2.395 s 35(2): 2.70 s 51: 11.145 ss 51 to 53: 11.130 s 52: 11.145, 17.320 s 53: 11.145 s 54: 11.145 s 54(2): 11.150 s 54(3): 11.150 s 54(3)(a): 11.150 s 54(3)(b): 11.150 s 54(4): 11.150 s 54(6): 11.150 s 54(7): 11.150 s 55: 11.145 s 55(1): 11.160 s 55(3): 11.160 s 56: 11.145 s 57: 11.145 s 59: 9.180, 11.145, 11.165, 11.240 s 60: 11.170 s 61: 11.180 s 61(1): 11.170 s 61(3): 11.170 s 61(4): 11.210 s 62: 11.170 s 63: 11.210 s 64: 11.100, 11.115, 11.175, 11.235 s 64A(1): 11.175, 11.235 s 64A(2): 11.175, 11.235 s 82: 17.380 s 102(3): 11.180 s 105: 17.410 s 131A: 1.185, 19.75 s 224: 11.200, 19.80 s 232: 17.150, 17.300, 19.80 s 236: 17.145, 17.150, 17.300, 17.305, 17.315, 17.320, 17.325, 17.330,

Acts Interpretation Act 1901 s 22(1)(a): 1.190 Austalian Consumer Law s 22(2): 19.125 s 22(3): 19.125 Australian Consumer Law: 1.175, 1.180, 1.185, 1.190, 1.205, 2.395, 10.05, 10.130, 11.05, 11.15, 11.100, 11.110, 11.135, 11.230, 11.235, 11.245, 17.150, 17.155, 17.195, 17.250, 17.265, 17.365, 17.380, 17.410, 19.55, 19.65, 19.70, 19.75, 19.80, 19.90 s 2: 11.135, 11.165, 11.240 s 2(1): 17.150, 17.195, 17.305, 17.345 s 2(2): 17.150, 17.235 s 2(2)(a): 17.250 s 2(2)(c)(i): 17.235 s 3(1): 11.125 s 3(2): 11.125 s 4: 17.150, 17.215, 17.240, 17.260, 17.265 s 4(1): 17.240 s 4(2): 17.240, 17.260 s 4(2)(c): 17.235 s 4(3): 17.240 s 4(4): 17.240 s 13: 17.325 s 18: 8.60, 9.180, 13.125, 17.145, 17.150, 17.190, 17.215, 17.230, 17.295, 17.300, 17.305, 17.310, 17.315, 17.320, 17.330, 17.335, 17.340, 17.345, 17.360, 17.395, 17.400, 17.410 s 18(1): 1.195, 17.05, 17.145, 17.230 s 20: 15.220, 19.70, 19.75, 19.85, 19.90 s 20(2): 19.85 s 21: 19.70, 19.75, 19.85, 19.115, 19.120, 19.125, 19.130 s 21(1): 19.115 s 21(2)(b): 11.75 s 22: 10.160, 19.70, 19.75, 19.125, 19.130, 19.135 s 22(1): 19.125 s 22(1)(l): 10.130 s 22(2): 19.125 s 22(2)(b): 11.75 s 22(2)(l): 10.130 s 22(4): 19.125 s 22(5)(a): 19.125 s 22(6): 19.125 s 22(7): 19.125 s 23(1): 11.10 s 23(1)(b): 11.15 s 23(2): 11.10 xxxix

Contract Law: Principles, Cases and Legislation

Part 2-3: 11.05

Australian Consumer Law — cont 17.335, 17.340, 17.345, 17.350, 17.355, 17.360, 17.365, 17.380, 17.395, 19.80 s 236(1): 17.305, 17.335, 17.360 s 237: 13.125, 17.145, 17.150, 17.300, 17.320, 17.335, 17.345, 17.350, 17.355, 17.360, 17.365 s 237(2): 17.360 s 243: 17.145, 17.150, 17.300, 17.345 s 243(e): 17.360 s 246: 19.80 s 250(1): 11.105 s 259(2)(a): 11.185, 11.250 s 259(2)(b): 11.185, 11.250 s 259(3): 11.185, 11.250 s 259(4): 11.250 s 260(a): 11.185, 11.250 s 260(b): 11.185, 11.250 s 260(c): 11.185, 11.250 s 260(d): 11.185, 11.250 s 260(e): 11.185, 11.250 s 261: 11.185, 11.250 s 262: 11.190, 11.255 s 262(2): 11.190, 11.255 s 263: 11.185, 11.250 s 266: 11.140 s 267(2): 11.185, 11.250 s 267(2)(b): 11.185, 11.250 s 267(3): 11.185, 11.250 s 267(4): 11.250 s 268(a): 11.185, 11.250 s 268(b): 11.185, 11.250 s 268(c): 11.185, 11.250 s 268(d): 11.185, 11.250 s 268(e): 11.185, 11.250 s 269: 11.185, 11.250 s 271(1): 11.195, 11.260 s 271(3): 11.195, 11.260 s 271(5): 11.195, 11.260 s 274: 11.195, 11.260 s 1041H: 17.290 Ch 2: 17.305, 17.345 Ch 3: 17.335 Ch 3, Pt 3-2, Div 1, subdiv A: 11.145 Ch 3, Pt 3-2, Div 1, subdiv B: 11.170 Pt 2-1: 1.195 Pt 2-2: 1.200, 19.55, 19.65, 19.80 Pt 2-3: 1.205, 11.300 Pt 2-5, Div 2: 11.105 Pt 3-1: 1.195 Pt 3-2: 1.210 Pt 3-2, Div 1: 11.110, 11.115 Pt 5-1, Div 1: 19.80 Pt 5-1, Div 2: 19.80 Pt 5-2, Div 4, subdiv A: 11.105, 19.80 Pt 5-2, Div 4, subdiv B: 11.105 Pt 5-4: 11.110, 11.115, 11.185, 11.250 Pt 5-4, Div 2: 11.195, 11.260 Pt 5.5: 1.185

Australian Securities and Investment Commission Act 2001: 1.185 Australian Securities and Investments Commission Act 2001: 19.75 s 12: 11.105 s 12BF(2b): 11.10 s 12BF(1): 11.10 s 12BF(1)(b): 11.15 s 12BF(3): 11.15 s 12BG(1): 11.25 s 12BG(1)(a): 11.30 s 12BG(1)(b): 11.70 s 12BG(1)(c): 11.85 s 12BG(4): 11.70 s 12BH: 11.100 s 12BH(1): 11.45 s 12BI(1): 11.20 s 12BI(2): 11.20 s 12BK(1): 11.15 s 12BK(2): 11.15 s 12BL: 11.20 s 12CA: 19.75 s 12CB: 19.75 s 12CC: 19.75, 19.135 s 12EB: 11.100 s 12ED(1): 11.230 s 12ED(2): 11.230 s 12GD: 11.105 s 12GM: 11.105 s 12GND(1): 11.105 Pt 2 Div 2, subdiv BA: 11.05 Banking Act 1959: 20.80 Competition and Consumer Act 2010: 1.105, 1.175, 1.185, 1.190, 17.150, 20.175 s 4M: 20.175 s 6: 1.185 s 48: 8.50 s 51(2): 20.175 s 87(1A): 17.355 s 87CB(1): 17.340 s 87CB(2): 17.340 s 87CB(5): 17.340 s 87CC(1): 17.340 s 87CD(1): 17.340 s 87CD(3): 17.340 s 87CD(4): 17.340 s 87CE: 17.340 s 130: 11.05 s 131(1): 1.185 s 131A: 1.185, 11.05, 11.230 s 131C: 1.190 s 137B: 17.150, 17.335, 17.360, 17.395 s 137B(a): 17.335 s 137B(b): 17.335 s 137B(d): 17.335 s 139A: 11.175, 11.235 Pt IV: 20.175 xl

Table of Statutes

Trade Practices Act 1974: 1.105, 1.175, 1.180, 1.210, 8.120, 11.115, 17.150, 17.195, 19.55, 19.70 s 4(1): 17.195 s 4(2): 17.150, 17.235 s 4(2)(a): 17.250 s 51A: 17.150, 17.240, 17.260 s 51A(2): 17.240 s 51AA: 19.70, 19.90 s 51AB: 19.70, 19.115, 19.130 s 51AC: 10.160, 19.70, 19.115, 19.130 s 52: 8.60, 17.150, 17.250 s 52A: 19.55 s 56(2): 2.70 s 75B: 17.150 s 80: 17.150 s 82: 17.150, 17.305, 17.320, 17.335, 17.355 s 82(1B): 17.150, 17.335 s 87: 17.150, 17.335, 17.350, 17.355 Pt V, Div 2: 11.115 Pt IVA: 19.55

Competition and Consumer Act 2010 — cont Pt XI: 1.185 Pt XI, Div 2, subdiv A: 11.05 Pt VIA: 17.340 Sch 2: 1.175, 1.180, 11.05 Competition and Consumer Legislation Amendment Act 2011: 19.115 Competition and Consumer Regulations 2010 reg 90: 11.180 reg 90(2): 11.180 Contracts Review Act 1980 s 4(1): 19.160 s 4(2): 19.150 s 6(2): 19.150 s 8: 19.155 s 9(1): 19.160 s 9(2): 19.160 s 9(4): 19.160 s 9(5): 19.155 Sch 1: 19.155

Trade Practices Amendment (Australian Consumer Law) Act (No 2) 2010 Sch 5, items 1 to 2: 1.175

Corporations Act 2001: 14.193 s 1041H: 17.290 Electronic Transactions Act 1999 s 3: 2.90, 6.45 s 5: 2.315 s 5(1): 2.310 s 8: 6.45 s 10: 6.45 s 14A: 2.315 s 14A(1): 2.310 s 14A(2): 2.310 ss 15A to 15F: 2.315 s 15B: 2.90 s 15C: 2.90 s 15D: 2.90, 16.210

Treasury Legislation Amendment (Small Business and Unfair Contract Terms) Act 2015: 11.109

Fertilisers and Feeding Stuffs Act 1906: 20.25

Civil Law (Wrongs) Act 2002: 21.225 s 107B: 21.265 s 174: 17.110 Ch 7A: 17.340

Unfair Contract Terms Law: 11.25, 11.30, 11.40, 11.45, 11.55, 11.65, 11.70, 11.75, 11.85, 11.90, 11.95

AUSTRALIAN CAPITAL TERRITORY Civil Law (Property) Act 2006 s 204: 6.10 s 204(2)(c): 6.60 s 250: 21.425 s 501: 14.210

Insurance Contracts Act 1984: 8.45, 8.200, 8.210 s 4(1): 8.45 s 13: 10.125 s 15: 11.20 s 21: 17.65 s 21(1): 17.65 s 48: 8.45, 8.200 s 48(3): 8.210

Civil Law (Wrongs Act) 2002 s 101: 21.255 s 102: 21.250 Commercial Arbitration Act 1986 s 55: 20.180 Electronic Transactions Act 2001 s 3: 2.90, 6.45 s 5: 2.310, 2.315 s 7: 6.45 s 9: 6.45 s 13A: 2.315 s 13A(1): 2.310 s 13A(2): 2.310 ss 14A to 14E: 2.315

Marine Insurance Act 1909 s 24: 17.65 s 24(1): 17.65 National Security (Exchange Control) Regulations: 20.220 reg 14: 20.220 reg 14(1): 20.220 reg 14(3): 20.220 xli

Contract Law: Principles, Cases and Legislation

s 6(1): 19.150 s 7: 17.345, 19.145, 19.175 s 7(1): 19.130, 19.155 s 9: 19.175

Electronic Transactions Act 2001 — cont s 14B: 2.90 s 14D: 16.210 Electronic Transactions (Queensland) Act 2001 s 6: 2.315 s 24: 2.315 ss 26A to 26E: 2.315

Conveyancing Act 1919 s 13: 14.210 s 54A: 6.10 s 54A(2): 6.60 s 54B: 21.280 s 55: 21.500 s 55(2A): 22.260 s 129(2): 15.195 s 144(1): 21.425

Fair Trading Act 1992 s 12: 17.150 Fair Trading (Australian Consumer Law) Act 1992: 1.190 s 10: 1.190

Electronic Transactions Act 2000 s 3: 2.90, 2.320, 6.45 s 5: 2.320 s 5(1): 2.310 s 7: 2.320, 6.45 s 8: 2.320 s 9: 6.45 s 13: 2.320 s 13A: 2.320 s 13A(1): 2.310 s 13A(2): 2.310 ss 14A to 14E: 2.320 s 14B: 2.90 s 14C: 2.90 s 14D: 2.90, 16.210

Fair Trading (Australian Consumer Law) Amendment Act 2010: 1.190 Sale of Goods Act 1954 s 7(2): 7.35 s 13(2): 5.15 s 14: 5.30 s 32: 12.15 s 52(1): 21.410 s 53(3): 21.200 s 54(3): 21.200 s 57: 21.200 s 60: 2.75 Sale of Goods (Vienna Convention) Act 1987: 1.100

Fair Trading Act 1987: 1.190 s 4(1): 17.195 s 31: 1.190 s 42: 17.150

Supreme Court Act 1933 s 26: 21.695 s 27: 21.695 s 34: 21.695

Fair Trading Amendment (Australian Consumer Law) Act 2010: 1.190

Supreme Court Act 2006 s 1619: 21.275 s 1623: 21.275

Financial Institutions (NSW) Code: 14.193 Friendly Societies Act 1989: 14.193

NEW SOUTH WALES

Frustrated Contracts Act 1978: 14.190 ss 5 to 15: 14.193 s 10: 14.190 ss 10 to 15: 14.190 s 11: 14.190 s 12: 14.190 s 13: 14.190 s 15: 14.190

Associations Incorporation Act 2009: 14.193 Civil Liability Act 2002 s 16: 21.225 s 34: 21.265 Pt 4: 17.340 Civil Procedure Act 2005 Div 3: 21.275

Industrial Relations Act 1996: 14.193

Co-operative Housing and Starr-Bowkett Societies Act 1998: 14.193

Law Reform (Miscellaneous Provisions) Act 1965 s 8: 21.255 s 9(1): 21.250

Co-operatives Act 1992: 14.193 Commercial Arbitration Act 1984: 20.180

Minors (Property and Contracts) Act 1970: 7.10, 7.15 s 6: 7.32 s 6(1): 7.15 s 6(3): 7.15 ss 8 to 9: 7.32

Commercial Arbitration Act 2010: 20.180 Contracts Review Act 1980: 19.55, 19.145, 19.150, 19.160, 19.165, 19.170 s 6: 19.175 xlii

Table of Statutes

Minors (Property and Contracts) Act 1970 — cont ss 16 to 39: 7.32 s 17: 7.10 s 18: 7.15 s 19: 7.15 s 20: 7.15 s 22: 7.15 s 23: 7.15 s 24: 7.15 s 26: 7.20 s 27: 7.20 s 30: 7.25 s 30(5): 7.25 s 31: 7.25 s 33: 7.25 s 34: 7.25 s 37: 7.25 s 38: 7.25 s 39: 7.25 ss 47 to 48: 7.32 s 48: 7.30

Consumer Affairs and Fair Trading Act: 1.190 s 4: 17.195 s 30: 1.190 s 42: 17.150

Partnership Act 1892: 14.193

Law of Property Act s 5(c): 6.60 s 56: 8.230 s 56(1): 8.200 s 56(2): 8.205 s 56(3)(d): 8.205 s 56(4): 8.210 s 56(6): 8.200 s 58: 6.10 s 58(2): 6.25 s 62: 6.10 s 65: 14.210 s 70: 21.280 s 138(2): 15.195 s 212(1): 21.425

Real Property Act 1900: 15.130 Restraints of Trade Act 1976: 20.240 Sale of Goods Act 1923 s 7: 7.35 s 12: 14.193 s 13(2): 5.15 s 14: 5.30 s 31: 12.15 s 51(1): 21.410 s 52(3): 21.200 s 53(3): 21.200 s 55: 21.200 s 60: 2.75

Consumer Affairs and Fair Trading (National Uniform Legislation) Act: 1.190 Electronic Transactions (Northern Territory) Act s 3: 2.90, 6.45 s 5: 2.310, 2.315 s 7: 6.45 s 9: 6.45 s 13A: 2.315 s 13A(1): 2.310 s 13A(2): 2.310 ss 14A to 14E: 2.315 s 14B: 2.90 s 14C: 2.90 s 14D: 2.90, 16.210 Law Reform (Miscellaneous Provisions) Act s 15: 21.255 s 16: 21.250

Sale of Goods (Vienna Convention) Act 1986: 1.100

Personal Injuries (Liabilities and Damages) Act: 21.225 s 27: 21.225

Securities Industry Act 1970 s 70: 20.65

Proportionate Liability Act: 17.340 s 4: 21.265

Supreme Court Act 1970 s 58: 21.695 s 68: 21.695

Sale of Goods Act s 7(2): 7.35 s 13(2): 5.15 s 14: 5.30 s 31: 12.15 s 51(1): 21.410 s 52(3): 21.200 s 53(3): 21.200 s 55: 21.200 s 60: 2.75

Trustee Act 1925 s 78: 14.193 s 78(2): 14.193 s 79: 14.193 Pt 3: 14.193

NORTHERN TERRITORY Commercial Arbitration Act: 20.180 Commercial Arbitration (National Uniform Legislation) Act 2011: 20.180

Sale of Goods (Vienna Convention) Act: 1.100 Supreme Court Act s 14(1)(b): 21.695 s 62: 21.695 xliii

Contract Law: Principles, Cases and Legislation

s 68: 21.280 s 124(2): 15.195 s 232(1): 21.425

Supreme Court Act — cont s 63: 21.695 s 84: 21.275 s 85: 21.275

Sale of Goods Act 1896 s 5(2): 7.35 s 11(2): 5.15 s 12: 5.30 s 30: 12.15 s 50(1): 21.410 s 51(3): 21.200 s 52(3): 21.200 s 55: 21.200 s 59: 2.75

Water Act: 20.90

QUEENSLAND Civil Liability Act 2003: 21.225 s 28: 21.265 Ch 3: 21.225 Pt 2: 17.340 Civil Proceedings Act 1991 s 58: 21.275 s 59: 21.275

Sale of Goods (Vienna Convention) Act 1986: 1.100

Civil Proceedings Act 2011 s 8: 21.695

SOUTH AUSTRALIA

Commercial Arbitration Act 1990: 20.180

Australian Consumer Law (Tasmania) Act 2010 s 9: 1.190

Commercial Arbitration Act 2013: 20.180

Civil Liability Act 1936: 21.225 s 52: 21.225

Electronic Transactions Act 2001 s 26B: 2.90

Commercial Arbitration Act 2011: 20.180

Electronic Transactions (Queensland) Act 2001 s 3: 2.90, 6.45 s 6: 2.310 s 8: 6.45 s 14: 6.45 s 24(1): 2.310 s 24(2): 2.310 s 26D: 16.210 Sch 2: 2.310

Commercial Arbitration and Industrial Referral Agreements Act 1986: 20.180 Early Closing Act 1926: 2.70 Electronic Transactions Act 2000 s 3: 2.90, 6.45 s 5: 2.315 s 5(1): 2.310 s 7: 6.45 s 9: 6.45 s 13A: 2.315 s 13A(1): 2.310 s 13A(2): 2.310 ss 14A to 14E: 2.315 s 14B: 2.90 s 14C: 2.90 s 14D: 2.90, 16.210

Fair Trading Act 1989: 1.190 s 5(1): 17.195 s 19: 1.190 s 38: 17.150 s 107: 17.410 Fair Trading (Australian Consumer Law) Amendment Act 2010: 1.190 Land Acts 1910-1924: 21.665

Electronic Transactions Regulations 2002 reg 4(1)(a): 6.45

Law Reform Act 1995 s 5: 21.255 s 10(1): 21.250

Electronic Transactions (Victoria) Act 2000 s 3: 2.315 ss 13A-14E: 2.315

Property Law Act 1974 s 6(d): 6.60 s 55: 8.230 s 55(1): 8.200 s 55(2): 8.205 s 55(3)(d): 8.205 s 55(4): 8.210 s 55(6): 8.200 s 56: 6.10 s 56(2): 6.25 s 59: 6.10 s 62: 14.210

Fair Trading Act 1987: 1.190 s 17: 1.190 s 56: 17.150 s 96: 17.410 Law Reform (Contributory Negligence and Apportionment of Liability) Act 2001 s 3: 21.255 s 3(2): 21.265 s 7: 21.250 xliv

Table of Statutes

s 11A(2): 2.310 ss 12A to 12E: 2.315 s 12B: 2.90 s 12C: 2.90 s 12D: 2.90, 16.210

Law Reform (Contributory Negligence and Apportionment of Liability) Act 2001 — cont s 8: 21.265 Pt 3: 17.340 Law of Property Act 1936 s 16: 14.210 s 26(1): 6.10 s 26(2): 6.60 s 64: 21.425

Fair Trading Act 1990 s 14: 17.150 Mercantile Law Act 1935 s 6: 6.10 s 12: 6.25

Misrepresentation Act 1971 s 7: 17.110

Sale of Goods Act 1896 s 7(1): 7.35 s 9: 6.10 s 13(2): 5.15 s 14: 5.30 s 33: 12.15 s 53(1): 21.410 s 54(3): 21.200 s 55(3): 21.200 s 58: 21.200 s 62: 2.75

Sale of Goods Act 1895 s 2(1): 7.35 s 8(2): 5.15 s 9: 5.30 s 28: 12.15 s 48(1): 21.410 s 49(3): 21.200 s 50(3): 21.200 s 53: 21.200 s 57: 2.75

Sale of Goods (Vienna Convention) Act 1987: 1.100

Sale of Goods (Vienna Convention) Act 1986: 1.100

Supreme Court Civil Procedure Act 1932 s 11(7): 14.210 s 11(13): 21.695 s 34: 21.275 s 165: 21.275

Statutes Amendment and Repeal (Australian Consumer Law) Act 2010: 1.190 Supreme Court Act 1935 s 21: 21.695 s 30: 21.695 s 30C: 21.275 s 114: 21.275

Wrongs Act 1954 s 2: 21.255 s 4: 21.250

TASMANIA

VICTORIA

Apportionment Act 1871 s 2: 21.425

Australian Consumer Law and Fair Trading Act 2012: 1.190 Pt 3.2: 14.185

Australian Consumer Law (Tasmania) Act 2010: 1.190

Commercial Arbitration Act 1984: 20.180

Civil Liability Act 2002: 21.225 s 9A: 17.340 s 27: 21.225 s 43A: 21.265

Commercial Arbitration Act 2011: 20.180 Electronic Transactions (Victoria) Act 2000 s 1: 2.90 s 3(1): 2.310 s 4: 6.45 s 7: 6.45 s 9: 6.45 s 13A: 2.310 s 13A(1): 2.310 s 13A(2): 2.310 s 14B: 2.90 s 14C: 2.90 s 14D: 2.90, 16.210

Commercial Arbitration Act 1986: 20.180 Commercial Arbitration Act 2011: 20.180 Conveyancing and Law of Property Act 1884 s 36(1): 6.10 s 36(2): 6.60 Electronic Transactions Act 2000 s 3: 2.310, 2.315 s 5: 6.45 s 7: 6.45 s 11A: 2.315 s 11A(1): 2.310

Fair Trading Act 1985 s 10A: 17.260 xlv

Contract Law: Principles, Cases and Legislation

Fair Trading Act 1999: 1.190 s 9: 17.150 s 12: 1.190 Pt 2B: 11.05, 11.60, 11.65, 11.75, 11.80

s 8: 6.45 s 10: 6.45 s 14(1): 2.310, 2.315 s 14(2): 2.310 ss 17 to 21: 2.315 s 18: 2.90 s 19: 2.90 s 20: 2.90, 16.210

Fair Trading Amendment (Australian Consumer Law) Act 2010: 1.190 Goods Act 1958: 1.100 s 7: 7.35 s 13(2): 5.15 s 14: 5.30 ss 17 to 20: 10.05 s 35: 12.15 s 55(1): 21.410 s 56(3): 21.200 s 57(3): 21.200 s 60: 21.200 s 64: 2.75

Fair Trading Act 1987: 17.195 s 5(1): 17.195 s 10: 17.150 Fair Trading Act 2010: 1.190 s 13: 17.410 s 23: 1.190 Law Reform (Contributory Negligence and Tortfeasers’ Contribution) Act 1947 s 3A: 21.255

Instruments Act 1958 s 126: 6.45 s 126(1): 6.10, 6.40 s 126(2): 6.45 s 129: 6.25

Law Reform (Contributory Negligence and Tortfeasors’ Contribution) Act 1947 s 4(1): 21.250 Law Reform (Statute of Frauds) Act 1962 s 4: 6.10

Property Law Act s 49(2): 21.500

Property Law Act 1969 s 11: 8.230 s 11(2): 8.200 s 11(2)(a): 8.210 s 11(2)(b): 8.185, 8.215 s 21: 14.210 s 36(d): 6.60 s 81(2): 15.195 s 131: 21.425

Property Law Act 1958 s 41: 14.210 s 146(2): 15.195 Statute of Frauds: 17.260 Supreme Court Act 1986 s 38: 21.695 s 54: 21.425 s 60: 21.275 s 101: 21.275

Sale of Goods Act 1895 s 2(1): 7.35 s 4: 6.10 s 8(2): 5.15 s 9: 5.30 s 28: 12.15 s 48(1): 21.410 s 49(3): 21.200 s 50(3): 21.200 s 53: 21.200 s 57: 2.75

Wrongs Act 1958: 21.225 s 24AF: 21.265 s 25: 21.255 s 26(1): 21.250 s 28G: 21.225 s 28H: 21.225 Pt IVAA: 17.340

WESTERN AUSTRALIA

Sale of Goods (Vienna Convention) Act 1986: 1.100

Civil Liability Act 2002: 21.225 s 5AI: 21.265 s 9: 21.225 Pt 1F: 17.340

Supreme Court Act 1935 s 25(10): 21.695 s 32: 21.275

Commercial Arbitration Act 1985: 20.180 Commercial Arbitration Act 2012: 20.180

IMPERIAL

Electronic Transactions Act 2011 s 3: 2.90, 6.45 s 5: 2.315 s 5(1): 2.310

Chancery Amendment Act 1858: 21.695 Mercantile Law Amendment Act 1856 s 3: 6.25 xlvi

Table of Statutes

ENGLAND Contracts (Rights of Third Parties) Act 1999: 8.230 Judicature Act 1873 s 25(7): 14.210

GERMANY Bürgerliches Gesetzbuch s 241: 21.680 s 328(1): 8.175

NEW ZEALAND Consumer Guarantees Act 1993: 11.160 Contracts (Privity) Act 1982: 8.230 s 4: 8.200 s 5: 8.205 Fair Trading Act 1986 s 43(1): 17.320

Statute of Frauds 1677: 13.155 s 4: 6.10 Unfair Terms in Consumer Contracts Regulations 1999: 11.05, 11.60, 11.65, 11.75, 11.90, 11.95 reg 5(1): 11.90 reg 5(4): 11.15

TREATIES AND CONVENTIONS Convention on the Use of Electronic Communications in International Contracts 2005: 2.315 UNCITRAL Model Law on International Commercial Arbitration: 20.180 UNIDROIT Principles for International Commercial Contracts 2010: 15.55 Art 7.1.4: 15.55

Principles of European Contract Law Pt I: 1.100 Pt II: 1.100 Pt III: 1.100

UNIDROIT Principles of International Commercial Contracts 2010: 2.100, 22.225 Art 2.1.4(2): 22.225 Art 2.1.4(2)(b): 2.100 Art 2.1.6(2): 2.200 Art 2.1.11: 2.370 Art 2.1.22: 2.370 art 2.1.4: 2.100

Restatement of Contracts ss 302 to 15: 8.175

Uniform Commercial Code: 1.100 Art II: 1.100

Uniform Commercial Code: 10.125, 10.150 s 1-203: 10.125 s 2-103(1)(b): 10.150 Art 2-207: 2.370 Art 2-207(3): 2.370

United Nations Convention on Contracts for the International Sale of Goods: 1.100, 15.55 Art 48: 15.55

UNITED STATES

UNITED KINGDOM Contracts (Rights of Third Parties) Act 1999 s 1: 8.200 s 2: 8.205 s 3: 8.210 s 4: 8.215 s 5: 8.185, 8.215 s 7: 8.220 Lord Cairns’ Act: 21.100, 21.695 Misrepresentation Act 1967: 17.110 Sale of Goods Act 1893: 9.310 Statute of Frauds: 6.05, 6.10, 6.15, 6.20, 6.40, 6.45, 6.50, 6.55, 6.60, 6.80, 6.95

United Nations Convention on Contracts for the International Sale of Goods (1980) Art 1(1): 1.100 Art 7: 1.100 United Nations Convention on International Contracts for the Sale of Goods: 2.100, 22.225 Art 16(2): 2.100, 22.225 Art 18: 2.200 Art 19: 2.370 United Nations Convention on the Use of Electronic Communications in International Contracts: 2.90, 2.310 United Nations Convention on the Use of Electronic Communications in International Contracts 2005: 2.310

xlvii

CHAPTER 1 Contract Law Theory [1.05]

THE IDEA OF CONTRACT ......................................................................................... 2

[1.10]

CLASSICAL CONTRACT THEORY .............................................................................. 4 [1.10] [1.15]

[1.20]

The philosophy underlying classical contract law ............................... 4 Criticism of the classical approach ........................................................ 6

ECONOMIC ANALYSIS OF CONTRACT LAW .......................................................... 9 [1.25] [1.50] [1.55]

Economic functions of contract law ...................................................... 9 Emphasis on consequences .................................................................. 11 Criticism of economic analysis ............................................................. 11

[1.65]

CRITICAL LEGAL SCHOLARSHIP ............................................................................. 13

[1.70]

FEMINIST ANALYSIS OF CONTRACT LAW ............................................................. 14 [1.75] [1.95]

Three approaches .................................................................................. 14 Feminist approaches and the “wives” special equity ........................ 16

[1.100]

COMPARATIVE PERSPECTIVES ................................................................................ 18

[1.110]

TORT ......................................................................................................................... 21 [1.115] [1.120] [1.125]

Torts committed in a contractual context .......................................... 22 Concurrent liability in contract and tort ............................................. 22 Tort and contract compared ................................................................ 23

[1.150]

UNJUST ENRICHMENT ............................................................................................ 25

[1.155]

EQUITY ...................................................................................................................... 26 [1.160] [1.165] [1.170]

[1.175]

The development of equity .................................................................. 26 Equitable obligations ............................................................................ 27 Equitable doctrines and remedies in contract .................................... 28

STATUTORY OBLIGATIONS AND REGULATION ..................................................... 29 [1.175] [1.195] [1.200] [1.205] [1.210]

Statutory obligations and regulation .................................................. 29 Misleading or deceptive conduct ........................................................ 31 Unconscionable conduct ...................................................................... 31 Unfair contract terms ............................................................................ 32 Consumer guarantees ........................................................................... 32

1

Contract Law: Principles, Cases and Legislation

Extracts from Paterson, Robertson and Duke, Principles of Contract Law (2016, 5th ed), Ch 1

THE IDEA OF CONTRACT [1.05] A contract is commonly defined as an agreement or set of promises that the law will

enforce (ie, for breach of which the law will provide a remedy). 1 There are, however, many different ways of understanding what a contract is, and what contract law is about. This chapter explores some ideas about the nature of contract and the role of contract law. Given the range and complexity of the different approaches covered in this chapter, it is necessary to begin with an overview of the different perspectives. According to the classical understanding, a contract is an expression of the joint will of parties engaged in a transaction. On this view, contractual obligations are voluntarily assumed and sharply distinguishable from obligations imposed by the law of tort. The role of contract law, according to the classical understanding, is to facilitate the freedom of the parties to create their own private law. This set of ideas, known as “classical contract theory”, exerted a significant influence over the development of English contract law in the 19th century. Although these ideas have been the subject of sustained criticism over a considerable period of time, their influence can still be seen in many principles of Australian contract law and in the outcomes of contemporary Australian contract cases. The classical theory of contract was a unifying theory that attempted to capture the essence of contract in a single idea. Some contemporary scholars have offered alternative unifying theories that are related to classical theory, but avoid some of its inconsistencies and deficiencies. Two prominent contemporary unifying theories of contract law are Charles Fried’s theory that contractual obligation is based on promise and Randy Barnett’s idea that contract is based on consent to the transfer of entitlements. A second way of understanding contract, then, is to see it as based on the moral obligation to keep a promise. Charles Fried argues that a moral obligation arises from the making of a promise, because the promisor has invoked a convention that gives the promisee moral grounds to expect the promised performance. From this liberal individualist perspective, promise is the core of contract. Thirdly, contract can be seen to be based on consent. Randy Barnett suggests that it is consent to a transfer of entitlements rather than promise that gives contract law its moral force. A person who manifests an intention to assume a legal obligation invokes the institution of contract and thereby incurs a moral obligation to perform that promise. The legal enforcement of a contractual promise is justified because the parties have consented to legal enforcement or have at least behaved in such a way as to indicate that they have so consented. Fourthly, contract can be seen as a mechanism that facilitates economically efficient exchanges. Michael Trebilcock has suggested that, from an economic viewpoint, the functions of contract law are: first, to prevent opportunistic behaviour by enforcing contractual obligations; secondly, to provide a set of default rules and thus save parties the effort and expense of negotiating all of the terms of their transactions; thirdly, to fill gaps in contracts; and, fourthly, to address market failures, such as misinformation and improper pressure. 2 The 1 2 2

Coote, “The Essence of Contract – Part I” (1988) 1 Journal of Contract Law 91, 94-7. Trebilcock, The Limits of Freedom of Contract (1993), pp 15-7. [1.05]

Contract Law Theory

CHAPTER 1

economic approach to contract law can be seen as another unifying theory: it attempts to explain and justify all of contract law by reference to a single idea and a single goal, namely economic efficiency. Not all writers on contract law share the desire to explain the subject by reference to a single principle or unifying theory. Most contract scholars accept that contract law draws on a diverse range of ideas and is shaped by a number of goals, which often point in different directions. This fifth view of contract law sees it as “a rich combination of normative approaches and theories of obligation” which draws on a complex mixture of values and influences. 3 The leading exponent of this view is Robert Hillman. 4 A sixth way of understanding contract law is to see it as a set of contradictory formal rules that serve an ideological function. That function is to mask the political and social issues underlying particular disputes and to perpetuate a legal order that protects the interests of the powerful. This understanding of contract law is associated with the Critical Legal Studies movement. Seventhly, contract law can be analysed from the point of view of gender. Its doctrines, its ideology and its representations of women can be seen as having negative effects on women. Contract law can also be seen as reflecting a masculine viewpoint, with its emphasis on abstract rules and its disregard of values such as co-operation and respect for others. It can also be criticised for its failure to address issues of substantive gender inequality. These views can all be described as feminist perspectives on contract law. Eighthly, contract can be viewed as a social relationship. The behaviour of parties to contracts is affected by the social relations between the parties and by the broader social context in which the contract is made. These social relations may be more important to the parties than their legal rights. Empirical evidence shows that even business people in some contexts plan transactions on the basis of trust, rather than the availability of legal sanctions, and routinely modify exchange transactions without regard to their legal rights. In many cases this is because the relationship between the parties, which may form part of a broader web of social relations, is more important than the particular transaction. Ian Macneil and other relational contract theorists argue that contract law suffers from too strong a focus on discrete exchange transactions. Some suggest that the principles of contract law should to a greater extent reflect the relational aspects of contracting (eg, by accepting that contractual obligations can evolve over time and that parties do not always attempt complete planning at the beginning of the relationship). Ninthly, contract can be seen as a form of regulation. Jean Braucher points out that contract law plays a significant regulatory role in determining the validity of contracts, interpreting the language and conduct of the parties and filling substantial gaps in agreements. Hugh Collins characterises the law of contract as a particular form of regulation of markets and exchanges, which he calls “private law” regulation. The “private law of contract” gives rights to the parties themselves and allows them to enforce those rights through the courts. This private form of regulation can be contrasted with the public regulation of exchanges, through legislation that sets standards and establishes government agencies to enforce compliance with those standards. 3

Hillman, The Richness of Contract Law (1998), pp 6-7.

4

See Hillman, The Richness of Contract Law (1998). See also Trakman, “Pluralism in Contract Law” (2010) 58 Buffalo Law Review 1031. [1.05]

3

Contract Law: Principles, Cases and Legislation

A tenth way of understanding contract is to see it in its doctrinal context, as part of the law of obligations. The common law recognises three fundamental obligations owed by individuals to each other: the obligation to perform certain promises (the law of contract), the obligation to avoid causing harm to others in certain situations (the law of tort) and the obligation to restore certain unjust gains (the law of restitution or unjust enrichment). Alongside these legal obligations are numerous equitable and statutory obligations, which cannot be so neatly categorised. Contract law can be understood as part of a web of obligations created by the common law, equity and statute. This way of understanding contract is considered from [1.105]ff in this chapter. The internationalisation of contract law is discussed at [1.100]. There are many ways in which the principles of contract law in different jurisdictions are converging. There are both formal and informal moves to harmonise and standardise the principles of contract law, particularly in relation to international transactions. From a practical point of view, it is important to understand the different ways in which contract law is becoming internationalised. It is also useful to compare the approaches taken in different jurisdictions to particular contract problems. Such comparisons give us a better understanding of the nature of Australian contract law and help us to consider why a particular approach is adopted and whether it is desirable.

CLASSICAL CONTRACT THEORY The philosophy underlying classical contract law [1.10] Classical contract theory is the set of ideas and assumptions that underpinned the

development of contract law in England and the United States during the 19th century. The latter half of the 19th century is often described as the classical age of English contract law. There are two reasons for this: first, because of the extensive development of contract principles that took place during that period; and secondly, because the prevailing political and economic views of the time elevated contract to a position of central importance in the law. 5 Classical theory remains important to us today because significant areas of Australian contract law are still based on the classical principles developed in England in the 19th century. Moreover, the classical understanding of contract continues to influence the development of contract law in the Australian and English courts. The law of contract that developed in the 19th century was influenced by the will theory of contract. 6 According to the will theory, a contract represents an expression of the will of the contracting parties and, for that reason, should be respected and enforced by the courts. At the heart of the will theory is the notion that a contract involves self-imposed liability. The will theory and the principle of freedom of contract were connected with economic, philosophical and political views of the late 19th century. 7 The prevailing ideology was the liberal individualist philosophy of laissez faire, and the courts developed principles of contract law that were consistent with that philosophy. 8 The parties to a contract were regarded as self-interested individuals who created their own private law through agreement. It was 5 6 7 8 4

Atiyah, An Introduction to the Law of Contract (5th ed, 1995), p 10. See Atiyah, The Rise and Fall of Freedom of Contract (1979), pp 405-8. Atiyah, The Rise and Fall of Freedom of Contract (1979), Chapters 1–5. Atiyah, An Introduction to the Law of Contract (5th ed, 1995), pp 7–9. [1.10]

Contract Law Theory

CHAPTER 1

thought that individuals should be free to enter into whatever bargains they considered would benefit them and the courts should facilitate that freedom by enforcing whatever bargains individuals chose to make. Otherwise, the courts should interfere as little as possible. 9 Freedom of contract was the starting point for the determination of all contract law issues. 10 These ideas are reflected in the famous statement by Sir George Jessel MR in Printing and Numerical Registering Co v Sampson that: 11 if there is one thing which more than another public policy requires, it is that men of full age and competent understanding shall have the utmost liberty of contracting, and that their contracts when entered into freely and voluntarily shall be held sacred and shall be enforced by Courts of justice.

The political and social context in which modern contract law developed thus favoured individualism, self-reliance and the exercise of free will over government intervention and paternalism. 12 The principles of modern contract law were founded on those concepts, 13 which were encapsulated in a political theory labelled “contractualism” by Morris Cohen: Contractualism in the law, that is, the view that in an ideally desirable system of law all obligation would arise only out of the will of the individual contracting freely, rests not only on the will theory of contract, but also on the political doctrine that all restraint is evil and that the government is best which governs least. This in turn is connected with the classic economic optimism that there is a sort of pre-established harmony between the good of all and the pursuit by each of his own selfish economic gain. 14

This approach had two principal effects. First, the courts were reluctant to recognise the existence of non-contractual obligations. The law of tort and restitution went largely undeveloped during the latter half of the 19th century, 15 and the courts imposed stifling constraints on the enforcement of promises that had been relied upon, but did not form part of, a bargain or exchange between the parties. 16 Hugh Collins has observed that the courts tended to perceive social relations in contractual terms. This is illustrated by the famous case of Carlill v Carbolic Smoke Ball Co. 17 When a manufacturer’s advertisement for a device designed to prevent colds proved to be misleading, Mrs Carlill was able to obtain a remedy against the manufacturer by establishing a contract between them. A contract was found to have been made despite the fact that the parties had never communicated with each other or exchanged money or goods. 18 Collins points out that, rather than recognising the misleading

9 10 11 12

Atiyah, An Introduction to the Law of Contract (5th ed, 1995), p 8. Atiyah, The Rise and Fall of Freedom of Contract (1979), p 666. (1875) LR 19 Eq 462 at 465. Atiyah, The Rise and Fall of Freedom of Contract (1979), esp Chapters 1-2.

13

Atiyah, The Rise and Fall of Freedom of Contract (1979), esp Chapters 13-6. Atiyah’s detailed account argues that free market principles influenced the judges and filtered into the content of contract doctrine. Cf Gordley, The Philosophical Origins of Modern Contract Doctrine (1991), who argues that Atiyah and others have exaggerated the influence of liberal theories.

14 15 16

Cohen, “The Basis of Contract” (1933) 46 Harvard Law Review 553, 558. Atiyah, An Introduction to the Law of Contract (5th ed, 1995), p 10. See Robertson, “Situating Equitable Estoppel within the Law of Obligations” (1997) 19 Sydney Law Review 32, 33-7. [1893] 1 QB 256. See [2.10]. Collins, The Law of Contract (4th ed, 2003), p 4.

17 18

[1.10]

5

Contract Law: Principles, Cases and Legislation

advertising as a civil wrong in itself, the court used the law of contract to discourage misleading claims in advertising and to deter the marketing of unproven pharmaceutical devices. 19 Secondly, the principles of contract law were developed and justified by reference to an overriding concern with giving effect to the intentions of the parties. The courts “felt that they were not imposing legal rules on the parties, but were merely working out the implications of what the parties had themselves chosen to do”. 20 The principles were seen as objective and neutral, and based on a respect for voluntary choices. 21 There could therefore be no room for any requirement of fairness in contractual exchanges or for the imposition of contractual obligations without the consent of the parties. 22 An important factor in the development of contract as a distinct body of law was that textbooks on English contract law began to be written in the 19th century. Textbooks such as those by Chitty, Pollock and Anson played an important role in the development of the classical idea of contract law by describing in systematic form a set of abstract general principles which applied to all types of contract. 23 The textbooks helped to carve out contract as an independent body of law, which was separate from property law, the law of tort and the law of restitution. 24 Contract could therefore be seen as a branch of law that was exclusively concerned with voluntarily assumed obligations. 25 Contract was sharply distinguished from the law of tort, in which obligations were imposed on individuals. This separation was and remains artificial, since obligations are routinely imposed by the law of contract, while intention and voluntary conduct play a role in shaping obligations in tort. 26 Moreover, property, tort and restitution play an important role in the regulation of market transactions 27 and in the determination of the rights and obligations of contracting parties in particular cases. 28 Criticism of the classical approach [1.15] The will theory and the classical approach to contract have been comprehensively

criticised. The first point is that the rights and obligations arising from a contract do not necessarily represent the will of the parties. Many problems the courts must deal with arise as a result of what the parties have not expressly agreed upon, rather than what they have agreed upon. As Morris Cohen has pointed out, litigation almost invariably reveals the absence of 19 20

Collins, The Law of Contract (4th ed, 2003), p 4. Atiyah, An Introduction to the Law of Contract (5th ed, 1995), p 10.

21 22 23

Collins, The Law of Contract (4th ed, 2003), pp 6-7. Collins, The Law of Contract (4th ed, 2003), pp 6-7. Simpson, “Innovations in Nineteenth Century Contract Law” (1975) 91 Law Quarterly Review 242, 247; Atiyah, The Rise and Fall of Freedom of Contract (1979), pp 388-90. Collins, The Law of Contract (4th ed, 2003), p 5. This view remains influential; see, eg, Transfield Shipping Inc v Mercator Shipping Inc [2008] UKHL 48; [2009] 1 AC 61 (“The Achilleas”), esp at para [12]: “It seems to me logical to found liability for damages upon the intention of the parties (objectively ascertained) because all contractual liability is voluntarily undertaken”. See also Astley v Austrust Ltd [1999] HCA 6; (1999) 197 CLR 1, 36: “Tort obligations are imposed on the parties; contractual obligations are voluntarily assumed”. Atiyah, “Contracts, Promises and the Law of Obligations” (1978) 94 Law Quarterly Review 193, 221. Collins, The Law of Contract (4th ed, 2003), p 6. See [1.105]and [2.395].

24 25

26 27 28 6

[1.15]

Contract Law Theory

CHAPTER 1

agreement between the parties. 29 Problems arising from miscommunication or a lack of agreement cannot be resolved by treating the agreement as an expression of the will of the parties. The courts resolve such problems by determining the rights and obligations of the parties on an objective basis. In determining whether a contract has been formed, the courts are not concerned with whether the parties actually intended to enter into a contract, but with whether a reasonable person would believe they intended to do so, based on their words and behaviour. 30 This approach requires the court to make policy decisions as to whether contractual obligations should be recognised in particular circumstances. Liability for breach of contract can therefore be seen as tort-like liability for negligent conduct or careless use of language, rather than as self-imposed liability that has emanated from the will of the parties. 31 The content of a contract is also determined objectively: statements made during negotiations may form part of a contract if a reasonable bystander would think that a contractual promise was intended, 32 and unsigned written terms form part of a contract if reasonable notice of the terms was given by one party to the other. 33 The contractual terms are then interpreted according to what a reasonable person would think was meant by the language used. 34 The courts routinely imply terms to fill gaps and deal with contingencies not provided for in the contract. Other contract doctrines, such as the doctrine of frustration and the remoteness rule require the courts to fill gaps in the contractual allocation of risk. 35 Contracting parties routinely leave it to the courts to decide what should happen in the event that one of the parties should fail to fulfil their obligations. Thus, in many respects, contract law operates in a similar way to the law of tort: the state, through the courts, imposes obligations on the parties based on norms of reasonable behaviour. Contractual obligations derived from an objective interpretation of behaviour can be seen as obligations that are imposed by the state in order to protect persons who rely on promises. This serves the broader policy goal of facilitating commercial transactions and other valuable exchanges by ensuring that individuals can rely on serious commitments made by others. A second problem with the classical approach to contract is that it assumes that contracts are fully negotiated between the parties. Today, most written contracts are made on the basis of standard form terms which are generally not negotiable and typically not read, and the implications of which are commonly not understood by the non-drafting party. 36 The widespread use of standard forms, which began in the 19th century, undermines the idea that a contract necessarily represents a consensus between the parties. If the bargaining power in a given situation is sufficiently unequal that one party is able to impose his or her own standard terms on the other, then the resulting contract is unlikely to represent the will of both 29 30

Cohen, “The Basis of Contract” (1933) 46 Harvard Law Review 553, 577. See Chapters 2 and (Paterson Textbook Ch 5).

31 32 33 34 35 36

Mensch, “Freedom of Contract as Ideology” (1981) 33 Stanford Law Review 753, 763. Subject to the parol evidence rule: see [9.100]-[9.127]. See Chapter 9. See Chapter 9. See Chapters 14 (on the doctrine of frustration) and 21 (on the remoteness rule). See Kessler, “Contracts of Adhesion – Some Thoughts About Freedom of Contract” (1943) 43 Columbia Law Review 629; Slawson, “Standard Form Contracts and Democratic Control of Lawmaking Power” (1971) 84 Harvard Law Review 529; Rakoff, “Contracts of Adhesion: An Essay in Reconstruction” (1983) 96 Harvard Law Review 1173; Hillman and Rachlinski, “Standard-Form Contracts in the Electronic Age” (2002) 77 New York University Law Review 429. [1.15]

7

Contract Law: Principles, Cases and Legislation

parties. 37 The classical notion of individuals freely bargaining in relation to contract terms does not take account of the dominance of standard form contracts or the unequal distribution of economic power. 38 A third problem with the notion that contract law is fundamentally concerned with individual autonomy is the role played by the state in enforcing contracts and in establishing the legal framework in which bargaining takes place. Freedom of contract is not a matter of leaving parties to do their own thing, as the philosophy of laissez faire might suggest, because the state plays a decisive role in both the enforcement and formation of contracts. A contract is only “binding” because the state, through the courts, will enforce it. Morris Cohen has observed that the role played by the state in the enforcement of contracts allows the law of contract to be viewed as a branch of public law. 39 The state also plays a decisive role in the making of a contractual bargain. In a market economy in which labour is specialised, individuals have no choice but to make contracts in order to obtain food, clothing and shelter, to acquire skills and to work. 40 Coercion is “at the heart of every bargain” because it is “inherent in each party’s legally protected threat to withhold what is owned”. 41 It is the right to withhold property that allows a party to force another to submit to his or her terms, provided they are no worse than the alternative. 42 The power to bargain is founded on property rights that are conferred and enforced by the state. As Betty Mensch has explained, ownership, or the right to withhold property, is a function of legal entitlement. 43 If we can say that ownership is at the heart of every bargain and ownership is a function of the legal order, then every contract is a function of the legal order, rather than a function of the will of the parties. This conclusion demonstrates the falsity of the distinction between public and private in contract law, and the distinction between free and regulated markets. 44 The validity of the first and second criticisms of classical contract theory set out above have become matters of debate in recent years. Scholars such as Charles Fried, Randy Barnett and Stephen Smith, (whose work is discussed in the Paterson Textbook), defend theories of contract that are based on the core classical idea that contractual obligations can in general be regarded as voluntary or self-imposed. There is also a broader movement in the contract law literature that seeks to show that there are fewer gaps in contracts than is commonly thought, and that judges play a less significant role in shaping contractual obligations than is commonly thought. 45

37

See Robertson, “The Limits of Voluntariness in Contract” (2005) 29 Melbourne University Law Review 179, 187-202.

38

Dawson, “Economic Duress – An Essay in Perspective” (1947) 45 Michigan Law Review 253; Cohen, “The Basis of Contract” (1933) 46 Harvard Law Review 553.

39 40

Cohen, “The Basis of Contract” (1933) 46 Harvard Law Review 553, 586. Radin, “Contract Obligation and the Human Will” (1943) 43 Columbia Law Review 575, 580; Hale, “Bargaining, Duress, and Economic Liberty” (1943) 43 Columbia Law Review 603.

41 42

Mensch, “Freedom of Contract as Ideology” (1981) 33 Stanford Law Review 753, 764. Hale, “Coercion and Distribution in a Supposedly Non-coercive State” (1923) 38 Political Science Quarterly 470, 472-3; Hale, “Bargaining, Duress, and Economic Liberty” (1943) 43 Columbia Law Review 603, 604. Mensch, “Freedom of Contract as Ideology” (1981) 33 Stanford Law Review 753, 764. Mensch, “Freedom of Contract as Ideology” (1981) 33 Stanford Law Review 753, 764. See [1.22] (Paterson Textbook).

43 44 45 8

[1.15]

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ECONOMIC ANALYSIS OF CONTRACT LAW [1.20] Economic analysis has been a significant force in the field of contract law in North

America in the last 30-40 years. 46 Economic analysis of law involves analysing legal rules by reference to their ability to promote efficient market outcomes. A transaction enhances economic efficiency if it results in the transfer of goods or services to a person who values them more highly. Economic analysis places a high value on voluntary exchanges. Individuals are assumed to be the persons best placed to assess their own welfare. Voluntary exchanges move resources to their most valued uses because an individual will only exchange a thing (such as money, goods or services) for another thing that he or she values more highly. This analysis assumes the individual to be a “self-interested egoist who maximises utility”. 47 It is not assumed that all individuals are rational, but that the utility-maximising individual represents a “weighted average of the individuals under study in which the non-uniformities and extremes in behaviour are evened out”. 48 Economic functions of contract law [1.25] Given its emphasis on voluntary exchanges, it is not surprising that the neo-classical

economic analysis of contract law, like classical contract theory, favours a principle of freedom of contract and discourages state intervention. Nonetheless most adherents of an economic analysis of law would accept that contract law fulfils a number of important functions in regulating voluntary exchange. Richard Posner has argued that voluntary exchanges would still take place without contract law, but the system would be much less efficient because contracting parties would need to implement costly measures to protect themselves against opportunistic behaviour. 49 Michael Trebilcock identifies four functions of contract law in promoting economic efficiency. 50

“Containing opportunism in non-simultaneous exchanges” [1.30] A first economic function of contract law is to contain opportunistic conduct. Where

parties do not perform their contractual obligations at the same time, the party performing second may engage in opportunistic behaviour. The incentive for such conduct will occur where, after the contract is made and one party has performed, something causes the other party to regret making the commitment. The contract might, for example, prove to have been a bad deal because the market price has changed or a better opportunity has arisen. The party who has not performed may then seek to renege on the contract, despite the expectations of the other party and his or her reliance in performing. As we shall see, contract law enforces contracts by requiring a party who refuses to perform in breach of contract to pay damages to the other party and, in some cases, may order specific performance of the contract. Proponents 46 47 48 49 50

For a recent overview and discussion, see Katz, “Economic Foundations of Contract Law” in Klass, Letsas and Saprai, Philosophical Foundations of Contract Law (2014) 171. Veljanovski, “The Economic Approach to Law: A Critical Introduction” (1980) 7 British Journal of Law and Society 158, 162. Veljanovski, “The Economic Approach to Law: A Critical Introduction” (1980) 7 British Journal of Law and Society 158, 162. Posner, Economic Analysis of Law (9th ed, 2014), §4.1. Trebilcock, The Limits of Freedom of Contract (1993), pp 15-7; Trebilcock, “The Value and Limits of Law and Economics” in Richardson and Hadfield (eds), The Second Wave of Law and Economics (1999), p 12. [1.30]

9

Contract Law: Principles, Cases and Legislation

of an economic analysis of law stress that these rules provide important protection for contracting parties against such opportunistic advantage-taking. There are also many non-legal incentives for parties to perform contracts, such as the value of a good reputation, which may in fact prove a more significant incentive for loyalty to a contract than the law. 51

“Reducing transaction costs” [1.35] A second economic function of contract law is to reduce transaction costs. Contract

law reduces transaction costs by supplying default rules. Default rules are rules that will apply to all contracts, or to all contracts of a certain type, unless the parties have excluded their application. As we shall see, contract law recognises numerous terms that are routinely implied in certain types of contracts. 52 Moreover, many of the general rules of contract law, such as those governing termination, may be seen as default rules. 53 Default rules save the parties the expense of having to negotiate and draft provisions dealing with particular contingencies. Proponents of the economic approach argue that the default rules of contract law should encourage or facilitate efficiency-enhancing behaviour. This can be done in one of two ways. First, default rules might attempt to provide outcomes that best approximate what the parties themselves would have agreed on had they had the opportunity. Secondly, default rules can be formulated in such a way that they provide incentives or disincentives that encourage parties to behave efficiently.

“Filling gaps in incomplete contracts” [1.40] A third function of contract law, which is closely related to the provision of default

rules, is to fill gaps in incomplete contracts by dealing with those matters on which the parties have not expressly reached agreement. A contract may prove incomplete where the parties fail to foresee or provide for a particular contingency affecting performance of their contract. As we shall see, where a contingency for which the parties have not provided occurs, courts are in some cases prepared to imply terms in contracts on a one-off basis. 54 The doctrine of frustration, which relieves parties from their obligations where performance becomes impossible or radically different from what they intended, may also be seen as a gap-filling rule. 55

“Distinguishing welfare-enhancing and welfare-reducing exchanges” [1.45] A fourth economic function of contract law is to provide excuses for non-performance.

Contract law thus discourages exchanges that are inefficient because of a market failure. As we shall see, the law of contract recognises a range of factors as vitiating a contract and justifying non-performance, such as where a party has been misled, has entered into a contract on the basis of a mistake or has been subjected to illegitimate pressure to enter into a contract. These vitiating factors may be seen in economic terms as regulating cases of market failure, such as information failure 56 and lack of voluntariness. 57 51 52 53 54 55 56 57 10

See [21.125]. See Chapter 10. See Chapter 13. See Chapter 10. See Chapter 14. See Chapter 17. See Chapter 19. [1.35]

Contract Law Theory

CHAPTER 1

Emphasis on consequences [1.50] Much legal analysis is confined to considering the effect of a particular rule in resolving

a dispute that has occurred between the parties in a particular case. By contrast, economic analysis directs our attention to the broader consequences of a rule. Economic analysis considers the broader functions of contract law rules and analyses how well those rules fulfil their functions. Adherents of an economic analysis of law ask: what sort of incentives will the rule provide to contracting parties in the future? Economic analysis is concerned with the overall effect of the rule in either encouraging or discouraging efficient outcomes, rather than with the results in a particular case. 58 Criticism of economic analysis [1.55] One criticism of the economic analysis of law is that its emphasis on individual

autonomy reflects an “impoverished, pre-social conception of human life”. 59 As noted at [1.20], adherents of an economic analysis of law presume a contracting party to be a “self-interested egoist who maximises utility”. 60 By contrast, as discussed at [1.85], relational contract theorists argue that human behaviour is not merely influenced by self-interest but also by social bonds, such as those between families and communities, and also by values such as loyalty and altruism. An account of contracting behaviour that does not take account of these social influences on human behaviour will, on this view, be incomplete. Another criticism of law and economics is that the concepts deployed are indeterminate and commonly rely on unexpressed value judgments. 61 For example, a person’s decision in a particular situation will be optimal in an economic sense only if it is voluntary and informed. These are abstract concepts and there can be much argument about what they require. As Trebilcock argues, in the real world, few choices are made with perfect information or free from pressures of any kind. 62 Accordingly, value judgments will be required to determine what amount of pressure should invalidate a transaction and what degree of information imperfection should be tolerated. 63 A third criticism of economic analysis of contract law concerns its neglect of the issue of distributive justice. 64 Economic analysis focuses on the question whether an exchange is efficient, rather than on whether the allocation of resources between the parties involved was fair to begin with. Trebilcock explains that proponents of economic analysis of law assume that contracting parties have equal opportunities, but ignore the fact that individuals do not “start out equal, if only because of the effects of the genetic lottery or early family circumstances, which are morally arbitrary”. 65 Trebilcock gives the following example: Suppose a starving painter or artist agrees to sell for “a song” a book or painting he or she has been working on for years to raise a couple of dollars to buy a loaf of bread. Does this 58

Craswell, “Against Fuller and Perdue” (2000) 67 University of Chicago Law Review 99.

59 60

Trebilcock, The Limits of Freedom of Contract (1993), p 18. Veljanovski, “The Economic Approach to Law: A Critical Introduction” (1980) 7 British Journal of Law and Society 158, 162.

61 62 63 64

Trebilcock, The Limits of Freedom of Contract (1993), p 19. Trebilcock, The Limits of Freedom of Contract (1993), p 20. See generally Trebilcock, The Limits of Freedom of Contract (1993). Trebilcock, The Limits of Freedom of Contract (1993), p 20.

65

Trebilcock, The Limits of Freedom of Contract (1993), p 20. See also Duggan, The Economics of Consumer Protection: A Critique of the Chicago School Case against Intervention (1982), pp 98-100. [1.55]

11

Contract Law: Principles, Cases and Legislation

transaction meet the Pareto criterion? The answer is yes in the sense that the seller of the book or painting prefers two dollars to the book or painting and the buyer of the latter prefers it to the two dollars he agrees to pay for it. Similarly in the case of the bread transaction. Everybody seems to be better off, but we may wish we lived in a society where people did not find themselves in such desperate circumstances that they have to sell their life’s work to buy a loaf of bread. The Pareto criterion provides no purchase on this problem, implying that economics has no theory of distributive justice. 66

A fourth criticism of law and economics is that it emphasises the desirability of giving effect to parties’ choices or preferences without applying any ethical criteria to the value of those preferences. 67 We may consider that some choices are not worthy of recognition. For example, we may consider that choices should not be sanctioned where they would cause harm to other people. We may also consider that some people do not have the capacity to decide what is in their own best interests, such as children or persons who are mentally incapacitated. Only value judgments can tell us what limits should be imposed on individual autonomy. Although economic analysis continues to play a dominant role in contract law literature in the United States, Eric Posner has judged economic analysis of contract law a failure in terms of explaining contract doctrine or of generating ideal contract law rules. 68 Posner notes that, despite its dominance, economic analysis has had very little influence on US contract law. Simple economic models are unhelpful because they exclude relevant variables, while complex models are unable to justify reform because “the optimal rule depends on empirical conditions that cannot be observed.” 69 The literature is becoming increasingly sophisticated as more complex models are developed, but no more helpful for understanding or reforming contract law. Some proponents of economic analysis of contract law have tried to respond to some of these criticisms of the economic approach. They have tried to adopt a less dogmatic approach to the economic analysis of contract law than that which is often associated with the neo-classical approach. Scholars such as Michael Trebilcock and Gillian Hadfield have tried to combine the rigour of an economic analysis, in particular its emphasis on assessing the consequences of legal rules, with the insights of other theoretical perspectives in order to enrich those provided by an economic analysis. 70 Economic perspectives are considered in relation to estoppel in (Paterson Textbook Ch 9), implied terms in Chapter 7, contract remedies in Chapter 21 and vitiating factors in Chapters 16 to 20.

66 67 68 69 70

12

Trebilcock, “The Value and Limits of Law and Economics” in Richardson and Hadfield (eds), The Second Wave of Law and Economics (1999), p 20. Trebilcock, The Limits of Freedom of Contract (1993), p 21. Posner, “Economic Analysis of Contract Law After Three Decades: Success or Failure?” (2003) 112 Yale Law Journal 829. Posner, “Economic Analysis of Contract Law After Three Decades: Success or Failure?” (2003) 112 Yale Law Journal 829, 854. Trebilcock, The Limits of Freedom of Contract (1993); Hadfield, “The Second Wave of Law and Economics: Learning to Surf” in Richardson and Hadfield (eds), The Second Wave of Law and Economics (1999), p 50ff. [1.55]

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CRITICAL LEGAL SCHOLARSHIP [1.65] The Critical Legal Studies (CLS) movement has attempted to expose the ideology of

contract law and the contradictions within contract doctrine. 71 CLS literature on contract law is extremely rich and diverse and draws on a number of different philosophical traditions. Broadly speaking, it involves a critique of legal formalism in contract law: the notion of contract law as a set of value-free, abstract rules that can be applied to any fact situation with predictable results. The CLS movement has sought to expose the way in which contract doctrine conceals the political choices made by judges. Contract law has been a central focus of the CLS movement, because it provides such a clear example of the formalist model and has an identifiable ideological agenda. That agenda is to support the existing economic and social order and to suppress communitarian values and collective interests. 72 Drawing on the technique of deconstruction, some CLS writing on contract law has been concerned to expose the unquestioned assumptions and inconsistencies of contract law. 73 This begins with exposing the dualities that exist in contract law, the most important of which are: market versus community, individualism versus altruism, self versus other, form versus substance. Contract law is generally thought to favour the first of each of those poles: markets over community, individualism over altruism, self over other and form over substance. It is clear that the disfavoured poles play a role in contract law, although there are different interpretations of what that role is. Jay Feinman argues that the dichotomies between the favoured and disfavoured poles make contract law incoherent, because it relies on contradictory principles and flips from one side to another. 74 Duncan Kennedy, on the other hand, argues that the occasional forays into altruism, substance and community values (through doctrines such as estoppel, unconscionable dealing and economic duress) preserve the existing structure by pre-empting more comprehensive reform. 75 Roberto Unger also argues that the less favoured poles are used to prop up the system. 76 He argues that they are given effect as vague slogans, such as unconscionability and good faith, which have a very limited impact on contract law. Unger also argues that the vagueness of contract doctrine is used to confine the disfavoured poles. Given the broad range of approaches to contract law falling within the CLS movement, attempts to criticise the entire movement can be viewed as misguided. Nevertheless, general criticisms have been made. 77 Critical Legal Scholars have been criticised for their focus on appellate cases and legal doctrine, rather than empirical evidence concerning “the social ‘impact’ of law or the behaviour of legal actors”. 78 Robert Hillman has argued that CLS writers overstate the indeterminacy of contract doctrine. Hillman argues that contract law is 71 72 73 74 75

See Hillman, The Richness of Contract Law (1998), Chapter 10. See Feinman, “The Significance of Contract Theory” (1990) 58 Cincinnati Law Review 1283, 1308-13. A good example of this is Dalton, “An Essay in the Deconstruction of Contract Doctrine” (1985) 94 Yale Law Journal 997. Feinman, “Critical Approaches to Contract Law” (1983) 30 UCLA Law Review 829, 836. Kennedy, “Form and Substance in Private Law Adjudication” (1976) 89 Harvard Law Review 1685.

76 77

Unger, “The Critical Legal Studies Movement” (1983) 96 Harvard Law Review 561. For a defence of CLS writing on contract law against these criticisms, see Feinman, “The Significance of Contract Theory” (1990) 58 Cincinnati Law Review 1283, 1308-13.

78

Trubek, “Where the Action Is: Critical Legal Studies and Empiricism” (1984) 36 Stanford Law Review 575, 576. [1.65]

13

Contract Law: Principles, Cases and Legislation

sufficiently determinate that the results of most cases can be predicted. 79 Moreover, he suggests that such incoherence or malleability as exists in contract law need not necessarily be used to preserve and legitimise the status quo, but could be exploited as a means of effecting social change. 80 John Murray has gone further, suggesting that the CLS movement is “irrelevant and counterproductive” to the task of refining and enhancing legal doctrine because CLS scholars eschew doctrine and fail to offer an “alternative design” other than “an ambiguous ‘communitarian’ notion of a vague utopia”. 81 Some critical perspectives on the formation of contracts are provided in Chapter 2. 82

FEMINIST ANALYSIS OF CONTRACT LAW [1.70] Feminist analyses of the law have often concentrated on areas of the law that raise

issues of specific concern to women, such as parts of criminal law, employment law and family law. Some feminists have also considered areas of the law that do not deal specifically with women but clearly affect them, such as the law of contracts. While those analysing the law from a feminist perspective generally share a concern to reveal and redress inequalities between men and women, feminist analyses of contract law reflect a range of political and theoretical perspectives. 83 Three approaches [1.75] It is possible to identify three different feminist approaches to contract law based on

ideas of identical treatment, difference and subordination. 84 The second and third approaches involve different, rather than opposing, types of inquiry and therefore overlap.

The identical treatment approach [1.80] The identical treatment approach denies that there are any significant differences

between women and men. Accordingly the approach “[c]alls for the elimination of legal or other distinctions between the sexes and promotes gender-neutral, strictly identical treatment of women and men”. 85 The identical treatment approach has little to say about the modern law of contract, which generally does not purport to treat men and women differently.

The difference approach [1.85] The difference approach is based on the idea that women are physically, socially,

psychologically and politically different from men. 86 Substantive equality for women can only 79 80 81

Hillman, “The Crisis in Modern Contract Theory” (1988) 67 Texas Law Review 103, 107-10. Hillman, “The Crisis in Modern Contract Theory” (1988) 67 Texas Law Review 103, 112. Murray, “Contract Theories and the Rise of Neoformalism” (2002) 71 Fordham Law Review 869, 875. See also Fried, “The Ambitions of Contract as Promise” in Klass, Letsas and Saprai, Philosophical Foundations of Contract Law (2014) 17, 18-20.

82 83 84

At [2.385]. See Mulcahy (ed), Feminist Perspectives on Contract Law (2005). See Sheehy, Background Paper, “Personal Autonomy and the Criminal Law: Emerging Issues for Women”, reproduced in Graycar and Morgan, The Hidden Gender of Law (1990), p 40. Sheehy, Background Paper, “Personal Autonomy and the Criminal Law: Emerging Issues for Women”, reproduced in Graycar and Morgan, The Hidden Gender of Law (1990), p 40.

85 86

14

Sheehy, Background Paper, “Personal Autonomy and the Criminal Law: Emerging Issues for Women”, reproduced in Graycar and Morgan, The Hidden Gender of Law (1990), p 41. [1.70]

Contract Law Theory

CHAPTER 1

be achieved if the law takes those differences into account. 87 One version of the difference approach has been influenced by the work of Carol Gilligan. 88 Gilligan argues that, typically, men and women view life differently. Feminists influenced by Gilligan’s work criticise the law as reflecting a masculine viewpoint and neglecting a feminine perspective. In relation to contract law, such feminists criticise the almost exclusive use of an abstract, rule-orientated and apparently neutral style of analysis. Feminists argue that this style of analysis relies on characteristics associated with the cultural stereotype of men. 89 A more contextualised approach to contract law would give voice to a “feminine” viewpoint. 90 Such a viewpoint might be subjective and context-specific. It might emphasise the role of values such as reliance, co-operation, respect for the other and compromise in contract law. 91 For some feminists applying a difference approach, relational contract theory 92 is seen as providing what they regard as a “feminine voice” in contract law. 93 This is because relational contract theory emphasises the importance of “relationships” in contract and the role of norms such as trust and co-operation. 94 A closely related, and overlapping, approach comes from feminists influenced by postmodern literary theory. Postmodern feminism is also closely associated with the CLS movement. Some postmodern feminists focus on the dichotomies in legal discourse. 95 These scholars then explore the ways in which the dichotomies in legal discourse mirror cultural stereotypes of women and men. 96 Mary Joe Frug explains that through this process “[p]ostmodern feminists attempt to overcome the male/female opposition by accepting it and at the same time disrupting it”. 97

87 88 89

90 91 92 93

94

Sheehy, Background Paper, “Personal Autonomy and the Criminal Law: Emerging Issues for Women”, reproduced in Graycar and Morgan, The Hidden Gender of Law (1990), p 41. See, eg, Gilligan, In a Different Voice (1982). See also Shaughnessy, “Gilligan’s Travels” (1988) 7 Law and Inequality Journal 1, 9. See, eg, Frug, “Re-Reading Contracts: A Feminist Analysis of Contracts Casebook” (1985) 34 American University Law Review 1065; Frug, “Rescuing Impossibility Doctrine: A Post-modern Feminist Analysis of Contract Law” (1992) 140 University of Pennsylvania Law Review 1029; Tilwell and Linzer, “The Flesh Coloured Band Aid” (1991) 28 Houston Law Review 791; Shultz, “The Gendered Curriculum: Of Contracts and Careers” (1991) 77 Iowa Law Review 55; Wightman, “Intimate Relationships, Relational Contract Theory, and the Reach of Contract” (2000) Feminist Legal Studies 93, 99-100. Morgan, “Feminist Theory as Legal Theory” (1988) 16 Melbourne University Law Review 743, 756, discussing the work of Boyle, “Book Review” (1985) 63 Canadian Bar Review 427. See, eg, Tilwell and Linzer, “The Flesh Coloured Band Aid” (1991) 28 Houston Law Review 791. See [1.100]-[1.170] (Paterson Textbook). See, eg, Threedy, “Feminists and Contract Doctrine” (1999) 32 Indiana Law Review 1247, 1258; Tilwell and Linzer, “The Flesh Coloured Band Aid” (1991) 28 Houston Law Review 791; Wightman, “Intimate Relationships, Relational Contract Theory, and the Reach of Contract” (2000) Feminist Legal Studies 93, 100. But cf Dow, “Law School Feminist Chic and Respect for Persons: Comments on Contract Theory and Feminism in the Flesh Coloured Band Aid” (1991) 28 Houston Law Review 819. See Mulcahy, “The Limitations of Love and Altruism” in Mulcahy (ed), Feminist Perspectives on Contract Law (2005), p 1.

95 96

See [1.65]. Frug, “Rescuing Impossibility Doctrine: A Post-modern Feminist Analysis of Contract Law” (1992) 140 University of Pennsylvania Law Review 1029, 1031.

97

Frug, “Rescuing Impossibility Doctrine: A Post-modern Feminist Analysis of Contract Law” (1992) 140 University of Pennsylvania Law Review 1029, 1064. [1.85]

15

Contract Law: Principles, Cases and Legislation

The difference approach might be criticised as perpetuating undesirable stereotypes about masculine and feminine characteristics. 98 Proponents might respond that by drawing attention to the gender implications of contract law doctrine and analysis, they are mounting a radical challenge to legal thought. Indeed if, as these feminists argue, contract law is premised on a masculine viewpoint, then gender reform may not merely be a case of introducing a feminine voice. Rather the entire legal system might have to be rethought. Alternatively, we might need to recognise that certain values remain outside the law. 99

The subordination approach [1.90] The subordination approach is associated with the work of Catherine MacKinnon. 100

This approach sees women’s inequality in terms of subordination to men, rather than differences between women and men. Scholars adopting this approach evaluate particular legal practices and policies in order to “assess whether they operate to maintain women in a subordinate position”. 101 If those policies and practices are justified on the basis of differences between men and women, “then the differences themselves must also be examined to ascertain whether they are consequences of social or economic oppression”. 102 Applied to contract law, the subordination approach suggests that the gender of the parties, and consequentially the power relation between them, must be taken into account in resolving contractual disputes. 103 The subordination approach makes high demands of the law in resolving disputes. It requires the law to go beyond formal legal principles to examine the reality of the power relations between the parties involved. This approach offers a radical re-envisioning of the role and function of contract law. Feminist approaches and the “wives” special equity [1.95] These three feminist approaches can be illustrated by considering the decision in

Garcia v National Australia Bank Ltd. 104 In that case the High Court of Australia recognised the continued existence of a special principle protecting women who guarantee their husbands’ business loans, where the woman has either been subject to undue influence by her husband or has misunderstood the effect of the guarantee. 105 A proponent of the identical treatment approach might argue that maintaining a special equity or principle applying to wives perpetuates undesirable sexual stereotypes of women as incapable of making financial decisions or protecting their own interests. Thus, for example, Kirby J said in Garcia: For this court to accept that principle is to accord legitimacy to a discriminatory rule expressed in terms which are unduly narrow, historically and socially out of date and unfairly 98

See Otto, “A Barren Future? Equity’s Conscience and Women’s Inequality” (1992) 18 Melbourne University Law Review 808, 812.

99 100 101

See Shaughnessy, “Gilligan’s Travels” (1988) 7 Law and Inequality Journal 1. See, eg, MacKinnon, Feminism Unmodified (1987). Sheehy, Background Paper, “Personal Autonomy and the Criminal Law: Emerging Issues for Women”, reproduced in Graycar and Morgan, The Hidden Gender of Law (1990), p 42. Sheehy, Background Paper, “Personal Autonomy and the Criminal Law: Emerging Issues for Women”, reproduced in Graycar and Morgan, The Hidden Gender of Law (1990), p 42. Frug, “A Critical Theory of Law” (1989) 1 Legal Education Review 43, 56. [1998] HCA 48; (1998) 194 CLR 395. The decision is discussed further in (Paterson Textbook Ch 37).

102 103 104 105 16

[1.90]

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discriminatory against those who may be more needful of the protection of a “special equity” but who do not fit within the category of married women. 106

Proponents of both the difference and the subordination approaches might argue that an approach based on formal equality would ignore the very real social differences between men and women. Proponents might argue that women do not always exercise independent judgment in deciding to guarantee their husbands’ business loans. 107 Thus, in Garcia the High Court said: That Australian society and particularly the role of women in that society has changed in the last six decades is undoubted. But some things are unchanged. There is still a significant number of women in Australia in relationships which are, for many and varied reasons, marked by disparities of economic and other power between the parties. 108

Given this social reality, Richard Haigh and Samantha Hepburn argue that the Garcia principle is desirable even though it relies on a stereotype because it operates to protect a vulnerable group in society. 109 They explain that the “type of analysis required in Garcia relies on stereotypes not to cement prejudice in place, but to critically reassess the nature of spousal guarantees and thereby balance gender ideals with practical realities”. 110 A proponent of the difference approach might argue that the special protective principle in Garcia is justified because, in deciding to guarantee their husbands’ business borrowings, women are often influenced by factors other than their own economic interests. Wives are sometimes subjected to pressure by their husbands. Even in the absence of pressure, wives may be influenced by the bonds of relationship, trust and reliance. Proponents of the difference approach might argue that legal protection is needed to ensure that the trust and reliance shown by wives is not abused or exploited. This view is reflected in the reasoning of the majority judges in Garcia. Their Honours explained that the rationale of the principle “is not to be found in notions based on the subservient or inferior economic position of women. Nor is it based on their vulnerability to exploitation because of their emotional involvement”. 111 Instead, the majority judges said, the principle “is based on trust and confidence, in the ordinary sense of those words, between marriage partners”. 112 Proponents of the subordination approach, while not disagreeing with the special protection accorded to wives by the decision in Garcia, might focus on the disparities of power that may exist between husband and wife. It might be said that, because of the subordinated position of many married women, a woman’s guarantee of her husband’s debts cannot be presumed to have been given freely. It might be argued that the law should go beyond merely recognising the vulnerability of wives guaranteeing their husbands’ debts, and should strive to address that vulnerability. Thus Dianne Otto argues that if the principle applied in Garcia: 106

Garcia v National Australia Bank Ltd [1998] HCA 48; (1998) 194 CLR 395, 425.

107

We might also note that, although numerous cases have come before the courts on this issue, there is little statistical information on the extent of the problem: see Haigh and Hepburn, “The Bank Manager Always Rings Twice: Stereotyping in Equity after Garcia” (2000) 26 Monash University Law Review 275, 303-4. Garcia v National Australia Bank Ltd [1998] HCA 48; (1998) 194 CLR 395, 403-4. Haigh and Hepburn, “The Bank Manager Always Rings Twice: Stereotyping in Equity After Garcia” (2000) 26 Monash University Law Review 275, 127. Haigh and Hepburn, “The Bank Manager Always Rings Twice: Stereotyping in Equity After Garcia” (2000) 26 Monash University Law Review 275, 302. Garcia v National Australia Bank Ltd [1998] HCA 48; (1998) 194 CLR 395, 404. Garcia v National Australia Bank Ltd [1998] HCA 48; (1998) 194 CLR 395, 404.

108 109 110 111 112

[1.95]

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Contract Law: Principles, Cases and Legislation

is applied paternalistically so as to protect the wife/woman because of her subordinate position, the [principle] does nothing to change her position of inequality. In effect, it operates to institutionalise her subordination by presuming that protection is necessary. On the other hand, if the [principle] arises from an acknowledgement of the socio-structural origins of women’s inequality, and the legal response is directed towards altering the distribution of power that creates the relationship of influence, some broader social change may result. 113

The Garcia decision treats the provision of independent advice as a panacea for some of the problems faced by women guaranteeing their husbands’ debts. Proponents of the subordination approach might argue that providing independent advice is not a solution where the woman’s consent to the guarantee is a result of her subordination to her husband. 114 Accordingly, measures with deeper implications for the power relationship might be required. Otto suggests that a legal response directed to altering the distribution of power might, for example, be achieved by requiring husbands (seeking to borrow on the strength of guarantees given by their wives) “to show that they have taken tangible steps to alter their position of social dominance in the relationships in question”. 115 Feminist perspectives are further considered in relation to terms in standard form contracts in Chapter 9 and in relation to third party impropriety in (Paterson Textbook Ch 37).

COMPARATIVE PERSPECTIVES [1.100] Internationalisation is a significant force in contract law. This is manifested in a

number of different ways. First, the desire to facilitate international trade has given rise to treaties such as the United Nations Convention on Contracts for the International Sale of Goods (known as the CISG or the Vienna Convention), which promulgates a set of standard principles governing international contracts for the sale of goods. The treaty aims to remove legal barriers to international trade by providing a set of uniform rules for international sales, thus avoiding uncertainty resulting from differences in national laws and uncertainty as to which national law should apply to a particular transaction. Australia has ratified this treaty and legislation has been passed in all Australian States and Territories to carry it into effect. 116 The principles laid down by the convention apply to “contracts for the sale of goods between parties whose places of business are in different States: (a) when the States are Contracting States; or (b) when the rules of private international law lead to the application of the law of a Contracting State”. 117 The convention expressly provides that, in its interpretation, regard is to be had to “its international character and to the need to promote uniformity in its application and the observance of good faith in international trade”. 118 113 114

Otto, “A Barren Future? Equity’s Conscience and Women’s Inequality” (1992) 18 Melbourne University Law Review 808, 820. Otto, “A Barren Future? Equity’s Conscience and Women’s Inequality” (1992) 18 Melbourne University Law Review 808, 826.

115

Otto, “A Barren Future? Equity’s Conscience and Women’s Inequality” (1992) 18 Melbourne University Law Review 808, 820.

116

Sale of Goods (Vienna Convention) Act 1987 (ACT); Sale of Goods (Vienna Convention) Act 1986 (NSW); Sale of Goods (Vienna Convention) Act (NT); Sale of Goods (Vienna Convention) Act 1986 (Qld); Sale of Goods (Vienna Convention) Act 1986 (SA); Sale of Goods (Vienna Convention) Act 1987 (Tas); Goods Act 1958 (Vic); Sale of Goods (Vienna Convention) Act 1986 (WA). United Nations Convention on Contracts for the International Sale of Goods (1980), article 1(1). United Nations Convention on Contracts for the International Sale of Goods (1980), article 7.

117 118 18

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Secondly, there have been significant attempts to develop regional 119 and international statements of contract law principles. 120 An important statement of international principles of contract law is provided by the UNIDROIT Principles of International Commercial Contracts 2010 (UPICC). 121 These principles have been developed under the auspices of the International Institute for the Unification of Private Law, which is an independent inter-governmental organisation based in Rome. Its purpose is to examine ways of harmonising and co-ordinating the private law of different states and to prepare uniform rules of private law for adoption by states. The UPICC is a code of principles governing international commercial contracts, which has been developed by representatives of common law, civil law and socialist systems. The UPICC are intended to provide balanced and comprehensive rules that are ideal for international commercial transactions. They provide a model for national legislators, provide a basis for contract negotiation, can be adopted as the governing law of a particular contract (typically between parties belonging to different legal systems or speaking different languages) and are used by arbitrators and judges as a statement of internationally recognised principles. 122 The UPICC are also used as a means of interpreting, supplementing and influencing the development of domestic contract law. 123 The New Zealand Court of Appeal has referred to the principles as a “restatement of the commercial contract law of the world”. 124 The principles may have a direct influence on the development of Australian contract law. In Hughes Aircraft Systems International v Airservices Australia, 125 for example, Finn J cited art 1.7 of the UPICC as evidence that the implied contractual duty of good faith has been propounded as a fundamental principle in international commercial contracts. This, along with other factors, led Finn J to the view that more open recognition of the duty is warranted in Australian contract law. Useful comparisons with the UPICC have been drawn in numerous other cases. 126 Thirdly, Australian contract law is enriched by comparisons with approaches adopted in other jurisdictions. It is possible, for example, to point to particular contract cases in which

119

120 121

See the Principles of European Contract Law, Parts I and II (1999) and Part III (2002), produced by the Commission on European Contract Law, and von Bar and Clive, Principles, Definitions and Model Rules of European Private Law Draft Common Frame of Reference (2010). See generally Berger, The Creeping Codification of the Lex Mercatoria (2nd ed, 2010). The UPICC were first published in 1994 and were revised and expanded in 2004 and 2010. See http://www.unidroit.org. A list of cases and arbitral awards citing the principles and details of relevant books and articles may be found at www.unilex.info.

122 123

Bonell, “UNIDROIT Principles 2004” (2004) 9 Uniform Law Review 5, 6-15. Bonell, “UNIDROIT Principles 2004” (2004) 9 Uniform Law Review 5, 15-16. See also Bonell, An International Restatement of Contract Law (3rd ed, 2005); Bonell (ed), A New Approach to International Commercial Contracts – The UNIDROIT Principles of International Commercial Contracts (1999) and Bonell, “Symposium Paper: The UNIDROIT Principles of International Commercial Contracts: Achievements in Practice and Prospects for the Future” (2010) 17 Australian International Law Journal 177.

124 125 126

Yoshimoto v Canterbury Golf International [2000] NZCA 350; [2001] 1 NZLR 523, [89]. (1997) 76 FCR 151, 192. See also, eg, Aiton Australia Pty Ltd v Transfield Pty Ltd [1999] NSWSC 996; (1999) 153 FLR 236, 260-261; Bobux Marketing Ltd v Raynor Marketing Ltd [2001] NZCA 348, [39]; Tan Hung Nguyen v Luxury Design Homes Pty Limited [2004] NSWCA 178, [705]; Koompahtoo Local Aboriginal Land Council v Sanpine Pty Ltd [2007] HCA 61; (2007) 233 CLR 115, [108]; Chartbrook Ltd v Persimmon Homes Ltd [2009] UKHL 38; [2009] AC 1101, [39]; Franklins Pty Ltd v Metcash Trading Ltd [2009] NSWCA 407; (2009) 76 NSWLR 603, [7] – [9] [1.100]

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Contract Law: Principles, Cases and Legislation

Australian courts have been directly influenced by the principles applied in other countries. 127 Comparisons with the laws of other countries also help to provide us with a better understanding of Australian law and are drawn throughout this book. Care must be taken in relation to comparisons with the United States, because each State has its own law of contract. Since the United States Supreme Court does not hear appeals in contract law cases, there is no single court that can unify contract law in the manner of the High Court of Australia. 128 Problems of uniformity in the US are addressed to some extent by Restatements of Law published by the American Law Institute, which include the Restatement of Contracts (2d), published in 1981. The Restatements are written by eminent lawyers in the relevant field and are recognised as highly authoritative secondary sources. 129 References are also made in this book to the Uniform Commercial Code, article II of which deals with contracts for the sale of goods. 130 It must be noted that the Uniform Commercial Code has not provided the uniformity its name might suggest, because the code has been amended in different ways by State legislatures and interpreted in different ways by State courts. 131 Extracts from Paterson, Robertson and Duke, Principles of Contract Law (2016, 5th ed), Ch 2 [1.105] A useful perspective on contract law is provided by considering its place within the

law of obligations and its place within the field of private law. The law of obligations is concerned with the obligations owed by individuals (including legal entities, such as corporations) to one another. The law of obligations comprises the fields of contract, tort and restitution (or unjust enrichment), along with a number of miscellaneous categories such as the equitable principles relating to fiduciaries, confidential information and estoppel. Statutes such as the Competition and Consumer Act 2010 (Cth) (formerly the Trade Practices Act 1974 (Cth)) are also an important source of obligations owed by individuals to one another. 132 It is sometimes said that what distinguishes contractual obligations from other private law obligations is that the obligations owed by contracting parties are self-imposed, while other private law obligations are imposed by law. 133 As we have already seen, however, contractual obligations may be imposed on both parties by the state or by one party on the other. 134 The expression “private law” is commonly used to describe a field of law comprising the law of obligations and the law of property. 135 The law of property can be understood as “a 127

See, eg, the influence of French law in Banque Brussels Lambert SA v Australian National Industries Ltd (1989) 21 NSWLR 502, 521, discussed at [5.15] (Paterson Textbook), and the influence of American law in Renard Constructions (ME) Pty Ltd v Minister for Public Works (1992) 26 NSWLR 234, 267-8, discussed at [16.40] (Paterson Textbook).

128

See Priestley, “A Guide to Comparison of Australian and United States Contract Law” (1989) 12 University of New South Wales Law Review 4, 5-6. See Farnsworth, Farnsworth on Contracts (3rd ed, 2004), vol 1, pp 32–34.

129 130 131 132 133 134 135

20

See generally Farnsworth, Farnsworth on Contracts (1990), vol 1, pp 34-8, 40-52. See Priestley, “A Guide to Comparison of Australian and United States Contract Law” (1989) 12 University of New South Wales Law Review 4, 5-9. See [1.175]-[1.210] and Chapter 17 and (Paterson Textbook Ch 38). See, eg, Burrows, Understanding the Law of Obligations (1998), p 13. See [1.15]. See, eg, Burrows (ed), English Private Law (3rd ed, 2013), which deals with the law of persons (family and corporations law), the law of property and the law of obligations (including contract, agency, bailment, torts and equitable wrongs and unjust enrichment) and litigation (insolvency, private international law, judicial remedies and civil procedure). [1.105]

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category of law concerned with relations between people and things”. 136 In the case of both obligations and property, the relevant legal rights are “private” in that they are exclusively enforceable by the individuals who are recognised as holders of the relevant rights, and who may choose whether or not to enforce them. Private law is sometimes distinguished from public law, which is the body of law dealing with the relationship between individuals and the state and between states. 137 This distinction is somewhat artificial, since private law obligations exist only because they are recognised and enforced by the state through the courts. Thus “private law” has a significant public dimension. 138 Contract commonly overlaps and intersects with other parts of the law of obligations, particularly tort, unjust enrichment, equitable doctrines (such as the duty of confidence, fiduciary duties and estoppel) and statutory obligations (such as the duty not to engage in misleading or deceptive conduct in trade or commerce). It is important to be able to identify and distinguish the different types of claim that may be available in a particular situation in order to determine the nature of the remedies available and, in some cases, to identify the claim that provides the optimal measure of relief.

TORT [1.110] The law of torts is concerned with actions that harm others. Torts are often described

as “civil wrongs”. These wrongs are “civil” as distinct from “criminal” because they are enforceable by the person wronged, rather than by the state. The law of torts provides the victim with a remedy against the perpetrator in the form of an award of damages. Torts comprise a rather miscellaneous group of anti-social acts, such as assault, battery, false imprisonment, trespass to land, conversion of goods, nuisance, defamation, deceit and negligence. From this list it will be seen that the law of torts imposes a host of duties to avoid certain kinds of conduct which cause various kinds of harm, including physical injury, nervous shock, loss of freedom, loss of reputation, damage to or loss of property and economic loss. Generally there is no liability without fault on the part of the perpetrator (“fault” meaning here an intention to cause the harm or carelessness in bringing it about), but there are also instances in which the law of torts imposes strict liability, or liability without fault. The most significant tort from a practical point of view is the tort of negligence. The elements of this tort are: (1) a duty of reasonable care owed by the defendant to the plaintiff; (2) a breach of that duty; and (3) a legally recognised form of damage to the plaintiff resulting from that breach. The law has imposed duties of care on a wide variety of defendants, including manufacturers, drivers of vehicles, employers, school authorities, occupiers of land, solicitors, medical practitioners and many others. The general aim of an award of damages in negligence, as in tort actions generally, is to restore the victim as far as money can to the position he or she would have been in if the tort had not been committed. 136 137

Samuel, Law of Obligations and Legal Remedies (2001), p 2. To the list of topics covered by Feldman (ed), English Public Law (2nd ed, 2009), of constitution and administrative law, human rights, public law remedies and criminal law, we might add public international law and fields of regulation such as environmental law and competition law, although in some cases these regulatory regimes also confer rights enforceable by individuals against other individuals.

138

Compare Beever, “Our Most Fundamental Rights” in Nolan and Robertson (eds), Rights and Private Law (2011), p 63 (arguing that private law rights exist independently of the state). [1.110]

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Contract Law: Principles, Cases and Legislation

Torts committed in a contractual context [1.115] The law of torts must often be considered in a contractual context. Consider the

following situations. First, assume that A is induced by B’s statement to enter into a contract with B, and that B’s statement later proves to be false. If the statement was incorporated into the contract (so that it can be said that B promised the truth of the statement in the contract), A will have an action against B for damages for breach of the contract. If the statement was not incorporated in the contract, such an action is not available. However, A may have an action for damages in tort – the tort of deceit (if B did not believe in the truth of the statement) or the tort of negligence (if B owed a duty of care to A and was careless in believing in the truth of the statement). Secondly, a victim of loss may be able to sue in the tort of negligence when an existing contract provides no means of relief. Assume A purchases a product from B and is injured as a result of a defect in the product. The contractual action against B may be of no use because, for example, B is bankrupt. However, A may be able to bring an action in negligence against C, the manufacturer of the product, who owes a duty of care to consumers such as A. 139 Take another example. Assume A retains solicitor B to prepare a will under which A leaves $1 million to C. When A dies C gets nothing under the will because it is invalid owing to B’s carelessness in preparing it. C has no action for breach of contract against B as B’s only contract was with A (ie, the contract of retainer). There is a doctrine of privity of contract which requires that only a party to a contract can sue on it. 140 But C may have action in negligence against B for breach of a duty of care owed by B to C. 141 The point to note in both these examples is that, although B’s duties in contract may be owed solely to A, an independent duty of care may be owed by B to a third party, such as C. The argument that B’s duties are governed exclusively by the contract with A has been rejected by the courts. Concurrent liability in contract and tort [1.120] A particular incident may provide a plaintiff with actions in both contract and tort

against a particular defendant. This is known as concurrent liability. Concurrent liability typically arises where one person (A) owes a contractual obligation to another (B) to take reasonable care in performing services for B, and also owes B a duty of care in tort. If A is careless in performing the services, B may have an action for breach of contract and also an action for the tort of negligence. Hence, a taxi driver who drives carelessly and injures a passenger would be liable to that passenger in both contract and negligence. An employer who maintains an unsafe system of work may be liable in both contract and negligence to an employee injured as a result. Needless to say, duplication of damages is not permitted in these situations, but the law does allow a choice between suing in contract and suing in tort. The plaintiff may “assert the cause of action that appears to be most advantageous”. 142 The choice of one action over another may be significant given that contract and tort rules differ in areas such as the assessment of damages, remoteness of damage, the effect of the plaintiff’s contributory negligence and limitation periods. 139 140 141 142 22

Donoghue v Stevenson [1932] AC 562. See Chapter 8. See, eg, Hill v Van Erp (1997) 188 CLR 159. Bryan v Maloney (1995) 182 CLR 609, 622, quoting Central Trust Co v Rafuse [1986] 2 SCR 147, 204-5. [1.115]

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Tort and contract compared [1.125] Is there any significant difference between a tort and a breach of contract? 143 They

may both be described as civil wrongs and they are both creations of the common law. However, a number of possible distinctions should be noted.

Contract as self-imposed obligation [1.130] It is often claimed that duties in contract are determined by the contracting parties

themselves when they voluntarily enter into an agreement, whereas we are all bound not to commit torts whether or not we have agreed not to commit them. Ultimately, however, all duties are imposed by law in that the law recognises them as suitable for recognition. As we saw earlier in this chapter, the objective approach to contract formation means that contractual liability arises where parties behave in a certain way, regardless of their actual intentions. 144 In this sense, contractual obligations can be seen to be imposed by law on the basis of expected conformity with standards of conduct determined by the courts, in the same way as tort. 145 Moreover, as we have seen, parties to a contract often have duties imposed on them that have not been the subject of express agreement between the parties. On the other hand, duties in tort are sometimes, in a sense, self-imposed. The law of negligence recognises a duty of care in some instances where a person has assumed a responsibility to take care. 146 Whether these obligations can properly be understood as voluntary is a matter of debate. 147

Tort as universal duties [1.135] It is sometimes said that by virtue of the doctrine of privity of contract a contractual

duty is only owed to the other party to the contract, whereas duties to avoid committing torts are owed to everyone. No doubt this is broadly true, and yet a duty of care, the foundation of the tort of negligence, is not owed by everyone to everyone. It is owed only by a person in a particular situation to “neighbours” (foreseeable victims) and sometimes only to just one group of people or indeed just one person. The range of potential plaintiffs in a negligence context may be quite strictly limited where the loss suffered is of a purely economic kind, such as economic loss resulting from careless financial advice. While the doctrine of privity of contract allows that contractual duties are owed only to other parties to the contract, that principle is not without some flexibility and has been substantially modified by statute in many jurisdictions. 148

Contract as strict liability [1.140] Another point of difference relates to culpability. Liability in contract is strict: it is not

to the point that the contract breaker did not intend to break the contract or was not careless in doing so. We noted earlier that culpability of some kind is normally relevant to establishing 143 144 145 146 147

148

See generally Swanton, “The Convergence of Tort and Contract” (1989) 12 Sydney Law Review 40. See [1.15]. See Robertson, “On the Distinction between Contract and Tort” in Robertson (ed), The Law of Obligations: Connections and Boundaries (2004), pp 87-109. See, eg, L Shaddock & Associates Pty Ltd v Parramatta City Council (No 1) (1981) 150 CLR 225; Hill v Van Erp (1997) 188 CLR 159. See Barker, Grantham and Swain (eds), The Law of Misstatements: 50 Years on from Hedley Byrne v Heller (2015), especially Robertson and Wang, “The Assumption of Responsibility” (ch 3) and Beever, “The Basis of the Hedley Byrne Action” (ch 4). See Chapter 8. [1.140]

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Contract Law: Principles, Cases and Legislation

liability in tort and, in the case of some torts such as deceit and negligence, the very name of the tort spells a degree of culpability. Nevertheless, the standard of care in negligence is objective and may be pitched so high as to be virtually strict.

Measure of damages [1.145] An award of compensatory damages is the primary remedy for both tort and breach

of contract. The aim of such damages in both instances is to compensate for loss: to put the plaintiff in the position he or she would have been in had the contractual or tortious duty not been breached. Although it is sometimes said that the two measures of damages are different, it has been pointed out that this “is no more than a convenient way of indicating that the wrong involved and, thus, the loss occasioned by a breach of contract is of a different kind from that involved in and occasioned by the commission of a tort”. 149 In contract the wrong is the promisor’s failure to perform the contractual promise. In tort the wrong is the tortfeasor’s failure to avoid harming the plaintiff or to take appropriate care of the plaintiff’s interests. The primary purposes of tort and contract are not the same. The law of torts is concerned to protect individuals from interferences that make them worse off, such as physical injury, damage to property, loss of reputation and diminution of wealth. The duties recognised by the law of tort are generally of a negative kind, prohibiting certain forms of antisocial behaviour that may harm others. Accordingly, in tort, the award of damages aims to put the victim in the position he or she would have been in had the tort not been committed – to protect the plaintiff’s status quo ante interest. The law of contract, on the other hand, is concerned to ensure that the promisor improves the position of the other party by providing the promised money, property or services. The duties recognised by the law of contract are generally of a positive kind, requiring the promisor to act affirmatively in the promisee’s favour. Accordingly, in contract the award of damages aims, as we have seen, to put the promisee in the position he or she would have been in had the contract been performed – to protect the promisee’s expectation interest. This distinction between tort and contract is useful, but it is important to note that in some contract cases damages do no more than protect a promisee from being made worse off by the contract, and in some tort cases the plaintiff is made better off by having his or her expectation interest protected. In some cases contractual damages protect the promisee’s reliance interest by compensating the promisee for loss incurred as a result of acting in reliance on the promisor’s promise. 150 Such an award restores the promisee to his or her previous position or status quo ante the contract. Similarly, damages awards in tort occasionally have the effect of fulfilling the plaintiff’s expectations. For example, a solicitor making a will for a client owes a duty of care to the prospective beneficiaries (even though they are not contractually linked with the solicitor) to take care to ensure that the will is valid. If a prospective beneficiary loses his or her bequest because of the solicitor’s negligence, the solicitor will be required to pay damages to the disappointed beneficiary equal to the value of the expected bequest. 151

149 150 151 24

Marks v GIO Australia Holdings Ltd [1998] HCA 69; (1998) 196 CLR 494, [14]. See (Paterson Textbook Ch 26). See Hill v Van Erp (1997) 188 CLR 159. [1.145]

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UNJUST ENRICHMENT [1.150] The law of unjust enrichment is another principal source of obligations owed by

individuals to one another. 152 It is concerned with obligations to restore unjust gains. In certain circumstances a duty will be imposed on one individual to pay a sum of money to another on the ground that otherwise the former will enjoy an unjust enrichment at the expense of the latter. Where a defendant has been unjustly enriched at the expense of the plaintiff, the plaintiff seeks restitution, which means the return of the benefit which has been transferred from the plaintiff to the defendant. A restitutionary remedy is one that “aims to give back to the plaintiff the value obtained directly from the plaintiff’s labour or assets”. 153 A claim for restitution based on unjust enrichment may take the form of a claim to recover money paid (under mistake, for example) or a claim to recover reasonable remuneration for services rendered or goods delivered (under an unenforceable contract, for example). The liability to restore unjust gains used to be described as a “quasi-contractual” obligation, because it was based on an implied contract to repay money or to pay a reasonable value for goods or services received. The implied promise was a fiction designed to provide the plaintiff with a basis for recovering an unjust gain under the constraints imposed by the medieval forms of action. It is now accepted that the obligation recognised in certain defined circumstances to restore a benefit received at the expense of another party is one that is imposed by law in order to prevent unjust enrichment. 154 That obligation is not based on an implied contract and has a different legal foundation from contractual obligations. We have already seen that a sharp distinction cannot be drawn between contract and tort. Similarly, the law of unjust enrichment cannot be sharply distinguished from contract or tort. One type of restitutionary remedy is somewhat like tort, in that the result of a successful claim is the restoration of the status quo ante (ie, the parties are returned to their earlier positions): this is the effect of recovery of money paid where there has been a total failure of consideration. Another type of restitutionary claim is closer to contract in that the result of a successful claim is the realisation of an exchange: this is the effect of recovery of a reasonable sum for services rendered or goods delivered. In such a case the plaintiff may be better off than before the exchange, just as in contract law the promisee is made better off than before the contract by virtue of the enforcement of the contractual agreement. In the leading restitution case of Pavey & Matthews Pty Ltd v Paul, 155 Mrs Paul’s contractual promise to pay reasonable remuneration to builders for work on her cottage was unenforceable under a statutory provision because the contract was not in writing and signed by both parties. The builder was able to recover reasonable remuneration in restitution for the work done because Mrs Paul had requested and accepted the benefit of the work. Mrs Paul’s obligation to pay was a restitutionary obligation, which was said to be imposed by law on the basis of unjust enrichment. The existence of the unenforceable contract was said to serve only to demonstrate that the services had not been performed gratuitously and to provide guidance in the determination of the amount that should be paid. Steve Hedley has argued that the restitutionary claim that was allowed in this case was indistinguishable from the contract 152 153 154 155

See (Paterson Textbook Ch 10). Edelman and Bant, Unjust Enrichment in Australia (2006), p 19. See Pavey & Matthews Pty Ltd v Paul (1987) 162 CLR 221. (1987) 162 CLR 221. See (Paterson Textbook [10.10]). [1.150]

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Contract Law: Principles, Cases and Legislation

claim that was barred by statute: “The builders had simply dressed up a contractual claim in the language of unjust enrichment.” 156 The law of unjust enrichment is considered further in (Paterson Textbook Ch 10).

EQUITY [1.155] Equity is also a rich source of personal obligations. The word “equity” in popular

usage means, among other things, the quality of fairness or justice. While this meaning is not irrelevant for our purposes, it is important to understand that “equity” has a specialised meaning in law. It is to be compared with the common law and seen as a system of doctrines and remedies developed historically as a means of remedying defects in the common law. In this context, “common law” means the law developed by judges in England in the centuries following the Norman Conquest. The King’s justices, in the three courts of King’s Bench, Common Pleas and the Exchequer, unified the various local customs existing throughout the kingdom into a common custom: the common law. This judge-made law was ultimately the source of the basic principles of what today we call the law of contract, the law of torts and the law of restitution. From the Middle Ages on there was much dissatisfaction with the common law system for several reasons. To take just one example, the common law courts offered a limited range of remedies: they could order the payment of damages but they could not order someone to do something or to refrain from doing something. A separate court developed, the Court of Chancery, to redress various inadequacies of the common law. It was this court that administered and developed a system of doctrines and remedies that we describe as equitable. For example, the Court of Chancery could exercise the power of ordering someone to perform a contract (specific performance) or to refrain from committing a tort or breach of contract (injunction). Accordingly, the word “equity” has the following specialised meaning: it is the system of doctrines and remedies developed by the Court of Chancery to rectify defects in the common law. A brief historical excursus will explain how this development occurred and its relevance to the current position in Australia. What follows is a simplified account of the development of equity. 157 The development of equity [1.160] In the 13th century, litigants who were dissatisfied with the injustice or inadequacy of

the common law system petitioned the King to intervene in particular disputes. These petitions were referred to the Chancellor, as the representative of the King, and in due course the petitions came to be addressed to the Chancellor. Gradually a distinctive court, the Court of Chancery, was developed to hear these petitions. In its early years, the Chancellors resolved disputes on a discretionary basis, according to what the conscience of the defendant required in the particular circumstances. The Chancellors usually came from an ecclesiastical background and thus exercised a spiritual authority over the litigants. After the Reformation, Chancellors with training in the common law came to be appointed and this led to the legalisation of the Court of Chancery. Cases began to be decided on the basis of precedent: 156 157

26

Hedley, “Unjust Enrichment: The Same Old Mistake” in Robertson (ed), The Law of Obligations: Connections and Boundaries (2004), pp 75, 81. The following discussion draws on Heydon, Leeming and Turner, Meagher Gummow and Lehane’s Equity Doctrines and Remedies (5th ed, 2015), Chapter 1, and Baker, An Introduction to English Legal History (4th ed, 2002), Chapter 6. [1.155]

Contract Law Theory

CHAPTER 1

decisions came to be reported and a body of equitable principles was developed. However, it was clearly inconvenient for litigants to have two sets of courts applying different principles. Moreover, the Court of Chancery eventually gained a reputation for scandalous delay and inefficiency. This sad state of affairs was memorably described by Charles Dickens in his celebrated novel Bleak House. The Court of Chancery was abolished and the administration of common law and equity in England and Wales was merged by the Judicature Act, passed in 1873. This established the Supreme Court of Judicature, which was to give effect to both common law and equitable principles, with equity prevailing in the event of conflict between the two. These reforms were soon followed in the Australian colonies, where the Supreme Courts were given power to administer common law and equity together, although in the Supreme Court of New South Wales equity was administered exclusively by a separate division until 1972. 158 Although the administration of common law and equity has been merged, the bodies of principles have not been fused. It remains important to distinguish between common law and equitable doctrines because they operate according to different principles. Equity provides different remedies from the common law. Equitable remedies (such as specific performance) are available at the discretion of the court, unlike common law remedies (such as damages for breach of contract), which are available as of right. A separate set of defences is also available in equity. Historically, the role of equity was to remedy injustice resulting from an overly rigid common law. In the 19th century there was a decline in this ameliorative role. Towards the end of the 20th century, however, there was an equitable revival within the law of contract, which did much to restore equity’s role as the guardian of conscience. This is seen, for example, in the more frequent invocation of unconscionability as a basis for equitable relief. 159 Indeed, the prevention of unconscionable conduct may be seen today as the unifying rationale for a number of specific heads of equitable intervention. 160 Equitable obligations [1.165] Three equitable obligations are particularly relevant in the contractual context: the

obligation not to harm others by behaving inconsistently (equitable estoppel), the obligation to act solely in the interests of those who repose special trust and confidence in us (fiduciary obligations) and the obligation not to misuse confidential information. Equitable estoppel creates rights where promises and representations have been relied upon. As we will see in (Paterson Textbook Ch 9), in terms of its operation and remedial effect, equitable estoppel is in some ways similar to contract, because it results in the enforcement of promises and the fulfilment of expectations. It can also be seen as closely analogous to tort, however, since, like tort, it is concerned with providing protection against harm. 161 158 159

160 161

See Heydon, Leeming and Turner, Meagher Gummow and Lehane’s Equity Doctrines and Remedies (5th ed, 2015), Chapter 1. See, eg, Waltons Stores (Interstate) Ltd v Maher (1988) 164 CLR 387 and Commonwealth v Verwayen (1990) 170 CLR 394 (discussed in (Paterson Textbook Ch 9)); Taylor v Johnson (1983) 151 CLR 422 (discussed in (Paterson Textbook Ch 31) and extracted at [16.150]); Commercial Bank of Australia Ltd v Amadio (1983) 151 CLR 447 (discussed in (Paterson Textbook Ch 36) and extracted at [19.15]). See Loughlan, “The Historical Role of the Equitable Jurisdiction” and Parkinson, “The Conscience of Equity”, Chapters 1 and 2 in Parkinson (ed), The Principles of Equity (2nd ed, 2003). See Robertson, “Situating Equitable Estoppel within the Law of Obligations” (1997) 19 Sydney Law Review 32. [1.165]

27

Contract Law: Principles, Cases and Legislation

Fiduciary obligations are owed in certain situations where one person (the fiduciary) undertakes to act in the interests of a second person (the principal or beneficiary) and has the ability to exercise powers and discretions that affect the interests of the beneficiary. 162 The beneficiary reposes trust and confidence in the fiduciary and is entitled to expect that the fiduciary will act solely in the beneficiary’s interests. For example, solicitors owe fiduciary obligations to their clients. Fiduciaries must not profit from their position and must ensure that their personal interests do not come into conflict with their duties to the beneficiary. The remedies for breach of fiduciary duty are sometimes restitutionary (where the fiduciary profits from the breach of duty) and sometimes compensatory (where losses are suffered by the beneficiary as a result of the breach of duty). Fiduciary duties can exist alongside contractual obligations, although it is very difficult to establish a fiduciary relationship between parties dealing at arm’s length on an equal footing in a commercial transaction. 163 Equity also enforces a duty not to misuse information that is disclosed in circumstances giving rise to an obligation of confidence. 164 Again the remedies for breach of confidence are sometimes restitutionary (where profits are made from misuse of the information) and sometimes compensatory (where losses result from disclosure of the information). A duty of confidence may arise, for example, between parties negotiating for a contract. If one party divulges confidential information to another during contractual negotiations which later break down, no contractual duty to pay for the information ever arises, but equity may recognise an obligation not to use the information for any purpose other than that for which it was disclosed. Equitable doctrines and remedies in contract [1.170] In this book we will be concentrating on equitable doctrines and remedies that are so

closely connected with contract that they are regarded as part of contract law. Equitable estoppel falls into this category, but the equitable doctrines relating to fiduciaries and confidential information do not. There are other aspects of equity that are crucial to a study of contract law. First, equitable remedies supplement the common law remedy of damages in the enforcement of contracts. The equitable remedies of specific performance and injunction will be granted in circumstances where the common law remedy of damages would be inadequate. 165 Secondly, a contract will be set aside or rescinded in equity where there has been some unconscionable conduct in the bargaining process, such as misrepresentation, undue influence or unconscionable dealing. 166 Thirdly, equity will rectify a written document where the parties have by mistake inaccurately recorded the terms of their agreement. 167

162

See generally Parkinson, “Fiduciary Obligations” in Parkinson (ed), The Principles of Equity (2nd ed, 2003), Chapter 10.

163 164

See Hospital Products Ltd v United States Surgical Corporation (1984) 156 CLR 41. See generally Richardson and Stuckey-Clarke, “Breach of Confidence” in Parkinson (ed), The Principles of Equity (2nd ed, 2003), Chapter 12. See Chapter 21. See Chapters 16–19 and (Paterson Textbook Chs 31 and 39). See (Paterson Textbook Ch 31).

165 166 167 28

[1.170]

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STATUTORY OBLIGATIONS AND REGULATION Statutory obligations and regulation [1.175] A number of statutes impose obligations that affect the formation, performance and

enforcement of contracts. Some statutes also regulate the content of contract terms. The statutory regime with the closest connection to contract is the Australian Consumer Law (ACL), which is set out in Sch 2 of the Competition and Consumer Act 2010 (Cth) (CCA). 168

The Australian Consumer Law [1.180] The origin of the ACL is in the Productivity Commission’s Review of Australia’s

Consumer Policy Framework, which recommended the introduction of a single national consumer law. 169 The enactment of the ACL followed an agreement by the Council of Australian Governments in October 2008 to implement the Productivity Commission’s recommendation. The ACL is comprehensive consumer protection legislation which applies uniformly across Australia. 170 It draws on the consumer protection provisions previously contained in Trade Practices Act 1974 (Cth) (TPA), as well as other consumer protection regimes that were previously in operation in different Australian jurisdictions. The ACL regulates misleading and deceptive conduct, unconscionable conduct, unfair contract terms, consumer guarantees, product liability and unsolicited consumer agreements. The Australian Competition and Consumer Commission is given power to enforce certain provisions of the ACL, by seeking fines and remedies for affected parties. Parties who are affected are also able to seek redress by instituting legal proceedings of their own. Legislative power to pass laws relating to consumer protection is shared between the Commonwealth and State and Territory Parliaments. To implement the ACL, the Commonwealth Parliament acted as the lead legislator. The ACL is contained in Sch 2 of the Competition and Consumer Act 2010 (Cth) (CCA). Schedule 2 applies to the extent provided for by application legislation. 171 The Commonwealth parliament, and the parliaments of all of the States and Territories, have passed legislation applying Sch 2 as a law of their respective jurisdictions. As a result, corporations, unincorporated entities and individuals are all caught by the ACL under Commonwealth and/or State and Territory application laws.

Application as a law of the Commonwealth [1.185] Part XI of the CCA provides for the application of the ACL as a law of the

Commonwealth. The legislative power of the Commonwealth Parliament is limited by the Commonwealth Constitution. The CCA provides that the ACL applies to activities with respect to which the Commonwealth has constitutional power. In particular, s 131(1) of the 168 169 170

171

The CCA was, until 2010, called the Trade Practices Act 1974 (Cth); see the Trade Practices Amendment (Australian Consumer Law) Act (No 2) 2010 (Cth), sch 5, items 1 – 2. Productivity Commission, Review of Australia’s Consumer Policy Framework, Inquiry Report No 45 (2008), http://www.pc.gov.au/inquiries/completed/consumer-policy/report. See, the Council of Australian Governments, Intergovernmental Agreement for the Australian Consumer Law (2009), cl 3.2, https://www.coag.gov.au/sites/default/files/IGA_australian_consumer_law.pdf, where the States and Territories have undertaken to enact legislation applying the ACL as laws of their jurisdictions. See also Department of Treasury (Cth), Implementing the Australian Consumer Law: Information Note (2010), pp 5-6, http://www.consumerlaw.gov.au/content/the_acl/downloads/Implementing_ACL_Information_ Note.pdf. ACL, s 1. [1.185]

29

Contract Law: Principles, Cases and Legislation

CCA applies the ACL to the conduct of corporations. 172 Section 4 of the CCA defines “corporation” to mean a body corporate that is: • a foreign corporation (a body corporate incorporated overseas); • a trading corporation formed within the limits of Australia (a body corporate is a trading corporation if a sufficiently significant proportion of the corporation’s overall activities are trading activities); 173 • a financial corporation formed within the limits of Australia (a body corporate that performs the function or engages in the activity of dealing in finance); 174 • incorporated in a Territory; or • the holding company of a trading corporation, financial corporation or body corporate incorporated in a Territory. Section 131A of the CCA provides that with the exception of Pt 5.5 of the ACL, which is not relevant for present purposes, the Commonwealth application laws do not apply “to the supply, or possible supply, of services that are financial services, or of financial products”. These types of services and products are regulated under the Australian Securities and Investment Commission Act 2001 (Cth) (ASIC Act), which contains many, though not all, 175 of the consumer protection provisions found in the ACL. Interestingly, the State and Territory laws applying the ACL do not contain a provision equivalent to s 131A of the CCA. It is as yet uncertain whether the ACL as applied by State and Territory law could be used in respect to “to the supply, or possible supply, of services that are financial services, or of financial products” or whether such an application of the ACL would be found inconsistent with the intention expressed in the CCA for these services and products to be regulated under the ASIC Act.

States and Territories [1.190] Under the Intergovernmental Agreement for the ACL (2009), the States and Territories undertook to enact legislation applying the ACL as a law of their jurisdictions. 176 Laws to apply the ACL to “persons” have been enacted in all States and Territories. 177 The CCA confirms that the ACL provisions in the CCA do not exclude the operation of an application law of a participating jurisdiction to the extent that they are capable of operating concurrently. 178 Section 22(1)(a) of the Acts Interpretation Act 1901 (Cth) provides that 172 173

Other heads of constitutional power are invoked as a basis for applying the ACL under CCA, s 6. R v Judges of the Federal Court of Australia; Ex parte Western Australian National Football League (1978) 143 CLR 190, 233.

174 175 176

State Superannuation Board v Trade Practices Commission (1982) 60 FLR 165, 175. See Chapter 11. See further Attorney General’s Department, Implementing the ACL (Commonwealth of Australia, 2010), http://www.consumerlaw.gov.au/content/Content.aspx?doc=the_acl/implementation.htm. Fair Trading (Australian Consumer Law) Act 1992 (ACT), as amended by the Fair Trading (Australian Consumer Law) Amendment Act 2010 (ACT); Fair Trading Act 1987 (NSW), as amended by the Fair Trading Amendment (Australian Consumer Law) Act 2010 (NSW); Consumer Affairs and Fair Trading Act (NT) as amended by the Consumer Affairs and Fair Trading (National Uniform Legislation) Act (NT); Fair Trading Act 1989 (Qld) as amended by the Fair Trading (Australian Consumer Law) Amendment Act 2010 (Qld); Fair Trading Act 1987 (SA) as amended by the Statutes Amendment and Repeal (Australian Consumer Law) Act 2010 (SA); Australian Consumer Law (Tasmania) Act 2010; Fair Trading Act 1999 (Vic) as amended by the Fair Trading Amendment (Australian Consumer Law) Act 2010 (Vic); Fair Trading Act 2010 (WA). CCA, s 131C.

177

178 30

[1.190]

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“expressions used to denote persons generally … include a body politic or corporate as well as an individual”. 179 Thus the State and Territory application laws apply directly to both individuals and corporate entities. 180 While the ACL regulates a range of different types of conduct, the provisions with most significance to the law of contract are outlined as follows. 181 Misleading or deceptive conduct [1.195] In the discussion of torts earlier in this chapter we saw that a person who suffers loss

through acting on a false statement might recover damages for deceit (for a dishonest statement) or negligence (for a careless statement made in breach of a duty of care). Accordingly, a person induced to enter a contract by a false statement that did not become part of the contract might nonetheless claim damages for loss suffered. A contract might also be set aside or rescinded in equity if it has been induced by a misrepresentation (restrictively defined) and various bars to relief can be avoided. Today, however, the most important source of relief for misleading conduct (including misrepresentations) is under Pts 2-1 and 3-1 of the ACL. In particular, s 18(1) in Pt 2-1 of the ACL prohibits misleading or deceptive conduct in trade or commerce. 182 More specific prohibitions on misleading and deceptive conduct are contained in Part 3-1 of the ACL. Persons who suffer loss as a result of contravention of these provisions have access to a wide range of remedies (including damages and rescission) under the legislation itself. 183 Provided the misleading conduct occurred in trade or commerce, applicants for relief are not hampered by the limitations on claims for damages imposed by the law of torts (such as culpability) nor by limitations on claims for rescission imposed by equity. Unconscionable conduct [1.200] Part 2-2 of the ACL prohibits certain types of unconscionable conduct in trade or

commerce. 184 The courts are given power to grant a wide range of remedies, including the power to award monetary compensation and to declare contracts void, where a person suffers loss as a result of unconscionable conduct engaged in by another. These prohibitions are particularly important during contractual negotiations, but also regulate the exercise of contractual rights, such as the power to terminate a contract. 179

180

181 182 183 184

The State and Territory application laws provide that the Commonwealth interpretation legislation applies to the ACL rather than the State and Territory interpretation legislation: Fair Trading (Australian Consumer Law) Act 1992 (ACT), s 10; Fair Trading Act 1987 (NSW), s 31; Consumer Affairs and Fair Trading Act (NT), s 30; Fair Trading Act 1989 (Qld), s 19; Fair Trading Act 1987 (SA), s 17; Australian Consumer Law (Tasmania) Act 2010 (Tas), s 9; Fair Trading Act 1999 (Vic), s 12; Fair Trading Act 2010 (WA), s 23. Fair Trading (Australian Consumer Law) Act 1992 (ACT), as amended by the Fair Trading (Australian Consumer Law) Amendment Act 2010 (ACT); Fair Trading Act 1987 (NSW), as amended by the Fair Trading Amendment (Australian Consumer Law) Act 2010 (NSW); Consumer Affairs and Fair Trading Act (NT) as amended by the Consumer Affairs and Fair Trading (National Uniform Legislation) Act (NT); Fair Trading Act 1989 (Qld) as amended by the Fair Trading (Australian Consumer Law) Amendment Act 2010 (Qld); Fair Trading Act 1987 (SA) as amended by the Statutes Amendment and Repeal (Australian Consumer Law) Act 2010 (SA); Australian Consumer Law (Tasmania) Act 2010; Australian Consumer Law and Fair Trading Act 2012 (Vic); Fair Trading Act 2010 (WA). More information about the ACL can also be found at http://www.consumerlaw.gov.au. See Chapter 17. See Chapter 17. See Chapter 19. [1.200]

31

Contract Law: Principles, Cases and Legislation

Unfair contract terms [1.205] Part 2-3 of the ACL regulates unfair terms in consumer contracts. 185 This part of the

ACL looks to the fairness of the terms of the contract, not merely to the conduct of the parties in making, performing or enforcing the contract. The effect of an unfair term is that it is void, which means that the term is treated as if it never existed. Consumer guarantees [1.210] Part 3-2 of the ACL contains a regime of “consumer guarantees”. 186 The consumer

guarantees provide a range of minimum standards of quality that apply to the supply of goods and services to consumers. These guarantees cannot be excluded or limited by contract and take priority over any express guarantee or extended warranty that might be provided by a retailer or manufacturer. The consumer guarantees replace the contract terms that were previously implied under the TPA.

185 186 32

See Chapter 11. See Chapter 11. [1.205]

CHAPTER 2 Agreement (Offer and Acceptance) [2.05]

OFFER AND ACCEPTANCE ...................................................................................... 34

[2.10]

OFFER ........................................................................................................................ 35 [2.10]

The nature of an offer ........................................................................... 35 [2.15] [2.25] [2.35]

[2.50] [2.55]

Offer and unilateral contracts .............................................................. 49 Offers and invitations to treat .............................................................. 51 [2.60]

[2.85] [2.90] [2.95]

Goldsbrough, Mort & Co v Quinn ............................................ 61

Revocation and unilateral contracts .................................................... 69 [2.145]

[2.170]

Pharmaceutical Society of Great Britain v Boots Cash Chemists (Southern) ................................................................ 51

Ticket cases ............................................................................................ 56 Electronic transactions .......................................................................... 58 Termination of an offer ......................................................................... 60 [2.110]

[2.140]

Gibson v Manchester City Council ............................................ 36 Carlill v Carbolic Smoke Ball Co ................................................ 40 MacRobertson Miller Airline Services v Commissioner of State Taxation (WA) ................................................................ 45

Mobil Oil Australia v Wellcome International ............................. 69

ACCEPTANCE ........................................................................................................... 80 [2.170] [2.175]

Conduct constituting an acceptance .................................................. 80 Consciousness of the offer ................................................................... 81 [2.180]

[2.195]

[2.210] [2.215] [2.220] [2.305] [2.320] [2.330]

[2.340] [2.355]

The Crown v Clarke ................................................................. 83

Communication of acceptance ........................................................... 86 Felthouse v Bindley .................................................................. 90 Empirnall Holdings v Machon Paull Partners ............................. 91 Brambles Holdings v Bathurst City Council ................................ 92 Brinkibon v Stahag Stahl und Stahlwarenhandelsgesellschaft ............................................... 108 Electronic Transactions Act 2000 (NSW) ................................. 113 Guide to Enactment of the UNCITRAL Model Law on Electronic Commerce ............................................................. 118

Method of acceptance ........................................................................ 119 Correspondence between offer and acceptance ............................. 121 [2.375]

Butler Machine Tool Co v Ex-Cell-O Corp (England) ................. 123

[2.385]

A MEETING OF THE MINDS ................................................................................. 127

[2.390]

AGREEMENT WITHOUT OFFER AND ACCEPTANCE ........................................... 128

[2.395]

NON-CONTRACTUAL OBLIGATIONS .................................................................. 130

33

Contract Law: Principles, Cases and Legislation

Extracts from Paterson, Robertson and Duke, Principles of Contract Law (2016, 5th ed), Ch 3

OFFER AND ACCEPTANCE [2.05] The traditional approach to establishing an agreement between two parties is to

identify an offer made by one party and an acceptance of that offer by the other. Under that analysis, a contract is said to come into existence when acceptance of an offer has been communicated to the offeror. 1 This approach to contract formation by reference to offer and acceptance was developed in the 19th century. It is based on a 19th century model of contracting, in which negotiations are conducted through written correspondence, with a series of letters passing between the parties leading ultimately to an agreement. 2 This approach is also based on a 19th century idea of contracting, in which parties can bargain freely in an unregulated market, stipulating the terms they require, reaching a concluded bargain only if there is a real consensus between them. According to classical contract theory, the offer and acceptance formula identifies a “magic moment of formation” 3 when the parties are ad idem (of one mind) and their individual wills come together to create binding obligations. In that moment, all of the parties’ contractual obligations spring into existence. 4 The rules about offer and acceptance are based on the idea that up until the moment of formation the parties are under no obligation to one another and are free to withdraw from negotiations. Hugh Collins has observed that these rules “typify the formalist qualities of classical law: they are detailed, technical and mysterious, yet claim logical derivation from the idea of agreement”. 5 The classical approach to contract formation has been softened by developments in the law of estoppel, misleading conduct, negligent misrepresentation and unjust enrichment, which mean that parties in negotiation today clearly owe obligations to one another before the moment of formation. 6 The courts also find it difficult to fit the facts of some cases within the offer and acceptance framework. Even where the parties have clearly reached an agreement it can be difficult to identify conduct that can be characterised as an offer on one side, and conduct that can be characterised as an acceptance on the other. Many everyday transactions are entered into with little or no discussion of terms. A tram ticket may be purchased from a machine, for example, or an airline ticket over the telephone, with very few terms having been spelt out. A contract may be made with a professional person, such as a medical specialist, without even any mention of price. In cases where there is extensive discussion of terms, such as commercial agreements drafted by solicitors, there is unlikely to be a formal offer made by one party which is accepted by the other. Instead there may be a series of negotiations, which culminates in the parties simultaneously signing a written document. Although the courts recognise its deficiencies, 7 the traditional offer and acceptance approach is routinely applied when the courts need to decide whether a contract has been 1 2 3

Eg, Tallerman & Co Pty Ltd v Nathan’s Merchandise (Vic) Pty Ltd (1957) 98 CLR 93, 110. See Stoljar, “Offer, Promise and Agreement” (1955) 50 Northwestern University Law Review 445, 453-6. Mensch, “Freedom of Contract as Ideology” (1981) 33 Stanford Law Review 753, 760.

4 5 6 7

See Mensch, “Freedom of Contract as Ideology” (1981) 33 Stanford Law Review 753, 755-6. Collins, The Law of Contract (4th ed, 2003), p 159. See [2.395]. See, eg, MacRobertson Miller Airline Services v Commissioner of State Taxation (WA) (1975) 133 CLR 125, 136.

34

[2.05]

Agreement (Offer and Acceptance)

CHAPTER 2

formed. In order to identify whether, when or where a contract has been formed, the courts will usually seek to attach the labels “offer” and “acceptance” to particular actions, even where it seems somewhat artificial to do so. 8 As we will see, however, a contract can be established without an identifiable offer and acceptance, provided the parties have manifested mutual assent and appear to have reached a concluded bargain. 9

OFFER The nature of an offer [2.10] An offer is an expression of willingness to enter into a contract on specified terms. 10 A

proposal only amounts to an offer if the person making it indicates that an acceptance is invited and will conclude the agreement between the parties. 11 In Brambles Holdings Ltd v Bathurst City Council, Heydon JA suggested in obiter that an offer must take the form of a proposal for consideration which gives the offeree an opportunity to choose between acceptance and rejection. 12 On this view, a communication which “uses the language of command” and “peremptorily requests” the other party to adopt a particular course of action may not be regarded as an offer. 13 It becomes important to determine whether particular conduct constitutes an offer when the party to whom it was directed purports to accept the offer and claims that a binding contract has been formed. Whether particular conduct amounts to an offer may also be relevant in ascertaining the terms of a contract or in determining when or where a contract has been made. The cases discussed and extracted at [2.15]-[2.165] show that it is also sometimes necessary to determine whether particular conduct constitutes an offer for other reasons, such as determining whether a statutory offence of offering prohibited goods for sale has been committed. In determining whether an offer has been made, the crucial issue is whether it would appear to a reasonable person in the position of the offeree that an offer was intended, and that a binding agreement would be made upon acceptance. It does not matter whether the offeror in fact intended to make an offer; the court determines the offeror’s intention objectively, according to outward manifestations. 14 The decision of the English Court of Appeal in the quaint old case of Carlill v Carbolic Smoke Ball Co 15 provides a useful illustration of the classical principles. The defendants manufactured and sold a device called the “Carbolic Smoke Ball”, which was claimed to prevent colds and influenza. They placed an advertisement in various newspapers which said that a £100 reward would be paid to any person who contracted a cold or influenza after having used the device three times daily for two weeks, in accordance with the directions supplied with each ball. The advertisement said: “£1000 is deposited with the 8 9 10

See, eg, MacRobertson Miller Airline Services v Commissioner of State Taxation (WA) (1975) 133 CLR 125. See [2.390]. JW Carter Contract Law in Australia (6th ed, 2012), [3-07].

11

Restatement of Contracts (2d) (US), § 24, American Law Institute, 1981; Greig and Davis, The Law of Contract (1987), p 254.

12 13 14 15

[2001] NSWCA 61; (2001) 53 NSWLR 153, 171. This point is discussed further [2.390]. [2001] NSWCA 61; (2001) 53 NSWLR 153, 171. Eg, Carlill v Carbolic Smoke Ball Co [1893] 1 QB 256; Storer v Manchester City Council [1974] 1 WLR 1403. [1893] 1 QB 256. [2.10]

35

Contract Law: Principles, Cases and Legislation

Alliance Bank, Regent Street, shewing our sincerity in the matter.” After reading the advertisement, the plaintiff purchased a smoke ball, used it for several weeks and then contracted influenza. The defendants refused to pay the reward to the plaintiff. The plaintiff’s claim that there was a contract between the parties was met with five arguments. The defendants first argued that no promise was intended and the advertisement was a “mere puff” which meant nothing. Secondly, no offer had been made to any particular person. Thirdly, the plaintiff had not notified her acceptance of any offer. Fourthly, the agreement was uncertain because it failed to stipulate a period within which the disease must be contracted. Fifthly, the plaintiff had supplied no consideration for the defendant’s promise. The English Court of Appeal rejected these arguments and held unanimously that a contract had been formed between the plaintiff and the defendants. That contract obliged the defendants to pay £100 to the plaintiff. In relation to the first argument, the court held that the statement relating to the bank deposit made it clear that a promise was intended. 16 The court construed the advertisement objectively, according to what an ordinary person reading the document would think was intended, rather than by reference to what the defendant actually intended. 17 In relation to the second argument, the court held that the offer was made to the whole world and could be accepted by any person who performed the conditions on the faith of the advertisement. 18 Thirdly, the court held that, although acceptance of an offer must normally be notified to the offeror, the offeror may dispense with that notification. An offer that calls for performance of particular conditions may be accepted by performance of those conditions. An offer of a reward is typically this type of offer. 19 Fourthly, the court held that a reasonable construction must be placed on the advertisement, which made it sufficiently certain. It was possible to construe the document in three different ways, so that the reward would be paid to any person who contracted the disease during the epidemic, while the smoke ball was in use or within a reasonable time after using it. 20 Each of those possible restrictions was clearly satisfied here. Fifthly, the court held that the use of the smoke ball by the plaintiff constituted both a benefit to the defendant and a detriment to the plaintiff, either of which would have been enough to constitute good consideration for the promise. 21 Extracts from Paterson, Robertson and Duke, Contract: Cases and Materials (2016, 13th ed), Ch 3

Gibson v Manchester City Council [2.15] Gibson v Manchester City Council [1979] 1 All ER 972; [1979] 1 WLR 294 House of Lords – Appeal from the Court of Appeal. [FACTS: In 1970 Manchester City Council, then controlled by the Conservative Party, adopted a scheme allowing tenants of council housing to purchase the freehold title to their homes. In furtherance of the scheme, the Council wrote a standard form letter to Robert Gibson in relation to the Council house he was renting. The letter said that the Council “may be prepared to sell the house to 16 17 18 19 20 21 36

[1893] 1 QB 256, 261-2, 268, 273-4. [1893] 1 QB 256, 266. [1893] 1 QB 256, 262, 268. [1893] 1 QB 256, 262-3, 269-70, 274. [1893] 1 QB 256, 266-7, 263-4, 274. [1893] 1 QB 256, 264-5, 270-1, 274-5. [2.15]

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Gibson v Manchester City Council cont. you” at a nominated purchase price and asked Gibson to complete an application form if he wished to make formal application to buy the house. Gibson completed an application form (leaving the purchase price blank) and returned it to the Council. Before formal contracts were prepared, local government elections were held in which control of the Council passed to the Labour Party. The Council then resolved to abandon the scheme and to complete only those sales for which a binding contract had been concluded. The Council denied that there was a binding contract with Gibson. Gibson claimed that a contract had come into existence, and sued to enforce it. The trial judge held that there had been an offer and acceptance, and so a binding contract had arisen. He ordered specific performance. The Council’s appeal to the Court of Appeal was dismissed. The Council then appealed the House of Lords, using this as a test case to determine the status of arrangements with hundreds of tenants in a similar position to Gibson.] LORD DIPLOCK [295] My Lords, this is an action for specific performance of what is claimed to be a contract for the sale of land. The only question in the appeal is of a kind with which the courts are very familiar. It is whether in the correspondence between the parties there can be found a legally enforceable contract for the sale by the Manchester Corporation to Mr Gibson of the dwelling house of which he was the occupying tenant at the relevant time in 1971. That question is one that, in my view, can be answered by applying to the particular documents relied upon by Mr Gibson as constituting the contract, well- [296] settled, indeed elementary, principles of English law…. The two documents principally relied upon by Mr Gibson were in standard forms used by the corporation in dealing with applications from tenants of council houses to purchase the freehold of their homes under a scheme that had been adopted by the council … [and later] abandoned…. [T]he only contract that is alleged is one made by letters accompanying documents passing between the parties. The outcome of this appeal depends upon their true construction. In the Manchester County Court where the action started, the case was pleaded in the conventional way. The particulars of claim alleged an offer in writing by the corporation to sell the freehold interest in the house to Mr Gibson at a price of £2,180 and an acceptance in writing of that offer by Mr Gibson. The judge (Judge Bailey) followed the same conventional approach to the question that fell to be decided. He looked to see whether there was an offer of sale and an acceptance. He held that, upon their true construction, the documents relied upon as such in the particulars of claim did amount to an offer and an acceptance respectively and so constituted a legally enforceable contract. He ordered specific performance of an open contract for the sale to Mr Gibson of the freehold interest in the house at the price of £2,180. The corporation’s appeal against this judgment was dismissed by a majority of the Court of Appeal (Lord Denning MR and Ormrod LJ); Geoffrey Lane LJ dissented. Lord Denning MR rejected what I have described as the conventional approach of looking to see whether upon the true construction of the documents relied upon there can be discerned an offer and acceptance. One ought, he said ([1978] 1 WLR 520 at 523H) to “look at the correspondence as a whole and at the conduct of the parties and see therefrom whether the parties have come to an agreement on everything that was material.” This approach … led him however to the conclusion that there should be imported into the agreement to be specifically performed additional conditions, against use except as a private dwelling house and against advertising and a restriction not to sell or lease the property for five years. These are conditions which would not be implied by law in an [297] open contract for the sale of land. The reason for so varying the judge’s order was that clauses in these terms were included in the standard form of “Agreement for Sale of a Council House” which … was entered into by the corporation and council tenants whose applications to purchase the freehold of their council house reached the stage at which contracts were exchanged. There was, however, no reference to this standard form of agreement in [2.15]

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Gibson v Manchester City Council cont. any of the documents said to constitute the contract relied on in the instant case, nor was there any evidence that Mr Gibson had knowledge of its terms at or before the time that the alleged contract was concluded. Ormrod LJ, who agreed with Lord Denning MR, adopted a similar approach … Geoffrey Lane LJ in a dissenting judgment, which for my part I find convincing, adopted the conventional approach. He found that upon the true construction of the documents relied upon as constituting the contract, there never was an offer by the corporation acceptance of which by Mr Gibson was capable in law of constituting a legally enforceable contract. It was but a step in the negotiations for a contract which, owing to the change in the political complexion of the council, never reached fruition. My Lords, there may be certain types of contract, though I think they are exceptional, which do not fit easily into the normal analysis of a contract as being constituted by offer and acceptance; but a contract alleged to have been made by an exchange of correspondence between the parties in which the successive communications other than the first are in reply to one another, is not one of these. I can see no reason in the instant case for departing from the conventional approach of looking at the handful of documents relied upon as constituting the contract sued upon and seeing whether upon their true construction there is to be found in them a contractual offer by the corporation to sell the house to Mr Gibson and an acceptance of that offer by Mr Gibson. I venture to think that it was by departing from this conventional approach that the majority of the Court of Appeal was led into error. The genesis of the relevant negotiations in the instant case is a form filled in by Mr Gibson on 28 November 1970, inquiring what would be the price of buying his council house … and expressing his interest in obtaining a mortgage from the corporation. The form was a detachable part of a brochure which had been circulated by the corporation to tenants who had previously expressed an interest in buying their houses. It contained details of a new scheme for selling council houses that had been recently adopted by the council. The scheme provided for a sale at market value less a discount dependent on the length of time the purchaser had been a council tenant. This, in the case of Mr Gibson, would have amounted to 20 per cent. The scheme also provided for the provision by the corporation of advances upon mortgage which might amount to as much as the whole of the purchase price. As a result of that inquiry Mr Gibson’s house was inspected by the corporation’s valuer and on 10 February, 1971, the letter which is relied upon by Mr Gibson as the offer by the corporation to sell the house to him was sent from the City Treasurer’s Department. It was in the following terms: [298] Dear Sir, Purchase of council house Your Reference Number 82463 03 I refer to your request for details of the cost of buying your council house. The corporation may be prepared to sell the house to you at the purchase price of £2,725 less 20 per cent = £2,180 (freehold) … Maximum mortgage the corporation may grant: £2,177 repayable over 20 years. Annual fire insurance premium: £2.45 Monthly repayment charge, calculated by: (i) flat rate repayment method £19.02 If you wish to pay off some of the purchase price at the start and therefore require a mortgage for less than the amount quoted above, the monthly instalment will change; in these circumstances, I will supply new figures on request. The above repayment figures apply so long as the interest rate charged on home loans is 8.5 per cent. The interest rate will be subject to variation by the corporation after giving not less than three months’ written notice, and if it changes, there will be an adjustment to the monthly instalment payable. This letter should not be regarded as firm offer of a mortgage. 38

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Gibson v Manchester City Council cont. If you would like to make formal application to buy your council house, please complete the enclosed application form and return it to me as soon as possible. Yours faithfully, (Sgd) H R PAGE CITY TREASURER … My Lords, the words I have italicised seem to me, as they seemed to Geoffrey Lane LJ, to make it quite impossible to construe this letter as a contractual offer capable of being converted into a legally enforceable open contract for the sale of land by Mr Gibson’s written acceptance of it. The words “may be prepared to sell” are fatal to this; so is the invitation, not, be it noted, to accept the offer, but “to make formal application to buy” upon the enclosed application form. It is, to quote Geoffrey Lane LJ, a letter setting out the financial terms on which it may be the council will be prepared to consider a sale and purchase in due course. Both Ormrod LJ and the judge in the County Court reaching the conclusion that this letter was a firm offer to sell the freehold interest in the house for £2,180, attached importance to the fact that the second paragraph, dealing with the financial details of the mortgage of which Mr Gibson had asked for particulars, stated expressly: “This letter should not be regarded as a firm offer of a mortgage.” The necessary implication from this, it is suggested, is that the first paragraph of the letter is to be regarded as a firm offer to sell despite the fact that this is plainly inconsistent with the express language of that paragraph. My Lords, with great respect, this surely must be fallacious. If the final sentence had been omitted the wording of the second paragraph, unlike that of the first, with its use of the indicative mood in such expressions as “the interest rate will change”, might have been understood by council tenants to whom it was addressed as indicating a firm offer of a mortgage of the amount and on the terms for repayment stated if the council were prepared to sell the house at the stated price. But whether or not this be the explanation of [299] the presence of the last sentence in para 2, it cannot possibly affect the plain meaning of the words used in para 1. Mr Gibson did fill in the application form enclosed with this letter. It was in three sections: s A headed “Application to buy a council house”, s B “Application for a loan to buy a council house” and s C “Certificate to be completed by all applicants.” He left blank the space for the purchase price in s A and sent the form to the corporation on 5 March 1971, with a covering letter in which he requested the corporation either to undertake at their own expense to carry out repairs to the tarmac path forming part of the premises or to make a deduction from the purchase price to cover the cost of repairs. The letter also intimated that Mr Gibson would like to make a down payment of £500 towards the purchase price instead of borrowing the whole amount on mortgage. In reply to the request made in this letter the corporation, by letter of 12 March 1971, said that the condition of the property had been taken into consideration in fixing the purchase price and that repairs to the tarmac by the corporation could not be authorised at this stage. This letter was acknowledged by Mr Gibson by his letter to the corporation of 18 March 1971, in which he asked the corporation to “carry on with the purchase as per my application already in your possession”. My Lords, the application form and letter of 18 March 1971, were relied on by Mr Gibson as an unconditional acceptance of the corporation’s offer to sell the house; but this cannot be so unless there was a contractual offer by the corporation available for acceptance, and, for the reason already given I am of opinion that there was none. It is unnecessary to consider whether the application form and Mr Gibson’s letters of 3 and 18 March 1971, are capable of amounting to a contractual offer by him to purchase the freehold interest in the house at a price of £2,180 on the terms of an open contract, for there is no suggestion that, even if it were, it was ever accepted by the corporation. Nor would it ever have been even if there had been no [abandonment of the scheme] as the policy of the [2.15]

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Gibson v Manchester City Council cont. corporation before the change required the incorporation in all agreements for sale of council houses to tenants of the conditions referred to by Lord Denning MR in his judgment and other conditions inconsistent with an open contract. I therefore feel compelled to allow the appeal. One can sympathise with Mr Gibson’s disappointment on finding that his expectations that he would be able to buy his council house at 20 per cent below its market value in the autumn of 1970 cannot be realised. Whether one thinks this makes it a hard case perhaps depends upon the political views that one holds about council housing policy. But hard cases offer a strong temptation to let them have their proverbial consequences. It is a temptation that the judicial mind must be vigilant to resist. [LORD EDMUND-DAVIES and LORD RUSSELL OF KILLOWEN in separate judgments agreed that the appeal be allowed. LORD FRASER OF TULLYBELTON agreed with LORD DIPLOCK and LORD RUSSELL. LORD KEITH OF KINKEL agreed with LORD DIPLOCK.] Appeal allowed.

[2.20]

Note

In the extract at [2.15] Lord Diplock refers to the possibility of exceptional types of contracts which do not “fit easily into the normal analysis of offer and acceptance”. On this issue see further Brambles Holdings Ltd v Bathurst City Council [2001] NSWCA 61; (2001) 53 NSWLR 153, at [2.220].

Carlill v Carbolic Smoke Ball Co [2.25] Carlill v Carbolic Smoke Ball Co [1893] 1 QB 256 Court of Appeal – Appeal from Hawkins J. [FACTS: The defendants manufactured a device called a “Carbolic Smoke Ball”, which was claimed to prevent colds and influenza. They placed the following advertisement in a number of newspapers, including the Pall Mall Gazette of 13 November 1891: £100 reward will be paid by the Carbolic Smoke Ball Company to any person who contracts the increasing epidemic influenza, colds, or any disease caused by taking cold, after having used the ball three times daily for two weeks according to the printed directions supplied with each ball. £1 000 is deposited with the Alliance Bank, Regent Street, shewing our sincerity in the matter. During the last epidemic of influenza many thousand carbolic smoke balls were sold as preventives against this disease, and in no ascertained case was the disease contracted by those using the carbolic smoke ball. One carbolic smoke ball will last a family several months, making it the cheapest remedy in the world at the price, 10s, post free. The ball can be refilled at a cost of 5s. Address, Carbolic Smoke Ball Company, 27 Princes Street, Hanover Square, London. The plaintiff purchased a smoke ball from a chemist on the faith of the advertisement and used it in accordance with the manufacturer’s directions from 20 November 1891 until 17 January 1892, when she contracted influenza. The trial judge held that the plaintiff was entitled to recover the £100. The defendant appealed.] LINDLEY LJ: [261] The first observation I will make is that we are not dealing with any inference of fact. We are dealing with an express promise to pay £100 in certain events. Read the advertisement how you will, and twist it about as you will, here is a distinct promise expressed in language which is 40

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Carlill v Carbolic Smoke Ball Co cont. perfectly unmistakable: “£100 reward will be paid by the Carbolic Smoke Ball Company to any person who contracts the influenza after having used the ball three times daily for two weeks according to the printed directions supplied with each ball.” We must first consider whether this was intended to be a promise at all, or whether it was a mere puff which meant nothing. Was it a mere puff? My answer to that question is “No”, and I base my answer upon this passage: “£1 000 is deposited with the Alliance Bank, shewing our sincerity in the matter.” Now, for what was that money deposited or that statement made except to negative the suggestion that this was a mere puff and meant nothing at all? The deposit is called in [262] aid by the advertiser as proof of his sincerity in the matter – that is, the sincerity of his promise to pay this £100 in the event which he has specified. I say this for the purpose of giving point to the observation that we are not inferring a promise; there is the promise, as plain as words can make it. Then it is contended that it is not binding. In the first place, it is said that it is not made with anybody in particular. Now that point is common to the words of this advertisement and to the words of all other advertisements offering rewards. They are offers to anybody who performs the conditions named in the advertisement, and anybody who does perform the condition accepts the offer. In point of law this advertisement is an offer to pay £100 to anybody who will perform these conditions, and the performance of the conditions is the acceptance of the offer. That rests upon a string of authorities, the earliest of which is Williams v Carwardine (1833) 4 B & Ad 621; 110 ER 590, which has been followed by many other decisions upon advertisements offering rewards. But then it is said: “Supposing that the performance of the conditions is an acceptance of the offer, that acceptance ought to have been notified.” Unquestionably, as a general proposition, when an offer is made, it is necessary in order to make a binding contract, not only that it should be accepted, but that the acceptance should be notified. But is that so in cases of this kind? I apprehend that they are an exception to that rule, or, if not an exception, they are open to the observation that the notification of the acceptance need not precede the performance. This offer is a continuing offer. It was never revoked, and if notice of acceptance is required – which I doubt very much, for I rather think the true view is that which was expressed and explained by Lord Blackburn in the case of Brogden v Metropolitan Ry Co (1877) 2 App Cas 666 at 692 – if notice of acceptance is required, the person who makes the offer gets the notice of acceptance contemporaneously with his notice of performance of the condition. If he gets notice of the acceptance before his offer is revoked, that in principle is all you want. I, however, think that the true view, in a case of this kind, is that the person who makes the offer shews by his language and from the nature of the transaction that he [263] does not expect and does not require notice of the acceptance apart from notice of the performance. We, therefore, find here all the elements which are necessary to form a binding contract enforceable in point of law, subject to two observations. First of all it is said that this advertisement is so vague that you cannot really construe it as a promise – that the vagueness of the language shews that a legal promise was never intended or contemplated. The language is vague and uncertain in some respects, and particularly in this, that the £100 is to be paid to any person who contracts the increasing epidemic after having used the balls three times daily for two weeks. It is said, When are they to be used? According to the language of the advertisement no time is fixed, and, construing the offer most strongly against the person who has made it, one might infer that any time was meant. I do not think that was meant, and to hold the contrary would be pushing too far the doctrine of taking language most strongly against the person using it. I do not think that business people or reasonable people would understand the words as meaning that if you took a smoke ball and used it three times daily for two weeks you were to be guaranteed against influenza for the rest of your life, and I think it [2.25]

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Carlill v Carbolic Smoke Ball Co cont. would be pushing the language of the advertisement too far to construe it as meaning that. But if it does not mean that, what does it mean? It is for the defendants to shew what it does mean; and it strikes me that there are two, and possibly three, reasonable constructions to be put on this advertisement, any one of which will answer the purpose of the plaintiff. Possibly it may be limited to persons catching the “increasing epidemic” (that is, the then prevailing epidemic), or any colds or diseases caused by taking cold, during the prevalence of the increasing epidemic. That is one suggestion; but it does not commend itself to me. Another suggested meaning is that you are warranted free from catching this epidemic, or colds or other diseases caused by taking cold, whilst you are using this remedy after using it for two weeks. If that is the meaning, the plaintiff is right, for she used the remedy for two weeks and went on using it till she got the epidemic. Another meaning, and the one which I rather prefer, is that the reward is offered to [264] any person who contracts the epidemic or other disease within a reasonable time after having used the smoke ball. Then it is asked, What is a reasonable time? It has been suggested that there is no standard of reasonableness; that it depends upon the reasonable time for a germ to develop! I do not feel pressed by that. It strikes me that a reasonable time may be ascertained in a business sense and in a sense satisfactory to a lawyer, in this way; find out from a chemist what the ingredients are; find out from a skilled physician how long the effect of such ingredients on the system could be reasonably expected to endure so as to protect a person from an epidemic or cold, and in that way you will get a standard to be laid before a jury, or a judge without a jury, by which they might exercise their judgment as to what a reasonable time would be. It strikes me, I confess, that the true construction of this advertisement is that £100 will be paid to anybody who uses this smoke ball three times daily for two weeks according to the printed directions, and who gets the influenza or cold or other diseases caused by taking cold within a reasonable time after so using it; and if that is the true construction, it is enough for the plaintiff. I come now to the last point which I think requires attention – that is, the consideration. It has been argued that this is nudum pactum; that there is no consideration. We must apply to that argument the usual legal tests. Let us see whether there is no advantage to the defendants. It is said that the use of the ball is no advantage to them, and that what benefits them is the sale; and the case is put that a lot of these balls might be stolen, and that it would be no advantage to the defendants if the thief or other people used them. The answer to that, I think, is as follows. It is quite obvious that in the view of the advertisers a use by the public of their remedy, if they can only get the public to have confidence enough to use it, will react and produce a sale which is directly beneficial to them. Therefore, the advertisers get out of the use an advantage which is enough to constitute a consideration. But there is another view. Does not the person who acts upon this advertisement and accepts the offer put himself to some inconvenience at the request of the defendants? Is it nothing [265] to use this ball three times daily for two weeks according to the directions at the request of the advertiser? Is that to go for nothing? It appears to me that there is a distinct inconvenience, not to say a detriment, to any person who so uses the smoke ball. I am of opinion, therefore, that there is ample consideration for the promise … It appears to me, therefore, that the defendants must perform their promise, and, if they have been so unwary as to expose themselves to a great many actions, so much the worse for them. [2.30] BOWEN LJ: I am of the same opinion. We were asked to say that this document was a contract too vague to be enforced. The first observation which arises is that the document itself is not a contract at all, it is only an offer made to the public. [266] The defendants contend next, that it is an offer the terms of which are too vague to be treated as a definite offer, inasmuch as there is no limit of time fixed for the catching of the influenza, and it cannot be supposed that the advertisers seriously meant to promise to pay money to every 42

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Carlill v Carbolic Smoke Ball Co cont. person who catches the influenza at any time after the inhaling of the smoke ball … It seems to me that in order to arrive at a right conclusion we must read this advertisement in its plain meaning, as the public would understand it. It was intended to be issued to the public and to be read by the public. How would any ordinary person reading this document construe it? It was intended unquestionably to have some effect, and I think the effect which it was intended to have, was to make people use the smoke ball, because the suggestions and allegations which it contains are directed immediately to the use of the smoke ball as distinct from the purchase of it … It is written in colloquial and popular language, and I think that it is equivalent to this: “£100 will be paid to any person who shall contract the increasing epidemic after having used the carbolic smoke ball three times daily for two weeks.” And it seems to me that the way in which the public would read it would be this, that if anybody, after the advertisement was published, used three times daily for two weeks the carbolic smoke ball, and then caught cold, he would be entitled to the reward. Then again it was said: “How long is this protection to endure? Is it to go on for ever, or for what limit of time?” [267] I think that there are two constructions of this document, each of which is good sense, and each of which seems to me to satisfy the exigencies of the present action. It may mean that the protection is warranted to last during the epidemic, and it was during the epidemic that the plaintiff contracted the disease. I think, more probably, it means that the smoke ball will be a protection while it is in use. That seems to me the way in which an ordinary person would understand an advertisement about medicine, and about a specific against influenza … My brother, the Lord Justice who preceded me, thinks that the contract would be [268] sufficiently definite if you were to read it in the sense that the protection was to be warranted during a reasonable period after use. I have some difficulty myself on that point; but it is not necessary for me to consider it further, because the disease here was contracted during the use of the carbolic smoke ball … It was also said that the contract is made with all the world – that is, with everybody; and that you cannot contract with everybody. It is not a contract made with all the world. There is the fallacy of the argument. It is an offer made to all the world; and why should not an offer be made to all the world which is to ripen into a contract with anybody who comes forward and performs the condition? It is an offer to become liable to any one who, before it is retracted, performs the condition, and, although the offer is made to the world, the contract is made with that limited portion of the public who come forward and perform the condition on the faith of the advertisement. It is not like cases in which you offer to negotiate, or you issue advertisements that you have got a stock of books to sell, or houses to let, in which case there is no offer to be bound by any contract. Such advertisements are offers to negotiate – offers to receive offers – offers to chaffer, as, I think, some learned judge in one of the cases has said. If this is an offer to be bound, then it is a contract the moment the person fulfils the condition … [269] Then it was said that there was no notification of the acceptance of the contract. One cannot doubt that, as an ordinary rule of law, an acceptance of an offer made ought to be notified to the person who makes the offer, in order that the two minds may come together. Unless this is done the two minds may be apart, and there is not that consensus which is necessary according to the English law – I say nothing about the laws of other countries – to make a contract. But there is this clear gloss to be made upon that doctrine, that as notification of acceptance is required for the benefit of the person who makes the offer, the person who makes the offer may dispense with notice to himself if he thinks it desirable to do so, and I suppose there can be no doubt that where a person in an offer made by him to another person, expressly or impliedly intimates a particular mode of acceptance as sufficient to make the bargain binding, it is only necessary for the other person to whom such offer is made to follow the indicated method of acceptance; and if the person making the offer, expressly or [2.30]

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Carlill v Carbolic Smoke Ball Co cont. impliedly intimates in his offer that it will be sufficient to act on the proposal without communicating [270] acceptance of it to himself, performance of the condition is a sufficient acceptance without notification … Now, if that is the law, how are we to find out whether the person who makes the offer does intimate that notification of acceptance will not be necessary in order to constitute a binding bargain? In many cases you look to the offer itself. In many cases you extract from the character of the transaction that notification is not required, and in the advertisement cases it seems to me to follow as an inference to be drawn from the transaction itself that a person is not to notify his acceptance of the offer before he performs the condition, but that if he performs the condition notification is dispensed with. It seems to me that from the point of view of common sense no other idea could be entertained. If I advertise to the world that my dog is lost, and that anybody who brings the dog to a particular place will be paid some money, are all the police or other persons whose business it is to find lost dogs to be expected to sit down and write me a note saying that they have accepted my proposal? Why, of course, they at once look after the dog, and as soon as they find the dog they have performed the condition. The essence of the transaction is that the dog should be found, and it is not necessary under such circumstances, as it seems to me, that in order to make the contract binding there should be any notification of acceptance. It follows from the nature of the thing that the performance of the condition is sufficient acceptance without the notification of it, and a person who makes an offer in an advertisement of that kind makes an offer which must be read by the light of that common sense reflection. He does, therefore, in his offer impliedly indicate that he does not require notification of the acceptance of the offer. A further argument for the defendants was that this was a [271] nudum pactum – that there was no consideration for the promise – that taking the influenza was only a condition, and that the using the smoke ball was only a condition, and that there was no consideration at all; in fact, that there was no request, express or implied, to use the smoke ball … The short answer, to abstain from academical discussion, is, it seems to me, that there is here a request to use involved in the offer. Then as to the alleged want of consideration. The definition of “consideration” given in Selwyn’s Nisi Prius (8th ed), p 47, which is cited and adopted by Tindal CJ, in the case Laythoarp v Bryant (1836) 2 Bing (NC) 735; 132 ER 283, is this: Any act of the plaintiff from which the defendant derives a benefit or advantage, or any labour, detriment, or inconvenience sustained by the plaintiff, provided such act is performed or such inconvenience suffered by the plaintiff, with the consent, either express or implied, of the defendant. Can it be said here that if the person who reads this advertisement applies thrice daily, for such time as may seem to him tolerable, the carbolic smoke ball to his nostrils for a whole fortnight, he is doing nothing at all – that it is a mere act which is not to count towards consideration to support a promise (for the law does not require us to measure the adequacy of the consideration). Inconvenience sustained by one party at the request of the other is enough to create a consideration. I think, therefore, that it is consideration enough that the plaintiff took the trouble of using the smoke ball. But I think also that the defendants received a benefit from this user, for the use of the smoke ball was contemplated by the defendants as being indirectly a benefit to them, because the use of the smoke balls would promote their sale … [AL SMITH LJ delivered a judgment to a similar effect.]

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Carlill v Carbolic Smoke Ball Co cont. Appeal dismissed.

MacRobertson Miller Airline Services v Commissioner of State Taxation (WA) [2.35] MacRobertson Miller Airline Services v Commissioner of State Taxation (WA) (1975) 133 CLR 125 High Court of Australia – Appeal from the Supreme Court of Western Australia. [FACTS: A person wishing to take passage on MacRobertson Miller Airline Services would be advised, on inquiry, on what flights seats were available to her or his destination, and the fare. Having selected the flight, the prospective passenger was handed a ticket, on which were entered the appropriate details, in return for the fare. At the appropriate time, the passenger presented the ticket to secure her or his seat on the flight. A condition printed on the ticket provided that the airline reserved the right to abandon any flight or cancel any ticket or booking and that upon abandonment or cancellation, the passenger would be entitled to a refund of so much of the fare as was proportionate to the part of the flight abandoned or cancelled, and the airline would be under no other liability to the passenger for failure to carry her or him at the booked or scheduled time or at all. It was necessary for stamp duty purposes to determine whether the ticket so issued was “an agreement or any memorandum of agreement”. The Supreme Court of Western Australia found that it was. The airline appealed.] BARWICK CJ: [132] It is, in my opinion, clear that the issuing airline operator does not by the terms of the ticket assume or offer to assume any obligation [133] to carry the intending passenger. Clauses 2 and 5 made this particularly clear. The case is not, in my opinion, one in which an obligation is assumed or an offer of an obligation made from or upon which obligations, exemptions or limitations are stipulated. The exemption of the ticket in this case fully occupies the whole area of possible obligation, leaving no room for the existence of a contract of carriage. In my opinion, the proper legal analysis of the situation which arises on the making of a reservation for a seat upon a flight, the payment of the fare appropriate to that flight and the issue of a ticket as in this case, is that if, without any antecedent promise to do so, the airline operator in fact conveys the passenger in accordance with the reservation or any variant of it permissible under the terms of carriage indorsed on the ticket, the airline operator will have earned the fare which has been prepaid and be entitled to retain it: otherwise the amount which has been prepaid against the possibility of such carriage will be refunded. But if, in any case, the described carriage eventuates it shall be upon the indorsed terms of carriage. To this statement there is a possible qualification, namely, if the airline operator has been able, ready and willing to carry the passenger in accordance with the particulars on the ticket and the intending passenger has not presented himself in due time at the airline traffic office at the designated airport, the airline operator may claim to have earned the fare. In general, therefore, the entitlement of the airline company to retain the prepaid fare is dependent on the actual performance of carriage. The situation is an example of the payment of a reward for an act performed at request with no antecedent promise by the person performing the act to do so. The terms of carriage are akin to the terms of the prospectus in Edgar v Blick (1816) 1 Stark 464; 171 ER 531, and like them are not dutiable, though admissible to determine the rights of the passenger and airline in respect of the actual carriage. In my opinion, therefore, the precise question in the stated case should be answered in the opposite sense to the answer given by the Supreme Court. However, quite apart from the particular terms of the ticket in the instant case, the issue of a ticket by an airline operator neither constitutes an agreement nor a memorandum of an agreement. I [2.35]

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MacRobertson Miller Airline Services v Commissioner of State Taxation (WA) cont. apprehend that the normal procedure in making a reservation of a seat on an aeroplane flight is that inquiry is made of the airline operator or its agent, usually being a travel agent, whether, having regard to existing reservations, a seat is available on a nominated flight. If it is, the appropriate fare is paid or promised to be paid [134] and a ticket appropriate to the reservation issued. Now, supposing the airline ticket does not contain an express promise to carry the ticket holder on the nominated flight, it could (sic) be inferred from this procedure that the airline company by the issue of the ticket had bound itself by agreement to carry the intending passenger on the specified, or for that matter on any, flight, a promise which being broken would require the payment of damages. On a proper analysis of the procedure described, the airline operator was not in contractual relations with the intending passenger until it had provided him with a seat on the aeroplane. Then, in consideration of the fare prepaid, such obligations as the conditions of the ticket impose on the airline operator attached. The issue of the ticket, in my opinion, is mainly a receipt for the payment of the fare, though it also stipulates an occasion when the fare may not be refundable though actual carriage has not ensued. The payment made on the making of the reservation ought, in my opinion, to be regarded as no more than the prepayment of the fare payable for an actual carriage performed. Having regard to the known contingencies of airline operation it would be incongruous to infer the making of a promise to carry from the mere payment of the fare and its acknowledgment by the issue of a ticket. The ticket, apart from any specific terms it might contain, would not be regarded as entitling its holder to a place on a particular flight. It should be regarded as doing no more than denominate the carriage which, if performed, will earn the prepaid fare. If, as in the present case, the ticket contains terms of carriage, these will, given the performance of the denominated carriage, regulate the relationship of the parties during and in connection with such carriage and thus their respective rights in relation thereto. It should be observed that in Hood v Anchor Line (Henderson Bros) Ltd [1918] AC 837, the question was whether a part of the ticket which had been issued by the steamship company formed part of the terms on which the actual carriage took place. The action was for negligence in the performance of that carriage. Thus, even if there had not been in that case an antecedent promise to carry, the condition by which the appellant was held to be bound would have been part of the terms governing the relationship of the parties during the performance of the actual carriage. But, in fact, the ticket issued by the ship owner in that case contained an express engagement “to provide passage with certain accommodation on a particular voyage”. The ticket in that case, as Lord Findlay observed, “really professes to be a memorandum of the contract”: [1918] AC 837 at 841. [135] In any case, a promise to carry may be more appropriately made by a steamship company than by an airline operator. The marked degree of certainty on the one hand and of uncertainty on the other affords good ground for distinguishing the inferences which, apart from express provisions, might be drawn in the one case though not in the other. Therefore, although the terms of the ticket in this case with their express and extensive limitations and exclusions preclude the existence of an antecedent contract of carriage, it is my opinion that, in any case, without the presence of these express provisions and in the absence of an express provision to carry, the ticket would not represent an agreement or a memorandum of agreement to satisfy the relevant portion of the schedule to the Stamp Act … For these reasons, I would allow the appeal. [2.40] STEPHEN J: Until 1970 the United Kingdom stamp duty legislation contained a similar provision and a wealth of authority as to its meaning has developed which is directly applicable to the provisions of the Western Australian legislation. It establishes that a document containing a written offer which is subsequently accepted orally or by conduct does not thereby become either an agreement or a memorandum thereof for the purposes of stamp duty … [136] Accordingly, in the present appeal it will be critical to determine whether the issue by the appellant of its ticket was merely the making of an offer, to be later accepted either orally or by 46

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MacRobertson Miller Airline Services v Commissioner of State Taxation (WA) cont. conduct, or whether, on the contrary, an agreement, of which it contained the terms, was concluded at or before the time of its issue, the ticket either being that agreement or being a memorandum of it. Each of these two latter possibilities will be excluded if the fact be that when the ticket was issued to the passenger no agreement had yet been concluded but instead awaited the passenger’s acceptance of the offer constituted by the ticket … A prospective passenger makes known his requirement, is informed whether and when the passage is available and the cost, a ticket is then written out in duplicate on a printed form and tendered to the passenger in return for the price; in due course, on the day of travel, the passenger uses his ticket to secure transport of his baggage and himself on the relevant aircraft. It is to those facts that the accepted doctrine of the formation of contracts must be applied so as to determine whether the ticket is merely an offer, antecedent to agreement, or is itself the agreement or a memorandum of it. This doctrine, of the formation of contracts by offer and acceptance, encounters difficulties when sought to be applied, outside the realms of commerce and conveyancing, to the everyday contractual situations which are a feature of life in modern urban communities. Contracts for the carriage of passengers, one of the most common classes of contract in a commuter society and one which ordinarily involves the attempted imposition of contractual restrictions upon the passenger’s rights should he suffer loss or injury, provide an instance of these difficulties. The circumstances in which mass transportation occurs frequently permit of no time for prior negotiation, which would in any event usually be pointless with prevailing contracts of adhesion; moreover the transportation often will begin before there has been any communication at all between the passenger and the carrier’s agent, the contract being “inferred from [137] the acquiescence of the carrier in the presence of the passenger on the conveyance”: Hood v Anchor Line (Henderson Bros) Ltd per Lord Dunedin; and see Wilkie v London Passenger Transport Board [1947] 1 All ER 258 at 259 per Lord Greene MR. The conventional analysis of the formation of contracts for the carriage of passengers in those somewhat more leisurely transactions which involve the issue of a ticket in return for payment of a fare and the subsequent performance of the contract by the act of transportation, is to regard the ticket as the offer, the contract being made upon acceptance of that offer by the passenger, usually by conduct. Lord Denning describes this analysis, referring to the authorities which establish it, in Thornton v Shoe Lane Parking Ltd [1971] 2 QB 163 at 169. He does so in the course of demonstrating its inappropriateness in situations in which there in fact exists no opportunity either of considering the terms of the proffered contract or of declining to enter into it on the terms which are offered. In the present case there is no such inappropriateness. It is just such a case as that for which the conventional analysis was devised. This analysis affords to the intending passenger an opportunity, no doubt but rarely availed of, of ascertaining the conditions which the carrier seeks to impose and of accepting or rejecting them. The conventional long-distance rail or passenger liner situation is therefore applicable, a ticket is purchased in advance of the carriage and that ticket constitutes an offer available for acceptance by the passenger. Although the economics of mass transportation in fact lead to an absence of much real choice on the passenger’s part whether or not to accept conditions sought to be imposed, he at least retains the ability to learn of those conditions and to refuse to travel by the intended means if he sees fit. The general run of so called “ticket cases” involving contracts of carriage has been concerned with mishaps occurring during transportation and with the effect, if any, which conditions, sought to be imposed upon the passenger by the ticket issued to him, may have upon his rights against the carrier. The precise time at which the carrier’s offer is accepted has not been the central question, although it has been indirectly involved in the central question of whether or not the conditions on the ticket have [2.40]

47

Contract Law: Principles, Cases and Legislation

MacRobertson Miller Airline Services v Commissioner of State Taxation (WA) cont. been incorporated as terms of the contract. The authorities make it clear that, in the [138] absence of particular conduct on the part of the passenger, acceptance of the offer which a carrier makes when a ticket is issued does not occur immediately upon its receipt by the passenger; the whole concept of a passenger’s acceptance of ticket conditions and of the need adequately to draw those conditions to his attention (Balmain New Ferry Co Ltd v Robertson (1906) 4 CLR 379 at 387 per Griffith CJ) is dependent upon this. It is enough to refer to three authorities, over a span of almost a hundred years, in which, when the ticket itself contains conditions or a reference to conditions elsewhere available, the passenger’s acceptance of the carrier’s offer is treated as occurring some time after issue of the ticket. In Parker v South Eastern Railway Co (1877) 2 CPD 416 at 426–8 Bramwell LJ, on three occasions referred to the passenger being afforded, if he wishes, the opportunity of reading the conditions on a ticket which is proffered to him before becoming bound by them, that is, before the contract can be regarded as concluded, and see also (1877) 2 CPD 416 at 425 per Baggallay LJ … [139] The cases … are replete with references to passengers who elect not to read ticket conditions, no doubt the common behaviour of most passengers; they, it is said, do not thereby escape being bound by those conditions. This rule of law, which is directed to identifying the agreed terms of the particular contract, does not detract from but, rather, supports the proposition that acceptance, and the resultant formation of the contract, does not occur upon tender of the ticket. It occurs after that event, either when the passenger has by actual conduct intimated his acceptance of the offer, for instance by immediately boarding the vehicle in question, or, absent any such conduct, when a reasonable time has passed during which the passenger has had an opportunity of reading the conditions appearing on the ticket and has not then rejected the offer and demanded the return of his fare. In other words, acceptance will normally be by conduct and this conduct will consist either of an overt act consistent only with acceptance or, in its absence, of the passenger’s failure to reject the offer after he has had an opportunity of learning of the conditions upon which carriage is offered. Those cases in which a contract is concluded which incorporates ticket conditions despite the passenger’s failure to read them are instances either of the occurrence of such an overt act or of the passing of a reasonable time without rejection. In the latter case there is involved the concept of effective acceptance without actual communication to the offeror; but when, as here, the offeree, by tendering his fare, has performed his part of the bargain in advance his acceptance may readily be inferred from his failure, within a reasonable time after receipt of his ticket, to reject the offer and demand the return of his fare: Williston on Contracts (3rd ed), vol 1, para 91C. What will be a reasonable time within which to reject proffered terms will be a question of fact in every case dependent upon all the circumstances, including, no doubt, the length and complexity of the conditions which form part of the offer. What Hawkins J in Watkins v Rymill (1883) 10 QBD 180, and Megaw LJ in the passage cited from the Shoe Lane Parking case [1971] 2 QB 163 at 173–4, each referred to as “a fair opportunity” of reading the tendered ticket will provide the test, recourse being had, for this purpose, to familiar standards of reasonableness. If this, then, be the correct view of the time of formation of such a contract as the present one, it necessarily follows that in the [140] typical circumstances referred to in the stated case the completed ticket itself will not, when it comes into existence, then record any existing agreement nor itself be an agreement; it will be no more than a written offer open for acceptance. Hence it is not dutiable as an “agreement or any memorandum of an agreement” for the purposes of the Stamp Act. The conditions appearing in the appellant’s ticket are not easy to interpret; they appear to relieve the appellant very substantially from performance of those obligations relating to the carriage of the passenger which are to be implied from the description, in the ticket, of the destination, the flight number and the departure time and date. However I think it unnecessary to arrive at any conclusion as to whether the presence of these conditions is such as to prevent the formation of any contract 48

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MacRobertson Miller Airline Services v Commissioner of State Taxation (WA) cont. between the appellant and its passenger before transportation commences. It is enough for me to conclude that at date of issue the ticket was not an agreement or any memorandum of agreement. I would therefore allow this appeal … [JACOBS J also considered that the ticket was not an agreement or memorandum of agreement. In relation to cl 2, Jacobs J commented (at 148): “any enforceable promise to carry which might on the present assumption be implied between the airline and passenger from the issue of the ticket is negatived.”] Appeal allowed.

[2.45]

Note

The identification of offer and acceptance in cases involving the issue of a ticket is considered further in Oceanic Sun Line Special Shipping Co Inc v Fay (1988) 165 CLR 197, at [9.55]. Extracts from Paterson, Robertson and Duke, Principles of Contract Law (2016, 5th ed), Ch 3 Offer and unilateral contracts [2.50] The contract in Carlill v Carbolic Smoke Ball Co was of a kind known as a

“unilateral” contract. A unilateral contract is one in which the offeree accepts the offer by performing his or her side of the bargain. As the High Court has explained, “the consideration on the part of the offeree is completely executed by the doing of the very thing which constitutes acceptance of the offer”. 22 The offer is accepted by performing an act, and the performance of that act is all that the contract requires of the offeree. Accordingly, by the time the contract is formed, the offeree has already performed all his or her obligations. In Carlill v Carbolic Smoke Ball Co the plaintiff accepted the company’s offer to pay the reward by using the smoke ball in accordance with the instructions and then contracting influenza. The offer of a reward for a lost dog is another example of a unilateral contract; the finder accepts the offer by returning the dog and thereby does all that the contract requires of him or her. As the High Court explained in Australian Woollen Mills Pty Ltd v Commonwealth, the expression “unilateral contract” is a misnomer because there must necessarily be two parties to a contract. 23 A unilateral contract is only unilateral in the sense that, because one party has performed his or her obligations by the time of formation, only one party is ever under a contractual obligation. The contract can thus be distinguished from a “bilateral” contract formed by an exchange of promises. At the time of formation of a bilateral contract, the obligations of both parties remain to be performed. In other words, in a bilateral contract, the obligations of both parties are executory at the time of formation. In the case of a unilateral contract, the obligations of one party (the offeree) are executed at the time of formation while the obligations of the other party (the offeror) are executory. In Australian Woollen Mills Pty Ltd v Commonwealth, the plaintiff (AWM) claimed that a unilateral contract had arisen out of the Commonwealth Government’s wool subsidy scheme. 22 23

Australian Woollen Mills Pty Ltd v Commonwealth (1954) 92 CLR 424, 456. (1954) 92 CLR 424, 456. [2.50]

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The scheme was introduced after the Second World War, at a time when wool was scarce. The Commonwealth subsidised purchases of wool by manufacturers of woollen products to enable those manufacturers to supply the products at low prices. In 1946, the Commonwealth announced in a series of letters to manufacturers, including AWM, that it would pay a subsidy on all wool purchased for domestic use by Australian manufacturers. AWM purchased large quantities of wool over the next two years, including purchases in April, May and June 1948 in respect of which the subsidy had not been paid. In June 1948 the Commonwealth announced that it was discontinuing the scheme, but would ensure that each manufacturer would have a certain amount of subsidised wool in stock on 30 June 1948. The stockpile of wool held by AWM exceeded this amount and so the Commonwealth required AWM to repay the subsidy paid on that excess. AWM repaid that amount, but later sued to recover it, along with the unpaid subsidy on the April, May and June purchases. AWM claimed that each of the announcements by the Commonwealth constituted a contractual offer to pay the subsidy in return for AWM purchasing wool for domestic consumption. Each purchase of wool was therefore said to give rise to a unilateral contract. AWM claimed that each of its purchases of wool constituted both an acceptance of the Commonwealth’s offer and consideration for the promise to pay the subsidy. The High Court held that, for a unilateral contract to arise, the promise must be made in return for the doing of the act. 24 There must be a relation of quid pro quo (this for that) between the offeree’s act and the offeror’s promise. The court distinguished a unilateral contract from a conditional gift. If A says to B in Melbourne, “I will pay you £1000 on your arrival in Sydney”, this alone does not establish the existence of a contract on B’s arrival in Sydney. B must establish that the money was to be paid in return for B travelling to Sydney. The court referred to three different ways of stating this requirement, which all state essentially the same test. 25 First, the principal test is whether the “offeror” has expressly or impliedly requested the doing of the act by the “offeree”. Secondly, the court can look to whether the “offeror” has stated a price which the “offeree” must pay for the promise. Thirdly, the court can ask whether the offer was made in order to induce the doing of the act. In this case AWM failed to establish that there was a relation of quid pro quo between the Commonwealth’s promises and AWM’s acts. AWM also failed to establish that, viewed objectively, the offer was intended to give rise to a contractual obligation. 26 There was, therefore, no contract between the parties and the Commonwealth was under no obligation to pay the subsidy. On appeal, the Privy Council accepted that the Commonwealth might be said to have impliedly requested the purchase of wool by manufacturers. They said: “There may be cases where the absence of a request negatives the existence of a contract. The presence of a request does not however in itself establish a contract.” 27 The Privy Council nevertheless upheld the High Court’s decision on the basis that the Commonwealth’s letters must be read as statements of policy and could not be regarded as offers to contract. 28 This case demonstrates the inextricable connection between the requirements of offer and acceptance, consideration and intention to create legal relations. An offer is effective only if it identifies a valid consideration and manifests an intention to create a legal obligation. The 24

(1954) 92 CLR 424, 456-7.

25

(1954) 92 CLR 424, 458.

26

(1954) 92 CLR 424, 457–8.

27

(1955) 93 CLR 546, 550.

28

(1955) 93 CLR 546.

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[2.50]

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requirement of certainty is also inherent in offer and acceptance, as Carlill v Carbolic Smoke Ball Co shows. An offer can lead to a binding agreement only if the offer identifies the terms of the proposed agreement with sufficient certainty. Offers and invitations to treat [2.55] An offer is often distinguished from an invitation to treat, which is an invitation to

others to make offers or enter into negotiations. An indication by the owner of property that he or she might be interested in selling at a certain price, for example, has been regarded as an invitation to treat. 29 A wine merchant’s circulation of a price list has been regarded as an invitation to treat on the basis that, if it was an offer, the merchant might find himself obliged to supply unlimited quantities of wine at the listed price. 30 Whether particular conduct amounts to an offer is a question to be decided on the facts of each case 31 and there are no firm rules about whether particular types of conduct necessarily do or do not amount to an offer. 32 Nevertheless, the courts have tended to take a consistent approach to the identification of offer and acceptance in common transactions. Extracts from Paterson, Robertson and Duke, Contract: Cases and Materials (2016, 13th ed), Ch 3

Offers distinguished from invitations to treat

Pharmaceutical Society of Great Britain v Boots Cash Chemists (Southern) [2.60] Pharmaceutical Society of Great Britain v Boots Cash Chemists (Southern) Ltd [1953] 1 QB 401 Court of Appeal – Appeal from Lord Goddard CJ. [FACTS: The defendants (Boots) operated a self-service shop in one part of which certain drugs were displayed. This part of the shop was under the control of a registered pharmacist. A customer, having taken the goods, including drugs, which he wished to buy from the shelves, would put them in a wire basket provided for the purpose and take them to an attendant at the cash register at one of the shop’s exits. Whenever a customer took drugs to the cash register the pharmacist supervised that part of the transaction and was authorised by the defendants to prevent a customer removing drugs if he saw fit. Two customers following this procedure purchased drugs. The Pharmacy and Poisons Act 1933 (UK) made it unlawful for a person to sell certain drugs unless “the sale is effected by, or under the supervision of, a registered pharmacist”. Lord Goddard had held that sales of the drugs in the manner described did not contravene the Act.] SOMERVELL LJ: [405] The point taken by the plaintiffs is this: it is said that the purchase is complete if and when a customer going round the shelves takes an article and puts it in the receptacle which he or she is carrying, and that therefore, if that is right, when the customer comes to the pay desk, having completed the tour of the premises, the registered pharmacist, if so minded, has no power to say: “This drug ought not to be sold to this customer.” Whether and in what circumstances he would have that power we need not inquire, but one can, of course, see that there is a difference if supervision can only be exercised at a time when the contract is completed … 29 30 31 32

See, eg, Harvey v Facey [1893] AC 552. Grainger v Gough [1896] AC 325, 334. Australian Woollen Mills Pty Ltd v Commonwealth (1954) 92 CLR 424, 457; B Seppelt and Sons Ltd v Commissioner for Main Roads (1975) 1 BPR 9147, 9151. Eg, Carlill v Carbolic Smoke Ball Co [1893] 1 QB 256. [2.60]

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Pharmaceutical Society of Great Britain v Boots Cash Chemists (Southern) cont. Whether the view contended for by the plaintiffs is a right view depends on what are the legal implications of this layout – the invitation to the customer. Is a contract to be regarded as being completed when the article is put into the receptacle, or is this to be regarded as a more organised way of doing what is done already in many types of shops – and a bookseller is perhaps the best example – namely, enabling customers to have free access to what is in the shop, to look at the different articles, and then, ultimately, having got the ones which they wish to buy, to come up to the assistant saying “I want this”? The assistant in 999 times out of 1 000 says, “That is all right”, and the money passes and [406] the transaction is completed. I agree with what the Lord Chief Justice has said, and with the reasons which he has given for his conclusion, that in the case of an ordinary shop, although goods are displayed and it is intended that customers should go and choose what they want, the contract is not completed until, the customer having indicated the articles which he needs, the shopkeeper, or someone on his behalf, accepts that offer. Then the contract is completed. I can see no reason at all, that being clearly the normal position, for drawing any different implication as a result of this layout. The Lord Chief Justice, I think, expressed one of the most formidable difficulties in the way of the plaintiff’s contention when he pointed out that, if the plaintiffs are right, once an article has been placed in the receptacle the customer himself is bound and would have no right, without paying for the first article, to substitute an article which he saw later of a similar kind and which he perhaps preferred. I can see no reason for implying from this self-service arrangement any implication other than that which the Lord Chief Justice found in it, namely, that it is a convenient method of enabling customers to see what there is and choose, and possibly put back and substitute, articles which they wish to have, and then to go up to the cashier and offer to buy what they have so far chosen. On that conclusion the case fails, because it is admitted that there was supervision in the sense required by the Act and at the appropriate moment of time. For these reasons, in my opinion, the appeal should be dismissed. [2.65] BIRKETT LJ: [407] The Lord Chief Justice dealt with the matter in this way, and I would like to adopt his words ([1952] 2 QB 795 at 802): It seems to me, therefore, that the transaction is in no way different from the normal transaction in a shop in which there is no self-service scheme. I am quite satisfied it would be wrong to say that the shopkeeper is making an offer to sell every article in the shop to any person who might come in and that person can insist on buying any article by saying “I accept your offer.” Then he went on to deal with the illustration of the bookshop, and continued: Therefore, in my opinion, the mere fact that a customer picks up a bottle of medicine from the shelves in this case does not amount to an acceptance of an offer to sell. It is an offer by the customer to buy and there is no sale effected until the buyer’s offer to buy is accepted by the acceptance of the price. The offer, the acceptance of the price, and therefore the sale take place under the supervision of the pharmacist. This is sufficient to satisfy the requirements of the section … [ROMER LJ in a brief judgment also agreed that the appeal should be dismissed.] Appeal dismissed.

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Extracts from Paterson, Robertson and Duke, Principles of Contract Law (2016, 5th ed), Ch 3

Shop sales [2.70] The display of goods for sale, whether in a shop window or on the shelves of a

self-service store, is ordinarily treated as an invitation to treat, and not an offer. 33 In the English case Fisher v Bell 34 it was held that the owner of a shop who displayed a flick-knife in a shop window had not committed the statutory offence of “offering” the knife for sale. In Pharmaceutical Society of Great Britain v Boots Cash Chemists (Southern) Ltd 35 it was necessary for the English Court of Appeal to determine when a sale occurred in a self-service pharmacy in order to determine whether sales took place under the supervision of a registered pharmacist. Pharmacists supervised transactions at the cash registers, but did not supervise the customers’ selection of goods from the shelves. The plaintiff argued that the display of goods should be regarded as an offer, which was accepted when a customer took an item from the shelf and placed it in his or her receptacle. The Court of Appeal rejected this argument on the basis that customers must be entitled to return and substitute articles they have chosen from the shelves. 36 If the customers are entitled to return articles selected from the shelves, the court reasoned, customers must be regarded as making an offer when they present the items to the cashier and are not bound until the cashier has accepted that offer. 37 Accordingly, the defendant was held to have complied with the legislative requirement that the sales be supervised. The characterisation of the display of goods as an offer is not, however, itself inconsistent with the entitlement of customers to return goods they have selected. A customer’s acceptance would not be effective until communicated to the offeror, so a sale must on any interpretation take place at the checkout. 38 In both Fisher v Bell and Boots Cash Chemists the issue before the court did not relate to the contractual rights of the parties, but to whether a statutory offence had been committed. The English courts took a technical approach in these cases to determining whether a statutory offence had been committed. In Australia, the courts have tended to take a less technical approach to deciding whether goods have been “offered for sale” for the purpose of determining whether a statutory provision has been breached. In Goodwin’s of Newtown Pty Ltd v Gurrey, 39 for example, the defendant was held to have been “offering goods for sale” in breach of the Early Closing Act 1926 (SA), although the defendant’s conduct amounted to no more than an invitation to treat. The defendant displayed television sets with marked prices and provided information to prospective purchasers. Prospective purchasers were told that the sets on display were not for sale, but an equivalent set could be purchased from the defendant at the marked price. A similar approach has been favoured in the interpretation of the provision that was s 56(2) of the Trade Practices Act 1974 (Cth), now s 35(2) of the ACL, which requires a corporation that has advertised goods or services for supply at a specified price to “offer such goods or 33 34 35 36 37 38 39

See Winfield, “Some Aspects of Offer and Acceptance” (1939) 55 Law Quarterly Review 499, 517. [1961] 1 QB 394. [1953] 1 QB 401. [1953] 1 QB 401, 405-6. [1953] 1 QB 401, 406, 408. Greig and Davis, The Law of Contract (1987), p 263. [1959] SASR 295. [2.70]

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services for supply” at that price for a reasonable time and in reasonable quantities. Although it was held in one case that the corporation was required to make offers to sell in the technical contractual sense, 40 most judges have favoured a non-technical approach. 41 In Wallace v Brodribb 42 Spender J said that unnecessary difficulties were introduced by drawing distinctions between offers and invitations to treat and the expression “offer to supply” should be given its ordinary meaning.

Auctions [2.75] The holding of a public auction will also usually be regarded as an invitation to treat. It

is well accepted that an auctioneer does not make an offer to sell, but merely invites offers from those present at the auction. Each bid constitutes an offer and the auctioneer communicates acceptance of the final bid by the fall of the hammer. 43 This means that no contractual claim can arise if the auction is cancelled; 44 a bidder is entitled to withdraw his or her bid before it is accepted 45 and the auctioneer is not obliged to sell to the highest bidder. 46 The common law position is reflected in the Sale of Goods Acts, which provide that a sale of goods by auction is complete when the auctioneer announces its completion and, until such announcement, a bid may be retracted. 47 The situation becomes more complicated when an auction is advertised to be held “without reserve”. In AGC (Advances) Ltd v McWhirter 48 it was held that an announcement that an auction was to be held without reserve did not alter the general rule. The holding of an auction without reserve did not constitute an offer and did not bind the vendor to sell to the highest bidder. The auction in that case was not advertised as being without reserve, but the auctioneer announced during the auction that the “property is on the market”, which was held to have the same effect. It has been held in England that, by holding an auction without reserve, an auctioneer makes an offer to sell to the highest bidder. 49 If the highest bid is not accepted, no contract arises between the bidder and the vendor, but the bidder is able to sue the auctioneer for damages under a separate, collateral contract. This contract governs the process by which the

40 41

Reardon v Morley Ford Pty Ltd (1980) 33 ALR 417. Attorney General for NSW v Mutual Home Loans Fund of Australia Ltd [1971] 2 NSWLR 162, 165; Attorney General for NSW v Australian Fixed Trusts [1974] 1 NSWLR 110, 117; WA Pines Pty Ltd v Registrar of Companies [1976] WAR 149, 153; Wallace v Brodribb (1985) 58 ALR 737.

42 43

(1985) 58 ALR 737. Payne v Cave (1789) 3 TR 148; 100 ER 502; British Car Auctions Ltd v Wright [1972] 1 WLR 1591, 1524; AGC (Advances) Ltd v McWhirter (1977) 1 BPR 9454. Harris v Nickerson (1873) LR 8 QB 286. Payne v Cave (1789) 3 TR 148; 100 ER 502. AGC (Advances) Ltd v McWhirter (1977) 1 BPR 9454.

44 45 46 47

48 49 54

Sale of Goods Act 1954 (ACT), s 60; Sale of Goods Act 1923 (NSW), s 60; Sale of Goods Act (NT), s 60; Sale of Goods Act 1896 (Qld), s 59; Sale of Goods Act 1895 (SA), s 57; Sale of Goods Act 1896 (Tas), s 62; Goods Act 1958 (Vic), s 64; Sale of Goods Act 1895 (WA), s 57. (1977) 1 BPR 9454. Warlow v Harrison (1859) 1 El & El 295; 120 ER 920; Barry v Davies [2000] 1 WLR 1962. [2.75]

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auction is conducted. By announcing the conditions of auction, the auctioneer offers to conduct the auction in a particular way and a bidder may accept that offer by making the highest bid. 50

Tenders [2.80] A contract may also be formed by a tender process. Unlike an auction, a tender process

involves each interested party submitting a single bid without knowing what other bids have been made. The tender process is sometimes used for the sale of commercial or residential property. It is commonly used by governments seeking to contract out the performance of government functions, such as the construction or operation of a prison. A call for written tenders will also usually constitute an invitation to treat, with each tender constituting an offer. A person calling for tenders can stipulate the basis on which the tender process will be conducted and will be bound by any conditions which he or she says will govern the tender process. In Harvela Investments Ltd v Royal Trust Co of Canada (CI) Ltd, 51 for example, a call for tenders was held to amount to an offer because the vendor promised to accept the highest bid. In Harvela Investments Ltd v Royal Trust Co of Canada (CI) Ltd, two parties, Harvela and Outerbridge, were invited to submit written tenders for the purchase of shares. The successful tenderer would obtain control of the company. The letter sent by the vendors to the two tenderers said that “we bind ourselves to accept” the “highest offer” complying with the conditions of tender. Harvela tendered to purchase the shares for $2.175m and Outerbridge for $2.1m “or $101 000 in excess of any other offer which you may receive”. The vendor accepted Outerbridge’s tender, but Harvela claimed it was entitled to purchase the shares for $2.175m. The trial judge, Peter Gibson J, held that the invitation to submit tenders amounted to an offer capable of acceptance by submission of the highest bid. 52 The Court of Appeal upheld this conclusion and it was accepted by the House of Lords. The resulting contract was said to be a unilateral contract “in the sense of a contract brought into existence by the act of one party in response to a conditional promise made by the other”. 53 The fact that the invitation described the tenders as “offers” did not require the court to conclude that they were offers in law, since it was for the court to determine the character of a document. 54 The vendors’ promise to accept the highest bid converted what would otherwise have been an invitation to treat into an offer which, when the highest bid was received, completed a contract. 55 Whether this should be regarded as a contract to sell the shares or a contract to enter into an enforceable contract to sell the shares did not matter, since they amount to the same thing. 56 The principal question, then, was whether the contract had been made with Harvela or Outerbridge. This depended on whether Outerbridge’s tender conformed to the requirements of the vendor’s invitation. The trial judge held that there was an implied term in the invitation 50 51 52 53 54 55 56

This reasoning was applied in Ulbrick v Laidlaw [1924] VLR 247. See further Carter, “Auction “’Without Reserve’” – Barry v Davies” (2001) 17 Journal of Contract Law 69. [1986] 1 AC 207. [1985] 1 Ch 103, 119. [1985] 1 Ch 103, 119. [1985] 1 Ch 103, 119. [1985] 1 Ch 103, 119, 133-4, 137, 149. [1985] 1 Ch 103, 121, 133-4, quoting Hillas & Co Ltd v Arcos Ltd (1932) 147 LT 503, 515. [2.80]

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that excluded referential bids. 57 This meant that a contract had been made between the vendors and Harvela. Although the Court of Appeal regarded Outerbridge’s tender as valid, Harvela successfully appealed to the House of Lords. The House of Lords held that the question whether the invitation allowed referential bids depended on the presumed intention of the vendors deduced from the terms of the invitation read as a whole. Those terms were inconsistent with the making of referential bids. 58 The use of the tender process for government procurement of goods and services has come under considerable judicial scrutiny in recent years. 59 Although each case turns on its own facts, it has been held in a number of cases that governments and government instrumentalities calling for tenders have owed contractual obligations to tenderers under preliminary contracts governing the tender process. 60 These tender process contracts also impose obligations on tenderers, such as an obligation not to withdraw their tenders. 61 In Blackpool and Fylde Aero Club Ltd v Blackpool Borough Council, 62 the English Court of Appeal held that the Council was under an implied contractual obligation to give consideration to complying tenders. The call for tenders amounted to an offer, which was accepted by the submission of a complying tender. The Council was liable for damages under this preliminary contract when it mistakenly failed to consider the plaintiff’s complying tender. In Hughes Aircraft Systems International v Airservices Australia, 63 Finn J found that a tender process conducted by the Civil Aviation Authority (CAA) was governed by two “process contracts”. The first contract was formed by signature of a letter in which the CAA and the two tenderers committed themselves to participate in a tender process. The terms of the second contract were set out in a request for tenders, which amounted to an offer accepted by each tenderer’s lodgement of a tender. The CAA was obliged to conduct the tender process in accordance with those process contracts. Ticket cases [2.85] In some cases the courts are concerned to identify offer and acceptance for the purpose

of determining when, rather than whether, a contract was formed between two parties. It has been necessary to decide when a contract has been formed in order to determine whether a document is chargeable with stamp duty. 64 When a contract has been entered into between parties in different jurisdictions, it is sometimes necessary for a court to determine when and where the contract was made so that the court can decide whether it can adjudicate on the contract. 65 It may also be important to determine when a contract has been formed in order to determine whether written conditions given by one party to another form part of the contract. If one party gives the other notice of terms after a contract has been formed, then those terms 57 58 59 60

[1985] 1 Ch 103, 119. [1987] 1 AC 207, 230-4, 225. See Seddon, Government Contracts: Federal State and Local (5th ed, 2013), Chapter 7. In addition to the cases mentioned, see Martel Building Ltd v Canada [2000] 2 SCR 800.

61 62 63 64

See Ontario v Ron Engineering & Construction Eastern Ltd (1981) 1 SCR 111. [1990] 1 WLR 1195. See Phang, ““Tenders and Uncertainty”” (1991) 4 Journal of Contract Law 46. (1997) 76 FCR 151, 162-87. MacRobertson Miller Airline Services v Commissioner of State Taxation (WA) (1975) 133 CLR 125.

65

Eg, Oceanic Sun Line Special Shipping Co Inc v Fay (1988) 165 CLR 197; Brinkibon Ltd v Stahag Stahl und Stahlwarenhandelsgesellschaft mbH [1983] 2 AC 34.

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cannot form part of the contract. 66 This problem is exemplified by cases involving the issue of tickets for passenger transport. Typically a ticket containing contractual terms is issued after the fare has been paid and it might therefore be thought that the contract is formed before the ticket is issued. The courts have usually regarded the issue of the ticket as an offer which can be accepted or rejected by the passenger after the passenger has had a reasonable opportunity to consider the conditions on the ticket. The difficulty of applying the offer and acceptance model to this type of transaction is illustrated by the decision of the High Court in MacRobertson Miller Airline Services v Commissioner of State Taxation (WA). 67 The issue before the High Court was whether an airline ticket issued by MacRobertson Miller was chargeable with stamp duty as an “agreement” or a “memorandum of agreement”. The airline’s practice was first to quote the fare and availability of seats and then to issue a ticket in return for the fare. The ticket contained a condition giving the airline the right to cancel a flight or cancel a booking without incurring any liability. The court held unanimously that a ticket did not record the terms of an agreement, but rather the terms of an offer which was subsequently accepted by conduct. The judges’ reasons for reaching that conclusion differed. Barwick CJ thought that the sweeping exemption clauses relieved the airline from any obligation to carry the passenger. The exemption conferred by clauses 2 and 5 “fully occupies the whole area of possible obligation, leaving no room for the existence of a contract of carriage”. 68 Even apart from those express terms, however, the uncertainties of air travel precluded any promise to carry the passenger from being inferred from the issue of the ticket. Barwick CJ therefore considered that the arrangement was similar to a unilateral contract. The passenger was in effect making an offer, which could be accepted by conduct. If the airline carried the passenger, then the airline would be entitled to retain the fare as a “reward”. If the passenger was not carried, the airline incurred no obligation other than to refund the fare. On that basis, there were no contractual obligations between the airline and the passenger until the airline provided the passenger with a seat on the plane. 69 Stephen J adopted the conventional analysis in “ticket cases”, which is that the ticket constitutes an offer by the airline, which is capable of acceptance or rejection by the passenger once the passenger has had a reasonable opportunity to read the conditions. 70 On that basis, the ticket records the terms of an offer. Jacobs J agreed that no agreement was formed at the time the ticket was issued for the reasons advanced by both Stephen J and Barwick CJ. Jacobs J agreed with Stephen J that formation of the contract could not precede the notification of special conditions and the ticket simply recorded the terms of an offer made by an airline. He also agreed with Barwick CJ that clause 2 negatived any promise to carry which might have been implied. 71 The lack of any obligation imposed on the airline prevented the ticket from representing an enforceable agreement. Jacobs J also noted that the person who buys the ticket may not be the passenger. Where the buyer is not the passenger, then two contracts will arise. The purchase of the ticket will result in an executory agreement between the purchaser of the 66 67 68 69 70 71

See [9.50]. (1975) 133 CLR 125. (1975) 133 CLR 125, 133. (1975) 133 CLR 125, 133-4. (1975) 133 CLR 125, 137-40. (1975) 133 CLR 125, 148. [2.85]

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ticket and the airline. The issue of the ticket will also constitute an offer made to the passenger, which the passenger can accept by presenting herself or himself for travel. 72 MacRobertson Miller Airline Services v Commissioner of State Taxation (WA) provides a good illustration of the difficulties experienced in applying the doctrine of offer and acceptance “outside the realms of commerce and conveyancing, to the everyday contractual situations which are a feature of life in modern urban communities”. 73 As Stephen J noted, the contract involved sweeping restrictions on passengers’ rights, passengers were not given the opportunity to negotiate the terms of the contract, and any attempt to negotiate would “in any event usually be pointless”, since the carrier was willing to contract only on its standard terms. 74 Electronic transactions [2.90] The common law rules of offer and acceptance can be applied to electronic

transactions in the same way they can be applied to other forms of communication. 75 Like other forms of communication, electronic communications raise some particular issues about the mechanics of contract formation, but do not call for a fundamentally different approach. 76 Although there is no particular need for legislation dealing with offer and acceptance in electronic transactions, Electronic Transactions Acts (ETAs) have been enacted in all Australian States and Territories with the broader object of providing a regulatory framework that facilitates and promotes confidence in electronic transactions. 77 The ETAs were originally introduced pursuant to a national scheme to implement the United Nations Commission on International Trade Law (UNCITRAL) Model Law on Electronic Commerce 1996. The purpose of the Model Law was to remove obstacles to electronic commerce and ensure the validity of electronic transactions. 78 Since the introduction of the ETAs, the Model Law has been supplemented by the United Nations Convention on the Use of Electronic Communications in International Contracts. 79 The purpose of the Convention is to facilitate electronic transactions between parties located in different countries. The Convention builds on the Model Law and clarifies some of the issues and fills some of the gaps in the regime introduced by the Model Law. The Convention was not intended to alter substantive contract

72 73 74 75

76 77

78 79

58

(1975) 133 CLR 125, 146. (1975) 133 CLR 125, 136. (1975) 133 CLR 125, 136. See generally Nolan, “Offer and Acceptance in the Electronic Age” in Burrows and Peel (eds), Contract Formation and Parties (2010), 61-87 and Furmston and Tolhurst, Contract Formation: Law and Practice (2010), 159-94. Nolan, “Offer and Acceptance in the Electronic Age” in Burrows and Peel (eds), Contract Formation and Parties (2010), 86-87. Electronic Transactions Act 2001 (ACT), s 3; Electronic Transactions Act 1999 (Cth), s 3; Electronic Transactions Act 2000 (NSW), s 3; Electronic Transactions (Northern Territory) Act, 3; Electronic Transactions Act 2000 (SA), s 3; Electronic Transactions (Victoria) Act 2000, s 1; Electronic Transactions (Queensland) Act 2001, s 3; Electronic Transactions Act 2011 (WA), s 3. UNCITRAL Secretariat, Guide to Enactment of the UNCITRAL Model Law on Electronic Commerce (1996), http://www.uncitral.org. See Mik, “Updating the Electronic Transactions Act – Australia’s Accession to the UN Convention on the Use of Electronic Communications in International Contracts 2005” (2010) 26 Journal of Contract Law 184. [2.90]

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law rules, but only to clarify some of the legal issues. 80 The ETAs have been amended in accordance with the Convention to clarify some questions about the formation of contracts by way of electronic communications. Although the Convention relates only to international contracts, the amendments to the ETAs extend the provisions of the Convention to contracts made within Australia, including personal, family and household contracts. The new legislation provides, first, that a proposal to make a contract through electronic communications which is not addressed to a particular person, but is made generally accessible to people using information systems, is to be treated as an invitation to make offers unless it clearly indicates an intention to be bound in the case of acceptance. 81 This is clearly intended to ensure that websites offering goods or services should generally be considered to be making an invitation to treat, rather than an offer, and is entirely consistent with the approach of the common law to more traditional communications in cases such as Grainger v Gough. 82 Secondly, the ETAs confirm that a contract formed between a natural person and an automated system, or between two automated systems, is not invalid merely on the ground that a natural person was not directly involved in the process. 83 Thirdly, and more significantly, the ETAs provide that where a natural person makes an “input error” in the course of a transaction with an automated system, and the system provides no opportunity to correct that error, then the person making the error is entitled to “withdraw the portion of the communication in which the input error was made”, provided he or she does so as soon as possible after learning of the error, and provided he or she has not received any material benefit from goods or services provided by the other party. 84 The ETAs specifically provide that the right to withdraw a portion of an electronic communication is not a right to rescind a contract. The consequences of withdrawal of the relevant portion of the communication are to be determined in accordance with applicable legal rules, but clearly in some circumstances this will undermine the validity of the contract. If, for example, a consumer booking a ticket for air travel through a website accidentally booked a seat for travel on the wrong date, and was not given an opportunity to correct the error, the withdrawal of that portion of the communication would undermine the validity of the contract, since the withdrawn communication would have identified the subject matter of the contract. 85 Since most websites provide an opportunity to correct input errors, it seems unlikely that this provision will be widely used. 80

81

82 83

84

85

Explanatory note by the UNCITRAL Secretariat on the United Nations Convention on the Use of Electronic Communications in International Contracts, [3]-[4]; Explanatory Memorandum, Electronic Transactions Bill 2011 (Cth), p 3. Electronic Transactions Act 2001 (ACT), s 14B; Electronic Transactions Act 1999 (Cth), s 15B; Electronic Transactions Act 2000 (NSW), s 14B; Electronic Transactions (Northern Territory) Act, s 14B; Electronic Transactions Act 2000 (SA), s 14B; Electronic Transactions Act 2000 (Tas), s 12B; Electronic Transactions (Victoria) Act 2000, s 14B; Electronic Transactions Act 2001, s 26B; Electronic Transactions Act 2011 (WA), s 18. [1896] AC 325. See [2.55]. Electronic Transactions Act 1999 (Cth), s 15CElectronic Transactions Act 1999 (Cth), s 15C; Electronic Transactions Act 2000 (NSW), s 14C; Electronic Transactions Act 2000 (Tas), s 12C; Electronic Transactions (Northern Territory) Act (NT), s 14C; Electronic Transactions Act 2000 (SA), s 14C; Electronic Transactions (Victoria) Act 2000, s 14C; Electronic Transactions Act 2011 (WA), s 19. Electronic Transactions Act 1999 (Cth), s 15D; Electronic Transactions Act 2000 (NSW), s 14D; Electronic Transactions Act 2000 (Tas), s 12D; Electronic Transactions (Northern Territory) Act (NT), s 14D; Electronic Transactions Act 2000 (SA), s 14D; Electronic Transactions (Victoria) Act 2000, s 14D; Electronic Transactions Act 2011 (WA), s 20. See the Explanatory note by the UNCITRAL Secretariat on the United Nations Convention on the Use of Electronic Communications in International Contracts, [241]. [2.90]

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Termination of an offer [2.95] An offer will cease to be available for acceptance when it is withdrawn by the offeror,

lapses or is rejected by the offeree.

Withdrawal General rule [2.100] An offer may be revoked at any time before it is accepted. At common law a promise

to hold an offer open for a specified period is not binding unless the offeree has given consideration for that promise. 86 The offeror can therefore revoke the offer before the specified period for acceptance has expired, provided the offer has not been accepted in the meantime. The withdrawal of an offer is effective only when it has been actually communicated to the offeree. No exception is made for a withdrawal sent by post. 87 In civil law systems a promise to hold an offer open is binding: in France an offeror who wrongfully revokes an offer will be liable in damages; 88 while in Germany an attempt to withdraw an offer prematurely will simply be ineffective. 89 The German approach is adopted in both the United Nations Convention on International Contracts for the Sale of Goods (Vienna Convention) and the UNIDROIT Principles of International Commercial Contracts 2010 (UPICC). 90 Article 16(2) of the Vienna Convention and art 2.1.4 of the UPICC both provide that an offer cannot be revoked if it states a fixed time for acceptance or otherwise indicates that it is irrevocable. Options [2.105] A promise to hold an offer open is binding at common law if consideration has been

given in return for that promise. The agreement between the parties is then described as an option. An option is an agreement between an option holder and a grantor under which the option holder is entitled to enter into a contract with the grantor on specified terms, either at a specified time or within a specified period. The option holder is then free to choose whether to exercise the option at that time or within that period. In Goldsbrough, Mort & Co Ltd v Quinn, 91 for example, the grantor gave the option holder an option to purchase certain land at a specified price at any time within one week of the agreement in return for the sum of five shillings paid to the grantor. The grantor’s attempt to repudiate the offer before acceptance was held to be ineffective. The option holder exercised the option within the specified period and was able to force the grantor to sell the land as agreed. There was a difference of opinion in Goldsbrough, Mort & Co Ltd v Quinn as to the true nature of an option. Griffith CJ and O’Connor J regarded an option to purchase a property as a contract for the sale of that property, conditional upon the option being exercised within the 86

Dickinson v Dodds (1876) 2 Ch D 463; Goldsbrough, Mort & Co Ltd v Quinn (1910) 10 CLR 674, 678, 690. It is important to note that such a promise can give rise to an estoppel if it is relied upon: see [22.225]. See similarly UNIDROIT Principles of International Commercial Contracts 2010, art 2.1.4(2)(b).

87 88 89

Byrne & Co v Leon Van Tienhoven & Co (1880) LR 5 CPD 344. Zweigert and Kötz, Introduction to Comparative Law (3rd ed, 1998), pp 359-60. Burgerliches Gesetzbuch (BGB), § 145; Zweigert and Kötz, Introduction to Comparative Law (3rd ed, 1998), pp 361-2. See [1.100]. (1910) 10 CLR 674.

90 91 60

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specified period. 92 This has been confirmed in subsequent cases as the preferred interpretation. 93 Isaacs J regarded an option as a preliminary contract to hold open an offer to sell the property, with the exercise of the option giving rise to a separate contract of sale. 94 The significance of the distinction between an irrevocable offer and a conditional contract in this case related to the remedy available to the option holder if the grantor purported to revoke the option. Griffith CJ preferred to treat the agreement as a conditional sale, which was enforceable by specific performance once the condition was satisfied. He took the view that, if regarded as an irrevocable offer, the only remedy available to the offeree in the event of revocation was damages. Isaacs J, however, held that the grantor’s attempt to revoke the offer was ineffective, and so the option was successfully exercised and specific performance was available. On either view, therefore, the grantor’s attempt to revoke the option was ineffective and, once the option holder had exercised the option, a contract of sale enforceable by specific performance subsisted between the parties. In England it has been said that an option is neither a conditional contract nor an irrevocable offer. 95 In Spiro v Glencrown Properties Ltd 96, in determining whether an option agreement satisfied the statutory requirement of a written contract for the sale of land, Hoffmann J did not find it useful or necessary to characterise the agreement as a conditional contract or an irrevocable offer. He found the analogy of the irrevocable offer useful to describe the position of the option holder, and the analogy of a conditional contract useful to describe the position of the grantor of the option. An option resembles each of them, but does not have all of the incidents of either. It is a legal relationship sui generis (of its own kind). 97 It cannot be regarded as a conditional contract, according to Hoffmann J, because “one generally thinks of a conditional contract as one that does not lie within the sole power of one of the parties to the contract”. 98 Nor can it be regarded as an irrevocable offer, since it conveys an equitable interest in land to the grantee. 99 Hoffmann J held that the option agreement satisfied the statutory requirement of writing because such a result was consistent with the intention of the legislature. 100 Extracts from Paterson, Robertson and Duke, Contract: Cases and Materials (2016, 13th ed), Ch 3

Revocation of an offer

Goldsbrough, Mort & Co v Quinn [2.110] Goldsbrough, Mort & Co Ltd v Quinn (1910) 10 CLR 674 High Court of Australia – Appeal from the Supreme Court of New South Wales. [FACTS: The facts are set out by Griffith CJ in the extract.] 92 93

(1910) 10 CLR 674, 678-9, 685. Carter v Hyde (1923) 33 CLR 115; Laybutt v Amoco Australia Pty Ltd (1974) 132 CLR 57, 71-6.

94 95 96 97 98 99 100

(1910) 10 CLR 674, 696. See also Carter v Hyde (1923) 33 CLR 115, 123. Spiro v Glencrown Properties Ltd [1991] Ch 536. [1991] Ch 536. [1991] Ch 536, 544. [1991] Ch 536, 544. [1991] Ch 536, 543. [1991] Ch 536, 546. [2.110]

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Goldsbrough, Mort & Co v Quinn cont. GRIFFITH CJ: [677] This was a suit by the appellants for specific performance of an agreement, the terms of which are contained in a document dated 8 February 1909, and signed by the respondent in the following terms: I John Thomas Quinn in consideration of the sum of five shillings paid to me hereby grant to Goldsbrough, Mort & Co Ltd the right to purchase the whole of my freehold and conditional purchase and conditional lease lands situate near Canonbar, and known as Bena Billa, comprising about 2 590 acres, within one week from this date at the price of £1 10s per acre, calculated on a freehold basis, and subject to the usual terms and conditions of sale relating to such lands, and upon the exercise of this option I agree to transfer the whole of the said lands to the said company or its nominee. The respondent says that before the expiration of the week, and before acceptance of the offer by the appellants, he informed the appellants’ solicitor, at whose office the document was drawn up and signed, that he repudiated the offer, alleging that it had been made under a mistake…. [678] The appellants, notwithstanding the alleged repudiation, but without any other notice of it, accepted the offer within the week. The respondent contends that under these circumstances there never was any complete contract for sale of the land, that the only agreement evidenced by the document of 8 February was an agreement to make another agreement, which if made might have been enforced specifically, and that the only remedy for breach of the actual agreement is in damages … All agreements consist, in substance, of an offer made by one party and accepted by the other. The offer and acceptance may be contemporaneous, or the offer may be made under such circumstances that it is to be regarded as a continuing offer subsisting at the moment of acceptance. At that point there is a consensus ad idem, that is, a contract. But an offer may be withdrawn at any time before acceptance. A mere promise to leave it open for a specified time makes no difference, because there is, as yet, no agreement, and the promise, if made without some distinct consideration, is nudum pactum and not binding. But if there is (as in the present case) a consideration for the promise it is binding. This is often expressed by saying that an option given for value is not revocable … I think that the true principle is that in such a case the real transaction is not an offer accompanied by a promise, but a contract for valuable consideration, viz, to sell the property (or whatever the subject matter may be) upon condition that the other party shall within the stipulated time bind himself to perform the terms of the offer embodied in the contract. I think that such a contract is not in principle distinguishable from a stipulation in a lease that the lessee shall have an option of purchase, which is in substance a contract to sell upon condition. The nature of the consideration for the promise is not material. If, however, the only promise was a promise not to withdraw [679] the offer, I should have some difficulty in saying that a breach of it could not be properly compensated for in damages. I think, therefore, that this point fails, and that a suit for specific performance may be maintained in respect of the contract constituted by the letter of 8 February, and its acceptance by the appellants. [684] For these reasons I think that the appeal must be allowed. [2.115] O’CONNOR J: [685] [I]t is necessary to advert to the form of the offer and to its effect. In substance it is an undertaking by the respondent to sell and transfer to the appellants the lands referred to at the price named on condition that the appellants on their part are willing to buy on those terms, and signify their assent within one week from 8 February 1909. In other words, it is an agreement to sell on a condition subsequent, the condition being the acceptance of the other party within the time named. The appellant’s right under the contract is to accept within the week, and having fulfilled [686] the condition they were entitled to all the benefits of the contract. The respondent’s refusal to perform his part by withdrawing his undertaking and preventing the appellants from accepting was a breach which entitled them to maintain an action for damages at law, or if the case were deemed to be one for specific performance, entitled them to a decree for that relief. But the 62

[2.115]

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Goldsbrough, Mort & Co v Quinn cont. document may also be regarded from another point of view. Assume that it was merely an offer to sell on the terms embodied in the document. The respondent on the face of it undertakes for valuable consideration to keep it open to the plaintiff for a week. During that week he could not lawfully withdraw it. That proposition seems to me obvious on the established principles of the law of contracts, and it appears to have been assumed to be so in many cases. In Bruner v Moore [1904] 1 Ch 305, for instance, Farwell J takes it to be settled law that an option for value is not revocable during the period for which it is given. The respondent therefore having withdrawn the offer during the week is liable at law to an action for depriving the appellants of their right of acceptance. The position in equity assuming the agreement proper under all the circumstances for specific performance, is I think correctly stated in the passage from Page on Contracts, vol 1, pp 63–4, quoted during the argument. A court of equity will disregard the withdrawal, and treat the offer as if it had been duly accepted while still open for acceptance. In my view it is of little moment whether the document is regarded as an agreement by the vendor to sell subject to a condition subsequent which the purchaser has performed, or as an option given for valuable consideration which could not be withdrawn, and the withdrawal of which before acceptance a court of equity will disregard in adjusting the rights of the parties. Looked at in either aspect there is nothing in the form or effect of the document to disentitle the appellants from obtaining a decree for specific performance of the whole agreement to as full an extent as if the option was still subsisting at the date of acceptance … [690] It follows that the appeal must be allowed and the judgment appealed against set aside. [2.120] ISAACS J: The first question is as to the effect of the contract of 8 February 1909. That contract is what is ordinarily known as an option; it consists of a promise founded on valuable consideration to sell land on stated terms within a given time. Unsupported by valuable consideration such a promise would be nudum pactum, and until the creation of a contract by acceptance in strict accordance with the stated conditions, could be withdrawn. So much is clearly established by a century of decisions … If accepted in accordance with the stipulated conditions, no attempted withdrawal having meanwhile taken place, the relation of vendor and purchaser is created by the contract thus formed, and such a contract may be ordered to be specifically carried out. Again, that is the subject of express decision as in Bruner v Moore. The respondent argues that in the circumstances of this case there was no contract of sale. He contends that, although the offer is supported by valuable consideration, yet if the promisor does in fact, before due acceptance, declare his intention not to carry out his promise, that is a withdrawal of his offer, and no subsequent acceptance can convert the relation of the parties into that of vendor and purchaser. The result, it is argued, is that although damages for breach of the original contract to let the offer stand may be recovered, yet in law there is no contract of [691] sale and purchase of land to specifically perform, or for the breach of which even damages can be awarded. No decision actually determining this precise point has been cited to us; but the reasoning and unvarying dicta of judges of eminence demonstrate that the principle on which actual decisions have proceeded places the matter beyond doubt … In Bruner v Moore where £400 was given for the option Farwell J says: “The option, which is given for value and is, therefore, not revocable,” &c. In South Wales Miners’ Federation v Glamorgan Coal Co [1905] AC 239 at 253 Lord Lindley points out that to break a contract is an unlawful act, and that in point of law a party to a contract is not entitled to break it even on offering to pay damages. This is only another way of saying the promise is irrevocable. In my opinion the whole question turns on that point, the irrevocability of the option. The feature which distinguishes an option from a mere offer is the consideration. That, however, does not alter the nature of the offer, it merely ensures its continuance, by creating a relation in which [2.120]

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Goldsbrough, Mort & Co v Quinn cont. the law forbids the offeror retracting it. He may attempt to do so – ignoring the circumstance that for consideration he has parted with the right to withdraw – but his attempt is in the sight of the law ineffectual. He has parted with the right to alter his mind for the period limited, and he cannot in breach of his contract be heard to say the contrary. His offer must therefore be deemed to stand. [692] To hold otherwise would be equivalent to saying he had not sold to the promisee on option, but only the promise to give an option, which would be absurd. It is the option which he has sold, that is, the right of electing whether to purchase or not … It was rightly urged by learned counsel for the appellants that such an option gives the optionee an interest in the land … Of course the interest which the optionee possesses is not the same as that of a purchaser, but it is something real and substantial, and beyond the power of the grantor of the option to withdraw. Nevertheless I do not for this branch of the case rely on that equitable interest, because I would hold the respondent bound on general principles of contract whatever were the subject matter of the agreement, and would regard the offer as irrevocably fixed for the period agreed on. The inevitable consequence is that in contemplation of law the offer was not withdrawn, and when linked with the acceptance, the necessary mutual contractual obligation to sell and purchase the land on the stipulated terms was created … [696] In the view I take … I necessarily regard the parties as having entered into two separate contracts. The first was a unilateral contract that a certain offer should last for a week, and in this contract the con-[697]sideration was 5s. The appellants had no obligation beyond the consideration, the respondent none but to continue the offer for the stipulated time. Had there been any attempt by the respondent to dispose of the land to another during that period he might have been enjoined, because the affirmative promise to the appellants necessarily implied an undertaking not to sell to another. But in the absence of such an attempt the remedy was in the appellants’ own hands. They could at any moment before the expiration of the period agreed on, by simple acceptance, convert their position of optionees into that of absolute vendees, with mutual obligations … That change of position has been effected by the act of the party entitled, and therefore the remedy of specific performance of the primary agreement is not only unnecessary and inappropriate but impossible. There is nothing in that agreement to perform. Its terms must be looked at, but only to ascertain the offer, which with acceptance constituted the later and distinct contract.

Extracts from Paterson, Robertson and Duke, Principles of Contract Law (2016, 5th ed), Ch 3

Lapse [2.125] An offer which is expressed to be available for acceptance for a particular period of

time will lapse at the end of that period. If no period is stipulated, the offer will lapse after a reasonable time has passed. This can be explained either on the basis that a term can be implied that the offer lapses after a reasonable time has passed or on the basis that the court can infer rejection from the offeree’s failure to accept the offer within a reasonable time. 101 What period of time is reasonable will depend on the circumstances, including the nature of the subject matter and the form in which the offer was made. A verbal offer to buy a car, for 101

64

See Farmers Mercantile Union and Chaff Mills Ltd v Coade (1921) 30 CLR 113; Manchester Diocesan Council v Commercial & General Investments Ltd [1970] 1 WLR 241, 247-8. [2.125]

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example, is likely to lapse after a short period, whereas a written offer to purchase a substantial parcel of land will be open for acceptance for a relatively longer period. Identifying the duration of an offer will in some cases simply be a matter of determining how a reasonable person in the position of the offeree would interpret the offer. In Bartolo v Hancock, an offer made at the beginning of a five day trial to settle the litigation on the basis the parties would discontinue their claims against each other and bear their own costs was interpreted, in its context, to be “a ‘here and now’ offer”, the aim of which was “to dispose of the case then and there.” 102 An attempt to accept the offer on the fifth day of the trial was unsuccessful. There are judicial statements to the effect that both the death of an offeror 103 and the death of the offeree 104 will necessarily terminate the offer. However, in Fong v Cilli, 105 Blackburn J was careful to avoid such generalisations. He limited his statement that an offeree could not accept an offer after the offeror’s death to the case where the offeree knew of the death before the purported acceptance. In the case of an option there is at least a presumption that the death of the option holder does not prevent the option from being exercised by the option holder’s personal representatives. 106 However, if the offer is personal to the option holder, then the option lapses. There seems to be no good reason why a similar presumption should not apply to the case of the death of the grantor of the option. Gibbs J has suggested that since an option is in essence a conditional contract, it can be enforced against the estate of a grantor, unlike an ordinary offer. 107

Failure of condition and changed circumstances [2.130] An offer may be made subject to an express or implied condition that must be fulfilled

before the offer can be accepted. Alternatively, it may be made subject to an express or implied condition that it should lapse upon the happening of a certain event. In Financings Ltd v Stimson 108 the defendant signed an offer to purchase a car on hire-purchase terms from a finance company, the document having been given to him by a car dealer. The document contained a clause stating that the agreement contained therein would not be binding until it had been accepted on the finance company’s behalf. Before the company signed the agreement, the defendant took possession of the car, but later returned it because he was dissatisfied with the car’s performance. The car was stolen from the dealer’s premises and was eventually recovered in a badly damaged condition. In ignorance of this fact, the finance company then purported to accept the defendant’s offer. The company sued the defendant for breach of the hire-purchase agreement. The English Court of Appeal held that the defendant’s offer was subject to an implied condition that the car should continue in the condition it was in when the offer was made and that, on the failure of that condition, the defendant’s offer lapsed. The “implied condition” approach adopted in Financings Ltd v Stimson is the traditional method of dealing with cases in which circumstances change between the making and 102 103 104

[2010] SASC 305, [16]. Dickinson v Dodds (1876) 2 Ch D 463, 475; Laybutt v Amoco Australia Pty Ltd (1974) 132 CLR 57, 72-3. Reynolds v Atherton (1921) 125 LT 690, 625. See further Greig and Davis, The Law of Contract (1987), p 344.

105 106 107 108

(1968) 11 FLR 495, 498. Carter v Hyde (1923) 33 CLR 115, 121, 125, 132. Laybutt v Amoco Australia Pty Ltd (1974) 132 CLR 57, 76. [1962] 1 WLR 1184. [2.130]

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acceptance of an offer, but is not the only approach. In Neilsen v Dysart Timbers Limited, the Supreme Court of New Zealand explored the different ways of dealing with the problem of changed circumstances. 109 The offer in question was an offer to compromise or settle litigation. Dysart had obtained judgment against the Neilsen brothers for almost $315,000 under a guarantee given by the Neilsens for the debts of their company. The Neilsens disputed liability under the guarantee and applied for leave to appeal the decision against them. Three days after the leave application was heard, the Neilsens offered, through their solicitors, to pay Dysart $250,000 in full satisfaction of the judgment debt. Dysart’s solicitors were asked to obtain urgent instructions from their client. Only three hours later the parties were told by the court registrar that leave to appeal had been granted. There had been real doubt as to whether leave would be granted, and the granting of leave meant that Dysart was now faced with the costs of the appeal and the risk that it would be successful. 110 Dysart accepted the offer 42 minutes after receiving the news, but the Neilsens claimed that the offer was no longer available for acceptance. The New Zealand Supreme Court held (3-2) that the offer remained open for acceptance. The judges were agreed that a fundamental or important change of circumstances had the effect of terminating the offer, but did not agree on the conceptual basis for that rule or how it applied to these facts. 111 First, as in Financings Ltd v Stimson, a court can ask whether the offer was subject to an implied condition that it would remain open only while a particular factual state of affairs continued. Secondly, the relevant principle can be seen, like the doctrine of frustration, as a rule that an offer will lapse in the event of fundamentally changed circumstances as a matter of law, rather than as an implication as to the intentions of the parties. 112 Thirdly, the court can take the broader interpretive approach of asking “whether, having regard to the terms of the offer, the change of circumstances, and the subsequent ‘acceptance’, viewed as a whole and objectively, there is a concluded agreement.” 113 The third approach could be seen as the same as the first, on the basis that “a condition that an offer lapse upon the occurrence of a particular change of circumstances should be implied into the offer only if it is objectively apparent that the willingness of the offeror to be bound by the offer has been fundamentally undermined by the change of circumstances.” 114 This is consistent with the view recently expressed by the Privy Council that the implication of a term in an instrument is simply a matter of spelling out “in express words what the instrument, read against the relevant background, would reasonably be understood to mean.” 115 This implication of conditions has an important application to contracts involving more than two parties. Although each case must be decided on its own facts, a written contract signed by one party is often construed as an offer made by that party. That offer may well be subject to an implied condition that the document is ineffective until signed by all the parties to it. In Neill v Hewens 116 only one of two co-vendors signed a contract of sale. The purchasers 109 110 111 112 113 114 115 116 66

[2009] NZSC 43; [2009] 3 NZLR 160. Neilsen v Dysart Timbers Limited [2009] NZSC 43; [2009] 3 NZLR 160, [37] (Tipping and Wilson JJ). McLauchlan and Bigwood, “Lapse of Offers Due to Changed Circumstances: A Contract Conversation” (2011) 27 Journal of Contract Law 222, 222. [2009] NZSC 43; [2009] 3 NZLR 160, [54]-[60] (McGrath J); [30]-[32] (Tipping and Wilson JJ). [2009] NZSC 43; [2009] 3 NZLR 160, [61] (McGrath J). [2009] NZSC 43; [2009] 3 NZLR 160, [26] (Tipping and Wilson JJ). Attorney-General of Belize v Belize Telecom Ltd [2009] UKPC 10; [2009] 1 WLR 1988, [21]. (1953) 89 CLR 1. [2.130]

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signed the agreement and later sought specific performance, even though the second vendor had not signed. The High Court held that no contract had been concluded. When one of the co-vendors signed, the presumption was that she did not intend to bind herself unless her co-vendor also signed. 117

Rejection and counter offer [2.135] Once an offer has been rejected, it is no longer available for acceptance. 118 A rejected

offer may, however, later be revived or may form the basis of an agreement which is inferred in the absence of a valid offer and acceptance. 119 The making of a counter-offer is treated as a rejection of the original offer and will, therefore, also extinguish it. 120 The courts draw a distinction between a counter-offer and an inquiry relating to an alteration of the terms. 121 By requesting information, the offeror is not intending to reject the offer, but only to obtain some guidance in deciding whether to accept or reject. In determining whether an agreement has been made, the courts are principally concerned to ascertain the intentions of the parties from the language and circumstances of their communications. 122 The characterisation of conduct as a counter-offer or an inquiry is really stating a conclusion about the manifested intentions of the parties. If a seller offers to sell a tonne of widgets for $1000 to a buyer, the buyer might be said to make a counter-offer if she responds by saying, “I’ll give you $900”. In applying this label, the court is saying that the buyer has implicitly rejected the seller’s offer and the offer should therefore no longer be available for acceptance. The buyer might be said to make an inquiry or request for information if she asks whether there is some room for movement on the price. The label “inquiry” signifies that the buyer has not manifested an intention to reject and so the seller’s original offer should be treated as remaining open. Revocation and unilateral contracts [2.140] The revocation of an offer to enter into a unilateral contract raises more difficult

questions. There is no difficulty if the offer is withdrawn before the offeree begins to perform. The difficulty arises where the offeree has begun to perform, but has not completed the acts that constitute acceptance. If, for example, the offeror offered to pay $100,000 to the first person to swim backstroke across Bass Strait, it might seem unfair if the offer could be revoked when a swimmer was halfway across. It has been held that an offer made in exchange for the doing of an act becomes irrevocable once the act has been partly performed. 123 This principle has been justified on the basis that the offeror is subject to an implied obligation not to revoke the offer after the offeree has started to perform. 124 In a broader sense, it can be justified on the basis that an offeror has power to stipulate the terms on which his or her offer is made and can expressly reserve the right to withdraw the offer. It is more difficult for an offeree to protect himself or herself against the risk of loss once the offeree begins to perform. The notion 117 118 119

(1953) 89 CLR 1, 13. As to deeds, see Federal Commissioner of Taxation v Taylor (1929) 42 CLR 81, 87. Tinn v Hoffman & Co (1873) 29 LT 271, 278. Brambles Holdings Ltd v Bathurst City Council [2001] NSWCA 61; (2001) 53 NSWLR 153, 179. See [2.390].

120 121

Harris v Jenkins [1922] SASR 59; Hyde v Wrench (1840) 3 Beav 334; 49 ER 132. Stephenson, Jacques & Co v McLean (1880) 5 QBD 346; Brambles Holdings Ltd v Bathurst City Council [2001] NSWCA 61; (2001) 53 NSWLR 153. Greig and Davis, The Law of Contract (1987), p 338. Veivers v Cordingly [1989] 2 Qd R 278, 297-8. Daulia Ltd v Four Millbank Nominees Ltd [1978] Ch 231, 239.

122 123 124

[2.140]

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that there is a general principle preventing revocation of offers in exchange for acts was, however, rejected by the Full Federal Court in Mobil Oil Australia Ltd v Wellcome International Pty Ltd. 125 Mobil v Wellcome involved an incentive scheme operated by Mobil to improve the performance of franchisees operating Mobil service stations. Mobil told its franchisees that it was seeking to implement a proposal whereby a franchisee who achieved certain performance targets within the “Circle of Excellence” scheme over a period of six years would be granted a nine-year renewal of his or her franchise. Mobil’s representative acknowledged that there was a great deal of work to do on the proposal, but made a commitment “that we will find a way to extend your tenure automatically no costs to you if you consistently achieve 90% or better in Circle of Excellence judgings”. 126 Several franchisees claimed to have spent time and money improving the operation of their retail operations in order to meet the 90% performance target. After four years, Mobil unilaterally abandoned the Circle of Excellence scheme by which the franchisees’ performance was judged. Wilcox J at first instance held that Mobil had made an offer to enter into a unilateral contract and was not entitled to revoke it once the franchisees had embarked on performance. 127 Since Mobil’s abandonment of the scheme prevented the franchisees from completing performance, those franchisees who had achieved the 90% performance target in each year up to the time of revocation should be treated as though they had achieved the same in the remaining years. Those franchisees were, therefore, entitled to performance of the agreement to extend their franchises. On appeal, the Full Court held that Mobil had not made an offer to the franchisees. There were numerous indications that the scheme was only at a developmental stage and what Mobil said was not in the nature of an offer. 128 The commitment to “find a way” to extend tenure was “simply too vague and uncertain to be capable of giving rise to contractual obligation”. 129 Nevertheless, the court went on to address the question whether Mobil had successfully revoked any offer that had been made. The court held that a person offering to enter into a unilateral contract may, in some circumstances, be prevented from revoking the offer by an implied ancillary contract not to revoke. Revocation in breach of such a contract would be effective, leaving the offeror liable in damages. 130 An estoppel may arise where the offeree has acted to his or her detriment on an assumption that the offer will not be revoked. The Full Court found, however, that there is no universal principle that the offeror may not revoke once the offeree embarks upon performance of the act of acceptance. 131 If there is no implied contract and no estoppel, 132 the offeror is free to revoke the offer. There is no basis for any universal principle, according to the Full Court, because the circumstances vary greatly from one unilateral contract to another. Whether it is unjust for the offeror to revoke the offer once the offeree has commenced performance may depend on whether the offeror knows the offeree has commenced 125

(1998) 81 FCR 475 (Mobil v Wellcome).

126 127 128 129 130 131 132

(1998) 81 FCR 475, 498. Lyndel Nominees Pty Ltd v Mobil Oil Australia Ltd (1997) IPR 599, 636. (1998) 81 FCR 475, 496. (1998) 81 FCR 475, 499-500. (1998) 81 FCR 475, 506. (1998) 81 FCR 475. The estoppel aspects of the decision are discussed in (Paterson Textbook [9.50]).

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[2.140]

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performance, whether the offeree understands that incomplete performance is at his or her risk, whether the parties intended that the offeror should be at liberty to revoke the offer and whether the acts towards performance are detrimental or beneficial to the offeree. 133 In the present case, it was difficult to say when a franchisee should be taken to have “embarked upon” performance; the actions of the franchisees were of benefit to both parties and little or no detriment had been established. There was therefore no basis for an implied contract not to revoke the offer. 134 Accordingly, even if Mobil could be said to have made an offer to the franchisees, Mobil was free to revoke that offer. The effect of Mobil v Wellcome is that, in general, an offer made in return for performance of an act is, like any other offer, revocable at any time. The offeror will only be prevented from revoking the offer where there is an implied contract not to revoke or an estoppel. An estoppel will arise only where the offeree is induced to adopt the assumption that the offer will not be revoked and relies on that assumption in such a way that he or she will suffer detriment if the offer is revoked. 135 Extracts from Paterson, Robertson and Duke, Contract: Cases and Materials (2016, 13th ed), Ch 3

Unilateral contracts

Mobil Oil Australia v Wellcome International [2.145] Mobil Oil Australia Ltd v Wellcome International Pty Ltd (1998) 81 FCR 475 Federal Court of Australia – Appeal from Wilcox J. [FACTS: Mobil operated an incentive scheme for its franchisees known as the Circle of Excellence. Franchisees who achieved high scores in the Circle of Excellence judging were given certain rewards, such as overseas holidays. At a convention for franchisees held in 1991, Mobil’s general manager for retail marketing, Mr Ken Stumbles, told franchisees that Mobil was seeking to implement a “tenure for performance” scheme. He told them that Mobil wanted to implement a scheme whereby a franchisee who achieved a score of 90 per cent or better in any year would be granted an extra year’s tenure (the “one for one” proposal), but that this was very difficult to achieve under the Petroleum Retail Marketing Franchise Act 1980 (Cth) (the PRMF Act). He said it may be that the only way to give the extended tenure is to say that any franchisee who achieves a score of 90 per cent or better in the Circle of Excellence judging in each of the six years following 1991 would be granted a nine-year renewal of their franchise without cost (the “nine-for-six” proposal). A videotape including the relevant part of Mr Stumbles’ address was sent to all franchisees. The undertaking was repeated in literature distributed to franchisees. At subsequent regional meetings franchisees were given a brochure including a tear-off slip which franchisees could sign to indicate that they did “accept the challenge to exceed 90 per cent in Circle of Excellence judging and qualify for extra tenure.” Many franchisees signed and returned the tear-off slip and took steps to improve their performance in the Circle of Excellence judging. Several franchisees achieved a score of 90 per cent or better in the four years following the announcement. Following management and policy changes, Mobil announced in 1994 that it would not grant renewals free of charge on the basis proposed by Mr Stumbles, but would discount the renewal fees of any franchisees who had succeeded in obtaining 90 per cent or better in 1992 and 1993. 133 134 135

(1998) 81 FCR 475, 501-2. See (Paterson Textbook [9.50]). See (Paterson Textbook Ch 9). [2.145]

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Mobil Oil Australia v Wellcome International cont. One-hundred and fifty-four franchisees commenced proceedings against Mobil, claiming relief on the basis of breach of contract, equitable estoppel or misleading or deceptive conduct in breach of s 52 of the Trade Practices Act 1974 (Cth). They sought orders requiring Mobil to grant the additional tenure or compensate them for its loss. Mobil then abandoned the Circle of Excellence judging. The parties selected five test cases, which were heard together by Wilcox J. Wilcox J held that Mobil had made no offer of a one-for-one extension, since Mr Stumbles clearly indicated that this could not be done under the PRMF Act. Wilcox J upheld the contract claim based on the nine-for-six proposal made by three franchisees who had achieved 90 per cent or better in the Circle of Excellence judging in the four years following the announcement. He ordered Mobil to grant a nine-year extension of each of those franchises without charge. He found that Mobil had not engaged in misleading or deceptive conduct because Mr Stumbles had reasonable grounds for making the representation at the time he made it. In any event, a claim in respect of misleading conduct would not provide the franchisees with damages in respect of their disappointed expectations. Wilcox J also found that the franchisees were not entitled to a renewal of their franchises on the basis of promissory estoppel. The detriment the franchisees had suffered in reliance on Mobil’s promise did not justify holding Mobil to its promise. The relief claimed was disproportionate to the detriment suffered. Mobil appealed to the Full Court. The successful franchisees filed notices of contention in respect of dismissal of the estoppel claims.] THE COURT (LOCKHART, LINDGREN AND TAMBERLIN JJ): [494]

2. Contractual issues [498] The trial judge found an offer of a nine-for-six promise in the following passage: So we have more work to do and where we’re at at the moment is that maybe the only way to do this is to say that if you achieve 90 each year for the next 6 years then well [sic] guarantee you another 9 years as of right, no fees just a renewal. Now we’ve got a lot more work to do on this but the commitment that we’re making to you here today is that we will find a way to extend your tenure automatically no costs if you consistently achieve 90 or better in Circle of Excellence judgings. (Emphasis added.) This passage follows immediately that in which Mr Stumbles said that the one-for-one proposal was made “very very difficult” by the PRMF Act and that Mobil had more work to do on the tenure for performance reward. In the first sentence set out above he says that the stage reached as at the time of the Convention was that “maybe” the only scheme consistent with the PRMF Act is a nine-for-six one. The terms of the first sentence (“we have more work to do”, “where we’re at [499] the moment”, “maybe”) are not those of a present offer. That the first sentence is not to be understood as representing a commitment by Mobil is also made clear by the second and emphasised sentence: that sentence marks a passing from a statement of what Mobil is not prepared to commit itself to, to the language of commitment. The passage set out above is in fact as consistent with a rejection of a nine-for-six scheme as it is with a countenancing of it. The import of the second and emphasised sentence, read in the context of the problems previously outlined by Mr Stumbles, is that while Mobil could not promise an extension of tenure for any particular period, and, concomitantly, could not define the degree of “consistency” of attainment of 90 per cent or better in Circle of Excellence judgings to be achieved, it could and did assure franchisees that it would find some way to grant some extension automatically and without cost if a dealer achieved some degree of consistency of 90 per cent or better scores in those judgings. No doubt, the reference to “commitment” was taken seriously and was intended to be taken seriously. The sentence quoted came at the end of Mr Stumbles’ references to the problems which had prevented Mobil from implementing a simple one-for-one plan. He must also have known of the unsatisfactorily discriminatory nature of the nine-for-six alternative. Yet he wished to finish on a positive, reassuring 70

[2.145]

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Mobil Oil Australia v Wellcome International cont. note. The best that he could fairly manage was the sentence in question. But in our respectful opinion, an offer of a promise to “find a way” to “extend [for an unspecified period]” a dealer’s tenure if the dealer “consistently [over some undefined period]” achieved 90 per cent or better in Circle of Excellence judgings, is simply too vague and uncertain to be capable of giving rise to contractual obligation. Nor do we think that the sentence can be construed with that which immediately preceded it, to indicate that Mobil would grant a nine-for-six extension if it should conclude that this was the only lawful way to provide a reward of tenure for performance. We have reached this conclusion as a matter of construction of Mr Stumbles’ address and have taken into account the accompanying captions, including that reading: 90 or better for 6 years Automatic 9 year renewal. We need not repeat what we said earlier about the role of the screened captions. [The address was punctuated by captions flashed onto a screen at the front of the room in which dealers were having breakfast.] Certain circumstances extrinsic to Mr Stumbles’ speech may be noted. First, the second and emphasised sentence set out above was the only passage from Mr Stumbles’ speech which was communicated by means of the “Convention highlights” video and the September 1991 issue of the “Mobil Marketer”. Accordingly, in respect of persons who did not attend the Convention (with the exception of Mr Morris of Lyndel who saw a screening of the entire address), it is quite impossible to construe what they heard and saw as an offer of a nine-for-six promise…. The learned trial judge emphasised that Mr Stumbles intended his speech to be taken seriously and acted upon, and that he was, for the purpose, the “mind” of Mobil. His Honour said of Mr Stumbles: “He intended, and so Mobil intended, that his offer of tenure for performance would motivate franchisees to improve their businesses; and he believed this ‘would in turn improve Mobil’s business’.” [500] Referring to the tear-off slip, his Honour said: “Franchisees were asked to commit themselves in writing to ‘accept the challenge to exceed 90 in Circle of Excellence judging and qualify for extra tenure.’ This is the language of mutual commitment.” Notwithstanding Mr Stumbles’ intention and the “commitment” sought by means of the completion and return of the tear-off slip, in our respectful view, the problem remains for the franchisees’ case in contract, that neither the terms of the speech nor those of the tear-off slip were sufficiently certain to give rise to a contract. What we have said above addresses the question whether there was an offer of a one-for-one or nine-for-six promise to be accepted by performance of an act to be found in Mr Stumbles’ speech. We will deal later with the separate question whether Mr Stumbles’ address laid sufficient foundation to activate an estoppel or to support the claim under s 52 of the [Trade Practices] Act. It will next be necessary to consider other contractual issues which would arise if, contrary to our conclusions expressed above, Mobil did, through Mr Stumbles’ speech, offer the nine-for-six promise.

Revocation of offer Mobil submits that even if Mr Stumbles’ speech could be characterised as containing an offer of a nine-for six-promise: (a)

Mobil revoked the offer before the earliest time when acceptance could have occurred (1997);

(b)

the offer was not accepted because none of the five franchisees in question attained 90 per cent or better in Circle of Excellence judgings in all six years 1992, 1993, 1994, 1995, 1996 and 1997; and

(c)

specific performance was not an available remedy in all the circumstances. [2.145]

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Mobil Oil Australia v Wellcome International cont. These submissions raise several issues relating to unilateral contracts. A unilateral contract is one in which the act of acceptance of the offer is also an executed consideration for the promise offered. The act of acceptance called for by the offer, once completed by the offeree, leaves the contract executory only on the part of the offeror. A familiar illustration is the offer of a reward for the return of lost goods or for the provision of information. The supposed nine-for-six promise was the offer of a reward (nine years free tenure) in return for an act (the attaining of 90 per cent or better in Circle of Excellence judging over the six years 1992–1997). A distinction must be recognised. In the case of some unilateral contracts, it may remain within the offeree’s power unilaterally to complete the act of acceptance, and thereby to furnish the executed consideration sought, that is to say, without the necessity of cooperation by the offeror and even notwithstanding a purported revocation of the offer. An example is the furnishing of sought information by posting it in an envelope addressed in a particular way. There may also be a case (it is, perhaps, difficult to imagine one) in which the offeror may prevent the offeree from completing the act of acceptance, and thereby furnishing the executed consideration sought, yet the offer will be held not to have been revoked. In the present case, Mobil made it clear to its dealers that its supposed nine-for-six-offer was revoked. But, in addition, by terminating the system of Circle of Excellence judgings, it made it impossible for its dealers to complete the act of acceptance called for by that supposed offer. In the present section of these reasons, we address only the question whether Mobil effectively revoked its supposed offer. [501] … It will be recalled that it was in January 1996 that Mobil announced, without giving reasons, the abandonment of the Circle of Excellence awards. The sequence of events, then, is that there was a purported revocation after which Mobil made it impossible for franchisees to complete the act of acceptance by attaining 90 per cent or better in Circle of Excellence judgings in the last two of the six years (1996 and 1997). His Honour referred to discussions of the question whether an offeror of a promise for an act can effectively revoke the offer where performance of the act of acceptance has been embarked upon but not completed. He referred to Cheshire & Fifoot, The Law of Contract (2nd ed), pp 137–9; Carter & Harland, Contract Law in Australia (3rd ed), pp 67–9; Abbott v Lance (1860) 2 Legge 1283; Daulia Ltd v Four Millbank Nominees Ltd [1978] Ch 231; and Veivers v Cordingley [1989] 2 Qd R 278. He considered that the weight of authority was in favour of the proposition that: “… a person who makes an offer susceptible of acceptance by performance of an act, may not revoke that offer after the offeree has embarked upon performance of the act.” While his Honour thought that there was some difference in the authorities as to the proper juristic basis of this proposition and that “in a technical sense” he was not bound to follow the decisions to which he referred, he considered that he should follow them unless positively satisfied that they were wrong. He recorded that he was not so satisfied. We would make several observations at the outset. It has been suggested to be unjust that an offeror should be at liberty to revoke the offer once performance of the act, which is at once the act of acceptance and the executed consideration, has commenced. This proposition is usually stated as if its truth were self evident and universal. We do not think that it is either. (a)

The respective positions of offeror and offeree vary greatly from the case of one unilateral contract to another. The following factors illustrate: (i) the offeror may or may not know that the offeree has commenced performance; (ii)

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the offeree may or may not have an understanding that the offeror is at liberty to revoke and that any incomplete performance of the act of acceptance by the offeree will be at his or her risk;

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Mobil Oil Australia v Wellcome International cont. (iii)

the notion of “commencement of performance of the act of acceptance” or “embarking upon the act of acceptance” is problematical and can lead to a result which is unjust to the offeror. [502] By reference to the facts of the present case, could it be suggested that attainment of 90 per cent in the first year or even perfect operation of a service station for a day, a week or a month, albeit by reference to the offer, represents a commencement of attainment of 90 per cent in all six years so as immediately to bind Mobil not to revoke?

(iv)

the act called for by the offer may be detrimental to the offeree, or of some benefit to the offeree as well as to the offeror, as in the present case;

(v)

although the offeree is not obliged to perform, or to continue performing, the act of acceptance and is at liberty to cease performing at any time, ex hypothesi, the offeror remains bound, perhaps over a lengthy period as in the present case, to keep its offer open for completion of the act of acceptance, without knowing whether the offeree will choose to complete or not to complete that act;

(vi)

the circumstances of the particular case may or may not, by reference to conventional criteria, suggest that the parties intended that the offeror should not be at liberty to revoke once the offeree had performed the act of acceptance to some extent. We do not accept that it is universally unjust that an offeror be at liberty to revoke once the offeree has “commenced” or “embarked upon” performance of an act which is both the sought act of acceptance of the offer and the sought executed consideration for the promise.

(b)

A juristic basis which has been suggested to support the general proposition is that of an implied ancillary unilateral contract by which the offeror promises not to revoke once the offeree commences the act of acceptance of the principal offer. But even if such an ancillary contract should be implied in all cases, it is one thing to say that there is a contractually binding promise not to revoke and another thing to say that a purported revocation will be ineffective. The normal remedy for a revocation in breach of the ancillary contract would be an award of damages, the amount of which would be assessed, no doubt, by reference to the prospect that the act of acceptance would have been completed, and, by the same act, the offered promise duly “paid for”. No doubt it might be possible for the offeree to seek specific relief in the form of an injunction restraining the offeror from revoking the offer and from preventing the offeree from providing the executed consideration. In the present case, the franchisees did not seek orders that Mobil maintain its Circle of Excellence judgings and that it not act upon or implement its purported revocation. Perhaps no one thought of doing so. Perhaps the view was taken that an application for such relief would probably fail. We make no comment as to the prospects of success which any such application would have enjoyed.

(c)

It seems that the general undifferentiated proposition could produce unintended and unjust results. Assume that X made a public offer of payment for the collection and supply of information of a kind described in the offer; that A, B and C embark upon collecting the information; and that A supplies it to X. According to the general proposition, X is bound not to revoke the offer made to B and C, notwithstanding the inutility of their subsequently supplying to X the information that A has already provided. It may be replied that the terms of the offer would include an [503] implied qualification. But this very response bespeaks the inadequacy of a universal rule.

… [505] In Veivers v Cordingley, McPherson J [said]: There can be no doubt that, ordinarily an offer can be withdrawn before acceptance. It may well be a different matter if, in the case of what is commonly called a “unilateral contract”, the [2.145]

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Mobil Oil Australia v Wellcome International cont. promisee has already entered upon the act which, when completed, will constitute acceptance of the promise. The question has been much debated by text writers. The authorities in point are usefully collected in an article by Mr CD Gilbert in 46 ALJ 522, particularly at 525–6. The only decision directly in point is that of the Supreme Court of New South Wales in Abbott v Lance (1860) 2 Legge 1283, which was a decision of the court in Banc comprising Dickinson ACJ and Wise J… It seems to me that the decision in Abbott v Lance is authority for propositions that, although as a general rule an offer may be retracted before acceptance, yet, if it takes the form of an offer in exchange for the doing of an act or acts, then: (1) acceptance takes place when the offeree “elects” to do the relevant act or acts; and (2) the offer becomes irrevocable once the act or acts, which will constitute consideration for the offer, have been partly performed. Applied to the present circumstances, the decision in Abbott v Lance would carry judgment for the plaintiffs Veivers in this case…. On the authority of Abbott v Lance, I consider that it was then no longer open to Cordingley to retract his promise …, and that he was bound to perform it by paying the sum of $200 000 if and when Veivers succeeded in obtaining approval from the Council. [506] … For the reasons indicated earlier, we do not accept that there is a universal proposition that an offeror is not at liberty to revoke the offer once the offeree “commences” or “embarks upon” performance of the sought act of acceptance (being also the sought executed consideration for the offered promise). If and to the extent that any of the authorities to which we have referred say otherwise, we would respectfully disagree. In any event, even if it be assumed that an offeror has impliedly promised not to revoke in consideration of a commencement of performance of the act of acceptance, it would not follow that a purported revocation would be ineffective. On the contrary, in the absence of specific relief in respect of that promise, the offeror’s revocation would be effective, although leaving the offeror liable in damages. It should not be thought that the absence of a universal rule is unjust. In the circumstances of a particular case, it may be appropriate to find that the offeror has entered into an implied ancillary contract not to revoke, or that the offeror is estopped from falsifying an assumption, engendered by it, that the offeree will not be deprived of the chance of completing the act of acceptance. We see no basis in the particular facts of the present case for concluding that Mobil should be taken to have offered to all those franchisees who would but commence or embark upon performing the prescribed act of acceptance of its principal offer (of a promise of nine-for-six), an ancillary promise not to revoke that offer. Several considerations support this view. First, there is the problem of the meaning of “commencing” to attain not less than 90 per cent in Circle of Excellence judgings for all of the six calendar years 1992 to 1997. We referred, in a general context, to the nature of the problem earlier. In addition, there is a particular question arising from the nature of the specified act of acceptance in the present case: whether there can be a “commencement” only if at least one attainment of 90 per cent occurs. Perhaps, by reason of the nature of the act of acceptance (attaining 90 per cent or better in each of six successive years) mere “working towards” attaining that judging result counts for nothing in the present context. Mobil should not lightly be taken to have intended to be bound not to revoke its principal offer in favour of any franchisee who performed such an ill-defined act as “embarking upon” or “commencing” attainment of 90 per cent or better in Circle of Excellence judgings in the six years 1992–1997. Secondly, while it is true that even part performance of the act of acceptance would be of some benefit to Mobil, it would not be only to the benefit of Mobil and to the detriment of the franchisee. Mobil was inviting franchisees to embark upon a course which would benefit both parties. In these circumstances, the case for holding Mobil bound by an implied promise not to revoke is the less strong. 74

[2.145]

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Mobil Oil Australia v Wellcome International cont. Thirdly, it is unlikely that Mobil meant to promise not, throughout the period 1992 to 1997, to revoke an offer of nine years free tenure, to a franchisee which had already made the following promise to Mobil: (3) Adherence to Mobil Team Pak Standards Dealer acknowledges that its adherence and the adherence of other [507] Mobil dealers at all times to the Team Pak Standards, and to the policies and other requirements of the Team Pak Program is essential for the success, goodwill and reputation of the Mobil Dealer network and Mobil System and the Team Pak Program. Dealer therefore agrees to comply at all times during the life of this Agreement with the Team Pak Standards, as amended and updated from time to time. Likewise, Mobil agrees to comply with its part of those Team Pak Standards. This standard provision of the Mobil Team Pak Agreement is in fact copied from subcl 4(3) of the Mobil Team Pak Agreements dated 18 May 1990 and 12 November 1993 between Mobil and Lyndel. Whatever its technical effect for the presence or absence of consideration, the existence of this contractual obligation suggests, on the assumption that franchisees attempted to comply with it, that “to commence to attain 90 per cent or better” would involve little or no actual detriment to franchisees – his Honour found that little or no detriment had been established (see later under “Promissory estoppel issues”). In our respectful opinion, the trial judge erred in holding that Mobil was not at liberty to revoke its supposed offer of a nine-for-six promise, as made to those franchisees which had embarked upon the stipulated act of acceptance of that offer…. [508]

The stipulated executed consideration (and acceptance of the offer) was not furnished Three issues arise in connection with the furnishing of consideration. (1)

The first is that Mobil submitted to the trial judge, and submits on the appeal, that the franchisees were already legally obliged to attain 90 per cent or better in Circle of Excellence judgings, because they were obliged, under the Team-Pak scheme, to do all the things which would have earned scores of 100 per cent. His Honour dealt with this submission shortly: “But none of the franchisees was under an extant obligation to achieve any particular level of performance in the Circle of Excellence awards.” We deal below with the similar submission that in view of their existing contractual obligations, the attainment of 90 per cent or better in Circle of Excellence judgings could not constitute “detriment” for the purpose of the doctrine of promissory estoppel. Substantially for the reasons there set out, we are of the opinion that the franchisees’ performance did not attract the rule that performance of an existing contractual obligation owed to the promisor cannot qualify as valuable consideration….

(3)

Mobil submits that the franchisees were not entitled to nine years additional tenure because they did not furnish the only consideration stipulated as the price of obtaining such tenure, namely, the attainment of 90 per cent or better in Circle of Excellence judgings over all six years, 1992–1997. We accept this submission and deal with it under the next side heading. [509]

The award of specific performance in the absence of the stipulated executed consideration (and acceptance of the offer) With respect, it was erroneous to treat Lyndel, Thorpe and Wellcome as having attained 90 per cent or better in all six years: they did not do so or even promise to do so. They had therefore not done or even promised to do the one and only act for the doing of which Mobil had offered its promise. Unlike, for example, payment of money, the attainment of 90 per cent or better in Circle of Excellence judgings over six years was something which they were not able unilaterally to tender. An order for specific performance of Mobil’s supposed nine-for-six promise was, in the circumstances, not available in the absence of the actual furnishing of the agreed consideration for that promise: the attainment of [2.145]

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Mobil Oil Australia v Wellcome International cont. 90 per cent or better in Circle of Excellence judgings in all of the years 1992 to 1997: see Colly v Overseas Exporters [1921] 3 KB 302 at 310–11; Heyman v Darwins Ltd [1942] AC 356 at 371 (Lord MacMillan); Plaimar Ltd v Waters Trading Company Ltd (1945) 72 CLR 304 at 318; Automatic Fire Sprinklers Pty Ltd v Watson (1946) 72 CLR 435 esp at 465–7 (Dixon J), 476–7 (Williams J); City Motors (1933) Pty Ltd v Southern Aerial Super Service Pty Ltd (1961) 106 CLR 477 and Bolwell Fibreglass Pty Ltd v Foley [1984] VR 97 at 112 (FC) (Brooking J). The foregoing propositions hold good, even if it be correct that Mobil had impliedly promised not to revoke its offer. With respect, we think that, given the other conclusions of the trial judge in favour of Lyndel, Thorpe and Wellcome, the appropriate course was for his Honour to make an award of damages for any loss and damage which Mobil’s repudiation of the ancillary contract caused each of them to suffer. The amount of damages would have been based on the value of the lost opportunity of obtaining the additional nine years tenure. The assessment would have had to allow for the possibility that the franchisee would not have continued to score 90 per cent or better in 1996 or 1997 or both, and so failed to “win” any additional tenure. The franchisees did not seek an order compelling Mobil to continue with Circle of Excellence judgings promptly after the abandonment of those judgings was announced early in 1996, and they have not done so since. We make no comment as to whether Mobil’s supposed implied promise to provide those judgings from 1992 to 1997 was a promise which, of its nature, would have been susceptible to an order for specific performance. The franchisees sought specific performance only of the principal promise, relevantly, to grant nine years tenure. They were not entitled to that remedy in circumstances in which they had not furnished, and were not in a position to furnish, the consideration for it. Therefore, they were not entitled to the order which the learned trial judge made that Mobil grant them a renewal for nine years…. [510]

3. Promissory estoppel issues

General principles The principles on which remedies based on equitable estoppel, including promissory estoppel, are available are by no means clear or precise. This is reflected in the substantial developments in the case law, particularly over the past two decades, and in the extensive range of discussions and articles on this topic over that period. The relief is broadly grounded in the notion of unconscionability, but the ways in which the principles are applied to specific circumstances have been the subject of differing formulations. This area of equity is still in the process of development and extension…. In Austotel, a decision discussed by the trial judge in some detail in his preliminary reasons in this case, Priestley JA considered the line of authority in relation to estoppel, which had developed from the Privy Council decision in Plimmer v City of Wellington (1884) 9 App Cas 699. Although, in the final result, Priestley JA dissented, his distillation of the relevant principles was accepted as “cogent” by a Full Court of this Court in S & E Promotions Pty Ltd at 653. He considered that Plimmer was (at 604): … a clear example, where a plaintiff, despite being unable to point to some agreement which, although unenforceable, contains precise terms describing what he expected from the defendant, has nevertheless been held to be entitled to equitable relief which may be of a proprietary kind. He then formulated the relevant proposition as to equitable estoppel in the following terms (at 610): For equitable estoppel to operate there must be the creation or encouragement by the defendant in the plaintiff of an assumption that a contract will come into existence or a promise be performed or an interest granted to the plaintiff by the defendant, and reliance on that by the plaintiff, in circumstances where departure from the assumption by the defendant would be unconscionable. (Emphasis added.) 76

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Mobil Oil Australia v Wellcome International cont. … [2.150]

The representations In our view, for the purpose of determining the estoppel submission, it does not matter whether the formulation of Brennan J in Waltons or that of Priestley JA in Austotel is applied. While the difference may, in particular cases, lead to different results, in the present case it does not. On either approach, it is a necessary element of the principle that the defendant has created or encouraged an assumption that “a particular legal relationship” or “an interest” would arise or be granted by the respondent if certain things are done or not done by the applicant in reliance thereon and that it is contrary to good conscience for the defendant to depart from the assumption. In order to determine the appeal on the estoppel issue, it is necessary to consider whether the statements as to the one-for-one and nine-for-six proposals were sufficiently unqualified, firm and specific so as to induce an assumption that “a particular legal relationship” would be established or an “interest” would be granted… [515]

Nine-for-six The nine-for-six proposal was raised by Mr Stumbles as a “may be” alternative to the one-for-one proposal, which the PRMF Act was said to have made “very very difficult” to operate. There was a reference to a “lot more work” in relation to the nine-for-six proposal. This is not simply a case of “fine tuning” as the franchisees suggest. The difficulty for the applicants is not that the promise is not fully spelt out but rather that there was no promise made at all as to the nine-for-six proposal. The immediately ensuing commitment mentioned after reference to the nine-for-six statement was to the implementation of a process directed towards finding a way of somehow extending tenure for an indefinite period automatically and without costs if there was a consistent achievement of 90 per cent over an unspecified period. In our view, such a generalised commitment to find a way to implement an appropriate tenure for achievement scheme cannot, in the present context, give rise to an expectation of either a “particular legal relationship” coming into existence or the grant of an identifiable “interest”, to use the language of Waltons and of Plimmer. The essential elements and details of the legal relationship are lacking as are any specific details relating to the duration or terms of any extension or renewal or of the period over which the franchisees would qualify. Nor can such an indeterminate possibility be regarded as an expression of an intent that any particular incentive scheme will be formulated or implemented. No provision is made as to any objective or subjective criteria or to any person or entity by reference to which, or by whom, the nature, extent, duration or terms of any grant can be rendered reasonably certain. The substantial disparity in terms and in effect between the one-for-one proposal and the nine-for-six proposal mentioned by Mr Stumbles, itself highlights the range of widely varying alternatives which might result from subsequent elaboration of the scheme. The “less precise” approach identified in Plimmer by Priestley JA does not, in our view, support a submission that there is “sufficient” certainty in the “promise” or “encouragement” with respect to the “finding a way” commitment, to attract the operation of the doctrine of equitable estoppel. The lack of information as to the contents of the proposal is too pronounced. In particular, there is a lack of information as to the period of qualifying performance and the duration, and extent of the interest to be granted. The decisions which apply the Plimmer approach are cases which involve expenditures made on the property of another person, or alternatively, involve an injustice arising from the taking advantage of such expenditure by the defendant. Where there has been such expenditure it will often be possible to identify, with reasonable certainty, the amount or value of the expenditure or the value of work done [2.155]

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Mobil Oil Australia v Wellcome International cont. on the property in question, so that some reasonably precise determination can be made as to what relief is called for in order to redress or remove the detriment. Plimmer itself provides a clear example. In that case the plaintiff had been encouraged to expend money to provide a jetty at the request of the defendant. For the above reasons, we consider that his Honour erred in law in concluding that the statements or conduct of Mobil were sufficiently specific and unqualified to attract the application of equitable estoppel in relation to the nine-for-six proposal… [2.155]

Detriment His Honour found that there was some additional cost to Lyndel, Thorpe and Wellcome in their setting out to achieve the 90 per cent standard, but concluded that this was comparatively small and was not sufficient, when considered in the light of the “rewards” offered by Mobil, to justify a finding that it exceeded the reward offered. Nor could it justify the relief sought, namely a nine-for-six extension, because such relief is disproportionate to the detriment. The principles of equitable estoppel are directed to redress the detriment which a party might otherwise sustain as a result of the departure from an assumption on which the plaintiffs acted with encouragement from the defendant. It is intended to relieve against the detriment suffered and not to make good an expectation. This “minimum equity” aspect of equitable estoppel was discussed in considerable detail by the High Court in Verwayen at 413, 429, 442–3, 461, 487 and 501. In discussing the purpose and extent of estoppel, Mason CJ said (at 413): A central element of that doctrine is that there must be a proportionality between the remedy and the detriment which is its purpose to avoid. It [517] would be wholly inequitable and unjust to insist upon a disproportionate making good of the relevant assumption. … A similar approach is favoured by Meagher, Gummow & Lehane, Equity Doctrines & Remedies (3rd ed, 1992), pars 1723–6 inclusive…. McHugh J in Verwayen also referred to the principle that in moulding its decree the court, as a court of conscience, goes no further than is necessary to prevent unconscionable conduct and that a court of equity will only require the promise or expectation to be fulfilled if that is the only way in which the equity can be satisfied. This approach was recently applied by the English Court of Appeal in Sledmore v Dalby (1996) 72 P & CR 196 at 208–9; see also Andrew Robertson, “Satisfying the Minimum Equity: Equitable Estoppel Remedies after Verwayen” (1996) 20 MULR 805.

The present case In his judgment in the present case, although he considered there was some evidence of additional cost, the trial judge concluded that the nine-for-six relief claimed was not an available remedy to make good the detriment which the applicants suffered when considered against the “rewards” offered by Mobil. Mobil submits that the franchisees were already committed to comply 100 per cent with the Team-Pak requirements and that therefore, any attempt to achieve 90 per cent could not constitute detriment. Indeed, acquiescence by Mobil in attainment of only 90 per cent represented, according to the submission, a relaxation of an existing obligation, rather than an imposition. We do not accept the submission. It is apparent, from a practical, commercial point of view, that the incentive scheme was based on Mobil’s acceptance that 90 per cent compliance would represent an achievement over and above what was presently being obtained and accepted as adequate. Uncontradicted evidence given by dealers was that special efforts were made to achieve more than what would otherwise have been accepted by Mobil as a sufficient performance. 78

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Mobil Oil Australia v Wellcome International cont. We now turn to the detriment case advanced by the five individual franchisees.

Lyndel [2.160] The detriment claimed to have been suffered by Lyndel as a result of the implementation of the nine-for-six proposal included additional work, expense and loss of income. Lyndel’s case was that it increased the levels of staff after the August 1991 speech in order to attract the extension of tenure. In addition, it claimed to have paid additional wages, to the extent of $14 000 per annum, to meet and maintain the standards required by the Circle of Excellence proposal. Mr Morris retained the services of his retired father to assist him to achieve the 90 per cent score. There were also said to be expenses incurred and time spent [519] on staff training and the provision of staff uniforms. There were extra attendants at the premises necessary to meet random inspections by “mystery buyers” calling at the behest of Mobil. There were also said to be extra additional costs incurred in advertising, marketing and other promotion efforts. Losses were said to arise from discounting. There were further costs and losses in respect of Lyndel’s preferring Mobil products over those of competitors, of dealing with additional constraints due to a requirement to buy through a central ordering body and in complying with Mobil’s requirements as to a credit card system. A further matter was the losses from theft which were said to have arisen from Mobil’s requirement that oils be displayed outside in prominent view. Mobil’s response to these claims is that they are, in their totality, relatively minor and not proportionate to the remedy of an automatic nine-for-six extension at no cost. Many of the matters raised were simply sound and desirable business practices. They were inherently likely to, and did in fact, lead to increased turnover, sales and profitability. For instance, cleanliness, uniforms, random inspections, staff training, performance reports, advertising and promotion, are all processes calculated to enhance the viability of the operator’s business and profitability. Although there was no detailed or specific evidence as to amounts, Lyndel referred to increases in staff levels. However, there was evidence that there was no overall increase after the August 1991 speech, nor was there evidence of any material impact on profitability. As his Honour pointed out, Mr Morris spoke of Mobil approved products costing a “few more dollars”. In our view there is force in the submissions that much of the expenditure and efforts were of a nature which might reasonably be expected to lead to increased profitability and efficiency in day-to-day operations. The additional efforts and expenditures on the part of Lyndel were not directed to capital improvements to the premises which would enure to the benefit of Mobil in a proprietary sense. In that respect they are different from the benefits which, but for the relief sought, would accrue in a Plimmer sense, where expenditure was incurred on the land of another which would increase its value. Against the detriment outlined above, his Honour took into account the offer by Mobil to pay the sum of $32 209 compensation by way of reward in respect of the 1992 and 1993 years in which the 90 per cent Circle of Excellence level had been achieved by Lyndel. The question of the degree of detriment, is of course, one of fact which cannot be precisely spelt out. Having considered the evidence concerning Lyndel and the submissions made in relation to that evidence, we consider that it was open to his Honour to conclude that the detriment was not proportionate to the grant of the nine year extension…

Conclusion [2.165]

On the estoppel claim we conclude:

1.

There was no one-for-one assurance or promise which activated the principles of estoppel.

2.

There was no nine-for-six assurance or promise which activated the principles of estoppel. [2.165]

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Mobil Oil Australia v Wellcome International cont. 3.

The general commitment to “find a way” was not certain enough to ground an estoppel.

4.

The trial judge did not err in concluding that there was no detriment which could attract the

5.

application of estoppel.

6.

The applicants have not made out any estoppel case against Mobil. Appeal allowed.

Extracts from Paterson, Robertson and Duke, Principles of Contract Law (2016, 5th ed), Ch 3

ACCEPTANCE Conduct constituting an acceptance [2.170] An acceptance is an unqualified assent to the terms of an offer. An important question

is whether the acceptance must result in an actual consensus between the parties or a “meeting of the minds”. Where A makes an offer to B and B appears to accept, but was seriously mistaken as to what A was offering, is B bound? Whether a real meeting of the minds is required depends in theory on whether one adopts an objective or subjective approach to agreement. 136 Under a subjective approach, no contract is formed unless there was a real consensus between the parties. An objective approach, on the other hand, looks only to the external manifestations of consent, disregarding the offeree’s actual state of mind. In Taylor v Johnson 137 the High Court noted that, while there is a significant difference in legal technique between the subjective and objective theories, there is little difference in practice. The reason is that the subjective theory is coupled with a principle of estoppel that operates where a person conducts himself or herself in such a way that a reasonable person would believe that he or she was assenting to the terms of a contract. 138 In those circumstances, the principle of estoppel prevents the person from denying the existence of a contract. Accordingly, an offeree who behaves in such a way that a reasonable person would think he or she was accepting the offer and induces the offeror to contract with him or her on that basis will be bound under both the objective and subjective approaches. Smith v Hughes 139 provides a useful illustration of this point. A buyer agreed to purchase a quantity of oats on the faith of a sample provided by the seller. The buyer wrongly believed the sample to be old oats, when in fact the sample and the oats supplied were new oats and were unsuitable for the buyer’s purposes. Blackburn J held that there is no contract if the parties are not ad idem (of one mind) unless an estoppel prevents one of the parties from denying that he or she has agreed to the other’s terms. The relevant principle is: If, whatever a man’s real intention may be, he so conducts himself that a reasonable man would believe that he was assenting to the terms proposed by the other party, and that other party 136 137 138 139 80

See further (Paterson Textbook [1.25]) and [2.385]. (1983) 151 CLR 422, 428. (1983) 151 CLR 422, 428. (1871) LR 6 QB 597, 607. [2.170]

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upon that belief enters into the contract with him, the man thus conducting himself would be equally bound as if he had intended to agree to the other’s terms. 140

On a subjective approach to agreement, therefore, an estoppel prevented the buyer from denying the contract because he had behaved in such a way that a reasonable person would believe he was agreeing to buy new oats. An objective approach would lead to the same result: the court would impute an agreement on the basis that there appeared to be a consensus between the parties. While Smith v Hughes supports the application of a subjective approach coupled with a principle of estoppel, the High Court observed in Taylor v Johnson that “the clear trend in the decided cases and academic writings has been to leave the objective theory in command of the field”. 141 The High Court has since confirmed that “the principle of objectivity” determines “the rights and liabilities of the parties to a contract”: “It is not the subjective beliefs or understandings of the parties about their rights and liabilities that govern their contractual relations. What matters is what each party by words and conduct would have led a reasonable person in the position of the other party to believe”. 142 It is clear that the same objective approach governs the question whether two parties have entered into contractual relations. 143 On that basis, an offeree will effectively accept an offer if the offeree behaves in such a way that a reasonable person would believe he or she is assenting to the terms of an offer, even if there is no real consensus between the parties. 144 There is certainly no need for a consensus as to the terms of a contract. 145 In Fitness First (Australia) Pty Ltd v Chong, 146 Ms Chong signed an application form to join a gym on a 12-month membership without first reading the form. She was unaware that it stipulated that she was liable to pay a $200 fee if she cancelled the membership within the first two months. A Tribunal Member held that the parties did not have “the requisite consensus ad idem” required for a valid contract and therefore Ms Chong was not liable to pay the fee. That decision was overturned on appeal, with Harrison AsJ holding that “the Tribunal Member erred in law when he stated that a valid contract requires that the parties have the [requisite] consensus ad idem in that each fully know and understand the terms of their agreement”. 147 By signing the form, Ms Chong had manifested her assent to the printed terms and it was irrelevant that there was no true consensus ad idem between the parties. Consciousness of the offer [2.175] In the case of bilateral contracts formed verbally or in writing, it will usually be clear

that the offeree has deliberately accepted the offer. The situation is different with unilateral contracts. If an offeree performs an act requested by an offeror without intending to accept the 140 141 142 143 144 145

146 147

(1871) LR 6 QB 597, 607. (1983) 151 CLR 422, 429. Toll (FGCT) Pty Ltd v Alphapharm Pty Ltd [2004] HCA 52; (2004) 219 CLR 165, [40]. See Ermogenous v Greek Orthodox Community of SA Inc [2002] HCA 8; (2002) 209 CLR 95, [25], discussed (Paterson Textbook [5.07]). Subject to the principles of mistake, discussed in Chapter 16 and (Paterson Textbook Ch 31). See also Shahid v Australasian College of Dermatologists [2008] FCAFC 72; (2008) 168 FCR 46, discussed (Paterson Textbook [5.07]) (where, on the basis of an objective approach, the court overturned the decision of a trial judge who had found that “there was no meeting of the minds” in relation to a particular issue). [2008] NSWSC 800. [2008] NSWSC 800, [22]. Harrison AsJ applied the principle stated in Toll (FGCT) Pty Ltd v Alphapharm Pty Ltd [2004] HCA 52; (2004) 219 CLR 165, discussed (Paterson Textbook [12.50]). [2.175]

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offer, has a contract been formed? If a person returns a lost dog and subsequently learns of the reward that had been offered by the owner, can the finder of the dog claim the reward? The answer to these questions also depends on a choice between an objective and a subjective approach. In The Crown v Clarke 148 the High Court adopted a subjective approach to this particular question without abandoning the objective approach to formation generally. The court held that while an offeree’s conduct is normally assessed by reference to external manifestations, performance of a requested act will not give rise to a unilateral contract if the evidence establishes that the offeree was not in fact acting on the faith of the offer. In other words, a unilateral contract will only arise if the offeree performs the requested acts in reliance on the offer. The Crown v Clarke was concerned with a £1000 reward offered for information leading to the arrest and conviction of the person who murdered two police officers. Clarke and Treffene were arrested and charged with one of the murders. Clarke gave a statement which led to his own release and the arrest of a man named Coulter, and later gave evidence which led to the conviction of Treffene and Coulter. Clarke claimed the reward, but the Crown refused to pay it to him on the basis that he did not make the statement with a view to claiming the reward. Clarke admitted in evidence that, although he had seen the reward notice, he made the statement in order to clear himself of the charge of murder and not with the intention of claiming the reward. He gave no consideration to the reward until after the men were convicted. Clarke claimed the Crown was under a contractual obligation to pay him the reward, but he was ultimately unsuccessful in establishing a contract. The High Court held that a unilateral contract will be made only where the acts required for acceptance are performed on the faith of the offer. 149 The court held unanimously that there must be a consensus of minds or wills between the parties before a contract can exist. 150 Isaacs ACJ observed that “acceptance is essential to contractual obligation, because without it there is no agreement, and in the absence of agreement, actual or imputed, there is no contract”. 151 Higgins J noted that, without Clarke’s admission that he not acted in reliance on the offer, a presumption might have been made that he had acted upon it, but his own evidence rebutted such a presumption. 152 Starke J treated a unilateral contract as an exception to the rule that a person’s contractual intentions are normally judged from their outward expressions. The position is different, he said, in a case where communication of acceptance is dispensed with. In such a case, evidence of subjective intention can be taken into account. 153 By requiring an actual consensus between the parties, and allowing Clarke’s actual intentions to override his apparent intentions, the High Court decided the case on the basis of subjective evidence of intention. Had the court taken a purely objective approach, the court would have looked only at the outward manifestations of the parties’ intentions and would have imputed an agreement on the basis of Clarke’s conduct. The decision in The Crown v Clarke shows that the principle of estoppel described in Smith v Hughes does not entirely eradicate the practical consequences of the distinction between the objective and subjective 148 149 150 151 152 153 82

(1927) 40 CLR 227. (1927) 40 CLR 227, 234, 241-2, 244. (1927) 40 CLR 227, 234, 239, 243. (1927) 40 CLR 227, 233. (1927) 40 CLR 227, 241 (1927) 40 CLR 227, 244. [2.175]

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approaches to agreement. Although Clarke’s conduct would have led a reasonable person to believe he was assenting to the Crown’s offer, the principle of estoppel described in Smith v Hughes could only be used against Clarke to prevent him from denying the existence of the contract. It could not be used by Clarke to prevent the Crown denying the existence of a contact. Extracts from Paterson, Robertson and Duke, Contract: Cases and Materials (2016, 13th ed), Ch 3

The Crown v Clarke [2.180] The Crown v Clarke (1927) 40 CLR 227 High Court of Australia – Appeal from the Supreme Court of Western Australia. [FACTS: The respondent, Clarke, had claimed £1 000 from the Crown in the following circumstances. In May 1926 the Commissioner of Police gave notice by proclamation that he was authorised by the government of Western Australia “to offer a reward of £1 000 for such information as shall lead to the arrest and conviction of the persons who committed the murders” of an inspector of police and a sergeant of police, and that the Governor would be advised to extend a free pardon to any accomplice not being the person who actually committed the murders who should first give the information. In June, Treffene and Clarke were arrested and charged with one of the murders. Four days later Clarke, who had seen the proclamation, made a statement which led to the arrest of one Coulter. Coulter and Treffene were convicted of the murder, Clarke giving evidence in accordance with his statement. Clarke was released and claimed the reward. The Crown alleged by way of defence that his statement was not made with a view to obtaining the reward. His petition was dismissed at first instance, the judge finding that he had not acted on the faith of or in reliance upon the offer made in the proclamation or with any intention of entering into any contract, but rather that he acted to save himself from the unfounded charge of murder. The Full Court of the Supreme Court of Western Australia upheld an appeal against this decision. The Crown appealed.] ISAACS ACJ: [231] The facts of this case, including inferences, are not, as I understand, in dispute. They amount to this: The information for which Clarke claims the reward was given by him when he was under arrest with Treffene on a charge of murder, and was given by him in circumstances which show that in giving the information he was not acting on or in pursuance of or in reliance upon or in return for the consideration contained in the proclamation, but exclusively in order to clear himself from a false charge of murder. In other words, he was acting with reference to a specific criminal charge against himself, and not with reference to a general request by the community for information against other persons. It is true that without his information and evidence no conviction was probable, but it is also abundantly clear that he was not acting for the sake of justice or from any impulse of conscience or because he was asked to do so, but simply and solely on his own initiative, to secure his own safety from the hand of the law and altogether irrespective of the proclamation. He has, in my opinion, neither a legal nor a moral claim to the reward. The learned Chief Justice held that [232] Clarke never accepted or intended to accept the offer in the proclamation, and, unless the mere giving of the information without such intention amounted in law to an acceptance of the offer or to performance of the condition, there was neither “acceptance” nor “performance”, and therefore there was no contract. I do not understand either of the learned judges who formed the majority to controvert this. But they held that Williams v Carwardine (1833) 4 B & Ad 621; 110 ER 590, has stood so long that it should be regarded as accurate, and that, so regarded, it entitled the respondent to judgment. As reported in the five places where it is found it is a difficult case to follow. I cannot help thinking that it is somewhat curtly reported. When the various reports in banc are compared, there are some discrepancies. But two circumstances are important. One is the pregnant question of Denman CJ as to the plaintiff’s knowledge of the handbill … The other circumstance is the stress placed on motive. [2.180]

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The Crown v Clarke cont. The Lord Chief Justice clearly attached importance to the answer given to his question. He, doubtless, finally drew the inference that, having knowledge of the request in the handbill, the plaintiff at last determined to accede, and did accede, to that request, and so acted in response to it, although moved thereto by the incentive supplied by her stings of conscience. Making allowance for what is in all probability an abridged report of what was actually said, I cannot help thinking, on the whole, that not only Denman CJ but also some at least of the other members of the court considered that the motive of the informant was not inconsistent with, and did not in that case displace, the prima facie inference arising from the fact of knowledge of the request and the giving of the information it sought. Motive, though not to be confused with intention, is very often strong evidence of that state of mind, both in civil and criminal matters. The evidentiary force of motive in the circumstances of Williams v Carwardine is no criterion of its force in the circumstances of any other case, and it can never usurp the legal place of intention. [233] If the decision in Williams v Carwardine went no further than I have said, it is in line with the acknowledged and settled theories of contract. If it goes so far as is contended for by the respondent, I am of opinion that it is opposed to unimpeachable authority … It is unquestionable – putting aside what are called formal contracts or quasi-contracts – that to create a contractual obligation there must be both offer and acceptance. It is the union of these which constitutes the binding tie, the obligatio. The present type of case is no exception. It is not true to say that since such an offer calls for information of a certain description, then, provided only information of that description is in fact given, the informant is entitled to the reward. That is not true unless the word “given” is interpreted as “given in exchange for the offer” – in other words, given in performance of the bargain which is contemplated by the offer and of which the offer is intended to form part. Performance in that case is the implied method of acceptance, and it simultaneously effects the double purpose of acceptance and performance. But acceptance is essential to contractual obligation, because without it there is no agreement, and in the absence of agreement, actual or imputed, there can be no contract … That acceptance is necessary in a case of this kind is recognised in General Accident Fire and Life Assurance Corp v Robertson [1909] AC 404 at 411, a case sufficiently analogous to be illustrative here, though of course the mode of acceptance was very different. That difference constantly arises because the offeror may always prescribe the method of acceptance. In Attorney-General (Trinidad) v Bourne [1895] AC 83 at 88, the method was to tender payment of a balance of a price. In other cases it may be the posting of a letter, or the dispatch of goods, or anything stipulated expressly or by implication, even by hanging out a flag, as suggested by Bramwell LJ in Household Fire Insurance Co v Grant (1879) 4 Ex D 216 at 233. The method indicated by the offeror may [234] be one which either does or does not involve communication to him of the acceptance in order to form the contract and create the obligation, however necessary information of the fact may be required before default in payment, that is, in performance by the offeror, can arise. [His Honour then referred to several authorities and continued:] The controlling principle, then, is that to establish the consensus without which no true contract can exist, acceptance is as essential as offer, even in a case of the present case where the same act is at once sufficient for both acceptance and performance. But acceptance and performance of condition, as shown by the judicial [235] reasoning quoted, involve that the person accepting and performing must act on the offer … Instances easily suggest themselves where precisely the same act done with reference to an offer would be performance of the condition, but done with reference to a totally distinct object would not be such a performance. An offer of £100 to any person who should swim 100 yards in the harbour on the first day of the year, would be met by voluntarily performing the feat with reference to the offer, but would not in my opinion be satisfied by a person who was accidentally or maliciously thrown 84

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The Crown v Clarke cont. overboard on that date and swam the distance simply to save his life, without any thought of the offer. The offeror might or might not feel morally impelled to give the sum in such a case, but would be under no contractual obligation to do so… [2.185] HIGGINS J: [241] I have been struck by the resemblance of the position to that of an action based on misrepresentation. The statement of claim must allege and show that the plaintiff acted in reliance on the misrepresentation. If the defendant can establish that the plaintiff did not rely on the misrepresentation, the plaintiff fails. In Smith v Chadwick (1882) 20 Ch D 27 at 44, Jessel MR said: “if the court sees on the face of” the statement “that it is of such a nature as would induce a person to enter into the contract, or would tend to induce him to do so, … the inference is, if he entered into the contract, that he acted on the inducement so held out, … but even then you may show that in fact he did not so act, … by showing that he avowedly did not rely upon” the misstatement [sic] “whether he knew the facts or not.” … I need not dilate at length on the now classic case of Carlill v Carbolic Smoke Ball Co. It is quite consistent with the view [242] which I have stated. The facts were not in dispute and one of the facts was that the plaintiff had bought the smoke balls on the faith of the advertisement. This important fact is stated again in the report on appeal; and it is just the fact which is not, and could not be, found under the circumstances of this case. My view is that Clarke did not act on the faith of, in reliance upon, the proclamation; and that although the exact fulfilment of the conditions stated in the proclamation would raise a presumption, that Clarke was acting on the faith of, in reliance upon, the proclamation, the presumption is rebutted by his own express admission … [2.190] STARKE J: [244] In my opinion the true principle applicable to this type of case is that unless a person performs the conditions of the offer, acting upon its faith or in reliance upon it, he does not accept the offer and the offeror is not bound to him. As a matter of proof any person knowing of the offer who performs its conditions establishes prima facie an acceptance of that offer. And probably … the performance of some of the conditions required by the offer also establishes prima facie an acceptance of that offer, but does not of course establish the right of the person so performing some of the conditions of the offer to the reward until he has completely performed them all according to the proper construction of the offer. From such facts an acceptance is probable but it is not, as was urged, “an absolute proposition of law” that one, who, having the offer before him, acts as one would naturally be induced to act, is deemed to have acted on the faith of or in reliance upon that offer. It is an inference of fact and may be excluded by evidence. The statements or conduct of the party himself uncommunicated to the other party, or the circumstances of the case, may supply that evidence. Ordinarily, it is true, the law judges of the intention of a person in making a contract by outward expression only by words or acts communicated between them. But when the offeror, as in the anomalous case under consideration, has dispensed with any previous communications to himself of the acceptance of the offer the law is deprived of one of the means by which it judges of the intention of the parties, and the performance of the conditions of the offer is not in all cases conclusive for they may have been performed by one who never hears of the offer or who never intended to accept it. Hence the statements or conduct of the party himself uncommunicated to the other party are admissible to show the circumstances under which an act, seemingly within the terms of the offer, was done and the inducement which [245] led to the act. In the present case the statements of the petitioner himself satisfied the Chief Justice that he did not act on the faith of or in reliance upon the offer and we are unable to disturb that finding. Appeal allowed.

[2.190]

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Extracts from Paterson, Robertson and Duke, Principles of Contract Law (2016, 5th ed), Ch 3 Communication of acceptance

The general rule [2.195] An acceptance generally has effect only when communicated to the offeror. 154

Bowen LJ suggested in Carlill v Carbolic Smoke Ball Co 155 that notification of acceptance is required because this establishes that the minds of the two parties have come together and formed a consensus. This rule means that a contract is formed when the offeree’s acceptance is received by the offeror. In Latec Finance Pty Ltd v Knight 156 Mr Knight signed a hire-purchase agreement relating to a television set. The document was expressed to operate as an offer by the hirer (Knight), which was irrevocable for a period of seven days and was not binding on the hire-purchase company until signed by the company. The company’s acceptance of Knight’s offer was noted on the document, but was not communicated to Knight. Knight found the set unsatisfactory and returned it to the dealer before any instalments were paid. The company sought to enforce the agreement. The New South Wales Court of Appeal observed that ordinarily a contract is not made until acceptance of an offer has been communicated. 157 An offeror may, however, expressly or impliedly dispense with the need for actual communication and will commonly do so in one of two ways. Firstly, the offeror may agree to treat the doing of an act as an effective acceptance. Unilateral contracts are always accepted by the doing of an act and bilateral contracts can also be formed in this way. 158 Secondly, the offeror may treat the despatch of an acceptance by a particular method as effective, whether or not the acceptance is received by the offeror. 159 The company argued that this case fell into the first category, with the act of signing the document to be treated as an effective acceptance. The court held that clear language would be required to support such a construction of the document because, if signing without notification were enough, it would give the company power to “keep the form in their office unsigned, and then play fast and loose as they pleased”. 160 The language of the clause did not require this interpretation and, accordingly, there was no contract between the parties.

The postal rule [2.200] Common law courts have long recognised an exception to the general rule stated

above in cases where the acceptance is expected to be sent by post. In such cases the acceptance is effective as soon as it is posted. 161 In England this rule has been held to apply where the parties must have contemplated that the acceptance might be sent by post. 162 In Tallerman &

154 155 156 157 158

Eg, Latec Finance Pty Ltd v Knight [1969] 2 NSWR 79; Batt v Onslow (1892) 13 LR (NSW) Eq 79. [1893] 1 QB 256. [1969] 2 NSWR 79. [1969] 2 NSWR 79, 81. See The Crown v Clarke (1927) 40 CLR 227, 233-4; Brogden v Metropolitan Railway Co (1877) 2 App Cas 666, 691.

159 160 161 162

See the discussion of the postal rule at [2.200]. [1969] 2 NSWR 79, 81, quoting Robophone Facilities Ltd v Blank [1966] 1 WLR 1428, 1432. Adams v Lindsell (1818) 1 B & A 681; 106 ER 250; Henthorn v Fraser [1892] 2 Ch 27. Henthorn v Fraser [1892] 2 Ch 27.

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Co Pty Ltd v Nathan’s Merchandise (Vic) Pty Ltd 163 Dixon CJ and Fullagar J appeared to take a more restrictive view when they said that “a finding that a contract is completed by the posting of a letter of acceptance cannot be justified unless it is to be inferred that the offeror contemplated and intended that his offer might be accepted by the doing of that act”. 164 In Bressan v Squires 165 Bowen CJ in Eq considered whether Dixon CJ and Fullagar J intended to narrow the rule to cases where the offeror appeared to intend that the action of posting should have the consequence of concluding the contract. He concluded that Dixon CJ and Fullagar J must not have intended to narrow the rule because they cited in support of their formulation Henthorn v Fraser, a case in which the broader rule was applied. 166 When applying the principle to the facts before them, however, Dixon CJ and Fullagar J said that the necessary inference could not be drawn because solicitors were “conducting a highly contentious correspondence” and so “one would have thought that actual communication would be regarded as essential to the conclusion of agreement on anything”. 167 This seemed to be an application of the narrower principle. 168 Where the postal rule does apply, it has the effect that a contract is made when the acceptance is posted, even if it is received some time later or is lost in the post. 169 It also means that the contract is formed at the place where the acceptance is posted. Why should posted acceptances be effective on sending, rather than on receipt? One explanation is that one of the parties must bear the risk of the acceptance being lost in the post and the courts have simply created an arbitrary rule to resolve this practical problem. 170 The rule requiring actual communication of an acceptance prejudices the offeree, who has no way of knowing whether the acceptance has reached the offeror and therefore no way of knowing whether a contract has been formed. The postal rule, on the other hand, places the offeror in a difficult position because once the acceptance is posted, the offeror is bound without knowing it. If the letter of acceptance is lost in the post, the offeror may act on the assumption that there is no contract. Since one of the parties must bear the risk, the common law courts have chosen to place the burden on the offeror. French and German law, on the other hand, burden the offeree, rather than the offeror, by unconditionally requiring communication in all cases. 171 The civil law approach has been adopted in the Vienna Convention 172 and the UPICC, 173 both of which provide that an acceptance will be effective only when the “indication of assent reaches the offeror”. Greig and Davis suggest that the English courts chose the time of posting on the basis that it is the moment at which “the necessary consensus could be shown to exist”. 174 The rule was explained in some of the early cases on the basis that the post office is 163 164 165 166 167 168 169 170 171 172 173 174

(1957) 98 CLR 93. (1957) 98 CLR 93, 111-12. [1974] 2 NSWLR 460. [1974] 2 NSWLR 460, 461-2. (1957) 98 CLR 93, 111-12. See also Nunin Holdings Pty Ltd v Tullamarine Estates Pty Ltd [1994] 1 VR 74. Household Fire and Carriage Accident Insurance Co Ltd v Grant (1879) LR 4 Ex D 216. Peel, Treitel’s Law of Contract (13th ed, 2011), [2-029]; Atiyah, An Introduction to the Law of Contract, (5th ed, 1995), p 71. Wheeler and Shaw, Contract Law (1994), p 217. See also Zweigert and Kötz, Introduction to Comparative Law (3rd ed, 1998), pp 356-64. United Nations Convention on International Contracts for the Sale of Goods (1980), article 18. UNIDROIT Principles of International Commercial Contracts 2010, article 2.1.6(2). Greig and Davis, The Law of Contract (1987), pp 310, 314. [2.200]

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the agent of both parties and therefore receives the letter of acceptance as agent of the offeror, 175 but it has since been held that the post office is not the agent of either party. 176 More elaborate justifications for the postal rule have also been offered, 177 but no explanation is universally accepted.

Scope of the postal rule [2.205] With the advent of electronic communications, it might have been thought that the

postal rule would become an anachronism, which would have little application to modern methods of contracting. The postal rule has not, however, been confined to the post. The courts extended the postal rule to telegrams, on the basis that telegrams were given to the post office and delivered to the recipient in essentially the same way as posted letters. 178 The courts then sought to confine the postal rule, distinguishing forms of instantaneous communication. In Entores v Miles Far Eastern Corp 179 the English Court of Appeal held that the postal rule should not apply to instantaneous forms of communication, such as the telephone or telex. This decision has been followed by Australian courts in relation to telephone 180 and telex communications 181 and by the House of Lords in Brinkibon Ltd v Stahag Stahl und Stahlwarenhandelsgesellschaft mbH 182 in relation to telex. Brinkibon was concerned with a contract, made between an English buyer and an Austrian seller, for the sale of steel bars. The buyer sought to enforce the contract in the English courts and sought leave to serve a writ outside the jurisdiction. Under the Rules of the Supreme Court, leave could be granted where the litigation concerned a contract made within the jurisdiction. The contract was made by an exchange of telex messages between the buyers in London and the sellers in Vienna. After lengthy negotiations by telephone and telex the buyers sent a telex to Vienna accepting the terms of sale offered by the sellers. The House of Lords held that the contract was made in Vienna, where the acceptance was received. Lord Wilberforce said the general rule is that a contract is formed when acceptance is communicated to the offeror. It therefore “appears logical” that a contract should also be formed where acceptance is communicated to the offeror. 183 Where the postal rule applies, the acceptance is effective when and where it is placed in the hands of the post office. In the case of instantaneous communication, including telex, the general rule will usually apply. The situation may be different, according to Lord Wilberforce, where the message is sent or received through a third party, where it is sent out of office hours or is not intended to be read

175 176 177

178 179 180 181 182 183 88

See Household Fire and Carriage Accident Insurance Co Ltd v Grant (1879) LR 4 Ex D 216, 221. Henthorn v Fraser [1892] 2 Ch 27, 33, 35-6. See, eg, Evans, “The Anglo-American Mailing Rule: Some Problems of Offer and Acceptance in Contracts by Correspondence” (1966) 15 International and Comparative Law Quarterly 553; Gardner, “Trashing with Trollope: A Deconstruction of the Postal Rules” (1992) 12 Oxford Journal of Legal Studies 170. Cowan v O’Connor (1888) 20 QBD 640; Bruner v Moore [1904] 1 Ch 305. See also Leach Nominees Pty Ltd v Walter Wright Pty Ltd [1986] WAR 244. [1955] QB 327. Aviet v Smith and Searls Pty Ltd (1956) 73 WN (NSW) 274; Dewhurst (WA) and Co Pty Ltd v Cawrse [1960] VR 278, 282; Hampstead Meats Pty Ld v Emerson and Yates Pty Ltd [1967] SASR 109. Express Airways v Port Augusta Air Services [1980] Qd R 543. [1983] 2 AC 34. [1983] 2 AC 34, 41. [2.205]

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immediately. “No universal rule can cover all such cases; they must be resolved by reference to the intentions of the parties, by sound business practice and in some cases by a judgment where the risks should lie.” 184 Lord Fraser noted that a telex sent to a large firm is not really instantaneous, since it must pass from the telex operator to the responsible person in the firm. 185 It is, however, convenient to treat it as a form of instantaneous communication for three reasons. 186 First, no difficulty or complaint has arisen from the decision in Entores v Miles Far Eastern Corp. Secondly, it is the responsibility of the recipient to arrange for the prompt handling of messages within his or her office. Thirdly, the sender is more likely to be aware that an attempt to send a message has been unsuccessful than the recipient is to be aware that an unsuccessful attempt has been made. Lord Brandon also thought that commercial expediency justified the postal rule, but did not justify extending it to forms of instantaneous communication such as telephone or telex. 187 The real issue faced by the House of Lords in Brinkibon was whether or not an English company could sue an Austrian supplier in an English court. In order to resolve this question, the Rules of the Supreme Court required the House of Lords to decide whether the contract had been made in England. As John Wightman has observed, it is unfortunate that the technical rules of offer and acceptance are employed in cases such as Brinkibon to resolve jurisdictional questions. 188 This approach is also routinely followed in Australia. 189 The law of contract is not well equipped to determine where a contract has been made, since the place of formation is not relevant to the general law of contract, but only to jurisdictional questions. 190 By resolving these cases by reference to technical rules of formation, the courts cannot explicitly take account of the policy considerations relevant to the underlying issue, which involve the relative convenience and expense of the case being heard in each of the two jurisdictions. The effect of applying the technical rules of contract formation to the place of formation issue will often lead to an arbitrary result, as it did in Brinkibon. The contract in Brikinbon was concluded after lengthy communications between the two countries and it just happened that the last communication was received in Vienna. The House of Lords resolved the case by applying a technical “general rule”, but left the way open for future cases to be decided differently by observing that “no universal rule can cover all such cases”. 191

184 185 186 187 188 189 190 191

[1983] 2 AC 34, 42. [1983] 2 AC 34, 43. [1983] 2 AC 34, 43. [1983] 2 AC 34, 48. Wightman, “Does Acceptance Matter?” in Adams (ed), Essays for Clive Schmitthoff (1983). See, eg, Tallerman & Co Pty Ltd v Nathan’s Merchandise (Vic) Pty Ltd (1957) 98 CLR 93 and the cases referred to above. Wightman, “Does Acceptance Matter?” in Adams (ed), Essays for Clive Schmitthoff (1983), p 145. [1983] 2 AC 34, 42. [2.205]

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Extracts from Paterson, Robertson and Duke, Contract: Cases and Materials (2016, 13th ed), Ch 3

Silence and acceptance inferred from conduct

Felthouse v Bindley [2.210] Felthouse v Bindley (1862) 11 CB (NS) 869; 142 ER 1037 Court of Common Pleas – Rule nisi for nonsuit. [FACTS: After some discussion the plaintiff wrote to his nephew, John, offering to buy the latter’s horse for £30 15s 0d, adding: “If I hear no more about him I shall consider the horse mine at £30 15s 0d.” The nephew did not answer this letter but six weeks later an auctioneer employed by John to sell his farming stock sold the horse. John had directed the auctioneer not to sell the horse, saying that it had already been sold, but the auctioneer sold it by mistake. The plaintiff sued the auctioneer in conversion and obtained the verdict. The defendant obtained a rule nisi to enter a nonsuit.] WILLES J: [875] I am of opinion that the rule to enter a nonsuit should be made absolute. The horse in question had belonged to the plaintiff’s nephew, John Felthouse. In December 1860, a conversation took place between the plaintiff and his nephew relative to the purchase of the horse by the former. The uncle seems to have thought that he had on that occasion bought the horse for £30, the nephew that he sold it for 30 guineas; but there was clearly no complete bargain at that time. On 1 January 1861, the nephew writes: I saw my father on Saturday. He told me that you considered you had bought the horse for £30. If so, you are labouring under a mistake, for 30 guineas was the price I put upon him, and you never heard me say less. When you said you would have him, I considered you were aware of the price. To this his uncle replies on the following day: “Your price, I admit, was 30 guineas. I offered £30; never offered more: and you said the horse was mine. However, as there may be a mistake about him, I will split the difference. If I hear no more about him, I consider the horse mine at £30 15s.” It is clear that there was no complete bargain on 2 January; and it is also clear that the uncle had no right to impose upon the nephew a sale of his horse for £30 15s unless he chose to comply with the condition of writing to repudiate the offer. The nephew might, no doubt, have [876] bound his uncle to the bargain by writing to him: the uncle might also have retracted his offer at any time before acceptance. It stood an open offer: and so things remained until 25 February, when the nephew was about to sell his farming stock by auction. The horse in question being catalogued with the rest of the stock, the auctioneer (the defendant) was told that it was already sold. It is clear, therefore, that the nephew in his own mind intended his uncle to have the horse at the price which he (the uncle) had named – £30 15s – but he had not communicated such his intention to his uncle, or done anything to bind himself. Nothing, therefore, had been done to vest the property in the horse in the plaintiff down to 25 February, when the horse was sold by the defendant. It appears to me that, independently of the subsequent letters, there had been no bargain to pass the property in the horse to the plaintiff, and therefore that he had no right to complain of the sale. Then, what is the effect of the subsequent correspondence? The letter of the auctioneer amounts to nothing. The more important letter is that of the nephew, of 27 February, which is relied on as shewing that he intended to accept and did accept the terms offered by his uncle’s letter of 2 January. That letter, however, may be treated either as an acceptance then for the first time made by him, or as a memorandum of a bargain complete before 25 February, sufficient within the Statute of Frauds. It seems to me that the former is the more likely construction: and, if so, it is clear that the plaintiff cannot recover. But, assuming that there had been a complete parol bargain before 25 February, and that the letter of the 27th was a mere expression of the terms of that prior bargain, and not a bargain then for the first time concluded, it would be directly [877] contrary to the decision of the Court of Exchequer in Stockdale v Dunlop (1840) 6 M & W 224; 90

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Felthouse v Bindley cont. 151 ER 391, to hold that that acceptance had relation back to the previous offer so as to bind third persons in respect of a dealing with the property by them in the interim. Rule absolute.

Empirnall Holdings v Machon Paull Partners [2.215] Empirnall Holdings Pty Ltd v Machon Paull Partners Pty Ltd (1988) 14 NSWLR 523 Court of Appeal of the Supreme Court of New South Wales – Appeal from Smart J. [FACTS: Empirnall, a property developer, retained architects Machon Paull (Machon) to draw plans, obtain approvals, and do other work in connection with a property redevelopment. Empirnall then asked Machon Paull if they would be interested in acting as project manager for the development. Machon Paull replied in the affirmative. Further work was done and the architects requested a progress payment and the execution by Empirnall of a contract for the works. They were told to submit the progress claim but were informed that “Mr Jury” (a director and the major shareholder of Empirnall) “does not sign contracts”. On 3 October 1983 the architects sent a letter to Empirnall which stated: “As discussed we enclose two copies of the building cost plus contract … and we ask that you arrange for them to be signed and return one copy as soon as possible.” Work continued and on 15 October 1983 Machon Paull submitted a second claim for payment which was duly paid. On 19 October 1983 they wrote to Empirnall’s agent in the following terms: We are in receipt of the building approval and a copy of the conditions are enclosed for your information … With reference to our letter dated 3 October 1983, concerning the return of the signed contracts, we are proceeding on the understanding that the conditions of the contract are accepted by you and works are being conducted in accordance with those terms and conditions. By the time the matter reached the Court of Appeal, the only question was whether there was a contract in the terms of the draft agreement sent by Machon Paull. This draft contained a provision charging the architects’ fees and costs on the land the subject of the development. Empirnall had admitted that the sum claimed was owing under an oral contract.] McHUGH JA: [534] Under the common law theory of contract, the silent acceptance of an offer is generally insufficient to create any contract … The objective theory of contract requires an external manifestation of assent to an offer. Convenience, and especially commercial convenience, has given rise to the rule that the acceptance of the offer should be communicated to the offeror. After a reasonable period has elapsed, silence is seen as a rejection and not an acceptance of the offer. Nevertheless, communication of acceptance is not always necessary. The offeror will be bound if he dispenses with the need to communicate the acceptance of his offer. However, an offeror cannot erect a contract between himself and the offeree by the device of stating that unless he hears from the offeree he will consider the offeree bound. He cannot assert that he will regard silence as acceptance: Felthouse v Bindley (1862) 11 CB (NS) 869 at 875; 142 ER 1037 at 1040. The common law’s concern with the protection of freedom is opposed to the notion that a person must take action to reject an uninvited offer or be bound by contractual obligations. Nevertheless, the silence of an offeree in conjunction with the other circumstances of the case may indicate that he has accepted the offer. The offeree may be under a duty to communicate his rejection of an offer. If he fails to do so, his silence will generally be regarded as an acceptance of the offer sufficient to form a contract. Many cases decided in United States jurisdictions have held that the custom of the trade, the course of dealing, or the previous relationship between the parties imposed a [2.215]

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Empirnall Holdings v Machon Paull Partners cont. duty on the offeree to reject the offer or be bound. [535] But more often than not the offeree will be bound because, knowing of the terms of the offer and the offeror’s intention to enter into a contract, he has exercised a choice and taken the benefit of the offer. In Laurel Race Course Inc v Regal Construction Co Inc 333 A 2d 319 (1975) a contractor proposed that it would do additional work upon the basis that, if the work was the result of its defective workmanship under the original contract, there would be no charge. Otherwise the work would be charged on a “cost-plus” basis. The building owner made no reply to this offer. The contractor commenced work on the job to the knowledge of the building owner who was held bound by the terms of the offer. Speaking for the Court of Appeals for Maryland, Judge Levine said (at 329): Where the offeree with reasonable opportunity to reject offered services takes the benefit of them under circumstances which would indicate to a reasonable person that they were offered with the expectation of compensation, he assents to the terms proposed and thus accepts the offer. This formulation states acceptance in terms of a rule of law. However, the question is one of fact. A more accurate statement is that where an offeree with a reasonable opportunity to reject the offer of goods or services takes the benefit of them under circumstances which indicate that they were to be paid for in accordance with the offer, it is open to the tribunal of fact to hold that the offer was accepted according to its terms. A useful analogy is to be found in the “ticket cases” where an offeree, who has or ought to have knowledge of the terms of a contract of carriage or bailment, is generally bound unless he raises objection: compare Thornton v Shoe Lane Parking Ltd [1971] 2 QB 163 at 169 and MacRobertson Miller Airline Services v Commissioner of State Taxation (WA) (1975) 133 CLR 125 at 136–40. The ultimate issue is whether a reasonable bystander would regard the conduct of the offeree, including his silence, as signalling to the offeror that his offer has been accepted … In [the] circumstances Empirnall’s acceptance of the work, when [536] considered objectively, should be taken as an acceptance of the work on the terms and conditions offered by Machon. The case is not so much one of acceptance by silence as one of taking the benefit of an offer with knowledge of its terms and knowledge of the offeror’s reliance on payment being made in return for his work. Since the work for which payment is outstanding was carried out after 19 October 1983, there is no need to distinguish between the positions before and after that date. Empirnall relied on Mr Abrahams’ statement that “Eric does not sign contracts”. However, this statement supports, rather than weakens, Machon’s case. The objection was not to the terms and conditions but to the manner of acknowledging them. But, however this may be, the letter of 19 October sent one month later made clear what was the basis on which Machon was offering to perform the work. Since Empirnall has taken the benefit of the work with knowledge of the terms on which it was offered, an objective bystander would conclude that Empirnall had accepted the offer on those terms and conditions. [KIRBY P delivered a judgment to substantially the same effect. SAMUELS JA agreed with McHUGH JA.] Appeal dismissed.

Brambles Holdings v Bathurst City Council [2.220] Brambles Holdings Ltd v Bathurst City Council [2001] NSWCA 61; (2001) 53 NSWLR 153. Supreme Court of New South Wales, Court of Appeal – Appeal from Hodgson CJ in Equity. 92

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Brambles Holdings v Bathurst City Council cont. [FACTS: In 1982 Brambles, the defendant/appellant, and the Council, the plaintiff/respondent, entered into a contract for the defendant to manage the plaintiff’s Solid Waste Disposal Depot. In about 1985 the defendant started to receive liquid waste at the Depot, and to charge for its acceptance. The defendant retained this money. Before the first contract between the parties expired, the defendant tendered for a new contract and the plaintiff accepted the tender. However, after the expiration of the first contract on 1 November 1989, the parties continued to undertake negotiations in relation to the terms of the second contract. On 20 February 1990 the plaintiff wrote to the defendant stating that it was “appropriate” for the defendant to increase liquid waste fees to a certain level (1.1 cents/litre) upon completion of a liquid waste disposal area. The parties entered into the second contract on 12 July 1990. Clauses 21 and 22 of the second contract specified the fee to be charged for “general commercial waste” and required a portion of that fee to be remitted to the plaintiff. On 19 September 1991 the plaintiff wrote to the defendant stating that it had resolved to increase liquid waste fees and that “additional income” should be placed in a fund for the establishment of a Liquid Waste Treatment Plant. The defendant responded in a letter dated 3 October 1991, by denying that the contract between the parties covered liquid waste. The defendant proceeded to charge liquid waste fees at the rate set out in the plaintiff’s mid-September 1991 letter, but continued to retain the moneys. In 1996 the plaintiff sued the defendant in relation to the retained liquid waste fees. The trial judge entered judgment in favour of the plaintiff, and ordered the defendant to pay damages to the plaintiff.] MASON P: [155] I agree with Ipp AJA’s reasons as to the disposition of the contractual claim. As Heydon JA demonstrates, this case shows the difficulties of pressing too far classical theory of contract formation based upon offer and acceptance (see also Pobjie Agencies Pty Ltd v Vinidex Tubemakers Pty Ltd [2000] NSWCA 105). HEYDON JA:

The trial judge’s reasoning [2.225] [161] [The trial judge] held that the 12 July 1990 agreement, in establishing fees for general commercial waste under cl 21, established fees for liquid waste, and prohibited the defendant from charging any other fees. That meant that the defendant was in breach of contract from 1 October 1991 on, but the Council could not point to any loss stemming solely from breach of the 12 July 1990 contract. The trial judge found that the loss could be recovered by reason of the second stage in his reasoning. The second stage turned on a conclusion that the letter of 19 September 1991 was an offer which, though it was not accepted by the defendant’s letter of 3 October 1991, was accepted by the defendant’s conduct in charging the rates specified. This entitled the defendant to charge 6 cents, but only retain 1.1 cents. He held it was entitled to retain 1.1 cents because that was the figure permitted by the Council’s letter of 20 February 1990 once the condition stipulated – “completion of an appropriate liquid waste disposal area” – was satisfied, which he held was the case…

The 12 July 1990 contract [2.230] [162] The defendant’s first line of attack on the trial judge’s reasoning related to his findings about the 12 July 1990 contract …. [163] The defendant submitted that the trial judge “failed to apply conventional and accepted principles of the law of contract”. He was said to have done so in three respects: failure to apply the principles as to the implication of terms; straining the contractual language; and failing to have proper regard to the factual matrix. An evaluation of these criticisms depends in part on bearing in mind what [2.230]

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Brambles Holdings v Bathurst City Council cont. are the conventional and accepted principles of the law of contract relating to the problems in this case. These will be noted before the three criticisms are discussed. To some extent the defendant’s arguments turned on appeals to the conduct of the parties before the contract was made on 12 July 1990, to their conduct after the contract was made on that date, to their subjective beliefs and to submissions about the implication of terms. The first relevant principle of law is that pre-contractual conduct is only admissible on questions of construction if the contract is ambiguous and if the pre-contractual conduct casts light on the genesis of the contract, its objective aim, or the meaning of any descriptive term: Codelfa Construction Pty Ltd v State Rail Authority of New South Wales (1982) 149 CLR 337 at 347–52. [164] The second relevant principle is that post-contractual conduct is admissible on the question of whether a contract was formed: Howard Smith & Co Ltd v Varawa (1907) 5 CLR 68 at 77; Barrier Wharfs Ltd v W Scott Fell & Co Ltd (1908) 5 CLR 647 at 668, 669 and 672; B Seppelt & Sons Ltd v Commissioner for Main Roads (1975) 1 BPR [97011] at 9149 and 9154–6; Film Bars Pty Ltd v Pacific Film Laboratories Pty Ltd (1979) 1 BPR [97023] at 9255. The third relevant principle is that post-contractual conduct is not admissible on the question of what a contract means as distinct from the question of whether it was formed. As explained by Priestley JA (Meagher JA agreeing) in Hide & Skin Trading Pty Ltd v Oceanic Meat Traders Ltd (1990) 20 NSWLR 310 at 326–30, the status of the relevant High Court authorities is unclear: hence unless it is demonstrated that the later decisions of the Victorian Full Court and Court of Appeal against admissibility, Ryan v Textile Clothing & Footwear Union of Australia [1996] 2 VR 235 and FAI Traders Insurance Co Ltd v Savoy Plaza Pty Ltd [1993] 2 VR 343, are clearly wrong or they are overruled, they should be followed in New South Wales. No attempt was made to demonstrate that they are clearly wrong. The fourth relevant principle is that the construction of a contract is an objective question for the court, and the subjective beliefs of the parties are generally irrelevant in the absence of any argument that a decree of rectification should be ordered or an estoppel by convention found. No argument of these kinds was advanced in this case. The fifth relevant principle is that terms may be implied in one of four ways. The trial judge set out this orthodox classification in his unreported interlocutory judgment in Carlton & United Breweries Ltd v Tooth & Co Ltd, which was quoted by Young J, the trial judge in that case ((1986) 7 IPR 581 at 605–6): A more precise classification of the different types of implied terms was given by Hodgson J in his first interlocutory judgment in the current proceedings. His Honour set out four classes of implied terms, the first two of which are in the class of terms implied in law, the second two the implied terms in fact. His Honour said: There is a spectrum of different types of implied terms covering, inter alia, the following: (i) Implications contained in the express words of the contract: see Marcus Clarke (Vic) Ltd v Brown (1928) 40 CLR 540 at 553–4. (ii) Implications from the “nature of the contract itself” as expressed in the words of the contract: see Liverpool City Council v Irwin [1977] AC 239. (iii) Implications from usage (for example, mercantile contracts). (iv) Implications from considerations of business efficacy: see BP Refinery Westernport) Pty Ltd v Hastings Shire Council (1977) 52 ALJR 20 at 26; Codelfa Construction Pty Ltd v State Rail Authority of NSW (1982) 149 CLR 337. The reasoning of the trial judge conformed to these principles. The submissions of the defendant did not. [165] 94

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(a) Implication of terms to give business efficacy The criticism based on failure to apply the principles as to the implication of terms fastened on the fact that the trial judge described what he did as a “drawing out of what is implied by the language of the contract itself”. The defendant cited the leading cases about implying terms to give business efficacy and developed arguments designed to show that the terms found by the trial judge were not reasonable, equitable, necessary or obvious. This criticism is entirely baseless. The trial judge made it plain that he was not implying a term to give business efficacy. He said: “This is not an implication of a term by operation of law or on the basis of business efficacy; but rather the drawing out of what is implied by the language of the contract itself.” The trial judge was indicating that, of the four implications he had referred to in Carlton & United Breweries Ltd v Tooth & Co Ltd, he was not making implication (ii) or (iv), but (i). Despite the number of occasions on which the defendant said that what the trial judge “was really doing was implying a term and on a basis that didn’t comply with the usual rules”, the processes he employed were processes of construction.

(b) Straining the contractual language? The second criticism was that the trial judge’s construction strains the language of the contract. The first substantive argument advanced by the defendant in support of this criticism was put thus (written submissions para 30): To suggest, as his Honour does, that liquid waste is “general commercial waste” within the meaning of cl 21 is to strain the language of the Contract. The term “general commercial waste” is not defined by the Contract. It is a descriptive term and seemingly is a sub-species of “trade refuse” a term which is defined to include liquid waste. This suggests that the term “general commercial waste” was not intended to include liquid waste. The following matters support the trial judge’s view that “general commercial waste” includes “liquid waste”. Cl 21 deals with “refuse”, and contemplates “refuse” as falling into two categories – “commercial and industrial waste” and “domestic garbage and other refuse”. Cl 2(b) defines “trade refuse” as including liquid refuse, and hence liquid waste, from any industrial, chemical, trade or business process or operation. Cl 2(d) defines “other wastes” as including liquids. If “trade refuse” includes liquid waste, it would seem that the word “refuse” in cl 21 also includes liquid waste. And if the expression “other wastes” includes liquid waste, it would seem that “general commercial waste” includes liquid waste. Cl 6 obliged the defendant to accept “rubbish, refuse … and trade refuse”: it was common ground that that expression included liquid waste. It would be strange if cl 21 would contemplate the Council levying fees and charges for some categories of “refuse” delivered pursuant to cl 6, but not others (ie liquid waste). Further, the defendant was obliged by cl 21 to collect fees and charges levied for “refuse”, but not refuse which was “garbage, trade refuse or other wastes deposited at the depot for or on behalf of the Council”. Since “trade refuse” and “other wastes” are expressions which include “liquid waste”, and since those types of refuse when delivered for or on behalf of the Council are excluded from the general category of “refuse”, the drafting seems to [166] contemplate that “refuse” delivered otherwise than for or on behalf of the Council includes “trade refuse” and “other wastes”, and hence liquid waste. Finally, the words “general commercial waste” in their ordinary meaning can include liquid waste, and nothing in the context in which they are used points against the application of that meaning. The next argument which the defendant put was that the charge for “general commercial waste” was a rate per cubic metre, “and the adoption of that unit of measurement highlights that the parties did not intend liquid waste to be included within the concept of ‘general commercial waste’. When rates were set in relation to liquid waste by the parties, units of liquid measurement were used (see, eg 2/334; 3/528 and 3/604).” One cubic metre is a measure of volume. So is one gallon or one litre. Only elementary calculations are needed to convert one into [2.230]

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Brambles Holdings v Bathurst City Council cont. another. Of the three evidentiary references given, the second does not state any unit of measurement. The first, which is a reference to the letter of 20 February 1990, uses gallons or litres as an alternative, which scarcely points decisively against cubic metres being regarded as a measurement for liquids; in any event the admissibility of that letter on the issue of construing the 12 July 1990 contract, even if it can be regarded as part of the “surrounding circumstances”, appears to be forbidden by the principles stated in Codelfa Construction Pty Ltd v State Rail Authority of New South Wales (1982) 149 CLR 337 at 347–52. The letter does not evidence the genesis or objective aim of the 12 July 1990 contract. Nor does it point clearly towards any identification of “the meaning of a descriptive term”, as discussed at 349 and 351. On the defendant’s case, the 20 February 1990 letter has nothing to do with the 12 July 1990 contract. Further, surrounding circumstances are not to be examined unless the contractual words to be construed are ambiguous. Counsel for the defendant denied any material ambiguity in the 12 July 1990 contract: he said orally that it was “very clearly drafted” and “clear in its terms to the extent that it is primarily concerned at least in relation to the charging and retention of fees [for] dry waste”. Counsel for the defendant also said in writing: “There was no ambiguity resting either in the construction or interpretation of the contract or the words used.” The third evidence reference given by the defendant is to the letter of 19 September 1991 from the Council to Mr Landers, which spoke of rates per litre. A better reference would have been to the corresponding part of the letter sent on the same day to the defendant. The problem is that post-contractual events are not admissible on questions of construction. The defendant then argued (para 31): It is also significant that a particular rate is specified in relation to “general commercial waste”, namely, $3.00/m3 which does not appear to bear any relationship to the amount charged by Brambles from time to time in relation to liquid waste. So far as the higher charges postdate 12 July 1990, they are inadmissible on the question of construing the 12 July 1990 contract. So far as they predate it, they are inadmissible because they do not appear to be part of the background circumstances of which account can be taken on the question of construing the contract, which is in any event not ambiguous. The terms of the 12 July 1990 contract were subject to negotiation from 8 June 1989 until 12 July 1990. The defendant then submitted (para 31): His Honour’s construction of the Contract is also inconsistent with what the parties subjectively believed the Contract covered: Air Great Lakes Pty Ltd v KS Easter (Holdings) Pty Ltd (1985) 2 NSWLR 309, 330. [167] A memorandum of 20 December 1989 (2/317) demonstrates that Council was of the view that the Contract did not cover fees for liquid waste. The letter of 3 October 1991 (3/614) suggests that Brambles was of the view that the Contract did not concern liquid waste disposal at all. First, the passage referred to in the case cited is not authority for using the parties’ subjective beliefs about the construction of the contract as a guide to its construction. The passage rather deals with the different topic of the parties’ intention to effect legal relations, and the very limited role which a subjective intention not to contract has. Secondly, the memorandum of 20 December 1989 at most shows what the Council thought the predecessor to the 12 July 1990 contract, namely the 1982 deed, covered; it says nothing at all about what the 12 July 1990 contract would cover. Thirdly, the letter of 3 October 1991 is post-contractual conduct, and not admissible on question of construction ….

Failure to attend to the factual matrix? [2.235] … In any event, whatever might flow from the factual matrix, it cannot be resorted to unless the 12 July 1990 contract is ambiguous: it is not. 96

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Brambles Holdings v Bathurst City Council cont. [168] For the above reasons the trial judge’s conclusions about the 12 July 1990 contract are correct. It should be noted that there is some evidence that in 1990 and 1991 both the Council and the defendant did not share his conclusions, but in the absence of any argument for a decree of rectification or for an estoppel by convention the actual opinions of the parties are irrelevant …

Acceptance of the 19 September 1991 offer by conduct [2.240] [170] … [The submissions of the appellant] boil down to three propositions. First, the 19 September 1991 letter was not an offer. Secondly, if it was, it was rejected on 3 October 1991 and was not thereafter available for acceptance by conduct; and, even if it was available for acceptance, the conduct did not result in a completed agreement. Thirdly, even if there was a completed agreement, there was no consideration.

(a) Was the 19 September 1991 letter an offer? … [171] There is much to be said for the view that the 19 September 1991 letter was not an offer, or cannot have been intended to affect legal relations by contract. That is because to some extent the letter does not take the form of proposing a particular course for examination by the defendant with a view to the defendant choosing between acceptance or rejection in the light of that examination. Rather it sets out a resolution permitting fees to rise, and then peremptorily requests the defendant to charge those fees. To that extent the letter uses the language of command. Not only does the present point not appear to have been argued below, it was not pleaded: para 4 of the Amended Defence is a bare denial of the relevant paragraphs of the Council’s Summary of Contentions. The point is one which, even though the former Commercial Division may not have been a court of strict pleading, might have taken the Council by surprise, and hence ought to have been pleaded either under Pt 15 r 13(2)(b) of the Supreme Court Rules or by reason of conventional practice in that Division. It is a point on which evidence might have been called. In the circumstances it should not be entertained in this Court.

(b) Was the 19 September 1991 offer rejected by the 3 October 1991 letter so as to render it incapable of acceptance and, if it was, does that prevent it from forming the basis of a contract as a result of the sending of the 19 September 1991 offer and the defendant’s conduct in charging higher fees? … The 19 September 1991 letter concluded with a proposal that the new liquid waste fees (presumably the increased part, ie net of what the defendant [174] was able to retain) be paid in accordance with the cl 22 regime which had hitherto only applied to waste deposited by the defendant.

What on an objective construction was the reaction of the 3 October 1991 letter to the 19 September 1991 offer? [2.245] The 3 October 1991 letter did not purport to terminate all negotiations with the Council and it invited further communications. But, in two respects, it rejected the assumptions or proposals contained in the 19 September 1991 letter. First, the 3 October 1991 letter, the author of which was probably operating on the subjective assumption that the defendant could retain only the rate stipulated in the 25 June 1991 letter, which was the rate which the defendant was receiving at that time, made the point that the defendant could not continue to provide the service at that rate, because that rate did not make the service “viable”. When the 3 October 1991 letter said that the defendant was seeking “Adequate tip fees for the work involved in providing for liquid disposal”, it was rejecting what it was probably taking the Council to be offering – 0.3 cents per litre. But, even when the letter is read through the eyes of a reasonable [2.245]

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Brambles Holdings v Bathurst City Council cont. bystander, who must be taken to have knowledge of the fact that, as the trial judge found, on the true construction of the 9 January–20 February 1990 and 25 June 1991 letters, the Council was willing to let the defendant charge 1.1 cents per litre, the 3 October 1991 letter is a rejection of the Council’s offer to let it retain only 1.1 cents per litre. Secondly, the 3 October 1991 letter also made it plain that it did not accept that there was any contractual regime in place so far as liquid waste was concerned … [175] According to the defendant, the effect of the rejection of the 19 September 1991 offer was that it ceased to have operative effect unless it was later revived in some way, and it was not. Hence it was not capable of being accepted by conduct … [176] The defendant’s contention that the rejection of the Council’s offer meant that it was no longer capable of acceptance by conduct, and its related contention that its conduct did not constitute acceptance, depend heavily on the view that offer and acceptance analysis must invariably be employed in reaching decisions about the formation of contracts. While the process by which many contracts are arrived at is reducible to an analysis turning on the making of an offer, the rejection of the offer by a counter-offer and so on until the last counter-offer is accepted, that analysis is neither sufficient to explain all cases nor necessary to explain all cases. Offer and acceptance analysis does not work well in various circumstances. One example is a contract for the transportation of passengers on mass public transport (MacRobertson Miller Airline Services v Commissioner of State Taxation (Western Australia) (1975) 133 CLR 125 at 136–40). Another is the contract between competitors in a regatta: though they did not communicate with each other but only with the organiser of the regatta, they are bound by their conduct in “entering for the race, and undertaking to be bound by [the] rules to the knowledge of each other” (Clarke v Earl of Dunraven (The “Satanita”) [1897] AC 59 at 63). That case was applied in Raguz v Sullivan [2000] NSWCA 240 at [65] – [67]. Another example concerns the exchanges of contracts to sell land, which are hard to analyse in offer and acceptance terms; despite that Lord Greene MR observed of the practice: “Parties become bound by contract when, and in the manner in which, they intend and contemplate becoming bound. It is a question of the facts of each case …” (Eccles v Bryant [1948] 1 Ch 93 at 104). Another example concerns simultaneous manifestations of consent (Horst K Lücke “Striking A Bargain” (1962) 1 Adel LR 293 at 295–9). Another example concerns contracts between numerous parties, or even two parties, negotiated at meetings but not assented to until each party executes counterparts. Another is where the contract is made through a single broker acting for both parties. Another is where the parties are deadlocked and they agree to submit to a solution reached by a third party. In New Zealand Shipping Co Ltd v AM Satterthwaite & Co Ltd [1975] AC 154 at 167, Lord Wilberforce, in delivering the majority advice of the Privy Council about a bargain evidenced by a bill of lading between a shipper and a stevedore made through a carrier as agent, said: It is only the precise analysis of this complex of relations into the classical offer and acceptance, with identifiable consideration, that seems to present difficulty, but this same difficulty exists in many situations of daily life, eg sales at auction; supermarket purchases; boarding an omnibus; purchasing a train ticket; tenders for the supply of goods; offers of rewards; acceptance by post; warranties of authority by agents; manufacturers’ guarantees; gratuitous bailments; bankers’ commercial credits. These are all examples which show that English law, having committed itself to a rather technical and schematic doctrine of contract, in application takes a practical approach, often at the cost of forcing the facts [177] to fit uneasily into the marked slots of offer, acceptance and consideration. Anson’s Law of Contract (27th ed, 1998) concludes: It would be a mistake to think that all contracts can thus be analysed into the form of offer and acceptance or that, in determining whether an exchange does give rise to a contract, the sole 98

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Brambles Holdings v Bathurst City Council cont. issue is whether the communications match and are identical. The analysis is, however, a working method which, more often than not, enables us, in a doubtful case, to ascertain whether a contract has in truth been concluded, and as such may usefully be retained. Thus offer and acceptance analysis is a useful tool in most circumstances, and indeed is “normal” and “conventional” (Gibson v Manchester City Council [1979] 1 All ER 972 at 974 per Lord Diplock). But limited recognition has been given to the possibility of finding that contracts exist even though it is not easy to locate an offer or acceptance. In Integrated Computer Services Pty Ltd v Digital Equipment Corp (Aust) Pty Ltd (1988) 5 BPR 11,110 at 11,117–18 McHugh JA (Hope and Mahoney JJA concurring) said: It is often difficult to fit a commercial arrangement into the common lawyers’ analysis of a contractual arrangement. Commercial discussions are often too unrefined to fit easily into the slots of “offer”, “acceptance”, “consideration” and “intention to create a legal relationship” which are the benchmarks of the contract of classical theory. In classical theory, the typical contract is a bilateral one and consists of an exchange of promises by means of an offer and its acceptance together with an intention to create a binding legal relationship … Moreover, in an ongoing relationship, it is not always easy to point to the precise moment when the legal criteria of a contract have been fulfilled. Agreements concerning terms and conditions which might be too uncertain or too illusory to enforce at a particular time in the relationship may by reason of the parties’ subsequent conduct become sufficiently specific to give rise to legal rights and duties. In a dynamic commercial relationship new terms will be added or will supersede older terms. It is necessary therefore to look at the whole relationship and not only at what was said and done when the relationship was first formed. Those passages were cited with approval by Ormiston J in Vroon BV v Foster’s Brewing Group [1994] 2 VR 32 at 82–3. He also approved the following statement of Cooke J in Meates v Attorney-General [1983] NZLR 308 at 377: I would not treat difficulties in analysing the dealings into a strict classification of offer and acceptance as necessarily decisive in this field, although any difficulty on that head is a factor telling against a contract. The acid test in the case like the present is whether, viewed as a whole and objectively from the point of view of reasonable persons on both sides, the dealings show a concluded bargain. Ormiston J said at 81: … I am prepared to accept … that agreement and thus a contract can be extracted from circumstances where no acceptance of an offer can be established or inferred and where the most that can be said is that a manifestation of mutual assent must be implied from the circumstances. [178] In the language of para 22(2) of the Second Restatement on Contracts: “A manifestation of mutual assent may be made even though neither offer or acceptance could be identified and even though the moment of formation cannot be determined”. He concluded at 83: “there is now sufficient authority to justify the court inquiring as to the existence of an agreement evidenced otherwise than by offer and acceptance.” In Empirnall Holdings Pty Ltd v Machon Paull Partners Pty Ltd (1988) 14 NSWLR 523 at 555 McHugh JA (with whom Samuels JA concurred) said: where an offeree with a reasonable opportunity to reject the offer of goods or services takes the benefit of them under circumstances which indicate that they were to be paid for in accordance with the offer, it is open to the tribunal of fact to hold that the offer was accepted according to its terms. One further observation of McHugh JA in Integrated Computer Services Pty Ltd v Digital Equipment Corp (Aust) Pty Ltd (at 11,117) is relevant: it is an error “to suppose that merely because something has been done then there is therefore some contract in existence which has thereby been executed”. Nevertheless, a contract may be inferred from the acts and conduct of parties as well as or in the absence of [2.245]

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Brambles Holdings v Bathurst City Council cont. their words. The question in this class of case is whether the conduct of the parties, viewed in the light of the surrounding circumstances, shows a tacit understanding or agreement. The conduct of the parties, however, must be capable of proving all the essential elements of an express contract. See also, to the same effect, Pagnan SpA v Feed Products Ltd [1987] 2 Lloyd’s Rep 601 at 611 (affirmed on appeal at 615). A similar principle was enunciated in Brogden v Metropolitan Railway Co (1877) 2 App Cas 666 at 682, where Lord Hatherley adopted the language of a concession by Mr Herschell QC as sound: he says that he will not contend that this agreement is not to be held to be a binding and firm agreement between the parties, if it should be found that, although there has been no formal recognition of the agreement in terms by the one side, yet the course of dealing and conduct of the party to whom the agreement was propounded has been such as legitimately to lead to the inference that those with whom they were dealing were made aware by that course of dealing, that the contract which they had propounded had been in fact accepted by the persons who so dealt with them. Thus if a vendor of property, having been informed of its real estate agent’s scale of fees, permits the real estate agent to continue endeavouring to sell the property, the vendor will be taken to have agreed to that sale by conduct (Way & Waller Ltd v Ryde [1944] 1 All ER 9 at 10). While in Toyota Motor Corporation Australia Ltd v Ken Morgan Motors Pty Ltd [1994] 2 VR 106 at 178 Tadgell J exhibited some caution about the finding of a contract merely on the basis of a manifestation of mutual assent, he did quote Williston on Contracts, Vol I, para 4:3, p 258, to the following effect: It is not necessary to insist that assent must always be manifested by means of offer and acceptance, but cases where offer and acceptance are lacking are so rare that for purposes of general discussion they may be [179] disregarded. When they arise, they can be easily reduced to fundamental principles, particularly in the light of the modern view, adopted by both the Uniform Commercial Code and Restatement (Second), that so long as a manifestation of mutual assent is present, a contract can be found to exist though no offer or acceptance can be identified and though the precise moment that the contract thereby comes into being cannot be determined. He continued: If a contract is to be discerned in the absence of offer and acceptance I venture the suggestion that … it is to be discovered by inferring from the relevant facts the conclusion that the parties have agreed to incur reciprocal promissory obligations … As Williston suggests, the necessity or opportunity so to infer in the absence of offer and acceptance is likely to be rare …. If offer and acceptance analysis is not always necessary or sufficient, principles such as the general principle that a rejection of an offer brings it to an end cannot be universal. A rejected offer could remain operative if it were repeated, or otherwise revived, or if in the circumstances it should for some other reason be treated, despite its rejection, as remaining on foot, available for acceptance, or for adoption as the basis of mutual assent manifested by conduct. In the light of the above cases, it is relevant to ask: in all the circumstances can an agreement be inferred? Has mutual assent been manifested? What would a reasonable person in the position of the Council and a reasonable person in the position of the defendant think as to whether there was a concluded bargain? Applying the test stated by McHugh JA in Empirnall Holdings Pty Ltd v Machon Paull Partners Pty Ltd, the 19 September 1991 letter offered “services” in the sense of a commercial benefit. The commercial benefit was a contractual right, which had not existed before, to charge up to 6 cents per litre and retain 1.1 of that 6 cents. (While the defendant and the Council may at the time have regarded the figure to be retained as only 0.3 cents, as Hodgson J construed the letter of 25 June 1991, they were in 100

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Brambles Holdings v Bathurst City Council cont. error, and it is the reaction of reasonable parties, not the actual parties, which must be analysed.) The parties had treated the 9 January and 20 February 1990 letters as having conferred that benefit in a practical sense, but the conferral of the benefit lacked contractual backing. The defendant, as offeree, had a reasonable opportunity to reject the offer: indeed, initially it did reject the offer. However, it soon took advantage of the benefit offered. It knew that the only basis on which the Council was prepared to permit the higher prices to be charged and the 1.1 cents retained as a matter of contractual right was the basis stated in the 19 September 1991 letter. The charging of the higher prices by the defendant could convey one of two possibilities, that it was acting in breach of the condition on which the benefit was being conferred, or that the defendant was accepting that condition. A reasonable bystander, and in particular a reasonable bystander in the position of the Council, would prefer the latter possibility. Once the Council came to learn that the defendant was charging the higher fees from October it would reasonably have thought that a contract existed between the parties on the terms of the 19 September 1991 letter. Breach of the condition on which the benefit was being conferred did not take place when the higher fees were charged; it only took place when that part of the higher fees [180] which had to be passed over to the Council was not passed over pursuant to the 18 September 1991 letter and cl 22 of the 12 July 1990 agreement, namely within “one calendar month of the end of each quarter”. The first breach of that condition took place on 31 January 1992, well after the fees increased. The first breach of the duty to keep records and issue dockets to Council also took place after the increased fees began to be charged. There is some evidence that Mr Pitkin of the Council and Mr Grundy of the defendant believed that there was no contractual regime for liquid waste fees but that the Council had some other power to fix them. That does not matter. Reasonable persons in the position of the Council and the defendant would construe the 19 September 1991 letter and the defendant’s later conduct as henceforth putting the regime for liquid waste fees on a contractual basis, whatever the position had been before …. [181] One way of putting the applicable test is the way that Scrutton LJ put it in Sullivan v Constable (1932) 48 TLR 369 at 370: “If the [defendant] had so acted that the plaintiff was reasonably entitled to believe that [the defendant] was assenting to the position which had been asserted by the plaintiff, the [defendant] was bound.” A similar test was stated by Chitty on Contracts (28th ed, 1999) Vol 1, para 2-027: “conduct will only amount to acceptance if it is clear that the offeree did the act with the intention (actual or apparent) of accepting the offer” (emphasis added). A reasonable person in the Council’s shoes would, in the light of the defendant’s decision to charge the higher fees of which the Council speedily learned, have been reasonably entitled to believe that the defendant was assenting to the position asserted in the 19 September 1991 letter despite its initial rejection. That was the apparent intention underlying its conduct. The fact that the defendant did not communicate its move to the new fee levels directly to the Council does not matter. Speaking of the general rule that an acceptance must be communicated to the offeror, Chitty on Contracts (28th ed, 1999), Vol 1, para 2-041 states: The main reason for the rule is that it could cause hardship to the offeror to be bound without knowing that his offer had been accepted. It follows that, so long as the offeror knows of the acceptance, there can be a contract even though the acceptance was not brought to his notice by the offeree. Had the defendant wished to reserve to itself the right to retain the whole of the higher fees despite the position which Council had communicated in the letter of 19 September 1991, it was incumbent on it to inform the Council that it considered it had a right to charge the higher fees and retain the whole of them and proposed to act on that view. It did not communicate that view in its letter of 3 October 1991. And it did not communicate that view at any other time. Its failure to do so meant that the Council was reasonably entitled to believe that the defendant was acting in conformity with the letter of 19 September 1991 and entering a contract on its terms. [2.245]

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Brambles Holdings v Bathurst City Council cont. If, a few months after 19 September 1991, the Council had demanded that all fees received above those stipulated for in cl 21 and cl 22 be paid to it, and the defendant alleged that it was contractually entitled to retain the fees up to 1.1 cents, what would have prevented that contention from succeeding? On the trial judge’s findings, that contention could not have been met by appeal to the 9 January–20 February 1990 letters. But why could it not have been met by reference to the 19 September 1991 letter and the defendant’s actions in conformity with it? The defendant’s submissions to this Court offered no satisfactory answer to that question. It was submitted that the defendant’s conduct amounted to taking advantage of the beneficial parts of the 19 September 1991 proposal but not submitting to its disadvantageous aspects, and hence that the conduct did not establish consent to them. In all the circumstances it was for the defendant to make plain that its conduct amounted only to taking advantage of the proposal but not to submitting to the disadvantages if that was its position. It did not express that position until some years had passed. [182]

(c) Even if the 19 September 1991 letter was accepted by conduct or otherwise stated contractual terms, was there consideration? The trial judge found consideration in the fact that while the letters of 9 January–20 February 1990 authorised the defendant to retain 1.1 cents per litre, he did not find that this created any contractual entitlement. The effect of accepting the 19 September 1991 offer was to give a contractual entitlement. That is a benefit capable of amounting to consideration and moving from the Council as promisee. It is crucial to this reasoning that the 9 January–20 February 1990 letters did not create a contract. The trial judge’s failure to find that the 9 January and 20 February 1990 letters created a contract, and his implicit finding that they did not (in his use of the words “The pre-existing authorisation of 1.1c was put on a firmer footing”), is supported by the fact that when the Council purported to amend the rate by its letter of 25 June 1991, the defendant did not protest, as it could have if its rights were contractual. This subsequent conduct of the parties is admissible on the issue of whether there was a contract at all, and points strongly against it. The fact that there was no response to the 20 February 1990 letter, in which the Council put a proposal to the defendant different from that which the defendant had put to the Council on 9 January 1990, also indicates that there was no contract formed by the letters. A further benefit to the defendant was, as the trial judge said, that the problem of excessive depositing of liquid waste was burdensome to the defendant, and the higher charges, in operating as a deterrent to the excessive depositing of liquid waste, benefited the defendant intending to reduce those burdens. There was also a benefit to the Council as promisor, namely the creation of a fund which by creating a reserve to establish a liquid waste treatment plant, would enable liquid waste to be disposed of more efficiently and in a more environmentally friendly manner. That in turn would have advantages for the defendant in increasing the capacity of the site to carry waste …. IPP JA: [184]

The dispute about fees for collecting and depositing liquid waste [2.250] For the reasons set out by Heydon JA, I agree that the July 1990 contract governed the charging of liquid waste and regulated the fees that the appellant was entitled to charge and the parties’ obligations to each other in respect of [185] the liquid waste fees collected. It is, accordingly, unnecessary for me to say anything more in this respect. I also agree with Heydon JA for the reasons set out by him that the letter of 19 September 1991 has to be treated as a contractual offer, this being how the case was conducted at trial. It is now too late for the appellant to argue that, in writing that letter, the Council had no contractual intent. This was not an issue raised or investigated at the trial. I, too, have come to the conclusion that the offer contained in the letter of 19 September 1991 was 102

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Brambles Holdings v Bathurst City Council cont. accepted and the October 1991 contract was concluded. I have, however, done so by a route different to that followed by Heydon JA and the learned trial judge. In order to explain how I have arrived at this conclusion it is necessary for me to set out the background facts. [His Honour set out the background facts and continued:] [191]

The construction of the 19 September 1991 letter: the ambiguities [2.255] While the finding that the July 1990 contract governed the charging of fees for liquid waste inevitably results in the further finding that the appellant committed a breach of that contract by charging more for liquid waste than that contract allowed, it does not follow that the Council, in consequence, suffered any loss. For the Council, without more, to succeed in its claim for damages, it would have to establish a right to restitutionary damages, a proposition open to serious doubt. Whether the offer contained in the 19 September 1991 letter was accepted (and the October 1991 contract was thereby concluded), is therefore an issue of significant importance. In considering whether the 19 September 1991 offer was accepted, it is necessary to determine, precisely, the terms of that offer: Quadling v Robinson & Anor (1976) 137 CLR 192 at 201. It is nowadays a trite proposition that, if the language of a contract is ambiguous, evidence of surrounding circumstances is admissible for the purposes of construing the contract: Codelfa Construction Pty Ltd v State Rail Authority of New South Wales (1982) 149 CLR 337 at 352. Where ambiguities exist, mutually known facts establishing the commercial purpose of the contract, the genesis of the transaction, the background and the context in which the parties are operating will be admissible: Reardon Smith Line Ltd v Hansen-Tangen (1976) 1 WLR 989 (at 995 to 996 per Lord Wilberforce). On this basis, the shared beliefs of the parties as to their respective rights as they existed immediately before the contract was entered into are admissible, such beliefs constituting common assumptions: Codelfa Construction Pty Ltd v State Rail Authority of New South Wales at 353–4. [192] In B & B Constructions (Aust) Pty Ltd v Brian A Cheeseman & Associates Pty Ltd (1994) 35 NSWLR 227 Mahoney J (at 245) drew attention to the recent tendency to apply the parol evidence rule in a less restrictive way (see, for example, the statement of McHugh JA in Manufacturers Mutual Insurance Ltd v Withers (1988) 5 ANZ Insurance Cases para 60-853 at 75,343). Mahoney J went on to say: The Court is not confined to the examination of the text of the document. It is entitled to know, by extrinsic evidence or otherwise, what was the context in which the document was executed and the problem or problems which were to be solved by it. As I understand his Honour’s observations, he was referring to an unambiguous contract. With respect to his Honour, if the aim of construction is, by objective means, to arrive at the real intention of the parties, there is much to be said for this approach. Any exercise in objective construction that does not have regard to the context in which the contract was entered into must carry serious risks that the results will be distorted. It is, however, unnecessary to rely on any extension of the established rule as, in my opinion, the letter of 19 September 1991 is ambiguous and does allow regard to be had to the context and the parties’ common assumptions. The first ambiguity stems from the phrase “the additional income” in resolution (a). This phrase cannot be understood without reference to the letters of 9 January 1990, 20 February 1990 and 25 June 1991 as it does not have a fixed meaning. Those letters, in turn, cannot properly be understood without reference to the parties’ common beliefs as to their contractual effect. The issue is similar to that in Bank of New Zealand v Simpson [1900] AC 182 where the Privy Council considered that extrinsic evidence was admissible to determine the meaning of the phrase “the total cost of the works”. Secondly, it is not clear whether in the last paragraph of the letter of 19 September 1991 the Council was invoking cl 22 on the basis that the July 1990 contract, since its inception, governed the payment [2.255]

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Brambles Holdings v Bathurst City Council cont. of fees for liquid waste, or whether the Council was seeking merely to incorporate that clause by reference in its offer (so that, upon acceptance, its provisions would, for the first time, apply to liquid waste). This ambiguity is exacerbated by the reference, in the letter of 19 September 1991, to the appellant being required to keep records and issue dockets “in a similar manner to the Disposal Fees being paid to Council for Solid Waste disposal”. The July 1990 contract did not oblige the appellant to keep records and issue dockets save that cl 21 required it to issue receipts on behalf of the Council for fees and charges collected and to deliver to the Council all used receipt books “not later than one calendar month after the end of the quarter in which the book was completed”. The reference to a “similar manner” is therefore erroneous, but the sentence in which this phrase appears suggests that the Council was proposing a term similar to one contained in the July 1990 contract and was seeking to incorporate that term by reference. Accordingly, in my view, the offer being ambiguous in the respects indicated, the context and common assumptions are admissible, according to accepted principle, in the exercise of construction. I shall now detail the material that I consider to be relevant to construe the offer.

The construction of the 19 September 1991 letter: the extrinsic material [2.260] [193] … [At] the time the letter of 11 September 1991 was sent, the appellant and the Council, in common, assumed the following: (a)

The July 1990 contract governed the receipt of liquid waste but not the fees to be charged by the appellant for liquid waste.

(b)

The charging of fees for liquid waste was governed by the January and February 1990 letters as corrected or varied by the letter of 25 June 1991.

(c)

The appellant was not entitled to charge fees for collecting liquid waste otherwise than in accordance with the Council’s agreement as to the fees charged.

By September 1991 the volume of liquid waste deposited had increased significantly and serious problems with its disposal had emerged. There was a mutual need to deal with those problems. The appellant was incurring additional handling costs by reason of the difficulties in disposal. The vast quantities of liquid waste were impinging on the capacity of the depot to receive solid waste. The difficulties in disposal were causing bad odours and other problems. There was a need for a different method of treating the disposal of liquid waste at the depot. [194]

The meaning of the letter of 19 September 1991 [2.265] When the offer of 19 September 1991 is construed by reference to the context and the parties’ common beliefs, it is apparent that it was written on the assumption that, upon acceptance, it would give rise to a contract that dealt separately and independently with the determination of fees for liquid waste and the payment of part of them by the appellant to the Council. The parties did not believe that the July 1990 contract applied to liquid waste and they did not intend to invoke any clause of that contract on the basis that it governed the determination of fees for liquid waste. Accordingly, the last sentence of the letter of 19 September 1991 must be construed as seeking to incorporate cl 22 of the July 1990 contract by reference in the way I have explained. That being so, the Council was not thereby asserting that the July 1990 contract was, generally, of application to the charging of fees for liquid waste. Moreover, the “additional income” referred to in the letter of 19 September 1991, objectively construed by reference to the relevant background facts, means income additional to 1.1 cents per litre, that being the fee the appellant was entitled to retain pursuant to the 20 February 1990 letter, read with the letter of 25 June 1991.

Was the offer of 19 September 1991 rejected by the letter of 3 October 1991? [2.270] The question whether the letter of 3 October 1991 amounted to a rejection of the offer of 11 September 1991 involves a matter of construction: Quadling v Robinson at 201. The effect of the 104

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Brambles Holdings v Bathurst City Council cont. appellant’s letter of 3 October 1991 has to be considered in the light of the construction of the letter of 19 September 1991. On that basis, the appellant’s statement in the letter of 3 October 1991 that it “has no contract with Council for liquid disposal” was not a rejection of the offer contained in the earlier letter. The Council had not asserted that such a contract existed. Similarly, when the letter of 3 October 1991 is read in context and as a whole, the statement that “the present rates do not make it viable to continue providing a liquid disposal service” was not a rejection of the offer. This statement was in the same tenor as the request by the appellant for “adequate tip fees for the work involved in providing for liquid disposal”. These remarks were merely part of the posturing that often accompanies negotiation. The attitude displayed in the letter of 3 October 1991 is similar to that of the plaintiffs in Stevenson, Jacques & Company v McLean (1880) 5 QBD 346. In that case the defendant contemplated selling a quantity of iron to the plaintiffs. He wrote to the plaintiffs to the effect that he would sell for forty shillings nett cash per ton, the offer to remain open until Monday. On the Monday, the plaintiffs’ telegraphed the defendant, “Please wire whether you would accept forty for delivery over two months or, if not, longest limit you would give.” The plaintiffs sent a further telegraph message to the defendant informing him that, acting as his agents, they had secured a sale at the price he was asking. The question arose whether, by their first telegram, the plaintiffs had rejected the defendant’s offer, thereby rendering it incapable of acceptance at a later date. Lush J held (at 350) that the plaintiffs’ telegram was in the form of an inquiry, there was “nothing specific by way of offer or rejection”. I regard the letter of 3 October 1991 in the same light. [195] In my view, the letter of 3 October 1991 expressed dissatisfaction with the offer of 11 September 1991 and set out the appellant’s argument for higher fees, but did not amount to a rejection. The appellant was attempting thereby to create a platform for further negotiation while leaving the offer of 11 September 1991 open for acceptance.

Did the appellant accept the offer of 19 September 1991: the appellant’s argument [2.275] The Council pleaded that a contract was constituted by the letters of 19 September 1991, 3 October 1991 and 15 October 1991 together with “the consent of the [appellant] in accepting liquid waste and levying fees therefor”. Of these, it is only the pleaded conduct of the appellant in charging the fees stipulated in the letter of 19 September 1991 that is capable of constituting an acceptance of the offer contained in that letter. The conditions proposed by the letter of 11 September 1991 (properly construed) were as follows: (a)

Liquid waste disposal costs were to be increased to 1.3 cents per litre from 1 October 1991 and then quarterly by 1 cent per litre up to a figure of 6 cents per litre.

(b)

The appellant was to charge those fees to Cleanaway, Mr Landers and all other depositors of liquid wastes at the depot.

(c)

The respondent was to keep records and issue dockets to the Council each week.

(d)

The appellant was to retain 1.1 cents per litre of the fees collected by it and pay the additional income to the Council “each quarter in accordance with cl 22 of the contract”.

As mentioned, the appellant charged fees as contemplated by the letter of 11 September 1991 to itself, Mr Landers and all other depositors. It retained all the monies it so collected itself and did not comply with the other conditions. Accordingly, the appellant submitted, its conduct did not amount to an absolute and unqualified acceptance of the offer. [2.275]

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Brambles Holdings v Bathurst City Council cont.

Did the appellant accept the offer of 19 September 1991: the relevant surrounding circumstances [2.280] In Brogden v Metropolitan Railway Co (1877) 2 App Cas 666 Lord Hatherley said (at 686) that, for conduct to amount to implied acceptance of an offer, it must be “of such a character as necessarily to lead to the inference on the part of the defendants that the agreement had been accepted on the part of the plaintiffs and was to be acted upon by them”. The question is one of fact (Empirnall Holdings Pty Ltd v Machon Paull Partners Pty Ltd (1988) 14 NSWLR 523 at 535 per McHugh JA) and its determination depends on an examination of the facts said to give rise to an acceptance, seen in their context. A significant feature of the relevant context is the purpose of the offer, as mutually understood. One important purpose is manifest from the letter of 19 September 1991 itself, namely, the creation of a monetary reserve for the establishment of a liquid waste treatment plant. I have referred to the problems that were being experienced because of the vast increase of liquid waste being deposited at the depot. This had caused difficult physical conditions on site, making handling expensive and hindering the disposal of solid waste. These difficulties tended, practically, to limit the [196] quantity of liquid waste that could be deposited and limit the income that the appellant could earn from both liquid and solid waste. The Council, too, was being prejudiced as the services it wished to make available to the community at the depot were deteriorating. The establishment of a liquid waste treatment plant would ameliorate these difficulties. It is true that the July 1990 contract was due to expire in 1996 and there was no evidence as to when such a plant would be constructed, but the relationship between the appellant and the Council in regard to the management of the depot had endured since 1982 and there was no evidence to suggest that it was likely to terminate on the expiry of the current contract. The construction of a treatment plant was likely to be to the mutual advantage of both…. Additionally, the increase in prices would act as a disincentive to the public to use the depot for the depositing of liquid waste. Hence, the purpose of the offer of 19 September 1991 was to arrive at an agreement whereby funds for a liquid waste treatment plant could be obtained over a period when the quantities of liquid waste deposited at the depot would be reduced. This purpose was known to the appellant. A further factor to be born in mind is that the offer involved the continued use by the appellant of the Council’s land for the depositing of liquid waste. In other words, the Council was proposing to the appellant that it might continue to use the Council’s land for that purpose and charge higher fees for the liquid waste deposited, on the basis suggested. In reality, this proposal was a concession by the Council. True it is that cl 6 of the July 1990 contract required the appellant to keep the depot open for the receipt of trade refuse (which included liquid waste) from 8.30 am to 5.30 pm seven days a week, and it was implicit in this clause that the Council would allow its property to be used for the receipt of liquid waste during the periods stipulated. But the Council’s obligations in this respect were impliedly conditioned by considerations of reasonableness. The appellant was not entitled to collect or accept liquid waste in excessive quantities that would damage the Council’s land or otherwise prejudice the operation of the purpose of the depot (which was primarily to receive solid waste). By September 1991, the site problems to which I have adverted were reaching the stage where the Council would have had to consider, on the grounds of reasonableness, limiting the depositing of liquid waste. Were the offer of 19 September to be accepted, the Council was unlikely to impose any such limit.

Did the appellant accept the offer of 19 September 1991: conclusion [2.285] Both parties believed that fees for liquid waste could not be increased without the Council’s assent. By the offer, the Council was proposing an increase in fees, but only on condition that the 106

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Brambles Holdings v Bathurst City Council cont. moneys received from that increase were to be retained by the appellant and paid to the Council to be used as a reserve for the establishment [of] a liquid waste treatment plant. The establishment of such a plant was a matter of fundamental significance to the Council. The letter of 19 September 1991 when read in context, reflects a scheme whereby the Council intended to finance the construction of a liquid waste treatment plant by the additional income to be derived from the increase in liquid waste disposal fees. This was the sole reason for the Council proposing [172] the increase in fees. The two matters were dependent on each other and inextricably linked. They were not capable of being separated. In these circumstances, in my view, the fact that the appellant charged the higher fees is conclusive evidence that it agreed to all the conditions contained in the offer of 19 September 1991. When regard is had to the indivisible nature of the offer, the appellant’s conduct, objectively viewed, was an unequivocal acceptance of the offer. The appellant accepted the benefits proposed, namely, the charging of the higher fees while using the Council’s land. Those benefits could not be severed from the obligations proposed. Accordingly, by accepting those benefits the appellant accepted the Council’s offer in accordance with its terms (cf Empirnall Holdings Pty Ltd v Machon Paull Partners Pty Ltd at 535).

Consideration [2.290] By the October 1991 contract the appellant was not allowed to retain any moneys additional to the 1.1 cents per litre to which it was entitled under the arrangement that, as at that date, was already in place. The appellant submitted that this meant that it received no consideration and, therefore, the contract was not binding. The October 1991 contract laid the basis for the establishment of a liquid waste treatment plant that would enable more liquid waste to be deposited at the depot and alleviate problems with the handling of solid waste. This would enable the appellant, in consequence, to earn more. Moreover, the practical effect of the October 1991 contract was to enable the appellant to continue using the Council’s land for the depositing of liquid waste without the real prospect of the Council imposing any limit on such depositing. The benefits which I have outlined were adequate consideration for the October 1991 contract.

Conclusion [2.295] Having found that the offer was accepted and that there was consideration, it follows that I consider that Hodgson CJ in Eq correctly found that the parties entered into the October 1991 contract and that contract was binding and enforceable. It is therefore unnecessary for me to deal with the issues that arise out of the Council’s alternative claims. Accordingly, I would dismiss the appeal. I agree with the orders proposed by Heydon JA. Appeal dismissed.

Method of communication Postal acceptance rule [2.300] From the time of the decision in Adams v Lindsell (1818) 1 B & A 681; 106 ER 250, the “postal rule” (called the “mailbox rule” in the United States) has governed acceptances sent by post. In Henthorn v Fraser [1892] 2 Ch 27 at 33 Lord Herschell stated the principle as follows: [2.300]

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Where the circumstances are such that it must have been within the contemplation of the parties that, according to the ordinary usages of mankind, the post might be used as a means of communicating the acceptance of an offer, the acceptance is complete as soon as it is posted.

In Tallerman & Co Pty Ltd v Nathan’s Merchandise (Vic) Pty Ltd (1957) 98 CLR 93, 111-112 Dixon CJ and Fullagar J appeared to take a more restrictive view of the circumstances in which the postal rule is to be applied: The general rule is that a contract is not completed until acceptance of an offer is actually communicated to the offeror, and a finding that a contract is completed by the posting of a letter of acceptance cannot be justified unless it is to be inferred that the offeror contemplated and intended that his offer might be accepted by the doing of that act: see Henthorn v Fraser [1892] 2 Ch 27, at 35, per Kay LJ. In that case as in Household Fire & Carriage Accident Insurance Co (Ltd) v Grant (1879) 4 Ex D 216, it was easy to draw such an inference, but in such a case as the present, where solicitors are conducting a highly contentious correspondence, one would have thought that actual communication would be regarded as essential to the conclusion of agreement on anything.

In Bressan v Squires [1974] 2 NSWLR 460 at 461-462, Bowen CJ in Eq said: According to [the formulation of Lord Hershell in Henthorn v Fraser], all that needs to be in contemplation of the parties is the post as a mode, indeed as a possible or permitted mode, for the law to impose the consequence that the contract is concluded by the action of posting. It is not required that it should be within the contemplation of the parties that the action of posting should have the consequence of concluding the contract; this, of course, would apply in relatively fewer cases, and would narrow the application of the exception.

At first reading, it might be thought that the formulation by Dixon CJ and Fullagar J in Tallerman & Co Pty Ltd v Nathan’s Merchandise (Victoria) Pty Ltd … constituted an adoption of this narrower basis… The reference made by their Honours to the judgment of Kay LJ in Henthorn v Fraser, however, suggests to my mind they were not intending to narrow the exception.

Brinkibon v Stahag Stahl und Stahlwarenhandelsgesellschaft [2.305] Brinkibon Ltd v Stahag Stahl und Stahlwarenhandelsgesellschaft mbH [1983] 2 AC 34 House of Lords – Appeal from the Court of Appeal. [FACTS: After prolonged negotiations for the sale of a quantity of steel bars, the buyers, an English company, sent a telex to Vienna accepting the terms of sale offered by the sellers, an Austrian company. The contract was not performed and the buyers wished to sue the sellers, but the sellers objected on the grounds that the English courts had no jurisdiction over an Austrian company. The Rules of the Supreme Court, O II, r 1(1)(f) allowed a party to serve a writ on someone outside the jurisdiction, “if the contract was made within the jurisdiction” and, accordingly, the House of Lords had to decide when and where the contract was made.] LORD WILBERFORCE: [40] In the present case it seems that if there was a contract (a question which can only be decided at the trial), it was preceded by and possibly formed by a number of telephone conversations and telexes between London and Vienna, and there are a number of possible combinations [41] on which reliance can be placed. At this stage we must take the alternatives which provide reasonable evidence of a contract in order to see if the test is satisfied. There are two: (1)

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A telex dated 3 May 1979 from the sellers in Vienna, said to amount to a counter-offer, followed by a telex from the buyers in London to the sellers in Vienna dated 4 May 1979, said to amount to an acceptance. [2.305]

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Brinkibon v Stahag Stahl und Stahlwarenhandelsgesellschaft cont. (2)

… The first of these alternatives neatly raises the question whether an acceptance by telex sent from London but received in Vienna causes a contract to be made in London or in Vienna. If the acceptance had been sent by post, or by telegram, then, on existing authorities, it would have been complete when put into the hands of the Post Office, in London. If on the other hand it had been telephoned, it would have been complete when heard by the offeror, in Vienna. So in which category is a telex communication to be placed? Existing authority of the Court of Appeal decides in favour of the latter category, that is, a telex is to be assimilated to other methods of instantaneous communication: see Entores Ltd v Miles Far East Corp [1955] 2 All ER 493; [1955] 2 QB 327. The buyers ask that this case, which has stood for 30 years, should now be reviewed.

Now such review as is necessary must be made against the background of the law as to the making of contracts. The general rule, it is hardly necessary to state, is that a contract is formed when acceptance of an offer is communicated by the offeree to the offeror. And if it is necessary to determine where a contract is formed … it appears logical that this should be at the place where acceptance is communicated to the offeror. In the common case of contracts, whether oral or in writing inter praesentes, there is no difficulty; and again logic demands that even where there is no mutual presence at the same place and at the same time, if communication is instantaneous, for example by telephone or radio communication, the same result should follow. Then there is the case (very common) of communication at a distance, to meet which the so called “postal rule” has developed … In these cases too it seems logical to say that the place, as well as the time, of acceptance should be where (as when) the acceptance is put into the charge of the post office. In this situation, with a general rule covering instantaneous communication inter praesentes, or at a distance, with an exception applying to [42] non-instantaneous communication at a distance, how should communications by telex be categorised? In Entores Ltd v Miles Far East Corp the Court of Appeal classified them with instantaneous communications. Their ruling, which has passed into the textbooks, including Williston on Contracts, appears not to have caused either adverse comment, or any difficulty to businessmen. I would accept it as a general rule. Where the condition of simultaneity is met, and where it appears to be within the mutual intention of the parties that contractual exchanges should take place in this way, I think it a sound rule, but not necessarily a universal rule. Since 1955 the use of telex communication has been greatly expanded, and there are many variants on it. The senders and recipients may not be the principals to the contemplated contract. They may be servants or agents with limited authority. The message may not reach, or be intended to reach, the designated recipient immediately: messages may be sent out of office hours, or at night, with the intention, or on the assumption, that they will be read at a later time. There may be some error or default at the recipient’s end which prevents receipt at the time contemplated and believed in by the sender. The message may have been sent and/or received through machines operated by third persons. And many other variations may occur. No universal rule can cover all such cases; they must be resolved by reference to the intentions of the parties, by sound business practice and in some cases by a judgment where the risks should lie … The present case is, as Entores Ltd v Miles Far East Corp itself, the simple case of instantaneous communication between principals, and, in accordance with the general rule, involves that the contract (if any) was made when and where the acceptance was received. This was on 3 May 1979 in Vienna … I find myself in agreement with the Court of Appeal, and the appeal must be dismissed. [2.305]

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Brinkibon v Stahag Stahl und Stahlwarenhandelsgesellschaft cont. [LORD FRASER OF TULLYBELTON and LORD BRANDON OF OAKBROOK delivered concurring judgments; LORD RUSSELL OF KILLOWEN and LORD BRIDGE OF HARWICK concurred in the judgments of LORD WILBERFORCE and LORD BRANDON.] Appeal dismissed.

Extracts from Paterson, Robertson and Duke, Principles of Contract Law (2016, 5th ed), Ch 3

Modern electronic communications [2.310] The case law relating to communication of acceptance has inevitably lagged behind

developments in communication systems. 192 Telegrams and telexes were superseded by facsimile messages, and there are now many different forms of electronic data exchange which may be used in the formation of contracts. In Reese Bros Plastics Ltd v Hamon-Sobelco Australia Pty Ltd, 193 the New South Wales Court of Appeal held that a facsimile message, which is sent through telephone lines from one machine to another, should be treated as a form of instantaneous communication. Acceptances sent by facsimile are therefore governed by the general rule that an acceptance is effective only when received by the offeror. This general principle may be subject to exceptions in the circumstances discussed by Lord Wilberforce in Brinkibon. That is, a different principle may apply where the message is sent or received through a third party, is sent out of office hours or is not intended to be read immediately. Lord Wilberforce did not indicate what rule might apply in these situations. It could be that the postal rule should apply where an acceptance is sent or received through a third party. When a message is sent out of office hours or is not intended to be read immediately, it may be that it becomes effective some time after it is received by the offeror’s machine. All such cases are likely to be resolved by reference to the presumed intention of the offeror. The question of whether the postal rule should apply to communication over the internet has not been authoritatively determined, although it has been suggested by way of obiter dictum that email should be treated like other forms of instantaneous communication. 194 The two forms of internet communication most likely to be used in contracting are interactive websites and email. Communication via interactive websites is virtually instantaneous and there seems little reason to depart from the general rule that acceptance is effective only when received. Email, on the other hand, is in some ways analogous to post, as Squires explains. 195 Once a message is sent, the sender loses control of the message as it passes through the hands of intermediaries. As a result of technical problems that may be the fault of third parties, an email message may be delayed or may never reach the addressee. A delay in transmission may also be caused by an addressee’s failure to retrieve the message from an external server. 192 193 194

See generally Furmston and Tolhurst, Contract Formation: Law and Practice (2010), ch 6. (1988) 5 BPR 11,106. Olivaylle Pty Ltd v Flottweg AG (No 4) [2009] FCA 522; (2009) 255 ALR 632, [25].

195

Squires, “Some Contract Issues Arising from Online Business – Consumer Agreements” (2000) 5 Deakin Law Review 95, 107.

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None of these features provides a compelling reason to extend the postal rule to email messages, as Squires explains. 196 Email is far quicker than the post and could fairly be described as virtually instantaneous. Although email messages pass through the hands of third parties, so too do telephone, facsimile and telex messages. Delays caused by the addressee’s own failure to collect messages from a server are dealt with in legislative provisions discussed at [2.315] governing the time of receipt. As with telex and facsimile messages, a person attempting to send an email is far more likely to be aware that the attempt has been unsuccessful than an intended recipient is to be aware of the fact that an attempt has been made. 197 Even if email were considered to be analogous to post, the postal rule would only apply if it were thought to have been within the contemplation of the parties that an acceptance sent by email should be effective on sending. It therefore seems likely that the general rule would be applied to electronic communication and that acceptances sent electronically would, at common law, be effective only when received by the offeror. 198 Whatever might be the position at common law, the time of receipt of an electronic communication is now governed by the Electronic Transactions Acts (ETAs). As noted earlier in this chapter, the ETAs were originally based on the UNCITRAL Model Law on Electronic Commerce 1996, which has since been supplemented by the United Nations Convention on the Use of Electronic Communications in International Contracts 2005. 199 The 2005 Convention changed the wording of the provision relating to the time of receipt of electronic communications. According to an explanatory note produced by the UNCITRAL Secretariat, the change in wording in the 2005 Convention was not intended to produce different results, but simply to align the formulation of the rule with the elements used in domestic law. 200 The Electronic Transactions Acts distinguish between situations in which an electronic information system has been designated for the purpose of receiving communications and situations in which it has not. Where an electronic communication is sent to an address designated by the addressee, the time of receipt is the time that it “becomes capable of being retrieved by the addressee” at that designated address. 201 In the case of a communication sent to an address which has not been designated by the addressee, the communication is only effective once both (i) the communication “has become capable of being retrieved by the addressee” and (ii) “the addressee has become aware that the electronic communication has

196

197 198 199 200 201

Squires, “Some Contract Issues Arising from Online Business – Consumer Agreements” (2000) 5 Deakin Law Review 95, 107-10. See also Nolan, “Offer and Acceptance in the Electronic Age” in Burrows and Peel (eds), Contract Formation and Parties (2010), 61, 64-70. See Brinkibon [1983] 2 AC 34, 43. As indicated in Olivaylle Pty Ltd v Flottweg AG (No 4) [2009] FCA 522; (2009) 255 ALR 632, [25]. See [2.90] Explanatory note by the UNCITRAL Secretariat on the United Nations Convention on the Use of Electronic Communications in International Contracts, [15] – [16]. Electronic Transactions Act 2001 (ACT), s 13A(1); Electronic Transactions Act 1999 (Cth), s 14A(1); Electronic Transactions Act 2000 (NSW), s 13A(1); Electronic Transactions (Northern Territory) Act, s 13A(1); Electronic Transactions Act 2000 (SA), s 13A(1); Electronic Transactions Act 2000 (Tas), s 11A(1); Electronic Transactions (Victoria) Act 2000, s 13A; Electronic Transactions (Queensland) Act 2001, s 24(1); Electronic Transactions Act 2011 (WA), s 14(1). [2.310]

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been sent to that address”. 202 It is assumed that the communication “is capable of being retrieved by the addressee when it reaches the addressee’s electronic address”. 203 These provisions are subject to any agreement to the contrary. The notes to the UNCITRAL model law indicate that an information system should only be regarded as having been “designated” if it has been expressly specified for a particular purpose, such as the acceptance of an offer. The listing of an email address or facsimile number on a letterhead or similar document does not amount to a designation. 204 The effect of the ETA provisions would appear to be that an electronic message sent over the internet to a designated address would be effective once it is received by the server operated by the recipient or a commercial server used by the recipient. The definition of “electronic communication” would also appear to cover facsimile messages, 205 which means that an acceptance sent by facsimile to a designated number would be effective once it was received by the recipient’s facsimile machine. Extracts from Paterson, Robertson and Duke, Contract: Cases and Materials (2016, 13th ed), Ch 3

Electronic communications [2.315] The time of receipt of electronic communications is now governed by legislation in all

Australian States and Territories. The Electronic Transactions Acts were based on the United Nations Commission on International Trade Law (UNCITRAL) Model Law on Electronic Commerce (1996), which has since been supplemented by the United Nations Convention on the Use of Electronic Communications in International Contracts 2005. The New South Wales legislation is set out at [2.320] as an example. Equivalent or identical provisions are to be found in: Electronic Transactions Act 1999 (Cth), ss 5, 14A and 15A-15F; Electronic Transactions Act 2000 (Tas), ss 3, 11A and 12A-12E; Electronic Transactions (Northern Territory) Act, ss 5, 13A and 14A–14E; Electronic Transactions Act 2000 (SA), ss 5, 13A and 14A–14E; Electronic Transactions (Victoria) Act 2000, ss 3 and 13A–14E; Electronic Transactions Act 2001 ACT, ss 5, 13A and 14A–14E; Electronic Transactions (Queensland) Act 2001, ss 6, 24 and 26A–26E; Electronic Transactions Act 2011 (WA), ss 5, 14(1) and 17–21.

202

203

204

Electronic Transactions Act 2001 (ACT), s 13A(1); Electronic Transactions Act 1999 (Cth), s 14A(1); Electronic Transactions Act 2000 (NSW), s 13A(1); Electronic Transactions (Northern Territory) Act, s 13A(1); Electronic Transactions Act 2000 (SA), s 13A(1); Electronic Transactions Act 2000 (Tas), s 11A(1); Electronic Transactions (Victoria) Act 2000, s 13A(1); Electronic Transactions (Queensland) Act 2001, s 24(1); Electronic Transactions Act 2011 (WA), s 14(1). Electronic Transactions Act 2001 (ACT), s 13A(2); Electronic Transactions Act 1999 (Cth), s 14A(2); Electronic Transactions Act 2000 (NSW), s 13A(2); Electronic Transactions (Northern Territory) Act, s 13A(2); Electronic Transactions Act 2000 (SA), s 13A(2); Electronic Transactions Act 2000 (Tas), s 11A(2); Electronic Transactions (Victoria) Act 2000, s 13A(2); Electronic Transactions (Queensland) Act 2001, s 24(2); Electronic Transactions Act 2011 (WA), s 14(2). Guide to Enactment of the UNCITRAL Model Law on Electronic Commerce (1996), [102], http:// www.uncitral.org.

205

Electronic Transactions Act 2001 (ACT), s 5; Electronic Transactions Act 1999 (Cth), s 5(1); Electronic Transactions Act 2000 (NSW), s 5(1); Electronic Transactions (Northern Territory) Act, s 5; Electronic Transactions (Queensland) Act 2001, s 6 and Sch 2; Electronic Transactions Act 2000 (SA), s 5(1); Electronic Transactions Act 2000 (Tas), s 3; Electronic Transactions (Victoria) Act 2000, s 3(1); Electronic Transactions Act 2011 (WA), s 5(1).

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Electronic Transactions Act 2000 (NSW) [2.320] Electronic Transactions Act 2000 (NSW), ss 3, 5, 7. 8, 13, 13A, 13B, 14A-14E 3 Object The object of this Act is to provide a regulatory framework that: (a)

recognises the importance of the information economy to the future economic and social prosperity of Australia, and

(b)

facilitates the use of electronic transactions, and

(c)

promotes business and community confidence in the use of electronic transactions, and

(d)

enables business and the community to use electronic communications in their dealings with government.

5 Interpretation (1)

In this Act:

“addressee” of an electronic communication means a person who is intended by the originator to receive the electronic communication, but does not include a person acting as an intermediary with respect to the electronic communication. “automated message system” means a computer program or an electronic or other automated means used to initiate an action or respond to data messages in whole or in part, without review or intervention by a natural person each time an action is initiated or a response is generated by the system. “electronic communication” means: (a) a communication of information in the form of data, text or images by means of guided or unguided electromagnetic energy, or both, or (b)

a communication of information in the form of sound by means of guided or unguided electromagnetic energy, or both, where the sound is processed at its destination by an automated voice recognition system.

“information system” means a system for generating, sending, receiving, storing or otherwise processing electronic communications. “transaction” includes: (a) any transaction in the nature of a contract, agreement or other arrangement, and (b)

any statement, declaration, demand, notice or request, including an offer and the acceptance of an offer, that the parties are required to make or choose to make in connection with the formation or performance of a contract, agreement or other arrangement, and

(c)

any transaction of a non-commercial nature.

Part 2 Application of legal requirements to electronic communications Division 1 General rule about validity of transactions for the purposes of laws of this jurisdiction 7 Validity of electronic transactions (1)

For the purposes of a law of this jurisdiction, a transaction is not invalid because it took place wholly or partly by means of one or more electronic communications.

(2)

The general rule in subsection (1) does not apply in relation to the validity of a transaction to the extent to which another, more specific, provision of this Part deals with the validity of the transaction.

(3), (4) (Repealed)

[2.320]

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Electronic Transactions Act 2000 (NSW) cont. Division 2 Requirements under laws of this jurisdiction 8 Writing (1)

If, under a law of this jurisdiction, a person is required to give information in writing, that requirement is taken to have been met if the person gives the information by means of an electronic communication, where:

(2)

(a)

at the time the information was given, it was reasonable to expect that the information would be readily accessible so as to be useable for subsequent reference, and

(b)

the person to whom the information is required to be given consents to the information being given by means of an electronic communication.

If, under a law of this jurisdiction, a person is permitted to give information in writing, the person may give the information by means of an electronic communication, where:

(3)

(a)

at the time the information was given, it was reasonable to expect that the information would be readily accessible so as to be useable for subsequent reference, and

(b)

the person to whom the information is permitted to be given consents to the information being given by means of an electronic communication.

This section does not affect the operation of any other law of this jurisdiction that makes provision for or in relation to requiring or permitting information to be given, in accordance with particular information technology requirements: (a)

on a particular kind of data storage device, or

(b)

by means of a particular kind of electronic communication.

(4)

This section applies to a requirement or permission to give information, whether the expression “give”, “send” or “serve”, or any other expression, is used.

(5)

For the purposes of this section, “giving information” includes, but is not limited to, the following: (a)

making an application,

(b)

making or lodging a claim,

(c)

giving, sending or serving a notification,

(d)

lodging a return,

(e)

making a request,

(f)

making a declaration,

(g)

lodging or issuing a certificate,

(h)

making, varying or cancelling an election,

(i)

lodging an objection,

(j)

giving a statement of reasons.

Division 3 Other provisions relating to laws of this jurisdiction 13 Time of dispatch (1)

For the purposes of a law of this jurisdiction, unless otherwise agreed between the originator and the addressee of an electronic communication, the time of dispatch of the electronic communication is: (a)

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[2.320]

the time when the electronic communication leaves an information system under the control of the originator or of the party who sent it on behalf of the originator, or

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Electronic Transactions Act 2000 (NSW) cont. (b)

(2)

if the electronic communication has not left an information system under the control of the originator or of the party who sent it on behalf of the originator – the time when the electronic communication is received by the addressee.

Note: Paragraph (b) would apply to a case where the parties exchange electronic communications through the same information system. Subsection (1) applies even though the place where the information system supporting an electronic address is located may be different from the place where the electronic communication is taken to have been dispatched under section 13B.

13A Time of Receipt (1)

For the purposes of a law of this jurisdiction, unless otherwise agreed between the originator and the addressee of an electronic communication: (a) the time of receipt of the electronic communication is the time when the electronic communication becomes capable of being retrieved by the addressee at an electronic address designated by the addressee, or (b)

the time of receipt of the electronic communication at another electronic address of the addressee is the time when both: (i) the electronic communication has become capable of being retrieved by the addressee at that address, and (ii)

the addressee has become aware that the electronic communication has been sent to that address.

(2)

For the purposes of subsection (1), unless otherwise agreed between the originator and the addressee of the electronic communication, it is to be assumed that the electronic communication is capable of being retrieved by the addressee when it reaches the addressee’s electronic address.

(3)

Subsection (1) applies even though the place where the information system supporting an electronic address is located may be different from the place where the electronic communication is taken to have been received under section 13B.

13B Place of dispatch and place of receipt (1)

(2)

For the purposes of a law of this jurisdiction, unless otherwise agreed between the originator and the addressee of an electronic communication: (a)

the electronic communication is taken to have been dispatched at the place where the originator has its place of business, and

(b)

the electronic communication is taken to have been received at the place where the addressee has its place of business.

For the purposes of the application of subsection (1) to an electronic communication: (a)

a party’s place of business is assumed to be the location indicated by that party, unless another party demonstrates that the party making the indication does not have a place of business at that location, and

(b)

if a party has not indicated a place of business and has only one place of business, it is to be assumed that that place is the party’s place of business, and

(c)

if a party has not indicated a place of business and has more than one place of business, the place of business is that which has the closest relationship to the underlying transaction, having regard to the circumstances known to or contemplated by the parties at any time before or at the conclusion of the transaction, and [2.320]

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Electronic Transactions Act 2000 (NSW) cont.

(3)

(d)

if a party has not indicated a place of business and has more than one place of business, but paragraph (c) does not apply – it is to be assumed that the party’s principal place of business is the party’s only place of business, and

(e)

if a party is a natural person and does not have a place of business – it is to be assumed that the party’s place of business is the place of the party’s habitual residence.

A location is not a place of business merely because that is:

(4)

(a)

where equipment and technology supporting an information system used by a party are located, or

(b)

where the information system may be accessed by other parties.

The sole fact that a party makes use of a domain name or electronic mail address connected to a specific country does not create a presumption that its place of business is located in that country.

Part 2A Additional provisions applying to contracts involving electronic communications 14A Application and operation of this Part This Part applies to the use of electronic communications in connection with the formation or performance of a contract between parties where the proper law of the contract is (or would on its formation be) the law of this jurisdiction, and so applies: (a)

whether some or all of the parties are located within Australia or elsewhere, and

(b)

whether the contract is for business purposes, for personal, family or household purposes, or for other purposes.

14B Invitation to treat regarding contracts (1)

A proposal to form a contract made through one or more electronic communications that: (a)

is not addressed to one or more specific parties, and

(b) is generally accessible to parties making use of information systems, is to be considered as an invitation to make offers, unless it clearly indicates the intention of the party making the proposal to be bound in case of acceptance. (2)

Subsection (1) extends to proposals that make use of interactive applications for the placement of orders through information systems.

14C Use of automated message systems for contract formation- non-intervention of natural person A contract formed by: (a)

the interaction of an automated message system and a natural person, or

(b) the interaction of automated message systems, is not invalid, void or unenforceable on the sole ground that no natural person reviewed or intervened in each of the individual actions carried out by the automated message systems or the resulting contract. 14D Error in electronic communications regarding contracts (1)

(2)

This section applies in relation to a statement, declaration, demand, notice or request, including an offer and the acceptance of an offer, that the parties are required to make or choose to make in connection with the formation or performance of a contract. If: (a)

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[2.320]

a natural person makes an input error in an electronic communication exchanged with the automated message system of another party, and

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the automated message system does not provide the person with an opportunity to correct the error,

the person, or the party on whose behalf the person was acting, has the right to withdraw the portion of the electronic communication in which the input error was made if: (c)

the person, or the party on whose behalf the person was acting, notifies the other party of the error as soon as possible after having learned of the error and indicates that he or she made an error in the electronic communication, and

(d)

the person, or the party on whose behalf the person was acting, has not used or received any material benefit or value from the goods or services, if any, received from the other party.

(3)

The right of withdrawal of a portion of an electronic communication under this section is not of itself a right to rescind or otherwise terminate a contract.

(4)

The consequences (if any) of the exercise of the right of withdrawal of a portion of an electronic communication under this section are to be determined in accordance with any applicable rule of law.

Note: In some circumstances the withdrawal of a portion of an electronic communication may invalidate the entire communication or render it ineffective for the purposes of contract formation (see paragraph 241 of the UNCITRAL explanatory note for the United Nations Convention on the Use of Electronic Communications in International Contracts). 14E Application of Act in relation to contracts (1)

Subject to subsection (2), the provisions of sections 7 and 13-13B apply to: (a)

a transaction constituted by or relating to a contract, or

(b) an electronic communication relating to the formation or performance of a contract, in the same way as they apply to a transaction or electronic communication referred to in those sections, and so apply as if the words “For the purposes of a law of this jurisdiction” were omitted. (2)

However, this Part (including subsection (1)) does not apply to or in relation to a contract to the extent that: (a)

Part 2 would of its own force have the same effect as this Part if this Part applied, or

(b)

a law of another State or Territory (that is in substantially the same terms as Part 2) would of its own force have the same effect as this Part if this Part applied.

Note: This section applies provisions of Part 2 to contracts or proposed contracts to the extent (if any) that those provisions do not apply merely because they are expressed to apply in relation to a law of this jurisdiction. This section also disapplies the provisions of Part 2A to the extent that Part 2 would apply of its own force. An example where Part 2 may not apply of its own force is where a contract is being negotiated in a State or Territory from a supplier located overseas.

[2.325] The Guide to Enactment of the 1996 Model law was produced by UNCITRAL to

provide assistance to legislators, users of electronic communications and scholars. The full text of the guide can be found at: http://www.uncitral.org.

[2.325]

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Guide to Enactment of the UNCITRAL Model Law on Electronic Commerce [2.330] United Nations Commission on International Trade Law (UNCITRAL), Guide to Enactment of the UNCITRAL Model Law on Electronic Commerce (1996)

I. Introduction To The Model Law

A. Objectives 2. The use of modern means of communication such as electronic mail and electronic data interchange (EDI) for the conduct of international trade transactions has been increasing rapidly and is expected to develop further as technical supports such as information highways and the INTERNET become more widely accessible. However, the communication of legally significant information in the form of paperless messages may be hindered by legal obstacles to the use of such messages, or by uncertainty as to their legal effect or validity. The purpose of the Model Law is to offer national legislators a set of internationally acceptable rules as to how a number of such legal obstacles may be removed, and how a more secure legal environment may be created for what has become known as “electronic commerce”. The principles expressed in the Model Law are also intended to be of use to individual users of electronic commerce in the drafting of some of the contractual solutions that might be needed to overcome the legal obstacles to the increased use of electronic commerce…. [2.335]

B. Scope 1. The title of the Model Law refers to “electronic commerce”. While a definition of “electronic data interchange (EDI)” is provided in article 2, the Model Law does not specify the meaning of “electronic commerce”. In preparing the Model Law, the Commission decided that, in addressing the subject matter before it, it would have in mind a broad notion of EDI, covering a variety of trade-related uses of EDI that might be referred to broadly under the rubric of “electronic commerce” …, although other descriptive terms could also be used. Among the means of communication encompassed in the notion of “electronic commerce” are the following modes of transmission based on the use of electronic techniques: communication by means of EDI defined narrowly as the computer-to-computer transmission of data in a standardized format; transmission of electronic messages involving the use of either publicly available standards or proprietary standards; transmission of free-formatted text by electronic means, for example through the INTERNET. It was also noted that, in certain circumstances, the notion of “electronic commerce” might cover the use of techniques such as telex and telecopy [ie, facsimile]…. 2. Article 15. Time and place of dispatch and receipt of data messages 102. Paragraph (2), the purpose of which is to define the time of receipt of a data message, addresses the situation where the addressee unilaterally designates a specific information system for the receipt of a message (in which case the designated system may or may not be an information system of the addressee), and the data message reaches an information system of the addressee that is not the designated system. In such a situation, receipt is deemed to occur when the data message is retrieved by the addressee. By “designated information system”, the Model Law is intended to cover a system that has been specifically designated by a party, for instance in the case where an offer expressly specifies the address to which acceptance should be sent. The mere indication of an electronic mail or

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Guide to Enactment of the UNCITRAL Model Law on Electronic Commerce cont. telecopy address on a letterhead or other document should not be regarded as express designation of one or more information systems.

Extracts from Paterson, Robertson and Duke, Principles of Contract Law (2016, 5th ed), Ch 3 Method of acceptance [2.340] If an offer prescribes an exclusive method for the communication of acceptance, then

only an acceptance communicated by that method will be effective. 206 An offer may, for example, say: “This offer can be accepted only by written notice posted to the following address.” An offeror may also expressly or impliedly dispense with the need for communication. In the case of a unilateral contract, for example, it is the doing of the stipulated act that constitutes acceptance of the offer and the offeror implicitly dispenses with communication of acceptance. 207

Silence as acceptance [2.345] A contract cannot, however, be forced on the offeree by stipulating silence as the

prescribed method of acceptance. In Felthouse v Bindley 208 a man wrote to his nephew offering to buy a horse and said: “If I hear no more about him, I consider the horse mine at £30 15s.” The nephew intended to accept the uncle’s offer and instructed his auctioneer that the horse was already sold and should not be auctioned with his other stock. The auctioneer sold the horse at auction by mistake and the uncle sued the auctioneer in tort for conversion. The action was unsuccessful. No contract between uncle and nephew had been formed because the nephew had not communicated his acceptance. 209 The uncle was therefore held to have had no property in the horse at the time of the auction and no cause of action against the auctioneer. Greig and Davis have questioned this decision on the basis that the nephew had manifested his acceptance of the uncle’s offer by instructing the auctioneer not to sell the horse, and the uncle had dispensed with the need for communication of acceptance. On this basis, they suggest, an action would surely have been sustainable against the uncle if he had refused to take the horse. 210

Acceptance inferred from conduct [2.350] In some cases the courts will accept that an agreement has been formed, even though

the offeree has not effectively communicated his or her acceptance to the offeror. In Farmers’ Mercantile Union and Chaff Mills Ltd v Coade 211 the respondents applied in 1913 to buy a £25 share in the appellant company. The company did not communicate its acceptance of the offer within a reasonable time, but retained the £1 paid by the respondents and entered their 206 207

See George Hudson Holdings Ltd v Rudder (1973) 128 CLR 387. Carlill v Carbolic Smoke Ball Co [1893] 1 QB 256, 269-70.

208 209 210 211

(1862) 11 CB (NS) 869; 142 ER 1037. (1862) 142 ER 1037, 1040. Greig and Davis, The Law of Contract (1987), p 302. (1921) 30 CLR 113. [2.350]

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names on the register. The company intimated its acceptance only after a reasonable time had expired, by making calls for payment of further instalments of £5 in 1916 and 1918. The respondents ignored these calls. Knox CJ held that an agreement to buy the share could be inferred from the respondents’ inaction once they became aware their names were on the register of shareholders. 212 Higgins J held that, although the respondents would have been entitled to reject the shares when the belated notice of acceptance was received, an agreement to take the shares must be inferred from their failure to respond. 213 An offeror in this situation is required to make a prompt choice between condoning the delay and rejecting the contract. 214 Starke J dissented on the basis that the respondents’ silence could equally be regarded as a refusal to have anything to do with the company since its offer had lapsed and the matter was at an end. 215 It was for the company to establish the existence of a contract and it had failed to do this. Acceptance by conduct also occurred in Empirnall Holdings Pty Ltd v Machon Paull Partners Pty Ltd. 216 Empirnall, a property developer, verbally engaged architects Machon Paull to act as project managers for a particular development. After some work was done, the architects requested a progress payment and the execution of a contract. They were told to submit the progress payment, but were told that Eric Jury, a director and the major shareholder of Empirnall, “does not sign contracts”. The architects nevertheless sent two copies of a contract to Empirnall and asked that one copy be signed and returned. Two weeks later the architects wrote a letter to Empirnall that said “we are proceeding on the understanding that the conditions of the contract are accepted by you and works are being conducted in accordance with those terms and conditions”. The architects continued to work and receive progress payments, but the contract was never signed. When Empirnall became insolvent, it became necessary to determine the effectiveness of a clause of the unsigned contract charging the architects’ fees on the land being developed. The New South Wales Court of Appeal accepted the principle from Felthouse v Bindley that an offeror cannot set up a contract by stipulating silence as the mode of acceptance. 217 Silence may, however, indicate acceptance in some circumstances. The objective theory of contract requires an objective manifestation of assent to an offer. 218 The ultimate issue, therefore, is whether a reasonable bystander would regard the offeree’s conduct, including the offeree’s silence, as signaling acceptance of the offer. 219 In this case Empirnall did more than remain silent. It took the benefit of the services provided by the architects, knowing they were to be paid for in accordance with the offer and having had a reasonable opportunity to reject the offer. In those circumstances an objective bystander would conclude that Empirnall had accepted the offer on the terms proposed. McHugh JA adopted a principle of law applied in the United States, but restated it as a question of fact:

212

(1921) 30 CLR 113, 120.

213

(1921) 30 CLR 113, 125.

214

(1921) 30 CLR 113, 124.

215

(1921) 30 CLR 113, 131.

216

(1988) 14 NSWLR 523.

217

(1988) 14 NSWLR 523, 527, 534.

218

(1988) 14 NSWLR 523, 534.

219

(1988) 14 NSWLR 523, 535.

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Where an offeree with a reasonable opportunity to reject the offer of goods or services takes the benefit of them under circumstances which indicate that they were to be paid for in accordance with the offer, it is open to the tribunal of fact to hold that the offer was accepted according to its terms. 220

Correspondence between offer and acceptance [2.355] It is often said that an acceptance must correspond precisely with the offer. This

means that the offer empowers the offeree to do no more than accept or reject the terms proposed by the offeror. If the offeree attempts to vary the terms proposed, or to add additional terms, then the purported acceptance will amount to a counter-offer, which will give rise to a contract only if it is accepted by the original offeror. 221 A particular problem arises where both parties use standard form contracts. The problem arises where two parties, such as a buyer and seller of goods, exchange inconsistent standard forms during contract negotiations and reach agreement on the principal terms without deciding whose standard form should prevail. This situation is known as the “battle of the forms”.

The English approach [2.360] The English courts have resolved the battle of the forms problem by applying the

classical principles of offer and acceptance. On this approach the sending of the last form will usually be regarded as a counter-offer, and so the “last shot” will prevail, provided the recipient of the counter-offer can be taken to have accepted the terms proposed by the other sender. Butler Machine Tool Co Ltd v Ex-Cell-O-Corp (England) Ltd 222 exemplifies this approach. The seller of a machine provided a price quotation on certain terms and conditions. The seller’s form stipulated that orders would only be accepted subject to the terms and conditions set out in the quotation. The buyer then requested supply on its own terms and conditions, which differed in several important respects from the seller’s. Attached to the buyer’s form was a tear-off “acknowledgement of order” form, by which the sellers agreed to supply on the buyer’s terms and conditions. The seller signed this and returned it to the buyer with a letter stipulating that the machine would be supplied in accordance with the seller’s quotation. The issue was whether the seller was entitled to the benefit of a price variation provided for in the terms set out on the back of the seller’s original quotation. This clause allowed the seller to increase the price of the machine where the seller’s costs increased during the period of manufacture. The trial judge found decisive the seller’s stipulation that its conditions should prevail. The English Court of Appeal unanimously found for the buyer. Lawton and Bridge LJJ both applied the traditional analysis and found that the seller’s quotation constituted an offer and the buyer’s order a counter-offer. The effect of the counter-offer was to “kill the original offer”, 223 including the stipulation that the seller’s terms prevailed. The seller accepted this counter-offer by signing and returning the tear-off slip to the buyer. The reference in the seller’s letter to the original quotation was taken to refer only to the price and identity of the machine, and not to the terms on the back of the quotation. Lawton LJ observed that if the 220 221 222 223

(1988) 14 NSWLR 523, 535, citing Laurel Race Course Inc v Regal Construction Co Inc, 333 A 2d 319 (1975). Hyde v Wrench (1840) 3 Beav 334; 49 ER 132; Cullen v Bickers (1878) 12 SALR 5. See[2.135]. [1979] 1 WLR 401. See also British Road Services Ltd v Arthur V Crutchley & Co Ltd [1968] 1 Lloyd’s Rep 271, 281-2. [1979] 1 WLR 401, 406, 407. [2.360]

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seller’s letter had amounted to a further counter-offer, then it could not have been said that the parties were ad idem. There would then have been no contract between the parties. Lord Denning MR preferred to look at all of the documents passing between the parties as a whole and ascertain the terms from them. In some cases, he suggested, the terms of both parties should be construed together. If they are contradictory, “then the conflicting terms may have to be scrapped and replaced by a reasonable implication”. 224 In the present case Lord Denning found that, “as a matter of construction”, the seller’s acknowledgment of the buyer’s order was the decisive document, since it made clear that the contract was on the buyer’s terms and not the seller’s. 225

Conflict and synthesis [2.365] The judgments in Butler suggest two different methods of resolving the battle of the

forms: the conflict approach and the synthesis approach. 226 The conflict approach treats the exchange of terms as a battle and requires the court to determine which set of terms has prevailed. The battle will be won either by the party who fires the last shot or by the party who is most persistent in insisting that their own set of terms should prevail. The synthesis approach would require the court to build a contract from the two sets of terms. The synthesised contract would be made up of consistent terms, along with terms from one set that appeared to be accepted by the other party. Any gaps in the synthesised contract could be filled with terms implied by the court. Although Lord Denning suggested in Butler that the synthesis approach should be a last resort, relational analysis suggests that it should in fact provide the starting point. 227 The classical approach assumes that a set of terms is either accepted or not, and so the transaction is either on or off. This is well suited to discrete transactions, but fails to allow for any complexity that may exist in the relationship between the parties. 228 Parties exchanging standard forms may implicitly be rejecting the rule requiring precise correspondence between offer and acceptance. In the business world, a party commonly will neither entirely reject nor entirely accept the terms proposed by the other party, but will be more receptive to some terms than others. 229 The synthesis approach allows the court to take account of a party’s willingness to accept some terms, but not others. It acknowledges that parties to a transaction often focus on, and reach agreement on, the broader issues of the “deal”, without ever concerning themselves with the details of the contract. Extracts from Paterson, Robertson and Duke, Contract: Cases and Materials (2016, 13th ed), Ch 3

Legislative solutions [2.370] In the United States, art 2-207 of the Uniform Commercial Code (US) (UCC)

attempts to address the battle of the forms problem by creating an exception to the rule that acceptance must correspond precisely with the term of the offer. Article 2-207 provides that an acceptance that states additional or different terms will still be an effective acceptance. The 224 225 226 227 228 229

[1979] 1 WLR 401, 405. [1979] 1 WLR 401, 405. Greig and Davis, The Law of Contract (1987), pp 283-92. Greig and Davis, The Law of Contract (1987), p 288. See Macneil, The New Social Contract (1980), pp 72-3. Macneil, The New Social Contract (1980), p 73.

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additional terms are to be construed as proposals for additions to the contract. As between merchants, the terms become part of the contract unless the terms materially alter the offer, the offer expressly precludes the adding of terms or the offeror objects to the additional terms within a reasonable time. These provisions provide a starting point for a relational analysis because they allow a contract to be formed where a party accepts some terms, but rejects others. 230 Article 2-207(3) provides that a contract will be established where the parties by their conduct recognise the existence of a contract even though the writings of the parties do not establish a contract. The terms of the contract consist of the express terms on which the writings of the parties agree, and the terms implied by the UCC. Subsection (3) ensures that a contract will be formed where the parties have agreed on the principal terms and have begun performance. As suggested by Lord Denning in Butler, inconsistent terms are simply dispensed with. Subsection (3) provides “a relational base on which to rely when mutual consent fails”, but comes into play only when the parties have begun to perform. 231 UPICC art 2.1.22 adopts a similar approach to UCC art 2-207(3) without the requirement that performance has commenced, subject to one of the parties indicating either in advance or without undue delay afterwards that it does not intend to be bound by such a contract. 232 Both the Vienna Convention 233 and the UPICC 234 allow an acceptance to include non-material modifications. Both article 19 of the Vienna Convention and article 2.1.11 of the UPICC provide that an acceptance with additional conditions is regarded as a counter-offer unless the additional terms do not materially alter the terms of the offer. Where the additions or alterations are non-material, the acceptance will be effective and the additional terms incorporated, provided the offeror does not object.

Correspondence between offer and acceptance

Butler Machine Tool Co v Ex-Cell-O Corp (England) [2.375] Butler Machine Tool Co Ltd v Ex-Cell-O Corp (England) Ltd [1979] 1 WLR 401 Court of Appeal – Appeal from Thesiger J. [FACTS: The facts are set out by Lord Denning MR below.] LORD DENNING MR: [402] This case is a “battle of forms”. The plaintiffs, the Butler Machine Tool Co Ltd, suppliers of a machine, on 23 May 1969, quoted a price for a machine tool of £75 535. Delivery was to be given in ten months. On the back of the quotation there were terms and conditions. One of them was a price variation clause. It provided for an increase in the price if there was an increase in the costs and so forth. The machine tool was not delivered until November 1970. By that time costs had increased so much that the sellers claimed an additional sum of £2 892 as due to them under the price variation clause. The defendant buyers, Ex-Cell-O Corp (England) Ltd, rejected the excess charge. They relied on their own terms and conditions. They said: 230

Greig and Davis, The Law of Contract (1987), p 288.

231 232 233 234

Greig and Davis, The Law of Contract (1987), p 74. UNIDROIT Principles of International Commercial Contracts 2010, art 2.1.22. United Nations Convention on International Contracts for the Sale of Goods (1980), art 19. UNIDROIT Principles of International Commercial Contracts 2010, art 2.1.11. [2.375]

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Butler Machine Tool Co v Ex-Cell-O Corp (England) cont. We did not accept the sellers’ quotation as it was. We gave an order for the self-same machine at the self-same price, but on the back of our order we had our own terms and conditions. Our terms and conditions did not contain any price variation clause. The judge held that the price variation clause in the sellers’ form continued through the whole dealing and so the sellers were entitled to rely upon it … The judge said that the sellers did all that was necessary and reasonable to bring the price variation clause to the notice of the buyers. He thought that the buyers would not “browse over the conditions” of the sellers; and then, by printed words in their (the buyers’) document, trap the sellers into a fixed price contract. [403] I am afraid that I cannot agree with the suggestion that the buyers “trapped” the sellers in any way. Neither party called any oral evidence before the judge. The case was decided on the documents alone. I propose therefore to go through them. On 23 May 1969, the sellers offered to deliver one “Butler” double column plane-miller for the total price of £75 535. Delivery ten months (subject to confirmation at time of ordering) other terms and conditions are on the reverse of this quotation. On the back there were 16 conditions in small print starting with this general condition: “All orders are accepted only upon and subject to the terms set out in our quotation and the following conditions. These terms and conditions shall prevail over any terms and conditions in the buyer’s order.” Clause 3 was the price variation clause. It said: Prices are based on present day costs of manufacture and design and having regard to the delivery quoted and uncertainty as to the cost of labour, materials etc during the period of manufacture, we regret that we have no alternative but to make it a condition of acceptance of order that goods will be charged at prices ruling upon date of delivery. The buyers replied on 27 May 1969, giving an order in these words: “Please supply on terms and conditions as below and overleaf.” Below there was a list of the goods ordered, but there were differences from the quotation of the sellers in these respects: (1)

there was an additional item for the cost of installation, £3 100; and

(2)

there was a different delivery date (instead of ten months, it was 10-11 months).

Overleaf there were different terms as to the cost of carriage: in that it was to be paid to the delivery address of the buyers: whereas the sellers’ terms were ex warehouse. There were different terms as to the right to cancel for late delivery. The buyers in their conditions reserved the right to cancel if delivery was not made by the agreed date: whereas the sellers in their conditions said that cancellation of order due to late delivery would not be accepted. On the foot of the buyers’ order there was a tear-off slip headed: “Acknowledgment: Please sign and return to Ex-Cell-O. We accept your order on the terms and conditions stated thereon – and undertake to deliver by – Date – signed.” In that slip the delivery date and signature were left blank ready to be filled in by the sellers. On 5 June 1969, the sellers wrote this letter to the buyers: We have pleasure in acknowledging receipt of your official order dated 27 May covering the supply of one Butler Double Column Plane-Miller. This being delivered in accordance with our revised quotation of 23 May for delivery in 10/11 months, that is, March/April 1970. We return herewith duly completed your acknowledgment of order form. They enclosed the acknowledgment form duly filled in with the delivery date March/April 1970 and signed by the Butler Machine Tool Co. No doubt a contract was then concluded. But on what terms? The sellers rely on their general conditions and on their last letter which said: [404] “in accordance with our revised quotation of 124

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Butler Machine Tool Co v Ex-Cell-O Corp (England) cont. 23 May” (which had on the back the price variation clause). The buyers rely on the acknowledgment signed by the sellers which accepted the buyer’s order “on the terms and conditions stated thereon” (which did not include a price variation clause). If those documents are analysed in our traditional method, the result would seem to me to be this: the quotation of 23 May, 1969, was an offer by the sellers to the buyers containing the terms and conditions on the back. The order of 27 May, 1969, purported to be an acceptance of that offer in that it was for the same machine at the same price, but it contained such additions as to cost of installation, date of delivery and so forth that it was in law a rejection of the offer and constituted a counter-offer. That is clear from Hyde v Wrench (1840) 3 Beav 334; 49 ER 132. As Megaw J said in Trollope & Colls Ltd v Atomic Power Constructions Ltd [1963] 1 WLR 333 at 337: “the counter-offer kills the original offer.” The letter of the sellers of 5 June, 1969, was an acceptance of that counter-offer, as is shown by the acknowledgment which the sellers signed and returned to the buyers. The reference to the quotation of 23 May referred only to the price and identity of the machine. To go on with the facts of the case. The important thing is that the sellers did not keep the contractual date of delivery which was March/April 1970. The machine was ready about September 1970 but by that time the buyers’ production schedule had to be rearranged as they could not accept delivery until November 1970. Meanwhile the sellers had invoked the price increase clause. They sought to charge the buyers an increase due to the rise in costs between 27 May 1969 (when the order was given), and 1 April 1970 (when the machine ought to have been delivered). It came to £2 892. The buyers rejected the claim. The judge held that the sellers were entitled to the sum of £2 892 under the price variation clause. He did not apply the traditional method of analysis by way of offer and counter-offer. He said that in the quotation of 23 May 1969: “one finds the price variation clause appearing under a most emphatic heading stating that it is a term or condition that is to prevail.” So he held that it did prevail. I have much sympathy with the judge’s approach to this case. In many of these cases our traditional analysis of offer, counter-offer, rejection, acceptance and so forth is out of date. This was observed by Lord Wilberforce in New Zealand Shipping Co Ltd v AM Satterthwaite & Co Ltd [1975] AC 154 at 167. The better way is to look at all the documents passing between the parties – and glean from them, or from the conduct of the parties, whether they have reached agreement on all material points – even though there may be differences between the forms and conditions printed on the back of them. As Lord Cairns said in Brogden v Metropolitan Railway Co (1877) 2 App Cas 666 at 672: “there may be a consensus between the parties far short of a complete mode of expressing it, and that consensus may be discovered from letters or from other documents of an imperfect and incomplete description.” Applying this guide, it will be found that in most cases when there is a “battle of forms”, there is a contract as soon as the last of the forms is sent and received without objection being taken to it. That is well observed in Benjamin’s Sale of Goods (9th ed, 1974), p 84. The difficulty is to decide which form, or which part of which form, is a term or condition of the contract. In some cases the battle is won by the man who fires the last shot. [405] He is the man who puts forward the latest terms and conditions: and, if they are not objected to by the other party, he may be taken to have agreed to them. Such was British Road Services Ltd v Arthur V Crutchley & Co Ltd [1968] 1 Lloyd’s Rep 271 at 281-2 per Lord Pearson; and the illustration given by Prof Guest in Anson’s Law of Contract (24th ed), pp 37, 38 when he says: “the terms of the contract consist of the terms of the offer subject to the modifications contained in the acceptance.” In some cases the battle is won by the man who gets the blow in first. If he offers to sell at a named price on the terms and conditions stated on the back: and the buyer orders the goods purporting to accept the offer – on an order form with his own different terms and conditions on the back – then if the difference is so material that it would affect the price, the buyer ought not to be allowed to take advantage of the difference unless he draws it specifically to the attention of the seller. There are yet other cases where the battle depends on the shots fired on both [2.375]

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Butler Machine Tool Co v Ex-Cell-O Corp (England) cont. sides. There is a concluded contract but the forms vary. The terms and conditions of both parties are to be construed together. If they can be reconciled so as to give a harmonious result, all well and good. If differences are irreconcilable – so that they are mutually contradictory – then the conflicting terms may have to be scrapped and replaced by a reasonable implication. In the present case the judge thought that the sellers in their original quotation got their blow in first: especially by the provision that: “these terms and conditions shall prevail over any terms and conditions in the buyer’s order.” It was so emphatic that the price variation clause continued through all the subsequent dealings and that the buyers must be taken to have agreed to it. I can understand that point of view. But I think that the documents have to be considered as a whole. And, as a matter of construction, I think the acknowledgment of 5 June, 1969, is the decisive document. It makes it clear that the contract was on the buyers’ terms and not on the sellers’ terms: and the buyers’ terms did not include a price variation clause. I would therefore allow the appeal and enter judgment for the defendants. [2.380] LAWTON LJ: The modern commercial practice of making quotations and placing orders with conditions attached, usually in small print, is indeed likely, as in this case to produce a battle of forms. The problem is how should that battle be conducted? The view taken by Thesiger J was that the battle should extend over a wide area and the court should do its best to look into the minds of the parties and make certain assumptions. In my judgment, the battle has to be conducted in accordance with set rules. It is a battle more on classical 18th century lines when convention decided who had the right to open fire first rather than in accordance with the modern concept of attrition. The rules relating to a battle of this kind have been known for the past 130 odd years. They were set out by Lord Langdale MR in Hyde v Wrench to which Lord Denning MR has already referred; and, if anyone should have thought they were obsolescent, Megaw J in Trollope & Colls Ltd v Atomic Power Constructions Ltd called attention to the fact that those rules are still in force. When those rules are applied to this case, in my judgment, the answer [406] is obvious. The sellers started by making an offer. That was in their quotation. The small print was headed by the following words: “General. All orders are accepted only upon and subject to the terms set out in our quotation and the following conditions. These terms and conditions shall prevail over any terms and conditions in the buyer’s order.” That offer was not accepted. The buyers were only prepared to have one of these very expensive machines on their own terms. Their terms had very material differences in them from the terms put forward by the sellers. They could not be reconciled in any way. In the language of Art 7 of the Uniform Law on the Formation of Contracts for the International Sale of Goods (see Uniform Laws on International Sales 1967, Sched 2) they did “materially alter the terms” set out in the offer made by the plaintiffs. As I understand Hyde v Wrench, and the cases which have followed, the consequence of placing the order in that way, if I may adopt Megaw J’s words [1963] 1 WLR 333 at 337, was “to kill the original offer”. It follows that the court has to look at what happened after the buyers made their counter-offer. By letter dated 4 June, 1969, the plaintiffs acknowledged receipt of the counter-offer, and they went on in this way: “Details of this order have been passed to our Halifax works for attention and a formal acknowledgment of order will follow in due course.” That is clearly a reference to the printed tear-off slip which was at the bottom of the buyers’ counter-offer. By letter dated 5 June 1969, the sales office manager at the plaintiffs’ Halifax factory completed that tear-off slip and sent it back to the buyers. It is true, as Mr Scott has reminded us, that the return of that printed slip was accompanied by a letter which had this sentence in it: “This is being entered in accordance with our revised quotation of 23 May for delivery in 10/11 months.” 126

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Butler Machine Tool Co v Ex-Cell-O Corp (England) cont. I agree with Lord Denning MR that, in business sense, that refers to the quotation as to the price and the identity of the machine, and it does not bring into the contract the small print conditions on the back of the quotation. Those small print conditions had disappeared from the story. That was when the contract was made. At that date it was a fixed price contract without a price escalation clause. As I pointed out in the course of argument to Mr Scott, if the letter of 5 June which accompanied the form acknowledging the terms which the buyers had specified had amounted to a counter-offer, then in my judgment the parties never were ad idem. It cannot be said that the buyers accepted the counter-offer by reason of the fact that ultimately they took physical delivery of the machine. By the time they took physical delivery of the machine, they had made it clear by correspondence that they were not accepting that there was any price escalation clause in any contract which they had made with the plaintiffs. I agree with Lord Denning MR that this appeal should be allowed. [In a separate judgment BRIDGE LJ said that the case was plainly governed by the classical doctrine that a counter-offer amounts to a rejection of an offer and puts an end to the effect of the offer. He agreed that the appeal be allowed.] Appeal allowed.

Extracts from Paterson, Robertson and Duke, Principles of Contract Law (2016, 5th ed), Ch 3

A MEETING OF THE MINDS [2.385] Underlying many of the cases on offer and acceptance is the idea that a contract is

formed only when there is a meeting of minds or a consensus ad idem between the parties. The requirement of a consensus was strongly emphasised in some of the older cases. In Dickinson v Dodds, 235 for example, James LJ suggested that the “existence of the same mind between the two parties … is essential in point of law to the making of [an] agreement”. Whether an actual consensus, or just an appearance of consensus, is required may be said to turn on whether one adopts a subjective or objective approach to formation. It might be said that a subjective approach requires an actual consensus, whereas an objective approach looks only to the outward manifestations of the parties’ intentions, so the appearance of a consensus is sufficient, even if the parties do not actually agree. As discussed at [2.170], however, the subjective approach is for practical purposes almost indistinguishable from the objective approach, because of the principle of contract by estoppel. Under either a subjective or objective approach, a person who behaves as if accepting an offer will be bound, even if there was no actual consensus. While it might be superficially attractive to do so, it is not possible to draw a clear distinction between the subjective and objective approaches. 236 The subjective approach ultimately turns on objective criteria. In Smith v Hughes, the rule requiring subjective intent was met by a counter-rule imposing contractual liability where there was a false appearance of 235 236

(1876) 2 Ch D 463, 473. Dalton, “An Essay in the Deconstruction of Contract Doctrine” (1985) 94 Yale Law Journal 997, 1039-45. [2.385]

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consent. 237 The court maintained that a consensus was required to form a contract, but accepted that a party who appeared to consent would be estopped from denying the existence of a contract, with the same result if an actual contract had been formed. In The Crown v Clarke, Starke J confirmed that the law ordinarily adopts an objective approach to agreement, but allowed a party’s undisclosed intentions to be determinative in the “anomalous case under consideration”. 238 Under the Smith v Hughes principle, the objective appearance of consent trumps the party’s actual intentions, whereas in The Crown v Clarke, the party’s actual intentions trumped the objective appearance of consent. As Clare Dalton explains, the courts have tended towards objective standards for interpreting conduct in the modern cases for pragmatic reasons. 239 Assertions of private intention are unreliable and courts simply do not have access to a party’s true intentions. It is not possible to escape subjective considerations, however, because subjective will is still seen as the source of contractual obligation. 240 If the objective theory is in fact in command of the field, 241 and contractual obligation is based on objective criteria, then contract can be seen as an obligation that attaches by force of law to certain actions of the parties which normally, but may not necessarily, accompany and represent intent. 242 Contract cannot then be seen as a system of private or voluntarily assumed obligations. 243 It must be seen, like the law of tort, as a system of public obligation, in which liability is imposed on the basis of norms of reasonable behaviour. There is a fundamental inconsistency between, on the one hand, the courts’ adoption of objective formation criteria and, on the other hand, the rationalisation of particular doctrines and particular decisions on the basis of whether there was or was not a consensus. Dalton argues that if contract is a system of public obligation, then the courts should articulate the public concerns being addressed by the law of contract and the public values informing its operation. 244

AGREEMENT WITHOUT OFFER AND ACCEPTANCE [2.390] As noted at the beginning of this chapter, the identification of an offer and an

acceptance remains the conventional approach to establishing the agreement element of contract formation. It has, however, been accepted in a number of cases that a contract can be established without an identifiable offer and acceptance. The Australian courts have followed their counterparts in the United States in accepting that “a manifestation of mutual assent may be made even though neither offer nor acceptance can be identified and even though the 237 238 239 240

See above [2.170]. (1927) 40 CLR 227, 244. See [2.175]. Dalton, “An Essay in the Deconstruction of Contract Doctrine” (1985) 94 Yale Law Journal 997, 1040. Dalton, “An Essay in the Deconstruction of Contract Doctrine” (1985) 94 Yale Law Journal 997, 1042.

241

243 244

As suggested in Taylor v Johnson (1983) 151 CLR 422, 429, confirmed in cases such as Ermogenous v Greek Orthodox Community of SA Inc [2002] HCA 8; (2002) 209 CLR 95, 105-10 and Toll (FGCT) Pty Ltd v Alphapharm Pty Ltd [2004] HCA 52; (2004) 219 CLR 165, 179, and evidenced by decisions such as Fitness First (Australia) Pty Ltd v Chong [2008] NSWSC 800, discussed [2.170] and Shahid v Australasian College of Dermatologists [2008] FCAFC 72; (2008) 168 FCR 46, discussed (Paterson Textbook [5.07]). Hotchkiss v National City Bank, 200 F 287, 293 (1911). See Dalton, “An Essay in the Deconstruction of Contract Doctrine” (1985) 94 Yale Law Journal 997, 1043. As it was in Astley v Austrust Ltd [1999] HCA 6; (1999) 197 CLR 1, 36. Dalton, “An Essay in the Deconstruction of Contract Doctrine” (1985) 94 Yale Law Journal 997, 1030, 1066.

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moment of formation cannot be determined”. 245 In other words, “parties may drift into a contractual relationship”. 246 In Branir Pty Ltd v Owston Nominees (No 2) Pty Ltd Allsop J said that “Sometimes … having discussed the commercial essentials and having put in place necessary structural matters, the parties go about their commercial business on the clear basis of some manifested mutual assent, without ensuring the exhaustive completeness of documentation”. 247 In that case the Full Court of the Federal Court applied the following principle: The essential question in such cases is whether the parties’ conduct, including what was said and not said and including the evident commercial aims and expectations of the parties, reveals an understanding or agreement or, as sometimes expressed, a manifestation of mutual assent, which bespeaks an intention to be legally bound to the essential elements of a contract. 248

This approach to formation was discussed and followed by Heydon JA in Brambles Holdings Ltd v Bathurst City Council. 249 Brambles managed a solid waste disposal depot for the Council. For some years Brambles had received liquid waste at the depot and charged a fee to depositors, which Brambles retained. At the relevant time this was 1.1c per litre. By a letter dated 11 September 1991 the Council informed Brambles that it had resolved to increase liquid waste disposal fees to 1.3c per litre, increasing by a further 1c each quarter up to 6c per litre. Brambles was instructed to charge the increased fees and remit the additional income to the Council. By a letter dated 3 October 1991 Brambles replied that it was not viable for Brambles to continue to provide a liquid waste disposal service at the rates it was then receiving and asked for, inter alia, an increase in its remuneration. The parties did not reach agreement on Brambles’ entitlement to increased remuneration, but from October 1991 Brambles charged and retained the increased fees set out in the Council’s letter, including the quarterly increases. Some years later the Council claimed a contractual entitlement to all additional income received by Brambles from the fee increases. The Council’s entitlement to recover that income depended on the existence of a contract on the terms set out in the Council’s letter of 11 September 1991. The trial judge found that such a contract had been formed. Brambles appealed to the New South Wales Court of Appeal. Brambles argued, first, that no offer had been made by the Council. Heydon JA accepted that there was some question as to whether the Council’s letter could properly be regarded as an offer since it used the language of command, rather than that of a proposal which could be accepted or rejected. This point was not available to Brambles, however, because it had not been pleaded or argued below. 250 Brambles’ second argument was that its letter of 3 October amounted to a rejection of the Council’s offer and therefore extinguished it. 251 Ipp JA held that Brambles’ letter did not amount to a rejection but was “merely part of the posturing that often accompanies negotiation”. 252 Heydon JA said that the notion that rejection always renders an offer incapable of acceptance is based on the erroneous assumption that the “offer 245

Restatement of Contracts (2d), §22(2), cited with approval in Vroon BV v Foster’s Brewing Group Ltd [1994] 2 VR 32, 82-3; Brambles Holdings Ltd v Bathurst City Council [2001] NSWCA 61; (2001) 53 NSWLR 153, 178.

246 247 248 249 250 251 252

Husain v O & S Holdings (Vic) Pty Ltd [2005] VSCA 269, [51]. [2001] FCA 1833; (2001) 117 FCR 424, 525. [2001] FCA 1833; (2001) 117 FCR 424, 525. [2001] NSWCA 61; (2001) 53 NSWLR 153. [2001] NSWCA 61; (2001) 53 NSWLR 153, 171. See [2.135]. [2001] NSWCA 61; (2001) 53 NSWLR 153. [2.390]

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and acceptance analysis must invariably be employed in reaching decisions about the formation of contracts”. 253 Although the offer and acceptance formulation is “a useful tool in most circumstances” and is the “conventional” approach, 254 Heydon JA said that it is “neither sufficient to explain all cases nor necessary to explain all cases”. 255 Where no offer and acceptance can be identified, it is relevant to ask whether an agreement can be inferred, whether mutual assent has been manifested and whether a reasonable person in the position of each of the parties would think there was a concluded bargain. 256 This case was analogous to Empirnall Holdings v Machon Paull. Brambles took advantage of the commercial benefits being offered by the Council, knowing the basis on which the Council was prepared to allow the higher fees to be charged. This would lead a reasonable bystander to conclude that Brambles was assenting to the Council’s conditions. The Council’s letter and Brambles’ subsequent conduct would lead reasonable persons in the positions of the parties to believe that a contract was concluded on the basis proposed by the Council. 257 Thus a contract was made even though there was some evidence that representatives of both the Council and Brambles “believed that there was no contractual regime for liquid waste fees but that the Council had some other power to fix them”. 258

NON-CONTRACTUAL OBLIGATIONS [2.395] As noted at the beginning of this chapter, the classical approach to contract formation

is based on the idea of a moment of formation when enforceable contractual rights arise. Prior to that moment, the parties have no contractual obligations to one another. Once the moment of formation has arrived, however, each party becomes liable for the other party’s full contractual expectation. 259 Legal obligation between transacting parties under this approach is either all or nothing. Developments in the common law, equity and statute have addressed many of the inadequacies of the classical approach. Although the moment of formation is still of great importance, it is no longer as decisive as it once was, because the modern law recognises numerous non-contractual obligations between negotiating and contracting parties. The parties will owe obligations to one another even if a contract is never formed. Developments in the law of estoppel have facilitated the protection of pre-contractual reliance. The law of estoppel now recognises that in exceptional circumstances it may be unfair for A to withdraw from negotiations with B, if A has led B to act on the assumption that A will enter into a contract with B. 260 The law of restitution will sometimes require payment in respect of work done in anticipation of a contract that fails to materialise. 261 The law of tort recognises that in some cases negotiating parties owe each other a duty of care in the provision 253

254

[2001] NSWCA 61; (2001) 53 NSWLR 153, 176. Mason P (at 155) agreed with the reasons of Ipp AJA, but also agreed with Heydon JA that the case demonstrates the difficulties of “pressing too far classical theory of contract formation based upon offer and acceptance”. [2001] NSWCA 61; (2001) 53 NSWLR 153, 179, citing Gibson v Manchester City Council [1979] 1 All ER 972; [1979] 1 WLR 294, 974 (All ER).

255 256 257 258 259 260 261

[2001] NSWCA 61; (2001) 53 NSWLR 153, 176. [2001] NSWCA 61; (2001) 53 NSWLR 153, 179. [2001] NSWCA 61; (2001) 53 NSWLR 153, 179-80. [2001] NSWCA 61; (2001) 53 NSWLR 153, 180. Feinman, “Critical Approaches to Contract Law” (1983) 30 UCLA Law Review 829, 835. See (Paterson Textbook Ch 9, esp [9.175]). See (Paterson Textbook Ch 10, esp [10.50]).

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of information. 262 The ACL imposes numerous obligations on parties engaged in contractual negotiations. 263 The most important of these is the obligation not to engage in misleading or deceptive conduct in trade or commerce, which in some circumstances even requires one negotiating party to disclose information to another. 264 That may even include an obligation on the part of A to disclose to B the fact that another commercial opportunity has arisen which reduces the likelihood that the transaction between A and B will proceed. 265 The ACL also prohibits conduct such as bait advertising, 266 which from a contractual point of view would be regarded as an invitation to treat, having no legal significance. These developments are of great practical importance and must be borne in mind when reading the older cases. Equitable doctrines, the law of tort, the law of restitution and statutory provisions will often provide a remedy to a party who has no contractual rights. In many cases the remedies provided by these doctrines and statutory provisions will be more limited than those provided in respect of a breach of contract because the non-contractual doctrines are not concerned to enforce promises, but to protect against harm (in the case of estoppel, tort and the statutory prohibition on misleading conduct) or restore unjust gains (in the case of restitution). In addition to those practical consequences, the recognition of obligations between negotiating parties is also of philosophical significance. The development of these obligations can be seen as a move away from the classical law’s individualistic model of contracting, which gave primacy to the value of self-reliance. Parties involved in contractual negotiations are no longer regarded simply as autonomous individuals who need only be concerned with the pursuit of self-interest. It can be argued, however, that this recognition falls far short of overcoming all of the problems with the classical approach to formation. Jay Feinman has argued that similar developments in the United States have failed to overcome the inadequacies of the classical law. 267 The classical law’s rigid and formalistic approach to contract formation remains largely unchanged in the modern law. Despite the flaws in the classical model, the underlying idea of freedom of contract remains enormously powerful. The abandonment of the classical model would undermine the accepted basis of contract law and require too great a leap for the common law. 268 Accordingly, we are left with a mixed image, which accepts that the courts apply social values in some areas, while insisting that the core of contract is based on private agreement. 269

262

See [17.95]-[17.110].

263

See [1.175]-[1.210].

264

See Chapter 17.

265

See [17.230], especially the discussion of EK Nominees Pty Ltd v Woolworths Ltd [2006] NSWSC 1172.

266

ACL, s 35.

267 268 269

Feinman, “Critical Approaches to Contract Law” (1983) 30 UCLA Law Review 829. Feinman, “Critical Approaches to Contract Law” (1983) 30 UCLA Law Review 829, 833. Feinman, “Critical Approaches to Contract Law” (1983) 30 UCLA Law Review 829, 834. [2.395]

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CHAPTER 3 Consideration [3.05]

WHEN IS CONSIDERATION REQUIRED? ............................................................. 133

[3.10]

ORIGINS OF THE REQUIREMENT ......................................................................... 134

[3.15]

THE ESSENTIAL ELEMENTS ................................................................................... 134 [3.20] [3.25]

The benefit/detriment requirement .................................................. 135 The bargain requirement ................................................................... 135 [3.40] [3.50]

Australian Woollen Mills v Commonwealth .............................. 139 Beaton v McDivitt ................................................................. 142

[3.95]

CONSIDERATION MUST MOVE FROM THE PROMISEE ..................................... 150

[3.100]

SUFFICIENCY OF CONSIDERATION ..................................................................... 152 [3.105] [3.110]

Discretion as to performance ............................................................. 152 Past consideration ............................................................................... 153

[3.125]

The existing legal duty rule ................................................................ 155

[3.120] [3.135] [3.165] [3.175] [3.185]

[3.200]

158 165 168 172

Pao On v Lau Yiu Long .......................................................... 173

Bona fide compromise ........................................................................ 181 [3.225]

[3.235]

Foakes v Beer ........................................................................ Williams v Roffey Bros & Nicholls (Contractors) ....................... Musumeci v Winadell ............................................................ Re Selectmove .......................................................................

Duty owed to a third party ................................................................ 173 [3.200]

[3.225]

Roscorla v Thomas ................................................................ 154

Wigan v Edwards .................................................................. 181

PROMISES UNDER SEAL ........................................................................................ 183

Extracts from Paterson, Robertson and Duke, Principles of Contract Law (2016, 5th ed), Ch 4

WHEN IS CONSIDERATION REQUIRED? [3.05] The second essential element in the formation of a contract is consideration. The

doctrine of consideration requires that something must be given in return for a promise in order to make it binding. Consideration is clearly present in most agreements and is usually taken for granted. That is because most agreements that come before the courts involve an exchange. A contract may involve an immediate exchange of things, such as an exchange of money for goods. Alternatively, a contract may involve the exchange of a thing for a promise, such as A’s immediate payment of $1000 to B in return for B’s promise to build a fence for A. A contract may also involve an exchange of promises, such as A’s promise to pay $1000 to B in return for B’s promise to build a fence for A. It is where an agreement is entirely one-sided and a promise remains unperformed that the issue of consideration assumes central importance. [3.05]

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Consideration must be identified when A has made a promise to B, which B wishes to enforce, and there is some doubt as to whether B has given anything in return. Consideration is a requirement of the enforceability of promises. If we need to know whether A’s promise to B can be enforced by B, we must ask whether B (the promisee) has given consideration for that promise. 1 When a contract is made by an exchange of promises, each party’s promise provides consideration to support the promise made by the other. An agreement that is not supported by consideration on both sides is sometimes said to be nudum pactum (a naked agreement) and this label carries with it the idea that the agreement is unenforceable.

ORIGINS OF THE REQUIREMENT [3.10] The requirement of consideration was originally concerned with the motivation for

making a promise. In the 16th century, the legal effect of a promise depended on the “considerations” or factors motivating the making of the promise. 2 The existence of a “good consideration” for making a promise provided evidence that a promise had in fact been made and indicated that it would be just to enforce the promise. By the end of the 16th century, it was necessary to plead the motive or reason for the making of a promise on which one wanted to sue. 3 Promises came to be enforceable when the promisee had conferred some benefit on the promisor or the promisee had acted to his or her detriment in reliance on the promise. 4 Although in the latter situation detrimental reliance was induced by the promise, rather than providing a motive for it, the concept of “consideration” was twisted to include reliance. 5 In the 18th century the fact that the promisor was under a moral obligation to the promisee was taken to be sufficient consideration for a promise. 6 The modern doctrine of consideration took shape in the 19th century. In Eastwood v Kenyon, 7 the moral obligation conception of consideration was firmly rejected. During this period the concept of “bargain” came to dominate the law of contract being shaped by textbook writers and judges. Under the influence of the bargain concept, consideration came to be seen as something of legal value given in exchange for a promise, which could be seen as the price of the promise. An all-embracing formula for consideration was developed, which united the historical recognition of “benefit” and “detriment” with the idea of an exchange adopted by consensus between the parties. 8

THE ESSENTIAL ELEMENTS [3.15] Consideration is something the law regards as valuable, which is given in return for a

promise and can be seen as the agreed price of the promise. There are two aspects to that definition: first, the promisee must incur a detriment or confer a benefit on the promisor (the 1

In this chapter the person making the promise sought to be enforced will be referred to as the promisor and the person seeking to enforce the promise as the promisee.

2 3 4

Simpson, A History of the Common Law of Contract (1975), p 321. Greig and Davis, The Law of Contract (1987), p 7. Greig and Davis, The Law of Contract (1987), p 75.

5 6 7 8

Simpson, A History of the Common Law of Contract (1975), pp 324-5. Hawkes v Saunders (1782) 1 Cowp 289; 98 ER 1091 at 290, 294, 1093. (1840) 11 Ad & El 438; 113 ER 482. Greig and Davis, The Law of Contract (1987), pp 20-1.

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benefit/detriment requirement) and, secondly, that benefit or detriment must be given in return for the promise (the bargain requirement). The courts do not expressly set up a two-stage test covering these requirements; rather, some cases focus on the benefit/detriment aspect, while other cases focus on the bargain requirement. The benefit/detriment requirement [3.20] The first aspect of valuable consideration is that it must consist of a detriment to the

promisee or a benefit to the promisor. In a statement which has been described as a classic definition of consideration, 9 Lush J said in Currie v Misa 10 that: A valuable consideration, in the sense of the law, may consist in some right, interest, profit, or benefit accruing to the one party, or some forbearance, detriment, loss, or responsibility, given, suffered, or undertaken by the other …

This means that the person to whom the promise is made must either confer a benefit on the promisor, or must incur a legal detriment, in the sense of giving something up or undertaking an obligation. In most cases the consideration given in return for a promise will constitute both a benefit to the promisor and a detriment to the promisee. Assume, for example, that B wishes to enforce A’s promise to pay B $1000. The consideration given by B may be the transfer of property (such as B’s car), the performance of services (such as building a fence for A) or, more commonly, the making of a promise to transfer property or perform services in the future. B may also make a promise not to do something, such as a promise not to sue A in respect of a tort or breach of contract committed by A, or a promise not to trade in competition with A. In each of those examples, the consideration given by B constitutes both a detriment to B and a benefit to A. It is important to recognise that mutual promises will provide good consideration for each other. If B makes a promise in return for A’s promise, this will confer a benefit on A (because A will have an enforceable legal right to have the promise performed) and will also be a detriment to B (because B will come under an obligation to perform the promise). The recognition of mutual promises involves a paradox which has vexed writers on contract law. 11 If A and B exchange promises, each promise will constitute a legal benefit to the promisee and a legal detriment to the promisor only if it is legally enforceable. Each promise will be legally enforceable only if consideration has been provided in return. But the return promise will constitute good consideration only if it is enforceable. Thus, neither promise will be binding unless consideration has been provided, but, strictly speaking, neither promise should constitute consideration unless it is binding. Since there is no doubt that the courts do recognise mutual promises as good consideration for one another, this paradox is of academic interest only. The “bargain” requirement [3.25] The second aspect of the doctrine of consideration is that the benefit conferred on the

promisor or the detriment suffered by the promisee must be given in return for the promise. The act relied on as consideration must, in other words, be performed as the agreed price of the promise. This notion of consideration was adopted by the High Court in Australian 9 10 11

Beaton v McDivitt (1987) 13 NSWLR 162, 181. (1875) LR 10 Ex 153, 162. See Coote, “The Essence of Contract – Part II” (1989) 1 Journal of Contract Law 183, 191-5. [3.25]

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Woollen Mills Pty Ltd v Commonwealth. 12 This decision illustrates the proposition that: “Consideration, offer and acceptance are an indivisible trinity, facets of one identical notion which is that of bargain.” 13 The facts of the case were outlined in Chapter 2. 14 Australian Woollen Mills (AWM) attempted to enforce a series of promises made by the Commonwealth to pay subsidies on the wool purchased by Australian manufacturers. AWM claimed that, by purchasing wool, it provided consideration for the Commonwealth’s promises to pay the subsidies. The acts of purchasing wool satisfied the test outlined in Currie v Misa 15 because they constituted both a legal detriment to AWM and a benefit to the Commonwealth. The High Court held, however, that there must be a relation of quid pro quo (this for that) between the Commonwealth’s promise and the acts relied on as consideration for that promise. The acts must be performed in return for the promise. This “bargain” aspect of consideration will be satisfied if the acts which are said to amount to consideration have been performed at the request or implied request of the person making the promise. In this case, the statements made by the Commonwealth were in the nature of policy announcements and no request to purchase wool could be implied. In the absence of such a request, it was irrelevant that AWM may have acted to their detriment in reliance on the Commonwealth’s promise. 16 On appeal, the Privy Council upheld the decision of the High Court on the basis that the letters sent by the Commonwealth contained statements of policy, rather than offers. 17 The Privy Council indicated, however, that the High Court had over-emphasised the importance of a request. The Privy Council took the view that the presence of a request will not necessarily establish a contract. 18 Although in some cases the absence of a request will negate the existence of a contract, the presence of a request to perform an act will not necessarily establish a relation of quid pro quo between the act and a promise made by the alleged offeror. It is possible for an act to satisfy the bargain aspect of consideration, but not the benefit/detriment requirement. The facts of Ballantyne v Phillott 19 illustrate this. Phillott had commenced proceedings against Ballantyne, his former mistress, to recover a substantial sum of money he had lent to her. There was some evidence that Ballantyne had asserted that she had lent money to Phillott and had claimed she could sue him for defamation, although it seems doubtful that she had, or even believed she had, an enforceable claim against him on either ground. 20 At the instigation of a third party, Ballantyne and Phillott signed a written document in which Phillott agreed to discontinue the proceedings and to release all claims he may have had against her. Ballantyne relied on the agreement when Phillott later instituted fresh proceedings to recover the debt. As consideration for Phillott’s promises, Ballantyne relied on a statement in the signed document that she had no right or claim against Phillott in respect of the action for debt or otherwise. The High Court held, by a majority of 2-1, that 12 13 14 15 16

(1954) 92 CLR 424. Hamson, “The Reform of Consideration” (1938) 54 Law Quarterly Review 233, 234. See [2.50]. (1875) LR 10 Ex 153. Greig and Davis, The Law of Contract (1987), p 81. Such detrimental reliance might today be claimed to give rise to an estoppel: see (Paterson Textbook Ch 9).

17 18 19 20

Australian Woollen Mills Pty Ltd v Commonwealth (1955) 93 CLR 546, 554-5. (1955) 93 CLR 546, 550. (1961) 105 CLR 379. (1961) 105 CLR 379, 396, 399 and 390.

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Ballantyne had not given consideration for Phillott’s promises. Menzies J held that Ballantyne did not promise to give up a claim against Phillott and no promise could be implied in the circumstances. Ballantyne had done no more than to admit that she had no claim against Phillott and this does not amount to consideration. 21 On this view, even if Ballantyne’s admission could be regarded as the price of Phillott’s promise, the making of the admission did not constitute a detriment to Ballantyne or a benefit to Phillott. Windeyer J accepted that such an admission could be the price of a promise, but found that it had not been shown to be so in this case. 22 Dixon CJ dissented on the basis that, slight as the consideration was “in a legal point of view”, it was something and should be regarded as sufficient. 23

Bargains and conditional gifts [3.30] As discussed in Chapter 2, 24 the decision in Australian Woollen Mills Pty Ltd v

Commonwealth 25 illustrates the distinction between a contract and a conditional gift. A promise to pay someone $100 if they perform a certain act is a conditional gift, whereas a promise to pay $100 in return for performance of the act is capable of giving rise to a contract. The court used the example of a promise by A to pay B (who is in Melbourne) £1000 upon B’s arrival in Sydney. No contract arises upon B’s arrival in Sydney because A is simply announcing his intention to make a gift to B. The necessary relationship between the promise and the act does not exist. If, on the other hand, A had an urgent need for B’s presence in Sydney and B expressed concern about the cost of travel, B’s act may be regarded as consideration for A’s promise. That is because it would then be possible to infer a request by A which establishes the necessary connection between A’s promise and B’s act.

Bargains and reliance [3.35] It is also important to distinguish between an act performed as the agreed price of a

promise and an act performed in reliance on a promise. An act performed in reliance on a promise will not constitute good consideration, but may give rise to an estoppel. This boundary between contract and estoppel was delineated by the New South Wales Court of Appeal in Beaton v McDivitt. 26 This case concerned an unusual arrangement. The McDivitts expected their land to be rezoned in a way that would greatly increase the rates payable to the local council. Since they were not using all of the land, they decided to minimise the rates payable by subdividing the land into four lots. They planned to give one of those lots to a person prepared to cultivate the land using permaculture methods. An agreement was reached with Beaton that Beaton would occupy the land in question and work it rent-free. The McDivitts would transfer the land to Beaton when the rezoning and subdivision took place. Beaton took possession of the land, built a house and a road giving access to the block and farmed the block for several years. Neither the rezoning nor the subdivision eventuated. A dispute arose between the parties over a Tai Chi class held in Beaton’s house and the McDivitts ordered Beaton off the land. Beaton claimed there was a contract between the parties which entitled him to a transfer of the land in question. 21 22 23 24 25 26

(1961) 105 CLR 379, 397-8. (1961) 105 CLR 379, 399-400. (1961) 105 CLR 379, 390. See [2.50]. (1954) 92 CLR 424. (1987) 13 NSWLR 162. [3.35]

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At first instance 27 Young J held that the requirement of bargained-for consideration laid down in Australian Woollen Mills Pty Ltd v Commonwealth was not satisfied, but there was a line of cases, starting with Dillwyn v Llewelyn, 28 which represented “an exception to the modern requirement that a contract should be a bargain supported by consideration in the nature of a quid pro quo”. 29 Young J held that the plaintiff’s reliance on the defendants’ promise amounted to a consideration and gave rise to “a Dillwyn type contract”. 30 On appeal, the New South Wales Court of Appeal refused to extend the bargain theory of consideration laid down by the High Court in Australian Woollen Mills Pty Ltd v Commonwealth. Kirby P 31 and McHugh JA 32 made it clear that there was no exception to the bargain concept of consideration. They said that the Dillwyn v Llewelyn line of cases involved the enforcement of promises by way of estoppel and not by way of contract. Kirby P found that the bargain requirement was not satisfied on the facts, since Beaton made no promise which could be regarded as a quid pro quo for a promise to transfer the land. 33 McHugh and Mahoney JJA found that Beaton had provided consideration by working the land at the McDivitts’ request. 34 Beaton’s performance of the requested acts therefore gave rise to a unilateral contract. Beaton was ultimately unsuccessful, however, because Mahoney JA found that the contract had been brought to an end by frustration. 35 He therefore joined Kirby P in finding against Beaton. The decision in Beaton v McDivitt draws a clear line between contract and estoppel. Acts performed in reliance on a promise will not constitute consideration for that promise unless those acts can be regarded as having been performed in return for the promise. A person who relies on a promise which has not been bargained for must seek a remedy in estoppel rather than contract. In the subsequent decision of the High Court in the estoppel case Waltons Stores (Interstate) Ltd v Maher, 36 Mason CJ and Wilson J appeared to give their approval to a strict interpretation of the Australian Woollen Mills decision when they suggested that it “may be doubted whether our conception of consideration is substantially broader than the bargain theory” developed in the United States. 37 The bargain requirement is sometimes overlooked in the analysis of consideration. An example of a case in which this occurred was Atco Controls Pty Ltd (in liq) v Newtronics Pty Ltd (recs & mgrs apptd) (in liq). 38 Atco provided a series of annual “letters of support” to the auditors of its subsidiary (Newtronics), in which Atco confirmed that it would not to seek to recover debts owed by Newtronics to the detriment of other creditors, and confirmed that it would provide sufficient funds to Newtronics to enable Newtronics to meet its trading debts. Atco’s support was needed for Newtronics to remain solvent and to continue to trade, and the 27

Beaton v McDivitt (1985) 13 NSWLR 134.

28 29 30 31 32 33 34 35 36 37 38

(1862) 4 De GF & J 517; 45 ER 1285. (1987) 13 NSWLR 162, 170. (1985) 13 NSWLR 134. (1987) 13 NSWLR 162, 170. (1987) 13 NSWLR 162, 182 (1987) 13 NSWLR 162, 170. (1987) 13 NSWLR 162, 175, 183. (1987) 13 NSWLR 162, 177. As to frustration, see Chapter 14. (1988) 164 CLR 387. (1988) 164 CLR 387, 402. [2009] VSCA 238; (2009) 25 VR 411.

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provision of these letters allowed Newtronics to be presented in its audited accounts as a solvent, going concern. 39 When Newtronics subsequently became insolvent, its liquidator claimed that the letters of support were evidence of a contract between Atco and Newtronics under which Atco undertook to provide financial support for Newtronics and not to call up the debt to the detriment of other creditors. Pagone J at first instance found that, by continuing to trade, Newtronics provided consideration for Atco’s undertakings. This finding was overturned on appeal. The Court of Appeal held that the most that could be said was that Newtronics had continued to trade in reliance on Atco’s undertakings. For the consideration requirement to be satisfied, Newtronics would have to show that Atco’s undertakings were offered as the price or quid pro quo for the action of Newtronics in continuing to trade. “In this case, that required Newtronics to show that Atco in effect requested Newtronics to continue to trade in return for the undertaking of continued support and that Newtronics was moved by that request.” 40 No such request could be implied because “Atco for all intents and purposes ran Newtronics and had no need or intention of requesting it to do anything”. 41 Extracts from Paterson, Robertson and Duke, Contract: Cases and Materials (2016, 13th ed), Ch 4

Australian Woollen Mills v Commonwealth [3.40] Australian Woollen Mills Pty Ltd v Commonwealth (1954) 92 CLR 424; Privy Council (1955) 93 CLR 546 High Court of Australia – Action. [FACTS: The plaintiff (Australian Woollen Mills Pty Ltd) claimed that a unilateral contract had arisen out of the Commonwealth government’s wool subsidy scheme. The scheme was introduced after World War II, at a time when wool was scarce. The Commonwealth subsidised purchases of wool by manufacturers of woollen products to enable those manufacturers to supply the products at low prices. In 1946 the Commonwealth announced in a series of letters to manufacturers, including the plaintiff, that it would pay a subsidy on all wool purchased for domestic use by Australian manufacturers. AWM purchased large quantities of wool over the next two years, including purchases in April, May and June 1948 in respect of which the subsidy had not been paid. In June 1948 the Commonwealth announced that it was discontinuing the scheme, but would ensure that each manufacturer would have a certain amount of subsidised wool in stock on 30 June 1948. The stockpile of wool held by AWM exceeded this amount, and so the Commonwealth required AWM to repay the subsidy paid on that excess. AWM repaid that amount, but later sued to recover it, along with the unpaid subsidy on the April, May and June purchases.] THE COURT (DIXON CJ, WILLIAMS, WEBB, FULLAGAR AND KITTO JJ): [456] The contracts alleged by the plaintiff are pleaded in paras 3 and 4a of the statement of claim. Paragraph 3 alleges: At or prior to the commencement of the wool season 1946–1947 the defendant promised the plaintiff that in consideration that the plaintiff would during that season purchase wool at auction and otherwise than at auction for domestic consumption in Australia the defendant would pay to the plaintiff a subsidy. The alleged mode of determining the amount of the subsidy is then set out, but this may be put on one side for the moment. Paragraph 4a contains an identical allegation in respect of the wool season 39 40 41

See Newtronics Pty Ltd (recs & mgrs appd) (in liq) v Atco Controls Pty Ltd (in liq) [2008] VSC 566, [9] – [12]. [2009] VSCA 238; (2009) 25 VR 411, [62]. [2009] VSCA 238; (2009) 25 VR 411, [64]. [3.40]

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Australian Woollen Mills v Commonwealth cont. 1947–1948. In each case there follows an allegation that the plaintiff made purchases of wool from time to time “in pursuance of the said agreement”. The contract put forward by the plaintiff is thus seen to be of that type which is commonly said to be constituted by an offer of a promise for an act, the offer being accepted by the doing of the act. Such contracts are sometimes described as “unilateral” contracts, but the term is open to criticism on the ground that it is unscientific and misleading. There must of necessity be two parties to a contractual obligation. The position in such cases is simply that the consideration on the part of the offeree is completely executed by the doing of the very thing which constitutes acceptance of the offer. A well-known example in which a contract was held to have been made is to be found in Carlill v Carbolic Smoke Ball Co [1893] 1 QB 256 … Other well-known examples are the cases in which a reward is offered for the giving of information or for the finding and return of lost property and the cases in which there is forbearance by a creditor in return for the debtor’s promise to give security. In cases of this class it is necessary, in order that a contract may be established, that it should be made to appear that the statement or announcement which is relied on as a promise was really offered as consideration for the doing of the act, and that the act was really done in consideration of a potential promise inherent in the statement or announcement. Between the statement or announcement, which is put forward as an offer capable of acceptance by the doing of an act, and the act which is put forward as the executed consideration for the alleged promise, there must subsist, so to speak, [457] the relation of a quid pro quo. One simple example will suffice to illustrate this. A, in Sydney, says to B in Melbourne: “I will pay you £1 000 on your arrival in Sydney.” The next day B goes to Sydney. If these facts alone are proved, it is perfectly clear that no contract binding A to pay £1 000 to B is established. For all that appears there may be no relation whatever between A’s statements and B’s act. It is quite consistent with the facts proved that B intended to go to Sydney anyhow, and that A is merely announcing that, if and when B arrives in Sydney, he will make a gift to him. The necessary relation is not shown to exist between the announcement and the act. Proof of further facts, however, might suffice to establish a contract. For example, it might be proved that A, on the day before the £1 000 was mentioned, had told B that it was a matter of vital importance to him (A) that B should come to Sydney forthwith, and that B objected that to go to Sydney at the moment might involve him in financial loss. These further facts throw a different light on the statement on which B relies as an offer accepted by his going to Sydney. They are not necessarily conclusive but it is now possible to infer: (1)

that the statement that £1 000 would be paid to B on arrival in Sydney was intended as an offer of a promise;

(2)

that the promise was offered as the consideration for the doing of an act by B; and

(3)

that the doing of the act was at once the acceptance of an offer and the providing of an executed consideration for a promise.

The necessary connection or relation between the announcement and the act is provided if the inference is drawn that A has requested B to go to Sydney. The position has been stated above in terms of the technical doctrine of consideration, and this is, in our opinion, the correct way of stating it. But it may be referred to a principle which is fundamental to any conception of contract. It is of the essence of contract, regarded as a class of obligation, that there is a voluntary assumption of a legally enforceable duty. In such cases as the present, therefore, in order that a contract may be created by offer and acceptance, it is necessary that what is alleged to be an offer should have been intended to give rise, on the doing of the act, to an obligation. The intention must, of course, be judged in the light of the principle laid down in Freeman v Cooke (1848) 2 Ex 654; 154 ER 652 at 656, but, in the absence of such an intention, actual or imputed, the alleged “offer” cannot lead to a contract; there is, indeed, in such a case no true “offer”. 140

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Australian Woollen Mills v Commonwealth cont. [458] A test which has not seldom been applied in such cases in order to determine whether a contract has been made or not is to ask whether there has been a request by the alleged promisor that the promisee shall do the act on which the latter relies. Such a request may, of course, be expressed or implied. In an interesting article in the (1953) 69 LQR 99, to which Mr Windeyer referred us and which has already been incidentally mentioned, Mr JC Smith maintains that the presence of a request, express or implied, is an essential element in every true offer. Sir A Goodhart ((1951) 67 LQR 456 and (1953) 69 LQR 106), contests this general proposition, maintaining in effect that the essential thing, in a case such as the present, is that the “offeror” should state a price which the “offeree” must pay if he wishes to purchase a promise. This way of putting the position does not seem to differ materially from the way in which we have put it above. At the same time, it can hardly be denied that the presence or absence of an implied request to do the act may often provide a useful test for determining whether there has been a true offer and a true acceptance such as to bring a contract into existence. We are really applying the same test if we ask whether the “offer” was made in order to induce the doing of the act … The presence or absence of an implied request that the act be done has been regarded as material in a number of cases. In Carlill’s case itself it is regarded as material by both Bowen LJ and AL Smith LJ. Bowen LJ says: “A further argument for [459] the defendants was that this was a nudum pactum … that there was no consideration at all; in fact, that there was no request, express or implied, to use the smoke ball”: [1893] 1 QB 256 at 270, 271. His Lordship then refers to [two cases] and proceeds: “The short answer, to abstain from academical discussion is, it seems to me, that there is here a request to use involved in the offer”: at 271 … Several other illustrative cases are cited in Mr Smith’s article. It will suffice here to mention two cases, the one nearly a hundred years old and the other very recent. The correctness of the actual decision in Shadwell v Shadwell (1860) 9 CB (NS) 159; 142 ER 62, is likely to be forever debated. Erle CJ and Keating J took, in the light of all the circumstances, one view of the letter on which the plaintiff relied: Byles J took another view. But the approach of all the learned judges to the problem of fact was exactly the same. Erle CJ and Keating J said: First, do these facts shew a loss sustained by the plaintiff at his uncle’s request? … If the promise was made in order to induce the parties to marry, the promise so made would be in legal effect a request to marry. Secondly, do these facts shew a benefit derived from the plaintiff to the uncle, at his request? … If the promise of the annuity was intended as an inducement to the marriage … this is the consideration averred in the declaration: (1860) 142 ER 62 at 68. Bales J said: “The inquiry therefore narrows itself to this question – Does the letter itself disclose any consideration for the promise? The consideration relied on by the plaintiff’s counsel being the subsequent marriage of the plaintiff”: (1860) 142 ER 62 at 69. Then after discussing the contents of the letter he says: “The question, therefore, is still further narrowed to this point – Was the marriage at the testator’s request? Express request there was none. Can any request be implied?” (1860) 142 ER 62 at 69. His Lordship concludes that no such request can be implied, and that the marriage could not be said: “to have taken place at the testator’s request or, in other words, in consequence of that request”: (1860) 142 ER 62 at 69. The very recent case is Combe v Combe [1951] 2 KB 215. [460] This is one of the “forbearance” cases. Denning LJ said: Unilateral promises of this kind have long been enforced, so long as the act or forbearance is done on the faith of the promise and at the request of the promisor, express or implied. The act done is then in itself sufficient consideration for the promise, even though it arises ex post facto: at 221. [3.40]

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Australian Woollen Mills v Commonwealth cont. And Asquith LJ (as he then was) said: “I do not think an actual forbearance, as opposed to an agreement to forbear to approach the court, is a good consideration unless it proceeds from a request, express or implied, on the part of the promisor. If not moved by such a request, the forbearance is not in respect of the promise”: at 226, 227. Coming to the present case, it is impossible, in our opinion, to hold that any contract was constituted at any stage binding the Commonwealth to pay a subsidy to the plaintiff, or to any manufacturer, in consideration of a purchase of wool for local manufacture … Judgment for defendant. [Australian Woollen Mills Ltd appealed to the Privy Council. In the course of their judgment dismissing the appeal (1955) 93 CLR 546, their Lordships said:] [3.45] [548] The first answer of the respondent to this claim is that there were no contracts; that the basis of the scheme was not contractual but administrative, and that the letters contained statements of policy and not contractual offers … [554] Their Lordships are of the opinion that these letters cannot be read as an offer or offers to contract. They contain a statement of [555] policy. The “scheme” is to be administered by the Commission which is itself to determine the amount of the subsidy. No single phrase or provision may be decisive. The letters must be read as a whole. If the intention had been to provide for a series of contracts one would as between these parties have expected a form containing the provisions which, if disputes arose, would be construed and applied by the courts. The number of uncertain factors make it natural that the basis should be administrative. Nor is there anything remarkable in the fact that the manufacturers should be content to act on the respondent’s statement of policy. A further letter of 20 August elaborating the procedure emphasises the control which the respondent thought the Commission was keeping on the scheme … [550] The appellant further submitted that the respondent wanted the manufacturers to purchase so that there could be woollen goods on the home market. There was therefore an implied request to do so. Let this be admitted. It does not appear to their Lordships to advance the argument. There may be cases where the absence of a request negatives the existence of a contract. The presence of a request does not, however, in itself establish a contract. Manufacturers may be requested to come into and work a non-contractual scheme. On this aspect of the argument their Lordships think, with all respect, there was force in the criticism of that passage in the judgment of the High Court in which it is said that there was nothing in the nature of a request or invitation … Appeal dismissed.

Beaton v McDivitt [3.50] Beaton v McDivitt (1987) 13 NSWLR 162 Court of Appeal of the Supreme Court of New South Wales – Appeal from Young J. [FACTS: The McDivitts (the respondents) owned 25 acres of land but farmed only a portion of it. Mr McDivitt believed that the local council was likely to rezone the land within two years and that the council rates would then be increased substantially. McDivitt feared that he would be unable to pay the new rates and he decided to divide the land into four blocks, three to be retained by himself and his family, the fourth to be made available to “someone interested in the form of cultivation known as permaculture to work the block”. He said that he would transfer the title to the block to the person selected when the rezoning took place. Mr Beaton (the appellant) was told of this plan by a mutual friend and the Beatons then had discussions with the McDivitts. As a result of those discussions the Beatons moved on to the fourth 142

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Beaton v McDivitt cont. block, farmed the land using permaculture methods and, in accordance with oral undertakings given to McDivitt, assisted in the creation and maintenance of a road which gave access to the block. After seven years a dispute arose and McDivitt ordered the Beatons off the land. Young J said: Doing the best I can, in my view what happened was this, Mr McDivitt feared that the zoning would be changed which would affect his rates, knew that he was not using the whole of his 25 acres, thought it would be nice to have someone who was interested in permaculture work on part of the land, and was quite willing to give part of the land to that person if and when the land was rezoned … Accordingly, the essential facts as I have found them, are that the defendants made a proposal to Mr Beaton that he would come on to lot B and work it rent free, and that when subdivision took place, which was thought to be only a short time, that is, a matter of two to three years away from being a legal possibility, the Beatons, or at least Mr Beaton, would be given the title to lot B in fee simple. Mr Beaton accepted this proposal and he suffered some detriment in acting upon it in that he spent approximately $1,000 on planting trees and shrubs on the land. He has, of course, also spent seven years living on the land and working on it, though there must also be taken into account the fact that he has occupied that land without payment. Young J held that the Beatons had not given consideration sufficient to satisfy the bargain requirement of something given in exchange for the promise. He found, however, that there was a line of cases starting with Dillwyn v Llewelyn which represented “an exception to the modern requirement that a contract should be a bargain supported by consideration in the nature of a quid pro quo.” The Beatons’ acts of reliance were sufficient to give rise to a “Dillwyn v Llewelyn type contract”. Young J held, however, that this contract had been frustrated. Accordingly, the Beatons were not entitled to remain on the land. Mr Beaton appealed.] KIRBY P: [168] By our law, consideration is an essential requirement for an enforceable contract. Without consideration, a promise is unenforceable at law. The modern theory of consideration has arisen from the notion that a contract is a bargain struck between the parties by an exchange. By that modern theory, consideration must be satisfied in the form of a price in return for the promisor’s promise or a quid pro quo. The price can be in the form of an act, forbearance or promise. In Pollock on Contracts, 13th ed (1950) at 133 Sir Frederick Pollock, in words adopted by Lord Dunedin in Dunlop Pneumatic Tyre Co Ltd v Selfridge and Co Ltd [1915] AC 847 at 855, expressed the idea of consideration as the “price in return” in the following way: “An act or forbearance of one party, or the promise thereof, is the price for which the promise of the other is bought, and the promise thus given for value is enforceable.” The triumph of the bargain theory of consideration necessary for a contract amounts to a rejection of the theory of contractual obligation based upon reliance. This shift may have come about as a result of the mercantile attitudes and the requirements of England in the eighteenth and nineteenth centuries. It may reflect the consequent final subordination of Roman Law doctrines, founded ultimately in notions of relationships and morality: see P S Atiyah, The Rise and Fall of Freedom of Contract (1979) at 499 f but cf J H Baker (1980) 43 Mod L Rev 467 f and sources there cited. Whatever the origins and explanations for this shift (to the extent that they can now be known given that such disputes were typically resolved by jury verdicts) it was necessary, thereafter, to have resort to courts of equity for the enforcement of claims based on relationships. For in the courts of law, duties arising from bargains entered between free parties were to be enforced, not duties deriving from suggested moral obligations such as those deriving from relationships. The High Court of Australia has accepted this “modern” or bargain doctrine of consideration. In Australian Woollen Mills Pty Ltd v The Commonwealth (1954) 92 CLR 424 at 456–7, the Court (Dixon CJ, Williams, Webb, Fullagar and Kitto JJ) said, relevant to the present arrangement: [3.50]

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Beaton v McDivitt cont. In cases of this class it is necessary, in order that a contract may be established, that it should be made to appear that the statement or announcement which is relied on as a promise was really offered as consideration for the doing of the act, and that the act was really done in [169] consideration of a potential promise inherent in the statement or announcement. Between the statement or announcement, which is put forward as an offer capable of acceptance by the doing of an act, and the act which is put forward as the executed consideration for the alleged promise, there must subsist, so to speak, the relation of a quid pro quo. Young J (rightly in my opinion) was unable to find consideration in this sense in the facts of the present case. It is just not possible, however indulgently one approaches those facts with sympathy to the appellant, to classify the promises he made as a quid pro quo for the suggested promise of the respondent, in certain circumstances, to transfer title in the land to him. At the time, the appellant was having difficulties with his landlord. Therefore, a right to occupy and use the respondents’ land rent free was of considerable benefit to him. What other possible benefit did the respondents derive of the kind which the High Court said in the Australian Woollen Mills case was necessary for an enforceable contract? True it is they would have somebody living on the land. True also they might hope that such person would be a congenial neighbour, sharing with them their peculiar ideas about horticulture. But these scarcely amount to a quid pro quo for such a substantial promise as the passing of title and the taking of steps to that end. I do not in this conclusion overlook the fact that the law is not concerned with the sufficiency of the suggested consideration. I examine the facts simply to see whether those suggested benefits which passed to the respondent can properly be classified as consideration. In my opinion the expenditures and actions of the appellant are more properly to be categorised as entirely for his own benefit and that of his family. The element of congeniality and of having on the land a neighbour of like horticultural practices is not valuable consideration. It is more akin to domestic and social arrangements and the natural love and affection which have long been held not to amount to consideration sufficient to establish a binding contract … There is a policy behind the law’s insistence upon consideration of the kind explained. People make foolish and ill considered promises to confer gifts and other benefits on others. Especially do they do so, one might say, in the festive atmosphere of the Christmas and New Year season. In the cold light of the dawns that follow, disputes require courts to decide whether these promises will be enforced. Leaving aside equitable relief occasioned by the dealings between the parties, why should the law hold a party to such a promise of a gift unless it can be demonstrated that, in return for such a promise, the promisor received some bargain from the promisee by way of quid pro quo? In a sense, this shows our law (which has generally declined to adopt the formalism of the civil law approach to contract) insisting upon a bargain before it will attach legal consequences to the unformalised dealings of the parties. The law is not concerned (in this respect) with the equality of [170] the bargain. But in some cases the “bargain” will be so illusory or one-sided that a quid pro quo will not be found. Formality apart, the suggested “contract” will then not be enforced at law. But was the promise made on New Year’s Eve 1977, that the appellant would maintain the private road to the property, a sufficient quid pro quo to amount to consideration to sustain an enforceable contract? In my view it was not. Any “agreement” between the parties was made on 26 December 1977. Talk about the road did not arise until nearly a week later. Even then it arose only in response to the appellant’s offer to pay the rates. That very offer indicates the appellant’s acknowledgment of the great benefit which he was receiving. Any promise made to maintain the road (which after all was necessary to secure access to the appellant’s home) cannot be classified as one demanded or offered in exchange for the alleged promise of the respondents to transfer title. In the manner in which the additional term as to the road arose, it was not contemplated by the respondents’ promise, earlier accepted by the appellant. Accordingly it cannot represent consideration. I therefore agree with 144

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Beaton v McDivitt cont. Young J’s conclusion that no contract was made between the parties which would be enforced according to the conventional or “modern” view about the requirement of valuable consideration for a contract enforceable at law.

Gift and ex post facto consideration [3.55] But was Young J right in holding that a contract of the kind found in Dillwyn v Llewelyn existed here and would be enforced by the law of contract? His Honour analysed the line of cases which have followed Dillwyn v Llewelyn. He concluded that its conceptual classification was not estoppel but the survival of an old contract principle of detriment, as an exception to the modern requirement that a contract should be a bargain supported by consideration in the nature of a quid pro quo. Whatever may be the position elsewhere, I consider that to hold as Young J did would be to subvert the principle accepted unanimously by the High Court of Australia in Australian Woollen Mills. Moreover, it would be to undermine the simplicity of the requirements of contract law and the uniform approach to the definition therein of the requirements of consideration. Given the clear way in which contract law has moved from a “detriment” to a “bargain” theory, I regard the belated attempt to suggest an exception founded on Dillwyn v Llewelyn as unconceptual and unhistorical. However that may be, it is impermissible to the courts in Australia until the High Court of Australia reviews and modifies its decision in the Australian Woollen Mills case. In any case, close analysis of the judgment of Lord Westbury LC in Dillwyn v Llewelyn suggests that the basis for equitable intervention in that case was proprietary estoppel. The inter-relationship of common law and equity is notoriously troublesome. But it is both obligatory and desirable in this Court to preserve the unity of contract law by avoiding suggested exceptions to the rule that consideration for an alleged promise must involve “the relation of a quid pro quo”. The “exception” to the general rule thought by Young J to be necessary is better classified not as an exception to the requirement of a quid pro quo for consideration but as an illustration of the [171] relief which equity will sometimes give, based upon estoppel, whatever may be the rights of the parties in law. It is suggested that the quid pro quo for the transfer of the block of land assigned to the appellant was his act in coming upon and working the block by means of the particular form of horticulture specified by the respondents. Once he did so, it is argued that it was not open to the respondents to withdraw their offer. I do not consider that this is the correct analysis of the arrangement between them. I have mentioned the difficulties which the appellant was having with his landlord because of which the offer of rent-free accommodation must have seemed remarkably well timed. The lack of specificity as to the work and expenditure to be carried out by the appellant on the land (reinforced by the evidence of the lack of substantial work in actuality) combined with the fact that the appellant contemplated and performed some work as part of his own business to his own advantage suggests (as do numerous other indications) that, both before and after the Yuletide conversations in 1977, the true classification of the appellant’s occupation of the land was that of a bare licensee. If it be relevant to look to whether the appellant acted to his detriment, I do not believe that he did. On the contrary, the arrangement made was entirely to his advantage. If, as I have held, it is necessary to decide whether the appellant gave a quid pro quo for the suggested promise to transfer the land, I do not believe he did. Properly considered, the true interpretation of events appears to be that the respondent for reasons of congeniality and commitment to a shared idea of horticulture invited the appellant onto part of his land. No rent or other relevant consideration passed from the appellant to the respondents for this permission. No relevant detriment was suffered by the appellant. He received rent-free accommodation for seven years. To enforce the Boxing Day promise (apart from the many other difficulties it faced) would in my view amount to the enforcement of a contract made without consideration. This conclusion relieves me of the obligation to consider whether any such contract, if made, would have been frustrated by the events which later occurred…. [3.55]

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Beaton v McDivitt cont.

Relief in equity [3.60] This conclusion brings me to the alternative way in which the appellant sought relief, so far as still pressed in this Court. This was that, whatever the position in law, it would be unconscionable for the legal owners of the land (the respondents) to insist upon their legal rights and that equity would provide relief to the appellant. One such circumstance where relief will be provided is where there is unconscionable behaviour on the part of the legal owner in circumstances in which another party is incurring expenditure, to the knowledge of the owner. Even where the owner may not request or excite that behaviour, where the expenditure is induced by an expectation of obtaining protection, equity will intervene to ensure that an injustice may not be perpetrated … [172] [S]o far as any expenditure which the appellant made on that part of the respondents’ property which he occupied, this is entirely explained by the appellant’s own domestic and business needs and interests. The appellant and his family enjoyed the property, rent free, for seven years before the judgment of Young J. Despite all that has occurred and not occurred, including the absence of rezoning, the absence of consent by the council, the absence of the Minister’s consent and the delay of years far beyond that originally contemplated, to now suggest that equity can only be satisfied by the transfer of an interest in the land to the appellant is so disproportionate to the identified detriments to which the appellant can point, that I cannot accept that equity would in the circumstances lend its aid. [173] There being no enforceable contract between the parties and no equity which the courts would enforce in favour of the appellant, I have concluded that the orders of Young J should be sustained… [3.65] McHUGH JA: [180] The learned judge found that the plaintiff gave no consideration in the conventional sense for the defendant’s promise to make the land over to him. However, his Honour said that, where a person has made a promise of a conditional gift and the promisee has relied on that promise to his detriment, the promisee gives ex post facto consideration for the promise and that makes it contractually enforceable. Young J referred to many cases where promises to make a gift of land have been enforced against the promisor when the promisee had acted to his detriment in reliance on the promise: see for example, Dillwyn v Llewelyn (1862) 4 De G F & J 517; 45 ER 1285; [1861–1873] All ER Rep 384; Ramsden v Dyson (1866) LR 1 HL 129. Professor Atiyah regards this line of decisions as based on the law of contract and as an exception to the bargain theory of contract: see Consideration in Contracts: A Fundamental Restatement (1971), pp 30-3. Young J accepted this analysis. The principle upon which his Honour relied is succinctly stated by Jordan CJ in New South Wales Trotting Club Ltd v Glebe Municipal Council (1937) 37 SR (NSW) 288 where his Honour said: if a person lays out money in improving land which he knows to belong to another, and does so, to the knowledge of the other, on the faith of an express or implied promise from that other that he is to have some interest in the land, a court of equity, so far as it can, will compel the other to give effect to the promise. It is pointed out in Canadian Pacific Railway Co v The King [1931] AC 414 at 428 that this type of case depends on contract express or implied. However, in my opinion it is not open to this court to regard this line of cases of which Dillwyn v Llewelyn and Ramsden v Dyson are well known examples as contract based. It is true that statements can be found in many of them which suggest that the promise is enforceable because the parties have made a contract. As late as 1961 Nagle J, sitting in the Full Court in Commonwealth v A E Goodwin Ltd [1962] SR (NSW) 315; [1961] NSWR 1080 at 325 (SR (NSW)), 1090 (NSWR), declared that contract was the basis of these decisions. But this is not the explanation which more recent authorities have placed on them. Nor in the light of the decision of the High Court in Australian Woollen Mills Pty Ltd v Commonwealth (1954) 92 CLR 424 is it possible for this court to hold that the Dillwyn v Llewelyn line of cases is contract based. The statement by Jordan CJ to which I have referred and which Young J quoted in his judgment cannot now be considered an accurate statement of the law. 146

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Beaton v McDivitt cont.

The jurisprudential basis of the plaintiff’s claim [3.70] [181] Historically, the doctrine of consideration was nearly identical with the motive for making a promise. Before it could be decided whether the promise was binding, a court had to know why the promise was made: Simpson, A History of the Common Law of Contract (1975), p 321. Historically, there was little difference between the common law conception of consideration and the Roman idea of “causa”. But in the 19th century, the basis of consideration moved from motive and reliance to bargain. By 1842 Patteson J could say in Thomas v Thomas (1842) 2 QB 851; 114 ER 330 at 859 (QB), 333-4 (ER): It would be giving to causa too large a construction if we were to adopt the view urged by the defendant: it would be confounding consideration with motive … Motive is not the same thing with consideration. Consideration means something which is of some value in the eye of the law, moving from the plaintiff: it may be of some benefit to the plaintiff or some detriment to the defendant; but at all events it must be moving from the plaintiff. In Currie v Misa (1875) LR 10 Exch 153 at 162, Lush J, in the course of giving the judgment of Keating, Quain and Archibald JJ and himself, gave the now classic definition: “A valuable consideration, in the sense of the law, may consist either in some right, interest, profit, or benefit accruing to one party, or some forbearance, detriment, loss, or responsibility, given, suffered, or undertaken by the other.” The element of bargain is inherent in this definition. In the United States, O W Holmes Jnr was a strong proponent of the bargain theory. In The Common Law (De Wolfe Howe ed), he said (at 230): “The root of the whole matter is the relation of reciprocal conventional inducement, each for the other, between consideration and promise.” This sentence was quoted with evident approval by Isaacs ACJ in The Crown v Clarke (1927) 40 CLR 227 at 236. By the beginning of the 20th century, Pollock was able to say that an “act or forbearance of one party, or the promise thereof, is the price for which the promise of the other is bought, and the promise thus given for value is enforceable”: Pollock on Contracts (8th ed, 1911), p 175. Pollock’s definition was adopted by Lord Dunedin in Dunlop Pneumatic Tyre Co Ltd v Selfridge & Co Ltd [1915] AC 847 at 855. In the United States the bargain theory has been extended to the point where nothing is regarded as consideration “which is not regarded as such by both parties”: Restatement, Contracts, 2d, s 75(1). English law has not gone so far: see Treitel, ““Consideration: A Critical Analysis of Professor Atiyah’s Fundamental Restatement”” (1976) 50 ALJ 439 at 440. However, the essential elements of the bargain theory were adopted in The Crown v Clarke and in Australian Woollen Mills Pty Ltd v Commonwealth. The ratio decidendi of Australian Woollen Mills Pty Ltd v Commonwealth is that the expenditure of money in reliance on an announcement by the government that it would pay a subsidy to a manufacturer on wool purchased and used for local manufacture is not itself sufficient to create a contract to pay the subsidy … The reasoning of the High Court … accepts the basic element of the bargain theory of consideration and amounts to a rejection of a reliance based theory of consideration. Modern writers on contract law have criticised the use of the bargain theory as the exclusive test of consideration: see Atiyah at 27-8; Gilmore, The Death of Contract (1974), pp 19-21, 60-5; Sutton, Consideration Reconsidered (1974), p 33; Greig and Davis, The Law of Contract (1987), pp 758. The criticisms of these writers would extend to the theory of consideration applied in Australian Woollen Mills Pty Ltd v Commonwealth. However, the current theory of consideration has its modern supporters (see Treitel, Law of Contract (6th ed, 1983), pp 51-4) and the paper given by Sir Anthony Mason and Gageler at the Australian National University, “The Contract”. However, so far as this court is concerned, the discussion is academic. In the case of a unilateral contract such as the present, the law [3.70]

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Beaton v McDivitt cont. relating to consideration is laid down in Australian Woollen Mills Pty Ltd v Commonwealth. None of the cases to which Young J referred, therefore, can be treated as contract based unless there was a quid pro quo for the defendant’s promise. The jurisprudential basis of cases such as Dillwyn v Llewelyn, in my opinion, is that equity will not allow a person to insist upon his strict rights when it is unconscionable to do so … Although I disagree with the jurisprudential basis on which Young J found a contract in this case, I am of the opinion that his Honour was correct in finding a contract. However, as will be seen, I do not fully agree with all that his Honour said as to the terms of that contract.

The contract [3.75] When a person promises or offers to transfer property to another person, care must be taken to distinguish between three situations. The first concerns a promise to transfer property subject to the occurrence of an event or condition. The promise will not be enforceable even if the event or condition [183] occurs. An example is a bare promise to pay X $100 if a certain team wins a football match. The second situation concerns a promise to transfer property after which the promisor allows the promisee to act to his detriment in reliance on the promise. In this situation, depending on the circumstances, equity may prevent the promisor insisting on his strict rights and may enforce the promise. The third situation is where the promise contains an express or implied request by the promisor to do an act or fulfil a condition. In that situation the doing of the act or the fulfilling of the condition by the promisee in reliance on the promise will usually constitute consideration and create a binding contract: see Australian Woollen Mills Pty Ltd v Commonwealth and Combe v Combe [1951] 2 KB 215 [and Carlill v Carbolic Smoke Ball Co. [1893] 1 QB 256] … In the present case, I think that the promise made by Mr McDivitt was an offer which was intended to give rise to an obligation on the part of himself and his wife upon the plaintiff coming and working on the land. Mr McDivitt was concerned that the land would be rezoned, that the rates would go up, and that he would not be able to pay them when he went on the pension. Accordingly, he decided to subdivide the land. Upon the transfer of three of the blocks after subdivision, he would obtain a benefit because his rates would be reduced. This motivated him to offer the block in return for a person coming and working the block by means of organic farming. Thus the consideration for the transfer of the block was the act of the plaintiff in coming and working the block by means of organic farming at the request of the McDivitts. Once the plaintiff went on to the land and commenced to work the block, it was not open to the McDivitts to withdraw their offer … By entering onto lot B and performing work, the plaintiff had suffered sufficient detriment to constitute consideration even though he was obliged to work the land until the time of subdivision before he was entitled to the transfer of lot B …

Frustration [3.80] … With great respect to the learned trial judge, I am unable to conclude that the contract was frustrated by December 1982 or at all. His Honour found, and it was common ground on this appeal, that the present zoning did not prevent the subdivision of the land of the McDivitts. Nor with respect was there any evidence from which a conclusion could be drawn that an application for subdivision would certainly fail. His Honour’s finding concerning the terms of the contract did not include any term that the plaintiff’s right to the transfer of the land depended upon the rezoning of the land. The plaintiff’s right arose upon the subdivision of the land. Moreover, the evidence does not establish that the fulfilment of the [185] offer was dependent upon the land being rezoned. I have already set out the plaintiff’s evidence. On that evidence the question of rezoning, while a motivating factor, was not a condition of the transfer of the land … 148

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Beaton v McDivitt cont. It may well be that, without the rezoning of the land, no approval will be given to the subdivision. However, subdivision is not a legal impossibility; it is possible that in all the circumstances the council might permit the land to be subdivided to enable the title to lot B to pass to the plaintiff.

The duty to co-operate [3.85] The McDivitts have a contractual duty to do everything necessary on their part to enable the plaintiff to have the benefit of the contract: Secured Income Real Estate (Aust) Ltd v St Martins Investments Pty Ltd (1979) 144 CLR 596 at 607 per Mason J. Accordingly, it is and was their duty to do everything in their power necessary to have the land subdivided so as to transfer “lot B” to the plaintiff. No doubt it was not a breach of that duty for the McDivitts to wait and see whether the land would be rezoned. But if the land is not to be rezoned, then the fulfilment of the McDivitts’ duty requires that they make an application under the present zoning. If that application fails and if it appears that there is no prospect in the foreseeable future of a [186] subdivision being carried through, then it may be proper to conclude that the contract between the parties has been frustrated. But in my opinion that moment has not yet been reached. Moreover, it necessarily follows from what I have said that the plaintiff is entitled to work lot B and remove the fruits of his labour. [McHugh JA concluded that the plaintiff was entitled to have the block transferred to him conditional upon the appropriate consent of the council and the minister being obtained.] [3.90] MAHONEY JA: [175] In my opinion, the transaction between the parties constituted a contract. To adopt the Ansonian approach, the defendants offered the plaintiff a promise for an act: they promised to transfer the land if Mr Beaton came on the land and worked it as they discussed. The appeal has proceeded on the basis that Mr Beaton did, or did substantially, the act in question. Therefore there was a binding contract…. [176] I think the conclusion should be drawn that Mr Beaton also did what he did upon the basis that the transfer of the land to him was to be made as and when the land was rezoned and therefore could be subdivided … It is therefore necessary to determine the significance of the contemplated rezoning in the contractual obligations of the parties. On the facts as the learned judge found them, I would be inclined to think – at least it might be argued – that the rezoning was a condition subsequent to the contractual arrangements made. On this basis, the defendants would be contractually bound to transfer the land to Mr Beaton but they would not be bound to effect the transfer unless and until the rezoning took place. If the rezoning was a condition, then it was not fulfilled. No time was specified within which the rezoning was to take place. In the absence of specification of time, the implication would be, I think, that it should take place within a reasonable time. And, on the evidence, I would conclude that that time has now elapsed. That being so, it would be open to the defendants to terminate and what they have done constitutes such a determination. However, before this Court the parties did not argue the significance of rezoning as a condition of the contract. I do not think that the learned judge made a definitive finding in this regard. There may be reasons why, had such an argument been raised and pursued, it would have been rejected: it may be that evidence could have been called upon the matter. I therefore do not think it is proper for this Court to hold that rezoning was a condition of the contract or that, if it was, the contract has been terminated by failure of it. What, then, should this Court see as the significance of the rezoning? For the reasons I have given, it is proper to approach this question upon the basis that, though the parties regarded rezoning as they did, it was not a contractual term in their contract. On this basis, I agree with his Honour’s conclusion that the fact that there was not a contemplated rezoning by the [3.90]

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Beaton v McDivitt cont. time of the hearing effects a termination of the contract. The fact that the rezoning was specifically contemplated by the parties does not, I think, prevent the doctrine of frustration operating. Ordinarily an event operating by way of frustration will not be expressly contemplated or the subject of an [177] express provision in an agreement. But there is, in my opinion, nothing in the doctrine of frustration which will prevent it operating where the parties have contracted on an expressed assumption which in the event proves false: see generally Brisbane City Council v Group Projects Pty Ltd (1979) 145 CLR 143 and Codelfa Construction Pty Ltd v State Rail Authority of New South Wales (1982) 149 CLR 337. In so far as the applicability of the doctrine of frustration is to be tested by the circumstances, I think that, had a bystander said to the parties in 1977: But what if the rezoning does not take place?, they would both have said that (subject to one matter): Of course, the land cannot be transferred. And that, in principle, provides the basis for the operation of frustration. The matter that I have mentioned is the provision for an accounting of what should come from or go to Mr Beaton if his contractual rights in the land were to come to an end. It would be expected that the parties would have said not merely “Of course …” but “Of course … but …”. I do not think that, if conditions subsequent be put aside, the fact that there would be a qualified “Of course” prevents the operation of the doctrine of frustration, at least in the present case. I do not think that, in principle, it prevents that doctrine operating. The fact of the qualification would go, not to frustration, but to what would follow from it. To that I shall return subsequently. There remains the possibility that a rezoning may take place. But, as far as the evidence shows, there is no present prospect of a rezoning. The contemplation was, as his Honour said, that there would be a rezoning within some two years. Ten years and more have passed. I think that, in these circumstances, the theoretical possibility of a rezoning in the future does not prevent the contract coming to an end. … it was not suggested – at least the matter was not pursued before the learned judge – that efforts by the defendants could or would have procured a rezoning. I do not think that the contemplation of the contract was that the defendants should produce a rezoning: the contract was upon the basis of a rezoning resulting, not from the efforts of the defendants but otherwise. The defendants were, in my opinion, under no obligation to procure it and the imposition of a term upon them that they should seek so to do would be wrong. Appeal dismissed.

Extracts from Paterson, Robertson and Duke, Principles of Contract Law (2016, 5th ed), Ch 4

CONSIDERATION MUST MOVE FROM THE PROMISEE [3.95] It is clear that consideration given in return for a promise need not move to the

promisor: A may undertake a contractual obligation to B in return for a benefit conferred by B on C. A might, for example, agree to pay a reward to any person who finds and returns C’s dog. If B finds and returns the dog in reliance on A’s promise, B’s acts will not confer a benefit on A, but will constitute a legal detriment to B and will have been given in return for A’s promise.

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Although consideration need not move to the promisor, it is a fundamental principle that consideration must move from the promisee. 42 This requirement has led some to question whether Lush J was right to accept in Currie v Misa 43 that a benefit to the promisor can constitute good consideration. 44 The argument is that a benefit to the promisor cannot be treated as an alternative to detriment to the promisee in the requirement of consideration because, if the consideration moves from the promisee, it must necessarily constitute a legal detriment to the promisee. This argument appears not to be accepted by the courts, which in recent cases have clearly accepted a benefit to the promisor as an alternative to detriment to the promisee in satisfying the requirement of consideration. 45 Where two or more parties to a contract are regarded as joint promisees, consideration may be provided by one of them on behalf of both or all of them. This principle was accepted in Coulls v Bagot’s Executor & Trustee Co Ltd. 46 That case concerned an agreement by which Arthur Coulls gave a company the right to quarry stone from his property in return for royalties. Under the agreement, Arthur Coulls authorised the company to pay the royalties to himself and his wife Doris Coulls “as joint tenants”. Property held as joint tenants passes to the surviving tenant when one of them dies. When Arthur Coulls died, a dispute arose as to whether the company was obliged to pay the royalties to Doris Coulls or to the executor of Arthur Coulls’ estate. Whether Doris Coulls was entitled to receive the royalties depended on two issues: first, whether she was a party to the agreement and, secondly, whether she had given consideration for the company’s promise to pay the royalties. A majority of the court found that she was unable to enforce the agreement because she was not a party to it. 47 In their dissenting judgments, Barwick CJ and Windeyer J held that a promise made to two or more joint promisees can be supported by consideration provided by one of the promisees on behalf of all. The consideration is then regarded as moving from all of them collectively and the promise can be enforced by action taken by them jointly. 48 Taylor and Owen JJ in the majority agreed that if Doris Coulls had been a party to the contract, it would not have mattered that she personally did not provide consideration. 49 It is important to note that a party to a contract who has not herself provided consideration will be able to enforce a promise only if she can be regarded as a joint promisee with the person who has provided consideration. In other words, it is possible to be a party to a contract in which a promise is made, but still be a stranger to the consideration given in return for that promise. In Trident General Insurance Co Ltd v McNiece Bros Pty Ltd, 50 Mason CJ and Wilson J observed that: 42 43 44 45 46 47 48 49 50

Thomas v Thomas (1842) 2 QB 851; 114 ER 330 at 859, 333-4; Dunlop Pneumatic Tyre Co Ltd v Selfridge and Co Ltd [1915] AC 847. (1875) LR 10 Ex 1537. See Shatwell, “The Doctrine of Consideration in the Modern Law” (1954) 1 Sydney Law Review 289, 305-6. See [3.155]-[3.160]. (1967) 119 CLR 460. See [8.15]. (1967) 119 CLR 460, 478-9, 492-3. But see Coote, “Consideration and the Joint Promisee” [1978] Cambridge Law Journal 301. (1967) 119 CLR 460, 486. (1988) 165 CLR 107. [3.95]

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If A, B and C are parties to a contract and A promises B and C that he will pay C $1000 if B will erect a gate for him, C cannot compel A to carry out his promise, because, though a party to the contract, C is a stranger to the consideration … 51

Whether a person is regarded as a joint promisee, and therefore as a party to consideration given by another, involves a question of interpretation. 52

SUFFICIENCY OF CONSIDERATION [3.100] It is said that consideration must be sufficient, but need not be adequate. The

requirement of sufficiency means that consideration must be something the law regards as valuable. Provided it meets this threshold, the courts will not inquire whether the value of the consideration is equal or even proportionate to that of the promise it supports. In Woolworths Ltd v Kelly 53 Kirby P explained why the courts do not generally enquire into the adequacy of consideration. First, the courts have no way of assessing the value a particular person places on the consideration he or she has contracted to receive. Secondly, any requirement of adequacy of consideration would render the enforceability of contracts uncertain. Thirdly, the courts’ stance protects economic freedom, even though “[t]hat liberty extracts a price in social terms”. 54 Law and economics scholars argue that the courts’ refusal to consider adequacy of consideration is justified because economic efficiency is best pursued though voluntary exchanges. 55 The role of the courts, therefore, is simply to ensure that a bargain has been struck and an exchange made. 56 The refusal of the courts to consider the adequacy of consideration means that a promise to give a peppercorn is good consideration for a promise to pay $1m. In practice, it means that parties can effectively avoid the requirement of consideration through the use of nominal consideration. 57 One party may, for example, undertake quite onerous obligations in return for another’s promise to pay $1. In Thomas v Thomas, 58 for example, a woman’s promise to pay £1 towards the ground rent and to keep the house in good repair was held to be good consideration for a promise by her husband’s executors to give her the right to occupy the house for life. Although inadequacy of consideration does not in itself invalidate a contract, it may be taken into account as evidence of procedural unfairness in the formation of a contract. Where a party under a special disability has received inadequate consideration, for example, this will provide evidence that the other party has unconscionably taken advantage of that disability. 59 Discretion as to performance [3.105] A promise will not constitute good consideration if the promisor retains an unfettered

discretion as to performance. If the promisor is not bound to perform, then the promise will 51 52 53 54 55

(1988) 165 CLR 107, 115-16. See Seddon and Ellinghaus, Cheshire and Fifoot’s Law of Contract (10th Aust ed, 2012), [4.8]. (1991) 22 NSWLR 189, 193. (1991) 22 NSWLR 189, 194. See Posner, Economic Analysis of Law (8th ed, 2011), §4.1 and §4.2 and the discussion of economic analysis of contract law [1.20] – [1.55].

56 57 58 59

Posner, Economic Analysis of Law (8th ed, 2011), §4.2. See Patterson, “An Apology for Consideration” (1958) 58 Columbia Law Review 929, 952-4. (1842) 2 QB 851; 114 ER 330. Cf Greig and Davis, The Law of Contract (1987), p 93. See, eg, Blomley v Ryan (1956) 99 CLR 362, esp at 399 and 406, and (Paterson Textbook [36.65]).

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constitute an illusory consideration. Placer Development Ltd v The Commonwealth 60 concerned a written agreement in which the Commonwealth promised to pay a subsidy “of an amount or at a rate determined by the Commonwealth from time to time”. The High Court, by a majority of 3-2, held that the agreement imposed no obligation on the Commonwealth to pay any subsidy. Accordingly, the Commonwealth’s promise was an illusory consideration. Kitto J expressed the applicable principle as follows: The general principle … is that wherever words which by themselves constitute a promise are accompanied by words showing that the promisor is to have a discretion or option as to whether he will carry out that which purports to be the promise, the result is that there is no contract on which an action can be brought at all. 61

The minority judges found that the Commonwealth was under an obligation to determine “what the subsidy was to be, and then to pay it.” 62 The concept of illusory consideration overlaps with the concept of an illusory promise, which may render a contract uncertain. Illusory promises are considered in Chapter 5. Past consideration

The general rule [3.110] Past consideration is not considered sufficient consideration. This means that, subject

to one exception, something given before a promise is made cannot constitute good consideration for the promise. The thing may have been given gratuitously, such as where A gives B a dog and B subsequently promises to pay A $50 for it. A cannot rely on the giving of the dog as consideration for B’s promise because it is past consideration. More commonly, the past consideration rule will be invoked where, after a contractual transaction has been completed, one of the parties makes a promise which the other seeks to enforce. This is illustrated by Roscorla v Thomas. 63 The defendant sold the plaintiff a horse for £30. Later, at the plaintiff’s request, the defendant promised that the horse was “sound and free from vice”. The plaintiff sought damages for breach of contract when the horse turned out to be “very vicious, restive, ungovernable and ferocious”. 64 Lord Denman CJ held that the promise was not enforceable because the plaintiff had given no consideration. Payment of the purchase price was a past consideration which did not support the later promise. It is important to distinguish between past consideration and executed consideration. Executed consideration is something given as part of the same transaction as the promise. In the case of a unilateral contract, for example, the consideration given by the offeree has been provided or executed by the time the contract is made. Assume, for example, that A offers $50 to whoever finds and returns a lost dog, and B finds and returns the dog. The contract is made when B returns the dog. At that time, B’s consideration is executed, but A’s promise remains executory.

Promise to pay for past services [3.115] An exception to the past consideration rule is made in the case of a promise to pay for

past services. Where services are performed at the request of the promisor, in circumstances 60

(1969) 121 CLR 353.

61

(1969) 121 CLR 353, 356.

62

(1969) 121 CLR 353, 363, 370-1.

63

(1842) 3 QB 234; 114 ER 496.

64

(1842) 3 QB 234, 234; 114 ER 496, 497. [3.115]

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that raise an implication that they are to be paid for, then performance of the services by the promisee will constitute good consideration for a subsequent promise to pay for them. The performance of the services and the promise to pay for them are in effect treated as part of the same transaction. In Ipex Software Services Pty Ltd v Hosking, 65 for example, the respondent transferred to a corporate group a computer software business of which he was part-owner on the understanding that he would receive shares in the restructured group. That transfer was held by the Victorian Court of Appeal to constitute good consideration for a subsequent promise to transfer five per cent of the equity in the group to the respondent. The leading early case on this point was Lampleigh v Brathwait. 66 Brathwait asked Lampleigh to do all he could to secure a pardon from the King for a murder Brathwait had committed. Lampleigh was unable to obtain the pardon, but expended considerable effort in travelling to see the King. Brathwait afterwards promised to pay Lampleigh £100 for his services and Lampleigh sought to enforce this promise. It was held that, where services are provided at the request of a party, a later promise to pay for those services will be binding because the promise “couples itself” with the earlier request. This principle was reformulated in the 19th century to cover only situations in which there was an understanding throughout the transaction that the services were to be paid for. The leading statement of the modern principle is that of Bowen LJ in Re Casey’s Patents; Stewart v Casey. 67 In that case the plaintiff had worked to promote the defendant’s patents and was subsequently promised a one-third share of the patents. The English Court of Appeal held that the plaintiff had provided good consideration for the plaintiff’s promise. Bowen LJ said: Now, the fact of a past service raises an implication that at the time it was rendered it was to be paid for, and, if it was a service which was to be paid for, when you get in the subsequent document a promise to pay, that promise may be treated either as an admission which evidences or as a positive bargain which fixes the amount of that reasonable remuneration on the faith of which the service was originally rendered. 68

Extracts from Paterson, Robertson and Duke, Contract: Cases and Materials (2016, 13th ed), Ch 4

Roscorla v Thomas [3.120] Roscorla v Thomas (1842) 3 QB 234; 114 ER 496 Court of Queen’s Bench – Rule Nisi for Arrest of Judgment. [FACTS: The plaintiff bought a horse from the defendant. After the sale was made, the defendant promised the plaintiff that the horse was sound and free from vice. The plaintiff sought damages for breach of warranty, claiming the horse was not free from vice, but was “very vicious, restive, ungovernable, and ferocious.”] LORD DENMAN CJ delivered the judgment of the Court. [236] This was an action of assumpsit for breach of warranty of the soundness of a horse. The first count of the declaration, upon which alone the question arises, stated that, in consideration that the plaintiff, at the request of the defendant, had bought of the defendant a horse for the sum of £30, the defendant promised that it was sound and 65 66 67 68

[2000] VSCA 239. (1616) Hob 105; 80 ER 255. [1892] 1 Ch 104, 115-6. [1892] 1 Ch 104, 115-6.

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Roscorla v Thomas cont. free from vice. And it was objected, in arrest of judgment, that the precedent executed consideration was insufficient to support the subsequent promise. And we are of opinion that the objection must prevail. It may be taken as a general rule, subject to excep-[237]tions not applicable to this case, that the promise must be coextensive with the consideration. In the present case, the only promise that would result from the consideration, as stated, and be coextensive with it, would be to deliver the horse upon request. The precedent sale, without a warranty, though at the request of the defendant, imposes no other duty or obligation upon him. It is clear, therefore, that the consideration stated would not raise an implied promise by the defendant that the horse was sound or free from vice. But the promise in the present case must be taken to be, as in fact it was, express: and the question is, whether that fact will warrant the extension of the promise beyond that which would be implied by law; and whether the consideration, though insufficient to raise an implied promise, will nevertheless support an express one. And we think that it will not. The cases in which it has been held that, under certain circumstances, a consideration insufficient to raise an implied promise will nevertheless support an express one, will be found collected and reviewed in the note (a) to Wennall v Adeney (1802) 3 Bos & Pul 247; 127 ER 137, and in the case of Eastwood v Kenyon (1840) 11 A & E 438; 113 ER 482. They are cases of voidable contracts subsequently ratified, of debts barred by operation of law, subsequently revived, and of equitable and moral obligations, which, but for some rule of law, would of themselves have been sufficient to raise an implied promise. All these cases are distinguishable from, and indeed inapplicable to, the present, which appears to us to fall within the general rule, that a consideration past and executed will support no other promise than such as would be implied by law. [238] The rule for arresting the judgment upon the first count must therefore be made absolute. Rule absolute.

Extracts from Paterson, Robertson and Duke, Principles of Contract Law (2016, 5th ed), Ch 4 The existing legal duty rule

The general rule [3.125] Neither a promise to perform an existing legal duty, nor the performance of an

existing legal duty, is regarded as sufficient consideration to support a contract. The existing legal duty rule covers promises to perform existing public duties, such as a promise to give evidence in court when the promisee is obliged by a subpoena to do so. 69 There is an obvious public interest in this aspect of the existing legal duty rule. It is important that the law of contract does not encourage public officials and those involved in the administration of justice to be influenced by promises of extra rewards for discharging their responsibilities. 70 The existing legal duty rule is most commonly raised in relation to one-sided variations to contracts where one party either assumes an additional obligation or agrees to release the other party from an obligation. In order to avoid confusion between the two parties involved 69 70

Collins v Godefroy (1831) 1 B & Ad 950; 109 ER 1040. Cf Glasbrook Bros Ltd v Glamorgan County Council [1925] AC 270. See Greig and Davis, The Law of Contract (1987), pp 101-4. [3.125]

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in a one-sided contract variation, the person who promises to perform an existing legal duty and claims the benefit of the contractual modification will be referred to in this chapter as the beneficiary. The party assuming an additional obligation or releasing the beneficiary from an obligation will be referred to as the modifying party. The rule can be illustrated as follows. Assume that one party (the beneficiary) has agreed to build a garage and fence for another (the modifying party) for $30,000 and, after the contract has been made, the beneficiary realises that she has agreed to perform the work at a loss. She expresses some reluctance to perform, so the beneficiary and the modifying party reach an agreement that if the beneficiary builds the garage, the modifying party will pay the beneficiary an extra $5000 and will not require the beneficiary to build the fence. In return for the modifying party’s promises, the beneficiary has simply promised to perform her contractual obligations. She has not agreed to do anything she was not already obliged to do. The courts will not generally enforce a promise made by the modifying party in such a situation, even though it was intended to be binding. 71 The principle was clearly stated by Mason J in Wigan v Edwards: 72 The general rule is that a promise to perform an existing duty is no consideration, at least when the promise is made by a party to a pre-existing contract, when it is made to the promisee under that contract, and it is to do no more than the promisor is bound to do under that contract.

The existing legal duty rule is sometimes referred to as the rule in Stilk v Myrick. 73 In that case two sailors deserted a ship on a voyage to the Baltic. Because the captain was unable to replace the deserters, he promised the remaining crew that he would divide the deserters’ wages among them if they would sail the ship back to London short-handed. The plaintiff was one of the remaining crew and he sued to recover his share. The crew were originally employed on the basis that they would “do all that they could under all the emergencies of the voyage”. 74 Lord Ellenborough CJ found that the desertion of a small part of the crew was such an emergency. The remaining crew were bound by the terms of their original contracts to complete the voyage short-handed. Accordingly, their agreement to sail the boat back to London was simply a promise to perform an existing obligation and did not constitute good consideration for the promise of extra payment. The captain’s promise was therefore unenforceable. In Wigan v Edwards 75 Mason J noted that the existing legal duty rule is conceptually justified by the fact that a promise to perform an existing contractual duty is an illusory consideration. The promisor incurs no new burden and the promisee receives no benefit he or she did not already enjoy. From the point of view of policy, the principle is said to discourage parties from seeking to secure additional benefits by threatening to breach their contracts. 76 The English courts seemed to regard ship owners as particularly vulnerable to extravagant demands for extra wages and, since Britain was heavily reliant on shipping, were especially concerned to protect them. 77 A case which preceded Stilk v Myrick and involved similar facts 71 72

Eg, TA Sundell & Sons Pty Ltd v Emm Yannoulatos (Overseas) Pty Ltd (1955) 56 SR (NSW) 323. (1973) 1 ALR 497; 47 ALJR 586, 512 (ALR).

73

(1809) 2 Camp 317; 170 ER 1168.

74

(1809) 2 Camp 317, 319; 170 ER 1168, 1169.

75

(1973) 1 ALR 497; 47 ALJR 586, 512 (ALR).

76 77

Wigan v Edwards (1973) 1 ALR 497; 47 ALJR 586, 594 (ALR). See also Musumeci v Winadell Pty Ltd (1994) 34 NSWLR 723, 741. Greig and Davis, The Law of Contract (1987), pp 108-10.

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was decided on the basis of public policy, rather than the absence of consideration. 78 One report of Stilk v Myrick suggests that it too was decided on the basis of policy issues, rather than consideration. 79 It is clear that these policy considerations influenced the development of the existing legal duty rule. The existing legal duty rule is regularly criticised on the basis that it does not reflect the practices of businesspeople, who routinely make one-sided variations to contracts. This is supported by empirical studies, which indicate a preparedness to modify concluded bargains where circumstances have changed. 80 Modifications are often accepted on the basis that each business deal must remain viable for both parties, so that the parties can preserve their relationship and their reputations in the business community. 81 The difficulty for lawmakers is that a one-sided variation may involve the co-operative reallocation of unforeseen risks, where the economic environment of the contract has changed, or may simply reflect one party’s exploitation of another’s dependency and a lack of adequate remedies for breach. 82 It may be doubted whether the requirement of consideration provides any great protection against coercive modifications as the courts do not inquire into the adequacy of consideration. The presence of nominal consideration will render a contract modification enforceable, but is entirely consistent with coercion. 83 As Santow J said in Musumeci v Winadell: “Consideration expressed in formalistic terms of one dollar can indeed actually cloak duress rather than expose it.” 84 The developing doctrine of economic duress is therefore likely to provide a more useful weapon against coercive modifications. 85

Part-payment of a debt [3.130] A corollary of the existing legal duty rule is the principle that part-payment of a debt

does not constitute good consideration for an agreement to discharge the debt. This is known as the rule in Pinnel’s case. 86 If a debtor owes a creditor $100 and the creditor agrees to accept $50 in satisfaction of the debt, this agreement will not be binding and the creditor will be entitled to recover the remaining $50. In paying part of the debt, the debtor is simply performing (part of) his or her legal obligation. The rule in Pinnel’s case was applied by the House of Lords in Foakes v Beer, 87 where a debtor promised to pay a judgment debt in six-monthly instalments in return for the creditor’s promise not to enforce the judgment. When the debt had been repaid in full, the creditor successfully claimed interest. The House of Lords held that, even if the creditor’s promise could be construed as an agreement to forgo 78 79

Harris v Watson (1791) Peake 102; 170 ER 94. Stilk v Myrick (1809) 6 Esp 129; 170 ER 851.

80

See Macaulay, “Non-Contractual Relations in Business: A Preliminary Study” (1963) 28 American Sociological Review 55, 60-2, discussed (Paterson Textbook [1.115]). Macaulay, “Non-Contractual Relations in Business: A Preliminary Study” (1963) 28 American Sociological Review 55, 60-5; Collins, Regulating Contracts (1999), Chapter 6, esp pp 144-5. Trebilcock, The Limits of Freedom of Contract (1993), pp 169-70.

81 82 83 84 85

86 87

United States v Stump Home Specialties Manufacturing Inc, 905 F 2d 1117, 1121-2 (1990), quoted in Musumeci v Winadell Pty Ltd (1994) 34 NSWLR 723, 742-3. Musumeci v Winadell Pty Ltd (1994) 34 NSWLR 723, 742. Musumeci v Winadell Pty Ltd (1994) 34 NSWLR 723, 744; Williams v Roffey Bros & Nicholls (Contractors) Ltd [1991] 1 QB 1, 13-14. See also Posner, Economic Analysis of Law (8th ed, 2011), §4.2. As to duress, see Chapter 18. (1602) 5 Co Rep 117a; 77 ER 237. (1884) 9 App Cas 605. [3.130]

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interest on the debt, such a promise was not supported by consideration under the rule in Pinnel’s case. Although the House of Lords felt that the rule was too well entrenched to be overruled, its practical inconvenience was acknowledged by Lord Blackburn: What principally weighs with me … is my conviction that all men of business, whether merchants or tradesmen, do every day recognise and act on the ground that prompt payment of a part of their demand may be more beneficial to them than it would be to insist on their rights and enforce payment of the whole. Even where the debtor is perfectly solvent, and sure to pay at last, this often is so. 88

The rule in Pinnel’s case has no application where the debtor pays before the due date or in a different form, 89where several creditors jointly agree to forgo part of each of their debts (known as a composition), 90 where the payment is made to the creditor by a third party 91 or where the debtor gives something other than money: By no possibility a lesser sum can be a satisfaction to the plaintiff for a greater sum: but the gift of a horse, hawk or robe, etc, might be more beneficial to the plaintiff than the money, in respect of some circumstance, or otherwise the plaintiff would not have accepted it in satisfaction. 92

This leads to an apparently absurd situation in which a promise to accept $999 in discharge of a $1000 debt is unenforceable for want of consideration, whereas a promise to accept $1 plus an old sandshoe in discharge of the same debt will be enforceable. 93 If nominal consideration is viewed as a formal requirement, however, the enforcement of the transaction involving the sandshoe does make some sense. Such an artificial bargain must have been deliberately set up in order to make the promise binding. 94 In practice, where a creditor is prepared to accept a lesser sum in full satisfaction of a debt, the rule is commonly avoided through the use of a more conventional form, namely a deed. If the agreement is made in the form of a deed, it will be binding in the absence of consideration. 95 Extracts from Paterson, Robertson and Duke, Contract: Cases and Materials (2016, 13th ed), Ch 4

Foakes v Beer [3.135] Foakes v Beer (1884) 9 App Cas 605 House of Lords – Appeal from the Court of Appeal. [FACTS: On 11 August 1875, Beer recovered judgment against Foakes for £2 077 17s 2d for debt and £13 1s 10d for costs. On 21 December 1876, a memorandum of agreement was made and signed by Foakes and Beer in the following terms: Whereas the said John Weston Foakes is indebted to the said Julia Beer, and she has obtained a judgment in Her Majesty’s High Court of Justice, Exchequer Division, for the sum of £2 090 19s. And whereas the said John Weston Foakes has requested the said Julia Beer to give him time in which to pay such judgment, which she has agreed to do on the following conditions. 88

(1884) 9 App Cas 605, 622.

89 90 91

See Greig and Davis, The Law of Contract (1987), pp 113-5. Couldery v Bartrum (1881) 19 Ch D 394; Re Pearse [1905] VLR 446. Hirachand Punamchand v Temple [1911] 2 KB 330.

92 93 94 95

Pinnel’s case (1602) 5 Co Rep 117a; 77 ER 237. Carter, Contract Law in Australia (6th ed, 2012), [6-58]. See (Paterson Textbook [4.115]). See [3.235].

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Foakes v Beer cont. Now this agreement witnesseth that in consideration of the said John Weston Foakes paying to the said Julia Beer on the signing of this agreement the sum of £500, the receipt whereof she doth thereby acknowledge in part satisfaction of the said judgment debt of £2 090 19s, and on condition of his paying to her or her executors, administrators, assigns or nominee the sum of £150 on 1 July and January or within one calendar month after each of the said days respectively in every year until the whole of the said sum of £2 090 19s shall have been fully paid and satisfied, the first of such payments to be made on 1 July next, then she the said Julia Beer hereby undertakes and agrees that she, her executors, administrators or assigns, will not take any proceedings whatever on the said judgment. Beer, having in June 1882 taken out a summons for leave to proceed on the judgment, an issue was directed to be tried between Beer as plaintiff and Foakes as defendant whether any and what amount was on 1 July 1882 due upon the judgment. At the trial of the issue before Cave J, it was proved that the whole sum of £2,090 19s had been paid by instalments, but Beer claimed interest. The jury under his Lordship’s direction found that Foakes had paid all the sums which by the agreement of 21 December 1876, he undertook to pay and within the times therein specified. Cave J was of opinion that whether the judgment was satisfied or not, Beer was, by reason of the agreement, not entitled to issue execution for any sum on the judgment. The Queen’s Bench Division (Watkin, Williams and Mathew JJ) discharged an order for a new trial on the ground of misdirection. The Court of Appeal (Brett MR, Lindley and Fry LJJ) reversed that decision and entered judgment for the respondent for the interest due, with costs: 11 QBD 221.] EARL OF SELBOURNE LC: [610] Although, therefore, I may (as indeed I do) very much doubt whether the effect of the agreement, as a conditional waiver of the interest to which she was by law entitled under the judgment, was really present to the mind of the judgment creditor, still I cannot deny that it might have that effect, if capable of being legally enforced. [611] But the question remains, whether the agreement is capable of being legally forced. Not being under seal, it cannot be legally enforced against the respondent, unless she received consideration for it from the appellant, or unless, though without consideration, it operates by way of accord and satisfaction, so as to extinguish the claim for interest. What is the consideration? On the face of the agreement none is expressed, except a present payment of £500, on account and in part of the larger debt then due and payable by law under the judgment. The appellant did not contract to pay the future instalments of £150 each, at the times therein mentioned; much less did he give any new security, in the shape of negotiable paper, or in any other form. The promise de futuro was only that of the respondent, that if the half-yearly payments of £150 each were regularly paid, she would “take no proceedings whatever on the judgment”. No doubt if the appellant had been under no antecedent obligation to pay the whole debt, his fulfilment of the condition might have imported some consideration on his part for that promise. But he was under that antecedent obligation, and payment at those deferred dates, by the forbearance and indulgence of the creditor, of the residue of the principal debt and costs, could not (in my opinion) be a consideration for the relinquishment of interest and discharge of the judgment, unless the payment of the £500, at the time of signing the agreement, was such a consideration … The question, therefore, is nakedly raised by this appeal, whether your Lordships are now prepared, not only to overrule, as contrary to law, the doctrine stated by Sir Edward Coke to [612] have been laid down by all the judges of the Common Pleas in Pinnel’s case, 5 Co Rep 117a; 77 ER 237 in 1602, and repeated in his note to Littleton, s 344 (Co Litt 212b), but to treat a prospective agreement, not under seal, for satisfaction of a debt, by a series of payments on account to a total amount less than the whole debt, as binding in law, provided those payments are regularly made; the case not being one of a composition with a common debtor, agreed to, inter se, by several creditors … The doctrine itself, as [3.135]

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Foakes v Beer cont. laid down by Sir Edward Coke, may have been criticised, as questionable in principle, by some persons whose opinions are entitled to respect, but it has never been judicially overruled; on the contrary, I think it has always, since the 16th century, been accepted as law. If so, I cannot think that your Lordships would do right, if you were now to reverse, as erroneous, a judgment of the Court of Appeal, proceeding upon a doctrine which has been accepted as part of the law of England for 280 years. The doctrine, as stated in Pinnel’s case is: that payment of a lesser sum on the day [it would of course be the same after the day] in satisfaction of a greater, cannot be any satisfaction for the whole, because it appears to the judges, that by no possibility a lesser sum can be a satisfaction to the plaintiff for a greater sum. As stated in Coke Littleton, 212b, it is: “where the condition is for payment of £20, the obligor or offeror cannot at the time appointed pay a lesser sum in satisfaction of the whole, because it is apparent that a lesser sum of money cannot be a satisfaction of a greater”, adding (what is beyond controversy), that an acquittance under seal, in full [613] satisfaction of the whole, would (under like circumstances) be valid and binding. The distinction between the effect of a deed under seal, and that of an agreement by parol, or by writing not under seal, may seem arbitrary, but it is established in our law; nor is it really unreasonable or practically inconvenient that the law should require particular solemnities to give to a gratuitous contract the force of a binding obligation. If the question be (as, in the actual state of the law, I think it is), whether consideration is, or is not, given in a case of this kind, by the debtor who pays down part of the debt presently due from him, for a promise by the creditor to relinquish, after certain further payments on account, the residue of the debt, I cannot say that I think consideration is given, in the sense in which I have always understood that word as used in our law. It might be (and indeed I think it would be) an improvement in our law, if a release or acquittance of the whole debt, on payment of any sum which the creditor might be content to receive by way of accord and satisfaction (though less than the whole), were held to be, generally, binding, though not under seal; nor should I be unwilling to see equal force given to a prospective agreement, like the present, in writing though not under seal; but I think it impossible, without refinements which practically alter the sense of the word to treat such a release or acquittance as supported by any new consideration proceeding from the debtor. All the authorities subsequent to Cumber v Wane (1 Sm LC, 8th ed, 366), which were relied upon by the appellant at your Lordship’s Bar (such as Sibree v Tripp (1846) 15 M & W 23; 153 ER 745; Curlewis v Clark (1877) 3 Ex 375; and Goddard v O’Brien (1882) 9 QBD 37), have proceeded upon the distinction, that, by giving negotiable paper or otherwise, there had been some new consideration for a new agreement, distinct from mere money payments in or towards discharge of the original liability. I think it unnecessary to go through those cases, or to examine the particular grounds on which each of them was decided. There are no such facts in the case now before your Lordships. What is called “any benefit, or even any legal possibility of benefit”, in Mr Smith’s notes to Cumber v Wane, is not [614] (as I conceive) that sort of benefit which a creditor may derive from getting payment of part of the money due to him from a debtor, who might otherwise keep him at arm’s length, or possibly become insolvent, but is some independent benefit, actual or contingent, of a kind which might in law be a good and valuable consideration for any other sort of agreement not under seal. My conclusion is, that the order appealed from should be affirmed, and the appeal dismissed, with costs, and I so move your Lordships. [LORD WATSON and LORD FITZGERALD delivered speeches in which they reached the same result.] [3.140] LORD BLACKBURN: [622] What principally weighs with me in thinking that Lord Coke made a mistake of fact is my conviction that all men of business, whether merchants or tradesmen, do every day recognise and act on the ground that prompt payment of a part of their demand may be more beneficial to them than it would be to insist on their rights and enforce payment of the whole. Even 160

[3.140]

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Foakes v Beer cont. where the debtor is perfectly solvent, and sure to pay at last, this often is so. Where the credit of the debtor is doubtful it must be more so. I had persuaded myself that there was no such long-continued action on this dictum as to render it improper in this House to reconsider the question. I had written my reasons for [623] so thinking; but as they were not satisfactory to the other noble and learned Lords who heard the case, I do not now repeat them nor persist in them. I assent to the judgment proposed, though it is not that which I had originally thought proper. Appeal dismissed.

Extracts from Paterson, Robertson and Duke, Principles of Contract Law (2016, 5th ed), Ch 4

Exceptions to the existing legal duty rule [3.145] There are five situations in which the existing legal duty rule will not apply. First, the

rule will not apply where the beneficiary is providing fresh consideration, such as where the beneficiary undertakes to do something more than he or she was obliged to do under the original contract. Secondly, an exception to the rule has been recognised where the beneficiary’s promise to perform confers a practical benefit on the modifying party. Thirdly, the rule has been held to be inapplicable where the promise to perform an existing contractual duty is made by the beneficiary to a third party. Fourthly, a promise made by way of a bona fide compromise of a legal claim will not be covered by the rule. Fifthly, the rule will be avoided where the original contract is terminated by agreement and replaced with a new contract. These exceptions will be considered in turn.

Fresh consideration [3.150] The existing legal duty rule applies only where, in return for the modification, the

beneficiary promises to do no more than he or she promised under the original contract. If the beneficiary provides fresh consideration, by undertaking to do something more than he or she originally promised, then the existing legal duty rule can have no application. 96 Hartley v Ponsonby, 97 for example, was a case on similar facts to Stilk v Myrick 98 except that almost half the crew had deserted the ship, making it dangerous to continue. The remaining crew were under no obligation to go to sea in those conditions and therefore provided fresh consideration by agreeing to continue the voyage. The captain’s promise of extra wages was therefore enforceable. The existing legal duty rule can be avoided, if the parties are aware of it, by the beneficiary giving nominal fresh consideration in return for the promise or concession made by the modifying party. In Stilk v Myrick, for example, the remaining crew could have avoided the operation of the existing legal duty rule by agreeing to work longer shifts. 99 Of course, only parties who can afford and have access to legal advice can take advantage of technical exceptions such as this. 96 97 98 99

Larkin v Girvan (1940) 40 SR (NSW) 365, 368. (1857) 7 El & Bl 872; 119 ER 1471. (1809) 2 Camp 317; 170 ER 1168. See Posner, Economic Analysis of Law (8th ed, 2011), §4.2. [3.150]

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Practical benefit [3.155] The existing legal duty rule has also been held to be inapplicable where the modifying

party obtains a practical benefit from the beneficiary’s promise to perform an existing obligation. This exception was first recognised by the English Court of Appeal in Williams v Roffey Bros & Nicholls (Contractors) Ltd. 100 The defendant had contracted to refurbish a block of 27 flats. It entered into a subcontract with the plaintiff under which the plaintiff agreed to perform some carpentry work involved in the refurbishment for £20,000. Before the work was finished, the plaintiff got into financial difficulties and was concerned that he was unable to complete the work. In order to avoid the trouble and expense of finding a replacement carpenter, and to avoid incurring financial penalties under the head contract for late completion, the defendant agreed to pay the plaintiff an extra £575 for each flat completed. The plaintiff substantially completed work on eight further flats, but stopped work when the promised additional sum was not paid. The defendant then engaged another carpenter to finish the work and incurred one week’s time penalty on the head contract. The plaintiff sought to enforce the promise of extra payment, but had provided no consideration other than a promise to perform his obligations under the original contract. 101 The Court of Appeal upheld the plaintiff’s contractual right to recover the promised payments on the basis that he had provided consideration. The court held that the rule in Stilk v Myrick 102 remained good law, but an exception to the rule should be recognised where the promise to perform confers a practical benefit on the promisee. The plaintiff’s promise to perform on time was of benefit to the defendant because the defendant retained the services of the plaintiff and would have been able to have the work completed without employing another carpenter. Glidewell LJ held that: (i) if A has entered into a contract with B to do work for, or to supply goods or services to, B in return for payment by B; and (ii) at some stage before A has completely performed his obligations under the contract B has reason to doubt whether A will, or will be able to, complete his side of the bargain; and (iii) B thereupon promises A an additional payment in return for A’s promise to perform his contractual obligations on time; and (iv) as a result of giving his promise, B obtains in practice a benefit, or obviates a disbenefit; and (v) B’s promise is not given as a result of economic duress or fraud on the part of A; then (vi) the benefit to B is capable of being consideration for B’s promise, so that the promise will be legally binding. 103

The Williams v Roffey principle has been widely criticised. 104 The main criticism is that the new principle indirectly abolishes the rule in Stilk v Myrick because it will always be possible to identify a practical benefit resulting from performance of a contractual obligation. In one 100 101

[1991] 1 QB 1. The plaintiff did not make an argument based on estoppel before the trial judge, so estoppel could not properly be considered by the Court of Appeal: [1991] 1 QB 1, 13, 17-8. As to the possible application of estoppel in these circumstances, see [22.265].

102 103 104

(1809) 2 Camp 317; 170 ER 1168. [1991] 1 QB 1, 15-6. Eg, Coote, “Consideration and Benefit in Fact and in Law” (1990) 3 Journal of Contract Law 23; Chen-Wishart, “Consideration: Practical Benefit and the Emperor’s New Clothes” in Beatson and Friedmann (eds), Good Faith and Fault in Contract Law (1995), p 123.

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sense a practical benefit will be present in all cases since, absent coercion, the modifying party will only agree to a modification if there is some benefit in doing so. In another sense the modifying agreement can never generate a real benefit for the modifying party, since that party already had a contractual right to receive any practical benefits flowing from performance. This appears to be a perfect example of situation in which “a ‘rule’ that appears to dispose cleanly of a fact situation is nullified by a counter-rule whose scope of application seems to be almost identical.” 105 The “exception” in Williams v Roffey appears to cover precisely the same ground as the “general rule” in Stilk v Myrick. [3.160] Two other problems with the Williams v Roffey principle have been identified. 106

First, the principle provides that the presence of economic duress and fraud will prevent the practical benefit from being regarded as consideration. This means that the modifying agreement will have no contractual force. As we will see in Chapters 17 and 18, however, the effect of fraud and duress is to render a contract voidable at the option of the party affected, not void. By bringing these vitiating factors into a principle of formation, the rule in Williams v Roffey changes their effect. Rather than providing a ground for rescission of the modifying agreement, the presence of these factors will prevent the agreement from being binding in the first place. 107 Secondly, the rule in Williams v Roffey is said to be inconsistent with the bargain theory of consideration in the way in which it identifies consideration. 108 According to the bargain theory, consideration is the thing given in exchange for a promise. What is given and accepted in return for the modifying party’s promise is in fact the beneficiary’s promise to perform, not the practical benefit flowing from that performance. The principle in Williams v Roffey might be thought to provide an exception to the rule relating to part-payment of a debt 109 in cases where there is some practical benefit to the creditor in accepting part-payment. The English Court of Appeal has, however, refused to extend the rule in Williams v Roffey to the discharge of debts. In Re Selectmove Ltd 110 the English Court of Appeal held that the principle in Williams v Roffey could not be applied to an agreement to discharge a debt in return for part payment, because that would leave the principle in Foakes v Beer without any application. In such a situation, according to Peter Gibson LJ, “the creditor will no doubt always see a practical benefit to himself in so doing”. 111 The rule in Williams v Roffey has been applied in a modified form in the Supreme Court of New South Wales. Musumeci v Winadell Pty Ltd 112 concerned the enforceability of a promise by a landlord to accept a reduced rental from its tenants, who were in financial difficulties. The tenants operated a fruit shop in a shopping centre and their business suffered when the landlord let a much larger shop to a member of a chain of fruit stores. In view of the tenants’ 105 106 107

Kennedy, “Form and Substance in Private Law Adjudication” (1976) 89 Harvard Law Review 1685, 1700. Carter, Phang and Poole, “Reactions to Williams v Roffey” (1995) 8 Journal of Contract Law 248. Carter, Phang and Poole, “Reactions to Williams v Roffey” (1995) 8 Journal of Contract Law 248, 253.

108 109

Carter, Phang and Poole, “Reactions to Williams v Roffey” (1995) 8 Journal of Contract Law 248, 253-4. See also Carter, Peden and Tolhurst, Contract Law in Australia (5th ed, 2007), [6-48]. See [3.130].

110 111

[1995] 1 WLR 474. See also Collier v P & MJ Wright (Holdings) Ltd [2007] EWCA Civ 1329; [2008] 1 WLR 643. [1995] 1 WLR 474, 481.

112

(1994) 34 NSWLR 723. The correctness of the principle applied in Musumeci has been accepted in a number of cases, including Tinyow v Lee [2006] NSWCA 80, [61]. It was mentioned, with apparent approval, by Gummow and Hayne JJ in DPP (Victoria) v Le [2007] HCA 52; (2007) 232 CLR 562, [43]. [3.160]

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difficulties, the landlord agreed to reduce the rent by one-third. After further disputation, the landlord resiled from the agreement and claimed the full amount of rent. The tenants sought to rely on the landlord’s promise to accept a reduced rental and the issue was whether they had provided consideration for that promise. Santow J considered that the “practical benefit” exception should be accepted in Australia, with three modifications. First, modification was required to allow for the fact that this was a case in which the modifying party agreed to accept less, rather than to pay more for the beneficiary’s performance. Santow J therefore extended the Williams v Roffey principle to cover a situation in which the modifying party makes a concession, such as accepting a reduction in the beneficiary’s obligations. 113 Secondly, in order to protect against coercive modifications, Santow J considered that the practical benefit principle should apply only where the promise has not been induced by “unfair pressure”. 114 Thirdly, and most importantly, Santow J refined the rule in order to meet the criticism that the practical benefit concept does not provide an adequate basis for distinguishing between cases. 115 He held that a practical benefit should only constitute good consideration if the beneficiary’s performance is capable of being regarded by the modifying party as worth more than any remedy against the beneficiary. 116 In other words, performance by the beneficiary must be seen to be worth more to the modifying party than an award of damages against the beneficiary. 117 It may be doubted whether this third refinement resolves the fundamental problem with the Williams v Roffey principle. In theory, contract damages should reflect the value of performance, since such damages are calculated to place the innocent party in the position he or she would have occupied had the contract been performed. 118 In practice, given the uncertainties, delays and costs involved in litigation, performance will almost always be preferable to a claim for damages. The New Zealand Court of Appeal has accepted the force of criticism of the practical benefit exception to the existing legal duty rule and has come very close to abandoning it. 119 Although on the facts it was not necessary to decide whether the practical benefit rule should be abandoned, the Court of Appeal held that Stilk v Myrick “can no longer be taken to control” contract modification cases. 120 The court accepted the strength of the argument that one-sided contract modifications should be binding and “that the only principled way to such a result is to decide that consideration should not be necessary for the variation of contract”. 121 The court observed that: The importance of consideration is as a valuable signal that the parties intend to be bound by their agreement, rather than an end in itself. Where the parties who have already made such 113 114 115 116 117 118 119

121

(1994) 34 NSWLR 723, 747. (1994) 34 NSWLR 723, 744. (1994) 34 NSWLR 723, 744-7. (1994) 34 NSWLR 723, 745-7. (1994) 34 NSWLR 723, 745. See Chapter 21. Antons Trawling Co Ltd v Smith [2003] 2 NZLR 23; see Coote, “Contracts and Variations: A Different Solution” (2004) 120 Law Quarterly Review 19. See also Nav Canada v Greater Fredericton Airport Authority Inc (2008) 290 DLR (4th) 405 and the discussion in Coote, “Variations Sans Consideration” (2011) 27 Journal of Contract Law 185. [2003] 2 NZLR 23 at 45, citing Coote, (1990) 3 Journal of Contract Law 23.

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intention clear by entering legal relations have acted upon an agreement to a variation, in the absence of policy reasons to the contrary they should be bound by their agreement. 122

Extracts from Paterson, Robertson and Duke, Contract: Cases and Materials (2016, 13th ed), Ch 4

Exceptions to the existing legal duty rule Practical benefit

Williams v Roffey Bros & Nicholls (Contractors) [3.165] Williams v Roffey Bros & Nicholls (Contractors) Ltd [1991] 1 QB 1 Court of Appeal – Appeal from County Court. [FACTS: Roffey Bros (the defendants) held a contract (the main contract) to refurbish a block of 27 flats. They entered into a subcontract with Williams (the plaintiff) under which Williams was to carry out the carpentry in the flats. Williams commenced work, but because his agreed price of £20 000 was too low, got into financial difficulties. Roffey Bros were concerned that he might not be able to complete his contract. The main contract imposed a penalty for late completion. The parties made an oral agreement whereby Roffey Bros were to pay Williams an additional £10 300 at the rate of £575 for each flat on which the carpentry had been completed. Williams continued work and substantially completed the carpentry on eight more flats, but after approximately seven weeks, the defendants having made only one payment of £1 500, ceased work on the flats. The defendants declined to pay the balance of the additional amount promised as well as an amount outstanding under the original contract. They subcontracted other carpenters and finished the refurbishment one week late. Williams sued for these amounts and Roffey Bros counterclaimed for damages for breach of contract. The trial judge found that Williams was entitled to be paid for eight flats substantially completed since the oral agreement less “some small sum for defective and incomplete items”, together with £2 200 owing under the original contract. He further found that as Williams had received only £1 500, he was entitled to stop work.] GLIDEWELL LJ: The issues [7] Before us Mr Evans for the defendants advances two arguments. His principal submission is that the defendants’ promise to pay an additional £10 300, at the rate of £575 per completed flat, is unenforceable since there was no consideration for it. [8] Mr Evans’ secondary argument is that the additional payment was only payable as each flat was completed. On the judge’s findings, eight further flats had been “substantially” completed. Substantial completion was something less than completion. Thus none of the eight flats had been completed, and no further payment was yet due from the defendants … [The doctrine of substantial performance is dealt with at [21.360].] Was there consideration for the defendants’ promise made on 9 April 1986 to pay an additional price at the rate of £575 per completed flat [10] The judge made the following findings of fact which are relevant on this issue. (i)

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The subcontract price agreed was too low to enable the plaintiff to operate satisfactorily and at a profit. Mr Cottrell, the defendants’ surveyor, agreed that this was so. [2003] 2 NZLR 23 at 45-6, citing Coote, (1990) 3 Journal of Contract Law 23. [3.165]

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Williams v Roffey Bros & Nicholls (Contractors) cont. (ii)

Mr Roffey (managing director of the defendants) was persuaded by Mr Cottrell that the defendants should pay a bonus to the plaintiff. The figure agreed at the meeting on 9 April 1986 was £10 300.

The judge quoted and accepted the evidence of Mr Cottrell to the effect that a main contractor who agrees too low a price with a subcontractor is acting contrary to his own interests. He will never get the job finished without paying more money. The judge therefore concluded: In my view where the original subcontract price is too low, and the parties subsequently agree that additional moneys shall be paid to the subcontractor, this agreement is in the interests of both parties. This is what happened in the present case, and in my opinion the agreement of 9 April 1986 does not fail for lack of consideration. In his address to us, Mr Evans outlined the benefits to his clients, the defendants, which arose from their agreement to pay the additional [11] £10 300 as: (i)

seeking to ensure that the plaintiff continued work and did not stop in breach of the subcontract;

(ii)

avoiding the penalty for delay; and

(iii)

avoiding the trouble and expense of engaging other people to complete the carpentry work.

However, Mr Evans submits that, though his clients may have derived, or hoped to derive, practical benefits from their agreement to pay the “bonus”, they derived no benefit in law, since the plaintiff was promising to do no more than he was already bound to do by his subcontract, that is, continue with the carpentry work and complete it on time. Thus there was no consideration for the agreement. Mr Evans relies on the principle of law which, traditionally, is based on the decision in Stilk v Myrick (1809) 2 Camp 317; 170 ER 1168. That was a decision at first instance of Lord Ellenborough CJ. On a voyage to the Baltic, two seamen deserted. The captain agreed with the rest of the crew that if they worked the ship to London without the two seamen being replaced, he would divide between them the pay which would have been due to the two deserters. On arrival at London this extra pay was refused, and the plaintiff’s action to recover his extra pay was dismissed. Counsel for the defendant argued that such an agreement was contrary to public policy, but Lord Ellenborough CJ’s judgment was based on lack of consideration. It reads (at 318-19): I think Harris v Watson (1791) Peake 102; 170 ER 94 was rightly decided; but I doubt whether the ground of public policy, upon which Lord Kenyon is stated to have proceeded, be the true principle on which the decision is to be supported. Here, I say the agreement is void for want of consideration. There was no consideration for the ulterior pay promised to the mariners who remained with the ship. Before they sailed from London they had undertaken to do all they could under all the emergencies of the voyage. They had sold all their services till the voyage should be completed. If they had been at liberty to quit the vessel at Cronstadt, the case would have been quite different; or if the captain had capriciously discharged the two men who were wanting, the others might not have been compellable to take the whole duty upon themselves, and their agreeing to do so might have been a sufficient consideration for the promise of an advance of wages. But the desertion of a part of the crew is to be considered an emergency of the voyage as much as their death; and those who remain are bound by the terms of their original contract to exert themselves to the utmost to bring the ship in safety to her destined port. Therefore, without looking to the policy of this agreement, I think it is void for want of consideration, and that the plaintiff can only recover at the rate of £5 a month. In North Ocean Shipping Co Ltd v Hyundai Construction Co Ltd [1979] QB 705, Mocatta J regarded the general principle of the decision in Stilk v Myrick as still being good law … [13] It was suggested to us in argument that, since the development of the doctrine of promissory estoppel, it may well be possible for a person to whom a promise has been made, on which he has relied, to make an additional payment for services which he is in any event bound to render under an 166

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Williams v Roffey Bros & Nicholls (Contractors) cont. existing contract or by operation of law, to show that the promisor is estopped from claiming that there was no consideration for his promise. However, the application of the doctrine of promissory estoppel to facts such as those of the present case has not yet been fully developed … There is, however, another legal concept of relatively recent development which is relevant, namely, that of economic duress. Clearly if a subcontractor has agreed to undertake work at a fixed price, and before he has completed the work declines to continue with it unless the contractor agrees to pay an increased price, the subcontractor may be held guilty of securing the contractor’s promise by taking unfair advantage of the difficulties he will cause if he does not complete the work. In such a case an agreement to pay an increased price may well be voidable because it was entered into under duress. Thus this concept may provide another answer in law to the question of policy which has [14] troubled the courts since before Stilk v Myrick and no doubt led at the date of that decision to a rigid adherence to the doctrine of consideration. This possible application of the concept of economic duress was referred to by Lord Scarman, delivering the judgment of the Judicial Committee of the Privy Council in Pao On v Lau Yiu Long [1980] AC 614 … [15] It is true that Pao On is a case of a tripartite relationship that is, a promise by A to perform a pre-existing contractual obligation owed to B, in return for a promise of payment by C. But Lord Scarman’s words, at 634–5, seem to me to be of general application, equally applicable to a promise made by one of the original two parties to a contract. Accordingly, following the view of the majority in Ward v Byham [1956] 1 WLR 496 and of the whole court in Williams v Williams [1957] 1 WLR 148 and that of the Privy Council in Pao On the present state of the law on this subject can be expressed in the following proposition: (i)

if A has entered into a contract with B to do work for, or to supply goods or services to, B in return for payment by B; and

(ii)

at some stage before A has completely performed his obligations under the contract B has reason to doubt whether A will, or will be able to, complete his side of the bargain; and

(iii)

B thereupon promises A an additional payment in return for A’s promise to perform [16] his contractual obligations on time; and

(iv)

as a result of giving his promise, B obtains in practice a benefit, or obviates a disbenefit; and

(v)

B’s promise is not given as a result of economic duress or fraud on the part of A; then

(vi)

the benefit to B is capable of being consideration for B’s promise, so that the promise will be legally binding.

As I have said, Mr Evans accepts that in the present case by promising to pay the extra £10 300 his client secured benefits. There is no finding, and no suggestion, that in this case the promise was given as a result of fraud or duress. If it be objected that the propositions above contravene the principle in Stilk v Myrick I answer that in my view they do not; they refine, and limit the application of that principle, but they leave the principle unscathed for example, where B secures no benefit by his promise. It is not in my view surprising that a principle enunciated in relation to the rigours of seafaring life during the Napoleonic wars should be subjected during the succeeding 180 years to a process of refinement and limitation in its application in the present day. It is therefore my opinion that on his findings of fact in the present case, the judge was entitled to hold, as he did, that the defendants’ promise to pay the extra £10 300 was supported by valuable consideration, and thus constituted an enforceable agreement … For these reasons I would dismiss this appeal. [3.170] RUSSELL LJ: [19] For my part I wish to make it plain that I do not base my judgment upon any reservation as to the correctness of the law long ago enunciated in Stilk v Myrick. A gratuitous promise, [3.170]

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Williams v Roffey Bros & Nicholls (Contractors) cont. pure and simple, remains unenforceable unless given under seal. But where, as in this case, a party undertakes to make a payment because by so doing it will gain an advantage arising out of the continuing relationship with the promisee, the new bargain will not fail for want of consideration…. I too would dismiss this appeal. [PURCHAS LJ delivered a judgment to a similar effect.] Appeal dismissed.

Musumeci v Winadell [3.175] Musumeci v Winadell Pty Ltd (1994) 34 NSWLR 723 Supreme Court of New South Wales – Action. [FACTS: The plaintiffs were tenants of a fruit and vegetable shop in a shopping centre owned by the defendant. The introduction of a larger competing fruit and vegetable shop in the shopping centre threatened the ability of the tenants (the plaintiffs) to pay the full rent. The defendant landlord promised to accept a reduced rent but later sought to resile from that arrangement. The plaintiffs sought, inter alia, a declaration that the landlord had made a binding promise to reduce the rent. The principal issue was whether the tenants had given consideration for the landlord’s promise.] SANTOW J: [741] Williams v Roffey – should it be followed in Australia? There are three reasons which might be put as to why a contract to perform an existing obligation should not be enforced. First, to protect the promisor from extortion, such as may result from threatening to breach a contract in order to exact a concession. Thus, for example, the two dollar unguaranteed corporate tenant in a falling market, whose directors threaten to walk away from a lease, unless rent concessions are conceded. G H Treitel, The Law of Contract (8th ed, 1991) suggests (at 90 and 364) that this argument is much reduced in importance, now that such a refusal may constitute duress: B and S Contracts and Designs Ltd v Victor Green Publications Ltd [1984] ICR 419 was such a case. However it has been held by the Privy Council that a threat to breach a contract may not amount to duress, where there has been no “coercion of the will”, having regard to alternative courses open: Pao On v Lau Yiu Long. The Australian cases, discussed below, make clear that coercion of the will is not essential for duress. One may choose to submit, without one’s will being overborne, but by reason of illegitimate pressure consisting of unlawful threats or unconscionable conduct: Crescendo Management Pty Ltd v Westpac Banking Corp (1988) 19 NSWLR 40 at 45–6. Furthermore economic duress has not received unqualified acceptance as a basis for setting aside contracts in Australia. Thus, in Equiticorp Finance Ltd (in liq) v Bank of New Zealand (1993) 32 NSWLR 50, [742] Kirby P (at 106) cast doubt on the utility of economic duress as a satisfactory remedy. He described it as an unsatisfactory and uncertain doctrine, lending itself to open ended formulae, little clarified by the cases over the last hundred years. He criticised its encouragement to the courts to substitute their own subjective opinion about agreements for those reached by the parties, particularly when substantial corporations. He preferred to see the concepts of economic duress invoked under sensibly limited and structured legislation like the Contracts Review Act 1980 or more broadly, subsumed by the doctrine of undue influence and unconscionability. Clark JA and Cripps JA did not reject the doctrine, but were satisfied it did not apply in the circumstances. This reflects the Court of Appeal’s acceptance of economic duress in earlier cases such as Crescendo Management Pty Ltd v Westpac Banking Corp. 168

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Musumeci v Winadell cont. But does it follow that, because there is not as yet a fully developed doctrine for the avoidance of contracts on the grounds of economic duress (pace Hobhouse J in The “Alev”, Vantage Navigation Corp v Suhail and Saud Bahwan Building Materials LLC [1989] 1 Lloyd’s Rep 138 at 147, who thought otherwise), that therefore strict consideration should remain the discrimen for enforceability of contractual modifications? There are a number of reasons why not. If it is assumed that the underlying concern is to prevent coercive modifications, the traditional notion of consideration does not perform that role very well. Its very certainty is bought at the price of inflexibility. This produces a real disincentive to re-negotiate a contract which changed circumstances have made unduly onerous. This is especially if the outcome is likely to be unenforceable by reason of lack of consideration. Even the presence of consideration does not preclude there having been economic duress inducing the contract. Consideration expressed in formalistic terms of one dollar can indeed actually cloak duress rather than expose it. Posner J sets out incisively the policy issues as he saw them in United States v Stump Home Specialties Manufacturing Inc 905 F 2d 1117 (1990) at 1121–2: The requirement of consideration has, however, a distinct function in the modification setting – although one it does not perform well – and that is to prevent coercive modifications. Since one of the main purposes of contracts and of contract law is to facilitate long-term commitments, there is often an interval in the life of a contract during which one party is at the mercy of the other. A may have ordered a machine from B that A wants to place in operation on a given date, specified in their contract; and in expectation of B’s complying with the contract, A may have made commitments to his customers that it would be costly to renege on. As the date of scheduled delivery approaches, B may be tempted to demand that A agree to renegotiate the contract price, knowing that A will incur heavy expenses if B fails to deliver on time. A can always refuse to renegotiate, relying instead on his right to sue B for breach of contract if B fails to make delivery by the agreed date. But legal remedies are costly and uncertain, thereby opening the way to duress. Considerations of commercial reputation will deter taking advantage of an opportunity to exert duress on a contract partner in many cases, but not in all. [743] … [7] The rule that modifications are unenforceable unless supported by consideration strengthens A’s position by reducing B’s incentive to seek a modification. But it strengthens it feebly … The law does not require that consideration be adequate – that it be commensurate with what the party accepting it is giving up. Slight consideration, therefore, will suffice to make a contract or a contract modification enforceable. And slight consideration is consistent with coercion. To surrender one’s contractual rights in exchange for a peppercorn is not functionally different from surrendering them for nothing. The sensible course would be to enforce contract modifications (at least if written) regardless of consideration and rely on the defence of duress to prevent abuse … All coercive modifications would then be unenforceable, and there would be no need to worry about consideration, an inadequate safeguard against duress …. I conclude that even if duress is not a fully developed doctrine, it is nonetheless a useful weapon. It, with fraud, is already introduced by element (v) of Glidewell LJ’s formulation [see above, [3.165], p 107], precluding enforcement of a promise so induced. Logically though, one should expand that element also to exclude promises induced by undue influence or unconscionable conduct, at the least. But should our courts go further, as American courts have done, by drawing a line between legitimate inducement and extortion, doing so according to a doctrine of good faith, as suggested by Richard Hooley, Consideration and the Existing Duty [1991] JBL 19 at 27–8, 33–4? … [744] … I consider that the notion of “good faith” is better replaced by the more precise and apposite one of “unfair pressure” on A’s part inducing B’s promise in element (v). Economic duress, as the cases demonstrate, cover[s] many examples of unfair pressure, but by no means all. Furthermore, where the circumstances giving rise to the re-negotiation were unforeseen by A at the time of the [3.175]

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Musumeci v Winadell cont. original contract, possibly reflecting unanticipated hardship in future performance by A, these still do not justify a demand for re-negotiation backed by unfair pressure. But such circumstances giving rise to that demand, may nonetheless have some influence on the court in judging fairness, by reference to proportionality of any pressure brought to bear. Thus such a reformulation of element (v) might read as follows: (v) B’s promise is not given as a result of economic duress or fraud, or undue influence or unconscionable conduct on the part of A nor is it induced otherwise by unfair pressure on the part of A, having regard to the circumstances. The second reason cited by Treitel (at 89) why the new promise should not be enforced, is that the promisee suffered no legal detriment in performing what was already due from him. Nor did the promisor receive any legal benefit in receiving what was already due to him. He answers that this way: But this reasoning takes no account of the fact that the promisee may in fact suffer a detriment: for example, the wages that a seaman could earn elsewhere may exceed those that he would earn under the original contract together with the damages that he would have to pay for breaking it. Conversely, the promisor may in fact benefit from the actual performance of what was legally due to him: in Stilk v Myrick the master got his ship home and this may well have been worth more to him than any damages that he could have recovered from the crew. Indeed the very fact that a concession is extended by B, without extortion, supports an inference, though by no means conclusively, that consideration from A, in a real and practical sense, has moved that concession. The law is increasingly tending away from the artificial towards the substantive. Such a practical notion of consideration reflects that trend. It is a notorious fact that concessions are made to avoid the necessity for enforcing a contract whose performance is in jeopardy. It would indeed be far more artificial to treat such concessional modification to the contract as moved by a consideration consisting of cancellation of the old contract in return for the [745] new, an approach which the Court of Appeal in Williams v Roffey expressly and correctly disclaimed. That leads to the third possible reason for why such a promise should not be enforced. It is expressed in the proposition that a benefit which is merely the hoped-for end result of performance cannot constitute consideration: Brian Coote. “If these matters are capable of being regarded as consideration the reality is that the existing duty rule no longer applies, for in every case these types of benefits will be present”; Carter and Harland, Contract Law in Australia (at 109). The authors of that text go further: “Indeed, it is because contracting parties regard such matters as benefits that the argument can be made that existing rule should be abolished.” But that assumes the existing rule has not even residual utility and I do not accept that proposition. Thus, Williams v Roffey and subsequent cases such as Anangel Atlas Compania Naviera SA v Ishikawajima-Harima Heavy Industries Co Ltd (No 2) [1990] 2 Lloyd’s LR 526 per Hirst J, have been at pains to treat Stilk’s case as still good law, though only “where there is a wholly gratuitous promise” (at 545). But it should be apparent that Stilk’s case involved no less a practical benefit than was upheld as sufficient for consideration in Williams v Roffey. What then is a sufficient practical benefit to B, so as to take the situation beyond a wholly gratuitous promise by B? The answer lies in the proposition put by Treitel (at 90) quoted above. It is indeed inherent in the situation posed by Williams v Roffey itself (and indeed in Stilk’s case itself, despite the decision). There the subcontractor A’s performance was worth more to B (the principal contractor) than likely damages, even taking into account the cost of any concession to obtain greater assurance of that performance. This suggests there should be an addition to element (iv) of Glidewell LJ’s formulation by adding this proviso at the end: 170

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Musumeci v Winadell cont. provided that A’s performance having regard to what has been so obtained is capable of being viewed by B as worth more to B than any remedy against A (allowing for any defences or cross-claims) taking into account the cost to B of any such payment or concession to obtain greater assurance of A’s performance. Nor should the alternative and indeed original basis of consideration be ignored, namely detriment to A, the promisee for this purpose. It is of course long settled that detriment to the promisee suffices as consideration – indeed it better reflects the origins of contract in the action of assumpsit. Thus element (iv), as I have expanded it, should be divided into parts, the second as follows: (iv)(a) …, or (b). As a result of giving his promise, A suffers in practice a detriment (or obviates a benefit), provided that A is thereby foregoing the opportunity of not performing the original contract in circumstances where such non performance, taking into account B’s likely remedy against A (and allowing for any defences or cross-claims) is being capable of being viewed by A as worth more to A than performing that contract, in the absence of B’s promised payment or concession to A. To all this it might be said that such a relaxation of the doctrine of consideration, [746] if adopted, will discourage concessions, since they would then too readily become legally binding throughout the term of the contract. But the answer to that is simple enough. The courts should be alert to distinguish promises intended by their terms to be no more than temporary, or truly ex gratia, concessions, for example if expressly limited to a period of difficult circumstances for performance by the other party, which may not be permanent. And “care must also be taken not to infer anterior promises from conduct which represents no more than an adjustment of their relationship in the light of changing circumstances”: per McHugh JA in Integrated Computer Services Pty Ltd v Digital Equipment Corp (Aust) Pty Ltd (1988) 5 BPR 11,110 at 11,117. Accordingly, I’m satisfied to conclude that, subject to the earlier re-casting of the five elements of Glidewell LJ, Williams v Roffey should be [747] followed in allowing a practical benefit or detriment to suffice as consideration. For convenience, I set out below the re-cast elements, changes indicated by italics. I recognise that they will be further refined in light of experience. One particular issue is the extent to which a benefit or detriment, said to be “practical”, as distinct from explicitly bargained for, must nonetheless be consistent with, and not extraneous to, the bargaining process, as at least its intended result if not necessarily its moving force: The present state of the law on this subject can be expressed in the following proposition: (i)

If A has entered into a contract with B to do work for, or to supply goods or services to, B in return for the payment by B, and

(ii)

At some stage before A has completely performed his obligations under the contract B has reason to doubt whether A will, or be able to, complete his side of the bargain, and

(iii)

B thereupon promises A an additional payment or other concession (such as reducing A’s original obligation) in return for A’s promise to perform this contractual obligation at the time, and (a) As a result of giving his promise B obtains in practice a benefit, or obviates a disbenefit provided that A’s performance, having regard to what has been so obtained, is capable of being viewed by B as worth more to B than any likely remedy against A (allowing for any defences or cross-claims), taking into account the cost to B of any such payment or concession to obtain greater assurance of A’s performance, or (b)

as a result of giving his promise, A suffers a detriment (or obviates a benefit) provided that A is thereby foregoing the opportunity of not performing the original contract, in circumstances where such non-performance, taking into account B’s likely remedy against A (and allowing for any defences or cross-claims) is capable of being viewed by A as worth more to A than performing that contract, in the absence of B’s promised payment or concession to A. [3.175]

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Musumeci v Winadell cont. (iv)

B’s promise is not given as a result of economic duress or fraud or undue influence or unconscionable conduct on the part of A nor is it induced as a result of unfair pressure on the part of A, having regard to the circumstances, then,

(v)

The benefit to B or the detriment to A is capable of being consideration for B’s promise, so that the promise will be legally binding.

Application of Williams v Roffey to present circumstances [3.180] … [748] Thus I find that the particular practical benefit here, was that the lessor had greater assurance of the lessees staying in occupation and maintaining viability and capacity to perform by reason of their reduction in their rent, notwithstanding the introduction of a major, much larger competing tenant. [749] The practical detriment to the lessees lay in risking their capacity to survive against a much stronger competitor, by staying in occupancy under their lease, rather than walking away at the cost of damages, if the lessees’ defences, including under the Contracts Review Act 1980, were unsuccessful…. As to element (iv) which, in its proviso, is designed to eliminate “wholly” gratuitous promises, there is evidence before me that the plaintiffs’ goodwill was at risk of destruction by the introduction of the much stronger competitor on a concessional basis, unless the rent reduction were forthcoming. That makes it a proper inference for me to draw that there was indeed a sufficient practical benefit, procured by maintaining the plaintiffs as viable tenants on the promise of reduced rental. This is compared to the evidently less attractive alternative of finding another tenant and suing for any rent shortfall, particularly where the lessees might plead a number of foreshadowed defences and cross-claims.

Re Selectmove [3.185] Re Selectmove Ltd [1995] 1 WLR 474 Court of Appeal GIBSON LJ: [481] [I]f the principle of Williams v Roffey Bros & Nicholls (Contractors) Ltd [1991] 1 QB 1 is to be extended to an obligation to make payment, it would in effect leave the principle in Foakes v Beer, 9 App Cas 605 without any application. When a creditor and a debtor who are at arm’s length reach agreement on the payment of the debt by instalments to accommodate the debtor, the creditor will no doubt always see a practical benefit to himself in so doing. In the absence of authority there would be much to be said for the enforceability of such a contract. But that was a matter expressly considered in Foakes v Beer yet held not to constitute good consideration in law. Foakes v Beer was not even referred to in Williams v Roffey Bros & Nicholls (Contractors) Ltd [1991] 1 QB 1, and it is in my judgment impossible, consistently with the doctrine of precedent, for this court to extend the principle of Williams’s case to any circumstances governed by the principle of Foakes v Beer, 9 App Cas 605. If that extension is to be made, it must be by the House of Lords or, perhaps even more appropriately, by Parliament after consideration by the Law Commission.

[3.190]

Notes

1. In Collier v P & MJ Wright (Holdings) Ltd [2007] EWCA Civ 1329; [2008] 1 WLR 643 the English Court of Appeal affirmed the position adopted in Re Selectmove, but accepted that its effect may be substantially undermined by the doctrine of promissory estoppel. 172

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2. As the extracts at [3.165]-[3.185] indicate, the problems of contract modification and the acceptance of part payment of a debt in full satisfaction also raise the application of the doctrines of economic duress (see Pao On v Lau Yiu Long [1980] AC 614 [3.200] and North Ocean Shipping Co Ltd v Hyundai Construction Co Ltd [1979] QB 705) and promissory estoppel (see (Paterson Textbook Ch 9, esp Je Maintiendrai Pty Ltd v Quaglia (1980) 26 SASR 101, at [9.10])). Extracts from Paterson, Robertson and Duke, Principles of Contract Law (2016, 5th ed), Ch 4

Promises made to third parties [3.195] A promise to perform an existing contractual obligation does amount to a good

consideration if it is made to a person who was not a party to the original contract. 123 The existing legal duty rule does not apply because the promisor incurs an additional legal obligation and confers an additional legal right on the new promisee. In Pau On v Lau Yiu Long 124 the plaintiffs had agreed to acquire shares in a public company under a contract which required them not to sell 60 per cent of the allotted shares for 12 months. They entered into a second contract with the shareholders of the company. In return for the plaintiffs performing their obligations under the first contract, the shareholders agreed to indemnify the plaintiffs against any loss resulting from a fall in the share price during that 12-month period. When the plaintiffs sought to enforce that contract of indemnity, the Privy Council held that a promise to perform an act which the promisee is already under an existing obligation to a third party to perform will constitute good consideration. The plaintiffs had provided good consideration because the shareholders obtained the benefit of a direct obligation which they were able to enforce. 125 Moreover, the plaintiffs’ entry into the main contract could not be regarded as past consideration, because the plaintiffs agreed to the restriction on selling their shares in the public company on the understanding that they would be indemnified against loss resulting from a fall in the share price. 126 The granting of the indemnity therefore fell within the exception to the past consideration rule described by Bowen LJ in Re Casey’s Patents; Stewart v Casey. 127 Extracts from Paterson, Robertson and Duke, Contract: Cases and Materials (2016, 13th ed), Ch 4 Duty owed to a third party

Pao On v Lau Yiu Long [3.200] Pao On v Lau Yiu Long [1980] AC 614 Privy Council – Appeal from the Court of Appeal of Hong Kong. [FACTS: On 27 February 1973, the plaintiffs agreed (the main agreement) to sell to Fu Chip Investment Co Ltd (Fu Chip) the whole of the issued capital in Tsuen Wan Shing On Estate Co Ltd 123

Scotson v Pegg (1861) 6 H & N 295; 158 ER 121, at 299-300, 123. For a recent application, see Ailakis v Olivero (No 2) [2014] WASCA 127; (2014) 100 ACSR 524, [104]–[109].

124 125 126 127

[1980] AC 614. [1980] AC 614, 631-2. [1980] AC 614, 629-30. [1892] 1 Ch 104; see [3.115]. [3.200]

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Pao On v Lau Yiu Long cont. (Shing On). The price payable was $HK10.5 million which was to be met by an allotment of 4.2 million ordinary shares of $HK1 each in Fu Chip of which the defendants were majority shareholders. For the purposes of the agreement, one Fu Chip share was deemed to be worth $HK2.50. So that the market in Fu Chip shares might not be unduly depressed by a sale by the plaintiffs of their allotment, under cl 4(k) of the main agreement, the plaintiffs agreed not to sell 60 per cent of their allotment of shares in Fu Chip before the end of April 1974. In view of this restriction, the plaintiffs required some protection should the price of Fu Chip shares fall during the period in which they were unable to sell. Accordingly, a second agreement (the subsidiary agreement) was entered into by which the plaintiffs agreed to sell to the defendants on or before 30 April 1974 at a price of $HK2.50 per share, 2.5 million shares in Fu Chip, this being 60 per cent of the plaintiffs’ total allotment. Although this arrangement protected the plaintiffs from loss, it also effectively prevented them from realising any profit on 60 per cent of their holding in Fu Chip should the price rise above $HK2.50 as, indeed, was generally expected. On realising what they had done, the plaintiffs refused to proceed with the main agreement unless the subsidiary agreement was cancelled and replaced by a guarantee by way of indemnity. The defendants considered bringing action against the plaintiffs for specific performance of the main agreement, but in view of the fact that the takeover of Shing On had already been announced, and certain other business considerations, they agreed to cancel the subsidiary agreement and give the requested guarantee. The guarantee did not require the plaintiffs to sell their shares to the defendants at $HK2.50 per share, but guaranteed that each share in the 60 per cent portion of their holding would be worth $HK2.50 immediately after 30 April 1974, and further indemnified them against any loss which they might sustain should the market price fall below that figure. The guarantee further provided that if the defendants were in fact called upon to indemnify the plaintiffs, the defendants would have the option of buying the 60 per cent portion for $HK6.3 million, that is $HK2.50 per share. Under this arrangement, the plaintiffs were guaranteed a minimum of $HK2.50 per share but might receive more if the market value of Fu Chip shares rose above that figure after 30 April 1974. By 30 April 1974 Fu Chip shares had fallen to 36 cents and the plaintiffs sought to rely on the indemnity. The defendants refused to indemnify them. The plaintiffs successfully brought an action on the indemnity but this decision was reversed on appeal. The plaintiffs appealed to the Privy Council.] The judgment of their Lordships was delivered by LORD SCARMAN:

The first question [628] The first question is whether upon its true construction the written guarantee of 4 May 1973, states a consideration sufficient in law to support the defendants’ promise of indemnity against a fall in value of the Fu Chip shares. The instrument is, so far as relevant, in these terms: Re: Tsuen Wan Shing On Estate Co Ltd. In consideration of your having at our request agreed to sell all of your shares of and in the abovementioned company … for the consideration of $10.5 million by the allotment of 4.2 million ordinary shares of $1 each in Fu Chip Investment Co Ltd … and that the market value for the said ordinary shares of the said Fu Chip Investment Co Ltd shall be deemed as $2.50 for each of $1 share under an agreement for sale and purchase made between the parties thereto and dated 27 February 1973, we Lau Yiu Long … and Benjamin Lau Kam Ching … [629] the directors of the said Fu Chip Investment Co Ltd hereby agree and guarantee the closing market value for 2 520 000 shares (being 60 per cent of the said 4.2 million ordinary shares) of the Fu Chip Investment Co Ltd shall be at $2.50 per share and that the total value of 2 520 000 shares shall be of the sum of $6.3 million on the following 174

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Pao On v Lau Yiu Long cont. marketing date immediately after 30 April 1974, and we further agree to indemnify and keep you indemnified against any damages, losses and other expenses which you may incur or sustain in the event of the closing market price for the shares of Fu Chip Investment Co Ltd according to the Far East Exchange Ltd, shall fall short of the sum of $2.50 during the said following marketing date immediately after 30 April 1974, provided always that if we were called upon to indemnify you for the discrepancy between the market value and the said total value of $6.3 million we shall have the option of buying from you the said 2 520 000 shares of Fu Chip Investment Co Ltd at the price of $6.3 million. Mr Neill, counsel for the plaintiffs … contends that the consideration stated in the agreement is not in reality a past one. It is to be noted that the consideration was not on 4 May 1973, a matter of history only. The instrument by its reference to the main agreement with Fu Chip incorporates as part of the stated consideration the plaintiffs’ three promises to Fu Chip: to complete the sale of Shing On, to accept shares as the price for the sale, and not to sell 60 per cent of the shares so accepted before 30 April 1974. Thus, on 4 May 1973, the performance of the main agreement still lay in the future. Performance of these promises was of great importance to the defendants, and it is undeniable that, as the instrument declares, the promises were made to Fu Chip at the request of the defendants. It is equally clear that the instrument also includes a promise by the plaintiffs to the defendants to fulfil their earlier promises given to Fu Chip. The Board agrees with Mr Neill’s submission that the consideration expressly stated in the written guarantee is sufficient in law to support the defendants’ promise of indemnity. An act done before the giving of a promise to make a payment or to confer some other benefit can sometimes be consideration for the promise. The act must have been done at the promisors’ request: the parties must have understood that the act was to be remunerated either by a payment or the conferment of some other benefit: and payment, or the conferment of a benefit, must have been legally enforceable had it been promised in advance. All three features are present in this case. The promise given to Fu Chip under the main agreement not to sell the shares for a year was at the first defendant’s request. The parties understood at the time of the main agreement that the restriction on selling must be compensated for by the benefit of a guarantee against a drop in price: and such a guarantee would be legally enforceable. The agreed cancellation of the subsidiary [630] agreement left, as the parties knew, the plaintiffs unprotected in a respect in which at the time of the main agreement all were agreed they should be protected. Mr Neill’s submission is based on Lampleigh v Brathwait (1615) Hobart 105; 80 ER 255. In that case the judges said (at 106): First … a meer voluntary courtesie will not have a consideration to uphold an assumpsit. But if that courtesie were moved by a suit or request of the party that gives the assumpsit, it will bind, for the promise, though it follows, yet it is not naked, but couples it self with the suit before, and the merits of the party procured by that suit, which is the difference. The modern statement of the law is in the judgment of Bowen LJ in Re Casey’s Patents [1892] 1 Ch 104 at 115–16; Bowen LJ said: Even if it were true, as some scientific students of law believe, that a past service cannot support a future promise, you must look at the document and see if the promise cannot receive a proper effect in some other way. Now, the fact of a past service raises an implication that at the time it was rendered it was to be paid for, and, if it was a service which was to be paid for, when you get in the subsequent document a promise to pay, that promise may be treated either as an admission which evidences or as a positive bargain which fixes the amount of that reasonable remuneration on the faith of which the service was originally rendered. So that here for past services there is ample justification for the promise to give the third share. Conferring a benefit is, of course, an equivalent to payment. [3.200]

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Pao On v Lau Yiu Long cont. Mr Leggatt, for the defendants, does not dispute the existence of the rule but challenges its application to the facts of this case. He submits that it is not a necessary inference or implication from the terms of the written guarantee that any benefit or protection was to be given to the plaintiffs for their acceptance of the restriction on selling their shares. Their Lordships agree that the mere existence or recital of a prior request is not sufficient in itself to convert what is prima facie past consideration into sufficient consideration in law to support a promise: as they have indicated, it is only the first of three necessary preconditions. As for the second of those preconditions, whether the act done at the request of the promisor raises an implication of promised remuneration or other return is simply one of the construction of the words of the contract in the circumstances of its making. Once it is recognised, as the Board considers it inevitably must be, that the expressed consideration includes a reference to the plaintiffs’ promise not to sell the shares before 30 April 1974 – a promise to be performed in the future, though given in the past – it is not possible to treat the defendants’ promise of indemnity as independent of the plaintiffs’ antecedent prom-[631]ise, given at the first defendant’s request, not to sell. The promise of indemnity was given because at the time of the main agreement the parties intended that the first defendant should confer upon the plaintiffs the benefit of his protection against a fall in price. When the subsidiary agreement was cancelled, all were well aware that the plaintiffs were still to have the benefit of his protection as consideration for the restriction on selling. It matters not whether the indemnity thus given be regarded as the best evidence of the benefit intended to be conferred in return for the promise not to sell, or as the positive bargain which fixes the benefit on the faith of which the promise was given – though where, as here, the subject is a written contract, the better analysis is probably that of the “positive bargain”. Their Lordships, therefore, accept the submission that the contract itself states a valid consideration for the promise of indemnity. This being their Lordships’ conclusion, it is necessary [sic – it seems that this should be unnecessary] to consider Mr Neill’s further submission … that the option given the defendants, if called upon to fulfil their indemnity, to buy back the shares at $2.50 a share was itself a sufficient consideration for the promise of indemnity. But their Lordships see great force in the contention. The defendants promised to indemnify the plaintiffs if the market price of Fu Chip shares fell below $2.50. However, in the event of the defendants being called on to implement this promise they were given an option to take up the shares themselves at $2.50. This on the face of it imposes on the plaintiffs in the circumstances envisaged an obligation to transfer the shares to the defendants at the price of $2.50 if called on to do so. The concomitant benefit to the defendants could be a real one – for example, if they thought that the market, after a temporary setback, would recover to a price above $2.50. The fact that the option is stated in the form of a proviso does not preclude it being a contractual term or one under which consideration moves.

The second question [3.205] There is no doubt – and it was not challenged – that extrinsic evidence is admissible to prove the real consideration where: (1)

no consideration, or a nominal consideration, is expressed in the instrument; or

(2)

the expressed consideration is in general terms or ambiguously stated; or

(3)

substantial consideration is stated, but an additional consideration exists.

The additional consideration must not, however, be inconsistent with the terms of the written instrument. Extrinsic evidence is also admissible to prove the illegality of the consideration. In their Lordships’ opinion the law is correctly stated in Halsbury’s Laws of England (4th ed, 1975), vol 12, para 1487. The extrinsic evidence in this case shows that the consideration for the promise of indemnity, while it included the cancellation of the subsidiary agreement, was primarily the promise given by the plaintiffs to the defendants, to perform their contract with Fu Chip, which included the undertaking not to sell 60 per cent of the shares allotted to them before 30 April 1974. Thus the real 176

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Pao On v Lau Yiu Long cont. consideration for [632] the indemnity was the promise to perform, or the performance of, the plaintiffs pre-existing contractual obligations to Fu Chip. This promise was perfectly consistent with the consideration stated in the guarantee. Indeed, it reinforces it by imposing upon the plaintiffs an obligation now owed to the defendants to do what, at the first defendant’s request, they had agreed with Fu Chip to do. Their Lordships do not doubt that a promise to perform, or the performance of, a pre-existing contractual obligation to a third party can be valid consideration. In New Zealand Shipping Co Ltd v AM Satterthwaite & Co Ltd (The Eurymedon) [1975] AC 154 at 168, the rule and the reason for the rule were stated: An agreement to do an act which the promisor is under an existing obligation to a third party to do, may quite well amount to valid consideration … the promisee obtains the benefit of a direct obligation …. This proposition is illustrated and supported by Scotson v Pegg (1861) 6 H & N 295; 158 ER 121, which their Lordships consider to be good law. Unless, therefore the guarantee was void as having been made for an illegal consideration or voidable on the ground of economic duress, the extrinsic evidence establishes that it was supported by valid consideration. Mr Leggatt for the defendants submits that the consideration is illegal as being against public policy. He submits that to secure a party’s promise by a threat of repudiation of a pre-existing contractual obligation owed to another can be, and in the circumstances of this case was, an abuse of a dominant bargaining position and so contrary to public policy. This, he submits, is so even though economic duress cannot be proved. This submission found favour with the majority in the Court of Appeal. Their Lordships, however, consider it misconceived. Reliance was placed on the old “seaman” cases of Harris v Watson (1791) Peake 102; 170 ER 94, NP, and Stilk v Meyrick (1809) 6 Esp 129; 170 ER 851; 2 Camp 317; 170 ER 1168. Counsel also referred to certain developments in American law, which are to be found described in two leading works, Corbin on Contracts (1950) and Williston on Contracts (3rd ed, 1975) … Their Lordships would make one general observation on what is revealed by these two distinguished American works. Where some judges speak of public policy, others speak of economic duress. No clear line of distinction between the two concepts emerges as settled in the American law. In the seaman cases there were only two parties – the seaman and the captain (representing the owner). In Harris v Watson the captain during the voyage, for which the plaintiff had contracted to serve as a seaman, promised him 5 guineas over and above his common wages if he would perform some extra work. Lord Kenyon thought (at 103) that if the seaman’s claim to be paid 5 guineas was supported “it would materially affect the navigation of this kingdom”. He feared the prospect of seamen in times of danger insisting “on an extra charge on such a promise”, and non-suited the plaintiff. In Stilk v [633] Meyrick, Lord Ellenborough CJ also non-suited the seaman. According to the report in 2 Camp 317, 319, he said: I think Harris v Watson was rightly decided; but I doubt whether the ground of public policy, upon which Lord Kenyon is stated to have proceeded, be the true principle on which the decision is to be supported. Here, I say the agreement is void for want of consideration. Espinasse, who appeared as junior counsel for the unsuccessful plaintiff in the case, reports the case somewhat differently. He reports (6 Esp 129 at 130) Lord Ellenborough CJ as saying that: “he recognised the principle of the case of Harris v Watson as founded on just and proper policy.” But the report continues: “When the defendant [sic – but surely the plaintiff is meant?] entered on board the ship, he stipulated to do all the work his situation called upon him to do.” These cases, explicable as they are upon the basis of an absence of fresh consideration for the captain’s promise, are an unsure foundation for a rule of public policy invalidating contracts where, save for the rule, there would be valid consideration. [3.205]

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Pao On v Lau Yiu Long cont. When one turns to consider cases where a pre-existing duty imposed by law is alleged to be valid consideration for a promise, one finds cases in which public policy has been held to invalidate the consideration. A promise to pay a sheriff in consideration of his performing his legal duty, a promise to pay for discharge from illegal arrest, are to be found in the books as promises which the law will not enforce. Yet such cases are also explicable upon the ground that a person who promises to perform, or performs, a duty imposed by law provides no consideration. In cases where the discharge of a duty imposed by law has been treated as valid consideration, the courts have usually (but not invariably) found an act over and above, but consistent with, the duty imposed by law: see Williams v Williams [1957] 1 WLR 148. It must be conceded that different judges have adopted differing approaches to such cases: contrast, for example, Denning LJ at 149 et seq with the view of the majority in Williams’ case. But, where the pre-existing obligation is a contractual duty owed to a third party, some other ground of public policy must be relied on to invalidate the consideration (if otherwise legal); the defendants submit that the ground can be extortion by the abuse of a dominant bargaining position to threaten the repudiation of a contractual obligation. It is this application of public policy which Mr Leggatt submits has been developed in the American cases. Beginning with the general rule that “neither the performance of duty nor the promise to render a performance already required by duty is a sufficient consideration” the courts have (according to Corbin on Contracts, vol 1, s 171) advanced to the view: “that the moral and economic elements in any case that involves the rule should be weighed by the court, and that the fact of pre-existing legal duty should not be in itself decisive.” [634] The American Law Institute in its Restatement of the Law, Contracts (ch 3, s 84(d)), has declared that performance (or promise of performance) of a contractual duty owed to a third person is sufficient consideration. This view (which accords with the statement of our law in New Zealand Shipping Co Ltd v A M Satterthwaite & Co Ltd) appears to be generally accepted but only in cases where there is no suggestion of unfair economic pressure exerted to induce the making of what Corbin on Contracts calls “the return promise”. Their Lordships’ knowledge of this developing branch of American law is necessarily limited. In their judgment it would be carrying audacity to the point of foolhardiness for them to attempt to extract from the American case law a principle to provide an answer to the question now under consideration. That question, their Lordships repeat is whether, in a case where duress is not established, public policy may nevertheless invalidate the consideration if there has been a threat to repudiate a pre-existing contractual obligation or an unfair use of a dominating bargaining position. Their Lordships’ conclusion is that where businessmen are negotiating at arm’s length it is unnecessary for the achievement of justice, and unhelpful in the development of the law, to invoke such a rule of public policy. It would also create unacceptable anomaly. It is unnecessary because justice requires that men, who have negotiated at arm’s length, be held to their bargains unless it can be shown that their consent was vitiated by fraud, mistake or duress. If a promise is induced by coercion of a man’s will, the doctrine of duress suffices to do justice. The party coerced, if he chooses and acts in time, can avoid the contract. If there is no coercion, there can be no reason for avoiding the contract where there is shown to be a real consideration which is otherwise legal. Such a rule of public policy as is now being considered would be unhelpful because it would render the law uncertain. It would become a question of fact and degree to determine in each case whether there had been, short of duress, an unfair use of a strong bargaining position. It would create anomaly because, if public policy invalidates the consideration, the effect is to make the contract void. But unless the facts are such as to support a plea of “non est factum”, which is not suggested in this case, duress does no more than confer upon the victim the opportunity, if taken in time, to avoid the contract. It would be strange if conduct less than duress could render a contract void, whereas duress does no more than render a contract voidable. Indeed, it is the defendants’ case in this appeal that such an anomaly is the correct result. Their case is that the plaintiffs, having lost by cancellation the 178

[3.205]

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Pao On v Lau Yiu Long cont. safeguard of the subsidiary agreement, are without the safeguard of the guarantee because its consideration is contrary to public policy, and that they are debarred from restoration to their position under the subsidiary agreement because the guarantee is void, not voidable. The logical consequence of Mr Leggatt’s submission is that the safeguard which all were at all times agreed the plaintiffs should have – the safeguard against fall in value of the shares – has been lost by the application of [635] a rule of public policy. The law is not, in their Lordships’ judgment, reduced to countenancing such stark injustice: nor is it necessary, when one bears in mind the protection offered otherwise by the law to one who contracts in ignorance of what he is doing or under duress. Accordingly, the submission that the additional consideration established by the extrinsic evidence is invalid on the ground of public policy is rejected.

The third question [3.210] [635] Duress, whatever form it takes, is a coercion of the will so as to vitiate consent. Their Lordships agree with the observation of Kerr J in Occidental Worldwide Investment Corp v Skibs A/S Avanti [1976] 1 Lloyd’s Rep 293 at 336 that in a contractual situation commercial pressure is not enough. There must be present some factor “which could in law be regarded as a coercion of his will so as to vitiate his consent”. This conception is in line with what was said in this Board’s decision in Barton v Armstrong [1976] AC 104 at 121 by Lord Wilberforce and Lord Simon of Glaisdale – observations with which the majority judgment appears to be in agreement. In determining whether there was a coercion of will such that there was no true consent, it is material to inquire whether the person alleged to have been coerced did or did not protest; whether, at the time he was allegedly coerced into making the contract, he did or did not have an alternative course open to him such as an adequate legal remedy; whether he was independently advised; and whether after entering the contract he took steps to avoid it. All these matters are, as was recognised in Maskell v Horner [1915] 3 KB 106, relevant in determining whether he acted voluntarily or not. In the present case there is unanimity amongst the judges below that there was no coercion of the first defendant’s will. In the Court of Appeal the trial judge’s finding (already quoted) that the first defendant considered the matter thoroughly, chose to avoid litigation, and formed the opinion that the risk in giving the guarantee was more apparent than real was upheld. In short, there was commercial pressure, but no coercion. Even if this Board was disposed, which it is not, to take a different view, it would not substitute its opinion for that of the judges below on this question of fact. It is, therefore, unnecessary for the Board to embark upon an inquiry into the question whether English law recognises a category of duress known as “economic duress”. But, since the question has been fully argued in this appeal, their Lordships will indicate very briefly the view which they have formed. At common law money paid under economic compulsion could be recovered in an action for money had and received: Astley v Reynolds (1731) 2 Str 915; 93 ER 939. The compulsion had to be such that the party was deprived of “his freedom of exercising his will”: see at 916. It is doubtful, however, whether at common law any duress other than duress to the person sufficed to render a contract voidable: see Blackstone’s Commentaries (12th ed), Book 1, pp 130–1 and Skeate v Beale (1841) 11 Ad & E 983; 113 ER 688. American law (Williston on Contracts (3rd ed)) now recognises that a contract may be avoided on the [636] ground of economic duress. The commercial pressure alleged to constitute such duress must, however, be such that the victim must have entered the contract against his will, must have had no alternative course open to him, and must have been confronted with coercive acts by the party exerting the pressure: Williston on Contracts (3rd ed, 1970), vol 13 s 1603. American judges pay great attention to such evidential matters as the effectiveness of the alternative remedy available, the fact or absence of protest, the availability of independent advice, the benefit received, and the speed with which the victim has sought to avoid the contract. Recently two English judges have recognised that commercial pressure may constitute duress the pressure of which [3.210]

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Pao On v Lau Yiu Long cont. can render a contract voidable: Kerr J in Occidental Worldwide Investment Corp v Skibs A/S Avanti [1976] 1 Lloyd’s Rep 293 and Mocatta J in North Ocean Shipping Co Ltd v Hyundai Construction Co Ltd [1979] QB 705. Both stressed that the pressure must be such that the victim’s consent to the contract was not a voluntary act on his part. In their Lordships’ view, there is nothing contrary to principle in recognising economic duress as a factor which may render a contract voidable, provided always that the basis of such recognition is that it must amount to a coercion of will, which vitiates consent. It must be shown that the payment made or the contract entered into was not a voluntary act. For these reasons their Lordships will humbly advise Her Majesty that the appeal be allowed … Appeal allowed.

[3.215]

Note

See further North Ocean Shipping Co Ltd v Hyundai Construction Co Ltd [1979] QB 705. Extracts from Paterson, Robertson and Duke, Principles of Contract Law (2016, 5th ed), Ch 4

Compromise and forbearance to sue [3.220] A promise to perform an existing legal obligation will also constitute good

consideration where it is made by the beneficiary as part of a bona fide compromise of a disputed claim. This principle was applied by the High Court in Wigan v Edwards. 128 The Edwards entered into a contract to buy from Wigan a house that he had built. After the contract was made, the Edwards became concerned about some defects in the house. They gave Wigan a list of defects that required attention before they would consider “going into the house and finalising anything”. 129 In other words, the Edwards refused to complete the transaction unless the defects were rectified. Although they had no legal right to refuse to complete the purchase, there were many defects and their claim was made honestly. 130 Faced with the Edwards’ claim, Wigan signed a document agreeing to rectify the listed defects within one week and to repair any major faults in construction within five years of the purchase date. Wigan rectified some of the listed defects before the transaction was completed, but did nothing after completion of the transaction to rectify the defects that remained outstanding. The Edwards sued Wigan for damages for breach of contract. Wigan argued that the Edwards had provided no consideration for his promise to rectify the defects. All the Edwards had done in return for the promise was implicitly to agree to perform their existing legal duty to pay the purchase price and complete the transaction. The High Court held that a promise made as part of a bona fide compromise constituted an exception to the existing legal duty rule: An important qualification to the general principle is that a promise to do precisely what the promisor is already bound to do is a sufficient consideration, when it is given by way of a bona 128 129 130

(1973) 1 ALR 497; 47 ALJR 586. (1973) 1 ALR 497; 47 ALJR 586, 510 (ALR). (1973) 1 ALR 497; 47 ALJR 586, 513 (ALR).

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fide compromise of a disputed claim, the promisor having asserted that he is not bound to perform the obligation under the pre-existing contract or that he has a cause of action under that contract. 131

In order to fall within this exception, it was not necessary for the Edwards to establish that they had a valid legal entitlement to refuse to perform the contract. It was enough that they intimated that they did not consider themselves bound to perform and that their claim was honestly made. The requirement that the dispute must be bona fide is said to prevent parties from seeking to obtain an unfair advantage by threatening unscrupulously to withhold performance. 132 Extracts from Paterson, Robertson and Duke, Contract: Cases and Materials (2016, 13th ed), Ch 4 Bona fide compromise

Wigan v Edwards [3.225] Wigan v Edwards (1973) 1 ALR 497; 47 ALJR 586 High Court of Australia – Appeal from the Supreme Court of Queensland. [FACTS: Mr and Mrs Edwards (the respondents) agreed to purchase a house from Wigan (the builder, appellant, promisor) under the terms of a contract dated 15 April 1969. The contract contained no express term that the house had been constructed in a good and businesslike manner nor that it was free from structural defects, nor any other term relating to quality. Nonetheless, shortly after the contract was signed the Edwards had discussions with Wigan in relation to certain features of the house and gave him a list of matters which they said required attention before they would complete the transaction. Wigan agreed to remedy certain defects, and on 22 April 1969 he signed a document in which he promised to remedy the minor defects listed therein and “any major faults in construction five years from purchase date I will repair”. Subsequently the appellant failed to remedy the minor defects and also a major fault which was discovered in the concrete slab. The Edwards sued Wigan in the District Court of Queensland and obtained judgment for $6 000. An appeal to the Full Court of the Supreme Court of Queensland was dismissed. One of the points argued on behalf of Wigan on appeal to the High Court of Australia was that there was no consideration for the promises contained in the document dated 22 April.] MASON J: [594] The first question which arises is whether there was valuable consideration for the appellant’s promise of 22 April 1969. The general rule is that a promise to perform an existing duty is no consideration, at least when the promise is made by a party to a pre-existing contract, when it is made to the promisee under that contract, and it is to do no more than the promisor is bound to do under the contract. The rule expresses the concept that the new promise, indistinguishable from the old, is an illusory consideration. And it gives no comfort to a party who by merely threatening a breach of contract seeks to secure an additional contractual benefit from the other party on the footing that the first party’s new promise of performance will provide sufficient consideration for that benefit. An important qualification to the general principle is that a promise to do precisely what the promisor [595] is already bound to do is a sufficient consideration, when it is given by way of a bona fide compromise of a disputed claim, the promisor having asserted that he is not bound to perform the obligation under the pre-existing contract or that he has a cause of action under that contract. The qualification recognises that for the court itself to examine and determine the correctness of the 131 132

(1973) 1 ALR 497; 47 ALJR 586, 512 (ALR). (1973) 1 ALR 497; 47 ALJR 586, 512 (ALR). [3.225]

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Wigan v Edwards cont. promisor’s claim would be a pointless exercise when the new bargain indicates that the promisee regarded the fresh promise as a benefit, presumably viewing the promise of performance as more advantageous than the remedies available to him for breach of contract. But the law, by insisting that the claim in dispute is one which was honestly or bona fide made, prevents the qualification from assisting the party who would seek to gain an unfair advantage by threatening unscrupulously to withhold performance under a contract. It is no objection to the existence of a bona fide compromise of a dispute that the court considers that the claim made by the promisor that he was not bound under the former contract would not have succeeded had the issue been litigated: Callisher v Bischoffsheim (1870) LR 5 QB 449; Miles v New Zealand Alford Estate Co (1886) 32 Ch D 266. But it is perhaps open to question whether a bona fide compromise of a dispute is sufficiently established by showing that the promisor honestly believed that his claim was well founded. It has been said that it must also be shown that the claim was not vexatious or frivolous. In Miles v New Zealand Alford Estate Co Bowen LJ (at 291-2) expressed himself in favour of the second formulation, whereas in the same case Cotton LJ (at 283-4) and Fry LJ (at 297-8) expressed themselves more obliquely. However, as I understand their observations, they are not inconsistent with what Bowen LJ had to say. In many courts in the United States a similar test to that adopted by Bowen LJ has been adopted. Williston on Contracts (3rd ed), s 135B states: “In many jurisdictions the tendency is to make the test the honesty of the claimant, provided the invalidity of the claim in law or in fact is not entirely obvious.” Even so, according to the author, the forbearance is insufficient consideration “if the claim forborne is so lacking in any foundation as to make its assertion incompatible with both honesty and a reasonable degree of intelligence”. The different expressions of the principle do not reflect an important conceptual difference. There will be few cases involving an honest or bona fide belief in a claim which is vexatious or frivolous. In this case it is unnecessary to choose between the competing formulations, for in my view the more stringent test, that favoured by Bowen LJ in Miles’ case is satisfied. The judge found that the respondents honestly believed that, having regard to the defective condition of the house, they were not bound to complete. In my opinion his Honour was correct in so finding. Although it is my view that the majority of the defects on which the respondents relied would not have justified a refusal to complete the contract, there were many defects. In addition, the water had not been connected and the fence had not been erected. In these circumstances the respondents’ claim that they would not complete cannot be described as a frivolous or vexatious claim. The respondents merely asserted that they would not complete until the matters of which they complained were set right. They did not threaten to bring an action or to defend a suit for specific performance. However, a threat to bring an action or enter a defence is not an essential element of a bona fide compromise; it is enough if there is a claim (of the kind already discussed) that the contracting party is not bound to perform the contract. Clearly the respondents’ claim was of this kind. Accordingly, in my view there was valuable consideration to support the agreement of 22 April 1969. In expressing this conclusion I am mindful that the appellant’s promise to repair major defects in five years incorporated in the document of 22 April 1969 was volunteered by him and was given after he had acceded to the respondents’ demand that the list of defects should be remedied. Though volunteered by the appellant after he had acceded to the initial request, the additional promise should be regarded as an element of the bargain reached by the parties …

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Wigan v Edwards cont. [On this point WALSH AND GIBBS JJ agreed with the reasoning of Mason J. MENZIES J and McTIERNAN ACJ reached the same conclusion.]

Extracts from Paterson, Robertson and Duke, Principles of Contract Law (2016, 5th ed), Ch 4

Termination and replacement [3.230] The existing legal duty rule will have no application where the parties have

terminated their original contract and entered into a new contract. This is so even if the obligations of one party (the modifying party) are more onerous than those in the original contract and the obligations of the other (the beneficiary) are identical to those in the original contract. Since the original contract has been brought to an end, the promise made by the beneficiary is seen as a “new” promise, which provides consideration for the promises undertaken by the modifying party. The question whether a contract has been modified or replaced is potentially very important because a new contract will be supported by consideration, whereas a modification of an existing contract may not be. This exception to the existing legal duty rule will only operate where the parties intended to terminate and replace, rather than modify, their original contract. 133

PROMISES UNDER SEAL [3.235] A promise which is not supported by consideration will nevertheless be enforceable at

common law if it is made under seal. Dixon CJ was referring to this rule in Ballantyne v Phillott when he said that, if the plaintiff had overcome his prejudice against solicitors, then a seal would have been affixed to the agreement and the consideration point would not be available to him. 134 A contract under seal is commonly known as a deed and more rarely as a specialty contract. It is an agreement recorded in a particular form, which traditionally involved sealing and delivery, although the common law requirements have been modified by statute in most Australian jurisdictions. 135 The solemnity of that form is recognised by the courts as a justification for enforcing a promise in the absence of consideration. Contracts which are not under seal, and which therefore require consideration to be binding, are sometimes described as simple or informal contracts. Trebilcock notes that the institution of the seal “has been repealed by statute in about two-thirds of the American states”. 136 He observes that the ability to make a gratuitous promise binding by using a seal is clearly justified on autonomy grounds but more difficult to rationalise on the basis of economic efficiency. 137 In any case deeds are commonly used in Australia to ensure the enforceability of promises where there is some doubt as to whether consideration is being provided by the promisee, such as a guarantee or an agreement to compromise a disputed claim.

133

See Chapter 13.

134

(1961) 105 CLR 379, 389.

135 136 137

See Halsbury’s Laws of Australia, Vol 10, Chapter 140 (Deeds). Trebilcock, The Limits of Freedom of Contract (1993), p 170. Trebilcock, The Limits of Freedom of Contract (1993), pp 170-3. [3.235]

183

CHAPTER 4 Intention [4.10]

PRESUMPTIONS ..................................................................................................... 186 [4.10]

[4.30]

COMMERCIAL TRANSACTIONS ........................................................................... 191 [4.30]

[4.45]

Todd v Nicol ......................................................................... 197

GOVERNMENT AGREEMENTS .............................................................................. 202 [4.65]

[4.80]

Banque Brussels Lambert v Australian National Industries ............................................................................. 191

DOMESTIC AND SOCIAL AGREEMENTS ............................................................. 196 [4.50]

[4.60]

Ermogenous v Greek Orthodox Community of SA .................... 186

Administration of Territory of Papua and New Guinea v Leahy ................................................................................ 203

PRELIMINARY AGREEMENTS ................................................................................. 205 [4.80]

Masters v Cameron ............................................................... 205

Extracts from Paterson, Robertson and Duke, Contract: Cases and Materials (2016, 13th ed), Ch 5 [4.05] The third element of contract formation is that the parties must manifest an intention

to create legal relations. There are several situations in which parties may reach a clear and certain agreement that satisfies the consideration requirement, but may not be intended to create legal relations: 1.

Where an agreement is made in a commercial context, a question may arise whether the parties intend to make an honourable, rather than legal commitment.

2.

The issue may arise in a social or domestic context. An agreement to help a friend to move some furniture in return for dinner involves an exchange of promises, but is clearly not intended to be legally binding. An agreement relating to more substantial matters, such as employment or the sale of valuable property, may be intended to attract legal consequences even when it is made with a close relative.

3.

An issue of intention to contract may arise where an agreement is made between a government and an individual. The implementation of government policy may, for example, lead a government to reach an agreement with a particular individual to provide some assistance. The fact that the individual is providing something in return for that assistance does not necessarily mean that the parties intend to make a contract.

4.

Where parties reach a preliminary agreement, the question may arise whether the parties intend to be bound immediately, or not until some time in the future when the parties have finalised some outstanding issues or recorded their agreement in a more formal manner. The intention to create legal relations requirement has often been approached on the basis that certain types of agreements are presumed to be intended to be binding, while others are presumed not to be made with such an intention. It is said that parties to commercial agreements are presumed to intend legal consequences, while parties to social or domestic [4.05]

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agreements are presumed not to intend legal consequences. Such presumptions determine who bears the onus of proof. A person denying the enforceability of a commercial agreement has been said to bear the onus of proving that the parties did not intend legal consequences. A person seeking to enforce a social or domestic agreement is said to bear the onus of proving that it was intended to be binding. The decision of the High Court in Ermogenous v Greek Orthodox Community of SA Inc [2002] HCA 8; (2002) 209 CLR 95 (at [4.10]) suggests that considerable caution should be exercised in using presumptions to determine whether the intention to create legal relations requirement is satisfied. It has even been said that the court in Ermogenous “rejected the use of presumptions as a basis for ascertaining whether parties intended to enter into contractual relations”: Evans v Secretary, Department of Families, Housing, Community Services and Indigenous Affairs [2012] FCAFC 81; (2012) 289 ALR 237, [12]. The objective nature of the inquiry as to intention and the circumstances that should be taken into account were clearly articulated in the joint judgment of Gaudron, McHugh, Hayne and Callinan JJ in Ermogenous v Greek Orthodox Community of SA Inc. The admissibility and relevance of evidence as to the actual intentions of the parties were considered by the New South Wales Court of Appeal in Air Great Lakes Pty Ltd v KS Easter (Holdings) Pty Ltd (1985) 2 NSWLR 309. A good illustration of the application of these principles is Shahid v Australasian College of Dermatologists [2008] FCAFC 72; (2008) 168 FCR 46.

PRESUMPTIONS Ermogenous v Greek Orthodox Community of SA [4.10] Ermogenous v Greek Orthodox Community of SA Inc [2002] HCA 8; (2002) 209 CLR 95 High Court of Australia – Appeal from the Supreme Court of South Australia. [FACTS: The appellant served as the Archbishop of the autocephalous Greek Orthodox Church in Australia for more than 23 years. He claimed that he had been employed by the respondent to serve in that position. After he resigned from the position, the Archbishop claimed that the respondent owed him certain sums of money in respect of accumulated annual leave and long service leave entitlements. He could only claim those payments if he was an employee of the respondent. The respondent was a community organisation founded to foster Greek culture as well as the Greek Orthodox faith. It organised cultural, sporting and social activity, built churches and recruited and paid consecrated clergy. The respondent recruited the appellant to the position of Archbishop, paid him a salary or stipend during his period of service and treated him as an employee, reserving the right to control the way in which he discharged his duties. An industrial magistrate found that he was an employee of the respondent and was therefore entitled to the payments. The Full Court of the Supreme Court of South Australia (by majority) allowed an appeal on the basis that the parties had not intended to create legal relations. The Archbishop appealed to the High Court.] GAUDRON, McHUGH, HAYNE and CALLINAN JJ: [103] Both members of the majority in the Full Court of the Supreme Court (Doyle CJ and Bleby J) took, as their stated starting point, the proposition that an intention to enter a contractual relationship about the remuneration and maintenance and support of a minister of religion is not to be presumed ((2000) 77 SASR 523 at 524-5 [4] per Doyle CJ, 575-6 [207] per Bleby J). This proposition was said to find its origin, or at least its support, in several decisions in the United Kingdom … and one Australian decision (Knowles v Anglican Church Property Trust, Diocese of Bathurst (1999) 89 IR 47 a decision of the Industrial Relations Commission of New South Wales). Both Doyle CJ (2000) 77 SASR 523 at 529 [19] – [20] and Bleby J (2000) 77 SASR 523 at 577-578 [212] concluded that the Industrial Magistrate had not considered, as a distinct issue, 186

[4.10]

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Ermogenous v Greek Orthodox Community of SA cont. whether the parties had intended to enter a legally binding relationship. Their Honours then proceeded to consider whether there had been such an intention and concluded that there had not….

Intention to create contractual relations [4.15] [105] “It is of the essence of contract, regarded as a class of obligations, that there is a voluntary assumption of a legally enforceable duty” (Australian Woollen Mills Pty Ltd v The Commonwealth (1954) 92 CLR 424 at 457 per Dixon CJ, Williams, Webb, Fullagar and Kitto JJ). To be a legally enforceable duty there must, of course, be identifiable parties to the arrangement, the terms of the arrangement must be certain, and, unless recorded as a deed, there must generally be real consideration for the agreement. Yet “[t]he circumstances may show that [the parties] did not intend, or cannot be regarded as having intended, to subject their agreement to the adjudication of the courts” (South Australia v Commonwealth (1962) 108 CLR 130 at 154 per Windeyer J). Because the inquiry about this last aspect may take account of the subject-matter of the agreement, the status of the parties to it, their relationship to one another, and other surrounding circumstances (South (1962) 108 CLR 130 at 154; Placer Development Ltd v The Commonwealth (1969) 121 CLR 353 at 367 per Windeyer J), not only is there obvious difficulty in formulating rules intended to prescribe the kinds of cases in which an intention to create contractual relations should, or should not, be found to exist, it would be wrong to do so. Because the search for the “intention to create contractual relations” requires an objective assessment of the state of affairs between the parties (Masters v Cameron (1954) 91 CLR 353 at 362 per Dixon CJ, McTiernan and Kitto JJ; ABC v XIVth Commonwealth Games Ltd (1988) 18 NSWLR 540 at 548-9 per Gleeson CJ) (as distinct from the identification of any uncommunicated subjective reservation or intention that either may harbour) the circumstances which might properly be taken into account in deciding whether there was the relevant intention are so varied as to preclude the formation of any prescriptive rules. Although the word “intention” is used in this context, it is used in the same sense as it is used in other contractual contexts. It describes what it is that would objectively be conveyed by what was said or done, having regard to [106] the circumstances in which those statements and actions happened (Codelfa Construction Pty Ltd v State Rail Authority of NSW (1982) 149 CLR 337 at 348-353 per Mason J; Royal Botanic Gardens and Domain Trust v South Sydney City Council (2002) 76 ALJR 436; 186 ALR 289). It is not a search for the uncommunicated subjective motives or intentions of the parties. In this context of intention to create legal relations there is frequent reference to “presumptions”. It is said that it may be presumed that there are some “family arrangements” which are not intended to give rise to legal obligations and it was said in this case that it should not be presumed that there was an intention to create legal relations because it was a matter concerning the engagement of a minister of religion. For our part, we doubt the utility of using the language of presumptions in this context. At best, the use of that language does no more than invite attention to identifying the party who bears the onus of proof. In this case, where issue was joined about the existence of a legally binding contract between the parties, there could be no doubt that it was for the appellant to demonstrate that there was such a contract. Reference to presumptions may serve only to distract attention from that more basic and important proposition. More importantly, the use of the language of presumptions may lead, as it did in this case, to treating one proposition (that an intention to create legal relations is not to be presumed) as equivalent to another, different proposition (that generally, or usually, or it is to be presumed that, an arrangement about remuneration of a minister of religion will not give rise to legally enforceable obligations). References to “the usual non-contractual status of a priest or minister” and factors which “generally militate against” a finding of intention to create legal relations (cf (2000) 77 SASR 523 at 576 [207] per Bleby J) illustrate the point. The latter proposition may then be understood as suggesting, in some way, that proof to the contrary is to be seen as particularly difficult and yet offer [4.15]

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Ermogenous v Greek Orthodox Community of SA cont. no guidance at all about how it may be done. Especially is that so when the chief factor said to justify the proposition that an intention to create legal relations must be proved (the essentially spiritual role of a minister of religion) is then put forward as the principal reason not to find that intention in a particular case, and any other matters suggesting that there may be an intention to create legal relations are treated as dealing only with “collateral” or “peripheral” aspects of the relationship between the parties ((2000) 77 SASR 523 at 576 [207] per Bleby J). In practice, the latter proposition may rapidly ossify into a rule of law, that there cannot be a contract of employment of a minister of religion, distorting the proper application of basic principles of the law of contract. It is equally important to notice that the second form of proposition that we have identified may hide the making of some unwarranted [107] assumptions that certain principles and practices of church governance are “usual” or “general”, or that a particular kind of relationship between clergy and the church or community in which they work is the norm. No such assumptions can be made. It is convenient to turn now to examine some of the cases said to support the proposition that an intention to create legal relations about remuneration of a minister of religion is not to be presumed. As Bleby J pointed out (2000) 77 SASR 523 at 563 [173], it was held in most of the cases to which he referred that the minister of religion concerned was not employed under a contract of employment. The cases did not all take the same path to reach that conclusion and, on analysis, it can be seen that there are several different and distinct questions that were seen as determinative. In the Curates Case, Parker J noted [1912] 2 Ch 563 at 568–70 that a curate in the Church of England owed duties to the vicar of the parish and to the bishop of the diocese, but his Lordship concluded that the authority which each had over the curate came not from some contractual relationship, it came from the fact that the curate held an office subject to the laws of the Church in which that office was held … In other cases to which reference was made, both in argument and in the reasons of Bleby J, there was a real question about who would be the employer if there was a contract of employment. In Parfitt [1984] QB 368, a minister sued the President of the Methodist Conference because that person was nominated by statute to represent the Methodist Church in all legal proceedings [1984] QB 368 at 371 but the contract which he sought to establish was one to which it was said that the Church (an unincorporated body) was party … [108] As was pointed out in Cameron v Hogan (1934) 51 CLR 358 at 371, there are at least two difficulties that arise if action is brought to enforce a contract said to have been made with an unincorporated body. First, there is difficulty in properly constituting the action by sufficiently identifying all the proper parties to the suit (difficulties that may not always be met by constituting the action as a representative proceeding). Secondly, there is the further difficulty ((1934) 51 CLR 358 at 372) of identifying who it is who is said to be responsible for the breach which is alleged. Are all members of the body to be said to be in breach of the contract; are only some to be [109] said to be in breach? These are not mere formal difficulties. They invite close attention to identifying the contract that is alleged to have been made and, in particular, the identification of its parties. Similar but not identical problems in identifying who it is who is said to be the employer can be seen to be reflected in the decision in Diocese of Southwark v Coker [1998] ICR 140. The “Diocese of Southwark”, initially named by Dr Coker as the respondent to his claim for unfair dismissal, was a description of the district under the jurisdiction of the Bishop of Southwark…. It was the Bish op who had legal responsibility for licensing the appointment of assistant curates, and for the termination or revocation of such an appointment. But as Mummery LJ pointed out [1998] ICR 140 at 148, the Bishop could not be regarded as the employer: [T]hat relationship [between bishop and curate], cemented by the oath of canonical obedience, is governed by the law of the established church, which is part of the public law of England, and not by a negotiated, contractual arrangement. 188

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Ermogenous v Greek Orthodox Community of SA cont. Finally, reference must also be made to the statements, found in several cases, that the relationship between a minister of religion and a church is pre-eminently or even entirely spiritual, not contractual (Rogers v Booth [1937] 2 All ER 751 at 754 per Sir Wilfrid Greene MR; Lewery v Salvation Army in Canada (1993) 104 DLR (4th) 449 at 453). [110] That the relationship between a minister of religion and the relevant religious body or group in which, and to which, he or she ministers is, at its root, concerned with matters spiritual is self-evidently true. That the minister’s conduct as minister will at least be informed, if not wholly governed, by consideration of matters spiritual is likewise self-evident. It by no means follows, however, that it is impossible that the relationship between the minister and the body or group which seeks or receives that ministry will be governed by a contract, and the respondent in this appeal did not seek to advance any such absolute proposition. Rather, the respondent advanced the more limited proposition, adopted by Doyle CJ and Bleby J, that an intention to enter contractual relations is not to be presumed where the arrangement concerns the engagement of a minister of religion but must affirmatively be proved ((2000) 77 SASR 523 at 524 [4] per Doyle CJ, 576 [207], 584 [236] per Bleby J). Nevertheless, it is as well to identify some aspects of the more absolute proposition earlier identified – that the relationship between minister and church is pre-eminently or even entirely spiritual because, in the end, the conclusion at which the majority of the Full Court arrived, was that the only arrangement or relationship which the appellant had was with a church not the respondent, and was a spiritual, not a contractual relationship. First, although the proposition that the relationship between minister and church is pre-eminently or even entirely spiritual is couched in apparently absolute terms, it has been recognised that there are aspects of that relationship which may give rise to legally enforceable rights and duties. As was pointed out in Davies [1986] 1 WLR 323 at 329 per Lord Templeman; [1986] 1 All ER 705 at 710: Until the applicant [in that case] was deprived of his pastorate in accordance with the procedures laid down in the book of rules, he was entitled to be paid his stipend out of the income of the sustentation fund and to occupy his manse. (emphasis added) Secondly, the “essentially spiritual” character of the relationship may take on a different character when one of the parties to the arrangement (the putative employer) is not itself a spiritual body but is, as Staughton LJ said in Coker [1998] ICR 140 at 150, “a school, or a duke, or an airport authority” or, we would add, an incorporated body having the characteristics of the present respondent. To say that a minister of religion serves God and those to whom he or she ministers (Diocese of Southwark v Coker [1998] ICR 140 at 150 per Staughton LJ) may be right, but that is a description of the minister’s spiritual duties. It leaves open the possibility that the minister has been engaged to do this under a contract of employment. Against the background of this examination of some of the cases [111] relied on by the respondent, it is convenient to turn again to the facts of the present case.

The present case [4.20] The Industrial Magistrate’s finding that the appellant was employed by the respondent under a contract of employment proceeded from the premise of his unchallenged finding that the respondent (and other similar Australian bodies in the same tradition) had previously recruited and employed clergy who were, as we noted earlier, generally subject to the directions of the Communities. Those clergy were, and were treated as, employees of the relevant Community. The respondent, and other Communities, had employed clergy because to do so was to provide for a fundamental element in the preservation of the Hellenic and Orthodox culture they had been formed to enhance and preserve … [112] We do not accept that the Industrial Magistrate failed to consider the question of intention to create legal relations. The Industrial Magistrate described the issue as being “Can a minister of religion [4.20]

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Ermogenous v Greek Orthodox Community of SA cont. be in law an employee?” and he dealt at length with the principal cases upon which the respondent relied both in this Court and in the Full Court of the Supreme Court. It seems that, at trial, the respondent advanced an argument framed in absolute terms. The Industrial Magistrate recorded it as being that “a minister of religion – any religion – can not in law be considered an employee of any other person or legal entity”. This proposition was rejected. But, read as a whole, the reasons of the Industrial Magistrate reveal that whether the arrangement which he had found to have been made between the appellant and the respondent was intended by them to be subject to the adjudication of the courts was a question at the centre of his consideration. No less importantly, the Industrial Magistrate expressly recognised that, in each of the several cases to which the respondent had referred in support of its submissions, there had been (1997) 64 SAIR 622 at 734: a close consideration of the particular facts of the matter, including the charters, statutes and documents of fundamental belief of each creed considered, the documented position of the clergy in respect of each of the churches mentioned, and the special provisions of statute which govern the actual situation in the law of that particular church. He undertook a similarly close examination of the evidence that had been called at the trial of this matter about those subjects. That is, he examined, with care, all of the objective circumstances which bore on whether the parties intended to make a contract, as distinct from an arrangement binding only in honour. The Industrial Magistrate did not make the error which the majority in the Full Court of the Supreme Court attributed to him. Even if the Industrial Magistrate did make that error, the inference which the Full Court drew about the absence of an intention to create legal relations was an inference that was not open on the facts that had been found at trial. An inference that there was no intention to create legal relations depended upon making an assumption, contrary to the facts found below, that the “church” was distinct from the “Community”, or it depended upon discerning from the decided cases a proposition more general or absolute than those decisions warrant. In its appeal to the Full Court the respondent had put forward, as a separate ground of appeal, that “[i]f there was any enforceable contract it was not in law a contract of employment”. The leave to appeal granted by the Full Court was not restricted and it follows that this ground was before it, but the conclusions reached by the majority on the question of intention to create legal relations made it [113] unnecessary for their Honours to decide it. Accordingly, as things now stand, there remains for further argument in the Full Court, the issue whether the contract found to have been made between the appellant and the respondent was a contract of employment. Given the resolution of the question which appears to have been the chief foundation for the Full Court granting leave to appeal to it, despite there having been two previous unsuccessful appeals in this matter, there may be an issue whether this remaining question should be agitated further or, instead, the leave previously granted by the Full Court should to that extent now be revoked. That is a matter for the Full Court. The appeal to this Court should be allowed with costs. Paragraphs 3 to 6 inclusive of the order of the Full Court of the Supreme Court should be set aside and the matter remitted to that Court for further hearing and determination conformably with the reasons of this Court. [4.25] KIRBY J: [119] I am unconvinced that the English cases cited by Bleby J warrant a conclusion that, in Australia, a contract partaking of the usual features of one of employment, necessarily loses that character because it relates to the vocation of a minister of religion. A minister of religion must be housed, must eat, be clothed and otherwise be provided for. The fact that his or her vocation is, at one level, spiritual in purpose and character does not, of itself, remove the possibility that arrangements for necessities may have been intended to be enforced when it is proved that such arrangements have been breached. If one starts with the proposition that a religious vocation is in law an “office” created by the public law and in its essential character is only a “spiritual” one, it is comparatively simple to 190

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Ermogenous v Greek Orthodox Community of SA cont. arrive at a different result than if one accepts the postulates that have developed in Australian law because of the different history of churches and other religious organisations in this country. Courts here, as elsewhere, will be hesitant to enforce purely spiritual and theological rules (as in Wylde (1948) 78 CLR 224 and Scandrett v Dowling (1992) 27 NSWLR 483). But they will not hesitate to enforce, as arrangements intended to have contractual or other binding force, rules of a proprietorial character concerned with proprietoral rights. Within this dichotomy, a proved agreement with a body such as the respondent to provide for the necessities of life of a minister of religion, or even of an archbishop, is an arrangement of the second kind. It is not one which, of its character, Australian law will refuse to enforce because the law presumes a lack of intention to enter legal relations or classifies the resulting dispute as non-justiciable. To the extent that English decisions, starting from a different history and legal foundation and taking a different approach, reach a different conclusion, they do not express the common law of Australia… [121] There is therefore no presumption that contracts between religious or associated bodies and ministers of religion, of their nature, are not intended to be legally enforceable. At least where the contracts concern proprietary and economic entitlements, of the kind which in this case Archbishop Ermogenous sought to enforce (and certainly where they are not intertwined with questions of religious doctrine that a court would not feel competent to resolve according to legal norms) there is no inhibition either of a legal or discretionary character that would prevent enforcement of such claims when they are otherwise proved to give rise to legal rights and duties… [123] Even if, contrary to my view, there were something in the spiritual calling of a minister of religion (including an archbishop) that put that person in relation to his or her church beyond the kind of contractual relations that might be enforced in a court of law, any such rule would not apply to arrangements for the provision of necessities made with a secular community organisation such as the respondent. Every day of his life, Archbishop Ermogenous, like everyone else in Australia, made contractual arrangements of an express or implied kind with secular organisations and individuals of great variety. Most of these were insubstantial but some would be substantial. It would be contrary to basic principle to suggest that his spiritual calling somehow placed him outside the rights and duties of the law of obligations. Appeal allowed.

COMMERCIAL TRANSACTIONS Banque Brussels Lambert v Australian National Industries [4.30] Banque Brussels Lambert SA v Australian National Industries Ltd (1989) 21 NSWLR 502 Supreme Court of New South Wales – Action. [FACTS: The defendant (ANI), a public company listed on the stock exchange, provided a letter of comfort to the plaintiff (BBL) in relation to a loan facility provided by the plaintiff to Spedley Securities Ltd (Spedley). The defendant held a controlling interest in Spedley’s parent company, Spedley Holdings Ltd (Holdings). The defendant provided a strongly worded letter of comfort at the plaintiff’s insistence after some negotiation and the exchange of several drafts. In the letter the defendant consented to the making of the loan, agreed to provide the bank with 90 days notice of any decision to dispose of its interest in Holdings and confirmed that it was the defendant’s practice to ensure that Spedley will at all times be in a position to meet its financial obligations. The defendant disposed of its shareholding in Holdings without giving the required notice to the plaintiff. Spedley was unable to repay the debt to the plaintiff and later went into liquidation. The plaintiff sought relief on the basis of [4.30]

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Banque Brussels Lambert v Australian National Industries cont. breach of contract, equitable estoppel or misleading or deceptive conduct in breach of s 52 of the Trade Practices Act 1974 (Cth). The defendant denied liability in contract on the basis, inter alia, that the parties did not manifest an intention to create legal relations.] ROGERS CJ:

The proceedings [504] In 1982, Spedley Securities Ltd (Spedley) wished to obtain a loan facility of US$5 million from the plaintiff, a Belgian bank. The plaintiff (BBL) wanted, to adopt a neutral term, additional reassurance that any draw down loan would be repaid. Spedley was a fully owned subsidiary of Spedley Holdings Ltd (Holdings). In turn, 45 per cent of the capital of Holdings was held by the defendant (ANI). The reassurance to the plaintiff took the form of a letter from the defendant in the following terms: We confirm that we are aware of the eurocurrency facility of US$5 million which your Bank has granted to Spedley Securities Limited, which is a wholly-owned subsidiary of Spedley Holdings Limited. We acknowledge that the terms and conditions of the arrangements have been accepted with our knowledge and consent and state that it would not be our intention to reduce our shareholding in Spedley Holdings Limited from the current level of 45 per cent during the currency of this facility. We would, however, provide your Bank with ninety (90) days notice of any subsequent decisions taken by us to dispose of this shareholding, and furthermore we acknowledge that, should any such notice be served on your Bank, you reserve the right to call for the repayment of all outstanding loans within thirty (30) days. We take this opportunity to confirm that it is our practice to ensure that our affiliate Spedley Securities Limited, will at all times be in a position to meet its financial obligations as they fall due. These financial obligations include repayment of all loans made by your Bank under the arrangements mentioned in this letter. [His Honour then set out a letter from Spedley to the bank which referred to the letter from ANI and which further stated that should ANI give the 90 days notice, Spedley would repay all outstanding loans within 30 days.] In fact, in 1989, the defendant sold its shares in Holdings without first giving 90 days notice and the plaintiff lost the opportunity of calling for repayment of its outstanding loan to Spedley within that period. The defendant did not ensure that Spedley was in a position to meet its financial obligation to the plaintiff as it fell due. [505] It is common ground between the plaintiff and the defendant that the defendant failed to act in accordance with the statements it made in its letter. It did not, at any time, notify the plaintiff that it did not intend to so act. Put simply, the plaintiff, BBL, lent Spedley a large sum of money (approximately A$7 million) on the “security” of the letter from the defendant. The plaintiff seeks to recover damages from the defendant in respect of its losses, as Spedley is now in liquidation. It has been agreed that only liability should be argued and depending on the outcome, quantum shall be decided later. The defendant maintains that it is not liable to compensate the plaintiff for any damage it may have suffered. At the forefront of the defendant’s argument stands the judgment in Kleinwort Benson Ltd v Malaysia Mining Corp Berhad [1989] 1 WLR 379; [1989] 1 All ER 785. Three of the Lord Justices in the English Court of Appeal held that the statement in the letter of comfort given by the defendant, concerning its policy with respect to the liabilities of subsidiaries, involved it in no enforceable legal obligation. Ralph Gibson LJ, delivering the judgment of the court, concluded (at 394; 797–8): If my view of this case is correct, the plaintiffs have suffered grave financial loss as a result of the collapse of the tin market and the following decision by the defendants not to honour a moral responsibility which they assumed in order to gain for their subsidiary the finance 192

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Banque Brussels Lambert v Australian National Industries cont. necessary for the trading operations which the defendants wished that subsidiary to pursue. The defendants have demonstrated, in my judgment, that they made no relevant contractual promise to the plaintiffs which could support the judgment in favour of the plaintiffs. The consequences of the decision of the defendants to repudiate their moral responsibility are not matters for this court. Before me, two Queen’s Counsel, their juniors and a platoon of solicitors were engaged over five days in argument as to whether, as in Kleinwort Benson, the defendant in this case, assumed merely a moral responsibility, or whether it was liable at law … The plaintiff puts its case in a number of ways. First, that the letter of comfort constitutes a binding contractual obligation, which the defendant breached. The plaintiff claims that the letter made two promises enforceable at law. One, that whilst the facility was on foot, the defendant was to provide the plaintiff with 90 days notice of any sale by the defendant of its 45 per cent shareholding in Holdings. Two, that, during the life of the facility, the defendant would ensure that Spedley would at all times be in a position to meet its financial obligations as they fell due … [His Honour then set out the evidence and continued:]

Letters of comfort [4.35] [520] This is an appropriate point to examine in general terms the learning on letters of comfort, for their purpose and the various modes of their interpretation are indicative of their general standing. As was noted in Kleinwort Benson, there is no general rule concerning letters of comfort, although trends can be detected in the academic analysis. The letter of comfort developed as an alternative to a guarantee or surety where the writer, more often than not the parent company, either was unable, or unwilling, to issue one of these more traditional securities. According to Mr Osterreith, letters of comfort were first used in the 1960s in the United States. United States parents were reluctant to give guarantees because they had to be disclosed in the accounts as contingent liabilities. Letters of comfort were not required to be so shown. The same situation applied in Europe and so letters of comfort came into use there as well. In Mr Osterreith’s experience, letters of comfort have been invariably sufficient to secure payment to the creditor. Letters of comfort were issued where the parent simply did not want to incur legal liability, where the parent was primarily concerned to protect its own credit rating, where the parent wanted to avoid showing a contingent liability on its balance sheet as this would contravene limits on commitments, and also where there were unfavourable tax and foreign exchange consequences: see generally, “Letters of Responsibility” (1978) 6 International Business Lawyer 288–332. Letters of comfort have become so frequent in international commercial transactions that a German writer characterised them as “collateral sui generis” (Franken, “The Force of Comfort Letters Under German Law” (1985) 6(4) International Financial Law Review 14 at 15), although this same writer acknowledges that a great deal of uncertainty surrounds the practical legal obligations imposed by a letter of comfort. This view is reiterated throughout the literature. In each case, it ultimately turns on the terms of the [521] letter. Yet, in this context, the French approach to letters of comfort is refreshingly honest and sensible. Writing in the section on France in the compilation on Letters of Responsibility (at 302), Léon Proscour states that: A so called “letter of responsibility” will, under French law, be considered as a commitment to perform (“obligation de faire”) because in the commercial world the creation of a meaningless instrument or document is unthinkable. It is not a full-sized guaranty [sic] – otherwise it would say it is so – but some performance is provided in order to help a creditor insure his rights. Refusal of such performance opens a case for damages; this is the legal rule of violation of an “obligation de faire”. [4.35]

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Banque Brussels Lambert v Australian National Industries cont. In Société Viuda de Jose Tolra v Sodler (21 December 1987, La Revue Banque March 1988) the Cour de Cassation recognised as enforceable security a letter of comfort from a parent company to a creditor of its subsidiary.

The claim in contract [4.40] This claim turns on the existence or otherwise, of an intention to create legal obligations and whether the terms of the letter are of a sufficiently promissory nature to be held to be contractual. The two questions arise independently, but are interrelated in that it is from the terms of the letter seen against the backdrop of surrounding circumstances that the parties’ intentions in both respects fall to be determined. Turning first to the question of intention to enter into a legal relationship in order to ascertain whether the letter of comfort was intended to give rise to legal obligations, it is necessary to examine the events surrounding its inception. BBL starts with the prima facie presumption that in commercial transactions there is an intention to create legal relations, and the onus of proving the absence of such intention rests with the party “who asserts that no legal effect is intended, and the onus is a heavy one”: Edwards v Skyways Ltd [1964] 1 WLR 349; [1964] 1 All ER 494 at 355 (WLR), 500 (All ER) per Megaw J. The defendant submits that the Skyways onus is discharged by pointing to the course of negotiations leading to the final version of the letter, coupled with a close textual analysis of its terms. Greig and Davis in The Law of Contract (1987) state that: “The overriding test is, of course, that the intentions of the parties, as deduced from the document as a whole seen against the background of the practices of the particular trade or industry”: 229-30. Nothing turns on the nomenclature of “letter of comfort”, as was observed by the Court of Appeal in Kleinwort Benson. It is clear that at the time of negotiating the initial US$1 million facility, and its subsequent increase to US$5 million, it was made quite clear to both Spedley and ANI that the facility was subject to BBL obtaining a suitable letter of comfort or some other indication of commitment from ANI… [523] In a very different field of discourse, Lord Justice Scrutton remarked “there will be no Alsatia in England”. I believe it was that kind of sentiment that informed the judgment of Sir John Megaw in Edwards v Skyways Ltd. There should be no room in the proper flow of commerce for some purgatory where statements made by businessmen, after hard bargaining and made to induce another business person to enter into a business transaction would, without any express statement to that effect, reside in a twilight zone of merely honourable engagement. The whole thrust of the law today is to attempt to give proper effect to commercial transactions. It is for this reason that uncertainty, a concept so much loved by lawyers, has fallen into disfavour as a tool for striking down commercial bargains. If the statements are appropriately promissory in character, courts should enforce them when they are uttered in the course of business and there is no clear indication that they are not intended to be legally enforceable. If I may say, the judgments of Hirst J, at first instance in Kleinwort Benson [1988] 1 WLR 799; [1988] 1 All ER 714 and Staughton J, whose unreported judgment in Chemco Leasing SpA v Redifusion plc Staughton J, 19 July 1985 is extensively referred to by Hirst J, reflect the bias of experienced commercial judges to pay high regard to the fact that the comfort letters in issue before them came into existence as part and parcel of a commercial banking transaction and that the promises were an important feature of the letters. In the Court of Appeal in Kleinwort Benson, Ralph Gibson LJ held the principle in Edwards v Skyways Ltd inapplicable, saying that the presumption of intention only became significant when the words of the agreement were clearly promissory. The Court of Appeal pointed [out] that, in a sense, the trial judge had been asked the incorrect question. The parties had conceded that one of the statements in 194

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Banque Brussels Lambert v Australian National Industries cont. the letter was a contractual promise and intended to have legal effect. The true question therefore was whether the statement sued upon was promissory in character. It was to this question that the Court of Appeal returned a negative answer. The Court of Appeal subjected the letters to minute textual analysis. Courts will become irrelevant in the resolution of commercial disputes if they allow this approach to dominate their consideration of commercial documents. Probably at the heart of the judgment delivered by Ralph Gibson LJ is the statement (at 792): “In my judgment, the defendants made a statement as to what their policy was, and did not in para 3 of the comfort letters expressly promise that such policy would be continued in future.” That construction of the letter renders the document a scrap of paper. If the Lord Justice is correct, the writer has not expressed itself on anything relevant as a matter of honour. [524] The test prescribed by the law of Australia to determine whether a statement was promissory or only representational is different from that in England. This has been pointed out by McPherson J in Nemeth v Bayswater Road Pty Ltd [1988] 2 Qd R 406. His Honour said (at 416): The question to be determined therefore is whether the passages in the evidence set out above can be said to give rise to a warranty or promise having contractual effect. In Dick Bentley Productions Ltd v Harold Smith (Motors) Ltd [1965] 1 WLR 623 at 627, the matter was stated thus by Lord Denning MR: It was said by Holt CJ, and repeated in Heilbut, Symons & Co v Buckleton, that: “An affirmation at the time of the sale is a warranty, provided it appear on evidence to be so ’intended’. But that word ’intended’ has given rise to difficulties. I endeavoured to explain in Oscar Chess Ltd v Williams that the question whether a warranty was intended depends on the conduct of the parties, on their words and behaviour, rather than on their thoughts. If an intelligent bystander would reasonably infer that a warranty was intended, that will suffice. What conduct, then? What words and behaviour lead to the inference of a warranty?” Adopting that approach, the problem nevertheless remains of determining what it is in the conduct or words of the parties that in an objective sense demonstrates that they intended a particular statement to be legally binding upon the party making it. After the passage from the case just cited, Lord Denning went on to say that there was prima facie ground for inferring that a warranty was intended if the statement or representation in question was made “for the very purpose of inducing the other party to act upon it, and actually inducing him to act upon it” by entering into the contract. But there is authority binding upon us to hold that such factors alone are not sufficient to convert the statement or representation into a promise or undertaking to be contractually bound to its factual accuracy or to its fulfilment: see JJ Savage & Sons Pty Ltd v Blakney (1970) 119 CLR 435 at 443; Ross v Allis-Chalmers Australia Pty Ltd (1980) 55 ALJR 8. Greig and Davis discuss in helpful detail (p 480 et seq) the various matters to be taken into account in determining this objective intention. Obviously the actual words used are a very important indicator. Nonetheless, it is inimical to the effective administration of justice in commercial disputes that a court should use a finely tuned linguistic fork. A good illustration of where this leads is the well meant effort by counsel for the defendant in the present case in providing me with a schedule showing the similarities and differences between the letter in Kleinwort Benson and the present case. Turning to the terms of this particular letter of comfort, it is clear that the first paragraph contains no contractual representation, but merely an indication of awareness. The second paragraph may be split into two sections; for ease of reference, let the statement in relation to ANI’s intention as to reduction of its shareholdings in Holdings be called 2(a), and that pertaining to giving 90 days notice be called 2(b). Looking at para 2 as a whole, the plaintiff argued that it was expressed in the language of promise, and that the amendments made in the course of [525] negotiations did not detract from this. The [4.40]

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Banque Brussels Lambert v Australian National Industries cont. defendant, on the other hand, maintained that the inclusion of the word “would” softened the statement to such an extent that it could not be regarded as anything more than a statement of present intention. In addition, the inclusion of “however” indicates that the second part (2(b)) is also only intended to be a statement of intention. In my opinion, 2(b) contains an undertaking of a contractual nature, which is in no way diminished by the presence of “however”. The reason for the use of the word is easily explained. The first limb, 2(a), caters for the contemplated intention. Then 2(b) deals with the situation where, for whatever reason, that intention is to be departed from. In that context, to say “however” should my intentions change is perfectly appropriate use of language in preceding the promise of the action to be taken in that circumstance. That action, that is, the 90 days notice, is intended to confer a clear benefit on the plaintiff. The nature of the benefit appears most clearly from an earlier draft. It enables the plaintiff to obtain immediate reimbursement. The 90 days notice, together with the 30 days period of demand, is a carefully crafted trigger to allow for recovery. The two letters need to be read together as a scheme. That deprives the employment of the word “would” of any significance. The Spedley letter in the second paragraph, in speaking of the 90 days notice for ANI, speaks of “they (that is ANI) will provide you” with the requisite notice. I can see no reason why 2(b) should not be regarded as a promissory statement. As to 2(a), the now famous letter in Kleinwort Benson contained a similar, albeit somewhat stronger, provision: “We confirm that we will not reduce our current financial interest in MMC Metals Ltd until the above facilities have been repaid …” The parties there agreed that it was a promise intended to give rise to legal relationships: compare Commonwealth Bank of Australia v TLI Management Pty Ltd [1990] VR 510. In the present case, the statement “it would not be our intention to reduce” carries the same import. The only reason for splitting the analysis of para 2 into (a) and (b) would be if the foregoing was held to be incorrect, in that 2(a) was determined not to be contractual. There can, in any case, be no doubt as to the status of 2(b) … The question whether the third paragraph of the letter of comfort is promissory is far more thorny. However, in my view, if the paragraph is read as follows: “it is our practice to ensure that Spedley is at all times in a position to repay all loans made to it by your Bank”, its promissory nature is much clearer. I see no relevant difference between that and saying that “we promise to ensure that” Spedley will at all times be in a position to repay the [526] plaintiff. The letter needs to be read in the light of the statement of policy ascribed to Mr Maher (at 508G): “it is our corporate policy to support our subsidiaries.” … In my view, the plaintiff has made out its claim that the defendant was in breach of two enforceable contractual promises. This enables me to deal with the other issues in a summary fashion. Judgment for the plaintiff on liability.

DOMESTIC AND SOCIAL AGREEMENTS [4.45] Domestic and social agreements have, in the past, been approached on the basis that

the parties are presumed not to intend legal obligations (see eg Jones v Padavatton [1969] 1 WLR 328, 332–3). In some cases, this presumption of fact almost appears to operate as a principle of law that such agreements will not be legally binding (see eg Balfour v Balfour [1919] 2 KB 571, 579). In Ermogenous v Greek Orthodox Community of SA Inc [2002] HCA 8; (2002) 209 CLR 95 at [4.10]) Gaudron, McHugh, Hayne and Callinan JJ rejected the idea that any rules can or should be formulated to prescribe the types of cases in which an intention to create legal relations should or should not be found. It is now accepted that, since 196

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Ermogenous, no presumption should be made about the enforceability of agreements made in a social or domestic context: Ashton v Pratt [2015] NSWCA 12; (2015) 318 ALR 260, [73]; Evans v Secretary, Department of Families, Housing, Community Services and Indigenous Affairs [2012] FCAFC 81; (2012) 289 ALR 237, [12]–[16]. Each case will be considered on its own facts, although the nature of the relationship between the parties and the context in which the agreement was made remain important considerations.

Todd v Nicol [4.50] Todd v Nicol [1957] SASR 72 Supreme Court of South Australia – Action. [FACTS: The defendant, a woman living in Australia, invited the plaintiffs, the sister (Margaret Todd) and niece (Grace Todd) of the defendant’s deceased husband, to move from Scotland to Australia to share her house and provide her with company. The defendant proposed the arrangement in a letter to the plaintiffs. The defendant promised to alter her will (by making a codicil) so that the house would be theirs until they died (or, in the case of Grace, married). The plaintiffs accepted the offer. They sold their belongings and the niece resigned her employment. The plaintiffs moved from Scotland to South Australia and resided with the defendant for several years. The relationship between the plaintiffs and the defendant deteriorated, and the defendant asked the plaintiffs to leave the house. The plaintiffs claimed they were entitled by contract to remain in the house. The defendant counterclaimed for possession of the house, either on the basis that there was no contract between the parties, or that any contract had been validly terminated.] MAYO J: [74] In this action the plaintiffs (sister and niece of the defendant’s husband, now deceased) claim a declaration that pursuant to a certain contract they are entitled to reside rent free in the premises, 254 Greenhill Road, Hazelwood Park until their respective deaths, or, in the case of the second plaintiff, until marriage. Ancillary relief is also sought in respect of the contract described in the statement of claim. The defendant denies the contract alleged, but, if there be any such contract, she seeks its rescission by counterclaim. There is a reply on behalf of the plaintiffs…. The contract, on which the plaintiffs rely, is said to be contained in letters which passed between the parties. I will quote so much of the correspondence as in my opinion has bearing on the preliminary question that counsel have asked to be determined before other matters are investigated, viz whether there is an agreement legally binding between plaintiffs and defendant whereby the former became entitled to live in the premises mentioned. Important parts of the defendant’s letter to the plaintiffs of date April 6th, 1947, may be cited: I have wondered if you would like to come and live with me. That is what I want to know first of all. I must have company at my age and it is not good for anyone to live alone … This is a funny old house … there is quite room enough for you both to come to me (and May Holt, later, when she wants to and has opportunity – which will not be yet as far as we both can see). You would share my home … and no rent at all … All in it we could share for I have enough I think, for all. If … you do sell your belongings – keep your china, and house linen and cutlery for I may not have enough of those things to go round … It is a big thing for you to do … but I think we would be happy together … once you are here or on the way, I would alter my will that the home was to be yours and Gracie’s (unless you marry …) until you passed on … and if May Holt is with me, may be she to share it too … I have not mentioned this to Willie but will you consult him? I may tell him in my next letter … of my proposition … think well before accepting my suggestions … if this does not eventuate I will have to work out some other plan for myself. To that “proposition” the plaintiffs sent a cable and a letter to the defendant. These were not produced, having been destroyed. In substance both these communications were to the effect that [4.50]

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Todd v Nicol cont. they accepted the invitation. It is alleged by the plaintiffs that these documents were productive of the contract. Steps were promptly taken by them to engage passages by steamer for the voyage to Adelaide. It is an accepted principle that regard may be had to the subsequent conduct of, and communications between, parties for the purpose of discovering whether the intention to be attributed to them was to make a binding arrangement or otherwise, and if the former what the parties understood the terms to be, that is to say, in so far as the words used were not productive of certainty. The acts of parties, where meaning is in doubt, may be used to remove uncertainty, or to explain, but not to contradict, the language used (Van Diemen’s Land Co v Table Cape Marine Board (1906) AC 92; Watcham v Attorney-General of the East Africa Protectorate (1919) AC 533). The manner in which parties act, with the apparent approval of all concerned, may indicate their view of what has been agreed between them. Upon receipt of the plaintiffs’ cable the defendant wrote again, the communication being dated April 16th, 1947. The introductory words are: How perfectly thrilling it was to me to get your cable this morn … The little place … we will try and make it home for us all … Today I went in to the solicitor and added a codicil to my will, for I want to protect you both in case anything happens to me before your arrival here … When I sign it the house is yours for life Margaret without expense, also you Gracie (unless you marry) … and if Miss Holt wishes to share the home too she is also protected … I am longing now to get your letter … so that I can know a little more of your immediate plans and how far you have gone and when you can really come … When I know I will try and get the place as I think you would enjoy it best. Anyway we can change round to suit each other when the time comes … I want you to have the beautiful sunshine and freedom of life that one enjoys in Australia…. If you sail before you get another letter … bring your china and linen … hoping we can soon meet. A letter from the defendant of April 24th refers to a codicil: to the effect … you both were to be allowed to live on in this home until you either died too – or were married … and also if I were to die before you came out you were to receive a sum of money to help to carry you on…. I am doing my darndest to think things out for your protection just in case … I went to the Immigration Office … and secured two forms of nomination … although we sound alright on paper you might not like me … when you have to live with me. Still I think you will … Margaret … if I can make life … brighter and easier for you and Gracie I would be so happy in doing it. The plaintiffs left Scotland in June, 1947. They gave up the tenancy of their house, sold furniture and belongings. Grace gave up her employment a fortnight before sailing. Passages were obtained on RMS Stratheden costing about £79 each (tourist class). They arrived in Adelaide about the end of July, and have lived under the same roof as the defendant ever since. A copy of clauses 7 and 8 of the defendant’s will was handed to them by her, or on her behalf, after their arrival. The clauses contain certain additions that were not foreshadowed in the [77] correspondence, but it can be said that in substance the provisions secure the home, rent free, to the plaintiffs (with two others) during life if they do not marry, and desire to continue in residence at 254 Greenhill Road. Unhappily, cordial relationship has not been sustained. As a result the questions involved in the present proceedings have come up for determination by a court of law. The request at present made by counsel for both sides is for a decision whether, as between the parties, there is a contract of a kind that is enforceable, or which, on breach, will sound in damages. If there be such a contract, it may be necessary to ascertain the precise terms (express or implied), also whether a breach was threatened, or has occurred on either side, and what consequences follow. The alternative findings are said to be: (1) The arrangement was purely social. The parties had no actual intention to create legal obligations, and 198

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Todd v Nicol cont. no such intention will be attributed to them. (2) A contract legally enforceable between the parties was entered into. (3) There is no contract other than a licence to reside in the defendant’s home, which may be revocable, or irrevocable. Mr Cleland, for the defendant, claimed that the understanding to which acceptance of the proposal in the letter of April 6th gave rise was in the nature of a family or domestic expedient for mutual convenience, or alternatively a social project based on courtesy. He contended the plaintiffs must show that there was a deliberate promise by the defendant seriously made and supported by consideration. As between relatives or persons on intimate terms of good will, the prima-facie presumption will always be, he claimed (where visits and friendly intercourse are involved) that the basis is not legal obligation but affection and trust. Dr Bray submitted that there was a complete mutuality of wills which gave rise to a contract cognizable and enforceable at law. I do not suppose that it came into the conscious thoughts of any of the parties (ie either plaintiffs or the defendant) that legal sanctions would be called in aid of the plan that was proposed and followed. But even so, that does not solve the problem. There is no explicit reference to, nor indeed any latent indication concerning, methods of enforcement, in the correspondence. Where mutual trust is present, it is unlikely that such an aspect will enter the mind of any party to negotiations. Still less is it likely to be expressed in speech or writing. Nevertheless there is an allusion in the letter of April 24th, to which reference has been made. There was of course a consensus, and that was responsible for the voyage by the plaintiffs to Australia. The purpose of the voyage was for them to take up residence with the defendant at her home. Certainly the plaintiffs were licensed to enter upon those premises and reside there. But that fact does not conclude the matter. Residence in the home of another may be on a licence determinable forthwith or by notice. Such a situation could be incidental to travel from Scotland here, or even to a purpose to remain here indefinitely. Much argument was addressed to the elements that go to make up an enforceable bargain. A contract may be defined as an agreement between two or any number of persons that is intended to be enforceable at law. [78] It comes into being by virtue of an offer on one side which is accepted on the other. The offer and the acceptance may be explicit in precise terms, or implied from conduct, or language, which can be properly so construed. The contract may result from communications, by word of mouth, in writing, or by inference from conduct, or by a combination of all or any two of these media. The subject matter usually involves the parties on either side doing, or abstaining from, conduct of some sort. A factor that is requisite is the presence of valuable consideration. Some right, interest, profit or benefit must be provided for, or some forbearance, detriment, loss or responsibility given, suffered or undertaken. Consideration must “move” from both sides. The adequacy of the benefit or burden, or the balance of equality, does not come up for investigation provided the law attributes some real value to it. If an intention to enter into an enforceable undertaking does not appear by the express terms of the engagement, it must be capable of being properly read into the provisions. The language used, or the relative situation of the parties to the understanding, may be such as to indicate no such intention was present (Balfour v Balfour (1919) 2 KB 571). When the circumstances or conduct of the parties demonstrate that no such purpose was present it will not be imputed (Booker v Palmer [1942] 2 All ER 674, at pp 676–7; Cobb v Lane [1952] 1 All ER 1199). If the arrangement by its terms indicates that the plan is merely to take effect as an honourable pledge, or is not to be followed by any legal consequences, it will not have legal enforceability attributed (Jones v Vernon’s Pools Ltd [1938] 2 All ER 626; Appleson v H Littlewood Ltd [1939] 1 All ER 464.) The status in this respect may be explicitly set out in a document (Rose and Frank Co v JR Crompton & Bros Ltd [1925] AC 445). Where business arrangements are involved the presumption of enforceability will be readily presumed. Where, however, the situation is not of that kind, such an implication is necessarily more doubtful. [4.50]

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Todd v Nicol cont. The intention must, of course; be shown to be that of all parties. Where the parties are ad idem consensu, a common purpose will be attributed to them. Neither side will be permitted to prove an intention that is not in conformity with what has passed between them. If the existence of mutuality be in issue, one party or the other may demonstrate by reference to the negotiations (whether committed to paper or oral), that the alleged acceptance was not unqualified, or unconditional, in relation to the terms of the offer, or that the respective intentions of the negotiators differed in material aspects. [4.55] Another element concerns the certainty that is required. A contract will not be formulated for parties if they have left important conditions hidden in obscure language, or there are details subject to further negotiation. If provisions are too vague, or too indefinite, for reasonable certainty to be discovered concerning what is intended, the engagements will not be enforced unless the uncertain features are severable from that [79] part constituting the substantive arrangement. As to this aspect arrangements between parties will not necessarily be expected to cover every possible contingency that may arise, particularly where the duration of performance will be lengthy and the circumstances in detail unpredictable. Solvitur ambulando may be the principle for meeting some of such future day to day problems. It is conceded the plaintiffs had a licence to enter upon the defendant’s land and live in her home. The question whether that licence was irrevocable was referred to in argument. It was pointed out that such a licence will be revocable unless (i) there be a grant of an interest in the land, (ii) an agreement for such a licence that is specifically enforceable, or (iii) there is conduct raising an equity in favour of the licensees. “Putting it briefly, they must show grant, contract, or estoppel” (Moffat v Sheppard (1909) 9 CLR 265 at 286). As already noticed, in the communications quoted in part, there is no explicit reference to intention, that is to say, to an intention to create obligations that are legally enforceable. In the absence of any statement concerning that purpose it is necessary to inquire whether there is any material from which an inference may be drawn. By a process of reasoning it may be possible to ascertain if any such an intention can be attributed to the parties having regard to the features with which they have enveloped the project. The essentials of the scheme are somewhat submerged in rather dithyrambic passages of explanation. Counsel have drawn attention to extracts that they have deemed important, and I have essayed a selection. The references show to some extent what the parties contemplated on either side, and accordingly the underlying animus may perhaps be extracted by a process a posteriori. There can be no definite rule or formula for deducing the purpose or intention entertained, that is to say, whether enforcement of a plan is to depend on trust or legal sanction. The process of elucidation will be empirical. Certain elements incidental to the suggested scheme or plan may be noticed. The expense of travel from Scotland to Australia by two persons who do not seem to be over-endowed with wealth, and the absence of any condition covering a return to Scotland, seem to negative the notion of a visit; a visit that was to provide opportunity for social intercourse. Although one letter from the defendant shows that the possible incompatibility of temperament or temper, the possibility of a “misfit”, had occurred to her, no provision for separating or leaving the home before death, except on marriage (the reference to which is concluded in terms suggesting the jocular), was formulated. No provision is put forward to enable the discharge of joint residence, or a termination of the arrangement. The expectation that certain belongings of the plaintiffs would have to be sold ex necessitate rei, and the suggestion that the sale should not comprise certain household articles probably required to render the premises a home for all, are significant. Thereby is demonstrated an [80] intended combination of resources of an apparently permanent nature. The provision of a testamentary adjunct 200

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Todd v Nicol cont. to give security to the plaintiffs in the administration of the defendant’s estate justifies the view that the defendant thought security for the plaintiffs during her lifetime was adequately provided by the plan laid down in the letter of April 6th. The provision by will might be construed, I suppose, as indicating that her goodwill was the safeguard, but I incline to the alternative that the arrangement inter vivos was expected to be binding in some way upon her during her lifetime. It is undeniable that features in the letters are capable of being harmonised with an hypothesis that the plan was quite safe and secure for the plaintiffs because of the defendant’s honourable assurances accompanying or implicit in her invitation, backed up (as it were) by her affection for her deceased husband. But in my view that theory cannot measure up when compared with the weight that must be given to an interpretation that does not place the future of the plaintiffs so largely subject to what would be no more than the whim of the defendant in so material an aspect. My conclusion is that the intention to be attributed to the parties was to enter into a contract that was legally binding. The element of consideration gives no difficulty provided the other ingredients necessary to form a binding contract are present. Mr Cleland did not suggest that the disposal of property, the expense of travel, the change of location, and the abandonment of employment and of the security of their Scottish residence in exchange for the Australian domicile, had no features capable of being so regarded. I have not yet directed attention to the terms and conditions of that contract express or implicit. Counsel purposely refrained from addressing any arguments on that aspect…. [After further hearing Majo J considered whether the terms of the contract had been breached by the plaintiffs and, if so, the consequences of such a breach.] [75] The defendant sets up an implied term in the contract that the plaintiffs should, whilst residing in the premises mentioned, “behave in a reasonable and decent manner.” … [85] Provision is to be implied in a contract when the matter, to which the same relates, is not covered by express terms, nor annexed thereto by usage, statute or otherwise. But the implication will, even then, be treated as proper to be read into the text, only when it is clearly necessary [86] to introduce the term in order to make the contract operative according to the intention of the parties as indicated by the express terms: per Latham CJ in Scanlan’s New Neon Ltd v Tooheys Ltd (1943) 67 CLR 169, at 194 et seq. The term must be directly related to the project entertained by the parties. If they did not direct their minds to the necessity for some condition to enable the purpose to be carried out, an interpretation of the transaction may be worked out where it is shown to be required, from its character, from the elements which are contained within it. The nature and circumstances of the transaction will supply the grounds from which the intention is to be deduced: eg per Dixon J (as he then was) in Bonython v The Commonwealth (1948) 75 CLR 589, at 626. The most famous and oft repeated passage on this topic emanated from Bowen LJ in The Moorcock (1889) 14 PD 64, at 68. Another case that has been highlighted is Hamlyn dr Co v Wood dr Co (1891) 2 QB 488. But it has been commented that the “general remarks” of Bowen LJ do not accurately state the principle as it is now understood (McKinnon LJ in Shirlaw v Southern Foundries (1926) Ltd (1939) 2 KB 206, at 227). An implication may be manifestly necessary as an adjunct, so that, if such a term had been suggested to the parties at the time they were negotiating, they would have immediately agreed such a term was indispensable. Ordinarily it appears to be accepted that the provision to be implied must be necessary in the “business sense” to give efficacy to the contract: eg per Scrutton LJ in Reigate v Union Manufacturing Co [1918] 1 KB 592, at 605. The bestowal of such efficacy to a contract to join in a home suggests the importation of some sort of “business” activity into a domestic scene. But I suppose “business” in that sense does not limit the principle to contracts of a commercial or trading kind. A home is a place where the residents ordinarily eat morning and night, and where they usually sleep. With adults it may have the characteristic of permanency. A home is, or used to be regarded as a [4.55]

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Todd v Nicol cont. place of refuge and rest. With modern conveniences, and under the present conditions of life, these aspects may perhaps be regarded as undergoing change. References to “sharing a home” can be taken to import an intention by the parties to live together under conditions of mutual indulgence and forbearance, of propriety, decorum and friendliness, and, if necessary, of resignation and toleration as might be reasonably expected in a home. Will not a contract to share a home necessarily have implied in it conditions concerning behaviour? I have no difficulty in giving an affirmative answer to that question as a generalization. Acceptance of the licence to enter and remain upon premises for use of the same as a home results in the privilege taking effect as a licence. A limited privilege under licence must, I think carry with it an implicit engagement not to act in any manner that exceeds the scope of the permission … [88] That plaintiff [Mrs Todd] has not behaved in a reasonable and decent manner in the home. Her conduct is, in my opinion, responsible for the cessation of reasonable home conditions. The contract to which all litigants were parties, the licence under which all three persons lived together at the Hazelwood Park address, came into being in an expectation that all would contribute to satisfactory home conditions. The plaintiffs’ licence was to enable them to join in, establish and continue a home for all three persons. Mrs Todd has been responsible for breaches of conditions implied in the contract by virtue of the nature of the licence … [89] If I am correct in my conclusion, did the breach by the elder plaintiff give the defendant the right to terminate contractual relations and withdraw the licence? I accept the proposition that the plaintiffs on their side, and the defendant on her side, were under duty to conduct themselves, or herself, in a sufficiently reasonable manner that the ordinary features of a home should be available to them all. Only under such conditions would life for elderly people under the same roof be possible. In the presence of persistent disruptive influences the locality ceases to be a home, it ceases to have the qualities of a home. As it is no longer a home the licence is ended. Such being the position the defendant was entitled to act, and bring the agreement to an end. Notice by the defendant’s solicitors was effective. The arrangements no longer avail the plaintiffs. There will be judgment for the defendant on the claim and on the counterclaim. Order that the plaintiffs do vacate the premises. The plaintiffs will pay the defendant’s costs. Judgment for defendant on claim and counterclaim.

GOVERNMENT AGREEMENTS [4.60] Governments and governmental bodies routinely enter into contracts with suppliers of

goods and services in the usual fashion. An intention to create legal relations is likely to be manifested when a government enters into a commercial transaction expressed in contractual language (see Placer Development Ltd v The Commonwealth (1969) 121 CLR 353, 367–8 (per Windeyer J), extracted at [5.220]). Where the administrative or political activities of government are concerned, however, the courts are likely to find that an intention to create legal relations does not exist (in addition to the following case, see Australian Woollen Mills Pty Ltd v Commonwealth, extracted at [3.40]).

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Administration of Territory of Papua and New Guinea v Leahy [4.65] Administration of Territory of Papua and New Guinea v Leahy (1961) 105 CLR 6 High Court of Australia – Appeal from the Supreme Court of the Territory of Papua and New Guinea. [FACTS: For several years the plaintiff had experienced difficulty controlling an infestation of cattle ticks on his property. He was provided with equipment and advice by the Commonwealth Department of Agriculture as part of its tick eradication program. He requested further assistance. In a meeting with representatives of the Department, an arrangement was made that officers of the Department would take over the spraying of the plaintiff’s property. The plaintiff was to supply and pay for the other labour required, and to muster the cattle. The department’s officers failed to carry out the spraying skilfully and efficiently and the plaintiff’s cattle became even more seriously infected with ticks. The plaintiff sued the Administration for damages for breach of contract. The plaintiff succeeded at first instance.] DIXON CJ: [10] In my opinion this appeal must be allowed on the simple ground that the facts in no way support the conclusion that the defendant, the Administration of the Territory, entered into any such contractual relation with the plaintiff as his pleading alleges or as has been found in his favour. I am clearly of opinion that the Administration of the Territory, by its officers, did not contract with the plaintiff; there was no intention on their part to enter into any contract, to undertake contractual obligations or to do or undertake more than was considered naturally and properly incident to carrying out their governmental or departmental function in the conditions prevailing. They were merely pursuing the policy adopted for the eradication of tick. I do not wish to add anything to the reasons for this view of the case given by Kitto J whose judgment I have had the advantage of reading … [4.70] MCTIERNAN J: I think that this appeal should be allowed … [11] The arrangement consisted of agreed promises but that is not enough to make a contract, unless it was the common intention of the parties to enter into legal obligations, mutually communicated, expressly or impliedly. It was not an express or implied term of the arrangement that the respondent should make any payment for the treatment of the cattle. I cannot agree that the Administration through its officers intended to enter into legal relations when, at the request of the respondent, it undertook the organization of the tick eradication campaign with respect to his cattle. The conduct of the parties constituted an administrative arrangement by which the Administration in pursuance of its agricultural policy, gave assistance to an owner of stock to prevent that stock contracting a disease which was prevalent in the Territory. The work done by the Administration was analagous [sic] to a social service which generally does not have as its basis a legal relationship of a contractual nature and from which no right of action would arise in favour of the citizen who is receiving the services if the Government acts inefficiently in performing them … [4.75] KITTO J: [13] In the statement of claim one cause of action only against the Administration was alleged, and that was in contract. After setting out that the respondent was the lessee and the appellant, the Administration, was the lessor of a property at Zenag in the Territory, on which for a number of years the respondent had been grazing and rearing dairy and beef cattle and carrying on the business of a producer and vendor of dairy products, beef cattle and meat, the statement of claim alleged a contract between the Administration and the respondent by which the former agreed that it would carry on at Zenag a campaign for the eradication of cattle tick from the respondent’s cattle, and that the campaign would be carried out thoroughly and skilfully. The consideration alleged was that the respondent would allow the Administration’s servants to enter upon his property and spray the cattle thereon, would make available to the Administration the services of six native labourers, and would forbear from interfering with the work of the servants in carrying out the campaign. The breach assigned was that the Administration, although its servants sprayed the respondent’s cattle between June 1954 and July 1955, failed to carry out the spraying thoroughly and skilfully. Particulars of [4.75]

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Administration of Territory of Papua and New Guinea v Leahy cont. resulting damage were given, comprising loss of cattle by death, loss of natural increase, loss of milk production, and deterioration of condition of the herd … On the appeal the controversy has been as to whether the proved and admitted facts, when considered in their setting of time and circumstance, establish a contract, or only an arrangement having no legally binding force. The question is whether the parties to [14] the correspondence which passed and the conversations which took place evinced an intention to make a bargain mutually binding between the Administration and the respondent in the sphere of legal rights and obligations … [18] In the judgment of the learned Chief Justice there occurs the following passage: Considering the position of the plaintiff it is clear that he was assuming some liabilities and responsibilities and agreed to depart from his own proposals to the extent of co-operating with the Administration to carry out its campaign. I [19] think that it is clear that the plaintiff expected the Department to honour its promises and to see that the campaign was carried out properly. He was prepared to leave the entire conduct of the campaign to the Department and in fact he was insisting that they should take complete charge of it. I think that the proper conclusion is that Mr Leahy was entering into a transaction which as between individuals would amount to a contract and which was intended to impose obligations of a legal character on both parties. There remains of course the question whether in relation to this transaction the Administration should be considered as being upon a different footing from that of an ordinary individual. It must be remembered, however, that there are not two questions, whether the interviews were such as would have produced a contract if they had taken place between private individuals, and if so whether it makes a difference that they took place between a private individual on the one hand and government officers acting in their official capacities on the other hand. There is only one inquiry: whether, taking into account all the circumstances, it is right to conclude that the respondent and the Administration were dealing with one another on a contractual basis, or were merely arranging the manner and extent of gratuitous assistance to the respondent which the Department was willing to render in execution of the Administration’s policy concerning the eradication of cattle tick in the Territory … [20] From first to last the Department showed itself to be doing no more than giving effect to a general policy of dispensing aid to individual cattle owners as a means of coping with a recognized menace to an important part of the Territory’s economy. And the respondent’s [21] attitude throughout was that of a private person appealing for government assistance on the ground that the Department, by doing for him what it insisted ought to be done on his property, would be performing a function of government in accordance with its settled policy. The whole atmosphere of the correspondence and discussions that took place was different from that which exists between contracting parties. True it is that the Department relied upon the continuing co-operation of the respondent in performing his part of what was arranged between them. The officers concerned were no doubt quite fully aware that if the respondent should make substantial failure at any time in affording the co-operation he was promising, all that had been put into the campaign up to that time would go for nought. But they knew too that he had every incentive to make the campaign a success. The loss, if it should be abandoned, would be far more serious for him than for the Administration, and he had already shown that he felt he was in a cleft stick: he could not afford to carry out a thorough spraying campaign himself, but unless it were carried out he could not get permission to move his cattle from his eaten-out pastures to new country. In the circumstances, the fact that in the absence of a contract he might draw out at any time has no real weight in considering whether a contract was entered into. For the reasons given, the case falls into the class of which illustrations may be found in Australian Woollen Mills Pty Ltd v The Commonwealth (1954) 92 CLR 424; (1955) 93 CLR 546, and Milne v 204

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Administration of Territory of Papua and New Guinea v Leahy cont. Attorney-General for the State of Tasmania (1956) 95 CLR 460, at 472, 473. The arrangements made on 7th June 1954 were not contractual and the judgment giving damages for the failure of the Administration, through the two defaulting officers, to give effect to them on its part cannot be sustained. Appeal allowed.

PRELIMINARY AGREEMENTS Masters v Cameron [4.80] Masters v Cameron (1954) 91 CLR 353 High Court of Australia – Appeal from the Supreme Court of Western Australia. [FACTS: Cameron (the respondent) and Mr and Mrs Masters (the appellants) signed a document whereby Cameron agreed to sell and the Masters agreed to buy for £17 500 a certain property owned by Cameron. A deposit of £1 750 was paid by the purchasers to a farm agent. The document contained the following clause: “This agreement is made subject to the preparation of a formal contract of sale which shall be acceptable to my [Cameron’s] solicitors on the above terms and conditions.” The purchasers encountered financial difficulties, denied that they were legally bound to purchase the property, and sought to recover the deposit.] THE COURT (DIXON CJ, McTIERNAN and KITTO JJ): [360] The first question in the appeal is whether, as Wolff J considered, this document on its true construction constitutes a binding contract between the respondent and the appellants, or only a record of terms upon which the signatories were agreed as a basis for the negotiation of a contract. Plainly enough they were agreed that there should be a sale and purchase, and the parties, the property, the price, and the date for possession were all clearly settled between them. All the essentials of a contract are there; but whether there is a contract depends entirely upon the meaning and effect of the final sentence in that portion of the document which the [male] appellant signed. Where parties who have been in negotiation reach agreement upon terms of a contractual nature and also agree that the matter of their negotiation shall be dealt with by a formal contract, the case may belong to any of three classes. It may be one in which the parties have reached finality in arranging all the terms of their bargain and intended to be immediately bound to the performance of those terms, but at the same time propose to have the terms restated in a form which will be fuller or more precise but not different in effect. Or, secondly, it may be a case in which the parties have completely agreed upon all the terms of their bargain and intend no departure from or addition to that which their agreed terms express or imply, but nevertheless have made performance of one or more of the terms conditional upon the execution of a formal document. Or, thirdly, the case may be one in which the intention of the parties is not to make a concluded bargain at all, unless and until they execute a formal contract. [4.85] In each of the first two cases there is a binding contract: in the first case a contract binding the parties at once to perform the agreed terms whether the contemplated formal document comes into existence or not, and to join (if they have so agreed) in settling and executing the formal document; and in the second case a contract binding the parties to join in bringing the formal contract into existence and then to carry it into execution. Of these two cases the first is the more common. Throughout the decisions on this branch of the law the proposition is insisted upon which Lord [361] Blackburn expressed in Rossiter v Miller (1878) 3 App Cas 1124, where he said that the mere fact that the parties have expressly stipulated that there shall afterwards be a formal agreement prepared, [4.85]

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Contract Law: Principles, Cases and Legislation

Masters v Cameron cont. embodying the terms, which shall be signed by the parties does not, by itself, show that they continue merely in negotiation. His Lordship proceeded: “as soon as the fact is established of the final mutual assent of the parties so that those who draw up the formal agreement have not the power to vary the terms already settled, I think the contract is completed”: (1878) 3 App Cas 1124 at 1151. [4.90] A case of the second class came before this court in Niesmann v Collingridge (1921) 29 CLR 177, where all the essential terms of a contract had been agreed upon, and the only reference to the execution of a further document was in the term as to price, which stipulated that payment should be made “on the signing of the contract”. Rich and Starke JJ observed that this did not make the signing of a contract a condition of agreement, but made it a condition of the obligation to pay, and carried a necessary implication that each party would sign a contract in accordance with the terms of agreement. Their Honours, agreeing with Knox CJ, held that there was no difficulty in decreeing specific performance of the agreement, “and so compelling the performance of a stipulation of the agreement necessary to its carrying out and due completion”: (1921) 29 CLR 177 at 185. [4.95] Cases of the third class are fundamentally different. They are cases in which the terms of agreement are not intended to have, and therefore do not have, any binding effect of their own. The parties may have so provided either because they have dealt only with major matters and contemplate that others will or may be regulated by provisions to be introduced into the formal document, as in Summergreene v Parker (1950) 80 CLR 304 or simply because they wish to reserve to themselves a right to withdraw at any time until the formal document is signed. These possibilities were both referred to in Rossiter v Miller (1878) 3 App Cas 1124. Lord O’Hagan said (1878) 3 App Cas 1124 at 1149: Undoubtedly, if any prospective contract, involving the possibility of new terms, or the modification of those already discussed, remains to be adopted, matters must be taken to be still in a train of negotiation, and a dissatisfied party may refuse to proceed. But when an agreement [362] embracing all the particulars essential for finality and completeness, even though it may be desired to reduce it to shape by a solicitor, is such that those particulars must remain unchanged, it is not, in my mind, less coercive because of the technical formality which remains to be made. And Lord Blackburn said (1878) 3 App Cas 1124 at 1152: Parties often do enter into a negotiation meaning that, when they have (or think they have) come to one mind, the result shall be put into formal shape, and then (if on seeing the result in that shape they find they are agreed) signed and made binding; but that each party is to reserve to himself the right to retire from the contract, if, on looking at the formal contract, he finds that though it may represent what he said, it does not represent what he meant to say. Whenever, on the true construction of the evidence, this appears to be the intention, I think that the parties ought not to be held bound till they have executed the formal agreement. So, as Parker J said in Von Hatzfeldt-Wildenburg v Alexander [1912] 1 Ch 284 at 289, in such a case there is no enforceable contract, either because the condition is unfulfilled or because the law does not recognise a contract to enter into a contract. The question depends upon the intention disclosed by the language the parties have employed, and no special form of words is essential to be used in order that there shall be n