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Express Terms

Express Terms
Express terms are agreed expressed by the parties (oral or written).

4 tests for establishing the express terms of a contract


What are the facts? o What did the parties say and do? o This forms evidentiary base from which the terms are determined Was anything signed? o Signed documents are normally binding Toll (FGCT) Pty Ltd v Alphapharm Pty Ltd A storage and cartage business, Finemores, is operated by toll. Richard Thomson is an agent for Alphapharm, a pharmaceutical business. When signing a contract in an application for credit, Richard failed to read the terms and conditions outlined my Finemores but signed the document anyway. The terms expressed in the document were not hidden or misrepresented in any way. Is there any unsigned writing which has been incorporated into the contract? o Reasonable notice test Parker v Sth Eastern Railway Mr Parker left a bag in the cloakroom of the Charing Cross railway station which was run by South eastern Railway company He gave his bag to the cloakroom and paid for his ticket, on the ticket it said that items worth more than 10 that South eastern railway would not be liable Mr Parker failed to read the clause as he thought the ticket was only a receipt of payment a His bag was lost which was worth more than 10 He sued the company, the jury found that it was reasonable for Mr Parker for him not to read the ticket Conclusion: the court held that an individual cannot escape a contractual term by failing to read the contract but that a party wanting to rely on an exclusion clause must take reasonable steps to bring it to the attention of the customer. Are there any oral representations which the parties intended to be terms? o Reasonable bystander test Oscar Chess v Williams

Statements made after contract formed are not terms


A party cannot be bound by statements, promises or representations made after the contract has been formed unless fresh consideration is provided.

Roscorla V Thomas (1842)

Importance of a signed document


A person is bound by their signature o A person who signs a document that has a contractual appearance about it is bound by the contents of the document o Applies even if the document was not read LEstrange v F Graucob Ltd When is a person not bound by a document o The document didnt appear to be contractual A person is not bound his or her signature if not reasonable person would have realised the document they signed was a contract Le Mans Grand Prix Pty Ltd v Iliadias (1998) o Estoppel A signed agreement may not be enforceable where it is at odds with terms expressly, but orally, agreed between parties, however it may be difficult to convince the courts of the necessary factual basis for this claim Equuscorp Pty Ltd v Glengallen Investments Pty Ltd o Misrepresentation Where a person has been misrepresented the contents of the signed document that person will not be able to rely in the contents that have been misrepresented. Representations do not have to be deliberate, it may be innocent Curtis v Chemical Cleaning and Dyeing Co o Condition Precedent A signed document will not be binding if the parties have made it subject to a condition precedent. o The document does not accurately record the agreement A court may refuse to enforce a signed contract where there has obviously been a mistake made in recording the terms and one party is unfairly tying to take advantage of that mistake

Incorporating unsigned terms into the contract by notice


The reasonable notice test o Parker V South-eastern Railway Co (1877) What constitutes as reasonable notice? o A question of fact. It is necessary to look at all the facts including Whether the document containing the term was contractual in nature Whether the term sought to be incorporated was unusual for that type of contract Whether the parties discussed the matter o Is the document contractual in nature o Is the term unusual? o Were there any conflicting statements or promises? Incorporating terms and condition by notice

o Thompson v L M & S Railway Co (1930) Internet Transactions

When are oral statements or representations binding?


Oral Statements o There is no rule which says an oral statement cannot become a term o Only becomes part of the contract if a reasonable person would have regarded as promissory Statements must be promissory in nature o Only statements which are promissory become terms other statements are mere representations Representation may be o Term of a contract Representation must be promissory Remedy for breach of contract o Mere representation No remedy in contract must rely on law of misrepresent o Mere Puff No Remedy Applying the reasonable bystander test o Was the representation included in a written document? o When in the negotiations was the representation made? o Did the representation sound promissory? o How objectively important is the representation to the overall deal? o Did either of the parties have special knowledge about the subject matter of the representations? o Was there a written document? o How much time elapsed between statement and contract? o How important was the statement to the deal as a whole? o What words were used? o Did either the party have special knowledge?

Collateral Warranties
A collateral contract operates in conjunction with a main contract Not every representation forms a collateral contract. To be a collateral warranty a representation o Must be promissory JJ Savage and Sons Pty Ltd v Blakney o Must not contradict the main contract Hoyts Pty Ltd v Spencer (1919)

Meaning of a term
Parol Evidence Rule o Where the contract is wholly in writing, the courts must judge the meaning of the document from the words of the document and not otherwise. o Exceptions of the rule Clarify ambiguities in the document Correct errors made in the recording the contract Establish necessary background facts so that the contract can be seen in the context

Express Terms In Relation to Case Study


Contract 1 o There was a verbal agreement between Alice and Charlie regarding the duration of the renovation process of the restaurant the cost of the renovation process Contract 2 o Agreement between Alice and Iyeshu regarding Agreed 50 % or profits but must contribute $15000 to cover the renovation costs, supply all seafood and puffer fish and supervise all kitchen staff Contract 3 o Between Double happiness and Customers Disclaimer on the menu regarding the fugu fish

Implied Terms
Implied term
A term that has been put into the contract by the courts or by the statute, not by the parties

Terms implied by courts and by statute


Special Terms implied by Courts o Cooperation o Good faith o Reasonable care and skill Terms implied by courts based on the facts of the case o On the basis of past dealings o On the basis of an industry custom o To make the contract effective Terms implied by sale of goods legislation o Correspondence with description o Merchantable quality o Fitness for Purpose

Correspondence with sample

Implied terms of cooperation


In all contracts unless the parties expressly or by implication agree otherwise there is an implied term that each party will do that which is reasonably necessary to enable the other party to have the benefit of the contract

Implied term of Good faith


Important in long term relational contracts such as the arrangements between a franchisor and a franchisee The duty of good faith apply both to the performance of obligations under the contract and to the exercise of contractual rights It cannot be a breach of good faith to pursue ones legitimate rights Burger King Corp v Hungry Jacks Pty Ltd

Contracts between Professional Persons and their Clients


There is an implied term that the professional person carries out his or her contractual duties with reasonable care and skill This duty applies to all professional service providers The standard of care is the same as that required of a professional person under the tort of negligence

Contracts for work and materials


During any construction the court will imply terms such as o The contractor use reasonable care in performing the work o The service be reasonably fit for the purpose for which it was acquired o Any materials supplied in relation to the work be of good quality and fit for the purpose for which they were supplied o Reg Glass Pty Ltd V Rivers Locking Systems Pty Ltd The court will not imply the above term if it would be unreasonable in the circumstances o Helicopter Sales (Aust) Pty Ltd v Rotor Work Pty Ltd

Employment Contracts
The employer has an implied duty to provide a safe system of work The employer also impliedly undertakes not to require the employee to do any unlawful act The employee has an implied duty to obey all reasonable instructions of the employer to carry out he or her work with an appropriate level of skill and competence The employee has to act in good faith towards the employer and to keep the employers trade secrets confidential

Terms implied as a matter of fact


Parties neglect to include a term either because o It was obvious and therefore overlooked o Each party assumed that it applied In such cases the courts will imply a term and will do so to when the term reflects the intention of the parties The implied term cannot be in conflict with an express term of the contract or with the general tenor of the contract

Terms implied on the basis of past dealings


In order to imply a term on the basis of past dealings it must be proved that o The term claimed to have been used in past dealings is clearly identifiable o The previous dealings were sufficiently numerous and consistent to constitute a regular course of dealing o The present dealing fits into that course of dealing to the extent that it can reasonably be said that the same terms should be included o There is no conflict between the implied terms and express terms Henry Kendall & Sons v Williams Lillco & Sons Ltd

Terms implied as a result of custom or trade usage


A term may be implied on basis of custom or trade usage provided o It is possible to state the term with precision o The custom or trade usage relied on is so well known and widespread throughout the industry that all contracts of the same type can be said to have that term o The custom is reasonable o There is no conflict between the implied term and express terms British Crane Hire Corp Ltd v Ipswich Plant Hire Ltd

Terms implied in order to make the contract effective


The courts will only imply a term to make a written contract effective provided all the following criteria are satisfied o The term is capable of clear and precise expression o The term is necessary to make the contract effective. It is not sufficient to show that the term is reasonable. There must be a gap in the contract that makes the contract unworkable o The term is so obvious that it goes without saying o The term is fair and equitable to both parties o There is not conflict with the express terms The Moorcock

Sales of Goods contracts Consumer special protection under ACL


Sales of goods that do not come under ACL o Sales of component parts to a manufacturer o Sales of raw materials to a commercial enterprise o Sales of finished goods to reseller o Sales of industrial goods where the sale price is in excess of 40 000 o International sales of goods

Terms implied by the sales of goods legislation


Every contract for the sale of a good has the following implied terms, but the same or similar provisions apply in each state or territory: o An implied condition that the seller has a right to sell. VGA s17 o An implied warranty that the buyer shall have and enjoy quiet possession of the goods. VGA s 17 o An implied warranty that the goods are free from encumbrance (that is, not match the description. VGA s18 o Where the goods were sold by description, an implied condition that the goods match the description. VGA s 18 o An implied condition that the goods be of merchantable quality. VGA s 19(b) o Where the buyer has expressly or implicitly made known to the seller the purpose for which the goods were being purchased in such circumstances that the seller knew or ought to have known that the buyer was relying on his or her skill or judgement, an implied condition that the goods match the sample. VGA s 20.

Correspondence with description


Where goods are sold by description they must correspond with that description in accordance with Section 18 A purchaser alleging a breach of contract on the basis that goods do not correspond with description will have to prove the following o There was a contract for the sale of goods o The contract was made in Victoria o The goods were sold by description o The goods do not match that description

Implied Terms in relation to Case Study


Contract 1 o Agreement between Alice and Iyeshu Since Iyeshu was qualified and was a professional at his job he had an duty to carry out his work with reasonable care and skill

Therefore there is a breach in the contract as Iyeshu did not exercise reasonable care and skill in the preparation of the fugu fish Contract 2 o Employment Contract Between Charlie and his employees which restricts Charlie to remove the Asbestos through his employees Charlie has an implied duty to provide a safe system of work therefore he could not put his employees at risk by removing the Asbestos.

Exemption Clauses
Exemption Clause
With the exception of consumer contracts, parties are free to assume whatever contractual obligations they wish. They are free to exclude, restrict or limit the consequences of breaching those obligations Exemption clauses include clauses which exclude liability and clauses which limit liability

Examples of exemption clauses


No Warranty given Passengers ride at own risk No refunds No responsibility taken for loss goods

Rules for interpreting exemption clauses


Ambiguity rule Negligence rule Presumption that the exemption clause does not apply to fundamental breaches of the contract Four corners rule Deviation rule

Ambiguity Rule
Ambiguities in the exemption clause will be resolved against the person seeking to rely on the exemption clause and in favour of the other party Photo Production Ltd v Securicor Transport Ltd

Negligence Rule
If a person wishes to exclude liability for his or her own negligence the exclusion clause must do so clearly Liability for negligence may be expressly or implicitly excluded

If words of the exclusion clause could reasonably be applied to protect against some ground of liability other than negligence, then negligence will not be covered White v John Warwick & Co Ltd

Presumption against fundamental breach


A breach that undermines the fundamental purpose of the agreement Photo Production Ltd v Securicor Transport Ltd

Four Corners Rule



This rule requires that the exclusion clause will only cover a breach that has occurred within the scope of the contract. An act which was not authorized by the contract may not be covered by the exclusion clause

Sydney Corp v West

Deviation Rule Application of Four Corners Rule


Unless clearly stated otherwise, an exemption term in a contract of carriage will not excuse the carrier from liability where the carrier deviates from authorised route. In the case Thomas National Transport (Melbourne) Pty Ltd v May & Baker (Australia) Pty Ltd. In the terms it says TNT are not liable for any damage to the goods; however the self-employed driver who was working for TNT did not make the depot in time and stored the goods at his house where they caught fire. The high court held that the goods will be stored at the TNT depot not the drivers backyard, due to this act being beyond the four corners of the contract TNT was not protected by the exemption clause.

Unenforceable Contracts
Contracts for an immoral purpose Contracts to oust the jurisdiction of the courts Contracts tending to promote corruption in public life Contracts prejudicial to the safety of the state

Unenforceable Terms in Standard form consumer contracts


A standard form contract is one where the rems are nominated by one party and the other party is essentially forced to take the contract or leave it A term is unfair if o It would cause a significant imbalance in the parties rights and obligations arising under the contract o It is not reasonably necessary in order to protect the legitimate interest of the party who would be advantaged by the term o It would cause detriment financial or otherwise to party if it were to be applied or relied on Director of Consumer Affairs (Vic) v AAPT Ltd

Exemption Clauses in relation to Case Study


Negligence Rule o Written warning on the menu stating that the fugu dish is made of a poisonous fish which contains toxins