Contract Law 1, 2011

COMMON LAW AND OBLIGATIONS

Common law recognizes THREE fundamental obligations owed by individuals to eac ot er! 1. T e obligation to "erform certain "romises #t e law of contract$ 2. T e obligation to avoid causing arm to ot ers in certain situations #t e law of tort$ 3. T e obligation to restore certain un%ust gains #t e law of restitution or un ust enric!"ent$ # # # & remedy in tort will restore t e "laintiff to t eir original "osition before t e tort was committed' & remedy in contract will advance t e "laintiff to a "osition if t e contract ad not been breac ed' & remedy in restitution will return t e un%ust benefit from t e defendant to t e "laintiff'

Concurrent lia$ilit%& arises in contract and tort w en one "erson #&$ owes a contractual obligation to anot er #($ to ta)e reasonable care in "erforming services for t em and also owes ( a duty of care in tort' *u"lication of damages is not "ermitted, but in situations of concurrent liability, t e "laintiff may c oose one over t e ot er due to t e different rules in terms of assessment of damages, remoteness of damage and limitation "eriods'

T'( NAT)*( O+ CONT*ACT

& contract is a legally enforceable agreement or set of "romises #i'e' for a breac of w ic t e law will "rovide a remedy$ and may be establis ed by being set out in a "articular, solemn form #i'e' a ,ee,$ or by meeting t e re+uirements for legal enforceability according to t e ,law of si"-le contract-' & contract may involve an #i$ immediate e.c ange of t ings e'g' an e.c ange of money for goods/ #ii$ an e.c ange of a t ing for a "romise/ #iii$ an e.c ange of "romise for a "romise' T e remedy for a breac of contract involves "lacing t e "romisee in as good a "osition #e'g' financially$ as e or s e would ave been ad t e "romise been underta)en, i'e' s-ecific -erfor"ance or more commonly, -a%"ent of a sum of money' Dee,s 0n order to be a valid deed, a document must satisfy bot substantive and formal re+uirements! Su$stanti.e re/uire"ents! T e document must clearly intend to o"erate as a deed and e."ress t at t e "erson w o e.ecutes it consents to some assurance of some interest in "ro"erty or of some legal rig t or enters into an agreement enforceable at law w ic affects t e legal relations or "osition of a "arty to t e instrument'

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+or"al re/uire"ents! 2ritten on "arc ment or vellum, signed, sealed, delivered, witnessed #re+uired in 342$'

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T ere are two )inds of deeds! 1. In,enture 5 a deed wit 2 or more "arties to t e instrument re"resenting different interests' 2. Dee, -oll 5 a unilateral deed normally e.ecuted by one "erson w o is t e only "arty to t e deed' However, it can be e.ecuted by two or more "ersons w o re"resent a single interest and in t is, t e deed remains unilateral' 0n modern law, most of t e general "rinci"les of contract law w ic deal wit issues ot er t an contract formation are essentially t e same for contracts made under seal #deeds$ and sim"le contracts' +or"ation of a Contract& (le"ents 6rom t e end of t e 17t century, Englis common law recognised t at an increasingly mar)et orientated society re+uired legal enforceability to be given to many "romises w ic could not be conveniently formalised in t e solemn manner re+uired for a valid deed' T is ultimately gave rise to t e law of sim"le contract' 1. A0ree"ent! T e "arties must ave manifested an agreement t at certain obligations would be underta)en 5 tested via offer and acce"tance' 2. Consi,eration! Eac "arty must ave given somet ing of value in e.c ange for w at t e ot er as done, in "articular, a "romisee must s ow t at e or s e gave somet ing of value in e.c ange for t e "romise soug t to be enforced' &n agreement not su""orted by consideration on bot sides is said to be nu,u" -actu" #a na)ed agreement$ and is not enforceable' 3. Intent to create le0al relations! T e "arties must ave manifested a common intent t at t eir agreement creates legal relations' 0ntention is determined ob%ectively i'e' by reference to t e words and conduct of bot "arties rat er t an sub%ectively #i'e' intended in t eir minds$' 1. Co"-letion an, certaint%

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AG*((M(NT
Offer an, acce-tance anal%sis is used to determine #i$ w et er an agreement was reac ed, #ii$ w en t e agreement was reac ed and #iii$ t e terms of t e agreement'

O++(*
&n offer ,offers- a "romise #i'e' a commitment to do or not do somet ing$' & "ro"osition is an offer only if! 1' T e offeror8s words and conduct indicate t at e will consider imself committed wit out furt er negotiation if t e addressee c ooses to give w at is s"ecified &3* 2' T e statement "ro"oses an e.c ange of a commitment to carry out a "romise in return for an act, a forbearance from acting or a return "romise to do or not do somet ing' # &n offer must be communicated to t e offeree and received ot erwise t e offer is ineffective' 9ffers must be communicated by t e offeror or an aut orised agent of t e offeror to t e offeree! 'ent!orn . +raser 14-day property 2 en an offer is made, t e terms of t e "ro"osed contract must be communicated to t e offeree! T!ornton . S!oe Lane 2ar3in0 auto ticket parking 9ffers can be made in general terms, leaving t e "recise term of t e contract to be settled later! Masters . Ca"eron home subject to contract &n offer may be made to a s"ecified "erson, class of "ersons or to everyone to w om it becomes )nown! Carlill . Car$olic S"o3e Ball 415637 T e fact t at t e word ,offer- is used is not in itself conclusive! Se--elt 8 Sons Lt, . Co""issioner of Main *oa,s sales of BP servo

# # # #

)nilateral .s Bilateral Contracts # & unilateral contract arises w en an offer of a "romise is e.c anged for act' T e contract is acce"ted w en t e offeree "erforms t e sti"ulated act, t erefore, w en t e contract is formed only t e offeror8s obligation remains e.ecutory! Carlill . Car$olic S"o3e Ball 415637 & bilateral contract arises w en an offer of a "romise is e.c anged for a return "romise, so t at t e obligations of bot "arties are e.ecutory at t e time of contractual formation' 3ote! :enerally, a court will find t at a contract is formed by an e.c ange of "romises rat er t an a "romise for an act since it is unrealistic t at t e "erson ,acce"ting- t e act will ave given t eir "romise in e.c ange for an act t at mig t or mig t not a""en' 0nstead, a "romise t at t e act will occur is "referable'

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Offer .s In.itation to Treat 4+inalit%7 # &n offer must be distinguis ed from an in.itation to treat, w ic can be described as any "art of t e negotiation "rocess t at invites furt er bargaining! conduct of c emist in 2!ar"aceutical Societ% of Great Britain . Boots Cas! C!e"ists Lt, 416937/ council8s letter in Gi$son . Manc!ester Cit% Council :16;6< council flat sale

A,.ertise"ents! :enerally an advertisement in an invitation to do business, not an offer, as it invites a bargaining res"onse rat er t an acce"tance' 4uc "ro"ositions are considered as an in.itation to treat! Carlill . Car$olic S"o3e Ball S!o- Sales! T e dis"lay of goods for sale #at t e window or on s elves$ wit attac ed "rice tags is usually considered an in.itation to treat! +is!er . Bell knife sale/ 2!ar"aceutical Societ% of Great Britain . Boots Cas! C!e"ists ' However, in Goo,win=s of Newtown . Gurre% early sale TV it was incorrectly eld to be an offer' 2rice Lists& T e circulation of a "rice list is usually considered as an in.itation to treat on t e basis t at if it was an offer, a seller mig t be obliged to su""ly unlimited +uantities of t e listed goods at t e listed "rice! Grain0er . Gou0!> S-encer . 'ar,in0 sale of block' Auctions! T e olding of a "ublic auction is usually considered as an in.itation to treat wit eac bid constituting an offer and acce"tance of t e final bid notified by t e fall of t e ammer' T is means t at! # no contractual claim can arise if t e auction is cancelled! 'arris . Nic3erson # t e bidder is entitled to wit draw is or er bid before it is acce"ted! 2a%ne . Ca.e # t e auctioneer is not obliged to sell to t e ig est bidder #even w en auction is advertised to be eld ,wit out reserve-$! AGC 4A,.ances7 Lt, . McW!irter
mortgage bids

Ten,ers! & tender "rocess involves interested "arties submitting a single bid wit out )nowing t e bids made by ot er "arties, and is usually considered as an in.itation to treat& 'ar.ela In.est"ents Lt, . *o%al Trust Co of Cana,a 4CI7 Lt, share bids' However, re+uests for tenders w ic contain a "romise t at t e ig est bidder will be acce"ted may be offers! S-encer . 'ar,in0. Tic3et Cases& & tic)et containing contractual terms is usually regarded as an offer w ic can be acce"ted or re%ected by t e conduct of an individual after t ey ave ad t e o""ortunity to consider t e conditions on t e tic)et' &s suc , a contract is not formed w en a tic)et is issued des"ite its issue being de"endent on t e "ayment of a fare! Mac*o$ertson Miller Airline Ser.ices . Co""issioner of State Ta?ation ticket offer> T!ornton . S!oe Lane 2ar3in0 Lt, auto ticket park. 4imilarly, t e "rovision of buses as been eld to be an offer w ic is acce"ted by getting on t e bus rat er t an an invitation to treat! Wil3ie . Lon,on 2assen0er Trans-ort Boar,.

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Offer .s Con,itional Gift 2ro"ise 4(?c!an0e7 # # & con,itional 0ift -ro"ise may be distinguis ed from an offer as it involves a firm commitment or "romise w ic is given before certain conditions are fulfilled by t e "romisee #i'e' "romisee "rovides no consideration$' ;erformance #and not t e commitment to "erform$ is t en de"endent on t e fulfilment of t e sti"ulated condition' 0n contrast, in an offer, firm commitment is only given w en certain conditions are fulfilled by t e "romisee in return! Australian Woollen Mills Lt,> Carlill . Car$olic S"o3e Ball

:enerally, if it is beneficial to t e "romisor t at conditions attac ed to t e "romise are fulfilled, courts will infer t at t e "romise was made in order to induce t e "romisee to fulfil t em and not a conditional gift! Carlill . Car$olic S"o3e Ball cf' Australian Woollen Mills w ere t e court eld t at t e Commonwealt ad no commercial interest in &2< fulfilling t ose conditions' Ter"ination of an Offer 1. La-se of ti"e &n offer t at is e."ressed to be available for acce"tance for a "articular "eriod of time will la"se at t e end of t e "eriod' 0f no "eriod is s"ecified, it will la"se after a reasonable time as "assed w ic will de"end on t e circumstances e'g' verbal offer to buy a car is li)ely to la"se after a s ort "eriod, w ereas a written offer will be o"en for acce"tance relatively longer! Manc!ester Diocesan Council . Co""ercial an, General In.est"ent rong address tender held! 2. Wit!,rawal or re.ocation Revocation is effective once wit drawal of t e offer as been communicated to t e offeree by t e offeror, or an aut orised agent of t e offeror! 2a%ne @ Ca.e ithdra bid/ Gol,s$orou0! Mort @ Auinn 1 eek sale' # # &n offer can only be revo)ed before t e offer as been acce"ted! +inancin0s Lt, . Sti"son car hire finance 9nce t e offeree as started to "erform t e act, t e offer cannot be revo)ed until t e offeree as a reasonable o""ortunity to com"lete "erformance #often occurring w ere "erformance of act ta)es time$! A$$ott . Lance> @ei.ers . Cor,in0le%> owever current law concerning revocation of offers in e.c ange for an act #unilateral contracts$ is t at no general "rinci"le can be stated! Mo$il Oil Australia Lt, . Wellco"e International 2t% Lt, improvement plan renege T ere is no "ostal rule for revocation of offer! B%rne . @an Tien!o.en plate sale
post"

# # #

Communication need not emanate from t e offeror' Revocation "rovided by a 1rd "arty #not necessarily an ,aut orised agent-$ is valid "rovided t at t e offeree )nows t at t e 1rd "arty is a reliable source! Dic3inson . Do,,s B Thursday land sale! & "romise to old an offer o"en for a s"ecified "eriod is not binding unless t e offeree as given consideration for t at "romise i'e' w ic establis es an o"tion or a subsidiary contract! Gol,s$orou0! Mort 8 . Auinn'

3. *e ection an, Counter Offer # :enerally, once an offer as been re%ected it can no longer be acce"ted! '%,e . Wrenc! land negotiations'

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# # # #

& counter=offer as t e effect of re%ecting t e original offer! '%,e . Wrenc!> Butler . (?DcellDoDcor- increased tool price' & ,re+uest for information- to obtain guidance in deciding w et er to acce"t or re%ect does not! Ste-!ensonE Fac/ues 8 Co . McLean> Bra"$les 'ol,in0s Lt, . Bat!urst Cit% Council' &n offeror w ose offer as been re%ected by a counter offer may re"ly to t e counter offer re%ecting it but doing so in a way w ic ,revives- t e original offer e'g' by stating ,0 cannot reduce t e original "rice-' 0f one "arty gives t e ot er notice of terms after a contract as been formed, t ose terms cannot form "art of t e contract! Oceanic Sun Line S-ecial S!i--in0 Co Lt, . +a%.

1. +ailure of Con,ition &n offer w ic is e."ressly or im"liedly intended to remain o"en for acce"tance as long as a certain state of affairs continue #e'g' ,w ile stoc)s last$, or under certain conditions # ire "urc ase agreement not binding until finance is a""roved$ will automatically la"se if t e condition fails "rior to acce"tance! +inancin0s Lt, . Sti"son' 9. Deat! of offeror or offeree :enerally s"ea)ing, deat of an offerror terminates t e offer! Dic3inson . Do,,s/ as does deat of t e offeree! *e%nol,s . At!erton7' 0n +on0 . Cilli, (lac)burn > attem"ted to narrow t is rule by stating t at an offer could not be acce"ted after t e offeror8s deat if t e offeree )new of t e deat before t e "ur"orted acce"tance' 0n contrast, o"tions #considered as conditional contracts$ for t e "urc ase of sale of "ro"erty are binding on t e "ersonal re"resentatives of a deceased offeror or offeree unless "ersonal to t e o"tion older! Carter . '%,e'

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ACC(2TANC(
2rinci-les of Acce-tance 1' Acce-tance "ust $e a$solute an, un/ualifie, , i'e' in t e form e."ressly or im"liedly "rescribed by t e terms and conditions of t e offer' 0f an offeree "ur"orts to acce"t on different terms to t ose stated in t e offer, t is may constitute a counter=offer' 2' Acce-tance "ust $e in res-onse to an offer, i'e' at t e time of acce"tance t e offeree must )now of t e e.istence of t e offer and t e acce"tance must be based on t e offer made! * . Clar3e snitch re ard' Cross=offers #w ere bot "arties offer t e same "ro"osal in ignorance of eac ot er8s offer$ does not satisfy t is re+uirement! Tinn . 'off"ann' 1' Acce-tance "ust $e uncon,itional, i'e' offer and acce"tance must corres"ond in all material as"ects e'g' an offeree must "rovide e.actly and wit out +ualification w at t e offeror indicated as t e "rice of is or er "romise! Turner Ge"-son . Ca"" raspberry letters! & ,battle of t e forms-! w en "arties e.c ange inconsistent forms during negotiations ? reac agreement on "rinci"al terms wit out deciding w ose standard form s ould "revail' England! last form is regarded as a counter=offer and so t e ,last s ot- will "revail "rovided t e reci"ient of t e counteroffer can be ta)en to ave acce"ted t e terms "ro"osed by t e ot er sender! Butler Mac!ine Tool Co Lt, . (?DCellDODCor-' However, if t e reci"ient ad not acce"ted t e terms, two a""roac es could be used! 1' Conflict a""roac #Lawton L>$ 5 traditional offer and acce"tance, ence, t e "arty w o sends t e last form ,last s ot- "revails 2' 4ynt esis a""roac #*enning <R$ 5 a contract s ould be constructed from consistent elements w ic were acce"ted by bot "arties wit ga"s filled by terms im"lied by t e court' @' Acce-tance "ust 0enerall% $e co""unicate,, i'e' acce"tance is generally not com"lete until t e offeror is informed of t e offeree8s intention to acce"t! Latec +inance 2t% Lt, . Gni0!t TV hire! However, t e offeror may waive t e rig t for actual communication of t e acce"tance by clearly indicating #e."ressly or im"liedly$! 1. (y agreeing to treat t e doing of an act as effective acce"tance e'g' unilateral contracts! Carlill . Car$olic S"o3e Ball 2' (y treating t e dis"atc of an acce"tance by a "articular met od as effective, w et er or not t e acce"tance is received by t e offeror #;ostal Rule$' A' Acce-tance can $e inferre, i'e' an offeree8s acce"tance, by way of giving a return "romise, can be ob%ectively inferred from is or er words or conduct' 6or instance, if t e offeree ta)es t e benefit of a service w ic t e offeror as em" asised would be "rovided only on certain terms! ("-irnall 'ol,in0 2t% Lt, . Mac!on 2aull 2artners architect no contract#/ Bra"$les 'ol,in0s Lt, . Bat!urst Cit% Council li$uid aste' 7' An offeror cannot i"-ose a contract u-on t!e offeree $% sa%in0 t!at failure to re ect t!e contract will $e consi,ere, as acce-tance ! +elt!ouse . Bin,le% nephe %s horse' (y corollary, an offeree cannot acce"t an offer by mere ,silence

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of words and conduct-, and t us cannot enforce suc a "ur"orted contract' Bnless t e offer waives t e rig t to be notified of acce"tance'

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Met!o,s of Co""unicatin0 Acce-tance 1. 2ostal Acce-tance *ule 0f acce"tance is reasonably e."ected by t e offeror to be sent by "ost, acce"tance of an offer is com"lete as soon as it is "osted even if it is received some time later or is lost in t e "ost! 'ent!orn . +raser' T is rule e.tends to telegrams i'e' acce"tance com"lete w en t e telegram is anded in for transmission! Cowan . O=Connor' T e rule does not a""ly! 1. 0f t e "arties are conducting a ig ly contentious corres"ondence in t e course of w ic an offer is made! Taller"an 8 Co 2t% Lt, . Nat!an=s Merc!an,ise 2. 2 en anot er mode of acce"tance as been e."ressly stated! 'olwell Securities . 'u0!es' 3. To instantaneous forms of communication including tele. and tele" one #(ntores Lt, . Miles +ar (astern Cor-$ and fa.es #*eese Bros 2lastics Lt, . 'a"onD So$elco Australia 2t% Lt,$, alt oug tec nically tele. acce"tance mig t not be ,instantaneous- as it ad to be ty"ed out on t e receiver8s mac ine and relayed to a "erson of aut ority #Brin3i$on Lt, . Sta!a0 Sta!l$' ("ails! T e general rule is li)ely to a""ly, alt oug t e common law "osition may be irrelevant since t e time of recei"t of electronic communication is governed by (lectronic Transactions Acts, w ic distinguis between situations in w ic an electronic information system as been designated for t e "ur"ose of receiving communications and situations in w ic it as not' 0n t e former, communication is effective once it enters t e system and in t e latter, communication is only effective once it comes to t e attention of t e addressee' 2. Clearl% sti-ulate, "et!o,s of co""unicatin0 acce-tance &n offeror is entitled to "rescribe a "articular met od of communicating acce"tance and to indicate t at t is is t e only met od to be used! Geor0e 'u,son 'ol,in0s Lt, . +renc!' However intention must be very clearly indicated' 9fferor is also usually considered willing to tolerate an alternative met od of communicating acce"tance if it is no less e."editious or reliable! Geor0e 'u,son 'ol,in0s Lt, . +renc! shares posted' A0ree"ent wit!out Offer an, Acce-tance 0n a number of cases #see below$, a contract can be establis ed wit out an identifiable offer and acce"tance as "arties may ,drift into a contractual relations i"-, mutual assent is in turn regarded as an intention to be legally bound to t e essential elements of a contract' E.am"les! 1' 2 en "arties e.c ange signed standard forms of ,contract for sale of land2' 2 ere two or more "arties in +uic) succession sign a single document w ic sets out t e "romises eac is giving but does not identify eit er of t em as an offeror or offeree 3. 2 ere a number of "ersons sign u" for a com"etition on t e basis of a standard set of rules w ic are meant to set out t e terms of eac com"etitors8 contract wit t e organisers and wit all ot er com"etitors, irres"ective of w et er t e latter ave entered before or after t e individual entering isC er name e'g' t e yac t race in T!e Satanita> Clar3e . Dunra.en D1EFGH &C AF

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CONSID(*ATION
Consideration is somet ing valuable given in return for a "romise and must satisfy bot t e benefitCdetriment and bargainCe.c ange re+uirement' 6ailure to do so will amount to no consideration! Ballant%ne . 2!illott loan to mistress' 1' T!e BenefitIDetri"ent *e/uire"ent T e "romisee must eit er confer a legal benefit on t e "romisor #or anot er s"ecified "arty$ or incur a legal detriment #e'g' a forbearance from suing or e.erting e.isting legal rig ts$! T!o"as . T!o"as 1& for dead husband house' 6or instance, even if someone does not smo)e t ey still suffer a DlegalH detriment w en t ey surrender a legal freedom to smo)e w ic would be considered sufficient consideration' <utual "romises "rovide good consideration for eac ot er/ if ( ma)es a "romise in return for &8s "romise, t is will confer a benefit on & #because & will ave an enforceable legal rig t to ave t e "romise "erformed$ and will also be a detriment to ( #because ( will come under an obligation to "erform t e "romise$' 2' T!e JBar0ainK or (?c!an0e *e/uire"ent T e benefit conferred on t e "romisor or t e detriment suffered by t e "romisee must be given in e.c ange for t e "romise! Beaton . McDi.itt re'oned land> Australian Woollen Mills' 0f not, no contract is establis ed regardless of w et er t e "romisee suffered a detriment or conferred a benefit on t e "romisor'

+O)* BASIC *)L(S O+ CONSID(*ATION

0n order for an act, forbearance or "romise to constitute consideration all of t e four rules must be satisfied' 1. Consi,eration "ust "o.e fro" t!e -ro"isee I#or t e "erson attem"ting to enforce a contract$! T!o"as . T!o"as/ but need not necessarily move to t e "romisor' # # 0f two or more "arties to a contract are regarded as %oint "romisees, consideration may be "rovided by one of t em on be alf of bot or all of t em' & "arty to a contract w o as not "rovided consideration will only be able to enforce a contract if t ey can be regarded as a %oint "romisee wit t e "erson w o did "rovide consideration! Coulls . Ba0ot=s ido (oris

2. 2ast consi,eration is not 0oo, consi,erationE It erefore somet ing t at is given before a "romise is made does not amount to good consideration! *oscorla . T!o"as' Commonly invo)ed w ere after a contractual transaction as been com"leted, one of t e "arties ma)es a "romise w ic t e ot er see)s to enforce! *oscorla . T!o"as D cra'y horse (?ecute, consi,eration is not "ast consideration but somet ing given as "art of t e same transaction as t e "romise and is not given before t e "romise e'g' in a unilateral contract, w ere consideration given by t e offeree as been "rovided by t e time t e contract is made'

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(?ce-tions 4i7 & "romise to "ay for "ast services initially re+uested by t e "romisor in circumstances w ere reasonable remuneration was envisaged by bot "arties is usually considered to be good consideration! La"-lei0! . Brat!wait pardon fees/ 2ao On Lau Liu Lon0 falling shares' 4ii7 & new "romise to "ay an old debt w ic can no longer be enforced #e'g' in courts$ due to a 4tatute of Limitations may be considered to be su""orted by consideration #t e ongoing obligation arising from a "romise to "ay t e debt in t e first "lace$! Case% . Co""issioner of Inlan, *e.enue' 3. Consi,eration "ust $e sufficient $ut nee, not $e a,e/uate 0'e' of some legal value to t e "romisor, but not e+ual or "ro"ortionate to t e su""orted "romise! Woolwort!s Lt, . Gell%/ C!a--el . Nestle royalties comp song' T erefore, unless it is clear #e."ressly or im"liedly$ t at t e alleged consideration is of value to t e "romisor courts are slow to infer t at t e "romisor intended to allow it to be t e "rice for t e "romise' 1. Consi,eration "ust not $e illusor% Iw ic often involves analysis of w et er t e "romisee incurred a real legal detriment' Consideration is illusory w en! 1. T e "romisee ad no legal #Stil3 . M%ric3 unlucky sailors$ or factualC" ysical #Nerot . Wallace$ freedom to do ot er t an w at t ey did or "romised to do 9R 2. 2 en t e "romisee retains an unfettered discretion as to t e "erformance of a "romise! 2lacer De.elo-"ent Lt, . Co""onwealt! P)* timber/ in "articular due to t e "resence of a wide e.em"tion clauses! Britis! ("-ire +il"s 2t% Lt,/ Mac*o$ertson Miller Airline Ser.ices . Co""issioner of State Ta?ation / or if t e "romise is too vague! Dunton . Dunton sober ife "er > Hood #in dissent$' E.am"les of illusory "romises! M 2 ere an agreement e."ressly leaves a vital matter to be determined by one "arty wit unfettered discretion e'g' w ere "arties "ur"ort to enter a contract for sale at a "rice to be fi.ed by a buyer! Go,ec3e . Girwan' M 2 ere a "urc aser8s "romise to "ay a definite sum is sti"ulated to be sub%ect to er obtaining finance w ic is satisfactory to erself and no limits are im"osed as to w et er or not t e terms of a""roved finance are satisfactory! Mee!an . Fones until finance -er Mason F' However, in Mee!an . Fones t e HC& eld t at t e ,sub%ect to- clause was not uncertain and did not amount to unfettered discretion as eac %udge could attribute a meaning to it #eit er reasonable or onest$ and it could also be waived by t e "urc aser' M 2 ere an airline com"any8s "rima facie assum"tion of an obligation to carry a "assenger on a flig t designated on a tic)et ad been entirely eroded by a clause w ic "rovides t at in no circumstances will t e airline be liable for a failure to effect carriage! Macr*o$ertson Miller Airline Ser.ices . Co""issioner of State Ta?ation B -er Barwic3 CF' M 2 ere an em"loyer com"any "romised t at a newly a""ointed em"loyee would be allowed to "artici"ate in a senior staff e+uity s aring sc eme w ic bot "arties )new did not yet e.ist and w ose nature was to be determined solely by t e em"loyer wit out any definite limits on is discretion! Biotec!nolo0% . 2ace

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& "romise to "ay a subsidy w ose amount was to be determined by t e "romisor in its unfettered discretion! 2lacer De.elo-"ent . Co""onwealt! - P)* timber

E.ecuted consideration is less li)ely to be illusory i'e' if a "romise as been offered in return for an act or forbearance no consideration as been given until t e act or forbearance as actually occurred #e.ecuted consideration$'

T*O)BL( WIT' A22LICATION O+ CONSID(*ATION *)L(S

Genuine Co"-ro"ises +or$earance fro" -ressin0 a 0roun,less clai" & "romise to forbear #or actual forbearance$ from suing on a claim genuinely #bona fide$ believed to be sound is good consideration regardless of w et er t e claim would ave succeeded in court or not! 'ercules Motors 2t% Lt, . Sc!u$ert/ Callis!er . Bisc!offs!ie" +onduras bond' +or$earance fro" raisin0 a ,efence w!ic! woul, !a.e faile, & "romise to forbear #or actual forbearance$ from defending an action w ic one genuinely believes one as a rig t to defend #under a new contract$ is good consideration even if no suc rig t e.ists #e'g' since it is "art of an e.isting legal obligation$! Wi0an . (,war,s defect house' )n,erta3in0s to -erfor" or -erfor"ance of e?istin0 ,uties &rises in situations w ere t ere is a one=sided variation to a contract w ere one "arty #"o,if%in0 -art%$ eit er #i$ assumes an additional obligation or #ii$ agrees to release t e ot er "arty #$eneficiar%$ from an obligation' 1. If a -ro"isee un,erta3es to -erfor" 4or -erfor"s7 so"et!in0 t!at t!e% are $oun, to ,o un,er t!e 0eneral law 4i.e. ot!er t!an t!e law of contract7 t!ere is usuall% no consi,eration e'g' giving evidence in court w en obliged by sub"oena! Collins . Go,efro% , guineas for court' # However, if a "romisee w o at t e "romisor8s re+uest underta)es to "erform somet ing more t an t e ,minimum- legal duty t is will be good consideration! Glas$roo3 Bros Lt, . Gla"or0an Count% Council e-tra police protection'

2. If a -ro"isee un,erta3es to -erfor" 4or -erfor"s7 no "ore t!an t!e% are $oun, to ,o un,er an earlier contract wit! t!e -ro"isor t!ere is usuall% no consi,eration& Stil3 . M%ric3' # However, a "romisee w o re=commits to "erform #or actually "erforms$ an e.isting contractual duty owed to t e "romisor will ave given good consideration if! i. T e "romisee at t e "romisor8s re+uest gave ,somet ing e.tra- e'g' increasing t e letter of credit "rice! Nort! Ocean S!i--in0 Co Lt, . '%un,ai Construction Co Lt, 4T!e Atlantic Baron7 drop in ./0 9R ii. T e "romisee genuinely dis"uted t e e.isting duty and gave t e re="romise to "erform #or actual "erformance$ in a com"romise setting! Wi0an . (,war,s defect house 9R

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iii. T e "romisee can demonstrate t at t ey were ,disc arged- from t eir e.isting duty #i'e' t e original contract was terminated by agreement$ so t at a re= "romise to do t e same amounts to good consideration! 'artle% . 2onson$%
lucky sailors!

3. 2ractical Benefit (?ce-tion T e e.isting legal #contractual$ duty rule will not a""ly if t e beneficiary8s "romise to "erform an e.isting legal duty confers a "ractical benefit to t e modifying "arty i'e' t e "ractical benefit is good consideration! Willia"s . *offe% refurbish flats! T is may be distinguis ed from Wi0an . (,war,s, w ere t ere was a dis"uted "romise, w ereas in Willia"s . *offe% it was a undis"uted "romise' <ost im"ortantly, t e modifying "arty must not ave given a new "romise as a result of economic duress, t reat or fraud on t e "art of t e beneficiary' :enerally, economic "ressure in a contractual situation in itself is insufficient to constitute duress! T!e Si$eon an, T!e Si$otre -er Gerr G and 2au On . Lau Liu Lon0 -er Lor, Scar"an' Economic duress is "resent if modifying "arty is de"rived of free consent ? agreement w ic may be tested by an e.amination of t e following #2au On . Lau Liu Lon0$! M 2 et er t e modifying "arty "rotested or not M 2 et er at t e time of t e alleged coercion t ere was an alternative course available suc as an ade+uate legal remedy M 2 et er t e modifying "arty was inde"endently advised M 2 et er t e modifying "arty after entering t e contract too) ste"s to avoid it e'g' did t ey intend to re"udiate t e new agreement T e "ractical benefit rule in Willia"s . *offe% as been acce"ted in &ustralia wit t ree modifications #Musu"eci . Wina,ell fruit shop rent$! 1. To allow t e modifying "arty to acce"t less rat er t an "ay more for t e beneficiary8s "erformance #may be used to override +oa3es . Beer B loan interest$' 2' T e e.ce"tion will only a""ly if t e "romise as not been induced by ,unfair "ressure1' & "ractical benefit may only constitute good consideration if t e beneficiary8s "erformance is wort more t an any remedy against t e beneficiary #e'g' damages$ alt oug in t eory, contract damages s ould reflect t e value of "erformance alt oug in "ractice, given t e uncertainties, delays and costs involved in litigation, "erformance is usually "referable' 3ote! (ot t e "rinci"les of Stil3 . M%ric3 and Musu"eci . Wina,ell will a""ly in situations of coercion to render a contract unenforceable, and money "roduced by duress can be recovered! Sun,ell . Lannoulatos iron price increase' If a -ro"isee un,erta3es to -erfor" 4or -erfor"s7 so"et!in0 w!ic! t!e% are $oun, to ,o un,er a contract wit! a t!ir, -erson It ere is good consideration since t e "romisor could not ave com"elled "erformance of t e duty to t e 1rd "arty since t e duty to "erform t e duty to t e 1rd "arty was not owed to t e "romisor! S!a,well . S!a,well marrying nephe / 2ao On . Lau Liu Lon0'

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2ro"ises to acce-t -art -a%"ent in full satisfaction of a ,e$t ;art "ayment of a debt does not constitute good consideration for an agreement to disc arge t e debt #2innel=s case$ as it involves "erformance of less t an an e.isting contractual duty #e.tension of Stil3 . M%ric3$' T e rule establis ed in Willia"s . *offe% 4refur$is!e, flats7 does not a""ly to "artial "ayment of debts! *e Select"o.e' T erefore, after a debtor "rovides a "art "ayment or "romise in res"onse to t e creditor8s "romise to disc arge t e full debt, t e creditor is free to renege on t is "romise and sue for t e un"aid balance! +oa3es . Beer' (?e"-tions& situations w!ere -art -a%"ent -ro.i,es 0oo, consi,eration for a -ro"ise to ,isc!ar0e t!e full ,e$t& 1' 2 en t ere is a bona fide com"romise 2. 2 en t ere is "art or full "ayment by a t ird "arty! 'irac!an, 2una"c!an, . Te"-le 1ndian lenders son 3. 2 en t e "art "ayment is accom"anied by ,somet ing e.tra- e'g' it is "aid before due date! Coul,er% . Bartru"/ or accom"anies a non=monetary good w ic may be more beneficial t an money! 2innel=s case less earlier' 1. 2 en t e "ayment is in a non=monetary form! 2innel=s case 9. 2 en a debtor w o cannot "ay all is creditors in full agrees to "ay eac of t em some "ercentage of t e debt and t e creditors %ointly agree amongst t emselves to forbear from "ressing a claim to t e full amount owed in return for every ot er creditor8s "romise to do t e same #com"osition agreement$! Coul,er% . Bartru"' C. 2 en t e debtor can invo)e t e "rinci"le of "romissory esto""el! Fe Maintien,rai 2t% Lt, . Aua0lia 8 Aua0lia hairdressers rent! Hence, a "romise to acce"t JFF in disc arge of a J1000 debt is unenforceable due to lac) of consideration but a "romise to acce"t J1 "lus an a""le in disc arge of t e same debt will be enforceable' 0n "ractice, if a creditor is "re"ared to acce"t a lesser sum in full satisfaction of a debt, t e rule is avoided t roug t e use of a deed w ic is binding and enforceable in t e absence of consideration' 0n England, t e "ractical benefit e.ce"tion cannot be a""lied to "art "ayment of a debt since t is would involve a decision in t e Court of &""eal #Willia"s . *offe%7 overruling a House of Lords decision #+oa3es . Beer$' However, in &ustralia +oa3es . Beer is not binding and it is "ossible to ta)e t e view t at "art "ayment of a debt is a "ractical benefit and a""ly Musu"eci . Wina,ell' Co"-osition A0ree"ents 0t is settled law t at a debtor can "lead t e com"osition agreement as a defence s ould any creditor w o was "arty to t e agreement subse+uently attem"t to sue t e debtor for t e full debt' However, a""lication of +oa3es would suggest t at t e debtors com"osition arrangement amounted only to a "romise to "ay less t an t e amount due to eac creditor and would t us not amount to consideration for t e creditor8s "romise to forbear from "ressing is full claim' 0n addition, eac creditor8s "romise to forbear may ave been made only to t e ot er creditors and not to debtor, i'e' t e debtor is not "rivy to t e "romise and t us cannot enforce it'

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INT(NTION TO C*(AT( L(GAL *(LATIONS

0ntention is e.amined ob%ectively #including by reference to surrounding circumstances beyond a written document$ alt oug if a sub%ective intention of a "arty not to bound is )nown #i'e' by reference to ob%ective factors$ a contract will not be formed! Air Great La3es 2t% Lt, . GS (aster 4'ol,in0s7 2t% Lt, airline sale' 6actors w ic determine w et er "arties intended legal relations include #i$ t e sub%ect matter of t e agreement/ #ii$ t e status of t e "arties to t e agreement/ and #iii$ t e relations i" of t e "arties! (r"o0enous . Gree3 Ort!o,o? Co""unit% of SA Inc ' 1. Co""ercial a0ree"ents # # &greements made in a commercial or business conte.t are "resumed to be made wit an intention to create legal relations! (,war,s . S3%wa%s Lt, redundant pilot> Ban/ue Brussels La"$ert SA . Australian National In,ustries letter of comfort! T erefore, a "arty see)ing to deny t e enforceability of suc a transaction bears t e onus of "roving t at it was not intended to be binding! Fones . 2a,a.atton B
daughter study la !

T is "resum"tion may be rebutted! = by e."ress words e'g' ,binding in onour only-! Fones . @ernon=s 2ools Lt, an, *ose> +ran3 Co . F* Cro"-ton 8 Bros Lt,, 9R = t e circumstances considered as a w ole! +or, Motor Co Lt, . A"al0a"ate, )nion of (n0ineerin0 an, +oun,r% Wor3s ' 0f a statement in a commercial document was not intended to be as a contractual "romise, t e onus lies on t e "arty alleging a contract to demonstrate ot erwise! Gleinwort Benson Lt, . Mala%sia Minin0 Cor- B!, ' & letter of comfort #document given to a ban) by a "arent com"any assuring t at t e "arent com"any will su""ort t e subsidiary 5 39T a guarantee$ is unli)ely to ave intended to create legal relations if #i$ t e wording was not discussed in advance, #ii$ t ere was no evidence of reliance by t e lender and #iii$ t e letter was ,clearly intended to be ambiguous- and #iv$ t e e."ressions ,vague and woolly-! Australian (uro-ean +inance Cor-oration . S!ea!an '

2. +a"il%E ,o"estic or -urel% social a0ree"ents T e a""roac to agreements made in a domestic or social conte.t is effectively neutral alt oug it as been eld t at t ere is a "resum"tion a0ainst an intention to create legal relations! Fones . 2a,a.atton/ Balfour . Balfour sick ife &23/ but t is was criticised in! (r"o0enous' T erefore, a "arty see)ing to enforce a non=commercial transaction bears t e onus of "roving t at it was intended to be binding! (r"o0enous' Se-aratin0 s-ouses Courts ave generally been willing to find an intention to create legal relations w ere s"ouses ave se"arated or are about to do so! Merritt . Merritt divorce home &43/ cf' to s"ouses ,living in amity-' 6inancial agreements between s"ouses are now sub%ect to t e +a"il% Law Act 16;9 and are sub%ect to general contract law'

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2ro"ises relatin0 to !ousin0 Courts ave generally been willing to find an intention to create legal relations in cases involving "romises relating to ousing or "ro"erty rig ts! To,, . Nicol 0cots aunty/ wit t e main factor being t e degree of reliance by t e "laintiff on t e agreement! Wa3elin0 . *i-le%' T erefore, in a domestic setting, an agreement t at antici"ates substantial reliance by one of t e "arties is li)ely to be intended to be binding' Co""ercial a0ree"ents $etween fa"il% "e"$ers 0f a transaction between family members is essentially commercial in nature, t e intention re+uirement is satisfied! *oufos . Brewster/ Snellin0 . Fo!n Snellin0 Lt, ' 3. A0ree"ents $etween "e"$ers of unincor-orate, .oluntar% associations :enerally, consensual arrangements between members of unincor"orated voluntary associations #e'g' t e rules of t e association or clubs$ are not intended to create legal relations! Ca"eron . 'o0an' However, t ere is increasing %udicial willingness to intervene and "rotect members entitlements in cases involving denial of "ro"erty rig ts, denial of t e rig t to wor) or denial of natural %ustice albeit not on t e basis of breac of contract but on e+uity! McGinnon . Gro0an' 0f t e voluntary association is incor"orated under legislation #e'g' Associations Incor-oration Act 1653 #342$$ its members are li)ely to be statutorily deemed to be in a contractual relations i"' However, t e rules of an unregistered trade union may sometimes constitute a contract between its members! Ma3in . Galla0!er' 1. A0ree"ents wit! Go.ern"ent A0encies & government agreement will be binding if it is commercial in nature' 0n contrast, an agreement will not be binding if it involves im"lementation of government "olicy or administration function! Australian Woollen Mills 2t% Lt, . Co""onwealt!/ A,"instration of 2a-ua New Guinea . Lea!% 4ticks on cattle5" even if t e government instrumentality in "erforming a statutory duty #e'g' anding out information$ as c arged a fee for t is service! Cos!ott . Woolla!ra Munici-al Council' 9. 2reli"inar% A0ree"ents ;arties w o ave negotiated t e "rinci"al terms of a "ro"osed transaction may enter into a -reli"inar% written a0ree"ent #e'g' eads of agreement$, w ic may be e."ressed to be ,sub%ect to contract- or ,sub%ect to t e "re"aration of a formal contract-' ;reliminary agreements may fall into one of t ree categories! Masters . Ca"eron 1' &ll t e terms of t e bargain are finalised and t e "arties intend to be bound immediately but "ro"ose to restate t e terms in a form w ic is fuller or more "recise but not different in effect #no conditional terms$' T e "arties are t us bound w et er or not a later formal document is signed' T e "arties ave ,com"letely agreed u"on all t e terms of t eir bargain- and do not intend to vary t ese terms but ave made "erformance of one or more terms

2'

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conditional u"on t e e.ecution of a formal document' T e "arties are t us bound to bring t e formal document into e.istence'

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1'

T e "arties did not intend to ma)e a binding agreement at all until e.ecution of a formal contract' T us, t e "arties are not bound unless a formal document #contract$ is signed'

Bltimately, w et er a "reliminary agreement relays a binding intention de"ends on t e language used' Bse of e."ressions suc as ,sub%ect to contract- or ,sub%ect to formal contract- indicate t at t e "arties ave done no more t an establis a basis for a future agreement and t at t e "reliminary agreement was not intended to be binding! Masters . Ca"eron' 0f t e "reliminary agreement is intended to binding t en a furt er +uestion of w et er it is sufficiently com"lete to be ca"able of constituting a binding contract arises' A,,ition of +urt!er Ter"s 4im"ly because a "ro"osed future contract is intended to include furt er terms does not "revent a "reliminary agreement from being binding, "rovided t at t ese terms can be settled wit out furt er agreement between t e "arties! Go,ec3e . Girwan' However, if t e agreement re+uires furt er agreement between t e "arties it cannot be binding, i'e' an agreement to agree Dto furt er agreementCnegotiationH is not enforceable! Ma% an, Butc!er Lt, . T!e Gin0/ Go,ec3e . Girwan'

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)NC(*TAINTL AND INCOM2L(T(N(SS

Certainty and com"leteness overla"s wit t e conce"t of intention and also t at of offer and acce"tance' 0n determining w et er an agreement fails to ac ieve contractual effect c ec) for t e following #in t is order$! 1. 2 et er t e "arties words and conduct reveal a common intention to be contractually committed at t e stage of negotiations at w ic a contract is alleged to ave been made #lac3 of finalit%$ 2. 2 et er t ere is a ,essential matter- w ic re+uires furt er agreement between t e "arties #lac3 of co"-leteness$ 3. 2 et er t e court is unable to attribute a "articular meaning to a ,essential matter- as it as been outlined in suc vague and difficult to inter"ret terms #incura$le .a0ueness$ 1. 2 et er a "arty as unfettered discretion to determine t e actual content of a basic obligation #,vital matter-$ 9R an unfettered discretion as to w et er or not to "erform it #illusor% consi,eration$ &greements w ic are silent in relation to an essential term are to be distinguis ed from t ose w ic "rovide t at t e "arties will reac future agreement on t at term, as a court may im"ly an obligation to settle t e essential term in t e former but not if t ere is an agreement to agree! Ma% an, Butc!er Lt, . T!e Gin0' (ssential Ter"s &n agreement will be sufficiently com"lete if t e "arties ave reac ed agreement on t e essential terms! T!or$% . Gol,$er0. 2 et er omission of a term "revents formation of a contract re+uires analysis of! 1' T e im"ortance or essentiality of t e term 2' T e reason as w y t e term was left out e'g' did "arties fail to reac agreement on t e issue/ deliberately defer agreement/ or sim"ly fail to consider it' 1' 2 et er t e agreement remains w olly e.ecutory #neit er "arty as "erformed$ or as been w olly or "artly "erformed on one side E.am"les of Essential Terms! # 4ale of land! "arties, "ro"erty and "rice! 'all . Buust depreciating land # 4ale of goods! failure to sti"ulate "rice may not be fatal as 4ale of :oods &cts im"ose an obligation to "ay a reasonable "rice! 'all . Buust -er Win,e%er F in ,issent # &greement for a lease! "arties, "ro"erty, duration of lease! 'ar.e% . 2ratt/ and rent! *an,aNNo . Goul,in0' Courts may im"ly obligations in a transaction suc as com"leting eac ste" wit in a reasonable time! Ca.allari . 2re"ier *efri0eration

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(?-ress Settle"ent of an (ssential Ter" ;arties may ma)e a valid contract t at defers agreement on an essential term if t ey ave agreed to an effective mec anism in w ic t at term may be su""lied w ic does not de"end u"on furt er agreement between t e "arties! Council of )--er 'ouse . Australian C!illin0 E.am"les! 1' &n e."ress statement e'g' t e "rice will be JK e'g' in t e event agreement as to t e "rice cannot be reac ed' 2. & formula or standard #reasonable rental or mar)et valuation e'g' for variable interest rates$ w ic may be a""lied by t e court! Wennin0 . *o$inson 3. & 1rd "arty suc as a s"ecified valuator or arbitrator w o will determine t e term! Boo3er In,ustries . Wilson 2ar3in0 1. &n agreement t at one "arty to t e contract, t roug an e.ercise of controlled discretion, may determine t e term! Go,ec3e . Girwan However, if t e mec anism itself fails t e agreement will be eld to be ineffective' E'g'! M 0f s"ecified 1rd "arty refuses or is unable to "erform t e tas)! Geor0e . *oac! M 0f standard or formula to be a""lied is not sufficiently clear or certain due to an inability to establis ob%ective criteria e'g' due to t e uni+ueness of t e "ro"erty in consideration! 'all . Busst -er Di?on CF/ W!itloc3 . Brew land for 0hell <ore broadly, an inability to assess a term of an agreement in an ob%ective manner e'g' due to its uni+ueness, will render t at term unenforceable! Biotec!nolo0% Australia . 2ace' I"-lie, Settle"ent of an (ssential Ter" Courts will usually discover im"lied terms #including an im"lied "rovision on a vital matter$ if! 1' T e term is necessary to ma)e t e agreement wor) in t e way bot "arties, if acting reasonably, would ave intended it to wor) #deduced from words and conduct of t e "arties and in erent nature of transactions of t e )ind$ 2. T e "arties ave "reviously conducted a similar transaction suggesting t at "rovisions governing earlier decisions would also a""ly to t e current agreement in +uestion! 'illas . Arcos e-tra timber sale! 3. T ere is a trade custom #w ic would ave been )nown to bot "arties as reasonable "ersons$ t at "arties doing business of t e )ind in issue ave "articular res"onsibilities! 'illas . Arcos' A0ree"ents w!ere one -art% is to ,eter"ine "atters &n agreement e."ressly "roviding t at matters may be determined by one "arty alone may be a valid contract "rovided t at t e matters are subsidiary and not vital 9R if vital, determination is sub%ect to controlled discretion or ob%ective limits' T erefore, a "arty8s ability to freely determine an essential term will undermine t e contract, owever, controlled discretion as to an essential term or an unfettered discretion regarding a non=essential term will not! Go,ec3e . Girwan'

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(?ecute, Contracts :enerally, t e furt er t e "arties ave "erformed t e contract t e less li)ely courts are to find t at t e agreement was incom"lete or uncertain, and will more readily im"ly reasonable terms to give effect to t e "arties8 intentions! +ole% . Classi/ue Coac!es Lt, an, Lor3 Air Con,itionin0> *efri0eration . Co""onwealt!' Co"-le?it% of Transaction 0n reasonably ,straig t forward- transactions #T!o"son . W!ite$ a court will generally be able to ma)e necessary im"lications' However, t e more com"le. and novel an agreement is, t e less li)ely t e court will fill ga"s in an agreement! Trawl In,ustries of Australia . (ffe" +oo,s. A0ree"ents to Ne0otiate .s A0ree"ent to A0ree 0n England, an agreement to negotiate lac)s t e certainty re+uired to constitute a legally enforceable obligation since "arties are free to wit draw at any time! Walfor, . Miles. 0n 342, a "romise to negotiate in good fait may be enforceable as it is not an agreement to agree since it does not re+uire "arties to reac agreement but to ma)e good fait efforts to reac agreement and only t en, if t ey cannot agree are t ey free to wit draw! Coal Cliff Collieries . Si e!a"a -er Gir$% 2 8 Wa,ell AFA/ Aiton Australia . Transfiel, -er (instein F' An a0ree"ent affecte, $% uncertaint%E inco"-leteness or illusor% ter"s can $e sa.e, ifO 1. T e incom"lete, uncertain or illusory term or "art is not essential to t e agreement and t e court can infer an intention t at t e agreement s ould remain valid and enforceable wit out t e relevant "rovision #se.erance$! +itN0eral, . Masters' However, if courts infer an intention for an uncertain term to remain in t e agreement t en severance is not "ossible and t e agreement will not be enforceable! W!itloc3 . Brew' 2. T e incom"lete, uncertain or illusory term or "art is not essential #e'g' sub%ect to finance$ and as been inserted for t e benefit of one of t e "arties w o t en wai.es co"-liance wit t is "rovision allowing t e remainder of t e contract to be enforceable! Bra,for, . Pa!ra' However, if t e uncertain clause is essential to t e agreement it may not be waived! Gri"e . Bart!olo"ew'

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(STO22(L
& "rinci"le of fairness under w ic a "erson #i$ w o induces anot er "erson to ma)e an assum"tion &3* #ii$ t ereby leads t at ot er to act in reliance on it, to be esto""ed #"revented$ from subse+uently contradicting t e assum"tion since t is would cause t e reliant "arty to suffer detriment' 'istor% of (sto--el 2reD1591! Re"resentations as to future conduct #e+uitable esto""el$ and fact #common law esto""el$ were e+ually enforced if t ey induced anot er to act in reliance and cause detriment if t ey were subse+uently contradicted' For,en . Mone% 415917! Re"resentations as to future conduct #i'e' "romises$ are only binding under contract' Esto""el may no longer be used as a ,bac)door- met od of enforcing a "romise lac)ing consideration and is limited to re"resentations as to fact #common law esto""el$' Two e.ce"tions to t e rule in For,an . Mone% develo"ed in e+uity courts #e+uitable esto""el$! 1. (/uities of ac/uiescence 4-ro-rietar% esto--el7 =9"erated w en a landowner led a relying "arty to assume t at t ey ad or would be granted an interest in t at land' 0f t e relying "arty acted to is or er detriment on t e fait of t at assum"tion #e'g' e."ended money in im"roving t e land$ t en t e re"resentor would be esto""ed from not giving an interest' T erefore, "ro"rietary esto""el can be an inde"endent cause of action' Courts often find t at t e most a""ro"riate way to remove t e relying "arty8s detriment is to com"el t e "ro"erty owner to onour t e re"resentationCassum"tion! Dillw%n . Llewel%n/ *a"s,en . D%son/ Cra$$ . Arun' 2. 2ro"issor% esto--el 9"erated w ere one "arty in a contract led a second "arty to believe t at certain contractual rig ts would not be enforced against t em' 0f t e second "arty t en c anged is or er "osition on t e fait of t at assum"tion t e first "arty would not be allowed to enforce t ose rig ts! Central Lon,on 2ro-ert% Trust . 'i0! Trees 'ouse' 6ollowing 'i0! Trees and Co"$e . Co"$e, "romissory esto""el could only be used as a defence #e'g' if t e "arties were already in an e.isting contract$ and not as an inde"endent source of action since t is would effectively undermine t e doctrine of consideration' T is rule was acce"ted in &ustralia by Fe Maintien,rai . Aua0lia and Le0ione . 'atele%' Walton Stores 4Interstate7 . Ma!er 416557 unified "ro"rietary and "romissory esto""el suc t at bot were an inde"endent source of new rig ts' T e doctrine of consideration was not undermined since t e elements and remedy "rovided by esto""el and contract were different, im"ortantly, e+uitable esto""el aims to remove detriment sub%ect to t e discretion of t e court and not com"el ad erence to t e re"resentation #alt oug t is may be ordered$'

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(sto--el .s Misre-resentation an, +rau, ;rinci"les of esto""el are only concerned wit inconsistent conduct, t erefore, w ere a misre"resentation as been made, esto""el will only "rotect against arm t at results from an attem"t by t e re"resentor to de"art from t at assum"tion rat er t an it being untrue! Mur-!% . O.erton In.est"ents'

(SS(NTIAL (L(M(NTS O+ (STO22(L

1. Assu"-tion T e relying "arty must ave ado"ted an assum"tion of fact! For,en . Mone%/ or future conduct! Waltons Stores' :enerally, t e assum"tion must relate to a legal relations i"! Waltons Stores -er Brennan F' &lt oug e.ce"tions e.ist in regards to! an e."ectation of an interest in land! Mo$il Oil Australia Lt, . Wellco"e International 2t% Lt,> Dillw%n . Llewel%n/ and "arent ood or co abitation! W . G' 2. In,uce"ent T e assum"tion may be induced by conduct or absence of conduct of t e re"resentor! Waltons Stores' 3. Detri"ental reliance Relying "arty must ave acted on t e assum"tion in a way t at eCs e will suffer detriment if re"resentor de"arts from t e assum"tion! Co""onwealt! . @erwa%en
naval retiree!

E.am"les of *etrimental Reliance # 2asted e."enditure of money eit er on im"rovements to t e re"resentor8s land! Dillw%n . Llewel%n/ or in "re"aration for a contract wit t e re"resentor! Waltons Stores' # Time and energy in t e "erformance of services for t e re"resentor suc as domestic services! 2u$lic Trustee . Wa,le%/ or building wor)! Fac3son . Cros$% No 2. # 0nactivity leading to a loss of o""ortunity to obtain a benefit or avoid a loss! not e.ercising a contractual rig t suc as an o"tion to renew a lease! S 8 ( 2ro"otions . To$in Brot!ers 2IL/ failing to commence litigation during t e statutory limitation "eriod! *e Lin,sa% . S"it!/ or consenting to ad%ournment of litigation! Collin . 'ol,en' However, inactivity will not be regarded as detrimental if t ere is not ing t e relying "arty could ave done to im"rove its "osition! T!o"son . 2al"er' # Commencement or continuation of litigation! Co""onwealt! . @erwa%en # Cost of rearing c ildren! W . G # Entering a witness "rotection "rogram and t us losing ,t eir lawful means of liveli ood-! Gra% . National Cri"e Aut!orit%

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*etriment must be assessed at t e time t e re"resentor see)s to abandon t e relevant assum"tion and not before! Fe Maintien,rai . Aua0lia/ and must be bot sufficient and ade+uate #unli)e consideration$! 'aw3er 2acific 2IL . 'elico-ter C!arter 2IL ' *etriment does not actually ave to be suffered at t e time t e esto""el is establis ed wit t e "ros"ect of detriment being sufficient' However, t is "ros"ect must be reasonably founded and cannot be mere s"eculation! Territor% Insurance Office . A,lin0ton' *etriment cannot sim"ly be due to t e "erformance of a contractual obligation or a loss of an o""ortunity to breac t e contract! Coulls . Ba0ot=s (?ecutor 8 Trustee Co Lt,/ cf' Fe Maintien,rai 2IL . Aua0lia -er W!ite F #not t e ma%ority view$' 1. *easona$leness T e relying "arty s ould ave acted reasonably in ado"ting and acting u"on t e relevant assum"tion! Mur-!% . O.erton In.est"ents 2IL' 9. )nconsciona$ilit% 0t would be unconscionable in t e circumstances for t e re"resentor to de"art from t e assum"tion! Co""onwealt! . @erwa%en' C. De-arture or t!reatene, ,e-arture :enerally an esto""el claim will not arise unless t e re"resentor as de"arted from or t reatens to de"art from t e assum"tion! T!o"son . 2al"er/ alt oug t ere is strong case law to su""ort t e view t at an esto""el comes into effect once an assum"tion as been induced and reasonably relied u"on! Ginto"inas . Secretar%E De-art"ent of Social Securit%'

*(M(DI(S )ND(* (STO22(L

E+uitable remedies #e'g' s"ecific "erformance or in%unction$ aim to remove a detriment, w ic is incurred or will be incurred and are sub%ect to t e discretion of t e court and are not available as of rig t unli)e common law remedies #e'g' damages for breac of contract$' :enerally, if t ere is any doubt w et er a detriment may be removed by material damages or any alternate means t en s"ecific "erformance s ould be ordered unless t e defendant can demonstrate t at somet ing less will be sufficient to remove t e detriment! Co""onwealt! . @erwa%en -er Deane F' However, in certain circumstances monetary relief may be more a""ro"riate! Giu"elli . Giu"elli orchard for son/ for instance! 1. 0t is im"ossible, im"ractical or ina""ro"riate in t e circumstances to fulfil t e relying "arty8s e."ectations e'g' because t eir e."ectations are indefinite, t e assum"tion

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related to a "ro"erty w ic as since been dis"osed of or enforcement of t e assum"tion would cause ards i" to a 1rd "arty! Giu"elli . Giu"elli 2' T e value of t e e."ected benefit is dis"ro"ortionate to t e arm t at would be suffered by t e relying "arty as a result of is or er reliance on t e assum"tion #minimum e+uity "rinci"le$' 0n suc a case, a court must grant t e relief t at is t e minimum necessary to ensure t at t e relying "arty suffers no arm as a result of is or er reliance' 3ote! 0n general, courts are unwilling to "lace a financial value on t e relying "arty8s labour and lost o""ortunities! Fennin0s . *ice/ alt oug in one "rominent case t e relying "arty was com"ensated for t eir services at t e mar)et rate! 2u$lic Trustee . Wa,le%' (sto--el .s Contract *istinguis ed on t e basis of liability and remedy, alt oug since bot e+uitable esto""el and contract arise from a "romise esto""el, it is often "leaded as an alternative to contract' M Contract 5 liability arises from a "romise in t e form of a deed or su""orted by consideration wit t e "laintiff entitled by common law rig t to a monetary remedy w ic would "lace t em in as good a "osition as if t e "romise was )e"t #damages$/ alt oug s"ecific "erformance #an e+uitable remedy$, w ic is not available as of rig t is often ordered by t e court' M (sto--el 5 liability arises from re"resentation as to fact or "romise w ic as induced reasonable reliance suc t at t e relying "arty would suffer detriment if t is re"resentation was not maintained' 3o entitlement to a s"ecific remedy 5 only an e+uity being raised in favour of t e relying "arty w ic is sub%ect to t e court8s discretion' 2reli"inar% A0ree"ents an, (sto--el # # &n esto""el will not arise if t e "arties ave failed to settle an essential term in a "reliminary agreement suc as rent in a lease! Austotel 2IL . +ran3lins Selfser.e 2IL' &n esto""el will not arise if t e "reliminary agreement is binding in onour only! Leo"an=s *ow Mana0e"ent . Co$$e cf' (G No"inees 2t% Lt, . Woolwort!s'

2ri.it% an, (sto--el # & "erson w o is not a "arty to a contract but w o as been led to believe t at t ey are a "arty or will receive a benefit under a contract may be able to establis an esto""el if t ey ave acted to t eir detriment on t at assum"tion! Tri,ent General Insurance Co Lt, . McNiece Bros 2IL' 4imilarly, a re"resentor w o is not a "arty to a contract will be liable if t ey ave induced a relying "arty to act to t eir detriment on t e fait of an assum"tion t at t e re"resentor will abide by t e terms of t e contract! Weir . 'o%le.ans 2IL'

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+or"alities an, (sto--el & contract may be unenforceable if it fails to com"ly wit formal statutory re+uirements e'g' t e re+uirement of a written contract for t e sale of land' T erefore, w ere a "arty as acted to is or detriment on t e fait of an e."ectation t at a written contract will come into e.istence relief may be obtained via e+uitable esto""el! Collin . 'ol,en/ as t e statutory re+uirements of writing do not affect t e o"eration of esto""el since t e action is broug t on t e e+uity raised by t e esto""el and not on t e contract! Waltons Stores . Ma!er' Contract @ariations an, (sto--el 0f a "arty induces anot er to believe t at a contract as been or will be varied or t at a term of t e contract will not be enforced esto""el will "revent t em de"arting from t is re"resentation! M ;re=contractual variations e'g' a "articular term will be inter"reted in a certain way or will not be strictly enforced! Anancon,a Nic3el . (,ensor No"inees 2IL ' M &ssumed state of affairs forming t e basis of an agreement #esto""el by convention$! W!ittet . State Ban3 of New Sout! Wales M Termination of contracts e'g' t at t e rig t to terminate will not be e.ercised even if t e relying "arty breac es t e contract! Le0ione . 'atele%/ or does not fulfil certain contractual conditions! Willin0 . Ba3er' T e ;arol Evidence Rule # 9"erates w ere "arties ave entered into a written document t at a""ears to "rovide a com"lete record of t eir agreement/ and "revents use of e.trinsic evidence w ic subtracts from, adds to, varies or contradicts t e terms of t e written contract # However, an esto""el by convention w ic contradicts a written instrument can be establis ed "rovided t at it is su""orted by clear "roof t at certain legal rig ts ave been given on t e fait of an assurance t at t ey will only be e.ercised in a "articular way! W!ittet . State Ban3 of NSW' # T erefore, assess w et er a "romise forms "art of an enforceable contract' 0f it does not t en and only t en s ould t e a""lication of e+uitable esto""el be considered'

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2*I@ITL O+ CONT*ACT
:enerally, a "erson w o is not a "arty to a contract can neit er enforce t e contract nor incur any obligations under it, but may receive a benefit from a contract! Coulls . Ba0ot=s (?ecutor an, Trustee Co Lt, ido (oris'

(QC(2TIONS TO T'( DOCT*IN( O+ 2*I@ITL

Insurance an, In,e"nification Contracts 1rd "arties are able to enforce insurance contracts! Tri,ent General Insurance Co Lt, . McNiece Bros 2IL/ w ic as been e.tended to contracts involving indemnification due to t eir similarity! Gate Gour"et Australia 2IL . Gate Gour"et 'ol,in0' *estricti.e Co.enants 1rd "arties may incur legal obligations under restrictive covenants affecting land/ Tul3 . Mo?!a%/ and s i"s! De Mattos . Gi$son' Restrictive covenants bind subse+uent owners of land, and limit w at t e land may be used for cf' "ositive covenants suc as a "romise to )ee" a ouse in good re"air w ic do not im"ose legal obligations! *!one . Ste-!ens' A0enc% &gency 5 if a 1rd "arty "romised a benefit under a contract can demonstrate e'g' by consent t at one of t e "arties entered into t e contract as is or er agent &3* was not acting solely for t eir own be alf! 2ic3woo,s 2IL . 2ana0o-oulos Ratification involves t e ado"tion or confirmation of a contract by a "erson not originally bound by it #e'g' t e 1rd "arty$ and may be used to avoid a""lication of t e "rivity rule e'g' in relation to limitation of liability clauses in contracts of carriage of goods! T!e New Lor3 Star' :enerally, a contractual "romise may be broadened to confer a benefit on a 1rd "arty not directly involved in t e ma)ing of an agreement so t at t e 1rd "arty is entitled to enforce t e contract! Scruttons Lt, . Mi,lan, Silicones Lt, -er Lor, *ei,/ if! 1' T e contract ma)es it clear t at a benefit is to be conferred on a beneficiary/ 2' T e contract ma)es it clear t at t e "romisee is acting as agent of t e beneficiary/ 1' T e "romisee was aut orised to enter into t e contract on t e beneficiary8s be alf #or t e contract was subse+uently ratified$ &3* @' T e beneficiary "rovided consideration for t e "romise' Assi0n"ent an, No.ation

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&ssignment involves one of t e original "arties transferring t eir rig ts 39T obligations, under t e contract to a 1rd "arty so t at t e original "arty is no longer able to enforce t ose rig ts' Contractual obligations may not be assigned unless consent is obtained #e'g' via subcontracting or delegation$ and t us remain wit t e original "arty' 3ovation involves t e transfer of rig ts &3* obligations by terminating an e.isting contract and entering a new one, usually on t e same terms but wit one of t e "arties being different' *istinguis ed from assignment in t at novation re+uires consent of all t e "arties to t e e.isting contract unless t e contract aut orises a "arty to be substituted in t e "lace of an original "arty wit out t e need for furt er agreement! 2acific Bran,s S-ort 8 Leisure 2IL . )n,erwor3s 2IL Trust 0f t e "romisee olds rig ts under t e contract on trust for a beneficiary #1rd "arty$, t e beneficiary may indirectly enforce t e contract, by suing t e "romiseeCtrustee, or more ty"ically by suing t e "romisor wit t e "romiseeCtrustee %oined as a defendant! Tri,ent . McNiece Blue 6ircle indemnity' & trust is a relations i" w ereby "ro"erty #real, tangible, intangible$ is Lentrusted8 by a settler #grantor$ to be managed by a trustee #w o as legal owners i"$ for t e benefit of anot er w o as beneficial owners i" #beneficiary$' 0n order to determine w et er t ere is an intention to create a trust courts will e.amine t e language of t e "arties, t e conte.t of t e transaction and circumstances of t e agreement! Tri,ent . McNiece' 0ntention to create a trust will often be a %oint intention but t e "romisee8s intention alone is sufficient to create trust! Tri,ent . McNiece/ in suc a case, t e "romisee will be bot t e settlor and trustee of t e trust' 3ote! T e "erson ma)ing a contractual "romise to benefit a 1rd "arty is t e "romisor' T is "romise is made to t e ot er "arty in t e contract #"romisee$' T e 1rd "arty see)ing to enforce t e contract is referred to as t e beneficiary' Mislea,in0 or Dece-ti.e Con,uct T e Tra,e 2ractices Act 16;1 #Ct $ and 4tate and Territory +air Tra,in0 Acts "ro ibit misleading or dece"tive conduct in trade or commerce and a "erson w o suffers loss as a result of suc conduct is entitled to recover damages or suitable remedy' Recovery does 39T de"end on t e enforcing of a contract but rat er an assertion of statutory rig ts' 0f t e contractual "romise is a warranty t at a "articular fact is true t ere will generally be no esto""el as t e arm suffered by t e beneficiary does not result from t e "romisor acting inconsistently before and after formation of t e contract #i'e' t e "romisor t emselves believe t e fact to be true$ but sim"ly from t e falsity of t e warranty! Accountin0 S%ste"s 2HHH 4De.elo-"ents7 2IL . CC' Australia Lt, '

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Contract Law 1, 2011

*(M(DI(S A@AILABL( TO A 2*OMIS((

Da"a0es :enerally if non="erformance of an obligation to a 1rd "arty causes no "articular arm to a "romisee t en t e "romisee will only be entitled to nominal damages! Tri,ent . McNiece' However, if t e "romisee olds contractual rig ts on trust for a 1rd "arty beneficiary, t en t e "romisee can recover all t e 1rd "arty could ave recovered if t ey were "art of t e contract! Coulls . Ba0ot=s (?ecutor an, Trustee Co Lt, ' T!e (n0lis! A--roac! 0n Fac3son . 'oriNon Lt, :16;9<, it was eld t at w enever a contract is made for t e benefit of a 1rd "arty, t e "romisee is entitled to recover damages in res"ect of t e loss suffered by t e 1rd "arty even if t e "romisee is not a trustee' However, dicta of t e House of Lords suggests t at recovery s ould be restricted to contracts w ere #i$ 1rd "arties stand to gain indirectly by "erformance or #ii$ t ere may be a "resum"tion t at t e "romisee imself or erself suffered a loss as a result of t e de"rivation of t e 1rd "arties! Woo,ar In.est"ent De.elo-"ent Lt, . Wi"-e% Construction Lt, :165H<. 0n Alfre, McAl-ine Construction Li"ite, . 2anatown Lt, :2HH1<, t e House of Lords eld t at if a direct remedy is available to a 1rd "arty against t e "romisor #e'g' under anot er contract$ t en t e "romisee is only entitled to nominal damages but did not consider t e correctness of Fac3son . 'oriNon' 3ote! T e House of Lords decision #Alfre, McAl-ine Construction Li"ite, . 2anatown Lt,$ effectively restricts t e Court of &""eal8s decision in Fac3son . 'oriNon' 4"ecific e.ce"tions to t e general rule recognised by Englis courts! # Contracts for t e carriage of goods being sold to a 1rd "arty! Dunlo- . La"$ert # Contracts concerning goods w ere t ey may be transferred to a 1rd "arty before t e breac occurs! T!e Al$aNero # (uilding contracts in w ic it is foreseeable t at land will be transferred to a 1rd "arty! St Martin=s 2ro-ert% Cor-oration . Sir *o$ert McAl-ine Lt, S-ecific 2erfor"ance 9nly available if t e "romisee is willing or obliged by a trust to sue on be alf of t e 1rd "arty! Tri,ent . McNiece/ &3* if damages are inade+uate' However, it is generally acce"ted t at damages will be an inade+uate remedy for breac of a "romise to confer a benefit on a 1rd "arty, even if t e "romise is sim"ly to "ay money! Tri,ent . McNiece' 4"ecific "erformance is unavailable or unsuitable if t e contract involves t e #i$ "erformance of "ersonal services, #ii$ w ere t e su"ervision of t e court would be re+uired to enforce t e decree or #iii$ t e decree would be futile #e'g' if "erformance is re+uired at a "articular time or defective "erformance as been tendered as in Fac3son . 'oriNon 'oli,a%s Lt,'

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