1 Law of Contract B Summary Summaries

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Law Of Contract B - Summary - Summaries
Law Of Contract B (University of Queensland)
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Dimmock v. Hallett (1866) LR 2 Ch App 21

- Advertisement for the auction of land described the landf as fertile and improvable (misrep 1) and as each lot
of land to be let out to tenants at a high price. It was not mentioned that the tenants had already given notice
to leave the property and the property had been let out to other tenants at a lower price (misrep 2).
- Buyer of the land brought an action for recession of the contract for misrepresentation of (amongst others) the
quality of the land and the tenancy.
o Held: with respect to fertile and improvable
A mere general statement that land is fertile and improvable, whereas part of it has been
abandoned as useless, cannot [except where land is irreclaimable]be considered such a
misrepresentation as to entitle a purchaser to be discharged. In the present case, I think the
statement is to be looked at as a mere flourishing description by an auctioneer. Sir GJ Turner LJ
- Statements that are general are mere puffs except where that statement represents something totally different.
E.g. if the land was covered with water and irreclaimable and the ad said fertile and improvable, that would
not be a mere puff.
- Misrep 2 was held to be misrepresentation because it was not true that the farm had been let
Carlill v. Carbolic Smoke Ball [1892] 2 QB 484
- Company made a claim about their product. Turned out to be false.
- Action was brought to recover the cost of the product and company claimed mere puffery.
- Statement was not a mere puff. It was too specific. In the advert, company said they deposited 1K into the
bank and this showed sincerity and confidence in their product.
- Statements that are precise and specific combined with sincere conduct, will not be mere puffs.
Mitchell v. Valherie [2005] SASC 350
- Advert for house stated that the house needed nothing to spend perfect presentation.
- After purchasing the house faults and cracks were evident in the house and the P brought an action for
misrepresentation as to the condition of the house.
- Trial Judge held that the words were a misrepresentation.
- Held: No misrepresentation
o Majority (White J and Layton J); Minority (Sulan J)
o Minority noted the need to take into account the position of the buyers and their experience to judge
whether the statement was one of fact or simply a mere representation.
o Where the statement was made in extensive and complex negotiations to sophisticated investors, the
statement may be regarded as mere puffery.
o Generally statements made in respect of house sales or advertising will be puffery to draw in prospective
buyers.
- Whether a statement is one of fact or puffery will depend on the circumstances in which the statement was said
and the audience of that statement.
- Ultimately a question of fact.
- In this case, a reasonable purchaser would not understand the words to convey a representation about the
structural integrity of the property
However, an action may be brought under ACL s18 where the puffery would have misled a reasonable person.
Couchman v. Hill [1947] KB 554
- P purchased a heifer (female cow) on auction that was warrantied not to be pregnant in the sale catalogue after
P asked D about its condition, clearly unwilling to purchase one that was. Condition in the catalogue that no
warranty was given as to the cows condition.
- Heifer was in fact pregnant and died in the process of giving birth
- Q: Was the statement a mere representation (opinion) or a representation incorporated into the contract
(term)?
- Held:
o Though the conditions protected the D from a suit based on the catalogue, the representation that the cow
was not pregnant was incorporated, because the P attached importance to the question/statement by D
and formed the basis of the P entering the contract. Therefore, the D breached this term, which overrode
the condition in the catalogue,
Dick Bentley Productions Ltd v. Harold Smith (Motors) Ltd [1965] 1 WLR 623
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Car dealer (D) made a statement as to cars mileage to P. Statement was false as the cars mileage was in fact
more.
Central question was whether the statement was an innocent representation or a warranty (term) as to the cars
mileage?
Held:
o if a representation is made in the course of dealings for a contract for the very purpose of inducing the
other party to act on it, and it actually induces him to act on it by entering into the contract, that is prima
facie ground for inferring that the representation was intended as a warranty. Denning LJ
o Because the dealer was in a position to find out the history of the cars mileage, there were no reasonable
grounds to believe that the cars mileage on the speedometer was true.
Denning LJ compared this case to the facts in Oscar Chess, where the purchaser of a second-hand
car had reasonable foundations for believing the mileage written in the cars logbook was correct
after it was proven that it was not. (Was an innocent misrepresentation).
A representation will be incorporated into the contract if the maker of the representation is in a position to verify
the statement being made.
Look at whether an intelligent bystander would reasonable infer that a warranty was intended; as well as the
words, behaviour, and conduct of the parties.
Ecay v. Godfrey (1947) 80 LI LR 286

- Oral statement by the D that a boat to be purchased by P was capable of going overseas with a sound hull, but
advised P to obtain a survey first.
- P bought the boat without obtaining a survey and started noticing problems in the vessel.
- Was the statement made by D a warranty (term) as to the condition of the boat or simply an answer to a
question (innocent opinionated representation) posed by P?
- Held:
o Statements verifying the truth of a question are unlikely to form a term of the contract
Jones v. Dumbrell [1981] VR 199
- D wanted to buy shares, on behalf of company A, from P who was a shareholder in company B. Company A was
already a shareholder in B
- D made representations that the purchase of the shares was to continue business for the benefit of his family.
- Not wanting to sell to outsider persons and on the basis of that representation, P sold the shares to D at an
undervalued price.
- D in fact had concealed his true intentions after commencing negotiations to resell the shares prior to P handing
the shares over
- P brought an action for fraudulent misrepresentation
o It was argued that the representation on part of D was not a material one.
o This was rejected on the basis that the representation was intended to induce the Ps to part with their
shares on terms favourable to the D therefore was material.
- Question of whether the Ds representation was false at the time or not? Can a person be liable for deceit for
representations that are innocent but later false?
- Presumption of fact that representations when made are continuing representations up until the conclusion of
the contract (Dalgety and Co. Ltd. v Australian Mutual Provident Society, [1908] VLR 481 Cussen J at 506)
- If a representation made to induce the contract is true when made, but later becomes false before conclusion of
the contract and the representor continues that representation in fact (and not merely constructively), then there
exists the essential element of an intention to defraud and his liability in deceit would be the same as if the initial
representation was false when made.
o Held:
Ps able to recover damages in deceit for the amount of loss to the Ps for the unconcluded
contract.
Gordon v. Selico (1986) 798 EG 53
- Ps contracted with D to purchase a lease of a flat owned by D.
- Flat had dried rot in the house and, prior to first inspection; D had the rot painted over to conceal it.
- P inspected the flat and obtained an independent survey, which found no evidence of dried rot (though the
inspection was very brief).
- P moved in and subsequently found the dried rot throughout the flat.
- P brought an action in fraudulent misrepresentation
o Ds claimed caveat emptor the buyer should beware and get good inspections
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o
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Argument rejected The general principle caveat emptor has no application where a purchaser has been
induced to enter the contract of purchase by fraud
Held:
o The cover up was a misrepresentation which led the Ps to act to their detriment.
Conduct can constitute misrepresentation where it is intended to mislead the representee.
Keates v. The Earl of Cadogan (1851) 10 CB 591

- Generally, no party is under a duty to disclose facts known to one party but not to the other.
- Difficult to distinguish what and where a party has to disclose as well as whether this duty has been met.
- Any such duty would hinder commercial freedom and some parties may be getting free information.
- There are however, some exception mainly stemming from conduct encompassing the silence and whether there
is a significant relationship between the parties.
Dimmock v. Hallett (1866) LR 2 Ch App 21
- Advertisement for the auction of land described the land as fertile and improvable and as each lot of land to
be let out to tenants (misrep 1).
- It was advertised that each lot of land had been let out to tenants, but it was not mentioned that the tenants
had already given notice to leave the property (mis rep 2).
- Buyer of the land brought an action for recession of the contract for misrepresentation of (amongst others) the
quality of the land and the tenancy.
- Held: with respect to the accidental omission of rent and tenancy (misrep 2 See misrep 1 above mere
puff)
o Turner LJ: There was no reference to the fact that the tenants of the land had given notice to quit, the
purchaser was therefore led to believe that the land had continuing tenants. In actual fact, upon purchase
of the land, the purchaser would have to find new tenants. This appears to be a material
misrepresentation, due to the representations being calculated to increase the apparent value of the
property
The representation is claimed under a condition of the sale, though Turner thinks that it only
applies to accidental slips. This case, although not visually fraudulent, amounts to the Court of
Equitys view of fraud a misrepresentation calculated materially to mislead the purchaser.
o Cairns LJ: a statement that the cost will be moderate is too indefinite to amount to a misrepresentation.
The omission to state that the tenants had given notice to quit is a fair inference that there was no such
statement and as such, that the tenant had not given notice. The omission is, therefore, very material, but
does not seem to be willful rather it is accidental. Therefore, if the omission stood alone, it does not adhere
to the court of equity definition of fraud (misrep) as stated by Turner LJ.
With v. OFlanagan [1936] Ch 575
- In negotiations for the purchase of his medical practice, OFlanagan truthfully stated that the earnings of the
practice were about 2000 pounds pa.
- However in May the takings were only 5 a week because O had become ill.
- The contract with With went ahead and O did not disclose the change in earnings.
- Held:
o Question of whether O had a duty to disclose the change in earnings to W before the contract went ahead?
o Even though there is no duty to disclose information, where a statement becomes false as a result of a
change in circumstances and this is not disclosed; then actionable misrepresentation can be claimed.
o It was also noted by Lord Wright MR that fiduciary relationships, partnerships and Uberrimae fidei
contracts have a complete duty for disclosure.
o Romer LJ:
If A. with a view to inducing B. to enter into a contract makes a representation as to a material
fact, then if at a later date and before the contract is actually entered into, owing to a change of
circumstances, the representation then made would to the knowledge of A. be untrue and B.
subsequently enters into the contract in ignorance of that change of circumstances and relying
upon that representation, A. cannot hold B. to the bargain
o What could With do? Rescind the contract
o What type of representation does it need to be? Signifiant or only one representation?
Any change to a fundamental reason for contract must be communicated, where it is known to one
party. It does not matter what the motive for not communicating is, it doesnt need to be fraudlent
or malicious, but merely known to the representor.
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S21 of Insurance Contracts act

Westpac Banking Corporation v Robinson
HELD: the bank was under no duty to disclose to a prospective guarantor of a customers account that the account
had been overdrawn.
o it is naturally to be expected that hte bank is not satisfied with the customers credit and that was why it
would have reuiqred a guarantee.
Cf:
Goodwin v The National Bank of Australasia
o FACTS: Woman guarantees for son for mortgage of house. Bank did not disclose that week before that son
had become guarantee for 3rd party.
o HELD: Bank was bound to revenant anything which was not naturally to be expected or where there are
some unusual features in the particular case.
The Bank was said to be bound to reveal to the guarantors that the overdrawft limit given to the
debtor was especially temporary and that the bank had participated with the debtor in the
selective dishonouring of hte debtors cheques.
THEREFORE: the rule of the duty to disclose with relation to contracts of guarantees is that misrepresentation
would take place only if there was non-disclosure of circumstances which were not naturally to be expected.
McKenzie v McDonald
o FACTS: Pl was a widow with pressing financial and family problems
Pl. engaged the defendant estate agent to sell her farm and to find her a suitable home in the city
agent knew of the Pls circumstances
agent was told by an experienced land vaguer that the farm was worth the price asked but he suggested to
the pl. to accept a lower price for the farm and suggested she exchange the farm for a dwelling he owned on
terms that were advantageous to him and disadvantageous to her.
D. later sold the farm for the increased price.
o HELD: where hte party is in a fiduciary relationship, there is a duty to disclose.
fiduciary is a person who undertakes to act in the interests of another (the beneficiary) and not in the
interests of himself / herself.
primary obligation is not to profit from the position of trust enjoyed by it.
D. in this case was under a duty to the Pl. to make full disclosure of all that he knew about the farm
not every agent stands in a fiduciary relationship with a principal, but this D. did.
he assumed a position of confidence towards her
he had an intimate knowledge of her financial position and family needs
he offered her counsel as to the value of the farm and as to the obtaining of finance.
he had failed to discharge his duty of disclosure and had misled her.
Krakowski v. Eurolynx Properties Ltd (1995) 183 CLR 563
- K agreed to enter into a contract to buy a shop premises from E as long as a 'strong tenant' had been
organized.
- The contract proceeded on the grounds that such a tenant had been arranged.
- Unbeknown to K, E had entered into an additional agreement with the tenant to provide funds for the first
three months rent to ensure the contract went ahead.
- When the tenant defaulted on the rent and subsequently vacated the premises, K found out about the
additional agreement and rescinded the contract with E.
- A term of the lease was that an entire agreement clause. The additional agreement with the tenant was not
disclosed as part of the agreement.
- Q of whether E misrepresented strong tenant?
- Held:
o Yes. When looked at from the perspective of a reasonable person in the buyers position, it was a
misrepresentation of the true contractual relationship between the seller and the tenant, and when looked
at in the context in which it was meant to be interpreted, it was fraudulent, as the seller meant to
misrepresent that relationship.
o The motive of the representor in making the representation is immaterial if fraud is proven that the
represntor had no honest belief in the truth of the representation in the sense in which the representor
intended it to be understood.
o Failure to disclose all material facts about the strong tenant was enough to entitle K to recission of the
contract on the grounds of misrepresentation.
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Edgington v. Fitzmaurice (1885) 29 Ch D 459

- P purchased debenture bonds in the D ltd. after seeing its prospectus.
- The prospectus stated that the money was to be used for completing various projects and for the purchase of
horses and vans to save transport costs.
- The money was instead used to pay off the debts of the company.
- It was shown that P would have bought the bonds regardless.
- P sued for misrepresentation of the prospectus anyway.
- Argued by D that the statements in the prospective were mere statements of future intention and not
statements of presently existing fact and therefore could not amount to misrepresentation.
- Held:
o Cotton LJ: Despite Ps admission to buy the bonds anyway, his loss nonetheless resulted from the
misstatement of the prospectus having relied on it and therefore the Ds are still liable.
o Against the Ds argument: Cotton LJ agreed that it was a statement of intention, but also stated it was one
of fact and if it could not be shown that the objects in the prospectus were true then the Ds were stating
something that was not true, or was reckless and therefore would be liable.
o It is not necessary that the misrepresentation was the sole reason for entry into the contract, merely that
the P relied on the statement.
o Bowen LJ: The state of a mans mind is as much a fact as the state of his digestion A misrepresentation as
to the state of a mans mind is, therefore, a misstatement of fact
- Statements of future intention can be actionable as they are representations as to the state of a mans mind,
which is as much a statement of fact as a statement as to his digestion. Statements that are knowingly false will
be fraudulent.
- Misrepresentation does not need to be the sole reason for entry into the contract. Importantly, it must be
shown that the P was induced/relied on the statement when entering the contract.
Ritter v. North Side Enterprises Pty Ltd (1975) 132 CLR 301
- During negotiations for the sale of land, P gave assurances as to the connection of sewerage to the land within
4 months. Without the sewerage the D would not be able to use the land.
- Land was not connected in time and D pulled out
- P sued for specific performance of a contract for the sale of land.
- D claimed that the representations made the P were fraudulent and provided evidence
- Question of whether the representation was a statement of belief or a statement as to the represent present
state of mind:
- Held:
o The statement by the P believing that the sewerage would be set out in time is a statement as to the
present mind of the P and is therefore a misrepresentation of fact.
Bisset v. Wilkinson [1927] AC 177
- Contract agreed upon the purchase of land in NZ.
- During negotiations Wilkinson believed that the land could hold 2000 sheep.
- Land had never been used to hold sheep before and it turned out that it could not hold that many sheep.
- Bisset brought a claim for misrepresentation.
- Held: (Privy Council)
o Important considerations were the material facts of transaction, knowledge of the parties, and their
relative positions, the words of the representation, and the actual condition of the subject matter.
o The most material fact was that both parties were aware that the land has never been used to hold sheep
before and therefore, any statement as to the number it could hold would be an estimate.
- Take into consideration the material facts, knowledge, words and the actual subject matter in deciding whether
the statement is one of opinion or fact.
- Based on the facts, if a reasonable person in that position would not hold that opinion, or the opinion is not
actually held, a fraudulent misrepresentation will exist.
Esso Petroleum Co Ltd v Mardon [1976] EWCA Civ 4
- Purchase of a petrol station by Mardon from Esso.
- Esso stated the amount of petrol throughput would be 200,000 gal. per year
- Esso did not account for a councils planning decision, which would reduce the number of customers when
giving their estimate
- As such, Mardon lost money, and Esso brought an action for repossession of the station. Mardon
counterclaimed for negligent misstatement.
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Held:
o Esso, possessing specialist knowledge greater than that of Mardon, has a duty to take reasonable care in
giving representations to parties, which induce that partys entry into the contract.
Statements from parties who hold specialist knowledge or experience will amount to a misrepresentation if
incorrect, notwithstanding whether it is an opinion or not.
Smith v. Land & House Property Corp. (1884) 28 Ch D 7

- Contract for the purchase of the freehold title of a hotel.
- Smith described the tenant as a most desirable tenant
- LHP agreed to purchase the hotel, but tenant went bankrupt before transfer of the title
- Smith brought an action for specific performance after LHP refused to complete transaction
- LHP defended the action by claiming the description by Smith of the tenant was grounds for misrepresentation.
- Held:
o Bowen LJ: statements of opinion can involve statements of fact where one party knows the facts better
than the other, and as such can justify their opinion.
o The statement amounts to an assertion that nothing has happened between the tenant and the landlord as
to make the tenant and unsatisfactory one, but a tenant who pays in driblets and under pressure is
unsatisfactory
o Further, given that the statement induced LHP to enter the contract initially, Smiths suit failed.
- A statement made by one person who knows the facts better than the other, is asserting a statement of fact
and entry into the contract subsequent to that statement can be in reliance of that statement.
Eaglesfield v. Marquis of Londonderry (1876) 4 Ch D 693
- FACTS: Railway company had power under its Acts to issue 100,000 pounds of preference shares and a large
amount of ordinary shares. The Directors of the company (D.) was under a bona fide belief that they had the power
to raise the remaining 15,000 pounds of preference shares and described the shares in the certificates as No. 1
Preference Stock. Some of the stocks was purchased by the Pl. Pl. argues that the sale of the stocks should be
rescinded because of misrepresentation by the D.
- HELD: Since the Pl. did not believe that they were purchasing part of the initial No. 1 Preference Stock but a new
stock which ranked with the No. 1 Preference Stock, the Pl. had not been deceived by any misrepresentation of fact
THEREFORE, there was no fraud.
- In this case, there were recognized difficulties in distinguishing between statements of fact and that of law.
- The distinction between the two has been abolished in Australia as a result of David Securities v CBA.
David Securities v. Commonwealth Bank of Australia (1992) 175 CLR 353
- Case concerned claims for restitution after the Ps engaged in foreign loans and ran into problems with the
Swiss and Australian exchange rates.
- For this section, the mistake under law is where a payment was made that the Ps claimed did not need to be
made due to the provision requiring payment being void by another provision in another statute considered
earlier (very technical)
- P brought a claim to recover the money paid to the bank under that mistake of law
- Question of whether a wrong payment under law can be recovered.
- Held:
o Rejected the old rule precluding recovery for mistakes of law.
o Mistakes of law only extend to where Ps pay money to a recipient who is not entitled to receive them, not
where the P paid under a mistaken belief that they were legally bound to do so.
o Questions the distinction between fact and law. Said that mistakes in law should prima facie be
recoverable in the same way as mistakes in fact.
- There should be no distinction between statements of fact and those at law.
Public Trustee v. Taylor [1978] VR 289
- A contract for the sale of land, which was advertised to be zoned for road widening.
- In fact, the land was not zoned and reserved for a proposed main road
- Held:
o The representation was one of law, not fact and was made with the intention to induce prospective bidders
to enter into the contract, as the P knew of the falsity of the statement.
o With respect to misrepresentations of law vs. fact, the same rights and consequences should flow from
the making of fraudulent misrepresentation of law by which a party was induced to enter into a contract
and from the making of a fraudulent misrepresentation of fact
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Fraudulent misrepresentations of law should be treated the same as misrepresentations of fact and similar
remedies should be awarded
Misrepresentations of law will be fraudulent if it is made with the knowledge of being false.
L Shaddock & Associates v The Council of the City of Parramatta (1981) 150 CLR 225
- Shaddock wanted to purchase a block of land in an area governed by the council
- Enquired the Council as to whether there were any proposals to widen roads
- Council stated that there were no proposals, when in fact there were
- This reduced the value of the property Shaddock sued for the reduced amount
- Held:
o The council owed a DOC when providing information to representees who the council ought to have known
would suffer loss for incorrect information.
o Government was liable for a negligent misrepresentation, but Shaddock was not entitled to rescind the
contract and was enetitled to damages instead.
- Liability for misrepresentations of law will be suffered where the representor owes a DOC to the representee
and where it is reasonable for the representee to rely on that information.
Peek v. Gurney (1873) LR 6 HL 377
- P bought shares from company in reliance upon statements made in the original prospectus
- P was not an original shareholder and the prospectus was addressed to original allottees of the shares.
- P suffered loss after the company went into liquidation and he sought to reclaim those losses; sued the
company
- Held:
o Because the P was not of the class of persons to whom the original prospectus (and therefore company)
was aiming at, the company had no intention to induce the contract between the P and the Company.
o There was nothing to suggest that the Plaintiff and, the company were in direct communication with each
other.
Nicholas v. Thompson
FACTS: Pls entered into contracts to purchase Ds interest in a speculative business venture. During negotiations, D
said he had been offered a large sum of money for his interest but had turned it down. Ps sought to rescind the
contract because D had lied about that statement during negotiations and had induced them to enter into the
contracts.
HELD: the D. argued that the statements were not representations of fact because they could not be regarded in
law as material since it was not such as would induce reasonable person, as distinct form the particular
representees, to enter the contract.
o Even though the large sum was not specified, it is a different issue from whether or not that statement
was material.
o if the statement is intended to induce certain behaviour, and it does induce that behaviour, then that is
sufficient.
o it is not necessary that the representation in question should be of such a nature that it would be likely to
induce an ordinary reasonable person to enter into a contract...
o it is sufficient if the D. knew that it would be likely to induce the particular Pl. to enter into the contract...
Holmes v. Jones (1907) 4 CLR 1692
- Holmes offered to sell a pastoral property to Jones
- Offer misrepresented the amount of stock the property carried and an inspection was carried out by a third
person on instruction by Jones, which confirmed the misrep.
- Jones then made a fresh offer to Holmes, who accepted.
- Following acceptance of the contract, Jones tried to set aside the contract on the basis of the first misrep.
- Q of whether Jones relied on the first misrep when entering into the second contract
- Held:
o The representation must be a continuing one to the point of entry into the contract for the representation
to be an inducement into the contract.
o Therefore, because the representation was made during negotiations in the first contract, on rejection of
that first offer by Holmes, that representation ceases to continue and cannot be relied upon for any further
contract.
o Jones had not relied on the statements made in the first letter.
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When a purchaser chooses to rely on his own judgment, or that of an agent, he cannot afterwards say that
he relied upon a previous representation made by the vendor.
o Further, Jones has actual knowledge as to the misrep in the first offer and this means that Jones has no
claim for misrepresentation.
Representations must be continuing up until the point of entry into the contract or rejection of it, at which point
the representation ceases to exist
Where a P has actual knowledge of the falsity of a statement, no claim will lie in misrepresentation
Rerpresentees who rely on their own knowledge and judgement, or that of an agent, cannot claim that their
entry into the contract was as a result of the representation.
Nicholas v. Thompson [1924] VLR 554, 565, 575-77

- Seller makes a statement as to the turnover of a practice.
- Buyer is suspicious about the turnover and requests the documents to see for himself
- Buyer did not examine documents, and it turned out the turnover was falsified
- Contract was entered into
- Did the Buyers opportunity to find out the falsity of the Sellers statement mean he cannot claim
misrepresentation?
- Held:
o The fact that the buyer could have found out the falsity of the Sellers statement does not bar his recovery.
Redgrave v. Hurd (1881) 20 Ch D 1
- Redgrave advertised for a partner to join the business
- R misrepresented the profits of the firm and gave Hurd the opportunity to check them
- Hurd did not inspect the papers and signed the contract but he refused to go through after realizing the falsity
of the statement
- Mr Redgrave sued for specific performance and Mr Hurd counterclaimed for rescission based on fraudulent
misrepresentation.
- Held:
o There was no claim for fraudulent misrepresentation as there was no evidence to show R knew of the
misrepresentation instead, there was an innocent misrep.
o Judges also overturned the earlier court, saying that the fact that Hurd did not check the documents does
not mean he cannot have relied on Rs misrepresentation.
Gould v. Vaggelas (1984) 157 CLR 215
- GHoldings (GH) entered negotiations with V to purchase a resort
- Purchase was funded by G (sole shareholder of GH)
- GH signed purchase contract and executed a mortgage with V (and other companies)
- Within 2 years, GH began to default on payments; V repossessed property under mortgage and resold resort at a
deficiency
- V sued for deficiency; G counterclaimed for damages for fraudulent misrepresentation during negotiations. (G
sued not GH)
- Issues:
o Whether G could sue for losses suffered by GH?
Whether G was induced to act by the misrepresentations made by V?
o Measure of damages to be awarded
o Bullock order against Gs accountants (separate issue of law)
Esanda Finance v. Peat Marwick Hugerfords
HELD: mere foreseeability of the possibility that a statement made by A to B might be communicated to a class of
which C is a member... is not sufficient to impose on A a duty of care owed to Cin the making of hte statement
o Common problem is whether an auditor who reports onthe financial state of a company owes a duty
beyond hte company itself to others who rely on the auditors report in delaing with the company.
o (Brennan J) necessary for hte Pl. to allege and prove that the D:
i. knew or ought to have known that the infomraiton or advice would be communicated to the pl.
either individually or as a member of an identified class
ii. that hte info would be so communicated for a purposed that would be very likely to lead the Pl .to
enter into a transaction of the kind that the Pl. does enter
iii. very likely tha hte Pl. would enter into such a transaction in reliance on the information
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iv. Pl. would therefore risk the incurring of economic loss if hte statement should be untrue / the
advice unsound.
Derry v. Peak (1889) 14 App Cas 337
- Company's prospectus stated that the company had permission to use steam trams, rather than horse
powered ones. In fact, the company applied for permission, and honestly believed that they would get it.
- In fact, after the prospectus was issued, they did not get permission.
- Shareholders, represented by Sir Henry Peek, who had purchased their stakes in the company on the faith of
the statement's truth sued when the company's business ended up in liquidation.
- Held:
o Claim failed because it was not proven that the company/director lacked honest belief in the statement
- Thus, for a fraudulent misrepresentation to exist it must be shown that the representor knows the statement is
untrue, has no belief in its truth or is reckless as to whether it is true or false
- The statement need not be intended to induce entry into the contract, but the fact that there was no intention
does not bar recovery.
- In cases of Fraudulent misrepresentation, actual inducement is assumed.
- This case would now fall under negligent misstatement. At the time of the case, negligent misstatement could
only be actionable if it was fraudlent; however, in this case, while the company was negligent, they were not
fraudulent.
Hedley Byrne v. Heller [1964] AC 465
o HELD: negligent misstatement were actionable in tort. Not wholely clear what the requirements are before
a DOC is owed. However, where the parties are in a contracutaly relationship, it is more likely that there is
a duty of care owed not to make negligent misstatements.
Car Financing Ltd v. Caldwell [1965] 1 QB 525
o FACTS: Caldwell was phoned by a rogue who bought the car on a cheque which was dishonoured. Caldwell told
the police and the Automobile Association straight away but the car had been sold on again and again to Car
and Universal Finance. Financing had bought the car in good faith without any notice. ISSUE: can Caldwell
validly rescind the contract before the car was acquired by a bona fide purchaser?
o HELD: by asking the police to recover the car, the title to the car was vested in C. Since he had rescinded the
contract4 of sale at that point.
o The act of telling the police was enough to rescind the contract.
Hawker Pacific Pty Ltd v Helicopter Charter Pty Ltd
FACTS: helicopter owner signed a contract under duress of goods. He then fobbed off the other party in respect of
moneys owing under the contract. During the fobbing off of the pther party, the helicopter owner had not
exercised his right to elect to rescind but at the same time, he was not estopped from rescinding nor had he
affirmed the contract.
o a person who has the right to election is not bound to elect immediately but may keep the question open
so long as the delay does not cause prejudice to the other party
HELD: (Priestley JA) where election does not apply because the party with the right of election is ignorant of that
right, an estoppel may operate
o ie. the party with the right of election may act in such a way as to represent to the other party that the
contract was being affirmed and the other party may act in detrimental reliance.
*Alati v. Kruger (1955) 94 CLR 216
HELD: in suing for fraudulent misrepresentation, the purchaser had a choice of three courses open to him:
o first, he could sue for damages for breach of contract (the warranty that the average takings of hte
business were 100 pounds per week) --> he cannot do this and rescind the contract as well.
o second, sue to recover as damages for deceit the difference between the price he had paid and the fair
value of hte property at the time of the contract --> again, if he does this, it would mean affirming hte
contract and not being able to rescind it.
o Third option (the option the Pl. took) was to rescind the contract so long as he could restore to the seller
substantially what he had received.
o Issue for the court was then whether the rescission was valid ie whether restitio in integrum was
possible.
HELD: restitio in integrum was possible
o equity demands only substantial, not precise restoration.
lOMoARcPSD
o
o
o
o
o
o
although the purchaser had taken possession of hte premises, in equity ,a money payment could
copmeasnte for any difference between nthe rental value of the premises and the rent paid by hte
purchaser
title to the lease would revest in equity when the purchaser elected to rescind
although the purchaser had rtaken over stock and could not return it to the seller, he could pay its value
business itself had deteriorated but this was not de to any fault on the purchasers part
even at commo nalw, it was not necessary to return the property in its original condition if changes
occurred as a result fo the inherent nature ohte peroperty or by reason of hte purchasers exercise of
contractual rights.
Pl. did not lose his right to rescind by discontinuing the business and leaving the premises before judgment
was given.
Furrther, the seller could have applied to the court for hte appolintment of a manager to preserve the
property and he did not offer to take ht property back Pl. was not under a duty to go on indefinitely and
incurring loss.
if the property that is the subject matter of a contract has been wholly or substantitally destroyed by the
party seeking rescission, there can be no rescission.
Vadasz v Pioneer Concrete (SA) Pty Ltd (1995) 130 ALR 570
FACTS: V. Executed a guarantee to pay all monies which now or may at any time until we are released be owing by
his company to Pioneer Concrete supplier of Vs concrete. P continued to supply concrete to V and V continued to
be in debt. V went bankrupt and was sued for the total indebtedness of V. He claimed that the guarantee was
unenforceable because P had misrepresented that the guarantee would relate only to debts incurred after the date
of the guarantee. V therefore succeeded in the misrepresentation but was seeking to be exonerated from all
liability even though further debts had been incurred after the date of the guarantee.
Representor misrepresented effect of personal guarantee to representee said it would only cover future debts when
in fact covered present and future debts
When representor sued for the total debt, based on the guarantee (i.e. present and future debts), court held that
guarantee should be set aside in so far as it related to existing debts, but representee still liable for future debts
HELD: courts will look at what was practically just for both parties and V, as the guarantor, is bound by the maxim
he who seeks equity must do equity. THEREFORE, even though V had been granted rescission and restitution
should follow, flexibility is allowed and complete restitution was not required by equity.
o had complete restitution be allowed, it would have ivolved not only a cancellation of Vs obligations under
the guarantee but also either a return of the concrete subsequently supplied to his company or the actual
payment of an amount equivalent to the vavlue of that concrete.
o Instead, V was ordered to hold his guarantee as to future indebtedness since it was what he was prepared
to undertake independently of any misrepresentation ie. he was exonerated of the debts incurred prior
to the contract.
o Reasons for partial rescission limiting the obligation to pay only to future debts and setting aside of the
obligation to guarantee existing debts:
could not be maintained that V would not have entered into the guarantee had P said that hthe
guarantee was only to cover future debts evidence showed that he would have entered into the
contract so that he had future supply of concrete.
If V wre given complete relief from obligations under the guarantee, he would enjoy the benefits of
the transaction without accepting its burdens.
the notion of unconcsionability provides a justification for setting aside the transaction and also for
not setting aside it entirely so as to prevent one paraty obtaininig an unwarranted benefit at the
expense of the other.
Principles flowing from vadasz:
o Where a case has been made out for a contract to be set aside in equity, the court must consider what
would have happened in the absence of the vitiating factor.
o court should set the contract aside in its entirety only if had it not been for the vitiating factor, the victim
would not have entered into the contract at all.
o if the victim would have accepted some obgliation in the absence of the vitiating factor, then partial
rescission should be granted and that obligation upheld.
Issues flowing from Vadasz:
o Equitys jurisdiction is concurrent with common law ie. it would follow the law in affirming or denying the
valididty of the act of rescission but waqs more accomodatging in recognising the possibility of restitution
in integrum (ie. allows partial compensation / monetary compensation) but equity also has an exclusive
jurisdiction:
lOMoARcPSD
ie. in cases of innocent misreps, rescission is effected not by the representee but by the decree of
the court.
BUT: Vadasz ruling rejects this dichotomy and reflects a more flexible approach to equitable relief
in cases of fraudulent misreps equity may by its own decree and its own discretion, effect
rescission, assessing the rights of litigants according to standards of practical justice and good
conscience.
The fact that the courts question what the victims would have done absent the vitiating factor is a
question of causation nthat is inconsistent with the well established approapch to causation at the earlier
stage of establishing whether or not the Pl. had relied on the misrepresentation when entering the
contract
by asking questions of this kind at a remedial level, the innocent partys entitlement is thrown into
doubt.
courts emphasis on the fact that V had received a benefit from the transaction with P thorugh the
continued supply of concrete shows a problem because it means that the amount of partial rescission is
based on some tangible benefit such an approach works well in this case (since it is easy to see what V
would have done had the misrepresentation not occurred) but would give the wrongdoer in other cases
the right to speculate and potentially reduce the remedy that the victim is entitled to.
Hartigan v International Society for Krishna Consciousness Inc

FACTS: Pl. donated a rural property to the D. in circumsntaces of undue influence. Property was sold by the D.
before the Pl. sought rescission and proceeds used to reduce the Ds bank debts. D. argued tha the Pl. should be
denied rescission on the gorund that the property was already sold and restitution in integrum was no longer
possible
HELD: (Bryson J) the remedies available for undue influence are not limtited to remedies against specific
assetsthe appropriate remedy was to order the D. to pay to the Pl. an amount equal to the proceeds of sale of the
farm.
Wilde v Gibson
HELD: as a result of misrepresentation, if hte buyer of a property has completed the contract (ie. Whre everything
required to be done under the contract is done and the buyer has the land and the seller has the property) the
contract cannot be set aside.
o This bar does not apply where the misrepresentation is fraudulent BUT may be significant for cases of sale
of land.
Rationale of the rule is that the purchaser has the fullest opportunity to investigate title and conduct surveys of the
land so that the vendors representations can be tested.
Position of this bar in Australia is not clear because the rule (ie. that executed contract for sale of land can be
rescinded where the misrepresentation was fraudulent) has been applied to contracts other than contracts of land
where the meaning of executed is not clear.
There are some Australian cases that suggest that this rule does not apply to Aus. (ie. in cases such as Leason, even
though the misrep was not fraudulent, rescission was allowed and not restricted to fraudulent misreps only)
Svanosio v. McNamara (1956) 96 CLR 186
Bar to rescission applied after execution of the contract for sale of land innocent misrep will not enable the court
to grant rescission for executed contract where there has been no total failure of consideration.
o Other statements of the general rule extend the scope of the exception beyond cases of fraud correctly
stated by saying that there must be a total failure of consideration or what amounts practically to a total
failure of consideration.
Leason Pty v. Princes Farm Pty. [1983] 2 NSWLR 381
o HELD: the contract for a sale of horse was executed but it could still be rescinded.
Most States in Australia (but not clear in Queensland) if this bar still applies.
When it is said that a contract for the sale of land can be set aside for fraud, fraud may be given its wide equitable
meaning including unconscionable dealing --> ie. even if the contract has been executed, the rule may not apply
to prevent rescission because there were unconscionable dealings.
Toteff v. Antonas (1952) 87 CLR 647
HELD: Damages in the tort of deceit can be awarded for all of those losses that flow directly from the deceit. It is
not that the damages need to be reasonably foreseeable the test is broader: its losses that flow directly from the
deceit.
lOMoARcPSD
Consequential damages are recoverable for the tort of deceit.
*Gould v. Vaggelas (1984) 157 CLR 215

- Damages for fraud will be greater if the contract is affirmed because the P usually retains the subject matter of
the contract.
Professional Services of Australia Pty Ltd v. Computer Accounting & Tax Pty Ltd (2009) 261 ALR 179
HELD: the basis of the damages was that because wed entered into a contract, as a result of the deceit, we miss
out on alternative investment opportunities. Ie. An opportunity was lost. Damages can be awarded on the basis
that an opportuiniy was lost = the money that they would have made by investing elsewhere which they failed to
make because of the deceitful contract, could be recovered.
Archer v. Brown [1984] 2 All ER 267
FACTS: Pl. Entered into contract with defendant as a result of the deceit. This deceitful contract caused serious
financial damage to the defendant and as a result, they were forced to take a bank loan with interest charged.
HELD: shows how wide damages are in this context. The interest accruing on the bank loan could be recovered.
So long as the loss flowed directly from the deceit can be recovered from the deceit.
*Kenny & Good Pty Ltd v. MGICA (1992) Ltd (1999) 199 CLR 413
FACTS: real estate valuer contracted with a bank to value a residential property in order for hte bank to determine
whether it should provide mortgage finance to hte owner.
o the bank instructed that the valuation could be relied on and so the insurers did rely onthe valuation.
o the report stated that he property was suitable security for investment ...
o the loan was secured and hte mortgage insurer provided insrance to the bank (in case the owners could
not pay)
o the true value of the property was less than the valuation and when the owner defaulted, the property was
sold substantially lower than that of hte valuation as a result of the fall in the property market = the bank
lost nearly $2million which was paid by the insurers.
o the insurers sued the valuer and the trial judge held that he valuation was negligent and hence, the bank
valueer was liable for the whole of hte $2million loss. The valuer appeals and was unsuccessful:
HELD: the amount that the bank could recover was the full amount paid under the insurance policy. Ie. Not simply
the real difference between nthe real value and the negligent vvalue but it was all the money that the insurers had
paid out.
o WHY? Because if not for the negligent misstatement, the insurer would not have lent the money.
o (Gaudron J) the valuer was under a duty of care because of a foreseeable risk that in the event of default,
the mortgagee might not be able to pay the interest, as well as the foreseeable possibility of a decline in
market value...
o (McHugh J) the mortgage insurers loss flowed directly from the negligent representation in the valuers
report.
o (Gummow J) mortgage insurer would not have entered into the transaction but for hte negligent valuation.
o (Kirby and Callinan J) loss sustained by the mortgage insurer was caused by the valuers negligence. Loss
was readily foreseeable.
Concrete Constructions (NSW) Pty Ltd v. Nelson (1990) 169 CLR 594
FACTS: Pl. Was a worker on a building site. Pl. Was injured when he fell down an air conditioning shaft. Pl. Removed
the grate at teh entry to the shaft and fell down it. Pl. Had fallen down because the foreman had told himthat it
was safe to remove the bulks on the gate when it was not het case in fact and he fell down the shaft.
o Doesnt really look liek a contracts case merely an accident at work?
o But the Pl. Tries to argue that it was under the TPA because by this method, he would have gotten more
compensation than un der the workplace safety act.
ISSUE: was the Pl. Covered under the legislation in that wr er the D. The company putting up the building were
they acting in trade or commerce for hte purposes of hte legistlation?
o the misleading or deceptive conduct was that the foerrman had said that it was safe to remove the bulks
from the gate.
ISSUE: were these statements made during hte progress of trade or commerce?
HELD: no. A misleading statement by one of hte companys own employee to another employee in the course of
their ordinary activities is not conduct in trade or commerce
o The HC was worried about people bringing all sorts of claims within the TPA
lOMoARcPSD
HC: deception isnt intended to overlay commonwealth law in every field of legislation. Something done
by one employee to another employee during hte course of building work was no within trade or
commerce. such a meaning wass unnatural.
not simply that the building was engaging in commercial activity by buildinga building that was not
enough.
Not entirely clear what instances falls within the legsaitonsince theres no clear list but the HC was
concenred about widening the trade or commerce activity definition too broadly.
distinction was drawn by the judges between conduct that is of the essence of a corporations trade or
commerce and conduct that is merely incidental to it.
in this case, the conduct was internal comunciation by one employee to another in the course of
their ordinaray activities in hte construction fo hte building = the conduct was not an aspect of
activities which of their nature bore a trading or commercial character.
it was undertaken merely in the course of or incidental to the carrying on of a trading or
commercial business.
the word in in the phrase in trade or commerce means that he conduct must be directed towards
persons with whom the corporation had dealings of a trqading or commercial character
eg. consumers.
(Toohey J) the question is not whether the conduct engaged in was in connection with trade or commerce
or in realtion to trade or commerce. It must have been in trade or commerce.
OBrien v. Smolonogov (1983) 53 ALR 107

in trade or commerce excludes conduct of those who act not in a business capacity but in a purely private capacity
concerning domestic transactions.
FACTS: D. Advertsised for sale of land in a newspaper.one of the Pl. Spoke to the D. By telephone. Pl. Alleges that the D.
Made certain statements about hte land which were false and misleading.the question was whether the statements
were made in trade or commerce?
HELD: No, the statemsnt were not made in trade or commerce. WHY? Because the land was not used for any business
activity it was domestic land and was not used for farming or grazing.
o Pl. Tried to argue that the fact that the land was advertised in a newspaper and that negotiations were
conducted in telephone was a commercial way of dealing Pl. Tries to argue that hte way the sale was
conducted owul,d have put it as a trade or commerce activity.
o HC said NO: it was not in trade or commerce.
o In determining whether the activity is in trade or commerce , it is not necessarily that hte activities were
carried out in ways that commercial parties would have done it does not change it intgo an activity that
would be classified as uinder trade or commerce.
BUT: if the vendor engages a real estate agent, the agents conduct may well cocur in trade or
commerce Havyn Pty Ltd v Webster.
HELD: sale of a block of six units that had been let out by the respondent occurred in trade or
commerce because the property was used for a business activity.
Bevanere Pty Ltd v. Lubidineuse (1985) 59 ALR 334
FACTS: the D, sold a beauty clinic to hte Pl. It was the one capital asset of hte D. The D. Wanted to retire. As part of hte
sale, the D. Had represented that a key employee would stay with the beauty clinic. The D. Knew that hte employee
was going off to set up his own business.
ISSUE: was the sale of the beauty business in traade or commerce?
ARGUMENTS: D ssaid that because he had been selling tohe clinic it was not in trade or practices.
HELD: even if thesale was their only remaining capital asset, it is within trade or commerce. You have to look at their
activities as a whole.
o The fact that it was their only business asset did not deprive it of the character of hte sale as in trade or
commerce.
o even thought hte slae of a cosmetic clinic by a company that waws not in the business of selling such capital
assets was a transaction in trade or commerce.
TCN Channel Nine Pty Ltd v. Ilvariy Pty Ltd [2008] NSWCA 9
FACTS: Channel Nine wanted to , kin order to gain access in builders premises, pretended that htey were interested in
the builder in the building work. What channel nine wanted was access to the building director. Once they got their
foot in the building, they wanted to expose the managing directors practices. The director sued channel nine for
makinga misleading statement that they wanted building work done and were, in that process, acting in trade or
practices so that he could get damges.
lOMoARcPSD
ISSUE: was teh activity of channel nine in pretending that they wanted building work done activity in trade or
commerce of channel nine.
ARGUEMNTS: Channel nine argues that they wer not in the building business - their trade or commerce is to make
television programs and therefore was not a trade or commerce activity.
HELD :Channel Nione was acting in trade or commerce because while the conduct occurred in relation to hte trade of
commerce of hte builders ie. The conduct was trying to get some building work done and even if that was not the main
purpose of hte person making the representation, this statemtn to the builders was part of trade or commercial
practice.
o The party to whom the statement is made is also relevant in considering whether the person acting in deceit
was acting in trade or commerce.
o Regardless of whether hte person making hte statement was in trade or commerce.
ie. in this case, the statements were made in the trade or commerce of hte representee.
Is professional advice within trade or commerce or not?

Bond Corporation Pty v. Thiess Contractors Pty Ltd (1987) 14 FCR 215
Prior to the case: professional advice was not acitivty in trade or comeerce trade and omcmerce was different from
professional advice. BUT:
HELD: YES.professional advice was in trade or commerce. Now, s2 of hte ACL (b) says that includes any business or
professional activity which shows that whislt therer was no clear guidelines / criteria as what would constitute trade
or commerce. There is a fair bit of discretion under the courts.
o Mere I sell my house to you is not trade or practices (OBrien)
o the definition of the phrase in trade or commerce is wider than the definition previously contained in s4(1) of
the TPA because the words in s2 inclues any business or professional activity were not included in s4(1).
Shahid v Australasian College of Dermatologists
HELD: (Jessup J) expression any professional activity does not = everything done by a professional.
o purely instrumental or administrative functions...will continue to fall outside the defintiioin of trade or
commerce BUT once oconduct is classified as professional activity , it is not necessary to show tha the
professional activity bears a trading or commercial character.
Campomar Sociedad Limitada v. Nike International Limited (2000) 202 CLR 4
o FACTS: the D. Began selling a sport fragrance labelled Nike Sports Fragrance. Nike were very annoyed (there were
other issues about copyright) and argued that he conduct of C. Was misleading or deceptive. They were misleading and
deceiving the public into thinking that Nike had produced this sports fragrance.
o HELD: Was anyone mislead by it? Because in order ot be liable ,there has to be somebody who was mislead or
deceived.
HC said that the conduct was directed at teh public what would an ordinary reasonable member fo hte
public think?
An ordinary reasonable member of the public would believe that Nike had either made that product
themselves or had consented to it being marketed under its name
where the persons are not identified individuals to whom a particular misrepresentation has been made...but
are members of a class to which hte conduct in question was directed in a general sense, it is necessary to
isolate by some criterion a representative member of htat classs
this involves an objective attribution of certain characteristics
ordinary or reasonable member is expected to take reasonable care of his or her own interests
extreme or fanciful reactiosn to hte conduct will not be attributed to the ordinary or reasonable
member.
Hansen Beverage Company v Bickfords (Australia) Pty Ltd
o FACTS: Hansen released an energy drink called MONSTER ENERGY in the US.
marketed product by sponsoring atheletes in the field of eextreme sports
Bickfords decided to launch a similar sports drink in Australia
B asked H to discuss licecnsing arrangements BUT no such agremenet was mae.
B then started to sell an energy drink also called MONSTER ENERGY in packaging very similar to that of hte
Hansen drink.
H claims that B had engaged in misleading or deceptive conduct by realeasing an energy drink with teh same
name and similar get-up.
o LITIGATION: trial judge said that the relevant class of audience were males aged between 18 and 30 years of age (those
targetd by Bickfords advertising then asked whether a reasonable member of this class would be mislead.
lOMoARcPSD
HELD: the relevant class for mass-marketed products is the public at large (and not the segment of hte population to
whom the goods are marketed which Campomar seems to be saying since the court said to look at the audience as
members of a class to which hte conduct in question was directed at...
ie. trial judge asked the wrong question.
Butcher v. Lachlan Elder Realty Pty Ltd (2004) 218 CLR 592
FACTS: D. Real estate agent had included a guard ramp on the brochure of hte property which gave a false notion
of the area of hte boundaries of hte property. A disclaimer in hte brochure said that they give no guarantees to hte
accuracy of hte brochure and anyone who wants infomraiton should contac them through enquiries.
o disclaimer said :All information herein is gathered from sources we believe to be reliable. However, we
cannot guarantee its accuracy and interested parties should rely on their own enquiries.
o D. Was only putting information that he was told by the owner to include in the brochure. ISSUE: whether
Pl. Purchaser of hte property were mislead or deceived.
HELD: (majorty) in order to determine whether the conduct was misleading, it was necessary to consider:
the nature of the parties
the character of the transaction and
what each party knew about the other as a result of hte dealings...
o the D. Were merely a small firm of real estate agents and the purchasers were wealthy and intelligent. The
property was a waterfront property. The purchasers were legally advised and actually employed solicitors.
The matters were complex and should be dealt with by specialists.
o The D. Did not talk themselves up as legally qualified or able to verify the boundaries.
o The D. Had included a disclaimer
o All hte D. Had done was pass on information supp;lid by the owners.
o When one consiuders who the Pl.s were, the HC said that they were not mislead or deceived.
o (McHugh J in dissent but took a different approach)
asked whther the conduct was likely to mislead persons in the lcass identified as reaonssble
potential purchasers of waterfront properties in the price range of over $1 million.
NB: McHugh stil implied many of Butchers subjective characterstics to members of hte lcass he
identified.
he concluded that such members would have benefit of professional advice and be aware that it
waws not part of a selling agents function to obtain or verify a survey plan > not that different
from the position of the other judges in majority.
BUT: McHugh J dissented because he said htqat herlevant conduct that was misleading was not
merely the inaccurate diagram in the brochure BUT the conduct of the D. during inspection:
B had a conversation with his architect about the possibility of moving hte pool to create al
larger entertainment area
E overheard this conversation and B made it clear that he was relying on the accuracy of
hte survey diagram
E said he was sceptical about hte renovations BUT still continued the conversation
premised on the pool being within the freehold land.
McHugh J says that in order for the disclaimer to be effective, it had to modify the effect of
all the conduct engaged by E including the conduct at the inspection and the disclaimer did
not operate as such.
o (Kirby in Dissent) the fact that the Pl. Were wealthy and intelligence they had no knowledge of land law
why should this be a factor -> he seemed to accept that B was intelligent and self-reliant BUT these
characteristics would not have made B alert to the nuances of land law.
Because hte majority placed some weitght on the disclaimer on the brochure, that anybody
wanting to escape liability would start putting disclaimers anywhere.
this strikes a blow at the Acts intended operation
many corporations will be encouraged vby this decsiison to believe that they can avoid
liability of the act by a miniscule font that a disclaimer is now effective...this is contrary to
the language and purpose of parliament
Kirby was concenred that hte majority, though not hte whole weight, that there was a disclaimer
and that a reasonably and intelligent person like the Pl., though legally advised,knows what hte
disclaimer means. --> just because there was a guarantee that it was not accurate does not mean
that it is immediately not deceptive conduct.
ALSO: Es gave no oral reinforcement of hte disclaimrer at hte inspection = misleading
conduct.
lOMoARcPSD
disclaimer waa miniscule in size and therefore should not have the effect of excluding
liability.
Henjo Investments Pty v. Collins Marickville Pty Ltd (1988) 79 ALR 83, 92-93 (Lockhart J):
Purchase of restaurant. The owners extended the restaurant due to liquor licence. Business was bought and
assumed that liquor could be consumed in the extension. Owners remained silence as to the boundaries of the
licence. Purchaser would have a reasonable expectation that the facts would be disclosed. In this case, there was a
duty to disclose those facts is this misleading or deceptive conduct?
HELD:
o The two words, misleading and deceptive, are plainly not synonymous. That is not to say that each
word may not catch some of the same conduct and that there may not be some degree of overlap.
Mislead does not necessarily involve an element of intent and it is a word of wider reach than
deceive. However, it is difficult, in my opinion, to read the word deceive in s 52 other than as involving
some degree of moral turpitude as it does in ordinary English usage. Trickery, craft and guile, though not
essential elements of liability, are typically at the heart of this second element of the statutory provision
directed to the protection of the public from unfair trading practices.
o Seems to be saying htat one has to be active in deceptive conduct but meisleading may not be something
that one intended to do.
Parkdale Custom Built Furniture Pty v. Puxu Pty Ltd (1982) 149 CLR 191, 197
FACTS: manufacturer of a couch was very similar in design to a more expensive couch distributed by the
manufacturer.
HELD: the manufacturer had not engaged in misleading or deceptive conduct because the price of hte product in
question with reference to the fact that hte product is of a higher value means that the ordainry or reasonable
member would have paid closer attention to the labels and therefore would have paid close attention to teh brand
of hte couch and any labels attached = not deceptive or misealding conduct.
o the ocnudct has to be viewed as a whole...
o would be wrong to select some words or act wich , alone , would be likely to mislead if those awords or
acts, when viewed in their context, were not capable of misleading
o (Gibbs CJ): The words of s 52 have been said to be clear and unambiguous Nevertheless they are
productive of considerable difficulty when it becomes necessary to apply them to the facts of particular
cases. Like most general precepts framed in abstract terms, the section affords little practical guidance to
those who seek to arrange their activities so that they will not offend against its provisions. It has been held
that the section is not confined to conduct that is intended to mislead or deceive.. There is nothing in the
section that would confine it to conduct which was engaged in as a result of a failure to take reasonable
care. A corporation which has acted honestly and reasonably may therefore nevertheless be rendered
liable to be restrained by injunction, and to pay damages, if its conduct has in fact misled or deceived or is
likely to mislead or deceive.
ie. no requirement for the misleading conduct to be culpable in the sense of being fraudulent,
reckless or negligent.
ie. perfectly innocent misrepresentation may contravene s18.
NB: culpability is sometimes relevant
ie. promises, statements of opinion or statements as to the future, the speakers state of
mind may be relevant in establishing misleading conduct.
s4 - representation as to future matter will be taken to be misleading or deceptive unless
the represnetor leads evidence that he or she had reasonable grounds for making the
represtnation
individuals are only taken to be ionvolved in a contravention if they have knowledge of all
the relevant circumstances including the falsity of the representations.
Pacific Dunlop Ltd V Hogan
FACTS: D. appeared in crocodile dundee and became widely identified with the character he played inthe film. Pl.
was entitled to merchandising rights of the film.
o Pl. televised an advertisement which used a striking scene the knife scene- in the film, to advertise his
shoes as something that D. had commercial associations with.
HELD: reasonable mmber of hte public is unlikely to pay close attention to the details of the advertisement...courts
should focus on the general impression the aedvertisemtn is likely to leave with the viewer and not the details of
hte advertisement. BUT: tin this case, the advertisement was misleading because of its overall impression
o even though line-by-line analysis said nothing that was literally false.
lOMoARcPSD
Cf. Butcher v Lachlan Elder: where the brevity of the information in the brochure meant that reasonable person in
the position of hte purchaser would have paid close attention to the details of hte brochure and read it in its
entirety.
Byers v. Dorotea Pty Ltd (1986) 69 ALR 715

FACTS: there was a statemtn by the D. That hte aparmtnt would be bigger and better than those close by. It was
said that what mattered under the leiglsaiton was the particular audience to whom it was directed and the
particular facts.
HELD: the particular statemtn was not mere puff because it was specifically comparing apartment with
paaarrtments close by.l It is possible that cases that fail as mere puff and therefore non-actionable at common
law maybe actionable under the ACL.
o bigger and better conveyed a clear nad false impression that the units were on a grander scale than
those located in the other building.
o NB: if the statement was bigger and best = not comparing the units to another specific building, the court
may have been more willing to dismiss the statement as mere ppuff because it would have been a general
statement.
Petty v Penfold Wines Pty Ltd: HELD: statement that Petty was getting Penfolds best discount was held not to be mere
puff but a stateemnet of specific fact.
Demagogue v. Ramensky (1992) 110 ALR 608
FACTS: Mrs Ramensky entered into a contract with D to purchase a unit. R asked about access to hte property and
were informed by D that of course, there would be access.
o later, R was also shown a plan of development that wshowed a driveway that ran between their property
and the road.
o D failed to inform R that the driveway was ap ublci road adn that R would be required to obtain, at a fee, a
licence in order to be able to use thte driveway
HELD: the significance of silence falls upon the facts of the circumsnatces of the case...in any event, the test
seems to be whether in teh light of all the circumstances constituted by acts, omissions, statements or silence,
there has been conduct which is...misleading or deceptive
o whether the facts give rise to a reasonable expectation that the facts that the D. Remained silent about
should be disclosed.
o in this case, failure to disclose the licence requirement was misleading.
General Newspapers v Telstra corporation:
FACTS: General Newspapers approached Telstra and expressed interest in tendinring for hte printing of Telstras
telephone directories.
o T had no definite plans to put hte printing contracts out for tender
o P told GN that it was continually evaluating its approach to future printings and that GN would be placed
on a list of potential tenderers
o T then employs its current rinter and renewqed the printing contracts with that company
o GN arued that T s failure to disclose hte fact that it was negotitinbg with teh company currently
responsible for printing hte directories constituted misleading conduct HELD: NO.
HELD: the particular facts of hte case must be considered in light of the ordinary incidents and character of
commercial behaviour.
o in this case, not misleading or deceptive conduct because T had not consducted itself in a way that
suggested it would keep GN informed about the neogitation process.
Miller & Associates Insurance Broking Pty v. BMW Australia Finance Ltd (2010) 241 CLR 357
FACTS: Miller was an insurance broker. it negotiated an insurance premium fuding loan with BMQ Austalria on
behalf of its client CTH.
o BMW had been given a copy of the policy.
o CTH defaulted and BMQ Finance sought to recover its losses from Miller
o BMW claims that the memorandum nad certificate given by Miller was misleading or deceptive as it
conveyed the misrepresentation that he policy covered property and was assignable and cancellable when
it was not.
o BMW also claims that Millers failure to disclose was misleading and deceptive conduct.
lOMoARcPSD
HELD: expectatiosn of disclosure depends on the nature ofhe parties. An expectation does not arise merely
because one party knows about the matter by which they remained silent which was liely to be important to the
other. It depends on the nature of hte parties.
o The parites were two large commercial parties and therefore, the legislation must be sensitive to them.
o the prohibition against misleading or deceptive conduct in trade or commerce deos not require a party to
commercial negoaitionts to volunterr informaiotn which wil be of assistance to the decision-making of hte
other party...
o party is not required to volunteer information in order to aovid the consdequences of careless disregard of
aother party of equal bargaining power and competence.
o reasonable expectation of disclosure dos not arise merely because one party knows that a particular
matter is likely to be of importance to the other party.
o HC THEREFORE rejected BMWs argument that M had engagedin misleading conduct.
Nagy v Masters Dairy Ltd

FACTS: milk supplier did not give notice to N, a party who it was in negoitaations with to act as its supplier, that it
had entered into a distribution relationship with another party.
o there were extended negotiations
o supplier did not specify a deadline by which N was to decide whether it wished to act as a distributor
HELD: the failure of M to inform N that it had entered into arrangements wit another distrtibutor was held to be
misleading or deceptive.
Noor Al Houda Islamic College Pty LTd v Bankstown Airport Ltd
o FACTS: College sued the Bankstown Airport that there was milsleading or deceptive conduct because the land that it
had leased to the college was contaminated.
throughout negotiations, the respondent endeavoured to point out the disadvantages of the proposed leased
site so as to enable the college to make an informed choice.
o HELD: a reasonable person would therefore have expected that if htere werew problems associated with the site, such
as conbtamination ,they would have been disclosed.
(Hoeben J) this was not a case oif silence alone...ratehr, teh college alleged hat hte combiantio nof full
disclosure combined with the failure to mention the risk of contamination was misleading.
EK Nominees Pty Ltd v Woolworths
FACTS: W was interested in opening a supermarket in the Auburn area
o negotiatsion for the Queen St store that it initially wanted to open in had failed and therefore, W started to
negotiate with EK who were owners of the Auburn site.
o EK was aware that W had been interested in opening hte Queen St site and sought an assurance from W
that its interest in the Auburn Rd site was genuine
o W gave this assurance
o W made an offer to take a lease of a supermarket to eb constructed at the Aurburn Rd site subject to Ws
boards approval
o W expected EK nominees to commit itself to the project
o EK then spends significant amonunts of money developing the site under the plans and specifications that
W gave.
o solicitors of both parties began to negotiate the terms of the lease
o W became aware htat hte Queen st site was being developed and entered into confidential negotiations
with the new owner of hte Queen St site
o W did not inform EK nominees and continued to negotiate with htem
o EK then asks whether W was going elsewhere but was informed that no decision had bee made whether to
open a supermarket at the Auburn Rd site or the Quen st site.
o EK stops work o nteh project
o W resolved not to proceed with the agreement for lease fo the Auburn Rd site
o EK sues W fofr engaging in misleading or deceptive conduct by failing to disclose its ngotiatisn with hte
owners of hte Queen st site.
HELD: (White J) Woolworths failure to disclose that it was negotiating with another potential landlord constituted
misleading conduct.
o W had encouragaged EK to spend substantial moneys
o EK oculd reasonably have expected that if a new proposal arose in lreaiton to hte Queen St site, ti would be
told babout it or tolkd that W was reconsidering tis decision to open a site in Auurn Rd,
lOMoARcPSD
o
o
negotiatiosn with the owner of the Queen St site were confidential BUT W could have disclosed that it was
reconsidering its decision to continue with the Auburn Rd site without bereaching confidene
THEREFORE. W had engaged in misleaingor deceptive conduct and liable for EKs wasted expenditure on
the project.
Miba Pty Ltd v. Nescor Industries Group Pty Ltd (1996) 141 ALR 525
FACTS: a arpresnetaion was made about the likely takings of a franchise business that the D. Were selling. A letter
was sent by the D. With figures of various other similar businesses and this was presented to hte Pl. The question
was wwheterh it was a rerpresnetation aqbout the future ie. The future takings.
o If it was, it was necessary that the representation had to be made on reasonable grounds otherwise, it
would be taken as miseleading or deceptive conduct.
ARGUEMNTS: Pl. Argued that it was a representation into the future (future takings).
HELD: No, it was not a representation to the future because it was a merely statement of present belief. The
statement was merely suggesting that it was a present belief that the person making the statement held that these
were the takings that would be received.
o Whilst there was a future element / prediction of future takings, it was however a statemtn of present
belief.
o Crucial in the case was the way the statement was framed it was expressed as it is our current belief that
hte franchise would make X amount of money
NOTE: Mibas approach was firmly rejected in Digitech: the Court did not accept that the statement of hte grounds
on which a forecast was based meant that it was not a statement of future matters..
o Court said that even a statement explicitly made as an expression of belief may nevertheless be a
representation as to a future matter:
Digi Tech (Aust) Pty Ltd v. Brand [2004] NSWCA 58
FACTS: similar statement of forecast as Miba v Nescor
HELD: the way that the statement was framed ie. It is our belief that in the future, the business would have X
amount of income did not prevent it from being a statement of the future.
o it all dependso nthe words used and the general context
o The expression of a belief involves the expression of a state of mind. There is no reason why a person's
state of mind should not relate to future matters. Thus, in determining whether an xpressed belief relates
to future matters, regard must be had to the words used and the context: Sydney Harbour Casino
Properties Pty Limited v Coluzzi & Anor [2002] NSWCA 74 at [24] per Mason P.
Accounting Systems 2000 (Developments) Pty Ltd v. CCH Australia Ltd (1993) 42 FCR 470
FACTS: A entered into a contract with Castle Douglas underwhich copyright interests in software were assigned. A.
Gave a warranty to Castle Douglas that they were owners of the copyright and Castle Douglas sold to CCH the
licence to use the software. In fact, A did not own the copyright. CCH said that they were mislead and sought to
recover money that it hass spent on the licence from Castle Douglas.
ISSUE: CCH was not the party to the original contract therefore, whilst there was a warranty in the contract
between A and Castle Douglas, privity of contract applies and CCH is banned from suing under contract for
misleading conduct of A.
o Privity of contract = one cannot sue under contract for which one was not a party
HELD: even though the parties were in a contractual relationship and even though the warranty was included in the
contract and had taken the form of hte promimse, CCH had no remedy in contract and hence, sought for remedies
under the legislation.
o Under legislation, CCH was allowed to recover.
o (Lockhart and Gummow J) s2(2) provides significant support for the general proposiation that the making
of a statement as to a presently existing state of affairs may be engaging in misleading or deceptive
conduct where the statement is embodied as a provision of a contract.
Futuretronics Pty Ltd v. Gadzhis [1992] 2 VR 217
FACTS: under the statutes of fraud, the contract could not be enforced and hence Pl. Could not have remedy under
contract law. Issue was whether Pl. Could then recover under the legislation?
o The D. Bid for the Pl. Property at an auction
o For some reason, as required for the condition under the auction, D. Decides that they did not want uit and
refuses to pay.
o Pl. Could not sue in contract because of Victorian Statue of frauds.
lOMoARcPSD
Pl. Then argues that the D. Had engaged in misleading or deceptive conduct by bidding at the auction and
that was misleading because it was a representation that he bid was genuine and they intended to be
bound by the conditions of sale.
HELD: on what basis was the liability? It is not necessary for the Pl. On the facts here to show that the D. Had no
intention of performing the promise(ie. s4 is not limited to whether or not there was an intention nor ability by
hte D to perform the contract at the time the promise was made the promise here being implied by their
behaviour rather, the representation that D. would complete the contract shows that there was an implicit
promise on the part of hte D. To perform and if you implicitly promise to perform nad you fail to perform, that
conduct is misleading and decepetive.
o BUT: in this case, the Pl .cannot be said to have suffered loss because there was no competing genuine
bidder at the auction.
Facts: G made the only genuine bid at an auction of F's commercial property and the property was knocked down
to him; G refused to sign the contract of sale and he was sued for specific performance or damages
Held: F failed. Failure to fulfill a promise for future action is not a breach of s52 of TPA. F had not relied upon the
misleading conduct so as to suffer loss or damage.
s51 says that a representation about any future matter will be taken to be misleading unless the maker of the
statement can prove that he or she had reasonable grounds for making the representation. since G could not
show that he had reasonable grounds for making the statement, it could still be argued that G had engaged in
misleading or deceptive conduct.
A promise to do something in the future is not misleading or deceptive conduct because when the promise is
made, the person fully intends to keep the promise- s52 requires the promisee to be led into error.
Concrete Constructions Group Ltd v. Litevale Pty Ltd (2002) 170 FLR 290 demonstrates a more restrictive approach.
FACTS: implied promise was that we would perform the act and was bound by the contrac and would complete the
sale
HELD: failure to keep a promise was not enough to be a deceptive conduct. Instead, a narrower view was taken.
o It is necessary that you have the capacity to perform more than just the intention to perform in order to be
aa promise that was deceptive conduct.
o Not enough that D. Impliedly or exdpressly represented that he would perform in the future.
Global Sportsman Pty Ltd v. Mirror Newspapers Pty Ltd (1984) 2 FCR 82
HELD: an opinion can amount to deceptive and misleading conduct BUT an opinion is not misleading and ddceptive
merely because it was incorrect
o an expression of opinion conveys no more than the opinon is held and perhaps that here is a basis for the
opinion..howevere erroneous, misrepresents nothing
o There has to be within the opinion an implied statement of fact that there is a basis for the opinion.
In Global, conduct was held to be misleading only if it contains a misrepresentation --> Court later said that this was
too narrow.
o may be possible to establish that an opinion was misleading without hte need to look for implied
representations htath e opinion is held and had a solid basis.
Havyn Pty Ltd v. Webster [2005] NSWCA 182
FACTS: purchaser of a block of six flats alleged that a statement in a brochure that each flat was approximately 63
square metres in area.
HELD: a represnetaiotn of opinion was misleading and deceptive if the person making it lacked belief in the opinion
or there was no adequate foundation upon which hte belief could be held.
o It is not merely stating an opinion that turns out to be untrue.
o Misealding or deceptive = D. Presents the opinion as genuine OR that it has reasonable foundations when
he lacked belief in the opinion or there was no adequate foundation upon which the belief could be held.
o in this case, the statement in the brochure was misleading.
o the real estate agent had arrived at hte estimation by pacing out the unit
o such a method of estimation was so cruedde that htere was no adequate foundation upon which the freal
estate agent could have had a rational belief that each flat was approximately 63 square metre in area.
\Inn Leisure Industries Pty Ltd v. DF McCloy Pty Ltd (1991) 28 FCR 151
FACTS: a astatement was made that hte sale would not be taxable under the sale tax. an audit was done yb the
ATO resulting int he vendor being obliged to pay tax and a penalty.
lOMoARcPSD
HELD: This was not misleading or deceptive conduct because hte person making the opinion did not represent
himself as having legal expertise the purchaser gave evidence that its statement was based on advice it received
fomr its accountants.
there was nothing to suggest htat the opinon was not honestly held or that the advice had not
been given.
o a representation of law...may do no more htan convey what is, on the facte of it, the untutored opinion
of hte representor. As such, evne if it was wrong, it is unlikely to constitute misleading or deceptive
conduct.
o the situations in which advice, expert or toher wise as to the law may be misleading will depend upon the
context and circumstances in which it is proffered and the representations implied or expressed that
accompany it.
BUT contrasting case:if the party holds itself out a shaving expertise, statements about the law are more likely to
be viewed as misleading:
SWF Hoists and Industrial Equipment Pty Ltd v. State Government Insurance Commission [1990] ATPR 41-043
FACTS: whether the policy that the Pl had taken out worked interstate or whether it works only in that state. Pl.
Asked the Commision if they wouild be covered by the insurance policy if one of their employees were injured.
The commission is held out as having knowledge of the insurance industry.
HELD: the statmente was made by someone holding themselves out to have expertise.
o The Commission was liable for satetment of law.
o the statement is one of fact as to hte content of packages of insurance offered to the Pl.--> note, even if it
was characterised as statements of law, the advice would still have been an actionable form of misleading
or deceptive conduct.
Cf: Commonlaw: unless courts twist them to make them [statements of law] statements of fact.
North East Equity Pty Ltd v Proud Nominees Pty Ltd:
FACTS: Pl. purchased equipment form the D. misreprestantions wer emade to induce the Pl. to purchase the
equipemetn and the Pl. claiomed damages to compensate for the additional power costs incurred in operating the
new machinery.
HELD: trial judge ought to have brought hte additional power costs to account because those costs arose directly
ouit of the operation of hte equipment acquired in reliance the Ds mirepresentations even though none of these
misrepresentations related to power costs.
Gates v City Mutual Life Investments Pty Ltd (1986) 160 CLR 1
FACTS: Pl. had been induced by an agent of hte D. to take out total disability cover on his insisting insurance policy.
Pl. claimed that he did that because of a representation by the D. that he was entitled to the full amount of the
insurance should he be injured and unable to carry out his current occupation as a carpenter.
o in fact, what the policy entitled him to was that he could not recover the full amount under the full amount
under the policy if he could carry on any sort of employment. ie. whilst he could not work as a carpenter
but can work as something else, then the policy would preclude him from recovery.
ISSUE: there was a problem in terms of recovering for damages it was said that if the tort measure applied, he
would have gotten what he paid for.
o Pl. had paid for a policy that covered if he could not work at all appolying the tort measure, this was what
he got therefore damges = 0.
HELD:
o Gibbs CJ: when deciding what damages you get, you always go for hte tort measure.
o Mason, Wilson and Dawson JJ: unnecessary to make a definiticve choice between contract measure and
torts they wont rule out a contrafcct measure. BUT in cases where there is a making of false statements
of making of misleading /defceptive conduct, then the tort measure applies.
o Under the tort measure, Pl. got what he paid for even though there had been misleading and deceptive
conduct = no loss. He had not gottten what he had expected so under a contract measure, he could have
recovered but under the tort measure, there was no recovery.
o the claim for damages under s236 of the ACL failed as there was no evidence that hte cover was not worth
wahat he paid for it.
o NB: another way of giving relief would have been to rescind the contract BUT the Pl. did not plead it that
way..he tried to claim the benefits that were payable according to the representation = Pl. tried to claim
expectation loss but the court said tahat this was not a method appropriate for loss in such a context.
Henville v Walker
lOMoARcPSD
FACTS:
W made a statement as to the selling prices of a block of apartment blocks.
H then assessed the profitability of the project, relying on his own expertise in estimating the costs and W's
advice regarding the likely selling prices and decided to go ahead with the development.
The costs were substantially under-estimated, the selling prices substantially over-estimated and the units were
sold at a substantial loss to H.
H subsequently brought proceedings against W for misleading and deceptive conduct, in contravention of s 52 of
the Act, and sought to recover his losses under s 82(1).
HELD:
The HC found in favor of H, holding that Ws representations regarding the units' likely selling prices were
misleading. The main issue on appeal was the amount of damages to which H was entitled, in light of his
investigation.
The HC considered that conduct would legally cause damage if it materially contributes to the damage,
irrespective of whether the conduct alone was sufficient to bring about the damage. Two or more causes may
jointly influence a person. The fact that the making of the representation induced a person to act in a certain
manner, resulting in loss or damage from the act means that act is a link, not a break, in the chain of causation.
McHugh J emphasized the public policy consideration that the function of causation is to determine whether a
person "should" be held responsible for some past act or omission - whether some breach of a legal norm is so
significant that as a matter of common sense, it should be regarded as a cause of the damage. In this context, the
fact that the representation was intended to induce the very act, which it did induce, was significant
Gaudron and McHugh JJ considered that once the plaintiff had established the requisite causal connection, the
defendant must bear the burden of establishing why the plaintiff must not recover its total loss. By contrast,
Gleeson CJ would not support a decision whereby Walker would be required to underwrite all of Henville's
losses, regardless of how they were incurred.
The decision in Henville v Walker confirms that liability for misleading and deceptive conduct can arise even
where the relevant conduct did not directly cause the damage. Supervening events will not necessarily break the
chain of causation. The decision also illustrates the policy considerations that underlie questions of causation.
Murphy v. Overton Investments Pty Ltd (2004) 216- CLR 388

FACTS: Pl. takes out a 99 year lease over a unit in a retirement village owned and managed by the defendant. as
part of the package, the Pl. was required to contrtibute to outgoings (eg. service charges for maintaining the
property). Pl. asked what the outgoings would be and the D. gave an estimate but saying that it could vary from
time to time. The estimate was inaccurate and the Pl. was lumbered with a large bill. Pl. alleged misleading and
deceptive conduct and sought damages.
ISSUE: the property thath thePl. had paid for was worth what they paid and the money that htey paid for
maintenance was perfectly reasonable Pl .was getting good value for what they were paying. question was then
what loss has the Pl. suffered?
HELD:the court took a broad view of losses suffered. Court stressed that what the Pl. had lost was a loss of
opportunity to enter into a contract with at third party because they had relied on the defendants misleading and
deceptive conduct.
o this is a clever ruling because it gets around the expectations issue they did not characterise the loss as an
expectation but aas a lost opportunity in the sense of reliance THEREFORE evading the question.
o the court characterised the loss as a lost opportunity = the loss of an opportunity to enter into an
alternative contract, the court allowed recovery.
in Gates: the Pl. would have been able to claim damages for loss of opportunity if he was able to
prove that had it not been for the agents misrepresentation , he could and would have entered into
a contract of insurance that would have covered him in the event that he could not work in his
profession.
o the court said that the lost laid in the continuing financial obligation undertaken under the lease to the
extent they were larger than what they were led to believe.
Murphy v Overton shows that courts have not ruled on an expectation measure but they are prepared to use a tort
measure broadly by invoking the idea of a lost opportunity. Along with the following cases demonstrating the
same:
Sellars v. Adelaide Petroleum NL (1992) 179 CLR 332
FACTS: Adelaid entered into parallel negotiations with two companies with the purpose of persuading one of them
to acquire the shares in A. Afterwards however, A decides not to pursue the negotiations with one party so as to
enter the contract with S. However, S had exceeded his authority and the document was not authorised by the
company that S represented.
lOMoARcPSD
A thought that meant htat S had repudiated the agreement (as a result of hte misrepresentation) and
reusmed negotiations with the first party in which a contract was signed BUT the terms of htat contract
were less favourable than the agreement that would have resulted had A not decided to stop negotiations
with it to negotiate with S.
HELD: the court considered the problem of proof of damage and assessment of damages in a case where hthe Pl.
seeks to show that he had lost an opportunity to obtain a commercial advantage BUT was based on hypothetical
fact situation.
o HC said that it was not necessary for the Pl. to prove that on the balance of probabilities a benefit would
have been derived form the opportunity ahd it not been lost.
also not necessary to show the extent fo hte benefit.
o sufficient for hte Pl. to show, by reference to the degree of possibilities and probabilite,s that there was
some prospect of deriving a benefit from the opportuntity had it not been lost.
o court will ascertain the value of hte opportunity or benefit by reference to such possibilities and
probabilities.
Marks v. GIO Australia Holdings Ltd - Needs Case summary!

HC said that the recovery under the statute was not the same as common law and therefore common law rule
should not be as readily applied to qualify the remedy under statute.
This case appears to provide some guidance on the question of gaining damages in this situation. Damages may be
awarded under s 82 of the Act if loss or damage has been suffered as a result of conduct that contravenes a
provision of Part IV, IVA, IVB or V of the Act (s 51AD is located in Part IVB of the Act). However, Marks is authority
for the proposition that the contravening conduct must be a cause of the alleged loss or damage. In other words,
according to the majority in that case, 'a comparison must be made between the position in which the party that
allegedly suffered the loss of damage is and the position in which that party would have been but for the
contravening conduct'. Only if an alternative, less detrimental or more beneficial, course was available to the party
at the time it entered the relevant contract would it be able to claim damages.
Dalecoast Pty Ltd v Guardian International Pty Ltd
FACTS: Pl. purchased a graffiti removal franchise from the D. D misrepresented that the Pl. would ha vena
indefinite supply of a graffiti removal product when in fact the Pl. only had the irhgt o an indefinite supply of a
graffiti-coating product.
o there was no operating loss suffered.
HELD: damages were awarded by referenfce to hte profits that would have been amde form the distribution and
application fo hte graffiti removal product on the bassi that hte Pl. did not receive all that it bargained for.
o ie. this is an expectation measure of loss.
o judge justified based on Murphy and saying htat ther is a compensatory element and a public interest
element in the assement of damages for breach of hte prohibiton against misleading or deceptive conduct
in trade or commerces.
Callander v Ladang Jalong (Australia) Pty Ltd
FACTS: D. represented that it would advance money to a businesss and the Pl .woud lbe appointed CEO of theat
business at a certain salary.
o Pl. then joins the company and worked in the excpectation taht he would be paid that salary.
HELD: damage was calculated by reference to hte amount the Pl. expected to be paid less the amount he had
received rather than on the basis of salary payments foregone (which would have been teh reliance measure of
damage).
Cases where courts distinguished Muprhy:
Warwick Entertainment Centre Pty Ltd v Alpine Holdings
FACTS: Pl. sued for loss of profits it had hoped to earn by conducting a business it had been induced to purchase on
the basis of misleading conduct.
HELD:
o the loss that hte Pl. claimed had not actually been suffered because all that had happened was that an
expectation which it had been led to hold had failed.
Sumy Pty Ltd v Southcorp Wines Pty Ltd
FACTS: Pl. bought a block of land that had been advertised as being 100 acres in area when in fact it was only 80
acres in area.
o Pl. said that it would not have entered into athe contract at that price had it known the truth.
lOMoARcPSD
HELD: distingusihgi nfrom Murphy because the amount paid for the land was not higher than the lands real or fair
value reliance based.
o confining Murphy to its facts.
Campbell v. Backoffice Investments Pty Ltd (2009) 238 CLR 304.

FACTS: Clause in the contract saying we do not rely on any representation made by the defendant which was
trying to show that htere was no causal link between the deceptive conduct and the loss.
HELD:
o (French CJ) it is a quesiotn of fact depending on the indiidvual case how effective the acknowledgement
clause is.
o whether conduct is misleading or deceptive is a question of fact to be decided by reference to all of the
relevant circusmtnaces of which hte terms of the contract are but one.
NEA Pty LTd v Magenta Mining
FACTS: D. stated htat crushing equipment it hired to the Pl. was fit for the purpose of crushing ore stockpiled by the
Pl.
o contract included an exclusion clause 8: no warranty or condition expressed or implied is given by hte
owner as to the condition of hte plant or as to the suitability or fitness ofthe plant for any purpose.
o nothing else was said to the Pl .to dispel the misrep that hte equipemtn was fit for the relevant purpose.
HELD: (Martin CJ) important to differentiate between a factual siautation wher one party makes it clear to hte
other party that information provided may not be reliable (ie. that there is no liabitliy from the very beginning a
disclaimer effectively) vs. a situation in which there is nothing more than a contractual provision which attempts to
limit liability.
o in this case, clause 8 only worked to prevent any term from being incorporated into hte contract realting to
the condition of hte equipment
did not negate the misleading or deceptive nature of hte representation made by the respondent.
Butcher v Lachlan Elder Realty
FACTS: Disclaimer in the brochure said all information contained herein is gathered from sources we belive to be
reliable. Hwoever, we cannot guarantee its accuracy and interested parties should rely on their own enquiries.
HELD: important that he agents conduct be viewed as a whole = everything that hte agent did up to the time when
the purchasers contracted ot buy the land must be taken into accocunt.
o court looked at:
nature of hte parties involved
short length and brevity of hte brochure
the lciamants were sophisticated buyers who had access to legal and other professional adviace
whilst teh D. were small real estate agents.
o (McHugh J in dissent) took the conduct of hte D. to include its actions during the inspection whereby it had
told Butcher that it wos sceptical about the pool that it wanted to build but whre it did not reinforce the
disclaimer.
o (Kirby J in dissent) the disclaimer wqas in tiny font nad majority placed incorrect emphasis on the
relationship between the parties.
I00F Australia Trustees (NSW) Ltd v Tantipech
FACTS: Pl. eneterd into a lease of a shop in a shopping centre and signed a separate deed of acknowleedgment that
stated in cl 1 that the Pl. confirmed that it had only relied on the statements in Cl 2 and nothing else.
o Cl. 2 identified two represntaiotns neither of which related to hte number or proportion of leases which
were likely ot be entered into by teh D. It also included an indemnity clause that the Pl. agreed to
indemnify hte D. against any calim he might make in respect of statements other than those in Cl. 2 -->
effectively, Pl. would not be able to sue on other repsresntatiosn.
o the D. had misrepresented that hte centre had already leased out 80% of its shops.
HELD: court made a finding in fact hat Pl. was induced by the misleading conduct to sign the deed and did not
understand that the ded related to represnetatison about the occupancy of surrounding shops.
o deed was therefore not effective in barring the claim.
o ie. the exclusion clasue was part of the whole conduct of hte D. which was held tobe misleading.
Barton v. Armstrong [1976] AC 104
lOMoARcPSD
FACTS: B. and A. were major shareholders in a company. both wanted control of hte company. A decides that he
wants B to buy his shares in order to make quick returns on very generous terms. A says that if you dont buy
these shares on these terms, I will murder your family.
o B took the threats seriously BUT there were also good business reasons for executing the deed.
HELD: Austrtalian trial judge: the threat was absolutely clear on the evidence but nevertheless, they said that the
reason B bought the shares was not because of the threat but because B wanted control of the company.
o what was the required link between the illegimtiate pressure and tehcontract? (element 2)
(Privy Council) were keen to allow duress as a defence reversed trial judge decision.
o It is perfectly enough to hsow in cases of duress to the person that the duress only needs to be a cause of
the contract. There were other reaonss but once you can show tha thte threat was a cause for entering
into the contract (theres not an issue about the illegitimacy of the pressure), the onus is on the D. to show
that the threats were not a cause.
o Pl. should therefore succeed in obtaining relief even though he could not show that , but for hte threats
whe would not have signed the deed.
Skeate v Beale
FACTS: ther was a promise to pay money for the reutnr of goods detained nad threatened to be sold because of
alleged arrears of rent.
o promisor paid
o BUT promisor then argues that the payment was induced by duress
HELD: the defence failed because (Lord Denman CJ) an agreement is not void because madae under duress of
goods...the fear that goods maqy be taken or injured does not deprive anyone of his free agency.
o ISSUE with Skeates ruling is that it sit unsasily with the recognised right to recover back money paid to
prevent the unlawful seizure of goods or to obtain goods actually seized --> ie. the doctrine of restitution.
leads to the absurd result that if A paid money under duress of goods, he could recover the money
paid but iif he eneterd into aa contract to pay money under similar duress, he could not aovid the
contract and would be oboligaed to pay hte money due thereunder.
NOW: it is accepted that threatened detention or seizure of goods, or threatened damage to goods, is within the
scope of duress in contract law
o Kerr J in Occidental Worldwide Investment Corps (The Siboen and The Sibotre) if I should be compelled
to sign a lease or some other contract... under immediate threate of having my house burnt down...though
without any threat of physical violence to anyone, I do onot think the law should uphold the agreement.
Distinguish Skeate v Beale: on the basis that hte Pl. of the threat to sell the goods had a real alternative to
submission in the circumsntaces --> ie. he oculd have an action in court but he chose not to pursue it.
Astley v. Reynolds (1731) 2 Str 915

FACTS: A pawned silver plate to R and given money in return. A went to redeem the plate, R said cant have the
plate unless you pay twice the legal interest rate. A paid the money and then sought to recover the overpayment.
HELD: the overpayment was recovered under duress to goods.
The duress to goods could be used to avoid a contract:

Hawker Pacific Pty Ltd v. Helicopter Charter Pty Ltd (1992) 22 NSWLR 298
FACTS: Pl. owned a Helicopter. Helicopter needed maintenance and the D. agreed to repaint it. the cost of
repainting was relatively high at $5,200. The work was unsatisfactory and further work was done and theprice was
increased to $5,550. The Pl. was still not satisfied but the helicopter is returned again to the D. The Pl.s employee
goes to retrieve the helicopter and the D. says that he can have his helicopter if the Pl. agrees to pay a further
$4,300 and release D. from any further liability wanting to avoid litigation against D. for unsatisfactory paint. Pl.
signs the agreement, takes the helicopter but refuses to pay.
ISSUE: was the Pls entrance into the agreemnte a result of duress?
HELD: Duress can be used to avoid the contract ass well as compensation for the money paid. The threat to
withhold the helicopter need not be expressed, it oculd be implied. The way that the D. went about making Pl. sign
the agreement was in itself sufficient.
o Pl. believed that hte D. would prevent hte helicpopter being taken away unless the document was signed.
o D. knew that hte helicopter was needed urgently for a charter that day.
o it would have been different if the Pl. had affirmed the contract in some way or where there have been an
estoppel BUT on the facts, neither of these were present.
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Smith v. William Charlick Ltd (1924) 34 CLR 38

FACTS: Pl. was a miller. pl. needed wheat for his job and he bought his wheat from the wheat harvest board as
constituted by regulations. The Board ahd agreed to the price and that was fine. The wheat was delivered and paid
for at the agreed price. The Pl. was told that unless they agreed to pay additional sums demanded by the board,
the board may not supply the Pl. with wheat any more. At the time, the Pl. was not able to purchase wheat from
any one other than the board.
o Pl. would not be able to continue his businesss as a miller unless he paid the money.
o Pl. paid and sought to recover his money back.
HELD: Pl cannot recover his money because the pressure was not illegitimate.
TA Sundell & Sons Pty Ltd v. Emm Yannoulatos (Overseas) Pty Ltd (1955) 56 SR (NSW) 323
o broader view was adopted of economic duress
Similar facts to Smith
HELD: in Smith, the claimant had failed because hte threat not to deliver the wheat in teh future did not infringe
any fo the Millers existing rights it was about future deliveries.
o that was not a legitimate limitation.
Overbearing will theory
The Siboen & The Sibotre [1976] 1 Lloyds Rep 293
FACTS: a ship was chartered and the charterers to the ship owners that unless teh charter price was reduced,they
would go into liquidation. ship owner had a problem because the charter marketed at the itme was in a poor state
there wre other circumstances such as high oil prices difficult circumstance to ship owner. If ship owner had not
agreed to lower price, the charterers would have gone bust. The parties agreed to the modification and the ship
owner accepted a lower price.
o Ship owner then argues taht the modification was athe result of economic duress and should be set aside.
HELD: economic duress is a ground for setting aside a contract BUT on the facts of the case, there was no
economic duress because there was only commercial pressure.
o authority that if you can show economic duress, you can set the contract aside BUT on the grounds of hte
facts, there was no economic duress, there was only commercial pressure.
Pao On v. Lau Yiu Long [1980] AC 614
FACTS: the Pl. agreed to sell a building under construction to the D. However, payment for hte building was to be
made by a share swap. Parties entered into a share swap agreement which the building owners realise was not
advantageous to them. The building owners said that htey would terminate the contract unless the party was
willing to pay the increased price.
ISSUE: was the contract a product of economic duress?
HELD: no, economic duress could in theory be used to set aside the contract but on the facts ,this was only
commercial pressure.
o fear in losing out on buying the building was only commercial pressure therefore legitimate.
Pao On applies the overall theory that the courts used to adopt a view of duress that duress occurs only when
there was no consent BUT the narrow view aht th duress can only be used where there is no consent has been
rejected in the 1980s.
o in 1980s, the courts look whether th epressure was illegitimate instead of looking at the will of the party
being overborn by the pressure.
o moving away from the overborn will theory to the two fold test by Lord Scarman.
Crescendo Management Pty v. Westpac Banking Corp (1988) 19 NSWLR 40
The Hilbrinks sold their home in order to relocate with their group of companies.
Proceeds of the sale went to Westpac in order to pay loans, the remainder of which was stored in a Westpac
account.
Westpac refused to release the proceeds unless Hilbrink signed certain documents executing a guarantee and a
mortgage on the new property; Hilbrink, as director of Crescendo Management signed the documents
Mortgage came into effect on 8 July Crescendo claimed duress in signing the contract on 27 July.
It was accepted that Westpac had withheld the funds unlawfully.
ISSUE: The main issue was whether Crescendo was induced to enter the contract as a result of the pressure.
Causation problem.
lOMoARcPSD
Find the distinction between duress and unconscionable dealing (is not talking about the Amadio cases). Whether
someone is getting more out of the contract than they should on the plain words as an ordinary person would
understand them.
HELD (McHugh J): pressure can be illegitimate if it is unlawful but not just if it is unlawful.
o proper approach is to ask whether any applied pressure induced the victim to enter the
contract...whether that pressure went beyond wahat hte law is prepared to countenance as legitimate?
Pressure will be illegitimate if it consists of unlawful threats or amounts ot unconscionable conduct....the
categories are not closed.
o this approach is vague enough to afford discretion to the judges did the applied pressure induce the
party into entering the contract is a question of fact and when is the pressure illegitimate? is not clearly
defined at all.
Equiticorp Finance Ltd v. Bank of New Zealand (1993) 32 NSWLR 50, 106 (Kirby P.): the part of duress concerned with lawful
acts might better be seen as an aspect of the doctrines of undue influence and unconscionable dealing.
Kirby P says that it is terribly danagerous if the courts start replacing the contractual agreements of the parties
because courts are not equipped to do so.
Betwene commercial parties, commercial parties want certainty and to have their terms to be able to be freely
negotaiated and adhered to.
Kirby P argues that economic duress might be better dealt under undue influence and unconscionability.
o he argues that it is ridiculously uncertain when the court will say thathte pressure was illegitimate.
BUT note the advantages of the vague test gives judges a bit of leeway.
o economic duress can be used to set the contract aside.
ISSUE: extent to which the econimc duress has to cause the contract - relationship between duress and contract.
Australian and New Zealand Banking Group v. Karam (2005) 64 NSWLR 149
duress as limited to threatened or actual unlawful conduct. The threat or conduct in question need not be
directed to the person or property of hte victim.
if the conduct or threat is not unlawful, the resulting agremenet may nevertheless be set aside where the weaker
party established undue influence or unconscionable conduct
where the power to grant relief is engaged because of a contravention of a statutory provisions, the court may be
entitled to take into account a broader range of circumstances than those considered relevant under the general
law.
equally suggesting that undue influence and unconscionability are better ways for dealing with economic duress in
dealing with these cases BUT because it is not a high court case, econimc duress still exists. (agreeing with Kirby J in
Equiticorp)
Smith v. William Charlick Ltd (1924) 34 CLR 38 cf White Rose Flour Milling Co Pty Ltd. v. Australian Wheat Board (1944)
18 ALJ 324
o White Rose: difference in facts from Smith, is that the Wheat board said that they would not deliver unless
White Rose paid more even though the contract was a fixed term contract. White Rose pays.
o Cf. Smith, the payments could be recovered.
o great weights were placed on the facts that he payment wre not voluntary but was made to ensure
continuous supply. since hte board controlled the supply of wehat in the market at the time, the Pl. would
have gone out of business had they not paid the extra charge.
o Two cases that looked quite similara yet in Smith, it was found tha the money was only pressured thorugh
legitimate commercial means.
o Both cases concerned puchases for the supply of wheat.
The Siboen & The Sibotre [1976] 1 Lloyds Rep 293 cf Atlas Express v. Kafco Ltd [1989] QB 833
o Siboen: the charter price was reducecd but that was said to be commercial pressure.
o Cf. Atlas: FACTS: A. was a courier company that delivered goods. A underquoted on the contract for
carrying Ks goods. A realised that he had made a mistake and said that he would not deliverr Ks goods
unless K agrees to pay double. K really has no choice because the retailers that they wanted to deliver the
goods to prior to Christmas was their main market and other couriers were busy and unavailable.
ISSUE: was this economic duress or commercial pressure?
HELD: it was economic duress.
North Ocean Shipping Co Ltd v Hyundai Construction Co Ltd
FACTS: shipbuilding company contracted to buld a tanker for prospective owners at a fixed price in US dollars.
o payments were to be made in instalments
o after hte owners had paid the first instalment, the US dol,ar was sdevalued by 10%.
lOMoARcPSD
o
o
o
o
o
shipbuilder wanted to claim 10% more in the remaining instalemnets

it declined to go to arbitration and said htat if hte owners did not agee to pay the extrea moeny, it would
terminate the contract and return the first instalment.
owners had already entered into a lucratigve agreement to charter the tanker upon completion therefore,
they knew they were not obliged to pay but would do so in order to maintain amicable relationship and
without prejudice to our rights.
at the owners request, the company increased an existing letter of credit.
After paying hte final instalment in full and final settlement the owner took delivery of hte ship BUT 8
months later, claimed return of hte 10 percent excess.
HELD:
o by increasing hte letter of credit, consideration was for hte promise to pay the extra 10 per cent BUT thee
agreement to pay was made under duress int he form of economic pressure
ie. the threat by hte shipbuilder to break the orgiina lcontract
o shipbuilding company had been adamant in insisting on the cincrease and would have been unreasonable
to expect the owners to lciam damages in arbitration with all the inherent uncertaintites of litigation.
o shipbuilding contract would therefore have been voidble because of hte illegitimate pressure hte
shipbuilding company had applied
whether or not ti was in good faith or not is irrelevant.
o BUT: the oweners had affirmed the varied contract by their overt acts of :
falilling to protest when final payment was made
deleay of 8 months after delivery of htetanker in putting forward a claim.
o owners had no reason to believe that if they had made a proetest in the protocol of delivery and
acceptance, the shipbuilders woud have refused to deliver the vessel
ie. it understood that it was under no obligation to produce that increase in letter of credit.
Allcard v. Skinner (1887) 36 ChD 145, 183,

FACTS: gift was given to religious body.
HELD: Lindley LJ: no court has ever attempted to define undue influence.
o WHY? because equity has always been more flexible than the common law. + given strict definition of
undue influence means that epopel will try to find ways around it.
o He did however give some indication of what undue influence involved:
o some unfair and improper conduct, some coercion from outside, some overreaching, some form of
cheating and generally, though not always, some personal advantage obtained by a donee placed in some
close and confidential relation to the donor.
TWO MAIN FACTORS:
some relationship between parties
some sort of improper conduct
HELD: (Kekewich J) few, if any men, are gifted with characters enabling them to act, or even think, with complete
independence of others, which could not largely exist without destroying the foundations of society.
o there is a scale: at the one end, there is no influence between the parties entering into the contract
o at the other end, there is a total loss of autonomy : eg. in cases of physical duress where on the continuum,
the question is where the courts draw the line.
o BUT: undue influence sits between those two extreme ends.
o Question is deciding where the line has to be drawn it is a vague exercise.
Williams v. Bayley (1866) LR 1 HL 200

FACTS: a son was a dishonest individual and had forged his fathers signature on vaiorus bank notes. son then
spent the money carelessly on loose living.
o bank summoned the fathrer to see the bank manager.
o bank wanted the money returned.
o bank told father Will you take over repsonisbiltiy for your sons debts Father replies I will.
o the debt is secured overhte fathers business by waty of equitable mortgage.
ISSUE: whether the transaction that hte father agreed with the bank to pay out his sons debts was a result of
undue influence.
HELD: on the facts, there was undue influence by the bank against he father.
o the only motive to inducve the father teo adopt the dad qwas the hope that by doing so, he would relieve
the son from the inevitable conseuqneces of his crime
o the bank said that if dad paid this money, the bank would nto go to the police for fraud under that
presre, the father agreed.
lOMoARcPSD
o
o
o
TEHREFORE: the bank had insinuated that hte son would pay criminal prosecution unless the father paid
the debt.
Father therefore paid the debt because hte bank had threatened to go to the police = undue influence.
was said that perhaps had the faather had independent legal advice, the transition would have stood as not
being unduely influenced but on the facts ,there were not any.
Farmers Co-operative Executors & Trustees Ltd v. Perks (1989) 52 SASR 399
FACTS: wife transferred her interest as tenant in common in a farming property, jointly owned by herself and her
husband ,to the husband.
o evidence showed that there was a long history of brutal violence perpetrated by the husband which ended
in his murdering her.
HELD: a relationship of influence existed and the presumption that he wife transferred the property as a result of
her husbands undue influence was not rebutted
o also,m the transfer was from actual undue influence.
o transfer was set aside.
Need to be able to show that one exercised:
o influence over the other
o the influene was undue
o adn teh exercise brought baout the contract
Hartigan v. International Society for Krishna Consciousness Incorporated [2002] NSWSC 810).
FACTS: Pl. was a member of hte Krishna Consciousness Movement
o Pl. gave her house and farm to the D.
o Pl. had misunderstood the religious teachings of the Movement and wrongly thought it required her to
agive up all worldy prossessions
HELD: (Bryson J) the transaction gave rise to a presumption fo undue influence by theD.
the presumption was not rebutted.
o ther was nothing in the nature of a deliberate attempt by the D. or by anyone in the Movemenet to get the
better of hte Pl. BUT the improvidence of the gift emphasised that hte pl. was susceptible to be influeinced
even by hte slightest and most subtle indications appearing ot favour the donation.
Johnson v. Buttress (1936) 56 CLR 113, 134-5 sets out Australian law of this category of cases.
o NOTE: No mention of manifest disadvantage
FACTS: a man gave his aldn adn cottage to the D. three years before he died because she had been very good to his
wife and he was very fond of her.
o administrator of his will challenged the transfer
HELD: it should be set aside
o (Dixon J) although there was no positive proof that hte transfer was procdured by improper exercise of an
actual ascendancy gained byh te D. over hte deceased, there was evidence of an antecedent relationship of
influence over the deceased.
o deceased was illiterate, ignorant of affairsn and a person of strange disposition who did not understand he
had disposed of hte porpoerty irrevocably.
o D.(bank) knew him fr more than 20 years and had renedered assistance to his wife before she died.
o the d. had the burden of rebutting a presumptio nof undue influence she failed to discharge this burden
o D. could not show that hte transfer was the result of the free exercise fo the donors independent will.
Lord Dennings in Lloyds Bank v. Bundy [1975] 1 QB 326
- FACTS: father took a loan and mortagaged his farm to pay for his sons debts.
o Dennings argued that hte unequal bargaining power of the bank - bank could not rebut the presumption
Westmelton (Vic) Pty Ltd v Archer & Schulman [1982] VR 305
FACTS: the Pl. was a solicitor who advised the D. development cmopmany
o hecontinued to do the companys legal work after he was appointed as director and chairman of hte board
o he presented a bill for $25,000 for legal feees but suggested to one fo hte directors that it could be
reduced in return for a share in the companys profits
he accepted the proposal that the bill should be reduced by $10,000 if he was entitled to 7.5% of
the Ds profits before tax
o D. paid the reduced bill but refused to pay the profits
lOMoARcPSD
HELD: the contract wasenforceable = presumption of relationship of influence ie. it was a special relatinsihp of
client solicitor was rebuted by proof that hte solicitor had adveised the directotrs to obtain separate legal
advice on the natureof the proposed contract.
o the company had more expertise in tcmmercea nd finance ahtan most solicitors
o Pl. solicitor dealt fairly and honeslty with a well-informed and sophisticated corporate client
o client asw in no way relying upon any confidencfe or expectation of legal advice
o therew as no duty to advise the client further.
Badman v. Drake [2008] NSWSC 1366

ISSUE: what srot fo factors do the courts take into account in order to allow the rpesumption of undue influence to
be rebutted.
o Westmelton says there is no rigid rule simply look at the facts and whether or not there was free will.
FACTS: D. befriended an 87 y-o woman. D. was in financial difficulties and woman purchased a hosuee for them in
return for looking after her.
o both sets of solicitors feared influence
o question was whtehr the trsnaction in which they have been given a shouse could be set aside.
o Solciitors on both side says steps needed to be taken to protect the woman from being able to set the
contract aside because there was undue influence but the D. refused to take any of thee steps becaused
they were in a hurry to tget their hands on the house
o one of the steps was to bring hte Pl. a medical adviser so that the adviser would have seen bot hte Pl. adn
the D. workgin together and were both satisfied as to her capacity to sing the contract independently.
HELD: there is no special relationship beut the transaction was a produce of influence and the influence was undue.
o there was a failure to rebut eh presumption
o had the d. followed th advice of the solicitors, it would have been different and the presumption maey
have been rebutted.
Yerkey v. Jones (1940) 63 CLR 649, 678 situation described above in common scenario.
o HELD: The proposition that, if a married womans consent to become a surety for her husbands debt is procured
by the husband and without understanding its effect in essential respects she executes an instrument of suretyship
which the creditor accepts without dealing with her personally, she has a prima-facie right to have it set aside.
o ie. where a wife acts as a guarantor fora husbands debts and teh bank accepts her as a guarantor but does
not deal with the wife personally ie deals with the husband only the wife has a prima facie right to set
aside the agreement.
ISSUE: how do banks ensure thathe agareemnet stands with the wife in that context?
HELD: in htis case, the wife only has a prima facie right ot have the agreement set aside BUT on the facts, the
agreement was not set aside because the bank believed that the wife understood the transaction and the
transaction had been explained to her by a solicitor in a way taht a person of average intelligence would
understand
o because hte transaction had been explained to her, the transaction wwas not set aside.
(Dixon J) Although the relation of husband to wife is not one of influence, yet the opportunities it gives are such
that if the husband procures his wife to become surety for his debt a creditor who accepts here suretyship
obtained through her husband has been treated as taking it subject to any invalidating conduct on the part of her
husband even if the creditor be no actually privy to such conduct. It is evident, however, that it many cases, though
it is the husband who obtains his wifes consent to act as guarantor or surety, yet the creditor or his agents will
deal directly with the wife personally. It must then be a question how far an apparent or real comprehension on
the part of the wife or advice or explanation received by her will prevent any earlier improper conduct on the part
of the husband from operating to make the transaction voidable.
Garcia v. National Australia Bank Ltd (1998) 194 CLR 395
FACTS: similarly, wife guarantees husbands debts
ISSUES: is Yerkey still necessary because of the doctrine of unconscionability?
HELD: Yerkey is sstill a separate category rule in that case can still be applied ie. what matter is whether hte wife
understood the transction.
o another factor is that in allowing the transaction to be set aside is that hte wife makes no gain.
o you have to look upon teh facts whether the transaction should be set aside even though there is a prima
facie rule that it should.
see if the wife understands the transaction
rationale of the transaction: based on the trust nad confidence between marriage partners requires that the wife be
relieved of her contractual obligations where the husband has been dealing with the bank and not the wife.
lOMoARcPSD
Blomley v. Ryan (1956) 99 CLR 362, 405

FACTS: Pl. tries to enforce specific performance but D. tries to argue that hte contract was set aaside for
unconscionability:
o D. agreed to sell Pl. a large plot a land at a significant undervalue and on terms favourable to the P. The D.
refuses to perform.
o ISSUE: why did the D. agree to the undervalue sale and then change his mind?
o D. was described as an old man and an alcoholic and that when he entered into the transaction, he was
drunk BUT he was not so drunk that hte transaction could be set aside onthe basis of drunkness.
it was nott ttht he was too drunk to know what he was doing
o but he had a disadvantage and was old and addicted to rum. and on htatb basis, teh transaction was
unconscionable.
o not necessary to show htath e party disadvantaged actually suffered the loss
ie. not necessary that hte transaction was at an addvantage becuaase it was under the value
HELD: duringhte course of hte negotiations for hte sale, the Pl. kept pouring runm down the defendant ie. kept
feeding D. rum. D. was in a disability and was in a position of disadvantage , an unfair use was made of that =
unconscionable conduct.
o case listed a number of a partys disadvantages that made the Pls ocndut unconscionable :
age
infirmity of body of mind
drunkeness
illiteracy etc.
(Fullager J):
The circumstances adversely affecting a party, which may induce a court of equity either to refuse its aid or to set a
transaction aside, are of great variety and can hardly be satisfactorily classified. Among them are poverty or need
of any kind, sickness, age, sex, infirmity of body or mind, drunkenness, illiteracy or lack of education, lack of
assistance or explanation where assistance or explanation is necessary. The common characteristic seems to be
that they have the effect of placing one party at a serious disadvantage vis--vis the other. It does not appear to be
essential in all cases that the party at a disadvantage should suffer loss or detriment by the bargain.
Adequacy of consideration?
a transaction may still be unfair and unreasonbahble form the point of view of hte person under a special disability
even though adequate consideration has moved fomr the D.
o (Blomley v Ryan) per Fullager J: inadequacy of consideration will often bye especially important element
in cases of this type...firstly, as supporting teh inference that a position of disadvantage existing, secondly,
as tending top sow that an unfair use was made of the occasion.
Louth v Diprose
FACTS: D. gave $58,000 to L. D. was infatuated with L and gave L the money so she oculd buy a house. L leads
him on toget his money even though she doesnt like him.
D was a solicitor and Louth was a single mother with two children
D gave L many gifts and bought a property in Ls name even after L tried to leave him and said she was
unable to see him again.
D. is no longer infatuated and subsequently wants the house to bereturned and teh contract set aside.
ISSUE: was this an unconscionable (with respect of Ls conduct) gift?
HELD: yes it was unconscionable gift.
the disadvantage was the infatuation of D.
L. threatendd to commit suicide and knew fully well about his infatuation = unconscionable
o L therefore took advantage of Ds disadvantage.
there is a presumption nof unconscionability that was not rebutted.
DISSENT: (Toohey J) unrequited love did not give a balanced picture ofhte parties relationship, whichc was
not one of complet emotional dependence
D understood the unabalanced terms fothe relationship
his dependence and improvidence were self-induced
the evidnce did not support the conclousion that L had manuftured an atmosphere of crisis.
CRITICISM of Louth for the judges use of stereotypes:
Louth is portrayed as a schemeing temptress determined to grasp all that she ccan, while D appears as
a susceptible but generous male .
this view of the facts overlooks the influence that D. had over L: by virtue of his superior wealth and
higher education
lOMoARcPSD
the dissenting view was not immune from this L was portrayed as a pitiful victim who should nbe able
to keep the hosue given to her by a benign romantic suitor evne though she hass done nothing to
desrve it. D was a grown profiessional man who should have known better.
i. Bridgewater v. Leahey (1998) 194 CLR 457

ii. FACTS: farmer had substantial pastoral holdings.
1. made a will to leave certain property to his wife and his residuary estate to his daughters
BUT before the daughters could have the residuary estate, an option was granted for all his
pastoral holdings to his nephew for $200,000.
2. property was in fact worth $695,000
3. farmer enjoyed a long working relationship with his Nephew in partnership with both the
nephew and his brother
4. farmer fully trusted the nephew and regarded him as the son he never had
5. farmer encouraged nephew to sell his own land so that the nephew could concentrate on
the farmers land.
6. Nephew suggested to the uncle that he should sell to the nephew part of his pastoral
holdings to the nephew for $150,000 --> the land that was worth approx. $700,000 was
then put under a deed of forgiveness to the extent of $550,000 so that the amount owing
was $150,000 from the nephew.
7. there were no solicitors advising the farmer to obtain independent advice but there was a
medical examination to ensure that he was of sound mind
8. evidence showed that even if the farmer had been advised by another lawayer about the
transactions, the end result would have been the same.
iii. LITIGATION: daughters challenged the deed of forgiveness on the basis that the transaction
resulted from undue influence but this failed because evidernce did not show that he newphew
exercised influence over his uncle.
1. daughters then challenged it on the basis that it was procured by Neils unconscionable
conduct.
iv. HELD: the deed of forgiveness should be set aside because:
1. the farmer waws in a position of disadvantage stemming from a strong emotional
dependence or attachment
a. ie. the farmerrs affection for the nephew, his aim to preserve his holdings intact
and his view that the newphew was a reliable and experienced maanger were
significant elements in his emotional attachment.
2. nephew had taken advantage of his disadvantaged position to obtain a benefit through a
grossly improvident transaction
3. transaction was neither fair, just nor reasonable.
4. the fact that the uncle, knew what he was doing despite his age or deteriorating condition
and even though he would not have changed his mind when advised independently does
not mean that the nephew had not taken advantage of the uncles disadvantaged
condition.
5. where the complaint is of unconscionable dealing, the denial of independent assistance
rather than speculation as to what might have happened if the advice had been obtained is
an element in the unconscientious conduct.
6. the nephew jhad initiated the transaction when his uncle was already in teh disadvantaged
position.
7. even though the nephew did not pursue this intiative to implement it, equity is enlivened
which meant that unconscionable conduct could be found in the passive acceptance of a
benefit.
v. DISSENT: there was no special disability in this case
1. uncle had the requisite independence of mind and capacity for judgment when he entered
the transaction
2. transaction could only be understood in a wider context which is that the uncles long held
view was that his nephew should inherit his pastoral interests
the nephews suggestions merely coincided with the uncles plans.
Australian Competition and Consumer Commission v CG Berbatis Holdings Pty LTd
i. FACTS: Roberts conducted a business in a shopping centre and became concerned at some of hte charges levied
under the terms of their leases.
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3. R claimed that she had paid an extra $50,000 under their leases.
4. R had told teh manager of the shopping centre that they wer anxious to sell their business and that if they
could negotiate a new lease term, they could then assign that to the purchaswer which would assist them
5. the owner of the shopping centre said that if they wanted to renew their lease, they would have to consent
t othe dismissal of any current legal proceedings ie. the overpaid leases.
6. Rs solicitor advised against consenting to his proposal
7. BUT R decided that they wouldagree and the business was eventually sold
ii. HELD: lesseses were in a difficult bargaining position but there was no special disadvantage on teh part of hte
lessees nor unconscientious conduct on the part of hte lessors.
8. case merely concerned where a party had a bargaining advantage which they used with the consequence
tha the other party was required to forego a financial interst
9. (Gleeson CJ) all the people involved inthe transaction were business people, concerned to advance or
protect heir own financial interests.The critical disadvantage from which the elssees suffered was that they
had no legal entitlement to a renewal or extension of their lease...R were at a distinct disadvantage but
there was nothing special about it...good conscience did not require the lessors to permit the lessees to
isolate the issue of the lease from teh issue fo the claims...everyday occurrence in negotaitons for
settlemtn of legal disputes that one party will be required to abandom claims...
Australian Competition and Consumer Commission v Radio Rentals Limited
i. FACTS: Pl. was both intellectually disabled and had schizophrenia.
10. he was in receipt of diabiltiy pension his sole source of income
11. Pl. entered into 15 rental,two loan and 19 service agreements with Radio Rentals and three
rental agreements with Walker Stores
ii. LITIGATION:
12. ACCC brought proceedings against hte wo companies under the TPA 1974 alleging that in
entering into, and enforfcing the agreements, the comaneis had engaged in
unsconscionable conduct (now in contravention of s20 and 21 of the ACL).
13. ACCC argued that Radio Rentals and Walker Stores knew or ought to have knwon that the
Pl. was unable to conserve his own interst and that he agreements with thme would result
in financial hardship pfor hte consumer
iii. HELD: the Pl. was able to present himself in a mnner which did not eimmeditately suggest he was
markedly intellectually disabled
14. the disaabiltiies of hte Pl. were not sufficientl edvident tothe salespeople who dealt with
him to give them knowledge of the Pls disadvantage
15. items of information held by various employees of hte companies could not properly be
aggregated in the circumstnacecs where the information fcame from unrelated
transactions and interactions.
Commercial Bank of Australia v. Amadio (1983) 151 CLR 447

FACTS: parents gave a guarantee of a sons debt. (not a husband and wife situation not Yerkey)
o Maybe if Yerkey had extended beyond hte case of husband and wife, the siaution may follow the prima
facie rule.
ISSUE: whether, as against the bank, the transaction could be set aside as unconscionable.
HELD:
unconscionability doctrine extends generally to cicrumsntaces in which (i) a party was undner a special disability in
dealaing with the other party ...ther was an absence of any reasonable degree of equality between them...(ii) that
disability was sufficiently evidence to the stronger party to make it prima facie unfair or unconscientious that he
procure the weaker partys asset to the impugned transaction in the circumstances...onus is cast upon teh stronger
party to show that the transaction was fair, just and reasonable.
elements of unconscinoability:
o what was the disability?
the party has to suffer a special disability:
disability of the parents was their limited knowledge of English
ALSO: they were totally reliant on their son and the son was basically telling the parents
what to do (disability 2)
they were of ages 76 and 71.
the parents did not know about the financial difficulties of their sons company and the bank had
selectively dishonoured cheques drawn by the company
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o
o
o
o
o
the parents relied on their sons advice that the guarantee was only for $50,000 for siz months
when in fact, there was no such limit.
bank went to As house to sign the relevant documents which were signed without having read the
document nor were they explained the terms of the guarantee.
seriously affecting partys capacity?
yes, parents were signnign documents they did not understand
Didd the bank know about it?
yes, the bank had met with the parents.
the bank knew that hte transaction was unwise and they also understood full well that hte
parents had limited comprehension of Englsih and that they were reliant on their son.
on the facts, the bank shoud be treated as being aware that hte parents, the gauarntors, were at a
special disadvantage or at least that the bank should have been aware as a reasonable person atht
they were at a disadvantage.
bank needed the debt gurantee presumption of unconscinoability by allowing parents to take up the
guarantor
parents would not have executed the transaction if they had known of the financial troubles their sons
company was experiencing.
although there may have been adequate consideration, the contract was unfair because there was no
benefit from the contract to the As (consideration moving from the bank to theier son) or because they
would have never entered that contract if they had been informed of its salient terms and the relevant
circumstances surrounding it.
NEXT: onus then lay onthe bank to rebut the presumption that hte transaction was uncsoncionable and
that it should nto be set aside
the bank could have shown thath e paraents had indepenedent advice / that hte transaction had
been translated into Italian / that hte transaction was otherwise fair, just and reaosnble difficult
to show on the fats because there was no advantage on the paents by the transaction
the transction was to their disadvantage.
HERE: the presumption was not rebutted.
Reed v. Kilburn Co-operative Society (1875) LR 10 QB 264

FACTS: The Pl. lent 50 pounds to hte D.at 6% pa for 6 OR 9 months
o ie. there were alternative methods of performance 6 months OR 9 months.
ISSUE: Who is able to choose under that contract sincei t does not state whether or not its the lender or hte
borrower who selects the terms of hte contract. Uless you nkow who has the right to choose, you dont know if hte
contract has been performed or not.
HELD: the period of hte loan depends on the choice of hte borrower could choose if it was 6 months or 9 months.
BECAUSE the alternative, whether to pay in 6 or 9 monhts, was for the borrowers benefit.
o the borrower was the party who acted first by repaying the money.
o Essentially, where a contract provides alternatives and the contract does not state which party can choose,
then it is a mattere of interpretation as to which party can choose.
o By determining which party can choose, it is then possible to see if the contract has been performed.
British Waggon Co. v. Lea & Co (1880) 5 QBD 149
FACTS: A contract was formed to prepare railway wagons. The contract was performed not by the promisor but by
a third party. Was that valid performance?
HELD: Yes it was vlid. it was irrelevant to the person who kept them in repair.
Davies v. Collins [1945] 1 All ER 247
FACTS: There was an army officer who wanted to get hiss uniform cleaned by a cleaner. Under a contract which
stated:
o Whilst every care is exercised in cleaning garments, all orders are accepted at hte owners risk
o Cleaner was over burdened with cleaning uniforms
o Cleaner delegated the task to a th3ird party
o contract does not expressly forbid performance by antoher party.
o With uniforms, it is not a person al contract liek a painting who does the cleaning.
o Third party loses the uniform.
o There were vaiours questions about exclusion of liability
ISSUE: can the contract be performed vicariously?
o there was no express termrs saying no.
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o Can one be implied?

HELD: Yes the term can be implied because the wrds Whilst every care is exercised in cleaning this was
inconsistent with the right to perform vicariously.
SOGA s30: Sale of goods are concurrent conditions. As such the Seller must be willing to provide the goods at the same
time the buyer is willing to buy the goods.
Kingston v. Preston (1773) Lofft 194

HELD: there needs to be very clear intentions in the contract that performance is independent.
o it is otherwise quite difficult to hsow this.
Perri v. Coolangatta Investments Ltd (1982) 149 CLR 537

FACTS: a contract where the parties were not bound by a time stipulation clause. the contract was for a sale of
land.
o contract was made on the 7th April 1978
o No time was fixed for completion but there was a conditioin of cteh contract that the contract was subject
to the purchasers completion of the slae of another property.
ie. they could not buy this land until theyve sold another
o By July 1978, nothing had happened. (3 months)
presumably, purchaser had not managed to sell their other property.
o Vendor gave notice requiring the purchaser to complet the sale by 8th August 1978 this did not happen.
o On 10th August 1978, the Vendor gave notice rescinding the contract.
o On 29th September, Vendor brought an action aginst the purchaser.
o Purchaser had not been able to sell their other property until the 30th June 1979.
ISSUE: Whether time had urn out for the purchaser?
o contract remained silnet as to the itme they had to sell the property by.
HELD: In these situations, where there is no time specified, the court imply a requirement of a rreaosnble time. And
the condition in the contract that the purchaser sell their other property was a condition that they sell their
property within ar eaosnable time.
o had they sold the property in a reasonable time? No.
o A reasonable time had expired.
Therefore, if there is an issue of time:
o was there an expreseed time stipulation clause?
o If not, the court will imply one for a reaosnble time.
ACT Cross Country Club v. Cudy [2010] FCA 782

FACTS: dispute arose between two parties responsible for organising a marathon. Litigaiton ensued on the 1st
March 2010 where the parties reached a contractual document (settlement) to setllte the dispute.
o the temrs of the contract included a promise to desist in the litigation as well asa a temr that Cudy sports
would have the right to organise and administer the 2010 marathon.
o Marathons could not be held without permission fo the road authorities.
o the road authorities said that they were not willing to allow the marathon ot be held unless the parties
provde a writte nconfirmtion to the road authority that the dispute had been settled.
o The cross country club failed to provide the written confirmation to the road authority.
ISSUE: whether the settlement agreemtn had been breached by the behaviour of the club.
HELD: Yes therw as breach (held by the Federal Court of Appeal) because the club had failed to cooperate with
Cundy by communicating that he dispute was at an end to the road authorities.
o there was a duty to cooperate within the contract.
Burger King v. Hungry Jacks [2001] NSWCA 187 question arose whether beyond the duty to cooperate, which if
you dont cooperate there is a rbeach, are therer other terems that can be implied in this area?
HELD: there was no argument in the case hat there wass a duty to cooperate (this was not disputed, merely
accepted through past authority) but the (NSW court of appeal) said htat a teerm of good faith and reaosnableness
could be implied in all contracts.
o
o
o
Royal Botanic Gardens and Domain Trust v. South Sydney City Council (2002) 186 ALR 289
HELD: courts were not in the position to address that issue in this case.
Vodafone Pacific Ltd v. Mobile Innovations Ltd [2004] NSWCA 15
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HELD: yes there is a duty of good faith and reaonsableness can arise in the performance of contractual
obligation and this could be implied as a matter of law but only to be implied in commercial contracts.
not every commercial contract would be open to such an implciaiton this would be too broad.
first step is to look at existin g contracts of the sort as to whether the oblgation has been implied.
If authorities are not helpful, then you look if the obligations were necessary within the situation of
the case.
ie. there can be an implied duty to perform in good faith and reasonableness BUT where it is implied dpeneds on the
type of contract.
Courts seems to be unwilling to imply an oblgiatio nto negotiate in good faith

Walford v. Miles [1992] 2 AC 128 HELD: much too vague to imply an obligation to negotiate in good faith.
Coal Cliff Collieries Pty v. Sijehama Pty Ltd (1991) 24 NSWLR 1
For more on Good Faith See Good Faith in Australia in LAWS2111 folder!!!!!!
Cutter v. Powell (1795) 6 TR 320

FACTS: Sailor agreed to serve on a ship form Jamaica to Liverpool.
o he was to be paid 30 guinees (an enormous sum) 1 days after the ship arrived in Liverpool provided he
does nhis duties from hence to the port of Liverpool
o on August 2, ship set sail from Jamaica and arrived in Liverpool on October 9. (2 month voyage).
o There were vaiorus problems with sailors on the Jamaica-England loop ie. they would threaten ships
captains that if they did not raise their salaries, they would not work on the ship.
o Sailor had died on Sept 20th , (1.5 months into journey) question is hewehter his family oculd recoer forh te
work he had done before his death?
HELD: No, contract was entired, nothing was to be paid until the hwoleo f the dutuies had been performed ie.
when the sailor got to Liverpool.
Baltic Shipping Co. v. Dillon (1993) 176 CLR 344, 350
D offered a cruise of 14 days, P paid to go on the cruise
The cruise sunk after 9 days
Could the P recover the money paid for the remaining days of the voyage?
HELD:
o The obligation by D was entire and therefore P could not recover the costs unless there was a total failure
of consideration. In this case, there was no failure.
o P was not entitled to restitution corresponding to the period of the trip she missed.
Phillips v. Ellinson Bros Pty Ltd (1941) 65 CLR 221
Steele v. Tardiani (1946) 72 CLR 386

FACTS: Pl. were three Italians who had been in-temr because they had been in the war but they had been
realeased from in-termment to work for Steele. S had them chopping wood in return for taking them out of hteir
terms.
o S did not want to pay them.
o S claimed that the wood was not cut in specifications of the contract of interment.
P sued for their payment.
ISSUE: Given that some of the wood was cut to specifications and some were not, could the Pl. ecover payment for
firewood that did meet the specifications.
HELD: yes ,the contract was severable anda the pl. ocould recoer for the wood that met the specification.
o the Pl. could recoveere to the extent that they performed the part of it.
o
Cutter v Powell looks a little harsh this has been addressed with the doctrine of substantial performance.
Hoenig v. Issacs [1952] 2 All ER 176

FACTS: the Pl. agreed to redecorate and furnish the Ds unit for 750 pounds. the furniture was defective in vaiorus
ways.
o it would have costed the D 55 pounds to repair the defects.
o the question was wheter the Pl. could recover 750 pounds minus the cost of making good the defects?
HELD: yes, the Pl. could recover 750 55 pounds because he substantially performed.
DIFFICULTY WITH: Bolton v. Mahadeva [1972] 1 WLR 1009

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FACTS: the Pl. agreed to install a heating and hot water system in the Ds house for 560 pounds.
o Pl. claimed 560 pounds and the D refused ot pay.
o D. said that there were all these defets in the system.
ISSUE: could the Pl.recover?
HELD: No. Pl. cannot recover because there was not substantial performance on the facts
o because the heating system did not work properly and it gave out fumes.
Sumpter v. Hedges [1898] 1 QB 673

o FACTS: Pl. say sthat he wll build a house for D. but does not build the floor.
o HELD: restiutation can be allowed where the other party (the D.) does not accept the work.
ther is no remedy for part performance.
Connor v. Stainton (1924) 27 WALR 72 (strict view of part performance)
FACTS: the Pl. agreed ith the D. to erect fencing.
o the fence consist of 5 plaid wires and 1 barbed wires with posts 50 feet apart.
o Pl. put the fences up but got the diwstances between the posts wrong.
the distances were graater than it should have been.
o Pl. contended that with the assistance of droppers, the fence could be made effective as if the posts were
the right distance apart.
ISSUE: was there substantial perfroamance?
HELD: No, there was no substantial performance. there was part performance only and therefore, the Pls action
was not in accordance iwqth the terms of the contract.
o it si not open to one who has undertaken the work off aa certain kind to say that he has done something
fo a certain nature but it is really as good as what he was contracted to perform
o ie. Pl. cannot argue that if you put something else in, the fence will be as good as whata he was contracted
to do.
o Not open for the P to argue that it was just as good. If the D specified the type of fence, then the fence
must be to the specifications. Have to fulfil work on that nasos. Therefore entitled to nothing under the
contract.
Pan Foods Company Importers & Distributors Pty Ltd v Australia and New Zealand Banking Group
FACTS: bank provided finance to P. in the form of a number of loans.
o loan said that if nay of a number of events of default occurred, bank could terminate its obligations under
the agreement and declare that any moneys owing immediately due and payable
o bank was required to give P notice notice had to be issued by an authoirsed represnetative of the bank I
nwriting.
o bakn told its solicitors to prepare the notice and an officer of the bank, who was an authorized
representative, attendeed the premises of P anad handed the notice to it.
o P challenges the validity of the notice that it was made by the solicitors of the bank and no t the bank
itself.
HELD: rejecting Ps argument
o requirements of commercial contracts should nto be construed in an overly technical or restrictive manner
o (Kirby J) commercial contracts should be construed practically,so a sto give effect to the parties presumed
commercial piurpsoes and so as tno to defeat the achievmenet of such purposes by an excessively narrow
and artificially restricted construction
o would therefore not be fatal that a party did not comply with a strict construction of the procedure for
termination provided the apparent defect did not prejudice the other party in any substantial way.
o agreement did not require the notice to be signed
o cirucmsntaces in which the notice was handed over made it clear that the notice was from the bank.
o
o
Crawford Fitting co v Sydney Valve & Fitting Pty Ltd:

FACTS: under a distributorship contract, one party, the distributor, contracts to sell the products of a
manufacturer
in performing the contract, the distributor may incur considerable expenditure in establishing and
hten expanding its distribution network.
HELD: the period of six months notice prior to terminating the contract with the distributor was sufficient.
the courts want to ensure tha the relationship of the parties will continue for long enough after the
notice of termination to enable the distributor to recoup any extraordinary expenditure or effort.
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BUT: the court also said that there is nevertheless going to be a certain amount of effort going
unrewarded because it is a business risk that a distributor takes when he enters into an agreement
terminatable at any time.
Crawford Fitting Co v. Sydney Valve & Fitting Pty Ltd (1988) 14 NSWLR 438 implied term of termination.
HELD: whether a commercial agremenet for an indefinite period may be terminated (ie there is an indefinite
agreement and ther was no express term) depended on whtehter a term could be implied to that effect. How do
you decide if the term can be implied or not?
o depends on the subject matter ofhe agreement and the circusmtnqaces in which it was made and the
other provisions of the contract.
o Are the courts liekl y ot imply a term that the parties have agreed to terminate the contract?
o HELD: no, there is a presumption against such a term except where it is a commercial contract
o in a commercial contract, it will ordinarly be of the nature of the commercial contract that the partieds
would intend it to be terminable upon notice.
McDermott v Black
FACTS:
Plaintiff (Black) purchased shares under a terms contract (a name for a contract where one of the parties pays a
deposit and the balance of the purchase price is paid in instalments)
In this instance, Black paid a small deposit and had difficulty finding the balance
So if he cant perform then he is in breach, so he tried to wriggle out of it by alleging that he had been induced to
enter into the contract as the result of fraudulent misrepresentations
But he actually wanted to honour the contract so he agreed to withdraw all allegations of improper conduct on
condition that McDermott gave him a 3-week extension
McDermott gave him the extension, he still couldnt pay so he tried to revive his cause of action
HELD:High Court of Australia held that he had given up his original cause of action
It was accord and satisfaction but promises performed so accord satisfied and original cause of action discharged
Fitzgerald v. Masters (1956) 95 CLR 420

FACTS: a contract to purchase some land to be paid for by instalments. Pl. paid some of the instalments btu there
was a lapse of 6- years between the contract and the litigation.
HELD: nop the contract was not abandoned because more than half the purchase price was already paid.
o if the contract had been abandoned, the legal title would have been retained by the D. and he would also
be allowed to keep the money.
DTR Nominees Pty Ltd v. Mona Homes Pty Ltd (1978) 138 CLR 423 contract hat has been taken to have been
abandoned.
FACTS:
o Parties adopted different interpretatiosn of the contract but both claimed that hey wanted to terminate
the contract because the other party had repudiated it.
o cleara evidence that the parties wanted to terminate and they tried to invoke a notice of termination but
for some technical reason, the notice had not been sent.
ISSSUE: could the contract be abandoned?
HELD: Yes, the contract can be abandoned.
o neither of the parties notices of termination wer effective.
o the way in which the parties conducted themselves showed that they really were intending to abandon
because they tried to terminate the contract
o (Stephen, Mason and Jacobs JJ, with whom Aickin J agreed) said that by the time the proceedings were
commenced, neither party regarded the contract as still being on foot THREFORE, the parties should be
regarded as having abandoned their contract.
o highly distinguished from Fitzgeerald v Masters.
NOTE: mere lapse of time is not enough- there has to be some behaviour that indicates that they have abandoned.
o contract may also be inferred to have been abandoned where an inordinate length of time has been
allowed to elapse during which neither party has attempted to perform, or called on the other party to
perform. (Fitzgerald v Masters)
BUT: where one party has already partly performed the contract, courts may be less likely to concluded from a
later period of inactivity that the contract has been abandoned.
Photo Production Ltd v. Securicor Transport Ltd [1980] AC 827

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HELD: (Lord Diplock) expelled the effects of termination termination discharages both parties from future
performance (after the termination).
o termination is a self held remedy Party can end the contract without going to court.
o onus is on the other party (the party who breached) then has to challenge the termination by going to
court.
Le v. Qureshi [2003] QDC 442

FACTS: a contract for the sale of land. A clause said thqat if the buyer failed to comply with any provision of this
contrac,t they seller may terminate the contract.
o it was a standard term that was breached
HELD: there was anb expressed right to terminate for breach.
Arcos v Ronaasen
o Contract for sale of timber. When timber delivered, it didn't match description. Correspondence with
description was condition under SOGA. It was only fractionally different from specifications and was still
suitable for its intended purpose.
o Even though the breach was minor and buyer probably only wanted to repudiate due to market shift (i.e.
could get timber from elsewhere for lower price), b/c term was condition, termination allowed.
Luna Park (NSW) Ltd v. Tramways Advertising Pty Ltd (1938) 61 CLR 286
FACTS: Pl .ran an amusement park in Sydney. The D. was an advertising agent.
o D. in consideration of 20 pounds/week payment said that for 52 weeks it would distribute advertisement
boards on tram cars.
o Agreement consisted of a letter and a contract the terms of which were critical.
o Letter contained a statement that the average time that each tramcar is on the track is 8 hours a day and we
guarantee that these boards will be on the track at least 8 hours a day throughout the seasons.
o difficulty for the owners of the amusement park was that each and every board on the tram was not displayed
for at least 8 hours a day
o Pl. argued that the advertiser had breached a condition and therefore the contract was at an end.
HELD: (majority in HC) agreed with Pl. that the term was a condition
o the undertaking that the board would be displayed for at elast 8 hours every day was a condition
o T?HEREFORE, since it was not so, the contract could be terminated.
o Majority placed great weight on the fact that the contract said we guarantee that the boards will be on the
track at least 8 hours a day
a guarantee is a guarantee (Latham CJ)
It is an undertaking that the board will be displayed for 8 hours a day
(dissent per Dixon J) said htat the term was not a condition
o oyu have to look at the context of the subject matter.
o the majority are mistaken they have focused on the single word
o in determining if whether or not the term is a condition or nto, you dont just look at a signle word guarantee
the context matters more than thej prescsie grammatical construction
o the clause makes no sense if it is just viewed in isolation
you have to look at the context.
L Schuler AG v. Wickman Machine Tool Sales Ltd [1974] AC 235 - support for the view htat you dont just look at the
term used but you look at the context.
FACTS: the German Pl. gave the D. a sole right to sell their goods in UK.
o clause 7 of the contractwas labelled a condition that two named sales reps of the D.s should visit
manufacatursrs each week to promote the Ps goods.
ISSUE: whether the named reps when failing to visit particular manufacturers was it a breach of a codnition? was cl
7 a condition?
HELD: IT was labelled a condition (Lord Reid) the label attached to the term was a strong indication BUT it did not
determine the outcome
o doesnt mean that because of its label, it is automatically a condition.
o where the particular construction of the words leads to unreasonable result, the nthis cannot be what the
parties intended.
o cl 7 was not a condition befccause this would lead to an unreasonable result
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it was unreasonable because under the contract, there wqas supposed to be 1400 visits where they failed to
visit 1- there would bea breach of a condition? this would be unreasonable THEREFORe, the term was not a
condition.
the more unreasonable the result, the more unlikely the party intended it as a condition.
o Key point is that simply labelling something a condition does nto make it onne.
Cf. Luna Park: where it was not labelled a condition.
Associated Newspapers v. Bancks (1951) 83 CLR 22 Leading authority on whazt factors courts consider:
FACTS: D was an artist
o D. entered into a contract with the newspaper over a ten year period to devote the whole of his time and
attention nto the affairs of the newspaper and to use his best endeavours for which he was swell enumerated.
o asa part of the agreent, he had the weekly cartoon that would be on the front page of the weekly newspapers
in their comic section.
o Initially, cartoon appeared on the front page of the comic section all was well.
o Then, in 1951, there was a shortage of newsprint = the artists comic ddi not appear nthe first page.
it appeared at the back of the magazine
this happened several times.
o the D. (artist) was dismayed and protested
o D claims that he was no longer bound by the contract because it was a condition of the contract that his
cartoon would appear on the front page of the comic section.
ISSUE: was the term of a otnract that it appeared on the front page of the comic section a condition?
HELD: how do we determine wheterh it is a condition? IT depends on how essential the term is.
o does the term go to the root of the contract?
o in this case, the D. was not an ordinary employee of the Pl. he was employed as a comic artist and his true
work was to produce his weekly drawings
it was for htat htat he was paid a substantial salary
o It would be strange if the artist was bound to the newspaper for 10 years and had to produce his weekly
drawings every week and that was a conditionIt would be ridiculuous if the ds obligations were a condition
and the Pls were not
o IT was of prime importance tpo the D that there should be continuity of the agreement and the work should
be published to a whole and not on page 27 of the coloured maagazine
o THEREFOPRE: the term was a condition
o What the court seems to be stressing are 2 things:
how important the term was to the D? in this case essential.
relationship between the Pl. and the D.
Shevill v. Builders Licensing Board (1982) 149 CLR 620 recent authority on whether or not a term is essential and is a
condition or not:
FACTS: the terms of the contract if lessee does not pay for 14 days, the lessor may enter the landwtihotu the lessee
having any other remedy in contract or optherwise
o the lessee was in breach of the contract by constantly being late with the rent.
o LEssor re-entered claiming damages.
ISSUE: Was the failure to pay rent a condition?
HELD: Applying Bancks: the term was not fundamental or essential .
o HC Was concerned that non payment for 14 days over long weeks could give right to termination of the lease.
o IT was absolutely clear that they have a right of action for non-payment BUT non-payment for 14 days may not
necessarily give aright to terminate.
ie. you look at the context of the term and whether or not it is essential in determining the nature of the term =
condition, warranty or innominate term.
The Mihalis Angelos [1971] 1 QB 164

FACTS: if you have a charter party ie. you wish to charter a ship from the shipowner, it is actually quite important ship is
ready when the shipowner says it will be. this was a dispute
o background: charter market fluctuated massively what the parties were trying to do to bring a contract to an
end so they ocudl get the contract cheaper elsewhere.
o clause stipulated date ofe expected readiness in the charter party was such a term a condition?
HELD: a body of case law that says that terms of these sorts are conditions.
o (Dennings LJ) there is a significant body of case law that these sorts of temrs can be classified as a condition a
clause stating that a ship is ready on a certain daate is a condition
lOMoARcPSD
ie. if you deliver a ship a day later or a month later, you are in breach.
any breach of any sort gives a right ot terminate because it is a condition
Ankar Pty v. National Westminster Finance (Australia) Ltd (1987) 162 CLR 549
HELD: (HC) you have to look , when determining whether or not the term is a condition, what the context is and what
previous courts had to say.
o it was a surety contracts and so, court has to look at previous cases and hwo the courts have construed it.
Hong Kong Fir Shipping Co. Ltd v. Kawasaki [1962]

FACTS: Charter contract contained a seaworthiness clause provided that the owners of the ship were to maintain the ship
in an efficient state during service. The ship constantly broke down and was unavailable for 7 out of 24 months of hire.
HELD:
- The clause was not a condition nor was the contract repudiated as minor breaches could give right to terminate.
- Was not a warranty because only damages would be recoverable wanted termination.
- If you want to terminate the contract, need to classify the term as an inominate term giving a right to
terminate depending on seriousness of the breach.
- However, no right to terminate on the facts because the charterer was not seriously deprived of substantially the
whole benefit of the contract still operable for 17 months of the hire period.
- Charter instead liable for lost profits of charterparty because of wrongful termination
The Hansa Nord [1976]
FACTS: Term in a contract for the shipment of orange peel for animal feeds that the feed was to be in good condition.
When shipment arrived, wasnt in good condition and buyer wanted to terminate.
HELD:
The term is not a condition, but an inominate term because it could be breached in many ways.
Peel was okay for its use, therefore; the breach did not go to the root of the contract and wasnt serious enough
No right to terminate arose.
Relevant that the market for orange peel had lowered in price (P had a bad bargain)
When determining whether termination should be allowed in cases where market has shifted, courts should
generally prefer to construct contract such that performance will be ensured
Bunge v. Tradax [1981]
FACTS: Term in contract for the sale of soybeans gave buyer ability to nominate time for shipment with 15 days notice to
seller. Buyer required goods by 30 June at late notice; seller could not perform. Did buyer breach by giving late notice?
HELD:
Decided on previous cases that this was, on the facts, a condition.
If it was an inominate term no right to termination as breach did not deprive seller of substantially the whole
benefit of the contract: could just send goods a few days late.
Courts keen to treat as a condition because commercial contracts require certainty in conducting commercial
transactions
Lord Scarman: Treat term as inominate unless made clear expressedly or impliedly in contract or statute that term
is a condition or warranty.
Koompahtoo Local Aboriginal Land Council v. Sanpine Pty Ltd [2007] 233 CLR 115
FACTS: Jpoiint agreement between K and S
o K managed the development while S managed the books for development
o Venture failed to obtain approval for commercial rezoning
o K terminated the agreement because S failed to keep proper accounts or financial records of the duration
of the joint venture and because of that S had repudiated the agreement by breaching its obligations under
the agreement
o No express provisions for unilateral termination.
ISSUE: Whether a breach of a non-essential term gives right to a right to terminate
HELD: (HC) yes, we have a third category called an intermediate term.
o 3 circumstances in which right to terminate arises
breach of essential term (condition
breach of non-essential term or inominate term
sufficiently serious to justify termination
goes to the root of the contract nature of the agreement and consequences of breach
lOMoARcPSD
deprives or loses innocent party any substantial part of the benefit for which it contracted
one party shows unwillingness or inability to perform its obligations (repudiation).
o Ss breaches were of a non-essential term, that went to the root of the contract because K would not have
entered into the contract if they knew S wouldnt keep the books properly.
o The breaches deprived K of a substantial part of the benefit for which they contracted to get a proper
record of all accounts and finances. Further, Ss breaches of their obligations were sufficiently serious as
legal consequences can arise if books are not kept properly.
o Therefore, the right to terminate the contract arose.
o In order to determine whether a term is essential or not, consider the construction and working of the
term as well as the common intention of the parties.
o (Kirby J in dissent) does not approve of intermediate term category because he believes the concept is
fairly uncertain.
Seems that where you want to terminate a contract, but there is no breach of a condition, argue that there was an
intermediate term that was sufficiently serious breach that went to the root of the contract and deprived and lost K a
substantial part of the benefit for which they contracted. Argue intermediate term because if you prove a breach of
warranty, the only remedy is damages up until the point of the breach.
Vitol SA v. Norelf Ltd [1996] AC 800

FACTS: there was a cargo of propane.
o on a CIF contract the cargo was to be loaded on the vessel on specific dates.
o the sellers were to tender a bill of lading and the buyers were to pay 30 days late.
o problem was that on the fafcts, the loading was too slow instead of loading the canistersr by a certain
date, by few days before the date that it was supposed to be loaded , they were still loading the ship.
o buyers thought that the ship would not be able to load in time.
o buyers sent a telex and repudiated the contract because they thought that it would not be loaded in time.
o the vessel was actually in fact loaded in time and sailed.
o Neither of the parties , neither buyer nor sellers, took further steps to perform the contract ie. propane
was not delievered by sellers to buyers and buyers did not pay.
ISSUE: had the seller elected to accept the buyers breach?
o because the buyer had erroneously believed that the propane was not going tob e loaded on time and
whether or not the seller had accepted buyers repudiation?
o by failing to take further stpes to perform the contract is this sufficiently unequivocal as showing that
youd elected to terminate the contract
ie. by simply refusing the perform after that date, doe sthat signify election?
HELD: (Steyn LJ) yes it was an unequivocal sign that theinnocent party has elected to terminate the contract by
failing to perform.
o election is something that can be done by conduct.
o in certain situations, failure by the innocent parties to perform their obligaiotns under their contract
amounts to an election to terminate.
o IT is then for the party in breach to challenge the terminateion.
FACTS: ther was an expressed termiatnio nclause in a charter party.
o the issue was whether or not the cancellation clause had been correctly exercised.
o this was na absolutely typical case there was a charter party that was date dependent (ie. dates were
extremely important because of shift and volatility in charter market )
o the clause said that the charterers could cancel the contract fi the ship was not ready to load on July 20.
o the ship was, on July 17 1965, clearly not ready to be loaded even by July 20.
o charterers claimed under the cancellation clause that they could cancel there and then it was not
disputed on the facts that the ship would not be ready to load by July 20 the ship owners said that the
charter parties had been premature Iin exerciseuing the cancellation clause
ie. that they could not cancel untiul July 20 since that was what the clause stated.
HELD: (Lord Denning) it would be silly if it was clear that the vessel would not arrive in time - it was obvious that it
would not in this case.
o Lord Denning too kinto account commercial convenience
o it would, be better for borth sides to allow the contract to be vancelled when it was obvious that the
vessel would not be ready in time.
o ISSUE with Dennig reasonsing: it might be slower to engaged another vessel than it would be to wait
another couple of days wher is the commercial convenience?
lOMoARcPSD
o
o
conflicts with Shepherd and earlier authorities that you have ot wait until the date for performance bfore
you can elect to terminate.
Even if the charterers had cancelled for the wrong reasons- that did not matter so long as there were
grouns to cancel
The innocent party is not bound to elect at once but if you are slow to do anything, the innocent party runs the
risk of affirming if they do not.
o what that period of time is is not clear.
o Generally, until an election to terminate is made, the contract remains alive.
o risk of not electing and leaving it, there is a risk that he focntract may be frustrated and may be terminated
by an operation of law the consequences are very different than if one fo the parites had elecdted to
terminate the contract.

FACTS: ther was an expressed termiatnio nclause in a charter party.
o the issue was whether or not the cancellation clause had been correctly exercised.
o this was na absolutely typical case there was a charter party that was date dependent (ie. dates were
extremely important because of shift and volatility in charter market )
o the clause said that the charterers could cancel the contract fi the ship was not ready to load on July 20.
o the ship was, on July 17 1965, clearly not ready to be loaded even by July 20.
o charterers claimed under the cancellation clause that they could cancel there and then it was not
disputed on the facts that the ship would not be ready to load by July 20 the ship owners said that the
charter parties had been premature Iin exerciseuing the cancellation clause
ie. that they could not cancel untiul July 20 since that was what the clause stated.
HELD: (Lord Denning) it would be silly if it was clear that the vessel would not arrive in time - it was obvious that it
would not in this case.
o Lord Denning too kinto account commercial convenience
o it would, be better for borth sides to allow the contract to be vancelled when it was obvious that the
vessel would not be ready in time.
o ISSUE with Dennig reasonsing: it might be slower to engaged another vessel than it would be to wait
another couple of days wher is the commercial convenience?
o conflicts with Shepherd and earlier authorities that you have ot wait until the date for performance bfore
you can elect to terminate.
o Even if the charterers had cancelled for the wrong reasons- that did not matter so long as there were
grouns to cancel
Stoczia Gdanska SA v. Latvian Shipping Company (No. 2) [2002] EWCA Civ 889
[87] Rix LJ
In my judgment, there is of course a middle ground between acceptance of repudiation and affirmation of the
contract, and that is the period when the innocent party is making up his mind what to do. If he does nothing for
too long, there may come a time when the law will treat him as having affirmed. If he maintains the contract in
being for the moment, while reserving his right to treat it as repudiated if his contract partner persists in his
repudiation, then he has not yet elected. As long as the contract remains alive, the innocent party runs the risk that
a merely anticipatory repudiatory breach, a thing writ in water until acceptance, can be overtaken by another
event which prejudices the innocent party's rights under the contract such as frustration or even his own
breach. He also runs the risk, if that is the right word, that the party in repudiation will resume performance of the
contract and thus end any continuing right in the innocent party to elect to accept the former repudiation as
terminating the contract.
Foran v. Wright (1989) 168 CLR 385

FACTS: Contract for sale of land, prior to date due for completion, the vendor said that they would not be able to
compl,ete by that date.
o on failure to complete by the date, the purchaser terminated.
o ISSUE: the evidence shows that had the vendors been able to complete on that day , the purchasers were
not in themselves in the position to complete that day they were desperate to geet finance to complete
that property.
o question arises whether that fact precluded the purchasres right to terminate.
lOMoARcPSD
it could be argued that the purchasers were not themselves wilign and ready to perform at the date ofd
copmeltion THEREFORE they themselves would have been in breach = opurchasers themselves could not
have elected to terminate.
HELD: yes, purchasers were allowed to terminate.
Legione v. Hately (1983) 152 CLR 406
FACTS: there was a sale of land and the balance was to be paid on the 1 July 1979.
o condition 5 of the contraction : time was of the essence
o BUT parties could not enforce their rights under the contract without written notice.
o Matters were moving slowly but on the 9th August 1979, the purchasers solicitor telephones the vendors
solicitors and stated that they would be ready to complete on the 17th August ie. later than the 1 July.
o Clerk at the solicitors said I think that will be laright but Ill have to get instructions
o On the 14th August, the vendor said that they had given notice and the contract was terminated under
condition 5.
ISSUE: could the defaulting purchaser get relief?
HELD: (HC) in very exceptional circumstances, yes they could.
o what were the exceptional circumstances?
the way that the sale was set up meant that the purchasers have lived on the land for many years
and the balance to be paid was only the final instalment
as a result, the purchasers had a beneficial interest on the land and they in fact had a hosue on the
land
that in itself increased the value of hteland (the house) the final price to be paid was on 1Jiuly
1979 but for years before, the parites had been paying the house for years before on the land
vendors was try ing to ues condition 5 to bring the contract to an end and reclaim the land
and the valaue of the house.
o When you look at the statement made by the solicitors, the court said that relief against forfeither could be
granted = the parties were given more time to pay the final instalment.
o Even where, as here, ther is a breach of an essential condition the imte of the essence clause- relief
against forfeiture can be granted though only in exceptional cirucmsntaces.
o Mason and Deane JJ goes through relevant factosr and stressed :if the purchasers breach was trivial or
slight , as here, it was not a very late date of completion, it was just ovewr a month late, what would the
magnitude of the pruchasers loss be and the vendors gain if the contract had been terminated?
the purchaser would have l;ost earlier investments and their house vs. the vendors would get their
land back.
A contract for the sale of land to be paid over a number of years by 1 July 1979. Buyer sought to extend that date
for 7 days. Sellers solicitor said that would be okay, but have to get instructions. Buyer did not have money by the
date and seller terminated the contract under condition of forfeiture under the contract condition 5 reclaim land
and value of the house. Court could give relief against forfeiture in exceptional circumstances. Court gave regard to
the consequences for the purchaser of the breach, seriousness/triviality of breach, magnitude of buyers loss to
sellers gain and whether seller had an alternative way to enforce contract.
The exceptional circumstance was that the purchasers had been living and paying the contract balance for years
and this was the final instalment. The purchasers had erected a house on the land, which increased the value of the
land. Given the triviality of the breach (late payment by 1 month) compared to the value of the claim (land plus
value of the house and all instalments paid by the purchasers under the contract and specific performance for
remaining payments) and the representation made by the sellers solicitor that late payment would be okay, this
would give the sellers a large gain while placing a heavy burden on the purchaser. Therefore the court granted
relief from forfeiture meaning the sellers could not terminate the contract.
Stern v. McArthur (1988) 165 CLR 489

FACTS: Ther was contract for sale of land to be paid for by instalments over a number of years.
o husband and wife went into possession and built the house
o the vendors knew of so.
o in 1977, the marriage was ended and the wife still lived in the property and the husband stopped paying
the mortgage / instalments.
o the wife was unaware that he husband had stopped paying until a year or so afterwards at which point the
wife made up some of the shortfall.
o therew as a clause in the contract in default of any of the instalments, the balance became due.
o vendors tried to invoke that clause
lOMoARcPSD
HELD: relief aginst forfeiture was granted.

o what was stressed here is that he vendors had acted uncoinscionable:
they had known fo the default of the husband and had made nothing to inform the wife and the wife had made up
some of the shortfall.
o (Gaudron J) actually, all the vendors needed to do, rather than activate the clause, they just had to make a
lcaim for specific performance of the unpaid payments.
ie. the effect of the clause was so serious for the purchaser and the vendors oculd have gotten their money by simply
bringing a claim for the instalments.
o (Deane & Dawson JJ) wide notion of relief against forfeiture formed: in those situations where relief
aginast forfeiture can be granted, iee for proprietary forfeiture only,m relief could be granted in avoiding
misjustice orf to relieve against unconscionable or unconscientious conduct. NOTE: even they say that
atsrong case has to be made to depart from the general rule.
BUT: only in exceptional circumstances will relief aginst forfeiture be allowed & only applies in property transactions
tend not to apply in contractual rights
o NOTE: wher it applied, the party seeking it was not a commercial party.
White and Carter (Councils) Ltd v. McGregor [1962] AC 413

FACTS: D. entered into a contract with the Pl. wher the Pl agreed to display advertisements for the Ds garage for a
period of 3 years on little plates attached to litter bins.
o They had enetered into this contract but later that same day, the D. wrote to the Pl .saying that they no
longer wished to continue with performance of the contract.
o Pl. had done nothing yet under the contract at this stage but had proceeded to display the advertisements
and then sued for the contract price.
ISSUE: Pl knew prior to performance that the other party wanted to withdraw, could they carry on with
performance?
o did the Pl. have to accept the Ds breach OR could they simply affirm the contract and carry on?
HELD: (majority) yes, the Pl. could just carry on with prrfomrance of the contract.
o the Pl. were perfeeclty entitled to affirm and let the contract continue even though the D. had signed
themselves with an unwanted contract and would have wasted their money.
o In most cases, this would not abe a problem where the damages have been incurred because the Pl. was
under a duty to mitigate the loss BUT by affirming the contract before you started to perform, if this was a
claim for damages, they woulid not be mitigating their damages by continuing on with perfomraing and
making the plates.
o the special fact in this case was that the lcaim was not a lcaim for damges but was a claim in debt
claim in debts and claims in contracts are distinct.
o There were also discussions on whether your rfight to affirm can be barred: general rule is that if the
innocent tparty wishes to affirm, they can do so they do not have to accept the breach to terminate.
NOTE: there seems to be two qualifications of White:
o wehere the innocent party cannot continue their own performance without the coopreration fo the party
in breach in such a situation ,you cannot affirm.
o (Lord Reid in White) second qualification although the usual rule is that the innocent party need not
accept the breach but can affirm, where there have no legitimate interst, financial or otherwise in
performing, rather htan simply claiming damage sfor breach, then in that situation ,the right to affirm
would be barred.
ie. you have to terminate and just claim damages whre they have no legitimate interst, finanicla or
otherwise
this view is controversial but there is authority for this view: see Alaskan Trader.
The Alaskan Trader [1984] 1 All ER 129

FACTS: Pl. chartgered a ship to the D. for 2 years. After a year, the ship required extensive repairs and the D. told
the Pl. that they no longer needed the ship.
o the shipowners told the charters that they no longer needed the ship BUT the ship owner wnet ahead with
a million pounds for repairs and kept the crew on the hip for standby.
o the shipowners then sought to recover the losses in an actionfor breach of contract.
HELD: the pl. had acted wholely unreasonably in refusing to accept the breach.
General rule: where I am the innocent party, whether I affirm or terminate is up to me.
o I cannot be forced to terminate BUT there are eceptions.
lOMoARcPSD
in any event, in most cases, where it is a contract claim rather than a claim in debt (ie. if White was only a
contract claim and not a claim in debt) then they should have just terminated since they were under a duty
to mitigate loss.
McDonald v. Denny Lascelles (1933) 48 CLR 457

HELD: where there is a contract for the sale of land payable by installments, and the contract is terminated, the
vendors cannot retain the installments the installments have to be repaid
o unless there was a clause in the contract stating otherwise
o But in any event, equity may operate to return the installments anyway
o generally, the deposit can be retained BUT the installments have to be returned.
What if the deposit is due before the contract is terminated and is not being paid the contract is terminated, can
the deposit be claimed?
o i.e. Buyer does not pay deposit contract terminated- can seller recover deposit?
Bot v. Ristevski [1981] VR 120 Yes, seller can claim the unpaid deposit.
Baltic Shipping v. Dillon [1992] 176 CLR 344
FACTS: ship sank part way through the voyage and the fare had been paid in advance could the fare be
recovered?
HELD: the claim was in restitution the claim failed because most of the voyage had been complete there was no
need to return the consideration.
Installments are prepayments on account THERFORE, they have to be seen in the context of the whole contract
hence, cannot be retained BUT deposits can.
o LOOK OUT IF THE MONEY PAID IS A DEPOSIT OR AN INSTALMENT.
Associate Newspapers Ltd v. Bancks (1951) 83 CLR 322
FACTS: cartoonist and newspaper case
ISSUE: whether the term breached was a condition or not. The conduct of the newspaper in printing the cartoon
inside the color magazine, was not merely a breach of the condition at the time of the performance was it also a
renunciation for future performance?
HELD: yes it was a renunciation of future performance.
Universal Cargo Carriers Corp v. Citati [1957] 2 QB 401
FACTS: charterparty of a ship charterers were under an obligation to finish loading the ship by a specified teime
o owner terminated the charter party before the expiry of this specified time on the gorund that the
charterers could not have loaded within the time remaining and so had repudiated the contract
o arbitrator found that owners could have inferred that the charterer could nto have performed within a
reasonable time after the time for loading required by the contract BUT could have perfofrmred before the
delayt became so long as to frustrate the purpose fo the contract.
ISSUE: had charterers disabled themselves from performing?
HELD: (Devlin J) findings precluded a conclusion that the charterers had repudiated by conduct be cuase the test
for repudtiaiton by conduct based on delay is not whether the delay was unreaosnblae but whether it was
sufficident to frustrate the commercial purpose fothe contract.
o owners could justify termination on the grounds of impossibility if they could establish in fact, as opposed
to inference, that the charterer was, at the time of termination by the owners, unable to find and to load a
cargo in a shorter period of time than was necessary (ie. where performance fell due) to frustrate the
commercial purpose fo the contract.
o have to really show that it was inevitable that the other party would not be able to perform the contract at
the time that the performance falls due.
Woodar Investments Ltd v. Wimpy Construction (UK) [1980] 1 WLR 277
FACTS: Pl agreed to sell land to the D.
o completion was to occur after gaining planning permission
o D. mistakenly thought that a lcause in the contract enabled them to withdraw.
HELD: the D. were in good faith they genuinely believed the clause allowed them to withdraw and therefore,
there is no renunciation.
o THEREFORE: D did not intend to renunciatte
o an error in renunciation ie. I renunciate believing that I didnt need to perform (though this was not
correct) generally, renunciation has legal effect.
o BUT: in this case, because the parties were acting in good faith, they did not renunciate the contract
lOMoARcPSD
this is an exceptional case such cases only concern renunciation in cases where the breach is
anticipatory. Mmost renunciation cases occurs where the breach is prior to performance of the
contract.
These exceptions NEVER apply to renunciation at the time of performance.
BUT: how wide is this exception?
DTR Nominees Pty Ltd v. Mona Homes Pty Ltd (1978) 138 CLR 423
FACTS: contract for the sale of land that was to be subdivided by the seller.
o seller considered that he contract permitted it to subdivide the land in tewo stages this interpretation
was incorrect.
o purchasers purported to terminate the contract on the gorund that he vendor had shown unwillingness to
perform the contract according ot its terms
ie. purchasers were aattempting to terminate the contract on the ground that the vendors
misinterpretation of the contract & its conduct amounted to repudiation
o Seller argues thath t e purchsers termination was wrongful and itself constituted repudiation of the
contract
HELD: netihre party had repudiated the contract
o seller had nto repudiated the contract because it had honestly believed in its interpretation
o (Stephen, Mason and Jacobs JJ) no attempt was made to persude the vendor of the error of its ways or to
give it any opporutntiy to reconsider its position in the light of an assertion of the correct interpretation
o therefore, there is not basis on which one coan infer thath t vendor was persisting in its interpretation
wily nilly in the face of a clear enunciation of the true agreement
o since the vendor was the party in error, the vendor could nto terminate on the basis of htep purchasers
wrongful termination.
o purchsers termiantino indicated no more than an inteniotn not to proceed on the incorrect
inteprpretation of the contractparties were considered to have abandoned the contractu.
if there had to be a renunciation, then the other party would be entitled to terminate and claim damages for
anticipatory breach.
Taylor v. Caldwell (1863) 2 B & S 826

FACTS: parties had entered into a contract ofr the use of a music hall for the purpose of giving a serious of concerts
and night fetes
o the contract was made but concerts had not been held yet hall was then destroyed by fire
o Pl. lost money paid by them in preparing for the concerts
o pl. sought to recover this expenditure cliaimed that the D. had breached the contract
HELD: the contract was frustrated
o owners of the hall were thererfofer not liable for breach of ontract for failing to make ocontracted on the
basis of the continued existence of the hall and the existence of this ubsject matter was essential to the
contract.
o (Blackburn J) there is an implied term that the parties should be excused from performing if performance
becomes impossible because the subject matter fo the contract has been destroyed without fault of the D.
o THIS TEST IS NOT APPLIED IN Aus.
o (quoting Lord Radcliffe per Davis Contractors v Fareham) logical difficulty in seeing how the parties could
even impliedly have provided for something which they neither expected nor foresaw
Davis Contractors Ltd v. Fareham DC [1956] AC 696 (approved in Codelfa by Majority)

FACTS: builder agreed to build 78 houses ofr a fixed price
o work was to be completed in 8 months
cost of contract was 94,000 pounds
o bad weather and a shortage of laboru and materials meant that the work took 22 months instead
o cost of the contractor was higher 115,000 pounds.
o builder claimed that the contract had been frustrated and tried to claim 17,000 puonnds as reasonable
remueartion for the work that had been done
o builder wanted to argue that the contract had been extinguished and this was a restitution case so that
they could recover the costs quantum merits
HELD: (house of lords) contract had not been frustrated
o the cause of the delay was reasonably foreseeable to the parties
lOMoARcPSD
ie. the possibility of enough labour aand materials not being avialabe was before their eyes and
could have been the subject of special contractual stipulation.
there was a hardship and inconvenience but that was not frustration
it is only where circumstances were such that the obligations were so significantly changed that the
thing, if performed, would, be different from that which was contracted for.
modern test : per Lord Radcliffe in Davis Contractors Ltd v Fareham UDC and approved by the HC in Codelfa
Construction Pty Ltd v State Rail Authority of NSW:
frustration occurs whenever the law recognized that twithout defuault of either party a
contractual obgliation has become incapable of being performed because the circusntaces in which
performance is called for would reneder it a thing radically different form that which was
undertaken by the contractuit was not this htat I promised to do.
Lord Redi in Davis contractors v Fareham UDC: task of the ocurt is to determine on the true construction
of the terms in the contract read in light of the nature of the contract and of the relevant surrounding
cirucmsntacesand whether the contract which they did make is wide neoguh to apply to the new
situation.
Codelfa Construction Pty Ltd v. State Rail Authority of New South Wales (1982) 149 CLR 337
FACTS:
Codelfa began work to excavate two tunnels in 3 shifts/day, 7 days a week in order to complete the tender contract
in time
The work was noisy and in close proximity to residential neighbourhoods.
An injunction was thus sought by third-parties, which was granted, and constrained Codelfa to not working
between 10pm and 6am, not on Sundays and below a certain noise level
Codelfa, as a result of the injunction, claimed from the Authority additional prices payable under the contract for
the additional costs incurred and lost profit
They claimed on three bases:
o That there was an implied warranty for compensation of any additional costs
o That the contract was frustrated by the injunction
o That Codelfa should be able to recover for partial performance (quantam meruit) an amount exceeding the
contract price.
HELD: majority applying the construction theory relying on Davis.
o in Davis, the contract was held not to be frustrated and the contract applied to the new factual situation.
o LOOK AT CASE SUMMARY
o (Majority) contract was frustrated.
o doctrine of frustration applied widely here : (see Aickin J) the contract will be frustrated when there has
been a significant changes in the cirucmsntaces of the case ass well as the cirucmstaces ofhte case
o (Brennan J in dissent) by holding that the contract was frustraiotn, the risk is taken to fall o nthe railway
authority because it would be liabel for the increased costs but brennan J says that it should fall on the
construction company.
NOTE: only Mason and Brennan dealt with the allocation of risk issue THEREFORE still open.
GENEERALLY: courts ask : does the contract on its true construction cover the new circusmtnaces, if it does, then it is
not frustrated. If it does not, then the contract is frustrated.
Tsakiroglou and Co Ltd v Noblee Thorl GmbH
FACTS: a contract for the slae of Sudanese ground nuts to be shipped from the port of ssudan to hamburg
o goods were to have been shippepd via a Canal but when hat Canal was shut
o sellers of the ground nuts therefore had to take the ship around South Africa which took twi ce as long and
hence more expensive.
o sellers argued that the contract was frustrated because the canal was closed.
HELD: the contract was not frustrated becausest the alternative to the usual route was available
o courts were reluctant to alow a contract to be frustrated where the result fo the frustrating event is that
performance was merely longer or that performance was more expensive.
o in this case, it is about the allocation of risk
o courts are fundamentally looking at where they think the risk should fall
o ie. does the contract, on its true construction, apply or not apply to the new factual situation?
o greater cost fo the route was nto a ground for frustration
court generally takes the view that the risk falls on the shipping company.
Where the facts only mean a delay or increased costs, likely not to be frustration.
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The Eugenia [1964] 2 QB 226

FACTS:Charterers took a vessel for a trip out to India thorugh the black sea. There was a war clause in the contract
forbiudding the ship to enter the dagneours zones without the owners consent.
o the ship entered the Canal at the time when entering the Canal was dangerous
o ship was trapped in the canal.
o on the release on the ship, the charterers said tha t the contract was frustrated. Owners said that there
had been a breach.
HELD: (Court of Appeal) ther had been a breach of the war clause and the contract was not frustrated.
o the ship could have gone around the Cape of Guteau which would have made the contract more onerous
but did not frustrated it.
o weight was placed on the facts that the cargo was not something that was perishable on the long voyage.
o (Dennings LJ) the contract was not time dependent there was no special need for the goods to be
delivered within a particular time.
therefore, impossibility of performance can be permanent or temporary BUT it should not be equated to performance
that is more onerous, expensive or more time consuming.
Fibrosa v. Fairbairn [1943] AC 32
FACTS: a contract was made between the sellers aand the purchasers for the sale of machinery
o in accordance with the contract, the purchasers made an intitial paymenttot the sellers of 1000 fofr the
total contract rpice of 4800 pounds.
o because of the war, parties could not engaged in commercial transactions with enemy parties Poland
and German.
o Contract could have been performed BUT contract was found to be frustrated because of the illegality of
the act.
o Purchasers requested return of the money
o sellers sought to retain the money on the basis that it had done considerable work in manufacturing the
machinery
HELD: purchasers scould recover the 1000 pounds because there had been a total failure of the ocnsideraation
supporting the payment
o seller had although incurred considerable expenses in preparing for the contract, the consideration in
theis case aws the delivery of the machinery which had not taken place.
o mere fact that a party has incurred expenses in preparing to perform a contract does not prevent tere
being a total failure of ocnidderation
o if no actual performance has been rendered = money paid for the performance contracted cnnot be kept
to cover expenses.
Krell v. Henry [1903] 2 KB 740

FACTS: Parites had entered into a contract for the hire of rooms on Pall Mall fn two dates
o for the purpose of coronation procession of the King but this was not expressly stated in the contract.
o but the price paid for the hire of the rooms were much higher than usual.
o coronation was postponed
o party hiring the rooms declined to pay the hire for them
o D. argued that the Pl. could have used the rooms in questions there was no physical impossibiltity
nothing was stopping them from using it.
HELD: the contract was frustrated and thus no hire was owing
o the procession was regarded by both contracting parties as the foundation of the contract and had
disappeared.
o at the root of the contract was the fact that the room was hired to watch the coronation procession.
o Given that what the D contracted for was no longer happening, they had no purpose in hiring the room.
Herne Bay Steam Boat Co. v. Hutton [1903] 2 KB 683

FACTS: (similar to Krell) Pl wanted to watch the King inspecting the fleet of ships. Pl. hires a boat for this purpose.
o ISSUE: was the contract frustrated when thte king was too ill to inspect the ship?
o had Krell v Henry been applied, one might have thought that the contract was frustrated because the
common purpose was to watch the king inspect the ship
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HELD: contract was not frustrated.

o key is what is the common purpose of the parties in the contract.
Scanlans New Neon Ltd v. Tooheys Ltd (1943) 67 CLR 169

FACTS: contract for hire and installation of neon signs for which the D. paid a monthly rate.
o WWII breaks out and government regulations forbid lighting of the neon signs.
o D argues that they wanted the signs and they wanted the signs lit.
HELD: (Latham CJ) contract can be performed and the owners of the signs gave no guarantee under the ocontract that
the signs could be illuminated.
Brisbane CC v. Group Projects Pty Ltd (1979) 145 CLR 143

FACTS: GP owned land zoned future urban which they wished to ddevelop as a residential subdivision
o BCC agreed to make the necessary applciatoin to have the land zoned residential in consideration of GP
carrying out certain works if rezoningng was approved
ie. construction of roads and infrasutraucture approapriate for a residential subdivision.
o mucuh of the work GP agreed ot carry out were on sites other htan the land in quesiotn
o rezoning was approved
o land was however resumed by the Crown for development as a school
o GP therefore no longer owned the land and oculd not proceed with the proposed subdivision
o council argued that GPs obligations eremained in place
HELD: the judges who cconsiderd the question found that the contract had been frustrated
o however: note: thisz was not a case whre performance was rendered impossible
bulk of hthe work was to be done off the lnad in question and was not affected by the reszumption
by the crown
o acquisition of htel and however had wholly destroyed GPs purpose in undertaking any obligation at all.
o have to look at the common purpose of the parties.
The Super Servant [1990] 1 Lloyds Rep 1

FACTS: the D. owned 2 ships.
o both ships were out on hire
o two contracts one with Pl and one with third party
o one of the ships sank D. decided to fulfil contract obligation only to third party and not to both.
HELD: (Court of appeal) contract was not frustrated because the D. chose to perform the other contract and as a result,
the frustration was self-induced.
Joseph Constantine SS Line v. Imperial Smelting Corp Ltd [1942] AC 154

FACTS: Chartered ship exploded and the charterers sued the owners of the ship for not providing ship (breach of
contract = damages)
Owners argued contract was frustrated by explosion
Charterers countered this by saying that owners had to prove explosion was not their fault (if it was then owners
couldnt rely on frustration to avoid paying damages).
HELD: rejected charterers argumemnts and said that there was frustration.
o it is not clear what caused the explosion this was never explained.
o Do not have to show that the frustration was not their fault.
o Onus lies on the Charterers (alleging self-induced frustration) to prove that it was the owners fault.
THEREFORE, whether this limitation applies is fact dependent.
Meriton Apartments Pty Ltd v. Mclaurin and Tait (Developments) Pty Ltd (1976) 133 CLR 671
FACTS: parties had entered into a contract for a group of properties in Sydney
o purchaser proposed to redevelope the properties
o contract was subject tohte relevant council approving the development application
o approval was given
o property then became the subject of green bans embargos imposed by trade unions that oopposed the
proposed development of the land
HELD: the green bans did not frustrate the contract
o bans reduced the value of htel and and prevented the use of the land for the purpose for which the
purchaser bought it BUT this was not enough to frustrate the contract
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o
o
availabiloity ofhte land for the purchasers proposed purpose was nota term of the contract
the term relating to council approval was significant because the assingemnt of this one risk affecting the
development to the vendor left all other risks to be borne by the purchaser.
National Carriers Ltd v. Panalpina (Northern Ltd) [1981] AC 675.

where the contract is for 99 years, difficult to argue that a contract that was for such a long time that the contract
was frustrated.
FACTS: lessee was denied access to a leased property for a period of 20 months out of a term of 10 years
o there was 3 years left ot run on the lease
HELD: (House of Lords) this delay was not sufficient to frustrate the contract.
o there was not a complete bar
o frustration may apply to a lease if the lease was a very short lease.
Halloran v. Firth (1926) 26 SR (NSW) 183 and then Firth v Halloran in the HC: you cannot use the case of frustration in
leases.
Scanlans New Neon Ltd v. Tooheys Ltd (1943) 67 CLR 169 per Williams J : possible that frustration could apply to leases
o it would only be excluded where the lessees took possession onder the lease.
NOTE: in England, it is no longer the case that lease contracts would be totally barred see National Carriers- but
not clear in Australia.
Re Continental C & R Rubber Co Pty Ltd (1919) 27 CLR 194 payments prior to the frustrating event could not be
recovered. this is the old common law position in England nad Australia.
o ie. if I make a payment to you, under contract, if the contract is frustrated, I cannot get my money back.
o the loss falls where it lied BUT this position was changed :
Fibrosa v. Fairbairn [1943] AC 32 changed the old common law rule that no money is recoverable BTU exception
created: where the payment was made and the consideration had totally failed, then the money could be recovered.
Baltic Shipping v. Dillon (1993) 176 CLR 355, 357 Mason CJ : the above reflects the common law of Australia now but
note: must be total failure of consideration.
Appleby v. Myers (1867) LR 2 CP 651 - shows current common law approach

a. NOTE: other jurisdictions may differ BUT QLD follows the common law approach
FACTS: Pl. agreed to make and erect the whole of the machinery in the Ds factory and to keep the machinery in good
order for 2 years. After some but not all of the machinery was put in, there was a fire and the machinery was destroyed
along with the factory.
HELD: because of the fire, the contract was frustrated.
ISSUE: could the Pl. recover for the machinery they had put in - the contract had not been completely performed, only
partially.
a. the D. had incurred partial benefit
b. oculd Pl. recover the costs of the machine and the costs of the labour?
HELD: NO.
a. in the situation where hthe contract is partially performed and then frustrated, benefits cannot be
recovered.
NOTE: it is different though if the contract had been fully performed and then the factory had burned down in
such a situation, the machinery and labour costs could have been recovered.
Dunlop Pneumatic Tyre Co. Ltd v. Selfridge & Co. Ltd [1915] AC 847.
ISSUE: why cant a third party rely on a contract made for their benefit OR rely on clauses in such contracts?
HELD: 2 reasons why.
o the parties only rule = only parties who are in the contract can sue on the ocntracat or rely on exemption
clause
o no consideration had moved from the third party
Coulls v. Bagots Executor and Trustee Co Ltd (1967) 119 CLR 460-- (Windeyer J) both of the requirements are
needed if you are a non party OR if you fail to provide cdonsideration for the contract, the claim fails.
lOMoARcPSD
FACTS: Arthur Coulls granted to a company the right to quarry stone from his property in return for the payment of
certain royalties.
o agreement was headed Agreemnt between Arthur Coulls and ONeil Construction
o agreement was signed by Arthur Coulls and his wife as well as L ONeil on behalf of the company
o agreement said that Arthur Coulls authorised the company to pay all moneys connected with the
agreement to Doris Couslls nad himself as joint tenants
o Coulls died and his executor soughg directions from tnhe court as to whether the ocmpanyt was entitled or
bound topay the royalties to Doris Coulls
HELD: company owed no contractual obligaitoon to Doris because she was not a prty to the agreement
o the contract expressly purported to be made between Arthur Coulls nad the company
o company made no express promise to pay royalties to Doris
not possible to imply such a promise
o Doris signed the agreement but this does not make her a prty
o the authorisaiton clause was a revocable mandate tohte ocpmany to pay the royalties to Arthur and Doris
.mandate lapsed on the death of Arthur Coulls.
o (dissent) Barwick CJ : Doris signature was given on the basis that she was intended ot be a party to the
agreement
o companys promise to pay royalties was made to both the husband nad wife jointly
inteitno was the the royalties would be paid to ethem while they both lived and thereafter, to the
survivor only.
Trident General Insurance Co Ltd v. McNiece Bros Pty Ltd (1988) 165 CLR 107 - HC had the opportunity to clearup
the mess of the privitty doctrine in Australia.
FACTS: insurance contract give nfrom T to BC
o M was the principle contractor for consturciton work for BC
o under the contract for insurance from Trident, T agreed to indemnify The Assured against liability
The Assured = Blue Circle, all of its related companies and all contractors nad suppliers.
o crane driver , who was not an employee of M but was working under Ms direction, sued M for damages
for personal injury nad M sought indemnity form T under the terms of the insurance contract made with
BC.
ISSUE: T argued that M had no right to use on that contract since it was not a party to it.
o Insurance Contracts Act 1984 (Cth) was passed after to the event:
provides that a person who is covered by a general insurance policy can recover from the insurer
notwithstanding that he or she is not a prty to the contract
BUT: the Act does not apply to a contract of insurance made before its commencement
M therefore had to rely on common law principles.
o If the matter had been decided now, then yes M could get indemnified because statute has intervened in
the case of insurance contracts HOWEVER, the problem facing the court in Trident was that this contract
pre-dated the leiglsation
HELD: (Court of Appeal) BC did not contract as the agent of M but M was entitled to enforce the contract.
o an exception to the privity rule should be recognized in the case of insurance contracts commercial
convenience and practice demanded it.
o common law should proceed in parallel fashion with statutory reforms.
o rule of privitty of contract does not apply to insurance situation because the third party was getting benefit
off the insurance contract Trident then appeals to HC.
HELD: (HC) favouring McNiece
o (Mason CJ and Wilson J) prvity rule has been crticised on substantial groundsHC has aresponsibilty to
reform nunjust rules ,even when they are well entrenched.
judges went further to suggest a way in which the law relating ot contracts to benefit third parties
could be modified.
the problem with privity was that it often creates uncertainty uncertainty in the law is
bad because solicitors do not know how to advise their clinets.
uncertainty in law calls for reconsideration.
BUT: they limited themselves ote hquesiotn whether the privity rule applied to a policy of
insurance judges said no they did not apply.
if the privity rule applied, they woulc ause injustice because the likelihood of reliance on
insurance plicies by third party is so great.
third parties may order their affairs nad refrain from making their own arrangements in the
knowledge that another person has insured against a particular risk.
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(Toohey J) privity rule should not prevent enforecement of a contract of insurance by a third party
insurance excpeiton exists but should only apply where it may be expected that the hird party
would order his or her affairs by referncne to the insurance policy.
o in essence, Toohey J and Mason CJ and Wilson Js formaulations are not distinct.
o The HCc majority looked at the workding of the contract part of the role of the courts is to interpret the
intention of the parties in the contract
from the words used employees, subcontractors, ancillaries etc will be covered by the indeminity
insurance indicates that a ruling in favour of M is merely putting into effect the intention of the
parties.
o (Gaudron J) there was unjust enrichment promisor who accepts consideraiont for a promie to benefit a
third party is unjustly enriched at the expense of the third party if the promise is not fulfilled
to prevent unjust enrichment, third party is entitled to enforce an obligation imposed by law.
Gaudrons approach has been questioned in subsequent cases.
o (Deane J) terms of the contract in quesiotn indicated that BC held its rights against T on trust for non-party
beneficiaries including M
M could have pleaeded trust and join BC as a party to the action against T.
o (dissent ) (Brennan and Dawson JJ)
(Brennan J) there waws no basis in policy or logic for any special principle allowing third parties to
enforce contracts of insurance
there was no basis for overruling the doctrine of privity.
any injustices to the ruel could be overcome by thel aw of trusts, estoppel and damages
to hold that liability to insurance are an exception to privity, then some criterion must be
found to distinguish the mform the general rule, I can find none
no reason either of policy or logic is advanced for retaining the doctrine for application to
other contracts
(Dawson J) there was no conceptual basis for exempting only contracts of insurance from the
privity doctrine
overturngin the doctrine would require resolution of numersous difficult issues of policy
which was inappropriate for the court to resolve
Difficulty with this Trident was that 3 members of the HC allowed the claims in contract though some of them
confined their remakrs to contract of insurance
o some support that privtiy has been abolished
o ie. where it is a situation involving contract of insurance this is special third party can rely on cover that
was made for hteir benefit
o 2 memebrs allowed the lcaim for other reason in dissent.
Trident does not give a clear direction nand there was so many directions in the case only 1 judge prepared to
abolish privity in Australia.
o at least 5 judges were willing to find ways around the doctrines eg. to sazy that the insurance contract
was special / abolish privity entirely.
Trident: it was absolutely cleari nthte insurance contract hatt it was for hteb enefit for the subcontractors - it was
not that the insurers were nto aware in that case, even though it clearly stated in the contract that subcontractors
were covered, insurers argued that they were tird parties and cannot therefore rely on the contract.
o common in the building industry to employ subcontract
o THEREFORE: to overcome this common law issue Australia government came up with legislation to
intervene.
Shanklin Pier Ltd. v. Detel Products Ltd [1951] 2 KB 854
FACTS: The Pl. employed contractors to paint a pier and instructed to buy a new paint made by the D.
o the Pl. was keen on the contractors usinge the Ds paint because the D. said that the Pl. would nto need to
repaint the pier for another 7 years.
o in fact, the paint did not last 7 years it lasted only for 3 months.
ISSUE: contract to purchase the paint was between the contractors and the D.
o ie. Pl. was not a party to the contrtacat
o Pl. was wishing to sue because the repressntations had been made from D. to Pl. that the paint would last
for 7 years they were not a party to the contract of sale could the Pl. bring a claim?
HELD: Yes they could because there was a collateral contract between the Pl. and the D. relatoing to the quality of
the paint.
o on the facts, courts probably did not like the extent of falsity of the stqatemnet made by hteD.
lOMoARcPSD
collateral contracts probably not big deal not much use for it.
Hill v. Van Erp (1997) 188 CLR 159 claims for pure economic loss are now actionable in thelaw of tort. One of the
consequences of this is that claims can arise in tort law in contract like situations.
FACTS: a solicitor prepared a will for a client. It was to include a testimatory disposition to a friend of the client. The
issue is that when the will was being executed, the solicitor asked the husband of the intended beneficiary to attest
it. One cannot do that becaauswe under s51 of the Succession Act 1991 (Qld) means that the disposition to the
friend was no longer valid.
o After the death of the client, the friend discovered that they did not have their money from the will and
sued the solicitor.
o There was a problem in bringing a claim in contract because the contract was between the client and the
solicitor nad not with the intended beneficiary
o Could friend recover onn the basis of the intended disposition?
HELD: solicitor owed the friend, the intended beneficiary, a duty of care and had breached the duty.
Accounting Systems 2000 v CCH Australia

FACTS: contract was between AS2000 and Castle Douglas where A assigned copyright in a program to CD
o A warranted that there was no claim or potential claim agsint it for breach of copyright BUT in fact, there
was
o CCH had relied on the warranties made by A to CD.
HELD: CCH suffered loss as a reulst of htat misleading conduct and was therefore eenitled ot relief under the TPA in
respect of misleading conduct.
The Eurymedon [1975] AC 154
FACTS: Third parties were Steevdores stevedores unloaded ships and were notorious for dropping things and
damaging things.
o ther was a contract between the shippers of the goods and the carrier
o question was whether there was a limitation clause between the shipper and the carrier contract where
the stevedore was protected could stevedores rely on such clauses?
o the clause stated No servant or agent, including independent contractors, of the carrier was to be liable
for any act of default in the course of his employment (exclusion clause). Every limitation availbe to the
carrier should be available to such persons. The carrier would be contracting on behalf / agnet of the
contrctors
HELD: (Lord Wilberforce) Himalayan clause enforced BUT there is a limit: in this situation , the party in the main
contract must have the authority of the thikrd party gto act as their agent they must have the authority.
o they cannot mjerely declare that they are acting as an agent for the third party contractors , they have to
have actual authority
The New York Star [1981] 1 WLR 138 (Lord Wilberforce) Courts where they could would not search for fine
distinctions. They wll try to allow the operation of the Himalayan clause.
o commercial parties
o where the courts would, they would construe the Himalayan clause as effective.
FACT:S tehr was a consignment of razor blades shipped from Canada to Autrali
o carrier issued a bill of lading toeh consignor of the fgoods
o terms ofhte contract included a ione year time bar on proceedings in respect of loss or dmage to the goods
o Clasuse 2 was a Himalaya clause extends the benfit fo htat liimitaiton clauase to servants, agents and
independent contractors employed by the carrier.
o stevedore was 49% owened by the carrier and commonly acted as its stevedore and was aware of the
terms of the bill of lading.
o goods were unloaded and were stolen
o consignee sued the stevedore fofr damages in tort, but stevedore was trying to enforce the Himalaya
clause and argue that it was outside of the time period.
HELD: (3-2) the stevedpre was entield to the protection of the clause BUT (4-1) the stevedores actions were not
covered bythe lcause
o (Barwick CJ) carrier had acted with the authority of the stevedore as its agent in contracting for the
stevedores protection
stevedore provided consideration by unloading the goods
o (Mason and Jacobs JJ) treated the protective provisions of the bill of lading as an offer made by the
consignee to the stevedore thorugh the agent (carrier)
lOMoARcPSD
stevedore accepted that offer and provided consideraiotn for it by unloiading the goods knew of
hthe offer and had relied on it
THEREFORE, hthere was a unilateral contract between the consignee and the stevedore rather
than a bilateral contract made thorugh the agency of the carrier.
principle in New York Star case has been applied in subsequent cases where:
o a contract makes it clear hta abenfit is to beconferered ona beneficiary
o contract makes it clear htat the promsisee is acting as agent of the beneficiary
o the promisee was authoirsed teoenter into he contract onteh beneficiarys behalf OR the contract was
subsequtnly ratified
o beneficiary provided ocnsidereation for the promise
Sorbello v. Sorbello [2005] QSC 219
FACTS: involved a life insurance policy. A husband was a beneficiary under a wife. When the wife knew that she
was dying, she had discussions with the husband about where the insurance money would go. couple had children
and they were discussedas possible recipients.
o ther was no contract with the children
o any discussions had totally taken place between the husband and the wife.
o Children tried to bring a claim under the legislation claiming that they were third parties to the insurance
contract and wanted the money.
HELD: (Supreme Court of Qld) thjer ewas no intention to enter legal relations between the husband and wife and
therefore, no intention to create a duty enforceable by the children.
Re Davies [1989] 1 Qd R. 48 - failure of reasonable time accepetance
FACTS: A and B had entered into a contract for benefit of C. C had noticed in June 1985 , purporting to accept over
a yeara later.
HELD: this was outside of the reasonable time.
If you have notice of the contract being made in your benefit, you are required to accept you cannot just sit there
and do nothing.
Howie v. NSW Lawn Tennis Ground Ltd (1956) 95 CLR 132, 156 (Dixon CJ, McTiernan and Fullagar JJ) HELD: the
rule in Tulk v Moxhay only ever applie sto real property. It is a specific rule in property doctrine, it is not a wide
invention.
Jackson v. Horizon Holidays Ltd [1975] 1 WLR 1468.

FACTS: a father (solicitor) wanted to take his family whom he never saw on holiday.
o marvellous things are promsid by the holiday company
o it was promised that there would be lots of people ther and there were all sorts of entertainment facilities
o in the second week, the family were the only people in the entire hotel wher the food was terrible and the
entertainment was bad.
o father decides to sue the travel company.
ISSUE: could he recover for the upset and distress of other members of his family?
HELD: (Lord Denning MR) where a oncotnract is made for the benfit of a third aprty, promsiee is entitled to
recovere damages in respect ofh gthe loss suffered by the third party even where the promisee is not a trustee
o THEREFORE: J was eneitled to recover for the expensediscomfort, vexation and upset suffered by the
other members of his family
This exception is very limited:
Woodar Investment Ltd v. Wimpey [1980] 1 WLR 277: dicta indicated that Lord Denning went too far in saying tahat
damges will always be recoverable in respect of loss suffered bya third party beneficiary
damages may only be recovereable in respect of contracts of a particular type wherrere the third parties s and to
gain indirectly by performance OR where there may be a presumption that promisee himself suffered a loss as a
result of the deprivation of the third parties.
Alred McAlpine construction v Panatown
HELD: where a direct remediy is avialble to the third party beneficiary against he promisor, the n he promisee is
entieltd to only nominal damages
BUT: courts did not consider the correctness of Jackson.
Trident v McNiece per Mason CJ and Wilson J: doubts eht decision in Jackson
o said that its uncertainty indicated that privity should nto stand
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The Albazero [1977] AC 774, 847, Lord Diplock:

o In a commercial contract concerning goods where it is in the contemplation of the parties that the
proprietary interests in the goods may be transferred from one owner to another after the contract has
been entered into and before the breach which causes the loss or damage to the goods, an original party to
the contract, if such be the intention of them both, is to be treated in law as having entered into the
contract for the benefit of all persons who have or may acquire an interest in the goods before they are
lost or damaged, and is entitled to recover by way of damages for breach of contract the actual loss
sustained by those for whose benefit the contract is entered into.
o ie. exception cannot be used hwen the third party has their own claim
Linden Gardens Trust v. Lenesta Sludge [1994] 1 AC 85 (St Martins appeal).

FACTS: Pl. had a building contract with the D. to develop land. problem arose because the land was transferred to a
third party without the benefit of the contract between the original parties (nromalyl, they would just assing the
benefit of the original contracdt to the new party but in this case, there was no assignment)
o this created a problem because the party (new owner) suffering the loss had no contract with the builder.
o The party who had the contract with the builder no longer had property in the land and therefore, suffered
no loss
HELD: (majority in the HL) applied the Albazero principle (which was very narrow and applied only to sale of goods)
in this situation.
Darlington B.C. v. Wiltshier [1995] 1 WLR 68 HELD: excpetion could be used even where there was no transfer in
the property to the third party.
Alfred McAlpine Construction Ltd v. Panatown Ltd. [2001] 1 AC 518 HELD: where the third party has their own
claim, even if the way the contract was arranged make stheir claim less lucrative, then you cannot use this
excpetionn.
Raffles v. Wichelhaus (1864) 2 H & C 906

FACTS: Pl sold D 125 pounds of cotton to arrive on the ship
o Pl. tended cotton from the ship in December.
o There were two ships with the same name.
o D. claimed that the ships that they were interested in in buying cotton from was the ship that sailed in
October.
both ships were sailing from Bombay and in the same year but in different months.
o ISSUE: is the contract valid? Have the parties agreed?
o One party thinks that they have agreed to take cotton from the October ship the other thinks that they
have agreed to take cotton from the December ship
o there is a mutual mistake one thinks December one thinks October is there a contract?
HELD: difficult in the case to extract reasoning. Essentially, the view of the majrority is that there is no contract no
agreement.
o it is a formation mistake.
o there is no contract one thinks dec one thinks October.
o This case was accepted by the late 19th century as a case of mistake and there was no contract but difficult
to discern ratio.
BUT: it will be rare that an apparent agreemtn will be so ambiguous that there will be no way of preferring one partys
tinerepratatio nover
Scriven Bros & Co. v. Hindley & Co. [1913] 3 KB 564

FACTS: quesiotn is whether there was a contract ni the first place.
o an auctioneer acting for the Pl. put up a sale of a box of hemp.
o The auction catalogue was misleading.
o Tow was much cheaper than Hem and the D thought theat they were going to get Hem.
o The D. bid for the lot thinking there was Hem
o D discovered their mistake and refused to pay
HELD: there was a mistake that one party(the auctioneer) thought they were selling Tow and the party bidding
thought they were buying Hem.
o was there a contract? no, there was a no contract
it was a formation mistake = there was no contract.
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These formation mistakes are mutual one party thinks one thing the other thinks another (like Red car blue car
analogy of Anna and Bill)
Smith v. Hughes (1871) LR 6 QB 597

FACTS: the D was an owner and trainer of race horse. D agreed to buy some oats from the Pl. farmer.
o sale was by sample ie. they saw a sample of the oats before they bought it.
o there is a crucial difference between new oats and old oats as far as horses are concerned.
o Pl. supplied new oats
o D. claimed that they had conracted to buy old oats is there a contract?
o one of the parties knows that the other party is mistaken.
HELD: there is no contract in this situation
o the word old was used ith e discussison preeding the slae and ontract was for the sale of old oats
o it would therefore allow the mistaken party to rely on the otherp artys mistake to argue that there
was a contract but there is no contract
o iti s a formation mistake that one party knows ath the other party is isteaken they cannot htne claim
that there is a contract on their terms.
Hartog v. Colin and Shields [1939] 3 All ER 566

FACTS: D. entered into a contract to sell 3000 Argentinian hair skins from Pl.
o as a result of a mistake, they were offered by the Pl. to be for sale of 10 pence per pound instead of 10
pence for each hair skin.
o when the mistake was revealed to D. that the D were selling the skins for less than it was, they refused
ot deliver them.
o Pl. sued for delivery.
HELD: Pl. could not reasonably have thought that the offeres were genuine because they were dealers in skins.
o
o
o
They could not possibly have thought that one would get a hair skin for 10 pence a pound.
therefore, there was no contract formed.
a party who is awarae ofhee error made by the other party cannot claim that there is consensus ad
idem
Taylor v. Johnson (1983) 151 CLR 422
FACTS: a party entered into a written contract under a serious mistake about contents and the question arose
there whether that mistake was such that there was no contract formed.
HELD: Court questions whether the common law fo Aus relieves against unilateral mistake
o in thi cas,e the vendor had made a pricing error and that errorw as nkown to hted purchaser
o HC set asideteh contract in equity
could be argued that the commo nalw of Aus does not provide relief against unilateral mistake
because if relief was availbae at common law, there would have been n o contract for eqwuity to
set aside.
o could say that Taylor v Johnson was like Smith v Hughes- there is a mistake to term (price) applying Smith
v Hughes, there is no contract. BUT not ohow the HC decided.
Boulton v. Jones (1857) 2 H & N 564
FACTS: If the mistake of identity was material, the contract was void.
o how do we decide if the mistake of identiy is material?
o look at case law.
HELD: it comes down to the facts whether the mistake of identity was material.
Cundy v. Lindsay (1878) 3 App Cas 459
FACTS: major fraud involved.
o Pl. received an order for hankerchiefs from a rogue seller who gave his address to the Pl.
o Buyer wanted to get the order on credit by presenting to the Pl. as another client who lived on the
same road as the fake address given.
o Buyer wanted the handkerchiefs sent to him on credit and once he did, he sold them.
it was a scam.
o Buyer did not pay nbecuase they were on credit and he sold them to the D.
o Ds were an innocent third party was there a contract between the Pl.s and the seller?
HELD: the contract was void there never was a contract.
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Shogun Finance Ltd v. Hudson [2004] 1 AC 919

FACTS: ther was a slae of car.
o a finance company agreed to sell a car to a rogue.
o rogue misrepresented their character and identity to the finance company.
o Rogue produced proof of identity a driving licence which was unlawfully obtained.
it was not a genuine driving licence it was in the name of another person.
o the finance company sued the man on the driving licence
rogue had sold the car on and disappeared.
o ISSUE: if the agreement was voidable, then the party who currently have the car would be able to keep
it because he was bona fide.
if the agreement was void, then the Pl. fiannce company could have the car.
HELD: majority said that the contract was void
o hterew as never a contract
o there was never a contract because the finance company thought they were dealing with Mr Patel (on
the driving licence) but they were not dealing with him and they were dealing with the rogue.
o contract was clerlay expressed to be one madebetween P and S
o ina consumer credit agreement , the identiy of the consumer is fundamental because credjt is givne on
thebasis of the consumers credit rating
o ther was no oconsensus ad idem between S and the rogue
S intended ot ocntracto nly with P anda the rogue had on contracutla intention at all. THEREFORE,
contract was void.
o 2 judge in dissent: (needs to take the dissent seriously) the contract is not void because the parties
have dealt face to face.
basic argument: where parties deal face to face, there is an assumption that there is a contract.
they are not dealing at a distance.
it is not that the contract is not voidable , the contract is voidable for fraud BUT it is ont theat
there was never a contract
ther was a contract.
you cannot pretend that if the parties are dealing face to face that there is no contrac
on the facts parties were daelign face to face, it might be different if the parties were dealing
at a distance.
o BUT: in any event, the dissent is only 2 judges out of 5 they are however stating a rule that courts,
prior to Shogun, did not like contracts to be void hard luck if someone was pretending to be someone
else.
Kings Norton Metal Co. Ltd v. Edridge, Merrett and Co. Ltd (1897) 14 TLR 98
FACTS: Pl. received an order from Hallum & Co.
o H&Co were descrbied as a substantial firm.
o Pl. thought that a rogue called Wallace was Hallum and Co. and sent in wire (metal) to him.
o Wallace osld the wire faile1d to pay Metal Co.
o ISUSE: si the contract void?
HELD: the Pl. intended to contract there was no mistake of identity.
o Wallace has merely misrepresented that it was a respectable firm it was a mistake as to credit
worthiness.
o Wallace could have traded under any name it thought fit.
o Hallum & Co was merely an alias for Wallace.
o The contract was voidable for fraud but it was not void.
o the third party bona fide purchaser could keep the wire.
o NOTE: the parties here were dealing by letter.
o where the parties are dealing face to face, the situation is different there is a presumption that wher
A deals with B face to face, A intends to deal with the person physically present
you cannot argue that the contract is void.
Phillips v. Brooks Ltd [1919] 2 KB 243

FACTS: there was a rogue he liked jewellery.
o Rogue selected a valuable ring.
o Rogue produced a cheque book claiming to be Sir George who was a wealthy man and gave Sir
Georges address.
lOMoARcPSD
o
o
o
o
Pl. was not a complete fool they checked the address and found that Sir George lived at that address.
as a result, the Pl. allowd the rogue to take the ring.
rogue immediately went down to te pawn brokers and sold the ring.
ISUE: Whether or not there was a occntract between the pawn broker or the Pl
if it was voidable pawn broker (bona fide third party) oculd keep the ring
if it was void- jeweller could get the ring back.
HELD: contract was valid
o it was a face to face dealing
o the intention of the seller was to deal with the person in front of him.
After Phillips, clear that courts do not like to void contracts between parties dealing face to face BUT note:
Ingram v. Little [1961] 1 QB 31

FACTS: (similar to Phillips) Rogue wanted to buy a car and he bought a car from the Pl.
o he bought the car pretending to be PGM Hutchinson and gave address of PGM.
o Rogue goes ot the sellers (who were little old ladies) and pretends ot be PGM.
o little old ladies were not entirlely inapt they checked the directory for the address and found that
PGM did live at the address given
o PGM sold the car without paying as the cheque bounced.
o ISSUE: if you apply Phillips, if you preteend to be somebody, and you check the books to correct the
rogues information, the contract is voidable.
HELD: the court of appeal said that the contract is void.
o contrary to Philips, the contract was voidl.
How do you distinguish Ingram and Philips?
o the courts focused a graet deal in Ingram that it was all about intention and that the parties had not
made a mistake as to credit worthiness
the Pl. had intended to deal with the rogue.
o probably that Corut of Appeal wanted to reach the outcome it reached there is really no difference
between Ingram and Phillips
o It was distinguished that in Phillips the dealer was quite happy to sell to the rogue before the name Sir
George was mentioned
BUT: ti wass not clear that this was the case from the facts.
Lewis v. Avery [1972] 1 QB 198

FACTS: Pl. sells a car to a rogue.
o rogue pretends that he is a well known actor.
o Is there a contract? there is aconflict in authorities apply Phillips ? or Ingram?
HELD: it is a matter of intention.
o ther is a presumption that where parties deal face to face, they intend to deal with the parties in front
of theem THEREFORE you cannot say that the contract is void.
o (Denning L) a mistake of identity never makes a contract void.
looks at with hwo the risks would lie?
Lewis said you can take the car before the cheque clears
balancing of where the risks should lie because both parties were really innocent.
therefore, because L had contracted with the rogue face to face.
we do not look at the parties intentions, we look to outward appearances
Lewis should hold the risk and the contract was voidable.
o Lord Dennig rejected the distinction between mitetake as to identity nad mistake as to attributes
ie. he rejected that a mistake as to identity can render the ocntrafct ovidb ut the mistake as to
attributes / quality cannot
o Denning also rejected the distinction between a contract of sale conlcudededj ustbefroe the rogues
fraudulent misrep were made or just after the fraduelnt mistake was made
it was the original owner who got duped and therefore, nan innocent purchaser shoud not be able
to redcover.
o MEgaw LJ: mistake here was to an attribute and not to dientty (ie. same conclusion as Dennig but accepted
th distinction between mistake as to identyy and mistake as to attribute)
pl. intended to contract with the person physically before him
identity of the buyer was not vital because identiy was sought only to assess the creditworthiness
of the purchaser.
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In any event, Shogun : House of Lords said that wher het parties daeal face to face, there is a presumption that there is
a contract. REMAINS THE RULE.
Porter v. Latec Finance (Qld) Pty Ltd (1964) 111 CLR 177
FACTS: LH Gale got a loan form the D. pretending to be LHGs father
o there wree various subsequent frauds.
o ISSUE: could the loan contract be set aside was it a case like Phillips?
HELD: this is not a mistake that voids the contract. Contract stands.
o (Barwick CJ in majority) it is not fundamental to the transaction who the fraudster pretends to be the
contract stands.
o (minority) (Windeyer and Kitto JJ) disagreed and held that the contract is void because there is a
mistake.
you have assessed the party to be credit worthy therefore, you cannot say that the partys
identity was not fundamental
In Aus nad England, it is very difficult to void a contract to void a contract where the parites dedal face toface.
o courts dont like voiding a contract where a third party is involved.
Taylor v. Johnson (1983) 151 CLR 422 main authority.

FACTS: Johnson granted an option to T ot purchase 2 lots of land, each comprising 5 acres for a total purchase price
of $15,000
o option was exercised there was a written contract
o J declined to perform the contract ecasue she had thought that heagrement provided for a price of $15,000
per acre nad no the whole land
o T believed that J was under some seirous mistake BUT delieberatley set out tho ensure htat hse didn toe
become aware fo the mistake
o D. had refrained form mentioning the price and wrongly stated that he did not have a ocpy of the option to
make avialbe to her
HELD :the contrac tshoud be set aside
o court looked at subjective nad objective theories of contractual asset
o subjective theory affirsms that true consent is essential to a vlaid contract and thereof,re in the absence,
the contract is void
o objective theory affirms that contralct law is confcerned nto with t4he relear inteitnso of the parties bunt
with the outward manifestation of htose intentions
objectively, the parties have agreed with the price of $15,000 because this is what was written
down.
o therfoer, under objective theor,y, where there is uncosncioanble conudc,th te onctract is voidable
objectively at law, there is a contract BUT in equity, the contract is voidable.
o court refereed to Denning LJ in Solle
o a party who has entered into a written contract under a sseirous mistake about its ocntnet in relation to a
fundamental termu will be netield in equity to an order rescinding the onctrafct fi the oather party
(defendant) is aware that cirucmsntace exist twhihch idnciate that the firstp arty is entering the ocntractg
under mistake and dleibveratley sets out toe ensrue htath efirst party does not become arware of the
mistake
above statement hads bee ntaken as not a comphrensive state of the only cicusmtnacstanace in which mistake by a
contracting party would attract equitable relief.
generally, look at hwehteri t would be unconsionblae for the non-mistaken party to atke advantage ofh te mistaken
partys mistake.
courts deal with unilateral mistake cases (Smith v Smith) essential emelmts are:
o one paersosn enters into a contract under a serious mistake about its content in relation to a fundamental
matter
o other party is aware of the cirumcsntaces exisxts indicatiogn that the first perons is enterin into the onctrat
under serious mistake
o second aprty dliberalety set out to ensure thathe first party does not become aware of the mistake. by
positive acts or omitting to bring ti to their attention.
o Taylor v Johnson: even though one party is mistaken, objectively, they said that there is a contract.
seems to limit common law in terms of mistake because paradox: this liberates the law on common
mistake (like Bell v Lever Bros: where the parties make the same mistake at common law, it is
virtually impossible to argue that he contract is void unless the mistake is fundamental
lOMoARcPSD
subsequent cases after Bell v Lever have shown that it was virtually impossible to void a contract for
common mistake)
Smith v. Smith [2004] NSWSC 663 needs ot be deliberate concealment BUT you can give a false impression by
omission without being deliberate.
Leibler v. Air New Zealand (No. 2) [1999] 1 VR 1 suggested that ther need not be a deliberate concealment of the
mistake in order for the contract to be set aside in equity.
FACT:S agreement for the lsae of shares comprising a hhalf-itnerst in a company that operated a travel angecy
o solicitpors acting forth purchaser mistakenly delated from the agrfement for sale a lcause given the
prcahser a right of preemption in relation to the slelers remaining shares in the company
HELD: equity required the seller to brign th4e mistake to the attention nfo the purchaser because of circusmtnaces:
o copmelxity of the transcation
o degree fo trust involved
o funadmaental importance ofteh omitted term
o fact thathe deletion of the clasue was totally inconsistent with the tenor of the negotiatons.
o HOWEVE:R it is actually not clear what is required before equity can intervene
XCB Pty Ltd v. Creative Brands Pty Ltd [2005] VSC 424 knowledge of the other mistaken party making the mistake
is not enough needs something more than that but what more, it is not clear.
Couturier v. Hastie (1856) 5 HCL 673

FACTS: One party agrees to sell corn which no longer exsited at the time the contract was made
HELD: it depends on the construction of the contract.
o the contract was void.
Queensland legislation: Sale of Goods Act 1876 (Qld)s 9

When there is a contract for the sale of specific goods, and the goods without the knowledge of the seller have
perished at the time when the contract is made, the contract is void.
McRae v. Commonwealth Disposal Commission (1951) 84 CLR 377

FACTS: Commissioner invivted tenders for htep urchase of an oil tanker described as wrecked at a certain location in
Papua.
o Pl. put in a tender and was accepted
o Pl. incurred expensies in fitting out a salvage operation
o there was no tanker in the vicinity of the allegted location
HELD: there was a contract and the D. was liable for breach
o D. had impliedly promised that there wa a tanker in the position specified and was liable for breach of that
promise
o evne if a common mistake of a fundamnetla nature could render a contract void, a party cannot rely on such a
mistake wher it conststs of a belief entertained without any reasonable gorund and deliberately induced by
that party in the mind of the other party.
o Court gave reliance losses.
Svanosio v. McNamara (1956) 96 CLR 186 LAND SALE no bad behaviour therefore reluctance to set aside.
FACTS: D sold land to the Pl.
o both parties were mistaken and thought that the land that was sold included a hotel.
o vendor was not in the position to sell the hotel because part of the land that the hotel was on was owned by
the crown.
o ISSUE: was the contract void?
o Pl. could have just claimed damages but they wanted the contract set aside and money repaid.
to get the money repaid, the contract had to be void.
HELD: the contract was not void.
o court was reluctant to set the contract aside in equity.
o usually, it is easy to set hete contract aside in equity because the courts will just refuse specific performance
o BUT here, no, equity could not do so.
o it was not voidable in equity because there was no fraud both parties had made a common mistake.
o + it was partly because they were reluctant to set the contract aside in contract law or equity becauseit was a
sale of land.
Bell v. Lever Bros. Ltd. [1932] AC 161
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FACTS: B and S agreed to serve as Chairman and Vice Chairman at Lever Bros. Lever Bros hhad to pay B and S monies as
the company did not do well.
o ISSUE:neither parties thought that they were entired to a payoff.
o BUT in fact, B and S had breached their contract sand were not entitled to a payoff.
at the time the parties entered into the compensation package, B and L thought htat B was entield to
compensation.
o was the contract void for mistake?
o L argued that the contract was void becaue he wanted to get he money back.
HELD: contract was not void.
o because the mistake was not sufficiently fundamental.
mistake only realted to the quality of the agreement was not fundamental
o (AtkinL) it was a payoff to end the contract and that was what they got
the release contract was identical whether they had been opedrating under the contract or not.
mistake as to quality can make the contract void but only if it was fundamental
o is an agreement to terminate a broken contract different in kind from an agrfeemtn t oterminate an unbroken
contract ? in this case, no.
o contract reaeased is identical contract in btth cases, and the party paying for the release gets exactly what he
bargains for.
it is difficult to argue (almost impossible) that the mistake is fundamental where there are mistakes to quality, courts
do not like to say the contract is void.
o you can do so in equity however.
Svanosio v. McNamara (1956) 96 CLR 186
HELD: doctrine of equitable mistake was fairly narrow there ahs to be a fraud OR a total failure of consideration.
Svansio papproved Denning LJ in Solle that despite the parties mistake, a contract holds goodu unless and until it is set
aside on some equitable ground
o FACTS: D sold to the Pl. scertain alloktment of land with a hotel whichv was erected onti
after conveyance of the property, it was discovered htat only apportion of htehotel building stood on
the land described
one third of the land was owned by the Crown
Pl. laimed thath e contract nad conveyance hsoudl be set aside and the purchase money returned
because teparties had entered the contract undera common mistake
o HELD: HC dismissinghte claim
equity would not undo a slae of land after conveyance uneless ther was fraud or a total failure of
consideration
here: there was only partical failure of consideration.
it is difficult to conceive any circusmtnances in which equity cvould properly give relief by setting
aside the contract unless there had been fraud or a condition can eb found express or implied int eh
contract
Crucial factor of the case also was that the contract of sale of lthe land was in a special category
because the purchaser has a good opportunity to inestigate the sellers title nad survey the land prior
to conyeance
in this ca,se only a cursorty examination fot title was made on behalf of the purchasaer
Taylor v Johnson agreed with the statement and said that fraud means the wide equitable sense inclduign
unconscionable dealing.
o THEREFORE: in later cases after McNamara (see Taylor) seems slightly wider equity may be wider in allowing
contracts to be voided where there is mistake.
Maralinga Pty Ltd v. Major Enterprises Pty Ltd (1973) 128 CLR 336
FACTS: Major put up ladn for sale by auction
o auctioneer announced hat the purchaser would be allowed a mortgage back tohe vendor for $64,500 for 3
years at8%.
o property was knocked doewn to Maralinga
o draft contract provided for the paymtent of the balance of purchase price on completion buyt did not
contain a provision for any part of the price to remain on mortgage
o Maralinga signed the contract knowing this omission and Major did oto
o Maralinga thought it coud lstil lhave the benefit of the auctoneeers promise regardin gehthe mortgage
and sought rectification
HELD: HC refused to order rectifciaction
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no mistake had been made because both parties knew the written instrument differed from the temrs of
the bargain
o Court must be staisisfied thath e instrument does not reflect the true agrremnet of the parties
o cannot be so ssatisfied unless the writing was intended ot record the earlier agremetn and by mistake, the
parties fail to do so
o rectification would nhave ben granted only if an actual agreement had been ocncluded before the
edxecution of htewriting sinstrument.
o BUT: even without actual agreemtn prior to the written instrument, rectification could still be allowed but
in this cas,e intentions did not indicate that the parties had intended to contract upon the auctioneers
promise.
NOTE: parol evidence rule would apply but ,, equity may order recotification of the doc so thagt it expresses the
true inteitnos ofh te parties
o even where there is an entire agreent clause , it owudl not preclude the reception of evidence to rpove
that the written contract was not in accord with the true intentions ofh te parties MacDonald v Shinko
Pukallus v. Cameron (1982) 180 CLR 447
fACTS: written agreement asaid that only Subdivision 1 of Portion 1154 was for sale
o both parties beelived that Subdivision 1 included a bore and an area of cultivated land which they had
einspected together before the contract was signed
o after the sale, purchaser discovered that the are aof land in queswiton was part of Subdivision 2
o ;purchasersought rectiifcatoint of the contract
HELD: written contract did embody the inteitno of the parties which was to transfer Subdivision 1 of Portion 1154
THEREFORE: ther was evidence of inetnion to transfer only Subdoivision 1
o to obtain rectification, the purchase would nted to provie the precsise term athtt was agreed between the
parties and have mistakenly omitted from the written contract
It is all about looking at the true agreement
you cannot use rectification merely because the parties have changed their minds popst thewritten contracts because
at the time of formation, the contract reflects their intentions at the time of entering the contract.
(Winks v. WH Heck & Sons Pty Ltd [1986] 1 Qd R 226)
LEstrange v. Graucob [1943] 2 KB 394 general rule for non est factum
FACTS: contract was for the sale of slot machines.
o parties had signed the contract where in it, liability was excluded for express and implied warranties
straightforward exclusion clause
o it was in tiny print that one needed a magnifying glass to read it
o machines turned out to be faulty.
o was the Pl. bound by the exclusion clauses? the Pl.s had signed the contract.
HELD: the pl.s were bound non est factum could not be used.
sc ope of the defence considered in England in Saunders v. Anglia Building Society [1971] AC 1004: HELD: non est
factum is not confined to people whoe were illiterate but covered all of those who were permanently or temporarily,
thorugh no fault of their own, unable without an explanation to understand the document whether through defective
education, illness or innate capacity.
Petelin v. Cullen (1975) 132 CLR 355

FACTS: man had poor understanding of English. P was persuaded by an agent of Cullen to renew an option to be in
favour of C.
o P did not understand the doc that he had signed
o P thought that it was just a receipt
o the fact that he thought that was deliberate
o C tried to exercise the option of land at a very cheap price issue is wheter renewal of the land was valid.
could non est factum be used?
HELD: qualificatiosn to non est factum:
o class of person who can avail themselves fo the rulee is limited to those who cannot read bowing to some
sort of disability +
o signer msut sign the document in the ebleif that it was radically difernt from whatit was in fact.
mistake as to contents of a dociuemtn can be just as radical as a mistake as to its character
lOMoARcPSD
where the defnece is asserted against an innocent third party, failure to read nad understand the
document msut not be due to carelessness on the part of the signer.
signer must have taken reasonable precautiosn to understand the document.
o person who seeks to rely on the defnece does not need to sstalish thath e other party had knoweldfvge of
the incapacity that led to the signing of the contracts.
o on the facts, P had not been careless not their fault that they did not understand englsh; and Cs agents
had reason to suspect that there was misapprehension of the character of the document that was signed
o there are two conflicting policy araguemtns:
there is on the one hand, the notion that if A gets B to sign something, B should be able to rely on
As signature when there is no reason to doubt its validity.
vs.
there is injustice in holding someone to a contract that they have not really consented to.
in a case like Petellin, where there is no fault of the person signing and the other knew that they did no really
understand what they were signing that the defence toan action in contract to non est factum can be brought.
Sale of Goods Act 1896 (Qld), s 54 (2)-(3):

The measure of damages for breach of warranty is the estimated loss directly and naturally resulting, in the
ordinary course of events, from the breach of warranty.
In the case of breach of warranty of quality such loss is prima facie the difference between the value of the
goods at the time of delivery to the buyer and the value which they would have had if they had answered to the
warranty.
Ruxley Electronics and Constructions Ltd v. Forsyth [1996] 1 AC 344 - more serious example of when
expectation damages = 0.
FACTS: Pl. entered into contract with D to build a swimming pool,.
o under the specifications of the building contract, the pool was supposed to be 7 foot 6 inches deep at
the deep end.
o the pool was only 6 foot 9 inches at the deep end when built.
o Mr Forsyth argued htat he did not get the pool that he contracted for it was more shallow
o therefore, F argued that he should be allowed damages
o ISSUE: the pool was perfrectly safe for swmming / diving ther ewas no difference between nthe
market value of the thing contracted for and the actual value
o THEREFOER: expectation damages were 0.
o No one doubted that there was a breach BUT that the breach made no difference to the value of the end
product.
o F was a wealthy / litigious man argued that he should be entitled ot recover the cost of diggin up the
whole pool and starting it up again to make it fit witht the specifications
this is a cost of cure.
F was seeking for damages to rectify the breach.
o the cost of diggingup the deep end of the pool nad paying someone else ot do it was significant.
HELD: Could he claim those damges? House of Lord reasoning is not entirely clear. but they said No, he
could nto claim the damage sought.
o such an award would be unreasonable but you maey recover costs of cure in some cases some times
o HL did not lay odwn clear rules but said that such an award would be wholely disproportionate to any
benefit that would result:
o it was unreasonable (apapears that F was terribly litigious and the swimming pool company had offered
vaiours other benefits free of charge to F before going to court)
o HL said you can recover for costs of cure you can recover damage sto get the defect fixed
what ehy were saying was that the pool was good and it was totally unraeosnbale to be able to
claim the costs of curing
o HL was probably also worried about pocketing the money from those damges to cure.
o F was entitled to compensation for looss of amenity.
Tabcorp: HC discussed Ruxley and said thqat the finding wqas not consistent with the statement of Oliver J
(about taking into consideration the pls preferences in whether or not rectification should be allowed) BUT
Tabcorp said that the circumstances in Ruxley were quite exception.
lOMoARcPSD
Bellgrove v. Eldridge (1954) 90 CLR 613

FACTS: builders built a house wher there were bad foundations.
o foundations were not in accordance with the contract and were faulty.
problem: concrete had not been mixed properly
o hosue with weak foundations is not what people wants
o ISSUE: could they recover cost of cure damages?
LITIGATION: on the facts, ti was not that expectation damges were 0 but that the Pl. wanted the house rebuilt
o Pl. was not interested in how much less the house was worth in the market price
o they were simply seeking to cure the defect
o in this situation, one wants a house that would not in 10 years fall down HTHEREFRE, Pl argued that
they could recover the cost of getting the house rebuilt.
o cost of getting thte house built in the first place was $3,500 cost of rebuilding the house was $5000.
HELD: (HC) yess they could recover the cost of cure.
o it was stressed that cost of cure damages will only be awarded in exceptional circusmtnaces
o normally, you get expectation damages BUT there are some casese where there are exceptions.
o exception dependso n whether it was reasonable and necessary to be awareed cost of cure damages.
recticiation in this case was reasonbel because the foundation of the house were defective and
the building was unstable.
THEREFORE: a real and practical necessity arose for the work to be redone.
o alos stressed that it was not the courts business if the Pl. ddid not use the damages to cure the defect
ie. even if the Pl. just pocketed the damgages it would not be for the court to decidej how the
damages are spent
Is it relevant whether the Pl. intends to carry out the repairs?
Pl. may not actually intend to carry out the work required to rectify the building
damages are beoing sought on this basis but unsettled whether the Plos intention should be
relevant in assessing damages for the cost of rectification.
o there are examples given in the judgment of when cost of cure damgges can be awarded and when not:
o 2 examples were given:
Cost of cure awarded: where A contract with B to paint a room purple; instead, B paints the
room yellow; yello and purple room are probably worth the same ca n you recover cost to get
the room repainted? court said yes.
an example where cost of cure damages can be awarded
some sort of personal preference is allowed.
where cost of cure not awarded: where A contracts with B for B to use old bricks as he prefers
BUT B uses new bricks rather than old bricks. Cost of cure damages cannot be awarded A
cannot recover the costs of knocking down the house and building it.
o there are several factors in play with the 2 examples before all of which are treated under the rubric of
what is and what is not unreasonable
partly depends also whether the thingis totally different to the thing contrafcted for +
more importantly,whether the damages would be disproportionate to the breach.
the concern behind reluctance in looking at whether or not the Pl. would use the damages to actually fix the
defect is that inquiry intop a pls subjective intentions is not part of the ordinary approach to contract damages
and..will produce commercial uncertainty. (Bowen Investments v Tabcorp)
o Brewarrina Shire Council v Beckhaus Civil Pty Ltd
o FACTS: the levee built though not in compliance with the contract, it would adequately perform its
funcitonws and the rectification work would not increase its capacity to repel floodwater.
o HELD: rectification of the dry side of a levee was unreasonable.
o Award of damages for the cost of rectification nmay be unreasonable where the cost of rectification
would be wholly disproportionate to the benefit obtained.
Jarvis v Swan Tours: 1973 QB 233

- Solicitor booked a holiday with Swan Tours for 2 weeks in Switzerland described as a winter sports holiday on the
faith of a brochure describing the activities (including skiing etc).
- In the first week, there were only 13 other people in the hotel
- Enterainement was not good
lOMoARcPSD
2nd week the family were the only people in the hotel
yodler couldnt yodel. Cakes were stale and skiing was bad
He sued not only on expectation measure, but also for mental distress from disappointment in the holiday. (could
Baltic fall into this category? And therefore the exception?)
The 5th category of Masonss exceptions as a result of Jarvis and Baltic is quite wide.
McRae v. Commonwealth Disposals Commission (1951) 84 CLR 377
Ps entered into contract with D for purchase of an oil tanker it intended to salvage in a given locality.
P spent money to equip ship with salvageable gear and sent it to location, but the tanker wasnt there
tanker did not exist breach of contract
Expectation damages inappropriate, b/c it is impossible to value a non-existent thing too speculative
P could not quantify lost oprofits had the contract been carried out.
Instead, P was able to recover for expenses incurred in preparing the ship because they were
reasonable steps to be taken on reliance of Ds promise

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Law Of Contract B - Summary - Summaries

Law Of Contract B (University of Queensland)

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Dimmock v. Hallett (1866) LR 2 Ch App 21

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Ecay v. Godfrey (1947) 80 LI LR 286

Keates v. The Earl of Cadogan (1851) 10 CB 591

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S21 of Insurance Contracts act

Edgington v. Fitzmaurice (1885) 29 Ch D 459

Smith v. Land & House Property Corp. (1884) 28 Ch D 7

Nicholas v. Thompson [1924] VLR 554, 565, 575-77

Hartigan v International Society for Krishna Consciousness Inc

Consequential damages are recoverable for the tort of deceit.

*Gould v. Vaggelas (1984) 157 CLR 215

OBrien v. Smolonogov (1983) 53 ALR 107

Is professional advice within trade or commerce or not?

Byers v. Dorotea Pty Ltd (1986) 69 ALR 715

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Nagy v Masters Dairy Ltd

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Murphy v. Overton Investments Pty Ltd (2004) 216- CLR 388

Marks v. GIO Australia Holdings Ltd - Needs Case summary!

Campbell v. Backoffice Investments Pty Ltd (2009) 238 CLR 304.

Barton v. Armstrong [1976] AC 104

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Astley v. Reynolds (1731) 2 Str 915

The duress to goods could be used to avoid a contract:

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Smith v. William Charlick Ltd (1924) 34 CLR 38

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shipbuilder wanted to claim 10% more in the remaining instalemnets

Allcard v. Skinner (1887) 36 ChD 145, 183,

Williams v. Bayley (1866) LR 1 HL 200

Badman v. Drake [2008] NSWSC 1366

Blomley v. Ryan (1956) 99 CLR 362, 405

i. Bridgewater v. Leahey (1998) 194 CLR 457

Commercial Bank of Australia v. Amadio (1983) 151 CLR 447

Reed v. Kilburn Co-operative Society (1875) LR 10 QB 264

o Can one be implied?

Kingston v. Preston (1773) Lofft 194

Perri v. Coolangatta Investments Ltd (1982) 149 CLR 537

ACT Cross Country Club v. Cudy [2010] FCA 782

Courts seems to be unwilling to imply an oblgiatio nto negotiate in good faith

Cutter v. Powell (1795) 6 TR 320

Phillips v. Ellinson Bros Pty Ltd (1941) 65 CLR 221

Steele v. Tardiani (1946) 72 CLR 386

Hoenig v. Issacs [1952] 2 All ER 176

DIFFICULTY WITH: Bolton v. Mahadeva [1972] 1 WLR 1009

Sumpter v. Hedges [1898] 1 QB 673

Crawford Fitting co v Sydney Valve & Fitting Pty Ltd:

Fitzgerald v. Masters (1956) 95 CLR 420

Photo Production Ltd v. Securicor Transport Ltd [1980] AC 827

Le v. Qureshi [2003] QDC 442

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The Mihalis Angelos [1971] 1 QB 164

Hong Kong Fir Shipping Co. Ltd v. Kawasaki [1962]

Vitol SA v. Norelf Ltd [1996] AC 800

The Mihalis Angelos [1971] 1 QB 164

Foran v. Wright (1989) 168 CLR 385

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Stern v. McArthur (1988) 165 CLR 489