Formation of contract

Issues P D
Offer D showed intention to make Mere information or invitation to
contract trade
1 Is offer made
Carlill v Carbolic Harvey v Facey
2 Is the offer effectively revoked Offer can not be revoked after Revoke offer anytime before
acceptance acceptance
Byrne & Co v Van Routledge v Grant
3 Rejected Offer is rejected (Counter offer)
Hyde v Wrench
Acceptance Unconditional but requiring further Conditional
information
1 Unconditional Masters v Cameron
Stevenson v Mclean
2 Communicated (Postal rule) Postal rule is not applicable if
Postal rule particular mean of acceptance is
Effective as soon as posted mentioned
Even if lost or never delivered
Not applicable for instantaneous
communication
Consideration
Have value but need not to be Thomas v Thomas
adequate
Not previously given Roscorla v Thomas
Promise to perform existing Stilk v Myrick
obligation
Early payment of debt is No consideration for contract (By
consideration merely paying the debt owed)
Pinnel’s case Foakes v Beer
Exceptions
Deed or seal
Equitable promissory estoppel
Intention to create legal
relationship
Social and domestic Easily rebutted especially when Presumed not legally binding
Easily rebutted the contract is essential between
Balfour v Balfour
two businesses (Merritt v Merritt)

Commercial Rebutted by express clear words

Hard to rebut
Hard to rebut Edwards v Skyways Ltd Rose v Frank

Express terms of contract

Issues P D
Signed written contract
1 A party who signed contract is No contract made L’Estrange v Graucob Ltd
taken to have read, understand and D J Hill and Co v Walter H Wright
agreed to be bound by all of its
terms even if the party actually did
not read (Exceptions: Document
does not appear to be a contract/
Terms have been misrepresented)
2 Parole evidence (If the written
term is complete, other statements
can not vary those written terms)
Exceptions: Not complete/ Second
collateral contract
Written statement and
unsigned written contract
1 Party is aware of the contract D is aware of the contract term D is not aware of the term and no
terms sufficient notice is given prior to
Balmain New Ferry v Robertson
making the contract

2 Prior sufficient notice must be

given (Nature of the
document/Nature of the
transaction/Nature of the clause)
3 Must not be misrepresented
Notice is given too late
Olley v Marlborough
No prior sufficient notice is given
Interfoto Picture Library v Stiletto
Visual Programmes

Oral statement and written

contract
Reasonable bystander test Yes. Oral statement is the Negate P’s argument. Oral
Time between statement and contractual term. statement is already after contract
contract
Nature of statement: importance,
promissory, unqualified. (Whether
to be intended to rely on)
Party making the contract has
special knowledge.
Oral statement and oral
contract
Reasonable bystander test
Collateral contract
Consideration is entering the main
contract
1 Statement is intended to be relied
on.
2 Statement is not inconsistent with
main contract
Exemption clause
Is exemption clause a term of the
contract
Does exemption clause apply to the
claim
Exemption clause overruled by a
statute (TPA 68)
Van Den Esschert v Chappell made.
Time is immediately before. No intention to rely on.
P would not sign the contract D does not have special knowledge
without assurance of D about the statement.
D has special knowledge about the
property
Same argument Same argument
Oscar Chess Ltd v Williams
Intended to be relied on and not Not intended to be relied on.
inconsistent with main contract.
JJ Savage and Sons v Blakeney
De Lassalle v Guildford
Inconsistent with main contract
Hoyts Pty Ltd v Spencer
Exemption clause is Exempt liability for breach of a
misrepresented and thus void. fundamental term or obligation.
Curtis chemical cleaning v Dyeing Photo Production v Securicor
Transport
Contra proferentem rule
Any ambiguity arisen must be
interpreted against the party who
drafted it.
Alex Kay Pl v Gen Motors Accept
Corp
Four corners
Clause can not exempt a liability
that arises outside the terms of the
contract.
Sydney Corporation v West
Termination of contract
Ending contract
Frustration
Causes (P’s argument) 1 Intervening event
2 Not contemplated by
both parties
3 Not fault of both parties
4 Impossible or radically
different to original
Potential defence Negate 4 conditions
above
Results 1All outstanding
obligation discharged
2 Benefits and Liabilities
equalised between both
parties
Process
Termination Rescission
1Breach of condition 1 Mistake (Each party
(Clearly expressed as made the same mistake
condition/Statutory about a fundamental
implied as condition/P matter)
would have not entered
2 Undue influence
without strict or
(Absence of a free and
substantial assurance)
voluntary act of a
2 Serious breach of party/Could be caused by
intermediate term special relationship)
(Substantially deprived of
Exceptions: Husband and
P’s benefit)
wife/ P got independent
advice
3 Economic duress
(Pressure exerted goes
beyond legitimate)
4 Unconscionable
conduct (Covered in part
2)
Negate P’s argument (Not Negate P’s argument/Use
serious enough to exemption rule
terminate)
L Schuler AG v Wickman
Machine Tool Sales
1 Ends from time election Ends from its beginning
is made
Note : Rescission is not
2 Relieved from available in scenarios
performing future below
obligation
1 Contract has been
3 Does not affect affirmed
obligations already
2 Restitution is not
accrued
available
3 Third party’s legal
rights are affected
1P makes an election to Same
treat breach as ending the

Cases Taylor v Caldwell
Remedies
Caused by breach of warranty or slight intermediate condition
Types
Damages
1 Must be a type damage can be
awarded (Exception: provision of
entertainment or enjoyment)
2 Loss must be caused by breach
3 Loss must not be too remote
4 Innocent party has to mitigate
loss
Recovery of the contract
price
Specific performance
1Only when damage is not
adequate
2 Never ordered for contracts
involving personal service
Injunction
Stop a party from doing an act
contract
2 Must not be
unequivocal and be
communicated to the
party in breach
3 Party terminating
proves to be ready and
willing to perform their
part of contract
4 Cant not be revoked
Associated Newspaper Taylor v Johnson
Ltd v Bancks
P D
Damage can be awarded Damage cant be awarded
P would have not suffered loss but P’s loss is not caused by D
by D
Loss is outside the usual course of
First limb: loss is in contemplation business and unreasonable
of usual course of business
P’s contributory act counts for
Second limb: within reasonable reduction of damage
contemplation of parties as a
probable result of the breach
(Consequential damage only if
notice is given)
Performed obligation under the Stipulates precise completion
contract
Requires substantial performance
Entitled to recover the agreed price
Dongan v Ley Lumley v Wagner
Show the contravening conduct
will continue or happen again
 Lumley v Wagner
Restitution D has been enriched at the expense Baltic Shipping v Dillon
of P, it is unjust for D to keep the
Prevent unjust enrichment benefit
Fair and just compensation to P
Fibrosa v Fairbairn
Rectification
Mistake common to both paties
Seek order to rectify incorrect
terms
Third party’s legal right must not
be affected
Time limitation
Legal action for simple contract is
within 6 yrs
Legal action for formal contract is
within 15 yrs
Legal action for unconscionable
conduct is within 6 yrs