Transcript Fundamentals of Law (BL502)

MANAGEMENT & LEGAL IMPLICATIONS OF eCOMMERCE
Week 2
Law of Contract
Revision
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Revision
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Sources of Law
Separation of Powers
Division of Powers
Court Hierarchy
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Sources of Law
Parliament
The Courts
Federal
State
Trade Practices
Act
Fair Trading Act
Equity
Promissory
estoppel
Unconscionable
Conduct
Common Law
Contract Law
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Privy Council
FEDERAL COURTS
Appeals Abolished
High Court
Federal Court
Family Court
VICTORIAN COURTS
Court of Appeal
Supreme Court
County Court
Federal Magistrates Service
Magistrates Court
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Revision (cont.)
 Precedent
 2 types
 Describe
 2 parts of a decision
 Rule of Law
 Citing decisions
 Smith v Jones (2001) 145 CLR 203, 207
 Smith v Jones [1945] 2 All ER 203, 207
 Smith v Jones (2001) HCA 203, [20]
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Revision (cont.)
 Statutory Interpretation
 3 approaches
 Current approach
 Why
 Aids to interpretation
 Rules of interpretation
 Proof
 Burden of proof
 Presumptions
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Week 2
Law of Contract
Development, Intention & Offer
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Development of Contract Law
 Developed in England pre 1900
 Laissez faire economic environment
 Underlying common law principles
 Freedom of Contract
 Equality of bargaining power
 Courts reluctant to interfere unless
 Duress
 Illegal
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Recent Developments
 Equal bargaining power is a myth
 Courts developed equitable principles
 Unconscionable conduct
 Unjust enrichment
 Economic Duress
 Promissory estoppel
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Recent Developments (Cont.)
 Consumer protection legislation
 Trade Practices Act 1975
 Fair Trading Acts
 Insurance Contracts Act 1987
 Credit Codes
 Licensing Acts (e.g. Builders Licensing Act)
 Amendments to Sale of Goods Act
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Contract
 An agreement between two or more persons
that will be enforced by law
 May be
 In writing
 Oral
 Partly in writing and partly oral
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Writing
 Contracts need not be in writing
 Exceptions
 Sale of Land
 Guarantees
 Credit contracts
 Other statutory requirements
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Analysing a Contract
Is there a contract?
What are the terms?
Is it valid & enforceable?
Has it been discharged?
Has there been a breach?
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Six Elements
1. Contractual Capacity
2. Offer
3. Acceptance
4. Intention to create a contract
5. Consideration
6. Certainty
The elements are not always clear
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Intention to Contract
 Parties must intend their agreement to be legally
binding i.e. enforceable by a court
 An intention to be morally binding is not enough
 Objective test
 Distinction between
 Social/domestic agreements
 Commercial agreements
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Intention
 Subjective intention
The person’s actual state of mind
 Objective intention
Concludes, on the basis of what a person said
and did, what a reasonable person in the same
circumstances would have intended
 Contract law uses objective tests
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Domestic Agreements
 Court presumes that parties did not intend to
contract
 Presumption may be rebutted
 Todd v Nicholls (S&O p94)
 Roufos v Brewster (S&O p94)
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Domestic Agreements (cont.)
 Court will look at
 Terms of agreement
 Circumstances surrounding the agreement
 Effect of the agreement on the parties
 Parties conduct subsequent to agreement
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Commercial Agreements
 Courts presume that the parties intended to
contract
 Clear words are needed to rebut the
presumption
 Onus is on party seeking to disprove the
contract
 Rose & Frank v J R Crompton (S&O p95)
 Edwards v Skyways (S&O p95)
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Commercial Agreements (Cont.)
 Contrast with Clauses excluding courts
jurisdiction which are are invalid
 Letters of Comfort
 Kleinworth Benson v Malaysia Mining (S&O
p96)
 Banque Brussels Lambert v Australian
National Industries (S&O p97)
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Commercial Agreements (Cont.)
 Heads of Agreement/Letters of Intent
 Air Great Lakes v K S Easter (S&O p98)
 Coal Cliff Collieries v Sijehama (S&O p98)
 “Without prejudice” documents
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Offer
 Specific legal meaning
 An offer exists only where a reasonable person
would conclude on the facts that the person was
willing to be bound in a court of law
 Distinguish
 Indication of future conduct
 Invitation to treat
 Negotiations
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Indication of Future Conduct
 A mere statement of a present intention to do
something in the future is not an offer
 Harvey v Facey (S&O p 70)
 Australian Woollen Mills v Commonwealth
(S&O p71)
 Harris v Nickerson (S&O p71)
 Kelly v Caledonian Coal Co (S&O p71)
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Invitation to Treat
 An invitation to
 Negotiate
 Make an offer
is not an offer but an “Invitation to Treat”
 The distinction lies in the objective intention of
the person making the offer or invitation to treat.
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Invitation to Treat
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Retail Displays
Catalogues
Advertisements
Auctions
Tenders
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Retail Displays
 Fisher v Bell (S&O p72)
 Pharmaceutical Society v Boots (S&O p73)
 In most circumstances the retailer does not
make an offer by displaying goods for sale, even
where the goods are marked with a price
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Catalogues
 Grainger v Gough (S&O p73)
 If the catalogue publisher was making an offer
then it would be bound by every acceptance
even if their stock was exhausted.
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Advertisements
 Depends on circumstances
 Carlill v Carbolic Smoke Ball Co (S&O p74)
 But note legislative restrictions e.g. Trade
Practices Act
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Auctions
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Bidder makes the offer
Auctioneer accepts
S64 Sale of Goods Act (Vic)
Auctioneer announces terms at start
Anyone who bids then accepts the auctioneers
offer as to terms
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Tenders
 Person submitting the tender makes the offer
 Body calling for tenders accepts any tender
 Not bound to accept lowest
 BUT, the request for tenders may be an offer to
deal with tenders in a certain manner
 Hughes Aircraft v Aeroservices Australia (S&O
p76)
 Harvela Investments v Royal Trust Co of
Canada (S&O p76)
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Negotiations
 An offer will not arise merely because parties
have reached agreement on one aspect of the
deal
 Implied (or express) understanding that parties
not bound until formal contract executed
 Heads of Agreement
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Fate of An Offer
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Withdrawn by offeror
Accepted by offeree
Rejected by offeree
Lapse due to passing of time
Lapse due to death of offeror or offeree
Lapse due to failure of condition precedent
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Withdrawing an Offer
 Cannot be withdrawn after accepted
 A contract is made when the offer is accepted
 The withdrawal of the offer must be
communicated to the offeree
 Special cases:
 Unilateral offers
 Options cannot be withdrawn
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Withdrawing an Offer Before Acceptance
 Generally, an offeror may withdraw an offer at
any time before acceptance
 Routledge v Grant (S&OR p78)
 But, options cannot be withdrawn
 an option is a separate enforcable obligation
and cannot be withdrawn
 Exists where the offeree has given
consideration to keep an offer open
 Goldborough Mort v Quinn (S&OR p 80)
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Withdrawal Must be Communicated
 Offeror must let the offeree know that the offer is
withdrawn
 Byrne & Co v Tienhoven & Co S&OR p79)
 Offeror does not have to communicate
withdrawal personally
 Would a reasonable person in the position of the
offeree conclude that the offer had been
withdrawn?
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Withdrawing a Unilateral Offer
 Involves a unilateral promise e.g. Carllil v
Carbolic Smoke Ball Co (S&O p74)
 If offeree has acted on the promise then offeror
cannot withdraw until offeree has had a
reasonable opportunity to complete
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Rejecting an Offer
 Once rejected, an offer cannot be accepted
 May be rejected expressly or by implication
 Implied
 Offeree’s actions are inconsistent with an
intention to accept
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Rejecting An Offer (Cont.)
 A counter offer is a rejection
 Hyde v Wrench (S&O p81)
 Any material alteration is a counter offer
 Restating the offer when accepting is not a
counter offer
 Turner Kempson v Camm (S&O p81)
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Rejecting An Offer (Cont.)
 A counter offer is a rejection (cont.)
 Asking for clarification is not a counter offer
 Reasonable person test
 examine all circumstances
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Lapse of Offer
 Due to death of either party unless
 An option; and
 Does not involve personal skill or service by
the deceased
 Due to failure of condition precedent
 Due to time
 Express time limit
 Otherwise, offer remains open for a
reasonable time
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Lapse of Offer (Cont.)
 Due to time (Cont.)
 What is reasonable time depends on:
 Method by which offer made
 Nature of the transaction
 Terms of Proposed Contract
 Actions of parties between offer &
purported acceptance
 Intimations as to time by offeror