Contract

Posted 28 November, 2016

ADMISSIBILITY ISSUES

Whether ‘post-agreement’ admissions are admissible as to contractual intent: Factory 5 Pty Ltd v State of Victoria [2010] FCA 1229

Admissibility of parol evidence: FWS Joint Sports Claimants v The Copyright Shop 22 IPR 429; Whittet v State Bank [1991] 24 NSWLR 146

AFFIRMATION

Affirmation by estoppel – whether co aware of facts giving rise to a right to rescind – affirmation by conduct – parties to contract with common directors: Beach Petroleum v Johnson 115 ALR 411

AGREEMENTS and see “Formation” and “Implied Contract” below

Oral contract of employment and subsequent written contract – whether second contract terminated and replaced first contract: Concut Pty Ltd v Worrell 176 ALR 693

Agreements — Consensus as to essential terms — Failure to execute documentation: Branir Pty Ltd v Owston Nominees (No 2) Pty Ltd [2001] FCA 1833

Agreements — Application for declaration that letter imposed no contractual obligation – Terms and conditions — Uncertainty: Capitol Theatre Management Pty Ltd v Sydney City Council [2005] NSWSC 5

Agreements — Concluded agreements — Later formal contracts — Application for recovery of shares — Prior decision declaring existence of constructive trust in favour of defendant over all shares in computer program: Youssef v Victoria University of Technology [2005] VSC 223

Agreements — Oral agreements — Evidence of contract — Application by four plaintiffs for recovery of moneys from defendants — Plaintiffs claimed moneys unlawfully misappropriated: Chan v Chen [2005] VSC 432

Appeal against Supreme Court declaration that no contract concluded between parties – quantum meruit — set-off: Monarch Building Systems Pty Ltd v Quinn Villages Pty Ltd [2006] QCA 210

ANTICIPATORY BREACH OF CONTRACT

The leading case on anticipatory breach is Foran v v Wight (1989) 168 CLR 385

Whether insolvency constitutes an inability to perform: Winterton Contstructions v Hambros 111 ALR 649

Whether failure to perform further contractual obligations constitutes acceptance of repudiation: Vitol SA v Norelf [1994] 4 AER 109 and on appeal to House of Lords [1996] 3 AER 193

Discharge, breach and defences to action for breach – on 18 December 2007 the defendant contracted to buy the plaintiff’s house and land for $3 million with settlement on 31 December 2008 – defendant advised the plaintiff that it would not settle on that date requested a deferment of settlement of one year. – defendant asserted that the circumstances leading up to the execution of the contract rendered it void or voidable and purported to rescind on that basis – plaintiff served notices to complete and then a notice to terminate the contract – plaintiff sues for breach of contract – whether the defendant’s initial refusal to settle on the specified date amounts to anticipatory breach and repudiation – whether actual failure to settle amounted to fundamental breach – whether notices to complete and terminate the contract were valid – whether defendant’s letter of 8 January 2009 constituted repudiation – whether letter of 19 December 2008 constituted an anticipatory breach of an important term of the contract and repudiation of the contract by the defendant: Ryan v Urban Construct (SA) Pty Ltd [2012] SASC 128

BEST ENDEAVOURS

Sale of land — Contract subject to finance clause — Appeal against finding of failure to use best endeavours to obtain finance — Failure to discharge onus: Fay v Sheridan [1999] WASC 61

Sale of land — Implied terms — Sale off the plan — Completion conditional upon registration of plan by specific date — Vendor to use best endeavours to obtain registration: Etna v Arif [1999] VSCA 99

Sale of Land – Respondent did not breach contract because best endeavours used to obtain subdivision approval: O’Rourke v P and B Corporation Pty Ltd [2008] WASC 36 at [144] to [157]

CERTAINTY

See under “Offer and Acceptance” and “Implied Contract” below

CONSTRUCTION and INTERPRETATION OF CONTRACT

For discussion of principles see: Gardiner v Agricultural and Rural Finance Pty Ltd [2007] NSWCA 235 at [11] to [13]; Sai Teys McMahon Real Estate Pty Ltd v Queen Street Apartments Pty Ltd and Anor [2007] QSC 264 at [56]; Pateman and Anor v Daw Koh and Anor [2007] WASCA 85 (Buss J) at [33] to [37]; Middleton Nominees Pty Ltd v Westpac Banking Corporation [2008] FCA 371 at [51] – [52]; PRP Diagnostic Imaging Pty Limited (in its capacity as trustee for the Pittwater Radiology Trust) & Ors v Pittwater Radiology Pty Limited [2008] NSWSC 701 at [16] – [19] and Wachmer v Jaksic [2007] WASC 313 (Newnes J) at [167] – [189]; Masterton Homes Pty Ltd v Palm Assets Pty Ltd |(2009) 261 ALR 382; [2009] NSWCA 234

Following from Bowes v Chaleyer (1923) 32 CLR 159 at 172

It is therefore impossible, when appealed to for its judicial opinion, that the Court in authoritatively declaring the rights of the parties should accept an erroneous construction of the very nature and effect of the contract, even though suggested by both parties. Parties may so conduct their case as to conclude themselves as to the existence or non-existence of facts, where the truth does not appear; but they cannot relieve the Court from its duty of legal interpretation of documents before it, or of giving the true legal effect to facts as ascertained. The common law is as binding on the Court as any statute.

Following from Mineralogy Pty Ltd and Ors v the State of Western Australia and Anor [2005] WASCA 69 at [13]

[13] There is no quarrel with the trial Judge’s statement of the relevant legal principles as follows. The Agreement is not to be interpreted like a statute. So, for example, the Interpretation Act 1984 (WA) does not apply: see Hancock Prospecting Pty Ltd v BHP Minerals Pty Ltd [2003] WASCA 259 at [65] to [67]. As a result the long title to the ratifying Act cannot be relied on to assist in construing the Agreement.

[14] The usual principles which govern the proper construction of a written contract apply. The primary duty of the Court in construing a written contract is to endeavour to discover the intention of the parties from the words of the instrument in which the contract is embodied. The whole agreement has to be considered, since the meaning of any one part of it may be revealed by other parts. If the words used are unambiguous, the Court must give effect to them. The Court has no power to remake or amend a contract for the purpose of avoiding a result which is considered to be inconvenient or unjust. However, if the language is open to two constructions, that will be preferred which will avoid consequences which appear to be capricious, unreasonable, inconvenient or unjust: see Australian Broadcasting Commission v Australasian Performing Right Assn Ltd (1973) 129 CLR 99 at 109 per Gibbs J.

[15] A contract should be construed practically so as to give effect to its prescribed commercial purpose, because the law seeks to uphold commercial contractual obligations and the expectations that derive from them: Pan Foods Co Importers & Distributors Pty Ltd v Australia and New Zealand Banking Group Ltd (2000) 170 ALR 579 [24] per Kirby J. The Court should not adopt a narrow or pedantic approach to construction, particularly in the case of commercial arrangements: Upper Hunter County District Council v Australian Chilling & Freezing Co Ltd (1968) 118 CLR 429 at 437 per Barwick CJ.

Terms ambiguous – admissibility of extrinsic evidence – written signed agreement: NZI Captial Corp v Child 23 NSWLR 481

Whether a term which is not fundamental can be elevated to the level of a condition by appropariate drafting: Lombard Plc v Butterworth [1987] 1 QB 52

Whether signature on behalf of company binds signatories in personal capacities as well: Deeks v Little Moreton Trading Pty Ltd (1995) 14 WAR 58

Agreement allegedly made between plaintiff and deceased — Agreement substantially oral — Plaintiff adduced evidence of letter allegedly written by deceased — Whether letter a forgery: Eggins v Robinson [2000] NSWCA 61

Interpretation — Commercial contracts — Conditions — Construction of commercial contracts — Admissibility of pre-contractual material to aid construction of contract: LMI Australasia Pty Ltd v Baulderstone Hornibrook Pty Ltd [2003] NSWCA 74

Principles to be applied in construing the intentions of the parties to the contract: O’Loughlin v Mount (1998) 71 SASR 206

High Court authority on whether ambiguity is a precondition to using surrounding circumstances: Masterton Homes Pty Ltd v Palm Assets Pty Ltd (2009) 261 ALR 382; [2009] NSWCA 234

Relevant principles of contractual construction: Santos Offshore Pty Ltd v apache Oil Australia Pty Ltd [2015] 242 and Mainteck Services Pty Ltd v Stein Heurtey SA [2014] NSWCA 184

The meaning of the terms of a commercial contract is to be determined by what a reasonable business person would have understood those terms to mean – reasonable endeavours obligation: Electricity Generation Corporation t/as Verve Energy v Woodside Energy Ltd (2014) 306 ALR 25 at [35]ff and see also Kenneth Martin J’s judgment in Jamac Construction Group Pty Ltd v De Mol Investments Pty Ltd [2014] WASC 273 at [22]

CONTRIBUTORY NEGLIGENCE – WHETHER DEFENCE IN ACTIONS UNDER CONTRACT

Whether arguable case that plea of contributory negligence is defence to action based on contract: Duke Group v Arthur Young No 2 (1991) 4 ACSR 355; Challenge Bank v VL Cooper [1996] 1 VR 220

Whether contributory negligence available to reduce damages for breach of contract: Astley v Austrust Limited (1999) 161 ALR 155 at [28] to [32]

CO-OPERATION – IMPLIED DUTY ON PARTIES

See Secured Income Real Estate (Australia) Ltd v St Martins Investments Pty Ltd (1979) 144 CLR 596; Australis Media Holdings Pty Ltd v Telstra Corporation Ltd (1998) 43 NSWLR 104; Alcatel Australia Ltd v Scarcella (1998) 44 NSWLR 349 per Sheller JA (with whom Powell and Beazley JJA agreed) at 368C; Australian Hotels Association (Nsw) v Tab Limited [2006] NSWSC 293 at [65]

DISCHARGE

Discharge by agreement – contract determinable at instance of one party – whether party bound to act reasonably or honestly: Snowlife Pty Ltd v. Robina Land Corporation Ltd (No 2) [1993] 1 Qd.R. 584

Discharge – effect of acceptance of repudiation of contract partly performed at time of discharge – effect upon rights unconditionally acquired: Elkhoury v. Farrow Mortgage Services Pty Ltd (In Liq) (1993) 114 ALR 541

DISCLAIMER OF LIABILITY

Breach of contract — disclaimer of liability — appellant owned horse riding business advertising provision of special quiet horses for learners — respondent inexperienced rider requested placid horse which was easy to control: Mouritz v Hegedus — Supreme Court, WA, Full Court — Kennedy, Ipp and Owen JJ — 19 April 1999 BC9901806

See cases referred to by Heenan J in NEA Pty Ltd v Magenta Mining Pty Ltd [2005] WASC 106 at [244]

DURESS

Economic duress – discussion of principles: News Ltd v ARL (1996) 135 ALR 33

Release entered into between bank and customer unenforceable because bank had applied illegitimate pressure by representing that bank entitled to appoint managers and receivers: Westpac v Cockerill (1998) 152 ALR 267

DUTY OF CARE

The duty of care owed by one contracting party to another is seen as a duty not imposed by tort but by the implication of a term: Astley v Austrust Limited (1999) 161 ALR 155 at [47]

ELECTION

Doctrine of election dealt with by the High Court in Craine v Colonial Mutual (1920) 28 CLR 305 and Sargent v ASL Developments (1974) 131 CLR 634

Actions taken after accrual of right of rescission: Immer v Uniting Church (1993) 112 ALR 609; Gallagher v Pioneer Concrete (1993) 113 ALR 159.

Whether suing on a guarantee inconsistent with unstamped deed amounts to election to abandon unstamped deed – whether reliance can later be placed on unstamped deed: Lill v Merchant Capital (1996) 15 WAR 536

Contract for sale of land contained two special conditions with two independent rights to rescind, one if unsuccessful development approval, one if finance not obtained – election requires choice between two mutually exclusive rights — purchaser did not elect as there were not mutually inconsistent rights — conduct was consistent with wishing to complete contract but keeping in reserve right to rescind: Koutsopoulos v Pintusen (No 2) [2011] NSWCA 122

ENTIRE CONTRACT

Effect of “entire contract” clauses: Johnson Mathey v AC Rochester [1990] 23 NSWLR 23

Payment for 14 day holiday cruise – ship sinking after 10 days – whether entire contract – whether conditional upon complete performance: Baltic Shipping v Dillon (1993) 111 ALR 289

EXEMPTION AND EXCLUSION CLAUSES

Such clauses should be taken to mean what they say: Life Savers (Aust) Ltd v Frigmobile Pty Ltd (1983) 1 NSWLR 431 at 439

Exclusion of liability clauses – interpretation: Botany Fork & Crane Hire Pty Ltd v. New Zealand Insurance Co Ltd (1993) 116 ALR 473

Main object of contract – clause read down so as not to defeat main purpose of contract: Kamil Export v NPL [1996] 1 VR 538

Exclusion clause — appeal against upholding of clause — claim by exhibitor against organiser of trade show — jewellery stolen during show: GL Nederland (Asia) Pty Ltd v Expertise Events Pty Ltd [1999] NSWCA 62

See generally on this topic Heenan J’s decision in Nea Pty Ltd v Magenta Mining Pty Ltd [2005] WASC 106 at [235] to [259]

FORCE MAJEURE CLAUSES

See Gardiner v Agricultural and Rural Finance Pty Ltd [2007] NSWCA 235 at [218] ff and AGL Sales (Qld) P/L v Dawson Sales P/L & Ors [2009] QCA 262

FORMATION – see also “Implied Contract” and “Intention to create legal relations” below

In Toll (FGCT) Pty Ltd v Alphapharm Pty Ltd (2004) 219 CLR 165 the High Court said at [40]:

This Court, in Pacific Carriers Ltd v BNP Paribas (2004) 218 CLR 451, has recently reaffirmed the principle of objectivity by which the rights and liabilities of the parties to a contract are determined. It is not the subjective beliefs or understandings of the parties about their rights and liabilities that govern their contractual relations. What matters is what each party by words and conduct would have led a reasonable person in the position of the other party to believe. References to the common intention of the parties to a contract are to be understood as referring to what a reasonable person would understand by the language in which the parties have expressed their agreement. The meaning of the terms of a contractual document is to be determined by what a reasonable person would have understood them to mean. That, normally, requires consideration not only of the text, but also of the surrounding circumstances known to the parties, and the purpose and object of the transaction.

Following from Pascoe and Anor v Duarte [2006] NSWSC 1233 at [133]

In Podjie Agencies Pty Ltd v Vinidex Tubemakers Pty Ltd [2000] NSWCA 105, the New South Wales Court of Appeal determined the existence of the implied contract of indemnity based on the tacit understanding or agreement of the parties in that case. Mason, P cited dicta of McHugh, JA (as he then was) in Integrated Computer Services Pty Ltd v Digital Equipment Corporation (Australia) Pty Ltd (1988) 5 BPR 11,110 at 117–118. There, McHugh, JA stated:

It is often difficult to fit a commercial arrangement into the common lawyers’ analysis of a contractual arrangement. Commercial discussions are often too unrefined to fit easily into the slots of ‘offer’, ‘acceptance’, ‘consideration’ and ‘intention to create a legal relationship’ which are the benchmarks of the contract of classical theory. In classical theory, the typical contract is a bilateral one and consists of an exchange of promises by means of an offer and its acceptance together with an intention to create a binding relationship … A bilateral contract of this type exists independently of and indeed precedes what the parties do. Consequently, it is an error ‘to suppose that merely because something has been done then there is therefore some contract in existence which has thereby been executed’: Howard ‘Contract, Reliance and Business Transactions [1987] Journal of Business Law at 127. Nevertheless, the contract may be inferred from the acts and conduct of parties as well as or in the absence of their words: Empirnall Holdings Pty Limited v Machon Paull Partners Pty Limited (Court of Appeal, unreported 11 November 1988). The question in this class of case is whether the conduct of the parties viewed in light of the surrounding circumstances show a tacit understanding or agreement. The conduct of the parties, however, must be capable of proving all the essential elements of an express contract … Care must be taken not to infer anterior promises from conduct which represents no more than an adjustment of their relationship in the light of changing circumstances.

And see County Securities Pty Limited v Challenger Group Holdings Pty Limited and Anor [2008] NSWCA 193 at [2] referring to Branir Pty Ltd v Owston Nominees (No 2) Pty Ltd [2001] FCA 1833. The following passage from Branir at [369] is instructive in this area:

The contract arose from the prior conduct and communications of the parties, in particular around mid December. Mr Campbell QC called this a springing contract’ and something not known to the law. On the contrary, a number of authorities discuss the need not to constrict one’s thinking in the formation of contract to mechanical notions of offer and acceptance. Contracts often, and perhaps generally do, arise in that way. They can also arise when business people speak and act and order their affairs in a way without necessarily stopping for the formalities of dotting “i”s and crossing “t”s or where they think they have done so. Here, the “i”s were not dotted and the “t”s were not crossed because of Mr Graham’s conduct. Sometimes this failure occurs because, having discussed the commercial essentials and having put in place necessary structural matters, the parties go about their commercial business on the clear basis of some manifested mutual assent, without ensuring the exhaustive completeness of documentation. In such circumstances, even in the absence of clear offer and acceptance, and even without being able (as one can here) to identify precisely when a contract arose, if it can be stated with confidence that by a certain point the parties mutually assented to a sufficiently clear regime which must, in the circumstances, have been intended to be binding, the court will recognise the existence of a contract. Sometimes this is said to be a process of inference or implication. For my part, I would see it as the inferring of a real intention expressed through, or to be found in, a body of conduct, including, sometimes, communications, even if it be the case that the parties did not consciously advert to, or discuss, some aspect of the relationship and say: ‘and we hereby agree to be bound’ in this or that respect. The essential question in such cases is whether the parties’ conduct, including what was said and not said and including the evident commercial aims and expectations of the parties, reveals an understanding or agreement or, as sometimes expressed, a manifestation of mutual assent, which bespeaks an intention to be legally bound to the essential elements of a contract.

Offer and acceptance — agreement in anticipation of execution of formal document — whether contract concluded — whether solicitors could conclude agreement — intention of parties: Star Marketing (Aust) Pty Ltd v Hawkes [2000] SASC 95

Offer and acceptance — existence of binding contract — conditions precedent: Whittle v Parnell Mogas Pty Ltd (2006) 94 SASR 421

Lease — offer and acceptance — ambiguity in terms of offer — use of surrounding circumstances — use of pre-contractual conversations: Boreland v Docker and Ors [2007] NSWCA 94

Whether parties had reached concluded agreement — contractual uncertainty and incompleteness — whether agreement reached on all essential terms — whether agreement reached on matters ordinarily agreed upon in transactions of the class in question: Quinlan v A and J Brady Pty Ltd [2007] FCA 1409

Formation of contractual relations — matters not giving rise to binding contract — vagueness and uncertainty — agreement subject to further agreement or arrangement: Profile Events Pty Ltd v West Beach Trust [2011] SASCFC 1

Formation – intention to create legal relations for sale of business – Masters v Cameron (1954) 91 CLR 353 – document stated ‘This Offer is intended to be legally binding upon the Vendor and the Purchaser’ and was ‘Executed as an Agreement’ – where plaintiff purchaser sought specific performance of the contract – where defendant alleged agreement to negotiate, rather than sell – contemplation of future ‘formal’ contract of sale – failure of parties to agree to ‘formal’ terms – the relevance of the post agreement communications – Vendor later signs contract with third party: Verrocchi v Messinis [2016] VSC 490

Important case highlighting the importance of concluding agreement in respect of all necessary terms of a contract and discussion of general contractual principles: Mushroom Composters Pty Ltd v IS and DE Robertson Pty Ltd [2015] NSWCA 1 especially at [59] ff

Whether oral agreement binding immediately where to be replaced with a formal written agreement which may have contained additional or varied terms – effect of Fox v Percy and whether court of appeal can determine where the weight of evidence lies: Absolute Analogue Inc v Sundance Resources Ltd [2015] WASCA 168

See also generally on this topic Le Miere J’s judgment in Claremont 24-7 Pty Ltd v Invox Pty Ltd [No 2] [2015] WASC 220

FUNDAMENTAL BREACH

Leading cases:

Progressive Mailing House v Tabali (1985) 157 CLR 17 at 31A – 33D, 44-46 and 55

Shevill v Builders Licensing Board (1982) 49 CLR 620 at 625E – 626, 633, 636

Esanda Finance Corporation Ltd v Plessnig (1989) 166 CLR 131 at 143D and 144

GENERAL

For summary of general contractual principles see: SVI Systems Pty Ltd v Best & Less Pty Ltd and Ors – (2001) 187 ALR 302

Where parties entered into a Share Sale Agreement to transfer the ownership of a company – where under the Share Sale Agreement the sellers warranted certain things to the buyers – where the company itself was not a party to the Agreement – where some warranties provided that the sellers would grant indemnities in favour of the buyers over claims against the company arising from circumstances that existed prior to settlement – whether the warranties appear to be intended to create duties enforceable by the company – whether the company is entitled to bring a claim for breach of those promises: Davis v Perry O’Brien Engineering Pty Ltd [2016] QSC 202

GOOD FAITH

Following from Uranium Equities Ltd v Fewster [2008] WASCA 33 at [250]

Agreements to negotiate in good faith have been the subject of considerable discussion in the United Kingdom, Australia and New Zealand: see, in the United Kingdom, Walford v Miles [1992] 2 AC 128; in New Zealand, Wellington City Council v Body Corporate 51702 [2002] 3 NZLR 486 and, in Australia, Coal Cliff Collieries Pty Ltd v Sijehama Pty Ltd (1991) 24 NSWLR 1; Australis Media Holdings Pty Ltd v Telstra Corporation Ltd (1998) 43 NSWLR 104; Con Kallergis Pty Ltd v Calshonie Pty Ltd (1998) 14 BCL 201 and Jobern Pty Ltd v BreakFree Resorts (Victoria) Pty Ltd [2007] FCA 1066. Also relevant, in Australia, are Hooper Bailie Associated Ltd v Natcon Group Pty Ltd (1992) 28 NSWLR 194; Elizabeth Bay Developments Pty Ltd v Boral Building Services Pty Ltd (1995) 36 NSWLR 709; Aiton Australia Pty Ltd v Transfield Pty Ltd [1999] NSWSC 996; (1999) 153 FLR 236 and Laing O’Rourke v Transport Infrastructure [2007] NSWSC 723, all of which deal with agreements to negotiate in good faith with a view to resolving a dispute.

Content of duty: Esso Australia Resources Pty Ltd v Southern Pacific Petroleum NL [2005] VSCA 228

Implied term — Good faith and fair dealing: Kellogg Brown & Root Pty Ltd v Australian Aerospace Ltd [2007] VSC 200

Express term required parties’ negotiations to be undertaken in good faith — whether term certain — duty of good faith: Jobern Pty Ltd v BreakFree Resorts (Victoria) Pty Ltd and Ors [2007] FCA 1066

Implied duty of good faith: Insight Oceania Pty Ltd v Philips Electronics Australia Ltd [2008] NSWSC 710

Memorandum of understanding — express term obliging parties to deal with each other in good faith: Strzelecki Holdings Pty Ltd v Cable Sands Pty Ltd – [2010] WASCA 222

The test for implication of a term – the meaning of an implied term of “good faith” – the context affects the content of any implication of a duty of good faith: Mineralogy Pty Ltd v Sino Iron Pty Ltd (No 6) [2015] FCA 825 – Edelman J

Alleged oral contract to co-operate in good faith with land developer – fails on facts: Johnson Property Group Pty Ltd v Thornton [2015] NSWSC 1389

ILLEGALITY

See article by F Rose “Reconsidering Illegality” (1996) 10 JCL 271

Whether agreement illegal – application of general principles:

Yango Pastoral Co Pty Ltd v First Chicago Australia Ltd (1978) 139 CLR 410

J C Scott Constructions v Mermaid Waters Tavern [1984] 2 Qd R 413 at 124

Hurst v Vestcorp Ltd [1988] 12 NSWLR 394 at 420

Frank Davies v Container Haulage (1989) 98 FLR 289 at 307

Compass v Cervara Fifty Seven [1992] 1 VR 48 at 51

Farrow v Edgar (1993) 114 ALR 1 at 8

Barac v Farnell (1994) 125 ALR 241 at 58

Bendigo Sandhurst v Tefeti (1995) 17 ACSR 463 at 467

Colbron v St Bees Island [1995] 56 FCR 303 at 317

Gafney v Ryan [1995] 1 Qd R 19 at 22

Henderson v Amadio (1995) 20 ACSR 367

Permanent Building Society v Wheeler (1993) 10 WAR 109

Whether agreement void or merely unenforceable – effect of illegality – ex turpi causa non oritur actio: Wilson Internatinal Pty Ltd v International House [1983] WAR 243

Whether court will enforce contract where party does not rely on actual illegality – whether court will assist party to recover where there is fraud or illegality: Weston v Beaufils (1994) 50 FCR 476

Consequences of non registered company entering into contract: PTLtd v Maradona Pty Ltd [1992] 25 NSWLR 643

Illegality – false declaration under Defence Services Homes Act – whether illegal purpose precludes relief: Nelson v Nelson (1995) 184 CLR 538

Drilling without a permit: Fitzgerald v HJ Leonhardt Pty Ltd (1997) 189 CLR 215

Void contracts — Illegality — Instalment contracts — Application for declaratory relief — Declaration sought that contract of sale of business rendered void: Ethnic Earth Pty Ltd v Quoin Technology Pty Ltd (in liq) [2004] SASC 257

Plea of illegality based on argument of intention to evade stamp duty (rejected): Iannotti v Corsaro (1984) 36 SASR 127

Illegal contracts — as contrary to statute — contravention of Code enforced by statute — requirement to provide information prior to entry into contract — information not provided operation of common law rule on unenforceability of illegal contracts — whether statute negates operation of common law rule — whether statute prohibits the making of the contract — Franchising Code of Conduct, cl 11 — Trade Practices Act 1974 (Cth), s 51AD: Ketchell v Master of Education Services Pty Ltd [2007] NSWCA 161

Contracts unenforceable for statutory illegality – relevant general principles: Barker v Midstyle Nominees Pty Ltd [2014] WASCA 75

IMPLIED CONTRACT

See the following from Laidlaw v Hillier Hewitt Elsley Pty Ltd [2009] NSWCA 44 at [58]

Dr Bell opened his submissions to this Court by speaking to a written summary of his key propositions which, slightly edited, was as follows:

1. A contract may come into existence through conduct: Empirnall Holdings Pty Ltd v Machon Paull Partners Pty Ltd (1988) 14 NSWLR 523 at 535; Brambles Holdings Ltd v Bathurst City Council [2001] NSWCA 61 ; (2001) 53 NSWLR 153, 177–9.

2. The conduct is to be viewed in the light of the surrounding circumstances and in the commercial context in which the dispute arose: ABC v XIVth Commonwealth Games (1988) 18 NSWLR 540,584.

3. The conduct must be of such a character as necessarily to lead to an inference that an agreement has been made and its terms: Empirnall (1988) 14 NSWLR at 535; Brambles (2001) 53 NSWLR at 195.

4. It is an error to suppose that merely because something has been done there is a contract in existence which has thereby been partly performed: Integrated Computer Services Pty Ltd v Digital Equipment Corp (Aust) Pty Ltd (1988) 5 BPR at 11,117.

5. Business people not uncommonly act on an anticipated contractual relationship prior to the contract being formed: Sagacious Procurement Pty Ltd v Symbion Health Ltd [2008] NSWCA 149 para [117].

6. Subsequent conduct is admissible to determine whether a contract has been entered into: Sagacious (above) paras [69], [99]–[106]

7. Subsequent correspondence showing that the parties continued in negotiation negatives a concluded contract: Barrier Wharfs Ltd v W Scott Fell & Co Ltd [1908] HCA 88 ; (1908) 5 CLR 647; Sagacious (above) para [104].

8. The retention of lawyers supports the view that the parties intended to contract through formal documentation: Carruthers v Whitaker [1975] 2 NZLR 667 CA, 671.

9. It is one thing for the parties to settle what are to be the terms of an agreement, if it should be made, and quite another to make that agreement: Barrier Wharfs Ltd v W Scott Fell & Co Ltd (1908) 5 CLR 647 at 650.

10. The use of the words “in principle” ordinarily requires a conclusion that there will be no binding contract until formal contracts are executed and exchanged: Baulkham Hills Private Hospital Pty Ltd v G R Securities Pty Ltd (1986) 40 NSWLR 631 at 636; Stephenson v Dwyer [2008] NSWCA 123 at [106], [126], but this will not be so 11in every case: Baulkham Hills (above) at 628.

A contract may be inferred from the acts and conduct of parties, as well as, or in the absence of , their words – where the conduct of the parties, viewed in the light of surrounding circumstances, shows a tacit understanding or agreement – the question in such a case is whether, viewed as a whole and objectively from the point of view of reasonable persons on both sides, the dealings show a concluded bargain: Melreef Pty Ltd v Glenn [2015] WASCA 111

IMPLIED TERMS

Following from Handley and Anor v Gunner [2008] NSWCA 113 at [118]-[119]:

[118] In Brambles Holdings Pty Ltd v Bathurst City Council [2001] NSWCA 61 ; (2001) 53 NSWLR 153 at [28] Heydon JA adopted a taxonomy of four different types of implied terms in contracts, that had originally been given by Hodgson J (Carlton & United Breweries Ltd v Tooth & Co Ltd (Supreme Court of New South Wales, Hodgson J, 11 June 1985, unreported)). That taxonomy is: (i) Implications contained in the express words of the contract: see Marcus Clarke (Vic) Ltd v Brown (1928) 40 CLR 540 at 553–4. (ii) Implications from the “nature of the contract itself” as expressed in the words of the contract: see Liverpool City Council v Irwin [1977] AC 239. (iii) Implications from usage (for example, mercantile contracts). (iv) Implications from considerations of business efficacy: see BP Refinery (Westernport) Pty Ltd v Hastings Shire Council (1977) 52 ALJR 20 at 26; Codelfa Construction Pty Ltd v State Rail Authority of NSW (1982) 149 CLR 337. It is only the fourth type of implied term which could be applicable here.

[119] As Mason J pointed out in Codelfa Construction Pty Ltd v State Rail Authority of NSW [1982] HCA 24 ; (1982) 149 CLR 337 at [3]; 345, and again at [25]; 353, deciding whether there is an implied term in a contract is an exercise of interpretation of that contract. It requires close attention to be paid to the detail of the particular contract that is in issue. Thus, generalisations in other cases about circumstances in which an implication of a requirement for some event to occur within a reasonable time being frequently made are of limited assistance.

Implication on an ad hoc basis, see: Dresna Pty Ltd v Linknarf Management Services Pty Ltd (In Liq) [2006] FCA 540 at [207] – [212]

Whether implied term to give business efficacy to contract – whether implied term of good faith in performance of contract: Service Station Association Ltd v Berg Bennett & Associates Pty Ltd (1993) 27 IPR 23

Terms of joint venture so vague as to be unenforceable – duty to co-operate not to be implied: Australis Media v Telstra (1998) 43 NSWLR 104

Implication of mutual obligation – mutual duty of good faith in performing obligations and exercising rights – may be implied: Alacatel Australia Ltd v Scarcella [1998] 44 NSWLR 349

Distinction between implication in fact and in law – whether terms necessary for reasonable or effective operation of contract in circumstance: South Sydney District Rugby League Football Club Ltd v News Ltd [2000] FCA 1541 at [391] – [394]

Appellant developed and upgraded computer program for third party – whether implied that respondent not obligated to provide source code: Centrestage Management Pty Ltd v Riedle [2008] FCA 938

Where contract provided that vendor loan funds to purchaser to facilitate the sale of the business – where contract provided loan amount to be repaid with interest 90 days after completion – where no provision in contract for interest payable in event of default – whether term can be implied that parties intended interest to continue to accrue at the pre 90 day rate: Upintheair Pty Ltd v Business Custodians Ltd [2016] NSWCA 287

INTENTION TO CREATE LEGAL RELATIONS – see also “Formation” and “Implied Contract” above

For general statements of principle, see Pura v Kornmehl [2004] NSWSC 260

Whether intention to enter into contractual relations is subjective or objective: White v Shortall [2006] NSWSC 1379 at [125]

Intention to make a contract — when void for uncertainty — construction principles — implication of terms — collateral contracts: Ku v Song [2007] FCA 1189

Following from Uranium Equities Ltd v Fewster [2008] WASCA 33 at [127]:

There is some overlap between the requirements of intention to create legal relations and certainty. If a contract is legally uncertain, this might indicate that the parties did not intend to create legal relations. A contract can be uncertain in various ways, one of these being incompleteness, in the sense that essential terms are lacking: Thorby v Goldberg (1964) 112 CLR 597, 603 (Kitto J); Godecke v Kirwan (1973) 129 CLR 629, 646 – 647 (Gibbs J). The overlap between intention and uncertainty is at its greatest in cases in which agreement on some matters is deliberately postponed. If what is postponed is essential to the agreement (itself a question that largely depends upon the intention of the parties), the agreement, to the extent that it has been reached, will be void. Also, the fact that essential terms have been left over for later agreement will militate against a finding that the parties intended to create contractual relations.

and at [257]

It is trite that, even when the requisite intention is present, a contract can fail for uncertainty. It is also trite that only the omission of an essential term will have the effect that a contract is so incomplete or uncertain as to render it invalid.

MASTERS v CAMERON categories

The Masters v Cameron (1954) 91 CLR 353 (at 360) categories are as follows:

Where parties who have been in negotiation reach agreement upon terms of a contractual nature and also agree that the matter of their negotiation shall be dealt with by a formal contract, the case may belong to any of three classes. It may be one in which the parties have reached finality in arranging all the terms of their bargain and intend to be immediately bound to the performance of those terms, but at the same time propose to have the terms restated in a form which will be fuller or more precise but not different in effect. Or, secondly, it may be a case in which the parties have completely agreed upon all the terms of their bargain and intend no departure from or addition to that which their agreed terms express or imply, but nevertheless have made performance of one or more of the terms conditional upon the execution of a formal document. Or, thirdly, the case may be one in which the intention of the parties is not to make a concluded bargain at all, unless and until they execute a formal contract. In each of the first two cases there is a binding contract: in the first case a contract binding the parties at once to perform the agreed terms whether the contemplated formal document comes into existence or not, and to join (if they have so agreed) in settling and executing the formal document; and in the second case a contract binding the parties to join in bringing the formal contract into existence and then to carry it into execution. Of these two cases the first is the more common.

On developments in Masters v Cameron see Perfection Dairies Pty Ltd v Australian Co-Operative Foods Ltd t/as Dairy Farmers [2007] NSWSC 176 as follows:

[121] In Baulkham Hills Private Hospital Pty Ltd v G R Securities Pty Ltd & Ors (1986) 40 NSWLR 622, McLelland J at 628, basing himself on what had been said in Sinclair, Scott & Co Ltd v Naughton (1929) 43 CLR 310 at 317, identified a fourth class of case:

One in which the parties were content to be bound immediately and exclusively by the terms which they had agreed upon whilst expecting to make a further contract in substitution for the first contract, containing, by consent, additional terms.

[122] His Honour’s decision was upheld on appeal: G R Securities Pty Ltd v Baulkham Hills Private Hospital Pty Ltd (1986) 40 NSWLR 631. See in particular McHugh JA (with whom Kirby P and Glass JA agreed), who said at 634 (omitting citations):

However, the decisive issue is always the intention of the parties which must be objectively ascertained from the terms of the document when read in the light of the surrounding circumstances: … If the terms of a document indicate that the parties intended to be bound immediately, effect must be given to that intention irrespective of the subject matter, magnitude or complexity of the transaction.

Even when a document recording the terms of the parties’ agreement specifically refers to the execution of a formal contract, the parties may be immediately bound. Upon the proper construction of the document, it may sufficiently appear that “the parties were content to be bound immediately and exclusively by the terms which they had agreed upon whilst expecting to make a further contract in substitution for the first contract, containing, by consent, additional terms” ….

[123] In the present case, Mr Rayment submitted that the accepted Perfection offer fell into the first of the Masters v Cameron categories, or alternatively into the fourth class identified by McLelland J. Mr Oslington submitted that it fell into the third of the Masters v Cameron categories.

[124] The question of intention must be answered having regard to all relevant circumstances. Of course, the language used by the parties is significant. But so is (for example) the subject matter of the bargain. Further, the subsequent conduct of the parties may assist in shedding light on what they contemplated at the time they made their bargain, as Gleeson CJ said in Australian Broadcasting Corporation v XIVth Commonwealth Games Limited (1988) 18 NSWLR 540 at 547–550. His Honour dealt with the question of intention, and with the role that subsequent correspondence might play in casting light on intention, as follows (omitting citations): (go to if necessary)

So-called “fourth class” of case in Masters v Cameron: Vantage Systems Pty Ltd v Priolo Corporation Pty Ltd [2015] WASCA 21

Intention to create legal relations for sale of business – Masters v Cameron (1954) 91 CLR 353 – document stated ‘This Offer is intended to be legally binding upon the Vendor and the Purchaser’ and was ‘Executed as an Agreement’ – where plaintiff purchaser sought specific performance of the contract – where defendant alleged agreement to negotiate, rather than sell – contemplation of future ‘formal’ contract of sale – failure of parties to agree to ‘formal’ terms – the relevance of the post agreement communications – Vendor later signs contract with third party: Verrocchi v Messinis [2016] VSC 490

MISTAKE

Court not satisfied it should make declarations on the basis of doctrines of common mistake, mutual mistake or unilateral mistake: Charitou v The Owners of Strata Plan 10394 [2015] NSWSC 1059

NON EST FACTUM

Latham CJ said in Wilton v Farnworth (1948) 76 CLR 646 at 649 as follows:

In the absence of fraud or some other of the special circumstances of the character mentioned, a man cannot escape the consequences of signing a document by saying, and proving, that he did not understand it. Unless he was prepared to take the chance of being bound by the terms of the document, whatever they might be, it was for him to protect himself by abstaining from signing the document until he understood it and was satisfied with it. Any weakening of these principles would make chaos of every-day business transactions.

A mistake as to the nature of a signed document or the extent of the obligations created by it can in appropriate circumstances render the document void both as between the parties and as against the world. A claim that a party’s signature does not evidence their consent is a plea of non est factum i.e. “it is not my deed”: Petelin v Cullen (1975) 132 CLR 355 at 360. The person asserting non est factum carries a heavy onus of proof when establishing the elements of the plea.

Contract

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