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Contract Law

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Belinda Chong

on 17 March 2014

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Transcript of Contract Law

What is Contract Law?
Elements of Contract
Contract Relating to Property
Performance & Termination
Property Law 1
Contract Law
Legally Binding Contract
Elements of Valid Contract
People entering the contract must intend the contract to be binding
An offer is made by one person and is freely accepted by another
Some price (money, right or benefit) is paid in return for a promise
People making the contract have legal capacity to form a contract
Pre-contractual misrepresentations may provide contractual remedies at common law or statutory remedies pursuant to the Competition and Consumer Act 2010
Section 18 provides: (1) A person must not, in trade or commerce, engage in conduct that is misleading or deceptive or is likely to mislead or deceive
Example: Buying "Off the Plan"
Mistake is a complex area of contract law. As a general rule, being mistaken about some aspect of a contract will not provide a party with a right to escape contractual obligations - even if that mistake is fundamental. There are four forms of mistake :
Common mistake
Mutual Mistake
Unilateral mistake
Non Est Factrum

Where duress is established the common law permits the victim to escape their contractual obligations by rendering the contract voidable.
To be established one of the contracting parties must exert 'illegitimate' pressure on the weaker party which induces the weaker party to enter into the contract.
Example: threatening, economic etc
Undue Influence
Undue influence, where established, will render a contract voidable. It occurs when there is an inequality of power between the contracting parties which results in the weaker party entering into a contract with the dominant party.
Illegality is a highly complex area of contract law. It deals with both criminal conduct, conduct prohibited by statute (even if not criminal) and conduct regarded as contrary to public policy. In some cases it will be simple to determine whether or not an illegal contract exists and will be rendered void.

Statutory illegality - this encompasses contracts directly prohibited by statute (eg, cartel contracts

Common law illegality and contracts which are contrary to public policy
Ways to Terminate
Prior Agreement
Parties are free to terminate their contract by agreement.
This might take the form of a termination provision in the contract itself or through a new and separate contract.

The non-breaching party may terminate a contract for breach if;

(a) a provision of the contract permits discharge for breach in the circumstances (eg, it might provide that in the event of failure to supply goods on a specific date the other party may terminate the contract)
(b) the other party repudiates the contract - that is, renounces their obligations under it (eg, they say that will not perform the contract); or

Impossibility of Performance

(c) the breach is sufficiently serious (minor or technical breaches will generally not allow the non-breaching party to terminate)

Types: Actual or Anticipatory
Remedies in Contract Law
The manner in which a right is enforced or satisfied by a court when some harm or injury, recognized by society as a wrongful act, is inflicted upon an individual.

Damages and liquidated claims are the common law remedies available following a breach of contract
Liquidated damages will be available where a clause in the contract between the parties provides that a particular sum of money will be payable upon breach
These are orders directing a party not to do something - eg, not to persist with a contractual breach
This is an order directing the breaching party to perform the contract in the way specified by the court. It will only be ordered if damages will not provide adequate compensation and will not be awarded in relation to contracts of personal service
Exchange Contract
Contract to Sale and Purchase (SPA)
Tenancy Agreement
Loan Application

Contract Relating to Property
Forms of Contract
agreements about buying, selling or mortgaging land and houses
consumer finance or credit agreements
agreements to buy a car from a licensed motor car trader
door-to-door sales agreements
agreements for things to be done more than one year from the date of the agreement being made.
Any agreement that is important to you should be put in writing.
Letter of Intent (LOI)
A letter of intent is a non-binding agreement stating two or more parties' desire to enter into a real estate transaction, such as a sale or lease
Basic information included:
-the parties involved
-fees and commissions
-important dates related to payment or delivery of the property
-purchase price
-Viewing options- inspection
Note: has a time frame

Contract involving property
-the contract for sale

-no two properties are the same, no two contracts will be the same either.

-some things a contract for sale do, includes properly identifying the property as well as the terms on which it’s being sold.

-It should also attach a number of documents, the most common of which are:

When buying
Standard terms in a contract

Sometimes unfair – Need solicitor

make sure that the contract for sale isn’t just legal, but that it also isn’t unfair to you

What is exchange?
A contract to sell a property becomes binding
the buyer also usually hands over a deposit (often 10%).
At an auction?

*Signing the contract isn’t always final*

A general tenancy is a binding contract that outlines the legal rights and responsibilities of a tenant and lessor/agent. Special terms can be added if the lessor/agent and tenant agree.

A tenancy agreement must include:
-the name and address of the tenant, and the lessor, agent, provider, owner or manager
-the dates
-details about payment
-details about what the tenant and the agent, lessor, provider, owner or manager can and cannot do, known as ‘standard terms’
-any special terms

The key difference between an LOI and a contract is that LOIs are usually much shorter, containing less precise legal language. LOIs also do not require an earnest money deposit

a zoning certificate

a drainage diagram showing any sewer lines

a copy of the property certificate

a copy of the plan for the land

copies of any documents showing easements, rights of way, restrictions, covenants,

Loan application
To buy a property most people will need to take out a mortgage.

A solicitor can help you make sense of what your obligations are under the mortgage, including whether you’ll be penalized for refinancing or paying out your loan early

What happens at settlement?
settlement day

Most commonly this will be six weeks after the date of exchange

Case Study
Bressan v Squires

Supreme Court of New South Wales [1974] 2 NSWLR 460

Squires gave Bressan an option to purchase land.  Clause 1 provided that it could be exercised ‘by notice in writing addressed to me at any time on or before 20 December, 1972.’ On 18 December Bressan posted a notice, addressed to Squires, exercising this option. It was received on 21 December. Was the option exercised?

Held (Bowen CJ)

The general rule is that ‘a contract is not concluded until acceptance of an offer is actually communicated …’ but that post presented an exception ‘based upon notions of expediency and convenience’.  The rule applies whenever the parties contemplated post as a mode – even if just a possible or permitted mode – of communication.  It is ‘not required that it should be within the contemplation of the parties that the action of posting should have the consequence of concluding the contract’ as this would considerably narrow the exception. In this case the parties contemplated the option could be exercised by post.  Consequently, prima facie, the exception applied.  However, in this case there was further language used in the option that suggested actual notice of acceptance was required before acceptance would occur; consequently P’s case failed

Mobil Oil Australia v Wellcome International
Mobil Oil v Lyndel Nominees

[1998] FCA 205; (1998) 81 FCR 475

Mobil represented to dealers that any dealer who performed at a set level for six years would be given a franchise for a further nine years at no cost. Mobil subsequently discontinued the scheme and a number of dealers alleged (amongst other things) breach of contract.

In a unilateral agreement the act of acceptance is also the consideration and act of performance. In this case Mobil’s revocation of its scheme made it impossible for the dealers to complete the act of acceptance. The trial judge held that once an offer was made, requiring performance as the act of acceptance, the offeror could not revoke the offer once the offeree has embarked upon acceptance. The Full Court disagreed. Although in some cases there may be an ‘implied ancillary unilateral contract’ in which the ‘offeror promises not to revoke once the offeree’ commences performance, that is not the same as saying that the original offer cannot be revoked - and there is no ‘universal proposition that an offeror is not at liberty to revoke the offer once the offeree ‘commences’ or ‘embarks upon’ performance of the sought act of acceptance …'

Trident General Insurance Co Ltd v McNiece Bros Pty Ltd
(1988) 165 CLR 107
Quick summary
Blue Circle Cement entered into a contract of insurance with Trident.  The insurance policy covered liability for accidents occurring during this construction and defined the ‘assured’ parties as including all Blue Circle’s contractors and sub-contractors (which included McNiece). McNiece subsequently became the principal contractor for work being carried out at the Blue Circle plant.  A worker was seriously injured and recovered a judgment against McNiece who sought indemnity under the policy from Trident.  Trident denied liability on the ground that McNiece was not a party to the insurance contract.

What Happened?
McNiece succeeded at first instance in the SC of NSW.  On appeal to the Court of Appeal the court found there was no privity of contract and McNiece had not provided consideration to Trident.  Nevertheless they found for McNiece on the ground that under insurance policies beneficiaries can sue on the policy despite no privity or consideration.  Trident appealed to the High Court.


At least in relation to insurance policies, and almost certainly in relation to contract of indemnity generally, where the evidence is that third parties were in the contemplation of the principal, then those third parties can enforce the contract. That was the case here - Trident was liable.


Contract law is the legal system that studies the rights and obligations of parties entering into contracts.

A contract is more or less an agreement between two or more parties that will be enforced by a court of law.

Contracts can be entirely oral, entirely in writing or partly oral and partly written.  

Used as a way for parties pursuing a common commercial goal to minimize risk

Simple Contracts
A simple contract is a contract which can be totally oral, totally written, or partly oral and partly written.

Simple Contract
The four elements of simple contract, which must be present at all times for the contract to be valid, are:
a) intention
b) offer
c) acceptance
d) Consideration

Three elements of a simple contract that could invalidate the agreement are:
a) the capacity
b) the certainty
c) the legality

A deed is an agreement or disposition signed under-seal.

Example of a deed.

Elements of a contract
Intoxicated, Unsound mind and bankrupts
If one of the parties is intoxicated or has a unsound mind, the contract can be abandoned if the opposing party is aware

Legislation restricts bankrupted parties to entering into a contract without them declaring bankruptcy

A contract exists where an offer had been accepted and good consideration has been provided.

Harvey and Facey (1893)
Consideration is a simple idea where both parties involved in the contract provide something of value but do not have to be of equal value.

Contractual remedies
Termination of contract
Specific performance
Recovery of the contract price
Agreed damages clause

Lewis Muston- N8617422
Michael Tutticci- N8615454
Belinda Chong- N9060197
Kelvin Kumar- N9120483
Full transcript