文本7052-非常重要week

1、BUSN7052 commercial lawWeek 5Contracts Part 2Chapter 4 cont (Capacity)Chapter 5Bonnie Allanlecture outline capacity and privity of contract(Chapter 4)Contracts: Interpretation Chapter 5 terms of a contract parol (oral) evidence rule express terms of a contract and circumstances where terms can be im

2、plied incorporation of terms to a contract interpretation of terms in a contractIf time, Misrepresentation (Chapter 7)Contractual capacityA contract might not be valid (and therefore not enforceable) if one or both of the parties lack legal capacity to enter into the contract. This section discusses

3、: Minors Corporation Persons of unsound mind/intoxicated persons BankruptsContractual capacity: minorsAge of majority is 18 (used to be 21)In general contracts with minors are unenforceable against the minor but may be ratified upon turning 18.The minor can enforce the contract against the other par

4、ty.If a minor pays cash for goods or services they are bound. Generally the common law will permit minors to enter contracts for things that are essential (necessary) or for his or her benefit.Minors contracts at common law: valid contracts (enforceable against the minor)(a) contracts for necessarie

5、s goods and services necessary to the condition in life of the minor and his/her actual needs bound to pay a reasonable price not necessarily the contract price. Ask: Are the goods or services classed as necessaries? Were the goods or services in fact necessary?If the answer is yes, then the minor i

6、s bound.Minors contracts at common law valid contracts (enforceable against the minor)(b) beneficial contracts of service contracts involving some element of education or instruction e.g. contracts of apprenticeship which on balance are for minors benefit.Ask: is the contract overall for the minors

7、benefit? (it wont be if it contains unreasonable terms)If the answer is yes, then the minor is bound.Minors contracts at common law: valid contracts (enforceable against the minor)McLaughlin v Darcy (1918) SR (NSW) 585 text p 108Darcy was 20 (a minor in 1916) and a professional boxer. He wanted to g

8、o to America where he would get more bouts and more instruction. He hired a solicitor to help him to get a passport. Darcy died in the US before the bill was paid. Was the contract binding on Darcy? Ask: was a contract for necessaries or otherwise beneficial?Case summary: Minors contracts at common

9、law: valid contracts (enforceable against the minor)De Francesco v Barnum (1890) 45 Ch D A seven year apprentice agreement was not binding as the minor agreed not to accept any professional work without the consent of the master, the pay was very low and the master was under no obligation to provide

10、 employment or to maintain the apprentice while unemployed and there was a unilateral right for the master to terminate the apprenticeship if, after a period, the master considered unfit for stage dancing.Minors contracts at common law: voidable contractsContinuing contracts are voidable Contracts w

11、here the minor acquires an interest in something of a permanent nature to which continuous rights attach e.g. interest as lessee, shareholder or partner Binding unless repudiated during minority or within a reasonable time after attaining majorityMinors contracts at common law - unenforceableAll oth

12、er contracts unenforceable against the minor but the minor could enforce the contract against the adult.In practical terms, unenforceable means not binding unless ratified (where statute allows) within reasonable time of attaining majority.Minors contracts at common law - misrepresentationAt common

13、law minors are not liable for torts connected with the contract e.g. misrepresenting age because to do so would destroy the protection offered to minors by the law of contract : Leslie v Sheill 1914 3 KB 607. This case applies in the ACT but not in NSW where this precedent has been superseded by the

14、 Minors (Property and Contracts) Act 1970 (NSW). Minors contracts in New South Wales under statuteMinors (Property and Contracts) Act 1970 (NSW)Civil act (which includes the making of a contract, s 6) is presumptively binding if for benefit of minor: s 19.Application may be made to court for an orde

15、r granting capacity to enter into the contract prior to the contract being made: s 26.Civil acts (which are not presumptively binding) may be affirmed by court or by minor once he or she turns 18: s 30.Civil acts (which are not presumptively binding) may be repudiated by minor during minority and un

16、til the age of 19: s 31.Rule about minor not being liable for misrepresentation of age is abolished: s 48.Capacity corporate bodiesCorporations: companies registered under the Corporations Act 2001 (Cth) have the legal capacity of a natural person: section 124Other corporate bodies that are not regi

17、stered under the Corporations Act may not have this capacity.Hazell v Hammersmith & Fulham London Borough Council & Ors 1990 2 QB 697 text p 109: found that local council did not have capacity to enter into a particular interest rate swap transaction and contract therefore void.Capacity: Mentally in

18、capacitated and intoxicated personsMentally incapacitated and intoxicated persons are liable under contracts for the provision of necessaries: Sale of Goods Act 1954 (ACT) s 7.All other contracts voidable provided: The person was incapable of understanding the nature of what they were agreeing to at

19、 the time of contract; and The other party was aware or should have been aware of the incapacitySuch contracts must be repudiated (rejected) within a reasonable time after the person es sane or sober. If the contract is confirmed once the incapacity has ceased, then it cannot be later voided.Capacit

20、y: bankruptsBankrupts are able to enter into contracts however disclosure must be made if contract entered into for is more than $5,485 (indexed to CPI) if the person is an undischarged bankrupt Bankruptcy Act 1966 (Cth) s 269Privity of contract Only parties to the contract can sue and be sued on th

21、e contract. The idea behind this principle is that if a contact is between two parties, and third party cannot be bound by, or enforce a benefit, that arises from an agreement they were not part of. There are some exceptions to this general principle.PRIVITY OF CONTRACTJackson v Horizon Holidays 197

22、5 1 WLR 1468 TEXT p. 110Facts: Mr Jackson entered into a contract with a travel agent for a holiday for himself, his partner and his children. Unfortunately the holiday did not meet his expectations: he did not get the hotel he had booked and the substitute hotel was very poor quality and did not ma

23、tch the description in the contract. Legal issue: Could Mr Jackson, his partner and his children all sue for damages or could only Mr Jackson sue? Found: Only Mr Jackson was party to the contract, and so only Mr Jackson could sue. This was the case even though Mr Jackson booked the holiday for the b

24、enefit of the group (as he was not the agent of the group). Fortunately the damages awarded by the court to Mr Jackson recognised the fort, annoyance and distress of the whole group.PRIVITY OF CONTRACTThe rule can create difficulties where a contract is for the benefit of a third party who is unable

25、 to sue on it. The court may look to agency or trust law to e the problem.Beswick v Beswick 1968 AC 58 This case relates to the sale of business from uncle to nephew. The terms of payment included an annuity to his widow on his death. The nephew decided to make only one payment. The court held that

26、the widow couldnt sue in her own capacity (as she was not a party to the contract) but could enforce promise as administrator (the legal personal representative of her husbands estate).A good summary is available here: Privity of contractContracts of insurance to benefit a third partyTrident General

27、 Insurance Co Ltd v McNiece Bros Pty Ltd (1988) 165 CLR 107 text 111-12 Public liability insurance covered subcontractors (not party to the contract) and insurance company refused to pay. The High Court held that doctrine of privity did not apply to insurance contracts.This is provided for in Insura

28、nce Contracts Act 1984 (Cth). Where a person not a party to the contract is referred to as a beneficiary that person has a right to recover his or her loss from the insurer: s 48(1)Terms of the contractContracts: Interpretation (Chapter 5)See diagrams on p. 119 and 120 terms of a contract parol (ora

29、l) evidence rule express terms of a contract circumstances where terms can be implied incorporation of terms to a contract interpretation of terms in a contract)Terms of the contractExpress Terms are terms to which the parties have actually agreed which may be found in: Oral contracts Contracts part

30、ly written and partly oral Written contracts (all terms in writing are express terms)tERM OR REPRESENTATION ?Often you will need to study the intention of the parties to find out whether or not an express pre-contractual statement is a term of the contract. If the statement is a mere representation

31、then it is not a term of the contract, and is not binding. tERM OR REPRESENTATION ?Factors to consider are: is the statement promissory in nature? (i.e. does it look like a promise?) when was the statement made in relation to when the contract was made? how important is the statement? did the person

32、 making the statement possess a special skill or knowledge? was the statement followed by a written contract?Term or Representation ?Oscar Chess v Williams 1957 1 WLR 370 text p 123 The seller described a 1939 model Morris as a 1948 model. The court considered whether this statement was a term or a

33、representation by asking whether the language used was promissory in nature (like a promise)?Oscar Chess v Williams 1957 1 WLR 370 per Lord Denning: much depends on the precise words used. If the seller says I believe it is a 1948 Morris. Here is the registration book to prove it, there is clearly n

34、o warranty. It is a statement of belief, not a contractual promise. But if the seller says, I guarantee that it is a 1948 Morris. This is borne out by the registration book, but you need not rely solely on that. I give you my own guarantee that it is, there is clearly a warranty. The seller is makin

35、g himself contractually responsible, even though the registration book is wrong.Term or Representation ?Ross v Allis-Chalmers Australia Pty Ltd (1980) 32 ALR 561 text p 123Facts: Ross wanted to buy a harvester. He sought advice from the salesperson who had done similar work. He said in my experience

36、 the best this one could do is 90 acres per a day. Ross bought it. He found out that it would not even do 90 acres, and sued for breach of warranty.Issue: Was the representation intended to be a binding promise?Held: The statement was not a warranty because it was only a statement of opinion based o

37、n experience. The salesperson had not intended the statement to be binding to the extent that it would give rise to liability if it was proven to be untrue.Term or Representation ?Allied Express Transport Pty Ltd v Hill 1997 NSWC 52 text p 123-124Mr Hill was told in a statement that the Arnotts bisc

38、uit delivery route would average 800 kms per week. He asked what would happen if it was more and was told that this would not happen. He then entered into the contract. In fact the route was more than 800kms per week. Issue: Was it a term or representation?Held: It was an important matter and the qu

39、ery was made just before contract entered into and company in the best position to know the information, therefore the statement was held to be a term. Therefore Allied Express were held to be in breach of the term that he would drive 800km a week for $1000.Parol (Oral) Evidence RuleWhen a contract

40、is in writing the general rule is that the writing contains the entire contract. The court will not allow evidence (e.g. of what the parties thought, said or did) to be admitted which would add to, vary or contradict the terms of the written contract.Codelfa Construction Pty Ltd v State Rail Authori

41、ty of NSW (1982) 149 CLR 337 textbook p. 124 and p. 129.British Movietone New Ltd v London & District Cinemas 1952 AC 166 textbook p. 124Goss v Lord Nugent (1833) 110 ER 715Exceptions to the Parol Evidence RuleThere are execptions to this rule. Parol (oral) evidence can be given in the following cir

42、cumstances: to show that a custom or trade usage is applicable (even though not specifically referred to): Smith v Wilson (1832) 110 ER 266 to show the contract was subject to a condition which has not been fulfilled yet (e.g. approval by third party) to show that the contract was partly written and

43、 partly oralExceptions to the Parol Evidence Rule(cont) to resolve ambiguities arising from the words used: Royal Botanic Gardens and Domain Trust v South Sydney Council (2002) 240 CLR 45 textbook p. 125 to identify either the subject matter or a party to the contract to show the contract is not leg

44、ally binding because it was obtained by duress or undue influence or unconscionable conduct or does not reflect the intentions of the parties.Collateral contractsCollateral contracts are a way to avoid the effect of the parol (oral) evidence rule. In effect, there are two contracts that taken togeth

45、er represent the intentions of the parties. The collateral contract must be a contract in itself: a subsidiary contract the consideration for which is entering into the main contract. Collateral contractsFour conditions must be met:Terms in the collateral contract must not be inconsistent with the p

46、rimary contractThe terms in the collateral contract must not be terms usually found in the primary contractThe terms of the collateral contract must be promisory in natureEntry into the main contract is the consideration for the promise made in the collateral contractJJ Savage & Sons Pty Ltd v Blakn

47、ey (1970) 119 CLR 435. See also SVI Systems Pty Ltd v Best & Less Pty Ltd 2001 FCA 279 p. 127 textbook.Collateral contractsVan den Esschert v Chappell 1960 WAR 114 text 127 Facts: The purchaser asked before signing a contract for the purchase of a house whether there were any white ants (termites).

48、The vendor provided a verbal assurance that there were not any. The purchaser signed the contract and discovered white ants in the house.Issue: was the statement promissory in nature and therefore a term of the contract? (contracts for sale of land must be in writing)Held: there was a collateral con

49、tract as the statement was promissory, not inconsistent with the main contract and not ordinarily found in the standard terms of a contract of sale of real property.Implied terms Courts will read or imply terms in a contract. This is because sometimes parties do not turn their minds to every possibi

50、lity, and other times because certain terms were always part of the contract (and intended by the parties), but not actually expressed in the contract.Implied termsCourts are willing to imply terms to give a contract commercial meaning. That is, for reasons of business efficacy.Such terms must be:Re

51、asonable and equitableSo obvious that it goes without sayingNecessary for business efficacy: a term will not be implied if the contract is already effectiveCapable of clear expressionNot contradict the express termsBP Refinery (Westernport) Pty Ltd v Hastings Shire Council (1977) 180 CLR 266 p. 128-

52、129Implied termsCodelfa Construction Pty Ltd v State Rail Authority of NSW (1982) 149 CLR 337 text p. 129-130Codelfa had a contract to upgrade the Eastern suburbs rail link. There was an incorrect assumption that rail authoritys immunity from legal action extended to Codelfa. Both parties thought th

53、at work could occur 24 hours a day, 6 days a week. The terms relating to price and time for completion calculated on this basis.Injunctions were obtained by residents on the basis of nuisance which prevented Codelfa working through the night. This meant that Codelfa could not meet the timelines set

54、in the contract, and incurred extra cost.The court held that there was no implied term regarding the cost of extra time as it was not obvious that was what the parties would have agreed. A term cannot be implied because it is reasonable, it must be necessary. Implied terms Implied terms in employmen

55、t contractsCommonwealth Bank of Australia v Barker (2014) CLR 169; 312 ALR 356 2014 HCA 32 text p. 130Under common law employment contracts do not contain an implied term of mutual trust and confidence (that is, no implied term that neither the employer or the employee will, without reasonable cause

56、, act in a way likely to destroy or seriously damage the relationship of trust and confidence between them). This is because it is not necessary (being reasonable is insufficient).Implied termsTerms implied by custom and trade usage This will be a question of fact and must be so well known that ever

57、ybody in the trade enters a contract with that usage as an implied term. It must be universal and reasonable: Nelson v Dahl (1879) 12 Ch D 568 text p. 130 Further, a term will not be implied on the basis of custom or trade usage if it contradicts an express term of the contract and a person can be b

58、ound by the custom even if they are not aware of it: Con-Stan Industries of Australia Pty Ltd v Norwich Winterthur Insurance (Aust) Ltd (1986) 160 CLR 226 text book p 131.Implied termsTerms implied by custom and trade usage (cont)Dockside Fitness Pty Ltd v Woods 1996 TASSC 142 text p 131Facts: The c

59、aptain of a yacht refused to have crew member because of sea sickness. The father of the ill man had paid for his right to board the yacht.Issue: Was the owner of the yacht in breach of contract (and liable to pay damages)? Was there an implied term relating to the right of the Captain to determine

60、who could be crew?Court: held that there was an implied term through custom that captain can refuse crew member who compromises safety of the vessel. However, this term did not extend to excluding someone who was seasick, so the yacht owners were in breach of the obligation to provide the son a plac