contract 1 exam notes

8/14/2019 Contract 1 Exam Notes

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Contract Law 1, 2011

COMMON LAW AND OBLIGATIONS

Common law recognizes THREE fundamental obligations owed by individuals to eacoter!

1. Te obligation to "erform certain "romises #te law of contract$2. Te obligation to avoid causing arm to oters in certain situations #te law oftort$

3. Te obligation to restore certain un%ust gains #te law of restitution or unustenric!"ent$

# & remedy in tort will restore te "laintiff to teir original "osition before te tort wascommitted'

# & remedy in contract will advance te "laintiff to a "osition if te contract ad notbeen breaced'

# & remedy in restitution will return te un%ust benefit from te defendant to te"laintiff'

Concurrent lia$ilit%& arisesin contract and tort wen one "erson #&$ owes acontractual obligation to anoter #($ to ta)e reasonable care in "erforming services fortem and also owes ( a duty of care in tort' *u"lication of damages is not "ermitted,but in situations of concurrent liability, te "laintiff may coose one over te oter dueto te different rules in terms of assessment of damages, remoteness of damage andlimitation "eriods'

T'( NAT)*( O+ CONT*ACT

& contractis a legally enforceable agreement or set of "romises #i'e' for a breac ofwic te law will "rovide a remedy$ and may be establised by being set out in a"articular, solemn form #i'e' a ,ee,$ or by meeting te re+uirements for legalenforceability according to te law of si"-le contract-'

& contract may involve an #i$ immediate e.cange of tings e'g' an e.cange of moneyfor goods/ #ii$ an e.cange of a ting for a "romise/ #iii$ an e.cange of "romise for a"romise'

Te remedy for a breac of contract involves "lacing te "romisee in as good a"osition #e'g' financially$ as e or se would ave been ad te "romise beenunderta)en, i'e' s-ecific -erfor"anceor more commonly, -a%"entof a sum of

money'

Dee,s

n order to be a valid deed, a document must satisfy bot substantive and formalre+uirements!

Su$stantie re/uire"ents! Te document must clearly intend to o"erate as a deedand e."ress tat te "erson wo e.ecutes it consents to some assurance of someinterest in "ro"erty or of some legal rigt or enters into an agreement enforceable atlaw wic affects te legal relations or "osition of a "arty to te instrument'

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+or"al re/uire"ents! ritten on "arcment or vellum, signed, sealed, delivered,witnessed #re+uired in 34$'

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Tere are two )inds of deeds!1. In,enture5 a deed wit 2 or more "arties to te instrument re"resenting different

interests'2. Dee, -oll5 a unilateral deed normally e.ecuted by one "erson wo is te only

"arty to te deed' However, it can be e.ecuted by two or more "ersons wore"resent a single interest and in tis, te deed remains unilateral'

n modern law, most of te general "rinci"les of contract law wic deal wit issuesoter tan contract formation are essentially te same for contracts made under seal#deeds$ and sim"le contracts'

+or"ation of a Contract& (le"ents

6rom te end of te 17 tcentury, Englis common law recognised tat an increasinglymar)et orientated society re+uired legal enforceability to be given to many "romiseswic could not be conveniently formalised in te solemn manner re+uired for a validdeed' Tis ultimately gave rise to te law of sim"le contract'

1. A0ree"ent! Te "arties must ave manifested an agreement tat certainobligations would be underta)en 5 tested via offer and acce"tance'

2. Consi,eration! Eac "arty must ave given someting of value in e.cange forwat te oter as done, in "articular, a "romisee must sow tat e or se gavesometing of value in e.cange for te "romise sougt to be enforced' &nagreement not su""orted by consideration on bot sides is said to be nu,u"-actu"#a na)ed agreement$ and is not enforceable'

3. Intent to create le0al relations! Te "arties must ave manifested a commonintent tat teir agreement creates legal relations' ntention is determinedob%ectively i'e' by reference to te words and conduct of bot "arties rater tansub%ectively #i'e' intended in teir minds$'

. Co"-letion an, certaint%

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AG*((M(NT

Offer an, acce-tance anal%sisis used to determine #i$ weter an agreement wasreaced, #ii$ wen te agreement was reaced and #iii$ te terms of te agreement'

O++(*

&n offeroffers- a "romise #i'e' a commitment to do or not do someting$' &"ro"osition is an offer only if!

1' Te offeror8s words and conduct indicate tat e will consider imselfcommitted witout furter negotiation if te addressee cooses to give wat iss"ecified &3*

2' Te statement "ro"oses an e.cange of a commitment to carry out a "romisein return for an act, a forbearance from acting or a return "romise to do or notdo someting'

# &n offer must be communicated to te offeree and received oterwise te offer isineffective' 9ffers must be communicated by te offeror or an autorised agent ofte offeror to te offeree! 'ent!orn +raser 14-day property

# en an offer is made, te terms of te "ro"osed contract must be communicatedto te offeree!T!ornton S!oe Lane arin0 auto ticket parking

# 9ffers can be made in general terms, leaving te "recise term of te contract to besettled later! Masters Ca"eron home subject to contract

# &n offer may be made to a s"ecified "erson, class of "ersons or to everyone towom it becomes )nown! Carlill Car$olic S"oe Ball 415637

# Te fact tat te word offer- is used is not in itself conclusive! Se--elt 8 SonsLt, Co""issioner of Main *oa,s sales of BP servo

)nilateral s Bilateral Contracts

# & unilateral contract arises wen an offer of a "romise is e.canged for act' Tecontract is acce"ted wen te offeree "erforms te sti"ulated act, terefore, wen

te contract is formed only te offeror8s obligation remains e.ecutory! Carlill Car$olic S"oe Ball 415637

# & bilateral contract arises wen an offer of a "romise is e.canged for a return"romise, so tat te obligations of bot "arties are e.ecutory at te time ofcontractual formation'

# 3ote! :enerally, a court will find tat a contract is formed by an e.cange of"romises rater tan a "romise for an act since it is unrealistic tat te "ersonacce"ting- te act will ave given teir "romise in e.cange for an act tat migt ormigt not a""en' nstead, a "romise tat te act will occur is "referable'

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Offer s Initation to Treat 4+inalit%7

# &n offer must be distinguised from an initation to treat, wic can bedescribed as any "art of te negotiation "rocess tat invites furter bargaining!conduct of cemist in !ar"aceutical Societ% of Great Britain Boots Cas!

C!e"ists Lt,416937/ council8s letter in Gi$son Manc!ester Cit% Council:16;6< council flat sale

A,ertise"ents! :enerally an advertisement in an invitation to do business, not anoffer, as it invites a bargaining res"onse rater tan acce"tance' 4uc "ro"ositions areconsidered as an initation to treat! Carlill Car$olic S"oe Ball

S!o- Sales! Te dis"lay of goods for sale #at te window or on selves$ wit attaced"rice tags is usually considered an initation to treat! +is!er Bell knife sale/!ar"aceutical Societ% of Great Britain Boots Cas! C!e"ists' However, in

Goo,win=s of Newtown Gurre% early sale TVit was incorrectly eld to be an offer'

rice Lists& Te circulation of a "rice list is usually considered as an initation totreaton te basis tat if it was an offer, a seller migt be obliged to su""ly unlimited+uantities of te listed goods at te listed "rice! Grain0er Gou0!> S-encer 'ar,in0 sale of block'

Auctions! Te olding of a "ublic auction is usually considered as an initation totreatwit eac bid constituting an offer and acce"tance of te final bid notified by tefall of te ammer' Tis means tat!# no contractual claim can arise if te auction is cancelled! 'arris Nicerson# te bidder is entitled to witdraw is or er bid before it is acce"ted! a%ne Cae

# te auctioneer is not obliged to sell to te igest bidder #even wen auction isadvertised to be eld witout reserve-$! AGC 4A,ances7 Lt, McW!irter mortgage bids

Ten,ers! & tender "rocess involves interested "arties submitting a single bid witout)nowing te bids made by oter "arties, and is usually considered as an initation totreat&'arela Inest"ents Lt, *o%al Trust Co of Cana,a 4CI7 Lt, share bids'However, re+uests for tenders wic contain a "romise tat te igest bidder will beacce"ted may be offers! S-encer 'ar,in0.

Ticet Cases&& tic)et containing contractual terms is usually regarded as an offerwic can be acce"ted or re%ected by te conduct of an individual after tey ave adte o""ortunity to consider te conditions on te tic)et' &s suc, a contract is notformed wen a tic)et is issued des"ite its issue being de"endent on te "ayment of afare! Mac*o$ertson Miller Airline Serices Co""issioner of State Ta?ation ticket offer>T!ornton S!oe Lane arin0 Lt, auto ticket park.

4imilarly, te "rovision of buses as been eld to be an offer wic is acce"ted bygetting on te bus rater tan an invitation to treat! Wilie Lon,on assen0er

Trans-ort Boar,.

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Offer s Con,itional Gift ro"ise 4(?c!an0e7

# & con,itional 0ift -ro"isemay be distinguised from an offer as it involves a firmcommitment or "romise wic is given before certain conditions are fulfilled by te"romisee #i'e' "romisee "rovides no consideration$'

# ;erformance #and not te commitment to "erform$ is ten de"endent on tefulfilment of te sti"ulated condition' n contrast, in an offer, firm commitment is onlygiven wen certain conditions are fulfilled by te "romisee in return! AustralianWoollen Mills Lt,> Carlill Car$olic S"oe Ball

:enerally, if it is beneficial to te "romisor tat conditions attaced to te "romise arefulfilled, courts will infer tat te "romise was made in order to induce te "romisee tofulfil tem and not a conditional gift! Carlill Car$olic S"oe Ballcf' AustralianWoollen Millswere te court eld tat te Commonwealt ad no commercialinterest in &< fulfilling tose conditions'

Ter"ination of an Offer

1. La-se of ti"e&n offer tat is e."ressed to be available for acce"tance for a "articular "eriod of timewill la"se at te end of te "eriod' f no "eriod is s"ecified, it will la"se after areasonable time as "assed wic will de"end on te circumstances e'g' verbal offerto buy a car is li)ely to la"se after a sort "eriod, wereas a written offer will be o"enfor acce"tance relatively longer! Manc!ester Diocesan Council Co""ercial an,General Inest"ent rong address tender held!

2. Wit!,rawal or reocationRevocation is effective once witdrawal of te offer as been communicated to teofferee by te offeror, or an autorised agent of te offeror! a%ne @ Cae ithdra bid/Gol,s$orou0! Mort @ uinn 1 eek sale'

# &n offer can only be revo)ed before te offer as been acce"ted! +inancin0s Lt, Sti"son car hire finance

# 9nce te offeree as started to "erform te act, te offer cannot be revo)ed untilte offeree as a reasonable o""ortunity to com"lete "erformance #often occurringwere "erformance of act ta)es time$! A$$ott Lance> @eiers Cor,in0le%>owever current law concerning revocation of offers in e.cange for an act#unilateral contracts$ is tat no general "rinci"le can be stated! Mo$il Oil AustraliaLt, Wellco"e International t% Lt, improvement plan renege

# Tere is no "ostal rule for revocation of offer! B%rne @an Tien!oen plate salepost"

# Communication need not emanate from te offeror' Revocation "rovided by a rd"arty #not necessarily an autorised agent-$ is valid "rovided tat te offeree)nows tat te rd "arty is a reliable source ! Dicinson Do,,s Thursday land sale!

# & "romise to old an offer o"en for a s"ecified "eriod is not binding unless teofferee as given consideration for tat "romise i'e' wic establises an o"tion ora subsidiary contract! Gol,s$orou0! Mort 8 uinn'

3. *eection an, Counter Offer# :enerally, once an offer as been re%ected it can no longer be acce"ted! '%,e

Wrenc! land negotiations'

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# & counter=offer as te effect of re%ecting te original offer! '%,e Wrenc!>Butler (?cellocor- increased tool price'

# & re+uest for information- to obtain guidance in deciding weter to acce"t orre%ect does not! Ste-!ensonE Fac/ues 8 Co McLean> Bra"$les 'ol,in0s

Lt, Bat!urst Cit% Council'# &n offeror wose offer as been re%ected by a counter offer may re"ly to te counteroffer re%ecting it but doing so in a way wic revives- te original offer e'g' bystating cannot reduce te original "rice-'

# f one "arty gives te oter notice of terms after a contract as been formed, toseterms cannot form "art of te contract! Oceanic Sun Line S-ecial S!i--in0 CoLt, +a%.

. +ailure of Con,ition&n offer wic is e."ressly or im"liedly intended to remain o"en for acce"tance as longas a certain state of affairs continue #e'g' wile stoc)s last$, or under certain conditions#ire "urcase agreement not binding until finance is a""roved$ will automatically la"se

if te condition fails "rior to acce"tance! +inancin0s Lt, Sti"son'

9.Deat! of offeror or offeree:enerally s"ea)ing, deat of an offerror terminates te offer! Dicinson Do,,s/ asdoes deat of te offeree! *e%nol,s At!erton7' n +on0 Cilli, (lac)burn >attem"ted to narrow tis rule by stating tat an offer could not be acce"ted after teofferor8s deat if te offeree )new of te deat before te "ur"orted acce"tance'

n contrast, o"tions #considered as conditional contracts$ for te "urcase of sale of"ro"erty are binding on te "ersonal re"resentatives of a deceased offeror or offereeunless "ersonal to te o"tion older! Carter '%,e'

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ACC(TANC(

rinci-les of Acce-tance

1' Acce-tance "ust $e a$solute an, un/ualifie,, i'e' in te form e."ressly or

im"liedly "rescribed by te terms and conditions of te offer' f an offeree "ur"orts toacce"t on different terms to tose stated in te offer, tis may constitute a counter=offer'

2' Acce-tance "ust $e in res-onse to an offer, i'e' at te time of acce"tance teofferee must )now of te e.istence of te offer and te acce"tance must be based onte offer made! * Clare snitch reard' Cross=offers #were bot "arties offer tesame "ro"osal in ignorance of eac oter8s offer$ does not satisfy tis re+uirement!

Tinn 'off"ann'

' Acce-tance "ust $e uncon,itional, i'e' offer and acce"tance must corres"ondin all material as"ects e'g' an offeree must "rovide e.actly and witout +ualification

wat te offeror indicated as te "rice of is or er "romise!Turner e"-son Ca"" raspberry letters!

& battle of te forms-! wen "arties e.cange inconsistent forms during negotiations ?reac agreement on "rinci"al terms witout deciding wose standard form sould"revail' England! last form is regarded as a counter=offer and so te last sot- will"revail "rovided te reci"ient of te counteroffer can be ta)en to ave acce"ted teterms "ro"osed by te oter sender! Butler Mac!ine Tool Co Lt, (?CellOCor-'

However, if te reci"ient ad not acce"ted te terms, two a""roaces could be used!1' Conflict a""roac #Lawton L>$ 5 traditional offer and acce"tance, ence, te "arty

wo sends te last form last sot- "revails

2' 4yntesis a""roac #*enning


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of words and conduct-, and tus cannot enforce suc a "ur"orted contract' Bnless teoffer waives te rigt to be notified of acce"tance'

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Met!o,s of Co""unicatin0 Acce-tance

1. ostal Acce-tance *ulef acce"tance is reasonably e."ected by te offeror to be sent by "ost, acce"tance ofan offer is com"lete as soon as it is "osted even if it is received some time later or is

lost in te "ost! 'ent!orn +raser' Tis rule e.tends to telegrams i'e' acce"tancecom"lete wen te telegram is anded in for transmission! Cowan O=Connor'

Te rule does not a""ly!1. f te "arties are conducting a igly contentious corres"ondence in te course of

wic an offer is made!Taller"an 8 Co t% Lt, Nat!an=s Merc!an,ise2. en anoter mode of acce"tance as been e."ressly stated! 'olwell Securities

'u0!es'3. To instantaneous forms of communication including tele. and tele"one #(ntores

Lt, Miles +ar (astern Cor-$ and fa.es #*eese Bros lastics Lt, 'a"onSo$elco Australia t% Lt,$, altoug tecnically tele. acce"tance migt not be

instantaneous- as it ad to be ty"ed out on te receiver8s macine and relayed to a"erson of autority #Brini$on Lt, Sta!a0 Sta!l$'

("ails! Te general rule is li)ely to a""ly, altoug te common law "osition may beirrelevant since te time of recei"t of electronic communication is governed by(lectronic Transactions Acts, wic distinguis between situations in wic anelectronic information system as been designated for te "ur"ose of receivingcommunications and situations in wic it as not' n te former, communication iseffective once it enters te system and in te latter, communication is only effectiveonce it comes to te attention of te addressee'

2. Clearl% sti-ulate, "et!o,s of co""unicatin0 acce-tance

&n offeror is entitled to "rescribe a "articular metod of communicating acce"tanceand to indicate tat tis is te only metod to be used! Geor0e 'u,son 'ol,in0s Lt, +renc!' However intention must be very clearly indicated' 9fferor is also usuallyconsidered willing to tolerate an alternative metod of communicating acce"tance if it isno less e."editious or reliable! Geor0e 'u,son 'ol,in0s Lt, +renc!shares posted'

A0ree"ent wit!out Offer an, Acce-tance

n a number of cases #see below$, a contract can be establised witout an identifiableoffer and acce"tance as "arties may drift into a contractual relationsi"-, mutualassent is in turn regarded as an intention to be legally bound to te essential elements

of a contract'

E.am"les!1' en "arties e.cange signed standard forms of contract for sale of land-2' ere two or more "arties in +uic) succession sign a single document wic sets

out te "romises eac is giving but does not identify eiter of tem as an offeror orofferee

3. ere a number of "ersons sign u" for a com"etition on te basis of a standard setof rules wic are meant to set out te terms of eac com"etitors8 contract wit teorganisers and wit all oter com"etitors, irres"ective of weter te latter aveentered before or after te individual entering iser name e'g' te yact race in

T!e Satanita>Clare DunraenD1FG &C AF

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CONSID(*ATION

Consideration is someting valuable given in return for a "romise and must satisfy botte benefitdetriment and bargaine.cange re+uirement' 6ailure to do so will amount

to no consideration! Ballant%ne !illott loan to mistress'

1'T!e BenefitDetri"ent *e/uire"entTe "romisee must eiter confer a legal benefit on te "romisor #or anoter s"ecified"arty$ or incur a legal detriment #e'g' a forbearance from suing or e.erting e.isting legalrigts$!T!o"as T!o"as 1& for dead husband house' 6or instance, even if someonedoes not smo)e tey still suffer a Dlegal detriment wen tey surrender a legal freedomto smo)e wic would be considered sufficient consideration'


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(?ce-tions4i7 & "romise to "ay for "ast services initially re+uested by te "romisor in

circumstances were reasonable remuneration was envisaged by bot "arties isusually considered to be good consideration! La"-lei0! Brat!wait pardon

fees/ ao On Lau iu Lon0 falling shares'4ii7 & new "romise to "ay an old debt wic can no longer be enforced #e'g' incourts$ due to a 4tatute of Limitations may be considered to be su""orted byconsideration #te ongoing obligation arising from a "romise to "ay te debt inte first "lace$! Case% Co""issioner of Inlan, *eenue'

3. Consi,eration "ust $e sufficient $ut nee, not $e a,e/uate

'e' of some legal value to te "romisor, but not e+ual or "ro"ortionate to te su""orted"romise! Woolwort!s Lt, ell%/ C!a--el Nestle royalties comp song' Terefore,unless it is clear #e."ressly or im"liedly$ tat te alleged consideration is of value to te

"romisor courts are slow to infer tat te "romisor intended to allow it to be te "rice forte "romise'

. Consi,eration "ust not $e illusor%

Iwic often involves analysis of weter te "romisee incurred a real legal detriment'

Consideration is illusory wen!1. Te "romisee ad no legal #Stil M%ric unlucky sailors$ or factual"ysical #Nerot

Wallace$ freedom to do oter tan wat tey did or "romised to do 9R2. en te "romisee retains an unfettered discretion as to te "erformance of a

"romise! lacer Deelo-"ent Lt, Co""onwealt! P)* timber/ in "articulardue to te "resence of a wide e.em"tion clauses! Britis! ("-ire +il"s t% Lt,/Mac*o$ertson Miller Airline Serices Co""issioner of State Ta?ation/ orif te "romise is too vague! Dunton Dunton sober ife"er > Hood #in dissent$'

E.am"les of illusory "romises! ere an agreement e."ressly leaves a vital matter to be determined by one "arty

wit unfettered discretion e'g' were "arties "ur"ort to enter a contract for sale at a"rice to be fi.ed by a buyer! Go,ece irwan'

ere a "urcaser8s "romise to "ay a definite sum is sti"ulated to be sub%ect toer obtaining finance wic is satisfactory to erself and no limits are im"osed asto weter or not te terms of a""roved finance are satisfactory! Mee!an Fones

until finance-er Mason F' However, in Mee!an Foneste HC& eld tat tesub%ect to- clause was not uncertain and did not amount to unfettered discretionas eac %udge could attribute a meaning to it #eiter reasonable or onest$ and itcould also be waived by te "urcaser'

ere an airline com"any8s "rima facie assum"tion of an obligation to carry a"assenger on a fligt designated on a tic)et ad been entirely eroded by a clausewic "rovides tat in no circumstances will te airline be liable for a failure toeffect carriage! Macr*o$ertson Miller Airline Serices Co""issioner ofState Ta?ation -er Barwic CF'

ere an em"loyer com"any "romised tat a newly a""ointed em"loyee would beallowed to "artici"ate in a senior staff e+uity saring sceme wic bot "arties)new did not yet e.ist and wose nature was to be determined solely by te

em"loyer witout any definite limits on is discretion! Biotec!nolo0% ace

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& "romise to "ay a subsidy wose amount was to be determined by te "romisorin its unfettered discretion! lacer Deelo-"ent Co""onwealt!- P)* timber

E.ecuted consideration is less li)ely to be illusory i'e' if a "romise as been offered in

return for an act or forbearance no consideration as been given until te act orforbearance as actually occurred #e.ecuted consideration$'

T*O)BL( WIT' ALICATION O+ CONSID(*ATION *)L(S

Genuine Co"-ro"ises

+or$earance fro" -ressin0 a 0roun,less clai"& "romise to forbear #or actual forbearance$ from suing on a claim genuinely #bonafide$ believed to be sound is good consideration regardless of weter te claim would

ave succeeded in court or not! 'ercules Motors t% Lt, Sc!u$ert/Callis!er Bisc!offs!ie" +onduras bond'

+or$earance fro" raisin0 a ,efence w!ic! woul, !ae faile,& "romise to forbear #or actual forbearance$ from defending an action wic onegenuinely believes one as a rigt to defend #under a new contract$ is goodconsideration even if no suc rigt e.ists #e'g' since it is "art of an e.isting legalobligation$! Wi0an (,war,s defect house'

)n,ertain0s to -erfor" or -erfor"ance of e?istin0 ,uties

&rises in situations were tere is a one=sided variation to a contract were one "arty#"o,if%in0 -art%$eiter #i$ assumes an additional obligation or #ii$ agrees to releasete oter "arty #$eneficiar%$ from an obligation'

1.Ifa-ro"isee un,ertaes to -erfor" 4or -erfor"s7 so"et!in0 t!at t!e%are $oun, to ,o un,er t!e 0eneral law 4i.e. ot!er t!an t!e law of contract7t!ere is usuall% no consi,eratione'g' giving evidence in court wen obliged bysub"oena! Collins Go,efro% , guineas for court'

# However , if a "romisee wo at te "romisor8s re+uest underta)es to "erformsometing more tan te minimum- legal duty tis will be good consideration!Glas$roo Bros Lt, Gla"or0an Count% Council etra police protection'

2.If a -ro"isee un,ertaes to -erfor" 4or -erfor"s7 no "ore t!an t!e% are$oun, to ,o un,er an earlier contract wit! t!e -ro"isort!ere is usuall% noconsi,eration& Stil M%ric'

# However , a "romisee wo re=commits to "erform #or actually "erforms$ an e.istingcontractual duty owed to te "romisor will ave given good consideration if!i. Te "romisee at te "romisor8s re+uest gave someting e.tra- e'g' increasing

te letter of credit "rice! Nort! Ocean S!i--in0 Co Lt, '%un,aiConstruction Co Lt, 4T!e Atlantic Baron7 drop in ./09R

ii. Te "romisee genuinely dis"uted te e.isting duty and gave te re="romise to"erform #or actual "erformance$ in a com"romise setting! Wi0an (,war,sdefect house 9R

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iii. Te "romisee can demonstrate tat tey were discarged- from teir e.istingduty #i'e' te original contract was terminated by agreement$ so tat a re="romise to do te same amounts to good consideration! 'artle% onson$% lucky sailors!

3. ractical Benefit (?ce-tionTe e.isting legal #contractual$ duty rule will not a""ly if te beneficiary8s "romise to"erform an e.isting legal duty confers a "ractical benefit to te modifying "arty i'e' te"ractical benefit is good consideration! Willia"s *offe% refurbish flats!Tis may bedistinguised from Wi0an (,war,s, were tere was a dis"uted "romise, wereasin Willia"s *offe%it was a undis"uted "romise'


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ro"ises to acce-t -art -a%"ent in full satisfaction of a ,e$t

;art "ayment of a debt does not constitute good consideration for an agreement todiscarge te debt #innel=s case$ as it involves "erformance of less tan an e.istingcontractual duty #e.tension of Stil M%ric$' Te rule establised in Willia"s

*offe%4refur$is!e, flats7does not a""ly to "artial "ayment of debts! *eSelect"oe'

Terefore, after a debtor "rovides a "art "ayment or "romise in res"onse to tecreditor8s "romise to discarge te full debt, te creditor is free to renege on tis"romise and sue for te un"aid balance! +oaes Beer'

(?e"-tions& situations w!ere -art -a%"ent -roi,es 0oo, consi,eration fora -ro"ise to ,isc!ar0e t!e full ,e$t&1' en tere is a bona fide com"romise2. en tere is "art or full "ayment by a tird "arty! 'irac!an, una"c!an,

Te"-le ndian lenders son

3. en te "art "ayment is accom"anied by someting e.tra- e'g' it is "aid beforedue date! Coul,er% Bartru"/ or accom"anies a non=monetary good wic maybe more beneficial tan money! innel=s case less earlier'

. en te "ayment is in a non=monetary form! innel=s case9. en a debtor wo cannot "ay all is creditors in full agrees to "ay eac of tem

some "ercentage of te debt and te creditors %ointly agree amongst temselves toforbear from "ressing a claim to te full amount owed in return for every otercreditor8s "romise to do te same #com"osition agreement$! Coul,er% Bartru"'

. en te debtor can invo)e te "rinci"le of "romissory esto""el!Fe Maintien,rait% Lt, ua0lia 8 ua0lia hairdressers rent!

Hence, a "romise to acce"t JFF in discarge of a J1000 debt is unenforceable due tolac) of consideration but a "romise to acce"t J1 "lus an a""le in discarge of te samedebt will be enforceable' n "ractice, if a creditor is "re"ared to acce"t a lesser sum infull satisfaction of a debt, te rule is avoided troug te use of a deed wic is bindingand enforceable in te absence of consideration'

n England, te "ractical benefit e.ce"tion cannot be a""lied to "art "ayment of a debtsince tis would involve a decision in te Court of &""eal #Willia"s *offe%7overruling a House of Lords decision #+oaes Beer$' However, in &ustralia +oaes Beer is not binding and it is "ossible to ta)e te view tat "art "ayment of a debt is a"ractical benefit and a""ly Musu"eci Wina,ell'

Co"-osition A0ree"entst is settled law tat a debtor can "lead te com"osition agreement as a defence souldany creditor wo was "arty to te agreement subse+uently attem"t to sue te debtorfor te full debt' However, a""lication of +oaeswould suggest tat te debtorscom"osition arrangement amounted only to a "romise to "ay less tan te amount dueto eac creditor and would tus not amount to consideration for te creditor8s "romiseto forbear from "ressing is full claim' n addition, eac creditor8s "romise to forbearmay ave been made only to te oter creditors and not to debtor, i'e' te debtor is not"rivy to te "romise and tus cannot enforce it'

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INT(NTION TO C*(AT( L(GAL *(LATIONS

ntention is e.amined ob%ectively #including by reference to surrounding circumstancesbeyond a written document$ altoug if a sub%ective intention of a "arty not to bound is

)nown #i'e' by reference to ob%ective factors$ a contract will not be formed! Air GreatLaes t% Lt, S (aster 4'ol,in0s7 t% Lt, airline sale'

6actors wic determine weter "arties intended legal relations include #i$ te sub%ectmatter of te agreement/ #ii$ te status of te "arties to te agreement/ and #iii$ terelationsi" of te "arties! (r"o0enous Gree Ort!o,o? Co""unit% of SA Inc'

1. Co""ercial a0ree"ents

# &greements made in a commercial or business conte.t are "resumed to be madewit an intention to create legal relations! (,war,s S%wa%s Lt, redundant pilot>

Ban/ue Brussels La"$ert SA Australian National In,ustries letter of comfort!# Terefore, a "arty see)ing to deny te enforceability of suc a transaction bears teonus of "roving tat it was not intended to be binding!Fones a,aatton daughter study la!

# Tis "resum"tion may be rebutted!= by e."ress words e'g' binding in onour only-!Fones @ernon=s ools Lt,

an, *ose> +ran Co F* Cro"-ton 8 Bros Lt,, 9R= te circumstances considered as a wole! +or, Motor Co Lt,

A"al0a"ate, )nion of (n0ineerin0 an, +oun,r% Wors'# f a statement in a commercial document was not intended to be as a contractual

"romise, te onus lies on te "arty alleging a contract to demonstrate oterwise!

leinwort Benson Lt, Mala%sia Minin0 Cor- B!,'

# & letter of comfort #document given to a ban) by a "arent com"any assuring tatte "arent com"any will su""ort te subsidiary 5 39T a guarantee$ is unli)ely toave intended to create legal relations if #i$ te wording was not discussed inadvance, #ii$ tere was no evidence of reliance by te lender and #iii$ te letter wasclearly intended to be ambiguous- and #iv$ te e."ressions vague and woolly-!Australian (uro-ean +inance Cor-oration S!ea!an'

2. +a"il%E ,o"estic or -urel% social a0ree"ents

Te a""roac to agreements made in a domestic or social conte.t is effectively neutralaltoug it as been eld tat tere is a "resum"tion a0ainst an intention to createlegal relations!Fones a,aatton/ Balfour Balfour sick ife &23/ but tis wascriticised in! (r"o0enous'

Terefore, a "arty see)ing to enforce a non=commercial transaction bears te onus of"roving tat it was intended to be binding! (r"o0enous'

Se-aratin0 s-ousesCourts ave generally been willing to find an intention to create legal relations weres"ouses ave se"arated or are about to do so! Merritt Merritt divorce home &43/ cf' tos"ouses living in amity-' 6inancial agreements between s"ouses are now sub%ect tote +a"il% Law Act 16;9and are sub%ect to general contract law'

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ro"ises relatin0 to !ousin0Courts ave generally been willing to find an intention to create legal relations in casesinvolving "romises relating to ousing or "ro"erty rigts!To,, Nicol 0cots aunty/ witte main factor being te degree of reliance by te "laintiff on te agreement!

Waelin0 *i-le%' Terefore, in a domestic setting, an agreement tat antici"atessubstantial reliance by one of te "arties is li)ely to be intended to be binding'

Co""ercial a0ree"ents $etween fa"il% "e"$ersf a transaction between family members is essentially commercial in nature, teintention re+uirement is satisfied! *oufos Brewster/ Snellin0 Fo!n Snellin0 Lt,'

3. A0ree"ents $etween "e"$ers of unincor-orate, oluntar% associations

:enerally, consensual arrangements between members of unincor"orated voluntaryassociations #e'g' te rules of te association or clubs$ are not intended to create legalrelations! Ca"eron 'o0an' However, tere is increasing %udicial willingness tointervene and "rotect members entitlements in cases involving denial of "ro"erty rigts,denial of te rigt to wor) or denial of natural %ustice albeit not on te basis of breac ofcontract but on e+uity! Mcinnon Gro0an'

f te voluntary association is incor"orated under legislation #e'g' AssociationsIncor-oration Act 1653 #34$$ its members are li)ely to be statutorily deemed to bein a contractual relationsi"' However, te rules of an unregistered trade union maysometimes constitute a contract between its members! Main Galla0!er'

. A0ree"ents wit! Goern"ent A0encies

& government agreement will be binding if it is commercial in nature' n contrast, anagreement will not be binding if it involves im"lementation of government "olicy oradministration function! Australian Woollen Mills t% Lt, Co""onwealt!/A,"instration of a-ua New Guinea Lea!%ticks on cattle5"even if te governmentinstrumentality in "erforming a statutory duty #e'g' anding out information$ ascarged a fee for tis service! Cos!ott Woolla!ra Munici-al Council'

9. reli"inar% A0ree"ents

;arties wo ave negotiated te "rinci"al terms of a "ro"osed transaction may enterinto a -reli"inar% written a0ree"ent#e'g' eads of agreement$, wic may bee."ressed to be sub%ect to contract- or sub%ect to te "re"aration of a formalcontract-'

;reliminary agreements may fall into one of tree categories! Masters Ca"eron

1' &ll te terms of te bargain are finalised and te "arties intend to be boundimmediately but "ro"ose to restate te terms in a form wic is fuller or more"recise but not different in effect #no conditional terms$' Te "arties are tus boundweter or not a later formal document is signed'

2' Te "arties ave com"letely agreed u"on all te terms of teir bargain- and donot intend to vary tese terms but ave made "erformance of one or more terms

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conditional u"on te e.ecution of a formal document' Te "arties are tus boundto bring te formal document into e.istence'

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' Te "arties did not intend to ma)e a binding agreement at all until e.ecution of aformal contract' Tus, te "arties are not bound unless a formal document#contract$ is signed'

Bltimately, weter a "reliminary agreement relays a binding intention de"ends on telanguage used' Bse of e."ressions suc as sub%ect to contract- or sub%ect to formalcontract- indicate tat te "arties ave done no more tan establis a basis for a futureagreement and tat te "reliminary agreement was not intended to be binding!Masters Ca"eron'

f te "reliminary agreement is intended to binding ten a furter +uestion of weter itis sufficiently com"lete to be ca"able of constituting a binding contract arises'

A,,ition of +urt!er Ter"s4im"ly because a "ro"osed future contract is intended to include furter terms doesnot "revent a "reliminary agreement from being binding, "rovided tat tese terms can

be settled witout furter agreement between te "arties! Go,ece irwan'However, if te agreement re+uires furter agreement between te "arties it cannot bebinding, i'e' an agreement to agree Dto furter agreementnegotiation is notenforceable! Ma% an, Butc!er Lt, T!e in0/ Go,ece irwan'

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)NC(*TAINT AND INCOML(T(N(SS

Certainty and com"leteness overla"s wit te conce"t of intention and also tat of offerand acce"tance'

n determining weter an agreement fails to acieve contractual effect cec) for tefollowing #in tis order$!

1. eter te "arties words and conduct reveal a common intention to becontractually committed at te stage of negotiations at wic a contract isalleged to ave been made #lac of finalit%$

2. eter tere is a essential matter- wic re+uires furter agreement betweente "arties #lac of co"-leteness$

3. eter te court is unable to attribute a "articular meaning to a essentialmatter- as it as been outlined in suc vague and difficult to inter"ret terms#incura$le a0ueness$

. eter a "arty as unfettered discretion to determine te actual content of abasic obligation #vital matter-$ 9R an unfettered discretion as to weter or notto "erform it #illusor% consi,eration$

&greements wic are silent in relation to an essential term are to be distinguisedfrom tose wic "rovide tat te "arties will reac future agreement on tat term, as acourt may im"ly an obligation to settle te essential term in te former but not if tere isan agreement to agree! Ma% an, Butc!er Lt, T!e in0'

(ssential Ter"s

&n agreement will be sufficiently com"lete if te "arties ave reaced agreement onte essential terms!T!or$% Gol,$er0.

eter omission of a term "revents formation of a contract re+uires analysis of!1' Te im"ortance or essentiality of te term2' Te reason as wy te term was left out e'g' did "arties fail to reac agreement

on te issue/ deliberately defer agreement/ or sim"ly fail to consider it'' eter te agreement remains wolly e.ecutory #neiter "arty as "erformed$

or as been wolly or "artly "erformed on one side

E.am"les of Essential Terms!# 4ale of land! "arties, "ro"erty and "rice! 'all Buust depreciating land# 4ale of goods! failure to sti"ulate "rice may not be fatal as 4ale of :oods &cts

im"ose an obligation to "ay a reasonable "rice! 'all Buust -er Win,e%er Fin ,issent

# &greement for a lease! "arties, "ro"erty, duration of lease! 'are% ratt/and rent! *an,ao Goul,in0'

Courts may im"ly obligations in a transaction suc as com"leting eac ste" witin areasonable time! Caallari re"ier *efri0eration

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(?-ress Settle"ent of an (ssential Ter"

;arties may ma)e a valid contract tat defers agreement on an essential term if teyave agreed to an effective mecanism in wic tat term may be su""lied wic doesnot de"end u"on furter agreement between te "arties! Council of )--er 'ouse

Australian C!illin0

E.am"les!1' &n e."ress statement e'g' te "rice will be JK e'g' in te event agreement as to

te "rice cannot be reaced'2. & formula or standard #reasonable rental or mar)et valuation e'g' for variable

interest rates$ wic may be a""lied by te court! Wennin0 *o$inson3. & rd"arty suc as a s"ecified valuator or arbitrator wo will determine te term!

Booer In,ustries Wilson arin0. &n agreement tat one "arty to te contract, troug an e.ercise of controlled

discretion, may determine te term! Go,ece irwan

However, if te mecanism itself fails te agreement will be eld to be ineffective' E'g'!f s"ecified rd"arty refuses or is unable to "erform te tas)! Geor0e *oac!f standard or formula to be a""lied is not sufficiently clear or certain due to an

inability to establis ob%ective criteria e'g' due to te uni+ueness of te "ro"erty inconsideration! 'all Busst -er Di?on CF/ W!itloc Brew land for 0hell


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(STO(L

& "rinci"le of fairness under wic a "erson #i$ wo induces anoter "erson to ma)e an

assum"tion &3* #ii$ tereby leads tat oter to act in reliance on it, to be esto""ed#"revented$ from subse+uently contradicting te assum"tion since tis would cause tereliant "arty to suffer detriment'

'istor% of (sto--el

re159! Re"resentations as to future conduct #e+uitable esto""el$ and fact#common law esto""el$ were e+ually enforced if tey induced anoter to act in relianceand cause detriment if tey were subse+uently contradicted'

For,en Mone% 41597! Re"resentations as to future conduct #i'e' "romises$ are

only binding under contract' Esto""el may no longer be used as a bac)door- metodof enforcing a "romise lac)ing consideration and is limited to re"resentations as to fact#common law esto""el$'

Two e.ce"tions to te rule inFor,an Mone%develo"ed in e+uity courts #e+uitableesto""el$!1. (/uities of ac/uiescence 4-ro-rietar% esto--el7=9"erated wen a landowner led a relying "arty to assume tat tey ad or would begranted an interest in tat land' f te relying "arty acted to is or er detriment on tefait of tat assum"tion #e'g' e."ended money in im"roving te land$ ten tere"resentor would be esto""ed from not giving an interest' Terefore, "ro"rietaryesto""el can be an inde"endent cause of action'

Courts often find tat te most a""ro"riate way to remove te relying "arty8sdetriment is to com"el te "ro"erty owner to onour te re"resentationassum"tion!Dillw%n Llewel%n/ *a"s,en D%son/ Cra$$ Arun'

2. ro"issor% esto--el9"erated were one "arty in a contract led a second "arty to believe tat certaincontractual rigts would not be enforced against tem' f te second "arty tencanged is or er "osition on te fait of tat assum"tion te first "arty would not beallowed to enforce tose rigts! Central Lon,on ro-ert% Trust 'i0! Trees'ouse'

6ollowing 'i0! Treesand Co"$e Co"$e, "romissory esto""el could only be usedas a defence #e'g' if te "arties were already in an e.isting contract$ and not as aninde"endent source of action since tis would effectively undermine te doctrine ofconsideration' Tis rule was acce"ted in &ustralia byFe Maintien,rai ua0liaandLe0ione 'atele%'

Walton Stores 4Interstate7 Ma!er 416557unified "ro"rietary and "romissoryesto""el suc tat bot were an inde"endent source of new rigts' Te doctrine ofconsideration was not undermined since te elements and remedy "rovided byesto""el and contract were different, im"ortantly, e+uitable esto""el aims to removedetriment sub%ect to te discretion of te court and not com"el aderence to te

re"resentation #altoug tis may be ordered$'

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(sto--el s Misre-resentation an, +rau,

;rinci"les of esto""el are only concerned wit inconsistent conduct, terefore, were amisre"resentation as been made, esto""el will only "rotect against arm tat resultsfrom an attem"t by te re"resentor to de"art from tat assum"tion rater tan it being

untrue! Mur-!% Oerton Inest"ents'

(SS(NTIAL (L(M(NTS O+ (STO(L

1. Assu"-tion

Te relying "arty must ave ado"ted an assum"tion of fact!For,en Mone%/ or futureconduct! Waltons Stores'

:enerally, te assum"tion must relate to a legal relationsi"! Waltons Stores -erBrennan F'&ltoug e.ce"tions e.ist in regards to! an e."ectation of an interest in

land! Mo$il Oil Australia Lt, Wellco"e International t% Lt,> Dillw%n Llewel%n/ and "arentood or coabitation! W G'

2. In,uce"ent

Te assum"tion may be induced by conduct or absence of conduct of te re"resentor!Waltons Stores'

3. Detri"ental reliance

Relying "arty must ave acted on te assum"tion in a way tat ese will sufferdetriment if re"resentor de"arts from te assum"tion! Co""onwealt! @erwa%en naval retiree!

E.am"les of *etrimental Reliance# asted e."enditure of money eiter on im"rovements to te re"resentor8s land!

Dillw%n Llewel%n/ or in "re"aration for a contract wit te re"resentor! WaltonsStores'

# Time and energy in te "erformance of services for te re"resentor suc asdomestic services! u$lic Trustee Wa,le%/ or building wor)!Facson Cros$%No 2.

# nactivity leading to a loss of o""ortunity to obtain a benefit or avoid a loss! not

e.ercising a contractual rigt suc as an o"tion to renew a lease! S 8 (ro"otions To$in Brot!ers L/ failing to commence litigation during testatutory limitation "eriod! *e Lin,sa% S"it!/ or consenting to ad%ournment oflitigation! Collin 'ol,en' However, inactivity will not be regarded as detrimental iftere is noting te relying "arty could ave done to im"rove its "osition!T!o"son al"er'

# Commencement or continuation of litigation! Co""onwealt! @erwa%en# Cost of rearing cildren! W G# Entering a witness "rotection "rogram and tus losing teir lawful means of

liveliood-! Gra% National Cri"e Aut!orit%

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*etriment must be assessed at te time te re"resentor see)s to abandon te relevantassum"tion and not before!Fe Maintien,rai ua0lia/ and must be bot sufficientand ade+uate #unli)e consideration$! 'awer acific L 'elico-ter C!arter L'

*etriment does not actually ave to be suffered at te time te esto""el is establisedwit te "ros"ect of detriment being sufficient' However, tis "ros"ect must bereasonably founded and cannot be mere s"eculation!Territor% Insurance Office A,lin0ton'

*etriment cannot sim"ly be due to te "erformance of a contractual obligation or a lossof an o""ortunity to breac te contract! Coulls Ba0ot=s (?ecutor 8 Trustee CoLt,/ cf'Fe Maintien,rai L ua0lia -er W!ite F#not te ma%ority view$'

. *easona$leness

Te relying "arty sould ave acted reasonably in ado"ting and acting u"on terelevant assum"tion! Mur-!% Oerton Inest"ents L'

9. )nconsciona$ilit%

t would be unconscionable in te circumstances for te re"resentor to de"art from teassum"tion! Co""onwealt! @erwa%en'

. De-arture or t!reatene, ,e-arture

:enerally an esto""el claim will not arise unless te re"resentor as de"arted from or

treatens to de"art from te assum"tion!T!o"son al"er/ altoug tere is strongcase law to su""ort te view tat an esto""el comes into effect once an assum"tionas been induced and reasonably relied u"on! into"inas Secretar%EDe-art"ent of Social Securit%'

*(M(DI(S )ND(* (STO(L

E+uitable remedies #e'g' s"ecific "erformance or in%unction$ aim to remove a detriment,wic is incurred or will be incurred and are sub%ect to te discretion of te court andare not available as of rigt unli)e common law remedies #e'g' damages for breac of

contract$'

:enerally, if tere is any doubt weter a detriment may be removed by materialdamages or any alternate means ten s"ecific "erformance sould be ordered unlesste defendant can demonstrate tat someting less will be sufficient to remove tedetriment! Co""onwealt! @erwa%en -er Deane F'

However, in certain circumstances monetary relief may be more a""ro"riate! Giu"elli Giu"elli orchard for son/ for instance!

1. t is im"ossible, im"ractical or ina""ro"riate in te circumstances to fulfil te relying"arty8s e."ectations e'g' because teir e."ectations are indefinite, te assum"tion

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related to a "ro"erty wic as since been dis"osed of or enforcement of teassum"tion would cause ardsi" to a rd "arty ! Giu"elli Giu"elli

2' Te value of te e."ected benefit is dis"ro"ortionate to te arm tat would besuffered by te relying "arty as a result of is or er reliance on te assum"tion#minimum e+uity "rinci"le$' n suc a case, a court must grant te relief tat is teminimum necessary to ensure tat te relying "arty suffers no arm as a result ofis or er reliance'

3ote! n general, courts are unwilling to "lace a financial value on te relying "arty8slabour and lost o""ortunities!Fennin0s *ice/ altoug in one "rominent case terelying "arty was com"ensated for teir services at te mar)et rate! u$lic Trustee Wa,le%'

(sto--el s Contract

*istinguised on te basis of liability and remedy, altoug since bot e+uitableesto""el and contract arise from a "romise esto""el, it is often "leaded as analternative to contract'

Contract5 liability arises from a "romise in te form of a deed or su""orted byconsideration wit te "laintiff entitled by common law rigt to a monetary remedywic would "lace tem in as good a "osition as if te "romise was )e"t#damages$/ altoug s"ecific "erformance #an e+uitable remedy$, wic is notavailable as of rigt is often ordered by te court'

(sto--el5 liability arises from re"resentation as to fact or "romise wic asinduced reasonable reliance suc tat te relying "arty would suffer detriment iftis re"resentation was not maintained' 3o entitlement to a s"ecific remedy 5 only

an e+uity being raised in favour of te relying "arty wic is sub%ect to te court8sdiscretion'

reli"inar% A0ree"ents an, (sto--el

# &n esto""el will not arise if te "arties ave failed to settle an essential term in a"reliminary agreement suc as rent in a lease! Austotel L +ranlinsSelfsere L'

# &n esto""el will not arise if te "reliminary agreement is binding in onour only!eo"an=s *ow Mana0e"ent Co$$ecf' ( No"inees t% Lt, Woolwort!s'

riit% an, (sto--el

# & "erson wo is not a "arty to a contract but wo as been led to believe tat teyare a "arty or will receive a benefit under a contract may be able to establis anesto""el if tey ave acted to teir detriment on tat assum"tion!Tri,ent GeneralInsurance Co Lt, McNiece Bros L'

# 4imilarly, a re"resentor wo is not a "arty to a contract will be liable if tey aveinduced a relying "arty to act to teir detriment on te fait of an assum"tion tatte re"resentor will abide by te terms of te contract! Weir 'o%leans L'

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*I@IT O+ CONT*ACT

:enerally, a "erson wo is not a "arty to a contract can neiter enforce te contract norincur any obligations under it, but may receive a benefit from a contract! Coulls

Ba0ot=s (?ecutor an, Trustee Co Lt, ido (oris'

(QC(TIONS TO T'( DOCT*IN( O+ *I@IT

Insurance an, In,e"nification Contracts

rd"arties are able to enforce insurance contracts!Tri,ent General Insurance CoLt, McNiece Bros L/ wic as been e.tended to contracts involvingindemnification due to teir similarity! Gate Gour"et Australia L GateGour"et 'ol,in0'

*estrictie Coenants

rd"arties may incur legal obligations under restrictive covenants affecting land/Tul Mo?!a%/ and si"s! De Mattos Gi$son'

Restrictive covenants bind subse+uent owners of land, and limit wat te land may beused for cf' "ositive covenants suc as a "romise to )ee" a ouse in good re"air wicdo not im"ose legal obligations! *!one Ste-!ens'

A0enc%

&gency 5 if a rd"arty "romised a benefit under a contract can demonstrate e'g' byconsent tat one of te "arties entered into te contract as is or er agent &3* wasnot acting solely for teir own bealf! icwoo,s L ana0o-oulos

Ratification involves te ado"tion or confirmation of a contract by a "erson notoriginally bound by it #e'g' te rd"arty$ and may be used to avoid a""lication of te"rivity rule e'g' in relation to limitation of liability clauses in contracts of carriage ofgoods!T!e New or Star'

:enerally, a contractual "romise may be broadened to confer a benefit on a rd"artynot directly involved in te ma)ing of an agreement so tat te rd "arty is entitled to

enforce te contract! Scruttons Lt, Mi,lan, Silicones Lt, -er Lor, *ei,/ if!

1' Te contract ma)es it clear tat a benefit is to be conferred on a beneficiary/2' Te contract ma)es it clear tat te "romisee is acting as agent of te beneficiary/' Te "romisee was autorised to enter into te contract on te beneficiary8s bealf

#or te contract was subse+uently ratified$ &3*@' Te beneficiary "rovided consideration for te "romise'

Assi0n"ent an, Noation

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&ssignment involves one of te original "arties transferring teir rigts 39T obligations,under te contract to a rd"arty so tat te original "arty is no longer able to enforcetose rigts'

Contractual obligations may not be assigned unless consent is obtained #e'g' viasubcontracting or delegation$ and tus remain wit te original "arty'

3ovation involves te transfer of rigts &3* obligations by terminating an e.istingcontract and entering a new one, usually on te same terms but wit one of te "artiesbeing different'

*istinguised from assignment in tat novation re+uires consent of all te "arties to tee.isting contract unless te contract autorises a "arty to be substituted in te "lace ofan original "arty witout te need for furter agreement! acific Bran,s S-ort 8Leisure L )n,erwors L

Trust

f te "romisee olds rigts under te contract on trust for a beneficiary # rd"arty$, tebeneficiary may indirectly enforce te contract, by suing te "romiseetrustee, or morety"ically by suing te "romisor wit te "romiseetrustee %oined as a defendant!

Tri,ent McNiece Blue 6ircle indemnity'

& trust is a relationsi" wereby "ro"erty #real, tangible, intangible$ is entrusted8 by asettler #grantor$ to be managed by a trustee #wo as legal ownersi"$ for te benefitof anoter wo as beneficial ownersi" #beneficiary$'

n order to determine weter tere is an intention to create a trust courts will e.aminete language of te "arties, te conte.t of te transaction and circumstances of teagreement!Tri,ent McNiece' ntention to create a trust will often be a %oint intentionbut te "romisee8s intention alone is sufficient to create trust!Tri,ent McNiece/ insuc a case, te "romisee will be bot te settlor and trustee of te trust'

3ote! Te "erson ma)ing a contractual "romise to benefit a rd"arty is te "romisor'Tis "romise is made to te oter "arty in te contract #"romisee$' Te rd"artysee)ing to enforce te contract is referred to as te beneficiary'

Mislea,in0 or Dece-tie Con,uct

TeTra,e ractices Act 16;#Ct$ and 4tate and Territory +air Tra,in0 Acts"roibit misleading or dece"tive conduct in trade or commerce and a "erson wosuffers loss as a result of suc conduct is entitled to recover damages or suitableremedy' Recovery does 39T de"end on te enforcing of a contract but rater anassertion of statutory rigts'

f te contractual "romise is a warranty tat a "articular fact is true tere will generallybe no esto""el as te arm suffered by te beneficiary does not result from te"romisor acting inconsistently before and after formation of te contract #i'e' te"romisor temselves believe te fact to be true$ but sim"ly from te falsity of tewarranty! Accountin0 S%ste"s 2HHH 4Deelo-"ents7 L CC' Australia Lt,'

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*(M(DI(S A@AILABL( TO A *OMIS((

Da"a0es

:enerally if non="erformance of an obligation to a rd "arty causes no "articular arm

to a "romisee ten te "romisee will only be entitled to nominal damages!Tri,ent McNiece' However, if te "romisee olds contractual rigts on trust for a rd "artybeneficiary, ten te "romisee can recover all te rd "arty could ave recovered if teywere "art of te contract! Coulls Ba0ot=s (?ecutor an, Trustee Co Lt,'

T!e (n0lis! A--roac!

nFacson 'orion Lt, :16;9

contract 1 exam notes

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