Contract Law.docx

Contract LawCheck List1. What are the terms of the contract?2. What do these terms mean?3. Have the terms been followed?4. If the terms have not been followed, does the contract effectively exclude or limit the liability for the relevant breach?1. What are the terms of the contract?Content that is expressly contained in a contractIn general, the terms of a contract may be Entirely oral Entirely in writing Partly oral and partly writtenNature of contractual terms For a statement to be a term of a contract, the statement must amount to a promise It is inferred that statements in a contract are promissory in nature unless the words that are used tend against the making of such an inference1. The contents of a contractIdentifying the terms in a contract:Depend on both the nature of the statement made and on the circumstances in which it is made. A statement made during the formation of a contract becomes a term of the contract only if it can be inferred from the circumstances that the statement was intended to be a legally binding promise.Handbury v Nolan F109 Held: the auctioneers statement was an express term of the contract. In particular, the statement was made at a breeders sale where higher prices would be paid for a cow that was pregnant. Furthermore, the statement was made just before bids were invited. The relative importance of particular terms:Conditions: Associated Newspaper v Bancks F110 the test of essentialityWarranties: Bettini v Gye F111Representation distinguished from terms:Oscar Chess v Williams F111 Held: the statement as to the age of the care was a mere representation rather than a contractually binding promise.Opinions distinguished from terms:Expressions of personal opinion must be distinguished from statements of fact and should not be relied on. Accordingly, it will not be inferred that opinions expressed during the formation of a contract are intended as promises. Phrases such as I believe, in my view, I think, and in my opinion indicates that a statement is an opinion. Express and implied agreement to termsObjective agreement to terms:When a person signs a document that they know contains contractual terms, it appears, objectively speaking, that they are agreeing to be bound by those terms. LEstrange v F Graucob F113Terms are final when the contract is created:A contract includes only those obligations or promises which the parties have made at the moment of formation. Terms cannot be added to a contract after it has been made.Agreement to terms contained in written documents:If terms are contained in a document that is made available to the parties at the time of contracting, and the document is one that can reasonably be expected to contain contractual terms, the party receiving the document will be held to have objectively agreed to the terms, even if they do not read or sign it. However, if the document containing terms is not a document that would be generally be expected to contain contractual terms, then it is not reasonable to expect the person receiving it to read what is printed on it and it will not be inferred that such persons have assented to the terms unless those terms are actually drawn to their attention, or a reasonable attempt is made to do so. Causer v Browne F116Terms agreed to by implication ad hoc:For a term to be implied ad hoc, the court must first decide that it was obvious in the circumstances that this is what the parties must have intended when they contracted. And all of the following requirements must also be satisfied before any term is implied into a contract ad hoc: that the suggested term is reasonable and fair, that it is needed to make the contract workable or commercially complete, that the suggested term can be clearly expressed, that it is compatible with expressly agreed terms of the contract. Moorhead v Brennan F119Limitation on evidence that may be led to prove terms implied ad hoc:The necessity in a contract for terms implied ad hoc must arise from an analysis of the written terms of the contract, and not by reference to any extrinsic evidence. Codelfa Construction v State Rail F120Proving the existence of agreed termsWholly written contracts and the parol evidence rule:When a written contract appears on its face to be a complete agreement, the courts will presume that the parties intended their written contract to contain all the agreed terms. Evidence of additional oral terms will not be allowed. Displacing the presumption that a contract is wholly written:Even when a written contract initially appears complete, if what was agreed orally is of obvious importance in the type of transaction in question, the court may conclude that the oral undertaking was intended to be a term.Van den Esschert v Chappell F122Exception to parol evidence rule: complete, ambiguous, mistakeTerms that exclude or limit liabilityIncorporating exclusion or limitation terms in a contract:To be effective, it is essential that exclusion or limitation clauses be properly included in the agreement, as terms of contract.Scrutiny of exclusion or limitation clausesInterpretation contra proferentemThe four corners ruleTerms imposed by law into all contracts F126Universally implied terms: cooperation, good faithTerms implied by law to fill gaps in particular kinds of contract F130Terms imposed by legislation regarding the quality of goodsMerchantable quality F137Fit for purpose F1412. Breach of contractInterpreting the terms of a contractThe ordinary, nature meaning of wordsThe intention of the partiesCommercial realismPost-contractual behaviorHide & Skin F150Identifying different kinds of breachNon-performance, partial performance, substantial performance, and late performance. F155Assessing the seriousness of a breach of contractF161Establishing a breach of contract F1723. Remedies for breach of contractAn award of damages for breach of contractThe compensatory nature of damages: to successfully claim damages for breach of contract, the non-defaulting party must be able to prove both that a breach of contract took place and that the losses in question were caused by that breach. The purpose of damages: an award of damages for breach of contract is calculated to put the non-defaulting party in the same position financially as if the contract had been performed. Radford F178 Tabcorp F179Damages for wasted expenses: damages can be claimed for reasonable expenses incurred in expectation of proper performance of the defaulting partys contractual obligations, to the extent that the expense would not have been wasted if the contract had been properly performed. McRae F179Damages for immediate/direct loss: an award of damages for breach of contract can include compensation for losses that flow naturally from the breach according to the usual or normal course of events.Damages for consequential loss: damages for consequential loss can only be claimed if the losses may reasonably be supposed to have been in the contemplation of both parties, at the time they made the contract. F181Damages for distress or disappointment: an exception is when the contract was for the provision of enjoyment, entertainment or pleasure such as a pleasure cruise or holiday. Baltic F181The duty to mitigate losses: when faced with a breach of contract, the non-defaulting party is required to do everything reasonably possible to mitigate the losses that flow from the breach. Damages following a failure to mitigate: as long as the non-defaulting party acts reasonably in the circumstances in taking mitigating action, then, even if the result is counter-productive, the non-defaulting party is entitled to recover both the actual loss suffered and any additional expenses incurred. Termination of performanceThe availability of termination: termination of performance is only available as a remedy for relatively serious breaches of contract. It is available for a breach of a term that is condition of the contract.No termination for non-fundamental breaches: a breach of warranty, or a breach of an innominate term that does not substantially deprive the plaintiff of an intended benefit of the co