Revision Copyright Guy Harley 2008 1 Terms Terms can be Express In writing Oral Partly in writing and partly oral Implied By the Courts
By legislation Copyright Guy Harley 2008 2 Reasonable Bystander Test Which statements and representations would a reasonable bystander, aware of the circumstances of the case, regard as promissory? The test is objective Parties actual intention is irrelevant
Copyright Guy Harley 2008 3 Reasonable Bystander Test - Guidelines Timing of Statement Was the statement in writing Did one party have special skill or knowledge How objectively important is the representation to the whole deal What words were used
Copyright Guy Harley 2008 4 Parol Evidence Rule Courts presume that written formal contracts that appear to be a complete record of the agreement, contain the whole agreement Exceptions Parties did not intend written document to record
whole of the agreement Written document inaccurately records the parties agreement Terms must be implied to make the agreement workable Collateral contracts Copyright Guy Harley 2008 5 Implied Terms Terms implied by Statute
Terms implied by the Courts Implied as a matter of law Trade Custom Copyright Guy Harley 2008 Implied as a matter of fact Business efficacy Past Dealings 6
Exemption Clauses Courts adopt a 2 step process Has the exemption clause become a term of the contract? If so, does it cover the breach in question? Copyright Guy Harley 2008 7 Does the Clause Cover the Breach? Courts will examine the clause carefully to
determine its effect and limit its scope where possible Generally, the Courts will give effect to the parties intentions as evidenced by the natural and ordinary meaning of the words There are 3 rules that courts use to limit exemption clauses: The Contra Preferendum rule Negligence Clauses The Four Corners Presumption Copyright Guy Harley 2008 8
Void and Voidable Contracts Copyright Guy Harley 2008 9 Void, Voidable & Unenforcable Void Where one or more of essential elements of contract are missing There is no contract Voidable
Parties have option to avoid contract Equitable remedy of rescission Valid & enforceable until one party rescinds Copyright Guy Harley 2008 10 Void, Voidable & Unenforceable Unenforceable Valid contracts Legislative or procedural requirement not satisfied E.g. Sale of Land must be in writing (s26 Law
of Property Act) Copyright Guy Harley 2008 11 Rescission Effect Contract is terminated ab initio (i.e. it is as though there never was a contract) cancels the contract from the point of termination Procedure
Innocent party rescinds by giving notice to the other party Copyright Guy Harley 2008 12 Notice of Rescission Innocent party must give notice of rescission to other party Notice can be implied from conduct Academy of Health & Fitness v Power
Copyright Guy Harley 2008 13 Rescission Available for: Misrepresentation Undue influence Unconscionable conduct Duress Copyright Guy Harley 2008
14 Bars to Rescission Third Party rights adversely affected Substantial restitution not possible Innocent party affirms contract Party wishing to rescind does not have clean hands Lapse of time
Copyright Guy Harley 2008 15 Third Party Rights Rescission is not permitted if the legal rights of an innocent third party will be adversely affected For example, where goods have been on sold in good faith and for value to a purchaser But, rescission will be effective where it occurs before the third party gains an interest
Car & Universal Finance Co v Caldwell Copyright Guy Harley 2008 16 Restitution The parties must be capable of being restored to substantially the position they were in before the contract was entered into Known as Restitution Court can make consequential orders Precise restitution is not necessary Alati v Kruger Brown v Smitt
Not possible where services already supplied pursuant to a contract of service Copyright Guy Harley 2008 17 Affirming the Contract Rescission is not permitted if the contract has been affirmed After discovering misrepresentation, innocent party does any act which indicates that he is treating contract as still
running A delay in rescinding can amount to an affirmation Copyright Guy Harley 2008 18 Clean Hands Rescission will not be permitted if party seeking to rescind has also done something wrong under the contract E.g. One party makes misrepresentation
Other party has breached the contract by not carrying out their obligations Copyright Guy Harley 2008 19 Lapse of Time Lapse of time will not normally deprive innocent party of right to rescind except if long period Leaf v International Galleries (Graw 12.8.4) Copyright Guy Harley 2008
20 Duress, Undue Influence, Unconscionable Conduct and Mistake Copyright Guy Harley 2008 21 Duress A contract entered into due to coercion or
force can be rescinded Coercion can be: To the person; To goods; or Economic duress Copyright Guy Harley 2008 22 Duress (cont.) Duress to the Person Threats of physical punishment or
imprisonment to the person, his family or friends Duress to Goods Threats that are made against a persons property Copyright Guy Harley 2008 23 Economic duress An economic threat that is not legitimate No rule that that commercial parties have to
be fair to one another A threat to break a contract can be economic duress North Ocean Shipping v Hyundai A lawful threat may be illegitimate Cockerill v Westpac Copyright Guy Harley 2008 24 Undue influence The unconscionable use by one person of power possessed by him over another in
order to induce the weaker party to enter into a contract Mitchell v Pacific Dawn Copyright Guy Harley 2008 25 Undue influence Presumed in pre-existing special relationships where one party is in a position of trust and confidence Called a fiduciary relationship
Cases OSullivan v Management Agency Lloyds Bank v Bundy Copyright Guy Harley 2008 26 Fiduciary Relationships
Parent & Child Guardian & ward Principal & Agent Trustee & Beneficiary Doctor & Patient Lawyer & Client Religious advisor & Follower More
Copyright Guy Harley 2008 27 Where No Special Relationship Weaker party must show that there is a relationship of dependence, trust & confidence Stronger Party exerted undue influence to the extent that the weaker party could not exercise an independent judgment There must be more than mere reliance or
influence Weaker party must show that the contract would not have been made without the undue influence Copyright Guy Harley 2008 28 Where no Special Relationship Court will look at: The equality of the bargain The weaker partys ability to make free and independent choices
Domination by one party Dependency on another Need for guidance, advice and support Low intelligence, weak mindedness, illiteracy Age & Health Lack of independent financial or legal advice
Copyright Guy Harley 2008 29 Rebutting Undue Influence Party in weaker position made an independent decision of their own free will No pressure or influence as weaker party encouraged to seek independent advice Weaker party was paid market price Copyright Guy Harley 2008
30 Unconscionable Conduct One party takes advantage of the other parties special disability to the extent that the contract is unfair or unconscionable Blomley v Ryan (S&OR p219\261) Commercial Bank v Amadio (S&OR p61\86) Elements Special disability Absence of any equality between the parties Disability evident to other party Copyright Guy Harley 2008
31 Mistake A party cannot get out of a contract because they made a mistake Exceptions: Mistake due to other partys misrepresentation, unconscionable conduct etc. Common mistake Mutual mistake Unilateral mistake Mistake as to nature of document
Copyright Guy Harley 2008 32 Mistake Mistake at Common Law makes contract void Mistake at equity makes contract voidable Copyright Guy Harley 2008 33 Common Mistake Common Law
Both parties make the same mistake Res Extincta Subject matter of contract has ceasd to exist Res Sua Subject matter of contract already owned by purchaser Cooper v Phibbs Copyright Guy Harley 2008 34
Common Mistake Equity A common misunderstanding An important but not fundamental mistake Mistake through no fault of either party Unconscionable for one party to benefit from mistake No bar to rescission Solly v Butcher (Graw 11.3.5) Copyright Guy Harley 2008 35
Mutual Mistake Parties are talking about different things Both are mistaken Difficult to work out what parties intended No meeting of the minds Raffles v Wichelhaus
Copyright Guy Harley 2008 36 Unilateral Mistake - Equity One party is mistaken as to a fundamental term; and Other party is aware, or should be aware, of the mistake Mistaken party will suffer detriment if not allowed to rescind Taylor v Johnson Copyright Guy Harley 2008
37 Unilateral Mistake Common Law Mistake as to Identity If Third Party rights involved, identity must be important Ingram v Little (Graw 11.5.4) Mistake as to nature of document Non est factum Copyright Guy Harley 2008
38 Mistake as to nature of document Radical difference between what was signed and what party believed they were signing Mistaken party relied on others for advice because unable to read document Understand document Mistaken party not careless Saunders v Anglia Building Society Copyright Guy Harley 2008
39 Rectification Correction of document that does not accurately record parties intention Nobleza v Lampi Copyright Guy Harley 2008 40
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