PROMISES INTENDED TO CREATE LEGAL RELATIONS
PROMISES INTENDED TO CREATE LEGAL RELATIONS
- consideration and intention interrelated -
- the law requires that the third element necessary to the contract is an intention to create legal relations- Ermogenous v Greek Orthodox Community of SA Inc (2002) 209 CLR 95 at 105.
- Common positive intention not to contract will be respected - Equuscorp Pty Ltd v Glengallan Investments Pty Ltd (2004)
- Test for intention is objective - Toll (FGCT) Pty Ltd v Alphapharm Pty Ltd
- Question is whether looking at the type of agreement, can the party sue if there is a breach?
Intention- express or implied
- presence of intention depends on the facts of each case- Air Great Lakes Pty Ltd v KS Easter (holdings) Pty Ltd
- the relevant intention may be express or implied- Deutsche Schachtbau-und Tiefbohrgesellschaft mbH v Shell International Petroleum Co Ltd
OBJECTIVE TEST
- what reasonable inference would a third party draw from the parties' words, conduct and surrounding circumstances?
- would a reasonable third party think that the parties intended to be legally binding?
Edmonds v Lawson
- Edmonds a pupil barrister accepted an unfunded pupilage in Lawson's chambers
- Not paid for her work, only for tasks that "warranted payment"
- She claimed she was entitled to the minimum wage in accordance with the National Minimum Wage Act 1998 (UK)
- Lawson argued that there was no contract and that the parties had not intended to create legal relations
- the court looked at the context of the agreement and the fact that the offer of pupilage had come at the end of a time consuming and expensive process with very serious consequences for the pupil
- court found that under the circumstances legal relations were intended
Useful Guidelines
) How close was the family relationship?
2) What did the parties say to one another?
3) What were the surrounding circumstances when the statements were made?
4) Whether the parties have commercial interests?
5) How serious are the consequences for the party acting on the promise?
Family, Social & Domestic Agreements
Presumption that such agreements are not legally binding
- rebuttable presumption exists that agreements made between close relatives are not intended to be contracts
3 types
) husband and wife agreements
- under normal circumstances the courts will refuse to come involved in cases where agreement arises out of normal domestic arrangements - strong presumption
Balfour v Balfour
- for medical reasons a wife could not accompany her husband back to Ceylon from England and he had orally promised to pay her 30 Pounds a month until she could rejoin him
- agreement held not binding as there was a lack of intention in the parties "that they should be attended by legal consequences"- Balfour v Balfour
- reinforced in Australia in Cohen v Cohen (dress allowance case)
Rebuttal
- there has been many cases where agreements between husband and wife have been found to be contractual
) where there is a written agreement - Milliner v Milliner
2) wife return to live with her husband in consideration of the husband's promise to transfer the title of the matrimonial home into both names- Popiw v Popiw
- it is not difficult to infer the requisite intention to create legal relations- especially where implementation requires the promisee or dispose of existing advantages
- this presumption doesn't extend to people after they have divorced or separated or are about to when making the agreement - McGregor v McGregor; Merritt v Merritt
- an agreement between husband and wife can be contractually binding when it is clearly commercial eg) Milliner v Milliner or if it falls outside normal domestic relations eg) McGregor v McGregor; Merritt v Merritt
- presumption reversed and parties treated as intending to be legally bound
2) Other family agreements
- although marital arrangements carry a greater presumption that no legal relations were intended, other purely family agreements will not be enforced if the parties had not contemplated legal enforcement
- close relatives don't usually intend various arrangements they make, to create legal relations and prefer to rely on "family ties of mutual trust and affection"- Jones v Padavatton
Jones v Padavatton- not enforceable
Facts
- mother promised to pay daughter $200 per month if she went to London to read for the Bar
- the mother then purchased a house for the defendant to live in
- it was a large house and rooms were intended to be let out
- the rooms were let however none of the money was forwarded to the plaintiff who was paying a substantial mortgage
Outcome
- due to the daughter's words and action eg) "A normal mother doesn't sue her daughter in court..."the court ascertained that there was no intention of her mother or herself enforcing legal obligations
- no legally enforceable contract present as it was "...not intended to be rigid, binding agreements"- Dankwerts CJ
- Salmon LJ said that the all arrangements in relation to the house were vague and made without contractual intent and therefore the mother still had rights to the house and could evict her daughter who was considered "mere licensee"
Todd v Nicol - enforceable
Facts
- Nicol wrote to her sister in law and niece asking them to come over to Australia from Scotland as they would be given a share in her house
- They moved over however the plaintiff became extremely hard to live with and Nicol moved out
- Nicol asked for her house back
Outcome
- court found that the presumption had been overturned as an objective third party would see the seriousness of moving from overseas to Australia as demonstrating an intention to be bound
- court got around this through asserting that Nicol had given Todd a license and was entitled to revoke it and did
Rebuttal
- courts look at intention in an objective light to see what the parties intended
- this is often done by looking at the consequences of acting in reliance upon the agreement - the more serious the consequences the more likely it is that the parties intended to be bound
Wakeling v Ripley
Facts
- the defendant persuaded his sister and her husband to come and live with him
- promised to leave him the property when he died and to provide them with a home until then
- considerable amounts of correspondence occurred between the plaintiffs and the defendant -the plaintiffs agreed
- the plaintiff brother in law gave up his job, the plaintiff's sold their house in order to move
- after a year they had a quarrel and the defendant went back on his promise and sold the house and disinherited them
Outcome
- the court held that due to the large volume of correspondence and the seriousness of the move for the plaintiffs it demonstrated that the parties had intended their agreement to be binding
- similar decisions seen in Todd v Nicol and Riches v Hogben- question posed is: Would the reasonable person think that this agreement was intended to be legally binding?
3) purely social agreements
- presumption against any intention to create legal obligation in voluntary association eg) clubs and societies
- the court accept that these associations are founded upon consent rather than contract
- if a dispute does arise then the court will not normally intervene
Balfour v Balfour
- gives an example of parties agreeing to take a walk together and offer and acceptance of hospitality
- Lord Atkin: "...Nobody would suggest in ordinary circumstances that those agreements result in what we know as a contract..."
Cameron v Hogan- not enforcable
Facts
- Hogan was refused endorsement by the Labor Party state executive and was expelled from the party
- He alleged that both actions were against party rules
Outcome
- party's rules found not to be an enforceable contract between the members themselves of the members and the executive because party membership had never been intended to confer legally enforceable rights
- followed in Baldwin v Everingham; Thorley v Heffernan
Ermogenous v Greek Orthodox Community
- if the relationship between the association and its members involves property or economic entitlements the consentual involvement may evolve into a contract
Rebuttal
- courts reluctant to find purely social agreements as intended to be legally binding
- however some agreements do have serious consequences
Simpkins v Pays - presumption overturned
Facts
- the defendant, her grand-daughter and the plaintiff regularly entered into fashion competitions run by a Sunday newspaper
- the entries were always made in the defendant's name, but they all contributed to the postage and other expenses and agreed that any prizes would be shared
- they eventually won a prize and the defendant refused to share
Outcome
- it is clear that the parties had contemplated that their agreement would be enforceable in the event of a win
...
This is a preview of the whole essay
Simpkins v Pays - presumption overturned
Facts
- the defendant, her grand-daughter and the plaintiff regularly entered into fashion competitions run by a Sunday newspaper
- the entries were always made in the defendant's name, but they all contributed to the postage and other expenses and agreed that any prizes would be shared
- they eventually won a prize and the defendant refused to share
Outcome
- it is clear that the parties had contemplated that their agreement would be enforceable in the event of a win
- the plaintiff had to share the prize
Lottery
Trevey v Grubb
- everyone that has contributed to the payment of the ticket is entitled to reward
Commercial Agreements
Presumption that parties intend to be legally bound
- onus rests on the party contending that the agreement was not intended to be legally binding to rebut the presumption- Toyota Motor Corp Australia Ltd v Ken Morgan Motors Pty Ltd
Carlill v Carbolic Smoke Ball Co
- as the onus to prove there was no such intention falls on the party alleging it - onus can be quite severe
- the company tried to raise the defence that it had not intended to create legal relations saying that the advert was "mere puff" that no reasonable person would take seriously
- this defence failed
- the offer appeared serious and was reinforced by the statement that 1000 pounds was in a bank ready for recovery "showing our sincerity in the matter"
- the company failed to rebut the presumption of intention
Esso Petroleum Ltd v Commissioners of Custom and Excise
-
Successful Rebuttal
Keller v Holderman
- American case
- Keller gave Holderman $300 for a watch worth about $15
- It was held by the court on evidence that neither party had intended legal consequences
- Joke was obvious to the plaintiff
- No contract had arisen as there was no serious intention to create legal relations
Honour Clauses
- Express stipulation in the agreement that it is not intended to be legally binding
- make an agreement unenforceable at law
Jones v Vernon's Pools Ltd
Facts
- the plaintiff sued on a football pools coupon which he alleged he had posted and the defendants had lost
- the defendants relied on a clause in the agreement that stated that neither the conduct of the pools or any associated agreement or transaction would create a legal relationship between the parties
Outcome
- the inclusion of such a clause meant that the agreement had not been intended to give rise to a legally binding contract
Rose & Frank Co v Crompton (JR) & Bros Ltd
Facts
- the plaintiff American firm and the defendant company had dealt with each other for years
- had a written agreement that included an "honourable pledge"
- a dispute arose and the English companies terminated the agreement without the 6 month notices required by the agreement
Outcome
- court held that the agreement wasn't legally binding
- "honourable pledge" demonstrated an intention of the parties to be bound in honour rather that an intention to create legal obligations
Excluding the court's jurisdiction
GOOD
"This agreement does not give rise to any legal relationship, nor is it intended by the parties that legal consequences should flow from it."
- as this denies any existence of a contract it is permissible
BAD
"No court shall have power or jurisdiction to arbitrate in respect of any matter arising out of this agreement or any breach thereof."
- as this acknowledges that there is a contract but attempts to exclude the jurisdiction of the court in adjudicating on it - it is not permissible
Ambiguous language
- as parties can make an agreement in honour only and demonstrate that there is no intention to create legal obligation, it is vital that they make it manifestly clear in their words
- if there is any doubt, the court will disregard the words and look at the surrounding circumstances to independently determine the true intention of parties
- where express exclusion of the intention is alleged the words used must be clear and unambiguous- Edwards v Skyways Ltd- "ex gratia" not clear enough
- The English court of appeal held in Kleinwort Benson Ltd v Malaysia Mining Corp Berhad that if a commercial agreement was not intended to have legal force then it must be justified by a separate agreement
Summary
) An agreement will only be enforceable if the parties intended that the agreement affect their legal relations
2) Look at the agreement to see if there is express provision regarding intention.
3) Where the parties are silent on intention it is presumed that:
a) parties to agreements concerning social or domestic matters do not intend to be bound and
b) parties to agreement concerning commercial matters do intend to be bound
4) the presumptions may be rebutted by evidence to the contrary
5) the onus of proof is on the person trying to rebut the presumption
CONSIDERATION
Promisor= party who makes the promise
Promisee= party to whom the promise is made
Unilateral contracts= one person making a promise to the other person
Bilateral contracts= both parties make one or more promises to each other
Definition of 'consideration'
Currie v Misa- Lush J
"A valuable consideration in the sense of the law may consist either in some ...benefit accruing to one party, or some forebearance ...suffered or undertaken by the other"
- similar to that given by Lord Dunedin in Dunlop v Selfridge when he stated that consideration is the "an act of forebearance, or the promise thereof, is the price for which the promise of the other is bought, and the promise thus given for value is enforcable."
) A promise must be paid for in order to be enforceable
Parastatidis v Kotaridis
- gratuitous promises that are not under seal is not enforceable - promisee has no rights at law
- consideration is the amount paid for the promise
Example 1
Sarah promises to supply goods to Ben for $100
- Sarah = promisor, Ben= promisee
- $100 is the sum for the consideration of Sarah's promise
- Receipt of that money will benefit Sarah and the payment will be a detriment to Ben
2) Consideration moves from the promisee
- the person who wants to enforce the promise must pay for it
- have to establish consideration in order to enforce it
- in bilateral contracts the plaintiff only needs to establish that they provided consideration for the defendants promise
Fleming v Bank of NZ- an agent can pay the consideration on the promisee's behalf
3) Consideration need not flow to the promisor
- the consideration must flow from the promisee but it does not need to flow to the promisor
- the promisor can direct the consideration to a third party
- if consideration is provided to the third party then it will be good making the promisor's promise enforceable at law
Bolton v Madden
Facts
- the plaintiff and defendant made an agreement to give 28 votes of theirs to benefit a child
- they agreed to vote for the other party's child to be benifitted
- the plaintiff had to pay 7 pounds 7 shillings to acquire an additional 28 votes and was suing for that amount
- the 28 votes used by the plaintiff to support the child the defendant wanted to benefit was good consideration
- the defendant argued that he had not been provided with consideration for his promise from the plaintiff and therefore it could not be enforced
Outcome
- court held that consideration had moved from the plaintiff because he conferred the benefit to a third party at the promisor's request
- the fact that the promisor had not personally benefited was immaterial
4) Consideration may be a benefit to the promisor or a detriment promisee
- consideration takes the form of either -
a) a benefit to the promisor OR
b) a detriment or forbearance to the promisee incurred at the promisor's request
Hamer v Sidway
Facts
- William Story promised to pay his nephew $5000 if he refrained from, drinking, smoking, swearing and gambling until he was 21.
- He did but it was still owing when the uncle died and the uncle's executor's refused to pay him.
Outcome
- nephew contractually entitled to the money
- his forebearance was good consideration
Carlill v Carbollic Smoke Ball Co
- Lindley LJ deciphered that good consideration had taken place based on benefit and detriment
- He said that it was at the company's advantage if it could gain public confidence in its product
- Mrs Carlill put herself at inconvenience at the company's request
- She had done what was requested of her by the company - that was sufficient for good consideration
5) Consideration may be executed, executory, but not past
Executory
- considered executory if the act or forebearance is still to occur
Example- if 2 people promise to mow the others lawns for an amount of money then the consideration would be executory as both parties still have to perform the promised acts
Executed
- the party has done what was promised - consideration has been performed
- good consideration
Past
- act or forebearance pre-dates the promise
- not good consideration because the act of forbearance must occur as a response to the promise
- promise must have been in existence and communicated to the promisee before any act or forbearance supposedly constituting consideration can occur
- if an act is not done in reaction to a promise it is not good consideration
Eastwood v Kenyon
Facts
- Eastwood was promised by Kenyon to be reimbursed for the money he spent Sarah's (Kenyon's wife) interests while being her guardian
- After the marriage Kenyon went back on his word
Outcome
- Eastwood had not provided consideration for Kenyon's promise to reimburse him
- The payments made for Sarah's education and the upkeep of the estate were past consideration
- The promise was gratuitous = only moral obligation and therefore not enforceable at law
- Endorsed in Roscorla v Thomas and Anderson v Glass
Not all past acts constitute past consideration
- in certain cases an act or forebearance pre-dating a promise to confer some benefit in exchange for it can be considered good consideration if:
Rules have been adduced from Pao On v Lau Yiu Long; Re Douglas; Ex parte Starkey & Bluebird Investments v Graf
) the act or forbearance occurred at the request of the promisor and
2) if at the time the parties understood that the act was to be paid for through the conferring of a benefit (such as subsequent payment) in exchange for it
3) the compensation must have been promised in advance instead of in retrospect is recoverable (added after Lampleigh v Brathwait) and would have been legally recoverable
- needs to be an implied promise in the initial request that there was to be payment which is supported in a subsequent promise
- there must be an act on the part of the promisee that could not be explained as done out of friendship or generosity of the promisee's heart
- such acts will constitute executed consideration and not past consideration
Lampleigh v Brathwait
Facts
- Thomas Brathwait had killed Patrick Mahume and had asked Lampleigh to intercede on his behalf for a royal pardon
- Lampleigh exerted himself for Brathwait, traveling at his own expense
- Brathwait promised him 100 pounds for his trouble
- He went back on his word and Lampleigh sued
- Brathwait argued that the consideration was past
Outcome
- Lampleigh won
- Court found that an act that pre-dates a promise can be good consideration if it was done at the request of the promisor and both parties understood at that time that there would be payment for it- Hobart LCJ
This case gives a better understanding of the law as it includes the 3rd consideration above
Re Casey's Patents; Stewart v Casey
Outcome
Bowen LJ
"the promise to render future services, if an effectual promise, is certainly good consideration...the fact of a past service raises an implication that at the time it was rendered it was to be paid for...when you get in the subsequent document a promise to pay, that promise may be treated either as an admission which evidences or as a positive bargain which fixes the amount of that reasonable remuneration of the faith of which the service was originally rendered."
6) Consideration must be something of value
Lord Dunedin in Dunlop v Selfridge when he stated that consideration is the "an act of forebearance, or the promise thereof, is the price for which the promise of the other is bought, and the promise thus given for value is enforcable."
- consideration needs to be sufficient but it need not be adequate
- the consideration that the promisee provides need not be equal to the value of the promisee's promise- however it must have a value
- without value there can be no benefit or detriment
Value in the eyes of the law
- this concept goes further than just intrinsic value and demonstrates that something with no intrinsic value may have a special significance to the promisor = special value
- eg) if the promisor collects bottle caps then the bottle cap could constitute good consideration because of its special value to the promisor
Chappell & Co Ltd v Nestle Co Ltd
Facts
- Nestle offered to sell records of the song "Rock Shoes" for 1s 6d plus three choc bar wrappers
- Chappell & Co owned the copyright on the song and Nestle had not obtained their permission
- Chappell & Co sued and it was clear that they would succeed unless they complied with s 8 of the Copyright Act 1956 (UK) which stated that anyone could make copies of the records provided that they paid the copyright holder 6.25% of the ordinary retail selling price
- Nestle offered Chappell & Co 6.25% of the 1s 6d but they refused suggesting that that amount was not 6.25% of the ordinary selling price
- Chappell & Co argued that "ordinary retail price" was not 1s 6d but 1s 6d plus three chocolate bar wrappers
- Nestle argued that the wrappers were not part of the consideration as they were valueless
Outcome
- the wrappers did form part of the consideration
- they had value to the company because requiring them to be sent promoted Nestle products
- the value was not in the wrapper but in the increase of sales
- as s8 alluded to "ordinary retail selling price" it would constitute the whole consideration
- the transaction wasn't covered by was not covered in the section and Nestle could not use the records
7) Consideration must be distinguished from motive
- consideration requires that the promisor gets something in return for the promise however in motive that is not the case
- consideration is not concerned with why the offeror makes the offer
- Chitty: "Consideration for a promise is always a motive for promising; but a motive for making a promise is not necessarily consideration for it in law."
Thomas v Thomas
Patterson J
"Motive is not the same thing with consideration."
8) Forbearance as consideration
- Forbearance can constitute good consideration when it requires the non-exercising of a right at the request of the promisor
- Forebearance= deliberately not doing something or exercising a particular right on the request of another
- demonstrated in Dunton v Dunton that consideration does not need to be an act or thing it may be a promise not to do something that the promisee was entitled to do
- forbearance to sue can be good consideration- plaintiff needs to believe that they could have won as if they don't they aren't giving up anything and it can't be good consideration- Callisher v Bischoffsheim
9) Acts or forbearances not constituting consideration
- some acts, promises or forbearances cannot be considered good consideration including:
a) acts, promises or forbearances in performance of an existing duty;
b) acts promises or forbearances in discharge of an existing duty.
Acts or forbearances in performance of an existing duty
- there is no conferring of additional benefit or incurring an additional detriment by doing or forbearing from doing that thing and therefore acts or forbearances in performing an existing duty is not good consideration
- the promisee neither gives or gives up anything he or she was not already obliged to give or give up
- Wigan v Edwards per Mason J:
"The rule expresses the concept that the new promise undistinguishable from the old, is an illusory consideration."
Rule: Unless what the promisee gives or what the promisor receives is something to which there is no previous entitlement, the thing received will not be good consideration.
Acts done in performance of existing duties include
a) Acts or forbearances in performance of an existing public duty;
b) Acts or forbearances in performance of an existing duty to the promisor;
c) Acts or forbearances in performance of an existing duty to a third party.
Acts or forbearances in performance of an existing public duty
Public duty= things that members of the community give and receive as a right
- no one is entitled to bargain to obtain a personal benefit in exchange merely for the performance of a public duty
- eg) no one can hold another to a contract to pay money in exchange for a promise that the other will not be harmed
- this is because the promisee is already under a public duty not to inflict harm and the promisor is already entitled to expect that he or she will be able to live life free from such harm
- Rule: an act done in performance of an existing public duty does not constitute good consideration
Collins v Godefroy
Facts
- Collins had been subpoenaed to give evidence in a case in which Godefroy was a litigant
- Godefroy had promised to pay him for giving the evidence
Outcome
- there was no consideration for the promise
- a subpoena imposes a public duty to give evidence- the performance of a public duty is not consideration
- reinforced in Jamieson v Renwick
Exception 1) performance of a public duty at a time when it is not necessary can be considered good consideration
Eg) off - duty police officer where extra protection would be good consideration for their promise to pay for it
- Glasbrook Bros v Glamorgan County Council
- Harris v Sheffield United FC
Exception 2) Acts or forbearances in performance of an existing duty to the promisor
- an act or forbearance will not be good consideration if it involves the promisee undertaking or refraining from doing something they were already obligated to do for the promisor
- the promisor gets nothing more than they were entitled to anyway
- Stilk v Myrick; Hartley v Ponsonby
Exceptions to the rule - won't apply in these situations
) An existing agreement is terminated by the parties and a new one substituted for it
2) An additional payment is promised in compromise of a bona fide dispute
3) Additional risks are undertaken by the promisee or where the promisee provides some additional act or forbearance
eg) Hartley v Ponsonby- the additional performance in his job went beyond his original contract and was good consideration for the master's promise to pay an extra 40 pounds on top of his wages
Expansion of rule 3
* In 1991 the UK Court of Appeal
* Williams v Roffey Bros & Nicholls (Contractors) Ltd [1991] 1 QB 1 (Graw page 127; para [6.4.5])
o "Practical benefit" was good consideration.
* Glidewell LJ (at 15-16) (Graw page 127; para [6.4.5]):
"...the present state of the law on this subject can be expressed in the following proposition:
(i) if A has entered into a contract with B to do work for, or to supply goods or services to, B in return for payment from B; and
(ii) at some stage before A has completely performed his obligations under the contract B has reason to doubt whether A will, or be able to complete his side of the bargain; and
(iii) B thereupon promises A an additional payment in return for A's promise to perform his contractual obligations on time; and
(iv) As a result of giving his promise, B obtains in practice a benefit, or obviates a disbenefit; and
(v) B's promise is not given as a result of economic duress or fraud on the part of A; then,
(vi) The benefit to B is capable of being consideration for B's promise, so that the promise will be legally binding."
* Supreme Court of New South Wales - Musumeci v Winadell Pty Ltd (1994) 34 NSWLR 723 (Graw page 128; para [6.4.5])
o Applied the "practical benefit" test from Williams v Roffey.
o See Santow J (at 748) (Graw page 128):
"Landlords are not in the habit of extending rent concessions for purely altruistic reasons. More likely there was a strong element of enlightened self-interest...it is well known that vacant shops are not in the interests of the landlord while a reputation for fairness is. The landlord/owner benefits from uninterrupted, successful trade overall in that shopping centre...particularly when it comes to renewing leases, or when vacancies otherwise arise and the landlord wants to attract tenants.
PROMISSORY ESTOPPEL & CAPACITY
Part 1: PROMISSORY ESTOPPEL
* Graw (page 135; para [6.6.1]) promissory estoppel is "a doctrine which, when it applies, estops (or prevents) promisors reneging on their promises where it would be unconscionable for them to do so.."
* Equitable in nature - now generally referred to as equitable estoppel.
* Graw (page 140; para [6.6.5]): "essentially, it [promissory estoppel] only operates where concepts of equity and fair play demand that it be used to avoid injustice where one party has acted on an assumption positively engendered by the other."
Origins of Promissory Estoppel
* Lord Denning in Central London Property Trust v High Trees House Ltd [1947] KB 130 (Graw page 135-136; para [6.6.2])
Obiter dictum of Lord Denning:
"If parties...by their own act or with their own consent enter upon a course of negotiation which has the effect of leading one of the parties to suppose that the strict rights arising under the contract will not be enforced, or will be kept in suspense, or held in abeyance, the person who otherwise might have enforced those rights will not be allowed to enforce them where it would be inequitable having regard to the dealings which have thus taken place between the parties." (Graw, page 135-136)
Development of the doctrine
* Originally restricted in two ways:
o 1. It applied only to cases in which the parties were in an existing contractual relationship (eg High Trees); and
o 2. Restricted to being a defence to a claim by a promisor who had subsequently broken the promise and was then trying to assert their legal rights. (eg. Combe v Combe - Graw page 141; para [6.6.6])
* ie. "a shield not a sword".
* These restrictions now done away with due to Walton Stores.
The development of the doctrine in Australia
* 1983 - High Court, Legione v Hateley (1983) 152 CLR 406 accepted the doctrine of promissory estoppel in Australia,
* Waltons Stores (Interstate)) Ltd v Maher (1988) 164 CLR 387 (Graw page 137; para [6.6.3], Carter & Harland casebook, page 148)
o "We have not yet obtained our client's specific instructions to each amendment requested, but we believe that approval will be forthcoming. We shall let you know tomorrow if any amendments are not agreed to."
o "By way of exchange"
o "Go slow".
The Elements of Estoppel
Brennan J:
* Brennan J at 428-429 (Carter & Harland Casebook, page 158):
"In my opinion, to establish an equitable estoppel, it is necessary for a plaintiff to prove that
(1) the plaintiff assumed or expected that a particular legal relationship existed between the plaintiff and the defendant or expected that a particular legal relationship would exist between them and, in the latter case, that the defendant would not be free to withdraw from the expected legal relationship;
(2) the defendant has induced the plaintiff to adopt that assumption or expectation;
(3) the plaintiff acts or abstains from acting in reliance on the assumption or expectation;
(4) the defendant knew or intended him to do so;
(5) the plaintiff's action or inaction will occasion detriment if the assumption or expectation is not fulfilled; and
(6) the defendant has failed to act to avoid that detriment whether by fulfilling the assumption or expectation or otherwise."
Mason CJ and Wilson J:
* A more simplified approach than Brennan J.
"...equity will come to the relief of a plaintiff who has acted to his detriment on the basis of a basic assumption in relation to which the other party to the transaction has played such a part in the adoption of the assumption that it would be unfair or unjust if he were left free to ignore it....The appellant's inaction, in the circumstances, constituted clear encouragement or inducement to the respondents to continue to act on the basis of the assumption which they had made. It was unconscionable for it, knowing that the respondents were exposing themselves to detriment by acting on the basis of a false assumption, to adopt a course of inaction which encouraged them in the course they adopted {therefore}...the appellant is estopped from retreating from its implied promise to complete the contract (at 407-408)."
* Basic elements from Mason CJ and Wilson J:
o 1. Defendant induces an assumption;
o 2. Plaintiff acts on the basis of that assumption to its detriment;
o 3. Defendant knows that plaintiff is exposing itself to detriment by acting on the basis of that false assumption;
o 4. Defendant's behaviour in the circumstances is unconscionable;
o 5. Defendant will be estopped from retreating from its promise to complete the contract.
Restrictions on the doctrine
The effect of estoppel
* Remedy -minimum necessary to do justice between the parties.
* Commonwealth v Verwayen (1990) 170 CLR 394 (Graw page 137-138; para [6.6.3])
* The courts will consider what detriment has been suffered by the person who has relied on the promise, undertaking or assurance.
* They will then only do what is necessary to compensate for that detriment.
Equitable remedies
* Discretionary remedies.
* "You must come to the court with clean hands"
Part 2: CAPACITY
Introduction
The common law
* The traditional categories of persons lacking contractual capacity:
o Minors (ie. persons under the age of 18 years)
o mentally ill persons
o intoxicated persons
o nationals of foreign countries (aliens)
o corporations
o married women
o bankrupts
o imprisoned persons
MINORS
* 18 years -section 5 of the Age of Majority Act 1972 (WA)
* Section 199(2) of the Life Insurance Act (Cth) 1995 16 year olds can enter into life assurance contracts.
MINORS AT COMMON LAW
(a) VALID CONTRACTS
* 2 types of contracts that minors will be legally bound by.
o 1. Contracts for the supply of "necessaries"; and
o 2. Beneficial contracts of service.
Contracts for the supply of necessaries
What are necessaries?
* Graw (page 149-150; para [7.3.2]) -, "In very broad terms, necessaries are those things without which an individual cannot reasonably exist in the society in which he or she lives. Clearly, they include food, clothing, shelter, medical care and so on."
* Case example: Chapple v Cooper (1844) 153 ER 105
* Alderson B (see long quotation page 150 Graw):
o Things necessary without which an individual cannot reasonable exist
o Food, raiment (clothing), lodging
o Proper cultivation of the mind
o Instruction in art, trade or religion
* Alderson B:
"The classes being established, the subject matter and extent of the contract may vary according to his station and rank."
* See for example, Ryder v Wombwell (1868) LR 4 Exch 32 (Graw page 151; para [7.3.4])
Legislative definition
* Section 2 of the Sale of Goods Act 1895 (WA) defines necessaries as:
"'Necessaries' in this section means goods suitable to the condition in life of such infant or minor or other person, and to his actual requirements at the time of sale and delivery."
The questions to ask
o Are the goods or services suitable to the minors station in life?; and
o Were the goods or services in fact necessary at the actual time of delivery (ie. were they necessary at the time they were purchased)?
Liability of minors
Beneficial contracts of Service
* Graw - "...the term beneficial contracts of service usually encompasses all those contracts of employment by which minors either: (a) provide themselves with a means of self support; or (b) provide themselves with a means of obtaining instruction or education to fit them to earn a living at a suitable trade or profession."
* Graw (page 156; para [7.4.1]) - apprenticeships, cadetships and articles of clerkship are examples of category (b).
* Case example is Roberts v Gray [1913] 1 KB 520 (Graw page 154; para [7.3.9])
o Note: Graw has this case in his section on "necessaries" - Graw points out that education or instruction can also be regarded as a necessary.
* Another case example is Hamilton v Lethbridge (1912) 14 CLR 236 (Graw page 157; para [7.4.4])
Beneficial or detrimental
* See for example, De Francesco v Barnum (1890) 45 CH D 430 (Graw page 158; para [7.4.4])
o Phineas T. Barnum.
Trading contracts: an exception
* Case example: Mercantile Union Guarantee Corporation Ltd v Ball [1937] 2 KB 498 (Graw page 160; para [7.5.1])
(b) VOIDABLE CONTRACTS
* Contracts may fall within another 2 categories:
o 1. Contracts that are binding on the minor unless repudiated by them while still a minor or within a reasonable time after 18 years; and
o 2. Contracts that are not binding upon a minor unless ratified by them within a reasonable time after attaining adulthood.
. Contracts that are binding unless repudiated
* Carter text book - (page 302; para [15-17])
* Carter - "...contracts whereby a minor acquires property of a permanent nature to which continuing obligations are attached."
* Examples (pg 148 Graw):
o Contracts to lease or purchase land;
o Purchase of shares
o Partnership contracts
o Contracts to acquire a business.
2. Contracts not binding until ratified within reasonable time of turning 18
MENTALLY ILL
* The contract is voidable
* Onus of proving both of the following:
o 1. At the time of contracting they were unable to understand what they were doing; and
o 2. The other party was aware or ought to have been aware of their condition.
* See Lord Escher MR in Imperial Loan Co v Stone [1892] 1 QB 599 at 601 (page 167 Graw, para [7.8.1])
"When a person enters into a contract, and afterwards alleges that he was so insane at the time that he didn't know what he was doing, and proves the allegation, the contract is binding on him in every respect whether it is executory or executed, as if he had been sane when he made it, unless he can prove further that the person with whom he contracted knew him to be so insane as not to be capable of understanding what he was about."
INTOXICATED PERSONS
* Case example: Blomley v Ryan (1956) 99 CLR 362 (Graw page 168; para [7.8.2])
* Students can look at the summary of Matthews v Baxter (1873) LR 8 Ex 132 (Graw page 170; para [7.8.4])
FOREIGN NATIONALS
* Also known as "aliens" eg. in your Graw book!
* If a foreign national wishes to acquire an Australian Company, or to purchase certain types of property, they may need Foreign Investment Review Board approval (web site www.firb.gov.au).
CORPORATIONS
* S124 of the Corporations Act 2001 (Cth) - separate legal person capable of suing and being sued in its own name.
* Section 126(1) Corporations Act 2001 (Cth) (reproduced in Graw, page 174) -through human agents.
* Section 127 Corporations Act 2001 (Cth) now provides two ways in which a company can execute (sign) its contracts without having to use a "common seal"
o 1. For a company that has more than one director, the contract should be signed by 2 directors, or a director and the company secretary; or
o 2. If the company is a sole director/company secretary company, by the sole director signing the contract on behalf of the company
Sample signing clause:
SIGNED by EVANS PTY LTD
(A.C.N. 001 002 003) in accordance
with Section 127(1) of the Corporations
Act 2001 (Cth) in the presence of:
Director:
Director/ Company Secretary:
INCOPORATED ASSOCIATIONS
* Associations Incorporation Act 1987 (WA)
* Section 4(1) - eligibility for incorporation - 5 or more members, etc.
* Section 4(2) - cannot incorporate if the purpose is for "trading or securing pecuniary profit to the members".
* "not for profit"
* "Body corporate with perpetual succession and a common seal" - section 10(a)
* "May sue and be sued in its corporate name" - section 10(d)
* Section 13 - "an incorporated association may do all things necessary or convenient for carrying out its objects and purposes, and...may...enter into any contract it considers necessary or desireable."
* Carter text book (page 317; para [15-55]) discuss "unincorporated associations" which have no legal personality independent of their members and therefore no contractual capacity.
MARRIED WOMEN
* Section 3(2) of the Law Reform (Miscellaneous Provisions) Act 1941 (WA).
BANKRUPTS
* Bankruptcy Act 1966 (Cth)
* Section 269(1)(a) - Bankrupts may not obtain credit or enter into contracts for more than $3,000 without informing persons they are dealing with that they are a bankrupt.
* Section 269(1)(b) - may not carry on business without disclosing to persons with whom dealing that they are bankrupt.
PRISONERS
* "Attainted" - which Graw (page 171; para [7.9.1]) - their blood was corrupted and their property was forfeited to the Crown.
