Contract Law - Week 1: Introduction to Contract Law and Offer

Week 1: Introduction to Contract Law

Introduction to the Course

• Admin: Course introduction, contract law concepts, and assessment overview.

• Course Content: Focus on agreement and offer, including what constitutes an offer, transaction examples, communication, termination, and electronic contracts.

• Resources and Expectations: Guidelines for success, including the importance of readings, tutorial attendance, and discussion board engagement.

• Agreement: Basics of contract law focusing on Offer and Acceptance.

Contract Law Basics

• Common Law vs. Codified Law: Contract law is primarily based on common law, with some statutory influences.

• Australian Context: Consideration of UK/AUS history, relevant to understanding how the legal system fits together (though not directly examinable).

• Historical Context: Overview of the evolution of Australian law, including limitations on appeals to the Privy Council through acts like the Privy Council (Limitation of Appeals) Act 1968 (Cth) and the Australia Act 1986 (Cth) and (UK).

Course Structure

The course is structured to address key questions in determining the existence and enforceability of a contract:

• Week 1 & 2: Is there a contract?

  • Offer

  • Acceptance

  • Certainty + Completeness

• Week 3: Intention, Consideration

• Week 4-6: Is it Enforceable?

  • Formalities

  • Privity

  • Capacity

  • Estoppel

  • Part Performance

• Week 7-12: What are the terms?

  • Express Terms

  • Misrepresentation

  • Implied Terms

  • Interpretation

  • Essentiality

  • Specific Terms

Assessment Details

• Contract Drafting Scenarios (Tasks): 10% (Task A - Week 4, Task B - Week 11)

• Contract Interpretation (Assignment): 40% (Week 8)

• Exam: 50% (Exam Period)

• Resources: Essential resources for assessment include materials on ILAC, AGLC, contract drafting, and general writing skills.

Hypothetical Case Study: SooperFoodz

Facts:

• Background: Charles Dodgson owns SooperFoodz, a Brisbane-based food distribution business with 60% market share in Southeast Queensland.

• Negotiation: Stephen Bachman wants to buy SooperFoodz, including the Kenmore factory and intellectual property.

• Charles' Condition: Charles has Mild Cognitive Impairment (MCI), which sometimes affects his concentration and memory.

• Price Disagreement: Charles values the company at $2,500,000$, Stephen offers $1,700,000$.

• Royalty Agreement: They agree on $1,300,000$ upfront plus 5% of profits over two years (projected at $400,000$ - $800,000$ total, or $50,000$ - $100,000$ quarterly).

• Restraint Clause: Stephen includes a restraint of trade clause, not explicitly discussed with Charles. Charles did not read the contract due to an MCI episode and relied on his lawyer.

• Contract Clauses:

  • 3. 1: Purchase price of $1,300,000.00$

  • 3. 2: Additional payment of 5% of Turnover as defined in clause 3.3.

  • 3. 3: Turnover shall be the amount of all revenue received by the purchaser from the sale of products and services related to the operation of the business during the period of two (2) years commencing on the completion date.

  • 3. 4: Additional payments to be made quarterly within 14 days of each quarter's end.

  • 4. 5. 7: For 10 years, Charles agrees not to engage in food production for commercial purposes anywhere in Australia, and will not compete with SooperFoods.

• Completion: On 25 September 2020, the initial payment is made.

• Royalty Payments: Stephen pays consistent royalties of $75,000$ - $80,000$ every three months in 2020 and 2021.

• Business Changes: In November 2021, Stephen reduces marketing and production for SooperFoodz.

• Reduced Royalties: Charles receives only $10,000$ for the quarter ending December 2021.

• Dispute:

  • In January 2022, Charles threatens to sue Stephen for underpayment.

  • Stephen asks for 6 months to redesign the company.

  • Charles demands Stephen remove 'offensive' ads.

  • Stephen agrees, and Charles does not immediately sue.

  • Charles has an MCI episode during the call, affecting his memory of the agreement.

• Further Developments:

  • April 2022: Charles receives $7,000$ royalty payment.

  • April 2022: FreshChef hires Charles as chief innovation officer.

  • May 2022: Charles sues Stephen for breach of contract; Stephen claims breach of the restraint clause.

Legal Questions Arising:

1. Is there a binding contract for Charles to forgo suing Stephen for six months, and is it enforceable?

2. Can clause 4.5.7 (restraint of trade) be enforced against Charles?

3. Did Stephen breach the contract by shutting down production?

Contract Law Concepts

• Offer: An expression of willingness to be legally bound by stated terms.

• Acceptance: Agreement to the terms of the offer.

• Consideration: Something of value exchanged by each party.

• Intention: The parties must intend to create legal relations.

• Formalities: Certain contracts must be in writing.

• Privity: Only parties to the contract can enforce it.

• Capacity: Parties must have the legal capacity to enter into a contract.

• Estoppel: Prevents a party from going back on a promise.

• Part Performance: An exception to the requirement of writing for land contracts.

Diagrams & Flowcharts

• These are useful for understanding contract law, but create your own instead of relying on pre-made ones.

• Flowcharts help in determining if there is a contract, if it is enforceable, and what terms are included.

Assessment Policy

• Assignments submitted late without an approved extension will not be marked and will receive a grade of 1 or 0%.

• There is a 48 hour late submission period.

• No extensions available on tasks A and B

Key Terminology

• Promisor: The party making the promise.

• Promisee: The party to whom the promise is made.

Achieving Success in the Course

1. Watch all videos

2. Read the Readings

3. Attend Tutorials

4. Prepare for tutorials

5. Consolidate learning after tutorials

6. Engage with the Discussion Board

7. Use ISAACS/IRAC/ILAC problem-solving frameworks, and attend QUT workshops.

Generative AI

• Caution: Generative AI cannot be used for assessments unless explicitly permitted.

• Appropriate Uses: Research, ideas, and writing assistance; enabling learning rather than replacing it.

• Example AI Tools: Microsoft Copilot.

• Important Note: Do not rely too much on Generative AI.

Contract Formation: Offer

Agreement: Offer and Acceptance

• For a contract, there must be a 'concluded bargain': Offer and Acceptance.

• It is not always necessary to determine the precise offer and acceptance, but it is easier if you can.

• If not, argue that there is enough to say there is 'agreement' (Clarke v Dunraven [1847] AC 59).

What is an Offer?

• An offer is the expression to another of a willingness to be legally bound by the stated terms.

• It is a voluntary assumption of a legally enforceable duty.

• The communication must indicate a willingness by the alleged offeror to be bound without further negotiation as to the terms of the proposed contract.

• An offer creates in the offeree the power to create a contract by acceptance of the offer.

Unilateral and Bilateral Agreements

• Bilateral: Exchange of promises between two parties.

• Unilateral: Acceptance is the performance of the contract, leaving only one promise to resolve.

What is NOT an Offer?

• Mere puff

• Requests for supply of information

• Invitations to treat

Mere Puff

• Exaggerated or insincere statements not intended to be taken literally.

• Example: Carlill v Carbolic Smoke Ball Co [1893] 1 QB 256 - The deposit of £1000 in the bank showed sincerity and negated the suggestion that it was a mere puff.

Requests for Supply of Information

• A request for information is not an offer.

• Example: Harvey v Facey [1893] AC 552 - Telegram exchange regarding the price of Bumper Hall Pen; stating the lowest price was not an offer to sell.

Invitations to Treat

• An invitation to others to make an offer or enter into negotiations.

• Example: Pharmaceutical Society of Great Britain v Boots Cash Chemists [1953] 1 QB 401 - Display of goods in a store is generally considered an invitation to treat, not an offer.

Transaction Examples

Advertisement of Goods

• Generally considered invitations to treat.

• Grainger & Son v Gough [1896] AC 325 - A wine catalogue with prices was not an offer to sell wine at that price.

Auction

• Each bid represents an offer that could be accepted or rejected by the auctioneer.

• The auctioneer accepts the winning bidder when the hammer falls.

• AGC (Advances) v McWhirter (1977) 1 BPR 9454.

• Payne v Cave (1789) 100 ER 502.

Tenders

• Typically invitations to treat unless the announcement states that the lowest tender will be accepted.

• The court will look at the whole of the circumstances to determine if it is an offer or not.

• Hughes Aircraft Systems v Airservices Australia (1997) 146 ALR 1.

• Blackpool & Fylde Aero Club v Blackpool Council [1991] WLR 1195.

Standing Offers and Options

• Standing Offer: An indication by one party of their willingness to provide goods or services over a specified period.

  • The offer is accepted each time an order is placed.

  • Can be withdrawn at any time because the standing offer is not itself a contract.

• Option: An agreement to keep an offer open for a period of time in exchange for consideration.

Tickets

• MacRobertson Miller Airline Services (1975) 133 CLR 125.

• Thornton v Shoe Lane Parking Ltd [1971] 2 QB 163.

• When was the offer made? When was the information presented?

Communication of an Offer

• Must be communicated from offeror to offeree (Cole v Cottingham (1837) 173 ER 406).

• The communication can be to the whole world (Carlill v Carbolic Smoke Ball Co [1893] 1 QB 256).

• You cannot accept an offer 'in ignorance'; an offer must have been made to accept it (Taylor v Laird (1856) 25 LJ Ex 329).

Terminating an Offer

• Withdrawal

• Rejection

• Lapse of Time

• Death

Withdrawal

• An offer can be withdrawn at any time before acceptance.

• Requires actual and effective communication using substantially the same method (or better) than the original offer.

• Can be effective if withdrawn by a 'reliable source' other than the offeror, as determined by facts of case (Dickinson v Dodds (1876) 2 Ch D 463).

• Shuey v United States 92 US 73 (1875) World at large

Rejection

• If an offer is rejected, the offer is terminated.

• Cannot change mind; if rejected, it is terminated.

• A new offer then needs to be made and then accepted.

• Can be express or implied (Stevenson Jaques & Co v McLean (1880) 5 QBD 346).

• Counter offers amount to a rejection of the first offer (Harvey v Facey [1893] AC 552). However, distinguish this from requests for information or clarity of terms.

• Quadling v Robinson (1976) 137 CLR 192.

Variation

• Any variation in the effect of the offer prevents a contract from being formed.

• Difference in substance: Turner Kempson & Co Pty Ltd v Camm [1922] VLR 498.

• Can be material if “the deviation from the offer is solely in favour of the offeror” (Ex parte Fealey (1897) 18 LR (NSW) 282).

Lapse of Time

• If enough time passes, the offer lapses and is terminated.

• Within the time period – OR – a reasonable time if none set.

• Ramsgate Victoria Hotel Co v Montefiore (1866) LR 1 Ex 109.

• Reasonableness is a question of fact depending on the circumstances of the case.

• Look to the nature of the subject matter and the means to communicate the offer (Manchester Diocesan Council for Education v Commercial and General Investments Ltd [1970] 1 WLR 241).

Death

• If an offeror dies, the offer cannot be accepted after they are dead.

• The offer is not intended to be made to a dead person or to their executors, and the offer ceases to be an offer capable of acceptance (Reynolds v Atherton (1921) 125 LT 690, 695).

Termination Unilateral Contracts

• To avoid such injustice, an offeror cannot effectively withdraw an offer after an offeree has commenced acceptance of it (Veivers v Cordingly [1989] 2 Qd R 278).

• Acceptance takes place when the offeree ‘elects’ to do the relevant act or acts; and the offer becomes irrevocable once the act or acts, which will constitute consideration for the offer, have been partly performed.

• Mobil Oil Australia v Lyndel Nominees Pty Ltd (1998) 153 ALR 198 at 228. Ultimately no clear rule, the decision will depend on the facts of the case.

• Abbott v Lance (1860) Legge 1283.

Electronic Contracts (Part 1)

• Can a contract be made using digital/electronic methods? Of course!

Online Stores

• Goods advertised for sale on the internet: Electronic Transactions (Queensland) Act 2001 (Qld) s 26B.

• eBay International AG v Creative Festival Entertainment Pty Ltd [2006] FCA 1768 where it was held that goods displayed on a website constituted an offer.

Online Auction

• Smythe v Thomas [2007] NSWSC 844

• eBay International AG v Creative Festival Entertainment Pty Ltd [2006] FCA 1768.

Review Questions

• What is a contract? What does it need?

• What is an offer? Define

  • Puff

  • Request for info

  • Invitation to treat

• What is this specific offer?

  • Advertisement

  • Online Auction

  • Tender

  • Standing offer option

• Has the offer been communicated?

  • World at large

  • Knowledge

• Has the offer been terminated?

  • Withdrawn

  • Rejected

  • Lapse of time

  • death