Luật học - Chapter 9: Contract law 3

This is the prescribed textbook for your course.Available NOW at your campus bookstore!CONTRACT LAW 3CHAPTER 9Learning objectivesAt the end of this chapter you should understand:the tests that determine whether a statement is a term of a contractthe difference between a condition and a warrantyconditions precedent and conditions subsequent and be able to provide examplesexpress and implied termsthe doctrine of privity of contractthe circumstances that will discharge a contractthe doctrine of frustration of contract and examples Learning objectives (cont.)the doctrine of frustration and examples of its applicationwhat is meant by breach of contract and remedies available for the injured partythe definition of specialty contractsthe definition and regulation of franchise agreementsFranchising Code of Conduct and the recent amendments.-4IntroductionOnce a contract has been made, assuming that all six essential elements are present, it may be necessary to consider in some detail the terms contained in the contract.These terms can be either express or implied.Terms can be enforced, but only by a party to a contract—this is the doctrine of privity.A contract can end or be terminated.Terms of a contractThe terms of a contract are its contents. They define the obligations of each party. Determining whether a statement or representation is a term in the contract can sometimes be difficult.The terms of a contract can be express or implied.Tests for determining the terms of a contractDependent upon:Time statement madeForm of statementReliance on special skills and expertiseIntention of parties Resulting in Mere representation Term of contract (collateral contract)Classification of express termsTermSignificanceRemedy if breachedConditionHeart of the contractRescission of contract and/or damagesWarrantyOf less importanceDamages onlyExpress terms of contract statements (made throughout negotiations)Resulting in Mere representation Term of contract No damages Breach Damages Warranty Condition i.e. term of vital importanceTEST: Did party enter contract because of term? No Yes Damages Damages (rescinds contract)Conditions precedent and conditions subsequentPrecedent conditionA term that must be satisfied before the contract can be enforced.Subsequent conditionA term that will terminate the contract due to either the occurrence of a particular event, or a particular act of a party to the contract.Implied termsBy courts (officious bystander test)Reasonable and equitableContract ineffective otherwiseSo obvious it didn’t need to be includedClearly expressibleNot contradictory to other termsBy statute lawSale of Goods Act 1895 (SA)By custom or trade usageCertain, reasonable, notoriousNot contradictory to express termsNot contradictory to statutory restrictionsExemption clausesA term contained in a contract that attempts to reduce or exclude one party’s contractual liability to the other party in certain instances.Can be divided into two categories:Exclusion termsLimiting termsRequirements to give notice of exemption clauseCourts have viewed such clauses conservatively and tend to interpret them against the party seeking to rely upon them.The court will ascertain whether the exemption clause seeking to be relied upon has become a term of the contract.For this to have occurred, it must have been brought to the attention of the party against whom it will be used.Did the other party have notice of it?Exemption clausesActual notice and constructive noticeTypes of notice requiredDocuments that are contractual in natureNon-contractual documents:Ticket casesThe doctrine of privity of contractOnly parties to a contract can sue or be sued on the contract.Exceptions:Insurance Contracts Act 1984 (Cwlth)Person(s) acting as agent or trusteePerson assigning rights and liabilities to anotherDischarge of a contractA contract is regarded as at an end when the word discharged is used.There are several circumstances that will result in the discharge of a contract:performanceagreement between partiesprovision for dischargeoperation of lawfrustrationbreach.Discharge of contract—by performancePerformanceActual Tender (attempted performance)Exceptions to the rule that performance must be exactSeverable contract—allows for payment by instalments and confers some right on the party that has partially performed the contract.Substantial performance—confers the right for the defaulting party to enforce the entire contract but entitles the innocent party to recover damages from any loss caused because a performance was not exact.Acceptance of partial performance—requires free and willing acceptance of partial performance of the contract.Obstruction of performance—if one party is prevented from performing, the other party may regard the contract as at an end.Discharge of contract—by agreementAgreementCancellation of originalagreementSubstitution of newagreementMutual dischargeBoth parties agreeto end contractRelease Party can release otherparty from obligations NovationReplaced by newcontract involving third partyAccord and satisfactionRelease one party fornew agreement with further considerationDischarge of contract—provision for dischargeOptions to terminate Conditions subsequentDischarge of contract—operation of lawBankruptcy Material alteration Merger Discharge of contract—frustrationFrustration(i.e. impossibility of performanceof a contract through no fault of either party)Destruction of subject matterFailure of event totake placeContract of personalserviceChange inlawGovernment interferenceIncrease inburden of performanceThe occurrence of the event must not be the fault of either partyThe frustrating event must make performance of the contract radically different from what was agreed by the parties An event that is unforeseen must occurThe frustrating event must occurafter the contracthas occurredDischarge of Contract—by Breach BreachAnticipatory Renunciation Impossibility Actual during of performance performanceRemedies for Breach of Contract ConditionRight to rescind Damages (reasonably foreseeable)Specific performance InjunctionQuantum meruit Ordinary Nominal Exemplary (mitigate  losses)Specialty contractsLeaseOne party grants exclusive possession of property to another party for a period of time.Hire purchaseThe owner of goods hires the goods in exchange for regular payments to the hirer. Title passes after all payments have been made.Franchise agreementAgreement between a supplier of a product or service, or an owner of a trade mark or copyright (franchisor), and a reseller (franchisee).Franchise agreementA marketing tool and means by which, through a contract, the franchisor grants the franchisee a right to the use of:a productservicesa trade markcopyright, etc.Advantages of franchisingFor franchisor (seller)Ability to penetrate markets quicklyAccess to capital resourcesRisk-sharingFor franchiseeInstant reputationArranged marketingFinancial expertiseEstablished businessThe Franchising Code of ConductDisclosure documentCooling-off periodCopy of leaseAssociation of franchiseesProhibition of general release from liabilityTransfer of the franchiseFranchisor must receive documentation from the franchiseeTermination of a franchiseResolution of disputesAmendments to Franchising Code of Conduct—March 2008Aims to increase the transparency, quality and timeliness of disclosure to franchisees.Places more onerous disclosure requirements on franchisors, including that all details must now be given in full.Disclosure includes comprehensive details of franchisor and their officers’ own business dealings, past franchisees, and a history of the franchise site.Foreign franchisors are no longer exempt from the code.Amendments to Franchising Code of Conduct—July 2010Amendments applicable to franchise agreements commenced, transferred, renewed or extended on or after 1 July 2011.Matters including novation, notices of renewal and methods of dispute resolution addressed.Disclosure document provided by franchisor to franchisee must include:statement that franchise could failany payments that must be made by franchisee to a third party of which the franchisor is awareAmendments to Franchising Code of Conduct—July 2010 (cont.)make reference to any unforseen capital expenditure to be made by the franchiseeinform franchisee of cost contribution obligations for dispute resolutiondisclose any unilateral variations to franchise agreements imposed by the franchisor in any franchise agreements since July 2010inform franchisee regarding confidentiality obligationsinform franchisee as to obligations or options for renewal at conclusion of franchise agreement.Competition and Consumer Act 2010 (Cwlth)Section 45: Exclusionary provisionsSection 46: monopoliesSection 47: exclusionary dealingSection 48: resale price maintenanceSection 20: unconscionable conductSection 18: misleading and deceptive conduct