LAWS1204 Lecture 1: CONTRACTS LECTURE NOTES
CONTRACTS LECTURE NOTES
Lecture one
Lecture One will introduce students to the body of law known as Contracts. There are no required readings
for Lecture One. However, it might well be useful to peruse Chapter One of Thampapillai, Bozzi and Bruce.
Common law method
Key Points:
(i) The common law is an iterative decision-making system.
(ii) The courts seek to do justice in each case while keeping a body of law intact.
(iii) Judges make law incrementally.
(iv) However, sometimes the common law has to develop via an evolutionary leap.
(v) There is significant tension between keeping the law relevant and just, while also maintaining a
fidelity to its structure, rationale and core principles.
• Observations on rules:
• There is a policy rationale behind every legal rule.
• Every legal rule, or set of legal rules, exists in response to a particular type of legal policy problem.
• A legal rule must have a meaning otherwise it has no utility within a legal system.
• Reasonable minds may differ on the interpretation of a legal rule.
• No legal rule, no matter that it may be expressed in absolute terms, is capable of unlimited
application.
• Every rule may be limited or qualified by other rules.
• Whether one rule takes priority over another depends on the facts at hand.
• The hierarchy amongst certain legal rules is not necessarily fixed.
• Whether a particular rule applies depends on the fact circumstances at hand.
• In interpreting and applying the law judges will inevitably make law.
Theories of contract law
• The purpose of theory:
• “i Atho Maso has oeted that it is a eo to ie the la as a disete set of piiples
i a auu ad ithout a otet.
• Theory plays the role of fleshing out the context and rationale behind the law.
• However, Contract Law is overrun with theories.
• Uge: It ould e stage if the esults of a oheet, ihl deeloped oatie theo ee to
oiide ith … a eteded ah of la.
(i) Classical contract theory
• Classical contract theory views the contract as expressing the will of the parties.
• The classical theory emphasises freedom of contract and autonomy.
• This consensus or will theory sees the contract as a set of self-imposed obligations.
• Classial theo is losel itetied ith the otio of the agai that udepis much of
contract law.
• The will of the parties is now largely judged on an objective basis rather than on a subjective basis.
(ii) Reliance Theory or Promise theory
• In theory reliance on a promise should be sufficient to make that promise binding upon the
promisor.
• The reliance theory attempts to find a moral framework within the law.
• Reliance theory also identifies the nature of the risk borne by the promise when they act in trust of
the poisos stateets.
• Protecting that reliance interest is crucial to facilitating a well-ordered legal and commercial
system.
(iii) Relational Theory of Contract Law
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• A contract might be a one-off exchange, alternately it might be a part of an ongoing commercial
relationship.
• Relational theory recognises the economic imperatives underpinning contract law and contracting
in general, but it also recognises the sociological side of contract law.
• Law and the sanctions it provides does not explain every aspect of contractual behaviour.
(iv) Economic Perspectives
• The economic perspective judges law by the economic standard of efficiency.
• There are aspects of contract law that correlate with economic efficiency.
• However, evaluating law by the standard of economic efficiency ignores other essential
considerations within the law.
(v) Contract as property
• A contract may be regarded as a property interest.
• I effet, the popet lies i the poisos futue atios.
Lecture two – Topic 1 – OFFER AND ACCEPTANCE
Lecture Two will examine the doctrine of offer. The following concepts will be relevant to our discussion of
the nature of offer and acceptance:
- Agreement and Formation
- Defining an Offer
- Invitations to Treat
- Mere Puffery
- Unilateral and Bilateral Contracts
- Categories of Offer
- Revocation
1. Agreement and Formation
• What is a contract? – a legally binding agreement between two parties.
• A contract contains obligations and duties.
• A contract invariably involves some form of exchange between the two parties.
• In essence a contract involves one party conferring a benefit upon the other party in
exchange for some other benefit.
• For example, Party A agrees to pay $X to Party B if the latter builds a house for the former.
• There are two promises here: (i) the promise to pay $X and (ii) the promise to build the
house. A contract makes these promises legally binding.
• There are six essential elements of a contract:
(i) There must be an offer.
(ii) There must be an acceptance.
(iii) There must be consideration between the parties.
(iv) The parties must have intended to create legal relations.
(v) The parties must have the capacity to enter into legal relations.
(vi) The agreement must be certain and complete.
• Classical contract theory postulates that there are two parties to a putative contract.
• One party would make an offer.
• The other party would accept the offer.
• Under this model the contract is formed when the acceptance is communicated.
• This suggests that there is a agi oet of foatio - Mensch – Freedom of Contract
as Ideology, (1981) 33 Stanford Law Review 753, 760.
• When this happens there is a meeting of the minds and mutually binding obligations are
formed.
• This theory explains the existence of the offer and acceptance doctrines.
• There are two problems with the theory.
• First, the classical theory assumes equality between the parties.
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• However, the very existence of the vitiating factors doctrines undermines the assumption
underpinning the theory.
• If the parties were truly equal then we would not need doctrinal laws on duress, undue
influence unconscionable conduct and the like.
• If the assumption underpinning the idea is incorrect or not totally true, then the idea itself is
questionable.
• The existence of the vitiating factors doctrines (i) admits that there is not always equality
between the parties and (ii) sets a standard for contractual behaviour.
• Second, there are a number of basic transactions that just do not fit the paradigm of two parties
explicitly reaching a bargain.
• There are a number of transactions in normal life which do not involve any real offer and
acceptance.
• For example, buying a train ticket, hiring a taxi, buying a plane ticket on the internet, your i-
Tues puhases…
• Shrinkwrap, Clickwrap, Browsewrap licenses?
See Pro CD v Zeidenberg ---- How should the law respond?
• Clearly, the rigid offer and acceptance model has limits. There are alternative views.
• Note the views of Lord Denning MR in Gibson v Manchester City Council [1978] 1 WLR 520:
• To my mind it is a mistake to think that all contracts can be analysed in the form of offer and
aeptae. … You should look at the correspondence as a whole and at the conduct of the parties.
• What Lod Deig is suggested is a gloal appoah to otat foatio. This has da soe
support in obiter in Australia. In Integrated Computer Services Pty Ltd v Digital Equipment Corp
(Aust) Pty Ltd BP‘ , at , MHugh JA stated a otat a e ifeed fo
the ats ad odut of paties as ell as o i the asee of thei ods. “iilal, i Brambles
Holdings Ltd v Bathurst City Council (2001) 53 NSWLR 153, Heydon JA stated that the framework of
offe ad aeptae is eithe suffiiet to eplai all ases o eessa to eplai all ases.
• Recent decisions of the New South Wales Supreme Court of Appeal have made it clear that the
global view of contract formation has majority support --- at least in those instances where it is
applicable to the facts.
• For example, in Mushroom Composters Pty Ltd v IS & DE Robertson Pty Ltd [2015] NSWCA 1,
“akille AJA stated, it is ot eessa, i deteiig hethe a otat has ee foed, to
identify a precise offer or acceptance; nor is it necessary to identify a precise time at which an offer
or aeptae a e idetified..
• See also: Universal Music Australia Pty Limited v Pavlovic [2015] NSWSC 791.
• Also Melreef Pty Ltd v Glenn [2015] WASCA 111 and Diao v Cohen [2016] NSWSC 96.
• Wh hast offe ad aeptae ee aadoed?
• Magill v Magill (2006) 226 CLR 551, per Heydon J at [210]:
• The law often develops doctrines which are useful tools of analysis in standard instances,
even though they are difficult to employ in other instances. An illustration is the doctrine of
offer and acceptance in relation to contract formation. That works in many factual
circumstances. The fact that it does not work well, and can only be applied with some
artificiality, in other sets of circumstances, has not been seen as a reason for its wholesale
abandonment.
2. Defining an Offer
• An offer is a statement that if accepted will create a binding contractual relationship between the
offeror and offeree.
• The offeo a sa: If ou agee to do XY), the I ill pa ou $.
• If the offeree accepts this offer, then a contract will form.
• In effect, an offer is a statement of the terms upon which the offeror is prepared to be
contractually bound by the offeree.
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Document Summary
Lecture one will introduce students to the body of law known as contracts. There are no required readings for lecture one. However, it might well be useful to peruse chapter one of thampapillai, bozzi and bruce. The common law is an iterative decision-making system. The courts seek to do justice in each case while keeping a body of law intact. Judges make law incrementally. (i) (ii) (iii) (iv) however, sometimes the common law has to develop via an evolutionary leap. (v) In interpreting and applying the law judges will inevitably make law. In theory reliance on a promise should be sufficient to make that promise binding upon the promisor. Relational theory of contract law: a contract might be a one-off exchange, alternately it might be a part of an ongoing commercial relationship, relational theory recognises the economic imperatives underpinning contract law and contracting. Economic perspectives in general, but it also recognises the sociological side of contract law.
