Ace your exams in style

C
o
n
t
r
a
c
t

with UniCramNotes in town!

L
a
w
N
o
t
e
s

Contract Law
Cram Notes
2011
1st Edition

UniCramNotes.com
Copyright UniCramNotes.com 2011

Page 1

Ace your exams in style

C
o
n
t
r
a
c
t

with UniCramNotes in town!

L
a
w
N
o
t
e
s

TABLE OF CONTENTS

1. INTRODUCTION ....................................................................................... 4
A. How to use Cram Notes .......................................................................................................... 4

2. WAS THERE AN OFFER? ........................................................................... 4

A. Was an offer made? .................................................................................................................. 4
B. What was the nature of the offer? ...................................................................................... 5
i.

ii.

Invitation to treat ............................................................................................................................ 5

1)
Display of goods for sale ................................................................................................... 5
2)
Auctions .................................................................................................................................... 6
Unilateral contract .......................................................................................................................... 6

C. Was the offer withdrawn or otherwise cancelled? ........................................................ 6

i.
ii.
iii.
iv.
v.

Withdrawn ......................................................................................................................................... 6
1)
Options ...................................................................................................................................... 6
Lapse .................................................................................................................................................... 7
Counter-offer or inquiry ............................................................................................................... 7
Rejection ............................................................................................................................................. 7
Unilateral contract .......................................................................................................................... 7

3. WAS THERE ACCEPTANCE OF THE OFFER? ................................................. 7

A. Was there conduct indicating acceptance ....................................................................... 8
B. How was the offer accepted? ................................................................................................ 8
i.
ii.
iii.
iv.

Expressly communicated.............................................................................................................. 8
Implied acceptance (silence & by conduct) ......................................................................... 8
Offeror Dispenses with Need for Communication (Unilateral contract) ................... 9
Postal Acceptance rule.................................................................................................................. 9
1)
Scope.......................................................................................................................................... 9
2)
Application ............................................................................................................................... 9

C. Which offer was accepted & on what terms? ............................................................... 10

i.

Battle of the forms ....................................................................................................................... 10

4. WAS THERE CONSIDERATION? ............................................................... 10

A. What was the consideration bargained for? ................................................................. 11
i.
ii.
iii.
iv.
v.

Quid pro quo ................................................................................................................................. 11

Illusory .............................................................................................................................................. 11
Sufficiency of consideration..................................................................................................... 11
Past consideration ....................................................................................................................... 12
Existing legal duty ........................................................................................................................ 12
1)
Exceptions ............................................................................................................................. 12

B. Did consideration move from the promisee? ............................................................... 12

5. WAS THERE AN INTENTION TO CREATE LEGAL RELATIONS? ..................... 13

A. Was there an objective and clear intention to create legal relations? ................ 13
B. Presumptions ............................................................................................................................ 13
i.
ii.

Social relationship........................................................................................................................ 13
Commercial relationship ........................................................................................................... 13

C. Government policy .................................................................................................................. 14

D. Preliminary agreements (subject to contract)............................................................... 15

6. IS THE CONTRACT COMPLETE AND CERTAIN? .......................................... 15

A. Complete Does it contain all the requisite essential terms?................................ 16

Copyright UniCramNotes.com 2011

Page 2

Ace your exams in style

C
o
n
t
r
a
c
t

with UniCramNotes in town!

L
a
w
N
o
t
e
s

B. Certainty Can the imprecise & ambiguous terms be given meaning

consistent with intention? ............................................................................................................ 16
i.
Is there a readily ascertainable external standard to give the term an
appropriate and reasonable operation?.......................................................................................... 16
ii.
agreements to agree or negotiate ........................................................................................ 16
iii.
Do terms depend on settlement by third party? ............................................................ 17

C. Is the promise illusory? .......................................................................................................... 17

D. Can the offending term be severed or waived? ........................................................... 17

7. WAS THERE PRIVITY OF CONTRACT?....................................................... 18

A. Is the person a party to the contract?.............................................................................. 18
B. Has the person provided consideration? ....................................................................... 18
C. Remedies available.................................................................................................................. 18
i.
ii.

Damages .......................................................................................................................................... 18
Specific performance .................................................................................................................. 18

8. WAS THERE CONDUCT GIVING RISE TO AN ESTOPPEL?.............................. 19

A. Forms of estoppel.................................................................................................................... 19
i.
ii.

B.
C.
D.
E.
F.
G.
H.

Common law estoppel ............................................................................................................... 19

Equitable estoppel ....................................................................................................................... 19

Assumption as to existing fact or future conduct ....................................................... 19

Inducement to adopt assumption..................................................................................... 20
Reliance upon assumption ................................................................................................... 20
Representor knew or intended that representor act in reliance ............................ 20
Was the reliance detrimental? ............................................................................................ 20
Representor failed to act to avoid detriment ............................................................... 20
Is there proportionality between the relief granted and detriment suffered? . 21

9. WHAT ARE THE TERMS OF THE CONTRACT? ............................................ 21

A. Incorporation of terms .......................................................................................................... 21
i.
ii.
iii.
iv.

Written terms and effect of signature ................................................................................. 21

Incorporation of terms by notice (ticket cases) ............................................................... 22
Incorporation by a Course of Dealings ............................................................................... 22
Statements made during negotiations ............................................................................... 23

B. Implied terms ............................................................................................................................ 24

i.
ii.

iii.

Terms Implied in Law.................................................................................................................. 24

Terms Implied in Fact ................................................................................................................. 24
1)
Formal contracts ................................................................................................................. 24
2)
Informal contracts .............................................................................................................. 25
Terms Implied by Custom ........................................................................................................ 25

C. Construing contract using extrinsic evidence ............................................................... 25

i.

Parol Evidence Rule ..................................................................................................................... 27

1)
Exceptions ............................................................................................................................. 27

D. Exclusion clauses ...................................................................................................................... 27

E. The requirement for good faith ......................................................................................... 29

10.

TERMINATION & BREACH OF THE CONTRACT .................................... 30

A. Right to Terminate By Agreement .................................................................................... 30
i.
ii.
iii.
iv.

Formal Requirement of Termination .................................................................................... 30

Termination by Express Terms ................................................................................................ 31
Termination by Implied Right ................................................................................................. 31
Termination by Subsequent Agreement ............................................................................ 31

Copyright UniCramNotes.com 2011

Page 3

Ace your exams in style

C
o
n
t
r
a
c
t

with UniCramNotes in town!

L
a
w
N
o
t
e
s

B. Right to Terminate following failure of a Contingent Condition .......................... 31

i.
ii.

Duty to Fulfill ................................................................................................................................. 31

Failure of contingent condition .............................................................................................. 32

C. Right to Terminate for Breach ............................................................................................ 32

i.

Condition vs intermediate term ............................................................................................. 33

D. Right to Terminate for Repudiation.................................................................................. 33

i.

Repudiation .................................................................................................................................... 34
1)
Instalment Contracts ......................................................................................................... 35
2)
Misinterpretation of Contract/Mistake ...................................................................... 35

E. Right to Terminate for Delay ............................................................................................... 35

i.
ii.
iii.

11.
A.
B.
C.
D.

Is time of the essence?............................................................................................................... 36

Termination for delay ................................................................................................................. 36
Notice to complete ..................................................................................................................... 36

RESTRICTIONS ON THE RIGHT TO TERMINATE .................................... 37

Election (Affirmation) ............................................................................................................. 37
Ready, willing and able.......................................................................................................... 38
Effect on Accrued Rights....................................................................................................... 38
Relief Against Forfeiture (Property) .................................................................................. 38

1. INTRODUCTION
A. HOW TO USE CRAM NOTES
The Contract Law Cram Notes are formatted into a step-by-step guide, which you can use as a
checklist in your exams to ensure that every element of the exam question is answered. You
may find the Table of Contents to be a quick and useful overview of the law to be applied.
You should also answer the exam question using the ILAC method, which will ensure your
answer is comprehensive.
Issue
Law
Analysis
Conclusion

State the legal issue relevant to the problem

Identify the relevant case law and legislation
Analyse and apply the law to the legal issue. This is the most important
part, so ensure your legal analysis is very thorough.
Form a conclusion based on your analysis and application of the law,
giving some practical advice to the hypothetical client.

It is very important to spend time perfecting your analysis section, as this is the part that
examiners are most interested in. Do not worry if you reach the correct conclusion (there
often isnt one clear answer) examiners will give more weight to your legal analysis, and
sometimes may even reward answers that propose an innovative and unconventional answer!

2. WAS THERE AN OFFER?

A. WAS AN OFFER MADE?
Firstly, it must be analysed whether an offer was in fact made. An offer is an indication by a
person to another of his or her willingness to enter into a contract with that person on certain

Copyright UniCramNotes.com 2011

Page 4

Ace your exams in style

C
o
n
t
r
a
c
t

with UniCramNotes in town!

L
a
w
N
o
t
e
s

terms. The statement alleged to be an offer must indicate willingness by the offeror to be
bound without further negotiation as to the terms of the proposed contract.
Although the making of an offer does not of itself give rise to a contract, an offer does have
legal significance in that it creates in the offeree a power subsequently to create a contract by
the offerees unilateral action in accepting the offer.
In determining whether an offer has been made, the crucial issue is whether it would appear
to a reasonable person in the position of the offeree that an offer was intended, and that a
binding agreement would be made upon acceptance.
Carlill v Carbolic Smoke Ball
- Offer can be made to specified persons, or the whole world the offeror has the power to
say who can accept.
o In Carlill, the court held that the advertisement for the smoke ball could be offered to
the whole world, and could be accepted by any person who performed the conditions
on the faith of the advertisement.
- Offer mustnt be a mere puff;
o In Carlill, the court held that the advertisement was not a mere puff because the
statement relating to the bank deposit made it clear that a promise was intended.
- It must, to a reasonable person in the position of the offeree, seem that an offer was
intended (the intention is objectively decided by the court, rather than what the original
intention of the party was).

B. WHAT WAS THE NATURE OF THE OFFER?

i.

INVITATION TO TREAT

An offer is often distinguished from an invitation to treat, which is an invitation or request for
offers or to engage in negotiations with a view to a sale.
Gibson v Manchester City Council
- The Council's appeal was allowed on the grounds that there was not an offer, but merely
an invitation to 'make a formal application to buy'. Even if the application form and Mr
Gibson's return letters were an offer (and they were not because of lack of certainty due
to the omission of the price), they were never accepted by the Council. Therefore, there
was no contract.

1) Display of goods for sale

The display of goods for sale is ordinarily treated as an invitation to treat and not an offer.
Customers will be regarded as making an offer when they present the items to the cashier for
purchase, and no contract has been entered into until the cashier has accepted that offer.
Pharmaceutical Society v Boots Cash Chemists
- An offer is not made by the seller and accepted by the customer when the customers pick
the goods from the shelf. The offer is rather made by the customer himself when he
approaches the checkout register, where the assistant accepts the customer's offer and
completes the contract.
- The display of goods for sale is only to be regarded as an invitation to treat

Copyright UniCramNotes.com 2011

Page 5

Ace your exams in style

C
o
n
t
r
a
c
t

with UniCramNotes in town!

L
a
w
N
o
t
e
s

2) Auctions
The holding of an auction will also usually be regarded as an invitation to treat by the
auctioneer, by inviting bids to be placed for the goods. Each bid constitutes an offer, and the
auctioneer communicates acceptance of the final bid by the fall of the hammer.
This means that no contractual claim can arise if the auction is cancelled (Harris v Nickerson), a
bidder is entitled to withdraw his or her bid before it is accepted (Payne v Cave), and the
auctioneer is not obliged to accept the offer of the highest bidder (AGC (Advances) Ltd v
McWhirter). The corollary is that a bidder can withdraw an offer any time before it is accepted,
on the principle that an offer can be withdrawn before it is accepted.
However, an auction advertised as being one without a reserve price implies that the highest
offer (i.e. bid) will be accepted. If in such a case, there was no acceptance of the highest bid by
the auctioneer, the auctioneer would be in breach of contract with the highest bidder (Barry v
Davies).

ii. UNILATERAL CONTRACT

Unilateral contracts are those where the acceptance of the offer can be manifested completely
by the offerees conduct. As such, the offeree can accept the offer by performing his or her
side of the bargain, and the consideration on the part of the offeree is completely executed by
the doing of the very thing which constitutes acceptance of the offer. The contract is thus
unilateral in the sense that because one party has performed his or her obligations by the
time of formation, only one party is ever under a contractual obligation.

C. WAS THE OFFER WITHDRAWN OR OTHERWISE CANCELLED?

i.

WITHDRAWN

The overriding rule is that an offer may be revoked at any time before it is accepted
(Goldsborough Mort Co v Quinn). This is so even if the offerer promised to keep the offer open
for a specified period of time, and the offerer is at liberty to withdraw at any time. This is
because such a statement or promise to keep the offer open is unenforceable because the
offeree has not given consideration in return (Dickinson v Dodds).

1) Options
On the other hand, if consideration is given for the promise to keep the offer open, an option
is thus created. A promise to hold an offer open is binding as long as consideration has been
given in return for that promise (Goldsborough Mort Co v Quinn).
An option is an agreement between an option holder and a grantor under which the option
holder is entitled to enter into a contract with the grantor on the execution of the option,
prior to the expiry of option period (Goldsborough Mort Co v Quinn).
Goldsborough Mort Co v Quinn
- In this case, the grantor gave the option holder an option to purchase certain land at the
specified price at any time within one week of the agreement, in return for consideration
of five shillings paid to the grantor. The grantor's attempt to repudiate the offer was
ineffective because the promise to keep the option open was binding as there was
consideration.

Copyright UniCramNotes.com 2011

Page 6

Ace your exams in style

C
o
n
t
r
a
c
t

with UniCramNotes in town!

L
a
w
N
o
t
e
s

ii. LAPSE
An offer will lapse either after a reasonable time has passed or after a specified time, where
the offer is expressed to be available for acceptance for a particular period of time (i.e. it will
lapse at the end of that period). Whether a period of time is reasonable will depend on the
facts and circumstances of each individual case, including the nature of the subject matter and
the form in which the offer was made.

iii. COUNTER-OFFER OR INQUIRY

The making of a counter-offer is treated as a rejection of the original offer and, therefore,
extinguishes the original offer (Butler v Ex-cell-o-Corp). That is, a counter-offer kills the
original offer (Butler v Ex-cell-o-Corp). However, close attention is required to consider
whether the supposed counter-offer was in fact a counter-offer, or rather an inquiry relating
to an alteration of the terms (Brambles Holdings Ltd v Bathurst City Council).

iv. REJECTION
An offer, once rejected, is no longer available for acceptance. Although communication of
revocation is required, it need not be communicated by the offeror. It does not matter who
communicated the revocation to the offeree, so long as the information given to the offeree is
reliable (Dickinson v Dodds).
Dickinson v Dodds
- In this case A made an offer to sell land to B, but before B accepted A sold the property to
C. A did not tell B of the sale, but B discovered it from D who was not connected in any
way with A. B purported to accept As offer. The court rejected this claim, stating that B
knew the offer was revoked, because of the sale of the land to C, and therefore there was
no offer to accept.

v. UNILATERAL CONTRACT
As a unilateral contract can be accepted by conduct of the offeree, the difficulty arises where
the offeree has begun to perform, but has not completed the acts that constitute acceptance.
While an offer to enter into a unilateral contract can be revoked prior to the offeree entering
into performance of the contract, an offer made in exchange for the doing of an act becomes
irrevocable once the act has been partly performed (Veivers v Cordingly). In addition, if there is
an implied contract not to revoke, or an estoppel to this effect, the offerer will only be
prevented from revoking the offer (Mobil Oil Australia v Wellcome International Pty Ltd).

3. WAS THERE ACCEPTANCE OF THE OFFER?

Where an offer has been made that has not been withdrawn, the agreement will become
binding once the offer is accepted. The acceptance brings about consensus ad idem, which is a
meeting of the minds of both the offerer and offeree.

We hope you have enjoyed this short preview of the Contract Law Cram Notes. Dont forget
to check out the Law Study Tips we have on our website at www.UniCramNotes.com!

Copyright UniCramNotes.com 2011

Page 7