A Problem Question on Contracts

CONTRACTS Scope of Advice The following documentation will aim to provide legal advice to all parties and their contractual agreements formed prior.

1. John - Race horse trainer
2. Ann – Horse transport business owner

The issues of determination of terms, material breaches and liabilities, will be discussed within this scope of advice. John Terms Agreed Clauses The express terms that had been agreed upon and signed on contract between John and Ann had been for the exclusivity of transportation and the inclusion of a 40% discount on all journey costs, for four years. Therefore, per parole evidence rule, restricts the extrinsic evidence that maybe considered by the court[1] however, sufficient evidence to give acceptance to a collateral contract or fair construction of the agreement, the above can be permissible.[2] Promissory Terms John’s conduct with Ann in regards to the air conditioning that had been discussed prior to the singing of the contract could be seen to be a promissory term[3]. In this circumstance, statements that had been made by Ann to provide air conditioning had been connected to, but independent, of a main contract, as consideration for the promise[4], had been undertaken when John had initially signed the contract. There had also been prior discussion as to which Ann had made a statement to John ‘not a problem’ which, by an interpretation by a reasonable person[5], would be seen as a promise or assurance.[6] Collateral Contract The issue of whether Ann’s statements of promising to provide air-conditioned floats could be regarded as a collateral contract[7], which would allow for John seek necessary remedies for the breaches that had occurred. In order for this, it must be promissory in nature[8], have the intention to induce another party entry into the contract[9], have consistency with main form of the contract[10] and be made prior or during the formation of the contract[11]. As John and Ann had discussed the terms of having an air-conditioned float before the effects of signature, John satisfies these conditions, and can claim to have been proceeded in a collateral contract with Ann. If such a promise had not been made initially, then John would not have made Ann an exclusive transporter of his horses. Knowledge or Notice The second issue is the clause regarding limitation of liability. Limitation of liability in general terms would be expressly defined within the contract[12], in this circumstance, neither John, nor Ann had mentioned this clause. Terms that have been made available to a party before a contract is made can be incorporated into the contract, so as to be binding on that party.[13] John had no prior actual knowledge or had been given reasonable notice of the terms, [14]. Although this clause can be taken as a legitimate exclusion clause[15], in this circumstance, it had not been provided, and therefore not binding. Furthermore, a reference to terms that are not readily available is not sufficient enough to satisfy reasonable notice [16]. Thus, John can proceed to with termination, or claim liability from negligence from Ann’s transportation. Implied Terms The current contract may also have terms that are implied and not entirely written down at the time of signature[17]. As per the case of Byrne v Australian Airlines; Frew v Australian Airlines[18]; there should not be an automatic or rigid application of the cumulative criteria[19], if the contract is oral or partly oral, or it appears the parties did not reduce the agreement completely written form. Given these conditions, the issue of air-conditioning in floats, and the expressly stated time ‘during summer’ had been implied largely by Ann that it will be delivered, prior to the signature of the contract. Although there had been no written documentation, the oral implied terms, perform supplementary information to the written document. Therefore, John has the right to seek liabilities from Ann. Termination by breach The termination by breach can be understood to be when a party fails to perform at time or to the standard by the contract[20]. As per Tramways Advertising Pty Ltd v Luna Park, it is accepted that a breach occurs when the promise is of such importance to the contract, that one could not have entered into the contract unless they had been assured of a strict or substantial performance of the promise, and this ought to have been apparent to the promisor.[21] In John’s circumstances, the use of non air-conditioned floats to transport his horses to and from venues was not per contract. It was not expressly stated in the written contract, but as per the above, through collateral contract and promissory terms, Ann needed to ensure the performance of her promise. Essentially, non-performance may fairly be considered by John as a substantial failure to perform the contract at all. [22] Therefore, as Ann has failed to perform her part in the contract, John can choose to terminate the contract and claim damages under the breach of conditions principle. Termination by delay Where time stipulation is a condition, i.e ‘time is off the essence’, failure to perform within the specified time, lead to an option for termination for either party[23]. In short, if a party fails to comply on a specified day, they are guilty of delay. [24] In this circumstance, John’s horses needed to be delivered to their appropriate venues, well before their races had begun. The principle of ‘time is off the essence’ can be applied in a strict approach, as Ann had the obligation to perform her promise to deliver the horses. In their first breach, in which Ann was delayed by two hours, had been permissible by John, however he had expressly stated ‘further problems will end their relationship’. As per Laurinda v Capabala Park Shopping Centre[25], if they delay is so long that there is a serious breach of an innominate term, a right to terminate will be available to the party[26]. In the second instance where Ann’s transpiration entirely failed to provide John with horses for the race, Ann was unable to uphold her obligations; hence John may have a right to terminate for delay. Ann Terms Effect of Signature In absence of fraud or misrepresentation, a document containing contractual terms, when signed is binding.[27] This was reaffirmed in the case of Toll (FGCT) Pty v Alphapharm Pty Ltd[28], ensuring that signed documents that are known[29], intended to affect legal relations[30], and are binding unto all parties that have written on the document. Ensuing that there are no vitiating factors or matter of misrepresentation[31], John’s written signature on documentation, can be seen as a contractual relation between Ann and John. Parol Evidence As per the circumstances, due to the principle that agreements had been contained in a written document, the parol evidence restricts extrinsic evidence that may be considered by the court.[32] As Ann had not made express terms stating she had agreed to the terms of all floats to be air-conditioned, she merely stated ‘it is not a problem,’ which could have been misinterpreted by John. As this specific clause had not been included in the written contract[33], Ann could argue that there is no breach of contract, and she had performed all her promises, including the 40% discount special, given to John. Frustration Frustration occurs whenever the law recognizes that without fault of either party, a contractual obligation has become incapable of being performed, as circumstances changed radically from which was undertaken by the contract.[34] For Ann, the consequences of John being banned from horse training, makes it impossible of the performance of her promise of transportation, as per the contract that had been signed. As such, Ann does have grounds to be excused per her performance to transport[35] or provide discount pricing to John.[36] It is also important for Ann to review the state of affairs and the extrinsic circumstances[37], which had caused for the transportation miscommunication. The frustration doctrine has three limitations: must not have been provided in the contract, reasonably foreseen and it must have occurred without fault of party seeking to rely on frustration. Ann satisfies all three limitations and consequently could seek to end the contract [38] Termination For Repudiation This principle will apply when a party has an absence of willingness or readiness to perform, and deprive the aggrieved party of substantially the whole of the benefit of the obligations remaining to be performed as per the contract. [39] In Ann’s circumstances, this can be applied. As expressly stated prior to the writing of signature, Ann had indicated that she would need to be the exclusive transporter of John’s horses. John had breached this when he changed modes of transportation, and due to his inability to complete the contract; Ann has the ability to terminate the contract. She would also have the ability to claim liability to discount pricing loses and other costs associated with this mode of transportation. As John had willingly and readily signed the contract, he would be bound to perform, a breach would allow for Ann to have the right to terminate.[40] Exclusion clause The exclusion clause provided by Ann to John can take effect, given the notice of the course of dealings that had occurred over 2 years[41]; it is implied to have been accepted by John. The nature of the contract, which had delivery slips with signature of John’s own staff, further give right to the implementation of the exclusion clause. The process of construction and the language that had been used allows for Ann to be limited in her breach[42]. Providing, the clause expressly states the limitation of liability for negligence[43], which enables Ann to be excluded from liability, and terminate the contract as per above. Recommendation Based on the above, both parties may need to seek further legal advice upon reading this. Bibliography - Cases Balmain New Ferry Co Ltd v Robertson (1904) 4 CLR 379. Baltic Shipping Company v Dillon (1993) 176 CLR 344. Bensten v Taylor, Sons & Co (1893) 2 QB 274. BP Refinery (Westernport) Pty Ltd v Hastings Shire Council (1977) 180 CLR 266. Bowes v Chaleyer (1923) 32 CLR 159. Bryne v Australian Airlines Ltd; Frew V Australian Airlines Ltd (1995) 185 CLR 411. Codelfa Contruction v State Rail Authority of NSW (1982) 149 CLR 337. Darlington Futures Ltd v Delco Aust Pty Ltd (1986) 161 CLR 500. Davis Contractors Ltd v Fareham Urban District Council (1956) AC 696. Davis v Pearce Parking Station Pty Ltd (1954) 91 CLR 642. Ebay International AG v Creative Festival Entermaintment Pty Ltd (2006) FCA 1768. Equuscorp Pty Ltd v Glengallan Pty Ltd (2004) HCA 55. Hart v Mcdonald (1910) 10 CLR 417, 430 Hoyt’s v Spenscer (1919) 27 CLR 133. JJ Savage & Sons v Blakney (1970) 119 CLR 435. Laurina v Capabala Park Shopping Centre (1989) 166 CLR 623. L’Estrange v Graucob (1934) 2 KB 294. Louinder v Leis (1982) 149 CLR 509. Masterton Homes Pty Ltd v Palm Assets Pty Ltd (2009) NSWCA 234. Oscar Chess Ltd v Williams (1957) 1 WLR 370. Perri v Coolangatta Investmetns Pty Ltd (1982) 149 CLR 537. Progressive Mailing House v Tabali Pty Ltd (1985) 157 CLR 17 Sydney City Council v West (1965) 114 CLR 481 44. Taylor v Caldwell (1863) 3 B &S 826. Thornton v Shoe Lane Parking Ltd (1971) 2 QB 163. Toll (FGCT) Pty Ltd v Alphapharm Pty Ltd (2004) 219 CLR 165. Tramways Advertising Pty Ltd v Luna Park (NSW) Ltd (1938) 61 CLR 286.

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[1] Codelfa Contruction v State Rail Authority of NSW (1982) 149 CLR 337, 165. [2] Hart v Mcdonald (1910) 10 CLR 417, 430. [3] JJ Savage & Sons v Blakney (1970) 119 CLR 435, 32. [4] Tramways Advertising v Luna Park (1938) 61 CLR 286, 45. [5] Oscar Chess Ltd v Williams (1957) 1 WLR 370, 66. [6] JJ Savage & Sons v Blakney (1970) 119 CLR 435, 41. [7] Hoyt’s v Spenscer (1919) 27 CLR 133, 14. [8] Ibid. [9] Ibid. [10]Ibid. [11]Ibid. [12]Darlington Futures Ltd v Delco Aust Pty Ltd (1986) 161 CLR 500, 90. [13] Ebay International AG v Creative Festival Entermaintment Pty Ltd (2006) FCA 1768, 203. [14] Thornton v Shoe Lane Parking Ltd (1971) 2 QB 163, 75. [15] Davis v Pearce Parking Station Pty Ltd (1954) 91 CLR 642, 54. [16] Ibid. [17]BP Refinery (Westernport) Pty Ltd v Hastings Shire Council (1977) 180 CLR 266, 99. [18] Bryne v Australian Airlines Ltd; Frew V Australian Airlines Ltd (1995) 185 CLR 411, 110. [19] BP Refinery (Westernport) Pty Ltd v Hastings Shire Council (1977) 180 CLR 266, 99. [20] Bensten v Taylor, Sons & Co (1893) 2 QB 274, 90. [21] Tramways Advertising Pty Ltd v Luna Park (NSW) Ltd (1938) 61 CLR 286, 143. [22]Ibid. [23] Bowes v Chaleyer (1923) 32 CLR 159, 29. [24] Louinder v Leis (1982) 149 CLR 509, 95. [25] Laurina v Capabala Park Shopping Centre (1989) 166 CLR 623, 44. [26] Ibid. [27]L’Estrange v Graucob (1934) 2 KB 294, 13. [28]Toll (FGCT) Pty Ltd v Alphapharm Pty Ltd (2004) 219 CLR 165, 86. [29] Ibid. [30] Ibid. [31] L’Estrange v Graucob (1934) 2 KB 294, 13. [32] Masterton Homes Pty Ltd v Palm Assets Pty Ltd (2009) NSWCA 234, 98. [33] Equuscorp Pty Ltd v Glengallan Pty Ltd (2004) HCA 55, 131. [34]Davis Contractors Ltd v Fareham Urban District Council (1956) AC 696, 91. [35] Perri v Coolangatta Investmetns Pty Ltd (1982) 149 CLR 537, 81. [36] Taylor v Caldwell (1863) 3 B &S 826, 221. [37] Codelfa Contruction v State Rail Authority of NSW (1982) 149 CLR, 337. [38] Baltic Shipping Company v Dillon (1993) 176 CLR 344, 65. [39] Progressive Mailing House v Tabali Pty Ltd (1985) 157 CLR 17, 12. [40] Progressive Mailing House v Tabali Pty Ltd (1985) 157 CLR 17, 19. [41] Balmain New Ferry Co Ltd v Robertson (1904) 4 CLR 379, 1. [42] Sydney City Council v West (1965) 114 CLR 481, 44. [43] Davis v Pearce Parking Station (1954) 91 CLR 642, 3.

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