Introduction

Emily is seeking advice regarding a potential breach of contract. In order

to provide advice, the terms of Emilys contract with Margaret must be
considered.
a) Is there a contract?
In order to advise Emily, it must be established whether she entered into a
legally binding contractual relationship, or just a domestic agreement with
her mother. In order for a contract to be enforceable, it must contain an
offer, acceptance and consideration, which form a simple contract. In
establishing whether a contract is valid, legal capacity, consent, legality of
purpose and procedural elements are all requisites, but establishing
intention and evaluating the terms of the contract are of most importance
in this situation.
Emily and her mother are in a domestic relationship, and as such, under
previous legal presumptions, it would be assumed that the two parties
were not willing to enter into legal relations. However, following the cases
of Ermogenous vs Greek Orthodox Church of South Australia1 and Air
Great Lakes vs Easter Holdings2, McHugh J stated that the court is
entitled to look beyond therelationship of the parties for the purpose of
determining whether they intended to create a legally enforceable
contract3, which indicates that proving a domestic relationship does not
discharge the legality of a contract.
In the same case, Mahoney LJ also commented that the law would hold a
binding contract to have been made even though neither had any actual
subjective intention that there be a contract4, which applies here because
there is an offer, acceptance and consideration.
In addition, the case Branir Ltd vs Owston Nominees5 has demonstrated
that although the appellants believed that no agreement existed on 23
December 1993they would be bound contractually to each other
according to any consensus which they had reached concerning their
affairs.6
1Ermogenous v Greek Orthodox Community of SA Inc [2002] HCA 8; 209 CLR 95
2 Air Great Lakes Pty Ltd v KS Easter (Holdings) Pty Ltd [1985] NSWLR 309
3 McHugh J
4 Mahoney LJ
5Branir Pty Ltd v Owston Nominees (No 2) Pty Ltd [2001] FCA 1833; 117 FCR 424
6 Mansfield J

However, it can also be argued that the agreement was an informal one,
with no legal ramifications. An example of an informal agreement is found
upon examination of Cohen vs Cohen7, where provisions for a dress
allowance was deemed to be domestic, and their discussion and
concurrence was not legally binding. But, the fact that consideration was
present means that the agreement, although formed in a domestic
environment, has the potential to carry legal connotations.
Therefore, having established the intention of both parties to be bound by
their verbal agreement, the terms of their contract must be explored.
I)

Offer.

An offer is a communication amounting to a promise to do something if

the person to whom the offer is directed does something in return. In this
situation, the family discussion at the kitchen table which concluded
with the agreement that Emily would work in the shop for as long as
requiredin return she would receive any unsold dolls is a firm, definite
offer to Emily, who has relied on the promise, and provides a service to
her mother.
Although it could be argued that the porcelain dolls in the agreement was
an express, pre contractual term, the fact that it was on the basis of the
dolls Emily undertook employment makes it a fundamental condition,
making it an integral aspect of the contract.
II)

Acceptance.

While there is no statement, or written proof which plainly demonstrates

Emilys acceptance of the offer, her conduct is indicative of her
acceptance as she has worked for her Mother from July 2006 to the end
of 2009. This is similar to Brogden v Metropolitan Railway Company8,
where acceptance is perceived when both parties act in a manner which is
consistent with their verbal agreement, but is not set out in writing.
Although the fact that it is a purely oral agreement may make it difficult to
enforce, the fact that both parties were aware of the conditions is
sufficient to render the contract valid.

III)

Consideration.

Consideration is any definite and legal item of value which passes from
the offeror to the offeree as a result of fulfilment of a contract. This was

7Cohen v Cohen [1929] HCA 15; 42 CLR 91

8Brogden v Metropolitan Railway Company [1877] 2 AC 666

established after the Chappell & co. v Nestle co Ltd.9 case, where the low
price of wrappers was not a determining factor in the judgement as it
constituted some form of value. In this situation, the unsold porcelain
dolls in exchange for working in the store is valid consideration, with no
limits on the monetary or physical value of consideration.
However, following the case of Biotechnology Australia v Pace10, where the
High court found that consideration will be illusory if payment or
fulfilment depends on unfettered discretion of the promisor11, it can be
argued that consideration in Emilys case was illusory or uncertain
because Emily was promised any unsold dolls. In addition, what was
found was consideration was within Biotechs discretion, with no
objective standards12; since her mother was the owner of the shop and its
goods, it can be credibly argued that she was in a position to give the
dolls to anyone at her discretion.
But, since the dolls appear to be a condition of the contract, where there
is no mention of monetary or other payments, it can be assumed that
Emily undertook employment significantly persuaded by the promise to
receive unsold rare porcelain dolls, meaning that there appears to be
valid consideration in this situation.
Tentative conclusion.
On the balance of probabilities, it would appear that Emily has grounds to
bring a case against her mother for a breach of her contract. Her mother
would likely be estopped from giving her unsold stock to charity. On this
matter, it is stated that The principle upon which estoppel in pais is
founded is that the law should not permit an unjust departure by a party
from an assumption of fact which he has caused another party to adopt or
accept for the purpose of their legal relations.13 This is the most accurate
advice that can be provided to Emily.

9Chappell & Co Ltd v Nestle Co Ltd 1960] AC 87

10Biotechnology Australia Pty Ltd v Pace [1988] NSWLR 130
11McHugh JA
12McHugh JA
13 Hudson J, The True Purpose of Estoppel by Representation (August 2015) Volume 32 Issue 3 Journal of Contract Law 475-480.

Introduction
Exclusion clauses are aspects of a contract which seek to relieve a
contracting party from liabilities they may have. The effectiveness of an
exclusion clause is a matter of the construction of the contract as a whole,
taking into the account the bargaining position of the parties. Exclusion
clauses are interpreted using the four corners rule, the contra proferentem
rule and are read in light of their natural and ordinary meaning. In order
for a party to rely on exclusion clauses they must show that the clause is
compliant with Australian Consumer Law, it is included within the original
contract, the signatory is aware of its existence when signing or leaving a
contract unsigned, and the clause is properly worded into the contract.
Four Corners
In order for a party to rely on an exclusion clause, they must be aware
that the clause falls within the framework of The four Corners Rule, which
states that exclusion clauses do not apply to actions outside, or external
to the terms specified within a contract. That means exclusion clauses
relating to deliberate breaches or for actions external to those stipulated
in the contract will have no legal effect. In the case of The Council of the
City of Sydney v West14, the council was prevented from relying on their
exclusion clause because the actions of the attendant in discharging the
car went beyond the four corners, or the express terms of the contract.
Contra Proferentem
Furthermore, the contra proferentem rule is crucial to establishing
whether a party can rely on an exclusion clause. It dictates that an
exclusion clauses are interpreted against the person putting it forward.
There is a strict construction again the party relying on the clause or term,
with effectiveness depending solely on how well the clause is constructed
within the contract as a whole. In White v John Warwick & Co Ltd15, an
exclusion clause was found to be effective in contract, where the vendor
of a tricycle stated that nothingshall render the owners liable for
personal injury to the riders of machines hired.
Additionally, the recent case of Zhang v Popovic16 is another example of
where the judge, Adamson, contended that the exclusion clause, which
waived liability for the employer in the event of an injury to the plaintiff as
a result of a fault in the forklift the plaintiff was using whilst it is being
driven was too narrow, as the forklift was not in operation at the time of
the incident, resulting in it being struck down. It was contended that the
14Sydney Corporation v West [1965] HCA 68; 114 CLR 481
15White v John Warwick [1953] 1 WLR 185
16Zhang v Popovic [2016] NSWSC 407

clause was ambiguous, and that that ambiguity was created by the above
phrase. Hence Adamson stated that I am required to construe the clause
so as to avoid absurdity.17

Natural Meaning
I order to rely on an exclusion clause, a party must ensure it makes sense
when read and interpreted based on its natural and ordinary meaning.
Furthermore, if there is ambiguity in language used, this will be construed
in the claimants favour. This is expressed well in the Law Society Journal,
where it is said that exclusion clauses in contracts will be given a
meaning that makes commercial sense and reflect their natural meaning
read in the light of the contract as a whole... If there is a breach, carve
outs will be sensibly and commercially applied."18 Furthermore, in Mancorp
Pty Ltd v Baulderstone Pty Ltd19, it was judged that if a party to a contract
wishes to exclude the ordinary consequences that would flow in law from
the contract he is making, he must do so in clear and unambiguous
terms.20
Consumer Awareness
In addition, a party relying on an exclusion clause must demonstrate that
the consumer was aware of the clause at the time that they were entering
into the contract. The party which seeks to rely on the exclusion clause
must consider if reasonable steps have been taken to give sufficient
notice of the term. This is demonstrated in the case of Olley v
Marlborough21, where an exclusion clause waiving a hotels liability for
stolen goods was provided after the contract was formed. It was found
that clause was ineffective because it was not part of the original contract
formed between the two; if it was to be effective, there should have been
new consideration.
Signed Documents
If a document is found to be an integral part of a contract between two
parties, much depends on whether the contract was signed by the offeree.
A party signing a document knowing it contains contractual terms is
17Adamson J
18Anon, (Dec 2013) Volume 51 No. 11, Law Society Journal 78-80
19Mancorp Pty Ltd v Baulderstone Pty Ltd (No 2) [1992] 60 SASR 120
20ibid
21Olley v Marlborough Court Ltd [1949] 1 KB 532

bound by those terms, whether they have read it or not. In the case of
LEstrange v Graucob22, it was found that LEstranges signature on a
document labelled sales agreement constituted a valid clause, enabling
Graucob to successfully rely on it. In contrast the case of Le Mans Grand
Prix Circuits Pty Ltd v Iliadis23, the misrepresentation of the exclusion
clause as an agreement entitled To Help With Advertising rendered it
invalid, even with Iliadis signature. This means that any form of
misrepresentation on unfairness will lead to the clause rendered
unenforceable.
Unsigned Documents
In order to rely on an exclusion clause when a document is unsigned, the
question is whether the customer knew of and consented to the exclusion
clause. If they didnt, the question must be asked whether a reasonable
person would have regarded the document as a contractual one or just a
receipt of a good or service. For example, in the case of Curtis v Chemical
Cleaning and Dyeing Co24, the misrepresentation of an exclusion clause as
a receipt rendered it invalid as it meant that a reasonable persons
wouldnt have considered it to be an exclusion clause, leading to its
invalidity in court.
Unusual Conditions
Finally, a party relying on an exclusion clause which contains provisions
for unusual or onerous conditions must notify the persons to whom they
apply. As demonstrated by Interfoto Picture Library Ltd v Stiletto Visual
Programmes25 case, onerous and unconscionable clauses will be struck
down in court.
Conclusion
Exclusion clauses can be relied upon if these criteria are satisfied.

22L'Estrange v F Graucob Ltd [1934] 2 KB 394

23Le Mans Grand Prix Circuits Pty Ltd v Iliadis [1998] 4 VR 661
24 Curtis v Chemical Cleaning & Dyeing Co [1951] 1 KB 805
25Interfoto Picture Library Ltd v Stiletto Visual Programmes Ltd [1988] 2 WLR 615

BIBLIOGRAPHY
Journals
The True Purpose of Estoppel by Representation. (2015). Journal
of Contract Law, 32(3), pp.275-280.
Anon, (2013). Law Society Journal, 51(11), pp.78-80.
A realistic route to vicarious immunity: Third parties, exclusion
clauses and voluntary assumption of risk. (2013). Tort Law
Review, 21(38).
Books
Stone, R. (2013). The Modern Law of Contract. Hoboken: Taylor
and Francis.

Gillies, P. and Selvadurai, N. (2009). Law of Contract. Sydney:

The Federation Press, pp.92-94.
Khoury, D. and Yamouni, Y. (2009). Understanding contract law.
Chatswood, N.S.W.: LexisNexis Butterworths.
Websites
Australiancontractlaw.com. (2016). Australian Contract Law |
Julie Clarke. [online] Available at:
http://www.australiancontractlaw.com/law/formationintention.html.