Contract

Defects Terms and Termination

CRICOS Provider Number 00103D

 Defects
• Lack of required formalities.
• Lack of contractual capacity
• Illegal contracts

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 Lack of required formalities
• Contracts that must be in writing
include:
• contracts for the sale of land
• cheques
• bills of exchange and promissory notes
• share transfers
• assignments of copyright
• contracts of marine insurance.

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 Illegal contracts
• Contracts illegal at common law
include contracts:
• to commit an unlawful act
• that are sexually immoral
• that prejudice public safety
• that prejudice the administration of
justice
• that tend to corruption in public life
• that defraud the revenue.

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 Illegal contracts
• A contract that is illegal as formed
is totally void.
• A contract that is illegal as
performed is not enforceable by the
guilty party.

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 Illegal contracts
• Void contracts (or clauses) are those
that:
• attempt to oust the jurisdiction of the
courts
• tend to prejudice the status of marriage
• constitute an unreasonable restraint on
trade.
• A void clause is unenforceable but if it can
be deleted without destroying the basis of
the contract, it will be severed.

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 Illegal contracts
• A statute may expressly outlaw
certain types of contracts, e.g. s. 45
of the Trade Practices Act 1974
(Cth).
• Case: News Ltd v Australian Rugby
Football League Ltd (1996)

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 Terms of the contract
• The terms of the contract reflect the
rights and obligations of the parties.
• Breach gives rise to a legal action
called “breach of contract”.
• Terms can be:
• express
• Implied either by law or by facts

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 Express terms
• Express terms: those to which the
parties have actually agreed, either
orally or in writing.
• Where the contract is purely oral, the
courts look at the surrounding
circumstances to determine whether
the statements made by each party
are terms or merely representations.
• Case: Oscar Chess Ltd v Williams (1957)

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 Implied terms (fact)
• Terms may be implied by the courts to fill in
gaps in the contract where the circumstances
show that this is what the parties intended.
• Such circumstances include:
• where there is a prior course of dealing
between the parties
• where there is an established trade custom
• where it is necessary to make sense of the
contract.

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 Implied terms (law)
• Terms may be implied by statute,
e.g. under the Sale of Goods Act or
the Trade Practices Act.

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 Note: Parol evidence rule
• Where the parties have recorded their agreement
in a signed document that appears to represent
the entire agreement, neither party is allowed to
introduce evidence of oral statements that would
add to, vary or contradict the written contract.
• Case: Van den Esschert v Chappell (1960)
• Case: De Lassalle v Guildford (1901)

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 Representation pre-contract
• a statement of fact which leads of
induces the other party to enter into
the contract
• these can be actionable if found to
be misleading
• Oscar Chess Ltd v Williams [1957] 1
WLR 370

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 Conditions and warranties.
• A condition is a term in a contract
which is so fundamental to the
purpose of the contract that it cannot
be performed without it.
• A warranty is something in the
contract which still allows the
contract to be performed however
not quite the way it had been
anticipated.

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 conditions
• “conditions precedent” (the
contract only comes into effect when
and if a certain event happens)
• “conditions subsequent” (the
contract only lasts until something
happens).

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 What do these mean?
• Condition precedent – a contract will
not come into effect unless and until
a particular event happens (I will sell
you my motorcycle when petrol hits
$2.00 per litre)
• Condition subsequent – the contract
lasts until a certain event happens (I
will rent my motorcycle to you until
petrol hits $2.00 per litre)

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 Exemption clauses
• An exemption clause is a
contractual term which seeks to
exclude or limit liability – they can
take various forms
• Liquidated damages
• Exclusions
• Disclaimers

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