Week 8 - Contract Law

Question 1

What is consideration?

Answer 1

To enforce a contract, you have to pay, or promise to pay, something. Can be:

• money
• provision of goods/services
• the undertaking of an onerous obligation
• refraining from doing something e.g. agreeing not to sue or
• a promise to do any of these things

Question 2

Does the consideration have to go from promisee to promisor?

Answer 2

No. Like the consideration could be to donate to charity or something

Question 3

Does consideration have to be a fair/adequate price?

Answer 3

No, it only has to be a price of some legal value.

Question 4

Consideration must be sufficient and not be:

Answer 4

• A vague promise
• Past consideration or
• A promise to do something one is legally obligated to do (prior legal obligation)

Question 5

What is a vague promise?

Answer 5

When the promisee promises to do something or refrain from doing something that really has no legal value or is super uncertain, e.g. promising to be nice or to ‘cease complaining’ (White v Bluett)

Question 6

What is past consideration?

Answer 6

If the price was paid before the promise was made then it’s insufficient consideration (Roscorla v Thomas). e.g. at the end of the working day, Johnny promises to pay Cathy $50 bonus for her hard work.

Question 7

What is prior legal obligation?

Answer 7

If the price paid by the promisee is the fulfilment of a prior legal obligation, this is insufficient evidence

Question 8

Is part payment of a debt by the debtor sufficient consideration for a promise by the creditor to waive payment of the balance of the debt?

Answer 8

No. It’s only sufficient consideration if:

• the debtor makes the part payment earlier than the originally agreed due date
• The part payment is made by a third party rather than the debtor
• The debtor accompanies the part payment with additional consideration such as the provision of a service

Question 9

What is a deed?

Answer 9

A formal, written contract signed by the parties before a witness and ‘sealed and delivered’. To enforce a deed, no need to show that the promisee provided consideration for the promise.

Contracts that aren’t deeds are simple contracts, and those needs consideration. Most contracts are simple contracts

Question 10

What is lack of consent, and the 5 circumstances where it may occur?

Answer 10

When one of the parties have been bullied, pressured, manipulated into entering into the contract, thereby making it unenforceable.

Circumstances include:

• Mistake
• Duress
• Undue influence
• Unconscionability
• Misrepresentation

Question 11

What are the three times of mistakes that can terminate contracts?

Answer 11

1. Unilateral mistakes
2. Common mistakes
3. Mutual mistakes

Question 12

What is a unilateral mistake?

Answer 12

Where one party makes a serious mistake about a fundamental aspect of the contract and the other party knows that they have made this mistake and seek to take advantage of that mistake.

In mistaken identity cases, the court will declare a contract void for unilateral mistake where (Cundy v Lindsay):

a) one party is mistaken as to the identity of the other party and
b) the identity of the party is a fundamental aspect of the contract and
c) the other party knows of the mistake and seeks to rely on it.

Question 13

How will the court declare the contract void in a case of unilateral mistake?

Answer 13

A) one party is mistaken as to the identity of the other party and

B) the identity of the party is a fundamental aspect to the contract and

C) the other party knows of the mistake and seeks to rely on it

Question 14

Can unilateral mistakes be made about the nature of a written document that was signed?

Answer 14

Yes. If:

A) the party made the mistake had a good reason not to read the contract (eg blindness, illiteracy)

B) the mistake is about the fundamental nature of the document they were signing

This is known as non est factum (not my document)

Question 15

What is a common mistake?

Answer 15

When both parties make the same mistake. The contract will be made void if:

A) the agreement between the parties was conditional upon the truth of a belief held by both parties and

B) at the time the agreement was formed the belief was incorrect

But if the court was not conditional upon the truth of the bilateral belief, the contract will not be void. E.g selling a painting that you thought was a Monet

Question 16

What is a mutual mistake?

Answer 16

Occurs when the parties believe they have reached an agreement but really they were thinking of different things. The contract is void if:

A) the agreement between parties is conditional upon the truth of a belief held by each party and

B) the belief held by each party is different

Question 17

What is duress?

Answer 17

When one party compels the other to enter into the contract by expressly or impliedly threatening harm.

The threat can be to:

• the personal safety of the other party or to that of their loved ones
• the safety of the other person’s goods/property
• the other party’s economic or financial wellbeing, known as economic duress

Question 18

What is undue influence?

Answer 18

When the parties have a pre-existing relationship where one party has a degree of influence or dominance over the other. If the stronger party takes advantage of their influence such that the weaker party is not exercising their independent judgement, the contract will be void

Question 19

What are the 5 recognised relationships that may experience undue influence?

Answer 19

* doctor and patient,
◦lawyer and client,
◦trustee and beneficiary,
◦parent/guardian and child, or
◦religious leader and follower.

In these situations, undue influence will be presumed so that it will be up to the stronger party to establish that despite the relationship they did not exert their influence over the weaker party in making the contract.
•If the stronger party cannot do this, the contract will be voidable.

Question 20

When the relationship between the parties is not a recognised one, will influence be assumed?

Answer 20

No. It is up to the weaker party to establish that the stronger party had a controlling influence over their decision making. If this can be established, then it’ll be up to the stronger party to show they didn’t take advantage of that influence.
e.g. spouse and spouse or carer and patient

Question 21

What is unconscionability?

Answer 21

When:
1. one of the parties has a special weakness or disadvantage (like sickness, illiteracy, lack of education or even love) and
2. the other party knows about or should know about the special weakness or disadvantage and
3. the other party takes unfair advantage of that special weakness or disadvantage
(Commercial Bank of Australia Ltd v Amadio)

Question 22

What is misrepresentation?

Answer 22

A false statement of fact made by one party to induce the other party to enter into a contract (Derry v Peek).

Question 23

The misrepresentation must be a statement of fact, NOT:

Answer 23

• Promises
• Statements of opinion
• Statements of a highly exaggerated nature
• Silence

Question 24

What are the three types of misrepresentation?

Answer 24

1. Fraudulent
   * statement-maker knowingly or recklessly makes a false
   * statement intending it to induce the contract
   * Can rescind contract and get damages
2. Negligent
   * statement-maker is under a duty of care, and carelessly makes a false statement
   * Can rescind contract and get damages
   * Negligent misrepresentation is the same as negligent misstatement
3. Innocent
   * statement-maker genuinely believed the * statement of fact to be true
   * Can rescind contract, not entitled to damages