Overview
This lecture provides a comprehensive overview of Australian contract law, covering contract formation, interpretation, vitiating factors, discharge, and remedies, suitable for students needing a foundational or revision resource.
What is a Contract?
- A contract is an agreement between two or more parties that creates legally enforceable obligations.
- Not all promises are contracts—only those intended to be legally binding are enforceable by courts.
Elements of Contract Formation
- Five key elements: capacity, intention to create legal relations, agreement (offer and acceptance), consideration, and certainty/completeness of terms.
- Capacity: Minors, intoxicated, or mentally incapacitated individuals have limited or voidable contractual ability.
- Intention: Social/domestic arrangements are presumed not to be contracts; commercial agreements are presumed to be.
- Agreement: Requires clear offer and acceptance; offers can be revoked or lapse; acceptance communicated by words, conduct, or as agreed.
- Consideration: Each party must give something of value; must be sufficient (have value) but need not be adequate (equal value).
- Certainty/Completeness: Terms must be clear and defined; vague or incomplete agreements are not contracts.
Interpretation and Terms of Contract
- Express terms are written or clearly stated in the contract; classified as conditions, warranties, or intermediate terms.
- Incorporation of terms: By signature, notice before contracting, or prior consistent dealings.
- Exclusion clauses require clear notice and are interpreted strictly against the party seeking to rely on them.
Implied Terms
- Terms may be implied by consistent course of dealings, industry custom, business efficacy, or by law (e.g., duty to cooperate, good faith).
- Consumer contracts include statutory guarantees under Australian Consumer Law (ACL) regarding title, quality, and fit for purpose.
Vitiating Factors (Making Contracts Void/Voidable)
- Mistake: Can be unilateral, common, or mutual; only certain types allow avoidance.
- Misrepresentation: False statement inducing contract; may be innocent, negligent, or fraudulent.
- Promissory Estoppel: Reliance on a promise can bind a party even without a formal contract.
- Unconscionable Conduct: Taking advantage of another's disadvantage can make contracts unenforceable.
- Undue Influence/Duress: Improper influence or threats invalidate the contract.
- Illegality: Contracts for illegal or immoral purposes are void.
Discharge of Contract
- Discharge can occur by performance, agreement, frustration (unforeseen events making performance impossible), or breach.
- Performance: Must be exact unless divisible, substantially performed, or part performance is accepted.
- Agreement: Parties may terminate by expiry, failure/occurrence of conditions, or mutual release.
- Frustration: Contract becomes impossible or radically different to perform due to external factors.
Remedies for Breach
- Damages: Compensate for loss, calculated at breach date, include expectation loss, but are subject to mitigation and causation rules (Hadley v Baxendale).
- Restitution: Prevents unjust enrichment if the contract is unenforceable.
- Equitable remedies: Specific performance, injunctions, and rescission (returning parties to pre-contract position).
- Statutory remedies under ACL: Refunds, replacements, or compensation for consumer law breaches.
Key Terms & Definitions
- Capacity — Legal ability to enter a contract.
- Consideration — Value exchanged in return for a promise.
- Condition — Essential term; its breach allows termination.
- Warranty — Less important term; breach allows damages but not termination.
- Exclusion Clause — A contractual term limiting liability.
- Implied Term — Unwritten rule included in a contract by law or custom.
- Frustration — Contract ends due to unforeseeable events making performance impossible.
- Rescission — Cancelling the contract and returning parties to original positions.
Action Items / Next Steps
- Review relevant case law for each doctrine as cited in lectures.
- Read up on collateral contracts and Australian Consumer Law provisions.
- Practice identifying contract elements and remedies in sample scenarios.