The law of contract in Australia is similar to the contract law of other Anglo-American common law jurisdictions, but differences from other jurisdictions have arisen over time because of statute law and divergent development of common law in the High Court, particularly since the 1980s.To the point where, in 2014 the High Court said that "Judicial decisions about employment contracts in other common law jurisdictions, including the United Kingdom, attract the cautionary observation that Australian judges must 'subject [foreign rules] to inspection at the border to determine their adaptability to native soil'." .
A brief history Australian courts take the view that contract law arose in the actions of assumpsit,. and concepts of motive and reliance.
Bargain theory is an important part of how contract law is understood; quid pro quo, is understood to be an essential element.
The law of equity plays an important role in Australian contracts, and will affect which remedies may be available when a contractual promise is breached.
Doctrines of importance to contract law practitioners include negligent mis-statement,. promissory estoppel, and misleading or deceptive conduct.
Formation There are five essential elements necessary for legally binding contract formation: Agreement between the parties. There cannot be a unilateral contract.A deed poll is a form of legally enforceable promise where there is only one party. Consideration (a bargain requirement: generally, the supply of money, property or services or a promise to undertake, or not undertake a particular act in exchange for something of value); Capacity to enter legal relations (e.g. of sound mind and legal age); Intention by the parties to enter into legal relations (private non-commercial agreements between family members may not indicate intention to enter a legally binding contract and therefore may not be enforceable); and Certainty (the contract has to be complete, certain, clear and binding). where the defendant's newspaper advertisement to the public that a £100 reward would be paid by the defendant to any person who contracted influenza, after having used preparation according to printed directions, was held to be an offer to public.
The absence of any of these elements will signify either that there is in law no agreement or that the agreement is not enforceable as a contract.
In most jurisdictions contracts do not need to be represented in writing and oral contract are as enforceable as written contracts. However, there are a number of exceptions that have been created by statute follow from the Statute of Frauds 1677 (UK) and were principally designed to reduce fraud. (1983) 9(2) Adelaide Law Review 252. Examples are marine insurance which is not enforceable unless it is documented in writing.Section 28 Marine Insurance Act 1909 (Cth). Also consumer credit must be documented in written form with a copy provided to the consumer.Section 14 National Consumer Credit Code, Schedule 1 to the National Consumer Credit Protection Act 2009 (Cth). Similar formalities are required for the sale of land.for example sections 23C (leases etc) and 54A (sale of land) Conveyancing Act 1919 (NSW) The courts however will intervene so that the Statute of Frauds is not made an instrument of fraud.Ogilvie v Ryan 2 NSWLR 504 LawCite.
Agreement
The existence of an agreement between the parties is usually analysed through the rules of offer and acceptance.. This may be expressed as a clear indication ("offer") by one party (the "offeror") of a willingness to be bound on certain terms.. accompanied by a communication by the other party (the "offeree") to the offeror of an unqualified assent to that offer ("acceptance").
An offer indicates an intention by the offeror to be bound without further discussion or negotiation, on acceptance of the terms set out. The court will determine the offeror's intention objectively..Empirnall Holdings Pty Ltd v Machon Paull Partners Pty Ltd (1988) 14 NSWLR 52. It is distinguished from an "invitation to treat", which is a request to others to make offers to engage in negotiations with a contract in mind.Retailers have sometimes taken advantage of this distinction to engage in bait advertising (advertising goods at attractive prices but not in fact intending to sell in more than minimal quantities, if at all), but this is prohibited under section 35 of the Australian Consumer Law. Items displayed for sale are invitations to treat.. An offer is also distinguished from "mere puff". An offer may be made to become liable to anyone who, before it is withdrawn, accepts the offer. It may be restricted to certain classes of people; where an application for shares directed to provisional directors of company about to be formed was held to be offer to company when formed. or on the other hand be made to anyone who, before it is withdrawn, accepts the offer, including unascertained persons,Westminster Estates Pty Ltd v Calleja 1 NSWR 526; (1970) 91 WN (NSW) 222 LawCite in which an offer to "A or his nominee" was effective and may be accepted by the nominee once appointed, even though nominee's identity was not ascertainable at time when offer made. or to the public at large. However, an offer is ineffective until it has been communicated,Henthorn v Fraser 2 Ch 27] at 37 per Kay LJ LawCite (an offer to sell is nothing until it is actually received). either by the offeror or a third person acting with the offeror's authority. In some circumstances, the difference between an offer and an invitation to treat can be hard to recognise. For example, in property auction cases the auctioneers language should generally be constructed to be inviting bids, as opposed to offering the house.Payne v Cave (1789) 3 TR 148; EngR 2443, (1789) 100 ER 502. According to the New South Wales Supreme Court case of AGC (Advances) Ltd v McWhirter, withdrawing a properties reserve price during an auction does not obligate the sale.AGC (Advances) Ltd v McWhirter (1977) 1 BPR 9454 Supreme Court (NSW) Summary at australiancontractlaw.com. This is different to the British case, Barry v Davies which found that if an auctioneer removes the reserve, they are bound to sell to a bona fide purchaser..
An acceptance of the offer resulting in a binding contract must take place with knowledge of the offer and an intention to accept the offer... Although acceptance need not be express and may be implied from conduct, it must correspond with the offer;Tonitto v Bassal (1992) 28 NSWLR 564 LawCite (option to purchase land not validly exercised where three documents were required to be sent and one was sent for another purpose at an earlier time) (Act must be done on faith or by reliance on the offer to constitute acceptance). be unequivocal;Appleby v Johnson (1874) LR 9 CP 158 LawCite.. and in general, be communicated to the offeror.. Silence cannot be requested by the offeror to be, or used by the offeree as a method of communication for acceptance. Rather, if after a reasonable period has lapsed, silence will be seen as a rejection to the offer, unless the offeree's actions objectively show otherwise. Where a purported acceptance proposes one or more additional or different terms it is ineffective as an acceptance, unless the variation is solely in favour of the offeror. where the defendant's order for insertion of half inch advertisement in the plaintiff's newspaper was accepted by inserting one inch advertisement the rate for which was the same as for half inch advertisement. A purported acceptance will also be ineffective if made at a time when the offer has lapsed by virtue of time; if it is made subject to a contingency and that contingency ceases to exist; if the offeror dies and the offeree has notice of this fact; by the revocation of the offeror or the rejection by the offeree..
The postal rule is an exception to the general rule that acceptance of an offer takes place when communicated to the offeror. Under the rule, acceptance of an offer is effective as soon as it is posted, notwithstanding it may be lost in the delivery process and not received by the offerer.. However, the postal acceptance rule does not extend to instantaneous telecommunication methods, such as telephone, facsimile, and, presumably, emails.Reese Bros Plastics Ltd v Hamon-Sobelco Australia Pty Ltd (1988) 5 BPR 11,106., an appeal from this decision on unrelated grounds was dismissed in . This means that, where acceptance is communicated electronically, contract is formed when and where acceptance is received, rather than at the moment it is posted. Transactions via electronic communications are now governed by statute.See, for example, ; .
However, the rules of offer and acceptance are merely "an aid to analysis",. and may sometimes prove inconclusive or artificial.Meates v Attorney General NZLR 308. A contract can be made without an identifiable offer and acceptance, provided the parties have manifested their mutual assent. The "acid test" in a case where offer and acceptance cannot be identified, according to Justice Cooke in Meates v Attorney-General, "is whether, viewed as a whole and objectively from the point of view of reasonable persons on both sides, the dealings show a concluded bargain."
Consideration
The second element necessary for contract formation is consideration. A promise will be enforceable as a contract only if it is supported by consideration,Beaton v McDivitt (1987) 13 NSWLR 162 LawCite. Consideration can be anything from money to a promise to undertake or not undertake a particular act, even a mere peppercorn could suffice.For the definition of Consideration in English Law, see Currie v Misa (1875) LR 10 Ex 153; (1875-76) LR 1 App Cas 554 LawCite.Woolworths Ltd v Kelly (1991) 22 NSWLR 189 LawCite. In Australian law, the question of sufficiency of consideration does not refer to 'adequacy' as it is not the role of the judge to determine and value whether something is adequate or valuable or not. This accounts for the fact that different things mean differently to different parties. Sufficient consideration may also include abstract exchanges such as 'love and affection'..
"Consideration" in this context means that a promise is given in return for a promise received. The usage of the word derives from expressions such as: "I will give you ten pounds in consideration of the apples you are delivering to me."
Joint promisees: Consideration given in return for a promise must move from the promisee; where there are joint promisees in a contract, consideration may be provided by one on behalf of both of them, or consideration may be provided by both promisees..
Generally past consideration is not sufficient consideration...Musumeci v Winadell Pty Ltd (1994) 34 NSWLR 723 . but a past service performed at the request of the promisor with an implication they will be paid for is sufficient consideration for a subsequent promise to pay for them.Stewart v Casey 1 Ch 104
Illusory Consideration: An agreement may be held as void if a vital provision is deemed to be illusory..Biotechnology Australia Pty Ltd v Pace (1988) 15 NSWLR 130 LawCite. That is, that one part has a discretion either to the performance or to the content of that provision.. Note, if one party has some latitude or discretion as to the manner in which certain agreed provisions will be effected, but that discretion is limited, then the provisions are not illusory.
Further, a contract will not be illusory where an essential term is left to the discretion of a third party.
Capacity