Express+Terms


 * // (9a) Extrinsic evidence- Parol evidence rule //**

Where a contract is made orally, court may consider all relevant evidence. Where a contract is written, the evidence which is admissible for the purpose of identifying and construing terms of a contract is limited by PER
 * The Parol Evidence rule **

__ PER has two parts: __ (1) the rule prevents extrinsic evidence being given to **//add to, vary or contradict//** the terms of a contract as they appear in a written document (ambit) WHERE THE CONTRACT IS **//WHOLLY IN WRITING//** (2) the rule limits the evidence that can be given to **//explain the meaning//** of the terms of a written contract


 * (I) Identifying the terms **

· The PER is based on a view that parties who have recorded their contract in writing probably intended the written document to embody or integrate the whole of their agreement //(**__Codelfa__**).// · PER which excludes extrinsic evidence applies only to contracts **//wholly//** in writing · PER does **//not//** apply to contracts only **//partly in writing//** · If there is a **//merger//** or **//entire contract clause//** included in the contract, this will be conclusive evidence that the writing represents the entire agreement between the parties · Where there is no express statement of intention by the parties, court to assess whether or not a document is wholly in writing for the purposes of the PER

· 1. the PER is attracted by the production of a written document that appears to be the complete record of the parties’ contract **not** admissible to add to the terms contained in the written document · 2. **//__State Rail Authority of NSW v Health Outdoor P/L__//** gives support for the broad view which says that PER has **//NO//** //**application**// **//until it is determined that the parties intended the written document to contain all of the terms of their contract//** à extrinsic evidence **//will be//** admitted to establish whether the document was intended to be an exclusive record of the contract or whether parties intend the written document to be supplemented, usually by promissory statements made during negotiations · Note: the second approach probably has more support in recent Australian cases, but the matter has not been conclusively determined by the HC · CAN BE USED TO SAY IT IS PART ORAL/WRITTEN. · Note: for **//Electronic contracts,//** suggested that- where the terms of a contract are recorded electronically, but are capable of being retrieved and converted to a readable form, the terms should be treated as being **//in writing//** for the purpose of the PER
 * Two approaches to the use of extrinsic evidence is assessing whether a written **
 * document contains the whole of the parties’ agreement: **


 * (II) Exceptions to the PER in identifying terms **

Circumstances in which extrinsic evidence adding to or varying the terms of a contract in writing may be admitted

consensus’: **//__Thorne__//** (cc) Will be hard to prove if there is a signature or entire contract clause. · Collateral contract made when one party makes a promise, **//connected to but//** agrees to **//enter into the main contract//**. · ** EG ** : a buyer of property signs a formal written contract of sale which says nothing about drains, after the seller makes a verbal promise that the drains on the property are in good order. If drains are not in good order, buyer will be confronted by the PER. Can get around PER by two ways: · 1. the buyer may avoid the operation of the rule by showing that the written document was not intended to comprise all the terms of the contract; OR · 2. buyer can show there were two separate contracts: the main contract is the contract of sale; the other is a collateral contract, consisting of the seller’s promise that the drains are in good order, given in return for buyer’s entry into the main contract
 * 1. Part oral/part written contract **
 * // (bb) //** If only **//partly written//** then the agreement is **//not//** the ‘final expression of full
 * 2. Collateral Contracts **
 * // independent of a main contract //**, and as **//consideration//** for that promise, the other party

· 1. Made as a **//promise//** and must be **//intended to induce entry//** into the contract (**//__JJ__//** · 2. Must be **//consistent//** with the **//terms of the main//** contract. This is the rule in **//__Hoyts__//**//.//  · In **Hoyts** court said = the requirement of consistency means that, while a collateral contract may add to the main contract, it must not alter the provisions of the main contract  · The two contracts must be able to stand together- the collateral contract must be ‘supplementary’ only to the main contract  · **// Note //** : the requirement of consistency means that the collateral contract may have a narrow operation in avoiding the PER and giving force to an oral representation varying a contract in writing
 * __For a statement to give rise to a collateral contract, statement must be:__ **
 * //__ Savage __//** )

· Promissory estoppel may also provide an effective response to an oral promise supplementing a written contract · Estoppel is not restricted by the requirement of consistency · Thus, an estoppel might be raised to give relief to one party where the other party seeks to depart from an assumption that he/she would modify or refrain from enforcing the terms of a contract in writing · BUT, **court remains divided** as to whether the PER precludes the admission of extrinsic evidence for the purpose of establishing an estoppel. **//__Whittet__//** says an estoppel that contradicts a written instrument can be established provided the estoppel is supported by clear and convincing proof. **//__Australia Co-op Foods__//** says otherwise.
 * 3. Estoppel **


 * (III) Extrinsic evidence in construing a contract **

· The second aspect of the PER prevents extrinsic evidence from being given to **//explain the meaning of the terms//** of a written contract · Thus the rule will exclude oral or written evidence of the parties’ subjective intentions about the meaning of the terms in their contract
 * (a) Evidence excluded **


 * (b) The relevance of the surrounding circumstances **

· The **//surrounding circumstances//** form the ‘factual matrix’ or ‘objective framework’ within which the contract came **//into existence//** · Relevance of evidence of the surrounding circumstances in construing a contract is illustrated by **//__Appleby v Pursell__//**- held that evidence of the advertisements and the conversation was admissible to establish the background against which the parties had been contracting
 * __Factual matrix/objective framework__ **

· Two alternate views of **//when//** evidence of surrounding circumstances should be admitted: · 1. In **//__Codelfa Construction Pty Ltd v State Rail Authority of New South Wales__//**- if the · 2. evidence of the surrounding circumstances should be generally admissible in construing a contract- supported by statements made by House of Lords, esp. in **//__ICS Ltd v West Bromwich__//** · In **//__Royal Botanic Gardens and Domain Trust v South Sydney City Council__//**- HC said that Australian courts should follow **//__Codelfa__//** until HC makes a determination on the issue; thus suggesting that **//ambiguity is necessary in Australia before looking at surrounding circumstances when construing a contract//** · However, it is suggested that the majority in **//__Royal Botanic Trust__//** did **//not//** demand a very high standard of ambiguity before being prepared to admit evidence of the surrounding circumstances
 * __When should evidence of the surrounding circumstances be admitted?__ **
 * // language is ambiguous //**, then use evidence of surrounding circumstances **//is admissible//**; c.f.

· Evidence of negotiations **//not//** admissible for the purpose of proving the subjective intentions of the parties: **//__Codelfa Construction Pty Ltd v State Rail Authority of New__//** · However, suggested that evidence of prior negotiations may be admitted as part of the surrounding circumstances · In **//__Codelf__a//**, Mason J said that evidence of prior negotiations will be admissible to ‘establish objective background facts which were known to both parties and the subject matter of the contract.’ · Note: c.f. subsequent conduct cannot be used in construing a contract
 * __Prior negotiations as part of the surrounding circumstances__ **
 * //__ South Wales __//**

· extrinsic evidence is admissible to resolve problems of ambiguity in a written document · There must be uncertainty about the meaning of the words in the written document · That the words do not mean what one of the parties hoped they meant is not sufficient
 * (c) Exceptions to the PER in construing a contract **
 * Where extrinsic evidence will be admitted in construing a contract: **
 * 1. Ambiguity ** -
 * 2. To identify the parties or the subject matter **
 * 3. Evidence of trade usage **


 * // (9b) Identifying the express terms //**

First task to resolve dispute as to whether or not one party had adequately performed a contract is to **//identify the terms of that contract.//** An **//objective//** test is used for determining intention.

· Express terms of a contract may be found in the communications through which it was made (eg: statements made during negotiations, signed or unsigned documents. · Express terms may also be incorporated into a contract other than through negotiations  (eg: notices displayed on party’s premises, a document delivered at the time the contract was made such as a receipt or ticket.)


 * (I) Is it a term or a mere representation? **

· Whether a statement is promissory or is a ‘mere representation’ depends on the **//intention//** of the party making the statement. · Intention is judged objectively.


 * OBJECTIVE TEST ** : The court will assess **//whether or not the statement would reasonably be considered a promise by a person placed in the situation of the parties//**: **//__Hospital Products Ltd v United States Surgical Corporation__//**


 * (II) Factors in deciding what a //reasonable person// **** would think **

· statement is more likely to be promissory where the party making it uses words that suggest a promise, c.f. where merely stating an opinion statement is more likely to be a mere representation (**//__JJ Savage__//**) · EG: A statement likely to be promissory if words such as: ‘promise’, ‘agree’, ‘guarantee’, or ‘warrant’ used · A statement likely to be mere representation: ‘I would estimate’, or ‘I guess it is about...’
 * (1) **** Language **

· From an expert, it is more likely to be promissory statement than one who isn’t (**//__Oscar__//**
 * (2) Relative expertise of the parties **
 * //__ Chess __//** )

· A statement which the circumstances show was highly significant or important to the transaction is more likely to be regarded as a promise than a statement of lesser significance (**//__Chappell__//**– white ants)
 * (3) Importance of the statement **

· Was it before the immediately contract (**//__Harling__//** – able to be included) or was there a lengthy period of time (**//__Routeledge__//** – not able)? Must be at **//time of negotiating//**.
 * (4) Timing **


 * (III) Has the term/s been incorporated? **

· Signature will bind a party to the terms of a contractual document regardless of whether or not the party has read or understood the terms (**//__L’Estrange__//**). · There are two circumstances in which the above rule can be avoided: 6. Where there is a **//misrepresentation about the terms//** of document by the supplier (**//__Curtis__//**) 7. Where the document is **//not a contractual document or could not reasonably thought//**
 * (a) Effect of signature **
 * // to be a contractual //** document (**//__Curtis__//**)


 * (b) Incorporation of terms by notice **

A supplier of goods or services (who does **//not//** rely on written contracts) will attempt to **//incorporate written terms//** **//into//** what would otherwise be **//an oral contract//**

Whether delivered or displayed terms are incorporated into a contract will depend primarily on two issues: · Whether **//notice//** of the terms was given **//before//** the contract was formed; · Whether **//reasonable steps//** were taken **//to bring the terms to the notice//** of the party to be bound

· In determining whether delivered or displayed terms are incorporated into a contract they must be made available **//at or before//** the contract is made: **//__Oceanic Sun Line Shipping v Fay__//**
 * 1. Timing **

· A party who **//actually knows//** that a delivered document or a sign displayed //**before or at the time**// **//the contract was made contains contractual terms will be bound by those terms- regardless of whether or not the party has actually read the terms//** · In the absence of actual knowledge, a party **//will be//** bound by delivered or displayed terms if the terms have been **//made available in such a form that the party to be bound can be taken to have been given reasonable notice of them:// //__Thorton v Shoe Lane Parking__//** · Where delivered or displayed terms are **//not//** contained in a document which would reasonably be thought to contain contractual terms, the party seeking to incorporate the terms must take **//reasonable steps//** to bring those terms to the **//notice//** of the party to be bound. · **// Note //** : Courts have suggested that if a document is one that a reasonable person in the circumstances would **//expect to contain the terms//** of a contract, the **//mere presentation//** of the document **//will be sufficient notice//** of the terms in the document · What is reasonable notice of delivered or displayed terms will depend on the circumstances of the particular case. The general principle is that the **//notice must be in such a form that it is likely to come to the attention of the party to be bound//**.
 * 2. Knowledge or notice **

· Where the terms to be incorporated into the contract are **//unusual or onerous//**, special notice, such as will **//fairly and reasonably//** bring the terms to the attention of the party to be bound, **//must//** be given: **//__Thorton v Shoe Land Parking__//** · Notice of these terms must be **//even greater or more explicit than would ordinarily be the case//** (see Lord Denning MR quote in **//__Spurling v Bradshaw__//** – “the red hand test”). · **// Mere presentation/availability of conditions of the terms is not sufficient notice //** of the unusual terms: **//__Baltic Shipping Co v Dillon (The Mikhail Lermontov)__//**
 * 3. Unusual or onerous terms **

· The question that arises is whether this concern with onerous terms also applies to contractual documents that are signed. · So far, the requirement of special notice of onerous terms has only applied to terms contained in unsigned documents. Signature renders the terms in a signed document binding on the signing party. · In **//Toll v Alphapharm//**//,// the HC rejected the argument that a special notice requirement should apply to unusually onerous terms in signed documents.
 * __Does this requirement apply for written documents?__ **

· Where parties have had a history of dealings, contractual terms introduced in **//earlier//** transactions **//may be incorporated into a subsequent contract//** event though the ordinary requirements for the incorporation of terms have not been met in relation to that subsequent contract. · For a term to be incorporated by a course of dealings, that course of dealings must have been **//regular//** //(**__Henry Kendall v William Lillico__**//) and **//uniform//** (**//__McCutcheon v David MacBrayne Ltd__; B__almain New Ferry Co v Robertson__//**). · The document relied upon in previous transactions must also reasonably be considered a contractual document, rather than having the appearance of a mere docket or receipt
 * 4. Course of dealings **


 * // (9c) Construing the terms //**


 * // Construction //** = is the process by which courts determine the **//meaning and legal effect of the terms//** in a contract; (i.e. **//how//** the terms apply to govern the dispute in question)

In construing a contract, court aims to give effect to the parties’ intentions- **//objectively//** interpreted

· The normal rule in construing a contract is that the courts give the contract its **//plain and ordinary//** meaning. · The mere fact that the plain and ordinary meaning leads to an **//unreasonable//** result is **//not//** enough to depart from the ordinary meaning (**//__ABC__//**). · However the courts have also said if the result is actually **//absurd//**, then the courts will construe a different meaning of the terms (**//__Westpac__//**). · Courts will favour an interpretation which produces a reasonable commercial result where express terms are ambiguous · C.f. where there is no apparent ambiguity, there is authority that if an uncommercial result is produced, no court interference


 * (I) Exclusion clauses **

**//Exclusion clauses//** = aim to **//reduce or exclude a party’s liability//** for conduct that would otherwise be in breach of contract (or constitute a tort such as negligence)

Four issues need to be considered in **//determining whether an exclusion clause//** · Was the exclusion clause properly incorporated into the contract? · Was the person seeking to rely on the protection of the clause a party?  As a matter of construction, does the clause apply to exclude or reduce the liability in relation to the issue?  Do legislative restrictions apply?
 * // applies to reduce or exclude a party’s liability under a contract //**** — **

 In contracts for the supply of goods and services involving consumers, **//legislation//** **//renders void terms which purport to exclude, restrict, or modify terms implied and certain rights//** conferred under that legislation, or which have that effect: **TPA s.68**  In certain circumstances, the TPA **//permits//** the use of clauses to limit liability where ‘fair and reasonable’: **//TPA 1974 (Vic) s.68A//**  Exclusion clauses may also be affected by general legislative provisions; eg: those prohibiting unconscionable conduct: **//Fair Trading Act 1999 (Vic)//**
 * (a) Legislative restrictions on exclusion clauses **

 Where not regulated by legislation, three questions needed to determine whether an exclusion clause applies to reduce or exclude a party’s liability under a contract: 1. whether or not the exclusion clause was properly incorporated into the contract: see incorporation of terms 2. whether the person seeking to rely on the protection of the clause was a party to the contract: see privity 3. whether, as a matter of construction, the clause applies to exclude or reduce the liability in relation to the issue in dispute: see below
 * (b) The common law approach to exclusion clauses **

 In **//__Darlington Futures Ltd v Delco Aust Pty Ltd__//**//,// HC said:  that the meaning and effect of an exclusion clause is to be determined by the ordinary processes of construction of a contract  that an exclusion clause is to be construed in its ‘natural and ordinary meaning, read in the light of the contract as a whole, thereby giving due weight to the context in which the clause appears including the nature and object of the contract’  also said that **//where ambiguous, an exclusion clause may be construed contra//**  Contra proferentem = in cases of ambiguity, an exclusion clause may be **//construed//**  Note: In **//__Nissho Iwai Aust Ltd v Malaysian International Shipping Corp__//**, the HC stated that a clearly worded exclusion clause may apply to exclude liability even for events occurring in circumstances which would defeat the main object of the contract.
 * (c) Does the clause apply to the issue in dispute? **
 * Ordinary principles of construction and contra proferentem **
 * // proferentem //**
 * // strictly against //** the interest of the **//proferens//**, (the **//party seeking to rely on the clause//**)

 The principles should only be applied in cases of ambiguity  Where the words of an exclusion clause have a clear meaning there should be no scope for a restrictive interpretation
 * __Other principles of strict construction__ **

 **// Four corners rule //** = courts have shown some unwillingness to construe an exclusion clause as excluding liability for acts that are not authorised by the contract- (i.e. an exclusion clause is unlikely to have been intended to apply to acts that are unauthorised or outside the contract)  Similarly, an exclusion clause is unlikely to apply to a breach that would defeat the main object of the contract
 * __Four corners rule__ **

 Under the deviation rule = a carrier is **//unlikely//** to be able to rely on an exclusion clause to exclude liability for loss occurring **//during a deviation//** from the contractually agreed voyage or route: **//__Thomas National Transport__//**  Route can be expressly or impliedly stipulated as the usual or customary route  Can be for both carriage by sea or land
 * (d) Deviation **

 Clear words are necessary to exclude liability for negligence: **//__Davis v Pearce Parking__//**  Most effective way for a party to exclude liability for negligence is to refer to negligence as an excluded head of liability  However, a general clause but strong language (eg: excluding liability for losses ‘however caused’ or ‘under no circumstance’) **//may be sufficient//** to exclude negligence: **//__Quinn__//**  Also, if negligence is the **//only//** basis on which a P may be liable, **//general words are likely to be sufficient//** to exclude liability for such negligence: **//__Davis v Pearce Parking__//**
 * (e) Negligence **
 * //__ Station Pty Ltd __//**
 * //__ Station Pty Ltd __//**