Formalities

Common law does **//not//** require a contract to be in any particular form. **BUT**, where the contract is one for the **//sale/disposition of interest in land//** (interest in land includes a lease and the property on it) OR a **//guarantee//**, **__s.126 Instruments Act__** states that this contract:

 **// Must be in writing //** (**//or//** be evidenced by a sufficient **//note/memorandum//**); **AND**  **// Signed by the party to be charged //** (or agent authorised in writing) in order to be binding.

Lack of writing doesn’t stop there being a contract (i.e. doesn’t stop a property from being transferred) but it means that if one person goes to court, that **//contract cannot be enforced//**.
 * // Note: *Formalities go to enforceability, not whether there is a contract //**


 * (I) Common Law & legislation **

 Common law does **//not//** impose requirement regarding formalities  Contracts can be oral, written or part oral/part written  Contracts at CL are enforceable even if there is no written record of it; c.f.  Formal writing requirements are imposed by statutes for some types of contracts  Examples include: Sale of land- unenforceable unless it is made or evidenced in writing; Consumer Credit; Residential Tenancy Agreements


 * (II) The Statute of Frauds **
 * Provided that no action could be brought on contracts of particular types unless the agreement or some memorandum or note of the agreement was in writing and signed.
 * Designed to prevent fraudulent claims from being made – rejects oral testimonies.
 * Affects contracts of guarantee, contracts made in consideration of marriage, contracts of the sale of an interest in land, contracts not to be performed within the space of one year form the making of the contract, and contracts for the sale of goods for a price of $10 or more.


 * (III) Contracts Covered by Victorian statute **


 * //__ Instruments Act 1958 (Vic) __//**

(1) An action must not be brought to charge a person upon a special promise to answer for the debt, default or miscarriage of another person or upon a contract for the sale or other disposition of an interest in land unless the agreement on which the action is brought, or a memorandum or note of the agreement, is in writing signed by the person to be charged or by a person lawfully authorised in writing by that person to sign such an agreement, memorandum or note. (2) It is declared that the requirements of subsection (1) may be met in accordance with the **Electronic Transactions (Victoria) Act 2000**
 * 126. Certain agreements to be in writing **

 ** Contracts of guarantee ** : Promise to answer for debt, default or miscarriage of another  ** Contracts for land ** : Sale or other disposition of an interest in Land
 * INSTRUMENTS ACT THUS COVERS— **

A **//guarantee//** = is a promise to pay another person’s debt if that person defaults; c.f. An **//indemnity//** is a promise to keep another person free from harm or to ensure that the person suffers no loss arising out of particular circumstances
 * (a) Contracts of guarantee **

 Contracts of guarantee are required to be evidenced in writing: **s__.126 Instruments Act__**  this section applies **//only//** to guarantees: **//__Yeoman Credit v Latter__//**  a contract of guarantee depends upon the validity of the principle transaction, so where the underlying transaction is invalid, the contract of guarantee will also be invalid, whereas a contract of indemnity will stand independently of the primary transaction
 * __ 1958 (Vic) __**

 Guarantor assumes a secondary liability, i.e. Guarantor only liable to pay if Debtor **//does not pay//**  C.f. Indemnity - three parties to the arrangement but **//two parties assume primary liability to the creditor//**
 * __Three parties to the arrangement__ **

 Is the contract an indemnity or guarantee?  Even if it is a guarantee, was it the main object of the parties’ solicitude (consideration) or a mere incident in a larger transaction?  Did the promise place the promisor under full liability or did it merely make available for the satisfaction of the debt some specific property of the promisor?
 * 3 questions asked by courts to determine whether a guarantee is required to be in writing: **


 * (b) Contracts dealing with an interest in land **

Covers contracts for the **//sale of land//**, other dealings in **//interests in land//** (such as **//leases//** and **//mortgages//**), and **//options to purchase or acquire an interest//** **//in land//**


 * (IV) The Formalities required **


 * Statute provides that an action shall not be brought on a contract of a particular type unless the agreement (written contract) OR memo/note of agreement (verbal contract) is in writing and signed by the party to be charged in the contract
 * Memo/note- a document that provides evidence of the existence of the verbal agreement
 * A document need not be created as a memo of the contract in order to satisfy the statute- documents such as receipts and letters are commonly relied upon

The courts take a flexible approach to determining sufficient memorandum – but 5 elements are essential:  ** Content of document- ** document must identify **//parties to the contract//** and **//essential terms//** of the contract to be a memo/note: //**__Pirie v Saunders__**//  ** Timing- ** document needs to come into existence **//after//** the contract made: **//__Pirie v Saunders__//**  ** Joinder of documents- ** when two documents can be read or **//joined together//**, constitute a memo/note: **//__Tonitto v Bassal__//**  ** Signature//-// ** signature of party (the defendant) to be charged: **//__Pirie v Saunders__//**  ** Electronic- ** electronic document and signature are valid: **//__Electronic Transactions (Victoria) Act 2000__//**


 * __ Contents of memorandum or note- essential terms __**
 * A memorandum or note must contain **//all of the terms OR//** at least **//all of the essential terms//** of the contract (i.e. the subject matter, the consideration, and the terms of payment.
 * In **//__Pirie v Saunders__//**__,__ a solicitor’s notes of instructions to prepare a draft lease were held to be inadequate because they contemplated that special conditions relating to certain matters were to be formulated at a later time
 * A party may be described in the document, rather than named, provided the description is sufficient to identify the party; eg: reference to the ‘owner’ of a particular property will be sufficient
 * also, subject matter may be described in general terms; eg: ‘my house’
 * BUT, a document will be inadequate if it says only that ‘part of’ a particular property is being sold, without identifying which part: **//__Pirie v Saunders__//**

 A memo must generally come into existence **//after//** the contract has been made  Any document made earlier **//cannot establish//** that a contract was made, but only indicate a probability that a contract would be made: **//__Haydon v McLeod__//**  **// Exception //** - where a written offer is made by the D, and subsequently accepted verbally by the P (once offer accepted, the document setting out the terms of the offer **//can be//** regarded as an agreement in writing, rather than a memo/note of an oral agreement)  **// Note //** : In **//__Pirie v Saunders__//**, the HC refused to extend this exception to a solicitor’s notes recording verbal instructions to prepare a draft lease- not a memo/note because, parties may have intended that no binding contract be made until the formal document was executed (c.f. a written offer, which records terms in which the offeror is prepared to be bound immediately upon acceptance)
 * __ Time of creation of memorandum or note __**

 Often necessary to rely on **//more than one document//** to satisfy the statutory requirements  The acceptance of two documents as together constituting a memo/note of a contract is known as **//joinder//** of documents  The courts will allow joinder of documents that are **//physically connected//** **OR** where there has been no physical connection between two documents, the **//documents may be joined by reference in one document to the other//**  But, difficult to determine how specific that reference must be  In **//__Thomas v McInnes__//**, Griffith CJ said that it is necessary to find some words that are capable of referring to another document, rather than to a transaction or event  A less stringent approach may have been approved by Knox CJ, Gavan Duffy and Starke JJ in **//__Harvey v Edwards Dunlop__//**
 * __ Joinder of documents __**

// “The memorandum may be made out from several documents if they be connected together. They may be connected by reference one to the other ... if you can spell out of the document a reference in it to some other transaction, you are at liberty to give evidence as to what that other transaction is” //

 In **//__Tonitto v Bassal__//**, NSW Court of Appeal held that if the words used in one document were capable of referring to another, but it was not clear whether they did, then oral evidence could be admitted to resolve the doubt

 The Statute of Frauds require that the document in question be signed by the party to be charged, or by his or her authorised agent  In Victoria, the **//agent must be authorised in writing//**  Since the statute requires only that the document be signed by or on behalf of the party to be charged, an agreement will often be enforceable at law against only one of the parties  The courts have taken a very liberal approach to the requirement of signature  Where the printed or typed name of the party to be charged appears on the relevant document, that will be regarded as a signature, provided the document has been ‘authenticated’ or recognised by that party as the final record of the contract (this is known as the **//authenticated signature fiction//**)  The principle does **//not//** apply to a printed name in a document to which the parties intend to affix their handwritten signatures: **//__Pirie v Saunders__//**
 * __ Signature __**

 The //**Electronic Transaction (Victoria) Act 2000, s. 7**// provides that ‘a transaction is not invalid’ because it took place wholly or partly by means of one or more electronic communications  Seems likely that this provision was intended to allow electronic communications to satisfy the statute of frauds provision  In Victoria, s 126 of __the //**Instruments Act**//__ specifically provides that its requirements ‘may be met in accordance with the **//__Electronic Transactions (Victoria) Act 2000__//**  An electronic indication of approval or consent to contract terms may be regarded as a signature even without resorting to the provision of the ETA
 * __ Documents in electronic form __**


 * (V) The Consequences of Non-Compliance **

 A failure to comply with the legislative provision (s.126 IA) makes a contract legally unenforceable, rather than void: **//__Leroux v Brown__//**  Per Hudson J at [200] in **//__Popiw v Popiw__//**//__:__//  It is clear of course that non-compliance with the Statute of Frauds does not render a contract void, that its provisions are procedural, and that in terms it precludes the bringing of any "action" unless its requirements are satisfied. BUT plainly the policy of the statute is to deny the enforceability of contracts to which it applies unless proved by the necessary writing  BUT, dealings between the parties may still give rise to enforceable rights, although contract is unenforceable
 * (a) Unenforceability **

In some instances, possible to rely on an unenforceable verbal contract as a defence (as in But, remains a matter of controversy (see **//__Perpetual Executors and Trustees Association of Australia Ltd v Russel__l; __Privy Council in Take Harvest Ltd v Liu__//__)__**
 * __ Reliance on contract as a defence __**
 * //__ Thomas v Brown __//**__ ) __

 Courts of equity will grant specific performance of verbal contracts falling within the statute if they have been partly performed  Only equitable relief can be awarded to give effect to the ‘equity’ created by part performance of an unenforceable contract  Thus, only remedies are specific performance or equitable damages  Doctrine of part performance operates only when the P has performed some acts that establish the existence of the contract  Preparatory acts are not sufficient to invoke doctrine of part performance  Part performance does not require that the P has performed obligations under the contract, but only that P has taken some action under a contract  Extent to which the acts relied upon must prove the existence of a particular contract- broad and narrow view contrasted in **//__Ogilvie v Ryan__//**
 * __Part performance__ **
 * Narrow view – acts of part performance must unequivocally and in their own nature refer to some such agreement as that alleged: **//__Maddison v Alderson__//**
 * NOTE: The narrow view prevails in Australia!! **


 * (b) Constructive trust and equitable estoppel **
 * Circumstances surrounding a verbal contract for the sale of land may give rise to a ‘common intention’ constructive trust: **//__Ogilvie v Ryan__//**
 * An equitable estoppel may also arise


 * (a) **** Restitution for unjust enrichment **

// Builders Licencing Act 1971 (NSW) // s.45 – a building contract was not enforceable against the other party to the contract unless it was in writing, signed by each of the parties and sufficiently described the building work. **//__ Pavey & Matthews v Paul __//**
 * the builder did the work, and on that basis they were entitled to be paid for it.
 * ** Mason, Wilson and Deane JJ – ** the builders were entitled to recover in restitution reasonable renumeration for the work they had done, which had been accepted by Mrs Paul. A person who accepts services performed under an unenforceable contract is obliged by law to pay a reasonable renumeration for those services. Although that obligation was formerly seen as arising from an ‘implied’ contractual promise to pay, it should now be recognised as an obligation imposed by law.
 * Old ‘quasi contractual’ actions are now seen as obligations imposed by law in order to prevent unjust enrichment.


 * __ UNJUST ENRICHMENT FORMULA __**
 * the defendant must have received an enrichment
 * the enrichment must have been received at the plaintiff’s expense
 * the enrichment mut have been unjustly received, in the sense of falling within one of the recognised grounds of resitution; and
 * no defence must be available to the defendant.