Laws2111 Lecture8a 2011

Terms (cont)

Parol Evidence Rule

  • A written (and ideally signed) document will generally be held to be the complete contract, and exclusive source of terms incorporated into the document
  • No evidence can be admitted for the purpose of varying the written document (Codelfa)
  • It is, however, a rebuttable presumption if you can prove that the written document was NOT intended to be the whole contract, particularly moreso recently – but the onus is on the party attempting to bring in extrinsic negotiations/terms.
  • Traditional ‘strict’ application (Gordon v McGregor)
  • Modern approach – still a ‘presumption’, but must be clear that it was intended to be the complete contract (Equuscorp v Glengallen)
  • If a contract is “partly in writing” it allows the oral component to also constitute terms (The Ardennes)
  • To be effective, the oral negotiations must have been conducted before the documentation/record was produced, not after (County Securities)
  • Even if the contract contains an ‘entire contract’ or ‘supercession’ clause, it does not necessarily encode the parol evidence rule as a term – though it does suggest it is more likely to have been intended to apply (Nemeth v Bayswater). It also can’t circumvent non-excludable statutory terms
  • Promissory estoppels really doesn’t give a damn about what was in the written contract, as equity trumps the common law presumption (Saleh v Romanous)
  • In short, there are SO many exceptions to the so called ‘rule’ that its more the ‘parol evidence presumption’
    • Implied terms (Codelfa)
    • Custom (Hutton v Warren)
    • Condition precedent (Pym v Campbell)
    • Invalidity (eg misrepresentation or “mistake”) (Curtis v. Chemical Cleaning & Dyeing)
    • Rectification
    • Estoppel (Saleh v Romanous)
    • Collateral contracts

Collateral Contracts

  • Traditional method of avoiding the parol evidence rule in the interests of justice
  • example: contract for the sale of land, plus a collateral contract that the drains are in good condition if enquiries were made to that effect prior to sale
  • Circumvents the problems of adding to the original contract by creating a fictional ‘second’ contract
  • Promise generally must have been made immediately prior to the contract to constitute a collateral contract/warrant (Van Den Eschert v Chappell)
  • Can extend to a third party collateral contract, if consideration is present (Shanklin v Detel)
  • Collatoral contract CANNOT directly contradict the primary written agreement (Hoyts v Spencer, Maralinga) – though the modern equitable approach CAN do this (Saleh)

Promissory Estoppel

  • Illustrated by recent case of Saleh Romanous
    • Saleh and brother owned two houses next door to one another
    • Promised that he could get the brother to sell as well, and sold his property to a developer
    • Couldn’t follow through – but contract made no mention of being conditional on brother’s sale
    • Held that equity required he rescind the contract after failing to fulfil the promise that he would ensure his brother sold the property (because it would be unconscionable for him to profit from breaking his word)

Incorporation of Terms

  • Exemption/Exclusion clause – no liability for any damage covered by clause
  • Indemnity clause – agreement that the other party will accept legal liability
  • Can only be incorporated by reference (eg. see terms on website) if REASONABLE STEPS have been taken to bring them to the other parties attention. The more unusual the term, the greater effort required to accomplish this
  • A cloakroom ticket with terms on it is only part of the contract if attention is drawn to those terms via some kind of notification (Parker v South East Railway)
  • A big noticeboard at the entrance that had to be walked past is probably sufficient notice (Balmain New Ferry v Robertson)
  • Document purporting to incorporate terms must be contractual – cannot be superfluous to the negotiations (Oceanic Sun)
  • Access to the incorporated terms: Head office in another country is not sufficiently accessible (Oceanic)
  • Identification of Terms: Simply stating ‘usual conditions’ is probably too vague
  • Must be incorporated PRIOR to acceptance: If notification occurs after contract is concluded, it’s too late (Olly v Marlborough) – must identify prior to that point (eg. in advertisements, brochures, websites, etc.) or alternatively, incorporate over the course of repeated dealings
  • Note: The exact point of formation can still be tricky – particularly in ticket cases where the ticket is paid for well in advance subject to other terms, but attempts to incorporate additional terms with the ticket (Baltic Shipping v Dillon)
  • How unusual the term is: Lord Denning’s “Red Hand” test – the more unusual the term, the greater the notice required to incorporate it (Thornton v Shoe Lane)
    • Unusual Clauses include Foreign Jurisdiction (Oceanic) and peculiar limited liability clauses (Baltic Shipping)

Learning Guide Cases

Van den Eschert v Chappell
Relevant To: Collateral Contract – immediacy/importance
Issue: Was a promise that there were no white ants in a house, made immediately prior to sale, a collateral warranty?
Held: Yes, it was. The primary contract was consideration for a collateral warranty that the house would be free of white ants, as it was an important consideration in purchasing houses in Australia, and made immediately prior to signing.

Hoyt's v Spencer
Relevant To: Collateral Contract – cannot contradict express terms
Issue: Was an oral agreement not to terminate a lease unless requested by the primary lessor that contradicted a term in the lease stating that they could terminate with 4 weeks notice a collateral contract?
Held: No, it was not – collateral contracts cannot directly contradict a term of the primary contract.

Saleh v Romanous
Relevant To: Estoppel - estoppel as a form of collateral contract, effect of parol evidence rule on estoppel.
Issue: Did a promise to 'take care of Eddie' prior to the contract being made create an equitable requirement that Eddie refusing to sell the adjacent property would constitute grounds for rescission?
Held: Yes, they did. The parol evidence rule has no effect on estoppel, as it is equitable and outside the scope of common law rules. The fact that the promise was inconsistent with the terms of the contract (which would have been fatal to a traditional collateral contract) was also held to not be relevant to estoppel.

Balmain New Ferry v Robertson
Relevant To: Exemption clause – reasonable notice
Issue: Was a term on a noticeboard above the turnstiles stating that it would cost a penny to travel through the ferry turnstiles whether or not they travelled on the ferry sufficient notice to incorporate that clause?
Held: Yes, there was sufficient notice, as he was only walking through the turnstile, and had plenty of time to view/consider them, particularly bearing in mind his repeated custom.

Causer v Browne
Relevant To: Reasonable notice – effect of non-contractual document.
Issue: Was an exclusion clause on a dry cleaning docket given when a dress was dropped off incorporated into the document?
Held: No, it was not – there was nothing to suggest the docket was contractual, as opposed to merely a receipt, and no effort had been made to bring the clause to the plaintiff’s attention.

*Oceanic Sun v Fay
Relevant To: Incorporation of Terms in modern passenger tickets
Issue: When was a contract formed in a modern passenger ticket situation, what was the latest point at which terms could be inserted into it, and could terms that were literally not on display anywhere in Australia be incorporated as part of the contract?
Held: The contract was formed in Australia, at time of payment, rather than in Greece, when the ticket itself was issued. To hold otherwise would prevent any remedy after travelling overseas to go on the crusie. Attempting to incorporate terms through a reference in a brochure to an office not located in Australia was not sufficient notice, particularly given the unusual nature of the jurisdiction clause being relied upon and the non-contractual nature of the brochure.

*Baltic Shipping v Dillon
Relevant To: Incorporation of terms in modern passenger tickets
Issue: Was a booking form issued after payment stating that the contract of carriage only took place when the tickets were issued enough to allow the incorporation of additional terms through the tickets, as per MacRobertson Miller, particularly given the unusual nature of the terms?
Held: In the absence of any signature, it was necessary to do everything reasonable to bring unusual terms to the notice of the passengers. As the conditions were only available on the ticket or at the cruise offices, and the contract was formed at the latest when the ticket was issued, they were not incorporated.