Digital Signature Legality for Terms of Use Agreement in Australia

How to eSign a document: digital signature legality for Terms of Use Agreement in Australia

[Music] [Music] get everyone my name's Anthony Merrick I'm a legal practitioner admitted in New South Wales and I've taught law at CQ University in Queensland for a little over five years welcome to my to our contract course the idea is that in the space of two hours I want to take you through an entire university course in contract law now a couple of things before we get started first this video is great if you're soon to study contract law and you want to get an overview it's also pretty good if you're studying business saw one of those degrees and your interest in contract law is general finally it's pretty good as a way of reviewing your work however fair warning if you're a Bachelor of law student you've done no work at all all term and you're hoping this video can make up for it well it will help but there's no way that a two-hour video can make up for our whole terms missed opportunities now every time I mention a case or a statutory provision the citation will come up along the bottom of the screen you'll need those the law cited is Queensland law that contract law is pretty much the same throughout Australia I understand the law to be correct as at the 31st of March 2018 okay so can we do this in two hours let's give it a crack start the clock the first thing we need to think about is what a contract actually is now there are a few different theoretical models but my favorite is what's called promise theory the idea here is that a contract involves two or more parties let's say two to make it easy exchanging promises you promise to mow my lawn and I promise to pay you 50 bucks when it's done a contract is more than just an exchange of promises though the special thing about contracts is that if one of the parties doesn't on they're promised well then the other party can take them to court and get her remedy so the court will enforce those promises this means a contract is an exchange of prices where those promises are enforceable by the court now like I say there are other theoretical models but if you keep this idea of promises in mind the rest of these two hours is likely to make a lot more sense we know however that not all promises are enforceable I mean people make all sorts of promises all the time and people are notoriously unreliable if your partner promises to pick up Indian food on the way home from work that forgets to do so well it's a broken promise but it's not one you can go to court over so how do we tell which promises are enforceable and which promises are not to do this we look at the topic of contract formation to make a contract five elements have to be sorted first you have to have the capacity to make a contract second you must intend to create legal obligations third there must be agreement on the terms of the contract fourth there must be what we call consideration which means you give something to get something and finally the contract must be sufficiently certain and complete let's look at each of those in turn will start with capacity now the laws starting position is that everybody is assumed to have the capacity to enter a contract however there are a few exceptions the first and most obvious of these relates to minors so people aged less than eighteen the rule isn't that young people can't make contracts at all I mean that'd be silly it would mean that children couldn't buy a packet of chips or a can of drink instead the rule is that a contract made by a child is voidable that is it can be enforced by the child but it can't be enforced against the job let me be clear if I make a contract with my 15 year old neighbor to mow my lawn for 50 bucks and he mowed the lawn well he could sue me for the 50 bucks if I fail to pay sounds fair however if we made that same contract and I paid him but then he never got around to mowing the lawn I wouldn't be able to sue to get my 50 bucks back the law basically says if you make a contract with a child you do so at your own risk the reason for this is that children obviously lack maturity and so often they won't be able to really consider the nature of the obligations they're taking on so it's a rule that stops young people from being exploited there are a few situations however where contracts can be enforced against a child the first of these is when the child is making a contract for what we call necessaries these are things that a young person in their circumstance would ordinarily need however you can't even enforce a contract for necessaries if the child already has a good supply of those necessaries now how is the merchant supposed to know that I've never quite known however the rule is that you can't enforce a contract for necessaries if the child already has a good supply finally contracts can be enforced against children if they are what are called beneficial contracts of employment or education Sarge for children what about people with diminished mental capacity again there's no rule against such people entering into contracts however the contracts will only be enforceable by them not against them the contracts are avoidable a warning though this rule only applies if the other party knew or ought to have known that they had a mental incapacity finally a very similar rule is in place if a person is so intoxicated by drugs or alcohol that they don't understand the nature of the contract that they're entering into the thing with these types of incapacity though is that they're often not permanent children become adults drunk people sober up people with mental incapacity are orphans restored to full mental capacity what happens then well if a person makes a contract while they don't have full capacity but then they later obtain capacity they have the choice to either repudiate the contract which means pull out of it or they can ratify the contract which means they've now agreed to it while they've had capacity so it becomes fully binding okay so let's assume that our contract is being made between two people who have full legal capacity the next thing to ask is whether they are actually intending to create a legal relationship in other words do they intend for their agreement to be a contract that can be enforced by the courts to work this out the law makes two presumptions the first is that agreements between family members and others in close relationships are what we call social agreements and that social agreements are not enforceable by the courts this makes sense if you think about it because families make all sorts of promises and agreements within themselves and it's not the laws intention to jump in every time there's a family squabble a second presumption is that an agreement which happens in a commercial or trading context between people who are not family and not in a close relationship is a commercial agreement and the commercial agreements are intended to be enforceable both of these presumptions can be rebutted so it's possible for family members to make business arrangements and enforceable contracts among themselves it's also possible for commercial agreements to contain what is called an honour clause which states that the agreement is merely an agreement of honor and is not enforceable in the courts okay so let's now assume we have two parties they both have capacity and they both intend to create legal relations with one another the next thing we need to look for is agreement which has two elements offer and acceptance the idea is pretty simple one party makes an offer which means that they indicate a set of obligations that they're willing to be bound by and they say what they want in return they can either make that offer to another specific person or to the whole world at large we need to be careful though because there are a few things that look like offers but are not actually offers first and advertisement looks like an offer but it's not actually an offer and advertisement is what we call an invitation to treat in other words an advertisement invites you to make an offer to the store to buy their goods or services sounds weird right in the same way if you go into a store and there are groups on display with price tags attached those aren't offers either you make the offer when you take the goods to the checkout and the store accepts your offer when they ring up the sale there are other weird situations for instance what about a few using a ticket machine or a vending machine well in that case the machine itself makes the offer strictly speaking the owner or the operator of the machine makes the offer and you accept the offer by putting your money in the machine same sort of situation with options in an option the offer is made by the person making the bids and the offer is accepted when the hammer Falls or when the auction period ends this includes auctions conducted in environments like eBay once that offer is made a number of things can happen for one thing the party receiving the offer might make a counteroffer this often happens in situations where you are bartering or bargaining it's very common in house and car sales in that case if a person receives an offer and they make a counteroffer their counteroffer extinguishes the previous offer and they become the one making the offer this can bounce back and forwards as many times as necessary another thing that can happen is that the party receiving the offer can make a request for more information a request for more information is different to a counteroffer because they're not saying hey I reject your offer but here's my counteroffer rather they're saying I need more information in order to help me to decide whether to accept your offer finally offers can be withdrawn to withdraw an offer though the person making the offer has to communicate that withdrawal to the other party before it's accepted once it's accepted it's too late to withdraw the offer because once it's accepted you got yourself a contract offers can also be withdrawn if there's a time limit set for acceptance and that time expires and offers are also withdrawn if the person making the offer dies before it's accepted now let's say none of those things happen an offer is made there's no counteroffer no request for information and the offers not withdrawn what happens then well if the person receiving the offer agrees with it in its entirety then the parties are as we say add edom that's Latin for of one mind at that point the offer disappears in a magic puff of law and becomes a contract the acceptance of the offer becomes valid when it is communicated to the person making the offer but there's a bit more to it than that there are a few different ways in which acceptance can and can't be communicated first up acceptance can't be communicated by silence so you can't say to someone well here's my offer if I don't hear back from you rejecting the offer by 5:00 p.m. Friday then I will assume you have accepted the offer however beyond that parties can choose how the offer will be accepted perhaps the most obvious way is by signature another way in which an offer might be accepted is by conduct this is how most offers are accepted in the retail world by accepting your money giving you a receipt and bagging up the goods the store assistant is accepting your offer and at the same time that executing the contract now back in the days when snail mail was still king the rule used to be that if parties allowed for acceptance to be mailed then acceptance occurred and the contract became binding when the acceptance was actually mailed this was called the postal acceptance rule these days snail mail is almost a relic of history and communication is far more likely to be instantaneous communication goodbye email or via a website the Parliament has established specific rules for when acceptance occurs basically acceptance has been communicated when the message becomes available for retrieval on the recipients server one final thing you need to know about acceptance the acceptance has to be made with knowledge of the offer you can't just inadvertently accept an offer that you never knew existed this happened when a murderer confessed his crime this is the case of the crown and Clark the murderer confessed his crime and then sought to be paid the reward for information on that crime it's absurd but what tripped him up was not the absurdity of the request but rather the fact that he didn't actually know about the reward when he made his confession so he hadn't acted in acceptance of the offer with knowledge of the offer crazy case okay so now we have two parties with capacity they intend to create legal relations and there's been an offer and acceptance of that or fun do we have a contract yet you see there's a difference between a contract and a gift a gift occurs when a person gives something or does something for another person without agreement that they'll get anything in return the courts won't enforce a gift a contract on the other hand is always an exchange you give something and you get something in legal terms whatever you give in order to obtain something from the other side is your consideration this is one of those odd occasions where a word has a completely different legal meaning to its normal English meaning so to make a contract both sides have to give consideration what sorts of things can be consideration well the most obvious types of consideration are money and goods but there are other types of consideration too first up conduct can be consideration if I agree to pay you money and you agreed to mow my lawn well then my consideration is the money and your consideration is the conduct of mowing second promises can be consideration so I might pay you money in return for your promise to stop smoking cigarettes in that case my consideration is the money and your consideration is the promise third what we call forbearance can be consideration in other words you can give consideration by refraining from doing something that you had otherwise intended to do the most common time you see this in the cases is what we call forbearance to sue so if you're going to sue me for $25,000 I might make you an offer of $15,000 provided you do not sue me in that case my consideration would be the $15,000 and your consideration is your refraining from suing me so you can see there are various types of consideration the next thing to consider is how much consideration is required the rule is that consideration needs to be sufficient but need not be adequate what on earth does that mean really well it means that the consideration has to have some type of value so it's referred to as valuable consideration however when we say the consideration need not be adequate we mean there doesn't need to be equal value on each side if you want to sell me your car for 20 bucks you can the law of consideration isn't interested in making sure the contract is fair the Lord just wants to make sure that each side is giving some sort of real and valuable consideration in the extreme case there's what we call nominal or peppercorn consideration even a single peppercorn can be good consideration for a contract provided both sides agree sometimes and this is a bit complicated entering into one contract can be consideration for another contract sounds like gobbledygook right well let's say I was now heavily encouraging your new lawn mowing business I learned that my mother was offering you fifty dollars to do her lawns once every fortnight too but I also learned you were contemplating saying no I really want you to get into that contract I might say listen I will pay you an extra ten dollars every time you mow my lawn provided you agreed to enter into that contract with my mom can you see how in this new ten dollar contract your consideration is actually your promise to enter into the contract with my mum in this situation my ten dollar contract with you is called a collateral contract a collateral contract is one where one party's consideration is their agreement to enter into another contract called the main contract now that's the fundamentals but I've got to admit I always found collateral contracts to be a little bit mind-bending this is probably one area where I would suggest that you really need to go beyond this lecture and read a little bit further there's one last rule you'll need to know about consideration though we call that the rule in pinellas case basically this rule only affects contracts of debt and it says that the payment of a lesser amount is not good consideration to discharge the debt then we translate that if I have a contract with you when you've loaned me $5,000 and I've agreed to pay it back by say December the 31st then we can't agree that by paying you back three thousand dollars I will have discharged the debt you'd still be able to sue for that other two thousand dollars no matter what we'd agreed it's easy to see why because if I can use three thousand dollars to pay off or five thousand dollar debt then in effect you'd be making me a gift of two thousand and we know that gives the different two contracts there are some exceptions to the rule in Pinellas case let's say you needed money in a hurry I might agree to pay you back three thousand dollars by December the thirtieth in order to discharge the debt in that case both sides have given consideration your consideration is to give up the $2,000 I would have otherwise paid and my consideration is to make my payment much earlier than I otherwise would have see how it works okay we're nearly there we now have two parties with capacity they intend to create legal relations there's offer an acceptance and both sides of given consideration the final thing we need to check is whether the contract is sufficiently certain and whether the contract is sufficiently complete let's start with certainty a contract is uncertain when the words of the contract are too vague to enable the court or indeed the parties to understand their obligations under the contract the key case is a good example where one party agreed to buy a motor vehicle on hire-purchase terms for two years there were really no more details nobody really knew what on hire-purchase terms meant nobody knew when payments would have been made or how much those payments would be or when ownership of the vehicle was transferred the court was really unable to enforce the contract because the court was unable to understand the contract it's thankfully pretty rare for the court to walk away from a contract because of uncertainty the court will make every effort to try to read some sense into the contract this is particularly so in the case of executed contracts which are contracts where one party has already fully completed their obligation under the contract a second strategy the court can use is to refer to some external to standard so it might be that the contract itself uses words that are pretty vague but overall it describes a situation that's pretty common in that particular industry if there's a standard way of doing things or a standard set of understandings the court is quite likely to look at those as a way of filling in the gaps finally in some cases it may be possible to sever the uncertain terms from the rest of the contract now obviously this doesn't work if the uncertain terms go to the very heart of the contract but if the contract can work without them the court may be inclined to just cut them away and to enforce the rest of the contract ultimately though it's really up to the parties and up to their legal advisers to make sure that the contract is sufficiently certain finally the contract needs to be sufficiently complete the difference between certainty and completeness is that an uncertain contract covers everything but uses words that really can't be understood an incomplete contract leaves out important things so if I made a contract with you to mow my lawn in return for payment but we didn't specify what that payment would be well that's an incomplete contract a contract which is incomplete may not be a properly formed contract at all there are a couple of tricks with completeness first sometimes parties will make an agreement to agree so if we made a contract that you would mow my lawn and that after you'd done so we would agree to a price well that's really just the same as leaving the price all together isn't it that contract is incomplete if on the other hand we made an agreement to negotiate that would be fine if we make the contract that you will mow my lawn and that I agree that after you've done so we will negotiate in good faith to determine the price well that's fine because my consideration for that contract is not my promise to pay but rather my promise to negotiate so an agreement to agree is not okay but an agreement to negotiate is sounds with a - you realize that if there's an unsuccessful negotiation well we've fulfilled our agreement to negotiate but we wouldn't have fulfilled an agreement to agree you never know whether that second agreement will even be possible the difficulty with all this is that sometimes especially when a contract is ongoing it can be really hard to nail down a price or some other provision that both parties will be happy with how can parties handle this without the contract becoming incomplete well one way is to give the parties discretion in terms of their promises so we might make an agreement that for 50 bucks you will mow my lawn every fortnight at 9 a.m. on Saturday unless I specify another time on the weekend you can see that gives me a discretion the only rule with discretion though is that it can't be too broad a discretion will not be allowed if it makes one parties promise illusory what does that mean well and the illusory promise is a promise that isn't really a promise at all it's an illusion so if we agree that you will mow my lawn and that I will have a discretion as to whether to pay you depending on whether I'm happy with the job that's an illusory discretion because I could just choose to pay a zero in which case I'm not making a promise or giving any consideration so there's no contract see how it all comes together finally parties can agree to refer out certain aspects of their contract to a third party source either some other person or some external source of reference so we might make an agreement that for 50 bucks you will mow my lawn to an adequate standard and we might insert a provision that if we disagree as to whether the job is adequate we will jointly pay for the honor Chief Comptroller and inspector of garden maintenance to determine whether the job has been done properly when you think about certainty and completeness can you see what contracts are sometimes written in a painfully detailed way it can be really important to have that detail in there so that everyone knows exactly what they're promising all right that's the first big chunk of the course done we now know how to form a contract we know that you need to have capacity and we know what happens when contracts are made by someone without capacity we know that you need to intend to create legal relations and that agreements between family members usually don't intend to create legal relations we know that there needs to be an author and there needs to be acceptance of the exact terms of that offer and acceptance needs to be communicated to the person who's making the offer we know that both sides need to give consideration but the consideration doesn't have to result in a fair deal finally we know that the contract has to be sufficiently certain and sufficiently complete but we know that the court will work hard to avoid uncertainty and that there are ways to build in flexibility without the contract being incomplete so now we've got ourselves a contract the next thing we need to learn is how the courts will read and interpret those contracts in other words what rules does the court use to attach meaning to the words of the contract generally speaking in this second part of the two-hour course we're going to assume that we're dealing with a written contract all the same rules apply in the case of an oral contract but the rules of evidence are a lot more tricky because you haven't gotten anything in writing to bring before the court so assuming a written contract the first thing to understand is that every sentence or every paragraph of the written contract is a term we call those express terms because they're expressed in the contract and we divide those terms into three categories ing to their level of importance we call them conditions warranties or intermediate terms conditions are those terms which are so important that if they were not delivered the innocent party might as well have never entered the contract at all these are the terms which really do go to the heart of the contract so if we made a contract where you mow my lawn and I agree to pay you 50 bucks we can straightaway swap two conditions in the contract your promise to mow my lawn as a condition because if you didn't mow the lawn there'd be no point me enter in the contract in the same way my promise to pay you is a condition because if I didn't pay you there'd be no point you entering into the contract so if a condition is breached that contract as a whole loses its value to the innocent party the opposite of the condition is called a warrantee now be careful this is another one of those situations where the legal meaning of the word is very different to its usual meaning in English in normal language when we talk about a warranty we're talking about a guarantee that if something goes wrong the seller will fix it in contract law however a warranty is a term of the contract that is just a little less important a warranty is not so important that the contract would lose all of its value if the warranty wasn't completed so for instance let's say that our lawn mowing contract included a term that when you mow the lawn you'll take away all the clippings and dispose of them but on the third time you came and mowed my lawn you forgot to take out the last lot of clippings and they were left in a pile along the side of my house now obviously that's not great you haven't completed your side of the contract but we could hardly say the contract lost all its value to me I still gotta freshly mowed lawn after all so why does this distinction matter in the real world well in contracts more serious than worn nine contracts if a condition is breached the cord is more likely to allow the innocent party to get out of the contract together however if a warranty is breached the innocent party will still be required to keep their promises under the contract but they might be paid damages well they might get up some other similar remedy to make up to them the fact that they didn't get what they paid for finally we have what we call intermediate terms these are terms which sometimes act like a condition and sometimes act like a warranty depending on the circumstances so let's say I made two different law buying contracts with you on two different occasions each contract included a term that the mine had to be complete by midday on the Saturday exactly the same term in each contract now let's say on education you weren't finished mowing the lawn to 1:30 p.m. on the first occasion it was a perfectly normal Saturday nothing particular happening I was sitting around waiting for the bombers to smash war thorn in the foot yes yeah there was a breach of the contract but it hardly matters really in that case the timing provision was acting like a warranty on the second occasion however I decided to sell my house and I had an open house scheduled for 12:30 and instead of potential buyers turning up to a freshly mowed lawn they turned up to the sound of the mower and a front yard that looked like jungle can you see how in this case the term really was acting more like a condition if the mug lawn hadn't been mowed by midday it might as well not have been mowed at all that's an intermediate term the same term is sometimes acted like a condition and sometimes acted like a warrantee okay so now we know the different types of turn the next thing we need to think about is how we can tell whether a term is actually part of the contract at all we call these the rules of incorporation obviously the easiest and clearest way to incorporate words into a contract is by signature if you sign a contract and you acknowledge that you've done so then in general terms you'll be bound by what you have signed this is the case even if you haven't actually read or understood as long as you knew it actually was a contract and as long as you signed it well you'll be bound by those terms unfortunately not all contracts are nearly as simple as that there are other ways in which terms can be incorporated one obvious one is by notice I'm sure you've all been in this situation where you show up to a commercial car park and next to the ticket booth is a big sign showing a bunch of words which they call terms and conditions now that's a bit of a nonsense of course because they're all religious terms but terms and conditions has become the customary form of words so can you incorporate terms into a contract by a notice where you can but there are a couple of rules the first of these is that the notice must be reasonable so for instance a notice board containing a thousand words of text which is intended to be read by a driver entry in the car pocket peak hour might not be considered to be reasonable you can imagine the chaos which would ensue if every driver stopped to read all the terms of the notice in the same way think about some of those ads you see on TV where there are terms written at the end of the ad but they're written in text so small that it's virtually impossible to see second notice has to be given before the contract is formed so for instance let's imagine that you booked a hotel room and you pay for the hotel room and then when you get into the room there's a card showing terms which the hotel wishes to impose on you during your stay now those terms won't actually be effective because the contract has already been formed or for an acceptance occurred when you pay for your hotel room finally if there are particularly onerous terms in the contract well they will require special notice in the key case of Sperling and Bradshaw or the court said the more unreasonable are clauses the greater the notice which must be given of it some clauses which I have seen would need to be printed in red on the face of the document with a red hand pointing to it before the notice could be held to be sufficient however if reasonable notice is given and the notice is given in time and the notice is appropriate to the content of the clause well then the terms in the notice will be part of the contract there are some additional special considerations around what we call exclusion clauses an exclusion clause is a clause which limits the liability of the party who suggests the clause so in our Lord mine contract and exclusion clause might provide that you are not required to mow the lawn if it has been raining in the previous six hours and that a failure to mow the lawn under those circumstances will not be regarded as a breach of the contract now there's nothing inherently wrong with exclusion clauses they can be a sensible thing to include in contracts to ensure that risks are appropriately apportioned between the parties however exclusion clauses can also be used in an evil or tricky way where one party tries to basically exclude all possible liability which might fall on them if things went wrong as a result the more looks at exclusion clauses very carefully some of the rules are quite similar to express clauses generally for instance if you sign a contract which contains an exclusion clause the exclusion Clause is likely to be effective in a similar way if an exclusion clause is put forward by notice the notice has to be given before the contract is formed special rules apply if a party puts forward an exclusion clause but they misrepresent the nature of the exclusion clause now if they do that the exclusion clause is likely not to be valid so if for instance somebody shows you a page of contract provisions and then they try to play down the contents by saying don't worry about that stuff it's just standard boilerplate well that may well be enough to invalidate any exclusion clauses in the contract now even if the exclusion clause does become part of the contract the court will read the clause contra proffer Wrentham this is a Latin phrase meaning against the person who profits so if one party is seeking to rely on an exclusion clause the court will give that clause its minimal meaning if there's any doubt as to whether the exclusion will apply or not in a particular situation the court will read the clause against the person relying on the clause and the exclusion clause won't be effective so they have to be written very carefully finally exclusion clauses are bound by what we call the four-corners rule so the exclusion clause will only apply to conduct which is within the four corners of the contract anything that happens between the parties and which happens outside the four corners of the contract won't be subject to the exclusion clause this sounds more complicated than it really is let's go back to our lawn-mowing contract and let's imagine that contract included a clause which says that you will not be liable for any damage caused to the lawn or the garden or the house regardless of how that damages is caused now if I agreed to that contract and one you were mowing the lawn Navas spat out a rock which broke my window it's pretty clear the exclusion clause would protect you because that's happened within the four corners of the contract it's a mowing contract and you were mine but now imagine that you were walking past my house one afternoon and for some reason you decided to pick up a rock and throw that rock at the window and the window broke the exclusion clause wouldn't help you in that situation because that conduct throwing a rock at my window while walking past is pretty clearly outside the four corners of the contract okay so much for written terms we also have a range of unwritten terms can be included in a contract these are still expressed terms because they're clearly spoken they're just unwritten unwritten terms often occur when there are verbal negotiations between the parties particularly in sales situations so how could we tell whether words spoken in the course of negotiation are intended to be binding provisions of the contract well there are a few things to consider the first of these is the actual words used the law distinguishes between words which are used to give information and words which are used to make promises you see in any negotiations before a contract is signed it's very likely that information will be exchanged that exchange of information is not necessarily an exchange of promises so for instance let's say that we're negotiating our lawn-mowing contract you tell me that you have a large high-quality professional standard lawn mower well that information might impress me but it's just information on the other hand if you said if you give me this work that I will use a large high-quality professional standard lawn mower that sounds much more like a promise something that I can hold you to a second thing the court will consider is the relative expertise of the parties words which are spoken by a person who has with claims to have specific expertise are more likely to be considered binding this is particularly important in sales situations where the seller is likely to have much more expertise than the buyer in that case if the seller makes promises about the product those promises are much more likely to be considered binding third the court will consider whether either party attached any specific importance to the statement the more importance that was attached to the statement the more likely it is to be binding so for instance let's say we were making our lawn mowing contract and I said to you it's really important to me that my lawn is mowed by somebody using an electric mower I don't want anyone using a petrol and then let's say your answer was well it sounds like I can definitely keep your walls in great need for you can you see how I've attached great importance to the electric mower you haven't actually promised to use one but your answer combined with the importance I've attached to my statement will likely mean that you are bound by a requirement to use an electric mower finally if words are spoken in the formation of a contract but later on those words are reduced into writing even if this happens after the contract is signed well that'll be great evidence that both parties intended the words to be binding all along so if after the contract was signed I sent you an email and said remember that discussion we had about the motors and you said yeah I remember that discussion that will be great evidence that we intended those words to be binding finally we need to consider a rule called the parole Evidence Rule this rule says that if there are negotiations between two parties and then after those negotiations the parties produce a written contract which they agree is the entire contract well then they have obviously chosen which bits of their discussion to put into writing and only those things which have been written in the contract will be binding so under the parole Evidence Rule if there's a full written contract you can't go back to something that was said in the negotiations but they're not included in the contract and claimed that the words spoken in those negotiations were binding the court will take the view that if you considered those words to be so important you should have made sure they went into the contract one way to put the parole Evidence Rule beyond all doubt is to include what's called an entire agreement clause an entire agreement Clause quite simply says that the signed and written contract contains the entire agreement between the parties this will stop any suggestion that any other words spoken or any other words included in emails or anything like that as somehow part of the agreement between the parties next lots of contracts include what is called a force majeure clause this is a special type of clause that says in the event of an unforeseen event which is beyond the control of either party and which causes a party not to be able to complete their obligations there'll be no liability so in our Lord mine contract the force majeure clause might operate so that if my home and yard were affected by a bushfire so there was no grass to cut anymore well then both parties would be relieved of our obligations you wouldn't have to mow and I wouldn't have to pay you any more money the last type of special cause I want to talk about is what's called a choice of law clause now you see these all the time especially on the internet if you're buying something from an overseas website let's say one located in Japan well which laws should apply is the contract governed by Australian law or by Japanese law if you actually read the T's and C's before clicking accept you'll find that most of these international contracts include a choice of law clause stating that the contract is agreed by the parties has been subject to the laws of some particular country in this case most likely either Australia or Japan so now we know how to work out what the express content of our contract is it includes everything written down in the contract but it might also include provisions incorporated by notice or unwritten terms provided they meet the criteria now let's say there's a dispute about the meaning of those terms when lawyers talk about the construction of a term they mean the process of determining its true meaning when the court is undertaking the construction of a contract its purpose is to try to figure out what the parties actually meant when they made the contract however in a dispute that's always going to be difficult because the likelihood is that if the parties agreed on the meaning of the contract there probably wouldn't be a dispute so the court starts with the view that if there are clear Express words in the contract those will prevail so if the words themselves clearly say one thing but one party says they mutually intended to say something else well then in the case of a dispute the court will begin by enforcing the clear written words of the contract what if the words in the contract are ambiguous well then the court will look to the matrix of surrounding circumstances to work out what the court what the words mean but it does so in a very interesting way the court doesn't look at the matrix of surrounding circumstances that ask what the parties themselves intended rather the court looks at those circumstances and asks what a reasonable person in the situation of the parties would have meant by the words so in the case of our lawn-mowing contract let's say the contract was for you to mow quote my lawn end quote you came along and mowed the lawn within my boundary fence but then you refused to mow the nature strip without extra money because in your view that was not my lawn and if you knew that I'd wanted that mode you would have quoted me extra money my view of course is that the price is fair and that it always included the nature strip the court would consider the circumstances of our negotiation and would consider whether a reasonable person would consider that the words my lawn included the nature strip most likely the court would find that when most people mow their lawn they don't distinguish between their Lord and the nature strip and that it would have been unreasonable for me to make a contract to get the lawn within my boundaries mode while allowing the worn on my nature strip to become overgrown see how it works so now we know how to identify the expressed terms of a contract and how to read them there's an entirely different category of terms though these are called implied terms now as you might guess these are not written into the contract and they're not even spoken about they're just assumed to be there or else they're in there because the Lord demands that they be there let's spend some time looking at implied terms the first set of implied terms comes from what we call a consistent course of dealing in other words if you're in business and over a long period of time you've developed a business relationship with a supplier and you've always done things a certain way and you've come to understand their policies and ways of doing things then it might eventually reach the point where you're no longer writing everything into a detailed contract for every transaction well in that situation if a dispute later took place the court might well take a look at the way the consistent course of dealing between you and your supplier had taken place and the court might determine that there was an implied term in your agreement that you would both continue to operate that way another type of implied term comes from the standard way that things are done in a certain business or industry if things had done that way universally the court might be ready to accept evidence that a specific contract between the two parties impliedly assumed that things would be done in the same way however to imply this requirement into a contract the court has to be really sure it has to be so well known in the industry or situation that everyone entering into a contract in that industry would know of the customer a third type of implied term is implied into a contract to give it what we call business efficacy you see no contract is so detailed that it covers off on every single possibility or every single possible fact that can be relevant to the contract sometimes a contract will be sufficiently certain that it actually qualifies as a contract but then a dispute will happen and the dispute will be based on things that the parties just simply never turned their mind to so for instance let's say you and I made our Boeing contract and then the first time you came round to mow the lawn the moment you started the mower I came out to complain about the noise and my complaint was this we never said in the contract that you'd be allowed to make so much noise that I couldn't hear my TV and your response would be well that's the noise make and I might say we don't use a lawnmower they don't get an old-fashioned scythe or a manual push mower your answer would be well mowing the lawn that way would take ages and I would weigh more than 50 bucks can you see the dilemma well in a situation like that the court would most likely employ into the contract a term that you were allowed to use a mechanical now there's a danger in this isn't there because by employing terms in this way the court might actually end up binding people to things they never really agreed to to prevent that happening the court has established five rules for terms which are going to be implied into a contract for business efficacy the first rule is that the term must be reasonable and equitable in other words the courts are thinking about what's fair in the situation second the term must be necessary if the contract works arcade without the term then the court will be much less likely to employ a term into the contract third the term must be so obvious that it goes without saying that's actually the words of the rule it needs to be blindingly obvious fourth the term has to be capable of clear expression so the court has to be able to say exactly what the term should have said if the parties had stop to think about it finally the term must not contradict any express terms in the tract so these implied terms they fill gaps in the contract they don't overturn things which are already in the contract now the implied terms that we've talked about so far are really all about fixing problems with the contract there's an entirely separate category of implied terms and these are what we call terms implied by law so these are terms which the law sticks in your contract whether you like it or not the first one I want to talk about is the implied duty to cooperate what this means is that you have to do everything reasonable to allow the other party to have the benefit of the contract for instance let's imagine there was a contract for a house sale and some inspections needed to be done as part of the pre-sale process well if this wasn't written into the contract there would be an implied term that the seller would allow the inspectors onto the premises at an appropriate time so they could carry out their inspections a second implied Duty is the implied duty of good faith now this one's a bit more controversial but I've never quite understood why the implied duty of good faith says essentially that when you make a contract you have to do so with the honest intention of keeping your own side of the bargain and allowing the other side of the fact of the bargain to keep theirs you can't prevent the other party from keeping their side of the bargain and then complain about it so if you came along to mow my lawn and I locked you out of my yard well I could hardly then argue that you were in breach of the contract because you hadn't made the lawn in fact you could sue me for the fifty bucks that you should have received on the basis that it was my bad faith that stopped you from mowing the lawn next there are a bunch of terms which are implied into consumer contracts under the Australian Consumer Law the Australian Consumer Law operates throughout Australia by agreement between the Commonwealth and all the state governments we find the Australian Consumer Law as a schedule to the Competition and Consumer Act to thousand and ten the consumer lore makes a bunch of rules that only apply to consumer contracts somebody is a consumer in a transaction if the goods they're buying are worth less than forty thousand dollars or if the goods they're buying are normally bought for personal domestic or household use and there are consumer providing they're not planning to use those goods in their own business activities now provided you're a consumer there are some great protections the first one is that unfair provisions in standard form contracts won't be enforced unfair terms cause or take advantage of significant imbalances in the obligations of the parties and they cause a detriment to the person with the greater obligations standard form contracts of course are the sort of thing you might normally see as a consumer where you don't really have any opportunity to negotiate it's a standard form however even in standard form contracts unfair terms might still be enforced if they are reasonably necessary to protect a legitimate business interest of the trader the classic example is a contract provision in a gym membership which enables the gym to toss members out in this case they did actually toss someone out after he repeatedly breached the etiquette of the gym now the court found that this was reasonably necessary for the gym to protect their legitimate interest because other members would withdraw their membership if the benches were drenched in sweat because all might hadn't used to tell elsewhere in the Australian Consumer Law we find what I call Consumer Guarantees now if you've never heard of these they're really worth a look basically there are three broad categories of guarantee and then there's a bunch of detail to flesh those out the first broad category is that there has to be a guarantee of title for any which is being solved so when a trader sells you something they are impliedly guaranteeing that they have titled in that object if they don't for instance if it turns out to be stolen where you can rely on that guarantee to get your money back the second broad category is that goods are guaranteed to be of an appropriate quality they must be appropriately fit for the normal purpose those goods are used for and they must be appropriately fit for any purpose which the buyer has disclosed to the trader before the sale finally services are guaranteed to be of appropriate quality conducted by somebody of appropriate skill and they're guaranteed to be fit for whatever purpose lay behind the service if these guarantees are breached the consumer law contains a range of things you can do about it we'll talk more about those later on in this video when we get to breach and remedy all right suddenly we're halfway there at this point we know what you need for contract formation capacity intention to create legal relations or for an acceptance consideration certainty completeness and now we know how to read the actual terms we know how expressed terms work including exclusion clauses we know how unwritten Express terms work we know that when the court looks at Express terms they'll implement the clear words first good look to surrounding circumstances to resolve any ambiguity we know that sometimes terms are implied into a contract in order to make the contract work sensibly and finally we know that sometimes the law itself implies terms into the contract mostly to keep things fair and try to prevent disputes in the first place what all of this means is that we now know everything we need to know for a contract to go right but if contracts always went right well there'd never be any legal disputes in this third section of the video we're going to talk about what happens when things go wrong we'll look at mistake misrepresentation misleading and deceptive conduct we'll look at a thing called estoppel we'll look at unconscionable dealing at duress and finally we'll look at illegality do you remember when we were talking about offer and acceptance I said that offer and acceptance result in the two parties being ad edom of one mind well what if one of the parties has made some sort of a mistake what if for instance you and I had been discussing our lawn mowing contract and I told you that my place was that eighteen University Drive but you misheard and you heard a T University Drive now to be on the safe side you swung by the University and you saw that the yard at 80 University Drive was really quite small so in fact quoting me 50 bucks felt like it was a bit cheating turns out though that my yard at 18 University Drive is huge and it'll take you three times as long tomorrow the contract itself doesn't include the address it just says you will mow my yard this is what we call a unilateral mistake because only one party you have made the mistake you got mixed up about the address but I knew the right address all along generally speaking if you make a unilateral mistake the law won't allow you to rely on that mistake to get out of the contract the law will say that the person making the mistake should have been more careful some unilateral mistakes are a bit more complicated dog particularly where it's a mistake as to identity now I'm blessed with a fairly unusual surname but let's pretend my name was Anthony Smith and let's pretend you watched this video and then you had to get some more tutoring from Anthony Smith you signed up for it straight away and when you were signing up you said to the organizer this is going to be great I saw Anthony's to our contract law video on YouTube and it was really helpful getting cheated by him it's too good an opportunity to miss now let's imagine that it turned out to be a completely different Anthony Smith well you might have signed up and you might have paid as much if you knew that would be the case now that's a unilateral mistake isn't it I mean only one party's made a mistake there however when the identity of the other party is a material factor so when it's an important element of the contract and when you intended to make a contract with a completely different person and where the other party ought to know that the identity was important the contract will be void when we say a contract is void it is as though the contract had never been now just to make things slightly more complicated if two parties are face to face when they make a contract even if you're mistaken about the identity of the person standing opposite you the law will still assume that you intended to make a contract with that person the person standing right there you've got plenty of opportunity to work out who they are so a mistake as to identity a unilateral mistake as to identity will only save you if the parties are not face to face and if their identity is an important aspect of the contract and if you intended to make a contract with someone else and if the other party knew that there's one other type of mistake that the law will protect you from it's a very particular type of mistake we call non nest factor that means it was not done or more commonly it's translated as it was not my deed this occurs if you've made a mistake about the actual nature of the document that you've signed so let's say the document was had an expression of interest and you signed it believing that what you were doing was expressing your interest in potentially making a contract at some time in the future as far as you were concerned all you were doing was handing over your details in most cases the law won't help you you've had your chance to read past the headline and to realize the document was in fact a contract however if you are from a special class of people you will be protected if you're unable to read through blindness illiteracy or a lack of understanding of the English language and you have to rely on somebody else to explain the document tooth to you or if for some other reason with no fault of your own you are unable to understand the nature of the document well then the contract will be void now these are pretty serious barriers to overcome so really we come back to the basic rule that in the event of a unilateral mistake it's very likely that the person making the mistake will be held to the contract despite their mistake now there's a second type of mistake called common mistake it might be called a common mistake but it's a pretty rare situation a common mistake occurs when both parties make a mistake as to the existence of some object or some state of affairs which is crucial to the contract and where neither party has actually taken on responsibility for the statement that that thing exists so for instance let's say that I had ordered a book from an overseas book seller on the internet while I was waiting for it to arrive I read some reviews and decided that actually I didn't really want to read that book at all so I put it on eBay and you purchased the book before I'd even received it so the idea was that when I got it I wouldn't even open it I just forwarded on to you little did we know that two days before you agreed to purchase the book it was destroyed in a fire at the overseas mail handling center so I saw you a book that didn't exist you bought a book that didn't exist it wasn't either of our fault and we both made the same mistake in that situation the contract would be void you'd get your money back and we'd go our separate ways finally there's a type of mistake called a mutual mistake this confuses the heck out of my students because a mutual mistake is different to a common mistake even though the words common and mutual mean virtually the same thing a mutual mistake occurs when the parties are completely at cross-purposes so let's say I owned a white sedan and a white ute and you offered to buy my white car for $10,000 now I assumed that you meant the white sedan because if you'd meant by the ute you would have said I want to buy a ute you on the other hand didn't even know that I had the white sedan and you were only interested in buying the ute neither of us discover the confusion so we make a contract for the sale of my white car I'll give you the keys to the sedan and suddenly we have a dispute can you see how both sides have made a mistake but they've made different mistakes my mistake is that I've misunderstood the car that you wanted to buy your mistake is that you've misunderstood which car I wanted to sell it's not a unilateral mistake because it's impossible to look at the contract and say one of us is right and the other one is wrong in a situation like this the truth is that the parties have never actually been at edom at all so the contract will be void so those are our three types of mistake can you see how the one thing that unites them all is that all of these mistakes are innocent the person making the mistake can't really be blamed and neither can the party who's not making the mistake now we're going to get a bit more sinister and look at misrepresentation this happens when one party is actually trying to lead and the other party into a mistake or misunderstanding to prove that misrepresentation has occurred you need to show five things first you need to show that there has been a false statement about some past or present fact now that generally means that statements about the future can't be misrepresentations but if I'm selling you a car and I tell you it's never been in an accident when I know that's not true then I'm making a false statement about a past or present fact second the statement must be made by one contracting party to another or by their agent which means somebody speaking with their authority so if a friend of mine says to you you should buy Anthony's car it's never been in any accidents well that won't be a misrepresentation because I'm not the one who said but if you asked me whether that was true and I didn't set you straight well then there be a problem third the statement has to be made at or before the time the contract was made so if you agree to buy the car and after we've already made our agreement I say you won't regret this this is a great car and it's never been in an accident then even if I'm lying it's not a misrepresentation because the contract was already in place when I said it finally the statement has to be intended to induce you into entering the contract and it has to actually have that effect so if I can see that you want the car but you're balking at the price and I tell you falsely that it's never been in an accident my intention is pretty clearly to convince you to pay the price if that lie pushes you over the line well that's a misrepresentation so let's say we've met all of those requirements what is the effect of a misrepresentation well it depends you see there are three types of misrepresentation innocent fraudulent and negligent innocent misrepresentation happens when the party doesn't know that what they're saying is untrue they may in fact believe that they're telling the absolute truth they've just got it wrong if the other party proves that this misrepresentation occurred well the innocent party will be able to rescind the contract that means that they will be able to set the contractor side and get their money back but nothing more than that it's not like the law would want to punish someone who was not actually trying to tell lies next we come to fraudulent misrepresentation now this occurs when someone who's just dead set lying now making a misrepresentation and they're doing so either knowingly or without actually believing in what they're saying or they're doing it recklessly that is without checking in to what they're saying and without caring if it's true or not if a fraudulent misrepresentation occurs the innocent party can rescind the contract but they can also potentially obtain damages for any harm they might have suffered as a result of the fraud finally we come to negligent misrepresentation this happens when one party is under a special duty to make sure that what they are telling the other party is the truth this is most obvious when the contract is actually for the provision of advice if you go to say a financial advisor then they're under a special duty to make sure that the statements they make prior to the contract are accurate because they have access to knowledge you don't and the whole purpose in going to see them is to obtain access to that knowledge so if the person making a statement is under a special duty to be reliable and tell the truth and they fail in that duty and that failure results in the other party suffering loss or damage well then the innocent party can rescind the contract and they can also obtain damages to undo the harm now under the Australian Consumer Law and before 2010 under the old trade practices act 1974 there are in fact statutory provisions which prohibit corporations from making false or misleading statements about a whole bunch of aspects of goods and services those provisions being statutory provisions carry with them the potential for what's called a pecuniary penalty that's a fancy way of saying a fine and in addition to that a range of other orders might be made under the legislation now mistake and misrepresentation and misleading and deceptive conduct do all great but they really only apply in a situation where there is a contract they're also limited to statements about the past and present and finally they're limited in terms of their remedies it comes down to basically rescission or damages or both there's another doctrine that comes out of what we call equity law which is a bit more flexible it doesn't require that a contract is ever actually formed and it allows for a wider range of potential remedies this doctrine is called promissory estoppel the idea of estoppel is deceptively simple if you make a statement to someone about a state of affairs including a future state of affairs and you intend them to rely on that statement well you know they're going to and the statement turns out not to be true and they do rely on that statement and some harm comes as a result well then you should be responsible for that harm even if you're never actually concluded of contract so if I was to tell you look I'll make a contract with you to mow my lawn but I want it done well so you have to go out and buy this particular thousand dollar mower and then we can make our contract and if you did go out and buy the mower but I changed my mind then and said no actually I'm just gonna make myself you can see that my statement is about a future state of affairs it turned out to be wrong you've suffered loss as a result and it's only fair that I should be responsible for that even though we never actually contract at all there are five elements of promissory estoppel first there has to be an assumption or expectation which ultimately turns out to be wrong or invalid or unwisely held in some way second the assumption has to be encouraged or induced by the person against whom the estoppel is being taken now at this point we need to distinguish between expressing hope and encouraging or reducing an expectation if I'm encouraging you to buy that and while lawnmower and I say I know three friends who'll also want you to mow their lawn so you'll make back the cost of the mower in no time well that's a representation however if I just said once you've bought the mower well I hope other people might get you to mow