Australian Contract Law Cases

Contracts are legally binding agreements made between two or more parties. Common law is governed by the common law or judge-made law. This article considers some of the leading Australian contract law cases from the last hundred years.

Elements of a contract

The required elements for a legally binding contract are:

• An offer to do or provide something with a corresponding acceptance of that offer;
• Consideration, i.e., something of value given in exchange for the act done or goods provided;
• An intention to enter into a legally binding contract;
• Capacity to enter into a contract; and
• Adherence to other required legal formalities.

Some Australian contract law cases that consider these elements, along with other contract law principles include the following:

Australian Contract Law Cases: Blomley vs Ryan (1956) 99 CLR 362

This Australian contract law case considered what it means to have the capacity to contract. It concerned the selling of a farm from Ryan to Blomley.

At the time of entering into the contract, Ryan was drinking heavily and suffering from a prolonged and excessive episode of alcoholism. Blomley was aware of Ryan’s condition but still proceeded with the transaction. Ryan tried to avoid his obligations under the contract. Blomley took Ryan to court and sought specific performance of the contract (a court order directing Ryan to fulfil his obligations under the contract).

The court found that Ryan did not have the capacity to contract at the time of entering the agreement due to his being significantly affected by alcohol. The court also noted that Blomley was aware of Ryan’s condition and sought to benefit from it. Due to these reasons, it was found that there was no contract entered into, and Ryan was not required to fulfil his obligations under the contract.

Australian Contract Law Cases: AGC (Advances Ltd) v McWhirter, Supreme Court of NSW (1977) 1 BLR 9454

This Australian contract law case is about the required element of agreement in contracting. It relates to a property that was put up for sale at an auction so long as a reserve price was met. The highest bidder made a bid of $75,000. This bid was not accepted by the owner as the owner had concerns about the bidder’s capacity to pay. The highest bidder then made a claim that a legally binding contract had been entered into with the highest bid was made.

The court determined that in relation to auctions, bidders when they make bids, make offers. These offers can be accepted by the seller but do not have to be. Accordingly, in this case, it was decided that a legally enforceable contract had not been entered into as there had not been any agreement.

Waltons Stores (Interstate) Ltd v Maher 164 CLR 387

Rather than the elements of contract mentioned above, this Australian contract law case concerned the equitable doctrine of promissory estoppel in relation to contract law. The doctrine of promissory estoppel concerns the situations where the law will allow a promise to be relied upon even though a formal or written contract had never been executed.

The facts of this case were that Maher owned property in Nowra, New South Wales, which Waltons Stores was going to lease. There were buildings on this land which Waltons Stores wanted to be demolished and new ones built. Maher relied on Waltons Stores’ representations that a contract would be entered into and demolished the existing buildings. Waltons Stores allowed Maher to continue to think that the contract would be signed even while they performed the work on the property to demolish the buildings and build the new ones and that the contract being signed was only a formality. A contract did not end up being signed, and Waltons Stores backed out of the deal.

Maher took Waltons Stores to court to seek to enforce the agreement. The question was whether the agreement could be enforced despite no written contract being signed. It was held by the majority of the High Court that Maher was entitled to believe that formal contracts were to be mere formalities and that Maher was entitled to rely on the doctrine of promissory estoppel and be compensated accordingly. The elements of promissory estoppel, in this case, were defined as the following:

1. A promise is made;
2. It creates or allows an assumption to be made on the basis that the promise will be kept and a contract will be created;
3. The person who is the recipient of the promise relies on the representation and suffers as a result of this reliance; and
4. It is unconscionable for the party who made the promise to ignore the promise made intentionally.

Air Great Lakes Pty Ltd vs KS Easter (Holdings) Pty Ltd, Supreme Court of NSW (1989) 2 NSWLR 309

This Australian contract law case concerned the sale of an airline by Air Great Lakes to Easter. Easter decided to not go ahead with the purchase, and Air Great Lakes took Easter to court for not honouring the agreement. The court determined that Easter never had the intention to create legal relations, and Air Great Lakes was aware of this face. Accordingly, no contract had been entered into, and Air Great Lakes was not entitled to Easter’s compensation.

ACCC v Reckitt Benckiser (Australia) Pty Ltd [2016] FCA 424

This is an Australian contract law case as it concerns obligations imposed on providers of goods and services through legislation, under the Australian Consumer Law. It concerns the marketing of the anti-inflammatory drug Nurofen. The Australian Competition and Consumer Commission (ACCC) launched legal action against the maker of Nurofen, Reckitt Benckiser, as it was labelling different types of Nurofen as targeting different types of pain. Some of the tablets were priced differently to others. In fact, all the pills were the same. Reckitt Benckiser was ordered to pay a $1.7 million fine for misleading customers. This fine was later increased to $6 million.

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