LAW2101

CONTRACT A

Tutorial Book
Semester 1, 2014

This Tutorial Book should be read in conjunction with

the Contract A Unit Guide and Reading Guide 2014

Prepared by:
Dr Jeannie Marie Paterson and Dr Rebecca Giblin (and amended by the 2014
Contract A Teaching Team)
Clayton Campus
Monash University
Produced and Published by:
Faculty of Law
Monash University
Clayton, Victoria, Australia, 3800
First Published 2008
Copyright 2014
NOT FOR RESALE. All materials produced for this course of study are protected by
copyright. Monash students are permitted to use these materials for personal study
and research only, as permitted under the Copyright Act. Use of these materials for
any other purposes, including copying or resale may infringe copyright unless written
permission has been obtained from the copyright owners. Enquiries should be made to
the publisher

Tutorial 1
Offer & Acceptance
1

Short answer questions give reasons for your answer including reference
to authority

1.1

What are the differences between: (a) an offer; (b) a puff; and (c) an invitation
to treat?

1.2

What is an acceptance?

1.3

What is a counter-offer?

1.4

What is a battle of the forms?

1.5

How may an offer be revoked?

1.6

When can an acceptance be revoked?

Problem Scenario - you will need to look at the correspondence between

Chocolate Printers Ltd and MacRobertson Equipment Supplies Ltd (pages
9 26 of the Tutorial Book)

2.1 If you are representing Chocolate Printers Ltd, what date (or time) would you
argue the contract between your clients and McRobertson Equipment Supplies
Ltd was made? Provide reasons and relevant cases for your answer.
2.2

If you are representing McRobertson Equipment Supplies Ltd, what date (or
time) would you argue the contract between your clients and Chocolate Printers
Ltd was made? Provide reasons and relevant cases for your answer.

Tutorial 2
Consideration
1

Short answer questions give reasons for your answer including reference
to authority

1.1

What is consideration?

1.2

What does it mean to say that consideration must move from the promisee?

1.3

What is meant by consideration must be sufficient but need not be adequate?

1.4

What is past consideration, what is the legal effect of past consideration, and
when may what appears to be past consideration be good consideration?

1.5
1.6

What is the existing legal duty rule?

What is the practical-benefit exception to the existing legal duty rule? Do you
agree with Santow Js decision in Musumeci v Winadell Pty Ltd?

Problem - give reasons for your answer including reference to authority

2.1

Does your client want the price rise apparently agreed on 14 June 2009 to be
binding?

2.2

What arguments support this position?

2.3

Are these arguments likely to succeed?

Tutorial 3
Intention and Certainty
1

Short answer questions give reasons for your answer including reference
to authority

1.1
1.2

What is the difference between an agreement and a contract?

What is the role of presumptions in relation to determining intention to create
legal relations?

1.3

What are the differences between an illusory promise, an uncertain promise and
an incomplete contract?

1.4

What does it mean for a contract to be expressed to be subject to finance'? Are

such contracts enforceable?

Problem - give reasons for your answer including reference to authority

2.1

Are there any issues of uncertainty in any contract between Chocolate Printers
Ltd and McRobertson Equipment Suppliers Ltd?

2.2

How would your client seek to resolve any such issues?

Tutorial 4
Formalities and Estoppel
1

Short answer questions give reasons for your answer including reference
to authority

1.1
1.2

What types of contract must be in writing?

What is necessary for a contract to satisfy the requirements of section 126 of the
Instruments Act 1958 (Vic)?

1.3

What is the difference between common law estoppel and equitable estoppel?

1.4

What is the effect of the decision in Waltons Stores (Interstate) Ltd v Maher?

1.5
1.6

What are the elements for establishing an estoppel?

What is the effect of an estoppel?

Problem - give reasons for your answer including reference to authority

2.1

Do Chocolate Printers Ltd have an estoppel argument in any legal action

against McRobertson Equipment Suppliers Ltd relating to the ability of the
machine purchased to perform the work for Chocolate Confectionaries ?
Explain your reasoning.

Tutorial 5
Express Terms
1

Short answer questions give reasons for your answer including reference
to authority

1.1

A party who has signed a contractual document is usually bound by the terms
of that document even if that party has not read the document before signing it.
What is the authority for this statement? What are the exceptions?

1.2

When do the terms contained in a displayed sign or document form part of the
contract between the parties?

1.3

What is the parol evidence rule and when does it apply?

1.4

When does a statement made during negotiations become a contractual term?

Problem - give reasons for your answer including reference to authority

What are the terms, if any, relating to the type of foil on which the machine
sold by McRobertson Equipment to Chocolate Printers can print?
If you are representing McRobertson, what will be your arguments, and what
is your likelihood of success?
If you are representing Chocolate, what will be your arguments, and what is
your likelihood of success?

Tutorial 6
2011 Examination Paper

Question One
Armstrong Jones (AJ) owns and manages Pace Suites (PS), a hotel and
serviced apartments in Melbourne. In June 2010, AJ tendered for, and won, a
contract to host the Melbourne Motor Racing (MMR) events scheduled for 28
March to 3 April 2011.
A condition of AJs contract with MMR Corporation (MMRC) was that a wide
range of specified facilities within PS was to be refurbished and a new show
room built to be ready by 28 February 2011. If the work was not completed by
the scheduled date, AJ was to pay to MMRC liquidated damages of $25,000
for each week, or part thereof, until completion.
AJ invited tenders for the refurbishment and construction work. Ian Crap (IC),
who owns and manages a construction business called Quality Constructions,
won the contract. The price for the works, incorporated into a detailed
contractual document between AJ and IC, was $15 million. The contract,
which was signed by AJ and IC, also contained the following clauses:
Clause 8:

The contractor (IC) may use the services of subcontractors as he deems fit. IC does not guarantee the
quality of the workmanship or any materials used by any
such sub-contractors. Neither is IC liable for any loss or
damage that may flow from the work of any subcontractor.

Clause 20:

The contractor (IC) must complete all work no later than

15 February 2011.

On 15 December 2010, IC, who (by himself and through sub-contractors) had
completed about 70% of the work required under the contract, wrote an email
to AJ stating that he would have to stop work because he had already spent
$15 million dollars on the project and there is still a lot to be done. He stated
6

further that the only way out is for AJ to agree to an additional payment of $8
million, as costs have been much higher than he (IC) anticipated.
AJ, who thought that ICs tender price of $15 million was on the low side,
responded that he understood the market, and would pay the additional
money if he could afford to do so. He continued:
Unfortunately, I am in serious financial difficulty, and I am counting on
my hosting the MMR events to save me. I may still have to sell some
assets. I am confident you can propose a solution that suits us both; I
see in you unmatched ingenuity. This has to resolve quickly so the
project can get back on schedule, otherwise I will go under, for sure
On 20 December 2010, IC sent AJ an email proposing that he can finish the
work with borrowed funds in exchange for the new showroom and the land on
which it is situated being transferred to him (IC) straight after the MMR
events. AJ phones IC and says, I agree with your proposal. Please move fast
to complete the work on time; the paperwork for the showroom will be done
later.
Required:
Advise the specified parties as to their legal rights and/or liabilities in the
following scenarios. Each scenario is separate and does not follow on
from the other.

A. IC completed the work on time. MMRC was pleased with the facilities at
PS, and has extended AJs hosting contract for another 5 years. However,
AJ has refused to transfer the showroom to IC, although he (AJ) has done
well financially from hosting the MMR events. AJ says that the Showroom
is crucial to his hosting of the MMR events in the future, it is the newest of
all of his PS facilities and, besides, he does not think he is legally obliged
to transfer the showroom to IC.
IC seeks your advice as to his legal position relating to his
contract with AJ
(30
Marks)
7

B. IC completed the work on time. However, before final inspection could

take place, faulty electrical work done by Sparky Plus, the sub-contractor
used by IC, caused fire and damage to a large part of the refurbished
buildings. AJ is unable to host the MMR events. While both IC and Sparky
Plus have insurance, IC disclaims liability, referring to Clause 8 of his
contract with AJ.
AJ seeks your advice as to whether he has a contractual
claim against IC and/or Sparky Plus
(12 Marks)

C. Should Victoria legislate to reform the Common Law rule on Privity?

Discuss this question in the context of cases and secondary
texts with which you have become familiar in your study of
Contract A this year
(8
Marks)

Question Two
Emma runs a dry cleaning business. One of her regular customers is George,
who has used her services many times. One day, George hands in his
designer suit for dry cleaning. Emma gives him a receipt. During the dry
cleaning process, Emma fails to handle the suit with reasonable care, and the
suit gets spoiled with irremovable stains. George is furious and demands that
Emma pay him $1,000 to purchase another suit of similar quality. Emma
refuses, pointing to the clauses printed on the back of the receipt. She has
printed these clauses on the back of receipts since she started the business.
Clause 3 on the back of the receipt reads:
All articles are received and treated entirely at the owners risk. No
liability is accepted for loss of, or damage to, articles through any
cause whatsoever.
Meanwhile, Emma intends to upgrade her dry cleaning equipment. In
particular, her current shirt pressing machine can only process 10 shirts per
hour, which is too slow. Emma meets with Bob, who is a representative of
SEC Pty Ltd, a company importing and selling dry cleaning machinery. Emma
tells Bob that she needs a shirt pressing machine that can process at least 20
shirts per hour. Bob says that SECs new FastPress66, which costs $10,000,
is exactly what she needs. Emma replies that she would like to buy one
FastPress66. Bob takes a document with several pages out of his suitcase
and says to Emma that this document contains the terms of their agreement.
On the first page of the document, Bob enters the details of Emmas
business, FastPress66 as the subject matter and $10,000 as the price. He
then hands the document to Emma and tells her that she needs to sign it if
she wants to purchase a FastPress66. Emma signs the document without
reading it.
Two weeks later, Emma receives a FastPress66. It turns out that it can only
process 15 shirts per hour. When Emma complains to SEC Pty Ltd, she is
referred to the following clauses in the document she signed:
Clause 5:

SEC Pty Ltd does not give any guarantee as to the

amount of shirts that the machine can process per hour.

Clause 6:

This document contains all terms of the contract. No oral

terms form part of the contract.
9

In order to relax from the stress of her business, Emma decides to become a
member of her local gym operated by FIT Pty Ltd. She goes to the counter of
the gym and says that she would like to become a member. She is handed a
document which states that the membership is initially for one year, and that
the membership fee is $50 per month. It also says that the contract is subject
to the standard terms and conditions of FIT Pty Ltd, which are set out in a
brochure available at the counter. Emma sees the brochure but does not read
it. She signs the document and pays the fee for the first month. Two weeks
later, Emma receives a letter from FIT Pty Ltd informing her that her
membership fee will increase to $75 per month from the following month.
When Emma contacts FIT Pty Ltd to complain, she is referred to clause 4 in
the terms and conditions of FIT Pty Ltd, which reads: FIT Pty Ltd is entitled to
increase the fee by up to 50% at any time.
Required:
Advice Emma on her rights and obligations under her contracts with
George, SEC Pty Ltd and FIT Pty Ltd.
(50 Marks)

END OF PAPER
***********************************************************

10

Chocolate Printers Ltd.

Specialist Printers
Tea Trader House
Erica
Gibbsland
Victoria
17 April 2011

Mr N McRobertson
McRobertson Equipment Suppliers Ltd
The Tramshed Docklands
Melbourne Victoria
Dear Mr McRobertson,
I see from your website that you can supply refurbished flexoprint machines. We
would be interested in acquiring such a machine urgently and request your best
price and delivery for a six colour machine with a varnishing stand.
We are interested in printing coated and uncoated papers for wrapping polyester
and also metallic foils for use in the confectionery market and similar fields.
Typical plain and coloured aluminium foil for chocolate wrappers may be of 8
micrometer thickness.
There is no other flexoprint operator in Gibbsland and we believe the machine
you supply will enable us to develop a commanding lead in the Gibbsland
market. At present users of foil products in particular have to import the
printed products, which is expensive. We have identified another possible
source for a machine to fit our requirements, located in Belgium. We would
however prefer to use the services of an Australian supplier such as yourself.
Yours faithfully,
(Signed)
Roland
Chocolate

11

McRobertson Equipment Suppliers Ltd

The Tramshed Docklands
Melbourne, Victoria
Mr Roland Chocolate
Chocolate Printers Ltd
Specialist Printers
Tea Trader House
Erica
Gibbsland
25 April 2011
Dear Mr Chocolate,
Thank you for your letter of 17 April 2011. We have indeed a second hand
flexoprint machine for your task. It is a 7 stand Magiprint Flexometix Mark 8
machine with a varnishing stand having heated air drying. It was recently acquired
from a user in Hobart, Tasmania, and has not yet been dismantled for transit to our
workshop for refurbishment. We would be very happy to arrange for you to visit the
works of the former owners to inspect the print machine, which we are able to offer
at a price of $44,500.
Yours sincerely,
(Signed)
Norman McRobertson

Chocolate Printers Ltd.

Specialist Printers
Tea Trader House
Erica, Gibbsland
Victoria
10 May 2011

Mr N McRobertson
McRobertson Equipment Suppliers Ltd
The Tramshed Docklands
Melbourne Victoria
Dear Norman,
The trip to Hobart was most enjoyable. It was my first time in Tasmania and I am
glad we had a few days to be tourists.
The Magiprint Flexometix machine looked to be just what we need. It appears much
more suitable to our needs than the alternative machinery offered to us for purchase
by the Belgium firm mentioned in my earlier correspondence.
It is imperative that we move fast on this. We signed a contract with Prestige
Chocolate Confectionaries yesterday, which we must be able to service by 15 July.
It is an excellent contract from which we can expect to earn a profit of $400,000 a
year. The contract runs for four years, subject to renewal at the end of that period.
Unless something unexpected happens, we can anticipate a long period of
handsome profits.
There is one other concern. It now appears that Reliable Printers, another printing
firm in Gibbsland, is also considering the purchase of a flexoprint machine. They
have not decided yet but, if our machine is in place and producing, they certainly
won't make the purchase. They would go for the Prestige Chocolate Confectionaries
account if they had any possibility of getting it. While there are other uses for the
machine, of course, the market in the Gibbsland region is very small and it is the
Prestige Chocolate Confectionaries account that makes the flexoprint machine most
worthwhile.

The relevant Belgium firm has indicated that they could supply us with suitable
machinery within the required time frame. However, as indicated, we would prefer
to deal with your firm if you are able to satisfy our needs.
I look forward to your prompt reply.
Yours faithfully,
(Signed) Roland
Chocolate

McRobertson Equipment Suppliers Ltd

The Tramshed Docklands
Melbourne Victoria
16 May 2011
Mr Roland Chocolate
Chocolate Printers Ltd
Specialist Printers
Tea Trader House
Erica
Gibbsland
Dear Roland,
I am glad you enjoyed the trip to Tasmania. That evening at Cradle Mountain was
something to be remembered.
The only way to get the machine to you quickly would be for it to be dispatched
directly to you from Hobart, rather than by way of our workshop. Our engineers
would re-erect it on your premises and refurbish anything that is required. This
should allow completion by your required date.
We also note that as the proposed arrangements would involve one transit period
rather than two, we can reduce the price. You moreover mentioned the possibility of
part of the payment taking the form of a preference share option in your expanding
business. On this basis we would be able to offer the machine to you for the sum of
$42,000 to be made up of a payment of $34,000 plus a top up amount consisting of
preference share options, if that appeals to you.
Your old pal
(Signed)
Norman

Chocolate Printers Ltd.

Specialist Printers
Tea Trader House
Erica
Gibbsland
Victoria

21 May 2011

Mr N McRobertson
McRobertson Equipment Suppliers Ltd
The Tramshed Docklands
Melbourne Victoria
Dear Norman,
We acknowledge your letter of 16 May 2011.
Please take this letter as our Order to buy the refurbished Magiprint Flexometix
Mark 8 flexoprinter machine as discussed, direct to our plant in Erica all for the
sum of $42,000 to be made up of a payment of $34,000 plus a top up amount
consisting of preference share options. We will arrange payment of the cash sum
by direct transfer when we receive your Bank details.
For and on behalf of Chocolate Printers Ltd.
(Signed)
Roland Chocolate

16

McRobertson Equipment Suppliers Ltd

The Tramshed Docklands
Melbourne Victoria
27 May 2011
Mr Roland Chocolate
Chocolate Printers Ltd
Specialist Printers
Tea Trader House
Erica
Gibbsland
Dear Roland,
I am very pleased that you are so satisfied with the Magiprint Flexometix Mark 8
flexoprinter machine. You can be assured that with this machine you will be able to
meet all the needs of your customers.
Our contract is enclosed with the copy of this letter sent by courier. Please sign and
send it to me immediately so that the machine can be sent to you quickly. A copy of
the manufacturers manual for the Magiprint Flexometix Mark 8 flexoprinter
machine is also enclosed. Even though the machine is easy to operate and is a very
reliable machine, you will certainly wish to have a copy of the manual.
Our Bank details will be sent to you directly.
Our personnel are already in Hobart dismantling the machine and it should be
ready for shipment within the week. They will then supervise the refurbishing and
reassembly at your plant on arrival in Gibbsland.
It has been a pleasure doing business with you.
With best wishes,
(Signed)
Norman
Enclosure:

Contract
Instruction Manual

17

McRobertson Equipment Suppliers Contract (Excerpts)

McRobertson Equipment Suppliers Ltd (hereafter Seller) agrees to sell and Chocolate
Printers Ltd. (hereafter Buyer) agrees to purchase one second hand 7 stand Magiprint
Flexometix Mark 8 flexoprinter machine.
1. Price is $34,000 plus preference share options in Chocolate Printers Ltd (total
contract value $42,000).
2. Machine is to be refurbished by Seller on installation at Buyer's premises.
(Signed)
Mr N E McRobertson
McRobertson Equipment Suppliers Ltd
(Signed)
Mr R Chocolate
Chocolate Printers Ltd

18

Extract from Manufacturers Manuel for Magiprint Flexometix Mark 8

Substrate Limits of Performance:
Paper (bleached wood pulp) > 40 Grams/square metre
Aluminium Foil > 10 micrometers (mm)

19

McRobertson Equipment Suppliers Ltd

The Tramshed Docklands
Melbourne Victoria
7 June 2011
Mr Roland Chocolate
Chocolate Printers Ltd
Specialist Printers
Tea Trader House
Erica
Gibbsland
Dear Roland,
Thank you for returning our signed contract and for your payment.
I am writing with unfortunate news. The Magiprint Flexometix Mark 8 flexoprinter
machine has been dissembled and packed for shipping to Victoria. However, we
have been advised that due to unseasonably bad weather, shipping and freight costs
have increased dramatically, to the order to $8000. We will ourselves bear some of
these increased costs as a token of our desire for a long standing relationship.
Nonetheless we will need to request from you a small contribution of $4000,
bringing the total sale price to $38,000 payment plus top up amount in the much
discussed share preference option to bring the total contract price to $46,000. I am
hoping that you will be understanding of our difficulties.
With best wishes,
(Signed)
Norman

20

Chocolate Printers Ltd.

Specialist Printers
Tea Trader House
Erica
Gibbsland
Victoria
14 June 2011

Mr N McRobertson
McRobertson Equipment Suppliers Ltd
The Tramshed Docklands
Melbourne Victoria
Dear Norman,
I have given careful consideration to your last letter. I understand your difficulties
although they do not represent good news for us. It is essential that we have the
machine operating on time and accordingly I am prepared to accede to your request.
Yours faithfully,
(Signed)
Roland Chocolate

21

Chocolate Printers Ltd.

Specialist Printers
Tea Trader House
Erica
Gibbsland
Victoria

1 July 2011

Mr N McRobertson
McRobertson Equipment Suppliers Ltd
The Tramshed Docklands
Melbourne Victoria
Dear Norman,
Your workmen are first rate. They have refurbished the Magiprint Flexometix and
given it a test run. So far, so good.
We plan on starting production printing next week.
Yours faithfully,
(Signed)
Roland Chocolate

22

William Swain
McRobertson Equipment Suppliers Ltd
The Tramshed Docklands
Melbourne Victoria
10 July 2011
Mr N McRobertson
McRobertson Equipment Suppliers Ltd
The Tramshed Docklands
Melbourne Victoria
Dear Mr McRobertson,
This is to confirm what I told you on the telephone. We installed the Magiprint
Flexometix Mark 8 machine at the premises of the Chocolate Printers and
refurbished it once installed. By 1 July we had started doing the test runs and
made the final adjustments. The machine worked perfectly.
We turned over the machine to Mr. Chocolate on 8 July 2011. The first job they
wished to use it for was to print aluminium foil wrappers for Chocolate
Confectionaries. We were at the hotel preparing our luggage for departure when Mr
Chocolate called us. He told me that the foil would crease and the colors were out
of register.
When we arrived at the plant we saw that they were feeding 8 micrometer foil into
the machine. Naturally it wouldn't print properly. The foil was too thin. Because
Mr Chocolate stressed that it was imperative that they be able to print on the 8
micrometer foil and that they had to be ready to deliver by 15 July, we have done
everything I know of to adjust the machine to print on thinner material than it was
designed for. So far we have been unsuccessful.
We will stay here for awhile yet. It may be that there are ways to get around the
problems, but I have my doubts.
I will keep you informed of developments.
Yours truly,
(Signed)
William Swain
Foreman

Chocolate Printers Ltd.

Specialist Printers
Tea Trader House
Erica
Gibbsland
Victoria
1 August 2011
Mr N McRobertson
McRobertson Equipment Suppliers Ltd
The Tramshed Docklands
Melbourne Victoria
Dear Mr. McRobertson,
By now you are well aware of the situation in regard to the Magiprint Flexometix Mark
8 flexoprinter machine you sold to us. It has worked on the various paper products, but
not on the foil products for confectionary wrapping. The machine creases the foil and
tears it, and multiple colour runs on foil are badly out of register.
Your personnel have been working diligently to try to fix matters. I do not fault
their efforts. However, so far they have been unsuccessful. This is becoming very
serious.
As I wrote to you in my letter of 10 May 2011, our contract with Chocolate
Confectionaries requires that we begin delivery to them by 15 July. We are already
more than two weeks past that date. They are threatening to cancel the contract if we
are not able to start production promptly. The consequence would be that those
contracts would most likely go to Reliable Printers.
When it became evident that our machine was having problems, Reliable purchased the
machine they had been considering and got almost immediate delivery. Their machine
is installed and from what I hear it is working well, though they do not have any real use

24

for it at present. My fear is that they will soon be fully occupied while we sit with an
idle machine.
If your personnel are not able to bring the machine into full operation soon, we will
expect you to cover all of our expenses and losses.
Yours faithfully,
(Signed)
Roland Chocolate

25

Chocolate Printers Ltd.

Specialist Printers
Tea Trader House
Erica
Gibbsland
Victoria
15 August 2011
Mr N McRobertson
McRobertson Equipment Suppliers Ltd
The Tramshed Docklands
Melbourne Victoria
Dear Sirs,
Your mechanics and printers have been fiddling with the Magiprint installation for
almost 6 weeks now, and we are no nearer to being able to print quality foil products
for our customers than we were at the beginning.
Chocolate Confectionaries has cancelled its contract with us since we were not able to
supply them with the printed foil they needed. They have contracted with Reliable
Printers. That leaves us with almost no business for that machine you sold us.
The machine is useless to us. We wish to give notice of our intention to claim
compensation including the price of the machine, the cost of the preparatory work on
our part, together with $25,000 in respect of stocks of printing materials, some of
which have been wasted by your personnel in tests, and our significant loss of profits
from the loss of the Chocolate Confectionaries contract.
I am so very sorry it has come to this stage, but it has.
Yours faithfully
(Signed)
Roland Chocolate

26

McRobertson Equipment Suppliers Ltd

The Tramshed Docklands
Melbourne Victoria
10 September 2011
Mr Roland Chocolate
Chocolate Printers Ltd
Specialist Printers
Tea Trader House
Erica
Gibbsland
Dear Mr Chocolate
Your letter of 15 August 2011 has been received. I am very sorry that matters have
reached this impasse.
I must reject in totality your claim in regard to the Magiprint Flexometix Mark 8
machine you purchased from us. Our foreman, Mr Swain, has pointed out to you that
you were attempting to use the machine to print 8 micrometer foil. However, the
specification page in the manufacturer's manual that you received prior to your signing
the contract clearly specified that it could be used only on 10 micrometer and thicker
foil.
At your request, more like at your insistence, Mr Swain and his crew attempted to adjust
the machine to print 8 micrometer foil, but to no avail.
The Magiprint Flexometix Mark 8 machine was completely refurbished by Mr Swain
and his crew. It is in perfect condition and fit to do everything for which it was
designed. If you have no further use for it, we would be prepared to re-purchase it for
$20,000.

27

I look forward to hearing further from you.

Yours sincerely,
(Signed)
Norman McRobertson

28