The Law Handbook 2024

682 Section 7: Consumers, contracts, the internet and copyright reasonable both between the parties and in the public interest). In these cases, the courts will look at the relative bargaining power of the parties. Restraint imposed between equals is viewed with more favour than, for instance, a contract between an employer and employee in unequal bargaining positions. Illegally formed contracts are generally void and unenforceable by either party at common law. Where legally formed contracts are performed illegally (i.e. the illegal conduct was not an intended or required part of the contract, but merely incidental to the way it was performed), then the contract is not void, but: • no remedies are available to the guilty party; and • the innocent party retains all rights and remedies (provided they did not know the contract was to be performed illegally). Where only a part of a contract is contrary to public policy, then the contract is not entirely void, but only so far as it is contrary to public policy. That is, the offending term(s) can be severed, provided that the rest of the contract continues to make sense. Money paid or property transferred under a contract that is void at common law may be recoverable because the effect of the contract being void is that there is no contract, so the parties should be returned to their original positions. Other kinds of conduct that might or might not affect the enforceability of a contract are covered by the ACL, which include prohibitions against: • misleading or deceptive conduct; • unconscionable conduct; and • misrepresentation in particular matters, all of which are discussed in Chapter 7.2: Consumer protection laws (see ‘Misleading or deceptive conduct’, ‘Prohibition of misrepresentations’ and ‘Unconscionable conduct’). The terms of a contract What are the terms of a contract? To determine what terms have been incorporated into a contract and what the terms mean, courts apply the rules of ‘construction’ (see Mount Bruce Mining Pty Ltd v Wright Prospecting Pty Ltd (2015) 256 CLR, 104, 116 [46]-[52]). In short, this means having regard to: • the exact words used in the term in the context of the whole contract; • the purpose and objective of the transaction; and • what a reasonable person would have intended or would have understood by the language used in the contract. Generally, this process of construction can be done by referring only to the contract, but sometimes it is necessary to refer to the surrounding circumstances of the contract, such as where the term is ambiguous or to identify the purpose or objective of the contract. Accordingly, courts have adopted an objective approach to the construction of contracts; subjective intentions, understandings and expectations are disregarded as irrelevant. Incorporation of actual terms A court will consider a term to be incorporated into a contract if it determines that the parties objectively intended to include the term at the time the contract was formulated. This generally covers ‘express terms’ (terms that are expressly written into a contract) and ‘inferred terms’ (terms that are not made explicit in the contract, but can be understood from the nature and context of the transaction and the circumstances surrounding the contract). For example, if a written offer refers to attached terms that are provided to the other party and that are agreed to by that party, but those terms are inadvertently not attached to the final contract, this may be sufficient for a court to consider that the parties objectively intended to incorporate those terms. Issues about whether or not a term has been incorporated into a contract often come up in the following circumstances: • pre-contractual statements; • signed documents; and • unsigned documents. Pre-contractual statements Before entering into a contract, various statements may be made by one party that encourage or induce the other party to enter into the contract. If these statements are not explicitly written into the contract, a dispute may arise about whether any of these pre- contractual statements should be considered to be a term of the contract.