Australian Contract Law: Critical Case Comment on Con-Stan v Norwich

This report provides a critical case comment on Con-Stan Industries of Australia Pty Ltd v Norwich Winterthur Insurance (Australia) Ltd (1986) 160 CLR 226, a landmark case in Australian Contract Law. It details the facts, procedural history, and ratio decidendi, focusing on the implication of terms. The report critiques the court's decision regarding implied terms, discussing express terms, and the role of contract law. It analyzes the legal arguments, including the relevance of custom and usage, and the application of gap-filling provisions. Furthermore, the report explores economic and feminist analysis of contract law, providing a comprehensive understanding of the case's implications within the broader legal framework. The conclusion summarizes the key findings, emphasizing the importance of contract law principles and the court's interpretation of the contract.

Australian Contract
Law Critical case
comment

Table of Contents
INTRODUCTION...........................................................................................................................1
CASE COMMENT..........................................................................................................................1
1.1 Case Citation.........................................................................................................................1
1.2 Brief Summary of Facts:.......................................................................................................1
1.3 Procedural history of a case..................................................................................................2
1.4 Brief summary of the ratio decidendi....................................................................................2
1.5 Critique..................................................................................................................................3
CONCLUSION................................................................................................................................5
REFERNCES...................................................................................................................................1

INTRODUCTION
In this present world era, law is considered as an important part of legal functioning of a
country. Law can be defined as a mechanism or system of rules and regulations which are
framed with a perspective to ensure effective regulation of behaviour of a community. Each
country has its own laws and regulations 1. There are significant parts of law, which can be
defined as company law, contract law business law etc. In this present report, various aspects of
Contract act will be demonstrated. Also, critique case in respect of a decided case law will be
given effect, in this present assignment. In addition to this, brief citation of facts and its
procedural history, as well as summary of Ratio decidendi will also be elaborated, in this report.
CASE COMMENT
1.1 Case Citation
With reference to the given case scenario of Con-Stan Industries of Australia Pty Ltd
v Norwich Winterthur Insurance (Australia) Ltd (1986) 160 CLR 226, it can be considered
as a landmark case in respect of implication and application of Contract law and legislations.
Basic Facts:
Con Stan industries is a company, registered in Australia, known as Con Stan Industries
of Australia Pty Ltd, has engaged a company, namely Norwich, which is an insurance broker, for
a purpose to select insurance for different types of risks. Latter company agreed to insure former
business organization. So, there are many issues which have been arisen in between these two
parties, in regard to payment of money.
1.2 Brief Summary of Facts:
Various facts have been summarised in relation to this case, which are elaborated as:
 Con-Stan Industries of Australia Pty Ltd hired a company namely Norwich Winterthur
(AUST) Ltd, as an insurance broker. The main objective of engagement of Norwich
company is to ensure former company for an objective of selection of insurance for
various risks. In addition to this, Norwich agreed to do insurance on behalf of Con-Stan.
1
Cindawati, C., 2016. The Development Standard Agreement Influences on National and
International Business Practices. Hasanuddin Law Review. 2(3). pp.362-370.
1

 Con-Stan has paid all amount in respect of Insurance premiums to broker. However, he
did not pay them to Norwich.
 Afterwards, it was found that Broker was declared as insolvent. He went into liquidation.
 Consequently, Con –Stan argued that in their contract or legal agreement, there was an
implied term which was incorporated to introduce the fact that it was required to pay
amount of insurance to broker only. Also, paying that amount by broker enable him to get
discharged from his duties and obligations for insurance premiums2.
 Furthermore, Con –Stan has exclaimed that court should include another term, by which
liability to pay insurance amount to Norwich could have been vanished.
 Court has not accepted to include any term and also upheld the provisions of express
terms for legality of contract.
 In addition to this, it was being held that there was an argument by the side of con stan
industries that there was an evolution of implied terms in respect to the contract of
insurance. In this light, it should include all those terms.
1.3 Procedural history of a case
This case is based on various provisions which can be elaborated as contract acts and
other provisions of other act. In this light, the case has been established in between Con-Stan and
Norwich, on the basis of provisions of Contract act law. In addition to this, various provisions of
implied terms and express terms are explained. Con Stan company was in favour to incorporate
any implied terms, so that they can be excused for payment of insurance amount to Norwich
company.
1.4 Brief summary of the ratio decidendi
Ratio decidendi is a concept. Which signifies a point in case that is used for
determination of judgement. In other words, it can be defined as a Principle, which has been
established by a case. In addition to this, it is a concept which is a legal rule or provision derived
and consistent with all parts and components of legal reasoning within a judgement on which any
result of a particular case is dependent3. Moreover, it can also be considered as all moral beliefs,
legal terms and social benefits, which are utilised by judicial system or courts to effect a
2 Chen-Wishart, M., 2012. Contract law. Oxford University Press.
3 Stewart, A., 2013. Stewart's guide to employment law (Vol. 3). Sydney: Federation
Press.
2

particular judgement. This rule is binding on all lower and later jurisdiction courts, with an aid of
doctrine of Stare Decisis. In simple words, Ratio decidendi can be defined as a concept which
involves formation of judgement on the basis of legal rules and judgement. In this light, the
concept of the other provisions is also applicable.
In the context of case law of Con-Stan Industries of Australia Pty Ltd v Norwich
Winterthur Insurance (Australia) Ltd (1986) 160 CLR 226, court has form its judgement in terms
of Provisions of Contract act. It was of opinion that there is no need to incorporate any implied
terms in a contract. Express terms are the basis to proceed over a contract. Also, court can also
have considered to include any implied terms in cited case so as to resolve any issues in between
parties.
1.5 Critique
Was the court correct in refusing to imply terms proposed in Com –Stan and Norwich case.
This case has been based on various provisions of Contract act. A contract is a legal
agreement between two parties which consists of all legal requirements of an essential legal
contract 4. It comprises of all terms and conditions which are required to give effect any
contractual relationship. In other words, contract can be defined as a legal concept which has
been formed and made by exchange of promises by parties, through which set of lawful
obligations are created 5.
There are different terms and conditions, which are framed in respect of Contract law.
Following are terms and conditions:
 Express terms: These are those terms which are expressly stated in an agreement made
by two parties. in accordance of these terms both the parties are liable to perform their
functions.
 Implied terms: These terms are not expressly stated in a contract. These terms are
implied by custom and applicable in terms of facts. In accordance of this rule, a term will
only be applicable or included in a contract, of it is a reasonable or equitable.
4 Kar, S. and Datta, D., 2014. Industrial and Labor Economics: Issues in Developing and
Transition Countries (Vol. 25). Springer
5 Overview of Australian contract law. 2010. [Online]. Available
through:<https://www.australiancontractlaw.com/law.html>. [Accessed on 3rd August
2017]
3

In context of case of Con -Stan and Norwich company, it is possible for a court to include
any implied terms, on the basis of a common knowledge within an arena of a particular industry.
In this case, implied terms have been implied on basis of Customs. Also, in this case, High court
has considered four points for deciding, whether any term should be included on basis of
customs or not 6.
Furthermore, there are certain methods which are used in analysis of contract legislation.
These can be demonstrated as follows: Economic Analysis: Law can be evaluated through Principle of economic efficiency in
economic analysis. In this aspect, it is considered that it is best to transfer resources to
those persons, who have their best value and importance.
 Feminist Analysis: It is framed against any kind of discrimination activities, that are
practised for women 7. It is a notable fact that there are various aspects of contract law
which has been framed in perspective of feminist analysis.
In this case, Con-Stan is of opinion that there is a requirement of incorporating a new
clause in their contract, known as implied terms, by which they are not legally tenable to pay
Norwich on the behalf of their broker. As decided by court, it should not be included in their said
contract. In accordance with judgement made by court, express terms should be served as a basis
for effective conclusion of case. In other words, court believes that both the parties should
practise their functions on the basis of agreed express terms laid down in a contract. Also, in
accordance with provisions, it was also held that broker was alone responsible for payment of
insurance premium to Norwich company. Also, there were no implied terms in relation to their
contract, which have arisen by virtue of custom and usage 8. Also, there is no term which
signifies that broker is an only person to pay insurance premium to Norwich company. In
addition to this, in cited case, broker is considered as an agent of Con-Stan company, as per laws
and regulations of agency, a broker is considered as an agent of assured. In this light, broker is
held liable to pay all amounts of insurance to Norwich company on the behalf of Con-Stan. So,
in this regard, Con-Stan is liable to pay amount of insurance amount to Norwich.
6 Mazeel, M.A., 2014. Petroleum fiscal systems and contracts. diplom. de
7 Mohamad, S., Ahmad, A.A. and Shahimi, S., 2011. Innovative Islamic hedging
products: Application of wa'd in Malaysian banks
8 Sudini, L.P., 2016. Mediation in the Settlement of Business Disputes in Indonesia. JL
Pol'y & Globalization. 48. p.41.
4

While, in order to establish a custom to effect that a broker is only liable to pay the
insurance amount to Norwich, it is not sufficient and satisfactory to prove, that in accordance
with daily events, that premium is paid to insurer by broker, nor it is sufficient to represent that a
broker is failed to pay a premium, that has been demanded by insurer 9. Hence, it is vital to
establish a clarification in which insurers are not liable to look over the person who has been
assured by insurer. In other words, it can be said that there is a need to establish an effective and
prompt evidence to prove that broker is only liable to pay money.
On the other hand, it was evaluated that there is a freedom given to parties to contract in
regard to incorporate few terms in accordance to their feasibility 10. In accordance with the
provisions of Gap Fillings, parties to the contract are free to incorporate any of the provisions in
accordance with their situations. They are free and also entitled to agree or to choose any legal
terms as per their consent.
So, in conformity with above argument, parties are fee to incorporate any legal terms in
perspective of a respective situation.
 Role of contract law
With accordance to the provisions and norms of contract law, in terms of classical
understanding, main role and function of contract law is to facilitate and enable freedom of
parties to introduce any provision or any legal terms as their own private law. Court has made
judgement as per point of view of provisions of Gap Filling provisions 11. Court has form this
decision in terms of promoting an understanding of the function of contract law. In addition to
this, classical theory of contract law has been applied in terms of decision formation.
9 Parveen, T., Zadeh, E.L. and MuzakkirSyed, A., Evolution of Islamic Banking in IRAN:
Prospects and Problems.
10 Sundermeier, M. and Schlenke, C., 2010. Projektallianzen für Großbauvorhaben—
lediglich “noch ein Partnerschaftsmodell” oder Paradigmenwechsel der
Vertragsgestaltung?. Bautechnik. 87(9). pp.562-571.
11 You, J. and Zhang, J., 2012, June. Relational contract, government support and stable
collaboration: an empirical research on district medical collaboration platform in China.
In Proceedings of the 13th Annual International Conference on Digital Government
Research (pp. 206-215). ACM
5

CONCLUSION
From the above mentioned report, it can be assessed that contract law is a legislation,
which has been framed with a view to effect contract made in between two parties. In this report,
various aspects of Gap Filing provisions and other methods of analysis of contract law has also
been mentioned. In addition to this, both aspects of judgement of case of Con-Stan and Norwich
has been discussed in this report.
6

7

REFERENCES
Books and Journals
Cindawati, C., 2016. The Development Standard Agreement Influences on National and
International Business Practices. Hasanuddin Law Review. 2(3). pp.362-370.
Dhaoui, E., 2015. The role of Islamic Microfinance in Poverty Alleviation: Lessons from
Bangladesh Experience.
Jokinen, A., 2016. Towards sustainable public procurement–Case Procurement Services of
Lappeenranta: tendering food products.
Kar, S. and Datta, D., 2014. Industrial and Labor Economics: Issues in Developing and
Transition Countries (Vol. 25). Springer.
Mazeel, M.A., 2014. Petroleum fiscal systems and contracts. diplom. de.
Mohamad, S., Ahmad, A.A. and Shahimi, S., 2011. Innovative Islamic hedging products:
Application of wa'd in Malaysian banks.
Parveen, T., Zadeh, E.L. and MuzakkirSyed, A., Evolution of Islamic Banking in IRAN:
Prospects and Problems.
Sudini, L.P., 2016. Mediation in the Settlement of Business Disputes in Indonesia. JL Pol'y &
Globalization. 48. p.41.
Sundermeier, M. and Schlenke, C., 2010. Projektallianzen für Großbauvorhaben—lediglich
“noch ein Partnerschaftsmodell” oder Paradigmenwechsel der
Vertragsgestaltung?. Bautechnik. 87(9). pp.562-571.
You, J. and Zhang, J., 2012, June. Relational contract, government support and stable
collaboration: an empirical research on district medical collaboration platform in China.
In Proceedings of the 13th Annual International Conference on Digital Government
Research (pp. 206-215). ACM.
Chen-Wishart, M., 2012. Contract law. Oxford University Press.
Stewart, A., 2013. Stewart's guide to employment law (Vol. 3). Sydney: Federation Press.
Online
Overview of Australian contract law. 2010. [Online]. Available
through:<https://www.australiancontractlaw.com/law.html>. [Accessed on 3rd August
2017].
8