The four most essential legal concepts for law graduates

My experience as a law graduate so far has taught me that it is very important to know certain key legal concepts because they come up repeatedly and colleagues will expect you to be across them (even if they aren’t – life can be hypocritical). I’m not going to go into serious detail because this is a blog not a textbook, but will set out the basics.

Disclaimer: I have been working in property law, family law, commercial litigation and industrial relations, which are quite litigious areas of law. Your personal “essential legal concept list” may vary. Please share in the comments section if this is the case.

Essential concept 1: legal professional privilege

My Evidence course at law school really glossed over sections 117 to 126 of the Evidence Act 1995 (NSW). These sections are very important when working in any potentially litigious area of the law. At work I write at least one legal research memorandum on legal professional privilege a month. Legal professional privilege is taught in the admission to practice courses, so if you are yet to do College of Law, make sure you pay attention for the legal professional privilege component.

What was known as legal professional privilege at common law is split into “legal advice privilege” (s118) and “litigation privilege” (s119) in the Evidence Act.

Legal advice privilege is designed to protect legal advice (obviously), and will prevent evidence being adduced under s118 where:

EITHER

1. A confidential communication has been made between the client and lawyer or between lawyers acting for the client; or
2. A confidential document has been prepared;

AND

The confidential communication or confidential document was made for the dominant purpose of the lawyer providing legal advice to the client.

The “purpose” is the purpose that at the time led to the creation of the communication or the preparation of the document (Carnell v Mann (1998) 159 ALR 647).

The champion of evidence law Stephen Odgers has stated the question to be as follows: “would the communication have been made or the document prepared even if the suggested dominant purpose had not existed? If the answer is ‘yes’, the test is not satisfied. If the answer is ‘no’, the test will be satisfied, notwithstanding that some ancillary use or purpose was contemplated at the time”.

Litigation privilege will exist under s119 where:

EITHER

1. A confidential communication has been made between the client and lawyer or between a lawyer acting for the client and another person; or
2. A confidential document has been prepared;

AND
The confidential communication or confidential document was made for the dominant purpose of the client being provided with professional legal services relating to an Australian or overseas proceedings where the client is/may be/might have been/was party to the proceedings.

Examples where s119 privilege was held to exist include:

• A record of interview between a solicitor for the coal company and an employee about a mine accident (Newcastle Wallsend Coal Co Pty Ltd v Court of Coal Mine Regulations (1997) 42 NSWLR 351 at 389);
• Communications between the party and an expert witness called by that party (Tirango Nominees Pty Ltd v Dairy Vale Foods Ltd (No 2) (1998) 156 ALR 364 at 365);
• Documents recording communications between prosecution lawyers and prosecution witnesses for the dominant purpose of pending legal proceedings against the accused (R v Petroulias (No 22) (2007) 176 A Crim R 309 per Johnson J); and
• A document prepared as an originating process of legal proceedings or pleadings (as distinct from a draft witness statement or affidavit) is not privileged because it was not made for the dominant purpose of providing legal services: Ingot Capital Investments Pty Ltd v Macquarie Equity Capital Markets Ltd [2004] NSWSC 40.  

There is significant case law on the “dominant purpose test” for both s118 and s119, which I won’t go into any more depth here.

It is also useful to be across the ways in which privilege can be lost:

1. Where the document is used to revive a witness’s memory (s122(6));
2. In criminal proceedings where the defendant is adducing the evidence, unless the evidence is derived from an associated defendant (s123);
3. Joint clients retaining the same solicitor in civil proceedings (s124);
4. Where the document was prepared in furtherance of fraud or abuse of statutory power (s125); and
5. Where there is a related communication already in evidence and it is reasonably necessary for the otherwise privileged document/correspondence to be in evidence so the first communication can be understood (s126).

Essential concept 2: Principles of contract interpretation

Note: The terms “contract interpretation” and “contract construction” are used interchangeably.

The most important case outlining the classic rule is: Codelfa Construction Pty Ltd v State Rail Authority of NSW [1982] HCA 24

The rule: Start with the text and then look at the rest of the contract. If, and only if, there is ambiguity, you can look at extrinsic evidence to aid interpretation. Ambiguity arises where the words are capable of more than one meaning. Extrinsic material is not admissible to contradict the text of a contract where the words have a clear meaning.

It is a two step process:

Step 1: What is the meaning of the words looking at the text itself?

Step 2: If there is ambiguity extrinsic evidence can be used as an aid.

The process stops at Step 1 if there is no ambiguity.

There are some NSW cases suggesting that it is permissible to look at the surrounding circumstances at Step 1. These cases are wrong. In Western Export Services Inc v Jireh International Pty Ltd [2011] HCA 45 the High Court reprimanded these cases and clarified that Codelfa remains the authority on interpreting contracts in Australia. That is, extrinsic evidence is only admissible if the meaning of the clause in the contract is ambiguous. If the meaning is clear, you do not go near the factual matrix.

What does extrinsic evidence/the factual matrix include?

It is useful to start with what extrinsic evidence does not include. Extrinsic evidence never includes:

1. The subjective intention of parties on entering the contract. The subjective intention of parties can be used to for rectification matters, to establish that a contract exists, and for establishing what the terms of an oral contact may be. Subjective intention cannot be used for interpretation purposes (Life Insurance Co of Australia v Phillips (1925) 36 CLR 60).
2. Subsequent conduct of the parties. The conduct of parties after the contract has been entered into can only be used to establish there is a contract in existence and what the terms of the contract are. Subsequent conduct cannot be used for interpretation to determine what the terms actually mean (Franklins Pty Ltd v Metcash Trading Ltd [2009] NSWCA 407).

Extrinsic evidence includes analysing the factual matrix, considering the parties at the time the contract was formed from the perspective of a “reasonable person”. The analysis is objective, ie:

“What were the objective surrounding circumstances at the time of entering into the contract?”

In practice, it does not take much to manufacture ambiguity, but it is a step that must be taken before the factual matrix can be considered.

For extra nerd points: revise implications in fact and law, what you may have learned in Torts & Contracts II in the cases of BP Refineries (formal contracts) and  Byrne v Australian Airlines (informal contracts). Remember it is very difficult to have a new term implied by law, as implied terms in law wapply to all contracts of that category.

Essential concept 3: Principles of statutory interpretation

Statutory interpretation is so important I have written a separate blog post on this topic. In the modern legal environment, most law is contained in statute. A lawyer who does not understand the principles of statutory interpretation will struggle. It is hard to believe Interpretation is not a compulsory subject at law school. 

Essential concept 4: Principles of contract formation

I thought that working in commercial law, all contracts would be formal, written contracts. This is not the case. I have had to deal with many entirely or partly oral contracts. Which meant revising principles of contract formation I learnt five years ago:

1. Agreement

Otherwise known as “offer” and “acceptance”.

Offers:

Remember the difference between an offer and an “invitation to deal”. Once an offer is terminated it can no longer be accepted. An offer can be terminated in a number of ways including revocation, rejection, death of the offeror, and the failure to perform a condition. Understanding rejection is particularly important. A counter offer is a form of rejection. There is a fine line between counter offers and requests for further information (Hyde v Wrench [1840] EWHC Ch J90).

Acceptance:

Can be oral, written or indicated by conduct. The acceptance must be received by the offeror.

2. Consideration

Usually not an issue in commercial contracts.

3. Intention to create legal relations

This intention is usually evidenced in commercial contracts by the passing of consideration between parties (Air Great Lakes Pty Ltd v KS Easter (Holdings) Pty Ltd [1989] 2 NSWLR 309).

4. Capacity to contract

The relevant time is the time of contract formation. There are two elements the party seeking to withdraw from the contract must establish:

1. They are suffering from a disability such that they were unable to understand the general nature of the contract (Gibbons v Wright (1954) 91 CLR 423);
2. The other party was or ought to have been aware of the disability.

Not all oral contracts will be valid. Statute dictates that certain contracts must be in writing, including contracts for the sale of land s54A(1) Conveyancing Act 1919 (NSW).

Note: when establishing that an oral contract exists, all surrounding circumstances can be used, including the parties subjective intentions in entering into the contract.