Transcript Fundamentals of Law (BL502)

THE LAW OF COMMERCIAL CONTRACT
Law of Contract
Revision
THE LAW OF COMMERCIAL CONTRACT
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6 elements of a valid contract
Objective\Subjective Tests
Domestic agreements
Invitation to Treat
Withdrawing an offer
Rejection of offer
Lapse of offer
THE LAW OF COMMERCIAL CONTRACT
Law of Contract
Acceptance
THE LAW OF COMMERCIAL CONTRACT
Accepting the Offer
 Only person to whom the offer was made may
accept
 Acceptance must be final & unqualified
 Must be communicated to the person who made
the offer (some exceptions)
THE LAW OF COMMERCIAL CONTRACT
Accepting the Offer (Cont.)
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Acceptance must be final & unqualified
 “Subject to Formal Contract” – 3 possibilities
1. There is a contract & one of terms is that
documentation be prepared
2. There is a contract but nothing can
happen until contract prepared
THE LAW OF COMMERCIAL CONTRACT
Accepting the Offer (Cont.)
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Acceptance must be final & unqualified (cont.)
 “Subject to Formal Contract” (cont.)
3. There is no contract
 Masters v Cameron (S&OR p82)
 Plastyne Products v Gall Engineering
(S&OR p83)
 Communications after acceptance are
irrelevant
THE LAW OF COMMERCIAL CONTRACT
Acceptance Must be Communicated
 Silence does not amount to acceptance
 Acceptance by large companies
 Who must receive acceptance?
 Depends on intention of parties
 Acceptance usually occurs when the
communication is received in the ordinary
course of business or would have been
received if ordinary course of business were
followed
THE LAW OF COMMERCIAL CONTRACT
Acceptance Must be Communicated
 Internet
 Electronic Transactions Act
 Receipt occurs when it enters the
addressee’s designated information system
 Otherwise, when it comes to attention of
addressee
THE LAW OF COMMERCIAL CONTRACT
Acceptance Must be Communicated
 Express Communication of Acceptance is not
necessary where
 Implied from past dealings between parties
 Industry custom
 Acceptance indicated by conduct
 Unilateral contracts
 Postal rule applies
THE LAW OF COMMERCIAL CONTRACT
Acceptance Must be Communicated
 The Postal Rule
 Applies where offeror has expressly or
impliedly accepted post as the means of
communication of acceptance
 Acceptance occurs at time of posting not
receipt
 Applies to all situations where noninstantaneous communications are used
 Often determines jurisdiction
 Berinkibon v Stahag Stahl (S&OR p 86)
THE LAW OF COMMERCIAL CONTRACT
Acceptance Must be Communicated
 Mode & timing of acceptance must conform to
offeror’s requirements
 BUT, nominating a mode of acceptance may not
set the only mode of service
 Spectra v Pindari
 Agent of the person to whom the offer was made
may accept on their behalf
 Powell v Lee (S&OR p87)
THE LAW OF COMMERCIAL CONTRACT
Has an offer been
made?
No
No Contract
Yes
Did the offeror
intend to revoke
the offer?
Yes
Did the offeror
communicate
revocation?
No
Has the offer
lapsed?
No
Yes
Yes
No
Has acceptance
been received by
the offeror?
Yes
No
Contract
Yes
Was acceptance
made under the
postal rule?
No
THE LAW OF COMMERCIAL CONTRACT
Fundamentals of Law
Consideration
THE LAW OF COMMERCIAL CONTRACT
Two Types of Enforceable Agreement
 Deeds
 Contracts that comply with special rules
 Do not require consideration
 Simple contracts
 Do require consideration
THE LAW OF COMMERCIAL CONTRACT
Deed
 In writing
 Maker of deed must sign, seal and deliver the
document
 Independent witness
 Special attestation clause
SIGNED SEALED AND DELIVERED )
by the said JOE BLOGGS
)
in the presence of:
)
THE LAW OF COMMERCIAL CONTRACT
Consideration
 Every simple contract must be supported by
consideration
 The law will not enforce a gratuitous or bare
promise
 Lack of consideration may be overcome by
the equitable doctrine of estoppel
THE LAW OF COMMERCIAL CONTRACT
What is Consideration
 Consideration must flow from both sides of the
contract
 Can be:
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A promise to do something
A promise not to do something
Doing something
Refraining from doing something
A benefit for the promisee
A benefit for a third person at the promisee’s direction
A detriment to the promisor
Anything of real value to the promisee
THE LAW OF COMMERCIAL CONTRACT
Consideration Must Move From Promisor
 Only the person who has “paid” for the
promise can enforce it
 Dunlop v Selfridge (S&OR p101)
Dunlop
Contract
Wholesaler
(bought tyres from Dunlop, sold to retailers)
Contract
Selfridges
(broke promise to wholesaler not to discount)
 Called “Privity of Contract”
THE LAW OF COMMERCIAL CONTRACT
Joint Promisee Rule
 If a promise is made to two or more people
jointly then only one promise need give
consideration
 All promisors must be parties to the contract
 Coulls v Bagot Executor and Trustee Co
(S&OR p 102)
THE LAW OF COMMERCIAL CONTRACT
Privity of Contract - Exceptions
 Statutory exceptions
 Insurance Contracts entered into with the
intention of benefiting another
 Where one party acts as agent for another
person
 Contractual benefits held on trust for another
 Contractual benefits may be assigned
THE LAW OF COMMERCIAL CONTRACT
Consideration May Not Be Past
 A promise can be executed (i.e. present execution) or
executory (i.e. future execution) but cannot be past
 A promise must be paid for but if consideration has
already been given then there is nothing being paid
for the new promise
 Roscorla v Thomas (S&OR p103)
 Settling unsettled aspects of a past transaction may
be consideration
 Re Casey’s Patents: Stewart v Casey (S&OR
p104)
THE LAW OF COMMERCIAL CONTRACT
Consideration May Be Inadequate
 Consideration must be sufficient i.e. have
some value in the eyes of the law
 Need not be equal in value to the promisor’s
promise
 The very nature of contract law is to let the
parties make their own bargain
 However, doctrine of unconscionable conduct
has developed to overcome resulting
injustices
THE LAW OF COMMERCIAL CONTRACT
Consideration Must Be Sufficient (Cont)
 Settling disputes
 Forbearance to sue (i.e. an offer not to sue) is
good consideration provided
 The claim (defence) was reasonable
 The promisee had an honest belief that the claim
had a reasonable chance of success
 The promisee has not concealed any facts that
might affect the validity of the claim
 Wigan v Edwards (S&OR p106)
THE LAW OF COMMERCIAL CONTRACT
Consideration Must Be Sufficient (Cont)
 Renegotiating a debt
 Pinnel’s Case (S&OR p109)
( approved by House of Lords in Foakes v Beer)
 Exceptions
 Composition with creditors
 Payment by third party
 Ways around
 Deed
 Payment in kind
THE LAW OF COMMERCIAL CONTRACT
Consideration Must Be Sufficient (Cont)
 Promising to perform an existing contract is
not consideration
 To be binding, there must be a promise to do
something additional to contracted duty
 Stilk v Myrick (S&OR P 107)
 Rule may be undergoing change
 Williams v Roffey Bros. & Nicholls (S&OR p108)
 A practical benefit is conferred
 No duress
 Followed in NSW
THE LAW OF COMMERCIAL CONTRACT
Consideration Must Be Sufficient (Cont)
 Promise to perform an existing contractual
duty to a third party is sufficient consideration
 Performance of a public duty is not sufficient
consideration
 Collins v Godefroy (S&OR p110)
THE LAW OF COMMERCIAL CONTRACT
Consideration Must Be Sufficient (Cont)
 Illusory promises are not consideration
 E.g. “in consideration of natural love and
affection”
 Too uncertain to be enforced
 Dunton v Dunton (S&OR p 106)
THE LAW OF COMMERCIAL CONTRACT
Consideration Must Be Sufficient
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$1 for a Rolls Royce
“I promise to be an honest public servant”
“I’ll give up my legal claim against you”
“I will pay you less than I owe you if you
forget the rest”
 “In love and affection”
 “I promise to carry out my contractual
obligations”
THE LAW OF COMMERCIAL CONTRACT
Fundamentals of Law
Capacity to Contract
THE LAW OF COMMERCIAL CONTRACT
Contracts with Minors
 Anyone under 18 years of age
 Contracts with minors can be
 Valid – legally enforceable
 Voidable – legally enforceable until
repudiated by the minor
 Void – no legal effect
THE LAW OF COMMERCIAL CONTRACT
Contracts with Minors (Cont)
 Valid contracts
 Supply of necessaries
 Contract for the supply of goods and services
that are suitable to the condition in life of the
minor and to his actual requirements at the time
of sale and delivery
 Onus is one person seeking to enforce contract
against minor
 Nash v Inman (S&OR p116)
 Reasonable price not contract price
 Beneficial contracts of service
THE LAW OF COMMERCIAL CONTRACT
Contracts with Minors (Cont)
 Benefical contracts of service
 E.g. apprenticeships
 Must be for the benefit of the minor
 Ratification by Minor after turning 18
 Contract becomes valid and enforceable
 Statutory modification
 NSW & SA
THE LAW OF COMMERCIAL CONTRACT
Fundamentals of Law
Certainty
THE LAW OF COMMERCIAL CONTRACT
Agreement Must be Certain
 Must be sufficiently certain in all its essential
elements especially:
 Subject matter
 Price
 Must not contain unclear, ambiguous or
contradictory terms
 Courts will uphold contract where possible
 Implying a reasonable price
 Whitlock v Brew (S&OR p 89)
THE LAW OF COMMERCIAL CONTRACT
Agreement Must be Certain (cont.)
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Agreement to agree
Agreement to negotiate
Subject to contract
Subject to finance etc
THE LAW OF COMMERCIAL CONTRACT
Reminder
 Exam next week
 Australian Legal System
 Week 1 material
 Revision material from Week 2
 Multiple choice
 30 minutes
 Closed book
 Can use approved dictionary
 No electronic devices