THE LAW OF COMMERCIAL CONTRACT Law of Contract Revision

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Transcript of THE LAW OF COMMERCIAL CONTRACT Law of Contract Revision

Fundamentals of Law (BL502)Law of Contract
6 elements of a valid contract
Objective\Subjective Tests
Law of 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)
Pp 82
Accepting the Offer (Cont.)
“Subject to Formal Contract” – 3 possibilities
There is a contract & one of terms is that documentation be prepared
There is a contract but nothing can happen until contract prepared
THE LAW OF COMMERCIAL CONTRACT
Accepting the Offer (Cont.)
“Subject to Formal Contract” (cont.)
There is no contract
Plastyne Products v Gall Engineering (S&OR p83)
Communications after acceptance are irrelevant
THE LAW OF COMMERCIAL CONTRACT
Acceptance Must be Communicated
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
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
Implied from past dealings between parties
Industry custom
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 non-instantaneous communications are used
Often determines jurisdiction
P 86
Berinkibon v Stahag Stahl – instantaneous therefore no postal rule therefore made in Austria
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)
P 87
An alternative method may be valid provided it is no less advantageous to the offeror.
Spectra v Pindari
D granted P an option to be exercised by notice in writing “to be sent by pre-paid registered mail”. P sent a notice exercising the option through the ordinary mail and it arrived in time. D claimed no acceptance. The court held that the option had been exercised. The use of ordinary post merely placed the risk of communication not reaching its destination on the offeree.
THE LAW OF COMMERCIAL CONTRACT
Has an offer been made?
No Contract
Did the offeror communicate revocation?
Has the offer lapsed?
Contract
No
No
No
No
No
Yes
Yes
Yes
No
Yes
Yes
Yes
Fundamentals of Law
Deeds
Do not require consideration
Deed
Maker of deed must sign, seal and deliver the document
Independent witness
in the presence of: )
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
Can be:
A promise not to do something
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)
Called “Privity of Contract”
Selfridges
Contract
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
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
( approved by House of Lords in Foakes v Beer)
Exceptions
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
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
“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”
THE LAW OF COMMERCIAL CONTRACT
Fundamentals of Law
Capacity to Contract
Contracts with Minors
Contracts with minors can be
Valid – legally enforceable
Void – no legal effect
Contracts with Minors (Cont)
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
Contracts with Minors (Cont)
Benefical contracts of service
Ratification by Minor after turning 18
Contract becomes valid and enforceable
Statutory modification
NSW & SA
Fundamentals of Law
Agreement Must be Certain
Must be sufficiently certain in all its essential elements especially:
Subject matter
Courts will uphold contract where possible
Implying a reasonable price
THE LAW OF COMMERCIAL CONTRACT
Agreement Must be Certain (cont.)
Agreement to agree
Agreement to negotiate
Subject to contract
Reminder
Multiple choice
30 minutes
Closed book