How to Create a Legal and Business Relationship - Essay Example

Australian Contract Laws Student Name Instructor Name Course Code and Name University Date of Submission Australian Contract Laws Legal Rights From the conversation, there are some facts that legal contract issues raised from the conversation between Joseph and Andy, who is an employee representing Adcom Pty Ltd. For a start, it is important to establish whether both Joseph and Andy had the capacity to contract, where, from the discussion, there is evidence that both had the capacity to contract given that they fully understood what they were entering into. In addition, both parties were in a position to contract given that they were both above the ages of 18 years, and were not mentally unsound or drunk during the phone conversation (Monahan 2001, p. 32). Most importantly, from the telephone conversation between Joseph and Andy, both parties showed an express intention to create a legal relationship. Evidence that both had an intention to create a legal relationship is the fact that there existed a business agreement between both parties; thus, a court of law would likely presume that there was an intention to create a contractual relationship. Where there lacks an intention to create a legal relationship, it means that the agreement will not be legally binding to either party (Monahan 2001, p. 32). Another issue with the case between Joseph and Adcom relates to whether the offer from Joseph was an offer or an invitation to treat (Monahan 2001, p. 32). It is important to mention that, in the telephone conversation, Joseph gave two offers to Joseph of an offer price of $2,000 and $1,800. According to company law, an offer has to be definite and should be clearly stated, and the terms of the offer are brought to notice of the offeree and followed exactly. From the Joseph’s perspective, Andy’s initial offer price of $2,000 amounted to an invitation to treat, and can be used as a defense given the fact that it was the mere declaration of the willingness to enter into negotiations. In addition, there is evidence that Joseph had not accepted the terms of the initial offer price of $2,000. Another aspect that provides evidence that the initial offer price was an invitation to treat is that Andy lowered the offer price to $1,800, and it is under these terms that the other party made an acceptance. A defense under contract law for Adcom may be that Joseph accepted the terms of the contract as the acceptance was communicated through the telephone (Monahan 2001, p. 48). This means that their offer was accepted and a legal contract was, therefore, formed. However, the terms of the offer were that Andy was supposed to send the terms of the contract through fax, and thus, acceptance was only through fax are required by the law. This also provides evidence that the initial offers were invitation to treat and the offer was contained in the faxed letter; thus, since acceptance was effective only when Joseph faxed back the letter means that they did not enter into a contractual agreement. For that reason, Joseph was only bound to the terms of the initial agreement and the terms sent through fax amounted to a counteroffer, thus, needed acceptance from Joseph to make it a legal contract binding him to the terms. The written document qualifies as a counter offer as it provides new terms, such as an advertising campaign for 8 weeks with a price of $2,200, which includes a $200 Goods and Services Tax. Another element of a valid contract is the presence of a consideration, where in this case, the consideration was $1,800 as the offer price for Joseph in exchange for 8,000 dockets in the advertising campaign. Both parties had the right to terminate the offer in the case where Joseph failed to fax the acceptance. The grounds for termination of the offer for Adcom would be due to lapse of time as it took long before acceptance was made. On the other hand, Joseph had the right to terminate the offer on grounds such as the offer being a rejection of a counter offer, or failure of the offeror to adhere to the conditions prior to the formation of the contract (Poole 2012, p. 43). This is because Joseph’s acceptance was based on the fact that the offer price was $1,800 and Adcom did not adhere to the condition. Another defense under contract law for Adcom is through the application of the doctrine of promissory estoppel (Sharma 1994, p. 15). A promissory estoppel stops the promisor from denying that the words, statements, and a certain conduct did not happen. For that reason, the decision by Adcom to go through with the advertisement campaign at Joseph’s business was in exercising the doctrine of promissory estoppel. However, the defense for Joseph may be that there was no substantial detriment that occurred to Adcom when he failed to honor the promise (Sharma 1994, p. 20). In addition, the consideration that Adcom offered was inadequate given that no single customer was attracted by the advertisement campaign; thus, enforcement of the contract would be unfair to Joseph who seeks to escape from it. In general, the contract was unconscionable as only one party would benefit from the contract. There is also evidence to prove that there was misrepresentation at the time both Joseph and Andy were entering into the contract. This is a defense for enforcement of the contract by Joseph. It is important to mention that representation refers to a statement of facts that is made by one party to the other, either prior to or at the time of entering the contract in relation to an existing fact or past event that induces the contract (Cross & Miller 2007, p. 220). There was negligent misrepresentation on the side of Andy, given that the discount of $200 amounted to a false statement of facts and the statement was made negligently (Cross & Miller, 2007, p. 220). In addition, the statement by Andy was meant to induce Joseph to enter into a contract. The reason why Andy’s actions amounted to negligent misrepresentation is because; first, there is a special relationship between both parties such that Andy was supposed to exercise a duty of care prior to providing information about the discount to Joseph. Joseph may use the discount as evidence to prove that he accepted the offer due to such advice (Cross & Miller 2007, p. 220). In addition, the subject matter in this case is the offer price, thus has a business nature. For Andy’s statement to amount to negligent misrepresentation, it had to show that the recipient acted upon such advice, and this was the case with Joseph as he accepted the offer after Andy reduced the offer price by $200. However, the defense for Adcom may be that Joseph never suffered any damages as he did not pay the offer price of $1,800 and did not suffer any economic loss from the enforcement of the contract by Adcom. Joseph also had the right to rescind the contract as there is enough evidence to show that Andy applied undue influence on him that led him to act to the benefit of Adcom (Cross & Miller 2007, p. 220). Evidence to prove the undue influence may be the statement made by Andy that the offer was a “once only deal” and would likely go to another business if Joseph did not accept it. In addition, Andy also assured Joseph that the lower offer price of $1,800 was only available to him alone, all of which were meant to influence Joseph to accept the offer. Finally, Joseph had the right to rescind the contract as he was not given reasonable and sufficient time, as well as notice, before the new terms were introduced to the contract. The new terms paced extra burden on Joseph and, thus, he had the right to seek extra notice with regards to such unsigned terms. The oral representations made by both Andy and Joseph were meant to be contractually binding to both parties as they sounded promissory and was important to both parties. Advice after Signing the Written Document My legal advice to Joseph may differ if he had signed the written document with the clause 10. This is because the general rule under contract law is that a signed contract is binding to both parties, even if the parties who signed had not read the contract. However, in the case of Joseph, the rule will be applied in a court of law due to the presence of clause 10 as the clause made the oral representation made by Andy void; thus, Joseph could not use the Andy’s representation as evidence to prove that the signed agreement was at odds with the oral agreement (Blum 2007, p. 207). From the standpoint of the law, Clause 10 qualifies to be an exemption clause as it excludes Adcom from liability and it forms part of the contract. However, using the contra proferentum rule, Joseph may provide evidence relating to the ambiguities in the exemption clause as a defense (Blum, 2007, p. 207). On the other hand, the negligence rule requires that the exception clause expressly states the exemption from liability as a result of a breach of negligence. However, this is not the case with clause 10, which makes Adcom liable to negligent misrepresentation as stated earlier. In addition, the fundamental breach rule excludes liability from fundamental breach, and in such a case, Joseph is required to perform his part of the contract, and thus is required to pay the $2,200 as required by the contractual agreement. List of References Blum, BA 2007, Contracts: examples & explanations, Wolters Kluwer Law & Business, Austin. Cross, FB & Miller, RL 2007, West's legal environment of business: text and cases: ethical, regulatory, international, and e-commerce issues, Thomson/West, Mason, Ohio. Monahan, G 2001, Essential contract law, Cavendish, Sydney, N.S.W. Poole, J 2012, Casebook on contract law, Oxford University Press, Oxford. Sharma, LK 1994, Doctrine of promissory estoppel, Deep & Deep, New Delhi. Read More