Australian Contract Law Problem Question - Case Study Example

Elaine v Kramer The main issue in the given situation is whether there was a valid and enforceable contract between Elaine and Kramer. In common law, there are three key elements to the creation of a contract: an agreement (consisting of offer and acceptance), a consideration, and an intention to create legal relations. In the given situation, the issue is whether the parties (Elaine and Kramer) have reached an agreement Specifically, has Elaine made a properly constituted offer and validly accepted by Kramer The offer, made by the offeror to the offeree, is the the statement of a willingness to be bound on certain specified terms. The offer may be oral, written or implied from conduct. Offers are of two kinds: a specific offer is made to a specific offeree. No one else can accept it. 'If you propose to make a contract with A, then B cannot substitute himself for A without your consent and to your disadvantage, securing to himself all the benefit of the contract': see Pollock, CB, Boulton v Jones (1857)1. A general offer can be accepted by anyone, and usually without prior notification of acceptance: Carlill v Carbolic Smoke ball Co. (1893)2. It was found in Carlil that there was: 'an offer made to all the world'; 'to ripen into a contract with anybody who comes forward and performs the condition'; and that 'as notification of acceptance is required for the benefit of the person who makes the offer, the person who makes the offer may dispense with notice to himself if he thinks it desirable to do so.' In the given situation, Elaine's statement 'I will give that bike to anyone who can fix my neck', was clearly a general offer. However, neither it was shown that Kramer has validly communicated his acceptance to Elaine nor it was shown that the latter has dispensed with the notice of acceptance. Clearly, there was no valid and enforceable contract between Elaine and Kramer considering that there was no agreement between the parties. However, it can be argued that acceptance may be done by positive conduct of the offeree as long as the acceptance must be active and that there must be some positive act by the offeree: Felthouse v Bindley (1862)3. Hence, Kramer may argue that by massaging Elaine, he has communicated his acceptance by positive conduct to Elaine. Furthermore, a valid offer has certain characteristics: certainty (a promise to pay an extra 15 or 10 buy another horse if a horse 'proves lucky to me' is too vague to amount loan offer: Guthing v Lynn [1831])4 and communication (an offer must be communicated to the offeree before it can be accepted.) Thus, if a seaman helps to navigate a ship home without informing the owners in advance, he cannot insist on payment, since the owners have not had notice of his offer, and, therefore, no opportunity to accept or reject it: Taylor v Laird (1856)5. Thus, in the given situation, the promise 'I will give that bike to anyone who can fix my neck' lacks the requirement of certainty. Such promise is similarly too vague as the promise to pay an extra 15 or 10 buy another horse if a horse 'proves lucky to me' to amount to a loan offer: Guthing v Lynn [1831]) In several cases, it has been ruled that preliminary statement may not amount to an offer. An invitation to treat which is a statement that is intended to elicit an offer from someone else has been ruled to have no legal force as the offer it elicits can be accepted or not without obligation: Gibson v Manchester City Council (1979).6 Moreover, a statement of the price at which one is prepared to consider a selling a piece of land or any communication of information in the course of negotiations is a mere preliminary statement which were held not to be an offer. In the given situation, it can be argued that Elaine's statement was a mere preliminary statement which does not constitute a valid offer. Moreover, another requirement in the creation of a valid and enforceable contract is an intention to create legal relations. In an agreement between friends in a domestic arrangements, there is a presumption that there is no intention to create a binding legal relation. Thus, in a promise by a husband to pay allowance to his wife was not binding because neither husband not wife intended such promise to generate any legal imposition or liability: Balfour v Balfour (1919).7 Clearly, domestic agreements do not amount to contracts. It can be argued that Elaine's and Kramer's agreement, if there was one, was a domestic agreement and thus there was no intention among the parties to create a legal and binding obligation. However, the presumption is weak and may be rebutted in the case of a husband and wife in the process of separation: Popiw v Popiw. While the courts will accept that such an agreement is intended to create legal and binding relations, such situation does not exist in the given situation. More than that, Elaine's statement was uncertain and vague. This is because these types of arrangements are often somewhat vague and ill-defined. As such, such statement did not constitute a valid offer. Hence, Elaine may recover her bicycle from Kramer. Susan v 'Truly Madly Deeply (TMD) The main issue in the given situation is whether there was a valid and enforceable contract between Susan and TMD. If there was no valid and enforceable contract between Susan and TMD, then Susan is not obliged to pay the extra money in order to get the invitations. Moreover, Susan may order the invitations from another stationer's shop without having to pay the agreed price of $4,500. To constitute a valid and enforceable contract, the following must exist: an agreement (consisting of offer and acceptance), a consideration, and an intention to create legal relations. In the given situation, the issue is whether Susan and TMD have reached an agreement Specifically, has TMD made a properly constituted offer and validly accepted by Susan An offer must be definite, not tentative or qualified in some way. It is no good saying "I offer you this but I don't intend to be bound to anything if you accept": MacRobertson Miller Airline8; Gibson v Manchester City Council case9. If there was no offer, then it is just an invitation to treat: Carlill v Carbolic Smoke Ball Co.10 For a contract to be valid and binding, there must be a promise. TMD cannot argue that there was no promise made since it is clear that Susan has signed the order which shows that the parties have reached an agreement: the parties have agreed on the 'pink gerbera' package containing 200 invitations and RSVP cards with envelopes; Susan has provided the shop owner with the wording of the invitations; the shop owner wrote out an order form setting out the details; the shop owner told George and Susan that the total cost is $4,500; and Susan signed the order form. A general offer can be accepted by anyone, and usually without prior notification of acceptance: Carlill v Carbolic Smoke ball Co. (1803)11. It was found in Carlil that there was: 'an offer made to all the world'; 'to ripen into a contract with anybody who comes forward and performs the condition'; and that 'as notification of acceptance is required for the benefit of the person who makes the offer, the person who makes the offer may dispense with notice to himself if he thinks it desirable to do so.' In the given situation, the fact that the shop owner accomplished the order form which was subsequently signed by Susan and the fact that the shop owner gave George and Susan the price of the order shows a valid offer and acceptance duly notified to the offeror. There was therefore at that time an agreement by the parties as to create a legally binding obligation. Clearly, there was a valid and enforceable contract between Susan and TMD. Furthermore, a valid offer has certain characteristics: certainty and communication. Thus, in the given situation, the offer was certain and the acceptance duly communicated to the offeree. Such promise or offer was not vague as the shop owner in fact gave Susan the costs of her order: Guthing v Lynn [1831])12 In several cases, it has been ruled that preliminary statement may not amount to an offer. An invitation to treat which is a statement that is intended to elicit an offer from someone else has been ruled to have no legal force as the offer it elicits can be accepted or not without obligation: Gibson v Manchester City Council (1979)13. Moreover, a statement of the price at which one is prepared to consider a selling a piece of land or any communication of information in the course of negotiations is a mere preliminary statement which were held not to be an offer. In the given situation, it cannot be said that there was a mere preliminary statement as the parties have already reached an agreement as to the object of the contract and its consideration. The rule on preliminary statements therefore does not anymore apply. Moreover, another requirement in the creation of a valid and enforceable contract is an intention to create legal relations. In commercial contracts, a strong presumption that intention to create legal relations is present exist. While such presumption maybe rebutted, it is very difficult to displace it because there is indeed a very strong presumption in favour of the intention to create legal relations. No one cannot claim to make any commercial contract while at the same time argue that there was no intention on his part to create binding and legal relations. To rebut the presumption, there must be a very clear and explicit statement. For example, the parties may indicate the words "subject to contract" in all correspondence or on any documents in the negotiating process: Masters v Cameron (1954)14. The parties may also displace this presumption by the inclusion of a clause in the agreement that such agreement is not intended to be a contract: Rose and Frank Co v JR Crompton & Bros Ltd.15 In several cases, the person trying to rebut this presumption in commercial contracts has the heavy burden to prove otherwise: Edwards v Skyways Ltd. In the given situation, it does not appear that the order form prepared by the shop owner and duly signed by Susan contains the words - "subject to contract" or that "it is not intended to be a contract." Hence, being a commercial contract, a strong presumption exists that Susan and TMD has intended to create a legal relation. In view thereof, a legally binding contract exists between Susan and TMD. Susan, therefore, may not pay the extra money in order to get the invitations as they have agreed on the price beforehand. Moreover, Susan can avoid the contract with TMD and order the invitations from another stationer's shop without having to pay the agreed price of $4,500 if and when TMD refuses to deliver the invitations as such action on behalf of TMD is tantamount to breach of contract. Another element of a valid and enforceable contract is the presence of consideration. Courts will not enforce a simple contract unless it is supported by valuable consideration. The classic definitions of consideration are in terms of benefit and detriment. As Lush, J. phrased it in Currie v Misa (1875)16, 'A valuable consideration may consist either in some right, interest, profit or benefit accruing to one party, or some forbearance, detriment, loss or responsibility given, suffered or undertaken by the other'. It is easier to think of the consideration as the price paid for the contract. It means the element of exchange in a bargain and, in order to satisfy the requirement of common law, it must be valuable, i.e. something that is capable of being valued in terms of money or money's worth, however slight: Chappell v Nestle (1960)17. To be valid, consideration must be real and must not be vague, indefinite or illusory: White v Bluett (1853)18. Consideration need not be adequate as it is up to the parties to fix their own prices but there must be some definite valuable consideration: Haigh v Brooks (1839)19. Furthermore, the consideration must be legal and must move from the promisee: Dunlop v Selfridge (1915)20. Moreover, it must be something beyond the promisee's existing obligation: Stilk v Myrick (1809)21 and it must not be past: Roscorla v Thomas (1842)22. In the given situation, it is clear that the consideration for the invitations is valid considering that it is real, not vague, indefinite or illusory, definite, valuable, legal, beyond the promisee's existing obligation and it was not past. Hence, there was a valid and enforceable contract between Susan and TMD. References: Australian Woollen Mills Pty Ltd v The Commonwealth (1954) 92 CLR 424 (CB1)(CB 2) Brinkibon Ltd v Stahag Stahl [1983] 2 AC 34 (CB1), (CB2) Brogden v Metropolitan Ry (1877) 2 App Cas 666 Butler Machine Tool Co v Excell-O Corporation (England) Ltd [1979] 1 WLR 401 (CB1)(CB 2) Byrne v Van Tienhoven (1880) 5 CPD 344 Carlill v Carbolic Smoke Ball Co [1893] 1 QB 256 (CB1), (CB2) Chappel & Co Ltd v Nestle Co Ltd [1960] AC 87 (CB1) Coal Cliff Collieries v Sijehama (1991) 24 NSWLR 1 (CB2) Dickinson v Dodds (1876) 2 Ch D 463 (CB2) Empirnall Holdings Pty Ltd v Machon Paul Partners (1988) 14 NSWLR 523 (CB1) Entores Ltd v Miles Far East Corpn [1955] 2 QB 327 Ermogenous v Greek Orthodox Community of SA Inc [2002] HCA 8 (CB 1) Felthouse v Bindley (1862) 11 CBNS 869; 142 ER 1037 (CB1), (CB2) Fisher v Bell [1961] 1 QB 394 Godecke v Kirwan (1973) 129 CLR 629 (CB 1) Harvey v Facey [1893] AC 552 Henthorn v Frazer [1892] 2 Ch 27 Holwell Securities Ltd v Hughes [1974] 1 WLR 155 Hyde v Wrench (1840) 3 Beav 334, 49 ER 132 Jones v Padavatton [1969] 2 All ER 616 (CB2) Lampleigh v Brathwait (1615) Hob 105; 80 ER 255 Latec Finance Pty Ltd v Knight [1969] 2 NSWR 79 MacRobertson Miller Airline v Commissioner of State Taxation (1975) 8 ALR 131 (CB1) Manchester Diocesan v Commercial & General Investments Ltd [1970] 1 WLR 241 (CB2) Masters v Cameron (1954) 91 CLR 353 (CB1), (CB2) Meehan v Jones (1982) 149 CLR 571 (CB1) (CB2) Pharmaceutical Society of GB v Boots [1953] 1 QB 401 (CB1), (CB2) R v Clarke (1927) 40 CLR 227 (CB2) Spencer v Harding (1870) LR 5 CP 561 Stevenson v McLean (1880) 5 QBD 346 (CB2) The Brimnes [1975] QB 929, pages 941-946 Todd v Nichol [1957] SASR 721(CB 1) Williams v Carwardine (1833) 5 C & P 566; 172 ER 1101 Read More