Law of Contract Assessment - Essay Example

Law of Contract Assessment III Introduction A contract is a legally binding agreement between two or more parties. For a contract to be considered legally binding, all the six elements of a contract must be present. The six elements: there must be two parties, one party giving an offer while the other one accepting the offer (Whincup, 2006)1. The second element entails a consideration. This is the exchange value which is usually in monetary terms. The third element is that, there must be genuine consent between the contracting parties. The fourth element entails the intention of the parties to create a binding relationship between them (Fitzroy Legal Services Inc, 2014)2. . The fifth element entails capacity. This involves the soundness of mind as well as legal age for a person entering into a contract. The law does not recognize a contract formed with a minor. The sixth and the final element entail legality of the contract. For example, some /contracts may be considered valid in a particular but may be invalid in other countries (Poole, 2010)3. The study will provide an insight of whether John is obliged to pay the extra £3000 to B&B Ltd, and whether he is obliged to pay the full rent /arrears to Maritime Developments Ltd. In addition, the study will provide a clear summary of common law and equity as well as law and /facts relating to case. Finally, the study will take into consideration any issues arising for each party. Common law and equity In common law, the judges utilize the past precedent to decide on the current cases. This means that the principle of Stare decisis tend to be applied especially where there is no other law that can be applied to decide a case. Therefore, the judge decides a case based on the previous cases decided by previous the judges (Ferrari, 2012)4. However, if the case emerged to be very distinct from the previous cases that were being decided by the past judges, the court may formulate a law that may be used to decide on other future cases. The other principle in common law is that similar fact should be treated unanimously and should be isolated in any whatsoever. Therefore, similar cases should be held similarly (Shiblee, 2012)5. On the other hand, equity entails a system of principles that address or issues that fall outside the reams of a common law. This means that unlike common law which provides a manner in which the case may be decided by the court of law using the past precedent; equity provides a solution to the case. Equity further mitigates strict decisions arrived through application of the common law. Some of the maxims/principles of equity include: Who ever who seek equity must have clean hands. This means that one should not violate the law when seeking fairness. An example of a case law where this maxim of equity applies was in the case of D and C Builders Vs Rees in the year 1966 (Sharp and Etches, 2003)6. The second principle of equity is that equity does not have a remedy for those who exercise unreasonable delay. This means that in case of injustice/ crime one should report the matter to the relevant authorities within the shortest time possible. Example of case that substantiates this principle is the case of Leaf Vs International Galleries, 1950 (Emerson, 2009)7. Finally, whoever seeks equity must seek equity. This means that one should do justice to others if one expects others to do justice o to them. Example of a case law that applied this principle is the case of Chappell Vs Times Newspaper Limited, 1975. Equity provides numerous remedies for the wrong committed towards the Plaintiff and defendants. Those remedies are broadly classified into three categories namely; specific performance, injunctions, compensation and ratification (United Nations Commission on International Trade Law, 2008)8. The law to the facts, discussing any particular issues arising for each party In this case John entered into a lease agreement with Maritime development limited whereby, John was the lessee while Maritime development limited was the lessor. John entered into this lease agreement with an aim of using the building to operate a wine bar. During the contract formation, a consideration of two thousand pounds was made between John and Maritime limited. John had to pay Maritime Development a monthly lease of two thousand pounds. However, john realised that his wine business was performing badly due economic recession that was prevailing during the last two years since the establishment of the wine business. John decided to approach Maritime Development to see whether they could reduce his monthly rent to one thousand dollar. The lessor agreed to reduce John monthly rent to one thousand pounds till the time when john business could improve (Poole, 2010)9. In the second issue, John mother died and left him with forty five thousand pounds which he decided to use to refurbish the bar. He entered to an agreement to refurbish the building with B and B Builders Limited. The B and B limited accepted a consideration price of forty thousand pounds to refurbish the entire bar. However, on 14th of November, B and B Builders limited realized that they had seriously under casted the cost for bar refurbishment and approached John for an additional money in order to complete the work before 25th November, the planned date for the grand opening of the bar. John was so anxious to open the bar on 25th November given the fact that it was his birthday and therefore, agreed to give out an additional three thousand pounds so that the work could be completed on time. The B and B Builders accepted to take additional three thousand pounds and completed the refurbishment on 20th November five days prior to the grand opening of the bar. Therefore, based on the facts presented in this case it can be scrutinized that there are two issues arising from this case. The first issue for determination is whether, John should pay Maritime Development Limited the money in arrears of two thousand pounds for the previous month when business was performing poorly. The second issue arising from the case is whether John should or should not pay B and B Builders limited an addition of three thousand as they had agreed in the second contract (Thorpe, Bailey and Institute of Directors, 1999)10. In the first issue of determination is John should not pay Maritime Development Limited the arrears because it against the principals of a valid contract. It can be observed that the that there was no agreement that John should pay the arrears if his business improved but rather they agreed that after the business had improved John could continue paying the actual rent of two thousand pound each month. Therefore, Maritime Development Limited should not claim any arrears from John because it will be a breach of contract under which John can institute legal actions file against the lessor. For example in the case of Hirachand Punamchand Vs Temple in the year, 1911, a father paid some small amount of money to a lender for the debt of his son. The lender agreed to accept the small sum of money as the full settlement of the debt later, the lender claimed the arrears. It was held that the payment made by the father was a valid consideration and therefore, allowing the lender to claim the arrears could amount to fraudulent act against the father (E-law resources, 2014)11. In above connection, the case of Wood Vs Robarts in the year 1818 may also apply in this case. In this case it was held that the court cannot allow creditors to sue for the arrears because it would amount to fraud (Chitty on Contracts, 2012)12. The second issue is on whether john should pay or should not pay an additional three thousand pounds. This issue may be determined based on the principle of the law contract as well as based on the relevant case laws that were decided in the past. Based on the principles of a valid contract, John is supposed to pay the additional of three thousand to B and B Biulders ltd because they had genuinely established a valid contract and therefore, failure to pay them will be considered as a breach of contract. Further, B and B builders may institute legal actions against John. The relevant case laws that may help to determine the issue of John and B and B Builder Limited is the case of D and C Builders Vs Rees 1965. It was held that the company was entitled to succeed if Rees fail to pay the outstanding balance. Therefore, based on this case it is not a question of whether John should pay the outstanding three thousand pound but rather he bound by the law to pay the outstanding amount agreed in the contract (Robert,1965)13. Conclusion It can/be observe that a contract is a legally binding agreement between two or more parties. For a contract to be considered valid, all the six elements of a contract discussed must be observed. Further, a summary of common law and equity has been put forth as well as the facts and issues arising from the case of John, Maritime Limited and B and B Biulders. The first issue was that John should not pay Maritime Development Limited the arrears because it against the principals of a valid contract. This has been substantiated various case laws, for instance the cases of Hirachand Punamchand Vs Temple in the year 1911 and the case of Wood Vs Robarts in the year 1818. Conclusively, the second issue was that John must pay the three thousand pounds to B and B Biulders as they had agreed in the contract. This issue has been substantiated by the case of D and C Builders Vs Rees 1965 as discussed. Read More