Australian Contract Law - Research Proposal Example

Australian Contract Law Part A Under Australian contract law, a number of prerequisites must be met before a contract comes into force. The Australian law assumes that in majority cases those parties to an agreement mean that agreement to be legally bonding. However, in between close family members, if there are agreements where presumption is overturned and the parties to the contract must able to demonstrate that a legally binding was meant. Offer A contract is said to be concluded when after negotiation, a final offer has been tendered and that offer has been consented by the opposite party. Binding Contracts and consideration For a valid contract, the parties must each offer consideration which is something of worth to the other party. Consideration in a contract can take many shapes other than money, such as promise to perform in a specific way. Further, the common law does not envisage that the consideration should be sufficient, the sense of symbolizing a market value. All that it demands is that the parties themselves have to decide that some value is to transpire between them. Implied Terms: Many terms of a contract are usually not thrashed out but are however an essential part of the contract. For instance, think of a buying a cup of tea. No purchaser would ask whether it is fit for human consumption. As every buyer will assume that it fits for human use. Such unwritten or unspoken words are perceived to an implied terms. Thus, implied terms are frequently essential to a contract and the common law still expects the contracting parties as being honored by the implied terms. (Kerridge et al 2007:54) In the given case, Michael was shown a used car by his uncle Boris at his used car yard. Michael was informed by his uncle that car was in good condition and it would cost $ 2000. After seeing the car, Michael asked his uncle to give him some time to think about and his uncle Boris gave him a week time to consider the purchase. The next day, Michael wrote to Boris that he is ready to take the car at $ 800. Boris immediately accepted the same and replied by post to Michael about his acceptance. In the meantime which is well before the week time given by Boris, Michael changed his mind and telephoned his uncle Boris not to proceed with his offer. Now, Boris insists that Michael should fulfill his promise as on the basis of his acceptance, he turned away the other prospective buyers and would be at loss. Under Australian contract act, the acceptance by Michael is not good if the pointer of the acceptance has not been received by the offeror within the period determined or if no period has been set, within a rational period, due recognition is to be given on the swiftness of the tools of communiqué used by the offeror. In this case, Boris has given Michael a week to decide on his offer. Michael has initially accepted to pay $ 800, he immediately changed his mind within the week period which Boris agreed for the Michael to decide on his offer. The scenario cuts across the common law notion that an offer which expresses that “If I do not receive a firm acceptance from you within a week, then my offer lapses.” Thus, Boris offer can be revoked by Michael with in week period since due to the absence of consideration. An espousal may be backed out if the pulling out arrives at the offeror at the identical time or before as the approval would have become efficacious. At the instance of an offeror where a period of time for acceptance has been set , ( that is , it is irrevocable) , it would appear that an offeree who forwards his acceptance which takes many days to arrive can revoke his acceptance by phone since it would reach the addressee before the acceptance. (Burnett & Bath 2009: 17). Acceptance by post is normally complete when the letter is posted. Whether Michael then changes his mind and revokes his acceptance before it reaches the offeror or Boris by telephoning? The main question involved in this case is that whether offeree Michael is having the right to both to accept and then revoke whereas the offeror Michael could not revoke his offer once the letter of acceptance is posted by the Michael. Had the Michael telephoned to the Boris after his acceptance by mail had reached the Boris or after a week, the time given by Boris to Michael to consider his offer, then revocation of acceptance by Michael can be considered as a breach of contract? (Whincup 2006:60). According to English law, “Acceptance of offer what a lighted match is to a train of gunpowder.” Thus, a valid acceptance of a valid offer produces something which cannot be undone or recalled. To a train full of gun powder, if a lighted match is shown to it, it will explode and drastic loss will happen which cannot be undone. Likewise, an offer once accepted can not be revoked. However, as long as a lighted match is not shown to train of gun powder, then train will remain in tact and likewise, an offer can be revoked before it accepted. However, in this modern technology era, courts give due regards to mode of communication. Courts give due consideration if revocation of acceptance has been made by a quicker means of communications like telephone or telex so that the offeror knows it before the written acceptance sent through mail reaches him. In case of simultaneous deliverance of letter of acceptance and telephone or telegram or fax containing revocation of acceptance, the formation of contract depends upon the scenario which one is read first by the offeror. Had Boris have read the letter of acceptance sent by Michael first and then Michael telephoned to Boris and informed him about his change of mind, then Michael cannot have the right to rescind the contract. (Tulsian 2001:213). Under Australian contract law, if an offer is rejected by the offeree, then there is a termination of such offer. It is not necessary that rejection of an offer need not necessarily be explicit. If the offeree makes a counter offer, then the offer comes to an end. A counter offer is one where it denotes a desire to contract but on varied conditions from the offer. In this case, initially, Boris had offered the car for $2000 and however, Michael made a counter offer of $800. In “Evans Deakin Industries v Queensland Electricity Generating Board,” [1984] (Qld), it was viewed by the court that offeree’s acceptance which attempts to vary the offer and it is normally regarded as a rejoinder offer that the offeror may think. In “Hyde v Wrench [1840] 3 Bea 334” Wrench, the defendant volunteered to dispose off a farm to Hyde, plaintiff for £1,200. Hyde rejected that offer. Then, Wrench made a further offer of £ 1100. Wrench replied to that further offer that he was ready to pay £950 for it. However, this was not accepted by Wrench. Hyde later wrote to the Wrench that he was ready to pay £ 1000. Wrench subsequently decided not to sell. The Court viewed that plaintiff Hyde threw a counter offer of £ 950 which terminated the offer by the defendant to sell the form for £ 1000. Hence, there was no offer for the plaintiff to accept. In “Stevenson Jacques and Co v McLean [1880] 5 QBD 346, “McLean, the respondent proposed to offer some quantity of iron at some price per to Stevenson, the plaintiff. Later, Stevenson, the plaintiff cabled the defendant thereby inquiring that whether payment by installments would be permitted. McLean misconstrued the request for payment in installment as rejection of his offer and he disposed off the iron to another party. Stevenson subsequently cabled his acceptance without knowing that McLean already sold the iron. The court viewed that the plaintiff’s original cable was not either a rejoinder offer or a rejection but mere appeal for additional information. Hence, there was a valid contract and held that McLean was liable for breach of contract. Likewise, an offer is valid until the offeree accepts it or it lapses. When an offer lapses, it no longer legally presents and offeree can no longer accept the same. Thus, an offer may lapses in the under mentioned ways. Further, if an offer that needs acceptance within some point of time, lapses if that time frame ends. An offer that contains no time frame will lapse after efflux of some rational time. The circumstances of each case will be considered by the court for deciding what a reasonable time is. In “Ramsgate Victoria Hotel Co Ltd v Montefiore [1866] LR 1 Ex 109, “Montefiore, the defendant made a request for allotment of shares of the hotel company owned by Ramsgate, the plaintiff. After five months of his application to the company, the management allotted the shares to defendant. However, defendant declined to accept the allotment. The court viewed that defendant had every right to reject the allotment as his offer has not been accepted by the plaintiff within the reasonable time. Offeree must communicate his acceptance either to the offeror or to his agent. In “Northern Territory of Australia v SkyWest Airlines Pty Ltd 919 of 1986, [1987] 45 NTR 29, it was viewed by the court that “an agent of offeree can communicate the acceptance on behalf of offeree. In “Entores Ltd v Miles Far East Corporation, [1955] 2 QB 327, “Entores, the plaintiff had his business at London whereas the defendant Miles conducted his business in Amsterdam through an agent. As both the parties had telex machines, plaintiff made a proposal to purchase the merchandises from the defendant and this was accepted by the defendant’s agent through telex. It was viewed by the court that the postal regulation does not pertain to virtually direct ‘messages. Hence, the agreement came into existence on receipt of the acceptance in London. An analogues approach was applied in “Brinkbon Ltd v Stahag Stahl GmbH, [1983]2 AC 34 (HL)”. The court viewed that where the acceptance has taken place is often a complex one and then it is to be solved by references to the intention and conduct of the parties. It is supposed that email, telephone or fax messages are kinds of instantaneous communication and still the rule may apply if the acceptance is transmitted by a public provided for instance the Australia Post. In “Leach Nominees Pty Ltd v Walter Wright Pty Ltd [1986]WAR 244” it was viewed by the court that the postal acceptance rule will be applicable to an acceptance forwarded by’ public telex.” (Monahan 2001:15). Conclusion In view of the above , Michael has every right to reject the offer made by Boris as he had turned down his initial acceptance within the time period set by the Boris and it was only an invitation to sale by Boris and there has been no consideration that has been passed between the parties. Part B A written contract was entered between Alfred and Benjamin for the sale of a clock for $ 2000. Benjamin caused to believe Alfred that the clock was 285 years old. However, no mention about the age of the clock was made in the written contract. Alfred subsequently learnt that clock was just 28 years old and consideration was higher than what the watch worth. Under Australian contract act and under common law, pre-contractual misrepresentation can offer contractual remedies both under federal law or state law concerned. A pre-contractual misrepresentation is actionable one where a party makes a false statement or representation either in writing or by conduct or by orally. In this case, Benjamin caused to believe Alfred that the clock was 285 years old. On that basis, a written contract was entered between the parties to sell the clock for $2000. A misrepresentation must have been made to the other party to the contract and such false promise or inducement might have compelled to enter into contract. One of the general remedy available is to rescind the contract. Thus, Alfred has the right to rescind the written contract already made. However, Alfred cannot claim any damages from the Benjamin for the fraudulent representation or misrepresentation. The circumstances under which a contract can be rescinded: Fraudulent representation If there was duress, a dishonest intimidation employed as a coercive tactics by one contracting party. In Barton v Armstrong [1975] 2 AER 465, it was viewed by the court that a contract can be rescinded if it has been entered on duress even if both the parties to contract can derive benefits under the contract. Unconscionable conduct: This represents transactions between weaker and dominant parties. Hence, it goes beyond undue influence and duress. In Australia, unconscionable conduct is barred by recent statue and by equity. If a strong party takes advantage of weaker party, then principle o equity applies. If the resulting transaction may end in oppressive and harsh to the weaker party. In such cases, the weaker party is having the right to avoid the contract. In Commercial Bank of Australia Limited v Amadio [1983] CLR 447, the principles of unconscionable conduct were applied. In “Hart v O’Connor [1985] 1 AC 1000,” vendor sold a trust property to Hart, the plaintiff. Vendor was of unsound mind and aged about 83. The plaintiff, Hart did not aware of this fact and he was fair in his conciliations with the solicitor’s of vendors. After the deal was over, Hart occupied the property and improved the same. Later, the defendant, O’Connor, brother of Vendor took over as trustee, he tried to set aside the contract. Court viewed that the vendor did not possess contractual capacity at the time when contract was entered. It is to be recalled that that a contract concluded with party who is of unsound of mind but seems to be of sound mind while the other party having no awareness about his unsound mind is legally valid. There exists no iniquitous that can be ascribed to the party who is having no knowledge about the other’s legal incapacity. Further, in this case, Hart completed the contract through the help of vendor’s solicitors. It was viewed that this transaction did not attract the equitable fraud. Court further viewed that if an individual temporary lacks mental incapacity and subsequently regains his mental capacity, then court may ratify a contract even if it has been entered into during the period of insanity. In misrepresentation, there has been always a false representation which has been arduous to succeed in and the main relief of rescission is easily lost. A famous illustration is the Constable painting sold as original and only after the lapse of five years, it was detected that it was not the original. In this case, the court viewed that there was a misrepresentation but the delay frustrated the remedy for rescission as held in the case Leaf v International Galleries Ltd. [1950] 2 KB 86. However, there has been some successful legal remedy for misconduct. In ESSO V Mardon, [1976] QB 801 –CA, a petrol service station owner misinformed as to the quantum of petrol needed for three year lease from the petroleum company. In misrepresentation, the following have to be established: Real statement of fact Information given before the contract was finalized Information given acted as an inducing element Information given to an individual for entering the contract. In Walten Stores Ltd v Maher, a clear principle of estoppel was developed far beyond its original application in the High Tree case. Walten case relates to negotiation of lease for a shop in a newly developed shopping centre. Before the site was suitable, special alteration had to be arranged and expenses for such alteration were to be borne by lessor. The probable lessee did not mention that they had resolved not to lease the space and aware that the lessors were prolonging work in arranging of the lease to the lessee. No pre-existing authorized association between the persons was existed and the court still viewed that lessee was estopped from refuting the promise that had been made. Court awarded damages to the lessors since of the damages caused by the absence to intimate that they were not interested in perusing the unsigned lease. Walton case did change the whole gamut of the negotiations during the pre-contractual process and promises that are offered at such meetings. (Adams 2001: 42). Conclusion This is the clear case of misrepresentation which have been made to Alfred and such false promise or inducement was the main cause to enter into contract. One of the general remedy available is to rescind the contract. Thus, Alfred has the right to rescind the written contract already made. However, Alfred cannot claim any damages from the Benjamin for the fraudulent representation or misrepresentation as he has not last anything financially in this case. List of References Adams Michael. (2001). Australian Essential Management Law. Sydney: Routledge Cavendish. Burnett Robin & Bath Vivienne. (2009) Law of International Business in Australasia. Australia: Federation Press. Kerridge Ian, Stewart Cameron, Lowe Michael, Parker Malcolm & Parker Florence R. (2007). The Australian Medico-Legal Handbook. Australia-Elsevier. Monahan Geoff. (2001) Australian Essential Contract Law. Sydney: Routledge –Cavendish. Tulsian P C. (2001). Business Law. New Delhi: Tata McGraw Hill. Whincup Michael H. (2006). Contract Law and Practice. The English System. , London: kluwer Law International. Read More