New Zealand Shipping Co Limited v A M Satterhwaite - Case Study Example

New Zealand Shipping Co Limited v A M Satterhwaite With regard to Pete, whilst there is a signed contract the issue in contention is whether the contract is legally binding the law of contract stipulates three fundamental requirements for the formation of a legally enforceable contract; namely; offer, acceptance and consideration. This was asserted by Lord Wilberforce presiding in the case of New Zealand Shipping Co Limited v A M Satterhwaite, The Eurymedon {1975]AC 154]). An “offer” in the context of contract law has been described as “an expression of willingness to contract on certain terms, made with the intention that it shall become binding as soon as it is accepted by the person to whom it is addressed, the “offeree” (Brambles Holdings Limited v Bathurst City Council [2001] 53 NSWLR 153). In the current scenario there is no issue that there was offer and acceptance, therefore if Silvia wants to cancel the contract, she may be in breach of contract as revocation of contract is only valid if communicated to prior to acceptance (Monahan, 2001). However it is questionable whether there was sufficient intention to enter into the contract. The intention element is an objective consideration and the case of Smith v Hughes ((1871) LR 6 QB) emphasised the relevant consideration as being a focus on how a reasonable person would view the situation. Therefore, Silvia may be able to claim that the contract with Pete is voidable or void on grounds on grounds of lack of genuine agreement. A voidable contract is a contract which remains valid and can be terminated by a party on certain specific grounds (Monahan, 2001). In contrast, a void contract is an invalid agreement the result of which nullifies any legal obligations between parties. Whether the agreement is void or voidable will depend on the nature of Pete’s conduct. Common law has developed three types of mistake in the context of contract formation, namely; unilateral mistake, mutual mistake and common mistake. The law of mistake in contract law covers situations where the mistake is regarded as so serious to effectively avoid the contract. Applicability of mistake has been limited in practice due to the prevailing consideration of sanctity of contracts (Gooley & Radan, 2006). With regard to Silvia, she may be able to rely on unilateral mistake on grounds that she didn’t really want to sell, was intoxicated at the time of the decision and that Pete took advantage of this. The most likely recourse for Silvia against Pete is to argue that the contract is voidable on grounds of undue influence. In Union Bank of Australia Ltd v Whitelaw (1906 V. L. R. 711), it was held that undue influence constituted “the improper use of ascendancy over another for the benefit of himself or someone else, so that the acts of the person influenced are not….. his free voluntary acts” (at p.720). The central element of undue influence is the inequality of bargaining power, coupled with an abuse of trust and confidence and exploitation of the weaker party and results in a manifest disadvantage. In the current scenario, Pete was aware of the fact that Silvia had an alcohol problem and was uneducated. He plied Silvia with alcohol resulting in her agreeing to sell her home, which is likely to fall within the manifest disadvantage requirement. Accordingly, Silvia will have strong grounds to argue that the contract is voidable on grounds of undue influence. With regard to an action against Kevin, as Kevin is not the manufacturer or distributor of the vase and is not “a corporate in trade or commerce” within the definition of the Trade Practices Act (TPA), Michael will be prevented from initiating action against him for statutory misrepresentation under the Act as the TPA applies to trade and commerce contracts. Alternatively, Michael bought the vase on the basis that it was an original and if Kevin knew it wasn’t an original and sold it to him on this basis, Michael may be able to claim breach of contract for contractual misrepresentation only if the point regarding the vase being an original was incorporated as a contractual term. The general rule regarding pre-contractual statements is that if the statement is not included in the parties’ contract, it is unlikely that the term was intended to become a contractual term (Monahan, 2001: 43). Additionally, if the agreement is written, the general principle under the parol evidence rule is that the parties to a written contract are prevented from adducing extrinsic evidence to contradict the terms of the contract. For example, in the case of Mercantile Bank of Sydney v Taylor ((1891, 12 LR NSW 252) Innes J asserted that “where a contract is reduced into writing…. It is presumed that the writing contains all the terms of it”. Furthermore, in the case of Bacchus Marsh Concentrated Milk Co Limited v Joseph Nathan Co ((1973), 133 CLR 191) Higgins J commented that the parol evidence rule prevented the written words in a contract being qualified “by the uncertain testimony of slippery memory”. Additionally, the parol evidence rule dictates that pre-contractual negotiations will be superseded by a signed agreement. For example, in the case of Nemeth v Bayswater Road Pty Limited ([1988] 2 Qd r 406), a plaintiff entered into a written contract to hire an aircraft to the defendant. The contract included a specific assertion that all terms of the agreement are contained in this document and the plaintiff attempted to sue for additional hire charges due under an oral contract agreed before the written contract was signed. However, the claim failed as it was held that the written contract contained all relevant terms and that evidence pertaining to another alleged oral contract was inadmissible under the parol evidence rule. Nevertheless, in the case of Codelfa Construction Pty Limited v State Rail Authority of NSW (1982) determined that evidence of discussions between the parties to a contract prior to signature was admissible for the purpose of establishing common understanding of the parties in relation to a matter of fact. Therefore Michael may be able to rely on the rationale in this case to adduce evidence of the discussions with Kevin regarding contractual intention. Bibliography J. Carter (2006). Carter’s Guide to Australian Contract law. LexisNexis Butterworths Chitty on Contracts (2007). 29th Edition Sweet & Maxwell. J. Gooley & P. Radan (2007). Principles of Australian Contract Law. LexisNexis Butterworths. G. Monahan (2001). Essential Australian Contract Law. Routledge Cavendish G H. Treitel., (2007). The Law of Contract. 12th Revised Edition Sweet & Maxwell. Table of Cases Bacchus Marsh Concentrated Milk Co Limited v Joseph Nathan Co ((1973), 133 CLR 191 Brambles Holdings Limited v Bathurst City Council [2001] 53 NSWLR 153 Codelfa Construction Pty Limited v State Rail Authority of NSW (1982) 149 CLR 337. Mercantile Bank of Sydney v Taylor ((1891, 12 LR NSW 252 Nemeth v Bayswater Road Pty Limited ([1988] 2 Qd r 406 New Zealand Shipping Co Limited v A M Satterhwaite, The Eurymedon [1975]AC 154]). Smith v Hughes ((1871) LR 6 QB Union Bank of Australia Ltd v Whitelaw (1906 V. L. R. 711) Statute Trade Practices Act 1974 Read More