Contract Law, Rules and Application - Assignment Example

Contract Issues Customer name Subject Name Here Instructor’s Name Here September 3rd, 2012 Introduction A contract is defined as a consensus between two parties to carry out or refrain from a certain action. If a party fails to carry out their contractual obligations the other is entitled to seek enforcement of the contract from a court of law1. Question 1 Facts Fred Smith is a wealthy founder and owner of Multi-million business. He is 74 years old and has retired from actively running the business and has been recently diagnosed with Alzheimer’s disease. His only son James runs the company on his behalf. On an emotional family occasion Fred promises to pay James an additional $10,000 every year from 2012. James instead convinces him to be paying him an additional $100,000 which Fred agrees. In 2012 Fred does not pay James the additional 100,000 in 2012. Pre-contractual issues Having looked at the fact of the case it can be established there are a number of pre-contractual issues that may influence any legal action you decide to take against Fred. The first issue would be whether the agreement with your father was intended to create legal relations or not. Secondly, a question of whether Fred had the capacity to enter into contract as he was affected by illness, old age and emotions. Thirdly, the issue of whether you had undue influence over Fred while he made the decision to award you an extra 100,000 a year. Rules and Application The family meeting as the setting for the agreement between you and your father would make enforcement of your contract very hard as courts are reluctant to enforce contracts made in a domestic setting as the intention to create legal relations is questionable. In Balfour v Balfour [1919] 2 KB 571 the court decried to enforce an agreement between a wife and husband to pay some amount for upkeep2. Similarly, in Ermogenous v Greek Orthodox Community of SA Inc (2002) 209 CLR 95 family arrangements were viewed as having no intentions of creating legal relations3. The Second issue of whether Fred had the capacity to enter a valid contract arises from the fact he suffered from Alzheimer’s disease, he was old aged and during the making of the contact he was very emotional. In Blomley v Ryan (1954) 99 CLR 362 a principle was established when dealing with matters of capacity; a person who consents to a contract when in conditions of sickness, poverty or need, advanced age, drug intoxication or frail health conditions and has no one to make them understand the implications of the contract cannot be compelled to perform his contractual obligation4. It is clear that as the only son of Fred Smith and in-charge of his multi-million estate you have an influence over the financial decision he makes. This means the issue of undue influence would arise in you action against him. It can be argued from the facts of the case that you had actual undue influence over you father as set out in Allcard v Skinner (1885) 36 Ch D 1455 as you influenced you Fred from increasing you bonus from $10,000 he had promised to $100,0006. Conclusion Therefore, it would be hard for you to prove that you had a binding contract with Fred as the pre-contractual issue discussed indicate the contract is void. As the contract was made as a family arrangement it would not be recognised by a court as it had no legal implications. Secondly, it is clear that Fred did not have the capacity to enter into a valid contract. Finally, it is also evident that you unduly influenced Fred to increases you annual bonus ten folds. Question 2 Facts Fred Smith is a wealthy founder and owner of Multi-million business. He is 74 years old and has been recently diagnosed with Alzheimer’s disease. Matt is 16 years old and helps Fred with household chores and runs errands for him. Fred does not offer Matt any payment for his help. Matt does not ask for payment from Fred. At family meeting he asks his son to be paying Matt $10,000. Fred had already told he would be assisting him. James who is in-charge of Fred’s estate was present at the signing of the agreement. After two years James refuses to pay Matter. Matt says he had not intended to honour the contract at the time of signing and at the present time. Issues A number of contractual issues can be established in you contract with Fred/James. The issue of whether Fred had the legal capacity to enter into a valid contract with you would be the first consideration for your case. Secondly, you would have to prove you did not have any undue influence on Fred when he decided to give the gift. Lastly, it can be said that James acted in a deceptive manner during the signing of the contract; he signed it knowing very well he had no intention of abiding by it. Rules and Application It can be argued from the facts that when Fred did not have the capacity to enter into a legally binding contract at the time he made the decision to support you through university. This was due to him suffering from Alzheimer’s disease and his advanced age, conditions recognized in Blomley v Ryan (1954) 99 CLR 362 as placing a person at a serious disadvantage during contract formation7. However, this argument can be refuted by the fact that James was there to assist his father understand the financial implications of the decision. However, James just let Fred sign the contract only to say he did not recognize it later. Secondly, you relationship with Fred could mean you had presumed undue influence over him and that is why he awarded the gift to you. In Royal Bank of Scotland v Etridge [1998] 4 All ER 705 (No 2) presumed undue influence was defined as a “relationship between two persons where one has acquired over another a measure of influence, or ascendancy, of which the ascendant person then takes unfair advantage”8. It would be your onus to prove to the court you did not abuse the influence you had over Fred. In your defence you could argue you were not present at the family meeting when Fred made the decision to support you through university. Secondly, Fred had made the decision to support your education before he even announced it at the family meeting. Finally, Fred’s decision to pay for your school fees can be reasonably accounted for on the grounds of friendship and charity as you had assisted him with his domestic chores without demanding payment and he also understood that you were struggling financially9. Finally, your chances to have the contract enforced by the courts would be greatly improved by James’s conduct during the formation of the contract. James refusal to honor the contract and assert that he did not intend to intend to honor constitutes deceptive conduct. As set out in Henjo Investments Pty Ltd vs. Collins Marrickville Pty Ltd (No. 1) (1988) 79 ALR 83 James’ silence when the contract was being signed constitutes deceptive conduct which points to the fact that David understood his Fred’s intentions for making the agreement but did not intend to honor them later10. Conclusion In summary all the issues explored point out that the contract between you and Fred was Valid and you can seek it enforcement in a court of Law. Since James was present at the signing of the contract Fred’s illness and age could not have affected his capacity to contract. Secondly, it is clear you did not unduly influence Fred to assist you in your education as the act of paying school fees for a needy individual constitutes a reasonable act of charity. Therefore you are likely to succeed if you seek enforcement of the contract in a court of law. Question 3 Facts Fred Smith is a wealthy founder and owner of Multi-million business. He is 74 years old and has been recently diagnosed with Alzheimer’s disease. Kat and Jane are the granddaughters of Fred Smith both aged 16 years In a family meeting on January 1st 2012 he promises to give them up to $50,000 if they ever need some cash. At the end of the year he gives Jane $50,000 as a gift on his birthday to start a jewellery shop. When Kat asks for a similar amount to go on a world trip with his boyfriend he refuses. Advice Issue From the facts it is questionable whether Fred’s promise to You and James intended to create any legal relations because of the occasion and you relationship with him. Rules and Application Fred’s promise to give you and Jane up to $ 15,000 if they are ever in needed some cash. The occasions when the promise made; during a family meeting on New Year’s Day, points to the fact that Fred did not have any intention to create any legal relations while committing himself to assist you. As set out in Jones v Padavatton [1969] 2 All ER 616 this was “one of those family arrangements which depend on the good faith of the promises which are made and are not intended to be rigid, binding agreements” 11. It is clear the promise he made to you depended on his consideration for your need for cash. This accounts for his reason to give Jane $50,000 to while he later refused you request for a similar amount to take a world trip on with your boyfriend as he does not consider that need. Conclusion You case against Fred is not actionable as it is clear he did not have any intention of entering into a legally binding contract with you. This is evidenced by occasion of the promise, the wording of the promise with emphasis on “whenever you are in need and finally his consideration for refusing your request. Bibliography Barry, Alan 2006. "Trust Me, I'm Your Husband": Undue Influence and Royal Bank of Scotland v Etridge." Otago Law Review 11, no. 2: 247-262. Burns, Fiona. "Mortgages, seniors and the common law contractual doctrine of mental incapacity in Australia." International Journal Of Law And Psychiatry 34 Read More