Analysis of the Contract Law - Case Study Example

Question a Issue Initially, John agrees to build an extension to Chen’s house, at that time the two parties enter an agreement. Since the prices of the building materials were changing in a weekly basis, determining the exact cost of the extension by the completion of the construction period was somewhat difficult because of the weekly increasing cost of materials. The two parties thus agreed that the total amount payable to John at the end of the construction process will be the cumulative amount of the building materials plus the agreed labor of $6000. They also agreed that the completion date of the construction was to be at the end of June. John later demanded that the labor force be increased to $10000, Chen agreed reluctantly agrees to this because of the need to complete the work by the end of June for his visitors to occupy. Rule The contract law in Australia is based on the common law of contract and consumer law in Australia. In order for the contract to be created, there is need for agreement, consideration and the intention to create a legal relation (Carter, 2011). Analysis This in itself confirms that the two parties Chen and John had an intention to create legally binding contract. They agreed on the labor charges and the period that the construction process was to be completed. The later adjustment of labour charges was compelled by the need to meet the set deadline and the undue pressure from the other party. Conclusion In conclusion, once the two parties agreed, set the deadline and the labor charges, the intention to create a legally binding contract was effected with the initial terms of agreement acting as the basis of fulfillment of the contract or breach of the contract. Question b Issue The initial agreement was created on the basis that John was to build an extension of Chen’s house, the two parties agreed that the labor cost was to be $6000 and since the prices of the building materials could not be accurately determined because of their frequent changes. The two parties agreed that at the completion date, the cumulative price of the building materials to be added to the labor charges. The completion date was set to be at the end of June. In the process of the construction, two issues emerged; the prices of the building materials dropped unexpectedly, John on the other hand increased his labor cost to $10000, this was not genuine as the initial agreement was set to $6000, and it looks like John took advantage of the significant reduction of the building materials cost to increase labor charges. Despite the reluctance acceptance by Chen because of his desire to see the completion of the house by the end of June for the purpose of his visitor’s occupation, John failed to meet this important deadline and completed the work by mid July instead. As a result of John’s failure on the completion date, Chen incurred extra money $3000 in order to accommodate his visitors in the hotel. Rule A contract is created once there is a mutual agreement between two parties on how to execute the contract. The initial conditions hold to how the execution of the contract is going to be fulfilled. Any adjustment that seems to derail the initial agreement must be equally agreed by the two parties; more so the time or the set condition for the fulfillment of the agreement through performance must be adhered to otherwise it will lead to discharge of the contract by breach. In the case of Carr v J A Berriman Pty Ltd the two parties entered into a contract for the construction of a factory. The principal later seek to terminate the contract because of the failure to deliver the site in the specified condition and a unilateral decision to end the contract was successful because of the failure of the execution process This case is a good example of the failure to execute the contract as agreed by the two parties under conditions of quality and meeting the set deadline (Koffman & Macdonald, 2007). Analysis From the case, Chen and John, the two parties to the contract had agreed on $6000 as the labor for the Chen’s house extension. The claims for John to add the total amount to $10000 was not genuine as the contract was created when the two agreed on the set amount as well as the deadline for the execution of the contract. John failed to meet the deadline hence making Chen spend $3000 for hosting his visitors in a hotel. A contract is created once there is mutual agreement and intention to enter into a legally binding contract. Conclusion In this case, John is only entitled to $6000 and more so a fine of $3000 as he failed to execute the contract on the time condition agreed which led to Chen paying for the accommodation of his visitors. Question c Issue In this case, John and Chen entered into a contract for the extension of Chen’s house in order to accommodate visitors expected by the end of June. The set amount of labor was set to $6000 and the cost of materials agreed to be paid at the end of the construction process because of their uncertainty. In essence this implied that the failure by John to meet the deadline, Chen would suffer extra expenses of accommodating the visitors and hence a breach of contract. Rule A contract is created through mutual agreement of the contracting parties; this is inclusive of the condition such as the time frame and the quality execution of the contract (performance by the required party). The rationale for the statement of condition such as the time frame set is important because of the deadline is not met then the other party will suffer financial loss because of the untimely completion of the task and as such, a breach of the contract (Loots & Charrett, 2009). Analysis Chen can claim compensation for the hotel charges based on the following reasons. The initial agreement had clearly outlined the deadline for the completion of the extension. The purpose of the extension was to accommodate Chen’s visitors. John was therefore obliged to meet these demands within the stated deadline in order for Chen not to incur hotel cost for hosting his visitors. John failed to meet this important deadline and hence resulting in the extra expense of $3000 on Chen’s part (Seddon, 2009). Conclusion The failure to meet the set deadline thus impacted on Chen as evident by the extra cost that Chen had to cover. The actions of John were thus a breach of the stated initial contract and hence liable for the damages that resulted from his failure to meet the initial agreement terms of the contract. John is thus liable for the $3000 expenses that Chen incurred. Question d Issue In this case, Chen and John entered a contract which was to be fulfilled by performance on John’ side, John was required to perform extension of Chen’s house in order for Chen to accommodate his visitors on the material date of contract completion. The initial agreement for labor work was set at $6000. In the middle of the execution process, John initiated a plea to raise the initial labor force to $10000, Chen accepted to this offer because of his desire not to stop the progress of the work as time was already running out. The acceptance of Chen to add on the labor charges created a new contract as there was an offer and acceptance of the offer on which the two parties agreed upon. Rule Contract agreement can only came into effect once the two parties agree on the terms of contract discharge. Modification of the initial terms of agreement can only be made and agreed on by the two concerned parties and not one party. In this case, John initiated an addition of the labor force to a total of $10000; John did not object but reluctantly accepted the new set labor cost. A binding contract was therefore created and hence making both parties subject to the agreement (Radan & Vickovich, 2009). Analysis John could initiate a lawsuit for the defendant Chen on the condition that Chen had accepted his offer for addition of labor cost. This is because Chen did not object to the same. More so, Chen failed to initiate an agreement complain on the basis of John’s extension of the time. John therefore completed his work and expected Chen to meet the agreed labor charges. John can rely on the fact that Chen accepted the offer and hence he committed to the payment of the extra amount after the contract is completed (Beale, 2007). Conclusion Despite the fact that John was late in the execution of the contract and the consideration of the fact that Chen incurred extra money in order to accommodate his visitors, his agreement to pay John a labor cost of $10000 cannot be dismissed. Chen had an option to claim a breach of contract on John’s part once John initiated a late offer. Instead Chen agreed to the new terms of the contract and hence making him liable for the payment of the full amount. Chen can thus only claim the expenses that he incurred as a result of John’s failure to meet the deadline. Reference Beale,H.G., Bishop, W.D. & Furmston, M.P.(2007). Contract. Thousand Oaks: Oxford University Press. Carr v J A Berriman Pty Ltd (1953) 89 CLR 327. Carter, J.(2011). Cases and Materials on Contract Law in Australia. Sydney: LexisNexis Butterworths. Koffman, L., &  Macdonald, E.(2007). The Law of Contract. Melbourne: Oxford University Press. Loots P., & Charrett, D.(2009). Practical Guide to Engineering and Construction Contracts. Sydney: CCH Australia Limited. Radan P., & Vickovich, I. (2009). Principles of Australian Contract Law: Cases and Materials. Melbourne: LexisNexis Butterworths. Seddon, N.(2009). Government Contracts: Federal, State and Local. Sydney: Federation Press. Read More