Analysis of Legal - Case Study Example

Question 1 Facts of the Case: John is a tractor dealer in a country town in South Australia. He had several new tractors in stock but due to an extreme drought the sales were low. A John Deere who had been in stock for nine months was put up on sale at $110,000. Bert, a local farmer was interested in buying the tractor and asked John the best price. John said that, “if Bert had $90,000 cash then they could be in business”. Bert asked John if he could hold the tractor for a month since he will receive a wheat check at the end of the month and John said it would be fine and entered Bert’s name in the company file definite orders. However, three weeks later prices of the tractor were up by 20% due to an increase in exchange rate. Alan, another tractor dealer offered John to buy the tractor at $120,000 and they signed a sale’s contract with delivery in a week’s time. Four weeks later, Bert returned with the wheat check amounting to $90,000 but was told that the tractor had been sold to Alan. Bert argued that the tractor is his. Issues 1) Whether or not the prior verbal agreement between John and Bert is valid and does it constitute a contract of sale? 2) Whether or not the contract of sale between John and Alan is valid? Held One of the essential requisites of a valid contract is to have an agreement which consists mainly of an offer and acceptance. There is no particular form required to constitute an offer. An offer is a communication to do something or not to do where the person to whom the offer is directed do something or refrains from doing something in return. An offer may be terminated by the following means: (1) revocation; (2) rejection; (3) failure to accept on time; (4) death; (5) failure of a condition. Generally, an offer may be revoked at any time prior to acceptance – even if the offeror had promised they would keep it open until a particular date, unless such promise is covered with a consideration.1 However, in order for revocation to be effective it must be communicated either directly or indirectly and in any form or conduct signifying an intention to no longer bind by the offer. In the case of Clarke v Dunraven (1897) AC 59 where the offer and acceptance cannot be clearly identified but it is nevertheless possible to conclude that the parties have reached an agreement by virtue of their conduct.2 It can be remembered that John entered the name of Bert in the company’s file definite order, an action that affirms John’s acceptance of the offer. But in the case of Dickinson v Dodds (1876) 2 Ch D 46 it was held that, “the promise to keep the offer open was not binding because it was not supported by consideration.”3 Under this premise, it can be contended that the agreement between John and Bert is not binding since it was not supported by a consideration, hence, there was no contract of sale between them. Furthermore, in the case of Daulia Ltd v Four Millbank Nominees Ltd [1978] 2 All ER 557 it was held: “on the issue of acceptance in cases of unilateral contracts: Whilst I think the true view of a unilateral contract must in general be that the offeror is entitled to require full performance of the condition which he has imposed and short of that he is not bound, that must be subject to one important qualification, which stems from the fact that there must be an implied obligation on the part of the offeror not to prevent the condition becoming satisfied, which obligation it seems to me must arise as soon as the offeree has embarked upon performance it is too late for the offeror to revoke his offer”.4 Therefore, Bert could not claim that the tractor is his. On the other hand, it can be said that a contract of sale exist between John and Alan. Generally, in order to have a contract it is sufficient that the parties have reached an agreement, but common law requires that, for an agreement to be binding, the promisee must provide consideration (payment of some kind) for the promise he has received. Question 2 Facts of the Case Australian couple Rick and Dora were on an overseas tour where they met Jan and John who lived in a cottage in Cornwall, England. The Australian couple lived with Jan and John for three weeks and became good friends. Upon learning that Jan and John planned on moving to Australia, Rick and Dora offered that they could share in their home in Adelaide since they inherited a large house. Three months later, Rick and Dora wrote a letter to Jan and John saying that they missed the latter and are thinking of changing the will of their home should they transfer to South Australia. Jan and John left their home in Cornwall and migrated to Australia in the hope of finding a better job for John. They stayed with Rick and Dora. However, six months later John still hasn’t find a job and they started having misunderstandings with Rick and Dora of which the latter told them to find another place. But Jan and John refused to leave because they had an interest in it under the agreement made by Rick and Dora. Rick and Dora contended that they had not changed their will and the house is their name. Issue Whether or not Jan and John had an interest in Rick and Dora’s house? Held Another essential requisite of a valid contract is consideration. Consideration is the price that is asked by the promisor in exchange for their promise - the price for a promise.5 In the case of Chappell & Co Ltd v Nestle Co Ltd [1990] AC 87 the Court held: “a contracting party can stipulate for what consideration he chooses. A peppercorn does not cease to be good consideration if it is established that the promisee does not like pepper and will throw away the corn. It need not be monetary or monetary in value, it can be anything stipulated by the promisor. It must be sufficient but need not adequate.”6 One rule to consider in having a good consideration is that “past consideration is no consideration.” The consideration must come into existence either with or after the promise. Where the stipulated consideration pre-dates the promise, it will not be considered good consideration such as in the case of Rick and Dora. In Roscorla v Thomas (1842) 3 QB 234 it was held: “There was no consideration for the promise that the horse was sound. The only consideration that had been alleged was the contract for the sale of the horse – this, however, had preceded the defendant’s promise – it was not part of the bargain – not given in exchange for the promise. Consequently, this is no good consideration.”7 In the case of Eastwood v Kenyon it was decided that a moral obligation to pay was not regarded by the law as sufficient to make a promise legally enforceable. There had to be an exchange because in order for a promise to be legally enforceable it must be supported by consideration moving from the promise, a reciprocal act or promise.8 However, in the case of Pao On v Lau Yiu Long [1979] 3 WLR 435 provided an exception for the rule – past consideration may be good consideration (a) if provided at the request of the promisor; (b) the parties understood that the act would be remunerated; and (c) had the promise occurred in advance of the act it would have been enforceable. Moreover, the Court also observed that a promise perform a pre-existing contractual obligation to a third party can be valid consideration in the absence of duress.”9 Thus, Jan and John does not have an interest in the house of Rick and Dora and the latter are not obliged to turn over the house to the former. Read More