The Legal Issues Relating to the Validity of a Contract in the Problem - Assignment Example

Common Law Assignment Name Student number Instructor Date Legal issues relating to the validity of a contract in the problem Outstandingly, a binding contract needs an offer which is comprehensible and explicit1. Keith wrote a letter to Frank and Frances clearly stating the terms of the contract and all the stipulated conditions. The terms are that customer will be fully responsible for any damage of CF’s property by guests and that CF will not be liable for any stolen property. Noticeably, Keith is in the legal capacity to make a contract while Frank and Frances are in the capacity to enter into contacts since they are neither minors, bankrupt nor disabled. The terms of the offer are such that a reasonable person can readily understand the terms of the offer. The offer also explains all the necessary defining terms such as the parties, price, scope of services and duration of existence of the contact. Therefore, while applying reason, the letter by Keith is considered as an offer and therefore this necessity is satisfied. Secondly, in a binding contact, there has to be an acceptance where the offeree should accept the offer and communicate to the offeror. Keith’s offer was accepted due to the fact that Frank and Frances signed the relevant section of the letter (offer) and returned it to CF. This connotes that a consensus was reached and whether Frank and Frances signed the contact without reading or understanding the terms is at their own risk. The offer presented by Keith in a letter was accepted by the offeree. Consequently, there was a legally enforceable contract between CF and Frank and Frances and it is assumed there was a “meeting of the minds” or mutual assent between them. Markedly, the contract clearly identifies respective parties and clearly states their duties and responsibilities. The offeror uses the name of the entity, Centreline Functions, rather than Keith’s name since entering into the contact as a representative of CF gives her limited liability. The contract clearly states the goods and services to be offered by CF and the amount of payments by Frank and Frances which forms the heart of the contract. The offer stipulates the conditions of the contract and identifies condition for its fulfillment. Nonetheless, there are ambiguities in defining terms of consequences of breach of said conditions by CF which leaves room for misunderstanding. If the contract is to be considered valid, then the parties must exchange something valuable2. In this case, Keith has promised a valuable consideration which is CF’s large functional room and catering services minus drinks. Keeping in mind that Frank and Frances accepted the offer, they have also a bargain for exchange of $ 2,000. Under this approach, the consideration is mutual since each party is gaining from the contact and has some obligations and benefits. For formation of a legally enforceable contract, the agreement must be certain that parties’ rights and obligations will be fulfilled and stipulate remedies for foul play or avoidance. In keeping with the terms of the contract, Keith fails to determine the remedies in the contract for violation of contact or failure to fulfill consideration. Nevertheless, a contract is formed after acceptance albeit that the offer is lacking. Though businesses and people enter into contracts with outmost good faith, it is vital to include remedies to the damaged party in the situation where the other party conducts an infringement. Legal Principles applicable to aforementioned issues Australian Case Law may be pertinent where a formed contract was agreed upon without prior anticipation or suspicion of avoidance. Preceding Australian cases have set standards on what circumstances where legal action may be taken on contracts. Frank, Frances and CF did form a contract; therefore Australian Case Law can be used to help validate the contract and help seek equitable remedy for damages. Several legal principles can be derived from the Australian Case law to determine the validity of the contact. First, based on the Australian Case Law the contract will be held as binding based on the principle that as long as the presence of essential elements of a contract are present(consideration, agreement, certainty and clarity); then a contract is enforceable3. The contract signed by Frank and Frances contains all of these elements and thus the courts may almost certainly find it binding. Nonetheless, a contract is not enforceable where a party is at a “special disadvantage”: Commercial Bank of Australia Ltd Vs Amadio4. Keith inserted terms to cater for damages of CF property but the contract did not include remedies of avoidance on the part of CF. This disadvantaged Frank and Frances since CF did not feel responsible for fifteen of the vegetarian guests were not catered for but felt that the invoice required to be paid. The expected consideration is a promise to $ 2,000 for catering of all guests which was not fulfilled by CF presumably because of ignorance since terms of breach of contract were not included in the contract. The dispute between Frank & Frances and CF is therefore due to breach of condition by CF and damages of CF property by guests. Since the essential elements are fulfilled by the contract, it is therefore legally binding. This means that failure to fulfill obligations by CF would be considered as breach of condition where the damaged party can sue the other to seek for remedies on the damages. In keeping with Commonwealth v Verwayen, Frank and Frances acted “unconscionably” which may lead to invalidation of the contract5. Frank and Frances entered into the contract with a presumption that CF would fulfill all responsibilities and obligations. However, CF did not hold good faith by failing to serve any vegetarian meals for the night. The court could overturn the validity on a basis that Frank and Frances did not contemplate avoidance of fulfilling the expected consideration by CF. To sum up, the presence of essential elements in the contract means the contract is valid despite several factors that may lead to its invalidation. Application of the legal principles to the facts By signing the offer presented to them by Keith, it can therefore be presumed that a contract was entered between them and CF. Therefore, it is assumed that CF would provide catering services and a large functional room and a promise of $ 2,000 was the consideration. Notably, the terms of this contract were in a clear and definite language which means that in accepting the order and providing consideration, a contract was formed where each party was expected to fulfill all terms in the contract. In addition, CF inserted an exclusion clause in the contract so as to protect the business from any damages. According to the clause, CF will not be liable whatsoever for any stolen property and the customer will be fully responsible for any damages on CF’s property by their guests. The statement makes it clear that CF intended to eliminate any liability caused by negligence of its customer and their guests. Frank and Frances had to sign into the contract within the required time which means they entered into the contract with prior consent that CF accepts no responsibility for stolen property and damages. Markedly, the language used for the exclusion clause in clear and unambiguous and would therefore be acceptable by courts. CF did not provide any vegetarian meals for the night of the party as agreed. Though not specified in the contract, these terms had been in the request by Frank and Frances which had been accepted by CF. Consequently, the failure to provide vegetarian meals would be seen as breach of contract. Despite this, CF isn’t taking any responsibility for this violation when requesting settlement for the broken mirror. Despite the fact that an agreement was reached on essential terms, some terms were ambiguous which CF intended to take advantage of. In keeping with ANZ v Frost Holdings Pty Ltd, though there were uncertainties in the agreement, CF’s avoidance would most likely still be considered as breach of condition6. Since the contract can be identified as valid and binding, parties in the contract are legally committed and obligated to fulfill its promises7. Having identified deceptive actions by CF, it would be necessary to determine what would be the remedies for the damaged party, Frank and Frances. In the case where the breach is identified before commencement of the contract, it would be advisable to terminate the contract. However, in this condition, the contract has already been completed therefore the necessary action would be to seek remedies for the damages8. Collectively, given the breach in contract it may be almost certain remedies will be sought for Frank and Frances for damages caused for breach of condition by CF. Nonetheless, they will be required to settle $ 300 for the broken mirror. CF may almost certainly not be held liable for the stolen watch as per the exclusion clause of the contract. Conclusion In summary, presence of an offer, agreement and consideration means that a court would almost certainly consider the contract valid and binding9. An in-depth analysis on the legal issues relating to the validity of the contract has laid a foundation of facets that a court may consider to assert the validity of this contract. This paper has also comprehensively critiqued the Australian Case Law to identify the relevant legal principles that apply the legal issues and their application. Having successfully inserted an exclusion clause in the contract, CF is not liable for the stolen wrist watch while Frank and Frances are responsible for the broken mirror. A number of preceding decisions from courts in Australia also helped assert breach of condition by CF for failure to serve vegetarian meals. Based on this exhaustive analysis of the contract, a court can not only accurately but also comprehensively answer all arising questions. Bibliography Books/Articles/Reports Honeyman, C. and Prof. J. H. Wade. 2005. Negotiating Beyond Agreement and Commitment: Why contracts are breached and how to make them more durable (20): 7-17. Koffman, L., & Macdonald, E. (2010). The law of contract. Oxford University Press. McKendrick, E. (2014). Contract law: text, cases, and materials. Oxford University Press. MK & JA Roche v Metro Edgley Pty Ltd [2005] NSWCA 39 Smits, J. (2014). The Law of Contract. In Introduction to Law (pp. 51-70). Springer International Publishing. Cases ANZ V Frost Holdings Pty Ltd [1989] Supreme Court of Victoria (Full Court) VR 695 Commercial Bank of Australia Ltd v Amadio [1983] HCA 14 ; See also Blomley v Ryan (1956) 99 CLR 362; See also Kakavas v Crown Melbourne Limited [2013] HCA 25 ;See also Bridgewater v Leahy [1998] 194 CLR 457; See also Louth v Diprose [1992] HCA 61; (1992) 175 CLR 621 Commonwealth Vs Verwayen (1990) 179 CLR 394 Google Inc v ACCC [2013] HCA 1 Legislation Competition and Consumer Act 2010 Read More