Concepts of Contract Law in relation to Two Contracts that Were Signed by Marcus - Case Study Example

Business Law Name Date Course Business Law Introduction In Australia a contract is considered as a promise or set of promises that are legally binding. Contract law in Australia is mainly regulated by the common law. Two or more parties are usually involved in a contract and it takes place when one party makes an offer and the other party communicates an intention to accept the offer. The contract does not necessarily require written documents but bit can also be agreed orally1. Once both parties are in agreement with the contract, it becomes binding. A party is in breach of the contract in case it goes against the terms that have been agreed upon. A contract may however be declared null and void by the courts in case of certain conditions2. A contract may be declared null and void in case of misleading and deceptive conduct, mistake, duress, undue influence, unfair terms, illegality or unconscionable conduct. The paper thus discusses the concepts of contract law in relation to two contracts that were signed by Marcus in the sale of two ships. Discussion In the case of the contract that was signed between Marcus and Luiggi’s shipping company, Moskva was sold for $15 million. Both parties agreed to the contract and the money was transferred to the account of Marcus on the same day3. However, all the parties including Marcus were not aware that the ship had caught fire a few days ago and suffered unrepairable damage a few days ago before sinking. According to the concepts of Non est factum, all the parties are bound to the documents that they have signed regardless of whether they read it or not. However in the case of Petelin v Cullen, the contract was declared void due to the presence of a mistake4. The contract between Marcus and Luiggi’s shipping company is binding since all the parties signed the contract and the money was transferred to Marcus. At the time of signing the contract, both parties were not aware of the incident that had taken place. As a result of this Marcus cannot be held liable for any offence since he was unaware of the incident. The contract law requires that all the parties should be satisfied with the contract and none of the parties should be subjected to any unfair terms. This situation can therefore be considered as a common mistake. A common mistake is recognized in the common laws and it involves a situation where both parties are mistaken about the same thing. Both parties were not aware that the ship was already burnt and sunk. Marcus should therefore return the full amount to the shipping company to avoid being sued5. When a contract is signed between the two parties, each party owes a responsibility to the other party. This means that each party must deliver what they owe to the other party. In this case, Marcus would not be able to deliver the ship as required by the contract since is already burnt and sunk. If Marcus fails to return the money and cancel the contract, he will be in breach of contract and may face prosecution and penalties. The breach of contract is illegal and the parties involved may be faced with huge penalties. If the matter is taken to court, the contract can be declared as null and void due to the conditions surrounding the contract. According to the contract law, a mistake can be used as a ground for declaring that a contract is void. In the case of Taylor v Johnson, the court was able to identify a mistake which prevented one party in the contract from fulfilling the terms6. On the other hand, it is important to note that a mi8stake is a complex issue when it comes to the contract law. A mistake which may also be fundamental in nature may not be used as a right to escape the contractual obligations. It is for this reason that Marcus may face a breach of contract if he fails to cancel the contract and return the money since he will not be in a position to deliver the ship. It is therefore important for Marcus to ensure that the contract is cancelled and the money returned as he was not aware that the ship had already burnt and sunk. In the second case, Marcus signed the contract with Chow for the sale of Leningrad which was worth $ 20 million7. Chow paid the money with the belief that the ship is a red hulled vessel that she had seen before. The valuation later indicated that the ship had deteriorated and it was worth only $ 10 million. The matter that may arise in this case is that of misleading and deceptive conduct on the part of Marcus. The pre-contractual misrepresentations may provide remedy in the common law. According to section 18 of Schedule 2 of the Competition and Consumer Act 2010 (Cth), a person must engage in conduct that is misleading or deceptive or is likely to deceive or mislead. Chow was using information that was misleading. This is considering that the Ship that she saw and was made to believe that she will be buying was quite different from the ship that was sold to her. Marcus had the duty to clarify all the details with regards to his ship that he intended to sell to Chow. Despite the information that Chow had the wrong impression of the ship after being shown another ship, Marcus did not make any clarifications. This therefore indicates that Marcus was engaged in deceptive and misleading conduct. In the case of Marks v GIO Australia Holdings Limited, the High court found that the appellant had engaged in misleading and deceptive conductive after providing a false interest rate to attract the customer8. Marcus was involved in false representation by displaying another ship which misleads Chow. The valuation that was carried out on the ship indicated that it was worth only $ 10 million due to the depreciation. However, Marcus still sold the ship to Chow for $ 20 million. This is an indication that Marcus was only interested in making a high amount of money through a deceptive conduct. As a result of this, the contracted can be declared void. The misrepresentation was responsible for inducing Chow to enter into the contract. This is considered Chow would not have bought the ship if she was aware that it was different from what she had seen. This is therefore an indication that the contract was based on deceptive and misleading conduct. According to section 18, a wide range of remedies exists when a contract is based on deceptive and misleading information. Since the actions of Marcus are a violation of Schedule 2 of the Competition and Consumer Act 2010 (Cth), he may end up facing a criminal as well as civil liability. Chow has the right to pursue the matter in court and prove that section 18 was violated by Marcus. In the case of Concrete Constructions v Nelson, the High Court found that the foreman of the company was engaged in misleading and deceptive conduct after providing the employees with false information that led to his injury9. Chow can also argue that the terms of the contract were not fair. This is because it only favored Marcus. According to the common law, a contract has to be fair so as to meet the needs of all the parties involved. The court has the responsibility of determining whether a contract is fair or not. In this case, the facts indicate that the contract was unfair and Marcus intended to mislead Chow. Although it was the duty of Chow to confirm all the details before entering into the contract with Marcus, the contract law indicates that the offer should not be misleading as it may influence the decision of the offeree. The decision of Chow was influenced by the misleading representation that was made by Marcus. The court may also declare the contract void based on the grounds of unfair terms as well as the misleading and deceptive conduct10. The cancellation of the contract will require that Marcus return all the money paid to him by Chow. Since there is a violation of section 18, Marcus mainly also be fined. The amount that he may be required to pay as a fine will however be determined by the court. Marcus stands to lose more if the matter is taken to cour11t. Conclusion In conclusion, it is evident that the first contract that Marcus entered with the shipping company can be declared void. This is based on the common mistake between the two parties. It is evident that none of the parties knew that the ship had caught fire and sunk. Marcus may be required to return the full amount to avoid the breach of contract. In the second contract, the contract can also be declared void due to misleading and deceptive conduct on the part of Marcus. It is evident that section 18 was violated by Marcus in the second contract and this may also attract a fine or penalties. References Used Cases Petelin v Cullen High Court of Australia (1975) 132 CLR 355 Taylor v Johnson [1983] HCA 5; (1983) 151 CLR 422 Marks v GIO Australia Holdings Limited [1998] HCA 69 (11 November 1998) Concrete Constructions v Nelson (1990) 169 CLR 594 Act Schedule 2 of the Competition and Consumer Act 2010 (Cth) Journal and Book Marshall, B, A, 2012, Reconsidering the Proper Law of the Contract, Melb. J. Int'l L., 13, 505. McKendrick, E, 2014, Contract law: text, cases, and materials, Oxford University Press. Read More