Australian Contract Law - Essay Example

Commercial Law Assignment “Student’s Name” “Institution Affiliation” “Course “Date” Part one The issue Theo entered into a binding contract when he signed a lease agreement with Cassie. Cassie was acting in capacity of MME. In addition, Pat the CEO and owner of MME, had verbally confirmed to Theo that Cassie was coming to inspect the premises with a view to entering into a lease agreement. Cassie executes a lease on behalf of MME. On the other hand, Pat refuses to agree to the terms of the premises and cancels the agreement.1 Does Cassie have the authority to represent MME? Is the lease a valid contract? Does the situation have an “offer” and “acceptance” provisions? Is there an agreement to make the contract valid? The above issue can be understood by exploring the formation of contract. The Australian law requires a valid contract to be written and signed by all parties. A contract is enforceable by law if the person given an offer accepts and signs the agreement L'Estrange v F Graucob Ltd (1934)2. Any implied or express condition, statutory or otherwise is expressly excluded. In signing the lease forms, MME was legally bound to the terms contained in the form irrespective whether they were favorable or not. In this case, Cassie was acting in full capacity of MME, therefore, representing interests of MME. Agency is a relationship involving authority or capacity in one person to create legal relations with another person and third parties on behalf of the principal International Harvester Co of Australia Pty Ltd v Carrigan’s Hazeldene Pastoral Co (1958)3. Under this definition, the agent has authority to act on behalf of the principal and there is an agreement between the principal and the agent. Where the principal is unable to attend, the agency fully represents the principal Lysaght Bros & Co Ltd v Falk (1905)4.In addition; an actual authority is legal relationship between the principal and the agent that is created by a consensual agreement to which they alone are the parties Freeman and Lockyer v Buckhurst (1964)5. Considering these principals, the capacity of Cassie to represent Pat has a legal backing. The agent has the authority of the principal making any commitments by the agents to be legally binding for the company. Therefore, Cassie has the authority to represent MME. Is the lease a valid contract? For a lease to be a valid contract there must be an agreement Concrete constructions NSW Pty Ltd v Nelson (1990)6. The contract normally comprises an offer and an acceptance. There is no particular form to constitute an offer Carlill v carbolic smoke ball co (1892)7. Offer is a communication amounting to a promise. However, offer and invitation to deal are different. The consideration under such is whether the party making statement intend that affirmative response would give rise to an agreement Pharmaceutical society of Great Britain v Boots (1953)8. Pat might use this case to invoke the argument that it would be commercially inconvenient to accept the contract. However, this is not the issue, the real issue is MME entered a contract with Theo where Cassie (the agent) made in writing, a lease agreement that Theo agreed to. The Crown v Clarke 1927 considers acceptance as an unequivocal statement by the offeree agreeing to the offer9. In addition, for the offer to be valid, the person whom it is directed to must accept it. There is no particular form required for acceptance. If the person receiving the offer regards it in silence, then acceptance prevails, Empirnall holding v machon Paull 1988. Under no circumstance does MME have the power to revoke the offer before performance of the contract has begun Daulia Ltd b Four Mill bank. Therefore, the lease agreement is a valid contract. MME have a legal obligation to fulfill the terms of the contract unless price considerations make the contract incomplete. If parties do not agree on the price, it is possible to dispute the contract. In this specific case, MME does not complain about the price, but considers the terms unfavorable. Thus, there was there some form of influence that made the agent overlook the unfavorable terms? The influences that matter to this case are only undue influences. Presumed undue influence may arise from the relations existing between parties. This can be only when the offeror exercises dominion over the offeree Johnson v Buttress 1936. MME must prove that Cassie was under undue influence from Theo to make the lease agreement without considering the unfavorable terms. Otherwise, MME has no power whatsoever to cancel or revoke the lease agreement. Part 2 The Australian contract and consumer law defines contract law as rules and regulations directed towards enforcing certain promises. The common law governs the contract law in Australia. Contract law has five broad sections namely; contractual formation, scope and content of contracts, avoidance of contractual obligations, performance and termination, and remedies. Agency law explicitly refers to relationship between agent or a person that acts on behalf of the company, government, or another person, typically termed the principal. When the principal names someone as an agent or asks an individual to make a delivery through a contract leading to responsibility of the principle, an agency is formed. In this case, agent’s actions are similar to those of the principal (Australian Contract Law 2016). Such agency is enforceable by written agreement facilitated by an attorney. On the other hand, contract law refers to legally enforceable law that occurs after two or more parties enter a contract agreement. The contractual agreement requires intention to create legal relations (Gail and Fisher 1999). Parties in the contract make promises that define the obligations and rights of the parties. As such, the contract comprises a set of mutual covenants, whereby one party promises being in consideration of the other party. The contract allows the parties to define the relationship (Australian Contract Law 2016). However, the fundamental principle of the binding natures requires the agreement be made at arm’s length. Similar to agency law, contract binds two parties whereby the contract term determines the rights and obligations of parties. The two forms of law plays a crucial role in enhancing commercial relations. In agency law, the agency relationship is generated by consent of both the agent and principal, meaning that the relationship is mutual. In this case, no person can unwillingly become an agent for another. In most cases, in order to ensure clarity for the parties in the agreement, a written contract is necessary. Thus, the intent of the parties can be inferred from their words. The concept of control is an intricate element of the principal and agent relationship in agency law (Australian Contract Law 2016). This is because the agent agrees to act under the direction of the principal. Therefore, if the principal infers powers to the agent to act in their capacity, then the agent has the capacity of entering into a binging contract just as the principal. When the agent exercises authority over deliberate directive of the principal, it is legally viewed as if the principal is acting. In the event that the principal knowingly or unknowingly authorizes an agent to carry out specific actions with authority, then the principal bears the full responsibility of agent’s actions. However, when such authority does not exist, then the agent is exercising apparent authority. Nonetheless, if the other person believes in good faith that such right is in existence, the principal will remain liable for actions that agent engages in. In such instance, the principal is unable to rely on the defense that no actual authority was reputable. Regardless of whether the agent’s authority is apparent or actual, the scope of the authority is considered in determining the agent’s legal responsibility (Australian Contract Law, 2016). Furthermore, an agent in accordance with agency law cannot be liable to a third party for contract that the agent has entered into as the representative of the principal. In the event that the agent extends authority and enters into the contract, then the agent will be financially responsible to the principal, in accordance with the Australian law. The agency relationship is bind by the agency contract. Therefore, termination of the relationship must be in accordance to the principal-agent relationship initially fashioned. The law provides for the principal to retract an agent’s authority at any time. If the principal does so, then the principal is liable for damages in the event that such retracting violates the contract. Mental unsoundness and death can also permit the principal to end the relation by invoking the operation of law. Restatement of agency defines the agency as fiduciary relation resulting from the manifestation of consent of one person authorizing the other person to act on his/her behalf. The other person (agent) acting on behalf of the principal is subject to his/her control. In the principal-agent relationship, the relationship is consensual. That is, the agent assents to acting under the direction and control of the principal (Tong 2000). The relationship is also a fiduciary one; that is, the agent agrees to act for and on behalf of the principal. The agent is in no sense proprietor entitled to benefits of the company, thus, is not expected to bear all the risks. Ordinary loss on the principal does not affect the agent. However, agent’s liability for the fulfillment of the contract is not assured as much of the law centers around principal and agent as opposed to agent and third party. Agencies are created by contract, thus, contract laws apply in the agency contract. The general rule of contract law governs the law of agency (Australian Contract Law, 2016). In some instances, agencies can be created in the absence of contract, just by agreement. In such instances, three contract principals are important; that is, the requirement for consideration, requirement for a writing, and contractual capacity. Under requirement for consideration, agencies are created by consent; implying they are necessarily not contractual. Rarely, one person can act as an agent for another person without consideration. Such agencies would give rise to similar results as that of common contractual agreement. Oral agency contract are also legally binding. The law does not make it mandatory that the oral agency contracts be reduced to writing. However, in order to avoid problems of proof, many agency contracts tend to be written. Where the agency contract must be in writing includes: (a) If the agreed-on purpose of the agency lasts more than year because it cannot be fulfilled within a year; (b) If there is an agreement to pay commission to real estate broker, (c) If the agency has the authority to sell real estate, and (d) If the contract is between company and sales representatives While the contract between the principal and the agent is not necessary to be in writing, contract between the agent and third party must be in writing. According to the section 2-201 of the Uniform Commercial Code, contracts for sale of goods worth more than $500 must be in writing. The party against authorized agent should sign such contract. If the parties lack capacity to make a contract, the law considers such contract as void. If both the agent and the principal lack capacity; there can be no question of the contract’s voidability. However, if only one party lacks capacity, then by general law, the competency of the contract is weighted against the principal. For instance, if the principal lack the capacity and the agent is competent, then the contract is avoidable. Under special circumstances, such as mental incapacity of the agent, incompetency on part of agent cannot bind a principal. In areas of social need, courts consider an agency to exist in absence of an agreement. In this instance, the relationship is termed “implied” by operation of the law. This is where dependence comes in. If the agent is dependent on the principal in absence of written agreement, the principal is liable for the actions of the agent. For instance, in a family setting, the head of the family is principal and children are agents. Supposedly, if the children order food, the head of the family will have to pay for the food, not because the head has delegated functions to the agent, but because there exists an implied relationship by the virtue of law, making the contract legally binding (Arts Law Center 2016). Reference List JADE. International Harvester Co of Australia Pty Ltd v Carrigan’s Hazeldene Pastoral Co. 1958. HCA 16; 100 CLR 644; 32 ALJR 160 AUSTRALIAN CONTRACT LAW 2016. Contract Law. Retrieved from http://www.australiancontractlaw.com/law/formation-agreement.html AUSTRALIAN CONTRACT LAW Carlill v carbolic smoke ball Co. Court of Appeal 1893, 1 QB 256. Retrieved from http://www.australiancontractlaw.com/cases/carlill.html GAIL PEARSON AND FISHER SIMON, Commercial law Commentary and Materials, LBC Information Services, 1999 TONG ROBERT, LBC Nutshell: Sale of Goods – 3rd ed, 2000 ARTS LAW CENTER OF AUSTRALIA 2016. Agency Agreements. Retrieved from http://www.artslaw.com.au/info-sheets/info-sheet/agency-agreements/ Read More