Research Korner: Contract Law

Report of law

Law of Contract             Rules in the Formation of a Valid Contract                         Prepared by:   (Name) (Course) (Instructor/Tutor) (Date of Submission)         Introduction                A contract is defined by Sir  as “a promise or set of promises which the law will enforce”[1]. There are several essential elements to a valid contract. First is agreement or a meeting of the minds of the parties to the agreement when one party makes an offer and the other party accepts that offer. Second is the giving of consideration or the giving of a bilateral or unilateral promise. Third is existence of a clear intention to create a legal relationship placing upon the parties their corresponding obligations enforceable under the law. Fourth is the form of the contract since there are contracts such as the sale of real property that are required by law to be made in writing for the agreement to have a binding force. Fifth is capacity of the parties to enter into a contract so that there is no impediment to the giving of a free willing or voluntary consent. Sixth is consent or freely given agreement to the terms of the contract so that contract formation is not made ineffective by the presence of undue influence or duress. Seventh is the legal purpose of the contract so that agreement should neither be illegal nor contrary to public policies. [2] Since these elements are essential, all should be present in the formation of a contract. Otherwise the resulting agreement may be rendered by the court as void, voidable or unenforceable.[3] A contract creates rights between the parties exercised with the corresponding remedies for violations. Legal Issues               The legal issues arising from the case involves: 1)  the determination of the formation of a valid contract between George and Allan for the sale of the moped by George to Allan as well as the corresponding rights and remedies available to the parties due to the incidents surrounding the moped after the sales transaction and 2) the determination of the formation of a valid contract between Allan and Charlotte when Allan promised to pay Charlotte money for the temporary repair of the moped and the legal standing and remedies available to the parties involved.   Contractual Relations between George & Allan               The formation of a valid contract involves the process of exchanging offers and until there is a final offer made by one party and accepted by the party. On one hand, an offer refers to the expression of readiness to enter into a contract coupled with the intention of making the contract binding upon both parties as soon as a valid offer is made by the offeror and duly accepted by the offeree. On the other hand, an acceptance pertains to the final and unqualified acquiescence to the terms contained in the offer. For the acceptance to be valid, this should cover all the terms of the contract. The making of an offer and the corresponding acceptance of the same offer should be made by the parties with the intention of creating legal relations. [4]               In business dealings there is a presumption that the parties intended the creation of legal relations in concluding the contract. Since this is only a presumption, any party claiming otherwise may show proof rebutting the presumption such as through the inclusion of any express statement stating the lack of intention to enter into the agreement.[5]    In the given case, George made the offer for the sale of his second hand moped for $1,200 to Allan, who in turn, accepted the offer. There was a clear intention between the parties to enter into a legal sales agreement since there was no indication to the contrary. There were no statements or previous and succeeding actions from George or Allan that would defeat the formation of a valid contract.   However, despite the formation of a valid contract, there are certain factors that may vitiate the agreement such as 1) misrepresentation, 2) mistake, 3) duress, 4) undue influence, and 5) illegality. Depending upon which of these vitiating factors have intervened in the contract would make the agreement void, voidable or unenforceable resulting to different remedies. Misrepresentation refers to the false statement of fact communicated by one party to other and even if the false statement does not form part of the contract, the statement served as an inducement for the other party to enter into the contract. This has the effect of making the contract voidable. Mistake refers to an error occurring in the formation of the contract that if classified as an operative mistake makes the contract void. Duress exists in a situation where a party is forced to enter into the contract in which case the agreement becomes voidable. Undue influence pertains to the situation where an agreement occurs due to the improper pressure brought down upon a party to the contract so that the contract becomes voidable. Illegality refers to the subject of the contract that is against the law making the contract void. [6]   In the given case, the vitiating factor that intervened in the contractual relations of George and Allan is misrepresentation. Two elements of misrepresentation exist, which are 1) the presence of a false statement of fact and 2) the misrepresentation worked to induce the formation of the contract. There is misrepresentation because during the delivery of the offer, George gave the statement that the moped had only run for 10,000 miles when in fact the moped already had more than 20,000 in mileage. This was also followed by the statement that if Allan does not believe in George’s claim, that Allan should check with Gary at the motor shop who would back-up his statement. From the facts of the case, although Allan did not check with Gary, it can be implied that his acceptance of the offer was influenced by the claim made by George. Because of the existence of misrepresentation, the contract of sale between George and Allan becomes voidable.   A voidable contract means that a party to a contract has the right to choose to avoid or rescind the binding legal consequences of the contract or the right to ratify the legal obligations arising from the contract with the effect of extinguishing the right of avoidance. A voidable contract is characterized as operational in all its aspects much like a valid contract until such time that a party with the power to avoid or rescind the contract actually conducts steps to avoid the agreement. In the case of actual avoidance made by a party to the contract, the goods obtained under the agreement should be returned if this is possible but if the goods have been resold prior to the actual avoidance, the owner will not be able to exercise claim over the good. [7] This means that in case certain vitiating factors arise in the compliance with the obligations arising from the contract, the party with the power to rescind the contract may either avoid the contract or ratify it.   Since the contract between George and Allan has become voidable, Allan who is the party with the power to rescind the contract has the option to either avoid the agreement or ratify the sales agreement after learning that George made a misrepresentation of the mileage of the moped at the time of sale. On one hand, rescinding the contract means that the parties reverts back to their position prior to the creation of the contract[8] so that Allan returns the moped to George and the latter returns the purchase price. On the other hand, ratifying the contract after learning of the misrepresentation means that Allan is willing to confirm the validity of the contract.   Rescission is made by the injured party by communicating the intention to rescind the contract to the other party. However, in some instances where there are indications of repudiation such as informing authorities of the intention to rescind the contract constitutes a valid rescission[9]. Section 2 of the Misrepresentation Act 1967 provides that the injured party has these remedies: 1) rescission, 2) damages, and 3) indemnity or a combination of these three depending upon the nature of misrepresentation.   However, despite the right of the party with the power to rescind or avoid the contract, there are certain bars to rescission. First is the affirmation by the injured party of the contract after having complete knowledge of the misrepresentation and the concurrent right to rescind the contract[10]. Second is the lapse of time without the injured party taking any action to rescind the agreement[11]. Third is restitution in integrum impossible or the situation where it is impossible to restore the parties to their original situation prior to the contract so that the right to rescind is lost[12]. However, precise restoration is not called for and the remedy still persists provided that there is still substantial restoration. Even if the property subject of the contract has already deteriorated, this would not bar the exercise of rescission provided the restoration is still substantial.[13] Fourth is the acquisition of a third party, in good faith and in exchange for value, of the property[14]. Lastly, the power to rescind the agreement may be lost in case the court exercises its discretion by awarding damages in place of rescission as provided in section 2(2) of the Misrepresentation Act 1967.   In the given case, Allan learned about the misrepresentation in mileage from the motor shop when something went wrong with the moped. However, after having the moped repaired, Allan decided to still use the moped to his trip to Cornwall and return the moped to George upon returning home. This instance may be considered allowing the lapse of time after learning of the misrepresentation before actually doing any explicit action to communicate the intention to rescind the contract. During Allan’s trip, the moped again broke down requiring Allan to get the aid of a passing motorist with a promise to pay for the temporary repair. Upon meeting with George, Allan communicated the problem about the moped. Instead of rescinding the contract, with the effect of Allan returning the moped and George the purchase price, Allan instead agreed to the sale of the moped in its temporarily repaired state for a lower price than the cost of purchase. Upon discovering that the moped was vandalized the purchase price agreed upon by the parties further decreased from $1,000 to $700. The succeeding incidents covered the negotiations for the sale of the moped by Allan to George. The actions of Allan indicate that he has waived his right to rescind the contract. Allan’s engagement in the negotiations for the sale of the moped back t George implies that the initial sales contract has been ratified. Allan may be found by the court to have waived the right to rescission so that the remedy is no longer available to him.     In relation to the sale of the moped back to George, the determination of the formation of a valid contract depends upon whether there was a valid acceptance when George sent his letter of acceptance by mail but this was received by Allan one day after the latter has sent a communications cancelling the offer because he learned that the repair could be made at a lower price with the effect that he looses $100 dollars in the purchase price.   The general rule in contract law is that the letter of acceptance should be communicated to the offeror before the offeror cancels the offer in order to create a valid contract[15]. Exceptions to the rule are 1) carrying out of obligations in a unilateral contract constitutes acceptance, 2) waiver of the requirement of communication, and 3) the postal rule. The postal rule that applies to the given case pertains to a situation where acceptance by post is agreed upon by the parties or it is the appropriate mode of communication so that acceptance is deemed to have been given at the time that the letter of acceptance has been posted regardless of whether the letter is delayed, lost or destroyed en route that the letter fails to reach the offeror. [16]        In the given case, it appears that the letter of revocation of the offer sent by Allan is dated and was sent earlier than the letter of acceptance of George. This implies that the offer was revoked before acceptance. However, the rules of the revocation of an offer and acceptance by post need to be reconciled since effective acceptance by post becomes effective at the time of posting while the effective revocation requires communication to the offeree so that without communication the revocation becomes ineffective[17]. In the case of the revocation of the offer, the essential element is that the offeree is informed so that the revocation becomes effective at the time that this has been received by the offeree even if the letter of revocation was dated October 21, 2005. In the case of acceptance by post, this becomes effective at the time of posting or October 22, 2005. If George received the letter of revocation before October 22, 2005, then there was no effective acceptance but if the letter of revocation was received after the letter of acceptance was posted, then there is a valid acceptance.         Contractual Relations between Allan & Charlotte               One of the elements of a valid contract is the existence of consideration or the giving of a unilateral or bilateral promise. This means that the parties to the contract should promise to either give or do something for the other. A consideration may be executory if the exchange of promise covers future actions or executed if the act in exchange for the promise has already been accomplished. The existence of consideration may be determined when the party wanting to enforce the contract shows that consideration has been given. In particular, the promisee should be able to prove that consideration was provided by him/her so to support the contractual claims. [18]   Consideration is important to show that the parties equally benefit from the contract and there are no unfair relations between the parties such as when only one party gains from the performance of the obligations set out in the agreement. The importance of consideration is expressed in the case where Easton contracted with X covering the arrangement that in exchange for the work performed by X for Easton, Price would receive £19 as payment. X performed the work however Easton failed to pay Price. Price commenced suit against Easton. The court held that the claim of Price for £19 is not valid since he was not able to provide consideration. The decision of the court was based on the rationale that Price did not extend any consideration in exchange for the payment he is claiming from Easton since it was X who performed the work for Easton. [19]               The letter received by Allan from Charlotte reminding him of the promise he made to pay $50 is based on the incident where Allan flagged down the car of Charlotte because Allan’s moped derailed on a deserted road. He promised Charlotte $50 to do temporary repair on his moped. Since Charlotte is the party and promisee claiming for payment based on the promise made by Allan, she has to prove that she has given consideration to support the contractual claim. In her defence, Charlotte can claim that she has extended the consideration of doing temporary repair on Allan’s moped in exchange for payment. She can also state that Allan has noted her name and address indicating the intention to pay. If Charlotte is able to prove the existence of consideration then she may be awarded the amount being claimed from Allan and the latter may be ordered to pay Charlotte.   Conclusion     Contract law has been proven to be an inevitable legislative tool governing the transactions arising in various forms of human relations. This serves to provide guidelines in determining the formation of a valid contract and the ensuing rights and obligations accruing to the parties. In this way parties are informed of their rights and its limits as well as the legally binding remedies available to them in particular circumstances.   The formation of a valid contract follows the negotiations between parties through the making of an offer and the giving of acceptance to the same offer. However, the process is not as simple as it seems, especially when the parties have differing opinions over whether a contract was formed and the time of effectivity. A valid offer comprises an expression of willingness to engage in a contract while acceptance is the acquiescence to all the terms of the offer. Despite the existence of a valid offer and an effective acceptance, there are vitiating factors, such as misrepresentation, which could render the contract voidable and subject to the remedy of rescission as well as claim for damages or indemnity depending upon what the court deems appropriate.   Apart from this, the creation of legally binding agreements is also subject to compliance with essential elements, one of which is consideration. This element serves the purpose of ensuring that there is a fair exchange in the performance of the contract so that the parties to the contract should give in order to receive.    These aspects of contract law reflect and respect the fundamental rights of contracting parties, provide guides for various situations that may occur in the formation and implementation of contracts, and remedies available to the parties.

Report of law

Law of Contract Rules in the Formation of a Valid Contract ...

Law Assignment

LAW Assignment   1.                  Ping is thinking of opening a restaurant. On Monday she contacts Dennis and is offered by him a restaurant property lease at Causeway Bay for a good rental. Dennis says that he would like to hear of her acceptance “by the end of the week”. All that week she thinks about it. On Friday morning, Ping hears from Billy that the lease has been offered by Dennis to Myna, and Myna has accepted. Ping drives past the property on Friday afternoon and this information appears to be true, as Myna is moving in. Ping is upset that the offer to her of the restaurant lease has apparently been revoked. Pretending she knows nothing of Myna, she calls Dennis Saturday morning and accepts his offer before he can get a word in. Does she have a contract? If so, why? If not, why not? (400 words)               Ping does not have a contract because there was an effective revocation of the offer. To form a contract, there should be a valid offer made by one party and duly accepted by the other party. An offer is a proposal made by an offeror, which if duly accepted by an offeree creates a valid contract (Graw, 2005). This means that the offer is communicated in a manner that would result to the formation of a contract once is accepted. In the given case, there is a valid offer for the lease of the restaurant property at a given monthly rental. In addition, Dennis communicated that he would like to know of Ping’s acceptance before the end of the week. From this, the offer remains open until the end of the week.             However, there are instances when an offer lapses such as when the time given for acceptance has lapsed (Ramsgate Victoria Hotel v Montefiore, 1866), a reasonable time has already elapsed (Ramsgate Victoria Hotel v Montefiore, 1866; Manchester Diocesan Council v Commercial & General Investments Ltd, 1970), a counter offer came about (Hyde v Wrench, 1840), and if one of the parties loses the capacity to contract such as because of the death of one party (Bradbury v Morgan, 1862). An offer can also be terminated at any time as long as this is before an acceptance is given (Byrne v Van Tienhoven, 1880), provided the revocation or termination of the offer is communicated to the offeree (Dickinson v Dodds, 1876). In the revocation of an offer, it is an absolute condition that the fact that the offer has already been revoked has to be communicated or made known to the offeree. According to Dickinson v Dodds (1876), the manner of communicating the revocation does not need to be made personally by the offeror or on the offeror’s behalf. This means that as long as the offeree learned of the revocation, then there is an effective communication, giving rise to a valid revocation. In the given case, Ping learned of the revocation of the offer through a call from Billy telling her that Dennis has made an offer to Myna, which Myna has accepted. Ping even went to the lease site to see for herself that Myna was already moving in. This means that there was an effective communication of the revocation of the offer. As such, even if Ping called Dennis before the end of the week to communicate her acceptance, there was already no offer to accept.       2.                  Ping is also looking to buy an apartment in Aberdeen as an investment. She approaches Aberdeen Property Holdings (APH) stating that she will only buy an apartment where there are reliable tenants already in the apartment. APH advise her that they have just the property that she is looking for, “with some exceptionally good tenants who have been there 3 years”, they say. Ping buys the apartment but the tenants are terrible, always behind in their rent and regularly damaging things and neglecting the garden. She later finds out that the tenants had been there only 3 months, not 3 years. The misrepresentation was made to her due to an innocent miscommunication between staff at APH. Ping now wants to rescind the contract. APH have offered her another set of very reliable tenants who can move in immediately (since the tenancy has just expired) but Ping wants nothing more to do with APH. Advise her. (400 words)               Ping is entitled to the remedy of rescission with indemnity based on the misrepresentation. Misrepresentation pertains to the issuance of a false statement by one part to another party over a fact resulting to the inducement of one of the parties to enter into a contract (Graw, 2005). Based on this definition of misrepresentation, there are two major conditions to support rescission based on misrepresentation. One is the existence of a false statement of fact, which should be material fact (Kennedy v Panama New Zealand and Australian Royal Mail Co Ltd, 1867). The other is the inducement of the party to engage in a contract because of the misrepresentation of a material fact. In the given case, there is misrepresentation because APH falsely stated to Ping that there were reliable tenants in the apartment building when the tenants have stayed in the apartment for only three months. This material fact induced Ping to enter into a lease contract since she specifically considered reliable tenants as a motivation to enter into a contract with APH. There was a substantial difference between the material fact stated to Ping about the tenants of the apartment and the actual situation of the tenants of the apartment.             Even if the statement was issued because of an innocent misunderstanding among the staff of APH, there was misrepresentation because of the occurrence of its elements in the case. Specifically, there was innocent misrepresentation (Graw, 2005) since the staff made the statement to Ping with the belief that what they were saying was true. In the event of a misrepresentation, the outcome could be rescission with indemnity or affirmation of the contract through express communication or action such as by continuing the contract or implied by allowing the lapse of a substantial period after learning of the misrepresentation. Rescission for innocent misrepresentation finds support in Leason Pty Ltd v Princess Farm Pty Ltd (1983), which provides there is no authority that precludes entitlement to rescission of the aggrieved party to an innocent misrepresentation. Rescission with indemnity based on a claim of innocent misrepresentation is an action available to Ping because she does not have any intention to continue the contract even if APH has stated that new tenants will replace the existing tenants. Ping needs to file an action in court seeking indemnity and rescission of the contract with APH and she has to prove the existence of the elements of innocent misrepresentation.                3.                  Ping’s friend Polly operates an import/export company in Wan Chai. She arranges for a load of a client’s furnishing supplies to be sent by train to Guang Zhou. She approaches the manager of transport services at the railroad company, Mr Bao. He prepares the written contract. Nothing is said on the written contract about when the journey will be made, and Polly is worried that the goods may arrive too late in Guang Zhou. She tells Mr Bao of her concerns. He replies: “I promise you that I will get this load on the train leaving Thursday morning.” Polly is pleased, and pays the price quoted immediately. In fact, the goods are not loaded until Friday and they eventually leave Saturday morning. Sadly, that train is involved in an accident and fire en route, and the goods are badly damaged. The written contract has an exemption clause “exempting KCR from all liability for any damage caused to a client’s goods by accident or fire during transit.” Advise Polly. (400 words)               A collateral contract constitutes a promise, which does not form part of a principal contract (Graw, 2005). A collateral contract constitutes a contract in itself operating independently but significantly linked to the primary contract so that the collateral contract emerges when a consideration of one party is engagement in the main contract (Heilbut, Symons & Co v Buckleton, 1913). In Evans v Andrea Merzario (1976), a collateral contract is explained as a promise or assurance given with the intention of acting on it through the engagement in a contract and the actual entry into a contract makes the promise binding. This means that in deciding whether statements constitute a collateral contract, the statement should be delivered with the intention to rely on it, the party insisting on the presence of a collateral contract should have relied on the statement, and the party making the statement delivered this with the intention to guarantee its truth. Concurrently, there are two major elements of a collateral contract. First, the statement communicated has a promissory nature and in the form of an assurance (JJ Savage & Sons v Blakney, 1970). Second, there should not be any inconsistency arising between the primary contract and the collateral contract. In Hoyts Pty Ltd v Spencer (1919), the promise was not recognized as a collateral contract because this was inconsistent with the primary contract. In JJ Savage & Sons Pty Ltd v Blakney (1970), the promise was not also considered as a collateral contract because this does not have a promissory nature. In the given case, Polly made express mention of her concern over the schedule of the loading of the goods to reach the destination on time. This is in the context of an already existing contract between Polly and Mr Bao. Mr Bao replied that he promises Polly that he will have the goods loaded on the train that leaves Thursday morning to reach the destination on time. This constitutes a collateral contract because this involves a promise made for the fulfillment of the primary contract. In addition, the statement was communicated as a promise or an assurance and there is not inconsistency between the promise comprising the collateral contract and primary contract for transit.             In the case of the exemption clause, this should clearly form part of the terms of the contract. However, the operation or validity of the exemption clause constitutes a matter of court determination but Photo Production Ltd v Securicor Transport Ltd (1980) provides for the application of the contra preferentum rule that the exemption clause is interpreted against the party claiming its protection. 4.                  Polly’s friend Paul (now 27) is a chef for Hokkaido Pty Ltd, which owns the famous Hokkaido Japanese restaurant (owned by Yoshi) in Kowloon Tong. Paul has been working there for 10 years and now thinks he can make more money if he is his own boss. He wishes to move to Discovery Bay and open another Japanese restaurant there, called “Paul’s Japanese Restaurant.” Yoshi reminds Paul that when he joined Hokkaido he signed a letter stating that he would not open another Japanese restaurant “anywhere in Hong Kong for a period of 5 years” if he left Hokkaido Pty Ltd.  Paul doesn’t remember signing the letter, as it was 10 years ago. When it is shown to him, he realises that he did sign it, but that happened 6 weeks before his 18th birthday. He wants to know if he is bound by the terms of the letter. If so, why? If not, why not? (400 words)               Paul may not be bound by the restraint of trade clause by proving that the clause is too broad because it covers any area in Hong Kong and the limitation of five years is too unreasonable. Restraint of trade is an employment clause that puts a restriction on the freedom of individuals to deal or trade assets or information, in a particular manner, or trade with third parties. This applies during the period of employment and could extend after the termination or expiration of the employment contract. (Graw, 2005) Laws covering restraint of trade consider this practice as against public policy making unenforceable subject to the exception that the interest of a party or public interest justifies the reasonableness of the restraint (Attwood v Lamont, 1920). This means that a restraint of trade clause becomes unenforceable when this is unreasonable, subject to the determination of courts at the time of the imposition of the clause. The burden of proof rests upon the party wanting to enforce the restraint of trade clause while the party claiming unreasonableness have to show proof of the violation of public policy by the clause. (Linder v Murdock’s Garage, 1950) Restraint of trade applies to interests subject to protection so that in the case of an employment context, broad restraint of trade clause that covers all possible future forms of competition with the employer is unenforceable because it is unreasonable and does not constitute an interest subject to legal or contractual protection. In Wentworth Partners Estate Pty Ltd trading as RE MAX Gold v Gordony (2007), the restraint clause was considered unenforceable because the clause was broad. In Orton v Melman (1981), validity of a restraint of trade clause depends on factors such as the relative bargaining power of the parties, the nature or type of the prohibition, and the period or scope of the clause. In IRAF Pty Limited v Graham (1982), a restraint period of nine to twelve months was deemed sufficient in the case of a hairdressing salon.             Paul signed the employment contract including the restraint of trade clause when he was a minor but the employment contract stands since it covers employment, which is generally beneficial to him and the continuity of his employment when he achieved the age of majority constitutes ratification of the contract (Graw, 2005). However, Paul may also question the validity of the employment contract on the grounds of unreasonable terms subject to the consideration of the court.   References   Secondary Source   Graw, S. (2005). An introduction to the law of contract (5th edn.). Pyrmont, NSW: Lawbook Co.     Cases   Attwood v Lamont (1920) 3 KB 371 Bradbury v Morgan (1862) 1 H&C 249 Byrne v Van Tienhoven (1880) 5 CPD 344 Dickinson v Dodds (1876) 2 ChD 463 Evans v Andrea Merzario (1976) 1 WLR 1078 Heilbut, Symons & Co v Buckleton (1913) AC 30 Hoyt's Pty Ltd v Spencer (1919) 27 CLR 133 Hyde v Wrench (1840) 3 Beav 334 IRAF Pty Limited v Graham (1982) 1 NSWLR 419     JJ Savage and Sons v Blakney (1970) 119 CLR 435 Kennedy v Panama New Zealand and Australian Royal Mail Co Ltd (1867) LR 2 QB 580 at 587 Leason Pty Ltd v Princes Farm Pty Ltd (1983) 2 NSWLR 381 Lindner v Murdock's Garage (1950) 83 CLR 628 Manchester Diocesan Council v Commercial & General Investments Ltd (1970) 1 WLR 241 Orton v Melman (1981) 1 NSWLR 533 Photo Production Ltd. v Securicor Transport Ltd. (1980) A.C. 827 Ramsgate Victoria Hotel v Montefiore (1866) LR 1 Ex 109 Wentworth Partners Estate Agents Pty Ltd trading as RE MAX Gold v Gordony (2007) NSWSC 1135

Law Assignment

LAW Assignment 1. Ping is thinking of opening a restaurant. On Monday she contacts Dennis and is offered by him a ...

PRIVITY OF CONTRACT IS OUT OF DATE IN THE MODERN WORLD

I.              Introduction The principles related to the privity of contract have been under considerable scrutiny in the past years. Essentially, the doctrines related to privity concerns the issues relating to third parties. Specifically, it claims that an individual cannot have any rights or put into effect any right found on a contract which he/she is not considered a party. In the same manner an individual who is not considered a party to a contract will not be liable to any concerns relating to it. In looking at the accepted definition of the privity doctrine, there seem some discrepancies that need to be addressed. The following discussions will attempt to establish a set of arguments in opposition to the implementation of the doctrine.     II.            Arguments against the Privity Doctrine Being out of Date There are several major arguments that need to be addressed in the doctrine of privity. These include the importance of the privity doctrine in determining who would enforce the contract; protection of the integrity of a contract being a private transaction; and possible injustices held in relation to the capabilities of the third party. These four are to be expounded in the subsequent parts. Certain laws applicable will be taken into consideration such that the arguments will be supported.   A.   Third Party and Consideration In contract law, it is an established tenet that consideration should be present in any legal relationship. This being said, one could therefore deduce that a third party cannot take any benefit whatsoever in the contract, given that he has not given any consideration on it. On its plane, it is just logical that a third party given a better legal position in the context of contracts as compared to the promisor and the promisee is essentially unreasonable given that the two latter parties has provided consideration in the agreement. Nevertheless, in certain jurisdictions the third party could acquire rights in the contract provided that they are covered by law. Specifically in Australia, s55 of the Property Law Act 1974 (Queensland), s56 Law of Property Act 2000 (Northern Territory), s11(2-3) of the Property Law Act 1969 (Western Australia), provides the third party the capability to enforce the contract if they were named in the contract itself. This means for Third Parties to have any right in implementing the terms of the contract, then they have to be actually named. Thus, the doctrine of privity is not out of date. It only appears to be because it is often misconstrued as the consideration rule. There is a difference. The doctrine of privity is still a superior in determining the people who should implement the contract, as seen in the legislation above those named should be the ones having the right to do so. On the other hand, the rule of consideration the actual promises that should be enforced. This means as the lack of consideration is a valid argument against the privity doctrine provided that they are two separate principles. The presence of the Acts such as those above provides a venue in where the privity doctrine could be contested.        B.   Contracts as Private Transactions Essentially, contracts are indeed a private and personal transaction between the parties involved. The presence of consent (offer and acceptance) is essential in determining the actual existence of a legal relationship bound by contract. Thus, in the context of the third party, it is perceptible that he/she should not have any rights on the contract. However, in analysing the creation of consent in contractual relationships, it is done not so much as to preclude others from acquiring benefit from the terms held in it. The existence of us is to establish protective legal armour for the autonomy of the contracting individuals. It seeks to protect the intention of the contracting parties in enforcing an agreement. Thus, in instances where, as stated above, third parties are given the ability to benefit in the contract, then it still does protect the autonomy of the parties involved, and consequently maintains the transaction still as a personal one. Nevertheless, as stated in the case of Trident General Insurance Co Ltd. v McNiece Bros Proprietary Ltd. [1988] 165 CLR 107 at 123, 117-118, there should be established that it is the intention of the parties involved to provide the third party power of enforcing the terms indicated in the contract. This claimed under the credence of s55(6) of the Property Law Act 1974 (Queensland) and s55(6) of the Law of Property Act 2000(Northern Territory). It means that there should be an expressed intention among the parties involved. In Western Australia on the other hand, an implied intent to enforce the third party is sufficient. (Western Farmers v Southern Meat [1981] WAR 241)   C.   Capability of Third Party to Sue There is the longwinded argument against the privity doctrine that it favours the third party because the third party could take legal actions against the promisor but the promisor is not authorised to take legal action against the third party. In looking at this scenario, the doctrine of privity appears to present a situation where a degree of protection is given to those not part of the contract from any unjust legal actions. In the case of third party, the problem lies in the capability of the promisor to take reciprocal actions, thus appears to have placed his/her interests in the line. Thus, as the intention of the creation of the contract, interests of the parties involved should constantly be protected. In this context, the inability of the promisor to sue the third party does not compromise his/her interests; in the first place he/she could still protect it by taking legal actions against the promisee.      III.           Conclusion The discussions above has provided arguments against the claim that the doctrine of privity being out of date. The issues presented above indicate that the doctrine continues to protect the parties involved. In the same way, the doctrine has evolved such that laws and legislations have been ratified to meet the flexibility required by the courts. The doctrine of privity does not go out of date. It continues to develop and improve. With the enactment of such laws as Property Law Act 1974 (Queensland) and Law of Property Act 2000 (Northern Territory), then issues relating to privity will continue to grow.    Credit:ivythesis.typepad.com

PRIVITY OF CONTRACT IS OUT OF DATE IN THE MODERN WORLD

I. Introduction The principles related to the privity of contract have been under considerable scrutiny in the past years....

Contract Law

Introduction             The meeting of minds on the conformity of the wills of the contracting parties as to the object and consideration creates the obligation which will be the binding force between the parties. As long as the contract gives rise to the obligation is valid and not contrary to law, public morals, public policy, public order or good customs; the contracting parties are legally bond to comply with their respective obligations in good faith.             Contracts are meant not only to the business but it is the most popular example where the power of a contract can be expressed. A contract can be presented in the form of written or oral agreement but the most highly valued is in the written form. But there are many things to be consider before making a contract and what are the rights of the contracting parties if and only if, the responsibilities are not performed well. Understanding Common Law The law of Australia can be just as confusing as any other legal system in the world. It is split into federal laws, Australian common law, and state laws. The Australian common law is actually based very closely on English common law as a result of most of the settlers originally coming from England. Common law, also known as case law, consists of law formed through court decisions. Things like services or land sales are covered by common law. It also includes any goods that is tangible that a person can buy and sell. A land or building is considered a good because it's not often that during a purchase, the land or building is actually physically moved someplace else. The Contract Law             A formation of a contract needs the essential elements and any absence of these elements will signify either that there is in law no agreement or that the agreement is not enforceable as a contract. 1.      Agreement – the agreement between the contracting parties is analyzed through the rules of offer and acceptance which makes it as the binding force. 2.      Consideration – it is which a promise will be enforceable at common law only if it is supported by consideration or made under seal. It comes with the mutuality that generally arrives through the form of money, property, or services. 3.      Intention – this manifests the legal relations or its relativity. Both parties should enter the intention requirements. 4.      Certainty – the contract requires to be done, or restricts from being done. The agreement must be sufficiently certain to complete the tasks, rights, or obligations. Termination of a Contract There are instances that a contract can be terminated and arise in different situations. 1.      Revocation - is when the person that's made an offer decides he wants to take it back. He can revoke the offer as long as there has not yet been an acceptance. 2.      Rejection - is when saying "No" to the offer. The offer then dies. 3.      Counteroffer - is when the offeree responds to the offer with an offer of her own. This has two effects: first, rejection of original offer (which terminates it) and second, the creation of a offer. In a way, the offeree and offeror have switched roles as a result of a counteroffer. 4.      Lapse of time - If the offer states that it terminates at a specific date, and should an acceptance not be made by that time, then that offer is terminated. 5.      Intervening illegality - This is when the subject matter of the offer becomes illegal after the offer is made but before it's accepted. This arises even in the loss of a subject matter. 6.      Subsequent death or insanity of either party - Both parties to the proposed contract must be mentally competent. The case law reflects the tension between, on the one hand, the desire to hold parties to their bargains in accordance with the principle pacta sunta servanda and, on the other hand, the courts' reluctance to make a bargain for the parties. Although there have been differences in Australian judicial opinion as to the role of the court in giving effect to a contract, in general the courts give primacy to the need to uphold agreements, particularly executed agreements and commercial arrangements. A Common Law Case Study In the situation presented as the case study for business contract law, the client named Paula can certainly achieve her rights. In a simple case like receiving a wrong order from the store, she can refuse to pay the certain amount of goods delivered and eventually cancel the contract and if there had been damage occurred; the complainant is entitled to receive the monetary equivalent. Since the problem is from a tangible good that bears a profit at the end of every year but still not sufficient to fulfill the promised amount written in the contract, the complainant can still keep the business under her protection and make an appeal in the court and demand for the right. One of the essential parts of the contract has been neglected or overlook, therefore, the other party should amend the issue and fulfill the promised subject into any other form. The complainant can also set aside the contract or unrecognizing the termination of it by taking considerations. The consideration aspect is in the form of accepting the business fruitful conditions. The collective party has the priority in terms of the court law. The contracting party has a right to enjoy the following: 1.      The right to use, profit from, and transfer land contracting and operation rights, and the right of autonomy over production operations and disposition of products; 2.      When land is expropriated in accordance with law, to receive the related compensation as provided by law; 3.      Other rights that are set forth in laws and administrative regulations. Conclusion             It is important to know the individual rights, and the scope and limitation of every contract before signing for an agreement. The rights are applicable if the other contracting party is incapable of giving the sufficient cost or object about the subject matter. On the other hand, the other party may demand for the right that originally belongs to her/him.             As long as there is the existence of a court, and can be considered as the last resort, the appealing party or the contracting party will receive proper attention. For they are the priority of the law, and since the ensuing party neglects the power of the contract and did not heed to the obligations written in  the contract, therefore, he/she can be considered as an irresponsible and face corrective actions under the supervision of the court.         Credit:ivythesis.typepad.com

Contract Law

Introduction The meeting of minds on the conformity of the wills of the contracting parties as to the object and considerat...