THE LAW OF COMMERCIAL CONTRACT Law of Contract Revision

THE LAW OF COMMERCIAL CONTRACT  6 elements of a valid contract  Objective\Subjective Tests  Domestic agreements  Invitation to Treat  Withdrawing an offer  Rejection of offer  Lapse of offer

THE LAW OF COMMERCIAL CONTRACT Law of Contract Acceptance

THE LAW OF COMMERCIAL CONTRACT Accepting the Offer  Only person to whom the offer was made may accept  Acceptance must be final & unqualified  Must be communicated to the person who made the offer (some exceptions)

THE LAW OF COMMERCIAL CONTRACT Accepting the Offer (Cont.)  Acceptance must be final & unqualified  “Subject to Formal Contract” – 3 possibilities 1.There is a contract & one of terms is that documentation be prepared 2.There is a contract but nothing can happen until contract prepared

THE LAW OF COMMERCIAL CONTRACT Accepting the Offer (Cont.)  Acceptance must be final & unqualified (cont.)  “Subject to Formal Contract” (cont.) 3.There is no contract  Masters v Cameron (S&OR p82)  Plastyne Products v Gall Engineering (S&OR p83)  Communications after acceptance are irrelevant

THE LAW OF COMMERCIAL CONTRACT Acceptance Must be Communicated  Silence does not amount to acceptance  Acceptance by large companies  Who must receive acceptance?  Depends on intention of parties  Acceptance usually occurs when the communication is received in the ordinary course of business or would have been received if ordinary course of business were followed

THE LAW OF COMMERCIAL CONTRACT Acceptance Must be Communicated  Internet  Electronic Transactions Act  Receipt occurs when it enters the addressee’s designated information system  Otherwise, when it comes to attention of addressee

THE LAW OF COMMERCIAL CONTRACT Acceptance Must be Communicated  Express Communication of Acceptance is not necessary where  Implied from past dealings between parties  Industry custom  Acceptance indicated by conduct  Unilateral contracts  Postal rule applies

THE LAW OF COMMERCIAL CONTRACT Acceptance Must be Communicated  The Postal Rule  Applies where offeror has expressly or impliedly accepted post as the means of communication of acceptance  Acceptance occurs at time of posting not receipt  Applies to all situations where non- instantaneous communications are used  Often determines jurisdiction  Berinkibon v Stahag Stahl (S&OR p 86)

THE LAW OF COMMERCIAL CONTRACT Acceptance Must be Communicated  Mode & timing of acceptance must conform to offeror’s requirements  BUT, nominating a mode of acceptance may not set the only mode of service  Spectra v Pindari  Agent of the person to whom the offer was made may accept on their behalf  Powell v Lee (S&OR p87)

THE LAW OF COMMERCIAL CONTRACT Has an offer been made? No Contract Did the offeror intend to revoke the offer? Did the offeror communicate revocation? Has the offer lapsed? Has acceptance been received by the offeror? Was acceptance made under the postal rule? Contract No Yes No Yes

THE LAW OF COMMERCIAL CONTRACT Fundamentals of Law Consideration

THE LAW OF COMMERCIAL CONTRACT Two Types of Enforceable Agreement  Deeds  Contracts that comply with special rules  Do not require consideration  Simple contracts  Do require consideration

THE LAW OF COMMERCIAL CONTRACT Deed  In writing  Maker of deed must sign, seal and deliver the document  Independent witness  Special attestation clause SIGNED SEALED AND DELIVERED) by the said JOE BLOGGS) in the presence of:)

THE LAW OF COMMERCIAL CONTRACT Consideration  Every simple contract must be supported by consideration  The law will not enforce a gratuitous or bare promise  Lack of consideration may be overcome by the equitable doctrine of estoppel

THE LAW OF COMMERCIAL CONTRACT What is Consideration  Consideration must flow from both sides of the contract  Can be:  A promise to do something  A promise not to do something  Doing something  Refraining from doing something  A benefit for the promisee  A benefit for a third person at the promisee’s direction  A detriment to the promisor  Anything of real value to the promisee

THE LAW OF COMMERCIAL CONTRACT Consideration Must Move From Promisor  Only the person who has “paid” for the promise can enforce it  Dunlop v Selfridge (S&OR p101)  Called “Privity of Contract” DunlopWholesaler (bought tyres from Dunlop, sold to retailers) Selfridges (broke promise to wholesaler not to discount) Contract

THE LAW OF COMMERCIAL CONTRACT Joint Promisee Rule  If a promise is made to two or more people jointly then only one promise need give consideration  All promisors must be parties to the contract  Coulls v Bagot Executor and Trustee Co (S&OR p 102)

THE LAW OF COMMERCIAL CONTRACT Privity of Contract - Exceptions  Statutory exceptions  Insurance Contracts entered into with the intention of benefiting another  Where one party acts as agent for another person  Contractual benefits held on trust for another  Contractual benefits may be assigned

THE LAW OF COMMERCIAL CONTRACT Consideration May Not Be Past  A promise can be executed (i.e. present execution) or executory (i.e. future execution) but cannot be past  A promise must be paid for but if consideration has already been given then there is nothing being paid for the new promise  Roscorla v Thomas (S&OR p103)  Settling unsettled aspects of a past transaction may be consideration  Re Casey’s Patents: Stewart v Casey (S&OR p104)

THE LAW OF COMMERCIAL CONTRACT Consideration May Be Inadequate  Consideration must be sufficient i.e. have some value in the eyes of the law  Need not be equal in value to the promisor’s promise  The very nature of contract law is to let the parties make their own bargain  However, doctrine of unconscionable conduct has developed to overcome resulting injustices

THE LAW OF COMMERCIAL CONTRACT Consideration Must Be Sufficient (Cont)  Settling disputes  Forbearance to sue (i.e. an offer not to sue) is good consideration provided  The claim (defence) was reasonable  The promisee had an honest belief that the claim had a reasonable chance of success  The promisee has not concealed any facts that might affect the validity of the claim  Wigan v Edwards (S&OR p106)

THE LAW OF COMMERCIAL CONTRACT Consideration Must Be Sufficient (Cont)  Renegotiating a debt  Pinnel’s Case (S&OR p109) ( approved by House of Lords in Foakes v Beer)  Exceptions  Composition with creditors  Payment by third party  Ways around  Deed  Payment in kind

THE LAW OF COMMERCIAL CONTRACT Consideration Must Be Sufficient (Cont)  Promising to perform an existing contract is not consideration  To be binding, there must be a promise to do something additional to contracted duty  Stilk v Myrick (S&OR P 107)  Rule may be undergoing change  Williams v Roffey Bros. & Nicholls (S&OR p108)  A practical benefit is conferred  No duress  Followed in NSW

THE LAW OF COMMERCIAL CONTRACT Consideration Must Be Sufficient (Cont)  Promise to perform an existing contractual duty to a third party is sufficient consideration  Performance of a public duty is not sufficient consideration  Collins v Godefroy (S&OR p110)

THE LAW OF COMMERCIAL CONTRACT Consideration Must Be Sufficient (Cont)  Illusory promises are not consideration  E.g. “in consideration of natural love and affection”  Too uncertain to be enforced  Dunton v Dunton (S&OR p 106)

THE LAW OF COMMERCIAL CONTRACT Consideration Must Be Sufficient  $1 for a Rolls Royce  “I promise to be an honest public servant”  “I’ll give up my legal claim against you”  “I will pay you less than I owe you if you forget the rest”  “In love and affection”  “I promise to carry out my contractual obligations”

THE LAW OF COMMERCIAL CONTRACT Fundamentals of Law Capacity to Contract

THE LAW OF COMMERCIAL CONTRACT Contracts with Minors  Anyone under 18 years of age  Contracts with minors can be  Valid – legally enforceable  Voidable – legally enforceable until repudiated by the minor  Void – no legal effect

THE LAW OF COMMERCIAL CONTRACT Contracts with Minors (Cont)  Valid contracts  Supply of necessaries  Contract for the supply of goods and services that are suitable to the condition in life of the minor and to his actual requirements at the time of sale and delivery  Onus is one person seeking to enforce contract against minor  Nash v Inman (S&OR p116)  Reasonable price not contract price  Beneficial contracts of service

THE LAW OF COMMERCIAL CONTRACT Contracts with Minors (Cont)  Benefical contracts of service  E.g. apprenticeships  Must be for the benefit of the minor  Ratification by Minor after turning 18  Contract becomes valid and enforceable  Statutory modification  NSW & SA

THE LAW OF COMMERCIAL CONTRACT Fundamentals of Law Certainty

THE LAW OF COMMERCIAL CONTRACT Agreement Must be Certain  Must be sufficiently certain in all its essential elements especially:  Subject matter  Price  Must not contain unclear, ambiguous or contradictory terms  Courts will uphold contract where possible  Implying a reasonable price  Whitlock v Brew (S&OR p 89)

THE LAW OF COMMERCIAL CONTRACT Agreement Must be Certain (cont.)  Agreement to agree  Agreement to negotiate  Subject to contract  Subject to finance etc

THE LAW OF COMMERCIAL CONTRACT Reminder  Exam next week  Australian Legal System  Week 1 material  Revision material from Week 2  Multiple choice  30 minutes  Closed book  Can use approved dictionary  No electronic devices