Law of Contract

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Law of Contract

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Title: Law of Contract

1

Law of Contract
Revision

6 elements of a valid contract
Objective\Subjective Tests
Domestic agreements
Invitation to Treat
Withdrawing an offer
Rejection of offer
Lapse of offer

Law of Contract
Acceptance

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)

Accepting the Offer (Cont.)
Acceptance must be final unqualified
Subject to Formal Contract 3 possibilities
There is a contract one of terms is that
documentation be prepared
There is a contract but nothing can happen until
contract prepared

Accepting the Offer (Cont.)
Acceptance must be final unqualified (cont.)
Subject to Formal Contract (cont.)
There is no contract
Masters v Cameron (SOR p82)
Plastyne Products v Gall Engineering (SOR p83)
Communications after acceptance are irrelevant

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

Acceptance Must be Communicated
Internet
Electronic Transactions Act
Receipt occurs when it enters the addressees
designated information system
Otherwise, when it comes to attention of addressee

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

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 (SOR p 86)

Acceptance Must be Communicated
Mode timing of acceptance must conform to
offerors 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 (SOR p87)

12
Has an offer been made?
No
No Contract
Yes
Did the offeror intend to revoke the offer?
Did the offeror communicate revocation?
Yes
Yes
No
Has the offer lapsed?
No
Yes
No
Has acceptance been received by the offeror?
Yes
No
Was acceptance made under the postal rule?
Contract
No
Yes
13

Fundamentals of Law
Consideration

Two Types of Enforceable Agreement
Deeds
Contracts that comply with special rules
Do not require consideration
Simple contracts
Do require consideration

Deed
In writing
Maker of deed must sign, seal and deliver the
document
Independent witness
Special attestation clauseSIGNED SEALED AND
DELIVERED )by the said JOE BLOGGS )in the
presence of )

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

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 promisees
direction
A detriment to the promisor
Anything of real value to the promisee

Consideration Must Move From Promisor
Only the person who has paid for the promise
can enforce it
Dunlop v Selfridge (SOR p101)
Called Privity of Contract

Dunlop
Wholesaler (bought tyres from Dunlop, sold to
retailers)
Contract
Contract
Selfridges (broke promise to wholesaler not to
discount)
19

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 (SOR p
102)

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

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 (SOR p103)
Settling unsettled aspects of a past transaction
may be consideration
Re Caseys Patents Stewart v Casey (SOR p104)

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 promisors
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

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 (SOR p106)

Consideration Must Be Sufficient (Cont)
Renegotiating a debt
Pinnels Case (SOR p109)( approved by House of
Lords in Foakes v Beer)
Exceptions
Composition with creditors
Payment by third party
Ways around
Deed
Payment in kind

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 (SOR P 107)
Rule may be undergoing change
Williams v Roffey Bros. Nicholls (SOR p108)
A practical benefit is conferred
No duress
Followed in NSW

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 (SOR p110)

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 (SOR p 106)

Consideration Must Be Sufficient
1 for a Rolls Royce
I promise to be an honest public servant
Ill 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

Fundamentals of Law
Capacity to 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

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 (SOR p116)
Reasonable price not contract price
Beneficial contracts of service