Provisions Of Australian Contract Law Essay

Question:

Discuss about the Provisions of Australian Contract Law.

Answer:

Introduction

This question consists of three different cases where we need to comment that whether consideration is present and whether it has an enforceable agreement. All three cases are almost similar with slight difference in the price which is offered for the Lotus Super 7 Sports Car. Before commenting on all three cases we should understand the meaning of Consideration and Enforceable Agreement/Contract. (Lawyerie, 2016)

Consideration: it is a value which a promisor receives from a promisee in return for his promise. It is concerned with the bargain of the contract. It must have a value in the eyes of law and excludes promises of love and affection, betting gaming etc. A promise which is only from one side is not a consideration, instead it is a gift. There are various rules which are governing the law of consideration. The rules are given below: (Ilovelibrariesorg, 2016)

  • Consideration should not be past.
  • It should move from the promise.
  • It must be sufficient and should not be adequate.
  • Any part payment made should not be considered as a valid consideration for a promise to forgone the balance.
  • Any existing public duty and contractual duty should not be regarded as valid consideration.(E-lawresourcescouk, 2016)

Enforceable Agreement/Contract:

There are certain provisions which needs to be fulfilled to called a contract or an agreement is enforceable. The basic requirements which need to be there for a contract to be enforceable are: (Lawscom, 2016)

1. Consideration must be present.

2. There must be an offer by a party

3. Acceptance must be given by the other party.

4. Relevant parties must have the legal capacity to the contract.

5. The matter on which the discussion is there must be legal in law.

6. There must be a mutual obligation between both the parties

If all the above mentioned conditions are present then a contract or an agreement is considered as enforceable. (Lawcom, 2016)

There are two parties involved in this case named as Jane and Jack. Jane is giving an offer to Jack to give her Lotus Super 7 sports car. Nothing is mentioned regarding the price at which the car is offered. The price of the same vehicle in a very good condition in the market was $25,000. In this case only Jane has given promise to give her sports car to Jack but there is no promise from the side of Jack. For a consideration to be present promise should be there from both sides, but here promise is given only from one side. Jack has not given any promise to Jane, so there is no consideration. In such cases it is called as gift. Jane has gifted her Sports car to jack without any consideration. Jack has even accepted the offer which is given by Jane. Now since consideration is not present then this contract would be enforceable by law. Any contract can be enforceable only when a consideration is present in it, but in this case consideration is not there. Hence this case neither has any consideration nor is the contract enforceable by law.

The second case is also very similar to the first one but the only difference is the price which is given for the sports car. Jane has promised to give her sports car to Jack at a price of $25,000. The market price of the same vehicle in a very good condition would also cost $25,000. This means the price which is offered by Jane is same as the price which is offered in the market. In this case both Jane and Jack promised each other. Jane has promised to give her car to Jack while Jack has promised to give $25,000 to Jane. $25,000 paid by Jack to Jane is the consideration paid. The said contract between Jane and Jack is enforceable since all the elements of a contract are present in it. The elements fulfilled in this case are: (Rocketlawyercom, 2016)

  • Jane has offered her Sports car to Jack. Hence the offer condition is fulfilled.
  • Jack has accepted the offer which was offered by Jane. Hence the acceptance condition is also fulfilled.
  • Jack has paid $25,000 to Jane for the car which is same as the price which is offered in the market. Consideration condition is also fulfilled.
  • Both the person involved has the obligation. Jane has an obligation to give her Sports car to Jack and Jack has an obligation to give money to Jane. Hence Mutuality of obligation condition is also fulfilled.
  • Both Jack and Jane have the legal capacity to the contract.(Thefreedictionarycom, 2016)

Hence in this case consideration is present and even the contract is enforceable by law.

The third case is also very similar to the first two cases except the price which was given by Jack. Even here Jane has offered her Sports Car to Jack but at a price which is very low than the price offered in the market. Price offered in the market was $25,000 while the price offered by Jane to Jack was only $2,500. The price offered was only 10% of the price offered in the market. Consideration is present in this case but it is not legally enforceable because the price offered is very low. For a consideration to be present certain rules needs to be fulfilled. The rules are explained below: (Wwwuiono,, 2016)

  • Consideration paid here does not belong to past.
  • It was a promise given by Jack to Jane in return for the Sports Car.
  • The consideration paid was not sufficient because it was only 10% of the price which was offered in the market.
  • The amount paid is not a part payment. $2,500 is the full payment which was paid by Jack to Jane.
  • There are not contractual and public duty included in the consideration.

All the conditions regarding consideration have been fulfilled except the third condition. Consideration paid by Jack was not sufficient enough.

Now since consideration is not present then the contract would also be not enforceable by law. Hence in this case neither the consideration is present nor is the contract enforceable by law. (Findlawcom, 2016)

Issue: This case also highlights the provisions of contract law. With the help of this case we would understand about the breaches in a contract. Two parties are involved in this contract. A shipbuilder has taken a contract to build a tanker for North Ocean Tankers. The terms and conditions of the contract were:

1. Amount paid to the shipbuilder would be in U.S. Dollars.

2. If there is any change in the currency then price paid would not get affected. It does not contain provisions for currency fluctuations.

When fifty percentage of the contract was completed U.S. had devalued Dollar by 10%. Now since the contract didn’t contain provisions regarding currency fluctuations, shipbuilder suffered losses. Due to the loss suffered shipbuilder demanded an extra amount of $3 million and if the amount is not paid then the construction would be stopped. Buyer didn’t want the construction to be stopped since they had a charter for the tanker and it was essential that it should be delivered on time. Buyer agreed to pay the demanded extra amount under protest. Buyer decided not to take any action until the entire construction is completed. As soon as the construction was completed buyer wanted to recover the extra money which was paid. We need to see that whether buyer would be successful in claiming back the extra amount which was paid by them or not. (Wordpresscom, 2016)

Rule: when an agreement between two parties is legally enforceable then it is called a contract. But there are certain elements which need to be present in a contract to make it legally enforceable. The elements are discussed below: (Contractstandardscom, 2016)

  • Acceptance and offer
  • Agreement should be legal as per the respective State Laws.
  • Both the parties must have the intention to create binding relations.
  • Consideration must be paid for the promise, which is made by the party.
  • Both the parties must have the genuine consent.
  • Legal capacity of the parties to act.

If all the above-mentioned elements are present in a contract then it is considered as a contract. (Lsuconca, 2016)

Breach of a contract is a legal cause of action in which one of the parties did not performed its promise as per the terms and conditions of the contract. If a party was unable to perform his duty as mentioned then it is considered as a breach. There are various kinds of breaches in a contract which are discussed below: (Ideaint, 2016)

  • Minor Breach: in such kind of a breach non-breaching party could not sue the breaching party for specific performance but can sue for actual damages.
  • Material Breach: in such kind of a breach party to the contract can either compel performance or collect damages because of the breach.
  • Fundamental Breach: In such kind of breaches aggrieved party can terminate the performance of a contract and the party can sue for damages as well.
  • Anticipatory Breach: under this breach party will not perform his duty when the performance is due. It is a situation where future non-performance is inevitable.(Adamsdraftingcom, 2016)

Application: first we need to check that whether the contract entered between the shipbuilder and North Ocean Tankers is legally enforceable by law or not. The elements of a contract are discussed below in detail:

  • North Ocean Tankers is a company which has given an offer to the shipbuilder to construct a tanker for them. Offer is present in this contract.
  • Shipbuilder has accepted the contract which was offered by the buyer. Acceptance is also present in the contract.
  • For the work done by the shipbuilder, amount is paid by the buyer in U.S. Dollars. Hence consideration is also present in this case.
  • Both the parties have obligation to perform. Shipbuilder has the obligation to build the tanker and North Ocean Tankers has the obligation to pay them.
  • The terms and conditions of the contract are legally enforceable. As per the terms payment will be made to the shipbuilder only in U.S. Dollars and it will not contain any provisions regarding currency fluctuations.(Dlapipercom, 2016)

Since all the elements of a contract are present in this case, the said contract is legally enforceable by law.

But since shipbuilder was suffering losses, it had asked for extra $3 million to be paid. This was not as per the terms and conditions of the contract. It was clearly mentioned that provisions of currency fluctuations should not be there. Inspite of knowing this shipbuilder had asked for extra amount. This is a breach of a contract committed by the shipbuilder. If he was not happy with the terms of the contract then he should have requested for a change in the terms. But unfortunately there was no such request by the shipbuilder and hence it was assumed that he has agreed with the terms and conditions of the contract. This breach is considered as a minor breach which was committed by the shipbuilder. Though buyer had paid an extra amount to the shipbuilder, it has an option to recover the amount from him. Nine months after when the contract was completed buyer wanted to recover the excess payment which was paid under protest. As per Australian law buyer has the complete right to recover the amount which was earlier paid by the buyer under protest.

Conclusion:

The shipbuilder should have raised an objection when terms and conditions of a contract were made but no objections were raised. So now he cannot change the terms of the contract. Payment terms were fixed so buyer has the right to recover the excess amount, which was paid to the builder. Hence Buyer would be successful in recovering the excess amount paid to the builder.

References

Adamsdraftingcom. 2007. Adams on Contract Drafting. [Online]. [19 August 2016]. Available from:

Contractstandardscom. 2016. Contractstandardscom. [Online]. [19 August 2016]. Available from:

Dlapipercom. 2016. DLA Piper. [Online]. [19 August 2016]. Available from:

E-lawresourcescouk. 2016. E-lawresourcescouk. [Online]. [19 August 2016]. Available from:

Findlawcom. 2016. Findlaw. [Online]. [19 August 2016]. Available from:

Ideaint. 2016. Ideaint. [Online]. [19 August 2016]. Available from:

Ilovelibrariesorg. 2016. Ilovelibrariesorg. [Online]. [19 August 2016]. Available from:

Lawcom. 2016. Lawcom Legal Dictionary. [Online]. [19 August 2016]. Available from:

Lawscom. 2016. Lawscom. [Online]. [19 August 2016]. Available from:

Lawyerie. 2016. Lawyerie. [Online]. [19 August 2016]. Available from:

Lsuconca. 2016. Lsuconca. [Online]. [19 August 2016]. Available from:

Rocketlawyercom. 2016. Rocketlawyercom. [Online]. [19 August 2016]. Available from:

Thefreedictionarycom. 2016. TheFreeDictionarycom. [Online]. [19 August 2016]. Available from:

Wordpresscom. 2006. LAW INFORMATION . [Online]. [19 August 2016]. Available from:

Wwwuiono. 2016. Wwwuiono. [Online]. [19 August 2016]. Available from:

How to cite this essay: