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Contract Law: Legal Case Studies

Case Study 1

According to Australian law, a contract is a covenant or understanding that could be enforced by a legal process. “In Australia, contract law is primarily regulated by the ‘common law’, but increasingly statutes are supplementing the common law of contract – particularly about consumer protection.” (Contract law 2009).

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In this case study, it is seen that the parties were in agreement regarding the intention to offer, the acceptance of the offer, and the final acceptance by the seller. But, there was no consensus regarding the price which had been bargained by the buyer.

In the case of Pharmaceutical Society of Great Britain v. Boots (1953) 1 QB 401, the Court had held, “An ordinary shop, although goods are displayed and it is intended that customers shall go and choose what they want, the contract is not completed until, the customer having indicated the articles which he needs, the shopkeeper, or somebody, on his behalf, accepts that offer- then the contract is completed.” (Pharmaceutical Society of Great Britain v Boots 2008).

In this particular case, there was an agreement to sell, the offer was accepted by the buyer and validated by the seller. But what was lacking in material terms was the presence of consideration that could have consummated it into a valid contract, such as payment of advance or any other fact that could have effectuated the contract on the day and date of the vocal agreement between John and Bert had occurred.

Thus, it is quite evident in the tractor sale case, with John as the seller and Bert as the buyer, the contract seems more in line with an agreement to sell, rather than an actual sale. Although both sides had made promises, John on his part to keep the tractor for Bert, and the latter to pay Aus $ 90,000 in the future purchase, the contract had not been consummated. This would have been accomplished if there were any consideration flowing from the buyer to the seller.

For example, if Bert had paid a token advance of Aus $ 1000, or whatever, at the time of booking the sale, the contract would have been created. In the absence of any creation of consideration at the time of contract agreement, under Australian law, the aspects that would apply would be that of an agreement to sell, and not a full-fledged enforceable contract.

Again, the fact that there had been a change in the original offer by Bert and they had bargained it for Aus $ 90,000 shows that there was the absence of “valid contract,” in that the terms of the original contract ceased to exist and a new contract needs to be enforced if the parties wish to continue. (Hyde v. Wrench (1840), 3 Beav 334) (Mulcahy & Tillotson 2004, p.74).

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But, if one were to consider the case of Wiger v. Edwards (1973), it is seen that the promisor reneged on his promise to repair the house and the applicant moved to court to recover the repair costs. Although general laws are seeking no enforcement of pre-contracted claims, etc, in this case, the fact that came up was “that a promise to do what the promisor is already bound to do is sufficient consideration when it is a bona fide compromise of a disputed claim that the promisor has a cause of action under the contract.” (Moles, n.d.).

In this case, however, the applicants could not enforce their claim since it was undetermined during the consummation of the contract.

Thus, by applying the rules, it could be opined that in this case there was no contract existing between the buyer, Bert, and the seller John since the original offer was not accepted. A fresh bargain was struck, but without an important element, consideration.

Hence, Bert may not be in a position to enforce his claim over the new buyer, since there was no contract existing between him and the seller, and in the absence of which, the latter was free to contract the sale of goods to any other party of his choice.

This principle was reinforced in the English case of Northern Airliners v. Dennis Ferrari Meters Ltd. (1970) when “the ‘buyers’ reply introduced two new terms, one as to the payment and the other as to delivery and the sellers were not bound to reply to this counteroffer.” (Mulcahy 2008, p.61).

Under Australian contract law, the aspect of harmony, or the fact that both the parties, buyer and seller, have not only meant the same thing, but also said it, takes precedence, and this cannot be enforced in this case by any stretch of the imagination.

Case Study 2

In this case, it is seen that although Rick and Dora had promised orally and through a letter to accommodate Jan and John, and have even contracted to change their will to offer interest to the former couple, later on, they reneged on their agreement and evicted them from their house.

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Under Australian contract laws, even if a contract has not been formed, the conduct of the party, through estoppels, could ensure that an agreement has been created and need to be honored. (Agreement 2008).

By applying the Australian laws on estoppels, it is possible for Jan and John to enforce their claim under the agreement. The law of estoppels is very simple in that if a person takes a stand on certain issues, later on, he would need to stand along with such stances, and the Courts would not allow him to change his views, or attitudes on such matters.

However, the main aspects that courts would need to take would be that relating to “gratuitous promises.” (Chapter 3: the making of contracts (2)-consideration n.d., p.23).

It could also be seen in terms of having only unilateral consideration flowing from one party and no reciprocal consideration from the other. This case is also one of the gratuitous promises, in that while the consideration for Jan and John to immigrate to Australia was to seek out a job for Jan and live in the residence of their friends, Rick and Dora. Apart from the friendship, there was no consideration flowing from Jan and John to Rick and Dora. Whether the promise of the latter to entrust a portion of their estate could be enforceable in a competent court of justice is also a matter of conjecture. Thus, the matter of fact, in this case, assumes more significance than that of law.

There is no contract as such except verbal promises and written invitations, but the invitees have responded by conduct and have thus submitted to contract. In the case of Jorden v. Money (1854), The House of Lords had held that “only a representation of fact, not a promise, can give rise to an estoppel, and the principle of ‘promissory’ estoppel has nothing in common with estoppel in its original sense.” (Chapter 3: the making of contracts (2)-consideration n.d., p.29).

In this case, the main aspects that need to be viewed are that:

  1. The gesture of Rick and Dora could be seen as a reciprocal move to compensate for the hospitality and friendship extended by Jan and John during their visit to the UK.
  2. The invitation to settle in Australia was conveyed to Jan and John and they agreed to it, thinking that Jan could get a job in Australia and the couple could settle down there.
  3. Jan’s inability to get a job in Australia and other issues caused the friendship to flounder and finally, they were evicted from their friends’ place.

While under law, Jan and John do not have claims, under-representation of fact it is possible for them to seek remedial measures for breach of estoppel trust. These aspects have been enlightened in the Jorden v Money case in which there was a pre-existing contract. In this case, it is doubtful whether the case of pre-existing contract could be enforced. Moreover, in the case of estoppels, the intentions of the parties and their conduct are major factors that would be considered by the court, especially regarding the matter of fact.

It is seen that in this case study, both parties were in consensus over the need for Jan and John to immigrate to Australia. The issues arose after they arrived in Australia. When the point of law is seen, then the emigrants have no locus standi, since they were only guests with no real interests, except perhaps what was promised to them. In the absence of consideration on their part flowing to Rick and Dora, it would be doubtful whether this could be enforceable, and if so, the extent to which it could be enforced.

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The most likely solution to this impasse could be an out-of-court settlement, or even the use of mediators, who could take an unbiased stand and solve the matter permanently. While one party (the defendant) would argue from the point of law – the house is registered in their names and the will has not been changed in favor of Jan and John. The latter would take the stand of point of fact, the visit of the couple in England, they’re becoming good friends, their invitation to stay in Australia and, through good faith, their acquiescence for immigrating to this country. Thus, it would be a matter of legal acumen and also logical and rational thinking that could decide this case.

What could be particularly critical is the fact whether estoppel laws could be used in this case, and if so, would it be enough for the immigrant couple to gain the dues promised to them, in terms of share in the will and right to stay in their residence.

Reference List

Agreement 2008, Australian Contract Law. Web.

Chapter 3: the making of contracts (2)-consideration: general remarks n.d. Web.

Chapter 3: the making of contracts (2)-consideration: promissory estoppel: Jorden v Money (1854) n.d. Web.

Contract law 2009, Australian Contract Law. Web.

Moles, RN. n.d., Networked knowledge-contract law casenotes: Held Mason J, Networked Knowledge. Web.

Mulcahy, L, & Tillotson, J 2004, Contract law in perspective, 4th edn, Routledge Cavendish.

Mulcahy, L 2008, Contract law in perspective, 5th edn, Taylor & Francis.

Pharmaceutical Society of Great Britain v Boots: [1953] 1 QB 401: Held (Somervell LJ) 2008, Australian Contract Law. Web.

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