Module 3 Flashcards
Sequence of contract
- Negotiations precede the formation of a contract
- Formation of a contract
- Obligations under a contract
- Discharge by performance, failing this there is a breach of contract and then enforcement remedies
Limitations contractural capacity (minors)
Minors can make a contract
Problem- enforcing contract
NSW and SA legislation makes a contract enforceable for a minors benefit
Relevant case- McLaughlin v Darcy
McLaughlin v Darcy (1918) 18 SR (NSW) 585
Facts:
• Darcy was a 20 year old boxer (minor in 1916)
• Wanted to travel to US to further career
• Hired lawyer, McLaughlin, via contract to present a better case for granting passport
• McLaughlin was not able to obtain passport but put in work
• Darcy died before paying fees
Issue: was Darcy’s estate obliged to pay McLaughlin’s legal fee even though he was a minor at the time of contracting?
Decision: yes, the contract was one for necessaries and the work done by McLaughlin was essential to the welfare of Darcy
Limits to contractural capactiy
- minors- except for their benefit
- intoxicated persons
- people of unsound mount- void unless courts has have not declared the persons was unfit
Explain doctrine of privity
Only the parties to a contract can derive benefits under it
Only parties to the contract can attempt to enforce it by the courts
Where a contract is made for the benefit of a third party that person cannot enforce it
Noteable cases: Jackson v Horizon Holidays
Exception to doctrine of privity
Doctrine of privity abolished in application to contracts of insurance for the benefit of third parties
Jackson v Horizon Holidays [1975] 3 ALL ER 90
Facts:
- Jackson entered contract with travel agent for family holiday
- Holiday is dissapointment (hotel overbooked, transferred to inferior hotel with dirt , mould and expected facilities absent)
Issue:
- was Mr Jackson the only person to sue or collectively as a group, was he the sole party to the contract
Decision:
- only he could sue but as he entered for the benefit for third parties he can claim for their ‘discomfort’ endured.
The element of intention
There must be an intention to enter a contract for it to be legally binding
- parties must prove that intention exists, courts ask whether a reasonable person would consider it legally binding.
- two types of relationships to consider
- commercial
- domestic / social
Intention in commercial relationships
In commercial relationship the courts presume the parties intend to be legally bound
Relevant case: Ermogenous v Greek Orthodox Community of SA
Intention in domestic or social relationships
The courts presume that in domestic or social relationships the parties do not intend to be legally bound by their agreement
Relevant case: Woodward v Johnston
Ermogenous v Greek Orthodox Community of SA [2002] 209 CLR 95
Facts:
- once the archbishop left the church he wanted to claim the leave he had accumulated
Issue:
- Could it be inferred from the circumstances that the appointment of the archbishop was intended to be a legally binding contract of employment?
Decision:
- The agreement intended to a legally binding and Ermogenous was entitled to payment for accumulated leave.
Woodward v Johnston [1992] 2 Qd R 214
Facts:
- Mrs W worked for husband helping on weekends for 10%
Issue:
- Can Mrs W sue for damages because her husband didn’t pay her when the marriage broke down?
Decision: No. It was a domestic arrangement- she was never forced to do the work and wouldn’t have been sued if she failed to deliver
Can intention be established in domestic or social agreements?
Yes! It usually requires one of the following situations to occur
- alleged rights and obligations are clearly spelt out
- if agreement invites one party to incur considerable expense (Todd v Nicol)
- Where it was contemplated that a party would engage litigation if the other failed to meet obligations
Todd v Nicol [1957] SASR 72
Facts:
• Mrs Nicol resided in SA
• She invited sister in law and niece (the Todds) who lived in Scotland to live with her promising free accomodation and the property after her death
Issue:
• As it concerns this agreement could the requisite to be legally bound be established by the Todd’s?
Decision:
• Yes, the Todds only moved because of Nicol’s promise and incurred significant detriment by being removed from the household.
The element of agreement
• Contracts are consensual transactions
parties must be in complete agreement
• Requires a meeting of the minds (consensus) where both parties comprehend what the essential terms of the contract are
• The element of agreement has two components OFFER and ACCEPTANCE
Offers
A statement signifying a willingness to contract and must be
- Sufficiently complete
- Promissory
- More than an advertisement (expression of interest in doing business)
- Can lapse
- Can be revoked before acceptance
- Rejection and counter offer destroy it
Define :
(1) Sufficiently Complete
(2) Promisory
• Sufficiently complete- the fundamental aspects of the offer must be outlined e.g. what is being offered, for
what price, in exchange for what?
• Promissory- worded in such a way as to convey the offers willingness to honour the terms of the offer if it is
accepted I.e. an undertaking to give or do; or an undertaking of liability:
Harvey v Facey [1893] AC 552
Facts:
• Harvey sent Facey telegram stating “Will you sell us Bumper Hall Pen? Telegraph lowest cash price- answer paid”
• On same day Facey sent a reply stating “Lowest price for Bumper Hall Pen $900”
• Harvey sent Facey another telegram agreeing to purchase the property at asking price
• Facey refused to sell and Harvey sued
Issue:
• Was Facey’s statement an offer capable of being accepted by Harvey?
Decision
• No. It was merely a statement providing info on what terms he might be willing to sell. No language was promissory
Partridge v Crittenden [1968] 2 All ER 421
Facts-
• Mr Partridge tried to sell birds illegally in ad paper
• RSPCA said that they will be prosecuting him for the statutory offence for unlawfully selling wild bird
Issue-
• Mr Partridge said no he was presenting an ‘invitation to treat’ so he was not necessarily going to sell
Decision-
• Not guilty
Pharmaceutical Society of Great Britain v Boots Cash Chemists (Southern) Ltd [1953] 1 QB 401
Facts-
• Boots had special medication on shelf where consumers walking around that were regulated drugs under supervision of a pharmacist
Issue -
• Boots said that it is an ‘invitation to treat’ Where the drugs sold before the customer got to the counter?
Decision-
• No, the sale of the drugs took place at the cashier
Acceptance
A statement assenting to the terms of an offer, it requires:
- Identical to terms of the offer (cannot be conditional) ‘meeting of the minds’
- Can only come from person offer was addressed to
- Must be communicated to the offeror
- Cannot be undone once communicated
When is acceptance established?
In general it is considered accepted when the offeror recieves it
Exception- postal exception rule
Postal Acceptance Rule
• Whenever parties contemplate that the method of acceptance of an offer be made by post , the offer will be accepted at the time a properly addressed letter is put into the hands of the post office, and a binding contract is formed at the time when and the place where the letter of acceptance is posted
Adams v Lindsell (1818) 106 ER 250
Facts
• Lindsell wrote to Adams offering to sell him some wool and asked for ‘reply in post’
• Letter was delayed and the wool was on sold
Issue
• Was an agreement between Adams and Lindsell reached prior to Lindsell on-selling the wool to a third party?
Decision
• Yes. Because of the effect of the postal acceptance rule, an agreement was reached the moment that Adams posted the letter of acceptance to Lindsell, asking for a reply ‘in the course of post’ was in no position to deny the mode of acceptance used by Adams was effective
Consideration
Consideration is an exchange of promises , it is the price paid for the other persons promise
Can consist of anything valuable, it need not be adequate
Case of relevancy: Thomas v Thomas
Thomas v Thomas [1892] QB 851
- Mr Thomas said that his wife should be allowed to live in his home until her death
- Mrs Thomas accepted and provided consideration of one pound/year
- Family didn’t agree
Decision
• Yes, Mrs Thomas provided sufficient consideration
