Contract Act In Australia : Business Law

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Contract Act In Australia : Business Law

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Contract Act In Australia : Business Law

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Question:
Discuss about the Contract Act in Australia for Business Law.

Answer:

1 (a)Issue
To find the existence of consideration in the given situation, and comment whether there is an enforceable agreement between Jane and Jack.
Law
According to the requirement of the contract law, there are two requisite aspects for the conclusion of any valid agreement i.e. a lawful offer from the offeror and lawful acceptance from the offeree. However, lawful consideration is another vital factor for the parties to enter into an enforceable agreement (Carter, 2012). Consideration is the amount or any value in return to the respective offer. If the offer from the respective offeror is having lack of valid consideration as per the contract law, then such promise/offer is termed as gratuitous promise. No enforceable agreement can be enacted on the basis of the gratuitous promise (Gibson & Fraser, 2014).
Application
In this situation, Jane the concerned offeror has offered her vehicle to Jack, because she has made a plan to go overseas and hence, she offers her car without asking for any return amount from Jack, while she knows that the real price of the car is $25,000. Jack the offeree has confirmed to take car from Jane without any conditions.
According to the above facts and respective law, Jane has not asked for any return amount of the car from Jack. Hence, in this scenario, valid offer and acceptance is present. However, the given promise is gratuitous promise (lack of consideration), as Jane has not stated consideration amount from Jack, and it is essential that there must be some consideration amount for the enactment of enforceable agreement. Thus, there is no enforceable agreement for offeree Jack.
Conclusion
Hence, there is no enforceable agreement between the respective parties as consideration is absent.
(b) Issue
To find the existence of consideration in the given situation, and comment whether there is an enforceable agreement between Jane and Jack.
Law
The following key features are essential for the enactment of an enforceable agreement as per the provisions of contract law (Richard, 2003)

Valid offer from the offeror
Valid acceptance from the offeree
Presence of valid consideration amount
No counteroffer from the respective offeree

It is essential that the offeror must mention the consideration amount for the exchange of the offer. It can be anything like a numeric value, any assessable object, any property etc. Even, few pieces of peppercorn is a valid consideration in return to a large house. It depends on the willingness of the parties who are entering into agreement (Taylor & Taylor, 2015).
Application
Jane has clearly asked for the return amount of $25,000 of the car from Jack. This selling amount is exactly same as the real rate of the car i.e. $25,000. Jane asks a valid consideration amount of $25,000 and Jack is willingly to pay this consideration amount to Jane. Hence all the requisite features for an enforceable agreement have been satisfied by the parties.
Conclusion
Presence of valid offer, acceptance and consideration lead to enactment of an enforceable agreement between Jane and Jack.
(C) Issue
To find the existence of consideration in the given situation, and comment whether there is an enforceable agreement between Jane and Jack.
Law
An element for the enactment of any enforceable agreement is termed as adequacy of the consideration value. As per the relevant provisions of the contract law, valid consideration is sufficient for the parties to enter into an enforceable agreement, any small thing can also be considered for the consideration, equality of the consideration amount is not essential (Harvey, 2009). This can be explained in the arguments of the case Chappell v Nestle (1960) case, in which an empty small wrapper of chocolate was hailed as valid consideration. If any of the unsuspicious conduct has been encountered between the parties, then the adequacy of the consideration amount is needed and will be considered for the further decision (Paterson, Robertson & Duke, 2015).

Application
In this situation, the offeror Jane has asked for a return amount of $ 2,500 in order to sell her car to Jack. This value of $2,500 specifically indicates the valid consideration, which is accepted by Jack. However, the next step to determine the presence of any unsuspicious conduct between them, because this offered amount is lower than the real rate of the car i.e. $25,000. As per the given information, Jane and Jack both are willingly accepted this consideration amount and no unsuspicious conduct is present between them. This indicates that both parties have an enforceable agreement in place.
Conclusion
All the respective elements required for the enactment of an enforceable agreement are fulfilled. Hence, an enforceable agreement is binding on given parties.
2. Issue
The core issue is to discuss the relevant legal aspects of contract based on which and opinion needs to be tendered with regards to the claim made by North Ocean Tankers for recovery of $ 3 million.
Law
While consent is a key constituent of any enforceable contract, but at times this may be obtained through the usage of threat. Such situation is classified as duress and contracts involving duress are voidable as the agreement is not voluntary (Davenport & Parker, 2014). The application of force may be physical or economic and both are accepted in the court as valid defences for recovering damages as has been made clear in the verdict of the Electrcity Generation Corporation t/as Verve Energy v. Woordside Energy Ltd. [2013] WA SCA 36 case. One of the key steps in order to establish duress is to prove that decision taken under duress would not have been taken in its absence (Pendleton & Vickery, 2005).
In case economic duress needs to be proven by the plaintiff, there are some indicators based on previous cases that need to be satisfied. Evidence needs to be present for indicating that superior economic position has been acted upon in bad faith to gain acceptance of plaintiff on a demand which is unreasonable (Carter, 2012). Under the influence of duress, the plaintiff should be left with no choice worth taking except giving in to the demand of the defendant. The agreement by the plaintiff is binding and hence results in contractual relation. The satisfaction of the above conditions leads to economic duress being proven which presents an opportunity to the plaintiff to recover losses caused due to unreasonable terms (Gibson & Fraser, 2014).
A very significant aspect is the timing of claim filing in such cases. The courts should be approached for relief at the earliest and if possible when the delivery of the product is completed. However, if immediate filing is not an option, the case must be brought before the court in reasonable time. The reasonable time has not been defined in any statute and essentially would be decided by the court only after taking into consideration the relevant circumstances and reason of delay (Pathinayake, 2014). A useful case highlighting the importance of timing in such cases is North Ocean Shipping v Hyundai Construction (The Atlantic Baron) [1979] QB 705 case (Carter, 2012). In this case, the plaintiff only filed for the claim when eight months had already gone from the delivery time. The court rejected the plaintiff’s request for claim of damage even though it did recognise the plaintiff’s right of holding the contract as void as economic duress was apparent. However, the beyond reasonable delay resulted in the plaintiff providing tacit acceptance to the condition and thus making the contract valid (Harvey, 2009).
.Application
The given situation revolves around a contract for the building of tanker between North Ocean Tankers acting as the buyer and shipbuilder acting as the seller. The buyer enacted a charter with a customer for the under construction tanker. However, USD suffered a devaluation of 10% and hence the seller indicated that extra payment of $ 3 million was to be made. Since the executed contract between the parties had no clause regarding such payments, hence the buyer resented. However, the buyer was cornered with the threat of breach of contract which prompted acceptance. The payment was made and now nine months post tanker delivery, the buyer has brought the matter before court.
The various elements of economic duress are apparent in this case. The seller by threatening to breach contract has misused their economic position and with the charter in place, the buyer had no alternative but to pay the $ 3 million to the shipbuilder. There was protest from the buyer as the payments were not in accordance with the executed contract. Thus, it cannot be denied that economic duress is present and it gives the buyer the right to hold the contract voidable and also claim damage within the passage of reasonable time. However, here the buyer waited for nine months before bringing the matter before the court. Clearly, taking a cue from the judgement in the North Ocean Shipping v Hyundai Construction (The Atlantic Baron) [1979] case, it seems that this delay is unacceptable and amounts to the contract becoming valid.
Conclusion
The discussion above clearly leads to the conclusion that the buyer i.e. North Ocean Tankers would not have success in the claim case brought before the court even though elements of economic duress are indeed present in the case.

References
Carter, J 2012, Contract Act in Australia, 3rd eds., LexisNexis Publications, Sydney
Davenport, S & Parker, D 2014, Business and Law in Australia, 2nd eds., LexisNexis Publications, Sydney
Gibson, A & Fraser, D 2014, Business Law, 8th eds., Pearson Publications, Sydney
Harvey, C. 2009, Foundations of Australian law. 3rd eds., Tilde University Press, Prahran, Victoria
Pathinayake, A 2014, Commercial and Corporations Law, 2nd eds., Thomson-Reuters, Sydney
Paterson, J, Robertson, A & Duke, A 2015, Principles of Contract Law, 5th eds., Thomson Reuters, Sydney
Pendleton, W & Vickery, N 2005, Australian business law: principles and applications, 5th eds., Pearson Publications, Sydney
Richard S 2003, The Modern Law of Contract, 5th eds., Cavendish, London
Taylor, R & Taylor, D 2015, Contract Law, 5th eds., Oxford University Press, London

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