Copyright 2003 McGraw-Hill Australia Pty Ltd. PPTs t/a Fundamentals of Business Law 4e by Barron & Fletcher. Slides prepared by Kay Fanning. Copyright

Copyright © 2000 McGraw-Hill Australia

Copyright 2003 McGraw-Hill Australia Pty Ltd. PPTs t/a Fundamentals of Business Law 4e by Barron & Fletcher. Slides prepared by Kay Fanning.

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Contract LawPart 1

Chapter 7



7-3

Valid contract

• An agreement made between two or more parties, giving rise to legal rights and obligations which the law will enforce.



7-4

Valid contract

Intention to create Legality

legal relations of object

Terms:- Express/implied

Offer Form

Acceptance Conditions Warranties Consideration

Exclusionary clauses

Reality of Capacity of

consent parties



7-5

Classifications

Classifications

Validity Performance Format Formation



7-6

Validity

A ll essen tia l e lem en tsp resen t, th erefo re laww ill en fo rce o n b eh alf o feith er p arty

V alid

N o legal effect

V o id

E n titled to b e rescin d edb y in n o cen t p arty

V o id ab le

E ssen tia l e lem en tsp resen t b u t tech n icalityp reven ts it fro m b ein gen fo rced

U n en fo rceab le

P u rp o se o r o b ject o fco n tract is i l legal

Illegal

V alid ity



7-7

Performance

PERFORMANCE

EXECUTED EXECUTORY

One party to contract Both parties have

has completed their part obligations to

of the contract perform



7-8

Formation

FORMATION

EXPRESS IMPLIED QUASI

Dependant on By operation of

associated conduct law w

WRITTEN SPOKEN



7-9

Intention to create a legal relationship

Social/domestic agreement Business agreement

Assumption No intention to create legal relationship (Balfour v Balfour)

Intention to create legal relationship

Prove Intention to create legal relationship(Todd v Nicol)(Wakeling v Ripley)

No intention to create legal relationship

• Financial disadvantage leaving job

• Expenses incurred in moving• Selling belongings

• Presumption rebutted in contract



7-10

Format

SIMPLE FORMAL Verbal, written, implied WrittenConsideration must pass Does not require in both directions. consideration passing

in both directionsStatute of limitations – 3 yrs Statute of limitations - 12 yrs

Contract of Record Contracts under Seal (Deeds)



7-11

Essential elements of a contract

• Intention to create a legal relationship• Offer and acceptance• Form and/or consideration• Capacity of parties• Reality of consent• Legality of object



7-12

Offer

• Invitation to treat: An invitation to invite people to make offers.

Pharmaceutical Society of Great Britain v Boots Cash Chemists (Southern) Ltd (1952) 2 QB 795

• Offer: A proposal by the offeror that if accepted by the offeree will create a legally binding contract.



7-13

Rules with respect to offer

• An offer is not required to be in any particular form.

• The person who makes the offer is called the offeror; the person to whom the offer is made is the offeree.

• An offer can be made to one or more persons, even the whole world.

• All terms of an offer must be communicated to the offeree.



7-14

Rules with respect to offer - termination

• An offer can be revoked at any time before acceptance.• Revocation must be communicated to offeree.• An offer will lapse if:

1. not accepted within the time stated, or2. within a reasonable time, or 3. if a counter offer is made, or 4. if a party loses its contractual capacity.

• An offer can be revoked at any time:1. before acceptance, and2. if communicated to the offeree.

• An offer will be terminated if rejected.• Death of the offeree or offeror may terminate an offer.• An offer will be terminated if a condition precedent is not met.



7-15

Rules with respect to offer - termination

Termination of offer

Rejection Lapse Revocation

Conditional Death of

offer offeree/offeror



7-16

Rules of acceptance1. Acceptance must be communicated to offeror by an

authorised person.

Exception: Offeror waives the right to receive notification of acceptance.

Communication by post: (postal rule): If it is agreed that post is the method of acceptance and the letteris stamped and addressed correctly, acceptance occurs when posted.

2. Acceptance relies on the knowledge of an offer.

3. Acceptance must be unqualified.

Acceptance can only be made by the offeree.

Acceptance must take place within a prescribed time or within a reasonable time.



7-17

Consideration

• Consideration can be regarded as something done or promised by one party (the promisor) in exchange for something done or promised by the other party (mutual promises).



7-18

Promisor and promiseePromisor

• Person undertaking to perform the consideration

Promisee

• Recipient of the consideration



7-19

Rules of consideration

1. Past consideration not valid for simple contract.

2. Amount of consideration is irrelevant.

3. Nature of consideration must be definite.

4. Consideration must be able to be performed.

5. Consideration must not be illegal or unlawful.

6. Consideration must extend beyond what person is already obliged to do in terms of:a) requirement by lawb) compliance with contract already existing.

7 Consideration must move from the promisee.



7-20

Rules of consideration (continued)

8. Part payment of a debt will not be adequate consideration.

9. Consideration is essential in all simple contracts.



7-21

Promissory estoppel

• If one party to a contract, by its behaviour, leads the other party to the contract to believe a certain state of affairs exists between them, the courts will support that state of affairs rather than the terms of the contract.

Elements• The promisee has altered their position in reliance

on a new promise.• It would be impossible for the promisee to return to

their original position without detriment.• It would be unfair for the promisor to renege.



7-22

Contracts required to be in writing

• Transfer of ownership of a British ship or share in a ship

• Appointment of an agent where the agent will be contracting by deed (Power of Attorney)

• Bills of exchange and promissory notes• Cheques• Assignments and mortgages of life

insurance policies• Assignment of copyright• Contracts for marine insurance



7-23

Contracts required to be evidenced in writing

Via

• Letters passing between parties

• Receipt for a deposit

• Cheque signed by the purchaser.

Documents

Copyright 2003 McGraw-Hill Australia Pty Ltd. PPTs t/a Fundamentals of Business Law 4e by Barron & Fletcher. Slides prepared by Kay Fanning. Copyright