Background

Australian contract Law is governed by Australian common law.  There are five categories evolve around a contract law[1].

• The formation of a contract
• Contents of contract
• Avoidance of contract
• Performances of a contract (including terminations)
• Remedies for the breach of contract

Issue

In the give case, Mechille and Tim run a Motor bike company. They sell and buy motor cycles and also undertake repair works. Tim and Mechile signs a contract to b cycle from John for $5000. Later on when they realized that the amount paid to John is higher, they want to get out the contract[2].

Law

As per the Australian Contract Law (ACL), the promises which are legally enforced by law are made to form a legal relationship for the purpose of doing legal business is termed as a Contract. The contract should be supported by a consideration[3].

Generally a contract starts with an agreement between the parties who get into the contract. The content of Agreement will be about the terms and conditions that need to followed and agreed by both the parties before enter into transactions. The Agreement is well documented and signed by both the parties which are legally enforced by law. A contract with unsigned Agreed document is void under ACL[4].

The effect of the Signature in the documented agreement is a vital factor in any contract. In other words the signature in the agreed document implies that the “offer” and the “acceptance” related to the contract (or the main objective of a contract) are mutually agreed by the parties who sign such agreements[5].

The case Toll (FGCT) v Alphapharm Pty Ltd can be referred to the given case. Finemores which was taken over by Toll, entered into a contract with Richard Thomson (acting on behalf of Alphapharm) to store and transport goods which were being imported for Alphapharm. The contract document was signed by both the parties. During the process of contract, Finemores caused damages to Alphapharm due its negligence. Alphapharm sued Finemores for damages[6].

Finemores wanted to escape the liability by relying upon an exclusion clause in its contract with Richard Thomson[7].

The High court of Australia held this case in favour of Alphapharm stating that once the agreement document is signed, the related parties should perform as per the agreed terms. The court of Law will not consider the excuse saying that the document is signed without reading or understanding the contents therein subject to the absent of fraud at any point during the performance of the contract.

The court also referred the case Wilton Vs Farnworth and held the case citing the reason that “a man cannot escape from the consequences of signing the document by saying that he did not understand the content of such document”. If he signs the document, it is implied that he has agreed to the terms and condition of the contract and need to fulfil the performance as agreed in the document.

Legal Requirements for Contracts

In the given case, Tim and Mechile sign a contract with John saying that they will buy a motor cycle from him for $ 5000. At this point of signature, it is implied by the law that Tim and Mechile need to perform the contract as per the agreed terms.

Conclusion

Once Tim and Mechile signs the agreement with John, it implies that the following conditions are agreed by them with full understanding of those terms.

• To buy the Motor cycle from John
• The condition of the Motor cycle at the time of buying
• The price of the Motor cycle (very vital in this case)
• The period of completion of such contract

Under such circumstances, Tim and Mechile cannot get out of the contract for reason saying that the rate paid to John is too high. The reasonability of the rate should have been analysed by Tim and Mechile before signing the contract with John. Moreover the contract was already performed as per the terms and conditions of the agreement[8].

If this case goes to the court, the court of law may dismiss this case under the following grounds.

• The contract is agreed and signed by both Tim and Mechile for performing the contract.
• The price of the motorcycle is completely agreed before signing the contract by Tim and Mechile.
• Since no fraud is found in this case, the claim of Tim and Mechile will not at considered by the court of Law.

“Acceptance” will be considered as “Willingness” to perform a contract. Once accepted, the further withdrawal from such acceptance will not be entertained by the court of Law subject to the condition that the fraudulent is not involved in the context of such acceptance[9].

The given case will be covered under Australian Contract Law. The case relates to the withdrawal of contracts after the completion of contract as per the terms and conditions agreed. The contract is documented in the form of Agreement deed[10].

Issue

Gerard and Sylvia have registered a company under Australian Securities and Investments commission under the name “Cakes Pty Ltd”. Gerard and Sylvia purchased a cake shop from George. On the day of purchase Gerard stamps the contract with the Cakes Pty Ltd company seal and signs as witness. Sylvia also signs the contract as witness. After performance of the contract, George feels bad about selling the cake shop and wishes to get it back.[11]

Law

As per the Australian Contract Law and Companies act 2001, Section 127 states that a contract document can be executed with or without using a company’s common seal. But the following conditions are inevitable for executing an agreement document in order to perform a contract[12].

• Signing by two directors of the company
• Signing by one director and a company secretary of the company
• Affixing the common seal of the company to the document and the fixing of such seal is witnessed by two directors of the company or a director and a company secretary of the company.

If the document is not prepared as per the above said norms, the agreement becomes void and the agreement deed cannot be enforced by Law. The document will not have any value.

The case of Knight Frank Australia Pty Ltd Vs Paley Properties Pty (2014) can be referred with the given case. The background of the case is that the $ 1.5 million purchase contract was signed by only one director on behalf of the purchaser.

Implications of Signed and Executed Contracts

The purchaser had not correctly signed the contract and, as a result, the contract was not enforceable against the purchaser[13].

The issue was whether there was an enforceable contract with the purchaser and, if the contract had not been correctly signed by the purchaser, whether the director who purported to sign the contract on behalf of the purchaser was personally liable to pay damages to the vendor for breach of warranty of authority[14].

In the given case, the executive of the document on the part of Gerard and Sylvia need to be verified for the validity under the court of Law. In case of improper documentation Gorge will have the opportunity to get back the cake shop as the contract or agreement becomes void in case the documentation is not properly executed[15].

Conclusion

The case can be explained in two scenarios (assumed). The problem is silent on the directorship of Sylvia[16].  

In the given case, if Sylvia is also a director like Gerard then the contract is well executed as per the requirement of ACT under Corporate Act Section 17. The Law says that if all the directors’ signs as witness for affixing the Company’s common seal in a document, then the document is enforced by law and has legal value.

Under this context, the contract signed and agreed by Gerard, Sylvia and George becomes a legally valid document and enforced by law. In such circumstances George cannot proceed legally to get the cake shop[17].

Before signing the agreement, George should have taken a right decision, after performing the contract, George cannot reverse his decision. The court of law will not be in favour of Geroge’s wishes[18].

A contract once performed as per the well executed document, and if the contract does not consists of any fraudulent activity, the contract is considered to be complete in all aspects..

If Sylvia is not a director then the agreement deed is not properly executed for the reason that the affix of the company seal in the document is witnessed by only one of the Director. The signature of Sylvia is just a common witness. In such case, the agreement deed will not e valid and not enforced by Law[19].

Under this condition, George can very well approach the court for getting back the cake shop citing the reason that the agreement deed is not valid and it was not properly executed[20]

Reference

Andrews, Neil. Contract law. Cambridge University Press, 2015.

Carter, John, and Elisabeth Peden. “Good faith in Australian contract law.” (2003).

Cartwright, John. Contract law: An introduction to the English law of contract for the civil lawyer. Bloomsbury Publishing, 2016.

McKendrick, Ewan. Contract law: text, cases, and materials. Oxford University Press (UK), 2014.

Pearson, Gail. “Further challenges for Australian consumer law.” Consumer Law and Socioeconomic Development. Springer, Cham, 2017. 287-305.

Poole, Jill. Textbook on contract law. Oxford University Press, 2016.

Treitel, Guenter Heinz. The law of contract. Sweet & maxwell, 2003.