Key Aspects of Contractual Relationship under Australian Law

Describe about the Contractual Relationship for Australian Contract Law.

Issue

The two basic issues that arose are:

Whether Wendy has any contractual relationship with Dave and can claim $3,000?

Whether Wendy has any contractual relationship with Bill and can claim $2,000?

A contract is a kind of agreement which has legality in law. Thus, whenever any contract is established amid the parties then the basic contractual requirements are:

Agreement – When a valid offer is made by an offeror to an offeree which is accepted by such an offeree then an agreement is made (Smith v Hughes (1871). An offer is valid when an offeror communicates his intention to an offeree, clearly and unambiguously, wherein he specifies the task he intents the offeree to undertake or forgo (Carlill v Carbolic Smoke Ball Co (1893). When such valid offer is affirmed by an offeree without any changes then such approval is a valid acceptable in law Crown v Clarke (1927). (J Clark, 2012)

Consideration – Every agreement is accompanied by some valuable support which is made in exchange of the promises made by the offeror and the offeree and is called consideration (Australian Woollen Mills v The Commonwealth (1954). Consideration makes an agreement enforceable and in absence of a consideration the promises are just gratuitous in nature. (Moles & Sanha, 1998)

Capacity of the parties – the parties must be of sound mind and major to make a valid contract.

Intention to be in legal relationship –Legal intention specifies that when an offer and offeree are exchanging promises then the same must be done with the intention to abide by the same legally, that is, to enforce the promises in the court of law in the event of dispute. This legal intention is very important to convert any agreement into a valid contract (Air Great Lakes Pty Ltd v KS Easter (Holdings) Pty Ltd (1989).

There is a general presumption, that whenever the contractual parties are in family relationship then they do not intent to abide by the contract legally. But, when a contract is made by the parties who are commercial relationship, then they intent to make a contract which is enforceable in law (Balfour v Balfour (1919)).

 However, this general presumption is not always true and if it is established that the contractual parties wishes to abide by their promises legally, then, it does not make any difference whether the parties are in family or commercial relationship, such a contract will be  a valid contract and is enforceable in the law of contract.

Case Study 1: Wendy and Dave

In the leading case of Todd v Nicol (1957) the parties are in family relationship but it was proved that the intention of the promises while exchanging promises was to abide by their promises legally. Thus, the contract was held to be valid even though the parties holds no commercial contacts. Whereas in Rose and Frank & Co v Crompton (1923) the parties are in commercial relationship, but the facts depicts that while exchanging promises the parties never wished to abide by the promises legally. Thus, there was lack of legal intention and thus the contract was held invalid in law. (P Gillies 2004)

The compliance of all the contractual elements makes a contract valid and enforceable in law.

Contract amid Wendy and Dave

Dave asked Wendy whether she intends to participate in the fun run and if she does than he is willing to pay her $ 3000 if she takes one hour to complete the run.

Thus, an offer is made by Dave to Wendy at a consideration amount of $ 3000 which was accepted by Wendy.

However, both Wendy and Dave are not known to each other thus they are not in any kind of family relationship but hold a commercial relationship. Based on the promise made by Dave, Wendy has completed the run in 58 minutes (which is less than one hour). It is submitted that when the promises are made by the parties both intent to abide by the same legally. Thus, there is presence of legal relationship amid them and thus, Wendy has every right to sue Dave for the consideration amount.

Contract amid Wendy and Bill

 Wendy and Bill are friends and thus are not in any commercial relationship. In order to inspire Wendy, Bill promised to provide her with new running shoes and clothes.  Wendy purchased the shoes and clothes which were worth $ 2000.

It is submitted that when Bill made a promise to Wendy, neither parties intent to abide by the promises legally. The promise was made out of love and affection and there was no legal ignition amid the parties. Thus, Wendy cannot sue Bill for the price of shoes and clothes.

Conclusion

It is concluded that Wendy can sue Dave as there was presence of legal intention when the promises were exchanged amid the parties but cannot sue Bill as Bill does not intent to abide by the promise legally.

Case Study 2: Dani and Vintage

Issue

The main issue is whether Dani has any remedy against Vintage or whether Vintage can rely on the exclusion clause to mitigate their liabilities?  

Whenever any contract is made amid the parties then such contract must be formulated by complying all contract essentials that is agreement, consideration, capacity and legal intention of the parties. When any valid contract is made, then, the parties to the contract incorporated terms to the contract to which they intent to abide by. (J Clark, 2012)

One of the terms which is made part of the contract is called an exclusion clause. An exclusion clause is a clause which is made part of the contract and which excludes or mitigates the liability of one of the party to the contract at the consent of another. Thus, the consensus of both the parties is required to make a valid exclusion clause (L’Estrange v Graucob [1934]. The important essentials to make an exclusion clause valid are: (The Law Teacher, 2016)

The clause must be made part of the contract at the time of formation of the contract. The clause can be incorporated at the later stage but only at the consent of both the parties.

The clause can be made part of the contract either by notice or by signature (Olley v Marlborough Court [1949].

The clause is valid only when the same is made part of the contract ay the consent of both the parties. If the clause is made part of the contract at the wish of only one party then the clause has no legal validity unless and until all reasonable attempts are made by the relying party to bring the clause with the knowledge of the other party (Hollier v Rambler Motors [1972]

Further, many a times, when one party makes a statement of fact which is not true and which is of present or future and persuades another party to make a contract with him and the other party actually makes a contract with him and suffers loss, then, a misrepresentation is said to incur and the aggrieved party has right in law to claim damages for the loss suffered (Bisset v Wilkinson  (1927).  (The Law Teacher, 2016)

The law is now applied the facts of the case.

Dani intends to restore the car upholstery to its original condition. Dani took the services of Vintage for restoration. Dani specifies that she wants her car to be restored to original condition and also showed some pictures. Vintage submitted that their staff is highly qualifies and experience. They submitted that Carl will restore her car and has experience of the same.

It is submitted that Vintage has made statements of fact that they will restore her car to its original and the statement was not true and has persuaded Dani to enter into a contract with them and because of which she has suffered losses. thus, a misrepresentation was made by Vintage which has ultimately caused loss to Dani. Thus, Dani can sue Vintage under the law of misrepresentation.

But, Vintage relied on the exclusion clause which was made part of the contract as per which Vintage does not accept any responsibility for any damage to goods or for any defect in work completed. All warranties were excluded. However, the clause was made part of the contract without making Dani aware of the same.

Further, the clause was also appeared on a sign next to the counter in Vintage’s workshop but the same was not reasonably readable. Thus, no extra efforts were undertaken by Vintage to bring the clause within the notice of Dani.

Hebe, Vintage cannot rely on the exclusion clause that was made part of the contract.

Conclusion

So, Dani has full right to sue the Vintage under the law of misrepresentation and claim damaged for the loss. However, Vintage cannot rely on the exclusion clause that was made part of the contract as the same was made part of the contract without bring the same to the knowledge of Dani nor any reasonable efforts were made for the same.

Reference list

Books/Journal/Articles

Gillies, p. 2004. Business Law. Federation Press.

Case laws.

Air Great Lakes Pty Ltd v KS Easter (Holdings) Pty Ltd (1989).

Australian Woollen Mills v The Commonwealth (1954).

Balfour v Balfour (1919).

Bisset v Wilkinson  (1927).

Carlill v Carbolic Smoke Ball Co (1893).

Crown v Clarke (1927).

Hollier v Rambler Motors [1972]

L’Estrange v Graucob [1934].

Olley v Marlborough Court [1949].

Rose and Frank & Co v Crompton (1923).

Smith v Hughes (1871).

Todd v Nicol (1957).

Online Material

Clark , J . 2012. Agreement – Australian Contract law (online). Available at: https://www.australiancontractlaw.com/law/formation-agreement.html. [Accessed on 26th September 2016].

Moles, R & Sangha, B. 1998. Consideration  (online). Available at: https://netk.net.au/Contract/04Consideration.asp. [Accessed on 26th September 2016].

The Law Teacher. 2016. Exclusion clauses. (online). Available at: https://www.lawteacher.net/cases/contract-law/exclusion-clauses-cases.php. [Accessed on 26th September 2016].