The Five Elements of a Valid Contract

Discuss About The Consideration Invalid Cause Problems Promise.

These elements have to be identified between the correspondences taking place between the parties in order to establish a valid contract before law. If any of the five elements are not present than there is no contract formed between the parties.  The element of offer and acceptance re related to the meeting of minds of the parties. Till there is an absolute management between the parties a contract is not formed. Thus the principles of agreement are based on this rule (McKendrick 2014).

The process of creating a contract starts when a party makes a valid offer rather than an invitation to offer. A valid offer is an offer which a person with reasonable knowledge will come across and think that the person making such statement or expression wants to create a legal relationship. These principles had been discussed by the court in the case of Smith v Hughes (1871) LR 6 QB 597. Further when a party makes a statement in form of an advertisement it is generally not regarded as an offer unless it is a unilateral offer as held in the case of Carlill v Carbolic Smoke Ball Company [1892] EWCA Civ 1. Further it has been found by the court in the landmark case Partridge v Crittenden [1968] 1 WLR 1204 that there is no legal sense in declaring that an advertisement is an invitation to an offer. This is because a person will not be able to meet the demands of the whole group to which the advertisement has been made. It has been provided through the scenario that an advertisement had been made by the website owned by Magda for the sale of the panting in context.  Thus as per the principles of Partridge v Crittenden the painting advertisement will be an invitation to treat.

An offer had been made by Avinash for the purpose of purchasing the painting at a price of $1600. The offer had been made by him via an email. On the case of Smith v Hughes it had been ruled by the court that when a statement is made having the intention to bind the other party reasonably to its terms and is of a complete nature it is held as a valid offer. Thus in this case Avinash has made a valid offer.

An offer comes to an end when it has been rejected via a counter offer as stated in the case of Hyde v Wrench [1840] EWHC Ch J90. A counter offer is a statement which is made against an offer and is not unequivocal. Thus when Magda quoted a higher price for the painting the offer made by Avinash had been countered. 

Consumer Rights under the Australian Consumer Law

In addition via the same principles an additional condition had been asked for by Avinash and thus there was no valid acceptance.

Avinash had been made a valid offer as per which the portrait was to be provided to him at a price of $1800 and the offer was valid till February 21.

As per the principles of Hyde v Wrench again a counter offer had been made by Avinash as he demanded certificate of authenticity. This is not a mere inquiry. An offer had been made by Magda which was valid till 4 pm. Magda had revoked the validity of the offer from 21 February to 20 February 4 pm by informing Avinash as per the case of Byrne & Co v Leon Van Tien Hoven & Co [1880] 5 CPD 344. However Avinash did not accept the offer and it elapsed due to time at 4 pm on 20^th February as per Ramsgate Victoria Hotel v Montefiore (1866) LR 1 Ex 109.

Thus there was no contract between Magda and Avinash on 21 February as the offer was not available to be accepted.

There is no contract between Magda and Avinash as the time of acceptance was changed by revocation to 4pm 20 February

What rights does Elton have under the provisions of the Australian Consumer Law which have been created via schedule 2 of the Australian Competition and Consumer Act 2010 (Cth)

A person will be regarded as a consumer in Australia if he or she falls within the meaning of consumer as provided under the rules of section 3 of the ACL. A person would be regarded as a consumer in Australia where the price paid to procure goods and services are less than $40000, the goods and services have been purchased or domestic and household purpose or there is a vehicle purchased for transport. The section only applied if such purchases has not been done for resupply and production purpose.

Section 18 of the ACL imposed a liability on the seller via which in the course of trade and commerce they cannot commit an act which may reasonably be regarded as misleading or deceptive or is likely to mislead and deceive.

Under the provisions of consumer guarantees which have been provided to consumers through the ACL it has been stated that in situation where the sale of a service or a good has taken place through a specific description than it is mandatory that such goods are a exactly according to such description. These provisions have been stated via section 56 of the ACL.

Misleading and Deceptive Conduct and Consumer Guarantees

The rules in relation to an act which may be considered as misleading and deceptive under the principles of section 18 of the ACL had been discussed via the case of ACCC v Reckitt Benckiser (Australia) Pty Ltd [2016] FCAFC 181. In this case it had been stated by the court that an advertisement is misleading and deceptive as the information which it provided was not accurate.

Where consumer guarantees have been subjected to a major breach the innocent party may reject the goods and claim a refund as provided under the rules of s 260 of the ACL

It has been set out through the facts of the case that the portrait which had been sold to Elton by Magda had not been printed on a high quality paper as provided through the website and thus it had the potential of losing out its colors which is already taking place. This would have not happened where the print was done on a high quality paper. In addition the painting which had been sold was not a limited edition as promised by the advertisement. Thus in the given situation it can be stated that the provisions of section 56 and 18 have been violated in this situation. This is because the painting was not printed on high quality paper and does not match with its description and thus the provisions of section 56 have been breached. In addition the painting is not a limited edition as stated on the website and as per the application of section18 and the case of ACCC v Reckitt Benckiser it can be stated that such action was an action which is to be regarded as misleading or deceptive or is likely to mislead and deceive. Thus Magda would be liable under section 18 and Elton can reject the painting under section 261 of the ACL.

Elton being a consumer have the right to reject then goods under section 261 of the ACL.

I agree with the statement that ‘Consideration provided under a contract is not always valid. This can have unfortunate consequences for a party seeking to enforce the contract’. 

In relation to the law of contracts consideration in related to the promise because of which a contract has been formed between the parties. According to Knapp, Crystal and Prince (2016) every party to the contract has to be provided with a benefit and has to also suffer a detriment. These detriments and benefits in relation to the parties to the contract are known as consideration of a contract. In the words of Poole (2016) a consideration is “something of a value”.

Valid Consideration and Its Rules under Contract Law

There are certain rules which make a contractual consideration valid at law. These rules indicate that an act done in the past is not a consideration, consideration does not have to comply with the value of the other parties promise and will be effective even where its s merely sufficient and not adequate, it must move between the parties to the contract, it will not include an existing duty under law or a contract and it is not valid where it has been paid in part (Hunter 2017). Thus these rules signify the consideration under the law of contract is not always valid and may lead to unwanted situation for the parties to the contract. There are few cases in which such rules have been discussed by the courts. For instance, in the case of Chappell v Nestle [1960] AC 87 the court found that a consideration to be valid need not be adequate.

 A small amount provided in relation to a promise may also be regarded as a valid consideration. One of the prime examples in which consideration can be regarded as invalid and cause detriment to the promisee is provided through the case of Collins v Godefrey (1831) 1 B & Ad 950. In this case a police officer was not able to claim a money promised to him as a consideration for providing protection services as the court ruled that an existing duty at law is not a valid consideration and no contract was formed between the parties. In the same way in the case of Stilk v Myrrick [1809] EWHC KB J58 the plaintiff was not able to make a claim for additional money promised to him as the court stated that an existing contractual duty was not a valid consideration.

However these principals are not absolute and there are few cases in which exception to these rules have been discussed. For instance as per the cases of Hartley v Ponsonby [1857] 7 EB 872 and Glasbrook Bros v Glamorgan County Council [1925] AC 270 where the plaintiffs were seen to have gone beyond their legal or contractual duty the court stated that it would be considered as a valid consideration. Another situation which may arise is related to a past consideration. A person who wants to claim an act done prior to the formation of the contract as a consideration is not allowed to do so as stated in the case of Pao On v Lau Yiu Long [1980] AC 614.. This rule is not applicable if the act had been carried out based on the request of a promisor. In case of a past consideration also the parties are subjected to detriment where they had been made a promise by the promisor in relation to a past consideration by such promise does not lead to the formation of a valid contract.

Another situation where the promisee may be subjected to detriment is that of a part payment of debts. There have been situation where a person has accepted a part payment as a full and final settlement but have later made a claim in relation to the remaining amount and had been successful as it was done in the case of Foakes v Beer (1883-84) L.R. 9 App. Cas. 605. This issue had been discussed in the Pinnel’s case 1602 5 Rep, 117 where the court stated that unless accompanied by an additional fixture a part consideration is not valid. A consideration is also invalid if it is illegal in nature. 

However in these situation the principles of equity may sometimes intervene to provide the relief to the promisee . One of such rules under the principles is the doctrine of promissory estoppels where the promisor may be restrained to go back on his promise as discussed in the case of Central London Property Trust Ltd v High Trees Ltd [1947] KB 130. Thus form the above analysis it can be clearly stated that there are various situation where a consideration may be invalid and cause problems the promisee.

References

ACCC v Reckitt Benckiser (Australia) Pty Ltd [2016] FCAFC 181

Australian Competition and Consumer Act 2010 (Cth)

Byrne & Co v Leon Van Tien Hoven & Co [1880] 5 CPD 344

Carlill v Carbolic Smoke Ball Company [1892] EWCA Civ 1

Central London Property Trust Ltd v High Trees Ltd [1947] KB 130

Chappell v business-law[1960] AC 87

Collins v Godefrey (1831) 1 B & Ad 950

Foakes v Beer (1883-84) L.R. 9 App. Cas. 605

Glasbrook Bros v Glamorgan County Council [1925] AC 270

Hartley v Ponsonby [1857] 7 EB 872

Hunter, H., 2017. Modern Law of Contracts.

Hyde v Wrench [1840] EWHC Ch J90

Knapp, C.L., Crystal, N.M. and Prince, H.G., 2016. Problems in Contract Law: cases and materials. Wolters Kluwer Law & Business.

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

Pao On v Lau Yiu Long [1980] AC 614

Partridge v Crittenden [1968] 1 WLR 1204

Pinnel’s case 1602 5 Rep, 117

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

Ramsgate Victoria Hotel v Montefiore (1866) LR 1 Ex 109.

Smith v Hughes (1871) LR 6 QB 597

Stilk v Myrrick [1809] EWHC KB J58