Application of Contract Law Principles in Three Scenarios

This article discusses the application of contract law principles in three different scenarios, including partnership law, part payment of debt, and types of contract terms. It also explains the consequences of breaching different types of contract terms.

Question 1
Issue: The issue in this question is if Daniel can be considered as a partner according to the
principles of partnership law and therefore if he can be held liable to pay for the tyres that were
ordered by Madison.
Rule: According to the partnership law, partnership can be described as a relationship iron
Association that exists between two or more persons and that has been created with a view to
earn profit. The persons can be individuals or corporations. As in the case of a company, a
partnership is not incorporated under the law (Lang v James, 1911). As a result the partnership
agreement governs the rights and liabilities of the parties. Such partnership agreement could have
been created in writing, orally or implication. The provisions of Partnership Act are applicable
(Smith v Anderson, 1880).
The law provides that a partnership enters into an agreement with others in the name of its
partners. Generally each partner is jointly liable for the responsibilities that have been created by
an agreement entered into by the partnership (Re Griffin; Ex parte Board of Trade, 1890).
The partnership relationship can exist between the parties when persons are “carrying on
business in common with a view to profit”. Therefore partnership involves an agreement that has
been created between two or more persons for legally enforceable relationship. This relationship
is essentially contractual in nature. In Green v Beesley (1835), it was stated by the code that the
definition of partnership has always been considered as a mutual participation but in this case the
participants do not form a legal entity while entering into a partnership.

The elements that are necessary for the creation of a partnership are as follows
The carrying on of a business
 In common
 With a view to profit
In case any of the elements mentioned above is not present, the relationship cannot be described
as a partnership.
Application: The law provides that everything in of a partnership is shared by the partners
according to the shareholding of each partner. The share of each partner is mentioned in the
partnership agreement. In the same way, the Assets and liabilities of the partnership are also
shared by the partners according to holding of each partner. At this point it is worth mentioning
that unlike corporations, there is unlimited liability in case of partnerships. The result is that if
one partner has been found liable for doing something, all the other partners will be held
personally liable. This is not the case in a corporation where the liability of the shareholder is
limited to the extent of their shareholding. Therefore in this case, the shareholders can lose the
amount equal to the value of shares held by them at the most. This is not the case in a
partnership. The law of partnership does not prescribe any limit on the potential liability of the
partners. The reason is that as is the case with Seoul traders, the partnership is not a distinct
entity, separate from its operators.
In the present case, it is clear that a partnership has been formed by Madison and Daniel. For this
purpose they have also entered into a written agreement. According to the agreement, the profit

made by the business was going to be divided 50-50 buy Madison and Daniel.
Under these circumstances, Madison given order to Fast Bikes for 250 tyres. After giving the
order, she leaves for a month long voyage to Antarctica. Now Fast Bikes want to recover the
price of the tyres from Daniel. By applying the laws of partnership that have been discussed
above, it can be stated that individually liable for the liabilities of the partnership. As a result in
the present case also, Fast Bikes can sue Daniel for the recovery of the price of the tyres.
Conclusion: In the present case, it can be concluded that Daniel is partner in the business. As a
result, he can be held liable for paying the $5000 that were owed by the business to Fast Bikes.
Question 2
Answer:
Issue: The issue in this question is related with the fact If the part payment by Rupert can be
considered as the full final payment of amount due bruce can claim the rest of the amount that
was 2 under the landscaping contract.
Rule: The law provides in such cases that when part payment of the debt has been accepted by
the seller that was owed under the contract, the general rule is that there is nothing to prevent the
seller from the rest of the amount at a later date. This rule has been found in Pinnel's case (1602)
and later on held by the court in Foalkes v Beers (1882). This rule is applicable where the buyer
has not provided any consideration for enforcing the promise made by the seller to accept the full
satisfaction of the contract. It was held in Pinnels case that the agreement according to which

was going to be accepted as full payment was binding only if the buyer had provided some fresh
consideration at the request made by the seller.
In Pinnel's Case [1602] it was stated by the court that the part payment of a debt did not result in
extinguishing the application for paying the whole debt. The brief facts of this case are that Cole
was sued by Pinnel in an action of debt on a bond. It was argued the defendant that at a request
made by Pinnel, he had tendered $5 2d before the date when the debt was due and this amount
has been accepted by the plaintiff the full satisfaction of the debt. However, it was stated by the
court that payment of a lesser sum on the day in satisfaction of a greater amount cannot be
treated as the satisfaction of the whole debt. The reasoning of the court was by no possibility, a
lesser amount can be dissatisfaction of a greater amount accept the gift of a horse, hawk or a
robe.
Another case that is important in this area is that of Williams v Roffey Bros (1990). In this case
Williams had entered into a sub contract for performing carpentry work by Roffey Bros price
that was going to be paid in installments. As a result of certain financial difficulties as the price
of the work was too low, Williams faced a risk of the failure to complete the work on time.
However it needs to be noted that when the issues related with the part payment of debt, the
principal provided in Williams v Roffey is not applicable. Therefore in such cases the more strict
view adopted by the court in Foakes v Beers will be applicable and the benefit of receiving part
payment itself as consideration. Therefore, part payment cannot be considered as the satisfaction
of greater sum owed.
Application: In the present case, a landscaping contract was created between Rupert the owner
of the house and Bruce, the landscaper. Under the contract the fee of $40,000 was going to be

paid to Bruce after the completion of the work. But due to some reason, Rupert offer to pay
$25,000 as the full settlement of account. This sum was accepted by Bruce as the full settlement
of the account. However, later on Bruce received a letter from Rupert according to which he had
won a lottery of $500,000. Now Bruce wants to claim the rest of the amount. In view of the rules
mentioned above, it is clear that under the law of contract Bruce can claim the rest of the amount
from Rupert. Even if had accepted $25,000 as the final settlement of the amount, the law does
not prevent bruise from claiming the rest of the amount.
Conclusion: Under the circumstances understated that Bruce can recover the $5,000 from Rupert
even if we had accepted $25,000 as the final settlement.
Question 3
Answer:
Term 1
(a) Type of Term: In the present contract the term according to which time is to be of the
essence appears to be a condition. The terms of a contract the category of conditions, warranties
or innominate terms. Conventionally the contract can be termed as condition or warranty.
However, in Hong Kong Fir Shipping (1962), the category of innominate terms was introduced
by the court. It is very important that the parties correctly identify which term falls under the
category of conditions and which term is a warranty. In the Present case it appears that this term
of the contract is a condition. A condition can be described as a major term. For such a time goes
to the root of the contract.

While drafting a legal Contact it is very important that conditions should be mentioned clearly
and specifically. The conditions are reactions or the steps that need to be taken by one or both
parties for fulfilling obligations under the contract. In this way, conditions can be described as
the requirement based on the agreement concluded between the parties. In a typical contract,
conditions can be express or implied. Express conditions are the conditions that have been
clearly defined agreed by the parties. On the other hand, implied conditions are the conditions
that have not been expressly discussed by the parties but are expected to be a part of the contract.
Some illustrations of implied conditions are the title of the goods, quality of the goods etc.
(b) As a result of the fact that this term is a condition, in case of a breach of this condition the
other party gets a right to terminate the contract and similarly, the party can also claim
compensation.
Term 2
a) The term according to which landscape design architect will be engaged by the contractor
appears to be a warranty. In this case a warranty has been given by the contractor for engaging
skip design architect so that the formal exterior presentation can be completed by using suitable
established trees and shrubs. It is also a warranty that plants have to be minimum 4 years old and
native to Sydney basin.
b) As it is clear that this of the contract is a warranty, the other party does not get the right to
terminate the contract in case of a breach of such a term. A warranty can be described as a minor
term of the contract that is not central for the presence of the contract. Therefore in case of a

breach of a warranty innocent party is allowed by the law to claim damages but it cannot
terminate the contract.
Term 3
a) The third term appears to be an exclusion clause. An exclusion clause is the term of the
contract that has been included in the contract with the view to exclude the liability of one of the
parties or to limit liability of the party in case of the circumstances, conditions or situations
mentioned. The exclusion clause can be incorporated in the contract for the purpose of limiting
the liability of such party in case of breach of contract or for negligence.
b) The law provides that the party included the exclusion clause in the contract may rely on
such a clause for the purpose of excluding a limiting its liability only if
The exclusion clause has been in the contract
The clause has been clearly mentioned
The clause is not unfair.
Therefore in case of a breach of exclusion clause, the party may rely on the clause only if the
mentioned above are fulfilled.

References
Foakes v Beer [1884] UKHL 1
Green v Beesley (1835) 2 Bing N C 108
Hong Kong Fir Shipping Ltd v Kisen Kaisha Ltd (1962) EWCA Civ 7
Lang v James Morrison & Co Ltd (1911) 13 CLR 1
Pinnel’s Case (1602) 5 Co Rep 117
Re Griffin; Ex parte Board of Trade (1890) 60 LJQB 235
Smith v Anderson (1880) 15 Ch D 247
Williams v Roffey Bros (1990) 2 WLR 1153