Validity and Payment in Contract Law

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LAW OF COMMERCE

Issue
The following issues have been identified in the given case scenario. The first issue is the
validity of the contract in light of the delay of providing permission. The second issue that has
been identified is that whether Buildcon is entitled to full payment of $90000 in light of the
completion of the contract.
Rules
The contract law prescribes rules for the formation, operation and the discharge of the contracts
in Australian context. It is imperative to note that there are certain essential elements that must
be established to regard a contract between the parties to be valid. These essential elements are
that there should be an offer by one party, to which there should be a valid acceptance. The offer
and acceptance both must be communicated by the parties to each other. The next essential term
is that there should be certainty in terms of the contract which must be legal in terms of the
statute and laws of land. Further the contract must be essentially supported by the consideration.
A consideration must not be necessary in monetary terms, but should be something of value in
exchange of performance of an act, as was held in the case of Carlill v Carbolic Smoke Ball Co1.
Further, the parties must intend to be binding by a legal enforcement. This means, an agreement
between the parties where there is no intention to create a legal relationship would not be
regarded as a contract. The principle was held in the case of Air Great Lakes Pty Ltd v KS Easter
(Holdings) Pty Ltd2. In addition to the above mentioned condition, it is vital that the parties to a
contract must be legally capable to enter into a contract. Thus, if all the above mentioned
conditions are present, an agreement would be regarded as a valid contract enforceable at law. In
1 Carlill v Carbolic Smoke Ball Co Court of Appeal [1893] 1 QB 256; [1892] EWCA Civ
2 Air Great Lakes Pty Ltd v KS Easter (Holdings) Pty Ltd (SC of NSW, 1989

addition, it is efficient to note that a contract can be discharged by various means. One of such
means to discharge a contract is the breach of contract. The breach of the contract denotes a
condition where one of the parties either does not performs or interferes with his or her part to
the contract which leads to non-honouring of a binding contract. Further it must be noted that
when there is a breach of a condition and not warranty of a contract, the innocent party obtains a
right to repudiate the contract. One of the aspects of the breach of the contract is the anticipatory
breach. In the event of an anticipatory breach, there is an indication of an intention of one of the
parties of the non performance of their contractual obligations, as a result of which the other
party has no obligations to wait for the occurrence of the actual breach to bring their action for
breach. The principle was stated in the case of Hochster v De la Tour3. Further, in the case of the
anticipatory breach, the innocent party can either continue the contract themselves and wait for
the occurrence of the breach or sue the other party immediately.
Application
The application of the principles of the contract to the given circumstance is elaborated as
follows. For the past part, there is a valid contract created as evident from essential conditions.
Arthur offered for renovation work, which is accepted by BuildCon for the exchange of $ 90000.
There is intention to create legal relationship in commercial contracts. Further, the parties are
capable and terms are certain. One of the terms is that the work should start from August 14.
However, in the given situation, Arthur has engaged BuildCon for the renovation work in which
one of the contractual obligations on part of Arthur is to seek the permission from the owner of
the adjoining land Shambo. However, just two weeks in the commencement of the work by
BuildCon, the permission has not yet been taken. This situation matches with the principle of the
3 Hochster v De la Tour (1853) 2 E & B 678