Business Law Assignment: Judicial System, Contract Formation, MMPA 503

This report provides comprehensive answers to a business law assignment. The first part analyzes the structure of the New Zealand judicial system, detailing the hierarchy of courts from the District Court to the Supreme Court, and explaining the principles of judicial precedent and stare decisis. It exa...Read More

BUSINESS LAW

Answer 1)
The judicial system is one of the most essential components of a social system of a country or
a region. In context of the country New Zealand, the courts are structured in the form of a
pyramid to serve the judicial decisions on the matters of the conflicts in the society. It is vital
to note that at the lowest level is the District Court, followed by the High Court, the Court of
Appeal and the Supreme Court at the top. Thus, if the applicants are unsatisfied with the
court’s decision at one of the lower courts, can move to the higher courts for the
reconsideration of the said matter. The judicial system of New Zealand is structured in a
manner so as to ensure an independent decision being served that is where the impact of the
individual personality in the determination of the cases is minimized. However, it cannot be
entirely eliminated. This is because the judges of the higher courts have the power of
overruling a decision taken by the lower court. A decision served by a higher court is binding
on the other lower courts. In addition to state, the decisions of the Supreme Court, which is
regarded as the final court of appeal, are binding on all other courts.
In order to avoid the erratic behaviour of judges or the conflict of interest in the case
decisions, the law is based on the doctrine of the precedent and the multi member courts of
appeal. According to the doctrine of the precedent, there must be consistency and the
certainty in the application of the law by the various judges of the legal system. When
deciding the case, the judges must first decide onto what happened, decide the relevant
principle of law that is applicable on the given situation, and lastly apply the legal rules to the
given circumstances. Once the decision is passed, the said statement of law is stated to
become the part of the law, for the application of the same in a later case on the similar lines
of facts. The principles of the doctrine of the precedent are stated as follows. The first
principle of “stare decisis” states that where the material facts of the cases are similar, the
decision must be on the same lines. Yet another principle is of the “ratio decidendi”, which
states that a consistent legal principle must be applied in the similar cases.
For instance, one of the most popular contract laws cases of New Zealand is that of the
Phillips v Phillips1 which is considered a benchmark case on the issue of the parties making a
same mistake in the formation of a contract. The case has been repeatedly cited where the
issues are in the contract formation relating to the mutual mistake of the parties. In yet
1 Phillips v Phillips [1993] 3 NZLR 159; 10 FRNZ 110

another instance, the decision established in the case of Sky City Auckland Ltd V Wu2 was
cited in the judgement pronounced in the case of Jones v Sky City Auckland Ltd3
As per the discussions conducted in the previous parts, it can be concluded that the judicial
system of New Zealand has been well designed and is based on the system of hierarchy and
precedent. These systems aid in the justice being served in the consistent manner and various
courts reconsider the matter when the situation or the applicant demands.
Answer 2)
Introduction
The formation of contract is comprised of various essential conditions to be complied with,
for the valid enforcement of a contract in the courts of law. The law of the contract regulates
the matters pertaining to the contract creation, administration and the execution in the New
Zealand. The following report would shed light on the various aspects of the creation of the
contract for the executives of the company A, to be paid attention to for a valid contract to be
created. The report would further relate the said principles to the circumstances of the govern
case, for the understanding of the same. The three key issues in the contract formation in the
stated circumstances would be identified.
The law of the Contract
As per the law of the contract, there are various essential conditions to be complied with for a
valid contract to be created, that can be enforced at the courts of the law. These key
conditions are explained as follows. The first key condition is that there must be intention to
create the legal relationships, offer and acceptance by the parties on the terms of the contract,
a support of the consideration and that the said terms of the contract must be certain and not
vague4.
One of the essential terms of the contract creation to be valid is that the terms of the contracts
must be certain. As per this condition, if the agreement terms are vague, or uncertain, a
binding contract cannot be stated to be formed, as held in the case of Foley v Classique
Coaches Ltd5. The result of which is that the said agreement would not be enforced at the
courts of law, in the events when certain key terms are not settled by the parties. It is vital for
2 Sky City Aukland Ltd V Wu [2002] 3 NZLR 621 (CA)
3 Jones v Sky City Auckland Ltd [2004] 1 NZLR 192 (CA)
4New Zealand Law Commission, The law of contract (Web Page) <
http://www.nzlii.org/nz/other/nzlc/report/R50/R50-3.html>
5 Foley v Classique V Coaches Ltd [1934] 2 KB 1

the parties to at least define the mechanism for the settling of the terms of the contract that
have currently not been settled. As held in the case of Scammel v Ouston6, the terms of the
contract must not be vague so as to construct different meanings by the parties. In the given
situation, there is absence of determination of the quantity and the frequency of the materials
to be supplied by the company B to the company A. In addition, the terms are not clear as to
what are the quality standards as to the “reasonable precautions” that would be taken by the
company B, while supplying the materials for the manufacturing of the clothing line. Hence,
the first issue that has been identified is regarding the uncertainty in the terms of the contract,
and that the parties must state the terms more definitely. If the terms are not stated in definite
form, the same would not be lead to a valid contract between the parties.
In addition to the above, the yet another key condition for the contract formation is that of the
acceptance to the offer. The acceptance refers to the unqualified expression of the offeree, as
to assent to the terms of the contract7. This means that the acceptance by the other party must
be absolute and must not be under the impact of the undue influence, misrepresentation or
with an intention of the fraud. The misrepresentation refers to the untrue or the misleading
statement extended by the offeror to the offeree with an intention to securing the contract. In
the given case, it is vital to note that the unrealistic financial position has been displayed by
the executives of the company B, without the support of the adequate statements. In addition,
in one of the previous instances the questionable materials are used by the company B and the
same are snot supported by the disclosure of the further information to rule out the
possibilities of the danger from the materials to the consumers. There are various case laws
that have been pronounced where the acceptance is sorted by the use of the unfair means and
the said contracts have been regarded as voidable at the option of the parties to which the
misrepresentation has been made. The case law of Howard Marine v Ogden8 is one of the
renowned case laws where the parties had entered into the contract relying upon the statement
made by the other parties without the reasonable grounds of believing the same. The said
types of contract can lead to the fulfilment of the damages to the other parties or the contracts
been rescinded.
One of the yet another important conditions to be complied with while forming a contract is
the capacity of the parties. The law has elaborated a list of the persons that do not possess the
6 Scammel v Ouston [1941] 1 All ER 14
7 Jeffrey Frederick Fitzpatrick et al, Business and Corporations Law, 3rd Edition (LexisNexis Butterworths, 3rd
ed, 2016
8 Howard Marine v Ogden [1978] QB 574

legal capacity of the contract creation, and a contract that is formed with the parties that are
barred from the creation of the contract, such a contract is regarded as void. The law of the
contract states a person of unsound mind, minor, corporates to be not possessing the legal
capacity to the contract. In addition, it has been stated that if the parties to the contract are
under the influence of alcohol or are intoxicated, the result of which is that they are not in
position to form a valid judgement to the terms of the contract, the said contract is still not
stated to be validly created. In the given case, in order to secure the deal, the executives have
made arrangements for the alcoholic beverages as well, apart from the food in an attempt to
create a friendly atmosphere. It must be noted that the terms of the contract that are agreed in
the light of the alcoholic effect would not be stated to be valid and the contract would be
void, as held in the renowned case law of Gore v. Gibson9 it was held that the intoxicated
persons are not in a condition to understand the terms of the contract absolutely and that the
contract cannot be validly formed with such parties. Thus, applying the above case principles
on the given situation, it can be stated that it is not right for the executives of the company to
secure the contract in the said manner, as the parties are not in a position to apply their minds
to the terms of the contract.
Conclusion
The discussions conducted in the previous parts aid to conclude that the chief conditions of
contract creation that are the offer, acceptance, consideration, certainty of the terms and the
capacity of the parties must be complied with, for a valid contract to be formed. The report
identified three key issues in the agreement of the company A and the company B, and the
same must be paid attention to by the executives to ensure a valid contract formation, without
which the contract would not be enforced at the courts of law.
9 Gore v. Gibson (1845) 13 M & W 621; 153 ER 260

Bibliography
Books and Journals
Fitzpatrick, Jeffrey Frederick et al, Business and Corporations Law, 3rd Edition (LexisNexis
Butterworths, 3rd ed, 2016).
Cases
Foley v Classique V Coaches Ltd [1934] 2 KB 1
Gore v. Gibson (1845) 13 M & W 621; 153 ER 260
Jones v Sky City Auckland Ltd [2004] 1 NZLR 192 (CA)
Phillips v Phillips [1993] 3 NZLR 159; 10 FRNZ 110
Scammel v Ouston [1941] 1 All ER 14
Sky City Aukland Ltd V Wu [2002] 3 NZLR 621 (CA)
Other Resources
New Zealand Law Commission, The law of contract (Web Page) <
http://www.nzlii.org/nz/other/nzlc/report/R50/R50-3.html>