Analysis of Contract Law Principles in a Case Study

Desklib provides solved assignments and past papers to help students succeed.

Fundamentals of Law
Page | 1

Table of Contents
Introduction......................................................................................................................................3
Question 1........................................................................................................................................3
Question 2........................................................................................................................................6
References........................................................................................................................................7
Page | 2

Introduction
In this report, the provisions of Contract law and negotiability and the Bills of Exchange Act
1909 are discussed. It consist the solution to resolve the issue mentioned under the given case
study. These laws guide the parties to perform their duties and responsibilities as per the
provision mentioned under the law. Further, in the second part, it defines various terms in
accordance with the Property law. For the valid contract, it is important that the parties of the
contract must fulfill all the contractual terms and conditions. A contract is valid only if it fulfills
all the essentials of the contract such as acceptance, consideration, competency, offer, intention,
and certainty.
Question 1
Issue
Is the buyer is liable for any claim against the seller and what is the defense claim by the seller?
Is the buyer is liable for any remedy from the court?
Rule
In accordance with the provisions of the Australian Contract Law, its concern with the promises
and its enforcement made by the parties for the formation of the legal relationship under the
contract. For the valid contract, it is important that all the essential of the valid contract are
fulfilled. For the legal formation and binding of the contract, it is important to fulfill all the under
mentioned five essential of the contract are as follows:
Offer
An offer is an indication made by one person to another person to empress his or her willingness
to accept the certain term and conditions of the contract (McKendrick & Liu, 2015). An offer is
an indication to bound the other person and it is ineffective until and unless it is communicated
to the other party.
Page | 3

For instance, in the case of Crown vs Clarke court states that the acceptance is the responses
against the offer.
In Carlill v Catholic Smoke Ball case, the court held that acceptance held before the contract
performance not requires need to be notified before the performance.
In this case, FOR SALE is not considered as an offer and it termed as an invitation to an offer.
Acceptance
With the acceptance of an offer, it creates a binding contract and forms a legal relation between
the parties of the contract. Acceptance need not be in the express form or may in the implied
form of conduct. It is important the acceptance must be communicated to the offeror. An
acceptance must be failed, if at the time if the offer has lapsed by the virtue of the time (Burrows,
2016). In the electronic, the acceptance must be communicated and the contract is formed when
the acceptance is received electronically instead from the moment it is posted (Adams v
Lindsell). It is important that the acceptance of an offer must be communicated within then
specifies a time period and through specifies the mode.
In this case, the buyer was not ready to enter into the contract and seller argues that he did not
accept and the buyer said that he paid the money next week.
Consideration
It is also one of the most important elements of the valid contract as it is necessary for the valid
formation of the contract. Consideration is an amount for the performance of the promise to
undertake or not undertake any particular amount (Cartwright, 2016). For the valid contract, it is
important that there must be sufficient and legal consideration that enough to determine the
validity of the contract. Consideration is the return of the performance of the promise of the
contract and it is one of the imperative elements of the valid contract (In the case of Foakes v
Beer, the court explains the legal concept behind consideration).In this case, to keep the option
open $5000 is the sufficient amount of considerations.
Capacity
Page | 4

For create a valid contract, it is important that the parties must be capable of entering into the
legally binding contract (Cuniberti, 2013). If there is any lack of capacity under the contract, then
the agreement is considered as void. In the Blomley v Ryan case, the court states that inadequacy
in consideration will be considered as relevant but not determinative.
Intention
For creating legal relations, it is important that the intention of the parties must be legal and
honest (Decock, 2012). If contract is enact to satisfy the illegal and malicious intention than it
considered as an invalid contract. In Baulkham Hills Private Hospital Pty Ltd v GR Securities
Pty Ltd case, the court decides that the dependency of the contract depends upon the intention of
the parties.
Certainty
While the formation of the contract, it is important that the agreement must be sufficient and
certain to accomplish the rights and obligations under the contract (Fried, 2015). For instance, in
the case of Whitlock v Brew, the court decides that agreement must be teamed as uncertain if its
terms are ambiguous and vague. Further, a contract is termed as invalid if the parties failed to
determine all the essential terms and conditions of the contract that determine the validity in
present as well as in the future of the contract.
Applicability
As per the case in the given scenario, it states that on 1 October, the buyer saw a van of courier
parked in a car park for sale by depicting a telephone number and price amounting $25000 in
cash. In this context, the buyer called the seller by explained that he buyer needs to borrow the
money for the purchase of the vehicle and arrange it in the next week. For this, address provided
by the seller to the buyer and said if the buyer wants to purchase the van than the buyer needs to
pay cheque today amounting $5000 and later on the balance money needs to be paid.
At 18th birthday of the buyer, the deals have discussed the buyer from the investor and after
purchase of the van, it was planned by the buyer to commence a service document courier. Buyer
spent amount on giving a cheque for $5000, also spent $1200 on business cards, mobile phones
Page | 5

and flyers. In the first year, buyer earned a profit amounting $50,000 in first year and with this
investor was impressed with a plan of the buyer and agreed to provide loan to the buyer $20,000
for purchasing of the van.
On 25 October, buyer called the seller for pick up the van but seller refused and said that
someone has offered seller for the van amounting $35,000 and seller not encased the cheque of
the buyer yet. Seller offered for cheque deposit and offer that the seller would give the van to the
buyer if buyer will pay $20,000 along with $400 a month for the 25 months. On this, buyer said
that without a van buyer is unable to commence the courier service.
As pert the above-mentioned essentials of the valid contract, FOR SALE is not considered as an
offer and it is termed as an invitation to treat when the buyer called the seller to make an offer. In
terms of acceptance, buyer argues with the seller to accept the cheque for the payment of the
contract in the next week. For forming an option contract, it is important that there must be a
consideration. Under the UCC, it is mention by the seller that the contract needs to be open for a
certain period of time and not require consideration. In this case, $5000 is sufficient for a valid
consideration.
Conclusion
In this case, the court enforces the contract because in this seller already know that the buyer
relies upon the offer. In this seller argue that payment was not made in cash and hence there was
no acceptance. Seller argues that it is not a valid contract and there was only primary and
preliminary negotiations and also argue that he gave a counter offer against the original offer to
the buyer.
On the other hand, buyer can claim for special damages for the breach of the contract like a
waste of time and money for buying a new van. Buyer also argues that he will suffer a loss
$1200 on cards, cell phones, and flyers. These damages are not given to the buyer until and
unless this is a unique van and buyer fully depend upon this van for his business. It concludes
that the buyer recovers the loss of profits until he finds another van.
Page | 6

Question 2
a. Chattel Mortgage
A chattel mortgage is the type of the contract loan that used in some states as per the legal
systems derived under the law. In this type of mortgage, the purchaser borrowed funds from the
lender (the Chattel) for the purchase of the personal movable property. These mortgages are used
by the partnerships, companies and sole traders for funding of cars, business equipment and
vehicles of commercial nature. Its provision is guided under the Personal Property Securities
Act 2009. In this chose in action assist to get all the rights in the personal property for then
enforcement of the action and not taking the physical possession of the property.
b. Perfection
Perfection is a state of completeness and excellence where the additional steps are taken for the
security interest to make it effective in relation to the third parties. Once the security interests are
created provides some rights and duties on the parties who give security. Perfection is of three
types includes possession, filing, and notice (Whittaker & Partner, 2015). In this chose in action
is arises in relation to the security over the debt or other chose in action in relations to the
property rights. This law is guided under the Personal Property Securities Act 2009.
c. Fixture
Fixture means any physical property which permanently fixed to the real property and property
which is not fixed is termed as chattel property. In accordance with the doctrine of fixtures in
relation to the statute, it assists in resolving the contest concern with the title objects. In
Australia, its provision is guided under Property law.
d. Torrens – System of registration for land rights and interests.
Torrens is a system of land registration and system of land transfer in which the state maintains
and creates a register for the holding of the land which treats as conclusive evidence for the
person title recorded in the register (Good, et. al., 2019). Torrens basically works on the three
Page | 7

provisions includes mirror, curtain, and principle of indemnity. This law is guided under the Real
Property Act 1886.
e. Leasehold
In Australia, leasehold is the method of owning property for a fixed term. It is a land which is
leased to a company or a person by the relevant state. It is applicable to all the mineral rights that
are reserved by the Crown. There is an exclusive grant of the right for the occupation on the land.
This law guided under the provision of the Land Administration Act 1997 (LAA).
Page | 8

References
 Burrows, A. (2016). A restatement of the English Law of Contract. Oxford University
Press.
 Cartwright, J. (2016). Contract law: An introduction to the English law of contract for
the civil lawyer. Bloomsbury Publishing. Cuniberti, G. (2013). The international market for contracts: the most attractive contract
laws. Nw. J. Int'l L. &Bus. 34, 455.
 Decock, W. (2012). Theologians and Contract Law: The Moral Transformation of the Ius
Commune (ca. 1500-1650). Brill Nijhoff.
 Fried, C. (2015). Contract as promise: A theory of contractual obligation. Oxford
University Press, USA. Good, K., Oldman, D., Temple, L., & Godfrey, P. (2019). Between the Lines.
 McKendrick, E., & Liu, Q. (2015). Contract Law: Australian Edition. Macmillan
International Higher Education. Whittaker, B., & Partner, A. (2015). A review of the Personal Property Securities Act
2009: final report.
Page | 9