Principles of Business Law - StudentVIP

Principles of Business Law Lecture One: The nature and Function of Law Chapter1:GovernmentandLawinAustraliaLegalandNon-LegalLawsLaworNationalLawisrulesofconductororganizationthatarerecognized,appliedandenforcedbythepowerofthestate.Non-legalrulesarerulesofconductororganizationthatareenforcedbyothersourcessuchasMoralorPhilosophicalbeliefs,religiousbeliefs,naturallaws,Customlawsincommunities.Lawscanoriginatefromno-legalrulesthatthestatedecidestoenforceornewrulescanbecreatedinresponsetoaperceivedneedforregulation.DifferentwayLawactsasaregulatorofbehavior

- Restrictstheuseofforce–forbidsunauthorizedviolence- Prohibitsandpunishparticularbehavior- Permitandrewardparticularbehavior- Creationofrightsanddutiesthatcanbeenforcedincourt

JusticeistheobjectiveofLawhoweversometimesgovernmentsusetheirpowertoenforceunfairrulessuchasdiscriminatorylawswhichfavorraceorgender.Whenruleoflawthatworkedinthepastdoesnotprovidefairandjustoutcomeincurrentsituations,requirementofjusticeandcertainty/predictabilityconflict.LawmakersGovernment:Federal,Stateandterritorylevel

- Electedlegislatures–legislativeactscreatedbyparliament- Courts–Casesdecidedbycourts

CategoriesofLawLawsaregroupedincategoriesaccordingtothetypeofconcept,situationorconducttheyreferto.CategoryofLaw DescriptionJurisprudence ScienceofPhilosophyofLawInternationalLaw Agreementsbetweensovereignstates

andinternationallyobservedcustoms. NationalLaw PublicLaw ConstitutionalLaw Organization,Powersandprocessesof

government

AdministrativeLaw Rulesgoverningtheprocessofofficialdecisionmaking

CriminalLaw Prohibitionandpunishmentbythestateofconductconsideredharmfultothegeneralcommunity

PrivateLaw CivilLaw Creationandenforcementofprivate

legalrightsanddutiesbetweenindividuals.Verylargecategory,encompassingalsocontact,tortandpropertyLaw

TortLaw Liabilityforharmwrongfullycausedbyonepersontoanotherpersonortotheirproperty.

ContractLaw Privateagreementsthatgiverisetolegallyenforceablerightsandduties.

AgencyLaw Useofarepresentativetoacquireordischargelegalrightsorduties.

Consumerprotectionlaw Legalprotectionsforconsumersintheirdealingwithsuppliersofgoodsandservices.

CorporationsLaw Thecreation,organizationandadministrationofcompanies.

PropertyLaw Acquisitionandtransferofprivaterightsingoodsandland.

PublicLawinvolvesthepartyofgovernmentbeingpresentwhilePrivateLawinvolvestwoindividualParties.BusinessLaw:BusinessLawarerulesthatarerelevanttobusinessandaretakenfromothercategoriessuchascontactLaw,agency,tortLaw,bankingLaw,InsuranceLaw,employmentLaw,corporationsLawandtaxLaw.10territoriesofAustralia:-NorthernTerritory(mainland)-AustralianCapitalTerritory(mainland)-AustralianAntarcticTerritory-Ashmore&CartierIslands-ChristmasIsland-Cocos(Keeling)Islands-CoralSeaIslands-JervisBayTerritory-HeardIslandandMcDonaldIsland-NorfolkIsland

AnatomyofLaw

OriginoftheAustralianLaw:RomanLawandtheEnglishLawStructureofGovernment:Constitutionsofthecommonwealthandthestates,Constitutionalmonarchy,OrgansandPowerofAustralianGovernments:TheCrownLegislature(parliament–Senate+houseofrepresentatives),Executive(PM+governors),Courts(High,Appeal,Superior,Intermediate,Lower)LocalgovernmentsPoliticalparties

Lecture 2: Legislation as a source of Law Chapter2:LegislationLegislation:Legislationmeanslawthatisenactedbythelegislature.Thecommonwealth,thestatesandtheself-governingterritoriesallhavelegislaturescapableofmakinglawintheformoflegislation.Localcouncilshavesimilarpowertoenactsubsidiarylegislationcalled‘locallaws’or‘by-laws’.Aparticularlegislativeenactmentisalsoreferredtoasan‘act’ora‘statue’.LegislaturesinAustraliaincludethebicameralandunicameralgovernments(Assembly,Council)oftheCommonwealth,statesandself-governingterritories.Legislativepowers:State:Legislatureofeachstateisgivenagenerallegislativepowerbytherelevantconstitution‘tomakelawforpeace,orderandgoodgovernment’.Self-governingterritories:Theyhaveabroadpowertolegislatesimilartothatofthestatesbutitissubjecttotheoverridingpowerofthecommonwealthparliament.Commonwealth:Totheextentthatitisproperlyenactedinaccordancewithitsconstitutionalpowers,commonwealthlegislationappliesthroughoutAustralia.However,thegovernmenthasmorelimitedlegislativepowersthanthestateandterritorygovernments.ThesepowersarelistedintheCommonwealthconstitution.Someareexclusivetothecommonwealthparliamentwhileothersaresharedwiththestates.

- TheCommonwealthlegislationenactedunderthesharedpowerswilloverrideanycontrarystateorterritorylegislationtotheextentofanyinconsistency,thesharedpowersoperateasalimitationonstateandterritorylegislativepowers.

Legislativeprocess:Foralegislaturetovalidlyenactnewlegislation,recognizedrulesandproceduresmustbefollowed. Proposalsornewlegislation:Procedureinthehouseoforigin:Procedureinthehouseofreview:BacktoHouseoforiginwithorwithoutamendments:FinalstagesbeforethebillbecomesoperationalaslawBills:Completeddraftoftheproposedlegislationiscalleda‘Bill’.

Procedureinthelegislature- Wherethebillisfirstintroducediscalled‘houseoforigin’andthehousetowhich

thebillproceedsis‘houseofreview’.FirstreadingoftheBill:Abillisintroducedintoalegislaturebyhavingitlistedforitsfirstreading.Atthefirstreading,amemberofthehouseproposedthat‘theBillbereadforthefirsttime’.Thehousevotestoapprovetheintroductionofthebill.Onlythe‘longtitle’oftheBillisthenreadoutandnodebatetakesplaceatthisstage.Afterthefirstreading,printedcopiesoftheBillaredistributedtoallthemembersoftheHouse.

- Exception:Exceptforthefinancialbillswhichmustfirstbeintroducedintolowerhouseofbicameralparliament,billscanbeintroducedintoeitherhouse.

Secondandthirdreadingofthebill:TheministerresponsiblefortherelevantportfoliomovesthattheBillbereadasecondtime.TheministerthendeliversaspeechoutliningtheprovisionsoftheBill,providingreasonsforitsintroductionandexplainingwhattheproposedlegislationwillachieve.Debatesofthebillthentakeplace,afterwhichthemembersofhousevoteonthemotionthattheBillbereadasecondtime.IfamoredetailedexaminationoftheBillisrequired,theHousebecomesthe‘committeeofthewhole’andthemembersconsidertheBillclausebyclause.Or,alternatively,theBillcanbesenttoasmallercommitteewhichwillexaminetheBillandreportbacktothefullHouse.AftertheBillpassesthesecondreadingandcommitteestage(ifany)thebillproceedstoathirdreading.TheministermovesthattheBillbereadathirdtimeandhousevotesonthemotion.(rarelyanydebateatthisstage).ProcedureintheHouseofreview:Inbicamerallegislature,thefirst,secondandthirdreadingsarerepeatedintheHouseofreview.IfthehouseofreviewpassestheBillwithoutanyamendments,thentheBillproceedstothenextstage.Butifamendmentshavebeenmade,theBillmustbereturnedtotheHouseofOrigin,whichthenmayacceptorrejecttheamendments.Iftheagreementcannotbereached,thegovernmentcaneitherabandonthelegislation,orresolvethedeadlockbydissolvingthegovernmentandcallingageneralelection.Royalassent:OncebothHouseshaveapprovedtheBillwithoutfurtherchanges,theBillisthensenttotheQueen’srepresentativetoreceiveRoyalassent.ThecrownhasatheoreticalpowertorejectlawspassesbyanAustralianlegislaturebutinpractice,theapprovalofthecrownis,byconvention,aformality.Commencement:Afterreceivingroyalassent,theBillbecomesanActandispublishedinthegovernmentGazette.Theactmaystatewhenitsprovisionsaretobecomeoperational.E.g.Samedayastheroyalassentisreceivedoraparticulardateetc.IftheActdoesnotspecifywhenitwillbecomeoperational,thenitwillcomeintoeffect28daysafterreceivingroyalassent.

StructureofanActTitle:TitleofanActbroadlyindicateswhatthelegislationisaboutandtheyearinwhichitwasenacted.Actsarealsonumbered.Tableofprovisions:Itislikeanindex–itshowsthestructureandcontentsoftheActinsummary.Notes:FoundattheendofanActandprovideusefulinformationthatisnotincludedinthelegislationitself,suchasdatesonwhichministergavethesecondreadingspeech.Royalassent:ThedateinwhichanActreceivedRoyalassent.Partsanddivisions:Varioussectionsareoftengroupedintoseparatepartsdependingonsubjectmatter.PartscanbefurthersubdividedintoDivisionsandSubdivisions.Purposesection:ItsetsoutthebroadobjectivesoftheActasawhole.Usefulinassessingtherelevanceoftheacttoaparticularquestionandininterpretingambiguousorunclearprovisionsintheact.Commencementsection:Dateinwhichprovisionsbecameoperationalorafter28daysafterroyalassent.Definitionssection:Importantwordsandphrasesaregivenspecialmeaning.Othersections:CitingandfindinglegislationCitingoflegislation:NameofAct+yearinwhichitwasenacted+abbreviatedreferencetocommonwealth,stateorterritorylegislationthatenactedit.

- InthelawlibraryorontheelectronicdatabaseInterpretinglegislationTherearerulesprovidedbythelegislationoninterpretinglaws,thatensureadegreeofconsistencyandpredictabilitytointerpretationquestions.Literalapproach:Meaningofwordinordinaryandnaturalsense.Thepopularandordinarymeaningiffoundbyconsultingadictionary.ThecourtinterpretsliteralmeaningoftheActinthelightoftheenactinglegislature’spurpose.Goldenrule:Goldenruleisappliediftheliteralapproachgivesanabsurdresult.WordsinanActneednotbegiventheirordinarymeaningifdoingsowouldresultinan‘objectiveabsurdity’.Itissparinglyusedandonlytoavoidtheeffectofobviousdraftingerrorsinlegislation.Thecourtchoosesameaningthatisconsistentwiththeoverallintentofthelegislation.Purposeapproach:Thecourtwilltakeaccountoftheapparentpurposewhichtherelevantlegislaturehadwhenenactingit.JudgesuseIntrinsicevidence(foundintheact)orextrinsicevidence(recordofparliamentarydebatesetc.).Speciallydefinedwordsarefoundinthedefinitionssectionandthesespecialdefinitionsoverridethemeaningthatmightotherwisebeattachedtothosewords,suchastheirordinarymeaning.

Lecture 3: The role of courts in law-making Chapter3:CaseLawCases:

- TaylorvJohnson- BalfourvBalfour- CohenvCohen- MerrittvMerritt

1. Informtheperson

Rememberthelatinnamesofeachcase–ThereasonformakingthejudgementLearnthecourthierarchyJudgesandLaw

- JudgeshavenodirectauthoritytomakeLawsuchastheconstitutionhowever,Judgesindirectlymakelawwhentheydecidecases.

- TheextentofpowergiventoacourttohearanddecidecasesaccordingtotheLawisreferredtoasacourt’s‘jurisdiction’.Samewordisusedtorefertothegeographicalareawithinwhichacourtexercisesitspower.

JudgesapplyanestablishedruleofLawbutiftheyareunabletofindestablishedLawthenJudgescan:

1. DeclarearuleasaruleofAustralianlawthefirsttime.(e.g.derivedfromnaturalorcustomLaw)

2. InterpretanexistingruleofLaw,toestablishitsmeaning(occurswhenexistinglawisunclear,uncertainorambiguousandneedstobeinterpreted)

3. ExtendanestablishedruleofLawtoanewsituation.4. IfthereisnoruleatallthenJudgecandecidewithoutmakingdirectreferencetoany

ruleandthesebecomesnewrulesthatwillbeusedinsimilarfuturecases.CaseLawCommonLaw:InthebeginningtherewasnosinglesystemoflegalrulesthatwereappliedthroughoutthewholeofEngland.Instead,locallawsandcustomsoperatedindifferentpartsbutafterwardsacentralauthoritywasestablishedandbegantodevelopandapplymoreuniformrules.Thenewuniformrulesreplacedlocallawsandwerecalled‘CommonLaws’.Equity:AnotherkindofcourtcalledCourtofChanceryexistedinEngland.Thiscourtheardcertaincasesandappealsfromcommonlawcourtsandthecourtpaidspecialattentiontonotionsofjusticeandfairness(equity).Sorulesoriginallyestablishedbycourtofchancerywerecalled‘rulesofequity’andexistedalongsidecommonlaw.CourtscandrawonCommonLawandequitytoresolvecasesandarejointlyreferredtoas‘case-law’or‘generallaw’.Therearenomoretwoseparatecourts.The‘ratiodecidendi’ofacase

- Itconsistsofthelegalprinciples,ruleorreasonwhichthecourthasappliedtothematerialsfactsofthecasetoarriveatitsdecision.Containsmaterialfactsandpreciseruleoflaw.

- Itisanessentialpartoftheprecedentandisflexibleandsometimesdifficultthingtoascertainwithabsoluteprecision.

‘Obiterdicta’meanssurroundingwordswhicharepartofajudgementthatisnotratiodecidendi.

TaylorvJohnson(1983)151CLR422Inhighcourt,forthefirsttimethisequitableprinciplewasappliedtothistypeofcaseasthecourtdecidedthatitwouldbeagainstgoodconsciencetoallowTaylortoenforcethecontract.Ratiodecidendi:Inequity,itiscontrarytogoodconsciencetoenforceacontractif:

- Oneofthepartiesisseriouslymistaken,and- Thesecondpartywasawareofcircumstancesthatindicatethefirstpartyis

mistaken,and- Thesecondpartdeliberatelyactstoensuretheerrorisnotdiscovereduntilitistoo

late.‘Staredecisis’principle‘Staredecisis’means‘letthedecisionstand’.i.e.Letitbeseenaslayingdowntherulebywhichlatersuchcaseswillalsobedecided.Themechanismbywhichjudgescreatelawiscalledthedoctrineofprecedentandisreferredtoascaselaw.DoctrineofPrecedentstatesthat:previousdecisionofsuperiorcourtsmustbefollowed,unlessthecasescanbedistinguishedontheirmaterialfactsandthereforetreatedassufficientlydifferenttojustifyapplyingdifferentrules.Basicallysaysthatwheneveracaseisdecided,itprovidesamodel(precedent)ofhowacasebasedonsimilarfactsoughttobedecidedinthefuture.WhenRatiodecidendiisbinding:

- Whencourtsarerankedinseniority,witharightofappealfromlowerlevelcourtstosuperiorcourts,saidtohavehierarchicalrelationship.

- Lowercourtsareboundtofollowthepreviousdecisionsofsuperiorcourtsinthesamehierarchy.

- Thedecisionsofcourtsoutsideofhierarchyarenotbinding,butmaybepersuasive.Procedureincivillaw

1. Purposeoftrail-Litigation:Concernedwithresolvingissuesthathaveariseninthedisputebetweentheplaintiffandthedefendant.

2. Exchangeofpleadings:Firststageoflitigationinvolvesanexchangeofwrittendocumentsinordertodefinethenatureandextentofthedispute.Plaintiffsendsstatementofclaimtodefendantanddefendantreplieswithinawrittenplea.

3. Provingthefacts:Factsareascertainedbyevidencefromwitnessorbyproducingdocumentsorartefacts.Courtdistinguishthetruefactsbyweighingconflictingevidenceandtakingintoaccountprobabilityandcredibility.

4. Ascertainingthelaw:Eachsideaddressesthecourtandsuggestwhatrulesoflawarerelevant,theirmeaningandhowtoapply.

5. Decidingthecase:Courtdecidesrelevantlawsanddecidethecaseinfavorofplaintiffordefendant.

CourtHierarchyinAustraliaLawreportsAfteracaseisdecided,awritten‘lawreport’ispublishedsettingoutwhatthecasewasaboutandthejudge’sdecision.Thereportsofindividualcasearepublishedincollectionscalled‘Lawreportseries’.Eachcasehasitsowncitation,consistingofname,year,volumenumber,abbreviationofLawreportseriesinwhichitispublishedandapagenumber.

E.g.TaylorvJohnson(1983)151CLR422PartofLawreport

1. Courtandkeydates2. Nameofthecase3. Catchwords4. Headnotes:Outlineofthereport-asummaryofthefactsofthecaseanda

statementoftheissuesunderconsideration5. Judges–names6. Judgements:Judge’sreasoningandconclusions–Beginswithsummaryofthe

materialfactsofcase,thenraiseparticularquestions,thenreviewrelevantlawandapplytherelevantlawandgiveadecision.

Casescanbefoundinthetextbook,LawreportssectionofalibraryandonAustliiwebsite.BalfourvBalfour(1919)2KB771Ratiodecidendi:Whenmarriedpersonsenterintodomesticagreements,thereasonableassumptionisthattheydonotintendsuchagreementstobelegallyenforceable.OnlypersuasiveinAustralianCourtasitisdecisionofcourtinEngland.CohenvCohen(1929)42CLR91Ratiodecidendi:SameasBalfourvBalfourRatiodecidendiisbindingonAustraliancourtsthatarebelowtheHighcourtinthehierarchy.(i.e.Allcourtsbutthehighcourtitself)MerritvMerrit(1970)1WLR1211Ratiodecidendi:Whenmarriedpersonswhoserelationshiphasalreadybrokendownenterintoagreements,evenofadomesticnature,thereasonableassumptionisthattheydointendsuchagreementstobelegallyenforceable.OnlypersuasiveinAustraliancourtsbutsinceitisbasedonvaliddistinctionbetweendifferentcases,itisverylikelytobefollowed.

- TheoutcomesarerelatedinthatifmarriedcouplemadeanagreementwhileinamityitisnotenforceablebyLawbutifitwaswhentheywereindisharmony(i.e.separatedorabouttoseparate)thenitcanbeenforcedbyLaw.

UsingCaseLaw:

1. Findoutthefactsofthenewcasetobedecidedandidentifythelegalissuesthatarise.

2. Lookforpreviouslydecidedcasesthatmayindicatehowcourtswilldecidethepresentcase.

3. Checkthatthenewcaseandtheearlierdecisionsaresufficientlysimilarontheirmaterialfacts.

4. Willthepreviousdecisionbebindingorpersuasive?5. Identifytheratiodecidendiofthepreviouslydecidedcases.6. Applytheratiodecidenditothenewcase.

Lecture 4: Contract Formation Chapter5:MakingacontractContractsAcontractisalegallyenforceableagreementbetweentwoormorepersonswhoarecalledthe‘parties’tothecontract.Itisimportantbecauseitenablesbusinesswithpersonyoumaynotknowwellenoughtotrust.Itiscalledlegallyenforceableatlawbecausewhencontractismade,thepartiesbecomesubjecttolegal‘obligation’whichisalegallybindingdutytogiveordosomething.Itconsistsofadutyandarightandeachofthedutiesowedinvolvesacorrespondingright.

Noteveryagreementthatisenteredintoisacontact,evenifparitieshavecapacitytoacquirelegalrightsandobligations.Manyagreementssuchassocialagreementsbetweenfriendsordomesticagreementsbetweenfamilymembersarenotcontacts.

Contractualobligationsbindparitiesuntiltherelevantdutiesarefulfilledordischarged.Dutiesarenormallydischargedbypartiescarryingoutthepromisescontainedintheircontract.Ifapartyfailstocarryouttheirpromises,itisa‘breachofcontract’andthelegalobligationsremainunchanged.

Contactscomeintoexistencewhenfollowingthreeelementsareallpresent:

1. Intentiontobelegallybound2. Sufficientdegreeofagreementontermsofthecontact3. Either(a)formalexecutioninadeedor(b)considerationwhichisexchangeof

‘somethingofvalue’whencontractismade.

Objectiveapproachusedtoascertainfactsratherthana‘subjective’one.Meaningwhatwouldareasonablepersonbeabletodrawfromtheobservablefactsofthecase.

InferringanintentiontobelegallyboundAnagreementisonlylegallyboundifthepartiesintendedtobelegallybound.Intentionisjudgedobjectively.Thecourtaskswhether,inthecircumstances,areasonablepersonwouldregardtheagreementasintendedtobebinding.CarlillvCarbolicsmokeballCo[1893]1QB256Facts:Carbolicsmokeballcompanyproceedpatentedsmokeballsandmarketedthemaseffectivemeansofpreventedinfluenza.Thecompanypublishedanadvertisement,offeringtopay100eurostoanyonewhopurchasedthesmokeball,usedthemandstillcaughtInfluenza.Todemonstratetheseriousnessoftheiroffer,thecompanydeposited1000eurosinabankaccountfromwhichtopaytherewards.WhenCarlillneverthelesscaughtinfluenzaafterusingsmokeball.Sheclaimedthemoneyandthecompanyrefused.Ratiodecidendi:Theadvertisementwasunlikeotheradvertisements.Itamountedtoanofferthatwascapableofacceptance.Thefactthatitstatedthat1000euroshadbeendepositedinabankbythecompanyexpresslyforthepurposeofmakingthepromisedpaymentsdemonstratedthatthepromisewasintendedtobelegallybinding.

Alsoanactperformedinexpectationofaknownpromisemayconstitutetheconsiderationgiveninexchangeforthatpromise,eventhoughactisperformedbeforesaidpromisebecomeslegallybinding.AcceptancebyconductAgreementsbetweenfamilymembersWhenclosefamilymembersreachdomesticagreements,itisnormallyinferredfromthefactsthattheseagreementsarenotconsideredtobelegallybindingunlessthereisadditionalcircumstancesuchastheywerenotinamitywhentheagreementwasmadeandthenitisconsideredacontractastheynolongerrelyonhonorableunderstandings.BalfourvBalfour[1919]2KB571CohenvCohen(1929)42CLR91MerrittvMerritt[1970]2AllER760AgreementsbetweenfriendsAgreementsmadebetweenfriendsandagreementstoprovidevolunteerorcharitableservices,arenotintendedtobelegallybinding.Soforittobeconsideredbindingtheremustbeadditionalcircumstancefromwhichlegallybindingcanbeinferred.ErmogenousvGreekOrthodoxCommunityOfSAInc(2002)209CLR95Facts:ErmogenousmovedcountrieswhenofferedtobeHeadofGreekOrthodoxChurchinAustraliaandworkedasarchbishopfor23yearswherehewaspaidsalarybycommunity.Attheendofhisappointment,Communityrefusedtopayhisaccumulatedleavewhichhewouldreceiveunderlegallybindingemploymentcontract.Ratiodecidendi:AgreementwaslegallybindingandErmogenousreceivedleavebecauseanagreementwithaministerofreligiondoesnotitselfmeantheagreementisnotintendedtobelegallyministerifothercircumstancesindicateotherwise.AgreementsreachedincommercialcontextItisusuallyinferredthatthepartiesintendtobelegallybound.Ifnotintendedtobelegallybound,thenitmustbeprovedthroughfactsbasedonfeelingsofhonororfriendship.EssoPetroleumCoLtdvCommissionersofCustomsandExcise[1976]1AllER117Facts:Essoproducedcommemoratecoinsascollector’sitemsandpromisedtogivemotoristafreecoinwitheverygallonsofEssopetrolpurchasedtopromoteitssales.Excisearguedthatfreecoinswereproducedinquantityofgeneralsaleandsoweresubjecttopurchasetax.Ratiodecidendi:ThetermsofthepromotionwereintendedtobelegallybindingpromisebecauseEssostoodtogainfromthepromotionexclusivelytoitscustomers.Thus,althoughofferisdescribedasgift,itcouldbeinferredfromcommercialcircumstancesthatitwaspromisemadewithintentiontobelegallybound.ConditionalagreementIfthepartieswant,theycandelaythefinalcreationofacontract(e.g.untilsomeeventoccurssuchassigningofaformalwrittenagreement).Surroundingfactsmayindicateanintentiontoavoidbeinglegallyboundatalluntilformalitiesarecompletedorthatonlyperformanceoftheiragreementisintendedtobedelayedandagreementbecomeslegallybindingevenbeforeitisformalized.

MastersvCameron(1954)91CLR353Facts:CameronagreedtosellherfarmtoMasters.Bothpartiessignedawrittenagreementwhichdescribedthepropertyandsetoutotherdetailsoftheagreement.Therewasalsoprovisionindocument–“agreementismadesubjecttothepreparationofaformalcontractofsalewhichshallbeacceptabletocameron’ssolicitorsonabovetermsandconditions”.Ratiodecidendi:Cameronhadintendednotbelegallybounduntilformalcontractwaspreparedandsigned.Thewords‘subjectto’thepreparationofformalcontractindicatethis.Inanothercaseafterwards,itwasconsideredlegallybindingifpartieshadagreedonsufficienttermsforaworkabletransactionandintendtobelegallyboundevenifanotherformalagreementwithmoretermswastoproceed.Eitherexecutionofthecontractinadeed,ortheexchangeofconsiderationFormalagreementsexecutedinadeedFormalagreementsarethosethatareexecutedinadeed.Adeedisawrittendocumentwhichissignedandsaidtobesealedbyitsmaker.Itmustalsobewitnessedbysomeonewhoisnotpartytotheagreement.Makermustintendtodeliverthedeedtotheotherpartyandtobeboundbyit.InformalagreementsandtheneedforanexchangeInformalisonenotexecutedinadeedanditistreatedlegallyenforceableonlyif,atthetimeofcontracting,eachpartygivessomethinginexchangeforwhattheyaregetting.WhateverisgiveninexchangeforpromiseiscalledConsideration.ConsiderationmustbeofvalueRuleisthatconsiderationdoesnothavetobeofequalvalue,onlyhastobesomevalueanditmustasleastbe‘real’ratherthanillusory.Pastconsiderationisnotgoodconsiderationanditcanevenbeapromise.ThomasvThomas(1842)114ER330Facts:Mr.Thomasexpresseddesirethatifhiswifeliveslongerthanhimthensheshouldbeallowedtoliveinhishouseuntilherdeath.Afterhisdeath,MsThomas’sexecutorsenteredintoaleaseagreementwithMsThomastooccupythehouseinreturnfor1euroayearandpromisetokeepthehouseingoodrepair.Decision:MsThomasisentitledtoenforcetheagreementasthepromisetopay1euroandkeepinghouseingoodconditionisaconsiderationeventhoughitmaynotbeofequalvalue.StilkvMyrick(1809)170ER1168Facts:Onashiptrip,twomendesertedshiphalfwayandCaptainmadepromisetoremainingcrewtopaythemthedesertedcrewspay.Onreturncrewmemberswerenotgiventheextrapaytheywerepromised.Ratiodecidendi:Crewhadgivennothingofvalueinexchangeforthecaptain’spromisetopayextrabeyondwhattheywerealreadylegallyboundtodo.Aswhencrewsignedforvoyage,theypromisedtodowhatevernecessaryincaseofanyemergenciestobringtheshiphomesafely.Sotherewereboundtodotheextraworkandsonobindingcontractforextrapay.

Bilateral+UnilateralcontractsBilateralcontractsisexchangeofpromisesanditissufficientforbindingcontract.E.g.Employee+EmployerInUnilateralcontractsthereisnomutualexchangeofpromisesatthetimeofagreement.Onepartypromisestobeboundtodosomethingonlyiftheotherpartyhadalreadycarriedouttheirtask.Ifanacthasbeenperformedbyonepersonintheexpectationthatanotherperson’spromiseinexchangeforthatactwouldbecomelegallybindingassoonastheactisdone,thentheactisregardedasexecutedconsiderationnotpastconsideration.PracticalbenefitasconsiderationRuleinStilkvMyrickcanleadtounfortunatedecisionssowhereonlypastconsiderationhasbeengiven,acloseranalysisshowsthatthepromisehasobtainedsome‘practicalbenefit’,orthatthepromisorhasundertakensome‘practicaldetriment’bygivingthepromise.Andsuchpracticalbenefitordetrimentmaybetreatedassufficientconsideration.MusumecivWinadellPtyLtd(1994)34NSWLR723Facts:MusumeciisaleaserandWinadellisalesserofashopatmall.Musumeci’sfruit+vegbusinessdeclinesandsoheasksWinadelltoreducerent.Ratherthanlosingthetenant,Winadellagreedtoreducerentby30%.DuetootherissuesWinadelldecidestonothaveMusumeciastenantandsoarguesthatleaseatreducedrentalwasnotlegallybinding.Ratiodecidendi:Thepromisewassupportedbyconsiderationastherewasbenefittoonepartyanddetrimenttoanotherandsolegallybinding.AgreementExtentofagreementneededReachingofagreementbetweenpartiesisessentialfortheformationofcontract.Agreementmustalsobereachedforallthethingsneededforaworkabletransactionandagreementonanymatterthateitherpartyhasindicatedmustbeagreeduponbeforethecontractiscompleted.IllusoryPromisesNotanagreementwhendetailsofpromisesarelefttobefixedatthediscretionofthepromiseralone,asnothingofsubstancehasbeenagreed.PlacerdevelopmentLtdvCommonwealth(1969)121CLR353Facts:Thegovernmentsaiditwillpaysubsidytoimportersoftimerproducts.Subsidywastobe‘ofanamountorataratetobedeterminedbythecommonwealthfromtimetotime’.Governmentpaidsubsidyatstartbutlaterstopped.Acompanyhasalreadyimportedtheirtimerandwantedsubsidy.Decision:Notlegallyenforceableasapromisetopayunspecifiedamountistorestinthediscretionofthepromisor.Conditionalagreement

Ifthepartiesmakethecreationofalegallybindingagreementconditionalonaneventthatmayormaynothappen,thecontractiscreatedonlyifandwhentheconditionisfulfilled.RelaterstoMastersvCameronReachingagreementbymeansofofferandacceptanceReachingagreementmayinvolvenegotiation,butnocontractiscreatedunlesspartiesclearlysignalthatnegotiationsisfinishedandarereadytobindthemselvesonparticularterms.Thisconsistsofan‘offer’madebyonepartyand‘acceptance’ofthisofferbythepersontowhomitwasmade.FacetoFacecommunication:agreementreachedwhenacceptanceofofferiscommunicatedtotheofferor.ByPost:Acceptancebyposttakeseffectwhentheletterofacceptanceisposted,notwhenitisreceived.HenthornvFraser[1892]2Ch27Facts:FraserofferedtosellhousestoHenthornandgave14daystoacceptoffer.Afterreceiveoffer,HenthornpostedaletterofacceptancetoFraser.Andafteracceptanceletterwaspostedbutbeforereceived,FraserwasofferedhigherpriceandattemptedtowithdrawoffertoHenthornbyarguingacceptancebypostwasnotauthorizedandsonoteffectivebeforeitwasdelivered.Decision:Acceptanceofofferwaseffectiveassoonasletterwaspostedbeforeofferorattemptedtowithdrawoffer.Postisappropriatemethodofcommunicationandwasofferdidnotindicatethatpostalacceptanceisnotpermitted.ByFaxortelex:acceptanceiseffectivewhencommunicatetotheofferorasitisinstantaneouscommunication.BrinkibonLtdvStahagStahlundStahlwarenhandelsgesellschaftmbH[1983]2AC34Facts:Brinkibonm,acompanyinEnglandwantedtopurchasesteelfromStahaginVienna,Austria.Anumberoftelexeswereexchangedbetweenparties,oneofwhichwasacceptanceofferbyBrinkibontoStanhag.Adisputelateraroseanditwasimportanttodeterminewherethecontractwasmade.Decision:AcceptancetookeffectwhentelexwasreceivedbyStahagsoinVienna.Byemail:Iftheofferorprovidedanemailaddresstosendacceptancethenacceptancetakesplacewhenemailreachesthatsystem.Ifnot,whenthecommunicationcomestoattentionoftheaddressee.AcceptancebyconductAcceptancecantakeplacebyconductaswellasbywords.Whenanofferismadeinvitingtheoffereestoacceptthetermsbyperformingspecifiedact,whenoffereedoesthoseacts,itisacceptanceofoffer.SilenceorinactionisnotacceptanceofofferCarlillvCarbolicSmokeballCo[1893]1QB256AdvertisementsAdvertisementsanddisplaysarenotgenerallyoffersandarecalled‘invitationtotreat’(invitationtonegotiate,askingpotentialcustomerstomakeanoffertobuy).PartridgevCrittenden[1968]2AllER421

Partridgeoutanadvertisementsaying:‘Bramblefinchcocksandhens25/-each’.HewasprosecutedbyRSPCAforthestatutoryoffenceofunlawfullyofferingwildbirdforsale.Decision:Notanofferinthefulllegalsense,onlyaninvitationtoenterintonegotiationswithinterestedbuyerswhothemselvesmayoffertobuytheadvertisedbirds.IdentifyingthosetowhomanofferismadeOffercanonlybeacceptedbypersonorpersonstowhomitisaddressed.Attemptfromthirdpartytoacceptofferisanofferbythethirdpartytotheoriginalofferor.Offercanbetoanyone,groupofpeopleortoeveryone.CarlillvCarbolicSmokeBallCo[1893]1QB256ExpiryandwithdrawalofoffersOffercansetperiodoftimeafterwhichitexpires.Ifthereisnotimelimit,thenitexpiresafterareasonabletime.Anoffercanwithdrawofferbeforeitisaccepted.Soapersonwhoneedstimetoconsideranofferwouldneedtoobtainanoptionwhichobligesofferortokeepofferopenforcertaintime.Counter-offersIfanoffereeindicateswillingnesstocontract,butondifferenttermstothosecontainedinoriginalofferthanthisiscounter-offer,whichdestroystheoriginaloffer.CapacitytocontractPersonswithfullpowertobindthemselvesbycontract

- Adultpersonsofsoundmindhavefullcontractualcapacity- Corporationandgovernmentbodieshavesamelegalcapacityandpowersasnatural

adultperson- Minorshavelimitedcapacitytobindthemselvesbycontracteithertoacquire

necessitiesorinagreementsthatarefortheirbenefit.Necessitiesmaycomprisefood,cloths,equipment,accommodation,medicalservicesandeventransport.Minor’shascapacitytobeboundbycontractforemploymentaslongasagreementisonbalanceandforminor’sbenefit.

- Avoidanceofcontractsbyminors:Acontractthatgivestheminterestinpropertyofapermanentnatureorwhichinvolvescontinuingobligationcanbeavoidedifminorchoses.Ifdoesnotavoidthemenforceableagreement.

- Mentaldisability:Ifapersonwithmentaldisabilitycannotvalidlyenterintoapermanentcontractbutifdisabilitydoesnotpermanentlyimpairthemthentheyareboundbycontract.Unless,atthetimeofcontract,thedisabilitypreventedthemfromunderstandingtheiractionsandtheotherpersonwasaware(orshouldhavebeenaware)oftheirimpairedmentalcondition.

PrivityofContractAcontractcreatesobligationsonlybetweenthosepersonswhoagreetobeboundtoeachotherwhicharepartiestocontractandanyoneelseisastrangertocontractisathirdparty.DoctrineofPrivity:Itmeanscontractisprivatematterbetweenthepartiestotheagreement.Onlyparitiesacquirerightsanddutiesundercontractandresultantobligationscanonlybeenforcedbytheparties.PricevEaston(1833)110ER518

Facts:BuilderownedPricesomemoneybutdidnothaveanymoneytorepayhim.EastonagreedtopaymoneytopriceiftheBuilderdidsomeworkforEaston.BuilderdidtheworkbutEastonfailedtoPay.PricedidnotsuethebuilderashehadnomoneyandbuildercannotsueEastonasEastondidnotpromisetopayanymoneytohim.SoPricetriedtosueEastontoenforcepromisethatEastonmadetobuilderthatEastonwouldpayPrice.Decision:PricecannotsueEastonasheisnotpartytotheagreementbetweenEastonandbuilderunderthedoctrineofprivity.Exceptions:Ifacontracthastheeffectofcreatingan‘equitableinterest’forathirdparty,thenthatthirdpartywillbeallowedtoenforcethecontract.E.g.Insurancecontractwherethirdpartyreceivesbenefit.AgencyandPrivity:Itdoesnotapplywhenonepersonmakescontractasanagentforanotherperson,sotheagentdoesnotbecomeapartytothecontractandPrincipalbecomesboundbythecontract,asthoughtheymadeitpersonally.Establishingcontract:

1. Sufficientagreement2. Intenttobelegallybound3. DeedorConsideration4. Sufficientcapacity5. Parties