Business And Corporate Law : Case Laws

1. Here, IRAC method has been used for structuring the answers to their respected case laws:

Issue: In the presented case, Jane offers her car which is Lotus Super 7 sports model to Jack. Jack accepts the offer. The value of this car as per the current market trends is around $25,000. There is an issue in the given situation as to whether consideration is present or not when Jane offers her car and whether the contract is enforceable.

Rules: Consideration refers to the benefit or value that is exchanged between the parties to a contract. It is the essence of bargain and one of the essential elements of a valid contract (Chang and Thorson, 2010). Australian Contract Law is inherited from English Contract Law which states that consideration is something in return which must move at the desire of the promisor. An agreement not supported by consideration is known as nudum pactum which means naked agreement. Such an agreement is unenforceable in the Australian Court of Law, except for when it is constituted in a deed. If the promissory pays money or provides something to the promisee and receives nothing in return, there is no consideration and hence, the contract is void. Consideration need not necessarily be in cash or kind. It also need not be adequate. However, it must have some ‘value’. It must be real and not illusory (McKendrick, 2014). It must be legal and not immoral or opposed to public policy. Also, a mere gratuitous promise is not enforceable in Australian law due to lack of legal force in want of consideration (subjected to some exception).

Application: This application can be observed in the case of Carlill v. Carbolic Smoke Ball Co., the court ruled that the agreement being void as it was made without consideration. Australian court follows the principle of ‘Quid pro quo’ in case of consideration which means ‘this for that’. It signifies that some benefit must be received by the promisor in return for the promise made by him.

In the presented case, Jack neither did nor promised to do anything in return to compensate Jack for her car. No exchange of promises or benefits exists in the agreement (Stone and Devenney, 2014). An agreement to be enforceable must be supported by valuable consideration. Jane offers her car to Jack without consideration.

Conclusion:  On the basis of above rules and analysis, the court is likely to declare the agreement to be void (Burrows, 2013). So, Jack cannot enforce this agreement in the court of law.

Example:  In 1833, a similar case was happened with Price v. Easton (Latimer, 2012). Easton entered into a contract with X to pay £19 for the work to be done by X. X performed the work. However, after that Easton refused to pay. This led to Price sued against Easton. Australian Houses of Lords decided against the Price’s claim as it was not valid since he had not provided consideration.

Issue: In the presented case, Jane offers her car to Jack, for $25,000. The price of the similar car is also $25,000. Jack accepts the offer. The issue presented here is, whether consideration is present and whether Jack can enforce the contract?

Rules: As per the rules of Australian Contract Law, consideration refers to the mutual benefits exchanged by the parties to a contract. However, past consideration is not considered as a sufficient consideration (Gibson and Fraser, 2013). All agreements are enforceable in the Australian court of law if they are made for good consideration.

Application:  The facts are similar to the case of Coulls v. Bagots. In the presented case, there is an exchange of mutual benefits between Jack and Jane while entering into the agreement. Jane offers her car to Jack for $25,000 and simultaneously, Jane accepts the offer. There exists an offer, an acceptance and consideration.

Conclusion: On the basis of above rules and analysis, the court is likely to conclude that the agreement is valid. Since, the agreement is made for consideration so, it is enforceable in the court of law.

Example:  In Beaton v. Mcdivitt case, Mcdivitt promised to transfer a part of his land to Beaton, when the latter worked on the land as required. Beaton shifted to the land and worked on it as required (Clark, 2010). After some years, Beaton was ordered to off the land. The Court of Law held that Beaton had provided valuable consideration so, Mcdivitt‘s claim is not valid.

Issue: Jane offers her car to Jack, for $2500. However, the market value of this type of vehicle which is in good condition is perceived as $25,000. Jack accepts the offer. The issue presented here is whether consideration exists in the agreement and whether the agreement is enforceable by Jack?

Rules: In Australian law, inadequate consideration is not considered as void. The ‘sufficiency’ of consideration does not mean ‘adequacy’ as it is not the role of the court to determine and value whether a consideration is adequate or valuable or not (Latimer, 2012). This leads to the fact that sufficient consideration may include not only money but also abstract exchanges such as ‘love and affection’ (Wang and Mukherjee, 2014).  However, past consideration is not considered as a sufficient consideration. If something was done or paid or provided before the promise was made, it is not considered as a part of the promise and therefore, is not a consideration in the eyes of Australian law. As per the rules of Australian Contract Law, Consideration need not be adequate as long as it is not illusionary. However, it must have some ‘value’, in the eyes of law.

Application: In the given case, Jane offers her car for a price which is lower than its market value. The facts of the presented are similar to the case of Biotechnology v. Pace. In this case, the court held that the consideration need not be equal in value to ‘something given’, provided that the party has acted fairly.

Conclusion: From the above analysis of rules, it is found that the agreement was made for a good consideration. Therefore, the court is likely to find the agreement between Jane and Jack, enforceable.

Example:   In the case of Chappel v. Nestle (1960), Nestle offered records of one shilling and sixpence along with three chocolate bar wrappers. Chappel who had the copyright for one of the records and filed a suit to claim its royalty of 6.25% of retail price at which that record is being sold (Owens, 2013).

The English court held that the three wrappers form the part of the good consideration even though they were thrown away. Nestle encouraged sales of chocolates, so consideration was valuable to them. Therefore, Chappel was granted the injunction and Nestle was ordered not to sell the records.

The case presented here is involves ‘duress’. North Ocean Tankers entered into a contract with a shipbuilder, to build a tanker. The contract was in US dollars. This contract did not contain provisions for currency fluctuations. After half of the work was done, the value of the US dollar fell by 10%, which has increased ship building cost. The shipbuilder demanded an extra US$3 million for his work or else mentioned that it will not complete the ship. The buyer paid the increased rate demanded from shipbuilder because he already had a Charter for the tanker and it was essential to deliver it on time. After nine months, the buyer sought to recover the excess as having been paid under “practical compulsion”. The issue is as to whether buyer has the right to recover the excess payment?

Rules: As per the rules and principles of Australian Contract Law, duress is defined as any wrongful threat or harm made by a person to compel another person to enter into a transaction against his consent (McKendrick and Liu, 2015). Duress under contract law falls under three categories: first is duress to person, second is duress to goods and third one is economic duress. Duress to person occurs when one party threatens another part to kill him if he refuses to enter into the contract. On the other hand, duress to goods occurs when one party refuses to release another party’s goods in order to compel them to enter into a contract (Erbacher, 2012). Economic duress refers to an illegal economic pressure to force a party to the contract to agree to demands which they would not have otherwise.

Application: Here, the case is related to economic duress. The facts of the case are similar to that of B. & S. Contracts and Design Ltd. v.Victor Green Publications Ltd. and Sundell v. Yannoulatos. In those cases also, the plaintiffs had contracted to erect an exhibition stand, but their workmen went on strike. To get the work done, the defendants agreed to pay £4500 to the workers. Later, the court held that the defendants have the right to recover excess payment from the plaintiff. In the given case, buyer paid the increased amount of US$3million to the shipbuilder. Since the contract made between them did not contain any such provision, so, as per the law there is no provision for the legal =.The buyer was commercially made to shell out compensation for the same. This constituted economic duress as the shipbuilder has caused financial distress to the buyer.

Some parties may have spinster motives and force unilateral variations to obtain additional benefits. They may misuse their advantageous position and halt performance midway in order to secure extra money from the other party to the contract. It determines whether there was a coercion of will on other party in making the contract. Such agreements fell within the principles of economic duress. The threat posed on one party under economic duress by other party is considered as unlawful. Therefore, the English court of law established victim party’s right to rely on duress and held the contract voidable on the ground of duress. In such circumstances, the victim party can sue for intimidation.

From the above detailed discussions and case study, it is concluded that the Australian court may find any undue commercial pressure on buyer as a serious threat to the buyer’s economic interests. This is because the buyer was left with no other realistic alternative, but the promise to pay an extra amount to get his work completed (Wilson, 2016). In these circumstances Australian courts would be more likely to find that the payment had been made under duress and that the client is entitled to recover his excess payment back.

A similar decision of the House of Lords in North Ocean Shipping Co. Ltd v. Hyundai Corporation Co. has provided an example of in an English Court of a successful claim to recover money on the ground of ‘economic duress’ (Cartwright, 2016). In this case, the defendants entered into a contract with plaintiffs to build a tanker (Chitty, 2012). The agreed price was fixed in US dollars. After the payment of first instalment, the US dollars devaluated suddenly by 10%. The defendants threatened to cancel the contract if plaintiffs and their claim was not recognized. The plaintiffs agreed to pay the increased price because they had to deliver the ship on time. After eight months, the plaintiffs claimed the recovery of their excess 10% from the defendants.  Finally, they were entitled to succeed in recovering the excess amount even after eight months. English court held that although the contract was made for good consideration but the excess payment by plaintiffs was made under economic duress. 

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