Business contracts and their enforceability is essential part of the effective functioning of the businesses. In this context, this report analyses whether contract is enforceable or not in the given situations.
Jane is going overseas and offers to give her Lotus super 7 sports car to Jack. The market value for this vehicle is around $25000. Jack accepts. The issue is to identify whether consideration is present and the agreement is legally enforceable.
Analysis
Consideration is necessary to forming a valid contract. According to the Australian contract law, consideration can be defined as the price of a transaction between two parties. In consideration there are two parties, one is promisor and another is promisee (Dickinson, et al. 2014). In many jurisdictions, it is stated that there is no need to consideration in each and every exchange for a legal contract.
In this given case there is no availability of consideration. In this situation market value of the sport car is given which is not worthwhile for the consideration. Jane is offering super 7 sports to jack, and he accepts this offer. However, no clarification of consideration is given, that Jack will give this much money to Jane. According to Australian law, only accepting the offer does not turn into contract. For a valid contract there should be some legality of consideration (Mitchell, et al. 2016). On the other hand, this contract is not enforceable because in this case there is no consideration.
Related case:
In case of White and Bluett (1853), father lent money to his son and said to stop complaining about the distribution of property among his children. After dying his father estate sue to pay the debt. In this there is not presence of consideration so this contract cannot be enforced by law.
In the given case, the consideration is not present and hence this contract is unenforceable by law.
Situation (b)
Jane offers to sell Jack her Lotus super 7 sport car for $25,000 which is also equal to its market value. Jack accepts. The issue is to identify whether consideration is present and the agreement is legally enforceable.
Analysis
In the second case, Jane is offering the sport car for $25000, and jack accepts the offer to purchase the car. In this case the consideration is present because the value of the car is disclosed by the Jane and acceptance of this offer by jack, also depict the legality of contract. On the other hand, the price of car is offered is also worthwhile according to the market value of car. Along with this the two parties are performing the action of contract in exchange of car.
On the other hand, the consideration is also moving from the promissor. According to the Australian contract law, consideration should have value but need not to be adequate (Round, 2013). as well as in this case the value of car is sufficient as Jane offers to Jack. In this case, Jane and Jack agreed upon the promise of purchasing and buying car. This contract is enforceable by law because all the legality related to the consideration has been fulfilled. As in this situation Jack accepting the agreement of contract, leads into enforceable by law. In this case the contract law of Australia is applicable to perform the action by two parties.
In case of Beaton v Mcdivitt (1987), Mcdivitt promised to transfer the portion of her land to the Beaton. Beaton moved to work on the land and worked as he required. After seven years, a dispute arose between the two parties, and Beaton was ordered off. In this case the consideration had been provided for working on the land. On the other hand in this case, the consideration was also sufficient (Australian Contract Law, 2010).
Conclusion:
Adequate consideration is present and the agreement is enforceable.
Situation (c)
Jane offers to sell her car for $2500 which is very low as compared to the market price of $25,000. Jack accepts the offer. The issue here is to identify whether the consideration is present and whether the agreement is legally binding to both the parties.
In this situation, it is clear that the consideration is present and thus, Jack has an enforceable agreement or contract. This is because an offer for sale was made and communicated by an offeror in return for a consideration and the acceptance of offer was communicated by the offeree to the offeror (Latimer, 2012).
However, this situation reflects a case of inadequate consideration. As per the Contract Act, a contract made with inadequate consideration is not considered as void. As long as there is some consideration, the courts are not concerned about its adequacy. Consideration must be sufficient and should have legal value (Gibson and Fraser, 2012). Thus, for an agreement to be valid, the consideration need not be adequate. The adequacy of the consideration is something that can be decided by the parties involved in the contract. The consideration is considered to be sufficient if it is not illusionary, tangible and has some economic value (Clarke and Clarke, 2016). Moreover, a consideration should not be past. This means that a promise, if given after the goods has been exchanged or act performed is not enforceable.
Conclusion:
It can therefore be concluded that in this case Jane is offering her car for a consideration of $2500. Even though this consideration is inadequate, it contains economic value in the eyes of law. Also, since the offer and acceptance is communicated by both the parties, the agreement is enforceable by law. Therefore, Jack has entered an enforceable agreement.
In this case, a ship maker company goes into a contract with North Ocean Tankers to build tankers. In this contract, no provision is included that contains the provision for currency fluctuations. But, after the devaluation of currency of United State by 10 percent, the ship maker demanded more US$3 million as compensation otherwise it would stop the construction of tankers. Therefore, North Ocean Tankers Company reluctantly agreed to pay more because it already booked a charter for the delivery on time. Now, the North Ocean Tanker Company wants to recover the exceed money after nine months of tanker’s delivery. Now, here the issue is whether buyer or North Ocean Company will succeed in recovery of excess money or not.
Contract Law: A contract is a legally valid agreement between two or more parties. It makes the contractual relationship by different elements such as offer, acceptance, and valid consideration between each party (Mckendrick, 2012). In the above case, the contract is made between ship maker and North Ocean Company with a valid legal acceptance and consideration. But, this contract includes only sales provisions and considerations of tankers and does not include any type of consideration about currency fluctuations. Therefore, Duress law can be applied in this case which is described as below:
Duress Law: In a contract, when an individual enters into an agreements as a result of threat than, that person goes to a contract law termed as Duress law. In other words, Duress refers to a situation where an individual acts as a result of threats, violence, and pressure from other person or party (Poole, 2014). Moreover, in Duress law only unlawful physical violence is considered as threats but in present time the courts have identified much economic duress in various situations or cases which is used as unlawful economic pressure. In Duress law there is no free consent as a vitiating aspect in context of contract law. Duress in contract law functions as a common law. The Duress law gives a rise to an action without the amounting of pressure for undue the influence of equity. The effect of finding undue influence and duress is that the contract will be voidable (Sullivan and Hilliard, 2014). But, the doctrine of Duress provides a wide scope for unlawful activities. From the analysis, it is found that duress may be of three types such as duress to the person, duress to goods, and economic duress. There are described as below:
Duress to the person: Duress of the person refers to the threats of violence, and violence from other persons, whether it may be intended or actual. Beside this, there is no need of claimant in threat of violence (Holmes, 2013). The need of complainant is to prove that the pressure was the main reason to enter in contract.
Duress to Goods: Duress of goods relates to threats by one party to another by seizing of goods and property through illegal way. In respect of duress, it is analyzed that the position of goods is seem likely not to survive if it is veteran in court. But, to achieve the claim in court it is essential for one party to demonstrate that another party made extremely pressure and leave no other alternative to avoid this threat (Laws, 2014).
Economic Duress: In economic duress, one party makes illegal economic pressure in order to include another party in the contract (Rudolph, 2013).
In concern of the given case study, the shipbuilder made economic duress on North Ocean Tankers to enter in the contract by demanding extra US$3 million due to the decline in value of currency as a result of unstable economic environment. In this context, the buyer has the right to recover excess money paid to shipbuilder. In economic duress, it is not essential for North Ocean Tankers to prove that the shipbuilder exerted pressure to enter in the contract. It is because economic duress alone is the big and main reason that forces another party to enter in the contract (Gearey et al, 2013).
Similarly it is found that, the duress always makes a contract voidable and provides the right to recover the losses to injured party in terms of goods and money (Samuel, 2013). Moreover, the victim party can sue the other party for threats that are considered unlawful in the eyes of law.
Related Case:
For example, in the Universe Sentinel Case, Liberian registered ship was black listed by a trade union. As a result, no any pull boats would be available, so the ship could not navigate and hence terrible consequences followed. The unions maintained a payment from its welfare fund as a condition to remove the name of the ship from the blacklist. In this case the owner of the ship is liable to pay the money to the union. The union may successfully claim for the recovery of the money under the doctrine of economic duress.
In concern of the above case, it can be concluded that North Ocean Tankers has the right to recover the excess payment from the shipbuilder. It is because, the demand of extra US$3 million will be considered as illegitimate and economic pressure on the buyer was exerted that will make this contract voidable. Along with this, there was no alternative left for the North Ocean Tankers against the protest by shipbuilder in order to resist the pressure to stay on the contract. Additionally, protest by shipbuilder including threats to breach the contract makes the contract voidable in the court and provides the right to buyer to recover excess money from the shipbuilder.
Australian Contract Law (2010) Beaton v Mcdivitt [online] Available at: https://www.australiancontractlaw.com/cases/beaton.html (Accessed: 17 August, 2016)
Clarke, P. and Clarke, J. (2016) Contract Law: Commentaries, Cases and Perspectives, 3rd edn. Australia: Oxford University Press.
Dickinson, A., Keyes, M. and John, T. (2014) Australian Private international Law for the 21st Century: Facing Outwards. UK: Bloomsbury Publishing.
Gearey, A., Morrison, W. and Jago, R. (2013) The Politics of the Common Law: Perspectives, Rights, Processes, Institutions. USA: Routledge.
Gibson, A. and Fraser, D. (2012) Business Law, 6th edn. Australia: Pearson.
Holmes, O. W. (2013) The Common Law. USA: Courier Corporation.
Latimer, P. (2012) Australian Business Law 2012. Australia: CCH Australia Limited.
Laws, J. (2014) The Common Law Constitution. UK: Cambridge University Press.
Mckendrick, E. (2012) Contract Law: Text, Cases, and Materials. USA: OUP Oxford.
Mitchell, R., O’Donnell, A., Marshall, S. and Ramsay, L. (2016) Law, Corporate Governance and Partnership at Work: A Study of Australian Regulatory Style and Business Practice. USA: Rouledge.
Poole, J. (2014) Textbook on Contract Law. UK: Oxford University Press.
Round, D. K. (2013) The Australian Trade Practices Act 1974: Proscriptions and Prescriptions for a More Competitive Economy. Germany: Springer Science & Business Media.
Rudolph, J. (2013) Common Law and Enlightenment in England. UK: Boydell Press.
Samuel, G. (2013) A Short Introduction to the Common Law. UK: Edward Elgar Publishing.
Sullivan, J. and Hilliard, J. (2014) The Law of Contract. UK: Oxford University Press.
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