Is there an enforceable contract between Dagon and Congregation of the Cthulhu Mythos Pty Ltd? Did Dagon breach his contract, if any, with Cthulhu Mythos Pty Ltd?
A legally binding and enforceable contract if formed through an offer, acceptance, parties having intention to create a legal relation, consideration being moved the parties, parties having the capacity to enter a contract and the non-existence of any vitiating factors such as misrepresentation, fraud and mistake.
An offer is an invitation to another person to enter a contract. Where the offer is accepted there is an agreement. However, the existence of a contract depends on the existence of other elements of a contract. It not necessary that the offer be made to a single person, it can be made to a group of people or to the whole world as found in Carlill v Carbolic Smoke Ball Co[1]. The offer can only be accepted where it was communicated to the other party[2]. In R v Clarke[3] the court found non-existence of a contract. It held that when Clarke accepted the offer he did not have the offer in his mind. Clarke’s situation was likened to a person who is ignorant of the offer or not aware of the existence of the offer. In those circumstances there is no valid agreement or contract.
In this case scenario, Cthuihu Mythos Pty Ltd communicated the offer to Dagos and Dagos was, also, aware of the terms of the contract. The person, target of the offer, must accept the offer and communicate acceptance to the person who made the offer. The communication of the acceptance must be in the manner the person who made offer intended. Where there has been no waiver of communication, it has to be made expressly or impliedly as was held in Felthouse v Bindley[4]. Where a person makes a counter offer, the initial offer is considered to be dispensed with and the person cannot purport to accept the same[5]. This was the holding in Hyde v Wrench[6] where a plaintiff made a counter-offer for purchase of wool and later purported to accept the initial offer. The court held that there was no contract as there was no offer to accept. Acceptance of the offer creates an agreement between the parties. Dagos accepted the offer by signing the contract and sending it to Cthuihu Mythos Pty Ltd. Under the circumstances there exists an agreement between Dagos and Cthuihu Mythos Pty Ltd.
Another element is that parties must have intended to create a legal relation. Where parties have waived or exempted the existence of a legal relationship, the courts have held non-existence of a contract. In Rose and Frank Company v JR Crompton & Bros Ltd[7] an agreements was stated to be meant for record purposes and not to be treated as a formal. The court held that there was no contract between the parties but just an agreement and that the instrument subject of litigation was a honourable pledge. The wording used by the parties should determine the intention of the parties to create a legal relation. However, in commercial relationship existence of intention to create legal relation is presumed and the party disputing the existence of the intention bears the burden of rebutting the presumption[8]. The arrangement between Dagos and Cthuihu Mythos Pty Ltd, even though involves religion, is commercial in nature. The relationship is that of employment, Dagos providing his services at a cost. The existence of intention to create a legal relationship is, therefore, presumed.
Dagon must have provided consideration in order to claim existence of a legally binding contract and be able to enforce it[9]. In Tweddle v Atkinson[10] the court refused to impute existence of a contract where the plaintiff did not provide consideration, it was his father who provided the consideration. The consideration must move from the person seeking to enforce the contract[11]. In Dunlop Pneumatic Tyre Co Ltd v Selfridge and Co Ltd[12] there was no contract between the parties since Dunlop did not provided consideration. The consideration need not be adequate but sufficient. In Chappell and Co v Nestle Co Ltd[13] the court dismissed a claim by a copyright holder who thought the consideration he accepted for advertising campaign was insufficient. In executed contract, such as employment contract, consideration is the provision of services and it is considered to pass at the time the contract is made[14]. The contract between Dagos and Cthuihu Mythos Pty Ltd is executed contract. Dagos, therefore, provided consideration through promising to offer the services in the agreement. The consideration moved from Dagos to Cthuihu Mythos Pty Ltd and is not insufficient.
The parties must have had the capacity to enter a contract. Cthuihu Mythos Pty Ltd is a proprietary company and therefore, capable of entering into a contract based on the Corporations Act 2001. There are no existing disabilities such as insolvency to take away that ability. Dagos is also an adult of sound mind. As such both parties had the capacity to enter the contract. It is also necessary that the contract be complete to be enforceable. Incomplete contracts are not enforceable as was held in Australian Securities and Investment Commission v Fortscue Metals Group Ltd[15]. In May & Butcher Ltd v R[16] a term postponing price agreement into the future was held to be incomplete and hence the contract unenforceable. The terms of the contract must also be certain and clear. Where the terms are vague and ambiguous the contract will be held to be unenforceable. The contract between Dagos and Cthuihu Mythos Pty Ltd was complete. The terms of the contract were also complete.
The issue, now, is whether Dagos breached the contract and whether the breach, if any, warranted the termination of the contract. Dagos undertook to, among others, hold bi-monthly fairs to raise revenue for the congregation. The Church was providing plastic bags for free but has now decided to sale. However, Dagos has failed to charge for the plastic bags. This was a breach of the terms of the contract. Dagos was also accused of failing to make an offering to Azathoth. This is not a term under the contract, however, it can be implied as a term of the contract based on custom and usage[17]. Dagos is a religious leader bound by the religious practices and customs of the church.
The court in Con-Stan Industries of Australia v Norwich Winterthur Insurance (Australia) Ltd[18] discussed circumstances under which a custom or usage can be implied into a contract. The court stated that the implication of the custom or usage is a question of fact, the custom must be well known and it can presumed that everybody entering into such a contract acquiesced into it, the custom must not be inconsistent with an express term and that not knowing the custom is not bar to implying the term. The making of offering is well known, it is not inconsistent with any term of Dagos’ written contract and it is immaterial that he had no knowledge of the practice. Therefore, Dagos breached his contract with the company.
The consequences of breach depend on whether the term is a condition or warranty. Breach of a condition entitles Cthuihu Mythos Pty Ltd to terminate the contract, however, breach of a warranty only entitles Cthuihu Mythos Pty Ltd to damages[19]. A term is a condition if a party would not enter a contract if it is excluded as was held in Tramways Advertising Pty Ltd v Luna Park (NSW) Ltd[20]. The term must be essential to the contract[21]. The Mythos’ holiest event was when the star Fomalhaut was visible from Earth and High Priests had to make sacrifice. This was a very important event and was core to the agreement between Dagos and Cthuihu Mythos Pty Ltd and without its existence the company would have not entered the contract. The breach of that term entitled Cthuihu Mythos Pty Ltd to terminate the contract.
Conclusion
There was a valid legal and enforceable contract. However, Dagos breached the terms of the contract by failing to offer sacrifice and to sale the plastic bags. Offering of sacrifices was a condition and breach warranted termination of contract.
References
Carter, J W, G J Tolhurst and Elisabeth Peden, ‘Developing the Intermediate Term Concept’ (2006) 22 Journal of Contract Law 268
Gibson, Andy and Douglas Fraser, Business Law 2014 (Pearson Higher Education Au, 2013)
Gillies, Peter, Business Law (Federation Press, 2004)
Latimer, Paul, Australian Business Law 2012 (CCH Australia Limited, 2011)
McKendrick, Ewan and Qiao Liu, Contract Law: Australian Edition (Macmillan International Higher Education, 2015)
Oughton, Sourcebook on Contract Law (Cavendish Publishinh, 2000)
Sainsbury, Maree, Moral Rights and Their Application in Australia (Federation Press, 2003)
Stone, Richard, Modern Law of Contract (Psychology Press, 2005)
Suff, Marnah. Essential Contract Law, (Cavendish Publishing, 1997)
Carlill v Carbolic Smoke Ball Co [1893] 1 QB 256
Felthouse v Bindley (1862) 142 ER 1037
R v Clarke [1927] HCA 47
Hyde v Wrench (1840) 3 Beav 334
Rose and Frank Company v JR Crompton & Bros Ltd [1923] 2 KB 261
Jones v Vernon’s pools Ltd [1938] 2 All ER 626
Dunlop Pneumatic Tyre Co Ltd v Selfridge and Co Ltd [1915) AC 847
Chappell and Co v Nestle Co Ltd [1960] AC 87
Australian Securities and Investment Commission v Fortscue Metals Group Ltd [2011] FCAFC 19
Australia v Norwich Winterthur Insurance (Australia) Ltd (1986) 160 CLR 226
Tramways Advertising Pty Ltd v Luna Park (NSW) Ltd (1938) 61 CLR 286
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