Contract Law For Commentaries, Cases, And Perspectives

How Contracts are Formed

Discuss about the Contract Law for Commentaries, Cases and Perspectives.

A contract is a legally binding document which comprises of a promise. In a contract, a party offers to do something in exchange for consideration from the other party. This consideration has to have an economic value. Further, the offer has to be accepted, and a counter offer is not considered as an acceptance. The parties to a contract must be free of any duress or undue pressure (Mulcahy, 2008).

Broadly, there are two kinds of contract, a verbal and a written. A verbal contract is formed by the exchange of words and has an ease in the formation process. A written contract contains all the terms of such promise in a written manner which is signed by the parties to the contract.

A contract has six major elements, and these are an offer, an acceptance, a consideration, intent, consent, and the capacity. For a contract to be formed, an offer has to be made. This offer then has to be accepted by the other party. The contract has to have an economic consideration (Mallor et al, 2010). This consideration can be anything which is decided by the parties as long as it has an economic value. The intent to enter into a contract has to be clear. The consent of the parties has to be clearly established. The parties should want to enter into such contract and must not be under any kind of duress or undue influence. Lastly, the parties should be of sound mental capacity and should have the legal capacity to enter into the contract (Frey & Frey, 2005).

In the following parts, the various aspects of a contract and how they affect a transaction have been covered. Further, the remedies available to various parties of the contract have also been stated below.

In the given question, the point of issue is whether a contract has been formed and if it has been formed who were the parties to the contract.

In the case of Alan and Bernard, the offer was made by Alan on November 1, 2005, through his Facebook page. On this offer, a counter offer was made by Bernard in the Facebook wall on November 2, 2005. This counter offer would not be considered as an acceptance as was held in the case of Hyde v. Wrench (1840) 3 Beav 334 (McKendrick, 2014). On November 3, 2005, Bernard decided to buy Alan’s material and posted the consideration amount to Alan and informed Alan about the money. Alan received the cash on November 5, 2005, and kept the money. Further, in this case, On November 3, 2005, Alan had rejected Bernard’s offer stating that he had another offer.

Scenarios between Alan, Bernard, Charleen, and Damien

Here, the offer would be considered as accepted by Bernard. To establish if a promise is being fulfilled by the other party, the payment of consideration is taken into account. Postage is one of the standard mediums of paying the consideration amount. In the case of Adams v. Lindsell (1818) 106 ER 250, it was established that the contract is considered as enforceable at the moment the acceptance is posted (Gibson & Fraser, 2013). So, the method of using the post for paying the consideration is a valid one. Bernard had told Alan to look out for money, which was being paid in exchange for Alan’s material and hence would be considered as his acceptance of the offer. It has already established that a contract has to be supported by consideration for it to be enforceable and so, the element of consideration was present in this case.

As there was a presence of offer, acceptance, consideration, capacity, intention between Alan and Bernard, a contract was formed (Andrews, 2015).

In the case of Alan and Charleen, the offer was made to the friends of Alan who were students enrolling or enrolled in Kaplan Higher Education. Charleen was Alan’s sister and not friend plus he was also not a student of Kaplan Higher Education, so the offer was never made for her. When the offer was not made, it cannot be accepted. There is no intent on the part of Alan to sell his sister the book. So here, no contract was formed between Alan and his sister Charleen.

In the case of Alan and Damien, the offer would be considered to have been made to Damien. Damien is Bernard’s friend and not on Alan’s Facebook. Though, he is a person studying in Kaplan Higher Education. This offer was made for friends who are enrolled in Kaplan Higher Education and is a general reference to the students of Kaplan Higher Education. So, an offer would be considered to have been made in this case.

The offer would be considered as accepted in this case. Acceptance can be inferred from the conduct of a person as was seen in the case of Brogden v. Metropolitan Railway Company (1877) 2 App. Cas. 666 (Riordan, 2003). Here, Damien called Alan to convey his acceptance. Further, on November 04, 2015, Damien paid Alan the consideration. So from his conduct, it was clear that Damien had in fact accepted the offer, and it was communicated. There was a presence of other elements of a contract, viz., content and intent. So, a contract was formed in this case.

Remedies Available in Case of Breach of Contract

So, the contract was formed between Alan and Bernard, and Alan and Damien.

The contract between Alan and Bernard was a valid one as the consideration of Bernard was received before the consideration of Damien. Here, Bernard has two grounds for seeking remedies. The first one is based on the breach of contract. Alan had promised to give the Book along with his handwritten notes. In reality, Alan just provided Bernard the Book and failed to provide the handwritten notes, which he had given to Damien. So, the promise, which was the base of this contract, was not fulfilled and hence, Damien can sue for a breach of contract.

The second ground for seeking a remedy is the breach of contract by the reasons of the sale of a product to another person. When the promise was made between Alan and Bernard regarding the sale of Book and handwritten notes, Alan had to sell the said products to Bernard only. But in reality, he sold the same product to Damien. Further, Alan misrepresented the fact that the book contained the notes and hence is liable for negligent misstatement (Singapore Legal Advice, 2014). So, again a breach of contract was established.

The Book was issued free of charge by the Kaplan Higher Education. But Alan was selling his textbook along with his notes. He was free to do so as there was no restriction on the sale of such book. Further, there is a principle of caveat emptor which means that the buyer has to be aware regarding the price and quality of what they purchase (Bono, 2006). So, Alan is not liable for such sale and hence, Bernard has no remedy available to him on this ground.

Here, Bernard is eligible for breach of contract because of defective performance and contractual damages. In such a case, a court will award monetary damages for the defective performance and contractual damages (Singapore Law, 2016). Further, Bernard could get an order for specific performance whereby Alan would be ordered to give Bernard his notes. Further, an injunction for the sale of Book and notes to Damien could also be attained so as to stop such sale.

Here, it can be concluded that Bernard is the aggrieved party, and so, he can sue Alan for monetary damages and equitable damages (Ayres & Klass, 2012).

There was no contract formed in the case of Charleen and Alan. Without a contract, and breach thereof, no remedy is available to the parties.

A contract was formed between Alan and Damien. But the promise, which was the base of this contract, was not fulfilled by Alan. The reason behind this is that the promise of the product and consideration was already accepted by Bernard, and hence, the contract on the same promise could not be made by Damien. The consideration of Damien reached Alan on November 4, 2015, in the evening. The consideration of Bernard had already been posted on the morning of November 4, 2015, and so Bernard’s consideration would be deemed to be the consideration. This establishes that Alan is in Breach of Contract (Clarke & Clarke, 2016).

Further, Alan never provided Damien the book he promised. He had purchased the same textbook from a store and gave it to Damien along with his notes. So, he had breached the material promise of this contract and was held in breach of contract.

Here, Damien can sue Alan for a breach of contract. He is liable to damages in the form of monetary compensation. Further, Damien has a right to rescind this contract as there was a misrepresentation on the part of Alan that he was selling Damien the Book when in reality he had already sold the Book to Bernard.

So, it can be concluded that Damien is the aggrieved party in this case and sue Alan for monetary damages and get the contract rescinded (Elliot, s2011).

In the case of a dispute, various dispute redressal options are available to the parties to the contract and these include mediation, arbitration, and litigation.

Mediation is one of the methods of alternative dispute resolution (ADR) in Singapore (State Courts Singapore, 2016). It is one of the flexible practices through which an impartial mediator helps the parties in settlement of negotiations so as to reach the solution to the dispute without going to court. In mediation, the solution to a solution is provided rather than deciding the faults of parties involved.

The advantages of mediation the control over the outcome as the parties to the dispute mutually decide the settlement. Further, by not going to Court, the matter remains confidential and private. Since the mediator is impartial, the settlement is considered fair. Mediation is also flexible and is more informal. Lastly, the cost of mediation is usually lesser than the trial proceedings. 

The biggest disadvantage of meditation is that it does not always result in a settlement agreement. Further, the settlement is not binding as mediation does not have the protection of the constitution. Also, the parties cannot be forced to fully disclose any fact, which can be done by law in a trial case. Further, a reliance on previous cases of mediation cannot be made, which is usually done in trial cases.

Arbitration is another form of ADR in Singapore. In Arbitration, the disputing parties refer the case to an arbitrator who is mutually elected by such parties. These parties are bound by the award, which is the decision, of arbitration. Usually, the contracts provide a clause of arbitration which contains the details regarding applicable legislature and a number of arbitrators. Usually, one or three arbitrators are chosen for ADR dispute (London, 2013). In case, a contract does not contain an arbitration clause; it can still be referred to by the parties of the contract. A famous case of arbitration was seen in the case of Yahoo Inc. v. Microsoft Corp (Law 360, 2016). The advantages of arbitration include the freedom to choose the arbitrator (or judge) which cannot be done in the case of a trial. Arbitration is faster, confidential and has the freedom to choose any language. The disadvantages of arbitration are similar to mediation. In arbitration also, the full disclosure cannot be forced. Further, arbitration awards are not enforceable unless a court confirms the award. And even though it is considered speedier than court but the absence of parties or judges in hearings can delay such proceedings.

The most common form of ADR is litigation. In litigation, the aggrieved party can sue the breaching party and the court solves the dispute in such a case. The aggrieved party can claim for remedies in nature of monetary damages and equitable remedies. The remedies are awarded at the discretion of the court and are binding on the parties.

As litigation order is binding on parties, this method is considered as the most favorable. Further, the court can force the disclosure of full facts. Though litigations take time, the final order is binding, lawful and uniform for all the parties. Further, in case a party is not satisfied with the order of the court, they can appeal against such order.

To conclude, there are various ways given under ADR to solve a dispute. But the most favored method is litigation due to its enforceability.

References

Andrews, N. (2015). Contract Law (2nd ed.). UK: Cambridge University Press.

Ayres, I., & Klass, G. (2012). Studies in Contract Law (8th ed.). New York: Foundation Press.

Bono, J. (2006). Caveat Emptor, Let the Buyer Beware: A Consumers Guide to Mental Health Services, Volume 1. Bloomington: AuthorHouse

Clarke, P., & Clarke, J (2016). Contract Law: Commentaries, Cases and Perspectives (3rd ed.). South Melbourne: Oxford University Press.

Elliot, C. (2011). Contract Law (8th ed.). London: Pearson.

Frey, H P., & Frey, M A. (2005). Essentials of Contract Law (3rd ed.). Portland: Delmar Cengage Learning.

Gibson, A., & Fraser, D. (2013). Business Law 2014. NSW: Pearson Australia.

Law 360. (2016). Microsoft Case Is Great Example of Emergency Arbitration. Retrieved on 14/09/16 from: https://www.law360.com/articles/495144/microsoft-case-is-great-example-of-emergency-arbitration

London, A. (2013). Anatomy of an arbitration Part II: Key elements of an arbitration clause. Retrieved on 14/09/16 from: https://www.ashurst.com/doc.aspx?id_Content=9363

Mallor, J., et al. (2010). Business Law: The Ethical, Global, and E-commerce Environment. (14th ed.) Boston: McGraw Hill.

McKendrick, E. (2014). Contract Law: Text, Cases, and Materials (6th ed., pp 80-81). UK: Oxford University Press.

Mulcahy, L. (2008). Contract Law in Perspective (5th ed.). Cavendish, London: Routledge.

Riordan, J.O. (2003). A2 Law for OCR (pp 187-188). Oxford: Heinemann Educational Publishers.

Singapore Law (2016). The Law of Contract. Retrieved on 14/09/16 from: https://www.singaporelaw.sg/sglaw/laws-of-singapore/commercial-law/chapter-8

Singapore Legal Advice. (2014). Breach of Contract in Singapore. Retrieved on 14/09/16 from: https://singaporelegaladvice.com/law-articles/breach-of-contract-in-singapore/

State Courts Singapore. (2016). An Overview Of Mediation. Retrieved on 14/09/16 from: https://www.statecourts.gov.sg/Mediation_ADR/Pages/An-Overview%20of%20Mediation.aspx.