Discuss About The Incorporate Terms Good Faith Contract Law In Australia?

Agreement

Question:

Discuss About The Incorporate Terms Good Faith Contract Law In Australia?

England’s contract law has significantly influenced the principles of Australian contract law; most of the regulations are similar in both laws. As per Treitel (2003), the crucial aspects of a binding contract are similar in both countries’ contract laws. Following are the essential requirement for a contract to legally bind a person:

Agreement: According to McKendrick (2014), the first condition for a contract to be legally binding under the law is an agreement between the parties of the contract. An agreement is created after an offer is made by one party which is accepted by another party. The offer of a party includes performance or non-performance of a particular task, which must be accepted by another party. The offeror is the person who makes an offer to another party, and the party who accepts or denies such offer is called offeree. The offer made by offeror must be for performance or non-performance of a lawful The offer must be accepted by offeree without any pressure or threat. After the acceptance of such offer, an agreement comes into existence.

Consideration: Every legal contract required a lawful consideration to bind it upon the parties of the contract. A consideration can include anything which is given in lieu of a promise to perform or non-performance of certain activities. An agreement cannot be formed without a legal consideration. As per Carter, Harland & Lindgren (1996), the consideration is an essential requirement for legal binding of a contract. Usually, the consideration for a contract can include money or anything which has a monetary value. It is necessary that consideration has a certain value, without a worth the consideration cannot be legal.

Capacity: The capacity or capability of the parties is necessary while entering into a legally binding contract. According to Bruce (2014), an incapable person cannot enter into a legal contract; any contract without the capacity of parties shall be considered as void ab initio. It is necessary that the person entering into the contract must be able to understand its legal consequences and then give his approval. A party of the legal contract must be above the proper age provided under the law that is 18 years. the person must have a sound mind to understand right or wrong for himself. It is also necessary that the person must not be insolvent.

Consideration

Intention: The intention of both parties to contract must be similar and clear from any influences. As per Brownsword (2000), it is one of the most important requirements of a legal contract to enforce the terms of the contract upon the parties to such contract.

Certainty: The terms of a legal contract must be fixed in order to marketing it legally binding upon the parties. The ambiguous or unclear terms of the contract cannot be legally binding upon the parties of contract (Applebey, 2001).

In order to enforce a legal contract, it is not necessary that the contract must be in written form. A contract can be legally binding if certain conditions get fulfilled such as there must be an offer and such offer must be accepted by another party without any new terms or conditions. The parties of the contract are capable to enter into a legal contract and there must be a legal consideration available for performance or non-performance of certain tasks. Both parties must have a similar intention of legally entering into the contract and the terms of the contract must be fixed. As per Solan (2001), a legal contract can either be written or oral, as per the requirements of the parties. Both contracts, either oral or written is equally enforceable under the law; the court did not distinguish upon the format of a legal contract, except for formal contract. The oral contracts are tough to enforce due to lack of evidence for proving their legitimacy. The parties of an oral contract can get into an argument regarding the terms of the contract. Due to the lack of evidence, it is tough for the court to force terms of the contract upon parties.

This is a significant drawback for parties while entering into an oral contract. While ascertaining the legitimacy of oral contract, the court analyses different pieces of evidence provided by both parties to support their claim, therefore, eventually, the terms of an oral contract can change according to the order of the court. As per the written contract, the terms cannot be changed by the parties without the approval of another party since the terms are written. The court can easily bind parties upon the terms of a written agreement. The parties of a contract can avoid any vagueness in the terms of contract if the terms are written properly in a contract (Nolo 2006).

Capacity

A written agreement is better than oral agreement since, in a long period of time, the parties of contract can forget about the terms of the contract, therefore, written contract ensures the proper implementation of contract terms. A written contract has several benefits over an oral contact, such as a written contract reduces the chances of conflicts at the time of enforcement of the contract. In case of daily business activities, such as selling or providing goods on credit, a written contract is significantly better than oral contracts, thus, it is a good idea for businesses to enter into a written agreement rather than oral contract (Zink, 2013).

Formal contracts are such contracts which require implementation of particular regulations, in order to legally enforce them over the parties of the contract. A formal contract is required to be formed in a particular format and written as prescribed by the law, to enforce it legally. The writing style and particular format of a formal contract are provided by law. It necessary that all such guidelines are meets while making a formal contract. A formal contract does not require a consideration to bind upon the parties. Consideration is not the essential requirement of a formal contract. Another requirement of a formal contract includes fulfillment of contract requirements within twelve months. A formal contract is of two types:

Contract of Record: The contract of record is the contracts which can be legally enforceable by the court without the consent or approval of parties of the contract. One of the essential requirements of a contract to be legally enforceable is the intention of both parties, but in case of a contract of record, the intention of parties is not required. The contract of record includes decree or award issued by a court in a certain case. The decision or judgment of the court is enforceable by law, which does not require the intention of parties. Another example is summoning of a person to perform a certain task or giving his presence in the court for the proceeding of a certain case (Lui 2009).

Contract under Seal or Contract by Deed: For the legal enforcement of a contract under seal, the contract must be formed under a prescribed format by law. The contract by deed required signature and attestation of a witness, the witness is the third person who is not the party of such contract. It is necessary to attest the contract by putting a seal on it and such seal authenticates the terms of the contract. The seal of contract can be recognised as the consideration for a contract under seal. The examples of the contract of deed or contract under seal include lease agreement or debt taken from banks (Ryall & Sampson 2009).

Intention

The intention of parties is significantly necessary while making a contract which is missing in social or domestic agreements, therefore, such arrangements cannot be enforceable by law. But, in the given case, the parties have an intention of legally bounding another party due to the availability of consideration. Each member gives their contribution with a common intention of purchasing the lottery ticket. This contribution is evidence of the intention of parties to form a legal contract, and each member of such contract has legally bound themselves to certain rights and responsibilities as per the terms of such contract (Bohnet, Frey & Huck, 2001).

There are several other cases in which court has given the same judgement. The court decided that an agreement happened between three friends when one of such friend agreed to buy an entry ticket for the other two friends. The contract between the friends was considered as legally enforceable after one friend wins the award. The court provided that prize must be distributed among all the friends because there was a legal contract between such friends (Trevey, 1981). In another similar case, the court provides similar judgement where two friends did not do anything to buy lottery tickets but both of them has the intention to attach to a legal contract. The court takes the television interview and radio interview as an evidence for the involvement of friends into an oral binding contract (Simpkins, 1995) (Chloros, 1960).

It can be concluded from the above observations that similar principles apply in this case as well. The people contributed money to buy the lottery ticket has entered into a legal contract which can be enforced by the court. The person purchased the lottery ticket is liable to share such prize with other contributors. The money contributed by other peoples shall be considered as the consideration for the contract. Therefore, the person who purchased the lottery ticket is liable to share the winning prize with other parties of the contract.

The regulation of vicarious liability includes different types of relationships, as per the law of Torts. One of such relationship includes the association of principal and agent. According to Milner (2006), the principle of vicarious liability legally enforced the principal to the actions of his agent because the work of an agent is completely controlled by the principal. There is a significant difference between the relationship of principal and agent to the relationship of employer and independent contractor.

Certainty

As per Peden (2001), the right and liabilities of an independent contractor are provided under Independent Contractors Act, 2006, in Australia. The rights of independent contractor protected under Fair Work Act, 2009 (Australia, 2009). The legislative significance of an independent contractor is considerably different from an agent. In the eyes of law, an independent contractor and agent are completely different from one another. An independent contractor provides his services to another party by entering into a legal contract with him.

An agent has a legal contract of service with his principal. In case of a contract of service, a person legally binds himself to provide services to such person, which is the basic difference between independent contractor and agent. An agent’s work is completely controlled by his employer; therefore, the principal is legally responsible for the acts of his agent. In case of an independent contractor, the contractor is completely independent of the control of the employer (Hall, 2006).

The terms and conditions of independent contractor’s work are established by the contractor itself. The employer has right to select the job but the method of performing such job cannot be determined by the employer, which is not the case in an agent-principal relationship. The employer of an independent contractor is not vicariously liable for the negligence of the contractor since the contractor works “for” the employer (Atiyah, 1967). An agent can only work for one principal whereas an independent contractor can work for the different employer at the same time. An agent performs various tasks on his principal’s behalf; on the other hand, an independent contractor is hired to perform a particular task only.

References

Economics, G. (2001). Contract law. Sweet & Maxwell.

Atiyah, P. S. (1967). Vicarious liability in the Law of Torts. Butterworths.

Australia, F. W. (2009). Fair Work Act 2009.

Bohnet, I., Frey, B. S., & Huck, S. (2001). More order with less law: On contract enforcement, trust, and crowding. American political science review, 95(1), 131-144.

Brownsword, R. (2000). Contract law: themes for the twenty-first century. Lexis Pub.

Bruce, J. (2014). What is the Requirement of Common Law Legality in a Contract?. MCNA. Retrieved from < https://mcna.com.au/requirement-common-law-legality-contract/ >

Carter, J. W., Harland, D. J., & Lindgren, K. E. (1996). Business law in Australia. MICHIE.

Chloros, A. G. (1960). The Intention To Create Legal Relations. The Modern Law Review, 23(3), 331-334.

Hall, R. (2006). Australian industrial relations in 2005-The WorkChoices revolution. Journal of Industrial Relations, 48(3), 291-303.

McKendrick, E. (2014). Contract law: text, cases, and materials. Oxford University Press (UK).

Milner, H. V. (2006). Why multilateralism? Foreign aid and domestic principal-agent problems. Delegation and agency in international organizations, 107.

Nolo. (2006). What Makes A Contract Valid?. Forbes. Retrieved from < https://www.forbes.com/2006/11/20/smallbusiness-statelaw-gifts-ent-law-cx_nl_1120contracts.html >

Peden, E. (2001). Incorporating terms of good faith in contract law in Australia. management L. Rev., 23, 222.

Ryall, M. D., & Sampson, R. C. (2009). Formal contracts in the presence of relational enforcement mechanisms: Evidence from technology development projects. Management Science, 55(6), 906-925.

Solan, L. M. (2001). The written contract as safe harbor for dishonest conduct. Chi.-Kent L. Rev., 77, 87.

Treitel, G. H. (2003). The law of contract. Sweet & maxwell.

Zink, T. J. (2013). Written vs. Oral Contracts: Why You Should Get It In Writing. Omni Law Group. Retrieved from < https://www.omnilawgroup.com/blog/written-vs-oral-contracts-why-you-should-get-it-in-writing/ >