Professional Accounting: Ecological Management And Restoration

According to the Australian Contract Law consideration is a price that exists between promisor and promisee to enforce a promise between them. In certain cases, payment of consideration is not essential to bind a contract but as per the requirements of common law, it is important to provide considerations for enforceable agreement (Restubog et al. 2015).

Further, Enforceable agreement is analyzed by the rules of offer and acceptance between the parties. In order to bind a contract it is important to set out the terms and conditions of the contract with the knowledge of the acceptance party as well as there must be communication between the two parties. The important elements of enforceable agreement are consideration, contractual capacity, intention and certainty (Broadhurst et al. 2015).

In the given case, Jane is travelling overseas and offers to give her Lotus Super 7 sports car to Jack. The prevailing market value of this sports car in good condition is approximately $25,000. Jack accepted the offer but the payment or communication of consideration is not clear in the present case.

As per the regulations and provisions of contract law an agreement is enforceable if there are rules of offer and acceptance as well as communication. Another important element of the enforceable agreement is consideration which may or may not be in monetary terms. However, there has to be some exchange of offer between the parties to enforce a promise for undertaking a particular act (Scollo et al. 2015).

In the present case, the information about the consideration between Jane and Jack is not clear but the communication of offer and acceptance is clear between the parties. Further, the information about the market price of the car provided in the question cannot be regarded as the price of consideration. Hence, in the first case, consideration of the exchange is not present between the parties. Moreover, the agreement is enforceable between Jane and Jack since there exist proper communication and promise of offer and acceptance.

In the second case, Jane offers a transaction for sale of her Lotus Super 7 sports car to Jack for a value of $25,000. The market value of the same type of car in good condition is also $25,000. Jack provides the acceptance of the offer for the sale transaction.

In this case, consideration in a contract is present as a value of exchange in a promise among the parties. As the element of consideration is an essential factor to have an enforceable agreement of offer and acceptance, it is not necessary to have a monetary consideration. However, in the present case offer made my Jane for the sale of car for $25,000 has been accepted by Jack is a valid agreement. Therefore, it can be said that the consideration is present in the second situation.

Additionally, for the purpose of enforceable agreement there are significant elements that should be present between the parties. First element is the rule of offer and acceptance and communication between the parties, which may be oral as well as written. In the given situation both the rules of first element are present between the parties Jane and Jack. The offer and acceptance element and an oral communication for the transaction of sale of car is also present. The second element of an enforceable agreement is consideration i.e. value of exchange for promise between promisor and promisee. In the given case, consideration of $25,000 is accepted by the promise, Jack for the agreement of sale of spots car as an exchange of promise by the promisor, Jane. Another significant element of a legally binding agreement is a capacity to enter the contract. Parties to the contract need to have the ability to enter the contract because minors, unstable or mentally challenged parties may not have the adequate capacity to enter the legally enforceable contract. Other important elements of a valid contract are intention of parties to enter the contract as well as there must be certainty to complete and indentify the rights and commitment to enforce the agreement.

In the last situation Jane offered the sale of her Lotus Super 7 sports car to Jack for a consideration of $2500 whereas the market value of the same in good condition is $25,000. The terms of contract were communicated and Accepted by Jack.

As per the provisions of Australian Contract Act, consideration is a significant element of a valid and enforceable agreement which is an exchange value that is paid or agreed to be paid between the parties. According to the common law, a promise between the parties is enforceable if it is supported by consideration or a value of exchange. However, consideration can be in terms of money, kind or even a promise to pursue the act (Swaminathan 2016). As per the law of Australia, a consideration is giving something in return for an act or promise you received which can either be single or a joint. In case of joint promises or joint contract, consideration might flow from one of the receiver party. It means if the agreement or contract is made between the parties where one is promisor and other two parties are promisee then the consideration might flow from one promisee on behalf of the other one.

Further, the law of contract does not state the mode of consideration as well as the value of consideration. For example the prevailing market price for a product that is exchanged between the parties might be different from that of actual price considered, but that difference in price falls under the criteria of consideration (Martin 2016). Similarly, in the given case, consideration of the contract for sale of sports car was agreed at $2500, which was less than the prevailing market price. However, the contracted amount is considered as consideration under the Australian Contract Act because there is a flow of promise from the promisee, Jack to the promisor, Jane in lieu of the transfer of sports car.

Further, an enforceable contract is required to have some other elements other than the consideration. One of the important elements for a valid agreement is capacity to offer and accept the contract with the terms and conditions. The law of contract act states that the parties to the agreement must have the ability to implement the promise. Parties involving minors, unsound mind, mentally challenged are not eligible to enter the contract. If there is a lack of capacity or ability to make or keep the promise, then the agreement would turn void (Chih et al. 2016).

Another element of a valid contract is intention of the parties to enter the contract. There must be intention to form legal bonding between the promisor and promisee to validate an agreement. This element has been considered to differentiate the agreement in commercial and social contracts. An agreement without the intention cannot be regarded as an enforceable agreement between the promisor and promisee under the provisions of Australian Contract Act (Broadhurst et al. 2015).

Moreover, a valid contract should also have the elements of formalities and certainty among the parties. Although it is not mandatory to have a written contract to make it validate, a contract entered orally is also valid provided there are formalities and certainty in the contract entered. However in certain types of agreement, written documents are necessary to legally bind the agreement like agreements of marine insurance, fire insurance or any other critical and commercial contracts. Apart from that, there must be certainty to validate an agreement between the parties. Sometimes the contract may be vague or indefinite for several reasons, then such contracts are called as uncertain agreement and cannot be enforced as an agreement by the court (Martin 2016).

In the given situation, the agreement between Jane and Jack incorporates all the elements of a valid contract as per the contract law of Australia. Therefore, it can be said that Jack has an enforceable agreement for the transfer of sports car from Jane at $2500.

As per the provisions of Australian Contract Act, a contract is legally enforceable if it has the rules of propose and acceptance along with the terms and conditions. A propose in the contract indicates the willingness to bind the act with the other party as receiver in terms of specified conditions. On the other hand, acceptance is a willingness to agree with the terms and conditions of the offering party. Another significant element of a legal contract is consideration which should be paid or agreed to be paid by the receiver in exchange of deliver the contracted service. It may be monetary or non- monetary but it is essential to have a certain consideration for a valid contract (Chih et al. 2016).

On the other hand, in case of commercial contracts it is important to have written documents to set out the terms and conditions of the legal contract. Such terms and conditions may include the nature of the service, names of the parties involved, price and consideration for delivering the contracted service and tenure of service. However, it is essential to include other terms in the contract with respect to any escalations, fluctuations in currency exchange in case the contract covers overseas transaction or any other possible fluctuations. Although these factors are not certain and cannot be evaluated with certain amount but can be analyzed with necessary speculations and provisions for certain percentage. It is important to forecast and incorporate the uncertain speculations in order to hedge the expected loss from currency fluctuations or any other reasons (Martin 2016).

In the given situation, a legal contract entered between a shipbuilder and North Ocean Tankers for building a tanker by the shipbuilder. The contract agreed for considerations to be paid in US dollars but the same did not have any provisions on gain or loss from fluctuations of currency. Further, the currency of United States being devalued its currency exchange by 10% and as a result shipbuilder encountered currency loss. Accordingly he demanded further payment of US$ 3 million which was paid by the buyer reluctantly. However, the buyer did not attempt to recover the excess payment for around nine- months.

The above case is a situation arising from the absence of escalation clauses as terms and conditions of an enforceable agreement. There was no provision for the recovery of losses due to currency fluctuations. However, the builder forcefully recovered the losses incurred by him which is a cause of undue influence on the contractee, North Ocean Tankers. As per the Contract Law of Australia it is an illegal act that may void the contract and parties to the contract depending on the actions by the parties (Restubog et al. 2015). Further, the provisions of the contract law of Australia states that a party who suffers the loss or damage from the agreed contract is eligible to recover such losses incurred by the party.

In addition, the parties to the contract are required to present the intention and capability to enter the agreement with all the necessary terms and conditions. If the enforceable contract covers overseas transactions then it is essential to incorporate the provisions for currency fluctuations (Swaminathan 2016). The escalations may be based on the prevailing market rates, trends and economic conditions of the contracted countries. In the given situation both the parties, shipbuilder and North Ocean Tankers did not consider the provision for currency fluctuations and consequently the buyer had to bear the extra payment of $3 million.

However, the provisions of the contract law specify the conditions to recover the excess payment if the same has not been occurred as per the terms and conditions of the contract. In the given situation, the buyer did not commence any action on recovering the excess payment for nine months from the date of delivery. In such circumstance, the Australian Contract Act states that the parties to the contract if suffers any losses due to absence of such provisions in the agreement, then such party can claim to recover within six months from the date of completion or delivery of contracted service, whichever is earlier (Restubog et al. 2015).

Since, the buyer did not take action to recover his extra payment for nine months from the date of delivery, the buyer will not succeed in recovering the extra payment made to the seller. However, the buyer can approach to the higher authority for recovering the excess payment due to absence of provision on currency fluctuations providing the valid reasons for not taking actions till the specified time. Apart from that, the buyer has to present necessary documents and reasoning for entering a contract without incorporating specified provisions of Contract Act.

As, a validate contract or agreement is required to be entered between the parties in lieu of consideration, capability, intention and formalities, a contract entered with partial terms is not valid in some cases. Hence, to make such contract valid and legal it is essential to revise the agreed terms and conditions between the parties (Restubog et al. 2015). In other words, the contract between the shipbuilder and North Ocean Tankers could be revised on acceptance of the change in provisions for the currency fluctuations gain or losses. An enforceable agreement should contain offer and acceptance of considerations, tenure of providing services, mode of providing services and other necessary fluctuations. In the given situation the contract between shipbuilder and North Ocean Tankers did not contain complete provisions of the agreement with respect to the foreign currency fluctuations and mode of recovering any such losses. Therefore, the contention of seller in recovering the devalued loss in US currency is not valid and the buyer is eligible and will succeed in recovering the excess payment.

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Martin, P., 2016. Contracts: The scope of releases: A case study. LSJ: Law Society of NSW Journal, 3(2), p.75.

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Scollo, M., Lindorff, K., Coomber, K., Bayly, M. and Wakefield, M., 2015. Standardised packaging and new enlarged graphic health warnings for tobacco products in Australia—legislative requirements and implementation of the Tobacco Plain Packaging Act 2011 and the Competition and Consumer (Tobacco) Information Standard, 2011. Tobacco control, 24(Suppl 2), pp.ii9-ii16.

Swaminathan, S., 2016. The Will Theorist’s Mailbox: Misunderstanding the Moment of Contract Formation in the Indian Contract Act, 1872. Statute Law Review, p.hmw029.