• Internal Code :
  • Subject Code :
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  • Subject Name : General Law

Business Law

Issue-

What are the legal rights of Angelo(buyer) under common law of contract in respect of the computer that he wished to purchase.

Rule-

Common Law

Application-

Contract, under common law, is an agreement that is legally enforceable. A contract, is legally enforceable, when the parties intend to create a legal relationship. There are certain essentials of a contract that needs to be fulfilled in order for it to be legally binding on the parties. These essentials are- agreement (offer and acceptance[1]), consideration[2], and intention to create a legal relationship[3]. All contracts are agreements but all agreements are not contract when other essentials of a contract are fulfilled then only a legal contract is formed. There must be an offer to do something and in turn there should be an acceptance to that offer to complete the process of agreement. An offer is proposal made by one party to another by in respect of a good or a service. Modes of offer are written, oral or implied by conduct. An offer is different from intention to offer under common law in Australia[4]. Where one party invites the other party to make an offer regarding a good or service then this is called invitation to offer. Advertisements, goods on a shelf are examples of invitation to offer under common law. Acceptance is final, unconditional consent to the terms of the offer. When the terms of an offer are changed before acceptance then a new offer is said to be made and acceptance is needed separately for new terms of the offer. The offer and acceptance can be verbal, written or by actions that clearly indicates an agreement. An agreement is effective, only when acceptance is communicated to the other party[5]. Here, when Angelo sent an email to Nandini regarding the availability and price of the Apple Model number 5 computers after reading the advertisement and got a reply from Nandini stating that sale price of the computers as $1000 that was an offer. As Nandini did not respond to this email the acceptance was not there and no agreement was formed between the two. But later when Angelo called Nandini’s store asking for the availability, she was informed that 1 computer was available for $1000, this again was an offer but with different terms and these terms were accepted by Angelo verbally when she said that she was willing to buy the computer and that she was coming over to her store. Now, even though both the offer and the acceptance were made on call it will still amount to verbal agreement. One of the other essentials of contract under common law is consideration. Consideration is payment or promise of payment in exchange of other goods or services. Consideration is something of value which is given by the promise to the promisor in order for the promise to be binding as a contract. Here, $1000 is the consideration, stated by the buyer to pay to the seller in exchange for an Apple Model number 5 computer. The third ingredient of a valid contract is intention to create a legal relationship. Under common law, the parties form a commercial agreement are usually presumed that the parties intent is to create a legal relationship as opposed to a family agreement. An agreement, even though there is adequate consideration involved, will not be considered as a legally binding contract unless there is intention to create a legal relationship between the parties. The Court, in Balfour v Balfour[6], held that in family agreements, the parties do not usually intend to form a legal relationship and hence the agreement is not legally binding on the parties. In the case of Winter v Nemeth[7], the court held that not every promise can be enforceable, and that the defendant was helping the plaintiff as a friend and there was no intention to create a legal relationship as they had a social agreement. Here, offer and acceptance was made on commercial terms by a seller and a buyer and hence, there was a clear intention to form a legal relationship between the two. It is clear from the facts that a legally binding contract was formed between the parties, Angelo and Nandini. Common law states that contracts can be made informally; oral contracts are still a valid contract in the eyes of law. In some cases, no oral or written exchange of terms is needed to bind parties to a contract. Once, a legally binding contract is formed between the parties the execution of terms of contract is done. Discharge of contract is mainly done by parties by performing their duties mentioned in the contract. The performance by the parties should be in accordance with the obligations mentioned in the contract and there should be no exception as to such performance of duty. The parties to a contract may even terminate their contract by agreement. Parties willingly use the termination clause in their contract or form another contract to terminate the contract in question. When one party refuses to perform their obligation under the contract, then there occurs a breach of contract. Even partial performance by one party amounts to breach of contract, the effect of which is different from a complete breach of contract. Breach occurs when the seller/service provider provides the goods in question or the service to a third party instead of the buyer. Anticipatory breach occurs when one party refuses to perform his obligation even though he is capable of performing it. The party who is injured by such action may in some cases not accept the breach and retains the right to enforce other party’s obligation and his liability to perform. In some cases, a contract may come to an end due to circumstances which makes the performance of terms of contract impossible. In the case of Taylor v Caldwell[8] the theatre which is hired by one party was destroyed as a result of a terrorist attack which made the use of theatre impossible and hence this resulted in frustration of contract. The doctrine of frustration is only applicable in certain circumstances where the event renders the performance of a contract different than was expected by the parties. In the case of Avery v Bowden[9] a cargoship was hired to load cargo but as the country declared war, the Government declared the loading of cargo at enemy port, illegal which resulted in non performance of the terms of contract. The contract was thereof frustrated. Principle of Frustration results in non performance of future obligations, all the rights and duties of the parties before the frustration will be applicable still. In a legally binding contract, the law will ensure that the promises made in a contract are carried out, this principle is known as doctrine of absolute liability. Under the common law, there are certain remedies or legal rights available for the injured party who suffered the loss as a result of breach of contract. Award of damages is the usual remedy available under common law remedy. If the party does not feel satisfied by monetary remedy, the court, through its discretionary power can order equitable remedies. Mentioned are equitable remedies available to injured party. Rescission[10] is a remedy available for the injured party at common law and equity. This applies where the contract is defective, that is, where there has been a fraud, duress or a total failure of consideration. Restitution is not a remedy for breach but more of a restitution of state of parties before the contract was made. When one party pays the consideration to the other before the other party refuses to perform its duty, the court can order the defendant to pay the amount received by him. The party is entitles to be restored back to the position they were before coming into a contract, the court in certain cases can even order the defendant to pay the principle amount along with interest if any[11]. Under Restitution doctrine of quantum meruit comes into play meaning it flows from the principle of unjust enrichment.[12] Specific performance is again a discretionary power of the court where it can order the defendant to fulfil their obligations under the contract. Rectification is equitable remedy whereby the court can rectify the terms of the contract keeping in mind the intentions of the parties to perform their obligations. Injunction is a remedy provided by the court restraining a party to contract from committing or omitting an act. Injunction will not be awarded by the court if it feels that awarding damages is not a passable remedy. Antor piller order is a search order passed by the court in favour of the plaintiff to inspect, remove or make copies of the relevant documents which may be presented as evidence[13]. Quantum meruit is an order passed by the court for make payment of reasonable value for the benefit enjoyed by the party. Award for damages is the main remedy available under common law to cover the losses incurred by the injured party. The award for damages is only established if there is a breach of contract and the party suffered loss or injury due to such breach[14]. Injured party needs to prove that they have suffered ordinary and/or special loss due to the breach of contract.

Conclusion-

There is a contract formed between Angelo and Nandini which is legally binding. By refusing to sell the Computer Nandini is breaching the terms of the contract. Angelo has the right to move to court for monetary or equitable remedies available to her under the common law.

Issue-

Whether Nandini has acted in breach of contract by changing the decided price of the computer.

Rule-

Australian Consumer Law

Application-

For a contract to be legally binding; the essential of a contract must be fulfilled. These essentials are agreement, consideration and intention of the parties to create a legal relationship. In the present case Angelo agrees to buys a Apple Model Number 5 Computer from Nandini’s store for a sale price of $1000. When Angelo reached the store Nandini changes the said price to $1800. Here, the consideration which was agreed upon was $1000 and as all the essentials of a contract are fulfilled a legal contract was formed between Angelo and Nandini for sale of a Apple Model Number 5 computer for $1000. Such terms are now legally binding on Nandini. Nandini cannot change the price of the computer because she does not intend to sell the computer to Nandini an more. This would amount to unfair terms and breach of contract between the two parties, Nandini and Angelo. As far as the rights of Nandini are taken into account, she had an option of revoking the offer before Nandini agreed to buy and left her house to go to Nandini’s store. In the case Daulia Lt v Four Millbank Nominees Ltd[15] it was said that the obligation of the offeror begins when the offeree starts to perform his duties. Until the offeree has not taken any action the offeror can revoke his offer and As soon as the offeree acts upon performance it becomes unacceptable in the eyes of law for him to decline his offer. Common law states that all the terms and conditions of the contract should be fulfilled by the parties and any non performance of an obligation will amount to breach of contract against which legal action may be taken by the injured party who suffered loss due to such breach. Here Angelo can claim damages if the previous already decided terms of the contract are not performed by Nandini. As far as the new consideration is concerned. Australian Consumer law talks about unfair terms of contract which would apply to this case if Angelo moves to Court. Section 23 and Section 24 of the Australian Consumer Law (contained in the schedule 2 of Competition and Consumer Act 2010) are provisions which related to unfair terms of contract. Section 23 of the Act states that- any term of a standard form contract may be void if the term is proven to be unfair; the contract would be binding on the parties it is operative without the unfair term; the contract is for supply of goods and services or a sale or grant of an interest in land. Section 24 of the Act defines the meaning of unfair. According to Section 24 any term which would cause significant imbalance in the rights and obligations of the parties and is not a necessary term in order to protect the interest of the other party but would cause detriment to the party in question if it were to be functional. A term in contract is considered unfair; when the parties to a contract have unfair rights and obligations under the contract; would cause significant loss to one of the parties to a contract if it were applied. To declare any term to be unfair it is the duty of the court to consider the whole of the contract and not just a part of it. It is done to protect the rights of both the parties. Any term may be considered as unfair if read in isolation but the same could be a normal term that would benefit both the parties while considering all the terms of a contract.[16] A term that allows one party to show a discrepancy in the upfront price payable under the contract is an unfair term. When a clause is added in a contract which allows one party to vary the terms and conditions of the product or service provided by them then that clause will amount to an unfair term. A term that allows one party to decide itself whether it has performed its duties mentioned under the contract will amount to an unfair term. A term that allows a business to disclaim the business’s responsibility for their agents is an unfair term. If contractual agreement with customers is assigned to another business by selling their business and this activity affects the consumer’s rights then it is an unfair term . A term that hinders one party to enforce their legal rights against the other party is an unfair term. Such term allows the party to work without due care and attention towards the other party without worrying about legal consequences. The prohibition of such terms in a contract only applies to consumer contracts. Consumer contracts are contracts made for supply of goods and services or sale of grant of an interest in land ‘ to an individual whose acquisition of the goods, services or interest is for personal use or consumption’. The courts have to find out the purpose of the contract and the extent of the alleged unfair term along with the true intentions of each party.

Conclusion-

After agreeing to sell the Computer to Angelo, Nandini formed a legal contract on the breach of which Angelo has the right to move to court. By changing the consideration of the contract, Nandini is being unfair and exploiting Angelo. This gives rise to action under Section 25 of the Australian Consumer Law. 

References for Angelo Legal Rights

Case Laws-

Crown v Clarke (1927) 40 CLR 227

Australian Wollen Mills Pty Ltd v The Common Wealth (1954) 92 CLR 424

Jones v Padavatton [1969] 2 All ER 616

Carlill v Carbolic Smoke Ball Company [1893] 2 QB 256

Manchester diocesan Council for Education v Commercial & General Investments Ltd [1970] WLR 241

Balfour v Balfour [1919] 2 KB 571

Winter v Nemeth [2018] NSWSC 644

Taylor v Caldwell (1863) 3 B & S 826

Avory v Bowden (1855) 5 E & B 714

Phillips v Brooks Ltd [1919] 2 KB 243

Commonwealth v Mc Cormack [1984] HCA 57

Pavey & Matthews Pty Ltd v Paul [1987] HCA 5

Anton Piller KG v Manufacturing Processes Ltd [1976] ch 55

Alexander v Cambridge Credit Corporation 919870 9 NSWLR 310

Daulia Lt v Four Millbank Nominees Ltd [1978] 2 All ER 557

Director of Consumer Affairs Victoria v AAPT Ltd (Civil Claims) [2006] VCAT 1493

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