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  • Subject Name : Commercial Law

Case Study Introduction: Sonja and Gerald

Sonja, a 20-year-old woman was studying at Murdoch University in Perth and was living in a shared apartment. Due to the financial constraints, she decided to do a part-time job in Riders Pub as a barmaid to cover her rental expenses of $7000 annually. Her grandfather Gerald visited her and was astonished to see her granddaughter working as a barmaid. He then promised her that he shall look after her rental expenses only if she quits her job. Following this, Sonja quits her job. Later, when she asked for the payment, Gerald said that he was just being a loving grandparent and wanted to convince her to leave the job and that he shall not be paying $7000. Now, Sonja is in a very fix situation as she doesn't have money to pay her rent nor she has her job.

Issue

Can Sonja implicate any legal actions against Gerald?

Rule

Commercial law

Application

Until the 19 century, contractual law was oblivious to the business world. It was after that when it came to be known that dispute can arise amongst contractual relationships as well (O’Sullivan, 2020). This theory was given the name of the classical theory of contracts which sets the roots of the modern theory of contracts (O’Sullivan, 2020). It defined three ultimate rules-first was there should be a reciprocal contract, meaning I promise to do XYZ thing only if you promise to do ABC thing; second the willingness of the parties meaning no pressure from anyone to enter into a contract and third was freedom to the parties to decide for themselves (O’Sullivan, 2020). Furtherance to this, the six golden rules of the modern theory of contract, known as common law came into prevalence. First, intention among the parties to form a contract; second, an extension of offer from one of the parties; third, acceptance of the offer from the extended parties; fourth, valid consideration backing the extended offer; fifth, legal capacity of the all the parties and lastly legality of the contract (Golding, 2020).

In Forrest v ASIC [(2012) HCA 39], it was held that whenever there is a call into question upon the enforcement of a contract, the court generally considers that whether either of the parties has acted on what was promised as an agreement (Turner, Trone & Gamble, 2016).

The contract entered between Sonja and Gerald was a contract as per Australian Commercial Law. There are five types of contract- simple contracts; contracts under seal; express and implied contracts; bilateral and unilateral contracts and valid, void, voidable and unenforceable contracts (Turner, Trone & Gamble, 2016). The contract between the two was an express contract as per the definition. Express contract means when the terms of the contract are said out loud explicitly to the other party, either orally or in writing (Turner, Trone & Gamble, 2016).

Gerald told Sonja that he would compensate her rental expenses only if she quits her job, on which she did quit. So, the six main elements of the contract have been fulfilled in this. Firstly, an offer was made by Gerald. Second, it was accepted by Sonja. Third, there was a consideration amount of $7000 between the parties. Fourth, they both were legally entitled to enter into a contract and fifth the contract was legal as it did not fall under the statute or common law. (Turner, Trone & Gamble, 2016). The element of intention to create a legal relationship, that was there as Gerald misrepresented himself when he was making an offer. For a court to judge whether there was any intention amongst the parties, they focus on the intentions of the parties making social or domestic agreements who do not intend to whereas the other party who does intend the contract be binding (Turner, Trone & Gamble, 2016).

However, this feature is not intended always whether a contract is a family arrangement or a commercial one. It depends upon the surrounding circumstances to decide whether there was a contract or not as per Ermogenous v Greek Orthodox Community of SA Inc [(2002) 209 CLR 95]. In Todd v Nicol [(1957) SASR 72], it was held that though domestic arrangement suggests that parties do not intend on creating any legal relationship, the court judges that on the basis of whether the other party has acted on that arrangement and changed her position (Turner, Trone & Gamble, 2016). This what happened in this case when the Todds left their home and their job to live with Nicol as she promised them that they shall live with her rent-free and would name the house in their name when she dies. However, due to some argument between the two, Nicol tried to remove them. Hence it was held even though in family arrangements, the intention of the parties is not considered, however it would cause a great amount of inconvenience to the plaintiffs.

Conclusion

It can be concluded that there was a contractual relationship between Gerald and Sonja. His refusal to pay $7000 does not liberate him off the contractual obligations. Sonja can file a suit for a breach of contract as he did not fulfil his promise of paying her the rent.

References

Ermogenous v Greek Orthodox Community of SA Inc [(2002) 209 CLR 95]

Forrest v ASIC [(2012) HCA 39]

Golding, G. (2020). The origins of terms implied by law into English and Australian employment contracts. Oxford University Commonwealth Law Journal, 1-29.

O'Sullivan, J. (2020). O'Sullivan and Hilliard's The Law of Contract. Oxford University Press.

Todd v Nicol [(1957) SASR 72]

Turner, C., Trone, J. & Gamble, R. (2016). Concise Australian Commercial Law. Thomson Reuters (Professional) Australia Pty Limited.

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