• Internal Code :
  • Subject Code : LAWS5002
  • University : University of Sydney
  • Subject Name : Contract Law

Case Study: Dendy & Co

To: Claire Dendy

From:

Date: 18th May 2020

Re: Summary of facts prepared by Cecil Barber

Respected Ma’am,

The facts of the case involve an agreement between Bob and Eunice in the context of extending the family house owned by Eunice for a sum of $22,000. However, although Bob sends an email to Eunice, she fails to sign it. It is important to note that written approval is not necessary to enter into a legally binding contract involving construction within the jurisdiction of New South Wales, especially when the parties involved fulfil the requirements of the contract. Special mention must be made to Section 7b of the Home Building Act 198, which mentions that contractors must provide a signed copy to the other party.1 Despite being a licensed contractor, Bob failed to send Eunice a copy of the contract within five days and only sent the same before commencing the work. Section 7b outlines a penalty in this regard, where failure by corporations involves 80 penalty units and any other case involves 40 penalty units.

In terms of contractual elements, Australia is primarily governed by the common law system as it is member o the Commonwealth. It does not have any specific codified statute in this context, albeit certain consumer contracts are covered under Schedule 2 of the Competition and Consumer Act 2010.2 The key elements as required within a legal standing and valid contract include an agreement between the two parties, consideration or a bargain requirement, capacity to enter into the contract, intentions by the parties involved to enter into legal relations and certainty within the contract.

In terms of an agreement, Bob and Eunice had several conversations regarding the extension of the family house where Eunice verbatim agreed to the price quote mentioned by Bob amounting to the sum of $22,000. While Bob failed to send the quote over email as discussed, Eunice, have not received an email, sent a message to bob stating how the requirement for the extension was urgent and she would sign the quote as an when it is sent and asked Bob to begin the works as soon as he was ready.

Naturally, it fulfils the requirements of the necessary elements to form a contract, where both the parties reach an agreement for a consideration of $22,000 and comprise of the capacity to enter into the contract. Furthermore, the intentions to discharge or perform the contract are evident in actions undertaken by both the parties. However, the element of certainty is an area of concern, especially since Bob failed to send Eunice the contract quote. Several cases involving disputes relating to contracts and agreements have been deemed as uncertain as the terms were too vague or ambiguous in terms of the courts being able to attribute meaning clearly and concisely. One of the most prominent examples in this regard relates to the matter of “Whitlock v Brew [1968] HCA 71, (1968) 118 CLR 445, High Court”, where the agreement was held voidable due to the inability of the courts to attribute any clear meaning.

However, the same for the case involving Bob and Eunice would involve the exercise of judicial discretion as Bob had mentioned to Eunice that the extension would require an additional $5,000 for it to be completed as the bricks from Craig were unavailable and the workers would require additional compensation as the extension work would take longer. However, after the extension came to completion and Bob furnished an invoice claiming the payment of $27,000, Eunice states that she would not pay the bill and she had assumed that the $5,000 was contained within the $33,000 estimate. However, when Bob mentioned that she would have to pay an additional $5,000, he stated that it would be ‘extra.’ Eunice agreed to the same as well, but the verbatim nature of the agreement certainly increases the complications involved therein in terms of credibility and ratification.

It is important to discuss this in light of how terms or provisions within contracts are viewed under the Australian legal system. They are usually classified into express or implied terms, whereby express terms involve enforceability and may be written or oral and must make up a part o the contract. Similarly, implied terms relating to the imposition of obligations that exist within the express terms albeit in an underlying manner. The discussion between Bob and Eunice regarding the additional $5,000 required would be considered as an express term as Bob had mentioned the word extra. Furthermore, Eunice had also agreed prior through an email that she would sign the quote as and when she receives it but needed the work to b started immediately.

While Bob would be liable to pay the 40 penalty units for failing to send a quote within 5 business days, the contract would essentially be valid and standing due to the fulfilment of all the necessary elements. An important case law where the express terms were upheld despite the same not being completely present in writing relates to the matter of “State Rail Authority of New South Wales v Heath Outdoor Pty Ltd (1986) 7 NSWLR 170”, where the judge allowed for the standing of the contract due to the nature of the terms that were discussed orally in the form of promissory statements. 

It would also be important to discuss the legality on the contract as put forward by several precedents under the Australian legal system. Agreements of the contract are primarily considered as illegal when they are specifically prohibited by a statue or infringe any rule or existent public policy. Important case law is a matter of “Yango Pastoral Company Pty Ltd v First Chicago Australia Ltd [1978] HCA 42, (1978) 139 CLR 410, High Court” where the contract was held as illegal and void due to implicit prohibitions by the statute.6 However, the contract involving Bob and Eunice would not be illegal as they do not violate either requirement as necessary for illegality to be entailed within a contract.

Considering the above discussion, Bob would certainly have the rights to claim for the amount after deduction of the 40 penalty units for failing to send a quote or the contract specification within 5 business days. Furthermore, his claims for compensation relating to the delay of payment could also be upheld in terms of causing delay or harassment. The principle of consequential loss may also be applied in the case where Bob suffers additional losses such as the loss of workers or suppliers due to Eunice’s non-payment. Two criteria are required for the applicability of consequential losses including the loss arising naturally from the breach of the contract and a certain degree of probability that would have been contemplated by the parties as a breach of the contract.

Moving onto Bob’s communication with Craig, one of his suppliers, Craig offered the supply of 1,000 bricks for a sum of $1,200. Craig also agreed that he could lower the price to $1,000 upon Bob’s request and would get back to Bob regarding the same. However, when the bricks were required as the construction work had already begun, Craig responds to Bob’s enquiry about the bricks saying that the supplies were running short and he could do $1,800 as the best price. As no further agreement was reached, Bob eventually had to obtain the bricks from another supplier for a sum of $2,000.

Regarding the claims that Bob would have against Craig, it would be important to discuss the doctrine of frustration that is a legally recognised principle that leads to the incapability of the parties to discharge their responsibilities within a contact. Although Bob and Craig had mutually arrived at an agreement where Craig would provide 1,000 bricks for the price of $1,200, Craig later states that there was a shortage of supply and that the bricks could not be offered at the price discussed before. The doctrine of frustration states that the inability to perform would not be considered a breach of contract if the event occurring after the reaching of the agreement makes in physically or legally impossible and that the party seeking to rely on the frustration was not at fault for the event.

Additionally, no clause or provisions could be contained within the contract that hints that the party was to bear the risk of occurrence of such an event either in an express or in an implied manner. The judgement passed in the matter of “Joseph Constantine Steamship Line Ltd v Imperial Smelting Corp Ltd (1942) 648 AC 154” is relevant in this regard, where the doctrine of frustration was relied upon to relax the defendant’s liability in claims for a breach of contract due to the unforeseen nature of the event.8

In conclusion, Bob would have hiss full rights towards the payment owed by Eunice after the deduction of the 40 penalty units. Considering his rights towards Craig, it would have to be verified whether the shortage was in actuality or a deliberate attempt by Craig to extort higher prices. Given that the shortage was genuine, Bob would have no rights for claims against Craig.

Bibliography

Statutes

"Competition And Consumer Act 2010", Legislation.Gov.Au (Webpage, 2020) <https://www.legislation.gov.au/Details/C2011C00003>

"NSW Legislation", Legislation.Nsw.Gov.Au (Webpage, 2020) <https://www.legislation.nsw.gov.au/#/view/act/1989/147/whole#/part2/div1/sec6>

Case laws

"Contract Law Casenote: Whitlock V Brew 1968", Netk.Net.Au (Webpage, 2020) <http://netk.net.au/Contract/Whitlock.asp>

"NSWLR | Preview", Nswlr.Com.Au (Webpage, 2020) <https://nswlr.com.au/preview/7-NSWLR-170>

"Yango Pastoral Co Pty Ltd V First Chicago Australia Ltd (1978) 139 CLR 410 – Law Case Summaries", Lawcasesummaries.Com (Webpage, 2020) <https://lawcasesummaries.com/knowledge-base/yango-pastoral-co-pty-ltd-v-first-chicago-australia-ltd-1978-139-clr-410/>

Egan-Ronayne, View, "Joseph Constantine Steamship Line Ltd V Imperial Smelting Corporation Ltd (1942)", THE BLACK LETTER (Webpage, 2020) <https://theblackletter.co.uk/2018/08/14/joseph-constantine-steamship-line-ltd-v-imperial-smelting-corporation-ltd/>

Journals

Carter, John, "Good Faith In Contract: Why Australian Law Is Incoherent" [2014] SSRN Electronic Journal

Doris, Martin, "Promising Options, Dead Ends And The Reform Of Australian Contract Law" (2014) 34(1) Legal Studies

Remember, at the center of any academic work, lies clarity and evidence. Should you need further assistance, do look up to our Contract Law Assignment Help

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