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The Law of Contract (Continued) - Coggle Diagram
The Law of Contract (Continued)
After agreement/acceptance has been made, there should be
intention to create legal relations
Objective test is performed to determine if parties intend to make a contract,
by verbally asking them
There are two presumptions (starting point):
Social or Domestic:
No; presumed no intention to create legal relations e.g. wanting to talk over the phone on Friday night at 5pm
Balfour v Balfour
Merritt v Merritt
Todd V Nicol
Ashton v Pratt
Commercial:
Yes; presumed there is intention to create legal relations where there is a business deal e.g. ordering stock
Malago Pty Ltd v AW Ellis
Banque Brussels v Australian National Industries
Differences are distinguished by:
Clarity of terms
Cost and Inconvenience
The true flavour of the agreement
Objectives can be
rebutted (express exclusion of intention)
by looking into the case objectively; using devices to help us apply the objective test.
CASE STUDY: Ermogenous v Greek Orthodox Community
Rose and Frank v JR Crompton and Bros Ltd
Consideration; price paid for a promise (something of value)
Rule 1:
Consideration must be "sufficient", but need not be "adequate" (consideration can be small, must be something, "peppercorn")
Rule 2:
Consideration must not be illusory of uncertain (must be possible to objectively evaluate the promise)
Rule 3 and 4:
Consideration can be executed or executory, but cannot be past
Executed:
one party performs an actual act in exchange for the other party's promise
good consideration
Carlill v Smoke Ball Co
Executory:
one party gives a promise in exchange for the other party's promise e.g. a promise to deliver food in 7 days time, and promise to pay for them 14 days after
good consideration
Past:
the act is already done
before
the promise e.f. a person works all weekend is
then
promised a bonus
not good consideration
Rule 5:
Performing an existing obligation (under the law of under an existing contract)
not good consideration
Exception from consideration
Deeds (contracts under seal)
are legally enforceable even if there is no consideration, as there is already a very formal document to show seriousness
Equitable doctrine of equitable estoppel
which are developed to "soften" the strict rule that a
promisor
is not bound to honour a promise for which no consideration has been paid
e.g. a promise to redue rent that is payable under a lease contract
Central London Property Trust v High Trees House
Formalities
Formalities and capacity are two further elements required for a legally binding contract for specific cases
e.g. orally create a contract when you're buying from the chemist doesn't require a formality, although purchasing land will require a formality (written document)
Capacity
Certain classes of persons are regarded by the law as incapable of entering into valid contracts
e.g. under 18, cant enter phone contract
Genuine Consent
"vitiating factors" may lead to the invalidity of a contract because the consent of both parties is not considered genuine, even if all five requirements for a legally binding contract are otherwise satisfied
e.g. mistake, misrepresentation, undue influence, unconscionable