Law of Contract: Principles of Business Governance
In business there are a number of legislative issues that require familiarity that fashion rights as well as decisions in order to safe guard an individual’s entity and can be enforced by the law. Over the past decade, emphasis have been placed to entrepreneurs getting to know these laws considering there has been an increase in cases where parties tend not to be in the same alignment with prescribed agreements. In reference to this, the most significant legislation in regards to business law is the law legislations governing contractual agreements[1]. According to Heinz an expert in business law, a contract is an agreement made by two or more parties voluntarily on fulfilling particular obligations and is enforceable by the law in order to protect both parties involved[2]. In addition to the above statement, Reynell et.al. suggests that a contract may exist in both an oral, inferred as well as a written documentation from the conduct or discussions from the involved parties[3].
In the case highlighted in this paper, it is significant to understand if Julio (Equipment P/L) is legally in contract with Edward and Johnny (Everbright P/L) in reference to the sale of the new sail making machinery that was discussed upon by the representative off both parties involved. In order for an agreement to be viewed as valid and permissible by law, several familiarities have to be taken into consideration. In order to give a comprehensive analysis of the case. This paper is divided into sub-titled categories each emphasizing on the legal approach underlining on the existence as well as validation of a contract between the two parties involved.
The first part presented below takes into account the factors that represent a valid contract and how they are shown in the case between Equipment P/L and Everbright P/L.
Agreement.
Offer
Author Karl Llewellyn in his manuscript states that an offer is the beginning of any agreement and should be considered as the most significant factor is forming a contract as it highlights the principles held by the parties involved[4]. According to Richard Posner an offer is the formal expression of willingness of one party (offeror) providing assent in reference to terms and conditions with the intention of being bound the moment acceptance has been made from the other part. It should be noted that an offer is presented for negotiation and is not part of a contract until both parties come to an agreement[5]. According to Nickerson Llewellyn a leading scholar in contractual law explains that an offer is not directly part of a contract as it only constitutes to an avenue that may lead to an agreement, which is part of a contract[6].
Acceptance
Karl Llewellyn additionally states that for a contract to be made there is need for the offer to be accepted by both parties[7]. This would then define an acceptance as the positive response of an offer making an agreement legally acceptable. Stephen Waddams a head advocate and author states that the acceptance has to be communicated clearly for it to make a contract since some agreements are made through counter offers from the offeree to the offeror suggesting that the positions in making an agreement may be turned[8].
Lack of a contract due to lack of acceptance from the provided offer.
A contract can only be legally enforceable when an offer and an acceptance on the offer either on the first request or negation is met by a positive response from the parties involved[9]. In the case between Julio (Equipment P/L) and Everbright P/L the former presented an offer of the sailing machine which did not constitute to an agreement since a counter offer was made. As earlier stated using the explanation from Reynell et.al. an offer can only be taken as part of a contract when the offeror clearly communicates of an acceptance. It can be argued that Edward and Johnny (Everbright P/L) replayed to the offer within the stipulated time; however, the fact they did not receive a reply on the counter offer was reason to request clear communication from Johnny (Everbright P/L)[10].
Counter offer invalidation
According to John Carter, an offer can be subsequently turned down in five basic means namely Revocation, Passing of Reasonable Time, Counter Offer, Rejection, and Death[11]. In terms of revocation in the above case as stated by Stephen Waddams making a counter offer automatically rejects the aforementioned offer and necessitates acceptance under the expressions presented if no communication is made the first offer as well as the counter are invalidated[12].
Consideration
According to Heinz Treitel the principle termed as ‘consideration’ is used by both English as well as Australian courts to indicate that the agreement derived from offer or counter offer have resulted into a contracted[13]. As explained earlier only an acceptance of an offer can constitute into an agreement; however, it is only when the agreement is highlighted in written that it can be considered as enforceable. It should be noted that contract law in Australia states that the process of offer and acceptance can be oral or verbal; nonetheless, the resulting agreement after negotiations has to be in written and clear of all the details that bind the two parties[14]. The principle of consideration is used by the court to highlight on any breach of contract for the law to determine damages as well as compensation or any other additional penalties that would be covered by law. The principle of consideration states that there should be an element of mutual understanding about the exchange between the parties involved in the contract, clearly highlighting on what each party should provide for the agreement to be settled, for instance, a promise or payment.
In the case of the representatives of Equipment P/L and Everbright P/L the principle of consideration cannot be highlighted. In reference to the first offer presented to Edward and Johnny (Everbright P/L) the figures in profitability do not seem real, consequently this leading to a counter offer that had a lower return value of about 50%. It can be argued that this in itself is a platform the principle of consideration can be used; however, Julio (Equipment P/L) does not respond to the counter offer. At this point, there is no consideration based on the fact that Julio did not give an acceptance on the lowered price suggesting a lack of the existence of any contact.
As highlighted in the case the lack of a reply on their counter offer made Edward and Johnny (Everbright P/L) panic and consequently led them to accept the first offer given to them. Nonetheless, it can be argued that this made the agreement valid since Julian had known of their counter offer. However, the most outstanding factor is when is an agreement made and the verdict in the Entores Ltd v Miles Far East Corporation case can be used as a reference. The courts in the Entores Ltd v Miles Far East Corporation scenario set out to understand the existence of a breach in contract in the first instance the court set out to know when an agreement is made. The judgment stated that only when the offeror reads the content of either a counter or acceptance could an agreement be stated as valid[15]. In this case, Julio did not receive the acceptance of the offer with good reason and cannot be held liable to any claim of damages or forceful sale.
Needs of Mutuality:
According to Authors Bryan Vermeesch, and Lindgren Kevin, a court is legally bound not to approve a specific verdict of a breach in contract if one party could not fit suit of the other[16]. The offer presented to Edward and Johnny was replied by a counter offer this suggesting that it was not revoked but needed altering due to the statistics provided by the offerors. The fact that the counter offer was not replied suggests that there is not agreement despite the cause of the lack of reply as explained in the Felthouse v Bindley (1862) case[17]. In the present case, Julio not receiving the email shows a lack of an agreement hence a lack of mutuality stating a lack of a contract.
Breach
Steven Burton a panelist with the Harvard review states that a breach of contract is explained as a failure of reaching terms of an agreement that constituted to the development of an agreement[18]. In the above case there is no agreement consequently suggesting a lack of breach.
Stipulations as to time of Performance
In reference to common law as stated by Steven Burton, the deficiency of contrary intention in most cases an acceptance to an offer time was regarded to be of the essence an elapsed period would suggest a lack of contract[19]. Consequently, if the offeror presented a proposal with a stipulated time, a lack of reply would indicate a lack of an agreement. When Julio receives both emails sent by Edward and Johnny, the time had already elapsed though sent early the inconvenience cannot be placed on his part. However, an elapsed time does not automatically revoke an agreement as stated in the Mersey Steel v Naylor Benzon case where damages or repudiation be determined by on the actual circumstances of the case an in this instance a lack of agreement may not legally force Julio to sell the machine to Everbright P/L[20] . However, in the instance Julio sells the machine to Jack on the basis of a previous favor the existence of modification of the general rule may force him to pay damages as the offer was accepted.
Bibliography
Anson, William Reynell, Jack Beatson, Andrew S. Burrows, and John Cartwright. Anson’s law of contract. Oxford University Press, 2010.
Austen-Baker, Richard. “Offeree Silence and Contractual Agreement. “Common Law World Review 35, no. 4 (2006): 247-267.
Burton, Steven J. “Breach of contract and the common law duty to perform in good faith.” Harvard Law Review (1980): 369-404.
Carter, John W., David J. Harland, and Kevin E. Lindgren. Contract law in Australia. MICHIE, 1996.
Ewan, McKendrick. Contract law: text, cases, and materials. Oxford University Press (UK), 2014.
Judi, Siti Suhana, Rosli Abdul Rashid, and Shah Alam. “Contractor’s Right Of Action For Late Or Non-Payment By The Employer.” Journal of Surveying, Construction@ Propoerty 1 2010: 65-95).
Llewellyn, Karl N. “On Our Case-Law of Contract: Offer and Acceptance, I.”The Yale Law Journal 48, no. 1 (1938): 1-36.
Miller, C. J. “FELTHOUSE v. BINDLEY RE‐VISITED.” The Modern Law Review 35, no. 5 (1972): 489-493.
Nickerson Karl, Llewellyn. “Our Case-Law of Contract: Offer and Acceptance, II.” The Yale Law Journal 48, no. 5 (1939): 779-818.
Peden, Elisabeth. “Incorporating terms of good faith in contract law in Australia.” Sydney L. Rev. 23 (2001): 222.
Posner, Richard A. “What Has Modern Literary Theory to Offer Law.” (2000): 195
Reynell, William, Anson, Beatson Jack, Burrows S. Andrew, and Cartwright John. Anson’s law of contract. Oxford University Press, 2010.
Treitel, Guenter Heinz. The law of contract. Sweet & Maxwell, 2003.
Vermeesch, Robert Bryan, and Kevin E. Lindgren. Business law of Australia. Butterworths, 1990.
Waddams, Stephen M. The law of contracts. Canada Law Book, 1993.
[1] John W. Carter, Harland J. David, and Lindgren E. Kevin. Contract law in Australia. (MICHIE, 1996).
[2] Heinz, G. Treitel. The law of contract. (Sweet & Maxwell, 2003).
[3] Reynell, W. Anson, Beatson Jack, Burrows S. Andrew, and Cartwright John. Anson’s law of contract. (Oxford University Press, 2010).
[4] Karl, N. Llewellyn. “On Our Case-Law of Contract: Offer and Acceptance, I. “(The Yale Law Journal 48, no. 1 1938): 1-36.
[5] Richard A. Posner. “What Has Modern Literary Theory to Offer Law.” (2000): 195
[6] Karl N. Llewellyn. “Our Case-Law of Contract: Offer and Acceptance, II.” (The Yale Law Journal 48, no. 5 1939): 779-818.
[7] Karl, N. Llewellyn. “On Our Case-Law of Contract: Offer and Acceptance, I. “(The Yale Law Journal 48, no. 1 1938): 1-36.
[8] Stephen M. Waddams. The law of contracts. (Canada Law Book, 1993), 44
[9] Reynell, W., Anson, Beatson Jack, Burrows S. Andrew, and Cartwright John. Anson’s law of contract. (Oxford University Press, 2010), 67.
[10] Ibid., 70
[11] John W. Carter, Harland J. David, and Lindgren E. Kevin. (Contract law in Australia. MICHIE, 1996), 45.
[12] Ewan, McKendrick. Contract law: text, cases, and materials. (Oxford University Press UK, 2014), 67.
[13] Heinz, G. Treitel. The law of contract. (Sweet & Maxwell, 2003).
[14] Elisabeth Peden. “Incorporating terms of good faith in contract law in Australia.” (Sydney L. Rev. 23 2001): 222.
[15] Ibid., 68
[16] Bryan R. Vermeesch, and Lindgren E. Kevin. Business law of Australia. (Butterworths, 1990), p.25.
[17] Richard, Austen-Baker. “Offeree Silence and Contractual Agreement. “Common Law World Review 35, no. 4, 2006), 247-267.
[18] Steven J. Burton. “Breach of contract and the common law duty to perform in good faith.” Harvard Law Review, 1980), 369-404.
[19] Ibid., 369-404.
[20] Suhana, Siti, Rashid Abdul Rosli, and Alam Shah. “Contractor’s Right Of Action For Late Or Non-Payment By The Judi Employer.” Journal of Surveying, Construction@ Propoerty 1 (2010: 65-95).