This is the prescribed textbook for your course.
Available NOW at your campus bookstore!
Copyright
2003 McGraw-Hill Australia Pty Ltd. PPTs t/a Fundamentals of Business Law 4e
by Barron & Fletcher. Slides prepared by Kay Fanning.
Copyright © 2000 McGraw-Hill Australia
Contract Law
Part 1
Chapter 7
Copyright
2003 McGraw-Hill Australia Pty Ltd. PPTs t/a Fundamentals of Business Law 4e
by Barron & Fletcher. Slides prepared by Kay Fanning.
Valid contract
• An agreement made between two or more parties,
giving rise to legal rights and obligations which the
law will enforce.
Copyright
2003 McGraw-Hill Australia Pty Ltd. PPTs t/a Fundamentals of Business Law 4e
by Barron & Fletcher. Slides prepared by Kay Fanning.
7-3Australia
Copyright © 2000 McGraw-Hill
Valid contract
Intention to create
legal relations
Legality
of object
Terms:- Express/implied
Offer
Acceptance
Conditions
Warranties
Form
Consideration
Exclusionary clauses
Reality of
consent
Copyright
Capacity of
parties
2003 McGraw-Hill Australia Pty Ltd. PPTs t/a Fundamentals of Business Law 4e
by Barron & Fletcher. Slides prepared by Kay Fanning.
7-4Australia
Copyright © 2000 McGraw-Hill
Classifications
Classifications
Validity
Copyright
Performance
Format
Formation
2003 McGraw-Hill Australia Pty Ltd. PPTs t/a Fundamentals of Business Law 4e
by Barron & Fletcher. Slides prepared by Kay Fanning.
7-5Australia
Copyright © 2000 McGraw-Hill
Validity
V a lid ity
V a lid
V o id
A ll e s s e n tia l e le m e n ts
p re s e n t, th e re fo re la w
w ill e n f o rc e o n b e h a lf o f
e ith e r p a rty
Copyright
N o le g a l e ffe c t
V o id a b le
U n e n fo rc e a b le
E n title d to b e re s c in d e d
b y in n o c e n t p a rty
E s s e n tia l e le m e n ts
p r e s e n t b u t te c h n ic a lity
p r e v e n ts it fr o m b e in g
e n fo rc e d
Ille g a l
P u r p o s e o r o b je c t o f
c o n tr a c t is ille g a l
2003 McGraw-Hill Australia Pty Ltd. PPTs t/a Fundamentals of Business Law 4e
by Barron & Fletcher. Slides prepared by Kay Fanning.
7-6Australia
Copyright © 2000 McGraw-Hill
Performance
PERFORMANCE
EXECUTED
One party to contract
has completed their part
of the contract
Copyright
EXECUTORY
Both parties have
obligations to
perform
2003 McGraw-Hill Australia Pty Ltd. PPTs t/a Fundamentals of Business Law 4e
by Barron & Fletcher. Slides prepared by Kay Fanning.
7-7Australia
Copyright © 2000 McGraw-Hill
Formation
FORMATION
EXPRESS
IMPLIED
Dependant on
associated conduct
QUASI
By operation of
law
w
WRITTEN
SPOKEN
Copyright
7-8Australia
Copyright © 2000 McGraw-Hill
2003 McGraw-Hill Australia Pty Ltd. PPTs t/a Fundamentals of Business Law 4e
by Barron & Fletcher. Slides prepared by Kay Fanning.
Intention to create a legal
relationship
Social/domestic
agreement
Assumpti No intention to create
legal relationship
on
(Balfour v Balfour)
Prove
Intention to create
legal relationship
(Todd v Nicol)
(Wakeling v Ripley)
Copyright
Business
agreement
Intention to
create legal
relationship
No intention to
create legal
relationship
• Financial disadvantage
• Presumption
leaving job
rebutted in
• Expenses incurred in
contract
moving
2003 McGraw-Hill
Australia
Pty Ltd. PPTs t/a Fundamentals of Business Law 4e
•
Selling
belongings
7-9
by Barron & Fletcher. Slides prepared by Kay Fanning.
Copyright © 2000 McGraw-Hill Australia
Format
SIMPLE
Verbal, written, implied
Consideration must pass
in both directions.
passing
Statute of limitations – 3 yrs
12 yrs
FORMAL
Written
Does not require
consideration
in both directions
Statute of limitations -
Contract of Record
Contracts under
Seal
(Deeds)
Copyright 2003 McGraw-Hill Australia Pty Ltd. PPTs t/a Fundamentals of Business Law 4e
7-10
by Barron
& Fletcher. Slides©
prepared
by Kay
Fanning.
Copyright
2000
McGraw-Hill
Australia
Essential elements of a
contract
•
•
•
•
•
•
Intention to create a legal relationship
Offer and acceptance
Form and/or consideration
Capacity of parties
Reality of consent
Legality of object
Copyright
2003 McGraw-Hill Australia Pty Ltd. PPTs t/a Fundamentals of Business Law 4e
by Barron & Fletcher. Slides prepared by Kay Fanning.
7-11
Copyright © 2000 McGraw-Hill
Australia
Offer
• Invitation to treat: An invitation to invite people to
make offers.
Pharmaceutical Society of Great Britain v Boots
Cash Chemists (Southern) Ltd (1952) 2 QB 795
• Offer: A proposal by the offeror that if accepted
by the offeree will create a legally binding contract.
Copyright
2003 McGraw-Hill Australia Pty Ltd. PPTs t/a Fundamentals of Business Law 4e
by Barron & Fletcher. Slides prepared by Kay Fanning.
7-12
Copyright © 2000 McGraw-Hill
Australia
Rules with respect to offer
• An offer is not required to be in any particular form.
• The person who makes the offer is called the
offeror; the person to whom the offer is made is
the offeree.
• An offer can be made to one or more persons,
even the whole world.
• All terms of an offer must be communicated to the
offeree.
Copyright
2003 McGraw-Hill Australia Pty Ltd. PPTs t/a Fundamentals of Business Law 4e
by Barron & Fletcher. Slides prepared by Kay Fanning.
7-13
Copyright © 2000 McGraw-Hill
Australia
Rules with respect to offer
- termination
• An offer can be revoked at any time before acceptanc
• Revocation must be communicated to offeree.
• An offer will lapse if:
1.
2.
3.
4.
not accepted within the time stated, or
within a reasonable time, or
if a counter offer is made, or
if a party loses its contractual capacity.
• An offer can be revoked at any time:
1. before acceptance, and
2. if communicated to the offeree.
• An offer will be terminated if rejected.
• Death of the offeree or offeror may terminate an offer
• An offer will be terminated if a condition precedent is
not met.
Copyright 2003 McGraw-Hill Australia Pty Ltd. PPTs t/a Fundamentals of Business Law 4e
7-14
by Barron
& Fletcher. Slides©
prepared
by Kay
Fanning.
Copyright
2000
McGraw-Hill
Australia
Rules with respect to offer termination
Termination of offer
Rejection
Lapse
Conditional
offer
Copyright
Revocation
Death of
offeree/offeror
2003 McGraw-Hill Australia Pty Ltd. PPTs t/a Fundamentals of Business Law 4e
by Barron & Fletcher. Slides prepared by Kay Fanning.
7-15
Copyright © 2000 McGraw-Hill
Australia
Rules of acceptance
1.
Acceptance must be communicated to offeror by an
authorised person.
Exception: Offeror waives the right to receive
notification of acceptance.
Communication by post: (postal rule): If it is agreed
that post is the method of acceptance and the letter
is stamped and addressed correctly, acceptance
occurs when posted.
2. Acceptance relies on the knowledge of an offer.
3. Acceptance must be unqualified.
Acceptance can only be made by the offeree.
Acceptance must take place within a prescribed time or
within a reasonable time.
Copyright
2003 McGraw-Hill Australia Pty Ltd. PPTs t/a Fundamentals of Business Law 4e
by Barron & Fletcher. Slides prepared by Kay Fanning.
7-16
Copyright © 2000 McGraw-Hill
Australia
Consideration
• Consideration can be regarded as
something done or promised by one
party (the promisor) in exchange for
something done or promised by the
other party (mutual promises).
Copyright
2003 McGraw-Hill Australia Pty Ltd. PPTs t/a Fundamentals of Business Law 4e
by Barron & Fletcher. Slides prepared by Kay Fanning.
7-17
Copyright © 2000 McGraw-Hill
Australia
Promisor and promisee
Promisor
• Person undertaking to perform the
consideration
Promisee
• Recipient of the consideration
Copyright
2003 McGraw-Hill Australia Pty Ltd. PPTs t/a Fundamentals of Business Law 4e
by Barron & Fletcher. Slides prepared by Kay Fanning.
7-18
Copyright © 2000 McGraw-Hill
Australia
Rules of consideration
1.
2.
3.
4.
5.
6.
Past consideration not valid for simple contract.
Amount of consideration is irrelevant.
Nature of consideration must be definite.
Consideration must be able to be performed.
Consideration must not be illegal or unlawful.
Consideration must extend beyond what person is
already obliged to do in terms of:
a) requirement by law
b) compliance with contract already existing.
7 Consideration must move from the promisee.
Copyright
2003 McGraw-Hill Australia Pty Ltd. PPTs t/a Fundamentals of Business Law 4e
by Barron & Fletcher. Slides prepared by Kay Fanning.
7-19
Copyright © 2000 McGraw-Hill
Australia
Rules of consideration
(continued)
8.
9.
Part payment of a debt will not be adequate
consideration.
Consideration is essential in all simple contracts.
Copyright
2003 McGraw-Hill Australia Pty Ltd. PPTs t/a Fundamentals of Business Law 4e
by Barron & Fletcher. Slides prepared by Kay Fanning.
7-20
Copyright © 2000 McGraw-Hill
Australia
Promissory estoppel
• If one party to a contract, by its behaviour, leads
the other party to the contract to believe a certain
state of affairs exists between them, the courts will
support that state of affairs rather than the terms of
the contract.
Elements
• The promisee has altered their position in reliance
on a new promise.
• It would be impossible for the promisee to return to
their original position without detriment.
• It would be unfair for the promisor to renege.
Copyright
2003 McGraw-Hill Australia Pty Ltd. PPTs t/a Fundamentals of Business Law 4e
by Barron & Fletcher. Slides prepared by Kay Fanning.
7-21
Copyright © 2000 McGraw-Hill
Australia
Contracts required to be in writing
• Transfer of ownership of a British ship or
share in a ship
• Appointment of an agent where the agent
will be contracting by deed (Power of
Attorney)
• Bills of exchange and promissory notes
• Cheques
• Assignments and mortgages of life
insurance policies
• Assignment of copyright
• Contracts for marine insurance
Copyright
2003 McGraw-Hill Australia Pty Ltd. PPTs t/a Fundamentals of Business Law 4e
by Barron & Fletcher. Slides prepared by Kay Fanning.
7-22
Copyright © 2000 McGraw-Hill
Australia
Contracts required to be
evidenced in writing
Via
• Letters passing between parties
• Receipt for a deposit
• Cheque signed by the purchaser.
Copyright
2003 McGraw-Hill Australia Pty Ltd. PPTs t/a Fundamentals of Business Law 4e
by Barron & Fletcher. Slides prepared by Kay Fanning.
7-23
Copyright © 2000 McGraw-Hill
Australia