Contracts

Question 1

What is the Postal Acceptance Rule?

Answer 1

It’s the exception to the rule that says that acceptance must actually be communicated.
Under this rule, if acceptance has been made by mail, the acceptance is deemed to have occurred once the letter of acceptance has been posted.
This rule only applies to acceptance and is based on a number of early cases/

Electronic communications:
Electronic communication is deemed sent when the person hits the send button, and the email comes through.
E.g. If an offer is accepted, then a counter offer is received and accepted, the acceptance is when the email was sent.
Juliana is entitled to the car. She accepted the original offer, and then received a counter offer, which was accepted when she opened and received the counter offer. Because she sent acceptance to Danny, through the email that he provided, she is entitled to the car.

Question 2

What can be presumed with social and domestic agreements compared to commercial agreements regarding the intention to create legal relations?

Answer 2

For social or domestic agreements, courts begin with the presumption that the parties DID NOT intent to contract.
For commercial agreements, the courts begin with the presumption that the parties intended their agreement to be legally enforceable.
Each presumption is rebuttable if there is evidence indicating a contrary intention.
The ultimate question is always whether a reasonable person present at the time would have concluded that the arrangement was contractual.

Question 3

How do you determine if an intention to create legal relations was present?

Answer 3

• What was agreed upon?
• What were the circumstances of the agreement being formed?
• The words used by the parties
• The effect of the agreement on the parties
• Whether the parties acted as though the agreement was binding

Question 4

What is consideration?

Answer 4

Consideration is something of value (gain or benefit) that passes from one party to another in return for a promise made:

• Consideration must exist in every contract
• The consideration must be provided by the person who has made the promise, not a third person
• Consideration offered now in return for past performance is not good consideration
• As long as there is consideration, the court is not concerned as to its adequacy, provided it is of some value
• A promise to refrain from taking legal action may be consideration

Also, if a contract states that the exact payment will be determined in the future, it is not consideration as the amount must be specified.

Question 5

Legal defences for breach of contract?

Answer 5

• Mistake - no meeting of minds = no contract
• Misrepresentation - a false representation of fact (fraudulent, innocent or negligent) that:
  1. induces an innocent party to enter a contract and
  2. they suffer a loss
• Duress - actual or threatened violence, or unlawful restraint or threats, directed towards the contracting party or a close family member
• Undue influence - abuse of a relationship where one party has influence over the other e.g. husband and wife, lawyer and client
• Unconscionable contracts -person takes advantage of a known special disadvantage e.g. poverty, sickness, age, sex, infirmity of body and mind, intoxication, illiteracy etc.
• Illegality - contract can’t be performed without breaching law e.g. no license to sell linseed oil
• Restraint of trade - unreasonable restriction on freedom to trade (seek employment) in the future
• Frustration - an event occurs beyond the control of either party and which makes it impossible to complete the contract. For example, an artist is contracted to paint a portrait but the person dies.

Question 6

Remedies available to plaintiffs

Common law

Answer 6

• Monetary damages - compensation paid to the innocent party who suffered a loss as a result of the breach of contract
• Restitution - designed to restore the injured party to the position that they occupied prior to the formation of the contract
• Rescission - extinguish the contract and restore (as far as possible) the parties to the positions they were in before contracting
• Specific performance - a contracting party is required to execute, as nearly as practicable, a promised performance when monetary damages would be inadequate to compensate for the breach.