Model answer - contract law assignment PDF

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Model answer for the contract law assignment on the creation of a contract...

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I INTRODUCTION For Mel to have contractual obligations to any of the parties, there must be an agreement (offer and acceptance), consideration, and intention to create legal relations. The agreement must be complete, certain, and compliant with formality requirements. II AGREEMENT A. Offer The letter informing the parties they could purchase a ‘Shrub,’ may be an offer as Mel appears to be expressing her willingness to be contractually bound.1 Assessing the letter objectively,2 the specification of major terms being the subject matter (‘Shrub’), price, parties and relevant dates, together with the formality with which it was delivered, would indicate to a reasonable person that an offer was intended. Whilst arguable that the letter is a circular advertising goods which are often construed as invitations to treat,3 it can be distinguished as it was sent to eight specific people and limited their purchase to one ‘Shrub.’4 The use of language such as ‘you can’ and ‘we will’ further indicate Mel’s intention to be bound, and the letter will amount to an offer.5 B. Withdrawal By sending a second letter on 12 March, Mel has attempted to withdraw her offer and is entitled to as no consideration was provided to keep it open.6 A withdrawal is effective once

1 Lexis Advance, Encyclopaedic Australian Legal Dictionary (at 10 April 2017) ‘Offer’; Jeannie Paterson, Andrew Robertson and Arlen Duke, Principles of Contract Law (Thomson Reuters, 5th ed, 2016) 56. 2Carlill v Carbolic Smoke Ball Co [1893] 1 QB 256 provides for the use of an objective test. 3 See, eg, Grainger v Gough [1896] AC 325. 4 Cf ibid. 5 Cf Gibson v Manchester City Council [1979] 1 All ER 972. 6 Goldsbrough Mort & Co Ltd v Quinn (1910) 10 CLR 674; Dickinson v Dodds (1876) LR 2 Ch D 463.

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communicated,7 which occurred when the parties received her email at 9am 12 March,8 and when Gwen received her letter via post.9 C. Acceptance An acceptance is an unqualified,10 unequivocal asset to the terms of the offer,11 and Mel will be unable to withdraw her offer if acceptance has occurred.12 This is a possibility as the parties took action before 12 March. As each party responded differently to Mel’s offer, acceptance must be assessed individually. 1.

Sam

Although posted on 9 March, Sam’s letter did not reach Mel until after withdrawal which means that his acceptance is ineffective unless the postal rule applies.13 Under the rule, acceptance is effective when posted,14 and is applicable where the parties have contemplated that acceptance may occur by post,15 in that post was a ‘possible or permitted,’ method for acceptance.16 Whilst Mel did not expressly state that acceptance by post was permitted, by placing her address on the letter, it is arguable that she must have contemplated that some parties would respond to her via post, and by providing it, implied that it was a permitted mode of acceptance. This argument is supported by her use of post for Gwen as it demonstrates her openness to using post. However, it could also be argued that in placing her 7 IVI Pty Ltd v Baycrown Pty Ltd [2005] QCA 205, [1] (McPherson JA); Macquarie

Generation v CAN Resources Ltd [2001] NSWSC 1040, [53] (Palmer J). 8 Electronic Transactions Act 2011 (WA) ss 5(1), 14; Electronic Transactions Act 1999 (Cth) ss 5(1), 14A. 9 Byrne & Co v Leon Van Tienhoven & Co (1880) LR 5 CPD 344. 10 Taylor v Johnson (1983) 151 CLR 422, 428. 11 Lang v James Morrison & Co Ltd (1911) 13 CLR 1. 12 Payne v Cave (1789) 100 ER 502; IVI Pty Ltd v Baycrown Pty Ltd [2005] QCA 205, [1] (McPherson JA). 13 Latec Finance v Knight [1969] 2 NSWLR 79; Henthorn v Fraser [1892] 2 Ch 27. 14 Henthorn v Fraser [1892] 2 Ch 27; Adams v Lindsell (1818) 1 B & Ald 861. 15 Henthorn v Fraser [1892] 2 Ch 27. 16 Bressan v Squires [1974] 2 NSWLR 460, 461-2 (Bowen CJ), explaining Henthorn v Fraser [1892] 2 Ch 27 and Tallerman & Co Pty Ltd v Nathan’s Merchandise (Vic) Pty Ltd (1957) 98 CLR 93.

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address on the letter Mel was merely following the conventions of a formal letter rather than contemplating that post was a possible or permitted method of acceptance as it was included amongst her other contact details. Furthermore, her postage to Gwen was purely out of necessity as Gwen did not use email and it is argued that by sending the offer via email to the other parties, she was expecting a prompt reply and implying that a response of similar instantaneity was required.17 Given the instantaneous nature of Mel’s offer and today’s technological context, it is unlikely that Mel would have contemplated that post was a possible or permitted mode as the ordinary, reasonable response for Sam to have made would be to respond via email or a more instantaneous method of communication.18 Therefore, as the postal rule does not apply, Sam’s acceptance did not occur until 11am 12 March which was after withdrawal and means that no agreement exists. 2. Renu The postal rule does not apply to communication by instantaneous means and for telephone acceptance to be effective, Mel must have received the message.19 There are three potential times for receipt, being 6pm 9 March when recorded, 9am 12 March as the beginning of the next business day, and 10am 12 March when Mel listened to it. As the message was left on the answering machine, the Electronic Transactions Acts,20 (ETAs), may be applicable in determining the time of receipt. However, although the message was a ‘communication of information in the form of sound by a means of guided or unguided electromagnetic energy,’21 an automated voice recognition system is intended to include systems that enable oral information to be recorded or reproduced in written form so that information provided is in a 17 See Quenerduaine v Cole (1883) 32 WLR 185. 18 See ibid. 19 Entores Ltd v Miles Far East Corporation [1955] 2 All ER 493; Aviet v Smith and Searls

Pty Ltd (1956) 73 WN (NSW) 274; Dewhurst (WA) and Co Pty Ltd v Cawrse [1960] VR 278; Hampstead Meats Pty Ltd v Emerson and Yates Pty Ltd [1967] SASR 109. 20 Electronic Transactions Act 2011 (WA), Electronic Transactions Act 1999 (Cth). 21 Electronics Transaction Act 2011 (WA) s 5(1); Electronic Transactions Act 1999 (Cth) s 5(1).

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form analogous to writing.22 As this is not ordinarily done by an answering machine, voicemails will not be included as an electronic communication,23 and the ETAs will not apply. For telephone conversation, receipt occurs only when the offeror hears the acceptance,24 which would mean that Renu’s acceptance was received at 10am after withdrawal. However, this rule equates telephone to face-to-face communication which should be distinguished as Renu left a message. As telephone messages are closer in nature to telexes than telephone conversation, the philosophy regarding telexes should be applied – that no universal rule can cover all cases, and each should be resolved with reference to the parties’ intentions, sound business practice and whether the message was left outside business hours.25 Although Mel would most likely bear the risk and responsibility of choosing not to monitor her telephone machine during business hours,26 as the message was left outside business hours (assuming a 9-5 business day), it would be unreasonable to expect it to have come to her attention when it was left which will therefore not be the time of receipt.27 However, the time of receipt may be 9am 12 March as this was the beginning of the next business day and Mel would have had the opportunity to hear the message at that time.28 Whilst Mel may argue that she was too busy to check, this is irrelevant as following sound commercial practice, she should have checked her messages at the start of the day,29 especially due to her intention to withdraw her offer. As it would make commercial sense for her to first check whether any of 22 Explanatory Memorandum, Electronic Transactions Bill 1999 (Cth). 23 Electronic Transactions Act 2011 (WA) s 5(1); Electronic Transactions Act 1999 (Cth) s

5(1). 24 See Entores Pty Ltd v Miles Far Eastern Corporation [1955] 2 QB 327, 332-3 (Denning LJ). 25 See Brinkibon Ltd v Stahag Stahl un Stahlwarenhandelsgesellschaft mbH [1983] 2 AC 34. 26 Ibid; Tenax Steamship Co Ltd v Reinante Transoceanica Navegacio SA [1975] QB 929. 27 Mondial Shipping and Chartering BV v Astarte Shipping Ltd [1995] CLC 1101; Brinkibon Ltd v Stahag Stahl un Stahlwarenhandelsgesellschaft mbH [1983] 2 AC 34. 28 See ibid. 29 Tenax Steamship Co Ltd v Reinante Transoceanica Navegacio SA [1975] QB 929.

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the offerees had tried to contact her, Mel cannot rely on her own failure to act in a normal businesslike manner,30 and Renu’s message was received at 9am.31 As this was before Mel’s withdrawal, provided that Renu’s message actually stated her acceptance, it will be effective as it was made in reliance on her offer,32 and it is not indicated that she purported to change any of the terms.33 Renu has an agreement with Mel. 3. Gwen Generally, acceptance must be communicated to the offeror,34 and despite forming an intention to purchase a ‘Shrub,’ Gwen has done nothing except wait. Whilst an exception exists where the conduct of the offeree allows for an acceptance to be inferred,35 a reasonable bystander would not regard Gwen’s waiting as acceptance as there was no external manifestation of her intent.36 However, Gwen’s silence could still amount to an acceptance as by stipulating the offerees had ‘to do absolutely nothing,’ Mel may have waived her right to notification. Whilst the right to communication can be waived in unilateral contracts,37 this is a bilateral contract as the offer provides that payment, and thus performance, is due upon installation – i.e once an agreement has already been established, not as a way of establishing it. As a bilateral contract, it will not be as readily drawn that Mel waived her right to communication,38 and an offeror cannot force contractual relations onto an offeree by stipulating silence as the prescribed mode of acceptance,39 even where the offeree has 30 Ibid. 31 Mondial Shipping and Chartering BV v Astarte Shipping Ltd [1995] CLC 1101. 32 Cf R v Clarke (1927) 40 CLR 227. 33 Cf Hyde v Wrench (1840) 49 ER 132. 34 Latec Finance Pty Ltd v Knight [1969] 2 NSWR 79. 35 Empirnall Holdings Pty Ltd v Machon Paul Partners Pty Ltd (1988) 14 NSWLR 523;

Mercantile Union and Chaff Mills Ltd v Coade (1921) 30 CLR 113. 36 Cf Empirnall Holdings Pty Ltd v Machon Paul Partners Pty Ltd (1988) 14 NSWLR 523; Multisteps Pty Ltd v Source & Sell Pty Ltd (2013) 308 ALR 83. 37 Carlill v Carbolic Smoke Ball Co [1893] 1 QB 256. 38 Latec Finance Pty Ltd v Knight [1969] 2 NSWR 79, Cf Nortel Australia Pty Ltd v Portfolio Leasing Australia Ltd (1998) 72 ALJ 355. 39 Felthouse v Bindley (1862) 142 ER 1037.

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intended to accept but not communicated such intention to the offeror.40 Although argued that this rule should be qualified where the offeree takes the offeror at her word and remains silent,41 this argument rests on estoppel.42 Under the law of contract, an acceptance requires the doing of an act which indicates the offeree’s intention to be bound,43 and unless special circumstances exist such as the establishment of a relationship where acceptance occurs by silence,44 there must be some external manifestation of assent to the offer.45 As no evidence of any special circumstance arises here, mental acceptance or mere acquiescence do not suffice,46 and Gwen does not have an agreement with Mel. It should also be noted that even if this was a unilateral contract, as Gwen has not paid, acceptance would not be found. 4. Alex Despite not notifying Mel of her acceptance, Alex’s payment will amount to an acceptance if a reasonable bystander would regard this as an assent to the offer.47 As not all conduct will give rise to an acceptance,48 it is arguable that payment is not enough and that more is required such as setting up of space for the ‘Shrub.’ However, by making payment, Alex essentially performed all obligations that would be required, which very strongly indicates her 40 Ibid. 41 Arthur Corbin, ‘Offer and Acceptance, and Some of the Resulting Legal Relations’ (1917)

26 Yale Law Journal 169, 200 cited in JLR Davis (eds), Contract: General Principles (Thomson Lawbook Co, 2006) 58; Donald Greig and JLR Davis, The Law of Contract ( LawBook Company, 1987) 203 cited in Jeannie Paterson, Andrew Robertson and Arlen Duke, Principles of Contract Law (Thomson Reuters, 5th ed, 2016) 83. 42 Arthur Corbin, ‘Offer and Acceptance, and Some of the Resulting Legal Relations’ (1917) 26 Yale Law Journal 169, 200 cited in JLR Davis (eds), Contract: General Principles (Thomson Lawbook Co, 2006); Empirnall Holdings Pty Ltd v Machon Paull Partners Pty Ltd (1988) 14 NSWLR 523, 528 (Kirby P) 43 Challenge Charter Pty Ltd v Curtain Bros (Qld) Pty Ltd [2004] VSC 1. 44 See, eg, Boyd v Holmes (1878) 4 VLR (E) 161. 45 Empirnall Holdings Pty Ltd v Machon Paull Partners Pty Ltd (1988) 14 NSWLR 523; Weemah Park Pty Ltd v Glenlaton Investments Pty Ltd [2011] 2 Qd R 582; Challenge Charter Pty Ltd v Curtain Bros (Qld) [2004] VSC 1. 46 Challenge Charter Pty Ltd v Curtain Bros (Qld) Pty Ltd [2004] VSC 1. 47 Empirnall Holdings Pty Ltd v Machon Paul Partners Pty Ltd (1988) 14 NSWLR 523; Multisteps Pty Ltd v Source & Sell Pty Ltd (2013) 309 ALR 83. 48 Integrated Computer Services Pty Ltd v Digital Equipment Corp (Aust) Pty Ltd (1988) 5 BPR 97,326 (McHugh J).

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intention to be bound, particularly as payment was made before it was due. The making of payments in compliance with contractual obligations can give rise to acceptance by conduct,49 and in receiving payment, Mel would be placed on notice of Alex’s intention to purchase. Although an issue may arise where Mel was unaware of the payment, this is unlikely due to the commercial nature of the dealings, the fact that payment was to her, and there being 14 days between payment and withdrawal. Therefore, payment will amount to an acceptance by conduct and as Alex knew the terms of the offer,50 paid in reliance on the offer,51 and did not purport to change or qualify the terms,52 her acceptance is valid and she has an agreement with Mel. III REMAINING ELEMENTS Having determined that Renu and Alex have an agreement with Mel, the remaining contractual elements will be examined together as the facts pertaining to both parties are materially similar. It should also be noted that where the postal rule does apply to Sam, the following analysis would be applicable to his case. A. Consideration For the agreement to be binding, Renu and Alex must each have provided sufficient consideration,53 being the conferral of a benefit or incurrence of a detriment,54 in exchange for a promise.55 As Renu and Alex promised to pay/paid $4500, sufficient consideration was provided as they conferred a benefit upon Mel in return for her promise to supply a ‘Shrub.’

49 See Empirnall Holdings Pty Ltd v Machon Paull Partners Pty Ltd (1988) 14 NSWLR 523; But see Gjergya v Cooper [2987] VR 167. 50 Cf Gjergya v Cooper [1987] VR 167. 51 Cf R v Clarke (1927) 40 CLR 227. 52 Cf Hyde v Wrench (1840) 49 ER 132. 53 Thomas v Thomas (1842) 2 QB 851 consideration must move from the promisee; Chappel & Co Ltd v Nestle Co Ltd [1960] AC 87 sufficient consideration need not be adequate. 54 Currie v Misa (1875) LR 10 Ex 153. 55 Australian Woollen Mills Pty Ltd v Commonwealth (1954) 92 CLR 424.

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B. Intention For the agreement to be binding, an analysis of the surrounding circumstances must give rise to an objective intention to enter into legal relations,56 and Mel’s intention is indicated by the promissory language and formality of the offer. Alex and Renu’s intentions can be ascertained by their acceptances and given nothing to suggest otherwise, the commercial relationship between the parties as buyer and seller and nature of the transaction, will result in an intention to be legally bound.57 C. Completeness and Certainty The contract is also complete and certain as the essential terms being the subject matter, price, and parties were provided in the offer without ambiguity.58 Whilst the offer provides a range of dates for installation rather than a specific date, this does not make the agreement uncertain as the contract is still commercially workable.59 The specification of a date range provides the parties with enough certainty of when performance will occur and it arguably makes more commercial and practical sense to organise installation separately. D. Formality As a contract for sale over $20, the formality requirements will be complied with if Mel’s offer letter amounts to a signed memorandum in writing.60 By outlining all the essential terms of the contract, the letter will amount to a memorandum,61 and as an electronic

56 Ermogenous v Greek Orthodox Community of SA Inc (2002) 209 CLR 95; Placer Development Ltd v Commonwealth (1969) 121 CLR 353. 57 Edwards v Skyways [1964] 1 All ER 494. 58 Cf Masters v Cameron (1954) 91 CLR 353 - completeness; Cf Hall v Bust (1960) 104 CLR 206 – certainty; Cf Whitlock v Brew (1968) 118 CLR 445. 59 Trollope & Colls Ltd v Atomic Power Constructions Ltd [1962] 1 WLR 333, 337 (Megaw J) provides a contract must be commercially workable. 60 See Sale of Goods Act 1895 (WA) ss 4(1), (2). 61 Harvey v Edwards Dunlop & Co (1927) 39 CLR 302.

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communication,62 may be deemed to be in writing and signed.63 Although there are requirements pertaining to whether electronic communications are in writing and signed,64 these are not an issue here. The email will satisfy the requirement of writing,65 and Mel signed by placing her name in the letter.66 Therefore the formality requirements are satisfied, and Renu and Alex will be able to enforce their contracts. IV CONCLUSION As the essential elements of a contract are present for Renu and Alex, Mel is contractually obliged to supply and install the ‘Shrub,’ for them for $4500.

62 Electronic Transactions Act 2011 (WA) s 5(1); Electronic Transactions Act 1999 (Cth) s 5(1). 63 Electronic Transactions Act 2011 (WA) ss 9(1), 10(1); Electronic Transactions Act 1999 (Cth) ss 9(1), 10(a). 64 Electronic Transactions Act 2011 (WA) ss 9(1), 10(1); Electronic Transactions Act 1999 (Cth) ss 9(1), 10(a). 65 Electronic Transactions Act 2011 (WA) s 9; Electronic Transactions Act 1999 (Cth) s 9. 66 Electronic Transactions Act 2011 (WA) s 10; Electronic Transactions Act 1999 (Cth) s 10....