Australian Contract Law Summary

Australian Contract Law

Australian Contract Law essentially implies that there will be good faith set forth by all parties involved in accordance with the contract itself.  The Murdock University Electronic Journal of Law, however, states that in Australia, “good faith” is not a requirement, per se, for contractual agreements because it is inherent in Australian law.  For the purpose of this discussion, therefore, good faith will be considered as obligatory for the contractual agreement between the two parties.  In this case, Eric has agreed to sell his Honda Zot 2000 to Charlie for a compromised amount of $450. 

Later, Charlie finds out that he has purchased a Honda Zot 1998 from Eric, and discovers that the true value of the model he has is significantly lower—assessed at just $100.  Charlie thus feels that he has been cheated in this deal.  The question on whether Eric acted in good faith towards this contract will ultimately define whether or not Charlie has the right to feel cheated, and if there is any legal action that he can take.  The question is also raised on whether or not Charlie should have researched his purchase before deciding and negotiating on the deal—there is a reason that “buyer beware” has become common in law vernacular.  Thus, both Eric and Charlie’s side of this contract will be analyzed to determine the best course of legal action.

Australian Contract Law Defined.

As a definition, contract law implies that “all contracts require there to be an offer and an acceptance[1].”  In the case of Eric vs. Charlie, there was indeed an offer and an acceptance.  Eric made the offer that he had a vehicle for sale, Charlie negotiated the price, an agreement was made, and the vehicle exchanged hands.  In this case, there was a clear offer and acceptance.

However, contract law also implies that there will be good faith inherent in both party’s actions—indeed, the concept of “good faith” is perhaps the most argued in contract law.  The intent of the parties involved within the contract often defines who will be considered negligent, or at fault.  As is stands, “good faith as a distinct doctrine is not well entrenched in Australian contract law. The fundamental principles which constitute good faith such as cooperation, reasonableness, legitimate interest and proper purpose are already implied in law[2].”  Thus, the “good faith” of the parties entering into any contract are assumed to be inherent and are not necessarily negotiable.

Now, it cannot be determined, at this point, without further information from Eric, whether or not he knew he was giving inaccurate information to his buyer, which means that consideration and an assumption has to be made that Eric did, indeed, act in good faith towards his buyer, Charlie.  Even more so, the fact that Eric intended to sell the vehicle for $500 (and not $100 as is the value of the 1998 model) suggests that he believed the vehicle to be the 2000 model.

Moreover, Oliver Wendell Holmes said “the making of a contract depends not on the agreement of two minds in one intention, but on the agreement of two sets of external signs – not on the parties having meant the same thing, but on their having said the same thing[3].”  In this case, both parties did agree upon the same thing.  That the car was a 2000 model, and that it would be sold to Charlie for $450.  The contract was made with the intentions of both parties, at this point, being equivalent to the other.  In fact, in the case of “Tamplin v James the judge said that  ‘if a person will not take reasonable care to ascertain what that person is contracting about, [then] that person must take the consequences. [4]’”  It is in this statement that the case begins to break down.  Eric was selling a vehicle, but it was up to Charlie to have full understanding of the vehicle that he was agreeing to purchase.  As the contract stands, the offer and acceptance were made in good faith and Charlie might not have any legal action he can take against Eric.

Buyer’s Rights.

Charlie purchased the Honda Zot 1998 based on the knowledge that Eric provided—that it was a 2000 model.  However, Charlie did not research this information before his purchase and did not realize the inaccuracy until after the contract had been decided upon, he had made his payment for completion of the contract, and he had driven away.  In most respects, because Charlie did not verify the accuracy of his purchase before completing the agreement and driving away, he may not have any rights towards Eric at all.

Thus, the matter must be determined as to whether or not Charlie has the right to cancel his purchase, even after the agreement has been made and accepted by Eric.  The Department of Justice cites that there are two case in which the buyer loses his rights in which to cancel his purchase, “the first case in which he will lose his right to cancel is the case where the contract was for the sale of specific goods and the property in these goods has passed to the buyer[5].”  Charlie gave his payment and took the vehicle, and according to the terms of the case “some time” has passed before Charlie realizes the exact model of the vehicle that he has purchased.  Despite the fact that the model of vehicle was different, the purchase was made and the vehicle passed to its new owner upon completion of the agreement.

Moreover, “the second case in which the buyer will lose his right to reject is the case where he has accepted the goods[6].”  Essentially, these conditions are the same; however in the second condition, the specifics state that Charlie would have had to accept the vehicle willingly—which he did.  According to the Department of Justice, Charlie has no case here.  He entered into an agreement with Eric, negotiated the terms, made his payment, and drove away with the vehicle.  It seems that Charlie should have researched his purchase before entering the agreement and making the purchase.

Family Contract Law Arrangements.

If Charlie and Eric had been brothers, then no contract exists at all.  In fact, “according to the principles of intention to be contractually bound, family agreements are presumptively unenforceable[7].”  With this accordance, Charlie has no course of action whatsoever.  Now, it very well could be that Charlie could take this to court and fight things out on the stand, but as the law states thus far, Charlie has no course of action.  First of all, he entered willingly into a contract.  Secondly, he made payment on that agreement and accepted the product.  It wasn’t until “some time” had passed that he reviewed his product and felt cheated.  Now, stores do offer a return policy (some give 7 days, some give 30) but no car buyer offers a return policy once that vehicle leaves the lot—the meaning behind this being that the buyer has done their research before their purchase.

Conclusion.

Whether or not Eric knew that he was inaccurate in his contract does not matter in this contract case.  With Australian law the way it stands, an assumption has to be made that both parties entered into this contract with the purpose of “good faith.”   By sheer purpose of a contract alone, “good faith” is inherently enforced.  Now, Eric sold a model that was not accurate with what his buyer, Charlie, found out.  However, in looking at the facts of the case, it can be determined that Eric did not know the true model that he was selling—he set a price in accordance with the 2000 model and his negotiations suggest that he knew the worth of his product.  In all respects, the law looks to be on the seller’s side in this case.

Furthermore, Charlie has responsibilities as a buyer to research the product that he is entering into negotiations with before making the final agreement.  A buyer should examine anything before they buy—as a standard.  Since Charlie did not question or inquire more about his product, especially since that product was a vehicle, Charlie is stuck in the contract that he agreed to.  Even more so, if Charlie and Eric had been brothers, a contract would not have existed (that could be enforced, anyway) and Charlie would be stuck with his bad purchase without recourse.

Bibliography.

Australian Consumer’s Association.  (2003).  Australian Consumer’s Association

Comment to the Copyright Law Review Committee: Reference on the

Relationship Between Copyright and Contract Law.  Retrieved May 4, 2009 from

the world wide web: http://www.ag.gov.au/www/agd/rwpattach.nsf/

VAP/(756EDFD270AD704EF00C15CF396D6111)~CLRC+Copyright

+and+Contract+Submission+-+ACA.pdf/$file/CLRC+Copyright+and+Contract+

Submission+-+ACA.pdf

Carter, J.W.  (2002).  Carter on Contract.  Sydney: Butterworths.

Clarke, Julie.  (2008).  Australian Contract Law.  Australian Contract Law Online

Resource.  Retrieved May 4, 2009 from the world wide web:

http://www.australiancontractlaw.com/

Department of Justice.  (June 21, 2000).  The Consumer’s Rights and Remedies for

Breach by the Seller of His Responsibilities: Remedies for Breach of the Terms of

the Contract.  Consumer Protection Project.  Retrieved May 3, 2009 from the world wide web: http://law.unb.ca/cpwala/First103.htm#(b)%20When%20the%20Buyer%20Has%20the%20Right%20to%20Cancel

Gibbs, Harry, (Ed.).  (1991).  Halsbury’s Laws of Australia.  Sydney: Butterworths.

Harper, Mathew.  (September 4, 2003).  The Implied Duty of “Good Faith” in Australian

Contract Law.  Murdock University Electronic Journal of Law.  Retrieved May 4,

2009 from the world wide web:

http://www.murdoch.edu.au/elaw/issues/v11n3/harper113_text.html

Keyes, Mary and Kylie Burnst.  (December 1, 2002).  Contract and the family: whitherintention?(contract law)(Australia).  Melbourne University Law Review.Retrieved May 4, 2009 from the world wide web:http://www.encyclopedia.com/doc/1G1-101414949.htmlMoles, Dr. Robert and Bibi Sangha.  (2009).  Contract Law Lecture – Formation ofContract – Offer and Acceptance.  Networked Knowledge Law Lectures.Retrieved May 3, 2009 from the world wide web:http://netk.net.au/Contract/02Formation.aspRiordan, John, (Ed.).  (1993).  The Laws of Australia.  Melbourne: Thompson Legal andRegulatory / Law Book Company.Zeigel, Jacob.  (1993).  Commentary on Party Autonomy and Statutory Regulation: Saleof Goods.  The Journal of Contract Law (vol 6) pp. 123-130.

[1] Moles, Dr. Robert and Bibi Sangha.  (2009).  Contract Law Lecture – Formation ofContract – Offer and Acceptance.  Networked Knowledge Law Lectures.Retrieved May 3, 2009 from the world wide web:http://netk.net.au/Contract/02Formation.asp[2] Harper, Mathew.  (September 4, 2003).  The Implied Duty of “Good Faith” in Australian

Contract Law.  Murdock University Electronic Journal of Law.  Retrieved May 4,

2009 from the world wide web:

http://www.murdoch.edu.au/elaw/issues/v11n3/harper113_text.html[3] Moles, Dr. Robert and Bibi Sangha.[4] Moles, Dr. Robert and Bibi Sangha.[5] Department of Justice.  (June 21, 2000).  The Consumer’s Rights and Remedies for

Breach by the Seller of His Responsibilities: Remedies for Breach of the Terms of

the Contract.  Consumer Protection Project.  Retrieved May 3, 2009 from the world wide web: http://law.unb.ca/cpwala/First103.htm#(b)%20When%20the%20Buyer%20Has%20the%20Right%20to%20Cancel[6] Department of Justice.[7] Keyes, Mary and Kylie Burnst.  (December 1, 2002).  Contract and the family: whitherintention?(contract law)(Australia).  Melbourne University Law Review.Retrieved May 4, 2009 from the world wide web:http://www.encyclopedia.com/doc/1G1-101414949.html