Contracts Reponse

1. Introduction This is a response of legal recommendation to the contractual dispute between Simon and the Ballista Shire Council. Prima facie, the matter to determine is if Simon may be able to rescind the second contract enforced by the council. The legal issues espoused under this matter include: whether the circumstances of the case amount to economic duress, and if there was substantial consideration offered by the council to form a valid contract. . In order to approach Simon’s request for legal advice, the Simon and Ballista Shire Council case will be considered against the Competition and Consumer Act 2010 and relevant precedents.

By this, a judgement will be reached regarding the likelihood that Simon will successfully be able to rescind the second contract. 2. Economic Duress: a) What Constitutes Duress? A key issue to determine is if the circumstances of Simon’s case amount to economic duress, which has been recognised by common law as providing grounds upon which a contract may be avoided. Economic duress is defined as the ‘unacceptable use of economic power’ to place another person in a situation in which there is no practical alternative but to submit to the demand involved.

The Crescendo Management Pty Ltd v Westpac Banking Corporation case established four elements of duress which must be satisfied: (1) Pressure is used by, or on behalf of, one person in relation to a transaction; (2)The pressure is illegitimate; (3) The pressure causes, or contributes to, the victim’s assent to the transaction; and (4) The assent is reasonable in the circumstances, that is, there is no reasonable alternative but to submit. a) The Presence of Pressure From section (1) (2) and (3), it is evident that pressure is an essential element in establishing economic duress.

This is grounded in Lord Stanton’s judgment from the Crescendo case, who stated that ‘there must be pressure, of which the extent is the ‘compulsion or the absence of choice. ’ It is a general principle that when parties enter a contract, they are free to come to agreement upon the terms and conditions of the contract. In Simon’s case, the freedom to negotiate was amiss due to the pressure applied by the council. This was in the form of a threat to cancel Simon’s initial contract if he did not take on the extra work.

Relative to section (4), there was no alternative choice for Simon except to submit to the council’s demands due to his financial circumstances, where the payment earned from his first contract was necessary to expand his business. The accumulation of these factors: the context of Simon’s financial need, the disparity in bargaining power and the threatening nature of the pressure evidences the pressure that induced Simon to enter the second contract. b) Was there ‘illegitimate’ pressure?

Section (2) procures the necessity that the pressure is illegitimate, relating to the judgement in Crescendo that the pressure must go ‘beyond what the law is prepared to countenance as legitimate. ’ Kirby criticised the ambiguity of this term, recognising that pressure is commonplace in the commercial setting, of which even if unlawful, does not necessarily constitute as illegitimate. Thus, through the ANZ case, the definition was altered in New South Wales. Thus from the Karam case, Kirby found that ambiguity could be avoided by confining the concept of duress to ‘threatened or actual unlawful conduct.

The case of North Ocean is a clear demonstration of such conduct, providing the authority regarding conflicts between a threat to break contracts and economic duress. Mocatta J held that threats to break a contract, without renegotiation, could be unlawful conduct and constitute economic duress which if inducing a contract, could render that contract voidable. However, not all threats to break a contract, which give, rise to a further or amended contract will constitute economic duress Rather, it is required for the weaker party to demonstrate they had no reasonable choice to accede to the demand.

This has been recognised above and therefore, the council’s threat to break the existing contract act with Simon is likely to amount to economic duress. 3. Consideration: Consideration is an essential element of a simple contract, the lack of which voids the formation of the agreement. This principle is evident in Beaton, where J. recognised that ‘without consideration, a promise is unenforceable at law. ’ To be considered valid consideration, the price of the promisor’s promise must be sufficient and have ‘some value in the eye of the law.

In Simon’s case, there was no consideration offered to enter the second contract on the basis that payment agreed for the skateboard ramps was generous. This judgement is flawed, as recognized by the case of Rascorla v Thomas, which set the principle that having no consideration for the subsequent promise, past consideration is not a satisfactory ends to the promisor’s promise. Furthermore, there was no existing obligation or legal intention at the formation of the contract for Simon to assume responsibility over the tennis courts later on.

Thus, the contract is voidable due to the fundamental lack of consideration. The fact Simon entered into the second agreement without receiving any consideration only furthers that the contract was assented to under economic duress. 4. Conclusion and Recommendations: a) Advice to Simon: It is likely that Simon will be able to rescind the second contract due to the establishment of economic duress and lack of consideration provided by the council. If this is found he will be entitled to restitution for the services already and the first contract will be enforced, a principle established in Equiticorp.

Determining this remedy involves analysis of the breach’s severity. However, the rescission of the contract must be handled with promptly, as the individual will lose their right to rescind over time. This is evident in the case of North Ocean where the court held that the second contract was voidable due to duress. However the claimants did not seek legal relief for 9 months, meaning they had affirmed the contract. The length of time taken to bring the matter to the court did not allow recession. b) Advice to the Ballista Shire Council:

It is obvious that the Ballista Shire Council exercised undue influence which was the cause of Simon entering the contract, thus constituting economic duress. Rather, the council should have offered Simon a separate contract with suffice consideration to refurnish the tennis courts. It is in this action that the council could have negotiated the details of this consideration, coming to a mutual agreement. Currently, the second contract is voidable, to be subject to rescission at the victim’s will.