Law of contract Summary

A Contract is defined as a legal binding obligation created under an agreement between two or more persons that is enforceable by law. A contract is made valid by the following factors: there must be an offer and an acceptance, there must be an intention to create legal relations, the contract must be under deed or consideration, there must be a contractual capacity, a genuine consent which must not be obtained from mistake, fraud, duress and unconscionability and lastly the contract must be lawful.

Therefore in this case of Hillary and Barrack, we find that Hillary is provided with an obligation to sue Barrack for the breach of contract for failure to perform since the law provides that where a person fails to perform a contract, when the performance is due, the other party can hold him liable for the breach, provided the time of performance was made as the essence of the contract. In all commercial agreements we find that time is presumed to be the essence of the contract, and unless otherwise provided, the failure to act the obligation gives the innocent party a right to treat the contract discharged and claim for the damages.

Therefore Hillary may claim his damages basing on the fact of Specific Performance as related to the Australian law, whereby we find that specific performance is regarded as an equitable remedy which is awarded at the discretion of the court to a person who has suffered a legal injury where damages would not be an adequate remedy. Therefore Hillary is advised to note that specific performance is an order requiring a person to carry out a contractual obligation.[1]

On the other hand Barrack is advised to defend himself by applying the rule of exemption clauses, in which the law provides that the purpose of exemption clauses is to limit or extinguish the liability of one of the parties to which he would otherwise be liable in law. Such a clause will be enforced by the court if the document containing it was an integral part of the contract and reasonable care was taken to bring it to the attention of the other party before the contract was made.

But where a party has failed to carry out the basic obligation of the contract, the court will not allow him to rely on the exemption clause to escape liability. This indicates that Barrack may claim that he actually informed Hillary on the existing option clause of the contract, and that he Hillary did not exercise the renewal two months before the expiring of the initial term of contract.

This is well explained in the case of Karsale v Wallis, 1956: where W inspected a car and agreed to buy it from K. the agreement contained the following clause: “No condition or warranty that the vehicle is roadworthy or so to its age, condition or fitness for any purpose is given by the owner or implied herein.” When delivery of the car was made, it was in a shocking condition and incapable of self-starting.

W refused to accept the car. K sued him, relying on the exemption clause. Held that when W first inspected the car, it was in excellent condition, whereas the car which was subsequently delivered to him was no doubt the same car but it was in deplorable condition. Held that breach went to the root of the contract and does not entitle the plaintiff to rely on the exemption clause it was thereafter held that an obligation arising out of a contract may be so fundamental that no exemption clause can exclude liability for its non-performance.[2]

In this case we find that McCain had had been subjected to pressure from his wife to sublease the property to the Arcade Fire Pty Ltd that was being operated by Huckabee, his brother in-law. We can therefore say that McCain entered into a contract with Huckabee as a result of undue influence or what is known as duress this is usually used a s a remedy by the common law since it leads to a consent to a contract obtained by undue influence makes the contract voidable at the option of the party whose consent has been so obtained.

A contract is said to be induced by undue influence where one of the parties is in a position to dominate the will of another which prevents him form making his judgment freely. Thus a person may avoid the contract if he can prove that the other party has dominated his will and that the transaction is substantially unfair. The presence of these two factors raises a strong presumption by providing that the other party had independent sources of legal advice and no undue advantage had been taken of his inferior position.

According to the Australian law we find that the presumptions of undue influence is usually presumed in relationships such as that of an advocate and his client, a teacher and his pupil, a parent and child . This actually applies in this case where we find that McCain was being pressurized by his wife to sublease his property to his brother in-law.

This is well explained in the case of Lancashire Loans Ltd v Black, 1934: the defendant, a young married woman under the influence of her mother, entered into a money lending contract for her mother’s benefit. The money lenders knew of this situation and subsequently sued the mother and the daughter on a promissory note. Held that the contract could be set aside as the daughter was under the undue influence of her mother[3]

In the case of McCain and Huckabee, there was an acceptance of the offer where according to the law an offer can only be accepted by the person to whom it is made. This indicates that an offer can be accepted orally, in writing or by conduct. It is believed that in order to make a contract binding, the acceptance must be communicated.

The acceptance is also supposed to be made within the time prescribed by the offeror and if no such time is specified, then within such time as is reasonable having regard to the nature of the contract. it is indicated that on the 14th of January 2008 the two parties were found to be drafting the terms of their new lease agreement, and due to the busy schedule that Huckabee had they were not put in a position of signing the formal agreement and this made the acceptance to be not acceptable since the law states that the acceptance is considered complete immediately acceptance is past to the offeree. Here we find that the acceptance was not completed since they did not sign the formal lease agreement.

We find that Huckabee was admitted to a hospital with an expected overdose and at the time he was hospitalized the formal lease was yet to be executed and due to his illness McCain decided to cease his dealings with Huckabee and entered a new lease agreement with Mondale for the Zetland property which started on the 1st of February 2008. The law provides that once an acceptance is made it cannot be revoked.

An offer may be revoked by an express notice before it is accepted. But acceptance can not be revoked in any circumstances. This means that the moment a person expresses his acceptance of an offer, that very moment the contract is concluded. And it does not matter whether the acceptance is by word of mouth or in writing and sent by post. [4]

McCain had terminated the offer to Huckabee when the agreement was almost being executed, here we find that this offer was terminated by revocation meaning it was actually withdrawn by McCain, the law provides that revocation of an offer must be communicated to the offeree, though not necessarily by the offeror himself, it also provides that it is sufficient if the offeree comes to know of it through any reliable source  meaning that a third party should be involved through whom such a notice of revocation or withdrawal is passed so that the offeree can not accept the offer.

This is best explained in the case of; Dickinson v Dodds, 1876: on Wednesday, the defendant gave the plaintiff a written offer to sell him his house for £800. The offer was to be left open until next Friday 9.a.m. on Thursday; the defendant sold the house to someone else. On that very evening of Thursday, the plaintiff was told of the sale by a third party but before 9 a.m. on Friday, the plaintiff delivered his acceptance to the defendant, which the defendant refused to receive. It was held by the court that there was a proper revocation of the offer and the plaintiff could not accept it. Christie is therefore advised to know that as the result of the use of revocation of the offer by Monte, she can not therefore claim for the car she had accepted to buy.

According to the Australian law an offer lapses by the death or insanity of the offeror or the offeree before acceptance.

McCain had breached his contract since he was operating under the tenancy at will which according which allows the tenant to terminate the lease at any time with the presentation of his termination to the landlord, in this case we find that he did not inform the landlord about his termination and also he breached the contract by transferring his tenancy to a third party without the consent of the landlord. Therefore he is liable for his torts against the landlord.[5]

There are several elements that make a contract to be valid and this includes the following; there must be an offer and an acceptance, generally, for a contract to exist and to be valid more weight is directed to the intention of creating legal relationship by all parties involved therefore consideration must be adhered to for the agreement to be legally binding.

Consideration is therefore classified in two:-Executed consideration where there is an already given part of the value by the promise to the promiser for example: A is a casual worker and is employed by B to work in his farm for a day and is promised by B to be given his wages at the end of the day, A clears his work performing his side of the obligation of digging the farm this explains an executed consideration..

Executory recommendation-this is where an individual promises to do something in future like in the above illustration the consideration for the employer B is Executory until A is issued with his wages at the end of that particular day from B.

Consideration has also its own rules which are: it must be real meaning that it must have some values in the eyes of the law. It must not be in past this means that it should not include some past acts which took place before the promise is made. Consideration must move from the promise this means that no one can enforce another’s promise unless he has been a party to a contact and provided a promise to the promisor; this tells us that no stranger is allowed to enforce another person’s promise.

Consideration must be in excess of an existing obligation .a person who is under a contractual or legal duty to perform a certain act gives no consideration for a promise to pay for the performance of that contract. It must be legal, that is it should not be a consideration that is prohibited by law or against the public policy.[6]

In this case Daniel Lanois, and Robbie Roberts we find that there was the practice of transfer of liabilities whereby an obligation under a contract cannot be assigned without the consent of the other contracting party. The law provides that the liabilities of a contract cannot be shifted off the shoulders of the contractor on to those of another without the consent of the contractee.

This transfer of liabilities can be done in the following two ways; that is through novation which is stated as the rescission of the original contract and the substitution of a new one in which the obligation under the original contract are undertaken by new parties voluntarily. An example of this is; suppose A owes one thousand dollars to B and A transfers his liability to C, this would not bind B to claim the money from C. but if B consents to accept performance from C, and C also agrees to do so, then there is a substitution of a new contract, and the old contract is discharged.

The second way through which this may be done is by vicarious performance whereby the law says that it is open for parties to have their contract performed vicariously by another person, provided the contract does not expressly or implicitly insist on the performance of the contract by the promisor himself. In the absence of any such condition in the contract the promisee must accept the work done by a third party if it has been carried out in accordance with the terms of the contract. But even in such cases, the promiser remains liable under the contract because vicarious performance in its application is similar to the law of agency.[7]

This rule states that the vicarious performance is not permissible where the contract is to render personal services or personal performance by the promisor is the essence of the contract.

This is well explained in the case of Robson and Sharpe v Drummond, 1831:

Sharpe contracted to maintain and repaint a coach hired out to D for five years at a yearly payment of €75. After three years, Sharpe retired and informed D that thereafter Robson would be responsible for repairing and repainting of the coach. D refused to accept the performance by Robson who sued him. Held that D was entitled to refuse the arrangement, and Sharpe could not assign his liabilities under the contract without D’s consent.

Therefore for both Daniel Lanois and Robbie Roberts they both agreed to contract a third party and none of them will be able to fail holding him liable for the breach of contract.

The contemporary law provides a number of remedies for the breach of any contract, thus the innocent party is always entitled to the following remedies, refusal of further performance whereby a party who suffers by a breach of contract is entitled to treat the contract as ended and may refuse any further performance on his own part. But in case the victim of the breach does not take the initiative to bring an action for rescission of contract and the other party sues for any sums due to him, he may set up the breach of defense. Actions for damages, damages are regarded as the normal remedy for breach of a contract.

The aim of law is to place the injured party as far as possible in the position he would have been if the contract had been performed. It is not for every kind of damages that the plaintiff is entitled to recover compensation. In some cases the law considers that the loss sustained from breach of contract is too remote to merit any compensation. In the case where the profits have been lost to the plaintiff by the fault of the defendant in delaying delivery, and if the other party knew at the time of forming the contract that the special loss was likely to result from the breach of contract he will be liable for such loss, action for specific performance and action for an injunction.[8]

The act states that a contract may be discharged by performance where both parties fulfill their obligations under the contract and nothing remains to be completed. It is important for the discharge of the contract that performance must be strictly in accordance with the terms of the contract.

Therefore we can deduce that independent contractor has rights in terms of his termination of the contract applying the exceptions to the rule of precise performance, therefore the party may use the Substancial performance where a party gives up performing a particular contract when only part of it is done, the party is therefore not entitled to recover any sum for the work completed .for example if a builder substantially completes his contract and the workmanship falls below the contractual specifications in minor details, he can recover the contractual price, but the defendant can claim a deduction for the cost of rectifying the defects.

We can therefore conclude that what constitutes substantial performance depends upon the nature of the contract and all the relevant circumstances.

Partial performance is also found to be one of the way of terminating a contract applied by the contractor, where one of the parties to the contract has voluntarily accepted the benefit of the partial performance, the court may infer an implied promise to pay for the work done or goods already supplied.

The termination of a contract may also be practiced by the prevention of performance by the defendant where a party to a contract, if prevented from completing the whole of the contract by the fault of the other party, is entitled to recover damages for breach of contract or alternatively choose to recover reasonable payment for the work done.

Tender of performance is also one of the ways of termination of a contract where one party is willing and ready to perform his obligation in accordance with the terms of the contract but the other party refuses to accept the performance, in a situation like this, the contract is discharged because of the wrongful refusal to accept the performance by the other party. [9]

By waiver this is where when a contract is still Executory, a mutual agreement between the parties can release each other from their respective obligations and rights. This is known as waiver, and can take any form the original contract was under seal. But in a situation where one party has performed his duties and agrees to release the other party from his obligation, he is not bound by his promise, and can still demand the performance of the contract unless his promise of waiver is under seal.

The other way by novation this is where an existing contract may be discharged when a new contract is substituted in its place either between the same arties or between different parties. The consideration here is the discharge of the old contract.

Accord and satisfaction is also a way in which a party to a contract makes breach of his obligation, and the other party promises to accept less than what is due under an existing contract, he is not bound by such a promise. However, if a lesser is actually paid on an earlier date at the request of the payee, or something different in kind has been accepted, there is a good discharge, in such a case the old contract is discharged by accord and satisfaction.[10]


Emanuel, S (2004): Fundamental of Business Law, 4th Edition, New York,Educational PublisherGifford.K (1980): Legal Profession Law & Practice in Victoria Law Book Co, Sydney

Hudson A. (2003), Equity & Trusts, third edition, Cavendish London

Hemsworth, M. (1988): The new pre-action protocol for personal injury claims-2, NLJ

Jertz A. and Miller L. R, (2004): Fundamentals of Business Law, 3rd Edition, New York,

Macmillan Publisher

Lord, W. and Zuckerman, A (1996): Access to Justice: Plus ca change, 59 MLR 773

[1] Hemsworth, M. (1988): The new pre-action protocol for personal injury claims-2, NLJ

[2] Jertz A. and Miller L. R, (2004): Fundamentals of Business Law, 3rd Edition, New York,

Macmillan Publisher[3] Emanuel, S (2004): Fundamental of Business Law, 4th Edition, New York,Educational Publisher[4] Hudson A. (2003), Equity & Trusts, third edition, Cavendish London

[5] Gifford.K (1980): Legal Profession Law & Practice in Victoria Law Book Co, Sydney

[6] Gifford.K (1980): Legal Profession Law & Practice in Victoria Law Book Co, Sydney

[7] Emanuel, S (2004): Fundamental of Business Law, 4th Edition, New York,Educational Publisher[8] Jertz A. and Miller L. R, (2004): Fundamentals of Business Law, 3rd Edition, New York,

Macmillan Publisher

[9] Lord, W. and Zuckerman, A (1996): Access to Justice: Plus ca change, 59 MLR 773

[10] Emanuel, S (2004): Fundamental of Business Law, 4th Edition, New York,Educational Publisher