Luật học - Chapter 8: Contract law 2

This is the prescribed textbook for your course.Available NOW at your campus bookstore!CONTRACT LAW 2 CHAPTER 8 Learning objectivesAt the end of this chapter you should understand:the capacity of parties to contractwhether or not a contract with a minor is valid, void or voidablereality of consent and why it must be present to form a valid contractthe concepts of ‘mistake’, ‘misrepresentation’, ‘duress’, ‘undue influence’ and ‘unconscionable conduct’the defence of non est factumthe remedies available to an injured partyLearning objectives (cont.)the element of legality of object, both by statute and at common lawwhat a contract ‘in restraint of trade’ is and when it will be enforceablethe effect of illegality on a contractthe circumstances in which illegal terms of a contract may be severed.Capacity of partiesMinorsPersons of unsound mind or intoxicated (alcohol, drugs)BankruptsCorporationsLimited capacity—minorsMinor(i.e. <18 yrs)Valid Voidable VoidMinors—valid contract ValidCash transactionsBeneficial Re service: Education Employment InstructionNecessariesInvolves: Food Clothing Shelter MedicineDependent on: Lifestyle Time of saleMinors—voidable contract Voidable Differs between states due to introduction of statutes. (i.e. non-binding) If repudiated during minority, or within a reasonable time of turning 18 (i.e. binding) If ratified within a reasonable time of turning 18VoidValidMinors—void contract Void All ‘accounts stated’Contracts for the repayment of money lentContracts for the payment of goods supplied, or to be supplied, other than necessariesLimited capacity—persons of unsound mind and intoxicated personsVoidable contract if:one party did not understand what he/she was doing because of the condition they were in, and the other party in the contract knew of the condition.Voidable at the option of party in a)Restricted capacityBankruptsMust be disclosed if:credit in excess of $4623trading under a firm or under an assumed name.CorporationsPower to contract through individuals authorised to contract on behalf of company (Contracts entered into prior to incorporation can be ratified on incorporation—Corporations Act)Reality of consent ConsentAbsent due to: If there is genuine mistake consent by both misrepresentation parties, the contract duress will be valid.undue influenceunconscionable conductReality of consentMistake OF FACT OF LAW Legal rights or obligations Common Mutual UnilateralW Includes both parties W Includes both parties W Includes one partyW Same mistake W Different mistake W Other party knowsVoid if: Void if: Void if mistake as to:W mistake as to W a reasonable W terms of contract existence of subject person would not W identity of one party matter or a fact say that a contract W nature of document fundamental to the existed signed contract W no meeting of minds MistakeMistake as to identityOffer intended to be made to X (identity important)Reasonable steps taken to ensure actually dealing with XOfferee was aware the other party wished to deal with XCommon mistakeBoth parties to the contract make a mistake, but it is the same mistake.Mutual mistakeBoth parties to the contract make a mistake, but it is a different mistake.Unilateral mistakeOne party to the contract makes a mistake, and the other party knows or should have known a mistake has been made.Non est factum—‘not my deed’This is a rare defence which occurs when a person who signs a written document is mistaken as to the very nature or character of the document itself.Document must be radically and fundamentally different from that actually signed; e.g. person signs a mortgage believing it to be a lease.Person must not be careless or negligent in execution of the document.Usually when person must depend on another because of blindness or illiteracy. Petelin v. Cullin (1975) 132 355Reality of consent—misrepresentationReality of consent—duressWhere a person enters a contract because of actual/threatened violence to his/her person or to a person with whom he/she has a close relationship.Voidable—at option of injured partyReality of consent—duress (cont.)Duress against a personEnables contract to be made voidDuress against goodsUnable to be used to void contractEconomic duressEnables contract to be made voidReality of consent—undue influencePerson uses his/her influence over another to force the other to enter a contract. Voidable—at option of weaker partySpecial relationship Other relationship(stronger party shows (weaker partycontract made voluntarily) shows duress)guardian and wardsolicitor and clientdoctor and patienttrustee and beneficiaryreligious adviser and devotee Reality of consent—unconscionable conduct at common lawUnconscionable means ‘excessively unreasonable’.An agreement will be regarded as unconscionable where one party to a contract, being in a position of power with respect to another party, forces the weaker party into a contract.Voidable—at option of weaker party Commercial Bank of Australia Ltd v. Amadio (1983) 151 CLR 447Reality of consent—unconscionable conduct under the ACLAustralian Consumer Law is part of the Competition and Consumer Act 2010 (Cwlth), formerly the TPA.Section 21 provides:A person shall not, in trade or commerce, in connection with the supply of or possible supply of goods or services to a person, engage in conduct that is, in all the circumstances, unconscionable.Reality of consent—unconscionable conductTypes of disabilities that may give rise to unconscionable conduct include:sicknesspovertyageIlliteracy.Legality of objectsThe sixth necessary element to create a valid contract.The object or purpose of the contract must be legal.Legality of objects (cont.)IllegalCommon law Statute law• Defrauds govt. of revenue • Void • Commits unlawful act • Illegal• Hinders administration of justice • Unenforceable• Prejudicial to the institution of marriage• Sexually immoral• Promotes corruption in public life• Conflict of private interest with duty• Unreasonable restraint of trade• Depends on: – duration of restraint – extent of restraint – interests of parties to agreement and publicCommon law—contracts in unreasonable restraint of tradeA contract in restraint of trade restrains or hinders a person’s ability to undertake his/her trade or profession.Such contracts/clauses within contracts are unenforceable unless they are reasonable and supported by some consideration.Reasonableness in protecting goodwillPublic interestTypes of restraint of trade contractsContracts for sale and purchase of a businessContracts that restrain employmentRestrictive trading agreementsRestraint of employment(unequal bargaining power)Carrying on trade or profession in competition with their employer:while in employmentafter termination of contract of employmentTo prevent employee from disclosing an employer’s trade secretsContracts illegal by statuteOften a statute will prohibit certain conduct.Examples of contracts prohibited by statute:An agreement to share the proceeds of a robberyCertain betting and wagering contractsEffect of illegalityIt may be possible to enforce part of a contract if the illegal part can be severed and the legal part enforced.This can only happen if the contract is capable of being severed.Blue pencil test—the illegal portions are deleted with a blue pencil and if a valid contract remains, then it has passed the test.