Contracts Exercises - Contract Essay Example

Contracts Exercises

A Contract is a legal binding obligation created under an agreement between two or more persons that is enforceable by law - Contracts Exercises introduction. 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 contact must be lawful. [1]


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In this case of where the intention of the contract was to build a new road tunnel so as to reduce the traffic jams on the roads around the Paramatta River and Homebush. In this contract, Joe should know that there existed no consideration among the parties in agreement whereby, legally, consideration is an agreement between two parties, in which the agreement must have some value in the eyes of the law, whereby a bare promise is not binding unless it is in the form of specialty contract, therefore consideration is an act of promising of one party, whereby the promise is brought by the other party and is enforceable by law. Therefore Joe should know that for a contract to be binding legally it must be supported by consideration, in which there is a following benefit to both the parties.

In this case there was a substantial performance under which the law provides that where a party in a contract gives up work when only part of it is done, under this he is not entitled to recover any sum for the work completed but if the party completes his contract and it falls under below the contractual specifications then he can recover the price, but the defendant can claim a deduction for the cost of rectifying the defects. As in this case where the contract was to go for twenty years, the construction failed whereby his complaint is that TMC provided Digi-tags on the SBC’s buses that didn’t work well in which they are receiving fines each day for the unpaid tolls. This is also represented in the case of Dakin v Lee 1916. In this D a builder substantially completed his contract but some of the workmanship proved not in accordance with the specifications. L refused to pay anything on this ground. It was Held that the plaintiff could recover the contractual price less the amount required to rectify the defects in the building. [2]

In legal advances there exist the Assignment of Rights and Delegation of Duties rights under this a contract may be assigned and the assignee is able to demand performance from the other party, in the case where the other party fails to perform his obligations the assignee can sue him in his own name. This assignment normally takes place in one of the following three ways

Legal assignment- under this the assignment must be in writing by the assigner absolute and not by way of charge and the written notice must be given to the debtor and assignee’s right dates from the date of such notice. Legal assignments do not need consideration to support them, for the right is transferred by the statute and in this case we see that Joe cross the CEO of SBC signed in a contract with Neil Smith the CEO of MB this makes the contract legal.

Equitable assignment;  under this the assignment one cannot sue the debtor in his own name but must join assignor in any action that he takes  against the debtor  and if this is not  supported by consideration  the assignee can not  compel the assignor to join him in the court  action against the debtor.  For example  A owes some  amount of money to B and B assigns this right to C  in charity,  the assignment  is in writing  but not signed  by B therefore, C can not force B to join  him in court  action against  A because  no consideration moved from him to B. this is also represented in this case where we see that Joe complains that a surface road near the tunnel that was used by SBC’s buses in the past has been narrowed and the buses can no longer fit down it but in this case we see that MB had a top secret agreement with the train government, for the government to alter some surface roads around the tunnel thus forcing more traffic to use the tunnel under this SBC claims that it does not know about the secret agreement. So this case operated under third party beneficiary-obligations in which a contract cannot be assigned without the consent of the other contracting party, therefore the liabilities of a contract cannot be shifted off the shoulders of the contractor to those of the other party without the consent of the contractor therefore SBC is allowed to claim for damages caused by the top secrete agreement between MB and the Train government.[3]

Exemption clauses Joe should have known that the clauses written on the final contract that SBC signed are used to extinguish liability of one of the parties to which he would be otherwise liable in law. Such clauses are enforced by the court if the document containing it is an integral part of the contract, and when a reasonable care is taken to bring it to the attention of the other party before the contract was made and where a person puts his signature on a contractual document, then he is bound by any exempting clauses contained in it. Therefore the person can not rely on his ignorance of the contents of the document unless he is induced to sign by fraud or misrepresentation. In this SBC case we see that Joe signed the document that one of the clauses on it read that for the bus lanes that the volumes of the buses will be 14 on one lane in each direction of the Cross-River Tunnel will be used exclusively used by public transport vehicles, including buses, hire cars and taxis. Therefore, Joe is not under any obligation of complaining that so many bus companies are using the tunnel that SBC can only operate forty bus journeys through the tunnel each day due to traffic congestion. This case is also presented in a case of L’estrance v Graucob, 1934 where L bought an automatic cigarette vending machine from the defendant. L signed a document which contained a number of clauses in small print, among them a clause excluding “any express or implied condition, statement or warranty, statutory or otherwise is hereby excluded.” The plaintiff did not read the relevant clause and she refused to pay the price on the grounds that the machine did not work. Held that the clause was binding on L because she had signed the document and there had been no misrepresentation. [4]

   For Joe to be able to claim for the damages caused he must first of all show that there existed an original agreement between the promisor and the promisee, he should also show that there resulted a new agreement out of the original agreement for which no consideration was given by the promise and that through it the promisee relied on the promise, acted upon it and changed his position to his loss.

The remedies for third party can be done by assigning the contract to someone else by the consent of all the three and this process is done by; Novation this is the rescission of the original contract and substituting it with a new one in which the obligation under the original contract are undertaken by new parties voluntarily. It can also be done by Vicarious Performance- This is where the parties are allowed to have their contract performed by another person, provided the contract does not insist on the performance by the promisor himself. Here the promisor must accept the work to be done by a third party if it has been carried out in accordance with the terms of the contract. But under such cases the promisor remains liable under the contract. This is the same as in the case of Robison and Sharpe v Drummond, 1831 where Sharpe contracted to maintain and repaint a coach hire out to D for five years at a yearly payment of £74. After three years, Sharpe retired and informed D 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.

 Specific performance can also be used as an equitable remedy which can be awarded to a person who has suffered a legal injury where damages are not used as a remedy under this defendant is ordered by the court to carry out the contractual obligation.[5]

Penrose, R (2005): Road to Reality: A Complete Guide to the Laws of the Universe,
New York, Longman Publisher
Jertz, A. and Miller L. R, (2004): Fundamentals of Business Law, 3rd Edition, New York,

Macmillan Publisher

Emanuel, S. L. (2004): Fundamental of Business Law, 4th Edition, New York,
Educational Publisher

[1] Penrose, R (2005): Road to Reality: A Complete Guide to the Laws of the Universe, New York, Longman Publisher

[2] Penrose, R (2005): Road to Reality: A Complete Guide to the Laws of the Universe, New York, Longman Publisher

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

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

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

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