LAW514 Commercial Law

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LAW514 Commercial Law

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LAW514 Commercial Law

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Course Code: LAW514
University: Charles Darwin University

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Country: Australia

Discuss about the Contract Law Combination of Rules and Regulations.

“Invitation to offer” means when a person has posted an offer inviting people or other party to make an offer to him, which is not binding, in the initial stage. However, when the invitation to offer is accepted, an offer is made from the opposite party in response to which the other party either accepts the offer or rejects it. If the other party accepts the offer made then a legal contract may be formed between the parties.  
This means that for formation of a valid contract, it is very important that the other party accepts the offer and to make a contract legally binding, consideration has to be paid in return. As it is said that, “no consideration, no contract.” With this it may be concluded that offer, acceptance and consideration are the three most elements required to make a contract legally binding. Moreover, legal consent of the other party is needed and the parties to the contract should be of sound mind and major. Therefore, to make a contract legally binding so that damages and compensation can be claimed it is important that all the necessary elements in the contract are fulfilled.
In the case of Carlill v. Carbolic Smoke Ball Co, the Court of Appeal in the United Kingdom held that an advertisement having terms of contract in which an award is to be received to the plaintiff, the same should be given by the company if the opposite party fulfills the terms of the contract. In this case, a legal and binding contract existed between both the parties, which made the contract legally binding on the opposite party.
In the given case study, Rajeev was interested in buying a car having only 8000 dollars to spend. He saw an advertisement in the newspaper and told the car owner, Paul that he would be interested in buying the car. Rajeev signed the registration transfer paper and said that he would deposit the remaining money a day later. However, next day he did not return with the deposit nor was he further interested in buying the car. This disappointed Paul. However, Paul is not entitled to claim any damages or compensation from Rajeev, as they have not satisfied all the legal formalities of formation of contract.
Paul made an invitation to offer for selling the car to which Rajeev, as a response, made an offer to Paul. Paul accepted his offer. Thus, the legal formality of offer and acceptance is completed. However, if we take note of the case study, then it may be said that Rajeev did not give consideration amount to Paul. He promised to pay the deposit next day, however, he never paid the deposit to Paul. With this it may be said that legal contract did not exist between Paul and Rajeev.
Contract law is a combination of rules and regulations that is directed towards enforcing a set of promises. In Australia, contract law is regulated by “common law” however; the statutes link up with the common law of contract. As already discusses earlier, for a contract to be legally binding and enforceable it is important that all the essential elements of the contract are fulfilled, such as, offer, acceptance, consent, sound mind and a major. If both the parties fulfill these elements, a contract is valid. In case of infringement of contract, the other party may bring an action against another for damages or compensation.
In the case of Alati v. Kruger, the issue was whether rescission of contract would restore the previous legal status of the parties to the contract. In this case, the Court held that since P had relied on the representation made by D, a contract existed between the parties on the ground of representation that was made. In this case, the Judge granted rescission of the contract. In this case, rescission was a good option as the other party relied on the representation made by the opposite party. Rescission ins simple language means cancellation of the contract and return of the parties to the positions from where they initiated the contract.
In the given case, Rajeev could not insure the paintings for their value as his children had damaged one of the paintings damaging it to the point that it could not be repaired. In the given case, rescission of contract would not be a good remedy, as it would not help Bhanu restore the value of his paintings. As the paintings were very valuable and costly in price thus, the best option available to Bhanu is damages and compensation. Damages and compensation are the best common law remedies available in case of breach of contract. Rescission of contract would not provide Bhanu the value of the insured paintings.
Conclusively, it may be held that Bhanu should not chose rescission or restoration of original position of the parties to the contract rather, file a suit against Rajeev for compensation or damages for breach of contract against Rajeev.
Based on the facts, the issue that arises here is whether damages or injunction would be an appropriate remedy for Bhanu or not?
Relevant Rule:
Damages and liquidated remedies are the common type of remedy that is granted to people in case of breach of contract. Court grants damages to people in terms of monetary compensation. This means that on breach of contract, liquidated damages is granted to the opposite party. However, an injunction is an order that is passed by the Court for the parties either to do something or not to do something. This kind of relief is appropriate when the Court aims to prevent a given action. Injunctions and specific performance of contract are regarded as equitable remedies in case of breach of contract.
Specific performance of contract is an order that is passed by the court directing the breaching party to perform the contract in a manner as ordered by the Court. In the case of Dougan v. Ley, the High Court of Australia held that, since the sale value of the taxi is majorly related to the original value of the taxi thus in that case damages would not be an adequate remedy as it would not be sufficient to replace the value of taxi license.
In the given case study as well, damages and injunction would not be an appropriate remedy as monetarily Bhanu would not be undergoing any loss. He relied on Shane that he would be buying the house by paying the remaining deposit, thus, in this case Bhanu should claim for specific performance of the contract. In this case, it would be Shane who would go monetary loss as he would not get back the deposit to Bhanu. Thus, the best remedy available for Bhanu is to seek for specific performance of the contract.
Restitution would not be an appropriate remedy in this case, as Shane would have to give his gains to Bhanu. Restitution ideally takes place when the other party makes a gain or profit out of the existing contract and does not share the gains; in this case, Shane has not earned any profits. He has simply changed his mind for not buying the house anymore, therefore for the given case the best remedy is specific performance of contract ordering Shane to resume with the contract of sale and purchase.
Specific performance of contract shall be the ideal remedy and not damages and injunction for the given case.
Clive Turner, John Trone, ‘Australian Commercial Law’ (2015, 30th Edition), Thomson Reuters

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