Contract Law Essay Example

  • Category:
    Law
  • Document type:
    Article
  • Level:
    Undergraduate
  • Page:
    2
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    1197

6Contract Law

Contract Law

Question 1

Is the contract for the lease of the jet skis legal? Can Priscilla get the court’s assistance in recovering the money owed for the lease of the Jet Skis.

Courts will only come to the assistance of parties in recovering contractual consideration or remedies if the contract is legal. According to Re Mahmoud and Ispahani [1921] 2 KB 716, court will refuse to enforce illegal contracts or assist parties in recovering remedies pursuant to an illegal contract1. Courts are especially harsh to parties that seek enforcement of contract that are illegal at formation. Courts will never enforce contracts prohibited by legislation in any way.

Application

It is well known that courts will not enforce contracts that are considered illegal at formation. According to Thompson, contracts that are illegal at formation are those which cannot be performed without breaking the law2. One of the most common examples of a contract that is illegal at formation is a contract for something expressly prohibited by statute3. Court treat such contract as void and non-existent and thus parties have no valid claims for enforcement or remedies. In Re Mahmoud and Ispahani [1921] 2 KB 716, the complaint sold Linseed oil to the defendant despite there being a statutory prohibition preventing the sale or buying of Linseed Oil4. On delivery, the defendant refused to accept the Linseed Oil on the grounds that the contract was illegal as it contravened a statutory prohibition. The court held that the statutory prohibition rendered the contract illegal and thus the seller could not seek enforcement. Luckily for the plaintiff, the buyer had not taken delivery of the goods. In case the buyer had taken the Linseed Oil and refused to pay, the buyer would not have been able to recover the price.

Similarly, in David Taylor & Son v Barnett Trading Co [1953], a contract was deemed illegal as it contravened a statutory prohibition5. Barnett Trading had entered into a contract with David Taylor for the sale of Irish Steak for a set price between April and July. However, the set price exceeded a statutory maximum price set for trade in meat during the same period. Barnett failed to make delivery of the Irish steak. At first instance, arbitrators ordered that Barnett Trading compensate Mr. Taylor for non-delivery. However, the court of appeal set aside the awards to Mr. Taylor as it ruled the contract was illegal as it was formed in contravention to a statutory provision prohibiting trade in meat above certain set prices.

In the case, Priscilla cannot seek enforcement of the contract as it was illegal. Laura entered into a contract with Priscilla for hire of Jet Skis despite knowing she did not have the relevant licences to operate watercrafts. This contravened the NSW Personal Watercraft Act which render contract for hire of watercrafts with persons who do not hold Personal Watercraft Licenses illegal. The contract is therefore illegal and Priscilla cannot seek its enforcement in court.

Conclusion

Traders must always be aware that courts will not assist them in recovering payment if they enter into illegal contracts. As seen in this case, Priscilla will make a loss as she cannot recover the price of hire for the Water Skis despite the fact that Laura took them and used them as agreed in their contract.

Question 2

Do Laura and the visiting academics have a remedy against We R Boating for misleading them to take an online theory class on the pretence it would guarantee them boating licenses?

Application

.7. Section 18 of the Australian Consumer Law (contained in schedule 2 of the Competition and Consumer Act 2010 (Cth), prohibits misleading or deceptive conduct in trade or commerce and provides various remedies for breach of this provision6Australian Laws protects consumers against pre-contractual misrepresentation made by business in the course of trade and Commerce. The Australian Competition and Consumer Act 2010 (Cth) applies to situations where businesses seek to use pre-contractual misrepresentation to induce parties to enter into contracts

Application

:8Consumers have the onus of prove when it comes to misleading or deceptive conduct accusation against a business. To prove that a business has engaged in deceptive or misleading conduct, the consumer must prove the four elements below

  • The conduct took place in the course of trade or commerce;

  • The conduct will be interpreted as deceptive or misleading in all circumstances;

  • The plaintiff relied on the conduct or pre-contractual misrepresentation to make the purchase decision.

  • A loss was suffered as a result of reliance on the misleading or deceptive conduct.

Laura and the visiting academicians can easily prove that We R Boating engaged in deceptive conduct. First, We R Boating offers an online course for boating and charges $200 for the course and thus they conduct is related to trade and Commerce. Secondly, We R Boating put a notice on their website claiming that the certification one receives after completing their online course enables one to obtain a boating licence automatically. We R Boating do not caution its customers that they also need several hours of practical lessons to obtain a boating licence. The statement on their website is clear that one will obtain a boating licence once they complete their online course. Laura and the academicians rely on this representation and decide to pay We R Boating $200 for the course and go ahead to take the online course. This means they can easily prove reliance; the fourth element of misleading or deceptive conduct. Finally, the plaintiffs will have to prove they suffered loss as result of relying on We R Boating pre-contractual misrepresentation. This is easy as they were unable to hire and ride the Jet Skis as they could not obtain licences. They would have had the licences on time had We R Boating not misled them into believing their online boating course would enable them to obtain a watercraft licence automatically.

Conclusion

Businesses must be aware that pre-contractual misrepresentation is prohibited and can form the basis for avoidance of contract. Misleading and deceptive conduct leads consumers to making wrong purchase decision which later causes a loss and therefore the statutory prohibition is justified.

Bibliography

  1. Articles/Books/Reports

Latimer, Paul, Australian Business Law 2012 (CCH Australia Limited, 2012)

Thampapillai, Dilan, Vivi Tan, Claudio Bozzi, and Anne Matthew, Australian Commercial Law (Cambridge University Press, 2015), 463

Thompson, Neil. The Rights of Parties to Illegal Transactions (Federation Press, 1991)

Treitel, Guenter Heinz, The law of contract (Sweet & Maxwell, 2003)

David Taylor & Son Ltd v Barnett Trading Co [1953] 1WLR 562

Re Mahmoud and Ispahani [1921] 2 KB 716

Australian Consumer Law, s 18

1
Re Mahmoud and Ispahani [1921] 2 KB 716, court

2 Thompson, Neil. The Rights of Parties to Illegal Transactions (Federation Press, 1991)

3 Treitel, Guenter Heinz, The law of contract (Sweet & Maxwell, 2003)

4
Re Mahmoud and Ispahani [1921] 2 KB 716

5
David Taylor & Son Ltd v Barnett Trading Co [1953] 1WLR 562 .

6 Thampapillai, Dilan, Vivi Tan, Claudio Bozzi, and Anne Matthew, Australian Commercial Law (Cambridge University Press, 2015), 463

7
Australian Consumer Law, s 18

8 Latimer, Paul, Australian Business Law 2012 (CCH Australia Limited, 2012)