Law Essay Example

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Question 1

Why the bank was unable to enforce its guarantee/mortgage against the Amadios in Commercial Bank Australia V Amadio (1983) 151 CLR 447 ?

In the Commercial Bank Australia V Amadiocase, the bank was aware of the grave disadvantage that the Amadios couple were placed in. Hence, it was the bank’s responsibility to establish the reasonableness and justice of the transaction. The Amadios were unaware of the consequence and detrimental nature of the document that they had signed. If these details had been divulged to them and if the extent of the mortgage had been restricted to $50, 000, then it could have been construed that the transaction was just and reasonable. The court held that this transaction was unjust and unreasonable (Contracts voidable on the grounds of unconscionable conduct). As such, the bank could not enforce its guarantee against the Amadios.

Question 2

The difference between common mistake & unilateral mistake? And give example?

In the case of common mistake, a contract is formed on the presumption that some specific state of affairs are in existence at that time. Thereafter if it becomes evident that this was an erroneous assumption, then a mistake is deemed to have transpired. When both the parties to the contract assume as an essential feature of the contract, what is incorrect, then a common mistake is said to have taken place (Richards, 2009, p. 242).

However, flawed communications between the parties to a contract result in unilateral mistakes. In such cases, a genuine contract cannot exist between these parties. An instance is provided by the absence of correspondence between the offer and acceptance of these parties. The outcome is the lack of a genuine agreement between these parties, which in turn renders the contract void. The principal mistakes of this genre include discrepancies regarding contractual terms or the identity of a party to the contract (Virgo, 1999, p. 177).

This was illustrated in Smith v Hughes, wherein the principle of reasonable behaviour was stipulated. Accordingly, if a party behaves in a manner that would convince any reasonable person regarding that party’s affirmation of the terms stated by the other party, then such a party is held to have agreed to the terms, stipulated by the other party (Smith v Hughes , 1871).

Question 3

With reference to case law, explain the common law approach to exclusion clauses in signed documents?

In the context of the common law, on affixing their signature to a contract, the concerned parties are deemed to be bound by its terms. This even extends to any exemption clauses in the contract. This was exemplified by the decision in L’Estrange v Graucob Ltd, where the plaintiff entered into a contract with the defendant to purchase a machine from the defendant. She did not notice an exclusion clause regarding warranty for defects in the machine. The Court of Appeal held that as she had signed the contract, she was bound by the exclusion clause contained in it (Young, 2010, p. 95).

Question 4

What is meant when it is said that “consideration must be present or future but not past ?

The principle of consideration is subject to certain rules. Some of these are first, consideration is indispensable to simple contracts. Second, consideration must be present or future, however it cannot be past. This was the gist of the ruling in Anderson v Glass. All the same past consideration is valid if it is done at the promisor’s request during the course of business, and if it has been presumed that payment would be forthcoming. This was demonstrated in Lampleigh v Braithwaite. Third, consideration has to be transmitted from the promisee, and there is no necessity for it to move to the promisor, as held in Dunlop Pneumatic Tyre Co. Ltd v Selfridge & Co. Ltd. Moreover, in Coulls v Bagot’s Executor and Trustee Co. Ltd, it was ruled that with regard to joint promisees, wherein only one of them has provided consideration the promise can be enforced even by the other promisee.

Consideration must move from the promisee, though it need not move to the promisor (Dunlop Pneumatic Tyre Co. Ltd v. Selfridge & Co. Ltd [1915]). Where there are joint promisees and only one has given consideration, the other can still enforce the promise.

Question 5

Explain the meaning of the following terms used in contract law ? Rescission ab initio, partial performance, binding, tentative agreement, duress.

The representee, in contracts involving misrepresentation, has the choice of rescinding the contract. This constitutes rescission ab initio and it restores the status of the parties to what was obtaining, prior to the formation of the contract (Koffman & Macdonald, 2007, p. 358).

Partial execution of a contract takes place, when a part of the contract is executed. If the contract is divisible then partial execution may be permitted. However, in indivisible contracts, the performance has to be in full (partial performance).

An agreement is binding if it is of a commercial nature (Stone, 2009, p. 179).

Binding connotes the intention of the parties to the contract to be bound legally.

A tentative agreement is a preliminary document, which is informal in nature. Subsequently, this will be made in to a formal document that discloses the intention of the parties (Sweet & Schneier, 2008, p. 37). As such, a legally binding contract will come in to existence.

In accordance with the common law, duress and fraud are grounds for annulling a contract. Duress can be effected by threatening violence, prosecution, commencing civil proceedings or imposing economic sanctions. This took place in Malilang and others v MV Houda Pearl and Slater V Haskins (Vettori, 2007, p. 25).

Question 6

Explain the significance of the decision in Carlill v Carbolic Smoke ball company (1839) 1 QB 256.

A contract is an agreement with certain important requirements. The parties should not have any differences regarding the contractual terms. Such agreements are the outcome of situations, wherein an offer from one of the parties is accepted by the other (Macken).

However, it acceptance need not be communicated in unilateral contracts. In instances, where the offer is made to all and sundry, and does not necessitate notification of performance, acceptance of the offer and consideration will be deemed to have transpired on the performance of that stipulated condition (Macken).

On the other hand, the content of advertisements is in general not held to be legally binding. However, if an advertisement’s content unambiguously depicts an intention to be bound legally, it could be held to be a unilateral offer (Macken).

Question 7

Explain the significance of the decision in Donoghue (or McAlister) v Stevenson, [1932] All ER Rep 1.

In English and Scots law, any entity that manufactures a medicine, item of food or similar article is under a duty of care to the consumer or ultimate purchaser of that article. This was their Lordships’ decision in Donoghue (or McAlister) v Stevenson. The sale should be in a manner that prevents the distributor, ultimate purchaser or consumer from uncovering a defect in the goods sold, by subjecting them to an inspection. (Donoghue v Stevenson, 1932). As such, the manufacturer is deemed to be liable for any harm caused to the health of the ultimate purchaser or consumer.

Reference List

Anderson v Glass , 5 WW & A’B(L) 152 (1869).

Carlill v Carbolic Smoke ball company , 1 QB 256 (1839).

Commercial Bank Australia V Amadio , 151 CLR 447 (1983).

Contracts voidable on the grounds of unconscionable conduct. (n.d.). Retrieved June 2, 2011, from

Coulls v Bagots Executor & Trustee Co Ltd, 119 CLR 460 (1967).

Donoghue v Stevenson, UKHL 100 (House of Lords May 26, 1932).

Dunlop Pneumatic Tyre Co Ltd v Selfridge & Co Ltd , UKHL 1 (1915).

Koffman, L., & Macdonald, E. (2007). The law of contract. Oxford University Press.

Lampleigh v Braithwaite , EWHC KB J 17 (1615).

L’Estrange v Graucob Ltd , 2 KB 394 (1934).

Macken, C. (n.d.). Sample case summary of Carlill v Carbolic Smoke Ball Co [1892] 2 QB 484. Retrieved June 2, 2011, from

Malilang and others v MV Houda Pearl, (2) SA 714 (AD) (1986).

partial performance. (n.d.). Retrieved June 3, 2011, from BusinessDictionary:

Richards, P. (2009). Law of Contract. Pearson Education.

Slater v Haskins, TPD 264 (1914).

Smith v Hughes , LR 6 QB 597 (1871).

Stone, R. (2009). The Modern Law of Contract. Oxon: Routledge – Cavendish.

Sweet , J., & Schneier , M. M. (2008). Legal Aspects of Architecture, Engineering and the Construction Process. Cengage Learning.

Vettori, S. (2007). The employment contract and the changed world of work. Ashgate Publishing, Ltd.

Virgo, G. (1999). The principles of the law of restitution. Oxford University Press.

Young, M. (2010). Contract Law: The Basics. Taylor & Francis.