HI6027 Business And Corporations Law

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HI6027 Business And Corporations Law

Question 1


For any contract to be valid, it is essential for it to have the main elements present in it, which is considered to be required for any contract to be valid, by law. Consideration is one such component of a contract. Besides these, the other important elements are acceptance, legal intention, offer etc. Through time and after many cases that have occurred in history, there are many definitions of consideration that has been given by scholars and researchers. Consideration can be said to be something that is given in exchange for any act done by the performer or for the promise that is done by the promisee. In many cases, it is also said that consideration can be a valuable thing given by the parties within a contract, due to which they are bound to fulfil the requirements of the agreement through their respective acts (Australian Contract Law 2016).

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For consideration to be valid, it is essential that it is sufficient, is bargained for and also it is between two parties, where the promise is done by the promisee. A situation where a policeman who is bound to do a public duty cannot be rewarded if he catches a thief. In other words, if a person is legally bound to do an act that is a part of the consideration, he cannot claim for it. A person can also refrain from performing their part of the act in exchange for some other act and at the time that act is done, the person having a right initially cannot come and claim for that right. Consideration should always be bargained for, hence, in easy words, in a consideration, two parties make promises under an agreement or even exchange things that are of value in front of the court, and under which both the parties make a profit as well as be part of the damages if any. Hence, when there is a contract between two parties, a promisor gets something from the promisee and loses his part, whereas the promisee gets something from the promisor and loses what he had. In the case of Labriola vs. Pollard Group Inc., an employee of Pollard Group, Labriola signed an agreement at the time of joining the company which stated that he cannot join any competitive company as an employee within the time period of 3 years from the date of joining. Later, the company made amendments to its contract and Labriola had to lose his job. After that, he got a job in another company.  The court came to a decision that Labriola did not stand in a situation of gaining anything from this and hence decided that this was not sufficient consideration. Hence, a consideration is so deeply attached to the law that it cannot be easily overstressed.

Question 1 a

Jane is relocating out of the country and thus decides to sell her car to Jack. Her car is a sports car of model Lotus Super 7, which in the case of a resell, has a market value of $ 25,000. The offer is accepted by Jack (Carter 2006).

Issues arising

The above case gives rise to certain issues stated below:

  • If the consideration is sufficient.
  • If the contract is legally valid.
  • If this agreement is a kind of a gratuitous gift.
  • If this agreement is lawfully enforceable.

What the law provides

In the case of any dispute between the two parties who are in a contract, the Australian Court hears the case and gives their decision, which is mainly based on the common law and consumer law. There are many rules that are made to differentiate between a gift and a contract. Out of all the differences one of the most important differences is that in a gift, consideration does not exist. Hence, in a gift, there is something given to one person from the other without making any contract; however, in the case of a gift when something is given to the other person, there is always a contract that is signed between the two.

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Marrying the facts to the law

The present scenario states that Jane decides to gift her car to Jack. This act is not considered to be a valid contract as there is no consideration that is brought in by Jack. However, this act can be easily considered to be a gift because Jane gives her car to Jack without asking anything back from him. The act of Jack accepting the car completes the full procedure of the gift. In case Jack did not accept the car, the gift would not have been delivered to the other person, this clearly specifies that as a contract, it is important for an acceptance to be in the case of the gift as well (Maley 1994).


The given situation gives a clear perception that because of the lack of consideration, no contract has been made that is enforceable by law. Hence, in case later Jane asks for her car back, Jack will not have anything to prove it to be a gift before the court. However, Jack still has an option of arguing in front of the court that Jane gave her car as a gift to him and that, she cannot ask for that gift back from him. So, he will have to prove that giving the car to Jack was entirely an act of a gratuitous gift and that Jane did not have any intentions of taking the car back from him.

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Question 1 b

There is an offer given to Jack from Jane for selling her sports car for $ 25,000. The same car is sold at the same price in the market. Jack accepts the offer.

Issues that can be deduced from the above scenario

This situation gives rise to two issues:

  • Is there consideration in this offer?
  • Is $ 25,000 a sufficient consideration?

The law

The case of Stilk vs. Myrick gave a holding that even if there is a consideration, a person is not legally obligated to follow it. On the other hand, the case of Tweddle vs. Atkinson said that it is important for the consideration to move to the promisor from the promisee. As per this law, it is also held that the court shows no interest at all in case it is found that in the agreement there was no party that persuaded in the agreement whether through any misrepresentation or through any inappropriate influence (Study.com 2016). Hence, this law means that the parties who are into the contract would bear the consequences of the contract and also that the parties can decide the criteria for obligation while making the agreement being that they are as per the law; as they will stand illegal if they are outside of the law.


Applying the law to the facts

According to my perception, in this case, the agreement between Jack and Jane is considered to have consideration as Jane offers to sell her car to Jack and he accepts it at the price which is decided by Jane. Hence, in this situation, the act of consideration goes to the promisor from the promise (Netk.net.au 2016). Also, the consideration is taken to be sufficient as the price of the car decided by Jane is the same as that of the market value of the same car in the same condition.

Question 1 c


This situation gives rise to two issues:

  • If the consideration is sufficient.
  • If the contract is binding as per the law.

The relevant law

There are few situations in the past that have given rise to certain scenarios in which it is held that if there is an agreement and the person signing it, knows about the duties given in that agreement, then he is bound to follow the agreement even in spite of it being unconscionable.

Application of the law

In this situation, Jane offers to sell the car to Jack at a price of $ 2,500 which is much less than the market value of the same car, which is $ 25,000. Hence, there can be a finding made by the court of equity that there was an insufficient consideration and thus, it is not binding. It depends on the different cases what actually amounts for consideration to be sufficient. Here, the court will give a holding that Jane was well-aware of the fact that result from this agreement, hence it will be considered to be binding.


It can be concluded that in this case, whether the contract has consideration and whether it is enforceable by law, will entirely depend on the court of law (Hanrahan, Ramsay and Stapledon 2013).

Question 2

This situation will mainly have three issues to determine:

  • If the change in the dollar value would result in a frustration of the contract,
  • If the value change in the dollar would result in rendering the performance as per the agreement, impossible under the law,
  • If the depreciation in the dollar value was foreseeable.

The law which can be applicable in this situation is:

  • The law of Contracts
  • The frustrated contracts act
  • The rule of Non-haec in foedera veni (which states: ‘It was not this that I Promised to do’ as in the case of Pioneer Shipping Ltd. Vs. BTP Tioxide Ltd [1981]).

Section 6 of the Frustrated Law of Contracts says if there is a case of frustration that has happened while the process of completing the contract. It will entirely depend on the findings of the above issues if the buyer will be able to get the excess payment. Section 6 talks about the ‘impossibility of a performance’. This impossibility is considered when it becomes totally impossible for a party to fulfil the requirement of the contract due to some unavoidable circumstances and there is no fault of any of the parties. In the present case, the drop in the dollar value does not show any serious circumstances of the above case (Brettingham-Moore 1978). The case of Davis Contractors Ltd vs. V Fareham Urban District Council was that there was a contract between the two which stated that there was a building to be constructed for the local authority within 8 months at a certain amount. Because of some unavoidable situations and without any prior knowledge to either of the parties, there was a shortage in the number of labourers which led to a delay of the work which got extended to 22 months. In this case, it was asserted by the plaintiff that there had been frustrated in the contract. However, the court gave the decision saying that there was no frustration in this case. The Paradine vs. Jane case (1647), held that if a person makes a contract wherein he creates a duty for himself, he is bound to withstand it if he does not go through any accident due to any unavoidable situation. Hence, the court held that the doctrine of frustration only applies if none of the parties is at fault. Also, as there are risks involved in each business, the court will not consider it to be a case of frustration until it sees that the cost has gone extremely high. Hence, the dip in the dollar value cannot just decide the task to be difficult to perform (Carter 2006).

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The situation of the depreciation in the dollar, to my opinion, was foreseeable, so the parties should have made a clause in the contract so as to mitigate the same. As per Section 6, until the time the contract is in performance, the performer will have to take the responsibility for any loss/damage. Hence, as per this section, it will be the shipbuilder who will have to bear all the excessive costs.

Thus, it can be concluded that in the financial world, the rise and dip of the dollar value are quite common, hence, this should have been considered at the time of making the contract. Here, the buyer did accept the fact of the increased price in the mid of the contract and a charter was placed which helped in inducing the second offer and the acceptance given by him was seen as improper. Hence, no frustration is there in this situation as the shipbuilder can still continue with the work without any impossibility.

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Australiancontractlaw.com. (2016). Australian Contract Law | Julie Clarke. [Online] Available at: http://www.australiancontractlaw.com/law/formation-consideration.html [Accessed 16 Aug. 2016].

Brettingham-Moore, C. (1978). Report and recommendations on the common law and statute law in Tasmania relating to residential landlord and tenant law. [Hobart]: Govt. Printer.

Carter, J. (2006). Carter’s guide to Australian contract law. Chatswood, NSW: LexisNexis.

Hanrahan, P.F., Ramsay, I. and Stapledon, G.P., 2013. Commercial applications of company law. COMMERCIAL APPLICATIONS OF COMPANY LAW, CCH Australia Ltd,.

Maley, Y., 1994. The language of the law. Language and the Law1.

Netk.net.au. (2016). Contract Law lecture: “Consideration” in Acceptance of Contract. [Online] Available at: http://netk.net.au/Contract/04Consideration.asp [Accessed 16 Aug. 2016].

Study.com. (2016). Rules of Consideration in Contract Law: Elements & Case Examples – Video & Lesson Transcript | Study.com. [Online] Available at: http://study.com/academy/lesson/rules-of-consideration-in-contract-law-elements-case-examples.html [Accessed 16 Aug. 2016].

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