subject: Law of Contracts and Negligent Misstatement-Third Party Reliance [print this page] Law of Contracts and Negligent Misstatement-Third Party Reliance
A contract is a legally enforced agreement between two or more parties which have common mutual obligation (Barker 2000). The consequences for the breach of contract are most of the times monetary compensations or damages which can be in the form of an injunction or specific performance of the contract. The main issue in this case is about whether Michael is bound by his buying contract from Trevor. In order to prove whether there is a contract between the two parties, we must satisfy four prerequisites in the formation of contract which are offer, acceptance, consideration and intention.
Sub Issue1:
The issue is whether the advertisement for sale of a farm tractor on Dimboola newspaper an offer or an invitation to treat.
Rule:
The first step in ruling on this issue is to differentiate between an offer and an invitation to treat. An offer is "an indication by one person to another person of his willingness to enter into a contract with him on certain terms" (Sharma 2009). Offer is considered valid if it expresses to go into a contract, there has to be communication of the offer and there should be definite terms of the offer. Invitation to treat invites people to make offers to them and most importantly, they are not intended to be bound at that point as similar to Partridge v Crittenden In Partridge v Crittenden, Patridge advertise birds for sale at a specific price but then it was held that it was an invitation to treat and not an offer (Sweeney & O'Reilly 2007). However, for an offer to be valid it has to be accepted by another party and can not be revoked whatsoever after acceptance (Sharma 2009).
Application:
Through the application of the principles of offers and invitation to treat, we can summarize that Michael's advertisement is actually an offer. However, this offer is not valid because the offer was no accompanied with an acceptance. A reasonable person would not intend to be bound by an offer that has not been accepted. Moreover, the person making the offer is Michael and has nothing to be bound to (Helewitz 2010).
Conclusion:
We can therefore conclude that the advertisement on the newspaper was an offer and not an invitation to treat and was meant to bind between Michael and Trevor but was not accepted to make it valid.
Sub Issue2:
The issue here is whether sufficient considerations have been provided by Michael and Trevor to make a legally binding purchase contract.
Rule:
Considerations refer to something that has value that is given by the person that gives an offer to the person accepting the offer in exchange of something that the acceptor of the offer gives for the contract (Walker 1999). It can be defined as "something of value that must be exchanged by each side or party to a contract" (Sweeney & O'Reilly 2007). All contracts need consideration as similar to Rann v Hughes. Consideration must be sufficient but does not need to be adequate case (Sweeney & O'Reilly 2007). Consideration can be executed, executory but not past as similar to Roscorla v Thomas (Sweeney & O'Reilly 2007). Executed refers to consideration that is finished, whereas executory refers to consideration yet to be completed.
Application:
By the application of the principles of consideration both the parties had considerations since there was at least something of value to be exchanged by both sides with Michael having a tractor and Trevor having cash money. However, the consideration from Trevor was not sufficient initially since his consideration was little in value with respect to Michael's. This therefore constitutes nominal consideration and does not constitute a binding contract (O'Connor 2007). We can also apply the principle of a reasonable person here because Michael would expect that a reasonable person would offer to pay for the tractor some value tat is equivalent to the value of the tractor in order for sufficient consideration to prevail between them.
Conclusion:
We can conclude that Michael is providing something of value to Trevor but what Trevor is providing to Michael has value yes though not enough and at the right time. Ultimately, a consideration from one party; Trevor is not sufficient.
Sub Issue3:
The issue evident in this question is whether there is intention to create legal relationship between the two parties (Clikeman 2009).
Rule:
Because it is not a domestic or social relationship as similar to Balfour v Balfour or Todd v Nicol, the courts will presume that the parties did intend to create legal relations. This is a commercial relationship, therefore the presumption applies that the parties did intend to create legal relations as similar to Roufos v Brewster (Sweeney & O'Reilly 2007).
Application:
Michael and Trevor are in a commercial relationship because they are not families or friends.
Conclusion:
As Michael and Trevor do not share a social or domestic relationship, they are presumed to intend to create legal commercial relationship.
