Tuesday, June 8, 2010

Contracts -

Formation

  • Focuses on whether the parties actually have reached Agreement (mostly common law principles)
  • This is largely Common Law

o With a few equitable doctrines such as estoppel

  • An actual agreement
    • There can be no binding contract unless the parties have actually moved beyond the stage of negotiations and reached agreement on all the essential terms
    • Offer and acceptance rules determine whether an agreement is reached and when and where.
      • These rules tell us when and where an agreement has been reached.
  • The contents of the contract must be certain
    • Even if the parties think they have formed a contract the essential terms must be complete and clear.
      • The clarity requirement means that all the terms of the contract be clear (understandable) and [ completeness requirement] complete (can’t agree on something down the track)
    • This certainty requirement goes to the heart of contract law because it demands that parties are aware of exactly what they are agreeing to.
  • Consideration
    • Even where parties have reached an agreement on all the essential terms, that agreement will not be enforceable unless it involves a bargain or exchange
    • The most common form of consideration is an exchange of promises.
  • Intention to create legal relations
    • Even if there is an agreement supported by consideration and its terms are clear and complete, that may not be enough to get it over the line
    • A contract will still not be enforceable unless the parties can be taken to have intended to have assumed a legal obligation/relationship which could be enforced in a court of law.
      • This is not what is in their heads but it what they said and related to the nature of the agreement as well.
      • So the process in determining this is an objective approach.
    • In the commercial world, companies will often seek to negotiate with the final agreement at a st time so they will invoke other agreements, such as, e.g. preliminary agreements/Heads of Agreement or memoranda of understanding
    • If subsequent negotiations break down, one of the parties might visit court and contend that these heads of agreement are binding because despite the preliminary nature of the negotiations, the parties intended them to be binding
  • Unenforceability
  • Even if a contract is enforceable in all other respects, it can still be found to be unenforceable on grounds of Capacity (e.g., insanity)
    • These categories are
      • Minors
      • People who are drunkards
      • Those with intellectual impairment
      • Or other bodies such as the RAN or a government department
    • These groups may be found to be unable to contract on grounds of capacity.
  • Formalities (e.g., writing requirements]
    • E.g. contracts of guarantee and contracts for the sale of land have to be recorded in writing or in the absence of a formal agreement, there has to be at least some note or memorandum of at least some of the essential terms that has been signed by at least one of the parties.

Strategic Use of Formation Arguments

  • If any of these formation agreements is missing, then the contract is not binding, indeed there may be no contract at all
  • So this is one way of resisting an action for breach of contract - Defence to action for breach of contract – is to argue that there was no contract or it was unenforceable.
    • So in a problem, begin by asking what each of the parties wants, do they want to enforce the contract or do they want to get out of it
      • Then tailor the argument accordingly.

1 comment:

  1. A goal is not always meant to be reached, it often serves simply as something to aim at. See the link below for more info.


    #reached
    www.ufgop.org


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