Lecture Fundamentals of business law (4th): Chapter 8 - Margaret L. Barron, Richard J.A. Fletcher

Chapter 8 - Contract law (Part 2). This chapter will cover: capacity of minors to contract; contracts for necessaries, and beneficial contracts of service, voidable contracts with respect to minors, void contracts with respect to minors,...

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Contract law

Part 2

Chapter 8

Limited capacity (of either party)

• Minors

• Persons of unsound mind or

intoxicated (alcohol, drugs)

• Bankrupts

• Corporations

Limited capacity

Minor (i.e <18 yrs)

Valid Voidable Void

Minors - valid contract

VALID

NECESSARIES BENEFICIAL CASH

 Involves:  Re service: TRANSACTIONS

Minors - voidable contract

Minors - void contract

VOID

Contracts for the Contracts for the payment of

repayment of money goods supplied, or to be

lent supplied, other than necessaries

All “accounts stated”

Limited capacity - persons intoxicated or

of unsound mind

Voidable contract if:

(a) One party did not understand what

they were doing because of the

Restricted capacity

Bankrupts

• Disclosure if: - Credit in excess of $3 000

- Trading under a firm or under an assumed name

Corporations

• Power to contract through individuals authorised to contract on behalf of company

(Contracts entered into prior to incorporation can

be ratified on incorporation - Corporations Law)

Consent

Absent due to: Genuine

 Mistake by both parties

 Misrepresentation Valid

 Duress

 Undue influence

 Unconscionable conduct

 Includes both parties  Includes both parties  Includes one party

 Same mistake  Different mistake  Other party knows

Void if: Void if: Void if:

 existence of subject  reasonable person  terms of contract,

matter or fundamental agrees actual offer identity of one of

fact are mistaken and acceptance.

contracting parties, or

(Meeting of Minds)  nature of the

document are mistaken.

Mistake as to identity

• Offer intended to be made to X (identity important).

• Reasonable steps taken to ensure actually dealing with X.

• Offeree was aware the other party wished to deal with X.

MISREPRESENTATION FRAUDULENT INNOCENT (i.e. no intention

 Party enters contract due to

statement

 Made by person with special skill/expertise

 Contract entered  Contract entered  Contract entered

 Damage suffered  Damage suffered  Damage suffered

VOIDABLE – at option of

injured party VALID DAMAGES – if reasonable care not taken (Tort of

Negligence)

Actual/threatened violence to party of contract or

person with whom they have a close relationship

• Voidable - at option of injured party

• Duress against a person

- enables contract to be made void.

• Duress against goods

- not able to be used to void contract.

• Economic duress

- enables contract to be made void.

Undue influence

• Person uses their influence over another to force the other to enter a contract

Voidable - at option of weaker party

Special relationship Other relationship

(stronger party shows (weaker party shows

duress)

contract made volantarily)

• Guardian and ward

• Solicitor and client

• Doctor and patient

• Trustee and beneficiary

• Religious adviser and devotee

Unconscionable conduct

Trade Practices Act 1974 (Cwlth)

• One party to a contract, being in a position

of power with respect to another party,

forces this weaker party into the contract.

Voidable - at option of weaker party

Legality of object

Illegal

 Commit unlawful act

 Hinders administration of justice

 Prejudicial to the institution of marriage

 Sexually immoral

 Promotes corruption in public life

 Conflict of private interest with duty

 Unreasonable restraint of trade

Dependent on reasonableness of

- duration of restraint

Restraint of trade

• Reasonableness in protecting

goodwill

• Public interest

Restraint of employment

(unequal bargaining power)

• Carrying on trade or profession in

Unequal bargaining power

• Using a confidential list of their

employer’s customers to solicit

business for themselves

• Disclosing a secret process

• Working for a competitor during their current employment, or assisting the competitor

Blue pencil test

• Illegal portions are deleted with a

blue pencil