510 Lecture 6 Contract
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Law for New Zealand Business contract: overview and review
Law for New Zealand Business
1
Law for New Zealand Business
What is a contract?
Legally binding agreement between two or more legal persons
Law for New Zealand Business
2
Therefore: what are the essential elements? Offer and acceptance- before any contract can possibly be enforced. However, there are other essentials as well.
Law for New Zealand Business
3
What are they? Capacity Intention to create legal relations Consideration and/or form Legality Consensus (execution according to the agreement)
Law for New Zealand Business
4
So what problems arise and how are they dealt with?
Remember:
Contract law is based on common law New Zealand has codified significant aspects of contract law Attempts have been made to resolve some of the confusion with common law Most changes have happened since 1969 Law for New Zealand Business
5
Just an initial point about terms
Contracts can be:
Valid and enforceable Valid but unenforceable Voidable Void and of no effect
Law for New Zealand Business
6
Problem 1
What happens if the person you are dealing with turns out to have limited capacity?
Age Nationality State of mind Nature of personality Law for New Zealand Business
7
Resolution
Common law: Freedom of contract but with certain limitations where capacity is limited Statutory changes:
Minors’ Contracts Act 1969 Various pieces of legislation relating to ability of aliens to buy land, operate businesses etc Protection of Personal and Property rights Act 1988 for 1993 New Zealand Business CompaniesLaw Act
8
Problem 2
Are all agreements made between two or more persons with legal capacity enforceable?
Law for New Zealand Business
9
Resolution Common law presumptions The special case of advertisements
Pharmaceutical Society of Great Britain v Boots Cash Chemist Fair Trading Act 1986
The ability of others to enforce itContracts’ Privity Act 1982 Law for New Zealand Business
10
Problem 3 Do you always need consideration (the price of a promise)? Is the consideration (or the price) sufficient particularly if it does not reflect market value or where it is not money or money’s worth?
Law for New Zealand Business
11
Resolution
Normal rule: to be valid and enforceable under contract law a contract requires consideration (CF a deed- more about that later) However, normally consideration only needs to be sufficient not adequate
Value in law Adequate where the party giving the promise is vulnerable- minors etc Law for New Zealand Business
12
Problem 3- cont
Question of form- what happens of a contract is required to be in a particular form?-If it is not, is it valid?
Law for New Zealand Business
13
Resolution
Four classes of contract
Those that must be in a particular form to be valid (deeds)- consideration is NOT required Those that must be in a particular form to be enforceable by the person relying on them (egs, HP, Controlled Credit Contracts) Those that must be evidenced by writingno particular form to be enforced (Contracts Enforcement Act 1956) Those that do not require a particular form to be valid and enforceable Law for New Zealand Business
14
Problem 4
What happens if the contract involves a breach of the law?
Law for New Zealand Business
15
Resolution
Illegal Contracts Act 1970
Two classes of contract, validity depends on what class it falls into Fundamentally illegal Technically illegal- can be saved by the Court but only if it would not contravene public policy
Law for New Zealand Business
16
Problem 5
What happens if a party to the contract claims that they did not agree to what the other party is saying they did- that is, they are saying there was no consensus?
Law for New Zealand Business
17
Resolution
Enforceability may be decided by:
Contractual Mistakes Act 1977
Provides for Court discretion where there is a substantially unequal exchange of values arising from:
Unilateral mistake Common mistake Mutual mistake
Common law- non est factum, duress unconscionable bargains and undue influence Contractual Remedies Act 1979- remedies for misrepresentation Law for New Zealand Business
18
Problem 6
What happens if one of the parties fails to carry out their part of the contract or fails to live up to promises?
Law for New Zealand Business
19
Resolution
Depends on why
Law for New Zealand Business
20
Resolution The contract does not come into force unless a particular event happens or the contract’s continuance depends on a certain event and that has not happened (conditions precedent and subsequent) No enforceability unless satisfied
Law for New Zealand Business
21
Resolution cont.
Promises are made during negotiations and the other party relies on them (misrepresentations)
Contractual Remedies Act 1979
If the truth was essential OR Made the contract substantially different to what it would have been THEN the innocent person may cancel the contract and seek relief and damages Otherwise, damages only Law for New Zealand Business
22
Resolution cont.
Terms agreed to are not complied with (breach or repudiation)
Contractual Remedies Act 1979 If the performance was essential OR Made the contract substantially different to what it would have been THEN the innocent party may cancel the contract and seek relief and damages Otherwise, damages only
Law for New Zealand Business
23
Resolution cont.
A change to circumstances outside the party’s control- egs
Death or illness A change to the law Destruction of the subject matter Change to surrounding circumstances
Frustrated Contracts’ Act 1944- rules for balancing loss Law for New Zealand Business
24
So that is contract in a nutshell
Just a reminder:
New Zealand is a common law country BUT Contract law has been modified extensively New Zealand looks to other jurisdictions for guidance or new approaches, not just Britain British law is moving more towards European models. Therefore the gap is for New Zealand rather Business than smaller 25 likely to Law grow bigger
Therefore
Perhaps it is time we cut our ties and ended appeals to the Privy Council!!??
Law for New Zealand Business
26
Law for New Zealand Business
1
Law for New Zealand Business
What is a contract?
Legally binding agreement between two or more legal persons
Law for New Zealand Business
2
Therefore: what are the essential elements? Offer and acceptance- before any contract can possibly be enforced. However, there are other essentials as well.
Law for New Zealand Business
3
What are they? Capacity Intention to create legal relations Consideration and/or form Legality Consensus (execution according to the agreement)
Law for New Zealand Business
4
So what problems arise and how are they dealt with?
Remember:
Contract law is based on common law New Zealand has codified significant aspects of contract law Attempts have been made to resolve some of the confusion with common law Most changes have happened since 1969 Law for New Zealand Business
5
Just an initial point about terms
Contracts can be:
Valid and enforceable Valid but unenforceable Voidable Void and of no effect
Law for New Zealand Business
6
Problem 1
What happens if the person you are dealing with turns out to have limited capacity?
Age Nationality State of mind Nature of personality Law for New Zealand Business
7
Resolution
Common law: Freedom of contract but with certain limitations where capacity is limited Statutory changes:
Minors’ Contracts Act 1969 Various pieces of legislation relating to ability of aliens to buy land, operate businesses etc Protection of Personal and Property rights Act 1988 for 1993 New Zealand Business CompaniesLaw Act
8
Problem 2
Are all agreements made between two or more persons with legal capacity enforceable?
Law for New Zealand Business
9
Resolution Common law presumptions The special case of advertisements
Pharmaceutical Society of Great Britain v Boots Cash Chemist Fair Trading Act 1986
The ability of others to enforce itContracts’ Privity Act 1982 Law for New Zealand Business
10
Problem 3 Do you always need consideration (the price of a promise)? Is the consideration (or the price) sufficient particularly if it does not reflect market value or where it is not money or money’s worth?
Law for New Zealand Business
11
Resolution
Normal rule: to be valid and enforceable under contract law a contract requires consideration (CF a deed- more about that later) However, normally consideration only needs to be sufficient not adequate
Value in law Adequate where the party giving the promise is vulnerable- minors etc Law for New Zealand Business
12
Problem 3- cont
Question of form- what happens of a contract is required to be in a particular form?-If it is not, is it valid?
Law for New Zealand Business
13
Resolution
Four classes of contract
Those that must be in a particular form to be valid (deeds)- consideration is NOT required Those that must be in a particular form to be enforceable by the person relying on them (egs, HP, Controlled Credit Contracts) Those that must be evidenced by writingno particular form to be enforced (Contracts Enforcement Act 1956) Those that do not require a particular form to be valid and enforceable Law for New Zealand Business
14
Problem 4
What happens if the contract involves a breach of the law?
Law for New Zealand Business
15
Resolution
Illegal Contracts Act 1970
Two classes of contract, validity depends on what class it falls into Fundamentally illegal Technically illegal- can be saved by the Court but only if it would not contravene public policy
Law for New Zealand Business
16
Problem 5
What happens if a party to the contract claims that they did not agree to what the other party is saying they did- that is, they are saying there was no consensus?
Law for New Zealand Business
17
Resolution
Enforceability may be decided by:
Contractual Mistakes Act 1977
Provides for Court discretion where there is a substantially unequal exchange of values arising from:
Unilateral mistake Common mistake Mutual mistake
Common law- non est factum, duress unconscionable bargains and undue influence Contractual Remedies Act 1979- remedies for misrepresentation Law for New Zealand Business
18
Problem 6
What happens if one of the parties fails to carry out their part of the contract or fails to live up to promises?
Law for New Zealand Business
19
Resolution
Depends on why
Law for New Zealand Business
20
Resolution The contract does not come into force unless a particular event happens or the contract’s continuance depends on a certain event and that has not happened (conditions precedent and subsequent) No enforceability unless satisfied
Law for New Zealand Business
21
Resolution cont.
Promises are made during negotiations and the other party relies on them (misrepresentations)
Contractual Remedies Act 1979
If the truth was essential OR Made the contract substantially different to what it would have been THEN the innocent person may cancel the contract and seek relief and damages Otherwise, damages only Law for New Zealand Business
22
Resolution cont.
Terms agreed to are not complied with (breach or repudiation)
Contractual Remedies Act 1979 If the performance was essential OR Made the contract substantially different to what it would have been THEN the innocent party may cancel the contract and seek relief and damages Otherwise, damages only
Law for New Zealand Business
23
Resolution cont.
A change to circumstances outside the party’s control- egs
Death or illness A change to the law Destruction of the subject matter Change to surrounding circumstances
Frustrated Contracts’ Act 1944- rules for balancing loss Law for New Zealand Business
24
So that is contract in a nutshell
Just a reminder:
New Zealand is a common law country BUT Contract law has been modified extensively New Zealand looks to other jurisdictions for guidance or new approaches, not just Britain British law is moving more towards European models. Therefore the gap is for New Zealand rather Business than smaller 25 likely to Law grow bigger
Therefore
Perhaps it is time we cut our ties and ended appeals to the Privy Council!!??
Law for New Zealand Business
26
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