Elements Of A Valid Contract, Breach Of Contract, And Applicability Of The Australian Consumer Law

Elements of a Valid Contract

The issue which has been identified in the given situation that whether any contract has been formed between the parties in the case study based on the elements of  a valid contract

It had been stated in the case of Harvey v Facey [1893] UKPC 1 that a contract can be both written and oral.

There are five essential elements which make a contract valid at law. These essential elements are discussed below:

Offer- An offer is an expression which is used to initiate a contract between the parties. This is the first element which is required to form a contract which signifies to the other party the willingness of creating a legal relationship when the term of the offer is accepted.  

Acceptance- An offer has to be accepted to form a contract. Thus the second element for the formation of a contract is acceptance. An acceptance has to be unequivocal as stated by the case of Hyde v Wrench (1840) 49 ER 132.

Capacity- This element is required in relation to the parties to the contract. As per this element a contract which has been entered into with a minor is invalid. A minor is any person who has not reached an age of 17 years. However in the case of Pearce v Brain, [1929] 2 K.B. 310 it had been stated that in situation where the minor has performed the party he owed in relation to the contract he has the right to get the contract enforced by the court.

Consideration-  Another elements which is important in relation to the formation of a contract is that of consideration. As per the case of Chappell v Nestle [1960] AC 87 the court stated that consideration must be present in the contract even if it is inadequate a valid contract is formed between the parties.

Intention to form a legal obligation- in the case of Edwards v Skyways Ltd [1964] 1 WLR 349  it had been stated by the court that where agreement between the parties have a commercial nature, it is deemed that intention of creating a legal obligation is present  for the parties.

In the given situation it had been provided that an agreement has been entered upon into between Essence and Boyana according to which the latter is to pick 2000 kg apples per day for a compensation of $150 per day. Here the offer had been made by Essence and the acceptance has been done by Boyana thus a valid contact is formed. However it is provided in the given situation that Boyana is a minor and thus the element is capacity is not satisfied. However as per the case of Pearce v Brain Boyana can enforce the contract as she has completed her part of the obligations. Thus a valid contract is formed between Boyana and Essence as per the above discussed terms.

Breach of Contract and Available Remedies

It has been stated through the case of Harvey v Facey that a contract can be both written and oral. In the given situation there is an agreement between Essence and Manolo. There has been an offer made by Essence in relation to the juice idea which has been accepted by Manolo as he has sent his mobile juice machine to Essence. Although a written contract had not been signed an oral contract had been formed as per the terms discussed between Manolo and Essence.

Conclusions

There is a valid contract between Essence and Manolo and Essence and Boyana

Whether the contract formed between Manolo and Essence had been breached due to the actions of Manolo. The issue is also that if the contract had been breached what are the remedies which are available to Essence under the law of contract.

In the case of Poussard v Spiers (1876) 1 QBD 410 it had been stated by the court that when a party is not able to satisfy or meet the terms of the contract a breach of contract take place. The remedy of such breach depends upon the type of term which has been violated by the person in relation to the contract. Where it is found by the court that the basic and fundamental terms of the contract has been violated which are also known as conditions of the contract by the court may allow the aggrieved party to end the contract. On the other hand in the court also has the right to impose a liability of paying compensation only on the wrongdoer if the warranties which are not fundamental terms to the contract have been violated as provided by the case of Bettini v Gye 1876 QBD 183.

There are specific remedies which are made available to an aggrieved party when his or her contractual rights are violated. These include damages, restitution, recession, injunction and specific performance.

In the case of Addis v Gramophone [1909] AC 488 the court had made a judgment that where a contract has been found to have been breached by a party the purpose of providing damages in contract law is to restore the position of the party which was present when the party had not entered into a valid contract. Thus the purpose of damages which are provided under contract law is only restorative in nature.

It had been provided through the case study that Essence had Manolo had entered into a contact for the purpose of apple juice production. Under the terms of the contract the obligations which Manola has includes supply of mobile juice factory as well as providing stock, equipments or ingredients which are required for the purpose of successful production of apple juice. However it has been stated through the case study that Manolo does not have any knowledge in relation to making juice and as a result she does not know that what ingredients are to be added to the juice for the purpose of making the juice fit for human consumption. As a result at the time of testing the juice it was evident that the ingredients required to make the juice fit for human consumption had not been added and the juice therefore could not be used. The juice has been sold for a loss for pig consumption. An estimated loss of $2000 had been incurred by Essence. Thus in the given situation it is clear that Manola has violated the conditions of the contract. In these circumstances Essence has the right to remove rescind the contract. In addition as per  the principles of Addis v Gramophone in order to restore the position of Essence which existed prior to contract the court would impose damages worth $2000 on Manola.

Applicability of the Australian Consumer Law

Conclusion

The contract had been breached by Manola and she is liable to compensate  Essence for the losses which has been incurred by her worth $2000.

Whether the Australian Consumer Law as provided by the second schedule of the Australian Competition and Consumer Act 2010 (Cth) (CCA) would be applicable in relation to the contract between Essence and Manola and Essence and Boyano

It has been provided through the provisions of Section 3 of the ACL that the rules under the schedule are only applicable on a consumer in Australia.  Who can be called a consumer is also defined under this section of the ACL. It has been provided by the section that in relation to the purchase of goods a person can be called a consumer if the goods which has been purchased by the person are less than or equal to the price of $40000. In addition the acquisition of the goods have to be done for the purpose of consumption or personal, domestic or household use. The provisions of the ACL are also applicable in the situation where the goods in context are vehicles which have been purposed for the purpose of transport. It has also been made clear by the section that if the person has acquired goods in compliance of the above provisions he would not be considered as a consumer where the goods have purchased with a purpose transfer or resupply in trade or commerce.

In the given situation between Essence and Boyana a contract had been formed where Boyana is to pick 2000 kg apples per day for a compensation of $150 per day. It is clear from the terms of the contract that there are no services been provide or goods been purchased which are for the purpose of consumption or personal, domestic or household use. Thus in the given situation as per the provisions of section 3 of the ACL Boyana is not a consumer and the consumer law will not apply.

Further in the circumstances of the contract between Essence and Manola a contract has been formed for making apple juice for the purpose of resale. In the given situation it can be stated that there are no services been provide or goods been purchased which are for the purpose of consumption or personal, domestic or household use. In addition the goods have purchased with a purpose transfer or resupply in trade or commerce. Thus the parties to the contact are not consumers and the ACL would not apply.

Conclusion

ACL is not applicable in either situation

References

Addis v Gramophone [1909] AC 488

Australian Competition and Consumer Act 2010 (Cth)

Bettini v Gye 1876 QBD 183.

Chappell v Nestle [1960] AC 87

Edwards v Skyways Ltd [1964] 1 WLR

Harvey v Facey [1893] UKPC 1

Hyde v Wrench (1840) 49 ER 132

Pearce v Brain, [1929] 2 K.B.

Poussard v Spiers (1876) 1 QBD 410