Business And Corporations Law: Enforceable Agreements And Duress Defense Essay.

Enforceable Agreements and Valid Offer, Consideration, and Acceptance

Describe about the Business and Corporations Law for Modern and Contract.

1. The aim is to find the presence of considerations for given situations and conclude that whether Jack has an enforceable agreement which is legally binding on Jane.

(a) In this scenario, Jane is the offeror and Jack is the offeree. Jane is going overseas, hence she has offered her car to Jack, and Jack has agreed to take the car from Jane. This scenario is having both the elements to enact an agreement i.e. valid offer and acceptance. However, the question arises in this situation is to verify the presence of the consideration (Gibson & Fraser, 2014). Jane the offeror has not revealed any consideration amount for the exchange of the Lotus Super 7 Sports car from Jack. Thus, this case is having lack of consideration. According to the contract law, any agreement will be termed as void, if it does not have valid consideration. It can be the price made by the offeror to the offeree. This consideration value must be paid by the offeree in the exchange of the offer. Any valid consideration can have the tendency to bind both the parties into the enforceable agreement (Taylor & Taylor, 2015).  The court has provided the decision in Placer Development Ltd. Commonwealth [(1969) 121 CLR 353], that in any case, when there is any uncertainty to determine the consideration amount, then the case does not have valid consideration and results in void agreement (Davenport & Parker, 2014). It is also a critical feature that the offeror must inform the offeree about the consideration amount with any mode of communication, it can be direct or indirect. Also, the offeree cannot adopt any consideration amount without the confirmation from offeror. It is the prerequisite for the valid consideration that the consideration amount must be valid and lawful as per the civil law, besides the fact that it is regulatory value or non-regulatory value (Paterson, Robertson, & Duke, 2015).

In this situation, Jane has not asked for any value for her Lotus Super 7 Sports to Jack, this indicates the invalid consideration value. However, it also cannot considered from the above situation that Jane was going foreign, hence she offered her car to Jack at the current market price, because she has not cited any value for car, then Jack cannot adopt this car for any assumed consideration amount. Since, consideration cannot be any assumed value from offeree, irrespective of the fact that the offeror did not mention any value. In the present case scenario, the offeror has not asked for any consideration price from offeree and thus no enforceable agreement for Jack. It would in fact be referred to as gratuitous promise since Jane has no consideration in the promise made and such promises are non-enforceable.

Adequacy of Consideration

(b) In this situation, Jane the offeror has communicated a consideration amount to sell her Lotus Super 7 Sports car to Jack. This amount of the car is same as the market rate of the car i.e. $25,000 and this value of the car is acceptable by Jack. Hence, all the elements of any enforceable agreement are specified between the offeror and offeree i.e. valid offer, acceptance and consideration. It is not imperative that consideration have a numeric value in return to the offer, it can include any benefit interest, or devolving of rights in exchange of the offer (Harvey, 2009).

Consideration for the offeror is expressed in terms of the return favour from the offeree. It is the amount for the offer that the offeree needs to pay to satisfy the offer. The amount of consideration made by the offeror i.e. $25,000 is a valid consideration amount for the car, and easily distinguish in the view of law. Thus, this case satiated all the conditions needed for the contract. Hence, Jack has an enforceable agreement with Jane.

(C)  In this situation, Jane the offeror has clearly mentioned the consideration amount for the sale of her Lotus Super 7 Sports car to Jack. This amount is legally valid under common law and termed as regulatory value.

In the enactment of enforceable agreement, the intent and capacity of the parties are the imperative factors.. The main impact of the enforceable agreement is that both the parties are legally bound with regards to the obligations and rights as per the contract. There is not such importance in the equality of the consideration amount with the market real rate of the offer. This is called the adequacy of consideration (Gibson & Fraser, 2014).  Hence, the consideration must have some value more or less, is not the question in case of enforceable agreement. This adequacy of the consideration becomes imperative, when any unsuspicious conduct has offered between the parties. It is not essential that the consideration value is same as the specific monetary value. In Carlill v. Carbolic Smoke Ball Co case, it is necessary that the offeror should accept the consideration and same should be transferred from the offeree (Pendleton & Vickery, 2005).

The nature of the consideration can be explained with the example of the case Chappell v. Nestle, in which the offeror made the consideration of stipulated things. Even a mere peppercorn or an empty wrapper can also be treated as a valid consideration (Richard, 2003).

Duress Defense in Contract Execution

Additionally, the consideration must be a real value or object and should be feasibly exchanged between the parties. In this case, offeror Jane has made a consideration amount of $2,500 beside the deed that the real rate of the car is $25,000. This stipulated amount has been accepted by Jack. Even though, this consideration amount is much lesser than the real amount of the car, but still a valid consideration is present. Therefore, all the essential conditions are satisfied in this case i.e. valid offer, consideration, and acceptance. Thus, Jack has an enforceable agreement with Jane.

To comment on the possibility of success for North Ocean Tankers with regards to claim for $ 3 million recovery based on the applicable legal principles.

Law

One of the key requirements in the execution of a valid contract is that the parties should provide their free consent to assume the various contractual obligations. At times, when one of the parties do not find requisite consideration to be bound in a contractual relations, the offers by the other party may be turned down. In such cases, it is possible that the offeror may obtain a forced consent through the use of force, a situation which is termed as duress. The use of duress is quite common in bringing modifications to the contract clauses which essentially required consent from both parties and cannot be implemented unilaterally (Harvey, 2009),

It is noteworthy that as per the common law, any contracts that are executed with the use of force (whether physical or economic) are voidable if the party subject to threat desires the same (Pathinayake, 2014). This view is derived from the verdict given by the honourable court in the Electrcity Generation Corporation t/as Verve Energy v. Woordside Energy Ltd. [2013] WA SCA 36 case. The court detected the presence of economic duress and thus concluded the voidable nature of the contract.  The party subject to threat can claim duress as a valid defence and therefore demand losses from the other party due to the compliance with the unreasonable demands (Taylor & Taylor, 2015). However, the scope of claim is limited to only that damage which is caused due  to forced consent being given under the influence of threat (physical or economic) (Richard, 2003).

Over the period of time, duress has emerged as a strong defence for parties who are forced into contractual relations. This has been especially enabled with the addition of economic threat to the purview of the already existing duress concept. This is significant since unlike the old days when threat were primarily physical and apparent, now the threats are implicit and through the usage of superior economic power so as to gain at the behalf of the interests of the other party. In order to conclusively establish the usage of economic duress, certain aspects need to be established in the court (Gibson & Fraser, 2014). There needs to be evidence with regards to the economic power being used in bad faith with the intention of gaining agreement on an unfair term or promise. This threat leads plaintiff into a circumstance which demands that only possible option worth pursuing is acting in agreement with the demand.  As the plaintiff provides consent to the term, condition or clause, there is legal agreement between the parties which prevents the party from dishonouring the commitment given (Davenport & Parker, 2014).

If the presence of economic duress is established, the plaintiff gets the right to claim damages from the defendant citing duress (Harvey, 2009).  However, a critical aspect in this regard is the time within which the plaintiff should file a claim with the court. Ideally, this needs to be carried out as soon as the delivery of the product or the service is done but in case of valid reasons, if it cannot be filed immediately, then the same should be done before the passage of reasonable time. The definitive authority with regards to define the “reasonable time” is the court which decides this timeframe based on the underlying case facts (Pendleton & Vickery, 2005).

A leading case in this regard is the North Ocean Shipping v Hyundai Construction (The Atlantic Baron) [1979] QB 705 case. The court agreed to the presence of economic duress based on the case facts and thereby applying the above theory, the claimant should have been successful. However, it was not so as the court indicated that the delay amounting to right months since the tanker delivery is clearly beyond reasonable time in the given case ((Pathinayake, 2014).. Owing to this huge delay, the claimant has indirectly indicated voluntary acceptance to the extra payment and hence cannot now claim it

The given case facts indicate that a legal enforceable contract has been executed between North Ocean Tankers (“Buyer”) and a shipbuilder (“Seller”) with regards to tanker construction. During the building period, the buyer executes a charter for the tanker but there is request for payment of $ 3 million by the shipbuilder. The shipbuilder justified this on account of devaluation in USD but the contract did not had any provision for such a payment. The buyer denied making the payment even though subsequently it complied but only because the seller threatened to stop the work which the buyer could ill afford. The buyer got the tanker delivered on time but made a claim on the $ 3 million payment only after nine months.

It is apparent from the case fact that the seller acted in bad faith and used economic power by threatening to not fulfil the contractual obligations. The buyer on account of the charter could not delay the delivery and hence agreed for the payment. It is clear that if it hadn’t been for the threat from the seller, the payment of $ 3 million would not have been made by North Ocean Tankers. By agreeing to the demand, they had to make the payment which they did. Hence, economic duress is undoubtedly established but the long delay after delivery seemed unjustified and belong reasonable time. The same would also be indicated by the verdict in the North Ocean Shipping v Hyundai Construction (The Atlantic Baron) [1979] case. Thus, the buyer would not find any success in the recovery of the payment to the tune of $ 3 million as the long delay has made the modified contract legally valid.

Conclusion

North Ocean Tankers will not be able to recover the payment made to the buyer to the tune of $ 3 million on account of the delay beyond the reasonable time available to claim damages in cases involving duress.

References

Davenport, S & Parker, D 2014, Business and Law in Australia, 2^nd eds., LexisNexis Publications, Sydney

Gibson, A & Fraser, D 2014. Business Law, 8^th eds., Pearson Publications, Sydney

Harvey, C. 2009, Foundations of Australian law. 3^rd eds., Tilde University Press, Prahran, Victoria

Pendleton, W & Vickery, N 2005.  Australian business law:  principles and applications, 5^th eds., Pearson Publications, Sydney

Paterson, J, Robertson, A & Duke, A 2015, Principles of Contract Law, 5^th eds., Thomson Reuters, Sydney

Pathinayake, A 2014, Commercial and Corporations Law, 2nd eds., Thomson-Reuters, Sydney

Richard S 2003, The Modern Law of Contract, 5th eds., Cavendish, London

Taylor, R & Taylor, D 2015, Contract Law, 5^th eds., Oxford University Press, London