The Practical Importance Of Default Clauses In Land-Related Contracts

Discuss About The Land The Practical Importance Of Default Clauses?

The case involves three different individuals namely, Kate, Allen and Debbie. In the beginning, it was observed that Kate informs Allen on March 3, that she will sell her house at $421,000. The offer was supposed to remain open until 10pm of 14 March. Two days later Debbie informs by phone to Kate that she is ready to purchase the property at $418,000. However, Kate mentions that she can sell the house at a minimum price of $421,000. The final deal was settled at $421,000 on March 14 between Kate and Debbie. The conditions that prevailed during previous transactions between Kate and Debbie were also to be applied. In the same day, Debbie informed Allen that Kate’s house was purchased, which influences Allen to e-mail Kate to accept the offer of March 3. The paper therefore intends to assess the entire situation and determine whether in reality any contract exists between Kate and Debbie or Kate and Allen.

The rules of contract that are applicable in New Zealand can be used in this case. For a contract to be valid, it is important for an offer and acceptance to take place between individual(s) usually in exchange of money (New Zealand Writers Guild, 2011). The property Law Act of 2007 can hence be applied in this case (Ministry of Justice, 2007).

Based on part 2 of the property law act, it is evitable that a deed or contract can be considered liable if it has been completed in a written format. In the present case, there is no such trace which explains about mutual contract among the existing parties. Thus, at a glance it can be stated that contract do not exist between either of the parties. All the conversations have been done over the telephone and mail. Moreover, section 17 of the act clearly explains that any disclaimer regarding land can be considered valid in case there exists a deed or the court has made an order. As there is no interference of court into the matter so it can be considered that legal contract does not exist. However, conversations via e-mail clearly depicts that there are certain written evidences of contract among the three parties. Additionally, in March 14, Debbie had sent a letter to Kate confirming that she (Debbie) is ready to purchase the house for $421,000 on cash. The letter also mentioned that previous conditions of sale will be applied in the present condition. In case of Allen it, is observed that contract exists only during the initial mail when Kate sent her (Allen) the proposal to sale the house (Ministry of Justice, 2007).

Application

In a similar case between New Core Properties Ltd v Ganellen Construction Ltd, the court was observed to draw inferences from the e-mails that were exchanged between the parties. The same logic can be applied here to determine the validity of contract between Kate and Williams, and/or Kate and Debbie (Thomas, 2016).

The present scenario clearly suggests that no such clear existence of contract id found between the parties. However, communication by mail and letter reflects the fact that a valid contract is present between Kate and Debbie pertaining to the complete adherence to the factors offer and acceptance. Initial mailing between Kate and Allen also reflects the existence of contract.

1. a) Case of Sam and Colin

In the present case, it is apparent that Sam has refused to pay the money to Colin due to his separation with Tina. The contract law of New Zealand clearly mentions that in case two parties enter into consideration for exchange of goods or services, there can exists an intention to form a legal contract. Moreover, it is also depicted that prevalence of such intent can be considered void by stating evidences that can prove the contract legally enforceable. In the present case, there is no presence of any written deed of contact between Sam and Colin. Thus, the absence of credible proof can safeguard Sam from pay the money to Colin for entering into the consideration of repairing the house. However, Section 51 of the contract law explains that oral contracts can be treated in the same manner as that of the written ones. It can be clearly depicted that in case of oral contracts, the witness plays a significant role. Thus, in this case Tina can act as a witness before the court and state about the consideration that was made between Sam and Colin. This can make Sam liable to make the pre-determined payment of $9000 to Colin for completing the task of wiring repairs. Colin can even get verdict in his favor from the court civil-engineering produce any document that mentions about the expenses incurred on the repairing procedures (David, n.d.; Law Commission, n.d.).

b-i) Case of Direct Transfer

In the given case, it can be observed that Eddie had made a full settlement of $500 to Maxine, despite the due being $645. The law of contract in New Zealand clearly explains that there is a need of intention among two parties in case they enter into consideration. It can hence be observed that Eddie and Maxine entered into consideration orally for the transfer of $500. In case of oral contract, the same principles are applicable as that of written deeds. However, due to absence of witness, it is difficult for Eddie to prove that Maxine entered into the consideration to pay $500 instead of $645 (David, n.d.; Law Commission, n.d). Evidences from the case of Wilkinson (1998) mentions that the court does not consider any payment as fraudulent, if it has been done by means of direct transfer (exchange of money between two bank accounts). Thus, Maxine cannot claim for the balance of $145 by mentioning that Eddie has intentionally paid less than the due amount (Quinn, 2009).

Intention and Consideration

b-ii) Payment by Voucher

Even if Eddie had made an additional payment of $50 by voucher, then the answer to b-I would not change. This is because it further provides evidence of making a payment of $550 and the balance would have reduced to $95. However, in case Maxine has refused the payment of voucher amount, the justification would have remained the same for the settlement amount of $500 instead of $645.

1. a) Case between Fiona and Mathew

n the present case, Mathew entered into a contract to purchase a citrus orchard from Fiona at the price of $500,000. Mathew was informed by Fiona that the fruits of the orchard have been always of top-most quality. However, Mathew was informed by an expert that after harvesting Fiona sprayed a chemical in the orchard that was toxic and could hamper the future productivity of citrus trees. Mathew can thus get justice in his favor with the support of the Fair Trading Act of 1986. It is clearly mentioned in section 10 (Part A) of the act that an individual must never mislead another person regarding the suitability or characteristics of a good. Thus, it can be stated that Fiona had misrepresented Mathew by hiding this instance from him (New Zealand Government, 2016).   Based on the verdict of a similar case between Aldrie Holdings Limited and Clover Bay Park Limited, the court can order Fiona to pay compensation to Mathew for false representation. However, as negotiations had not even started between them, Fiona can prove the fact that Mathew was has not faced any loss as of yet and hence there exists no question of compensating (Ministry of Justice, 2016).

1. b) Case between Ralph and Carl

The contract law in New Zealand considers an acceptance to be valid only if it has been made on e-mail. Even in this case, the acceptance by Ralph was made through mail to Carl’s offer. Thus, it can be inferred that Ralph cannot readily deny the offer already accepted by Carl. Additionally, section 7(1) of the Contractual Remedies Act 1979 mentions that it is possible to rescind an acceptance only if there have been misrepresentations or breach of contract. Thus, it can be said that Ralph cannot rescind his contract with Carl (Thomas, 2016; Parliamentary Council Office, 2017).

1. c) Age of Ralph below 18 Years

The Minors’ Contracts Act 1969 clearly explains that in case Ralph is below 18 years then he is a minor. The e-mail is a proof that a fair and reasonable contract took place between Ralph and Carl. Section 6(1) of the act clearly explains that in general, the court cannot take any action against Ralph until he reaches 18 years of age. Thus, Carl cannot enforce his contract with Ralph. On the contrary, section 6(2) mentions that in case the contract is true and fair, then the court can take action against the minor. This can especially be the case when Ralph reaches 18 years of age. In that situation the court can order Ralph to bind on to the contract and sell the vintage car to Carl at $10,000 as mentioned in the mail (Parliamentary Council Office, 2017a).

1. d) Impact of New Zealand Legislation

Consent Capacity and Legality

As per section 16 of the Companies Act 1993, it is mentioned that an organization has the capacity to undertake business transactions within and outside New Zealand. The provisions present in the constitution of an organization can validly restrict powers, privileges and rights, which are considered to be legal. Section 8 of the Illegal Contracts Act 1970, mentions that the court has the capacity to alter a provision of trade that creates hindrances in business transactions (Parliamentary Council Office, 2017b; Parliamentary Council Office, 2017c).           

1. ai) Obligations for Vendor and Purchaser

In the present case, it is observed that Harry has to enter into a contract so that it is possible for him to sell the existing residential property and buy a new one for accommodating his increasing number of family members. Part 3 and section 29 (1) of the Property Law Act 2007 clearly mentions about obligation(s) of the vendor in case he/she enters into contract for sale of a property. It states that in case the contract gets cancelled, the vendor has to inform about the chances of remedy of the deed. This means that the vendor has to immediately state about the areas that are no longer considered as acts of breaches. The vendor is also obliged to inform about the compensation that is supposed to be paid by the purchaser as remedy for the breach. The mentioned obligation on remedy to breach of contract is clearly applicable in case of Harry, who is a vendor of the residential property (Parliamentary Council Office, 2017d).

Section 30 of the Property Act 2007, mentions it to be the obligation of the buyer to pay compensation in case a contract is breached pertaining to his inability to pay-off debts. It means that the purchaser of the residential property has to pay compensation to Harry in case any standard contract is breached by the purchaser (Parliamentary Council Office, 2017e).

One of the reasons that can lead to termination of a contract pertaining to the sale of residential property is the inability of the purchaser to fulfill his/her obligation(s) within the stipulated deadlines. For example, in case the purchaser is not able to make payment to the vendor within a stipulated time, it leads to the breach of contract and provides the vendor with a right to immediately cancel the contract (Arthur, 2015).

In case the buyer is not able to pay the money, then it is necessary to exchange another property for the settling the dues. The vendor in this case can offer extension of deadline pertaining to the payment of money by the purchaser. In this case, Harry is supposed to extend the deadline of payment to the buyer (Arthur, 2015).

1. bi) Cancellation of Contract

Section 7(3) of the Contractual Remedies Act 1979 clearly mentions that contract can be cancelled, wherein any one of the parties has caused any breach. In the present case, it is observed that Andrew had not completed construction of the beach house within the stipulated date i.e. 15^th of December. However, it is important to have order of the court for rescinding the contract by Andrew (O'Meara, 2012; Parliamentary Council Office, 2017).

Grant is supposed to take compensation from Andrews for causing breach of contract, as a result of which Grant’s son had to complete the work free of cost (O'Meara, 2012).

The creditor can take assistance of the court that orders Andrews to settle off the dues. Moreover, the supplier has to fill an application form and frame complaint against Andrews on payment of fees (New Zealand Government, n.d.).

References

Arthur, J. K. (2015). Rescission of contracts for the sale of land and the practical importance of default clauses. Uploads, 1-21.

David, P. (n.d.). Introduction to the business law of contract 2011. University of Auckland, 1-6.     

Law Commission. (n.d.). 3 The law of contract. Retrieved September 19, 2017, from https://www.nzlii.org/nz/other/nzlc/report/R50/R50-3.html

Ministry of Justice. (2007). Property law act 2007. Public Act, 1-284.

Ministry of Justice. (2016). In the high court of New Zealand Auckland registry. Documents, 1-35.

New Zealand Government. (2016). Fair trading Act 1986. Public Act, economics

New Zealand Government. (n.d.). About civil debt. Retrieved September 19, 2017, from https://www.justice.govt.nz/fines/about-civil-debt/

 New Zealand Writers Guild. (2011). What is a contract. Retrieved September 19, 2017, from https://www.nzwg.org.nz/members/contracts/general-information-about-contracts/

O'Meara, A. (2012). Cancelling a contract: why breaking up is hard to do. Retrieved September 19, 2017, from https://www.johnlaw.co.nz/news/cancelling-a-contract/

Parliamentary Council Office. (2017) a. Minors' contracts Act 1969. Retrieved September 19, 2017, from https://www.legislation.govt.nz/act/public/1969/0041/latest/whole.html

Parliamentary Council Office. (2017) b. Companies act 1993. Retrieved September 19, 2017, from https://www.legislation.govt.nz/act/public/1993/0105/latest/DLM320117.html

Parliamentary Council Office. (2017) c. Illegal contracts act 1970. Retrieved September 19, 2017, from https://www.legislation.govt.nz/act/public/1970/0129/latest/DLM396461.html

Parliamentary Council Office. (2017) d. Property law act 2007. Retrieved September 19, 2017, from https://www.legislation.govt.nz/act/public/2007/0091/79.0/DLM969151.html

Parliamentary Council Office. (2017) e. Property law act 2007. Retrieved September 19, 2017, from https://www.legislation.govt.nz/act/public/2007/0091/79.0/DLM969152.html

Parliamentary Council Office. (2017). Contractual remedies Act 1979. Retrieved September 19, 2017, from https://www.legislation.govt.nz/act/public/1979/0011/latest/whole.html

Quinn, S. E. (2009). Criminal law in Ireland. Ireland: Sean E. Quinn.

Thomas, G. (2016). Negotiations via email – A legally binding contract?? Retrieved September 19, 2017, from https://www.harknesshenry.co.nz/legal-articles/e-commerce/negotiations-via-email-a-legally-binding-contract/