Legal Case Analysis: Formation Of A Contract For Sale

Background Information

This is an individual written assessment worth 40% of your total marks.

• Part A requires you to read a case and apply legal knowledge gained from the case to answer eight short answer questions.  
• Part B comprises of one problem based question and one essay.

NOTE

1. In which court is this case [2015] QSC 119 heard?  What is the jurisdiction that the court is exercising?
2. Outline the facts of this case [2015] QSC 119 in your own words.
3. Outline the legal argument put forward by Stellard Pty Ltd.
4. Outline the legal defences claimed by North Queensland Fuel Pty Ltd.                           
5. Do the parties in the following scenarios have a legally binding contract? Assume all facts are given in the scenarios presented.

You are to support and quote the case(s) and legal principle(s) you have relied upon for your legal reasoning from the cases cited by Martin J in [2015] QSC 119.  These cases are found under the heading “What are the principles to be applied?” starting from paragraph [30].  

(a) Allan is a web designer.  Bob is an entrepreneur with a new start-up business.  Bob wants Allan to come up with a complex webpage for his new start-up business. After a one-hour initial discussion with Bob, Allan told Bob that he should be able to meet the preliminary requirements to set up the webpage.  Bob was happy and told Allan that he had “sealed the deal”. They shook hands at the end of their conversation.                                                                                                                                   

(b) After a lengthy six months negotiation and exchanges of emails for the sale of a unique painting and verification of provenance of the artwork by an independent art expert paid for by Y, a sophisticated art collector, Y accepted the counter-offer price of $3 million by X, subject to the execution of a formal agreement by their solicitors.

(c) A lessee (tenant) requested for a new lease as their existing lease with the lessor (landlord) is about to expire.  They have been in a lease relationship for two terms with duration of 6 years in total.  As per usual practice in the past lease renewals, the lessor informed the lessee in an email:  “I intend to renew the lease with you for another three years on terms similar with the existing lease, with the exception for rent to be increased annually by a rate to be determined by an independent commercial property valuer. New lease is subject to execution of a formal contract.”  The lessee responded in an email stating, “Email received and noted.” To date, no formal execution of the lease has been carried out.

6. What are the reasons for Martin J in [2015] QSC119 to conclude that there is a contract between the parties despite the fact that the email correspondences between the parties suggest that the offer is “subject to contract”?    You are to support your answer from facts from the case.    2 marks                                           
7.  Stellard Pty Ltd & Anor v North Queensland Fuel Pty Ltd [2015] QSC 119 deals with legal implications in property negotiations. The following is another fictitious situation in property negotiation:

You own a corner block of land in a suburb in Melbourne.  You decided to sell the block of land.  To increase the potential of capital gains, you have applied and gained approval from the relevant authority for the land to be rezoned for residential high-density development. In the Sale of Contract, there is no specific documentation to the approved zoning from the relevant authority as your solicitor is still waiting for the paperwork to come through. A property developer is keen on the property and the price you want for the property but notices the lack of zoning documentation. He wants to do his own due diligence and wants some sort of assurance that during the time of his investigation, his keen interest on the property is protected. You are equally interested not to lose this potential buyer given a falling property market.

Outline ONE risk mitigation strategy in law you can propose to the developer to meet his requirement. The risk mitigation strategy is to be backed up by a legal principle (case to be cited) from your study in week five.

8. Specific statutory requirement is stipulated for the sale of land under s59 of the Property Law Act (Qld) 1974.  

Assuming that you are an employee of a Queensland real estate agent representing an Australian seller who now resides overseas. You have been conducting negotiations and finalising the sale between the seller and the interstate buyer entirely in the form of email correspondences.

Outline TWO risk management proposals to the management of the real estate agent you work for to safeguard the legitimacy of the sale in light of s59 of the Property Law Act (Qld) 1974 after what you have learnt from reading paragraphs [56] to [69] from the case [2015] QSC 119.

Question One

Crystallite, a Queensland business, has recently won a major contract to stage a musical production in Brisbane.  As part of the requirements of this musical production, specialised light fittings are needed.  A tender process is initiated by Crystallite to secure the supply of 50 specialised light fittings from a sub-contractor.  In its tender advertisement, Crystallite specified that time is of the essence in the supply of these specialised light fittings.

Discuss the legal arguments of both parties and the likely outcome as to whether there is a contract between them. You are to support your response with legal principles and cases.  You are to concentrate only on this issue, i.e. there is no requirement to address consequences for breach of contract, if any.

Cases are to be drawn from week 5 study materials, including lecture contents and reading from your prescribed textbook, Chapter 3.  Subject to the word limit, there are no maximum cases that you should refer to.

Indicate your word count at the end of your response.

Question Two

The doctrine of separation of powers is the cornerstone of our government in Australia as it provides complete accountability to the Australian people.

Discuss this statement. Your analysis is to be supported from a variety of sources (at a minimum two sources). Sources of your analysis may come from the Australian Constitution, academic journals, textbooks, cases and newspaper articles. No specific number of journals, textbooks, cases and newspaper articles are stipulated. The more sources you draw your information from, the more enriched your content will be to support your analysis.

Indicate your word count at the end of your response.

The case was heard in Supreme Court of Queensland and the court was exercising the appellate jurisdiction in this matter.

In this case, North Queensland Fuel Pty Ltd was the vendor and had listed for sale a petrol service station. Stellard Pty Ltd was the purchaser who made a verbal offer for purchasing the property based in certain conditions like environmental assessment and due diligence. The agent of the vendor emailed the purchaser on October 30^th, 2014 where the basis on which the vendor was ready to sign the contract was set out, along with attaching a draft contract in which the guarantee of the director was covered. The agent of vendor on the next day asked the purchaser to put the offer in writing. The very same afternoon, an email was sent by the purchaser to the agent of the vendor for confirming the offer but was advised that the offer was subjected to the contract and the previously discussed due diligence. After a few minutes, the representative of the vendor responded to the offer by accepting it.

After a few days, the solicitor of the purchaser sent an email in which the modified contract for sale removed the clause of guarantee of director and a further special condition was inserted which dealt with the environmental conditions and due diligence. During this time, the vendor got in negotiation with other party for getting in a contract at a price which was higher. A declaration was sought by Stellard as a result of this by the Court that a binding agreement had been concluded in between the parties. The key issue in this case was whether a binding contract had indeed been formed in this case for sale.

Stellard Pty Ltd was the first plaintiff of this case and stated that a contract had been formed between them and the defendant. And this is the reason why they sought a declaration from court where they stated that the binding agreement had taken place between the parties. The reason for this was the chain of emails which were exchanged between the two parties.

The defendant on the other hand stated that there had been no contract on different grounds. It was alleged that the offer covered in the email was not unconditional which had been capable of being unqualified acceptance due to the same being “subject to contract”. They stated that the acceptance email from Beattie was not unqualified acceptance of October 31^st email terms from Hurry. The defendant also stated that the parties had not reached an agreement regarding material incidents of the transaction which had been proposed in terms of personal guarantee and due diligence period duration. It was also claimed upon by the defendant that the parties did not have the requisite intention of being bound by the contract in a legal manner. This lack of intention could be inferred from the parties not progressing to the exchange and point of executive of written contract.

In the present case, Martin J applied certain principles at [30]. In this regard, they made reference to the case of Masters v Cameron [1954] HCA 72; (1954) 91 CLR 353 at 360 regarding the joint decision given by CJ Dixon, JJ Mctiernan and JJ Kitto. The accurate summary of consideration was quoted from Halsbury’s Laws of Australia. In this regard, it was stated that the parties in negotiations, when reach an agreement on which the terms of contract are based, and also reach an agreement on the subject matter of negotiation to be dealt through a formal contract, the case may fall in three classes.

Key Issues and Arguments

The first category was one where the parties reach finality in terms of arrangement of the terms of bargain and have the intent of being bound by the terms’ performance in an immediate manner; and at the same time, there has been proposal to have the terms restated in form, which would be more precise or fuller but not different in its effect. The second case may be where the parties agree upon the terms of bargain and also have the intention of not making any departure from the agreed terms or making additions to it in an implied or express manner; but still have performance of one or more than one terms which are conditional to the formal document’s executive. The last class was such where the parties do not have the intention of concluding the bargain in any case till the formal contract is executed. Whether a contract has actually been created or not continues to be an object of determining the intent of parties.

The three classes given in the quoted case match the given scenario. In the first instance, Allan and Bob had the intention of getting in the contract and they sealed the deal by shaking hand at the end. This was done after a detailed discussion and the exchange of requirements for setting the webpage. The sealing of deal presented the intention and the parties being bound immediately. As a contract had not been formed, there was a need to restate the terms on the contract, which would be no different; thus, fulfilling the first class. Thus, a legally binding contract was present here.

The second case was one in which after lengthy negotiations between X and Y, a counter offer of X was accepted by Y where the painting would be provided by X for a price of $3 million. But, this was subjected to the executive of a formal agreement through the solicitors of the parties. In this case, the second class would be applicable. This is because after the bargain, there is an agreement of fulfilling these terms, on the agreed terms. However, the payment of consideration amount and the delivery of painting were conditional on the executive of a formal document, fulfilling the requirements of the second class. Thus, a legally binding contract was not present here, and for one to be present, a formal document was required.

The third condition given in this question fulfilled the requirements covered in the third class in the case cited by Martin J in [2015] QSC 119. This is because the intent of parties for concluding the contract was subjected to the execution of formal contract. Even though bargaining took place between the tenant and the landlord and the landlord stating in the email that he intended to renew the lease for another three years, but with a variation in the rent, to be increased on annual basis at a rate which had to be determined by the independent commercial property valuer. This email was simply received and noted by the tenant and no acceptance was given to the landlord. There was also a lack of execution of a formal lease. In order to hold if a contract had been formed between the two, reference needs to be made to the case of Ermogenous v Greek Orthodox Community of SA Inc (2002) 209 CLR 95, where the requirement is to objectively determine on the intention of the parties. In this case, the email sent by the landlord made it clear that he had the intent of continuing the lease at varied terms. However, the intent of the tenant was not clear as he did not give his acceptance to the sent mail. Mere acknowledgement of the email by the tenant cannot be deemed as intent. Thus, a legally binding contract was not present here.

Analysis using Legal Principles and Cases

In deciding upon this matter, the court made reference to section 59 of the Electronic Transactions Act, 1999 which provides the consequences of absence of sign. A signature has to be such in cases of electronic communications which fulfil section 14 of this act. And for this purpose, the purchaser is required to show that the person signing had been identified in email; there was intent of creating a legally binding relation and the same had been indicated through the undertaken communication; and the person receiving the signature gives consent to the requirement of sign being met through the email. It was found by the court that the conversations undertaken between the parties before October 31^st, 2014, which included the offer covered in email along with the admission of the vendor that he was the authorized representative for the purpose of sending the email; and that this was enough to satisfy the identification along with the intent requirement set out under section 14 of this act. It was held by the court that in cases where the parties engaged in negotiation through email, particularly where the offer was made through email, the court had the freedom of inferring consent being given through the other party’s conduct, despite the contract being “subject to contract”.

Risk mitigation helps in identification of methods for reducing or preventing the occurrence of certain things and also provides the methods which can be adopted for the purpose of lessening the impact on the projects and the organization. The development of a risk mitigation strategy requires the identification of the possible response to risk, evaluation of effectiveness of response, development of action plan for implementing appropriate response, and maintaining a constant review system of response to assess the effectiveness of it.

The risk in this case is associated to the departure risk of the client. This is because without the approval, the client would leave the firm. In this regard, the firm needs to be involved with the clients and for considering the implication for the firm if the acceptance is not attained. This could be done by simply stating in the contract, that the contract would be operable only after the acceptance is attained from the relevant authority. In the case of Nowingi LTCF (EES) [2006] PPV 92, the key issue was risk mitigation for avoiding the adverse impacts. And in this case, it was found that there was absence of risk mitigation strategies, which led to the recommendations on drawing adequate risk mitigation and management measures for avoiding the adverse impacts. Based on this case, it is advised to the client to draw up a proper risk mitigation strategy where the effects of not getting the approval are clearly stated. There is a need for ensuring that the client does not leave the firm even in absence of such mitigation strategy by showing that the reasons for which the approval was not granted, are amended at the earliest. There is a need to rely upon the three conditions given in Masters v Camero, where the second class is applied. This means that a contract would be formed with the client based on the terms exchanged and just a formal document is pending.

Conclusion

In the quoted case, section 59 of the Property Law Act 1974 (Qld) was referred by the defendant to show that even if a contract was found to be present, it could not be deemed as sufficient as there was nothing in writing, which was a requirement of the quoted section, and which could enable the plaintiff to bring forward any action. The issue in this case, based on the argument of the defendant was that there was a lack of contract based on the lack of an ordinary signature between the parties. However, the court found that this requirement was fulfilled based on section 14 of the Electronic Transactions Act. The defendant had also stated that the requirement of the intent was not met based on the precision required for satisfying the objects covered in section 59 of the Property Law Act.

In light with section 59 of this act, two risk management proposals have been stated here for the management of the real estate agent based on the quoted case. The first proposal is for the management to refrain from making such emails where an intention is shown by the management or the agents appointed by the firm which could result in the court coming to conclusion that a contract had been drawn between the two parties as was found in the case of [2015] QSC119.  In this regard, the management could drawn up the standards based on which the replies have to be made by the management or the agents, and a clear disclaimer is provided with each communication that the contract would not be applied till the time a formal contract is drawn between the parties. Here also, reference can be made to the case of Masters v Camero to state that a formal contract would not be formed until a formal contract is present.

The next proposal for the management is to identify all the possible risks which can be born as a result of the written communication being deemed as fulfilment of section 59 of the Property Law Act. This is important to avoid a contract being formed even in absence of the intent of the firm of getting in a contract. In order to safeguard the legitimacy of sale under this section, it is crucial that the firm confirms from the client that the property is being sold. For this purpose, there is a need to adopt a clear agreement where there is stated that where the signature is given through section 14 of the Electronic Transactions Act, the fulfilment of section 59 of the Property Law Act would be assumed to be present. The essence of all these proposals is to clearly state the terms being offered to the clients and attain clarity on the terms provided by the other party to the firm, in order to avoid the chances of an intention being construed as was done in case of [2015] QSC119 and contractual obligations being imposed, even when there is a lack of intent of doing so on part of the defendants, and in context, of the management of this firm.

Whether or not a contract was formed between Crystallite and LED Lighting? If a contract was formed, whether or not the contract was breached?

A contract is the promise made where there are two or more parties and each party has certain obligations towards the other party due to being bound by the contract. One side has obligation to undertake the contractual promise in terms of performing the mentioned task, and the other party usually pays the consideration for the first party doing the task (Clarke & Clarke, 2016). The contract formation has different requirements where there is a need for presence of certain elements of contract. These include offer, acceptance, consideration, intention, clarity and capacity (Latimer, 2012).  

The contract formation is started from the offer being made by one party to another party, where it is clearly stated. In other party, one party offers clear terms to the other party, stating what is being offered and at what conditions. It is important to make differentiation between an offer and an invitation to treat. The request for tenders is deemed as an invitation to treat, and the tenders which are submitted are deemed as offers (Ayres & Klass, 2012). It is also important to make differentiation between an offer and a request for information. Harvey v Facey [1893] AC 552 is a leading case in this matter, where the question about the ball pen’s lowest price was considered as a request for information by the court instead of deeming it as an offer or acceptance. A letter of intent, depending upon its specific language, could be deemed as an offer, invitation to treat or mere representation of the undertaken negotiations. Particularly where the letter of intent indicates agreement on major terms of the transaction and of the subject matter, it can be deemed as a binding agreement. But where the terms are left open for negotiations in future, it would not be deemed as a binding contract (Andrews, 2015).

Upon an offer being made successfully, it becomes important for the party, to which the offer has been made, to accept the offer, for the purpose of the element of acceptance for contract formation to be satisfied (Mulcahy, 2008). The acceptance has to be properly communicated to the offering party and the terms of acceptance have to match the terms of offer. As per the case of Felthouse v Bindley [1862] EWHC CP J35, silence cannot be deemed as an acceptance (Stone & Devenney, 2017). When upon an offer being made, the other party responds with a different offer, or gives acceptance with varied terms, it is deemed as a counter offer. And when this happens, Hyde v Wrench (1840) 49 ER 132 dictates that the original offer is destroyed and can no longer be accepted by the accepting party (Marson & Ferris, 2015).

In the given case study, the tenders invited by Crystallite would be deemed as an invitation to treat, based on the rules stated above. The reply of July 14^th by LED Lighting would not be deemed as an offer as nothing clearly was stated in this statement. This would instead be deemed as negotiation phase of the contract. The reply of July 30^th would again not be deemed as an offer, and would instead be deemed as a request for information based on Harvey v Facey. This is because here a request was simply made instead of offering something. The August 05^th negotiation would not be considered as an offer again as this lacks clarity. The letter of intent provided on August 10^th would be deemed as an offer where the possibility of a formal contract was stated, along with the details of products and delivery period.

The communication of August 15^th would not be deemed as a contract formed, as only a sample was provided based on the undertaken negotiations. For this sample, the payment was made by Crystallite on the same day. The August 20^th communication cannot be deemed as an acceptance on the basis of Felthouse v Bindley as silence cannot be deemed as an acceptance. So, they cannot assume that a contract had been formed and proceed with the supply and delivery of the stated products. So, the August 30^th claim of money would be invalid, as a contract had not been created for the lack of acceptance by Crystallite on the offered terms. This meant that Crystallite was free to accept or reject the contract.

All in all, the communications which transpired were request for information, negotiations and offer; there was a lack of clear acceptance on part of Crystallite. So, a breach of contract cannot be claimed upon by LED Lighting. Also, samples are not something which is usually paid upon. So Crystallite can claim the refund of the $3,000 deposit.

Conclusion 

Thus, a contract was not formed between the two; so, a breach of contract cannot be claimed upon.

The Australian Constitution is a remarkable document which provides the set of rules through which the nation is run. The first three chapters of it cover three large groups, i.e., the Parliament, the Executive, and the Judiciary, along with the role played by each of these in the governance of the nation. Between these three groups, the power of making and managing the federal law is divided. And this division is based on the separation of powers principle (Parliamentary Education Office, 2017). The following parts would highlight the manner in which the separation of powers acts as a cornerstone in the government of the nation as a result of the accountability provided through this to the people of the nation.

In the nation, the Parliament is the legislative body, and as a result of this role, it has the power of making and amending the legislations or the laws. The next division is the executive, through which the law is put in action. The next division is judiciary, where the judgements regarding the law are made. Each of these branches carry out their separate functions and these are held by the independent and separate organs of government (Campbell, Lee & Campbell, 2013). This doctrine helps in providing fair governance in the nation. However, a strict separation of power is not evident always in the nation. The separation of powers version of the nation combines the basic democratic concepts which are embedded in Westminster system, where the doctrine of responsible government is seen in this concept (Groves & Lee, 2007).

Even though an assumption is made that all of the branches under this concept do not overlap with each other; but, it cannot be denied that there are certain common grounds between the three, which make way for overlapping. If the three branches are carefully analysed, it becomes clear that there is very less separation in between the two initial branches of legislature and executive. This is due to the need of the executive to be drawn from the legislation, and in maintaining the confidence of legislature. The case of Victorian Stevedoring & General Contracting Co Pty Ltd & Meakes v Dignan (1931) 46 CLR 73 through more light in this regard, where it was held by the High Court of Australia that there was a strict division between the two levels; but the same was not very practical. The overlapping of legislative and executive is also inevitable and this is the reason why checks and balances have been developed (Irving, 2004). The reason for this is that the legislative brings out the law which the executive essentially executes. In the quoted case, it was held that the legislative power could be delegated to the executive, which upholds the validity of delegated legislation and is contrast to a strict separation of judicial power (Campbell & Goldsworthy, 2017).

Apart from the blurred lines between legislative and executive branches, there is also a contention of judiciary overpowering the two branches. This is because when there is a clash between the two branches, or these branches with other entities, the matter is decided upon by the judiciary. In order to resolve the dispute which has been raised, the judiciary takes all the relevant facts into consideration and makes the decision. But in doing so, the judges decide upon what the exact meaning of the drawn legislation was. Also, the judiciary decides if the executive of the legislation by the executive branch had been correct or not. This essentially gives supremacy to the judiciary amongst the three branches (Fenna, Robbins & Summers, 2013).

However, in such cases, it cannot be denied that the judiciary simply decides upon the matter and removes the ambiguities in the law. The judiciary does not change the law. Even when a law is unclear or such that its application is not practical, it directs the legislative to look upon the law and make the decision of amending or repealing the law, or for bringing out a new law. The court does not punish the executive for a different sort of execution of law in cases of ambiguity. It merely directs it to uphold the theme of the law, by clarifying the ambiguity. It is in this role that there is a harmonious existence of the three branches, which helps in the constitution being accountable in a proper manner to the people of the nation. The focus remains on providing the best results for the public, for which the law is drawn, executed and resolved (Groves & Lee, 2007).

Thus, it can be concluded that the doctrine of separation of power gives separate powers to the three branches of the government, where these three branches essentially work in unison, to provide the best results for the public, which in turn helps them in being accountable towards the general public. This makes the doctrine truly a cornerstone of the Australian government.

References

Andrews, N. (2015). Contract Law (2^nd ed.). UK: Cambridge University Press

Ayres, I., & Klass, G. (2012). Studies in Contract Law (8^th ed.). New York: Foundation Press

Campbell, E., Lee, H. P., & Campbell, E. M. (2013). The Australian Judiciary. Victoria: Cambridge University Press.

Campbell, T. D., & Goldsworthy, J. (Eds.). (2017). Judicial power, democracy and legal positivism. Oxon: Routledge.

Clarke, P., & Clarke, J (2016). Contract Law: Commentaries, Cases and Perspectives (3^rd ed.). South Melbourne: Oxford University Press.

Fenna, A., Robbins, J., & Summers, J. (2013). Government Politics in Australia. Melbourne: Pearson Higher Education AU.

Gerangelos, P. (2009). The Separation of Powers and Legislative Interference in Judicial Process: Constitutional Principles and Limitations. Portland, OR: Hart Publishing.

Groves, M., & Lee, H. P. (2007). Australian administrative law: Fundamentals, principles and doctrines. Victoria: Cambridge University Press.

Irving, H. (2004). Five things to know about the Australian Constitution. Cambridge: Cambridge University Press.

Latimer, P. (2012). Australian Business Law 2012 (31^st ed.). Sydney, NSW: CCH Australia Limited.

Marson, J., & Ferris, K. (2015). Business Law (4^th ed.). Oxford: Oxford University Press.

Mulcahy, L. (2008). Contract Law in Perspective (5^th ed.). Oxon: Routledge

Parliamentary Education Office. (2017). Separation of Powers: Parliament, Executive and Judiciary. Retrieved from: https://www.peo.gov.au/learning/fact-sheets/separation-of-powers.html

Stone, R., & Devenney, J. (2017). The Modern Law of Contract (12^th ed.). Oxon: Routledge.