Enforcement Of Contracts: A Case Study Of Patrick And Uncle Sam - An Essay.

Question:

Discuss about the Overview of the Law of Contract.

One or two parties may decide to come together to create an agreement. And for that reason, the law of contract comes in to enforce their agreement to make sure that none of the parties frustrates the other after that. However, in order for the law to enforce a particular agreement, it must look whether the agreement has all the elements or not. If all the elements exist, the court will definitely enforce the agreement, forcing the non performing party to either perform or give a remedy. In that concern, this paper will review a specific case of Patrick and his Uncle Sam.  

The issue here is a question of the enforcement of an agreement. One party backs from the deal after they had finalized their contract. In looking at the problem, the law of contract recommends that an enforceable contract must carry all the main elements. Some of the central elements are; agreement, consideration, intention to create a legal relation, certainty, and formality among others. Regarding this case, this paper shall conduct a test for the Patrick v. Sam case, and countercheck with each element mentioned. The law of contract recognizes a valid agreement if it has an offer and acceptance. A valid offer must demonstrate the readiness of the offeror to create a contract following some given terms. For it to be valid, the offers should have two components. These are the expressed willingness by the offeror. Secondly, the offer should be definite.[1]    

After an offer has been made and communicated to the offeree.  To constitute a valid contract, the offeree ought to communicate his/her acceptance to the offeror. Also, the acceptance should be communicated in a clear manner and in the way the offeror has set, together with the time limit given by the offeror.[2]  Additionally, an offer should be unconditional. In analyzing Patrick and Sam case, it’s possible to see that there was an valid offer since it was clearly made and communicated to Patrick. On the side of Patrick, there is also a valid acceptance since there was a acceptance, and it was also clearly communicated to Sam.

The next test for this contract would be consideration. Consideration is a primary constituent an enforceable contract. In English law, any contract without consideration void and doesn't have a legal capacity. An explanation to consideration was stated by the House of Lords described consideration as the "price that one to a contract pays for the promise or the performance of the other party.”[3] In the case of Peter and Sam, there is a valid consideration. Sam is giving out his Farm Plot marked 101 plus the cottage, while in return he is getting a weekly pay of $1000 for the Plot 101, and $200,000 for the cottage. With this, the contract passes the second test.

The third test is the intention to create a legal relation. The law of conducts some test to  determine the parties intended to be legally bound by the terms of their agreement. One of these test is called the objective approach.[4] The test was summarized by Lord Clarke said[5]

Offer and Acceptance

“Whether there is a binding contract between the parties and, if so, upon what terms depends upon what they have agreed. It depends not upon their subjective state of mind, but upon a consideration of what was communicated between them by words or conduct, and whether that leads objectively to a conclusion that they intended to create legal relations and had agreed upon all the terms which they regarded or the law requires as essential for the formation of legally binding relations.”

Rather than this option, the court also looks at other assumptions. In most cases, the court looks at three things. The first one is the manifested intentions by the parties, the content of the agreement and lastly, the facts encompassing the case. The content of the agreement can look at the agreement in regard to where it’s arising from. In this case, where the agreement is arising from a commercial environment, the presumption is that the parties intended to create a legal relationship[6].  A helpful example is the case of Esso Petroleum Ltd v Commissioners of Customs and Excise.[7] This involves  Esso company with its promotion program. The Customs and Excise were concerned with their operation and wanted to claim the purchase tax on the ‘sale’ of the coins. Esso company contended to the issue of paying tax, but the House of Lords concluded that Esso had adopted the method as a way to gain more sales, meaning there was an intention to create a legal enforcement and were supposed to pay tax.

On the other side, where agreement is coming from a social and domestic settings, the assumes that the parties never intended to create a legally binding agreement.[8] Coming back to the case of Patrick and Sam, based on the explanation above, it’s very possible to see that the parties wanted to be legally bound by the contract. In this case, the agreement is of commercial nature. Secondly, where there is an issue of money, the court mostly rules that the parties wanted to be legally bound. Thirdly, the fact that the parties had a written contract makes it look that that they indeed wanted to be bound by the agreement.

The next issue in the contract that this paper will handle is the issue of uncertainty. The uncertainty in Patrick and Sam case is that the parties “drafted the contract Sale Contract subject to Patrick obtaining finance, building and pest inspections, and other terms and conditions as deemed necessary by Uncle Sam’s solicitors.” The question in law is whether this part can lender the contract unenforceable.

Even though the courts will never make a contract for the parties, certainty helps in setting the principle that courts should employ to give a fair judgment. In most cases where the terms of a contract are vague causing the parties to abandon the agreement, the court has always held that an agreement to agree doesn't constitute an agreement. Furthermore, inability to settle on the fundamental issues would result in a voidable agreement.[9] Some of these significant issues are the price. However, the court has always attempted to enforce commercial contracts by interpreting the contract in a reasonable man's perspective.[10] At sometimes, the courts may also look to external principles like a statute, custom, and the courts. At other times, a court can imply a reasonable price where price is the source of ambiguity.  However, this doesn't apply to land. In cases where uncertain is causing the highest destruction of the contract, the court may strike out the clauses causing such uncertainty.[11] This happens when the actual meaning of the contract remains even without the ambiguous clauses. For the case of Patrick and Sam, to the eyes of the law, the contract is still enforceable since the parties had agreed on the offer, consideration, and acceptance. So even if the court removes the ambiguous clause. The contract would still remain intact.

Lastly, it’s the formalities. Contracts of sale of land are applicable only when they are made in writing. As a general rule, English law does not make it a mandatory rule that all contracts should comply with a particular formality.[12] However, for clarity and enforcement, the law encourages people to create contracts in writing. Eve though, it is a rule that all contracts for the sale of land must be made in writing. Additionally, the law requires that contracts for lease of more than three years be made in a deed.[13] If not, they entire contract gets at a risk of losing the force of law. This one is a rule that renders all unwritten contract for the sale of land unenforceable. Nevertheless, the doctrine of part-performance provides that the law will not look away from where the plaintiff performed a part of the contract on reliance on the defendant’s agreement. This is where equity comes in despite the fact that there were no formalities. However, formalities are requirements to discourage cases of fraud. Following this, since Patrick and Sam already had a written contract, its going back is not an option for Sam. More than that, Patrick has already travelled in reliance of their agreement.

Conclusion 

The law can decide on what it would take for an enforceable contract depending on the nature of the contact. But for a general rule, the law may only require that a contract have a valid agreement with offer and acceptance, consideration, and intention to create legal relations. To some extent, other element like formality may come in. However, in matters of land and sale of second hand goods, the law requires that that the parties enter into a written contract.

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Cases

RTS Flexible Systems Limited v Molkerei Alois Muller GmbH. 2010 UKSC 14

Coward v Motor Insurers’ Bureau. 1962 1 All ER 531

Dunlop Pneumatic Tyre Co Ltd v Selfridge & Co Ltd [1915] UKHL 1