Legal Issues In Contracts And Trusts

1. The main issue in this case is to determine whether Sally and Harry had a contract. The other issue is to determine if it would have been different if Harry would have used the e-mail instead of postal service.

2. The issue in this case is to identify the most suitable trust for Tanya and the kind of legal duties she could expect to obey.

Therefore, the main issue in this case is to determine whether Sally and Harry had a contract. The other issue is to determine if it would have been different if Harry would have used the e-mail instead of postal service.

• Contract Law
• Postal Acceptance rule
• Electronic Transactions Act 1999.

A contract is a legally binding agreement between two or more people. For a contract to exist between parties there must be offer and acceptance between the parties. An offer is a promise provided by offeror to show that he or she is legally bound if genuinely acknowledged. On the hand, Postal Acceptance Rule governs contract agreements performed through Postal services. According to this rule, any delay in delivery or undelivered letter of acceptance does not make the acceptance invalid. Moreover, Electronic Transaction Act is different from the Postal Acceptance Rule in that it is an instantaneous form of communication, meaning that the time of acceptance is the time when the receiver of the information has retrieved it from his or her email.

Postal Acceptance Rule states that where parties agreed to use postal service medium of exchange for both offer and acceptance, the acceptance happens immediately the letter of acceptance is posted (North & Flitcroft, 2016). However, this could not have been applied in this case because there was no mode of acceptance prescribed. In the case between Harry and Sally there was an offer, but the acceptance failed to reach the offeror. Therefore, it is evident that Harry’s acceptance failed to reach Sally in time as was indicated in her offer, thus making his acceptance a mere representation, which is not a term in the contract.  It means that there was no contract between the parties. Being that Harry’s statement failed to make its way to the final agreement; Sally had no obligation to meet.  She terminated the contract based on the fixed time lapse.

According to the parole evidence rule, statements that fail to make their way into the final agreement are generally excluded (Fitzpartrick et al., 2016). Therefore, Sally did not breach the contract when she proceeded to sell the ring. On the other hand, according to the rules of acceptance, lack of prescribed method of acceptance by post service or other means will only be legally binding if it proves to be the same or more advantageous to the offeror.

Consequently, if Harry could have used email instead of post service, it would have been treated as a form of instantaneous communication. Meaning that, the time of receiving the acceptance will be the same as the time email will get retrieved by Sally. The law states that if communication between parties is instantaneous, the agreement is complete when the offeror receives the acceptance (Ready, 2015). In the case Asher v Goldman Sachs & Co., the court held that the contract is only complete after the acceptance has been received by the offeror (Fitzpartrick et al., 2016). Therefore, the time of receiving the acceptance would be the time email is retrieved by the recipient at the designated addressee (Svantesson & Clarke, 2013).

Law

Additionally, under Electronic Communication Act 1999, if Sally would have sold the diamond to someone else without waiting to retrieve the acceptance information from her email, then she could have breach the contract. The court would have treated the agreement as an enforceable contract.

According to the rules to the method of acceptance, where there is no prescribed mode of acceptance, the assumption is that the acceptance should match the form taken by the offer (Fitzpartrick et al., 2016). It is evident in the case Eliason v Henshaw (1819) where a delay caused fault the offeree (Gardner, GK 1932). Further, an offeror cannot claim that silence will be treated as an acceptance without the consent of offeree.

Conclusion

To conclude with, it is clear that acceptance through a postal service can be legally binding when both the offeror and the offeree used it to send an offer and acceptance. On the other hand, email is a form of instantaneous communication, meaning that the time electronic communication is received is the time it is retrieved by the party designated by the sender. Lastly, a contract consists of an offer, acceptance, performance, and consideration.

The issue in this case is to identify the most suitable trust for Tanya and the kind of legal duties she could expect to obey.  

• Discretionary Family Trusts
• Trustee’s Duties to the Beneficiaries (Part 1 of the Trustee Act Sections 5 to 13.)

A discretionary trust under Australian law and other common jurisdictions refers to a trust where the entitlements of the beneficiaries trust fund is determine by the criteria set out by the settlor (Harrison, 2015). On the other hand, a trustee is a person who accepts to act on behalf or in the interest of another person in the exercise of power that may affect that person legally.

A trust is a legal agreement whereby a person holds and manages property for the benefit of other as stated in a trust deed. A person who holds and manages a property for the benefit of others is known as trustee, while the person who receives the benefits is referred as the beneficiary. On the other hand, a trust deed is a legally binding document that outlines the terms of the trust.

There are various categories of trusts under Australian Trust Law, for example, discretionary of trusts, fixed trusts, charitable trusts, bare trusts, hybrid trusts, and unit trusts. The the most suitable trust for Tanya’s situation is the Discretionary of Trusts (Harrison, 2015). Discretionary family trust falls under the category of the Express trust. An express trust is created through a direct language that evinces an intension to create trust. It is usually documented through writing or in deed of trust.

Application

Discretionary trusts mean that the trustee has the power to choose the beneficiaries who will be benefited by the fund trust and the amount they should receive. Because in this case the benefit is money that should be given to children after they would have attained 21 years of age, Tanya can decide which of her children will receive payment and how much each will be paid. Under discretionary trust, no beneficiary has the right to require or force the trustee to pay money (Harrison, 2015). Besides having the advantage of income flowing for the purposes of taxation, discretionary family trusts are easy to create, operate, and are free from external scrutiny.

Some of the duties that Tanya will have as a trustee are stated in Part 1 of the Trustee Act 1936 Sections 5 to 13.  These duties include acting honestly, administering the trust personally, exercising reasonable care, diligence, and skillfulness, keeping records, loyalty, and deliberating the powers of a trustee. Violating these duties by the trustee may result to breach of trust. As a fiduciary, a trustee must be honest in whatever they consider is in the best interest of the beneficiaries (Fitzpartrick et al., 2016). The trustee also has the duty to give the trust personally, meaning that he or she cannot delegate her role except in exceptional situations specified under the Trustee Acts. Additionally, for a trustee manage trust, she needs to practice reasonable care, diligence, and skillful. She must make a decision that anybody else in her position would have made.

Moreover, the trustee is required to keep records that are related to how the trust property will be administered. She must properly and accurately keep the financial accounts showing their dealings on the behalf of the trust. Further, a trustee must not have any conflict of interest when dealing on behalf of the beneficiary (Fitzpartrick et al., 2016). She must fully disclose any interest derived from running the trust property to the beneficiary. Lastly, a trustee must use the power bestowed on them when making a decision to avoid unfair discrimination against one or more of the beneficiaries (Fitzpartrick et al., 2016). Any breach of trust under Part 13C of the Trustee Act 1936. 

Conclusion

To conclude with, it would be right for Tanya to take a discretional trust that allows parents to become their children’s trustee. They are also easy to create and to operate. However, she must perform all her duties according to trust laws and regulations. Above all she must not have any conflict of interest and should act in the interest of her children. Finally, the trustee must be considerate and trustworthy to the beneficiary while exercising reasonable care, diligence, and skillfulness as provided under the rules governing a settlor.

References

Costigan, J 1914, 'The Classification of Trusts as Express, Resulting, and Constructive', Harvard Law Review, vol. 27, no. 5, pp. 437-463.

Fitzpartrick, J., Symes, C., Veljanovski, A., & Parker, D., 2016, ‘Business and Corporations Law (3rd ed.). LexisNexis.

Gardner, GK 1932, 'An Inquiry into the Principles of The Law of Contracts', Harvard Law Review, vol. 46, no. 1, pp. 1-43.

Harrison, L 2015, 'Property investment through discretionary trusts', Taxation in Australia, vol. 50, no. 2, pp. 84-88.

North, J, & Flitcroft, R 2016, 'Businesses beware -- when does the Australian Consumer Law apply?', Governance Directions, vol. 68, no. 5, pp. 306-309.

Ready, K 2015, 'Email contracts: Who, what, when and where -- the formation of binding agreements through email exchanges', Governance Directions, vol. 67, no. 10, pp. 620-622.

Svantesson, D, & clarke, R 2013, 'The Trade Practices Act: A Hard Act to Follow? Online Consumers and the New Australian Consumer Law Landscape', James Cook University Law Review, vol. 20, pp. 85-116.