Essay: Contract Law In New Zealand - Essential Elements.

What this assessment covers
This assessment is divided into two parts. You will complete each part when you have finished studying the relevant topic(s) in the course material. However, you may only submit the entire assessment as one document, for the purpose of marking, when you
have completed both parts.

In Part 1 of this written assessment you will:

 Explain the law of contract as it governs real estate sales contracts.
 Determine appropriate signatories for a given contract.
 Explain the provisions of the Residential Tenancies Act 1986 as applied to licensees.
 Explain the legal implications of the Employment Relations Act 2000 as applied to icensees in relation to sale of businesses.

In Part 2 of this written assessment you will:

Explain the provisions of the law of agency.

Your marker will return your work and tell you whether you have achieved the standard required.

Work is marked ‘competent’ or ‘not yet competent’. There may also be a statement that says ‘more evidence required’. If any parts of the assessment do not meet the required standard, you will be asked to rework them and submit them for reassessment.

Capacity, Consent, Consideration, Offer and Acceptance, Intention, and Legal Character

Answer to question (a)

Under the Contract Law of New Zealand, there are six essential elements under which the contract can be done. The six elements are capacity, consent, consideration, offer and acceptance, intention and legal character. Capacity means eligibility of the parties i.e. the age and mental status of the parties. The character of a contract cannot be legal until both the parties give their consent over the terms of the contract. There must be certain consideration present in the contract. Offer and acceptance is the main base of a contract. in this, a party makes and offer and the other person accept the same after considering all the aspects of the offer. All the parties should have legal intentions to make the contract valid and legal from all aspects and it is no doubt to state that the nature of the contract must be legal.

All these elements are important in case of sale context of real estate in New Zealand. Capacity means competency of the contracting parties (sound mind, age). Under the Real Estate Sale Contract of New Zealand it has been stated that the contract executed by the parties should be legal in nature and the parties must be competent i.e. they should attain the age of 18 years (Burrows, Todd and Finn 2016). The agreement should be based on the principle of offer and acceptance and the agreement should be based on legally valued subject matters that are particularly termed as consideration. Consent plays important role here and it is no doubt to say that parties shall have the intention to make the contract be done.

Answer to question (b)

Certain requirements have been specified for an agreement or sale and purchase of real estate to make both the instruments enforceable in law under section 24 of the Property Law 2007. According to the section, in case of any short-term lease or a registered sale of land, the contractual matters should be in writing and all the parties must put their signature on the agreement to make it enforceable (Bridge 2015).

Answer to question (c)

Offer and acceptance are one of the most important criteria under the contract law of New Zealand. Certain common rules are there in case of acceptance of an offer. It has been stated that both the offer and acceptance must be communicated and a person is required to accept the terms of the contract with free consent (Cartwright 2016). Capacity, consent, consideration, offer and acceptance, intention and legal character are the requirements by which a contract can be come into existence. In case of any alteration of contract, the offeree should communicate with the person who has made the previous terms of the offer and the alteration should be made on mutual consent. There should be an announcement regarding the performance of the condition.

Answer to question (d)

The Importance of these Elements in Real Estate Sales Contracts

There are four ways by which a contract can be discharged as follows:

1. Discharge by performance;
2. Discharge by agreement;
3. Discharge by breach; and
4. Discharge by frustration.

A contract can be discharged by performance if both the parties have performed their part of obligation and liabilities. A contract can be discharged by agreement when all the terms of the contract upon which the agreement has been made completed by the parties (Carter, Courtney and Tolhurst 2018). It is a common rule that the parties should maintain all the contractual terms and if any party made any breach to the terms, the contract will be discharged by breach. In Couturier v Hastie (1856) 5 HL Cas 673, it has been observed that where any contractual terms become impossible to be performed due to subsequent alteration, the purpose of the parties become frustrated and the contract will be discharged.

Among the above noted contractual discharge, the real estate related contract can be discharged by performance if any of the parties to the contract have performed their respective duties as per the real estate contract. The parties can repudiate the contract on the basis of non-compliance of performance. Therefore, discharge of the real estate sale contract by performance can be treated as an example.

Answer to question (a)

The main purpose of Joint Family Homes Act 1964 is to promote stability and security in family life by encouraging the concept of joint ownership. It provides a settlement regarding the flats which are included under company system and where there is a scope for obtaining separate title. This Act simplifies the registration process and according to section 6 of the Act, husband and wife or any of them can proceed on the basis of agency agreement as neither husband nor wife is the absolute owner in case of joint ownership (McFarlane, Hopkins and Nield 2015).  

Answer to question (b)

According to the Joint Family Homes Act 1964, any person in whose name the property has been registered can sign on the agency agreement. According to section 5 and section 6 of the agreement, joint home Act does not give absolute ownership to any one of the registered proprietor and therefore, any of the registered proprietor can sign on behalf of him and other co-proprietor in the agreement.

Answer to question (c)

(i) Both the parties should put their signature on the sale and purchase agreement and they are required to specify their share or portion in the property.

(ii) The main purpose of mentioning the shares is that when they or any of them will sell the property on subsequent event, they will obtain a right on their portion to sell, mortgage or lease the property.

Answer to question (d)

Requirements and Obligations Under the Property Law Act 2007

The four basic principles mentioned under the Property (Relationship) Act 1976 are:

• Equal right should be given to both husband and wife in case of property ownership;
• Any kinds of contribution will be applied equally;
• Equal right can be obtained from either of the spouses in case of married couple, civil union or any de-facto relationship.

As the house is in the name of George, he will get the right to sale of the property.

Sylvia should be referred to registrar for further advice regarding the property.

Scenario A

Answer to question (a)

The word subdivision means dividing a portion of land in certain further portions. The purpose of it is to change the existing boundary portion. Advertise for the subdivision means take all the proper process to divide the portion of land.

Answer to question (b)

According to section 6 of Real Estate Agents Act 2008, no person will be able to be an agent unless licensed under the Act (Andonov, Eichholtz and Kok 2015). However an agent can be terminated after making a complaint against the agent to the Complaint Assessment committee and it should be analysed what wrongs has been done by the agent. The agent could be terminated on the basis of reasonable ground.

Answer to question (c)

The nature of the contract made in between Jane and the seller is unconditional and it is impossible to cancel the contract once signed by both the parties. However, there are certain limited circumstances present in this case. If the title of the property becomes different from the title that has been contracted to, either of the parties can terminate the contract. Further, if the seller or his agent had misrepresented the purchaser, the contract can be terminated. Additionally, the purchaser can obtain remedy under section 7 of the Contractual Remedies Act if any breach has been made by the parties regarding the essential terms of the contract.

Answer to question (d)

An advocate should provide necessary legal advice to his client. In this case, the behaviour of the Advocate was quite unprofessional and what he has suggested is required to be verified. He has told Jane to buy a property without revealing the fact that the property is owned by him. Further, he has not specified the nature of the Unit Title property. He also had provoked Jane to cancel the unconditional contract with the previous seller with certain ill motive.

Answer to question (e)

The Property Law Act 2007 and Land Transfer Act 1952 deal with the transfer and purchase of any landed property in New Zealand (Bennett 2017). The term paddock means a horse enclosure or a grassland field. Therefore, any kind of purchase or transfer of this property will come under the purview of these Acts.

Answer to question (f)

According to section 6 of Real Estate Agent Act, an agent should act in good faith and for the well interest of the clients. The agent should not misrepresent the clients or should not provide false information to the client.   

Answer to question (g)

Discharging a Contract by Performance, Agreement, Breach, or Frustration

According to section 6 of the Real Estate Agents Act (Professional Conduct and Client Care) Rules 2012, an agent should comply with all the fiduciary obligations while dealing with the clients and should not do anything by which the reputation of the industry of agency can be disturbed. An agent should not provide false statement to the clients. The agents must comply with the three rules such as he should have a sound knowledge about the property, he should act in accordance to the rules of the Act and he must not engaged with any unsatisfactory conduct during his course of work.

Answer to question (a)

• The main difference between fixed-term tenancies and periodic tenancies are:
• Periodic tenancy lasts until the end notice by either of the tenant or land lord. Fixed term tenancy lasts for certain amount of time specified by the parties.
• Periodic tenancy is not required to be renewed; whereas fixed-term tenancy can be renewed if the parties want to extend it.
• In case of periodic tenancy, either of the parties are required to give 21 day’s written notice for the end of tenancy; in case of termination of contract before the specified period in fixed-term tenancy, consent of both the parties are required.
• Residential Tenancies Act 1986 governs the rules regarding rights of entry of landlord. According to section 66Q, the landlord can enter into the tenant premises at any time but is restricted to enter into it for his own domestic purpose.
• In case of fixed-term tenancy, the land lord can increase the rent according to the provision mentioned in the tenancy agreement.
• In case of periodic tenancy, the landlord can increase the rent after 180 days of first tenancy period. He is obliged to serve a notice regarding the same.
• In case of termination of fixed-term tenancy, consent of both the landlord and tenant is required. In case of any adverse situation, any of the parties can appeal before the Tenancy Tribunal (Bierre, Bennett and Howden-Chapman 2014).

Answer to question (b)

• The landlord is required to submit 90 days notice in case he wants to terminate the contract.
• The tenant is required to submit 21 days notice for termination of tenancy.
• The landlord must give 42 day’s notice in case landlord’s daughter wishes to move into the property.
• The landlord should give 42 days’ notice to tenant if he just wants to end the tenancy without providing any sufficient reason.

Answer to question (c)

• If the landlord has done any unlawful act and performed not according to the rights and responsibilities of Residential Tenancies Act 1986, it will be termed as a breach.
• According to the rules of periodic tenancy, landlord is restricted to visit the tenancy area with his or her domestic purpose. Here in the case, Mrs Brown had visited the tenant place without informing the tenants and therefore, she made a breach regarding the provisions of Residential Tenancies Act 1986.
• The parties who is in breach liable to get a remedy notice for a term of 14 days. If the dispute could not be fixed, affected parties could plea before the Tenancy Tribunal.

Answer to question (d)

• The sales person and the property manager are required to serve 48 hours notice and he can do only one inspection in a month. The inspection should be made between the time limit of 8 am and 7 pm.
• Routine inspection can be done once in three months and at least 7 days notice is required to be served to tenant.

Answer to question (e)

The termination of tenancy under the Residential Tenancies Act 1986 has been governed by section 52, 53, 53A, 59 and 59A. Landlord is under the obligation to serve minimum 21 days written notice to tenant by specifying the reasons.

Answer to question (a)

According to Employment Relation Act 2000, the employer need not discriminate any employee and should be held responsible for the works of the employees and should act in favour of the employees (Chisholm, Howden-Chapman and Fougere 2017). Under section 65 of the Act, an employer must provide written employment agreement to employees and in case of any change in the nature of the terms of the agreement; the employer should serve 90 days notice to employees.  

Answer to question (b)

The employees can terminate the contract with the employer and sue him before the competent court. According to IUOW v Woolworth 2 NZLR 372 [1985], the employee can ask for constructive dismissal if the employer made any breach to his obligations.

Answer to question (c)

The employees will get all the leave benefits as per the agreement until the end of employment terms. Section 69A of the Act provides that the employer is compelled to give redundancy benefits if it has been mentioned under the employment agreement. In case of any failure, employee can take proper action on the ground of personal grievance (Chisholm, Howden-Chapman and Fougere 2017).

Answer to question (d)

Yes, the new employer can change the current employment condition. 

The law of agency:

Answer to question (a)

(i)

For the purpose of selling a property in New Zealand under the law of agency it is required to contract a real estate agent. Therefore David and Danika should contract Brian Leghornie while listing the property.

(ii)

The contractual obligations to the agency shall be grant the real estate broker with the authority to act as the agent of the owner for the purpose of sale of property (Martyniszyn 2015).

The Joint Family Homes Act 1964 and Agreements Between Proprietors

(iii)

The real estate broker who during the process of sale acts as an agent of the seller or the buyer is termed as the fiduciary. The fiduciary should be loyal, obedient and shall maintain confidentiality.

(iv)

Apart from fiduciary duties, it is required on the part of the agent to take reasonable care and diligence while dealing with the affairs of the seller. The agent is at the obligation to provide account for the property belonging to the seller for the purpose of safeguarding the transactions.

(v)

In case of real estate, a contract of agency can be created in two different ways. The first is by the express appointment by the principal and the second is due to implied appointment by the principal (Shore and Wright 2015). However, by implied appointment the buyer or seller is at the authority to hold the agent under his supervision.

(vi)

According to section 121 the agent is at the authority to display the required name of the business however confidential information should not be disclosed (Fraser et al. 2014). Section 122 states that the agent shall perform the transactions affairs of the principal. Section 124 states that the agent is supposed to furnish account to the client for his principal.

(vii)

The three rules are- firstly, the agent is at the authority to promote awareness and rules of the business. Secondly, the agent must ensure that the salesperson contracted by the agent must work accordingly. Thirdly, the agent must ensure that the licensees are working in best interests.

Answer to question (b) 

• General agency relationship always exists between the broker and the sales person (Reddy and Locke 2014). However in a sole agency it is to be stated that a single agent is given the entitlement for selling the property (Chambel et al.2016). The difference between a sole agency and exclusive agency is that a selling agent is rewarded with a commission or other rewards.
• In a conjunctional agreement the agent who holds the exclusive agreement of agency provides another agent with the right of selling the property. In joint agency real estate agents are jointly employed for the purpose assisting a buyer to reach a deal.

Answer to question (c)

Master agencies mostly tend to provide back office support for sub agents.  Master agencies track commissions, orders and quotes of other sub agents (Koerniadi, Krishnamurti and Tourani-Rad 2014). Master agencies are also employed for to sell property directly.

According to section 54 of Real Estate Agent Act 2008, a registrar will be appointed in case of termination of any agent by following the rules of instrumentality. A registered can be appointed under section 33 of the Act. The term instrumentality means an instrument to put the agency to an end. Effective cause means sufficient causes that are required to be shown at the time of put the agency to an end.

Reference:

Andonov, A., Eichholtz, P. and Kok, N., 2015. Intermediated investment management in private markets: Evidence from pension fund investments in real estate. Journal of Financial Markets, 22, pp.73-103.

Bennett, J., Howden?Chapman, P., Chisholm, E., Keall, M. and Baker, M.G., 2016. Towards an agreed quality standard for rental housing: Field testing of a New Zealand housing WOF tool. Australian and New Zealand journal of public health, 40(5), pp.405-411.

Bennett, M., 2017. Problems in Residential Tenancy Law Revealed by Holler v. Osaki. Victoria U. Wellington L. Rev., 48, p.497.

Bierre, S., Bennett, M.J. and Howden-Chapman, P., 2014. Decent expectations? The use and interpretation of housing standards in tenancy tribunals in New Zealand.

Bridge, M., 2015. Personal property law. OUP Oxford.

Burrows, J.F., Todd, S.M. and Finn, J., 2016. Law of Contract in New Zealand: A Successor to Cheshire & Fifoot's Law of Contract, New Zealand Edition. LexisNexis NZ Limited.

Carter, J.W., Courtney, W. and Tolhurst, G., 2018. TWO MODELS FOR DISCHARGE OF A CONTRACT BY REPUDIATION. The Cambridge Law Journal, pp.1-27.

Cartwright, J., 2016. Contract law: An introduction to the English law of contract for the civil lawyer. Bloomsbury Publishing.

Chambel, M.J., Lorente, L., Carvalho, V. and Martinez, I.M., 2016. Psychological contract profiles among permanent and temporary agency workers. Journal of Managerial Psychology, 31(1), pp.79-94.

Chisholm, E., Howden-Chapman, P. and Fougere, G., 2017. Renting in New Zealand: perspectives from tenant advocates. K?tuitui: New Zealand Journal of Social Sciences Online, 12(1), pp.95-110.

Chisholm, E., Howden-Chapman, P. and Fougere, G., 2017. Renting in New Zealand: perspectives from tenant advocates. K?tuitui: New Zealand Journal of Social Sciences Online, 12(1), pp.95-110.

Fraser, J., Sidebotham, P., Frederick, J., Covington, T. and Mitchell, E.A., 2014. Learning from child death review in the USA, England, Australia, and New Zealand. The Lancet, 384(9946), pp.894-903.

Kelsey, J., 2015. The New Zealand experiment: A world model for structural adjustment?. Bridget Williams Books.

Koerniadi, H., Krishnamurti, C. and Tourani-Rad, A., 2014. Corporate governance and risk-taking in New Zealand. Australian Journal of Management, 39(2), pp.227-245.

Martyniszyn, M., 2015. Inter-agency evidence sharing in competition law enforcement. The International Journal of Evidence & Proof, 19(1), pp.11-28.

McFarlane, B., Hopkins, N. and Nield, S., 2015. Land law: text, cases, and materials. Text, Cases, And Materials.

Reddy, K. and Locke, S., 2014. The relationship between ownership structure, capital structure and corporate governance practices: A case study of co-operatives and mutuals in New Zealand. International Journal of Managerial Finance, 10(4), pp.511-536.

Shore, C. and Wright, S., 2015. Governing by numbers: audit culture, rankings and the new world order. Social Anthropology, 23(1), pp.22-28.