Contracts Take Home Exam (HIRAC) Advice to Aggie

Is there a valid and binding contract for the first agreement? (a) Is it a contract and are the elements of offer, acceptance and consideration satisfied? In the case of Pharmaceutical society of Great Britain v Boots Cash Chemist1, the display of poison on the shelves was not an offer, but an invitation to treat. Drawing parallels to this case, it would appear that the genetically modified canola sold by BTG was merely an invitation to treat, and the offer was made when Aggie rings Bill to tell him she wanted to plant BTG canola. As such, Aggie would be seen as the offeror while BioTechGreen (BTG) is the offeree. This offer to purchase the canola was accepted when Bill signs the document as an agent of BTG. The consideration for this case would be the exchange of promise between both parties, as defined in the decision of Dunlop v Selfridge2. It also meant that the promise of BTG was bought, and the promise thus given for value was enforceable. This is an executory consideration as the promise has not fallen due for performance. Another element for a contract to be enforceable is the evidence that the parties must have objectively intended to create legal consequences to flow. As seen in the case of Rose v Frank Co v JR Crompton and Bros3, there is an underlying assumption for most commercial relations to create legal relations, and hence this is not an issue. However, it remains a contentious issue whether the first document that Aggie signed with BTG is enforceable because a contract is only complete when consideration proves to exist. The council of BTG may argue that there is an absence of consideration at the time of the making of the first agreement as.. Besides, the court still faces problem in determining consideration for promises exchanged under an executory contract4, as it is difficult to answer the question of how a promise made by Aggie support a reciprocal promise by BTG, when Aggie has done nothing at that time beyond furnishing a promise in return for BTGs promise. The court might attempt to incorporate the oral promise between both parties as terms of the contract. However, Aggie should not argue that it is complete because if she sues on the ground of this contract, it is likely that she can only recover nominal damages as there was no real damage done. On the other hand, she would probably recover higher damages if she sued based on promissory estopple for the second contract, which will be discussed in detail below. (b) Is it a Subject to contract? The agreement states that it is made subject to the preparation of a formal contract containing such further terms as shall be satisfactory to both parties. A similar case would be Masters v Cameron 1954 91 CLR 3535, in which the agreement signed between both parties contained a subject to clause. The court held that the contract was not in its final form because the sale was subjected to the solicitors who could have unilaterally changed the terms by adding or detracting from it, thus rendering it unenforceable. Similarly, in the case of Aggie and BTG, the contract would likely be
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1953 1 queen bench division 401

unenforceable because Aggie still has the opportunity to make potential variations to the terms. The clause states that the agreement was dependent upon a formal contract being prepared containing such further terms, implying that the parties intended to be subjected to a new agreement the terms of which are not expressed in detail. Also, when Bill calculated the price as $25,000, and Angie merely replies fine without prior consideration or bargaining in what seems to be a casual context. This is evidence that the essential terms were not final and was subjected to change. Also, the agreement is likely to be considered uncertain and incomplete as the quantity of canola seeds to be supplied was unspecified. Other essential terms were also missing, such as the size of field and price of seeds. Thus, the contract will be held void and unenforceable due to its ambiguity and incompleteness, as seen in the case of Whitlock v Brew6. Likewise, Masters v Cameron7 had also established three categories of subject to contracts. Prima facie, it is likely that the court would classify this document as the third category that the parties have no intention on creating a legal contract until they have signed a formal document at a later stage.8 The first category and second category are for parties who have reached final agreements in their terms9, which is not the scenario in Aggies case as they intend to draw out further terms and have not reached finality. There is a possibility that the alleged fourth category10 could apply. However, since it is not clear whether the parties intended to be immediately bound, it would most likely not be applied. As such, the courts would probably decide that the parties had not reached finality of agreement, and thus it is not a valid or binding contract.

Is the Formal Contract between Aggie and BTG a valid and binding contract?

The courts may attempt to use the Parole Evidence Rule, which is a rule which restricts the use of extrinsic evidence depending on the purpose for which the evidence is sought to be used11. It can be used here to aid in the interpretation of the document and to discover direct evidence of the actual, subjective intentions of the parties. In Prenn v Simmonds, Lord Wilberforce explained that the reason for excluding prior negotiations is simply because such evidence is unhelpful. However, the council of Aggie should argue that the Parole Evidence Rule does not apply in this case. For instance, in the case of Pym v Campbell, oral evidence was treated as an exception to the rule, and whether the contract is binding is not an issue determined by the application of the rule and could be determined by evidence. Similarly, the courts could employ the use of the letter attached to the front of the contract as a guide in deciding whether the contract was valid or binding. Another case would be Hope v RCA Photophone of Australia Pty Ltd whereby the document was the entire understanding of the parties.. and no other terms. The clause was conclusive and the subject matter did not create any ambigui

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1968 118 Commonwealth Law Reports

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Estoppel Since the contract does not have signatures from both parties, it is unenforceable but not void. Aggie would be able to seek compensation for her efforts and financial loss through an equitable remedy, which is also known as the doctrine of unjust enrichment. The object of estoppel is to prevent an unjust departure by one person from an assumption adopted by another as the basis of some act or omission which, unless the assumption be adhered to, would operate to that others detriment.12 A similar case would be Waltons Stores (Interstate) Ltd v Maher13, in which Waltons Stores was estopped from denying the existence of an agreement even though there was no formal contract that was enforceable. Waltons Stores was found liable because they knew that Maher was carrying on with the renovations on the assumption of their promise and was acting in their detriment. In this case, the manager of BTG knew that Aggie had started digging up her potatoes and it would cause her great financial loss if she does not get the seeds. But he merely dismissed the situation with a yeah, yeah whatever, and did not attempt to inform her even though he had already known then that the seeds may not be effective. In the Waltons Stores case, the courts also regarded Waltons silence as implying a promise to complete the transaction, not unlike the silence on BTGs part. Another similar case is There are generally three elements of promissory estoppel reliance and detriment, a promise that may be express or implied and unconsionability. BTG knew that Aggie was acting on reliance of their promise, and would be placed in a position of material disadvantage if they were to withdraw the promise without notice. It would also be unconscionable for BTG to not fulfil their promise as it was unequivocally made. Consideration was also present as there was an exchange of promise, and thus BTG would not be free to retract their promise. Since all the elements are present, BTG would most likely be estopped from going back on their promise to supply the seeds to Angie.

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13

Thompson v Palmer Waltons Stores v Maher 1998 164 Clth Law Reports 387

No breach payable on exchange of contracts. Plus no consideration, hence not a valid contract Formal implied exchange of contractsno collateral - breach

Central London Property Trust v High Trees House Limited 1947 Kings Bench 130

Pavey v Matthews

Fauzi Elias v George Sahely and Company Prenn v Simmonds