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Weeks 2 & 3: Capacity & Intention

I’m doing a combined post for weeks two and three of Contract A for two reasons. The first reason is the catch up, as I am week behind in my reflections, and also because this subject appears to be very straight forward and just “makes sense”. This is in part due to the easy to follow flowcharts provided for each week of material, and also due to the very literal nature of contracts. With contract law it appears to be simply a matter of applying the rules of contract theory.

Understandably factors that contribute to contract include mental capacity and intoxication, but the rules surrounding minors/age can be challenging at times. Partly this is due to the subjective test of “what is a necessity”. Unlike the more understandable necessities such as food, shelter and clothing, necessity is in relation to contracts also include what is necessary for the individuals station in life. However want you can get your head around this concept, the remainder of contract theory related to capacity is very straightforward. The party is a minor you simply have to consider if the contract is for a good or service, or is the contract for employment or education. Answering yes to the majority of the questions related to these two broad areas results in a binding contract. If the party is not minor but is instead intoxicated and the other party knows this or should know is this, then the contract is voidable. And if the person is a bankrupt or prisoner than some special rules apply, mainly related to delegation of authority. The word voidable is used to refer to a state were the individual in question, once they have regained their mental faculties or have become of legal age to make a contract, has the option of ratifying (agreeing to be bound by) or repudiating (declining to be bound by) the contract.

The next consideration when determining if a contract exists is if the agreement is a social, commercial or a so-called “special” agreement. A social agreement is usually made between friends family, and the presumption is there is no intent to create legal relations. A commercial agreement is typically made between business entities, and the presumption is that that is intent to create legal relations between the parties. However these are not absolutes, there are many instances in which a situation that would normally be considered a social contract is in fact a commercial contract, and vice versa. This is when the circumstances of the agreement rebut the presumption that is normally made. For example in a commercial contract the use of a “honour clause” can rebut the presumption that there was intent to create legal relations. Finally the so-called “special” agreements. This class of agreements refers to those made with a government or government agency, or agreement that is actually a preliminary agreement for a later contract. For these agreements a special set of questions are asked to identify if legal relations have or have not been created between the parties.

Week 1: Introduction and Theory

Week one of Contract A has been a very interesting. In this first week of material, there was the explanation of what exactly is a contract and the three major theories behind contract law. There was also an examination of the Australian Consumer Law, which was much needed clean of legislation that existed across the different jurisdictions.

Of the three types of contract law theory (classical, promise, consent) I was most familiar with the concept or idea of the promise theory as on a daily basis this form of contract is the one that we most often enter into. You could also understand the idea of the classical contracts, as it establishes private laws, but it wasn’t the theory that I most readily associated with contracts. And frankly I’m unsure why consent theory even exists as transfer of rights could easily be rolled into promise theory but obviously some more creative minds than mine believe that it is needed so it exists.

I enjoyed reading about the Australian Consumer Law, as it was a much needed refresh of varying state territory and federal legislation. Instead of several pieces of legislation per state which were all different, a single piece of legislation was created as a schedule in the Trade Practices Act at the Commonwealth level and the states and territories then bound themselves to that legislation in their own consumer legislation. As a result regardless of which state or territory you currently live in the warranties and express provisions allowed for in the legislation apply to all states and territories equally. This is beneficial to both the manufacturers and sellers as there is no doubt as to what their requirements are, and consumers have confidence in being able to make a purchase and know that they will be supported by the law if the seller is misleading or deceptive, engages in unconscionable conduct or presents unfair terms in the transaction.

All in all the first week of contract theory has been very engaging and I look forward to next week. I have no idea what Anthony would have thought that this subject would be boring.