Commercial Law : Hamid and Kathy - Case Study Example

Commercial Law: Case Study Name Institution Date Commercial Law: Case Study Advise Hamid if this contract with Speed Connect is valid? Can he get out of this contract? Use the IRAC (Issue, Rule, Application & Conclusion) method to answer your question Introduction The issue at hand is one of a valid contract. What Hamid needs to understand is about these elements that make a valid contract that is enforceable by the law. A contract is any agreement which is legally binding and it is formed between two or more people. There are various elements to a valid contract in the law of commerce including; offer and acceptance, consideration, lawfulness, contractual capacity of the parties, free consent, possibility of excitability or performance, written and registered if required by the law (Sweeney, O'Reilly and Coleman 2013 ). For a contract to be valid there must be an offer and acceptance between the parties to the contract. Valid offer and a valid acceptance to the offer is important to warrant a contract valid. This element of a contract illustrated in the case between Crawley Vs Rex 1909 and Carbolic Smoke Ball Co vs Carllil, where the court held that, when one party to a contract signifies the willingness to perform or abstain from performing a particular act with the intention to obtain assent or abstinence from the particular act from the other party, then the party is said to have made a valid offer. On the other hand, when a party willingly signifies the assent of the proposal of the offer, then this party is said to have validly accepted the offer and this concludes the contract. An offer should always be accompanied by the intention of being contractually bound. This is well described in the case of Saambou Nasionale Bouverenigin vs Fried Man 1979 whereby an offer can be expressly or impliedly. Expressly means use of words that are spoken or written while impliedly means the use of a conduct or an action to make an offer. An offer is followed by a mutual assent of the parties to form a valid contract. This is illustrated in the case of Smith v Hughs (1871) whereby the court held that, when a party to a contract acts in a manner to suggest to the other party that he or she is assenting to the offer, then the party is considered to have mutually assented to the terms and condition of the offer. For parties that are entering into a contract, consideration is an essential element in the formation of a valid contract. Consideration is a detriment to the offerer or a benefit that is conferred to the party accepting the offer. It is measurable in economic terms and it should be adequate. Meaning that, it should have the capacity to be enforced by the law. A party entering to a valid contract must have a contractual capacity. This means that, all parties to a contract must have the ability to make conclusions of valid contracts or be competent legally to sue or be sued. The parties must be the age of eighteen years and above to have the capacity of entering into a valid contract. This statement is supported in the case of Mhondoro Muchabaiwavs John Katekwe 1984, whereby the court held that, only people who have attained the age of majority status have the capacity to enter into a valid contract. It is also important to note that, only physical or natural people can enter into a valid contract, companies or artificial people do not have the capacity to enter into contractual agreements. Minors or artificial persons entering into contracts will be considered as void contracts. Both parties to a contract must be of sound mind, they must be intellectually and psychologically fit to be considered as meeting the conditions as well as the terms of a valid contract. The case between Wood vs Davies 1939 supported this argument whereby the court held that, mentally ill persons, people under the influence of drugs or even alcohol cannot enter into a valid contract under the law. Lawfulness is another important element that should be considered in a valid contract. For a contract between two parties to be valid, the intention of entering into the contract must be lawful or permitted by the law. If parties want to enter into a contract with an intention that is not permitted by the law, then such a contract will be unlawful. This element of lawfulness as an essential element of a valid contract was supported in the case between Zimcar v Grain Marketing Board s240-92 whereby it was clear that, illegality of a contract arises when the making of such a contract is seen to contravene some rule of law. A contract that is made contrary to public policy is invalid such as; taking the law into one’s hands, contracts for committing a crime, contracts for entering into gambling transactions and even contracts to restrict free trade. Free consent is another element that is very important in making a valid contract between two parties. Free consent means, the parties to a contract agree on one thing in the same sense. Valid contracts require the consent of parties to be real and not defective. This means that, consent must be genuine and given freely. For consent of a valid contract to be free, it should not result from undue influence or unconscionability, mistake, coercion, and fraud misrepresentation or false statements. When entering into a contract. Parties are required to enter into that contract at free will as well as proper understanding each other. Free consent to the contract makes it binding between the parties. Any contract that is entered into without free consent, it is considered to be void and not enforceable by the law. Another element that makes a contract valid is the element of performance or executability of the contract. If the terms of the contract cannot be carried out physically by the two parties, then the contract is not valid, but void. The impossibility of carrying out a contract can be either initial or supervening. Initial impossibility of the performance of a contract makes that contract void from the time it is entered into. Supervening impossibility of a contract makes that contract void when it is concluded since such a contract becomes impossible to be executed. The general rule in such contracts is that, if a contract if physically impossible to be executed after its conclusion, then that contract is void. The elements of a contract must be in a position to make that contract valid. A valid contract should also be a written agreement so as to avoid any conflicts, disagreement and misconceptions that may arise later between the parties to the contract. Written agreements of a contract also help in minimizing chances of misinterpretation and fraud. However, it is important to understand that, all written agreements are not usually contracts. Agreements that are enforceable by the law are the only ones that are contracts. Agreements that are enforceable by the law must be possession of the essential elements of a contract. Considering our case study, it is evident that most of the elements of a contract are available between the parties Kathy and Hamid. There was a consensus between the parties whereby, Kathy offered to sell an internet access contract to Hamid and Hamid willingly accepted the offer. The consideration was that Hamid would benefit from the internet access of the Speed Connect Pty Ltd Company and Kathy would be paid for selling the contract. The activities of the contract are lawful and both parties to the contract have contractual capacity. They are above the age of eighteen years, are natural persons and of sound mind. The activities of the contract are executable and therefore making the contract valid. The contract is also written and signed by both parties. The two parties consented to the contract willingly. However, free consent of Hamid to the contract was altered by misrepresentation, false statements, duress and undue influence or unconscionability. Therefore, consent was not real and genuine. Considering that the contract between Kathy and Hamid was supported by many of the essential elements of a contract, the fact that, the consent of the contract was altered makes the whole contract void and not enforceable by the law. Kathy used some technical language to make some explanations of the terms of the contract to Hamid. Kathy was aware that Hamid does not understand the full extent of the contract terms and ignored to use a telephone translation service to explain the terms to Hamid. She also lied to Hamid that, if he breaks the contract before lapse of 2 years, he will incur a penalty of $ 1,200 of which Hamid found out later that the penalty is $ 1,500. What Kathy was aimed at is signing as many contracts as possible before the end of the day since she is paid on commission. She influenced Hamid to enter into a contract without the full and clear information about the contract. Hamid had different impression about the terms of the contract that he can terminate the contract anytime he would like to without incurring any penalty. Hamid knew that, he was required to only give the company Speed Connect a one month’s notice and return the tablet. Therefore, since he needed internet to Skype with his family in Afghanistan and learn a free English course online. Hamid entered into the contract. Due to financial demands of the internet connection, Hamid wanted to end the contract with the company since there were hidden costs that he was unaware of and a penalty that was higher than what he knew. Since, Hamid entered into this contract without being given clear information and was under influence, the contract is not valid and he can get out of this contract since it is not enforceable by the law. To get out of this contract, Hamid has defenses of misrepresentation, undue influence, false statements and unconscionability. Conclusion The contract between Hamid and Kathy is not valid and Hamid has a right to discharge the contract by breach of frustration since there occurred events that were unforeseen hence making the contract impossible for Hamid to perform. References Sweeney, Brendan; O'Reilly, Jennifer; Coleman, Andrew, Law in Commerce, 5th Edition, (2013). Crawley Vs Rex 1909 Carbolic Smoke Ball Co vs Carllil Mhondoro Muchabaiwavs John Katekwe 1984 Saambou Nasionale Bouverenigin vs Fried Man 1979 Smith v Hughs (1871) Wood vs Davies 1939 Zimcar v Grain Marketing Board s240-92 Read More