Morris sold his photocopying and laminating business for $95,000 to Beth. Because Beth did not have the money to pay cash, Morris agreed to an immediate payment of $35,000 with the balance payable out of future profits over the next three (3) years.
In the first six (6) months the business did well and Beth was able to pay Morris a further $5,000.
Beth's profits fell alarmingly.
Beth advised Morris that financially she could no longer continue with the agreement and would have to close the business. Further, she accused Morris of knowing that the competitor was about to open up and therefore she was commencing legal action to rescind the contract based on fraudulent misrepresentation.
Morris contacted Beth and made the following comments: "I absolutely deny your accusation. By my reckoning you still owe me $55,000. However, if you continue with the agreement I'll reduce that amount to $35,000." Beth accepted the deal.
Six (6) months later Beth landed a huge contract laminating all the posters for a chain of tourist attractions along the north coast of New South Wales. Beth's profits have soared. Morris is now demanding that the original contract price be complied with (i.e. Beth pays the remaining $55,000).
This discussion is going to specifically deal with what a valid contract contains, because if these elements are essential to determining a valid contract. This is done from a sale of goods perspective; however the basics are the same whatever the type of contract. Finally this discussion will stress the importance of these elements and the necessity for all three, i.e. agreement, consideration and intention, to be present or the contract is void or voidable. ...