Contracts Law 1 Lecture 1-9 (PNG 2023/2024) PDF

THE UNIVERSITY OF PAPUA NEW GUINEA SCHOOL OF LAW Semester 1, 2024 Contracts Law 1 ( 5.10704 ) Lecture 1 Moral basis for Contract Law 1. Genesis Raised them out of the dust A man ( Adam ) and a woman ( Lilith ) Made them in his image  Respect and honour 2. Law in the garden Do the things you are all...

THE UNIVERSITY OF PAPUA NEW GUINEA SCHOOL OF LAW Semester 1, 2024 Contracts Law 1 ( 5.10704 ) Lecture 1 Moral basis for Contract Law 1. Genesis Raised them out of the dust A man ( Adam ) and a woman ( Lilith ) Made them in his image  Respect and honour 2. Law in the garden Do the things you are allowed Do not do the things you are not allowed.  Penalties 3. Violation of God’s law 4. Expulsion  Nothing  Idea of law  Sustained and ensured survival 5. Idea of law  Relationships  Valid  Binding  Enforcable  Commerce 6. Covenants – Yahova > Chosen 7. ‘ Do unto others what others do unto you ‘ 8. Mark 10:9  Judaeo/ Christianty Eg Leviticus  Islam - Jihad  Hindu  Other major world religions THE UNIVERSITY OF PAPUA NEW GUINEA SCHOOL OF LAW Semester 1, 2024 Contracts Law 1 ( 5.10704 ) Lecture 2 Contract: An agreement between two or more parties which confers rights and imposes obligations which the legal system will enforce 1. Agreement:. freely entered into agreement. freely agreed to terms. freely agreed to be bound. suffer penalties for breach PNG – Three national languages: a) English b) Pidgin c) Motu  Agreement ? a) English – agreement ?  Consensus ad idem. Latin legal maxim. 3 words  meeting of the minds. 4 words b) Pidgin – agreement?  Numi wan bel laka?. 4 words c) Motu – agreement?  Mauro. 1 word 2. Two or more:. cannot contract with self 3. Persons:.Human beings. Excludes non-human species  Horse drawn carriage  Horse racing  Cow milk  Chicken eggs. ET - non-human  Change our definition? 4. Rights:  Right to receive a benefit Eg. Pay – overtime – hda - etc. Uniform. Vehicle/allowance. Accommodation/allowance. School fees. Annual leave. Long service. Pension. Etc 5. Obligations:  Duty to do something. Positive duty  Duty to not do something. Negative duty Eg-Moonlighting 6. Enforcability:  Must be enforceable in a court  Not enforceable  not a contract:. Domestic. Social THE UNIVERSITY OF PAPUA NEW GUINEA SCHOOL OF LAW Semester 1, 2024 Contracts Law 1 ( 5.10704 ) Lecture 3 Elements of contract 1. Offer and Acceptance 2. Intention to create legal relations 3. Capacity to contract 4. Consideration 5. Legality of the objects of contract 6. Formalities 1. Offer and Acceptance Offer A ------------------offer----------------------------> B < ---------------- acceptance--------------------- A – Offeror B - Offeree Offer A proposition by the offeror to the offeree coupled with an intimation by the offeror that he/she is willing to enter into a contract should the offeree accept the terms of the offer R v Clark ( 1927 ) CLR 227 Leana v PNG Power Ltd ( 2005 ) N3085 A. To whom? i) A particular person. identifiable person  Perform  Subject matter. Egs: Coffee Buai Car Aircraft,etc ii) A group of persons Egs: Accountants  Specialist skills Egs: Company auditors Doctors  Specialist skills Egs: Surgeons Lawyers  Specialist skills Eg: Contract law lawyers iii) World at large Carlill v Carbolic Smoke Ball Co ( 1892) 2 QB 484 CSBC-----Advertisement Medicinal drug –influenza Take as prescribed Still contract influenza  500 pounds Mrs C---took -influenza Claimed 500--refused CSBC---Defence:  No offer to Mrs C  No acceptance  No communication Court:  World at large  Mrs C accepted by purchase  No requirement to communicate acceptance  CSBC waived that requirement Not an offer: a) Invitations to treat. Supermarket  Shopper offers to buy  Store owner accepts Payne v Cave ( 1789 ) 3 Term Rep 148 Pharmaceutical Society of GB v Boots ( 1953 ) 1 QB 256 Fisher v Bell ( 1961 ) 1 QB 304 b) Auctions i) Property owner ii) Auctioneer. agent of owner. duty – highest bid iii) Bidder – makes offer Payne v Cave ( 1789 ) 3 Term Rep 148 Harris v Nickerson ( 1873 ) LR 8 c) Advertisements i) Property owner or agent ii) Employer or agent iii) Newspaper/radio iv) Owner of building v) Owner of notice board vi) Interested buyer/seller/emplo yee Carlill v Harding ( 1870 ) LR 5 Cp 561 Patridge v Crittenden ( 1968 ) 2 ALL ER 421 d) Statements of price i) ii) Property owner or agent  Eg: Selling - K20,000.00 ono Buying - K20,000.00 per metric ton Interested buyer/seller Harvey & Ano v Facey & Ors ( 1893 ) UKPC 1 Gibson( AP) v The Council of the City of Manchester ( 1979 ) 1 All ER 972 e) Tenders i) Property owner  Sell property  No price  Reserve price ii) Interested buyer  Nominates price Harvela Investments v Royal Trust Co of Canada ( 1985 ) 2 All ER 966 Blackpool Aero Club v Blackpool Borough Council ( 1990 ) 3 ALL ER 25 f) Memorandum seeking attention of interested buyers Mcdonald and McDonald v Papuan Constructions Ltd ( 1964 ) PNGLR 22 Maip Pty Ltd v Ambra Coffee Estate ( 1995 ) N1368 Hohore Suve v Bromley & The Rural Development Bank of PNG ( 1997 ) PGNC 68 g) Draft Agreements  Records future intention of parties  Non-binding  MOUs  MOAs Seafreights Pty Ltd v Bishop Shipping Services Pty Ltd ( 1996 ) PNGLR 22 THE UNIVERSITY OF PAPUA NEW GUINEA SCHOOL OF LAW Semester 1, 2023 Contracts Law 1 ( 5.10704 ) Lecture 4 Elements of contract 1. Offer and Acceptance 2. Intention to create legal relations 3. Capacity to contract 4. Consideration 5. Legality of the objects of contract 6. Formalities 1. Offer and Acceptance Acceptance A ------------------offer----------------------------> B < ---------------- acceptance--------------------What is acceptance? Offeree:  Reject  Accept. unqualified agreement to the precise terms of the offer: i) Less ii) Different The Butler Machine..v Ex-cell ( 1979 ) 1 WLR 40 Conditional acceptance – condition fulfilled > K legally binding Egs: a) Subject to contract Postpone performance of obligation – formal K b) Subject to finance Finance > performance Acceptance 1. Knowledge of offer Williams v Cowardine ( 1883 ) 172 ER 1101 R v Clark ( 1927 ) 40 CLR 227 2. Who may accept?  To whom offer directed  Someone other than offeree  More than one person 3. Communication a) By offeree Powel v Lee (1908 ) b) Waived Callil v CSBC c) Silence? d) Conduct Brogden Metropolitan Railway Co v 4. Time of acceptance. Important:  Taxation  Insurance  Liability for loss  Jurisdiction of court 5. Instantaneous Communications Postal rule no application  Telephone  Telex  Facsimile  Email  Text messages. Time and place communicated Problems: a) Indistinct & faulty transmissions Entores Ltd v Miles Far Eastern Corp b) Fasimile. Received it?.Out machine? of.Handed person? to  Intention of parties  Sound practice business 6. Electronic commerce How should law recognize and deal? Two principles: basic a) Functional equivalence Paper – electronic b) Technology neutrality  Not discriminate – different forms of technology THE UNIVERSITY OF PAPUA NEW GUINEA SCHOOL OF LAW Semester 1, 2023 Contracts Law 1 ( 5.10704 ) Lecture 5 Elements of contract 1. Offer and Acceptance 2. Intention to create legal relations 3. Capacity to contract 4. Consideration 5. Legality of the objects of contract 6. Formalities 2. Intention to create legal relations Contract:  Confer rights  Impose obligation  Legal consequences for breach Consensus ad idem Carlill v CSBC ( 1893 ) 1 QB 256 Konia Wuamp ( 1963 ) PNGLR 130 Patterson v NCDC ( 2001 ) N2145 A) Husband and wives Not enforceable Synge v Synge ( 1894 ) Balfour v Balfour ( 1919 ) 2 KB 571 Eves v Eves ( 1975 ) Bulange v Ben ( 1990 ) PNGLR 473 Rebutting Merrit v Merrit ( 1970 ) 1 WLR 1211 B) Family members Not enforceable Murphy v Simpson ( 1957 ) VR 598 Rebutting Wakelin v Ripley ( 1951 ) 51 SR ( NSW ) 183 C) Social agreements Not enforceable Coward v Motor Insurance Bereau ( 1963 ) 1 QB 259 Cameron v Hogan ( 1963 ) 51 CLR 358 Rebutting Simpson v Pays ( 1955 ) 1 WLR 975 D) Business Agreements or Commercial Enforcable Carlill v CSBC Rebutting Keller v Holderman ( 1863 ) 11 Mich 248 E) Parties expressly exclude intention i) Honour clauses ii) Exclude jurisdiction of court iii) Ambiguous language THE UNIVERSITY OF PAPUA NEW GUINEA SCHOOL OF LAW Semester 1, 2023 Contracts Law 1 ( 5.10704 ) Lecture 6 Elements of contract 1. Offer and Acceptance 2. Intention to create legal relations 3. Consideration 4. Capacity to contract 5. Legality of the objects of contract 6. Formalities 3. Consideration Contract: Benefit------------------ one party Other party --------Detriment/loss Price-------------------Other’s promise Each party------------something of value  K--------------------bargain  Gift---recipient---Nothing of value Consideration  Act – do an act now  Promise to do something Eg: K -delivery of goods  Promise to deliver goods on an agreed future date Egs 1. Farmer  Grow  Harvest  Deliver 2. Car maker/shipbuilder/aircraft  Make  Test  Deliver Some features: a) Economic value Chappel Co Ltd v Nestle Co Ltd ( 1960 ) AC 87 b) Legal/lawful Illegal – robbery – rape –kidnap Unlawful Civil law – tort Public policy c)    Need not be adequate Economic value Parties----adequacy Not court Gaumont-Britist Pictures Corp v Alexander ( 1936 ) ALL ER 1686 d) Consideration: i) Executed ( present ) – good ii) Executory ( Future ) – good iii) Past – Not good Eastwood v Kenyon ( 1840 ) 113 ER 482 Roscorda v Thomas ( 1842 ) 3 QB 234 Statutory exceptions: i) Frauds & Limitations Act s14 ii) Bills of Exchange Act s 32 ( 1) and ( 2)  Business practice  Business sense  Business expectations e) Move from promisee  Enforce Tweddle v Atkinson ( 1861 ) T sr------------------WG T jr ------------ Ms G T sr -------------- T jr WG----------------Died T jr--------------- P Court > No Fleming v BoNZ ( 1900 ) AC 577 f) Agreements – creditor- lesser sum  Not binding  Debtor – No fresh consideration Lesser sum – Discharge debtor: i) Before due date at request of creditor ii) 3rd party iii) Lesser amount – debt in dispute iv) Lesser amount + chattel v)    Composition agreements ( CA ) Company in liquidation Sell assets > not enough - debts Creditors > lesser sums THE UNIVERSITY OF PAPUA NEW GUINEA SCHOOL OF LAW Semester 1, 2023 Contracts Law 1 ( 5.10704 ) Lecture 7 Elements of contract 1. Offer and Acceptance 2. Intention to create legal relations 3. Consideration 4. Capacity to contract 5. Legality of the objects of contract 6. Formalities 4. Capacity to contract Generally – all persons  Full legal powers  K – bind Law: 1) Infants/minors 2) Mentally deficient  Exploitation > special rules 3) Legal entities  Restriction > variety of reasons 1. Infants/minors Below age of contractual capacity PNG – No single statute Rohlack v Lutheran Church Property Trust ( 1985 ) PNGLR 185  Absence of statutory provision  18 years Statutes: a) MASA  14 > b) Apprenticeship Act s 13  15 years c)    Marriage Act s 7 M---- 18 years F ---- 16 years Customary—physical maturity Incapacity  Not penalty  Protect from consequences of own inexperience Infants/minors Ks Three ( 3 ) groups: 1. Valid 2. Voidable 3. Void 1. Valid infant contracts a) Ks for necessaries. Food. Clothing. Education. Medical. Legal Necessary goods  Goods Act s 4. conditions of life  Luxury – no b) Beneficial contract of service K – benefit of infant/minor. employment. Training. Education  Binding  Clauses disadvantageous 2. Voidable infant contracts Continuing obligations: Leases Co shares Partnerships  Can repudiate before majority  Other party cannot 3. Void infant contracts Declared by law – no legal effect i) Marriage Act s 17 ( 1 ) ( e ). Not marriageable age – void ii) MASA ss 7 & 10. s7 ( 1 ) < 14. s10 ( 1 )- void iii) MSA s 114. ( 1 ) < 15. ( 2 ) void 4. Persons of unsound mind  Incapable of understanding nature of contract  K voidable 5. Drundards – alcohol – drugs  Not knowing what he/she doing  K voidable 6. Legal entities a) Companies Constitution – objects clause. Identifies business. Limits. Common law – ultra vires. Companies Act ss 18 & 19  Does away with ultra vires  Protects investors B) Business groups/ILGs. All powers. Cannot deal – customary land c) Statutory corporations  Enabling legislation  Ultra vires d) Partnerships  Partnership Act s 3 ( 1 )  Capacity---members State. Constitution 247 ( 1 )  Act of Parliament  i) Government Contracts Act. 3 million and more  ii) Ministers Delegation Act. less than 3 million PNG v Keboki Business Group Inc ( 1985 ) PNGLR 396 THE UNIVERSITY OF PAPUA NEW GUINEA SCHOOL OF LAW Semester 1, 2023 Contracts Law 1 ( 5.10704 ) Lecture 8 Elements of contract 1. Offer and Acceptance 2. Intention to create legal relations 3. Consideration 4. Capacity to contract 5. Legality of the objects of contract 6. Formalities 6. Legality of purposes Ks – Lawful purpose Ks – illegal  Making. Making prohibited by statute  Performance. Making not prohibited. Performance Eg – Lease or rent house  Prostitution  Drugs smuggling  Arms smuggling  People smuggling Ks – Illegal 1. At Common Law 2. By Statute 1. At Common Law  Specific legally wrongful act  Contrary to public policy i) Public interest ii) Public good EGs of Ks illegal at common law a) Crime – tort – fraud Everet v Williams ( 1875 ) Highway robbery Share loot b) Prejudicial to country’s safety  Peacetime – espionage  Wartime – aiding/dealing enemy c) Damaging relations to existing d) Administration of justice – foreign e) Corruption in public life Parkingson v College of Ambulance ( 1925 ) f) Defraud national or local revenue Miller v Karlinski ( 1945 ) g) Sexual immorality Upfill v Wright ( 1911 ) Other void/unenforceable Ks a) Oust jurisdiction of court b) Institution of marriage  Public policy - sanctity of marriage – Mark 10: 9 c) Restraint of trade. Profession – any way she chooses. Constitution s 48 Flick v Thompson ( 1976 ) PNGLR 112 Taurama Pharmacy v Sherwin ( 1990 ) PNGLR 127 Courts – Reasonable  Time & space  Public 2. Statute > prohibit > K void a) MASA s 10 b) Land Act s 69. transfer. lease. mortgage c) Whaling Act s 16. offence – lactating mother Effect Illegal K -----void  Neither party can sue  Acquire property rights  Recover property THE UNIVERSITY OF PAPUA NEW GUINEA SCHOOL OF LAW Semester 1, 2023 Contracts Law 1 ( 5.10704 ) Lecture 9 Elements of contract 1. Offer and Acceptance 2. Intention to create legal relations 3. Consideration 4. Capacity to contract 5. Legality of the objects of contract 6. Formalities 6. Formalities Generally - law – formalities Informal  word  sign  nod  wink PNG v Keboki Business Goup Inc  K to provide svs to State  Need not be in writing Statutes  Evidenced in writing  Other formal requirements a) Hire Purchase Act s 7 b) Marine Insurance Act s 23 c) Arbitration Act s 1 d) Companies Act s 103 Shares/debentures e) Instruments Act s 4 Bill of sale f) Merchant Shipping Act s 110 g) Public Employment ( Non-Citizens ) Act s 8 h) Bills of Exchange Act ss 8 & 93 Bills of exchange i) Land Registration Act s 42 Non – customary land j) Frauds & Limitation Act s 2 & 3 Land Registration Act 49 & 69 Leases/Mortgages - > 3 years Others – other than evidence in writing A) Consents B) Approvals C) Authorities D) Stamping E) Signing F) Attestations G) Registration Non-compliance – legal effect?  Not safe to generalize  Statute & case law Some specific: i) Interest in land – not enforceable ii) Hire- Purchase – not enforceable + offence iii) Goods Act s 6 Others – not clear Court:  Purpose of statutory requirement  Give effect  Not defeat purpose of K Rainbow Holdings Pty Ltd v Central Province Forests Industries Pty Ltd ( 1983 ) PNGLR 34