Management: Contract and John Essay

Submitted By nimar21
Words: 1538
Pages: 7

A contract is a legally binding or valid agreement between two or more parties. The law will consider a contract to be valid if the agreement contains all of the following elements: * offer and acceptance; * an intention between the parties to create binding relations; * consideration to be paid for the promise made; * legal capacity of the parties to act; * genuine consent of the parties; and * Legality of the agreement.
An agreement that is lacking any of the above elements listed above is not a valid contract. (Law in commerce)

Based on the scenario above there is Bilateral binding agreement in place between John and Chen. There has been an offer with the intention to making a contract enforceable by the courts. And acceptance and good consideration was provided initially.

It clearly stated at the beginning that Chen agreed to pay John the purchase price of materials and an additional $6,000 for labour. By giving an indication from one person to another of willingness to enter into a contract bound by certain terms insinuates an offer has been made. The information then advises that both parties agree that work must be completed in exchange for a sum of money before the end of June which confirms an offer has been accepted with adequate consideration.

Looking further into the scenario there are a few inconsistencies with the contract that arises, based on the events which later unfold in the interactions between John and Chen. This will be discussed further in the body.

Part A
I believe that Chen has strong evidence to support his claim to not pay more than the original price.

After the initial contract had been agreed upon, John advises Chen that there had been an increase in labour costs and an equal decrease in materials. Hence there is an additional amount he would need to pay. Chen’s was placed in a position of economic duress. Chen agreed to pay the amount under compulsion. Chen had no effective option at the time. The work had already been commenced, plus his time restriction meant that he was forced to accept. The following case supports my argument; North Ocean Shipping Co Ltd V Hyundai Construction Co Ltd [1979] QB 705 (Queen’s Bench Division)

There was a clear condition in the very heart of the contract which held importance. Chen would not have entered into the contract if this condition of finishing date was not met. This has resulted in a major breach. Breaches of condition results in a possible consequence of Damages and termination. In support of this is case Associated Newspapers ….pg 310

The contract initially started off with a good consideration. However the change in labour cost changed the consideration. Consideration is the exchange of goods and/or services, for which a contract can be valid. Consideration is the price paid for the promise of the other party. The price must be of value, not necessarily needing to be money. Consideration may be some right, benefit or interest or some loss, detriment, or responsibility given, suffered or undertaken. When renegotiating the contract, a new consideration needs to be made by both parties. John wanted more money from Chen for the same amount of work that had already been agreed upon. John was not providing anything extra for the consideration in this re-negotiation to be valid. A promise to perform the same contractual duty already owing by John is not good consideration. Support of this is case Stilk v Myrick (1809) 170 ER 1168 (King’s bench division).

The parole evidence rule could be applied. The contract was wholly in writing. It stipulated that both parties agreed for the work to be completed before June. The courts will judge the meaning of this document from the words in it. Hope v RCA Photophone of Australia pty Ltd (1937) 59 CLR 348 (High Court) supports this.

Part B
Chen can bring forward a few arguments to support his claim for compensation.

Before entering