1/06/2014

question
John, a builder, is building a new Motel. John hires Bob, a subcontractor to excavate and dig out the hole for the swimming pool.
The terms of the agreement are that Bob has to complete the job
within 7 days and will be paid $5,000. On the fourth day Bob tells
John he is running behind time and will not finish within the 7 days.
John tells Bob that if he finishes the job within the 7 days, John will
pay him an extra $2,000.00. Bob finishes the job in time and then
John refuses to pay him the extra $2,000.00. John argues that Bob
has not provided anything of value in exchange for the promise of
the extra $2,000.00. Therefore, there was no consideration paid by
Bob to create a legally binding contract. Advise Bob.

answer
The issue in this question is, did Bob give consideration for Johns
promise to pay the extra $2,000.00? A promise already given,
cannot be given again later as consideration, this is known as past
consideration. According to common law past consideration is not
good consideration and this was discussed in Roscola V Thomas.
Bob already promised John in their initial contract that he would
complete the job within 7 days for a fee of $5,000.00. Bob was only
doing what he was already contractually bound to do. Bob does not
do anything extra in return for the extra $2,000. As stated in the
above case, the payment agreed by John is to complete the work
within 7 days. The consideration already made is considered as
past consideration for the new promise. Therefore, John is not
bound to pay Bob the extra $2,000 as Bob provided no
consideration for the promise.
.

1/06/2014

question
Melissa expressly authorises her business agent, Molly, to buy her a
hairdressing salon and to spend no more than $200,000. Molly
meets Derek who is selling his exclusive Chapel Street Salon. Molly
tells Derek that she is an agent and she is looking at purchasing a
hairdressing salon on behalf of Melissa. Derek says he will only sell
the salon for $250,000. Molly tells Derek its a deal and purchases
his salon for Melissa. When Melissa finds out, she is unhappy at
paying the extra $50,000; however she is excited about the
exclusive salon and its location. Melissa agrees to ratify the
agreement. Can Melissa do this?

answer
The issue is can Melissa ratify the agreement? According to
common law principles, it is possible for a principal to ratify the act
of an agent who has exceeded their authority, retrospectively. The
result of ratification is the same as if the act was initially authorised.
As discussed in Keighley, Maxted & Co, if the principal is
undisclosed, the principal is not entitled to ratify an unauthorised act
of an agent. In this case, Molly told Derek that she was acting on
behalf of Mellissa, therefore, the principal was disclosed unlike in
the case of Keighley Maxted & Co. Melissa can therefore ratify
Mollys act retrospectively, even though Molly exceeded her
authority. Therefore, Melissa can ratify the agreement.
.

1/06/2014

question
Deakin University advertises its courses on offer in The Age
Newspaper in Melbourne. It is a term of the contract that The Age
will print a full page advertisement for Deakin University, in each
Saturdays edition for 10 weeks straight, with the advertisement to
appear on page 3. Although it is expensive advertising, Deakin is
very happy with the deal, as page 3 is valuable advertising space. In
the first two weeks, the advertisement is printed as agreed. Then,
because of production problems, the advertisement is printed on
page 30, not page 3 for the next 3 weeks. Deakin is not happy with
page 30 as it is after the sport pages and makes it very hard to find
their advertisement. Deakin decides to terminate further
performance of the contract. By not publishing Deakins
advertisement on page 3, has The Age breached an essential term
that justified Deakins termination of further performance of the
contract?

answer
The issues in this question is, whether the breach is an essential
term of the contract that justified Deakins termination of further
performance of the contract? A condition in an essential term of that
goes to the root of the contract. High Court of Australia said that a
condition was the heart or essence of the contract in Associated
Newspapers v Bancks. In other words a condition is a term so
important that the party in question would not have entered the
agreement if the term did not exist. On the facts it was extremely
important and essential that the advertisement appear on Page 3
and the facts states that Deakin is very happy with the deal as Page
3 is valuable advertising space. Deakin most likely would not have
entered into a contract with the Age for advertising without the
promise of advertising on Page 3. Therefore, this would be classed
as a breach of condition and Deakin is justified in terminating the
contract and can seek damages.