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Law for New Zealand

Business

Week 2- contract: overview


and review

Law for New Zealand Business Week 2 1


Law for New Zealand
Business
 What is a contract?
 Legally binding agreement between
two or more legal persons

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Therefore: what are the
essential elements?
 Offer and acceptance- before any
contract can possibly be enforced.
 However, there are other
essentials as well.

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What are they?
 Capacity
 Intention to create legal relations
 Consideration and/or form
 Legality
 Consensus
 (execution according to the
agreement)
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So what problems arise
and how are they dealt
with?
 Remember:
 Contract law is based on common law
 New Zealand has codified significant
aspects of contract law
 Attempts have been made to resolve
some of the confusion with common
law
 Most changes have happened since
1969
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Just an initial point about
terms
 Contracts can be:
 Valid and enforceable
 Valid but unenforceable
 Voidable
 Void and of no effect

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Problem 1
 What happens if the person you
are dealing with turns out to have
limited capacity?
 Age
 Nationality
 State of mind
 Nature of personality

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Resolution
 Common law: Freedom of contract but
with certain limitations where capacity
is limited
 Statutory changes:
 Minors’ Contracts Act 1969
 Various pieces of legislation relating to
ability of aliens to buy land, operate
businesses etc
 Protection of Personal and Property rights
Act 1988
 CompaniesLaw Act
for 1993
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Problem 2

 Are all agreements made between


two or more persons with legal
capacity enforceable?

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Resolution
 Common law presumptions
 The special case of advertisements
 Pharmaceutical Society of Great
Britain v Boots Cash Chemist
 Fair Trading Act 1986
 The ability of others to enforce it-
Contracts’ Privity Act 1982

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Problem 3
 Do you always need consideration
(the price of a promise)?
 Is the consideration (or the price)
sufficient particularly if it does not
reflect market value or where it is
not money or money’s worth?

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Resolution
 Normal rule: to be valid and enforceable
under contract law a contract requires
consideration (CF a deed- more about
that later)
 However, normally consideration only
needs to be sufficient not adequate
 Value in law
 Adequate where the party giving the
promise is vulnerable- minors etc

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Problem 3- cont
 Question of form- what happens of
a contract is required to be in a
particular form?-If it is not, is it
valid?

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Resolution
 Four classes of contract
 Those that must be in a particular form to
be valid (deeds)- consideration is NOT
required
 Those that must be in a particular form to
be enforceable by the person relying on
them (egs, HP, Controlled Credit Contracts)
 Those that must be evidenced by writing-
no particular form to be enforced (Contracts
Enforcement Act 1956)
 Those that do not require a particular form
to be valid and enforceable
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Problem 4
 What happens if the contract
involves a breach of the law?

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Resolution
 Illegal Contracts Act 1970
 Two classes of contract, validity
depends on what class it falls into
 Fundamentally illegal
 Technically illegal- can be saved by the

Court but only if it would not contravene


public policy

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Problem 5
 What happens if a party to the
contract claims that they did not
agree to what the other party is
saying they did- that is, they are
saying there was no consensus?

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Resolution
 Enforceability may be decided by:
 Contractual Mistakes Act 1977
 Provides for Court discretion where there is a
substantially unequal exchange of values arising
from:
 Unilateral mistake
 Common mistake
 Mutual mistake
 Common law- non est factum, duress
unconscionable bargains and undue
influence
 Contractual Remedies Act 1979- remedies
for misrepresentation
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Problem 6
 What happens if one of the parties
fails to carry out their part of the
contract or fails to live up to
promises?

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Resolution
 Depends on why

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Resolution
 The contract does not come into
force unless a particular event
happens or the contract’s
continuance depends on a certain
event and that has not happened
(conditions precedent and
subsequent)
 No enforceability unless satisfied

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Resolution cont.
 Promises are made during negotiations
and the other party relies on them
(misrepresentations)
 Contractual Remedies Act 1979
 If the truth was essential OR
 Made the contract substantially different to what
it would have been
 THEN the innocent person may cancel the
contract and seek relief and damages
 Otherwise, damages only

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Resolution cont.
 Terms agreed to are not complied
with (breach or repudiation)
 Contractual Remedies Act 1979
 If the performance was essential OR
 Made the contract substantially different

to what it would have been


 THEN the innocent party may cancel the

contract and seek relief and damages


 Otherwise, damages only

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Resolution cont.
 A change to circumstances outside
the party’s control- egs
 Death or illness
 A change to the law
 Destruction of the subject matter
 Change to surrounding circumstances
 Frustrated Contracts’ Act 1944- rules for
balancing loss

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So that is contract in a
nutshell
 Just a reminder:
 New Zealand is a common law
country BUT
 Contract law has been modified
extensively
 New Zealand looks to other jurisdictions

for guidance or new approaches, not just


Britain
 British law is moving more towards

European models. Therefore the gap is


likely to Law
grow bigger
for New Zealand rather than
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Therefore
 Perhaps it is time we cut our ties
and ended appeals to the Privy
Council!!??

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