If They Breach the Contract There Will Be Termination of Contract

Introduction

This case is all about Jack and Basil formation of contract and binding contract with B-Bay Auction Company. I have analyzed this case through F.L.A.C approach. For a long time Jack and Harry was a good friend. They both were playing for the same golf team past 15 years. Even both of their family invites each other to their home for dinner and drinks. When Harry goes to Jack house he often admire Jack car and he was interested in buying it. Some month’s later jack was affected by the financial crisis. Now Jack planned to sell his Ford Shelby Mustang, without knowing the interest of Harry on his car. Jack approaches B-Bay online auction company and list his car. There comes Basil, who offers the car under some consideration. After some day Harry offers his car in higher price than Basil. In the meantime the auction period has over; at last Basil offer is accepted and becomes a binding contract under some condition between Jack and Basil because Basil was the only bidder in auction. Now Jack is frustrated by the binding contract with Basil and B-Bay. Even after the contract Jack is trying to sell his car to Harry in higher price.

F-L-A-C Approach

Facts

Parties involved in this case.

In this case there are three parties involved they are Jack, Harry, Basil and B-Bay an online auction company. In this Jack and Harry are friends for a long time. Both of them where in the same golf team for 15 years and they used to paly every Saturday. They often invite each other and their families around to homes for dinner and drinks. Basil was known to Jack through B-Bay Company, when Jack listed his Ford Shelby Mustang for sale on B-Bay.

Advice

In this case I have asked to advice Jack and Basil. They are the most important party in this cause, were both the parties are under binding contract by B-Bay Auction Company. So B-Bay sends conformation emails advising Jack and Basil mentioning, in auction Basil was the highest and only bidder.

Legal issues

Is there an Invitation to treat in this case?

Do the parties have any consideration? If so what consideration?

How much offers are there in this case and which offer is accepted?

Is there a legal Binding contract?

Does the contract have a condition?

Is any party frustrated in this case?

Is there any termination or breach in the case?

Yes, there is an Invitation to treat in this case, by listing Jack’s Ford Shelby Mustang in B-Bay online auction company as an advertisement to all by Jack. There was a consideration by Basil to Jack. The consideration was done before acceptance, so it becomes a past consideration. There are two offers in this case. The 1st offer was made by Basil through B-Bay. For the same product2nd offer was made by Harry in higher price but that was not in B-Bay auction. Harry said orally to Jack because they both were friend for a long time.  In the meantime the auction date comes to an end and the 1st offer was accepted by the B-Bay. Now B-Bay sends conformation emails advising Jack and Basil mentioning, in auction Basil was the highest and only bidder. So now there is a binding contract between Jack and Basil with B-Bay Auction Company and the contract has a terms condition by B-Bay. Now Jack is frustrated and does not believe that there is a contract with Basil or B-Bay, he is going to breach the condition of B-Bay and trying to terminate the contract.

Diagram

Law

This case is all about Formation of contract between Jack and Basil, after all process a binding contract was made by B-Bay Auction Company under a condition. For this binding contract we can use common law and case law to classify each issue. As per this case there is no termination of contract but if Jack and Basil breach the contract there will be termination of contract. Now Jack is planning to sell his car to Harry, if he didn’t sell the car he will not breach the contract. In this case there was an invitation to treat as an offer which was given by Jack through B-Bay. As per law invitation to treat is an advertisement to the whole world like (Smythe v Thomas [2007] NSWSC 844) case. As per law in this case the consideration was a past consideration so it is not a good consideration like (Roscorla V Thomas (1842) 3 QB 234; 114 ER 496. In this case there was three offers and on acceptance by the B-Bay auction company. Then the contract which was a legally binding contract between Jack and Basil like (Bettini V Gye (1876) 1 QBD 183 case. Then there was condition between Jack and Basil with B-Bay like Associated Newspapers V Bancks (1951) 83 CLR 322 case. At last Jack was frustrated by the binding contract like (Codeifa Construction pty Ltd State Rail Authority (Nsw) (1982)) case. If Jack and Basil breach termination of contract like (Foran v Wight (1989) HCA 51; (1989) 168 CLR 385, noted (1990) 64 ALJ 287) case. So as per the case every issue can be classified with common law and case law

Application

Offer and Acceptance

Smythe v Thomas [2007] NSWSC 844

This is a similar case where offer and acceptance is made through online E-bay auction company. Thomas listed his aircraft for a minimum bid of x$. Smythe was the last bidder and only bidder for minimum x$ under E-bay condition. The auction period was over and E-bay Auction Company made the acceptance. Thomas was not willing to sell his aircraft because another party offered for higher amount than Smythe.

In this case Jack listed his Ford Shelby Mustang in B-Bay online auction company as an invitation to treat. It was an advertisement to all the people. The contract was not concluded at the time when Basil placed an order online because it was auction; it will be concluded only at the last date of auction. He is bound by those terms and condition brought to his notice before he offers the car. In this case there was a second offer by Harry in higher price but that was not in B-Bay auction. Harry said orally to Jack because they both were friend for a long time.  In the meantime the auction date comes to an end and the first offer is accepted by the B-Bay. So the second offer by Harry is killed.

Consideration

Thomas v. Thomas (1842)

Past consideration is not enough to create a valid contract. In this case, the past services (consideration) were done at the request of the subsequent promisor and it was implicit that there would be payment.

Here in this case the auction date is over already and now if Jack asks the full amount from Basil, he will not be able to pay the full amount B-Bay will sue on Basil. Because there was no valid consideration to make the promise enforceable and the verbal contract made by a Jack, which can ran contrary to his will.

Contract

Smythe v Thomas [2007] NSWSC 844

This is a similar case where the contract is made between Smythe v Thomas by e-bay auction company. As per this case the contract is not between both parties. Both the parties are under the contract of E-bay Auction Company. If any party breaches the contract E-bay auction company can sue them, because the binding contract is under some terms and condition.

To formulate a contract there are six legal issues they are intention to contract, offer and acceptance, consideration or price, capacity to contract, genuine consent and legality of contracts. An agreement becomes a contract when all these six requirements are fulfilled.

In this case B-Bay sends conformation emails advising Jack and Basil mentioning, in auction Basil was the highest and only bidder. So now there is a binding contract between Jack and Basil through B-Bay Auction Company. Actually both the parties are under the contract of B-Bay, with some terms and conditions.

Condition

Associated Newspapers V Bancks (1951) 83 CLR 322

B contracted to draw Ginger Meggs cartoons for Newspaper. Contract – full page feature on front page of comic section every Sunday. But for 3 consecutive Sundays the cartoons were on page 3 only. B treated the contract as over. Newspaper took him to court. The court held Newspaper undertaking was a condition/essential term.

When compare to the above case even B-Bay has a condition, in auction if you receive at least one bid at or above your stated minium price, you are obligated to complete the transaction with the highest bidder upon the items completion, unless there is an exceptional circumstance. If the buyer fails to meet the terms of seller listing, such as payment etc. according to the condition Jack has to sell the car to Basil, if Basil makes the full payment.

Frustration

Codeifa Construction pty Ltd State Rail Authority (Nsw) (1982)

In this case codeifa construction got an contract and that had a condition to finish it within 130 weeks. Due to some government rules they were not allowed to work from 10pm to 6am. But the construction company is imposed to finish it within 130 weeks. Now the contract is frustrated. Because they are not allowed to work 24hours.

When related to above case Jack is frustrated by the binding contract with B-Bay and Basil. He listed his car for 75000$ in B-Bay auction company. There only on bidder Basil at the same value 75000$. Now his friend Harry offers his car for 85000$. In the meantime the binding contract was made by B-bay and Basil. So Jack is frustrated with the binding contract.

Termination of contract

Foran v Wight (1989) HCA 51; (1989) 168 CLR 385, noted (1990) 64 ALJ 287.

In this case a party contracted to buy a land from another party. The vendor said the party to make the payment after 2days it was ok with the buying party because he had enough time searches for finance. After 2days buying part is ready with the money for payment but the vendor fails to complete on due date. So the vendor breaches the contract. In the above case Jack is the selling party, but he is not willing to sell his car to Basil so there will be a breach of contract.

If two parties move out of contract from their contractual commitments there will be a termination of contract. A contract can be terminated in many was likebreach of contract, frustration etc. In this case there is a binding contract with B-Bay Auction Company between Jack and Basil. There are two issues where the contract can be terminated by Jack and Basil. As per case Jack is under frustration after the binding contract is made between him and Basil. If Jack sells the car to Harry, he will breach the contract. Then the contract will be terminated. The second issue is by Basil, because Basil has offer Jack car under a consideration in term of payment. If Jack asks the full amount to Basil, he will not able to pay the full amount then Basil will breach the contract. Then the contract will be terminated. If both Jack and Basil breach the contract B-Bay can sue them, because they both are under the contract of B-Bay with some terms and condition.

Conclusion

In this case Jack and Basil are under a binding contract with B-Bay Auction Company. Both Jack and basil are having a problem with the contract. Jack is frustrated by the contract because his friend Harry offer higher price for his car. Basil is not having the full amount to buy the car, but there was a consideration between Jack and Basil. If Jack did not accept that consideration Basil will not be able to pay the full amount and even basil can’t sue Jack because it was a past consideration, which is not legally signed document. So there is a chance for both Jack and Basil to breach the contract. If Jack sells the car to Harry then Jack will breach the contract. If they both breach the contract B-Bay can sue Jack and Basil with his terms and condition. Because both of them are under the contract of B-Bay.