Specific Terms Such As Consideration, Capacity, Intention

Contract is form by specific terms such as consideration, capacity, intention and also genuine consent. Among all of these terms there also sub topic under each specific terms that we previously mention that are important in the law of contract. Contract exists in either a verbal or written way. In order to make sure the agreement is legally enforceable; the law requires three elements, an agreement, an intention to create the agreement and also consideration.

Parol Evidence Rule

The parol evidence rule was briefly stated by Innes J in Mercantile bank of Sydney V Taylor (1891) 12 LR (NSW) 252 (at 262)[2] and was expressed in Goss V Lord Nugent (1833) 5 B & Ad 58 (at 64-65) ; 110 ER 713 (at 716) . Furthermore, it also is relates to defend the terms of the contract by written contracts. The courts assume that contracts contain the terms and requirements that the parties specifically planned and lack those requirements that the parties did not want.[3] Parol Evidence Rule is refers to unnecessary evidence such as an oral agreement (a parol contract), or even a written agreement, that is not included in the related written document. The parol evidence rule executes the supposed intention of the parties; achieves certainty and finality as to the rights and duties of the contracting parties; and prevents imitation and perjured claims. It has no claim to consequent oral contracts that modify or discharge the written contract.

[1] http://legal-dictionary.thefreedictionary.com/contract

[2] Graw, S., (2008), An Introduction to the Law of Contract, Sixth Edition, Law Book Company, Thomson Legal & Regulatory.

[3] http://law.jrank.org/pages/9039/Parol-Evidence.html

Exceptions to the Parol Evidence Rule

If the parties obviously foreseen their agreement to be affected by other unwritten factors, the parol evidence rule must turn to concede possibility. For the cases, it has at least six situations in which parol evidence rule will not be stringently applied [4] :

Partly written, partly oral contracts

Terms implied through trade usage or custom

Suspension of operation

Invalidity

Rectification

Ambiguity or uncertainly

From the six situations above, I would like to discuss partly written, partly oral contracts and terms implied through trade usage or custom.

(a) Partly written, partly oral contracts

If the written agreement was not intended to be the whole contract on which the parties had actually agreed, and that other (usually oral) terms were also intended, extrinsic evidence may be adduced to show[5]:

The agreement is, in fact, partly written and partly oral ; and (if can be proved)

The nature and intend effect of the oral terms.

It seems to deny the whole effect of the parol evidence rule from this exception but in effect, it does not. The courts will only allow this exception where it is or should have been clear to all parties that the written document was not intended to be whole agreement.

[4]Graw, S., (2008), An Introduction to the Law of Contract, Sixth Edition, Law Book Company, Thomson Legal & Regulatory.

[5] Graw, S., (2008), An Introduction to the Law of Contract, Sixth Edition, Law Book Company, Thomson Legal & Regulatory.

The case of Van den Esschert v Chappell [1960] WAR 114 shows how one party may aim to unfairly disadvantage the other party. By this case, the purchaser asked the seller

whether the house was affected by white ants before signing a contract to buy a house.

The purchaser signed with the seller guaranteed her that there were no white ants. The purchaser discovered white ants and had to pay $60 10s to destroy white ants and also

affected timbers repaired after several months. She sued the seller for the costs of repair and extinction. By discussion of this case, the purchaser’s action succeeded. The seller verbal’s assurance was a term of contract although there were no white ants was not mentioned in the written document. By the way, if the buyer asked after she signed the contract, and then the problem just came out, at that time the buyer cannot sue the seller for the dishonest. This is because before you signed, you can ask all the questions which are will affect your house. According to buy a house, it is important the presence of white ants because it might to affect timbers and repaired. So the purchaser asked the question immediately before signing a contract to make a verbal assurance. If the purchaser understand about the knowledge and skill of the house, she may know this house got the white ants or not and she can confuse to buy this house or not. By the timing of the statement, if the seller let the purchaser think over about 1 week before signing this contract, the purchaser did not think properly before sign this contract and did not ask for any question, it was not use to sue the seller. For 2nd example case Nemeth v Bayswater Road Pty Ltd [1988] 2 Qd R 406, the parties contracted which is hire of an aircraft and recorded the details of their agreement in an especially prepared written document. It also contained a specific acknowledgement that all the terms are contained in this written agreement. But later the plaintiff sued for additional charges and was due under an oral agreement entered into before the written contract was executed. By this case, the plaintiff failed because the agreement was not classify by partly written, partly oral. The agreement was already mentioned that all the terms are contained in this written agreement. Even though additional hire charges not appear in the agreement, but the plaintiff was signed the contract. The timing of this case is the contract was executed after he sued for the additional hire charges; therefore it was not use to sue the parties. Compare with these two of cases, the first case is the seller’s verbal assurance that there were no white ants before the purchaser signed the contract. The second case is the plaintiff sued for additional changes after he signed and the contract was executed.

(b) Terms implied through trade usage or custom

The court will be implied terms where there is in the light of local or trade custom, it could be assumed that the parties must have contracted with the term in mind. Furthermore, it is admissible to add to or explain the evidence of custom by a written agreement and not to reverse it. The court held that the following offers apply in a common decision [6]:

Whether there is a custom or usage that justifies implying a term into a contract is always a question of fact.

There must be evidence that the custom relied on is so well known and acquiesced in that everyone making a contract in the circumstances can be reasonably presumed to have imported that term into their contract.

A term will not be implied if it is contradict to the express terms of the agreement.

The case of Hutton v Warren [1836] 1 M & W 466; 150 ER 517, it is well demonstrated in the exception of term implied through trade usage or custom. The tenant who had been given notice to quit his rented farm from the landlord. As a local custom, if a tenant farmer had to quit his tenancy, he was enabled to receive a rebate or allowance from the landlord for both seed his had used and his labour on the land in the last year of the tenancy. This right, he said, arose and existed although

[6] Graw, S., (2008), An Introduction to the Law of Contract, Sixth Edition, Law Book Company, Thomson Legal & Regulatory. page 229

there was not mention in the written lease. By discussion of this case, the tenant won because his contract with the landlord to be read in the light of the custom. Given by that local custom, the landlord had to pay a reasonable allowance for the seed and labour consumed on the land to tenant. Even though there were not contained in written lease, but this was in the light of the custom and is notorious that everybody in the trade enters into a contract with the usage as an implied term. The other case is Pelly v Royal Exchange Assurance [1757] 97 ER 342. During a voyage Pelly had insured his ship and tackle. The shipmasters removed and put the tackle into a warehouse while arrived. The warehouse accidentally lost as fire. The insurers claimed the loss as it had occurred on shore but not covered on the scope of the voyage. The insurance claim was rejected because the place of the ship’s tackle in a warehouse was normal practice. Basically, the insurers must be claimed the loss, but it was understood to refer in every policy and even without put into contract.

Collateral Contract

Collateral contract is a separate contract which is exists beside the main contract. [7] A collateral contract will be existed where statements have been made and intended as a promise, and to reassure the main contract. Although it clashes with a written contract and does not drop within any of the exceptions to the parol evidence rule, that is a way which can be supposed compulsory with an oral statement. If the plaintiff can establish, it is only legal and enforceable by collateral contract is proven [8]:

The statement depend on is promissory.

The collateral contract is constant with the main contract, so the provisions of the main contract are enforceable.

The past consideration is not held by the collateral contract.

Thus, I will discuss the case De Lassalle v Guildford [1901] 2 KB 215, this fact of case is the parties negotiated the lease of a house. The tenant asked whether the drain was in order before signed the contract and the landlord assured that the drain were in good order. After that the drain were not in good order and the tenant sued the landlord for his assurance. The landlord argued there was not a term of contract and it was not mentioned into the lease. Apart from that, he was not responsible for damages. By this case, the plaintiff’s action succeeded. However the tenant asked whether the drains was in good order is had not been written into the lease but he landlord assurance becomes a separate collateral contract which is alongside by the main contract, the consideration for which was the tenant entering into the main lease. This separate collateral contract was binding, therefore the landlord must responsible and capable of breach for the damages of the tenant. If the landlord told the tenant that the drain was not in good order, he would

[7] https://www.lawteacher.net/contract-law/collateral-contracts.php

[8] Gibson. A, (2007),Business Law , 3rd edition, Pearson Education Australia, page 362

never entered into the main lease. The case of J Evans & Son (Portsmouth) Ltd v Andrea Merzario Ltd [1976] 1 WLR 1078, the plaintiff and defendant entered into a contract with imported machines from Italy. From the defendant’s contract it had an exclusion clause for loss or damage of the goods unless caused by willful damage. Additionally, the defendant verbal assured that the containers would be shipped below the deck. After that, the plaintiff sued for the container was shipped on deck and was washed overboard during a storm. According to this case, the plaintiff won because the defendant verbal assurance becomes a collateral contract beside the main contract. Before signed the contract, the defendant made an oral promise in order to convince the plaintiff agree for the shipment. In this situation the promise was binding and the defendant he should liable for the damage. By the same token, even though an oral assurance not contained in the main contract, but it was become a collateral contract beside the main contract. This is due to the promise was binding or not and consideration must be supported.

Conclusion

In my conclusion, I will conclude by starting a clearly understand about how the important of the Parol Evidence Rule, collateral contract and some of the exceptions of the rule. According to these rules and these appropriate cases, I am clearly understood all laws have their own reasons. But in some of circumstances, example for the cases Van den Esschert v Chappell [1960] WAR 114 and Nemeth v Bayswater Road Pty Ltd [1988] 2 Qd R 406, first case was admissible and the second case was inadmissible. The reason is the timing of the contract so that we can know similar cases but they have their different situations. We must prove the evidence of the case. By the same token, this is very useful for our further study and it can improve our business law study and knowledge. For instance, Contract is important for every business enterprise because it must enter contracts with customers to operate business, suppliers and employees of good and services in order to control quality, price and delivery.

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