XXIX Jon. I 2014 (Contract Law and Magistrates)

The Purpose of this Act is to codify Austenasian contract law, as well as to establish the position and powers of magistrates and to provide for legally binding compromises made by disagreeing parties outside of court

A contract is a legally enforceable agreement between parties, which is completed when both sides honour it by carrying out their obligations under the contract. It is a breach of contract when a party fails to do so.

There is only a contract where there is a mutual agreement, a consideration, and an intention to be legally bound by the terms of the agreement.

A contract exists when a valid offer is followed by a valid acceptance.

1. A person making an offer is the offeror. The only person who can accept it is the offeree, that is, the person to whom the offer is made. The offer is a statement of intent by the offeror to be legally bound by the terms of the offer if it is accepted, and the contract exists once acceptance has taken place.

2. An invitation to treat is not an offer. An invitation to treat is an invitation to make an offer, the contract then being formed by acceptance of this offer. For example, placing goods in the window or on the shelves of a shop is not an offer to buy, but an invitation to treat – the customer makes an offer to buy, and the contract is formed when the shop agrees to the sale. The mere fact that a party has indicated a price which they would find acceptable does not make it an offer.

3. If an advertisement indicates a course of action in return for which the advertiser makes a promise to pay, then they are bound by this promise. For example, if a company were to advertise a mouse repellent for house use with the promise that if a purchaser uses the product correctly and their house remains infested with mice they would receive a refund, the company would be obliged to pay the refund to a customer who fulfilled said conditions.

4. An auction with a reserve price does not form a contract to buy unless the highest bidder reaches the reserve price set by the seller. In an auction held without a reserve, the goods for sale must become the property of the highest bona fide bidder.

An offer must be communicated to the offeree. It is impossible to accept an offer of which one has no knowledge; although in a dispute, should the offeror prove that they sent the offer to the offeree the burden of proof is on the offeree to show that they did not receive it.

An offer can be made to one person, several people, or to the whole world; anyone who has knowledge of the offer may accept it should it have been intentionally communicated to them.

The terms of an offer must be certain – if the words used are too vague, the contract cannot be binding.

It is possible to withdraw an offer at any time before the offer is accepted. The offeree must be made aware of the withdrawal before they accept the offer, or the contract will have been formed. Communication of withdrawal of the offer can be by a reliable third party known to both offeree and offeror.

An offer can be terminated by being accepted, refused, or withdrawn, by a time given for acceptance having lapsed, or by the death of the offeree. Should the offeror die, however, the heirs of the offeror may still be bound by the acceptance of the offeree, should the latter be unaware of the former’s death.

The acceptance must be communicated to the offeror, and cannot be taken from silence. Acceptance can be by word, writing, or conduct, but if the offeror requires it to be in a specific form then it must take that form to be valid.

1. The acceptance must be unconditional and conform exactly to the terms of the offer, or no contract will have been made. Any attempt to vary the terms of the offer is a counter-offer, terminating the original offer, which cannot then be accepted unless it is made again.

2. A mere enquiry about the contract is not a counter-offer, as it does not reject the terms of the offer.

A consideration exists where both sides are bound under the agreement to give something to the other. Consideration cannot come before the agreement but must follow it. Where one party has done a voluntary act in favour of another, they may not enforce a promise to pay made by the second party after the act, unless the act was requested by the second party with the understanding that discussion of payment would follow.

A person cannot sue or be sued under a contract unless they have provided consideration, the contract expressly allows them to do so, or the contract would have bestowed a direct benefit on them.

Performing an existing duty, whether a public duty or a duty under a law or an existing contract, cannot be the consideration for a new promise. It can, however, be consideration if what is given is more than would be expected or required from the existing duty.

A promise to accept part payment of an existing debt in place of the whole debt cannot be enforced, as there is no consideration for the promise. The exceptions to this are if the creditor waives in writing part of the debt as a gift, an agreement is made to accept earlier payment of a smaller sum (where the earlier payment is the consideration on the part of the debtor), or an agreement to accept something else in place of all or of part of the debt.

By making an agreement in writing, or by shaking hands in front of witnesses upon the conclusion of a verbal agreement, the parties display an intention to be legally bound by the terms of the agreement made. An agreement made in writing is valid even if it is not fully read by one of the parties. Any agreement made in a business context is presumed to be intended to be legally binding unless evidence can show a different intent. A contract cannot be made by a person under sixteen years old, or by a person who is unable to make a reasonable judgement through being intoxicated, asleep, mentally incapable, et cetera.

The terms of a contract are those which the parties have agreed upon, and are often identified in pre-contractual statements known as representations. Some representations may be deemed to be sufficiently significant to be incorporated into the contract as terms, especially if either party attached great importance to it when deciding whether or not to make the contract, or if its validity was backed up by a specialist or expert in a relevant field. Terms can be implied through custom and/or past conduct.

A misrepresentation is a false statement of fact made by one party to the contract to the other at or before the time of contracting, not intended to be part of the contract but intended to induce the other party to agree to the contract. A misrepresentation can, if considered to have been significantly influential in inducing a party to agree to the contract, make the contract void, and said party will be able to sue for damages should they have already fulfilled some or all of their obligations under the contract. If misrepresentation is done fraudulently, it can also be the second-class felony of fraud by false representation.

There are two types of terms: conditions and warranties. A condition is a term which goes to the very root of the contract, breach of which would render the contract meaningless, whereas a warranty is any other term. The party who is a victim of a breach of a condition can repudiate their obligations under the contract instead of or as well as suing for damages (see Paragraphs 25 and 29 of this same Act), while a victim of a breach of a warranty can only sue for damages. Where the parties are silent or disagree on what type a term is, the judge must construe it from the context and surrounding circumstances.

The discharge of a contract refers to the ending of the obligations under it; this is usually where all of the primary obligations created by the contract have been met, although in some cases a contract may be discharged even if some of the relevant obligations remain uncompleted. Where the contract is discharged because all obligations under the contract have been carried out, this is referred to as performance of the contract.

For performance of the contract, all obligations should be performed, although there are exceptions. If obligations are divisible, then payment should be made for the part performed, unless a large majority of the work to be done remains uncompleted; where a party has accepted part performance, this should be paid for; and where there has been substantial performance, the full price will be paid, less the sum appropriate to what has not been done.

A party can sue for damages where their performance has been prevented by the other party, and also where they have offered to perform their obligations under the contract but said offer has been refused.

The time of performance is of importance when it says so in the contract, the circumstances make it so, and/or one party has already failed to perform.

A frustrating event is one that prevents performance of the contract but is beyond the control of either party. These can include impossibility (e.g. destruction of the subject matter, the unintentional unavailability of the other party, or even the outbreak of war), subsequent illegality, or where the commercial purpose in the contract is lost. In such cases, obligations finish at the point of the frustrating event. Frustration cannot be recognised where it has been self-induced, or where the contract is merely more burdensome to perform.

A breach occurs when one party fails to perform at all, or does less than is required under the contract and/or does not perform satisfactorily. It will also be a breach where one party wrongly repudiates. Breach of a warranty only allows suing for damages, whereas breach of a condition allows suing for damages and/or repudiation, but only if the term in question is really a condition going to the root of the contract.

Damages are a sum of money paid by the defendant to the claimant by order of a magistrate once liability is established, in compensation for the harm suffered by the claimant as a result of a breach of contract. The purpose of damages are to compensate for the losses suffered as a result of a breach, so that – so far as is possible and so far as the law allows – the victim of the breach is in the same position that they would have been in should the contract had not been broken but performed. The breach must be the actual reason for – an effective and substantial cause of – the claimant’s loss. The party injured by a breach of contract should take reasonable steps to mitigate the effects of the breach – any failure to mitigate may be taken into account in awarding damages.

The office of magistrate is hereby established. The Monarch, Prime Minister and/or Home Secretary may appoint any Austenasian subject a magistrate. Any person with a dispute regarding ownership and transferral of property, breach of contract, inheritance, and/or the custody of children may take their case to a magistrate, and may sue (see Paragraph 29 of this same Act) the other party for damages and/or some other remedy.

Should a case be taken before a magistrate, the magistrate shall issue summons to the parties involved to attend a hearing at which the case shall be decided. Summons may be issued up to three times – should a party fail to attend after receiving a third summons, the magistrate may decide to go ahead in hearing the case and issue a binding decision with the contumacious party in absentia.

Magistrates shall, after hearing a case, issue a decision in regards to the dispute at hand based on the evidence which they have heard. This decision shall be legally binding, and may be enforced by the police by order of the magistrate.

To sue is to set forth a remedy to the case and formally request the magistrate that they make such remedy their decision, e.g. the payment of damages to a specific amount – a magistrate is not bound in any way to follow the remedy sued for, but may consider it when making their decision, e.g. awarding the suing party the precise amount sued for even if they consider the suing party to deserve more.

Vexatious litigation is where a party brings cases (regardless of their merits) before a magistrate, solely to harass or subdue an adversary and where they know that their case is extremely unlikely to succeed due to a lack of legal merit. A magistrate who considers a person who has brought a case before them to be guilty of vexatious litigation may convict them of such after placing evidence before and receiving the approval of the Home Secretary. Vexatious litigation is not a crime, but a party found to have committed vexatious litigation a third time may be fined by the respective magistrate, with the party fined able to appeal to the Consuls to have the amount of the fine lessened.

Where parties are in disagreement, they may negotiate a compromise without going before a magistrate. A compromise is an agreement between the disagreeing parties to settle the case in hand which, once agreed upon, becomes legally binding.

While attempting to reach a compromise, the parties in disagreement may agree upon a third party – an arbitrator – to review the evidence in the case and to themselves impose a compromise upon the parties.

A compromise may include a clause stating that a party who violates the compromise may have to pay a penalty. Should this happen, the case may be taken to the magistrate and the penalty sued for.