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Published: Fri, 02 Feb 2018

Contract Agreement Payment | Free Contract Law Essay

Question 1

Formation of Contract

Contract is part of every transaction which is intended to create the legal relationship. It is the binding agreement by two or more parties that had enforced by the law. Formation of contract is written at the paper undersigned and agreed by the two responsible persons. A business contract is the agreement that Tan had made in pursuance of ordering to the Billiton Steel. In this case the proper contract signing as well as the terms had been settled but conflict had been made when there nothing had been agreed on the terms of payment of the Tan in his orders. Besides, the financial plan of Tan is not covered about its payment to Billiton Limited.

Implied Terms

Some terms have not expressly inserted by the parties, the contract may contain and be subject to the implied terms. Basically, there are three ways to interpret the implied terms by the law, it can be implied by previous dealings, by trade usage and by business efficacy. In the case, the defendant (Tan) should have a condition in relying on previous communications in previous dealings or the usual practice in the particular business. Though, it has been written in the contract and has been agreed to the terms of the delivery, the payment will not be done. In the consideration of the long term relationship of both parties and they are doing this many times only the payment had made the conflict. In this case, Tan’s financial plan was planned for construction and not allowed to make any such advance payment to Billiton Steel. Under this circumstance, Tan will have the right to defend itself for the payment supposed to have for its orders. Just like the precedent of Hillas & Co v Acros Ltd (1932) LT 503, the contract was enforceable by the court. It was not violated the principles of contract for the seller and for the buyer’s guarantee and satisfaction.

Postal Rule

Under the general rule of acceptance, the acceptance must be perfectly conformed with the terms of the offer. Tan has the right to defense the communication of revocation since an acceptance must be formally communicated to the offeree, if not, it is unenforceable. Besides, Billiton sent a fax to confirm the dispatch of the steel and requested the payment on the same day of the delivery. Under the postal rule, it is not applied as facsimile message is not held in all forms of instantaneous or near-instantaneous communication. Just like the precedent of Entores Ltd v Miles Far East Corp [1955] 2 QB 327, since the contract made in England and the postal rule did not apply to that form of communication, the acceptance was not effective. However, the court will be judged the acceptance became effective unless it has communicated by both parties, like the case of Reese Bros Plastics Ltd v Hamon-Sobelco Aust Pty Ltd (1988) 5 BPR 11,106, where the acceptance was dealt with facsimile.

Question 2

Promissory Estoppel

Doctrine of Promissory estoppel arises from a promise made with intention that it should be acted upon. Mr Tan and Mr Song expected to create the legal relationship in the business and the 5% rise is one of the factors that Tan to consider and it is the vital elements to integrate part of promissory estoppel. Tan can be argued the point of equity’s doctrine of promissory estoppel just like the precedent of Central London Property Trust v High Trees House Ltd [1947] KB 130, the plaintiff failed because equity was raised in giving the fairness and being behaved equitably to the defendants. However, the promise that Mr. Song had made should be considered an inadequate act since there is no legal contract that was supported why Tan is obliged to pay of the said payment. In this case, Tan should have a legal evidence of the promises that had been made regarding the transaction to Exxon. It can be a recorded telephone conversation of the transaction he made to Mr. Song, or a third party or the witness on the transaction of the Tan and Mr. Song who will prove that Mr. Song had promised to Tan a less than 5% of the price he offers. If do so, the court should have a legal analysis and Exxon is obliged to lessen the percentage increase to Tan when the evidences had been made.


Consideration can be defined as “the price of the promise”, where one party promises to do something in return for the act of another which is the elements of binding an agreement between two parties. One of elements of consideration must be a benefit to one party binding by a promise. In Tan’s case, Mr. Song (promisor) gave a promise to Tan (promisee) for not increase 5%, and Tan has turned it for the act in exchange. However, the promisor has already left Exxon it cannot normally support the promise. The promise has become a past consideration, it was not enforceable because of a past consideration is no consideration. Just like the precedent of Roscorla v Thomas (1842) 3 QB 234; 114 ER 496, it is a past consideration as the deal has already completed and has no consideration to support the promise, therefore, it was not enforceable. Furthermore, the value is subject to the market is not a sufficient and valuable consideration.

In Tan’s case, it is possible to consider the factor of an element detriment under the typical situation. It is because Tan relied on the promise made by Mr. Song to purchase heavy oil products but not the usual supplier. It was clear that Tan (the promisee) was suffered from a worse situation of market price rose and believed the promise made by Mr. Song. Just like the precedent of Commonwealth v Verwayen (1990) 170 CLR 394, the plaintiff had suffered detriment and the Commonwealth led the plaintiff believed that the liability will not enforce. Any other factors it should be considered, such as, incorrect input of the data and prices has also been tampered or had been changed by one of the Exxon’s employee.

Question 3

Exemption Clause

A contract may contain express terms under which one or both of the parties excludes or limits liability for breach of contract or negligence. The court have protected and continue to protect consumers of goods and services against the effect of exclusion clause never became part of the contract or by interpreting the contract in such a way as to prevent the application of the clause. In Tan’s case, the contract is made by signing a written document, in general, it would be bound by everything which the document contains, although Tan has not read it. An exception is the rule of non est factum, provided the signer is not negligent. In the precedent of the L’Estrange v Graucob Ltd [1934] 2 KB 394, it has shown that the document containing the clause was signed in where assume that the signers must read, understand and agreed the terms of contract.


Since, Tan had signed to the contract without even noticed of the claim of the contract that the one who is responsible for the properties is not liable for anything. However, the application of the exemption clause for this case was not enforceable because it did not apply to the loss of the valuable tools. Just like the precedent of Mendelssohn v Normand Ltd [1970] 1 QB 177, the plaintiff parked the car in the defendant’s carpark protecting by the exclusion clause but the valuables was stolen by the thief even the plaintiff had emphasized the cark contained valuables and should be locked after parking. The court judged that the exemption clause did not apply. On the other hand, security company should draw Tan’s attention on awareness of the clause prior to become into the contract. It is because all terms contained in a document that the party should have the intention to let the other party to notice before the contract is entered into, just like to the precedent of Chappleton v Barry UDC [1940] 1 KB 532.

Question 4


There are three kinds of mistake which includes the common mistake – both parties make the same error relating to a fundamental fact, mutual mistake – both parties misunderstand each and the unilateral mistake – one party is mistaken and the other party knows or must have been taken to know. Normally, common mistake will lead the contract void by the law, just like the precedent of McRae v Commonwealth Disposals Commission (1951) 84 CLR 377, the contract has a common mistake before the agreement executed therefore it was unenforceable.

Unilateral Mistake

In Tan’s case which is unilateral mistake as Tan make a careless mistake on “per unit” instead of “per week”. Tan has made a mistake and Wing On did not give misleading information to Tan, therefore it can be assumed that Tan has already understood what the terms were in the contract. There is a legal application as the legal maxim or the non est factum which simply means of not the deed and the special contract law is allowing the person to respect the contract that he has signed. If the person is pleading for the non est factum will have to prove that the document being signed is different from the expected one. Just like the precedent of Taylor v Johnson (1983) 151 LCR 422, the contract was void because the plaintiff has already known the mistake of the defendant but no rectification has risen by the plaintiff. Therefore, the court think equity could happen in such a way as to prevent the contract from being done. In Tan’s case, Wing On had known that Tan had made the mistake but did not want to correct Tan or make any rectification. Therefore, this mistake will totally affect on the justice of the agreement.



  • Graw, S. 2005, ‘An Introduction to the Law of Contract‘, 5th Edition, Thomas LBC, Sydney
  • Smith, K. & Keenan, D. 2004, English Law, 14th edn, Pearson Education Limited, England
  • Cases (all cited in the above book)
  • Central London Property Trust v High Trees House Ltd [1947] KB 130
  • Chappleton v Barry UDC [1940] 1 KB 532
  • Commonwealth v Verwayen (1990) 170 CLR 394
  • Entores Ltd v Miles Far East Corp [1955] 2 QB 327
  • Hillas & Co v Acros Ltd (1932) LT 503
  • L’Estrange v Graucob Ltd [1934] 2 KB 394
  • McRae v Commonwealth Disposals Commission (1951) 84 CLR 377
  • Mendelssohn v Normand Ltd [1970] 1 QB 177
  • Reese Bros Plastics Ltd v Hamon-Sobelco Aust Pty Ltd (1988) 5 BPR 11,106
  • Roscorla v Thomas (1842) 3 QB 234; 114 ER 496
  • Taylor v Johnson (1983) 151 LCR 422

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