Illegality And Immorality In Contracts

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Illegality And Immorality In Contracts

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Question:
Discuss about the Illegality and Immorality in Contracts.

Answer:
Introduction:

The basic requirement for a contract to be valid includes an offer, acceptance to the offer, consideration, lawful object and two or more parties.
According to the law, not all contracts are necessary to be in writing, except a contract relating to mortgage, land and guarantee. Nowadays there has been an increase in E-commerce contracts like contracts via social media, e-mails or text messages. At times, there are some formalities to be maintained in case of e-commerce contracts like inclusion of a digital signature, and others (Gillies, 2016).
The contracts made via E-mails shall have the same effect as a written contract. Section 8 of the Electronic Transaction Act, 2002 states validity of E-commerce contracts (“Electronic Transactions Act 2002 No 35 (as at 01 January 2016), Public Act Contents – New Zealand Legislation”, 2017). Section 11 and Section 13A comes into question.
In the given case Mary had intended to buy the tea set from Susan, as a result there was an exchange of e-mail id between the two. Mary had responded to the invitation to offer and made a counter offer to buy the tea set at a lower price, which was rejected. Both Susan and Mary had an intention to create legal relation in exchange of a consideration.
The main issue with agreements via e-mail is that it is difficult to determine that when the contract is formed, when it has been read by the recipient, the time of sending the e-mail and receiving.
Hence, in the given case there were elements of a valid contract. There was a miscommunication because Mary missed the e-mail message sent by Susan on the day before Mary accepted the offer. The mail had already entered into Mary’s system which was kept for the purpose of exchange of electronic communications.

Generally, verbal contracts are valid except in case of mortgages, land and guarantee. Verbal agreements and promises shall have the same effect as the other contracts. The doctrine of estoppel aims at reasonability of the promise made. The Contractual Remedies Act, 1979, deals breach of contract. The contract law also deals with rules of a contract. The court may direct to pay compensation, or injunction or specific performance of the contract in case of breach. Section 11(1) of C.R.Act, 1979 may come into operation (Rowan, 2012).
In the given case, there has been an offer and acceptance between Zoincos Limited and Lagos Roofing. There was an existence of mutual consideration between the parties. There was performance as well. Zoincos had already made a part payment to Lagos. As a result of the malfunctioning in the manufacturing process, the contract could not be performed. A counter offer had been made but there was no written evidence. Performance of the contract has only been done by Lagos Roofing (Eigen, 2012).
There is a form of compulsory insurance, managed by Accident Compensation Corporation. Hence, third party insurance is not needed. The compulsory insurance covers all injuries or damage caused by car accident (Australia, 2012). The Consumer Guarantee Act 1993 protects the interest of the consumers. The National Consumer Credit Protection Act helps in providing sufficient information for awareness to the borrower.
The credit laws of Australia further gives rights to borrowers facing hardships, which allows the person to apply to the car loan department for financial hardship. Special arrangements like settlement shall be made on being approved. The borrower can also apply to the External Dispute Resolution (EDR) in case of conflicts with the car loan department. If unsatisfied with the EDR, the borrower can also move to the court.
In the given case, Jordan, being affected by redundancy, was unable to pay further. He had a savings of $50,000 that was sufficient for the deposit of a Ford Mustang, which was second hand.
Jordan on being a minor, his contract shall be voidable at the discretion of the court. As he was 17 years, he was close to become a major. Jordan shall be liable to the amount of his savings and on being a minor; the liability shall be carried forward to his guardian or guarantor in that case. Jordan under Section 5(2) of The Minors Contract Act as the person arranging the finances did not specify the nature of the guarantee could seek a defense.

The law makes a minor’s contract voidable at the discretion of the District Court. The guarantor on signing and agreeing to the terms shall be liable to pay the debt on the incapacity of the borrower. Terms of the contract shall be applicable.
Discretion shall be at the District court to validate the contract of a minor. In the given case, the age of Jordan was 17, and close to majority. As the contract was signed by him, according to the terms, his father acted as the guarantor. Hence, not only Jordon shall be personally liable but also his guardian who has given the guarantee. The extent shall be decided by the court.
The provision relating to the essential elements of a contract and competency to contract have been enumerated in The Contract and Commercial Law Act, 2017 (“Contract and Commercial Law Act 2017 No 5 (as at 14 July 2017), Public Act Contents – New Zealand Legislation”, 2017). Some of the essentials required for a valid contract include free consent of the parties. There has to be some consideration. There must be an offer and acceptance. The parties must have the intention to enter into the contract. The object has to be lawful and each party must have the capacity to contract.
All individuals above the age of 18 are competent to contract, provided they are of sound mind (McKendrick, 2014). In some cases persons below the age of 18 or a minor’s contract is also valid. A person may not be of unsound mind always, then, in that case a contract made while the person is of sound mind shall be considered as valid.
Factors that can cause unsoundness of mind are lunacy, idiocy, being intoxicated or drunkenness, and others. These factors can often cause a contract to be void or voidable in the eyes of law. The relevant factor is free consent between the parties.
The conditions laid down for a contract to be binding are applicable in the given case. Joseph and George knew each other for years and got along well. Both of them were competent to contract, and had the intention to enter into a contract. There was an offer present in the given case as well as an acceptance. Hence, both the parties had knowledge of each other and there was free consent, in spite of George’s forgetfulness, all the paperwork was done.
The provision of illegal contracts has been enumerated in Subpart 5 of The Contract and Commercial Law Act, 2017. Section 71 of the Act gives the definition of an illegal contract, and it is subject to Section 72. Contracts, which are illegal in nature, do not have any effect, per se, in the eyes of law.
A contract governed by New Zealand Law, which is illegal in the eyes of law or in equity, whether from the inception or while the contract is being performed, can be termed as illegal contract. Section 3 of The Illegal Contracts Act, 1970 provides the definition of illegal contracts. Notwithstanding any law of equity or rule, the illegal contracts are not supposed to have any effect in the eyes of law. An example of an illegal contract can be a contract to kill a person (MacQueen, 2014).

In the case referred, the advertisements made by Sleep Ahead Limited did not match completely with the facts, which Bobby found out during his investigation. Hence, the issue is whether Sleep Ahead Limited has abided the norms of The Fair Trading Act, 1986 or not, and if breached what would be the penalties imposed by Law?
The provisions of unfair conduct have been enumerated in Part 1 (Section 9 to Section 26A) of The Fair Trading Act, 1986. The trading conduct that has been prohibited by law includes: provisions of misleading and deceptive conducts generally, which is contained in Section 9 to Section 12 of the Act. Provisions of unsubstantiated claims contained in Section 12A to 12D of the Act. Provisions of false representations contained in Section 13 to 16 of the Act. Provisions of unfair practices contained in Section 17 to 26 of the Act, and Section 26A deals with provisions relating to unfair contract terms.
Part 5 of the Act deals with penalties or remedies for breach of the fair trading norms. In case of a company committing breach in relation to the said Act, the penalty can fine, injunctions restraining an unfair conduct, account of profit, compensation, and others (Graw, 2012).
Part 1 of The Fair Trading Act, 1986 deals with various kinds of unfair conduct like deceptive and misleading conduct, false representations, unfair trade practices like bait advertising, and others. According to the law, no organization shall make any false or misleading statements or representations as to content, quantity, price, quality, et cetera (Poole, 2012).
‘False’ means any representation, which is untrue and is not consistent with facts. ‘Misleading’ means any representation that would lead any reasonable person to misunderstand. Some of the essentials of unfair trading practices includes, puffing, exaggeration, misleadingness and falsity. The intent of the advertiser is irrelevant (Richards, 2013).

In the given case, according to the investigation of Bobby, there was an existence of puffing or exaggeration in the advertisement made by Sleep Ahead Limited. Not only it was limited to puffing, Bobby had also found out that there was bait advertising as well (Velentzas, Broni, & Pitoska, 2012).
In case of a company constituting breach of the said Act, it can attract a penalty of fine that may extend up to $600,000. The court may also order for a refund to the consumers of goods or services, and may further order for repair.
Conclusively, by the investigation of Bobby, Sleep Ahead Limited, attracts Part 1 of the Act. This implies that the furniture store named Sleep Ahead Limited has committed breach of The Fair Trading Act, 1986 and will attract penalty imposed by the court, such as fine not exceeding $600,000 and others.

References
Australia, S. W. (2012). Comparison of Workers¿ Compensation Arrangements in Australia and New Zealand. Australian Government-Safe Work Australia.
Contract and Commercial Law Act 2017 No 5 (as at 14 July 2017), Public Act Contents – New Zealand Legislation. (2017). Legislation.govt.nz. Retrieved 4 October 2017, from https://www.legislation.govt.nz/act/public/2017/0005/21.0/DLM6844033.html
Eigen, Z. J. (2012). When and why individuals obey contracts: experimental evidence of consent, compliance, promise, and performance. The Journal of Legal Studies, 41(1), 67-93.
Electronic Transactions Act 2002 No 35 (as at 01 January 2016), Public Act Contents – New Zealand Legislation. (2017). Legislation.govt.nz. Retrieved 8 October 2017, from https://www.legislation.govt.nz/act/public/2002/0035/28.0/DLM154185.html
Gillies, L. E. (2016). Electronic commerce and international private law: A study of electronic consumer contracts. Routledge.
Graw, S. (2012). An introduction to the law of contract. Thomson Reuters.
MacQueen, H. L. (2014). Illegality and Immorality in Contracts: Towards European Principles.
McKendrick, E. (2014). Contract law: text, cases, and materials. Oxford University Press (UK).
Poole, J. (2012). Casebook on contract law. Oxford University Press.
Richards, J. (2013). Deceptive advertising: Behavioral study of a legal concept. Routledge.
Rowan, S. (2012). Remedies for breach of contract: a comparative analysis of the protection of performance. Oxford University Press on Demand.
Velentzas, J., Broni, G., & Pitoska, E. (2012). Unfair commercial practices on marketing-Advertising and consumer protection in EU member states. Procedia Economics and Finance, 1, 411-420.

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