Creating legally binding agreements
Who has the right to enforce contractual obligations? * Contractual obligations only exist between those who have agreed to undertake them. * It follows that only parties to the contract have the right to bring an action to enforce it. This is called ‘privity’ of contract. * Price v Easton (1833) 4 B & Ad 433 * Coulls v Bagot's Executor & Trustee Co Ltd (1967) 119 CLR 460
Price v Easton 1. Original debt owed by builder to Mr Price. But the builder cannot pay 2. Mr Easton makes a promise to the builder that he will pay the builder’s debt to Price if the builder does some work for Easton 3. Builder does the work for Easton, but Easton does not pay Price. Price sues Easton to enforce promise Easton made to the builder
Coulls v Bagot's Executor 1. A contract was made for stone to be quarried by O’Neill in exchange for a payment of royalties 2. Under the contract, the royalties are to be paid direct to Mrs Coulls 3. After Mr Coulls dies, his executor (Bagot) wants to know if Mrs Coulls has a contractual right to the royalties
The element of intention to be bound * An agreement is only legally enforceable if the parties intended to be legally bound. * Note: The ‘intention to be legally bound’ is important because it serves to distinguish between contracts and agreements that are not enforceable in the courts. * Intention is to be judged objectively. The court asks whether, in the circumstances, a reasonable person would regard the agreement as intended to be binding. * Carlill v Carbolic Smoke Ball Co [1893] 1 QB 256
Carlill v Carbolic Smoke Ball Co (Smoke Ball Co- Manufacturer, Mrs Carlill-Consumer)
1. The manufacturer advertises in newspaper: 100 pounds paid if you use our smoke ball, use it as directed, and catch flu.
2. Carlill sees the