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Australian Contract Law Theories

Law is one of the ancient sciences in the world. Romans were the first who managed to structured law articles, who implemented these laws and followed them. It is not a secret that most of the law concepts in the modern countries have its beginning from Roman civilization and from their legislative power. Modern Australian society is also has its rules and laws and follows them. One of the chapters of law in Australia, as well as in other countries, concerns the contract law. The problem of contract law is to the point nowadays as all agreements and arrangements are supported by contracts in obligatory manner as people do not trust each other any more. There are a lot of different theories of contract law, such as classical theory, promise theory, consent theory and others. The named theories have different rules and aspects, which are going to be contrasted and compared in this paper.

In general, contract is usually understood as the agreement of two or more people, who establish, change or cease previous rights and responsibilities, in other words, contracts regulate people’s relations. Every contract is a law document which functions according to definite theories and concepts. The notion contract law has a lot of definitions, but according to Richard Craswell ‘common belief holds that tort law imposes duties without regard to a party’s consent, while contract law enforces only those duties that a party has voluntarily assumed.’1 ‘In contract law, judgments have been rendered to the effect that intention to enter into legal relations must be objectively assessed to prevent self-serving statements from contaminating investigative processes.’2

There are different theories of contract law,3 but we are going to consider classic theory, promise theory and consent theory. These theories have a lot in common as they all deal with contracts, but at the same time, these theories differ greatly as they refer to different concepts. The very titles of these theories may tell some information about central ideas of this or that concept.

Classical theory of contract law is aimed to provide parties own terms without the court interference, the court just supports the parties intentions and gives all the responsibility to them to decide their questions. The significant feature of the classical contract is the refusal to insert in the contract anything which was not agreed as the part of the abilities, and in the cases when these additions would be necessary they will be inserted in the contract. The last significant feature of the classical contract theory is those participants do not turn to the court in the case of considering the justice and fairness.4 Under the classical theory of contract law, contracts are said to be an expression of the joint will of the parties and the voluntary assumption of agreed obligations.

The other theory of contract law is the promise theory. This means that the promisor takes up all the responsibilities about the contract to himself/herself. Social practice interferes in the promise theory of contract law5 as the social beliefs and responsibility before the society are the main guarantees that the problem is going to be solved and that the promise will remain delighted with the provided affair. The person appears to be bound by the promise which was given.

A promise which the promisor should reasonably expect to induce action or forbearance on the part of the promisee or a third person and which does induce such action or forbearance is binding if injustice can be avoided only by enforcement of the promise.6

Promise theory of contract law is rater specific as the responsibility about the contract lays only on one part as well as the other just follows the situation and how the promisor keeps his/her promise.

Consent theory of contract is not so simple as it may seem from the first sight. As Randy Barnett claims, consent theory of contract law presupposes that the person agrees to take up the responsibility about the affair but it was not his/her idea.7 The consideration is that the person is imposed to take up obligations, but this impose is voluntary, without any intimidation or enforcement. The cases are known when the consent was dictated, in such a way the person may turn to the court and the contract may be canceled. The example of the imposed consent is considered in the court case Barton v Armstrong (1979) on appeal to the Privy Council from Australia.8 The main idea of the case is that the director of some company refused to sign the contract, and he was intimidated by the phrases like ‘the city is not so safe as you may think between office and home’.9 Such contract was recognized as signed under duress and considered to be invalid. The discussed case exposes the main idea of the consent theory, which is that the contracts signed according to the consent theory of contract law may be canceled in the case when the illegal actions were provided over one of the parties of the contract participants.

The discussed theories have both similarities and differences. The similarities are easier to discuss as they are not so numerous. The same features of these theories occur because all of them deal with law, with contract law. The theories of contract law in Australia are based on general proposition, and ‘works on the basis that it reflects a static state of affairs by which the parties (or the courts when disputes are properly activated) can pinpoint accurately the time when a contract is formed’.10 All these theories are supported by social rules and the government laws what make the contracts, signed according to any theory have a legal base, as the participants of the contract may turn to legal structures in order to punish this or that part for failure to comply with points which were discussed in the contract. In general, the contracts became so important in modern Australian society, because the good faith is not so well developed and entrenched to be named a distinct doctrine.11 People should trust each other better and show their readiness to help and follow all declared in the contract obligations. Such absence of the trust is also confirmed by Andrew Robertson, who says that ‘the non-drafting party does not trust the drafting party or the drafting party’s representative’.12

The differences between the theories of contract law also exist as these theories have absolutely different nature. The main different feature is the level of trust which is absolutely different. Focusing on classical theory, the decisions are provided when they appear without previous negotiations. The absence of problem or obligation is not put in the contract, when the problem appears or a new obligation should be provided, the new point is inserted. The parties trust each other.

Considering the promise theory, the trust and responsibility are on the highest level as one side of the contract promises to cope with his obligations and the promisee must believe, at the same time, there is a huge responsibility on the promisor as the reputation is crucial for serious company. The case with consent contract law theory also has some peculiarities. One side of the contract signs it and is asked to be responsible for some obligations. Only in case of his/her voluntary agreement the contract is legal, in other cases it may be contested in court. The situation with court is different in the classical theory as the court does not take part in the interrogation and conflict decisions in this case.

In conclusions, the classical theory, the promise theory and the consent one of the contract law have both differenced and similarities. These theories are used in comprising contracts and to support the relations of different business partners as law side in the business became very important. Different theories are used by different people and in different situations, as the differences which they possess have both their advantages and disadvantages, what help business partners to take up the theory which fits both sides in this very situation.

Bibliography

Barak, Aharon. Purposive interpretation in law. Princeton University Press, 2005.

Barnett, Randy, ‘A Consent Theory of Contract’. Columbia Law Review, 1986.

Charman, Mary. Contract law. Willan Publishing, 2005.

Craswell, Richard. ‘Against Fuller and Perdue’. University of Chicago Law Review, 2000.

Duncan, William David. Joint ventures law in Australia. Federation Press, 2005.

Harper, Matthew. The Implied Duty of “Good Faith” in Australian Contract Law. Victoria University of Technology School of Law, September 2004, 11. 3

Longo, Michael. ‘Hostile Receptions: Dilemmas of Democracy, Legitimacy and Supranational Law’. The Australian Journal of Politics and History, 2004, 50.2.

Mason Anthony and Geoffrey Lindell. The Mason Papers: Selected Articles and Speeches by Sir Anthony Mason. Federation Press, 2007.

Mather, Henry. Contract Law and Morality. Westport, CT: Greenwood Press, 1999.

Robertson, Andrew. The limits of voluntariness in contract. Online.

Footnotes

  1. Richard Craswell, ‘Against Fuller and Perdue’ (2000) 67 University of Chicago Law Review.
  2. Michael Longo, ‘Hostile Receptions: Dilemmas of Democracy, Legitimacy and Supranational Law’ (2004) 50(2) The Australian Journal of Politics and History.
  3. Aharon Barak, Purposive interpretation in law (2005) Princeton University Press.
  4. Anthony Mason & Geoffrey Lindell, The Mason Papers: Selected Articles and Speeches by Sir Anthony Mason (2007) Federation Press.
  5. Henry Mather, Contract Law and Morality (1999) 108 Westport, CT: Greenwood Press.
  6. Mather, Henry. Contract Law and Morality. (1999) 108 Westport, CT: Greenwood P.
  7. Randy Barnett, ‘A Consent Theory of Contract’ (1986) 86 Columbia Law Review 269, 299.
  8. Mary Charman, Contract law 2005 (150) Willan Publishing.
  9. Ibid.
  10. William David Duncan, Joint ventures law in Australia (2005) Federation Press.
  11. Matthew Harper, ‘The Implied Duty of “Good Faith” in Australian Contract Law’ (2004) 11 (3) Victoria University of Technology School of Law.
  12. Andrew Robertson, ‘The limits of voluntariness in contract’. Web.