Business Law

Question1:

Contracts are an important aspect of every business transaction. A legally binding contract is distinguishable from other agreements because the contract is enforceable in a court of law. Contracts may be oral or written, partly oral and partly written, or may even arise out of conduct. A written contract will be valid when it has all the elements that made a contract in general valid.

Once of contract has been formed it is necessary to identify the precise terms of the contract. The terms of the contract impose obligations on each party, so if a term remains unfulfilled or a party has not performed a term, the innocent party can commence an action for breach.

"A person should always be bound by the terms of a valid written contract he or she has signed." To discuss this statement, we should know about Parol evidence rule.

The main view taken with written contracts is that if they are entirely in writing then the document itself contains all of the terms of the contract. This is the referred to as the PAROL EVIDENCE rule or “4 corners” rule. The rule operates to prevent the parties to a written contract from providing evidence rule. The rule operates to prevent the parties to a written contract from providing evidence that contradicts the terms of the contract: Mercantile Bank of Sydney v Taylor (1891) 12 LR (NSW) 252.

That means the statement above will not true if the exceptions to the parol evidence rule appear:

 Show a custom or trade usage, which is part of the contract

Case: Hutton v Warren (1836) 1 M&W 466;

 Clarify any unclear language used in the written contract;

 Show that the written document represents only part of the agreement

Case: State Rail Authority of NSW v Health Outdoor Pty Ltd (1986) 7 NSWLR 170;

 Show that, due to mistake of the parties, their agreement has been recorded incorrectly;

 Show that the written agreement between the parties was entered into subject to a verbal...