Contract Law Assignment

Introduction

Magic Pty Ltd (“M”) and Roger (“R”) are assumed to have a valid contract. However, the nature of the contract changes as a result of the course of events outlined in the question. In order to advise R whether he has an obligation to repay M for the period in which he underpaid them or resume payment at the original price of $3000 in the future, there is a need to examine whether a new contract exists as a result of the manager’s statement. First and foremost, there is the question as to whether the manager’s statement was legally binding. The existence of an offer, acceptance and consideration should be consequently determined. This is followed by an investigation of the scope of the manager’s letter to R. Finally, regardless of consideration, Roger’s eligibility of applying for promissory estoppel needs to be analysed.

The Manager’s Statement - Intention

For M to be entitled to the recovery of payments from R, it must be ascertained that the manager’s statement did not convey an intention to be legally bound. M could assert that the manager’s statement was merely a “letter of comfort.” Thus it does not give rise to contractual obligations and therefore remuneration of the reduction in lease payments during the eight month period is required. Notably, it can also be argued that the manager’s statement was binding only “in honour or in principle”, thus it does not represent a legal relationship between the two parties.

However, there is a legal presumption where parties of a commercial or business nature create agreements with the intention of being bound unless proven to the contrary by evidence. Additionally, the promise made by M to reduce payment to $2000 is expressed to represent “full payment,” clearly signifying an intention to be legally bound whilst also provisionally replacing the original contract with a new one.

The Manager’s Statement – Offer and Acceptance

Consequently, M’s statement is most likely...