Woolworths v Kelly

Contract Law of Australia

Australia's contract law is common law and is governed by the courts rather than being codified. The primary characteristic of contract law is the freedom of contract, which gives the parties the ability to enter into any agreement they wish. Under Australian contract law, a valid contract must have five components: an agreement between the parties, but not a unilateral one; consideration, which is a requirement of a bargain or the supply of property, money, or services, but does not entail performing any specific act in exchange for anything; and so on. The third essential is the capacity to enter into legal relations and the fourth is the intention of the parties to enter into legal relations. If any of the elements is not present then it is meant that the agreement is not enforceable as the contract under the law. The law of contract to have binding force upon the parties must fulfill all the given essential conditions to the contract. Noncompliance with any of the essentials will make the contract invalid and it will not be enforced by the law.

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Consideration can be anything that is stipulated and is legal by a promiser. The consideration must have some value in the eyes of Law and it must be in existence.

Adequacy of Consideration means that to have the contract lawfully valid it is important that there exists some consideration at a fair value that can either be equivalent to or proportional to the offer made by the offeror.

Facts

Sir Theo Kelly was a clerk at Woolworths Limited in 1928 and in 1940 he grabbed the position of leadership in a very short time. At the time of his retirement, the control of the company was passed to other directors who changed the policies of the company. A dispute arose which relates to the pension entitlement. Kelly was entitled to the amount of pension and also quarterly payments or annuity. He ordered the company and made declarations to claim the money from the company. This resulted in filing an appeal by the company to the court to claim the amount due from the company.

Legal Issues

• Kelly is entitled to claim pension and annuity?
• Whether the adequacy of the consideration be determined?

Decision

It was held by the court that the amount of consideration varies in different situations and it can easily be calculated. The amount may seem inadequate to the court but it may be different for the person claiming it. The claimant may have value for consideration or may also have sentimental reasons. The court can't indulge in such evaluation and promises that were made between the parties. The court further said that if these evaluations had to be made, they must be made by the lawyers trained for the same. This will further increase the disputes between the parties in case of non-agreement.

The court also explained that there is generally no need for an inquiry into the adequacy of the consideration. The doctrine of considerations needs that there must be something given in return for the promise so that the contract can be made binding and enforceable by the law.

Criticism of the Judgement

It is generally seen that different people place different values on things and the judiciary is not trained in the subject of economics and other things which helps them to decide on such issues. Different judges may offer different judgments on the same issues which may result in uncertainty.

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