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LAW514 Types of Unenforceable Contract For Law of Consent Assessment 1 Answer


VALUE: 30% OR 30 MARKS WORD COUNT: 2,000.  

There are two (2) questions worth 15 marks each. Contract law is essentially all about legally binding promises and consent of the parties involved. What if there is no consent between the parties and the contract is unenforceable? What can be done by an accountant and what cannot be done by an accountant in this situation?
• Consider the types of unenforceable contracts for the lack of consent.
(15 marks)
• Discuss the type of advice accountants can and cannot provide to their clients in terms of borders between legal and accounting advice in contract law.
Important: Answers must refer to cases, legislation, accounting standards, articles or law reports.


Answer to Question 1.

As per the common law in Australia, a contract defines the legal enforcement of promises which are legally formed between the parties in order to achieve certain mutual conditions. The contract comprises some essential elements which makes it legally binding for the contractual parties. Such elements include agreement between parties, legal capacity, intention, consideration and consent. To form a legally binding contract, it is necessary to have all these elements into a contract. Among all these elements, consent is considered as an important element in a contract. Consent shows the understanding which the parties have about conditions of contract. consent is a type of deliberation and shows that parties have the physical ability to act. In line to give the consent, a party should not be influenced by any of the outside forces. For instance, if the consent is given by the parties under duress, the contract shall not be regarded as legal. The consent given under duress, undue influence, mistake or in the lack of capacity shall not be regarded as legal consent and it makes the contract unenforceable by the law. Hence, the type of unenforceable contracts in the lack of consent can be as follows: 

Duress: A legal or valid contract represents that every party of contact has made their agreement with their own free will and no one has been forced to give his consent. If there is duress, the contract cannot be filed before the Court for any kind of claim under the law of contract as the Court would not consider it the lawsuit. Duress involves the conditions like threat of force, violence to coerce a person to enter into a contract or illegitimate pressure. The duress can be made in subject to person, goods or economically. For instance, threatening a person to harm is duress to the person whereas threatening to damage or detain the property or goods of a person is amount to duress to goods. In addition to that, if a party threatens to another party for cancelling the contract unless he agrees to their demands and another party gives his consent to avoid the economic losses then it shall be considered as economic duress. Hence, the consent given under duress can made a contract unenforceable by law and Court shall not consider such contract as a lawsuit. 

Undue Influence: This condition usually occurs when the parties to contract are unequal and, in a relationship, where one party has the power to influence another. For instance, a boss can have undue influence over his employee and force him to sign a contract that benefits the boss. Further a person may have undue influence on someone by preventing him to act understanding, intelligently and voluntarily. A contract in which the consent of either party has been taken under the undue influence is unenforceable by the law. However, to prove the condition of undue influence it is necessary that the parties has a relationship in which one party has dominant position over the other. In the case of “Johnson v Buttress, High Court of Australia (1936) 56 CLR 113” Buttress was the deceased who transferred land to Johnson with whom he had an antecedent relationship. After the death of Buttress, this transfer of land was challenged by Buttress’s son by stating that such transfer was made under the undue influence. The Court held in this case that donor was illiterate and weak-minded and such transfer has no witnesses hence such contract has been considered to formed under the undue influence and the transfer of land set aside. 

Misrepresentation/Fraud: It includes an intentional act which is performed by a party to deprive the rights of another party or to harm them. In the act of misrepresentation, untrue or false statement of facts is made by the party to take the consent of another party for entering into a contract. Similarly, in case of fraud, a party intentionally escapes the material facts about the contract or portrays unfair conditions in contract to take the consent of another party. In both the conditions, the consent shall not be regarded as legal which makes the entire contract leally unenforceable.

Mistake: This situation occurs when the party enters into a contract mistakenly. Generally, it happens when both the parties to contract made a common mistake. For instance, parties made a contract with subject matter which is don’t even exist then such contract shall be legally unenforceable. On the other hand, if one party has given his consent by mistake and other party is aware of such fact but taking the advantage of his mistake then also the contract shall not be enforceable by the law. 

Unwritten consent: In certain contract, it is necessary to give a written consent from the parties. These contracts include the prenuptial contract or contract for sale or transfer of land or property. In these contracts, it is mandatary to take written consent of parties to avoid future conflicts. In case of lack of written consent, such contracts cannot be enforceable in the Court or by law. 

Hence, the contract in which the consent is given by any of the above discussed means shall not be enforceable by the law i.e. such contract cannot be presented before the Court as a lawsuit. A contract which is legally unenforceable cannot be entertained by the Courts. In addition to the above discussed forms of consent, the consent given by an incompetent person who does not carry the legal capacity to accept the contract, shall not be enforceable under law. 

Answer to Question 2.

An accountant is a person who has the skills to work with numbers, formulas, figures and accounting records. He has the responsibility to provide sound financial advices to his clients and to maintain their accounting records properly. He may even advice the clients regarding debt consolidation, budgeting and insurance. He can also suggest the ways to his clients through which they can plan their taxability but they cannot provide a legal advice to them which is not concerned with their profession or qualifications. For instance, an accountant cannot advice his client regarding a conflict occurred under the contract law. However, he may suggest him for the facts which relates to the accounting aspects under the contract. Therefore, there is a boundary between the accounting and legal advices given by an accountant tor legal advisor and it must be maintained by both of these professions. As per the statuary framework determined for the accountants under the laws and provisions of Australia, an accountant can only perform the acts according to the rules, obligations, standards and regulations dictated by the professional association in which he is a member. Generally, an accountant may perform following works: 

  • Providing advice in relation to income tax laws, FBT laws and GST laws.
  • Providing advice in regards of directors’ obligations as per the Corporations Law.
  • Drafting of resolutions, interpreting contracts for sale and administering deceased estates.
  • Providing legal advice related to taxation laws and appearing on a tax prosecution at Court.

In addition to that an accountant may act as an expert witness in a litigation like a forensic accountant or may registered as a tax agent to provide tax-agent services. On the other hand, if it comes to the law of contract, an accountant cannot advice his clients regarding the legal aspects of a dispute occurred under the contract law. For such purpose, only legal professionals van advice the clients. There is a clear classification of professions and their actions has been determined by different articles, laws and professional authorities which builds a boundary between the actions of accountant and legal professionals. 

Section 12 (1) of Legal professional Act, 2008: This section imposes restriction on performing the legal practice if not entitled. For such purpose, the legal work includes a work in the connection of any administration law and work related to drawing or preparing a deed/instrument to deal in real/personal estate, or in any civil and criminal proceeding of law. 

Section 12 (1) of Legal professional Act, 2008: This section imposes the obligation that only an Australian legal practitioner may engage in the legal practice of this jurisdiction. On the other hand, subsection (3) states that section 12 (2) does not apply on following kinds:

  • Appearing and defending in person in the Court.
  • Drawing or preparing a transfer of land.
  • Public officer performing a legal work in order to perform his duties.

Similarly, in the contract law there are different roles and actions can be suggested for the legal practitioners and accountants as per their professional conducts. This standard of conduct prevents the professionals to interrupt into the professional practices of other professionals. For instance, an accountant is not permitted to entertain a lawsuit before the Court as a legal practitioner. As per the imposed restrictions and determined professional and statuary guidelines an accountant may perform following actions in the law of contract: 

  • He may provide general advice to his clients related to any contractual dispute but cannot defend him before the Court by engaging himself into the legal proceeding. 
  • The Court may appoint an accountant as a forensic accountant to investigate the accounts of parties and provide the investigation outcomes on which the Court may rely but he cannot nominate himself for doing the investigation of accounts.
  • In case of breach of contract by other party, the accountant may inform his client about the same or suggest him to file a claim against defaulting party but he cannot himself file a lawsuit on the behalf of his client.
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