COMM1100 Chap.10 The Legal System and Contract Law
The Legal System and Contract Law
From Week 4 the course turns to the legal rights of stakeholders. The Week 1 lecture describes the law as both a constraint on business and an enabler of it, and the optional law readings on Moodle start with how the Australian legal system is organised: common law and statute, criminal and civil law, federal and state jurisdiction.
This chapter then works through contract law, the legal backbone of market exchange.
It covers the essentials of a valid contract, why advertisements are usually invitations to treat, the difference between conditions and warranties, exclusion clauses, the ways a contract ends, and the remedies for breach, including the duty to limit your losses.
Contract law also explains why markets can work at all.
The readings note that it gives individuals and businesses the predictability and confidence to trade, which links it to the lecture’s point that markets need property rights and the rule of law. When a contract is not freely negotiated, the consumer laws in the next chapter take over.
What this chapter covers
- 01
Law as a constraint and an enabler for business
- 02
Common law and statute law; precedent and priority
- 03
Criminal and civil law; burden and standard of proof
- 04
Federal and state jurisdiction
- 05
Essentials of a valid contract: offer, acceptance and the rest
- 06
Conditions, warranties and exclusion clauses
- 07
Ending a contract: performance, agreement, frustration, repudiation, breach
- 08
Damages and the duty to mitigate
Worked example · free
Is there a contract for the catering order?
- +1The caterer's listed price was an invitation to treat; the society's email was the offer at $15 a head.
- +1The caterer's reply changed the price, so it was a counter-offer, which rejects the original offer rather than accepting it.
- +1The society never accepted the counter-offer, so there was no concluded agreement and no contract for the caterer to breach.
Key terms
- Common law
- Law made by judges deciding cases, developed through the doctrine of precedent.
- Statute law
- Law made by parliament as Acts, together with the regulations made under them.
- Invitation to treat
- An indication of willingness to deal, such as an advertisement, that invites offers rather than being one.
- Consideration
- Something of value given in exchange for a promise, which makes the promise enforceable as a contract.
- Condition
- A contract term so important that its breach allows the other party to terminate as well as claim damages.
- Warranty
- A less important contract term whose breach allows a claim for damages but not termination.
- Exclusion clause
- A contract term that excludes or limits one party's liability, effective only if properly incorporated.
The Legal System and Contract Law FAQ
Is a price in an advertisement an offer?
Generally no. Advertisements, catalogues and shop displays are invitations to treat. The customer makes the offer, and the seller accepts it, so a seller can usually refuse to sell at a wrongly advertised price under contract law.
What is the difference between civil and criminal law?
Criminal law is enforced by the state, which must prove guilt beyond reasonable doubt, and can lead to penalties such as fines. Civil law involves private parties, uses the balance of probabilities, and leads to orders such as damages.
When can I terminate a contract for breach?
Only if the contract gives that right or the breach is serious, such as a breach of a condition or one that substantially deprives you of what you bargained for. Terminating without that right is itself a serious breach.
What is the duty to mitigate?
After a breach, the innocent party must take reasonable steps to limit its losses. Losses that could reasonably have been avoided are not compensated by damages.
Why are courts reluctant to rewrite a contract?
The common law starts from freedom of contract: the assumption that a contract is a bargain made freely between equal parties. Courts have therefore generally upheld contracts even where one side made a poor deal, leaving parliament to protect weaker parties through consumer legislation.
Assessment move
Learn the legal tests as lists you can apply in order: the essentials of a valid contract, the conditions for incorporating an exclusion clause, and the ways a contract ends. In every answer, state the rule first, apply it to the facts, then conclude. Practise on everyday situations such as a concert ticket, a phone plan or a car-park sign, and connect each one to the stakeholder question of who carries the risk.
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