Question

Gerard and Sylvia love cakes and have recently decided to buy a cake shop from George. Gerard and Sylvia register a company “Cakes Pty Ltd” with the Australian Securities and Investments Commission. Gerard is listed as a Director and his mum, Sarita, is listed as the company secretary. On the day of signing the contract to buy the cake shop from George, Gerard stamps the contract with the Cakes Pty Ltd company seal and signs as a witness. The other witness is Sylvia. A few days pass and George thinks he should have not sold his cake shop. He now wants it back. Is George bound by the contract? Provide reasons for your answer. You must cite relevant Australian case law and the Corporations Act 2001 (Cth). Do not discuss contract law.

Answer 1

Answer-

Issue-

Here, George is the owner of cake shop and Gerard & Sylvia wanted to buy it. So, they registered a company Cakes Pty Ltd and George signed a contract with the company to sell it. However now he wants it back. We should now address the issue to decide if George is breaching the contract or not. (Crown v Clarke (1927) 40 CLR 227)       

LAW-

A contract is an agreement to do or not to do something. It should be enforceable and legally binding for it to be valid. Also improper persuasion, false statement, threats, and coercion should not have been used to force George to sign the contract (Balfour v Balfour [1919] 2 KB 571).

It also important to that a person who signs a contract is presumed to understand it is bound to its terms.

Analysis-

George having signed the contract during the selling of the cake shop is bound by the contract. By signing meant that he was acutely aware of the term the agreement. Also, there is no evidence telling us that there was improper persuasion, false statement, threats or coercion by either Gerard or Sylvia to force George to sign the contract. Also in our case there no evidence which might show us that there was a mistake in the basic assumption on which the contract is based for the contract to be cancelled. Therefore George is presumed to have understood the contract, and he is bound by the contract.

As seen in the case of ABN Amro Bank NV v Bathurst Regional Council (2014) FCAFC 65. ABN Amro promised to a financial product with certain features for Local Government Financial Services Pty Ltd. Thus this term should have been implied by s 12ED of the Australian Securities and Investments Commission Act 2001 (Cth) (ASIC Act) which required ABN Amro to come up with a note having a degree of security commensurate with an AAA rating (Beaton v McDivitt (1987) 13 NSWLR 162).

Conclusion

In conclusion based on the fact that George agreed to sell the cake shop on free will and went on to sign the contract, he is therefore bound by the contract.