Question

Chris runs a small company in Melbourne and had a contract with Web Warriors Pty Ltd that has offices in Perth and Sydney to supply computer services for Chris’s business at $200 a month. The contract was to expire at the end of December 2019. Before the expiry of the contract Chris said by mobile phone that he would pay $400 a month for the next six months so that Web Warriors Pty Ltd could upgrade the cloud services for storage of data and documents.

Web Warriors continued to perform the maintenance work on the computer system but failed to upgrade the cloud services within the six months. For that six months Web Warriors invoiced Chris at $400 a month which he paid.

When Chris asked why the cloud system had not been upgraded Web Warriors said they had not completed this work as there was no contract.

Advise Chris;

a)     Has Chris got a legally enforceable second contract ?

b)     Are there any cases that support your answer?

c)      What evidence is needed to show there is a second contract?

d)     If Web Warriors Pty Ltd sent a text in January 2020 acknowledging the new charges to upgrade the system, in which State would any contract be formed?

Answer 1

a) no , there is no second contract. Its just an amendment to the existing contract. Both the parties agreed upon the change before expiry of the existing contract . So there is no second contract was formed.

b)

The parties to a contract have the freedom to enter into a contract and alter its terms by mutual consent. When both the parties mutually agree to change the term of the contract which they have previously entered into, then the new agreement becomes binding on them. However, in case there is a clause in the contract stating that the terms of the contract can be altered by one party (unilaterally) such changes in the terms will be considered as valid. Hence, a party cannot by unilateral term impose conditions which were not a part of the original contract.

In the case of RS Amarnath Mehra v. Union of India, the court observed that calling of fresh rates at a lower price will not amount to a new contract. If a contract consists of a number of terms and conditions then it does not mean that each term or condition is a separate contract.

Similarly, in the case of Ramji Dayawala & Sons (P) Ltd v. Invest Import, the Apex Court held that a contract having a number of parts should have been assented by the contracting parties in the same manner and in the same sense, that is, it should have consensus ad idem.

C) specific terms must be there to express a contract.  

Both parties agreed to form a new contract.

Expiry of previous contracts.

Any other condition that both parties intentionally form new contract.

D) if web warriors sent acknowledgement in January for agreeing the new terms then it will be a fresh contract clearly. Because the old contract expired at the time of agreeing to new contract.