Seminar 3

Essentials of a Contract of Employment

Basic Elements of Any Contract• For there to be any valid contract, there needs to be 4

elements:

• If any 1 element is missing – there is no valid contract.• In addition to these 4 elements, generally must the

contract be in writing to be valid?

Contract

Offer

Acceptance

Consideration/Seal or Deed

Intention to create

legal relations

Offer• Offer: Offering to do something with a

clear intention of being bound should the other party accept.

• Note: Offer different from INVITATION TO TREAT under which there is no clear intention of being bound.

• An example of an invitation to treat:- Advertisements generally.

Offer - Termination• Offer may be terminated by

various means such as :- Revocation- Lapse of time- Offer subject to a condition and

condition not fulfilled.

Acceptance•Acceptance – must be on the same terms as the offer.

Is there an offer and acceptance in the following situations?:

• (1) Eating at a Restaurant• (2) Buying something from a furniture shop• (3) Studying in the University• (4) Coming to campus by a public bus• (5) Going to a public toilet• (6) Parking your car in a public carpark• (7) Promising to donate $50 to a club• (8) A parent promising his child a trip to Disneyland if

he does well in his exams

Consideration• Consideration – means each side must

have given or agreed to give something in return for the other’s promise. • Note: Consideration need not be

adequate. • Also note: need not have

consideration if document is a “deed”.

Intention to Create Legal Relations

• Generally, intention to create legal relations:- presumed in commercial

transactions; - not presumed in domestic

transactions.

Is there consideration and intention to create legal relations in these situations?

• (1) Eating at a Restaurant• (2) Buying something from a furniture shop• (3) Studying in the University• (4) Coming to campus by a public bus• (5) Going to a public toilet• (6) Parking your car in a public carpark• (7) Promising to donate $50 to a club• (8) A parent promising his child a trip to

Disneyland if he does well in his exams

Employment Contract

• Typically, who makes the offer? •Note: offers can be subject

to conditions.• How can the offer lapse?

Employment Contract

• Typically, who gives the acceptance?

• What is the consideration? Note: as stated, consideration need not be adequate.

• Is there an intention to create legal relations?

• Does the contract have to be in writing?

Minors – Civil Matters• In addition, for a contact to be valid, the parties must have the

capacity to enter into the contract. One such situation relates to Minors.

• In this context, minors are persons less than _____ years of age.

• Case law has held that certain contracts may not be enforceable against the minor. What is the reason for this?

• In relation to employment contracts – whether they can be enforced against the minor – depends on whether on the whole the contract is beneficial to the minor.

• If it is, then it will be enforceable.• If it is not, then it would not be enforceable. • But note: the minor can always enforce the contract against

the other party whether or not the contract is beneficial.

De Francesco v Barnum• Minor entered into a 7-year agreement with a

master, to be a dancer.• Contract prohibited minor from engaging in other

outside engagements without consent of the master.• Contract also provided that during the contract,

could not marry.• Contract did not provide for payment – unless there

was a performance – but master not obliged to use her for any performances.

• Was she bound by the contract?

Minors - Criminal Matters• In addition, there are statutory obligations under the Employment

(Children and Young Persons) Regulations - breach of which results in a criminal offence:

(i) Less than 13 – cannot be employed at all.

(ii) 13, 14 – can be employed in a non-industrial undertaking or in a industrial undertaking of his family (subject to various conditions such as - can’t work as a workman for more than 6 hours a day or in the night).

(iii) 15 – can be employed in a non-industrial undertaking or in a industrial undertaking (subject to various conditions such as - can’t work as a workman for more than 7 hours in a day or in the night).

(iv) 16 and above – no statutory restrictions.

a) Must sheobserve the contract?: Eg: contractstates toresignmust give1 weeks’notice or1 weeks’salary in Place of notice

(b) Can shesue for unpaidsalary?

(c) Is the company committing an offence?

Variation of Contract

• Once a contract is entered into, subsequently one party may want to make changes. Will such changes automatically be upheld?

• If the original contract expressly and clearly states that such changes can be made, then the changes may be upheld.

Variation of Contract

• However, if the original contract does not expressly/clearly state that such changes can be made, then effectively, it is likely making a new contract – in particular, the parties must agree (offer and acceptance) and there must be consideration.

• In relation to consideration, if any 1 of the following 3 elements, are present, the courts have held that, that would suffice:

Assuming the contract does not allow variation, for it to be effective, there

must be:

Consideration

Williams v RoffeySeal or Deed

Fresh Consideratio

n

AcceptanceOffer

OR

OR

Fresh Consideration• This refers to a situation where

both parties agree and both parties get a fresh/new/direct benefit because of the change. In such a situation, the change can be enforced.

Deed

• This refers to a situation where the change is agreed to by both the parties by deed under seal. • In such a situation, the change

can be enforced.

Williams v Roffey This refers to a situation where one party, X,

initiates a change without there being fraud or dishonesty on his part and the other party, Y agrees.

But later, Y objects to the changes. If Y has gotten, for practical purposes, some

benefit or avoids some detriment, the change can be enforced.

(Note: this focuses on the indirect/less visible matters as opposed to fresh consideration).

Example based on Williams v Roffey

• I agree to manufacture pens for you at $10 each.• After that, cost of raw materials go up and I am in financial

difficulties.• I inform you that I cannot fulfill the order unless you pay me $12

per pen.• You agree.• After I deliver the pens to you (same quantity/date as per

contract), you refuse to pay the extra.• Can I sue you for the extra?• However, what if you agreed to pay more because, you had already

entered into a contract to sell the pens to Z for $20 each and if you did not deliver, Z will sue you?

Summary• For there to be a valid contract of employment, there must

be an offer, acceptance, consideration and intention to create legal relations.

• Generally for the contract of employment to be valid – it does not have to be in writing.

• Employment contracts entered by minors can be enforced against them if there are “beneficial”. Usually, it will be beneficial. However, even if it is not beneficial, minors can always enforce contracts against employers.

• It is an offence to employ a minor in breach of the Employment (Children and Young Persons) Regulations.

• Generally variations to the contract would not be binding. However, there are some exceptions to this rule (such as where there is fresh consideration, the changes are by deed or the Williams v Roffey exception is satisfied).

Readings

• Basic Text: Chapter 2.1-2.4, 2.8, 2.10-2.20, 3.77-3.83, 3.85-3.86.

• International Labour Standards (www.ilo.org) referred to in Tutorial 2.