Week 2 - Contract Law

Question 1

Define contract

Answer 1

An agreement between 2 or more parties with legal rights and obligations, enforced by the courts

Question 2

Essential elements of contract (in order)

Answer 2

Offer and acceptance 
Intention 
Consideration
Capacity 
Consent
Legality 

OICCCL

Question 3

Explain an offer

Answer 3

Proposal from one party to another

To specific person
Group of people
World at large

Question 4

Explain the acceptance and offering phase of a contract

Answer 4

Proposal (offer)
Communicated
To enter into an agreement (accept)
If the other person accepts a contract is made

Proposal should be CLEAR

Question 5

Explain rules as to offer

Answer 5

May be made to one or more people
All major terms must be included (time frame)
MY specify conditions to be followed 
Must be communicated to offeree 
May be revoked or lapse

Cannot be withdrawn after acceptance

• specific person
• group of people
• world at large

If a valid contract is alleged it must be shown that the person has made the offer and another person has accepted that offer expressly or impliedly on the terms in which it was made.

Question 6

What is “consensus ad idem”

Answer 6

Meeting of the minds - common understanding of mutual agreement

Question 7

What is an invitation to treat

Answer 7

Expression of willingness to negotiate, inviting someone to make an offer
E.g. Buying st supermarket

Question 8

Why could an offer end/elapse

Answer 8

Offer ends due to
Death
Time
Counter offer (original offer comes to an end)

Question 9

Exceptions to communication of acceptance phase:

Answer 9

PAge 34

Postal acceptance

Question 10

Explain intention

Answer 10

For a contract to exist the parties must intend for their agreement to be legally binding
Therefore could sue of breached

Question 11

Types of agreements

Answer 11

1. ) social, family domestic (presumption in law that there is no legal intention)
2. ) commercial, consumer and business (presumption in law that there is legal intention)
   * However can be rebutted by evidence

Question 12

Define consideration

Answer 12

The price paid for the promise- something of value given or a detriment suffered in exchange for the promise

Question 13

Explain rules of consideration

Answer 13

Consideration needs to be adequate
Consideration may. E executed or executory but cannot be past consideration
Preforming an existing obligator (at law or under contract) is not good consideration (e.g life saver saving swimmer before contract)
Consideration must move from the promise
Consideration must not be uncertain or illusory (love and erection)

Question 14

Define capacity

Answer 14

Ability to enter into a contract certain classes of persons are regarded by law as incapable of entering contracts

Minors
Mentallly incapacitated
Mentally ill

Question 15

difference between offer + invitation to treat

Answer 15

invitation to treat = indication of willingness to deal or trade - initial approach to others inviting them to make an offer
e.g. “ i want to sell my car but i will not let it go for less than $5,000”

offer = indication by one party of a willingness to enter into a contract and can be verbal, written or even by conduct
“I will sell you my car for $5,000”

Question 16

Explain postal acceptance rule

Answer 16

The postal rule states that a contractual acceptance is complete when the acceptance is posted, NOT when it reaches the offeror:
see Adams v Lindsell (1818) 106 ER 250 for the early origins of the rule – [2.280].

However it can be excluded if a requirement is made that notice of acceptance is necessary (see Bresson v Squires (1974) 2 NSWLR 460 – [2.290]) or if the offer is made by instantaneous communication.

Question 17

Explain promissory equitable

Answer 17

where one party to a contract promises, or by words or conduct, leads the other party to believe, that the promisor will not enforce their legal rights under the contract and the other party relies on this and acts accordingly. This situation usually arises where the circumstances have changed
(financial difficulties: see Je Maintiendrai Pty ltd v Quaglia (1980) 26 SASR 101) or where it is unjust to allow the first party to resile (go back on) their promise of relief.

Question 18

explain capacity

Answer 18

Certain classes of person may be restricted or prevented from entering contracts because of their status.
Minors (any person under the age of 18 years) may contract at common law for the supply of “necessaries” or a beneficial contract of service, such as an apprenticeship.

The concept of what constitutes a “necessary” varies depending upon circumstances but generally may be regarded as goods suitable for the life of a minor and her or his actual requirements at the time of sale and delivery. No hard and fast rules can be laid down as cases like Scarborough v Sturzaker (1905) 1 Tas LR 117 and Bojczuk v Gregorcewicz [1961] SASR 128 demonstrate that a minor is only required to pay a “reasonable” price for necessaries.

Minors may contract for services for their “benefit” and these generally are thought to be ones for livelihood, apprenticeship and education. Obviously each contract would be treated subjectively as a whole.
Certain contracts voidable by a minor are either:
a) Binding unless repudiated by the minor during their minority or within a reasonable time after attaining their majority (continuing obligation contracts such as leases); or

b) Not binding unless ratified within a reasonable time after attaining the age of majority (non-continuous such as the purchase of goods which are not necessaries).
In each State and territory of Australia, common law rights of minors are regulated by statute. In NSW it is the Minors (Property and Contracts) Act 1970.
Mentally incapacitated and intoxicated persons  Read [3.540]

Such persons may be made liable for contracts for necessaries, but apart from that contracts entered by them are voidable, provided:
a) they were incapable of understanding the nature of the contract; and
b) the other party was so aware.
The burden of proof of incapacity in either of these situations rests with the person suffering the disability.

Question 19

Khalid telephoned James on the 12th August and offered to sell him his Holden Commodore for $20,000. James told Khalid that he would buy it for $18,000. Khalid told James no, don’t worry about it. James told him okay, I accept your offer to buy it for $20,000. Khalid said no. Can James accept the offer to buy it for $20,000?

Is there a valid offer?

Answer 19

Yes

The 18k is a counter-offer (Hyde v Wrench). It will have the effect of destroying the original offer. Khalid does not accept the counter-offer (no contract). James cannot revive the old offer because it has been destroyed by the counter-offer.

Question 20

JT HIFI advertise a 60inch Sona TV for $800 in its catalogue. David goes to JT HIFI and tells the salesperson that he accepts their offer to buy the TV for $800. The salesperson tells him there has been a mistake in the catalogue and the TV is actually $1400. Does JT HIFI have to sell the TV to David for $800?

Answer 20

In order for there to be a valid contract it must be legally formed. It must therefore include:

Offer and acceptance

Consideration

Intention

Capacity

Formalities (if any)

It must further not be illegal.

This is related to offer and acceptance. The advertisement is an invitation to treat (PS of GB v Boots). David cannot accept an ITT, as the only response you can make to an ITT is an offer. As it is an ITT, there is no need for JT HIFI to honour the price of $800.

Question 21

Meredith sends a letter to Mandy on the 12th November offering to sell her prized horse for $14,000. Mandy receives the letter on the 14th On the 15th November Mandy sends a letter to Meredith agreeing to buy the horse for $14,000. In the meantime Meredith has changed her mind and has decided not to sell the horse. Meredith sends a letter to Mandy on the 15th November revoking her offer to sell. Mandy receives this letter on the 17th November. Mandy says they have an agreement. Does Meredith have to sell the horse to Mandy?

Answer 21

In order for there to be a valid contract it must be legally formed. It must therefore include:

Offer and acceptance

Consideration etc.

This is related to offer and acceptance. The initial letter from Meredith is a valid offer (it also may envisage that acceptance by mail is a valid form of acceptance). According to the postal acceptance rule Mandy’s acceptance is valid at the time of posting (Adams v Lindsell), ie the 14th. Meredith’s revocation (Byrne v Van Tienhoven) is too late as the acceptance is deemed to be effective. There is a contract and Meredith is bound. If Meredith states that acceptance cannot be made by post in her offer then there is no contract.

Question 22

Robert and Mary have been married for 25 years and decide their marriage is over. Upon separation, Robert agrees to pay Mary $500 a month for the rest of her life as she earns less money than him. After 6 months Robert meets a new lady and decides to stop paying Mary the $500 a month. Mary wants to enforce the agreement and says they intended for it to be legally binding. Can Mary enforce the agreement?

Answer 22

In order for there to be a valid contract it must be legally formed. It must therefore include:

Offer and acceptance

Consideration

Intention

Capacity

Formalities (if any)

It must further not be illegal

This appears to be mostly related to intention to create legal relations. The default rule is that married couples do not intent to make legal relations when they make agreements, however this presumption may be rebutted. This case appears to be similar to the case of Balfour v Balfour, however in that case the couple was still together. This case is closer to Merritt v Merritt because they have been separated and the agreement between them was not under the conditions of marriage. In this case the court may deem this to be outside of the presumption and Rober will be forced to pay Mary as promised.

Further there may not be consideration provided in this agreement, because nothing is provided in return for the promise to pay.

Question 23

It is the week before ANZACday and Ann’s house is robbed.The thieves steal many items, including her Great-Grandfather’s World War I medals.Ann is distraught and puts an advertisement in the local newspaper and offers a reward of $1,000 for whoever finds and returns the precious medals.Donny is a cleaner at the local shopping centre.As he was emptying the bins, the medals fell out of the rubbish.Not knowing whom they belong to,he took them to his local RSL Club, who in turn contacted Ann.Ann was overjoyed at the return of the medals.Donny then reads the paper and sees Ann’s advertisement.Donny now wants to claim the reward of $1,000.00 she promised. Donny argues he performed the required act to accept the offer.Does Ann have to pay him the $1,000.00?

Answer 23

The issue in this question is by finding and returning the medals to Ann, did Donny validly accept Ann’s offer to pay $1,000 reward?

The law relating to this issue is an offeree who responds to an offer, and performs the required act, is held to have validly accepted the offer.

This was discussed in Carlill v Carbolic Smoke Ballcase.However, common law principles state that there can be no acceptance if the offer is unaware of the offer.

When applying the facts to the law, it is clear that Donny’s not aware of her advertisement, and did not act in expectation of receiving the $1,000.00.He only found out about the reward AFTER he completed the act.

Therefore, Donny did not act in the knowledge of the offer; he only learnt about it afterward, therefore, Ann is not required to pay him the $1,000.00