Legal Issues and Relevant Laws in Contract Formation

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Table of Contents
Solution 1.........................................................................................................................................2
Step 1 – Legal Issue.....................................................................................................................2
Step 2 – Relevant Laws................................................................................................................2
Step 3 – Application of Laws.......................................................................................................4
Step 4 – Conclusion.....................................................................................................................4
Solution 2.........................................................................................................................................4
Step 1 – Legal Issue.....................................................................................................................4
Step 2 – Relevant Laws................................................................................................................4
Step 3 – Application of Laws.......................................................................................................6
Step 4 – Conclusion.....................................................................................................................7
Analysis...........................................................................................................................................7
Reference List..................................................................................................................................9

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Solution 1
Step 1 – Legal Issue
The major issue that is raised are:
i. Whether there is existence of lawful aim amid Jasmine and Curtis to originate a legal
enforceable bond?
ii. Whether the promises exchanged amid Jasmine and Curtis is supported with valid
deliberation to prepare a legal enforceable bond?
Step 2 – Relevant Laws
One of the most prominent civil law that prevails in Australia is contract law. Contract law
establishes a contractual relationship amid the parties by laying down the rules that are required
to be followed.
When any two parties decide to bound themselves contractually then all the relevant contract
elements must be comply with. In Harvey v Facey [1893] a contract was considered to be an
agreement which has legal sanctity. In Carlill v Carbolic Smoke Ball Co [1893] the main
elements that are required for the proper formation of the contract comprises of an offer, an
acceptance, legal intention and deliberation. (Graw, et.al 2015)
However, an agreement has no forcibility of law unless the same is supported with legal aim
amid the parties and the promises that are exchanged amid them are supported with valid
consideration. (Graw, et.al 2015)
Legal Intention
Legal intention was rightly evaluated in Woodward v Johnston [1992] in which it was held that it
is necessary that when both the offeror and the offeree exchange promises then the same must be
made with the legal intention to be bound by the same. In the said case both the husband and
wife exchange promises in a family arrangement and thus the legal intention was found to be not
present. It implies that the party’s intent that if any of the party does not comply with their
respective promises, then, the aggrieved party is permitted to seek the path of the court in order
to seek justice and is analyzed in Todd v Nicol [1957]. (Graw, et.al 2015)

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Generally, when two persons enter into contract, then, the offeror and the offeree are at times
connected to each other. The parties might be sharing friendly relationship or domestic
relationship or social relationship. The general presumption that is laid down by courts is that
when the parties are sharing non-commercial relationship, then, there is no lawful purpose that
exists among the party. In the leading case of Woodward v Johnston [1992], the parties are
sharing domestic relationship and thus there cannot be presence of any kind of legal relationship.
(Graw, et.al 2015)
At the same time, the law is also settled that as the parties are sharing profitable association with
each other and are into business dealings, then, the court have evaluated in Esso Petroleum Ltd v
Commissioners of Customs and Excise [1976] that the party are assume be having legal intention
between themselves. Thus, when the parties were dealing commercial transactions the court
ruled in favor of the presence of the legal intention.
But, the general rules that are stated above are not strict and rigid, rather, the court held that the
presumptions can be easily rebutted if the parties are able to prove their case by laying down
evidence. In Todd v Nicol [1957] the parties are found to be in non commercial relationship but
still the court held that there is presence of legal relationship as the circumsttbces depict so. The
court held that Tidd moved to Scotland on the promise made by Nicol and thus there is presence
of legal intnetion. (Graw, et.al 2015)
Likewise, in Ermogenous v Greek Orthodox Community of SA Inc [2002] the parties are not in
family relationship, but, the court rules that there is no binding relationship among the parties as
there is no legal intention that can be depicted from the situation. (Graw, et.al 2015)
Consideration
Consideration is the element which is very essential in any contract formation in order to enforce
the contract in law. When the promisor and the promisee exchange promises then such promises
must be supported with some kind of benefit or gain to make it enforceable in law and is called
consideration. As per Stylk v Myrick (1809) a consideration must be for present and future
promises and not for any past promises. As per Thomas v Thomas (1842) QB 851 a consideration
must be sufficient in order to hold the promises enforceable in law. A contract is considered to
be enforceable in law even when the promises is supported with the gain of sufficient benefit.