Contract Law Case Study 2022

Running head: CONTRACT LAW
CONTRACT LAW
Name of the Student:
Name of the University:
Author Note:

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Part 1:
Issue involved:
The issues to be discussed here refer to the legal liabilities and rights of Kate, Gino,
Marcel, Lin, Singo and Hang as per the facts of the present case.
Rules:
In order to create a valid contract, a legally enforceable agreement must be made between
the parties to the contract (Watanabe et al., 2018). To make a valid agreement, a valid offer and
its acceptance must be made between the contracting parties as seen in the case of Wakeling v
Ripley (1951) 51 SR (NSW) 183.
The offerer must make a valid offer showing his intention to make a contract with the
offeree. The offeree when accepts the offer unconditionally, then it amounts to an acceptance.
Agreement forms one of the essential elements of a contract. An offer however must be
differentiated from an invitation to offer. An invitation to the offer is generally made not to any
particular person but to public at large to invite them in negotiations regarding the contract. Items
displayed for the purpose of sale can be regarded as the invitation to offer as seen in the case of
Pharmaceutical Society of GB v Boots Cash Chemists (Southern) Ltd [1956] EWCA 6, [1953]
1 QB 401, Court of Appeal (England and Wales). Similarly, advertisements in newspapers or
hoardings are not offers but invitation to offer. Thus the person who is making advertisement for
sale is not compelled to sell as seen in Partridge v Crittenden [1968] 1 WLR 1204 case.
In order to create contract, the acceptance of the offer must be done unconditionally. It
must be unequivocal as seen in the case of Spencer's Pictures Ltd v Cosens [1918] NSWStRp 1,

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(1918) 18 SR (NSW) 102, Supreme Court (NSW, Australia). In general, acceptance of an offer
occurs when communication of the acceptance is made to the offeror. However, the postal rule
forms an exception to the general rule. As per the postal rule, offer is said to be accepted when it
is posted by the offeree. This was entrenched in the case of Tallerman & Co Ltd v Nathan's
Merchandise (Vic) Pty Ltd [1957] HCA 10, (1957) 98 CLR 93, High Court. In case of
electronic communication, contract is created when the acceptance is received. Thus, until and
unless, the offer is accepted, no contract is formed.
Another essential element of the contract is the consideration. A contract without a
consideration cannot be enforced. In general past consideration is no consideration in the eye of
law as seen in the case of Roscorla v Thomas [1842] EWHC J74, (1842) 3 QB 234, High Court
(England and Wales). However, there are certain exceptions to this principle. To consider a past
service as a valid consideration, three criteria laid down in the case of Pao On v Lau Yiu Long
[1979] UKPC 17 must be satisfied. They are as follows; the act should have been done at the
request of the promisor, the parties to the contract should have understood that the act has to be
remunerated by payment or by conferring some benefit and such payment or conferring benefits
must be legally enforced.
Revocation refers to the withdrawing of the offer made by an offerer. This is established
in the case of Payne v Cave (1789) 3 TR 148 which states that offer can only be revoked at any
possible time prior to the acceptance taking place. Such revocation made by the offerer must be
communicated directly or indirectly to the offeree before he accepts the offer as seen in Byrne v
Van Tienhoven & Co [1880] 5 CPD 344.

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Application:
In the present case study, Kate proposes to give his old car to Gino. Gino replied : ‘Thank
you, that’s great. I am in some financial difficulty at present and getting your car as a gift will be
of enormous financial benefit to me’. Thus a valid offer was made by Kate which is again
accepted by Gino. Thus a valid agreement was created between both as per Australian Woollen
Mills Pty Ltd v The Commonwealth [1954] HCA 20; (1954) 92 CLR 424]. But, the
consideration for the transaction was the past services provided by Gino. When Kate started her
business, Hino helped her by giving her advice about computer programmes, informs her about
the names of the persons who are involved in the similar type of business and also make her meet
some of the potential clients. All these were regarded as the past services given by Gino. It is
known that past consideration is not a valid consideration as per the case of Re McArdle [1951]
Ch 669 unless all the three criteria are satisfied. In the present case, Gino has not given past
service at the request of Kate, both of them have not understood that the act has to be
remunerated by payment or by conferring some benefit. Thus, it does not amount to a valid
consideration. Hence, no contract was created between both Kate and Gino.
The advertisement made by Gino in the newspaper states that “Holden X22 car for sale
$20,000. Excellent condition. Write, phone or, email. Also, you may call at my home address.
The first person to contact me will get the car.” This amounts to an invitation of offer as it was
not made to any particular person or class of person but to the public in general. Moreover, he
published it to invite people to take part in negotiations with him regarding the sale of the car.
Thus it was an invitation to offer made by Gino as entrenched in the case of AGC (Advances)
Ltd v McWhirter (1977) 1 BLR 9454 (Supreme Court of NSW).

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A letter is being posted by Marcel stating that ‘I am interested in buying your car. Is it an
automatic or manual?’. It amounts to an offer in response to such invitation to offer. Gino had
not replied to it. Thus the offer was not accepted. As per the postal rule, the offer was complete s
it was received by the offeree Gino. But Gino did not accept the offer. She did not make any
acceptance to the offer made by Marcel. This is enumerated in the case of Tallerman & Co Pty
Ltd v Nathan's Merchandise (1957) 98 CLR 93, 111-112. Thus no agreement was created
between them.
Again, another letter was posted by Lin stating that ‘I agree to buy your car for your price
of $20,000. When can I pick it up?’. This again amounts to an offer made responding to the
invitation to offer made by Gino. Gino had not replied to it. Thus the offer was not accepted. As
per the postal rule, the offer was complete s it was received by the offeree Gino. But Gino did
not accept the offer. She did not make any acceptance to the offer made by Marcel. This is
enumerated in the case of Tallerman & Co Pty Ltd v Nathan's Merchandise. Thus no agreement
was created between them.
Again, another offerer Singo called Gino to inform that he wanted to purchase the car at
the price quoted by Gino. This again amounts to an offer made responding to the invitation to
offer made by Gino. Gino had not replied to it. Thus the offer was not accepted. As per the postal
rule, the offer was complete s it was received by the offeree Gino. But because of the bad
telephone connection, she could not hear reply made by Gino. The communication of proposal
over telephone is said to be complete when the offer is communicated to the offeree as seen in
the case of Powell v. Lee (1908)99 LT 284 (KB). Thus whether the offer is complete is doubtful
as Singo could hear nothing from Gino. Thus no agreement was created between them.

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Again an email was sent by Hang which states that ‘I really want your car. I called at
your address but no one was home. I left a cheque in your mailbox for $2000 as a deposit on the
full price of $20,000. I hope a cheque is acceptable to you’. This amounts to an offer made
responding to the invitation to offer made by Gino. Gino here read the email but had not replied
to Gino. Further he tore the cheque. Here the offeree got the offer and also read it. Thus
communication of the offer to the offeree is complete as per Powell v. Lee. But, no acceptance
was made by Gino. Thus, no agreement was created between them.
But on 2nd May, Kate told Gino ‘I am very sorry but I have decided to keep my Holden
car as I think I will need a second car for use in the business. I am very sorry for any trouble I
may have caused you.’ This does not amount to a valid revocation of the offer made by Kate.
This is because an offer can only be revoked at any possible time prior to the acceptance taking
place. Such revocation made by the offerer must be communicated directly or indirectly to the
offeree before he accepts the offer as seen in Byrne v Van Tienhoven & Co [1880] 5 CPD 344.
Here Gino can sue against the Kate for revocation of offer.
Conclusion:
Thus, it can be concluded that Kate and Gino cannot enforce the contract (Marsh 2017).
Further, Marcel, Lin, Singo and Hang have no rights against Gino as Gino had not accepted any
of the offer made by them. However, Gino can enforce revocation of offer against Kate.

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Question 2:
Issue:
The issues involved here are regarding the rights and liabilities of Lilly and Doall Pty Ltd
or the D Co as per the facts of the present case scenario.
Rule:
In order to create a valid contract, a legally enforceable agreement must be made between
the parties to the contract. The agreement contains the terms and conditions which bind the
parties to the contract. The rights and duties of each of the parties are also contained in the terms
of the contract. However, any party to the contract has the option to restrict his liabilities towards
the other party or even exclude such liabilities completely by the use of an exclusion clause
(Jones 2016). Such clause can be referred as the conditional statement enumerated in the contract
agreement that allows a party to exclude or limit his duties and responsibilities to the other party
of the contract.
However, in order to rely on the exclusion clause, the party seeking it must bring the
exclusion clause into the attention of the other party on whom such clause is going to be applied.
This was seen in the case of Causer v Browne (1952) VLR 1. As per the decision of the case of
Thornton v Shoe Lane Parking Ltd (1971) 2 QB 163, unless and until the exclusion clause is
brought to the knowledge of the other party whose rights will be affected by it, then the clause
has no effectiveness. Similar observation was seen in the Sydney Corporation v West [1965]
HCA 68; (1965) 114 CLR 481 (High Court) case. Again once a contract is formed, any new
term or condition cannot be introduced without consent from both the parties as observed in
Interphoto Picture Library v Stiletto Visual Programmes Ltd (1988) 2 WLR 615.

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Exclusion clause can also be incorporated in a contract in an effective manner if its
incorporation is done by signature as observed in L'Estrange v Graucob [1934] 2 KB 394. it
states that when such clause is approved by both the parties to the contract by means of signature
, then it will be considered to be the part of the contract. Such clause will then bind the parties to
such contract.
When a contract is breached, the most favorable option available to the aggrieved party is
to seek damages as legal remedies from the party who is responsible for the breach of the
contract as seen in Addis v Gramophone [1909] AC 488. In granting the damages for the loss or
injury suffered by the aggrieved party, the court takes into consideration the damages that can be
foreseen reasonably by any reasonable person. However, if the damage is too remote to the effect
from breach of the contract, then it will not be taken into account. As per the principles of
remoteness of damage given in the case of Hadley v Baxendale (1854) 9 Ex Ch 341, the
aggrieved party can only recover losses that arise from contract breach naturally.
Application:
As per the facts of the case, it is seen that a valid contract was created between Lily and
the company named Doall Pty Ltd. Hereinafter referred to as the D Co. Lily was provided with a
document called the “Memorandum of Terms of Contract” that provides the specification of the
job, date of completion, price of completion of the work. This can be denoted as the agreement
form between the two parties. However, on the back side of the document, two clauses are
inserted. The clauses read the following:
“Clause 1: The company accepts no responsibility for personal injury to the customer during
performance of the contract.

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Clause 2: Liability for any damage to the customer’s home is limited to the sum of $3000 and no
liability can be accepted for the loss of, or damage to, the customer’s goods.”
These two clauses can be considered to be the exclusion clause as per the rules
enumerated above. Though the clause was included on the back side of the contract but as per the
decision of Thornton v Shoe Lane Parking Ltd, the D Co did not take any attempt to bring such
clause into the attention of Lily. Further, such clause was rubber stamped by the D Co. It clearly
shows that the other party Lily had not signed the clause. Thus the clause had no effect.
As per the facts of the case, when Lily collided against the truck, her car was totally
damages and further her wrist also got broken. All these amount to losses suffered by Lily are
direct consequence of the negligence act of the D Co. they were not remote to the cause of action
as observed in the case of Victoria Laundry (Windsor) Ltd v Newman Industries Ltd [1949] 2
KB 528. Thus the company will be liable to pay for the broken wrist though it amounts to a
personal injury. Further the company will be liable to pay for the damages caused because of her
wrecked car. Hence, if the loss is found to be more than 3000 $, it will be liable to pay it.
The reason behind this is the exclusion clause provided at the back of the memorandum is
not effective as it was not incorporated by proper method in the contract. Thus both clauses
present have no validity.
Conclusion:
From the discussion of the rules and its application made above, it can be inferred that D
co will be liable to pay for the losses suffered by it due to breach of contract.

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References:
Addis v Gramophone [1909] AC 488.
AGC (Advances) Ltd v McWhirter (1977) 1 BLR 9454 (Supreme Court of NSW).
Australian Woollen Mills Pty Ltd v The Commonwealth [1954] HCA 20; (1954) 92 CLR 424]
Byrne v Van Tienhoven & Co [1880] 5 CPD 344.
Causer v Browne (1952) VLR 1.
Hadley v Baxendale (1854) 9 Ex Ch 341
Interphoto Picture Library v Stiletto Visual Programmes Ltd (1988) 2 WLR 615.
Jones, E., 2016. Exclusion Clauses.
L'Estrange v Graucob [1934] 2 KB 394.
Marsh, P., 2017. Contract law. In Contracting for Project Management (pp. 65-80). Routledge.
Partridge v Crittenden [1968] 1 WLR 1204 case.
Payne v Cave (1789) 3 TR 148
Pharmaceutical Society of GB v Boots Cash Chemists (Southern) Ltd [1956] EWCA 6, [1953] 1
QB 401, Court of Appeal (England and Wales
Powell v. Lee (1908)99 LT 284 (KB)
Re McArdle [1951] Ch 669

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Roscorla v Thomas [1842] EWHC J74, (1842) 3 QB 234, High Court (England and Wales). Pao
On v Lau Yiu Long [1979] UKPC 17
Spencer's Pictures Ltd v Cosens [1918] NSWStRp 1, (1918) 18 SR (NSW) 102, Supreme Court
(NSW, Australia)
Sydney Corporation v West [1965] HCA 68; (1965) 114 CLR 481 (High Court)
Tallerman & Co Ltd v Nathan's Merchandise (Vic) Pty Ltd [1957] HCA 10, (1957) 98 CLR 93,
High Court
Thornton v Shoe Lane Parking Ltd (1971) 2 QB 163
Victoria Laundry (Windsor) Ltd v Newman Industries Ltd [1949] 2 KB 528
Wakeling v Ripley (1951) 51 SR (NSW) 183
Watanabe, H., Akutsu, A., Miyazaki, Y., Nakadaira, A. and Fujimura, S., NTT Corp,
2018. Contract Agreement Method, Agreement Verification Method, Contract Agreement
System, Agreement Verification Device, Contract Agreement Device, Contract Agreement
Program and Agreement Verification Program. U.S. Patent Application 15/743,523