Assignment on Australian Business Law

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Business Law Assignment
Contract Law Issues
26-Oct-17
(Student Details: )

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Introduction
A promise, which results in creation of legal rights and liabilities, covering certain specific
elements, and is drawn in particular manner, results in the creation of contract. This promise
takes place between a number of parties, which has to be more than one, in which one set
offers some terms to be undertaken and the other pays the consideration for upholding such
terms. It can be created in a verbal manner, in which this promise is made verbally; or by
writing on a document and getting the same signed by the parties, resulting in written
contracts. It is important that the promise made in the contract is upheld, or it would result in
the contract being breached1.
In order to create a contract, there is a need to have the components of offer, which is
accepted, and there is presence of consideration, intent, capacity and clarity. All these have to
be present together to create a legally binding contract2. The given case study revolves around
the different aspects of contract law.
Part (a)
Issue:
The key issue of this case revolves around the presence of a contract between Ashley and
Adam.
Rule:
1 Benny S. Tabalujan, Valerie Du Toit-Low and Julie L.Y. Huan, Singapore Business Law (BusinessLaw Asia, 7th ed,
2015)
2 Linda Mulcahy, Contract Law in Perspective (Routledge, 5th ed, 2008)

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The contract formation is started when a party makes an offer to another party with some
specific terms. There is a need to make differentiation between an offer and an invitation to
treat, as the former shows the intention of getting into legal relations and the latter denotes
the intention of negotiating upon a possible contract. Hence, invitation to treat comes before
the offer3. The adverts which can be found in the newspapers or magazines are given the status
of invitation to treat as per Partridge v Crittenden4. However, where such adverts covers such
terms, which can be accepted through performance, it is deemed as unilateral offer as was seen
in Carlill v Carbolic Smoke Ball Company5.
It is also important to differentiate between offer and request for information. Harvey v Facey6
was a case in which Harvey showed his interest in the Bumper Hall Pen which was being sold
and he wanted to purchase the same at the lowest cash price. To this, Facey had replied that he
lowest price for the pen was £900. To this, Harvey replied that they agreed to purchase the pen
for 900 pounds, as this was the amount asked by Facey. And he asked Facey to send the title
deed for getting early possession. It was held by the Privy Council that no contract had been
formed as the stating of lowest price was mere a request for information, instead of an offer.
Hence, the lack of intention led to the lack of offer in this case7.
After offer has been made, it has to be accepted by the party to which the offer had been
made. The acceptance has to be obtained on the exact offer as had been made. Where there is
3 Brian A. Blum, Contracts: Examples & Explanations (Aspen Publishers Online, 4th ed, 2007)
4 [1968] 1 WLR 1204
5 [1892] EWCA Civ 1
6 [1893] UKPC 1, AC 552
7 Jill Poole, Casebook on Contract Law (Oxford University Press, 13th ed, 2016)

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any change in the original offer, the case of Hyde v Wrench8 provides that a counter offer is
made. And this counter offer extinguishes the earlier offer. Gibson v Manchester City Council9
provided that for an agreement to be present, the acceptance has to be reflected in a proper
manner upon the comprehensible offer. In this case, the House of Lords analysed the wordings
‘may be prepared to sell’ as the notification of price, which was not a distinctive offer, thus
denying the requirement of acceptance.
Once an offer and acceptance has been established, there is a need to show the presence of
consideration element. The consideration needs to be a value or such a thing, which has an
economic value and can be decided upon by the contracting parties10. Chappell & Co Ltd v
Nestle Co Ltd11 is a leading case in this matter where the court accepted the three wrappers as
a valid consideration, due to the context of the case. There is also a need for the consideration
to be present and if the same is past, it would not be valid. The consideration needs to only be
sufficient and not adequate12.
Application:
Applying the rules to the facts of this case, a discussion with regards to the intent of the two
parties, i.e., Ashley and Adam was carried on. It was show that Ashley was interested in
purchasing the products which Adam offered. However, none of the parties stated anything
about the particularly products or their aspects. This has to be, at the very best, deemed as
negotiations, taking place before offer was made. This is particularly because of a lack of a
8 [1840] 49 ER 132
9 [1979] UKHL 6
10 Jeffrey A. Helewitz, Basic Contract Law for Paralegals (Aspen Publishers Online, 5th ed, 2007)
11 [1960] AC 87
12 Paul Latimer, Australian Business Law 2012 (CCH Australia Limited, 31st ed, 2012)

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comprehensible and clear offer in this case. This conversation had only two aspects which are
deemed as requisites of contract formation. The parties had the intent of creating a contract
and were also interested in creating one. However, a clear offer was lacking in this case, as the
parties never clearly stated that they wanted particular products for a specific price or quantity.
So, there was also a lack of consideration in this case which meant that the contract was invalid.
Ashley and Adam had a conversation where the information was supplied. Applying the case of
Harvey v Facey, there had been no offer made here. When an offer had not been made, the
same cannot be accepted. Applying the case of Gibson v Manchester City Council, there was a
sheer lack of distinctive offer. Hence, the elements required to create a contract were absent,
which meant that no contract was created in between Ashley and Adam.
Conclusion:
Thus, the issue highlighted earlier has been solved and it is presented that there was no
contract formation from the conversation which took place between Ashley and Adam.
Part (b)
Issue:
The key issue of this case revolves around the presence of a contract between Ashley and
Adam.
Rule:

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When the process of negotiations of contract takes place, the parties have to take into
consideration, different points. When the process of negotiations takes place, the parties often
make statements, which can be deemed as a term of the contract or a representation. When
the statement becomes part of the contract, it is deemed as a term of contract13. And where
the statement is not fulfilled, the individuals get the option of making a claim of breach of
contract. Though, where the statement is deemed only as a representation, which later on
proves to be untrue, it results in the party getting the option of making a case of
misrepresentation14.
When a false statement, which relates to a fact, is made as a result of which, the other party is
forced to go through the contract or is induced into entering into the contract,
misrepresentation takes place. Where only a statement is made for the present situation or for
the past facts and the same relates to contract, where by the party is influenced to go forward
with the contract, it is deemed as representation15. Behn v Burness16 was a case in which it was
held by Justice Williams that representation for a contract is related to the contract, but the
same never forms a part of the contract. In the case of Ecay v Godfrey17, there was a statement
made regarding the soundness of the boat. When the matter reached court, it was deemed that
the statement made for the soundness was a representation and it had to be considered as an
adequate matter for being deemed as a term of the contract. Also, it was shown that the advice
13 Steven Emanuel, Contracts (Aspen Publishers, 8th ed, 2006)
14 Neil Andrews, Contract Law (Cambridge University Press, 2nd ed, 2015)
15 Richard Stone and James Devenney, Text, Cases and Materials on Contract Law (Routledge, 3rd ed, 2014)
16 (1863) 3 B & S 751
17 [1947] 80 Lloyds Rep 286

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relating to the survey of boat covered no aspiration of relying upon the statement which had
been made.
There are five vitiating contracts which can be found in a contract and the result of which is the
contract being voided. Where the vitiating factors are present, the contract can be invalidated,
as a result of which, the terms covered under the contract, coming to an end. The five vitiating
factors include misrepresentation, illegality, mistake, undue influence and duress18. In Turner v
Green19 it was held that a misrepresentation was a false statement, made in connection to the
term of the contract, whereby the party was induced to entering of contract.
Application:
In order to create a contract, it is important that the basic elements provided in the previous
segment are present. In case these are not present, a contract is not deemed to have been
formed. The case study shows that Ashley and Adam decided to create a contract. However,
before finalizing this contract, both of them drank alcohol and a statement was then made by
Ashley where she presented that she would be willing to purchase anything which Adam was
willing to offer. However, this is not a term of contract, owing to the lack of clarity and can be
best deemed as representation. This is because this statement can be deemed as having been
made for inducing Adam in the contract.
There was a lack of lucid and clearly comprehensible offer in this case. The reason for this stems
from the representation made by Ashley, instead of an offer. Applying the case of Ecay v
18 James Marson and Katy Ferris, Business Law Concentrate: Law Revision and Study Guide (Oxford University Press,
3rd ed, 2016)
19 [1895] 2 Ch 205

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Godfrey, this had to be considered only as a statement owing to the lack of clarity with regards
to what was being offered, the price at which it was offered or the terms of this offer. The
statement was not clear in any manner, which denied the ability of the statement being
deemed as a term of the contract.
When an offer was not made, an acceptance cannot be obtained. The lack of the other
elements of a contract, along with offer and acceptance, helps in clearly establishing that no
contract had been created at this stage. For making a case of misrepresentation, there was a
need to be presented that Adam had been induced to enter in the contract. Though, where a
contract had not been created, a claim for misrepresentation cannot be made by Adam, as the
statement was vague, resulting in the lack of contract.
Conclusion:
Thus, the issue highlighted earlier has been solved and it is presented that there was no
contract formed even at this stage in between Ashley and Adam as a result of representation
having been made, instead of terms of contract. And without the presence of a contract, a
claim for misrepresentation would not be present.
Part (c)
Issue:
The key issue of this case revolves around the presence of a contract between Ashley and
Adam.

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Rule:
To reiterate, there are certain key elements of contract which have to be present to create a
contract and apart from the three explained in detail earlier, i.e., offer, acceptance and
consideration, there is a need to concentrate now upon the interplay of clarity, capacity and
intent. It is of utmost importance that the terms on which the contract is being created are
comprehensible and not ambiguous20. In case of ambiguity in the terms of contract, the
performance of contract becomes difficult and can also result in different issues being brought
forward on the basis of the contractual elements. As a result of these reasons, there is a need
for the contractual terms to be very clear. These contractual terms act as the foundation of the
contract which give rise to different rights and liabilities of the parties, allowing the matter to
be presented before a court of law21.
There is a need for the parties to the contract, to have a clear intent of creating legal relations,
particularly with regards to the liabilities for not fulfilling the contractual terms. The intent
denotes that the parties known that there would be legal repercussions for not following the
promise made under the contract22. The objectivity test given in Carlill v Carbolic Smoke Ball
Company is of assistance in this case. This test provides that for deciding upon the intent of
thee parties, the viewpoint of a rationale bystander has to be considered, based on the facts of
the case.
20 Ewan McKendrick, Contract Law (Pearson Education Limited, 11th ed, 2015)
21 Andy Gibson and Douglas Fraser, Business Law (Pearson Higher Education AU, 2013)
22 Catherine Elliott and Frances Quinn, Contract Law (Pearson Education Limited, 9th ed, 2013)

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The last requirement is for the parties to have the contractual capacity. This refers to the ability
of the parties to be able to enter into a contract and is usually covered in terms of sound mind
and legal age. The legal age is taken to the age of majority, which means 21 or over23. There is
also a need for the parties to be free from any kind of coercion, duress or under the influence of
alcohol as these have the ability of affecting the judgment of the person. In Singapore, the
Minors’ Contracts Act24 is applicable which has been modified from the common law, in order
to give validity to the contracts, which the minors enter into. As a general rule, the contracts do
not have the power of entering into a contract and the contract cannot be enforced against
minors. However, there is an exception to this rule in the context of the contracts entered for
supply of necessity which binds the minor to pay for the contract. The supplies are related to
the goods and the services which are deemed as an important element for living. And till the
time such contracts are repudiated by the minors upon attaining majority, within a reasonable
period of time, the minors cannot be bounded by the contract25.
There is a duty which has been posed over the parties to the contract and this is based on the
principle of good faith, with regards to the disclosure of the material information regarding the
contract, which is present with them. Lambert v Co-operative Insurance Society Ltd26 was a
case in which the court held that the insurance policy had to be rescinded as there was an
absence of proper disclosure. In order to make a care regarding misrepresentation, a crucial
requirement is to show that the party had relied on the false statement of fact made to them.
23 Singapore Legal Advice, Requisite elements in the formation of a contract (14 August 2012)
<https://singaporelegaladvice.com/law-articles/requisite-elements-in-the-formation-of-a-contract/>
24 Minors’ Contracts Act (Cap 389, 1994 Rev Ed)
25 Singapore Law, Ch.08 The Law of Contract (30 April 2015) <http://www.singaporelaw.sg/sglaw/laws-of-
singapore/commercial-law/chapter-8>
26 [1975] 2 Lloyd's Rep 485

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In Attwood v Small27, the House of Lords denied the escape of contract by Attwood, claiming
misrepresentation, as they held that Attwood had not relied upon the statement.
Application:
Once an offer is accepted, the contractual terms become clear and are finalized. And a contract
having the capacity of binding the parties in a legal manner is created once all the relevant
elements for the creation of contract are present. During the formation of contract between
Ashley and Adam, there was nothing which could lead to Adam believing that Ashley was below
the age of 21. This led Adam to believe that Ashley had the requisite contractual capacity for
the contract formation purposes.
On the grounds of good faith, there was a failure on part of Ashley as she did not disclose to
Adam that she was still a minor. Apart from this, not only she lied about having the contractual
capacity, she also misrepresented a statement of fact where she showed that she had turned
major, but in reality, did not have the majority age. Applying the case of Lambert v Co-operative
Insurance Society Ltd to the present case, the contract can be rescinded at the option of Adam.
Apart from this, he can make a claim of misrepresentation against Ashley as she had
misrepresented a major fact of this case. This would again allow him to get the contract
rescinded since contracts formed from misrepresentation are voidable.
On the other hand, Ashley can talk to Adam regarding this issue and ask to continue with the
contract upon attaining majority, which was due just in one week. Hence, she can ask for Adam
to continue with the contract instead of getting the same rescinded. This would allow the
27 [1838] UKHL J60

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parties to continue the contract upon Ashley attaining majority on the same terms as were
formed under the drawn contract.
Conclusion:
Thus, the issue highlighted earlier has been solved and it is presented that there was indeed a
contract formed between Ashley and Adam. And Adam has an option of getting the contract
rescinded owing to the misrepresentation of her age. Or, he could choose to continue with the
contract, upon Ashley attaining majority in the next week.

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Bibliography
Articles/ Books/ Journals:
Andrews N, Contract Law (Cambridge University Press, 2nd ed, 2015)
Blum BA, Contracts: Examples & Explanations (Aspen Publishers Online, 4th ed, 2007)
Elliott C and Quinn F, Contract Law (Pearson Education Limited, 9th ed, 2013)
Emanuel S, Contracts (Aspen Publishers, 8th ed, 2006)
Gibson A and Fraser D, Business Law (Pearson Higher Education AU, 2013)
Helewitz JA, Basic Contract Law for Paralegals (Aspen Publishers Online, 5th ed, 2007)
Latimer P, Australian Business Law 2012 (CCH Australia Limited, 31st ed, 2012)
Marson J and Ferris K, Business Law Concentrate: Law Revision and Study Guide (Oxford
University Press, 3rd ed, 2016)
McKendrick E, Contract Law (Pearson Education Limited, 11th ed, 2015)
Mulcahy L, Contract Law in Perspective (Routledge, 5th ed, 2008)
Poole J, Casebook on Contract Law (Oxford University Press, 13th ed, 2016)
Stone R and Devenney J, Text, Cases and Materials on Contract Law (Routledge, 3rd ed, 2014)
Tabalujan BS, Toit-Low VD and Huan JLY, Singapore Business Law (BusinessLaw Asia, 7th ed,
2015)

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Cases:
Attwood v Small [1838] UKHL J60
Behn v Burness (1863) 3 B & S 751
Carlill v Carbolic Smoke Ball Company [1892] EWCA Civ 1
Chappell & Co Ltd v Nestle Co Ltd [1960] AC 87
Ecay v Godfrey [1947] 80 Lloyds Rep 286
Gibson v Manchester City Council [1979] UKHL 6
Harvey v Facey [1893] UKPC 1, AC 552
Hyde v Wrench [1840] 49 ER 132
Lambert v Co-operative Insurance Society Ltd [1975] 2 Lloyd's Rep 485
Partridge v Crittenden [1968] 1 WLR 1204
Turner v Green [1895] 2 Ch 205
Legislation:
Contract Law
Minors’ Contracts Act (Cap 389, 1994 Rev Ed)
Others:

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Singapore Legal Advice, Requisite elements in the formation of a contract (14 August 2012)
<https://singaporelegaladvice.com/law-articles/requisite-elements-in-the-formation-of-a-
contract/>
Singapore Law, Ch.08 The Law of Contract (30 April 2015)
<http://www.singaporelaw.sg/sglaw/laws-of-singapore/commercial-law/chapter-8>