Australian Contract Law: Validity of Contract and Duties of a Trustee

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Contents
Solution 1....................................................................................................................................................2
Issue........................................................................................................................................................2
Law..........................................................................................................................................................2
Application of Law..................................................................................................................................2
Conclusion...............................................................................................................................................4
Solution 2....................................................................................................................................................4
Reference List.............................................................................................................................................6

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Solution 1
Issue
i. Who made the offer?
ii. Whether there is a valid contract amid Sally and Harry?
iii. Would it make any difference if Harry worried about possible delays in the postal
service, sent his reply by email instead?
Law
The Australian Contract law governs the rules for the establishment of a valid contract in law. A
contract is made when an agreement is supported with consideration and intention of the capable
parties. (Clark J, 2010)
An offer is the intention or wish of the offeror which he intends to be complying with by the
offeree. When this intention is communicated by the offeror orally or in written form then an
offer is said to be made and is held in Carlill v. Carbolic Smoke Ball Co (1891). An offer can be
made to one specific person or to the world at large.
Now, when the offer is approved by the offeree then there is valid acceptance in law and is held
in Felthouse v Bindley (1862). An acceptance once made must reach the offeror in order to make
it complete. However, when the acceptance is made by posting the letter of acceptance, then, as
per Adams v Lindsell (1818) the acceptance is competing when the letter is posted. Thus, there is
an immediate acceptance in case of postal acceptance. (Ibrahim et. Al, 2009)
Now, when an acceptance is made but the offeree incorporate new terms to the acceptance then it
is not a valid acceptance in law and is called counter offer. The counter offer cancels the offer
and the acceptance so made is considered to be a new offer and is held in Butler Machine Tool
Co Ltd v Ex-Cell-O Corp (n.d),. This new offer when approved by original offeror resulting in
the formation of contract.
The law is now applied to the facts of the case.
Application of Law
Issue i

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Sally (a top fashion diamond jewellery designer) and Harry (rich diamond buyer) both met at a
diamond exhibition that took place in London. They developed a friendly relationship and agreed
to remain in touch. Harry has a house in London and Paris and both Harry and Sally started
writing each other.
In May, a letter is written by Harry to Sally specifying that he really liked the design of the ring
with a blue diamond and wish he had the same. It is submitted that through this letter Harry has
communicated his desire to have the ring and thus made an offer that of the same to Sally.
Thus, an initial offer was made by Harry to Sally specifying his intention to buy the ring.
Issue 2
It is submitted that Harry has made an offer to buy the ring. Now, it is necessary that Sally must
communicate her acceptance without bringing any changes to the offer in order to make a
contract amid the two.
Now, against the letter of Harry, an email is written by Sally specifying that she is delighted that
Harry liked the ring and that she would love to supply the same. She further submitted that if
Harry is interested in the ring then he must make his acceptance within three days.
It is submitted that Sally accepted the offer of Harry but included a new term that he must
confirm the same within three days. Thus, a counter offer is made making her statement as new
offer.
Harry the very next day reply through letter that he accepts the offer of Sally and will pay her
$100,000. It is submitted that a valid acceptance is made by Harry and it makes no difference
whether the letter is reached to sally or not because as per Adams v Lindsell the acceptance is
deem to be completed when the letter is posted.
Thus, there is a valid contract between the parties.
Issue iii
If the acceptance is made by Harry not by a letter but by an email then as per Empirall Hldings v
Machon (1988), it is necessary that the email must be read by Sally in order to consider the