Business Law Assignment: Contract Formation and Promissory Estoppel

Business Law Assignment

Question 1
Issue
The key issue is whether Frank entered into an agreement with any of the parties?
Rule
A contract forms a binding agreement between two or more parties which can be
enforceable by the law. Certain elements must be fulfilled by the parties to form a contract.
Following are different elements which must be present while forming a contract.
 Offer
Firstly, an offer must be made which has the power to bind the offeror, person making the
offer, to its terms as given in Harvey v Facey [1893] UKPC 1. It is important for parties to
differentiate between an offer and an invitation to treat because a contract cannot be
formed by accepting an invitation to treat. In Partridge v Crittenden [1968] 2 All ER 435 case,
it was held that advertisements are also generally considered as invitations to treat
(McKendrick, 2014). However, in Carlill v Carbolic Smoke Ball Co [1893] 1 QB 256 case, the
court provided that the advertisement was a unilateral contract. The key feature of this
contract is that it can be accepted by anyone who complies with its terms.
 Acceptance
Another element of a contract is acceptance of the offeree; without a valid acceptance, a
contract cannot be formed. The offeree must communicate the acceptance which is similar
to the terms of the offer and it is certain. In Felthouse v Bindley [1862] EWHC CP J35 case, it
was held that silence of a party does not generally amount to an acceptance.
 Capacity
The parties to a contract must be the capacity to bind each other in a legal relationship. It is
necessary that parties are competent to enter into a contract. A minor, insolvent or
unsound mind person is not competent to form a legal contract (Mason, 2016).
 Intention of parties
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While forming a contract, parties must have valid intention in order to enforce themselves
by the terms and conditions of the contract. On the other hand, not every agreement is
enforceable by the court, for example, social and domestic agreements are not legally
enforceable because of lack of intention of parties (Jones v Padavatton [1969] 1 WLR 328).
 Consideration
With a valid consideration, a contract cannot be formed. It is referred to the bargain of the
contract. One party suffer a detriment, and another receives a benefit which is referred to
the consideration. In Thomas v Thomas [1842] 2 QB 851 case, it was held that a
consideration which did not have a value as per the law is not valid (Chen-Wishart, 2012).
Application
In this case, the sign put by Frank is not an offer; instead, it is an invitation to treat. Thus,
parties cannot accept the invitation to treat of Frank, and they are required to make an offer
to purchase Frank’s car.
a. In the first scenario, Bill calls Frank and offers him $1,600 for his car. An offer is made
by Bill that is not yet accepted by Frank. No contract has formed between parties.
b. Mark made an offer to Frank that he would pick up his car on Friday and he also sent
him a cheque for $1,950. Although, Frank deposited the cheque of Mark, however, a
contract has not formed between the parties because Frank did not communicate
his acceptance and he did not comply with the agreement’s conditions. Mark can file
a suit against Frank to recover his money; however, they did not enter into a
contract.
c. John told Frank that he accepted his offer; however, Frank is not bound because the
sign was an invitation to treat. However, Frank has not entered into a contract with
any other party; thus, he has the right to sell his car to John for $2,000 by accepting
his offer.
d. Tom offered to pay $1,700 for Frank’s car, and Frank told him that he would sell his
car if he does not receive a better offer by weekend. It is a social agreement which
cannot be enforceable by the law. Furthermore, Frank also rejected the offer from
Tom by email because he got a better offer.
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