Business Law: Validity of Contract and Frustration of Contract

Running Head: BUSINESS LAW
BUSINESS LAW
Name of the Student
Name of the University
Author’s Note

BUSINESS LAW1
1. ISSUE:
The issue involved in the case study is whether Ted can sue Ann for the contract breach.
Rules:
Contract can be regarded as an agreement which can be enforced and executed in a legal
manner among at least two or more than two persons who can be considered as the parties to
it. For resulting into valid contract, some essential elements are required to be present which
are as follows; intention of the parties to be legally bound, presence of consideration, legal
capacity of the parties and an agreement.
The concept of consideration has been explained in the case of Currie v Misa (1876) 1
AC 554 by Lush J where he said that consideration can consist of rights, benefits, profits or
interest which is accruing to one party given, undertaken by other. it was held in Thomas v
Thomas (1842) 114 ER 330, it was held that consideration may not be of equal valuation but it
would be held sufficient if it is of some value even if such value is very small . Hence it can be
said that the consideration given in an agreement by one party to other need not to be adequate
but it can be just a token amount. But it was not be an illusory it is to be real.
It is not necessary that consideration must be always of some pecuniary amount. It can
consist of providing any particular thing for performing something which is of some importance
some value and importance to the other party. Consideration actually refers to a promise instead
of any actual thing however anything provided as an exchange of promise of another person shall
not comprise of anything which is given previously. To simplify it, it can be said that anything
which has been already given cannot be provided later on again as a consideration. The thing or

BUSINESS LAW2
service which is already provided in the past is called the past consideration and such part
consideration cannot be a good consideration. Similar observation was held in the Stilk v Myrick
(1809) 170 ER 1168.
However instead of providing anything, if any act is performed in exchange of any
service or anything such performance of the act can be considered as a valid consideration. This
principle is followed when an individual asks another to cause the performance of any act and
mention that binding agreement will be made in exchange for such performance of the act at a
later date. In such situation that act which has been performed on relying on the assurance can be
considered consideration relation to the promise made later. In such case the performance of the
party does not amount to past consideration but it is treated as an executed consideration. This
has been observed in Pao On v Lau Yiu Long [1980] AC 614 where it was held that performing
any act can amount to a valid consideration. In the same manner in Musumeci v Winadell Pty Ltd
(1994) 34 NSWLR 723, it was discussed that any practical benefit that has been incurred by one
party due to the act of the other party can be considered as a valid consideration. However it has
to be noted that an agreement will result into void agreement if the consideration is absent or
found illusory as observed in Placer Development Ltd v Commonwealth (1969) 121 CLR 353.
Another important factor required to form a contract legally valid is the contractual
capacity of the parties. If the party to a contract is less than 18 years, he will be considered minor
then generally the contract is not binding on the minor as per section 17 of the Minors (Property
and Contracts) Act 1970 No 60 – NSW. However if it is for minor’s benefit then that contract is
binding as per section 19. Similar observation was found under the provisions of common law
where a contract entered by an individual of below 18 year (minor) for purpose of employment,