Questions on Contracts: Formation and Contents

Business Law
BUSINESS LAW
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Business Law 1
Questions on Contracts: Formation and Contents
Question1: Are there any enforceable agreements between any of the parties? If so, who are
the parties to the agreement and what are the terms?
Rules of Agreements
A determination whether there is a valid agreement or not is a matter of examining
whether all the main elements exist. According to (McKendrick, 2012, p.11), a valid agreement
must have an offer and acceptance definite terms. Secondly, both parties must show their
intention to form a legal (RTS Flexible Systems Ltd v. Molkerei Alois Muller GmbH & Co KG,
[2010]). The intention to be legally bound is usually presumed to exist in business agreement.
Thirdly, the agreement must be supported by a consideration. This is usually the parties’ promise
to part with, to do, or to refrain from pursuing a course in exchange for an equivalent promise
from the other party (Latimer and Limited, 2011, p.340).
In addition to these three main requirements, the law may require other elements such as
compliance with stated formalities if any. Also, where vulnerable persons are involved, the law
may require the contracting parties to have the capacity to enter into an agreement (McKendrick
and Liu, 2015, p.369). These vulnerable persons are drunk persons, minors, mentally disabled,
and corporations. Like as mentioned above, valid agreement is made up of two parties making it
unfair to impose liabilities to a third party in case the performance is extended. This rule was
stated by Steyn LJ that legal principles prevent imposition of the burden to a third party who has
not consented (Darlington Borough Council v. Wiltshier Northern Ltd, [1995]). An exception to
this rule is the law of agency. In agency law, one person (principal) either expressly or impliedly
allows another (agent) to form agreement with a third party. Where an agreement is made

Business Law 2
between an agent and a third party, it acts as though it was made between the principal and that
third party.
Application
(i) Karacal Kitchens Partnership and Barry Brickle
According to (Floyd et al., 2017, p.4), an employment relationship is governed by the
same rules that validate an agreement. A job offer from the employer is considered as a
legitimate offer, and acceptance of employment is a legitimate acceptance. In (Teen Ranch Pty
Ltd v Brown, [1995]), wages and work benefits satisfy the requirement for a consideration.
Considering that Barry was employed a designer, this satisfies that there was a valid agreement.
(ii) Lending of $100 000 to the Partnership by Barry Brickle
Like as mentioned above, the law takes general presumptions that commercial
agreements are made with intention to make them legally binding while domestic or social
agreements do not have such intention. In (Esso Petroleum Ltd v. Commissioners of Customs
and Excise, [1976]), the Court stated that since Esso was conduction operations in a business
setting, and the promotions helped to boost sales, there was intention to create legal relations. In
the case of Barry lending $100 000, the fact that he was receiving the interest, and this was on a
business setting made this a valid agreement.
On the other hand, it may be argued that being a Cousin to Karl makes the lending of
$100 000 as social or domestic arrangements thus presumption that there were no legal relations.
However, in (Robertson v. Anderson, [2003]), the Court held that situations involving monetary
issues and gains will refute this presumption. Therefore, even though Karl and Barry were