Business Law: Contractual Obligations and Liability

Running head: BUSINESS LAW
Business Law
Name of the University
Name of the Student
Author Note

1BUSINESS LAW
Answer to Question No 1
Issue
In this present scenario, the issue is whether Bruce is bound by the contract.
Relevant Rules
This issue can be resolved by having a discussion about the provision of contract law. A
contract is a legally binding agreement that binds two parties. There is an intention in that
agreement to bind the parties legally (McKendrick and Liu 2015). Promises are exchanged in a
contract to do an act in exchange of something else. The parties of a contract are legally obliged
to perform his or her part. When a party fails to perform his or her part without any reasonable
excuse, he is said to have committed a breach of contract. To be bound by the contract, the
person should have the legal capacity to do a contract (Poole 2016). For example, a person who
was intoxicated at the time of entering into the contract does not have the legal capacity to enter
into a contract. However he may ratify or cancel the contract when he is in a sound state
(McKendrick 2014). Such contract shall be enforceable against the parties. It is required that at
the time of ratification, the terms of the contract are sufficiently definite and clear to the parties
to the Court to enforce it. If the Court is satisfied that a contract existed, the party who was
intoxicated should show the defense as to the non-enforceability of the contract (Andrews 2015).
If the Court is satisfied by the defense, the contract shall be voidable.
In the case of Masters v Cameron the key principles to determine whether an intention to
legally bind the parties exists in relation to the preliminary agreements. It was established in the
case of Gibbons v Wright (1954) CLR 423 that, however a contract can be held voidable at the

2BUSINESS LAW
option of a party who, due to intoxication, was unable to understand the nature why the contract
was being made. Provided that the party may ratify a contract made while suffering the
intoxication, after he has sobered up and able to understand the nature of the contract he is
agreeing upon (Stone and Devenney 2017). The legal intention to bind the parties plays a
significant role in enforceability of the contract as it was stated in the case of Wakeling v Ripley
(1951) 51 SR (NSW) 183. It was held by the Court in the case of Rose and Frank Co v J R
Crompton & Bros Ltd (1925) AC 445 that, where there was an intention to agree, the Court
would, in the absence of any contrary situation, hold that there was an intention to enter into a
contract by the parties. The court has ruled that a contract can become voidable due to the
intoxicated state of contracted party. The intoxicated party has the right to disaffirm the contract.
The right to disaffirm a contract which is voidable can be waived by ratification. The party who
has entered a contract while he was intoxicated can state their intention to continue their contract
while he is sobered. The party who has stated his intention to continue the contract cannot refuse
later on to perform hios part of contract without any reasonable excuse.
Application
A contract is made when the parties agrees upon the terms of the contract while in sound
state and accepts the offer made by a party. To establish the ratification of a contract after a party
has been recovered from the intoxicated state, the intention of the parties should be analysed. In
this case, Bruce was intoxicated while he bid in the auction. The auctioneer had a knowledge that
Bruce is acting is intoxicated state and have no idea what he was doing. However, when Bruce
sobered up he made it confirmed to the auctioneer that he wants to continue the contract. This
means that Bruce has ratified to the terms of the contract while he had the legal capacity to enter