Business Law & Ethics: Contract Law, Promissory Estoppel, Unilateral Offer

This article discusses the legal concepts of Contract Law, Promissory Estoppel, and Unilateral Offer in Business Law & Ethics. It covers the relevant laws, their application, and conclusions. The article includes three questions that deal with the formation of an enforceable contract, the applicability of promissory estoppel doctrine, and the entitlement to a month's supply of free chocolates.

INTRODUCTION TO BUSINESS LAW & ETHICS
Contract Law
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Question 1
Issue
The issue is to determine if there is an enforceable legal contract between Fran and Marco
based on the given facts.
Relevant Law
For the formation of an enforceable contract, the following elements have to be present1.
 There should be a valid agreement which should be based on a legal offer and legal
acceptance.
 There must be mutual consideration present for both the parties involved.
 There should be intention present on the part of the contracting parties to enter into
legal relations.
In contracts enacted in social/domestic aspect, one of the key issues is whether intention to
enter into legal relations is present or not. Where agreements are enacted between relatives
or in social context, it is presumed that intention to enter into legal relations is not present2.
This is apparent in the verdict of Jones v Padavatton3. As a result, the contracting parties
must have explicitly specified the intention to legally enforce the agreement through their
conduct or otherwise. Only then, such contracts may be enforceable. In the absence of any
such explicit conduct, the court would assume that no intention to form legal contract is
present unlike commercial contracts4.
Application
Based on the given facts, it is apparent that Fran and Marco are brothers and hence the given
agreement is in a social context. While the other elements are present in this case, it needs to
be ascertained whether intention to enter into legal relation does exist on the part of both the
parties or not. The given facts indicate that a legal employment agreement has been drafted
using the services of a lawyer and both parties before giving their consent to the agreement
have thoroughly inspected the agreement. Further, the agreement has been duly signed in the
presence of requisite witness. It is apparent that through the conduct of using the services of
1 Andy Gibson, Douglas Fraser, Business Law (Pearson Publications., 8th e, 2014)
2 Shayne Davenport, Business and Law in Australia (Thomson Reuters, 4th ed, 2012)
3 Jones v Padavatton [1969] 1 WLR 328
4 Robert Bryan Vermeesch, Kevin Edmund Lindgren, Business Law of Australia (Butterworths, 12th ed. 2011)

lawyer to execute a written employment agreement, it may be appropriate to conclude that
intention to enter into legal relation is present. Hence, the given agreement is legally
enforceable and hence Fran is bound by the same.
Conclusion
Fran cannot hire Jane instead of Marco as the contract between them is enforceable on
account of presence of intention to enter into legal relations. Hence, hiring Jane instead of
Marco would constitute breach of contract.
Question 2
Issue
The main issue is to opine on the applicability of promissory estoppel doctrine in the given
situation.
Relevant Law
As per the doctrine of promissory estoppel, the first party which promised to act in a certain
way has to abide by that since the second party based on the promise acted upon the same.
Hence, as per this doctrine even though contract may not have been enacted, but still
contractual obligations can arise5. The following conditions need to be fulfilled for the
applicability of the above doctrine6.
 The first party A should make an unambiguous representation to the second part B.
 B on the basis of the representation believes or is made to believe that there is the
existence of a legal relationship.
 As a result, B acts on the promise.
 However, if A retracts, then B would be harmed in a material manner.
 Also, A did not make any attempts to warn B on the possibility that A might not
deliver on the promise made.
If all the above conditions are satisfied, then the doctrine of promissory estoppel would be
applicable.
5 Ibid. 1, p.63
6 Ibid. 2, p.95

Application
The conditions to be met for the doctrine of promissory estoppel can be fulfilled by the given
situation as highlighted below.
 Fran conveys to Octavia that she is interested in taking the warehouse on rent but has
only one issue which is the absence of an extractor fan in the kitchen. Octavia
conveys that she would get the issue fixed at her own expense provided Fran would
rent the warehouse. Fran assures Octavia about the same.
 Clearly, based on the above representation by Fran, Octavia believes that they had a
legal relationship in place.
 As a result, she called up an electrician that afternoon and installed a extractor fan in
the kitchen, thereby fulfilling her promise.
 Also, before calling the electrician in the afternoon, Octavia calls Fran to ask if she
should go ahead if Fran is serious about the renting of warehouse. Again Octavia is
assured by Fran and does not give any warning on the potential withdrawing of the
promise to rent.
 Fran retracts from her offer even though the lease agreement was fine but because her
friends had advised her otherwise.
Hence, it is apparent from the above discussion that all the relevant conditions required for
the doctrine of promissory estoppel to be applicable have been satisfied in this instance.
Conclusion
The doctrine of promissory estoppel is applicable to the promise between Fran and Octavia
and therefore either Fran would have to go ahead with the renting of warehouse or pay
damages incurred by Octavia.
Question 4
Issue
The central issue is to opine whether Arjun is entitled to a month’s supply of free chocolates
or no.
Relevant Law

A unilateral offer is one which is not directed to a particular offeree and hence is different
from bilateral offers. Acceptance in case of unilateral offer is communicated through the
performance of the act or activity desired in the unilateral offer as highlighted in the verdict
of Carlill v Carbolic Smoke Ball Company7 case. However, such an offer arises only when it
is communicated to the public at large8. Further, it is imperative that the offeree’s activity
must be driven by the underlying offer for the formation of a legally enforceable contract.
Also, unilateral offers can be revoked by communication of the same through reasonable
channels9.
Application
The critical aspect of the given situation is that Fran has thought of putting a notice on
display whereby anyone who is able to provide a suitable apprentice would be given one
month of free chocolate supply. However, she has not put the same on display till the time
Arjun steps into the shop for her regular purchase. Besides, it is noteworthy that when Arjun
actually tells Fran about his neighbour who can prove to be an ideal apprentice for Fran, he is
not aware of the offer and hence by the performance of the activity, he is not conveying
acceptance since there is no offer. Only after he finished his act did he saw that a notice has
been prepared by Fran. It is apparent that the notice has not been displayed and hence there is
no communication of the unilateral offer. Since there is no offer in existence, hence the same
cannot be accepted by Arjun.
Conclusion
There is no enforceable contract between Fran and Arjun and hence Arjun is not entitled to
one month free supply of chocolate.
7 Carlill v Carbolic Smoke Ball Company [1892] EWCA Civ 1
8 Ibid, 1, p. 113
9 Ibid. 4, p.110