Business Law: Validity of Contracts, Doctrine of Estoppels, Restraint of Trade Clause, Unilateral Offer

This article discusses the validity of contracts, doctrine of estoppels, restraint of trade clause, and unilateral offer in business law. It covers relevant cases and legal principles to provide a comprehensive understanding of these topics.

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

1BUSINESS LAW
Question One:
Issue:
The issue that exists in this given scenario is whether Fran is entitled to hire Jane in place of
Marco
Law:
It can be stated that for a contract to be considered valid and legally binding, the intention to
create legal relations is of significant importance. In general the intention to create legal relations
is implied by the consideration which is promised by the promisor for the fulfillment of the
promise to the promisee. However the intention to create legal relation separately acts as an
important element for the formation of a valid contract. As held in the case Australian Woollen
Mills Pty. Ltd. v. Commonwealth1 an objective test is required to be applied by the courts to
assess the intention of the parties. Previously, the courts used to assume that the parties did not
intend to be legally bund especially in domestic or family agreements Jones v Padavatton2.
However this approach of the court s was changed in the notable case Ermogenous v Greek
Orthodox Community of SA Inc3. It has been held in this case that the presumptions are not to be
taken into consideration while assessing the legal intention of the parties.
Application
In this given scenario, it is evident that the Marco had been hired by Fran as his assistant. Marco
is the brother of Fran; however Marco intended to be legally bound by the contract terms. This
can be substantiated by the agreement signed between the parties. Thus in accordance with the
1 (1954) 92 C.L.R. 424
2 [1969] 2 All ER 616
3 (2002) 209 CLR 95

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principle of the case Ermogenous v Greek Orthodox Community of SA the courts will not
assume any presumptions and therefore will consider Fran to have breached the contract terms if
she hires Jane in place of Marco.
Conclusion
Thus, in conclusion it can be said that Fran cannot avoid the contract that had been formed her
and Marco
Question 2
Issue
The issue that exists in this given scenario is whether Octavia can rely on the provision of
Doctrine of estoppels.
Rule:
This doctrine was first proposed in the case Hughes V. Metropolitan Railway4
Promissory estoppels has been defined as clause which prevents a person to use his legal right on
another person, if the former person has promised not t enforce his rights and the latter has relied
on such right and acted accordingly. To establish promissory estoppels as a ground of defense
the claimant must prove the following:
 There was a pre existing contractual relation between the parties as held in the case
Combe v Combe 5
4 (1877)2 App Case 439
5 [1951] 2 KB 215

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 The promise was clear and unambiguous as held in the case Woodhouse A.C. Israel
Cocoa Ltd. v. Nigerian Product Marketing Co. Ltd.6
 Change of Position as held in the case Alan v El Nasr7
 It was inequitable for the promisor to go back on his promise as held in the case D & C
Builders v Rees 8
Application
It has provided clearly in the given scenario that no contractual relationship existed between the
parties in consideration. Fran had not signed the contractual agreement with Octavia. She had
said that she would go through the papers of the lease first and then sign it, however before
signing the document the fan had been installed. Therefore by the application of the principle as
held in the Combe v Combe case. Therefore although Octavia acted and relied on her promise
she will not be entitled to the cost incurred by her for installing the fan.
Conclusion:
Therefore in conclusion, it can be said that Octavia cannot rely on the doctrine of promissory
esoppel.
Question 3
Issue:
In this given scenario the issue that can be identified is whether Dante can be restricted to work
independently by the application of the Restraint of Trade cause.
Rule:
6 [1972] AC 741
7 [1972] 2 WLR 800
8 [1966] 2 WLR 28

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In the case Petrofina (Great Britain) Ltd v Martin 9 the definition of the clause of restrain of
trade had been provided. It had been stated by Lord Diplock that restraint of trade is a clause
which aims to restrict the right of either of the parties to the contract upon his consent to engage
in trading with third parties outside the contract in a manner proposed by the contraventee.
However, in Australia the scope of the restraint of rade clause has been significantly reduced by
the Competition and Consumer Act 2010 (Cth). Restraint of trade clauses cannot conflict with
the provisions of the Competition and Consumer Act 2010 (Cth). Reasonableness is a key
element of the restraint of Trade clauses. An agreement or contract which contains a restraint of
trade clause would be considered to be void except in case such clause aims to protect the
interest of the parties and the interest of the public as held in the case Adamson v New South
Wales Rugby League Ltd 10. For the purpose of assessing whether the time period for which the
restraint of trade clause would be valid, the courts generally take into consideration the time
when the restraint of trade clause had been imposed instead on the time when such clause was
sought or challenged. In the case Vancouver Malt and Sake Brewing v Vancouver
Breweries11 it was held that a mere protection against competition cannot be considered to be a
legitimate interest.
Application
In this given scenario it has been clearly provided that the contract of employment of Dante
contained the restraint of trade clause which prevented him from opening a business or supplying
the clients of Fran separately for a period of one year after the apprenticeship. This clause can be
held to be unreasonable as it aims to provide protection against competition to Fran according to
9 [1966] Ch 146
10 (1991) 31 FCR 242
11 [1934] AC 181

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the Vancouver Malt and Sake Brewing v Vancouver Breweries case. Thus after analyzing the
facts f the case and applying the legal provisions to the same, it can be stated that Fran cannot
enforce the restraint of trade contract on Dante as it is unreasonable.
Conclusion
Thus to conclude, it can be said that Fran cannot enforce the restraint of trade clause on Dante.
Question four:
Issue
In this given case study the issue that can be identified is whether Arjun can get free supply of
chocolates for a month for recommending an assistant to Fran.
Law:
The principle of a unilateral offer is applicable inn this scenario. The case Carlill v Carbolic
Smoke Ball Co12 is one in which the principle of unilateral offer had been first illustrated. In this
case it had been held by the court that the offer involved was a unilateral offer. It was held that
Mrs Carlil had accepted such offer and performed the terms of the offer. Therefore the Carbolic
Smokeball company was bound to pay her the reward as mentioned in the advertisement.
Application
Thus by the assessing the facts as provided in the given scenario, it can be stated that Fran had
put up advertisement on the window of her shop. It was clearly mentioned in the advertisement
that any person who recommends an assistant for Fran’s business would be entitled to receive
free supply of chocolates for one month. Arjun had clearly acted as per the terms of
12 [1893] 1 QB 256

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advertisement. He had recommended his neighbor as the assistant. Therefore by the application
of the Carllil V Carbolic Smoke ball case it can be said that Arjun performed the terms of terms
of the advertisement and therefore is entitled to receive the reward.
Conclusion
Thus to conclude, it can be said that Arjun is entitled to receive free supply of chocolates for one
month.