Case Study Analysis

Running head: CASE STUDY ANALYSIS
CASE STUDY ANALYSIS
Name of the Student:
Name of the University:
Author Note:

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CASE STUDY ANALYSIS
A Part:
Issues:
The issue to be analyzed in the given case study is that how the contract between John
and the store Span and Spic is being formed.
Laws:
According to the Common Law principle, a valid contract is formed after all its essential
criteria are to be satisfied (Stone and Devenney 2017). Under the common law, a contract is
formed out of an agreement, legally enforceable between the parties to the contract and that
agreement consists of the terms that determine the corresponding rights and duties of parties in
such agreement. This is entrenched in the famous Commonwealth Bank of Australia v Barker
[2014] HCA 32 case which states that mutual obligations and confidence among the parties must
be always present in an agreement. Similar observation was also made in Shaw v State of New
South Wales [2012] NSWCA 102.
In order to form a valid contract, few essential conditions are to be satisfied. the first
important condition of a valid contract is the presence of an agreement (McKendrick and Liu
2015). An agreement is usually formed by an offer made by a party to another who accepted it as
given in the case of MacRobertson Miller Airline Services v Commissioner of State
Taxation (WA) (1975) 133 CLR 125. To initiate an agreement, offer must be made which is
done by showing eagerness and intention of a party to bind in a legal relation with another. The
intention of the party is considered objectively by the court as seen in the decision of Brambles
Holdings Limited v Bathurst City Council [2001] NSWCA 61, Court of Appeal (NSW). In

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CASE STUDY ANALYSIS
this case, the court held that The offer made by such party must be communicated to the other
party by any suitable means. This is observed in the case of R v Clarke [1927] HCA 47, (1927)
40 CLR 227, High Court. In this case, it was decided that to create a contract, it is required to
show that the parties must act in good faith. There cannot be any unilateral contract as decided in
the case of Mobil Oil Australia Ltd v Lyndel Nominees Pty Ltd [1998] 205 FCA; Mobil Oil
Australia v Wellcome International (1998) 81 FCR 475. The party who makes the offer is
known as offeror and the party who accepts it is called as the offeree.
However, there lies a difference between the offer and the invitation to offer. This
distinction is given in a detailed manner in the case of AGC (Advances) Ltd v McWhirter
(1977) 1 BLR 9454 (Supreme Court of NSW). Invitation to offer or treat means a request in
general not to any specific person or party to offer to involve in to negotiations resulting a
contract. For example, items displayed to sell is an invitation to offer as seen in Pharmaceutical
Society of GB v Boots Cash Chemists (Southern) Ltd [1956] EWCA 6, [1953] 1 QB 401,
Court of Appeal (England and Wales). Similarly, board containing price of objects or services
is also regarded as the invitation to deal or offer.
In order to form the agreement, the offer made must be accepted by another part. Unless
it is accepted, no agreement is formed. Similar to offer, acceptance is to be communicated too as
observed in the case of Bressan v Squires [1974] 2 NSWLR 460. Acceptance is to be made in
response to offer as seen in Crown v Clarke (1927) 40 CLR 227 (High Court) case. in the case
of Gibson v Manchester City Council 1979 1 WLR 24, the court held that agreement only
exists when there lies a clear offer which is accepted. Moreover, acceptance need not to be
express always and can be implied from the conduct of the parties to whom it is made as seen in
Tonitto v Bassal (1992) 28 NSWLR 564 where it is seen that option to purchase land is not

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CASE STUDY ANALYSIS
validly executed when three documents were needed to be sent and one was sent for some other
reason previously. Moreover, acceptance cannot be unequivocal as seen in Spencer's Pictures
Ltd v Cosens [1918] NSWStRp 1, (1918) 18 SR (NSW) 102, Supreme Court (NSW,
Australia).
The second important aspect of any contract is the existence of consideration. A promise
made out of offer and acceptance can be enforced only if it is supported by a suitable
consideration as observed in decision of Beaton v McDivitt (1987) 13 NSWLR 162. It is not
necessary that to constitute a valid consideration only monetary deposit is to be considered.
Consideration can be money or a promise to perform or to not perform a particular act as held in
Woolworths Ltd v Kelly (1991) 22 NSWLR 189. As per Australian law of contract, there is no
definite rule to determine the sufficiency of the consideration, it should be just present. The
amount or nature of consideration may vary with the parties. Consideration can also include love
and affection as observed in the case of Director of Public Prosecutions for Victoria v Le
[2007] HCA 52, (2007) 232 CLR 562, High Court. However, it has been decided unanimously
in several cases that past consideration is not a sufficient consideration as seen in Harrington v
Taylor 36 SE 2d 227 (1945) case. It is seen in the case of Musumeci v Winadell Pty Ltd
(1994) 34 NSWLR 723. In the similar manner, an agreement with illusory consideration is void
in the eye of law as given in Thorby v Goldberg [1964] HCA 41, (1964) 112 CLR 597, High
Court.
The third essential of a contract is the parties’ capacity to create contract. Certain persons
are strictly prohibited by law to contract as they lack capacity to contract as held in Gibbons v
Wright (1954) 91 CLR 423 (High Court). If they enter in to contract, it will be regarded as
void. Drunken person is prohibited to enter in to contract as decided in the case of Blomley v