Commercial and Corporation Law: Contractual Obligations Case Study

This article discusses the contractual obligations case study in Commercial and Corporation Law. It covers the essential elements of a valid contract, offer and acceptance, consideration, and certainty. The article also analyzes the contracts formed between Nick and John, Nick and the police, Nick and Hanson, and Nick and Ian.

Running head: COMMERCIAL AND CORPORATION LAW
Commercial and Corporation Law
Name of the Student
Name of the University
Author note

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Issue:
The issue of these contractual obligations consisted between the following:
a. Nick and John
b. Nick and
c. Nick and Hanson
d. Nick and Ian
The situation of the case study states that Nick was the leader of a political party,
which was formed presently and he had arranged a rally that was a component of the
campaign. This particular rally had attained plenty of unforeseeable losses. Thus, Nick did
not succeed in clearing the payments because of the losses to the various parties as it was
promised. Nick was not being able to make progress with the money, which he owed to him
by a few particular parties. If the obligations of the contract were held valid and it existed
between all the parties, Nick would have then cleared the payments that he was unable to at
this predicament and will be able to recover the money that he owed to him.
Law
As per the Australian Law, the common principles and their legal conception on the
obligations of the contract have been obtained from the principles of the contract of United
Kingdom. Five common essentials are significant for a contract to be valid. Firstly, an
agreement must be created between the parties. Secondly, a valid lawful consideration must
exist in a contract. Capacity must be present from both the parties for entering into a legally
enforceable agreement. Fourthly, there must be no absence of ambiguity in the contractual
terms. Fifthly, both the parties should have an intention of entering into the agreements,
which can be enforced legally. The judgments that were pronounced existed within the
jurisdiction by which the judicial stand of the terms of the contract developed. Gibson v
Manchester City Council explained the method of offer and acceptance that were dealt
with the reference to agreement between the parties1. Therefore, in such a case, it was held
that a clear and precise form of communication must be made by the offeree, which was
unconditional and therefore the offer must be accepted. If the acceptance has the conditions
attached with it, the contract will not be considered to be an acceptance but a counter-offer.
In the case of in Barry v Davies2, it was observed that the offer and consideration was dealt
with and it was confirmed that a promise can be treated as an enforceable contract only if it
1 Poole, Jill, Textbook On Contract Law (Oxford University Press, 2016).
2 Barry v Davies [2000] EWCA Civ 235, [2000] 1 WLR 1962.

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is a valid contract. However, it was additionally established that as per the Australian Law,
the consideration value is not mandatory but the consideration should be essential. Certainty
is the term which is mentioned above was considered to be an essential of contracts as well.
In the case of Australian Woollen Mills Pty. Ltd. v. The Commonwealth it was concluded
that the terms and obligations of the contract should be clear and concise. Unless the terms
of the contract are separately certain and identifiable, the contract will not be considered to
be a valid one.
Application
a. In this given scenario, it can be stated that Nick had formed a contract with John to
cater at his rally for a total amount of $5000. A clear and precise form of offer and
acceptance can be derived or inferred from the terms as far as the amount of $5000 is
concerned. Such circumstances states that a valid consideration is present for both the
parties. The contractual terms and obligations were clear till the time they were determined.
Nick further offered to pay a bonus of $1000 to John that happened at the end. It had been
observed that acceptance, which can be inferred will go against Gibson v Manchester City
Council but uncertainty will still remain in the terms and consideration of the contract as
Nick will be smoothly running things as he defined in the facts of the case. Hence, it can be
taken into account that there was a vague term that formed from smooth running of things
and cannot be construed by the court without supporting terms3.
b. The rally was engaged with extra security of police to ensure that the opposing
political parties will be unable to create any kind of interference to the commencement of the
rally. For an additional police security, Nick had agreed to pay an amount of $3000 as
consideration. However, in this case both the mentioned terms offer and acceptance are
clear and explicit. Consideration and certainty in this agreement formed a valid contract and
the police was entitled to receive full reimbursement from Nick.
c. This political cause of Nick was supported by Hanson who had given his word on
flying an aircraft over the rally for displaying the flag of the parties. He had promised to
execute the plan free of charge as to which Nick had agreed upon. The terms were clear but
consideration was missing from Hanson. Therefore, as observed in the case of Australian
Woollen Mills Pty. Ltd. v. The Commonwealth4, consideration was missing and thus no
valid contract was formed. However, when the costs of the act crossed the estimate of
3 Davis, Gary. "Taylor v. Johnson: Unilateral Mistake in Australian Contract Law." Monash UL Rev. 11 (1985):
65.
4 Australian Woollen Mills Pty. Ltd. v. The Commonwealth [1954] HCA 20; (1954) 92 CLR 424].

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Hanson, he demanded the money from Nick. He had agreed and promised to reimburse him
during the course. This was held insignificant and vague when the time period is concerned.
d. As seen in the facts, Ian too was a supporter of Nick’s political agenda as he had
promised to pay him an amount of $10000 to help with the expenses of the rally. It was
observed that there was a completely unilateral promise formed and therefore a contract
was not constituted5. However, Ian faced the financial difficulties as he was unable to pay
the sum that was promised6. There was no consideration for Ian in the present scenario and
therefore Nick had no contractual claim over the promised sum of $1000.
Conclusion
Lastly, it can be concluded from the above analysis that Nick and John had formed a
valid contract if the amount of $5000 is taken into consideration but no obligation exists.
Secondly, Nick had a valid contract with the police for additional security. Thirdly, there was
no concluded contract between Nick and Hanson. Fourthly, an unilateral promise cannot be
construed as a contractual obligation and therefore no valid contract was formed between
Ian and Nick.
5 Corones, S. G, Competition Law In Australia (Thomson Reuters Australia, Limited).
6

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References:
Peden, Elisabeth. "Incorporating terms of good faith in contract law in Australia." Sydney L.
Rev. 23 (2001): 222.
Davis, Gary. "Taylor v. Johnson: Unilateral Mistake in Australian Contract Law." Monash UL
Rev. 11 (1985): 65.
Barry v Davies [2000] EWCA Civ 235, [2000] 1 WLR 1962.
Corones, S. G, Competition Law In Australia (Thomson Reuters Australia, Limited).
Halsbury, Hardinge Stanley Giffard, Halsbury's Laws Of Australia (Butterworths, 1991).
Poole, Jill, Textbook On Contract Law (Oxford University Press, 2016).
Australian Woollen Mills Pty. Ltd. v. The Commonwealth [1954] HCA 20; (1954) 92 CLR
424].