Contract Law: Analyzing the Validity of Agreements in a Business Context

1
Contents
Answer 1.............................................................................................................................. 2
I.......................................................................................................................................... 2
Issue................................................................................................................................. 2
Applicable law.................................................................................................................... 2
Application of Law............................................................................................................... 3
Conclusion......................................................................................................................... 4
II......................................................................................................................................... 4
Issue................................................................................................................................. 4
Applicable law.................................................................................................................... 4
Application of Law............................................................................................................... 5
Conclusion......................................................................................................................... 6
Solution 2............................................................................................................................. 6
Reference List........................................................................................................................ 9
1

2
Answer 1
I.
Issue
Whether a contractual association is established amid Avinash and Magda?
Applicable law
A contract is a legal document which is made amid two parties, offeror and offeree, wherein
these parties exchange promises which are hold up with some gain (consideration), intention
and capacity of the parties. When all these constituents of a contract are present together at
the same time, when the promises are exchanged amid the parties, then, there is a valid
contract amid the parties. (Collins 2003)
An offer is the element which is the starting point of any contract. The offeror makes a
statement to the offeree with an expectation that the offeree will comply with the terms of the
statement and this communication of statement is called an offer. In Carlill v Carbolic Smoke
Ball Co (1893) it was held that an offer can be made to one person, to group or to entire
world. It is necessary that the offer must be communicated to the offeree in order to make it
binding in nature. But, it is necessary that if the offeror does not want to abide by the offer
then he must cancel the same before its approval and is held in the leading case of Byrne v
Van Tienhoven (1880).
An offeror can make an offer and ask the offeree to give his acceptance in a specific period of
time. Such offers can be accepted within the time frame provided by the offeror but to hold
the offer for such specific time it is necessary that the offeree must provide some value and is
held in Errington v Errington Woods [1952]. If no value is provided then there cannot be an
open offer and the offeror can revoke the same.
When the inviter instead of making offer, ask for offers by issuing advertisement, holding
auction, opening tenders, etc, then it is an invitation to treat. In Partridge v Crittenden (1968)
2

3
the advertisement was construed as invitation and any person can make offer to the inviter
based on the invitation and when the same is approved by offeree then there is contract.
The offeree when confirms the offer as per the terms of the offer, it is then acceptance in law.
But, when terms are altered by the offeree then it is not valid acceptance and is counter offer
and is held in Hyde v Wrench (1840). The counter offer terminates the original offer and it is
the counter offer which requires acceptance to make a valid contract.
The offer and acceptance must be hold with some benefit to make it legal and enforceable in
law and is called consideration and is held in Combe v Combe [1951].
When the offer and acceptance is made by the parties then it is held in Jones v
Padavatton [1969] that the same must be made with the intention to enforce the same in court
and thus there must be presence of legal intention.
It is also necessary that the parties to the contract are sound in mind and have attained the age
of majority to make them eligible for contract formation and is held in Nash v Inman [1908].
All the elements together make a valid contract.
Application of Law
Magda sale her prints with the help of website and her store and has issued an advertisement
for the sale of Paris Stilton poster for $2000.
As per Partridge v Crittenden, Magda has made an invitation to treat and no an offer.
Avinash on the basis of the invitation made an offer to Magda to buy the portrait for $1600
on 19th February. Magda did not approve the offer and revert to sell the portrait for $1800. So,
as per Hyde v Wrench, a counter offer is made by Magda which cancel the offer of Avinash.
Avinash likes the new offer but want to hold the same till 1st February. But as per Errington v
Errington Woods since no supporting benefit is attached, thus, Magda is fully entitled to
cancel the offer made to Avinash.
3

4
Now, on 20th, Avinash confirms the offer of Magda but with a ore condition and requires
certificate of authenticity. This is not a pure acceptance but an acceptance with altered terms
and thus counter offer.
This offer is not accepted by Magda. But, by sending an email she herself made a new offer
to sell the painting to Avinash for $1800 along with certificate provided acceptance is
received by 4PM the same day. But no acceptance is made and thus the offer is cancelled by
lapse of time.
So, later an acceptable by Avinash has no value. Also, Magda has cancelled her offer the
acceptance of Avinash, so, there is no contract.
Conclusion
No contract amid Avinash and Magda.
II.
Issue
i. Whether Elton is consumer?
ii. Is Magda violated terms?
iii. Whether Magda is liable under misstatements?
Applicable law
A contract is the combination of an agreement with consideration, legal intention and
capacity. The terms of the contract are obligatory on the parties. Apart from contractual
terms, the Australian consumer law has laid down few implied terms which a manufacture or
seller of the product should comply against the consumer.
According to section 3 of ACL, a consumer is a person who buys goods under value $40,000
(regardless for what reason it is purchased) or if the value if more than 4 40,000 then only for
domestic/personal use. (Corones 2012)
The implied terms include: (McKendrick & Liu 2015)
4