Contract Law: Validity, Mistake, and Breach of Contract

Running head: CONTRACT LAW
CONTRACT LAW
Name of the Student:
Name of the University:
Author Note:

CONTRACT LAW1
Answer a
Issue:
Issue here is whether there exists any contract with Johnny.
Rule:
A contract refers to a written or oral agreement that can be enforced legally between two
or more parties in presence of a valid consideration. For resulting into a perfectly valid contract,
the essential elements shall be present. Those elements are agreement, intention, consideration
and capacity.
The foundation of any contract lies on the agreement. An agreement is whether valid is
decided on the basis of the offer and acceptance in a valid manner. This has been validated in R v
Clarke [1927] HCA 47, (1927) 40 CLR 227. Offer refers to the intention or desire of a party
called the offeror to initiate a contract based on some definite and particular terms as observed in
Australian Woollen Mills Pty Ltd v The Commonwealth [1954] HCA 20, (1954) 92 CLR 424.
But, invitation to treat/offer is different from offer. An advertisement cannot be regarded
as an offer but an invitation to offer/treat as construed in Carlill v Carbolic Smoke Ball Co
(1893). Similarly, auctions fall under the ambit of invitation to treat. Invitation to treat is a call
made to people asking them to respond to such invitation by making a response in the form of
offer. This is entrenched in Pharmaceutical Society of GB v Boots Cash Chemists (Southern) Ltd
[1956] EWCA 6, [1953] 1 QB 401.
An offer when accepted results into a valid agreement. However, such acceptance must
be done validly. The acceptance to an offer happens when the other contracting party agrees with

CONTRACT LAW2
the offer made to him showing his eagerness to be bound by the offer made to him as in Banks v
Williams [1912] NSWStRp 55, (1912) 12 SR (NSW) 382. However the acceptance must be
correlating and corresponding with the offer as in Tonitto v Bassal (1992) 28 NSWLR 564 and
unequivocal as in Appleby v Johnson (1874) LR 9 CP 158. The offeror must be informed by a
communication that the offeree has accepted the offer as in Felthouse v Bindley [1862] EWHC
J35, [1862] 142 ER 1037. When all these are satisfied, a valid agreement is formed.
Another element is presence of a valid consideration which can be a promise or money as
in Woolworths Ltd v Kelly (1991) 22 NSWLR 189. A contract is said to be enforceable and valid
only if it is done in exchange of consideration as in Beaton v McDivitt (1987) 13 NSWLR 162.
Moreover the parties must have intention to legally bind agreement pertaining to the
contract between the parties to the contract. In commercial contract, the legal intention is
presumed to exist among the contracting parties as in Helmos Enterprises Pty Ltd v Jaylor Pty
Ltd [2005] NSWCA 235, Court of Appeal (NSW).
The parties shall be having the capability as well as capacity to create an agreement of
contract as in Blomley v Ryan [1956] HCA 81, (1956) 99 CLR 362, High Court. Such contract
must not illegal or against public policy as in Fitzgerald v F J Leonhardt Pty Ltd [1997] HCA
17, (1997) 189 CLR 215, High Court.
A valid contract is formed when all these elements are present.
Application:

CONTRACT LAW3
Here Johnny owned a restaurant where he appointed Summer as the sales and marketing
representative for the purpose of designing and launching a new website. After the launch of the
new website, the prices are modified which marked a 15% increase on all food items.
After few weeks Li makes a booking of wedding by the use of the menu he found on the
table of the restaurant. The menu card was showing old prices. The menu can be regarded as the
invitation to offer as laid in Pharmaceutical Society of GB v Boots Cash Chemists (Southern) Ltd
[1956] EWCA 6, [1953] 1 QB 401, Court of Appeal (England and Wales).
When Li makes the booking, it amounts to the offer of an agreement responding to such
invitation. Offer is accepted by Summer leading to the creation of a valid agreement as seen in
Carlill v Carbolic Smoke Ball Company [1892] EWCA 1, [1893] 1 QB 256.
The agreement was supported by consideration paid by Li in the form of deposit made by
him. Moreover, it is an agreement of commercial nature where the parties have intention to
enforce a legally executable contract. The parties are having the required capacity and capability
to enter into an agreement pertaining to the contract and moreover, the contract does not oppose
any public policy or illegal. Hence a valid contract is formed between Li and Johnny being the
owner of the restaurant. This is because a principal is liable for the acts of his agents.
Conclusion:
There exists a valid contract between Johnny and Li.
Answer b:
Issue: