Contract Law: Essentials of a Valid Contract and Vitiating Factors

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

CONTRACT LAW1
(a) Issue:
The issue arising here is whether there exists any contract where Johnny is a party to it.
Rules:
A contract is regarded as an agreement between two or more parties having legal
intension to give effect to it, supported by consideration for doing any lawful act. Thus the
essentials of any valid contract are agreement, consideration, intention of the parties and
legal object of the contract.
The first essential agreement of a contract is the existence of legal intention of the parties
entering the contract. Usually commercial agreements are said to be entered by the parties
having legal intention to affect it as seen in Ermogenous v Greek Orthodox Community of SA
Inc (2002) 209 CLR 95.
The second element is the presence of consideration which can be either in the form of
money or anything or even services as in Pao On v Lau Yiu Long [1980] AC 614. The
consideration must be of value the magnitude of which does not matter as seen in Currie v Misa
(1876) 1 AC 554. It can be in the form of a token amount as seen in Thomas v Thomas (1842)
114 ER 330.
Thirdly, the contract must be for any legal object else it will turn void. Such contract
must not be against public policy or for any illegal purpose. This can be supported by Lindner v
Murdock’s Garage (1950) 83 CLR 628 where restraint of trade makes the contract illegal.
Similarly in Pearce v Brooks (1866) LR 1 Exch 213 the contract turned illegal as it was against
public policy.

CONTRACT LAW2
The last essential is the presence of a valid agreement consisting of an offer and
acceptance. Offer means an indication given by the offeror, a party that he is ready to create an
agreement. In response, if the offeree also shows that he is ready to contract on the offered terms
then acceptance occurs which results into a contract. However, advertisement is not an offer but
an invitation to offer as in Partridge v Crittenden [1968] 2 All ER 421. Similarly, menu card also
denotes an invitation ad not mere offer.
Further the parties must possess the capacity to contract as some parties like minor,
lunatics and others are barred from entering into a contract as seen in Blomley v Ryan [1956]
HCA 81, (1956) 99 CLR 362.
When all these conditions are satisfied, a valid contract is formed. However, if one of the
parties to the contract has committed some mistake, then the court can set aside such contract if it
appears to the court else it will declare the contract void if it appears unconscionable if the
transaction is enforced in those situations as found in Taylor v Johnson (1983) 151 CLR 422.
Application:
It is observed that after the prices get modified, Li visited the Restaurant booked for
wedding by using their menu lying on the table. The menu card here does not contain the
modified price. This menu card acts like an invitation in response of which offer is made by Li.
Summer accepted the offer. This forms an agreement. Abu from the accounts department
accepted the price which forms the agreement. Here the parties have the capacity plus intention
to enter into the contract. Moreover, the object is legal. All these result into a valid contract
formation. But since Li made a mistake on accepting the offer at the unmodified prices and the
court can set aside such contract if it appears to the court else it will declare the contract void if it