Understanding Contract Law and Essential Elements

This report reveals the key understanding of the contract law and essential elements which needs to be fully filled by the parties to the contract to formulate a contract. It is analyzed that both the parties to the contract needs to the legal party and would meet the essentials of the contract.

Running head: CONTRACT LAW
Contract Law

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Introduction
This report reveals the key understanding of the contract law and essential elements which needs
to be fully filled by the parties to the contract to formulate a contract. It is analyzed that both the
parties to the contract needs to the legal party and would meet the essentials of the contract. The
legal contract is based on the consideration, legal relation, acceptance, terms, and conditions.
This report divulges the key understanding of the legal clauses for the contract and remedies
which aggrieved party could take in the failure of the performance of the contract by another
party.
Question 1 (A)
Issue
Does the contract had been formed between the cafe and Avinash?
Rule
In order to formulate a contract, there need to be at least two parties involved in the agreement.
The contact is constructed when both the parties accept the terms and conditions as may be
decided in the agreement. There are various essential elements of the contract that are required
to be fulfilled to construct a legal contract. The five essential elements of the contract are:-
Offer
An offer is the statement of terms that have been mentioned by the party in the undertaken
agreement. In the case of Australian Woolen Mills v The commonwealth case1., it was held that
the offer needs to be made by the party to the contract to other parties in order to formulate a
contract. However, other parties can negotiate on the terms that have been made by the offeror.
It is determined as an invitation to accept the offer2.
Acceptance
In order to formulate a contract, there needs to be an acceptance. The party who accepts the
terms called offeree. If the party satisfies with the terms then the party will accept the offer.
1 [1954] HCA 20; 92 CLR 424]
2 , Rod Thomas. "The Interpretation of Documents on the Register: Issues for England and Wales, Australia and
New Zealand." )(2019)17(3)Australia and New Zealand

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Consideration
It is an important element of a contract. It is considered that any amount which has been
paid in against of promise is called consideration. Any type of amount that has been paid for the
goods and services creates a consideration. In case of Carlill v Carbolic Smoke Ball Co. Carlill
v Carbolic Smoke Ball Company [1892] EWCA Civ 13, it was held that the court gave the
jurisdiction that in order to form a contract there needs to be legal consideration between the
parties to the contract. In the given case, the contract is based on the unilateral offer which was
made through the advertisement and Mrs. Carill accepted the conditions stated in the offer. Thus,
Mrs. Carill had paid the amount and will be considered as consideration for the contract.
Intention to create legal relations
It is analyzed that in order to formulate a contract, both the parties need to have the intention to
create legal relations while making an agreement. The legal relationship between the party is
made by accepting the offer and providing consideration.
Capacity in entering into a contract
According to the Australian contract law, it is found that the person who attains the age of 18 is
called the major and could enter into the contract. Provided that, the parties to the contract should
not be of unsound mind and prohibited by law.
Application
In the given scenario, it was held that Avinash ordered coffee through an automatic
machine in which the clause was given on the back side of the café. It was found that there were
no responsibilities of the Café for the coffee served and the cafe does not take any responsibility
if any damage happened to the customer. As in accordance with the contract rules, if any party
makes an offer and other party accepts with the legal consideration and given terms and
conditions then there would be a legal contract. In this case, the offer had been made by the cafe
in which the terms had been mentioned and the Avinash has accepted the offer by giving
consideration. In the case held Carlill v Carbolic Smoke Ball Co. Carlill v Carbolic Smoke Ball
3 Carlill v Carbolic Smoke Ball Co. Carlill v Carbolic Smoke Ball Company [1892] EWCA Civ
1,

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Company [1892] EWCA Civ 14, when party to the agreement accepts the terms paid the
consideration that means the contract has been executed. Both parties cannot withdraw from the
contract. Thus the contract had been executed between the Avinash and the cafe.
Conclusion
After analyzing the case, it could be inferred that the essentials of the contract had been fulfilled
in the scenario. Therefore it has been concluded that the contract has been made between the
Avinash and the cafe. However, Avinash could go to consumer protection court to ask for
remedies and compensation.
Question 1 (B)
Issue
Whether Avinash will be considered as a consumer or not under Competition and Consumer Act
2010 and under the common law?
Whether the cafe is entitled to pay compensation to Avinash or rely on their ticket to avoid its
liability?
Rule
The Competition and Consumer Protection Act 2010 aims to protect consumers from unfair trade
practices and ensure fair competition. This unfair trade practice includes
 False representation
 Misleading conduct (for goods, for services and in employment)
 Unsubstantial claims
Who is a Consumer?
According to Competition, a consumer is defined as a person who
 Acquires goods as a consumer if:
 a person has acquired particular goods not exceeding $40000;
 the goods are purchased for domestic, personal and household use;
4 Carlill v Carbolic Smoke Ball Co. Carlill v Carbolic Smoke Ball Company [1892] EWCA Civ
1,

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 the goods purchased for the transport of goods on public roads
 paid the desired price for the goods or service acquired
However the above does not apply to the goods which are acquired for:
 the purpose of re-supply;
 for the purpose of transforming them in trade and commerce5
 Acquires services as a consumer if:
 The amount payable for services does not exceed $40000;
 The services are acquired for domestic, personal or household use.
Cases under which consumer can seek compensation
A consumer can seek compensation from the manufacturer/supplier/service provider under the
following circumstances:
1. If the supplier has provided goods with safety issues
2. If the goods have caused loss or damage.
Rights available to a consumer under the Act
There are some of the rights which are available to consumers under the act which includes:
 Protection in the area of unfair contract terms
 Right to product safety
 Protection against unsolicited consumer agreements6
In the case Reckitt Benckiser (Australia) Pty Limited v Procter & Gamble Australia Pty
Limited- [2015] FCA 753 7, the court ruled in this case that in accordance with Australian
consumer protection law that protects the rights of the consumer had been breached.
5 Muntaha A Abdulwahid., et al. "Translating Legal Collocations in Contract Agreements by Iraqi EFL Students-
Translators." (2017) 5(1) International Journal of Education and Literacy Studies 55-68
6 Alison Mclean, Cameron Stewart, and Ian Kerridge. "Untested, unproven, and unethical: the promotion and
provision of autologous stem cell therapies in Australia." (2015) 6(1)Stem cell research & therapy 33.
7 [2018] FCA 378

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Applicability
As per the facts of the case, it can be held that Avinash is a consumer as per the Competition and
Consumer Act 2010 as he
 Acquires a service costing $7.50 (not exceeding $40000)
 He had paid the desired price before receiving the service
 He had acquired goods for his immediate consumption and not for resupply or
transformation in trade and commerce.
`As a consumer, Avinash has a “right to product safety” and he can exercise his right and claim
compensation in case of any injury, damage or loss. As established in the case of Reckitt
Benckiser (Australia) Pty Limited v Procter & Gamble Australia Pty Limited- [2015] FCA
753 that it was the breach of the consumer law that protects the rights of the consumer.
Therefore, Avinash would be liable to take compensation for his loss and could ask for the
remedies from the court.
Conclusion
It can be concluded by the rules and provisions of the act that:
1. Avinash is a consumer as it complies with the definitions prescribed in the law;
2. The cafe would be liable to compensate for Avinash as he has suffered loss from the
purchased goods. The manufacturer/supplier/service provider owes a duty of care to the
acquirer and ensures their safety against any injury, loss or damage.
Therefore, the piece of metal which was found in the pastry was negligence on part of the
management of the cafe. Therefore, the clause printed on the backside of the ticket does not hold
valid and the cafe has the whole responsibility to compensate his injury and the claim of Avinash
is right that "he is a consumer and he has a right"
Question-2
Express and Implied Contracts
Express Contracts

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It is considered that an express contract is a contract which is orally or verbally expressed
in words. It is much easier to legally bind an express contract. In express contracts, terms and
conditions are mentioned in detail which includes details like term, duration, consideration,
delivery. It is easy to understand and denotes a valid acceptance.
Implied contracts
These are the contracts which are not specifically communicated but are implied on the
parties. Implied contracts are based on actions, behaviors' and intention of the parties. They may
be ambiguous at times. For example, in the case study the cause was given that was implied but
the damage that has happened to Avinash, the cafe cannot take his responsibility by stating that
the clause was given behind the ticket. It is ambiguous in these cases8.
Express vs. implied Contracts (How they are significantly different with each other)
A contract is said to be express when it is clearly communicated to the other party. All the terms
must be verbally, orally or in written form communicate to the other party without any ambiguity
and it must be agreed by both the parties and any change must also be clearly communicated. All
the essentials of a valid contract are necessary for an express agreement.
Implied contract, on the other hand, are based on the parties behaviors’ and circumstances. It
may also involve one party benefiting from their actions towards another. Here, the terms and
conditions are inferred by the parties.These are of two kinds:
 Implied in law contracts
 Implied in fact contracts
Implied in law contracts are obvious and straight forward and the parties know the circumstances
in which they are to be performed and what will be implied on them. For example, if you visit a
restaurant and order food, it is obvious that you will pay the bill. This is an implied in fact
contract. These contracts are enforceable as express contracts. This shows the legal obligation
and bound to be performed without any consent.
Implied in fact contracts:
8 Eesa Allie Fredericks. "The common-law authors on contractual capacity in private international law."
(2015) 36(3) Obiter 762-768.

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These are not actual contracts and are also called as quasi-contracts. In these contacts, the court
decides the enforceability and can be called legal when the court agreed with the same. In these
contracts at least one essential element of contract i.e. the mutual consent is missing. The court
may interfere in these types of contracts if:
 one party has benefited on other party's expense
 there was an injustice to any of the parties
Hence these types of agreements are significantly different from each other. As per the case
Hendrickson v. Meredith, 161 Va. 193, 204, 170 S.E. 6029 it was held that there is a difference
between express and implied in law contracts as in the former all terms are clearly
communicated and in latter, the terms are based on the conduct of the parties10.
Conclusion
This case has reflected that contract law and consumer law both are different and the
formulation of the contract has no legal relationship with the compensation. However, in order
to formulate the contract, a party to the contract needs to be meet only essential elements of the
contract. Nonetheless, for the compensation, and performance of contract legal remedies, tort,
consumer acts and injections could be used by other parties.
9 161 Va. 193 (Va. 1933)
10 Louise Floyd, "SETTLING THE CONTRACT: ESSENTIALS OF FORMATION AND
CHARACTERISATION." (2018) 98(2)Employment, Labour and Industrial Law in Australia : 1-36

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Bibliography
Articles/Books/Reports
Abdulwahid, Muntaha A., et al. "Translating Legal Collocations in Contract Agreements by
Iraqi EFL Students-Translators." (2017) 5(1) International Journal of Education and Literacy
Studies 55-68
Case Laws
Reckitt Benckiser(Australia) Pty Limited v Procter & Gamble Australia Pty Limited [2018]
FCA 378
'Hendrickson vs. Meredith' 161 Va. 193 (Va. 1933)
Australian Woolen Mills v The Commonwealth [1954] HCA 20; 92 CLR 424]
Carlill v Carbolic Smoke Ball Co Court of Appeal [1893] 1 QB 256; [1892] EWCA Civ 1
Other
Thomas, Rod. "The Interpretation of Documents on the Register: Issues for England and
Wales, Australia and New Zealand." )(2019)17(3)Australia and New Zealand
Fredericks, Eesa Allie. "The common-law authors on contractual capacity in private
international law." (2015) 36(3) Obiter
Floyd, Louise, et al. "SETTLING THE CONTRACT: ESSENTIALS OF FORMATION AND
CHARACTERISATION." (2018) 98(2)Employment, Labour and Industrial Law in Australia:
1-36
McLean, Alison, Cameron Stewart, and Ian Kerridge. "Untested, unproven, and unethical: the
promotion and provision of autologous stem cell therapies in Australia." (2015) 6(1)Stem cell
research & therapy 33.