CONTRACT LAW1
Question 1:
Issue:
The primary issue to be discussed in this case study is whether there is any valid contract
between Frank and Nick on the basis of which Nick can claim 1000 $ from Frank.
Rules:
Apart from agreement, consideration, capacity, another important element to be
considered in a valid contract is the presence of legal intention of the parties. The presence of an
intention can change an agreement into a legally enforceable contract (Adriaanse 2016). This
was seen in the judgment given in the case of Helmos Enterprises Pty Ltd v Jaylor Pty Ltd
[2005] NSWCA 235. Such element of intention is valid in case of commercial transactions.
However, in case of social and domestic kind of agreement, the parties usually do not have a
legal intention to create a contract and thus in such type of social and domestic kind of
agreement, the parties cannot enforce the contract against one another. There is a general
presumption that parties involved in social and domestic kind of agreement do not possess legal
intention as construed in the decision given in Balfour v Balfour [1919] 2 KB 571. But this
presumption can be ignored if contradicting evidence is found. Instances of contradicting
evidence are supported by an agreement in writing as seen in Errington v Errington Woods
[1952] 1 KB 290, when the parties have separated and departed from one other as observed in
decision of Merritt v Merritt [1970] 1 WLR 1211, or when such agreement involves the rights
and obligations of a third party as observed in Simpkins v Pays [1955] 1 WLR 975. Similar
observation was made in the case of Coward v M.I.B. [1962] 1 All ER 531 CA where it is said
that there lies no legal intention of the party giving pillion lift to his friend.

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