Contract Law: Elements of a Valid Contract and Breach of Contract

Running Head: Contract Law 1
Contract Law
Name of Student
Instructor

Contract Law 2
Issue
Is there an enforceable contract between Dagon and Congregation of the Cthulhu
Mythos Pty Ltd? Did Dagon breach his contract, if any, with Cthulhu Mythos Pty Ltd?
Rule
A legally binding and enforceable contract if formed through an offer, acceptance,
parties having intention to create a legal relation, consideration being moved the parties,
parties having the capacity to enter a contract and the non-existence of any vitiating factors
such as misrepresentation, fraud and mistake.
Application
An offer is an invitation to another person to enter a contract. Where the offer is
accepted there is an agreement. However, the existence of a contract depends on the existence
of other elements of a contract. It not necessary that the offer be made to a single person, it
can be made to a group of people or to the whole world as found in Carlill v Carbolic Smoke
Ball Co1. The offer can only be accepted where it was communicated to the other party 2. In R
v Clarke3 the court found non-existence of a contract. It held that when Clarke accepted the
offer he did not have the offer in his mind. Clarke’s situation was likened to a person who is
ignorant of the offer or not aware of the existence of the offer. In those circumstances there is
no valid agreement or contract.
In this case scenario, Cthuihu Mythos Pty Ltd communicated the offer to Dagos and
Dagos was, also, aware of the terms of the contract. The person, target of the offer, must
accept the offer and communicate acceptance to the person who made the offer. The
communication of the acceptance must be in the manner the person who made offer intended.
Where there has been no waiver of communication, it has to be made expressly or impliedly
1 [1893] 1 QB 256
2 Paul Latimer, Australian Business Law 2012 (CCH Australia Limited, 2011) 321
3 [1927] HCA 47

Contract Law 3
as was held in Felthouse v Bindley4. Where a person makes a counter offer, the initial offer is
considered to be dispensed with and the person cannot purport to accept the same5. This was
the holding in Hyde v Wrench6 where a plaintiff made a counter-offer for purchase of wool
and later purported to accept the initial offer. The court held that there was no contract as
there was no offer to accept. Acceptance of the offer creates an agreement between the
parties. Dagos accepted the offer by signing the contract and sending it to Cthuihu Mythos
Pty Ltd. Under the circumstances there exists an agreement between Dagos and Cthuihu
Mythos Pty Ltd.
Another element is that parties must have intended to create a legal relation. Where
parties have waived or exempted the existence of a legal relationship, the courts have held
non-existence of a contract. In Rose and Frank Company v JR Crompton & Bros Ltd7 an
agreements was stated to be meant for record purposes and not to be treated as a formal. The
court held that there was no contract between the parties but just an agreement and that the
instrument subject of litigation was a honourable pledge. The wording used by the parties
should determine the intention of the parties to create a legal relation. However, in
commercial relationship existence of intention to create legal relation is presumed and the
party disputing the existence of the intention bears the burden of rebutting the presumption8.
The arrangement between Dagos and Cthuihu Mythos Pty Ltd, even though involves religion,
is commercial in nature. The relationship is that of employment, Dagos providing his services
at a cost. The existence of intention to create a legal relationship is, therefore, presumed.
Dagon must have provided consideration in order to claim existence of a legally
binding contract and be able to enforce it9. In Tweddle v Atkinson10 the court refused to
4 (1862) 142 ER 1037
5 Richard Stone, Modern Law of Contract (Psychology Press, 2005) 68
6 (1840) 3 Beav 334
7 [1923] 2 KB 261
8 Marnah Suff, Essential Contract Law, (Cavendish Publishing, 1997) 28
9 Ewan McKendrick and Qiao Liu, Contract Law: Australian Edition (Macmillan International Higher
Education, 2015)
10 (1861) 1 B & S 393