MLC707 Commercial And Corporations Law

deakin law school

CONTRACT 2
Contents
Question 1........................................................................................................................................4
Issue.............................................................................................................................................4
Rule..............................................................................................................................................4
Contract Formation..................................................................................................................4
Breach of Contract...................................................................................................................6
Application..................................................................................................................................7
Contract Formation..................................................................................................................7
Breach of Contract...................................................................................................................8
Conclusion...................................................................................................................................8
Question 2........................................................................................................................................8
Issue.............................................................................................................................................8
Rule..............................................................................................................................................9
Contract Formation..................................................................................................................9
Breach of Contract.................................................................................................................11
Vitiating Factors....................................................................................................................11
Misrepresentation..................................................................................................................11

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Application................................................................................................................................13
Contract Formation................................................................................................................13
Breach of Contract.................................................................................................................14
Vitiating Factors....................................................................................................................15
Misrepresentation..................................................................................................................16
Conclusion.................................................................................................................................17
References......................................................................................................................................18
Legislation.................................................................................................................................21
Cases..........................................................................................................................................21

CONTRACT 4
Question 1
Issue
The key issue in this case relates to the formation of a contract between Ian and Amy on the
basis of the Facebook advert. And, in case a contract has been formed, does that give Ian any
remedies for a breach of contract on part of Amy?
Rule
Contract Formation
A contract is such a document through which one party promises to undergo a particular thing
and the other party promises to pay the requisite consideration. A contract is an agreement,
which has legal validity due to presence of certain elements in it (Blum 2007, p. 2). These
elements include the elements of agreement, i.e., offer and acceptance, consideration, intention,
capacity, consent and clarity (Miller & Cross 2015, p. 257). When all of these elements come
together, in a single agreement, the agreement transforms into a contract, which gets a legal
validity and makes the contracting parties contractually obligated to perform the promise stated
in the contract. There are different modes of forming a contract, for instance, by verbally
exchanging the contractual terms, the contract can be formed. In the similar manner, by stating
down on a document, the terms on which the contract is based, a written contract is formed
(Mau, 2010 p. 5).
The first step for creating a contract is the establishing the presence of agreement, i.e., offer and
acceptance. An offer is the initiating point of the contract, where one party offers certain terms to

CONTRACT 5
another (Frey 2015, p. 29). It is important that an offer is clearly differentiated from an invitation
to treat as there is a key difference between these two. The first major difference is that the
invitation to treat shows that the parties want to start negotiating for the contract, whereas the
offer shows that the parties want to get into a contract. Also, the offer is needed for contract
formation compulsorily, whereas an invitation to treat is not present in every case. In order to
understand the difference between an offer and an invitation to treat, the facts of the particular
case have to be taken into consideration (Poole 2016, p. 37).
In the case of Pharmaceutical Society of Great Britain v Boots [1953] 1 QB 401, the case of
invitation to treat was established. This was due to the fact that the goods which are kept by the
seller on their shop window were deemed as an invitation to treat and not an offer. This meant
that the seller was not required to sell the products kept on shelf, as the same was not an offer till
it was taken to the billing counter (E-Law Resources 2017a). Similarly, in the case of Partridge v
Crittenden [1968] 2 All ER 421, the court held that the adverts which are given in magazines and
newspapers are not an offer and in general are to be taken as an invitation to treat (E-Law
Resources 2017b). However, where such advert contains such terms, which can be accepted by
acting upon them, it would be deemed as a unilateral offer and a noteworthy case in this regard is
that of Carlill v Carbolic Smoke Ball Company [1893] 1 QB 256 (E-Law Resources 2017c).
There are certain other communications which are not given the status of either an offer or an
invitation to treat. A request for information, in Harvey v Facey [1893] AC 552, in the statement
made in this case was not considered as an offer (E-Law Resources 2017d). Gibson v
Manchester City Council [1979] UKHL 6 saw the wordings “may be prepared to sell” was to be
construed as just an announcement of price. Further, it was not a different offer, as this

CONTRACT 6
information was required just for the purpose of supplementing the original offer which was
made (Swarb 2016).
The second part of the agreement element in contract formation is the acceptance. It is very
crucial that the acceptance is given to the offer which was made and by the person to which the
offer had been made (Helewitz 2010, p. 28). The acceptance has to be given to the offer which
was made and in the exact manner of it being made. In case there is any change in the
communication of acceptance, regarding the contractual offer, the communication is not given
the status of acceptance; and instead, is considered as a counter offer. Hyde v. Wrench (1840) 3
Beav 334 provided that in such cases, the original offer comes to an end (McKendrick 2014, p.
80). Another important point regarding acceptance is that it has to be properly communicated.
Felthouse v Bindley (1862) EWHC CP J35 saw the court holding that a mere silence is not an
acceptance (E-Law Resources 2017e).
The date of offer and acceptance are also of importance. When the communication regarding the
offer or acceptance reaches the other party that would be date of offer and acceptance. In the
cases of emails, in the jurisdiction of Australia, the Electronic Transactions Act, 1999 (Cth) is
applicable. Under section 14 of this act, the date for email is to be taken as such date on which
the email is sent from the sender’s electronic device and this is the date of acceptance or offer,
depending upon the communication made (Federal Register of Legislation 2011). This is similar
to that of the postal rules of acceptance in which the date of actual receipt of the communication
is irrelevant and the date of sending is the date of offer/ acceptance (Andrews 2015, p. 51).