Validity of Agreement between Simon and Julie

Comment on the validity of the agreement between Simon and Julie for the job in February

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Question 1
Issue
The issue is to comment whether Simon and Julie have enacted a valid agreement for the job
in February or not.
Rule
Legal offer and acceptance are considered to be the two main essential elements of an
agreement. The offer would get enforceable for contract formation when it would have been
received by the concerned offeree. However, this aspect is not necessary in case of
acceptance and would be differ based on the type of communication used for conveying the
acceptance. When instantaneous mode (electronic mode) such as email, SMS, calls, telex and
fax would be used by the offeree then the acceptance would become enforceable only when
the offeror’s device has received the acceptance1. The verdict of Entores Ltd v Miles Far East
Corporation2 case is the testimony of this as the acceptance sent by the offeree through
instantaneous mode became enforceable and a contract was enacted between the parties.
Also, it is imperative that the offeree accepts the offer before it gets revoked by the offeror.
Further, it is noticeable that offeree can use any method to send his/her acceptance towards
the offer unless the offeror has specified about the mode of communication as evident from
verdict of Yates Building Co. Ltd v RJ Pulleyn & Son (York) Ltd3.
Application
Julie (offeror) has directed an offer to Simon (offeree) through email which contained the
quotation amount for the job in February that had been inquired by Simon. Julie has also
indicated that the offer would remain valid for acceptance until the week end. Simon also
obtained quotation from other service providers and decided to take the service from Julie as
her quote was lowest. He was worried that she would check the mails on weekends or not and
hence, he used electronic mode of communication i.e. SMS and sent his acceptance for the
offer. The SMS was successfully received by Julie. Based on the common law, it can be said
the instant in which the SMS was successfully received by her, then only the acceptance gets
enforceable and valid contract is enacted. Further, Julie has not specified the mode of
conveying acceptance and thus, sending SMS would not impact the contract formation.
1 Andy Gibson and Douglas Fraser, Business Law (Pearson Publications,2014, 8th edition ) 174
2Entores Ltd v Miles Far East Corporation [1955] EWCA Civ 3
3Yates Building Co. Ltd v RJ Pulleyn & Son (York) Ltd (1975) 237 EG 183
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Conclusion
Simon and Julie would be bounded with a valid contract because the offer gets accepted
before it being expired and thus, both the parties have to satisfied the contractual liabilities.
Question 2
Issue
The issue is to comment whether Peter and Julie have enacted a valid agreement for the job in
the local fundraiser. The presence of consideration for the parties along with the intention to
enter into legal contractual relation would also be discussed based on the given scenario.
Rule
Consideration for the contracting parties is another very essential element for a valid contract
formation as no contract would be formed if the parties do not have valid consideration.
However, the adequacy of consideration for the parties is not necessary. Further, the
consideration for the parties must be mutually agreed based on their course of action and also,
it should not be defined by the courts4. Anything which is agreed by the parties would be
considered as valid consideration as evident from the verdict of Chappell & Co Ltd v Nestle
Co Ltd5 case where a chocolate wrapper was considered as valid consideration for
contracting parties and a valid agreement had formed between them based on this
consideration. Further, the intention to form legal contract needs to be proved only when the
contracting parties are connected through domestic relations6.
Application
Peter and Julie are not related through domestic relationship which implies that both the
parties have intention to create legal contractual relationship. Also, it can be seen that both
the parties have valid consideration as Peter would obtain the traffic service for the fundraiser
event and Julie would get an Ester goods hamper which is not proportional nor adequate.
However, presence of adequate consideration is not necessary for contract formation and
thus, a valid contract is formed between the parties. No family relationship is between the
4 Shayne Davenport, Business and Law in Australia (Thomson Reuters, 2014, 5th edition) 96
5Chappell & Co Ltd v Nestle Co Ltd [1959] UKHL 1
6 Ibid. 1
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parties and valid consideration would enforce a valid contract between them. Hence, Julie
cannot deny to provide the service for the event as she has a binding contract with Peter.
Conclusion
Peter and Julie are bound into a commercial contract for the fundraiser event and hence, Julie
cannot deny offering services for the events as there is mutual consideration and intention to
form legal contract.
Question 3
Issue
The issue is to comment whether Tina and Julie are legally bounded with contractual
liabilities or not for the case where Tina has asked to amend the initial contract.
Rule
Presence of valid consideration for contract is an imperative factor. Parties can amend the
original contract if they is agreement on revised terms of new contract. Further, it is essential
that both the parties must have consideration so as to ensure that the contract would be
enforceable on the parties7. It is noteworthy that formation of new contract with part payment
so as to discharge the payment of the existing debt would not be considered as valid
consideration as highlighted in the judgement of Foakes v Beer8 case. However, in this
regards, consideration would be valid only when the party is ready to provide partial payment
along with some additional compensation as evident from Pinnel’s Case9case. In such cases,
the creditor is not at loss considering that the part payment is received along with additional
consideration in a different form10.
Application
It can be seen that Tina has to pay $2300 to Julie for the provided services. However, Tina is
not able to pay the debt and hence, she has offered Julie that she would pay $1500 and also
referred her to her aunt who frequently needs traffic service maintainer for ample projects.
Julie has agreed with this consideration which implies that new contract would be enacted
7 Ibid. 1
8Foakes v Beer (1883) LR 9 App Cas 60
9Pinnel’s Case (1602) 5 Co Rep 117
10 Robert Bryan Vermeesch and Kevin Edmund Lindgren, Business Law of Australia (Butterworths, 2013, 12th edition) 85
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between Tina and Julie based on new consideration. It is imperative to note that both the
parties have some consideration as Tina has to pay only part of the payment which has
reduced her total debt and also, Julie has consideration for getting more projects in near
future due to the reference of Tina. Thereby, Tina and Julie have valid contract based on new
consideration.
Conclusion
It is apparent that Tina and Julie both have valid consideration in the amended contract and
thus, Tina and Julie have valid contract for the part payment of debt.
Question 4
Issue
The main issue is to determine whether Michael would be estopped in relation to going back
on his promise to Julie considering the fact that Julie has ordered to equipment required to
provide the service to Michael based on the assurance given by him.
Rule
There are cases where one of the contracting parties made certain promise or provide
assurance to fulfil the promise to the other party by enacting contract in future. Also, based
on this assurance the other party takes some actions in relation to complete the liabilities of
the futuristic contract with the concerned party. However, if the first party decides to not
enact the contract with the second party then in such scenario, the parties would be
considered as legally associated with the contractual liabilities irrespective of fact that no
formal contract is formed between the parties11. This is because the doctrine of promissory
estopped would be enforceable and the party has to satisfy the promise so that the rights of
the second party would be safeguarded. The evidence of this underlying aspect is highlighted
in Waltons Stores (Interstate) Ltd v Maher12 case where the rights of the aggrieved party
(second party) who had performed the acts based on the promise made by the first party was
protected only when the first party had confirmed about the promise from second party.
Further, the defaulting party could not deny fulfilling the promise because the aggrieved party
11 Athule Pathinayake, Commercial and Corporations Law, (Thomson-Reuters, 2014, 2nd edition) 145
12Waltons Stores (Interstate) Ltd v Maher [1988] HCA 7
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has taken steps based on the assurance only and thus, both would be bounded with the legal
duties to complete the promise13.
Application
It is apparent that Michael has made a promise to Julie to enact a contract that he would take
his services. Julie has specified to him that the required service would also require a special
equipment which would cost $3000.. Michael agreed with this and also, assured him that he
would enact the contract and she can also buy the required equipment. Julie has purchased the
equipment based on this promise which was reconfirmed by her. However, later on Michael
denied to enact the contract which means the estoppel would be enforceable as Julie has
made all the necessary arrangement i.e. bought the equipment based on the assurance of
Michael.
Conclusion
Michael would be estopped in relation to claiming that he does not has a valid contract with
Julie because Julie has acted based on the promise made by Michael.
13 Wayne Pendleton and RogerVickery, Australian business law: principles and applications, (Pearson Publications, 2015,
8th edition) 74
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