Legally Enforceable Contracts: Formation and Consideration

INTRODUCTION TO BUSINESS LAW AND ETHICS
STUDENT ID:
[Pick the date]

Question 1
Issue
It needs to be highlighted if a legally enforceable contract has been formed between Julie and
Simon.
Rule
A valid contract requires the formation of an agreement which in turn is based on existence of
an offer and acceptance. With regards to communication of offer, irrespective of the
underlying communication means used, the enforceability of offer happens when offeree
receives the offer1. However, in acceptance, the enforceability would be dependent on
underlying communication means deployed. A key form of communication deployed for
contract formation in modern times is the instantaneous modes such as SMS, email where the
delivery of the message to the other party is instantaneous2. As indicated in the Entores Ltd v
Miles Far East Corporation3 case, the acceptance would become legally valid only when the
offeror receives the same when instantaneous mode of communication is used. Another
pivotal aspect is the mode of communication which may not be same as that used for offer. A
relevant case dealing with this issue is Yates Building Co. Ltd v RJ Pulleyn & Son (York) Ltd
which clearly highlights that a particular means of communication is mandatory when the
offeror has specified the same at the time of extending offer.
Application
Julie provides traffic management service to clients. Simon was looking for same service and
thereby, asks Julie to provide him the quote price as per the required service. Julie provided
the quote to him along with the fact that acceptance ought to be given for Julie’s offer before
the weekend. Simon decided to avail the service from Julie as her quote price was lowest
among all the quotations. As a result of this, Simon provided acceptance towards the offer to
Julie via SMS. It would be fair to conclude that Simon’s acceptance will be enforceable on
Julie because he has communicated the same before the given deadline and without any
condition. Also, acceptance via SMS would also not affect the enforceability as Julie has not
1 Richard Stone, The Modern Law of Contrac,. (Cavendish, 2016, 5th edition) 78
2 Edlin Douglas, Common law theory, (University Press Cambridge, 2015, 5th edition) 93
3Entores Ltd v Miles Far East Corporation [1955] EWCA Civ 3
2

asked for a particular mean of communication. As a result, the change of means of
communication would not have any impact in this case. A valid contract has been formed
between Simon and Julie.
Conclusion
Simon and Julie have formed a valid contract because all the elements required for contract
formation seem to be present based on the case facts.
Question 2
Issue
Using legal principles, it needs to be highlighted if a legally enforceable contract has been
formed between Peter and Julie. A pivotal question is whether consideration is present for
Julie. Also, the presence of intention to enter into legal relationship needs to be explored.
Rule
In order to enact a valid contract, one of the key requirements is mutual consideration for the
contracting parties failing which contract would be held as void. It is not essential that the
consideration for both parties should be equal or adequate4. As indicated in the Chappell &
Co Ltd v Nestle Co Ltd5 case, the key aspect with regards to consideration is sufficiency as
decided by the contracting parties. The sufficiency of consideration is not to be objectively
determined unless there is element of undue influence or unconscionable conduct6. Another
key element is the presence of intention to initiate legal relations between the two parties.
This element is assumed to be present in commercial agreements but might be lacking in case
of social or domestic agreements7.
Application
4 Latimer Paul, Australian Business Law CC, (LexisNexis Study Guide, 2014, 4th edition) 121
5Chappell & Co Ltd v Nestle Co Ltd [1959] UKHL 1
6 Neil Andrews,Contract Law, (Cambridge University Press, 2015, 3rd edition) 103
7 John Carter, Contract Act in Australia, (LexisNexis Publications, 2014, 3rd edition) 134
3