“TLAW 401” 10 Business Law

Business Law
1/21/2020
Student’s Name

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Material Facts
To discuss the material fact of the case this is to state that a written contract was missing there
between Rita and her uncle. Despite saying repeatedly by Rita, Mr. Chorwala did not any sign a
written contract and instructed her to carry the renovation work. Considering the statements
made by Mr. Chorwala, Rita pursued the renovation work and spent nearly $40000 over the
same. Another important fact of this case is that the parties of the case i.e. Mr. Chorwala and Rita
have a social relationship with each other. Mr. Chorwala has presented his intention to enter into
a commercial contract by offering the development of a lease agreement. Later on, he did not
share a copy of the lease deed with Rita and proposed to breach the subjective deed.
Issue
Does the presence of a signed lease deed is required to be there for the validation of contract
made between Rita and Mr. Chorwala? Does a valid contract exist between the parties? What
rights would Rita have in against her uncle Mr. Chorwala?
Rules
A contract is an agreement that is enforceable by the parties and ensures their rights and
liabilities. In other words, this can be stated that no rights and liabilities exist in a case unless
there is a valid contract. Now the issue is to check the existence or absence of a contract. To
answer this query this is to mention that common law of contract defines some of the elements
that need to be there in each contract. If one or more element is missing that, an agreement
cannot be turned into a contract. The first element is an offer that is a proposal from one party to
another where the same promise to do something or refrain from doing that act. An offer can be

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made in either way such as oral as well as written in general. Nevertheless, the document, which
is made under a seal, needs to be developed in a written mode. For a valid offer, the same needs
to be clear. It means there must not be any ambiguity in the terms of the offer. It was given in the
case of Harvey v Facey1, that a valid offer is the one that shows the intention of the offeror to be
a bind. Similar to the offer, invitation to treat is also an important aspect of a contract that seems
similar to an offer but is not in actual as the same does not have the intention to be bind and
cannot be accepted by the other party. Another essential element of a contract is consent, which
is also known as acceptance. Acceptance takes place where offeree, (the person to whom an offer
is made) becomes agreed on all the terms mentioned in an offer. A binding contract is formed as
soon as the offeree gives his/her acceptance. There are some rules related to valid consent. The
very first rule has been confirmed in the case of “Entorres v Miles Far East”2, where it was
given that the acceptance should be informed to the offeror. It means only giving consent is not
enough but the same should also be communicated to the other party3. Secondly, the case of
Felthouse v Bindley4 is also an important one where it was given that the silence does not treat as
valid consent. The second rule in relation to the validity of consent demand similarity between
the terms of offer and consent. In other words, this can be stated that if the consent is given for
different terms as mentioned in the offer then the same cannot be treated as a valid acceptance.
Lastly, the consent must be certain. As given in the case of “Scammell & Nephew v. Ouston”5, it
must be possible to determine what has been agreed between the parties.
The third element of a valid contract is a consideration. In simple words, consideration can be
understood as an exchange of something of value for another. In other words, this can also be
1 Harvey v Facey [1893] UKPC 1
2 Entorres v Miles Far East [1955] 2 QB 327
3 Gary Slapper and David Kelly, English Law (Routledge, 2009), 99.
4 Felthouse v Bindley [1862] EWHC CP J35
5 Scammell & Nephew v. Ouston [1941] AC 251

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mention that the consideration is a benefit that parties get out of a contract. The common law of
contract does not put any limit on the value of consideration and the same can be of any value.
However, the value should be legal. Consideration must not be past. Further, another rule related
to the validity of consideration states that the same does not need to be adequate but must always
be sufficient as provided in the case of “Chappell v Nestle”6. In this sense, the value of
consideration can be less than the market value. For instance, giving $1 in the exchange of a car
would be valid. The logic behind the same is that the court is not bothered about the goodness of
bargain happened between the parties. Further, this is also important that the payment of
consideration should be done by the promisee him/herself. If any other person pays the
consideration then the promisee cannot enforce that contract.
The capacity and competency of the parties is another important element that matters while
checking the validity of a contract. The logic behind this element is to keep those people out of
the purview of court actions who are not able to develop a contract or to enter into legal dealings.
Contract law defines persons who are not able to develop legal and binding contracts. These
people include bankrupts, minors, people under influence of alcohol and drug and people who
are suffering from mental illness that is significant enough to affect the capacity of a person to
understand the agreement7. Minor refers to those who have not attended the age of majority. The
above-mentioned groups of people are treated as incapable to understand the nature and liability
under a contract that they have entered. Nevertheless, no party can be relieved from liability
unless the court orders so.
The last element of a valid contract is the intention of the parties to enter into a legally binding
contract. Both the parties of a contract must have an intention to create a legal relationship. The
6 Chappell v Nestle [1960] AC 87
7 lawbuddy.com.au, Contracts In Australia (law Buddy) <https://www.lawbuddy.com.au/contracts-in-australia/>.