Enactment of Valid Agreement and Contract in Business Law

This article discusses the necessary conditions for the enactment of a valid agreement and contract in Business Law. It covers the presence of lawful offer and acceptance with valid consideration, intention to enter into a legal relation, legal capacity, and mutual consent. It also discusses relevant cases such as Stilk v Myrick, Williams v Roffey Bros & Nicholls (Contractors) Ltd, and Glasbrook Bros v Glamorgan County Council. The article also provides solutions to case studies related to contract law.

BUSINESS LAW
Contract Act
STUDENT ID:
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Question 1
Issue
The central issue is to determine with whom Frank has enacted an agreement based on the
given case facts.
Rule
The two main aspects for the enactment of a valid agreement are the presence of lawful offer
and acceptance with valid consideration. It is essential that the offeror should highlight valid
offer to the offeree for the acceptance as highlighted in the verdict of Australian Woollen
Mills v The Commonwealth (1954) 92CLR 424. Also, an acceptance would be termed as
valid acceptance only when it has been communicated to the offeror within the given ambit
of time or as per the instruction given by the offeror (Carter, 2012). No enforceable contract
would be enacted between the parties when the valid acceptance for offer has not been
communicated. It is noteworthy that where electronic mode of communication (mail, fax and
so forth) is used for the negotiation of the contract then it is essential that acceptance for the
offer would be enforceable on the offeror only when the mail has been opened by the offeror
(Andrews, 2013). Also, it is imperative for an enforceable contract that when the offeror has
received the valid acceptance for the object for which the offer has been made, then the
offeror cannot reaccept another acceptance for the same offer (object) (McKendrick, 2013).
In case when the offeror has put an advertisement to sell their product or service then it is
imperative to distinguish whether the advertisement would be categorised as invitation treat
or offer.
Invitation to treat is also known as invitation to bargain in which the person who has posted
an advertisement has invited the parties to bring their offers for the negotiation. In such cases,
the person who is advertising is not bounded to sell their product even if the parties have
made offers that fit the advertisement requirement. The verdict of Partridge v Crittenden
[1968] 1 WLR 1204 is the evidence of this aspect (Gibson and Fraser, 2014). According to
the judgement of this case, defendant who put the advertisement for the sale of protected
birds in the newspaper was not contractually obliged to sell particular birds only. It means he
would have the right to sell more goods than the person would actually have. In this scenario,
the person who has put an advertisement has all the rights to do negotiation with the various
offeror and can decide whom he is going to enter into legal relationship. According to the

verdict announced in GB v Boots Cash Chemists Ltd [1953] case, the display of goods for
sale would be categorised under invitation treat and not offer (Davenport and Parker, 2014).
Application
It is evident from the above facts that the sign put by Frank on the shop’s window to sell car
for price $2,000 is an advertisement and also he invites parties to come up with offer and
therefore, it can be said that the sign is invitation treat not offer.
(a) It can be seen that Bill has offered Frank a consideration price of $1,600 for the car.
This offer has not been accepted by Frank because he has not given any acceptance
for Bill’s offer. Therefore, no contract has been enacted between Bill and Frank.
(b) In second case, Mark has offered a price of $1,950 for the car and hence, has posted a
cheque to the name of Frank. Further, it is evident that when Frank has received the
offer of Mark then he went to the bank and has deposited the cheque. This is the
indication of the aspect that Frank has accepted the offer of Mark and then only he has
deposited the cheque to the bank. If Frank has not accepted the offer of Mark, then he
must send back the cheque to Mark. Yes, it can be said that Frank has the right to
reject the offer of Mark by sending the cheque back to Mark. This is because
advertisement was invitation to treat and Frank has position to reject the offer of
Mark. Therefore, the conclusion can be made that Frank and Mark have entered into
an enforceable contract.
(c) John has sent an email to Frank regarding the advertisement that he is ready to pay
$2,000 for car. It is apparent that Frank has not seen the mail before and already been
entered into enforceable contract with Mark and therefore, the object for the contract
has not been available. Hence, Frank cannot accept the offer of John and no contract
would be formed between John and Frank.
(d) It is apparent that Frank has clearly stated to Tom that he would consider his offer of
selling his car for $1,700 only when he would not get any better option. However,
Frank has accepted the offer of Mark and enacted a contract with him. Therefore, no
contract is enacted between Tom and Frank.
Conclusion

The conclusion can be drawn that Frank has valid contract only with Mark because he has
accepted the offer of Mark by depositing the cheque in the bank.
Question 2
Issue
The key issue is to opine if Renee with regards to liability of Graphic Advertising Pty Ltd in
relation to paying the promised increase in salary. In this context, the key question to
deliberate is whether there is a valid contract between Renee and Graphic Advertising Pty Ltd
with regards to salary increase.
Rule
With regards to enactment of a valid contract, there are a few necessary conditions which
ought to be satisfied (Taylor and Taylor, 2015).
 There needs to be a valid offer and valid acceptance which essentially leads to a valid
agreement.
 Mutual consideration needs to be present for the contracting parties which need not be
same.
 There has to be intention on the part of all the contracting parties to enter into a legal
relation.
 The contracting parties should have the legal capacity to enact the contract.
 Mutual consent should be present on part of the contracting parties.
A key aspect of a valid contract as highlighted above is the presence of consideration for the
contracting parties. A relevant case in this regard is Stilk v Myrick [1809) EWHC KB J58.
The pivotal aspect that was indicated in the given case was that the duty of an individual
under an existing contract cannot be highlighted as valid consideration for the enactment of a
new contract (Paterson, Robertson and Duke, 2015). However, an opposite viewpoint was
taken in the Williams v Roffey Bros & Nicholls (Contractors) Ltd [1989] EWCA Civ 5 where
it was ruled that performance of pre-existing contractual obligation can be taken to constitute
valid consideration provided the promisee is bestowed upon with some benefit. The
following statement made by Glidewell LJ in context of the above case is relevant (Richard,
2013).

“It is not in my view surprising that a principle enunciated in relation to the rigours of
seafaring life during the Napoleonic wars should be subjected during the succeeding 180
years to a process of refinement and limitation in its application to the present day.”
Another relevant is Glasbrook Bros v Glamorgan County Council [1925] AC 270. In this
particular case, a colliery manager asked for incremental police protection during a strike.
Some additional security was provided but the Commissioner offered to provide any
additional security only for charges which the manager agreed but later refused to pay. It was
ruled that the police (plaintiff) went out of the way to render duty which was beyond that
required as part of public service and therefore the defendant was ordered to pay the
promised amount (Carter, 2012).
Application
The facts pertaining to the given situation need to be analysed in the light of the above law.
In the given situation, there is existence of a valid offer by Julius (representative of Graphic
Advertising) since it is definite and directed towards Renee. Renee has granted acceptance to
the offer whereby she would get an incremental pay of $ 150 more per week backdated from
December 1. Considering the existence of a valid offer and acceptance, it is apparent that
there is a valid agreement. Also, taking note of the fact that the given transaction is
commercial in nature and not a social or domestic agreement, hence it would be fair to
assume that intention to form legal relation is present. Besides, both parties have the legal
capacity to enter into contracts with regards to raising the salary. Additionally, there is mutual
consent on the part of both parties since there is no undue influence or duress.
The critical question not relates to whether the fulfilment of pre-existing duty on part of
Renee can be considered as valid consideration for enacting the contract for higher salary. To
answer this question, the fact that needs to be looked into is that if Renee would have left at
that time, then the company would have faced significant difficulty with regards to meeting
the needs of the client. As a result, it is apparent that benefit is derived by the company by the
decision on part of Renee to continue her job. Thereby, it would be fair to conclude that
consideration also exists for both Renee and the company. Since, all the necessary conditions
are fulfilled, hence it would be fair to conclude that there is a valid contract between Renee
and the company with regards to salary hike.
Conclusion

Since there is a valid contract between Renee and the company, hence the company needs to
pay Renee the promised incremental salary or else there would be breach of contract and
Renee can potentially sue the company.
References
Andrews, N. (2011) Contract Law 3rd ed. Cambridge: Cambridge University Press.

Carter, J. (2012) Contract Act in Australia. 3rd ed. Sydney: LexisNexis Publications.
Davenport, S. and Parker, D. (2014) Business and Law in Australia. 2nd ed..
Sydney:LexisNexis Publications.
Gibson, A. and Fraser, D. (2014) Business Law. 8th ed. Sydney: Pearson Publications
McKendrick, E. (2013) Contract Law 5th ed. Basingstoke:Palgrave.
Paterson, J. Robertson, A. and Duke, A. (2015) Principles of Contract Law 5th ed. Sydney:
Thomson Reuters.
Richard, S. (2013) The Modern Law of Contract. 5th ed. London: Cavendish.
Taylor, R. and Taylor, D. (2015) Contract Law. 5th ed. London: Oxford University Press.