CASE STUDY ON VALID CONTRACT

Running Head: CASE STUDY
CASE STUDY
Name of the Student
Name of the University
Author’s Note

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Table of Contents
Issue:................................................................................................................................................2
Rules:...............................................................................................................................................2
Application:.....................................................................................................................................3
Conclusion:......................................................................................................................................4
Issue:................................................................................................................................................4
Rules:...............................................................................................................................................4
Application:.....................................................................................................................................6
Conclusion:......................................................................................................................................7
REFERENCE:.................................................................................................................................8

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Issue:
The issue in the case is whether the contract between Rick and Cliff was legally
enforceable.
Rules:
Elements of a contract:
 Offer and acceptance: these are the most important elements for the formation of a valid
contract. Offer means when a proposal is made for the negotiation of the terms and
conditions of the contract including the contractual obligation, consideration, time period
and other terms. In Smith vs Hughes [1871] LR 6 QB 597, it has been stated if a
contract specifically mentions a particular type of acceptance, then the express type of
acceptance should be adhered to for a valid contract formation.
Acceptance means the mutual assent of both the parties to the terms and conditions of the
contract. Once the offer has been accepted, the contract becomes valid and legally
enforceable provided other elements are also satisfied. However, it is a general rule that
acceptance should be clear, loud and specific to the intention of the parties which should be
well communicated to the offeror. Silence is not considered as a valid mode for acceptance
(Felthouse vs. Bindley [1862] EWHC J35). As a general rule, it is assumed that the contract
become enforceable when the acceptance was posted by the party in case of acceptance is
expressly mentioned to be made by the means of post (Adams vs. Lindsell [1818] 106 ER
250). However, when the mode of communication is instantaneous, the rule is reversed as
explained in Entores Ltd vs. Miles far East Corporation [1955] 2 QB 327, where the

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Court held that telex are instantaneous forms of communication and any acceptance in these
forms shall be enforceable only after it has actually been received by the party (Beale 2014).
However, Emails are not considered to be the instantaneous communication because of their
uncertainty to the sender and receiver about the delivery of the message, and thus, the postal
rule will apply to the scenario stating that acceptance shall be enforceable the moment when
the acceptance mail has been sent.
 Consideration: the right, interest, profit, or any kind of exchange given in lieu of the
contractual obligation being performed by the other party is the consideration (Currie vs.
Misa [1875] LR 10 Ex 893). Consideration can be in cash or kind.
 Capacity: it means the legal capacity of the persons to enter into the contract. Under the
Common Law regime, the contract with a minor is contract void ab initio. The parties
must be mentally sound an fir to enter into the contract otherwise, the contract may b
rendered void ab initio.
 Free consent: the consent of the parties should be free and willfully given. It should not
be obtained by coercion, threat, undue influence, mistake or misrepresentation, duress
and so on otherwise, the contract may be rendered voidable at the option of the party
whose consent was obtained not willfully.
Application:
In the given scenario, Cliff offered the quotation of package and expressly mentioned the
acceptance to be by email only before 12 noon. Rick had sent a confirmation mail by 12 noon.
Since Email is not considered to be an instantaneous communication, the postal rule shall apply

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according to which, the offer was accepted when the email was sent and hence, a valid contract
was made between Rick and Cliff.
Conclusion:
It can be concluded that the contract between Rick and Cliff was legally enforceable.
Issue:
The issue in the case is whether formation of intention and consideration has been
satisfied in the given scenario.
Rules:
 Offer and acceptance: this means that the proposal has been offered by pne party and it
has been accepted by the other party. in other words, the contract becomes enforceable
only when the offer is offered by one party and such offer shall be conclusive with all the
specified terms and conditions of the contract and the related contractual obligation and
consideration and the same has been duly accepted by the other party. The acceptance
shall be enforceable only once it has been communicated to the other party.
 Free consent and capacity: it means that the consent of the other party should be free
and willful without any coercion, threat, mistake, misrepresentation, duress or undue
influence otherwise the contract shall be rendered voidable at the option of the party
whose consent is not received willfully. The capacity of the person means the legal
eligibility of the person by age or mental fitness to enter into the contract. Contract with a

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minor (any person below the age of 18 years) or a person with unsound mind shall be
rendered void ab initio.
 Intention to form a contract: this is the most important determining factor to establish
the test for offer and acceptance between the parties. The offer and acceptance may be
based on the mutual assent of the parties towards the terms and conditions of the contract,
the determining factor which explains the validity of the contract is the intention of the
parties to enter into the contact. In commercial agreements, it is an assumption that the
parties are intending to enter into the contract for each other unless otherwise has been
mentioned in the heads of the agreement as an explicit provision. It was established in
Rose & Frank Co. vs. JR Crompton & Bros Ltd [1924] UKHL 2 that the statement of
the intention of the parties does not make the contract enforceable of its own but the
intention only creates a ground for the assessment of the offer and acceptance of the
proposal between the parties. However, the contract between the members of the family
like parents and children, the enforceability of contract shall not be enforceable (Balfour
vs. Balfour [1919] 2 KB 571). This is done so to protect the interest of a family as an
institution and public policy. However, in Merritt vs. Merritt ([1970] EWCA Civ 6)
states that the contract can be enforced between an estranged couple because the intention
was to create the contract between them as parties to a specific contract. In Beswick vs.
Beswick [1967] AC 58, the contractual relationship between an uncle and his nephew
was enforceable.
As explained in Carllil vs. Carbolic Smoke Ball Company [1892] EWCA Civ 1, the
objective test when applied by the court, the issue for determination arose whether the
reasonable bystander, think that the parties were intending to enter into the contract.

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However, in subjective test, there are chances for the loophole to escape liability and thus,
the courts would apply the objective test for the determination of the intention of the parties.
 Consideration: it is the determining factor for the establishment of the intention to create
the legal relationship on the ground that one party is paying the other party in cash or
kind for the contractual obligations being performed for him as per the terms and
conditions stated in the contract between them. In Currie vs. Misa (1875) LR 10 Ex 893,
it has been explained that the consideration may be any kind of right, benefit, interest,
profit, forbearance or loss. Therefore, consideration is the value given by one party to the
other in return of the contractual obligation. In Dunlops. Selfridge [1915] UKHL 1, it
was held that the consideration is the price for which the promise of the other party is
bought. However, in Hamer vs. Sidway (1891) 124 NY 538, it has been explained that
consideration is more of a process of bargaining. The consideration should be a part of
the conditions laid down for the existing contract and not for any prior as in the past
consideration (East vs. Kenyon [1840] 11 AD & E 438). The failure to pay the
consideration as agreed between the parties, after the performance of the contractual
obligation, shall amount to the breach of contract and be subject to the claim for
damages.
Application:
In the given scenario, it can be observed that Rick and Cliff were cousins but applying
the objective test, it can be determined that as any reasonable bystander, the parties were
intending to create a legal relationship between them. Applying Beswick vs. Beswick, we can
explain the the contractual relationship between cousins is enforceable.

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In the given scenario, the quotation of the contract served as the consideration. The
payment was made by Rick through credit card which served as the consideration. Cliff offered
that he would offer Rick another package next year with discounted price. The discounted price
serves as the consideration. Hence the parties intended to create a legal relationship by payment
by Rick to Cliff in exchange of the tour package.
Conclusion:
It can be concluded that formation of intention and consideration has been satisfied in the
given scenario.

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REFERENCE:
Adams vs. Lindsell [1818] 106 ER 250
Balfour vs. Balfour [1919] 2 KB 571
Beale, H. (2014) Chitty on Contracts, 31st edition, London: Sweet & Maxwell.
Beswick vs. Beswick [1967] AC 58
Carllil vs. Carbolic Smoke Ball Company [1892] EWCA Civ 1
Currie vs. Misa [1875] LR 10 Ex 893
Dunlops. Selfridge [1915] UKHL 1
East vs. Kenyon [1840] 11 AD & E 438
Entores Ltd vs. Miles far East Corporation [1955] 2 QB 327
Felthouse vs. Bindley [1862] EWHC J35
Hamer vs. Sidway (1891) 124 NY 538
Merritt vs. Merritt ([1970] EWCA Civ 6
Rose & Frank Co. vs. JR Crompton & Bros Ltd [1924] UKHL 2
Smith vs Hughes [1871] LR 6 QB 597