Elements of a Valid Contract and Liability under Section 18 of Australian Consumer Law

Part A
In part A, the issue is if all the elements that should be present in order to form a really
enforceable contract are present in this case and as a result, it can be said that a valid contract is
present between Mike and Peter.
For this purpose, it becomes necessary to examine the four elements that are considered essential
for the formation of a valid contract. The law of contract provides that in order to be legally
enforceable and called a valid contract, the four elements should be present. These are: -
Offer: An offer is described as a specific promise that is made by one party, who is ready to
become contractually bound by the terms mentioned in the offer. In this way, an offer is a
promise to do or not to do something (Harvey v Facey, 1893). In this case, one party makes a
pledge to the other party, promising to enter into a contract on set terms (Carlill v Carbolic
Smoke Ball co, 1893). It is necessary that an offer is complete, specific and capable of being
accepted by the other party. An offer needs to be distinguished from an invitation to treat
(Pharmaceutical Society of Great Britain v Boots, 1953). Similarly, the law provides that if,
instead of accepting the offer, the other party has made a counter offer, it results in the
revocation of the original offer and it cannot be accepted anymore.
Acceptance: the law of contract requires that the acceptance of the offer should be unconditional.
Therefore, the offer should be accepted exactly on the terms and conditions that have been
mentioned in the offer. On the other hand, any change in the terms and conditions is considered
as the rejection of the offer. It is considered as a counter offer, and it is up to the other party to
accept or reject it (Hyde v Wrench, 1840). It is not necessary that the acceptance of the offer
should take place in writing; it can take place verbally or even be communicated by a particular

action, which reveals the acceptance of the offer. When the offer is accepted and at the same
time other essential elements are present, it results in the formation of a valid contract.
Consideration: a valid contract also requires the presence of consideration. In this case, the
consideration should be something of value that is going to be promised or exchanged in return
of a particular action or inaction that has been mentioned in the offer. Translation can be present
in the form of money like a payment for a service or it can be in the form of non-monetary items
or actions like the promised to do a particular service or by agreeing not to do something.
Therefore, consideration refers to the value due to which the other party is induced to enter the
agreement.
Intention to create legal relations: It is also required that the parties to the agreement should have
the intention of being legally bound by the terms of the agreement. The purpose behind the
introduction of this requirement is to separate mere social agreements from the agreements that
can be imposed by the law.
In this case, an offer was made by Peter to sell the painting at $2 million. However, in his reply,
Mike stated that he was ready to buy the painting for 1.5 million. In this way, the essential
element of offer and acceptance are not present. Therefore it can be concluded that a valid
contract has not been created between Mike and Peter.