Business Law Assignment

This assignment delves into the fundamental aspects of business law, focusing on contract formation, the necessity of intention, and the implications of agency law. It discusses the components required for a legally binding contract, the differences between verbal and written contracts, and the significance of formal contracts. Additionally, it examines case law to illustrate the principles of contract law and the responsibilities of parties involved in contractual agreements.

Running Head: QUESTIONS 1

QUESTIONS 2
Question 1
A contract is a legally binding contract in which party X promises to do a particular task
and party Y promises to pay the consideration, and can involve more than two parties. In order
for a binding contract to exist, there are some components which have to be present (Andrews,
2015). These components include offer, an acceptance, consideration, consent, capacity, clarity
and intent. A brief of these, with a particular reference to established case laws have been
presented herewith (Ayres & Klass, 2012).
The first component in contract formation is an offer, whereby some terms are offered
by one party to the other, which forms the base of the contract. It becomes crucial to
differentiate between an offer made and an invitation to treat. A controversial issue is raised in
differentiation between the two when it comes to the adverts placed in magazines, newsletters
and newspapers (Clarke & Clarke, 2016). For instance, in the case of Partridge v Crittenden
[1968] 2 All ER 421, the court formed the view that the advertisement was an invitation to
treat. However, the terms of advertisement in Carlill v Carbolic Smoke Ball Company [1893] 1
QB 256 were such that they could be accepted merely by acting on it and thus the advert was
actually an offer instead of an invitation to treat. Where an invitation to treat is established, the
seller is not bound to sell the product which are kept on the shelf of their shop, as was held by
the courts in Pharmaceutical Society of Great Britain v Boots [1953] 1 QB 401 (Latimer, 2012).
The second component required for creating a contract lies in the acceptance. The
acceptance has to be given by the party to which the offer had been made and in the exact
manner in which the offer had been made. If the offer is changed while communicating the
acceptance, it would be considered by the court as a counter offer and a prime example of this
is Hyde v. Wrench (1840) 3 Beav 334; further, the original offer expires in such cases (Marson &
Ferris, 2015). The acceptance has to be communicated properly and a silence is not taken as an
acceptance and a prime example of this is Felthouse v Bindley (1862) EWHC CP J35, where the
acceptance was not held to be given (Stone & Devenney, 2017).

QUESTIONS 3
The next element in contract formation is consideration which is mutually decided
between the parties and can be any amount so long it has an economic value. Owing to the
condition precedent, the three wrappers were deemed by the court as being valid in the matter
of Chappell & Co Ltd v Nestle Co Ltd [1960] AC 87. The lack of economic value resulted in
consideration not being valid and an example of this is White v Bluett (1853) 23 LJ Ex 36
(Latimer, 2012). Consideration is also required to move from the promise. And it does not have
to be adequate, but sufficient (Mulcahy, 2008).
The next component in contract formation is the need of the parties to have the
intention of creating a contract whereby legal relations would be formed between them. This
would mean that the contracting parties would be legally bound by the terms of the contract
and would have to bear liability for breach of the contract (Gibson & Fraser, 2014). Another
component is the consent, which represents a free consent to enter into legal relations,
without any duress, stress or pressure from another party. There is also a need for the
component of clarity to be present in the contract where they need to be clear about the terms
which form the contract. The last component in contract formation is the contractual capacity
of the parties whereby they need to be of sound mind and need to have the legal age (Lambiris
& Griffin, 2016).
Question 2
Contracts do not necessarily have to be in written form as there are two methods of
creating any contract, i.e., verbal and written. In verbal contracts, the terms of the contract are
spoken and agreed upon in a spoken manner. And in written contracts, these terms are
properly stated on a paper which is then signed by the parties of the contract. Even though
there is a difference in the manner of contract formation, both verbal and written contracts
continue to be binding (Mau, 2010).
Indeed, both the verbal and written contracts are valid; it is always preferable to draw
up written contracts, due to different reasons. This is because in a written contract the terms
are properly stated and defined where by the ambiguity regarding a term is not formed and

QUESTIONS 4
even when the same is done, by applying the statutory provisions of the interpretation
legislations, the same can be construed on the basis of the theme of the particular contract
(Irby, 2016). Also, the written contracts help in clearly stating what the rights and liabilities of
each of the party is clearly stated. This also gives the parties the right to make a case against
the other party for breaching the contract as the performance of the terms is clearly provided
in the contract.
Though, when the verbal contracts are made, there is always a claim made that a
particular right was not available or that the particular liability was never a part of the originally
drawn contract. The verbal contracts do not cover the terms which are generally present in the
written contracts whereby it is stated that in case of dispute a particular thing has to be done
(Pendragon, 2014). Hence, the dispute resolution in cases of written contracts is easier in
comparison to the verbal contracts. One point which proves favourable for the verbal contracts
is that they are easy to form and save both time and costs. But due to the difficulties which
have to be faced by the parties in cases of verbal contract it is preferable to draw up written
contracts.
Question 3
A formal contract is referred to as the contracts which are formed or which require a
particular method of formation to be enforceable (Miller & Cross 2015). A formal contract is
formed when the same is signed by the parties of a contract under a seal. The formality of the
formal contracts is dependent upon the kind of formal contract being entered into. The
different types of formal contracts which are available at present include drafts, cheques,
certificate of deposits and the promissory notes. The formalities of promissory notes include
the declaration that the promise has been made by the drawing party to pay the bearer certain
amount. It has to be properly signed by the party having the relevant authority (US Legal, 2017).

QUESTIONS 5
Question 4
I: Issue
Whether a contract was formed in this case, particularly with regards to the intention of
the parties, or not? Whether the contract was breached in this case, resulting in remedies being
available to the aggrieved party, or not?
R: Rules
As has been covered in the previous segment, the contract formation requires certain
components to be present and one of these components is intention of the parties. The
intention of the parties shows that they want to enter into legal contract and are serious about
creating lawful relations owing to the contract formed being binding in nature. In the case of
Trevey v Grubb (1982) 44 ALR 20, a tattslotto entry coupon was lodged by an individual on
behalf of the three members of a syndicate and ultimately, the price was won. The defendant
however denied sharing of the prize money which led to the plaintiff making a claim against the
defendant. The court analysed the presence of intention of the parties and made reference to
the case of Simpkins v Pays [1955] 1 WLR 975 and stated that there were similarities between
the two cases and also there was a presence of the required intention. And so, a legally binding
contract was present instead of a social setting in this case. And so, the court made the order to
the prize money to be distributed equally between the three parties (Gibson & Fraser, 2013).
When the terms of the contract are not fulfilled as per the promise made under the
contract, the aggrieved party gets the option of making a claim for breach of contract against
the breaching party and apply for damages (Latimer, 2012).
A: Application
The case study highlights that the award winning group made a claim of the
arrangement being a social one and not a legally binding contract. In order to prove them
wrong, the case of Trevey v Grubb proves to be of help. There are a lot of similarities in this case
and the given case study and so, the ruling of Trevey v Grubb can be applied here. As an

QUESTIONS 6
intention was present in this case due to the contribution of parties in the ticket purchase, a
contract would be deemed to be present. The denial of sharing the prize money would be
deemed as a breach of this contract and due to these reasons the other groups can make a
claim against the winning party, which would allow them to share the prize money equally as
was seen in the case of Trevey v Grubb.
C: Conclusion
Hence, a contract was formed in this case, particularly due to the presence of the
intention of the parties. Also, the contract was breached in this case, resulting in remedies
being available to the aggrieved party whereby they can apply for the prize money to be
distributed between them in an equal manner.
Question 5
One of the common laws applicable in different nations is the agency law. Under the
agency law, the principal is held liable to the third party for the work done by their agents as
the principal gives the agent the authority to do work on their behalf and they represent the
principal before the third party (Thampapillai et al, 2015). Vicarious liability is a principle borne
out of the agency law, whereby the employers are held liable for the work done by their
employees to the third parties, due to the employee working for the employer (Giliker, 2010).
The liability arising for the employers and for the principals is the reason for make a clear
differentiation between the agents and the independent contractors. The differences between
the two have been further elucidated below.
Agent can be denoted as an individual who works under the directions and supervision
of his principal and is obligated to adhere to the instructions laid down by the principal. And the
agency law makes the principal liable for the acts undertaken by the agents. Alternatively, the
independent contractors are such individuals who make use of their personal materials,
equipments, machines and labour for fulfilling the contractual terms. And for the acts of the
independent contractor, the contractor is liable instead of the principal (Miller & Jentz, 2007).

QUESTIONS 7
Independent contractor denotes by their very name that the worker works in an
independent manner and they take full liability for the work they do. Conversely, for the acts of
the agent, the principal is liable. The rationale behind this is that the independent contractor
does the work which has been contracted out to him, but the agents can often go beyond their
expressly given authority in manner of apparent or actual implied authority. The presence of
the authority with the agents makes the principal liable. The liability is fixed on the principals as
they are not aware of the presence/ absence, or the magnitude of the authority available with
the agent. And when the agent presents the principal, they are deemed to have the requisite
authority, till the time the contrary can be proven. Hence, the reason for differentiating
between the agents and independent contractors lie in the imposition of liability on the
principal for the actions and their liabilities arising due to agency law.

QUESTIONS 8
References
Andrews, N. (2015). Contract Law (2nd ed.). UK: Cambridge University Press
Ayres, I., & Klass, G. (2012). Studies in Contract Law (8th ed.). New York: Foundation Press
Clarke, P., & Clarke, J (2016). Contract Law: Commentaries, Cases and Perspectives (3rd ed.).
South Melbourne: Oxford University Press.
Gibson, A., & Fraser, D. (2014). Business Law 2014 (8th ed.). Melbourne: Pearson Education
Australia.
Giliker, P. (2010). Vicarious Liability in Tort: A Comparative Perspective. Cambridge: Cambridge
University Press.
Irby, L. (2016). What is a Written Contract When It Comes to Statute of Limitations?. Retrieved
from: https://www.thebalance.com/written-contract-961146
Lambiris, M., & Griffin, L. (2016). First Principles of Business Law 2016. Sydney: CCH.
Latimer, P. (2012). Australian Business Law 2012 (31st ed.). Sydney, NSW: CCH Australia Limited.
Legal Services Commission. (2017). Paying and collecting a cheque. Retrieved from:
http://www.lawhandbook.sa.gov.au/ch10s05s02s01.php
Marson, J., & Ferris, K. (2015). Business Law (4th ed.). Oxford: Oxford University Press.
Mau, S.D. (2010). Contract Law in Hong Kong: An Introductory Guide. Hong Kong: Hong Kong
University Press.
Miller, R., & Jentz, G. (2007). Cengage Advantage books: business law today: the essentials (8th
ed.). Mason, OH: Thompson Higher Education.
Miller, R.L. & Cross, F.B. (2015). The Legal Environment Today (8th ed.). Stanford, CT: Cengage
Learning.

QUESTIONS 9
Mulcahy, L. (2008). Contract Law in Perspective (5th ed.). Oxon: Routledge.
Pendragon. (2014). The Benefits Of A Written Contract. Retrieved from:
https://pendragon.net.au/benefits-written-contract-2/
Stone, R., & Devenney, J. (2017). The Modern Law of Contract (12th ed.). Oxon: Routledge.
Thampapillai, D., Tan, V., Bozzi, C., & Matthew, A. (2015). Australian Commercial Law.
Melbourne: Cambridge University Press.
US Legal. (2017). Promissory Notes Law and Legal Definition. Retrieved from:
https://definitions.uslegal.com/p/promissory-notes/