Business Law Assignment: Contract and Partnership Issues

This Business Law report analyzes two case problems related to contract and partnership law. Part A examines whether Lincoln can recover damages from Washington for breach of contract, focusing on the element of capacity, especially in the context of Washington's potential mental incapacity. The analysis considers whether the antique axe and cherry tree were necessities. Part B investigates whether George has grounds for action against Anita for breach of their partnership agreement. The report examines the presence of intention to create a legal relationship, consideration of the role of solicitors, and the impact of signed documents. Both sections apply legal principles and case law, including Appleson v Littlewoods, Smith v Hughes, Currie v Misa, and L'Estrange v F Graucob Ltd, to determine the legal outcomes. The report uses the IRAC method to structure its legal reasoning.

Running head: BUSINESS LAW
Business Law
Name of the Student
Name of the University
Author Note

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Part A
Issue
Whether Lincoln can recover damages from Washington for the breach of the contract
instituted between them.
Rule
The presence of validity instituted contract among two of the parties involved is to be
conceived as being instituted in adherence with all the requirements that needs to be abided by
for creating a valid contract. For claiming a contract to be valid the parties involved should
establish the presence of all the five elements of a validly created contract. This can be best
explained with the legal principle inculcated within the case of Appleson v Littlewoods 1939.
Firstly, the foundation of a valid contract is to be laid down by establishing an adequate
agreement with the involvement of an offer that has been initiated by the on of the parties and
which has been adequately presented with acceptance from the party to whom the offer has been
means. This can be best explained with the legal principle inculcated within the case of Smith v
Hughes [1871] LR 6 QB 597.
Secondly, the contracts in question is always required to have an underlying motive of
the parties involved to institute a legal relationship between them. This can be best explained
with the legal principle inculcated within the case of Rose & Frank Co. v JR Crompton & Bros
Ltd. [1923] 2 K.B. 261.
Thirdly, there has been a requirement for a valid consideration being present for both the
parties to a contract that has been adding some value to both of them for making the contract

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legally enforceable. This can be best explained with the legal principle inculcated within the case
of Currie v Misa (1875) LR 10 Ex 893.
Fourthly, the consent of the parties involved in a contract is required to be free from any
external forces so as to induce the same for rendering the contract to be valid. This can be best
explained with the legal principle inculcated within the case of Gordon v Selico (1986) 18 H.L.R.
219.
Fifthly, the parties involved in a valid contract is required to have the capacity of
instituting a contract. In this context it can be stated that the term capacity of the parties can be
construed to depict a situation where the parties involved or any of the parties involved does not
have a proper understanding regarding the terms or nature of the contract they have been
aggreeing to. This can be best explained with the legal principle inculcated within the case of
Simpkins v Pays [1955] 1 WLR 975.
The persons who has not been mentally fit or has been suffering from any mental ailment
would require the assistance of a guardian for the purpose of making transactions with third
parties. However for the purpose of establishing the person to be mentally unfit for entering into
the contract it needs to be established that he has not been under the capacity to understand the
severity of the terms inculcated within the contract. In case the medical illness has not been
impairing the judgement of the alleged person the contract cannot be said to have been voidable.
However contract for necessaries provided to a person suffering from mental illness is voidable
at the option of the mentally impaired person. This can be best explained with the legal principle
inculcated within the case of Imperial Loan Co. Ltd. v. Stone [1892] 1 Q.B. 599.

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However, when a person becomes mentally ill in certain cases and in certain times it
remains mentally fit then all the contracts during his mental adequacy would be rendered as valid
and all the contracts during the mental unfitness would be voidable in favour of the mentally ill
individual. This can be best explained with the legal principle inculcated within the case of York
Glass Co Ltd v Jubb [1925] All ER 285.
Application
In the present situation, the main concern is the capacity of the parties involved in the
situation instituting transaction among them. In this case Washington has been an insane
individual having limited means who have entered into a contract with another individual named
Lincoln for purchasing an antique axe along with a cherry tree for $100. These items cannot be
treated as necessities as it is more of a luxury and hence the supply for basic necessity principle
will not apply in this case as the items involved are not necessities. This can be supported with a
case of Imperial Loan Co. Ltd. v. Stone [1892] 1 Q.B. 599.
Again, the factor of consideration has been adequately complied with as a fair and
reasonable remuneration has been agreed and paid upon while instituting the agreement.
Moreover, Washington has been apparently a normal person as viewed from the outer
perspective while instituting the contract. However eventually there was a refusal by Washington
to take delivery of the axe along with the cherry tree. In this context it can be said that
Washington in this case has been an insane person and has never conceived the terms of the
contract in the same manner as that of Lincoln. This is because the parties to a contract are
required to have a proper and sane understanding of the terms of the contract for making the
contract legally enforceable. This can be best explained with the legal principle inculcated within
the case of York Glass Co Ltd v Jubb [1925] All ER 285. In this case, Washington has always

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been a lunatic person so any contract that has not been created to provide a commodity or service
of necessity to him or under the consent of his guardian, the same would not be treated as a valid
contract. As no contract has been created Lincoln cannot claim any damages for the repudiation
of the contract.
Conclusion
Hence, no contract has been created Lincoln cannot claim any damages for the
repudiation of the contract.
Part B
Issue
Whether George has any action against Anita for breach of the contract.
Rule
The presence of validity instituted contract among two of the parties involved is to be
conceived as being instituted in adherence with all the requirements that needs to be abided by
for creating a valid contract. For claiming a contract to be valid the parties involved should
establish the presence of all the five elements of a validly created contract. This can be best
explained with the legal principle inculcated within the case of Appleson v Littlewoods 1939.
Firstly, the foundation of a valid contract is to be laid down by establishing an adequate
agreement with the involvement of an offer that has been initiated by the on of the parties and
which has been adequately presented with acceptance from the party to whom the offer has been
means. This can be best explained with the legal principle inculcated within the case of Smith v
Hughes [1871] LR 6 QB 597.

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Secondly, the contracts in question is always required to have an underlying motive of
the parties involved to institute a legal relationship between them. This can be best explained
with the legal principle inculcated within the case of Rose & Frank Co. v JR Crompton & Bros
Ltd. [1923] 2 K.B. 261. It is a general contention to consider social agreements to be informal in
nature and does not have any intentions among the parties to establish legally enforceable
relationship between them. This can be best explained with the legal principle inculcated within
the case of Merritt v Merritt [1970] EWCA Civ 6. On the other hand, commercial agreements are
generally referred to as agreements that on the part of the parties has been supported by the
intention of creating legal relationship. This can be best explained with the legal principle
inculcated within the case of Balfour v Balfour [1919] 2 KB 571. However, this test of presence
of legal relationship has been made to have been carried out in lines with the objective test in the
case of Ermogenous v Greek Orthodox Community of SA Inc [2002] HCA 8. In this case it has
been held by the court that the intention of the parties of indulging into legal relation is required
to be constituted from the circumstances of the case and not from a subjective aspect.
Thirdly, there has been a requirement for a valid consideration being present for both the
parties to a contract that has been adding some value to both of them for making the contract
legally enforceable. This can be best explained with the legal principle inculcated within the case
of Currie v Misa (1875) LR 10 Ex 893.
Fourthly, the consent of the parties involved in a contract is required to be free from any
external forces so as to induce the same for rendering the contract to be valid. This can be best
explained with the legal principle inculcated within the case of Gordon v Selico (1986) 18 H.L.R.
219.

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Fifthly, the parties involved in a valid contract is required to have the capacity of
instituting a contract. In this context it can be stated that the term capacity of the parties can be
construed to depict a situation where the parties involved or any of the parties involved does not
have a proper understanding regarding the terms or nature of the contract they have been
aggreeing to. This can be best explained with the legal principle inculcated within the case of
Simpkins v Pays [1955] 1 WLR 975.
In case a party to the contract has enumerated his signature in a document acknowledging
and instituting the contract in question, the contract will automatically become binding up in him
and he cannot claim his on awareness of the contents of the contract. This can be best explained
with the legal principle inculcated within the case of L'Estrange v F Graucob Ltd [1934] 2 KB
394.
Application
In the present situation, the element of the contract that has been the main concern is the
presence of the intention between the parties while entering into the partnership agreement. In
this case George and Anita has been good friends who has involved solicitors for the purpose of
preparing their deed of partnership. This might points towards the contract created between them
to have lacked the intention of the parties to create legal relationship as being friends it consumes
more of a social agreement. This can be best explained with the legal principle inculcated within
the case of Merritt v Merritt [1970] EWCA Civ 6.
All of their rights along with the responsibilities has been enumerated within the
document evidencing the contract. This needs to be treated as a presence of the intention for
forming legal relationship between them. Moreover, the intention of the parties indulging into
legal relation is required to be constituted from the circumstances of the case and not from a

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subjective aspect. This can be best explained with the legal principle inculcated within the case
of Ermogenous v Greek Orthodox Community of SA Inc [2002] HCA 8. The involvement of the
solicitor and setting out all the rights and obligations for the purpose of creating the contract in
relation to partnership points towards the presence of the intention of the parties to establish legal
relations.
Another contention that requires mention in this furtherance is the signature of the parties
involved in this situation in the deed for creating the partnership contract. In case a party to the
contract has enumerated his signature in a document acknowledging and instituting the contract
in question, the contract will automatically become binding up in him and he cannot claim his on
awareness of the contents of the contract. This can be best explained with the legal principle
inculcated within the case of L'Estrange v F Graucob Ltd [1934] 2 KB 394. Hence, there has
been a valid partnership agreement being created between George and Anita.
Conclusion
George can bring an action against Anita for breach of the contract.

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Reference List
Appleson v Littlewoods 1939
Balfour v Balfour [1919] 2 KB 571
Currie v Misa (1875) LR 10 Ex 893
Ermogenous v Greek Orthodox Community of SA Inc [2002] HCA 8
Gordon v Selico (1986) 18 H.L.R. 219
Imperial Loan Co. Ltd. v. Stone [1892] 1 Q.B. 599
L'Estrange v F Graucob Ltd [1934] 2 KB 394
Merritt v Merritt [1970] EWCA Civ 6
Rose & Frank Co. v JR Crompton & Bros Ltd. [1923] 2 K.B. 261
Simpkins v Pays [1955] 1 WLR 975
Smith v Hughes [1871] LR 6 QB 597
York Glass Co Ltd v Jubb [1925] All ER 285