Business Law 10 Report: Elements of a Binding Contract and Contracts

This report provides a comprehensive overview of key elements of a binding contract, differentiating between written and oral contracts, and exploring the significance of offer, acceptance, and consideration. It delves into the formalities of contracts, including the Statute of Frauds, and the implications of agency relationships versus independent contractors. The report also examines the enforceability of gambling contracts, analyzing scenarios where shared lottery tickets are involved. It further discusses the concept of implied or apparent authority in agency, detailing the roles and responsibilities of agents and principals. This report aims to clarify complex legal concepts, offering insights into contract law, agency, and the legal implications of business transactions.

Running Head: BUSINESS LAW 1
BUSINESS LAW
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1. Elements of a Binding Contract-
Contracts can either be written or oral depending on the key elements which must be present;
offer acceptance and consideration with the intention of creating an agreement which is legally
binding. Also,there should be capacity and legality.
Offer- An offer is made when one party proposes and is accepted by the other party. This should
be distinguished from mere intentions to negotiate. It is a forbearance or a return promise, for
the exchange of performance for the promise. It demonstrates the willingness to enter into the
bargain so that the other party's willingness is justified as a conclusion of the agreement. An
offer should have terms which are certain and intent to enter into a contract (Cross, &
Miller,2012)
There should also be acceptance which is a definite and unconditional agreement set out in the
offer. It can be written or oral, and has to reflect the originally made offer.
Consideration- the parties to the contract must receive something of value or significant, in
which in the absence of such a thing, they would be disadvantaged.
Capacity- capacity covers mental capability of a person to enter a contract. It covers infancy and
mental competence to enter into a contract. If one of the parties does not have the mental
competence to sign a contract, then a contract will not be binding. Similarly, those considered as
children under the law, mostly 18 years and in other countries like America 16 years are
considered to lack capacity to consent and hence enter into a valid contract.
Intention to be legally bound by agreement- There should also be the intention to create
binding relations. If a person A promises person B to give them money so as to go somewhere
together, and person A fails to give money to B after going together, then person A cannot be

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sued for the money because their intentions at the promise were more of social as opposed to
creating an agreement which is legally binding (Bowrey, Handler, & Nicol, 2015)..
2. Do Contracts have to be in Writing to Be binding
A contract can be oral or written, but certain contracts are not binding and enforceable unless
they are in writing. Such contracts include contracts of sale and buying of land and mortgage
contracts. Agreements of sale and finance credit agreements for consumers. Most oral contracts
are enforceable but difficult to prove the details of the agreement. If an agreement is not in
writing, the elements of a valid contract should be fulfilled. In Gordon V Macgregor (1909)
8CLR 316, High Court of Australia the CJ held that when an oral contract is entered into in
writing then the written contract is the only evidence which will be administered in court, unless
it is proven that the written contract did not embody all the factors in the agreement (Ayres, &
Ayres, 2012).
Oral agreements are generally legally binding as long as they are conscionable, made in good
faith equitable and reasonable. Oral contracts also require consent and mutual understanding
where both parties are aware of what is going on. If for example a person hires a cleaner, both
parties should know how many rooms are being cleaned. Oral contracts are difficult to enforce
because they present many difficulties. Other contracts are silent and do not even require words
like going to a convenience store and purchasing bread. Written contracts have some advantages;
they are definite and clear, and the signatures of both parties are in record to show the intentions
to be legally bound. To sum up, when there is good faith when parties come into a transaction, it
important that a contract is put into writing so as to avoid disputes. The parole rule of evidence
prevents outside evidence on oral agreements where there are no ambiguous aspects. In Joachim
V Weldon 1962 OK 276, the court held that if an oral contract is to be enforced by a court of

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equity, the evidence should be clear, forcible and content in a way that there is not reasonable
doubt as to the terms of the contract. The judicial preference is to use the aspects of written
contracts. When a contract is written, most of the aspects which should be construed are out of
the window (Latimer, 2012).
3. Formalities of a contract
A formal contract is a contract which contains the necessary elements of a contract and is put
into writing. An informal contract does not necessarily contain all the necessary elements of a
contract and can time be oral. The difference between the contracts is how enforceable they can
be in a court of law. Most cases do not require contracts to comply with formalities. However,
there are certain impositions by the statute in particular contracts. The statute of Frauds 1677 UK
provides the requirements for such contracts. In Australia, formalities to protect consumers
require that consumers are given copies of contracts as a term to make proving such contacts
easier.
In contracts for the sale of land, they should be written and signed by the parties involved
according to Section 126. If such dispositions are not put into writing, an action cannot be
brought against a person. This is seen in the Victorian Act Instruments Act 1958 (Vic).
Accordingly, consumer contracts and contracts of guarantee require written and signed
agreements before an action is brought against a person.
If there are two different notes of the memorandum, they can be joined together if there is a
signature on one note and terms in the other. However, there must refer to each other by
implication or expressly. This is seen in Elias v George Saheley & Co Barbados Ltd (1983) 1C
AC 646 where the document can include a mark or a sign of the individual to show the contract

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or document was recognized by the parties, by putting a mark. If the requirements of 126 are not
met, then a contract is considered invalid (Mehta, 2012)
In Australia, formalities generally exist to prevent fraud. However, in the doctrine of part
performance contracts are enforceable in part despite non-compliance with the necessary
formalities, as we see in the case of McBride v Sundland (1918) 25 CLR 69. However, difficulty
arises in determining acts which constitute such performance.
Commercial contracts should be written or recorded in documents. If a contract is written, it
should be signed by the parties to an agreement or on behalf of the parties. Contracts are usually
signed at the end of the document by convention. However, parties can choose how the contracts
will come into effect without formal signatures or when faxed signature pages are exchanged. If
there is a deviation of the custom form of entering the contract, it is important that parties record
an agreement to that effect to have evidence of the agreement to that effect.
Many options exist nowadays including digital signatures. If such signatures are used on a draft
contract, then the contract will be effective. The instinctive preference would be to use the digital
signatures while sending an email; such would require a conscious effort than just logging into a
person's computer and sending their email. IP assignments need to be in writing and should be
executed as conveyancing documents, deeds, and real property. Under English laws, these are
rather exceptions than a rule.
4. The issue in this scenario is whether the lottery price should be shared between the
contributors of the ticket
A gambling contract is a contract which there is the performance of one party which is
contingent on the outcome of a bet which is enforceable in most jurisdictions by statute. The

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scenario given is an example of a gaming and gambling contract. When the price is paid and
there is a winning lottery, the person who pays and wins owns the money prima facie. However,
in the scenario above, everyone contributes $2 to the lottery ticket which wins. One group is
tasked with buying the ticket, and upon winning the purchaser does not feel like the rest of the
members need to have a share in the price.
From the above scenario, we see a verbal contract which can be difficult to prove because the
court cannot precisely determine what took place. This, however, does not mean that the court
will not enforce the contract. The risk in the scenario is the ambiguity of the contract and the
burden of proving what transpired between the interested parties. So we see a group of people
having the burden of proving that they had a share in the prize, and they have an equal share in
the prize. Therefore, it is just not a social arrangement ( Kozolchyk, 2014).
The group can prove interested in the prize, by demonstrating their intentions at the paying of the
$2.which was that all parties benefit equally if any prize is won. Therefore, if they can prove
that, it will be the courts job to decide whether there was a formation of a contract and the stakes
of the parties involved in the process. The court will further decide if a breach occurred and
whether the parties are entitled to damages, like specific performance, where whoever holds the
money gives everyone in the group their entitled amount. The only problem which may arise is if
the parties are not able to clearly identify and point out the terms of the agreement. Therefore,
the parties are entitled to the expected sum, if they can prove there was the existence of an oral
contract.

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6. Implications of a principal agent relationship and that of an independent contractor
An agency relationship is a fiduciary relationship where the agent acts as if it were the principal
acting. There is a manifestation of consent in agency relationship where the agent is subject to
consent and control of the principal. The instructions of the principal are binding on the agent.
Also, the actions of the agent are binding to the principal. An independent contractor uses their
own equipment and resources in carrying out their work. The terms of a contract are binding to
the independent contractor. The acts of an independent contractor, as opposed to the agent, are
not binding to their employer. AN independent contractor also carries out duties and functions
independently, and they are not controlled by their employees, and their omissions or acts are not
binding to their employees. An agent also works to benefit the principal and even makes third
party contracts on behalf of the principal. An independent contractor works for their employee
and receives payment for the work done; and just works to fulfill their duties (Hammer,2016).
An agency relationship could be apparent or implied authority. Implied or apparent authority can
be assumed by an outsider where it appears as if there is the authority. Consequently, the
company or principal will be prevented from denying the existence of such authority. For
apparent or implied authority to be asserted, someone with actual authority should represent the
person's authority by appointment to a certain position or allow such person to carry out certain
activities. In appointment to a certain position, in the daily running of a company, the director
binds the company while implementing daily running of company activities. An example of
allowing someone to carry out certain activities is the activities of directors or senior executives
over time are binding to a company. In agency, however, the agent has to act within the limits of
the given authority, and if they act ultra vires, they can be liable for activities which are carried
out outside the given authority. If a manager is given the mandate to act as a manager their

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mandate does not extend to selling the entire company. In agency relationship also, the agent can
be liable for not performing due diligence while carrying out their day to day activities. The
agent also has the duty to not let their interest conflict with the principal, not to disclose
confidential documents, not to make secret profits and not to delegate authority Braun, &
Starlinger, 2011). In Independent contractual relationships, have wide discretion in carrying out
their activities, they can make decisions outside the employer's knowledge.

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and Policy (pp. 602-627). TMC Asser Press.
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Ayres, I., & Ayres, I. (2012). Studies in Contract Law. Foundation Press.
Bowrey, K., Handler, M., & Nicol, D. (2015). Australian Intellectual Property: Commentary,
Braun, I., & Starlinger, A. (2011). Sports Betting. Law and Policy in Austria. In Sports Betting:
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Practical Guide for the Industry Professional. John Wiley & Sons.

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