Commercial Law: Contract Law Analysis of Graham and Stuart's Agreement

This assignment analyzes a commercial law contract between Graham and Stuart, formed over the telephone. The analysis centers on whether a valid contract exists, considering the essential elements: offer, acceptance, consideration, mutual intention, capacity of parties, and lawful subject matter. The document references key legal cases such as Carlill v Carbolic Smoke Ball Co, Thomas v Thomas, and Jones v Padavatton to support its arguments. It concludes that a valid contract was formed, fulfilling all essential elements, and therefore, Graham cannot cancel the contract. The assignment provides a clear understanding of contract law principles and their application in a real-world scenario, demonstrating the requirements for a legally binding agreement and the consequences of breach.

Running head: COMMERCIAL LAW 0
Commercial Law
Contract

COMMERCIAL LAW 1
Issue
Is a valid contract exists between Graham and Stuart given that they made it over the
telephone and can Graham cancel it?
Rule
A contract is referred to a legal agreement which creates a legal relationship between two or
more parties. A contract can be written or oral as long as certain essential elements are
fulfilled by parties of the contract which include an offer, acceptance, valid consideration,
mutual intention, the capacity of parties, and lawful subject matter (McKendrick, 2014). In
order to create a contract, an offer must be given by a party to another for acceptance, and the
party must accept it without making changes in its terms. An offeror is the party making an
offer and offeree is the party to whom the offer is made. In Carlill v Carbolic Smoke Ball Co
(1893) 1 QB 256 case, a judgement was given by the court that an offer must have the
capacity to bound offeror into a legal relationship if it is accepted by the offeree (Jones,
2016). The acceptance of parties must be communicated, and it should be free from external
forces. A valid consideration is another requirement which is referred to the exchange of
promises or money.
In Thomas v Thomas (1842) 2 QB 851 case, it was held that a consideration is something
which has a value in the eyes of the law. In Re McArdle (1951) Ch 669 case, the court held
that past consideration is not valid and the consideration must be present (Turner, 2014). The
parties to a contract must have a mutual intention to bind themselves into terms of the
contract. In Jones v Padavatton (1969) 1 WLR 328 case, the court held that domestic
agreement did not create a legal relationship because parties did not intend to enforce other
parties legally (Gulati, 2011). The parties to a contract must be competent to create a legal
relationship; incompetent parties include a minor, insane, intoxicated and insolvent person.
The contract must have a lawful subject matter which means its subject cannot violate public
policy or prohibited by law such as a contract to kill.
Application
In the present case, Graham made a contract with Stuart through the telephone. A contract
can be oral or written as long as its parties fulfil the essential elements of a contract. Graham

COMMERCIAL LAW 2
and Stuart fulfil all the essential elements of a contract. Both parties gave a valid offer and
acceptance along with a valid consideration. Both parties are competent, and they have the
intention to create a legal relationship. The subject matter was lawful as well, therefore, a
valid contract has constructed between the parties. Graham cannot cancel the contract, and
Stuart can take legal action in case Graham breaches the contractual terms.
Conclusion
In conclusion, a valid contract has constructed between Graham and Stuart because both
parties fulfil the essential elements and a contract can be written or oral. Stuart could take
legal action against Graham if he did not comply with its terms.

COMMERCIAL LAW 3
References
Carlill v Carbolic Smoke Ball Co (1893) 1 QB 256
Gulati, B. (2011) Intention to Create Legal Relations: A Contractual Necessity or an Illusory
Concept. Beijing L. Rev., 2, p.127.
Jones v Padavatton (1969) 1 WLR 328
Jones, E. (2016) Richard Stone and James Devenney, Texts, Cases and Materials on Contract
Law. The Law Teacher, 50(3), pp.393-396.
McKendrick, E. (2014) Contract law: text, cases, and materials. England: Oxford University
Press (UK).
Re McArdle (1951) Ch 669
Thomas v Thomas (1842) 2 QB 851
Turner, C. (2014) Key Cases: Contract Law. Abingdon-on-Thames: Routledge.