BUS201 Contract Law: Examining Contractual Validity and Mediation

This report provides a comprehensive analysis of contract law, addressing key elements such as offer, acceptance, and consideration in determining the validity of contracts. It examines a specific scenario involving John and Fred, assessing whether a valid contract exists for the sale of a PC, referencing relevant case law and the Electronic Transactions Act 2010. Furthermore, the report explores alternative dispute resolution methods, advocating for mediation as an appropriate approach for resolving contractual disputes. The document also distinguishes between implied and express terms in a contract, highlighting their significance in contractual obligations. This student-contributed assignment is available on Desklib, a platform offering a wealth of study tools and solved assignments for students.

Running head: CONTRACT LAW
Contract Law
Name of the Student
Name of the University
Author Note

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Answer 1
Issue 1
Whether there is a valid contract between John and Fred for the sale of the PC.
Rule
Contract is an agreement, which has legal enforceability. It is an agreement that has been
instituted by an offer made by one party, which has been accepted by another party. A valid
contract must contain certain elements that will render it to be valid and it will gain the status
of a legally enforceable agreement. The following paragraph will strive to discuss the four
elements that an agreement needs to posses in order to gain the status of a valid contract.
The first element that a valid contract must contain is the existence of an agreement that
has been achieved by an offer. An offer is a communication of the inclination made by the
promisor to enter into a contract on certain conditions with an intention to enter into a legal
relationship with the promise. The terms of the offer must be clear and unambiguous. It must
contain any illegal or wrongful terms. The person making the offer have the intention to
create legal relationship. The same can be explained with the case of Smith v. Hughes (1871)
LR 6 QB 597. The offer needs to be accepted for the purpose of creating a valid contract. An
acceptance implies a conduct of the promisor that indicates the willingness of the promisee to
be bound by the terms of the offer.
The second element that a valid contract must have is the acceptance of an offer, which
results into an agreement. The acceptance needs to be valid to create a legal relationship. The
acceptance to be a valid one needs to be communicated either expressly or by conduct. Mere
silence cannot be treated as a valid acceptance. The same can be illustrated with the case of
Felthouse v Bindley [1862] EWHC J35. However, in case of unilateral contracts, the
acceptance can be effected without any express communication of the same. Acting upon

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such an offer can be treated as a valid acceptance. The same can be illustrated by the case of
Carlill v. Carbolic Smoke Ball Co. [1893] 2 Q.B. 484. The acceptance needs to be effected by
the offeree himself and must effected within a reasonable time. In case a particular method
has been specified for the acceptance, the same needs to be effected in accordance with the
same. The same can be illustrated with the case of Yates Building Co. Ltd v. R.J. Pulleyn &
Sons (York) Ltd (1975) 119 Sol. Jo. 370. Acceptance needs to be unconditional, the alteration
of a terms of the offer while accepting it is not a valid acceptance as the same will amount to
a counter offer and not a valid acceptance. The offer and acceptance, which has been effected
in a lawful manner creates a valid contract.
The third element of a valid contract is the consideration involved in the contract. In the
case of Currie v Misa (1875) LR 10 Ex 893, the court has declared consideration to be an
essential element for the formation of a valid contract. Consideration implies a value or
benefit that a person must obtain form the performance of the contract. Each of the party to a
contract must obtain a benefit from the contract to make the contract a valid one. The same
can be illustrated with the case of Dunlop Pneumatic Tyre Co Ltd v Selfridge Ltd [1915] AC
847. Consideration needs to be present in the contract, the adequacy of the same is irrelevant.
The same has been explained in the case of Chappell & Co Ltd v. Nestle Co Ltd [1959] 2 All
ER 701.
The fourth element of a valid contract is the intention of the parties to the contract to
create legal relationship. This can be illustrated with the case of Daniel John Brader v
Commerzbank AG [2013] SGHC 284. The mere achieving of an agreement without the
intention of creating a legal relationship does not amount to a valid contract. The same can be
illustrated with the case of Rose & Frank Co v JR Crompton & Bros Ltd [1924] UKHL 2.

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An offer, which has not been accepted can be revoked at any time before the acceptance
has been effected. The revocation needs to be communicated to the offeree. However, the
revocation of an offer can be communicated either by the offeror himself or any other person
in his behalf. The same can be illustrated with the case of Dickinson v. Dodds (1876) 2 Ch.D.
463. In the case of Byrne & Co v Leon Van Tienhoven & Co [1880] 5 CPD 344, the offeror
posted the offer on 1st of October, which has been revoked by post on 8th October. On 11th
October the offer was accepted via telegram but the letter of revocation has been received by
the offeree on 20th October. Therefore the revocation is effective on 20th of October and the
contract was rendered to be accepted on 11th October. Therefore, the revocation was not
effective.
The Electronic Transactions Act 2010 (Cap. 88) renders the formation of a contract via
electronic mode to be valid under section 11. Section 2 of the Act defines communication to
be any declaration, statement, demand, request, offer, notice or acceptance, which the parties
to the contract effects in connection to the contract. Section 13 of the Act provides for the
time of receipt and dispatch of the communication via electronic device. The section renders
the communication to be received by the addressee when it enters the system of the
addressee.
Application
In the present situation, John has made an offer to Fred asking him to buy a computer for a
price of $2500 dollar via email. This is a valid offer both under the contract law and the
Electronic Transactions Act 2010 (Cap. 88). Fred has made an offer to keep the former offer
open till 15th of May for a price of $50 dollars for it. This can also be considered to be a valid
offer. Therefore, the first essential element of a valid contract is apparently present in both
the cases.

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Again, the offer of keeping the former offer open till 15th of May has been agreed by John,
which amounts to the acceptance of the offer. Fred has mailed his acceptance of the former
offer for buying the computer on 12th of May, which has entered the system of John, although
he has not read the same. This can be referred to as a valid acceptance forming an agreement
between the parties. However, John did not read the email that communicated the acceptance.
This makes the acceptance to be questionable, but applying the law relating to
communication via electronic mode the acceptance is valid as the same has entered the
system of the offeror within the time that has been allotted by the offer. Therefore, the second
essential element of a valid contract is also present in this situation.
The offer to buy the computer has been made for a consideration of $2500. In this case the
consideration for John is $2500 and for Fred is the computer. Again in the latter contract the
consideration for John was $50 and the consideration for Fred was the extension of the period
for accepting the offer. In this context, it can be stated that both the contract has the third
element of a valid contract that is the consideration.
The fourth essential element that needs to be present in a contract that is the intention to
create legal relationship is also present in the situation. Although John and Fred are friends
and this requirement excludes friends and family from its purview, but in this case the
contract is a commercial one, which will bring the contract to have entered into for creating
legal relationship.
Conclusion
There is a valid contract between John and Fred for the sale of the PC.
Issue 2
An appropriate alternative dispute resolution that, he may undertake with John.

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Rule
There are certain disputes that can be solved by way of negotiations between the parties to
the contract. However, there certain disputes that lacks the scope of being solved by way of
negotiations. The parties to such disputes might resort to the different methods of dispute
resolution. They can either opt for a litigation or the alternative dispute resolution techniques
for the resolution of the dispute.
Litigation implies a formal form of a dispute resolution technique. It involves disputing
parties to appear before the court and present their sides in the court. It provides the parties to
the dispute to contest in the court in order to present their sides. The court may take notice of
the sides presented by the parties and gather evidence regarding the same. The decision, in
this approach of dispute resolution is taken by the judge and is binding upon the parties to the
resolution. The parties do not have the authority to disobey the same. However, an appeal can
be preferred from such a decision. In litigation, the decision is always delivered in favour of
one of the disputing parties.
Other than this formal form of dispute resolution, there are certain alternative dispute
resolution approaches that the disputing parties may avail. One of such alternative dispute
resolution is the process of mediation. In this process, a neutral third party intervenes in the
dispute and arrive at a resolution that will bring the parties to an agreement regarding the
dispute. In this process, the mediator will not impose a formal order upon the parties. It will
rather make recommendation for a solution and for arriving at such a solution, the mediator
will take notice of both the sides of the dispute. The resolution arrived at by the process of
mediation is more of a recommendation, which the parties are not bound by. However, in this
approach the chance of compliance is high as the parties jointly come to an agreement
regarding the solution and is not imposed with the same. This process , being an informal
one, ensures confidentiality of the disputing situation. this strives to keep the reputation of the

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disputing parties intact. No appeal can be preferred from the same (Blake, Browne & Sime,
2016).
Another process of dispute resolution is the arbitration, which involves the a neutral third
party to act as a judge and exercise the duty of resolving the dispute. This process is similar
to litigation but is less formal than the litigation. In this process an arbitrator is appointed
before entering into the contract contending the fact that in case dispute arises, it will be
addressed with the process of arbitration.
Application
In the present case, the dispute has arisen in the contract between Fred and John for the
purchase of the computer. The dispute is a trivial one as the same involves a little amount of
money. In case, the parties opt for litigation for the dispute resolution, the same will be
considerably expensive and time consuming. Again, as the contract is not a big one,
arbitration will also be a hassle. Therefore, in the present case mediation will be appropriate
for the dispute resolution as the same will be less expensive and time saving.
Conclusion
An appropriate alternative dispute resolution that, he may undertake with John is
mediation.
Answer 2
Issue 1
Distinction between implied terms and express terms in a contract.
Rule
Contracts are formed by the compilation of several terms that the parties to the contract
has agreed upon to perform by virtue of the contract. These terms forms the part of the

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contract and are referred to as contractual terms. These terms creates the contractual
obligation that the parties to the contract are bound by. In case a party contravenes these
terms, the same might lead to the breach of the contract and will result in the dispute being
created between the parties.
A contractual term may be either expressly mentioned in the contract or may be implied
by the circumstances under which the contract has been entered into. Express terms implies
the terms that are explicitly mentioned in the contract and have been expressly discussed
between the parties at the time of entering into the contract. In case of these terms, the
intention relating to the parties are clear and these terms requires no further discussion.
However, implied terms of a contract implies the contractual terms that are not expressly
mentioned in the contract but are present by virtue of the circumstances under which the
contract has been entered into. In case of implied terms, the parties to the contract do not
discuss these terms but these terms forms part of the contract because of the situation in
which the contract has been entered into. There are certain ways in which the implied terms
of a contract arises, namely by custom, law and fact. There are certain terms in the contract
that are not expressly mentioned in the contract but forms the part of the contract because of
the customs of the trade prevalent in relation to the such contracts and are referred to as the
terms implied by customs. Certain terms of the contract arises owing to some legal
obligations on the part of the parties to the contract that has been mandated by a statute.
These are called terms implied by law. The same can be illustrated with the case of Liverpool
City council v Irwin [1977] AC 239. There are certain implied terms of the contract that has
been implied owing to the facts of the case. These are referred to as the terms implied by
facts. The same can be illustrated with the case of SABIC UK Petrochemicals Ltd v Punj
Lloyd Ltd [2013] EWHC 2916 (TCC).

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Application
In the present situation, the express terms in the contract between GCC and Ah Seng are
the clause 12 of the contract and the supply of vegetables on a weekly basis for twelve
months. These are considered to be expressed terms, as the same are expressly discussed and
agreed upon by the parties to the contract and are expressly provided in the contract.
The implied term in the contract is that the supplier is required to have the authority to
make the supply and the supply needs to be of acceptable quality.
Conclusion
Issue 2
Whether GCC would be entitled to terminate the contract with Ah Seng, on the basis of a
breach of Clause 12.
Rule
The terms of a contract can either be conditions or warranties. The identification of a
contractual term as a condition or warranty needs to be effected while analysing its
enforceability under the contract.
A condition implies a term of the contract, which is fundamental to the contract and forms
an essential part of the contract. The breach of a condition of a contract will be rendered as
the breach of the whole contract, as the contract will lose its purpose in case such a term of
the contract has been breached. In case one of the parties to the breach a condition of the
contract, the party aggrieved by the same has the option of both repudiating the contract and
claim damages for such a breach of the condition. In case one of the parties to the contract
fails to perform a condition relating to the contract, the other party is automatically
discharged from the duty of performing his part of the contract. The same can be illustrated
with the case of Poussard v Spiers and Pond [1876] 1 QBD 410.

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There are certain terms of the contract, which are supplementary to the contract and does
not form an essential part of the contract. The contract will not lose its essence if such a term
has been breached. These terms are referred to as warranties. In case of breach of a warranty
by a party to the contract, the other party has the option of claiming damages. A breach of a
warranty does not confer the aggrieved party with the right to repudiate the contract. It can
only create a right for damages. The same can be illustrated with the case of Bettini v Gye
[1876] 1 QB 183.
A condition is a term of the contract, which has induced the consent of the parties to enter
into the contract. In the absence of that condition, the parties would not have entered into the
contract in the first place. The whole existence of the contract is depending upon that
particular term of the contract. The same has been explained in the case of Schuler AG v
Wickman Machine Tool Sales Ltd [1974] AC 235. However, the term of a contract that is
subsidiary to the contract and the consent of the parties to the contract is not depended upon
the same, the term is said to be a warranty. The breach of the same will not severe the
contract from its essence. The same can be illustrated with the case of Wills v Amber [1954]
1 Lloyd’s Rep 253.
Application
In the present situation, the clause 12 of the contract between GCC and Ah Seng expressly
identifies the clause to be a warranty. Moreover, the contract has been entered upon for the
purpose of supply of vegetables. The contract would not have been entered upon if the supply
of vegetables are not in the contract. Therefore, the supply of the organically procured
vegetables is a condition. But in case of the clause 12, first of all it has been clearly stated
that the clause is a warranty. The vegetables to be procured from the Singapore and
organically procured is a secondary term of the contract. The clause does not form the main
subject of the contract. Moreover, this term does not render the contract to be impossible to

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operate in the event of the breach of such a term. The contract will still stand good in the
event of failure to comply with the term. Therefore, the term is considered to be a warranty
and not a condition. In such a case, as the clause was not a condition but a warranty the
breach of the same would incur the aggrieved party with a right to repudiate the contract. It
will however, provide the GCC with a chance of claiming damages from Ah Seng. Therefore,
as the clause is a warranty and not a condition to the contract, the same cannot confer upon
GCC a right to repudiate the contract.
Conclusion
GCC would not be entitled to terminate the contract with Ah Seng, on the basis of a
breach of Clause 12, but he may claim damages for the same.
Issue 3
SSPL is able to enforce Clause 15 against GCC, if GCC decides to start selling its own
soy-based chicken burgers.
Rule
Under the common law, individuals are free to pursue a trade and utilize their skill and no
undue prohibition needs to be imposed upon them. In the like manner, businesses are required
to be free to enter into competition with other businesses. The term restraint of trade clauses
are the clauses included in a contract that prohibits one of the parties to the contract from
entering into a trade practice that is similar to the business forming the subject of the contract.
Restraint of trade clauses implies contractual clauses of restrictive nature. Under common
law, the clauses restraining the practice of a particular trade is void under common law in
general. However, there are certain circumstances when such a clause can be enforced. Those
circumstances are:

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 In case, the clause has been imposed by the party in order to protect an interest,
which is legitimate. The same can be illustrated with the case of Marion White Ltd
v Francis [1972] 1 W LR 1423.
 In case, such a restriction has a reasonable connection with the protection of that
legitimate interest. The same has been discussed in the case of Lucas (T) & Co Ltd
v Mitchell[1974] Ch 129; [1972] 3 All ER 689.
 In case, such a restraint is not opposed to the public policy. The same can be
illustrated with the case of Greig v Insole [1978] 3 All ER 449.
The reasonableness attached to the restraint clause is to be judged from certain
perspective. The length of time for which such a restraint lasts is a valid ground for
determining the reasonableness of the restraint clause. The area of that restriction and the
scope of that restriction shall also be analysed while determining its reasonability.
In case of the contracts effecting the sale of a business, the buyer is justified to impose
restrictive clauses in the contract, which prohibits the seller to establish a competing business
to the same. In the case of Esso Petroleum Co Ltd v Harpers Garage (Stourport) Ltd
[1968] AC 269, it was held that to be valid the restraint of trade clause needs to be
reasonable.
Application
In the instant situation, the contract between GCC and SSPL contains a clause 15, which is
a restraint trade clause. This clause restricts the GCC form indulging in the manufacture,
selling or distribution of any soy based product in Singapore or anywhere else in the world.
The time for such a restriction has also been provided in the clause, which is for two years
after the termination of the contract.