Understanding Contracts: Key Elements, Types, and Case Studies

This assignment solution delves into fundamental aspects of contract law. It begins by outlining the essential elements required for a valid and enforceable contract, including offer, acceptance, consideration, and legal intention. The document then compares written and oral contracts, highlighting the advantages of written agreements. It further explains the concept of formal contracts, detailing the specific formalities required. A case study is presented to examine legal intention in the context of a lottery ticket purchase among friends, analyzing whether a binding contract exists. Finally, the assignment differentiates between an agent and an independent contractor, clarifying their roles and implications for liability. The solution is supported by relevant case law and a bibliography.

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Cover Page
Name of the student
Student ID
Word Count

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Contents
Solution 1....................................................................................................................................................3
The basic elements of contract.................................................................................................................3
Solution 2....................................................................................................................................................3
Which is better- written or oral contract..................................................................................................3
Solution 3....................................................................................................................................................4
Solution 4....................................................................................................................................................5
Case study – legal intention.....................................................................................................................5
Solution 6....................................................................................................................................................6
Difference amid an agent and an independent contractor........................................................................6
Bibliography................................................................................................................................................8

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Solution 1
The basic elements of contract
A contract is a relationship which is established by the parties privately. Two or more individual
when decide to carry out any act or omission then in order to do so adequate they require
a formal document which can be established in the form of a contract. A contract can be
formed in written form or in oral form. But there are few essential elements which are
needed in order to form a contract which is valid and enforceable in law. (Gibson &
Fraser, 2013)
Thus, the main elements of contract are:
i. A contract requires an offer on the part of the offeror. An offeror makes a statement in the
form of a proposal wherein he intends to describe any act or omission which he desires to
be carried on by the offeree. An offer can be oral or written but needs to communicated to
the offeree in order to be valid (Gibson v Manchester City Council , 1979);
ii. The acceptance is the approval of the offer which is communicated to the offeree by an
offeror. There should be no variation as results in cancellation of contract (Hyde v
Wrench, 1843). When an acceptance is made then an agreement is established amid the
parties;
iii. Every agreement must be made amid the parties for some kind of benefit which must be
exchanged amid the parties and is called consideration in the eyes of law. A consideration
makes any contract enforceable (Williams v Roffey Bros & Nicholls (Contractors) Ltd ,
1989);
iv. The parties must have legal intention when the promises are exchanged amid the parties.
If the intention while aiming the offer and the acceptance is not legal then the contract is
invalid in law (Jones v Padavatton, 1969);
v. The parties who are making the offer must be mentally capable and must have attained
the age of majority and are not barred by any law.
Thus, these are some of the elements which must be comply with by every party to make an
enforceable contract.
Solution 2
Which is better- written or oral contract
A contract is a relationship which is established by the parties privately. Two or more persons

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decide the terms with which they intend to abide by and then they are into contractual
duty to comply with such pre-decided terms. (Gibson & Fraser, 2013)
Now, a contract can be made by the parties by written the term (written contract) or verbally
communicating the terms (oral contract). The Australian contract law has regarded both
the kinds of law as valid in the eyes of law. However, when compared amid the two, it is
found that the establishment of a written contact is found to be more favorable mainly
because: (Findlaw, 2017)
i. When a contract is in the form of written document then the courts are able to find the
exact mindset of the parties which cannot be found when the terms of the contract are
oral in nature;
ii. The parties cannot rebut what is stated by them when the contract is formed if the terms
are written in nature, but, if the terms are oral then the parties can betray from there
verbal communication;
iii. The documents are better proof when compared with oral statements;
iv. There is clearance which can be brought in front of court s the court need not loom what
is intended by the parties as the true intention of the party can be depicted from the
written term of the contract.
Thus, these are some of the reasons which can be attributed which can submit that a written
contract is better when compared with an oral contract.
Solution 3
A formal contract is a kind of written contract but is different from a written contract on the
pretext that in a formal contract there are few manners or standards that must be comply
with. If these formalities are not complying with, then, the contract does not follow
within the definition of a formal contract. (Latimer, 2012)
Now, it is important to understand the formalities that are required in a formal contract. The
same are, firstly, a formal contract must have all the contact element but there is no need
if presence of consideration. A contract in absence of mutual promises is also a valid
contract; secondly, a formal contract has the life span of only twelve years; thirdly, if a
contract is written and is signed by the parties, then, only the contract is considered to be
a formal contract.
Thus, these are the formalities that are required in a formal contract. (RMIT, 2004)

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Solution 4
Case study – legal intention
The basic issue that arise is whether the purchaser of the ticket can claim the prize individually
or the same must be distributed amongst all the friends.
The raised issue can be resolved by understating one of the significant elements of contract, that
is, legal intention.
When a contract is made then the offeror must make an offer to an offeree who must accept the
same and this exchange of promises must be supported by consideration. But, when the
promises are made then the parties should have legal intention. (Latimer, 2012)
Legal intention signifies that the parties are bound by the terms of the contract legally. When the
parties exchange promises then they are making the offer and the acceptance with the
view to bind by the same in the court of law in cases of disputes (Air Great Lakes Pty Ltd
v KS Easter (Holdings) Pty Ltd, 1989).
There is a basic rule that when the parties are in domestic relation then the parties are exchanging
promises without any legal intention and is held in (Balfour v Balfour, 1919), but, it is
also held in (Esso Petroleum Ltd v Commissioners of Customs and Excise, 1976), that
when the parties are in business relationship then it is assumed by the courts that they are
entering into the contract with legal intention.
But, this assumptions that are raised by the courts regarding legal intention is not static and if the
parties can lay down the evidence which can prove that the intention otherwise then a
family or social relationship can also be held binding upon the parties. In the leading case
of (Trevey v Grubb , 1982), the relationship of the parties was held to be social but the
court held that the intention is legal and thus there is a contract amid the parties.
Now this relevant law is applied to the given facts,
A lottery ticket is purchased by friends by contributing $ 2. Over the weekend a prize was
announced in favor of the friends. But, the purchaser of the ticket claimed that since they
are friends thus they are in social relationship and there can be no contract.
However, as per Trevey v Grubb all the friends are contributing and they intent to divide the

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money amongst them. so, the intention is presumed to be in favor of the friends and
there is a binding contract amid the parties.
Solution 6
Difference amid an agent and an independent contractor
When any person wishes to conduct his work with the help of others then there are two options
that are available to him:
i. He can appoint an agent; or;
ii. He can appoint an independent contractor.
When an agent is appointed by the principal then there is a need for the creation of an agency.
An agency is created when the principal either expressly or impliedly delegates the work
he wishes to be complying with by the agent. The agent is then authorized to carry out
the work delegated to him.
The agent is authorized to conduct actions on the behalf of the principal and has the power to
make any kind of binding relationship with an outsider. The relationship amid an agent
and the outsider is a deem relationship amid the principal and the outsider.
Thus, when there is a relationship of an agent-principal, then, all the acts of the agent carried on
within his authority falls on the shoulders of the principal.
Now,
When the independent contractor is appointed by the principal then there is no need for the
creation of an agency. Rather, the independent contractor is not the authorized
representative of the principal. An independent contractor is assigned with the task that
is required by him to conduct but he is not working under the control and directions of
the principal and is free to choose his mode of actions and to establish any kind of
relationship with the third parties. the principal is not accountable with the acts of the
independent contractor and is only interested in the end result. (Gibson & Fraser,
Business Law 2014, 2013)
Thus, the distinction is very important to evaluate the liability of the principal. If the relationship
is of an agent-principal then the principal is liable by the acts of the agent. But if the
relationship is of the independent contractor-principal, then, the principal is not labia by
the actions of the independent contractor.

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