Contract Law Assignment: Case Studies on Contract Elements and Issues

This document presents a comprehensive analysis of various contract law case studies. The cases explore fundamental elements of contract law, including the intention to create legal relations, offer and acceptance, consideration, capacity of parties, free consent, legality, contract terms, and disch...Read More

Running Head: CONTRACT LAW
Contract Law Assignment
Name of Student
Name of University

CONTRACT LAW 2
Case Study Group 1: Intention to create a legally binding contract.
1. In the case of Jo and Rosie, Jo sued Rosie for breach of contract by not attending the
dinner for which Jo had made preparations after receiving her acceptance to attend. In order to
create a valid contract one of the essential element is the intention of the parties to enter into
legal relationship which means in case of the breach of contract by either party the other party
has right to take legal action. The case, here, falls under the category of social agreement as
distinguished from a legally binding contract where in the former case the parties are merely
under a moral duty. Social agreements entered into between members of a family, friends,
colleagues etc. cannot be said to have been made with an intention to enter into legal relations.
As was held by Lord Atkin a social agreement cannot be said to be a legally binding contract
even if all the elements of a valid contract are present1. The reason these agreements are not
contracts as the parties did not entered into the agreement with an intention that legal
consequences shall follow their agreement. According to him such agreements should not be
enforceable in the courts of law otherwise there will be institution of n number of cases for
breach of such contracts. Therefore, such contracts have been kept out of jurisdiction of contract
law. Following this observation it can be said in this case that there was no valid contract
between the parties as there was no intention of the parties to enter into a legally binding
contract, hence Jo cannot sue Rosie for not performing her moral duty2.
Case Study Group 2: Agreement being offer and acceptance.
1 Balfour v Balfour (1919) 2 KB 571.
2 Julie Clarke, Balfour v Balfour (2010) Australian Contract Law
<https://www.australiancontractlaw.com/cases/balfour.html>.

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6. In case where James made an offer to sell his snowboard to Liz and in case of silence on
her part he will assume that the offer has been accepted by her. The general law regarding
contracts says that an agreement comes into existence only when an offer is made by one person
to the other and such offer has been accepted by the latter. The acceptance can be made verbally,
in writing or impliedly i.e., by conduct of the latter3.
The general rule regarding acceptance is that silence does not amounts to acceptance, for
the reason that, to make sure that the offer was accepted by the acceptor willingly and was not
imposed upon him. An exception to this rule is that the acceptor has expressly mentioned that his
silence shall be considered as acceptance. Further it has also been held in a famous that the
person making the offer cannot state that the silence on the part of the person to whom the offer
is made will be considered as acceptance on his part and in that way cannot obligate the latter to
positively reject the offer4.
The rules mentioned above are applicable in this case whereby it can be concluded that
James cannot enforce the contract as he has no right to impose an obligation upon Liz to reject
the offer or otherwise make her bound by the same.
Case Study Group 3: Consideration being the price in the contract.
3 Simpsons, The Principles of Contract (2010) Simpsons Solicitors
<http://www.simpsons.com.au/documents/visarts/visarts89/1Princip.pdf>.
4 Felthouse v Bindley (1862) 142 ER 1037.

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9. According to the facts of the case Neville offers to repay his debt of $100 to Paul by $20
and a new baseball cap in full settlement which was accepted by the latter. The issue is whether
Paul can demand the balance after full settlement has been made.
The general rule regarding consideration is that it is one of the essentials to form a valid
contract and can be in form of a right, interest or benefit. It sometimes includes a forbearance,
loss or detriment also whereby if a party forgives another’s debt and a detriment is suffered by
the latter it will be said to be a valid consideration. Further, the rule is that part payment of debt
does not amounts to a good consideration5 but where part payment is made along with something
in addition for full and final settlement such part payment will be a good consideration6. Under
Australian contract law the consideration will be valid and acceptable if it is sufficient and is not
required to be adequate. The concept of sufficiency varies from case to case.
Accordingly, the settlement made by Neville in lieu of his debt amounts to valid
consideration on part of the former and Paul has no right to demand the balance amount after the
settlement as he has accepted a new baseball cap in lieu of the balance amount.
Case Study Group 4: Capacity of one of the parties.
5 Foakes v Beer (1884) 9 App Cas 605.
6 Julie Clarke, Consideration (2015) Australian Contract Law <
https://www.australiancontractlaw.com/law/formation-consideration.html>.

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12. In order to form a valid contract the parties should have capacity to enter into the
contract. In Australia, certain persons have been disqualified from entering into a contract viz.,
persons who are insane, under intoxication, bankrupts, minors, and companies.
a) Aliens: An alien is a person who is not a citizen of Australia. Such a person has capacity to
enter into a valid contract in peace time. In times of war, if such an alien belongs to the State
with which Australia is in war with, then such alien is restricted to sue but can be sued for any
breach in an Australian court of law.
b) Bankrupt: A bankrupt has right to enter into a contract while a contract of unprofitable nature
which has been made before he was been declared a bankrupt may be repudiated by the trustee.
Further restrictions may also be put by way of legislations upon the nature of a contract to which
a bankrupt may be a party and any contract entered into by a bankrupt person without disclosing
his status will be an offence7.
c) Companies: Under common law of Australia a company may enter into a contract if
authorized under the constitution of the company. Further according to the Corporations Act
2001 a company can enter into a contract as an individual8 and if a contract has been entered into
by a company beyond the authority given by its constitution, it will be a valid contract9.
Case Study Group 5: Did both parties freely consent to the contract.
7 Julie Clarke, Capacity to Contract 2013 Australian Contract Law
<https://www.australiancontractlaw.com/law/formation-capacity.html>.
8 Corporation Act 2001 (Cth) s 124.
9 Corporation Act 2001 (Cth) s 125.

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14. According to the facts of the case, Carlos purchased a jet ski from Ted which was in good
condition according to the latter. A contract was signed by the parties whereby no declaration
was made regarding the condition of the engine and a clause in the contract also waived the
warranty regarding the condition of the craft and its parts. The engine of the Jet Ski stopped as its
condition was not good. The issue here is that whether Carlos can seek damages from Ted.
In order to make a valid contract the parties must enter into the contract with free and
genuine consent. A consent is said to be not free if it is affected by any external factors. In cases
of false statement, where a party makes a false statement knowingly and with a dishonest
intention to induce the other party to enter into the contract will give a right to the latter to
repudiate the contract where such false statement was found to be the only reason to enter into
the contract10.
In the present case, the contract was entered into by Carlos on the false statement that
was made by Ted who knew that the condition of the engine of the craft was not good.
Therefore, the consent for entering into the contract by Carlos cannot be said to be a free consent
as it is made under the influence of the false statement made by the counterparty. Carlos has right
to recover damages for the loss accrued to him from Ted’s conduct.
Case Study Group 6: Was the Contract legal?
10 Law Handbook, Elements of Contract 2017 The Law Handbook 2017
<http://www.lawhandbook.org.au/07_01_02_elements_of_a_contract/>.

CONTRACT LAW 7
17. In case of Rita and Peter, Rita gave away her flat to Peter, a prisoner escapee, to provide
him place to hide. Peter refused to pay rent for two months of his stay in Rita’s house. The issue
in this case is whether Rita has right to recover the rent overdue from Peter.
The general rule as to contracts lays down that a contract cannot be held to be valid the
subject matter or the objective of which is illegal. If the promises, subject matter, objective or
consideration of a contract is illegal the contract cannot be said to be a valid contract11. An act
which is prohibited by law is said to be an illegal act and any person doing such illegal act or any
person entering into a contract with such person for providing him aid in doing the illegal act,
such contract will not amount to be a valid contract.
In the present case Peter was an escapee from a prison which is an illegal act. Rita was
providing her aid in hiding from the State authorities. Therefore, the acts of both Peter and Rita
fall under the category of illegal acts. Any loss or damage amounting from doing such acts are
not enforceable in the courts of law. If such acts are given enforceability it will lead to
encouragement to do illegal acts. Hence, Rita has no right to recover any rent from Peter.
Case Study Group 7: Terms of the Contract.
11 R P Emery and Associates, Legal Contract, Legal Agreements, Contracts and Forms (2013) Wordpress
<https://legalcontract.wordpress.com/2010/05/11/fundamental-principles-of-contract-law/>.

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17. In the case where Alana delivers her coat to Dennis’ for dry cleaning and when she came
back to pick up her coat she found it was badly burnt. The ticket given by Dennis’ stated that it
will not be responsible for any loss to the goods. The issue here is that whether Alana can sue
Dennis’ for damages.
This case falls under the category of bailment which means when one party delivers
goods to other party for some purpose, the latter is bound to take due care of the goods as a
person would have taken of his goods in similar circumstances. It is required on the part of the
bailee to take due care of the goods bailed to him by the bailor for a specific purpose. In case of
any default or negligence on the part of the former will amount to breach of a contract and the
latter will be entitled to sue him for the damages caused to him12.
In the case of Alana she was the bailor whereby she delivered her coat to Dennis’ for the
specific purpose of dry cleaning it. The Dennis’ was under a legal duty to take due care of the
coat bailed to it. Dennis’ cannot escape from his liability to take reasonable care of the goods by
entering a clause in the ticket, mentioning the terms of the contract, that was delivered to her
after delivering the coat to it. Further, the facts that the coat was badly burnt shows negligence
on the part of the bailee to take reasonable care of the goods bailed to it. Therefore, Alana can
sue Dennis’ for recovering the damages for loss caused to her.
Case Study Group 8: Discharge of the Contract.
12 Shane Simpson, Duty of Care to Lenders 2013 Simpsons <http://www.collectionslaw.com.au/34-duty-of-care-to-
lenders>.

CONTRACT LAW 9
23. Len, a singer, who entered into a contract to perform on Christmas Eve, his contract
frustrated due to occurrence of a cyclone. The issue is whether he can claim damages for the
frustration of the contract.
Under law a contract may be discharged by an agreement or by frustration or by the
breach of the contract. A contract gets frustrated when either or both the parties are unable to
perform the contract due to certain supervening impossibility. One of such supervening
impossibility where the parties are discharged from performing the contract is force majure or
act of God. An act of God is a situation when due to certain acts which are beyond human
control the parties are unable to perform the contract. In such cases neither party is liable for
breach of the contract.
In the instant case, the contract was cancelled due to occurrence of cyclone which is an
act of God. There was no breach of contract on the part of the party organizing the concert. Len
cannot ask for compensation due to breach of contract or for the reason that he could have taken
employment somewhere else as his payment might be doubt. The organizers could not have been
able to foresee the occurrence of the cyclone. Therefore no liability can be imposed upon the
organizers and Len cannot seek compensation for the frustration of contract by act of God.

CONTRACT LAW 10
Case Study Group 9: E-Contract.
23. According to the facts of the case Jenn, the supplier of clothes made negotiations with
Kirsty, the purchaser of the consignment of clothes through electronic mails. An offer was made
by Jenn on 20th April, 2016 and asked her to make an acceptance by 13th May, 2016. Kirsty sent a
mail on 22nd May, 2016 accepting the offer. The issue here was whether there was a proper offer
and its acceptance to form a valid contract and whether Jenn was bound by the contract, if any.
In Australia, the rules that are applied in case of a paper contract are applied in case of an
electronic contract which requires an offer been made which has to be duly accepted and should
follow a lawful consideration. According to the law of contract a valid offer is said to have been
made when it comes to the knowledge of the person to whom it is made. And an acceptance is
said to have been made as soon as it is accepted by the offeree.
In the instant case, the offer made by Jenn did not came to the knowledge of Kirsty till
22nd May, 2016 the stipulation period for which was already over on 13th May, 2016. Therefore,
no offer could be said to have been made to Kirsty as it did not came to her knowledge and
further, when no offer has been made, it cannot be said to have been accepted by Kirsty. As there
was no offer and acceptance, no valid contract is made and therefore no one is under any
contractual liability against the other.

CONTRACT LAW 11
Bibliography
Case Laws:
1. Balfour v Balfour (1919) 2 KB 571.
2. Felthouse v Bindley (1862) 142 ER 1037.
3. Foakes v Beer (1884) 9 App Cas 605.
Legislations:
4. Corporation Act 2001 (Cth).
Others:
5. Julie Clarke, Balfour v Balfour (2010) Australian Contract Law
<https://www.australiancontractlaw.com/cases/balfour.html>.
6. Julie Clarke, Capacity to Contract 2013 Australian Contract Law
<https://www.australiancontractlaw.com/law/formation-capacity.html>.
7. Julie Clarke, Consideration (2015) Australian Contract Law <
https://www.australiancontractlaw.com/law/formation-consideration.html>.
8. Law Handbook, Elements of Contract 2017 The Law Handbook 2017
<http://www.lawhandbook.org.au/07_01_02_elements_of_a_contract/>.
9. R P Emery and Associates, Legal Contract, Legal Agreements, Contracts and Forms
(2013) Wordpress <https://legalcontract.wordpress.com/2010/05/11/fundamental-
principles-of-contract-law/>.

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10. Shane Simpson, Duty of Care to Lenders 2013 Simpsons
<http://www.collectionslaw.com.au/34-duty-of-care-to-lenders>.
11. Simpsons, The Principles of Contract (2010) Simpsons Solicitors
<http://www.simpsons.com.au/documents/visarts/visarts89/1Princip.pdf>.