University Contract Law: Junior Gazette Case Study Analysis

This case study examines a contract law dispute between Linda, owner of the Junior Gazette, and Spike, a personal trainer. The core issues revolve around contract formation, specifically whether a contract was established, the inclusion of clause 5 as a term, and the obligation to pay interest on late payments. The analysis explores the concepts of offer, acceptance, counter-offer, and exclusion clauses, referencing relevant legal principles and case law such as Smith v Hughes and L’Estrange v Graucob. The case involves an initial oral agreement, followed by a written contract where a counter-offer was made, and the implications of an exclusion clause related to late payment penalties. The conclusion clarifies the timing of contract formation, the binding nature of clause 5, and the Gazette's lack of obligation to pay late payment interest, as per the invoice provided by Spike. The study utilizes relevant legal authorities and provides a detailed breakdown of the legal arguments.

Running Head: CONTRACT LAW
CASE STUDY
Name Of the Student
Name Of the University
Author’s Note

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CONTRACT LAW
Issue:
The first issue in the case is whether the parties entered into the contract and when.
The second issue in the case is whether clause 5 has been set out on attachment 6 as a
term of the contract.
The third issue in the case is whether a term of the contract that the Gazette is obliged to
pay interest on the late payment.
Rules:
Offer has been explained as the willingness by one party to enter into the conytract with
another party along with the definite set of terms and conditions along with the intention that the
contract shall be legally binding once it is accepted by the other party. The object test for the
determination of the intention of a party whether or not to enter into the contract making it
legally enforceable once it is accepted by the other party1. The test enabled the court to interpret
the intention of the party as a means of reasonableness of any person and not the subjective
analysis of the intention.
Unilateral Contract means the type of contract which is offered to act or refrain to act in return of
a favour as expressed in the contract. Therefore, in this type of contract, it has been explained
that the acceptance need not be expressly made to the offeror. The performance of the contract
shall bear the interpretation of acceptance by the other party2.
1Smith vs. Hughes (1871) LR 6 QB 597 applied in Ermogenous v Greek Orthodox Community of SA Inc [2002]
HCA 8
2 Carlill v Carbolic Smoke Ball Company [1892] EWCA 1, [1893] 1 QB 256

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The terms of a contract may be express or implied. It means that the terms of a contract
may be explicitly laid down in the formal form of contract or the same can be interpreted by the
means of implications of the statutory rights and obligations of the parties in their capacity. The
express terms of contract may be written or verbally delivered to the acceptor. The terms once
known to the accepteor, such terms shall be binding to the contract once agreed and entered by
the parties. The express terms of the contract shall be explicitly binding upon the parties.
However such terms are not absolute in nature. The terms expressed in the contract should be in
accordance with law and the legal provisions, customary laws, and the legal precedents. Like
warranty clause shall be binding upon the parties if such provision for the warranty has been
expressly intimated to the other party by means of written or oral contracts3.
Acceptance has been explained as a mode of accepting to the terms and conditions of the
contract as offered by the party. Acceptance should be clear and intimated to the offeror and
most essentially unconditional. Any condition proposed by the acceptor at the time of acceptance
would amount to the revocation of the offer. Silence is not considered to be an effective form of
acceptance4 because silence does not ensure that the contract has been effectively accepted by the
party. Acceptance of a contract is based on the theory of meeting of the minds. In other words
the theory has been identified as the consensus as idem meaning agreeing to the same things5.
The basic essence of acceptance is communication meaning that the offer has been accepted
should be clearly communicated to the other party failing which, the legal enforcement of the
3 SS Ardennes (Cargo Owners) v Ardennes (Owners) [1950] 2 All ER 517
4 Felthouse v Bindley [1862] EWHC J35, [1862] 142 ER 1037
5 R. Austen-Baker, "Gilmore and the Strange Case of the Failure of Contract to Die After All" (2000) 18 Journal of
Contract Law 1

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contract would be lost and thus, based on this very theory, silence is not considered as an
effective form of acceptance. However, unilateral contracts as discussed above are the exceptions
to such rule.
Counter Offer means that if the acceptor offers a condition or bargain to the original
offer, then such original offer is considered to be terminated and a new offer is created with the
condition or bargain as the new terms of the offer. The parties’ positions are changed. At this
point, the acceptor becomes the offeror and the offeror becomes the acceptor. However, the
contract can be revocated or terminated on the other grounds like death of the offerree,
impossibility of the performance of the contract, breach of the term by any party, breach of
essential elements of the contract and so on.
Time of contract formation is a an essential interpretation in the cases of contractual
disputes. Assuming that other factors have been fulfilled and binding upon the parties, the
contract is formed when the party established the positive intention to form a contract.
As a general rule, a person shall be legally bound has been by the formal terms of the
contract if expressly been mentioned in the contract and such contract has been accepted by the
other party. However, there are exceptions to such rule. One such exception states that if the
contract is accepted by mistake without the knowledge of the real nature of the contract, then
such contract shall not be binding like those written in foreign language, or the contract was not
being able to be read by the acceptor. However, this defence does not extend to assist the people
who were not careful while reading the contract or did not consider reading the contract before
accepting it.

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Exclusion Clause in contract law means that a term or condition in the contract which
limits the rights of the parties to the contract especially the offeror. The term for the exclusion
clause shall be incorporated by three means. Firstly being the incorporation by signature. If a
clause is written in a document, and has been signed by the parties, it shall be binding upon the
parties as an enforceable legal term or condition6. Second being the general rule that if the party
takes the reasonable step to notify the other person about the clause then such clause shall be
binding7. However, notice of such notification is a mandate8. Thirdly is the incorporation by the
previous dealings which means that regular and consistent dealing between the parties with the
compliance to the exclusion clause, shall be binding the parties9.
Application:
In the given scenario, the offer is first made by Linda to Spike what can be assumed as an
oral agreement. Spike requested for the formal contract, establishing the intention to create the
legal relationship between them. However, when Linda sends him the contract, he is not satisfied
with clause 5 and hence, modifies it before sending it to Linda. This can be assumed as the
counter offer resulting in the revocation of the original offer, which was sent by Linda to Spike.
Further, when Linda accepted the contract and Spike submitted his bill of 950$, Linda could not
rely on the defence to avoid the changed terms of the contract because she was not careful
6 L’Estrange vs. Graucob [1934] 2 KB 394
7 Parker vs. SE Railway (1877) 4 CPD 416
8 Olley vs. Malborough Court Ltd [1949] 1 All ER 127
9 McCitcheon vs. David MacBrayne Ltd [1964] 1 WLR 125

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enough to read the contract before accepting it and hence, she became legally bound towards the
terms of the contract.
According to the exclusion clause, the invoice as produced by Spike in Attachment 1
expresses that the late payments shall be payable with a penalty of 20%. Since such term was not
expressly laid down in the terms of the contract at the time of entering into the contract with
Linda and has not been accepted by Linda by intimation or signature or notification or past
dealings, and hence it would not be applicable.
Conclusion:
It can be concluded that in the first issue, the parties entered into the contract when the
intention was established by Spike to create a legal relationship with his mail requesting for a
formal written contract with all the terms.
It can be concluded that in the second issue, clause 5 has been set out on attachment 6 as
a term of the contract and is legally binding upon the parties.
It can be concluded that in the third issue, a term of the contract that the Gazette is not
obliged to pay interest on the late payment.

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BIBLIOGRAPHY:
Journals and Scholars:
R. Austen-Baker, "Gilmore and the Strange Case of the Failure of Contract to Die After All"
(2000) 18 Journal of Contract Law 1
Case Laws:
Smith vs. Hughes (1871) LR 6 QB 597 applied in Ermogenous v Greek Orthodox Community of
SA Inc [2002] HCA 8
Carlill v Carbolic Smoke Ball Company [1892] EWCA 1, [1893] 1 QB 256
SS Ardennes (Cargo Owners) v Ardennes (Owners) [1950] 2 All ER 517
Felthouse v Bindley [1862] EWHC J35, [1862] 142 ER 1037
L’Estrange vs. Graucob [1934] 2 KB 394
Parker vs. SE Railway (1877) 4 CPD 416
Olley vs. Malborough Court Ltd [1949] 1 All ER 127
McCitcheon vs. David MacBrayne Ltd [1964] 1 WLR 125