Contract Law Report

This report comprehensively explores various aspects of contract law. It begins by defining a contract and outlining its essential elements: offer, acceptance, consideration, legal intention, and capacity. The report then distinguishes between oral and written contracts, highlighting the advantages of written contracts for clarity and enforceability. Formal contracts are discussed, emphasizing their specific requirements and the distinction between contracts of record and contracts under seal. A case study analyzes the legal intention of parties involved in a lottery ticket purchase, applying relevant legal principles to determine the enforceability of the agreement. Finally, the report clarifies the crucial difference between a principal's relationship with an agent and an independent contractor, focusing on the implications for liability. The report concludes by summarizing the key findings and emphasizing the importance of understanding these legal concepts.

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Cover Page
Name of the student
Student ID
Word count

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Contents
Solution.......................................................................................................................................................3
1. Elements of contract........................................................................................................................3
2. Agreement – written or oral.............................................................................................................4
3. Formal Contract...............................................................................................................................4
4. Case study – legal intention of the parties........................................................................................5
Issue:...................................................................................................................................................5
Law:.....................................................................................................................................................5
Application of law...............................................................................................................................6
Conclusion...........................................................................................................................................6
5. Relationship of Principal with an agent or an independent contractor.............................................6
Bibliography................................................................................................................................................8

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Solution
1. Elements of contract
A contract is a kind of document wherein two parties, an offeror and an offeree, comply with
certain elements of contract and results in a binding relationship which must be honored
by them in every situation. A contract can be written or oral in nature but whatever
maybe the form of contract there are few elements which must be present to make it
enforceable in law. (Gibson & Fraser, 2013)
Thus, the main elements of contract are: (Clarke, 2012)
i. An offer – An offer is a statement, oral or written, which is communicated by an offeror
to an offeree, through which he specifies the act or omission which the offeror intends to
be confirmed by an offeree. It is necessary that the offer must be communicated to the
offeree to make it valid in nature. In the leading case of (Carlill v Carbolic Smoke Ball
Co, 1893), it was held that an offer can be made to one specific person or to the world at
large.
ii. An acceptance – When the offer is received by the offeree then the confirmation of the
offer without bringing any deviation to its terms is an acceptance. If the offeree brings
and variation to offer terms then it results in the revocation of the offer and is called
counter offer and is held in (Hyde v Wrench, 1843). An acceptance is valid only when the
same comes within the knowledge of the offeror.
An offer and acceptance makes an agreement. The other requirements to convent an agreement
into a contract are:
iii. Consideration – The agreement must be supported by some kind of benefit to make the
agreement enforceable in law. A consideration must move from the offeror to the offeree
against the act or omission undertaken by the offeree on behalf of the offeror. a
consideration must be sufficient and it is not necessary that the same must be adequate in
nature and is held in (Biotechnology Australia Pty Ltd v Pace, 1988)
iv. Legal intention – The parties when exchanging promises must do so with legal intention.
A contract based on family or domestic relationship is no contract in law but this
presumption is rebuttable on the presentation of evidence and is held in (Jones v
Padavatton, 1969)
v. Capacity of the parties - The parties must be major and of sound mind to make the
contract valid.
Thus, these are the elements which must be present in order to make a contract enforceable in
law.

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2. Agreement – written or oral
When the offeror and the offeree makes an offer and acceptance supported by consider on, legal
intention and are capable to enter into a contract, then, there is a binding contract amid
the two. (Gibson & Fraser, 2013)
However, in Australia, a contract can be made in mainly two forms:
i. Oral contracts – Oral contracts are the contracts which are formulated amid the parties
verbally. The offer and acceptance is carried out by the parties through words of mouth or
conduct.
ii. Written contracts – The written contract is the contract which is formulated by the parties
in textual form. The terms of the contract are written down on the sheet of paper and
parties must comply with the same.
Both oral and written contracts are valid. There is no compulsion that a contract has to be in
written form in order to be binding. An oral contract is equally valid when compared with
a written contract. In the leading case of (R v Clarke, 1927), an oral contract was held to
be a valid contract and considered to be same enforceability that of a written contract.
(Latimer, 2012)
However, normally it is understood that a contract if is in the form of a written document then it
is more authentic when compared with an oral contract. There are several reasons that
area attributed which submits that a written contract is considered to be more evidential
when compared with an oral contract. The same are: (Pendragon, 2014)
i. When the contract is in written form then it is very easy to prove the terms of the contract
and the rights and liabilities of the contractual parties.
ii. The enforceability of such contracts is very easy in the court of law;
iii. It helps in avoiding any kind of misunderstand that might take place amid the parties in
future regarding the terms of the contract. In case of any misunderstand the terms of the
contract can be read out and clarification can be made.
iv. It lists down the procedure to be followed in case any disputes arises amid the parties;
v. It helps in clarifying whether the contract is ‘employment contract’ or ‘services contract’
vi. It serves as a record amid the parties.
Thus, there arte various benefits that can be attributed if a contract is in written form. But, even
of the contract is written form, it cannot be submitted that an oral contract is not valid;
rather, an oral contract stands on equal footing with a written contract.
3. Formal Contract
Formal contract are the contracts which must be formed in a particular manner and style. For
instance, the formal contract must be in writing in order to be valid. One of the most
significant features of a formal contract is that a formal contract has the enforceability of

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twelve years. After twelve years they are considered to bar by law because of lapse of
time. When compared with a written contract, a formal contract is very distinct, mainly
because the formalities that are required in a formal contract are not the part and parcel of
a written contract. (RMIT, 2004)
Thus, the main formalities of a formal contract are: (Latimer, 2012)
i. It has to be in writing. It is very necessary that a formal contract must be in written form
specifying all the terms and conditions that are agreed by the parties;
ii. It has to be signed by the parties. this is one of the significant feature of a formal contract;
iii. It must be signed and delivered as a deed. If a formal contract is not signed then its main
requirement is not met;
iv. There are no requirements of any kind of mutual promises or consideration. Even if the
contract is not supported by consideration, still the contract is held to be valid in nature.
The two common kinds of formal contract that are normally found to be found are: (SIEleaning,
2017)
i. Contract of record – These are the contracts that can be proved in the court of law by
producing the supporting documents. There is no requirement to prove the intention of
the parties in order to hold the contract valid. For instance, promises to be in a good
behavior or to appear before the court at the prescribed time or to maintain peace are the
kind of contract of record. Also, the judgment of the courts is also court of record.
ii. Contract under seal or deed – Every deed must be signed by the parties and must be
witness by at least one person. These are the contract which is considered to be binding
on the basis of their form.
4. Case study – legal intention of the parties
Issue:
Whether the purchase of the lottery ticket by group of friends results in the formation of
contract?
Law:
The law of contract is the applicable law in the given case study.
In order to establish a valid contract the main elements that are required are offer, acceptance,
consideration and capacity. Apart from these elements one of the main element, the
presence of which is must in the formation of the contract is ‘legal intention of the
parties’. (Latimer, 2012)
Legal intention of the parties signifies that the parties are willing to enforce the contract under
law in cases of disputes. If the parties do not intent to bind by the contract then the

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contract has no enforceability in law and thus is invalid in law and is held in (Air Great
Lakes Pty Ltd v KS Easter (Holdings) Pty Ltd, 1989).
It is held in (Rose and Frank & Co v Crompton, 1923), that normally the parties who are in
commercial relationships are presumed to have legal intention. Whereas, in (Balfour v
Balfour, 1919), it is held that the parties who are in social relationship have no legal
intention. (Clarke, Australian contract law, 2010)
But, it is held in (Riches v Hogben, 1986), that this basic presumption is rebuttable in law. Thus,
if evidence can be laid down that the parties through are in social relationship have legal
intention to bind by the contract then the contract is said to be enforceable in law.
Likewise, if it can be proved that the parties to the contract are in commercial relationship
but does not have any legal intention, then, the contract is not enforceable in law. (Moles
& Sangha, 2017)
In (Trevey v Grubb , 1982) and (Simkins v pays , 1955), the parties were sharing a lottery ticket
and when the prize was declared one of the party claims that there is no contract as the
relationship is friendly. It is held by court that the circstantces reveal that the parties
intent to share the profits of the lottery proceeds and thus though they are friend but the
there is presence of legal intention.
Application of law
As per the facts,
All the friend contribute $2every Friday night for a lottery ticket. After the win of the ticket, the
friend refuses to share the prize with the remaining friends.
It is submitted that the sharing is regular with the intent to share the profits. Even though one of
the friend was authored to purchase the ticket but the intention of all the parties was to
bind by the result of the ticket.
Thus, though the relationship is social, but, there is presence of legal intention. The intention was
to bound by the result of the lottery irrespective whether the result is positive or not.
Thus the contract is enforce in law
Conclusion
It is thus concluded that the friends are sharing a cordial relationship but they have legal
intention to bind by the results of the ticket and thus the contact is enforceable in law and
the prize of the ticket must be equally distributed amid the parties.
5. Relationship of Principal with an agent or an independent contractor
It is very important to distinguish an agent that from an independent contractor mainly to analyze
the liability of the principal. This is because if the party is an agent then the liability falls

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upon the principal but of the party is an independent contractor then the liability is not of
the principal.
If the person is considered to be an agent of the principle then, the acts that are undertaken by an
agent will be considered to be the acts of the principal, provided the action are taken
within the authority by the agent. Thus, if any contract is established by an agent with any
third party then such third party has a right to sue the principal on the event of default. In
(Scott v Davis, 2000) and (Hollis v Vabu, 2001), it was held that an agent is the
representative of the princiapla nd must be held liable by the acts of the agents.
However, in the leading case of (Gaitanis v Nicholas Moss Pty Ltd, 2003), it was held that if the
person is not the agent of the principal but is an independent contractor, then the acts of
such an independent contract are not considered as the acts of the principal. Any liability
that is incurred by an independent contractor is construed be the acts of the contractor
alone and the principal cannot be held liable for the same. This is because an independent
contractor does not act as per the directions and control of the principal and so the
principal must not be held accountable by his actions. (MCCARTHY, 2004)
Thus, the distinction is very important to analyze the liability of the principal.

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Bibliography
Air Great Lakes Pty Ltd v KS Easter (Holdings) Pty Ltd (1989).
Balfour v Balfour (1919).
Biotechnology Australia Pty Ltd v Pace (1988).
Carlill v Carbolic Smoke Ball Co (1893).
Clarke, J. (2010). Australian contract law. Retrieved September 17, 2017, from Intention to create legal
relations: https://www.australiancontractlaw.com/law/formation-intention.html
Clarke, J. (2012). Australian Contract Law. Retrieved September 18, 2017, from Agreement:
https://www.australiancontractlaw.com/law/formation-agreement.html
Gaitanis v Nicholas Moss Pty Ltd (2003).
Gibson, A., & Fraser, D. (2013). Business Law 2014. Pearson Higher Education AU.
Hollis v Vabu (2001).
Hyde v Wrench (1843).
Jones v Padavatton (1969).
Latimer, p. (2012). Australian Business Law 2012. CCH Australia Limited,.
MCCARTHY, L. (2004). VICARIOUS LIABILITY IN THE AGENCY CONTEXT.
Moles, R., & Sangha, B. (2017). Intention to Create Legal Relations / Parties To a Contract. Retrieved
September 17, 2017, from Networked Knowledge - Law Lectures:
http://netk.net.au/Contract/05Intention.asp
Pendragon. (2014). The benefits of a written contract. Retrieved September 17, 2017, from Pendragon:
https://pendragon.net.au/benefits-written-contract-2/
R v Clarke (1927).
Riches v Hogben (1986).
RMIT. (2004). Explanation of contract law. Retrieved September 17, 2017, from DLSWEB:
https://www.dlsweb.rmit.edu.au/lsu/content/d_bus/law/business_contract/concept/
explanation.html
Rose and Frank & Co v Crompton (1923).
Scott v Davis (2000).

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SIEleaning. (2017). SIElearning. Retrieved September 17, 2017, from Contract Law:
https://sielearning.tafensw.edu.au/MBA/19194J/commerc_law/lo/u5_t1_contclass/
u5_t1_contclass_03.htm#EEABA
Simkins v pays (1955).
Trevey v Grubb (1982).