LAW1500 S3 2019: Contract & Promissory Estoppel - JJD Case Analysis

This assignment analyzes a business law case study involving Jumping Jack Darcy (JJD) and Fast Track Oils Ltd (FTOL). The core issues are whether JJD can claim a $750,000 prize under contract law and whether promissory estoppel applies to enforce a promise. The analysis covers Australian contract law principles, including offer, acceptance, consideration, intention to create legal relations, and the concept of vicarious liability. It examines the validity of the contract between JJD and FTOL, considering the terms of the agreement and the actions of a junior rally official. The application of promissory estoppel is assessed, considering JJD's reliance on the official's statement. The essay concludes that while a valid contract exists and JJD's participation is lawful due to the official's direction, the claim for the prize money is not valid, but JJD can claim weekly payment as per the original contract.

BUSINESS LAW

Issue 1: The first issue that has been determined in given case study is whether Jumping Jack
Darcy, herein referred to as the JJD, would be successful under the contract law in
establishing the claim for prize of $750,000.
Rule 1:
The Contract Law of Australia is the chief law for the legal directions in relation to the
establishment, administration, and the performance of the validly enforceable contracts in
Australia. The contract law principles work in conjunction with the Federal, State, and the
Territorial laws for the governance of the contract related matters. A contract is regarded to
be a relationship between two or more parties either in verbal or written form that may be
enforced in the courts of law, in the events of the conflicts between the parties and otherwise.
The contract law states that certain key conditions must be fulfilled for an agreement between
the parties to be regarded as a contract1. These key conditions are intention for the creation of
a legal relationship, offer, and acceptance, consideration to support the agreement, presence
of certain terms, and the capacity of the parties to enter into legal contracts. These conditions
are described in detail as follows.
The first condition for a contract to be regarded as valid is that one party must extend an offer
to the other, and the other party must render an absolute acceptance to the same. The offer
here denotes a proposal to do or not to do something, and may be a bilateral act or a unilateral
act of performance. The acceptance of the other party to the said extension of offer leads to a
specific promise. The significance of the acceptance was held in the case law of Empirnall
Holdings Pty Ltd v Machon Paull Partners Pty Ltd2. This above condition is followed by the
presence of consideration in the contract. The consideration denotes price to be paid by a
party to the contract in exchange of the performance or non-performance of something, as
decided by the parties. The said price need not necessarily in the monetary terms, but it must
be something that can be measured. The significance of the consideration in the contract was
mentioned in the case of Australian Woollen Mills Pty Ltd v The Commonwealth3. In addition
to the above, the parties must intend to be legally associated to each other, and the principle
has been well established in numerous case laws including the Air Great Lakes Pty Ltd v KS
Easter (Holdings) Pty Ltd4. The said conditions gives power to sue each other when the terms
of the contract are not adhered to. Furthermore, the terms of the contract must be certain and
1 Paul, Latimer, Australian Business Law 2016 (CCH Australia Limited, 2016).
2 Empirnall Holdings Pty Ltd v Machon Paull Partners Pty Ltd (1988) 14 NSWLR 523
3 Australian Woollen Mills Pty Ltd v The Commonwealth (1954) 92 CLR 424 (High Court)
4 Air Great Lakes Pty Ltd v KS Easter (Holdings) Pty Ltd [1989] 2 NSWLR 309

not vague, so that the parties associate with each other with similar and absolute
understanding of the terms. Thus, when the agreement between the parties fulfils all the
above-mentioned conditions, the said agreement would be regarded as a valid contract. Thus,
when all the stated terms are complied with by a party, the consideration would be entitled to
be given to said party.
In addition to the above rules, one key rule is that of the vicarious liability. The provision of
vicarious liability states that the employer of an entity would be responsible for the acts of the
employee by the virtue of the relationship of the principal and the agent shared between the
two. The principle of vicarious liability has been well established in a number of case laws,
including the New South Wales v Lepore & Anor5.
Application 1:
The following points must be noted essentially as derived on the application of the legal rules
discussed in the previous parts. There exists a validly formed contract between JJD and the
company Fast Track Oils Ltd, hereinafter referred as entity FTOL. It is vital to note that the
terms of the contract between the two parties stated for the participation of JJD in the car
races as per the instructions of the company FTOL. The offer of these terms is certain and is
accepted by Jumping Jack Darcy when extended by the company. In addition, a valid
consideration exists to support the contract in the form of the weekly payment to be received
by JJD by the company FTOL. Both the parties have associated with each other in their
respective legal capacity and thus the evidence of legal relationship intention exists. Thus, in
the given circumstances there is a valid contract between the parties, as ascertained from the
legal principles as announced in the various case laws as elaborated in the previous parts.
The first party to the contract that is JJD has participated in the rally as per the directions of
junior rally official, representing the company. The employee gave the said directions to
Jumping Jack Darcy even after the non-possession of roadworthy certificate. Thus, the said
participation would be regarded as valid as the terms and conditions in the form of the
directions of the company are complied with. The legal rule that is applicable here is the rule
of vicarious liability. In accordance of the applicability of the said rule, employer would hold
a responsibility for the acts of the employees, which includes the acts of negligence. It is
important to note that there was an essential condition of the roadworthy certificate
possession for the participation in the rally, yet junior rally official which was employed by
5 New South Wales v Lepore & Anor (2003) 212 CLR 511

the company FTOL had insisted JJD to participate in the rally. This is an act of negligence
and the organisation itself would be responsible for the same.
It is vital to note that the one of the terms to the contract between the stated two parties
further comprised the clause of the payment of the weekly sums to JJD whenever he
participated and not the price of the rally, under the sponsorship of the vehicle and car driver
by the organisation.
Conclusion 1:. The participation of Jumping Jack Darcy is lawful on the grounds of the term
of the directed participation as undertaken by the junior official of the Fast Track Oils Ltd.
This is because the discussions pertaining to the applicability of the rule 1 to the issue 1 leads
to the conclusion that there existed a valid contract between JJD and FTOL. This will lead the
both the parties to be bound by the stated terms. Accordingly, the first party that is JJD is
entitled to receive the weekly payment as was decided in the terms of the contract. Thus, the
conclusion is that JJD can only claim the weekly payment on account of fair participation and
not the winning amount of $750,000 prize.
Issue 2: The second issue is whether the principle of promissory estoppel, herein referred to
as PE is applicable and can be used in the given case circumstances to enforce the promise by
JJD.
Rule 2:
It is vital to note that the principles of justice and equity form the base for the rule of
promissory estoppel6. The said rule has been established to prevent the parties from the
drawbacks that may arise when one party places confidence on the declaration of the other
party. It has been stated by the rule of promissory estoppel that when a representation is made
by one party to the others in light of the trust placed by the words directly, or indirectly by the
conduct the former cannot get away with non-performance of such a promise. The said rule is
applicable when the other party has relied on to the promise, due to the underlying
relationship between the two parties, and went to act in a particular manner. The case law of
Walton Stores (interstate) Ltd v Maher7 is renowned on the lines of the rule of the promissory
estoppel. There are certain key characteristics of the said rule as elaborated follows. The first
condition is that the promising party must act upon the promise even when the said promise
does not comprise of the consideration as required in the legal terms. The second condition of
6 Amanda P. Stickley, Australian torts law (LexisNexis Butterworths, 2016)
7 Waltons Stores (Interstate) Ltd v Maher (1988) 164 CLR 387

the above rule states that there must exist some sort of consideration in the initial contract or
promise between the parties. Third key condition is that the rule of promissory estoppel is
applicable only in the case of pre-existing relationships between the parties that have been
created by the lawful affiliations in the first place.
Each of the above conditions must be essentially present in the circumstances for the
applicability of the referred doctrine. Thus, when a considerable reliance has been placed by
the aggrieved party on the promise and has acted in a particular manner, the promisor is
bound by the promise and cannot step away from it.
Application 2:
The application of the rule of the promissory estoppel and the legal guidelines is stated as
follows. The following observations are worth noting. Firstly, it is to note that JJD has placed
reliance on the statement of the junior official of the company Fast Track Oils Limited and
accordingly he participated in the rally even when he did not had the required certificate. The
disadvantageous position of JJD is well evident here. Secondly, to note, there existed already
a relationship between the organisation and JJD by the virtue of the original contract between
the two. Thirdly, to note, JJD participated in his professional capacity in the race on
insistence of the rally official which je would otherwise not have done as a racer. Thus, all
the conditions of the rule of the promissory estoppel are fulfilled in the given situations.
Conclusion 2:
As per the discussions conducted in the previous parts related to the issue and the application
of the doctrine of PE, it can be concluded that Jumping Jack Darcy’s participation on account
of relying the statement of junior rally official is valid. However, the rule cannot lead to the
disadvantage to the other party beyond the terms of the original contract. Accordingly, it can
be stated that the applicability of the rule is limited to the participation of Jumping Jack
Darcy and the same does not extends to the consideration in the contract. Thus, while the
participation is regarded as valid because of the promise, there is no change in the amount of
the of the earlier contract, as in the form of the weekly payments and not the rally prize itself.
Hence, a conclusion can be reached that the claim for consideration is valid but the same
cannot be for the amount of the prize of $750,000.

Bibliography
Cases
Air Great Lakes Pty Ltd v KS Easter (Holdings) Pty Ltd [1989] 2 NSWLR 309
Australian Woollen Mills Pty Ltd v The Commonwealth (1954) 92 CLR 424 (High Court)
Empirnall Holdings Pty Ltd v Machon Paull Partners Pty Ltd (1988) 14 NSWLR 523
New South Wales v Lepore & Anor (2003) 212 CLR 511
Waltons Stores (Interstate) Ltd v Maher (1988) 164 CLR 387
Books and Journals
Latimer, P., Australian Business Law 2016 (CCH Australia Limited, 2016)
Stickley, A. P., Australian torts law (LexisNexis Butterworths, 2016)