Enterprise Law Exam - Autumn 2019 - Legal Analysis of Contracts

This document presents a comprehensive solution to an Enterprise Law exam, focusing on contract law principles. The assignment addresses three key legal issues. The first question examines whether a store owner, Carla, is legally obligated to sell a book to Brenda, considering the display of the book as an invitation to treat. The second question is divided into three parts: Part A analyzes whether a valid agreement was formed between Edward and Greg, considering the postal rule of acceptance and a subsequent revocation. Part B evaluates whether Edward can hold Peter liable for an unpaid debt, examining the concept of consideration in the context of a part payment agreement. Part C assesses the validity of a contract between Edward and Peter, who are cousins, considering the intention to create legal relations. The solution applies legal principles, including offer, acceptance, and consideration, using relevant case law to support its analysis and conclusions.

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Question 1
Issue
The main is to comment if Carla possesses the legal right to not sell the book to Brenda
irrespective of the fact that the book is displayed for sale at the store.
Rule
A valid agreement will be formed when there is lawful offer and acceptance. Offeree needs to
communicate the acceptance for the offer to the offeror in order to enact the contract. Here, it
is imperative to note that any acceptance towards invitation to treat would not be considered
as acceptance rather its just an offer which may be accepted or rejected by the offeror. Hence,
it becomes essential to find whether it is an offer for acceptance or invitation to treat to direct
offer (Andrews, 2014). Any advertisement regarding the sale of object/goods with a price
sticker would not be termed as offer as it is just invitation to treat. The verdict of
Pharmaceutical Society of Great Britain v Boots Cash Chemists (Southern) Ltd [1953]
EWCA Civ 6 is testimony of this underlying fact where it had stated by the honourable court
that the seller company has all the legal rights to accept/reject the offer of buyer when it is
invitation to treat (Taylor & Taylor, 2015).
Application
There is a display at the window of the Clayton Books Store for the sale of a book which also
indicates the price of the book. Brendan approaches Carla (the store representative) to buy the
book. However, Carla informs him that all the respective copies of the book are already sold
but still he can search at the back of the shop. Brendan finds another copy of the exact same
book and hence, he takes the book along with the correct money as displayed at the window
to purchase the book. Here, it is apparent that display of the book at the store is not an offer
and rather invitation to treat which means the acceptance of Brendan to buy the book at the
mentioned price is not an acceptance but rather an offer in response to the invitation to treat.
Further, as per contract law principle, when the buyer extends any offer, then the seller party
has the legal rights to refuse or accept the offer of buyer. Hence, Carla is legally entitled to
refuse to sell the respective book to Brendan.
Conclusion
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Display for the book sell is invitation to treat and thus, the acceptance of Brendan to purchase
the book would be considered as offer which can be legally rejected by Carla.
Question 2
Part A
Issue
The issue is to offer a legal advice to Edward as to whether he has enacted a valid agreement
with Greg or not as Greg has mailed him regarding the revocation of the acceptance.
Rule
A key requirement for the formation of an agreement is the existence of valid and matching
offer and acceptance. With regards to offer, the means of communication is immaterial as
offer would become valid only when the same is received by the offeree. However, this is not
the case with regards to acceptance. The timing of validity of acceptance is dependent on the
mode of communication that is deployed (Edlin, 2015). The postal rule of acceptance has
been highlighted in Adams v Lindsell (1818) 1 B & Ald 681 case. As per this rule, acceptance
communicated through postal media would become valid at the very instant when the offeree
has posted the acceptance letter. The time by which the acceptance letter reaches the offeror
is not taken into consideration for contract formation (Carter, 2016). The contract is deemed
to have formed at the time of posting of the acceptance letter. Any revocation of offer or
acceptance after this moment would not impact the enforceability of the legally binding
contract (Parker & Davenport, 2014).
Application
An offer has been sent by Edward to Greg on 4th February through the use of postal media.
This letter has been received by Greg on 7th February and on the same day the offer becomes
valid. The acceptance letter has been posted by Greg on the same and hence acceptance has
become valid on 7th February as per the postal rule of acceptance. This implies that a valid
agreement between Edward and Greg has been formed on 7th February. The fact that
acceptance letter is received by Edward on 11th February has no relevance for contract
formation. Further, the acceptance is revoked by Greg through email after sending of postal
acceptance. This would not have any impact as contract formation has already happened.
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Conclusion
A valid agreement has been formed between Edward and Greg using postal media of
communication. Further, the revocation of acceptance by Greg would not impact the
agreement enforceability.
Part B
Issue
The key legal issue to resolve is whether Edward can hold Peter liable in relation to the
unpaid amount of $ 50.
Rule
Contract formation is based on the presence of consideration for both parties. Also, any
changes in the previous contract would also be considered valid if consideration exists for
both parties to make changes in the original contract. In regards to situations where as per the
original contract, a debt needs to be paid back, a key question that arises is whether an
amended contract for payment of a lesser amount is valid or not (Gibson & Fraser, 2014).
The pivotal legal question relates to presence of consideration on the end of creditor. In this
regards, the decision in the case Foakes v Beer [1884] UKHL 1 is pivotal as it highlighted
that part payment of debt cannot be considered as good consideration as the creditor would
essentially lose on some money only. Also, such a contract would be agreed to not by choice
by the creditor (Carter, 2016). Over time, the above understanding has been modified as has
been indicated in the Musumeci v Winadell Pty Ltd (1994) 34 NSWLR 723 case. Santow J
highlighted that in case the derived practical benefit exceeds the recovery from breach of
contract proceedings, then the part payment can also be regarded as good and sufficient
consideration (Davenport & Parker, 2014).
Application
The given scenario indicates that there is an existing contract between Peter and Edward with
regards to sale of goods to the tune of $ 450. The goods have been provided by Edward and
the payment needs to be made by Peter by the end of February month. However, it comes to
notice of Edward on 20th February, that Peter is experiencing financial difficulties.
Concerned that Edward may default on the payment, Peter decided to extend an alternative
offer of $ 400 payment for the discharge of existing debt. This was readily accepted and
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payment of $ 400 was made by Edward. Clearly, in this instance consideration is present for
Edward since if the financial situation deteriorated further, Peter may not pay even some
amount. In this case, the breach of contract proceedings may not result in significant payment
owing to lack of ability to pay. Hence, practical benefit derived by Edward is quite significant
implying that amended arrangement is enforceable.
Conclusion
Based on the above discussion, it is evident that contract for part payment of existing debt is
valid thus implying that Edward cannot ask for $ 50 payment at a later stage.
Part C
Issue
The key issue is to ascertain if the contract between Edward and Peter for the sale of goods
would be valid if they are cousins as intention to enter into legal relations may be lacking.
Rule
Contract formation requires that there has to be intention on the part of both the parties to
form legal relations. This is a tacit assumption in case of commercial agreements but this is
not so in case of domestic or social agreements. A relevant case in this regards is Jones v
Padavatton [1968] EWCA Civ 4 which indicated that in domestic or social agreements, it is
presumed that intention to form legal relations in absent unless there is concrete evidence
against the same (Gibson & Fraser, 2014). Thereby, if the contracting parties are related by
some personal or social relationship, then it is essential that adequate evidence is required
such as written contract to prove the presence of legal intention (Paterson, Robertson &
Duke, 2015).
Application
As per the scenario presented, it is known that Peter and Edward are cousins due to which
any contract enacted between them would be domestic agreement. The enforcement of this
agreement would be contingent on establishing the presence of intention to form legal
relationships on part of both Edward and Peter. In the given case, there is no evidence to
suggest that both of them had intention to hold the other party legally responsible for
discharging the contractual obligations.
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Conclusion
The discussion above highlights that the contract for sale of goods would not be considered
valid since in this contract the intention to enter legal relations cannot be established.
References
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Andrews, N 2014, Contract Law, 3rd edn, Cambridge University Press, Cambrisge
Carter, J 2016, Contract Act in Australia, 3rd edn,LexisNexis Publications, Sydney
Davenport, S & Parker, D 2014, Business and Law in Australia,2nd edn, LexisNexis
Publications, Sydney
Edlin, D 2015, Common law theory, 4th edn, University Press Cambridge, Cambridge
Gibson, A & Fraser, D 2014, Business Law, 8th edn, Pearson Publications, Sydney
Paterson, J Robertson, A & Duke, A 2015, Principles of Contract Law, 5th edn, Thomson
Reuters, Sydney
Taylor, R & Taylor, D 2015, Contract Law, 5th edn, Oxford University Press, Oxford
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