Holmes Institute HA2022 Business Law Report - Contract Law Analysis

This report analyzes two case problems related to contract law. The first part examines whether Lincoln can recover damages from Washington for breach of contract, considering Washington's mental capacity and the nature of the contract. The second part assesses whether George has grounds for action against Anita for breach of contract, considering the intention to create a legal relationship between friends entering into a partnership agreement. The report applies relevant legal principles and precedents, including the elements of a valid contract, the intention to create legal relations, and the impact of mental capacity on contract validity. The analysis uses the IRAC method to structure the legal arguments and reach conclusions on each issue. The report references key legal cases to support its analysis and conclusions.

Business Law
Name of Student
Name of University
Author Note

Issue
• Whether Lincoln can recover
damages from Washington for the
breach of the contract
Part A

Rule
• Appleson v Littlewoods 1939- For claiming a
contract to be valid the parties involved should
establish the presence of all the five elements of a
validly created contract.
• Smith v Hughes [1871] LR 6 QB 597- The
foundation of a valid contract is to be laid down by
establishing an adequate agreement with the
involvement of an offer.
• Rose & Frank Co. v JR Crompton & Bros Ltd.
[1923] 2 K.B. 261- The contracts in question is
always required to have an underlying motive of
the parties involved to institute a legal relationship
between them.

Rule (Contd.)
• Currie v Misa (1875) LR 10 Ex 893- A valid consideration is
required for both the parties to a contract that has been adding
some value to both of them for making the contract legally
enforceable.
• Gordon v Selico (1986) 18 H.L.R. 219- The consent of the parties
involved in a contract is required to be free from any external forces
for rendering the contract to be valid.
• Simpkins v Pays [1955] 1 WLR 975- The parties involved in a valid
contract is required to have the capacity of instituting a contract.
• Imperial Loan Co. Ltd. v. Stone [1892] 1 Q.B. 599- Contract for
necessaries provided to a person suffering from mental illness is
voidable at the option of the mentally impaired person.
• York Glass Co Ltd v Jubb [1925] All ER 285- When a person
becomes mentally ill in certain cases and in certain times it remains
mentally fit then all the contracts during his mental adequacy would
be rendered as valid .

Application
• Washington has been an insane individual having limited means
who have entered into a contract with another individual
forpurchasing an antique axe along with a cherry tree for $100.
Applying Imperial Loan Co. Ltd. v. Stone [1892] items cannot
be treated as necessities as it is more of a luxury and hence the
supply for basic necessity principle will not apply in this case
• Washington has been apparently a normal person as viewed from
the outer perspective while instituting the contract, however,
Washington has been an insane person and has never conceived
the terms of the contract in the same manner as that of Lincoln.
Applying York Glass Co Ltd v Jubb [1925] the parties to a
contract are required to have a proper and sane understanding of
the terms of the contract for making the contract legally
enforceable.

Conclusion
No contract has been created
Lincoln cannot claim any damages
for the repudiation of the contract.

Part B
Issue
Whether George has any
action against Anita for breach
of the contract.

Rule
• Appleson v Littlewoods 1939- For claiming a contract to be valid
the parties involved should establish the presence of all the five
elements of a validly created contract.
• Smith v Hughes [1871] LR 6 QB 597- The foundation of a valid
contract is to be laid down by establishing an adequate agreement
with the involvement of an offer.
• Rose & Frank Co. v JR Crompton & Bros Ltd. [1923] 2 K.B. 261-
The contracts in question is always required to have an underlying
motive of the parties involved to institute a legal relationship
between them.

Rule (Contd.)
• Merritt v Merritt [1970] EWCA Civ 6- . It is a general
contention to consider social agreements to be informal in
nature.
• Balfour v Balfour [1919] 2 KB 571- commercial agreements
are supported by the intention of creating legal relationship.
• Ermogenous v Greek Orthodox Community of SA Inc [2002]
HCA 8- test of presence of legal relationship.
• Currie v Misa (1875) LR 10 Ex 893- A valid consideration is
required for both the parties to a contract that has been
adding some value to both of them for making the contract
legally enforceable.

Rule (Contd.)
• Gordon v Selico (1986) 18 H.L.R. 219- The
consent of the parties involved in a contract is
required to be free from any external forces for
rendering the contract to be valid.
• Simpkins v Pays [1955] 1 WLR 975- The parties
involved in a valid contract is required to have
the capacity of instituting a contract.
• L'Estrange v F Graucob Ltd [1934] 2 KB 394- If
a party to the contract has enumerated his
signature in a document , the contract will
automatically become binding up in him.

Application
• Applying Merritt v Merritt as George and Anita has been good
friends who has involved solicitors for the purpose of preparing
their deed of partnership the contract lacked the intention to
create legal relationship
• Applying Ermogenous v Greek Orthodox Community of SA Inc
All of their rights along with the responsibilities has been
enumerated within the document evidencing the contract. This
needs to be treated as a presence of the intention for forming
legal relationship between them.
• Applying L'Estrange v F Graucob Ltd a party to the contract
has enumerated his signature in a document acknowledging and
instituting the contract in question, the contract will
automatically become binding up in him .

Conclusion
George can bring an action
against Anita for breach of the
contract.

Reference
Appleson v Littlewoods 1939
Balfour v Balfour [1919] 2 KB 571
Currie v Misa (1875) LR 10 Ex 893
Ermogenous v Greek Orthodox Community of SA Inc
[2002] HCA 8
Gordon v Selico (1986) 18 H.L.R. 219
Imperial Loan Co. Ltd. v. Stone [1892] 1 Q.B. 599
L'Estrange v F Graucob Ltd [1934] 2 KB 394
Merritt v Merritt [1970] EWCA Civ 6
Rose & Frank Co. v JR Crompton & Bros Ltd. [1923] 2
K.B. 261
Simpkins v Pays [1955] 1 WLR 975
Smith v Hughes [1871] LR 6 QB 597
York Glass Co Ltd v Jubb [1925] All ER 285