Assignment Cover Sheet

Question 1:
Using the four step process, discuss the element of agreement required for the formation of a legally binding contract between James and Mark. Step 1:
The legal issue is the element of agreement which is required for the formation of a legally binding contract between James and Mark.

Step 2:
There are three major requirements to form a legally enforceable contract which are agreement, intention and consideration. The element that requires discussing here is the element of agreement. Both offer and acceptance must contain in an agreement. Offer is defined as the statement that indicates willingness to contract. An offer must be sufficiently complete. Besides, a contract should outline the basic aspects of the offer (Duperouzel 2014). An offer of the agreement must be promissory. The agreement must be written in proper way which can inform the offeror‟s willingness to fulfill the terms of the offer if it is admitted (Duperouzel 2014). The case of Harvey v Facey [1893] AC 552 has shown the characteristic as a request for information and also the supply of information. In the case, a telegram which asked for the willingness to sell the Bumper Hall Pen was sent by Harvey to Facey.

Harvey also requested that Facey to send a telegram with the answer of lowest cash price. Facey then reply a telegram stated the lowest price of Bumper Hall Pen is £900. Harvey was satisfied with the price and sent another telegram to Facey agreeing to purchase the pen at the asking price. Facey declined to sell the pen to Harvey. The issue before the court was whether Harvey‟s statement an offer capable of being accepted by Facey. The court held that Harvey‟s statement is not an offer capable of being accepted by Facey. It was not a promise to sell Harvey the pen but only a statement providing information on what terms he might be willing to sell. Another requirement of an offer is the offer must be more than an exclusive expression of interest in doing business.

Advertisements are not considered as offers rather they are „invitations to treat‟. In the case of Partridge v Crittenden [1968] 2 AII ER 421, Partridge has advertised live wild birds for sale in a magazine. The RSPCA prosecuted Partridge as the unlawfully offering wild bird for sale is a statutory offence. The issue for the court was whether the advertisement an offer or merely an invitation to treat. The court judged that the advertisement was an invitation to treat as there was no sign of an expression of motive to be bound. It just an invitation to enter into negotiations with interested buyers who might themselves offer to but the advertised wild birds.

In Pharmaceutical Society of Great Britain v Boots Cash Chemists (Southern) Ltd [1953] 1 QB 401, the defendant was operating a chemist shop and sold medicine include drugs which need supervision of a registered pharmacist to sell. The Pharmaceutical Society of Great Britain sued Boots Cash Chemists under Pharmacy Poisons Act 1993 as they sold drugs that need supervision of a registered pharmacist. The court need to decide whether the drugs and medicines displayed on the shelves is considered as an offer before the customer took them to the cashier. The court held that the display of goods on shelves is not an offer but considered as an invitation to treat as the cashier can choose to accept or reject to sell the medicines.

An offer can also be made to a specific person or the whole world at large. This was shown in the case of Carlill v Carbolic Smoke Ball Co [1893] 1 QB 256. In this case, Carbolic Smoke Ball Company has published an advertisement in London newspaper to promote the use of the Carbolic Smoke Ball to prevent influenza. In the advertisement, the company offered £ 100 to the people, who bought the smoke balls and used them according the instructions given, but still contracted influenza. Mrs Carlill purchased the smoke balls after she read the advertisement. She used them according the directions, but nevertheless caught influenza. She claimed for the £ 100 which promised by the company but they refused to pay her. The court had to decide whether an offer that made to the world at large is valid to accept by an individual who read the advertisement or not. The court judged that the offer made to the whole world at large is the acceptance of the offer by everyone who knew about it.

Acceptance is an agreement on the terms of an offer. It must be made when the offer is still present. Terms of acceptance must be unanimous with the offer and cannot be conditional. It can only come from the person to whom the offer was made. Apart from that, acceptance must be communicated with the offeror and no certain form is necessary (Duperouzel 2014).

According to the general rule of acceptance, the acceptance is effective immediately when received. Once the acceptance is communicated to the offeror, the acceptance is effective and the agreement is reached. The case of Entores Ltd v Miles Far Eastern Corp [1955] 2 QB 327 has clarified. In this case, Entores which located in London sent a telex to the company based in Amsterdam for purchasing copper cathodes. The Dutch company then sent an acceptance to Entores by telex. Entores sued the owner of the Dutch company for damaged due to the contract was not fulfilled. The issue before the court was whether the contract is formed in London rather than Amsterdam. The court held that the contract is formed in London as the acceptance is effective once it communicated to the offeror.

There is an exception for the acceptance is the postal acceptance rule. Whenever the acceptance is posted, the offer will be accepted at the time. In the case of Adams v Lindsell (1818) 106 ER 250, Lindsell wrote an offer to Adams for selling him some wool and required him to reply by letter. However the letter was delayed in the post. On the day receiving the letter, Adams sent a post of acceptance to Lindsell. After Adams posted the letter, but before Lindsell received it, Lindsell sold the wool to a third party. Adams sued Lindsell for breach of contract. The court need to judge whether an agreement between Adams and Lindsell reached before Lindsell sold the wool to the third party. The court ruling that there was an agreement between Adams and Lindsell. According to the effect of postal acceptance rule, an agreement was reached at the moment Adams posted the letter of acceptance to Lindsell.

Step 3:
As an offer of the agreement must outline the aspects of the offer and also perform that the parties are interested in doing business, this principle is achieved in this scenario. James email which stated clearly that what is being offered, when the offer is honour and how much will be paid as an exchange of promise can be the evidence. Although James outlined that the acceptance of offer must be made before the deadline, however he did not state that the valid type of acceptance. James should send his acceptance of offer to Mark by email but unfortunately a sudden storm hit the residential area. He then tries to call Mark that he wants the job but Mark doesn‟t answer. As a last way, James drafted a letter of acceptance to Mark, and immediately prepared a strategic map for the project and post with the letter at the same day. The postal acceptance rule was applied in this situation. The acceptance is effective although Mark received the letter of acceptance after the due date as James had post his letter of acceptance on the same day. Based on the postal acceptance rule, the acceptance is effective at the time when the letter of acceptance is posted. Thus, the acceptance happened.

Step 4:
In conclusion, it is likely that the contract between James and Mark is legally bound as the offer and acceptance were satisfied.

Question 2:
Assume that the element of agreement required for the formation of a legally
binding contract between James and Mark can be satisfied. Using the four step process, consider whether the other elements required for an enforceable contract are present. Can James enforce the contract against Mark?

Step 1:
The legal issue is whether there are other elements required for an enforceable contract between James and Mark.
Step 2:
The other element required for an enforceable contract is there must be an intention to enter a contract so can be legally bound.
When the parties have commercial relationship, the court will assumed that they intended to create a contract that is legally bound. In the case of Esso Petroleum Ltd v Commissioners of Customs and Excise [1976] 1 AII ER 117, Esso Petroleum has produced free and commemorative coins. They promised to give free coins to the drivers who purchased four galloons of Esso Petrol. The Commissioners of Customs and Excise argued that Esso Petroleum produced free coins in quantity for general sale and subjected to the purchase tax. The court has to decide whether Esso intended to create legally bound by the offer to give the coins to drivers who purchased the fuel. The court presumes that it was intended to legally bind.

This can also be seen in the case of Ermogenous v Greek Orthodox Community of SA Inc [2002] HCA 8; (2002) 209 CLR 95. The Greek Orthodox Community has invited Ermogenous to become the head of Greek Orthodox Church in Australia. He accepted the offer and went to Australia. He served as archbishop for 23 years. The Greek Orthodox Community refused to pay him the accumulated leave. They disputed that there was no intention to be legally bound in the agreement with Ermogenous. The court held that the agreement between Ermogenous and Greek Orthodox Community was intended to be legally bound. Ermogenous was permitted to be paid for the accumulated leave.

When the parties are in domestic arrangements and social agreements, the court will assumed that there was no intention to create a contract that is legally bound. The case of Woodward v Johnston [1992] 2 Qd R 214 has clarified. In this case, Mrs Woodward has promised to help her husband to work to institute a gravel supply business. As a return, her husband promised to give her 10% of the business. Mrs Woodward did a lot of works for 18 months. Her husband exclusive the profit from the work and did not formalise her interest. The court has to decide whether the presumption that parties in domestic relationships is not intend to be legally bound can be rebutted by Mrs Woodward. The court judged that there was no intention to be legally bound as it was just a purely family arrangement.

However, if it can be proved, the presumption can be rebutted. In the case of Todd v Nicol [1957] SASR 72, Mrs Nicol has invited her sister-in-law and niece (the Todds), who resided in Scotland, to come to South Australia and lived with her. She promised to provide them free accommodation and will alter her testament. After she died, the house will transfer under the Todds‟ name. Mrs Todd quit her job and moved to Australia with her daughter. The Todds were asked to leave by Mrs Nicol after an argument break out. The issue before the court is whether the requirement in this arrangement intended to be legally bound be established by the Todds. The court has judged that the arrangement can be rebutted as the Todds moved from Scotland to Australia in reliance on Nicol‟s promise, which if not honoured, will carry significant aftermath to Mrs Todd and her daughter.

An enforceable contract is also required for consideration. Consideration can be defined as an amount paid to an exchange of promises (Duperouzel 2014). It is valuable and must be sufficient in the eyes of the law but not adequate. This can be seen in the case of Thomas v Thomas (1842) QB 851. Mr Thomas has showed his appetite that his wife is given permission to live in his house for the duration of her lifetime. The executor of Mr Thomas‟ estate allowed his wife to live in the house with condition of payment of £1 rental per year. The court has to decide whether the consideration provided by the wife is sufficient to make the agreement with the executors. The court judged that it is sufficient to bind.

A promise to emerge an existing obligation to the promisor is not an effective consideration (Duperouzel 2014). In the case of Stilk v Myrick (1809) 2 Camp 317; 170 ER 1168, the sailor is in a contract with a crew in ship on voyage for a definite amount of money. Two of the crew members deserved during the voyage. The captain making a promise that if they worked hard and completed the voyage safely, the deserters‟ wages will be divided among the crews. The captain refused to pay after they back from voyage. The issue for the court is whether the consideration given by crew to captain‟s promise is enable to create a legally bind contract. The court held that there is no binding contract made since the crew didn‟t provide anything as a return of captain‟s promise.

Step 3:
The relationship between James and Mark is commercial relation. In this case, the court will not assume that James and Mark are not intention to create a legal relationship. They depend on the presumption that James and Mark are intended to create legally binding contract when the agreement was made.

There are evidences which can prove James and Mark are intended to create a legal relationship. James would really like to gain another customer so that he can ensure he has enough work in the future. Secondly, Mark has sent the proposal to James on Monday morning which is the day he promised before. Next, James should email Mark for expressing his acceptance of the offer but unfortunately his email stops working. He then tries to call Mark that he wants the job but Mark doesn‟t answer. Hence, James drafted a letter with a strategic map for the project to post at the same day.

As an enforceable contract required consideration, James would have to provide consideration and Mark would also have to pay something value as a return. In this case, James helped Mark for revamp his store‟s website and Mark promise to pay $35000 with a parking spot provided to James as an exchange of promise. The consideration is adequate in the eye of the law. Apart from that, James is professional in website design and his consultancy is doing well. He can provide well design services to Mark by using his skill. As a return, Mark will pay James an appropriate amount of money. Besides, James had also post his strategic map for the project with the letter to Mark. Although the value is small but considered as a consideration. Step 4:

In conclusion, it is likely that the agreement between James and Mark is legally enforceable as they intended to be legally bound at the time and the act of consideration is shown when the agreement was made. Thus, James can enforce the contract against Mark.

Reference
List of cases referred to:

Adams v Lindsell (1818) 106 ER 250

Carlill v Carbolic Smoke Ball Co Ltd [1893] 1 QB 256

Entores Ltd v Miles Far Eastern Corp [1955] 2 QB 327

Ermogenous v Greek Orthodox Community of SA Inc [2002] HCA 8; (2002) 209 CLR 95

Esso Petroleum Ltd v Commissioners of Customs and Excise [1976] 1 AII ER 117

Harvey v Facey [1893] AC 552

Partridge v Crittenden [1968] 2 AII ER 421

Pharmaceutical Society of Great Britain v Boots Cash Chemists (Southern) Ltd [1953] 1 QB 40

Stilk v Myrick (1809) 2 Camp 317; 170 ER 1168

Thomas v Thomas (1842) QB 851

Todd v Nicol [1957] SASR 72

Woodward v Johnston [1992] 2 Qd R 214

List of other sources:
Barron, M. L. 2006. Fundamentals of Business Law. Australia: Mc Graw-Hill Australia Pty.
Duperouzel, Christian. 2014. “Lecture 3: Making a Contract.” PowerPoint lecture notes.
https://lms.curtin.edu.au/bbcswebdav/pid-2824618-dt-content-rid11389062_1/xid-11389062_1. Lambiris, Michael. 2012. First Principles of Business Law. Sydney: CCH Australia.