4 Step Process to Contract Law Essay

Question a) Step One The principle of law is that for a valid contract to be formed there must be an agreement reached by both parties. Step Two There are three main elements for the formation of a legally binding contract, intention, agreement and consideration. The requirement that requires discussion here is the existence of an agreement by the parties to enter into a legally binding contract. An agreement means a consensus on at least those essential terms needed for a workable transaction. The process of reaching an agreement is generally analysed as involving an offer and acceptance. Where the offer is a clear indication of the terms upon which a person is prepared to be bound, and an acceptance is assenting to, agreeing, or receiving the terms offered. See more: Basic Economic problem of Scarcity Essay The requirements of an ‘offer’ must be promissory, such as in Placer Development Ltd v Cth (1969) 121 CLR 353 where what the government had said was not a legally enforceable promise, but had appeared to be one. It must be sufficiently complete, and intended to result in a contract if accepted. The requirements of an ‘acceptance’ to exist must be in the same terms of the offer. It cannot still be subject to a condition, such as where it was clear that Cameron had not intended to be bound until a formal contract was prepared and signed, Masters v Cameron (1954) 91 CLR 353. An acceptance must be made while the offer is still in existence. It must be made by a person whom the offer was addressed. If the offer is intended to be made to any person that learns of it then any such person can accept the offer on the stated terms. Carlill v Carbolic Smoke Ball Co (1893) 1 QB 256, where Carlill had read an advertisement offering a reward to anyone who caught influenza after buying the company’s smoke ball. Carlill bought the ball and caught influenza, since the offer was made to ‘the world at large’ it is capable to be accepted by anyone who learns of it, including Carlill. An acceptance must be made in acceptable form. In the case of emails, it is considered to have been received when it reaches an information system designated by the person to whom the email is addressed via s 13 electronic Transactions (Victoria) Act 2000 and equivalent legislation in other stated and territories. For the process of offer and acceptance to result in agreement, the terms of the offer must be accepted without suggesting changes. For example, in Olley v Marlborough Court Ltd (1949) 1 KB 532 Olley had her furs stolen in the hotel, and there was a notice in the room notifying that the hotel was not held accountable for stolen goods. This notice was not part of the agreement as it was not in the initial contract and therefore the hotel was made liable. Step Three The review of whether an agreement has been reached between both parties involves determining the requirements of an offer and acceptance have been met. Firstly, for an offer to exist, it must be intended to result in a contract is accepted. The advertisement made by Games Travel Ltd is not viewed as an offer by the courts because advertisements are not intended to signal a readiness to be bound, but rather an invitation asking customers to make an offer to buy. Secondly, for the requirements of an acceptance to exist, it must be in the same terms of the offer. If the advertisement were to be seen as an offer, the terms agreed on would be $1000 for the tickets and tickets to the finals in swimming, archery and gymnastics. Jon only authorized the payment of $1000 as the terms on the offer expressed. As the terms had changed after he had authorized payments, there were no tickets to the gymnastics, which made the offer invalid. Lastly, for the process of offer and acceptance to result in agreement, the terms of offer must be accepted without suggesting changes. The change from $1000 to $2000 breached this requirement. An attempt to accept an offer on different terms should have been constructed as a rejection of the original offer and the making of a counter-offer. Step Four Due to not meeting the requirements of an ‘offer’ through not being intended to result in a contract if accepted, and not meeting the requirements of an ‘acceptance’ by not being in the same terms of the offer, there is no legal binding agreement between both parties and Jon is not obliged to pay $2000 for the plane tickets as there is no authorization for $2000, rather $1000. Question b) Step One The area of law relevant to this question is the review of a contents of a contract enforced between two parties. Step Two There are particulars to a contract which structure its existence. This includes the importance of terms within the contract, the freedom of contract, statements that do not become part of contract, and terms of contract. Within a contract consideration must be made to the creation of the contract. The terms of the contract define the obligations of the parties. It is by analysing the terms that you can find out what has to be done to discharge those obligations. For example in Cehave NV v Bremer Handelsgesellschaft mbH [1976] QB 44; [1975] 3 All ER 739, the buyer Cehave did not want to accept the delivered goods because they were not in ‘good condition’ although they were in satisfactory condition to perform their purpose which was to be used as animal feed. Freedom of contract is the freedom of individuals to bargain among themselves the terms of their own contracts, without external interference. People can negotiate effectively in their own interest and both parties negotiate from a position of equal strength. Limits included on freedom of contract are illegal undertakings not enforceable, such as anything more than minimal regulations and taxes may be seen as infringements. Policy considerations may limit freedom of contract. There are certain statements that do not become part of the contract but are said in negotiations. This includes puffs, opinions and representations. Puffs are statements of exaggerated praise to excite buyers and encourage sales and are without any real or measurable substance. Opinions are statements of personal views or beliefs and should not be relied on as it may be incorrect. If a person misrepresents their true opinion, their statement is treated as a representation. Representations are statements often made to encourage the other party to enter the agreement, without intending that they be contractual promises. For example Oscar Chess Ltd v Williams [1957] 1 All ER 325, the car dealer sued Williams for breach of contract due to the car age document being false. The courts decided the document was a mere representation rather than a contractually binding promise. The terms of a contract describe the entire contents of a legally enforceable agreement. Terms are ‘express’ when they have actually been declared or definitely stated. There are disagreements over whether particular terms have been included in the contract or not. For example Causer v Browne [1952] VLR 1 the statement on the docket was not seen as contractual terms as it was only an identifying docket. A term may also be ‘implied’ into a contract when that term was intended to be part of the contract without being expressly stated or referred to. It can only be implied if it is obvious that the parties had intended to include the term as part of their agreement. Implied terms must be reasonable and fair, be capable of clear, unambiguous expression and it must not contradict any express terms. In Codelfa Construction v State Rail Authority of NSW (1982) 149 CLR 337 Codelfa tried to claim extra payment for the extra costs incurred due to stopping and starting work overnight. The courts rejected this as there was no such term implied that would see unforeseeable stoppage to work and compensation paid out. A breach of contract that causes loss gives rise to a claim for damages. If sufficiently serious, a breach may justify a claim to damages plus a refusal to accept performance. To evaluate the seriousness of a breach various terms are distinguished and some terms are described as ‘conditions’ and the others ‘warranties’. Conditions are terms of fundamental importance to the agreement, whereas warranties are terms of lesser importance than conditions. In a breach of condition an injured party can terminate contract and/or sue for the damages. Whilst in a breach of warranty the injured party can sue for damages. In Associated Newspapers Ltd v Banks (1951) 83 CLR 322 Bancks, the cartoonist had the right to terminate his contract as the promise to publish Blancks drawing’s on the front page of the comic section was a condition term. Step Three Identifying the content of the contract between Jon and Games Travel Pty Ltd shows that there are express terms that exist within the contract. For example, the two tickets for the price of one, and the tickets to the finals in the swimming, archery and gymnastics. These terms are contractual terms and must be carried out as specified by the agreement. The terms sought throughout the contract are categorised as warranties, as they are not terms of fundamental importance. Such terms are the swimming tickets, where Jon had received men’s event and not the women’s. Also, the ticket price was doubled when charged, the initial contract was $1000 which is a warranty term. Terms that are conditional are the actual flight to the Commonwealth Games in India. Breaches of Warranty terms such as the swimming ticket and $2000 charge would be a breach of contract. In such a case, the remedy available for breaching warranties are to claim for damages only. This would include $1000 which Jon was overcharged. Step Four In conclusion, through analysis of the contents of the contract a breach of warranty has arisen. The remedy of such can include a sue for damages incurred.