4 Step Process to Contract Law

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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.

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...
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