Harry (H) who is the father of James (J) is attempting to sue J for a breach in contract and is seeking damages of $30,000 which he believes is the outstanding amount that is owed to him by J. This case touches on the fundamental concepts of contract law where H can only claim damages if the formation of a valid contract between the two parties is evident via the elements of a contract, including intention, agreement, consideration, legal capacity, genuine consent and legality of objects must be established. Once these elements are satisfied, the terms of the contract need to be evaluated to deem whether the contract between H and J is enforceable. Once it has been established that the contract is valid, the relevant facts should be analysed in regard to any breach in the contract, and if there is a breach, the extent of the damages which should be awarded to H should be outlined.
Upon further examination, this case can be split up, where there are two contracts that are potentially formed. For this contract to be valid and legally enforceable, offer, acceptance, intention and consideration need to be present. Upon analysing the facts, it can be seen that both parties have full legal capacity as they had enough legal knowledge to make the legal decisions themselves. Consent as well as the legality of objects is not an issue as there is genuine agreement between the two parties as well as the doctrine of privity of contract holds (Latimer 2012).
Although there is a domestic relationship between the two parties implying that there would no intention (Balfour v Balfour); Wakeling v Rippley shows that if there is economic seriousness involved between the domestic parties, the presumption that there was no intention to create a legally binding contract will be rebutted. Therefore intention is present in this first contract, as J pays H $60,000 and $20,000 for the timber and machine respectively. (Khoury and Yamouni, 2007).
J initially makes an offer to H to buy the timber and machine, H then agrees to that particular offer thereby accepting to supply the goods (R v Clarke). The offer and acceptance is expressed by words, and there is clear communication between H and J.
It can be seen that there is consideration in this first contract, as there is an exchange of promises (mutual promise) where J promises the money and H promises the supplies (Latimer, 2012). Consideration is also seen to move from the promise (Dunlop Pneumatic Tyre Co Ltd v Selfridge and Co Ltd) as H delivers the supplies and J pays H the original agreed amount of $80,000. Carter, Peden and Tolhurst (2007) state that consideration must not be past, which is not an issue in the first contract as the agreement to exchange value is made in the present. In addition, the consideration given by both parties is adequate and suitable, which is highlighted by the eventual exchange by both parties.
H and J are engaged in a legally binding contract in this instance which can be enforceable and is legally binding. The contract meets the requirement of the main elements of a contract and as a result, both parties fulfil their duties and there is no breach.
The validity of the second contract concerns the increase in payment for the timber by an extra $30,000. As is in the case in contract 1, even though the agreement is of a domestic nature, implying that the contract is not legally bound, this presumption may be rebutted (Khoury and Yamouni, 2007), due to the evidence of the economic situation to H (Wakeling v Rippley). Furthermore J shows his intention to complete the agreement by paying the initial $20,000. This is similar to the Carlil v Carbolic Smoke Ball Co, where by depositing the £1000 into a bank, Carbolic Smoke Ball Co, had shown their “sincerity in the matter,” that is,...