Binding Agreements in Business Law

Topics: Contract, Common law, Contract law Pages: 10 (2444 words) Published: October 1, 2014
Business Law

“To create a binding agreement the acceptance must occur, and that ‘acceptance’ must be final and absolutely unconditional. This is clear under Australian Contract Law.”

As a legacy of being a British colony, Australian Law has been very much guided by legislation and case law from England for over two centuries. Even though a number of Acts were passed in the British Parliament gradually enabling the Australian States, and from 1901 the Commonwealth, to enact their own legislation, it wasn’t until the 1980’s when the Australia Act 1986 was passed through all Australian Parliaments that full law-making independence was given.1 Australian Contract Law had its foundations in the laws of contracts that also emerged in England, with many precedents being set via common law in and around the 1870’s and amended, refined or enhanced in the years since in both English and Australian courts.2

It is quite clear under Australian Contract Law that once a final and unconditional acceptance of an offer is made, a binding agreement exists between the parties. Negotiations may take place a number of times before a final agreement is reached and it is irrelevant as to who makes the final offer, as long as an unequivocal acceptance is made. However, it must be acknowledged that not all agreements are recognised as contracts and courts are often left with the task of deciding what is, or isn’t, an agreement or contract. Within the business environment reference is often made to the ‘mirror image’ rule which states that for an absolute and unequivocal acceptance to an offer to occur the acceptance must match the offer exactly…anything less can constitute a counter offer which voids the original offer.3 The process of entering into an agreement naturally begins with an offer. This can either be through an ‘invitation to treat’ (as in a display of goods in a store) or the presentation of a specific offer.4 The offer itself can be directed towards individuals, as in an offer to sell a car to a friend for a set price, or at the other end of the spectrum, offer to sell to the world, as through eBay in current times or the precedent setting case of Carlill v Carbolic Smoke Ball Company5. It was held in that case that a binding unilateral offer had been made and hence a contract was formed between the Carbolic Smoke Ball Company and a Mrs Carlill when she complied with conditions set by Carbolic to access a monetary incentive. Carbolic argued that their advertisement offering to pay £100 to anyone who caught influenza after using their product was not a serious contract and should be declared void.6 The judgment went against Carbolic as it was deemed that the intention of offer did exist.7

Once an offer has been put out it is up to the offeree to accept or decline the offer. In order for an offer to be accepted to the extent where the agreement becomes binding, several rules need to be addressed. First of these is that the acceptance needs to be communicated and this can be done either expressly or implied from conduct as in Brambles Holdings v Bathurst City Council8 where Brambles Holdings under the business name of Cleanaway was judged to have accepted conditions of contract through their conduct in meeting obligations and charging specific fees for waste deposit. Regardless of how the acceptance is made it needs to be “clear, unambiguous and unequivocal”.9 One exception to this rule of communication is that relating to postal acceptances. The Postal Rule of Acceptance goes somewhat against the laws of logic in that it considers an acceptance of an offer to be made when the offeree posts the letter of acceptance, rather than when the offerer receives the letter. Although, as shown in Elizabeth City Centre Pty Ltd v Corralyn Pty Ltd10, when specific conditions are set the postal acceptance rule could not be relied upon. In this particular case, the offerer stipulated that if a building lease renewal acceptance was...

Bibliography: Articles, Books, Reports
Commonwealth of Australia, ‘A Guide to the Unfair Contract Terms Law’ (2010), Canberra
Fitzroy Legal Service Inc., ‘The Law Handbook 2014’ (2014)
Lindsay, Geoff, ‘The Common Law Tradition: Contract Law in an Age of Statutes’ (2012) UNSW Law Journal
Parker, David and Gerald Box, ‘Business Law for Business Students’ (3rd ed. 2013)
Case Law
Anaconda Nickel Ltd v Tarmoola Australia Pty Ltd (2000) 22 WAR 101
Balfour v Balfour (1919) 2 KB 571
Boscolo v Department of Education, Employment and Workplace Relations (2009) 51 AATA 794
Brambles Holdings v Bathurst City Council (2001) NSWCA 61
Carlill v Carbolic Smoke Ball Company (1892) EWCA Civ 1
Elizabeth City Centre Pty Ltd v Corralyn Pty Ltd (1994) SASR 235
Master v Cameron (1954) 91 CLR 353
Meehan v Jones (1982) 149 CLR 571
Merritt v Merritt (1070) EWCA Civ 6
Prudhoe Corp Pty Ltd v Commissioner of State Revenue (Vic) (2005) 59 ATR 566
Reardon v Morley Ford Pty Ltd (1980) 49 FLR 401
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