Law Binding Contract

Topics: Contract, Contract law, Invitation to treat Pages: 8 (1647 words) Published: September 16, 2011
Task A


The main issue that needs to be addressed here is whether there is binding contract between the two parties, Baldcure Ltd. and Gary Knudenut, and consequently whether Gary can sue under that contract.


A contract is a legally enforceable agreement between two or more parties. To be valid, a contract must comprise of the following elements: - agreement (offer + acceptance)
- intention
- consideration
- capacity to contract
- consent
- legality

In order to establish whether there is a binding contract between Gary and Baldcure we need to consider the existence of these elements.

One of the essential prerequisites of a contract (bilateral or unilateral) is agreement. Agreement means that the parties have reached consensus ad idem, indicated acceptance of the offer.

A primary principle of the common law to determine the existence of a contract is the existence of an offer and acceptance. If we apply this principle to the case of Gary and Baldcure Ltd, we will be able to establish the existence of a binding contract.

Sub issue 1

The issue is whether the advertisement for sale the Baldcure Tonic in Sydney newspaper an offer or invitation to treat and whether there is an acceptance.


An offer is a clear and specific statement, in writing or verbal, that outlines the conditions and terms of the contract. There are several rules in regards to an offer: • It has to be communicated to the offeree before it is accepted • The offeree has to be aware of its existence

• An offer may be made to a particular individual, to a group of people or to the whole world. If the offer is made to specific individual, only that person may accept it; if the offer is made to the world, it can be accepted by anyone, as in Carlill v Carbolic Smoke Ball Co [1893] 2 Q.B 49. • Advertisements are normally interpreted as invitations to treat, Granger and Sons v Gough (1896) AC 325. However they may be regarded as offers if they are unilateral, and may be accepted by the whole world Carlill v Carbolic Smoke Ball Co [1893] 2 Q.B 49. Furthermore, an advertisement can be an offer and not just an invitation to treat if it is very specific and detailed, for example, deposit on a bank account, as in Carlill v Carbolic Smoke Co [1893] 2 Q.B 49.


When applying the principles of offer and invitation to treat on the case of Gary and Baldcure Ltd we can determine that the advertisement of Baldcure is actually an offer, made to the whole world. Also, it is a specific offer “is guaranteed to revive and restore any hair to any male who applies it every night to his scalp for three months”. Furthermore, it was highlighted that Baldcure will pay $7,000 if the hair growth not occur.

Therefore it is clear that the advertisement on the newspaper was an offer to the whole world and not an invitation to treat.


Acceptance is defined as a statement or act showing offeree’s intention to accept the offeror’s terms without further discussion or negotiation. It may be verbal or written. Also, there are several rules in regards to the acceptance:

• it must be in reliance on the offer R v Clarke [1927] 40 CLR 27

• it must be complete and without any conditions attached to it Masters v Cameron (1954) 91 CLR 353

• it must be communicated to the offeror, either by words or conduct Powel v Lee (1908) 99 L.T. 284

• in the case of unilateral contracts, there is no need to communicate acceptance. The offeree’s action is acceptance of the offer Carlill v. Carbolic Smoke Ball Co. [1892] 2 Q.B. 484, where the court decided that with payment of the 100 pounds the acceptance was communicated.


By applying the principle of acceptance to Gary’s case, it is evident that the acceptance of the offer exists that is in the form of buying the product through the local retailer. Also, it is an offer to the entire world,...

References: Ardagh A., Guild W. (2010). Business and corporations law [LAW 504 Study Guide]. NSW: Charles Sturt University.
Pentony B., Graw, S., Lennard J., Parker D. (2003). Understanding business law (3th ed.). NSW, Chatswood: LexisNexis Butterworths.
Statutes: Section 18 – Australian Consumer Law
Cases: Balfour v Balfour (1919) 2 KB 571
Carlill v Carbolic Smoke Ball Co [1893] 2 Q.B 49
Dunlop Pneumatic Tyre Co Ltd v Selbridge & Co Ltd (1915) AC 847
Granger and Sons v Gough (1896) AC 325
Masters v Cameron (1954) 91 CLR 353
Powel v Lee (1908) 99 L.T. 284
R v Clarke [1927] 40 CLR 27
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