Answer 1

1) Offer and Acceptance

A contract is formed when an offer by one party is accepted by the other party.
An offer need not be made to a specific person. It may be made to a person, a
class of people, or to the whole world. A person can withdraw the offer that has
been proposed before that offer is accepted.
For example; J is offering a used car to sell A Ford car for $2,000,
without a roadworthy certificate. If A decides to buy the car, but insists on a
roadworthy certificate to be provided, then A is not accepting the offer of the J.
Instead of that, A is making a counter offer. It is then up to J to accept or reject
the counter offer.

2) Intentions to Create Legal Contract

A contract cannot simply exist if there is agreement between two parties. The
parties in agreement should intend to enter into a legally binding agreement.
For example; a friend offering you ride in his car doesnt lead to creating
a legally binding relation. However, you may agree with your friend to share the
costs of travelling to college on daily basis and agree that each Monday you will
pay $40 for the running costs of the car.

3) Form of Valuable Consideration:

Consideration is the price paid or good deed for the promise of the other party.
The price or deed can be something of value. The consideration should not be
illegal or impossible to perform.
It is known as quid pro-quo or something in return.
For example; the promise to pay a peppercorn rent in return for the lease
of a house would be good consideration.

4) Legal Capacity
The parties in an agreement must be in legal capacity to accept the contract. The
contract will not be valid if either of the parties doesnt have the capacity to
contract:
Minors
Mental Incapacitated & Intoxicated person
Bankrupts
Corporations (people acting on behalf of a company)
Married women

5) Consent
Consent means the parties must have agreed upon the same thing in the same
sense. Consent is said to be free when it is not caused by:
a) Mistake
o Common
o Mutual
o Unilateral
b) Misrepresentation
o Fraudulent
o Innocent
o Negligent
c) Duress
d) Undue Influence
e) Unconscionable Contracts

6) Legality of Object:
The most important thing regarding contract is the legality. There should not be
any undefined ideas or commitment. Contract should not cause any disturbance
to the people engage with it.

Answer 2

Formal contracts
The validity of Formal contract depend upon their formthe method or manner
in which they are being expressed.
It includes:
Contracts of record
Contracts under seal or by deed.
Contracts of record are enforceable independent from the intention of the parties
and are enforceable. Contracts by deed or under seal to obtain their binding
force from their form alone. A deed is attested and signed by the witness who is
not party to the deed to make it more validate.
Parties can only enforce a formal contract up to twelve years before being
barred by the statute due to passage of time.
For example; two parties entering into an agreement for the sale of a
piece of land after being agreed upon the price and other things related to it and
then entered into written contract of the sale of land making it officially
recorded in the court by the change in title indicating the new owner's name .

Simple contracts
Contracts which written, verbal or implied and which is not a formal contract, is
a simple contract. Simple contracts are never legally recorded or officially
sealed. Valuable consideration is the essential element and must be present in
all simple contracts.

Parties can only enforce a formal contract up to six years before being barred by
the statute due to passage of time.
For example; ordering of food on phone wherein the parties have only
the verbal contract to deliver the food at home in return of the money to be paid
for the services.

Case Study 1
Parties:
Plaintiff James
Defendant - Video game shop

Issues:
Issue 1: Is there any contract between James and videogame shop at the price of
$6.99 for the video game.
Sub Issue 1.1: Is the price tag of $6.99 is binding offer for the videogame shop
which was a typographical error.
Issue 2: Did shop made any offer to James.
Issue 3: Does the video game shop have any liability to it?
Issue 4: Is there any breach of contract between the Videogame shop and
James?
Sub Issue 4.1: Whether writing of amount of $6.99 was a typographical error or
was it to mislead the customers.

Rules:
1. The display of an article in the shop, even with a card indicating its price is
not generally offer. It is an invitation to treat (Pharmaceutical Society of
Great Britain v Boots cash chemists {southern} ltd) [1953] 1 QB 401
(CA); Grainger& Sons v Gough [1896] AC 325.
2. There is no contract by the shopkeeper until the customer has taken the
product to the shopkeeper and said I want to buy this book and shopkeeper
say Yes.
3. Invitations to treat are not offer and therefore cannot be accepted. There is no
contract if Video game shop cashier refuses to accept James offer.

4. It is unlawful to make false representation about the goods and services

when supplying or offer to supply the goods and services or promoting it in
the shop, it is the duty of the shopkeeper to check all the prices of the
products being displayed in the shop.
5. The Australian Consumer Law (ACL), s18 (misleading or deceptive
conduct) and s29 (false representation), provide recourse to a consumer
where it is shown that service provider was careless in the formation of
advertising material. James may have a right to take action under those
sections of the ACL.

Analysis:
Issue 1 & Sub issue 1.1) in the video game shop the card indicating the price of
any product is not offer made but a mere invitation to treat which James cannot
accept. There is no indication on the facts given that Video game shop had
expressed any intention to be legally bound by the price which is a
typographical error. There is accordingly no contract in existence between
James and Video game shop.
Issue 2) it is clear from the facts that there is no contract by the shop attendant.
There can be no contract by the shopkeeper until the purchaser takes the item to
the shopkeeper and said I want to buy this and shopkeeper says yes. James
already knew that mooncraft II is generally retailed at $69.99 but when he
noticed price indicating $6.99 he quickly picked it up and when to shop
attendant and on the checkout counter the attendant refuse to give the mooncraft
II to James and attendant stated that it was mere typographical error and the
game cost $69.99.
Issue 3) generally there is no law that requires any company or shop to honour
the advertised price even if the price is mentioned wrong or typographical error.
Honouring the wrong mentioned price or typographical errors can result in
items being offered at what appears to be very good discounts which can result
in heavy losses for the company or the shop. Law against this type of errors or
advertising require intent to deceive on the part of the advertiser in this case
video game shop.
Issue 4 & Sub issue 4.1) if the company or the shop is able to demonstrate that
the advertised price was a merely mistake, then it will not stated as false
advertising. The burden to prove that this was a typographical error would be
upon the shopkeeper. But, Video game shop has obligations under the ACL to

not engage in misleading or deceptive conduct (s18) nor make false

representation (s29). This it has to be done and hence, James has a right under
those sections of the ACL to claim the damages. Video game shop would not be
able to rely on the mistake in the circular as defence. Video game shop may
also be liable to a fine for breach of the ACL.

Conclusion:
There is no contract between James and Video game shop for the game
mooncraft II at the price of $6.99 which was an error and James would not be
obliged to accept the offer. Thus there is no breach of contract from the Video
game shop.
Video game shop may also face action for possible breaches of ACL, s18 and
s29.

Case Study 2
Parties:
Plaintiff Frederick
Defendant Sarah

Issues:
Issue 1: Was there an agreement between Sarah and Frederick?
Issue 2: Was Sarah known about the Frederick intoxication?
Sub Issue 2.1: Does Frederick intoxication make the contract enforceable or
void?
Issue 3: Is Sarah bind by the offer she made to Frederick after he accepted it?
Sub Issue 3.1: Is there a breach of contract by Sarah?
Issue 4: Does Sarah have any other option for the mistake she made by offering
cheap price to Frederick unknowingly?
Sub Issue 4.1: What is Sarah liability?
Issue 5: Is there any proof that there was a verbal agreement between Sarah and
Frederick?

Rules:1. An agreement between two parties can only happen when one party
communicates the offer to offeree with specifying the conditions and offer is
accepted by the second party and must be unconditional. In this case
agreement Sarah offer was accepted by Frederick.

2. An agreement will become voidable provided that the first party was aware
of incapacity or intoxication of the second party. Sarah takes an advantage of
the moment at which Frederick was intoxicated as she aware about that.
3. The effect of mental incapacity or intoxication is to make the contract
voidable at the option of intoxicated person in this case Frederick and it does
not entitle the other party Sarah to set aside the contract. Gibbons v Wright
(1954) 91 CLR 423 at 439; Hart v OConner [1958] AC 1000.
4. Once the agreement is made between two parties than the parties are bind to
it. It means that all the terms and conditions have been met and agreed upon
services and payment terms. If one of the party does not intend to carry
through on to agreement after it happened then it would be considered as
breach of contract.
5. If the representation is that the subject matter as actually existing is so
different from what it would have been if the representation had been true as
to amount to a complete difference in substance between what the mistaken
party bargained for and what in fact he or she will obtain if the contract is
fulfilled then the contract is void on the basis of common mistake at
common law: Kennedy v Panama Royal Mail Co (1867) LR 2 QB 580.
6. Any changes in agreement must be communicated. An agreement in
principle is not considered as complete agreement.
7. Verbal contracts if not written words, can be proven by actions. Any
verbal promise to perform a service that you agreed to is a valid contract.

Analysis:
Issue 1) Sarah on realizing that Frederick was intoxicated she made an offer to
Frederick about selling the painting she have back at her house and Frederick
being nice to Sarah and considering that she is in need of money decided to help
her by accepting Sarah offer that he will buy the painting from her and will be at
Sarah house tomorrow morning with the money and thus making a Complete
verbal agreement.
Issue 2 & Sub issue 2.1) it can also be seen in the facts that Sarah knew about
the Frederick intoxication and then only she decided to make an offer to
Frederick. This can make the agreement voidable on Sarah. Considering the
facts that while having an agreement between Sarah and Frederick. Frederick
was intoxicated but, when got sober Frederick was there at Sarah home with
money to be paid against the painting and wanted to get go ahead with the
agreement which shows that Frederick was in his capacity while making the

agreement and was not affected by the intoxication and Sarah cannot deny of
this Gibbons v Wright (1954) 91 CLR 423 at 439.
Issue 3 & Sub Issue 3.1) it was Sarah who made an offer to which Frederick
accepted accepting it with all the terms and price to be paid, thus making it an
agreement and also being Sarah aware of the fact that Frederick was intoxicated
at the time of agreement. This makes Sarah to be bind by the offer she made
but, considering that Sarah or realizing that she made an innocent mistake not
knowing the actual worth of the painting must have communicated with
Frederick and then can withdraw from the agreement.
Issue 4 & Sub Issue 4.1) without knowing the worth of the painting Sarah
made an offer to Frederick $400 for selling the painting but when she realized
that she had made a mistake of selling the painting at such low price which was
way much less than the actual worth of the painting i.e. $400,000. Sarah makes
an untrue statement in good faith and without knowing that she has made a false
statement. Sarah after knowing the actual worth of the painting must have
communicated to Frederick and rather than withdrawing from the agreement
could have made a new offer to Frederick.
Issue 5) there is as such no proof that Sarah and Frederick had an agreement
though they were in the bar it is not clear from the facts that whether they
written there agreement on a piece of paper or any witnesses to it to prove that
there was an complete verbal agreement but if Frederick in fact have no
physical proof, then it can be seen in his actions that he and Sarah agreed upon.
The burden to prove will be on Sarah to prove that there was no
agreement between both of them.

Conclusion:
There was Contract between Sarah and Frederick for the painting for the sum of
$400. While having an agreement Sarah knew that Frederick was intoxicated. It
is at Frederick option that he can make agreement voidable and sue Sarah for
the breach of contract.
Considering that Sarah was totally unaware of the actual worth of the painting
while making offer to Frederick can make this contract void.

Case Study 3
Parties:
Plaintiff Ryan
Defendant Fast Carz Co.

Issues:
Issue 1: Is there a contract for the model of the car between Joe and Ryan?
Sub Issue1.2: Exactly which model of car Ryan wants?
Issue 2: Was Ryan aware that for which model of car he is signing the written
document with Joe?
Issue3: Is there a misrepresentation from dealer?
Issue 4: Is there a breach of contract?
Issue 5: Does Ryan have any other option against car dealer Joe for his losses?

Rules:1. Contract is formed when the two parties consent over the terms and
conditions of the agreement and sign a written document to make it under
seal. Ryan signed the written document with Fast Carz Co. as Joe is the
representative the company.
2. As Ryan didnt know much about the different car models and he totally
justifiably relied and trusted on the dealer representation.
3. If a person signs a written a document and finds out that the transaction
entirely different in character from that to which in fact it does relate then he
will not be bound. Ryan can bring an action to his defence non est factum1
(it is not his deed). Saunders v Angelia Building Society [1971] AC
1004,

Petelin v Cullen (1975) 132 CLR 355, Ford v Perpetual Trustees Victoria
Ltd (2009) 75 NSWLR 42.
4. If the representation shown is known to be false by representor than he is
liable for the fraudulent misrepresentation. It is clear from the facts that
intentions of the dealer were not good and he made a false representation by
giving Ryan RX-9 model instead of RX-12. Derek v Peek (1889) 14 App
Cas 337 at 374, Peek v Gurney (1873) LR 6 HL 337 at 403.
5. If there has been a breach of some essential or fundamental obligation
under the contract. Tramways Advertising Pty Ltd v Luna Park (NSW)
Ltd (1938) 38 SR (NSW) 632 at 641-642.
6. Ryan not knowing that he has been duped by the dealer as he paid for the
RX-12 model but instead of that the dealer gave him the RX-9 model. Ryan
was damaged as a result of his reliance. The Australian Consumer law
(ACL), s18 (misleading or deceptive conduct) and s29 (false representation),
Trade Practice Act 1974 s73 (liability for loss and damages from breach of
contract).

Analysis:
Issue 1 & Sub Issue 1.2) Ryan made an offer to buy RX-12 car model to Joe
whom he accepted and both had an agreement over the car model RX-12 and
signing the written document. While making the offer Ryan was very specific
about which car model he wants to buy i.e. RX-12. As Ryan doesnt know much
about the cars in terms of models and mechanics but he knew that RX-12 comes
with a rear spoiler and is fire engine red as he saw in number of advertisement.
Issue 2) Ryan being not much aware of the different car models and he totally
justifiably relied and trusted on the dealer representation in the written
document and signed it. Ryan may invoke the plea non est factum in his
defense, claiming that what he intended to buy RX-12 model and agreed upon
and not for RX-9 model. But, there is also a possibility that Ryan may not be
entitle to non est factum because Ryan does not have any problem reading
anything in fact he is studying law.
Issue 3) it is clear from the facts that Joe after knowing that Ryan doesnt know
much about the car models and he intentionally changed the car model to RX-9
from RX-12 in the written document. Fast Carz Co. has obligations under ACL
to not engage in misleading or deceptive conduct (s18) nor make false

representation (s29). This it has done and, hence Ryan has a right under those
sections of the ACL to claim the damages.
Issue 4) there is breach of contract by Joe as he made the false representation of
the RX-9 model instead of RX-12 model on what Joe and Ryan agreed upon.
Also, Joe intentionally changed the car model in the written document and he
was known about it.
Issue 5: Joe has obligations under Trade Practice Act 1974 (s73) that the party
who breached the contract is liable for the loss and damage of the other party. In
this case Fast Carz Co. is liable for the loss and damages of Ryan as Joe is the
representative of the company.

Conclusion:
There is contract between Fast Carz Co and Ryan for the car model RX-12 not
for RX-9 model.
Ryan may invoke the plea for non est factum in his defense. But he may be
entitle to it or may not be.
Fast Carz Co. can be held liable for breach in contract by making fraudulent
misrepresentation and may also face action for possible breaches of ACL, (s18)
and (s29).
Fast Carz Co. may also be held liable for the loss and damages Ryan has faced
under Trade Practice Act 1974 (s73).

References

Texts
Turner, C. and Trone, J. (2015). Australian commercial law. Sydney: Law book
Co.

Legislation
Australian Consumer Law (ACL): in the competition and consumer act
2010(Cth), Scheduled 2. Section 18 (misleading or deceptive conduct) and
Section 29 (false representation)
Trade Practice Act 1974: Section 73 (liability for loss and damages
from breach of contract).

Cases
1. Non est factum in Turner C. and Trone J. (2015), 99
Pharmaceutical Society of Great Britain v Boots cash chemists (southern) ltd
[1953] 1 QB 401 (CA) in Turner C. and Trone J. (2015). 56
Grainger& Sons v Gough [1896] AC 325 in Turner C. and Trone J. (2015), 56
Gibbons v Wright (1954) 91 CLR 423 at 439 in Turner C. and Trone J.
(2015), 89
Hart v OConner [1958] AC 1000 in Turner C. and Trone J. (2015), 89

Kennedy v Panama Royal Mail Co (1867) LR 2 QB 580 in Turner C. and

Trone J. (2015), 107

Saunders v Angelia Building Society [1971] AC 1004, in Turner C. and

Trone J. (2015), 99
Petelin v Cullen (1975) 132 CLR 355 in Turner C. and Trone J. (2015),
100
Ford v Perpetual Trustees Victoria Ltd (2009) 75 NSWLR 42 in Turner C.
and Trone J. (2015), 101
Derek v Peek (1889) 14 App Cas 337 at 374 in Turner C. and Trone J.
(2015), 105
Peek v Gurney (1873) LR 6 HL 337 at 403 in Turner C. and Trone J.
(2015), 105
Tramways Advertising Pty Ltd v Luna Park (NSW) Ltd (1938) 38 SR (NSW)
632 at 641-642 in Turner C. and Trone J. (2015), 178