Free «The Four-Step Process: Contract Issues» Essay Paper

The Four-Step Process: Contract Issues

Question 1

Step 1

One of the legal issues, which is involved in this case, is whether the parties intended to be legally bound by the agreement and, thus, formed a valid contract. Another issue concerns the presence of consideration that is essential for a contract to be enforceable.

Step 2

When an agreement is commercial in nature, a presumption exists that the parties intended to create legal relations. To determine whether such a presumption applies, the court follows an objective approach to the intentions of the parties at the time when the agreement was reached. For this reason, the language employed by the parties and their conduct are examined in order to decide whether an intention to conclude a valid contract was present. The method was elaborated in the case of Helmos Enterprises Pty Ltd v. Jaylor Pty Ltd. In this case, Helmos Enterprises Pty Ltd (Helmos) reached the agreement with Jaylor Pty Ltd (Jaylor) on the purchase of two restaurants in the future. After the ownership of the first restaurant was successfully transferred to Helmos, he sought to obtain a second one. However, Jaylor denied to convey the restaurant and claimed that the agreement was invalid due to the absence of the intention to create legal relations. The court had to decide whether the parties intended to form a legally binding contract. In this case, it was found that such intention was present due to the nature of communication between the parties and usage of language associated with the commercial contracts.

Consideration is something of value that is given to another party in return for a promise. It can be made in the form of money, promise to perform an act or another legal detriment to the promisee. The promise as consideration is called executory consideration, i.e. the one that will be executed in the future, as opposed to the executed consideration. Consideration does not need to be sufficient, but it does need to move from the promisee. One of the relevant examples is the ruling in Dunlop Pneumatic Tyre Co Ltd v. Selfridge & Co Ltd. In this scenario, the contract between the tyre manufacturer and its dealer was allegedly breached by a third-party retailer. The court had to decide whether the contract can be enforced against a party who did not follow its obligation. The decision was rendered for the defendant because of the lack of consideration from its side. As was defined by the court, consideration, either in the form of an act, promise or forbearance, is the price for which the other promise is bought.

Step 3

For a party to enforce an agreement against the other party, an objective assessment of the intentions of both parties at the time the agreement was reached should be explored. In the given case study, Sebastian and Tagan were relatives and negotiated a deal during the family meeting. However, an agreement was reached later in the course of business communication. Although it is not clear whether Sebastian was acting as Nu Machinery Pty Ltd Director or in his own capacity, the buyer was clearly not Tagan herself but Quality Leather GoodsPty Ltd, which she represented. Moreover, Sebastian’s offer used language, which is usually employed in the business, as well as included all the necessary conditions and a means for its acceptance. Such a serious approach accompanied with a formal letter of acceptance from the buyer means that the parties were acting in the commercial context instead of domestic or social. Therefore, this is a commercial contract, and a presumption of intention of the parties to create legal relations should be applied.

Consideration was also present in this case. Since the contract was bilateral, both parties’ consideration should be established. Hence, Sebastian’s consideration was executed and took place after he performed the delivery of the machinery to the Quality Leather Goods Pty Ltd. The latter also provided consideration but in a form of executory consideration. Specifically, the buyer promised to instruct the bank to pay for delivering the goods. The promise was made, however, only in relation to the partial cost of the machinery, namely $140,000. Still, once the consideration was established, the contract became valid and enforceable. Therefore, both parties should fulfil their contractual obligations in strict accordance with the agreement between them, which was reached when the offer was accepted.

Step 4

In conclusion, the contract between Sebastian and Quality Leather Goods Pty Ltd is valid since it was of commercial nature and, thus, presumed to create legal relations. Moreover, the existence of consideration makes the contract enforceable and entitles Sebastian to sue for its breach.

Question 2

Step 1

The legal issue, in this case, is whether the parties reached the agreement, which is the basis for a contract formation.

Step 2

The agreement is formed when one party accepts an offer made by the other party. The offer, therefore, is expression of willingness to conclude a contract on the terms stated in the offer. It can be addressed to a specific person or the world at large. Acceptance, in its turn, is unconditional agreement with the offer. If the offer was addressed to the world in general, any person who is able to comply with its terms could accept it. Such a situation took place in Carlill v. Carbolic Smoke Ball Co. In this case, a newspaper advertisement stated the pharmaceutical company’s promise to pay £100 to anyone who will properly use its product and will still be infected with influenza. Carlill, who was infected regardless of the following product’s instructions, sought to receive the promised recovery from the manufacturer. The issue before the court was whether the agreement was reached between two parties. The court decided that a valid contract was concluded since the advertisement was an offer to pay £100 to anyone who will meet the set conditions. In this case, Carlill accepted this offer.

Any offer, however, can be terminated, what will prevent the offeree from accepting it. Termination can be made by revocation of the offer and is possible only unntil and unless an offer was accepted by the offeree. The notice of the revocation of the offer can be communicated directly to the offeree, or, in the case of offer placed in the advertisement, using the same media. The latter took place in the case of Shuey v. United States where the governmental officials issued the advertisement announcing a reward for some information about a criminal. Shuey identified this person and informed the authorities but did not receive expected payment due to the revocation of the offer. In this case, the court had to decide whether the contractual relationships existed between the parties. The court ruled that there was no contract since the offer was revoked by publishing a corresponding notice long before the claimant complied with its terms. Although Shuey was not directly informed about such a revocation, he should have known that offer can be revoked in a manner it was announced. Consequently, the agreement was not reached.

Step 3

Since a contract is based on the agreement between the parties, the outcome of the case in question depends on whether actions of Wagyu Burgers Delight were sufficient to constitute an offer and whether an appropriate acceptance of that offer took place. Hence, it should be noted that the message transmitted through TV, radio, and newspaper commercials indicating that any company’s customer who will satisfy announced conditions wins Subaru Forester is clear and unequivocal offer. The means with which it was communicated imply that anyone, including Adele and Maxwell, can win a prize if they fulfil stated conditions. Such conditions included finding a winning ticket and presenting it to the company’s head office. Therefore, Adele met all conditions and duly accepted the offer. Even though she saw a notice about the revocation of the offer, it took place after the acceptance and, thus, was not binding upon her.

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By contrast, Maxwell was not able to satisfy the terms necessary for entering into an agreement because the offer was revoked by Wagyu Burgers Delight. Since the offer was in the advertisement and, thus, available for anyone to accept it, its revocation was only possible by the same means of communication. Hence, the offer was properly terminated by the announcement made on the TV, radio, and in newspapers. As the facts of the case show, at that moment, Maxwell was in the hospital and had not yet presented a winning ticket to the company’s headquarters. Therefore, Maxwell did not accept the offer before it was revoked and could not do it after. The fact that he did not receive any official information about termination does not affect the validity of the offer. He discovered the information about the promotion campaign through the mass media, and it was reasonable for him to expect to receive the news about its termination through the same means.

Step 4

To conclude, since Adele promptly and properly accepted the offer, the agreement was formed between her and Wagyu Burgers Delight, and she should receive Subaru Forester. Maxwell, however, is not entitled to any prize for the offer was revoked before he could accept it.

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