Contract Law

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Law of Contract 3

Law of Contract

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Question 1

The case at hand deals with an issue of formation of contract. The focus here is on the mode of formation of a contract and whether there can be contracts where there is no written document.

A contract is made when an offer is made and there is an acceptance from the person to whom the offer was addressed (Richards, 2006). The acceptance must be communicated for a contract to be formed (Entores v Miles Far East Corporation [1955]
2 QB 327). A contract concluded verbally will be binding as would a written contract. The verbal contract or a partial verbal and partial written contract can be reduced to written form at a later time though the contract is formed the moment the acceptance is communicated. A contract will be enforceable whether in writing or not unless there is a requirement that the contract be written or be by deed (McCausland v Duncan Lawrie Ltd [1996] 4 All ER 995).

In the given case, Faye makes an offer to Brian, but Brian is not comfortable with it. He proposes that for $ 150,000, Faye should get a 50% share of the business. She says it is good but promises to communicate her position which she does later by a message. A contract is made the moment Faye communicated that she accepts the offer. Brian is bound by the contract.

Question 2

The case is of intention to create legal relations. There is the question of whether an ex gratia payment may become binding upon an employer.

Commercial agreements are generally considered to create legal relations (Treitel, 2003). Therefore, an agreement made in an employment setting will be presumed to be intended to create legal relations. The presumption can be rebutted by the use of express statements that indicate that there was no intention to be bound. The use of word ex gratia, however, has been said not to be enough to do away with the presumption that agreements made in the course of employment are meant to create legal relations (Edwards v Skyways Ltd [1964] 1 All ER 494). Consideration is also considered in agreements in which case, actions have been termed as consideration (Carlill v Carbolic Smoke Ball Co.
 [1893] 1 QB 256 (C.A))

In the given case, the company promises ex gratia payments to anyone who opts to move to Ballarat factory. They, however, indicate that they will not be obliged to pay. The words ex gratia is not enough to exclude the presumption of intention. However, the use of the statement stating that they are not obliged to pay may be effective. In this case, however, there is a reliance on the statement by Ben and as a result, he moves. The company will have an obligation to pay him since he moves due to the expectation that he will get paid.

Question 3

The case at hand deals with the adequacy of consideration. The question of the amount that should be given as consideration shall suffice.

In a contract, consideration must be given in order for the rights under the contract to be enforced (Smith & Atiyah, 2006). The law requires that the consideration be of some economic value. Consideration, however, is not measured against the real value in question. It is not equated to the value of the subject matter. It must be sufficient but not adequate. On keeping an offer open, the person making the offer might revoke it at any time before acceptance (Payne v Cave [1789]
 EngR 2443). The person to whom the promise to keep the offer open was made can only sue for the subsidiary promise to keep the offer open which must have been supported by consideration (Routledge v Grant [1828]
130 ER 920)

In the given case, Renoir need not have given more. The amount he gave was sufficient since the focus is not on the adequacy of the consideration given. He was not obliged to give out more. However, he could not have any claim had he not given consideration for the offer to be kept open.

Question 4

The case involves an issue of consideration and the performance of existing duties.

Consideration is considered as insufficient if it is already a performance of an existing duty (Furmston, Cheshire & Fifoot, 2012). A person cannot claim to have given sufficient consideration in a contract if the same amounts to performing their duties. However, the court will consider whether the person did more than his or her duty (Collins, 2003). Going over and above one’s duty will amount to having given sufficient consideration in the contract (Hartley v Ponsonby [1857]26 LJ QB 322).

In the case, Denton takes up more work as a result of the departure by one of the tutors. He is promised some extra payment, but the same is not given. Since the additional workload creates more pressure on him compared to his original work, Denton is entitled to get the extra payment for the extra work done.


Carlill v Carbolic Smoke Ball Co.  [1893] 1 QB 256 (C.A)

Collins, H 2003, The law of contract, Cambridge University Press, Cambridge

Edwards v Skyways Ltd [1964] 1 All ER 494

Entores v Miles Far East Corporation [1955] 2 QB 327

Furmston, MP, Cheshire, GC and Fifoot, CH 2012, Cheshire, Fifoot and Furmston’s Law of Contract, Oxford University Press, Oxford

Hartley v Ponsonby [1857]26 LJ QB 322

McCausland v Duncan Lawrie Ltd [1996]
4 All ER 995

Payne v Cave [1789]  EngR 2443

Richards, P 2006, Law of contract, Pearson Education, New Jersey

Routledge v Grant [1828] 130 ER 920

Treitel, GH 2003, The law of contract, Sweet & Maxwell, London

Smith, SA and Atiyah, PS 2006, Atiyah’s Introduction to the Law of Contract, Oxford University Press, Oxford