Law of contract

QUESTION 1

A.    Presence of an offer

For a contract to be said to be in existence, there must be an offer. This offer can be described as an intention to transact upon the fulfilment of the conditions set out in such a contract. The offer should therefore be accompanied by conditions which must be made clear to facilitate an informed acceptance[1]. In this case, the offer was made by Ross. This was an offer to sell his Toyota Corolla 1994 model to his friend Stanley at about $ 3,500. The offer implied that the price of the car is $ 3,500. However, this price was only implied and not explicit and the validity of the offer and the whole contract could therefore be in question. However, the communication was made in a manner that implies that Ross would only be willing to sell his vehicle upon recovery of the value of the car which stood at $3,500. Even though the terms of payment were not explicitly stated, the existence of the offer implied the need to obtain full payment for the car within a reasonable time.

B.     Acceptance of offer

The offeree should accept the offer made unconditionally for a contract to be said to be valid. Any suggestions as regards the terms of the contract are taken as a counter-offer which must then be accepted before a contract can be formed[2]. In this case, Stanley’s actions implied his acceptance of the offer when he first allows his daughter to drive away with the car and goes ahead to transfer the title of the car to his daughter’s name. At no point did Stanley make suggestions as regards to price or any other conditions and his actions therefore constituted an unconditional acceptance. This therefore led to the formation of a binding contract.

  

C.    Intention to create legal relations

The intention to create legal relations is a prerequisite to the formation of a valid contract. This intention may either be expressed directly or implied[3]. Where an agreement is put down in writing, such intentions tend to be quite clear. However, where the contract is not written, such determination can be done by examining the conduct of the parties to the contract[4]. To begin with, Ross goes out of his way to assure Stanley that the car is in good working condition by stating that he had invested $1,000 to ensure that the car’s condition is improved. This intention is further demonstrated by the handing over of a roadworthy certificate to demonstrate that the car is indeed in good condition and that he was about to dispose of a merchantable product. The consultative process that culminated into both parties agreeing on also demonstrates Ross’s intention to get Stanley to agree on the price that he would be willing to pay for the car. Even where the intention may appear to be absent, the nature of the transaction is such that it would normally constitute a binding contract and in the absence of an explicit waiver, the intention to create legal relations should be implied[5].

D.    Consideration

Consideration is a thing of value that is that is given in exchange of an item or promise. In most cases, consideration is the price of a product where the seller surrenders possession of an item to the promisor[6]. Consideration must be legal for it to be valid. It should also not be under circumstances where there was a pre-existing obligation for its issuance to the promise. In this case, the consideration can be said to be the promise to pay Ross the full value of the car. This consideration is implied by Stanley’s acceptance of Ross’s offer to sell his car at a price of $3,500.

E.     Terms of the contract

In this contract, the terms are to sell the Toyota Corolla 1994 model at a price of $3,500. Even though the terms of payment have not been explicitly provided for, the implication is that the price descried would be paid to the car owner within a reasonable time and in whatever form (cash or otherwise) that would be acceptable to the seller. From an examination of the facts in this case, it is clear that Ross had no intention to offer his car as a gift. In informal contracts, many terms tend to be implied rather than explicitly provided for. In fact, most simple contracts tend to lack explicit conditions and the execution of the contract tends to be executed based on perception of what is acceptable to both parties[7].  

F.     Views on the existence of a contract

For a valid contract to be constituted there must be an offer, an unconditional acceptance, consideration, and intention to create legal relations. The basis for the conclusion is that there was a valid contract lays in the understanding that the offer was valid and that subsequent actions by the offeree constituted an unconditional acceptance of the offer. Whereas the offer may have been implied and not necessarily expressed directly, it is a forgone conclusion that Ross had every intention to sell his car at the market value agreed between the two parties. Stanley seems to accept the offer by accepting the car and even going further to transfer the ownership of the car to his daughter. The discussion between the two begins with Stanley looking for a car to buy and the entry of Ross into this equation should be interpreted in light of Stanley’s search for a car seller with whom he would most likely form a valid contract to buy. The intention to create legal relations is present and so is the existence of a valid consideration. A binding contract is therefore in existence.

QUESTION 2

The contract between Stephanie and Bryan may be invalid due to the fact that Bryan does not have the capacity to enter into contracts. The legal age is 18 and those below this age are considered minors[8]. Contracts with minors can only be enforceable where one can prove that the subject of the contract was solely meant for the benefit of the minor. For instance, where one enters into a contract with a minor to pay for their education fees with a commitment to have the money refunded once the minor is employed and in a position to earn and repay the money. In this case no such arrangement exists. The contract would probably be enforceable if it had been between Stephanie and the Bryan’s parents where they would be purchasing the car with the intention of giving it to their son as a gift. Even though Stephanie did not purchase the car, her claim to the title of the car is valid since it the title to the car was procedurally passed down to her by her father. She would therefore have been in a better position transacting directly with the parents of her prospective buyer. Under the circumstances, the contract is unenforceable and Stephanie has no legal avenues for recovering the $700 outstanding.

References

Air Great Lakes Pty Ltd v KS Easter (Holdings) Pty Ltd (1989) 2 NSWLR 309

Astley v Austrust Limited (2000) 197 CLR 1

Balfour v Balfour (1919) 2 KB 571

Carlill v Carbolic Smoke Ball Co (1893) 1 QB 256

Crown v Clarke (1927) 40 CLR 227

Dunton v Dunton (1892) 18 VLR 114

Ermogenous v Greek Orthodox Community of SA Inc (2002) 209 CLR 95

Gibbons v Wright (1954) 91 CLR 423

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

[2] Crown v Clarke (1927) 40 CLR 227

[3] Air Great Lakes Pty Ltd v KS Easter (Holdings) Pty Ltd (1989) 2 NSWLR 309

[4] Balfour v Balfour (1919) 2 KB 571

[5] Ermogenous v Greek Orthodox Community of SA Inc (2002) 209 CLR 95

[6] Dunton v Dunton (1892) 18 VLR 114

[7] Astley v Austrust Limited (2000) 197 CLR 1

[8] Gibbons v Wright (1954) 91 CLR 423