BSB111 Lecture 8: contract law part 1
Week 8 – Contract law part 1
What is a contract?
Business is about making deals. For example –
◦Buyers & sellers
◦Wholesalers & retailers
◦Banks & borrowers
◦Landlord & tenants
Contract law underpins business transactions: A contract is a legally enforceable
agreement
◦How do you know if you have a legally enforceable contract?
What circumstances will make the contract unenforceable?
What are the consequences for breaching a contract?
Most contracts do not need to be in writing. Many contracts are made verbally, and some
contracts are implied by the conduct of the parties.
Some contracts are formed and performed at the same time. With other contracts, one or
both of the parties make a promise and therefore have an ongoing obligation once the
agreement has been formed.
Intention to create legal relations
Agreement (an offer and acceptance)
Consideration (the ‘price’)
Capacity of the parties
Consent that is genuine
Legality of objects
I Always Consider Chocolate Consumption Legal
Requirement 1: Agreement
An agreement is a meeting of minds, and exists when two or more people share
understanding and intention.
find more resources at oneclass.com
find more resources at oneclass.com
An agreement means that there has been a valid offer made and that this offer has been
accepted.
Once an agreement is reached, the contract comes into existence and the parties become
legally obliged to proceed with the contract. So it is crucial to understand the rules relating
to offer and acceptance.
Offer
A person makes an offer when they express a willingness to immediately enter into a
contract with the person to whom the offer is directed.
The person making the offer is called the offeror and the person(s) receiving the offer is
called the offeree.
The offer can be in writing, made verbally, or implied through one’s conduct.
An offer can be made to one person, many people, or ‘the world at large’
If the offer is accepted, an agreement comes into existence.
The offeree can reject the offer or make a counter offer
But this terminates (ends) the original offer (Hyde v Wrench)
So, if the offer is rejected (or a counter offer is made), the offeree cannot later change her
mind and accept the original offer.
But she can make a new offer (see later slides about counter offer).
If the offer is not accepted or rejected, the offeror can revoke the offer. But the timing is
important:
The offeror can only revoke the offer if it has not yet been accepted. If acceptance
has already occurred then the offer cannot be revoked.
The offeror can revoke their offer even if they have promised to keep the offer open for a
particular period,
Unless the offeree has provided consideration for the offeror’s promise to keep the
offer open (example by paying a deposit)
If the offer is not accepted, rejected or revoked, it will lapse and the offer ends.
For example: If A offers to sell his car to B, stating that the offer would remain open
until midnight on Friday, B cannot accept the offer on the Saturday morning. The
offer lapsed at midnight.
find more resources at oneclass.com
find more resources at oneclass.com
If no time is specified, this depends on the circumstances of each case. Offers will be
short-lived in the case of perishable goods, whereas in the case of land, the offer will
remain open for a longer time (but not indefinitely).
Responding to a request for information
Responding to a request for information is not the same as making an offer.
For example:
◦Jin emails Johnny to ask if Johnny is willing to sell his pizza oven and what would be
Johnny’s lowest price (this is a request for information)
◦Johnny emails back to say the lowest price he would sell it for would be $10,000
(this is responding to the request, and is not itself an offer).
Invitations to treat
Expressing a willingness to negotiate with someone is an invitation to treat. This is NOT an
offer and cannot be accepted.
The party who responds to the invitation will be the party making the offer.
Invitations to treat include:
◦Advertisements on television, magazines, posters and on the Internet
◦Goods displayed on shop shelves and in shop windows
◦Price lists, circulars and catalogues
What about vending machines such as a ticket machine or a drink machine?
Vending machines are not considered to be invitations to treat but are actually offering
goods for sale.
◦So when the customer puts the coins into the machine and makes a selection, the
customer is accepting the offer and at this point the contract is formed
Acceptance
When the offeree indicates by words or by actions that they are willing to immediately enter
into a legally enforceable contract with the offeror on the terms offered, they are said to
accept the offer.
Acceptance must be:
◦Unqualified
◦Communicated
find more resources at oneclass.com
find more resources at oneclass.com
Document Summary
Contract law underpins business transactions: a contract is a legally enforceable agreement. Most contracts do not need to be in writing. Many contracts are made verbally, and some contracts are implied by the conduct of the parties. Some contracts are formed and performed at the same time. With other contracts, one or both of the parties make a promise and therefore have an ongoing obligation once the agreement has been formed. An agreement is a meeting of minds, and exists when two or more people share understanding and intention. An agreement means that there has been a valid offer made and that this offer has been accepted. Once an agreement is reached, the contract comes into existence and the parties become legally obliged to proceed with the contract. So it is crucial to understand the rules relating to offer and acceptance.
