BLAW10001 Study Guide - Final Guide: Fax, Legal Liability, Exxon
BLAW CH 5 – MAKING A CONTRACT
WHAT IS A CONTRACT?
• A legally enforceable agreement between two or more persons who are called the
parties to the otrat
• Contracts create legal obligations → correlative rights and duties
• Contractual rights and duties can be discharged by voluntary performance
• Failure to perform the contract = breach of contract
o Breach of contract provides the legal basis for bringing an action into court to
enforce the agreement
o Breach of contract = cause of action
CAPACITY TO CONTRACT:
• A contract can only be made by persons with the capacity to acquire legal rights & take
on legal responsibilities
• WHO CAN BE PARTIES TO A CONTRACT?
o Adult persons (over 18) who are of sound mind
o Artificial persons e.g. corporations
o Minors to be protected by courts:
▪ for eessities (e.g. food, shelter, transport to work)
▪ for things that give a benefit
o Persons with a mental disability are bound by agreements reached in lucid
periods, but not otherwise
THE RIGHT TO ENFORCE CONTRACTUAL OBLIGATIONS:
• Undischarged obligations provide the basis for a legal action to enforce an agreement
• Contractual obligations only exist between the parties who agreed to the contract
• Only parties in the contract have a right to enforce it = privity of contract
• SEE: Price v Easton (1833), Coulls v Bagot’s… (1967)
HOW CONTRACTS ARE CREATED
• Principles of contract formation have been determined by courts (common law)
• When determining whether or not these elements have been met, courts adopt an objective approach
o Legal liability determined by contractual actions → behaviour of parties, NOT thoughts/intentions
• Contracts come into existence when 3 elements are present:
1. INTENTION TO BE LEGALLY BOUND
• Must be an intention for agreement to be legally bound
• Intention is to be judged objectively
• Court asks whether, in the circumstances, a reasonable person would
regard the agreement as intended to be binding
• SEE: Carlill v Carbolic Smoke Ball Co (1893)
• Factors affecting intention:
o Agreements between family members & friends
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Document Summary
Intention to be legally bound: must be an intention for agreement to be legally bound, court asks whether, in the circumstances, a reasonable person would. Intention is to be judged objectively regard the agreement as intended to be binding: see: carlill v carbolic smoke ball co (1893, factors affecting intention, agreements between family members & friends. Blaw ch 5 making a contract: sufficient agreement (consensus) Agreements between close family members/spouses are i(cid:374)ferred to (cid:271)e (cid:858)do(cid:373)esti(cid:272) agree(cid:373)e(cid:374)ts(cid:859) Nature of domestic relationships deems these agreements not to be intended to be legally binding. For agreements b/w friends, the onus is on the person who wants it to be legally binding to prove it is. See: balfour, cohen, merritt & greek orthodox: agreements made in a commercial context. Such agreements are intended to be legally bound. Onus on party that wishes to argue such agreement is not legally bound to pro(cid:448)e it (cid:449)as(cid:374)(cid:859)t. See: esso petroleum (1976: conditional agreement.
