LAWS1120 Study Guide - Final Guide: Signed, Sealed & Delivered, Partry, Estoppel
Chapter 2 - Intention, Consideration, Formalities, Capacity and Illegaliity -
Contract Law
Intention to Create Legal Relationship → No contract unless intention was to create one
→ Objective Test: “Would a reasonable person regard agreement as intended to be binding?”
Merrit v Merritt (1970)
→
Two Presumptions:
1. Social/domestic/family agreements are not intended to be legally binding
Balfour v Balfour (1919) pg40
2. Commercial/business agreemeents are intended to be legally binding
Rose & Frank Co v JR Crompton & Bros Ltd pg 41
These presumptions can be rebutted if a contrary intention can be proven
Merrit v Merrit pg 40
Consideration - means “something of value” - promised to give something in return for the
promise. All simple contract requires consideration from both parties (ie. each partry has
provided something of value to each other)
→
form of: promises, acts, omissions, money
Rules regarding Consideration:
1. Essential in every simple contract
2. Must be adequate, definite, specific
3. Must not be illegal or unlawful and must not involve a breach of the law or public policy.
4. Nature of consideration must be definite, cannot be vague.
5. Must be present or future but not past
6. Must be capable of being carried out
7. Must be supplied by the party seeking to enforce the contract
→ Promise to do something you are already contracted to do so Foaker v Beer (1884) pg44
→ Promise to do something you are already legally obligated to do Collins v Godefroy pg43
Formal Contract (under seal/deeds) → legally binding force because of their form
1. Must be fully in writing & signed, sealed & delivered
2. Every deed must be signed & attested by at least one witness who is not a party to the
deed
3. Law does not require consideration for these contracts to be enforced
→ Eg. Powers of Attorney, Deed of Partnership, Appointment of agent
Promissory/Equitable Estoppel - strict requirement of consideration in all simple contracts
allow parties to break promises without legal consequences.
TB definition → The primary application of this doctrine has been where one party to a contract
promises, or by words or conduct leads the other party to believe, that the promisor will not
enforce their strict legal rights under the contract, and the other party acts on that representation
and alters its position accordingly.
→For promisee to successfully rely on promissory or equitable estoppel, promisee must be able
to show that they have suffered some material detriment/they have altered their position in
reliance on the statement or representation, in consequence, it would be unjust to permit the
promisor to resile from statement or representation.
→ Idea of EQUITY introduced this doctrine (fair and just): allows a party who has received a
promise, the legal right to enforce it even though they may not have supplied consideration in
exchange for that promise
Waltons Stores (Interstate) Ltd v Maher (1988)
Criteria for Estoppel:
1. Promisee assumed a legal relationship existed/would exist
2. Promisor induced that assumption/expectation
3. Promisee acted/refrained from acting in reliance on that assumption
4. Promisor knew the promisee intended to act in that way
5. Promisee will suffer a detriment if assumption not fulfilled.
Formalities → Most simple contracts are binding without writing but may pose evidential
problems if there is a dispute. Law does require some types of contracts written.
Entirely in writing: oconsumer credit agreements, cheques, copyright assignments
Some in writing: contracts of land (sale/purchase), contracts of guarantee
The common law does not require a simple contract to be in writing nor that written evidence of
the details of the contract exist in order for the contract to be enforceable. Obviously, however, it
is easier for a person to prove that the contract was made and it consisted of particular terms if
there is something in writing but there is not a requirement that a simple contract must be
writing.
Capacity → Must have legal capacity to make a contract. Law imposes limit on certain
individuals or bodies in ability to enter into contracts:
1. Minor (individuals under age of 18 years)
Exceptions:
A minor is liable under a contract for “necessities”
a. → Not confined to articles necessary for maintenance of life but includes goods
and services fit to maintain the person in question at the standard of living and in
the position in life that he or she enjoys.
b. Two questions involved
i. Are the goods or services within the classes of goods which can be
classed as “necessaries” for a person in the circumstances
Document Summary
Chapter 2 - intention, consideration, formalities, capacity and illegaliity - Intention to create legal relationship no contract unless intention was to create one. Objective test: would a reasonable person regard agreement as intended to be binding? . Two presumptions: social/domestic/family agreements are not intended to be legally binding. Balfour v balfour (1919) pg40: commercial/business agreemeents are intended to be legally binding. Rose & frank co v jr crompton & bros ltd pg 41. These presumptions can be rebutted if a contrary intention can be proven merrit v merrit pg 40. Consideration - means something of value - promised to give something in return for the promise. All simple contract requires consideration from both parties (ie. each partry has provided something of value to each other) Promise to do something you are already contracted to do so foaker v beer (1884) pg44. Promise to do something you are already legally obligated to do collins v godefroy pg43.
