TUTORIAL 5– ANSWER GUIDE
What follows is a guide to the structure that you need to develop when
answering problem questions. It demonstrates an approach to answering
problem questions and has been designed to help you develop the
analytical skills you will require. It is not a sample answer and is not in
essay format – the format in which you will be required to present your
answers.
You will note that each answer follows a different structure, dictated by
the issues raised. Remember to structure your answer to address all the
issues raised in a question.
The answer guide is just that. It is intended to show you how to approach
the question rather than teach you the law of contract. Cases are referred
to briefly (without the full citation) to show you how much of a case needs
to be included. You do not need to repeat the facts or the judicial
discussion unless particularly relevant. You need to apply the principles
found in case and statute law to the facts of the question.
Question 1.
Your first step should be to go through the question, highlighting or
underlining important points, to consider what issue(s) are being
raised by the question, and what information you are being given to
address these issues. Information is usually included to direct your
mind to a particular issue, so consider carefully why the information
in a particular question is being provided.
The most important step in answering a problem question is always
to read the question very carefully.
Adam wishes to throw a surprise 40th birthday party for his mother.
Note that Adam’s mother is turning 40, a guide to the possible age of
Adam.
He has saved some money from several small jobs but needs to borrow
about $3,000 from his kind Uncle Bert.
Adam is borrowing the money- possible loan contract.
Bert is Adam’s uncle – family relationship. He has worked several small
jobs – another guide to his age.
Adam is talking to Uncle Bert at a family barbeque,
Consider whether offer and acceptance has been communicated. What
does the fact that they are at a family barbeque tell you about the family
relationship between Adam and Uncle Bert?
who is happy to help out and so lends Adam the needed money on the
understanding
What does this mean?
that Adam can pay off the loan when he starts his new after school job at
the supermarket.
It is intended that the loan be repaid
Adam is still at school – how old is Adam?
Adam contacts caterers, decides on the menu, and pays a deposit. He then
spends all of Uncle Bert’s money on the party. He can’t repay Uncle Bert
as he decides not to take the supermarket job but to finish school and
study hard to get the traineeship he wants.
Is finishing school in Adam’s interest, for his benefit?
Advise Uncle Bert.
WHAT IS THE ISSUE BEING RAISED BY THIS QUESTION:
Does Uncle Bert have an enforceable contract with Adam? (i.e.
CONTRACT FORMATION)
WHAT IS THE LAW YOU NEED TO DISCUSS FOR CONTRACT
FORMATION?
(Note: All the following elements are necessary for contract formation,
but they should not all be discussed in the same depth. Those elements in
issue should be discussed in detail –others may simply need a one line
mention.)
1 Legal Capacity
Minor –
Is Adam a minor?
What facts, drawn from the question, will you use to determine the
factual question of whether or not Adam is a minor?
after school job
youthful mother
several small jobs
hope for traineeship in future
If a minor, is Adam bound by this contract?
What law will you rely on to address this legal issue?
Common law/Statute (Minors (Property and Contracts) Act
1970 (NSW)) – is Adam so young as to lack understanding
of the significance of the contract? (s18)
What facts will help you answer this? Or, how does this broad legal
issue apply to the particular facts of the question before you?
Consider Adam’s school and work experience and
understanding of his obligation.
Has Adam participated in a civil act (s19)? If yes, (he has
entered into a contract) will it be presumptively binding on
Adam?
Consider the ss19 -25 tests.
Is the contract to borrow and repay money to Uncle Bert, to
fund his mother’s party, for Adam’s benefit?
If yes, it will be presumptively binding. If not, any contract
will be unenforceable by Uncle Bert unless ratified by Adam
when he turns 18. (Or not repudiated by 19). What effect
will this have for Uncle Bert?
After looking at all the above, does Adam have capacity? MAKE A
DECISION.
If no, do not stop here, but consider the rest of the issues raised.
2 Offer
Was the offer sufficiently definite, so as to be capable of acceptance Bert undertakes to pay the money to Adam (Australian Woollen Mills v.
Commonwealth)
Was the offer made to a specific person (Carlill v Carbolic Smoke Ball)
Offer made to Adam
Was the offer communicated? (R v Clarke)
How did Adam know that he could spend Uncle Bert’s money?
Is there an offer? MAKE A DECISION. If no, do not stop here, but
consider the rest of the issues raised.
3 Acceptance
Acceptance express or implied?
Express - discussion at barbeque.
Is it unequivocal?
Yes, there is nothing left to be negotiated.
Has acceptance been communicated? (Felthouse v Bindley)
Discussion at barbeque
Was acceptance in reliance on offer? (R v Clarke)
Discussion at barbeque
Was acceptance complete? (Did it contain all the essential terms of the
offer?) (George v Roach)
Discussion at barbeque
Was acceptance certain? (Whitlock v Brew)
Discussion at barbeque
Is there acceptance, If no, do not stop here, but consider the rest of
the issues raised.
4 Consideration
Was consideration sufficient? (Stilk v Myrick; Hartley v Ponsonby)
Simple loan contract; money lent on promise to repay
Does consideration move from the promisee? (Dunlop Pneumatic Tyre
Company Ltd v Selfridge & Company Ltd)
Simple loan contract
Is there consideration, if no, do not stop here, but consider the rest of
the issues raised.
5 Intention to create legal relations
Is the “contract” between family members? (Balfour v Balfour)
 Uncle/nephew
 How close a family relation exists between them - look at the
question to find information.
If yes, can the presumption be rebutted? (Merritt v Merritt)
 Is it intended to be a commercial relationship?
 Contract of loan (Woodward v Woodward (1863) 3 De GJ&J
672)
Make a decision and tie everything together in a concluding
paragraph.
Question 2
FIRST, READ THROUGH THE QUESTION AND CONSIDER
THE RELEVANT INFORMATION. WHAT ARE THE ISSUES
THE QUESTION IS RAISING?
Mary, a South American manufacturer of cane artefacts, entered
into a written contract with Bob under which Bob had the
exclusive rights to distribute and sell Mary’s artefacts in
Australia. The agreement was for 10 years, although Mary had
the right to terminate the agreement at any time upon giving 6
months’ written notice. [THIS CONSTITUTES CONTRACT
ONE, OR “THE HEAD AGREEMENT”]
Two years after the agreement was entered into, Bob granted to
Kate, as he was permitted to do by the terms of the agreement,
an exclusive right to act as his agent for the sale of Mary’s
furniture within the state of NSW. Bob’s agreement with Kate
was expressed to last 4 years. Clause 6 of this agreement
stipulated that Bob had the right to terminate the agreement at
any time upon giving written notice of one month. [THIS
CONSTITUTES CONTRACT TWO OR “THE AGENCY
AGREEMENT”] Before signing the agreement with Bob, Kate
telephoned Bob and asked for an assurance that Bob would only
terminate the agreement if Mary terminated Bob’s agreement
with Mary. Bob said to Kate: ‘ No problems. You can rest easy
on that.’ [THIS IS THE FIRST REASSURANCE, OR
STATEMENT MADE BY BOB].
One month ago, Kate advised Bob that she would be investing
heavily in a new advertising campaign and asked for (and
received) a repeat of the re-assurance about contract
termination. [THIS IS THE SECOND REASSURANCE, OR
STATEMENT MADE BY BOB].
A few days ago, and after one year of her agreement with Bob,
Kate received notice in accordance with clause 6 of the
agreement terminating the agency arrangement. Kate
immediately rang Mary and was advised that Mary had not
terminated her agreement with Bob.
Kate seeks your advice as follows:
(a) Does she have any basis to bring a claim against Bob for
breach of contract?
(b) Excluding claims based on tort or Statute, is there any other
basis for a claim against Bob?
This question is in two parts. Structure your answer so that you
consider each part separately.
(a) WORK OUT WHAT THE QUESTION IS
ABOUT:
There are two contracts mentioned in the question.
Which contract are you asked to consider? The
second, or the Agency agreement – the one
concluded between Kate and Bob. Be careful to
consider the correct contract.
The breach Kate is complaining about is Bob’s
early termination of the Agency Agreement. For
this to be a breach of contract, Bob’s statement
that he would not terminate unless his Head
Agreement with Mary is terminated needs to be
part of the Agency Agreement. So consider any
possible means by which this statement can have
contractual force.
Be sure you know which statement you are
considering. Bob has twice made a statement that he
will not prematurely terminate the Agency
Agreement: once before the Agency Agreement was
entered into, and once after it was on foot.
Consider carefully the timing of each statement?
Which may have formed part of the contract
between Bob and Kate?
The conversation between Bob and Kate before
entering the contract is the one to look at here
(Reassurance 1). The later conversation, when the reassurance was given took place after the contract was
entered into (Reassurance 2).
Was Reassurance 1 a TERM OF THE CONTRACT
(or part of the offer which was subsequently accepted)
or was it a COLLATERAL CONTRACT? Or was it
neither?
TERM
WHAT MUST WE CONSIDER TO ESTABLISH
WHETHER SOMETHING IS A TERM OF THE
CONTRACT?
The question tells us about Clause 6. So the contract
in question must be a written contract.
Can an oral representation form part of a written
contract?
Consider the parol evidence rule.
Consider any relevant exceptions to the parol
evidence rule.
Looking at all the above, do you think that Bob’s
statement is a term of the contract between Bob
and Kate?
WHAT ARE THE ELEMENTS OF
COLLATERAL CONTRACT?
 PROMISSORY STATEMENT
(Heilbut Symons & Buckleton; JJ Savage & Sons Pty
Ltd v Blakney)
WAS THE STATEMENT MADE BY BOB, NOT
TO TERMINATE THE CONTRACT WITH KATE
UNLESS HIS CONTRACT WITH MARY IS
TERMINATED, A PROMISE TO BE RELIED ON,
OR MERELY A REPRESENTATION ?
Did Kate enter into the contract in consideration of the
statement about the termination?
Was there “an intention on the part of either or both
parties that there should be a contractual liability in
respect of the statement”?(per Lord Moulton in
Heilbut Symons v Buckleton)
Yes - Collateral Contract
No - (You could consider misrepresentation – to be
considered later in
course)
 INCONSISTENCY
Was the statement inconsistent with the terms of the
main contract? (Hoyt’s v Spencer)
Was Bob’s statement inconsistent with the contract
entered into between Bob and Kate?
If yes - no collateral contract.
If no – collateral contract.
Looking at all of the above, do you think that there
was a Collateral Contract? Reach a decision and
draw your conclusion.
(b) This will be dealt with in a later tutorial.