IRAC
Contract Example
The Law
The essential elements of any contract are these:
1.
2.
3.
4.
5.
6.
an offer by one party and its acceptance by the other;
the intention of the parties to create legal relations;
valuable consideration
legal capacity
a genuine consent by the parties
legality of the object of the agreement.
An acceptance occurs when the party to whom an offer is made agrees to the
proposal of the offeror. That acceptance must be properly communicated to the
offeror.
Acceptance may be made by word-of-mouth, in writing or by conduct and must
be made in the manner indicated by the offeror. A counteroffer is not acceptance.
Relevant Case
Felthouse v Bindley
A offered to buy B’s horse for stated price adding, “ if I hear no more about him I
will consider the horse is mine at $30”. B made no response although it did
appear from subsequent dealings he had made up his mind to accept it.
Held: silence cannot constitute acceptance of an offer, consequently there was
no contract.
Jims Brokerage
Jim operates a ship brokerage business in Yeppoon. He has a yacht tied up and
advertised for $50,000.
Jim has been advertising online on Facebook and also in the local newspaper.
That ad says, $50,000 or near offer. Will consider trades.
The yacht has a sign on it which anyone visiting the marina can see. It just says
Sale : $50,000 – contact Jims Ship Brokers.
He has also been acting for Grace who has a fishing boat for sale for $20,000. It is
on a hard stand at the marina on a trailer.
Grace has not seen the Facebook page but she sees the sign on the yacht when
she visits the marina and is very interested. She thinks that the price is a bit high
but nevertheless wants to make an offer. She drops a note into Jims office which
says, “I agree to purchase the yacht as advertised for $50,000 on the basis that
you take my fishing boat as part payment of $20,000. Here are the keys.”
Jim says nothing and does not return the keys while he attempts to contact the
owner to recommend the offer to him. Jim tells another enquirer that the boat
“may be gone.” He takes the sign down from the boat but leaves the Facebook
page as it is.
The next day Grace turns up with a cheque for $30,000 to collect the boat. Does
she have a binding contract?