Determine the Existence of a Contract Assignment Sample


Emily (“E”) is attempting to claim her reward of unsold dolls that was promised by her mother, Margaret (“M”). Whether E has the right to claim the reward of the unsold goods will depend on the terms set out in the contract with M.

In order to advise E in regards to the legality of her claim, it is necessary to examine the significant facts leading up to the case, then consider the law that applies to the facts , the application or interpretation of the law to the facts which can determine the existence of a contract.

Question 1

Is there a contract?

A contract is an agreement giving ascend to obligations which are implemented or perceived by law.[1] Legally enforceable contracts can be communicated orally or in writing.  For a contract to be present, it must contain of three main elements: an agreement, intention to create legal relations, and consideration. Furthermore, there are certain elements of a contract that are essential to be there for a contract to be considered a valid contract: genuine consent, legal capacity, and legality of purpose. In order for E to take legal action against M, each possible contract must satisfy these elements.

Let’s look each of the component of the condition of contract in isolation. First of all, an agreement implies consensus ad idem which means that the both parties perceive the promise in the same way. Both have to have the ‘meeting of minds’ in order to have agreement qualify for a contract. In this very case consensus ad idem seems to be there, as mother promised in the simple words that the unsold goods will be given to her daughter for her services. But the second point is more important in this case which the intention to create legal relations. This implies that both parties: Emily and Margaret in this case, must have intentions that they are forming a legal agreement. Normally, discussions held during regular dinners are not intended to be legally binding. However, it is important to note that what made Emily to work for her mother was her mother’s promise to give her unsold goods. Therefore, given information shows that this element of a legal contract is also fulfilled.

Third part is consideration which means that both sides agree or offer to exchange something of value. Margaret offered her daughter Emily unsold goods in exchange of her services, hence we can establish that both parties offer consideration.

Moreover, the contract agreed must be genuine which means that both parties ought to have genuinely consented. Once again, the case above qualifies for it. The most intriguing essential of the contract with regard to this specific case is the legal capacity. Legal capacity implies that both parties are eligible for a contract. Emily was just 16, when the terms were agreed, and the law of contract obliges all parties to be at or over the age of 18 in order to be legally capable to come into contract. However, there are some exceptions attached to it, for example, a minor can enter into a contract if the contract is over housing, food or things necessary to sustain life. We know that contract was not over housing, neither on food but it can come under the third. None the less, it is subjective to decide that whether the giving of unsold dolls was necessary to sustain life for Emily.

It is important to entertain the condition of legality of purpose, because if an agreement is over some illegal outcome, it will not qualify for a legal contract. In our case, all the considerations are seemingly legal. Never the less, one can argue about the amount of hours allowed for a minor to work.

The component which distinguished contractual from other legitimate obligations is that they depend on the agreement of the contracting parties.Agreement is comprised of two components: the offer and the acceptance of such offer. In determining there is a valid offer, there must be an intention to be bound, a party’s promise, and communication of the offer. In this event, it is not clear whether there is an valid offer as M’ intention or willingness to be bound is not plainly expressed. However, the offer was communicated orally by M through the family discussion. Then, a promise was made with E who was 16 years old to work in the store, and as a reward E would receive the unsold dolls of the work undone.

Firstly, acceptance must be made in reliance of the offer…. R v Clarke [1927] HCA 47; Secondly, it must be communicated to the offeror either by words or conduct. In this case, there were no expressed words that were said by E to such offer. The issues addressed in Brogden v Metropolitan Railway Company conclude acceptance can be implied through the conduct of the parties. Conduct is an evident in the facts through E’s action by working at the store as long as she was needed. The action on following the terms set in the agreement, making the agreement legally enforceable if the contract was to come to existence.

Conclusively, the age of 16 and the absence of the expressed words preclude this agreement from becoming a legal contract. Therefore, the principal of estoppel seems not to be applicable here.

Question 2

Exclusion or exemption clause is the term in the contract that excludes, qualifies or limits the rights which a person would otherwise enjoy. The aim of exclusion clause is to relieve or limit a party’s legal responsibility for contractual breach or negligence. Limitations upon exclusion clauses are determined in the section 64 of the Australian Consumer Law, which is a part of the Competition and Consumer Act 2010 (Cth). In order for a party to rely on exclusion clause, there are two fundamental requirements that have to be satisfied;

  • The clause has been incorporated into the contract
  • Exclusion clause must be given before or at the time the contract is made.
  • What is the effect to the issue? (as a matter of representation)
  • Incorporated-terms

Condition, warranty and intermediate

The interpretation of an exclusion clause is determined by construing the clause according to its natural and ordinary meaning, read in light lot of the contract, as where

Rule of the exclusion clause, incorporated CASE, sign doc that document contain exclusion clause-> we have to be aware. Various rule – negligence, ambiguity, CASE

There are several forms under which a party can become excluded from a liability that it owes initially. Firstly, a party can be ruled out of a liability if it completely defends its actions of the breach. Of course, the defense ought to be under legal parameters. Furthermore, a party can be debarred from a liability if it did not commit a breach at all. For example, if a person parks a car in parking area and finds his car stolen which consequently makes him to hold the party owning the parking lot liable. But, if the defendant —the parking lot owners— have clearly told that the owner of the cars must park their car at their own risk, then the defendant party will get excluded from the imposed liability.

Moreover, there is another form in which the defendant does not get altogether excluded from the liability but there are some conditions attached to it. For instance, in the case of perishable items supplier agrees to return the item if found defective. However, this contracted is restricted by mentioning of the number of days after which the items will not be returned by the supplier. Let’s say supplier says that any rotten food must be returned within 14 days.

A clause may also have exception related to the conditional action of the other party. For example, a security team asserts that they will be responsible for the security of shops during night provided the shop keepers observe due diligence. Now, if any shop keeper does not lock his/her shop, security agency may get excluded from the liability because due diligence is required from the shop keepers.

One exceptional case in which the exclusion clause could be applied is of “consequential loss”.  This is not a direct lose but a loss occurred because of another lose. For example, if the store has been damaged due to a storm, insurance company will cover for the loss of the premises. However, the loss realized due to the drop in sales resulting from the recovering of premises will not be covered by the insurance company; hence insurance will get legally excluded from the liability lost sales because of it being consequential loss.

In order to have a smooth functioning of a contract, limitations are added with mutual consent which in some cases allows liable party exclusion.  For example, the amount of liability is capped therefore it is agreed after a certain amount the other party will not be held liable.

There are some cases in which the exclusion clause becomes ineffective. It is in the case when the defendant party uses a clause that is not treated by a reasonable person as contractual. Also, the court has to ascertain that whether the party, who has suffered the loss, has been given sufficient time to understand the exclusion clause. If the party of potential loss had the attention over the exclusion clause then the clause would become applicable. Once again, a reasonable notice is ought to be given.

Here, it looks quite subjective that what qualifies for reasonable notice and what does not. The matter varies with the scenario. The court here is required to objectively look at the circumstances which surround at the time of the contract being formed.

For instance, judge would have to probe that in what manner the notice of exclusion was handed to the other party. Did it give the opportunity to the recipient to check the additional clause?

Moreover, it is also a part of the convention that the more unpleasant or cumbersome are the consequences the longer is the notice required.

It is also required by the law to the exclusion to be operational to be legal. The clause that is added to exclude or limit the liability of a party ought to be legal.

The text must be available to the recipient, so she/he can read it clearly. It is not sufficient to verbally caution the recipient about the exclusion and written condition is available on request.

There are cases which presents a very complex situation regarding the applicability of the exclusion clause. For instance, a person parks a car into a parking area; on his return he gets severely injured because of the car park. When the injured person (plaintiff) takes the case toward the court, the rebuttal contended by the defendant was: it has been illustrated on the premises of the car park that the company cannot be held liable for any of the damage happened to the owner, therefore appeals on the basis of exclusion clause. However, in reality it has been the case that the premises displayed such warnings. None the less, in this example the plaintiff party reports that there was no clear indication towards those conditions. Those warnings should have been in red color and there need to be an indication of a red hand towards that. Therefore, from here we can establish it is very important to have clarity between both parties involved in the contract about the exclusion clause.

Similarly, an onerous and unusual should be illustrated in a wholesome manner, which implies that the party displaying the information must make sure that the condition has been brought under the attention of the other party concerned.