Contract Formation Case study PDF

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Case study on contract formation...

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Friday, 18 August 2017

Formation of Contracts - Tutorial Two Tutorial Scaffold Case Study Summary:

- M & R moved to new apartment on 10 August. - Contract One: Ross - Monica, Couch / Taking Ross's son to Adventure World. Ross buys a couch for M & R. Paid $1000 which is delivered on 11 August. Gift. Promise after conduct to take Ben, his son to Adventure World. Agreement: Grade A - No Agreement. The main issue with this situation is that there was no offer or acceptance before execution of conduct. An agreement needs a clear proposal by one party to enter into legally binding terms with another party and acceptance agreeing and assenting to the terms offered. It can be interpreted from this passage that Ross bought the couch as a nice gesture to be helpful to both his sister and girlfriend as " they were struggling for cash and hardly had any possessions..". This is further confirmed as the case study clearly states that Monica, "Thanks him for the kind gift and says "I'll take Ben to Adventure Word next weekend to say thanks!"" representing Monica's gratitude for the kind gesture. Also the fact that there was no exchange initially, not until the delivery of the couch it is considered as a gift. Secondly an offer needs to contain clearly specified conditions as legally binding terms of the contract. These conditions need to be met and exchanged for a price/ product to represent the exchange of promises between parties, in this case Monica and Ross. But Ross has not specified any conditions for buying the couch. It is after the delivery that Monica expresses her gratitude and initiates to take Ben, his son to adventure world as a thank you. Consideration: Grade B - No Consideration. As mentioned already, it is after Ross buys the couch Monica initiates to take Ben to adventure world which is past consideration. Past consideration is not good consideration because this promise is not enforceable as conduct was in the past and cannot rely on the agreement that happens afterwards i.e., agreement happened after conduct happened (Anderson v Glass). Intention: Grade C - No Legal Intention. Parties must have a legal intention to create legal relations. We have to consider that Monica and Ross are siblings meaning that this situations would most probably be considered as a social/domestic agreement hence can be presumed that they did not have any legal intentions. There are no other facts stating otherwise.

- Contract Two: Ross - Monica, Brand new refrigerator / Two hours of chores at Ross's house. 1

Friday, 18 August 2017 Ross offers to buy a refrigerator in exchange for Monica doing his chores for two hours the following day. The next day, Monica and Ross get into a fight and Ross refuses to buy the fridge while Monica refuses to fulfil her previous promise of taking Ben to Adventure World the following weekend. Intention: Grade A - No Legal Intention. Ross and Monica are siblings and share a social relationship therefore this agreement, though satisfying all conditions to be one, would be considered a domestic agreement and cannot be considered as legally binding. When considering the question, "in all circumstances, would a reasonable person regard this agreement as intended to have legal relations", - the answer would be no. This is because Ross initiated buying the couch as a gift to his sister and girlfriend, following which Monica and Ross made this agreement clearly suggesting that there were no legal intentions to begin with. As mentioned in the passage, the disagreement between Ross and Monica ensuing their refusal of holding up their ends of the agreement cannot be enforceable in court further confirming that this agreement cannot be legally binding. Agreement: Grade B - Agreement Present. Unlike above, this situation has a clear offer and acceptance. Offer - Ross saying, ".. if you are still struggling, how about you come over sometime and help me with chores fro two hours and I'll buy you a brand new, top of the line fridge in exchange". This proposal satisfies the 'Three Ps'. Parties - being Ross and Monica, Product being a new refrigerator for Monica's apartment and Price being Monica doing chores in Ross's house for two hours. This offer satisfies the definition by having a clear proposal and exchange of promises between the parties that are of sufficient value. Acceptance: It can also be agreed that the acceptance for this offer can be considered valid because, (1) Acceptance was verbal - it was clearly communicated to Ross. (2) Acceptance was an unqualified assent to the offer - Monica agreed without any changes to conditions (3) Acceptance was in response to the offer made by Ross But in contrast to the above reasoning, it cannot be ignored that Monica and Ross are related and hence this agreement would most likely be considered a domestic agreement with no legal intentions to begin with. Consideration: Grade C - Consideration Present. The considerations of this agreement are both to be executed in the future (not in the past) and are of sufficient value.

- Contract Three: Rachel and Chandler, Samsung TV / $350 2

Friday, 18 August 2017

Rachael contacts Chandler to buy his TV after viewing an ad for it on GumTree. C: "Let me have a bit of a think, I'm at work so email me at [email protected] if you need to get in contact with me." R: "OK, I'll keep the offer open until 3:00pm." - R did not receive any consideration to keep the offer open until 3:00 pm hence did not have an obligation to not consider or agree to other deals. Agreement: Grade A - No Agreement. Offer: The advertisement, "GREAT OFFER: Samsung 42-inch Smart TV for just $400!" made by Chandler was an invitation to treat as it indicates that Chandler is open for negotiations - most sale offers are usually invitations to treat. Rachel inquires if Chandler would accept $300 for the TV. It is important to note here that this is not a counter offer because though material conditions of initial offer changed, it is clear that Rachel asked a question. "Sorry I don't want to go much below $400. It's yours for $375." - Chandler declines makes a counter offer for $375. Now this can be considered as a counter offer because as mentioned in earlier cases, this offer satisfies all the requirements (three P's) and also changed the material conditions of the offer i.e., price for the TV changed to $375. "I'll buy it for $350." Rachel makes a counter offer for $350. Again, this offer changed the material conditions of the offer, hence it is a counter offer. Later, Rachel emails Chandler on the designated address revoking the offer meaning that there was no agreement between the two parties. Intention: Grade B - Legal Intention Present. Parties must have an objective intention to create legal relations, and unlike the above two cases Chandler and Rachel do not share any domestic/ social relationship, meaning they intended to enter into a commercial agreement. Both parties contacted each other via Gumtree - a sales website, which makes it clear that they began negotiations with legal intentions - in this case to purchase a TV. Consideration: Grade C - Consideration Present. It can be understood from the given case study that the consideration - exchange of promises are of substantial value and are not in the past hence are valid consideration - Samsung TV for $350.

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