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Contractual Formation Law And Practice

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Contractual Formation Law And Practice

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Discuss abut the Contract Formation Law and Practice.

Whether Bob had any contractual relationships with Mike, Tom, Steve and Mary
In Australia, every contract can be formed when there is offer, acceptance, consideration, legal intention and capacity amid the parties.
When the offeror communicates his wish to an offeree and desires his approval, then, it is called an offer (Carlill v Carbolic Smoke Ball Co [1893]). When the offer so received by an offeror is approved by an offeree, then, it is an acceptance (Crown v Clarke (1927)). But, when no approval is given and new terms are added to the offer and the same is revert back to the offeror, then, it is counter offer which cancels the original offer. The only offer that is valid is the new offer that is made by the offeree (Hyde v Wrench (1840)). Any subsequent approval of the original offer has no validity in law. (J Clark, 2014)
An acceptance is complete only when the same is made by an offeree and reaches to the notice of the offeror. If the offeree revokes the acceptance before it reaches the offeror, then, there is no contract (Brinkibon v Stahag Stahl und Stahlwarenhandelsgessellschaft mbH [1983]. But, if an acceptance is made via letter, then, the acceptance is complete as soon as the letter is posted and no revocation after the post of letter can cancel the contract and there is a valid contract that exists amid the parties. (Furmston & Tolhurst, 2010)
An offer and acceptance should be hold by consideration which is a benefit or gain which is exchanged amid the parties and which supports the promises that are exchanged amid them. But, a consideration which supports any past act is not a good consideration (Roscorla v Thomas (1842)). Thus, a valid consideration makes a contract enforceable. (P Latimer, 2012)
Also, the offeror and offeree must be major and mentally capable to make a binding contract.
Lastly, the parties should have legal intention to be bound by the contract and to make the contract enforceable. Generally, parties in domestic relationships have no legal intention to bind by the contract but the parties in commercial relationship have legal intention to make a binding contract. Also, if any contract is initiated by any party without any legal intention, then, such contract has non-binding effect (Ermogenous v Greek Orthodox Community of SA Inc (2002)). Legal intention is very important to make a binding contract. (Fitzhenry & Bennett, 2001) The law is now applied.
Bob and Mike
An offer is received by Bob (on 1st January) from Mike through which he intends to buy 30 laptops @ 300 each, inclusive of GST, delivery and insurance. But, the offer was not accepted by Bob and he made deviations in the acceptance and submitted that he can agree @ 300 plus GST (on 2nd).
Thus, the offer of Mike was not absolutely agreed by Bob and he made a counter offer which cancels the original offer of Mike. Now, the only offer that is valid is of Bob made on 2nd. But, Mike rejects the new offer on 3rd. Thus, there is no valid offer that exists now.
Now, an acceptance by Bob on 5th has no relevance as there is no existing offer against which any acceptance is made.
Bob and Tom
An offer is made by Bob on 10th January to purchase 5 hard drives @ $ 50 each which was accepted by Tom on 12th via post. Now, as per Adams v Lindsell (1818), any acceptance made via post results in binding contract amid the parties as soon as the letter is posted. So, there is a contract amid Tom and Bob on 12th when the letter is put into transit. Any later revocation by Bob has no significance irrespective of the fact as when was the letter is received by him.
Bob and Steve
On 1st February, Steve requests a computer from Bob which was accepted by Bob because Steve looked after his cat. However, this promise by Bob cannot be held to be a good consideration against the computer asked by Steve because the act for which the consideration is provided (taking care of cat) was a past action and any consideration provided by Bob to support such an act is not a good consideration in law.
As per Roscorla case, Bob promise cannot be enforced by Steve as it is past consideration and is not enforceable.
Bob and Mary
Bob intents to buy a van from Mary (sales manager of Capital motors). Mary offers Bob a Toyota Hilux 3000 automatic with air conditioning for $ 33 000 and sends him a document with a space of signature and date. Bob mixes the document with other documents of his and mistakenly signs the document send by Mary. He faxed the document to Mary thinking it as some other document.
It is submitted that when Bob signed the document of Mary he is neither aware of the document he is signing nor intent to abide by the same. The document was signed under mistake with no legal intention. Thus, there is lack of legal intention on the part of Bob.
Bob can refuse to honor the contract because there is no legal intention to support the contract and which is the most important element in making a valid contract.
There is no contract amid Bob and Mike as there is no valid and acceptance amid the two.
Bob has to pay $ 10 000 to Tom, because there is a valid contract amid the two when the letter of acceptance was posted by Tom on 12th January. 
Steve cannot sue Bob for the computer because the promise made by Bob was against a past act and is not a good consideration in law.
There cannot be any contract amid Bob and Mary because the document signed by Bob was not legally indented by him and thus there is no presence of legal intention to honor the contract. So Mary cannot sue Bob.
Thus, Neither Mike, Tom, Steve and Mary have any legal action against Bob and Bob has no obligations against any of them as there is no contract establishment with any of the parties.
Furmston & Tolhurst (2010). Contract Formation: Law and Practice.
Fitzhenry & Bennett (2001). The Australian Digest.
 J Clark (2014). Agreement, Australian Contract Law. P Latimer (2012). Australian Business Law 2012
Case Laws
Adams v Lindsell (1818) Brinkibon v Stahag Stahl und Stahlwarenhandelsgessellschaft mbH [1983] 2 AC 34
Carlill v Carbolic Smoke Ball Co [1893] 1 QB 256 Crown v Clarke (1927) 40 CLR 227.
Ermogenous v Greek Orthodox Community of SA Inc (2002) 209 CLR 95 Hyde v Wrench (1840) Beav 334.
Roscorla v Thomas (1842) 3 QB 234

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