Legally Enforceable Contract Advise To Stephanie & Adam Essay


Advise Stephanie and Adam as to whether they have formed a legally enforceable contract. Discuss your answer with reference to the law of contract only.



The issue in this case is to determine through the analysis of the elements of contract that whether a valid contract has been formed between Stephanie and Adam or not.


Ermogenous v Greek Orthodox Community of South Australia- Intention to create legal relationship (ICLR)

Carlill v Cabolic Smoke Ball Co- ICLR, Offer

Rose & Frank Co. v Crompton and Bros. Ltd- ICLR

Pharmaceutical Society v Boots Cash Chemists Ltd (1953) 1 QB 401. –Invitation to treat

Routledge v Grant-offer revocation

Masters v Cameron – Acceptance

Application of laws

An agreement which is intended to be binding between two or more persons and can be enforced in the court of law is known as a contract. A contract can be both in writing as well as oral. In order to form a binding contract there are six elements which needs to be present. Firstly the parties to the contract must have an intention to form an agreement which they know would be binding at law. There must be an agreement as to the fundamental terms of the contract between the parties. This is determined by analyzing offer and acceptance. There has to be consideration in the contract. The parties must be capable to get into the contract which means there must be a valid offer and acceptance. The terms in a contract have to be certain and the overall objective of the contract has to be legal. Therefore whether there has been a contract between Stephanie and Adam or not has to be determined upon the analysis of these elements. If these elements are satisfied than there is a contract between the two parties.

The court has to determine whether an intention to create a legal obligation is present or not in a contract. The presence of ICLR is analyzed by the court through an objective approach rather than a subjective way. According to the objective approach the court puts a prudent or reasonable individual in place of the claimant and then analyze whether the hypothetical person would have been induced by the offer of the defendant to get into a legally enforceable contract or not. In the case of Ermogenous v Greek Orthodox Community of South Australia Incorporated the judges held that the surrounding circumstances of the contract has to be considered in order to determine the presence of ICLR.

In the case of Carlill v Cabolic Smoke Ball Co it was provided by the court that where there is a commercial agreement it is presumed that the intention of creating a legal obligation is there between the parties to the contract. The presumption can only be rebutted where appropriate evidence is found such as an honor clause which states that there is no ICLR as stated in Rose & Frank Co. v Crompton and Bros. Ltd. In the given situation as there was a commercial agreement between Stephanie and Adam there is a presumption that ICLR is present in the contract. in addition there is no evidence which suggest that the parties did not want to be bound legally to the contract terms. Therefore it can be evidently stated that ICLR is present between Adam and Stephanie.

A clear expression which suggest that a person wants to create a legal relationship with another person where such expression is accepted is known as an offer. An offer has to be differentiated from incomplete offers which are known as invitation to treat. Goods displayed in a shop constitute an invitation to treat as stated in Pharmaceutical Society v Boots Cash Chemists Ltd. Ana offer can be made to any person or the world at large. An invitation has no legal significance as its lacks intention and is incomplete. An offer can be revoked by the parties before it has been accepted as stated by Routledge v Grant. In the given situation the agent of Adam did not make a complete offer but an invitation to offer as it was in form of a tender. However a complete offer hand been made by Stephanie to purchase the business at $300000. Thus a valid offer exists between the parties which is valid till 5pm Saturday.

Adam provided Stephanie on Wednesday that he wants to sell the business at $300000. The statement was made before the offer elapsed. According to the rules of acceptance it has to be communicated to the person making the offer and has to be complete and unequivocal as stated by Masters v Cameron. The statement of Adam would therefore account to be a valid acceptance as it is unequivocal and has been done in time. Thus an agreement is established. The parties have the capacity to be in a contract, there is consideration and the contract has legal objective. Thus a contract is formed between the parties and Adam cannot deny it.


There is a contract between Adam and Stephanie

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