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Referencing Styles : AGLC | Pages : 20

In Australian context, the Australian Contract Law as derived from the English common law governs the matters of contracts between two parties, together with the statute law that is the laws formulated by the Federal, State, and the Territory parliaments. The contract refers to a legally binding relationship between two parties which may be in verbal or written form. The contract law has specified certain necessary elements to be established by the parties for the valid contract to exist between them. These necessary elements are extension of an offer and acceptance thereon; an intention of the parties to create a legal relationship and be bound by it; presence of consideration; and certainty of terms in the agreement between the parties. The conditions are explained one by one as follows in detail.

The first essential condition to the contract formation is the extension of offer by one party to the other, and acceptance of the said offer. The offer is referred to as the proposal made by one party to the other to do an act or not to do an act. It is imperative to note that an offer may be a unilateral act or a bilateral act. When the other party provides his or asset to the proposal made, the process is known as the acceptance of offer. Thus, an offer when accepted becomes a definite promise by which the parties are bound. The second essential element to a contract is the intention of the parties to create legal relationship, as stated in the case law of Air Great Lakes Pty Ltd v KS Easter (Holdings) Pty Ltd. By the intention of the creation of a legal relationship it is understood that the parties can sue each other for the non-performance of agreed terms to the agreement. The said intentions must be expressed or implied and must be understood by both the parties as was established in the case of Empirnall Holdings Pty Ltd v Machon Paull Partners Pty Ltd. The next essential element is the consideration which refers to the price paid by one party to the other for the acts mentioned to be done or not to be done. It is imperative to note that the existence of consideration is essential, not necessarily the same must be in monetary form, as was established in the case of Australian Woollen Mills Pty Ltd v The Commonwealth. The yet another essential term is that the terms and conditions must be certain and must be agreed by both the parties in the same manner. Thus, if the terms are vague, the said essential condition is not fulfilled. Apart from the above, the basic objective of the contract must be legal as per the laws of the land and the parties must possess the legal capacity to enter into the contracts.

Further, one of the yet another essential concepts of a contract where the employer and employee relationship is found is the concept of vicarious liability. By virtue of the vicarious liability, one person is responsible for the acts of the others due to an underlying relationship. The most associated relationship with the vicarious liability is that of the employer employee relationship where the employers are responsible for the negligent or the omitted acts of the employees. The two essential elements in the said liability is the liability of negligence of another and the imposition of strict liability or the liability without proof of fault as stated in the case of New South Wales v Lepore & Anor.

In addition, it must be noted in order to enforce a claim, the parties to the contract must ensure that they acted within the terms and conditions of the contract. In addition, the parties would be entitled to the payment agreed in the form of consideration in the terms of the contract.

The rule of promissory estoppel is based on the principles of equity and justice. The rule of promissory estoppel states that when one party has made a promise or a representation to other either by his words or conduct, by virtue of which the legal relations of the parties were to be affected by acting accordingly, then the parties cannot go back from the promises. The principle has been established in the popular case law of Walton Stores (interstate) Ltd v Maher. The significant characteristics of such principle is that the party making the promise must act upon it even if the same are devoid of any consideration in legal terms. In addition to rely on the principle of promissory estoppel, there should be presence of consideration in the original promise. Thus, when the aggrieved party has made a significant reliance and acted in a certain manner, then the promisor cannot step away from the promise so made. Yet another important feature of said rule in Australian context is that the same can be enforced only in relation to pre-existing lawful affiliations.


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