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Elements required for formation of a contract

Connor Worpel is a Human Resources consultant with specific expertise in antidiscrimination policy and practice in the workplace. His consultancy is doing well, but he is always keen to engage new clients and create opportunities.
One Saturday, at his brother Blake’s engagement celebration, Connor is approached by Harry Nash, a business owner, who Connor has met previously at his brother’s 21st Birthday celebration. Harry explains to Connor that he could use Connor’s expertise as he is looking to revamp his employee procedures and bring them up to date. Connor expresses his interest in the work and Harry tells Connor that he is pleased and will email him on Monday with a proposal.

On Monday morning, Harry sends Connor the following email:


Dear Connor,
After thinking further about your potential involvement in the employee procedures revamp for my business, I want to bring you on board as Human Resources consultant as I am mindful that new anti-discrimination legislation has been enacted and want to make sure that my business is compliant. The terms of the engagement are that you will provide exclusive services for two weeks, starting on 1st August 2018, working onsite with me and the assistant manager. You will be paid a one off fee of $28,000 which includes
undercover parking for the duration. Please indicate your acceptance in writing by the end of the day or I will assume that you
are not interested.

Kind regards
Harry Nash.
An hour after the email is sent, Connor reads it and is happy with the terms of the proposal. He drafts an email to Harry detailing his acceptance of the offer, but because of a service interruptions caused by National Broadband Network (NBN) work in his street, Connor’s email is not working and he is unable to send the message to Harry. In desperation, Connor then tries to call Harry on his mobile phone to tell him that he wants the work, but Harry doesn’t answer, and Connor is not given the option to leave a message. As a last resort, Connor drafts a letter to Harry communicating his acceptance of the offer proposed. He then takes the letter to the local post office and posts it at 3.30pm on Monday afternoon. The letter takes a day to be delivered to Harry and he receives it on Tuesday afternoon.


On Wednesday, Harry realises that he has offered to pay Connor more than he should have (he has spent the morning searching for Human Resource Consultants in his local area and now has a much better understanding of costs and services available) and therefore does not want to engage Connor anymore. He quickly sends an email to Connor (whose email is back on line following the completion of the NBN work in his street) saying that because he didn’t receive Connor’s acceptance by the end of Monday, Connor has missed out on the work according to the original email but thanks anyway. Interestingly, Harry also states in his email that he never meant for the proposal to be taken seriously anyway because he was only trying to help out his good friend Blake by throwing Connor some work. Connor is most upset upon receiving this email from Harry and calls his lawyer for advice on the situation.


(a) Using the four step process, discuss the element of agreement required for the formation of a legally binding contract between Connor and Harry. 


(b) Assume that the element of agreement required for the formation of a legally binding contract between Connor and Harry can be satisfied.Using the four-step process, consider whetherthe elements of consideration and intention required for an enforceable contract arepresent.

Elements required for formation of a contract

To analyze the element of agreement required for the formation of a legally binding contract between Connor and Harry?

The law of contract has laid down several elements on the compliance of which any contract can be made between two or more intending parties. A contract is nothing but an agreement which has forcibility of law accompanies with consideration and legal intention of the parties. (Lambiris and Griffin 2017.)

An agreement is created between two parties when there is a legal offer which is supported with a legal acceptance by the offeror and the offeree respectively.

An offer is a kind of proposal in the form of a statement made orally or in writing or conduct which moves from an offeror to an offeree. An offeror through the proposal specifies the terms that he is willing to abide by and thus conveys the same to the offeree and is held in (Harvey v Facey 1893). An offer is valid if made to an individual or to the world. But as per (Carlill v Carbolic Smoke Ball Co 1893) it is very necessary that when the offer is made, then, it is only when the offeree comes in the knowledge of the same, it is then,  the offer stands concluded and binding upon the parties. It was held in (Carlill v Carbolic Smoke Ball Co 1893) that an offer is valid if made to an individual, group or world but the only requirement is that the offer must reach the offeree. An offer can be made for certain time frame and if no acceptance is given within such time then the offer lapses and is held in (Dickinson v Dodds 1876) wherein it was held that of the offer is communicated for a time frame, then, the acceptance must be made within such time otherwise the offer stands discharge and no later acceptance will make a binding contract amid the parties.  (Latimer 2011)

Now, the offeree has the right to give his confirmation to the offer which is made to him. An acceptance is the approval which is made very clearly and is in correspondence of the offer. There is no changes that are brought in to the terms of the offer. If the offeree while accepting the offer brings variations to the offer terms, then, as per (Hyde v Wrench 1840) the acceptance is not the mirror image of the offer. Such an acceptance is invalid and is called counter offer. The counter offer which is made by the offeree is considered to be a new offer. Further, when the offer is made and the offeror requires that the communication of the acceptance must be made in certain mode, then, the acceptance should be made only in such mode. Variation in the mode is no acceptance; however, as per (Tinn v Hoffman 1873) slight variation is permissible, that is, acceptance to be made by post but if the acceptance is made by telegram then the same is also held to be valid in law. (Caffrey 1991)

Offer and acceptance

Also, as per (Entores Ltd v Miles Far Eastern Corp 1955) and (N M Superannuation Pty Ltd v Baker 1992) an acceptance should come in the knowledge of the offeror to make it binding. But, when the acceptance is made by letters or the acceptance is posted, then, as per (Adams v Lindsell 1818)the acceptance is considered to be made and communicated to the offeror as soon as the letter is posted. There is no need that the letter should reach the knowledge of the offeror. (Latimer 2011)

As per the facts, Connor Worpel is a consultant in a Human Resource department and he has expertise in anti- discrimination policy and practices. He is practicing well but is always willing to engage to seek new clients and to create business opportunities.

On Saturday, Connor Worpel was present at his brother (Blake) engagement. Harry Nash approached Connor Worpel. Harry Nash is a business owner and both Connor Worpel and Harry Nash had met privately at the 21st birthday of Blake.

General negotiations took place amid Connor Worpel and Harry Nash, wherein Harry Nash told Connor Worpel that he is willing to revamp his employee procedures and thus there are chances that he might use the expertise of Connor Worpel.

At this stage, there is a normal communications that took place amid the two and there is no exchange of any kind of proposal from either side of the parties.

Connor Worpel is interested in what Harry Nash is stating. Harry Nash told Connor Worpel that on Monday he will send a proposal to him.

Harry Nash has not made any proposal at the party and thus there is no exchange of any offer that is made amid the two.

 Now, on Monday, Harry Nash sends an email to Connor Worpel. Harry Nash submits that he is willing to bring Connor Worpel to his board as a Human Resource consultant as he is very pleased with his expertise. Harry Nash further submits that the ‘terms of the engagement’ includes:

  1. That Connor Worpel will provide exclusive services for 2 weeks starting from 1stAugust 2018.
  2. That Connor Worpel will work onsite with Harry Nash and the assistant manager;
  • That engagement amid them will be supported with consideration fee of $28,000 which includes undercover parking for the duration.

Now, it is at this stage it is submitted that Harry Nash has send a proposal to Connor Worpel wherein he expresses the terms which he wants Connor Worpel to be comply with. The proposal is sent by Harry Nash by email. Thus, thus proposal is complete only when it comes in the knowledge of Connor Worpel. The email is read by Connor Worpel after an hour, thus, the communication of the proposal is complete.

Validity of an offer

Hence there is a valid offer that is made by Harry Nash to Connor Worpel in the morning of Monday.

Harry Nash further submitted that Connor Worpel must indicate his acceptance in writing by the end of the day or Harry Nash will assume that Connor Worpel is not interested.

Now, since the offer is valid thus, Connor Worpel must give his acceptance through writing by the end of day in order to make it binding in nature.

When Connor Worpel reads the terms of the offer, he was happy with the same. He drafted an acceptance but was not able to send the email as the services of NBN was defective and thus he was not able to send an email to Harry Nash. Connor Worpel also call Harry Nash but the phone was unanswered.

Lastly, Connor Worpel drafts a letter and he sends his acceptance to Harry Nash the same day.

Now, as per (Dickinson v Dodds 1876), Connor Worpel must have reverted with the acceptance the same day  (3:30 PM Monday) in order to make it valid. But as per (Tinn v Hoffman 1873)slight deviation will not make the acceptance invalid. Also, Harry requires Connor Worpel to write an acceptance and it was nowhere mentioned that the acceptance must be sent through email. Thu, as per (Adams v Lindsell 1818), an acceptance by letter is valid and an immediate agreement is concluded as there is no need that Connor Worpel should come in the knowledge of the acceptance.

It makes no difference as when the letter is received by Harry Nash. The letter is received by harry Nash on Tuesday, but a contract is lardy made when Connor Worpel has posted the letter of acceptance on 3:30 PM on Monday.

Now, on Wednesday when Harry Nash is of the view that he has quoted higher amount of money to Connor Worpel and send an email revoking the offer made by him, it is submitted that the revocation by harry Nash is of no relevance as the offer was already accepted by Connor Worpel on Monday afternoon.

Conclusion:

There is a concluding agreement that is made amid Harry Nash and Connor Worpel as a valid proposal is made by Harry Nash which was duly accepted by Connor Worpel by sending the letter of acceptance on Monday at 3: 30 PM and the letter has resulted in a valid acceptance immediately.

Acceptance and its communication

Whether there is presence of the elements of consideration and intention required for an enforceable contract amid Harry Nash and Connor Worpel?

As already submitted that the law of contract has laid down several elements on the compliance of which any contract can be made between two or more intending parties. A contract is noting by an agreement which has forcibility of law accompanies with consideration and legal intention of the parties.

Apart from offer and acceptance, there are two elements which must be present in order to make an agreement binding an enforceable amid the parties.

Consideration is one of the prime elements that must be present in order to make any agreement enforceable in law. a consideration is some benefit or loss that is caused to parties to support the promises that are made amid them and is held in (Currie v Misa 1875). A consideration can anything of value and must be sufficient in nature and is held in (Thomas v Thomas (1842)), wherein the court held that the compliance of the husband wish at a minimal rent is a valid consideration in law. in the leading case of (Chappell & Co Ltd v Nestlé Co Ltd 1960) the court held that chocolate wrappers are held to be sufficient consideration to establish a valid contract. So, even if the consideration is not adequate but sufficient, such consideration is valid in law.

Further, it is necessary that the consideration must move from the promisor and is held in (Dunton v Dunton 1892). A consideration from any other party is not held to be valid. Also, as per (Roscorla v Thomas 1847)the consideration must be exchanged amid the parties during the time of making the promises and after the promise are made but any consideration of past nature is not valid in law. (Clark 2013)

Also, when any agreement is made then the promises that are exchanged amid the parties should be exchanged with legal intention and is analyses in (Teen Ranch Pty Ltd v Brown 1995) and (Ermogenous v Greek Orthodox Community 2002). In (Esso Petroleum Ltd v Commissioners of Customs and Excise 1976) it was held that the parties sharing commercial relationship is assumed to be bound by the contract legally. And as per (Woodward v Johnston 1992) , the parties who are sharing domestic relationship are not intent to abide by the promises legally,

But, in (Rose and Frank & Co v Crompton 1923) the law is clear that if the evidence can be laid then the parties who are in commercial relationship can be held to be not bound by the promises with legal intent. It was also held in (Todd v Nicol 1957) that if the parties are in domestic relationship, then, if evidence is laid down then there can be presence of legal intention amid the oar ties.

Counter offer

It is submitted that it is assumed that the element of agreement required for the formation of a legally binding contract between Connor and Harry can be satisfied. It is now important to understand whether there is presence of the elements of consideration and intention required for an enforceable contract.

There is a valid offer that is made by Harry Nash to Connor Worpel through an email which was sent on Monday. Through the email that was sent by Harry Nash, there are several terms that were made part of the proposal and one of the term was that in exchange of the services which will be provided by Connor Worpel, Harry Nash will provide $28,000 which is inclusive of undercover parking for the duration. Thus, in exchange of a promise from Connor Worpel (that Connor Worpel will provide services to harry Nash), Harry Nash is willing to forgo $28,000 in favor of Connor Worpel.

Also, Connor Worpel accepted the offer that is made Harry Nash without bringing any changes to the terms of the offer. Thus, Connor Worpel is accepting the money of $28,000 inclusive of undercover parking in exchange of the services that are provided by him to Harry Nash.

Thus, there is exchange of promises that are made amid Connor Worpel and Harry Nash and to support the promises Harry Nash is giving money to Connor Worpel and Connor Worpel is giving his services to Harry Nash.

The exchange of money for the services is a valid consideration as per (Currie v Misa 1875). Also, as per (Chappell & Co Ltd v Nestlé Co Ltd 1960) the consideration was sufficient in nature to support the promises that are made amid Connor Worpel and Harry Nash.

So, there is presence of consideration,

Now, it is important to understand whether there is presence of legal intonation or not

It is submitted that both Connor Worpel and Harry Nash meet at the engagement part of Blake (brother of Connor Worpel). However, prior to the said meeting, both Connor Worpel and Harry Nash has already met once, that is, at the 1st birthday party of Blake. Thus, both of them are acquainted with each other.

Now, promises are exchanged amid Connor Worpel and Harry Nash, wherein, Connor Worpel will, provide his expertise to Harry Nash by joining his board in exchange of the services Harry mash will provide $28,000. This exchange of promises is made by them with an intention that they will abide by the promises legally. Thus, by applying (Todd v Nicol 1957) it is submitted that though they are known to each other before the promises are made, still, they are entering into a commercial contract and thus there is presence of legal intention amid the parties.

The email which is sent by Harry Nash on Wednesday revoking the offer that was made by him on Monday morning specified that he never intent to make a proposal to Connor Worpel as he was only helping Connor Worpel as wanted to help his good friend, Blake. It is submitted that this submission of Harry Nash is of no relevance as though they were known to each other but there was preselect of legal intonation amid the two when the promises are exchanged. If Harry Nash has to prove that there is no contract with Connor Worpel then he has prove the same by laying evidence.

Conclusion:

There is a valid consideration that is present amid Connor Worpel and Harry Nash as Harry Nash has promised to gave $28,000 to Connor Worpel against the services that will be provided by Connor Worpel to harry Nash. Also, though Connor Worpel and Harry Nash are known to each other but there is presence of legal intention amid the two and thus there is a valid contract that is formed amid the two.

Adams v Lindsell . (1818).

Caffrey, Bradford. Guidebook to Contract Law in Australia. CCH Australia,, 1991.

Carlill v Carbolic Smoke Ball Co. (1893).

Chappell & Co Ltd v Nestlé Co Ltd. (1960).

Clark, Julie. Australian Contract Law. 2013. https://www.australiancontractlaw.com/law/formation-consideration.html#considpast (accessed October 6, 2018).

Currie v Misa. (1875).

Dickinson v Dodds. (1876).

Dunton v Dunton. (1892).

Entores Ltd v Miles Far Eastern Corp. (1955).

Ermogenous v Greek Orthodox Community. (2002).

Esso Petroleum Ltd v Commissioners of Customs and Excise. (1976).

Harvey v Facey . (1893).

Hyde v Wrench . (1840).

Lambiris, Michael, and Laura. Griffin. First Principles of Business Law. . Melbourne: Oxford University Press , 2017.

Latimer, Paul. Australian Business Law 2012. CCH Australia Limited, 2011.

N M Superannuation Pty Ltd v Baker . (1992).

Roscorla v Thomas. (1847).

Rose and Frank & Co v Crompton. (1923).

Teen Ranch Pty Ltd v Brown. (1995).

Thomas v Thomas . ((1842)).

Tinn v Hoffman. (1873).

Todd v Nicol . (1957).

Woodward v Johnston. (1992).

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