1.List and explain briefly each of the components required to demonstrate that a binding contract exists.
2.Does a contract have to be in writing to be binding? In your answer explain whether this is the case, and further whether it is a good idea to put an agreement in writing.
3.What is a formal contract? Explain the ‘formalities’ of such a contract and give two examples.
4.A group of friends meet for a regular drink at a hotel every Friday night. Each contributes $2 towards a group lottery ticket, which is drawn over the weekend by Lotto company. One of the group is given the role of actually buying the syndicate ticket. When in fact a winning ticket is drawn for the group the purchaser of the ticket claims the arrangement is purely social and there is no arrangement whereby he needs to share the prize. Analyse this issue in terms of contract law.
5.Why is it important under law to distinguish between a party who is an agent for a principal, from that of an independent contractor? In your answer explain the legal implications of each relationship.
1.In Australia, all the important features which are an essential part of the contract to show the existence of the creation of the lawfully binding contract are as follows:
Agreement between the persons is the first important element to show the existence of a legally binding contract. It is the earlier stage of the contract. For the formation of every single agreement, an offer and acceptance are two basic features. An offer must be transferred by the offeror with terms and conditions of the offer for the acceptance of the another party (offeree). Other party should be accepted the offer before any withdrawal of proposal by the offeror, Therefore Offeror is the person who makes the offer and offeree is the one for whom such offer is made. But an invitation to offer do not create offer or acceptance this is not an offer but the request to create an offer. Mostly advertisement creates an invitation to offer (Treitel, 2003).
Consideration is the second most important element of the contract to introduce the existence of the lawfully binding contract. For the validity of the contract, consideration is a necessary part which means that there should be an exchange of any valuable thing between contracted parties. The contract without consideration is a void agreement. For the enforcement of a promise by the court, the other party should also give any valuable thing in return. The values exchanged between the parties do not have to be equal (Treitel, 2003).
Capacity is the third important element for binding force of the contract. The person who is minor and who is insane and not capable to understand the consequences of the contract cannot be the party to the contract. This means a person who obtains the age of majority and a person who is sane and capable to understand the consequences of the contract can be a party of the legally binding contract.
Intention to be legally bound
The legal intention is also an essential point for the contract in which both parties related to a contract should intend the type of their agreement whether such agreement has a capacity to form the lawfully binding effect the party to the agreement will be under obligation to prove such effect (Treitel, 2003).Formalities
The contract should also follow all provisions which are given in the statute to be a legally bound contract (Treitel, 2003).The last element is a certainty. The contract should complete and certain to introduced the rights, timeframe, the responsibility of the parties. In the absence of certainty, court may declare such contract void on the basis of ambiguity.
2.All the contracts are not lawfully binding contract. For the enforcement, such contract should have binding effect. The agreement can be oral or written. A number of people preferred only written contract in order to bind the parties. There are a number of dealings which needs a contract in writing like selling of a house, land or business dealing. But it does not happen in every case Verbal contracts are also actionable. a maximum contract which we do in daily life are mostly verbal contracts for example purchase a movie ticket, bus or air ticket, purchasing food, going to hospital etc. A verbal contract can be lawfully binding like written contract unless the law directs that such contract should be in writing (Bruce, 2014). As per the provision of the statue there are some essential elements for the binding effect which every contract has to follow includes:
- Agreement- when an offeror gives an offer to the offeree for the acceptance and offeree accepts the offer they said to make an agreement.
- Consideration- there should be exchange of any valuable thing between contracted parties
- legal intention- the party while making the promise shall have an intention to bind each other legally such that in case of any breach by one party the other may sue (Nolo, 2006).
However, oral contracts are very difficult to enforce because there's no clear record of the offer, consideration, and acceptance.
Although the oral agreements are operational and can be actionable like valid and lawfully binding contracts but there some disadvantage also. Due to no evidence of proposal, consideration, acceptance these agreements are extremely challenging to prove that makes the implementation of an unwritten agreement difficult and time consuming therefore not only you has to prove the existence of verbal agreement but also has to indicate the terms related to unwritten agreement which covers the healthy relationship between the parties hence in the lack of written evidence, where each party denies argument made of the other party so it is better to put every agreement in writing. This will assist the parties to reduce misunderstanding and ambiguity at the time of enforcement.
If it is not convenient to make an agreement in writing then all details of the contract related to argument and negotiation with the other party should be recorded (Stock, 2013).
3.In creating contracts, the law sometimes requires the conditions related to contract which should be fulfilled by the parties and expressed formally. The formation in which the contract creates is an essential point. The validity of the formal contract depends on the formation of the contract, therefore, the manner and technique are the important part of the formal contract which has to be expressed. The formal contract should be in writing which is offer more certainty to the parties of the contract. They clearly define the whole information related to the contract such as what process would follow in the case of dispute, timeframes, material, charges etc. formal contracts assist to reduce the possibility of risk as it always finds in the other contracts. it makes contract clear from the bingeing.
Contract of record and contract under seal or contract by deed are two examples of the formal contract.
- The first example of the formal contract is the deal which can be enforced independently or proved the existence of such contract with intention of both parties to the contract and by providing a record of the court. Including decision giving by the court after proceeding related to evidence related to the case have done. Or any bond which is filled in the court by the parties to the contract to maintain good conduct, peace or bond related appearance in the court as per the court direction which is known as a contract of record.
- The second example of the formal contract is Contracts by deedit is also known as a contract under seal these contracts bind the parties to contract by their manner in which they are formed. Previously, the placing seal over document related to contract and after delivery of such deed was the essential elements. But At the present, every single document of the contract should be signed by the parties and at least one eyewitness not the party to the contract should be attested such deed.
Essentially, consideration is an important part for the validity of the contract but for every formal contract the consideration is not necessary in order to make a contract valid. This kind of contracts is the exception in this case. For the enforcement of formal contract parties to the contract are given 12 year of the period before the court barred the parties to the contract due to the lapse of time (Lui, 2009).
4.All the agreements based on social and domestic relationship do not bind the parties to such agreements legally as the parties to the contract do not have lawful purpose to impose obligations to each other by the provision related to corporation law, therefore, these arrangement are not actionable in the court of law but in this case all the person to the contract had lawful purpose to obligate each other legally as there was contribution of money which can be taken as a consideration therefore in this case parties to the contract maid payment of the money to purchase the lottery ticket with a one intention of winning the prize and share it amongst the person related to the contract according to their contribution hence such parties have made legally binding contract and they are under obligation to abide all the terms and conditions related to the contract in order to bound each other lawfully.
Further there is another case where the court gave similar decision in this case one party to the contract made an request to purchase an entry coupon for himself along with his friends and won the lottery the high court held that the contract between the parties was a valid contract and thus actionable in the court of law further court observed that the parties to this arrangement had intention to impose legal obligation in order to bind each other legally as they all paid money to buy the entry coupon with the common purpose to win the lottery thus all the parties are entitled to the prize money and every party has right to get the prize money in ratio of their contribution paid by them to purchase the coupon. (Trevey v Grubb, 1982). There is one more case where the court gave the same decision related to purchasing the lottery ticket. In this matter, the court decided that the two other party had a purpose to tie themselves in a valid contract even though they did not make regular payment in order to purchase the lottery ticket. Hence such parties will get a share in the prize. (Simkins v Pays, 1955).
As has been decided by various courts it can be concluded that in cases where a lottery has been bought by a contributed sum the prize money shall be distributed among all the contributors.6.As per the law of torts, the principle of vicarious liability comprises several sort of relationships. One of the famous relationship is between the principal and agent. As per vicarious liability rule a principal is responsible for the action of his agent like an agent under work of his principal the relationship between the agent and principal is different from the relationship between the employee and independent contractor. In Australia, the rights of an independent contractor are given under the Independent Contractors Act of 2006 and Fair Work Act of 2009 (Legal Service Commission of South Australia. 2016). The legal obligations of an agent are distinguish from an independent contractor. An independent contractor is the one who enters into deal for giving services to other party as different from an agent who works under the principal. The key difference between the two contracts is that in the case agent bind himself to the principle of giving service only to the principal this relationship also known as a contract of service (Queensland Government, 2016). Thus The agent performed under pursuance of his principal. The performance by the agent under the pursuance bound the principal in the case of negligence this makes the principal bound by the acts of his agent in cases of negligence (Australian Government, 2016). On the other part, the independent contractor as per the name performed independently. This is known as a contract for service. The independent contractor is bound by the act of his employer and work on his own conditions. The employer will not be vicariously liable for any harm to a third party in the case of negligence of the independent contractor (Ministry of Manpower, 2017).
Further, an agent can perform only on the behalf of the principal at a time but an independent contract provides service to several types of clients simultaneously and can make more than one deal at a one time (Australian Government. (n.d.)). Unlike an agent, contractors negotiate their personal charges, working schedules, and can decline or accept services. An agent’s working hours, salary and security for continuing service are based on the agreement or award and have privileged such as excellent contributions, and paid vacation, sick leave, annual leave and long service leave. The independent contractor has no paid leave. They pay if someone works for them and also reimburse their own annuity and taxes offer their personal tools. In the case of damages and profits, the business of the independent contract directly impacted whereas an agent will not pay if any person does work on their behalf. And their all tax will be deducted by their principle.
Australian Government. (n.d.). Independent contractrors and employees. Retrieved from: <https://www.fairwork.gov.au/how-we-will-help/templates-and-guides/fact-sheets/rights-and-obligations/independent-contractors-and-employees>.
Australian Government. (2016). Laws affecting contracts. Retrieved from: <https://www.business.gov.au/info/plan-and-start/start-your-business/independent-contractors/understanding-contracts/laws-affecting-contracts>.
Bruce, J. (2014). What is the Requirement of Common Law Legality in a Contract?. MCNA. Retrieved from < https://mcna.com.au/requirement-common-law-legality-contract/>
Legal Service Commission of South Australia. (2016). Employees and independent contractors. Retrieved from: < https://www.lawhandbook.sa.gov.au/ch18s02.php>.
Lui, S. S. (2009). The roles of competence trust, formal contract, and time horizon in interorganizational learning. Organization Studies, 30(4), 333-353. Retrieved from:
Ministry of Manpower. (2017). Contract of service. Retrieved from: <https://www.mom.gov.sg/employment-practices/contract-of-service>
Nolo. (2006). What Makes A Contract Valid?. Forbes. Retrieved from < https://www.forbes.com/2006/11/20/smallbusiness-statelaw-gifts-ent-law-cx_nl_1120contracts.html>
Queensland Government. (2016). Step 4 contract of services versus contract for service. Retrieved from: <https://www.worksafe.qld.gov.au/insurance/which-insurance-product-is-right-for-you/accident-insurance/who-should-i-cover/worker-determination-from-1-July-2013/contract-of-services-v-contract-for-service>.
Simkins v Pays (1955)1 WLR 975.
Stock, H. (2013). When Is A Contract Legally Binding?. Harold Stock & Co. Retrieved from < https://www.haroldstock.com/contracts/contract-legally-binding/ >
Trevey v Grubb (1982) 44 ALR 20.
Treitel, G. H. (2003). The law of contract. Sweet & Maxwell.
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