ANSWER GUIDE
What follows is a guide to the structure that you need to develop when answering problem questions. It demonstrates an approach to answering problem questions and has been designed to help you develop the analytical skills you will require. It is not a sample answer and is not in essay format – the format in which you will be required to present your answers.
You will note that each answer follows a different structure, dictated by the issues raised. Remember to structure your answer to address all the issues raised in a question.
The answer guide is just that. It is intended to show you how to approach the question rather than teach you the law of contract. Cases are referred to briefly (without the full citation) to show you how much of a case needs to be included. You do not need to repeat the facts or the judicial discussion unless particularly relevant. You need to apply the principles found in case and statute law to the facts of the question.
Question 1.
Your first step should be to go through the question, highlighting or underlining important points, to consider what issue(s) are being raised by the question, and what information you are being given to address these issues. Information is usually included to direct your mind to a particular issue, so consider carefully why the information in a particular question is being provided.
The most important step in answering a problem question is always to read the question very carefully.
Adam wishes to throw a surprise 40th birthday party for his mother.
Note that Adam’s mother is turning 40, a guide to the possible age of Adam.
He has saved some money from several small jobs but needs to borrow about $3,000 from his kind Uncle Bert.
Adam is borrowing the money- possible loan contract.
Bert is Adam’s uncle – family relationship. He has worked several small jobs – another guide to his age.
Adam is talking to Uncle Bert at a family barbeque,
Consider whether offer and acceptance has been communicated. What does the fact that they are at a family barbeque tell you about the family relationship between Adam and Uncle Bert?
who is happy to help out and so lends Adam the needed money on the understanding
What does this mean?
that Adam can pay off the loan when he starts his new after school job at the supermarket.
It is intended that the loan be repaid
Adam is still at school – how old is Adam?
Adam contacts caterers, decides on the menu, and pays a deposit. He then spends all of Uncle Bert’s money on the party. He can’t repay Uncle Bert as he decides not to take the supermarket job but to finish school and study hard to get the traineeship he wants.
Is finishing school in Adam’s interest, for his benefit?
Advise Uncle Bert.
WHAT IS THE ISSUE BEING RAISED BY THIS QUESTION: Does Uncle Bert have an enforceable contract with Adam? (i.e. CONTRACT FORMATION)
WHAT IS THE LAW YOU NEED TO DISCUSS FOR CONTRACT FORMATION?
(Note: All the following elements are necessary for contract formation, but they should not all be discussed in the same depth. Those elements in issue should be discussed in detail –others may simply need a one line mention.)
1 Legal Capacity
Minor – Is Adam a minor?
What facts, drawn from the question, will you use to determine the factual question of whether or not Adam is a minor?
after school job
youthful mother
several small jobs
hope for traineeship in future
If a minor, is Adam bound by this contract?
What law will you rely on to address this legal issue?
Common law/Statute (Minors (Property and Contracts) Act
1970 (NSW)) – is Adam so young as to lack understanding of the significance of the contract? (s18)
What facts will help you answer this? Or, how does this broad legal issue apply to the particular facts of the question before you?
Consider Adam’s school and work experience and understanding of his obligation.
Has Adam participated in a civil act (s19)? If yes, (he has entered into a contract) will it be presumptively binding on Adam?
Consider the ss19 -25 tests.
Is the contract to borrow and repay money to Uncle Bert, to fund his mother’s party, for Adam’s benefit?
If yes, it will be presumptively binding. If not, any contract will be unenforceable by Uncle Bert unless ratified by Adam when he turns 18. (Or not repudiated by 19). What effect will this have for Uncle Bert?
After looking at all the above, does Adam have capacity? MAKE A DECISION.
If no, do not stop here, but consider the rest of the issues raised.
2 Offer
Was the offer sufficiently definite, so as to be capable of acceptance - Bert undertakes to pay the money to Adam (Australian Woollen Mills v. Commonwealth)
Was the offer made to a specific person (Carlill v Carbolic Smoke Ball)
Offer made to Adam
Was the offer communicated? (R v Clarke)
How did Adam know that he could spend Uncle Bert’s money?
Is there an offer? MAKE A DECISION. If no, do not stop here, but consider the rest of the issues raised.
3 Acceptance
Acceptance express or implied?
Express - discussion at barbeque.
Is it unequivocal?
Yes, there is nothing left to be negotiated.
Has acceptance been communicated? (Felthouse v Bindley)
Discussion at barbeque
Was acceptance in reliance on offer? (R v Clarke)
Discussion at barbeque
Was acceptance complete? (Did it contain all the essential terms of the offer?) (George v Roach)
Discussion at barbeque
Was acceptance certain? (Whitlock v Brew)
Discussion at barbeque
Is there acceptance, If no, do not stop here, but consider the rest of the issues raised.
4 Consideration
Was consideration sufficient? (Stilk v Myrick; Hartley v Ponsonby)
Simple loan contract; money lent on promise to repay
Does consideration move from the promisee? (Dunlop Pneumatic Tyre Company Ltd v Selfridge & Company Ltd)
Simple loan contract
Is there consideration, if no, do not stop here, but consider the rest of the issues raised.
5 Intention to create legal relations
Is the “contract” between family members? (Balfour v Balfour)
Ø Uncle/nephew
Ø How close a family relation exists between them - look at the question to find information.
If yes, can the presumption be rebutted? (Merritt v Merritt)
Ø Is it intended to be a commercial relationship?
Ø Contract of loan (Woodward v Woodward (1863) 3 De GJ&J 672)
Make a decision and tie everything together in a concluding paragraph.
Question 2
FIRST, READ THROUGH THE QUESTION AND CONSIDER THE RELEVANT INFORMATION. WHAT ARE THE ISSUES THE QUESTION IS RAISING?
a) Derek always buys his fruit for his juice stand in the shopping centre from Gary the market gardener.
b) On Monday morning he rang Gary and left a message on Gary
What is the nature of this communication? Simply because the question uses the word ‘offer’ does not mean that that is its legal status. Note a message is left. Is this communication?
c) Gary faxed a price list to Derek stating that carrots were $20 per for that Monday only, and he only had two cases left but he expected more to be available during the week.
What is the nature of this communication?
d) Derek faxed back as soon as he received Gary
What is the nature of this fax? Has the information in the fax been communicated to Gary
e) Gary was out of the office and did not receive the fax until Tuesday morning.
What is the effect of the fax?
f) On Monday afternoon Gary Gary
What is happening here? Has a contract been concluded between Gary and the other trader?
Advise Derek.
ISOLATE THE ISSUE(S), CITE THE RELEVANT LEGAL PRINCIPLES AND APPLY THEM TO THE FACTS OF THE CASE.
ISSUE:
IS THERE A BINDING CONTRACT BETWEEN GARY AND DEREK WHICH DEREK CAN ENFORCE?
That is:
Has the course of communication between the parties resulted in a contract?
Is there an offer?
Has there been acceptance?
Go through each paragraph in the question to determine the legal status of the communication.
(a) Background – speaks to history of relationship between Gary and Derek.
(b) ISSUE: Is this message a request for information, an invitation to treat or an offer?
LAW: Only an offer is capable of acceptance. Is there an intention that the offeror will be bound by the terms of the message?
APPLICATION: Is there an intention for Derek to be legally bound to buy the carrots regardless of price and any other conditions? What facts from the question will you apply to reach your conclusion?
If no? Invitation to treat/request for information?
If yes? Are the necessary elements of an offer made out?
Is it - definite?
- made to a person?
- communicated?
MAKE A DECISION AND GIVE YOUR REASONS. HOWEVER, IF THE DECISION IS CONTENTIOUS, BE PREPARED TO ARGUE IN THE ALTERNATIVE.
Note: Use of the word “offer” does not by itself convert an invitation to treat into an offer.
(c) ISSUE: Is this an invitation to treat or offer?
LAW: Is there an intention for the offeror to be bound by the offer? (What is your authority for this legal proposition? Which case(s) will you cite?)
APPLICATION: Is there an intention for Gary
If no? Invitation to treat
If yes? Offer, subject to – definite
- person
- communication
Is an offer by fax necessarily communicated at the time at which the fax is sent?
MAKE A DECISION AND GIVE YOUR REASONS. HOWEVER, IF THE DECISION IS CONTENTIOUS, BE PREPARED TO ARGUE IN THE ALTERNATIVE. REMEMBER TO BE CONSISTENT THROUGHOUT YOUR ANSWER. IF YOU DECIDED THAT (B) WAS AN OFFER THEN DOES IT MAKE SENSE FOR (C) TO ALSO BE AN OFFER? IF (B) WAS AN OFFER, THEN COULD THIS BE AN ACCEPTANCE?
(d) and (e) ISSUE: WILL DEPEND ON WHAT YOUR CONCLUSION WAS FOR PARAGRAPH ( C) ABOVE, BE PREPARED TO ARGUE IN THE ALTERNATIVE AND CONSIDER BOTH POSSIBILITIES.
IF (C) WAS AN INVITATION TO TREAT, IS THIS FAX AN OFFER?
You need to go through each possibility as you go through the question.
LAW: What constitutes an offer? It must be definite,
made to a person,
and communicated.
(HOW DO YOU KNOW THIS? - WHICH LEGAL PRINCIPLES -DERIVED FROM WHICH CASES – WILL YOU CITE?)
APPLICATION:
Was there:
Ø a definite undertaking – the price and delivery are clear.
Ø to a specific person – to Gary
Ø which has been communicated – by fax, but it has not yet been read?
Consider all elements.
IF (C) WAS AN OFFER, IS THIS FAX A COUNTER OFFER OR AN ACCEPTANCE?
If (c) was an offer,
ISSUE: is this a counter-offer or an acceptance?
LAW: Counter-offer – see discussion of offer above, and consider all the elements.
APPLICATION: Does Derek reject the offer made by Gary
ISSUE: Has Derek accepted the offer?
LAW: Was there:
Ø Communication
Ø In reliance on the offer
Ø Acceptance express or implied?
Ø Completeness
Ø Certainty
APPLICATION:
Is Gary
Is the fax sent in reliance on the offer made by Gary
Is it accepting all the terms of the offer?
Is it certain and complete?
If acceptance is by fax, when was the contract made?
Finally for completeness you may look at:
If Acceptance, was there consideration?
Ø Sufficient?
Ø Does it move from the promise?
If Consideration, was there intention to create legal relations?
THE PURPOSE OF CONSIDERING ALL THESE ELEMENTS IS TO DETERMINE IF AT ANY STAGE DURING THE EXCHANGE OF FAXES/MESSAGES AN ENFORCEABLE CONTRACT WAS CONCLUDED BETWEEN GARY AND DEREK. REMEMBER OUR ISSUE FOR DECISION IS: IS THERE A BINDING CONTRACT BETWEEN GARY AND DEREK, WHICH DEREK CAN ENFORCE TO GET HIS CARROTS?
IF YES, WHAT WILL BE THE EFFECT OF (E)?
IF NO, WHAT CAN DEREK DO? IF NONE OF THE COMMUNICATIONS HAVE SUCCESSFULLY FORMED A CONTRACT, THEN HE NEEDS TO BUY HIS CARROTS SOMEWHERE ELSE.
Susan Carter, Katherine Jolley – May 2005
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