An agreement must contain four essential elements to be regarded as a contract. If any one of them is missing, the agreement will not be legally binding.
Offer
There must be a definite, clearly stated offer to do
something. For example: A quotation by sub-contractor to the main
contractor and an offer to lease.
An offer does not include ball park estimates,
requests for proposals, expressions of interest, or letters of intent.
Invitation
to treat
An invitation to treat is part of the preliminaries
of negotiation, whereas an offer is legally binding once accepted, subject to
compliance with the terms of the offer. For example: Invitations to treat
are advertisements, price lists, circulars and catalogues.
Case
Study:
Fisher
v Bell (1960)
A shopkeeper displayed a flick knife with a price
tag in the window. The Restriction of Offensive Weapons Act 1959 made it an
offence to 'offer for sale' a 'flick knife'. The shopkeeper was prosecuted in
the magistrates' court but the Justices declined to convict on the basis that
the knife had not, in law, been 'offered for sale'.
This decision was upheld by the Queen's Bench
Divisional Court. Lord Parker CJ stated: "It is perfectly clear that
according to the ordinary law of contract the display of an article with a
price on it in a shop window is merely an invitation to treat. It is in no
sense an offer for sale the acceptance of which constitutes a contract."
Acceptance
Only what is offered can be accepted. This means
that the offer must be accepted exactly as offered without conditions. If any
new terms are suggested this is regarded as a counter offer which can be
accepted or rejected.
There can be many offers and counter offers before
there is an agreement. It is not important who makes the final offer, it is the
acceptance of that offer that brings the negotiations to an end by establishing
the terms and conditions of the contract.
Acceptance can be given verbally, in writing, or
inferred by action which clearly indicates acceptance (performance of the
contract). In any case, the acceptance must conform with the method prescribed
by the offerer for it to be effective.
Case
Study:
Adams
v Lindsell (1818)
The facts of Adams v Lindsell are that: the
defendants wrote to the plaintiffs on 2 September, offering to sell them some
wool and requested that the plaintiffs reply ‘in course of post'. The letter
which contained the offer was wrongly addressed and therefore the plaintiffs
did not receive it until 5 September. As a result of this delay, the letter of
acceptance was not received until 9 September by the defendants, and this was
two days later than the defendants would have expected to receive it. Because
of this, on 8 September the defendants had sold the wool to a third person. The
question for the court in Adams v Lindsell was therefore whether a contract of
sale had been entered into before 8 September when the wool was sold to the
third party. If the acceptance was effective when it arrived at the address or
when the defendant saw it, then no contract would have been made and the sale
to the third party would amount to revocation of the offer. However, the court
held that the offer had been accepted as soon as the letter had been posted.
Thus, in Adams v Lindsell there was indeed a contract in existence before the
sale of the wool to the third party, even though the letter had not actually
been received by the defendant. The defendant was therefore liable in breach of
contract.
Intention
of legal consequences
A contract requires that the parties intend to enter
into a legally binding agreement. That is, the parties entering into the
contract must intend to create legal relations and must understand that the
agreement can be enforced by law.
The intention to create legal relations is presumed,
so the contract doesn't have to expressly state that you understand and intend
legal consequences to follow.
If the parties to a contract decide not to be
legally bound, this must be clearly stated in the contract for it not to be
legally enforceable.
Types
and Case Study
a) Commercial
or business relations
In term of general rules of commercial or business
relations, there is a presumption or intention to be legally binding. Otherwise
in term of exception the presumption is rebuttable.
Case
example: Kleinwort Benson Ltd V Malaysia Mining Corporation Bhd in year 1989
The case shows the letters of comfort. In this case,
the plaintiff (bank) agreed loan to MMC Metals, subsidiary of MMC. The bank
asked MMC to guarantee loan. MMC said not policy to guarantee loans to subsides
offered letter of comfort stating: "It is our policy to ensure that the
business of MMC (Metals) is at all times in a position to meet its liabilities
under the arrangements”. The bank accepted but charged higher rate of interest
and the market collapsed and MMC went into liquidation. The plaintiffs tried to
claim balance from MMC. First instance the court found in favour of plaintiff,
relying heavily on Skyways (1964) ruling overturned on appeal and the judge
said Skyways case not was about promise supported by consideration so not
applicable here. Hence, ruled no intention to create legally binding agreement
statement was not meant to act as guarantee, stating on current position, not
future intention.
b) Social
friend's relations
In term of general rules of social friend's
relations, there is no presumption to be legally binding. Otherwise, in term of
exception the presumption is rebuttable.
Case
example: Simpkins V Pays in year 1955
The case shows mutuality. In this case .the
defendant, her granddaughter and the plaintiff (paying lodger) regularly took
part in newspaper competition. All contributed but entered in defendant's name.
There is no set of arrangement that state payment of postage etc. When entry of
the competition is successful, defendant refused to share with plaintiff. The
plaintiff sued for his share. Court ruled legally binding relationship as
sufficient mutuality in the arrangements between parties.
c) Family or
domestic relations
In term of general rules of family or domestic
relations, there is no presumption to be legally binding. Otherwise, in term of
exception the presumption is rebuttable.
Case
example: Balfour v Balfour in year 1919
The husband brought wife to England from Sri Lanka.
The husband had to return but wife stayed for medical reasons. He promised to
pay her £30/month until his return. When he failed to pay, the wife sued the
husband. Wife's action failed because there is no consideration moved from her
and there is no intention to create legally binding agreement found. The court
stated in husband and wife cases, burden of proof is on plaintiff to prove
intention to create legally binding agreement.
Consideration
In order for a contract to be binding it must be
supported by valuable consideration. That is to say, one party promises to do
something in return for a promise from the other party to provide a benefit of
value (the consideration)
Consideration is what each party gives to the other
as the agreed price for the other's promises. Usually the consideration is the
payment of money but it need not be; it can be anything of value including the
promise not to do something, or to refrain from exercising some right.
The payment doesn't need to be a fair payment. The
courts will not intervene where one party has made a hard bargain unless fraud,
duress or unconscionable conduct is involved.
Example
of consideration:
Ben promises to wash Jerry’s car in exchange for
Jerry’s promise to pay him $500. Ben and Jerry have each bargained for the
other’s promise. Ben considers his promise to wash Jerry’s car as the price he
needs to pay to get Jerry’s $500 and Jerry considers his promise to pay $500 as
the price he has to pay for Ben’s promise to wash his car. This exchange of
promises is consideration.
Case
Study:
Glassbrooke
v GCC (1925)
The police were under a duty to protect a coal mine
during a strike, and proposed mobile units. The mine owner promised to pay for
police to be stationed on the premises. The police complied with this request
but when they claimed the money, the mine owner refused to pay saying that the
police had simply carried out their public duty.
It was held that although the police were bound to
provide protection, they had a discretion as to the form it should take. As
they believed mobile police were sufficient, they had acted over their normal
duties. The extra protection was good consideration for the promise by the mine
owner to pay for it and so the police were entitled to payment.
An agreement must contain four essential elements to be regarded as a contract. If any one of them is missing, the agreement will not be legally binding.
Offer
There must be a definite, clearly stated offer to do
something. For example: A quotation by sub-contractor to the main
contractor and an offer to lease.
An offer does not include ball park estimates,
requests for proposals, expressions of interest, or letters of intent.
Invitation
to treat
An invitation to treat is part of the preliminaries
of negotiation, whereas an offer is legally binding once accepted, subject to
compliance with the terms of the offer. For example: Invitations to treat
are advertisements, price lists, circulars and catalogues.
Case
Study:
Fisher
v Bell (1960)
A shopkeeper displayed a flick knife with a price
tag in the window. The Restriction of Offensive Weapons Act 1959 made it an
offence to 'offer for sale' a 'flick knife'. The shopkeeper was prosecuted in
the magistrates' court but the Justices declined to convict on the basis that
the knife had not, in law, been 'offered for sale'.
This decision was upheld by the Queen's Bench
Divisional Court. Lord Parker CJ stated: "It is perfectly clear that
according to the ordinary law of contract the display of an article with a
price on it in a shop window is merely an invitation to treat. It is in no
sense an offer for sale the acceptance of which constitutes a contract."
Acceptance
Only what is offered can be accepted. This means
that the offer must be accepted exactly as offered without conditions. If any
new terms are suggested this is regarded as a counter offer which can be
accepted or rejected.
There can be many offers and counter offers before
there is an agreement. It is not important who makes the final offer, it is the
acceptance of that offer that brings the negotiations to an end by establishing
the terms and conditions of the contract.
Acceptance can be given verbally, in writing, or
inferred by action which clearly indicates acceptance (performance of the
contract). In any case, the acceptance must conform with the method prescribed
by the offerer for it to be effective.
Case
Study:
Adams
v Lindsell (1818)
The facts of Adams v Lindsell are that: the
defendants wrote to the plaintiffs on 2 September, offering to sell them some
wool and requested that the plaintiffs reply ‘in course of post'. The letter
which contained the offer was wrongly addressed and therefore the plaintiffs
did not receive it until 5 September. As a result of this delay, the letter of
acceptance was not received until 9 September by the defendants, and this was
two days later than the defendants would have expected to receive it. Because
of this, on 8 September the defendants had sold the wool to a third person. The
question for the court in Adams v Lindsell was therefore whether a contract of
sale had been entered into before 8 September when the wool was sold to the
third party. If the acceptance was effective when it arrived at the address or
when the defendant saw it, then no contract would have been made and the sale
to the third party would amount to revocation of the offer. However, the court
held that the offer had been accepted as soon as the letter had been posted.
Thus, in Adams v Lindsell there was indeed a contract in existence before the
sale of the wool to the third party, even though the letter had not actually
been received by the defendant. The defendant was therefore liable in breach of
contract.
Intention
of legal consequences
A contract requires that the parties intend to enter
into a legally binding agreement. That is, the parties entering into the
contract must intend to create legal relations and must understand that the
agreement can be enforced by law.
The intention to create legal relations is presumed,
so the contract doesn't have to expressly state that you understand and intend
legal consequences to follow.
If the parties to a contract decide not to be
legally bound, this must be clearly stated in the contract for it not to be
legally enforceable.
Types
and Case Study
a) Commercial
or business relations
In term of general rules of commercial or business
relations, there is a presumption or intention to be legally binding. Otherwise
in term of exception the presumption is rebuttable.
Case
example: Kleinwort Benson Ltd V Malaysia Mining Corporation Bhd in year 1989
The case shows the letters of comfort. In this case,
the plaintiff (bank) agreed loan to MMC Metals, subsidiary of MMC. The bank
asked MMC to guarantee loan. MMC said not policy to guarantee loans to subsides
offered letter of comfort stating: "It is our policy to ensure that the
business of MMC (Metals) is at all times in a position to meet its liabilities
under the arrangements”. The bank accepted but charged higher rate of interest
and the market collapsed and MMC went into liquidation. The plaintiffs tried to
claim balance from MMC. First instance the court found in favour of plaintiff,
relying heavily on Skyways (1964) ruling overturned on appeal and the judge
said Skyways case not was about promise supported by consideration so not
applicable here. Hence, ruled no intention to create legally binding agreement
statement was not meant to act as guarantee, stating on current position, not
future intention.
b) Social
friend's relations
In term of general rules of social friend's
relations, there is no presumption to be legally binding. Otherwise, in term of
exception the presumption is rebuttable.
Case
example: Simpkins V Pays in year 1955
The case shows mutuality. In this case .the
defendant, her granddaughter and the plaintiff (paying lodger) regularly took
part in newspaper competition. All contributed but entered in defendant's name.
There is no set of arrangement that state payment of postage etc. When entry of
the competition is successful, defendant refused to share with plaintiff. The
plaintiff sued for his share. Court ruled legally binding relationship as
sufficient mutuality in the arrangements between parties.
c) Family or
domestic relations
In term of general rules of family or domestic
relations, there is no presumption to be legally binding. Otherwise, in term of
exception the presumption is rebuttable.
Case
example: Balfour v Balfour in year 1919
The husband brought wife to England from Sri Lanka.
The husband had to return but wife stayed for medical reasons. He promised to
pay her £30/month until his return. When he failed to pay, the wife sued the
husband. Wife's action failed because there is no consideration moved from her
and there is no intention to create legally binding agreement found. The court
stated in husband and wife cases, burden of proof is on plaintiff to prove
intention to create legally binding agreement.
Consideration
In order for a contract to be binding it must be
supported by valuable consideration. That is to say, one party promises to do
something in return for a promise from the other party to provide a benefit of
value (the consideration)
Consideration is what each party gives to the other
as the agreed price for the other's promises. Usually the consideration is the
payment of money but it need not be; it can be anything of value including the
promise not to do something, or to refrain from exercising some right.
The payment doesn't need to be a fair payment. The
courts will not intervene where one party has made a hard bargain unless fraud,
duress or unconscionable conduct is involved.
Example
of consideration:
Ben promises to wash Jerry’s car in exchange for
Jerry’s promise to pay him $500. Ben and Jerry have each bargained for the
other’s promise. Ben considers his promise to wash Jerry’s car as the price he
needs to pay to get Jerry’s $500 and Jerry considers his promise to pay $500 as
the price he has to pay for Ben’s promise to wash his car. This exchange of
promises is consideration.
Case
Study:
Glassbrooke
v GCC (1925)
The police were under a duty to protect a coal mine
during a strike, and proposed mobile units. The mine owner promised to pay for
police to be stationed on the premises. The police complied with this request
but when they claimed the money, the mine owner refused to pay saying that the
police had simply carried out their public duty.
It was held that although the police were bound to
provide protection, they had a discretion as to the form it should take. As
they believed mobile police were sufficient, they had acted over their normal
duties. The extra protection was good consideration for the promise by the mine
owner to pay for it and so the police were entitled to payment.
An agreement must contain four essential elements to be regarded as a contract. If any one of them is missing, the agreement will not be legally binding.
Offer
There must be a definite, clearly stated offer to do
something. For example: A quotation by sub-contractor to the main
contractor and an offer to lease.
An offer does not include ball park estimates,
requests for proposals, expressions of interest, or letters of intent.
Invitation
to treat
An invitation to treat is part of the preliminaries
of negotiation, whereas an offer is legally binding once accepted, subject to
compliance with the terms of the offer. For example: Invitations to treat
are advertisements, price lists, circulars and catalogues.
Case
Study:
Fisher
v Bell (1960)
A shopkeeper displayed a flick knife with a price
tag in the window. The Restriction of Offensive Weapons Act 1959 made it an
offence to 'offer for sale' a 'flick knife'. The shopkeeper was prosecuted in
the magistrates' court but the Justices declined to convict on the basis that
the knife had not, in law, been 'offered for sale'.
This decision was upheld by the Queen's Bench
Divisional Court. Lord Parker CJ stated: "It is perfectly clear that
according to the ordinary law of contract the display of an article with a
price on it in a shop window is merely an invitation to treat. It is in no
sense an offer for sale the acceptance of which constitutes a contract."
Acceptance
Only what is offered can be accepted. This means
that the offer must be accepted exactly as offered without conditions. If any
new terms are suggested this is regarded as a counter offer which can be
accepted or rejected.
There can be many offers and counter offers before
there is an agreement. It is not important who makes the final offer, it is the
acceptance of that offer that brings the negotiations to an end by establishing
the terms and conditions of the contract.
Acceptance can be given verbally, in writing, or
inferred by action which clearly indicates acceptance (performance of the
contract). In any case, the acceptance must conform with the method prescribed
by the offerer for it to be effective.
Case
Study:
Adams
v Lindsell (1818)
The facts of Adams v Lindsell are that: the
defendants wrote to the plaintiffs on 2 September, offering to sell them some
wool and requested that the plaintiffs reply ‘in course of post'. The letter
which contained the offer was wrongly addressed and therefore the plaintiffs
did not receive it until 5 September. As a result of this delay, the letter of
acceptance was not received until 9 September by the defendants, and this was
two days later than the defendants would have expected to receive it. Because
of this, on 8 September the defendants had sold the wool to a third person. The
question for the court in Adams v Lindsell was therefore whether a contract of
sale had been entered into before 8 September when the wool was sold to the
third party. If the acceptance was effective when it arrived at the address or
when the defendant saw it, then no contract would have been made and the sale
to the third party would amount to revocation of the offer. However, the court
held that the offer had been accepted as soon as the letter had been posted.
Thus, in Adams v Lindsell there was indeed a contract in existence before the
sale of the wool to the third party, even though the letter had not actually
been received by the defendant. The defendant was therefore liable in breach of
contract.
Intention
of legal consequences
A contract requires that the parties intend to enter
into a legally binding agreement. That is, the parties entering into the
contract must intend to create legal relations and must understand that the
agreement can be enforced by law.
The intention to create legal relations is presumed,
so the contract doesn't have to expressly state that you understand and intend
legal consequences to follow.
If the parties to a contract decide not to be
legally bound, this must be clearly stated in the contract for it not to be
legally enforceable.
Types
and Case Study
a) Commercial
or business relations
In term of general rules of commercial or business
relations, there is a presumption or intention to be legally binding. Otherwise
in term of exception the presumption is rebuttable.
Case
example: Kleinwort Benson Ltd V Malaysia Mining Corporation Bhd in year 1989
The case shows the letters of comfort. In this case,
the plaintiff (bank) agreed loan to MMC Metals, subsidiary of MMC. The bank
asked MMC to guarantee loan. MMC said not policy to guarantee loans to subsides
offered letter of comfort stating: "It is our policy to ensure that the
business of MMC (Metals) is at all times in a position to meet its liabilities
under the arrangements”. The bank accepted but charged higher rate of interest
and the market collapsed and MMC went into liquidation. The plaintiffs tried to
claim balance from MMC. First instance the court found in favour of plaintiff,
relying heavily on Skyways (1964) ruling overturned on appeal and the judge
said Skyways case not was about promise supported by consideration so not
applicable here. Hence, ruled no intention to create legally binding agreement
statement was not meant to act as guarantee, stating on current position, not
future intention.
b) Social
friend's relations
In term of general rules of social friend's
relations, there is no presumption to be legally binding. Otherwise, in term of
exception the presumption is rebuttable.
Case
example: Simpkins V Pays in year 1955
The case shows mutuality. In this case .the
defendant, her granddaughter and the plaintiff (paying lodger) regularly took
part in newspaper competition. All contributed but entered in defendant's name.
There is no set of arrangement that state payment of postage etc. When entry of
the competition is successful, defendant refused to share with plaintiff. The
plaintiff sued for his share. Court ruled legally binding relationship as
sufficient mutuality in the arrangements between parties.
c) Family or
domestic relations
In term of general rules of family or domestic
relations, there is no presumption to be legally binding. Otherwise, in term of
exception the presumption is rebuttable.
Case
example: Balfour v Balfour in year 1919
The husband brought wife to England from Sri Lanka.
The husband had to return but wife stayed for medical reasons. He promised to
pay her £30/month until his return. When he failed to pay, the wife sued the
husband. Wife's action failed because there is no consideration moved from her
and there is no intention to create legally binding agreement found. The court
stated in husband and wife cases, burden of proof is on plaintiff to prove
intention to create legally binding agreement.
Consideration
In order for a contract to be binding it must be
supported by valuable consideration. That is to say, one party promises to do
something in return for a promise from the other party to provide a benefit of
value (the consideration)
Consideration is what each party gives to the other
as the agreed price for the other's promises. Usually the consideration is the
payment of money but it need not be; it can be anything of value including the
promise not to do something, or to refrain from exercising some right.
The payment doesn't need to be a fair payment. The
courts will not intervene where one party has made a hard bargain unless fraud,
duress or unconscionable conduct is involved.
Example
of consideration:
Ben promises to wash Jerry’s car in exchange for
Jerry’s promise to pay him $500. Ben and Jerry have each bargained for the
other’s promise. Ben considers his promise to wash Jerry’s car as the price he
needs to pay to get Jerry’s $500 and Jerry considers his promise to pay $500 as
the price he has to pay for Ben’s promise to wash his car. This exchange of
promises is consideration.
Case
Study:
Glassbrooke
v GCC (1925)
The police were under a duty to protect a coal mine
during a strike, and proposed mobile units. The mine owner promised to pay for
police to be stationed on the premises. The police complied with this request
but when they claimed the money, the mine owner refused to pay saying that the
police had simply carried out their public duty.
It was held that although the police were bound to
provide protection, they had a discretion as to the form it should take. As
they believed mobile police were sufficient, they had acted over their normal
duties. The extra protection was good consideration for the promise by the mine
owner to pay for it and so the police were entitled to payment.
An agreement must contain four essential elements to be regarded as a contract. If any one of them is missing, the agreement will not be legally binding.
Offer
There must be a definite, clearly stated offer to do
something. For example: A quotation by sub-contractor to the main
contractor and an offer to lease.
An offer does not include ball park estimates,
requests for proposals, expressions of interest, or letters of intent.
Invitation
to treat
An invitation to treat is part of the preliminaries
of negotiation, whereas an offer is legally binding once accepted, subject to
compliance with the terms of the offer. For example: Invitations to treat
are advertisements, price lists, circulars and catalogues.
Case
Study:
Fisher
v Bell (1960)
A shopkeeper displayed a flick knife with a price
tag in the window. The Restriction of Offensive Weapons Act 1959 made it an
offence to 'offer for sale' a 'flick knife'. The shopkeeper was prosecuted in
the magistrates' court but the Justices declined to convict on the basis that
the knife had not, in law, been 'offered for sale'.
This decision was upheld by the Queen's Bench
Divisional Court. Lord Parker CJ stated: "It is perfectly clear that
according to the ordinary law of contract the display of an article with a
price on it in a shop window is merely an invitation to treat. It is in no
sense an offer for sale the acceptance of which constitutes a contract."
Acceptance
Only what is offered can be accepted. This means
that the offer must be accepted exactly as offered without conditions. If any
new terms are suggested this is regarded as a counter offer which can be
accepted or rejected.
There can be many offers and counter offers before
there is an agreement. It is not important who makes the final offer, it is the
acceptance of that offer that brings the negotiations to an end by establishing
the terms and conditions of the contract.
Acceptance can be given verbally, in writing, or
inferred by action which clearly indicates acceptance (performance of the
contract). In any case, the acceptance must conform with the method prescribed
by the offerer for it to be effective.
Case
Study:
Adams
v Lindsell (1818)
The facts of Adams v Lindsell are that: the
defendants wrote to the plaintiffs on 2 September, offering to sell them some
wool and requested that the plaintiffs reply ‘in course of post'. The letter
which contained the offer was wrongly addressed and therefore the plaintiffs
did not receive it until 5 September. As a result of this delay, the letter of
acceptance was not received until 9 September by the defendants, and this was
two days later than the defendants would have expected to receive it. Because
of this, on 8 September the defendants had sold the wool to a third person. The
question for the court in Adams v Lindsell was therefore whether a contract of
sale had been entered into before 8 September when the wool was sold to the
third party. If the acceptance was effective when it arrived at the address or
when the defendant saw it, then no contract would have been made and the sale
to the third party would amount to revocation of the offer. However, the court
held that the offer had been accepted as soon as the letter had been posted.
Thus, in Adams v Lindsell there was indeed a contract in existence before the
sale of the wool to the third party, even though the letter had not actually
been received by the defendant. The defendant was therefore liable in breach of
contract.
Intention
of legal consequences
A contract requires that the parties intend to enter
into a legally binding agreement. That is, the parties entering into the
contract must intend to create legal relations and must understand that the
agreement can be enforced by law.
The intention to create legal relations is presumed,
so the contract doesn't have to expressly state that you understand and intend
legal consequences to follow.
If the parties to a contract decide not to be
legally bound, this must be clearly stated in the contract for it not to be
legally enforceable.
Types
and Case Study
a) Commercial
or business relations
In term of general rules of commercial or business
relations, there is a presumption or intention to be legally binding. Otherwise
in term of exception the presumption is rebuttable.
Case
example: Kleinwort Benson Ltd V Malaysia Mining Corporation Bhd in year 1989
The case shows the letters of comfort. In this case,
the plaintiff (bank) agreed loan to MMC Metals, subsidiary of MMC. The bank
asked MMC to guarantee loan. MMC said not policy to guarantee loans to subsides
offered letter of comfort stating: "It is our policy to ensure that the
business of MMC (Metals) is at all times in a position to meet its liabilities
under the arrangements”. The bank accepted but charged higher rate of interest
and the market collapsed and MMC went into liquidation. The plaintiffs tried to
claim balance from MMC. First instance the court found in favour of plaintiff,
relying heavily on Skyways (1964) ruling overturned on appeal and the judge
said Skyways case not was about promise supported by consideration so not
applicable here. Hence, ruled no intention to create legally binding agreement
statement was not meant to act as guarantee, stating on current position, not
future intention.
b) Social
friend's relations
In term of general rules of social friend's
relations, there is no presumption to be legally binding. Otherwise, in term of
exception the presumption is rebuttable.
Case
example: Simpkins V Pays in year 1955
The case shows mutuality. In this case .the
defendant, her granddaughter and the plaintiff (paying lodger) regularly took
part in newspaper competition. All contributed but entered in defendant's name.
There is no set of arrangement that state payment of postage etc. When entry of
the competition is successful, defendant refused to share with plaintiff. The
plaintiff sued for his share. Court ruled legally binding relationship as
sufficient mutuality in the arrangements between parties.
c) Family or
domestic relations
In term of general rules of family or domestic
relations, there is no presumption to be legally binding. Otherwise, in term of
exception the presumption is rebuttable.
Case
example: Balfour v Balfour in year 1919
The husband brought wife to England from Sri Lanka.
The husband had to return but wife stayed for medical reasons. He promised to
pay her £30/month until his return. When he failed to pay, the wife sued the
husband. Wife's action failed because there is no consideration moved from her
and there is no intention to create legally binding agreement found. The court
stated in husband and wife cases, burden of proof is on plaintiff to prove
intention to create legally binding agreement.
Consideration
In order for a contract to be binding it must be
supported by valuable consideration. That is to say, one party promises to do
something in return for a promise from the other party to provide a benefit of
value (the consideration)
Consideration is what each party gives to the other
as the agreed price for the other's promises. Usually the consideration is the
payment of money but it need not be; it can be anything of value including the
promise not to do something, or to refrain from exercising some right.
The payment doesn't need to be a fair payment. The
courts will not intervene where one party has made a hard bargain unless fraud,
duress or unconscionable conduct is involved.
Example
of consideration:
Ben promises to wash Jerry’s car in exchange for
Jerry’s promise to pay him $500. Ben and Jerry have each bargained for the
other’s promise. Ben considers his promise to wash Jerry’s car as the price he
needs to pay to get Jerry’s $500 and Jerry considers his promise to pay $500 as
the price he has to pay for Ben’s promise to wash his car. This exchange of
promises is consideration.
Case
Study:
Glassbrooke
v GCC (1925)
The police were under a duty to protect a coal mine
during a strike, and proposed mobile units. The mine owner promised to pay for
police to be stationed on the premises. The police complied with this request
but when they claimed the money, the mine owner refused to pay saying that the
police had simply carried out their public duty.
It was held that although the police were bound to
provide protection, they had a discretion as to the form it should take. As
they believed mobile police were sufficient, they had acted over their normal
duties. The extra protection was good consideration for the promise by the mine
owner to pay for it and so the police were entitled to payment.
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