Year 10 Legal Studies

1. Civil Law: Agreements & Torts
Year 10 Legal Studies | Term 4 2014

2. Agreements

3. Agreements
• Agreements: an exchange of promises between two or
more parties – one party promises to do something
and in return the other party promises to do
something else
• What agreements do you make in life?
• Explain your rights and obligations in one agreement
you have entered into.
• Why do parties to an agreement end up in court
sometimes?

4. • If one party to an agreement does not fulfil their promise, it is considered a breach of
contract
• This means the other party can seek a legal remedy in court
• Courts can enforce a legally binding contract
• ie. Force the offending party to keep their promise and perform their obligations under the
contract
• Sometimes there is more than one legal remedy available

5. • The legal rules that regulate agreements is know as the law of agreements
• This includes the elements required to create a legally binding contract, and the legal rights
and responsibilities regarding the contract

6. Domestic vs Commercial Agreements
• Domestic agreements are less formal and are usually just
simple promises
• Agreeing to mow the lawn if your parents give you $20
• If your parents don’t pay you because they find out you didn’t do
your homework, is this breaking an agreement?
• Technically, yes – but in domestic agreement situations the parties
are not bound to their promises and the courts do not want to deal
with it
• Commercial agreements are more formal and are usually
made with people who are not friends/family
• Agreeing to mow the lady from down the road’s lawn if she pays
you $20
• This could be considered a contract, as you would have intended
the contract to be binding on both parties – if she doesn’t pay you,
she is in breach of contract

7. • The main differences are:
• The intention of the parties to be bound by the promise, and
• The nature of the relationship between two parties
• Why does the law have different rules for domestic and commercial agreements?
• In what situation would a domestic agreement be legally enforceable?
• What are some common agreements that are not legally enforceable?

8. Elements of an Agreement
• Some agreements are not legally enforceable
• This can be for a number of reasons
• To make an agreement legally binding, a number of elements must be present:
1. Agreement
a) Offer/Invitation to treat
b) Acceptance
2. Intention
3. Consideration
4. Capacity
• We will go through these individually

9. 1. Agreement between the parties
• There must be an agreement between the parties
• This agreement is made up of two parts: offer and acceptance
• An offer must be made, and then this must be accepted for a legally binding contract
be begin
• This seems simple, but it isn’t always black and white

10. 1a. An Offer
• Offer: a proposal by one party to enter into a legally binding
contract with another party
• Can be made orally, by conduct, or in writing
• It must be clear and certain
• Examples:
• Grace says to Samantha: “I’ll give you $10 if you wash my car.” 
spoken offer
• Philip signs a contract to buy a house  written offer
• Lishan takes a can of Coke to the shop assistant and gives them
money  offer by conduct

11. • General principles of an offer:
1. An offer may be made to a particular person, a class of person, or to the whole world
2. The offer must be communicated to the person accepting the offer
3. All the terms of the offer must be communicated to ther peson accepting the offer
and brought to his/her notice
4. The offer may specify conditions to be followed by the person accepting the offer
5. An offer can be withdrawn at any time before acceptance
6. An offer will lapse with a stated time, or after a reasonable time if no time stated

12. • The following are not legal offers:
• Invitation to treat
• Supply of information
• Invitation to treat: an invitation to someone to get them to make an offer
• Example: Naomi says: “I wish I could sell my phone. It’s probably worth $50.”
• This is just an invitation for someone to offer her $50 (or more or less) for her phone.
• Tyler might reply with: “I’ll buy it for $40.”
• This is an offer (which she can accept or reject)
• Naomi’s original statement is not an offer as it is a bit ambiguous as to its intention – she is
just wishing she could sell her phone for $50 – if she said “You can have my phone for $50”
that would be an offer as the intention is clearly to sell her phone for $50.

13. Fisher v Bell [1961] 1 QB 394
• Stock on shelves in supermarkets is considered an invitation to treat,
not a legal offer
• A shopkeeper placed a knife with a price tag in a shop window
• Britain had passed a law that prohibited the sale of knives and their
offering for sale
• The shopkeeper was charged with offering the knife for sale
• The court held that the displaying if the knife in the window was an
invitation to treat only
• The shopkeeper was not making an offer and could legally refuse to
sell the knife

14. • If items in shops were all legal offers, you would be legally
bound to buy any item you picked up, you would be implying
acceptance of the offer by picking up the items
• It can also be an issue for the business
• If they advertise a can of Coke for $1 and you wanted to accept
this offer, but they were out of stock, they would be in breach of
contract
• Courts usually say that the offer is made by the person who
wishes to buy the item
• By making a move to buy something (taking it to the counter or
contacting the seller) you are making an offer for the goods
through your conduct
• The offeree can legally refuse the offer

15. • A supply of information is simply someone informing
you of the cost – it is not considered a legal offer
• Example:
Louisa hears from Soklee that Siu is selling a guitar.
Louisa asks Siu how much she wants for it, and Siu
says $100. Siu is simply supplying Louisa with
information, she has not made an offer.
If Louisa says, “Ok, here’s $100” and Siu refuses it, Siu
is not in breach of contract as she did not make an offer,
and therefore has the right to refuse Louisa’s offer of
$100.

16. Activities
1. What are the three ways offers can be made?
2. Give reasons to support your answers to the following. Do you have the legal right
to:
a) Pick up a loaf of bread from Coles and then put it back?
b) Insist that a shopkeeper sell you an item for the price on the tag?
c) Reject an offer made to you?
d) Sue a shopkeeper because they are unable to supply you with an item that was advertised
in their catalogue?
e) Accept an offer made to a friend?

17. 1b. Acceptance of the offer
• Acceptance occurs when the party to whom the offer is made agrees to the proposal of
the person making the offer

18. • Acceptance can occur without actual communication
• You can accept the terms of a sale (ie. Buy one get one free) without actually
communicating as such – it is implied by paying for two of the correct items.

19. • A qualified acceptance cannot be made. This would amount to a counter-offer.
• You must accept the offer as it is, if you reply with a different version of the offer, it is
considered a counter-offer and must then be accepted by the original offeree.
Offer A: Buy my car for $10,000
Counter-Offer B: No,
how about $9,500
Acceptance: Ok.
This is the original offer. Because it is
not accepted, but is met with a
counter offer.
This is technically a new offer/new
start of an agreement.

20. • Any conditions stated in the offer must be followed before an acceptance can be said
to have taken place
• You must agree to the whole offer
• If your mum says “I will give you $20 to do the mowing, but only if you have finished
your homework” and then you mow the lawn. She is within her rights to not pay you
when she finds out you haven’t done all your homework.

21. Gilbert J McCaul (Australia) Pty Ltd v Pitt Club Limited (1957) 59 SR(NSW) 122
• Facts: There was the option to renew a lease. But the tenant had to:
• Give 3 months notice in writing prior to the end of the lease;
• Pay the rent punctually; and
• Otherwise perform all of the terms of the lease.
• If the tenant did not do these things then they could not expect to have their lease
renewed unless the landlord agreed.
• The tenant was rarely on time to pay the rent. The tenant chose to try to renew the
lease, but the landlord refused.
• Legal Issue: Was the punctual payment of rent a condition which had to be fulfilled?

22. • Decision: The court said that it was clearly a term of the acceptance by the landlord of
an option to renew that the rent must have been paid on time. The tenant was not
entitled to renew the lease and exercise the option.

23. • Acceptance can be made only by the parties to whom the offer was made.
• If I tell my brother David that he can buy my car for $5000, my brother-in-law
Anthony cannot accept this offer as it was not made to him
• He can however, make an offer to me to buy it for $5000 and I could accept or reject
this

24. • Once acceptance is communicated, it cannot be
withdrawn except with the consent of the person
making the offer
• Alison offers to buy Bob’s boat for $200,000. She signs
a contract. Bob signs the contract. Alison then emails
and says she doesn’t want to proceed and to not give
Bob the contract to sign.
• She is too late, the offer has been accepted. Unless Bob
chooses not to, he has to sell his boat.

25. • No one can accept an offer that they do not know
exists.
• In 1927 man X was murdered. A reward was set at
$1000 for information leading to the arrest and
conviction of the murdered. Man Y is charged with
the murder. He gives the police information leading
to the actual murderers arrest. He had forgotten
about the reward and was only giving the
information to get himself free.
• When he tried to claim the reward the court found
that he was not entitled to it as he gave information
to set himself free, not in acceptance of the offer.

26. • Acceptance must be made within the time prescribed, or if not time given, within a
reasonable time.
• ‘Half price – Monday only’ – you cannot sue them for not giving it to you for half price
on Tuesday.
• ‘If you wish to buy my car for $5000, email me by Monday 1 December 2014.’ The
person emails on December 5.
• Peter sells mangoes. He phones Fred and tells him he will sell them for $5 for 20
mangoes. Fred says he will call back as soon as he can. Peter says to let him know
ASAP as the mangoes are getting ripe. He doesn’t hear from Fred and so sells them to
other people in 24 hours. Fred phones and says he wants 400 cases and then tries to
sue Peter when he doesn’t supply them.
• It was found that it was unreasonable to expect Peter to hold fresh fruit for more than
24 hours and that 24 hours was a reasonable amount of time in the circumstances.

27. Carlill v Carbolic Smoke Ball Company (1893) CA 1 QB 256

28. • Facts: as in the advertisement. Mrs Carlill met these conditions and sued for £100
when the company refused to pay her.
• Legal Issue: Was the advertisement an offer or an invitation to treat? If it was an
offer, did Mrs Carlill accept the offer by performing the conditions set out in the offer
or should she have communicated her acceptance of the offer to the company before
doing so?
• The Carbolic Smoke Ball Company argued that the advertisement was not an offer
capable of acceptance and that it was ‘mere puff’ (sales talk) and was not intended to
be a promise at all.
• Alternatively, they said it was a contract, but one made with the world, which they
believed could not be validly made.

29. What would you decide?
• Decision: The advertisement was not merely an invitation to treat, but was an offer to
become liable to anyone who fulfilled the conditions. The offer impliedly dispensed
with the need for notification of acceptance, and anyone who performed the conditions
accepted the offer.
• It was held that the £1000 bank deposit showed that their sincerity in the matter
meant that the advertisement was not just ‘puff’ but was actually a serious offer.
• They also found that an offer can be made to the world at large.

30. Leonard v Pepsico Inc. (1999, US District Court, New York)
• Pepsi had a loyalty program whereby customers
collected points and used them to claim prizes.
• The ad showed a Harrier jet, flown by a teenager, that
could be claimed for 7 million points.
• A viewer saw this and managed to collect the 7 million
points.
• When he tried to redeem the jet, Pepsi said there was
no offer.
• What do you think?

31. Hyde v Wrench [1840] 49 ER 132
• Facts: Wrench offered to sell Hyde property for $1000. Hyde said he would pay $950
but Wrench refused. Hyde then said he would pay $1000, but Wrench still refused.
Hyde sued, saying there was a legal agreement between the parties.
• Issue: Was there a contract between the parties?

32. What would you decide?
• Decision: the court found that there was no contract, because acceptance had not
occurred.

33. 2. Intention to create a legal contract
• Domestic agreements generally do not contain an intention to be held legally liable
for something
• This intention is when both parties wish for the agreement/contract to be legally
binding
• That is, they agree that if there is a breach of contract (from either party) then there may be
legal consequences
• For example, if your mum offers to pay you $20 for mowing, this would be a domestic
agreement, and your mum probably does not intend it to hold any legal ramifications
if she doesn’t pay up

34. • However, for commercial, legally binding agreements, there are a number of things
the court will look for to decide if there was intent:
• What was agreed upon
• Agreeing to mow the lawn is less serious than a company merger worth millions of dollars
• The circumstances of the agreement being formed
• If it was made during a big night out at the pub, after too many drinks, perhaps it shouldn’t be as
legally binding
• The words used by the parties
• More formal words and language = more likely to be a legally binding agreement
• The effect of the agreement on the parties
• Not being allowed to go to a party after your mum said you could if you stacked the dishwasher is not
that dire, however, a business having to close after losing million of dollars is much worse
• How the people acted
• Did they act as if the agreement was binding?

35. • Agreements between husbands and wives are usually considered domestic
• Except for when it involves marriage breakdowns and property investments
Merritt v Merritt [1971] WLR 1211
• Husband and wife are divorcing
• Husband says the wife can have the family home after the divorce
• However, he goes back on this and refuses to transfer it
• The found that this was not a social agreement and as such was bound by it
• It was more like a business arrangement

36. 3. Consideration
• The ‘price of the promise’
• Something of value passing from one party to the other in return for the promise
made
• I agree to pay $5,000 for someone’s boat
Boat
$5,000

37. • Consideration can be:
• Promising to supply something – a service or a good
• Exchanging money for a car wash
• Money
• If there is a breach of contract, the person who decides to sue (the complainant or
plaintiff) must prove they have given consideration for the other’s promise

38. General principles of consideration:
• C must exist in every simple contract
Heaton v Richards (1881) 2 LR (NSW) 73
• Facts: Plaintiff wants to print and publish a book. The govt agrees to do this if the
paintiff pays for all the costs. The govt is not receiving any benefit from this. The govt
was unable to uphold their end of the bargain. The plaintiff sued the govt for not
carrying out the contract.
• Legal Issue: Was there a binding agreement? Was there consideration passing from
the Plaintiff to the govt?

39. • Decision: there was no consideration passing from the plaintiff to the govt, therefore
the contract was not binding.

40. • As long as there is C, the court is not concerned as to its adequacy, provided it is of
some value.
• It is irrelevant whether the consideration on offer is of value to you as long as it is of
value to those involved in the case
• Consider trading cards in primary school – seems ridiculous to some, but to others
they held great value

41. • Chappell and Co. Limited v Nestle Co. Limited (1960) AC 87
• Facts: The respondents offered to sell a record for 1shilling 6pence plus 3 chocolate
bar wrappers. The applicant sued them for not delivering the record when they paid
1shilling 6pence. The applicants did not supply the chocolate bars as requested.
• The applicants argued that the chocolate wrappers were of no value to the
respondents.
• Legal Issue: Were the chocolate wrappers part of the consideration?

42. • Decision: A contracting party can stipulate what consideration he or she chooses.
• The respondents asked for chocolate wrappers, and as such it was within their rights
to refuse the offer of the applicants and therefore there was no binding contract.

43. • C must not be illegal or unlawful.
• You cannot agree to kill someone for money, or give them drugs as these things are
illegal.
• You cannot sue the driver of your getaway car after a bank robbery for not driving as
fast as agreed.

44. • C must be definite.
• Shiels v Drysdale (1880) 6 VLR 126
• Facts: a daughter promised to look after her aged father and mother as long as they
lived. In return, the father agreed, when requested by her, to transfer to her is
interest in some of his land. The father did not transfer any land to the daughter
when she made the request. She sued on the agreement claiming that the land sould
be transferred to her.
• Legal Issue: Could the subject matter of the contract be identified? That is, could the
land which was to be consideration for the promise to look after her father and
mother be identified so it could be transferred?

45. • Decision: Because the land was not identified clearly, it was not possible to transfer
any land to the daughter. The court held that the contract was void because of
uncertainty.

46. • C offered now in return for past performance is not good C.
• Roscorla v Thomas (1842) 3 QB 234
• Facts: Roscorla bought a horse from Thomas. After Thomas delivered the horse to
Roscorla, Thomas said that the horse was “free from vice”. In fact the horse was a
vicious animal. Prior to the sale there had been no representation by Thomas about
the horse and Roscorla had satisfied himself that the animal was sound. Roscorla
sued Thomas saying that he promised that the horse was “free from vice” and should
receive his money back.
• Legal Issue: Was the promise made by Thomas that the horse was “free from vice”
part of the consideration?

47. • Decision: The court held that the prior sale was not consideration for the promise that
the horse was “free from vice”. The promise made by Thomas was therefore not
enforceable, as it was made after the sale had been completed.

48. • C must be possible to carry out.
• The promise cannot be something impossible:
• Hold your breath under water for an hour without a breathing apparatus
• Fly to the moon on a carrot
• …you get the idea

49. • The C must be provided by the person who has made the promise.
• Jack, Phoebe and Michael all live in the same street and are friends. One afternoon,
One day while the three of them are hanging out Phoebe asks Jack to mow her lawn.
He says he will for $30. Phoebe agrees.
• Two days later Jack goes on holidays to Sydney. While he is away Michael mows
Phoebe’s lawn. Just as he is packing away the lawn mower, Phoebe arrives home from
the shops. Michael says hello, and asks if he can have the $30 in cash before he
leaves. Phoebe refuses his request. A bit angry, Michael threatens to sue Phoebe
unless she pays.
• FILAC this scenario.

50. • If someone promises to do something or does something which he or she is already
obliged to do under a contract, then that promise is not further C.
• Folkes v Beer (1884) 9 AC 605
• Facts: The plaintiff won a court judgment against the defendant. The defendant
asked for time to pay. The plaintiff was entitled to payment of the judgment debt plus
interest which accrued on any outstanding balance. It was agreed by the plaintiff that
the defendant would pay a certain sum at once and the balance by instalments. The
defendant eventually paid the whole of the judgment debt but did not pay the interest
which had accrued on the unpaid balances. The plaintiff sued the defendant.
• Legal Issue: Was the agreement by the plaintiff to accept payment by instalments
consideration for the whole of the judgment debt plus interest?

51. • Decision: It was held that the defendant was not relieved from the obligation to pay
interest. The defendant had not promised to do anything other than what he was
obliged to do.

52. 4. Lack of Legal Capacity
• Whether someone can enter into a legal agreement is called capacity
• Some people are not allowed to enter into legal agreements
• If they do, the agreement will not be upheld by the courts
• These include:
• Bankrupt people
• Criminals
• Mentally ill people
• Some intoxicated people
• They are said to lack capacity to contract

53. • Some groups of people also have special rules
• Such as corporations and people who are not Australian citizens
• Some contracts are between people who are not ‘equals’ (in the eyes of the law)
• The law will look at the question: is this agreement fair or has the stronger party
driven too hard a bargain?

54. Infants & Majority
• Legally, you are an infant until you reach 18 years old
• This is usually referred to as being a ‘minor’
• Minors lack capacity to enter into legal agreements
• There are 4 exceptions to this rule:
1. Contracts for necessaries
2. Contracts for the benefit of infants
3. Long-term contracts – binding unless repudiated
4. Where an infant needs to ratify a contract for it to be binding

55. 1. Contracts for necessaries
• Necessaries are things which maintain the minor in question to the standard of living
which they enjoy
• Their social position, age and occupation are all relevant factors
• Eg: a minor buys a bike to ride 20km to work every day – the court held that he had
to pay for it under contract because it was a necessary
2. Contracts for the benefit of infants
3. Long-term contracts – binding unless repudiated
4. Where an infant needs to ratify a contract for it to be binding

56. 1. Contracts for necessaries
2. Contracts for the benefit of infants
• When a minor enters a contract for an apprenticeship or some other agreement which
is for their benefit, they are usually bound by it
• The concept of what is a ‘benefit’ for the minor is determined by the facts of each case
3. Long-term contracts – binding unless repudiated
4. Where an infant needs to ratify a contract for it to be binding

57. 1. Contracts for necessaries
2. Contracts for the benefit of infants
3. Long-term contracts – binding unless repudiated
• This exception is for those contracts which involve a continuing obligation, and where
minors acquire property of a permanent nature
• Unless the minor repudiates (rejects, cancels, etc) the contract within a reasonable
time after turning 18, the contract becomes legally binding
4. Where an infant needs to ratify a contract for it to be binding

58. 1. Contracts for necessaries
2. Contracts for the benefit of infants
3. Long-term contracts – binding unless repudiated
4. Where an infant needs to ratify a contract for it to be binding
• After turning 18 a minor may confirm an agreement made previously so that they
become legally bound to it
• This is called ratification
• Generally, any contract that is not already legally binding (such as rule #1 above)
must be ratified for it to be binding on the infant