TUTORIAL 4 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 Adams 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 Adams 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 Berts money on the party. He cant 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 Adams 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 Adams 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 mothers party, for Adams 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 Berts 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)
Uncle/nephew
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)
Is it intended to be a commercial relationship?
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 Garys
answering machine, offering to buy carrots and asking this weeks
case price for carrots and explaining that he wanted them as soon as
possible.

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 Garys fax and said that he
wanted 2 cases to be delivered on Wednesday and another two on
Friday at the same price?
What is the nature of this fax? Has the information in the fax been
communicated to Gary? When?
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 was approached by another trader who
offered $25 per case for all his carrots for the next three weeks. Gary
agreed to this immediately.
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 to be legally bound to
sell the carrots to Derek? What facts from the question will you apply
to reach your conclusion?
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:
a definite undertaking the price and delivery are clear.
to a specific person to Gary
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 and
substitute his own offer?
ISSUE: Has Derek accepted the offer?
LAW: Was there:
Communication
In reliance on the offer
Acceptance express or implied?
Completeness
Certainty
APPLICATION:
Is Gary aware of the fax from Derek in (d) above?
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?
Sufficient?
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