Posted on Monday, 6 May 2013

Formation of contract

Agreement: The two parties must reach an agreement. Usually this is achieved through offer an acceptance, one party offers some sort of good or service in exchange for another good or service. The contract comes into force when acceptance has been communicated to offeror - Tallerman & Co Pty Ltd v Nathan’s Merchandise

Consideration: Each party must offer something in exchange for the other party’s offer. To be legally sufficient, consideration need not be adequate (have a fair price) but only have some value - Chappell v Nestle

Intention (CLR): (assessed objectively - Ermogenous v Greek Orthodox Community of SA) The actions of both parties will be examined by the viewpoint of a reasonable person (in the other party’s position) to determine whether they show an intention to create legal relations with the other party. Will be assumed there is no contract (unless otherwise proven) for private arrangements and assumed that there is a contract (unless otherwise proven) for commercial dealings - Helmos Enterprises Pty Ltd v Jaylor Pty Ltd (commercial dealings)   Ermogenous v Greek Orthodox Community of SA (private dealings)

Certainty: For the contract to be considered valid the terms must be certain and complete. There are three aspects that must be considered:

      1) The parties must reach an agreement on all the terms that are intended to be binding

      2) The terms must be clear enough for both parties to understand what is imposed on them.

      3) The promise must not be illusory. A promise established in a contract must not be unfettered, not allowing parties to have discretion over the performance of the promise 

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