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 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)

 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 Gary’s

answering machine, offering to buy carrots and asking this week’s
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 Gary’s 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