MONASH

BUSINESS
SCHOOL

IRAC Recognition Activity

An ‘IRAC’ style answer (BusLaw)- can you identify which analytical steps
are occurring for each sentence here?
Was a contract was created by Sam and Dom? To answer this we need to
ascertain whether an intention to be legally bound existed.
In contracts, the test for intention is an objective test: would a reasonable
onlooker believe that the parties intended to create legal relationship? This is
illustrated in Todd v Nichol,2 where the agreement between relatives was held to
be legally binding because the way parties conducted themselves plus the
serious nature of the promises would have made a reasonable onlooker believe
that the sisters had intended to form a legal binding relationship. In Sam and
Dom’s case, they are brother and sister. Normally people would think that
siblings would not intend to sue each other over agreements they make.
However Dom and Sam made this agreement on behalf of their companies, not
just between themselves. Plus they wrote down the agreement and had it signed
by a witness, which would make a reasonable onlooker believe they were really
serious about being able to prove and enforce their agreement if necessary.
For these reasons, I think a court would find there was an intention to be legally
bound, and since agreement and consideration are clearly present, this means
there was a contract formed here.

MONASH
2 BUSINESS
SCHOOL