LAW4198 Australian Commercial Law

27753 words 112 pages
Australian Commercial Law
Exam Notes

Formation of contracts

1. Agreement


Offeror/promisor = person making the offer.
Offeree/promisee = person to whom the offer is made.

Characteristics of an offer

Invites acceptance;
With a willingness to enter into a contract upon acceptance.

An offeror will have made an offer where it appears to a reasonable person in the position of the offeree that an offer was intended.

Subjective intentions are irrelevant.


Invitations to treat:
An invitation to others to make offers or enter into negotiations;
Display of goods for sale (customers make an offer when they present the items to the cashier. There is no sale until the cashier accepts that offer; Boots
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Where the promisee incurs a detriment, the benefit need not move to the promisor.

2. Bargain requirement;

ii. There must be a relation of quid pro quo (‘this for that’) between the promisor’s promise and the acts relied on as consideration for that promise – the acts must be performed in return for the promise (AWM); iii. In most cases this requirement will be satisfied if the acts are performed at the request (express or implied) of the promisor6 (however, the presence of a request will not always establish the relation; H of L in AWM); iv. Requirement not met where:
The promise is a conditional gift (eg. a promise to pay someone $100 ‘if they perform’ a certain act); or
Act is performed in reliance on a promise (Beaton v McDivitt).

3. Consideration must be sufficient (ie. something the law regards as valuable). But need not be adequate (its economic value is irrelevant – the courts will not inquire whether the value of the consideration is equal or even proportionate to that of the promise; Woolworths).

3. Intention

Essential elements

The parties must manifest an intention to create legal relations;
Objective approach (subjective intentions are irrelevant7); the court asks ‘would reasonable people regard the agreement as intended to be binding?’
The party who claims that a contract has been made bears the onus of establishing all elements of formation (including intention).

There are no presumptions (Ermogenous). Each case must be decided on its own facts,