Contract Law (common law) study summary 2025
Contract defined
An agreement concerning promises made between 2 parties with the intention of creating
legal rights and obligations upon the parties to that agreement which shall be enforceable in
a court of law.
• Promisor: person who makes promise
• Promise: person to whom promise is made
• Contract: ‘a legally enforceable agreement that is legally binding’
o An agreement is NOT necessarily a legally binding contract
o An agreement becomes a contract when it becomes LEGALLY ENFORCEABLE
Essential Elements of a Simple Contract
In order to create a contract, three elements must be present:
1. Was there an agreement between the parties?
There must be an offer by one party, and acceptance of the agreement for the other.
2. Was there valuable consideration?
There must be something of value or benefit passing from one party to another in
return for a promise to do something.
3. Was there an intention to create legal relations
4. Other requirements for a valid contract:
o Do the parties have legal capacity?
o Do the parties have consent?
o Was there legality of purpose?
o Was there any particular form the contract needed to be in?
• Terms of a contract
o Representation
▪ Pre-contractual negotiations
o Term
▪ Express/implied
▪ Condition/warranty
▪ Uncertain/meaningless/ambiguous terms
▪ Exclusion clauses
• Exception to Consideration:
o Promissory Estoppel
• Privity of contract
o Agency: exception to Privity
• Breach of contract
,Agreement between the Parties
• 3 components to determine whether a contract exists:
o There is a minimum of 2 parties
o There is an offer
o There is an acceptance
• Additionally, there must be:
o Exact correlation between both sides of the agreement: consensus ad idem
o An offer by one party (offeror) to be bound on certain terms
o An acceptance of the offer, communicated by the offeree
1. Offer
Must be:
1. Intention to be bound: (Clarke v Earl of Dunraven and Mount-Earl)
➢ Case regarding yacht club – all competitors agreed to abide by the club rules
with the race organiser, but not with other competitors.
➢ The court held there was no clear offer and acceptance.
➢ However, there was evidence of intention to enter into contract from the
conduct of the parties.
2. A Firm promise
3. Communication of the offer: (Carlill v Carbolic Smoke Ball co)
o Communication of the offer can be in writing, orally or by conduct
• Statements that are NOT offers
o Invitation to treat
▪ An invitation to treat is an offer to consider offers and cannot create an
agreement
• Auctions/Advertisements/Announcements/Goods on Display
(Pharmaceutical Society of Great Britain v Boots Cash Chemists)
o Requests for Information
▪ A request for information is not a firm promise and so is not an offer
▪ It does not destroy the offer, and is only an attempt to obtain
information
• Termination of an offer
o Revocation (withdrawal)
▪ Offeror must make sure the offeree knows offer has been withdrawn
BEFORE there is an acceptance:
o Counter-offer (Hyde v Wrench)
▪ A counter-offer is a rejection of the original offer
▪ If the initial offeree makes a counter-offer, they become the Offeror
o Lapse of time
▪ If offeror specifies a time which the offer will remain open, it remains
open only for that time
, ▪When no time limit is specified, the offer remains open for a
‘reasonable time’. This depends on the circumstances of the case
o Lapse by failure of a condition
▪ If an offer is made subject to a condition and this condition is not
fulfilled, then the offer will
2. Acceptance
Before acceptance of the offer, neither party is bound to the agreement. After acceptance,
both parties are bound. Acceptance has two elements:
- Willingness to take exactly what is offered AND agreement to pay required price
Rules Relating to Acceptance
1. Must be made strictly in response to the offer (R v Clarke)
2. Must be communicated to the Offeror
o Communication can be expressed (words) or implied (conduct)
(Brogden v Metropolitan Railway Corp)
o Silence is NOT acceptance (Felthouse v Bindley) (Walton Stores v Maher)
3. Must be absolute, unqualified & unconditional - or it may amount to a counter-offer
• The postal rule
o When parties use the post as a medium of exchange of promises, the rules of
acceptance changes as follows:
▪ An offer by letter is not effective until received by the offeree
▪ Acceptance is effective as soon it is posted
▪ If the offer is to be cancelled/revoked, notice of the cancellation must
be received by the offeree before their letter of acceptance is posted
• Instantaneous communications
o Where the communication of acceptance is instantaneous, the postal rules
don’t apply and the contract is formed when the acceptance is received.
o In case of agreements communicated by telephone, fax or email, the contract
is formed when the Offeror hears or receives the offeree’s acceptance
o The Electronic Transactions Act 1999 (Cth) provides guidance on times for
receipt and dispatch
3. Consideration
In formal contracts, there is no need for consideration – the contract is valid because of its
form. In simple contracts, valuable consideration turns an ‘agreement’ into a contract.
, Case with no consideration = Dunlop Pneumatic v Selfridge
Consideration: what each contracting party bargains for and gives in exchange for the return
promise of the other party. It is the price we pay to buy the other person’s promise.
• ‘Something for something’
• Concept of VALUE - but can be broader than just ‘price’
o Can include acts, promises etc.
o Can include the giving of a PRACTICAL BENEFIT
• It is what the promisor gives in exchange for the return promise from the promisee
Rules for consideration
1. Consideration is essential to the validity of every simple contract
o It may be:
▪ Something the promisee gives the promisor
▪ The carrying out of some act
▪ The refraining from doing something that the promisee had a legal
right to do
2. Consideration can be Present or Future, but NOT PAST (moral)
o Past consideration: when the promisor’s motivation for making the promise is
due to a past benefit he received.
o BUT past consideration can be good consideration IF:
▪ The act was done at the promisor’s request and the parties
understood that the act would be remunerated later
3. Something of value but need not be adequate (Chappell & Co Ltd v Nestle Co Ltd)
o This means it must have some legal value
4. Must be more than a promise to carry out an existing duty
5. Consideration must be definite
o The consideration must be real and identifiable
6. Consideration must be referable to the other party’s promise
Insufficient consideration
1. Promise to perform a duty already imposed by contract
o Exceptions:
▪ Acts in excess of duty will be good consideration
▪ Giving a practical benefit will be good consideration
(Musumeci v Winadell Pty Ltd)
2. Part payment
o Exception:
▪ If creditor agrees to accept smaller amount, a debt is considered
Contract defined
An agreement concerning promises made between 2 parties with the intention of creating
legal rights and obligations upon the parties to that agreement which shall be enforceable in
a court of law.
• Promisor: person who makes promise
• Promise: person to whom promise is made
• Contract: ‘a legally enforceable agreement that is legally binding’
o An agreement is NOT necessarily a legally binding contract
o An agreement becomes a contract when it becomes LEGALLY ENFORCEABLE
Essential Elements of a Simple Contract
In order to create a contract, three elements must be present:
1. Was there an agreement between the parties?
There must be an offer by one party, and acceptance of the agreement for the other.
2. Was there valuable consideration?
There must be something of value or benefit passing from one party to another in
return for a promise to do something.
3. Was there an intention to create legal relations
4. Other requirements for a valid contract:
o Do the parties have legal capacity?
o Do the parties have consent?
o Was there legality of purpose?
o Was there any particular form the contract needed to be in?
• Terms of a contract
o Representation
▪ Pre-contractual negotiations
o Term
▪ Express/implied
▪ Condition/warranty
▪ Uncertain/meaningless/ambiguous terms
▪ Exclusion clauses
• Exception to Consideration:
o Promissory Estoppel
• Privity of contract
o Agency: exception to Privity
• Breach of contract
,Agreement between the Parties
• 3 components to determine whether a contract exists:
o There is a minimum of 2 parties
o There is an offer
o There is an acceptance
• Additionally, there must be:
o Exact correlation between both sides of the agreement: consensus ad idem
o An offer by one party (offeror) to be bound on certain terms
o An acceptance of the offer, communicated by the offeree
1. Offer
Must be:
1. Intention to be bound: (Clarke v Earl of Dunraven and Mount-Earl)
➢ Case regarding yacht club – all competitors agreed to abide by the club rules
with the race organiser, but not with other competitors.
➢ The court held there was no clear offer and acceptance.
➢ However, there was evidence of intention to enter into contract from the
conduct of the parties.
2. A Firm promise
3. Communication of the offer: (Carlill v Carbolic Smoke Ball co)
o Communication of the offer can be in writing, orally or by conduct
• Statements that are NOT offers
o Invitation to treat
▪ An invitation to treat is an offer to consider offers and cannot create an
agreement
• Auctions/Advertisements/Announcements/Goods on Display
(Pharmaceutical Society of Great Britain v Boots Cash Chemists)
o Requests for Information
▪ A request for information is not a firm promise and so is not an offer
▪ It does not destroy the offer, and is only an attempt to obtain
information
• Termination of an offer
o Revocation (withdrawal)
▪ Offeror must make sure the offeree knows offer has been withdrawn
BEFORE there is an acceptance:
o Counter-offer (Hyde v Wrench)
▪ A counter-offer is a rejection of the original offer
▪ If the initial offeree makes a counter-offer, they become the Offeror
o Lapse of time
▪ If offeror specifies a time which the offer will remain open, it remains
open only for that time
, ▪When no time limit is specified, the offer remains open for a
‘reasonable time’. This depends on the circumstances of the case
o Lapse by failure of a condition
▪ If an offer is made subject to a condition and this condition is not
fulfilled, then the offer will
2. Acceptance
Before acceptance of the offer, neither party is bound to the agreement. After acceptance,
both parties are bound. Acceptance has two elements:
- Willingness to take exactly what is offered AND agreement to pay required price
Rules Relating to Acceptance
1. Must be made strictly in response to the offer (R v Clarke)
2. Must be communicated to the Offeror
o Communication can be expressed (words) or implied (conduct)
(Brogden v Metropolitan Railway Corp)
o Silence is NOT acceptance (Felthouse v Bindley) (Walton Stores v Maher)
3. Must be absolute, unqualified & unconditional - or it may amount to a counter-offer
• The postal rule
o When parties use the post as a medium of exchange of promises, the rules of
acceptance changes as follows:
▪ An offer by letter is not effective until received by the offeree
▪ Acceptance is effective as soon it is posted
▪ If the offer is to be cancelled/revoked, notice of the cancellation must
be received by the offeree before their letter of acceptance is posted
• Instantaneous communications
o Where the communication of acceptance is instantaneous, the postal rules
don’t apply and the contract is formed when the acceptance is received.
o In case of agreements communicated by telephone, fax or email, the contract
is formed when the Offeror hears or receives the offeree’s acceptance
o The Electronic Transactions Act 1999 (Cth) provides guidance on times for
receipt and dispatch
3. Consideration
In formal contracts, there is no need for consideration – the contract is valid because of its
form. In simple contracts, valuable consideration turns an ‘agreement’ into a contract.
, Case with no consideration = Dunlop Pneumatic v Selfridge
Consideration: what each contracting party bargains for and gives in exchange for the return
promise of the other party. It is the price we pay to buy the other person’s promise.
• ‘Something for something’
• Concept of VALUE - but can be broader than just ‘price’
o Can include acts, promises etc.
o Can include the giving of a PRACTICAL BENEFIT
• It is what the promisor gives in exchange for the return promise from the promisee
Rules for consideration
1. Consideration is essential to the validity of every simple contract
o It may be:
▪ Something the promisee gives the promisor
▪ The carrying out of some act
▪ The refraining from doing something that the promisee had a legal
right to do
2. Consideration can be Present or Future, but NOT PAST (moral)
o Past consideration: when the promisor’s motivation for making the promise is
due to a past benefit he received.
o BUT past consideration can be good consideration IF:
▪ The act was done at the promisor’s request and the parties
understood that the act would be remunerated later
3. Something of value but need not be adequate (Chappell & Co Ltd v Nestle Co Ltd)
o This means it must have some legal value
4. Must be more than a promise to carry out an existing duty
5. Consideration must be definite
o The consideration must be real and identifiable
6. Consideration must be referable to the other party’s promise
Insufficient consideration
1. Promise to perform a duty already imposed by contract
o Exceptions:
▪ Acts in excess of duty will be good consideration
▪ Giving a practical benefit will be good consideration
(Musumeci v Winadell Pty Ltd)
2. Part payment
o Exception:
▪ If creditor agrees to accept smaller amount, a debt is considered
