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Business law essay

Business Law Assignment 2.

Within this case there are two relevant parts, advice given to John, and advice given to Judith. I have separated these in respective order.

Part 1.

In consideration to the request lodged by John for advice on his legal position in regards to the case brought upon him by his son, I would outline the following argument.

Outline of the facts:

John purchases a new Holden Commodore car and queries his son Dave, if he would be able to use the car wash facilities at his garage on a regular basis agreeing to pay him "Whenever I have the money to spare." Dave replies with an answer saying "That’s ok Dad, I suppose after all those years of love and care you have generously given to the family, it’s only fair that I should give something in return."

Within the space of the following year, John has frequented the car wash on a number of occasions resulting in the total of the bill amounting to $500.

Dave then consequently sues John to the amount of $500 following this year of non-paid car washes.

When analysing these facts, many issues arise which one must address in order to find out which party is in the wrong.

Firstly one must ascertain whether there lies a legally enforceable contract between the two parties. Was the intent to form this contract of a legally enforceable nature or simply that of a family relationship? Also another issue one must look at is the default of payment. If the contract between the two parties was of a legally enforceable nature, then is John breaching the contract by not paying Dave the required sum of money.

These issues are both dealt with in contract law. A contract must comprise of three aspects, without these it is not legally binding. Firstly there must be an actual agreement, comprising of an offer and an acceptance. Secondly the contract must possess the intention to be legally bound. Thirdly there must be consideration, meaning the contract must contain a bargain or exchange underlying the agreement.

Within this case one can see these elements.

Firstly, there is an offer put forward by John to Dave, as stated above - John requested the use of the car wash facilities stating that he will pay when he has the money to spare.

Secondly, there is an acceptance to this offer by Dave when he replies to John – "Ok Dad...".

Thirdly, there is consideration – this lies in the agreement of payment.

Legally speaking, consideration can be viewed as price: law requires price to be paid for every promise, before the promise in question can be legally enforceable. A good definition of this fact lies in a similar case Currie v Misa (1875) LR 10 Ex 153 -

"...A valuable consideration may exist either in some right, interest, profit or benefit accruing to the one party or some forbearance, detriment, loss or responsibility given, suffered or undertaken by the other."

Clearly the elements of a contract of offer, acceptance and consideration have been met by the two parties, but is this contract of a legally binding nature, or simply that of a family relationship?

This is where one must look at the intent on the formation of this contract.

In law, one must look at the two presumptions made concerning the intent of contracts which are the following..

·         Where the parties are in a commercial relationship, the presumption is that they intended to create a legally binding contract by their agreement; and

·         where the parties are in a purely domestic or social agreement, the presumption is that it was not intended to create a legally binding contract[1].

These presumptions and similar issues can be seen in the case of Woodward v Johnston (1992) 2 Qd R 214 at 225-6; (1991) 14 Fam LR 828. In this case Mrs. Woodward agreed to help her husband salvage and repair a dredge and barge in order to establish a gravel supply company and in return her husband agreed to forfeit towards her 10 per cent of the business. Over an 18-month period Mrs. Woodward completed the work she had previously promised her husband but was refused her share of the profits by her husband. Consequently, Mrs. Woodward sued her husband. The judge proclaimed that he was in the right and was not legally bound by contract to forfeit the money. The judge claimed that due to the language used and the circumstances at the time the arrangement was merely a family agreement and therefore not a contract.

This case relates strongly to the one at hand in that the same circumstances are encountered. Therefore I would advise John that the arrangements made between himself and his son were that of a family agreement and not of a contract of legally enforceable nature.

Furthermore, I would advise John that if the Judge found that it was a legally binding contract, that he has made no breach of it. He clearly stated in his offer that "He would pay when he had any spare money", therefore the contract carries no finite period for payment, and therefore no breach has taken place.

Part 2.

In regards to the request put forward by Judith concerning the case between her and her brother Dave, I would give the following advice.

Outline of the facts:

Judith told Dave of her plans to acquire a $5000 loan from the National Australia Bank and asked if Dave could provide a guarantee for this loan.

Dave agreed to this offer replying "Yes, Judith I will help."

Judith gained the loan from the bank, but the need for a guarantor, Dave, was discarded.

Judith defaulted on her loan to the amount of $1000, and consequently sued Dave for this amount believing him to be guarantor.

When looking at this case one can see offer and acceptance portrayed by the two parties, but this does not form a contract, as the bank saw no need in Dave being the guarantor. This then means that the only legally binding contract that Judith is part of is that of herself and the bank, not with herself and Dave.

This argument brings forth another element of contract law, Privity of contract. This doctrine states that "A contract only binds those persons who are parties, or privy, to the contract - persons who are not parties to a contract cannot have rights imposed or enforceable benefits conferred on them.[2]"

Applying this doctrine of privity to the case between Judith and Dave I would advise her that she would receive no money, as there was no binding legal contract between herself and her brother. She is the only party involved in the contract with the bank, therefore she is the only person responsible for repaying the amount of $1000.



B. Pentony, S. Graw, J. Lennard, D. Parker (1999) Understanding Business Law, Australia, Butterworths.


Currie v Misa (1885) LR 10 Ex 153

Woodward v Johnstone (1992) 2 Qd R 214 at 225-6; (1991) 14 Fam LR 828

Introduction to Business Law


For: Arthur Hoyle

By: Brendan Kearney


Due: 7th May 1999

[1] B. Pentony, S. Graw, J. Lennard, D. Parker (1999) Understanding Business Law, Australia, Butterworths.

[2] B. Pentony, S. Graw, J. Lennard, D. Parker (1999) Understanding Business Law, Australia, Butterworths.

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