Contract Law – The Legal Rules Governing Contractual Relations Essay Example
Contract Law – The Legal Rules Governing Contractual Relations Essay Example

Contract Law – The Legal Rules Governing Contractual Relations Essay Example

Available Only on StudyHippo
  • Pages: 8 (1995 words)
  • Published: November 26, 2016
  • Type: Paper
View Entire Sample
Text preview


Contract is a customary of procedures guiding the relationship, content and validity of an agreement between two or more people (such individuals, businesses or other association) concerning the sale of goods, provision of services or interchange of interests or ownership. The elements of contract which are the offer and acceptance needed to be fulfilled. It is essential to have an offer and this must be accepted to make an agreement. While this would in the first instance appear to be self-explanatory. Perhaps even more obvious is that the requirement of consideration.

This term refers to the exchange of money for goods or services, or something else of value traded between the parties. Now with the agreement between two or more people confirmed as an agreement, containing an offer and acceptance, and the exchange


amount to money or something in money’s worth, there must still be the requisite intention to create legal relations. Therefore, in this case, there will be offer, acceptance, consideration, discharge, intention to create legal relations and free consent which are main elements used to discuss and advice both the plaintiff (Asmara Ltd) and the defendant (Patsy). In this case, Asmara Ltd sued Patsy because she did not pay the taxi service used, but also Dinky (taxi driver from Asmara Ltd) did not complete the distance that Patsy wanted to be.

Main Body

Offer & Acceptance

A contract usually begins with acceptance of an offer. In section 2(a) of the Contracts Act 1950 also mentions that “when one person signifies to another his willingness to do or to abstain from doing anything, with a view

View entire sample
Join StudyHippo to see entire essay

to obtaining the assent of that other to the act or abstinence, he is said to make a proposal”.

In this case the defendant – Patsy is the offeror (promisor) and Asmara Ltd (Plaintiff) is the offeree (promisee). Besides that, a valid offer must be communicated. According to section 4(1) of the Contracts Act 1950, the communication of a proposal is complete when it comes to the knowledge of the person to whom it is made.

There are many types of communication, which can be made in words like oral, written or others like conduct, combination. Here, the offeror – Patsy, has made the offer by oral communication to Dinky (the taxi driver from Asmara Ltd) that she wished to go to Maynard, a town seven miles away. According to the case Carlill v Carbolic Smoke Ball Co. Ltd (1893), in this case, the court held that a person who makes an offer may decline to require notice of acceptance if he or she wishes. To accept an offer, a person need only follow the indicated method of acceptance. If the offeror either expressly or impliedly intimates in his offer that it will be sufficient to act without giving notice of acceptance, performance is sufficient acceptance without notification .

According to section 2(b) of the Contracts Act 1950 provides that when the person to whom the proposal is made signifies his assent there to, the proposal is said to have been accepted. A contract is not formed until an offer is accepted. In Unilateral Contracts have mentioned that one party makes a promise that the other party can accept only by doing

something. In this situation, Dinky (taxi driver from Asmara Ltd) started off his journey after picking up Patsy, which showed that he accepted the offer to go to Maynard. And he needs to completely perform his duty till the end of contract.

Therefore, both of them were bounded in the contract which is formed immediately on acceptance by the moment Dinky started the journey. According to the case Brogden v Metropolitan Railway Company (1876-77), The House of Lords held that a contract had arisen by conduct. The court said that even though no formal agreement was signed, the parties had acted consistently with a formal contract being in force.


The fundamental principle of contract law is to create a binding contract. A binding contract must include an exchange of consideration. In section 2(d) of the Contract Act 1950 provides that when, at the desire of the promisor, the promisee or any other person has done or abstained from doing or promises to do something, that abstinence, act or promise is called a consideration for promise.

In this case, Dinky’s consideration to Patsy was to transport Patsy from Huntington to Maynard seven miles away, whereas Patsy’s consideration to Dinky was to pay the service rendered. According to the case Currie v Misa (1875), this states that the subjects which consideration may consist of are right, interest, profit, benefit, detriment or forbearance. In this case, in the defendant side, Patsy took the service provided from Asmara Ltd. Following the consideration, Patsy had to pay for the benefit uses of service in term of car, consumed gas and the driving service of Dinky.

style="text-align: justify;">According to the case, Dinky, the plaintiff did his duty by undergoing the 5 miles, but unable to complete another two because of the traffic jam, which means he did not completely perform the consideration of the contract between them. In this point, Patsy, the defendant could sue Asmara Ltd for did not completely provide the service as she has been a “fixed list” – a loyal passenger with the company. On the other hand, Asmara Ltd could claim for the monetary loss from Patsy as they provided the service for her over half way based on the meter in car, she might have paid for the five miles using service from the company.

Discharge of contract

Discharge by Breach

A party state that he will not perform his part of the contract before the time of the performance is due is called an Anticipatory Breach. Dinky stopped at the side of the road after 5 miles and suggested that it is better for Patsy to walk to the destination, showing signs that Dinky would not want to complete his duty of 7 miles. Similar case can be seen in Hochster v De La Tour (1853) where the Plaintiff sued the Defendant for expressing the statement that he “does not intend to perform his obligation” prior to the end of the actual performance. His act of switching off the air-conditioner did not breach any contract as his main duty is to transport Patsy from Huntington to Maynard. How Dinky does his duty is irrelevant.

Discharge by Performance

When Patsy (the defendant) does not fully perform the contract, it will

lead to a breach of contract and the other party, Dinky (the plaintiff) may claim for damages. In a contract, a price is payable upon completion, and completion is usually required to discharge the contract. In this case, Patsy has breached the contract by not fully performing her duty as a paying customer by not paying Dinky his 5 miles of damage. A similar case can be found in Bolton v Mahadeva (1972) where the defendant refused to pay money to the plaintiff because the plaintiff did not do any substantial performance at all as the case’s primary purpose to install the central heating system has been seen ineffective.


Unliquidated Damages

Unliquidated damages are to be provided to the victim of a breach with compensation to monetary loss. In this case the defendant did not compensate the plaintiff for the service used. Patsy should have paid Dinky for the driving services and gas consumption for the major part of the journey. A similar case can be found in Ruxley Electronics& Constructions v Forsyth (1995) where the defendant refused to pay the plaintiff for the defects made. Therefore, the defendant is said to be liable for the plaintiff’s journey.


It is an equitable remedy, where a court orders to a party to perform part of the contract, instead of imposing a fine (for non-performance or breach of contract) out of his or her obligations under the contract. Courts take this step when they are of the opinion that a payment of damages only is not good enough for a just settlement of the case.

In this case, Patsy

can use injunction for the court to make Asmara Ltd to perform part of the contract act for the breach of contract Asmara had done in the contract. Where Asmara Ltd only done 5 miles of 7 miles, therefore the agreement is not completed as like what being promised. This same case can be shown in the case of Kong Wah Housing Development Sdn Bhd v Desplan Construction Trading Sdn Bhd (1991).

Intention to Create Legal Relations

For a contract to exist the parties to an agreement must intend to create legal relations. It is the party’s free choice that makes the contract legally binding. When a contract is made, parties rely on the promise where later the promise also can be changed. It is considered that the contract with some conditions makes sure that it is legal to do so or to protect the parties in the contract.

Objective test is used based on whether a reasonable person would have believed the parties intended to enter into a contract. The presence of consideration will provide evidence of this, if the promisor has specified something as the price for the promise this - in most cases, carries with it an intention that the parties be bound.

In this case, Patsy as a “fixed list” passenger shows that she already have the intention to create legal relations, by using Asmara Ltd services for quite some time. This already can prove that she have the intention to create legal relation with Asmara Ltd, in term of using their taxi service.

While for the plaintiff (Asmara Ltd), the intention to create legal relations

can be seen when Asmara Ltd sent Dinky as Patsy's taxi driver to provide the service desired by their customer (Patsy). This shows that the promise should do something to make the promise legally binding.

Similar cases can be related with the existing case, such as the Kleinwort Benson Ltd v Malaysia Mining Corp Bhd (1989) and the Parker v Clarke (1960).

Free Consent

Section 13 of the Contract Act 1950 states that, two or more person are said to consent when they agree upon the same thing in the same sense. Section 14 contracts act 1950 provides that “consent is said to be free if it is not caused by coercion (section 15), undue influences (section 16), fraud (section 17), misrepresentation (section 18), and mistake (section 21, 22 and 23). It is the standard of freedom of contract depends for the individual rights.

In this case both parties are free consent. Where Asmara Ltd have the right to provide their service to anyone, here is Patsy (their fixed list passenger). As well as Patsy, she is the one who want the Asmara Ltd service. A case for free consent would be the Mohori Bibee v Dharmodas Ghose (1903).


For conclusion, in this case we are appointed to act for Asmara Ltd (plaintiff) and Pasty (the defendant). According to the case, Patsy is the one who made offer; while Dinky (taxi driver worked for Asmara Ltd) has accepted the offer made by defendant. Asmara Ltd have done part of the performance they should perform, however did not complete fully the service; sending Patsy from Deli supermarket, Huntingdon to

Maynard. In this case Patsy didn’t pay for that certain duties that Asmara Ltd done ( 5 miles of 7 miles).

With all point above stated that, Asmara Ltd company (plaintiff) have right to sue Pasty (defendant) for the discharge of performance in the contract between them. On the other hand base on the consideration in the contract between both parties, Patsy should not pay for the Asmara Ltd because the company has not completed the promise of the contract to take Patsy to her actual destination. Patsy has inform the Dinky that she is not in hurry but Dinky refused to move that action of him cause the discharge by breach of the contract. Therefore in this case the proper party to sue is Patsy for the breach of contract made by Asmara Ltd.

Get an explanation on any task
Get unstuck with the help of our AI assistant in seconds