Australian Contract Law

                                               Australian Contract Law


A contract is an agreement or a promise between two or more parties in which all parties to the contract are legally bound by the provisions of the agreement. Major elements of a contract include agreement, consideration, intention and capacity. Agreement is the first key requirement of a contract (Benson, 2001: 34). Agreement consists of offer and acceptance. For an acceptance to be valid it has to be communicated and the communication must reach the other party. It is important to note that when an offer is made and then the other party makes a counter offer, no agreement is reached. Therefore in this case Tom made an offer of 5,000 to Dick. Dick said that this was too high but he said he would give 4,000 for the motorbike. This was a counter offer. A counter offer has the effect of distinguishing the original offer. Thus, when Dick rejected the offer by Tom, it means that there was no agreement as the initial offer had been distinguished. In Hyde vs Wrench it was held that a counter offer had the effect of terminating the original offer (Victor, 2006: 45-46).


Consideration is an important element of any contract. Consideration refers to the form of commitment that a party to an agreement or contract shows towards the other party (Carter, 1994: 34). The party must show that he has undergone some form of detriment or loss as a result of accepting the offer. The commitment could be monetary or non-monetary. Nevertheless, there should be proof of loss or forfeiture on the part of each party (Whincup, 2006: 74-75).

Usually, in a contract, it is the promisor who is required to stipulate the nature of consideration he expects from the other party. Consideration can therefore be of any form provided it is within the legal parameters of a country. In Chapel vs Nestle, it was held that consideration could be in any form regardless of the promise made in return (Lind, 2005: 67-69). Any form of detriment or loss suffered by one party to the agreement is good consideration. In the case of Carill vs Smoke Ball Company Limited it was held that if one party to the contract suffered detriment or loss as a result of entering into the contract, the loss or detriment would suffice as good consideration (William, 2005: 24). In Dunton vs Dunton, the court also held that where a party to the contract had to give up their freedom as a result of entering the contract, this constituted good consideration (Gillies, 1998: 15). The court also held in Wigan vs Edwards that where a person gave up their legal right as a result of entering into a legal agreement, this amounted to good consideration (Lando, 2003: 52).

In this instance, Lott is under obligation to share the lottery winnings with other members of the group. The reason is that upon entering into an agreement, all members of the group gave some form of consideration by contributing their money (Elizabeth, 2007: 12-13). The fact that every member had some form of consideration in this case makes Lott obliged to share the winnings with every member. (Beatson, & Friedman. 1997: 12). Lott is legally bound to share the lottery winnings with all members of McMuffins Ltd because they all underwent some form of loss or detriment by forfeiting some of their money. Forfeiture of anything valuable also constitutes good consideration. Lott must therefore share the winnings with every ember of McMuffins Ltd (John, & David. 1998:44).

List of References

Benson, P. (2001). The theory of contract law: new essays Cambridge University Press.

Beatson, J. & Friedman, J. (1997). Good faith and fault in contract law, London: Oxford

University Press.

Carter, J. (1994). Outline of contract law in Australia, Australia: Butterworths.

Elizabeth, P. (2007). Cases and Materials on Contract Law in Australia, LexisNexis:


Furmston, M & Chesire, G. (2007). Law of contract Oxford University Press.

Gillies, P. (1998). Concise contract law, London: Federation Press.

John, C. & David, J. (1998). Cases and materials on contract law in Australia, Australia:


Julie, Clarke. (2010). Australian contract law. Retrieved on August 25th 2010 from

Kevin E., John, W. & David, H. (1986). Contract law in Australia, Australia:


Lando, O. (2003). Principles of European contract law, Volumes 1-2 Kluwer Law


Lind, M. (2005). Feminist perspectives on contract law, London: Routledge.

Taylor, R. & Taylor, D. (2007). Contract Law Directors, London: Oxford University


Victor, P. (2006). Framing contract law: an economic perspective, Harvard: Harvard

University Press.

William, D. (2005). Joint ventures law in Australia, Australia: Federation Press.

Whincup, N. (2006). Contract law and practice: London: Kluwer Law International.