A contract is an agreement between two or more parties, which can be legally enforceable. A contract maybe written or oral, although an oral agreement can be difficult to prove in court. In order for a contract to exist it must include four elements, that being offer, acceptance, intention and consideration. (Sweeney & O’Reilly 2007 pg 160). A contract only exists when an offer has been accepted, an offer has the intention to be legally binding and the willingness to contract on certain conditions (Butt 2004 pg306). Accepting an offer means agreeing to the contract and in essences agreeing to the terms of that contract, an offer can’t be withdrawn or rejected and only the offeree is able to accept the offer, this acceptance must be final and unqualified (Sweeney & O’Reilly 2007 pg 180).
In this case although there was an offer there was no acceptance therefore a valid contract did not exist also because a counter offer occurs it means the first offer has been rejected and no longer exists (Sweeney & O’Reilly 2007 pg 178). As both parties were negotiating terms and forwarding offers there is no actually acceptance just the introduction of new terms, this leaves Mary’s offer open to be accepted by James (Butt 2004 pg101). Therefore in this case an offer will only exist if James agrees to Mary’s counter offer. In this case the price of the toys at $9 is merely an invitation to treat or negotiate, not an offer.
It invites someone to make an offer but the offer does not have to be accepted (Gooley & Radan 2006 pg 37). As with the case Grainger & son v Gough  AC 325 the courts stated that the catalogue distributed to consumers with prices of wine was without a doubt an invitation to treat. The advertisement from the Petz R Us store simply states that the toys start at $5 it does not give a customer the right to be able to have the product at that price as its just a statement shops use to invite customers to treat, not a fixed price (Sweeney & O’Reilly 2007 pg167).
With relation to Pharmaceutical Society of Great Britain v Boots Cash Chemists  1 QB 401, the courts ruled that display of a product isn’t an offer but merely an invitation to treat. As discussed in Harvey v Facey  AC 552 the forwarding of a statement of price is usually not an offer so when Mary responded to James letter it was merely supplying James with further information and there was no intention to make an agreement. The only offer that was made was by James when he went on to offer Mary $7 per toy and being merely an invitation to treat Mary does not have to accept James offer by any means (Sweeney & O’Reilly 2007 pg 164).
Therefore the offer between James and Mary wasn’t an agreement as it was merely an invitation to treat and furthermore there was no acceptance by Mary to James offer. The elements involved in making a contract were not able to be met, although both parties may of had the capacity and legality to be able to contract there is not a binding contract without a valid agreement.
The element of consideration would have been met if the contract had of existed as James was offering money for the items from Mary, consideration may be provided either as a promise to do something or by an act that is of valve in the eyes of the law (Gooley & Radan 2006 pg 65), as with such cases as Dunton v Dunton  18 VLR 114 where a promise by the wife to act in a respected manner was held as sufficient consideration when the husband promised to pay certain payments after their separation. Although the intention of the offer between James and Mary would have been seen as being of a business or commercial nature and therefore the courts would presume that the parties did intend to create a legally bound agreement, there still was no agreement.
In this case if Mary and James were siblings it would not change the aspects of the agreement, as there was not an agreement in the first place because Mary took no acceptance to James offer. If there had of been a contract formed between Mary and James it would then have been presumed by the courts that the agreement is of a domestic nature and that the sibling did not intent to have their agreement legally enforceable. Although given the presumption they are open to being rebutted by establishing that the facts show otherwise, the courts tend to look at the circumstances surrounding the agreement and the effect of the agreement on the parties but that does not apply in the case between Mary and James (Gillies & Niloufer 2009 pg 75).
As with the case Balfour v Balfour  2 KB 571 the courts agreed since the agreement between the husband and wife was of a domestic nature it was presumed that the parties did not intend to contract, also because the wife had not provided consideration to the promise that was made to her by her husband and since there was no actual acceptance between them they have not contracted (Sweeney & O’Reilly 2007 pg 197).
In Balfour v Balfour it was seen to the courts that there would be little effect on Mrs Balfour if her husband didn’t pay her a monthly allowance as it was of a small sum of money, it could be argued that this applies to James as there would be very minimal effect on him if he didn’t receive the toys at a lower cost. As stated in Jones v Padavatton  2 ALL ER 616 although an agreement was made between the mother and daughter for the daughter to live in the mothers house rent free, it was said that a contract doesn’t exist because the agreement wasn’t intended to be enforceable by the law, as it was of a domestic nature.
In this case with James and the Petz R Us store no acceptance was made by Mary on behalf of the store therefore James has no legal rights against the Petz R Us store because a contract was not formed, the items advertised were merely an invitation to treat, the only obligation the store may have is that they return the money James has already forwarded to them.
As in the case Pharmaceuticals Society of Great Britain v Boots Cash Chemists  1 QB 401, The Pharmaceutical Society claimed the method of how Boots Cash Chemist sold their drugs breached legislation. But the court ruled that the items displayed in the shop were merely an invitation to treat not an offer, the customer may choose to make an offer but the retailer does not have to accept that offer. The courts suggested that if the items displayed were an offer and not an invitation to treat acceptance would take place when the items were selected by the customer whether they intended to buy the items or not therefore entering a contract.
So if a customer changed their mind about an item it would have been seen as a breach of contract. So in relation to this case it would be said that the Petz R Us advertisement is also merely an invitation to treat. If a contract had of been met between James and Mary the courts would presume they intended to create a legally binding contract as it was of a business nature, James then would of had the rights to sue for actual breach of the contract due to equitable remedies were suing for damages is inappropriate, restitution may occur were Mary failed to perform her part of the contract the courts could compel her to restore the money to James as it is unjust (Gillies & Niloufer 2009 pg 216).
If James arrived at the store and there was no stock left, if a contract had of occurred the contract may have been discharged through frustration as the items no longer exist and neither party were at fault, it may be seen as impossible to complete the contract since the item is no longer available (Sweeney & O’Reilly 2007 pg 366). The same outcome was discussed in the case Taylor v Caldwell  3 B S 826; 122 ER 309 where Taylor hire a hall from Caldwell but prior to Taylor using the hall it was burnt down, the courts concluded that the contract was discharged for frustration and Taylor could not claim damages.
In conclusion the contract between James and The Petz R Us store did not exist, as all the elements involved in making a contract such as agreement were not met between the two parties. It would be seen by the courts that such advertisements are recognised as an invitation to treat and that Mary was simply forwarding information to James not entering into a contract with him. If a contract was entered into the outcome would not have been much different if Mary and James were siblings as the courts presume such agreements not to be legally enforceable.
TextButt, P. (2004). Concise Australia legal dictionary (3rd ed). Chatswood, New South Wales, LexisNexis Butterworths.
Gillies, P & Niloufer, S. (2009). Law of Contract. New South Wales, The federation Press.
Gooley, J & Radan, P. (2006). Principles of Australian Contract Law. Chatswood, New South Wales, LexisNexis Butterworths.
Sweeney, B & O’Reilly, J. (2007). Law in commerce (3rd ed). Chatswood, New South Wales, LexisNexis Butterworths.
CasesBalfour v Balfour 2 KB 571 (Court of Appeal)
Dunton v Dunton(1892) 18 VLR 114 (Supreme Court of Victoria)
Grainger & Sons v Gough AC 325 (House of Lords)
Jones v Padavation 2 ALL ER 616
Havey v Facey Gooley & Radan 2006 (Privy Council)
Partridge v Crittenden 2 All ER 421 (Queen’s Bench Division)
Pharmaceutical Society of Great Britain v Boots Cash Chemists  1 QB 401 (Court of Appeal)
Taylor v Caldwell 3 B S 826; 122 ER 309 (Court of Queen’s Bench)
Todd v Nicol SASR 72 (Supreme Court of South Australia)
Fundamentals of lawCourse code- BULAW 1502Lecturer- Eric Holm
Contract law assignment1,552 words
By Sarah LucasStudent number- 30077910
Due 7th may 2010Submitted 5th may 2010