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The issue here is whether valid contractual relationship exist between the Wing and Tom.
To create a binding contract between the parties there must be 6 essential elements of contract i.e.
offer, acceptance, intention of parties to form legal relations, consideration, legality, capacity and
genuine assent, failure to comply with any one of these will result in unenforceable contractual
An offer is a promise to do something in a sense that if offeree accepts the offer then offeror is
bound. If offer lacks the commitment, then it merely a supply of information in line with Harvey
v Facey case. If offer is not accepted with in a reasonable time, then it will lapse, as it happened in
Ramsgate Victoria Hotel Co v Montefiore.
On the other hand, Acceptance is a promise by offeree to an offeror which can be created by word
of mouth, in writing or by conduct. If the acceptance is made varying the terms of original offer
then it would be a counter offer but not the acceptance, consistent with case Hyde v Wrench.
Acceptance is effective only if it is communicated, However, according to the judgment made on
case of Carlill v Carbolic Smokeball Co. communication of acceptance is not required if
performance of an act stipulates acceptance.
The next element of valid contract is intentions of parties to form a legal relationship. Such
intention generally found to be missing on the contract made between the family members in line
with a case Balfour v Balfour.
Another important aspect of binding contract is consideration and parties enter in to a contract
exchanges the promise for the same. In accordance to Dunlop Pneumatic Tyre Co Ltd v Selfridge
& Co Ltd, consideration must be moving from each party and consideration need not to be
adequate consistent with case Hercules Motors Pty Ltd v Schubert.
Beside all this, to be an enforceable contract 3 possible defeating condition need to be satisfied.
For instance, legality, capacity and genuine assent of both parties.
Apply rules to the facts
Here, Tom has made an offer to Wing to double his salary and make him equal partner in business
through a word of mouth. The offer made to wing did not lack the commitment and is a valid offer
unlike in Harvey v Facey case where Facey simply supply an information to Harvey about the
bumper hall pen, The facts clearly state that Wing stayed in a company stipulates acceptance of
offer by Wing even though there is no fact mentioning that Wing communicated he will be going
to stay in a company, consistent with Carlill v Carbolic smokeball.
Given that the agreement is commercial in nature there is clear intention between Tom and Wing
to enter in to a legal relation, this element seems to be satisfied in Wing’s case unlike it on Banque
Brussels Lambert v Australian National Industries Ltd (1989) case where they arranged to make a
contract which was not legally enforceable.
The next element of valid contract is consideration appear to be satisfied in that Tom required to
double the Wing`s salary and make him an equal partner in business in order to keep Wing while
Wing need to stayed in a company by rejecting other offer, in line with the case Dunlop Pneumatic
Tyre v Selfridge (1915) AC 847 which state that there must be consideration moving from each
party. In addition, consistent with the case Hercules Motors Pty Ltd v Schubert, Wing promise to
stay in a company is enough consideration.
The given facts did not indicate any causalities in terms of competency, general assent of both
parties and legal problem in the contract they formed.
In conclusion, there is binding contract between the Tom and the Wing as the agreement between
them satisfy all the 6 essential elements of contract stated by Australian Common law.