CONTRACT LAW – DEEP STUDY NOTES | Prepared for Stuvia
CONTRACT LAW
Deep Study Notes
Comprehensive Guide with Key Cases & Principles
1. WHAT IS A CONTRACT?
A contract is a legally binding agreement between two or more parties that is enforceable by
law. It creates rights and obligations on all parties involved.
2. ESSENTIAL ELEMENTS OF A VALID CONTRACT
All 6 elements must be present for a contract to be valid:
1. Offer
A clear proposal made by the offeror to the offeree.
• Must be definite and communicated
• NOT an invitation to treat (e.g., shop displays, advertisements, menus)
• 📌 Carlill v Carbolic Smoke Ball Co [1893] – An advertisement was held to be a valid
offer because it was specific and showed intention to be bound.
2. Acceptance
Unconditional agreement to all terms of the offer.
• Must mirror the offer exactly (Mirror Image Rule)
• A counteroffer destroys the original offer
• Acceptance must be communicated
• 📌 Hyde v Wrench [1840] – A counteroffer killed the original offer; the original could not
be accepted later.
Postal Rule Exception:
• Acceptance is complete when the letter is posted, not when received
• 📌 Adams v Lindsell [1818] – Established the postal rule for acceptance.
3. Consideration
Something of value exchanged between parties.
Page 1 | Contract Law Study Notes
, CONTRACT LAW – DEEP STUDY NOTES | Prepared for Stuvia
• Must be sufficient but need not be adequate
• Must not be past consideration
• Must move from the promisee
• 📌 Chappell v Nestle [1960] – Chocolate wrappers counted as consideration even
though they had little monetary value.
• 📌 Re McArdle [1951] – Past consideration is not valid.
Rules of Consideration:
• Cannot be something you are already legally obliged to do
• Must have some economic value
• Must be real, not illusory
4. Intention to Create Legal Relations
Both parties must intend the agreement to be legally binding.
Context Presumption
Social/Domestic agreements NOT legally binding
Commercial agreements Legally binding
• 📌 Balfour v Balfour [1919] – Husband's promise to wife = no legal intention.
• 📌 Merritt v Merritt [1970] – Separated couple's agreement = legally binding.
5. Capacity
Parties must be legally capable of entering a contract:
• Must be 18+ (minors have limited capacity)
• Must be of sound mind
• Companies must act within their constitution
6. Legality
The contract's purpose must be legal.
• Contracts for illegal acts = void
• Contracts against public policy = unenforceable
Page 2 | Contract Law Study Notes
CONTRACT LAW
Deep Study Notes
Comprehensive Guide with Key Cases & Principles
1. WHAT IS A CONTRACT?
A contract is a legally binding agreement between two or more parties that is enforceable by
law. It creates rights and obligations on all parties involved.
2. ESSENTIAL ELEMENTS OF A VALID CONTRACT
All 6 elements must be present for a contract to be valid:
1. Offer
A clear proposal made by the offeror to the offeree.
• Must be definite and communicated
• NOT an invitation to treat (e.g., shop displays, advertisements, menus)
• 📌 Carlill v Carbolic Smoke Ball Co [1893] – An advertisement was held to be a valid
offer because it was specific and showed intention to be bound.
2. Acceptance
Unconditional agreement to all terms of the offer.
• Must mirror the offer exactly (Mirror Image Rule)
• A counteroffer destroys the original offer
• Acceptance must be communicated
• 📌 Hyde v Wrench [1840] – A counteroffer killed the original offer; the original could not
be accepted later.
Postal Rule Exception:
• Acceptance is complete when the letter is posted, not when received
• 📌 Adams v Lindsell [1818] – Established the postal rule for acceptance.
3. Consideration
Something of value exchanged between parties.
Page 1 | Contract Law Study Notes
, CONTRACT LAW – DEEP STUDY NOTES | Prepared for Stuvia
• Must be sufficient but need not be adequate
• Must not be past consideration
• Must move from the promisee
• 📌 Chappell v Nestle [1960] – Chocolate wrappers counted as consideration even
though they had little monetary value.
• 📌 Re McArdle [1951] – Past consideration is not valid.
Rules of Consideration:
• Cannot be something you are already legally obliged to do
• Must have some economic value
• Must be real, not illusory
4. Intention to Create Legal Relations
Both parties must intend the agreement to be legally binding.
Context Presumption
Social/Domestic agreements NOT legally binding
Commercial agreements Legally binding
• 📌 Balfour v Balfour [1919] – Husband's promise to wife = no legal intention.
• 📌 Merritt v Merritt [1970] – Separated couple's agreement = legally binding.
5. Capacity
Parties must be legally capable of entering a contract:
• Must be 18+ (minors have limited capacity)
• Must be of sound mind
• Companies must act within their constitution
6. Legality
The contract's purpose must be legal.
• Contracts for illegal acts = void
• Contracts against public policy = unenforceable
Page 2 | Contract Law Study Notes
