Question:
Whether The Purchase Of The Lottery Ticket By Group Of Friends Results In The Formation Of Contract?
A contract is a kind of document wherein two parties, an offeror and an offeree, comply with certain elements of contract and results in a binding relationship which must be honored by them in every situation. A contract can be written or oral in nature but whatever maybe the form of contract there are few elements which must be present to make it enforceable in law. (Gibson & Fraser, 2013)
An offer – An offer is a statement, oral or written, which is communicated by an offeror to an offeree, through which he specifies the act or omission which the offeror intends to be confirmed by an offeree. It is necessary that the offer must be communicated to the offeree to make it valid in nature. In the leading case of (Carlill v Carbolic Smoke Ball Co, 1893), it was held that an offer can be made to one specific person or to the world at large.
An acceptance – When the offer is received by the offeree then the confirmation of the offer without bringing any deviation to its terms is an acceptance. If the offeree brings and variation to offer terms then it results in the revocation of the offer and is called counter offer and is held in (Hyde v Wrench, 1843). An acceptance is valid only when the same comes within the knowledge of the offeror.
The agreement must be supported by some kind of benefit to make the agreement enforceable in law. A consideration must move from the offeror to the offeree against the act or omission undertaken by the offeree on behalf of the offeror. a consideration must be sufficient and it is not necessary that the same must be adequate in nature and is held in (Biotechnology Australia Pty Ltd v Pace, 1988)
Legal intention – The parties when exchanging promises must do so with legal intention. A contract based on family or domestic relationship is no contract in law but this presumption is rebuttable on the presentation of evidence and is held in (Jones v Padavatton, 1969)
Capacity of the parties – The parties must be major and of sound mind to make the contract valid.
Thus, these are the elements which must be present in order to make a contract enforceable in law.
When the offeror and the offeree makes an offer and acceptance supported by consider on, legal intention and are capable to enter into a contract, then, there is a binding contract amid the two. (Gibson & Fraser, 2013)
Both oral and written contracts are valid. There is no compulsion that a contract has to be in written form in order to be binding. An oral contract is equally valid when compared with a written contract. In the leading case of (R v Clarke, 1927), an oral contract was held to be a valid contract and considered to be same enforceability that of a written contract. (Latimer, 2012)
However, normally it is understood that a contract if is in the form of a written document then it is more authentic when compared with an oral contract. There are several reasons that area attributed which submits that a written contract is considered to be more evidential when compared with an oral contract. The same are: (Pendragon, 2014)
Thus, there arte various benefits that can be attributed if a contract is in written form. But, even of the contract is written form, it cannot be submitted that an oral contract is not valid; rather, an oral contract stands on equal footing with a written contract.
Formal contract are the contracts which must be formed in a particular manner and style. For instance, the formal contract must be in writing in order to be valid. One of the most significant features of a formal contract is that a formal contract has the enforceability of twelve years. After twelve years they are considered to bar by law because of lapse of time. When compared with a written contract, a formal contract is very distinct, mainly because the formalities that are required in a formal contract are not the part and parcel of a written contract. (RMIT, 2004)
Thus, the main formalities of a formal contract are: (Latimer, 2012)
The two common kinds of formal contract that are normally found to be found are: (SIEleaning, 2017)
In order to establish a valid contract the main elements that are required are offer, acceptance, consideration and capacity. Apart from these elements one of the main element, the presence of which is must in the formation of the contract is ‘legal intention of the parties’. (Latimer, 2012)
Legal intention of the parties signifies that the parties are willing to enforce the contract under law in cases of disputes. If the parties do not intent to bind by the contract then the contract has no enforceability in law and thus is invalid in law and is held in (Air Great Lakes Pty Ltd v KS Easter (Holdings) Pty Ltd, 1989).
It is held in (Rose and Frank & Co v Crompton, 1923), that normally the parties who are in commercial relationships are presumed to have legal intention. Whereas, in (Balfour v Balfour, 1919), it is held that the parties who are in social relationship have no legal intention. (Clarke, Australian contract law, 2010)
But, it is held in (Riches v Hogben, 1986), that this basic presumption is rebuttable in law. Thus, if evidence can be laid down that the parties through are in social relationship have legal intention to bind by the contract then the contract is said to be enforceable in law. Likewise, if it can be proved that the parties to the contract are in commercial relationship but does not have any legal intention, then, the contract is not enforceable in law. (Moles & Sangha, 2017)
In (Trevey v Grubb , 1982) and (Simkins v pays , 1955), the parties were sharing a lottery ticket and when the prize was declared one of the party claims that there is no contract as the relationship is friendly. It is held by court that the circstantces reveal that the parties intent to share the profits of the lottery proceeds and thus though they are friend but the there is presence of legal intention.
All the friend contribute $2every Friday night for a lottery ticket. After the win of the ticket, the friend refuses to share the prize with the remaining friends.
It is submitted that the sharing is regular with the intent to share the profits. Even though one of the friend was authored to purchase the ticket but the intention of all the parties was to bind by the result of the ticket.
Thus, though the relationship is social, but, there is presence of legal intention. The intention was to bound by the result of the lottery irrespective whether the result is positive or not.
It is thus concluded that the friends are sharing a cordial relationship but they have legal intention to bind by the results of the ticket and thus the contact is enforceable in law and the prize of the ticket must be equally distributed amid the parties.
It is very important to distinguish an agent that from an independent contractor mainly to analyze the liability of the principal. This is because if the party is an agent then the liability falls upon the principal but of the party is an independent contractor then the liability is not of the principal.
If the person is considered to be an agent of the principle then, the acts that are undertaken by an agent will be considered to be the acts of the principal, provided the action are taken within the authority by the agent. Thus, if any contract is established by an agent with any third party then such third party has a right to sue the principal on the event of default. In (Scott v Davis, 2000) and (Hollis v Vabu, 2001), it was held that an agent is the representative of the princiapla nd must be held liable by the acts of the agents.
However, in the leading case of (Gaitanis v Nicholas Moss Pty Ltd, 2003), it was held that if the person is not the agent of the principal but is an independent contractor, then the acts of such an independent contract are not considered as the acts of the principal. Any liability that is incurred by an independent contractor is construed be the acts of the contractor alone and the principal cannot be held liable for the same. This is because an independent contractor does not act as per the directions and control of the principal and so the principal must not be held accountable by his actions. (MCCARTHY, 2004)
Thus, the distinction is very important to analyze the liability of the principal
References
Air Great Lakes Pty Ltd v KS Easter (Holdings) Pty Ltd (1989).
Balfour v Balfour (1919).
Biotechnology Australia Pty Ltd v Pace (1988).
Carlill v Carbolic Smoke Ball Co (1893).
Clarke, J. (2010). Australian contract law. Retrieved September 17, 2017, from Intention to create legal relations: https://www.australiancontractlaw.com/law/formation-intention.html
Clarke, J. (2012). Australian Contract Law. Retrieved September 18, 2017, from Agreement: https://www.australiancontractlaw.com/law/formation-agreement.html
Gaitanis v Nicholas Moss Pty Ltd (2003).
Gibson, A., & Fraser, D. (2013). Business Law 2014. Pearson Higher Education AU.
Hollis v Vabu (2001).
Hyde v Wrench (1843).
Jones v Padavatton (1969).
Latimer, p. (2012). Australian Business Law 2012. CCH Australia Limited,.
MCCARTHY, L. (2004). VICARIOUS LIABILITY IN THE AGENCY CONTEXT.
Moles, R., & Sangha, B. (2017). Intention to Create Legal Relations / Parties To a Contract. Retrieved September 17, 2017, from Networked Knowledge – Law Lectures: https://netk.net.au/Contract/05Intention.asp
Pendragon. (2014). The benefits of a written contract. Retrieved September 17, 2017, from Pendragon: https://pendragon.net.au/benefits-written-contract-2/
R v Clarke (1927).
Riches v Hogben (1986).
RMIT. (2004). Explanation of contract law. Retrieved September 17, 2017, from DLSWEB: https://www.dlsweb.rmit.edu.au/lsu/content/d_bus/law/business_contract/concept/explanation.html
Rose and Frank & Co v Crompton (1923).
Scott v Davis (2000).
SIEleaning. (2017). SIElearning. Retrieved September 17, 2017, from Contract Law: https://sielearning.tafensw.edu.au/MBA/19194J/commerc_law/lo/u5_t1_contclass/u5_t1_contclass_03.htm#EEABA
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