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Published: Fri, 02 Feb 2018

Intention to create legal relations

Did Andersons and Humphrey intend to create an enforceable contract?

The law requires that the parties to the contract have to create a relationship with a legal consequence, a binding agreement between two or more persons especially one enforceable by law or the courts.

Contract is a legally binding contract between parties, and gain rights and performance burdens and obligations in respect of agreement. (Gerbic & Miller, 2010, p. 134)

There are three steps to address the intention:

Assuming that the background was established in a family of social, and then we can assumption that it does not have legal binding between the parties.

Establishing some speculation that uses appropriate facts.

Find some evidence to refute and concluded that the facts of argument, then we can make a presumption. According to the evidence in this text, the agreement is a business arrangement.

Case: Carlill v Carbolic Smoke Ball Co (1893) 1 QB 256; (1891-4) All ER Rep 127 (Gerbic & Miller, 2010, p. 137)

The court held that it involved the words in this case; also the words indicated a distinct and unmistakable promise to pay a reward. Moreover the case base on advertisement and it was not a puff. The contract was judged a valid contract.

Apply the relevant law to the fact:

Simon and Rebecca Anderson were deciding that they would like to own and operate a business for elderly people. Also they found a local builder Humphrey and got a quote. And the Andersons told to Humphrey his requirements; in addition, Humphrey had quickly looked their property.

In these circumstances the negotiation established in a business environment.

The case provide another valid evidence shows that a professional quote from Humphrey and had made clear that “this is a quote only – while care is taken to ensure costs are kept under the figures quoted above, all figures are approximate only.” And it was not a puff. (Case authority: Carlill v Carbolic Smoke Ball Co) (Gerbic & Miller, 2010, p. 137)

Above indicated that Humphrey provides a quote through assess and price the Andersons’ property. And he had using some specialised words to emphasise and describe the price fluctuation. The words used in it indicated an unmistakable promise. It showed the serious intention to be legally bound (Case authority: Carlill v Carbolic Smoke Ball Co) (Gerbic & Miller, 2010, p. 137). So that it shall be deemed as being a business context, and affect a natural commercial activity by the contract.

For all these reasons, we can presumption that the Andersons do not accepted the quote so they would not bought the property, and do not had a legally binding agreement between parties. But the Andersons agree with the quote and brought it, and already arranged a date with Humphrey for work. Therefore, it had a legally binding agreement.

After that Humphrey negative his original price before the work begins so the cost up to $200,000 to $225,000. Because Humphrey though the property needs more structural changes. And Humphrey did not think the quote is a contract and had a legally binding.

Therefore, the Andersons and Humphrey have the intention to enter into business relations.


According to the case of Carlill v Carbolic Smoke Ball Co (1893) 1 QB 256 (Gerbic & Miller, 2010, p. 137), there is a valid agreement between parties, and also they intent create a contract and relationship for doing business. So, the Andersons and Humphrey have an enforceable contract, Humhprey have to execute a legal agreement and complete the work for $165,000.

Part two: Offer and Acceptance

Legal issue:

Is there a contract been formed between the Andersons and Premier Renovation?

1 Sept.

Simon sees an ad about Premier Renovation from Yellow Pages. According to the case of Pharmaceutical Society of Great Britain v Boots Cash Chemists (Southern) Ltd (Gerbic & Miller, 2010, p. 141) shows that it is invitations to treat. In this case the ad’s functions were designed to encourage or entice offers from others.

Beside, the brochure outlining the type of work Premier do, and it shows the prices are competitive and their workmanship is professional. The main purpose is invites potential clients to make a deal. So it is serving as an advertisement. The information was providing to questioner, it cannot be an offer.

3 Sept.

The Andersons have made an appointment to discuss more details via a phone call. The simple fact that the Andersons had the intention to establish a commercial relation with Frank, there is not offer. (Case authority: Harvey v Facey [1893] AC552) (Gerbic & Miller, 2010)

14 Sept.

The Andersons discuss the renovation requirements and Frank provides the work cost $205,000 including labour, materials, taxes; and the work will begin on October 1.

“The offer must be communicated direct to the offeree.” (Gerbic & Miller, 2010, p. 142) The Andersons and Frank had a two hours negotiation about the offer. It possible a valid offer if the contract had accepted.

The Andersons set a limit of $200,000, so that means they do not accept for this price. ‘An offer can be cancel by the offeree.’ (Gerbic & Miller, 2010, p. 143) It therefore the Andersons were terminated this offer. (Case authority: Fitch v Snedaker [1868] 38N.Y. 248) (Gerbic & Miller, 2006)

Frank says that he cannot accept the price ($200,000) from the Andersons. The same situation happens to Frank. Thus, Frank giving information in response and they were not offer between the parties. (Case authority: Stevenson, Jaques & Co v McLean (1880) 5QBD 346 ) (Gerbic & Miller, 2010, p. 146)

15-20 Sept.

The Andersons meet with four companies and get either quote all more than $200,000. The Andersons obtain the quote were not an offer, because the quote is compare with other companies, also the giving of information in response to a query. (Case authority: Harvey v Facey [1893] AC552) (Gerbic & Miller, 2010, p. 140)

21 September

Through the comparison of price the Andersons accept and back on Frank’s quotes; but comes with an attached condition-Finished the work on Dec 1.

On the other hand, the Andersons are rejected by Frank, because he has taken a new contract and an irrational term. (Case authority: Stevenson, Jaques & Co v McLean (1880) 5QBD 346) (Gerbic & Miller, 2010, p. 146)

29 September

Frank has agreed on a series of terms and pricing also begin renovation. Therefore, Frank set an exclusive price and rejection of other existing offer. (Case authority: Hyde v Wrench (1840) 3 Beav 334, 49 ER 132) (Gerbic & Miller, 2010, p. 140)


Summing up the above, there is not a valid contract be established. Even though, the Andersons obtain four companies’ quote, it is still not come to any agreement.

Part three: Consent

Legal issue:

Is there having any misrepresentation between the Andersons with Regency Revitalizations Ltd?

Relevant law:

This case is addressed the law of misrepresentation.

“Before the contract is entered into, a wide variety of statement can be made (orally or in writing) by the parties in the course of negotiations.”(Gerbic & Miller, 2010, p. 186). There are four steps to define the statement’s misrepresentation:

1. A false (untrue) statement of fact.

2. Made by one party to another.

3. Dose not become a term of the contract.

4. One party persuades another party to enter the contract.

Apply the relevant law to the fact:

In this case, Maurice’s statement that “he had personally been in the industry for 45 years and that Regency Revitalisations had not had a single dissatisfied customer.” In this part of statement, Maurice indication that his worded in a true.

Although, Maurice telling a true, the Andersons found some evidence of company background could prove he make a false statement. The Andersons find out the company only been established for three months, and they are Regency Revitalisations’ first clients. So it means he worked 45 years in other two previous companies; not at Regency Revitalisations Ltd. And he had owned two previous construction companies and they both suffered complaints and gone into liquidation. In between times Maurice had worked as a bricklayer’s labourer.

Moreover, it is the same situation that he ‘had not had a single dissatisfied customer.’

This statement can be regarded as a puff in the yellow page. And it was not mentioned his work before and customer’s satisfaction. An incorrect statement of law is not a fact. Because it arises when a person erroneously explains what the law is in certain circumstances. Persuades party to enter contract, it would make customers believe that the company has a good reputation (Case authority: Jolly v Palmer (1984) INZLR 658 (HC) (Gerbic & Miller, 2010, p. 599).

Above facts, all about the past state, it is about a false statement in future. So, the statement can regard as a misrepresentation. (Case authority: Ware v Johnson [1984] 2 NZLR 518 (HC)). (Gerbic & Miller, 2010, p. 188)

Actually, Maurice had not done building or repair work for any clients. But Maurice’s statement and his Ad show that both factors were persuades the Andersons into the contract. It would probably provide competitiveness.

(Case authority: Savill v NZI Finance Ltd [1990] 3 NZLR 135 (CA)) (Gerbic & Miller, 2010, p. 190)


According to the above four factors, it can prove Regency Revitalisation Ltd had been misrepresentation about the facts. So, the Andersons could successfully claim against Regency Revitalisation Ltd by the courts.

If the misrepresentation had established, it would made Regency Revitalisation Ltd lost this case.

If the misrepresentation had established, the parties can offer to remedies.


Relevant law:

The two type of the Contractual Remedies Act can be applied:


Cancellation (s7)

“When either fraudulent or innocent misrepresentation occurs, the Contractual Remedies Act provides for the remedies of damages, cancellation and other relief” (Gerbic & Miller, 2010, p. 191).

According to section 6 (1)(a) of the Contractual Remedies Act states that the Andersons have the right to obtain damages. Because a person may wish to use for damages for a variety of reasons and may not wish cancel the contract, or may not be legally entitled to cancel (Gerbic & Miller, 2010, p. 191).

The remedy of cancellation gives the right to a party to bring the contract to an end. A party can cancel the contract if a misrepresentation is found in the contract(s 7(3)(a)).

It is necessary to the cancelling parties when the parties have agreed with the truth of the statement (s7(4)(a));

The effect of this misrepresentation is to reduce the benefit and increase the burden to the Andersons (s7(4)(b)). Thus, the contract needs to be cancelled in this situation of remedies.

(Case authority: Contractual Remedies Act (CRA))


In this case, the contract considered that the Regency Revitalisations Ltd needs to remedy that the Andersons can obtain the damages and cancelling the contract.

Part four: Capacity

Legal issue:

Whether Todd and Amy have a valid contract and avoid it with the Andersons?

Relevant law:

Section 2 of Minor Contract Act identified that a minor is a person who has attained the age of 18 years; and have the legal capacity to enter into valid contracts. (Gerbic & Miller, 2010, p. 176)

Section 6 of Minor Contract Act does not apply to certain special contracts made by minors; such as life insurance contract and hold driver’s license. (Gerbic & Miller, 2010, p. 176) If the court can make orders after investigate the fairness and reasonableness of the contract, then the duty of proof is on the other party. Or if present to five criteria can affect the verdict, such as circumstance, nature of contract, nature and value of the property, age and means, and some relevant.

The court can make a wide variety of other orders, but cannot change the contract(s 6(2)).

According to s 2 of Minor Contract Act, Todd is over 18 year old. He can have legally bound with the Andersons’ contract.

But Amy is under 18 year old. Section 2 indication that she is a minor and there is no evidence to prove her obtaining a guarantee (Gerbic & Miller, 2010, p. 180). She is unenforceable the contract with the Andersons. The contract was signed by a fair condition. The parties agree with the terms of contract, but it is an unreasonable contract. $250 for 6 weeks work is unfair and unreasonable. So apply to s 6(2) the court can remedies that cancel the contract.


On the basis of the above views, the parties set up a valid contract. Todd cannot cancel the contract with the Andersons. He is more than 18 and agrees with the terms of the contract also enforceable the contract. Beside, all case shows that Amy can avoid the contract as result of do not have the legal capacity.

Part Five: Consideration

Legal issues:

Whether Simon is need to pay Fantabulous Foliage for the plan ($450)?

Whether Simon is need to pay the full amount claimed by Landscape Architects Ltd ($8,700)?

Relevant law:

The needs of consideration are a part of evidence of the existence contract. Consideration applies to all simple contracts. A simple contract requires be expounded the contract. It was regarded as one of the process of offer and acceptance when creating a contract. So, considerations need to support the contract. To be valid, it must be real and valuable. And also “where a person has entered into a contractual obligation or is under a duty to perform some public service, the performance of such an obligation or service cannot be a consideration to support another promise or obligation.” (Case authority: Stilk v Myrick (1809) 2 Camp 317) (Gerbic & Miller, 2010, p. 165).

A past consideration consists of something that has already happened. The events happened was unenforceable. (Case authority: Re McArdlle [1951] Ch 669) (Gerbic & Miller, 2010, p. 165).

Apply the relevant law to the fact:

In the case, Simon designed a garden for the property and asked the quote from Landscape Architects Ltd and Fantabulous Foliage Ltd. It is mere inquiring the price. So, they are not simple contract or not a valid consideration.

Before Simon submits the plans, he already received a detailed offer and plan. But he had not negotiation that the payment with the two parties. So it means that Simon had no intention to have valid consideration. Fantabulous Foliage therefore cannot obtain $450 of the payment for its plan. The quote and design of the construction work and plantings required already happened before Simon got the account. So, there is a past consideration and Simon does not required to pay for Fantabulous Foliage’s plan. (Case authority: Re McArdlle [1951] Ch 669) (Gerbic & Miller, 2010, p. 170).

Landscape Architects Ltd completed the work on schedule; and they both agree with the work. The final account was $8,000 via a negotiation they change the original price ($8,700). But they back on the original price ($8,700) when Simon immediately pays an half of the expenses ($4,000). Because this company decided to charge full payment ($8,700) and solve their financial difficulties.

However, Simon received a receipt for the money paid which indicated the remaining balance to be $4,700. But is not the promise $4,000. The lesser price of consideration was replaced by the new price ($8,000). But Simon received a receipt for the money paid; it clear shows that he accepted the price and pay $4,700 without negotiation with the parties. (Case authority: Fookes v Beer (1884) 9 App Cas 605 (PC))


Acutely, there is no a valid consideration applies to simple contract between Fantabulous Foliage Ltd and Simon. So he does not need to pay$450.

There is a valid consideration between Landscape Architects Ltd and Simon. Therefore, he has to pay the full amount ($8,700) to Landscape Architects Ltd.

Part Six: Discharge

Legal issues:

Can the Andersons release from the contract with the gardening firm?

Relevant law:

The contract can be discharged by performance. Full performance is required; part of performance is not enough for the parties’ obligation. When all of obligation is fully completed, then the contract comes to an end.(Gerbic & Miller, 2010, p. 246)

Apply the relevant law to the fact:

In this case, the Andersons hold a 12 month contract with the gardening firm, and pay $98 each week. The contract indicates that the gardening firm has promise to mow the lawns, trim the edges and remove all garden rubbish. But at the beginning of 2 weeks the company did not complied the terms of contract, they not only made the grass unbalance but also ignored the rubbish in the garden shed. If one party fails to complete the obligation, it will bring about the breach of contract and also do away with the requirement of payment. As the gardening firm did not fully complete the work, it can be considered the company is unfinished obligations.


In the case, the gardening firm discharge by performance. Because the Andersons had the contract with the gardening firm, they can still have work to do. Or the Andersons have a right to release the contract.

Legal issues:

Can the Andersons release from the contract with the catering firm?

Relevant law:

This contract discharge by impossibility or frustration, and arises when it is:

An external event,

Not contemplated by the parties to a contract,

Makes a contract impossible to perform or makes performance itself very difficult and different. (Gerbic & Miller, 2010, p. 252)

Apply the relevant law to the fact:

From the case information, Rebecca had a contract with a catering firm which to provide premium frozen desserts for the residents. Rebecca agreed to buy 60 of these desserts on the first day of each two month period for 24 months. However, Rebecca had thought that they have a large storage on the property but the health authorities have required them to use a commercial grade freezer which they cannot afford. So the factor indicates that it is an external event. Then, they decided to forego having a storage freezer altogether and therefore no longer have space to store the desserts. It is not contemplated by the third party led to this situation.

(Case authority: Rayneon NZ Ltd v Fraser [1940] NZLR 825 (SC))


In the case, the Andersons have to forego the storage freezer which beyond the budget. This contract was discharged on the grounds of frustration or impossibility by the requirement of the health authorities. Therefore, the Andersons can release the contract with catering firm.

Legal issues:

Can the Andersons release from the contract with Acorn Linen?

Relevant law:

The contract can be discharged by agreement. There are three aspects to this mode of discharge, there are some terms may provide for its own discharge in a contract; the contract may still be executory at the time of the agreement to discharge; when one party of the contract was completed or partly completed, then the other party agrees to release the obligation of the first party. (Gerbic & Miller, 2010, p. 248)

Accord and satisfaction indicate:

Applies the contract one party has received some or all of the benefits of the other party’s performance.

They have ability to recipient party from the party.

The promise to release is binding only if:

It is made in deed form,

It is accompanied by consideration supplied by the party to be released.

(Gerbic & Miller, 2010, pp. 248-249)

Apply the relevant law to the fact:

In this case, Rebecca had a contract with Acorn Linen to supply freshly laundered and starched linen for the guest rooms each week. After the Andersons use the service for three months, they wish to cancel the service and it has to pay a $100 discontinuation fee if they want. So, there had been accord and satisfaction by both parties, it means they can do the agreements to release.


From the above information, this contract discharge by accord and satisfaction. And it constitutes consideration. Thus, the Andersons can terminate that three months service from this contract and paid the $100 discontinuation fee.

Part Seven: Remedies

Legal issues:

What remedies should be suggestion that the Andersons may have against Heaven Scent Plumbing?

There are three types of problems should be solved:

Tap fittings;

Plumbing in ensuite Plumbing;

Kitchen Fittings and Tiles.

Tap fittings

Relevant Law:

Damages is the most common way to indemnify which is monetary compensation. Under the Section 6, Contractual Remedies Act 1979, damages is the appropriate remedy for the remoteness of loss. Amount of damages will be the normal expected losses that result from the breach of contract (lower quality taps) (Gerbic & Miller, 2010, p. 228) (Case authority: Hadley v Baxendale and Victoria Laundries v Newman)

Apply the relevant law to the fact:

In the case, the normal expected losses suffered by the Andersons as a result of Heaven Scent Plumbing Ltd’s supply of lesser quality tap. However, the Andersons have to suffer lower cost and quality taps, even additional losses which is replace the new taps. The case of Hadley v Baxendale (1854) 9 Exch 341 indicate that a set the basic principle for how to determine the scope of consequential damages arising from a breach of contract that one is liable for all losses that ought to have been in the contemplation of the contracting parties. (Case authority: Victoria Laundry (Windsor) Ltd v Newman Industries Ltd [1949] 2 KB 528)

Plumbing in ensuite Plumbing

Relevant Law:

Applies the Section 6, Contractual Remedies Act 1979, mitigation of damages is one of the damages principles. “A party who suffers a loss in connection with a building contract chooses an unnecessarily expensive repair option to rectify the defects, but claims that amount by way of damages” (Gerbic & Miller, 2010, p. 231). It means that the party cloud take reasonable steps to minimise or mitigate the loss sustained.

Apply the relevant law to the fact:

In this case, there is clear evidence that “Plumbing in the sink of one ensuite was deficient and two weeks after the installation the pipes burst and water spilled out” (Gerbic & Miller, 2010, p. 231). It ‘deficient’ makes an unintended consequence; the pipes burst result in a series of losses that two rooms of the antique furniture be damaged, cost of accommodation for one guest, cost of the pipes and replace the pipes; the cost of having the work done to clean up the flooding floor and waste lot of water.

(Case authority: White and Carter (Councils) Ltd v McGregor (1962) AC 413; (1961) 3 ALL ER 1178)

Kitchen Fittings and Tiles

Relevant Law:

According to Section 6, one of damages is that “difficulty of assessment cannot be a bar to an award” (Gerbic & Miller, 2010, p. 230), because the court require to fix the amount it considers appropriate.

Cancelation was introduced by Contractual Remedies Act 1979. A party has right to end a contract in common law of forms of remedy, and it only happens in the continuing contract. (Gerbic & Miller, 2010, pp. 235-236)

Apply the relevant law to the fact:

Some of the kitchen fittings had been ‘plumbed into’ because of problems with the plumbing. But there was three imported ceramic tiles were broken by repairers while the process of work. Moreover, the Andersons are get information from their supplier says that they cannot provide more tiles. Because the tiles has a pattern which runs around the whole kitchen, it probably affect the pattern of around the area. The situation assumed the whole kitchen should be change. It is a difficult of assessment, the cost of fixed the kitchen fittings, the cost hire a repairer to remove the original tiles, the cost of purchase the new tiles and the related materials cost of having the work done to replace the new tiles. All of losses are considered as the unpredictable factors.

(Case authority: Chaplin v Hicks (1911) 2 KB 786 (CA)).

However, there are no an ongoing contract. So, cancellation will not able to appropriate remedy in this case.


The poor quality of the taps brings about damage to the Andersons. On the basis of contract, they were promised that use a higher level tap fittings by Heaven Scent Plumbing Ltd. So at the beginning the company aware that the taps were not the same with the contract. According to that, Simon and Rebecca can release the contract and ask for some damages from Heaven Scent Plumbing Ltd.

Simon and Rebecca were only entitled to nominal damaged by their mitigation. Therefore, they can release the contract and ask for some compensation from Haven Scent Plumbing Ltd.

Due to the issues of kitchen fitting has been damage to Simon and Rebecca. Also bring about a huge loss. According to the case, the facts shows that all the damages are relating to Heaven Scent Plumbing Ltd’s workmanship problems, So, Simon and Rebecca may claim against Heaven Scent Plumbing in this issue.

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