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Australian Legal System

26 Jul 2016Government and Law Essays

Facts: At the Toowoomba Railway Station, Albert boarded Jack’s taxi. Albert asked that he wanted to be taken to the university. Upon arrival at the university, Albert refused to pay the taxi fare. He argued that one of the three essential elements to the formation of a simple and enforceable contract is lacking which is the consideration.

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Jack, on the other hand, argued that there was a valid and binding contract between them since consideration is manifested by Jack’s taking Albert to the University. Albert, on the other hand, argued that the consideration which Jack was referring to is a past consideration since at the time he was no longer at the railway station but is now inside the university making his consideration a past consideration. He added that past consideration is not the consideration within the meaning of the Law on Contracts.


  • whether or not there was a valid and binding contract between Albert and Jack
  • whether the contention that principle of past consideration is no consideration applies in this case

Ruling: On the first issue, I rule in favor of Jack and hold that there is a valid and binding contract in this case. There are three basic elements to the formation of a simple contract:

  • agreement between the parties which is manifested by subsequent acceptance by one party of the offer of another party;
  • intention to create legal relations;
  • consideration. (William R. Geldart) All these three elements are present in this case.

Firstly, there was a consummated agreement between both parties which was manifested by the offer and the acceptance of the offer. The most important element, which constitutes the heart and soul of contracts, is the agreement between the parties. It is also known as the agreement of the wills. This agreement between the parties is a matter of the mind which must be manifested by external acts. Under our law, the agreement between the parties is manifested by the concurrence of the offer and the acceptance. It must be stressed, however, that the act of the offer and the act of the acceptance need not be expressly made in words or in writing. In fact, the offer and the acceptance can be manifested in the conduct of both parties.

As a common carrier, Jack impliedly makes an offer to every computer every time he makes his vehicle available to the riding public. When Jack stayed at the Toowoomba Railway Station he was in effect making an offer to the riding public to enter into a contract of carriage with him. On the other hand, the act of Albert in boarding Jack’s taxi at the railway station is an act of acceptance of Jack’s offer. In this case, there was a concurrence of the offer and acceptance and there was a consummated agreement between Jack and Albert.

As early as 1957, the Supreme Court has already ruled that the relationship between a common carrier and its passenger is a contract. In the case of Peoples Checker Cab Company v. Dunlap, The Supreme Court has ruled that “the relation of passenger and 'carrier for hire' arises out of contract, which may be express or implied, and such relation begins when a person puts himself in care of the carrier or directly within its control, with intention of becoming a passenger and is accepted as such by the carrier.”

The second element is likewise present which is the intent to create legal relations. The rule on the concurrence of the offer and acceptance is not absolute. It may happen that the second party accepts the offer of the first party but no enforceable contract may exist between them because there was no intention to create a legal relationship between them. In this case, neither party may file a suit in the court of law.

Under our jurisdiction, courts have classified the nature of the agreements into two: a) social, family or domestic arrangements; and b) commercial or business arrangements. Under the social, family or domestic arrangements, the law presumes that there was no intention to create legal relations between the parties. One particular example of this is the case of Balfour v. Balfour which is about a husband agreeing to give his wife £30 on a monthly basis. Once he left, however, he stopped giving money to his wife. The court ruled that there was no enforceable agreement as there was not enough evidence to suggest that they were intending to be legally bound by the promise. On the other hand, the law presumes the intention to create legal relations between the parties in case of commercial or business transactions. In both cases, however, the law allows the parties to offer evidence that will rebut the presumption. Thus, even if the contract entered into was a social, family or domestic arrangement, if the person filing the suit proves that there was an intention to create legal relations, then an enforceable contract may exist between them. The same is true in cases of commercial or business transactions, the party filing the suit must offer evidence that will prove that there was no intention to enter into legal relations between the parties.

Applying this principle in the instant case, the nature of the agreement between the parties is a commercial or business transaction. It bears stressing that Jack was engaged in the business transporting passengers from one place to another. He offers his taxi to the riding public and at the same time, he expects that he be paid for his services rendered. In this case, the presumption that there was an intention to create legal relations applies because of the following reasons: a) Jack was engaged in the commercial transaction; b) Albert failed to offer any evidence that will rebut this presumption.

The third is the consideration. It is the generic term, it is anything of value (an item or service) which a party to a legally-binding contract must agree to exchange if the contract is to be valid. (“Consideration Under English Law”) It is the why of the contract or the essential reason which moves the contracting parties to enter into the contract. It is the immediate, direct or most proximate reason which explains and justifies the creation of an obligation through the will of the contracting parties. Under our law, there is sufficient consideration when there is an act or forbearance of one party, or the promise thereof is the price for which the promise of the other is bought, and the promise thus given for value is enforceable.

Applying this principle in the case at bar, the promise to pay of Albert in exchange for the service of transporting him from the railway station to the university is sufficient consideration to support the contract between them. Being engaged in the contract of transporting the public, Jack expected that he will be paid by Albert. It was the primary reason which moved Jack to transport Albert.

Thus, there was a valid, binding and enforceable contract between Jack and Albert. There was an agreement between the parties, an intent to create legal relations between them and sufficient consideration.

Albert argues, however, that there was no consideration of their contract that will make the agreement between them a valid and enforceable contract. He argued that on his part there was no consideration for the payment of his taxi fare. His theory was that at the time Albert boarded Jack’s taxi there was no agreement that he will pay the taxi fare. Now, since time has elapsed and he has now been taken to the university then this is already a past consideration which is not a sufficient consideration to support a valid and binding contract.

I rule against Albert and in favor of Jack holding that the principle of past consideration is not considered as a sufficient consideration does not apply in this instant case. In the past, our courts have explained the concept of past consideration. The case of Roscorla v. Thomas 3 QB 234 is instructive on the issue of past consideration. In this case, Roscorla bought a horse from Thomas for ₤30. After the sale was completed Roscorla sought an assurance from Thomas that the horse was not vicious. Thomas assured Roscorla that the horse was not vicious and he warranted that the horse was sound and free from vice. Eventually, the horse proved to be vicious and Roscorla sued Thomas for breach of warranty. The court, in this case, ruled that at the time the contract of sale between Roscorla and Thomas was entered into, the later made no warranty about the horse not being vicious. It was only after the contract entered into between both parties was consummated that Roscorla asked for an assurance from Thomas. The warranty of Thomas was given to Roscorla after the sale has been consummated. Such being the case there was no additional consideration for the warranty. One of the essential elements therefore of a valid and enforceable contract which is sufficient consideration was lacking making the suit for breach of warranty against Thomas unenforceable.

An analogous case is the case of Eastwood v. Kenyon. This case involved an executor of a deceased estate who obligated himself to take care of the deceased’s daughter. For many years, he spent a lot of money just to take care of the said daughter. When the child grew up, he promised the executor that she will reimburse him. This she never did. Hence a suit was filed. The Supreme Court ruled that the promise to reimburse the executor for the expenses he incurred was a purely moral obligation. It was not supported by an adequate consideration. What the executor had done for the daughter in the past does not form part of the exchange.

The case of Jack and Albert could be distinguished from the case of Roscorla v. Thomas. In the case of Jack and Albert, there was only one agreement entered into between the parties which is the contract of sale as contradistinguished from the two agreements entered into between Roscorla and Thomas which are the sale and the agreement that the horse was free from vice and defect. Secondly, in the case Jack and Albert there was only consideration needed to make their contract valid and enforceable in court which is the payment for the taxi fare. This case should be distinguished from the case of Roscorla v. Thomas which needed two considerations to support two agreements. Thus, the argument that there was past consideration since Albert was already taken to the university does not apply because there was no past and present or future consideration in this there being only one agreement between Albert and Jack.


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