Question 1IssueIs there a legally binding contract between the buyer and the seller?Legal RulesA legally binding contract contains following essential elements: offer and acceptance, capacity to contract, intention to create legal relations, certainty of contract terms and proper consideration. When these elements present, there is a legally binding contract. A legally binding contract will not be formed if lack one of the essential elements. However, nevertheless the existence of a legally binding contract, there may be other elements such as counter-offer in the course of negotiation by parties, but they are not essential for a legally binding contract.An “invitation to treat”refers to an intention of inviting others to make an offer to the inviter (Pharmaceutical Society of Great Britain v Boots Cash Chemists [1953] 1 QB 401). This always exists in the course of negotiation of contract but it is not a essential element for a valid binding contract.An offer refers to the intention to enter into contract by some conditions and terms with the offeree. Acceptance means the offeree accepts the offer and is willing to enter into contract with the offer (Turner Kempson & Co Pty Ltd v Camn [1922] VLR 498). “Intention to create legal relations”sometimes needs to be presumed, in case it is a “social or domestic agreement”the court will presume that there is no such intention, while a “commercial agreement” there is such intention.In exchange for the promisor’s promise, the promisee must provide something valuable, which is called “consideration”.As for “capacity to contract”, parties must be capable to enter into contract; if one is not capable doing so, he must be agented by a proper agent (Nash v Inman [1908] 2 KB 1). Juveniles and mental patients are incapable to enter into contract by their own.Application1.Invitation to treatThe advertisement for sale of the red Ford car constitutes an “invitation to treat”. The advertisement only represented that the seller wanted to sell a car, a red Ford without other contents, and was made to the whole world. Therefore it was an invitation to treat.2.OfferThe seller made an offer through representing that he would sell his car to one who is interested at a price of $15,000 or near. The buyer contacted the seller after seeing the advertisement and showed interesting buying the car, he requested the seller to make an offer to him. The seller then made an offer that he would accept the price of around $15,000. Offer is the fundamental element for a valid contract since there is no contract if no offer exists.3.Counter-offer (New offer)The buyer said the price is high since there was some defects existed on the car and made a counter-offer to the seller by requesting that if the seller accepted the price of $12,000.Then the seller made a new offer: he said he would an offer with a price of $14,000 to buy the car. The buyer did not accept the offer but again made a counter-offer: he would pay the seller $13,000 for the car. Through the offer-counteroffer4.AcceptanceThere is no contract until an offer is accepted. In the captioned case finally the seller accepted thebuyer’s counter-offer by saying that the price was ok for him.5.Intention to create legal relationsConcluded from the conversations between the seller and the buyer, there was no expressed intention to exempt legal relations between them; and the conversation did not happen between friends or relatives, therefore it is not a social or domestic agreement; actually it is a commercial agreement.6.Capacity to contractAs mentioned in the captioned case, there is no circumstance that parties lack capacity to contract. It is reasonably assumed that both the buyer and the seller have the capacity to enter into the sale contract.7.ConsiderationThere is a consideration for the red Ford, it is the price ($13,000) accepted by the seller.8.Certainty of contract termsThe terms of the contract are certain: the object that will be sold or purchased is a red Ford car and the price is $13,000. The seller and the buyer also agreed on the time to transfer the car. ConclusionSince all essential elements had been present, a legally binding contract had been formed between the buyer and the seller.Question 2Issue1.Whether termination of the contract by Harry constitutes a breach of contract.2.Whether Harry’s solicitor had been authorized to make the representation.3.Whether the representation made by Harry’s solicitor amount to promissory estoppel.Legal Rules1. A party is entitled to terminate the contract if the contract provides so;2.An agency must behave within the scope and to the extent authorized by the principal onbehalf of the principal3.Promissory estoppel requires that once a party has promised something and other party hasbehaved based on the promise, then the promissor shall not change his promise (Hughes v.Metropolitan Railway Co [1877]).ApplicationThe contract clearly specifies that the seller is entitled to terminate the contract if the buyer by the due date does not complete the purchase. That is, if Lee does not complete the purchase, Harry is entitled to terminate the contract. It is very clear and no one should doubt about this.Lee cannot complete the payment by the due date; Harry has a right to terminate the contract according to the provision of the contract. Lee contacted Harry’s solicitor and said that he would raise finance within 7 days after the due date; hoped Harry would not terminate the contract. The solicitor said he thought that it was Ok but he needed to get instruction from Harry. The solicitor’s reply confused Lee, made Lee thought that Harry had agreed to his late for payment. However he also represented that he would have to get instruction from Harry, it seemed that the solicitor had no authority to make such promise to Lee therefore such promise should be voidable. An agency must behave in the scope authorized by the principal, so is the solicitor.Promissory estoppel applied to parties who made valid promise to other parties. The solicitor is an agency of Harry, he was not authorized to make promise, nor should promissory estoppel apply to the case. In accordance with the contract provisions Harry had the right to terminate the contract, therefore Harry did not breach the contract, and to the contrary, Harry behaved in accordance with the contract. Lee cannot sue Harry for the termination of the contract.ConclusionHarry terminated the contract in accordance with the contract provisions, he did not breach the contract, therefore no lawsuits should be initiated by Lee against Harry; Harry’s solicitor made no valid promise to Lee therefore the representation did not amount to the doctrine of promissory estoppel.ReferencePharmaceutical Society of Great Britain v Boots Cash Chemists [1953] 1 QB 401Turner Kempson & Co Pty Ltd v Camn [1922] VLR 498Nash v Inman [1908] 2 KB 1Hughes v. Metropolitan Railway Co [1877]。