by Tran Nguyen
HIRAC and IRAC:
The HIRAC/IRAC method is used to sort through a hypothetical legal problem in many Australian law schools.
HIRAC = Heading, Issue, Rule, Application, Conclusion
IRAC = Issue, Rule, Application, Conclusion
Legal problem (Contract law): Aristotle (aged 22 years) had recently established a small suburban greengrocer’s shop. He owed his father, Plato, who ran a small market garden as a part-time activity, the sum of $2000 for vegetables that Plato had supplied him.
When Plato approached him about payment, Aristotle replied that his business had not been doing well and that the only way in which he would be able to obtain financial stability would be for him to take up a lease, which had been offered to him, of a shop in a new shopping arcade which was in a much better location than his existing premises. Aristotle said that such a move would involve his using all his capital and obtaining a bank loan and, if he were to make the move, he could only afford to pay Plato $1500.
Plato agreed to accept Aristotle’s cheque for $1500 in full settlement. He told Aristotle that he did so partly out of fatherly affection for his son, and partly because he hoped that Aristotle would continue to buy vegetables from him.
Aristotle subsequently obtained the necessary finance and moved his shop to the new arcade. Soon after Plato had a disagreement with Aristotle and now wishes to sue for the remainder of the original debt.
This is a contract law problem relating to intention to be legally bound and consideration.
The issues involve: (1) whether the parties do or do not intend to be legally bound; and (2) sufficiency of consideration and part payment of a debt.
Where the agreement between the parties is of a social or domestic nature, it is presumed that the parties do not intend to be legally bound by what they agrees on and that, therefore, such agreement is legally unenforceable (Balfour v Balfour  2 KB 571).
However, this presumption can be rebutted by evidence to the contrary (Roufos v Brewster (1971) 2 SASR 218). Matters to be considered include:
- What the parties said/represented to each other;
- The context in which the statements were made;
- How the parties conducted themselves; and
- How grave the consequences if the promise were breached.
Consideration must be present in every ‘simple’ contract. To enforce a promise made in such a contract, the promise must be supported by consideration.
Consideration must also be sufficient in the eyes of the law. Performance of an existing contractual duty owed to promisor is not sufficient (Stilk v Myrick (1809) 2 Camp 317) unless the promisor receives a practical benefit that otherwise might have resulted (Williams v Roffey Bro & Nicholls (Contractor) Ltd  I AII ER 512). A promise to perform a mere moral obligation also does not legally obligate the person making it (Eastwood v Kenyon (1840) II Ad & E438).
Part payment of an existing debt on the due date without something extra is not sufficient consideration for creditor’s promise to forego the balance. But part payment in a different manner, or at a different time, or in a different place (ie something not required under contract) may be sufficient (Pinnel’s case (1602) 77 ER 237 and Foakes v Beer (1884 9 App Cas 605). Also noting that no sensible distinction can be taken between the payment of lesser sum by cash and by cheque (Builders Ltd v Rees  3 AII ER 837).
Applying rules/principles to the facts
The courts would presume that the parties to the agreement, Aristotle and Plato, as family members, did not intend to be legally bound (Balfour v Balfour). To rebut this presumption, Aristotle would need to produce evidence that would lead a reasonable person to believe there was an intention to be bound. The facts here are similar to those in Roufos v Brewster, so this is obviously likely.
Moreover, Aristotle would argue that Plato couldn’t sue for the remainder of the original debt ($500) because he has provided a sufficient consideration to his father (the rule in Pinnel’s case). This includes:
- He would continue to buy vegetables Plato supplied since he moved to the new shop.
- With the new shop which was in a much better location than his existing premises, he would need more vegetables from Plato. So that Plato would take more benefits than before.
Thus, it is clear on the facts that Plato received a practical benefit from his promise to accept $1,500 in full settlement (Williams v Roffey Bro & Nicholls). Plato will be bound by such a promise.
Finally, Plato would still argue that his promise only created moral obligation because his promise, as he said, based partly on the fatherly affection, and therefore he cannot be legally held to it, as in Eastwood v Kenyon. Considering this argument in whole circumstance, a reasonable person will not believe Plato’s promise merely created a moral obligation because of his intention to be bound and sufficiency of consideration.
On the facts provided I would advise Aristotle do not have to pay his father the remainder of the original debt.
 Daniel Khoury and Yvonne Yamouni, Understanding Contract Law (LexisNexisButterworths, 8th ed 2010) [4.1].
 Ibid [4.5].
 Warwick Fisher, LAW10159 Principles of Contract Law Study Guide (Southern Cross University, 4th ed, 2012)12.
 Khoury and Yamouri, above n 1, [3.4].
 Ibid [3.20].
 Ibid [3.21].
 Ibid [3.16].
 Ibid [3.23].
 Ibid [3.24].