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Mobil Oil Australia v Wellcome International- Case Study

Question :

Contract law is considered as the most important law that governs the contractual relationships between the parties. In the case of Mobil Oil Australia v Wellcome International (1998), the company made an offer to give no cost franchisees if they achieve the goals set by the offeror. A few years later when Mobil revoked the offer made, all the franchisee sue Mobil for the breach of contract.

  • What do you mean by law of contract?
  • What is a unilateral contract? Explain with the case of Mobil Oil Australia v Wellcome International (1998).
  • Explain revocation of offer in case of unilateral contract with refernce to Mobil Oil Australia v Wellcome International (1998).
Answer :

Background

The law of contract governs the relation of the parties to the contract i.e. contractual relationships of the parties to the contract. It provides the laws which relate to the contract made between the parties. There are five essentials which are required to be fulfilled to make the contracts valid in Australia. The first essential is an offer which is made to the party. Second is acceptance to the offer made previously. Offer and acceptance together form an agreement between the parties. The third essential is an intention to create a relation between the parties which is legal in nature. An intention must be clear and both the parties must agree to the same thing in the same sense. Fourth is the consideration which usually is in the form of money or something which is of value. The fifth and last essential is the capacity to contract. The person entering into the contract and building contractual relationship must have the capacity to contract and shall not be restricted legally to not enter into one. All these essentials are the basic requirement in forming contractual relationships between the parties and the absence of any essential will make contract invalid. If all the conditions are fulfilled then the contract will be valid, legal and would have a binding effect on the parties. It will be enforceable by the law.

A unilateral contract is that contract which is accepted only on its performance of an offer made. These types of contracts are formed when a party makes an offer i.e. offeror in form of promise which will be fulfilled in exchange of some act or performance of act by the other party i.e. offeree. In this type of contract only one person is needed to make this contract.

Revocation of an offer made in Unilateral Contract can be revoked at any time even if the performance to the act has been commenced by the offeror. But if there is presence of consideration in the offer so made by the party then that offer can not be revoked by an offeror. Revocation of an offer is totally based on the fact that whether there is presence of consideration or not. It also depends on the fact that there are no conditions mentioned in the offer about non termination of the contract or about the expiry of the contract. If any such condition is present then the matter is decided on the basis of these facts.

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Facts of the case

In the case of Mobil Oil Australia v Wellcome International (1998), Mobil told its franchises that if they reach a certain goal set, the company would get rewards. The reward which was promised was to get no cost renewal of the franchise. After three years, Mobil informed all its franchise that they are revoking the offer made. Later, all the franchisees sued Mobil for breach of contract.

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Legal Issues

  • whether Unilateral contracts can be revoked or not after the performance has been partly performed?
  • Whether can a Unilateral offer be revoked once it is accepted by an offeree?
  • Whether any act was commenced in response to the offer made by Mobil?

Judgement

It was held by the court that the offer made by the Mobil can be revoked. The offer so made was a unilateral offer and it can be revoked by an offeror at any time even if the performance have been partly performed. Court held that if unilateral offers had any condition precedent that it cannot be revoked, then only it will be legally binding on the parties. Otherwise it has no meaning and party making offer may revoke at anytime they want. The offeror will be bound to perform the duties only if there existed consideration. Presence of consideration would have prevented the offeror from revoking the contract.

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The court while deciding the matter focused on the fact that there existed no consideration between the parties. It was a unilateral type of a contract in which an offeror had advantage of revoking it any time as there was no condition present to not revoke the same.

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