Letter of Advice – Jacob Smith, Smith Enterprises

Assessment: Memorandum

Purpose of  Memorandum

The purpose of this memorandum is to outline the research undertaken in preparation of a letter of our advice to our client, Mr Smith. A copy of the letter is attached for your perusal.

Facts

The relevant facts as detailed in the email sent by Mr Smith are as follows:

• A client, Antonio, wishes to borrow money to finance a shipping
  operation.
• Mr Smith is not convinced Antonio will pay back the money on time so
  wishes to know what needs to be considered in any agreement he enters
  into.

Issues/questions Asked

• What needs to be taken into account when forming an agreement?
• What are the essential terms Mr Smith must include in any agreement
  with Antonio?
• Is there any relevant legislation that must be considered when preparing
  the agreement?

Discussion

In establishing whether an agreement has been reached between parties, the courts identify whether there has been an offer made by one party (the offeror) that is accepted by the other (the offeree). As shown in Brambles Holdings v Bathurst City Council and Carlill v Carbolic Smoke Ball Co, it is important that it is clear this has occurred.

To ensure it is clear that Antonio has accepted the offer put forward by our client it is recommended that any agreement is put into writing, particularly as it will involve an exchange of money. 

Consideration

Consideration involves a ‘quid pro quo,’ an exchange of one thing (an act) for another (promise). For consideration to be valid, it must consist of:

▪ Some right, interest, profit, or benefit, accruing to one party and some detriment, loss, or responsibility given or suffered by another; and

▪ An act preformed in return for a promise

It is also fundamental that the consideration move from the promisee, i.e. the promisee must give something for the promise.

Thus any agreement between our client and Antonio will need to clearly detail the consideration given on both sides. If not, the agreement may be seen as a ‘naked agreement’ that is unenforceable. However, in this instance consideration should not present an issue as the lending of money by our client will be done in consideration of Antonio undertaking to repay the loan, i.e. there will be a quid pro quo.

Assessment requirements

Purpose: prepare a memorandum that summarises research undertaken to produce a client letter of advice about lending money to Antonio (to finance a shipping operation). A copy of the letter is attached.

Facts to use: the factual background supplied by Mr Smith (Antonio wants a loan; Mr Smith doubts timely repayment).
Questions to answer:

• What must be considered when forming an agreement?
• What essential terms must be included in any agreement with Antonio?
• Are there any relevant statutes or regulatory issues to consider when preparing the agreement?

Expected structure / key pointers to cover:

• Clear recital of facts.
• Identification of legal issues (offer/acceptance, consideration, enforceability, capacity, security, remedies).
• Legal discussion supported by authoritative cases/authorities (e.g. principles from Carlill, Brambles etc.) and contract law doctrine.
• Explanation of consideration and why the loan is not a naked promise.
• A checklist of essential contractual terms (parties, loan amount, repayment schedule, interest, security, default remedies, governing law, signatures).
• Identification of statutory/regulatory matters (consumer-credit rules, registration of security, AML/KYC, any shipping-specific regulation or foreign-exchange controls as applicable to jurisdiction).
• Risk assessment and practical recommendations (due diligence, guarantees, collateral, documentation, dispute resolution).
• Attach the letter of advice to the client and supporting documents.

How the Academic Mentor guided the student step-by-step

Step 1: Clarify facts & client objectives

Mentor asked the student to confirm missing factual details the memorandum must rely on (loan amount, term, any collateral, Antonio’s credit/reputation, jurisdiction, purpose of funds, cross-border elements). Emphasis: never assume facts note where further instructions are required.

Step 2: Identify legal issues and research plan

Mentor mapped the legal questions to research tasks: offer & acceptance, consideration, formalities, enforceability, role of written agreement, security interests, guarantor law, and relevant statutes/regulations. Student was directed to collect precedent authorities and up-to-date legislative sources.

Step 3: Apply case law and core principles

Mentor showed how to apply leading cases and contract principles to the facts: how courts detect agreement (offer + acceptance), what constitutes adequate consideration, and pitfalls (e.g., “naked promises”). Student drafted short legal analyses linking doctrine to Antonio/Mr Smith’s situation.

Step 4: Draft memo structure and content

Mentor provided a template and told the student what to put in each section:

• Facts (concise).
• Issues (bullet points of legal questions).
• Discussion / Analysis (legal tests + application to facts).
• Consideration (why consideration exists here).
• Essential terms & clauses (practical drafting checklist).
• Statutory/regulatory considerations.
• Recommendations / Next steps.
  This ensured logical flow and that each issue was addressed succinctly.

Step 5: Produce client-facing letter of advice

Mentor guided conversion of the technical memo into a plain-language letter for Mr Smith: short problem statement, clear risks, recommended contract terms, and immediate actions (due diligence, security, negotiation points). Tone: practical and actionable.

Step 6: Draft list of essential terms and sample clauses

Mentor asked the student to prepare a checklist of must-have terms (listed below) and to suggest clause headings for the final agreement. This turned theory into usable drafting guidance.

Step 7: Check statutory / practical compliance

Mentor reminded the student to flag jurisdictional rules likely to affect the loan (consumer credit laws if applicable, registration of security e.g., PPSR-type system, AML/KYC obligations, shipping/transport regulations, licensing or insurance needs). Where specifics were needed, the mentor instructed noting them as “jurisdiction to be checked”.

Step 8: Risk mitigation and client instructions

Mentor prompted the student to include risk-mitigation measures: credit checks, guarantees, collateral, escrow for funds, insurance, choice of exclusive jurisdiction, and steps for enforcement.

Step 9: Review and polish

Mentor reviewed the memo and the client letter for clarity, correct legal reasoning, and professional tone; suggested tightening analysis and adding cross-references to authorities.

How the outcome was Achieved (deliverables)

• Memorandum: concise factual summary, legal analysis (offer/acceptance, consideration), statutory flags, and practical recommendations.
• Letter of advice: client-friendly summary of risks and next steps.
• Essential terms checklist / drafting notes: items Mr Smith should insist on (see next section).
• Actionable next steps: due diligence plan and instructions for negotiation and documentation.

Essential terms / clauses the Student Recommended 

• Parties’ full legal names and addresses
• Loan amount and currency
• Purpose of loan (shipping operation specifics)
• Repayment terms (schedule, instalments, final maturity)
• Interest rate, calculation method, fees and default interest
• Security: type (charge, mortgage, pledge), description of collateral, registration requirements
• Guarantor provisions (if applicable) and guarantee form
• Representations & warranties (capacity, title, solvency)
• Events of default and remedies (acceleration, enforcement rights)
• Dispute resolution and governing law / jurisdiction clause
• Conditions precedent (e.g., satisfactory credit checks, insurance)
• Confidentiality, assignment, notices, and execution formalities

Learning objectives covered

• Legal reasoning and application: apply contract law principles to client facts (offer, acceptance, consideration, enforceability).
• Legal research skills: identify and use relevant cases and statutory materials.
• Practical drafting competency: translate legal analysis into essential contractual terms and client advice.
• Client communication: prepare a clear, actionable letter that non-lawyers can follow.
• Risk assessment and mitigation: identify commercial and legal risks and propose pragmatic safeguards.
• Professional practice: structure a memorandum and produce client-facing documents consistent with professional standards.

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