Foundation of Business Law - Case Study Example

FOUNDATIONS OF BUSINESS LAW I QUESTION ONE A Dan For advising Jane regarding her claims against Dan for revoking the offer before the stipulated time, the following issues have to be considered. 1 Issue The issue to be addressed is whether revocation of offer before the stipulated time amounts to a breach of contract? 2 Law The tests to be followed are those for revocation of offer. The revocation of an offer amounts to a breach of contract only when there is consideration for keeping the promise open for a specific period. 3 Authority Revocation of offer: Goldsbrough Mort v Quinn.1 Knowledge of Revocation of offer through a third party: Dickinson v Dodds.2 4 Application In this problem, the tests for revocation of offer had been applied and were satisfied. Dan revoked the offer within the stipulated time. Since there was no consideration, the offer need not be kept open for any period. In Dickinson v Dodds, one of the parties had agreed to sell a property to the other party. This was open for a specified number of days. As such, this was an offer. Subsequently, the other party obtained information that the vendor was about to sell the property to some other individual. This caused the other party to give a notice of the acceptance to the first party.3 The court held the offer of the seller as revoked, as the buyer had been aware of the intention of the seller to negotiate a sale with some other party. Moreover, there was no necessity for the seller to inform the prospective buyer about the proposed sale.4 In the absence of consideration, the promise to keep an offer open for a specific period is not valid. Strictly speaking, an option is a guaranteed option to act, and this guarantee assumes a contractual form. An instance of this is the option to purchase at the end of a lease or within specified time. Such options are to be found to a greater extent in transactions relating to land. 5 Options provide a convenient method for retaining offers in an open position. In such instances, the offer, by itself, establishes a contract and this makes it necessary for the offer to be kept open for a specific period. The exercise of such option brings another contract into existence. 6 In Goldsbrough Mort v Quinn, the defendant had provided the plaintiff with an option with respect to the purchase and lease of land. This option was to remain in effect for a week. However, the defendant declared the option closed, within the week, and stated that the option had been furnished as a consequence of a mistake. The Plaintiff had accepted the offer, prior to the expiry of the week.7 The Court held that in the absence of consideration, a promise to keep an offer open for a specific period was unenforceable. 5 Conclusion In this problem, the tests for revocation of offer were applied and satisfied. Dan is not liable for breach of contract, as he need not keep his offer open until Jane repays the security bond, as required by him; since there was no consideration in this regard. Although, Dan revoked the offer without any communication to Jane; as per the above discussion, she cannot claim against Dan for revoking the offer prior to her return with the security fund. B Disco John For advising Jane with respect to Disco John’s claims against her, the following issues need to be taken up for discussion. 1 Issue Whether Jane’s refusal to use Disco Johns services amounts to breach of contract. Whether Jane can rely on the doctrine of frustration in her defence. 2 Law The tests to be applied in this situation are with respect to the doctrine of frustration. The contract will be terminated automatically due to frustration. 3 Authority Contract annulled due to frustration: Krell v Henry.8 4 Application In this problem, the test for doctrine of frustration was applied. Jane booked the services of Disco John for her party at the venue. However, the venue was unavailable to her due to Dan’s contract with some other party. In Krell v Henry, a contract was formed, whereby a room overlooking the coronation route of King Edward VII was to be provided on hire. The sudden illness of the King resulted in the cancellation of the coronation, and the court held that the contract was cancelled due to frustration.9 The contemporary Australian legal position with regard to such situations is provided in the ruling in Codelfa Construction Pty Ltd v State Rail Authority of New South Wales.10 In this case, the plaintiff was forced to incur additional expenditure due to a court injunction. The Supreme Court of New South Wales, ruled that the contract was frustrated by the injunction.11 5 Conclusion As per the above discussion, Jane is not liable for any claims from Disco John with respect to her cancellation of services. This is because; doctrine of frustration annulled the contract between Jane and Disco John. II QUESTION TWO For advising Jane with respect claims for the harm caused, due to issues like sanitation, against Max the following discussion needs to be conducted. 1 Issue The issue to be discussed are whether claims can be made against Max for the harm caused by the unsatisfactory sanitation and substandard production of the beer that had been consumed at Jane’s party. 2 Law In Donoghue v Stevenson, it was held that any person had to take reasonable care to circumvent acts or omissions that could reasonably be expected to cause injury to others.12 3 Authority Duty of care in negligence: Donoghue v Stevenson. Duty of care with respect to manufacturing defects: Grant v Australian Knitting Mills.13 4 Application With regard to a product liability claim in negligence, there are four elements. These are; first, the defendant should be an individual who owes a duty of care to a class of individuals that comprises of the plaintiff. Second, the defendant should have breached that duty of care. Such infringement could be due to the supply of a product involving a manufacturing, design, or informational defect. Third, foreseeable damage should have been undergone by the plaintiff. Finally, the loss or damage to the plaintiff should be attributable to the breach of duty of care by the defendant.14 Lord Atkin, in his ruling in Donoghue v Stevenson, held that any person had to take reasonable care to circumvent acts or omissions that could be reasonably expected to cause injury to another. This was reiterated in Tame v New South Wales,15 by Gummow J and Kirby J, who stressed that the tort of negligence did not demand anything more than reasonable care to avoid risks that were reasonably predictable. The benchmark for liability is rationality of behaviour.16 As per the opinion of Lord MacMillan in Donoghue v Stevenson, the reasonableness of the defendant’s conduct had to be evaluated on the basis of the changing community values and circumstances. During the daily interactions of business and social life, individuals tend to be exposed to a vast array of relations with other individuals. Thus, the law has to be limited to a reference to the norms of the reasonable man, whilst establishing whether some specific association resulted in a duty to exercise care, with regard to the entities involved in that association.17 In Grant v Australian Knitting Mills, the plaintiff developed a rash after donning contaminated underwear manufactured by the defendant.18 The plaintiff sued both the retailer and the manufacturer. The court ruled that the manufacturer was liable for having breached a duty of care and for the defective products.19 The manufacture and supply of a product that leads to damage or loss, on account of defective manufacturing, constitutes a breach of the duty of care. An instance of this is the supply of a contaminated product, a product that fails prematurely, or in a manner that is inconsistent with normal wear and tear on account of defective manufacturing.20 Theoretically, in such instances, the duty of care could be satisfied if the defendant were to implement a manufacturing system that was safe, along with a mechanism to ensure the exercise of care by employees, during the course of effecting that system. The duty of care would also be satisfied if the defendant were to establish a system aimed at checking the products for imperfections. If the manufacturing defect in a product is the result of an act or omission of some other party, such as the entity that manufactures the component parts of the product, then the defendant supplying the flawed product will not be deemed to be in breach of the duty of care.21 5 Conclusion In this problem the tests for duty of care in negligence were applied. According to the above discussion, Jane can claim damages from Max for the harm caused to her close friends, who lost an opportunity of procuring jobs, due to the illness caused by the beer supplier Max. BIBLIOGRAPHY A Articles/Books/Reports Gillies, P, Business Law (Federation Press, 2004) Halsbury's Laws of Australia, 338 – Product Liability: (B) Elements – Negligence in Product Liability (LexisNexis, 2008) Maggi, M, Review of the Convention on Contracts for the International Sale of Goods (CISG) 2002-2003 (Kluwer Law International, 2004) Maxwell, C, ‘Too Much Law? Risk, Reasonableness and the Judge as Regulator’ (2009) 14(2) Deakin Law Review 143 Moles, RN, Networked Knowledge – Contract Law Casenotes Moles, RN, Networked Knowledge - Law Lectures B Cases Codelfa Construction Pty Ltd v State Rail Authority of New South Wales (1982) 149 CLR 337 Dickinson v Dodds (1876) 2 Ch D 463 Donoghue v Stevenson (1932) AC 562 Goldsbrough Mort v Quinn (1910) 10 CLR 674 Grant v Australian Knitting Mills Ltd (1936) AC 85 Krell v Henry (1903) 2 KB 740 Tame v New South Wales (2002) 211 CLR 317 Read More