Contract Law: Analysis of Ozzblock Pty Ltd - Case Study Example

Contract Law Introduction Hart, the manufacturer and distributer of sunglasses in Australia, produced a new range of sunglasses. These were d as Total Eclipse, and were targeted at the senior citizens of the nation. Hart decided to include scratch tickets with the sunglasses. If they disclosed a picture of the Eiffel Tower, then the purchaser would receive a two week holiday in Paris. In this regard, she entered into a three year contract with Ozzblock Pty Ltd, whose proprietor was Oswald Block, for printing the promotional material. The scratch tickets were to be printed by Oswald. For advising Hart, with regard to her rights and liabilities against Ozzblock Pty Ltd, the following issues need to be considered. Issue 1 Consumer Contracts It is required to advise Hart whether she can terminate the contract with Ozzblock Pty Ltd and sue for damages. For deciding the rights of Hart, Courts will examine her status as a consumer. This is because, Hart can avail protection under Australian Consumer Law, if she can be classified as a consumer under the provisions of the law. The Australian Consumer Law provides protection that depends upon whether the sale of goods or services was for the usual domestic, household, or personal purposes. It also provides protection for goods or services that had been obtained for other purposes. Any contractual term that endeavours to exclude, limit, or modify the protections provided by the Australian Consumer Law has no effect and is void. Most of the situations, wherein the consumer is an individual purchasing goods for personal use are covered by this (Hobart Community Legal Service, 2013). Rule of Law In Australia, an individual is a consumer even when the goods or services have been purchased for business purposes. However, the price of these goods or services should not exceed $40,000. In any commercial sale of goods or services that is subject to the Australian Consumer Law, liability can be restricted to the cost of replacement, repair, or the re-supply of services. However, there has to be an express provision, to this effect, in the contract. Moreover, it should be equitable and reasonable under the circumstances for the supplier to rely on the express provision. The burden of establishing that the transaction is unfair and unreasonable vests with the purchaser (Hobart Community Legal Service, 2013). In R & B Customs Brokers Co Ltd v United Dominions Trust Ltd [1988] 1 WLR 321, the agreement for the purchase of a car by one of the company’s directors was considered as a consumer contract. This was because the car was meant for his personal use and not for sale. Application In our present problem, Hart entered in to a contract for printing scratch tickets, in order to enhance the sale of sunglasses manufactured by her. Similar to the facts of the case, R & B Customs Brokers Co Ltd v United Dominions, Hart required the printed tickets for promoting her sunglasses business and not for any sale purposes. According to the above discussion and case, law, Hart can be considered as a consumer, although her contract with Ozzblock exceeded $40,000, since the purpose of the tickets was to promote sales and not for selling them. Hart can avail the protection of consumer guarantees under the provisions of Australian Consumer law. Conclusion Hence, Hart can be considered a consumer, and as such, she can avail the protection of consumer guarantees under the provisions of Australian Consumer Law. Issue 2 Guarantees in Consumer Contracts Since, Hart is a consumer under the provisions of Australian Consumer Law, her rights under the guarantees to consumers have to be considered. Australian Consumer Law provides some guarantees to consumers with respect to quality of the goods purchased. The classification of guarantees, instead of the previous implied terms has the effect that these do not generate common law contractual remedies upon being breached (Clarke, 2010). Rule of Law The Australian Consumer Law is to be found under Schedule 2 of the Competition and Consumer Act 2010. This law consists of a single group of consumer guarantees that supplant the implied terms in consumer contracts. These implied terms had been a component of the federal, state, and territory fair trading laws. Part 3-2, Division 1 of the Australian Consumer Law incorporates consumer guarantees, instead of implied terms in contracts. The crucial guarantees are to be found under Sections 54 and 55 (Clarke, 2010). These sections provide guarantees regarding acceptable quality and fitness for purpose. Section 60 of the Australian Consumer Law creates a guarantee that the services provided to a consumer, in trade or commerce, have to be done with due care and skill. In addition, Section 61(1) of this law requires services to be reasonably suitable for the purpose intimated to the supplier by the consumer, either impliedly or explicitly. Furthermore, Section 61(2) of this law declares that the services and product resulting from those services should possess the condition, quality, or state that could reasonably be expected to achieve the outcome desired by the consumer. Goods are deemed to be of acceptable quality, if they are; first, suitable for all the purposes for which they are usually supplied. Second, they are acceptable in finish and appearance. Third, they are devoid of defects. Fourth, they are safe. Finally, they are durable to the extent that a reasonable consumer, with full knowledge regarding their condition and state, would consider as acceptable (Paterson, 2011, p. 263). In this connection, the matters that could be considered are; the nature of the goods, their price wherever relevant, statements relating to the goods on a label or packaging on the goods, representations forthcoming from the manufacturer or supplier of the goods, and any other pertinent information regarding the supply of the goods (Paterson, 2011, p. 263). The extant situation is that a well-defined class of remedies have been provided by the legislation, for breach of the guarantee requirement. These remedies are described under Part 5-4 of the Australian Consumer Law, and depend upon the gravity of the violation. Specifically, they depend upon whether the breach constitutes a major failure. Some of these remedies are rejection of the goods, making the supplier remedy its failure to comply with a guarantee, and damages (Clarke, 2010). Application In our problem, Hart ordered the tickets for a specific purpose that was clearly made known to Oswald Block. However, Oswald failed to monitor the work and did not check the product for defects. In addition, he failed to prevent his son from tampering with the printing machine. Several printing mistakes occurred, and proof reading was not conducted. Hence, Oswald breached an important term of the contract. Due to this, Hart had to face several problems with her customers. As such, Oswald had breached the quality guarantee provisions of services accorded to the consumers under the provisions of Australian Consumer Law. Conclusion Since, Oswald, breached the provisions of guarantee for services under the provisions of ACL, Hart can rescind the contract and reject the goods and claim damages for breach of provisions of guarantee under the Australian Consumer Law. Issue 3 Exclusion Clauses Whether Ozzblock Pty Ltd can rely on the exclusion clause to evade liability for the loss caused to Hart. Their contract included the exclusion clause that Oswald would not accept responsibility for any loss or damage arising from defects in printing, by the printer or any of its employees. Hart signed the contract without reading its contents, as she had failed to bring her spectacles. Hart had planned to have the Eiffel Tower picture on just one of the scratch tickets. However, Oswald’s 10 year old son had come to the printing press and tampered with the printing machine. The outcome was that every fifth ticket had a picture of the Eiffel Tower. Hart was besieged with demands for the two week holiday from numerous senior people, who had purchased the sunglasses and had received tickets with the Eiffel Tower on them. Oswald quoted the exclusion clause to disclaim any responsibility for this capital blunder, and Hart decided to terminate the contract and sue him for damages. Rule of Law It is an important feature of Australia law that exclusion clauses cannot be employed with the objective of excluding the laws that protect consumers. An instance is provided by Section 18 of the Competition and Consumer Act 2010 (Cth). This prohibits conductive that is deceptive or misleading, in commerce and trade (Arts Law Centre of Australia, n.d.). It is essential to determine whether an exclusion clause is a component of the contract. It is necessary for the court to determine the presence of a contract between the disputants. This is the first step to be taken, at the time of establishing the validity or otherwise of exclusion clauses. Thus, in Curtis v Chemical Cleaning & Dyeing Company Limited (1951) 1 KB 805, the receipt for a garment given for cleaning contained an exclusion clause. The court held that this receipt was not a contractual document. Therefore, the exclusion clause printed on it could not avert liability for the damage caused to that garment (Young, 2009, p. 104). However, in Toll (FGCT) Pty Ltd v Alphapharm Pty Ltd (2004) HCA 52, the High Court of Australia held that as the parties had affixed their signature to the written contractual document, they were bound by its terms (Campbell, 2010, p. AUS/5). As such, an exclusion clause is a contractual term that aims to exclude or restrict the liability of one of the parties to the contract, which that party would otherwise owe to the other party to the contract (Gillies, 2004, p. 218).At times, a party could include an exclusion clause in the contract that would totally absolve it from liability for some specific event. An instance of such event being the damage caused, during transportation, to fragile goods. The effect of exclusion clauses is to provide an advantage to a party to the contract (Arts Law Centre of Australia, n.d.). In Henderson v Steven (1875) LR 2 HL, a few contractual conditions had been printed on the reverse of a document. The obverse of this document did not contain any notice relating to the presence of these conditions on the reverse of the document. It was held by the court that this constituted inadequate notice. Application In our present problem, Oswald cited the exclusion clause to evade liability. It is to be examined whether Oswald can rely on this exclusion provision. As per the above discussion, an exclusion should be prominently printed and brought to the notice of the other party, before making the contract. The laws pertaining to the sale of goods and services clearly state that specific conditions cannot be excluded. The idea behind the presence of such legislation is that no business should be permitted to circumvent the protections that are to the benefit of consumers. Conclusion In our problem, Oswald cannot evade liability for his negligence, by seeking protection of the exclusion clause. Hence, Oswald is liable for the losses caused to Hart, due to the erroneous printing of the tickets. References Textbooks Campbell, D., 2010. Remedies for International Sellers of Goods. Juris Publishing, Inc. Gillies, P., 2004. Business Law. 12 ed. Annandale, NSW, Australia: Federation Press. Young, M., 2009. Understanding Contract Law. Abingdon, Oxon, UK: Routledge. Journal Article Paterson, J. M., 2011. The New Consumer Guarantee Law and the Reasons for Replacing the Regime of Statutory Implied Terms in Consumer Transactions. Melbourne University Law Review, 35(1), pp. 252-279. Cases Curtis v Chemical Cleaning & Dyeing Company Limited (1951) 1 KB 805. Henderson v Steven (1875) LR 2 HL. R & B Customs Brokers Co Ltd v United Dominions Trust Ltd [1988] 1 WLR 321. Toll (FGCT) Pty Ltd v Alphapharm Pty Ltd (2004) HCA 52. Legislation Competition and Consumer Act (Cth) – C2011C00003, 2010. Canberra, Australia: Office of Legislative Drafting and Publishing, Attorney‑General’s Department. Web Site Arts Law Centre of Australia, n.d. Exclusion clauses, disclaimers and risk warnings. [online] Available at: [Accessed 27 September 2014]. Clarke, J., 2010. Consumer guarantees. [online] Available at: [Accessed 27 September 2014]. Hobart Community Legal Service, 2013. Consumer Guarantees - What you need to know. [online] Available at: [Accessed 27 September 2014]. Read More