Commercial Law: Rights and Obligations Regarding the Agreement - Assignment Example

Commercial Law Assignment Question One Part i In this problem, in order to advice Nicole, with respect to her rights and obligations regarding her agreement with Andrew, it is to be examined whether there is a binding contract between Nicole and Andrew. Contract law, enjoins that a standard contract has to necessarily consist of the making of an offer from the offeror to the offeree, its acceptance by the offeree, an intention to create a binding legal relation, and consideration[Har084]. The offeror’s offer upon being accepted by the offeree results in a contract. An offer differs from mere inclination to negotiate. An offer need not be made to a specific individual. It can be made to a person, a class of individuals, or everybody. As such, an offer connotes an explicit promise to be legally bound, upon acceptance of its terms[Fie10]. Consequently, the terms of the offer have to be accepted unconditionally. In our problem, on 21 July 2014, Nicole informed Andrew about her intention to sell her property for $50,000. This could constitute an offer, and Andrew replied that he would consider it. In the absence of Andrew’s acceptance, there is no binding contract with Nicole. Moreover, acceptance takes place when the offeree consents to the offer, by an act or statement. It is indispensable for acceptance to be unequivocal and conveyed to the offeror. In order to protect consumers, Sections 18 and 41 of the Competition and Consumer Act 2010 (Cth) Schedule 2 Australian Consumer Law (ACL) have been modified. One of these benefits is that invitations to treat or offers cannot be deceptive or misleading[Fie10]. On the evening of 22 July 2014, Nicole posted a letter to Andrew indicating her intention to sell her property for $45,000. Andrew saw this letter, the next day in the morning and posted his letter of acceptance on the same day. Since, Andrew accepted the offer unconditionally, a binding contract can be assumed in this situation. However, the postal acceptance rule is to be examined, to arrive at a decision regarding the conclusion of a binding contract. The postal acceptance rule constitutes an exception to the general rule that acceptance has to be conveyed to the offeror by the offeree for the contract to be formed. This rule declares that a contact has been completed and that it is binding at the time the acceptance is posted, instead of the time of receipt of the acceptance[HIl01]. For example, in Adams v Lindsell, the court held that the contract was formed when the offeree posted the letter of acceptance[Lat121]. Therefore, in our present problem, the contract is deemed to have been completed when Andrew posted the letter of acceptance on 23 July 2014. According to the above discussion and case law, Nicole cannot evade liability for breach of contract, if she refuses to carry out her obligations with regard to the sale contract made with Andrew, as a binding contract had been formed with the posting of the letter of acceptance by Andrew, under the provisions of the postal acceptance rule. Part ii The term subject to contract indicates the presence of conditions and terms that have to be fulfilled, if there is to be a contract between the parties. This was the ruling in Masters v Cameron[Mol14]. Similarly, in our case, Nicole’s letter disclosed her intention that the contract was to be concluded according to the formal deed prepared by her solicitor. Hence, there would be no contract, until the conditions specified in the formal deed were satisfied. Part iii When the offeror specifies in the terms of the offer that acceptance has to be undertaken in a particular manner, then the offeror can safely adopt the stance that he is not bound unless acceptance is conveyed exactly as specified by him. This derives from the ruling in Manchester Diocesan Council for Education v Commercial & General Investments Ltd[Ans10]. If Nicole had stipulated that the acceptance of her offer by Andrew had to be in person, and confirmation had to be by word, then she would not be bound to acknowledge the acceptance made by letter. Under those circumstance, Andrew’s acceptance would be deemed invalid. Question Two Bruce purchased a second hand motor boat, specifically for fishing and travelling regularly. During the pre-contract negotiations, he revealed the purpose behind the purchase of the boat to Tony, the proprietor of Tony’s Marina, Pty Ltd. However, Tony made false statements to Bruce about the boat’s condition. Tony’s behaviour amounts to deceptive and misleading conduct according to the provisions of the Trade Practices Act (Cth) 1974. In general, the laws that protect consumers cannot be excluded by including a disclaimer or exclusion clause. For instance Section 18 of the ACL, precludes deceptive or misleading conduct in trade or commerce. Moreover, the legislation pertaining to the sale of goods and services declares that specific conditions cannot be excluded or modified from sales involving goods or services. Such legislation is aimed at preventing businesses from circumventing certain provisions that are to the benefit of the consumers[Art14]. For example, the subject matter of Byers v Dorotea Pty Ltd related to misleading and deceptive conduct. In this case, it was held that exclusion clauses declaring that the purchase had not relied upon any representation of the vendor were ineffective in preventing a claim for deceptive and misleading conduct. This was on the basis of the provisions of Section 52 of the Trade Practices Act (Cth) 1974. Goods sold in trade or commerce and purchased by a consumer fall under the purview of consumer guarantees. This protection has been extended to second-hand, leased or hired goods. Nevertheless, certain consumer guarantees are applicable irrespective of whether the goods had been sold in commerce or trade. The ACL aims to ensure fair trading and to protect consumers and it includes the unfair contract terms legislation. The ACL ensures that consumers are provided with the same protection, and businesses are vested with the same obligations and responsibilities across the nation. The courts and tribunals of Australia can enforce the ACL[Com104]. In our problem, Bruce discerned defects with his second hand boat, Boomer, within a month of its purchase. As such, Marina Pty Ltd had violated the provisions of the ACL. Consequently, Marina Ltd is liable for breach of contract under the provisions of the law. Moreover, the Boomer was not in a fit condition due to lack of maintenance from a long time. It will cost around $15,000 to service and repair the boat. Furthermore, the marine radio is not working. All these issues make Marina Pty Ltd liable for breach of consumer guarantees under the provisions of ACL. In addition, it is liable for misrepresentation under the provisions of the law. A consumer can claim a remedy directly from an importer or manufacturer for goods that fail to satisfy any of the following consumer guarantees. These are; first acceptable quality; second, matching description; additional promises about the goods, such as condition, quality and performance; repairs and spare parts. A consumer is entitled to recover from an importer or manufacturer, costs that include an amount for reduction in the value of the goods and in some instances compensation for loss or damages[Aus14]. Furthermore, they should be suitable for the purpose intimated by the consumer to the seller, prior to purchasing the same. The consumer can claim a remedy from the retailer for goods that do not satisfy consumer guarantees. Some of the remedies that can be claimed from the retailer are; repair, replacement, or refund, and in some instances, compensation for loss and damages. The retailer is prohibited form redirecting the consumer to the importer or manufacturer[Aus14]. Hence, Bruce can claim a refund by returning the boat or repairs of the same, and damages for the losses suffered by him in respect of this agreement. Marina Pvt Ltd could have raised an argument of an exclusion clause if it had been included in the agreement. For example, in Toll (FGCT) Pty Ltd v Alphapharm Pty Ltd, it was ruled by the High Court of Australia that as the parties had signed the written contract, they were bound by it[Hig04].. However, no exclusion clause had been included in the contract. Hence, Marina Pty Ltd cannot make this argument. They can raise an argument that Bruce had purchased the boat after undertaking a test drive. Hence, he purchased the second hand boat with knowledge of defects, thereby rendering them not liable for any breach of contract. However, Bruce will be certain to win breach of contract proceedings, as Marina Pty Ltd had violated the provisions of ACL, by breaching its consumer guarantees. Bruce can sue Marina Pty Ltd for deception and misrepresentation under the provisions of the law. References Adams v Lindsell (1818) 1 B&Ald 681. Anson, W. R., Beatson, J., Burrows, A. S. & Cartwright, J., 2010. Anson's Law of Contract. Oxon, UK: Oxford University Press. Arts Law Centre of Australia, n.d. Exclusion clauses, disclaimers and risk warnings. [online] Available at: [Accessed 25 August 2014]. Australian Competition & Consumer Commission, n.d. Consumer guarantees. [online] Available at: [Accessed 25 August 2014]. Byers v Dorotea Pty Ltd (1986) 69 ALR 715. Commonwealth of Australia, 2010. Consumer guarantees. [online] Available at: [Accessed 25 August 2014]. Competition and Consumer Act (Cth) – C2011C00003, 2010. Canberra, Australia: Office of Legislative Drafting and Publishing, Attorney‑General’s Department. Field, C., 2010. The Terms of a Contract. [online] Available at: [Accessed 10 December 2013]. Hartmann, A., 2008. Australia: Doing The Deed: A Deed, Standard Contract OR Agreement ?. [online] Available at: [Accessed 25 August 2014]. High Court of Australia, 2004. TOLL (FGCT) PTY LTD (formerly FINEMORES GCT PTY LTD) v ALPHAPHARM PTY LTD. [online] Available at: [Accessed 25 August 2014]. HIll, S. W., 2001. Email contracts –When is the contract formed?. [online] Available at: [Accessed 31 August 2014]. Latimer, P., 2012. Australian Business Law 2012. [online] Available at: [Accessed 31 August 2014]. Manchester Diocesan Council for Education v Commercial & General Investments Ltd (1 WLR 241) 1970. Masters v Cameron (1954 ) 91 CLR 353. Moles, R. N., n.d. Intention to Create Legal Relations / Parties To a Contract. [online] Available at: [Accessed 31 August 2014]. Toll (FGCT) Pty Ltd v Alphapharm Pty Ltd (2004) 219 CLR 165. Trade Practices Act No. 51 (Cth), 1974. Canberra, Commonwealth of Australia. Young, M., 2009. Understanding Contract Law. Abingdon, Oxon, UK: Routledge. Read More