Evaluating the Contractual Issues in the Problem - Assignment Example

Name of the Student] [Name of the Professor] [Name of the Course] [Date] Contract Law Assignment Introduction Malcolm, the owner of an award winning rabbit and tropical fish, telephones Georgia, a home pet care service provider, as he has to visit another city for a week. During her visit to his house, Malcolm informs Georgia that his rabbit is expected to win $10,000 at a rabbit show to be held in Melbourne. Georgia promises to take good care of his rabbit and fish, and sends him a standard form contract the next day. She demands $700 for her services. Her offer includes an exemption clause, for circumventing liability in the event of the death of the tropical fish, on account of their specific vulnerabilities. Malcolm fails to notice this exemption clause. Subsequently, the fish expired and the rabbit lost its rich coat, due to having been fed with each other’s food. Moreover, the aquarium overflowed, due to the clogging of the drain system. The flooding water caused extensive damage to the furniture and the house. Question One Discuss the contractual issues that arise in this situation. Issues For evaluating the contractual issues in this problem, the following aspects have to be discussed. Whether there is any valid exclusion clause to limit liability in the contract. Whether Georgia is liable for any negligence in bailment Whether there is any breach of contract by Georgia. Rule Section 60 Australian Consumer Law (ACL), stipulates the presence of a guarantee regarding the provision of services by an individual, in commerce or trade, to a consumer. The ACL can be enforced by the federal, state and territorial courts and tribunals. The erstwhile Commonwealth, state and territory consumer protection laws have been supplanted by the ACL, which has been provided in the Competition and Consumer Act 2001, under Schedule 2. Section 267 ACL, provides compensation for the predictable personal injury or damage to property that arises on account of failure to exercise due care and skill, while providing services. According to the decision in Cowper v Cowper, the bailee was under an obligation to take care of the goods in his possession, so as not to cause any harm or damage. Analysis It is the objective of the Australian Consumer Law (ACL) to secure fair trading and safeguard consumers. This law incorporates unfair contract terms legislation and constitutes a law at the national, state and territory levels. Consumers are provided with the same protections, and identical obligations and responsibilities are imposed upon business, by the ACL (Commonwealth of Australia). The purpose of limitation clauses in consumer agreements is to limit or exclude the liability of a manufacturer of goods or a supplier of services that could stem from the contract with a customer. The party relying on the exclusion clause has to establish that this clause is part of the contract. At the time of assessing the effectiveness of the clause, the courts consider the following elements. Whether the exclusion clause has been incorporated into the written agreement. Whether, the exclusion clause is couched in terms that are unambiguous and whether it encompasses the anticipated event or infringement (Thomson Reuters). The ACL, at Section 60, states that there is a guarantee regarding the provision of services by an individual, in commerce or trade, to a consumer. This guarantee requires these services to be provided with appropriate care and skill. The statutory guarantee, so created by Section 60 of the ACL, facilitates consumers to seek damages if there is an absence of compliance with the guarantee under Section 267 of the ACL. This latter Section concerns services. In addition, Section 13 of the ACL incorporates injury in the description of damage or loss (Dietrich). In our present problem, no such skill and care had been exercised by Georgia, while providing her services to Malcolm’s pets. In addition, in Renehan v Leeuwin Ocean Adventure Foundation Ltd, the non – excludability of statutory terms was depicted. A breach of implied terms, as per the provisions of the previous Trade Practices Act 1974, was brought. The court held that the exemption clause in the contract was void, in accordance with the provisions of Section 68 of the Trade Practices Act 1974. As a consequence, the defendant could not resort to the exclusion clause (Dietrich). In ACCC v Lux Distributors Pty Ltd, the Australian Consumer & Competition Commissioner (ACCC) had determined that Lux Distributors Pty Ltd had engaged in unconscionable conduct, with regard to the sale of vacuum cleaners to three elderly ladies. Specifically, the ACCC had declared that Section 51AC of the Trade Practices Act 1974 and Section 21 of the Australian Consumer Law had been breached by that company. The Full Federal Court upheld this determination of unconscionable conduct during the sale of vacuum cleaners to the old female customer (Australian Competition & Consumer Commission). Similarly in our problem, Georgia made false promises with respect to her services regarding pet animals. In Council of the City of Sydney v West, the court held that an exclusion clause would provide protection, only if the contractual infringement or breach of duty of care transpired within the scope of the contract. With regard to damage or loss ensuing from unauthorized or impermissible conduct, the exclusion clause would not provide protection. In addition, in Cowper and Cowper, the defendant was held liable for the loss of a valuable mare, during its carriage. It was deemed that the defendant was not careful with regard to the condition of the mare during its transport (Cowper and Cowper v JG Goldner Pty Ltd). Furthermore, in Pitt Son v Badgery it was held that the broker, who was a bailee, was liable for negligence with respect to the losses caused to the wool stored in his possession (Pitt Son & Badgery Ltd v Proulefco SA). Similarly, in our problem, Malcolm’s rabbit and tropical fish were gravely harmed, due to Georgia’s negligence while they were in her possession. Hence, Georgia was liable for negligence in bailment according to the above cases. Conclusion In accordance with, the above discussion and case law, Georgia cannot rely on the exclusion clause for evading liability caused by her negligence. This was because the exemption terms included in the contract were unfair. Her negligence harmed the precious rabbit and the tropical fish. This rendered her liable for breach of contract, as she had violated the implied terms of quality in the service contracts under the provisions of the ACL. In addition, this rendered her liable for negligence in bailment. Question Two Malcolm is to be advised as to whether he can sue Georgia for breach of contract; and if so, what are the remedies that he can seek. Whether Georgia has any claim against Malcolm. Thereafter, assume the presence of a valid contract and completely analyze and discuss the remedies the might be available under that contract. Issues In order to advise Malcolm, regarding his claims against Georgia, the following issues have to be considered. Whether Georgia can evade liability, on the basis of the exemption clause in the contract, for the losses undergone by Malcolm. Whether Malcolm can make a claim against Georgia for breach of contract. Whether Malcolm has sufficient claims against Georgia for her negligence. Rule The ACL at Section 18 precludes an individual in trade or commerce, from indulging in conduct that is deceptive or misleading. This prohibition extends, in its ambit, beyond the supply of goods or services and generates a norm of conduct that encompasses the entire economy. In addition, Section 24 of the ACL declares that a clause creating significant inequality in the contractual duties and entitlements of the parties to the contract is an unfair contractual term. Analysis Section 27(1) of the ACL states that unless the other party establishes to the contrary, the assertion of a consumer that a contract is a standard form contract will be acknowledged (Clarke). In addition, Section 24 of the ACL declares that an unfair contractual term is one that would result in noteworthy inequity in the parties’ contractual duties and entitlements. Moreover, an unfair contractual term is not realistically essential for safeguarding the genuine interests of the party who stands to gain by it. At the same time, such contractual terms should prove to be disadvantageous to a party, on being depended upon or implemented. Section 24(4) of the ACL states that there is a legal assumption that a consumer contract term is not rationally indispensable for safeguarding the legitimate interests of the party who stands to benefit from it, unless that party establishes otherwise (Clarke). Chapter 5 of the ACL provides remedies, such as damages, compensatory orders and injunctions, for addressing contravention of the prohibition on deceptive and misleading conduct. Moreover, civil penalties and criminal sanctions do not apply to Section 18 of the ACL, on account of its wide scope. This section, produces a business conduct standard and permits individuals to seek remedies for harm resulting from infringement of that standard. Furthermore, other prohibitions could apply, with regard to specific types of misleading or false conduct, to instances of such conduct and be subject to specific criminal sanctions and penalties (Australian Government). The ACL directs that services have to be provided with due care and skill. In addition, services have to be reasonably suited to the purpose that the consumer, explicitly or implicitly, makes know to the supplier. Furthermore, the services provided should possess the condition, character and quality that would attain the result desired by the consumer, which the consumer brings to the knowledge of the supplier. The ACL provides certain guarantees, which no individual can exclude (Australian Government). Conclusion In our problem, Georgia violated the implied terms of guarantee provided by the ACL to consumers, in service contracts. In addition, Georgia displayed misleading conduct regarding the quality of her services, by promising high quality service at the time of making the contract. Malcolm can rescind the contract and claim compensatory damages for the losses suffered by him, due to the negligence of Georgia. He can claim damages for breach of contract. Georgia cannot rely on the exclusion clause, since it is inequitable, as per the above discussion. Georgia will not have any claims against Malcolm, as she cannot rely on a valid exclusionary clause in her contract. If it is assumed that the contract is valid, Malcolm will have the following remedies for the losses caused to him. The innocent party, upon the occurrence of a contractual breach or anticipated contractual breach can terminate the contract or affirm it. In the latter situation, the innocent party retains the right to sue the other party subsequently. An innocent party that desires to terminate the contract, can sue for breach of contract. In addition, it can employ such breach of contract to defend itself, if the other party sues it. Such action for breach of contract, can consist of damages for breach of warranty and breach of condition; and the right to rescind the contract, when there is a breach of a contractual condition (Latimer 469). The usual practice is to claim monetary damages, in action for breach of contract. During this time, contractual duties need not be performed by the innocent party. Moreover, remedy for breach of contract denotes; an action at law for rescission or damages. It could also include an action in equity for enjoining specific performance, injunction, or restitution. In addition, to these equitable remedies, the court may also provide damages to the innocent party (Latimer 469). Thus, if the contract is deemed to be valid, then Malcolm can claim damages from Georgia, for the losses suffered by him. In addition, he can repudiate the contract and seek damages for breach of contract. As per the above discussion and case law, Georgia is liable for breach of contract. She cannot rely upon the exclusion clause in the contract, since it violates the guarantee furnished by the ACL, regarding the quality of services. Furthermore, Malcolm can claim damages for negligence in bailment against Georgia. Works Cited ACCC v Lux Distributors Pty Ltd. No. FCAFC 90. Federal Court of Australia Full Court. 8 February 2013. Australian Competition & Consumer Commission. Full Federal Court declares Lux conduct unconscionable. 15 August 2013. Web. 24 January 2014. . Australian Government. "The Australian Consumer Law." November 2010. australian consumer law. Web. 25 January 2014. . Clarke, Julie. "Unfair terms." 2013. Australian Contract Law. Web. 24 January 2014. . Commonwealth of Australia. "A guide to the unfair contract terms law." 2010. Australian Consumer Law. Web. 24 January 2014. . Competition and Consumer Act – C2011C00003. Canberra, Commonwealth of Australia: Office of Legislative Drafting and Publishing, 2010. Print. Council of the City of Sydney v West. No. 114 CLR 481. 1965. Cowper and Cowper v JG Goldner Pty Ltd. No. 40 SASR 457. 1986. Dietrich, Joachim. "Liability arising from Contract and under the Australian Consumer Law." 2012. Bond University. Web. 24 January 2014. . Latimer, Paul. Australian Business Law. Barton, ACT, Commonwealth of Australia: CCH Australia, 2012. Print. Pitt Son & Badgery Ltd v Proulefco SA. No. 153 CLR 644 . 1984. Renehan v Leeuwin Ocean Adventure Foundation Ltd and Commonwealth of Australia. No. NTSC 28. 4 April 2006. Thomson Reuters. Consumer contracts: Are exclusion and limitation clauses allowed? 2014. Web. 24 January 2014. . Trade Practices Act No. 51 of 1974. Canberra, Commonwealth of Australia, 1974. Print. Read More