Legal Remedies Exist for Max and Sara - Assignment Example

Problem Solving Name Institution Course Date Issue Number 1 The issue is whether the terms of contract are fair to Max and Sara although they signed the contract form without reading the contract. The contract indicated that the company retains the right to keep all membership fees irrespective of the default, loss or breach on its part and requires all fees to be paid at the time of joining. During the signing of the contract Arnold the gym manger advised the couple to pay the membership for the whole year at a cost of $ 8400. The prices had been indicated at the top of the counter and Arnold assured the coup that the gym would continue to run for a long time. Rules According to the contract law in Australia, the terms of the contract must be fair. Any unfair terms within the contract may make it void. Remedy exists for the affected party to the contract incase unfair terms are used. In an unconscionable conduct, the stronger party tales advantage of a weaker party in the contract. Unfair contract terms are contrary to section 23 and 24 of the Competition and Consumer Act 20101. Unconscionable contract usually leads to the oppression of the weaker party to the contract. The stronger party to the contract however benefits as a result of the ignorance or limitation of the weaker party. The principle of equity is also breached when the stronger party takes advantage of the weaker party. Such a contract can be considered null and void. According to section 18 of the Competition and Consumer Act 2010, misleading and deceptive conduct is prohibited in trade and commerce. This includes during the process of carrying out transactions. Making false representation whether on writing or verbally at the precontractual stage amounts to a deceptive and misleading conduct. Remedies exist for the affected party in the case of misleading and deceptive conduct. The party responsible may be held to account for the deceptive and misleading conduct. Application Max and Sara did not read the contract before signing as the manger had portrayed a good image of the gym. However, the term in the contract which gives the company the right not to refund the money to the client is unfair. This is considering that it is only aimed at benefiting the company at the expense of the clients. The term only cautions the company from loss of money in case of uncertainty but it exposes the clients to risks. This is therefore an indication that the term was unfair. The term causes significant imbalance between the two parties to the contract which is a contravention of section 23 and 24. In the case of L’Estrange v F Graucob, the judge noted that the plaintiff was not bound to the term of the contract as he had not read it before signing2. The plaintiff entered into a contract to buy cigarette vending machines. However he did not know that the contract had exclusion clause that excluded implied warranties. The case was brought up after the machine failed to work. Arnolds who was the manger of the gym assured the couple that the gym would operate for a long period of time and even advised them to pay the membership for the whole year. However, as a manger at the gym he has information about the performance of the gym and was aware it was not financially stable. He therefore contravened section 18 by engaging in deceptive and misleading conduct which influenced the couples to sign the contract. Arnold took advantage of the ignorance of the couple with regards to handling the contract. He was the one who showed them the price with the knowledge that they would sign the contract after they had seen it. It was the duty of Arnold to ensure that his clients had read and understood the terms of the contract. This is therefore an indication that the contract is unconscionable. In the case of Commercial Bank of Australia v Amadios, it was held that Amadios suffered as a result of being disadvantaged in the contract3. The bank had used its unconscientious powers for the purposes of influencing the signing of a contract. The respondents were not provided with adequate information about the contract. Conclusion The terms of contract were not fair and it only benefited the gym. Arnold was also involved in misleading and deceptive conduct and he took advantage of the weaknesses of the couple in handling the contract. The contract can therefore be declared null and void and the gym order to return the money that had been paid by the couple. Issue Number 2 The issue is whether the exclusion sign placed at the gym equipment is valid and cautions the company from talking responsibility in case the member is injured. The exclusion clause states that the Gym members use the equipment at their own risk. Sara was injured when using the trade mill after Arnold the gym manager inadvertently turned off the trade mill. Sara had to take a undertake plastic surgery in order to treat her nose. As a result of this she had to miss her six month modeling engagement. Rule An exclusion clause in the contract law is usually aimed at limiting or excluding contractual breach for one of the parties to the contract4. According to the contract law, the exclusion clauses are generally effective if they are properly drafted. However, for the purposes of ensuring fairness, the exclusion clauses are limited in some instances by the statutory provisions. This is for the purposes of ensuring that a party does not unfairly avoid liability in case of breach. The needs of all the parties have to be considered when drafting the exclusion clauses. It should also be properly understood by the party that is likely to be affected. An exclusion clause that is not fair can be considered void as it may only serve the interest of one party while disadvantaging the other party. According to the common law, the exclusion clause is considered effective if the party relying on the contract read and agreed to the term of the contract5. An actual notice has to be brought to the attention of the party relying on the contract. The court can also look at the intention of the party with regards to the exclusion clause. An exclusion clause may not operate if the thing that went wrong is outside the scope of the agreements contemplated by the parties. An exclusion that is misleading or fraudulent can also be considered ineffective. Application The gym had an exclusion clause that had been clearly displayed above the mechanical equipment. This is however ineffective since Sara had not agreed to the terms of the exclusion clause as part of the contract that she had signed. The exclusion sign was not part of the contract and hence rendering it effective. In the case of The County Council of the City of Sydney v west, the high court held that the exclusion clause does not limit liability for the acts done outside the scope of the contract6. This is after the belonging to West was stolen in the parking controlled by the County Council of the City of Sydney. The receipt obtained by West after parking the car indicated that the council would not be responsible for any losses. The accident was caused by the action of Arnold which is an indication that the accident was within the outside scope. It is not the fault of Sara that she had the accident but it was a result of the actions of Arnold himself. The intention of the exclusion clause is simply for the purposes of excluding the gym from talking any responsibility in case of an accident. It is not for the purposes of cautioning the clients and hence making it unfair. This was highlighted in the case of Photo production Ltd v Securicor Transport Ltd7. An employee of Securicor started a fire at the photo production limited to warm himself while on duty. The accidentally burned the factor and Securicor argued that it could not pay since there was an exclusion clause at the contract which indicated that they were no liable for the actions of the employees. It was ruled that Securicor was liable since the doctrine of fundamental breach was not applicable. This means that the company can escape liability even in the event that it is not the fault of the client. The exclusion clause is therefore aimed at protecting the interests of the gym as opposed to the safety of the clients. Conclusion The exclusion clause placed at the equipment is not effective as Sara had not agreed to it in the contract. It was also unfair and its intention was to protect the interest of the company and ensure that it escapes liability. Sara can therefore sue for compensation as a result of the injury and loss of income for six months. Issue 3 The issue is whether remedy for breach of contract exists for Sara and Max. The gym was unable to fulfill its part of the contract as it entered into liquidity. The couples had paid a membership fee lasting for the whole year and the gym is no longer able to meet their demands as a result of liquidation. Rules According to the contract laws damages and liquidated claims are the common forms of remedies that are available for the breach of contract8. The main purposes of the damages is to ensure that the plaintiff is in a position that they would have been had the contract not been breached. Under the common law, damages are viewed as substitute for performance. However, the loss claimed has to be reasonable. It should not be too remote from the breach. It is also the responsibility of the non-breaching party to ensure that reasonable action is taken in order to mitigate the damages that they suffer. Damages are available for precontractual conduct such as misleading and deceptive conduct. The breach of contract can also result to tort and compensation has to be made to the affected party. According to the contract law, liquidated damages are available in case it is provided for in the contract9. The clause that indicates that money will be payable upon a breach of contract has to be provided in the contract. In the case of liquidation, the breaching party may sue for the liquidated sum. The court also has the powers to direct the breaching party act in a certain manner. Injunctions can also be issues for the purposes of preventing the party from engaging in further breach of contract. Application There was no clause between the gym and the couple that the money will be refunded in case of breach of contract. This was highlighted in the case of Andrews v Australia and New Zealand Banking Group Ltd10. This is after the customers complained that some of the fees charged by the bank amounted to penalties. The contract indicated that the money will not be refunded. However, this is invalid since the term is unfair and it is only aimed at benefiting the gym. Max and Sara cannot sue for liquidated sum for the breach of contract. However a remedy exists for Max and Sarah in terms of the damages. They can sue for damages as a result of breach of contract. The gym can be ordered to pay for Max and Sara a specific amount of money as a substitute for the breach of contract. The gym can also be ordered to look for alternative facilities where Max can continue carrying out the exercises in order to reduce weight. As a result of the breach of contract, Sara ended up losing 6 months earning as she had to undergo surgery to repair the broken nose. This was highlighted in the case of Howe v Teefy where there was a result of lost chance as a result of loss of contract11. The plaintiff was leasing a horse off the defendant for the purposes racing and making money. The defendant randomly took the horse back before the race which made the plaintiff sue for damages. It was ruled that the action of the defendant deprived the plaintiff a chance and was liable for paying the damages. The gym can also be compelled to pay Sara a specified amount for loss of earning as well as cost of surgery. Conclusion Legal remedies exist for Max and Sara in the form of damages. They can sue the gym for breach of contract and awarded specific amount for the damages. References County Council of the City of Sydney v West [1965] 114 CLR 48, Retrieved on 22nd September 2015 from, . Photo production Ltd v Securicor Transport Ltd [1980] 1 ALL ER 556, Retrieved on 22nd September 2015 from, . L’Estrange v F Graucob [1934] 2 KB 294, Retrieved on 22nd September 2015 from, . Commercial Bank of Australia v Amadio [1983] 151 CLR 447, Retrieved on 22nd September 2015 from, . Andrews v Australia and New Zealand Banking Group Ltd [2012] HCA 30, Retrieved on 22nd September 2015 from, . Howe v Teefy [1927] 27 SR NSW 301, Retrieved on 22nd September 2015 from, . Marshall, B. A. (2012). Reconsidering the Proper Law of the Contract. Melb. J. Int'l L., 13, 505. Woolley, T. (2012). [Book review of: Paterson, Jeannie.] Unfair Contract Terms in Australia:[(2012).]. University of Tasmania Law Review, 31(1), 163. Kenny, C. S. (2015). A Selection of Cases Illustrative of the English Law of Tort. Cambridge University Press. Read More