Contract between Xavier and Health Solutions Pty Ltd - Case Study Example

Before Xavier can exercise any rights under contract law he needs to prove there is a contract. Discuss whether there is a contract between Xavier and Health Solutions Pty Ltd. The basic three elements of offer, acceptance and consideration are necessary to form a contract. Besides there must have been an intent to create legal relations between the parties. Offer and acceptance together form an agreement which if supported by consideration becomes a contract. In the instance case, though Xavier initiated the enquiry, technically offer was made by the Health Solutions Pty Ltd for sale of the software required by Xavier for $ 14,500. The acceptance was immediately made by him by payment of the price which is the consideration made by the promisee Xavier. To examine offer in detail, Corbin states that it empowers the offeree to act on the words of the offeror in order to bind him into a contract. The offeree has therefore to communicate his acceptance in reliance of the offer. Though Xavier wants a particular software which would give him access to the details of the patients at the website of the natural therapists, Jasmine representing Health Solutions shows him different soft wares to choose from without actually committing to exactly what Xavier wants. Though it can be argued that is no meeting of minds between the parties, Xavier actually did not care to ask for a demo or see for himself at least at the time of installation. Hence assuming that Xavier communicates his acceptance to what Jasmine offers, it can be decided that there is a contract between them especially when Xavier signs the contract prepared by Jasmine mentioning the particulars of soft wares she has offered. It is for Xavier to mention that the software must meet his particular requirement. As held in the case of Gibson (1978), the offer must be definite and unqualified. In Macrobertson Miller Airline Services v Commissioner of Sate Taxation (WA) (1975), it was held that Airline ticket did not signify a contract but only an offer. As the ticket could not be utilized due to cancellation of the flight, the stamp duty paid on it was liable to be refunded since no contract took place. If this rule were to be applied to the present case, the issue of contract by Jasmine formed the offer. As this was signed by Xavier along with his payment, the acceptance along with consideration that has moved from the promisee gives rise to a formal contract between Xavier and Jasmine’s company Health Solutions. (Moles) One argument that can be advanced against the formation of contract is the possible fraud, misrepresentation or undue influence on the part of Health Solutions. But any such possibility makes the contract voidable and does not make it void ab-initio. Hence the transaction between the parties being supported by valid offer and acceptance along with consideration and with an intention to create legal relationship signified by their action of signing the contract, it can be concluded that there exists a valid contract between them. Further applying the business efficacy rule established in Moorcock case (1889), an English one, the software has performed the basic functions which is an implied one. As long as this implied functionality has been demonstrated by its use after installation, there can be no argument that that there is no contract for having failed to satisfy the implied condition. Assume there is a contract between Xavier and Health Solutions Pty Ltd. Discuss the legal rights and remedies available to Xavier. In your answer you must discuss the impact of the statements made by Xavier and Jasmine Here the question arises whether failure of the software supplied by Health Solution amounts to breach of a condition or a warranty for they have different consequences. A condition is crucial to contract and failure to observe it nullifies the contract. In Luna Park (NSW) v Tramway Advertising Pty Ltd (1938), it has been held that a condition is the root of the contract. For the promisee, the condition is so important that he would not have entered into contract if it was known to him that such a condition could not be fulfilled by the offeror. It follows therefore that non fulfillment or breach of the condition would render the contract void and give rise to claim for damages. The implied conditions as per Sale of Goods act are deemed to be forming part of the contract even if not mentioned in the contract. (Seddon and Davies) In contrast to a condition, a warranty is only incidental or collateral to the contract breaching which would result in payment of damages to the innocent victim. But it is not as simple as that to distinguish a condition from a warranty. It does not depend upon the relative importance of the term to a contract. It cannot be made flexible which follows that the parties must specify the term as such at the time of making the contract and not at the time of actual breach for claiming termination. One can be easily misled by the terms to treat them either as a condition or warranty due to circularity. It cannot be interpreted as a condition simply because it confers a right of termination or that it is terminable just because it is a condition. (Carter and Harland, 2002) In view of the ambiguities, law gives room for an intermediary condition between a condition and warranty by weighing the importance of the term breach of which can result in termination only if it leads to serious consequences as held in Ankar Pty Ltd v National Wetsminster Finance (Aust) Ltd (1987) The decision says that the terms are classifiable as intermediate if there is a broad variability from trifling to fundamental for breach. Accordingly, the intermediary term will be considered a breach or warranty depending on the gravity of the breach. To be a condition therefore, it should be intrinsically important in that it should be part of subject matter of contract, affecting safety or a deposit to guarantee performance. In the instance case, what has been breached according to Xavier is the software’s ability to give access to data of his patients at the natural therapists’ website which neither Jasmine promised explicitly nor Xavier had it stipulated in the contract specifically entered into. Even if oral utterances are considered, Jasmine has told “it would of the job well” in response to Xavier’s specific insistence that software should give access to the Natural Therapists’ website. Xavier failed to recheck it by asking for reassurance that the software would meet his particular requirement as any man of ordinary prudence would have done. He did not also take care at the time of installation of the software by asking for a demo or even before entering into the contract. As per the sale of goods act, the buyer is bound by the caveat emptor rule which means it is his duty to ensure that the software offered is meeting with his all requirements. It cannot be said that Jasmine failed to divulge any weakness of the software since Xavier finds it functional but it only does not give access to the natural therapists’ website. The condition being purely incidental or collateral, it could be termed only as a warranty and not a condition. In view of the above position, Xavier cannot ask for refund of the price paid which arises only if it amounts to breach of condition. As regards the fee of $ 60,000 estimated to have been lost by him to other naturopaths, he cannot claim it as damages for want of any proof brought in by him. It is further difficult to believe that he would have lost so much within such a short while. He should have neither waited longer just to claim higher damages. He should have taken steps to arrest the damage which was clearly within his capability. He could have very well notified the Health Solutions immediately without any loss of time. Thirdly his claim for damages of $ 125,500 as loss of wages had he been employed by NHP pty Ltd. In the first place, this was not at also informed to the offeror. Further the claim is far fetched and unreasonable in that Xavier could have sought employment elsewhere by remedying the situation so as to minimize the loss. Hence, he can only claim damages for a very brief period if he had informed of the special functionality requirement of the software. In conclusion, Xavier can claim only nominal damages on the ground of breach of warranty provided he is able to prove that he had mentioned the special requirement explicitly in writing on the contract he signed. That too, only for a brief period as it is always open for him to rectify the situation by going in for the appropriate software immediately. References Ankar Pty Ltd v National Westminister Finance (Aust) Ltd (1987) 162 CLR 549; 61 ALJR 245; 70 ALJR 641 [1987] ASC 55-566 at 562. Carter JW and Harland DJ, 2002, Contract Law In Australia, 4th ed, Butt, p 253 cited in Seddon C Nicholas and Davies JLR, Contract General Principles, available < http://legalonline.thomson.com.au.ezproxy.aut.ac.nz> accessed 4 September 2009 Gibson v Manchester City Council - CA [1978] 1 WLR 520, Court Of Appeal. MacRobertson Miller Airline Services v Commissioner of State Taxation (WA) (1975) Moles Robert Dr, Contract Law Lecture, Formation of Offer and Acceptance, Networked Knowledge-Law Lectures, available at http://netk.net.au/Contract/02Formation.asp> accessed 4 September 2009 Seddon C Nicholas and Davies JLR, Contract General Principles, accessed 4 September 2009 The Moorcock (1889) 14 PD 64 cited in Gilles Peter, 1988, Concise Contract Law, The Federation Press, p 85 Read More