COMMLAW7012 Business And Corporations Law

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COMMLAW7012 Business And Corporations Law

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COMMLAW7012 Business And Corporations Law

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Course Code: COMMLAW 7012
University: The University Of Adelaide

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Country: Australia


You must write an answer to the problem-type question below, using the ILAC (Issues, Law, Application, Conclusion) format.
Dan owns a business which sells second-hand cars.  He employs you as its legal advisor.  Dan phones you one day and tells you about the following issues. The first relates to a customer named Mary who says that she was walking around the car lot and saw a white 2002 Honda Jazz for sale for $ 14 999.  She went into Dan’s office and said that she would offer ‘$ 14 000 for the Honda Jazz’.  He accepted the offer and Mary said that she would collect the car later that day.   When she returned to the car lot, Dan handed her the keys of a red 2002 Honda Jazz, which had been at a different part of the car lot.  Mary said ‘That’s not the car I bought’.  Dan said ‘Well you just said you were buying Honda Jazz and this is the one I thought you were referring to, so here it is’.  Mary walks off the car lot and has refused to pay for the red Jazz or take delivery of it.   Dan says that as far as he is concerned, Mary should stick by the deal.
Michael was interested in a 2015 Toyota CX truck that was advertised by Dan for $ 20 000.  On 2 January Michael posted Dan a letter containing a form in which he offered to buy the truck for $ 18 500.  There was a place on the form for Dan to sign indicating his acceptance.  The letter reached Dan on 5 January.  He signed the nominated place for acceptance, and put the acceptance into the post on 7 January.  On 8 January, Michael phoned Dan and said ‘I’ve had second thoughts about the truck, and as I haven’t heard back from you I am hereby formally revoking my offer to buy the truck’.  Dan said ‘Too late, I’m delivering it today.’ Later that day, he delivered the truck to Michael’s premises, but Michael refused to accept it.  Dan’s letter of acceptance reaches Michael only on 10 November.
One of the salespeople employed by Dan is new, so Dan does not allow him to make deals and requires that the salesman bring any prospective contracts to him (Dan) to sign once they have been signed by a customer.  One afternoon the salesman brings Dan five contracts all at once.   Dan is in a rush and signs them without looking them over properly.  The salesman sends the signed contracts to each of the customers by email.   The next day one of the customers, Gordon, comes to the lot to collect the truck he has bought.  When Dan sees Gordon getting into the truck he rushes over and says ‘Sorry, I was keeping that truck back for my nephew to buy’.  Gordon says that he received the contract which had been signed by Dan, and that he has already taken orders from clients to transport goods.  Dan says ‘Well too bad, I signed that contract by accident and didn’t mean to agree to it.’  Gordon’s lawyer has sent Dan a letter demanding that Dan comply with the contract. 
Edgar was walking round the car lot and saw a 2014 Holden Statesman with a sticker saying ‘$ 10 000’ on the windshield.  He goes into Dan’s office and says ‘I agree to buy the 2009 Holden Statesman you are offering for $ 10 000.’  Dan realises that one of his workers misprinted the sticker and says ‘Sorry, the actual price of that vehicle is $ 15 000, so no deal.’  Dan has received a letter from Edgar’s lawyer demanding that he (Dan) perform under the contract and accept $ 10 000 for the car.
Advise Dan as to his legal position in each case.  You should substantiate your statements of law with legal authority.


The objective is to offer Dan legal advice pertaining to following legal issues.

Is there a legally binding contract between Mary and Jane for the sale of 2002 Honda Jazz?
Has a enforceable contract enacted between Dan and Michael for the sale of 2015 Toyota CX truck?
Does a legal contract exist between Dan and Gordon for the sale of truck?
Has a contract been enacted between Dan and Edgar for the sale of 2014 Holden Statesman for a consideration of $ 10,000?


At times, a legal agreement is formed based on mistake. This may be common mistake, mutual mistake or unilateral mistake. A type of mistake in which both the parties (i.e. offeror and offeree) have made a mistake is known as mutual mistake. This typically happens when the contracting parties were referring to different things during the contract enactment. A relevant case law in this regards is Raffles v Wichelhaus (1864) 2 Hurl & C 906. In this case, there was misunderstanding with regards to the cotton that the contracting parties were referring to owing to which the contract was held as void (Carter, 2016).

One of modes of communication used for agreement is through postal mail.  In this mode of communication, the offer sent by offeror would become valid only when the same is received by offeree. The offeree is also expected to express his/her acceptance of the offer by communicating through mail. The acceptance would become effective at the precise moment the acceptance is put into post. The date of delivery of the acceptance letter to the offeror does not hold any significance. This has been highlighted in the Adams v Lindsell(1818) 106 ER 250 case (Gibson & Fraser, 2014).

A type of mistake in which one of the parties is mistaken while the other is not mistaken is known as unilateral mistake. As highlighted in Cundy v. Lindsay (1878) 3 App. Cas. 459, if the other party is aware of the mistake by a party, then the mistaken party should be made aware by the other party (Carter, 2016). However, special rules tend to apply in cases where a written document has been mistakenly signed by a given party. This defence against fulfilling of contractual liability is known as ‘non est factum’. However, this a difficult defence and would hold only when the mistaken party can establish the presence of any disability when signing, difficulty in understanding meaning or that the signed document in actuality differed significantly from the presumed document (Davenport & Parker, 2014).

It is imperative to distinguish between invitation to treat and offer.  The presence of price label on a good advertised in a store does not amount to offer is “for sale” is explicitly mentioned on the underlying good. Instead this is an invitation to treat which implies that interested buyers can communicate an offer which may be accepted or rejected by the owner of the good (Edlin, 2017). This aspect has been highlighted in the Pharmaceutical Society of Great Britain v. Boots Cash Chemists [1953] 1 QB 401 case. In this case, it was highlighted by the court that display of medicines with price in the shelves does not amount to offer but invitation to treat (Taylor & Taylor, 2015).


It is evident that in the current scenario there is a mutual mistake with regards to the subject between Dan and Mary. This is because Mary has made an offer of $ 14,000 for the white 2002 Honda Jazz available for sale. On the contrary, Dan gave acceptance to Mary’s offer assuming that she had made an offer for the red Honda Jazz. The confusion was caused since in their oral agreement, the colour of the car was not mentioned by either of the parties. As a result of the mutual mistake regarding the car itself, the given contract between Dan and Mary would be held as void.

The offeror Michael on January 2 has given a offer to Dan for purchasing his truck for $ 18,500. This offer became effective when on January 5, the letter was received by Dan. The letter contained a place for signing in case of acceptance which Dan did and posted this letter to Michael on January 7. However, on January 8, Michael telephoned Dan to revoke the offer. An enforceable contract for the sale of truck has been formed between Michael and Dan considering the fact that acceptance to the offer became effective on January 7 before the offer could be revoked.

In this scenario, there has been a unilateral mistake since Dan has signed a contract for the sale of a truck which he intended to sell to his nephew. It is apparent that the buyer Gordon is not aware of the mistake made by Dan while signing the contract. Hence, the contract for the sale of contract would be considered enforceable. While Dan may use the “non est factum” as a defence but it would succeed considering that there is no reasonable explanation for signing the contract without reading the contents. As a result, Dan would have to sell the truck to Gordon.

The Holden Statesman on display highlights the price only without indicating that it on sale. Hence, it is evident that this is an invitation to treat and not an offer. As a result, when Edgar went to Dan’s office and expressed his willingness to buy the car for $ 10,000, he made an offer to Dan. The offeree Dan is within his legal rights to decline the offer. He gave a counter-offer of $ 15,000 which was rejected by Edgar. Hence, no contract has been formed.


Owing to mutual mistake about the car, no contract has been formed between Mary and Dan.
Owing to acceptance being given before revocation of offer, contract has been formed between Michael and Dan.
Owing to unilateral mistake made by Dan which Gordon was unaware of, contract for sale of truck would be enforceable.
Owing to display implying invitation to treat and not offer, no contract has been enacted between Edgar and Dan.

Carter, J. (2016). Contract Act in Australia (3rded.). Sydney: LexisNexis Publications.
Davenport, S. & Parker, D. (2014). Business and Law in Australia (2nded.). Sydney:LexisNexis Publications.
Edlin, D. (2016). Common law theory (4thed.). Cambridge: University Press Cambridge.
Gibson, A. & Fraser, D. (2014).Business Law (8thed.).  Sydney: Pearson Publications.
Taylor, R. & Taylor, D. (2015).Contract Law (5thed.). London: Oxford University Press.

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