LAW10004 Introduction To Business Law

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LAW10004 Introduction To Business Law

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LAW10004 Introduction To Business Law

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Course Code: LAW10004
University: Swinburne University Of Technology

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Country: Australia

1. Michelle is at University, studying to be a veterinary surgeon. David, a close family friend is also a veterinary surgeon. Whilst away at University, Michelle received a letter from David on 1′ April, saying that he was due to retire in a few weeks’ time and that he wondered whether she would be interested in buying his veterinary equipment for the bargain price of $5000. His letter asked for a reply by 15′ April as a junior partner, Peter, in his veterinary practice was also interested in buying the equipment, albeit at a higher price. Upon receipt of David’s letter, Michelle decided that she would like to buy, but would need to borrow the money. In order to speed matters up, she then wrote to David on 2′ April expressing a fum interest, but asking if he would be prepared to accept payment by instalments. Her letter got lost in the post and was never received by David. Not having heard from David, Michelle arranged a bank loan and then posted a second letter on 9″ April, enclosing a cheque for $5000. This letter only reached David on 17″ April. In the meantime, David had changed his mind about selling her the equipment and sent her an email on 10′ April retracting his offer to her. He sold the equipment to Peter on 16a April. With reference to the case situation above, discuss, using decided cases to support your arguments, the contractual implications and the remedies, if any, that Michelle might be able to pursue against David if she so wished. 
2. Jeremy wanted to make some changes to his home. He visited One Stop Shop and ordered the following items: a) An air-conditioner unit for $2000. He pays another $500 for the installation. b) A Smart TV worth $3000. The salesman told him that Samsunk was the best Australian brand to buy and had great reviews. C) A microwave oven for $400. When the items were delivered to his home, he was given a document. The document had the following clause: “No warranties or guarantees are made in relation to the efficiency of the operation and suitability for purpose of the items sold.” The air-conditioner was installed badly and there was a lot of water leakage when it was in operation. The Smart TV had very basic features and did not function like a Smart TV. It was later found that the TV set was not even an Australian brand and had very bad reviews. The microwave oven blew up after being used 5 times and it caused a small fire in Jeremy’s kitchen. This resulted in $3500 worth of damage. Boom Co manufactured the microwave oven. Jeremy calls One Stop Shop to complain but is told that no action can be taken against them because of the clause. Advise Jeremy if he can pursue remedies against One Stop Shop and Boom Co. 

1. Issue
The issue is to check that do Michelle has any right in against of David.
For every valid contract under Contract Law, some rules are prescribed there. Some basic elements such as offer, acceptance, consideration, and intention of the parties to develop a contractual relationship must be there in a contract If any of these elements are missing in an agreement, the same cannot be developed into a contract.
In general, as soon as an offeree gives his/her consent to the offer made by the offeror, a contract becomes developed between offeror and offeree. However, the other factors such as the intention of the parties and consideration must also be there in such a situation.
Communication of offer and acceptance: – Existence of offer and acceptance is not enough, both of these are required to be communicated to the other party. When an offer or acceptance will be treated as complete, it depends on the mode of the communication.
Request for information
At some of the time, offeree does not accept the offer made by the offeror at the very first instance. Nevertheless, he/she ask for certain additional information. Such request of the offeree is known as a request for information. An offeree makes such request when he/she wants to know something more about the subject matter or any other fact related to the contract. This is necessary to state that a request for information does not cancel out the original offer and is not treated as an additional term. Even after making a request for information, an offeree can accept the original offer of the offeror.
A counter offer is a reply from the side of offeree in a contract where such person does not accept the offer made by an offeror in it is original form and insert some new terms and conditions. A counter offer is neither an acceptance nor a request for information. It was held in the case of Hyde v Wrench that a counteroffer cancels all the previous offers in a contract and the offeree cannot accept the original offer.
One must not get confused between the request for information and counteroffer. In a request for information, the offeree does not introduce any new term but merely ask for certain additional information.
Postal Rules: – when parties to a contract decide in mutual that they will use the postal mode for the communication throughout the contract, then in such a situation, postal rules are applicable. According to the decision given in the case of Adams v Lindsell, whenever the postal rules are applicable in a contract, an acceptance is treated completely as soon as the offeree places the letter to the mailbox. It means if an offeree placed a letter to post as on 02 day of June and the same been received by the offeror as on 07th day of June then acceptance will be considered as complete as on 02nd June and not 07th June.
Revocation of offer:- As decided in the case of, Payne v Cave, an offeror can revoke the offer made by him/her any time before the acceptance takes place. It means as soon as an acceptance take place, a contract comes into existence. In those cases where postal rules are applicable, an offeror cannot revoke the offer if offeree put the acceptance letter to the mailbox.
In the given case, all the necessary elements of a contract were there. The offeror of the case i.e. David made an offer to Michelle showing his willingness to sell his veterinary equipment. Parties of the case were using the postal route for the communication; therefore postal rules were applicable in the case. Michelle received the offer of David as on 01st April. According to this offer, Michelle was required to send the acceptance by 15th April. Apart from the acceptance, all other necessary elements of a contract were there. In the offer, the consideration was stated as $5000. In addition to this, both the parties had the intention to develop a legal relationship.
In reply to the subjective offer, Michelle sent another letter to David. This letter was not the acceptance to the offer. In this letter, Michelle asked David that whether she could pay the consideration in installment rather than paying the same lump sum. This letter will be treated as a request for information and not the counteroffer. The reason behind not considering the same as counteroffer is that Michelle has not introduced any new condition in the original offer.
This letter of Michelle was lost in transits. When Michelle did not receive any reply of her request for information made by her, she sent a cheque worth $5000 to David accepting the offer as on 09th April. Applying the provisions of the case Adams v Lindsell, the acceptance will be treated completely as soon as Michelle post the acceptance letter to David i.e. as on 09th April. As on 10th April, David revokes his offer and sell his equipment to another person named Peter.
As per the decision of the case of Payne v Cave, David could revoke his offer before 09th April but not afterward.
On 09th April, the acceptance of the case was completed. As soon as Michelle has made the acceptance, the contract became developed between them. No matter what David did afterward, a valid contract was there between him and Michelle. Michelle can held David liable for the breach of contract and sue him for the performance of the contract or for damages.
2. Issue
Whether Jeremy has any remedy in against of one Stop Shop or not.
Under Contract Law, a term named Exclusion clause if very known. It is a situation where one of the parties to the case makes a statement for the purpose of limit his/her liability. An exclusion clause is one of the kinds of unfair terms. Under the exclusion clause, parties to the case state that they will not be held liable for so and so situation. This is not a mandatory clause but parties often introduce the same in order to minimize their liability. It was held in the case of Thornton v Shoe Lane Parking that an exclusion clause is treated valid only if the parties to the case introduce such clause at the time of entering into the contract or before that. It means if any party make an exclusion clause after the development of a contract, then such clause will not be held a valid clause and another party to the case will not be bind with such clause.
The decision provided in the case of L’Estrange v Graucob is also an important one in this area. This was given in the decision that if a party of the contract, signs a written document in which exclusion clause is mention that it will assume that the party is aware with the existence for such clause regardless the true situation.
For an exclusion clause, this is also necessary to inform that the same must not be something, which is adverse to the provisions of Law. It means an exclusion clause, which defeats the provisions of Law will not be considered as a valid exclusion clause even if the same has introduced before the development of the contract.
In the provided case, the contract has been made between Jeremy and One stop shop. Jeremy entered into this contract for the purchase of some items for his house. He personally visited the shop and ordered the required items such as an air conditioner, a microwave oven, and a smart TV. All these items had different consideration. When Jeremy received these items and started using them, he found many of the issues in all the three item purchased from one stop shop. An exclusion clause was there according to which One stop shop does not seems to be liable in case of any further issues related to items sold to Jeremy.
The contract of the case has been duly completed as soon as Jeremy took place the orders for these items, whereas on another side the exclusion clause has been made at the time of delivery of the items. Applying the provisions of the decision of the case Thornton v Shoe Lane Parking this clause was not valid as the same was inserted after the development of the contract. Nothing is stated in the given case that whether Jeremy has signed such document at the time of placing ten order or not, this is to assume that he has not signed any of such document in which exclusion clause was written and hence the clause is not valid.
As the exclusion clause introduced by One Stop Shop is not a valid one, hence Jeremy can sue One Stop Shop for the loss happened to him.
Adams v Lindsell (1818) 106 ER 250
Hyde v Wrench (1840) 49 ER 132 
L’Estrange v Graucob [1934] 2 KB 394 
Payne v Cave (1789) 3 T.R. 148; 100 E.R. 502
Thornton v Shoe Lane Parking [1971] 2 WLR 585 that
Routledge, Contract Lawcards 6/e: Sixth Edition (Routledge, 2009).
Other Resources
E-Law Resources. (2018) Contract Law .
Minter Ellison. (2018) How a legally binding contract is formed. .
Open Learn,  (2018) Exclusion clauses < https://www.open.edu/openlearn/society-politics-law/exclusion-clauses/content-section-1>.
Upcounsel. (2018) Communication of Acceptance in Contract Law < https://www.upcounsel.com/communication-of-acceptance-in-contract-law>.

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