CLWM4000 Business And Corporations Law: Case Study Analysis Assessment 2 Answer
- In the given scenario, Gemma, who is a legal practitioner has heard from her colleagues about the new coffee shop of Peter which was offering a latte for $5 with free mini brownie. One day she decided to visit that coffee shop and purchased a takeaway latte for $5. She has also asked for the mini brownie which was supposed to be delivered free with the latte but Peter told her to buy the large brownie for $8 due to the non-availability of mini brownies. Gemma paid for both latte and brownie and left the shop. In this scenario, Peter has made a unilateral offer in public for purchase the latte from his shop which will also provide a mini brownie for free of cost. By acquiring the latte from his shop, Gemma has accepted such offer and with such purchase, they have developed a legal contract with each other (Goldberger, 2020). Also, a consideration and legal intention was present in this arrangement hence this is a valid contract which is legally binding on both the parties. Such contract can also be validated under the provisions of contract law.
- As per the law of contract, an agreement must contain certain essential elements to make it legally binding on the parties. In the absence of any of these elements, the contract shall become void or voidable hence it would not be enforceable by the law. In order to create a legal contract, there must be a legal offer and acceptance which should be free from any kind of fraudulent or illegal factors. It is defined with the meaning that an agreement with all relevant features which can be enforceable by law is considered as a contract. These essential elements which makes a contract valid and legally enforceable are offer, acceptance, consideration, legal intention and capacity. In addition to that there are some elements which must not be included in the creation of a contract like fraud, undue influence, duress and misrepresentation. Also, if the parties are not having legal and common intention to enter into a contractual relationship and entered into an agreement by using any illegal mean then also the contract shall be treated as void or voidable (Bowley, 2019). The significance of all essential elements to form a legal contract is detailed hereunder.
- For making a contract enforceable by the law, it is required to undertake all the essential factors into consideration such as-
Offer and Acceptance: An offer is an expression of willingness of a person who wants to enter into a legal relationship with another person. It can be made in either oral or written form but should not be made for an illegal purpose. Also, the acceptance given by the offeree must be free from any undue influence or duress.
Intention of parties: The parties entering into contract shall have common intention to form a legal relationship with each other. Disinterest from either of the party in the matter of contract may create future conflicts between the parties (Bigwood, and Mullins, 2018).
Consideration: A legal contract should comprise a valid consideration to enforce the subject of contract between the parties. The consideration can be determined and paid in any valuable form such as money, share or other valuable things.
In addition to that there are certain elements which should be considered while forming a valid contract. The contractual parties are bound to undertake such elements in the creation of contract. Some other major elements which are required to be considered while formation process of a valid contract are as follows:
- Legality and Capacity: For making a valid contract, the object of contract must be legal and the parties entered into contract should carry the legal capacity to create a contract. If a contract has an illegal contract or an incapable party then it can be invalidated by the aggrieved party.
- Duress: It refers to the conditions such as threat, violence or force used on a person for taking his consent under a contract. If a person has entered into a contract under any illegitimate pressure then such contract can be treated as void or voidable. The duress can be performed in both physical and economic form (Saiti, & Abdullah, 2016). For instance, a person may threat another person for financial or physical harm if he does not enter into a contract with him.
- Undue Influence and Unconscionability: It generally occurs when a party is in dominant position or the relationship between the parties is unequal. If either of the party among the contractual parties has influencing power over the other then undue influence may occur in the contract. Moreover, it occurs in the contract of employment where the employer carries dominating powers over the employee. If the force of undue influence has been used in a contract, then such contract can be invalidated by the plaintiff party or by the Court. Similarly, as per the doctrine of Unconscionability, if a party has inserted certain unjust terms in the contract which will result into one-sided favour for the party, who carries superior bargaining power then also the contract shall be regarded as invalid.
- Misrepresentation/Fraud: These acts are performed by the contractual parties to attract another party for creating the contract. If one party to contract makes false or untrue statement in subject to the contract to influence another party, it shall be regarded as invalid for the creation of a legal contract. The act of fraud or misrepresentation is performed by the defendant party to gain advantage over another party for his own interest (Deep, Singh, & Ahmad, 2016). Hence, a consent taken by the act of fraud or misrepresentation shall not be considered as a valid consent for the development of contract.
- Mistake: It may occur when the contractual parties have entered into a contract by mistake. Sometimes, the parties formed a contract in the relation of an object which cannot be enforceable by the law or not having any existence. It shall be considered as common mistake but if a party has mistakenly entered into a contract and another party is aware with such fact then it shall be taken as intentional mistake and such contract shall not be entertained under the law.
In a relevant case of “Henjo Investments Pty Ltd v Collins Marrickville Pty Ltd (1988) 79 ALR 83” a legal issue of misleading and deceptive conduct has been found in which the plaintiff has bought a restaurant lease from the defendant which was operating illegally by allowing the seating to large number of people in comparison to the permitted sitting. When the plaintiff found such fact, he filed a legal suit against the defendant. In that case, the Court held that representation made by a person whether in expressed or silent way is treated as a misleading or deceptive conduct. The defendant has not informed the plaintiff about the illegal operation of him which shows that he has performed a misleading conduct hence the plaintiff won over the conduct of defendant.
- In the given scenario, Gemma can invalidate the contract held between her and Peter by arguing that Peter has made misrepresentation or a false statement for influencing the customers in his coffee shop. The contract can be held void on the basis of misrepresentation and Gemma can file a claim for the compensation against the damages occurred to her. The damages for which the claim can be made will include the medical expenses spent by her and the loss of revenue she caused due to the failure of event.
- In the given case law, Gemma purchased a take away latte from the coffee shop of Peter but he delivered a flat white coffee to her which was extra hot. Also, Peter has not offered the free mini brownie to her for which he has made an offer in public. Hence, he has breached the provisions of Australian Consumer law according to which a manufacturer or service provider is obligate to provide goods and services of acceptable quality to the consumers.
- As per the Schedule 2 of the Competition and Consumer Act 2010 (Cth), the guarantees offered to the consumers include several provisions for guarantee like guarantee to deliver acceptable quality of goods, guarantee in relation to the fitness of goods, guarantee to supply the goods by description and guarantee to express warrantee. Similarly in case of services, the guarantee of due care and skills, fitness of services for particular purpose and guarantee to provide the services in time (Pearce, & Pinto, 2018). In addition to that a person dealing under trade or commerce must not make a false or misleading statement in the relation of goods or services. If a person has made a false statement or misrepresentation in the relation to the following conditions then the plaintiff consumer may use the remedies against the defendant party.
- Supply of goods and services;
- Standard, value, quality, model or use of the goods and services;
- The existence of goods and services or claims that goods are new;
- Assent of particular person that he has acquired the goods;
- Testimony of goods or services by any particular person (Lewins, 2017).
- The approval, sponsorship, performance, characteristics, use or benefits of goods and services;
- Price or goods and services;
- Availability of relevant facilities such as repair or maintenance of goods;
- Origin place of the goods;
- Needs or requirements of goods or services;
- Effect, exclusion, warranty, right, remedy or guarantee of consumer under the goods and services.
- In the above given case, Peter has breached the provision of guarantee by making misrepresentation about the coffee delivered to Gemma. Gemma has ordered for latte and Peter delivered a white coffee which was not meeting the requirements of Gemma as she needed a latte with brownie for reveal her anxiety (Bant, & Paterson, 2019). Therefore, Gemma can make a claim against Peter for performing the breach of guarantee provisions under Competition and Consumer Act 2010 (Cth). She can claim for the compensation against the amount of damages caused to her due to the breach performed by Peter.
- According to the provisions of Competition and Consumer Act 2010 (Cth), if any contravention of above mentioned provisions has been made by a person then specific penalties shall be imposed on him (Pearson, 2017). The penalties can be imposed in either monetary or non-monetary form such as monetary compensation, injunction, civil liability or litigation.