Hope recently started a small business selling natural health products in Perth. Having witnessed the start of the popular obsession with organic and natural products, he decided to tap into this market and run the business through Hopeful Pty Ltd (“Hopeful”). Knowing that his business idea was sure to be a success, Hope looked into possible suppliers for his natural health products. Hope’s friend Helpful gave Hope some inside info about a really cheap supplier of bulk natural health products - TTT Ltd (“TTT”) located in Thailand. Eager to get a good deal, he called up the manager of the TTT, Awful, and asked him about the quality of their organic slim tea T20. Awful explained the quality of T20, promising that “our organic slim tea products are made with 100% organic substances.” “That is exactly what I need”, Hope replied. Hope then asked Awful about the price of T20, and if TTT could provide him with regular supplies of the T20 for 12 months. In response, Awful offered a price of $200 per 100 cartons. Hope replied, “Sweet deal”, and assured Awful that he (Hope) will soon send an email accepting the offer.
Next day, Hope received an offer by email from PPP Ltd located in Singapore about selling their good quality organic slim tea P50 at $180 per 100 cartons. Hope is very much happy about the price which is cheaper than the Awful’s offer. Both parties agreed that 100 cartoons of P50 at the price of S180 would be shipped out from Singapore to Hopeful’s main office in Perth every week on Monday for a period of 12 months.
Over the next several months, Hope had been receiving a regular supply of P50 from the PPP and was generally satisfied with everything. He had also hired a full-time customer service employee, Super, who was responsible for filling customer orders. Business was thriving for Hope (although competitors were starting to pop up in the area) and he needed to hire a full-time staff. He was really impressed with Super’s work and offered him the position of executive director of “Hopeful” for a period of 4 years with renewal possible on the expiration of the contract. However, one of the conditions noted in the contract was that if Super ever left “Hopeful” he would not work for any of the company’s competitors in Perth for 10 years following his exit from “Hopeful”. Hesitant at first, Super accepted the offer, knowing what position of executive director would do for his resume!
Over the last couple of months, Hope had been receiving complaints from his customers as to the quality of the P50 tea. Hope soon found out that PPP had been shipping another cheaper brand P20 (which are not 100% organic) instead of P50 as per the terms of the contract to “Hopeful” in order to provide for its other, more prestigious and loyal customers with the top-notch stuff and at a higher profit
To top off Hope’s problems, his company has started operating at a loss. He is losing customers to competitor companies and the decreasing quality of his products has really decreased customer purchases. Stubborn as Hope is, he is determined to keep his business up. Hope visits his local bank to inquire into the possibility of mortgaging his house to the bank in order to obtain money to keep his business going. The bank manager, whom Hope knows quite well and with whom he has been doing his day to day banking with for the past 10 years, proposes to loan Hope the money he needs if Hope gives a personal guarantee of $100,000 which is more than the value of his house. Being obsessed with ensuring his business stays afloat and not thinking of anything else, Hope accepts, saying “I trust you” and signs the required documents without any independent advice.
Hope is also caught up in the problems associated with the supply of the P50 tea as per the contract with the PPP. Last couple of weeks, the PPP’s supply of tea has often been delayed. Further, PPP although had promised him to deliver the P50 brand they supplied a cheaper brand P20 which was not 100% organic. Hope believes that this fact, along with PPP’s tardy shipping habits have contributed to the decrease in customer demand. He thinks the PPP is in breach of their agreement and wants to terminate their contract.
Finally, the bank manager is looking to recall the $100,000 loan. Hope’s newly promoted executive director, Super, is also fed up with all the drama surrounding the business. Super has told Hope that he has been offered a position of managing director at “NatureVilla”— one of Hope’s major competitors for more money and less drama. He quits, leaving Hope furious.
Hope asks for your advice regarding the issues noted above. Specifically, he is looking to determine:
(1) Whether a contract has been formed between “Hopeful” and the “TTT” what Hope believes that the contract is not validly formed?
(2) Whether Hope can obtain any recourse against PPP for supplying non-organicslim tea and failing to supply the tea as per the contract?
(3) Whether Hope is bound by the loan contract of the $100,000 with the bank?
(4) Whether Hope can enforce the employment contract against Super?
Please note that your answer should be limited to CONTRACT LAW only, you are not required to discuss any other laws including Company Law and Consumer Law.