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Question One

Billy and Sasha decide to go into business together following the completion of their studies at university. After extensive market research they write up a business plan for an online florist to be named Fusion Flowers.

Sasha has recently inherited $50,000.00 which she contributes as start-up capital. Billy doesn’t have any savings but contributes his van, tools and other equipment. They agree to lease a small warehouse space from which to operate the business. The pair agree that Sasha will pick up the flowers each day from the Flemington Markets while Billy will manage all customer enquiries and both will undertake deliveries. Profits will be split 50:50.

After the first two weeks of operations, they are struggling to keep up with the orders and decide to hire Jacob to take care of deliveries.

Without asking Billy, Sasha orders some very rare (and expensive) orchids from Ooh Orchids believing that she would be able to sell them, however, Billy says he never would have agreed to this if he had been asked. Ooh Orchids has demanded payment of the outstanding invoice of $1,500 from Billy.

While delivering some flowers the delivery driver gets caught in heavy traffic. Under pressure from Billy to get the flowers delivered on time to “a very important customer”, Jacob is speeding and crashes into a car stopped at a roundabout. Nobody is injured and the flower van is protected by a bar at the front, however, there is $5,000 of damage caused to the other driver’s car.

Without consulting Sasha, Billy started a separate business selling flowers specifically for weddings. So far Fusion Flowers haven’t been supplying flowers to events as it would increase their insurance costs, however, Billy and Sasha have previously discussed the lucrative nature of supplying the wedding industry.

Discuss Billy’s potential liability. Support your response with relevant case authorities.

Bianca has recently purchased a house in Mallacoota. Originally her plan was to move down there from Sydney at the end of 2017, however she has decided to wait a while as her father recently fell down some stairs and is now in need of full-time care. Bianca can’t afford to leave the house empty as she is not currently working so she advertises it as a holiday rental in the local newspaper and online. Wassim sees the newspaper listing, not realising it is his cousin Bianca’s house, and calls the number listed to make an enquiry. There is no answer so he sends the following text message: Hi. I would like to rent your house in Mallacoota for one month from 1 January 2018 for $2000.00. Please confirm how I should deposit the money and where I can pick up the key.

On 10 December 2017, Bianca replies that the house is already booked out between 1-7 January 2018 but is available for a month from 8 January 2018 and confirms it would cost $2000.00.

The following day Wassim phones Bianca to obtain her bank account details and realises he has been speaking to his cousin. Upon realising this Bianca says she will ‘do him a deal’ but acknowledges that ‘I can’t let you have it too cheap as I still have a big mortgage to pay off and I’m not currently working’. Bianca says ‘I will rent you the house for a month from 8 January for $1200.00, being $300/week, inclusive of power, internet and cleaning.’ Wassim says ‘that sounds perfect’ and agrees to transfer full payment by 20 December 2017.

Advise Wassim whether the three elements for formation of contract are established. Ensure your response is supported by relevant case authorities.

Find a written contract that is available online. It must be an Australian contract and you should include a URL link to the contract above your answer.

(i) Describe and classify four terms from the contract as either a condition, warranty or intermediate term, explaining why you believe each term would be classified this way. Your responses MUST be supported with relevant case authorities.

(ii) What impact does the classification of a term as a condition, warranty or intermediate term have on the remedies available?

Question One
  1. Whether there is a valid partnership between Sharjah and Billy according to the provisions of the Partnership Act 1963 (Cth) (PA)
  2. Can Ooh orchids make a claim from Billy in relation to the Purchase of expensive flowers by Sasha worth $1,500.
  3. Whether the negligence committed by Jacob would be binding on fusion flowers
  4. Does Billy have the right to start a new business in competition to fusion flowers.

Each state in Australia has its own Partnership Act however the definition of partnership in all the legislation are same.

A partnership is a business which is carried on by two or more partners with the intention of making profit for a long time. The owners of the business under a partnership are known as partners. Each partner unless he is a silent partner has a say in the management of the business. For establishing a partnership a partnership agreement has to be identified through which the intention of the parties to continue business and share profit and losses in a decided ratio is identified.

Section 6(1) of the PA states that partners must have joint ownership of the business. According to Section 6(2) of the PA partners must participate in the gross return of the business. According to Section 28(9) of the PA the partners must have powers to make decisions in relation to the business. According to Section 6(3) of the PA the business has to be carried out for the purpose of making profit.

Every action of a partner in a partnership business binds all others partners of the partnership to such actions. In the same way transactions which are entered upon by any of the partners of the business is binding on the business. Each partner would be liable towards such transaction. The concept had been provided by the case of John Grimes Partnership Ltd v Gubbins [2013] EWC

Unless it is specified in the partnership agreement the partners do not have any restrictions towards the way in which they should manage the business. Therefore an act by a partner would still be binding on the other partner if it was not approved but was within the powers of the partner who got into act as per Prince Alfred College Incorporated v ADC [2016] HCA 37

According to the principles of negligence a party who causes harm to another party due to and negligent action is liable to pay the aggrieved party damages. In case of a negligent act by any partner or agent of the partnership business the whole business would be liable to compensate the third party who has suffered damages because of such actions. The concept had been ruled in the case of Hollis v Vabu Pty Ltd (2001) 207 CLR 21.

The partnership act through section 35 prohibits a partner from indulging in a business activity which gives competition to the existing partnership firm in which he is a member.

Question Two

Through the facts provided in the case study it can be evidently stated that Billy and Sasha are formed a partnership as they had  intention of continuing the flower business and sharing profit and losses in 50:50 proportions. Both of them also had the right to manage the affairs of the business.

The facts in the case study does not depict any restrictions which have been imposed on the powers of the partners towards the management of fusion flowers. In addition according to the rules of partnership each partner is the agent of the business. An act committed by Sasha would be binding on the business which is also owned by belly according to the principles of joint ownership. Thus Billy has to pay Ooh orchids the sum of $1,500 for the purchase of expensive flowers done by Sasha.

Jacob had been appointed as the driver of fusion flowers therefore he becomes the Agent of the business. It has been discussed in the rules action that where the employee commits any negligent act the employer is liable to compensate the third party. In the same way as the employer here is Fusion flowers. Thus Billy and Sasha has the legal liability to compensate the person who has suffered from the accident.

Fusion flowers have the business of selling flowers and Billy is also starting a business which would sell flowers. Thus it can be stated that the nature of both the business is same. Through the application of section 35 of the PA, Billy does not have the right to continue such business under the duties of a partner.

Conclusion

Billy is liable for all three instances discussed above as he is a partner in fusion flowers.

Have the three elements of contract been satisfied between Wasim and Bianca.

An offer is the initial element of a contract from where the formation of a contract is initiated. Dickinson v Dodds (1876) 2 Ch D 46 defines an offer as an expression of willingness to get into a legally enforceable agreement with another party. An offer can be made to any number of persons, however it can only be accepted by those who were made the offer. A mere statement which is vague cannot establish an offer, instead an offer has to be comprehensive and must contain terms which can lure a reasonable person to accept it. Incomplete statements are called invitation to an offer as discussed in Pharmaceutical Society of Great Britain v Boots Cash Chemists (Southern) Ltd., [1953] 1 QB 401

Question Three

Acceptance is the second element of a contract. According to Crown v Clarke (1927) 40 CLR 227 an acceptance is an expression of consent from those who have been made the offer that they are ready to accept the terms of the offer and get into a legally enforceable agreement. An acceptance has to be unambiguous, which, means that it must be comprehend with the terms of the offer comprehensively.

Consideration is another essential of a contract. Consideration is the promise which has is provided to the person making the offer by the person who accepts it. Consideration has to be present in the contract in order to establish its formation. Without consideration there can be no contract. A mere presence of consideration is adequate to form a contract and therefore it is not required to be fair as per Australian Woollen Mills Pty Ltd v The Commonwealth (1954) 92 CLR 424

Bianca hand made an advertisement through which she intended to give her house on rent. As discussed in the case of Pharmaceutical Society of Great Britain an advertisement is generally an invitation to offer until it can induce a person to accept it as an offer. Therefore the advertisement made by Bianca was an invitation to treat.

Wasim made an offer to rent the house from Bianca without knowing that she was her cousin. However the offer was rejected by Bianca as the house was not available from the date which had been requested by Wasim. The expression made by Wasim would account as an offer because it was complete and any reasonable person in the position of Bianca would assume that it has the invention of creating a legal relationship. Moreover the offer was complete because it had terms like specification of services, price and time.

A valid oause it was complete and through the application of the objective test intention to create legal relationship can be derived.

Generally domestic agreements are considered to be having no intention to create legal obligation. However if a reasonable person is induced by an offer to get into a contract objective intention of the other party is established. Even though Wasim was a cousin of Bianca the valid offer made by her would be assumed by any reasonable person as having the intention of creating a legal obligation.

In addition as discussed above a contract has to have a consideration. Although the value of the rent was $2,000 it was agreed by Bianca to be given at $1,200. This would be considered as a valid consideration as consideration may not be fair but should be only present.

Answer 1

Conclusion

There is a contract between Wasim and Bianca

  1. “Delivery is free on all orders over $35.00.” condition as it is main part of the contract
  2. “Simply return any unused item within 28 days of receipt for a full refund of the price of the goods” Innominate term as it cannot be easily classified
  3. The prices quoted are those ruling at the time of production- condition
  4. The last order date for delivery before Friday 22nd December 2017 is 16th December 2017- warranty

A term which is the most important and fundamental part of the contract and without which the contract would not have been entered upon into is the condition of the contract. These are terms on which the parties to the contract relied upon for the purpose of entering into the contract. These terms are not collateral to the main terms of the contract and actually go to the root of the contract. The concept in relation to conditions in a contract had been provided by the landmark case of Poussard v Spiers (1876) 1 QBD 41

A term which is not the most important term of the contract and does not go to its roots and in addition is merely collateral to the main conditions of the contract is known as warranty. A warranty has a purpose of supporting the main conditions of the contract. Although they are the part of the contract but the parties do not rely on them expressly to get into the contract. The concept in relation to warranties in a contract has been provided by the landmark case of Bettini v Gye 1876 QBD 183.

There may be situation where it may not be clear that a term of the contract is a condition or a warranty. In such situations the court describes such terms as an innominate term or an intermediate term. These terms are analyzed by the court through determining the actual loss which may be caused to the party whose rights have been violated in case the term is classified as a condition or a warranty. In case the aggrieved party suffers significant damages due to the breach the term would be classified as a condition of the contract. The concept in relation to intermediate terms had been provided by the landmark case of Hong Kong Fir Shipping v Kawasaki Kisen Kaisha [1962] 2 QB 26   

In the case of Poussard v Spiers 26    it had been ruled by the court that where one of the parties to the contract has violated the conditions of the contract the party whose eyes have been reached is entitled to end the contract. In addition such party me also claim damages from the wrongdoer for any loss which have been suffered by the party due to the breach. Therefor breach of condition gives it to end the contract as well as damages.

In the case of Bettini v Gye the Court ruled that when a warranty of a contract is breached by a party the other parties does not have the right to repudiate or discharge the contract. The parties whose rights have been violated only have the legal right of claiming damages from the wrong doer. Therefore a breach of warranty only allows for claiming damages and not to repudiate the contract.

In case of innominate terms the situation of the case aggrieved party is determined to access the damagers.

References

Australian Woollen Mills Pty Ltd v The Commonwealth (1954) 92 CLR 424

Bettini v Gye 1876 QBD 183

Crown v Clarke (1927) 40 CLR 227

Dickinson v Dodds (1876) 2 Ch D 46

Hollis v Vabu Pty Ltd (2001) 207 CLR 21.

Hong Kong Fir Shipping v Kawasaki Kisen Kaisha [1962] 2 QB 26  

John Grimes Partnership Ltd v Gubbins [2013] EWC

Pharmaceutical Society of Great Britain v Boots Cash Chemists (Southern) Ltd., [1953] 1 QB 401

Prince Alfred College Incorporated v ADC [2016] HCA 37

The partnership Act 1963 (Cth)

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My Assignment Help (2021) Australian Business Law Essay: Partnership And Contract Law. [Online]. Available from: https://myassignmenthelp.com/free-samples/700254-enterprise-law/contract-law-and-business-management.html
[Accessed 05 March 2024].

My Assignment Help. 'Australian Business Law Essay: Partnership And Contract Law.' (My Assignment Help, 2021) <https://myassignmenthelp.com/free-samples/700254-enterprise-law/contract-law-and-business-management.html> accessed 05 March 2024.

My Assignment Help. Australian Business Law Essay: Partnership And Contract Law. [Internet]. My Assignment Help. 2021 [cited 05 March 2024]. Available from: https://myassignmenthelp.com/free-samples/700254-enterprise-law/contract-law-and-business-management.html.

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