Contract terms and formation: legal issues and application essay. (50 characters)

Advise Lila what is her legal position under the topic of ‘Formation of Contract’. In particular, ensure you address the following questions in your answer. When answering each question, it is important that you outline the issue, relevant law, application and conclusion. Please refer to relevant case(s) in your answer (under the law part of your answer).

(a)What are the four elements to form a contract and were they satisfied on the facts, as between (i) Lila and the store and (ii) Dina and Lila?

(b)Was the advertisement on television an offer to sell the item?

(c)Was the displayed IPhone Max at the store an offer to sell the item?

(d)Was the inaccurate price tag a breach of contract by the store?

(e)Was the promotion promising a discount on purchase of items of at least $2500, an offer?

(f)What was the effect of the email sent by the store to Lila informing her the discount promotion no longer applied? In other words, how does the Electronic Transactions Act apply here? Was the store in breach of contract?

(g)What was the effect of Lila and Dina’s emails to each other on Gumtree? Was there a contract between them?

Advise Jane on her legal position under the topic of ‘Terms of a Contract- In particular, under the topic of ‘Exclusion Clauses’. Refer to relevant case(s) in your answer. In your answer, be sure to address the following questions:

(a)What type of clause was found on the docket Jane received?

(b)Was the clause effectively incorporated into the contract? (i.e. was it a document to be signed or unsigned document and what was the legal effect of it being either one of those above)

(c)Would your answer for (b) be different if the receipt was not signed?

(d)What was the legal effect of the representative’s reply to Jane’s question about the clause on the receipt?

(e)Was the wording of the clause clear?

(f)Is the four corners rule relevant here?

(g)Overall, are you of the opinion that Jane can claim for her damaged gown?

What are the four elements to form a contract and were they satisfied on the facts?

Issue (a)

Have the elements of contract being satisfied in relation to the scenario

Law

Offer – As defined by Smith v. Hughes (1871) LR 6 QB 597 an offer is a expression of willingness to bound another person to its terms in a legally. The offer can be made to any specific person , group or in rem. The offer can only be accepted by the person who has been made the offer. The wordings of the offer has to be inclusive of necessary terms such as price, description and time of delivery of the goods. If the offer is not inclusive of such terms there is no offer and it becomes an invitation to treat. As provided in the case of Fisher v. Bell [1961] 1 QB 394 advertisements are generally invitation to an offer.

Acceptance- a person who has been provided with the offer can accept it. Appropriate acceptance is said to be made if the basic criteria for a complete acceptance is complied with. Firstly the acceptance has to be unequivocal which means it should be unaltered as compared to the terms stated in the offer as per Hyde v. Wrench (1840) 3 Beav 334.. Secondly the acceptance can only be made by person who has knowledge about the offer. Thirdly the acceptance has to be communicated to the person who has provided the offer as per Powell v Lee (1908) 99 L.T. 284. However there is an exception in case of a unilateral contract Carlill v. Carbolic Smoke Ball Co. [1893] 2 Q.B. 484

Consideration – the promise of acting or making an omission in relation to the contractual term is known as consideration. Consideration has to be present in the contract for it to be binding legally. It does not have to be fair but its mere presence is sufficient to make the contact legally binding as per Central London Property Trust Ltd. v. High Trees House Ltd. [1947] KB 130. There are six specific rules in relation to consideration however the rules are not applicable in the scenario.

Intention to create a legal obligation – one of the necessary elements in relation to the formation of contract is the intention of creating a legal obligation. No contract can be created unless the parties have an intention to bind each other legally. The intention is determined in an objective way as discussed in the landmark case of Hyde v. Wrench

Was the advertisement on television an offer to sell the item?

Application

In the first case there was an offer made by the store that if Lila makes a purchase of 2500 she would be eligible to a discount which she could use in the next six months. This was a proper offer and had the ignition to bind the other person to its terms objectively. Any reasonable person in the situation would have been induced by the offer to get into the contract. the offer had been accepted by Lila as she made a purchase of $2500. The consideration in relation to the contract was the purchase of the goods and the discount to be received. Therefore all four elements of the contract have been satisfied in this case and there is a legally binding contract.

In the case of Dian there was an offer to sell furniture. The offer was complete as it had the basic terms of price and descriptions of goods. According to the rules of acceptance the acceptance has to be made unequivocally. However along with the inquiry in relation to how old the furniture were an additional term had been made by Lila according to which she wanted to make the payments in two installments. In the situation the additional term defeated the original offer and created a counter offer. The counter offer was again rejected by Dina as she stated she needed the money urgently. Thus the acceptance of Lila after four days cannot be stated as a valid acceptance. Thus there is no contract between the parties even when the intention to create legal relation and consideration is present.

Issue (b)

Was the advertisement an offer

Rule

Advertisements which are not complete are only invitation to an offer and not an offer as provided by the case of

Advertisements which are complete can be regarded as an offer according to Fisher v. Bell [1961] 1 QB 394

Application

In this case the television advertisement was not clear and a reasonable person would have not considered as an offer

Conclusion

Thus the advertisement was not an offer

Issue C

Was the Iphone Max for sale an offer

Rule

Goods displayed for sale on the store are invitation to an offer as provided by the case of Pharmaceutical Society of GB v Boots Cash Chemists (Southern) Ltd [1956] EWCA 6.

Application

According to the above discussed rules the Iphone Max for sale is an invitation to offer

Was the displayed iPhone Max at the store an offer to sell the item?

Conclusion

No the display of the phone is not an offer

Issue D

Would the incorrect price tag result out in a breach of contract by the store

Rules

According to the rules discussed above the display of goods on the store is an invitation to an offer and not an offer itself

Application

In the given situation the phone had the price tag of $1000 and when Lila took it to the counter for purchase she was notified that the actual price of the phone was $1500. In the given situation till an official offer is made the store had the right to change the price of the phone. In addition a contract is breached only when it has been formed and as in this case there was no acceptance the contract cannot be said to be breached.

Conclusion

The contract has not been breached.

Issue (E)

Was the promise of discount for the purchase of $2500 an offer

Rule

An offer had been made or not is determined through the application of the objective test as stated by the case of Hyde v Wrench.

In addition in the case of Crown Melbourne Limited v Cosmopolitan Hotel (Vic) Pty Ltd [2016] HCA 26 it had been ruled by the court that the consideration for a contract be a new contract as well.

In the given situation any reasonable person if placed in the position of Lila would determine that the store had the intention of getting into a legally binding relationship. This is because the offer of the store was clear and complete according to which any person who purchases the goods worth $2500 would be eligible for a discount. In the situation Lila would have not purchased the additional scanner of the offer was not made nad thus she had been induced by the offer to get into the contract.

Conclusion

Yes, the promise of discount for the purchase of $2500 was an offer.

Issue (F)

The issue is to determine the effect of the email, the application of the Electronic Transactions Act and have the store breached the contract

Rule

According to section 14 and 15 of the Electronic Transaction Act the communication is competed when the email has reached the mail box of the other person irrespective of when it is read.

A contract is breach if terms of the contract are not complied with

Offer can be revoked before it has been accepted through communication

Was the inaccurate price tag a breach of contract by the store?

Application

In the given situation the ETA is applicable as the transaction is over email. The offer would have been revoked even if the mail was not read by Lila. However in this case the discount was not an offer it was a consideration as it had already been accepted by the purchase of $2500. Thus not providing the discount is a clear breach of contract.

Conclusion

The contract has been breached and the ETA is applicable.

Issue G

Was there a contract between Lila and Dina

Rules

Discussed in issue 1 as per the case of Hyde v Wrench

There is no contract because the correspondences through email between Lila and Dina resulted in only offers and counter offers and no valid acceptance

Conclusion

There is no contract

Issue (a)

Determining the clause which had been found in the docket received by Jane

Rules

According to Curtis V Chemical Cleaning Co [1951] 1 KB 805 an exclusion clause in a clause which can be incorporated into the contract by the parties to it , in order to exclude or limit their liabilities in arising out of the contract

Application

As the clause stated that the store would not be liable for damages through the docket clause the clause would be determined as an exclusion clause.

Conclusion

The docket clause is an exclusion clause

Issue (b)

Was the exclusion clause incorporated in the contract appropriately

Rule

Any person who has signed a document is contract has to abide by its terms legally. This is also the case if such person has read the contract or is not aware of the terms as provided by the case of L'Estrange V Graucob [1934] 2 KB 394. However the only exception to the rule provided by this case is that the consent of the party must not be obtained through any misrepresentation or fraud.

It is not necessary for a contract to be signed in order to be enforceable. If such would have been the case than oral contracts would not have been considered as valid contract. the acceptance of a contractual term can be made in various other ways and one of such ways is through providing tickets, receipt or dockets as provided in the case of Thornton V Shoe Lane Parking [1971] 1 All ER 686

However if a document has to be signed by the parties to give effect to the contract, the contract would not be enforceable unless the contract has been signed. There is an obligation on the party who is incorporating the contract to ensure that small prints and unclear terms are brought to the attention of the party.

Was the promotion promising a discount on purchase of items of at least $2500, an offer?

Application

In the given situation a docket has been provided to Jane when she went to the cleaning store. A docket is a kind of document which needs to be signed in order to be effective. Jane had signed the docket and therefore according to the principles provided by the case of L'Estrange V Graucob it can be stated that the exclusion clause has been effectively incorporated into the contract. This would also applicable when the terms which had been printed in the small prints have not been read by Jane. The term which was in small prints had been brought to the attention of Jane by the store as provided by the scenario. After the clause had been read by Jane the docket had been signed by her. Thus it can be stated that the exclusion clause has been incorporated in an appropriate way into the contract between Jane and the Store.

The legal effect of the docket being signed was that the clause has been legally incorporated. The clause would have also been incorporated if the docket would not have been signed however only if the clause had been brought to the attention of Jane by the store.

Issue c

Would the clause be incorporated if the receipt had not been signed

Rule

In the case of Olley V Marlborough Court [1949] 1 KB 532 it had been provided by the court that the any clause which had been incorporated by the party to the contract to the detriment of the other party such as the exclusion clause, the clause has to be brought to the notice of the other party before the contract is formed.

As discussed above it is not necessary for the parties to sign the contract in order to be valid

Application

in the situation where Jane would have not signed the docket the clause would not have been valid. This is because it could be argued then that the clause was not brought to the attention of Jane before the contract had formed between the parties.

Conclusion

No it would not have

Issue d

Legal effect of the reply

Rule

In the case of L'Estrange V Graucob it was ruled that the court that the contract was binding when signed unless there is misrepresentation

Application

In the given situation the representative had misrepresented the meaning of the exclusion clause to Jane and thus the clause is not binding.

Conclusion

The clause is not binding

Issue e

Was the wording of the clause clear

Rule

The wording of the clause is clear if it can be easily understood and read as provided by the case of Baldry V Marshall [1925] 1 KB 260

Application

The clause in this case was in small prints and did not have a certain and easily identified meaning thus the wording was not clear

Conclusion

The wording of the clause was not clear

Issue f

Is the four corner rule applicable in this case

Rule

According to the four corner rule a contract which is complete and unambiguous is interpreted by the court according to the clauses which are written in the contract.

Application

It has already been discussed above that the exclusion clause in the contract between Jane and the store is ambiguous. Thus as per the rules of the four corner rule it would not be applicable in this case.

Conclusion the rule is not applicable

Issue G

Overall strength of Jane’s claim

Rule

According to the case of Baldry V Marshall if the nature of the clause has been misrepresented the clause is not valid. In addition an ambiguous clause is interpreted by the court against the party who has opted for it

Application

Thus as per the above discussed rules and the facts of the case Jane has a strong claim against the store to recover damages against the gown.

Conclusion

The claim for damages is strong

References

Baldry V Marshall [1925] 1 KB 260

Carlill v. Carbolic Smoke Ball Co. [1893] 2 Q.B. 484

Central London Property Trust Ltd. v. High Trees House Ltd. [1947] KB 130

Crown Melbourne Limited v Cosmopolitan Hotel (Vic) Pty Ltd [2016]

Curtis V Chemical Cleaning Co [1951] 1 KB 805

Fisher v. Bell [1961] 1 QB 394

Hyde v. Wrench (1840) 3 Beav 334