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1.Magda is a highly acclaimed professional photographer focussing on celebrities in the fashion, entertainment and sports industries.  

Magda advertises and sells prints of her works via her website: www.madgaportraits.com.au, but she also sells directly to the public from her home studio.

The website sets out various categories of works including one entitled ‘Elite Sports’ where she has thumbnail photos of limited edition, framed, photographic portraits that she has taken, showing prices (including postage and handling).

There is also a notice on the website indicating that these portraits are numbered and signed by Magda, and are printed on archive quality, acid-free paper.

Avinash visits her website and admires a photographic portrait of an Australian Olympic champion, Paris Stilton. The advertised sale price is $2,000 and it is described as ‘a limited edition of only 3 prints’. According to the website only one of these portraits remains unsold.    

As described below, a number of exchanges take place between Magda and Avinash.  

Sunday 19 February:

  • Using the supplied email address from the website, Avinash emails Magda saying, ‘l’ll buy the Paris Stilton portrait for $1,600’.
  • Within minutes, Magda emails him back saying that she ‘cannot accept less than $1,800’.
  • An hour later, Avinash replies, indicating that $1,800 sounds like a fair price but asks her to ‘hold the portrait so he and his wife can discuss the matter’. Avinash points out that as his wife is overseas, the earliest his wife could do so would be the following Tuesday, 21 February.
  • Magda responds immediately by email agreeing to this and attaches the following scanned document:   

I, Magda Kingsbury, hereby offer to sell Avinash Kapoor one framed print of Olympian champion, Paris Stilton, for $1,800 cash. This offer shall remain open until 11.59 pm on Tuesday 21 February.

Signed: Magda Kingsbury

Monday 20 February:

  • Avinash emails Magda at 9 am stating he had been able to consult with his wife earlier than expected and he was willing to pay $1,800 for the portrait on the condition that she provided a certificate of authenticity that verified the portrait’s origin and status as a limited edition work.    
  • Magda emails him back at 9.30 am saying that she could do so. She adds, “If you want to go ahead you must confirm with me by 4 pm today”.  Avinash hesitates and decides to think it over and does not reply that day believing he has until Tuesday 21 February to decide.          
  • At 11 am, Elton, a sports enthusiast, who had visited Magda’s website and seen the portrait of Paris Stilton, decides to pay a visit to her studio to see it on display. Without haggling over the price he purchases the painting for $2,000 cash and takes it away with him.
  • At 11.30 am, Magda emails Avinash informing him that the portrait had been sold.

The next day, Tuesday 21 February:

  • At 9.45 am, without having actually read Magda’s most recent email ( in 8 above), Avinash telephones her informing her that he will buy the painting for $1,800. Magda informs him he has missed out.

Required

  • Advise Magda and Avinash whether they had formed a binding contract with one another.
  • You will need to address all the essential elements of a contract as well as analyse the legal status (if any) of each step or event that occurred, including information on the website. Refer to relevant case law and provide definitions of legal terms. In this part, do notdiscuss the impact, if any, of consumer protection laws.
  • You may, but are not obliged to use the IRAC format for this part, given that each step or event needs to be analysed separately.
  • Recommended maximum: 600 words

(b) Assume Elton discovered that the portrait he had purchased had only been printed on low quality photographic paper and was therefore susceptible to colour degradation (already occurring) which would not happen had high quality archive quality paper been used. Furthermore, he has discovered that recently, Magda had sold ten of the so-called limited edition prints of Paris Stilton to other buyers.

Advise Elton of his rights under the Australian Consumer Law (‘ACL’)

  • By reference to the ACL, explain whether
  • Elton qualifies as a consumer
  • Magda has breached any terms
  • Magda has made any misstatements   
  • Refer to specific sections of the ACL and any relevant case
  • For your information, ‘limited edition’ most commonly refers to the publication of an edition of a book, or reproduction of a print or object, limited to a specific number of copies.
  • Use IRAC format. Recommended maximum

2.‘Consideration provided under a contract is not always valid. This can have unfortunate consequences for a party seeking to enforce the ‘contract’.    

Required

Discuss this statement referring to relevant case law.  

Include:

  • An indication of whether you agree or disagree with the statement, justifying your viewpoint
  • Identification of the type of consideration exchanged between Magda and Elto 

1. Magda's Offer and Acceptance

Issues 

In the given case, Magda given some time to Avinash to accept the offer, but in the meanwhile she sold the subject matter of relevant offer to a third party named Elton, Further, Avinash has accepted the offer maid to him after the prescribed time. Now the issue is to decide that is there any binding contract has made in between Magda and Avinash in the discussed transaction?

Rule 

As per Australian Contract Law, there are some elements which are required to convert an agreement to contract. These elements are known as essential elements of contract. Firstly to enter into a contract it is mandatory to check eligibility of parties thereon. Only minor and sound mind people can form a valid contract.

As per the case Carlill v Carbolic Smoke Ball Co. Carlill v Carbolic Smoke Ball Company that in order to make a valid contract it is required that there should be an offer and acceptance of the same. A task which invites offers is known as Invitation to treat. When offeree rather than accepting an offer, make another offer, such later offer called Counter offer. As per the case Hyde v Wrench counter offers destroys all the previous offers. As per the case Dickinson v Dodds An offer can be revoke by offeror before the acceptance of offeree, but the same must communicate to offeree.

Further, Consideration is already a very important factor of a contract. This is the reason why the transaction appears in love and affection cannot build a valid contract. It was held in the case Thomas v Thomas that consideration must have some value in the eyes of law. There are other requirements also, which one needs to check in order to decide whether a consideration can convert the agreement into contract or not, such as consideration should be valid, must bring additional duties to other party of agreement and must be sufficient. It was held in the case of Tweddle v Atkinson  that consideration must move to promise only, not the any other person.

In addition to aforesaid, as per the case Jones v Padavatton if a case comes to social and domestic agreements then in such cases there must be an intention to constitute legal relation. In some other cases such as Scammell & Nephew v. Ouston and Sudbrook Trading Estate v. Eggleton it has held that an agreement must be certain.

In the case provided, Magda first made some information available about her business on her website, her this task was an invitation to treat. Afterwards, on 19 February, Avinash shown his interest to buy a particular portrait of an Australian Olympic champion (herein after referred as portrait) for $1600. In reply to this, Magda emails him that she cannot sell the same for less than $1800 and Avinash replied her back that he will confirm her after consulting his wife by 21st February. Both of the said replies will be treated as counter offers. As per the case Hyde v Wrench parties here destroyed all the previous offers.

2. Rights of the Buyer under the Australian Consumer Law

Here in the case, later on 20th February, Avinash confirm to Magda that he is ready to buy the subjective portrait for $1800 as he consulted with his wife but wants a certificate certifying that the said portrait has limited edition and the same is original. This was again a counter offer from side of Avinash which cancelled all the previous offers with Magda. Magda gave her consent to do so and e-mailed Avinash stating that if he wants to form a contract now, he is need to give his affirmation by 4:00 Pm on 20th February. This was the final offer of this case which was needed to accept by Avinash before the given time limit.

Now, on 20th February, Magda has sold the discussed portrait to a third party and informed to Avinash. Here as Avinash had not given his consent till that time, Magda was entitled to revoke the offer made to Avinash.

Conclusion 

To conclude the asked issue it may state that before the acceptance of Avinash, Magda has revoked the offer and informed the same to Avinash, so no contract has been formed in between them.  In this case even if Magda would not revoke the offer, a contract cannot be developed by them as Avinash has given his consent after the prescribed time

Issue 

In the given situation, lead issue is that after the Purchase, Elton has come to now that the purchased portrait was not up to the mark in terms of quality as it was printed on low quality photographic paper. Now, the questions are

  1. Whether Elton would be treated as consumer as per Australian Consumer Law?
  2. Whether Magda has breached her duty?
  3. Did Magda make any misstatement?

Rule 

As per the provisions of Australian Consumer Law ("ACL"), set out in (Schedule 2 of the Competition and Consumer Act 2010 (Cth)) consumer is a person who buy or acquire some goods or services up to $40 000 for his/her domestic, personal or household use and paid or agreed to pay a consideration to supplier (Australian Competition & Consumer Commission, 2018). As per the case Australian Competition and Consumer Commission v Reckitt Benckiser (Australia) Pty Ltd  it is duty of a supplier to provide it is consumer goods and services as mentioned in prescription. While making a contract in the course of business, a supplier can either provide some sample to consumer or can provide a description, so that it would be clear in opinion of consumer that what exactly he/she is going to purchase. It was held in the case Australian Competition and Consumer Commission v A Whistle & Co (1979) Pty Limited  that if supplier by provide false description or sample mislead the general public, such supplier will held liable for this act

Further, as per the provision of section 56 of Australian Consumer Law, if supplier in the course of trade or commerce makes some description about quantity or quality or about any other feature of goods, then it is an implied guarantee from the supplier side to provide the goods according to description. In addition to this as per Australian Competition and Consumer Commission v Bunavit Pty Ltdand ACCC v HJ Heinz Co Australia Ltd , a supplier will be held liable for penalties and punishment if in due course of his/her business, he/she mislead the consumer.

3. Validity of Consideration in Contracts

In the given case, Magda was running a website of her business where she has posted the information of available stock and prices thereof. She had a notice on her website where it as mentioned the Portraits that were available for sell was numbered, signed by Magda and were printed on archive quality acid free paper. But later on it has come to his notice that the provided Portrait was printed on a low quality paper. Here Magda being a supplier breached her duty under section 56 of Australian consumer law.

In conjunction to this, Similar to the case Australian Competition and Consumer Commission v Bunavit Pty Ltd , Magda has told to Elton that the portrait he wants to purchase, is one out of 3 limited edition but later on it has come into knowledge of Elton that the same was already been sold to different buyers in 10 copies, here Magda has made misstatement about the limited edition of Portrait.

Conclusion 

This case brought three questions that can be concluded as under:

  1. As Elton has paid the amount to buy the portrait and the same has not purchased for the purpose of re-sale, Elton shall be treated as consumer.
  2. Being a supplier it was the duty of Magda to provide goods as guaranteed but she has failed to do so and as in this way she has breaches her duty
  3. As Magda already sold 10 copies of that portrait to other buyers, she should not mention the same as “limited edition”, here by doing this Magda has made a misstatement.

An agreement cannot become contract until unless it has all the factors which are necessary of a valid contract. Consideration is one of the important elements of a contract. It may state that an agreement in which consideration is missing cannot become contract. Here it is to mention that only presence of consideration in an agreement is not enough, the sane must be valid also. There are some characteristics of a valid consideration under common law of Australia, which are defined further in this discussion.

For a valid contract, consideration must be there but in the contract law, there are some factors which define and decide a valid consideration. Firstly it is important to now that consideration in an agreement must not be past. As it was held in the case Re McArdle that promise to make the payment for the past consideration cannot be treated as valid consideration. But as per the case Lampleigh v Braithwaite, if such consideration proceeds by a request then the same will be valid. Further, consideration can be anything but must have some value in the eyes of law. It needs not to be as similar as value of subject matter but have some reasonable value.  It was held in the case Chappell v Nestle that consideration need not to be adequate but must be sufficient always. It can vary according to bargain level and mutual relationship of parties. This is the reason for which the agreements made in love and affection is not treated as contract.

In addition to above features, a valid consideration must be payable or paid to promisee always. It was decided in the case Tweddle v Atkinson  that if consideration is to be given to any other party that will not be treated as valid as that third person is not a party of the agreement and cannot entertain a legal and binding contract.

As Consideration is an element of contract, it is required that the same must bring some liability to the parties thereof. It has held in the some cases such as Collins v Godefrey, Glasbrook Bros v Glamorgan County Counciland Ward v Byhamthat if by paying any consideration by one person to another, the second one is not being liable to take any action or to perform any further duty; such consideration cannot be treated as lawful consideration and will not bind the parties to form a contract. The same was also held in the famous case named Glasbrook Bros v Glamorgan County Council It was held in the case Stilk v Myrrickand Hartley v Ponsonby that if it is contractual duty of a person to do something and he/she is using this duty as consideration in the favor of other person then such duty cannot be used as consideration for a new act.

In addition to this consideration must not be illegal or of a nature which can put an adverse impact on society.Such Considerations are not valid and make an agreement illegal too. While entering into a contract, it is advisable for the parties to check whether the subjective consideration is valid or not.

In a contract it is not necessity that the provided consideration will be valid. If the same would not have essential elements which are required to determine a consideration valid then, such consideration can bring problems to other party who wants to enforce the contract. In some of the cases, it happens that parties enters into a contract and later on come to know that their agreement has never converted into contract due to an invalid consideration. The one party who first pays consideration to another person wants the other person perform their action as per the requirement of an agreement, but in the absence of a valid consideration, such agreement cannot become contract and this situation brings unfortunate consequences to first party.

Further, as per the case Pinnel's caseand Foakes v Beer , a pert payment of a liability or debt cannot be treated as valid consideration. In the case Scotson v Pegg  it has decided that if in exchange of consideration, the receiver performs a duty to third party as per the direction of second party then such consideration will call valid. According to case New Zealand Shipping v Satterthwaite , such performance for third party shall be held valid consideration if it was the existing duty. 

In the given case, Elton has paid $2000 to Magda for purchasing the portrait of an Australian Olympic champion. Here this was a valid consideration as it has all the character, which valid considerations have. In conjunction to this, the said consideration was sufficient as well as adequate because Magda has already quoted the price of said portrait as $2000. Elton did not negotiate with price of Portrait so, here the consideration was adequate. In addition to this, the said consideration was not illegal and had the legal value. By Paying $2000 Elton made Magda liable to hand over the mentioned portrait to Elton, which mean it brought some liability to perform for Magda.

Here in the studied case, it can conclude that the consideration paid by Elton to Magda had all the feature of a valid consideration and therefore the contract made in between them was enforceable. Yet it is advisable for the parties of an agreement to check the validity of consideration along with other factors which develops an agreement to contract, as failure to do so can attract adverse consequences to them. So it may state here for creation of a contract, consideration must be there and for enforcement of the contract such consideration must be valid.

ACCC v HJ Heinz Co Australia Ltd [2018] FCA 360

Australian Competition and Consumer Commission v A Whistle & Co (1979) Pty Limited [2015] FCA 1447

Australian Competition and Consumer Commission v Bunavit Pty Ltd [2016] FCA 6

Australian Competition and Consumer Commission v Reckitt Benckiser (Australia) Pty Ltd (No 4) [2015] FCA 1408

Carlill v Carbolic Smoke Ball Co. Carlill v Carbolic Smoke Ball Company [1892] EWCA Civ 1

Chappell v Nestle [1960] AC 87

Collins v Godefrey (1831) 1 B & Ad 950

Collins v Godefrey, Glasbrook Bros v Glamorgan County Council [1925] AC 270 

Dickinson v Dodds (1876) 2 Ch. D. 463 

Foakes v Beer (1883-84) L.R. 9 App. Cas. 605

Glasbrook Bros v Glamorgan County Council [1925] AC 270

Hartley v Ponsonby [1857] 7 EB 872 

Hyde v Wrench (1840) 49 ER 132

Jones v Padavatton [1969] 1 WLR 328  

Lampleigh v Braithwaite [1615] EWHC KB J17 

New Zealand Shipping v Satterthwaite [1975] AC 154

Pinnel's case 1602 5 Rep, 117

Re McArdle (1951) Ch 669 

Scammell & Nephew v. Ouston [1941] AC 251 

Scotson v Pegg [1861] EWHC Exch J2

Stilk v Myrrick [1809] EWHC KB J58

Sudbrook Trading Estate v. Eggleton [1983] AC AC 444

Thomas v Thomas (1842) 2 QB 851

Tweddle v Atkinson [1861] EWHC QB J57

Ward v Byham [1956] 1 WLR 496  

Australian Consumer Law (Cth)

Competition and Consumer Act 2010 (Cth)

Australiancontractlaw, Consideration (2018) < https://www.australiancontractlaw.com/law/formation-consideration.html>

e-lawresources, Contract consideration (2018)  < https://e-lawresources.co.uk/Consideration.php >

Lawbuddy, Contracts in Australia (2018) <https://www.lawbuddy.com.au/contracts-in-australia/>

Legalvision, what are the consequences of a mistake in a contract? (2018)  < https://legalvision.com.au/what-are-the-consequences-of-a-mistake-in-a-contract/>

Small Business Development Corporation, Contracts and agreements (2018) <https://www.smallbusiness.wa.gov.au/business-advice/legal-essentials/contracts-and-agreements>

study.com,  Rules of Consideration in Contract Law: Elements & Case Examples (2018) < https://study.com/academy/lesson/rules-of-consideration-in-contract-law-elements-case-examples.html>

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