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Formation of Contract

Lianne emails Mary setting out her requirements for a Malaysian themed party including that country’s high quality ethnic food and drink, and live Joget and Zapin styles of music provided by musicians. She expects twenty people in her group, and asks for a quote. She tells Mary to direct all correspondence to her given email address.In reply, Mary emails Lianne suggesting that the party be held on board a boat that will travel up and down the local river for a period of eight hours. Lianne responds immediately saying she likes the idea provided there is room on board for dancing, and enquires about the type of boat that will be used.


Three hours later, Mary emails Lianne with information about the boat and attaches a detailed quote for the amount of $10,000. Lianne replies that the quote seems a bit high and proposes a price of $9,500.In response, Mary approves this lower price on the condition that her new quote for the lower figure would only remain open for seven days, and provided a 10% non-refundable deposit was received in that time-frame. As added encouragement, she writes, ‘I really hope to hear from you soon’.


Looking for someone to organise your next private or corporate function Would you like your party organised efficiently, stylishly and professionally? Look at our wide choice of packages to suit every budget. Parties start from $500 for a group of 5. Look no further. Contact Mary at Mary’s Party Treats for a quote.

Lianne’s personal commitments distract her from responding to Mary’s last email. It is only on 20 June,that she contacts Mary again and on that date, the following exchanges occur. Lianne sends Mary an email saying ‘go ahead with my party for $9,500. I’ll forward the deposit to you by the tomorrow’.Mary replies, ‘Sorry, but the price is now $10,000 due to increased costs’. Annoyed by this, Lianne writes, ‘You’re actually bound by your $9,500 offer. But I don’t want to quibble. So go ahead with the $10K deal’. Thirty minutes later, Lianne has a change of heart and sends another email to Mary stating, ‘I’ve changed my mind. The deal is off’.


Mary does not read these last two emails from Lianne because Mary’s computer had just experienced hard drive failure. She has no other electronic devices to access her emails, and the technical problem is not resolved until five hours later. When her computer is repaired, Mary reads for the first time Lianne’s two earlier emails.Mary has found Lianne to be a demanding client - or potential client. She had spent some time and effort preparing the quote, and believes they have a contract.
Required
(a) Explain whether the parties had entered into a contract with one another.
Your answer should include analysis of
all the parties’ exchanges and their legal significance (if any)

whether any opinions or views held by the parties are correct or not. ( Furthermore,beware of the words or descriptions used by the parties throughout the facts as these are only their interpretations of events, and may be incorrect)
(b) Assume for this part only, a contract was formed between the parties for the price of $9,500 On the agreed date of 30 July, Lianne arrives with her friends who boarded the boat arranged by Mary. The food and drink supplied by Mary ( through her supplier, Food Organics Ltd) was totally different from what Lianne had ordered, as it consisted of Russian-style food rather than Malaysian cuisine. Furthermore, the boat was extremely cramped and it was a tight squeeze to accommodate all the party guests, let alone the musicians, leaving no room for dancing. All the food was consumed. Upset by this, Lianne complains to Mary, ‘I’m a consumer and I have rights, you know!’.
Advise Lianne of her rights, if any, against Mary under the relevant legislation.

Advertisements published by businesses appear in various media such as television, radio, print, or internet. In Australia, as elsewhere, advertisements are designed to have a certain impact or effect on those who see, read or hear them. An example appears in the facts of Question 1 (above). The business advertiser needs to be careful about statements made in its advertisements given that they are subject to legal rules developed by the courts as well as by parliament ( through legislation). Required
Discuss this statement.

Formation of Contract

Whether there is a binding contract that has formed between the parties?

Rule of Law

Advertisements made in the newspapers are not an offer but an invitation to treat. It means that there is an invitation to the public in general to make an offer and no promise is attached to this invitation to treat (Partridge v Crittenden, [1968]).

Counter offer is made to negotiate the final contract. There is automatic rejection of the original offer once the counter offer is made and there shall not be any contract that is formed unless there is acceptance made under the new terms. The case of Hyde v Wrench established this, wherein there was an offer made for selling by Wrench of his land for £1000. Hyde then made a counter offer for £950 which Wrench did not accept. Hyde then told Wrench that he was ready to pay  £1000 and this communication was ignored. The rule which this case established was that “ Once a counter offer is made and the original offer rejected, the offeree can no longer accept the original offer (Hyde v Wrench, [1840]).”

There is a valid contract which is formed only once the offer has been accepted in the terms that are exact, meaning thereby that there is mirroring of the terms.

Conditions that bring an end to an offer there may be an understanding stated implict or expressly in an offer on which the offer’s continuous existence depends, if such an understanding then the offer will come to an end. As opined in the case of Financings Ltd v Stimpson in this case it was opined that the offer made was subject to the implied condition that the car is to continue in its unharmed state and failure of this condition led to the lapse of the offer (Financings Ltd v Stimpson, [1962]).

When the mode of communication of acceptance is instantaneous the general rule of law shall apply and contract will be formed once the acceptance is communicated (Entores L D v Miles Far East Corporation, [1955]). One of the most essential elements of contract is communication it is required to be made certainly and clearly and should be received prior to the effective date of the contract (Entores L D v Miles Far East Corporation, [1955]). In case of acceptance through email as in the case Stellard Pty Ltd & Anor v North Queensland Fuel Pty Ltd a binding contract shall be formed once acceptance is communicated through exchange of emails (Christensen, 2001) between both the parties (Stellard Pty Ltd & Anor v North Queensland Fuel Pty Ltd, [2015]). Once an acceptance is made the subsequent purported withdrawal will not be effective (Dunmore (Countess) v Alexander, [1830]).

Application of Law

In the given scenario the below mentioned would be applicable:

  • The advertisement by Mary was merely an invitation to treat for which an offer was made by Lianne, Mary for this offer gave the proposed price of  $10,000 for which a counter offer of  $9,500. A conditional counter-offer was made for this by Mary on the same date however since the understanding of the offer was not met with as in the case Financings Ltd v Stimpsonthis offer was no longer in existence.
  • Another offer was made by Lianne as the previous offers ceased to exist for $9,500 to which Mary did not agree and placed a counter offer. Mary received the acceptance of the offer and the subsequent revocation of the acceptance, however the agreement became binding once the acceptance is received by Mary and the subsequent revocation will not be effective.

Conclusion

The legal position of Mary is stronger and it may be concluded by the Court that there was a valid contract that came into existence between the two parties.

Whether there is a consumer guarantee available to Lianne in the given scenario?

Rule of Law

Consumer Rights

It is provided under the Sales of Goods Act Section 13 that the goods and properties should match with the description, this section is not about the quality but the product’s description (Arcos v Ranaason, [1933]). It is further stated under section 14(3) where it has been informed to the seller by the buyer of the certain qualities that are required then there should be higher standards which are placed. The seller would then be liable in such a situation even though the safety aspect has been met with respect to the product but the product is not what the purchaser had required (National Foods Ltd v Pars Ram Brothers (Pte) Ltd, [2007]).

Further the Australian Consumer Law provide guarantee to the consumer wherein the product supplied does not match with the description. This is regarded as a major problem and the consumer can reject the product and chose for a replacement or refund or keep the item and for any drop in value the seller shall compensate (Consumer.vic.gov.au, 2017).

Under section 56 Competition and Consumer Act 2010 (“CCA”) guarantee will be given by the seller in that the goods that are supplied by way of description by the seller will correspond with such description (unless they are supplied by auction). This guarantee will apply even in the situation where the goods had been inspected previously by the purchaser prior to the actual purchase (Australian Competition and Consumer Commission, n.d.).

Further section 29 of ACL provides with respect to misleading representation with respect to goods and services. Section 29(1) states that “A person must not, in trade or commerce, in connection with the supply or possible supply of goods or services or in connection with the promotion by any means of the supply or use of goods or services: (a) make a false or misleading representation that goods are of a particular standard, quality, value, grade, composition, style or model or have had a particular history or particular previous use; or (b) make a false or misleading representation that services are of a particular standard, quality, value or grade”

A breach of this section leads to civil proceedings and liabilities.

In the given situation the products supplied, the food and the boat, to Leanne did not match the description of the products based on which the contract had been entered into and there was breach of section 29 of ACL in providing goods and services that did not match the representation made. This is a major problem and Lianne can either ask for replacement or refund.

Conclusion

The legal situation of Lianne is strong in the given situation, she can sue for customer guarantee as well as breach of terms of contract Advertisement is used by most Australian businesses for promoting their services and goods. Whether these advertisement are through radio, television, print media or internet, it is essential that they ensure compliance with the law. This essay discusses why it is important for business advertisers to be very careful about the statements which they make in the advertisement since they are subject to various legal rules that are developed by the parliament and the courts.

Conclusion

The national law Australian Consumer (“ACL”) aims at ensuring in Australia protection of consumers and fair trade. The ACL is a part of the Competition and Consumer Act 2010 (“Act”). Businesses are prohibited under the ACL to make any statements that are false or misleading with respect to the services and goods that are provided by them. There are have been different cases where the courts have found the representations by the businesses to be misleading and false . In the case of Trade Practices Commission v Pacific Dunlop Limited it was found by the court that the socks which were being sold by the manufacturer labelled pure cotton were not actually pure cotton (Trade Practices Commission v Pacific Dunlop Limited, [1994]). In the case of ACCC v Giraffe World Australia Pty Ltd (1999)  there were serious misrepresentations that were made by the business regarding the negative ion mats therapeutic benefits (ACCC v Giraffe World Australia Pty Ltd, [1999]).

It will depend on the circumstances whether a representation is considered to be false and misleading (Smith, 2000). The general provisions relating to misleading conduct which are applicable on advertisements are found under section 18 of the ACL, breach of this section gives rise to civil liabilities. Additionally ACL Part 3-1 puts a prohibition on different business practices which are misleading and false and give rise to liabilities that are both civil and criminal. The section 18 of ACL also interacts with section 29, while there is a strict liability which is placed under section 18 in regulation of conduct that is misleading in commerce or trade, section 29 imposes a liability for representation made which is false regarding a supplier since they are in a position that is extremely powerful when it comes to having knowledge regarding a particular good.

There are certain landmark cases which ascertain why businesses should avoid making any advertisement that can lead to the misleading of the customers. In the case of ACCC v TPG Internet Pty Ltd [2013], it was opined by the court that the advertisement’s dominant message was of crucial importance for determining whether an advertisement is deceptive or misleading or not (ACCC v TPG Internet Pty Ltd, [2013]). A pecuniary penalty of  $2 million was imposed on TPG Internet Pty Ltd with respect to  Unlimited ADSL2+ broadband bundle advertisement campaign.

The court further stated that the qualifying statements that accompany the headline representation are required to be sufficiently clear and prominent so that the customers are not misled, particularly if such a representation is with respect to the price. This decision of the High Court is extremely essential for the advertisers to understand the extent and nature of their obligations under the ACL. The ACCC is also informed under this regarding the strategy of enforcement. The implications of the decision of the High Court in this case has been that the importance of test of “dominant message” has been reinforced for determining if an advertisement would be considered as being deceptive or misleading. An important precedent value has been attached to the TPG case for the ACCC and will be factored into the process of the Commission for deciding whether a business is to be pursued for advertisement that is considered as deceptive or misleading by the ACCC.

In the case of, comparative advertisement,  Telstra Corporation Ltd v Singtel Optus Pty Ltd, (No 2),5 Elliott J., made declaratory orders due to the reason that (Telstra Corporation Ltd v Singtel Optus Pty Ltd, (No 2), [2014]) there was a real controversy in this case. The claims which Telstra had made were opposed strenuously. In the judge’s opinion it was appropriate to make declaration in the given situation where it has been found by the court that deliberately Optus had engaged in a conduct which was significantly in contravention with the Australian Consumer over a good period of time. The contravening conduct will be identified clearly by the conduct, and it publicized the type of advertisement that would constitute as being contravening thus providing businesses with a warning to no engage in conduct that is misleading or deceptive or make representations that are false or misleading. The declaratory relief was given particularly to aid the consumers so as to protect them from making decisions that ae ill-informed regarding mobile phone plans that are long term.  

Further in the case of ACCC v Coles [2014], it was concluded by the court that Coles had engaged in a conduct that was misleading and in contravention with numerous ACL provisions which arose from the use of the expression “Baked Today, Sold Today” by Coles in advertising the bread products which were actually par-baked in a different location, snap frozen and then completely baked (ACCC v Coles, [2014]). The court passed an order that Coles would be required to pay a pecuniary penalty of $2.5 million to the Commonwealth for the misleading advertising under s 224(1) of ACL. It was stated by the chief justice in this case that (Australian Competition and Consumer Commission, 2015), that taking into accounts matters under the section 224(2) and other important factors which the parties identified, a fine was imposed on Coles amounting to $2.5 million.

Therefore, conclusively keeping in purview the legislations and ruling of the courts that to avoid liability of any kind (civil and criminal) which can also lead to further damaging of the reputation of the company it is essential that businesses advertising need  ensure that the statements that they make are not deceptive or misleading and care should be taking while making such statements.

References

ACCC v Coles [2014]FCA 45.

ACCC v Giraffe World Australia Pty Ltd [1999]FCA 1511.

ACCC v TPG Internet Pty Ltd [2013]HCA 54.

Arcos v Ranaason [1933]AC 470.

Australian Competition and Consumer Commission. (2015). Coles to pay $2.5m for misleading "Baked Today" and "Freshly Baked In-Store" bread promotion. [online] Available at: https://www.accc.gov.au/media-release/coles-to-pay-25m-for-misleading-baked-today-and-freshly-baked-in-store-bread-promotion [Accessed 20 Sep. 2017].

Australian Competition and Consumer Commission. (n.d.). Advertising and selling guide - What are the guarantees?. [online] Available at: https://www.accc.gov.au/publications/advertising-selling/advertising-and-selling-guide/consumer-guarantees/what-are-the-guarantees [Accessed 20 Sep. 2017].

Christensen, S. (2001). Formation of Contracts by Email - Is it Just the Same as the Post?. QUT Law Review, 1(1).

Consumer.vic.gov.au. (2017). Consumer guarantees that apply automatically. [online] Available at: https://www.consumer.vic.gov.au/products-and-services/refunds-repairs-and-returns/guarantees-that-apply-automatically [Accessed 20 Sep. 2017].

Dunmore (Countess) v Alexander [1830]9 Shaw 190.

Entores L D v Miles Far East Corporation [1955]EWCA Civ 3.

Financings Ltd v Stimpson [1962]3 All ER 386.

Hyde v Wrench [1840]49 ER 132.

National Foods Ltd v Pars Ram Brothers (Pte) Ltd [2007]2 SLR 1048.

Partridge v Crittenden [1968]1 WLR 1204.

Smith, R. (2000). Deceptive and Misleading Conduct On-Line Advertising and Business Practice. [online] www.asic.gov.au. Available at: https://www.aic.gov.au/media_library/conferences/other/smith_russell/2000-10-crf.pdf [Accessed 20 Sep. 2017].

Stellard Pty Ltd & Anor v North Queensland Fuel Pty Ltd [2015]QSC 119.

Telstra Corporation Ltd v Singtel Optus Pty Ltd, (No 2) [2014]VSC 3.

Trade Practices Commission v Pacific Dunlop Limited [1994]FCA 1043.

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[Accessed 03 March 2024].

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