Analysis Of Contract Formation And Australian Consumer Law Violation In Essay.

Relevant Issue

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:

1)Using the supplied email address from the website, Avinash emails Magda saying, ‘l’ll buy the Paris Stilton portrait for $1,600’.

2)Within minutes, Magda emails him back saying that she ‘cannot accept less than $1,800’.

3)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.

4)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:

5)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.

6)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.

7)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.

8)At 11.30 am, Magda emails Avinash informing him that the portrait had been sold.

The next day, Tuesday 21 February:

9)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

(a)Advise Magda and Avinash whether they had formed a binding contract with one another.

1.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 not discuss the impact, if any, of consumer protection laws.

2.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.

3.Recommended maximum

(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

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:

a.An indication of whether you agree or disagree with the statement, justifying your viewpoint

b.Identification of the type of consideration exchanged between Magda and Elton ( from question 1)

1.Relevant Issue

It is required to identify whether there is a valid contract formed between Magda and Avinash.

Rule

This situation deals with the contract law, therefore all the essentials of the contract law are been examined to determine the contract formation. The contract consists of five important components which are stated below:

• Legitimacy of the object.
• The intention for creating a lawful relationship.
• Offer and Acceptance.

The major component which is required to be carefully examined is offer and acceptance. Certain criteria are been laid down by Common law for this purpose, which makes sure whether or not the offer and the acceptance are been fulfilled.

The component of offer is an interpretation made for the purpose of creating a lawful relationship with the other party.

According to Fisher v Bell [1961] 1 QB 394, an advertisement is said to be a proposal made to the offer. However, acceptance is said to be a consent made by a party for the purpose of executing an offer, and to form the contract.

An acceptance needs to be communicated as well as definite in nature as mentioned by Entorres v Miles Far East [1955] 2 QB 327.

Meanwhile, it was stated by the court in the case of Hyde v Wrench (1840) 49 ER 132 that if a counter offer is said to be a definite acceptance then it ends the offer initially made.

According to the case of Scammell & Nephew v. Ouston [1941] AC 251 it is stated that the mere inquires do not make counter offers.

 In the case of Ramsgate Victoria Hotel v Montefiore (1866) LR 1 Ex 109 it was stated that if the acceptance is not done on time then the offer is said to be expired.

Application

The incident which occured on 19th July (Sunday), $2000 was the sale price of the portrait stated by Magda in the advertisement. According to the Fisher v Bell it was said to be an invitation made to treat.

Avinash made an offer of $1600 by an email he sent to Magda, for buying the portrait. This offer was made with regards to the advertisement and was complete.

The offer of $1600 ended as there was a counter offer made by Magda of a higher price which was decided by Avinash, as per the case of Hyde v Wrench.

No valid acceptance was stated by Avinash as he had additional conditions for the acceptance of the offer, the price of the portrait was raised by $200 of the initial offer, and therefore Avinash wanted to discuss with his wife before finalizing it.

Rules

The valid offer which was made by Magda stated that the portrait will be sold to Avinash for the amount of $1800, and 21st February was the duration of this offer.

On the 20th February, a confirmation of the purchase was made by Avinash as he mailed Magda regarding it, the mail also consisted of a condition which stated that the purchase will be successful after Avinash gets the certificate of authenticity. According to the case of Hyde v Wrench, this act done by Avinash was said to be a counter offer and therefore it ends the initial offer made, and it was valid till 21st February. This condition was not acceptable to be considered as an inquiry and therefore this was not eligible to be approved.

There was a mail sent by Magda which stated that she was ready to send the certificate of authentication to Avinash. However, this was a fresh offer which was applicable just before 4 pm.

According to the judgement made in the case of Ramsgate Victoria Hotel v Montefiore the acceptance was not made by Avinash in the given time period and thus this offer was said to be expired. Therefore, no such contract was made between Magda and Avinash, according to the principles of offer and acceptance, as this offer was never seen to be legally approved.

Conclusion

No contract was formed between Magda and Avinash.

2.Relevant Issue

In this situation, the issue required to be considered is that, what were the provisions of the Australian Consumer Law which were violated by Magda, and what were the rights of Elton.

Rules

In s. 18(2) of the ACL, it was stated that an individual in the procedure of trading has no legal rights to get involved in any behaviour which is deceptive or misleading or would likely deceive or mislead.

In the case of ACCC v Reckitt Benckiser (Australia) Pty Ltd [2016] FCAFC 181, the provisions with regards to the deceptive and misleading behaviour were explained. In this case an advertisement was found to be deceptive or misleading as it contained wrong information which had the possibility of misleading the consumers. Such a statement might violate this section if conducted on an individual, if he is seen dine in the procedure of trade or commerce and induces or might have the capability of occuring and error.

According to the provisions of s. 3 of the ACL, this law is appropriate on the individuals who have purchased the goods for the purpose of domestic or household usage, and the price cannot be exceeding the amount of $40000.

Application

It was also stated by the provisions of s. 56 of ACL, if the good are services are being sold by a specific description then it requires to be absolutely in conformity with that description or else violation of this section will be seen.

Application

In this scenario, according to the provisions mentioned in the s. 3 of ACL, Elton was stated to be the consumer because he brought the portrait for the sum of $2000 for the purpose of domestic usage. Therefore, the laws of the Australian Consumer Law will be relevant on him.

As per s. 18 a conduct is said to be deceptive or misleading if it consists of the following three components:

Firstly, Magda’s statement is directly made to the consumers as the advertisement in her website can be viewed by them. It was also stated that such a statement was made in the procedure of trade and commerce. This statement was capable of encouraging the consumers for purchasing this portrait as they thought it was made on a paper which was acid free and was a limited edition as three copies were only printed. As this statement was false, Magda had violated the s. 18 of the ACL.

It was also mentioned in the provision of s. 56 that the good and services which are sold by a specific description requires to be accurately in compliance to the initial description. Meanwhile, it was noticed that many copies of the portrait were printed hence it was not a limited edition product and also it was printed on a paper which was of low quality. Therefore, it was declared that Magda has violated the provisions of s. 56.

According to the Australian Consumer Law, Elton were given the rights of replace, repair as well as refund by the consumer guarantees. Therefore, if any of his rights are seen to be violated he is capable of getting back the refund, in this case the portrait which he bought for $2000.

Conclusion

According to s. 3 of ACL, Elton qualifies as the consumer, and also the violation of the s. 56 was done by Magda as she did not sell the goods in accordance to the description she gave. She made a misstatement by the provisions of s. 18.

2.‘Consideration provided under a contract is not valid’, this statement is appropriate. Such a statement might have adverse results for the party who is looking to enforce this contract. According to the case of Thomas v Thomas a consideration is defined to be something which has a value in accordance to the law, a one sided promise is said to be a gift not a consideration. No particular rules are created to determine if the consideration is valid or not. In this scenario we will examine the rules of consideration by different cases and lawful provisions. The rules are mentioned below:

• Consideration cannot be past.
• Even though consideration is required to be sufficient but not necessarily adequate.
• An existing public or contractual duty is not said to be a consideration.
• Payments in parts of the consideration is also not said to be a consideration.

Conclusion

As per Pao On v Lau Yiu Long [1979] UKPC 17, any past consideration will not be stated as a valid consideration. This refers to the act which has been done before the offer with regards to the contract, this is said to be a past consideration therefore it is not valid according to the law. Consider a situation in which Adam used to look after Jack’s garage at his own will. One day Adam asked Jack that he wanted one of the car from his garage for rent, Jack agreed to this as Adam used to look after his garage. But, later it was seen that Jack declined to rent the car. No contract was created in this case because the consideration which was given by Adam was stated to be past consideration. But, exceptions were also present which were presented in the case of Lampleigh v Braithwaite [1615] EWHC KB J17, the court stated that if an act had occured in the past, after the request done by other party. Therefore, with regards to the situation stated of Adam and Jack’s garage in which on the request of him it can be stated as a valid consideration for the process of renting the car. According to the case of Chappell & Co Ltd v Nestlé Co Ltd [1960] AC 97, the court declared that a consideration requires to be adequately exist in the contract even though it might not be adequate. Affection, love, gaming and betting are not said to be a consideration. Therefore, in order to make the contract valid either parties require be aware of the rules of consideration. As per the case of Tweddle v Atkinson (1861) 1 B&S 393, the court stated that if a consideration is made by any other individual other than the person who initially made it, then no valid contract will be formed. According to the case of Stilk v Myrick [1809] EWHC KB J58, the court stated that if there is any existing duty present in the contract then it will result in the consideration being invalid. In the given circumstances where Tom is liable to paint Sam’s house in a week’s time Tom notifies Sam that he will be unable to complete the given task in a week’s time. However, Sam gave Tom some extra money so that he could complete the job in a week’s time. In this case Tom will not be capable of the claim from Sam as there was already an offer present according to which he required to paint the house and no such fresh consideration was given. An exception was present in this too which was mentioned in the case of Glasbrook Bros v Glamorgan County Council [1925] AC 270 in which the defendant goes further of the contractual duties or might help plaintiff escape the loss. For example, a police officer has no right to claim any extra payment for the duties he does, meanwhile, this rule goes beyond the existing responsibilities by the law, according to the case of Hartley v Ponsonby [1857] 26 LJ QB 322.

Other scenarios in which either parties require to be more careful in respect to the consideration is payments done in parts. Such payments in the consideration cannot be said as a valid one as examined by Pinnel's Case [1602] 5 Co. Rep. 117a. A situation arises in which Bill owed an amount of $1000 to John, but asked him to only take $600, John accepted this offer as he could later get the amount of $400 by declaring that no such consideration took place adjacent to the promise.

In this case, the portrait was said to be the consideration in the contract made between Magda and Eldon, Magda received $2000 by Eldon. Such a consideration is said to be an executed consideration, as the act is completed by both parties

References

ACCC v Reckitt Benckiser (Australia) Pty Ltd [2016] FCAFC 181

Chappell & Co Ltd v Nestlé Co Ltd [1960] AC 97

Entorres v Miles Far East [1955] 2 QB 327.

Fisher v Bell [1961] 1 QB 394

Glasbrook Bros v Glamorgan County Council [1925] AC 270

Hartley v Ponsonby [1857] 26 LJ QB 322.

Hyde v Wrench (1840) 49 ER 132

Lampleigh v Braithwaite [1615] EWHC KB J17

Pao On v Lau Yiu Long [1979] UKPC 17

Pinnel's Case [1602] 5 Co. Rep. 117a

Ramsgate Victoria Hotel v Montefiore (1866) LR 1 Ex 109

Scammell & Nephew v. Ouston [1941] AC 251

Stilk v Myrick [1809] EWHC KB J58

Tweddle v Atkinson (1861) 1 B&S 39