Formation Of Contracts And Liability In Rachel's Mishap At ChunkyChicken

Rachel is a regular visitor to a local ChunkyChicken restaurant that provides a self-service facility where customers have the option of selecting drink and food items from a menu displayed on a touch screen located just inside the entrance. To select a product, a customer only has to touch an image or icon showing the desired product or products they wish to consume, the customer is then confronted with a message that states “do you agree to be bound by ChunkyChickens terms and conditions?” The customer can select to read the terms and conditions and then press Ok button or merely press the virtual Ok button. Once the Ok button has been pushed the customers order is submitted. The order is relayed to food preparation area where the customer’s order is prepared. Once prepared ChunkyChicken’s front counter staff are made aware the order is ready and the customer’s ticket number is displayed on a large screen that symbolises their order is ready for collection.

Customers using the touch screen are immediately issued with a printed ticket containing an order number and the price payable at the front counter.

Customers present these tickets to the cashiers who con?rm the relayed order appearing on their screens. At this point, the customers pay for their purchases and await delivery.

This system is designed to save time during peak periods and is very popular. Some customers place their orders as takeaways, while others, like Rachel, prefer to be seated and consume them on the premises. These preferences are preselected by the customers when they use the touch screen.

When Rachel reached the cashier, she paid $7.50 for the hamburger and drink, collected her order located a vacant table and enjoyed a leisurely meal.

A couple of days later, Rachel returned and instead of her normal meal decided to order the new gourmet chunkiest chicken burger and hand cut chips. The order was placed through the self-service ordering system. The total cost was $17.50 which she duly paid. Following the payment being processed Rachel received the normal printed ticket which included her order number, order and price.

Rachel’s order number appeared on the screen, and after collecting the order Rachel found a vacant table and started to eat the meal. As Rachel took a second bite of her gourmet chunkiest chicken burger she struck something hard and broke a tooth. Rachel examined the chewed remains and found a piece of metal that had somehow been lodged in the burger.

Rachel alerted management to this incident and demanded compensation for her anticipated dental repair. The manager expressed regret and directed Rachel to ChunkyChickens terms and conditions which included a clause stating:

ChunkyChicken accepts no responsibility or liability for any injury caused to customers by consumption of food or drink sold.

In response, Rachel exclaimed, ‘I’m a consumer and I have rights!’

Explain how the contracts Rachel made with ChunkyChicken were formed.

You will need to address all the essential elements of a contract (including consideration) as well as analyse the legal status of each step or event that led to ChunkyChicken supplying Rachel with its products. Refer to relevant case law. In this part, do not discuss 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 must be analysed separately.

Explain whether ChunkyChicken is legally entitled to rely on the clause contained in the electronic terms and conditions to avoid liability in relation to Rachel’s mishap.

For the purposes of this part you should consider both common law as well as consumer protection legislation (con?rming whether Rachel quali?es as a ‘consumer’).

Please use IRAC format for this part.

Essential elements of a contract

Whether a valid contract has formed between Rachel and ChunkyChicken by fulfilling all the essential elements of the contract?

A contract is referred to a legal agreement which his formed between two or more parties. This agreement gives them the right to enforce the contractual terms on each other. The terms of the contracts bind its parties, and they have to comply with its terms. However, this right is available only in case a valid contract is formed between the parties. A valid contract is formed when its parties fulfil all the essential elements of the contract. These elements include offer, acceptance, capacity, legality, intention and consideration. Firstly, an offer is made to form a contract which is referred to a proposal or proposition which gives rise to an agreement between parties after receiving acceptance. It can be expressed or implied, and it must be clear and unambiguous. An offer can be revoked by a party at any time before its acceptance unless it is supported by consideration as given in the case of Goldsborough Mort & Co Ltd v Quinn.

Moreover, it is important that parties must differentiate between offer and an invitation to treat. Certain examples of invitation to treat include broacher, advertisement and display of goods for sale. In Pharmaceutical Society of Great Britain v Boots Cash Chemists (Southern) Ltd case, it was held by the court that goods which are displayed on shelf for the sale of customers are not considered as a valid offer instead it is considered as an invitation to treat. A valid acceptance is another key element of the contract which is referred to clear and undoubted assent to the offer to comply with all of its terms. Certain rules must be fulfilled in order to constitute acceptance as valid. It must be clear and undoubted and must be communicated. It must be given with appropriate knowledge, and the party must use correct method while communicating acceptance.

The acceptance must be free from any condition, and it must be given for all the terms of the offer in order to constitute as valid as given in Hyde v Wrench case. Consideration is another key element of a valid contract. It is referred to the price for which the promise of another party is brought which makes the contract legally enforceable. It is the bargain of the contract in which one party’s gain is another party’s detriment. Consideration must be present in all simple contracts, and it must not be vague or illusionary as given in White v Bluett case. The consideration must be sufficient in the eyes of the law as given in the case of Hercules Motors Pty Ltd v Schubert.

In the given scenario, ChunkyChicken has implemented a self-service facility for its customers where they can select what they want to order by clicking on the image or icon of the product. The display of these products are not a valid offer, instead, they are invitation to treat. As discussed in Pharmaceutical Society of Great Britain v Boots Cash Chemists (Southern) Ltd case, the items which are displayed by the show on the shelf are not considered as available for sale. Similarly, showing the items of the display is not a valid offer; instead, it is an invitation to treat. The customers who wanted to purchase something can make an offer by clicking on the screen to place their order. Rachel made an offer to purchase the new gourmet chunkier chicken burger and hand cut chips in the screen, and this offer was accepted by ChunkyChicken when a printed ticket was issued immediately in which an order number and price is given which matched the terms of the offer made by Rachel (Hyde v Wrench).

Difference between offer and invitation to treat

However, a valid contract has not formed between the parties at the movement because the element of consideration is missing which is a key element to form a valid contract. The consideration is paid by Rachael to the cashier when she paid $17.50 for the burger. The consideration paid by her was not vague or illusionary, and it was sufficient for the product purchased by Rachel, hence, it was a valid consideration (White v Bluett). The consideration paid by Rachel for the burger was sufficient in the eyes of the law (Hercules Motors Pty Ltd v Schubert). Thus, a contract is formed between Rachel and ChunkyChicken when a payment of $17.50 was made by Rachel to the cashier after which all the necessary elements which are necessary to form a contract were present.

Conclusion

Based on the above analysis, it can be concluded that a valid contract has formed between Rachel and ChunkyChicken because all the essential elements of a contract were present.

Whether ChunkyChicken can rely on the clause included in the electronic terms and conditions in order to avoid liability towards Rachael?

The terms which are included in a valid contract are enforceable on its parties. It means that the victim party can enforce the contractual terms on another contractual party if they are not complying with such terms. In case the contractual terms are not fulfilled by the party, then the aggrieved party has the right to hold the breaching party liable for such violation. The victim has the option to enforce the terms on another party or demand damages for the loss suffered by the aggrieved party. However, this liability can be eliminated by the party by including an exclusion clause in the contract. The exclusion clause or unfair term is referred to a contractual term that seeks to either completely eliminate or limit the liability of a party which arise based on the breach of the contract. As per the rule of exclusion clause, if a party signs a contract, then they are bound by all of its terms. This rule was given in L’Estrange v Graucob Ltd case which applies whether or not the party has read or understood the term or not which is known as the signature rule. In the case of unsigned documents, the court relies on two tests to determine whether an exclusion clause is valid to ensure that it did not violate the right of customers.

The first test is nature of the document which is an objective test which evaluates whether a reasonable person would expect the contract to contain such term as given in Chapelton v Barry Urban District Council case. The reasonable notice test provided that the party must take reasonable steps to bind the clause into the notice of the customer while the contract is being formed as given in case. Thus, clause hidden on the back of pillar in the car parking is not considered as valid in the case of Thornton v Shoe Lane Parking Co. The Competition and Consumer Act 2010 gives the definition of a consumer under section 3. Section 3 (1) provided that a consumer is referred to such person who purchases any good for personal, domestic or household consumption and the payment about did not exceed $40,000. Section 24 of the act defines unfair as a term which causes imbalance between contractual parties’ rights and obligations and it did not protect their legitimate interest. Section 26 provides that unfair terms in consumer contracts are considered ineffective.

In the given scenario, the electronic terms and conditions contained the exclusion clause based on which ChunkyChicken wanted to eliminate its liability towards Rachael. The contract formed between parties was an unsigned document, thus, the validity of the term can be determined by two tests. Based on the first test, it was not reasonable to include such term in the contract because it violates customers’ rights (Chapelton v Barry Urban District Council). Based on second test, reasonable steps were not taken by ChunkyChicken to bring the term into the attention of Rachael. It was also not included when the contract was formed between the parties which were at the time when Rachael paid for the food (Thornton v Shoe Lane Parking Co). Moreover, Rachael is a consumer as per the definition given under section 3 of the Australian Consumer Law. Thus, the term included by ChunkyChicken which violates her right is considered as ineffective as per the provision gave under section 26 of the act.

Conclusion

In conclusion, ChunkyChicken cannot rely on the defence of the exclusion clause because it was not valid and Rachael has right under the Australian Consumer Law to receive compensation from ChunkyChicken.

A Articles/Books/Reports

Burrows, Andrew, A casebook on contract (Bloomsbury Publishing, 2013).

McKendrick, Ewan and Liu, Qiao, Contract Law: Australian Edition (Macmillan International Higher Education, 2015).

Monaghan, Chris and Monaghan, Nicola, Beginning Contract Law (Routledge, 2013).

Parker, David and Box, Gerald, Business law for business students (Lawbook Co., 2013).

Russell, Carron Ann, Opinion in Contract Law (Routledge, 2012).

B Cases

Chapelton v Barry Urban District Council [1940] 1 KB 532

Goldsborough Mort & Co Ltd v Quinn (1910) 10 CLR 674

Hercules Motors Pty Ltd v Schubert (1953) 53 SR (NSW) 301

Hyde v Wrench (1840) 49 ER 132

L’Estrange v Graucob Ltd (1934) 2 KB 394

Pharmaceutical Society of Great Britain v Boots Cash Chemists (Southern) Ltd [1952] 2 QB 795

Thornton v Shoe Lane Parking Co [1971] 4 CLR 379

White v Bluett (1853) 23 LJ 23 Ex

C Legislation

Competition and Consumer Act 2010 (Cth)

D Others

Austlii, Competition and Consumer Act 2010 (2018) < https://classic.austlii.edu.au/au/legis/cth/consol_act/caca2010265/toc-sch2.html>.