Business Law - Contract Law And Torts And Negligence Are Essential Topics In The Essay.

Part A:

1. Refer to the prescribed textbook: Gibson, A, Business Law, 10th edition (Pearson, Sydney: 2017).
2. From Part 3 –Law of Contracts, Chapters 7 to 15 on Contract Law, refer to the “Tutorial Questions” at the end of the chapters and choose one (1) problem case question. Note: it must be a case problem-type question and not a short answer question.
3. You must send your lecturer the number of your question and the page on which is appears for approval. Do not start work on a question without obtaining your lecturer’s prior approval.
4. Answer your chosen legal case question using the IRAC method.
5. Your answer must be supported by relevant law and cases decided by Australian courts (preferably the High Court) and/or scholarly articles. A minimum of 3 references are required for this part of the report.
6. Your references must be listed in a Reference list at the end of the Part A question.
Part B:
1. Again, refer to Business Law 10th edition by Gibson.
2. This time, refer to either of the following parts:
a. Part 2 – Civil Liability, Chapter 4 (Civil Liability: The Law of Torts and Negligence) and Chapter 5 (Applications of Negligence to Business). 
b. Part 4 – Consumer Law, Chapter 16 (Statutory Consumer Guarantees and the Australian Consumer Law) and Chapter 17 (General and Specific Consumer Protection under the ACL).
3. Refer to the “Tutorial Questions” at the end of the above-mentioned chapters and choose one (1) problem case question. Note: it must be a case problem-type question and not a short answer question.
4. You must send your lecturer the number of your question and the page on which it appears for approval. Do not start work on a question without obtaining your lecturer’s prior approval.
5. Answer your chosen legal case question using the 
IRAC method.
6. Your answer must be supported by relevant law and cases decided by Australian courts (preferably the High Court) and/or scholarly articles.

Legal capacity to enter into a contract

In this present scenario, the issue is whether Bruce is bound by the contract.

This issue can be resolved by having a discussion about the provision of contract law. A contract is a legally binding agreement that binds two parties. There is an intention in that agreement to bind the parties legally (McKendrick and Liu 2015). Promises are exchanged in a contract to do an act in exchange of something else. The parties of a contract are legally obliged to perform his or her part. When a party fails to perform his or her part without any reasonable excuse, he is said to have committed a breach of contract. To be bound by the contract, the person should have the legal capacity to do a contract (Poole 2016). For example, a person who was intoxicated at the time of entering into the contract does not have the legal capacity to enter into a contract. However he may ratify or cancel the contract when he is in a sound state (McKendrick 2014). Such contract shall be enforceable against the parties. It is required that at the time of ratification, the terms of the contract are sufficiently definite and clear to the parties to the Court to enforce it. If the Court is satisfied that a contract existed, the party who was intoxicated should show the defense as to the non-enforceability of the contract (Andrews 2015). If the Court is satisfied by the defense, the contract shall be voidable.

In the case of Masters v Cameron the key principles to determine whether an intention to legally bind the parties exists in relation to the preliminary agreements. It was established in the case of Gibbons v Wright (1954) CLR 423 that, however a contract can be held voidable at the option of a party who, due to intoxication, was unable to understand the nature why the contract was being made. Provided that the party may ratify a contract made while suffering the intoxication, after he has sobered up and able to understand the nature of the contract he is agreeing upon (Stone and Devenney 2017). The legal intention to bind the parties plays a significant role in enforceability of the contract as it was stated in the case of Wakeling v Ripley (1951) 51 SR (NSW) 183. It was held by the Court in the case of Rose and Frank Co v J R Crompton & Bros Ltd (1925) AC 445 that, where there was an intention to agree, the Court would, in the absence of any contrary situation, hold that there was an intention to enter into a contract by the parties. The court has ruled that a contract can become voidable due to the intoxicated state of contracted party. The intoxicated party has the right to disaffirm the contract. The right to disaffirm a contract which is voidable can be waived by ratification. The party who has entered a contract while he was intoxicated can state their intention to continue their contract while he is sobered. The party who has stated his intention to continue the contract cannot refuse later on to perform hios part of contract without any reasonable excuse.

Elements of a contract and legal validity

A contract is made when the parties agrees upon the terms of the contract while in sound state and accepts the offer made by a party. To establish the ratification of a contract after a party has been recovered from the intoxicated state, the intention of the parties should be analysed. In this case, Bruce was intoxicated while he bid in the auction. The auctioneer had a knowledge that Bruce is acting is intoxicated state and have no idea what he was doing. However, when Bruce sobered up he made it confirmed to the auctioneer that he wants to continue the contract. This means that Bruce has ratified to the terms of the contract while he had the legal capacity to enter into a contract.  The contract is valid and such can be made enforceable against both the parties. When Bruce confirmed the contract after sobering up, there was a intention for him to enter into a legal relation. He cannot refuse the contract after he has made a confirmation to the contract, without any valuable reason. If a person wants to refuse his part of the contract when he has confirmed the contract after recovering from the intoxicated state, he cannot take the ground of intoxication as a defense. He shall be said to have committed a breach of the contract which he had confirmed. As stated by Lord Coke while discussing the doctrine, that drunkenness cannot give any benefit to a person, nor can he escape from his liability using this ground. In the case of Gore v Gibson, the judges held that a contract entered into by a party in an intoxicated state is not void, but voidable. It can be made enforceable against the drunken man if he has ratified the contract when he is sober. In another case Hawkins V Cannon, it was decided that a contract made under intoxication can be ratified by the party while he comes to his sober sense. However, Bruce is bound by the contract as he had confirmed it after he came to his sense. He cannot refuse the contract afterwards without reasonable excuse. The contract shall be valid and enforceable against the parties. If Bruce refuses to perform his obligation as arises from the ratification from the contract, he shall commit a breach of contract, for which he shall be liable for damages.

Therefore, from the above discussion, it can be concluded that there was existing contract between Bruce and the auctioneer, and Bruce is bound by the contract.

The issue which is involved in this case is to determine any legal right of action that Owen Rowland has against Restaurant Equipment Pty Ltd.

To determine whether there is any legal course of action available to Owen Rowland against the Restaurant Equipment Pty Ltd, the law related to contract needs to be discussed. To form a contract there needs to be an offer and acceptance. The acceptance must be made after having a clear and sufficient knowledge about the conditions and terms of the contract. If there is a failure by one or more parties to a contract to disclose any material fact of the contract, the contract can be considered as voidable (Turner 2014). A voidable contract can be legal and enforceable against the parties provided that it is rejected by one party if he has discovered that the contract have defects. It is the duty of the offeree to disclose the material terms of the contract to the other party. The pre contractual duty of the parties is to act with good faith regardless of what the nature of the contract is. The parties are bound to disclose and be truthful. No terms of a contract should be ambiguous or disguised. It was considered recently in the case of Agapitos v Agnew [2002] and the Mercandian Continent [2002], that in the case where a breach of ‘contractual duty of utmost good faith’ has happened, the party should be liable to damage to compensate the party that has been injured for the actual proved loss. It is the right of the purchaser to have expressed information of a material fact of a contract. The seller will seek for exclusion of liability of warranty, but such clause must be stated in the contract. If the term is not conveyed to the purchaser, then the contract shall be regarded as unfair. The unfair contract terms in Australia regulates the restriction or exclusion of liability for the breach of the express and implied obligation that arise from a contract and the duty of care. If the terms are not properly understood by the parties before entering into a contract, then the other party can be held liable for causing breach of a contract. Therefore, the parties are required to disclose the facts or terms of the contract. Only after having the proper understanding of the contract clauses the parties should enter into a contract which shall bind them. Any unambiguous or secret or undisclosed fact of the contract can make it unenforceable against the others. A product which is being sold with ‘as is’ and with no warranty, should be stated to the other party expressly. A term of a contract must not reasonably protect the interest of one party who is advantaged by that term. According to Australian Competition and Consumer Commission, the terms of the contract should be transparent. A term shall be deemed as transparent, if it is legible and expressed in a clear and reasonable language within the contract. It should be presented clearly in the contract and made readily available to the party who could be affected by it.  However, if a party fails to expressly disclose the terms of warranty of the contract, the contract shall be voidable. Breach of this duty shall make the person liable to damage. Any unfair or deceptive contractual terms made between a seller or supplier with the consumer can make the term ineffective or misleading. For a contract to be enforceable, each terms of the contract should be agreed upon.

Contractual duties related to disclosing material facts of a contract

In this case Owen Rowland called from the tender to supply and installation of three ovens from the tenders. When they supplied the ovens and installed it, they did not communicate to Owen Rowland that they would not give a warranty. Restaurant Equipment Pty Ltd successfully supplied and installed the ovens to Owen Rowland. It was their duty to convey the fact to Owen Rowland that they do not provide any warranty service. It should have stated or provided to Owen Rowland while giving the service by Restaurant Equipment Pty Ltd. Failing to perform their duty causes a clear breach of contract. The contract of service becomes voidable at the instance that one of the parties, that is Restaurant Equipment Pty Ltd did not incorporated a transparent terms in the contract, and had failed to communicate it to the other party, Owen Rowland. They cannot claim that the ovens were supplied for ‘as is’ basis if they had not communicate it to Owen Rowland. For their breach of duty they have to take the liability for the damage that Owen had suffered irrespective of how minor it was. To determine whether a term of a contract is unfair it shall be considered as to what extent the term was transparent and the contract as a whole. As it was decided in the case of Director General of Fair Trading v First National Bank [2002] 1 AC 482; [2001] UKHL 52, the transparency of a term requires that terms of the contract should be expressed clearly, legibly and fully (Accc.gov.au 2018). It is evident from the fact of the case that the as is terms were not expressly mentioned to the purchaser, which makes the contract voidable. Additionally, it can make the Restaurant Equipments Ltd Pty liable for breach of their duty before entering into the contract. As the equipments were subsequently proved to be unreliable and unsatisfactory, the Restaurant Equipment Pty Ltd shall be held liable for the damages. They cannot refuse to take back the equipments or say no to do anything for it. Owen can held the Restaurant Equipment Pty Ltd for not observing their duty to communicate the terms of the contract to him and causing a breach of contract.

Conclusion

Hence, it can be observed from the aforesaid argument that Owen Rowland can take an action against the Restaurant Equipment Pty Ltd for not performing their obligation and causing a breach of contract.

References

Accc.gov.au. (2018). Australian Competition and Consumer Commission. [online] Available at: https://www.accc.gov.au/system/files/Unfair%20contract%20terms%20-%20A%20guide%20for%20businesses%20and%20legal%20practitioners.pdf [Accessed 26 Sep. 2018].

Agapitos v Agnew [2002]

Andrews, N., 2015. Contract law. Cambridge University Press.

Director General of Fair Trading v First National Bank [2002] 1 AC 482; [2001] UKHL 52

Gibbons v Wright (1954) CLR 423

Gore v Gibson,

Hawkins v Cannon

Masters v Cameron

McKendrick, E. and Liu, Q., 2015. Contract Law: Australian Edition. Macmillan International Higher Education.

McKendrick, E., 2014. Contract law: text, cases, and materials. Oxford University Press (UK).

Mercandian Continent [2002]

Poole, J., 2016. Textbook on contract law. Oxford University Press.

Rose and Frank Co v J R Crompton & Bros Ltd (1925) AC 445

Stone, R. and Devenney, J., 2017. The modern law of contract. Routledge.

Turner, C., 2014. Unlocking contract law. Routledge.

Wakeling v Ripley (1951) 51 SR (NSW) 183