Legal Issues - Supermarket And Property Sale

Scenario 1: Supermarket Manager and Purchasing Authority

Linda is the manager of a supermarket named John’s Supermarket, which is located in a large country town on the north coast of NSW. The store was named after the owner, John Miley, who lived in Sydney. On his frequent visits to the store, John would discuss the purchase of replacement stock and sign the necessary orders for Linda to dispatch to the suppliers.

As a rule, sufficient stock was ordered during John visits so that Linda had no need to order further stock.

Shortly after John’s visit in December, Cathy, the sales manager of AFS Grocery Wholesalers Co Pty Ltd, called at the store and showed Linda the orders she had taken from a nearby supermarket with which John’s Supermarket was in direct competition.

Linda was in a dilemma. John was overseas for the next two weeks and had left no contact details. Faced with the absence of John and very worried about losing customers to his competitor, Linda placed an order for $45,000 worth of goods for the lucrative Easter trade.

Three days later Linda received the goods and immediately placed them on sale. Unfortunately, the next day John had a large consignment of similar goods delivered to the store. In a note he apologised for not informing Linda of this consignment but said he had been busy with other retail business matters.

On his return to Sydney, John received an invoice for $45,000 for the goods supplied by AFS Grocery Wholesalers Co Pty Ltd to his north coast store. He immediately informed the company that he would not pay. In a letter to the company he said:” I will not pay because Linda the manager of my store had no authority to order those goods.”

Advise AFS Grocery Wholesalers Co Pty Ltd:

2. Of any legal rights they may have in order to obtain payment of $45,000 for the goods they delivered to John’s Supermarket
3. Would your advice differ if John informed you that Linda was expressly prohibited from ordering any goods without his authority?

In your answer, you are required to refer to relevant legal authority.

Bruno was a peasant farmer in Italy and had very little education. In 2010, he and his wife migrated to Australia. Soon after his arrival in Australia, he purchased a small farm on the south coast of NSW for $220,000.

In early 2012, Bruno’s wife who had never wanted to migrate to Australia left him to return to Italy. Bruno was devastated as a result of his wife’s departure and entered into a prolonged depression. This was compounded by an excessive consumption of alcohol.

In mid-2012, Brno was approached by Slybo, the managing director of Moreslybo Pty Ltd, a company that was involved in property development. Slybo told Bruno that the company was keen to purchase his property. Bruno in several conversations with Slybo told him of what had happened since his wife had left him. Slybo suggested that Bruno should return to Italy and try to patch things up with his wife. Slybo then said that, in order to help Bruno, Moreslybo Pty Ltd would purchase Bruno’s property for $160,000. Bruno was so happy that he could go back to Italy and be with his wife again and so he agreed to sell his property. Next day a contract between Moreslybo Pty Ltd and Bruno was prepared by the company’s solicitor and signed in the solicitor’s office.

A few weeks later, and before the sale of his property was concluded, Bruno was pleasantly surprised when his wife returned to Australia. She told Bruno that she could not live being separated from him. She said “I want to live with you and work the farm so that we have a future together. If things go well we can eventually make regular trips to Italy “. Bruno was delighted with his wife’s plans for their future.

Bruno told her of the contract he signed for the sale of the property. She became very upset at the news and pleaded with him to keep the farm.

Bruno now wants to keep the farm. He wants to get out of the contract with Moreslybo Pty Ltd.

Advise Bruno of any legal rights he may have in order to be released from liability under his contract with Moreslybo Pty Ltd.

In your answer, you are required to refer to relevant legal authority.

Issue

Whether AFS Grocery Wholesalers Pty Ltd holds any legal right to recover the payment of $45000 from John’s Supermarket for the goods they delivered to them-

Whether these rights are also available if John informed AFS Grocery that Linda is expressly restricted to Place order of any goods without informing John-

Law

The most important element of the valid contract is considered as an agreement of the contract, which generally includes offer and acceptance. It also involves the meeting of mind or consensus between the two parties. In other words, for agreement being legally enforceable it is necessary that agreement must contain three important factors-

• Offer and also an acceptance related to that offer.
• Consideration in terms of that contract, which means, something related to the value given by each arty of the contract in context of exchanging their promises.
• Intention of the parties for creating the legal relations with each other (ACL, n.d.}.

In case any of these factors are not resent in the contract then such contract is deemed as the void contract. In other words, such contract is not enforceable under the law.

The intention of the parties to create legal relations with each other is deemed as most important factor, and arties can create the legal relations with other arty either in express or implied form. Intention is considered as implied intention if all the surrounding situations support such intention, which means, if all the surrounded situations clarified the intention of the parties then such intention can be considered as the implied intention. Usually, classification is done in context whether agreement is commercial in nature or domestic in nature. In terms of determining this, an objective test is introduced by the Court (ACL, n.d.}.

Commercial agreements is deemed as those agreements which are of commercial nature, and generally it is presumed that while entering into such type of agreements parties intend to create legal relations with each other. In other words, it is the general resumption that commercial contracts are legally bound on the parties.

In case arties clearly state that the agreement is not legally bound, which means, that agreement does not entertain any legal consequences then such contracts are not deemed as valid contract (Jones v Vernon’s Pools [1938] 2 All ER 626}.

In case law Rose and Frank v Crompton Bros [1923] 2 KB 261, Court stated that agreement in question was not legally bound on the parties. In this case arties confess that arrangement between them was not entered as the legal and formal agreement, but both the parties give true promise to conduct the contract.

Therefore, it can be said that any contract which is of commercial nature is binding on the arties enter into the contract and it is deemed that arties related to such contract have intention to create the legal relations with each other.

Scenario 2: Property Sale and Contractual Right to Terminate

In case any arty fails to fulfil the promise under the contract then such failure is deemed as breach of contract, and following are the contractual remedies available to the arties-

Common law provides the remedies of thee damages and liquidated claims in terms of the breach of the contract. Damages are considered as the substitute of the performance of the contract, and they are provided for putting the plaintiff in the position they would in case contract is performed in proper manner by the defendant. It is necessary that loss claimed by the plaintiff must not be too remote in terms of the breach, and necessary actions are taken by the non-breaching party for reducing the resulting damages occurred from breaching of the contract (Legal Service commission, n.d.}.

There are some other remedies which are also available in terms of the contract breach and these remedies are known as liquidated damages. These types of damages are available in those cases in which clause is stated under the contract signed between the parties that specific amount is given to the arty in case contractual breach (ACL, n.d.}.

Other types of remedies are equitable remedies which are also given in case of the contractual breach. There are almost two types of remedies under this-

Specific performance- In this order is given to the breaching party to perform their obligations under the contract in the similar manner as directed by the Court. Court give this order in those cases only in which damages will not be considered as the adequate compensation and also in those cases also which involves the personal services.

In the resent case, Linda holds the position of manager in the Johns supermarket, and actual owner of the supermarket is John Miley. In this, Linda is expressly restricted to purchase any stock for the supermarket. By acting out of his authority, Linda places the order of goods worth $45000 with the AFS Grocery Wholesalers Co Pty Ltd. Later, when John visits the store he denies making payment to the AFS Grocery Wholesalers Co Pty Ltd on the ground that Linda does not hold any authority.

In this case, regulations of legal relationships will apply. The intention of the parties to create legal relations with each other is deemed as most important factor, and arties can create the legal relations with other arty either in express or implied form. Intention is considered as implied intention if all the surrounding situations support such intention, which means, if all the surrounded situations clarified the intention of the parties then such intention can be considered as the implied intention. Usually, classification is done in context whether agreement is commercial in nature or domestic in nature. In terms of determining this, an objective test is introduced by the Court. Commercial agreements is deemed as those agreements which are of commercial nature, and generally it is presumed that while entering into such type of agreements parties intend to create legal relations with each other. In other words, it is the general resumption that commercial contracts are legally bound on the parties.

Relevant Legal Authority

Contract signed by the Linda is the commercial contract, and the nature of this contract clearly reflects that arties to contract hold the intention to create legal relations with each other at the time of signing the contract. Therefore, there is binding contract between the parties because Linda signed the commercial contract on the basis of the John. In case john breach the contract than following contractual remedies are available to the AFS Grocery-

• Damages are considered as the substitute of the performance of the contract, and they are provided for putting the plaintiff in the position they would in case contract is performed in proper manner by the defendant.
• Specific performance is defined as the order which is given to the breaching party to perform their obligations under the contract in the similar manner as directed by the Court. Court give this order in those cases only in which damages will not be considered as the adequate compensation and also in those cases also which involves the personal services.

On the other hand, situations are different if John clearly state to the AFS grocery that Linda does not hold the authority to lace order for the Supermarket. As stated under the case law Jones v Vernon’s Pools [1938] 2 All ER 62, in case arties clearly state that the agreement is not legally bound, which means, that agreement does not entertain any legal consequences then such contracts are not deemed as valid contract. Therefore, if John inform the AFS Grocery Wholesalers Co Pty Ltd about the restriction then he will not be held liable to make payment to the lucrative Easter.

Conclusion

In first situation, john will be held liable to pay $45000 to the AFS Grocery Wholesalers Co Pty Ltd for the order laced by the Linda.

In second situation, john will not be held liable to pay $45000 to the AFS Grocery Wholesalers Co Pty Ltd for the order laced by the Linda.

Issue

Whether it is possible for Bruno to avoid his liability under the contract signed with the Moreslybo Pty Ltd

Law

A contract is considered as invalid contract if such contract is affected by any vitiating element which involves the legal importance. Vitiating factor is deemed as that factor which destroys the enforceability of any contract, which means, contract is deemed as the invalid or void contract. In this at the time of entering into the contract, one party induced another party to enter into the contract and this can be done because of the mistake, misrepresentations, and unconscionable or improper conduct used by another party.

Unconscionable conduct is considered as that conduct which deals with deals with the transactions occurred between the dominant and the weaker party. This type of conduct is prohibited by both common law and statute law (ACL, n.d.}. Common law states that when party takes the advantage of the special disability held by another party for inducing another party to enter into the contract then such contract is deemed as invalid contract. Special disability means any disability because of which another party is not able to understand the effect of the contract on them. It is necessary that resulting transaction must be harsh and oppressive in nature for the weaker party (Commercial Bank of Australia v Amadio (1983) 57 ALJR 358}.

The Australian Consumer law establish number of provisions which impose restriction on the unconscionable conduct, and these provisions are established under the Part 2-2 of the ACL. Section 21 imposes the restriction related to the unconscionable conduct in terms of the supply or acquisition of goods or taken services from another person. This section states that, any individual while conducting his actions under the trade and commerce involve in any such conduct which is unconscionable in nature.

Section 22 of the ACL defines those factors through which Court decide whether action conducted by the individual is considered as unconscionable conduct or not. As per this section, Court consider the factor whether weaker arty is able to understand the nature and effect of the contract on them.

In case law Blomley v Ryan, (1956) 99 CLR 362, B entered into the contract with the R for purchasing the farm. In this R was aged 78 years and suffering from the effects of the prolonged and excessive consumption of alcohol. In this case, main question decided by the Court was whether R holds the capacity to enter into the contract or not.

In this case, Court held that intoxication was the self-induced state and can be considered as the reprehensible thing, but it was not possible to allow the person to avoid the obligation of a contract by simply states that person was in the effect of the liquor at the time of signing the contract. Only drunkenness will not allow the person to get rid from the contract signed by them. However, when one arty in context of the knowledge of the other party gets affected by the drink in serious manner then equity will refuse the articular performances (ACL, n.d.]. Additionally, if any court is satisfied that signed contract caused disadvantage to the party which signed the contract in the influence of the drink or there has been any real unfairness while taking the advantage of his condition. In both the situation, party can set aside the contract.

Application

In the resent case, Moreslybo Pty Ltd purchased the land from Bruno for $160000, and the same land was purchased by Bruno in $220000. In this case, regulations of intoxication of implemented because Moreslybo Pty Ltd clearly knows about the current situation of the Bruno. They also know about the depression and side effects of the intoxication faced by the Bruno.

In this case, Bruno does not hold the capacity to enter into contract and because of this contract is considered as the invalid contract. Any contract which is entered with the person suffering from intoxication is considered as the invalid contract. In other words, contract is deemed as the voidable contract if such contract results from the unconscionable conduct. Unconscionable conduct is considered as that conduct which deals with deals with the transactions occurred between the dominant and the weaker party. This type of conduct is prohibited by both common law and statute law. Common law states that when party takes the advantage of the special disability held by another party for inducing another party to enter into the contract then such contract is deemed as invalid contract. In this case, Bruno is considered as the weaker arty because he is not able to understand the nature of contract and its effect on him.

As person suffering from depression and intoxication is not able to understand the nature of the contract made between the parties of the contract. For making such contract invalid, it is necessary that other arty knows about or ought to known about the special disability of the person.

As in this Bruno is not able to understand the general nature of the contract and also the effect of the contract on him. Facts of this case are similar to the case of Blomley v Ryan, (1956) 99 CLR 362. Court stated that, when one arty in context of the knowledge of the other party gets affected by the drink in serious manner then equity will refuse the articular performances. Additionally, if any court is satisfied that signed contract caused disadvantage to the party which signed the contract in the influence of the drink or there has been any real unfairness while taking the advantage of his condition. In both the situation, party can set aside the contract. Court further stated, inadequacy of consideration will considered as relevant factor but not the determinative factor.

In this case, Company purchase the farm in fewer amounts as compared to the market value of the farm. This is considered as the valid reason to believe that company takes the unfair advantage of the Bruno while signing the contract. Facts further stated that this contract also cause disadvantage to the Bruno, because of which Bruno can set aside the liability on the contract.

Conclusion

On the basis of above facts, it is clear that Bruno can set aside the contract on the ground off intoxication under the unconscionable conduct by the dominant arty. Bruno is not capable to enter into the contract with the company, because at the time of signing the contract he is not able to understand the effect of the contract on him.

References

ACL, Agreement. Available at https://www.australiancontractlaw.com/law/formation-agreement.html. Accessed on 30^th August 2018.

ACL. Damages and Liquidated Claims. Available at https://www.australiancontractlaw.com/law/remedies.html. Accessed on 30^th August 2018.

ACL. Intention to create legal relations. Available at https://www.australiancontractlaw.com/law/formation-intention.html. Accessed on 30^th August 2018.

ACL. Unconscionable Conduct. Available at https://www.australiancontractlaw.com/law/avoidance-unconscionable.html. Accessed on 30^th August 2018.

Australian Consumer Law- Section 21.

Australian Consumer Law- Section 22.

Blomley v Ryan, (1956) 99 CLR 362

Commercial Bank of Australia v Amadio (1983) 57 ALJR 358

Jones v Vernon’s Pools [1938] 2 All ER 626.

Legal Service Commission. Remedies for Breach of Contract. Available at https://www.lawhandbook.sa.gov.au/ch10s02s11.php. Accessed on 30^th August 2018.

Rose and Frank v Crompton Bros [1923] 2 KB 261.