Mojo Beverage placed the following advertisement in a local newspaper on 25 January:
‘Come one, come all! Fishermen and women of Lake Tranquil. We are offering to pay $100,000 to any person who catches Lord Harry, a trout which we have tagged and released into the lake.’
The following day was the Australia Day holiday. Lake Tranquil was crowded with people fishing both from the bank and from boats. At about lunch time, a rumour spread among the people on the bank that there had been an error in the advertisement: that the true amount should have been $ 1,000 and that Mojo Beverage had announced that the prize would be the lower amount. The rumour was in fact true. Ben heard this rumour from the stranger fishing beside him, minutes before catching Lord Harry. A Mojo Beverage representative was on hand to certify the catch before Lord Harry was released back into the lake, but did not say anything about the amount of the prize.
Ben is claiming that Mojo Beverage owes him $100,000.
Advise Mojo Beverage, explaining applicable legal principles and citing relevant authorities.Dorper Sheep Sellers Pty Ltd was negotiating the sale of dorper sheep flock to a firm called Livestock Brokers, which intended to on-sell the flock. On 1 June Dorper Sheep Sellers sent a letter to Livestock Brokers, setting out the number of sheep flock for sale and the price per head. It asked Livestock Brokers to reply within 14 days.
Livestock Brokers sent a letter by reply dated 6 June, inquiring whether the sale could be financed on the ‘usual terms’. Dorper Sheep Sellers did not reply.
On 14 December, at the opening of business, Livestock Brokers sent a fax stating: ‘We accept your offer of 1 June for the sale of sheep flock’. The same day Dorper Sheep Sellers faxed back, saying: ‘You’re too late. We’re just in the process of selling the flock to another purchaser. Formalities will be completed by tomorrow’.
Advise Livestock Brokers as to the rights and liabilities of the parties in the light of the commercial interactions taken place between them.
- Presume in (a) above Livestock Brokers sent the fax on 14 June but because of a transmission error Dorper Sheep Sellers did not receive it. Advise Livestock Brokers in this circumstances.
Stuart had a 5-year written lease of a shop in the Prince Mall. He entered the lease at $1000 per week at the end of 2010 and ran a successful music business for about two-and-a-half years. In 2013 the business was affected by decreased sales in CDs as a result of the increased ability of people to access music through the internet.
In December 2013 Stuart asked the lessor, Westphalia Marts Pty Ltd, for a reduced rental of $700 per week until the business improved. He told the lessor about his business problems and plans to diversify and indicated that he might have to terminate the lease early. Westphalia Marts agreed to allow Stuart to pay the reduced rent and in January 2014 Stuart began to pay the new agreed rent of $700.
In December 2014 Westphalia Marts decided to sell the Mall, including all the shops. They wanted the income from the Mall to look healthy, and asked Stuart to pay the full amount of $1000 per week rental beginning in January 2015 and also demanded the shortfall of $300 per week for each week of the year 2014.
Advise Stuart, with reference to the relevant principles.
Case Study 1: Mojo Beverage Advertisement
Can Mojo Beverage is bound to pay $100,000 to Ben?
A contract is a legal document which is established amid two parties, offeror and offeree along with legal intention (Merritt v Merritt , 1970), consideration (Thomas v Thomas , 1842) and capacity. (Moles, 1998)
An offeror is the person who makes an offer to the offeree wherein he communicates his intention to an offeree with an expectation of approval (Smith v Hughes, 1871). When an offer is made then it is necessary that it must come within the knowledge of the offeree to make it valid in law (Carlill v Carbolic Smoke Ball Co , 1893). (HandBook, 2016)
When an offeree receives the offer and gave his approval to the said offer then it is an acceptance in law (Crown v Clarke , 1927). An acceptance should be made by the person to whom the offer is made. An acceptance by some other person is no acceptance in law. When the acceptance is made then it must reach the offeror in order to be binding (Powell v Lee , 1908). (Clarke, 2012)
However, when unilateral offers are made then in such cases if the offeree comply with the mode of acceptance that is provided in the offer then such compliance results in deem acceptance and there is binding agreement amid the parties (Carlill v Carbolic Smoke Ball Co , 1893) & (Great Northern Railway Company v Witham , 1873). (Fraser, 2013)
However, when no offer is made but offers are invited with the help of advertisements, tenders, etc, then, it is an invitation to treat and the desired person must make offers to inviter which when accepted results in agreement (Partridge v Crittenden , 1968).
Many a times, when changes are brought in the offer/proposal by the offeror, then, it is essential that the confirmation must be done to the new offer/proposal in order to make a binding contract amid the parties.
An advertisement is issue by Mojo as per which it declare prize of $100,000 and is given to such a person who will catch Lord Harry which is tagged by them. However, the pries of $100,000 was a misprinting and the actual pries which is declared by Mojo was $1,000.
Normally, the advertisement as per (Partridge v Crittenden , 1968) is an invitation to treat. But, the advertisement that is issued by Moo falls in the category of the unilateral offer as defined under (Carlill v Carbolic Smoke Ball Co , 1893). This is mainly because Mojo has laid down the mode of acceptance’ that is to catch the tagged Lord Harry’ and that was construed as a mode of acceptance. Thus, it is a unilateral offer that is declared by Mojo.
Ben who was one of the intended person, by relying on the advertisement catches the tagged Lord Harry.
It is submitted that an offer was made by Mojo @ $ 1,000 which was within the knowledge of Ben (he is aware that the pries is $ 1,000 and not the greater amount). Thus, the communication of offer is complete.
Case Study 2: Livestock Brokers and Dorper Sheep Sellers
Also, by catching Lord Harry, Ben, has complied with the mode of acceptance as declared by Mojo. Thus, there is an acceptance by conduct on the part of Ben.
Both the parties are capable to enter into a contract, had legal intent and the offer and acceptance is supported by consideration of $ 1,000
Thus, all the elements of contract are present. There is a contract amid Ben and Mojo, but, Ben can only claim $ 1,000 from Mojo.
- Is there a valid contract between Livestock Brokers and Dorper Sheep Sellers Pty Ltd, when the fax is sent by Livestock Brokers on 14th June?
- Whether the contract is considered to be complete if Livestock Brokers would have sent fax but is not received by Dorper Sheep Sellers because of transmission error?
To make any contract, it is necessary that there must be presence of agreement (which is made with the presence of valid offer and acceptance), lawful aim of the parties, supporting consideration and the capacity of the parties. (Moles, 1998)
To initiate any contract, there is should be an offer. An offer is the proposal which is made by the offeror to an offeree wherein he dictates his terms and condition which he desires to be comply with by the offeree with an expectation of approval. An offer must be made by an offeror and should reach and offeree to make it valid (Gibson v Manchester City Council - CA , 1978).
Once the offer comes within the knowledge of the offeree and once the offeree gave his assent to the terms and conditions of the offer then it is an acceptance in law. An acceptance must also come in the knowledge of the offeror to make valid. Now, if the offeree does not make an acceptance as per the terms of the offer but brings variation to the offer terms when giving his consent then it is not an acceptance and is counter offer which has the capacity to cancel the offer and is held in (Hyde v Wrench , 1840). (S, 2001)
But, if statements of enquiry or suggestions are exchanged amid the parties then it is not counter offer in law and the offer should be considered to valid which when accepted result in binding contract amid the parties and is held in (Stevenson v. McLean , 1880).
In contract law, an acceptance when made with the help of post then such an acceptance is complete there and then (Mendelson-Zeller Co Inc v T & C Providores Pty Ltd, 1981). But, when the acceptance is made with the help of fax, email etc, then, it is held in (Express Airways v Port Augusta Air Service , 1980), that the acceptance is complete when it comes in the knowledge of the offeror. If the offeror is not aware of the acceptance then such an acceptance is incomplete in law. (Teacher, 2016)
On 1st June, Dorper Sheep Sellers Pty Ltd sent a letter to Livestock Brokers where it made an offer to sell sheep flock for sale and quoted price for the same. Dorper Sheep Sellers Pty Ltd has kept the offer open till 14 days.
Now, the offer made Dorper Sheep Sellers Pty Ltd reaches the knowledge of Livestock Brokers and is thus a valid offer. Now, Livestock Brokers must accept the offer within 14 days in order to make it a binding acceptance in law.
Case Study 3: Stuart's Lease of a Shop at Prince Mall
Also, it is held in (Stevenson v. McLean , 1880)that the inquiry that is made by Livestock Brokers on 6th June is not a counter offer as there is no variation in the offer terms. Thus, there is no counter offer that is made by Livestock Brokers to Dorper Sheep Sellers Pty Ltd.
So, when Livestock Brokers has made an acceptance on 14th June, then at that time the offer that is made by Dorper Sheep Sellers Pty Ltd is still valid. Thus, the acceptance by Livestock Brokers is valid.
So, there is a contract amid Livestock Brokers and Dorper Sheep Sellers Pty Ltd
It is submitted that if the fax of acceptance that is made by Livestock Brokers sent on 14 June if not reached by Dorper Sheep Sellers because of a transmission error, then it is submitted that as per (Mendelson-Zeller Co Inc v T & C Providores Pty Ltd, 1981) such an acceptance is invalid in law.
The acceptance should have reached to Dorper Sheep Sellers to make a binding contract amid the parties.
It is thus submitted that there is a concluded contract that is established amid Dorper Sheep Sellers Pty Ltd and Livestock Brokers when the fax is sent by Livestock Brokers on 14th June to Dorper Sheep Sellers Pty Ltd.
However, the acceptance that is made by fax on 14th June by Livestock Brokers which is not received by Dorper Sheep Sellers Pty Ltd is not a valid acceptance as it does not come within the awareness of Dorper Sheep Sellers Pty Ltd because of transmission error.
Is Stuart should pay the entire amount since January 2015 and the deficit of $300 per week for 2014 to Westphalia Marts Pty Ltd?
When any document which as sanctity in law then it is a contract. A valid contract in law is the combination of offer, an acceptance, the lawful purpose, the capacity of the parties and the supporting consideration. (Clarke, 2012)
Every valid contract contains terms which must be fulfilled by the parties to the contract. The conditions which are equally decided by the parties before the formation of the contract are called express terms. Whereas the terms which must be comply with by the parties under law, custom, usage, etc are implied terms. Both the terms must be fulfilled in law in order to avoid any kind of breach of contract. (Sainsbury, 2009)
Once the terms are decided then the parties must comply with them. Now, in any written contract the law does not allow any kind of variations unless and until the same variation is brought in by the parties by written mode. The law does not permit any kind or oral variations in law. But, if the parties orally decide to carry the written terms of the contract then such variation is permissible provided it is mutually decided by the parties (Globe Motors Inc v TRW Lucasvarity Electric Steering Ltd , 2016). (M, 2016)
That the lease contract is established amid Stuart and Westphalia Marts Pty Ltd where Stuart has to pay $1000 per week at the end of 2010. He ran the business successfully for some years.
That a written contract that is established amid Stuart and Westphalia Marts Pty Ltd and both the parties must comply with its terms. If changes are required then the same must be made in written form but of oral variations are needed then the can be oral if decided mutually by the parties (Globe Motors Inc v TRW Lucasvarity Electric Steering Ltd , 2016)
Now, in 2013 he faced a decrease in sales. Thus, Stuart seek the help of Westphalia Marts Pty Ltd and asked the reduction in the rent from $ 1000 to $700 per week. He asked the reduction in rent till the time the business is not improved. Now, an oral agreement is reached amid Stuart and Westphalia Marts Pty Ltd where in Westphalia Marts agreed to allow Stuart to pay the reduced rent and in January 2014 Stuart began to pay the new agreed rent of $700.
Now, this oral variation has changed the written terms that are agreed amid Stuart and Westphalia Marts Pty Ltd.
It is submitted that as per (Globe Motors Inc v TRW Lucasvarity Electric Steering Ltd , 2016) these oral variations are valid in law as the same are mutually decided by both the parties, that is, Stuart and Westphalia Marts Pty Ltd. these oral variations will supersede the written lease contract that is made amid the parties as they same is incorporated by the parties mutually.
So, Westphalia Marts Pty Ltd cannot ask Stuart to disburse the complete amount of $1000 per week rental beginning in January 2015 and cannot demand the shortfall of $300 per week for each week of the year 2014.
It is thus concluded that there is a valid written contract amid Stuart and Westphalia Marts Pty Ltd which is also validly modified by both the parties with the help of oral communications and is imposed by the parties.
Thus, Westphalia Marts Pty Ltd cannot force Stuart to pay any kind of increased rent.
Carlill v Carbolic Smoke Ball Co (1893).
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Crown v Clarke (1927).
Express Airways v Port Augusta Air Service (1980).
Fraser, G. &. (2013). Business Law 2014. Pearson Higher Education AU.
Gibson v Manchester City Council - CA (1978).
Globe Motors Inc v TRW Lucasvarity Electric Steering Ltd (2016).
Great Northern Railway Company v Witham (1873).
HandBook, T. L. (2016). The Law HandBook. Retrieved October 12, 2017, from Elements of a contract : https://www.lawhandbook.org.au/07_01_02_elements_of_a_contract/
Hyde v Wrench (1840).
M, H. (2016). Contract Modification. Retrieved October 12, 2017, from https://contracts.lawyers.com/contracts-basics/contract-modification.html
Mendelson-Zeller Co Inc v T & C Providores Pty Ltd (1981).
Merritt v Merritt (1970).
Moles, R. (1998). Offer and Acceptance . Retrieved October 12, 2017, from Contract Law Lecture - Formation of Contract : https://netk.net.au/Contract/02Formation.asp
Partridge v Crittenden (1968).
Powell v Lee (1908).
S, H. (2001). Email Contracts - When is the Contract Formed?" . Retrieved October 12, 2017, from https://www.austlii.edu.au/au/journals/JlLawInfoSci/2001/4.html#fn8
Sainsbury, M. (2009). Moral Rights and Their Application in Australia.
Smith v Hughes (1871).
Stevenson v. McLean (1880).
Teacher, T. L. (2016). Cases On formation a Contract Offer . Retrieved October 12, 2017, from https://www.lawteacher.net/cases/contract-law/agreement-cases.php Thomas v Thomas (1842).
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