Key Contractual Elements And Validity Of Exclusion Clause In Café Transaction

1. 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.

2. For the purposes of this part you should consider both common law as well as consumer protection legislation (confirming whether Rachel qualifies as a ‘consumer’).

Contractual Elements of Offer, Acceptance, Consideration, Intention to enter into legal relation, and Legal capacity for contract enactment

The objective is to discuss the various key aspects of contract taking into consideration the given transaction enacted at the café.  The discussion with regards to the key contractual elements is carried out below.

Offer – One of the key requirements of contract formation is presence of a valid agreement. The first step in this regards is floating of offer by the offeror.  This may be either unilateral or bilateral considering whether the given is meant for a particular party or meant for a large number of interested parties. A unilateral offer is one which is not directed towards any specified offeree but is directed towards several potential offeree. This has been indicated in the decision of the R vs Clarke case. For the given café scenario, the café is providing a unilateral offer towards the various customers. This offer pertains to the various food related products with an attached price tag.

Acceptance – It is imperative that the offer has to be accepted and this acceptance has to be communicated to the offeror.  While in bilateral offers, there is a need to communicate the acceptance, this is not the case in unilateral offers where engaging in particular activity highlighted in the offer leads to automatic communication of acceptance.  This aspect has been highlighted in the landmark Carlill v Carbolic Smokeball Co case where the acceptance of the challenge did not require any communication to the company.  In the given café transaction, the offer acceptance gets communicated as Rachael tends to press a particular button on the provided touch screen as it implies that the offeree has selected a particular product and is willing to pay the price indicated for the same. Besides, it is noteworthy that the acceptance by Rachael has been extended without any coercion or undue influence from the café or staff. Once the acceptance is carried out, a ticket issuance takes place which is representative of the formation of a valid agreement.

Consideration – For contract formation, it is imperative that for the contracting parties, mutual consideration ought to be present. Consideration is anything of value which the contractual parties tend to exchange and hence act as the requisite incentive to fulfil their respective promises and enact the underlying contractual transaction. With regards to consideration, it is essential that certain rules must be followed. A particular rule is that past consideration is not considered to be good consideration and it must be either in the present or future as has been indicated in the decision in the Re McArdle case.

Issue: Validity of Exclusion Clause in Café Transaction

Also, it is noteworthy that it is not imperative that both parties must have equal consideration but it is mandatory that sufficient consideration ought to be present. With regards to the café transaction, it is evident that for the contractual parties i.e. café and Rachael, mutual consideration is indeed present. The money that is paid by Rachael for buying the food product offered is the consideration for the café. The consideration for the customer i.e. Rachael is derived as desired food or beverage may be obtained. It is apparent that both parties tend to have a legal consideration which is sufficient for each of the parties involved.

Intention to enter into legal relation – Contract enactment also requires fulfilment of this particular condition.  Issue regarding this particular element is primarily witnessed in the event of agreement that is domestic or social in nature. In commercial contracts whereby the parties entering into contract do not share any personal relationship, the presence of intention to enter into legal relation is assumed to be present by default and the same does not need to be established. In the case of the given café transaction, it is apparent that there is no relation between the crew serving at the case and the customer Rachael. Also, the given setting clearly highlights the commercial nature of the transaction which is indicative of presence of intention for creation of legal relation.

Legal capacity for contract enactment – It is essential that the contracting parties should have the legal capacity to enact contracts. In this regards, it is imperative that neither of the contracting parties must be minor nor should be in a state where informed decision making is not possible. Considering the café transaction at hand, it is apparent that both the contracting parties i.e. cafe and Rachael, have the legal capacity to enact contractual relations and hence this condition is taken care of. 

Based on the given facts, the key issue is to highlight if the underlying exclusion clause on the café ticket would be considered valid or not. This would decide if the café can escape liability. The given situation would be considered both from a common law and consumer law perspective.

Exclusion clause may be defined as those contractual terms that are inserted in the contract so as to limit the liability of a particular party that would arise when a particular pre-defined event is triggered.  For the legal enforceability of the exclusion clause, it is essential that following conditions need to be fulfilled.

• The most critical requirement is that exclusion clause has to be communicated to the other party before contract has been enacted

Rule: Conditions for making exclusion clause legally enforceable

With regards to making the exclusion clause, it is imperative that the party inserting the clause in the contract should undertake reasonable efforts for communicating the exclusion clause before the contract enactment. This ought to be performed so that informed consent of the other party can be obtained thereby resulting in the clause being a part of enforceable contract. The imperative aspect to be noted is that the exclusion clause would be considered as valid even in situation where the other party has not read the clause but has been communicated about the presence and content by the inserting party.

Further, communication of exclusion clause post contract enactment leads to the clause being held as non-enforceable. A suitable case law that can be highlighted in support of this is Thornton v Shoe Lane Parking [1971] 1 All ER 686. As per the relevant facts of this case, the customer is issued the parking ticket after the act of payment and parking the car has already been enacted. The court highlighted that the contract was in place before the issue of ticket and hence upheld the decision that the exclusion clause was not legally enforceable 

• Any exclusion clause which aims to protect from negligence related claims, then the validity of this clause would be established only if consent is provided by the other party after understanding that the insertion of exclusion clause has been done so as to immune from any claims arising because of negligent behaviour

Besides, the common law, it is imperative that the sellers need to comply with the relevant provisions of the Australian Consumer Law (ACL) 2010. This is applicable only when the underlying transaction has a consumer as defined in s. 3 of this act. The buyer of the good or service would be termed as consumer if the purchase price does not exceed $ 40,000 or in case of a higher price, the good is meant for domestic or personal consumption of the buyer.  Under ACL, there are implied consumer guarantees which are extended irrespective of the fact that these are endorsed by the seller in their contracts or not. In accordance with s. 54, ACL, it is necessary that the underlying good must be of acceptable product and one of the underlying attributes is that it should be safe for normal use.  In case of any damages that the consumer suffers because of the faulty product, the manufacturer as well as the retailer can be held liable for the losses suffered by the consumer.

The exclusion clause that is printed on the ticket is not considered legally enforceable. This is because the ticket is given to Rachael only after the food item has been selected and payment made. Further, no effort has been taken by the café to communicate the exclusion clause to the potential consumers before ordering.  The exclusion clause printed on the ticket would have been valid had the same been communicated to Rachael before she placed an order.  Hence, the café cannot claim immunity from the negligence on account of the exclusion clause.

A similar conclusion would also be reached on the basis of ACL. This is because Rachael is a consumer owing to the purchase of item for personal consumption and cost being lower than $ 40,000. Hence, irrespective of the conditions listed on the ticket, there is an implied consumer guarantee of the food products being of acceptable quality. Clearly, the food item consumed by Rachael was not safe for consumption owing to presence of a piece of metal. Further, she has suffered damages owing to the product and hence liability would be on café to pay for the dental care.

Conclusion

It may be concluded that the clause printed on the ticket providing immunity to café is not legally enforceable. Also, in line with the ACL, the café would be held liable for breaching acceptable quality implied consumer guarantee and hence the café would have to pay Rachael for the dental care.

References

Davenport, Shayne & Parker, David, Business and Law in Australia, (LexisNexis Publications, 2^nd ed., 2014)

Gibson, Andy & Fraser, Douglas, Business Law, (Pearson Publications, 8^th ed., 2014)

Latimer, Paul, Australian business law, (CCH Australia Ltd, 24^th ed., 2005)

Pendleton, Wayne & Vickery, Roger, Australian business law:  principles and applications, (Pearson Publications, 5^th ed., 2015)

Pathinayake, Athule, Commercial and Corporations Law, (Thomson-Reuters, 2nd ed., 2014)