TLAW 101 – Business Law – Term Assignment Case Study Assessment Answer

Business Law – Term Assignment Case Study

Assessment Task

Question 1

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.

Question 2

(a) 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.

2

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.

(b) 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.

Question 3

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.

Answer 1

The main issue is whether Mojo Beverage is liable to pay Ben @ $100,000 or $1,000 for the catch of Lord Harry?

In Australian contract law, any contract can be made amid an offeror and an offeree provided there are offer, acceptance, consideration and legal intention of the parties. (The Law Handbook 2016)

Offer is the first element in the formation of the contract. An offer is the communication by an offeror to an offeree regarding his intentions and expects that an offeree to abide by the same Smith v Hughes (1871)). He communicates his offer with an intention that the same will be confirmed by such offeree. An offer is valid in the eyes of law when it reaches the knowledge of the offeree (Carlill v Carbolic Smoke Ball Co (1893)). (Clark 2012)

When such an offer is confirmed by an offeree then such conformation is called acceptance in the contract law Crown v Clarke (1927). An acceptance is valid when it is made absolutely and is the mirror image of the offer. An acceptance is complete only when it reaches the knowledge of the offeror Powell v Lee (1908). (Clark 2012)

Now, if any deviation is made in the offer, then, the acceptance so made by an offeree will be said to be complete and binding provided the offeree is making his acceptance on the varied terms of the offer. An acceptance without knowledge of the offer (even if modified) is no acceptance. But, many a times, unilateral offers are made through advertisements under which an offer is made by a person and any person who acts upon such an offer is considered to have made an acceptance. In such scenario, there is no rule to communicate the acceptance in order to consider the same as valid and is held in Australian Woollen Mills Pty Ltd v The Commonwealth(1954). An action is in itself sufficient to constitute as an acceptance which has sanctity in law. (Gibson & Fraser 2014)

Also, when instead of making an offer, a person invites people to make offer to him, then, such an act is called invitation to treat or offer. An invitation can be made through various modes, such as, through advertisement, auctions, tenders display of goods, etc (Pharmaceutical Society v Boots Chemists (1953) Based on such modes, when any person makes an offer to the displayer then the person who has made the offer is an offeror and the displayer is an offeree. It is when the displayer confirms the offer so made to him results in a binding contract amid the two. (Moles 1998)

Now, by applying the said rules of the law of contract on the given case study, it is submitted that, an advertisement is published in newspaper by Mojo Beverage through which it invites people of Lake Tranquil to catch Lord Harry (a trout) against a prize of $100,000. By applying the law in Partridge v Crittenden (1968), it is generally held that an advertisement is an invitation to treat and thus Mojo Beverage is an offeree and any person who makes an offer based on such advertisement is considered to be an offeror.

But, the advertisement so made by Mojo is in the form of unilateral offer. The rule of Australian Woollen Mills Pty Ltd v The Commonwealth(1954) is applied and the advertisement is unilateral in nature and who so ever acts as per the terms of the offer so made results in deem acceptance.

Now, when Ben acted as per the requirements of the advertisement, he is aware that the prize is not $100,000 but in reality it is $1,000. Thus, he is aware of the new terms and knowing the terms of the offer and the prize money he willingly preceded and catch Lord harry.

Thus, Ben can claim prize money from Mojo but he is liable only for $1,000 and not $100,000.

Answer 2

The main issue is whether there exists a valid contract amid Dorper Sheep Sellers Pty Ltd (Dorper) and Livestock Brokers (Livestock)?

In the contract law, any contract is valid provided it is initiated with a valid offer. An offer is the foremost element which initiates a valid contract. An offer is the communication of the intention of an offeror to an offeree. An offeror lays down his terms and conditions which he expects an offer to comply with and with a hope that the same will be accepted by such an offeree. Whenever an offer is made to an offeree then in order to hold such an offer valid and binding upon the parties it must reach the offeree and brought to his knowledge (Carlill v Carbolic Smoke Ball Co (1893)). (Clark 2012)

When a valid offer is made to an offeree by an offeror, then, it is the duty of the offeree either to confirm the same or to deny it. If an offeree wishes to confirm an offer then he must do so without bringing any deviation in the terms of the offer. Any acceptance which does not correspond to the terms of an offer is not a valid acceptance and is called counter offer which cancels the original offer (Hyde v Wrench ((1840)). Further, if an offeree instead of making an acceptance wishes to clarify the offer and thus makes inquires from the offeror, then, such inquiry or an act of seeking more information is not considered as an acceptance nor as counter offer and is held in Stevenson v. McLean(1880). Such acts does not invalidate the offer and the original offer remains active which when confirmed by an offeree results in binding contract. (The Law Teacher 2016)

Also, an acceptance is said to be valid when it comes in the knowledge of an offeror. Any acceptance which is not in the knowledge of an offeror will not bind the parties. However, there is an exception to the same, that is, when any acceptance is made by an offeree which is made through post, then, the postal rules is applied and is laid down in Brinkibon v Stahag Stahl und Stahlwarenhandelsgessellschaft mbH (1983). As per the rule, when an acceptance is made through post, then, an acceptance is said to be complete as soon as the same is posted and there is no further requirement to bring the same in the knowledge of the offeror in order to bind the parties. An acceptance through post is considered to be a complete acceptance in law and makes a binding contract amid the parties. However, in the leading case of EntoresLtd v Miles Far East Corporation (1955), it was held that the postal acceptance rule does not apply to instantaneous modes of communications, such as, fax, and any acceptance made through fax will be complete only when it comes in the knowledge of the offeror. (Clark 2012)

Now, by applying the law to the fact of the case, it is submitted that Dorper on 1st June has sent a letter to Livestock through which it made an offer to Livestock to buy the sheep’s specifying the number of sheep’s and the price per head. 14 days were given to accept the offer.

On 6th June, Livestock has made an enquiry and sent a letter to Dorper. By applying the law in Stevenson v. McLean(1880) it is submitted that mere making inquiry is not an acceptance which is not in correspond with an offer and thus cannot be treated as a counter offer. Mere inquiry does not invalidate the sanctity of an offer and the offer remains valid. Thus, the letter on 6th June by Livestock will not be treated as a counter offer and the offer remain valid.

Later on 14th June, Livestock has sent its acceptance through fax. As per law laid down in EntoresLtd v Miles Far East Corporation (1955), an acceptance when made by fax is complete only when the same reaches the offeror. No postal rule applies when an acceptance is made through post.

Now, Dorper has received the fax send by Livestock and is within 14days. Thus, there is a valid contract amid Dorper and Livestock.

If Livestock has send the sent the fax on 14 June but because of a transmission error Dorper did not receive it, then, there cannot be any contract that existed amid the two. This is because there is no application of postal acceptance rule when the same is made via fax instantaneous modes of communication). Hence, if the fax is not received by Dorper then there cannot be binding contract amid the two.

Answer 3

The main issue is whether Westphalia Marts can compel Stuart to pay the full amount of $1000 per week rental beginning in January 2015 and the shortfall of $300 per week for each week of the year 2014?

In contract law, whenever any contract is made then there are terms which are incorporated in such contract and with which the parties are bound to obey. The terms which are mutually decided by the parties and expressly made part of the contract are called express terms. But, the terms which are followed by the parties under law or custom or usage, then, the same are implied in nature. (Legal Service Commission 2016)

The terms are made part of the contract when the contract is at the stage of incorporation. But, if the parties wishes to deviate with the terms of the contract then whether they have right to modify the written terms of the contract orally?

Normally, when a written contract is made by the parties, then, the parties are bound by the written terms of the contract and the law does not allow any party to follow the tern which is not made part of the contract. But, many a times the parties wishes to modify the terms if the contract after the same is signed by the parties. The reasons can be many, such as, to extent the duration, to change payment, etc. if a process of modification is made part of the written contract, then , the medication in the terms of the contract is valid provided the due process is followed by the parties. But, if no modification method is mentioned in the written contract, then, the parties may by mutual discussion and agreement bring variation in the terms of the contract. Such oral modification is valid because law regards oral contrast as valid in nature. But, to be safe, the parties must incorporate the new terms in the already existing contract. (Hubble 2016)

Now, by applying the facts of the case,

It is submitted that a written contract is made amid Stuart and Westphalia Marts wherein Stuart has a 5-year written lease of a shop @ $1000 per week at the end of 2010. But after two-and-a-half years, in December 2013, Stuart asked Westphalia Marts for a reduced rental of $700 per week until the business improved and the same was agreed by Westphalia Marts. From January 2014 Stuart began to pay the new agreed rent of $700.

Now, an oral modification is brought in by Stuart and Westphalia Marts in the written contract which is made by them in 2010. The modification was made orally though no changes were brought in the written contract. However, still the changes are valid as the contract law regards oral agreements as valid agreements in the eyes of law.

Thus, the modified terms are valid on the parties and Westphalia Marts cannot sue Stuart to pay the full amount and the shortfall money.