Advertisement of NewBean Coffee: Invitation to Treat or Offer for Acceptance?

This document discusses whether the advertisement of Machine Express Pty Ltd regarding the sale of the NewBean Coffee would be categorized as an invitation to treat or an offer for acceptance. It explores the legal principles and case precedents related to advertisements and contract formation. The document also analyzes the legal rights of Heidi to claim damages for breach of contract and the enforceability of the contract between Gertrude and Heidi for the retired coffee machine. Additionally, it examines the damages that Heidi can claim from Coffee Supplies Fast Pty Ltd for the breach of contract.

AUSTRALIAN COMMERCIAL LAW
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PART A
Question 1
Issue
The main objective is to highlight whether the advertisement of Machine Express Pty Ltd
regarding the sale of the NewBean Coffee would be categorised as invitation to treat or an offer
for acceptance.
Law
An offer is directed on behalf of a party to other party for acceptance in regards to enact a
contract. An invitation to treat is extended to the public so as to invite their offer for starting the
negotiation with interested buyers to enact the contract for sale The advertisements for sale of
goods are generally categorised as invitation to treat and do not constitute an offer1. Further, if
the advertisement contains the various necessary details of the offer such as fixed price, details of
object and other specifications, then it may be categorised as offer for acceptance as highlighted
in the verdict of Carlill v Carbolic Smoke Balls Company2.
As per this case, the company had deposited a fixed sum into the bank to pay anyone who would
accept the offer. Also, the advertisement was quite objective and had all the relevant details
including the precise method of consumption so as to be eligible for the prize money. Only such
advertisements that indicate all the relevant details for contract formation may be treated as
offers. Another relevant case involving an advertisement is Partridge v Crittenden3 case. As per
the case verdict, the advertisement about the sale of the antique birds was not declared as offer as
it was mere invitation to treat and thereby, the seller party was not legally bound to sell the birds
against the offer as they had refused the offer of buyer4.
Application
1 Wayne Pendleton & Roger Vickery, , Australian business law: principles and applications, (Pearson Publications,
5th ed., 2015) 117
2 Carlill v Carbolic Smoke Balls Company [1893] 1QB 256.
3 Partridge v Crittenden [1968] 1 WLR 1204
4 Andy Gibson & Douglas Fraser, Business Law (Pearson Publications., 8th ed, 2014) 121

Heidi was looking for a coffee machine for her new store and she saw an advertisement
regarding the sale of a NewBean Coffee Machine of Machine Express Pty Ltd. The
advertisement did not contain any specific price of the machine and it just contained the
information that the NewBean Coffee Machine at the half price. Cleary, it would not be
categorised as offer for acceptance as there are many essential factors such as price, description
of the offer required for enacting a contract that are missing. Also, the advertisement itself is
indefinite, unclear and not explicit which means it leaves significant space for negotiation and
additional information request from the buyer which also implies that it is not an offer. It implies
that the Machine Express Pty Ltd is mainly seeking an offer from the interested buyers under
invitation to treat for negotiating the price and other essential terms for the contract. Thereby, it
would be fair to opine that the advertisement is merely an invitation to treat.
Conclusion
Cleary, the advertisement for sale of the NewBean Coffee will be an invitation to treat because it
does not constitute the details regarding the price and other terms of the offer which implies that
it would not be an offer to enact a unilateral contract.
Question 2
Issue
The main issue is to comment whether Heidi has the legal right to claim damages under breach
of contract against the manager of Machine Express Pty Ltd for selling the premium model of
NewBean Coffee Machine to other customer instead of her.
Law
The offeror needs to direct an offer to the offeree for acceptance. When the offeree accepts the
offer for the mutually agreed consideration, then a legally binding contract would be enacted
between the parties. Therefore, the parties have to complete their contractual liabilities and they
cannot deny performing the obligations arising under the contract. The offer would be
enforceable for contract enactment when it reaches to the offeree. Further, it is essential for a

valid acceptance that the offeree must communicate the acceptance to the offeror. When the
offeree does not provide the acceptance within the specified time stated by the offeror or within a
reasonable time period, then the offeror has to rights enact the contract with the other parties5.
Further, it is essential to note that the offeror who makes the offer can revoke the offer without
any legal implications as long as it has not been accepted by the offeree. It means at any point of
time the offer can be terminated by the offeror unless the offer has already been accepted by the
concerned offeree6. A relevant case in this regards is Routledge v Grant7 [1828] case where the
offeror has fixed a time period of six month for acceptance and the honorable court had declared
that the offeror can revoke the offer at any time irrespective of the given time period but the only
aspect is that it should be prior to the acceptance.
Application
It is witnessed from the given case facts that Heidi required a coffee machine. She considered a
premium model of the machine in the store and became very impressed with the capability and
size. However, she was not ready for the price and hence, thus, the manager offers her white
floor stock machine at additional discount. Here, the offer of manager becomes enforceable for
acceptance. Further, she does not have much idea about the space and thus, she tells the manager
that she will check out the space of the store to know whether the machine would be
accommodated or not in the space. It is not any counter offer which implies that the offer is still
valid for acceptance. The manager replies back that offer will remain open for acceptance.
However, he has sold the same machine to other customer. Here, it is noteworthy that Heidi has
not given the acceptance for the offer till the time of sale to another party which implies that the
manager has the right to revoke the offer. Thus, no contract is enacted between Heidi and
company and the revocation of the offer on the part of manager is valid. Thus, Heidi cannot
make any claim against the manager for not selling the machine to her.
Conclusion
Heidi cannot make any claim against the manager of Machine Express Pty Ltd for selling the
Machine to other customer because she has not given an acceptance for the offer which means
5 Athule Pathinayake , Commercial and Corporations Law, (Thomson-Reuters, 2nd ed., 2014) 148
6 Shayne Davenport, Business and Law in Australia (Thomson Reuters, 4th ed, 2014) 103
7 Routledge v Grant [1828] 4 Bing 653

the company has the right to revoke the offer from her. Thereby, she cannot sue Machine
Express Pty Ltd for not selling the machine because she has not enacted a contract with the
company.
PART B
Issue
The issue is to find whether there is a legally binding contract enacted between Gertrude and
Heidi in relation to the retired coffee machine.
Law
A valid contract would be formed when there is a valid agreement between the parties. A valid
agreement constitutes a lawful offer and acceptance. When the offeree accepts the offer without
any further conditions then a valid agreement would be formed between the contracting parties.
Also, it is noteworthy that offeror cannot revoke the offer once it is accepted on behalf of the
offeree8. Further, when the contract has been enacted between the parties, then the respective
contracting parties would be bounded with contract liabilities and both the parties have to
perform the contractual obligations in order to discharge the contract Also, if any of the
contracting parties refuses to complete the contractual liabilities, then the other party has all the
legal rights to sue the defendant party for not satisfying the contract obligations and claim for the
damages9.
Application
It is evident Heidi does not find any machine for her shop and hence, she informed about the
same to her store manager Gertrude. The manager has then extended an offer to Heidi, then he is
ready to sell one of the retiring coffee machines. Here, the offer becomes enforceable when
Hiedi becomes aware about the same. Further, this offer has been accepted on the part of Heidi
without any other condition at the agreed price. Thereby, it can be said that acceptance of Heidi
would also be enforceable and thus, a valid contract has been enacted between the parties. Also,
once the offer is accepted on the part of Heidi then Gertrude cannot revoke the offer despite the
8 Clive Turner & John Trone, Australian Commercial Law, (Thomas Reuters, 32nd ed., 2019) 198
9 Robert Bryan Vermeesch and Kevin Edmund Lindgren, Business Law of Australia (Butterworths, 12th ed. 2014) 153

payment not being made. Further, if Gertrude denies providing machine to Heidi at the agreed
price, then she has the rights to sue Gertrude and claim damages.
Conclusion
It can be concluded based on the above facts that Gertrude has made an offer to Heidi to sell the
retired machine which she has accepted without any condition and hence, a contract has been
enacted between the given parties.
PART C
Issue
The key issue is to highlight the damages that Heidi can claim from Coffee Supplies Fast Pty Ltd
on account of the breach of contract.
Rule
One of the key remedies that is available to the innocent party with regards to breach of contract
is damages with regards to the losses caused on account of breach of contract by the defaulting
party. The damages that the innocent party can potentially claim belong to the following two
categories10.
1) Compensatory Damages
2) Punitive Damages
The objective of the compensatory damages is to ensure that compensation for the actual losses
suffered by the innocent party is provided. As a result, it is imperative that the innocent party
should have suffered some loss. The amount of losses need to be accessed where the general
intention is to ensure that the innocent party after having received the damages should be in a
position where it would have been if the breach of contract has not occurred11. This approach has
been highlighted in the Robinson v Harman12 case. Further, an expectation measure approach is
utilized which compares the current status of the innocent party with the expected status if
contract breach had not occurred. Based on the expectation measure the various losses are
10 Ibid. 1. 93
11 Ibid. 4, 114
12 Robinson v Harman (1848) 1 Ex 850

quantified in monetary terms13. Further, in determining the extent of losses, the cost of curing the
breach approach commended in Tabcorp Holdings Ltd v Bowen Investments Pty Ltd14 may also
be deployed.
Also, it is imperative that the losses suffered by the claimant (innocent party) are directly
attributed to the breach of contract for damages to be awarded. In this regards, it is considered
whether the claimant could have taken some reasonable action to minimize or prevent the losses.
Besides, a key requirement is that the losses ought to be foreseeable which has been dealt in the
Hadley v Baxendale15 case16. As per this case there are two different kinds of losses that may be
claimed. One type of losses are those which would naturally arise on account of breach of
contract. The other type of losses comprises of hose which are not ordinarily expected and hence
for these to be actionable, it is imperative that these losses should have been foreseeable by both
contracting parties at the time of entering into contract17.
Application
Based on the given facts, it is evident that there has been a breach of contract by Coffee Supplies
Fast Pty Ltd considering that the GreenBean Coffee Machine that has been provided to Heidi is
faulty and therefore has malfunctioned on the first day itself. Owing to this breach, Heidi would
be entitled to compensatory losses which would aim to cure the breach by ensuring that she is
placed in a position that she would have been had the coffee machine been working. Clearly, the
expected losses would be the loss of profits in the interim period when an arrangement for an
alternative machine is done. Further, in this situation Heidi is not at fault since she has been
prompt in making arrangement for an alternative supplier. These losses are directly attributed to
the breach of contract and therefore would be payable by the defaulter party.
Another loss incurred by Heidi is with regards to loss of an investor who saw the shop closed on
the third day and demanded all the money back. Clearly, such a loss would be unexpected and
the same is applicable even for Hiedi and the coffee machine supplier at the time of contract
enactment. Even though this loss is also directly attributed to the faulty coffee machine. But
13 Ibid. 5, 143
14 Tabcorp Holdings Ltd v Bowen Investments Pty Ltd [2009] HCA 8
15 Hadley v Baxendale [1854] EWHC J70
16 Ibid. 8, 178
17 Ibid 9, 134

considering that it was not foreseeable, the same would not be considered actionable and thereby
non-payable.
Conclusion
Based on the above discussion, it is apparent that the Heidi would be compensated for the loss of
profits in the business for one week that it was shut since this damage was foreseeable. However,
the unexpected loss with regards to investor walking away would not be compensated as it was
not reasonably foreseeable.
Bibliography
Andy Gibson & Douglas Fraser, Business Law (Pearson Publications., 8th ed, 2014)

Athule Pathinayake , Commercial and Corporations Law, (Thomson-Reuters, 2nd ed., 2014)
Clive Turner & John Trone, Australian Commercial Law, (Thomas Reuters, 32nd ed., 2019)
Robert Bryan Vermeesch and Kevin Edmund Lindgren, Business Law of Australia (Butterworths,
12th ed.2014)
Shayne Davenport, Business and Law in Australia (Thomson Reuters, 4th ed, 2014)
Wayne Pendleton & Roger Vickery, , Australian business law: principles and applications,
(Pearson Publications, 5th ed., 2015)