Australian Commercial Law

This document provides an analysis of various legal issues related to Australian Commercial Law. It discusses the difference between invitation to treat and offer, the formation of enforceable contracts, and the remedies available for breach of contract. The document also includes relevant case laws and their application to the given scenarios.

AUSTRALIAN COMMERCIAL LAW
STUDENT ID:
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PART A
Question 1
Issue
The key legal issue is to outline if the advertisement put up by Machine Express Pty Ltd in the
context of NewBean Coffee sale would be classified as an offer or invitation to treat.
Law
The difference between invitation to treat and offer is significant since the former is an
invitation to interested buyer to initiate negotiations unlike latter which requires a valid
acceptance for contract enactment. It is noteworthy that offers may be intended towards a
particular offeree or may be directed at public at large. In this regards, a pivotal question arises
as to whether advertisements are invitation to treat or offer1. A relevant case dealing with this
fundamental legal question is Carlill v Carbolic Smoke Balls Company2. In this case, the
company (i.e. Carbolic Smoke Balls) put up an advertisement in the newspaper whereby it stated
that any person who would consumer their product in the recommended manner would not get
influenza. In case the person did get infected, the company would pay £10 to the concerned
person.
The plaintiff actually followed the steps mentioned and still got influenza owing to which she
claimed the payment which company refused citing that the advertisement was not an offer.
However, it was declared that the advertisement did constitute a valid offer owing to the level of
details and objectivity in the advertisement based on which no further information was desired
by the offeree to either accept or reject the offer. However, it is noteworthy that most of the
advertisements are not offers but invitation to treat as they provide only part information or filled
with puffery3. This is apparent from the verdict in the Partridge v Crittenden4 case which serves
as legal precedents for deciding on advertisements as invitation to treat. In this case, the
defendant dealt illegal act of making attempts to sell certain protected birds but since there was
1 Andy Gibson & Douglas Fraser, Business Law (Pearson Publications., 8th ed, 2014) 161
2 Carlill v Carbolic Smoke Balls Company [1893] 1QB 256.
3 Athule Pathinayake , Commercial and Corporations Law, (Thomson-Reuters, 2nd ed., 2014) 174
4 Partridge v Crittenden [1968] 1 WLR 1204

no offer through advertisement, hence the defendant was not guilty of breaching the wildlife
protection law5.
Application
As per the given details, Machine Express Pty Ltd has placed an advertisement relating to sale of
NewBean Coffee Machine. This particular advertisement did not indicate the price for which the
seller is willing to sell the machine but indicated that the machine is available at only half price.
It is apparent that the advertisement is aimed at promoting the product and communicating to
interested buying that the product is available and too at an attractive price. However, the details
of the exact pricing and other aspects is lacking in the advertisement owing to which this would
be considered as invitation to treat and not offer.
Conclusion
Based on the above discussion, it would be fair to conclude that the advertisement given by the
company regarding the NewBean Coffee machine would be categorized as an invitation to treat
and not a valid offer owing to limited details contained in the advertisement.
Question 2
Issue
The key issue of significance is to ascertain if there is binding legal contract formed between
Hiedi and Machine Express Pty Ltd manager with regards to sale of NewBean Coffee Machine
premium model and if the action to sell the machine to another customer constitutes breach of
contract.
Law
For the formation of an enforceable contract, a key pre-requisite is presence of a valid
agreement. In this regards, the first step is offer which may be directed to an offeree. The offeree
5 Wayne Pendleton & Roger Vickery, , Australian business law: principles and applications, (Pearson Publications,
5th ed., 2015)

in response to the offer may decide to accept the same or reject the same. In certain instances, the
acceptance by the offeree may take time and keeping this in mind the offeror may declare that
the offer would remain open for a stipulated time. The pivotal question that arises is whether the
offeror can make an offer for the same product to another willing buyer and enter into a
contractual relationship without informing the original offeror6.
A relevant case which addresses the above legal issue is Routledge v Grant7. In this case, an offer
regarding a property lease was made which as per offeror would remain close within six months.
However, before the elapsing of this period, the offeror enacted a legal contract with another
property regarding the lease of the same property. The original offeror gave his acceptance to the
offer after this incident but before the period of six months. It was highlighted that there was no
binding agreement between the original parties since the property was leased to someone else. A
key principle indicated by Best CJ in this case was that one of the contracting parties cannot be
bound to the contract if the other is not8.
Application
Based on the relevant facts, the Machine Express Pty Ltd manager has offered to sell a floor
stock machine to Heidi at a steep discount. Considering that this was not the model for which she
same, she was not sure if the machine would fit into her space. As a result, she asked time from
the manager so as to verify if the proposed coffee machine would fit properly or not. The
manager highlights the offer would be open all day. However, when Heidi returns later that day
to communicate her acceptance for the coffee machine, she realizes that the manager had just
sold the same. However, Heidi would not have a claim against the manager since when he sold
the machine to other customer, Heidi had not given her acceptance. If Heidi had no legal
obligation to buy the machine, then the manager also did not have any obligation to sell the
machine to Heidi only.
Conclusion
6 Robert Bryan Vermeesch and Kevin Edmund Lindgren, Business Law of Australia (Butterworths, 2013, 12th edition) 123
7 Routledge v Grant [1828] 4 Bing 653
8 Shayne Davenport, Business and Law in Australia (Thomson Reuters, 4th ed, 2014) 145

No enforceable contract was formed between Heidi and the manager. Also, since Heidi did not
have any obligation to buy,hence she cannot claim obligation to sell to her only on the part of
the manager.
PART B
Issue
The key legal issue is to determine if a enforceable contract has been enacted by Hiedi and
Gertrude with regards to the retired coffee machine.
Law
There are various pre-requisites for enactment of an enforceable contract. One of these is the
presence of a valid offer which must be unconditionally accepted by the offeror. This would
result in a valid agreement. It is imperative to note that a given offer cannot be revoked after it
has been accepted. Another key requirement is that mutual consideration ought to be present for
the contracting parties9. Besides, it is pivotal that intention to form legal relations also ought to
be present which is assumed to be satisfied for commercial transactions. Also, the contracting
parties should have capacity to enter into contract. Finally, the mutual consent of the parties
should be without the presence of any duress or undue influence. Any failure on the part of either
parties to discharge their contractual liabilities would lead to the breach of contract which would
provide various remedies to the innocent party10.
Application
Based on the given scenario, it is clear that Heidi has informed Gertrude (her store manager)
about her inability to find a coffee machine for her business. A legal offer has thereby been
extended by the store manager with regards to sale of a retiring coffee machine from the shop.
This offer is communicated to Heidi who accepts the same in an unconditional manner. Further,
there is consideration for the seller in the form of mutually agreed price. Also, both parties here
have the legal capacity to enact contract. Further, there is intention to enter into legal relations
present here owing to the commercial nature of the transaction. As a result, even though Heidi
9 Clive Turner & John Trone, Australian Commercial Law, (Thomas Reuters, 32nd ed., 2019) 198
10 Ibid. 6. 178

has not paid money, but a legally binding contract has been formed. Hence, Gertrude cannot
refuse to sell the coffee machine as it would amount to breach of contract which would provide
valid legal ground to Heidi to sue Gertrude for damages.
Conclusion
Based on the discussion above, it is fair to conclude that owing to the conduct of Heidi and
Gertrude, a legally binding contract is in place between the two. As a result, refusal on part of
Gertrude to sell the coffee machine would lead to breach of contract.
PART C
Issue
The main legal issue in this situation pertains to indicating the damages that can be claimed by
Heidi owing to the breach of contract by Coffee Supplies Fast Pty Ltd.
Rule
With regards to breach of contract, a key remedy that can be availed by the innocent party is
damages. These would potentially be sub-divided into the two categories listed below11.
1) Compensatory Damages – As the name suggests, the aim of these damages is to compensate
the innocent party for the losses that have been actually suffered.
2) Punitive Damages – As the name suggests, the aim of these damages is to punish the
defaulting party so that the same conduct is not repeated in the future.
For providing compensatory damages, the key requirement is that loss needs to be suffered in
reality by the innocent party. A key principle which is used for ascertaining the extent of losses is
by taking as a reference the position of innocent party if the breach of contract would not have
happened12. This approach was outlined in Robinson v Harman13 case. Another alternative
approach used in ascertaining the quantum of losses is the expectation measure approach. As part
11 Ibid. 8. 166
12Ibid. 3, 134
13 Robinson v Harman (1848) 1 Ex 850

of this approach, there is a comparison of innocent party’s existing status and expected status if
breach of contract did not happen. The difference in expectation in the two cases is used to
determine losses with monetary value assigned14. Also, the cost of curing breach of contract
approach has also been suggested in Tabcorp Holdings Ltd v Bowen Investments Pty Ltd15 case.
A key aspect to be established by the plaintiff is that the losses have been suffered on account of
contract breach by defaulting party. As a result, it is essential that the plaintiff or innocent party
should take actions to contain the damages arising from the breach of contract. Also, damages
from the defaulting party can be claimed only to extent that the damages were foreseeable at the
time of contract enactment as indicated in Hadley v Baxendale16 case17. In accordance with this
approach, two potential type of losses may be possible to claim. A particular type of loss is
which tends to arise naturally because of contract being breached. Additionally, there is another
type of loss which would not be expected in natural course. Such losses would become
actionable only when the underlying losses were foreseeable by the contracting parties when
contract was put in place18.
Application
It is apparent that Coffee Supplies Fast Pty Ltd has breached the contract since the coffee
machine provided by them to Heidi for her business was faulty and hence stopped working on
the very first day. Compensatory losses would arise for the innocent party (i.e. Heidi) so as to
ensure that the breach is cured and Heidi is in a position expected if contract had not been
breached and the coffee machine was not faulty. The most natural loss would in the form of
profits lost till the time she is able to attain another machine for which Heidi has taken prompt
actions by finding another supplier. The loss in profits therefore would be payable by Coffee
Supplies Fast Pty Ltd for breach of contract.
14 Ibid. 9, 177
15 Tabcorp Holdings Ltd v Bowen Investments Pty Ltd [2009] HCA 8
16 Hadley v Baxendale [1854] EWHC J70
17 Ibid. 1, 165
18 Ibid 3, 145

Owing to the shop being closed, Heidi has lost an investor who has made the demand for all his
capital to be paid back. While this is also attributed to breach of contract but at the time of
contract enactment, such an instance would be unforeseeable by both Hiedi and Coffee Supplies
Fast Pty Ltd. As a result, any loss in this regards would not be borne by the coffee machine
supplier despite the loss being attributed to the faulty machine.
Conclusion
Considering the discussed carried above, it can be concluded that Heidi would be able to recover
the lost profits for the time till the alternative supplier could not provide coffee machine since
such a loss in foreseeable and natural. However, the loss of investor is clearly unforeseeable and
would not be considered as actionable owing to which there is no damages payable on this
account to Heidi.

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)