Business and Company Law - Assignment

Running head: BUSINESS AND COMPANY LAW
BUSINESS AND COMPANY LAW
Name of the Student
Name of the University
Author Note

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Question 1
Part (a)
Issue
The issue here is to determine if a valid contract existed between Magda and Avinash.
Law
Australian contract law embodies common law principles. As per common law a legally
valid contract has the following elements (Hunter 2017):
 Offer and acceptance.
 Intention to create legal relationships.
 Consideration.
 Capacity to enter into the contract.
 Legitimacy of the terms of the contract.
Under the given set of facts and circumstances determination of offer and acceptance is
of utmost importance as that would form the basis of whether a contract existed between Magda
and Avinash.
An offer is made by an offeror who solicits the acceptance for the same from an offeree
in exchange for a consideration. The judgment in Carlill v Carbolic Smoke Ball co [1893] 1
QB states that for a contract to be legally enforceable it must be established that the offeror
intented to create legal relationships but an offer and an invitation to offer (Invitation to treat)
would not be accepted as an offer (Llewellyn 2016). An advertisement such a shop’s window

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display would be considered as an invitation to treat and not an offer. Acceptance of the same
would not create legally valid relationships. This has been laid down in the judgment in
Partridge v Crittenden (1968) 2 All ER. A variation or a change in the terms of a legally valid
offer would constitute a counter-offer and the same would then have to accepted by the original
offeror this has been laid down in the case of Hyde v Wrench (1840) 49 ER 132 (McKendrick
and Liu 2015). An enquiry or a clarification into an offer cannot constitute a lawfully valid offer
and this has been adequately established in the judgment in Scammell & Nephew v. Ouston
[1941] AC 251. It has also been determined that non-acceptance of an offer within an agreed
upon stipulated time would lead to revocation of the offer this has been established in the case
Ramsgate Victoria Hotel v Montefiore (1866) LR 1 Ex 109 (Hunt 2015).
Application
In the given set of facts and circumstances the advertisement on Magda’s website
regarding the price of the portrait is an invitation to treat and does not constitute a lawfully valid
offer. Thus following the judgment in Partridge v Crittenden (1968) 2 All ER this would not
constitute a valid acceptance of an offer. Avinash’s subsequent email to Magda regarding the
same is a valid offer.
Magda’s subsequent reply which raised the price of the portrait to $1800 is a lawfully
valid offer. Thus, in effect following the judgment in Hyde v Wrench (1840) 49 ER 132 it
would be considered a counter thus negating Avinash’s original offer.
Avinash agreed to accept this but varied the terms by stating he needed to consult with
his wife, thus forming another counter-offer. Another offer was made by Magda which stated a
time for the acceptance and the price of the portrait. Thus the previous offer was negated.

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Subsequently Avinash demanded a counter offer as he demanded a certificate of authenticity
from Magda. Magda agreed to the same provided there is an acceptance within a stipulated time.
Avinash does not accept the offer within the stipulated time and thus the offer is revoked
due to efflux of time as stated in Ramsgate Victoria Hotel v Montefiore (1866) LR 1 Ex 109.
Conclusion
To conclude there was no valid contract between Avinash and Magda.
Part (b)
Issue
The issue here is to determine if Magda had breached her obligations under Australian
Consumer Law (ACL) and if so the remedies available to Elton for the same.
Rule
Section 3 of the ACL states that when goods are purchased for domestic or household
purposes and the purchase amount is below $40,000 it would fall under the ambit of the act. As
per Section 18 (2) of the act a prohibition on misleading statements made by sellers to solicit
buyers is placed. This is applicable for any form of misleading or deceiving conduct.
In the case of Australian Competition and Consumer Commission v Hewlett-
Packard Australia Pty Ltd [2013] FCA 653 it was held that any form of misleading or
deceptive conduct would make the seller liable to pay fines (Brudner 2013). This case reaffirmed
the provisions of Section 18 of the ACL.
It is also laid down in Section 56 of the ACL that goods sold by description must match
the description provided by the seller (Milsom 2014). This is thus another condition that

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prohibits advertising products of a certain quality or standard and providing goods that do not
adhere to the same.
Application
Magda and Elton’s transaction would fall under the ambit of the ACL as Elton was
buying the goods in the capacity of a consumer, the transaction was below $40,000 and was
being undertaken for a domestic and household purpose. Thus following the provisions of
Section 3 it can be inferred that ACL would apply.
Magda had stated that the portrait was in archive quality acid-free paper and that it was a
limited edition with only 3 existing copies. Elton later found out that she had sold 10 of the same
paintings and the quality of paper did not adhere to the quality stated in the advertisement. Thus
following the provision of Section 18 and 56 we see that Magda was in breach of her obligations
as a seller. Thus, following the judgment in Australian Competition and Consumer
Commission v Hewlett-Packard Australia Pty Ltd [2013] FCA 653 it can be inferred that
Magda would be liable to be legally pursued by Elton for damages for the or a refund. Getting
his money back would be the most appropriate remedy for this situation.
Conclusion
Magda is in breach of her obligation as a seller as prescribed by the ACL and thus Elton
would be entitled to get back the amount of money which he had paid to Magda for the same.
Question 2
A legally binding agreement is called a contract which gives rise to rights and
obligations. The contractual terms create rights and obligations which are enforceable by law.

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The contractual terms are either express or implied in nature (McKendrick 2014). Express terms
are the ones which have been specifically stated in the contract either in writing or orally. These
are explicitly mentioned terms. Wilson v Best Travel dealt with the case of express terms in
contract law. On the other hand implied terms are not specifically or explicitly mentioned in the
contract but the parties entering into the contract are aware of the terms and mutually agree to be
bound by the contract. Implied terms of the contract can be gauged through the conduct of the
parties (Knapp, Crystal and Prince 2016).
Conditions
Conditions are an important element of contract law which determine the act and
obligations that the parties are required to carry out under the contract. A condition in contract
law can also be defined as a stipulation. In case there is a breach of the contractual terms, the
other party has the right to repudiate or rescind the contract (Kotz 2017). Therefore, the
contractual conditions are important for determining parties’ obligations under contract law.
Whenever one party refuses to keep his end of the bargain, the other party shall have the right to
repudiate the contract. hence, it is important for the parties to honor the terms of the contract
because of one part of the contract is not performed accordingly, the validity of the contract gets
affected (Cartwright 2016). Poussard v Spiers and Pond (1876) 1 QBD 410 is an important
English contract law case that talks about conditions in a contract and also unlawful dismissal.
This case also talks about when a term can be treated as a condition under contract law.
Warranties
Under contract law, warranties do not carry enough weight. These are considered minor
terms in the contractual agreement and in cases the warranties are breaches, the party cannot end
the contract and can only claim damages. The right to rescind or repudiate the contract does not

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rest with the party in cases of breach of warranties. Therefore, there are not given enough
importance in determining the liabilities of a party in cases of breach. The aim of a contract is to
meet a certain goal and fulfil the purpose of the intended goal, and in cases of breach of contract,
the rights of the parties are affected. But, in cases when the warranties are breached, the contract
is not affected but only the long secondary goals of the contract are affected. Bettini v
Gye (1876) QBD 183 is an important contract case where the Court held that there was a breach
of warranty and therefore the employer was not entitled to end the contract.
Implied terms
These are not like express terms of the contract but are gauged from the conduct of the
parties and are not written. These are inferred from the action of the parties. The Court exercises
its discretion to check if the implied terms of the contract give effect to the obligations of the
parties under the contract terms. The implied terms of the contract are binding on the parties and
the court decided of the incorporation of such implied terms are necessary for giving effect to the
obligations of the parties. The Moorcock case is important in the present discussion because it
held that a contractual term can be given the status of a contractual term of the term was
important for understanding the obligations of the parties under contract law. The court also
applied the reasonable man test which states that whether a term was implied in a contract has to
be understood from the point of a reasonable man. How a reasonable man would have treated the
term should guide the court into deciding whether the term was implied in the contract. Implied
terms can also be understood by the mutual relation of the parties and also how they have dealt in
the past. This decision was held in the case of Balmain New Ferry Co Ltd v Robertson. The
nature of trade the parties are indulging in is also an important factor to consider in
understanding if the implied terms of the contract are to be taken into consideration. The same

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was held in the case of of British Crane Hire Corp Ltd v Ipswich Plant Hire Ltd [1974] 2
WLR 856, where the Court ruled that implied terms of the contract can be understood from the
trade that the parties are dealing in. The custom of trade is a determining factor. The Australian
Consumer law also gives interpretation to the meaning of implied contractual terms. The
Australian Consumer Act talks about implied contract and also includes them in the relation
between the consumer and the trader (Corones, Christensen and Howell 2016). Implied
contractual terms are understood in terms of the business between the consumer and the trader.
These are termed as consumer guarantees and there are remedies available in cases there is
breach of those consumer guarantees (Howells and Weatherill 2017). These are provided in the
Australian Consumer Act.
Fact Scenario
Inferring from the fact scenario, it can be said that Elton had purchased a portrait from
Magda and Magda had already mentioned that the portrait that Elton was buying was a limited
edition. After Elton made the purchase, he came to know that Magda had lied and that in reality
the portrait was not a limited edition and there have been many copies of the portrait. The
portraits were printed many times and the printing was done on low quality paper. Applying the
principles held in the above mentioned case laws to the fact scenario, it can be said that there has
been a breach of the consumer relation between the business and the consumer and the implied
terms of the contract have been violated. The consumer guarantees are implied in the contract
and these warrant a relation between the consumer and the business. There has been a violation
of the Australian Consumer Law and the portrait failed to comply with the consumer guarantee
of delivery goods matching with their description under section 56 of the Australian Consumer
Law.

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Reference list
Brudner, A., 2013. The unity of the common law. OUP Oxford
Cartwright, J., 2016. Contract law: An introduction to the English law of contract for the civil
lawyer. Bloomsbury Publishing.
Corones, S.G., Christensen, S.A. and Howell, N., 2016. Submission to Australian Consumer Law
Review Issues Paper.
Howells, G. and Weatherill, S., 2017. Consumer protection law. Routledge.
Hunt, K.M., 2015. Gaming the system: Fake online reviews v. consumer law. Computer Law &
Security Review, 31(1), pp.3-25.
Hunter, Howard. "Modern Law of Contracts." (2017).
Knapp, C.L., Crystal, N.M. and Prince, H.G., 2016. Problems in Contract Law: cases and
materials. Wolters Kluwer Law & Business.
Kötz, H., 2017. European contract law. Oxford University Press.
Llewellyn, K.N., 2016. The common law tradition: Deciding appeals (Vol. 16). Quid Pro Books.
McKendrick, E. and Liu, Q., 2015. Contract Law: Australian Edition. Palgrave Macmillan.
McKendrick, E., 2014. Contract law: text, cases, and materials. Oxford University Press (UK).
Milsom, S.F.C., 2014. Historical foundations of the common law. Butterworth-Heinemann.