Assignment Business Law Rule Agreement

Running head: BUSINESS LAW
Business Law
Name of the Student
Name of the University
Author Note

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Question 1
Issue
The issue arising from the given situation is whether Flyways Airlines Ltd has any legal
position by virtue of the contract a situated with the Boeing Corporation Ltd (Boeing).
Rule
Any agreement having the status of enforceability in the eyes of the law and recognising
as well as controlling the rights of the parties involved depicts a contract. A contract needs to
have an agreement instituted by an offer being accepted along with consideration for each of
the parties as well as the intention of the parties to be bound by legal relation. An agreement
is said to be instituted when an offeror initiates with his willingness to be bound by legal
relations with the offeree in terms of certain conditions. Such an offer needs to be extended
with an acceptance by the other party with all the conditions contained in the same.
An agreement to be valid needs to be initiated with an offer which is valid as well as
acceptance of that offer in an absolute and unconditional manner. This can be illustrated with
the case of Smith v. Hughes (1871) LR 6 QB 597. Both the parties involved in a contract
needs to have a similar understanding of the terms of the contract. This can be supported with
the case of Household Fire and Carriage Accident Insurance Co Ltd v Grant (1879) 4 Ex D
216. However any contract which has been signed by the parties needs to have a binding
effect upon the parties and there is a presumption that the party’s had to read and understand
the documents before signing. This can be best explained with the case of L’Estange v
Graucob (1923) 2KB 394.
The offeree needs to accept the offer in an absolute manner and the acceptance needs to be
unconditional. There should not be any alterations made in the terms of the offer by the

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offeree while accepting an offer. In case the acceptance has been qualified with
supplementary alterations by the offeree being made to the actual offer then the same will not
be treated as an acceptance and it will be given the status of a counter offer.
Any alterations that an offeree might make while accepting a previously initiated offer at
the time of negotiating the main offer depicts a counter offer. The effect of a counter offer is
the nullification of the previous offer and the same being replaced by the counter offer. The
counter offer generally cancels the previous offer and replaces the same. This can be
supported with the case of Hyde v Wrench [1840] EWHC Ch J90.
The parties to a contract may insert an exclusion clause for the purpose of limiting their
liability towards certain aspect of the contract which has the effect of excluding their liability
legally. This can be best explained with the case of Chapelton v Barry Urban District
Council (1940) KB 532. The exclusion clause needs to be listed as a term in a contract that
has the effect of an agreement being created between the parties limiting or excluding the
liability pertaining to the party inserting the same in relation to certain contractual obligations
he has been conferred with by virtue of the contracts. However, for the purpose of validating
the exclusion clause it needs to be brought to the awareness of the other party prior to the
execution of the contract. This can be best explained with the case of Causer v Browne
(1952) VLR 1. In case the exclusion clause has not been expressly brought to the awareness
of the party against whom it needs to be enforced and eventually has caused detriment to that
person, cannot be given the status of validity and enforceability. This can be illustrated with
the principles established in the case of Thornton v Shoe Lane Parking Ltd (1971) 2 QB
163. All the terms to the contract needs to be incorporated prior to the institution of the
contract, no additional terms can be inserted in the contract afterwards. This can be best
explained with the case of Interphoto Picture Library v Stiletto Visual Programmes Ltd
(1988) 2 WLR 615.

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Any term of the contract, which on being contravened confers the other party with the
right to repudiate the contract and bring a claim for damages against the party in
contravention in relation to the losses incurred by the party owing to the breach of such a
term can be referred to as a condition of a contract. Again, any term arising out of the
contract, that does not give a right to repudiation to the other party on being contravened by
one of the parties to the contract needs to be referred to as a warranty. These terms does not
depict the subject matter of the contract and are consequential to the contract. The breach of
warranty confers the aggrieved party to the contract with the right to claim compensation but
does not have the right to claim repudiation of the contract.
While awarding damages to a party the court would consider the situation of the parties
that has existed prior to such a contravention of the terms contract and would compensate the
parties with an objective of restoring their previous position. Compensation can be awarded
both in case of breach of warranty as well as in case of breach of a condition as per the
principles established in the case of Tabcorp Holdings Ltd v Bowen Investments Pty Ltd
[2009] HCA 8.
Application
In the present situation, prior to the analysis of the position that Flyways has been holding
over Boeing, the existence of a valid contract between them needs to be assessed. This
requires the existence of a loafer and its valid acceptance between them. Both the parties in
this situation has instituted a valid contract with the incorporation of 678 terms in the same. It
can be contended that there is a presence of a valid agreement instituted by an offer and its
acceptance and all the terms of the contract has been duly agreed upon. This makes all the
687 terms being agreed upon by the parties and being binding upon them.

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In that contract term 65 contains that the plane is required to be capable of travelling 9,000
km at a speed of 700 km per hour. Again, according to term 457, the aircraft is required to
have an in-flight video system that has the capability of showing 27 entertainment channels to
passengers. This holds the both Flyways as well as Boeing to be obligated by the terms of the
contract and to abide by the same.
Subsequently, after the signing of the contract, Boeing has sent to Flyways a package that
contained a large number of documents, along with the contract itself and examples of the
colour scheme that will be used. In the middle of these documents there is also a new
document headed ‘Liability Limitation’, the key part of which states as follows: The liability
of Boeing Corporation Ltd for breach of contract is capped at $400,000. This depicts an
exclusion clause that has the effect of limiting the liability of Boeing and the same can be
claimed and conceived from the rules discussed above. However, there were no attempts on
the part of Boeing to bring the exclusion clause to the awareness of Flyways that effects the
liability of Boeing in relation to the breach of contract to be limited to $ 400,000. This can be
supported with the case of Thornton v Shoe Lane Parking Ltd (1971) 2 QB 163. Moreover,
any term of a contract needs to be brought to the notice of the parties to the contract to ensure
its enforceability. However, the inclusion of the clause in a document that has been sent to
Flyways after the institution of the contract does not depict a valid incorporation of the
exclusion clause. Moreover, the delivering of that clause inside a big box and not expressly
informing the Flyways regarding the same will not amount in the application of the exclusion
clause being valid.
However, at the time of the delivery of the plane, the engines were as required. However,
due to certain confusion at the factory, a wrong software was loaded in the entertainment
system that has only 21 channels. A reconfiguration would require a week. This needs to be
treated as a breach of warranty as the same does not result in the subject matter of the

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contract being breached. This confers Flyways with an entitlement to claim damages and not
a termination of the contract.
Therefore, it can be stated that the Flyways will be entitled to claim compensation against
Boeing and the exclusion clause will not be applicable limiting the liability of Boeing.
Conclusion
Hence, it can be concluded that Flyways will be entitled to claim compensation against
Boeing and the exclusion clause will not be applicable limiting the liability of Boeing.
Question 2
Issue
The issues arising from the given situation is whether Bob has any claim against Mike.
Whether Bob has any claim against Tom. Whether Bob has any claim against Steve. Whether
Bob has any claim against Mary.
Rule
Any agreement having the status of enforceability in the eyes of the law and recognising
as well as controlling the rights of the parties involved depicts a contract. A contract needs to
have an agreement instituted by an offer being accepted along with consideration for each of
the parties as well as the intention of the parties to be bound by legal relation. An agreement
is said to be instituted when an offeror initiates with his willingness to be bound by legal
relations with the offeree in terms of certain conditions. Such an offer needs to be extended
with an acceptance by the other party with all the conditions contained in the same.
An agreement to be valid needs to be initiated with an offer which is valid as well as
acceptance of that offer in an absolute and unconditional manner. This can be illustrated with

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the case of Smith v. Hughes (1871) LR 6 QB 597. Both the parties involved in a contract
needs to have a similar understanding of the terms of the contract. This can be supported with
the case of Household Fire and Carriage Accident Insurance Co Ltd v Grant (1879) 4 Ex D
216.
The offeree needs to accept the offer in an absolute manner and the acceptance needs to be
unconditional. There should not be any alterations made in the terms of the offer by the
offeree while accepting an offer. In case the acceptance has been qualified with
supplementary alterations by the offeree being made to the actual offer then the same will not
be treated as an acceptance and it will be given the status of a counter offer.
Any alterations that an offeree might make while accepting a previously initiated offer at
the time of negotiating the main offer depicts a counter offer. The effect of a counter offer is
the nullification of the previous offer and the same being replaced by the counter offer. The
counter offer generally cancels the previous offer and replaces the same. This can be
supported with the case of Hyde v Wrench [1840] EWHC Ch J90.
However, any contract which has been signed by the parties needs to have a binding effect
upon the parties and there is a presumption that the party’s had to read and understand the
documents before signing. This can be best explained with the case of L’Estange v Graucob
(1923) 2KB 394.
An offer needs to be communicated to the party to whom it has been intended to reach for
the purpose of being valid. An acceptance needs to be communicated in accordance with the
requirements of the offer and may or may not have an express communication. This can be
illustrated with the case of Tonitto v Bassal (1992) 28 NSWLR 564. Again, the offer needs to
be communicated towards the offer as has been established with the principles of the case of
Felthouse v Bindley [1862] EWHC J35. For the purpose of communication of an offer and

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acceptance the postal rule needs to be referred to. This rule provides for an exception to the
general rule that the acceptance is binding when it is communicated to the offeror. The offer
is said to be accepted and the acceptance is regarded as valid as soon as the same has been
posted irrespective of its reaching the offer. This can be illustrated with the case of
Tallerman & Co Ltd v Nathan's Merchandise (Vic) Pty Ltd [1957] HCA 10.
Again, the postal rule will not be applicable in case of revocation relating to an offer. A
revocation of an offer is said to be validly effected when it has been communicated to the
offeror. This can be illustrated with the case of Byrne & Co v Leon Van Tien Hoven & Co
[1880] 5 CPD 344.
One of the most important element of a contract is the presence of a consideration for both
the parties. It has been established in the principles laid down in the case of Australian
Woollen Mills Pty Ltd v The Commonwealth [1954] HCA 20 that a contract that has been
instituted without valid consideration will not be legally enforceable. Consideration need to
be valid irrespective of it having any monetary value. It may also come in the form of a
promise. However, as per the principles established in the case of Musumeci v Winadell Pty
Ltd (1994) 34 NSWLR 723, past consideration cannot have the status of a valid
consideration. Again, when such a past consideration has been performed at the request of the
promisor to be compensated with sufficient consideration in future would be regarded as a
valid consideration. This can be illustrated with the case of Stewart v Casey [1892] 1 Ch 104.
Application
In the present situation, Bob runs a company, which manufactures and sells computer
equipment. He has been occupied with concerns regarding certain terms of the contract. On 1
January Bob receives an email from Mike Jones which signified his willingness to purchase
30 Toshiba Satellite laptops for $ 300 each, inclusive of GST, delivery and insurance. In

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response, on 2 January Bob sent an email to Mike accepting the offer, but the price would
have to be $300 plus GST. This can be treated as a valid offer by Bob but the same has not
been accepted by Mike as he has altered the terms of the offer while accepting. This
amounted to counter offer, which has the effect nullifying the original offer. This can be
supported with the case of Hyde v Wrench [1840] EWHC Ch J90.
On 3 January Mike sends an email back saying he cannot agree to that the altered terms of
Bob. On 5 January Bob then sends an email saying accepting the offer of 1 January.
However, when he sends the computers to Mike with an invoice for $9,000, Mike sends the
computers back and refuses to pay for them, saying that he has purchased computers
elsewhere. Bob does not have the option of enforcing the contract the same has never been
created validly.
On 10 January, Bob sends a letter to Tom requesting to send him 200 Pentium 5 hard-
drives at $50 each. On 12 January Tom puts a letter into the post agreeing to deliver the hard-
drives before the end of the month. According to postal rule, the offer is said to be accepted
and the acceptance is regarded as valid as soon as the letter of acceptance has been posted
irrespective of its reaching the offeror. This can be illustrated with the case of Tallerman &
Co Ltd v Nathan's Merchandise (Vic) Pty Ltd [1957] HCA 10. Hence, a contract has been
formed between Bob and Tom accepting the offer.
Bob later on found that he no longer require the hard drives, and on 14th of January sends
an email to Tom requesting to cancel the order made on 10 January. The letter by Tom
reaches Bob on the 15th of January, and the hard-drives were delivered after a few days with
an invoice amounting to $10,000, the payment of which has been refused by Bob. The
revocation of the acceptance would only be valid if the same has reached offeror before
delivery. This is because the postal rule will not be applicable in case of revocation relating to

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an offer. A revocation of an offer is said to be validly effected when it has been
communicated to the offeror. This can be illustrated with the case of Byrne & Co v Leon Van
Tien Hoven & Co [1880] 5 CPD 344.
Again, there has been an agreement between Bob and Steve where Bob has agreed to give
a computer to Steve for the purpose of being used in his travel agency. As a consideration in
this agreement the looking after of the cat’s belonging to Bob when Bob was in a holiday buy
steel has been taken as a consideration. This cannot be treated as a valid consideration which
has not been carried out for the purpose of forming a contract the future. Can father be
supported with the case of Musumeci v Winadell Pty Ltd (1994) 34 NSWLR 723.
Bob has been thinking of purchasing a delivery van. He negotiated with the sales manager
of Capital Motors, namely Mary. A form has been sent to him by Mary on a Monday
morning in which she made an offer to sell a Toyota Hilux 3000 automatic with air
conditioning for $33,000 to him. The top sheet of the form had a line which says “I agree to
the purchase of this vehicle as specified in this document” and with a blank space for a
signature and date. Bob kept the papers aside on his desk, and it consequently it got mixed up
with piles of other paperwork. Later during the day, he put his signature on the form, thinking
it to be the front page of some other contract he had been sent by a supplier of microchips. He
extends it to his office manager, Tim, and asks him to fax the same. However, any contract
which has been signed by the parties needs to have a binding effect upon the parties and there
is a presumption that the parties had read and understand the documents before signing. This
can be best explained with the case of L’Estange v Graucob (1923) 2KB 394. Hence, the
conract has been validly created and the same cannot be refused by Bob.

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Conclusion
Hence, it can be concluded that Bob does not have a claim against Mike. Bob is liable to
Tom. Bob has no claim against Steve. Bob is liable to Mary.

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Bibliography
Australian Woollen Mills Pty Ltd v The Commonwealth [1954] HCA 20
Byrne & Co v Leon Van Tien Hoven & Co [1880] 5 CPD 344
Causer v Browne (1952) VLR 1
Chapelton v Barry Urban District Council (1940) KB 532
Felthouse v Bindley [1862] EWHC J35
Household Fire and Carriage Accident Insurance Co Ltd v Grant (1879) 4 Ex D 216
Hyde v Wrench [1840] EWHC Ch J90
Interphoto Picture Library v Stiletto Visual Programmes Ltd (1988) 2 WLR 615
L’Estange v Graucob (1923) 2KB 394
Musumeci v Winadell Pty Ltd (1994) 34 NSWLR 723
Smith v. Hughes (1871) LR 6 QB 597
Stewart v Casey [1892] 1 Ch 104
Tabcorp Holdings Ltd v Bowen Investments Pty Ltd [2009] HCA 8
Tallerman & Co Ltd v Nathan's Merchandise (Vic) Pty Ltd [1957] HCA 10
Thornton v Shoe Lane Parking Ltd (1971) 2 QB 163
Tonitto v Bassal (1992) 28 NSWLR 564