Business Law

This document discusses the formation of a valid contract and the use of exclusion clauses in business law. It explains the essential requirements of a valid contract and provides examples from relevant case law. It also discusses the effectiveness of exclusion clauses and the rights of consumers under the Competition and Consumer Act. The document concludes with a discussion on the liability of Span and Spic in relation to damage caused to a suit. Expert guidance and study material on business law is available on Desklib.

Running head: BUSINESS LAW
Business Law
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1BUSINESS LAW
Part A
Issue
The issue in this present scenario is whether any valid contract has been created between
John and Span and Spic.
Rule
The formation of a contract for being valid is required to be affected in compliance with
all the essential requirements of a valid contract as has been provided under common law.
Under the common law in case a contract has been validly created, it becomes legally
enforceable upon the parties who has been instituting the contract and creates rights and
obligations of these parties under the terms and conditions of the contract. This can be
illustrated with the case of Rose & Frank Co. v JR Crompton & Bros Ltd. [1923] 2 K.B.
2611. The first requirement of a valid contract is an offer that has been initiated by one party
to the other. The formation of a valid contract mandates an existence upon offer, which
indicates display of eagerness of a person to bind himself as well as the other towards certain
terms, with a view to obtain the consent of the other person towards the same. This can be
illustrated with the case of George Hudson Holdings Ltd v Rudder (1973) 1282. The second
requisite of a valid contract is the acceptance. Acceptance signifies the assent of a person
towards the conditions that has been provided under the offer in an absolute and unqualified
manner. Such an assent is required to be communicated to the person making the offer. This
can be illustrated with the case of Robophone Facilities Ltd v. Blank [1966] 3 All E.R. 1283.
This offer when accompanied with an acceptance forms of valid contract. However a mere
invitation to treat cannot be treated as a valid offer, it is an invitation towards the person
making the offer to come up with an offer which will further be required to be accepted. This
1 Rose & Frank Co. v JR Crompton & Bros Ltd. [1923] 2 K.B. 261
2 George Hudson Holdings Ltd v Rudder (1973) 128
3 Robophone Facilities Ltd v. Blank [1966] 3 All E.R. 128

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can further be illustrated with the case of Harris v Nickerson (1873) LR8QB 2864. The third
requisite that is required to be present for the purpose of instituting a valid contract is a
consideration. Consideration can be insufficient but it needs to be present. Efficiency of the
consideration is not relevant the presence of it is relevant. This can be illustrated with the
case of White v Bluett (1853) 2 WR 755. The fourth requisite of the institution of a valid
contract is the intention of the parties to create obligations of legal nature. Parties to the
contract are required to have the intention of creating a valid contract. This can be illustrated
with the case of Ermogenous v Greek Orthodox Community of SA Inc [2002] HCA 86.
Application
In the present situation, John has entered the premises of the Span and Spic for the purpose
of dry cleaning his suit. The notice board of the shop has laid down the prices of the services
being rendered in that shop along with the prices. This can be treated as an invitation to offer
as applying the case of Harris v Nickerson7, which has led to the offer being made by John
for the purpose of getting his suit cleaned by the dry cleaners. This can be treated as a valid
contract as under the principles of the case of George Hudson Holdings Ltd v Rudder8. The
Span and Spic has accepted the has accepted the offer of cleaning the suit of John by issuing
a receipt to that effect. This can be treated as a valid acceptance as under the principle of the
case of Robophone Facilities Ltd v. Blank9. Again, the price of the cleaning is the
consideration for the Span and Spic and the cleaning of the suit is the consideration for John
as can be supported with the case of White v Bluett10. The assent of John to choose a
particular service and the issuance of receipt by the Span and Spic points towards intention of
the parties to form a legal obligation as can be supported with the case of Ermogenous v
4 Harris v Nickerson (1873) LR8QB 286
5 White v Bluett (1853) 2 WR 75
6 Ermogenous v Greek Orthodox Community of SA Inc [2002] HCA 8
7 Harris v Nickerson (1873) LR8QB 286
8 George Hudson Holdings Ltd v Rudder (1973) 128
9 Robophone Facilities Ltd v. Blank [1966] 3 All E.R. 128
10 White v Bluett (1853) 2 WR 75

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Greek Orthodox Community of SA Inc11. Hence, it can be stated that all the requisites of a
valid contract has been abided by and a contract has been validly created by the parties. This
has given rise to the obligation as among the parties to carry out their part of the contract as
can be supported with the case of Rose & Frank Co. v JR Crompton & Bros Ltd12.
Conclusion
Hence, it can be concluded that a valid contract has been created between John and Span
and Spic.
Part B
Issue
The issue in this present scenario is whether Span and Spic are legally entitled to rely on
the clause contained on the back of John’s receipt to avoid liability in relation to the damage
caused to his suit.
Rule
The exclusion clause is to be construed as a condition that has been inserted in a contract
for the purpose of putting restriction underwrites of the other party pertaining to the contract.
An exclusion clause to be considered as effective needs to be included in the contract. There
is several ways of including such a clause in a contract. Exclusion clause can be included in a
contract by way of affixing signature in the contract document, which contains the clause.
This can be illustrated with the case of L'Estrange v F Graucob Ltd [1934] 2 KB 39413. For
the purpose of imposing and in forcing of the exclusion clause the notice of the same needs to
be extended to the other party prior to the formation of the contract. The same can be
illustrated with the case of Thornton v Shoe Lane Parking Ltd [1970] EWCA Civ 214.
11 Ermogenous v Greek Orthodox Community of SA Inc [2002] HCA 8
12 Rose & Frank Co. v JR Crompton & Bros Ltd. [1923] 2 K.B. 261
13 L'Estrange v F Graucob Ltd [1934] 2 KB 394
14 Thornton v Shoe Lane Parking Ltd [1970] EWCA Civ 2

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However if the same kind of contract has been carried out regularly it will be treated as an
effective notice and the exclusion clause will hold good. The same can be illustrated with the
case of McCutcheon v David MacBrayne Ltd [1964] UKHL 415.
Under section 3 of the Competition and Consumer Act 2010 (Cth)16 (Act), a person needs
to be availing and acquiring goods amounting to a price which does not exceeds $40,000. In
addition qualification of a person as a consumer the goods required to be obtained for the
purpose of being used for domestic or personal purposes. A person availing goods for
commercial or business purposes will not be treated as a consumer under the act. Any person
who can be construed as a consumer under this section will have the right to avail all the
benefits and protections under this act. This can be last created with the case of Australian
Competition and Consumer Commission v Woolworths Limited [2016] FCA 4417.
Under section 64 of the Act 18a person cannot deny the liabilities that he has for the
purpose of the guarantees that are insured by this act as a supplier by the formation for
insertion of any clause within the contract that indicates the contrary. Any term in the
contract that excludes a liability towards the guarantee insured by this act towards a supplier
will not be considered as valid. Under this section any exclusion restriction on modification
of the guarantees insured under this act will be treated as void even if it has been supported
by a valid contract. This can be illustrated with the case of ACCC v Valve Corporation (No
7) [2016] FCA 155319.
Application
In the present situation, on being approached by John for the purpose of availing their
cleaning services, the Span and Spic has provided John with a receipt that has been issued for
15 McCutcheon v David MacBrayne Ltd [1964] UKHL 4
16 The Competition and Consumer Act 2010 (Cth), s. 3
17 Australian Competition and Consumer Commission v Woolworths Limited [2016] FCA 44
18 The Competition and Consumer Act 2010 (Cth), s. 64
19 ACCC v Valve Corporation (No 7) [2016] FCA 1553

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the purpose of cleaning of the suit belonging to John. This receipt has been contained with
the clause that restricts any liability of Span and Spic with respect to any damages that might
be caused to the suit in the furtherance of the cleaning process. This can be construed to be an
exclusion clause restricting the liability of Span and Spic. But the same cannot be imposed
under common law as it has not been brought to the notice of John prior to the creation of the
contract as the receipt has been issued after the creation of the contract as can be supported
by the case of Thornton v Shoe Lane Parking Ltd20.
On the other hand, the cost of cleaning the suit cannot exceed $ 40000 and John has been
cleaning the suit for personal use that is for his own dressing purposes. This will render him
to be a consumer under the section 3 of the Act21. Moreover, the supplier has the
responsibility of the goods that has been kept with him for the purpose being subjected to his
services and he does not have the right or authority to deny that responsibility as under
section 64 of the Act22. This can further be supported with the case of ACCC v Valve
Corporation23.
Conclusion
Hence, it can be concluded that Span and Spic are not legally entitled to rely on the clause
contained on the back of John’s receipt to avoid liability in relation to the damage caused to
his suit.
20 Thornton v Shoe Lane Parking Ltd [1970] EWCA Civ 2
21 The Competition and Consumer Act 2010 (Cth), s. 3
22 The Competition and Consumer Act 2010 (Cth)
23 ACCC v Valve Corporation (No 7) [2016] FCA 1553

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Reference list
ACCC v Valve Corporation (No 7) [2016] FCA 1553
Australian Competition and Consumer Commission v Woolworths Limited [2016] FCA 44
Ermogenous v Greek Orthodox Community of SA Inc [2002] HCA 8
George Hudson Holdings Ltd v Rudder (1973) 128
Harris v Nickerson (1873) LR8QB 286
L'Estrange v F Graucob Ltd [1934] 2 KB 394
McCutcheon v David MacBrayne Ltd [1964] UKHL 4
Robophone Facilities Ltd v. Blank [1966] 3 All E.R. 128
Rose & Frank Co. v JR Crompton & Bros Ltd. [1923] 2 K.B. 261
The Competition and Consumer Act 2010 (Cth)
Thornton v Shoe Lane Parking Ltd [1970] EWCA Civ 2
White v Bluett (1853) 2 WR 75