Business Law: Contract Formation, Consideration, Exclusion Clauses and Sale of Goods

This article discusses various aspects of Business Law such as contract formation, consideration, exclusion clauses and sale of goods. It includes solved case studies and relevant case laws to provide expert guidance on the subject.

Running Head: BUSINESS LAW
BUSINESS LAW
Name of the Student:
Name of the University:
Author Note

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Answer One:
Issue
The issue that has been identified in the given scenario is whether the contract of selling the
flower business is a valid one and whether there was intention of the parties to be legally bound
by the terms of the contract.
Rule:
It can be mentioned that the intention create legal relation is an essential element for the
formation of a contract. A contract will only be legally binding upon the parties if it is assessed
by the courts that parties involved in the contract had the intention to be legally bound. The
courts generally analyze and assess this element to give validity to the contract. The objective
test is applied to assess intention to create legal relations. Previously it had been held by the
courts in that domestic or family contract are not enforceable as the courts assumed that the
parties to the domestic agreements did not intend to create legal relations. This had been
illustrated in the case. However, this view of the courts of considering the assumptions of while
determining the intention of the parties had been rejected. In the Ermogenous case it had been
held by the court that the courts are not to consider any assumptions while determining the intent
of the parties.
Relevant cases:
The cases that are relevant to the given scenario are:
Carlill v Carbolic Smoke Ball Company [1893] – objective test
Balfour v Balfour- domestic agreement

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Ermogenous v Greek Orthodox Community of SA Inc (2002) 209 CLR 95
Application:
By analyzing the facts of the case it can be said that if Ali sues Charlie in the court for breach of
a term of the contract he is likely to succeed. As held in the Ermogenous case, it can be stated
that the courts will not consider ay presumptions that the parties did not intend to be legally
bound. Thus as it had been clearly mentioned in the terms of the contract that Ali was prohibited
to open a business within a radius kilometers, Ali’s act of opening the flower shop within one
kilometer of Charlie’s shop would constitute breach of contract.
Answer 2
Issue
The issue that has been identified in the given scenario is whether Nick is liable to pay
consideration to the police.
Rule
It can be stated that a person is not required to consideration to party if it is established that the
party had an existing public duty to perform the same duty. Thus this means that the
consideration is not required to be paid to police personnel as it is already their duty to provide
protection to the people of the society. However, it is assessed that someone exceeded their
public duty, consideration is required to be paid to such person.
Relevant case laws

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Collins v Godefroy (1831) 1 B & Ad 950- No consideration to be paid where there is an existing
public duty of the party.
Glassbrooke Bros v Glamorgan County Council [1925] AC 270- Consideration to be paid for
exceeding public duties
Application
Nick is required to pay consideration to the police as he wanted a police officer to be posted
outside his entrance. This is exceeding the public duty as per the decision of the case
Glassbrooke Bros v Glamorgan County Council. Thus the police department can sue Nick.
Answer three:
Issue:
The issue that has been identified in the case whether Helen can sue mike for paying part
consideration.
Rule:
It can be stated that part consideration cannot be held to be good consideration. If a person owes
money to a party and he pays only a part of the entire amount in full settlement, the consideration
cannot be held to be good consideration for a promise to give up the claim of the rest of the
amount. However, it can be stated that a part consideration would be considered to be valid and
would be binding on the creditor, if the debtor at the request of the creditor provides fresh or new
consideration. Part consideration would be held to be valid if the creditor accepts from the
debtor:

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 Part of the entire amount on a date which is earlier than the due date
 Service or chattel instead of the money
 Part payment in a different place.
Relevant case law
Pinnel’s case (1602) 77 ER 237 – part payment of consideration
Application
Thus by analyzing the facts of the case it can be stated that Helen will not win in court if she sues
Mike for breach of contract. Mike had provided chattel instead of money. He had fixed the
steering wheel of the car by relying on the promise of Helen to forgo the outstanding amount.
Answer Four
Issue:
The issue that has been identified in the given scenario is whether term existing in the unsigned
contract is legally binding upon the parties.
Rule:
Terms in an unsigned contract can only be enforceable if it is established that such term had been
brought to the attention of the parties at the time of entering the contract. Whether or not the
terms would be enforceable depends on whether reasonable notice had been given by the party
who wishes to enforce such term. If the other party had been given reasonable notice the term
would be binding upon the parties. The red hand rule can be applied to assess whether the terms
are unusual and whether such term can be enforced upon the parties. This rule states that the

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more unreasonable the clause, the greater the notice should be given by the party who wishes to
enforce such term.
Relevant case law
Spurling v Bradshaw Ltd [1956] 1 WLR 461 – Red hand rule for incorporation of Unusual term
Parker v South Eastern Railway Co 2 CPD 416- Requirement to give reasonable notice for
incorporation of term
Application
Thus by analyzing the facts of the case it can be stated that Lizzie is likely to win the case if the
DVD store sues Lizzzie. There were numerous terms in the advertisement. The DVD store did
not give reasonable notice to Lizzie about the clause which mentioned the penalty provision for
failing to return the DVD. This term can be considered to an unusual one as the normal rental fee
of DVD is 5 dollars per day.
Answer Five:
Issue:
The issue that can be identified in this given scenario is whether the dry cleaners can rely on the
exclusion clause and limit their liability.
Rule
It can be stated that exclusion clauses are incorporated into contracts for the purpose of limiting
or restricting the liability of the party which incorporates such clause. An exclusion clause can be
held to be valid if reasonable notice of such clause had been given to the parties. However, in

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case of a signed contract the terms of the contract are held to be binding upon the party who
signs it irrespective of the fact whether such party has read the terms or not.
Relevant Case Laws
Parker v South Eastern Railway Co 2 CPD 416 – Reasonable notice of the term
L'Estrange v Graucob [1934] 2 KB 394 – written contract
Application
By analyzing the facts of the case it can be stated that Tori would not be successful in claiming
damages from the dry cleaners. Tori had signed the contract which contained the clause that the
dry cleaners would not be responsible for any damage caused to the dress. By the application of
the L'Estrange v Graucob case it can be stated that terms of the contract would be binding on the
party if such party signs the contract irrespective of whether such party had read the terms or not.
Therefore she cannot sue the Dry cleaners for damaging the dress.
Answer Six
Issue
The issue that has been identified in the given case study is whether Sanders can make a claim
against Mr Smith for breaching the terms of the contract.
Rule
It has been provided in section 19 of the Goods Act Victoria 1958 that none of the indirect
conditions regarding the sale of goods are to be considered except in cases when an individual
buys such goods through suggestions of someone and especially when such suggestion has been

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given in regards to the purpose of the goods to be used. However, it can be stated that the
aforementioned section does not imply that the goods have dissimilar deception which would
make such goods unsuitable for the pupose they are purchased.
Relevant Case laws:
In the case David Jones v Willis (1934) 52 CLR 110 the buyer had purchased the goods by
relying on the information given by the seller in relation to the purpose of the goods. However, it
turned out that the goods were not fit for the purpose that they were bought. Thus the
aforementioned section had been violated in this case.
Application
Thus by analyzing the facts of the case it can be stated that Sanders can claim damages from Mr.
Smith as she had relied on the expert advice of Mr. Smith. She had clearly specified the purpose
for which she had bought the printer. However the machine could not handle the amount of tasks
and had become slow. Therefore she can enforce her rights against Mr. Smith

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Reference List:
Carlill v Carbolic Smoke Ball Company [1893]
Balfour v Balfour
rmogenous v Greek Orthodox Community of SA Inc (2002) 209 CLR 95
Collins v Godefroy (1831) 1 B & Ad 950
Glassbrooke Bros v Glamorgan County Council [1925] AC 270
Pinnel’s case (1602) 77 ER 237
Spurling v Bradshaw Ltd [1956] 1 WLR 461
Parker v South Eastern Railway Co 2 CPD 416
L'Estrange v Graucob [1934] 2 KB 394
Jones v Willis (1934) 52 CLR 110

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