Case Study Analysis

This case study analysis examines a contract dispute between John and a dry cleaning company, Spic and Span. It explores the necessary elements of a valid contract and the presence of an exclusion clause. The analysis concludes that a valid contract exists between the parties and that the exclusion clause cannot be used to avoid liability for damage caused to John's suit.

Running head: CASE STUDY ANALYSIS
CASE STUDY ANALYSIS
Name of the Student:
Name of the University:
Author Note:

1
CASE STUDY ANALYSIS
Part A:
Issue:
The issue involved in this case study is that whether there lies any contract between John
and dry cleaning company Spic and Span.
Laws:
Under the common law, in order to constitute a valid contract, all its necessary
ingredients must be present (Stone and Devenney 2017 ). As per the common law, a contract is
validated by a legally enforceable agreement between the parties to the contract and such
agreement provides the rights and obligations of the parties depending upon the terms and
condition of the contract (McKendrick and Liu 2015). This has been put forwarded in the leading
case of Commonwealth Bank of Australia v Barker [2014] HCA 32.
The first essential of a valid contract is the agreement between the parties. An agreement
consists of an offer and its acceptance. Offer denotes the willingness of a party to bind himself in
a contract and it must be communicated to the other party. It was observed in the case of
Australian Woollen Mills Pty Ltd v The Commonwealth [1954] HCA 20. However, to create
an agreement, such offer must be accepted by the other party. The acceptance must corresponds
with the Offer as observed in the case of Tonitto v Bassal [1992] 28 NSWLR 564 and it must
be unequivocal and must be communicated to the offeror as seen in Spencer’s Pictures Ltd v
Cosens [1918] NSWStRp 1 case. However, an offer must be differentiated from an invitation of
offer where the latter invites people in general to respond to such invitation and make offer as
found in the case of Westminster Estates Pty Ltd v Calleja [1970] 1 NSWR 526.

2
CASE STUDY ANALYSIS
The second essential criterion of a valid contract is the presence of consideration. It can
be of any amount but it must be present. The case of Beaton v McDivitt [1987] 13 NSWLR 162
states that the consideration must not be money always but it can be anything from promise to do
something or not to do anything.
The third condition is the capacity of the parties to enter into a contract. Certain persons
like minors, drunken persons and the mentally challenged people are barred from entering into a
contract. It is shown in the case of Gibbons v Wright [1954] HCA 17. When the party to a
contract does not have the required capacity, as per the decision of High Court of Australia in the
case of Blomley v Ryan [1956] HCA 81, such contract is void.
The fourth criterion of a valid contract is the intention of the parties to create legal
relations. The conduct of the parties or their behavior can be used by the court to determine the
presence of intention of the parties as given in the case of Ermogenous v Greek Orthodox
Community of SA Inc [2002] HCA 8.
The final condition of the contract is the certainty such that the contract must be certain,
clear, complete as well as binding on the parties. It is provided in the case of Upper Hunter
County District Council v Australian Chilling and Freezing Co Ltd [1968] HCA 8. When all
the five conditions are fulfilled, then the contract is said to be valid and legally enforceable
(McKendrick and Liu 2015).
Application:
\ In the given case, John is a business graduate and is working in a prestigious firm. It
shows that he is not a minor and has required capacity to enter into a contract. When John has
entered into the Spic and Span shop for dry cleaning his suit, he saw the notice board displaying

3
CASE STUDY ANALYSIS
the charges of the various services that are rendered by the shop. Hence as per the decision of the
court of appeal in the case of Pharmaceutical Society of GB v Boots Cash Chemists
(Southern) Ltd [1956] EWCA 6, the notice board can be treated as the invitation to offer, to
which John has responded by giving them his suit to get it dry cleaned. It creates the offer by
John. When the shop accepted his offer by agreeing to do the dry cleaning, it has accepted the
offer of John. Thus a valid agreement is created between John and the Spic and Span shop as per
R v Clarke [1927] HCA 47. John has chosen the premium cleaning option and confirmed it with
the shop assistant who informed him that no harm will be caused to his suit as they use finest
quality machines and chemicals for dry cleaning. This showed that John has intention to create
the contract with the shop. Moreover, he was issued a receipt indicating his customer number
and also the amount due to be paid when the suit will be collected. Thus all the necessities of a
valid contract is present and hence the contract is binding on the parties (McKendrick and Liu
2015). Thus the parties are bound by the rights and duties as given in the agreement of the
contract.
Conclusion:\
Thus, it is clear that a contract has been created between the parties, that is John and the
Spic and Span.
Part B:
Issue:
The issues involved in this case is whether Spic and Span can rely on the clause given at
the backside of the receipt in order to avoid its liability for the damage caused by it to the suit.

4
CASE STUDY ANALYSIS
Laws/Rules:
In contract, an exclusion clause is a term that aims to limit or exclude the liability of a
party on the breach of such contract (Latimer 2016). It is generally used to refer to statements
that are made to limit or restrict the liability of a party in the event of loss or damage by such
party. As per the contract law, the party must have knowledge of such exclusion clause when the
contract is formed. This can be done by actual notice by making the other party to read it or by
constructive notice when the party may not be aware of such clause but the other party has done
everything to bring it in the attention of other party. It is given in the case of Darlington Futures
Ltd v Delco Australia Pty Ltd (1986) 161 CLR 500. However if the same kind of contract is
being carried out in a regular manner, then it will regarded as an effective notice to the party and
it will be valid.
As per section 18 of the Australian Consumer Law (ACL) contained in Schedule 2 of
the Competition and Consumer Act 2010 (Cth), restricts misleading and deceptive conduct in
trade or commerce and provides that certain conditions cannot be excluded in the transactions
related to sale of goods or delivery of service in consumer transactions.
Negligence results into personal loss or injury or damage and hence the intention to
exclude liability for the loss due to negligence must be clearly mentioned. Moreover, under
section 60 of the Australian Consumer law, for contracts in relation to supply of services, the
clause that the company will be taking any responsibility for loss or damage due to any cause is
void as it is presumed that the service will be done with proper care and skill.

5
CASE STUDY ANALYSIS
Application:
In the present case, when John visited the shop of Spic and Span for getting his suit dry
cleaning, he had been issued a receipt stating the amount of money to be paid while taking the
delivery of the suit. However, at the back side of the receipt, a statement is there which states
that Spic and Span will not b liable for any damage caused to the garment. This statement on the
back of the receipt amounts to an exclusion clause. This clause limits the liability of the Spic and
Span on the causing of causing damage to the dress. As per the Australian Consumer Law, such
clause is invalid as it is presumed that in case of any contract for delivery of services, it is
implied that the services will be rendered with carefully such that no damage is caused. Here the
clause as per the mentioned law is invalid as Spic and Span has not performed its service
carefully and skilfully. Thus it has breached section 60 of Australian Consumer law as found in
the case of Thornton v Shoe Lane Parking Ltd [1970] EWCA Civ 2. Moreover, the service
render has the duty to perform his work without causing any damage, hence the liability of
causing damage cannot be denied as laid down in the case of ACCC v Valve Corporation (No
7) [2016] FCA 1553.
Conclusion:
Thus it can be concluded, Spic and Span cannot deny its liability for causing damage to
the suit of John by relying on the exclusion clause provided at the back side of the receipt.

6
CASE STUDY ANALYSIS
References:
ACCC v Valve Corporation (No 7) [2016] FCA 1553
Australian Consumer Law (ACL)
Australian Woollen Mills Pty Ltd v The Commonwealth [1954] HCA 20
Beaton v McDivitt [1987] 13 NSWLR 162
Blomley v Ryan [1956] HCA 81
Commonwealth Bank of Australia v Barker [2014] HCA 32
Darlington Futures Ltd v Delco Australia Pty Ltd (1986) 161 CLR 500
Ermogenous v Greek Orthodox Community of SA Inc [2002] HCA 8
Gibbons v Wright [1954] HCA 17
Latimer, P., 2016. Protecting consumers from unfair contract terms: Australian comparisons.
McKendrick, E. and Liu, Q., 2015. Contract Law: Australian Edition. Macmillan International
Higher Education.
Pharmaceutical Society of GB v Boots Cash Chemists (Southern) Ltd [1956] EWCA 6
R v Clarke [1927] HCA 47
Spencer’s Pictures Ltd v Cosens [1918] NSWStRp 1 case
Stone, R. and Devenney, J., 2017. The modern law of contract. Routledge.

7
CASE STUDY ANALYSIS
The Competition and Consumer Act 2010 (Cth)
Thornton v Shoe Lane Parking Ltd [1970] EWCA Civ 2
Tonitto v Bassal [1992] 28 NSWLR 564
Upper Hunter County District Council v Australian Chilling and Freezing Co Ltd [1968] HCA 8
Westminster Estates Pty Ltd v Calleja [1970] 1 NSWR 526