Understanding Contract Law and Consumer Protection in Australia

This article discusses the essential elements of a contractual agreement, including intention, offer & acceptance, and consideration. It also explains the differences between warranties and conditions, and the importance of collateral contracts. Additionally, it explores the Australian Consumer Law and the protections it provides to consumers, including the right to demand repair and replacement charges and take legal action against suppliers who breach guarantees.

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

1BUSINESS LAW
Question 1
Part A
Issue
Can the issued contract that is between Scenic and Vincenzo Franco made invalid in view
of the various regulations of contract law?
Rule
Three elements that are considered essential for the formation of a contractual agreement
are intention, offer & acceptance, and consideration1. Such agreements can be verified by
factoring in things like capacity, legality and lastly, genuine consent – undue influence, duress,
unconscionability, mistake and misinterpretation2.
The element that is always present in any agreements made commercially is Interest, as
stated in Merritt v Merritt3 case.
AGC (Advances) Ltd v McWhirter4 case cleared the definition of Offer as words of
declaration made to a person by another. Such words of declaration are tied in legal bounds and
cannot be broken in any way.
Thomas v Thomas5 case clarified the meaning of consideration as a thing that surely
holds some sort of value. In order to forge a valid contract, such considerations (even when
insufficient) have to be given.
1 Smith, Joshuab. "Contract law in Australia" (2018) Ethos: Official Publication of the Law Society of the
Australian Capital Territory 248: 60.
2 Poole, Jill. Textbook on contract law. (Oxford University Press, 2016).
3 [1970] EWCA Civ 6.
4 (1977) 1 BLR 9454
5 (1842) 2 QB 851

2BUSINESS LAW
A legal consent that is given to the offering party by the offered party is rightfully called
an acceptance. Such a declaration solidifies the contracts and tied it with legal bounds; as defined
in Administration of PNG v Leahy6 case.
Consent of the party that has been offered the contract must be established by their own
free will and must be genuine7. Such consents must not be a result of unconscionability, duress,
misrepresentation, undue influence and mistake8.
In the case of a contractual breach, the cost of damage and other penalties for violation of
rights can easily be taken by the party who suffered the damage. The Addis v Gramophone9 case
has given a clearer picture on this context stating that when a contractual agreement is breached,
damages and penalties are instituted such that the position and welfare of the affected party are
strongly reestablished; even in cases of injunction, recession and specific performance.
The Cutter and Powell10 case have introduced us to the several ways that would help
bring a contract to a closure. Some of these methods are mutual consent, breach, frustration,
discharge and performance11.
For a person to enter into a contract, he/she must be legally capable of such a feat. Minors
and people with an unsound mind cannot legally be the recipients who can participate and form
an agreement. The subject of contract formation must also be legal in order for it to be
enforced12.
6 (1961) 105 CLR 6
7 Edwards, Alexander H. "Leading cases in contract law." (2017) Bar News: The Journal of the NSW Bar Association
Summer 61.
8 McKendrick, Ewan. Contract law: text, cases, and materials. (Oxford University Press (UK), 2014.)
9 [1909] AC 488
10 [1795] EWHC KB J13.
11 Eisenberg, Melvin A. Foundational Principles of Contract Law. (Oxford University Press, 2018).
12 Knapp, Charles L., Nathan M. Crystal, and Harry G. Prince. Problems in Contract Law: cases and materials.
(Wolters Kluwer Law & Business, 2016).

3BUSINESS LAW
Application
From the situation that is given to us, it is understood that all the situations that would
help make up a contract are satisfied by the parties. The offer for a $350 hotel room was kept for
consideration by Scenic and the acceptance by the client, Franco. Franco had accepted the offer
even though this particular one is especially expensive though it was inclusive of all taxes and
services. Being a commercial agreement, it’s strengthened by Merritt v Merritt, for $350/night.
Further elements of legality of the contract are satisfied when considering the facts that
both the parties are of sound mental health and aren’t minors and the motive is legal by all
means.
The managers as Scenic knew from the very start that Franco is not very proficient in the
English language and whether or not he had understood the managers and their terms of the
contract are unknown. Such an act is clearly unconscionable, weakening the legitimacy of the
contract. Franco can, by all means, declare it void.
It is given that on entering his hotel room, Franco discovered that unlike the promises
made to him by the managers in their contract, the room lacked a panoramic view and balcony. It
can be claimed by Scenic that such terms were not there in the contract to begin with but in this
situation, such a claim is impossible considering the amount of time, discussion, expertise and
trust that was put into the contract’s formation. Franco can, by all means, declare a breach of
contract and end it.
As in the Addis v Gramophone case, Franco has the right to claim penalties and damages
for the contractual breach. He has the right to break the contract and demand a refund.

4BUSINESS LAW
Conclusion
Scenic and Vencenzo Franco’s contractual agreement can be declared invalid when
taking the laws of contract into consideration.
Question 1
Part B
Issue
 The situation that is given to us here is to differentiate between a contract and
representation.
 Finding out the importance of a collateral contract.
 Determining distinctions between warranties and conditions
Rule
The level of representation shown in contractual terms and agreements can be verified by
when examining the situation with numerous tests. Such tests include, time passes after the
negotiation, parties and their expertise, the Parole and evidence rule, and the terms and their
significance.
The amount of time given or spent after a contractual negotiation is done can rightfully
be considered either a representation or in lesser cases, a simple term as declared in Routledge v
Mckay13 case.
13 [1954] 1 WLR 615

5BUSINESS LAW
In cases when a party involved in a contractual agreement has made the importance of a
particular statement clearly; such a statement will then be considered a term and not simply a
representation as in the Ecay v Godfrey14 case.
In a contract which is documented, any unrecorded statement can always be considered a
mere representation, as said in the Parole Evidence Rule15.
Warranties and Conditions are the two distinctive types in which we can largely
categorize terms of a contract. Conditions are said to be the most important of all contractual
terms. When terms of a contract are breached, then the party that has suffered has the right to
demand compensation or even end the contract as defined in Poussard v Spiers16 case. Whereas,
the statements that have not been a basis for the creation of the said contract but are considered a
part anyway are called warranties. As stated in the Bettini v Gye17 case, breach of warranties will
entitle the aggrieved to compensation, but the aggrieved will not be able to end the contract or
call of a breach.
As stated in Dick Bentley v Harold Smith Motors18, if the making a statement is more
knowledgeable about it, the statement will automatically become a term.
A newer contract formed to support the original one is termed as a collateral contract,
such a contract may be used by parties in the form of a consideration for the original one. If
desired, the terms and conditions specified in the collateral contract can always be enforced19.
14 [1947] 80 Lloyds Rep 286
15 Poole, Jill. Textbook on contract law. (Oxford University Press, 2016).
16 (1876) 1 QBD 410
17 1876 QBD 183
18 [1965] 1 WLR 623
19 McKendrick, Ewan, and Qiao Liu. Contract Law: Australian Edition. (Macmillan International Higher Education,
2015).

6BUSINESS LAW
Application
Since the managers of Scenic had more knowledge regarding the placement and
arrangement of rooms and including the amount of discussion, expertise and time that was put
into formation of the contract, the availability of a panoramic view and a proper balcony can and
will be considered as a contractual term when it comes to Scenic’s contract with Franco.
Managers of Scenic understood the fact that the only reason why Franco agreed to hold such an
elaborate expense for a hotel room was due to his desire of a panoramic view along with a
private balcony and hence, just after the completion of the negotiation, the room booking was
formally done.
But, when it comes to the situation in hand, no such collateral contractual term is actually
noticed. Hence, with our study of the various warranties and conditions, the mere factor of
having a panoramic view along with a balcony can legally be declared a contractual condition.
The reason for it is simply the importance and necessity of those factors for Franco, who would
surely have not initiated such an extravagant deal if not for those factors. Since, now that it is
established that the factor troubling Franco is essentially a condition, he can, by all means,
demand a claim against it.
Conclusion
 The study confirms that the availability of panoramic view along with a private balcony
is most definitely a contractual term.
 The presence of collateral contracts is not seen.
 Panoramic view along with the presence of a private balcony is most definitely not
simply a warranty but a condition.

7BUSINESS LAW
Question 2
Answer
Australian Competition and Consumer Act 2001(Cth) includes several laws in its books
and one of them is Australian Consumer Law. A consumer by 3rd Section of this law is stated to
be an individual who purchases household as well as domestic goods and goods for personal
recreation under the marginal price of $4000020. Hence, such an individual, who has met the
above condition, is under the staunch protection and care of the Consumer Law. In the case
presented to us, Franco being an individual who has met the above criteria and having purchased
a suitable amount of household and domestic material below a price tag of $40000 is also under
the protection of ACL that provide such distinctively applicable consumer guarantees in both
goods and in services. The laws for goods and services are in the sections 51-5921 and 60-6322
respectively. In such laws, it’s clear that even in cases with guarantees, the laws presented to us
by the court and its legal verdicts stand strong. S 64 in ACL23 has made it very clear that a
contractual document cannot leave out or excluded even when exclusion clauses are in use.
Franco is seen to have to have formulated a service contract with Scenic, and as a
consumer, he is by all means entitled to all ACL guarantees. The importance of a purpose in such
contractual agreements is also solidified in the S 61. The managerial staff knew that the sole
reason for Franco investing a huge amount of money on the hotel room was to experience a
panoramic view and have a private balcony and the unavailability of such a service in the hotel
20 Australian Consumer Law s 3
21 Australian Consumer Law s51-59
22 Australian Consumer Law 60-63
23 Australian Consumer Law 64

8BUSINESS LAW
was known to the staff, and yet this led to the formation of a false contract. Breach of Section 61
is clear in this example24.
Section 64 further solidifies the presence of a consumer by giving them the right to
demand repair and replacement charges if a breach in consumer rights or simple contractual
rights is noticed. Franco’s demand for a refund has to be heard and executed by the hotel staff for
they have failed to comply with consumer guarantees.
Franco can, by all means, resort to a certain few features that are handed to him by the
various consumer laws, fortifying his presence and rights over duties and compensations that
rightfully belong to him and affect him in far greater ways than just a loss of money. Several acts
in the Australian Consumers Law have successfully helped the consumers establish their
dominance towards things that they have their right over and not be overpowered or
overwhelmed by the forces in the marked or by suppliers and sellers looking out to make a profit
by disregarding guarantees and laws. Section 26725 of the Australian Commercial Laws have
given the consumer the right to take legal action against the supplier of goods and services in
cases where they have failed to keep contractual terms or have misrepresented details that are
essential for the consumer to know and to understand. In one of the many provisions of section
26826 of the Australian Commercial Law, it is clearly stated that breach of a guarantee is a fatal
error when seen in cases where services are not given or provided to the consumers as they were
guaranteed to be provided. Hence, the mere factor that Franco was provided with an undesired
grey wall view instead of a panoramic view which was promised to him by the hotel authorities
is a major failure by Scenic and its managerial staff. The unavailability of a balcony holds
24 Australian Consumer Law s64
25 Australian Consumer Law s267
26 Australian Consumer Law s268

9BUSINESS LAW
similar significance when it comes to the strength of this particular law. Franco posses the right
to forfeit and terminate his contractual agreement as per Section 289 of ACL27 with Scenic after
an analysis of the several breaches of contractual terms and their sheer disregard of several
consumer guarantees, hence their ignorance towards law. Franco has the right to demand
compensation for it.
Bibliography
Addis v Gramophone [1909] AC 488
Administration of PNG v Leahy (1961) 105 CLR 6
27 Australian Consumer Law s289

10BUSINESS LAW
AGC (Advances) Ltd v McWhirter (1977) 1 BLR 9454
Australian Competition and Consumer Act 2001 (Cth)
Bettini v Gye 1876 QBD 183
Cutter v Powell [1795] EWHC KB J13.
Dick Bentley v Harold Smith Motors [1965] 1 WLR 623
Ecay v Godfrey [1947] 80 Lloyds Rep 286
Edwards, Alexander H. "Leading cases in contract law." (2017) Bar News: The Journal of the
NSW Bar Association Summer 61.
Eisenberg, Melvin A. Foundational Principles of Contract Law. (Oxford University Press,
2018).
Knapp, Charles L., Nathan M. Crystal, and Harry G. Prince. Problems in Contract Law: cases
and materials. (Wolters Kluwer Law & Business, 2016).
McKendrick, Ewan, and Qiao Liu. Contract Law: Australian Edition. (Macmillan International
Higher Education, 2015)
McKendrick, Ewan. Contract law: text, cases, and materials. (Oxford University Press (UK),
2014.)
Merritt v Merritt [1970] EWCA Civ 6.
Poole, Jill. Textbook on contract law. (Oxford University Press, 2016).
Poussard v Spiers (1876) 1 QBD 410

11BUSINESS LAW
Routledge v Mckay [1954] 1 WLR 615
Smith, Joshuab. "Contract law in Australia" (2018) Ethos: Official Publication of the Law
Society of the Australian Capital Territory 248: 60.
Thomas v Thomas (1842) 2 QB 851