Understanding Contract Law and Consumer Protection in Australia

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.