Contract Law

This document provides an analysis of three different scenarios related to contract law. It discusses the issues involved, the relevant rules and principles, and applies them to the given situations. The scenarios include the sale of a hat, the incorporation of an exclusion clause, and the classification of a worker as an employee or independent contractor.

Running head: CONTRACT LAW
CONTRACT LAW
Name of the Student:
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Author Note:

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Question 1:
Issue:
The issue involved in the case study is whether Fran has to sell the hat at 10 $ to Michael.
Rules:
The most significant element of contract is its agreement between the parties. An
agreement is formed by the offer and its acceptance as entrenched in R v Clarke [1927] HCA 47,
(1927) 40 CLR 227. An offer must be placed by a party showing intention and willingness to
initiate a contract with another party to whom the offer.
However, an offer is not similar to an invitation to offer (James 2017.). Invitation to offer
is a request made by a party to others in general requesting them to make offers in order to
involve in negotiations with other party. For instance, items displayed for sale amounts to
invitation to offer and it cannot be treated as the offer.
An offer is different from an invitation to offer is that offer turns into an agreement when
it is accepted whereas invitation to offer turns into offer when people respond to it.
Invitations to offer occurs when the sellers are allowed to refuse to sell the products at a
price marked by mistake in the advertisement. This was seen in Pharmaceutical Society v Boots
[1953] 1 All ER 482.

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Application:
In the present case, it is seen that Michael saw a baseball hat with a sign saying that
‘Special Offer $10.00 each’. This amounts to an invitation to offer as per Brambles Holdings
Limited v Bathurst City Council.
Michael decided to buy 10 hats and paid 100$ to Fran as the price. This amounts to an
offer made by Michael to Fran in response of the invitation to offer contained in the sign on the
hat.
However, Fran refused it saying that the price was actually 30 dollars and the price
mentioned on the sign was due to an error. This shows that Fran refused to accept the offer made
by Michael. Since the offer made by Michael was never accepted by Fran, no contract is formed
between them. Due to the absence of contract, the parties are not bound by it.
Conclusion:
Hence, it can be inferred that Fran will not needed to sell the hat at 10 $.
Question 2:
Issue:
The issues involved here are;
a) whether the exclusion is incorporated in the contract and,
b) if the clause is incorporated, whether will it be protecting the Clocks and Watches
from its liability.

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Rules:
Exclusion clause refers to the most popular type of exclusion clause by means of which
one party tries to exclude his liability in the contract (James 2017). It will be regarded as valid if
two main conditions are satisfied, firstly the clause has been included in the contract in a valid
way and secondly, whether the clause can cover the loss in question. An exclusion clause will be
said to be incorporated into the contract by the following methods;
 Incorporation by signature,
 Incorporation by notice,
 Incorporation by past transactions.
When a written agreement is present and the parties have signed it, then they are bound by
such clause as seen in L'Estrange v Graucob [1934] 2 KB 394. Again, it is said to be valid if the
party who wants to rely on it has taken measures like a reasonable person to bring it in the
attention of the other party. Further, it is said to be included in a contract if the such type of
transactions is common between the concerned.
The first condition of validity of the clause by incorporation has been discussed above. The
second condition is related to interpretation matter by the court. This is regarded as the ‘contra
proferentum’. It means that when there is any ambiguity in the wordings of the clause, the court
will be interpreting the clause against the party who is trying to rely on it. The court interprets its
meaning in its simple, natural and general meaning..
However, as per decision of L'Estrange v Graucob, when there lies a written agreement
which has been signed, then the party is bound to follow the terms of the contract without giving
regard to whether he is aware of it or whether he has read it. Further, when the wordings of the

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clause exempts from the liability arising out of negligence consequences, then such clause will
be upheld by the court.
Application:
From the facts of the case, it is seen that a service form which was required to be filled up
by Joel has an exclusion clause at the bottom in red lettering along with a place of signature
below it. It was in writing and is present in the service form. Joe also had signed it. This shows
that the exclusion clause was incorporated in the contract. However, the clause was not brought
into the notice of Joe by Beth and Joe had signed it without reading it. But is was held that once a
party signed a document, it is presumed that he has read it before signing it. Hence such clause is
effective as per L'Estrange v F Graucob Ltd which will protect the watch repairing store from its
liability for the lost watch of Joel. Further, the court will construe it as the language was
unambiguous and clear.
Conclusion:
The above discussion concludes that
a) the exclusion has been validly incorporated in the contract and,
b) Since the clause is incorporated validly, it will be protecting the Clocks and Watches
from its liability.
Answer 3:
Issue:
The issue to be identified here is whether under the Employment law, Leon can be
regarded as an independent contractor or an employee.

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Rules:
The common law provides two different concepts and laws that are applicable to the
employees and independent contractor. The court usually refers to the multifactor test to
determine whether a worker is an employee or independent contractor (James 2017). This test
has four criteria which are control on work, remuneration, suspension and dismissal, to
differentiate between the two types of workers. All these tests have been compiled together to
formulate a multifactor test for the differentiation. The worker will be regarded as an employee
when majority of the below mentioned factors are applied like the employer has full control on
his work, when the worker provides exclusive service to the employer, when the employer has
the power to delegate the work to another person, when the worker works for a fixed timing and
wears uniform or badge of the company of the employee, when the worker is paid fixed salary
and when the worker works in the office of the employer.
Application:
In the present case, by applying the multifactor test, it is seen that Leon has to work
minimum three days per week and at fixed timing, then he gets fixed salary of 75 dollar per day.
Further the tasks are assigned to him by the store manager which shows that he was controlled
by the store manager as seen in Narich Pty Ltd v Commissioner for Pay-roll Tax (NSW) [1983] 2
NSWLR 597. In addition, he is required to wear his name badge and he is required to follow the
policies and procedures of the Shoes Plus company. Although he is regarded as an independent
contractor in the agreement, as per Fair Work Act 2009, it amounts to a sham contract. Thus
majority of the multifactor tests are followed which reveals that he is an employee.
Conclusion:
Hence, under the Employment law, Leon can be regarded as an employee.

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References:
James, N., 2017. Business Law. Wiley Blackwell (American Society Bone & Mineral Research).