Contract Law: Validity of Offer and Exclusion Clause

This article discusses the validity of offer and exclusion clause in contract law. It explains the essential elements of a valid contract and the enforceability of exclusion clauses. It also provides examples and case laws to support the discussion. The article is relevant to students studying contract law in any college or university.

Contract Law 1
Part 1
Issue:
Whether there is any contract for the sale of car between the Ann and jack?
Law:
Contract between the parties can be considers as the valid contract if all the essential elements of
the valid contract are present. The most important element of the contract is agreement, which
formed with the components of offer and acceptance, then consideration, capacity, and intention.
Offer is considers as communication between the two parties in which one party communicates
their willingness to do or abstain from doing anything for the purpose of getting assent from
other party, and such act of assent is known as the offer. In other words, offer is defines as
promise under the contract law in exchange of the promise given by another party.
There is no specific method, through which one party makes the offer to another party, and this
offer can be make either to the individual or to the whole world (ACL, n.d.).
Offer must be clear and there must be no vague or unclear words in the offer for considering it to
be the valid offer, and this was stated under the case law Carlill v Carbolic Smoke Ball Co,
Court of Appeal [1893] 1 QB 256; [1892] EWCA Civ 1.
Offer can be terminates also, and this can be done through different ways such as revocation,
rejection, etc.
Revocation- it must be note that, it is possible to revoke the offer at any time before such offer is
accepts by the offeree. Offer can be revoke even in those cases when offeror decided to open the
offer until particular date unless any type of consideration supports such promise. Revocation is
effective only in those cases in which it is properly communicates to the offeree either directly or
indirectly, and any words or form through which revocation of offer is communicates will be
sufficient.
Rejection - once the offer is reject by the offeree, then it is not possible for the offeree to accept
it. Rejection can be done either by the rejecting the offer in direct manner or by making the
counter offer. Counter offer is defines as the accepting the offer but on different terms and
conditions. It must be note that even though the difference between the terms is of no importance
then also such acceptance is considers as the counter offer or the new offer. It is necessary to
differentiates between the counter offer and only the request of further information in context of
the offer. For making the effective rejection, party must communicate it to the party who makes
it (Netk, n.d.).
In case law Hyde v Wrench, (1840) Beav 334, Court decided that offer made by P to purchase
for $950 was considered as the effective rejection of the offer and also the new offer. As per the

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general rule, once the offer was reject then it was not possible to provide subsequent acceptance.
Court further stated that, there was no valid contract exists between the parties in context of
purchasing of the property. Offer was made by the defendant to sell the property for £1000, and
if the plaintiff without any condition accepted such offer then there was valid contract between
the parties. However, plaintiff made the new offer in context of purchasing the property at
amount £950, and this new offer was considers as the rejection of the original offer. Therefore, it
was not competent for the plaintiff to revive the proposal given by the defendant, and because of
this, there was no binding contract or any obligation arises between the parties (ACL, n.d.).
It is clear that in case acceptance given by the offeree is alters or anything is added or removed
from the terms of the offer in any manner, then such acceptance is not valid. Such acceptance is
considers as counter offer or new offer.
In case Turner Kempson and Co Pty Ltd v Camm (1922) VLR 498, letter was sent by the Camm
to the Turner, in which offer is accepted by the camm to purchase the quantity of the raspberry
pulp, but while accepting the offer he added new term in the offer. Court stated that it was
considers as the new offer or counter offer, and not the acceptance of the original offer.
For forming the valid contract, it is necessary that both offer and acceptance must be present in
the contract. The acceptance must be relates to the original terms of the offer and no
modification is done. In case terms related to the offer and acceptance differs slightly, then there
is no agreement between the parties.
In case acceptance alters, the term of the original offer or proposes one or more additional or
different terms then it is not considers as the acceptance in terms of original offer but actually
considers as the counter offer or new offer (Kuklik, 2017).
Any original proposal that terminates the counter proposal made by the offeree is defines as the
counter offer under common law also. While instead of accepting the original offer with the
similar terms, offeree make some modifications in the particular term or condition then it is
considers that offeree made the counter offer. This can be understood through example, A made
the offer to sell the house with the condition that possession of the house will be given on 7th
march, and this offer is accepted by the B but by changing the possession date on 3rd march. This
acceptance will consider as the counter offer and not the valid acceptance made by the parties.
In other words, acceptance must give on the similar terms of the offer and not by changing the
offer terms, because such acceptance is not considers as the valid acceptance. In these cases,
Court applied the mirror rule and as per this rule in case acceptance fails to reflect the offer and
its terms, then such acceptance will not consider as the valid acceptance and the counter offer. In
those negotiations that are conduct from long time-period, it is difficult to identify whether there
is offer, counter offer, and valid acceptance by one party. However, there is possibility that
negotiations never end and there is no contract between the parties (Lindgren, 2011).

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Both the principles can be understands from the decision taken by High Court of Australia in
Mooney v Williams [1905] HCA 34. In this case, offer was made to sell the locomotive crane to
the government at £235, and product was delivered within the period of 1 week after the
acceptance of the offer. Later, government accept the offer for purchasing the locomotive crane
but make alteration to the delivery time of crane. In this case, court held that acceptance made by
the government was not valid acceptance in terms of the original offer, and it can be considers as
the counter offer or the new offer. Therefore, no contract exists between the parties, because
there was no qualified acceptance by the government, but it was the new offer for purchasing the
crane.
Application:
In the present case, Ann wrote letter to the jack for providing him offer in context of selling the
car for $12000, and this letter is wrote on 1st March. She further states in the letter that Jack can
accept the offer until 7th March.
After posting the letter to the Jack, Ann changed her mind, and on 2nd March posts another letter
to Jack in context of revoking the offer given by him.
First letter in which Ann gives the offer is receive by Jack on 3rd March at 10:00 A.M., and on
2:00A.M on the same day he posts letter to Ann in context of accepting the offer. He stated in the
letter that he likes the offer given by Ann very much, but because of his present financial
condition he will not able to make lump-sum payment and request the Ann to accept the payment
in instalment of $1000 over the year. This letter reached to Ann on 4th March.
On the same day in the evening, Jack received an unexpected cheque for $16,000 from his uncle
and in the evening he send another letter to Ann in which he states that he accepts the offer on
same terms and conditions. After posting this second letter, Jack received letter from Ann in
which he revokes the offer.
In this case, provisions of termination of offers will apply, and as per these provisions once the
offer is reject by the offeree, then it is not possible for the offeree to accept it. Rejection can be
done either by the rejecting the offer in direct manner or by making the counter offer. Counter
offer is defines as the accepting the offer but on different terms and conditions. It must be note
that even though the difference between the terms is of no importance then also such acceptance
is considers as the counter offer or the new offer. It is necessary to differentiates between the
counter offer and only the request of further information in context of the offer. For making the
effective rejection, party must communicate it to the party who makes it.
Jack makes the acceptance in his first letter by changing the terms of the offer. As per the rule if
acceptance alters the term of the original offer or proposes one or more additional or different
terms then it is not considers as the acceptance in terms of original offer but actually considers as

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the counter offer or new offer. Jack terminates the offer of the Ann by making the counter offer
or new offer.
As stated in case law Hyde v Wrench, (1840) Beav 334, Court decided that as per the general
rule, once the offer was reject then it was not possible to provide subsequent acceptance.
Court further stated that, there was no valid contract exists between the parties in context of
purchasing of the property. It was not competent for the plaintiff to revive the proposal given by
the defendant, and because of this, there was no binding contract or any obligation arises
between the parties. In this case, also Jack cannot accept the offer after rejecting it.
Conclusion:
Therefore, there is no contract between the parties and Ann is not liable to sell the car to jack.
Part 2
Issue:
Whether Qualal Motors can rely on the exclusion clause or Batty holds any right against them?
Law:
An exclusion clause in terms of the contract law is considers as the term of the contract which
limits or exclude the liability in context of the contractual liability. These types of terms are
generally considers as the effective term if these terms are drafted in proper manner. However,
there are some statutory provisions that restrict the use of exclusion clauses in few cases such as
in consumer contracts.
Business organizations use the exclusion clause for the purpose of excluding or limiting their
liability for those things that might go wrong by incorporating exclusion or limitation clause in
the contract that signed with other person or business. In some particular cases, business
organizations use this clause to allocate the risk and for figuring out who is responsible to
insuring that risk (Legal Service commission, n.d.).
Generally, Courts interpret the exclusion clauses in business contract and this clause can be
incorporates in the similar manner as any other term is incorporated. In other words, it must
incorporate in plain and ordinary meaning. If exclusion clause is not draw to the attention of the
party then there is clear danger, that clause will not be enforcing. Therefore, it is necessary for
the party who is incorporating the clause to make sure that exclusion clause is bring in the
attention of the other parties, and such other party gets the opportunity to accept or reject the

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clause. If conditions and exclusion clauses are only prints in the contract and not bring at the
attention of the parties, then these terms are not effective in nature.
In case, exclusion clause is ambiguous in nature, or the weaker party is in need of the protection,
then interpretation of the clause is does as per the contra proferentum rule, which means against
that party who wants to rely on the exclusion clause.
Exclusion clause is also questionable when it incorporates into the consumer goods and services
contract, and goods and services supplied fall under the provisions of the guarantee in context of
the Australian Consumer Law. It must be note that section 64 of the ACL imposes restriction on
nay such term of the contract that exclude, restricts, or modify the rights related to the
consumers.
In common Law, enforceability related to the exclusion clause under common law based on the
fact whether clause is inserts into the contract and whether such clause in drafted in proper
manner. It must be note that in case document is sign than the person might be bind by the
exclusion clause even though person read it or not.
It is the most important factor that party who is affect from the exclusion clause must notify
about the clause at the time of signing of contract or at that time when money is pay for
transaction (Legal Service Commission, n.d.).
In case Mans Grand Prix Circuits Pty Ltd v Iliadis, Court stated that there was no evidence that
reflect that participants were ask to read the exclusion clause or any knowledge was given to the
exclusion clause. Therefore, exclusion clause was not valid in this case (Bristow, n.d.).
Application:
In the present case, Batty is driving the car and at the time, his car is broke down. He contacts
with the Qualal Motors and they agree to send their mechanic for repairing the car. When the
mechanic checks car, he discovered that it is not possible to repair the car without towing it to
the garage. While mechanic winched the car on the towing vehicle, gear used by mechanic
slipped open and this cause the car to fall. Then car ran backwards on the foot of the Batty and
this breaks his toes. Car is also damage in severe manner.
On the back of the towing vehicle, there is notice, which reflects the exclusion clause, and as per
this clause, each towing is conducts at the risk of consumer. Notice further states that Quala
motors and their employees are not responsible for any damage, injury, or consequential loss,
occurred to the consumer.
In this case, exclusion clause is not effective because enforceability related to the exclusion
clause under common law based on the fact whether clause is inserts into the contract and
whether such clause in drafted in proper manner. It must be note that in case document is sign
than the person might be bind by the exclusion clause even though person read it or not. It is the

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most important factor that party who is affect from the exclusion clause must notify about the
clause at the time of signing of contract or at that time when money is pay for transaction.
In case law Dorahy’s Fitness Centre P/L v Buchanan, women joined gym and she also paid
fees of the gym, and later signed the document with the gym. Almost after 12 months, she signed
the new agreement with the gym and this new agreement printed at both sides of the paper, and
exclusion clause printed on the backside of the paper. In this case, court held that attention of the
member was never draw to the conditions, which were state on the backside of the agreement.
Therefore, gym cannot rely on the exclusion clause.
As stated in case Mans Grand Prix Circuits Pty Ltd v Iliadis, there was no evidence that reflect
that participants were asks to read the exclusion clause or any knowledge was give to the
exclusion clause. Therefore, exclusion clause was not valid in this case. In similar manner, no
evidence is present which reflects that Batty is informs about the exclusion clause.
In this case, Batty does not receive any notification related to the exclusion clause from the
mechanic or any other person related to the Quala, and as per the rule, person who affect from
the exclusion clause must notify about the clause at the time of signing of contract or at that time
when money is pay for transaction. Therefore, Batty can seek compensation from Quala motors
in context of injury or loss suffered by Batty.
Conclusion:
After considering the above facts, it is clear that Quala motors cannot rely on the exclusion
clause printed on the backside of the towing vehicle.

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References:
ACL. Agreement. Available at: https://www.australiancontractlaw.com/law/formation-
agreement.html. Accessed on 17th July 2018.
ACL. Hyde v Wrench (1840) Beav 334. Available at:
https://www.australiancontractlaw.com/cases/hyde.html. Accessed on 17th July 2018.
Australian Consumer Law- Section 64.
Bristow, G. Exclusion Clauses - Drawing The Line. Available at:
http://classic.austlii.edu.au/au/journals/MacarthurLawRw/1998/1.pdf. Accessed on 17th July
2018.
Carlill v Carbolic Smoke Ball Co, Court of Appeal [1893] 1 QB 256; [1892] EWCA Civ 1.
Dorahy’s Fitness Centre P/L v Buchanan.
Hyde v Wrench, (1840) Beav 334.
Kuklik, A. (2017). Law of Contract. Available at:
https://sydney.edu.au/lec/subjects/contracts/Summer%202016-17/Contract%20-%20Summer
%202016%20-%20Lecture%202.pdf. Accessed on 17th July 2018.
Legal Service Commission. Exclusion Clause. Available at:
https://www.lawhandbook.sa.gov.au/ch10s02s06.php. Accessed on 17th July 2018.
Legal Service Commission. Exclusion Clauses and the Australian Consumer Law. Available at:
https://www.lawhandbook.sa.gov.au/ch10s02s06s01.php. Accessed on 17th July 2018.
Lindgren, K. (2011). Vermeesch and Lindgren's Business Law of Australia - 12th Edition.
Mans Grand Prix Circuits Pty Ltd v Iliadis.
Mooney v Williams [1905] HCA 34.
NETK. Termination of an offer. Available at: http://netk.net.au/Contract/06Termination.asp.
Accessed on 17th July 2018.
Turner Kempson and Co Pty Ltd v Camm (1922) VLR 498.