Establishment of Contract and Validity of Exclusion Clause under Australian Contract Law and ACL

This article discusses the establishment of a contract and the validity of an exclusion clause under Australian Contract Law and ACL. It also explores the rights of a consumer under ACL.

Part A:
Issue:
Span and Spic offer services that have an associated price, and when clients decide to take up the
services it cannot necessarily translate into a contract. However, various terms that were
provided by the customer care assistant led to the establishment of the contract1. The contract
was established on the basis that the offeror, who is John, provided conditions for cleaning his
suit. In turn, the offeree, who is the customer care assistant accepted the terms and an assurance
that everything will be handled perfectly.
Law
Definition of a Contract.
A contract comes into existence when an offer has been made between two parties, such that the
offeree ends up being convinced by the offeror that the terms contained in the deal will be
suitable for his end of the bargain. The agreement established under a contract is legally binding
and all parties are expected to fulfil their legal obligations. Enforceability in a contract is
achieved through the exchange of something between the offeror and the offeree2.
OFFER-
This is basically a communication that leads to the establishment of a deal between two parties.
In this case, the offer that was made proved that Span and Spic understood all requirements
needs to handle a merino wool suit, and therefore, would be able to deliver on the expected
results. The offer made in this case influenced John to leave his suit at Span and Spic as the
terms contained in the offer were satisfactory for both parties at that time. The communication
establishes the intent of one party and it shows the willingness to be legally bound by the
provided terms.
ACCEPTANCE
This is the unequivocal statement, which may be established through conduct, orally, or by
writing by the offeree indicating that the provided is quite sufficient. An offer is only acceptable
to the person for whom it was intended. So that an acceptance can be constitute validity, it is
essential that conduct or statement must occur in relation to the offer that has just been laid out.
In this case, the offer that was made is what led John to act in the manner that he did since he
considered that his suit would appropriately be handled3.
CONSIDERATION
This is the price set out by the offeror, in exchange of the product or service to be delivered.
Ideally, this is the price of a promise. Australian Common Law upholds that a consideration is
essential in every contract, and it is critical that the parties involved are able to reach an
1 Chitty J. Chitty on contracts. Sweet & Maxwell; 2012. Chitty J. Chitty on contracts. Sweet & Maxwell;
2012.
2 Corones SG. The Australian Consumer Law. Thomson Reuters Lawbook Co; 2011.
3 Standard Chartered Bank v Ceylon Petroleum Corporation [2011] EWHC 1785 (Comm) at [568]

agreement that is binding. Common law stipulates that so that any agreement is binding, the
parties entering into a contract should include a consideration, i.e payment of any format, so that
it can sustain the promise that has been made.
INTENTION
Legal relations should be intended by the parties entering into a contract. The fact that a
consideration exists offers evidence of this fact. Where the promisor has specified that something
will be delivered, be it a good or service, at the price on which the promise is based, then this
will be considered to be an intent that legally binds the involved parties.
APPLICATION:
Services that are offered by Span and Spic simply translate into an invitation to treat. The latter is
merely the declaration that shows willingness by one party to engage in a negotiation. Therefore,
is cannot be accepted as a form of binding contract. However, John sought clarification on if
Span and Spic could be able to handle the super fine merino wool suit without damaging. This
formed the basis of the offer. On the other hand, the customer care assistant accepted the terms
through providing an assurance4.
CONCLUSION:
John showed his willingness to be legally bound in a contract by first of all seeking clarification
on the matter at hand. If the Span and Spic client assistant outlined that the company does not
have the capacity to clean such a suit, John would have considered to sought services from
another cleaning company. However, since Span and Spic accepted to handle and deliver on the
provided terms, a contract was established. The offer outlined clearly that the suit needed to be
cleaned as expected, and the fact that the expected service was not provided, the contract ended
up being breached5.
Part B:
4 J.Clarke, Australian Contract Law | Julie Clarke. [online] Australiancontractlaw.com. [Accessed 25 May
2019].
5 RH. Diwan. Problems Associated with the Enforcement of Arbitral Awards. 2003. p56

ISSUE: Whether the Exclusion Clause is legally valid or invalid?
The exclusion clause was not valid since it falls short of various conditions that the courts expect
to be upheld in order for the clause to be in effect. The law allows the exclusion clause to exist in
unsigned documents, but this is restricted to tickets and notices but it can never be included in
documents meant to ascertain payment like receipts. More importantly, the exclusion clause
should be communicated to all parties intending to enter into the contract. Ideally, it should be in
existence, well understood, and sufficiently disclosed prior to establishment of the contract6.
LAW:
Exclusion clause means a term that excludes the liability of a party.
INCORPORATION TESTS
So that the exclusion clause can be considered to be binding, it needs to attain the following
thresholds; The clause should be incorporated as a term into the contract, secondly, the clause
should pass the conditions of construction and finally, the clause should not be deemed as
unenforceable based statutory laws outlined within the Consumer Rights Act 2015 and Unfair
Contract Terms Act 1977. The exclusion clause can be incorporated either through a signature,
incorporation by notice, and incorporation through dealings7.
Document to be signed?
Singed exclusion clauses are considered to be more effective in court. Appending a signature
onto a document’s proves that the concerned parties are quite aware of the relationship being
established. The court considered that all parties are aware of terms in the signed document
whether or not it has been signed. This exist unless; Fraudulent activities was being undertaken
by the one drafting the exclusion clause, when misinterpreted terms led to signing of the
contract, and in condition of non-est factum8.
Unsigned document?
When it is challenging to introduce a signed document in the contract, liability exclusion should
introduce through a print on product advertisement. In this case, it is required that provided
notice should be reasonable. The following facts are considered when determining if a
reasonable notice was issued prior to establishment of the contract. The speed used in
establishing the contract, communication of the clause the parties involved, the extent of error in
the exclusion clause, and if the liability exclusion clause was reasonably contemporaneous with
regards to the contract at hand.
TESTS: Contractual Document test
6 Property Alliance Group v RBS [2016] EWHC 207 (Ch) at [207]
7 White v John Warwick & Co
8 Lawbuddy.Contracts In Australia LawBuddy.[Accessed 25 May 2019]

The contractual document needs to comply with certain elements that intend to restrict liability
that results from breaching a contract. The clause in such a case should withstand the
reasonabless test or be deemed invalid.
Reasonabless
This test determines the ineffectiveness or effectiveness of clause. This test explores if the clause
is fair and under what circumstance the clause ended up being included. This has been defined
under S11 of UCTA 1977. Secondly, was the clause know by all parties involved. The
bargaining power of involved parties is normally analyzed. The party that drafted the clause is
tasked with proving reasonability.
STEP 2: Are there any other ways of proving the EC is invalid?
Misrepresentation
The exclusion clause in the case of John v Span and Spic can be challenged on the basis of
misrepresentation since the customer care assistant argued on the basis of fact that he/she did not
understand and this is what led john to believe that the company could handle his suit.
Contra Proferentem rule
The liability exclusion clause that Span and Spic claims has been included in the receipt has been
placed at the back. It can be argued that this was done specifically so that clients will not be able
to detect it easily. Most importantly the liability clause doesn’t specify the kind of errs that it
won’t take liability for and therefore, John can argue in terms of negligence behaviour. The
terms of the liability clauses established by Span and Spic is quite ambiguous and therefore the
contra Proferentem rule can apply quite effectively9.
Fundamental Breach (four corners rule).
The fundamental breach doctrine dictates that contractual breaches can’t be restricted or
eliminated since it would result in a logical balance of logic. The parole/ four corners rule
dictates that implied/oral terms can’t be used to contradict outlined terms in a written agreement
within the court10. The receipt can be used to show that John played his part in the contract but
Span and Spic failed to do so.
APPLICATION:
Exclusion clauses in contract document mean that the party which drafted it cannot be held liable
if certain occurrences take place in the course of undertaking the contract. The applicability and
use of the exclusion clause is dictated by the Unfair Contract Terms Act 1977 ('UCTA') to avoid
misuse. An exclusions clause can be included into a document even in the absence of a signature.
CONCLUSION:
John was only informed of the exclusion clause when damage had occurred on his suit and this
shows the same clause had not been outlined well so that it could be easily noticed. Therefore, he
9 Unfair Terms in Consumer Contracts Regulations 1999.
10 Unfair Contract Terms Act of 1977.

can undertake to challenge the existence of the exclusion clause since it fails to fulfil various
conditions as expected required to prove its validity.
IRAC 2: ACL
Issue: Whether he is a consumer under the ACL and what rights does he have under ACL.
John qualifies for the definition of a consumer since he has paid for the service that he has
consumed. He is liable for protection from unfair practises, unconscionable conduct, he is
covered by statutory warranties also known as client guarantees, information standards, warning
notices, product safety and recalls11.
LAW
Whether the person is a consumer under s3?
The Australian Consumer Law (ACL) defines a consumer as a person who pays for the delivery
of a good or service for a fee that doesn’t exceed $40,000. For clients who acquire goods for
more than $40,000, but the acquired commodities cost is meant for domestic, personal, or
household consumption, they can also be regarded to as consumers. Defining the characteristics
of a consumer is meant to provide a guideline of approaches that can be taken to protect them.
Which of the consumer guarantees applies here? ss 60-62 (Services)
ACL guidelines s62 outline that services offered require to be undertaken with appropriate skill
and care and materials used in part with the service provided need to be suitable for each purpose
being used. The service being supplied should be delivered in a reasonable time.
STEP 3: Major or Minor Failure? Ss 267,268 ACL- REMEDIES?
Common law Outlines that the following remedies can be offered in this case where there is a
breach of contract under such two parties. First of all, payment of damages can be offered for
error that has led to the breach of contract. Payment of damages is normally seen as a substitute
of performance12. Payment of damages is meant to reimburse the client for the anguish and
mental stress that is suffered as a result of breaching the contract. The other solution revolves
around the Specific Performance, and its where Span and Spic may be directed to perform the
contract in the manner that is actually expected, or be liable to paying back a certain amount of
money.
STEP 4: Can the consumer guarantees be excluded or modified?- s64, s18
The ACL guidelines s64 outline that client guarantees can never be modified, excluded, or
restricted as this will lead to unconscionable conduct being undertaken recklessly by enterprises.
In relation to this, all remedies that should be provided by the person who breaches the contract
will apply indefinitely.
11 Trade Practices Act 1974
12 Competition and Consumer Act 2010 (CCA)

APPLICATION:
Unconscionability arises where Span and Spic advertises itself as a professional dry-cleaning
service, but it cannot satisfy the client’s needs. Furthermore, it has categorized its services
differently, and since John wanted his suit to be handled perfectly, he chooses the premium
services, and ends up paying a higher price than other clients who would pay for normal services.
In this case therefore, such categorization doesn’t make sense at all 13.
CONCLUSION:
Based on the definition provided by the Australian Consumer Laws, John qualifies as a
consumer and therefore, he is liable for protection from unconscionable conduct and unfair
contractual terms. Allowing Span and Spic to rely on the clause that protects the business from
liability will hurt the interests of very many clients. Additionally, the clause in the contract does
not show how the interests of the client are being protected in the business transaction, and
therefore, it definitely suffers from a conflict of interest. The oral confirmation given to John by
the customer assistant is sufficient proof that an oral contract was established, and applying the
statute of frauds efficiently will ensure that John’s interests are fully protected.
13 Australian Consumer Law (ACL)

Bibliography
Books
Clarke, J. Australian Contract Law | Julie Clarke. [online] Australiancontractlaw.com. Available at:
https://www.australiancontractlaw.com/law/formation-agreement.html [Accessed 25 May 2019].
Corones SG. The Australian Consumer Law. Thomson Reuters Lawbook Co; 2011.
Chitty J. Chitty on contracts. Sweet & Maxwell; 2012.
Diwan RH. Problems Associated with the Enforcement of Arbitral Awards Revisited: Australian Consumer
Protection; Conflict of Laws; An English Law Perspective. Arbitration International. 2003 Mar 1;19(1):55-
65.
Articles
Lawbuddy.Contracts In Australia LawBuddy. [online] Available at:
https://www.lawbuddy.com.au/contracts-in-australia/ [Accessed 25 May 2019].
Cases
Standard Chartered Bank v Ceylon Petroleum Corporation [2011] EWHC 1785 (Comm) at [568]
Property Alliance Group v RBS [2016] EWHC 207 (Ch) at [207]
Unfair Contract Terms Act of 1977.\
Unfair Terms in Consumer Contracts Regulations 1999.
White v John Warwick & Co
Legislations
Competition and Consumer Act 2010 (CCA
Australian Consumer Law (ACL)
Trade Practices Act 1974