Advertising Law and Business Liabilities

This assignment delves into the legal ramifications of advertising for businesses. It analyzes how advertisements can create liabilities, citing relevant case laws and legislation such as the Competition and Consumer Act 2010 (Cth). The discussion highlights potential penalties imposed on companies for misleading or deceptive advertising practices. Examples include cases like Australian Competition and Consumer Commission v TPG Internet Pty Ltd and Carlill v Carbolic Smoke Ball Company, illustrating the legal consequences of improper advertising.

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Business Law
Questions based assignment
21-Sep-17
(Student Details: )

QUESTION BASED ASSIGNMENT 2
Question 1 (a)
I: Issue
The case study reveals that the main issue here is regarding a valid offer and a valid acceptance
being made, which effectively resulted in a valid offer, or whether the offer and acceptance were
invalid, so as to render the offer invalid.
R: Rule
A contract can be defined as a voluntary arrangement which is enforceable through the law and
becomes a binding legal agreement, which takes place between two or more people. The contract
law is covered under common law and in civil law jurisdiction1. The formation of a contract is
very important process as upon it, depends the validity of the contract, along with its
enforceability. The key components which have to be present for the creation of a binding
contract are:
Offer
Acceptance
Consideration
Intention
Capacity
Consent
Clarity2.
Once all of these elements are present in an arrangement, a contract is found, which has validity
in the eyes of law and which gives rise to certain rights and liabilities for the parties of the
contract3.
Offer is the initiation point in any contract and it marks the beginning of the contract. The offer
denotes that the parties involved in this mutual arrangement want to begin legal relationships and
1 Neil Andrews, Contract Law (Cambridge University Press, 2nd ed, 2015)
2 Tess Wilkinson-Ryan and David A. Hoffman, ‘The Common Sense of Contract Formation’ (2015) 67 Stan. L. Rev.
1269.
3 Andy Gibson and Douglas Fraser, Business Law (Pearson Higher Education AU, 2013)

QUESTION BASED ASSIGNMENT 3
be bound by the contract. An offer is different from the invitation to treat which comes before the
offer, though, is not required to be present for contract formation. Invitation to treat shows that
the parties, who could form a contract in future, want to negotiate upon the offer of the contract.
The reason for differentiating between the two is that an offer gives rise to legal liability,
whereas an invitation to treat does not4.
The advertisements which a person comes across in different modes are usually deemed as
invitation to treat. For instance, in Partridge v Crittenden5 the newspaper advertisement given by
the defendant was considered as an invitation to treat. And so, the appeal of the defendant was
upheld and his conviction was quashed. It is also important to differentiate between an offer and
a request for information. An example of this can be found in Harvey v Facey6 where the Privy
Council stated that the answer of the lowest price was not an offer but a request for information,
due to the lack of intention.
The offer can be terminated only when it is revoked by the offering party. An important point is
that the offer can be revoked only before the same is accepted by the accepting party as was seen
in Byrne v Van Tienhoven & Co7. Also, an offer expires when the time for which the offer was
open for, expires. A counter offer also destroys the original offer. For instance, in Hyde v.
Wrench8 the court stated that when a term is modified or changed while the acceptance is being
communicated, it results in the original offer being expired and a counter offer being drawn9.
The second step in formation of contract is the acceptance. As the name suggest, this
requirement is for the offer to be accepted by the party to which the offer had been made. It is
important that the acceptance is given clearly and in an unambiguous manner. As was seen in
Felthouse v Bindley10, silence cannot be deemed as acceptance. Also, the requirements of the
offering party have to be met when an acceptance is being communicated.
A key aspect under acceptance is the date of the acceptance of the offer. As per the general rule,
the date of the acceptance of the offer is such date when the acceptance given by offeree reaches
4 Jill Poole, Casebook on Contract Law (Oxford University Press, 2016)
5 (1968) 2 All ER 421
6 [1893] AC 552
7 (1880) LR 5 CPD 344
8 (1840) 3 Beav 334
9 Paul S Davies, JC Smith's the Law of Contract (Oxford University Press, 2016)
10 (1862) 142 ER 1037

QUESTION BASED ASSIGNMENT 4
the offeror. Though, a very famous exception to this rule is the postal rule of acceptance. Under
the postal rule of acceptance, the date of posting the acceptance letter with the postal office is to
be taken as the date of the acceptance of the offer11. The reason for this was given in the case of
Byrne v Van Tienhoven as the court held that the postal office was the agent of the offering party
as they specified post as a valid method of acceptance. The postal rules of acceptance are also
applied on the communication of offer and acceptance which is sent through emails. Hence, the
date on which this letter actually reaches or is read by the offering party is not relevant. This
applicability is based on the Electronic Transaction Act, 199912. Section 14 of this act states that
the date and time of the offer or acceptance is such a date and time on which the email leaves the
computer system of the sending party13. So, here also, the date on which the receiver reads or the
reaching date of the communication is not relevant.
The other aspects of contract formation include the presence of a valid consideration, whereby
the need is for the consideration to have economic value. Further, the consideration has to be
sufficient and not adequate, so it can be mutually decided between the parties14. The next step in
the formation of contract is having clarity regarding the terms on which the contract is being
formed. There is also a need for the parties to the contract, to have the legal age and sound mind,
for them to have the contracting parties for getting into a contract. Lastly, there is a need for the
contracting parties to consent to the contract in a free manner, where they are not forced to get
into the contract15.
A: Application
The rules which had been decided in the preceding segment now have to be applied to the given
case study, to resolve the issue which were raised in the first part of this discussion. One thing is
very clear that the case study had its focus upon two key elements, i.e. offer and acceptance. The
advertisement in the newspaper, which was read by Lianne, would be considered as an invitation
to treat. This is because firstly, the quotes were invited in this case from the public for getting a
party arranged for the reader. And secondly, on the basis of applicability of Partridge v
11 Ewan McKendrick, Contract Law (Pearson Education Limited, 11th ed, 2015)
12 Electronic Transaction Act, 1999 (Cth)
13 Electronic Transaction Act 1999, s14
14 James Marson and Katy Ferris, Business Law Concentrate: Law Revision and Study Guide (Oxford University
Press, 3rd ed, 2016)
15 Catherine Elliott and Frances Quinn, Contract Law (Pearson Education Limited, 9th ed, 2013)

QUESTION BASED ASSIGNMENT 5
Crittenden also, this newspaper advertisement would be considered as an invitation to treat.
Hence, no offer was attained at this stage.
Section 14 of the electronic transaction act would have to be applied for the purposes of
ascertaining the date and time of the offer/ acceptance/ counter offer/ revocation/ request for
information which was made in this case. Hence, the moment these emails left the system of the
sender, would be the date and time of the particular communication.
The exchange of emails which were sent on June 10 have been analysed firstly. This email and
the email following it, were not an offer, but merely request for information as both Lianne and
Mary were asking for certain information and not making an offer, based on Harvey v Facey.
The email which was sent after three hours, containing a quote of $10,000 would be deemed as
an offer. However, this offer was cancelled out through a counter offer of $9,500. Again, this
counter offer was not accepted and another counter offer was made, with certain stipulations and
the value of $10,000. Further, this offer was open for a period of seven days only, i.e., till June
17. This offer was never accepted and after its validity period, it expired.
The communication which was sent on June 20th is not an acceptance as the offer had expired on
June 17. And this was rightly stated by Mary where she asked for a changed price due to the
previous offer being expired. This communication of Mary would be the offer of the case with
the consideration value of $10,000. This offer was accepted by Lianne through an email where
they gave a go ahead to Mary and a consideration here was fixed at $10,000. The offer sent by
Mary could have been revoked before the acceptance was given by Lianne. However, this was
not done, so the consequent email sent by Lianne for revocation of offer would not be valid as a
contract had been formed through acceptance, as the other elements of contract formation could
not proved to be absent.
C: Conclusion
This discussion makes it clear that a valid offer was made by Mary, which was validly accepted
by Lianne, which resulted in a valid contract.

QUESTION BASED ASSIGNMENT 6
Question 1 (b)
I: Issue
The case study reveals that the main issue here is regarding the possible rights held by Lianne by
being a consumer under the Australian Consumer Law (ACL).
R: Rule
Competition and Consumer Act, 201016 is the legislation which is applicable in the nation
through which the businesses are required to promote competition and protect the consumers.
Schedule 2 of the Australian Consumer Law is focused upon the consumer aspect of this act17.
Before rights are granted to the individual, it has to be proved that the person is a consumer as
per section 3 of this act. Section 3 of this act requires a person has to acquire services or goods
having a value of $40,000 for being a consumer and the product or services have to be used for
domestic or person usage18. The consumers are protected from misleading or deceptive conduct19
through section 18 of this act, and from the false and misleading representation20 through section
29.
A: Application
Applying the rules to the given case study, it becomes very clear that Lianne is a consumer as
she satisfies the condition laid down under section 3, whereby she acquired services of Mary for
$9,500, for holding her personal party. And as a result of this, she can make a claim under
section 18 and 29 of ACL as Mary mislead Lianne into believing that she would be provided
with Malaysian cuisine and instead was provided with Russian-style food. Also, the capacity of
the boat was also deceived about.
16 Competition and Consumer Act, 2010 (Cth)
17 Competition and Consumer Act 2010, sch 2
18 Australian Consumer Law, s3
19 Australian Consumer Law, s18
20 Australian Consumer Law, s29

QUESTION BASED ASSIGNMENT 7
C: Conclusion
This discussion makes it clear that a case can be made against May by Lianne, as Lianne is a
consumer under ACL.
Question 2
The advertisements which are published by the businesses in the different media, for instance,
internet, radio, digital media21 or print can often lead to legal problems for the businesses. This
requires the businesses to be careful about what they post and the wordings of such
advertisements, so that the legal liability rising from these advertisements are avoided. Through
this discussion, an attempt has been made to highlight the manner in which these advertisements
could prove to be a costly affair for the companies.
In the very first part of this paper, the advertisement given by Mary was analysed which came to
be an invitation to treat, as it had invited quotes from the readers. However, at times, the words
of the advertisement are such, which can result in a liability for the party, if it is deemed as an
offer, instead of an invitation to treat. A leading example of this was the case of Carlill v
Carbolic Smoke Ball Company22. This case had such wordings, which were deemed as an offer
as they could be accepted by merely acting upon it. Conduct is a valid means of acceptance and
where the parties do what has been stated in the advertisements, particularly for obtaining the
reward mentioned in the advertisement, an offer would be deemed to be made. In Carlill, the
advertisement stated that if after using the company made smoke ball, a person got influenza,
they would be awarded £100. The plaintiff used this product and still got sick, and made a claim
to the company. The company denied this claim which led the plaintiff in bringing a lawsuit
against the defendant. The court held that a unilateral offer was contained in the company given
advertisement and thus, the company had to give the reward to the plaintiff23. This case thus
21 Rokiah Kadir, ‘Rules of advertisement in an electronic age’ (2013) 55(1) International Journal of Law and
Management.
22 [1892] EWCA Civ 1
23 Torsten Cheong, ‘A Promising Idea: Reconceptualizing the Formation of Unilateral Contracts’ (2014) Oxford U.
Undergraduate L.J.

QUESTION BASED ASSIGNMENT 8
became a leading example for the individuals to be careful in drawing out the wordings of the
advertisement24.
The liability is also attracted for a possible misrepresentation being made by the businesses.
Misrepresentation refers to a false statement of fact being made, which induces another person
into getting in the contract25. A leading example of this is bait advertising. Bait advertising is
deemed as an unethical technique of advertisements as in this, the customers lured into a promise
regarding sale and upon the attention of the consumer being drawn the scheme is changed26.
Section 35 of the ACL makes bait advertisements as an unfair practice27. An example of this was
present in the second part of first question, where Lianne was baited into getting into a contract
with Mary. Apart from this, section 29 could also be breached by the businesses, where they
make a false representation regarding a particular term and be held liable for breaching the
provisions of ACL. An example where the business had to bear additional costs was that of
Australian Competition and Consumer Commission v TPG Internet Pty Ltd28. In this case, the
company had advertised that the package would be available at certain price, which contained
hidden and additional costs. The court stated that the company had breached different provisions
of this act and indulged in bait advertising. There are numerous other sections of the ACL, which
would be applied on the businesses where they fail taking care while the advertisements are
being drafted.
Once a case of misrepresentation is established under the contract law, or a newspaper offer
results in formation of contract, the aggrieved party can apply for different remedies. The
remedies which can be opted in such cases include the contract being voided, claiming
compensation for the loss, applying for injunction or specific performance29, and even repayment
of money, through the applicability of provisions of ACL. The court could also order the contract
not to be enforced or to be varied, or for the goods to be repaired. Instead of applying the
financial resources in such field, there is a need for the businesses to safeguard from such
occurrences, so that the money used for compensating the consumer, is used instead for the
24 Joel Bakan, ‘Social marketing: thoughts from an empathetic outsider’ (2016) 11 Journal of Marketing
Management.
25 Richard Stone and James Devenney, Text, Cases and Materials on Contract Law (Routledge, 3rd ed, 2014)
26 Paul Latimer, Australian Business Law 2012 (CCH Australia Limited, 31st ed, 2012)
27 Australian Consumer Law, s35
28 [2013] FCAFC 37
29 At 26

QUESTION BASED ASSIGNMENT 9
different objectives of the company. Also, these penalties create a negative view of the company
in eyes of the consumer, which can again impact the revenues of the company30.
Thus, it becomes very clear that the advertisements, irrespective of the medium in which they
appear, can result in additional liabilities for the businesses, where meticulous efforts are not
employed by the company in the creation and drafting of such advertisements. The case laws and
the discussion covered above clearly prove as an example of the loss which the company could
have to bear when care is not taken in these advertisements, particularly when they give rise to a
legal liability.
30 Kate Ried, ‘Contractual Risk and Internet Commerce’ (2001) 11(2) Journal of Law, Information and Science.

QUESTION BASED ASSIGNMENT 10
Bibliography
A. Articles/ Books/ Reports
Andrews N, Contract Law (Cambridge University Press, 2nd ed, 2015)
Bakan J, ‘Social marketing: thoughts from an empathetic outsider’ (2016) 11 Journal of
Marketing Management.
Cheong T, ‘A Promising Idea: Reconceptualizing the Formation of Unilateral Contracts’ (2014)
Oxford U. Undergraduate L.J.
Davies PS, JC Smith's the Law of Contract (Oxford University Press, 2016)
Elliott C, and Quinn F, Contract Law (Pearson Education Limited, 9th ed, 2013)
Furmston M, and Tolhurst GJ, Contract Formation: Law and Practice (Oxford University Press,
2010)
Gibson A, and Fraser D, Business Law (Pearson Higher Education AU, 2013)
Kadir R, ‘Rules of advertisement in an electronic age’ (2013) 55(1) International Journal of Law
and Management.
Latimer P, Australian Business Law 2012 (CCH Australia Limited, 31st ed, 2012)
Marson J, and Ferris K, Business Law Concentrate: Law Revision and Study Guide (Oxford
University Press, 3rd ed, 2016)
McKendrick E, Contract Law (Pearson Education Limited, 11th ed, 2015)
Poole J, Casebook on Contract Law (Oxford University Press, 2016)
Ried K, ‘Contractual Risk and Internet Commerce’ (2001) 11(2) Journal of Law, Information
and Science.
Stone R and Devenney J, Text, Cases and Materials on Contract Law (Routledge, 3rd ed, 2014)

QUESTION BASED ASSIGNMENT 11
Wilkinson-Ryan T, and Hoffman DA, ‘The Common Sense of Contract Formation’ (2015) 67
Stan. L. Rev. 1269.
B. Cases
Australian Competition and Consumer Commission v TPG Internet Pty Ltd [2013] FCAFC 37
Byrne v Van Tienhoven (1880) LR 5 CPD 344
Carlill v Carbolic Smoke Ball Company [1892] EWCA Civ 1
Felthouse v Bindley (1862) 142 ER 1037
Harvey v Facey [1893] AC 552
Hyde v. Wrench (1840) 3 Beav 334
Partridge v Crittenden (1968) 2 All ER 421
C. Legislations
Competition and Consumer Act, 2010 (Cth)
Electronic Transaction Act, 1999 (Cth)