HA2022 Business Law Report: Contract and Consumer Law Analysis

This business law report analyzes two key legal issues. The first part examines contract law, specifically addressing whether a breach of contract occurred between friends starting a fast-food business, focusing on the intention to create legal relations and the application of relevant case law, such a...Read More

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Contents
Question 1........................................................................................................................................2
Issue 2
Rules 2
Application 3
Conclusion 4
Question 2........................................................................................................................................5
Issue 5
Rules 5
Application 6
Conclusion 7
References........................................................................................................................................8

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Question 1
Issue
The issue is to check whether George can initiate an action against Anita or not to breach the
contract.
Rules
For a valid contract, some elements must exist there. An agreement is a prior stage of a contract
and remains only agreement always if the mandatory elements of a contract do not exist. In
addition to valid offer, acceptance, and consideration, the intention of the parties to the contract
is also an element of a contract. This is a much-needed aspect of a valid contract. For a valid
contract, it is necessary that there must be an intention of both the parties to create and develop a
legal relation (Smits, 2014). Both the parties must have a clear understanding that by developing
a contract they want to impose some legal obligation on each other. This is the reason that
agreement that people create out of affection and love with their dear and near ones cannot be
developed into a contract. This can be stated that if the intention of parties to develop a legal
relation is missing in a transaction then they cannot sue each other for breach of contract
(upcounsel, 2018).
In the transaction that people enters into with their relatives, friends and family members, there is
no intention to create a legal relationship in general. However, this is not necessary that every
time, such intention is missing. One can also develop a legally bound contract with their friends

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or family members but there must be an intention to create a legal relation. Such intention can be
expressed or implied (Surbhi S, 2017). Where parties do express that they want to develop a
legal relation, there will be no question of presumption. Presumption rules will apply in those
cases where parties do not expressly state that they have such intention. Now the issue is that
how it will be determined that an intention exist in a transaction or not in those cases where
parties do not express anything. In order to answer this inquiry, this is to say that in such cases
court look after the circumstances of the case and determine that an intention exists or not. There
are some circumstances where an implied intention of the parties exists. For instance, in case of
commercial and business transactions, this is to assume that parties to the contacts have
reasonable intention to bind each other in a legal manner and therefore a valid contract exists in
between them (Gibson, 2017). In addition to this, the custom of the parties is also an important
element to consider.
Partnership Agreements
Partnership agreements come under the purview of commercial contracts. People generally
choose this form of business with either their family members or with their friends, yet this is to
assume that partners of a firm do have their intention to create legal relation. No matter that a
partnership agreement is in oral or written form, it is of commercial nature and court while
determining the existence of the contract assumes that the agreement has commercial nature
(Colgar, 2013). Therefore, a valid contract exists there in cases of partnership even between
friends and family members.

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It was held in the case of Jones v Padavatton [1969] 1 WLR 328 that agreements develop
between family members will remain of domestic and social nature until unless there is an
intention to create a legal relationship at the end of both the parties to the case.
Impact of Contract Breach
Now, this to state that legal obligation refers to a state where the failure of one party gives
another party a right to sue the first one. In a contract, performance is the end thing to do. If any
of the party denies performing their obligation in a contract then another party can bring an
action for breach of contract and ask for the damages (Helewitz, 2010).
Application
In the given case, parties to the case i.e. George and Anita were friends. They wanted to start a
fast food business. The main motive was to earn money out of such business and that is a
commercial purpose. Applying the provision of Jones v Padavatton , this is to say that this was
not a domestic or social contract. Both the person was clear about their motive. Although neither
George nor Anita has expressly stated that, they want to develop a legal relation. In such a
situation, the rule of presumption will be applicable.
As stated in the rule section that in the cases of presumption, the court looks after the nature of
the agreement, here the development of partnership was a commercial transaction. In addition to
this, the solicitor was also involved in the case. As the court also check the conduct of parties,
this can review in this case, that parties have instructed their solicitor to develop partnership deed
including their rights and obligation. This act of both the parties makes their intention clear and it
is to conclude that they both had the intention to create a legal relationship between them despite

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the fact that they are friends also. Later on, in the case, Anita has rushed out of contract. As
nothing is given about their mutual arrangements, this is to say that George can sue Anita for
breach of contract if opening up a new business in the similar locality was prevented under their
contract and Anita has breached one or more terms of the contract.
Conclusion
In order to conclude the issue of the case, this is to be stated that both George and Anita had the
intention to create legal relation as they have called the solicitor and instructed him to include
rights and obligation of partners. Further, a partnership deed was also there so being a
commercial contract, this is to conclude that a valid contract was exited between George and
Anita. Further George can bring an action against Anita for breach of contract if the
establishment of a similar business was prohibited under their contract and also can ask for the
damages. The claim of Anita is not a valid one.

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Question 2
Issue
Issus involved in the case that whether Hui has any right in against of Ashmore Office
Equipment under the umbrella of Australian Consumer Law and if yes, then what kind of right
he has.
Rules
Australian Consumer Law is one of the important legislation of the country. As the name
implies, this law exists to protect the right of a consumer in against of manufacturers and
suppliers as well. This law can be found under Schedule 2 of Competition and Consumer Act
2010 (Cth). Now the question is to check that who is a consumer as per the Provisions of
Australian Consumer law (hereinafter referred as ACL/the act).
Consumer:- Section 3 of ACL states that a person will be considered as a consumer if acquires
good or service
1. Of value not more than $40000
2. If value more than $40000 then the acquisition is for household or domestic purpose but
not for a commercial purpose (Australia, 2011).
It was held in the case of Seeley International Pty Ltd v Newtronics Pty Ltd. [2001] FCA 1862
that in those cases where a person acquires goods or services even for the commercial purpose
he/she will be considered as a consumer if the value of such goods/services is less than $40000.
This is necessary to state that a person who falls into the category of the consumer can initiate an
action under ACL.

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Consumer Guarantees
These are the promises, which always exist in a transaction of sale of goods and services in
Australia. Whenever a consumer acquires some goods or services then it is assumed that the
same has given some guarantees under such transaction by the seller or goods or proved of
services, these guarantees are also applicable and impose on the manufacturer of goods. This is
to be stated that ACL provides these guarantees to the consumer. No matter what has contracted
between consumer and supplier, the consumer will always be blessed with these guarantees. In
addition to this, a supplier/manufacturer cannot impose any condition that prevents a consumer
to use these guarantees against him/her.
Section 51 is one of the act states one of the important consumer guarantees that is a guarantee of
title. The title refers to the right on goods. This section says that a business who is selling goods
to the consumer must have a good and proper title on goods (Sise, 2012). This is very general
that a person with no title of goods cannot further transfer the same to others. Therefore, under
section 51 of the act, it is required on the part of the supplier of goods to only transfer those
goods on which he/she has a complete title. The guarantees are also applicable to second-hand
goods.
Remedies: - In those cases where a supplier become fails to provide goods according to
guarantees mentioned under ACL, the consumer can ask for the remedies. The remedies will
depend on the circumstances of the case. Further, if a guarantee breach leads to an issue of major
failure then it will depend on the consumer that he/she can choose one remedy out of the refund,
replacement or compensation. A major failure will be there when the consumer would not
purchase the goods if was aware with actual circumstance (Legal Vision, 2016).

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In the case of Rowland v Divall [1923] 2 KB 500, a car dealer purchased a car from the
defendant, painted the same and further sold the same to a customer. Two months after the sell,
police has stated that the car is stolen and further returned the car to the original owner. The
purchaser of the car (customer) brought an action against the car dealer and therefore the dealer
had to return the value paid by such person in consideration of car. The car dealer brought an
action against the defendant to sell a car with a bad title. It was given in the decision that the
defendant was not the true owner of the car and hence is liable towards claimant. Further, it was
also held that the claimant was not entitled to receive compensation for the expenses that he has
done in order to paint the car (E-Law Resources, 2018).
Application
In the given case, Hui purchased a second-hand computer from Ashmore Office Equipment. Hui
has purchased the computer for $500 and also made some further expenses worth $95 on the
same. As stated under section 3 of ACL, Hui is a consumer here because the purchase value of
goods is less than $40000. Further, he has purchased the computer for a domestic purpose. Being
the supplier of the computer Ashmore Office Equipment owed some guarantees towards Hui in
the case.
According to section 51, Ashmore Office Equipment was liable to provide a computer with a
complete and good title to Hui. After three months of purchase of the computer, police arrived and
claimed that the computer he acquired from Ashmore Office Equipment is stolen one, and returned
the same to the actual owner. By selling a computer with the incomplete and defective title,
Ashmore Office Equipment has breached the guarantee under section 51 of ACL. Hui being a
consumer can bring an action against Ashmore Office Equipment. If Hui was aware of the bad title
of Ashmore Office Equipment, he might not have purchased the same. It is established that a major

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failure in performance of guarantee is there. He can claim for refund/replacement/compensation to
Ashmore Office Equipment, as it is a major failure.
Applying the provision of Rowland v Divall, Hui cannot demand the expenses that he has further
incurred on computer i.e. $95.
Conclusion
Hui is a consumer of the case. He has received goods of bad title and therefore the supplier of
goods i.e. Ashmore Office Equipment did not provide a guarantee of title under section 51 of
ACL. Hui can bring an action against Ashmore Office Equipment to get a replaced computer or
to get a refund. He can also claim for compensation but cannot ask for the further expenses that
he has made on the computer.

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References
Australia. (2011) Australian Competition and Consumer Legislation 2011. Australia: CCH
Australia Limited.
Colgar, T. (2013) Turkey: The Term Business Partnership And The Legal Status Of Business
Partnerships. [online] Available from:
http://www.mondaq.com/turkey/x/250906/Corporate+Governance/The+Term+Business+Partner
ship+And+The+Legal+Status+Of+Business+Partnerships [Accessed on 13/09/2018]
Competition and Consumer Act 2010 (Cth)
E-Law Resources. (2018) Rowland v Divall [1923] 2 KB 500. [online] Available from:
http://www.e-lawresources.co.uk/Rowland-v-Divall.php [Accessed on 13/09/2018]
Gibson, A. (2017) Business Law. Melbourne, Vic : Pearson Australia.
Helewitz, J., A. (2010) Basic Contract Law for Paralegals (6th ed.). New york: Aspen Publishers
Online.
Jones v Padavatton [1969] 1 WLR 328
Legal Vision, (2016) What are the Consumer Guarantees? [online] Available from:
https://legalvision.com.au/what-are-the-consumer-guarantees/[Accessed on 13/09/2018]
Rowland v Divall [1923] 2 KB 500
Seeley International Pty Ltd v Newtronics Pty Ltd. [2001] FCA 1862

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Sise, P. (2012) Consumer guarantees for the supply of goods: the manufacturer's or supplier's
problem? [online] Available from:
https://www.claytonutz.com/knowledge/2012/october/consumer-guarantees-for-the-supply-of-
goods-the-manufacturer-s-or-supplier-s-problem [Accessed on 13/09/2018]
Smits, J., M. (2014) Contract Law: A Comparative Introduction. UK: Edward Elgar Publishing.
Surbhi S, (2017) Difference Between Express Contract and Implied Contract. [online] Available
from: https://keydifferences.com/difference-between-express-and-implied-contract.html
[Accessed on 13/09/2018]
Upcounsel. (2018) Intention To Be Legally Bound: Everything You Need to Know. [online]
Available from: https://www.upcounsel.com/intention-to-be-legally-bound [Accessed on
13/09/2018]