Business Law: Contract Formation and Exclusion Clauses Report

This report provides a comprehensive analysis of Australian business law, specifically focusing on contract formation and exclusion clauses. The report begins by examining a case involving the sale of a laptop, exploring the legal principles of offer, acceptance, consideration, and intention to create legal relations. It analyzes whether a contract was formed between the seller and the buyer, considering aspects such as online advertisements as invitations to treat, counter-offers, and revocation of offers. The second part of the report delves into a case concerning a ball-gown sent for dry cleaning, focusing on exclusion clauses and misrepresentation. It examines the validity of an exclusion clause on a docket, considering whether misrepresentation by a representative of the dry-cleaning firm negates the clause's effect. The report references relevant case law, including AGC (Advances) Ltd v McWhirter, Carlill v Carbolic Smoke Ball, and Curtis v Chemical Cleaning Co, to support its arguments and conclusions. Ultimately, the report concludes that in the first case, no contract was formed, and in the second case, the dry-cleaning firm could be held liable due to misrepresentation.

Business Law

TABLE OF CONTENTS
INTRODUCTION...........................................................................................................................1
PART 1............................................................................................................................................1
PART 2............................................................................................................................................4
Overview or issue of the case......................................................................................................4
A..................................................................................................................................................4
B...................................................................................................................................................5
C...................................................................................................................................................5
D..................................................................................................................................................5
E...................................................................................................................................................5
F...................................................................................................................................................6
CONCLUSION................................................................................................................................7
REFERENCES................................................................................................................................8

INTRODUCTION
In Australia, several laws have been introduced by the concerned authority with the
motive to offer protection to innocent party in against to the wrongdoings of others. Australian
laws entail that for developing lawful relationship, contractual parties need to satisfy all the
essential aspects such as offer, acceptance, consideration and legal intention. The present report
is based on different case situations which will shed light on the laws and precedent judgments
regarding mis-presentation, offer and invitation to treat.
PART 1
Issue: Given case scenario presents that Sam decided to sell his laptop such as Delta Z2
and for this purpose, he placed an online advertisement. In this, Sam mentioned all the details
online regarding price, condition and amount. Hence, Danny showed his willingness in relation
to purchase laptop @ $700. In response to the same, Sam entailed that he will send such laptop
with a bag @ 800. Thus, mail was sent by Danny to Sam that shows\acceptance in relation to
purchasing laptop. Further, in mail, Danny depicted that he will make payment in the form of
two installments. Such condition has agreed by Sam and he sent bank details to Danny for the
purpose of getting payment. However, on the next day, Danny received a call from Sam and
found that owner had already sold laptop to another buyer. In this, Danny stated that he was
unhappy from the action taken by Sam and said that contract has been formed in between both
the parties. Thus, in this, the main issue is to ascertain whether contract would take place
between Danny and Sam or not.
Law: On the basis of Australian laws, for contract formation, there must be an agreement
(offer & acceptance), consideration, capacity of the parties, intention of legal binding, formalities
as well as certainties.
In the case of AGC (Advances) Ltd v McWhirter1, it has found that offer and invitation to
treat highly differ from each other. Court entailed and held that under invitation to treat, seller
has right either to accept or reject offer made by other. Moreover, under invitation to treat, party
does not want to enter in a legal binding without further negotiation.
1 AGC (Advances) Ltd v McWhirter (1977) 1 BLR 9454
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Australian contract law entails that consideration is must for legal contractual
relationship. Considering the cases of Carlill V carbolic Smoke Ball2, Australian Woollen Mills
Pty Ltd v The Commonwealth3 and Beaton v McDivitt4 it can be mentioned that contract must be
supported with valid consideration.
Further, Contract law of Australia and case Masters v Cameron5 presents that for legal
binding there must be an offer and unconditional acceptance. From assessment, it has identified
that when parties are negotiating contractual aspects then offer made by one lapses if other party
rejected the same. Hence, once an offer is rejected by the contractual party then it cannot be
accepted unless it revives. On the basis of such aspects and case of Kempson & Co Pty Ltd v
Camm [1922]6, counter offer is when new aspects are presented in response to another.
In the case of Rose and Frank Co v Crompton (1923)7, court held that contractual
relationship exists between the parties to a contract when there is a legal intention to create
obligations. As per contract law, offer may be terminated at any time before or prior to the
acceptance. Further, case judgment pertaining to Hyde v Wrench presented that once an offer is
rejected by the offeree then it can no longer be accepted.
Along with this, Electronic Transaction Act (1999), section 4, transactions or contract
done through online means considered as valid. Such Act includes several rules in relation to
giving information in writing, signing and producing document as well as retention8. Further, it
also includes legislation regarding time and place of dispatch as well as receipt.
2 Carlill v Carbolic Smoke Ball Co [1893] 1 QB 256; [1892] EWCA Civ 1
3 Australian Woollen Mills Pty Ltd v The Commonwealth (1954) 92 CLR 424
4 Beaton v McDivitt (1987) 13 NSWLR 162
5 Masters v Cameron [1954] 91 CLR 353
6 Kempson & Co Pty Ltd v Camm [1922]
7 Rose and Frank Co v Crompton (1923)
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Application:
By applying above depicted case of AGC (Advances) Ltd, it can be said that online
advertisement placed by Sam considered as an invitation to treat. Further, case of Kempson &
Co Pty Ltd exhibits that counter offer made by Danny and Sam regarding the price of Laptop
such as $700 7 $780. In this, offer made by Danny for purchasing laptop @ $700 lapsed as the
same was rejected by an offeree namely Sam. Hence, in the given case, new offer made by Sam
in relation to giving laptop with bag @ $800 which in turn considered as counter offer. In this,
such offer was accepted by Danny and he promised to pay amount in the form of installments. In
this regard, Sam replied that it’s fine to make payment in two installments and supplied bank
details.
However, before giving reply to Sam, Danny received a call from seller’s side that he had
already sold laptop to another entity. This aspect shows that there was no agreement between the
concerned parties9. As per Byrne v Van Tienhoven (1880)10 revocation requires communication.
Hence, on the basis of such aspect, by sending mail and calling to Danny, offer was revoked by
Sam. However, in this, Sam also asked to Danny that you can make payment in two days’ time
or not. Further, according to Carlill and Beaton’s case legal consideration takes place in the
contract related to selling of laptop11. Moreover, case situation clearly presents that Danny agreed
to purchase laptop and bag from Sam @ $800. Further, in this, intention among the parties also
exists in relation to creating legal relationship or obligations. Hence, considering all the above
8 Electronic Transactions Act 1999. n.d. [pdf]. Available through:
<https://www.legislation.gov.au/Details/C2011C00445>.
9 Agreement. 2017. [Online]. Available through:
<https://www.australiancontractlaw.com/law/formation-agreement.html >.
10 Byrne v Van Tienhoven (1880)
11 Consideration. 2017. [Online]. Available through:
<https://www.australiancontractlaw.com/law/formation-consideration.html>.
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depicted aspects it can be stated that due to the absence of having legal agreement there was no
contractual relationship found between Sam and Danny.
PART 2
Overview or issue of the case
On the basis of cited case situation, Jane gave very expensive ball-gown to Laundry
Today Pty Ltd for washing as well as dry-cleaning purpose. In this, Jane was given with the
docket on that contained exclusion clause regarding no liability of employees and agent
pertaining to the loss of clothing item. Given case clearly exhibits that Jane was concerned
towards the color of dress and discussed the same with the representative of dry-cleaning firm. In
such discussion, representative stated that statement mentioned on the back side of ticket was
applied only on sequins or buttons. By taking into account such statement of representative Jane
signed docket. On the next day, Jane found that color of the dress had run to the bottom. Due to
this, now Jane is not in condition to wear such gown in Christmas function. In this, an issue is to
ascertain whether Jane can claim for compensation irrespective of the exclusion clause
mentioned on docket.
A.
Exclusion clauses imply for the contractual terms which in turn limits liability pertaining
to one of the parties under certain circumstances. Specifically, as per Australian Law, there are
mainly two types of exemption clauses that can be inserted by contractual parties such as
exclusion and limitation. Case summary presents that ticket, received by Jane, contain an
exclusion clause that firm will not be liable for the clothing items of customers. In accordance
with Australian laws, contractual party may rely on clause when it has been incorporated into the
contract. Hence, if one of the parties wants to rely on exclusion clause then it must be
incorporate through signature, notice and course of dealing.
B.
Considering the current case situation, it can be depicted that clause mentioned on docket
was effectively incorporated into the contract. Moreover, docket, contains exclusion clause was
signed by Jane. English law presents that document containing an exclusion clause having
contractual effect if plaintiff signs a document. Hence, signed document automatically form the
part of contract and bounded by the terms and conditions mentioned on it. Case of L'Estrange v
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Graucob [1934]12 presents that exclusion clauses were applicable irrespective plaintiff had read
the document or not.
C.
Legal effect of the representative’s reply to Jane’s question
On the basis of judgment found in the case of Curtis v Chemical Cleaning Co [1951]13,
signed document is considered as an ineffective wholly or partly if other party had provided
plaintiff with mis-presentation or false information. By taking into account the judgment found
in the case of Curtis v Chemical Cleaning, it can be depicted that when situation of mis-
presentation exist then cleaning firm could not rely on the exclusion clause even though claimant
signed the same.
D.
Considering the rules and case laws pertaining to exclusion clause, it can be depicted that
Jane’s has right to sue for the damage regarding her dress. Moreover, representative of Laundry
Pty ltd served false information to Jane on the basis of which she signed docket. Hence, in the
given case, representative of Laundry Pty Ltd had mis-presented the effect of clause so it cannot
rely on such clause. Referring the decision of judiciary authority in the case of Curtis v Chemical
Cleaning it can be mentioned that Jane can sue on Laundry Pty Ltd for the loss suffered.
E.
Given case entails that wordings of the clause mentioned on docket in a small print which
shows that employees and agents of the firm do not owe responsibility for any loss or damage
regarding clothing items. Considering case of White v John Warwick (1953)14, it can be depicted
that ambiguous wording presented on exclusion clause offers protection to the defendant party
from strict contractual liability but it would not exempt liability pertaining to the situation of
negligence. Hence, under the given case, Laundry Today Pty Ltd mentioned that they will not be
liable for clothing items. However, they failed to specify the aspects or elements for which they
12 L'Estrange v Graucob [1934] 2 KB 394
13 Curtis V Chemical Cleaning And Dyeing Co [1951] 1 KB 805
14 White v John Warwick & Company Ltd [1953] EWCA Civ J0624-5, [1953] 1 WLR 1285
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do not owe any responsibility. Thus, it can be depicted that from current situation and judgments
which were given by judiciary authorities in previous cases it can be said that Laundry Today Pty
Ltd can protect itself from strict liability through such clause. However, such exclusion clause
does not offer freedom to defendant party in relation to liability in negligence. In accordance
with such aspects Laundry Today Pty Ltd is held accountable towards Jane. Moreover, it is
accountability of dry-cleaning firm to carry out activities with proper care. Hence, due to the
negligence from the side of Laundry Today Pty Ltd color of the dress related to both top and
bottom ruined. Thus, Jane has right to make sue on Laundry Today Pty Ltd and claim for the
compensation.
F.
No, answer would be the same, mentioned in e, if Jane was not required to sign docket
because in the case of unsigned document it is the accountability of plaintiff to give sufficient
notice. Case of Olley v Marlborough Court [1949] exhibits that notice regarding exclusion clause
must be given to other party before or at the time of contract formation. Along with this, in the
cases of Parker v SE Railway Co (1877)15 and Thornton v Shoe Lane Parking (1971)16 it can be
stated the exclusion clause must be mentioned on contractual document. On the basis of such
cases, exclusion clause mentioned on the document that merely acknowledges payment namely
receipt does not come into effect. Hence, in the case of unsigned document, Jane is also entitled
to sue or claim for the compensation.
CONCLUSION
By summing up this report, it can be depicted that for making a valid contract, concerned
parties need to satisfy all the essentials in line with Australian law. It can be seen in the report
that there was no legal relationship between Sam and Danny due to lack of having one of the
essential aspects i.e. an agreement. Further, it has been articulated that on the basis of mis-
presentation, Jane can sue against the dry-cleaning firm.
15 Parker V South Eastern Railway (1877) 2 CPD 416
16 Thornton V Shoe Lane Parking Ltd [1971] QB 163
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REFERENCES
AGC (Advances) Ltd v McWhirter (1977) 1 BLR 9454
Australian Woollen Mills Pty Ltd v The Commonwealth (1954) 92 CLR 424
Beaton v McDivitt (1987) 13 NSWLR 162
Beaton v McDivitt (1987) 13 NSWLR 162
Byrne v Van Tienhoven (1880)
Carlill v Carbolic Smoke Ball Co [1893] 1 QB 256; [1892] EWCA Civ 1
Curtis V Chemical Cleaning and Dyeing Co [1951] 1 KB 805
Kempson & Co Pty Ltd v Camm [1922]
Masters v Cameron [1954] 91 CLR 353
Parker V South Eastern Railway (1877) 2 CPD 416
Rose and Frank Co v Crompton (1923)
Thornton V Shoe Lane Parking Ltd [1971] QB 163
White v John Warwick & Company Ltd [1953] EWCA Civ J0624-5, [1953] 1 WLR 1285
Online
Agreement. 2017. [Online]. Available through:
<https://www.australiancontractlaw.com/law/formation-agreement.html>.
Consideration. 2017. [Online]. Available through:
<https://www.australiancontractlaw.com/law/formation-consideration.html>.
Electronic Transactions Act 1999. n.d. [pdf]. Available through:
<https://www.legislation.gov.au/Details/C2011C00445>.
Exclusion Clauses. 2017. Online]. Available through:
<https://www.lawhandbook.sa.gov.au/ch10s02s06.php>.
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