BLO5540 Business and Company Law Assignment, Victoria University

This document presents a comprehensive solution to a business and company law assignment, addressing key concepts in contract law. The assignment is divided into two parts. Part (a) examines the essential elements of contract formation, including offer, acceptance, intention to create legal relations, consideration, and certainty of terms, applying these principles to a case study involving a self-service food facility. Part (b) delves into exclusion clauses, analyzing their validity and enforceability under both common law and the Australian Consumer Law, specifically focusing on a scenario where a restaurant attempts to rely on an exclusion clause to avoid liability for a customer's injury. The solution incorporates relevant case law and legal principles to provide a thorough analysis of the issues, leading to well-supported conclusions regarding the validity of the contract and the enforceability of the exclusion clause.

Business and company law

Answer 1
A contract is referred to as the legally binding agreement between two or more parties. One
of the essential conditions of the contracts is the certainty of the terms and conditions of the
contract for the parties. The terms of the contract constitutes the obligations between the two
contracted parties. These terms may be express or implied. The express terms of the contract
refer to those terms that are mutually agreed by the parties either in the oral or written form1.
Thus, there is a direct acknowledgement by the parties to the said terms. Whether the said
terms are in written form or verbal form, the same must be understood by the parties and the
breach of the contracted terms may lead to litigations. In contrast to this, the implied terms of
the contract are the ones that are not mentioned by either of the parties yet these are fairly
obvious parts of the contract. The implied terms of the contracts highlight the intentions of
the parties by way of validation of the express terms. It is imperative to note that the terms
can be implied by the virtue of the customs, statutes or the courts. Thus, the deficiency in the
language of the contracts lead to the origin of the implied terms of the contracts.
The manner of operation of various kinds of terms have been explained as follows. For the
operation of the express terms, the said are expressed in the contract, and when in the written
form are signed by the parties to be bound by the same. Thus, whether understood by the
parties or not, once the express terms of the contract are signed, there is a consent of the
parties on the same. In context of construing the meaning of the express terms, the intention
of the parties are ascertained on an objective basis that is the terms would be understood in a
way a reasonable person would understand it. For instance, in the case of SS Ardennes
(Cargo Owners) v Ardennes (Owners)2 it was held that if certain oral terms are excluded from
the contract and unless the said terms are shown as the central part of the agreement, the same
would not be considered as part of the contract.
In contrast to the same, the implied terms of a contract are recognised on the basis of the
business efficacy test. The significance of the said test is that the terms of the contract must
be considered as the implied terms if the inclusion of the same lead to the contract working
and for the safety of the parties involved in the contract. It was held in the case of Davey v
Cosmos Air Holdings3 that the contract has an implied condition for the safety of the
customers and presence of non-hazardous conditions when they come to stay in the hotel.
Thus, even if there was no express condition for the safety of the customers from the ill
1 Paul, Latimer, Australian Business Law 2016 (CCH Australia Limited, 2016)
2 SS Ardennes (Cargo Owners) v Ardennes (Owners) [1950] 2 All ER 517
3 Davey v Cosmos Air Holdings [1989] Current Law 327

condition of the sewerage term, yet it was an implied term to be complied by the owners of
the hotel. In yet another case such as The Moorcock4 it was stated by the courts that since the
defendants had taken reasonable steps to ensure the safety of a wharf while the said wharf
was in their control of the defendant, they would be liable to the damages for the said steps
taken.
Answer 2
Part (a)
Issue
The issue in the given case study is to evaluate the essential elements in the formation of the
contracts which led to the formation of the contract between Kaffee Shoppe and Caitlyn.
Rules
The Australian Contract Law has its derivation from the English common law, which
oversees the matters of the contract formation between the parties. The principles are
additionally used with the relevant Federal, State, and the Territory laws to determine the
obligation and liabilities of the parties. The essential conditions as prescribed therein to be
fulfilled for the existence of a valid contract are listed as follows.
The first condition to a valid contract is that of offer and acceptance. One of the parties to the
contract must extend the offer of doing an act or abstaining from doing an act and the other
party must accept the same unconditionally. The offer once accepted becomes the agreement
between the parties subject to the presence of the other conditions. It is essential for the
communication of offer and acceptance. It is imperative to note that the invitation to treat is
separate from the offer and in the former one party extends the invitation of offers from
different people. Thus, on the making of such an invitation, the parties must make an offer to
be accepted in return and binding the other. The second essential condition is that the parties
must intend to be entering into a legal relationship as was held in the case of Air Great Lakes
Pty Ltd v KS Easter (Holdings) Pty Ltd5. Thus, with the intention of the legal relationship the
parties can sue each other for the enforcement of the contract. The third essential condition is
that a contract must include a consideration in return of an act or abstaining to do an act. It is
vital to note that the consideration here refers to the price paid for the obligation and may not
be necessary in the monetary form. The principle of vitality of consideration was established
4 The Moorcock [1889] 14 PD 64
5 Air Great Lakes Pty Ltd v KS Easter (Holdings) Pty Ltd [1989] 2 NSWLR 309

in the leading case law of Australian Woollen Mills Pty Ltd v The Commonwealth6. The next
essential condition to the formation of the contract is the existence of the certain terms and
conditions with specific description of the obligation of the parties and not vague terms. In
addition to the above conditions, the parties must have a legal capacity to enter into the
contracts and the basic objective of the contract must be legal as per the law of the land.
Application
The application of the above stated rules on the given case scenario lead to the following
points to be noted. In the given scenario, the setup of the self service facility denotes the act
of extension of invitation of offers by Kaffee Shoppe to the public. When the customers us
the machine, surf through the menu and press “OK”, they make an offer to the Kaffee
Shoppe. It was further pronounced in the case of Partridge v Critenden7 that the
advertisements are not offers rather the invitation to offers. When the receipt is produced and
handed over to the cash counter, the acceptance of the same is the creation of the agreement
between the parties. Thus, in the given case, the payment of the total cost of the order that is
the $ 20.00 is the consideration to be paid by the customer to the restaurant in return of
provision of the required dish. In addition, the nature of the contract being a commercial one,
it can be stated that the parties intended to be bound by a legal relationship. Hence, all the
essential elements that are required for the contract to be validly enforceable at the courts are
stated to be present in the given case scenario.
Conclusion
The discussions in the previous parts aid to conclude that by the virtue of the presence of the
essential pre requisites of the contract creation, a valid contract has come into existence
between Kaffee Shoppe and Caitlyn.
Part (b)
Issue
The issue in the given case study is to determine whether the restaurant Kaffee Shoppe can
rely on the clause printed on the ticket for the purpose of the avoidance of the liability in
relation to Caitlyn’s mishap.
6 Australian Woollen Mills Pty Ltd v The Commonwealth (1954) 92 CLR 424 (High Court)
7 Partridge v Critenden (1968) 2 All ER 425

Rules
It is essential to note that one of the practices in the industry for the purpose of reduction or
avoidance of the liability is the mentioning of the exclusion clause in the contract. The
exclusion clause refers to the condition in the contract where the liability of one of the parties
to the contract is limited8. It is imperative to note that the said practice is being used by the
parties to the contract as an unfair means, however the validity of the same lies in the fact that
said exclusion clauses must be legally viable in order to be included in the contracts. In
addition, one of the rule in relation to the said clauses is that it is necessary for the
communication of the same at the time of the formation of the contracts. The leading case
law of Thompson v LMS Railway9 is significant to be noted in this regard. It was pronounced
in the stated case law that the inclusion of the exclusion clause must be notified to the other
party at the time of formation of the contracts. The law pronounces two ways by which the
parties can take shelter of the benefit of the exclusion clause for the prevention from the
liability. These clauses can be part of both signed as well as the unsigned documents. A
formal manner of the formal notification is necessitated for the inclusion of the exclusion
clause in the case of the documents that are signed. As opposed to this, in case of the
unsigned agreements, the parties to the contract must have sufficient reasons to believe that
such a clause can be part of the contract in light of the subject matter of the contract. In
addition to the above, it is imperative to note that the parties to the contract must be aware of
the outcomes of such an inclusion of the exclusion clause in the contracts. This leads to an
important point to be noted here that where the party to a contract is unaware of the
consequences, the exclusion clause is not valid. In addition, by the virtue of the trade
practices, the exclusion clause can form the part of the contract.
The provisions of the consumer law in this regard are stated as follows. The Australian
Consumer Law is comprised of certain safety measures for the consumers of the goods and
services in the form of statutory guarantees. As per the provisions of the section 64 of the act,
the exclusion clause is stated to be invalid if the same are not on the lines with the statutory
guarantees as mentioned in the law.
8 Amanda P. Stickley, Australian torts law (LexisNexis Butterworths, 2016)
9 Thompson v LMS Railway [1930] 1 KB 41

Application
The application of the common law and the consumer law principles lead to the following
observations as mentioned hereunder. In the given case, the ticket retrieved from the machine
is comprised of the exclusion clause in which it has been stated that the restaurant does not
have a liability in context of injury to the consumers for the one caused by the food served. It
is known that such a clause is printed on the back side of the ticket and moreover the
consumers of the foods cannot have a sufficient reason to believe the presence of such an
exclusion clause. In addition the trade practices in the food industry also do not back the
presence of such a clause.
It can be further stated that the printing of such an exclusion clause is creating a limitation on
the guarantee of qualitative goods. According such a clause cannot be stated to be valid in
context of the Australian Consumer Law principles.
Conclusion
As per the rules discussed in relation to the exclusion clause in the common law and the
Australian Consumer Law, it can be stated that the exclusion clause in question is invalid,
Accordingly, the restaurant Kaffee Shoppe cannot rely on exclusion clause for the avoidance
of its liability towards Caitlyn.

Bibliography
Books
Latimer, P., Australian Business Law 2016 (CCH Australia Limited, 2016)
Stickley, A. P., Australian torts law (LexisNexis Butterworths, 2016)
Case Laws
Air Great Lakes Pty Ltd v KS Easter (Holdings) Pty Ltd [1989] 2 NSWLR 309
Australian Woollen Mills Pty Ltd v The Commonwealth (1954) 92 CLR 424 (High Court)
Davey v Cosmos Air Holdings [1989] Current Law 327
Partridge v Critenden (1968) 2 All ER 425
SS Ardennes (Cargo Owners) v Ardennes (Owners) [1950] 2 All ER 517
The Moorcock [1889] 14 PD 64
Thompson v LMS Railway [1930] 1 KB 41