Business Law Assignment: Contract and Consumer Law Analysis

This business law assignment addresses two main questions related to contract and consumer law. The first question examines the formation of a contract between Mary and Lianne based on email correspondence, analyzing elements like offer, acceptance, consideration, and intention to create legal relations. The second part of the question explores Lianne's rights against Mary under Australian Consumer Law (ACL) if the services provided did not match the contract's guarantees, specifically focusing on breaches related to service descriptions, fitness for purpose, and misleading conduct. The assignment further discusses advertising regulations under the ACL, emphasizing the prohibitions against misleading or deceptive conduct and the responsibilities of media and advertisers. It highlights the importance of fair business practices and the legal consequences of non-compliance with consumer protection laws.

Running Head: BUSINESS LAW 1
BUSINESS LAW
Name
Institution
Date

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Question 1 (a)
Issue
The issue is whether, based on the email correspondences between Mary and Lianne,
there was a contract that was formed.
Rule
For there to be a valid contract, there must be certain elements that must be fulfilled. The
major elements to be satisfied include intention to enter into a legal relationship, capacity to
contract, the agreement (which includes the offer and acceptance), the consideration and the
certainty of terms.
Intention to enter into a Legal Relationship
Courts undertake an objective perspective in understanding the parties’ intention and
hence, look at their words and actions to determine their intent. Parties to a contract must
demonstrate their intention to enter into a legally binding contract and this is usually inferred
from their conduct. There is a rebuttable presumption in commercial dealings that the parties had
the intention of entering into a legally binding contract (Rose & Frank Co v JR Crompton &
Bros Ltd 1924).
Capacity to Contract
The general position is that any legal person may contract. The exception to this general
rule has to do with minors, children and persons under the influence of intoxication.
Offer

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An offer is one party’s promise to another of giving a specific performance in exchange
of that other person’s specific performance or promise. Accordingly, to demonstrate that an offer
exists, an express or implied promise of performance of a specified thing for another must be
identified. An offer can be made in writing, by words or by conduct. Without a promise, there is
no offer. In the case of Carlill (1893), an advertisement made in a newspaper promising 100
pound in exchange for purchasing a smoke ball was held by the Court to be an offer. As was held
in the case of Ramsgate Victoria v Montefiore (1866), an offer may lapse after lapse of time that
was set by the parties or after a reasonable time. Also, if an offer was subject to the fulfilment of
a condition precedent, if that condition is not met, then the offer lapses. Furthermore, an offer
can be revoked before it is accepted (Routledge v Grant 1828). However, the revocation must be
communicated to the offeree. A counter offer acts as a rejection of the offer (Hyde v Wrench
1840). The general argument with regard to internet advertisements is that they amount to offers
as opposed to invitations to treat (Hance, 1996).
Acceptance
This is the unqualified acceptance of the offeror’s terms. An acceptance to an offer is
achieved when the specific counter-promise is made by the offeree or when the specified act is
performed in case it is a bilateral contract. Unless there is an intention by the parties to effect an
exchange, there can be no offer or acceptance. The acceptance must be communicated to the
offeree who is the only one that can accept the offer. Furthermore, the method of communicating
the acceptance must correspond with the requirements of the offeror. The offeror’s requirements
must also be met with respect to timing of the acceptance. Until the communication of the

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acceptance by the offeree, there will be no contract in existence. In the case of bilateral contracts,
that is, where an acceptance is reached by an exchange of promises, communication of the same
is necessary unless the parties dispensed with that option. Acceptance of an offer through email
correspondence is effected upon receipt of the email (Christensen, 2001). For there to be a
binding contract as a result of acceptance of an offer, the acceptance must rely on the offer (R v
Clarke 1927). Once an acceptance is communicated to the offeror, a contract is made (Tallerman
& Co Pty Ltd v Nathan’s Merchandise (Victoria) Pty Ltd (1957).
Consideration
This is one of the key elements for contract creation. A promise must be given by one
party in consideration for the performance of a counter-promise by the other party. The rule is
that even though the consideration is objectively inadequate, it must be for value. In other words,
it must be sufficient (Bret v JS 1600).
Certainty of Terms
The general requirement of the Courts is certainty as to price, subject matter and parties.
Hence, agreeing to negotiate or agreeing to agree will not be binding. Statements and
representations are considered as terms of the contract. This was the position in the case of Oscar
Chess Ltd v Williams (1957). Under the doctrine of privity of contract, contracts are only
enforceable by parties against each other. In simple terms, a party must be privy to a contract for
liability to arise or for them to enforce the same (Price v Easton 1833).
Application

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The advertisement on Mary’s website constituted the offer. However, it is arguable that
the advertisement on the website may amount to an invitation to treat. In considering the conduct
of Mary and Lianne, the question is whether they intended to be bound. The answer is yes. There
was an intention to create legally binding agreement from the conduct of the parties in the
present scenario. The email by Lianne to Mary setting out her preference for the trip as well as
Mary’s email suggesting the place of the trip may be considered as valid acceptance to the offer
or invitation to treat respectively. The counter offer made by Lianne constitutes rejection of the
original offer of $10000. The new offer became the $9500. However, because this offer was
conditioned and timed, failure by Lianne to satisfy the offer amounted to lapse of the offer.
A new offer was made by Mary of $10000 which was accepted by Lianne. This is
because an offer and acceptance by email is deemed communicated upon receipt. The email by
Lianne accepting the offer by Mary will be the acceptance. The other email purporting to cancel
the deal is not repudiation of the offer.
Conclusion
There is a valid contract between Mary and Lianne.
Question 1 (b)
Issue
Assuming that there was a contract between the parties but whatever was guaranteed in
the contract is not what was delivered. What rights therefore does Lianne have against Mary?
Rule

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Under the Australian Consumer Law, consumer guarantees are attached to all goods and
services automatically (ACCC 2014). By virtue of the consumer guarantees, consumers are
guaranteed certain levels of protections for the goods and services purchased. While some
businesses have the liberty to provide additional services – also known as extended warranties –
the consumer guarantees apply to all businesses regardless of the said warranties being offered
by the businesses.
With regard to goods, consumers have the below guarantees. It is a consumer guarantee
that the goods offered are of a good quality that is acceptable, defects-free, durable, safe and fit
for the purpose they were meant for (ACL section 54). Evermore, under section 55 of the ACL,
the goods must fit the purpose that the supplier or consumer specifies. Section 56 requires that
the goods will fit the description of either verbal, labeling or packaging representations. With
respect to services consumers have statutory guarantees that the same will be done with due skill
and care and that fit for the particular purpose that the consumer specified. Section 34 of the
ACL provides that businesses must not deal in conduct that misleads the public as regards the
quantity or suitability of their services.
Non-compliance with the guarantees entitles the consumer a right of action against the
supplier for remedies. The question for determination is whether the failure to comply with the
guarantee was major or not. Section 260 of the ACL provides a definition of major failure. If the
failure is minor, then the law requires the supplier to remedy the failure within a reasonable time.
In case the failure is major, the law requires notification that the goods are rejected, then suing
for compensation and damages. Section 271 (1) provides that where the goods are of a quality
not acceptable, the consumer can sue the supplier and section 271 (3) provides for a suit where
the goods do not correspond with the description.

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Application
Mary had earlier represented to Lianne that she would host her party with Malaysian
cuisine. However, she provided Russian cuisine. This was a breach of the representation of the
goods’ description contained in section 56. Furthermore, the boat was so cramped that there was
no room for the musicians to be on board. This was a breach of sections 55 and 54, that is, they
were not fit for the purpose represented and they were not free of defects or safe. Also, Mary
breached the provisions of section 34 in that she misled Lianne as regards the quantity and
suitability of the services she could render.
Conclusion
Lianne has rights known as statutory guarantees under the ACL. Lianne’s rights were
breached by Mary. Lianne has remedies against Mary for breach of the statutory guarantees.
Question 2
Introduction
Business advertisers must be careful concerning the statements that they make in
advertisements since the same are subject to the law as established by Parliament through
legislation and Courts through case law. This section discusses the above statement in light of
both statutory and case law.

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Discussion
From 1st January 2011, the Government of Australia introduced a law that protects
consumers and businesses in the country as relates to selling and advertising practices (ACCC
2007). The Competition and Consumer Act (2010) contains the Australian Consumer Law
(ACL), which is a schedule thereto that lays down the legal protections mentioned above. The
law is nationally applied and aims at ensuring that fair trade with consumers. Fair business
practices are one of the key pillars of successful markets and it is requisite for all businesses to
adhere to the consumer protection laws and regulations contained in the ACL. The following
paragraphs present a general discourse on the various issues that arise under advertisement laws.
There is a wide range of prohibitions that the ACL imposes on particular types of conduct
including conduct that is deceptive or misleading (or is likely to deceive or mislead), making
representations that are misleading or false and other types of conduct. Therefore, the application
of the ACL pertains to advertising in the form of face to face, telephone marketing, multimedia
and print (Justice Connect 2016).
Media and Advertisers
Media and advertising operators – online, radio, television and newspapers – must
particularly be careful of the services and products they advertise to their customers (ACCC
2014). They must be aware of their customers’ businesses and know the requirements of the
ACL for minimization of the risk of breaking the law. If a media house is merely a channel for
the misleading information, they may not be liable under the ACL. However, if the media
operator actually endorses or adopts the misleading message, it may be held liable (Australian
Competition and Consumer Commission v Channel Seven Brisbane Pty Limited 2009). In the

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Channel Seven case, a media firm endorsed the misleading information of an investment firm.
The court decided that both of them were in breach of the provisions of the Trade Practices Act
1974, which are now in the ACL.
Misleading or Deceptive Conduct
There are two fundamental advertising rules. The first rule is not to engage in conduct
that may likely mislead or deceive, and secondly is not to make misleading of false statements.
There is an overlap between the two rules in practice and a statement may be found to be in
breach of both. Accordingly, a business that engages in conduct that is deceptive or misleading
or that is likely to do that commits an illegality. Whether a business did not intend to mislead or
deceive or whether no person has suffered damage as a result of the conduct, the ACL is still
applicable (ACCC 2014). Section 18 of the ACL is the applicable law to deceptive and
misleading conduct.
Impressions
How a business’ behaviour affects the impression of the audience as a good service is
important. When deciding whether conduct is deceptive or misleading, the most relevant
question to ask is whether the conduct in question creates an overall impression of falsehood.
Although a business is not required to disclose all information, it may sometimes be required to
provide more information to explain conduct that was previously misleading. In the case of
Singtel Optus Pty Ltd v Australian Competition and Consumer Commission (2012), an internet
company advertised that it has ‘unlimited’ internet. However, the users experienced data cuts and
the court held that failure by the company to reveal the shortfalls in the internet amounted to
misleading and deceptive conduct.

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Businesses must further take particular heed to using the term ‘free’. For instance, stating
that a product or service is free as consumers are reasonably expected to take such words
literally. In other words, advertisers must be careful to reveal the whole truth about their products
since failure to do so may get them in trouble (ACCC 2014). In the determination of whether
conduct is deceptive or misleading, consideration will be made of the circumstances surrounding
the case and the audience. Advertisers must therefore, consider the product labels,
advertisements, product labels and their audiences. The audience that a business is targeting may
not be the one that gets the message.
Puffery
Puffery is terminology used to refer to vague, fanciful or widely exaggerated claims
concerning a good service that no one could possibly believe they are true or misleading. Under
the ACL such conduct is not considered to be misleading.
Other Forms of Conduct Considered as Misleading
Other forms of conduct that are considered as misleading or deceptive include the
following. Firstly, statements that are confusing and uncertain are sometimes considered
misleading. Secondly, disclaimers can be interpreted as misleading or deceptive conduct.
Thirdly, comparative advertising may be considered as deceptive or misleading. This is a
scenario where a business makes comparison between two businesses and lowers the brand, price
or reputation of one over the other (Justice Connect 2016). Lastly, passing off is conduct that is
considered as misleading. This is the situation where a business adopts another company’s style
to a level where they seem as almost alike or that there is a link between the two companies.

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The Do’s and Don’ts for Businesses under the ACL
In making predictions concerning future events, businesses must possess reasonable
grounds. They must adequately put into consideration the range of variables and uncertainties
(Section 4). Moreover, businesses must not engage in commercial conduct that is deceptive or
misleading or that is likely to deceive or mislead (Section 18). Misleading or false representation
of the attributes of goods and services is the other type of commercial conduct that businesses
must not engage in (Section 29). Furthermore, where a seller partially represents the prices of
goods or services, such seller is required to reveal the cash price of those goods and services
(Section 48).
Remedies and Enforcement
Persons who are found to have contravened the provisions of the laws on misleading and
deceptive conduct can be subjected to compensatory orders (Division 4), damages (236) and
injunctions (232).

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References
Australian Competition and Consumer Commission v Channel Seven Brisbane Pty Limited
[2009] HCA 19
Australian Competition and Consumer Commission. (2007). Advertising and Selling. Canberra,
Australia: Author
Australian Competition and Consumer Commission. (2014). Advertising and Selling Guide.
Canberra, Australia: Author
Bret v JS (1600) Cro Eliz 756
Carlill v Carbolic Smoke Ball Company [1893] 1 QB 256
Christensen, S. (2001). Formation of contracts by email-is it just the same as the
post. Queensland U. Tech. L. & Just. J., 1, 22
Competition and Consumer Act 2010 (Cth)
Hance, O. (1996). Business and Law on the Internet, McGraw Hill: Best of Editions
Hyde v Wrench [1840] EWHC Ch J90
Justice Connect. (2016). The Laws of Advertising and your Community Organisation. Retrieved
from
http://www.nfplaw.org.au/sites/default/files/media/The_laws_of_advertising_and_your_commun
ity_organisation.pdf

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Oscar Chess Ltd v Williams (1957) 1 WLR 370
Price v Easton (1833) 4 B & Ad 433
R v Clarke (1927) 40 CLR 227
Ramsgate Victoria v Montefiore (1866) LR 1 Ex 109
Rose & Frank Co v JR Crompton & Bros Ltd [1924] UKHL 2
Routledge v Grant (1828) 4 Bing 653
Singtel Optus Pty Ltd v Australian Competition and Consumer Commission [2012] FCAFC 20
Tallerman & Co Pty Ltd v Nathan’s Merchandise (Victoria) Pty Ltd (1957) 98 CLR 93
Trade Practices Act 1974, Australia (Cth)