Business and Company Law: Case Study on Contractual Obligations

This report analyzes a business law case involving a customer, Avinash, who suffered a broken tooth after consuming a pastry from a cafe. The report examines the formation of a contract between Avinash and the cafe, considering the elements of offer, acceptance, and consideration. It explores the legal entitlement of the cafe based on an exclusion clause printed on the tickets, considering relevant business and consumer protection laws in Australia, including the Corporation Act 2001 and the Competition and Consumer Act 2010. The analysis references the Donoghue v. Stevenson case to determine the cafe's liability for negligence and duty of care. Furthermore, the report distinguishes between express and implied terms of a contract, emphasizing the significance of implied terms in cases of negligence. The report concludes that Avinash has grounds to sue the cafe for negligence and damages, despite the presence of an exclusion clause, due to the cafe's breach of duty of care resulting in harm to the consumer.

Business and Company Law

Table of Contents
INTRODUCTION...........................................................................................................................1
QUESTION 1...................................................................................................................................1
A) Explaining making of contract between Avinash and the cafe...............................................1
B) Explaining legal entitlement of cafe on clause printed on the tickets ....................................3
QUESTION 2 ..................................................................................................................................6
CONCLUSION................................................................................................................................8
REFERENCES................................................................................................................................9

INTRODUCTION
Business laws and company laws have been framed to monitor and control various
business activities of the and transactions made by a company during its business operations.
These laws contains rules and regulations that are needed to be comply by each of the company
doing its business activities in the country. The present study shows a legal solution of a business
problem. The solution is being provided on the basis of various business laws and company laws
relating applied on the given case scenario. Various previous judgments provided in the similar
cases is also being taken into account while analysing proper legal solution of the business
problem.
QUESTION 1
Part A
Explaining making of contract between Avinash and the cafe
Introduction
Avinash is a consumer of a cafe who ordered a regular coffee and pastry. A hard piece of
metal stuck into the Pastry that resulted in broken of tooth of Avinash. Further, Avinash
approached management for complaining about the metal. Management refused to be liable by
showing the reverse side of ticket containing a clause that “This café accepts no responsibility or
liability for any injury caused to customers by consumption of food or drink sold.”
Business law:
Corporation Act 2001 concerns with the business law of Australia. It provides various
guidelines and rules that are needed to be followed by a business organisation while performing
its business activities.
Contract law:
Contract law in the Australia concerns with creation of obligation of each party to the
agreement for the purpose of determining legal rights and obligations of each party to the
agreement so as to eliminate the frauds and inadequacy by any individual while performing their
part if performance 1.
Essential elements of a contract for developing a valid contract can be analysed as
under:
Offer:
1
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The basic requirement of making a contract is an offer made by a party for asking another
party to do or stopping to do any performance.
Acceptance:
No contract can be formed without acceptance of the offer. Party to whom offer is being
made needs to accept the offer without making any alteration in the agreement terms.
Agreement:
When the offer is accepted, an agreement is formed between the parties.
Contract:
An agreement that fulfills all the legal requirements of a contract, such as legal
relationship, agreement between major persons, specific consideration, etc. 2 would be termed as
a contract that have a legal boundation over each party to the contract.
Essential requirement of contract:
For the purpose of creation of a valid contract, the contract must fulfill each of the
essential requirement. Some of the major essential requirement of the contract are :
▪ Both the parties must have intention to create a legal relationship between them.
▪ There must be a deed of agreement or a specific and valid value as consideration
for each party against their performance.
▪ Each term contained in the agreement must be valid and reasonable as well.
▪ Each party must fulfill the requirement of capacity to contract.
▪ Further, proper communication of both offer and acceptance must be present.
Legal position of all parties:
After development of a valid contract each party to the contract are bound to perform
their activities as per the terms of the contract.
Negligence by party:
In a contract, negligence arises when any party to the contract breaches their duty of care
against another party 3. As per the clause of negligence of duty, if any person claims satisfied the
2 Kiefel, S., 2016. Good faith in contractual performance: A background paper for the
Judicial Colloquium. Brief. 43(5). p.26.
3 Spengler, J. O., and et.al., 2016. Introduction to sport law with case studies in sport law.
Human Kinetics.
2

negligence of duty of care by another party, it would make the person who has breached the
contract would be liable to pay the damages to claimant equal to the loss suffered by claimant
and foretasted loss as well.
Exclusion of liability:
In order to exclude or limit the liability of a company, it may include an exclusion clause
in the agreement between the parties. Law has provided a right to include the exclusion clause
while making a contract. Although, if any of the exclusion clause results in providing any harm
to another party, the court may interrupt and held the exclusion liability as void as a result of
which the business would be liable to pay damages to the claimant.
Donoghue v. Stevenson, 1932, House of Lords 4
In this judgment, Donoghue purchased a beer from a wine shop. When the beer was
poured into a glass, a snail was found in the beer. Due to drinking that beer, she became sick.
Donoghue claimed the company for claiming the damages. Company refused to pay damages on
the ground of exclusion clause mentioned in their agreement. Further, the court held that the
company would remain liable towards the Donoghue as it is a negligence of duty of care.
Further, as the exclusion clause is providing damage and harm to another party, it would be
treated as a void clause.
Application of the above case study and rules relating to the present case scenario, it can
be analysed that there is a contract between cafe and Avinash due to the inclusion of offer and
acceptance. The cafe have right to include a exclusion clause in the agreement. Application of
previous judgment says that if the exclusion clause results in providing damage to the another
party, the business would be able to pay the damages to claimant.
From the analysis of application of above mentioned case study and rules regarding
contract law of Australia, it can be concluded that, the Avinash have right to sue the cafe on the
ground of negligence of duty of care by cafe. Further, cafe can not exclude the liability on the
ground of the exclusion clause as it is caused in harming the Avinash. Therefore, the Cfe would
need to pay the damages to Avinash.
B) Explaining legal entitlement of cafe on clause printed on the tickets
Issue:
4 Donoghue v. Stevenson, 1932, House of Lords. 2018
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 Does Avinash qualifies as a customer in the as per contract law?
 Can Cafe rely upon the exclusion of liability with the help of providing the contracvtula
term included mentioned on the ticket?
 Can Avinash ask for claim for damages?
Rules:
Business law: Business law deals with monitoring various business activities and
ensuring the validity of each business activities. It includes various terms and guidelines that are
needed to be followed by each business while performing any business activities.
Exclusion clause: The business law has provided a right to various businesses to include
an exclusion clause while making their agreement, this clause results in reducing or elimination
of liabilities and obligations of the firm towards another party. Although, such clause can be
invalidate in case any negligence of care of duty has been made by the firm that resulted in
providing damage to another party to the contract.
Consumer protection law: This law concerns with providing safeguard to the
consumers from any fraud or negligence made by the company that may result in damaging or
harming the consumers 5. As per the COMPETITION AND CONSUMER ACT 2010
Australia, a consumer is that person who purchases any goods or services from the firm and
pays sufficient amount of consideration in return. Further, the consumer is that specific person
that purchases the goods for consumption purpose rather than for further selling and gaining
profit from the sale.
Rights of consumers: A consumer contains sevelral rights like right to get several
information regarding product and services, etc. 6 Further, in case, if the consumer get harm or
damage due to consumption of product or services sold by the company, consumer have right to
claim damages equivalent to the amount of loss or damage suffered by consumer.
Application:
5 Veil, R. ed., 2017. European capital markets law. Bloomsbury Publishing.
6 Hedemann-Robinson, M., 2015. Enforcement of European Union environmental law: legal
issues and challenges. Routledge.
4

By applying the above rules and regulation over the present case study, it can be
concluded that as per the business law of Australia, the cafe have right to include the exclusion
clause in the agreement i.e. the ticket. Further, as the Avinash purchased coffee and Pastry for
the consumption purpose, the Avinash fulfills the qualifications of being a consumer.
Conclusion:
From the application of above rules relating to the business law and consumer protection
law of Australia, it can be concluded that the Avinash is a qualified consumer of the cafe.
Further, the company have right to include the exclusion clause in the agreement. Further, as the
negligence of duty and care has resulted in harming the Avinash in the form of broken of tooth,
he have right to claim the damages from the cafe.
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QUESTION 2
Express terms of the contract are the condition which are being expressed by one of the
party involved in the contract. The terms which are being stated by the parties. The express
contract consist of the direct promises made by either party to the other. The express contract can
be in verbal or written form. It must include the valuable consideration for both the parties
involve din the contract7. The implied contract terms are those which are being implied by the
law. It includes the terms which are being assumed by the court were intended to be included in
contract. As per the implied terms of contract it is the responsibility the the service provider to
provide reasonable care and skills while performance of its duties. Under the Custom or trade
usage, the implied terms and express terms could override one another
The express and implied terms of contract must be clear and understandable to both the
parties while forming the contract. The implied terms of the contract which are being applicable
to the case include that the service provider is liable to perform its duties in utmost care as per
the consumer protection Act. As per the case British Crane Hire Corp Ltd v Ipswich Plant Hire
Ltd whereas Ipswich orally agreed to hire crane from British crane hire corporation in which the
court decided that theses are the implied terms of contract and thus British crane is able to
recover the cost. There is a significant difference between the implied and express terms of
contract.
The express terms of the contract are those in which the terms and conditions are spelled
out in the contract either orally or in written. Once the express contract is established and have
been agreed by both the parties than the implied contract cannot exist. Whereas on the other
hand, the implied terms of contract are those in which terms and condition are inferred by the
action of the parties which are being involved in the contract. The express and implied terms of
contract are significantly different from each other as in the express terms of the contract in
which the offer and acceptance of the agreement are communicated verbally.
The main difference between the two terms is the mode of communicating the offer and
acceptance of those terms and conditions. The implied terms of contract are being implied by law
or the facts of the contract. For example, As per the facts contained in the Question 1 indicate
that there are both implied and express terms of contract which are been included because the
implied terms of the contract are those which are not being stated but are implied by the
7 Austen-Baker, R., 2017. Implied terms in English contract law. Edward Elgar Publishing.
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behaviour of the facts of the situation8. The contract include the terms and conditions on the
basis of which the parties are required to fulfil their part of responsibility. The express and
implied terms of the contract assist in identifying the the liability of the parties involve din the
contract and the the condition for the breach of contract9.
As per the contract Act, The party due to which the other party is being injured is liable
to pay the damages to the party injured. As per the facts of the case in which Avinash is the
injured party and is required to be paid with the damages for the injury which is being caused
due to the negligence of the party in performing its party of duty . The local cafe is required to
pay Avinash with the damages and the exclusion clause which is being stated in the case will
not restrain the part of the local cafe to pay the damages10. The contract can include both the
types of terms but the way this terms operate are significantly different from each other because
the express terms are expressed by one of the party involved in the contract whereas the implied
terms of the contract include the terms and condition based on the situation, facts and the law. for
example, as per the facts of the question 1 case it is identified that Avinash was being injured due
to the negligence of the service providers and it was not able to perform its part of responsibility
with due care so, it is responsible to pay the damages to Avinash.
Relating to case
The given case study of Avinash which is a regular visitor to the local cafe that provide
self - service facility that include the implied terms of the contract in which the contract is
formed between Avinash and Local cafe through offer of the services and its acceptance by
Avinash11. In the present case, the express terms of the contract is the exclusion clause present in
the contract in which the service provider provided that there is no responsibility or liability of
the cafe in regards to the injury caused to the customers by consumption of the food and drink12.
The implied terms of the contract which include the payment of the food and drink by Avinash
8 Savelyev, A., 2017. Contract law 2.0:‘Smart’contracts as the beginning of the end of
classic contract law. Information & Communications Technology Law. 26(2). pp.116-134
9 Austen-Baker, R., 2017. Implied terms in English contract law. Edward Elgar Publishing.
10 Knapp, C.L., Crystal, N.M. and Prince, H.G., 2019. Problems in Contract Law: cases and
materials. Wolters Kluwer.
11 O'Sullivan, J., 2018. O'Sullivan and Hilliard's the Law of Contract. Oxford University
Press.
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are the implied terms of the contract. Avinash is the customers for the local cafe and it is the
responsibility of the cafe to protect the interest of the customers and deal with utmost care while
performing their part of duties. In the situation Avinash as per the implied terms of the contract is
liable to claim for the injury which is being caused due to the negligence of the service provider.
as per the contract act, If there is any negligence in fulfilling their part of responsibilities as part
of the agreement the injured party is liable to claim for the compensation.
CONCLUSION
From the above assignment it has concluded about contract laws and the essential
elements for the contract which consist of the offer, acceptance, consideration etc. Moreover, it
has included information regarding the consumer protection legislation in order to determine the
responsibility of the cafe towards the protection of the customers. furthermore, It has contained
the information regarding the terms of contract which consist of express and implied terms terms
of contract. the express terms of contract are those which are being expressed by any of the party
involved in the contract either orally or in the written form. Whereas implied terms of contract
are those which are implied by the fact of the contract or the law.
12 Appenzeller, C., 2017. Towards a more effective regulation of unfair standard contract
terms in Europe: of cartels, watchdogs and a “gorilla in the closet”. Journal of European
Consumer and Market Law. 6(2). pp.60-67.
8

BIBLIOGRAPHY
Books and Journals
Veil, R. ed., 2017. European capital markets law. Bloomsbury Publishing.
Hedemann-Robinson, M., 2015. Enforcement of European Union environmental law: legal
issues and challenges. Routledge.
Samuel, G., 2017. Contract and the comparatist: should we think about contract in terms of
‘contracticles’?. In Comparative Contract Law. Edward Elgar Publishing.
Kiefel, S., 2016. Good faith in contractual performance: A background paper for the Judicial
Colloquium. Brief. 43(5). p.26.
Spengler, J. O., and et.al., 2016. Introduction to sport law with case studies in sport law. Human
Kinetics.
Austen-Baker, R., 2017. Implied terms in English contract law. Edward Elgar Publishing.
Knapp, C.L., Crystal, N.M. and Prince, H.G., 2019. Problems in Contract Law: cases and
materials. Wolters Kluwer.
Peel, E., 2015. Treitel on the Law of Contract (Vol. 414). London: Sweet & Maxwell.
Savelyev, A., 2017. Contract law 2.0:‘Smart’contracts as the beginning of the end of classic
contract law. Information & Communications Technology Law. 26(2). pp.116-134.
Appenzeller, C., 2017. Towards a more effective regulation of unfair standard contract terms in
Europe: of cartels, watchdogs and a “gorilla in the closet”. Journal of European Consumer
and Market Law. 6(2). pp.60-67.
O'Sullivan, J., 2018. O'Sullivan and Hilliard's the Law of Contract. Oxford University Press.
9

Online
Donoghue v. Stevenson, 1932, House of Lords. 2018. [Online] Available through :
<https://ece.uwaterloo.ca/~dwharder/PPE/Significant_cases/>
What Is the Difference Between Implied and Express Contract. 2019. [Online]. Available
through :<https://www.upcounsel.com/difference-between-implied-and-express-contract>
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