Business Law Case Studies: Contract Law Principles and Applications

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LAW00150
Introduction to Business Law
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Contents
Question 1........................................................................................................................................3
Question 2........................................................................................................................................4
Question 3........................................................................................................................................5
Question 4........................................................................................................................................6
Question 5........................................................................................................................................7
Question 6........................................................................................................................................9
Question 7......................................................................................................................................10
References......................................................................................................................................11
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Question 1
A contract can be made legally binding only when the parties forming the contract had an
intention to enter into legal relations and not otherwise. In the decided case of Ermogenous v
Greek Orthodox Community, the utility of using the presumption language was questioned by
High Court. The court doubted the principle of presumption in determining legal intentions. In
the given case, the issue was to identify if there was a legally binding contract existing between
the parties. The question raised in the matter is that whether the parties had an intention to create
legal relations and the court shall determine such intention based on factors such as what the
parties did, said or what were the circumstances (Chew, 2014). For the purpose of deciding any
matters in the future, it is important to make an objective assessment of actions and statements of
both the parties. The party claiming that there is a legally binding contract as the parties had an
intention to create legal relation shall also have the burden of proving it.
Further, with reference to presumptions regarding social/ domestic agreements and commercial
agreements, it shall be deemed that in social/domestic agreements, there is no intention to be
bound by legal obligations. However, in case of commercial contracts, the presumption shall be
that the parties intend to be bound legally by the promises made.
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Question 2
In light of the above mentioned clauses, it can be stated that the interpretation of both the clauses
can be differentiated. The first clause refers to a document which cannot be used by courts as
proof against any agreement or contract or in any other manner. Under this clause, the document
is declared void and therefore cannot be used as a reference for legal relation. Under the second
clause, the power of the court is limited (Ryder, et. al., 2012). It states that court shall not have
any power or jurisdiction on deciding the matters which may relate to such agreements or any
breach thereof.
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Question 3
Issue
Donald borrowed $2000 from Ace Finances Ltd at an interest of $500 and he was unable to
repay the money. He seeks advice on the matter.
Rule
Under contract law, in cases of debt settlement, the parties may enter into a ‘full and final
payment’ agreement. Such an agreement can be made by the parties as varying the terms of the
original contract. Under such agreement, the parties may agree to settle the debt on a reduced
amount on the condition that no further payments are due from the debtor to a creditor (Graw,
2012).
Application
The law can be applied in the given case scenario as follows:
a) Donald approaches the company and offers ‘full and final settlement’ in $2000 and an
agreement to not sue for $500. Here, Donald can request his creditors to enter into such
agreement as the offer is made before the date of maturity of the debt.
b) Donald sells his car for payment of a debt. $2000 was paid by car proceeds and he was
sued for balance $500. Here, Donald did not enter into any agreement of ‘full and final
settlement’. Therefore, the company has a right to sue him for the balance amount.
c) Ivanka offered to pay $2000 as ‘full and final settlement’ for her father’s debts. However,
this agreement cannot be held valid because she was not a party to the original contract
and therefore she cannot vary the contract terms (MacQueen & Thomson, 2016).
Conclusion
Based on the applicable principles of law, the following conclusions can be drawn:
a) The offer made by Donald is valid.
b) The company can sue Donald as no agreement for full and final payment was made
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c) Ivanka cannot vary the contract terms on behalf of his father.
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Question 4
The given case relates to the enforceability of promise to give a gift. Based on the principles of
contract law, promise to give a gift cannot be made legally enforceable. This is because a gift is a
voluntary and gratuitous transfer of property from the person making a promise to the person to
whom the promise is made. Such promise is made without receiving anything in return. In
contract law, for a promise to be made enforceable, there must be a valid contract between
parties and such contract can form only when something is given in exchange for the promise
made i.e. consideration. In matters of the gift, there is no consideration (Ayres & Schwartz,
2014). Therefore, when the party making promise to give a gift fails to do so, it cannot be
considered as a breach of contract and cannot be made enforceable as there is no consideration
exchanged between the parties.
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Question 5
In contract law, there is a series of cases called ‘ticket cases’ under which the enforceability of
tickets has been identified and analyzed. The given case scenario is discussed as under:
Issue
Bob parked his car in the parking of Aussie Stadium and paid $30 as parking fee. He was handed
a ticket containing the terms and conditions which included the term that ‘the parking authorities
shall not be responsible for any loss or damage to the vehicles. The issue here is to determine
a) if Bob is bound by the terms of ticket.
b) Will the answer in “a” be different if Bob had been parking at the stadium frequently?
Rule
Based on the rules of contract law, an exclusion clause is valid only when the parties to contract
to have notice of such exclusion (Poole, 2016).
Application
The facts of given case scenario are similar to the case of Thornton v Shoe Lane Parking
Ltd [1970] In this case, it was decided that the parties must have notice of the exclusion clause
on any parking ticket. The parking company can escape itself from any liability only if it has a
clearly visible notice stating the exclusion clause in the parking area premises. If there is no such
notice, the company shall be liable (Fried, 2015). In the case of Bob, there was no signboard in
parking stating that the liability of the company is excluded. Therefore, Bob shall not be bound
by the exclusion clause and shall have the right to recover the damages.
If Bob had been to the stadium at various other occasions previously, the answer can be different.
He shall be bound by the terms as it is a regular course of dealing. However, in this case, also, he
must have had notice of such an exclusion clause. If no notice was given previously, he shall not
be bound by the terms.
Conclusion
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Based on the applicable law, the following conclusions can be drawn:
a) Bob shall not be bound by the contract terms.
b) The answer would be different only if he was given notice of the exclusion clause at any
time previously.
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Question 6
Based on the principles of contract law and the decided cases, there are four factors that can be
considered to determine if a statement amounts to a representation or a term. These factors
include the following:
 The Parole Evidence Rule: It states that when there is a contract in writing, any verbal
statements shall be considered representations and written statements as terms.
 Relative Expertise of the Parties: the statement shall be deemed as a contractual term if
the representor has greater knowledge and it shall be deemed as representation if
representee has greater knowledge.
Oscar Chess v Williams [1957] 1 WLR 370
 Importance of statement: When the importance of the statement is indicated by
representee to representor, it is more likely known as a term (Beale, et.al., 2018).
Bannerman v White (1861) 10 CBNS 844
 Timing: The longer is the lapse between entering in the contract and making the
statement, the more likely it will be a representation.
Routledge v Mckay [1954] 1 WLR 615
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Question 7
Issue
David bought a paper from Super Paper Products Ltd. and informed the employee that he wanted
the paper for wrapping gifts. He bought printing quality paper and when he started printing, it
was found that the paper was not able to hold the ink. David seeks legal advice on the matter.
Rule
Based on provisions of section 19 of goods Act, 1958, when a buyer expressly makes his
requirements known to the seller, then the seller shall be under an obligation to provide the
buyers with products as specifically required by the buyer (Schwenzer, et.al., 2012). There is an
implied condition that the goods sold by seller are fit for the purpose stated by the buyer.
If the seller does not comply with the terms of Section 19, the buyer may make a claim for
remedies against the seller. Such remedies available to buyer are given in Section 59 of Goods
Act, 1958.
Application
In the given case scenario, David informed the shopkeeper about his requirements and purpose.
Even after such information was given, the shopkeeper provided him with bad quality paper
which could not hold the ink and were of no use for David. Here, based on the provisions of
Section 19 of Goods Act, 1958, the shopkeeper had the responsibility to provide David with
products as per specification (Knapp, et. al., 2019). However, he failed to do so. Therefore,
David can sue the company and can claim for remedies.
Conclusion
Therefore, based on the applicable law, David can sue the company and can claim remedies
under Goods Act, 1958.
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References
 Ayres, I., & Schwartz, A. (2014). The no-reading problem in consumer contract
law. Stan. L. Rev., 66, 545.
 Beale, H., Fauvarque-Cosson, B., Rutgers, J., & Vogenauer, S. (Eds.). (2018). Cases,
materials and text on contract law. Bloomsbury Publishing.
 Chew, C., (2014). Business Law Guidebook. Oxford Law Guidebooks. 2nd Edition.
 Fried, C. (2015). Contract as promise: A theory of contractual obligation. Oxford
University Press.
 Graw, S. (2012). An introduction to the law of contract. Thomson Reuters.
 Knapp, C. L., Crystal, N. M., & Prince, H. G. (2019). Problems in Contract Law: cases
and materials. Wolters Kluwer.
 MacQueen, H., & Thomson, J. (2016). Contract law in Scotland. Bloomsbury Publishing.
 Poole, J. (2016). Textbook on contract law. Oxford University Press.
 Ryder, N., Griffiths, M., & Singh, L. (2012). Commercial law: Principles and policy.
Cambridge University Press.
 Schwenzer, I., Hachem, P., & Kee, C. (2012). Global sales and contract law. Oxford
University Press.
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