Business Law: Case Study of Tom vs. Lisa Verbal Contract and Liability

This report provides a comprehensive analysis of a business law case involving a verbal contract dispute between Tom and Lisa. The introduction sets the stage by defining business law and outlining the case study's structure, which utilizes the ICRA format (Issue, Rules, Analysis, Conclusion). The main body addresses the central issue: the validity of the verbal contract for the creation of tables, examining offer, acceptance, and mutual consent under Australian contract law. It assesses whether the verbal agreement between Tom and Lisa constitutes a legally binding contract. The analysis section applies these legal principles to the case facts, concluding the contract's validity and Lisa's liability. The report then determines the amount Lisa owes Tom, considering the initial agreement, advance payment, and the attempted set-off. The conclusion summarizes the findings, emphasizing the validity of the contract and Lisa's financial obligations. References to relevant legal cases and academic sources are included.

BUSINESS LAW

TABLE OF CONTENTS
INTRODUCTION...........................................................................................................................3
MAIN BODY..................................................................................................................................3
QUESTION 1..................................................................................................................................3
Issue.............................................................................................................................................3
Rules............................................................................................................................................3
Analysis.......................................................................................................................................4
Conclusion...................................................................................................................................5
QUESTION 2..................................................................................................................................6
Amount that Lisa owes to Tom...................................................................................................6
CONCLUSION................................................................................................................................7
REFERENCES................................................................................................................................8

INTRODUCTION
Business law basically involves the different contracts and agreements that two people have
entered into (Howells, 2017). In this report, the contract law will be analysed for the case study
of Tom versus Lisa and the entire case study will be analysed using the ICRA format. Lastly, the
amount that Lisa is liable to pay to Tom will also be ascertained.
MAIN BODY
QUESTION 1
Issue
The issues or problem that is currently being discussed lies between Lisa and Tom where
they both entered into a verbal contract. Lisa contracted tom who is a carpenter to prepare six
timber tables for her café and tom quoted the price to be $ 3000. Lisa proposed through e-mail
that contract should be finalised at $ 3000 and added the conditions that the timber if hardwood
and is light in colour. However, later there was a counter offer that was made by Tom to Lisa
through e-mail stating that price of timber had changed and now the required six tables would
cost her $ 3600. He also mentioned in the mail specifically that he would ensure that the tables
are of hardwood but the light colour cannot be guaranteed as the colour often varies on the basis
of different batches of the timber that are received. He also stated that if she accepts the offer
then she is required to pay an advance amount of $ 500 that is to be further paid to the timber
merchant. Lisa does not verbally agree to it but rather transfers $ 500 to Tom’s account thus
giving her acceptance. When the final product is delivered to Lisa, she does not like the colour of
the table as it is very dark and refuses to accept them asking back for $ 500. When Tom refuses
to give the money back stating that they both have a contract and Lisa is legally bound to pay
him, Lisa argues that they do not have any contract as nothing was ever signed. She then adjusts
the amount of $ 500 by stating that they can be set off against the previous $ 800 that she owed
to Tom and as off now, she no longer owes him any amount of money.
The major issue here is that in the entire case scenarios that occurred between Lisa and
tom, the fact that whether there was an existing contract between them or not can be stated or not
(Austen-Baker, 2017).
Rules
Australian contract law specifies the mention of the oral contracts as legal contracts which
mainly originated from the case law of State Rail Authority of New South Wales versus Health
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Outdoor Pty Ltd (1986). The rules are mainly stated in the Australian contract law where it has
been specifically mentioned that the verbal agreements can be termed as valid if the conditions
that are required for formulation of any written contract as well are fulfilled i.e.:
 An offer was made by one part to another party.
 The other party must accept the offer that is being made i.e. acceptance must be there.
 Both the parties must be exchanging something of value with each other.
 Both the parties must be clearly aware of the terms of the contract that is being developed
and also know every condition that is being put forwards (Baker, 2019).
 There should be mutual consent to agree to the terms of the contract and fulfil them.
 The contract should not be entered into with a minor and if it is done so, then it will be
termed as null or void.
 If any fraud or duress is committed by either party then also the contract will be rendered
as unenforceable and could not prove to be a valid contract
Further, although the it is preferred that a written contract is drawn up so that any false
claims or lack of evidence can be avoided in the future, but even oral contracts can be termed as
equally valid and enforceable. Despite lack of any proofs of written contract, there are various
aspects that can be used to generate proof such as the presence of any witness that was present at
the time of contract and can be presented in the court as well; proof of payments if any, written
mails, texts or any other documentation that might have been used as communication methods;
evidence of services that are sought or are being demanded; or a cheque that was written or any
amount that has been transacted already (Campbell, Mulcahy and Wheeler, 2017). All of these
are evidences of the proof and can eb used in the court while fighting the case so that the point
can be proved clearly.
Analysis
In the rule section above, it was identified, that there are cetin rules and practices that act in
favour of the any of the parties if there was an existence of a verbal contract.
It was stated first that there must be an offer and acceptance. The case law of JJ Savage &
Sons Pty Ltd versus Blakney (1970) is evident in this case where the offer and acceptance both
was made orally as is the case in the preset issues as well i.e. the parties Tom and Lisa are legally
in a contract (Allen and et.al., 2016). Tom offered to make tables at $ 3600 ensuring that there
would be hardwood but light colour quality cannot be guaranteed and Lisa gave the amount of $
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500 that tom had demanded gains the acceptance without contradicting any point or
compromising the statements that was made by Tom this shows that an offer was made by Tom
which in turn was accepted by Lisa. The next concept that was stated pertained to the fact that
something of value must be exchanged with each other and both the parties were in contract to
exchange something of value i.e. Tom was offering completed timber tables and Lisa in turn was
paying $ 3600 to Tom i.e. there was exchange of something of value between both of them.
Further the under the case law, in case of verbal contracts, it is mandatory that all the
terms and conditions must have been specified clearly and both the parties must have agreed to
the terms and conditions proposed (Whittaker, 2019). This again is in favour of Tom where it can
be easily seen that the mail that was sent by tom include the condition that colour of tables
cannot be guaranteed as the timber wood comes in batches and therefore, Lisa did not contradict
or argue in any manner and made the payment of $ 500 even after the explicit mention of the
condition in the mail sent by tom. This is again in support of the case presented by Tom. The last
aspect relevant for this case is the aspect of mutual consent i.e. both the parties agreed to the
offer and acceptance and were willing to enter into the contract collectively ((Phang, 2018)).
This again can be signified that the tom offered t make table of hardwood with the condition that
they might not be light in colour and Lisa agreed to that offer by making the advance payment of
$500.
All the points collectively show above that the verbal contract that Tom and Lisa entered
into was valid and enforceable. Now the next aspect comes related to the proof that could be
produced in the court in order to establish the claim more critically (Wevill, 2019). The exchange
of the mails between Lisa and Tom are a consequent proof that offer was made along with
explicit terms and conditions and then the deposit of $ 500 by Lisa against the conditions
proposed by Tom marks the informed and agreed consent of Lisa towards the offer that was
proposed along with the conditions that were stated explicitly in the mail.
Based on the rules identified above and the consequent analysis that has been conducted, it
is clear that there was a valid contract that existed between both the parties i.e. both Tom and
Lisa were legally bound to each other in the contract or the six timber tables.
Conclusion
First of the all the validity of the verbal contract that was entered into between Tom and Lisa
was verified by indentifying the rules that have been stated in the Australian contract law. The
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terms and conditions that develop a valid offer were studied and it was analysed that how many
or what all conditions were being fulfilled in the current case of Tom and Lisa. It was identified
that all the conditions that can prove a verbal contract valid were completed and addressed by
both the parties. Next the question of proof was analysed i.e. what were the proofs related to the
claims that were being made by both the parties. It was identified that there was the exchange of
emails between Tom and Lisa where tom had made an offer along with the conditions that were
written in the mail sent by him. The next proof was the transaction that Lisa did where she made
the payment that was written as a part of condition in the mail, by transferring the amount of $
500 to Tom’s account as an advancement of the contract to which she has agreed implicitly. Both
the proofs that were presented were in accordance with the proofs that were presented in the
rules part i.e. the ones which have been permitted by the court as well in case of verbal contracts.
The two different basis of proof were enough to conclude that the contract was valid and Lisa
was aware of the conditions that Tom had already posed before her.
Based on the analysis of the case that was developed above, it can be adequately concluded
that the case lies in favour of Tom and after proving that he has upheld his part of contract, but
now Lisa is liable to complete the contract by undergoing through her own part of the duty i.e.
the payment that is to be made.
QUESTION 2
Amount that Lisa owes to Tom
As it was identified in the analysis of the case above, it can be adequately said that Lisa is
liable to complete or uphold her side of contract as Tom has fulfilled the basic item of contract
i.e. those tables that were delivered by him (Chen, 2017). Now the amount of contract against
those tables was initiated at $ 3000 and at the end it culminated at $ 3600 i.e. Lisa was initially
due to pay the amount of $ 3600 to Tom. However, she made an advance payment of $ 500 that
was to be paid to the timber supplier. This indicates that out of the due $ 3600, $ 500 have
already been paid by Lisa. So the net amount that is Lisa has to pay to Tom against the tables is $
3100.
However, in the case it was also mentioned that Lisa had tried to set off the amount due of
$ 800 that was the persona expense of Tom and Lisa form the trip that they took previously and
said that the amount of $500 that she had already paid off can be set off against that amount
which was owed. However, as it was proved that the claim of Lisa was null, so ultimately, the set
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off that she tried to make against due $ 800 was also nullified. Therefore, those $ 800 are still
pending and Lisa is liable to pay them as well to Tom. Although, this was their personal expense
and hence would have been kept out of the current case analysis, but after Lisa tried to
incorporate it with the existing contract, this amount has come in the purview of the existing
contract of timber tables.
Therefore it can be said that the total amount that Lisa is liable to pay to Tom is of $ 800 + $
3100 i.e. a total of $ 3900 that must be paid to Tom in a full and final settlement against the
receipt of timber tables that were made by him for Lisa.
CONCLUSION
The analysis done in the report above overall concludes that the verbal agreements are valid
as well provided that they are in compliance with the some basic rules that have been set out for
two persons to enter into contract. It was also concluded that Lisa is liable to pay to Tom the full
amount against the tables that she has received.
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REFERENCES
Books and Journals
Allen, P., and et.al., 2016. Public Contracts as Accountability Mechanisms: Assuring quality in
public health care in England and Wales. Public Management Review. 18(1). pp.20-39.
Austen-Baker, R., 2017. Implied terms in English contract law. Edward Elgar Publishing.
Baker, J., 2019. Introduction to English Legal History. Oxford University Press.
Campbell, D., Mulcahy, L. and Wheeler, S. eds., 2017. Changing Concepts of Contract: Essays
in Honour of Ian Macneil. Springer.
Chen, J., 2017. Should English Contract Law Adopt a General Duty to Negotiate in Good
Faith. BLR, p.18.
Howells, G.G., 2017. The European Union's Influence on English Consumer Contract Law. Geo.
Wash. L. Rev.. 85. p.1904.
Phang, A., 2018. The intractable problems of illegality and public policy in the law of contract–a
comparative perspective. In Essays in Memory of Professor Jill Poole (pp. 178-234).
Informa Law from Routledge.
Wevill, J., 2019. Law in Practice: The RIBA Legal Handbook. RIBA Publishing.
Whittaker, S., 2019. Unfair terms in commercial contracts and the two laws of competition:
French law and english law contrasted. Oxford Journal of Legal Studies. 39(2). pp.404-
434.
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