Case Study Analysis: Contract Law Dispute Between Buyer and Seller

This case study analysis examines a contract law dispute between a buyer and a seller concerning the sale of a courier van. The analysis focuses on whether a valid option contract was formed, considering the offer, acceptance, and consideration. The buyer saw a 'FOR SALE' sign, contacted the seller, and after an offer and acceptance, mailed a cheque. The seller later attempted to revoke the agreement. The analysis discusses key legal concepts such as invitation to offer, offer, acceptance, consideration, and option contracts, referencing relevant case law. The conclusion suggests that the buyer's claim for specific performance or an injunction is likely to prevail. The second part of the assignment defines and explains chattel mortgages, perfection, fixtures, the Torrens system, and leasehold, providing a comprehensive overview of these legal concepts. The assignment is well-structured, citing relevant case law and legislation.

Running head: CASE STUDY ANALYSIS
CASE STUDY ANALYSIS
Name of the Student:
Name of the University:
Author Note:

1CASE STUDY ANALYSIS
Question 1:
1) Issue:
The issues involved in the case study analysis are whether the Buyer has any potential
claim against Seller and whether there are any defences available to the Seller against the claims
of the Buyer.
Law/Rules:
A contract can be defined as an agreement between two or more parties that can be
enforced legally. In order to form a valid contract, five essential criteria are to be fulfilled. The
first criterion is that the parties must bind themselves to a valid agreement. An agreement is a
two step process consisting of offer and acceptance. It is given in R v Clarke [1927] HCA 47
case. Offer made by a party shows his intention to get himself bound by certain terms and
conditions by such agreement with another party as observed in Australian Woollen Mills Pty
Ltd v The Commonwealth [1954] HCA 20. However there lies a difference between an offer and
an invitation to offer. To distinguish it, the court usually considers the willingness of the offerer
as enumerated in Brambles Holdings Limited v Bathurst City Council [2001] NSWCA 61 case
by the Court of Appeal.
Invitation to offer is often denoted as a request of a party to others, not a single party but
to public or people in general to allow them to make offers such that an agreement can be
initiated by accepting the offer. Display of price on menu card, statements on sign board are
regarded as examples of invitation to offer. It has been held in Westminster Estates Pty Ltd v
Calleja [1970] 1 NSWR 526; (1970) 91 WN (NSW) 222.

2CASE STUDY ANALYSIS
The offer made by a party cannot come in to effect unless it has been accepted by other
party. Any offer when accepted completes an agreement. Acceptance means the permission
given by another party to become part of an agreement with the other party that made the offer.
This is stated in the Taylor v Johnson [1983] HCA 5 case.
The 2nd criterion of contract is the presence of consideration. As per decision given in
case of Beaton v McDivitt [1987] 13 NSWLR 162, an agreement becomes enforceable only
when it consists of consideration.
The 3rd criterion to form a valid contract is the intention of the parties to a contract is their
intention to perform the obligations and exercise rights given in the contract as observed in the
landmark case of Helmos Enterprise Pty Ltd v Jaylor Pty Ltd [2005] NSWCA 235.
The 4th criterion is the capacity of the parties. The parties must not be legally barred from
entering in to contract. Minors, mentally challenged and drunken persons are prohibited by law
to enter in to contract as found in Johnson v Buttress [1936] HCA 41 case. If a contract is
entered by theses prohibited persons, such contract will be treated as void.
The last criterion is certainty to constitute a valid contract which was decided in the case
of Whitlock v Brew [1968] HCA 71. When all the criteria are satisfied, a valid contract is
formed.
There is another type of contract known as the option contract where the agreement
allows a party to buy or sell any particular valuable thing or property on a pre scheduled future
date at a price or consideration as agreed upon by the parties to such contract.

3CASE STUDY ANALYSIS
Application:
In the given case study assignment, Buyer saw a courier van in a car parking area with a
sign board stating ‘FOR SALE’ that contained a contact number and a price of ‘ 25,000 $ cash’.
This cannot be treated as an offer but it is actually an invitation to offer as it was not made
specifically to any party but to people in general. Moreover, it was made to seek responses of the
people to make offer to initiate an agreement. Buyer after noticing it while responding to such
invitation, made a call to Seller. Seller told him that if he wants the van, he must mail him a
cheque of 5000 dollar on that day only. He further added that the remaining amount of money to
be paid by 1st November. This can be regarded as an offer made by the Seller to the Buyer. Buyer
on the same date mailed him the cheque of 5000 dollar. Thus the Buyer accepted the offer of
Seller. But on 25th of October, when Buyer made a call to Seller to pick up the van, the Seller had
changed his mind and told him that since someone else was ready to pay him 35000 dollar for
the same, he refused to deliver the van to Buyer. Seller further told him to pay 20000 dollar
immediately and 400 dollar monthly for 25 months, to which Buyer could not agree.
Thus as per these facts, it can be said that an option contract is being created as there was
an option to pay the consideration on the future date. Since it is an option contract, according to
its provisions, it cannot be revoked till November 1st as Buyer had already mailed the cheque
which resulted into acceptance of the contract. He spent around 1200 $ which shows that Buyer
had intention plus capacity to perform the contract. Hence a contract is validated.
Conclusion:
Thus Buyer can claim that an option contract was created between the Buyer and Seller
and Seller is bound by it. Thus the Seller cannot revoke it till 1st November. However, seller can

4CASE STUDY ANALYSIS
claim that as he had not encashed the cheque, the consideration was not received and thus no
contract is likely to be formed.
If the case is heard in the court, it is likely that the Buyer’s claim will prevail as
according to the facts of the case, an option contract is formed which cannot be revoked up to 1st
November.
2)
If the claims of the Buyer prevail in the court, he can claim remedies of either specific
performance of the contract that is making Seller deliver the van to him such that he can move
forward with his business or injunction that is preventing the Seller from delivering the van to
other party.
Question 2:
a) Chattel mortgage:
Chattel mortgage is a legal term which was developed from the English law and it is a
kind of loan contract. As per the provisions of the chattel mortgage, the purchaser borrows
money to buy any movable personal property known as chattel from the lender. The money
lender secures the loan given by him by creating mortgage on it. It is often used by the
companies, partnership firms and individual traders to receive loan to buy vehicles for for
communication purpose in Australia. The businesses which are listed to GST are able to
reimburse the Input Tax Credit for all the GST paid in addition to the cost price of the chattel in
the Business Statement Activity. This rule is being provided by the Australian Taxation Office.

5CASE STUDY ANALYSIS
b) Perfection:
Perfection means making perfect any security interest by imposing additional steps
against the 3rd parties. It is aimed to secure in case of any default done by the security interest’s
grantor. The provisions in relation to the perfection in Australia are given under the Personal
Property Securities Act 2009.
c) Fixtures:
Fixtures are the parts or annexure of the real property. It depicts a property having
physical existence that is attached or fastened to an actual real property like land or building of
permanent nature. In Australia, if there is no agreement between the parties, the doctrine of
fixtures is used to solve disputes connected to the title claims. This has been held in the Hobson
v Gorringe [1897] 1 Ch 182 case. The present position of fixtures in laws is provided in the
Fixtures and the Personal Properties Act 2009 (Cth).
d) Torrens - System of registration for land rights and interests:
Torrens is a registration system that deals with land rights and interests. It is related to
registration and transfer of land in which a register having the details of all the transactions of
land is maintained by a state and every entry made to the register is depicted as a conclusive
proof of all land transactions. Beside this, it provides conclusive proof for the title of the person
whose name is enrolled in the register as the lessor, mortgagor, seller or other. This system of
Torrens title was based on the central register of all land located in the jurisdiction of South
Australia provided in the Real Property Act 1886 (SA).

6CASE STUDY ANALYSIS
e) Leasehold:
The provision of leasehold is given under the Leases (Commercial and Retail) Act 2001.
It is a type of transfer of property where the ownership is retained by the title holder but the
possession and the right of enjoyment is passed to the other party for a particular period in
exchange of consideration. The lease period can range from few months to years to perpetuity.
The leasehold can be even subleased by the lessee.

7CASE STUDY ANALYSIS
References:
Australian Woollen Mills Pty Ltd v The Commonwealth [1954] HCA 20.
Beaton v McDivitt [1987] 13 NSWLR 162
Brambles Holdings Limited v Bathurst City Council [2001] NSWCA 61
Helmos Enterprise Pty Ltd v Jaylor Pty Ltd [2005] NSWCA 235.
Hobson v Gorringe [1897] 1 Ch 182.
Johnson v Buttress [1936] HCA 41
R v Clarke [1927] HCA 47
Taylor v Johnson [1983] HCA 5
The Fixtures and the Personal Properties Act 2009 (Cth).
The Leases (Commercial and Retail) Act 2001.
The Personal Property Securities Act 2009.
The Real Property Act 1886 (SA).
Westminster Estates Pty Ltd v Calleja [1970] 1 NSWR 526; (1970) 91 WN (NSW) 222.
Whitlock v Brew [1968] HCA 71