LST5CCL: Mid-Semester Assessment - Case Study on Contract Law

This case study analyzes three scenarios related to contract law. The first scenario examines the formation of a valid contract between brothers, considering the intention to create legal relations, legitimacy of purpose, and consideration. The second scenario explores the liability of a shipping company for destroyed goods, addressing express terms, non-est factum, the Goods Act 1958, Australian Consumer Law, and vicarious liability. The third scenario discusses warranties against defects under the Australian Consumer Law, focusing on remedies like repair, replacement, or compensation, and references relevant case law such as ACCC v. Reckitt Benckiser (Australia) Pty Ltd and ACCC v. A Whistle & Co. The analysis applies legal principles to each scenario to reach conclusions about the parties' rights and obligations.

Running Head: CASE STUDY
CASE STUDY
Name of the Student
Name of the University
Authors Note

1CASE STUDY
Scenario 1:
Issue:
The issue in the case is whether a valid contract has been formed between Tom and Jerry.
Rules:
As a general rule, the realm of law and legal relationships are separated from that of the
family. In other words, the contractual relationship established by the virtue of contractual rights
and duties of the parties is not recognized in case of family agreements (Meritt vs. Meritt). This
is so because the intention to create contracts cannot be established in family agreements on the
ground of lack of lawful purpose among the family. However, in commercial contracts, the
legitimacy of the purpose and consideration forms the intention between the parties to enter into
the contract with each other (Popwi vs. Popwi). However, the Court has recognized the
agreements between the family members as enforceable depending upon the contractual
intention created between them by the virtue of legitimacy of purpose and consideration and the
proof of elements for contract exists between the parties (Ermogenous vs. Greek Orthodox
Community of SA Inc).
Application:
In the given scenario, Jerry had asked Tom to buy him out in case he wanted the
company to continue. It can be explained that since they are brothers, the contract for partnership
would not be enforceable by law. However, by the virtue of the legitimacy of their purpose and
consideration involved between them, it can be explained that Tom and Jerry, in spite being
brothers, were involved in the contractual relationship with legal intention, purpose and

2CASE STUDY
consideration which forms the basis of commercial contract which can be proved by Jerry’s
comment where he has demanded for consideration against his shares for the legitimate purpose
to buy him out. Hence, Tom and Jerry were bound by the contractual relationship that existed
between them.
Conclusion:
It can be concluded that valid contract was properly formed between Tom and Jerry.
Scenario 2:
Issue:
The issue in the case is whether Star Shipping are liable to pay for the destroyed laptops.
Rule:
Express terms: these are the explicit terms in the contract that binds the parties however,
such term shall be lawful in nature.
Non-Est Factum: it means that the contract shall become void ab initio if the contract was
signed by mistake by the plaintiff. This means that the mistake on the part of the plaintiff to
understand the fundamentals of the contract and the same has been signed by him or her shall
render the contract as void ab initio. This means that the contract signing should be a
fundamental mistake and the signing has altered then intention of the party. However, the
carelessness or mistake or negligence in reading the contract and its terms shall not be assumed
as non-est factum and hence, such mistake shall not void the contract.

3CASE STUDY
Goods Act 1958: section 34 (5) of the Act has been explained as the duty of the seller and
the buyer where one is obliged to supply the goods to the buyer and the other is obliged to take
the acceptance of the delivery of the goods. However, such cost for the delivery of the goods
shall be borne by the seller of the goods. However, the vendor of the seller shall be accountable
for the delivery of the goods and such period shall be consigned as the period of employment.
any negligence on part of the vendor during the course of employment in the delivery of goods
shall hold the supplier vicariously liable for the negligence and the damages caused by the same.
Australian Consumer Law: negligence is codified and recognized in the Australian
Consumer law (Schedule 2). It has been explained that the seller owes the duty of care towards
that of the buyer and any breach of such duty shall amount to damages, making the seller liable
for the actual cost of the damages arising from such breach of duty of care.
Vicarious Liability: Liability of the employer for the damages occurring from the
negligent act of the employee during the course of employment (Prince Alfred College
Incorporated v ADC).
Application:
In the given scenario, applying the express term, it can be analyzed that the term imposed
by the Shipping Company shall be binding upon the parties. However, the clause is in conflict
with the interest of the buyer, making such clause as voidable at the option of the buyer.
In the given scenario, applying non-est factum, the brothers mistakenly signed the
contract but such negligence shall not be recognized by the court of law because it is the
carelessness of the brothers and not the fundamental wrong of the establishment of the contract.
Thus, the contract is not void ab initio.

4CASE STUDY
In the given scenario, applying the provisions of Goods Act, it can be said that the vendor
was the employee of the Shipping company and was in the course of employment until he had
delivered the goods to the buyer. Thus, negligence on his part would make the employer
vicariously liable for the goods lost.
In the given scenario, applying the provision of the Australian Consumer Law, it can be
explained that Shipping company owed duty of care towards the brothers and the same was
breached when the vendor negligently lost it and hence, making the company vicariously liable
for such negligence (Contract law).
Conclusion:
It can be concluded that the StarShipping are liable to pay for the destroyed laptops.
Scenario 3:
The warranties against defects of goods as ensured by the Australian Consumer Law are :
 Repair, replace or resupply of goods.
 Compensation
Schedule 2 (Section 267 (2))of the Australian Consumer Law guarantees the goods to be in fit
condition to be received by the consumer. This means that if the defect in the goods due to the
negligence of the manufacturer or the supplier is found, then such goods are entitled for
replacement, or resupply or compensation against the damaged goods.
 In ACCC vs. Reckit Benckiser (Australia) Pty Ltd., it was held that section 18 and 33 of
the ACL was contradicted by falsely decscribing the products as applicable for the
specific type of pain. Thus, the Court held that the product used the same active

5CASE STUDY
ingredient as any other pain reliever and not making the purpose as specific. Therefore,
the Court held that misrepresentations were made by the company and hence were held
liable for compensation.
 In ACC vs. A Whistle & Co., it was held that the company contravened section 29 (1)(e)
of the ACL. The company allowed its francises to advertise fabricated informated about
the company which were genuinely purported by a genuine consumer leading to
misleading of customers base on false information. Thus, the court ordered for the
payment of pecuniary damages, publication of corrective notice, contributory costs to
ACCC, restraint order against business.