Commercial Law I (Commlaw 1004) Assignment 1: Contract Law Issues

This document provides a comprehensive solution to a Commercial Law I (Commlaw 1004) assignment, focusing on contract law principles. The assignment addresses three key issues: the legal nature of a communication (invitation to treat vs. offer) and the enforceability of an offer with a time limit; the validity of an exclusion clause in a car park scenario, considering its reasonableness and business efficacy; and the termination of a contract due to frustration, specifically concerning a lecture theatre fire and the refund of a deposit. The solution analyzes each issue, providing relevant legal rules, applying them to the given scenarios, and drawing conclusions based on case law and legal principles. The document includes a detailed bibliography of cited sources, including cases and academic texts, demonstrating a thorough understanding of contract law concepts.

0
Business Law Assignment

1
Issue 1
Whether the last reply of Michelle is an invitation to treat or an offer and whether it is
legally binding for Michelle to hold the offer for one week?
Rule 1
The difference between an offer and an invitation to treat is important since a contract
cannot be formed after acceptance of an invitation to treat as provided in the case of Fisher
v Bell.1 In case of an invitation to treat, the intention of the party is to invite another person
to make an offer rather than bind himself into the contractual obligation.2 Furthermore, an
offer that is once rejected is no longer available for a person to accept and the counter-offer
is also constituted as a rejected as held in the case of Hyde v Wrench.3 In the case of
Goldsbrough, Mort and Co Ltd v Quinn4, it was held that a promise which is made to keep an
offer open for a specific amount of time is not enforceable; however, if consideration is
paid, then such promise binding.
Application 1
In the given scenario, an offer was made by Jack to purchase the car of Michelle for $1,000;
however, this offer was rejected by Michelle by stating that he will not sell his car below
$1,500. This is a counter-offer made by Michelle which resulted in rejecting the original offer
of Jack (). This is not an invitation to treat since Michelle did not ask Jack to make an offer
for the car; instead, he gave him an offer for $1,500 (Fisher v Bell). Lastly, the promise made
by Michelle to keep the offer open for one week is binding since consideration is paid
(Goldsbrough, Mort and Co Ltd v Quinn).
Conclusion 1
In conclusion, the last reply of Michelle is an offer, and he is legally bound to keep the offer
open for one week.
1 [1961] 1 QB 394
2 Ewan McKendrick, Contract law: text, cases, and materials (Oxford University Press, 2014).
3 (1840) 49 ER 132
4 [1910] HCA 20

2

3
Issue 2
Whether the court is likely to uphold the exclusion clause of the Car Park that limits their
liability to pay damages to Suzanne?
Rule 2
The exclusion clause is designed in order to limit or eliminate the liability of parties which
arise in case they violate the terms of the contract. A person who wanted to rely on the
exclusion clause has to ensure that such clause must be brought into the attention of
another party before the contract is formed or during its formation as provided by the court
in Thornton v Shoe Lane Parking Ltd.5 In case the terms are a part of a written contract, then
they are enforceable on the parties despite the fact that they have read those terms or not
as given in L'Estrange v F Graucob Ltd6 case. Furthermore, in the judgement of Baltic
Shipping Company v Dillon7, the court provided that if the exclusion clause is brought into
the attention of the parties prior to the formation of a contract, then they are considered as
valid. Furthermore, restrictions are given under the Australian Consumer Law that prevents
parties from including exclusion terms into their contract.8 Thus, the exclusion clause is valid
only if it is reasonable, obvious, clearly expressed, and business efficacy is present as given
in BP Refinery (Westernport) Pty Ltd v Hastings Shire Council.9
Application 2
In the given scenario, Car Park put a notice in front in which the exclusion clause was written
which provided that it will not be responsible for loss or damages of the car. Suzanne’s car
was stolen from the Car Park by a friend of the airport staff. As discussed in the case of
Baltic Shipping Company v Dillon, the term was brought into the attention of Suzanne before
the contract; thus, it is considered as valid. However, since the friend of the airport staff
stole the vehicle, it is not reasonable to uphold the exclusion clause. As discussed in BP
5 [1971] QB 163
6 [1934] 2 KB 394
7 (1993) 176 CLR 344
8 Alexandra Sims, ‘Unfair contract terms: A new dawn in Australia and New Zealand’, (2012) 39 Monash UL Rev.
739.
9 (1977) 180 CLR 266

4
Refinery (Westernport) Pty Ltd v Hastings Shire Council, the exclusion clause is not
reasonable and fair and it did not give business efficacy since Suzanne parked his car for its
protection; thus, the court is less likely to eliminate the liability of the Car Park.
Conclusion 2
In conclusion, the court is less likely to uphold the exclusion clause of Car Park, and Suzanne
is likely to hold them liable for compensation.

5
Issue 3
Whether the contract formed between Mike and Royal Adelaide Hospital can be terminated
and whether Mike can get back any deposit which is paid by him to the hospital?
Rule 3
A contract can be terminated by performance, agreement, breach, repudiation and
frustration. In the case of frustration, an external event which is not in the contract of either
of the contractual parties made it impossible to complete the performance due to which the
contract is frustrated, and it becomes void.10 In the case of Davis Contractors Ltd v Fareham
Urban District Council11, the court provided that the modern test of frustration focuses on
determining whether the frustration has occurred due to the fault of either party of the
contract. The court held in the case of Taylor v Caldwell12 that if the subject matter is
destroyed, then the contract becomes frustrated and it becomes void. The effect of
reputation result in the ending of the contract, and the consideration or money paid by the
parties is refunded.
Application 3
In the given case, the lecture theatre has caught fire due to which it is completely burned
down, and repair would require another six months. In this scenario, the contract can be
terminated due to frustration in which neither of the parties of the contract was at fault
(Davis Contractors Ltd v Fareham Urban District Council). As provided by the court in Taylor
v Caldwell, the subject matter in this contract was the lecture theatre which is destroyed
due to which the contract is frustrated, and Mike has the right to get back any deposit which
he paid for the booking.
Conclusion 3
In conclusion, the contract is terminated due to frustration and Mike can get back any
deposit which he paid.
10 Jill Poole, Textbook on contract law (Oxford University Press, 2016).
11 [1956] AC 696
12 [1863] EWHC QB J1

6

7
Bibliography
A Articles/Books/Reports
McKendrick, Ewan, Contract law: text, cases, and materials (Oxford University Press, 2014).
Poole, Jill, Textbook on contract law (Oxford University Press, 2016).
Sims, Alexandra, ‘Unfair contract terms: A new dawn in Australia and New Zealand’, (2012)
39 Monash UL Rev. 739.
B Cases
Baltic Shipping Company v Dillon (1993) 176 CLR 344
BP Refinery (Westernport) Pty Ltd v Hastings Shire Council (1977) 180 CLR 266
Davis Contractors Ltd v Fareham Urban District Council [1956] AC 696
Fisher v Bell [1961] 1 QB 394
Goldsbrough, Mort and Co Ltd v Quinn [1910] HCA 20
Hyde v Wrench (1840) 49 ER 132
L'Estrange v F Graucob Ltd [1934] 2 KB 394
Taylor v Caldwell [1863] EWHC QB J1
Thornton v Shoe Lane Parking Ltd [1971] QB 163