FNSTPB503 Contract and Consumer Law: Contract Formation & Validity

This assignment focuses on the application of legal principles in contract and consumer law, specifically addressing contract formation and validity, contractual performance, and the principles of E-Contracts. It covers enforcing rights and obligations, consumer protection law, restrictive trade practices, and financial services consumer protection through business-based scenarios. The assignment includes questions about the difference between an agreement and a contract, contracts for financial service providers, private agreements between spouses, letters of intent and comfort, communication of offer and acceptance, and circumstances leading to the lapse of an offer. It also presents a scenario to determine if a contract was formed based on offer and acceptance principles. Desklib offers a wide array of study resources, including solved assignments and past papers, to aid students in their learning journey.

Contract and Consumer Law Assignment 1601
Contract & Consumer Law
Assignment
Submission Instructions:
Key steps that must be followed:
1. Please complete the Declaration of Authenticity at the bottom of this page.
2. Once you have completed all parts of the assessment and saved it (eg. to your desktop
computer), login to the Monarch Learning Management System (LMS) to submit your
assessment.
3. In the LMS, click on the file "Submit Contracts & Consumer Law assignment” in the
Contracts & Consumer Law section of your course and upload your assessment file/s
by following the prompts.
4. Please be sure to click “Continue” after clicking “submit”. This ensures your assessor
receives notification – very important!
Declaration of Understanding and Authenticity*
I have read and understood the assessment instructions provided to me in the Learning Management System.
I certify that the attached material is my original work. No other person’s work hasbeen used without due
acknowledgement. I understandthat the work submitted may be reproduced and/or communicated for the purpose
of detecting plagiarism.
Student Name*: Date:
* I understand that by typing my name or inserting a digital signature into this box that I agree and am bound by the
above student declaration.

Contract and Consumer Law Assignment 1601
Important assessment information
Aims of this assessment
This assessment covers the application of legal principles in contract and consumer law.
It requires the completion of a set of questions in relation to:-contract formation and validity;
contractual performance and the principles of E-Contracts.
Enforcing rights and obligations, along with consumer protection law is also covered.
We look at and assess restrictive trade practices and financial services consumer protection.
Business based scenarios present different types of contracts and the capacity to enter into a
contract. There is an assessment task which covers the working use of E-contracts; important in
today's progressive society.
Also, what is lawful and unlawful in the area of consumer protection is explored.
Preparing your responses
Please refer to the beginning of the text and familiarise yourself with the sections on 'Case
Studies, Scenarios and Problem Questions', and 'How to answer a question'. This will assist you to
formulate your response.
Marking and feedback
This assignment contains 9 assessment activities based upon nine chapters of the text book. Each
assessment activity contains specific instructions.
Chapter 1 is not assessed in this unit as it is assessed in FNSTPB505 Property Law.
Chapters 8 and 9 are not assessed in this unit as they are assessed in FNSTPB504 Corporations and
Trusts Law.
This particular assessment forms part of your overall assessment for the following unit of
competency:
 FNSTPB503 Apply legal principles in contract and consumer law
Grading for this assessment will be deemed “competent” or “not-yet-competent” in line with
specified educational standards under the Australian Qualifications Framework.
What does “competent” mean?
These answers contain relevant and accurate information in response to the question/s with
limited serious errors in fact or application. If incorrect information is contained in an answer, it
must be fundamentally outweighed by the accurate information provided. This will be assessed
against a marking guide provided to assessors for their determination.
Unit: FNSTPB503

Contract and Consumer Law Assignment 1601
What does “not-yet-competent” mean?
This occurs when an assessment does not meet the marking guide standards provided to
assessors. These answers either do not address the question specifically, or are wrong from a
legislative perspective, or are incorrectly applied. Answers that omit to provide a response to any
significant issue (where multiple issues must be addressed in a question) may also be deemed
not-yet-competent. Answers that have faulty reasoning, a poor standard of expression or include
plagiarism may also be deemed not-yet-competent. Please note, additional information regarding
Monarch’s plagiarism policy is contained in the Student Information Guide which can be found
here: http://www.monarch.edu.au/student-info/
What happens if you are deemed not-yet-competent?
In the event you do not achieve competency by your assessor on this assessment, you will be
given one more opportunity to re-submit the assessment after consultation with your Trainer/
Assessor. You will know your assessment is deemed ‘not-yet-competent’ if your grade book in the
Monarch LMS says “NYC” after you have received an email from your assessor advising your
assessment has been graded.
Important: It is your responsibility to ensure your assessment resubmission addresses all areas
deemed unsatisfactory by your assessor. Please note, if you are still unsuccessful in meeting
competency after resubmitting your assessment, you will be required to repeat those units.
In the event that you have concerns about the assessment decision then you can refer to our
Complaints & Appeals process also contained within the Student Information Guide.
Expectations from your assessor when answering different types of assessment questions
Knowledge based questions:
A knowledge based question requires you to clearly identify and cover the key subject matter
areas raised in the question in full as part of the response.
Good luck
Finally, good luck with your learning and assessments and remember your trainers are here to
assist you 
Unit: FNSTPB503

Contract and Consumer Law Assignment 1601
Activity instructions to candidates
 This is an open book assessment activity.
 You are required to read this assessment and answer all 8 questions that follow.
 Please type your answers in the spaces provided.
 Please ensure you have read “Important assessment information” at the front of this assessment
 Estimated time for completion of this assessment activity: 2 - 3hours
Question 1.1
What is the fundamental difference between an agreement and a legally binding contract?
Question 1.2
Identify four contracts about which a client may seek advice from a financial services provider.
The term agreement and contract are often used interchangeably, but contract law does not consider
them to be synonymous. An agreement implies an offer made by a person showing his willingness to be
bound on certain terms followed by the acceptance of that offer by another. However, a contract
implies an agreement, which is enforceable by law. An agreement may or may not create legal rights to
the parties whereas a contract must result in the creation of legal rights of the parties. An agreement
generally requires to elements, namely offer and acceptance whereas a contract requires five elements,
namely offer, acceptance, consideration, capacity of the parties, intention to create legal relations.
Every contract is accompanied by an agreement, but an agreement may or may not be followed by a
contract.
Four contracts about which a client may seek advice from a financial services provider are contract for
loan, insurance contract, investment contracts and commercial contracts.
Unit: FNSTPB503
Assessment Activity 1:
Achieving Contract Formation ( Chapter 2)

Contract and Consumer Law Assignment 1601
Question 1.3
Lucy is a client whose tax and business matters you have dealt with for some time. She has been married for
10 years to Desi but they are currently separated whilst they consider divorce. Desi runs his own separate
business. They have entered into various private agreements during the life of the marriage concerning
money. Lucy wants to know under what type of circumstances would a private agreement between a husband
and wife be considered contractually binding?
Question 1.4
What is a 'letter of intent' and in what circumstances are such documents likely to be used?
The agreements made between husband and wife during their lifetime of the marriage, are called
domestic agreements. These agreements made during the ongoing relationships are, generally made
without any intention of creating legal relations. However, the agreements made after the breakdown
of the relationship may result into the creation of legal relationship. Therefore, agreements made
between Lucy and Desi during their lifetime of the marriage are not contractually binding, but the
agreements entered into after the breakdown of the marriage may create a legal relationship.
In literal sense, letter of intent implies to a document containing the statement of the intentions of the
person writing it. In legal sense, letter of intent is an instrument, which contains certain agreements
that are entered into parties prior to the finalisation of those agreements. Letter of intent are created
to mark the beginning of a business deal or a project that was being entered into by the parties and
contains the main business and contractual agreement that will establish the foundation of the final
contract.
Letter of intent is generally used to obtain an initial agreement on the terms of the contract before its
finalization, to address the confidentiality of the matters negotiated, to make an agreement regarding
the procedure to be followed in the negotiation.
Unit: FNSTPB503

Contract and Consumer Law Assignment 1601
Question 1.5
In what commercial situation may a client seek a letter of comfort? What three forms may it take? What is a
'letter of comfort'? Name a commercial situation where 'letters of comfort' are commonly used.
Question 1.6
What are some of the ways an offer and acceptance can be communicated between the parties to a contract?
Question 1.7
List some of the ways an offer may lapse.
A bank or a lending institution lending money to a subsidiary company will require a guarantee from
both the parent and the subsidiary company, which will contain the request for the loan. In this case,
the bank will require a letter of comfort from the parent company to secure the repayment of the loan.
At times, the parent company may decline to provide a letter of comfort for policy reasons or for
keeping the balance sheet healthy. In such a case, the provision of the letter of intent might get
compromised. Accordingly, a letter of comfort may take the following forms:
 An undertaking that the parent company will comply with the financial commitment it has
towards the subsidiary company,
 An agreement by the parent company ensuring the use of its influence to aid the subsidiary to
meet its obligations,
 An acknowledgement provided by the subsidiary company regarding the contract entered into
by the subsidiary company.
A letter of comfort is a document provided by the parent company to a bank providing loan to its
subsidiary company ensuring the repayment of the loan by the subsidiary company.
A letter of comfort is used when there is a presence of a parent-subsidiary relationship between
companies, the subsidiary company is availing a loan from a bank or a lending institution and the bank
requires the repayment of the loan to be secured by a guarantee provided by the parent company.
An offer or acceptance may be communicated by a letter, emails, verbal communication, telephonic
communication, text messages, or performing a condition which marks the offer or acceptance of the
contract.
The ways in which an offer may lapse are revocation of an offer, rejection of the offer, if not accepted
within stipulated time or within reasonable time, on death of the offeror before acceptance of the offer
or if any condition is stipulated for the acceptance and the condition is not satisfied.
Unit: FNSTPB503

Contract and Consumer Law Assignment 1601
Question 1.8
Valentine spotted a lovely blackwood bookcase in an antique shop owned by Tristan, which had a price tag of
$5,000. Valentine approaches Tristan and tells him she will take the bookcase for $3,000. Tristan says that isn't
possible but how about $4,000? Valentine says no, how about $3,500? Tristan says no to which Valentine
replies that she will accept Tristan's offer of $4,000. Tristan does not reply but turns to serve another customer
Isolde, as Valentine steps away from the counter to take a call on her mobile phone.
Valentine then turns to pay for the bookcase, but Tristan says he has already sold it to Isolde for $5,000.
Valentine is furious and says that she and Tristan had a contract and the bookcase was hers. Is Valentine
correct? Give reasons for your answer.
No, Valentine is not correct. There was no contract between Tristan and Valentine. In this case, the
subsequent bargaining regarding the price amounts to counter offers. Tristan’s offer for $4,000 was
rendered rejected by Valentine’s counter offer of $3500, which was again rejected by Tristan. As
Tristan’s offer for $4,000 was already rejected, therefore further agreeing of Valentine for $4,000 was a
counter offer, which again was not accepted by Tristan. Thus, there was no contract between Tristan
and Valentine regarding the bookshelf.
Unit: FNSTPB503

Contract and Consumer Law Assignment 1601
Activity instructions to candidates
 This is an open book assessment activity.
 You are required to read this assessment and answer all 7 questions that follow.
 Please type your answers in the spaces provided.
 Please ensure you have read “Important assessment information” at the front of this assessment
 Estimated time for completion of this assessment activity: 2-3 hours
Question 2.1
A minor does not have the capacity to enter into a contract which will be enforceable against them, except in
exceptional circumstances. Why? What are those exceptional circumstances?
There are certain contracts, which are binding on both the parties where one of the parties is a minor.
One of the contract, which is binding on a minor is the contract for necessities. The contract for
necessities is made binding on the minor because in absence of such an exception the other party
would not agree to provide necessities to the minor. The contract for employment of a minor is binding
against the minor, which can be repudiated on the minor’s attaining adulthood. However, the contract
of employment must not contain unfair or oppressive terms to be imposed on the minor.
Unit: FNSTPB503
Assessment Activity 2:
Achieving Contract Validity (Chapter 3)

Contract and Consumer Law Assignment 1601
Question 2.2
If a person who is intoxicated enters into a contract with another person will that contract always be voidable
by the intoxicated person when they return to sobriety? Give reasons for your answer.
Question 2.3
Tom, a client who is a commercial builder, entered into a contract with Roger to undertake construction of an
office building. Two months ago, Tom paid Roger $15,000 under a clause in their contract which required Tom
to pay this sum if Tom's work breached the National Construction Code. Tom has just been informed that the
clause of the Code he allegedly breached is invalid because of an inconsistency with environmental protection
legislation. Can Tom recover his $15,000? Give reasons for your answer.
A person entering into a contract under the effect of intoxication generally may repudiate the contract
on being sober. The contract becomes voidable by the person under intoxication. However, the onus of
proving the consent to the contract to given under the effect of intoxication lies with the person who
was intoxicated. Moreover, the person then intoxicated must also establish the impairment of his
understanding of the terms of the contract for the intoxication.
In this case, the breach of clause of National Construction Code has occurred while that clause was still
in force and the compensation was paid accordingly, which was also paid prior to the invalidation of the
same. However, the clause was declared invalid afterwards. Therefore, before the declaration the
clause was applicable and has the force of law. Thus, tom cannot recover his $15,000 as at the time of
the payment the clause was in force and the invalidation was declared afterwards.
Unit: FNSTPB503

Contract and Consumer Law Assignment 1601
Question 2.4
In what relationship does the presumption of undue influence arise?
Question 2.5
What is the definition of a guarantor? What is the legal responsibility of a person who agrees to be a guarantor
on a loan for someone else?
Question 2.6
A young couple wishes to take out a sizeable home loan and, at the insistence of the bank, your client, asks the
husband's elderly Chinese parents to guarantee the loan. The parents have very limited spoken and written
English. Under what circumstances would you advise your client, the bank, that they could successfully rely on
this guarantee should the young couple default on their loan?
The relation in which one person is in a position to control the will of another then the former is said to
have a presumption of undue influence over the latter. For example, an employer, generally has an
undue influence over his employee.
A person, who guarantees the payment of the debt of another person on that person’s default to pay
the same, can be termed as a guarantor.
The guarantor is under a legal obligation to make the payment of the loan of some other person, whose
repayment he had guaranteed, on that person’s failure to repay the same.
Generally, a person needs to be in an immediate relationship with the debtor to sign as a guarantor. In
this present case, the elderly parents of the husband qualifies in the immediate relationship
requirement. However, the parents of the debtor are Chinese by nationality which prohibits them to be
a guarantor, as Australian Law only allows citizens of Australia and New Zealand to be a guarantor.
Moreover, having a poor understanding of English and the terms of the contract being communicated
to them in English, their understanding of the contract of guarantee cannot be said to be proper.
Hence, bank should not rely on the on the guarantee of the old parents.
Unit: FNSTPB503

Contract and Consumer Law Assignment 1601
Question 2.7
Inspired by the myriad of cooking shows on television, Dawn is interested in investing a sum of money she has
recently inherited in a restaurant and therefore seeks the advice of Global Domination Advisors Pty Ltd.
Angel is appointed as her advisor and after some discussion, Angel recommends she invest in 'The Witches
Cauldron', assuring Dawn that the restaurant has been very successful and that its future is even brighter -
investment monies are now being sought so it can franchise and that an excellent profit within the next year is
assured. Dawn takes Angel's advice, but she wants extra funds to invest so she will receive a higher return.
Dawn approaches her neighbour, Tara, whom she has befriended. Tara suffers from a mild mental disability
and depression and does not cope well in the wider community, particularly since the death of her mother.
Tara relies on Dawn for advice and support. Dawn asks Tara to lend her $20,000 so she can make it into
$40,000 for her. Tara asks if this will make Dawn happy, when Dawn says yes, she gives her the money, and
Dawn asks her to sign a document to the effect that Tara has loaned the money to Dawn interest free, to be
repaid if and when the restaurant venture succeeds to Dawn's satisfaction.
Sadly, after 6 months, The Witches Cauldron is losing money and Dawn has lost most of her investment
monies. Dawn discovers that Angel gave his advice relying on financial information which was out of date and
incorrect. He also ignored the fact that the restaurant was about to be prosecuted for breach of their license
conditions. Dawn is furious. Tara's niece has now also discovered Dawn's behaviour and insists that she repay
Tara, claiming that the loan agreement is not valid.
Advise Dawn and Tara if there is any action and against whom they may take it, giving reasons for your
answers.
Dawn may bring an action against Angel as being a financial advisor Angel must have ensured the
advice to be honest, efficient and fair and must have maintained the competence in providing the
financial advice.
Tara was suffering from a mental disability while signing the contract with Dawn regarding the
repayment condition of the loan. Hence, the contract is voidable at the option of Tara and Tara has the
option of repudiating the contract claiming the repayment of the loan from Dawn.
Unit: FNSTPB503

Contract and Consumer Law Assignment 1601
Assessment Activity 3:
Identifying and Enforcing Rights and Obligations (Chapter 4)
Activity instructions to candidates
 This is an open book assessment activity.
 You are required to read this assessment and answer all 6 questions that follow.
 Please type your answers in the spaces provided.
 Please ensure you have read “Important assessment information” at the front of this assessment
 Estimated time for completion of this assessment activity: 3-4 hours
Question 3.1
Why is it important to identify the ‘terms’ of a contract?
Question 3.2
Using examples, describe how you would explain to a client the differences between conditions and
warranties, and why the differences matter?
Terms of a contract implies the provisions that forms the contract. The parties to the contract must
understand the terms of the contracts in the same sense while entering into a contract. If the parties to
a contract agree to enter into the contract having two different understanding of the terms of the
contract, then the contract will have the option of repudiation. Therefore, it is evident that to
understand the contract before entering into it in the same sense, the parties must first identify the
terms of the contract.
A condition is a term of the contract, which forms the main part of the contract the breach of which
would imply the breach of the contract. However, a warranty implies a term collateral to a contract the
breach of which might create a claim for damages but does not amount to breach of the contract. In
case of contract of sale of a product, the delivery of a defective product would be regarded as a breach
of condition as that will result in the breach of the contract. However, the purchase of extended
warranty would amount to warranties whose breach will lead to a refund of the extra payment but
would not amount to breach of the contract.
Unit: FNSTPB503