Business Law Assignment: Contract Law and Exclusion Clauses Analysis

This assignment analyzes a business law scenario involving a dry-cleaning service, "Span and Spic," and a customer, John. Part A examines the formation of a contract, including offer, acceptance, and consideration, applying legal principles to determine when a contract was established between John and Span and Spic. Part B delves into the validity of an exclusion clause present in the contract, considering both common law principles and the Australian Consumer Law (ACL). The analysis assesses whether the exclusion clause protects Span and Spic from liability, especially in light of misrepresentations made by the shop assistant and the provisions of the ACL regarding consumer guarantees, ultimately determining the enforceability of the exclusion clause under both legal frameworks. The report concludes that the exclusion clause is likely invalid under both common law and the ACL, exposing Span and Spic to potential liability.

Business Law
Assignment
Running head: BLO1105 0
Student’s Name
Address

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Part A
Every contract is required to be developed within the boundary of law; otherwise, it may be held
as invalid. Some factors are mandatory to be there in every contract, which will be discussed
hereunder. These factors are known as essentials of contract. Starting the discussion on these
elements, this is to inform that offer is the primary and basic elements of a contract. An offer is a
promise to do something or not to do something in exchange for particular consideration1. The
person who makes an offer is known as offeror and the Party to whom the offer is made is
known as offereee. When an offer is made, another party i.e. offeree need to accept that offer in
order to make an agreement. Such acceptance must be independent and there must not be any
undue influence or fraudulent purpose in this. It was decided in the case of Harvey v Facey2 that
an offer must have the intention to bind the other party. Further, an offer, as well as an
acceptance, is required to be informed to other parties. As decided in the case of Brogden v.
Metropolitan Railway Co.3, acceptance can be provided through conduct. Further, the acceptance
is required to be for original offer. In other words, this is to state that while providing the
consent, offereee must not make any alteration in the terms of the original offer and must accept
the same without making any changes. If offeree accepts an offer, changing terms of the same
then such consent is not treated as an accurate and valid acceptance and the communication
made by the offeree is known as a counteroffer. Court held in the case of Hyde v Wrench4 that a
counteroffer rejects all the earlier offers and therefore an original offer no more remain open to
accept for offeree. The request of information is another term that closely resembles to counter
1 J Day and A Lindner, International Legal English Teacher's Book: A Course for Classroom Or Self-study Use
(Cambridge University Press, 2011).
2 Harvey v Facey [1893] UKPC 1
3 Brogden v. Metropolitan Railway Co. (1877) 2 App. Cas. 666
4 Hyde v Wrench (1840) 49 ER 132

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offer. A request for information is a communication from the side of offeree where he/she
clarifies doubt regarding terms of the offer.
A term closely resembles to offer is also there which is known as an invitation to treat, however,
this is not an essential element of a contract. It seems to be similar to an offer but this is not a
fact. Offer as well as an invitation to treat is different from each other. The later one is only an
invitation for offers. In response to an invitation to treat, an offeror makes an offer, which is
required to be accepted by another party, in general, the party who makes an invitation to treat. It
means an invitation to treat cannot be accepted as it is not an offer5. Most of the times it is hard
to identify whether a communication is an offer or the same is an invitation to treat. In the case
of Pharmaceutical Society of Great Britain v Boots6 it was held that goods placed in a shelf are
treated as an invitation to treat but not an offer. When a customer selects a good and takes the
same to the counter then it is treated as an offer and when cashier receives the cash, then it is
treated as acceptance through conduct. Moving the discussion towards other essentials of
contract, the third element is a consideration. Consideration is required to be valid always. It
means an illegal article cannot be held as a valid consideration. Similar to offer and acceptance,
rules related to consideration are also there. Consideration can be anything that has a certain
worth in the views of the law. It is not a lookout of authorities to check whether consideration is
adequate for the parties or not7. In addition to these factors, all the parties of the contract must
have the intention to create a legal relationship with each other. Because of this element, family
agreements are not considered as a valid contract in usual.
5 Andrew Peter Sparrow, The Law of Virtual Worlds and Internet Social Networks (Gower Publishing, Ltd, 2010).
6 Pharmaceutical Society of Great Britain v Boots [1953] 1 QB 401
7 Janice Denoncourt, Q&A Business Law (Routledge, 2013).

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Here this is necessary to state there is no compulsion for a contract to be in writing, it may be
developed in an oral manner as well. In the presented case, John wanted to wear his best suit that
was demanding a dry clean. For this purpose, he visited Span and Spic, a local dry cleaner. When
he entered into the shop of Span and Spic, he saw a board placed over there. This board
contained different packages and their respective prices. Here to say that applying the provisions
of Pharmaceutical Society of Great Britain v Boots this was not an offer but an invitation to
treat. This was a general communication, which was addressed to everyone, and customers,
therefore, were required to make the offer in this scenario. John picked one of the packages
named premium clean option and moved to an assistant for further discussion. He made some
request for information, as he was doubtful about the quality of services. The moment when John
decided and approached the assistant for the premium clean package, he made an offer to Span
and Spic in respond to the invitation to treat made by the shop. Here the shop, being an offeree
needed to accept the offer. Shop assistance issued a receipt to John in which his order number
and the due amount was mentioned. By doing so, Span and Spic provided its acceptance; it
means it was an acceptance through conduct. At this moment, a contract was established between
John and Span and Spic. In order to discuss other elements of the contract, this is to clarify that a
valid consideration and intention to create legal relationship was also there. Dry cleaning of the
suit was a consideration for John whereas money was a consideration for Span and Spic. The
shop and John had no social relationship with each other and therefore their contract was of pure
economic nature. As consideration and intention were already there, the contract has come into
existence as soon as an offer made by John.

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Part B
Issue (a)
Considering common law, whether the protection under exclusion clause is available for Span
and Spic?
Rules (a)
Exclusion clause if one of the kinds of unfair terms under contract and common law (tort). These
clauses are there to limit/reduce or avoid the liabilities of a party in cases of breach of any term
of the contract. Contract law specifically outlines some requirement that needs to be considered
while making an exclusion clause. Firstly, this is to mention that such clauses can be there under
signed and unsigned contract and provisions are different for both situations. In cases of
unsigned contract, parties often introduce an exclusion clause in a casual manner. It means such
a clause is mentioned on a document, a receipt, token or ticket. In these circumstances, it is
required that the subjective clause must exist at the time of entering into contract and party who
develop such a clause must bring the same into the notice of other party8. Any document cannot
consist of such clause and there must be a reasonable belief for an innocent party that a
document can carry an exclusion clause.
The facts and decision of the case of White v John Warwick & Co Ltd9 need to discuss here. In
this case, claimant signed a contract with the defendant. As per this contract, the defendant was
liable to provide cycle to claimant on hire purchase basis. The contract stipulated that the
defendant would not be liable for any kind of personal injury incurred to the claimant while
using cycle. Later on, claimant got injure while cycling an initiated a claim against the defendant.
8 E-lawresources.co.uk, Unfair terms (Web Page) <http://www.e-lawresources.co.uk/Unfair-terms---regulation-by-
common-law.php>.
9 White v John Warwick & Co Ltd [1953] 2 All ER 1021

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Court held that because of the existence of exclusion clause, the defendant cannot be held liable
for to pay damages to the claimant under contract law but the liability of defendant will remain
same under tort law as the exclusion clause did not exclude negligent liability under Tort law10. It
means a person can be held liable under tort law even in the existence of an exclusion clause. In
the case of Curtis v Chemical Cleaning11 it was held that where a misrepresentation is associated
with an exclusion clause then the exclusion clause.
Application (a)
In the given case, John entered into a contract with Span and Spic that included an exclusion
clause. In this case, the exclusion clause does not seem to be properly introduced as it was made
after the development of the contract. As concluded in question 1, the contract was developed
when the receipt has been issued by the dry cleaner. The clause was mentioned on this receipt
and therefore John could not check the same before entering into a contract. However, this
receipt was a reasonable document to include exclusion clause as this was the only document
provided by shop to John, but such clause was required to mention at the front not behind the
receipt. As the clause was inserted after the development of a contract, the same would be treated
as invalid. Secondly, applying the provisions of Curtis v Chemical Cleaning, this clause held
invalid again as it was in contradiction of misstatement made by the shop. Shop assistant ensured
John that no harm would come to his suit. This statement induced John to enter into a contract
and therefore the clause was invalid. As given in White v John Warwick & Co Ltd, dry cleaner
seems to be held liable under contract law as well under tort law for the negligence dealt by
John.
10 Lancashire.gov.uk, Exemption Clauses Continued (Web Page)
<www3.lancashire.gov.uk/corporate/web/viewdoc.asp?id=1000>.
11 Curtis v Chemical Cleaning [1951] 1 KB 805

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Conclusion (a)
The exclusion clause was not valid and Span and Spic cannot avoid its liability relying on this
clause.
Issue (b)
Considering Australian Consumer Law12 (ACL), whether the protection under exclusion clause is
available for Span and Spic?
Rules (b)
Australian consumer law also provides protection to a consumer of goods and services. As per
this act, a consumer is a person who acquires goods or services of the value of $40000 or less for
personal purpose. Further Subdivision B of Division 1 of part 3-2 of this act provides guarantees
in relation to supply of services. Section 60 of ACL says that it becomes the liability of service
providers to provide services with due care and skills to the consumer13. Further section 61 says
that if a consumer states specific purpose behind seeking the services then it the supplier of
services must ensure that the provided services fulfill that particular purpose of consumer. In
respect to services, the last guarantee is mentioned under 62 of the act that says service providers
must render the services within a specific period14. Section 267 and 268 of ACL provides right of
the consumer in those cases where a service provider fails to provide services as per the manner
outlined under section 60, 61 and 62. Section 267 (3) states that when the failure is a major one
then the consumer can set aside the contract and also can ask for the compensation15. Further
12 Australian Consumer Law
13 Australiancontractlaw.com, Legislation | Competition and Consumer Act 2010 (Cth) (Web Page) <
https://www.australiancontractlaw.com/legislation/acl/acl60.html>.
14 Legislation.gov.au, Competition and Consumer Act 2010 (Web Page)
<https://www.legislation.gov.au/Details/C2019C00149/Html/Volume_3>.
15 Hobartlegal.org.au, What remedies are available? (Web Page)
<https://www.hobartlegal.org.au/handbook/consumers-money-and-debts/australian-consumer-law/what-remedies-
are-available/>.

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section 268 of the act says that failure is treated as a major failure when the services are not fit
for the particular purpose, that the similar services are used to provide. Section 64 of the act says
that these guarantees cannot be excluded by any exclusion clauses and suppliers of services are
always liable to act according to the same.
Application (b)
In the given case, it was the liability of Span and Spic to perform their duties with due care and
skills as required by section 60 of ACL. John was a consumer under ACL as he acquired the
services for personal purpose and it is assumed that the amount of services was not more than $
40000 as it was a contract for dry clean of a suit. Because of their services, John’s suit lost its
original color. Here the service provider i.e. Span and Spic would be held liable under section
267 of the act. Further applying the provisions of section 268 of the act, this seems to be a major
failure as it did not fulfill a general purpose, which was appropriate dry cleaning of the suit. Here
John can set aside the contract and can ask for compensation. Span and Spic cannot rely on the
exclusion clause, as the liability to act with care was a standard liability that could not be
excluded.
Conclusion (b)
Exclusion clause was invalid by the virtue of section 64 of the act.

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Bibliography
Case Laws
Brogden v. Metropolitan Railway Co. (1877) 2 App. Cas. 666
Curtis v Chemical Cleaning [1951] 1 KB 805
Harvey v Facey [1893] UKPC 1
Hyde v Wrench (1840) 49 ER 132
Pharmaceutical Society of Great Britain v Boots [1953] 1 QB 401
White v John Warwick & Co Ltd [1953] 2 All ER 1021
Legislations
Australian Consumer Law
Book/Journals
Day, J and A Lindner, International Legal English Teacher's Book: A Course for Classroom Or
Self-study Use (Cambridge University Press, 2011).
Denoncourt, Janice, Q&A Business Law (Routledge, 2013)
Sparrow, Andrew Peter, The Law of Virtual Worlds and Internet Social Networks (Gower
Publishing, Ltd, 2010)
Other Resources
Australiancontractlaw.com, Legislation | Competition and Consumer Act 2010 (Cth) (Web Page)
< https://www.australiancontractlaw.com/legislation/acl/acl60.html>.
E-lawresources.co.uk, Unfair terms (Web Page) <http://www.e-lawresources.co.uk/Unfair-
terms---regulation-by-common-law.php>.

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Hobartlegal.org.au, What remedies are available? (Web Page)
<https://www.hobartlegal.org.au/handbook/consumers-money-and-debts/australian-consumer-
law/what-remedies-are-available/>.
Lancashire.gov.uk, Exemption Clauses Continued (Web Page)
<www3.lancashire.gov.uk/corporate/web/viewdoc.asp?id=1000>.
Legislation.gov.au, Competition and Consumer Act 2010 (Web Page)
<https://www.legislation.gov.au/Details/C2019C00149/Html/Volume_3>.