Corporations Law Assignment: Contract, Agency, and Consumer Law

This document provides a comprehensive analysis of several key areas within corporations law. It begins by addressing contractual obligations, examining a scenario involving a health drink advertisement and determining the manufacturer's liability based on contract law principles, referencing the Carlill v Carbolic Smoke Ball Company case. The assignment then explores the validity of a contract between John and his grandfather, considering undue influence and referencing the Johnson v Buttress case. Further, the assignment explains exclusion clauses, detailing their incorporation methods with cases like L'Estrange v F Graucob Ltd, Parker v South Eastern Railway, and McCutcheon v David MacBrayne Ltd. The document then analyzes unconscionable contracts, using the Blomley v Ryan case, and differentiates between conditions and warranties in sales agreements, referencing Poussard v Spiers and Pond and Bettini v Gye. The assignment concludes with an examination of electronically created contracts and acceptance rules under the International Sale of Good Act. Section 2 addresses agency law and vicarious liability, analyzing a scenario involving an employee's actions, and determining the principal's liability, referencing the NMFM Property Pty Ltd v Citibank Ltd case. Finally, it examines the application of the Australian Consumer Law in a business transaction context and whether Smith can rescind the contract of sale.

Running head: CORPORATIONS LAW
CORPORATIONS LAW
Name of the Student
Name of the University
Authors Note

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CORPORATIONS LAW
Section 1:
Answer 1:
Issue:
The issue that has to be discussed in this case study is whether the manufacturer is
liable to pay John 10,000 $ as per the law of contract.
Rules:
The case to be referred here is the Carlill v Carbolic Smoke Ball Company [1892]
EWCA Civ 1. As per the decision of the case, it was held that any advertisement having
certain specific terms to get a reward formed a unilateral binding contract that any person can
accept by performing or doing the terms given in such contract to get the reward.
Application:
As per the facts given in the case, advertisement in a local newspaper publishes that
all natural health drink can prevent people from mumps and if the customers drink health
drink bottle every day for one year, then the manufacturer will pay a compensation of 10,000
$ to anyone who will be later on diagnosed with mumps. John, after going through the
advertisement, had one bottle every day for one year continuously. However, he was attacked
by mumps after two years and was admitted to hospital for two weeks. Thus a unilateral
binding contract is formed between John and the manufacturer. He performs the terms as laid
down in the advertisement. But the manufacturer failed to perform the contract as per the
advertisement as he suffered from mumps in spite of having the drink for one year.
Conclusion:
Thus it can be concluded that the manufacturer is liable to pay John 10,000 $ as per
the law of contract.

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CORPORATIONS LAW
Answer 2:
Issue:
The issue is whether a valid contract is created between John and his grandparents.
Rule:
Contract can be defined as an agreement legally enforceable that has been entered into
by the parties freely to form a legal relationship. Thus the parties to the contract must be with
free consent to form the agreement without any force, undue influence or misrepresentation.
When one party is at a special disadvantage or where a party exercises undue influence, then
the contract will be void or voidable at the option of the parties.
Application:
As per the facts of the case, John lives with his grandfather to take his care. He
persuaded him to sell his house to him at 40,000 $ where the original market price of such
house is 200,000 $. As per the rules discussed above, the contract is void as John exerted
undue influence on his ill grandfather and hence persuaded him. This type of observation is
also seen in Johnson v Buttress [1936] HCA 41, (1936) 56 CLR 113 case.
Conclusion:
Thus from the above discussion, it can inferred that the contract created between John
and his grandparent is void.
3. One of the types of unfair terms is the exclusion clause where one party tries to exclude or
evade from his liability out of a contract entered by him. It is a term or clause in the contract
that restricts the rights and liabilities of the parties to the contract. The concept of exclusion
clause is based on the common law of contract.

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In order to determine, whether the exclusion clause is a part of the contract the court
mainly considers the method of its incorporation in such contract. The court mainly
recognizes three methods of incorporation:
 Incorporation by signature: As per decision given in L'Estrange v F Graucob Ltd
[1934] 2 KB 394, when the clause is in writing in a document which is being
approved by the parties by signing, then it forms of the contract and hence binding on
the parties.
 Incorporation by means of notice: As per the decision of Parker v South Eastern
Railway [1877] 2 CPD 416, when one party relying on the exclusion clause took steps
like a reasonable man to bring it into the knowledge or attention of the other party,
then it forms part of the contract and hence binds the parties to the contract. However,
the such notice should be given prior to the contract creation as seen in the case of
Olley v Marlborough Court Hotel [1949] 1 KB 532.
 Incorporation by way of past dealings or transactions: the exclusion clause is
regarded as a part of a contract if the course of transactions among the parties to such
contract were found to be consistent and regular. This is entrenched in the case of
McCutcheon v David MacBrayne Ltd [1964] UKHL 4.
4. Issue:
The issue is whether the contract is binding on Rhodes.
Rules:
An unconscionable contract can be regarded as an one sided contract which is unfair
and derogatory to one party whereas it is advantageous to the other party to such contract.
Unconscionability is examined by analysing the circumstances or back grounds of the
parties under which the contract was formed like the bargaining power, age, knowledge,

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mental capacity and others. It is also found in the case involving fraud and deceit where a
party deliberately misrepresents facts to other parties to defraud or deprive the other party.
Application:
As per the facts of the case, Rhodes, an illiterate person, bought a bike. He was
unaware that an old bike is being sold to him as he could not read the contract. It forms an
unconscionable dealing as here one party that is Rhodes is at a special disadvantage being
illiterate and hence the contract is void as per the case of Blomley v Ryan [1956] HCA 81,
(1956) 99 CLR 362, High Court. Moreover, the bike store has practiced deception on
Rhodes and hence the contract is not valid.
Conclusion:
Hence, the contract is not binding on Rhodes.
5. The terms present in the agreement of contract of sale can be either a condition or
warranty. Conditions are fundamental to the contract that goes to the root of formation of
contract. When a condition is failed to be performed, then the innocent party has the right to
treat such contract as terminated or repudiated. In the case of Poussard v Spiers and Pond
[1876] 1 QBD 410, breach of condition occurred where an actor failed to perform on the
opening of a theatre as it was a condition laid down in the agreement. Thus the theatre party
had the right to terminate contract with such actor. However, in Bettini v Gye [1876] 1 QB
183, the duty of a singer to perform in the initial 3 days of rehearsal does not go to the root of
contract. Hence it is a breach of condition and remedy available is damages.
6. In case of electronically created contract, the acceptance statement is said to take place
when the message of acceptance of the offeree reaches the system of the offeror. It is given in
the Article 18(2) of the International Sale of Good Act which states that acceptance of the
offer made by the offeree comes into effect at the instant the assent will reach the offeror.

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Section 2:
a)Issue:
The issues involved in this case study are as follows:
a. whether Tom is liable to take the delivery,
b. whether the Pizza parlour is liable to sue Tom,
c. what will be the situation if Mary had ordered dinner on several occasions for Tom
from the pizza shop.
Rules:
In an agent-principal relationship, vicarious liability occurs when a person can be held
responsible for the act of another. It is a type of liability in strict nature. It arises due to the
relation between the actual tort feasor and the other person who is held liable in a vicarious
manner. An employer can be made liable vicariously for any act or omission occurred due to
his employee’s negligence during the course of his employment. it is not important whether
the employee is given permission by the employer to act or not to act in the manner which
caused the loss or damage. However, this vicarious liability of the employer is extra to the
primary responsibility of the agent or employee for the act of negligence. Here both the
employer and employee can be held severally and jointly liable. As per the common law, the
employment contract implies that the employee will exercise duties given in the contract with
due care. On this basis, the employer has the right to recover the loss or damages from the
employee for whom he incurred such loss or damage. When the employer is not at all
negligent, he will be able to be totally indemnified by such employee. But an essential
condition is that the employer or the principal can be made liable only if the act of the agent
falls within the acts authorised to him by his principal or the agent has made similar type of
the transactions previously and the employer was aware of it.

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Application:
It is seen in the given case that Mary who is an employee with her boss Tom had a
fight with him. Thus there lies an agent principal relation between them. Due to such fight,
she planned to play trick on Tom. Thus she called a local pizza counter and said that she was
calling on behalf of her boss and ordered twenty pizzas to be delivered at his house on that
evening. She cited the reason behind such bulk order as an order for working business dinner.
Tom was not aware of this and when the pizzas were delivered to his house, he had no idea of
what to do with all these. Thus he can deny paying the cost of those pizzas due to the act of
Mary as she was entrusted with such work and moreover, Mary had never done this before.
The pizza parlour had the right to recover the price of the twenty pizzas from Mary as
she made the order without the knowledge of her boss. From the principal of vicarious
liability, principal will not be made liable for his agent’s act done without any authority given
to him. It can be seen in the decision given in the case of NMFM Property Pty Ltd v Citibank
Ltd (2000) 186 ALR 442, 549.
However, if Mary had made orders for dinner on several other occasions from the
pizza parlour for Tom then Tom can be held liable as per the principle of vicarious liability as
well as implied authority.
Conclusion:
Thus it can be inferred that
a. Tom is not liable to take the delivery and pay the price,
b. Pizza parlour is liable to recover the money from Mary,
c. If Mary had made orders for dinner on several other occasions from the pizza parlour
for Tom then Tom will be liable to pay for them.

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CORPORATIONS LAW
b)Issue:
The issue is guiding of Smith for rescission of contract of sale as per Australian
Consumer Law.
Rules:
As per the section 3 of the Australian Consumer Law, it is said that any person is
said to acquire any goods if the price paid or to be paid for the goods must not exceed 40,000
$. Moreover the goods must be for domestic use, or for personal purpose or for household
consumption or use. Moreover, it also states that an individual is said to acquire any
particular type of service as a consumer if the cost of service does not exceed 40,000 $ and
such service is acquired for domestic, personal or household consumption or use.
Application:
From the facts of the case, it can be seen that Ace Petrol Pty Ltd. owned a service
station as an independent contractor for twenty years in NSW and had planned to sell it. John
is its managing director. Apart from the sale of fuel, the station had an adjoining shop that
sells grocery and local items. This showed that the case involved a business transaction of
commercial nature and not any type of personal or individual transaction.
Moreover, John stated that annual takings out the businesses amount to 200,000 $
approximately. The contract of sale however had no mention of such amount of money. From
the facts of the case, it cannot be determined at what price the station together with the shop
is to be sold to Smith but it must be somewhere near to or more than 200,000 $ as he
mentioned before the contract formation. Thus if the amount of sale is more than 40,000 $,
then it will not be taken into consideration as per the Australian Consumer Law. Moreover,
the contract of sale does not involve any domestic, personal or household use or service.
Hence, it cannot be considered as a part of ACL as per section 3.

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Conclusion:
Thus the case cannot be decided as per ACL as per its section 3.
Section 3:
Answer a:
No, the Terrifying Rides Ltd is not protected by the clause printed on the ticket as it
forms an exclusion clause and such clause is not binding unless the other party is aware of it.
Answer b:
If, Rex had been to the park number of times, he must be aware of the exclusion
clause. Once he is aware, it will be binding as it becomes a part of the regular dealings.
Answer c:
In third scenario, the Terrifying Rides Ltd will be vicariously liable for the act of his
employee who was negligent about his duty. However, the company can get the amount of
damages to be deducted from Sonny Bill as he was actually responsible for the injury of Rex.

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References:
Australian Consumer Law
Bettini v Gye [1876] 1 QB 183
Blomley v Ryan [1956] HCA 81, (1956) 99 CLR 362, High Court
Carlill v Carbolic Smoke Ball Company [1892] EWCA Civ 1
Johnson v Buttress [1936] HCA 41, (1936) 56 CLR 113
L'Estrange v F Graucob Ltd [1934] 2 KB 394
McCutcheon v David MacBrayne Ltd [1964] UKHL 4
NMFM Property Pty Ltd v Citibank Ltd (2000) 186 ALR 442, 549.
Olley v Marlborough Court Hotel [1949] 1 KB 532.
Parker v South Eastern Railway [1877] 2 CPD 416
Poussard v Spiers and Pond [1876] 1 QBD 410
The International Sale of Good Act