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

This case study analyzes two distinct scenarios involving contract law principles. The first part examines whether a valid contract exists between Jerry and Tom, focusing on the concept of invitation to offer versus offer. It concludes that no contract was formed. The second part assesses the liability of StarShipping for damaged laptops, considering the application of non-est factum, the Goods Act 1958, the Australian Consumer Law (ACL), and vicarious liability. The analysis determines that StarShipping is liable for the damages. The case study also briefly touches upon remedies provided under the Australian Consumer Law, referencing relevant case law and legislation, including the Boots Case, Petelin vs. Cullen, and Lowe vs. Mack Trucks Australia Pty Limited. The document includes a bibliography of cited sources.

Running Head: CASE STUDY
CASE STUDY
NAME OF THE STUDENT
NAME OF THE UNIVERSITY
AUTHORS NOTE

1CASE STUDY
PART 1:
Issue:
The issue in the case is whether there exists a valid contract between Jerry and Tom.
Rules:
Invitation to Offer is the way by which the party invites the other party to initiates offer
for the contract. The basic difference between invitation to offer and offer is that in offer the
legal intention to enter into contracts is established whereas the former only establishes the
intention to establish the terms of a contract and not the final contract. In Boots Case1, it was
stated that the display of shoes in a shop is an invitation to offer. Independent Contractors Act
2006 (Cth), Fair Work Act 2009 (Cth), Australian Consumer Law, application to ACCC
(independent federal body) for Collective bargaining, and so on. However, on equitable
terms, the equity may interfere and make decisions with the validity of the contract being void
or voidable.
Application:
In the given scenario, it can be explained that Jerry has placed an invitation to Tom to
buy his shares if he wants the hold over the company. Therefore, no offer was made and no
intention for legal relationship for the existence of contract between Tom and Jerry can be
established. Thus, there is no valid contract formed between Tom and Jerry because, comment
1 [1953] EWCA Civ 6

2CASE STUDY
made by Jerry is the invitation to offer to enter into contract. Hence, Tom is not liable to pay
Jerry any amount of money.
Conclusion:
It can be concluded that valid contract has not been formed between Jerry and Tom.
PART 2:
Issue:
The issue in the case is whether StarShipping are liable to pay for the laptops that are
destroyed.
Rules:
Non-Est Factum is the defence in the law of contracts (Common Law principles) as
laid down in Petelin vs. Cullen2. According to the defence, the signing party may claim that
such contract was signed mistakenly without the knowledge of its meaning. If the plea is
successful, then such contract would be held as “void ab initio”. However, for the establishment
for such plea, it should also be proved that such term is in contradiction with the interest of the
party signing the contract. It should be established that the signing of the contract was a basic
mistake and such signing has changed the decision of the party towards the contract. However,
the negligence or the carelessness on the part of the signee to read the provisions of the contract
carefully does not undermine the success of such plea (Petelin vs. Cullen).
2 [1975] HCA 24

3CASE STUDY
Goods Act 1958: Section 34 of the Act states that unless otherwise agreed, the expenses
of the custodial transit of goods shall be borne by the seller until it reaches the custody of the
buyer3. However section 34 of the Act states that it is the duty of the seller to deliver the goods to
the buyer and the buyer to accept the same as agreed upon by the parties in accordance with the
terms of the contract.
Australian Consumer Law (Schedule 2) (Section 18) explains that the seller is obliged
with the duty of care towards the buyer of the goods and failure to exercise the duty of care shall
result in damages which shall be borne by the seller as compensation towards the buyer4.
However, such compensation would include only the actual costs of the damages or the harm
caused5.
Vicarious Liability is a doctrine in contract law in which the employer is held liable for
the wrongs committed by the employee within the course of employment6. In other words,
determination of the course of employment holds an important recognition. In case of delivery of
goods, the vendor is in the course of employment until the goods have been successfully
delivered to the buyer from the seller. Any harm caused to the goods during the delivery of the
goods or in transit shall be borne by the seller as it is the duty of the seller to ensure that the
goods shall reach the buyer in a fit condition.
Section 267 of ACL determines that it is the statutory warranty of the seller to ensure
that the goods reach the buyer in a fit condition otherwise the buyer shall be entitled for two
3 Playcorp Pty Ltd v Taiyo Kogyo Limited [2003] VSC 108 (24 April 2003)
4 Butcher v Lachlan Elder Realty Pty Ltd [2004] 218 592
5 ACCC v Homeopathy Plus! Australia Pty Ltd [2014] FCA 1412
6 Prince Alfred College Incorporated v ADC [2016] HCA 37

4CASE STUDY
remedies: compensation and resale, return or resupply of goods by the seller towards the buyer
for the actual amount of goods being damaged7.
Application:
Analysing non-est factum, the parties are bound by the terms of the contract because the
negligence of Tom and Jerry are not regarded as a valid ground for making the contract void ab
initio.
Analyzing the Goods Act, the duty of the seller was incomplete until the goods have been
delivered to the buyer in a fit condition.
Analyzing the ACL, seller was negligent because because he owed the duty of taking
care towards the buyers and the same was infringed when the accident took place. It resulted in
loss to the buyers and hence the claim.
Analyzing vicarious liability, the vendor was employed by the Shipping corporation to
ensure that the delivery of the goods are made in the fit condition. The vendor was in the course
of employment when he decided to see his friend. And the accident occurred.
Analyzing section 267 of the ACL, the seller had ensured a statutory guarantee to the
buyer for the goods to be delivered in fit condition but it was breached and hence, the remedies.
Conclusion:
It can thus be concluded that StarShipping are liable to pay for the destroyed laptops.
7 Australian Competition and Consumer Commission v Radio Rentals Ltd (2005) 146 FCR 292.

5CASE STUDY
PART 3:
The Australian Consumer Law provides for the warranties towards the goods delivered or
sold by the seller to the buyer against following remedies:
 Resale, resupply and replace the goods.
 Compensate the buyer against the damaged goods.
It means that the Australian Consumer Law remedies the consumer or the buyer of the goods
against the defects or damages by the way the resupply or replacement of the damaged goods or
provides compensation for the same within a reasonable time, preferably 12 months from the
date of purchase.
 Lowe vs. Mack Trucks Australia Pty Limited8: In the given case study, it was decided
by the Court that the act of the party has amounted to the breach of the implied condition
of the standard quality. This is further escalated by the breach of condition of fitness for
the purpose intended to be purchased along with misleading and deceptive conduct.
 AFA Electronics Pty Ltd v Strathfield Group Wholesale Pty Ltd9: the issue in the
case was whether the duty of merchantable quality was breached by the party. The claim
for the balance of price and counterclaim for damages were pleaded to the court. Sections
19 (b), 59, 61 of Goods Act 1958 (Vic) has been referred for the interpretation of the
assessment of damaged. It was decided by the court that the company party had suffered
no loss and hence, there shall be no liability arising from the same.
8 [2008] FCA 439
9 [2001]VCS 289

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BIBLIOGRAPHY:
Boots Case [1953] EWCA Civ 6
AFA Electronics Pty Ltd v Strathfield Group Wholesale Pty Ltd [2001]VCS 289
Lowe vs. Mack Trucks Australia Pty Limited [2008] FCA 439
Butcher v Lachlan Elder Realty Pty Ltd [2004] 218 592
ACCC v Homeopathy Plus! Australia Pty Ltd [2014] FCA 1412
Prince Alfred College Incorporated v ADC [2016] HCA 37
Australian Competition and Consumer Commission v Radio Rentals Ltd (2005) 146 FCR 292.
Petelin vs. Cullen [1975] HCA 24
Playcorp Pty Ltd v Taiyo Kogyo Limited [2003] VSC 108 (24 April 2003)
Legislations:
Goods Act 1958 (Victoria)
Contract Law
Common Law
Australian Consumer Law
Independent Contractors Act 2006 (Cth)
Fair Work Act 2009 (Cth)