Analyzing Contractual Disputes: A Business Law Case Study (LAW105)

This case study examines a business law scenario involving a wedding booking at a restaurant, analyzing the formation, potential mistakes, and breach of contract. The analysis begins by determining whether a valid contract was formed between Johnny and Li, considering the elements of offer, acceptance, and consideration, and referencing the case of Smith v Hughes (1871). The second issue addresses a unilateral mistake made by Summer, the restaurant owner, regarding the quoted price, applying the case of Hartog v Colin & Shields (1939). Finally, the case study explores the consequences of the restaurant's potential breach of contract by refusing to provide the premises, referencing the cases of DTR Nominees v Mona Homes (1978) and Luna Park (NSW) Ltd v Tramways Advertising Pty Ltd (1938) to determine Li's rights and potential remedies. The study concludes that a valid contract was formed, there was a unilateral mistake, and the restaurant's refusal constitutes a breach, entitling Li to damages or specific performance.

RUNNING HEAD: INTRODUCTION TO BUSINESS LAW
Introduction to Business Law

INTRODUCTION TO BUSINESS LAW
{A}
Issue
The main issue in the given scenario is whether a contract exists between Johnny and Li.
Rule
To enter into a legal contract some requirements are required to be fulfilled. The first
requirement is an agreement (Davis, 2012). An agreement comprises of valid offer and
acceptance, which comprises a consensus of mind. Traditionally contractual agreement has
been considered in terms of offer and acceptance (Paterson et al., 2015). One party, the
offeror makes an agreement that generates a binding contract once adopted by another party,
the offeror. Once the offer is made the other party must give its acceptance (Radan & Gooley,
2010). A binding contract is made once the valid acceptance takes place (Mckendrick & Liu,
2015). When an acceptance is followed by the consideration, it becomes a valid agreement.
In the case of Smith v Hughes (1871) LR 6 QB 597, it was held by the court that if in a
contract the subjective intention of the parties may differ but it does not affect the contract.
As per the court, the conduct of Hughes was as such that a rational person would believe that
he consented to the terms offered by the Smith.
The second requirement of the contract is the intention to enter into lawful connections. The
parties to contract must intend to enter into lawful connections (Burnham, 2011). If the
promisor has indicated anything like the cost of the promise, in most of the cases it carries
intending to bind the parties. The last requirement to form a valid contract is the capacity of
parties. To enter into the contract a party must not be of unsound mind, minor, intoxicated,
bankrupt and companies. Thus, these persons are incapable to enter into a contract.
Once all the requirements are fulfilled, a valid contract is formed which has a binding effect
on both the parties.
Application
In the given case study, Li books the Lame Duck restaurant for the wedding using the menu
he found on the table. The menu in the provided scenario was an offer, that was accepted by
Summer by confirming the booking of the restaurant. Li paid the price for the same. Thus, as
per the requirements of the contract in the given case study, there was a valid offer, which
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was accepted by the party and Li paid the price for the booking of the restaurant, which
constituted a valid agreement between Li and Summer. As applying the case of Smith v
Hughes, however, the subjective intention differs in the given scenario but it will not affect
the contract between Li and the restaurant. Furthermore, the conduct of Summer was such
that a rational person would believe that he consented to the price mentioned in the menu.
As per the second requirement of the contract, there was an intention of both the parties to
enter into a contract as Li booked the restaurant and paid the quoted price whereas Summer
confirmed the booking. This act of both parties indicates that there was an intention to enter
into a contract, therefore, there was a binding contract between the parties. As per the last
requirement of the contract both the parties to the contract were major and of sound mind.
Thus in the given case study, all the essential elements were present which constitute a valid
contract.
Conclusion
From the above it can be concluded that Li after referring to the menu booked the restaurant
for his wedding, which was confirmed by Summer, thus in the given scenario, there were
offer, acceptance, and consideration which constitute a valid agreement. Furthermore, there
was the intention of parties to bind themselves in contract, which fulfills the other
requirement of a valid contract. Thus, it can be said that there was a valid contract among the
parties.
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INTRODUCTION TO BUSINESS LAW
{B}
Issue
The main issue in the given case study was there a mistake on the part of the parties to the
contract.
Rule
A mistake is a complicated contract law area. As a particular law, mistaking some element of
an agreement does not give a party the right to evade contractual commitments-even if that
mistake is essential (Radan et al., 2017). A mistake can be a common mistake or a mutual
mistake or unilateral mistake. It occurs where one of the parties to the contract is at mistake
relating to some aspect of the contract while the other party is not at mistake (Carter, 2011). It
is uncommon for the common law to provide a remedy for the unilateral mistake, but equity
will act more frequently, however equity requires some unfair behavior on the portion of the
unmistakable party, by which that group seeks to avoid the other from becoming conscious of
the mistake (Paterson et al., 2016).
Only one of the parties is in error in unilateral mistakes. There are two types of unilateral
mistake: mistakes in contract terms and mistakes in identification (Clarke & Clarke, 2016). A
mistake in the contract terms means, an error in the significance of phrases, regulations, or
circumstances that cause one or both parties to enter into the agreement without completely
knowing the contract's results or obligations. A unilateral mistake is such an error retained by
one side only and not communicated by the other (Carter, 2011). The vital point is that there
is only one part at mistake, while the other is not. It could contribute to an unreasonable
benefit in bargaining power because only one party is mistaken. Therefore, if an agreement is
concluded on the grounds of a one-sided mistake, it can result in multiple kinds of contract
remedies such as contract rescission or contract reform (Gooley et al., 2013).
In the case of Hartog v Colin & Shields (1939) 3 All ER 566, it was held by the court that due
to mistake the contract was void. Rabbit skins, in general, were sold per piece. Furthermore,
it was stated that when it is apparent that someone made a mistake in terms of the offer, it is
not possible for an individual to simply snap up the proposal and implement the agreement.
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Application
In the given case study, Summer was at a mistake as she mistakenly accepts the booking and
asked Abu from the accounts to accept the deposit and finalize the invoice. In this case, study
there is a unilateral mistake on the part of the Summer, while the Li was not at mistake. There
was an error in the quoted price by the restaurant as the prices were increased but Summer
mistakenly gave the quotation based on the previous prices. While at the time of entering into
contract both the parties without completely knowing the contract's result entered into a
contract. Such a mistake was not communicated by the Summer to Li. thus such agreement
was concluded on the grounds of one-sided mistake which resulted in multiple kinds of
contract remedies.
As applying, the case of Hartog v Colin & Shields, due to mistake on the part of the Summer
the contract between party is void. The price was upgraded which was not updated on the
menu which resulted in a mistake in the contract. It was apparent that Summer made a
mistake in terms of the offer, it is not possible for Li to simply snap up the proposal and
implement the agreement.
Conclusion
From the above, it can be concluded that since the party to the agreement was at mistake thus
Li can't enforce the contract and snap up the offer. Thus, there was a unilateral mistake in the
given case study as one of the parties to contract was at mistake.
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INTRODUCTION TO BUSINESS LAW
{C}
Issue
The main issue in the provided scenario is if the Lame Duck Restaurant is obliged to provide
the premises for the wedding but refuses to do so when then whether he will be liable for
breach of contract.
Rule
Once the valid contract is formed, both the parties become bound by the contract (Carter &
Chan, 2019). If any party to a contract fails to perform, his part of the contract the other party
has the right to treat it as a breach of contract. The legal cause of action is a breach of
contract that forms of a legal wrong in which one or more parties to the requirement do not
honor a binding contract or bargain for return by failure to perform or interference with the
consequences of the other party (Carter, 2013). A breach happens when a contracting party
fails to meet its obligations as defined in the agreement or communicates an intention to
break the duty or otherwise appears to be unable to meet its contractual obligations (Mellick
& Newlyn, 2015). In the case of DTR Nominees v Mona Homes (1978) 19 ALR 223, it was
held by the court that the innocent party could not end the contract if the breach is not
sufficiently stern. Where a contract breach occurs, the subsequent damages will have to be
paid to the aggrieved party by the person breaching the contract.
In the case of Luna Park (NSW) Ltd v Tramways Advertising Pty Ltd (1938) 61 CLR 286, it
was determined by the court that a party is unable to force the innocent party to terminate the
agreement by undertaking a violation of an important commitment, the latter may continue
with the execution of the agreement if he elects. However, if the conditions or nature of the
agreement is such that the defaulting party's involvement is essential to allow the innocent
party to conduct the agreement on its part and that involvement is withheld, the innocent
party will generally be avoided and absolved from performing as long as it is withheld from
participating.
Application
In the given case study, if the Lame Duck restaurant is obliged to provide the premises for the
wedding, but refuses to do so then it will be treated as a breach of contract. Because once the
valid agreement if formed the other party is under obligation to perform his part and he
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refuses to do so the other party has the right to treat the contract as a breach of contract. Lame
Duck Restaurant failed to meet its obligation as defined in the agreement. As applying the
case of DTR Nominees v Mona Home, the breach is a serious one in the given case study as
Li send all the invitations to all her friends studying at the CDU. Li has the right to treat the
contract as breached. If it is shown by the Li that breach of contract had occurred he can
claim for damages from the Lame Duck Restaurant or can ask for specific performance.
As applying the case of Luna Park (NSW) Ltd v Tramways Advertising Pty Ltd, Johnny the
owner of the restaurant cannot force Li to terminate the contract by undertaking a violation of
an important commitment, Li has the right to continue with the execution of the contract if he
elects.
Conclusion
It can be concluded that if the Lame Duck Restaurant was obliged to provide the premises for
the wedding to do so then it will be considered as a breach of contract. Li has the right to
claim for damages for the breach of contract or can ask for specific performance.
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