LST2BSL Business Law & Ethics: Contractual Issues Case Study S1 2018

This case study examines several contract law issues. First, it addresses whether Fran can hire her niece instead of her brother Marco, concluding that a valid contract exists with Marco. Second, it analyzes whether promissory estoppel applies to Fran's promise to Octavia regarding warehouse rental, determining it does not due to the absence of a pre-existing contractual relationship. Third, it assesses the enforceability of a restraint of trade clause in Dante's employment contract, finding that Fran can enforce it. Finally, it determines whether Arjun is entitled to a reward for recommending an apprentice, concluding that he is based on the principles of unilateral contracts. Desklib provides similar solved assignments and past papers for students.

Running Head: BUSINESS LAW
BUSINESS LAW
Name of the Student:
Name of the University:
Author Note

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Issue:
The issue that has been identified in the given case is whether Fran can hire her niece Jane,
instead of Marco.
Rule
It can be stated that for the formation of a contract and the same to be binding upon the parties
the intention to create legal obligations is necessary. The consideration generally implies the
intention to create legal relations between the parties. The consideration provides evidence of the
fact that the promisor has agreed to pay remuneration for the fulfillment of the promise and
therefore it implies the intention of the parties to be legally bound. However, it can be mentioned
that the intention to create legal relation still remains an essential element to assess whether a
contract enter into by the parties would be valid or not. An objective test is generally applied to
assess whether the parties entering into the contract intended to be legally bound as illustrated in
the case Air Great Lakes Pty Ltd v KS Easter (Holdings) Pty Ltd1.
In accordance with the decision of the case Balfour v Balfour2 it can be stated that the courts
generally apply certain types of presumptions to contracts while assessing the intention to create
legal relation of the parties. In case of domestic or social contracts the courts generally assume
that the parties to the contract do not intend to be legally bound. However, this provision of
applying presumptions has been replaced.
1 [1989] 2 NSWLR 309
2 [1919] 2 KB 571

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However, In accordance with the judgment of the case Ermogenous v Greek Orthodox Community
of SA Inc3 it can be stated that the High Court of Australia held that the presumptions should not
be taken into consideration when determining the intent of the parties to create legal relations.
Application
It has been provided through the facts of the case that Fran had entered in to an agreement with
Marco, who is the brother of Fran. The contract had been signed between Fran and her brother
Marco. Thus by the application of the case Air Great Lakes Pty Ltd, it can be said that both the
parties intended to create legal relations. However Fran cannot avoid the contract just because
the other party to the contract was her brother as it has been held in this case Ermogenous v
Greek Orthodox Community of SA Inc that any presumptions are not to be considered by the
court while determining intent.
Conclusion
Thus to conclude, it can be said that the contract entered into between Fran and Marco is a valid
one and therefore she cannot avoid it.
Answer 2
Issue:
The issue that has been identified in the given case study is whether the doctrine of promissory
estoppel would apply to the case of Fran and Ocavia.
Rule
3 (2002) 209 CLR 95

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The modern concept of promissory estoppel had been developed in the notable case of Central
London Property trust Ltd V. High Tree House Ltd.4. Promissory estoppel can be defined as
the principle which restricts any person to enforce his legal right on another person if such
person has promised that he would not take enforce his right and the other person has relied on
such promise. It can be noted that promissory estoppels differs from estoppels at common law as
the principle of promissory has strict requirements and it might arise from intention of the parties
or their future conduct. The principle of promissory estoppel had first been proposed in the case
Hughes V. Metropolitan Railway5. However, it can be stated that promissory estoppel would
only arise in circumstances in which a contractual relationship exists between the promisor and
the promisee as held in the case Combe v Combe 6 . Whether promissory estoppel should be
applied in cases in which a legal relationship does not exist between the parties still remains
debatable and unresolved. However, in the case Brinkom Investments Ltd V. Carr7 it had
been held by Lord Denning that the doctrine of promissory estoppel might arise in case of
promises made by the parties who are negotiating the contract. The basic requirement of
promissory estoppels is that the promisor must have provided unambiguous statement that he
does not intend to enforce his legal right. The second essential is that promise must have acted on
the promise. Promissory estopppel would arise in circumstances in which the promissee suffers a
detriment by relying on the promise of the promisor.
Application
In this case it has clearly been provided in the given case study that Fran had promised Octavia
that she would take her warehouse on rent and therefore told Octavia that she need Octavia to
4 (1974)1 KB 130
5 (1877)2 App Case 439
6 [1951] 2 KB 215
7 (1979)CA

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install a fan in the kitchen. However, after Octavia installed the fan in the kitchen Fran wanted to
go back on her promise. Thus in this case, it can be stated that no contractual relationship existed
between the parties and therefore Octavia cannot claim to implement the principle of promissory
estoppel.
Conclusion
Thus to conclude, it can be stated that the principle of promissory estoppels cannot be applied in
the given scenario.
Answer Three
Issue:
The issue that has been identified in the given case study is whether Fran can enforce the clause
of restraint of Trade
Rule:
The restrain clauses in Australia continue to e governed by common law which does not conflict
with the Competition and Consumer Act .8 The definition of Restraint of trade had been
provided in the judgment of Petrofina (Great Britain) Ltd v Martin 9. A restraint of trade can be
defined as the clause in which one of the parties, with the consent of the other party restricts the
liberty of the latter party to carry on business with other parties who are not involved in the
contract of the employment. However, it can be stated that the scope of the doctrine of restraint
of trade has been made limited by the Competition and Consumer Act10. As provided in the case
8 2010.
9 [1966] Ch 146
10 2010

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Adamson v New South Wales Rugby League Ltd 11any agreement which includes the restraint
of trade would be considered to be void unless:
 Such restraint of trade is reasonable in the best interest of the parties
 Such restraint of trade is in the best interest of the public.
Further it has been provided in aforementioned case that the time for assessing whether such
time period is reasonable is not, the courts generally consider the date on which the restraint of
trade had been imposed on the parties. Reasonableness is not assessed by the time period when
the restraint of trade is sought to e challenged or enforced.
Application
It has been provided in the given case study that the employment contract of Dante contained the
clause of restraint which stated that he was restricted him from opening a competitive business in
the same area in which the business of Fran operated. He was also restricted from supplying to
the customers of Fran. However Dante after six months of apprenticeship quit the job and started
supplying chocolates to the customers of Fran. Thus it can be stated that the act of supplying
chocolates to the customers of Fran breaches the term of the contract and not in the best interest
of his employer. Further, he started doing so Six months into the apprenticeship; however, the
restraint clause restricted him from doing so for one year. Thus Fran can enforce the restraint of
trade clause on Dante.
Conclusion
Thus to conclude, it can be stated that Fran can enforce the restraint of trade clause on Dante.
11 (1991) 31 FCR 242

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Answer 4
Issue
The issue that has been identified in the given scenario is whether Arjun is entitled to one
month’s supply of chocolates.
Rule
As held in the case Carlill v Carbolic Smoke Ball Co12 an offer can be made to a sing person
and to the world at large. In this case it was held that Mrs Carlil was entitled to the reward as the
advertisement involved in this case constituted to be an offer of a unilateral Contract which Mrs
Carlil had accepted and performed. Therefore she was entitled to the reward.
Application
It has been provided in the given case study that Fran had put up a notice on the front window of
her shop that any person who would recommend an apprentice for her business would be entitled
to one month’s supply of free chocolates. It can be stated in accordance with the facts as
provided in the case study that Arjun had visited the shop and had recommended his neighbor as
the apprentice. He provided the name and the number of the neighbor. Thus in accordance with
the case of Carlill v Carbolic Smoke Ball Co It can be stated that that the offer involved in this
case study was a unilateral and therefore was made to the world at large. Arjun had performed
the terms of the offer and therefore is entitled to the reward.
Conclusion
Thus to conclude, Arjun is entitled to receive one month’s supply of free chocolates.
12 [1893] 1 QB 256

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