LAW 101 Business Law Assignment: Contract Law, Breach and Remedies

This assignment solution addresses a Business Law problem involving contract law principles, breach of contract, and the validity of exclusion clauses. The first question examines a contract between Flyways Airlines Ltd and Boeing Corporation Ltd, focusing on whether an exclusion clause limiting liability is enforceable when the delivered aircraft fails to meet specifications. The analysis covers the rules regarding contract formation, the incorporation of terms, and the impact of exclusion clauses. The second question examines two scenarios involving offer and acceptance, and whether contracts were formed. It analyzes the legal positions of parties in these scenarios, considering the rules related to offer, acceptance, and counteroffers, and the postal rule. The solution provides detailed legal analysis and application of relevant case law such as Olley v Marlborough Court, L'Estrange v Graucob, and Hyde v Wrench.

Business Law
Running head: LAW 101 0
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Contents
Question 1........................................................................................................................................2
Issue.............................................................................................................................................2
Rules.............................................................................................................................................2
Application...................................................................................................................................4
Conclusion...................................................................................................................................5
Question 2........................................................................................................................................5
Issue 1..........................................................................................................................................5
Rules 1..........................................................................................................................................5
Rules 1..........................................................................................................................................6
Conclusion 1................................................................................................................................7
Issue 2..........................................................................................................................................7
Rules 2..........................................................................................................................................7
Application 2................................................................................................................................7
Conclusion 2................................................................................................................................8
Issue 3..........................................................................................................................................8
Rules 3..........................................................................................................................................8
Application 3................................................................................................................................9
Concussion 3................................................................................................................................9
Issue 4..........................................................................................................................................9
Rules 4..........................................................................................................................................9
Application.................................................................................................................................10
Conclusion 4..............................................................................................................................10
References......................................................................................................................................11

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Question 1
Issue
What is the legal position of Flyways Airlines Ltd.? Whether the same has any entitlement
against Boing Corporations Ltd?
Rules
A contract brings legal obligation and rights between the parties. As soon as parties develop a
contract, they become liable to fulfill the promises to each other as mentioned under a contract.
When parties fail to act as per terms of the contract, the situation is known as a breach of
contract. In such cases, certain remedies are available to innocent parties under contract law. The
victim party may repeal the contract and may ask for damages too. At some of the times, parties
to the case limit their liability out of the breach of contract by introducing some terms. The same
are known as unfair terms. Mostly such terms are introduced by an exclusion. It is a clause where
parties to the case exclude or limit their liability out of the breach of a contract. Contract law set
out the manner and rules in with an exclusion clause may be inserted under a contract.
The general rule in respect to the exclusion clause is that the same must exist and bring in the
attention of another party earlier or at the time of developing the contract. The reasoning behind
the same is that if a party would not be aware of the existence of such a clause they cannot
assume to accept the same. The facts of the case named Olley v Marlborough Court [1949] 1 KB
532 are important to have a look upon here. In this case, the claimant made a booking of a hotel
room and his contract with the hotel has been developed at the reception desk. Later on, when he
went into the room he found a notice containing exclusion clause where it was written that hotel
would have no liability in respect to lost or damaged of any property. In the decision of the case,

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the court declared the note ineffective and stated that at the moment when claimant saw the
notice, a contract was already there (Dannemann and Vogenauer, 2013). L'Estrange v Graucob
[1934] 2 KB 394 Court of Appeal, is an important case where the court has decided that in those
cases where the exclusion clause is a mentioned in a written contract, parties seem to agree with
such clause as soon as they sign the contract. Another condition is providing reasonable notice.
Party, who seek to rely on such clause, is required to verify that the same has taken necessary
steps to give reasonable notice to another party. It means that the party who introduces the
exclusion clause is required to demonstrate that the same taken steps to carry the exclusion
clause in the attention of another party. In the case of Thompson v London, Midland and
Scotland Railway Co [1930] 1 KB 41 Court of Appeal, the claimant got injury whilst stepping
off a train. The Railway station placed notices s at many places that the railway company is not
liable for personal injury claims. The claimant argued that the clause was not incorporated
properly and the same was missing at the moment when contract was developed. Her ticket also
stated that terms and conditions displayed at the platform were subjective to the case. In the
decision, the court provided that the defendant cause was properly incorporated as reasonable
efforts have been made to bring the same into attention of parties.
Another important case of the area is Interfoto Picture Library v Stilletto [1989] QB 433. In this
case, the claimant had a photo library. He advanced some transparencies to the defendant. With
the photos, he also provided a document in the package whereby it was mentioned that if
transparencies would not be reverted within 14 days then the defendant would be liable for
additional charges per photo. The defendant did not pay attention to this document and forgot to
return transparencies. Court decided the matter and provided that term was not a part of the
contract. It was given that when a term is particularly onerous then the party who seeks to reply

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on it takes greater liability to fetch the same in the consideration of another party. The third
condition works as an exception to the second condition and prescribes the event where a party is
not liable to bring the exclusion clause in the consideration of others. As per this condition, a
party that develops such clause is not required to bring the same into consideration of others
when they had similar dealing in the past containing such clause. Exclusion clause may also be
inserted in a contract through trade customs as decided in the case of British Crane Hire v
Ipswich Plant Hire [1975] QB 303.
Application
In the presented case, the contract to build a new aircraft has been developed between Flyways
Airlines Ltd and Boing corporations Ltd. As soon as the parties signed the contract, they have
become liable to act as per terms of the contract. As per one of the term of the contract, Boing
Corporation had liability to use a video system capable of showing 27 channels to new aircraft.
Boing Corporation sent many documents to Flyways airlines and one of the documents contained
a clause limiting the liability of Boing corporation up to $400,000 in case of breach of any term.
The issue of the case started when Boing Corporation has used entertainment system with only
21 channels. It was a clear breach of contract where the aircraft manufacturer failed to work as
per the terms decided under the contract.
To check the validity of the exclusion clause mentioned in the document, this is to state that the
same was not a part of the contract. It has been introduced after the development of the case.
Applying the provisions of Olley v Marlborough Court, the clause does not seem to be a valid
one, as it did not bring in to the attention of Flyways airline before or at the time of making the
contract. Secondly, as the clause was not mentioned under the contract itself hence the decision
of the case L'Estrange v Graucob cannot apply here. It means it cannot be stated that by signing

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the contract, Flyways Airlines accepted the clause as the clause was not a part of the contract.
Apart from this, Boing Corporation also did not take any reasonable efforts to bring the clause in
the notice of Flyways Airlines. The term was onerous for the Boring Corporation and therefore
this party was required to make additional efforts to bring the exclusion clause in the notice of
Flyways Airlines. Applying the decision of the case Interfoto Picture Library v Stilletto, the
clause seems to be “not validly incorporates.” Here this is to state that Boing Corporation cannot
take the assumption of previous dealings or trade customs to prove valid insertion of the clause
as nothing is mentioned about the existence of such dealings or customs. Hence, there is no
reason to held the exclusion clause as valid.
Conclusion
The exclusion clause inserted by Boing Corporation is invalid and has no legal enforcement. As
per the provisions of contract law, Flyways Airlines rescind the contract and may also ask for
damages. Since the exclusion clause is not valid, flyways Airlines may ask the amount of actual
loss as damages without being concerned of any limit.
Question 2
Issue 1
The issue of the case is to check whether Bob has any right in against Mike or not.
Rules 1
Offer and acceptance are the basic elements of a contract in conjunction with the other two
namely consideration and intention of the parties to develop a legal relationship. The dealings
under a contract start with sending an offer by one party to another. Offer making party is known
as offeror and another party that is to accept the offer is called offeree under contract law. An

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offeree is required to accept the offer made by the offeror to develop an agreement and a contract
afterward. Nevertheless, to say that only the existence of acceptance is not enough but the same
be according to rules and principles of contract law. It is a general rule that acceptance must be
absolute to the terms of an offer. It means the acceptance of offeree must be for the exact terms
as mentioned under offer received by the same. If an offeree accepts the offer but make changes
in certain terms then such acceptance cannot be treated as valid acceptance and the situation is
better known as a counteroffer. In the case of Hyde v Wrench (1840) 49 ER 132, it has been
decided that a counteroffer makes cancellation of all the previous offer of dealing and is required
to be accepted by another party to develop a contract. It means once a counteroffer is presented
by a party, original offer do not remain anymore available for acceptance.
Rules 1
In the presented case, Mike made the original offer to Bob on 1 January where he offered to
purchase 30 Toshiba Satellite laptops for the consideration of $ 300 each, inclusive of GST,
delivery, and insurance. This offer contained a valid consideration and intention to the parties
and therefore had the capability to develops a contract at the receipt of acceptance. Bob sent the
acceptance to the next day but make the changes in terms of the offer. He excluded the delivery
charges from consideration. This was a counteroffer and not the acceptance as Bob did accept the
offer of James with changes. This counteroffer now required to be accepted by Mike who
rejected the same on 3 January. Later on, Bob sent a mail to Mike accepting the offer made by
him on 1 January. Applying the provisions of Hyde v Wrench, Bob could not do so as
counteroffer made by him on 2 January canceled the original offer. The issue of the case started
when Mike rejected laptops sent by Bob. Here to say that Mike was entitled to do so as no
contract was developed between him and Bob.

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Conclusion 1
No contract has been developed between Mike and Bob and therefore Bob cannot force Mike to
accept the delivery of laptops.
Issue 2
Whether a contract has been developed between Bob and Tom?
Rules 2
In general, acceptance seems to be complete when it comes to the notice of the offer. However,
an exception is there of this general rule and it is related to the postal rules. It was given in the
case of Adams v Lindsell (1818) 106 ER 250 that in those cases where parties chose the postal
mode of communication, acceptance seems to be complete as soon as offeree drops the consent
letter to a mailbox (Turner, 2013). The event at which an acceptance becomes effective is
required to check for many reasons. One of the reasons is related to the revocation of the offer. It
has been provided in the case of Dickinson v Dodds (1876) 2 Ch. D. 463 that an offer may be
revoked or withdraw by the offeror before the acceptance takes place (Andrews, 2015). It means
in case of postal rules, an offer may be revoked up to the point of placing the acceptance letter
into the mailbox. As soon as offeree place his/her consent, a contract is developed between the
parties and no revocation can be made afterward. Nevertheless, this consent must be absolute and
must not contain any new information.
Application 2
In the case presented hereby, Bob made an offer to Tom on 10 January where he wanted to
purchase 200 Pentium 5 hard drives for a consideration of $50 each. On 12 January, Tom placed
his acceptance to post stating that the hard drive would be delivered by month-end. This cannot

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be considered as a valid and absolute consent as it contained new information with respect to the
delivery of goods. Hence to say that no consent was made through this document. On 14
January, Bob sent mail to Tom revoking his offer made on 10 January. Since no acceptance was
there till this moment, Bob had the option to revoke the offer. Tom delivered hard drive after a
few days and made the invoice. Applying the provisions of Dickinson v Dodds, the revocation
made by Bob seems to be valid.
Conclusion 2
In the absence of absolute consent, no contract has been developed between Tom and Bob. Later
on, Bob revoked the offer before the effectiveness of any consent.
Issue 3
Whether Bob has the right to deny the delivery of computer to Steve. Whether Steve has any
right in against of Bob?
Rules 3
For a valid contract, a valid consideration is required to be there in the dealings of parties.
Similar to offer and acceptance, rules related to consideration are also there. As per one of the
rules governing the law of consideration, this is to state that the consideration must not be the
past one. It means if anything has been done in the past then such doing cannot be considered as
valid consideration for future contracts. In the case Re McArdle (1951) Ch 669 Court of Appeal
of it has been provided that if a promise to make any payment or doing anything else comes after
the performance of something then the promisor cannot be held liable to make the payment as
such past performance do not form a valid consideration (Marson, 2013).

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However, an exception is also there when past consideration can be understood as a valid
consideration. It was held in the case of Lampleigh v Braithwaite [1615] EWHC KB J17 that
past consideration seems to be a valid consideration if other party instructed doings of one party.
Application 3
In the case presented hereby Steve done a favor for Bob. In his doing he look after the cat of Bob
when he went on holiday. For this action of Steve, Bob decided to give a new computer to Steve
and promised so. The issue of the case started when later on Bob refused to give the computer to
Steve. As the action of Steve, i.e. looking after Bob’s cat is a past act hence cannot constitute a
valid consideration. Applying the provisions of Re McArdle, Bob may refuse to give the
computer to Steve as this promise came after the performance of Steve’s action. Further, no
instruction was provided by Bob to Steve hence the exception rule set out under Lampleigh v
Braithwaite would not be applicable here.
Concussion 3
The action of Steve was a past consideration hence does not form any contract. In case of
absence of any contract in this scenario, Steve has no right to enforce the promise made by Bob
in respect to providing him a computer.
Issue 4
Whether Bob has, right to refuse the delivery of vehicle ordered by mistake.
Rules 4
Under the contract, it is a clear principle that parties to the contract become liable to fulfill the
promises mentioned under a contract as soon as they sign the contract. In case of a written
contract, it is to assume that parties have read the entire contract, understood the same, and after

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that signed the same. At sometimes, parties realize that they have signed the contract without
getting it or now are not ready to pursue the same. Apart from this, sometimes parties to the
contract sign a contract under the special circumstance and later on release them unable to
perform the same. The plea of non est factum can be taken in such a situation (Lexology.com,
2016). This is an exception to a general rule and provides safeguard to people in those situations
where they signed a contract by mistake. However, the defense is available in very limited
circumstances. Court only allows Plea of non est factum in those situations where the signed
document finds completely different what it was supposed to be. In the case of Saunders v
Anglia Building Society (Gallie v Lee) [1970] AC 1004- House of Lords, it has been decided that
plea of non est factum must only be provided in serious circumstances such as the inability of
reading, understanding or signing the contract under a relevant disability.
Application
In the given situation, Bob signed the document by mistake, as he misunderstood the subjective
contract by another contract. By signing the contract, he became ready to purchase the Toyota
Hilux 3000 automatic with air conditioning for $33,000. The contract was not different from
what it was supposed to be. In addition to this, Bob has not signed the document in any special
circumstances. Applying the provisions of Saunders v Anglia Building Society, the plea of does
not seems to be non est factum does not seem to be available for Bob.
Conclusion 4
Bob signed the contract with no disability and under no special circumstance, hence plea of non
est factum will not be granted. As soon as Bob signed the contract, he became liable to act
according to terms of contract and Mary can enforce the same against him.

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References
Adams v Lindsell (1818) 106 ER 250
Andrews, N. (2015) Contract Law. UK: Cambridge University Press.
British Crane Hire v Ipswich Plant Hire [1975] QB 303
Dannemann, G. and Vogenauer, S. (2013). The Common European Sales Law in Context:
Interactions with English and German Law. UK: OUP Oxford.
Dickinson v Dodds (1876) 2 Ch. D. 463
Hyde v Wrench (1840) 49 ER 132
Interfoto Picture Library v Stilletto [1989] QB 433
Lampleigh v Braithwaite [1615] EWHC KB J1
L'Estrange v Graucob [1934] 2 KB 394 Court of Appeal
Lexology.com. (2016) Non est factum — not reading is no excuse. [online] Available from:
https://www.lexology.com/library/detail.aspx?g=577d9718-7381-47cc-b357-c1b8cd51a7fb
[Accessed on 18/08/2019]
Marson, J. (2013) Business Law. UK: OUP Oxford.
Olley v Marlborough Court [1949] 1 KB 532
Re McArdle (1951) Ch 669 Court of Appeal
Saunders v Anglia Building Society (Gallie v Lee) [1970] AC 1004- House of Lords
Thompson v London, Midland and Scotland Railway Co [1930] 1 KB 41 Court of Appeal

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Turner, C. (2013) Unlocking Contract Law, Third Edition. Oxon: Routledge.