1 LAW OF CONTRACT

LAW OF CONTRACT

LAW OF CONTRACT

Situation:

Bill is 15 years old and his sister, Jill, is 22 years old. On July 1 this year Bill and Jill buy a

Sydney cbd cafe, Fine Food Cafe. In the contract the seller, Dodgy Pty. Ltd., dishonestly

states that the weekly takings are $10,000 and have been at this level for 5 years. The contract

also states that the costs of the business are estimated at $3000 per week. In the contract there

is a term stating that the seller will not run a cafe in the Sydney cbd for a period of 5 years

from July 1.

After running the business for several months Bill and Jill find that takings are on average

$2000 weekly and less than their costs.

Bill and Jill come to you for advice about the contract for the business and the remedies they

may have against the seller.

What are the key areas of business law that can assist Bill and Jill.

Summary of the case

Siblings Bill and Jill bought a Sydney Cbd Cafe from Dodgy Pty on July 1, 2016. A contract

was formed between the seller and the buyers. In the contract it was vaguely mentioned that

the weekly takings had been above $10,000 for the last five years and the weekly cost of

business was mentioned as $3000 in approximation. But after running the cafe for few

months, the buyers found out that the weekly takings is around $2000 on an average whereas

the weekly cost of business far exceeds the weekly takings of the business.

Analysis of the Case

It is clearly indicated from the summary of the case that it falls under the obligations of

contract law of Australia. According to the business law of Australia any business contract

can be divided into two broad categories which are speciality contract and simple contract.

From the summary of the case it can be clearly stated that the nature of the contract that was

being validated was a speciality contract which means a proper deed was formed between the

seller and the buyer.

Now for any contract to become a valid one must have few fundamental ingredients, which

are agreement, consideration, intention, capacity, accuracy of the content, legalisation and

formalities in some cases. Only after ensuring all these features are incapacitated in the

contract then it can be said a valid one.

The law of contract performance and termination gives certain statues under which a contract

can be discharged. Before forming any contract the contents or the terms are finalised in

accordance to the common law or statues. The Australian Consumer law, a statutory law that

is now applicable throughout the country provides remedies for the breach of contract (Treitel

2003).

The statue of breach of contract clearly states that a contract can be considered as breached if

the proposed terms of the contract are not genuine. It can also be backed by the statutory law

of failure of the offer condition. To support these statues the example of the cases Financings

Ltd Vs Stimson (1962) as well as the Soulsbury Vs Soulsbury (2007) can be used.

The statue of genuineness of the contract and mistake in equity also makes an outline for the

Bill and Jill case thereby showing them the remedies of their problems. As seen in the cases

like Grist Vs Bailey (1966), George Wimpey UK Ltd Vs VI Construction Ltd (2005), Shogun

Finance Ltd Vs Hudson (2004) Saunders Vs Anglia Building Society (1971), Luxor Vs

Cooper (1941), Simpkins Vs Pays (1995), Errington Vs Errington (1952) a clear idea can be

formulated about the remedies that can be availed by the siblings for their contract with

Dodgy Pty Ltd.

Remedies

If the facts were highlighted before the contract then the buyers would have been able to get

the remedy under the statue of misrepresentation. The case can also be listed under the statue

of misrepresentation or false statements. Since the misrepresentations are found out after the

formation of the contract, thus the buyers are eligible for getting the remedy under the

statutory law of breach of contract as seen in the Sykes Vs Taylor-Rose (2004) case.

Situation:

Hugh runs a pizza business, Homeslice Pizza. He has been using UberEats to pick up and

deliver his pizzas around Sydney. Sales are very good and this food delivery service helps his

business.

After a few months Hugh to cut expenses decides to stop using UberEats and arranges for his

son, Theo, to use his car for deliveries. High and Theo do not register any documents but they

advertise the service as UberPizzaDelivery.

To further cut costs Hugh decides to substitute old and out of date cheeses in his pizzas. In

his advertising he states that his business, Homeslice, only uses the freshest ingredients with

cheeses straight from the farm.

Many customers who buy the pizzas get very sick from the stale and out of date ingredients.

One customer dies because of these ingredients.

 What are the key areas of business law that are relevant in these facts?

 Who can take legal action and what remedies could be given by a court?

Summary of the case

The case revolves around the owner of a pizza business, Homeslice Pizza, Hugh. In the past

Hugh used to deliver his pizza through UberEats and the sales as well as the profit from the

business were very good. But later on to cut the expenses of the business Hugh decided to

deliver the pizzas by car with the help of his son Theo. But he kept on advertising that the

deliveries are made by UberEats without registering any documents.

Further on, Hugh started using expired and old cheeses for making the Homeslice Pizzas

rather than using the fresh ones. But they advertised that Homeslice Pizzas are only made by

freshest ingredients from the farms. Due to the out dated ingredients used in making the Pizza

many people fell ill and it also resulted in the death of one consumer. From the nature of the

case it can clearly be said that it is a clear violation of the consumer law of Australia and the

owner of the Homeslice pizza must be penalised for his fraudulent misrepresentations.

Analysis of the Case

It is clearly indicated from the summary of the case that it falls under the obligations of

consumer law of Australia. In accordance to the business law of Australia the consumer

contract is violated under the usage of unfair terms and there is a clear provision made for the

Manufacturer’s liabilities. From the summary of the case it can be clearly stated that the

consumer contract was breached by the Homeslice pizza and everything that happened due to

that falls under the liability of the manufacturer that is the owner of he Homeslice Pizza Hugh

(Carter & Peden 2003).

According to the statutory law passed as the Fair Trading Act in 1999, any business is liable:

• To promote the practice of fair trade along with a competitiveness in the market

• To provide protection to the consumers

• To regulate the practice of unfair means in trade

• To provide the provisions for statutory conditions as well as warranties in the contract of the

consumers

• To provide obligations for the unfair terms for the contract to be void

• Most importantly to ensure the safety of the products sold.

Thus it can clearly be seen that Homeslice pizza violated the statutory law passed by the Fair

trading Act of 1999.

The Australian consumer law gives certain statues under which a consumer contract can be

discharged. Before forming any consumer contract the contents or the terms are finalised in

accordance to the common law or statues. The Australian Consumer law, a statutory law that

is now applicable throughout the country provides remedies for the breach of consumer

contracts known as the consumer guarantees (Griggs 2011).

The statue of consumer guarantees clearly states that a consumer contract can be considered

as breached if the proposed terms of the contract are not genuine. It can also be backed by the

statutory law of failure of the offer condition. To support these statues the example of the

cases Financings Ltd Vs Stimson (1962) as well as the Soulsbury Vs Soulsbury (2007) can be

used.

The statue of fraudulent misrepresentation as well as the false statement can also be applied

in this case (Corones 2013). For the statue of fraudulent misrepresentation to be applied, a

person will be considered to be liable if he intentionally makes a false statement despite being

fully aware of the fact that the statement that he is making is totally vague or he is totally

negligent of the validity of the statement that he is making. Derry Vs Perek (1889), Smith

New Court Securities Ltd Vs Scrimgeour Vickers (1996) are few examples of the fraudulent

misrepresentation of the statement. In this case even after cutting ties with UberEats,

Homeslice continued to use their name for promotion and also they made the vague statement

of using the freshest ingredients which caused damage to the public (Vermeesch & Lindgren

1990).

In case of fraudulent misrepresentation the damaged party that is the affected public in this

case can sue the accuser in the court of law for the damages under the provision made by the

statue of tort of deceit. As seen in the cases like Grist Vs Bailey (1966), George Wimpey UK

Ltd Vs VI Construction Ltd (2005), Shogun Finance Ltd Vs Hudson (2004) and Saunders Vs

Anglia Building Society (1971), Spice Girls Ltd Vs Aprilla World Service BV (2000) and

Pankhania Vs London Borough of Hackney (2002), Edgington Vs Ftzmaurice (1885) are

some famous case of fraudulent representation.

Since this case can be charged under the statue of fraudulent misrepresentation so the accused party that is the owner of the Homeslice Pizza business will not be able to defence himself by taking the help of the statue of negligent misrepresentation as proposed by the House of Lords of Australia. They will also not be able to project it as a case of innocent misrepresentation as it is clear from the case summary that they intentionally used vague statements for promoting their business (Turner 2003).

It is previously stated that this case is voidable under the statue of unfair terms. According to the section 12 BG of ASIC act the court will conduct three test of unfairness in the consumer contract. Here, in this case the Homeslice Pizza owner Hugh deceived their customers by making fake statements which also resulted in the death of a consumer. So by doing this he took the help of unfair means for his business thus it makes it a criminal liability of business under the statue of criminal liability in business. As stated earlier from the nature of the case it can clearly be said that it is a clear violation of the consumer law of Australia and the owner of the Homeslice pizza must be penalised for his fraudulent misrepresentations(Latimer 2012).

Remedies

The consumers and UberEats can sue the Homeslice Pizza owner Hugh into the court of law. The unfair means conducted by him for promoting his business makes it a criminal liability under the statue of unfair commercial practices. So the case is easily remediable (Lindgren et al 1986).

Reference

Carter, J.W. & Peden, E.,2003. Good Faith in Australian Contract Law’(2003).Journal of Contract Law, 19, p.155.

Corones, S.G., 2013. The Australian consumer law. Thomson Reuters, Lawbook Co..

Griggs, L.D., 2011. Australian Consumer Law-An overview, unfair contracts, consumer guarantees and remedies. In Australian Consumer Law (pp. 1-9).

Latimer, P., 2012. Australian Business Law 2012. CCH Australia Limited.

Lindgren, K.E., Carter, J.W. & Harland, D.J., 1986. Contract Law in Australia. ButterworthHeinemann.

Treitel, G.H., 2003. The law of contract. Sweet & Maxwell.

Turner, C., 2003. Australian commercial law. Lawbook Company.

Vermeesch, R.B. & Lindgren, K.E., 1990. Business law of Australia. Butterworths

LAW OF CONTRACT

LAW OF CONTRACT

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