Case Studies On Contract Law And Business Structure

Promotional Campaign for Rocheo’s Chocolate Company

Whether there is any valid contract between the Jill and Rocheo, and Rocheo has any legal obligation to provide prize to Jill?

For valid contract between the parties there must be agreement between the parties which consists offer, acceptance, meeting of minds, and two or more parties. Meeting of minds between the parties is the factor which is determined objectively.  

Offer- it must be noted that no particular form is required for making an offer, and offer is considered as communication between the two parties in which one party promise to do something, it other person to whom offer is made does something or not do something. Offer can be made to individual, group, even to the world at large.

Acceptance- acceptance is the statement given by the offeree to the offeror in which offeree accepts the offer made by offeror.

This can be understand with the help of case law Carlill v Carbolic Smoke Ball Co, in this case Carbolic Smoke Ball Co is engaged in the production of Carbolic Smoke Ball which is designed to prevent users against the influenza or similar illnesses. For this purpose company make advertisement in the newspaper that company pays rewards of 100 pounds to any person who suffer from epidemic influenza, colds, or any other similar disease after consuming the ball for two weeks, and three times a  day.

After this advertisement, Mrs. Carlill purchased the ball and used it as per the directions, but even after consuming the balls she suffered from flu and claimed the rewards, but company refused to make payments. Case was filed by Mrs. Carlill against the company.

As per the Court, company is bound to pay the rewards to Mrs. Carlill because there was unilateral contract between the parties of the dispute, and this contract consist both offer which was given by the company in the form of advertisement, and acceptance given by Mrs. Carlill by consuming the balls as per the directions.

Court stated that there is valid offer between the parties because an offer can be made to the world, this advertisement was not just only a sales tool because as per the advertisement company already deposited £1,000 to show their sincerity, and language in the advertisement is clear.

Court further stated that this case also satisfied the general rule of communication of acceptance, as the offeror dispense the need of notification and similar thing is done in this case. In this case, it was implicit that there is no obligation on offeree to communicate the intention of acceptance to the offeror, and acceptance is showed through the performance of the offeree by his acts.

Fencing Contract for Jerry’s Farm

Court also stated that consideration is present in the case, as problems suffered by Mrs. Carlill was considered as valid consideration, and there is one more consideration such as benefits received by the company because of use of balls by people.

Express terms- these terms are those terms which are stated in the contract by parties before concluding the contract. These terms are simple to identify if these terms are stated in the written contract. In case of breach of terms, contract is not valid and parties are free to their legal obligations.

In the present case, Rocheo advertise in the newspaper that if any person collect 1 golden wrappers found in any Rocheo Product than that person wins trip to Belgium. On the basis of this advertisement, Jill a travelling blogger purchased 45  Rocheo salted caramel chocolate bars from local supermarket, and she found 10 golden wrappers from those chocolates. She posts those wrappers on the given address as per the directions given in advertisement.

After considering the facts of above mentioned case, it is clear that there is valid contract between the parties because it consist both offer given by the company in the form of advertisement, and acceptance given by Jill by purchasing the 45 chocolate bars.

It must be noted that Jill forgot to take receipt of purchase of chocolates from cashier, and as per the terms of contract valid evidence of purchase is required for claiming the prize. Therefore, company is not bound by the terms of the contract.

Conclusion:

In the present case, there is valid contract between the parties, but Rocheo is not liable to give any rewards to the Jill because there is breach of express term of the contract.

1. Whether there is any obligation on Jerry to pay Suzie?
2. Whether any remedy is available to the Jerry for this issue under contract law?

It must be noted that rights and obligations of the parties to the contract are considered by the terms of the contract, and these terms are both express as well as implied. Express terms are those terms which are stated by the parties in the written or oral form, and implied terms are those terms which are implied by common law or any statute. Implied terms are generated from the conduct of the parties or by necessity and commercial practice.

For the purpose of determining the contractual terms of the contract it is necessary to determine both pre contractual negotiations conducted between the parties as well as post contractual negotiations, and these negotiations must give rise to non-contractual rights and obligations between the parties and these are considered as concluded terms of the contract. However, in case of breach of pre contractual obligation liability under section 18 of Australian Consumer law was raised.

Proposed Restaurant and Cake Distribution Business

Express terms- for determining the terms of contract it is necessary that parties to the contract must intended to be promissory in nature. In other words, while entering into the contract parties are intended to create legal relations between them.

Terms of the contract are classified as condition or warranty. Generally, conditions are of two types’ precedent condition and subsequent condition. Precedent conditions are those which are performed before the formation of the contract, and subsequent conditions are those which must be fulfilled before the performance of contract. In this answer both Precedent conditions and subsequent conditions are referred as conditions.

On the other hand, warranty is considered as those terms which are collateral to the main purpose of the contract. Difference between condition and warranty is clear, and that difference is breach of condition allowed the innocent party to terminate the contract or claim damages while breach of warranty allowed the innocent party only to claim damages.

This can be understand with the help of example, as per the condition of the contract buyer requires vacant possession of the property, and in case if seller does not deliver the vacant possession of the property then it is considered as breach of condition. Buyer has two remedies available in case of breach which are buyer can affirm the contract and claim damages or buyer can sue the seller for specific performance or buyer can terminate the contract. It must be noted, if buyer choose to terminate the contract because of the breach of condition by seller then buyer can only claim for deposit or any other amount paid by him. This can be under stand with the help of the case law that is Ellul and Ellul v Oakes. In this case, house was purchased by Elluls from Oakes, and they entered in this agreement on the basis of the statement mentioned under form of real estate agent’s that property was Sewered and form is signed by Oakes. Afterwards, it was found that property is not steward, and Elluls file case for breach of contract and claimed damages. Court held in this case, that this statement was not the part of the contract and no contractual remedy is available.

Remedies available under contract law in case of breach of contract: damages and liquidated claims are two remedies which are available to the innocent party in case of breach of contract. Damages are considered as substitute of performance, and they are introduced for putting the plaintiff in the condition he was if contract was performed properly.

• In the present case, both Jerry and Suzie entered into contract and contract is based on some conditions which state that Suzie used best material for fences and these fences will last forever and Suzie completes the fencing work by 1^stOctober 2016. In this case, Suzie breaches both the conditions and later it was found that Suzie used worst material for fencing. Because of this Jerry terminate the contract between them and give this contract to other party. As stated above, in case of breach of conditions innocent party can terminate the contract. Therefore, there is no obligation on Jerry to pay any amount to Suzie.
• Jerry can seek for remedy under the contract law, and that remedy is damages. In other words, Jerry can file suit against the Suzie and claim for damages.

Conclusion:

• Jerry has no legal obligation to pay any amount to Suzie under contract law.
• Jerry can claim for damages under the contract law.

3. Following are some business structures which are suitable for Ryan, and advantages and disadvantages of these structures are also stated below:

a. Company- this business structure can be used at the time of starting and growing the business. Company is distinct entity from its members, and it is not like sole trader and partnership.  In other words, company access same right and obligations under the law as any natural person can access which means company can incur debt, sue and be sued. Owners of the company have option to limit their personal liability and they are not liable for the debts of the company. However, it must be noted that this form of business is complex in nature, and it requires high administrative cost to set this business structure because it requires additional reporting.

Company is registered with the Australian Securities and Investments Commission (ASIC), and all the directors and officers of the company are liable to fulfill obligations under the Corporations Act 2001. Following are key aspects of company:

• Company is a distinct entity from its members, and it has limited liability principle as compared to other business structures.
• This form of business is complex in nature, and involves higher administrative cost.
• Company is registered with the ASIC, and it is necessary to understand and complied with the requirements under the corporations Act 2001.
• This form of business is managed by the directors and owned by the shareholders.

Following are some advantages and disadvantages of company:

b. Partnership- this form of business is beneficial when number of peoples wants to conduct business together, and this business form is beneficial in comparison of sole trader. Maximum 20 persons can run the business together in the form of partnership. Generally, there are two types of partnership that are general partnership and limited partnership. Partnerships are governed under the state or territory partnership law. Following are the key elements of partnership which are stated below:

• This form of business is easy to start and run, and as compared to company this form is less expensive to set up.
• For setting this business, partners need to get separate Tax File Number (TFN).
• Partners can apply for Australian Business Number (ABN) but it is not compulsory to get this number.
• Partnership is not distinct entity from its partners, which means partners of the firm are personally liable for the debts of the company.
• Partners are the ultimate owners of the business, and they managed the business of the partnership.
• Partnership firm does not pay any income tax, and partners are liable at individual level to pay income tax on income earned by them.

Following are the advantages and disadvantages of partnership:

In the present case, both business structures are suitable for Ryan and he can choose any one of them, but on the basis of circumstances it is advisable for Ryan to choose company, because in this form of structure legal assistance is more as compared to partnership.

Websites

ACL, ‘Agreement’, <https://www.australiancontractlaw.com/law/formation-agreement.html#offer>, Accessed on 27^th April 2017.

The Law Handbook,’Elements of a contract’, < https://www.lawhandbook.org.au/07_01_02_elements_of_a_contract/>, Accessed on 27^th April 2017.

ACL, ‘Carlill v Carbolic Smoke Ball Co Carlill v Carbolic Smoke Ball Co’, < https://www.australiancontractlaw.com/cases/carlill.html>, Accessed on 27^th April 2017.

ACL, ‘Terms of Contract’, https://www.australiancontractlaw.com/law/scope-terms.html. Accessed on 27^th April 2017.

Legal Service commission, ‘Express and implied terms of the contract’, < https://www.lawhandbook.sa.gov.au/ch18s02s01.php>, Accessed on 27^th April 2017.

The Law Handbook, ‘The Terms of the Contract’, < https://www.lawhandbook.org.au/07_01_03_the_terms_of_a_contract/>. Accessed on 27^th April 2017.

ACL, ‘Ellul and Ellul v Oakes’, < https://www.australiancontractlaw.com/cases/ellul.html>, Accessed on 27^th April 2017.

ACL, ‘remedies’, < https://www.australiancontractlaw.com/law/remedies.html>, Accessed on 27^th April 2017.

Australian Government, ‘Business Structure’, https://www.business.gov.au/info/plan-and-start/start-your-business/business-structure, Accessed on 27^th April 2017.

The Quinn Group, ‘Company Structure’, https://www.allbusinessstructures.com.au/company-advantages-and-disadvantages/, Accessed on 27^th April 2017.

Australian Government,’ Business structures and types’, https://www.business.gov.au/info/plan-and-start/start-your-business/business-structure/business-structures-and-types, Accessed on 27^th April 2017.

ASIC, ‘Your business structure’, https://asic.gov.au/for-business/your-business/your-business-structure/, Accessed on 27^th April 2017.

Case law

Carlill v Carbolic Smoke Ball Co, Court of Appeal [1893] 1 QB 256; [1892] EWCA Civ 1.

Ellul and Ellul v Oakes, (1972) 3 SASR 377, Supreme Court of South Australia.

Article [Online]

Jackson McDonald,  ‘Condition Vs Warranty in a Contract’,

<https://www.jacmac.com.au/uploaded/News/publications/201204_Condition_vs_Warranty_in_a_Contract.pdf>. Accessed on 27^th April 2017.

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