Offer and Acceptance
1.Issue
- Whether a valid contract has been formed between Terry and Susan
- Weather Terry has committed negligence in relation to Kevin
Rule 1
A contract is a legal agreement which is formed if all elements required to establish it are identified within the discussions of the parties. In relation to the issue the elements which are to be identified in the discussion between the parties is that of an offer and acceptance. Specifically the issue which needs to be addressed is that when an offer is revoked and is no longer eligible to be accepted and when an acceptance is deemed to have been made through post.
One of the most Landmark case in the history of contract law is that of Adams v Lindsell. The issue before the court in this case was to decide when an acceptance by post is deemed to be made. In this case the court set out a Precedent that as soon as the letter of acceptance has been posted the party posting the letter is said to have made the acceptance. However the rule is only applicable when the parties to the contract do not expressly rule out post as a medium of acceptance. In addition the letter of acceptance has to be correctly addressed for the rule to be made applicable.
In the famous case of Byrne & Co v Leon Van Tien Hoven & Co it had been held by the court that the postal rule of acceptance is not applicable when it comes to the revocation of the offer. This signifies that only when the letter of revocation has actually been received by the offer is still available to be accepted. In this case the plaintiff hand accepted the offer through post before the letter of revocation actually reached him. The revocation letter had been sent by the defendant prior to the letter of acceptance being posted. The Court ruled in favour of the plaintiff stating that revocation is not subjected to the provisions of the postal rule.
Application
It has been provided through the scenario that Susan had made an offer to Terry to sell 100 gold bars at a price of $450,000. The offer had been sent by Susan to Terry on 27th January. The letter was actually received by 3rd February and on the same day Terry posted acceptance in relation to the letter. However the offer made by Susan had been attempted to be revoked by post sent by her on 30th January. According to the principles of the Byrne case this revocation would only come to effect when it has actually been received by Terry and if Terry accepts the offer made by Susan before he receives the revocation letter it would account to a valid acceptance.
Revocation
However the revocation letter had been received by Terry on 4th February the acceptance had already been made by him on 3rd February. This can be said through the application of the principles stated by the postal rule that acceptance is made if the parties agree to communicate through post as soon as the letter is posted. Therefore as the acceptance had been made before the revocation of the offer, a valid contract has been formed between Terry and Susan which is enforceable in court.
Conclusion
There is a valid contract which has been formed between Susan and Terry on 3rd February when the letter of acceptance was posted.
Rule 2
Negligence is defined as the failure on part of one party to comply with their duties towards others which results in reasonably foreseeable damages to others. The case of Donoghue v Stevenson introduced the elements of negligence to the legal system of England which was then adopted by various countries including Australia. The three elements which had been identified by the court in this case include the element of duty of care, breach of the duty of care and damages caused due to the breach.
It was stated in the case of Anns v Merton London Borough Council that a person may have a duty of care towards another person if his actions may foreseeably harm or damage the other person. The harm is not required to be only in relation to physical injury but also it can be towards financial or mental injury. Further it has been stated in Vaughan v Menlove, that where the question is whether the duty has been observed or not it is analysed objectively. The reasonable person test or the objective test is applied. However in the case of Hedley Byrne & Co v Heller it was ruled by the court that where the defendant of a negligent claim is a professional is action is to be analysed in the light of another reasonable professional not a normal person.
The “but for” test is put to use to analyse whether the injury is only the result of the breach as per Barnett v Chelsea & Kensington Hospital. In addition the person is able to defend the negligent came through a special defence called contributory negligence. The defence is applied to analyse whether the injured party acted reasonably in the situation with the same standard as for analyzing negligence as per Railways v Halley.
Duty of Care
Application
Terry had met Kevin in a pub. Kevin had asked Terry to provide him advice in relation to investment as Terry is an investment expert. In the given situation Terry had just agreed with Kevin that investment in Ziro is a sound idea. However the company was subjected to scandal and Kevin lost his investment. Terry owed duty of care to Kevin as his advice had the potential of causing financial injury to him. The duty was breached as he did not act as a reasonable professional and provided him an advice without any evidence. If the advice would not have been provided by Terry, Kevin would not have suffered the losses. Therefore Terry is liable for negligence. However Kevin had the knowledge that as he has metTerry in a pub he is not in normal condition and is intoxicated. Any reasonable person would not rely on an advice provided by an intoxicated person. Therefore the claim of Kevin for negligence would be defended successfully by Terry in the light of contributory negligence.
Conclusion
Although Kevin can make a claim for negligence he is likely not to be successful as he has contributed towards his own harm.
2.Issue
- Can Florence make a successful contractual claim against Renzo
- Whether any obligations are imposed by law on Florence for paying GLO
- What are the contractual remedies which may be claimed by Florence in relation to both the cases
Rule 1
A contract can be both written and oral. Whether a statement made by a party is a representation or a term of a contract depends upon few specific contract law provisions. One of such provisions is the Parol evidence rule. The rule had been introduced through the case of Mercantile Bank of Sydney v Taylor and it was stated by the court in this case that when contractual negotiations have been written down on a paper there is no value of those terms which have not been documented. Any term which is not documented when the contract has been written down is not considered to be a term of the contract.
A contract is voidable on the option of the aggrieved party if it has been subjected to misrepresentation. Misrepresentation in a contract takes place when a party induces the other party to get into the contract based upon false or wrong facts. However misrepresentation has to be in relation to a term of a contract as provided by the case of Bisset v Wilkinson
However it has been stated in the court Van den Esschert v Chappell the parole evidence rule would not apply if the written contract is incomplete and the parties are allowed to provide verbal evidence. In this case the plaintiff was promised that there were no white ants in the house she purchases. However the term was not added in the written contract and there were ants in the house. The court ruled in favour of the plaintiff.
Breach of Duty and Damages
Application
Renzo had represented to Florence that the cafe for sale has a turnover of $30,000 per week and can hold up to 70 persons at a time and also has a liquor licence. However when the contract had been formed between the parties Florence came to know that none of the statements provided by Renzo were correct. In the given situation Florence would have made a claim of misrepresentation against Renzo as he provided her with false and incorrect information upon which she realized and got into the contract. However according to the principles of the parole evidence rule where discussed terms which are not incorporated into a written contract they are not considered as the terms of the contract. Upon the closer inspection in relation to the written document Florence found that none of the terms were present in the contract. However through the application of the Van den Esschert v Chappell case it can be stated Florence can show verbal evidence in the court an make a successful claim against Renzo. Therefore she has a valid claim against Renzo as she had been assured of the terms before the contract was formed and the contract is incomplete.
Conclusion
Florence has a contractual claim against Renzo.
Rule 2
As discussed above a misrepresentation is a statement through which a party induces another party by providing them wrongful information about the subject matter of the contract to induce them to get into the contract the provisions have been discussed through the case of Smith v Land & House Property Corp.
Further it had been stated by the judge in the case of dash that where the subject matter of the contract has not been complied with by a party to the contract it accounts to a breach of contract Poussard v Spiers.
Application
In the given situation it has been provided that Florence went into a contract with Tim for the renovation of her Cafe. It was provided by Tim to Florence that they only use the best quality colours. It was also written in scheduled 2 of the contract that the company will use colour which is reasonably determined by the company, install bamboo Timber floating floors, install 26 pendant lights and install Modern Art work in the cafe. However none of such features had been added by the company and therefore they are liable for the breach of contract. Again after the written contract had been signed there was a Collateral contract between the parties verbally that the work would be completed by 1st September. This contract is not subjected to the Parol evidence rule as it was discussed after the written contract was signed. As the work was not completed on time the company is again liable to the breach of contract.
Misrepresentation
Conclusion
There has been a breach of contract by GLO thus Florence has no obligation to pay the entire amount to them.
Rule 3
In the case of Addis v Gramophone it has been provided by the court that in case the contractual right of a party has been violated the purpose of providing damages is to restore the initial position of the party which it was in when the contract had not been formed.
Further when a misrepresentation has been made by a party to the contract the innocent party may rescind the contract and claim any consequential damages as per Car & Universal Finance v Caldwell.
Application
In the given situation it is clear that the company has made misrepresentation to Florence by stating that they provide the best quality paint and not providing it in reality. In addition the terms of the contract has been breached by the company as they failed to install several fixtures to the cafe as promised through the written contract. Moreover they have not been able to complete the work on time and as a result Florence has faced consequential damages. As per the case of Addis it would be the objective of the court to preposition Florence where she was in before the contract was formed. Thus in this case Florence is entitled to claim the loss which has been incurred by her because of the contract and also has the right to rescind the contract with the company.
Florence also has contractual claim against Renzo as the contract was not breached and there was misrepresentation. She can claim damages for any loss which had been incurred by her.
Conclusion
The above discussed damages are applicable.
3.To
Client
Sub: Advice on business structures
This memorandum will provide you with advice in relation to the following areas
- The kind of business structures which are available
- Which is the best business structure for minimising your tax
- How can you obtain the additional funds required for your business
- How can you ensure that you are not injured by poor management decisions taking by partners Gary and Sandra
- How can you ensure that you have control over the day-to-day decision making in the business
Firstly I would like to tell you that there are three kinds of business structure from which a person main select best suitable structure as required based upon its features. These structures are a sole trader, a partnership and a company. A company is further divided into a proprietary company and public company.
A proprietor is the person who carries out a business in his own name. In this situation the business and the person do not have any distinguished identity and is regarded as the same by law. One of the primary advantages you would have if you select this form of business structure is that it is very easy to setup and involves negligible cost. However this business structure is not suited for your business because the income which is derived from the business would be treated as your own income and subsequently your tax liability would become higher. In addition this business structure does not provide provisions for limited liability which is essential to secure your personal assets. Although you would have Supreme control over decision making in this form of business structure you would not be able to run it with your partners.
Breach of Contract
The other structure I would like you to know about is that of partnership. This is a form of sole trader which can be carried out by more than one person. This means that all the features of a sole trader would be applicable on this structure along with the fact that you can choose to carry out business with your partner. However in this forms of business structure your decision making power would be considerably reduced as you would be subjected to the decision of your partners who have a history of poor management. In addition your tax liabilities would be the same as in the sole trader structure. Another significant disadvantage of this business structure would be that you would be liable for all actions which have been committed by your partners in the course of business. Therefore I would like to advise you not to select this form of business structure for your business.
A company in my opinion would be the best suited business structure for your business. However you need to know which form of company would be better suited to you. In a proprietary company your tax and personal liabilities would be reduced as compared to that of the above discussed business. In this form of business you can become the director and exert control over the day-to-day decision making of the business. You can ensure that your partners are merely made shareholders and they do not take part in management of the business. You can also ensure that the constitution of your company sets out the limits which any director of the company has to comply with while taking decisions on behalf of the company. Although an act is not merely invalid because it is stated so by the constitution you can claim compensation from the other directors as the constitution has a contractual relationship between the company and its members and the members with the members. This situation would be helpful if your partner’s insist on becoming directors of the company. The provisions of limited liability which are available in the company would ensure that you are only liable for the amount of investment you have made in the company in case something goes wrong with your business. Although your business idea as very strong but it is always better to foresee risk and make alternative plans for them. A Disadvantage which this business structure would bring to you is that the cost of setting up this structure is comparatively high as compared to the other structures discussed above. In addition you would not be able to obtain any public funding which apparently you require for funding your business. Although you can go for crowd funding I would not advise you for this option because it is not very reliable.
Therefore in the light of the above discussion I would like you to choose a public company for your business. This is because all the features which are present in a proprietary company would also be available in a public company. However an additional feature of a public company is that you will be eligible to raise funds in relation to your business structure. Although you would have all rights to take decision in relation to how the company functions, the activities of the company have to comply strictly with all legal regulations which are imposed on it. Moreover the legal regulations which are imposed on a public company are the highest as compared to any other business structure. In this situation the regulations will affect you in a positive manner and no person would be able to commit any fraud in your company and if they do then they may also be criminally liable under the Corporation Act 2001(Cth) or the Criminal Code for their actions.
Thus my advice to you would be that you initiate a public company for your business. Although you will have to bear additional cost and compliance burden in relation to its incorporation, with this structure you would be able to meet all your needs which you notified us during the interview. Wish you all the best for your business. Please do not hesitate to write to use in case of any questions regarding your business.
Adams v Lindsell (1818) 1 B & Ald 681
Addis v Gramophone [1909] AC 488
Anns v Merton London Borough Council [1978] AC 728
Barnett v Chelsea & Kensington Hospital [1969] 1 QB 428
Beatty, Jeffrey F., Susan S. Samuelson, and Patricia Sanchez Abril. Essentials of Business Law. (Cengage Learning, 2018).
Bisset v Wilkinson [1927] AC 177.
Byrne & Co v Leon Van Tien Hoven & Co [1880] 5 CPD 344
Car & Universal Finance v Caldwell [1965] 1 QB 525.
Clarkson, Kenneth, Roger Miller, and Frank Cross. Business Law: Texts and Cases. (Nelson Education, 2014).
Davidson, Daniel V., Lynn M. Forsythe, and Brenda E. Knowles. Business law: Principles and cases in the legal environment. (Wolters Kluwer Law & Business, 2015).
Donoghue v Stevenson (1932) AC 562
Hannigan, Brenda. Company law. (Oxford University Press, USA, 2015.)
Hedley Byrne & Co v Heller [1963] 3 WLR 101
KOH, Pearlie, Pey Woan LEE, and Hans TJIO. “Form, substance and context in company law.” (2017).
Mercantile Bank of Sydney v Taylor (1891) 12 LR (NSW) 252
Poussard v Spiers (1876) 1 QBD 410
Railways v Halley [1978] 20 ALR 409
Smith v Land & House Property Corp (1884) 28 Ch D 7
Van den Esschert v Chappell [1960] WAR 114
Vaughan v Menlove (1837) 3 Bing. N.C. 46
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