Bu1112 Business Law: A Case Assessment Answers

1.

Mojo Beverage placed the following advertisement in a local newspaper on 25 January:

‘Come one, come all! Fishermen and women of Lake Tranquil. We are offering to pay $100,000 to any person who catches Lord Harry, a trout which we have tagged and released into the lake.’

The following day was the Australia Day holiday. Lake Tranquil was crowded with people fishing both from the bank and from boats. At about lunch time, a rumour spread among the people on the bank that there had been an error in the advertisement: that the true amount should have been $ 1,000 and that Mojo Beverage had announced that the prize would be the lower amount. The rumour was in fact true. Ben heard this rumour from the stranger fishing beside him, minutes before catching Lord Harry. A Mojo Beverage representative was on hand to certify the catch before Lord Harry was released back into the lake, but did not say anything about the amount of the prize.

Ben is claiming that Mojo Beverage owes him $100,000.

Advise Mojo Beverage, explaining applicable legal principles and citing relevant authorities.

2.

• Dorper Sheep Sellers Pty Ltd was negotiating the sale of a number of dorper sheep to a firm called Livestock Brokers, which intended to on-sell the sheep. On 1 June Dorper Sheep Sellers sent a letter to Livestock Brokers, setting out the number of sheep for sale and the price per head. It asked Livestock Brokers to reply within 14 days.

Livestock Brokers sent a letter by reply dated 6 June, inquiring whether the sale could be financed on the ‘usual terms’. Dorper Sheep Sellers did not reply.

On 14 June, at the opening of business, Livestock Brokers sent a fax stating: ‘We accept your offer of 1 June for the sale of sheep’. The same day Dorper Sheep Sellers faxed back, saying: ‘You’re too late. We’re just in the process of selling the stock to another purchaser. Formalities will be completed by tomorrow’.

Advise Livestock Brokers as to the rights and liabilities of the parties in the light of the commercial interactions taken place between them.

• Presume in (a) above Livestock Brokers sent the fax on 14 June but because of a transmission error Dorper Sheep Sellers did not receive it. Advise Livestock Brokers under these circumstances.

3.

Stuart had a 5-year written lease of a shop in the Prince Mall. He entered the lease at $1000 per week at the end of 2010 and ran a successful music business for about two-and-a-half years. In 2013 the business was affected by decreased sales in CDs as a result of the increased ability of people to access music through the internet.

In December 2013 Stuart asked the lessor, Westphalia Marts Pty Ltd, for a reduced rental of $700 per week until the business improved. He told the lessor about his business problems and plans to diversify and indicated that he might have to terminate the lease early. Westphalia Marts agreed to allow Stuart to pay the reduced rent and in January 2014 Stuart began to pay the new agreed rent of $700.

In December 2014 Westphalia Marts decided to sell the Mall, including all the shops. They wanted the income from the Mall to look healthy, and asked Stuart to pay the full amount of $1000 per week rental beginning in January 2015 and also demanded the shortfall of $300 per week for each week of the year 2014.

Advise Stuart, with reference to the relevant principles.

1.

Whether a valid contract was formed between Ben and Mojo Beverages, or not?

A contract creates legal relationship between two or more parties, under which a promise is made to do certain things in exchange for a consideration (Gibson & Fraser, 2014). It can be drawn in two manners, the first being the oral contract, where the promise made under the contract and the consideration is finalized orally. In the second one however, which is the written contract, these are discussed and summarized on a document, which is than signed by the parties who are involved in the particular contract. Both these forms of contract are binding in nature (Andrews, 2015).

A contract, for being valid, needs to have the essential elements. These include an offer and acceptance, the consideration, intention, capacity and clarity (Elliot, 2011). The first and the foremost thing is an offer, which has to be separated from an invitation to treat. The invitation to treat shows that the individual is willing to negotiate, where as an offer shows that the individual is willing to form a contract (Abbott, Pendlebury & Wardman, 2007). In general, the advertisements in the magazines and newspapers are considered as an offer. And so, it is not requisite on the part of the advertising person to finish the sale, and a leading example of this is Partridge v Crittenden [1968] 1 WLR 1204 (Swarb, 2016). However, where a case of a unilateral offer is involved, the same would be deemed as an offer as was held in Carlill v Carbolic Smoke Ball Company [1893] 1 QB 256 (British and Irish Legal Information Institute, 2017).

An acceptance has to be gained on the offer that has been made. For a unilateral offer, the acceptance has to be attained through the performance of the act. And the performance has to be done after making reliance to the offer. Moreover, the offer needs to have a consideration, which has an economic value, but can be decided freely between the parties (Treitel & Peel, 2015). The three wrappers were taken as a valid consideration in Chappell and Co Ltd v Nestle Co Ltd [1960] AC 87, as it had economic consideration in the view of the judges (E-Law Resources, 2017).

The facts of this case match Carlill v Carbolic Smoke Ball Company case. In this case, the advertisement in the newspaper was the offer, being a unilateral offer. This offer contained a valid consideration, as it had economic value. The part of acceptance, in a unilateral offer is established from the acceptance. In this case, by performing the promise, Ben gave his acceptance. Even though he had heard the rumor, but he relied on the offer and caught Lord Harry. So, the acceptance would be valid. And as all the requisite essentials of a contract are present in this, a valid contract was formed. So, Mojo Beverage does owe Ben $100,000 as promised in the offer.

Conclusion

A valid contract was formed between Ben and Mojo Beverages.

2.

Whether a valid contract was formed between Dorper Sheep Sellers Pty Ltd and Livestock Brokers, or not?

As highlighted earlier, to form the contract, it needs to have the essential elements. Acceptance is one of such elements. The acceptance has to be made to the offer as it is (Paterson, Robertson & Duke, 2012). So, if any changes are made in the offer, while communicating the acceptance, it is not deemed as an acceptance, and is instead, taken to be the counter offer, as was established in Hyde v. Wrench (1840) 3 Beav 334 (Marson & Ferris, 2015). Once a counter offer is made, the original offer is terminated and cannot be accepted at a future date. The general rule is that the acceptance has to be communicated and also has to be received by the offeror, and this is known as the Instantaneous communication rule. However, there is an exception to this rule and that is the postal rules of acceptance (Latimer, 2012).

In case an acceptance is given on an offer through the use of post, than the date of posting the acceptance letter, is considered as the date of acceptance (O’Brien, 2007). It remains irrelevant that the offering party has received such a communication (Bits of Law, 2017). This is because of the rationale that the post office is the implied agent of the parties who have nominated it as the means of acceptance, hence, the receipt by the post office is the deemed receipt of the other party. The postal rules of acceptance are applicable over digital communications in form of fax, emails and the like (Gibson & Fraser, 2013).

In Tallerman & Co Pty Ltd v Nathan's Merchandise (1957) 98 CLR 93, the court viewed that the acceptance through post would not be justified in such cases where there is an absence of justified grounds in front of the offering parties regarding the post being a mode of acceptance (Jade, 2017). The court, in Byrne v Van Tienhoven (1880) LR 5 CPD 344 stated that the post office was the agent of the acceptance posting party and so, the delivery to post office is the delivery to the other party. In case an offer has to be revoked, it can only be effective if it is received by the other party before posting of the acceptance letter (Swarb, 2015).

The other elements include the intention, as per which the contracting parties should have the intention to create legal relationship. There should also be clarity in the terms of the contract. Lastly, it is requisite that the contracting parties have the contractual capacity, in terms of legal age and sane mind (Mulcahy, 2008).

In case the parties to the contract fail to fulfill their part of the obligation or the promise, it constitutes as a breach of contract. And in such cases, the aggrieved party can claim for remedies in form of monetary compensation or the equitable remedies in the form of specific performance, injunction and rescission (Latimer, 2012).

In the given case, the parties had a clear intent to enter into legal relationship. This is clear from the to and fro of their offer and counter offers. The communication sent on June 01^st by Dorper Sheep Sellers to Livestock Brokers through a letter was an offer as it stated the terms and the consideration offered. On this offer, a counter offer was made by Livestock Brokers, where they inquired if the sale could be financed using the general terms. This was a counter offer, and so, the acceptance had to be gained on this. This is because the offer ceased to exist on making a counter offer. No reply was given on this by Dorper Sheep Sellers, so an acceptance was not attained.

The communication sent on June 14^th would be considered as the new offer in this case, as the offer of June 1^st ceased with the counter offer made on June 6^th. In case we consider this as an acceptance, this communication was communicated through fax, instead of post. There was nothing to suggest that fax could be used and as per Tallerman & Co Pty Ltd v Nathan's Merchandise, there were no justified grounds for this use. Hence, the mode of this acceptance was invalid. And as the acceptance was not attained in this case, a contract was not formed. Without a contract, a breach of contract cannot be claimed upon.

It remains irrelevant that Dorper Sheep Sellers received the sent fax or not. The date of communication is the date of offer or acceptance. Hence, the denial of Dorper Sheep Sellers made on June 14^th regarding Livestock Brokers being late is invalid, as the date of fax would be the date of offer/ acceptance.

Conclusion

A valid contract was not formed between Dorper Sheep Sellers Pty Ltd and Livestock Brokers

3.

Whether Stuart has any legal rights in this case, or not?

In case a contract takes place and has to be revised later on, it should be redrawn so as to state the modified terms. This gives conclusiveness to any modification and helps in applying the changed terms. Without a revised or modified contract, the original contract continues to apply and any changes made are invalid.

 The principle of estoppels prevents an individual from making reliance on some rights or on set of facts, which are varied from the earlier drawn set of facts (Waddams, 2011). Equitable estoppel is a defensive principle which prevents an individual from taking an unfair advantage of some other person, through a false conduct or language. Through this doctrine a person to be stopped would have induced some other individual to act in certain manner, due to which an injury was caused to the other individual. Hence, a person is stopped from taking a position which is different from the earlier time, when such a different position would harm the other party (Blum, 2007).

An unconscionable conduct is something which defies good conduct by being unreasonable (Vout, 2009). Under contract law, promissory estoppel prevents the parties from acting in a particular manner as a result of the first parties promise of not to and where the second party has relied upon some promise and also acted upon the same (Blum, 2007).

In Central London Property Trust Ltd v High Trees House Ltd [1947] KB 130, also known as the High Tress case, an agreement was made to accept the reduced rent of £1250 instead of £2500 as the defendant could not find the enough number of tenants as a result of London’s evacuation during the Second World War. The promise to accept the reduced rent was not supported with consideration. Upon the flats becoming fully rent out, the claimant demanded the return of payment of the full rent. Giving his verdict, Denning J stated that the claimant was entitled to the full rent of the quarters from mid 1945. However, in the obiter dictum he stated that the defendant could not be asked to pay the rent from 1940 to 1945, and the claimant was estopped from doing so, even in the absence of consideration. The reason behind this ruling was that the plaintiff had represented that the half rent would be accepted and on this, the defendant had acted after making reliance (Stone & Devenney, 2014).

The facts given in the case study are quite similar to the case of Central London Property Trust Ltd v High Trees House Ltd. Hence, the judgment of this case needs to be applied. Hence, Stuart is required to pay the full amount of rent to Westphalia Marts from December 2014 and the reduced rent would no longer be acceptable. However, due to the applicability of equitable estoppels, Westphalia Marts could not ask Stuart to pay the amount of shortfall since January 2014. This is because Stuart made a reliance on the promise made and paying the unpaid amount would be detriment to Stuart, as firstly his business is not working properly and he is short on cash, and secondly cause it would be an unconscionable conduct on part of Westphalia Marts, especially since Stuart had relied upon the promise of modified rent. And as in the quoted case, even with the lack of consideration in the modified promise, the claimant was estopped from claiming the pending sum, in the same manner, the absence of consideration could not be used by Westphalia Marts to get Stuart to pay the reduced rent amount.

In case Stuart is asked to pay the pending amount, even after applying this case, it would be considered as an unconscionable conduct as it would breach the promise which was made, just to show that the income from the Mall was healthy. This was unconscionable not only for Stuart but also for any prospective buyers, as it would not present the true picture.

Conclusion

Hence, Stuart has the legal right of equitable estoppel in this case and he cannot be asked to pay the reduced rent for the period which has already lapsed. Moreover, such a claim would be deemed as an unconscionable conduct as the same is being done just to present a better picture for the sale, when in reality, the condition is quite different.

References

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Andrews, N. (2015). Contract Law (2^nd ed.). UK: Cambridge University Press

Bits of Law. (2017). Acceptance: Postal Rule. Retrieved from: https://www.bitsoflaw.org/contract/formation/study-note/degree/acceptance-postal-rule

Blum, B.A. (2007). Contracts: Examples & Explanations (4^th ed.). New York: Aspen Publishers.

British and Irish Legal Information Institute. (2017). Carlill v Carbolic Smoke Ball Company [1892] EWCA Civ 1 (07 December 1892). Retrieved from: https://www.bailii.org/ew/cases/EWCA/Civ/1892/1.html

E-Law Resources. (2017b). Chappel v Nestle [1960] AC 87 House of Lords. Retrieved from: https://www.e-lawresources.co.uk/Chappel-v-Nestle.php

Elliot, C. (2011) Contract Law (8^th ed.). London: Pearson.

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Latimer, P. (2012). Australian Business Law 2012 (31^st ed.). Sydney, NSW: CCH Australia Limited.

Marson, J., & Ferris, K. (2015). Business Law (4^th ed.). Oxford: Oxford University Press.

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O’Brien, R. (2007). Analysis of the Postal Rule. Retrieved from: https://corkonlinelawreview.com/editions/2007/COLR%202007%2013%20O'Brien.pdf

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Stone, R., & Devenney, J. (2014). Text, Cases and Materials on Contract Law (3^rd ed.). Oxon: Routledge.

Swarb. (2015). Byrne v van Tienhoven and Co: 1880. Retrieved from: https://swarb.co.uk/byrne-v-van-tienhoven-1880/

Swarb. (2016). Partridge v Crittenden: QBD 1968. Retrieved from: https://swarb.co.uk/partridge-v-crittenden-qbd-1968/

Treitel, G H., & Peel, E. (2015). The Law of Contract (14^th ed.). London: Sweet & Maxwell.

Vout, P.T. (2009). Unconscionable Conduct: The Laws of Australia. Pyrmont, NSW: Thomson Reuters.

Waddams, S. (2011). Principle and Policy in Contract Law: Competing or Complementary Concepts?. Cambridge: Cambridge University Press.