Busi 2301 Business Law : Assessment Answers

1. Vincenzo Franco and his family had come from Italy to visit relatives in Australia, decided that they would like to book a trip to Mount Hotham (Ski Resort) in Victoria.  They had done a lot of research online about the activities and services available at Mount Hotham. They found a resort called “Scenic Views”, it advertised that all their guest suites had open-fire places, TV’s and Cable, a spa bathroom and spectacular panoramic views from a private balcony looking out on the snowfields and the snow covered mountains.

As Vincenzo Franco, did not speak very good English, he was having difficulty understanding the terms and conditions relating to booking at the resort.  He decided that it was better if he went to see one of the marketing managers from Scenic Views at offices that they had in Melbournerather than make the booking on the website. 

When Vincenzo arrived at the offices of Scenic Views, he spoke directly to Mr George Smith (MarketingManager). Vincenzo with his broken English explained to George that he wanted to book one guest suite at Scenic Views.  George provided Vincenzo with a lot of detail about the hotel booking process and his options but he was not sure whether Vincenzo actually understood what he was saying.

Vincenzo asked about the price for 7 nights all inclusive and George responded $350 per night.  Vincenzo thought it soundedquite expensive but because it was all inclusive he decided to book for the 7 nights.

Despite the information that George provided when Vincenzo and his family arrived they discovered that not all the rooms had private balconies or panoramic views.  Vincenzo was very upset as this was not what he was expecting. Instead of the private balcony and panoramic views that he was expecting, his room was facing a grey wall from another building and had no balcony at all.

Vincenzo called George to complain and asked for and upgrade to a suite with a private balcony and panoramic views. George advised him that because it was peak season everything was fully booked.

Vincenzo was very unhappy and not satisfied with the level of service and did not want to stay there and get a refund for the 7 nights that he paid for. However George explained to Vincenzo that according to the terms and conditions from Scenic Views Hotel they could not refund the money and that there was normally a cancellation fee of 3 nights accommodation.

Vincenzo was very angry but did not know what to do…He was becoming increasingly frustrated because of his English. Hewas convinced that George, the Marketing Manager was not acting in good faith.

Required

Please advise Vincenzo  Franco if he entered in a contract with Scenic Views and if this contract can be invalidated  under the principles of Contract Law.

(a) Explain how the ELEMENTS to be satisfied in order to make a simple contract  valid

• You will need to address all the essential elements of a contract including (Offer and acceptance, intention and consideration) as well as elements of a valid contract(Capacity, Legality, Genuine Consent – Mistake, Misrepresentation, Durres, Undue Influence and Unconscionability.
• You will need to address  and explain the methods by which a contract is ended.
• You will need to address and explain Remedies available for Vincenzo Franco

Note : You must identify  relevant case studies in order to support your legal argument .

(b) Explain the construction of the contract.

• For the purposes of this part you should distinguish between representations and terms.
• Explain the importance of a collateral contract
• Distinguish between conditions and warranties

Note: You must address these questions according to the case scenario provided and do not forget to provide relevant cases studies to support your legal argument.

2. Explain to Vincenzo what are his Australian Consumer Law Guarantees under the Competition and Consumer Act 2010 (Cth) .

Required

• You need to justify your view as to whether these guarantees are available. You will also need to explain the meaning and significance of the implied consumer guarantees.
• Explain the consumer’s rights in the event of the supplier’s failure to comply with a consumer guarantee.
• In addition, Explain the remedies available to Vincenzo Franco and the penalties that can be imposed  to Scenic Views under the Act against  a trader in breach of the Australian Consumer Law.

1. Part A

Issue

Can the issued contract that is between Scenic and Vincenzo Franco made invalid in view of the various regulations of contract law?

Rule

Three elements that are considered essential for the formation of a contractual agreement are intention, offer & acceptance, and consideration. Such agreements can be verified by factoring in things like capacity, legality and lastly, genuine consent – undue influence, duress, unconscionability, mistake and misinterpretation.

The element that is always present in any agreements made commercially is Interest, as stated in Merritt v Merritt case.

AGC (Advances) Ltd v McWhirter case cleared the definition of Offer as words of declaration made to a person by another. Such words of declaration are tied in legal bounds and cannot be broken in any way.

Thomas v Thomas case clarified the meaning of consideration as a thing that surely holds some sort of value. In order to forge a valid contract, such considerations (even when insufficient) have to be given.

A legal consent that is given to the offering party by the offered party is rightfully called an acceptance. Such a declaration solidifies the contracts and tied it with legal bounds; as defined in Administration of PNG v Leahy case.

Consent of the party that has been offered the contract must be established by their own free will and must be genuine. Such consents must not be a result of unconscionability, duress, misrepresentation, undue influence and mistake.

In the case of a contractual breach, the cost of damage and other penalties for violation of rights can easily be taken by the party who suffered the damage. The Addis v Gramophone case has given a clearer picture on this context stating that when a contractual agreement is breached, damages and penalties are instituted such that the position and welfare of the affected party are strongly reestablished; even in cases of injunction, recession and specific performance.

The Cutter and Powell case have introduced us to the several ways that would help bring a contract to a closure. Some of these methods are mutual consent, breach, frustration, discharge and performance.

For a person to enter into a contract, he/she must be legally capable of such a feat. Minors and people with an unsound mind cannot legally be the recipients who can participate and form an agreement. The subject of contract formation must also be legal in order for it to be enforced.

Application

From the situation that is given to us, it is understood that all the situations that would help make up a contract are satisfied by the parties. The offer for a $350 hotel room was kept for consideration by Scenic and the acceptance by the client, Franco. Franco had accepted the offer even though this particular one is especially expensive though it was inclusive of all taxes and services. Being a commercial agreement, it’s strengthened by Merritt v Merritt, for $350/night.

Further elements of legality of the contract are satisfied when considering the facts that both the parties are of sound mental health and aren’t minors and the motive is legal by all means.

The managers as Scenic knew from the very start that Franco is not very proficient in the English language and whether or not he had understood the managers and their terms of the contract are unknown. Such an act is clearly unconscionable, weakening the legitimacy of the contract. Franco can, by all means, declare it void.

It is given that on entering his hotel room, Franco discovered that unlike the promises made to him by the managers in their contract, the room lacked a panoramic view and balcony. It can be claimed by Scenic that such terms were not there in the contract to begin with but in this situation, such a claim is impossible considering the amount of time, discussion, expertise and trust that was put into the contract’s formation. Franco can, by all means, declare a breach of contract and end it.

As in the Addis v Gramophone case, Franco has the right to claim penalties and damages for the contractual breach. He has the right to break the contract and demand a refund.

Conclusion

Scenic and Vencenzo Franco’s contractual agreement can be declared invalid when taking the laws of contract into consideration.

Part B

Issue

• The situation that is given to us here is to differentiate between a contract and representation.
• Finding out the importance of a collateral
• Determining distinctions between warranties and conditions

Rule

The level of representation shown in contractual terms and agreements can be verified by when examining the situation with numerous tests.  Such tests include, time passes after the negotiation, parties and their expertise, the Parole and evidence rule, and the terms and their significance.

The amount of time given or spent after a contractual negotiation is done can rightfully be considered either a representation or in lesser cases, a simple term as declared in Routledge v Mckay case.

In cases when a party involved in a contractual agreement has made the importance of a particular statement clearly; such a statement will then be considered a term and not simply a representation as in the Ecay v Godfrey case.

In a contract which is documented, any unrecorded statement can always be considered a mere representation, as said in the Parole Evidence Rule. 

Warranties and Conditions are the two distinctive types in which we can largely categorize terms of a contract. Conditions are said to be the most important of all contractual terms. When terms of a contract are breached, then the party that has suffered has the right to demand compensation or even end the contract as defined in Poussard v Spiers case. Whereas, the statements that have not been a basis for the creation of the said contract but are considered a part anyway are called warranties. As stated in the Bettini v Gye case, breach of warranties will entitle the aggrieved to compensation, but the aggrieved will not be able to end the contract or call of a breach.

As stated in Dick Bentley v Harold Smith Motors, if the making a statement is more knowledgeable about it, the statement will automatically become a term.

A newer contract formed to support the original one is termed as a collateral contract, such a contract may be used by parties in the form of a consideration for the original one. If desired, the terms and conditions specified in the collateral contract can always be enforced.

Application

Since the managers of Scenic had more knowledge regarding the placement and arrangement of rooms and including the amount of discussion, expertise and time that was put into formation of the contract, the availability of a panoramic view and a proper balcony can and will be considered as a contractual term when it comes to Scenic’s contract with Franco. Managers of Scenic understood the fact that the only reason why Franco agreed to hold such an elaborate expense for a hotel room was due to his desire of a panoramic view along with a private balcony and hence, just after the completion of the negotiation, the room booking was formally done.

But, when it comes to the situation in hand, no such collateral contractual term is actually noticed. Hence, with our study of the various warranties and conditions, the mere factor of having a panoramic view along with a balcony can legally be declared a contractual condition. The reason for it is simply the importance and necessity of those factors for Franco, who would surely have not initiated such an extravagant deal if not for those factors. Since, now that it is established that the factor troubling Franco is essentially a condition, he can, by all means, demand a claim against it.

Conclusion

• The study confirms that the availability of panoramic view along with a private balcony is most definitely a contractual term.
• The presence of collateral contracts is not seen.
• Panoramic view along with the presence of a private balcony is most definitely not simply a warranty but a condition.

2. Australian Competition and Consumer Act 2001(Cth) includes several laws in its books and one of them is Australian Consumer Law. A consumer by 3^rd Section of this law is stated to be an individual who purchases household as well as domestic goods and goods for personal recreation under the marginal price of $40000 . Hence, such an individual, who has met the above condition, is under the staunch protection and care of the Consumer Law. In the case presented to us, Franco being an individual who has met the above criteria and having purchased a suitable amount of household and domestic material below a price tag of $40000 is also under the protection of ACL that provide such distinctively applicable consumer guarantees in both goods and in services. The laws for goods and services are in the sections 51-59 and 60-63 respectively. In such laws, it’s clear that even in cases with guarantees, the laws presented to us by the court and its legal verdicts stand strong. S 64 in ACL has made it very clear that a contractual document cannot leave out or excluded even when exclusion clauses are in use.

Franco is seen to have to have formulated a service contract with Scenic, and as a consumer, he is by all means entitled to all ACL guarantees. The importance of a purpose in such contractual agreements is also solidified in the S 61. The managerial staff knew that the sole reason for Franco investing a huge amount of money on the hotel room was to experience a panoramic view and have a private balcony and the unavailability of such a service in the hotel was known to the staff, and yet this led to the formation of a false contract. Breach of Section 61 is clear in this example.

Section 64 further solidifies the presence of a consumer by giving them the right to demand repair and replacement charges if a breach in consumer rights or simple contractual rights is noticed. Franco’s demand for a refund has to be heard and executed by the hotel staff for they have failed to comply with consumer guarantees.

Franco can, by all means, resort to a certain few features that are handed to him by the various consumer laws, fortifying his presence and rights over duties and compensations that rightfully belong to him and affect him in far greater ways than just a loss of money. Several acts in the Australian Consumers Law have successfully helped the consumers establish their dominance towards things that they have their right over and not be overpowered or overwhelmed by the forces in the marked or by suppliers and sellers looking out to make a profit by disregarding guarantees and laws. Section 267 of the Australian Commercial Laws have given the consumer the right to take legal action against the supplier of goods and services in cases where they have failed to keep contractual terms or have misrepresented details that are essential for the consumer to know and to understand. In one of the many provisions of section 268 of the Australian Commercial Law, it is clearly stated that breach of a guarantee is a fatal error when seen in cases where services are not given or provided to the consumers as they were guaranteed to be provided. Hence, the mere factor that Franco was provided with an undesired grey wall view instead of a panoramic view which was promised to him by the hotel authorities is a major failure by Scenic and its managerial staff. The unavailability of a balcony holds similar significance when it comes to the strength of this particular law. Franco posses the right to forfeit and terminate his contractual agreement as per Section 289 of ACL with Scenic after an analysis of the several breaches of contractual terms and their sheer disregard of several consumer guarantees, hence their ignorance towards law. Franco has the right to demand compensation for it.

Bibliography

Addis v Gramophone  [1909] AC 488

Administration of PNG v Leahy (1961) 105 CLR 6

AGC (Advances) Ltd v McWhirter (1977) 1 BLR 9454

Australian Competition and Consumer Act 2001 (Cth)

Bettini v Gye 1876 QBD 183

Cutter v Powell  [1795] EWHC KB J13.

Dick Bentley v Harold Smith Motors [1965] 1 WLR 623

Ecay v Godfrey   [1947] 80 Lloyds Rep 286

Edwards, Alexander H. "Leading cases in contract law." (2017) Bar News: The Journal of the NSW Bar Association Summer 61.

Eisenberg, Melvin A. Foundational Principles of Contract Law. (Oxford University Press, 2018).

Knapp, Charles L., Nathan M. Crystal, and Harry G. Prince. Problems in Contract Law: cases and materials. (Wolters Kluwer Law & Business, 2016).

McKendrick, Ewan, and Qiao Liu. Contract Law: Australian Edition. (Macmillan International Higher Education, 2015)

McKendrick, Ewan. Contract law: text, cases, and materials. (Oxford University Press (UK), 2014.)

Merritt v Merritt  [1970] EWCA Civ 6.

Poole, Jill. Textbook on contract law. (Oxford University Press, 2016).

Poussard v Spiers  (1876) 1 QBD 410

Routledge v Mckay [1954] 1 WLR 615

Smith, Joshuab. "Contract law in Australia" (2018) Ethos: Official Publication of the Law Society of the Australian Capital Territory 248: 60.

Thomas v Thomas  (1842) 2 QB 851