LAW 1510 Contract Law - Adventure Tours
Case Study
Meg operates a travel agency in Hawksburn called Adventure Tours and put an ad into the local paper:
“Seeking experienced and adrenaline seeking tour guide with passion for adventure. Submit your resume via the link on our website at www.adventuretours.com.au by 6 August 2018. I would be prepared to offer employment for one year, with an option to renew.”
Jared saw the advertisement. He had been working for years in Canada as a tour guide but had recently returned to Melbourne to look after his elderly mother. Jared submitted his resume and Meg arranged to meet him for an interview at her travel agency on 7 August 2018. Meg outlined the requirements for the job and advised him that Adventure Tours was about to promote a new tour of the Northern Lights in Finland. They discussed Jared’s past experience, which is very impressive, but Meg was concerned about his lack of experience in conducting tours of Finland.
Meg had had no other interest from any other tour guides, so she offered the job to Jared but said, “Why don’t you try it for a bit and we will see what happens. If I don’t think it is going to work out, then I’ll just cancel our contract. I’ll get my lawyer to send you something in writing setting out the terms we discussed. Think about it. If I don’t hear back from you tomorrow, I’ll assume that you are happy with the arrangement and look forward to working with you.“ Before Jared could respond, Meg stood up and ushered him to the door. Jared said good bye and left the travel agency.
Meg didn’t hear from Jared until the end of that week, when he emailed her with a request for a copy of the key for the travel agency. Meg couriered him a copy of the key. The following week Jared came into the travel agency and Meg watched him familiarise himself with the agency’s procedures. Meg didn’t want to interrupt him so she didn’t communicate with him, other than polite chatter. She thought she would give him a few days to settle in. Meg was very relieved that Jared had accepted the job and phoned her lawyer to ensure that she would send her the formal employment contract for Jared to sign.
On Monday 13th August 2018, Meg arranged for some promotional flyers to be printed to be distributed in the local area to promote the adventure tour. Meg’s niece, Trish, was working part time in a public relations company while she studied at university. Meg asked Trish if she would walk around the local area and distribute flyers into letterboxes and businesses, as well as hand out flyers at university to students looking for an adventure holiday. Meg said, “you know I will be good to you”. Trish replied that this was no problem. Meg gave her two large boxes of flyers and Trish spent a few hours each day over that week distributing the flyers.
At the end of the week, Trish visited Meg at her travel agency and reported that she had done the work and would like to be paid. Meg was shocked that she wanted to be paid. Trish was offended and said that she had spent hours each day completing the task and she had only done this because she believed she would be paid. Meg said she would pay her $20 an hour but then later that day she changed her mind and refused to pay her.
That same afternoon, Meg arranged to meet with Jared at the travel agency to sign the employment documentation. Jared regretfully informed Meg that he had tried all week to see if he could do the job required of him before he accepted her offer but he had decided that the job was not for him. Meg was furious and told him that they had a contract in place and he couldn’t leave her in the lurch during the promotion of the next Adventure Tour.
Jane and Callie were having breakfast at a café on Sunday 26 August 2018. They attended the same university and were in their first year studying law. They discussed how exhausted they were from their intense studying and decided to holiday together at the end of the year. They each suggested holiday destinations but could not agree on a location. Their friend Trish had given Jane the promotional flyer at university and she took it out of her bag to see if she could get any inspiration for travel ideas. She discovered the following information on the flyer:
“Adventure Tours is offering you the adventure of a lifetime. Travel with experts to see the Northern Lights in the northern Lapland region of Finland. One of the best places to see the phenomena of the Aurora Borealis. $2996 per person includes all flights, accommodation, meals, sightseeing tours in a small group of 50 people. Travel dates are 14 December 2018 – 21 December 2018. If you are interested, come visit us at our travel agency located at 123 Main Road, Hawksburn or call 1300 656 464 to apply. Offer ends 5pm 2 September 2018.”
The two friends looked at each other and smiled, agreeing that this was the perfect adventure for them to enjoy together over their summer break from university. They agreed to finalise their bookings within the week.
That afternoon at 1pm, Jane stopped at the travel agency on her way home from university and was delighted to see Meg. She knew Meg from her book club and they chatted about the latest books they were reading. Then Meg asked Jane if she wanted to accept their amazing travel offer. Jane responded, “I do but it is a bit pricey for me. Is there any way I can get it a bit cheaper, perhaps 25% off?” Meg responded that she could offer her a ‘mate’s rate’ of 15% discount as long as she kept it to herself. Meg added, “We can offer you a 7 night tour to Finland to see the Northern Lights in a small group of 50 people maximum. This will include all flights, meals, sightseeing tours and accommodation. The accommodation is all great. There may even be a dog sledding tour with huskies! All you need to do is complete the form on our website and pay via the link attached to the form.” Jane is thrilled with this information and said, “that is perfect. I’m just going to Chadstone Shopping Centre to buy a jacket I saw for the trip and then I will go home and complete the paper work.”
By 3pm that day Meg was feeling unwell. She closed the office and set up a voice recording that directed callers to the Adventure Tours website to sign up for the Northern Lights tour. The website stated as follows:
Adventure Tours is offering you the adventure of a lifetime. Travel with experts to see the Northern Lights in the northern Lapland region of Finland. One of the best places to see the phenomena of the Aurora Borealis. $2996 per person includes all flights, accommodation, meals, sightseeing tours and a small group of 50 people. Travel dates are 14 December 2018 – 21 December 2018. Click on the information form link. Offer ends 5pm 2 September 2018.”
At 3.15pm Callie rang Adventure Tours and was directed to the website. She filled in her details as required on the information form and paid the fee with her credit card.
At 4pm Jane went onto the website and was distraught to see in bold lettering a notice that said, “Sold out. We are sorry you missed out but we look forward to having you travel with us another time.” She was so upset that she started to cry and could not bring herself to call Callie to let her know. She knew Callie had already booked and she was devastated that she would miss out on travelling with her.
The next day, Callie received an email as follows, “we regretfully inform you that due to unavoidable and unanticipated additional costs, we will be unable to run this tour at our high standards without an additional $500 from each applicant. We trust you understand our predicament. Please confirm your approval of the additional cost on the link on our website. We look forward to an exciting adventure with you.”
Callie assumed Jane had booked and would pay the additional $500, so she went on to the website and confirmed she would pay the additional $500. She preferred to pay the additional amount rather than not travel with Jane. She then rang Jane to chat about their upcoming trip. Jane had been upset all night about missing out on the booking and told Callie how upset she was. They both agreed that they did not want to travel without each other.
Question
1. Is there a legally binding contract between Adventure Tours and Jared? Explain.
2. Is there a legally binding contract between Adventure Tours and Trish? Explain.
3. Is there a legally binding contract between Adventure Tours and Jane? Explain.
4. Is there a legally binding contract between Adventure Tours and Callie? Explain
Answer
Contract Law
1. Issue
Whether a contract has formed between Adventure Tours and Jared?
Rule
In order to form a legally binding contract, its parties have to comply with certain elements. The first element is an offer; in Gibson v Manchester City Council case, it was held that an offer is made to do or not do a certain act which has the capability to enforce the offeror into its terms and it must have the authority to bind the offeror by the contractual terms. Generally, advertisement posted by parties did not constitute as a valid offer as given in the case of Carlill v Carbolic Smoke Ball Co. The advertisement were considered as an invitation to treat which are different from an offer since the acceptance of an invitation to treat did not form a valid contract between parties. However, in this case, the court provided that the advertisement posted by the defendant is not a mere sales puff since it was a unilateral offer which has the authority to be accepted with communication of the acceptance. The second element is acceptance of the party. Without a valid acceptance, a contractual relationship is not constructed between the parties. The acceptance of the parties must be certain as well. It must match the terms of the offer which is given by the offeror.
In the case of Brinkibon Ltd v Stahag Stahl, the court provided an essential element of the acceptance. It was held that the communication must be accepted by the party before it is effective. Moreover, the silence of a party is not considered as a valid contract to form a contractual relationship between parties as given in Felthouse v Bindley case. In this case, a nephew wanted to purchase the horse from his uncle, and he said to him that if he did not hear from him by the weekend that he will consider that he has the right to purchase the horse. The issue arises whether a valid contract has constructed between the parties. The court provided that no contract has been formed since silence is not considered as a valid acceptance.
Application
In the given case study, an advertisement was posted by Meg in order to find a new tour guide on behalf of Adventure Tours. This advertisement was not a unilateral offer, and it was an invitation to treat which did not have the authority to bind the parties into legal relationship (Carlill v Carbolic Smoke Ball Co). Jared saw the advertisement, and he wanted the job. Since he lacked the experience in conducting tours in Finland, Meg was a bit concerned. She told Jared that they would try it for a bit to see whether he is a good fit for the organisation. She also provided that she might cancel the contract if she did not think that Jared is suitable for the job. Moreover, she told Jared that her lawyer would send him the employment contract. She told him that if she did not hear from her by tomorrow, then she will consider that Jared has accepted the offer. As discussed in Felthouse v Bindley case, silence did not amount for a valid acceptance; therefore, the silence of Jared did not form a valid contract between the parties.
Conclusion
A valid contract has not formed between Adventure Tours and Jared because silence did not consider as valid acceptance.
2. Issue
Whether a legally binding contract has formed between Adventure Tours and Trish?
Rule
A valid contract can be oral or written. Both oral and written contract has the authority to legally bind their parties into contractual obligations based on which they can enforce the contractual terms on each other. In both of these contracts, the consideration is an essential element of a contract which must be present while forming of a valid contract. The consideration is referred to the bargain of the contract. It means that one party of the contract gains and the other party suffered a detriment. There are certain elements of a contract. A valid consideration which forms a legal relationship between parties must be some value in the eyes of the law (Australian Woollen Mills Pty Ltd v Commonwealth). The court provided that a valid consideration excludes factors such as gaming, betting, love, and affection between parties and others. The consideration given in a contract must be sufficient; however, it does not necessary to be adequate as provided in Woolworths Ltd v Kelly case.
Another key element of a valid consideration is that it must not be past. The court provided in the case of Roscorla v Thomas. that a consideration which is past did not form a valid contract between parties. In this case, a horse was purchased by Roscorla from Thomas. After selling the horse, Thomas told Roscorla that the hose is in a sound condition. It was later found out by Roscorla that the horse was not a sound condition. The horse was ferocious, and it had a very bad temper. Roscorla filed a suit regarding the breach of the contract against Thomas. The court provided that the claimant did not have the right to file a suit against the defendant because the statement that the horse is sound was made after completion of the sale. Since the promise was made after the sale, the claimant did not provide consideration for the same; therefore, the claim is not valid. An exception was given in Lampleigh v Brathwait case. In this case, the defendant asked the plaintiff to get the pardon of the king, and after receiving the same, he promised to pay £100, however, he never did pay. The court provided that it was a past consideration, however, the original request of the defendant contained an implied promise to pay for the efforts of the plaintiff based on which it is valid. Certainty of the terms is another key element which must be present in a contract. It means that all the terms of the contract must be certain and no ambiguity should exist.
Application
In the given case study, Meg asked Trish to distribute promotional flyers in the local area. Meg told Trish that she would be good to her if she completes this work. After completing the work, Trish demanded money from Meg. An oral agreement was formed between the parties regarding the completion of the job. However, the parties did not agree for consideration, and Trish told Meg that this work is no problem. After completing the work, the consideration is demanded by Trish that is considered as a past consideration which is not considered as valid by the court (Roscorla v Thomas). Moreover, the element of certainty was missing as well since the parties did not decide how much will Meg pay to Trish after completion of this job. However, as per the exception given in Lampleigh v Brathwait case, the request made by Meg contained an implied promise since she told Trish that she would be good to her. She agreed to pay $20 for her efforts after the trouble which Trish goes through, thus, Trish has the right to demand the money from Meg based on the contract formed between the parties.
Conclusion
A valid contract has formed between Adventure Tours, and Trish and Trish can demand $20 from Meg.
3. Issue
Whether a legally binding contract has formed between Adventure Tours and Jane?
Rule
While forming a legally binding contract between parties, it is important that all the elements of the contract are present between the parties. The offeree must accept the offer given by the party within a reasonable time. The acceptance must match the terms of the offer or else a counter offer is formed which terminates the original offer. After formation of a counter offer, the parties did not have the right to accept the original offer. The court provided in the case of Latec Finance Pty Ltd v Knight that acceptance is considered as valid if it is communicated to the offeror while the offer is effective. An acceptance which is communicated after the offer become ineffective did not count. The offeror must receive the acceptance of the party before the offer becomes ineffective.
Moreover, the element of intention is also necessary while forming a valid contract between parties. It provides that both the parties must have the intention to bind themselves by the contractual terms while giving the offer and acceptance. In case the intention of the parties is not valid, or the intention is given based on external influence, then it is not considered as valid a contract did not form between the parties. In Todd v Nicol case, the court provided that the agreements which are formed between the parties in social or domestic settings are not considered as legally enforceable. The court provided that it is presumed that the parties did not have the intention to bound each other by the terms of the contract in social settings.
Application
In the given case study, Meg and Jane are friends since they knew each other from the book club. Jane told Meg that the offer of Adventure Tours is a bit expensive, and she asked for a discount of 25 percent. A counter offer was given by Meg to Jane when she told her that she could give her ‘mate’s rate’ which includes a discount of 15 percent. She also specified various details regarding the trip which includes accommodations and others. Both the parties have the intention to bound a legal contract, thus, the element of intention was present (Todd v Nicol). After deciding on all the terms, Jane told Meg that she would make the payment after completing her shopping. When Jane later check out the website, she found out that all the tickets are sold out, and she cannot go on the trip. The acceptance of Jane was to be communicated by making the payments on the website as specified by Meg. However, she failed to communicate her acceptance within appropriate time due to which all the tickets were sold out (Latec Finance Pty Ltd v Knight). Since a valid acceptance is not present in the case, a legally binding contract has not formed between Adventure Tours and Jane based on which she cannot take legal action against the company for failing to provide her the tickets.
Conclusion
A valid contract has not formed between Adventure Tours and Jane since the acceptance was not communicated by Jane before the offer become ineffective.
4. Issue
Whether a valid contract has formed between Adventure Tours and Callie?
Rule
The offer made by the offeror for a contract must be certain which mean that ambiguity must not be present in terms of the offer. The acceptance given by the party must also be certain, and it must not contradict with the terms of the offer. Therefore, the certainty in the terms is a key element while forming a contract between parties. As discussed above, the consideration of a contract is referred to the bargain of the contract. A valid consideration requires that the gain of a party must be the detriment of another. When a party agrees to do something for specific payment, then it is considered as the consideration for the contract. The court provided in the case of Stilk v Myrick. that an existing contractual duty is not considered as a valid consideration to for a legally binding contract between parties. In order to introduce or demand “new consideration”, the promisee has to give up something new as well. The party cannot demand extra consideration for an already exist promise, and the introduction of new promise is required to demand more consideration. For example, if A agrees to paint the house of B for $50 and A demands extra $20 from B for completing the work, then B did not have to make the payment. Therefore, the consideration for an existing contractual duty to do an act is only valid if the party does before their existing duty given in the contract as given in the case of Hartley v Ponsonby.
Application
In the given case study, Callie called the office of Adventure Tours, and she was redirected to their website in which the offer for the trip to Finland was given. It was clearly specified in the offer that parties have to make a payment of $2996 in which all accommodations are included. Callie made the payment, and a contract is formed, however, the next day, an email was sent in which an additional $500 was demanded for providing same services. As per the element of certainty, the terms of the offer must be certain. This element is violated by the company by demanding an additional $500 from Callie. Moreover, a contractual obligation already exists between parties regarding the trip which the company has to provide at a price of $2996, therefore, it cannot demand additional $500 from Callie since the company is not providing any additional facilities or services to Callie (Stilk v Myrick). Moreover, as discussed in Hartley v Ponsonby case, the parties are required to go beyond existing duty in order to consider as existing contractual duty as the consideration. Since the duty of Adventure Tours did not exist beyond the existing obligation, it did not have the authority to demand addition $500. Since Callie has already paid the amount, she can recover it back from the company.
Conclusion
A contract has formed between Adventure Tours and Callie, however, the company cannot demand an additional $500 based on which Callie can recover the paid amount.
Bibliography
Articles/Books/Reports
Campbell D, ‘Good faith and the Ubiquity of the ‘Relational’ Contract’, (2014) 77 (3) The Modern Law Review 475-492.
Kuhnel-Fitchen K and Hough T, Optimize Contract Law (Taylor & Francis, 2017).
Monaghan C and Monaghan N, Beginning Contract Law (Routledge, 2013).
Monaghan C, Beginning Business Law (Routledge, 2015).
Rahnavard D, Course Notes: Contract Law (Routledge, 2013).
Suff M, Essential Contract Law (Routledge, 2013).
Turner C, Contract Law (Routledge, 2013).
Cases
Australian Woollen Mills Pty Ltd v Commonwealth (1954) 92 CLR 424
Brinkibon Ltd v Stahag Stahl [1983] 2 AC 34
Carlill v Carbolic Smoke Ball Co [1893] 1 QB 256
Felthouse v Bindley (1862) 11 CBNS 869
Gibson v Manchester City Council [1979] 1 WLR 294
Hartley v Ponsonby (1857) 7 El & Bl 872
Lampleigh v Brathwait (1616) Hob 105
Latec Finance Pty Ltd v Knight [1969] 2 NSWR 79
Roscorla v Thomas (1842) 3 QB 234
Stilk v Myrick (1809) 2 Camp 317
Todd v Nicol [1957] SASR 72
Woolworths Ltd v Kelly (1991) 22 NSWLR 189
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