LAW101 Introduction to Business Law And Management

Question 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.

Answers:

Question 1

Issue

The key issue of this case relates to the formation of a contract between Ben and Mojo Beverages on the basis of the given facts.

Rule

Contract is the legal agreement having binding effect where two or more parties make a promise to either pay the amount of consideration or to carry out the promised task (Andrews, 2015). A contract is usually created in two standard forms, which is of oral form and written form. The oral contract includes the formation of a contract in an oral or a verbal manner, in which the terms of contract are discussed orally, without putting anything in writing. The written contracts are one in which the terms are created by writing them on a paper and signs being attained on this paper. Irrespective of the kind of contract, both of these are valid in nature (Gibson & Fraser, 2014).

For the contract to have its legal validity, it needs to have certain key components which include offer, acceptance, consideration, capacity, clarity and intent (Abbott, Pendlebury & Wardman, 2007). The initial requirement of contract formation is for the party to give an offer to the other party, which covers certain terms. This is necessary to be differentiated from an invitation to treat, which only shows the parties want to negotiate on a possible offer and the offer instead shows that the parties want to get into a contract (Elliot, 2011). Generally, the newspaper or the magazine adverts are deemed as offer. When such happens, the advertising party, based on Partridge v Crittenden [1968] 1 WLR 1204, is not required to complete the same (Sward, 2016). Though, when it comes to such terms in the adverts which can be acted upon for giving the acceptance, the same is deemed as a unilateral offer and a leading example of this is Carlill v Carbolic Smoke Ball Company [1893] 1 QB 256 (Bailii, 2017).

The next requirement, after an offer has been made, is to attain an acceptance on the offer which was made to the other party. The unilateral offer can be accepted merely by performing on the action. There is also a need to show that reliance was made on the offer. The third element is for the offer to be coupled with consideration, which holds economic value, and the parties are free to make decision on what it is (Trietel & Peel, 2015). In the case of Chappell and Co Ltd v Nestle Co Ltd [1960] AC 87, the judges accepted the three wrappers as proper consideration for the purpose of the quoted case (E-Law Resources, 2017).

Application

In the given case study, the facts are similar to that of Carlill v Carbolic Smoke Ball Company. Here also the newspaper advertisement was taken to be the offer as a result of the same being a unilateral offer. This offer was coupled with a valid consideration, and the same held economic value. By performing upon the promise which had been made in this case, Ben gave his acceptance. Despite the rumour he came across, he acted on the offer due to reliance being placed on it and caught Lord Harry. This would make the acceptance a valid thing due to the presence of required elements of contract forward. And as per the promise, Mojo Beverage would owe $100,000 to Ben.

Conclusion

Indeed, a legally binding contract had been formed between the two.

Question 2

Issue

The key issue of this case relates to the formation of a contract between Livestock Brokers and Dorper Sheep Sellers Pty Ltd on the basis of the given facts.

Rule

As has already been stated, the formation of contract requires the presence of certain key components and acceptance is amongst these key components. The offer as has been made has to be accepted by the accepting party. In case there are any changes made in the original offer, the communication is not taken to be acceptance and instead is classified as counter offer. Upon such happens, Hyde v. Wrench (1840) 3 Beav 334 dictates that the original offer expires and cannot be accepted later on (Marson & Ferris, 2015). The rule regarding date of acceptance is that the same is attained when the communication reaches the offer making party. Though, the postal rules are a leading exception of this rule (Paterson, Robertson & Duke, 2012).

Where the post is used as the mode of giving acceptance, the date on which the acceptance letter was posted would become the date of acceptance instead of the date on which the letter reaches the offering party and this date remains irrelevant (Latimer, 2012). The reason for holding this is deeming the postal office as the agent of the offering party and based on the principles of agency law, the acceptance of the agent is the acceptance of the principal. There is the applicability of postal rules on the emails and fax communications also (Gibson & Fraser, 2013).

The status of the postal office being the agent of the offering party was given in Byrne v Van Tienhoven (1880) LR 5 CPD 344 (Swarb, 2015). In cases where an offer is to be revoked, the same can be done only before the acceptance is given by the accepting party and before such acceptance letter is posted. The case of Tallerman & Co Pty Ltd v Nathan's Merchandise (1957) 98 CLR 93 saw the judges stating that the acceptance through postal means is not justified in those scenarios in which there is absence of justified reasons for the offering party to accept the post as the post had not been stated as the valid mode of acceptance (Jade, 2017).

Intent is another major element in contract formation which requires the contracting parties to have the intent of getting in a legal relation. This is followed by the parties of contract having clarity on the terms on which the contract had been formed. The last requisite component for forming a contract is for the parties to have the legal capacity of forming a contract and this is defined in terms of the person being of legal age and having a sane mind capable of taking decisions (Mulachy, 2008).

Where the parties of the contract are not able to follow the requirements put down under the contract, the same results in the contract being contravened. And when such happens, the non-breaching party can apply for different remedies like monetary compensation, or the equitable remedies like injunction (Latimer, 2012).

Application

In the given case study, the facts highlight the intention of the parties to create legal relations. This can be evidenced from the offers and counter offers made between them. The communication which had been sent on 01^st June to Livestock Brokers by Dorper Sheep Sellers in form of a letter would be deemed as an offer as the same offered the other party some terms, where there was presence of consideration element also. A counter offer was made by Livestock Brokers on this offer in which they asked about the sale to be financed in general terms. On this counter offer, an acceptance was required as the original offer ended with this counter offer. As no reply had been given on this by Dorper Sheep Sellers, a contract was not formed due to lack of acceptance.

The communication which was sent on 14^th December would be deemed as a new offer since the original offer was ended with the counter offer of 06^th June. Where this is deemed as acceptance, the communication was sent through fax and not through post. Based on Tallerman & Co Pty Ltd v Nathan's Merchandise, this was not a justified manner of acceptance. Thus, this acceptance would remain invalid. Again, due to the lack of acceptance, a contract cannot be deemed to have been formed, and a lack of contract means no breach of contract can be claimed. 

It would be irrelevant that owing to the transmission error the fax was not received by Dorper Sheep Sellers as the postal rules of acceptance apply and the date of communication is the date of sending the communication.

Conclusion

Thus, no contract was formed in this case between the two parties.

Question 3

Issue

The key issue of this case relates to the legal rights of Stuart on the basis of the given facts.

Rule

Where a contract has been formed and the same is required to be amended at a later stage, there is a need to redraw the contract to cover the amended terms. This helps in giving a conclusive effect to the amendments and also helps in the application of the amended terms. In case the contract is not amended or revised, the original contract is applicable and the amendments continue to be invalid.

Estoppel is a key principle which helps in stopping the individuals from making such assertions which are opposite to their earlier position regarding certain matter (Waddams, 2011). Equitable estoppel is a leading defensive principle which helps in restricting the party from obtaining an unfair advantage of another party owing to false language or conduct. This doctrine essentially stops a person from inducing another person, in a particular manner, as a result of which the other party is harmed. Thus, a person is restricted or precluded from attaining such a position which is differentiated from the previous time, where the different positions would lead to harming the other person (Blum, 2007).

Unconscionable conduct refers to a conduct which is unreasonable, particularly the one which defies good conduct (Vout, 2009). Promissory estoppel under the contract law helps in preventing the individuals from acting in such a manner whereby the promise has been made to not do something and the other individual relying on this promise, acts on it (Blum, 2007). This can be explained with the help of Central London Property Trust Ltd v High Trees House Ltd [1947] KB 130 case. This case saw the agreement being attained between the two parties to accept a lower rent during the period of hardships. This promise was not supported with any consideration. When the war time was over, the claimant asked for the rent to be restored to the original rent. And the decision was given in the favour of claimant and the rent was increased from the period when the hardships ended. The case is more famous for its obiter statement in which Denning J stated that the claimant would have been unsuccessful where they would have claimed the amount of rent for the hardship period and in such case the claimant would have been stopped from claiming such high rent even when this promise was unsupported with consideration.    This was due to the reliance placed by the defendant in this case on the promise made regarding half rent to be paid during the hardship period and the same being accepted by the claimant (Stone & Devenney, 2014).  A key concept is that of misrepresentation where a false statement of fact results in the ability of the aggrieved party to rescind the contract (McKendrick, 2014).

Application

In the given case study, the facts are similar to that of Central London Property Trust Ltd v High Trees House Ltd. This would mean that the verdict of this case can be applied on the given case study. This would mean that Start would have to pay the full rent amount from December 2014 to Westphalia Marts and the reduced rent would not continue. Though, the applicability of promissory estoppel would mean that Westphalia Marts cannot ask Stuart for paying the shortfall amount since the period of January 2014. The reason for this is the reliance made by Stuart on the made promise. This is also because of the unconscionable conduct of unconscionable conduct undertaken by Westphalia Marts as reliance was made by Stuart on the reduced rent. The lack of consideration would not impact the promise made and this cannot be used as an excuse by Westphalia Marts to force Stuart to make payment of the reduced rent. The unconscionable conduct would be due to the breach of promise where Westphalia Marts showed that the income of Mall was healthy. This was false statement of fact made, resulting in presence of misrepresentation.

Conclusion

Thus, Stuart can use promissory estoppel to stop Westphalia Marts from claiming the rent for reduced period. Also, claims for unconscionable conduct and misrepresentation can be made by him against Westphalia Marts.

References

Abbott, K., Pendlebury, N., & Wardman, K. (2007). Business law (8^th ed.). London: Thompson Learning.

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

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

Bailii. (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.

Gibson, A., & Fraser, D. (2014). Business Law 2014 (8^th ed.). Melbourne, Pearson Education Australia.

Jade. (2017). Tallerman and Co Pty Ltd v Nathan's Merchandise (Vic) Pty Ltd. Retrieved from: https://jade.io/j/?a=outline&id=65197

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.

McKendrick, E. (2014). Contract Law: Text, Cases, and Materials (6^th ed.). Oxford: Oxford University Press.

Mulcahy, L. (2008). Contract Law in Perspective (5^th ed.). Oxon: Routledge.

Paterson, J.M., Robertson, A., & Duke, A. (2012). Principles of Contract Law (4^th ed.). Rozelle, NSW: Thomson Reuters (Professional) Australia.

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.