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700254 Enterprise Law | Belongings for Purpose of Business Financially

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Questions:

Question One

Without asking Billy, Sasha orders some very rare (and expensive) orchids from Ooh Orchids believing that she would be able to sell them, however, Billy says he never would have agreed to this if he had been asked. Ooh Orchids has demanded payment of the outstanding invoice of $1,500 from Billy.

While delivering some flowers the delivery driver gets caught in heavy traffic. Under pressure from Billy to get the flowers delivered on time to “a very important customer”, Jacob is speeding and crashes into a car stopped at a roundabout. Nobody is injured and the flower van is protected by a bar at the front, however, there is $5,000 of damage caused to the other driver’s car.

Without consulting Sasha, Billy started a separate business selling flowers specifically for weddings. So far Fusion Flowers haven’t been supplying flowers to events as it would increase their insurance costs, however, Billy and Sasha have previously discussed the lucrative nature of supplying the weddingindustry

Discuss Billy’s potential liability. Support your response with relevant case authorities.

Question Two (Contract Law)

Advise Wassim whether the three elements for formation of contract are established. Ensure your response is supported by relevant case authorities.

Question Three (Contract Law)

(i) Describe and classify four terms from the contract as either a condition, warranty or intermediate term, explaining why you believe each term would be classified this way. Your responses MUST be supported with relevant case authorities.

(ii) What impact does the classification of a term as a condition, warranty or intermediate term have on the remedies available?

Answers:

Question 1

Issue

  • The issue in this case is to identify whether a partnership exist between Billy and Sasha
  • In addition it also has to be determined weather Billy is liable to pay Ooh orchids for the purchase made by Sasha
  • The liability of Billy with respect to the negligence caused by Jacob

  • The liability of Billy for starting a new business is also to be determined.

Rule

According to the Partnership Act 1963 a business between two or more parties would be considered as a partnership is

  • There is a valid agreement between the parties
  • The agreement is for the purpose of sharing on business and not a single or isolated venture such as a joint venture.
  • Having mutuality of interest obligation agency and rights in common between the partners
  • Having a view of making profit through  the operations of the business and sharing such profit as provided by section 6(3) of the PA
  • Having joint ownership according to Section 6(1) of the PA
  • Participation Gross return as provided by Section 6(2) of the PA
  • Having a say in management as provided by section 28(9) of the PA

In the case of John Grimes Partnership Ltd v Gubbins [2013] EWC it has been ruled by the court that a partner is liable for the actions of the other partner and every Partner of the partnership is the Agent of the business. Therefore any action which has been committed by the partner in the course of business is binding upon other partners and the overall business. Even in case one of the partners have exceeded authority but the third party did not have knowledge about such incident the business would be bound to compensate the third party for any loss caused to them because of the actions of any other partners.

In the Partnership Act it has been clearly stated that it is the duty of a partner not to compete with the partnership business according to Section 35 of the PA.

The partnership business is liable to compensate any third party for the negligence caused by any of the partners or the Agent of the business in the course of business. One partner cannot claim that he did not commit the negligence and therefore you should not be liable to compensate the third party. The business is liable for the actions of the agent as per the principles of vicarious liability. These provisions has been ruled in the case of Prince Alfred College Incorporated v ADC [2016] HCA 37 and Hollis v Vabu Pty Ltd (2001) 207 CLR 21.

Application

Firstly it has to be established that there is a partnership business between Sasha and Billy.

It has been provided in the scenario that Sasha and Billy have entered into agreement to carry on a business. Even though Billy has not contributed in the business financially he has provided his personal belongings for the purpose of the business. Both Billy and Sasha have agreed to share profit and losses in equal proportions in relation to the business. They also have say in the management of the business. Therefore through the application of the facts of the case to the above discuss rules it can be clearly stated that there is a partnership between Billy and Sasha.

As discussed above apartment is liable to the actions of another partner even if the other partners have exceeded authority, in case the third party does not have knowledge about such incident. In the given situation even though Billy would not have approved the deal and in addition the lack of any express provision in the partnership agreement in relation to the limitation towards the authority of the partners, he would be liable to pay Ooh orchids for the purchase made by Sasha under the principles of agency in partnership.

In the given situation negligence has been committed by Jacob who is the Agent of the partnership business between Billy and Sasha. As discussed above an agent of a partnership commits negligence the whole business is bound to pay the third party who has suffered damages. Therefore in the given situation Billy and Sasha both are liable to pay any damages which have been suffered by the third party involved in the accident with Jacob.

It has been expressly stated in the Partnership Act that it is the duty of a partner not to compete with the partnership business. It has been provided by the scenario that Billy has opened his own business to supply flowers. Therefore Billy according to the provisions of the act is liable for the breach of partnership duties.

Conclusion

From the above discussion it can be concluded that there is a partnership between Billy and Sasha. Billy is liable to pay Ooh orchids for the purchase done by Sasha. Billy is also liable to pay for the negligence committed by Jacob. Billy’s also liable under the Partnership Act for the breach of duties of a partner.

Question 2

Issue

Whether there is a contract between Wasim and Bianca with respect to the major three elements of the contract which are offer, acceptance and Intention to create legal obligation

Rule

An offer is the first and foremost element which is required for the purpose of establishing the formation of a contract. An offer is a statement which has been made by one party to another party or a group signifying the willingness to establish a legally binding agreement. However an offer and invitation to an offer are not the same. Violin offer has to be complete an invitation to offer is an incomplete version of offer and has no legal significance. The provisions had been discussed in the case of Blackpool & Flyde Aero Club v Blackpool Borough Council [1990] 3 All ER 25.

The second element which is required to constitute a legally binding agreement is known as acceptance. Through the process of acceptance only the parties to whom the offer has been made can signify their willingness to accept offer. The acceptance has to be unequivocal as provided by Bressan v Squires [1974] 2 NSWLR 460 .

The third element required to constitute a legally binding agreement is the intention to create legal relationship. Domestic agreements have to be differentiated from contracts as they do not have legally binding effect as provided in the case of Merritt v Merritt [1970] EWCA Civ 6. Where are domestic agreement has the intention of being bound legally as through the application of objective test it would be considered as a binding contract as provided in the case of Balfour v Balfour [1919] 2 KB 571.

Consideration in a contract has to be present regardless of the fact that it is adequate or not

Application

In the given situation Bianca had made an invitation to offer to put her house on rent. It would be considered as an invitation to an offer because it was not complete and any reasonable person through such expression would not be induced to get into the offer. However a valid offer has been made by Wasim for renting the house from Bianca. However as the house was not available for rent from 1st to 8 January the offer was rejected. Another valid offer was made by Bianca to Wasim knowing that he is her cousin to rent house for $1,200 from 8 January. The offer was accepted by Wasim unequivocally and as a first complete a contract was formed between the parties.

In addition to the application of the objective test it can be analyse that both the parties and the intention to get into a legally binding document as a reasonable person would have had in the same situation. Although the consideration was low it was present in the contract which is sufficient to ensure the formation of a valid contract.

Confusion

All elements of a valid contract have been satisfied and therefore there is a contract between Bianca and Wasim.

Question 3 

Part i

Classification of terms of the contract as Conditions, Warranties and Intermediate terms

Term 1

“We will provide true, accurate, current, complete and non misleading information on any registration form or as otherwise reasonably requested by TJX UK”- Condition

In the case of Poussard v Spiers (1876) 1 QBD 41 it had been ruled by the court that conditions are the most important terms of a contract which go to the root of the contract and therefore a term which ensures the party that the website would not indulge in any misleading conduct is evidently a term of the contract as the other party would not have entered into a contract if such a term was not present in the contract.

Term 2

“Items purchased as gifts can be exchanged for either goods or a TK Maxx/Homesense gift card to the same value from Saturday 14th October and covers purchases up to and including Sunday 21st January 2018.”- Warranty

In the case of Bettini v Gye 1876 QBD 183 it had been ruled by the court that terms which are present in the contract to support the primary condition of the contract and are collateral to the fundamental terms of the contract are known as warranties. These terms do not go to the roots of the contract. In the given situation a term in relation to exchange policy dates is not a condition and merely a warty because it does not go to the root of the contract for buying materials online.

Term 3

“You have fourteen (14) calendar days starting on the day after you receive the goods, to cancel your contract in writing “ – Intermediate term

In the case of Hong Kong Fir Shipping v Kawasaki Kisen Kaisha [1962] 2 QB 26   it had been ruled by the court that an intermediate term is a term of the contract which cannot be easily classified as conditions and warranties. Whether such term is a condition or not is determined through analysing the loss which is borne by the aggrieved party in case of breach of such terms. Therefore in relation to a specific time period related to cancellation of contract it can be stated that it would be best analysed when the loss to the aggrieved party is determined.

Term 4

“Nothing in these Terms and Conditions shall limit TJX UK's liability for death or personal injury arising from negligence”- Warranty

In the case of Bettini v Gye it had been ruled by the court that terms which are present in the contract to support the primary condition of the contract and are collateral to the fundamental terms of the contract are known as warranties. These terms do not go to the roots of the contract. As the above term is collateral to the contract it is a warranty

Part ii

When a condition is violated the aggrieved party is entitled to compensations as well as the right to repudiate the contract.

When a warranty is violated the aggrieved party is entitled to compensations but not the right to repudiate the contract.

When an intermediate term is violated the rights of the aggrieved party is determined by analysing the loss caused to the party

References

Balfour v Balfour [1919] 2 KB 571.

Bettini v Gye 1876 QBD 183

Blackpool & Flyde Aero Club v Blackpool Borough Council [1990] 3 All ER 25.

Bressan v Squires [1974] 2 NSWLR 460 .

Hollis v Vabu Pty Ltd (2001) 207 CLR 21.

Hong Kong Fir Shipping v Kawasaki Kisen Kaisha [1962] 2 QB 26   

John Grimes Partnership Ltd v Gubbins [2013] EWC

Merritt v Merritt [1970] EWCA Civ 6

Poussard v Spiers (1876) 1 QBD 41

Prince Alfred College Incorporated v ADC [2016] HCA 37

The partnership Act 1963 (Cth)

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