BLO1105 The Structure of Words

Whether the contract that is formed between Scenic view (Mr George) and Vincenzo comprises of all elements of contract?

Rule

A contract is such a legal document which comes into existence on proposal being accepted by the parties who are capable to make a contract with legal intent and some benefits/detriment that are exchanged to support the proposal[1].

Thus, a contract is made not because of the presence of some single element. But, it is the formation which comes into existence when all elements are present.

Offer ignites the formation of contract. Any statement or proposal made by offeror specifying his intention in the form of terms which is transferred to the offeree in the structure of words, conduct or in textual form is offer and is held in Carlill v. Carbolic Smoke Ball Co [2].

The offeree consent to the terms of the offer is acceptance which in order to be valid should be clear and unambiguous and must communicate to the offeror and is held in Latec Finance Ltd v Knight[3].

When the offers are invited with the help of advertisements, actions, tenders then such are invitations and the approval of invitation by the inviter (offeree) makes a contract and is held in Pharmaceutical Society of Great Britain v Boots Cash Chemists (Southern) Ltd[4]. as per Partridge v Crittenden[5], an advertisement is an invitation.

The combination of offer and acceptance makes an agreement but it is only when something of value is present at the time of making the promises that makes them enforceable and is called consideration. Anything which is beneficial or detrimental to the parties when making the promises is consideration and it is the presence of consideration brings legality to the promise made and is held in Currie v Misa[6].

Every promise so made should have legal intention, that is, the promises can be proved in court if any conflict will arise. Intention if present in commercial contract and normally not in domestic, but, this assumption can be disapproved if evidence is laid down and is held in Balfour v Balfour[7].

 As per Clements v London and North Western Rly Co[8], the parties should also be capable.

Application 

Vincenzo visits Victoria. Scenic Views has placed an advertisement providing services. As per Partridge v Crittenden, it is an advertisement. So, Scenic views are the inviters and the interested parties must make an offer.  Mr George is the manager of Scenic Views and is in direct contact with when Vincenzo visited the office of Scenic Views. Mr George specifies that the room is available @$350 per night and all the terms of the advertisements remains. So, Vincenzo makes an offer to Mr George for booking of the room. This offer was confirmed by Mr George. The acceptance is made clearly by Mr George. The promises amid the parties are exchanged on the value of 4350 per night which is a consideration. The parties are capable and have legal intention.

A contract is framed between Vincenzo and Scenic Views (by Mr George) as all elements of a contract exists.

Issue ii

Can Vincenzo enforce the contract against Scenic views (Mr George)?

Rule

One of the prime elements that is required to be present in every contract is that the parties who are giving their assents should gave with their own minds and not because of the influence or domination of some other party. It is then only their consent is considered to be valid. Many a times, all contractual elements are present but still the consent that is given by the parties are not genuine as they suffer from some kind of influence or false representation, then, the aggrieved party has every right to terminate the contract. The contract which is valid can become voidable at the option of the aggrieved party[9]. 

When the offeror and offeree are related with each other on account of trust, honesty, good faith and there is presence of fiduciary relationship amid the parties, then, if the stronger party misuses his position and relation to bring gain to himself and loss to the weaker party by exploiting the relation of trust, then, it is an act of undue influence and any contract made in undue influence can be avoided by the aggrieved party and is held in Johnson v Buttress[10].

At times the parties are making promises but one of the parties is inferior from another because of his age, knowledge, understanding, etc. In such situation, if the superior party knowing the fact that the inferior party is suffering from some weakness, uses such weakness at his own gain, then, the acts are unconscionable and are not allowed resulting in termination of contract and is held in Commercial Bank of Australia v Amadio[11]. [12]

At times, one party before making contract makes several statements which are factual in nature. The representor knowingly makes false representation so that the other party is induced to make a contract with him. Any contract which is formulated on the basis of such untrue representation suffers from misrepresentation and the contracts are voidable at the option of the aggrieved and are held in Smith v Land & House Property Corp[13]. [14]

Application

A contract is made between Mr George (on behalf of Scenic View) and Vincenzo. There are various communications and negations that take place between the two before the contract is made. But, the contract can be rescinded by Vincenzo because:

1. Vincenzo is not very good in English. He hardly understands the same and is relying on the capability of Nr George. Mr George is aware of the said fact and he instead of helping Vincenzo, took advantage of his superiority. He makes no attempt to make Vincenzo understand the terms that are made part of the contract or the terms which are part of the advertisement. The nature of the terms is not able to be understood by Vincenzo. So, the acts of Mr George are totally unconsiousable.
2. Since  is not very pro in English and Mr George is fully aware of the meanings of the terms that are exchanged amid them and are made part of the contract, thus, Vincenzo is not at a superior position in comparison of Mr George. Vincenzo is trust Mr George that he will be provided a private balcony with scenic view. Mr George made statements to influence Vincenzo so that a contract is made. So, Mr George by taking the superiority of his position took undue advantage of Vincenzo, thus, the consent of Vincenzo endure from undue influence.

• Lastly, Mr George and Scenic View has made numerous representation prior the making of the contract which primarily includes that a private balcony with scenic view is available which in fact was not available and this facts was in the knowledge of Mr George. Knowing the said fact, Mr George still made no attempt to bring the same in the knowledge of Vincenzo but canceled the facts so that a contract can be made. So, this is clear case of misrepresentation.

Though a valid contract is made between Scenic View (Mr George) and Vincenzo, but, the consent of Vincenzo is not genuine and clear but it is based on misrepresentation, undue influence and unconscionability. So, Vincenzo has the authority to terminate the contract.

Issue iii

Is there any manner in which the contract made by Vincenzo and Mr George View can be discharged?

Rule

The presence of elements of contract makes a valid contract. The parties have an obligation to comply with contract terms. When the parties fulfill their obligations as defined in the contract then the contract is comply with as per the performance of the contract. However, when the parties did not abide by the terms that they must comply with, then, the contracts stands terminated because of breach.[15]

Application

Since a contract is made between Scenic View (through Mr George) and Vincenzo, so, they should have complied with the terms. But, Scenic View (through Mr George) has not provided the private balcony room with scenic view to which is the primary term of the contract. so, Scenic View (through Mr George) failed to fulfill the term and thus the contract stands discharged.

Failure on the part of Scenic View (through Mr George) ti comply with contract terms results in discharged of contract.

Issue iv

Is Vincenzo authorized to seek remedies from Scenic Views?

Every contract formation needs agreement (offer plus acceptance) supported with value (consideration) by capable parties (capacity) with intention (legal). All these elements make a contract. When the contract confers from not genuine consent then the aggrieved has the power terminate the contract and seek damages. But, damage is only attainable depending upon two factors, that is, Firstly, the damages that is caused is because of breach of contract and not because of any other reasons and is held in Voli v Inglewood SC [16]; Secondly, the loss so caused is the direct result of the breach and is held in Hadley v Baxendale[17] and Gates v. City Mutual Life Assurance Society Ltd[18].[19]

Once the loss is found to be caused because of the breach, then, the level of damage depends upon the type of term violated. The terms are divided into two categories on the basis of importance, firstly, the root terms which are heart of the contract and no contract can be performed without the compliance of such term and are called conditions and is analyze in  Poussard v Spiers [20]; Secondly, the terms required for adequate performance of contract and are not its essence are warranties and is held in Bettini v Gye[21]

Application

When Scenic View (Mr George) establish contract with Vincenzo then apart from several terms one term that was part of the contract was, the availability of rooms with private balcony and scenic views. Vincenzo made contract on this particular term. This term was the core of the contract. But, Mr George did not comply with the terms, thus, the contract is violated. Vincenzo suffers damages as a result of the breach of the said term. The term is the contract essence and is thus condition. So, Vincenzo has every right to cancel contract and sue for damages.

Breach of the essential term (condition), the availability of rooms with private balcony and scenic views, results in contract termination by Vincenzo and sue Mr George for damages.

Solution 1 B  Issue i

How the contract amid Vincenzo and Mr George is constructed?

Rule

The compliance of all contract terms result in the formation of the contract. The parties decide the terms of the contract with which they must comply with. But, the terms are formulated after parties undergo negotiations. As per Oscar Chess Ltd v Williams[22], whether the term is the part of the contract or depends upon parties intention.[23]

Several representations are exchanged amid the parties before contract formation. the representations which are not included in the contract are not terms, but, which are part of the contract are terms and the parties should abide by the same[24].

Application

Before the contract formation, negotiations are exchanged amid Vincenzo and Mr George, such as room with private balconies spa, bathroom, fire space etc and all are made part of contract and thus are terms of the contract

The parties must comply with the representations that are part of the contract.Can Vincenzo enforce collateral contract against Scenic View?

The negotiations that are exchanged prior the contract formation but are promissory in nature and are not in contradiction with the express contract terms are binding as they are collateral contracts[25].

Both Vincenzo and Mr George are binding with the contract terms but any oral terms which are promissory and are not in contravention with the written contract are also brining as collateral contract.

The parties are bound by oral terms if they are part of collateral contract.Can Vincenzo claim under Australian Consumer Law (ACL) for breach of consumer guarantees by Mr. George?

Section 3 of the ACL defines a consumer as a person who for personal use purchases goods/services which are not more than $40,000. As per Section 7 of the ACL, a manufacturer or a supplier must comply with the guarantees.

Now, Vincenzo had taken a room for 7 nights @ $350 per night from George who was the marketing manager of Scenic View. Hence Vincenzo is a consumer as per Section 3 as the services availed by him are less than $40,000 and scenic View is a service provider  and thus a supplier under section 7, so, must comply with implied guarantees.

The various implied guarantees which must be provided by a service provider are:

60. When a consumer purchases goods/ service then the supplier is duty bound to provide the service diligently and carefully as per section 60.
61. When the consumer specifically upraises to the supplier the purpose for which he is purchasing the product, then, the supplier is duty bound to supply the product to the consumer which suits his purpose under section 61;

• The service to be provided by the service provider must be provided within a reasonable time if no time frame is stated in contract as per section 62.

Now, Scenic View  was the service provider and Vincenzo was consumer. Hence all the implied guarantees must had been complied with by Scenic View. Scenic View must had acted diligently and with care (section 60) but the guarantee was breached as the room was not having a private balcony with scenic view. Moreover the said defect in service was also not cured hence there is breach of section 62.

If In case the implied guarantee is not comply with then the consumer can sue supplier for breach. The compensation depends upon the kind of injury to the consumer. 

When the implied guarantees under section 60-62 are breached then the breach is major breach (section 260). When the breach is not major then it is minor under Section 259.

In case of breach of section 60-62 by the supplier a consumer can terminate the contract or get his money refunded and he can also claim penalty of $220,000. In case of major breach the consumer can reject the product claim damages (section 271) and anticipated loss (section 259 (4) of ACL). Exclusion clause cannot modify or get away with the guarantees which are absolute in nature (section 64) Now, Vincenzo can get his contract cancelled and can seek damages along with refund of his amount paid.

Also, any acts of the manufacturer or a supplier if lead to deception or misleading of the consumer is misrepresntation (section 18)[26]. When a supplier makes representatiuon regarding the origion, novelty, safety or duarbility of the goods which is false then such representations are misleading and false and hence breach of section 29.

Mr. George made various statements which are in turn false and are made by in order to deceive Vincenzo to enter into contract; hence there is clear breach of section 18. Also, Mr. George told Vincenzo that he will be provided with private balcony and panoramic view but the said statement made by Mr. George is false and thus misleading and hence violation of section 29.

In given case Vincenzo is a consumer of Mr. George, hence Mr. George must take care of all the consumer guarantees. Vincenzo can get refund, along with compensation and can also back out of the contact and penalty will be levied on Mr. George.

Reference List

John , Formation and Variation of Contracts: The Agreement, Formalities, Consideration and Promissory Estoppel, Sweet & Maxwell, 2014.

Eggers, Peter,  Vitiation of Contractual Consent, CRC Press, 13-Sep-2016.

Graw, Stephen,  An Introduction to the Law of Contract. 2012, Thomson Reuters (Professional) Australia.

Gillies, Peter, ‘Business Law’ , Federation Press, 2004.

Latimer, Paul, Australian contract law. Federation Press 2012.

O'Donovan, James 2005, Lender Liability. Sweet & Maxwell.

Stone, Richard and Devenney, James, The Modern Law of Contract, Routledge, 14-Jul-2017.

Case Laws

Balfour v Balfour [1919]

Bettini v Gye (1876)

Carlill v. Carbolic Smoke Ball Co (1891);

Commercial Bank of Australia v Amadio (1983).

Currie v Misa (1975).

Clements v London and North Western Rly Co [1894] 2 QB 482;

Gates v. City Mutual Life Assurance Society Ltd (1986)

Hadley v Baxendale [1854] EWHC J70

Johnson v Buttress (1936).

Latec Finance Ltd v Knight (1969);

Oscar Chess Ltd v Williams [1957] EWCA Civ 5

Poussard v Spiers and Pond (1876);

Partridge v Crittenden [1968];

Pharmaceutical Society of Great Britain v Boots Cash Chemists (Southern) Ltd [1953] EWCA Civ 6 .

Ricochet Pty Ltd v Equity Trustees Executor & Agency Co Ltd (1993);

Smith v Land & House Property Corp (1884)

Shepperd v The Council of the Municipality of Ryde (1952) 85 CLR 1.

Toll (Fgct) Pty Limited v.Alphapharm Pty Limited & Ors  [2004] HCA 52.