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LAWS11061 Contract A- Smashed Avocados’ Smashing Success

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Question 

The Smashed Avocados’ Smashing Success

The Smashed Avocados are a small hipster band who have been rehearsing for about 1 year in a garage in the outer northern suburbs of Melbourne.  The band includes Maria, who is the lead singer, and her two sisters, Shari and Sally, who play drums and bass guitar.  Rikuto is not related to the others, but has a wicked synth, and joined the group about 6 months ago.

Following their long stint of private performances, the band decides it is finally time to enter the big time.  They decide to book the band room at the Northcote Anti-Social Club on High Street in Northcote, one of Melbourne’s hippest suburbs.  They plan to raise some extra money with a cover charge, to go into a fund to go on tour.

They ask Ned, a close friend and fan of the band, to work on the door.  Ned has worked hard promoting the band on social media, and through original art, which he has turned into poster advertising for the night.  Ned has also run off a batch of bootleg CDs of a jam session that he recorded while the band was rehearsing. He sets them up behind his desk at the door, with a sign that says “Smashed Avocados, limited edition bootleg release, $15”.  He works out that the profit will be $750 between them, with very little outlay.  Proud of himself, Ned awaits a customer.  He feels that the group, including himself, will be able to go on tour after the night, partly due to the band’s talent, but also because of his business savvy.

Following a scorching set by The Avos, the bootleg CDs are selling like hotcakes.  Shortly, Ned is down to his last 10 CDs.  At this stage, Maria approaches the desk.  She tells Ned the CDs are way too cheap, and that he must start selling them for $30 per CD.  Ned agrees, and when the next customer approaches the desk asking for a CD, Ned tells him the price is now $30.  The fan says he only has $20 left in his pocket.  He was planning to use it for an Uber ride home, but will walk if he can have a CD for $20. Ned feels sorry for the fan, and says “Okay, you can have the CD for $20.”  Another fan standing behind the first one, overhears the conversation and asks if she can have a CD for $20 also.  Ned says the price has gone up due to popular demand, and he cannot sell any more for under $30.  The fan takes a picture of the CDs on display with the $15 price tag and tells Ned the band will be hearing from her once she has approached a consumer affairs centre.  She says she must be allowed to have the CD for $15, as that is the price advertised.  After capturing a couple of pictures on her smart phone, the fan walks away.  Ned is anxious about the confrontation, and quickly removes the sign advertising the CDs.


Glowing from the success of the gig, and the half bottle of champagne she has drunk, Maria jumps onto the stage and announces that they will be auctioning off a band poster signed by every band member. Half of the proceeds will be going to the Organic Biodynamic Fairtrade Avocado Society, which encourages ethical farming methods of Avocados around the world.  She pulls one of the beautiful posters designed by Ned off the wall and is the first to sign it.  A crowd gathers around Maria, looking to put in the highest bid.  It quickly escalates up to $150.  Before the auction is completed, Sally tells Maria that Rikuto had developed a headache straight after the show, and had to jump on the 86 tram home.  He therefore will not be able to sign the poster.  Maria calls off the auction.  Frankie, the highest bidder to that point, gets angry and says the poster is his, as he is the highest bidder.  He says he has studied law and knows that once the reserve price has been met, the seller is contractually bound and must give the item to the highest bidder.  Maria, who studied fine arts, knows nothing of contract law, and does not know what to do.    

Meanwhile, Sally, Shari and Ned are counting the door money, including the money made on the CDs.  It looks like there will be enough there to go on tour.  Ned asks Sally and Shari “Where will be our first stop?”  Sally and Shari tell Ned that he will not be going on tour with them.  It is much cheaper for them to hire people to work on the door at each venue, rather than pay for transport and accommodation for a non-band member.  Ned is upset, as he thought he was a close friend of the band, and practically a member of it, due to all the unpaid work he has put in.  He says that the bootleg CD idea was his, and he now wants to be paid for the CD sales, time on the door, and original art.

Advise the Smashed Avocados.   What issue of contract arise from the various agreements they have entered into?  Refer to cases studied in contract A in your answer.

Answer

Issue

Advice the band Smashed Avocados on the following issues:

  • Sudden change in the price of the last 10 CD’s from $15 to $30 because Maria thought the initial price was too less although the price on the CD,s were marked as $15. One of the fans captures that on her smart phone and tells them she will approach the Consumer Affair Centre.
  • Maria under the influence of alcohol announces auctioning of a band poster signed by all the band members. But soon after the highest bid is made by Frankie, she learns than one of the band members has left for home due to his ill health.  Is Maria liable to the highest bidder for not giving the signed poster?
  • Ned, their friend who has helped them with the poster, CD’s and the door for the concert demands for a payment for all the work he has done from the CD sale to his time on the door and giving his own art for the poster. Will the band be liable to Ned?

Rule

When Ned on Maria’s instruction changed the amount of the last 10 CD’s left from $15 to $30 of their fans did not take this well and she pointed out that the marked price was $15 on the CD. She also informed Ned that she will take up this matter with the consumer affairs as they were cheating their customers. This can be seen under section 18, of the Consumer Act, 2010. It will come under misleading or deceiving of a product. This was the outcome of the case, of Balfour v Balfour [1919] 2 KB 571.  When a good or services creates any kind of misleading impression about the price of the product or services they are said to be breaking the law. It is illegal for any business to engage itself into deceptive or misleading practices. In such cases the law states that even if misleading or deceiving that has been caused is unintentional then also the person responsible for doing so will still be liable.

One very famous case considered for misleading and deceptive conduct is Google V Australian Competition and Consumer Commission. The behaviour of the business has an impact on its customers. For example, a customer is contemplating whether he should buy a certain gadget; he takes help of an expert in that field. The customer on the expert’s advice buys a particular gadget but it was not compatible with what the customer wanted. The retail assistant was aware of the fact that the gadget was not compatible this can be considered as misleading due to the retail assistants silence or not disclosing the fact that could help the customer change his mind.

Thus, for the sudden change in the cost of the CD’s will make Maria and the band liable to their fan. As they had caused a breach under section 18 of the Consumer Act of Australia causing misleading and deceiving to their fan. In the case of Edwards v Skyways Ltd [1964] 1 WLR 349, the defendant said that he has withdrawn his contributions from the company’s pension funds and they would pay him equal contribution of the companies ex gratia payment.

Maria had made an offer to the public saying that the band members will sign a poster and give it to the highest bidder. After the highest bid was made by Frankie, Maria learned that one of their members had gone home right after the concert due to headache. Frankie was furious at this point and reminded Maria about the laws. Maria had made an offer which an expression of willingness to a contract on certain terms. It is made with an intention that it will become binding as soon as it is accepted by the person to whom it has been made. On finding out that all four members of the band cannot sign the poster this caused revocation of the offer. Revocation means cancelling or annulling something which was previously made. Revocation is the withdrawal of an offer made by the person making the offer. Revocation of offer can be seen in the case of Wakeling v Ripley (1957) SASR72. Thus, Maria will be liable to Frankie for the revocation of the contract made by her.

When there is no expressed or implied terms of agreement between the parties then in that case there will be no contract being obliged to them. The authority of the court is to only enforce the contract for the parties and not make the contract for them. One very essential element of a contract is that it should be valid. All the parties to a contract are bound to the terms and conditions to which they have agreed only exception being there should be no fraud or undue influence. Also there should be good faith between the parties entering into the contract. The law recognises that the parties sometimes don’t create any legal binding contracts.

Ned, a close friend of the band was asked to work on the door. And he worked very hard in promoting the event on social media, making posters from his own art, and made the CD’s. With all the unpaid work he had done he thought he could also tour with them and help them but he was told they would not take him as it would be expensive in comparison to the other option they were getting. This made Ned sad and he demanded payment for his contribution made in this concert. Since Maria and the band asked Ned to help there was an expressed contract between them and therefore, in such a contract the parties have made an contract orally and so Maria and the band will be liable to Ned.

Application

Contracts are usually an agreement between two parties where a legal obligation is created which allows them to do certain things and prohibits them from doing certain things. A contract is made to establish the agreement and the rights and duties of the parties are fixed in the contract. Contracts are expressed or implied. A written contract is always preferred as in case of dispute the contract can help in providing the solution for the dispute. In case a general public is concerned or affected statues are prescribed and restrictions are made on the terms of the contract. Usually there is an Insurance Contract whose terms protect the common interest of the public guaranteeing that they will get financial compensation in case of an accident.

In certain cases, the words used in contracts are sometimes not considered as a part of the contract as the intention of the parties is an essential element; this can be seen in the case of Ms. V Maharaj. In Edward V Skyways Ltd. Skyways had used the term ‘ex gratia’ payment. This meant that extra payment was offered to Edward by Skyward after he left the company but this did not happen. The court in such a case goes through the intention of both the parties and takes consideration of the term ‘ex gratia’. Finally the court decided that this term was not strong enough to rebut the presumption between the parties.

Thus, Maria cannot change the price of the CD suddenly as it would result in misleading and deceiving the customers and on doing so the band will be liable. In relation Frankie, the highest bidder, there was revocation of contract and the band will be held liable for it. Also in relation to Ned they will be liable to pay him for his work and the band had asked Ned to help them.

Conclusion

Contract is legally binding between two parties; it can either be expressed or implied. Contracts are enforced by law. There should be two parties, one party will make an offer and other will accept it. There should be an intention of the parties to enter into a contract. As a result if either of the party fails to fulfil any promise made by them in the agreement, the person who has caused the failure shall be responsible. The intention of the party should be legal. A written contract is always preferred as in case of dispute the contract can help in providing the solution for the dispute. Thus, it is very important to see the terms and the representations between the parties.

Reference List:

Appleman, John Alan, Jean Appleman, and Eric Mills Holmes. Excuses for Nonpayment and Defenses to Actions for Premiums. Vol. 5. Appleman on Insurance Law and Practice, 2015.

Appling, Darren Scott, Erica J. Briscoe, and Clayton J. Hutto. "Discriminative models for predicting deception strategies." Proceedings of the 24th International Conference on World Wide Web. ACM, 2015.

Balfour v Balfour [1919] 2 KB 571

Edwards v Skyways Ltd [1964] 1 WLR 349

Furmston, Michael Philip. Cheshire, Fifoot, and Furmston's Law of Contract. Oxford university press, 2017.

Furst, Stephen, and Vivian Ramsey. Keating on Construction Contracts eBook. Sweet & Maxwell, 2015.

Gañán, Carlos, et al. "A model for revocation forecasting in public-key infrastructures." Knowledge and Information Systems 43.2 (2015): 311-331.

Kray, Laura J., Jessica A. Kennedy, and Alex B. Van Zant. "Not competent enough to know the difference? Gender stereotypes about women’s ease of being misled predict negotiator deception." Organizational Behavior and Human Decision Processes 125.2 (2014): 61-72.

Kumar, P. Vinod, and S. N. Ansari. "An Efficient Data User Authentication Protocol to Enable Data User Revocation." IJSEAT 4.11 (2016): 634-637.

Lenard, Patti Tamara. "Patti Tamara Lenard replies." Ethics & International Affairs 30.02 (2016): 271-273.

Newell, Carter. "What to do in a multiple offer scenario." REIQ Journal Dec 2016-Jan 2017 (2016): 36.

Wakeling v Ripley (1957) SASR72

Whitney, Frederick A. "Restatement of the Law of Contracts (Book Review)." (2014): 38.

Yasoobi, Milad Azizi, and Arsallan Sabet Saeidi. "The Comparative Study of Offer Revocation in Iran’s Law and International Convention on Sale and Principles of International Contracts." International Journal of Humanities and Cultural Studies (IJHCS)? ISSN 2356-5926 (2016): 1439-1451.

Yip, Jeremy A., and Maurice E. Schweitzer. "Mad and misleading: Incidental anger promotes deception." Organizational Behavior and Human Decision Processes 137 (2016): 207-217.

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