Laws20058 Australian Commercial Law - Assessment Answers

• There was a grocery store in the shopping village that sold a wide range of fruit and vegetables. 

• After six weeks, a man from a finance company arrived at the shop and repossessed the delivery van. It turned out that the van was only leased by the previous owner, and since Barry had not made the lease payments, the lease was in default. Barry’s expenses at the shop had been below $8,000 per month, but if he had paid the van lease, the expenses would have been on average about $8,500 per 

• The loader, which was a small motorised machine for putting pallets on and off the back of the van, was broken down and could not be fixed for less than the cost of replacing

You are providing a written report to your supervising partner. To impress him, you want to show that you worked hard at university by demonstrating your knowledge of law and your ability to use it. You need to provide a written report providing the following advices. 

2. Advise how Barry might challenge the validity of the contract on the basis of the statements made by Angelo before the contract was entered into. You should consider both common law and statute law.

3. Assuming Barry does not get out of the contract, advise on the possibility of an action for breach of contract.

NOTE: These are questions where the focus is on your reasoning processes, so you should use the IRAC method. You do not need to repeat the facts unnecessarily, so only refer to the facts of the case to support your argument. Also, only refer to cases to illustrate or support the legal points you are making or the argument you are putting. If you do refer to cases, you need to demonstrate how they are relevant to the facts or argment. Your supervising partner will not be impressed by you simply reciting law without purpose.

Part C

In this part, your task is to take the advices you gave to your supervising partner in Questions 2 and 3 and present them to your client, Barry, in a way that he can understand. You DO need to explain to him what the law is and how it leads to your recommendations, but it must be presented in a way that a client without legal training can understand. The report must be done as a YouTube video and the link for the video must be included in your assignment. The video must be set so that the marker can view it.  If the link does not work for the marker, you get no marks for this part. 

Your face must appear in the video. You should not be reading from a script, but you can use notes to prompt your talking.

Answer: 

Part B

2. Issue:

The main issue of the case is to determine whether Berry can challenge the validity of the contract for all the statements made by Angelo regarding the selling of the shop or not.

Rule:

The subject matter of the case is based on the common provision of the contract and the processes by which a contract can be terminated or its validity can be challenged. In Australia, the contractual cases are governed both by the common and statutory law. Australian Contract law is the common legal provision where the process of formation of contract has been mentioned[1]. However, apart from the formation, the terms and ground of termination of the contract has been discussed precisely. In Australia, there are certain other legislative provisions that affect the contractual cases and problems. All these legislative provisions are statutory in nature. The legislative Acts are Sale of Goods Act 1896, Independent Contractors Act 2006 (Cth), Frustrated Contract Act 1978 (NSW), and Contracts Review Act 1980 (NSW).

However, before a contract has been made between the parties, certain terms are required. According to the Australian Common Law, the contractual agreement should be based on offer and acceptance, there should be certain consideration, the contracting parties should have all the capacity to enter into the contract. Further, there should be legal intention of the parties regarding the formation of the contract, the considerable things under the contract should be certain, and they should not be vague in nature. All these conditions should be there made before the contract and all these grounds are mandatory[2]. If any parties have failed to maintain any of the grounds, the nature of the contract will be void ab initio and the affected party can terminate the contract. in case of Buckton v Hay (1879) 11 Ch 645, it has been observed by the court that any contract can be come to an end in one way or there can be other way.

There are number of grounds by which a contract can be terminated. According to Pan Foods Company Importers & Distributors Pty Ltd v ANZ Banking Group Ltd[3], the parties to the contract have an option to terminate the contract expressly. Further, a contract can be terminated on the implied grounds. This rule has been established in the case of Crawford Fitting Co v Sydney Valve & Fitting Pty Ltd [4]. The common law of contract has given both the parties an option to terminate the contract in case of any adverse situation that has been permitted by the law. The relevant ground to these terms is termination for breach and termination for misrepresentation. Termination by breach is a common legal provision and termination by misrepresentation is a statutory provision. The grounds of the termination by misrepresentation have been described in the Australian Competition and Consumer Act 2010 (Cth).  According to section 18 of the Australian Competition and Consumer Act 2010 (Cth), no person is allowed to make any deceptive statement at the time of formation of contract. according to this rule, if the seller had concealed certain facts intentionally for the buyer and the facts are essential for the formation of the contract, the buyer shall get all the option to terminate the contract if any mishap to this effect cropped up. If the contract has been terminated on the grounds of misrepresentation, the affected party can cancel the contract and claim compensation from the wrongdoer.

Application:

In this case, it has been observed that a contract has been made in between Berry and Angelo. Before the contract has been completed, seller did not mentioned any facts that can go adverse for the contract. When Berry has asked about the shop, Angelo stated about its price and did not mention any other fact. In this case, it has been observed that the seller had mentioned the price for the shop and the other essential things. However, after the formation of the contract, it has been observed by Berry that the delivery van was on lease and after six months, a financial company has taken back the delivery van. Further, it has been observed that the loader that transferred to Berry by Angelo is defective in nature and the same has been broken down. In this case, Angelo had concealed all these facts from Berry and Berry has to suffer losses from the same. Further, the shop was not that much crowded and therefore, he has to sustain loss from the same. However, Berry could not sue the owner for the misleading facts mentioned in the advertisement, as advertisement does not forms an offer, rather invitation to treat.

Conclusion:

It is advised that Berry can terminate the contract for the misrepresentation made by the owner regarding the delivery van and loader.

3. Issue:

The main issue of the case is to determine whether Berry can take any action for the breach of contract against the previous owner of the shop or not.

Rules:

The subject matter of the case is based on the grounds of terminating a contract for breach. A contract can be terminated for breach on certain grounds such as condition, warranty, and intermediate term. It has been held in Tramways Advertising Pty Ltd v Luna Park (NSW) Ltd [5] that if any party has failed to meet all the essential conditions of the contract appropriately, the aggrieved party has all the options to terminate the contract. Conditions play an important role for the formation of a contract. The term essentiality depends on the facts of the intention of the parties to the contract[6]. Further, if the formation of the contract has been affected by the non-maintenance of the terms and conditions properly, the parties can have the option to challenge the validity of the contract. Further, it has been observed that when any party of a contract is unable to get all the benefits of the contract, then the aggrieved party can terminate the contract even if the breach has been done for non-essential terms. Further, contract can be terminated if any breach has been done regarding the warranty of the contract. according to the principle laid down in the case of Hong Kong Fir Shipping Co Ltd v Kawasaki Kisen Kaisha Ltd[7], there are certain differences observed in between the breach of condition and breach of warranty. The court has observed that in case of any breach of warranty, the aggrieved party can claim damage from the wrongdoer and he could not terminate the validity of the contract. In addition to this, a contract can be terminated if a breach has been made in the intermediate ground. It has been held in Commonwealth v Amann Aviation Pty Ltd [8]that a term can be treated as intermediate if the party has been deprived of substantial benefit of the contract.

There are certain tests by which the essentiality of the terms can be understood categorically. All the general rules of the contract can be termed as essential for the contract. Further, when the contract has been signed between the parties contained of certain promise and the promise has been relied on the terms of the promise, the grounds of the promise can be regarded asessential[9]. There is a sheer possibility that the parties to the contract can be aggrieved if the promises could not be fulfilled properly. This provision has been observed in the Ankar v National Westminster Finance[10]. The Australian High Court in a well-known case observed that fact that the aggrieved party must have to show that he has sustained loss for the acts of the alleged person. It is the basic importance for justifying the breach.

Application:

In this case, it has been observed that a contract has been made in this case where Berry was the buyer and Angelo was the Seller. The owner of the alleged shop that the shop is highly profitable and there is no competitor for the shop has made an advertisement. In the original term, an advertisement is an invitation to treat and not an offer. However, in the case of Carlil v Carbolic Smoke Ball Co[11], it has been observed that if the nature of the advertisement is unilateral in nature, that will be binding in nature and it will be regarded as a valid offer. In Unilateral advertisement, the price of the goods or the contracted material has been prescribed specifically. In the Carlil’s case, it has been observed that the advertisement maker should have to fulfill all the conditions mentioned in the advertisement. In this case, the price and condition of the shop has been prescribed and confirmed by the owner. However, in subsequent event, ir has been observed that the shop is not in well condition and there are many facts that has been concealed by the owner. Angelo hide the fact that the delivery van was on lease. He has not mentioned that the condition of the loader is also not good. Therefore, he is liable for breach of the essential terms of the contract. according to the Commonwealth v Amann Aviation Pty Ltd [1991] HCA 54, it can be stated that Berry has failed to get substantial rights and therefore, can be eligible to file case for breach of contract.

Conclusion:

To conclude, it can be stated that Berry can make an action under the breach of contract against Angelo.

Part C

Content of the video

The main intention of the video is to make Berry understand all his rights against the contract made in between him and the owner of the shop. This video includes all the necessary provision of the common as well as the statutory legal provisions so that an effective action can be taken against the false representation of the owner of the shop. This video requires Berry to find out all the windows so that he can get relief for the contract and relief can be granted for all the losses sustained by him. Through this video, a message is served to Berry regarding the grounds of termination of contract so that an effective claim can be made against the shop owner.

In this case, it has been observed that Berry was tired off his job and wanted to open his own business and in the meantime, he came to know about the advertisement made by the shop owner Angelo. It has been contended by Angelo that his shop is one of the busy enterprise in the city and there is no competitor regarding his business. He has mentioned the selling price in the advertisement and Berry found it interesting. When he has called Angelo for the shop, Angelo confirmed all the things and make sure about the price of the shop including the price of the delivery van and the loader that are essential for the shop. Berry was ready for the payment and get the possession of the shop accordingly. It can be observed that the shop owner had not mentioned any more facts for the shop and the contract has been made by assuming the fact that the shop is free from all the encumbrances. However, it has been observed that after the possession has been transferred, a financial company claimed that the delivery van is subject to lease and takes back the possession of the van. Further, the internal condition of the loader was also bad and it has stopped working. It is clear that the owner of the shop did not mentioned about all of these and concealed these facts from Berry.

Under the Contract Law of Australia, an aggrieved party to the contract can take certain actions against the wrongful acts of the other party in case he has sustained losses. Common law and the statutory law deal the contractual law cases as well. Berry has the option to terminate the base of the contract and claim compensation for all the losses incurred by him for the contract. the terms of the contract can be cancelled on the grounds of misrepresentation of facts and breach of contract.

Misrepresentation of facts is a part of both the common and statutory law. According to section 18 of the Competition and Consumer Law, no person could make a valid contract by deceiving other regarding certain facts of the case. It has further been observed that the validity of the contract can be cancelled if the other party to the contract sustained losses for the misrepresented facts. In this case, similar situation has been observed hen Angelo had failed to reveal the facts regarding the lease and condition of the loader to Berry. Berry did not know the facts and sustained losses for the same.

It has further been contended that certain breaches have been done on the part of Angelo. According to the essential elements of the contract, intention of the parties play important role in the contract. a contract has been contained of certain essential grounds without that contract is not possible. Those essential grounds are treated as conditions. According to the case of Tramways Advertising Pty Ltd, it can be stated that if any party make a breach regarding the condition of the contract, the aggrieved party can terminate the contract. Further, if any party to the contract has failed to get any substantial rights from the contracting object, he can terminate the validity of the contract. Substantial rights mean the monetary profit. In this case, it has been observed that Berry has to face financial losses due to the misrepresented facts stated by Angelo. It is his right to claim compensation against Angelo. Therefore, it is advised to him that he can claim compensation from Angelo and can challenge the validity of the contract.      

Bibliography:

Ankar v National Westminster Finance [1987] HCA 15

Australian Competition and Consumer Act 2010 (Cth)

Carlil v Carbolic Smoke Ball Co [1893] 1 QB 256

Carton, Claire. "Principles of Australian contract law [Book Review]." Ethos: Official Publication of the Law Society of the Australian Capital Territory 237 (2015): 42.

Commonwealth v Amann Aviation Pty Ltd [1991] HCA 54

Crawford Fitting Co v Sydney Valve & Fitting Pty Ltd (1988) 14 NSWLR 438

Hong Kong Fir Shipping Co Ltd v Kawasaki Kisen Kaisha Ltd [1961] EWCA Civ 7

Macaulay, Stewart. "Non-contractual relations in business: A preliminary study." The Law and Society Canon. Routledge, 2018. 155-167.

McKendrick, Ewan, and Qiao Liu. Contract Law: Australian Edition. Palgrave Macmillan, 2015.

Pan Foods Company Importers & Distributors Pty Ltd v ANZ Banking Group Ltd [2000] HCA 20

Tramways Advertising Pty Ltd v Luna Park (NSW) Ltd (1938) 38 SR (NSW) 632 at 641–2

Van Huyssteen, LOUIS F., M. F. B. Reinecke, and G. F. Lubbe. Contract: General Principles. Cape Town: Juta, 2016.