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LAWCOMMERCIAL LAWASSESSMENT 3Individual WrittenAssignmentDo Linh Nga - s(2002 words excluding footnotes, references)PROBLEM SOLVINGContract FormationThe legal issue is whether a valid contract existed between Mary and BHB. Mary offers to hire Best Home Building Ltd (BHB) for the construction of her ...

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LAW2447

COMMERCIAL LAW

ASSESSMENT 3

Individual Written Assignment Do Linh Nga - s3877285

(2002 words excluding footnotes, references)

1

PROBLEM SOLVING Contract Formation The legal issue is whether a valid contract existed between Mary and BHB. Mary offers to hire Best Home Building Ltd (BHB) for the construction of her house. The offer made by Mary to BHB is clear and complete with the details of the subject matter, the parties, and the price1. It is also communicated to Simon since he was well aware of Mary's offer 2. The acceptance from Simon was clear3, communicated4 to Mary, and 100% identical to the offer without any condition5. Hence, there was an agreement between the two parties. There was a sufficient consideration from both parties with a promises 6. Moreover, the transaction was made in exchange for the construction services from BHB, indicating parties involved are presumed to form legal relations7. Thus, a valid contract existed between Mary and BHB.

The legal issue is whether Mary and BHB entered an enforceable contract for the job continuance relating to the additional $2000. Mary offered BHB an 'extra $2000' for 'continued ceiling work,' which Simon accepted. This consideration is past8 and insufficient for Mary and BHB to make a contract because ceiling building was an imposed contract duty of BHB. As a result, the enforceable contract between Mary and BHB for the additional $2000 did not exist.

Breach of Contract The legal issue is whether a written contract between Mary and BHB was breached (main). By signing a contract, both parties were bound by the contract terms 9. The moment BHB handed over the house to Mary exceeded the time specified in the contract. As a result, BHB breached its written contract with Mary.

1 Mildura Office Equipment & Supplies Pty Ltd v Canon Finance Australia Ltd [2006] VSC 42. 2 R v Clarke [1927] 40 CLR 227. 3 Scammell and Nephew Ltd v Ouston [1941] 1 AC 251. 4 Felthouse v Bindley [1862] 142 ER 107. 5 Masters v Cameron (1954) 91 CLR 353. 6 Biotechnology Australia Pty Ltd v Pace (1988) 15 NSWLR 130. 7 Wakeling v Ripley (1951) 51 SR (NSW) 183. 8 Roscorla v Thomas (1842) 3 QB 234. 9 Ellul and Ellul v Oakes (1972) 3 SASR 377. 2

The legal issue is whether there was a breach of collateral contract between BHB and Mary (subordinate). In order to persuade Mary to sign the main contract, BHB made a noncontractual promise to paint Mary's fence for free. As a result, this statement could be enforceable as a collateral contract10. Mary could file a lawsuit against BHB for breach of contract and seek compensation for $1000 of the painting costs. The issue is whether there was a breach of incorporated terms of the contract (subordinate). If a verbal statement is a promise or guarantee, it can be a contractual term 11. A verbal statement might be integrated into a contract if it is given reasonable notice before the contract was formed12. Simon declared that his company can meet all requirements of Mary for home design and engineering. All declarations were guarantees13 and independently provable as verbal statements14. Both parties were well aware of the outside statements because they were made prior to signing the contract. As a result, the statements were incorporated into the contract as terms. The issue is whether Simon's statement comes under any exception to PER (subordinate). Applying Van den Esschert v Chappell15,without Simon's statement that the company would easily afford all Mary's requests, she would not participate in the contract. Therefore, the outside statement became a term of the written contract. The issue is whether Simon's statement was considered a misrepresentation (subordinate). Simon at first promised to do everything Mary said related to her house construction, including 3-meter-ceilings. However, based on the building regulations, 2.5meter-ceilings were the construction standard. At the time Simon agreed to all requirements of Mary, he also did not know about the standard of the ceilings, thus he made a false statement16. This false statement induced Mary to enter into the contract 17. Therefore, Simon's statement was a misrepresentation.

10 De Lasalle v Guildford [1901] 2 KB 215. 11 Chandelor v Lopus (1603) 79 ER 3. 12 Thornton v Shoe Lane Parking (1971) 2 WLR 585; Olley v Marlborough Court Hotel [1949] 1 KB 532 Ltd. 13 Chandelor v Lopus (1603) 79 ER 3. 14 Handbury v Nolan (1977) 13 ALR 339. 15 Van den Esschert v Chappell [1960] WAR 114. 16 Derry v Peek [1889] UKHL 1. 17 Derry v Peek [1889] UKHL 1. 3

The issue is whether Simon's statements were conditions or warranties (subordinate). Applying Essentiality Test18, these terms were conditions because Mary would not join the contract if BHB breached any of its commitments. In terms of remedy, a breach of contract enables Mary to terminate the contract and seek compensatory damages19. The legal question is whether BHB's disclaimers (statements noted in the deposit receipt) were effective in removing the company's liability (subordinate). The disclaimers 'best practices of the construction sector' and 'appropriate changes' were ambiguous and difficult to verify. As a result, rules of interpretation are used to resolve ambiguities in Mary's advantage as the weaker party20. Mary had a reasonable expectation that BHB would adhere to local height and flooring regulations. In actuality, BHB never followed its assertions of "best construction practices," which were outside the scope of the disclaimers. To conclude, Mary was able to claim rescission and damages as BHB's disclaimers were unenforceable.

Negating Contract The legal question is whether or not the contract can be terminated due to a lack of consent (unconscionability). Unconscionability occurs when one party possesses a specific weakness that the other side can exploit21. Despite the fact that Mary was under the influence of alcohol prior to signing the contract, there were no signs that BHB was aware of her disadvantage and took advantage of it. Hence, Mary is unable to void the contract. Second, it is debated whether the contract can be terminated due to a lack of intellectual capacity (intoxication). Mary was intoxicated, but she was still aware that she had signed the contract and in the right frame of mind to think. Furthermore, BHB was unaware of her condition and there was no evidence that they took advantage of her disability. As a result, the contract cannot be voidable by Mary.

Consumer Law General protections The main legal issue is whether Mary can sue BHB under the ACL general protection. 18 Tramways Advertising v Luna Park (1938) 61 CLR 286. 19 Poussard v Spiers and Pond [1876] 1 QBD 410. 20 Poussard v Spiers and Pond [1876] 1 QBD 410. 21 Commercial Bank of Australia Ltd v Amadio (1983) 151 CLR 447. 4

The legal issue is whether Mary is a consumer under ACL (subordinate). Mary hired BHB to build her home, which cost more than $40,000 for personal usage. As a result, Mary is a consumer under ACL s322. The legal issue is whether BHB conducted any deceptive or misleading behavior. BHB was in commerce23 and promised to easily meet Mary's requirement for wheelchair accessibility, ceilings, flooring, and also a free fence-painting. Based on an Objective Test, as a reasonable customer, Mary was fooled into believing Simon's deceptive statements. Hence, s18 was broken. Mary could void the contract and sue for damages.

The legal issue is whether BHB engaged in any unconscionable conduct. There was no violation of s20 because BHB was unaware of Mary's intoxication and did not make use of her disadvantages. Because Mary had no experience in real estate, BHB's disclaimers are considered unfair terms. Mary may be unsure what 'best industry practice' or 'fair changes' mean. The disclaimer, which was written in a standard form contract, generated major imbalances in the parties' rights and gave BHB an advantage. As a result, s24 was violated, and the contract was voidable.

Specific protections The main issue is whether Mary can sue BHB for violating specific protections under ACL. The issue is whether the parties have entered into a consumer service contract (subordinate). BHB is in trade, providing Mary with a construction service for household use. As a result, according to s23(3)24, Mary and BHB both entered a consumer service contract. The issue is whether BHB breached its commitments in relation to Mary's disclosed purposes (subordinate). Using s61, BHB failed to construct wheelchair accessibility and did not meet Mary's requirements for flooring and ceiling 25. As a result, BHB violated its promises because the service was against Mary's disclosed purpose. 22 Australian Consumer Law, s 3. 23 Australian Consumer Law, s 18. 24 Australian Consumer Law, s 23(3). 25 Australian Consumer Law, s 61. 5

The s60 of the ACL is not violated since there was no evidence that BHB built Mary's house without care and skills26. On the other hand, BHB violated s62 because the construction process exceeded the time specified in the contract27. The legal issue is whether Simon's failure to comply with the guarantee is a major failure (subordinate). All breaches of Simon under ACL specific protections are considered major failures since Mary would not have entered the contract if she had known about these failures. As a result, she can reject the house, ask for a refund, and sue BHB to recover any reasonable loss28. Ben (the plaintiff) v Mary (the defendant) The legal issue is whether Ben and Mary have entered into a legally binding contract. First, Mary made a clear offer to pay Ben $1000 for fence painting. Because it was communicated to Mary and fulfilled the mirror image rule 29, Ben's acceptance was valid. In terms of revocation, Mary's withdrawal was invalid because her letter did not reach Ben 30. The revocation for her second attempt was still not valid because it was made after Ben had accepted her offer31. In conclusion, the parties formed an enforceable contract, and Mary was required to pay Ben $1000 for his painting.

CASE NOTE I. Introduction On 22 September 2017, the case of Armstrong v Atlantic Caravans Pty Ltd & Hinterland Caravans Morisset (HC) was decided before judge D.Moss in the NSW Civil and Administrative Tribunal. II. Identifications of legal rules and legal issues The first issue is whether the caravan's quality was acceptable when it was delivered to Mr Armstrong. The Tribunal correctly verified that HC supplied the caravan (a physical

26 Australian Consumer Law, s 60. 27 Australian Consumer Law, s 62. 28 Australian Consumer Law, s259(3) and s 259(4). 29 Hyde v Wrench (1840) 49 ER 132. 30 Dickinson v Dodds (1876) 2 Ch D 463. 31 Dickinson v Dodds (1876) 2 Ch D 463. 6

good) as part of its ongoing business, and Mr Armstrong is a consumer under the ACL 32. The car was seen defective and many defects also appeared apparently within a short time after the caravan delivered to the consumer. Regarding the price, a reasonable buyer would expect a good quality from the new caravan for the price of &73,500. In conclude, I agree with the judgement that the caravan provided by HC to Mr Armstrong did not satisfy the conditions of consumer guarantee to be of acceptable quality33. The second issue is whether the failure to comply with the guarantee as to acceptable quality is a major one. Apart from the major defect with its chassis, the caravan also has many other defects. The undercutting into the chassis is clearly noted to occur before Mr Armstrong received the caravan. The judgement was persuasive that the caravan would not have been purchased by a reasonable consumer fully knowing the nature and extent of the failures34. Therefore, the failure to provide a new caravan with good quality as guarantee is a major failure. The third issue is whether the caravan provided to Mr Armstrong fit for the disclosed purpose and matched the sample at the showroom. This legal issue was missed by The Tribunal and I disagree with the judgement that it is not the liability of HC to fail to deliver a caravan that fits the consumer's disclosed purpose35. Mr Armstrong expressly disclosed to HC that he wanted to buy the caravan with at least 700 kg payload; but HC provided the caravan with a different disclosed purpose of him36. Besides, the caravan delivered was not the same as the sample shown at the Caravan and Camping show, which breached the ACL s 5737. The fourth issue is whether Mr Armstrong could be entitled to a refund. Since the failure to comply with consumer guarantees of acceptable quality was considered a major failure, Mr Armstrong owned the right to immediately reject the good, seek a refund, and ask for a recovery of reasonable loss 38. Mr Armstrong already notified of his rejection and the grounds for his rejection39 of the caravan to HC, willing to return the good to the company if the company agreed to pay him a refund. To conclude, I agree with the Tribunal's decision that Mr Armstrong could be entitled to a refund. 32 Australian Consumer Law s 3. 33 Australian Consumer Law s 54. 34 Australian Consumer Law s 260. 35 Australian Consumer Law s 61. 36 Australian Consumer Law s 55. 37 Australian Consumer Law s 57. 38 Australian Consumer Law s 259(1), (2); s 261. 39 Australian Consumer Law s 259(3)(a). 7

The fifth issue is whether Mr Armstrong could recover damages for any loss and damage as a result of a failure. Based on the ACL (NSW) Section 259(4) 40, I fully agree with the judgement that Mr Armstrong is entitled to recover damages against HC for the cost of the inspection and report provided by specialists, and the registering cost of the caravan. I also approve the judgement of the insurance cost and both parties' own costs. It was convincingly decided by the Tribunal that the claim for damages in the amount of $300.00 per week was not established due to insufficient evidence. The sixth issue is whether Mr Armstrong could receive payment of an award of damages against Atlantic Caravans. Since the defects of the caravan were mainly formed during manufacturing processes, it was not complied with the guarantee of acceptable quality41. A manufacturer can be required to pay damages to a consumer for any loss which is reasonably foreseeable due to the failure of guarantee of acceptable quality42. Therefore, it is convincing that both HC and Atlantic Caravans were jointly and severally liable to refund for Mr Armstrong, plus damages for consequential loss.

III. Conclusion In general, I agree that the legal rules and legal issues are persuasively discussed by the judge, except for the breach of s55 and s57 that the Tribunal failed to examine.

40 Australian Consumer Law s 259(4). 41 Australian Consumer Law s 54. 42 Australian Consumer Law s 54. 8

BIBLIOGRAPHY Cases Biotechnology Australia Pty Ltd v Pace (1988) 15 NSWLR 130. Chandelor v Lopus (1603) 79 ER 3. Commercial Bank of Australia Ltd v Amadio (1983) 151 CLR 447. De Lasalle v Guildford [1901] 2 KB 215. Derry v Peek [1889] UKHL 1. Dickinson v Dodds (1876) 2 Ch D 463. Ellul and Ellul v Oakes (1972) 3 SASR 377. Felthouse v Bindley [1862] 142 ER 107. Handbury v Nolan (1977) 13 ALR 339. Hyde v Wrench (1840) 49 ER 132. Masters v Cameron (1954) 91 CLR 353. Mildura Office Equipment & Supplies Pty Ltd v Canon Finance Australia Ltd [2006] VSC 42. Poussard v Spiers and Pond [1876] 1 QBD 410. R v Clarke [1927] 40 CLR 227. Roscorla v Thomas (1842) 3 QB 234. Scammell and Nephew Ltd v Ouston [1941] 1 AC 251. Thornton v Shoe Lane Parking (1971) 2 WLR 585; Olley v Marlborough Court Hotel [1949] 1 KB 532 Ltd. Tramways Advertising v Luna Park (1938) 61 CLR 286. Van den Esschert v Chappell [1960] WAR 114. Wakeling v Ripley (1951) 51 SR (NSW) 183.

Legislations: Australian Consumer Law (ACL).

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