Tutorial 2 - Week 3 - Professor Ian Stevens Contracts A PDF

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Professor Ian Stevens
Contracts A...

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Principles of Contractual Liability– Sem 172 Tutorial 2 – Week 3 Question 1 Identify the moment at which the contracts (if any) are formed in the following scenarios. This generally entails identifying the offers (and acceptances, if any). In each case, be prepared to justify your reasoning. a) Brooks is a clothing store at Robina Town Centre. It has a good reputation for selling good quality clothes at cheap prices, largely because it has contact with a number of manufacturers who provide it with excess stock when there has been an oversupply of a particular product. A week ago Brooks was given a large number of short-sleeved shirts as a result of an oversupply of summer stock. Business had been a bit slow, so Brooks decided to sell these shirts virtually at cost price as a way of getting people into their store. It placed a large sign in the shop window, as follows:

Special Offer Quality mens’ cotton short-sleeve work shirts Various colours $7.50 each until stocks run out Just come in to collect your bargain During the day, the manager at Brooks happened to see Sheila, the owner of a rival clothing shop at Robina Town Centre come in and try to buy 50 shirts. He rushed over to the sales assistant, and told him not to supply any shirts to Sheila. The manager and Sheila then got into an argument about whether there was already a binding contract as a result of Sheila’s acceptance of the ‘offer’ in the shop window. If you were consulted on the issue: 1) What arguments would you raise on behalf Brooks? Although there is a clear offer of $7.50 shirts until stock runs out, Brooks could contractually deny acceptance of that offer from Sheila because there has been no consideration and both parties must agree to the offer. Brooks could also revoke the offer. Brooks can withdraw the offer up until the point of sale or acceptance by Brooks. 2) What arguments would you raise on behalf Sheila? There were no specific T’s and C’s that inhibited rival store members from buying the shirts. The offer was made to the world at large, which includes Sheila. 3) Which arguments would you find most persuasive if you were a magistrate hearing this dispute? Brooks. The common law requires that, for an agreement to be binding, the promisee must provide consideration for the promise they have received. In this instance, Sheila has not provided any consideration or payment of any kind and therefore there is no binding contract. Also, because Sheila is from a rival store, there would be a very small

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chance of the meeting of minds. + the offer is $7.50 for each shirt. Brooks is bound to sell those shirts but can choose who he sells too and how much as he created the offer. As long as the offer is revoked before the point of sale, there is not contractual obligation. b) Marcus Weber, a Bond Law student, is also a car enthusiast. He has been lovingly restoring a 1998 Holden (which had been damaged in an accident). Last week he had a list of spare parts that he needed and he went to Supa-Cheep Auto Spares to buy them. SupaCheep is a large warehouse-style self-service shop with all parts displayed on shelves with clear labels and prices. Marcus took a trolley and collected 12 different parts on his list. He took his trolley to the check-out counter. The till operator picked up each item and swept it past the bar code reader, and the price of that item (but not the total) appeared on the till display. When the till operator had finally rung up the last part, he said “That will be $850 please.” Marcus was taken aback by the total, having expected it to be less than this. He told the till operator he did not anticipate it being so much and did not want to go through with the sale – he said he would get the parts for much better prices at Cheapa Auto Spares. The till operator became annoyed at this suggestion. He said Marcus was legally bound and had to pay, since there was a valid contract as soon as each item was rung up on the till. Marcus remembered that the Boots Cash Chemist case said something about where and when the contract was formed, but he could not recall the details, so he paid the total amount to avoid an embarrassing scene and took the parts home. There would be no contractual obligation for Marcus to fulfil the purchase of the items he tried to buy at Supa-Cheep Auto Spares. Firstly, there is no offer by Supa-Cheep Auto Spares for the items, merely an invitation to treat. Secondly, in order for Marcus to be contractually obliged, he must provide consideration or payment of some kind for the items, of which he did not. Scanning items at a checkout doesn’t create a binding contract, it makes those items become an offer for which the purchaser may or may not provide consideration for. Offer is made at checkout while scanning. c) Bill Fence designed and developed a piece of software that works with the Windows operating system to make it more efficient. He has a website which he uses to promote and sell the software. If, after entering the website and reading about the product, a customer wishes to buy the software, they are required to click on a ‘Purchase product’ button. This takes them to a series of web forms that ask the customer to fill in relevant personal information, confirm the order, agree to the terms of use of the software and finally complete the details of their selected payment method (Credit Card or PayPal). Once the customer has completed these forms, they are required to click on a ‘Buy’ button to transmit their order to Bill’s server. Bill’s server then automatically checks the validity of the chosen payment method; and if valid, it automatically initiates the processing of payment and sends an email message to the address disclosed by the customer. The email message has two purposes: it thanks the customer for their order and supplies the software as an attachment to the message. On receipt of this message, the customer is able to run the attachment to install the software. (You may assume the Electronic Transactions Act 1999 (Cth) applies. A contractual relationship would arise when the customer both accepts the terms and conditions (acceptance) and provides payment for the software (consideration). This would establish a legally binding contract. Until the seller confirms the validity of the credit card or payment (consideration) there is no contractual obligation for the seller to proceed with the offer.

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Question 2 Who makes the offer and who accepts it in the case of auctions and tenders? In an auction, the offer is created when a bidder raises their placard to accept the price stated by the auctioneer for a particular item. In the case of tenders, one party may request the other to provide a document of intention etc. which is merely an invitation to treat. If or once the party requested upon provides the said document, such response is considered an offer. The tender may then accept, reject, counteroffer, request further info or do nothing. a. Ken decided to sell farm equipment at an auction. Bidding was spirited, with the best bid being submitted by Peta. As the auctioneer asked for any final bids, Peta announced that she had changed her mind and was withdrawing her bid. The auctioneer refused to accept the withdrawal of the bid and he knocked the goods down to Peta as the successful bidder. Peta now refused to pay. In an auction, a contractual obligation is formed when the auctioneer hits the gavel. In this case, Peta changed her mind before the critical moment (point of sale) of forming a contractual obligation, therefore, she is not legally bound to pay.  Does it make any difference if the auction is said to be ‘without reserve’ or a promise made to award the tender to the highest (or lowest) tender?  Should there be a claim against the auctioneer or person inviting the tender where they do not sell to the highest (or lowest) bidder? Auctioneer must establish T’s and C’s before the auction begins. If auctioneer creates their own T’s and C’s can be sued.  Can you reconcile or justify the different conclusions reached on this issue in AGC v McWhirter (1977) 1 BPR 9454 (about auctions) and Hughes Aircraft Systems v Airservices Australia [1997] FCA 558 (about tenders)? Drafting task How would you change Brooks’ shop window sign in question 1 to make it clear that: a) It was not intended to be an offer ‘to the world’ that was capable of acceptance by anyone who walked in and wanted one. b) It was intended to be an offer that would be honoured in all cases without exception? Draft a suitable sign for each requirement and hand both in at the beginning of your tutorial. Please only take account of the general principles of contract discussed in this subject – ignore statutory provisions, such as those dealing with false advertising, consumer sales or antidiscrimination laws....