Elements Of A Valid Contract And Exclusion Clauses – Australian Business Law Assignment

Offer

This section of the report will discuss the essential elements of a valid contract. This section of the report will also discuss whether a contract existed between the café and Avinash.

Offer- An offer is described as a promise of paying a consideration by the promisor to the promisee for the fulfillment of the promise. However for an offer to be considered to be valid, such offer must not be ambiguous and must be complete in its terms. The court stated in the notable case AGC (Advances) Ltd v McWhirter that an offer would not be considered to be a valid one if such offer lacks certainty of the terms or if the terms are incomplete. In such a scenario in which the offer lacks certainty and completeness in relation to its terms such an expression would be considered to be a mere invitation to treat.  It had been held in the notable case Pharmaceutical Society of Great Britain V Boots Cash Chemists ( Southern) Ltd  that goods displayed on the shelves of a store would not constitute an offer but a mere invitation to treat.  Thus in this given case study it can be stated that the self service menu presented by the café merely constituted an invitation to treat. However, when Avinash had placed the order of the pastry and the beverage from the digital self service menu, it constituted a valid offer. He was the offeror in this case who offered to pay consideration to the cafe for serving the order.

Acceptance- Acceptance can be considered to be second most important essential of a valid contract. A contract will legally bind the parties only when the offer has been accepted by the offeree. However for an acceptance to be considered valid:

• it has to be clear and un ambiguous
• It has to be accepted on the terms of the offer. Making any change in the terms of the offer while accepting it would not constitute valid acceptance but a mere counter offer Masters v Cameron
• The acceptance of the offer must be made as per specified criteria of the offeror.
• The person who accepts the offer must be aware of the offer and be acting in reliance of the offer as held in the case R v Clarke
• The acceptance of the offer has to be communicated to the offeror for the acceptance to be considered to be considered to be valid as held in the case Powell v Lee .Silence on the part of the offeror will not constitute valid acceptance as held in the case Felthouse v Bindley.

Thus by analyzing the facts of the case and applying the legal provisions to the same it can be stated that café had accepted Avinash’s offer in accordance with the terms of the offer. The acceptance of the offer had also been communicated to Avinash by the Café in the form of the printed ticket. The printed ticket given to Avinash by then café was the proof of the acceptance of Avinash’s ofer.

Intention to create legal relations- A contract will legally bind the parties only on the occasion the parties to the contract must have intended to create legal relations. In the case Carlill v Carbolic Smoke Ball case it had been held that intention to create legal relations must be assessed from the viewpoint of a person who is reasonable in nature. Further in accordance with the judgment of the case Air Great Lakes Pty Ltd v KS Easter (Holdings) Pty Ltd, it can be stated that an objective test is to be applied to assess whether the parties intended to create legal relations.  Thus by the analyzing the facts of the case it can be said that both Avinash and the café intended to create legal relations as it would be evident to any reasonable person that the print of the ticket would indicate the parties intended to be legally bound.

Acceptance

Consideration- Consideration is also an essential element of a contract. Consideration can be described as the price which is stipulated by the offeror to the offeree for fulfilling the promise.  The case & Co Ltd v Nestle Co Ltd  is a notable one which provides the description of considerations. As held in the case the promisor must stipulate the promise. Thus by assessing the facts of the case it can be said that the price paid by Avinash for the food and beverages ordered can be considered to be valid consideration.

Thus it can be said that all the essential elements of a valid contract had been present in the contract that had been formed between the café and Avinash.

Issue:

In this given scenario the issue that has been identified is whether the Café is liable to pay damages to Avinash or whether the café can rely on the exclusion clause written in the printed ticket.

Rule:

The principle of exclusion clause is relevant in the given case study. An exclusion clause can be defined as a particular term in the contract which aims to restrict the liability of the party to the contract who incorporates such term.  However, it can be stated that for an exclusion to be held effective, such exclusion clause has to be brought to the attention of the parties at the time of entering the contract. This had been held in the case L’Estrange v Graucob. In another landmark case Darlington Futures Ltd v Delco Australia Pty Ltd¸it the court held that exclusion clause is to be treated as any other general term of the contract. However, to assess whether reasonable notice of such exclusion clause had been given the application of an objective test is necessary.  Test would assess whether the parties had taken reasonable steps to inform the other party about the existence of the exclusion clause as held in the case Balmain New Ferry Co Ltd v Robertson The timing of giving notice of the clause is important as an exclusion clause cannot be incorporated in a contract after it has been signed by the parties as provided in the case Olley v Marlborough Court Ltd. It can be stated that that incorporation of an exclusion clause at the back of a ticket would not restrict the liability of the parties as provided in the Thornton v Shoe Lane Parking Ltd case. However, if an exclusion clause breaches the consumer warranties of a customer such exclusion clause would be considered to be invalid. It can be stated in relation to section 3 of schedule 2 of the Competition and Consumer Act 2010, which contains the principles of Australian consumer law that any person who consumes any goods or services can be considered to be a consumer if the amount of the goods did not exceed the amount of 40,000 and the goods or services consumed were for personal, domestic or household purposes.  Further it has been provided in section 64 of the ACL that the terms of a contract can be modified only in circumstances when such modification aims to provide remedies to suppliers against the claims of suppliers by relying on the exclusion clause.  However the remedies as provided in section 64 of the ACL is not permitted and available to the suppliers who provide goods and services to customers which are to be used for personal consumption or for household or domestic purposes.  Further it has been provided in section 64 of the aforementioned act that remedies and warranties which are granted to consumers by the ACL cannot be taken away by any term of the contract.  In accordance with section 260 of ACL it can be stated that a supplier or manufacturer has the legal obligations to customers in case the services or provided to the customers fail to comply with the consumer guarantees as provided in section 60-644.

Intention to legally bound

Thus by analyzing the facts of the case, it is to be stated that a valid contract had been made between Avinash and the Café . However it is important to mention that when Avinash had placed the order, he had not been intimated or notified about the presence of the exclusion clause. Thus by the application of the L’Estrange v Graucob case it be said that the exclusion clause would not restrict the liability of the café. Further as provided in the notable case Thornton v Shoe Lane Parking Ltd that the liability of a party who has incorporated the exclusion clause would not be restricted or limited by the representation of an exclusion clause at the back of the ticket.

In addition to the provisions of common law regarding exclusion clause, it can stated in accordance with section 64 of the ACL that any term of the contract which takes away the consumer guarantees of a consumer will be held to be in valid and such term cannot be given any effect. Thus in this case the exclusion clause printed at the back of the ticket would not restrict the liability of the café.

Conclusion

Thus to conclude, it can be stated that the café cannot limit its liability due to the existence of the exclusion clause and Avinash is entitled to claim damages from the café.

Terms of a contract

It can be stated that the obligations and the rights of the parties to the contract can be described as the contract terms. A contract valid in nature must contain either express or implied terms or both.

Implied terms

Implied terms are although not expressly mentioned neither agreed upon by the parties but are binding upon the parties if it is assessed by the courts that the existence of such terms are necessary for performing the contractual obligations of the parties. A term can be implied in a contract by the courts or by statutory provisions. In the notable case The Moorcock it had been held by the court that a court can assess that a term  is attached to the contract when such terms is necessary for carrying out the other terms or for maintaining the validity of the contract. Whether a term was implied in the contract has to be evaluated from the point of view of a person reasonable in naure. In accordance with the decision of the case Balmain New Ferry Co Ltd v Robertson it can be stated that terms of a contract can be implied due to past dealing between the parties.  In another case British Crane Hire Corp Ltd v Ipswich Plant Hire Ltd [1974] 2 WLR 856 the court held that the a term can be implied in a contract due to usage of trade or practice of the industry.

Express terms

An express term is one which is clearly provided in the contract either in writing or orally. The case dealing with the express terms is Wilson v Best Travel.

Conditions

It can be stated that conditions are considered to be the most important terms of the contract. A condition can be considered to e a form of stipulation and breach of the same right to the non breaching to rescind the contract. It can be stated that non fulfillment of the conditions of the contract generally affects the validity of the contract.

Warranties

However, warranties are considered to be less important than conditions in a contract. If the warranties of the conditions are not fulfilled the contract does not get affect however, the subsidiary goal of contract gets affected. A breach of a warranty of a contract does not provide the aggrieved party the right to repudiate the contract. However such aggrieved party can claim damages.

It is clearly evident in this given scenario that the term of exclusion clause was an invalid one. Avinash had ordered food from the café; the café accepted the order as per the terms proposed by Avinash. The order had been placed from the self service menu of the café. Therefore the terms of the contract formed between Avinash and the Café was expressly mentioned to the parties. However, there was an implied term in the contract which had been implied by the ACL. Such implied term provided consumer guaranties to Avinash.

References

(Advances) Ltd v McWhirter(1977) 1 BLR 9454

Pharmaceutical Society of Great Britain V Boots Cash Chemists ( Southern) Ltd (1953) 1 QB 401

Masters v Cameron (1954) 91 CLR 353.

R v Clarke (1927) 40CLR 227

Felthouse v Bindley (1862) 142 ER 1037

Powell v Lee (1908) 99LT 284

Carlill v Carbolic Smoke Ball

Air Great Lakes Pty Ltd v KS Easter (Holdings) Pty Ltd [1989] 2 NSWLR 309. 

case Balmain New Ferry Co Ltd v Robertson (1906) 4 CLR 379

case Olley v Marlborough Court Ltd [1949] 1 KB 532

Thornton v Shoe Lane Parking Ltd [1947] [1971] 1 QB 163.

L’Estrange v Graucob

The Moorcock(1889) 14 PD 64,

Balmain New Ferry Co Ltd v Robertson (1906) 4 CLR 379

Wilson v Best Travel

Competition and Consumer Act 2010