Business Law – Case Study By Jesses A seller must be a corporation to be under the TAP. As Frank Hardware is a sole proprietor, it therefore is not subjected to the TAP. It then must fall under GA-IV. GA- IV applies to all consumer contracts for the sale of goods that take place in the course of business, irrespective of whether the seller is a corporation, a partnership or a sole trader. 1. 3 What are the Implied terms that are breached? (I) GA-IV s(90) Fitness for particular purposes John had a contract with Frank for the supply of materials and the sale took place in the course of a business.
John made known the purpose for which the goods were required and had relied on his skill and Judgment in choosing the appropriate materials. It was also reasonable for John to rely on Frank. Therefore, there is an implied condition that the materials supplied be fit for that particular purpose. However, the materials were not of the purpose for which it was supplied. This implied term had been breached. (it) GA-IV s(89) Merchantable quality As the materials were sold in the course of a business, there is an implied condition that the materials be fit for their normal purpose(s) having regarded the price.
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When the materials were delivered, the pine is not limed and the Oregon beams have unsightly knots. John was not aware of the defect before the sale and if John had inspected the materials before sale it would not have revealed the defect. This is because John did not know that he actually had to lime the pine himself and the knots on the beams might not be easily seen. Therefore, there is evidence that this 1. 4 What is the effect of exclusion clause? As the materials bought by John is a kind normally acquired for personal consumption, Frank cannot rely on the exclusion clause to exclude his liability.
This is evidenced by GA-IV sis(1). 1. 5 What are the remedies available? John can terminate the contract and sue for damages. This means that he may return the materials and receive a refund. However, the goods must be returned as mime after delivery, the goods may be returned within reasonable time after discovering the defect. John may also receive compensation for losses caused by the breach of implied terms. 2. 0 2. 1 CONTRACT BETWEEN JOHN & SUE. Offer or Invitation to Treat? First, we need to distinguish offer from invitation to treat. An invitation to treat is an invitation to others to make an offer.
Generally, an advertisement amounts to an invitation to treat. This is held in Partridge V Christened  2 All ERR 421, where Sue will be inviting John to make an offer. However, there is an exception. An advertisement can also be an offer. This can be illustrated in Cargill V Carbolic Smoke Ball Co  1 CB 256 in which Sue might probably argue that it was an offer. This being the case, Sue is the offer will stressed that the offer was assumed to be accepted by John upon saying ” I think that’ll be okay “. An offer, once accepted, cannot be revoked.
Therefore there will be a binding contract. Assuming that it is an offer, it can either be a counter offer or a mere request for more information. 2. 2 Counter Offer or Mere Request for More Information? An offer will be rejected if there is a counter offer. A counter offer tampers with the original condition of the offer, it rejects the original offer and can no longer be accepted at later date. Looking at the words used in John’s reply ” I hadn’t expect it to be so high “, it is possible that this was either an acceptance with a request for more information, or a counter-offer.
If the court found the facts here sufficiently similar to those in Stevenson Jacques V McLean (1880) 5 JOB 346, it could hold that the words were a mere request for information. This being the case, the offer remains open and can be accepted. Another alternative is that the court might hold that John’s reply amounts to a enter offer as it seems to add new terms to the offer. This would be similar to Hyde V Wrench (1840) 3 BEA 334, in which the counter offer involved a reduction in price.
As in that case, the counter offer made by John had the effect of destroying the by quoting the price of $1 500, clearly shows that she had accepted the counter offer and made a new offer. It is now up to John, the offered, to accept or reject the offer. 2. 3 Acceptance or Rejection? Sue could rely on the fact that the mode of communication is instantaneous, I. E. A telephone conversation. She will argue that John’s response over the phone is assumed to be an acceptance to the new offer. This forms a contract in which she can argue that it had been breached.
REMEDIES FOR SUE (Damages) However, John can argue that there was no contract because his response failed to satisfy the rule that an acceptance must be absolute and unqualified. In fact, it’s a statement of his opinion of what he thought and therefore he reserved the right to change his mind. An offer, which had not been accepted, does not form a contract. Therefore there is no breach of contract and that he did not have to pay the pro rata amount requested by Sue. REMEDIES FOR JOHN (DO not have to pay) Having considered both sides of the argument, it is more likely that there is a contract between John and Sue.
And that it is a breach in which John had to pay It is clear that there is a service contract in which Drawing is to provide a plan for John. Due to the fact that terms implied under Statute only apply to consumer contracts, we need to determine if one exists in order to enforce the implied terms. 3. 1 Is it a consumer contract? To illustrate whether it is a consumer contract, we need to compare the definition of consumer under Trade Practices Act (TAP) and Goods Act Part IV (GA-IV). B(b) (I) of the TAP required that price of the service be less that $40,000.
If it exceeds that amount, it must be a kind ordinary acquired for personal use. Sis(a) of the GA-IV restricted that amount to be under $20,000. Similarly, if exceeds that prescribed amount, it must be for personal consumption. Given the service price of $1,400 and that John had acquired it for personal use, it is consumer contract. We then need to identify which of the Acts it falls into. 3. 2 TAP or GA-IV? TAP probably applies because there is evidence that Drawing is a corporation. This can be recognized by the ‘Pity Ltd’ in Drawing’s company name.
Having recognized that it subjects to TAP, it is obvious that GA-IV does not apply. 3. 3 What are the Implied Warranties that have been breached? As Drawing provide the similar service as Sue, we assumed that John had also made know the purpose for which the plan was required and that relied on the seller’s skills to perform the service. (I) TAP sis(1) Due and skills Drawing supplied the services in the course of a business, so there is an implied warranty that the service will be rendered with due care and skill. The material supplied (plan) in connection with the service must also be fit for the purpose for which they are supplied.
It is obvious that Drawing had breached this implied warranty because the material supplied was not fit for the purpose, I. E. It did not meet the Council’s standards. TAP sis(2) Fitness for particular purposes Applying our assumption that John had made known to Drawing his requirements for which the services were required and that Drawing had supplied the service in the course of a business. There is an implied warranty that the service and the materials supplied in connection of the service will be reasonably fit for that purpose and that t is reasonable for John in that circumstances to rely on Diarist’s skill.
The plan did not meet the Council’s requirement. This shows that it did not fit the purpose for which the services were required. Therefore there is a breach of this warranty. 3. 4 Can the implied terms be excluded? As the service provided is of a type ordinarily acquired for personal domestic or warranties. 3. 5 What are the remedies that are available? John can terminate the contract and sue for damages. This means that he could get a refund for the services and also receive compensation for the losses caused by the breached of the implied terms.