Contracts 1 Assignment

Contracts 1 Assignment Words: 2045

DR AMBER v MAGGIE Selwyn Selikowitz Group No: 3613 Advice has been sought as to whether or not Dr. Amber has an enforceable contract with Furniture Comfort, and whether she is entitled by law to buy the couch at the discounted price. In order to address the issue, one needs to start by examining each of the four essential elements for contract formation: agreement, consideration, certainty and an intention to create legal relations. [1] 1. NEWSPAPER ADVERTISEMENT The newspaper advertisement is not an offer but an invitation to treat.

In Boots v Pharmaceutical Society of Great Britain, it was decided that ‘a contract is not completed until, the customer having indicated the articles which he needs, the shopkeeper, or someone on his behalf, accepts that offer. ‘ The items on the shelf of the ‘self services’ shop were treated as offers to treat. This decision was due to the nature of the shop. It is not only inconvenient but also practically and legally unfeasible to be entered into a contract every time one picks up an item from the shelf. Advertisements are presumed to be invitations to treat due to similar reasoning.

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The exception to this presumption can be found in Carlill v Carbolic Smoke Ball, where the advertisement was determined to be an offer as there was an express intention to pay money in the event of certain circumstances occurring. This exception doesn’t apply to the present case. The reasonable person would interpret phrases such as “25% off all selected floor items”, and “We beat all competitors” in Furniture Comfort’s advertisements as not indicating a offer to enter into a contract with all readers, but merely inviting them to make an offer. Thus the newspaper advertisement is an invitation to treat. . OFFER Dr Amber saw this ‘invitation to treat’ and responded by visiting Furniture Comfort. Being unhappy with the fabric on the model, she wished to buy a couch with a suitable fabric of her choosing. She made an offer to buy the couch as long as the fabric was one she chose and the couch was sold to her immediately upon her return. This conditional offer is made evident through her words “I assume the sale will still be on”, and “I’ll need it immediately after that. ” Now under the main offer she gave an option, a condition to the purchase.

An option contract is defined as ‘an agreement for consideration under which a party acquires a right exercisable before a specified time to buy or sell property at a given price from another party. ‘[2] In Goldsbrough Mort & Co v Quinn, the grantor gave the option holder an option to purchase certain land at a specified price at any time within one week of the agreement in return for the sum of five shillings paid to the grantor. In the present case, the option was Dr Amber’s offer to buy the couch as long as the couch was reserved for her. 3. ACCEPTANCE In response to Dr.

Amber’s offers, Maggie replied “We can do that if you prefer. Let’s go to my office. ” Whether or not Maggie’s reply and consequent actions can be construed as an acceptance of the offers depends on whether it satisfies certain rules in contract law regarding acceptance. (a) The acceptance must be communicated In Felthouse v Bindley, it was determined that silence cannot be taken to indicate acceptance. [3] Although the acceptance may have been inferred by conduct of the nephew, his intention was not communicated to the uncle, and thus it was found that no acceptance had been made and no contract was formed.

In this case Maggie explicitly responded to Dr. Amber’s offer with the words “We can do that if you prefer. ” Thus the acceptance was communicated (b) The acceptance must be absolute and unqualified The acceptance must be complete, without changing any of the terms. Otherwise, instead of an acceptance it would be a counteroffer. In Butler Machine Tool Co Ltd v Ex-Cell-O Corp this distinction was made clear, in the ‘battle of forms’ involved. ‘Acceptance’ based on changing of conditions of an offer of one party was deemed to be a counteroffer, not an acceptance. Maggie in this case has absolutely agreed to the conditions of Dr.

Amber’s offer, reflected through her actions in allowing Amber to sign the special order information and also to leave with the fabric. (c) Acceptance must be in reliance of the offer In Crown v Clarke, Clarke was found to have not acted in the faith of or in reliance of the offer, but rather for his own intentions. Thus he was found to have no claim to a reward he had received under contract. In the present case, Maggie knew the specific details of the offer such as “reserve the couch now”, “take the samples” and “order the couch when I get back” Thus her acceptance was made in reliance of the offer and the option. d) Must be in compliance with the offeror’s offer Maggie complied with Dr. Amber’s offer by allowing her to leave with the samples, and placing a special order in the ‘fabric checkout binder. ‘ There was therefore a legally recognisable acceptance on Maggie’s part. Maggie accepted Dr. Amber’s option of keeping the couch reserved, as well as her offer of purchasing the couch. 4. INTENTION TO ENTER INTO LEGAL RELATIONS The courts adopt a ‘strong presumption’ that commercial transactions are intended to create legal obligations, which ‘will only be rebutted with difficulty. [4] In Ermogenous v Greek Orthodox Community of South Australia, the judges did not overturn this presumption despite the case being a sensitive one dealing with unpaid benefits of a minister of religion. It is clear that Dr. Amber and Furniture Comfort through Maggie were entering into a commercial agreement and thus it is presumed that they had a serious intent to enter into legally binding relations. The reasonable person would also infer from the actions of Dr. Amber and Maggie that they intended to enter into a legally binding agreement.

Not only did Maggie say “We can do that if you prefer”, she wrote into her diary the special order and allowed Dr. Amber to leave with the fabric samples. Dr. Amber signed the details of the special order in Maggie’s diary, and took home the fabric samples. It was made pretty clear through her actions that she wanted to buy the couch. Her phrasing of the offer to Maggie also indicated this intention, as if she did not intend to be bound, she would have used more ambiguous language.

The reasonable person would see, however, that language such as “I’ll need it immediately” and “I assume the sale will still be on” is not ambiguous. It is clear from both language and actions that both Dr. Amber and Maggie intended to form a binding contract. 5. CONSIDERATION Consideration is a requirement of the enforceability of promises. There are two aspects of the definition of consideration: (a), the promisee must incur a detriment or confer a benefit on the promisor and, (b), that benefit or detriment must be given in return for the promise. [5] (a) Benefit/detriment requirement

Atkin LJ defined consideration as consisting “either in some right, interest, profit or benefit accruing to one party, or some forbearance, detriment, loss or responsibility given, suffered or undertaken by the other. “[6] Dr. Amber, the promisor, received an executory benefit as Maggie promised to sell the couch to her in the future. Maggie, the promisee, received detriment as she was now under an obligation to perform the promise, thereby not being able to sell the couch to any other buyers. Thus there was consideration under the benefit/detriment requirement.

However this definition was found to be irrelevant to certain cases. For instance in AWM v Commonwealth, it was determined that though AWM did act to their detriment in reliance of the Commonwealth’s promise, this was irrelevant as the court considered that for there to be consideration, there must be ‘bargaining’. (b) The ‘bargain’ requirement The act relied on as consideration must also be performed as the agreed price of the promise. This is the ‘bargain’ requirement, a notion adopted by the High Court in AWM v Commonwealth.

The acts must be performed, or the promise made, as a quid pro quo for the other party’s promise. In the present case, it could be argued that Dr. Amber made a promise to buy the couch as a quid pro quo for Maggie’s promise to give the couch. However, given the facts, it would be more reasonable to say that this was not the case. Dr. Amber believed she was, as a result of negotiations, able to purchase the ‘Chipendale’ styled couch at the sale price in addition to having the couch upholstered by the fabric of her choice.

The detriment on behalf of Furniture Comfort was that they would have to provide the ‘special order’ at the sale price rather than the original price, as the “sale price didn’t apply to special order items. ” Thus there was no quid pro quo relationship, and the promise was not made in return for the agreed price of the other promise. Therefore there was no consideration under the ‘bargain’ requirement. 6. WAS THERE AN ENFORCEABLE CONTRACT? There is unfortunately no enforceable contract between Dr. Amber and Maggie. In response to the invitation to treat presented by the advertisement, Dr.

Amber made a clear offer . with an option, and this was accepted by Furniture Comfort through Maggie. There was a serious intention under this business environment to enter into binding contract that was supported by the language and actions of the parties. However, the key was that there was no satisfactory consideration as recognised by law. In Woolworths Ltd v Kelly, it was determined that consideration must be sufficient, but need not be adequate. Unfortunately, the promise Dr. Amber gave of promising to buy the couch was not sufficient consideration for Maggie’s promise of giving the couch to her.

In the present case, the benefit/detriment requirement was applicable. In addition there was also a reliance of Dr. Amber on Furniture Comfort to sell the couch made by special order at the sale price rather than the original price, as she passed up an opportunity to buy a similar couch for $1000. However in AWM v Commonwealth it was decided that reliance “in pursuance of the said agreement” was not sufficient unless it would appear that the “statement or announcement which is relied on as a promise was really offered as consideration for the doing of the act.

It is also necessary that the act was really done in consideration of a potential promise inherent in the statement or announcement” The connection between these two is what results in a quid pro quo. However in the present case there was no such connection, as the promise given by Furniture Comfort did not match up with the promise Dr. Amber gave. These were two different promises with different conditions. Thus in view of the light of the bargain theory, Dr. Amber gave insufficient consideration. Consideration must be given for there to be an enforceable contract.

Had there been sufficient consideration, there would have been a contract between Dr. Amber and Furniture Comfort. Maggie would then have been legally obliged to sell the couch to Dr. Amber with the new fabric and at the discounted price, as these were conditions she had absolutely agreed to. However there was no sufficient consideration given. Thus Dr. Amber does not have an enforceable contract with Furniture Comfort. Word Count: 1996 words LAWS 1071 TAKE HOME ASSIGNMENT z3291540 Suha Kim CONTENTS 1. Newspaper Advertisement 2. Offer 3. Acceptance 4. Intention to Enter into Legal Relations . Consideration 6. Was There an Enforceable Contract? Word Count: 1996 Words ———————– [1] Jeannie Paterson, Andrew Robertson, Arlen Duke, Contract – Cases and Materials, 11th ed, Sydney, Thomson Reuters Australia Ltd, 2009, p. 37 [2] Butterworths Concise Australian Dictionary, 3rd ed, Australia, LexisNexis, 2004 [3] Willes J [4] Helmos Enterprises Pty Ltd v Jaylor Pty Ltd [2005] NSWCA 235 [5] Jeannie Paterson, Andrew Robertson, Arlen Duke, Principles of Contract Law, 3rd ed, Sydney, Thomson Reuters Australia Ltd, 2009, p. 74 [6] Balfour v Balfour [1919] 2 KB 571

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