200909

Enterprise Law

Some answers to questions raised in:

Tutorial 8: Making Deals - Creation of Contracts Part I

1. *Xavier owns an art gallery. In the gallery is a painting with a price of $400 written on a
ticket next to it. From a contract law point of view, what is Xavier doing when he
displays the painting in this way?

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a. Making an offer to sell it.

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b. Making an ‘invitation to treat’.

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*Tim goes into the gallery and sees the painting. Tim could do, or could say, any of the
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following things to Xavier, but which ones would be an offer to buy the painting?
a. I’ll take that painting. Can I pay by cheque? Is this an offer to buy or negotiations?
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b. I’ll pay $360 for that painting. offer

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c. Bringing the painting to the counter and holding out $400 in cash. offer

d. Who painted this painting? Request for information not an offer

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e. What’s the lowest price you can sell this painting for? Request for information not an
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offer

f. Would you take $360 for this painting? Request for information not an offer
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g. What a nice painting! I’m willing to pay $400 for it, but I’ll need to see if I can buy a
suitable frame for it first. Legally nothing
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3. *Assume Tim has offered $360 for the painting. Xavier might respond to Tim in several ways.
Which of the responses below would be acceptance of that offer?
a. All right, I’ll take $360. acceptance

b. Taking $360 in cash when Tim offers it and providing a receipt and the painting to
Tim. Acceptance by conduct

c. Xavier makes no response and takes no action. Not acceptance

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 Enterprise Law 200909
d. That’s a great painting — it was painted by John Olsen. Answer to a request for
information, not acceptance

e. I’ll consider selling it to you next week for $360 if I don’t get a better offer in the
meantime. Could this be a counter offer? Depends on how you interpret this.

f. I’ll take $375, but I can’t take anything less. Counter offer

4. *Read the scenario and answer the questions that follow.

Julie is selling her car. She places an advertisement online, together with several
photographs of the car, as follows:

Toyota Camry 1999, green in colour, air conditioned, 185,000

kms, logbooks available. $4,000. Email julie@bigpond.net.

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On Tuesday, Brian sends Julie the following email:

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I would like to buy the car you’ve advertised - it’s the same as

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one I used to have that I was very happy with. I can offer you
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$3,500 for it.
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Later that day, Julie replies as follows:
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Unfortunately, the lowest price I can sell the car for is $3,750.
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If you can arrange to pay me before next week, I will sell the
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car to you for that amount.

On Wednesday night, Julie’s son Alex asks whether he can buy the car. Alex doesn’t
have enough money, but says if Julie will sell the car to him for $2,500 he will paint
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her house and he also promises to have dinner with his parents every Sunday night
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and to spend more time studying for his University course. Julie’s house does need
painting, and she has already got a quote for $1,500 for the work. Julie agrees to sell
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the car to Alex on this basis.

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On Thursday, Julie checks her emails and finds an email from Brian that reads as
follows:

I’ve been to the bank, and I can afford $3,750 after all, so I’d
like to buy the car for that amount. I have the money with me -
when can I bring it over and pay for the car?
Brian’s message has been in Julie’s email Inbox since Wednesday morning.

With whom does Julie have a contract to sell the car, Brian or Alex?

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 Enterprise Law 200909
After a contract has formed to sell the car, she is bound to carry out that contract.
Importantly, she cannot then re-sell the car to someone else because, technically, she no
longer owns it herself. You cannot sell what you do not own.
Timing of the communications:
 Julie’s advert is an invitation to treat, Boots Cash Chemist case.

 Brian’s email on Tuesday could be an offer or could be taken to be an indication

of interest (does he need to actually see the car first?)

 If it is an offer, then Julie makes a counter offer (change in price) on Tuesday.

 Alex makes an offer on Wednesday night, for $2,500 cash, paint house, have
dinner every Sunday night. What does ‘spend more time studying’ mean? If it
can be given a meaning then it also is part of the offer.

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

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Julie accepted Alex’s offer on Wednesday night.

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 Julie read Brian’s acceptance on Thursday morning.

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However, Brian’s acceptance was sent on Wednesday morning, before Alex made
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his offer (later that night).

 Brian’s acceptance is not complete until it is communicated to Julie, which

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means she must have received the communication. The rules for electronic
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transactions apply here because Julie and Alex have been communicating by
email. Although Julie only read the email on Thursday morning, it had been in
her email inbox, which she had designated in her advertisement as the means of
communication, since Wednesday morning. Under the electronic
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communications rules, the email is treated as having been received once it

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arrives in Julie’s inbox, regardless of whether or not she reads it straight away, as
it is capable of being retrieved. She has specified the means of communication
in her original advertisement.
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 Brian communicated his acceptance of Julie’s offer, forming an agreement

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between them, before Alex made his offer.

This agreement needs to be supported by the necessary intention and sufficient

consideration. The parties are in a business setting so Brian could use that
presumption (Carlill’s case) and there does not appear any evidence of a rebuttal.
Consideration does exist as it is a car for money.

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 Enterprise Law 200909
Tutorial 9: Contract Law II: When Deals go Wrong - Interpretation
and Enforcement of Contracts

Cleo and Will are upset about the reception and want to know what rights they may
have against Bling in relation to the following aspects of the agreement.

1. The delay in access to the venue

(a) Has Bling breached Clause 1?

Yes. The clause specifies the exact time — Bling has breached this clause by not performing
their promise.

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(b) At one stage Cleo threatened to cancel the reception at Oatlands and hold it at a relative’s

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house instead.

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i. Would Cleo and Will have been entitled to terminate the contract in this

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manner?
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This depends on whether the starting time in Clause 1(iii) is a condition or a
warranty. Time for performance isn’t usually a condition, unless made express (which
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it isn’t here). However, in view of the nature of the agreement (it’s for a wedding)
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this clause could be regarded by the courts as a condition. To make this even clearer
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Cleo and Will could add a clause making time of the essence, or otherwise making
the time a condition. Breach of a condition entitles Cleo and Will to terminate.

Even if this were treated only as a breach of a warranty it could still sound in
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damages if Cleo and Will were to pursue it. Either way, Bling has at least some legal
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liability for this delay.

ii. Does Clause 3 (Cancellation) have any bearing upon your answer?
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No, Clause 3 would probably not apply as strictly speaking this is not a cancellation
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under the contract but rather a termination for breach.

(c) What could Bling do to avoid this sort of problem in the future?

Leave adequate gaps between bookings, as a practical solution. They could also could try
to change the wording of their contracts to allow for delays, or to set out alternative
arrangements if this happens.

2.The flowers
a. Assume that Bling’s failure to supply the gardenias was a breach of the
contract. Would this be a breach of condition or a breach of warranty?

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 Enterprise Law 200909
A warranty. Even though this is important to Cleo, there is nothing in the contract that makes
this a condition, and this is not the sort of issue that would make the contract worthless to
her (viewed objectively) so it is not a condition from a legal point of view. If Cleo wants to
make it a condition, she should make it express in the contract, such as by adding words such
as ‘this is a condition of the contract’. This does not guarantee the courts will interpret it
that way though.
b. Would this breach have entitled Cleo and Will to terminate the agreement
(for example, by holding the reception at a friend’s house instead)?

No, only breach of a condition entitles the innocent party to terminate.

c. What could Bling have included in the contract to cover this situation?

Bling could insert a clause along the following lines:

‘The Provider reserves the right to make minor changes to the details set out in item 2,

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above, or to substitute equivalent goods or services in the event that those specified are not

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available (through no fault of The Provider)’.

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5. Seafood canapés rs e
a. Has Bling breached Clause 2?
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No, since the contract refers only to a ‘range of canapés’ — this is too general to be
construed as a restriction on seafood.
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b. May Cleo rely on her conversation with Doug as evidence that Bling breached Clause
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2?

Is Doug’s promise a term of the contract? The promise does not contradict anything in the
written agreement and moreover, the promise was of the utmost importance to Cleo (it went
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to the root of the contract). In these circumstances the parol evidence rule may not apply, in
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that the court will conclude the contract is partly written and partly oral. Consequently the
courts would accept evidence of Doug’s promise. If satisfied that the promise was made, the
courts would declare Doug’s promise to be a term of the contract and would also find that
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Doug had breached this term.

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c. What could Cleo have done to give her and Will a stronger contractual position in
regard to guest food allergies?

Add an express term to the letter of agreement that there be no seafood served at the event.
This term should also be declared to be a condition of the contract.
d. What could Doug have done to give Bling a stronger contractual position in regard to
guest food allergies?

Doug might have included an ‘entire contract’ clause/merger clause (a term to the effect that
the written agreement constitutes the entire agreement between the parties). Had Cleo and
Will signed an agreement containing such a term they would be unable to place reliance on
any verbal promise made by Doug.

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 Enterprise Law 200909
6. The catering
a. Has Bling breached Clause 2?

No. The written agreement did not oblige Bling to supply a wedding cake and Cleo’s
communications were too vague to establish a verbal term in relation to it. This was a
situation of ‘mutual mistake’: the parties were both mistaken, but about different things.
This means that there was no ‘meeting of the minds’ in relation to the cake and
consequently, no term to enforce. The courts would not imply into the contract any
requirement for Bling to supply such an important feature of the wedding. The
consequences of this unfortunate misunderstanding would have to be borne by Cleo and
Will.
b. Other than the wedding cake, was anything else missing from ‘Option B’ in Clause
2(i)? Hint: imagine that you are a guest — what would you expect to be served at the

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reception that isn’t covered by the description?

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Drinks! Wine, soft drink and beverages (other than the champagne on arrival and the coffee

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with dessert) are not provided for in the written agreement. The parties should not have

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overlooked this. Although nothing came of the oversight on this occasion, Bling could have
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refused to supply drinks on the basis that drinks were not specified in the written
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agreement. In any subsequent legal proceedings, the courts would have to decide whether
the provision of drinks should be regarded as an implied term of the contract (that is, an
obligation which is standard within the catering industry or is so obvious that the parties
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would have included it had they turned their minds to it). Of course, this would not have
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helped Cleo and Will on the night. In summary: specify everything to prevent confusion
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about the parties’ obligations.

c. Are there any other parts of this letter of agreement that should have been made
clearer? (Consider the situation from the point of view of each of the parties).
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The term in Clause 2, ‘ensemble’, is too vague: does this mean a chamber or classical
ensemble, or a hard rock band?
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7. Payment
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Cleo and Will are disgusted with Bling and do not intend to pay the balance of the hire fee.
Doug has threatened to commence legal proceedings to recover the outstanding amount of
$4500 if they do not pay.

a. Are Cleo and Will obliged to pay the balance of the hire fee (or some percentage of
it)?

Cleo and Will need to take legal advice about this. It is possible that the courts would
declare that, since Bling breached the contract (by not making the Ballroom available on
time), it should not be able to recover payment from Cleo and Will. However, as Cleo and
Will received the benefit of the contract after 7:15 pm it is more likely that the court
would accept that partial performance occurred and consequently, order the couple to

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 Enterprise Law 200909
pay something on a quantum meruit basis (perhaps three-quarters of the amount, since
the ballroom was provided for about three-quarters of the period agreed in the
contract). Their lawyers would probably advise them to pay some lesser amount, or none
at all, in recognition of the distress that the breach caused them (see (b) below).

b. Do Cleo and Will have any right to compensation against Bling?

It is possible that Cleo and Will have a right to damages against Bling for disappointment
and distress brought about by its breach of contract. This would need to be determined
by the courts. They would be entitled to some compensation for the terms breached,
such as flowers.

c. What actions would you advise Cleo and Will to take?

Although they suffered disappointment and distress, Cleo and Will have not paid the balance

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of the cost of their wedding and any compensation awarded in their favour would probably

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be set off against the amount they owe. Unless Bling sues them to recover this amount, Cleo

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and Will would probably be best advised to avoid the further stress and expense of litigation
and take no action.

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Tutorial 10: Employers and Employees

1. *
a. Was the company entitled to ask Jane whether she is married?

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 Enterprise Law 200909
This could be discriminatory - marital status, so why ask it? Is it relevant to the job?

b. If the company does employ Jane, may it insist that she not become pregnant for
two years?

No, again this is clearly discriminatory. The requirements of this position cannot be
viewed as a genuine occupational requirement for this type of job. Even if she made the
undertaking Jane would not be bound by it. The National Employment Standards cover
maternity leave and paternity leave.

2. *Brian is a welder employed by an engineering company. His employer sends him to a

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construction site to weld some handrails into place. Unknown to Brian, the immediate area in

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which he is working is soaked in petrol following a spillage yesterday. Sparks from Brian’s

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equipment fall onto the ground and start a fire which cannot be controlled. The fire destroys a
large part of the adjacent building.

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The owners of the building want to sue and tell Brian that he will ‘lose his house’ for causing
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the fire. Is Brian likely to be sued and forced to pay compensation to the building's owners?
Give reasons for your answer.
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No, the law of vicarious liability protects Brian from liability for the accident. Only Brian's
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employer could be ordered to pay compensation for the accident. This would be the case
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even if Brian had himself been negligent (for example, if he had smelled the petrol and
continued to work anyway). Brian could only be personally liable if he had deliberately set
the fire or had committed some other criminal act. Brian would only be personally liable if he
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was acting a long way outside the scope of his job/employment (what he was supposed to
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be doing) - even if he was doing his job badly or incompetently, he would not be liable
himself. The key advice for any business that has employees is that they must be insured
against the risk of a claim being made over the actions of an employee acting within the
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course of their employment - even if the work is being done badly, the employer will often
still be liable.
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3. *Kamran is a recent immigrant from Pakistan who works in a petrol station as a cashier. At the
end of a late night shift, two men held-up the store and stole a small amount of cash from the
till. Kamran was assaulted during the robbery, receiving a serious injury to his arm when he
was pushed to the ground. Kamran claims that the manager of the service station (who was in
the office at the time of the robbery) did not call a doctor for him, refused to pay any medical
bills and said he would have him ‘sent back to Pakistan’ if he made any complaints. Two weeks
after the incident, Kamran’s manager dismissed him without notice. Kamran feels that he has
been treated unfairly and unlawfully by his employer. He would like to know what remedies
could be available to him if he pursued his employer through the courts.

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 Enterprise Law 200909
What breaches of the law do you think Kamran’s employer has committed? What remedies
do you think could be available to Kamran if he decided to pursue his employer through the
courts? Give reasons for your answer.

Probable breaches:
 Failure to provide workers compensation for a workplace-related injury - this fairly
clearly happened in the course of employment.
 Discrimination based on race.
 Unlawful and unfair dismissal.

 Potential remedies:
o Compensation for injuries sustained at work.
o Reinstatement in former (or equivalent) position.

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o Reimbursement for lost wages.

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o The employer may also be prosecuted for discrimination and other breaches of the
law by the relevant workplace authorities.

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