This contract law assignment help answers the case study with the brief facts, issue of law, relevant law and application of law.
Oscar and Kate enter into a partnership in the name of OK Bakery. The business partnership requires more commercial machinery to meet customer demands. Oscar contacts Charlie (director of Bakery Aid) on behalf of the partnership and states that he requires a commercial food processor for his bakery. Charlie offers to sell Oscar a Swizz Processor. Charlie offers the swizz processor for $ 15,000 and makes the offer open till 24th January at 5 PM. But, Oscar wants to negotiate the offer and send an email to Charlie on 21st January 2014 that they are interested in buying the swizz processor but for $ 10,000. However, on 24th January 2014 they wrote a letter and email to Charlie in which they states that they are interested in buying the processor at $ 15,000 and request to ignore the previous mail. Due to problems with the OK Bakery ISP, the email is not received into the Bakery Aid email system until 6PM on Friday, 24 January 2014.
Charlie is at a four day conference between Tuesday, 21 January to Friday, 24 January 2014 and thus does not check or read his emails. On 27th January 2014, morning Charlie read all his mails and posts.
Issue of Law
The main issue is what the legal position of Charlie is and whether he is legally obligated to sell the Swizz Processor to Oscar and Kate.
A contract is created between the parties when one party offers the other party to do certain act and the same is being accepted by the other party on the terms of an offer but this acceptance should be with consideration and the parties must have the intention to be in the legal relation.
A contract must have the essential elements and those are three in number which are:
- Intention between the parties to enter into a contract and to be bound by the same legally.
- The parties must be in an agreement with each other.
- There must be consideration which is the basic essence of the contract or the contract must be written and properly executed.
Intention of the parties to contract – The intention in the contract plays a crucial role in certain contracts. It is very difficult to prove the intention in contracts that are formed within the domestic relations. The main case law which pointed out this view iis Balfour v Balfour  2 KB 571. Also there are a few more case laws supporting the above statement are Merritt v Merritt  2 All ER 760 & Cohen v Cohen (1929) 42 CLR 91.
But in contrast to the domestic contracts, in commercial finance contracts the intention of being in the legal relation is embedded therein only and one does not has to prove the same. The same is supported in Ermogenous v Greek Orthodox Community of SA Inc  HCA 8 & Esso Petroleum Ltd v Commissioners of Customs and Excise  1 All ER 117.
The concept of agreement in a contract – The concept of the agreement in a contract means that the parties to the contract agree on the contract as to their minds had met and that is the reason they had formulated the contract. There is consensus between the partied to the contract to be in it. An agreement is achieved after the following process:
Offer- When a person conveys to another that he is ready to be bound on the conditions given by him then that is called an offer. An offer must be promissory in nature and is held in Placer Development Ltd v Cth (1969) 121 CLR 353. An offer is converted into a contract when accepted on its terms. An offer and acceptance must reciprocate each other then only a contract is formulated. The case laws that elaborate and explains the above version are Pharmaceutical Society of Great Britain v Boots Cash Chemists (Southern) Ltd  1 QB 401 and Partridge v Crittenden  2 All ER 421.
An offer can be made to a specific person or to the public at large too and is held in Carlill v Carbolic Smoke Ball Co  1 QB 256. An offer expires after a certain period of time and the same can also be open for a certain period of time and after it the same expires and after its expiry the same cannot be accepted. Likewise the offer can also be withdrawn and the offer cannot be accepted after the same being withdrawal by the offer. An offer also comes to an end whenever the offer makes the counter offer. In that event the original offer lapses and cannot be accepted once the fresh offer is made by the offer.
- Acceptance is the necessity for the contract to be in existence. Few requisites of acceptance are as under:
- The acceptance must reciprocate the offer;
- Acceptance must be made before the expiry of offer;
- An acceptance must be communicated to the offer. If it not communicated to the offer then the acceptance is not complete.
- In case of acceptance is made by post then acceptance is complete as soon as the letter is posted by the offer (Henthorn v Fraser  2 Ch 27).
- In case of acceptance by telex machine or through fax machine then the acceptance is made when the massage is received by the offer on his machine (Brinkibon Ltd v Sthalwharenhandelsgesellschaft  2 AC 34);
- In case of the acceptance by an e mail the acceptance is said to have occurred when the email is actually noticed by the offer and not when the email is actually sent by the offeree to the offeror. So there is a deviation from the general postal rule in this class of acceptance.
- Consideration the main essence of the contract – Whenever the offer is acceptance it is accepted in exchange of something and that is known as consideration. Consideration is the motivating force for the contract (Thomas v Thomas (1842) QB 851). Consideration can be of various forms.
Application of Law
The law is now applied. It is submitted that the offer which is made by Charlie was rejected by Oscar and Kate via mail dated 21st January 2014 but now received by Charlie. Again on 24th January 2014 Oscar and Kate sent a letter and mail accepting the offer of Charlie. It is stated that by making a counter offer though mail dated 24th January the offer made by Charlie is rejected. Now, any mails and letters of acceptance after that have no relevance. On 27th January when all mails and letters that are received by Charlie, Charlie is under no obligation to honor the offer made as there is no establishment of contract as there is no acceptance.
To conclude, it is submitted that all essentials of contract is needed in order to make a contract binding. Any deprivation of any element will make a contract redundant.
Issue of Law
The main issues that arise are
- What are the statements that form part of the contract?
- What are the statements that do not form part of the contract?
- What terms are conditions and what are warranties.
There are various terms that form part of the contract. The terms that are intentionally made part of the contract by the parties are called expressed terms. Such terms are:
- Terms that exclude liability – the parties by these terms limit their liabilities of the contract. For example, the bus company limits the liability that may arise because any injury caused to the passengers of the bus. The concept is discussed in Causer v Browne  VLR 1. In order to make these terms valid these terms must be precise and clear and must be brought to the knowledge of the parties to the contract and the concept is discussed in Olley v Marlborough Court Ltd  1 All ER 304. Thus, when the exclusion clause is properly included than it is interpreted like any other term of the contract otherwise the interpretation is made against the preferred party interest. The concept is discussed in Sydney City Council v West (1965) 114 CLR 481;
- Terms that are implied by fact – the terms are considered to be implied when as per the facts of the circumstances it can be supposed that such term was intended by the parties to become part of the contract though not expressly specified. The main essentials that are looked into to consider a term as implied are:
- When circumstances submits that parties have intended to include the term as part of the contract;
- When the terms give business sustainability to the contract;
- They are not against the express terms;
- Should be clear, fair, and reasonable.
The concept of implied terms is discussed in Codelfa Construction v State Rail Authority of NSW (1982) 149 CLR 337 & Moorhead v Brennan  20 IPR 161
- Terms which become part of the contract by law – there are few terms which are impressed and become part of the contract with the help of corporation law. The law can include terms in a contract by three ways:
- In all contracts by common law – these are universal terms. These terms are that the parties must co-operate and must be reasonable in nature. The concept was discussed in Perri v Coolangatta Investments Pvt Ltd (1982) 149 CLR 537 & Secured Income Real Estate (Aust) Ltd v St Martins Investments Pvt Ltd (1979) 144 CLR 596. Further, the actions of the parties must be with good intention and is held in Alcatel Australia Ltd v Sarcella (1998) 44 NSWLR 349 & Burger King Corporation v Hungry Jack’s Pvt Ltd  NSWCA 187;
- In specific contracts by common law – these are called generic terms and is held in Breen v Williams  HCA 63; (1996) 186 CLR 71;
- By statute – many a times terms become part of the contract with the help of statue, such as, in case of sales of goods act. in Western Australia, the Sale of Goods Act 1895 is applicable. Section 13 of the Cat states that every sale of goods be must be by description and this is an implied condition. But no implied guarantee can be made in regard to best quality and the concept was discussed under Varley v Whipp  1 QB 513 . Section 14 (2) of the Act submits that the goods must be supplied so that they are fit for the purpose of the buyer and this is an implied condition. Section 14 (3) submits that there should be merchantable quality of the goods and is discussed under David Jones Ltd v Willis  HCA 47. Section 15 submits that sample must match with the goods.
Thus, this is the relevant law that is applicable.
Application of Law
It is assumed that there is a legally enforceable contract amid Oscar, Kate and Charlie based on the letter and email correspondence dated 24th January 2014.
The various statements and correspondences that can be gathered from the facts are:
- The Swizz Processor comes in three colors : black, red and white;
- Charlie says that the Swizz Processor is “the best thing since sliced bread”;
- Charlie states that the Swizz Processor has been proven to improve output and efficiency in bakeries by 25%;
- Charlie says that “this offer will lapse on Friday, 24 January 2014 at 5PM and acceptance can be made via email, fax or post”.
- On Tuesday, 21 January 2014, Oscar sends Charlie an email in which he made a counter offer for the swizz processor at $ 10,000.
- On 24th January 2014, Oscar and Kate, wrote a letter to Charlie in which they states that they are interested in buying the processor at $ 15,000 and request to ignore the previous mail.
- Oscar and Kate ordered red swizz processor through their email and letter dated 24th January 2014;
Now, after applying the relevant law to the given situations, the statements that form part of the contract are statement no 2-6 because the statements are expressed and implied by the parties to form part of the contract.
The statement that does not form part of the contract is statement No 1.
The terms which are implied conditions are terms No 2 & 3 under section 13 of the Sales of Goods Act 1895. The term 2 is a condition under section 14 (2) of the Act.
The terms which are warranties is statement 1 as the non-compliance will not make the purpose of the parties redundant.
To conclude it is submitted that there are various terms in the contract. Some are implied and some are expressed. Whatever are the forms of the terms but the same must be properly adhered to by the parties to the contract.
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Balfour v Balfour  2 KB 571;
Brinkibon Ltd v Sthalwharenhandelsgesellschaft  2 AC 34;
Carlill v Carbolic Smoke Ball Co  1 QB 256;
Cohen v Cohen (1929) 42 CLR 91;
Ermogenous v Greek Orthodox Community of SA Inc  HCA 8;
Esso Petroleum Ltd v Commissioners of Customs and Excise  1 All ER 117;
Henthorn v Fraser  2 Ch 27;
Merritt v Merritt  2 All ER
Placer Development Ltd v Cth (1969) 121 CLR 353
Pharmaceutical Society of Great Britain v Boots Cash Chemists (Southern) Ltd  1 QB 401;