Contract Formation Business Law Assignment

Case study

Oscar and Kate decide to enter into a partnership to open a bakery. They decide to call their bakery OK Bakery. Ok Bakery supplies their baked goods to cafes and local supermarkets at wholesale prices. The bakery becomes very successful and soon Oscar and Kate need more commercial machinery to meet customer demands.

Oscar contacts BakeryAid, a national supplier of baking equipment and machinery, on behalf of the partnership. Oscar speaks to Charlie, the sole director of BakeryAid, and informs Charlie that he requires a commercial food processor for his bakery.

Charlie offers to sell Oscar a new limited edition food processor that has just been developed and released in Switzerland, called Swizz Processor. The Swizz Processor comes in three colours: black, red and white. Charlie says that the Swizz Processor is “the best thing since sliced bread”. Also, Charlie states that the Swizz Processor has been proven to improve output and efficiency in bakeries by 25%. Charlie says he is prepared to sell the Swizz Processor to Oscar for $15,000. He says this offer will lapse on Friday, 24 January 2014 at 5PM and acceptance can be made via email, fax or post.

Oscar and Kate think that Charlie’s offer is very good and one which would enable OK Bakery to increase production and profit. Oscar and Kate are eager to accept Charlie’s offer, but feel that they should negotiate better terms. On Tuesday, 21 January 2014, Oscar sends Charlie the following email:

To: charlie.brown@bakeryaid.com.au

From:  admin@okbakery.com.au

Sent: Tuesday, 21 January 2014

Subject: Swizz Processor

Dear Charlie,

My business partner, Kate, and I are very interested in your offer made on Monday, 20 January 2014, regarding the Swizz Processor. However, we believe that the food processor will only deliver a 15% return on capital, so we are only prepared to pay you $10,000 for the Swizz Processor.

Please let us know if you are willing to accept $10,000. Regards,

Oscar

Partner, OK Bakery

 Check more assignment help on Aspects of Contract and Negligence in Business>>>>

Charlie is at a four day conference between Tuesday, 21 January 2014 to Friday, 24 January 2014. During this period, Charlie does not check or read his emails. Meanwhile Oscar and Kate have reconsidered their position and are feeling nervous that they may have missed out on a great opportunity because they have not heard back from Charlie. On the morning of Friday, 24 January 2014, Oscar and Kate decide to accept Charlie’s original offer and Oscar posts Charlie the following letter:

              To: charlie.brown@bakeryaid.com.au

Please disregard my email dated Tuesday, 21 January 2014.

My business partner, Kate, and I would like to accept your offer to purchase the Swizz Processor for $15,000. We would like a red Swizz Processor.

Please advise when and how you require payment.

Regards,

Oscar

Partner, OK Bakery

To be on the safe side, Oscar also emails a copy of the letter to Charlie’s email. Due to problems with the OK Bakery ISP, the email is not received into the BakeryAid email system until 6PM on Friday, 24 January 2014.

On the morning of Monday, 27 January 2014, Charlie reads his emails and opens the post. He receives all of Oscar’s post and email correspondence at once. He is considering his legal position and whether he is legally obligated to sell the Swizz Processor to Oscar and Kate.

Question one (15 marks):

Using the four step process, discuss the element of agreement required for the formation of a contract. Consider whether an agreement has been formed between Oscar, Kate and Charlie. Can Oscar and Kate legally enforce the contract?

Question two (15 marks):

 Assume there is a legally enforceable contract between Oscar, Kate and Charlie. That is, the parties have entered into a legally enforceable contract based on the letter and email correspondence dated 24 January 2014.

Using the four step process determine the express contents of the contract, based on the correspondence that has taken place thus far. In your answer you will need to indicate what statements form part of the contract and those that do not. Furthermore, in your answer you will need to indicate whether the terms are conditions or warranties.

NOTE:

·          The fact scenario used in this assignment is fictitious.

·          Students are to focus on answering the assignment questions with reference to the materials covered in topics 3 to 5 inclusive. Students do not need to (and should not) undertake any additional research. The level of detail and information contained in the course materials is sufficient to answer the assignment.

·          Note the four step process requires students to refer to legislation or case law as authority for the rules of law explained in step two. Where appropriate you will need to refer to any applicable legislation or case authorities contained in the materials for topics 3 to 5. You may also want to review the materials on referencing that were provided for the first assignment.