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

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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.

Aspects of Contract and Negligence for Business

You are required to fulfil the following four tasks. Each answer must address the task, and provide analysis and application with reference to relevant case law and statutory provisions. The total word limit is 3,500 words; your assignment should be at least 3,000 words in length.

Task 1

“Techno Products” is a small business that specialises in selling computers at discounted prices.

“Techno Products” has seen its profits decline and decides to run an advertising campaign to attract new customers. As part of this campaign it pays for a newspaper advertisement that states: “The first ten customers to enter our shop on the 12 September 2013 will be eligible to purchase one of our highest specification computers, which normally retail at £3000.00, for £1.00”.

Peter reads the advertisement and waits outside “Techno Products” shop all night on the 11 September 2013 to ensure that he is one of the first ten customers on the morning of the 12 September 2013. He is in fact the first customer to enter the shop on the morning on the 12 September 2013.

When Peter tells the sales assistant that he wishes to purchase one of “Techno Products” highest specification computers for £1.00 he is told that the advertisement was not meant seriously and nobody of “sound mind” would think that they could purchase a computer for £1.00. He is informed that if he wishes to purchase the computer he must pay the “market rate” of £3000.00.

Peter has sought your advice as to whether he can force “Techno Products” to sell him the computer for £1.00. In giving advice you must focus on the law relating to offer, acceptance and consideration.

Task 2

Jack wishes to purchase a new mobile telephone. He knows little about mobile telephones and decides to go to a local shop, “Telephones Are Us”, to get some information and possibly purchase a telephone. He finds the sales assistant at “Telephones Are Us” to be very helpful and decides to purchase a telephone on the basis of a 12 month contract. The sales assistant informs him that he must sign a standard form contract. He signs the contract in the shop without reading it.

When Jack later tries to use the telephone he finds that it does not work. He takes the telephone back  to “Telephones Are Us” and asks for a replacement but is informed that he is liable to pay for the cost of repairing the telephone and even if he chooses not to have the telephone repaired he is bound for the 12 month period of the contract that he signed. The sales assistant points out clause xiii of the contract  that he signed, which states:

“Telephones  Are  Us  accepts  no  liability  for  the  replacement  or  repair  of  faulty  products.  In all circumstances the customer must bear the cost of either replacing or repairing any faulty product and   is bound by the terms of this contract for its full duration”.

Jack has sought your advice as to whether he can force “Telephones Are Us” to replace/repair the telephone and whether he is bound by the 12 month contract. In giving advice you must focus on the relevant statutory provisions protecting consumers who purchase goods from businesses.

Task 3

Patricia was a passenger on “Safe and Steady Trains”, a train company that has recently gone into liquidation. The train she was on was involved in a crash with another train. She suffered a broken leg.

The crash was caused because the driver of Patricia’s train fell asleep.

Patricia wishes to bring a claim in negligence against the train driver. Advise her as to what she must establish to bring such a claim and her chances of success.

Task 4

Paula was invited to a job interview with “Pushing and Pulling Ltd.”. On entering the building, which   was solely occupied but not owned by “Pushing and Pulling Ltd.”, for her interview she tripped over a cable that was running across the reception area at floor level. There were no warning notices advising visitors to the building to take care with regard to the exposed cable.

Paula has sought your advice as to the possibility of bringing a claim against “Pushing and Pulling Ltd.”

under occupiers’ liability legislation. However, she is worried because she is taking medication for a virus and the medication should only be taken with food; she took the medicine on the day of the interview without food and feels this may have contributed to her falling over the cable.

Advise Paula as to any action that can be brought under legislation relating to occupiers’ liability and whether and damages award might be reduced because of any possible contributory negligence on   her part.

LO1. Understand the essential elements of a valid contract in a business context

Explain the importance of the essential elements required for the formation of a valid contract.

Discuss the impact of different types of contract.

Analyse terms in contracts with reference to their meaning and effect.

LO2. Be able to apply the elements of a contract in business situations

Apply the elements of contract in given business scenarios

Apply the law on terms in different contracts

Evaluate the effect of different terms in given contracts

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LO3. Understand principles of liability in negligence in business activities

Contrast liability in tort with contractual liability

Explain the nature of liability in negligence

Explain how a business can be vicariously liable

LO4. Be able to apply principles of liability in negligence in business situations

Apply the elements of the tort of negligence and defences in different business situations

Apply the elements of vicarious liability in given business situations.