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BLW17 Business Law
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ASSESSMENT – Legal Analysis -
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Due date: THURSDAY 15TH FEBRUARY 2018, 11.00 PM (SA TIME)

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Question 1
Whether Zot can sue Wizard for breach of contract and is entitled to compensation in this instance, and whether clause 8 proves to be enforceable?
To determine if there has been a breach of contract it is necessary to firstly establish that a valid contract exists. A contract is a legally binding document which the agreed terms. It is important to fulfil the terms covered by the contract; otherwise a breach of contract may take place. For a contract to exist three elements must be present, these are agreement between the parties, the intention to create legal relations and that each party has provided consideration, made a promise or paid a price (James 256)
. In this case there was agreement as Wizard had made an offer which Zot accepted and confirmed by signing the agreement at which point a contract was formed.
One of such terms is exclusion clause, which has the effect of restricting or limiting the liability of one part of the contract, due to the reasons mentioned (McKendrick and Liu, 2015). However, exclusion clauses have to fulfil certain key requirements, in order for them to be valid. The first one in this regard is that the exclusion clause has to be properly incorporated in the contract. It should to be brought to the attention of the contracting party, particularly the one which would be at the weaker side where this exclusion clause was to become applicable (Mulcahy, 2008).
Where an unfair term is to be relied on by a party, there is a need for the party to give reasonable notice for the same, in context that they brought the term to the attention of the other party. Where the exclusion clause is not brought to the attention of party, it would not be valid (Lambiris and Griffin, 2016). This was seen in Thornton v Shoe Lane Parking [1971] 2 WLR 585. In this case, upon entering the parking lot, the individual got a parking ticket, and the exclusion clause was printed on the back of it. The court stated that this exclusion clause was invalid as it had to be inserted prior to the contract was made, and here the contract was made when the individual got the parking ticket (Poole, 2016).
When it happens that the written contract covering the exclusion clause is signed by the parties, the exclusion clause becomes binding, irrespective of the fact whether the party had read this clause or not. This was established in LEstrange v Graucob [1934] 2 KB 394, where the court stated that in signing the order form, the claimant became liable for the terms covered in the form, despite the claimant not having read the same (Gibson and Fraser, 2014).
In the given case study, for contracting the services of Wizard, Zot approached them and for rendering these services, a contract was created between the two. The contract which was formed between the two when Zot signed Wizards order form indicating acceptance of the offer, required Wizard to provide a number of stunning images which would load swiftly. However, when the actual website was published, the images loaded slowly. Zot believed this poor functionality was a breach of promise made by Wizard for which Zot can sue Wizard.
However, the contract included clause 8 the wording of this clause is such that they remove the liability of Wizard for errors of programming. As per Thornton v Shoe Lane Parking, this exclusion clause was not brought to Zot’s attention when the contract was formed. Though, this claim is likely to fail due to the precedent given in LEstrange v Graucob. The facts of this case study match this case, so the ruling of this case would be applied here. Zot had signed the contract which included the exclusion clause, based on the quoted case, this would result in the exclusion clause in the contract being enforceable, as upon signing the contract, the terms become binding irrespective of the parties having read them or not. Clause 8 here would be relevant as the breach claimed by Zot was for programming error only.
Thus, it can be concluded that Zot would fail in his attempts to sue Wizard for the breach of contract, due to the validity of exclusion clause in 0the contract, and the contract being signed by the contracting parties. Zot would not be able to get compensation from Wizard by suing for breach of contract.
Question 2
Whether the company is legally entitled to get compensation from Mick in this case or not?
Where the terms mentioned under the contract are not fulfilled, it results in a breach of contract. For breach of contract, the aggrieved party gets different remedies, which can be used by them against the breaching party (Latimer, 2012). Where it is indicated by the party that they would not be performing their contractual promise, the aggrieved party is not to wait for the breach to take place and can claim anticipatory bring. They can also wait for the breach before bringing the action (Andrew, 2015).
The first remedy is damages, which are an award of money for compensating the aggrieved party. In Addis v Gramophone [1909] AC 488, it was stated that the purpose of compensating the aggrieved party was to put them in place where they would have been, had the contract had been properly performed (Stone and Devenney, 2017). For damages to be awarded there is a need to show causation, remoteness, and the duty of mitigating loss. In Hadley v Baxendale (1854) 9 Ex Ch 341 it was provided that the only losses which could be recovered were the ones which naturally arise from the breach of contract and which was reasonably contemplated at the time of formation of contract (Davies, 2016).
In Victoria Laundry (Windsor) Ltd. v. Newman Industries Ltd. [1949] 2 K.B 528, as a result of the breach of contract, the claimant lost a lucrative contract as the boiler was not present. The court held in this case that the reasonable compensation which could be claimed was the loss of profit from the lack of use of boiler, but not for the loss of lucrative contract as the defendant had not been aware of this contract (Poole, Shaw-Mellors and Devenney, 2017).
In the given case study, the company had contracted Mick for carrying out certain work and for this purpose a contract had been entered between the two. However, due to the disagreement between the two, Mick refused to complete the work wrongly. Here, even though the refusal by Mick was wrongly made, but it was nevertheless made. This meant that the company could bring forth a claim of breach of contract in anticipatory manner. This would therefore justify the actions of the company in hiring another builder to complete the work.
As the work was not completed by Mick, there was a breach of contract on his part. Based on Addis v Gramophone, this would allow the company to claim damages for the loss which they had to bear in order for them to be put in place where they had been, in case Mick had completed the contractual work. The costs which the company had to bear would be the one which would be awarded as damage based on this case.
When it comes to the compensation for the expected rent of the shopping centre, precedents need to be applied. In this regard, applying the case of Hadley v Baxendale, such loss can be awarded as damages which naturally rose from the breach of contract. Based on the breach of contract undertaken by Mick, he could not have reasonably foreseen that there was a lucrative accommodation contract. This could not have been contemplated when the contract was formed between the two. Further, based on Victoria Laundry (Windsor) Ltd. v. Newman Industries Ltd, Mick had no knowledge about the lucrative accommodation contracts. He could not have foreseen the expected rent from shopping centre.
Thus, based on this discussion, it can be concluded that the company can make a claim of breach of contract against Mick. However, in this case, the only damage which would be awarded to the company would be for $250,000 and not for missing out the lucrative accommodation contracts. So, Mick would have to compensate the company for the loss sustained by them owing to the breach of contract.
Question 3
Whether any consumer laws had been breached by Soft ‘N Cuddly Pty Ltd or not?
The Australian Consumer Law is covered under schedule 2 of the Competition and Consumer Act, 2010 (Cth) (Coorey, 2015). Under section 18 of this act, the prohibition is placed on an individual in commerce or trade from being engaged in conduct which is deceptive or misleading or where the same would possibly result in deceiving or misleading (Corones, 2012). Under section 29 of this act, the prohibition is placed on an individual in commerce or trade from making misleading or false representations regarding the services or goods (Australasian Legal Information Institute, 2018).
In the case of Australian Competition and Consumer Commission v Kingisland Meatworks and Cellars Pty Ltd [2012] FCA 859, interesting considerations were made regarding the place of origin and the brand name, when it could be deemed as misleading and deceptive, and also as a false representation regarding the place of origin of goods. The crux of the matter was that where the place of origin is used by the company or in the brand name, a representation is made that the product is sourced from this place. And for this purpose, there is a need for a major part of the goods to be sourced from this location. In this case, Murphy J gave an obiter where he stated that seventy percent was the acceptable amount for this purpose. This led to the court stating that there had been a breach of section 18 and section 29 in this case and for this purpose, different orders were made. These orders included declaration of contravention, restriction on the company for three years, publishing corrective notice at its premise, and paying the costs of ACCC and a pecuniary penalty of $50,000 (Hartley and McGushin, 2013).
In the given case study, two sections can be claimed to have been contravened by Soft ‘N Cuddly Pty Ltd and these two are 18 and 29 of ACL. Here, the company indulged in misleading conduct by using the name of the American company since last many years. The similarity in the name of the two companies was bound to create confusion in the minds of the consumers and was a conduct which could be best defined as misleading conduct. Further, this case also involves such representations on party of Soft ‘N Cuddly Pty Ltd which created a false representation in the mind of the consumers, which was bound to mislead or deceive them. This is because of the representation that the product was of Australia. However, the truth was that the skins of toy koalas used by Soft ‘N Cuddly Pty Ltd was imported from China.
The company has claimed that over 50% manufacturing cost had to be incurred in Australia for the label to be attached for product of Australia. However, the precedent given in Australian Competition and Consumer Commission v Kingisland Meatworks and Cellars Pty Ltd provides that 70% had to be deemed as the acceptable amount. Here the manufacturer cannot show that the costs which they bore in Australia was over 70% and it cannot be denied that the product was imported from China and merely labelled from being of Australia. Based on the quoted case, this would also attract the provisions of misleading and deceptive conduct, in addition to the false misrepresentation. Accordingly, the penalties would be made as per the case, where Soft ‘N Cuddly Pty Ltd would not only have to bear the pecuniary penalties for wrongly stating that the product was Australia made but also for the false representations regarding the same. The misleading conduct with regards to the resemblance in company name would further add to the value of penalties.
Thus, from this discussion, it can be concluded that Soft ‘N Cuddly Pty Ltd would be liable for breaching section 18 and 29 of the ACL, based on the cited case law.
List your references here
Andrews, N. (2015) Contract Law. 2nd ed. UK: Cambridge University Press.
Australasian Legal Information Institute. (2018) Competition and Consumer Act 2010 - Schedule 2. [Online] Australasian Legal Information Institute. Available from: [Accessed on: 27/01/18]
Coorey, A. (2015) Australian Consumer Law. London, United Kingdom: LexisNexis Butterworths.
Corones, S.G. (2012) The Australian Consumer Law. New South Wales: Lawbook Company.
Davies, P.S. (2016) JC Smiths the Law of Contract. Oxford: Oxford University Press.
Gibson, A., and Fraser, D. (2014) Business Law 2014. 8th ed. Melbourne: Pearson Education Australia.
Hartley, L., and McGushin, E. (2013) Misleading company and brand names – ACCC v Kingisland Meatworks and Cellars Pty Ltd – is your use of a place of origin in your company or brand name allowed? [Online] Lexology. Available from: [Accessed on: 27/01/18]
Lambiris, M., and Griffin, L. (2016) First Principles of Business Law 2016. Sydney: CCH.
McKendrick, E., and Liu, Q. (2015) Contract Law: Australian Edition. London: Palgrave.
Mulcahy, L. (2008) Contract Law in Perspective. 5th ed. Oxon: Routledge.
Poole, J. (2016) Textbook on Contract Law. 13th ed. Oxford: Oxford University Press.
Poole, J., Shaw-Mellors, A., and Devenney, J. (2017) Contract Law Concentrate: Law Revision and Study Guide. 3rd ed. Oxford: Oxford University Press.
James, Nickolas. Business Law, 4th Edition. John Wiley & Sons Australia, 08/2016. VitalBook file
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