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Contract Law

Issue 1

Desmond Aster, the proprietor of Sleet and Trumpet Real Estate wants to use Sydney Harbour Hotel's conference centre for a series of seminars he is running for his staff.

Valerie Ewer, an employee of Sleet and Trumpet contacts Sydney Harbour Hotel and makes a phone booking for a conference room at $500 for the 1st October 00.

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The hotel manager makes the booking and adds he will be sending a booking slip to the estate agency which must be signed and returned with $00 as a holding deposit.

The slip is never signed but a delayed payment of $00 is eventually made (before 1st October 00).

At 5.00 am on the 1st October 00, an electrical fault causes a fire. The conference room is damaged and cannot be used. Desmond arrives at 10.00 am and is informed of the fire, he threatens to sue and Sydney Harbour Hotel requests that Desmond pay the remaining $00 they say is due under contract.

An offer was made by Sydney Harbour Hotel for a conference room at $500 for the 1st October 00 at 10.00 am to Sleet Trumpet Real Estate. Acceptance and agreement of the terms was made by Sleet and Trumpet Real Estate when Desmond sent the $00 to Sydney Harbour Hotel.

So we must ask ourselves, is Desmond liable for the remaining $00 owed to Sydney Harbour Hotel? And is Sydney Harbour Hotel liable for refunding Desmond's initial payment of $00?

If after the formation of the contract an unforeseen event occurs which affects the performance of the contract, "the contract is automatically terminated if the effect on performance is substantial, provided neither party was at fault".

By frustration, parties are discharged from the obligation to perform, "or to be ready and willing to perform, their contractual duties".

The Frustrated Contracts Act 17 (NSW) s7 states "that a promise due for performance prior to frustration, which was not performed before the time of frustration, is discharged". s1 provides that "any monetary payments made prior to frustration must be returned".

In Fibrosa Spolka Akcyjna v Fairbairn Lawson Combe Barbour Ltd (14) AC , buyers were held to be entitled to recover that part of the price which had been paid prior to frustration where a contract for manufacture of machinery was frustrated prior to delivery .

As seen in Fibrosa Spolka Akcyjna v Fairbairn Lawson Combe Barbour Ltd, contracts became frustrated and the parties involved were discharged under the doctrine of frustration. Under s1 of the Frustrated Contracts Act 17 (NSW) monetary payments made prior to frustration were returned.

In Taylor v Caldwell (186) B & S 86; "A building had been hired to the plaintiff for the purpose of staging a concert there and it was destroyed by fire a short time before the concert date… the court held that the owner was released from his liability to perform the contract because of the destruction of the subject matter of the contract" . There is no mention of refund of money or any monies being paid but it does mention that both parties were discharged from their contractual duties (s7 of the Frustrated Contracts Act 17 (NSW)).

Desmond made a contract with Sydney Harbour Hotel to book a conference room on the 1st October 00, at 5.00 am on that same day an electrical fault caused a fire resulting in Desmond not being able to use the room. So in our response to the question stated above, Desmond could be refunded the $00 based on the outcomes of the Spolka Akcyjna v Fairbairn Lawson Combe Barbour Ltd (14) AC case. Sydney Harbour Hotel's request for the remaining $00 should be dismissed as Desmond is no longer required to fulfil his duties as the contract has been 'frustrated' and under the doctrine of frustration parties are automatically discharged from obligations to perform their contractual duties.

Issue

Unable to use the previously arranged conference room with Sydney Harbour Hotel, Desmond found an alternative one at Flawty Pagoda Inns. But due to the late notice, room hire cost him $800. He agreed to this price figuring he could sue Sydney Harbour Hotel for the difference of $00.

Salib Dore, the manager of Flawty Pagoda Inns attended Desmond's seminar and was so impressed with Desmond's talk that he promised Desmond he would be refunded the $00 of the money he paid as a hiring fee on the seminar room.

After the theft of Desmond's car and the disagreement over who will take responsibility for replacing the car, Salib takes back his offer regarding the $00.

So is Salib Dore liable for the payment of $00 he promised Desmond? And can Desmond sue Sydney Harbour Hotel for the difference?

Salib Dore makes an offer to Desmond stating he will refund him the $00 for the hiring fee.

However, it is fair to assume (from the question) that Desmond does not respond to Salib's offer, and in order for a contract to be valid, an acceptance must be communicated. Therefore no contract has been made and Salib is not liable to refund Desmond the $00.

Desmond cannot sue Sydney Harbour Hotel for the difference of $00 as the contract was 'frustrated' and the parties were discharged from their obligation to perform their contractual duties. Therefore the contract ended with the fire.

Issue

At 1.0 pm Desmond arrives at Flawty Pagoda Inn car park. Desmond stops at the entrance to the car park of the hotel. There is a large sign that says that entry is subject to the conditions printed on the back of the ticket. Desmond presses a button and an automatic ticket machine issues a ticket, which Desmond takes. He puts the ticket in his pocket without reading it, the barrier gate rises automatically, and Desmond drives through and parks his car.

After his seminar Desmond returns to his car to find it is missing. Enquiries reveal that an employee of Flawty Pagoda Inn has released the car to a thief, who managed to get a duplicate ticket from the employee by pretending that the ticket had been lost.

Flawty Pagoda Inn will not take any responsibility for replacing Desmond's car. They are saying that because Desmond had used the car park before in fact times in the previous 1 months he should have known about the conditions.

There was a contract between Desmond and Flawty Pagoda Inn. The offer was entry into the car park and acceptance was Desmond taking the ticket and entering the car park.

So is Flawty Pagoda Inn liable for damages/theft of Desmond's car? Does the exclusion clause exclude liability for the release of the car to the thief (the breach of contract)?

The hotel made use of an exclusion clause on the back of the parking ticket in the hope to exclude the hotel from liability of car theft, damage etc. "An exclusion clause is a term of a contract which excludes, qualifies or limits the liability of a party for breach of contract, or what would, but for the exclusion, be a breach of contract" . The hotel has used what is known as a 'standard form' of contract. Upon entry into the car park you take a ticket, which would contain an exclusion clause. It would be unreal for a customer to negotiate the details of the contract. Their arrangement with the hotel's car park is purely on a 'take it or leave it' basis and the only contractual freedom they have is to walk away if they don't agree with the terms.

"The exclusion clause must be brought to the notice of the contracting party before or at the time the contract is made. If notice of the exclusion clause is given after the contract has been made, it will have no effect" . Notice considered sufficient can be seen in the Thompson v LM & S Railway Co (10) 1 KB 41. Tickets contained 'for conditions see back' and a clause exempting the company from liability for any injury, fatal or otherwise. "T was injured. Her claim against the company failed. The court held that the notice given was sufficient for an excursion passenger" .

In the case of Council of the City of Sydney v West (165) 114 CLR 481, "West parked his car at a parking station and received a ticket which contained the following "the council does not accept any responsibility for the loss or damage to any vehicle.. However, such loss, damage.. May arise or be caused" together with a statement that the ticket must be presented before taking delivery of the vehicle. The evidence suggested that an unauthorised person obtained a duplicate ticket by falsely representing that he had lost the original, and that, by presenting the duplicate ticket, obtained possession of the plaintiff's car. It was held that the clause did not protect the council as the release of the car was not merely a negligent act but was delivery not authorised by the contract" .

The high court stated that "it is a question of construction i.e. interpretation of the contract as a whole, whether or not a particular exemption clause is wide enough to exclude liability for the alleged breach of contract" .

Flawty Pagoda Inn gave Desmond sufficient notice; the large sign stating entry is subject to the conditions printed on the back of the ticket. With the sign and Desmond's previous visits to the car park it is clear that he knew and understood the terms and conditions of entry.

Thus, according to the precedent set by the Thompson case, the Flawty Pagoda Inn exclusion clause prevents them from being liable for damages to Desmond.

However, with reference to West's case, Flawty Pagoda Inn's exclusion clause does not cover the release of the stolen vehicle and is therefore not wide enough to exclude liability.

In conclusion, Flawty Pagoda Inn was not responsible for the theft of Desmond's motor vehicle as it comes under their exclusion clause. However they are responsible for the release of the motor vehicle. A remedy for the breach of contract is Flawty Pagoda Inn to take part responsibility for the theft of the car and award Desmond a sum of money for damages.

Issue 4

Valerie purchased 8 chairs for $600 from Anne Tique with the belief that they were early Victorian. It is fair to assume (from the question) that Anne is not aware that these chairs are from that period.

It is later brought to Valerie's attention that only of the chairs are genuine early Victorian and the other 5 are artificially aged.

Valerie returns to Anne to ask for her money back.

Is Anne liable to refund Valerie her $600?

A contract was formed between Valerie and Anne as an offer of 8 chairs at $4000 was made by Anne and Valerie accepted these terms with a counter offer of $600 and in turn purchasing them. Consideration was evident from both parties as Valerie expressed interest in purchasing the chairs and negotiated with Anne on the final purchase price .

Valerie never mentioned or questioned Anne re the authenticity of the chairs and therefore has no case to claim refund of the chairs.

This can be said as she cannot claim a unilateral mistake. "One of the parties may be mistaken, and the other is, or ought reasonable to be aware of this" .

Factual mistakes recognised by the law i.e. a unilateral mistake could have been used in Valerie's defence had Anne been aware that Valerie was purely purchasing the chairs on her belief of them being early Victorian (with the information given, it is fair to assume Anne was not aware of this).

Caveat emptor could also have been used in Valerie's defence had she questioned the authenticity of the chairs to Anne and Anne misleading Valerie to believe they were "each party to a contract may keep silent, even in regard to facts which they believe might affect the other party… the law may require the speaker to act honestly, even if not required" .

Had Anne been aware of the authenticity of the chairs then Valerie would be eligible for a refund as Anne would have breached the contract via a unilateral mistake or caveat emptor.

As this is not the case, Valerie has no case and Anne is not liable to refund Valerie her $600.

Issue 5

Valerie purchases an old dog collar from Anne Tique with the knowledge that it is worth a lot more than her offer of $50. Anne however is unaware of the collar's true value and is more than happy to off load it.

A contract has been formed; an offer of $50 was made by Valerie and accepted by Anne.

Valerie lines up a sale of the dog collar to another dealer Kay Neign, who specialises in dog memorabilia. Both Kay and Valerie believe the collar is worth $5000.

A contract is also formed here; an offer and agreement of $5000 is made by Valerie and Kay.

Valerie is now being accused by Anne that she cheated her for buying the collar at such a cheap price as the latest edition of the local paper contained an article about the dog collar and Kay negotiating its sale for $100,000 to a private collector.

Are there grounds for the participating parties for rescission of the contracts?

Where a party has a lesser degree of expertise and enters into a contract with the belief that what they are purchasing is at true market value from the advice of the professional (the other party) and the professional fails to notify them of its true value, fraudulent misrepresentation is said to have occurred.

"A representation may be made by words or conduct, mere silence is not a misrepresentation unless there is, by reason of the nature of the contract into which the parties purpose to enter, a duty to disclose" .

Caveat emptor, the traditional law of misrepresentation applies here too, "each party to a contract may keep silent, even in regard to facts which they believe might affect the other party" .

Mere silence may constitute misrepresentation which might also occur without there being a false statement of material fact. In Krakowski v Eurolynx Pty Ltd (15) 18 CLR 56 "E sold strata title shop premises to K who bought on the basis, known to E, that the purchase price was calculated by reference to the expected rental return… That agreement between E and the tenant contained provisions which significantly reduced the effective rent payable. The existence of this agreement was not disclosed to K prior to settlement of the purchase. The High Court found … a fraudulent misrepresentation" .

Kay, a specialist in dog memorabilia owed Valerie a professional standard of care. She possesses special knowledge and skills regarding dog memorabilia. Valerie would have been aware of this and trusted Kay's supposed judgement. Had Valerie known the true authenticity of the collar she would not have sold it to Kay for a mere $5000.

Kay withheld important and relevant information from Valerie. Had Valerie known the collar's true history she would not have entered into the contract.

The Courts would find Kay's silence fraudulent misrepresentation (as seen in the Krakowski v Eurolynx Pty Ltd (15) case.

Rescission of the contracts is not an option for Valerie or Anne as the collar has been sold to a private collector. Valerie may however sue Kay for damages.

Contract Law Essay

Prepared By Lyndsay Benger

007166

Prepared For Sophie Riley

Due Date Monday, 1st October 00

Word Count ,587

BIBLIOGRAPHY

1. CARTER, J.W. Outline of Contract Law in Australia Sydney Butterworths (14)

. GILLIES, Peter. Business Law 7th Edition SydneyFederation Press (15)

. TURNER, Clive. Australian Commercial Law 0th Edition Sydney The Law Book Company Ltd (15)

4. McALLISTER, Margaret. The Law Handbook 7th Edition Sydney Redfern Legal Centre Publishing (1)

5. LATIMER, Paul. 001 Australian Business Law Sydney CCH Australia Ltd (000)

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