Australian Contract laws Editing and Proof Reading Services

This is the solution of Australian contract laws assignment help in which we discuss the case study of contract law about contract agreement between the company and third party

Introduction

Contract law include those laws and regulations which are directed towards enforcement of certain promises. In Australia the Contract law was initially under the regulation of common law but with time the focus has been directed towards consumer protection. The law of contract came into existence from the philosophy of laissez-faire, according to which the parties must be free to enter into contract with each other on the terms they wish with minimum intervention of the government and have limited control on areas of public policy. The Australia Contract Law is normally split under five categories namely; formation of contract, scope and content of the contract, avoidance of obligations of the contracts, performance of contract and termination and remedies for breaching of contract. When it comes to consumer law the main things which it includes are unfair terms related to the contract, consumer guarantees, unconscionable conduct and the liabilities of the manufacturer. Once the parties enter into a contract they become legally bounded for exercising the same and be aware of their rights, obligations and duties.

Question 1

Issue
Paula asked Tess to arrange for 1200 climwits from Woodo Co. whose cost shall not exceed $12,000. Tess being unable to arrange the same urgently contacted Sepal Co., who confirmed delivery of the order on time subject to a minimum limit of 1400 climwits at $16,000. Tess and Sepal Co. entered into a contract under consideration of a discount of 10% on the offered rate. However, Tess informed Paula that Sepal Co. is charging $16,000 for 1400 climwits. When Paula contacted Sepal Co. for making settlement of 1200 climwits at $12,000 without informing Tess with whom the company already entered into an agreement came to know that they have offered a discount of 10% on the price of the climwits and are not ready to enter into any other contract with Paula. It is clear that Tess has misrepresented the actual fact to Paula that she has managed a 10% discount on the offered rate of the climwits. On the other hand Paula did not notify Tess that she was going to get into a contract with Sepal Co for 1200 climwits. But this is fine till the time Paula and Sepal Co does not get into a contract.

This law case study falls under the law of agency. Agency in simple terms is an agreement between three parties involving, Principal, Agent and third party. The principal bestows the authority to an agent for making contract with third parties on behalf of the principal. The flowchart among principal, agent and third party can be shown by the given figure:

If otherwise mentioned the contract normally takes place between Principal and the third party. However, in this case study the contract takes place between the agent (Tess) and the third party (Sepal Co) being authority given to Tess by principal (Paula).

Legal Rights and liabilities of Paula
Paula’s requirement is only 1200 climwits thus even if Tess has entered into an agreement to obtain 1400 climwits with Sepal Co Paula is not bund to buy the whole lot from her as she mentioned in her letter that she requires only 1200 climwits that too for $12,000. Moreover Paula has instructed Tess to arrange the climwits from Woodo Co

By giving Tess the authority to acquire 1200 climwits, Paula gives her ‘authority of necessity’. By giving ‘authority of necessity’ Tess is given the control of the property (i.e. climwits) by Paula. Under this scenario the Principal (i.e. Paula) is virtually unable to contact the third party (i.e. either Woodo Co or Sepal Co). Given Tess the authority, Paula has all the right to confirm whether Tess is misleading or not. When Paula contacted Sepal Co she came to know that Tess and the third party has entered into an agreement of 1400 climwits for $16,000 less 10% discount, which was not informed to Paula. In this situation, when Paula finds Tess has breached the faith of Paula, she has the right to recover the damage from the agent; in case Paula had purchased those climwits again Tess disregarded the limitation on units and maximum price as instructed by Paula and without informing her entered into a contract of 1400 climwits for $16,000. Therefore, Paula has no obligation on acquiring the whole lot from Tess that too at an increased price.

Being the Principal, Paula has certain liabilities towards Tess:

Paula will be responsible for paying remuneration to Tess as agent’s services and reimburse the expenses borne by Tess for acquiring the climwits.
Being given Tess the authority, Paula should not approach the third party directly for settlement without notifying Tess.

Legal rights and liabilities of Tess
In this case Paula instructs Tess to arrange 1200 climwits for her. Here, Paula acts as a Principal and Tess acts as an agent. The agent is responsible for carrying out the orders of the principal to her best and must take care of the property till delivered to the principal. Tess being given the ‘authority of necessity’ to acquire climwits on behalf of Paula has the right to enter into a contract with the supplier. In the letter Paula asked her to arrange the same urgently from Woodo Co, but as Woodo Co did not have the required stock of 1200 units she had to contact Sepal Co since Paula did not mandate anything on the supplier. Tess being an agent has certain liabilities towards Paula and Sepal Co.

Liabilities towards Paula

Tess needs to abide by the instructions issued by Paula;
She must act within the authority of the principal i.e. Paula), failing to do which, she will be held responsible breaching the principal’s authority. (Case law: Watteau v Fenwick)
Must be very careful while carrying out responsibility and maintain standards;
Tess must be faithful to Paula. An agent should not try to make any secret profits at the expense of the Principal. (Case Law: Bentley v Craven (1853) 52 ER 29).

From the case study it is seen that Tess has entered into a contract law with Sepal Co for 1400 climwits at a price if $16,000 less 10% discount. But when she informed Paula about the climwits she did not disclose the 10% discount which she managed from the third party. By doing this Tess is trying to make secret profits at the expense of Paula.

Liabilities towards Sepal Co

Tess after entering into a contract for 1400 climwits at $16,000 less 10% discount is bound to acquire the whole lot from the company irrespective of the fact whether Paula accepts all at the said price or not.
Tess will be held responsible for fulfilment of obligations to the contract, since the contract is between them and Paula is not identified here.

Legal Rights and liabilities of Sepal Co
Sepal Co was contacted by Tess for climwits required by Paula. Since, Sepal Co never entered into any transactions with Paula earlier entered into a contract with Tess, whereby they were required to deliver 1400 climwits at $16,000 less 10% discount. Since, Sepal CO has contract with Tess they have the right to disregard the demand of Paula who contacted them for a different set of agreement. They are in no way obligated to deal with Paula directly. As per contract the company is liable to deliver the required order to Tess within the mentioned time

Case Law
The given case law will help in understanding the context more clearly.

Great Northern Railway Co. v Swaffield (1874) LR 9 Ex 132
under this case the owner of a horse was unable to collect the horse when it reached the station. The station master on being unable to contact the owner took the responsibility of collecting the horse and entered into a contract with another stable-owner for accommodating and feeding the horse. In this way the owner of that horse became liable to the stable-owner on behalf of the contract, where the station master was given the responsibility of acting as an agent being given the authority of necessity.

Question 2

This case study is explained on the basis of ILAC (Issue, Law, Application and Conclusion) format.
Issue
Marco came to Australia being employed by a large corporation. He has problem with English both in terms of speaking and writing. He met Ted Upton a sales representative for Eddo Publishing Co who insisted him to subscribe to their magazine English for ‘Migrants-Beginners to advanced stage’ through which he can develop his English. While demonstrating Marco about their magazine he made certain statements which were false for prompting him to buy the magazine. He even made Marco sign a contract knowing the fact that Marco is not well-versed in English. When Marco said he wants to take suggestion of his solicitor friend who can help him understand the contract better, Ted told that there is nothing such for which hw need to contact a solicitor and insisted to pay the price for first subscription then and there. While doing this Marco was not able to go through all the clauses of the subscription and Ted even did not notify him about the clauses which he should have being aware of the fact that Marco is not good in English. The main intension of Ted that reflects from here is that, he wanted to make Marco subscribe to the magazine anyhow.

Law
From the issue mentioned above it is clear that this is a case of Unconscionability. Unconscionability means unscrupulous or something that is unprincipled. The court will intervene in such issues where it is found that the plaintiff suffers some kind of disadvantage such as illness, inexperience, ignorance, financial planning need or impaired facilities, etc. and the other party knowingly takes the advantage of the condition of the plaintiff unconscionably while entering into a contrac. The court’s judgement can be:

rescinding of the contract; or
damages being met by the party taking advantage; or
enforcing a new contract by substituting the old one; or
Removal of the old contract because of its harshness.

The given case law will make it clear how court deal with Unconscionability.

Case Law: Commercial Bank of Australia Ltd v. Amadio (1982-1983) 151 CLR 447
An Old Italian couple who were not well-versed in English were made to sign a mortgage of their property as security for loan for the company of their son by their son and his bank manager. Their son had a loan from that bank. However, neither the son of the couple nor the manager of the bank disclosed the true financial position of the company. The couple believed their son and the bank manager that the liability was upto a limit of $50,000 for a period of 6 months. But the true fact was the limit was $240,000. The court declared that since the old couple had limited knowledge of English and being old-aged were not in an equal bargaining position with the other parties involved (i.e. their son and the bank manager). The bank’s responsibility was to disclose the true financial position of the company of their son. Hence, the couple were successful in keeping the mortgage and security aside on the basis that had they known the true picture which was not disclosed to them, they wouldn’t have signed. The court declared setting aside of the mortgage and security on the ground of the bank’s unconscionable conduct. The respondents were ordered by Justice Wellsto pay Amadio $239,830.85.

The claims of the respondents on the basis of which the bank could not enforce the mortgage and security were:

the bargain was unconscionable;
it was conducted under undue influence;
it was done by misrepresentation or concealments of facts for which the bank would be held responsible.

Application
In the given case where Marco has been provoked by Ted, a sales representative from Eddo Publishing Co to sign a lengthy contract containing 10 pages and 90 clauses written in English represents unconscionable behaviour on his part. He knew very well that Marco is not well-versed in English and he needs guidance of a friend who can help him understand the clauses of the contract, still he forced him sign the contract then and there keeping certain important clauses undisclosed. He even made certain statements which were misrepresenting and false. This case reflects an unconscientiously bargain. By misrepresentation of certain facts and creating undue influence on Marco reflects unconscionable conduct on his end. Here, Ted takes a superior bargaining position by entering into the contract with Marco being aware of his current situation and having knowledge of what will be the future implications of the contract, although keeping the same undisclosed. Thus, as per Australian Contract Law, Eddo Publishing Co on behalf of Ted will be responsible for either of the following towards Marco,

meeting damages caused intentionally to Marco; or
rescinding the contract; or
cessation of the contract; or
entering into a new contract with Marco.

Eddo Publishing Co may be liable to meet the damages caused by them in financial terms.

Conclusion

Marco is not legally bound to exercise the contract signed by him for Eddo Publishing Co as the same was done under influence and some sort of pressure. The sales representative of Eddo Publishing Co was aware that Marco had very limited knowledge in English and he won’t be able to understand the clauses mentioned in the contract which were written in English. Marco has all the right to claim the financial loss caused to him and has the right to set aside the contract on grounds that being aware of the condition of his English he has been victim to misrepresentation of facts and making false statements thereby creating pressure and non-disclosure of the important clauses. Eddo Publishing Co will be liable for meeting the claims of Marco whichever he opts. Marco can rescind the contract or claim for damages or enforce a new contract of which he will have complete knowledge thereby substituting the old one or declare the contract to be void.

Conclusion

The report is based on Australian Contract Law. The report highlights on the consequences based on which parties enter into contract with each other. The viability of the contract however, depends on the situation and motive under which the parties enter into contract. Contracts can be based on law of agency or unconscionable conduct. Under law of agency there are three parties involved; one is the principal who gives authority to the agent for entering into a contract with the third party. Here, both the principal and the agent has certain rights and obligations towards each other and the other is practice of unconscionable conduct by a party who being aware of the disadvantage of the plaintiff insists him to enter into a contract making fancy and false representations.

References

Cherednychenko, Olha, "Fundamental Rights And Contract Law" (2006) 2 European Review of Contract Law
Hesselink, Martijn W., "Democratic Contract Law" (2015) 11 European Review of Contract Law
Lindsay, G. C, Contract (Lawbook Co., 2004)
Monahan, Geoff and Susan Carr-Gregg, Essential Contract Law (Routledge-Cavendish, 2007)
Paterson, Jeannie Marie, Unfair Contract Terms Law In Australia (Thomson Reuters (Professional) Australia, 2011)
Willmott, Lindy, Sharon Christensen and D. A Butler, Contract Law (Oxford University Press, 2005)