Contract Law: Formation and Elements of a Valid Contract

Describe about the Business Law for Cafe from Dodgy Pty.

1. In accordance to the provided case study, it can be noticed that on 1^st July 2016 Bill and Jill bought a café from Dodgy Pty. Ltd. On the basis of this fact it can be stated that on the part of Bill and Jill an offer was made, where they being the offerer. In this case, Dodgy Pty. Ltd is the offeree. This indicates the fact that the element of a valid contract, i.e. offer is present in the scenario. The ownership of the café on the part of Bill and Jill also emphasizes on the dimension that it occurred basing upon certain consideration and terms, which is another crucial element of a valid contract. Acceptance, which plays an integral part in order to form a valid contract, is also present in the scenario (Griffith, 2009). Basing upon the above discussion it can be inferred that a valid contract was present between Bill, Jill and Dodgy Pty. Ltd.

Yet there exists another perspective to the provided scenario which is also required to be discussed. The minimum age in order to enter in a contract and form a valid contract is 18 years as par the present legislation. However Bill, who is a member in the contract, is a minor makes the contract a void contract and it is not a legal contract as the element of capacity is seen to be missing. The presence of misleading or deceptive conduct, unconscionable conduct or misrepresentation in certain matter results in contract to be void and illegal. This results in breaching of Corporations Act 2001 (Australiancontractlaw, 2013). In the context of the provided case, dishonest statement was provided on the part of Dodgy Pty. Ltd that the weekly takings of the café were $ 10000. The contract further stated that the business cost according to the estimation was $ 3000/week. However, in the process of operating the business Bill and Jill experienced that $2000 was the average weekly takings of the café, which was much less as compared to the mentioned weekly takings in the contract. This clearly establishes the fact that misrepresentation of contractual terms had occurred in the provided. When a false statement of a fact occurs in a contract basing upon which, and believing those facts the plaintiff enters into a contract it can be referred as misrepresentation. The presence of three elements is integral for the establishment of the occurrence of misrepresentation which includes incidence of a statement that is false in nature, plaintiff’s reliance on the statement, which acts the edifice for the plaintiff to enter into the contract. There are three types of misrepresentation which includes fraudulent, negligent and innocent misrepresentation. In this context it is mentionable here that, fraudulent misrepresentation refers to a statement the purpose for presentation of which is deceiving the plaintiff which also includes the presence of the element of ignorance regarding its truthfulness.  In the reference of the case it is observable that Dodgy Pty. Ltd purposefully presented to Bill and Jill i.e. the plaintiff with the false statement regarding the business cost and weekly takings, clearly highlights upon the fact that fraudulent misrepresentation had occurred in this case. According to Misrepresentation Act 1972 Part 2 in the process of conducting a business if on the part of an individual misrepresentation occurs, who is accountable in conducting the business, an individual approved to act on his or her behalf, the motive behind which is making an individual enter the contract then the individual is accountable of the offence (Austlii, 2016). In such a situation, under Misrepresentation Act 1972 Section 4 Part 2, in accordance to the scenario as the person responsible for the offence is a body corporate i.e. Dodgy Pty. Ltd, the remedy that Bill and Jill can avail is $ 100000 penalty on the part of Dodgy Pty. Ltd.

Misrepresentation Act: Types of Misrepresentation and Liability

In accordance to Australian Consumer Law Chapter 2 Section 18 (1), engaging in any kind of misleading or deceptive conduct is proscribed under the legislation. False or misleading representations of goods or services are also prohibited under Australian Consumer Law Section 29 (Corones, 2011).  Pecuniary penalty on the part of the defendant is prescribed under this section of the act. Hence Bill and Jill under the legislation can claim for rescission of the contract or they can claim compensation for the suffered damages. In this context Trade Practices v Pacific Dunlop Limited (1994) FCA 1043 can be referred where socks were sold by manufacturer that were not pure cotton yet labeled it as “pure cotton” (legalhelpdesklawyers, 1994).   

Dodgy Pty. Ltd can also be held liable to Bill and Jill under Fair Trading Act 1987 Section 57, which prohibits the performance or engagement of any kind of deceiving or misleading act on the part of the corporations. Bill and Jill are entitled for claiming compensation for the damages and loss under this act.

Corporations are also restricted from entering in any kind of deceiving or misleading act under Trade Practices Act 1974 Section 52.  This act entitles Bill and Jill for claiming compensation for the damages and losses.

2. The provided case states that Hugh is the owner of the pizza business. However, when he took initiative for the reduction of the expenses and, without any documents of registration he advertised the services. The fact that, in the advertisement it was stated by him that only fresh ingredients are used, yet, ingredients that were not at par with the quality standards, which were state and outdated were used that resulted in the occurrence of illness on the part of the users and even the death of one customer. These facts clearly indicate the relevance of number of laws in accordance to the scenario.  In such situation, the government and customers can take legal actions against the company. Under Business Names Registration Act 2011 Part 2 Section 18 he can be held liable as the owner did not have any documents that were registered but he advertised the services (Coombs, 2011). According to this section of the act, carrying a business under an unregistered business name is an offence. It if further stated by section 18(1) of the act that if an entity carries a business under a business name and a name, which in accordance to Business Names Register is not registered to the entity, in such a case under this act it is an offence. Under this act 30 penalty units are prescribed for the defendant. Under this section of the act the customers can claim for civil penalties which if not paid by Hugh, they can approach criminal code under section 6.1. In the provided case, he is liable under Business Names Registration Act 2011 Part 2 Section 18 as in spite of not having any documents that were not registered; he advertised the services as UberPizzaDelivery.

Australian Consumer Law: Misleading or Deceptive Conduct and False Representations

In the context of this case, Food safety standards, is extremely relevant, where Food Regulations 2015 and Food Act 2003 are required to be discussed.  On the part of the customers, basing upon Food Regulations 2015 Part 2 Clause 8 legal actions can be initiated against Hugh. The aspects that may be included are running a business which required license, which Hugh was not having. It has been stated in Food Regulations 2015 Part 2 Clause 8, that if an individual runs a food business or associated activity that requires license in accordance to the regulations for the purpose of carrying the business, in the absence of which, under the act it is an offence (Nestle, 2006). In the context of Hugh this is seen to have occurred. Hence it can be stated that under Food Regulations 2015 Part 2 Clause 8 he is liable to the customers.

Food Act 2003 Part 2 Section 14 deals with serious food related offences and sale of unsafe food. In the mentioned facts of the case, it can be noticed that because of the use of stale and outdated ingredients the customers were falling sick and death of one customer had occurred because of it comes under this act (Legislation, 2015). The sale of unsafe foods is prohibited under Food Act 2003 Part 2 Section 14.  Hence Hugh is liable under the act as he used outdated and stale ingredients in his product.  Actions taken on the part of customer under this act are entitled for 1000 penalty units on the part of the defendant i.e. Hugh and pizza business or imprisonment of defendant for two year or both. Sections 14 (2) of the act also makes him liable to the customers. It states that it is not permissible on the part of an individual under the law to sell food that the individual was aware of was unsafe. In this case as well it can be noticed that he was aware of the fact that the used ingredients were not at par the quality standards make him liable under this section of the act.  750 penalty units for individuals and 3750 penalty units for corporations are prescribed under this act, which are the remedies that the customers can opt for under this act.

 Another dimension to the provided case is false description of the food products as it was mentioned that only fresh ingredients were used, yet ingredients which were stale in nature and outdated were used. In this context Section 15 of Food Act 2003 is highly relevant, which is associated with false description of the food.  According to of Food Act 2003 Section 15(1) and (2) , in cases where individual is aware or ought reasonable to be  aware that reliance on the part of the consumers on the description of the food may result in their physical harm is prohibited that is intended for sale to be described under false terms (Porter, 2004). If the users take actions under this section of the act the remedy that they can avail are 1000 penalty units or two years of imprisonment of the defendant or both.      

Business Names Registration Act: Unregistered Business Names and Civil Penalties

It is also mentionable here that, as the customers faced physical harm due to the kind of product provided by him he is tortuously liable to the customers in terms of both personal and vicarious liability. The reason being he breached the duty of care (Giliker and Beckwith, 2008). This entitles the customers to sue Hugh to the court that may cause in the shutting down of his business.

The customers can also take actions under Australian Customer Law Schedule 2(194). According to this legislation supply of goods that do not comply with the safety standards is an offence (Austlii, 2015). In this case, the plaintiff can claim $ 1,100000 as the penalty amount of the defendant when it is a corporate and in case of individual the penalty amount would be $ 220000.

Fraudulent misrepresentation can also be seen to have occurred in this case, due to the false product description depending on which they bought the product. Australian Consumer Law Section 29 makes him liable to the customers and pecuniary penalty is prescribed to him under this law. ACCC v Giraffe World Australia Pty Ltd (1999) FCA 1511 can be referred in this context where severe false representation were made in the business transaction (Jade, 2016).

References

Austlii.edu.au. (2015). COMPETITION AND CONSUMER ACT 2010 – SCHEDULE 2The Australian Consumer Law. [online] Available at: https://www.austlii.edu.au/au/legis/cth/consol_act/caca2010265/sch2.html [Accessed 16 Sep. 2016].

Austlii.edu.au. (2016). MISREPRESENTATION ACT 1972. [online] Available at: https://www.austlii.edu.au/au/legis/sa/consol_act/ma1972224/ [Accessed 16 Sep. 2016].

Australiancontractlaw.com. (2013). Australian Contract Law | Julie Clarke. [online] Available at: https://www.australiancontractlaw.com/law/formation-capacity.html [Accessed 16 Sep. 2016].

Coombs, M. (2011). Business Names Registration (Application of Consequential Amendments) Bill 2011. Canberra: Parliamentary Library.

Corones, S. (2011). The Australian consumer law. Rozelle, N.S.W.: Thomson Reuters (Professional) Australia.

Giliker, P. and Beckwith, S. (2008). Tort. London: Sweet & Maxwell.

Griffith, R. (2009). Elements of a valid consent to treatment in capable adults. J Paramed Pract, 1(5), pp.196-203.

Jade.io. (2016). BarNet Jade – Find recent Australian legal decisions,          judgments, case summaries for legal professionals (Judgments And Decisions Enhanced). [online] Available at: https://jade.io/j/?a=outline&id=116023 [Accessed 16 Sep. 2016].     

legalhelpdesklawyers. (1994). Trade Practices Commission v Pacific Dunlop Ltd [1994] FCA 1043. [online] Available at: https://legalhelpdesklawyers.com.au/1994/04/22/trade-practices-commission-v-pacific-dunlop-ltd/ [Accessed 16 Sep. 2016].

Legislation.nsw.gov.au. (2015). NSW Legislation. [online] Available at: https://www.legislation.nsw.gov.au/#/view/act/2003/43 [Accessed 16 Sep. 2016].

Nestle, M. (2006). Safe food. 3rd ed. Berkeley, CA: University of California Press.

Porter, B. (2004). NSW Food Act 2003. [online] australianbeverages.org. Available at: https://www.australianbeverages.org/wp-content/uploads/2013/03/NewFoodActBPorterNSWFoodAuthority.pdf [Accessed 16 Sep. 2016].