Terms Of A Contract

QUESTION (1).

Express and Implied terms of a contract

A contract is an expression by a party that they will be bound by what they promise. These promises set out the obligations of the parties. When disputes arise, the court will determine the intentions of the parties and the breach. Express terms can either be oral or in writing. The courts have developed rules on how to interpret these expressed terms. Implied terms in a contract can be divided into four groups: terms implied in fact terms implied in law terms implied by custom and terms implied by trade usage (Elliott, Frances 2009}.

According to Elliott, Frances (2009) in oral statements the court adopts the following guidelines to identify the intentions of the parties firstly, the court will analyze whether the statement was relied upon. Secondly, courts regard most of the statements made by an expert than a layperson. Thirdly, in general, the more time that elapses between the statement being made and the contract is concluded, the less likely the courts will regard the statement as a term. Fourthly, the court analyzes the written contract and any representation made before.

Halson et al (2017) argue that written terms can be incorporated into a contract in three ways by signature, by reasonable notice, and by a previous course of dealing. This incorporation operates differently from the implied terms since parties have reduced their intentions into writing. Further, there are exceptions while applying parol evidence on the validity and inclusion of pre-contract negotiations that is excluded previous oral statement, qualification by other statements, capacity when making the contract, local trade or custom, and extrinsic evidence for specific circumstances. The parol rule may not apply to implied terms since the parties didn t express their intention.

In the case of Caitlyn who found metal in the Toffu, but upon informing the Kaffee Shoppee manager who regrets informed her to refer her to check the reverse side and found a clause exempting them from any liability as a result of an injury caused to customers. The Kaffee Shoppee can`t impose such terms when they never explained this clause before Caitlyn purchasing Tofu. This is an exclusion clause that is only meant to exempt the Kaffee Shoppee from liability. This is prohibited under section 4b (3) of the Australian Competition and Consumer Act 2010[1], which protects consumers from the services rendered. The court is likely to interpret such clause unfavorably and it will apply the contra proferentum rule to safeguard Caitlyn rights.

It should be noted that in implied terms, the courts have established two overlapping tests, that is the officious bystander test and the business efficacy test Neame (2018). The officious bystander test was laid down by Mackinnon LJ in Shirlaw v Southern Foundries (1926)[2]. He said :

..that which is any contract is left to be implied and need to be expressed is something so obvious that it goes without saying so that, if while the parties were making their bargain, an officious bystander were to suggest some express provision for it in the agreement .

Neame (2018) contends that the business efficacy test covers terms which one side alleges must be implied to make the contract work or give it business efficacy. That, this is a definition that was supplied by Lord Pearson in Trollope and Colls Ltd vs North West Regional Hospital Board (1973[3])

An unexpressed term can be implied if, and only if, the court finds that the parties must have intended that term to form part of their contract: it is not enough for the court to find that such a term would have been adopted by the parties as reasonable men if it had been suggested to them: it must have been a term that went without saying, a term necessary to give business efficacy to the contract, a term which although tacit, formed a part of the contract which parties made for themselves .

Once these tests have been satisfied then the court will proceed to look at these terms to how they can be implied Marson (2019). When the dispute arises on the validity of the contract, the court will look at the terms that must be present in the contract regardless of whether or not the parties want them. Under section 44ZZRL of the Australian Competition and Consumer Act 2010[4], parties are prohibited from incorporating and enforcing contracts with cartel provisions.

The local custom was upheld in the case of Smith v Wilson (1832)[5] in which evidence was admitted to the effect that, under local custom, 1000 rabbits mean 1200 rabbits. It is also important to note that, if the terms were express, a party might have made a different decision either to repudiate the contract or request that the term is changed.

Zarrokh (2008) maintains that the court may order the following first, the court may order that a party conclude a specific performance that they intended to accomplish in the contract thus fulfilling their obligations. Secondly, the court or tribunal may issue an injunction as mandated under section 44ZZG of the Australian Competition and Consumer Act 2010[6], directing a party not to do something as a result of the breach of the terms and rectify the contract.

In conclusion, parties to the contract are bound by their terms (either express or implied), where each of them is obligated to fulfill them. In the circumstances where the disputes arise, the court intervenes and interpret accordingly. The court`s determination is meant to compensate the aggrieved party. In a written contract, courts rarely interfere with the obligations of the parties, unless the contract was illegally executed and performed to the detriment of the aggrieved party

QUESTION (2).

(a)Explain how the contracts Kaffee Shoppe made with Caitlyn were formed.

In the contract between Kaffee Shoppe with Caitlyn, the following contract elements were present.

There was an offer whereby Caitlyn offered to buy the Tofu after printing the receipt from a display of food on a menu as shown on the touch screen at the Kaffe Shoppe. Catylyn was given an option to choose the order by touching the image of Tofu, then proceeded to submit the order hence making an offer by printing the ticket. The display of goods is not an offer rather an invitation to treat as was held in the case of Fisher vs Bell (1960)[7] the defendant had displayed flick knives in his shop window and was convicted of the criminal offense of offering such knives for sale. On appeal, Lord Parker CJ stated that the display of an article with a price on it in a shop window was only an invitation to treat not an offer, and the conviction was overturned.

The acceptance element was also fulfilled because she presented her ticket to the cashier who confirmed the relayed order through a self-service. This was accepted because she made payments of $2.5 and $20 and allowed to take the goods she had ordered. The Shoppee accepted to be bound by the terms of Caitlyn. It is also important to note that this offer was accepted within a reasonable time since she was immediately told to either wait from there as the staff brings or collect the product immediately. The same was accepted unconditionally since Kaffee never issued further conditions or requirements.

Capacity is another element that was fulfilled in the formation of this contract. Capacity here applies in the form of age and mental status. By presumption of Catlyin being a student at the university, she of maturity age to enter into a contract. Besides she was of a sober mind to enter into a contract. She wasn t under duress while making an offer.

There was a consideration. Each party gave something in return for what was gained from the other party. Caitlyn received goods and Shoppee received money that the customer paid at the counter. Consideration must be exchanged so that the contract is considered to be complete. In Dunlop v Selfridge (1915)[8] the House of Lords explained consideration in terms of purchase and sale. The plaintiff must show that he or she has bought the defendant s promise, by doing, giving, or promising something in return for it.

The element of certainty was never fully addressed, because, at a later stage, Coffee introduces a clause that was at the back of the ticket, without prior notification to Caitlyn before purchasing Tofu. This only emerged after the injury.in the case of Baird Textile Holdings Ltd v marks Spence Plc (2001),[9] the Court of Appeal held that uncertain terms can never rely on a contract without prior knowledge to the party that is aggrieved in a contract.

The contract between Kaffee and Caitlyn was made without many formalities in terms of reducing the same into writing. They didn t need to enter into a written contract. By payment and receiving of goods, the contract is deemed to have been performed or accepted hence their obligations are presumed to have been fulfilled at that stage, only for the Caitlyn to be injured which is subject to her recourse.

QUESTION (2).

(b)Explain whether Kaffee Shoppe is legally entitled to rely on the clause printed on the ticket to avoid liability about Caitlyn s mishap.

Issues for determination

The issue of a determination here is whether Kaffee Shoppee can rely on the clause printed on the ticket to avoid liability. Besides, what will be the consequences if they are unable to rely on the said clause.

Rules Applicable

Under section 4B (3) as read together with section 28 (1) (e) of the Australian Competition and Consumer Act 2010[10], these provisions protect Caitlyn from the injury or unfair service that was rendered to her. This, therefore, will mean that Kaffee`s argument on using the clause will not be sustained in the court or tribunal if the issue escalates to that level if they fail to admit liability.

Vide section 4k and section 42 of the Australian Competition and Consumer Act 2010[11], Caitlyn is empowered to sue Kaffee for the sustained injuries and the tribunal is likely to grant her prayers that she will be seeking because the tribunal will consider such clauses unfavorably and only meant to infringe consumer s rights.

Analysis

It is evident that there were no reasonable steps to notify Caitlyn of the existence of the clause before the contract was concluded. It is not possible to impose terms unilaterally on Caitlyn after she had been injured by the metal that she chewed in the Tofu. Therefore the timing of notification came later when she went to complain to the manager who informed her about the clause. Therefore, this in itself doesn t meet the requirement of the statutory provisions nor the common law provisions.

Donoghue v Stevenson (1932) (HL)[12]

In this case, the court established a neighbor s principle of product liability, hence Kaffee owes a duty of care to Caitlyn. This is what Lord Atkin stated

You must take reasonable care to avoid acts or omissions which you can reasonably foresee would be likely to injure your neighbour. Who then in law is my neighbour? The answer seems to be- persons who are so closely and directly affected by my act that I ought reasonably to have them in contemplation as being affected when I am directing my mind to the acts or omissions in question.

In the case of Olley v Marlborough Court Ltd (1949)[13] where an exclusion clause was viewed after checking in, it was held it was not binding because the notice of it was only given after the contract was made.

Conclusion

In conclusion, Kaffee is not legally entitled to rely on the clause printed on the ticket. The clause is unfavorable to Caitlyn and the court will uphold the same position. Let them admit liability and compensate Caitlyn to avoid further losses in the award of damages that the court may grant in favor of Caitlyn. Besides, settlement before trial or litigation process will protect the reputation of their business.

References

Elliott C., Frances Q. (2009). Contract law.7^th edition.pp 9-389.Pearson education publishers. Retrieved fromhttps://www.academia.edu/29771140/Contract_Law (Accessed 25 May 2020).

Halson R. Macmillan C. Stone R. (2017). Contract law.pp 69-103. The University of London Publication. Retrieved from https://www.academia.edu/35608092/Contract_law (Accessed 25 May 2020).

Marson J., Ferris K. (2019).Terms of a contract.pp2-10.Retrieved from https://www.researchgate.net/publication/337335452_Terms_of_a_Contract (Accessed on 25 May 2020)

Neame L.E, (2018).Terms of contract.pp 6-8. Retrieved from https://www.researchgate.net/publication/334355909_Terms_of_Contract (Accessed 25 May 2020).

Zarrokh E. 2008.Practical concepts in contract law. The University of Tehran. Retrieved from https://www.academia.edu/278752/Practical_Concepts_In_Contract_Law (Accessed 25 May 2020).

[1] Competition and Consumer Act 2010 [Com] Sec.4b(3) (Austl.)

[2] Shirlaw v Southern Foundries (1926) CA (1939) 2KB 206, (1940) AC 704, (1940) 2 ALL ER 445, 55 The Times LR 611 (UK) Mckinnon LJ.

[3] Trollope and Colls Ltd vs North West Regional Hospital Board (1973[3]) 1 WLR 601, [1973] 2 ALL ER 260 [UK] Lord Pearson, Lord Guest, Lord Diplock.

[4] Competition and Consumer Act 2010 [Com] Sec.44ZZRL (Austl.)

[5] Smith v Wilson (1832) 913 Pittsb. Leg.J. 538 31 How. Pv.272) District Court, S.D. Alabama.

[6] Competition and Consumer Act 2010 [Com] Sec.44ZZG (Austl.)

[7] Fisher vs Bell (1960) 1 QB 394. 3 All ER 731. Divisional court.

[8] Dunlop Pneumatic Tyre Co. Ltd v Selfridge co. Ltd (1915) UKHL 1 (1915) AC 847 (UK)

[9]