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Common Law Assignment: Case Assessment Using The IRAC Method

Question

Question 1 : Avinash is a regular visitor to a local café that provides a self-service facility where customers have the option of selecting a drink or food item from a menu displayed on a touch screen located near the counter. To select a product, a customer only has to touch an image or icon showing the desired product, and then touch a virtual ‘OK’ button to submit an order. The order is relayed to the café’s front counter where the cashiers can view it on their own screens.

Customers using the touch screen are immediately issued with a printed ticket containing an order number and the price payable at the front counter.

Customers present these tickets to the cashiers who confirm the relayed order appearing on their screens. At this point, the customers pay for their purchases and await delivery.

This system is designed to save time during peak periods and is very popular. Some customers place their orders as takeaways, while others, like Avinash, prefer to be seated and consume them on the premises. These preferences are preselected by the customers when they use the touch screen.

When Avinash reached the cashier, he paid $4 for the coffee he had ordered and then took a seat waiting for it to be served at his table.

The next morning, Avinash returned and ordered his usual coffee- and for the first time, a Danish pastry- using the self- service facility. The total cost was $7.50 which he duly paid. As he sat in the café consuming his drink, he bit into the pastry and struck something hard, breaking a tooth. He examined the chewed remains and found a piece of metal that had somehow been lodged in the pastry.

The next morning, Avinash returned and ordered his usual coffee- and for the first time, a Danish pastry- using the self- service facility. The total cost was $7.50 which he duly paid. As he sat in the café consuming his drink, he bit into the pastry and struck something hard, breaking a tooth. He examined the chewed remains and found a piece of metal that had somehow been lodged in the pastry.

This café accepts no responsibility or liability for any injury caused to customers by consumption of food or drink sold.

In response, Avinash exclaimed, ‘I’m a consumer and I have rights!’

Required: Explain how the contracts Avinash made with the café were formed.

  1. You will need to address all the essential elements of a contract (including consideration) as well as analyse the legal status of each step or event that led to the café supplying Avinash with its products. Refer to relevant case law. In this part, do not discuss the impact, if any, of consumer protection laws.
  2. You may, but are not obliged to use the IRAC format for this part, given that each step or event must be analysed separately.

Explain whether the café is legally entitled to rely on the clause printed on the ticket to avoid liability in relation to Avinash’s mishap.

  • For the purposes of this part you should consider both common law as well as consumer protection legislation (confirming whether Avinash qualifies as a ‘consumer’).
  • Please use IRAC format for this part.

Question 2 : ‘In contrast to express terms found in a contract, implied terms can arise in a variety of ways and are beneficial to at least one of the parties to the contract. Some contracts may contain both express and implied terms, but the ways these two types of terms operate are significantly different from one another’.

Required: Discuss this statement by reference to cases and legislation, providing examples of each.

  • You need to justify your view as to whether these two types of terms are ‘significantly different from one another’
  • You need to justify your view as to whether these two types of terms are ‘significantly different from one another’

Answer

Part A
Issues

  1. Formation of Contract between the café and Avinash in each step of the transactions between the parties. An evaluation of the presence of all essential to a contract.
  2. The aspect of consideration and identification of the same in light of the present transactions.

Rules: Agreements that lead to obligations which can be enforced under law are defined as contracts. Thus, an agreement that has no possibility of legal enforceability would not be a contract. The essential elements in a contract are derived from judicial interpretations of the same delivered in the form of judgments as per the common law system. The Australian Commonwealth incorporates the common law system and is bound by the judicial pronouncements and interpretations of the same. As per the common law system discussed in this common law assignment the first essential of a contract is an offer. An offer is an unequivocal representation for a clear intention to form a contract. An invitation to treat on the other hand is merely a precursor to an offer and thus is not a valid offer. The second essential is acceptance. The acceptance of an offer must be conveyed for a contract to be formed. However varying the terms of the offer or proposing a counter-offer revokes the original offer that was made and thus removes the possibility of accepting such an offer. This was considered in the judicial interpretation of the same laid down in the case of Hyde v Wrench1 . The next aspect of a valid contract is construed from the intention of the parties to create legally binding relationships. Such an intention would be presumed to be absent in agreements made between family members as laid down in the case Balfour v Balfour2 . The final aspect of inferring a valid contract is consideration and the same would be discussed below.

  1. (a) The value derived by a party from entering into a contract would be termed as the consideration for the same. This means that the consideration for a contract is the purpose for the parties entering into the same and thus would be essential in execution of the contract. This is because the parties have entered into such a contract due to the same. Consideration maybe executory or executed. Consideration which is executory is dependent on a future performance of the same whereas consideration which is executed has already been performed as laid down in the case of Dunlop v Selfridge Ltd3 .

Application

  1. In the present scenario discussed in this common law assignment the menu and options offered on screen by the café would be deemed to be an invitation to treat. When a customer places an order the same would be construed to be an offer and ticket issued by the machine would imply a valid acceptance of the same. This is because when accepting the same there was no variation of terms and thus the offer would be valid following the judgment in Hyde v Wrench4 . As an order was placed in a café it would be deemed to be commercial transaction and thus would imply the presence of an intention to create a legally enforceable agreement5 . Thus the requisites of a contract were satisfied as far as these essentials were concerned.
  2. The concept of consideration in this case discussed in this common law assignment would denote the values sought by the parties when entering into such contracts6 . The consideration sought by the café is the amount charged for the products sold and the consideration for Avinash is the product ordered. Thus when Avinash placed the order for the product and paid for the same the consideration owed from his end was executed. Thus, consideration owed from the café was to deliver the food to him when his turn arrived and thus the same was executory in nature as maybe derived from the judgment in Dunlop v Selfridge Ltd7 .

Conclusion

  1. It can be concluded in this section of this common law assignment that valid and enforceable contract existed between Avinash and the café. This is because the essentials of a contract can be inferred from the same.
  2. The aspect of consideration was present from both sides.

Part B
Issues

  1. The validity of the printed clause on the ticket and the ability of the café to rely on the same to avoid liability.
  2. Avinash’s rights with respect to the contract between him and café in light of consumer laws presently in force within the Australian Commonwealth.

Rules:

  1. (a) A contract embodies various obligations which need to be observed and carried out by the parties consenting to the same. These obligations are inferred from and are codified as terms of a contract. Thus a term of a contract would be the ideal mode of inferring the true meaning of the same. Thus these terms can also be devised to exclude liability from parties when such a situation or contingent in agreed upon by all parties to the contract. Such a term would be defined as an exclusionary term and thus would absolve a certain party form liability when a certain contingent is met or is inferred from the same. Thus an exclusion clause can be stated to be one which can also limit responsibility or liability in certain cases. However as such a clause can lead to inequities in the balance these clauses must be constructed in a way that completely adheres to principles of the same laid down in common law. The first is that such a term is incorporated and the same can be inferred through previous course of transactions or dealings between the parties as laid down in Chapelton v Barry Urban District Council8 . The second relates to its interpretation and states that the term must be interpreted in its ordinary meaning as can be construed from George Mitchell (Chesterhall) Ltd v Finney Lock Seeds9 .However and exclusion clause should not be against consumer rights or be an unfair term which may cause an imbalance to the balance of equities10 . This is also an essential of the same. In interpreting an exclusion clause however if it can be established that the same is vague as far as the ambit of its applicability is concerned the same would be construed to be inapplicable by Court as held in the judgment in Houghton v Trafalgar Insurance Co. Ltd11 . This is because such a clause would be interpreted against the party seeking to rely on the same applying the principle of contra proferentum12 . Thus such a term would be invalid.
  2. (b) Consumer laws refer to laws laid down the right of a consumer against sellers and manufacturers or products. This is devised to ensure that the products sold to the consumer adhere to the required standard and are safe for usage. In the Australian Commonwealth and its territories and territorial jurisdiction consumer law is regulated and administered through the provisions of Competition and Consumer Act, 2010. This legislation referred in this common law assignment covers guarantees and warranties that must be given by a seller to a consumer and puts a financial limit of $40,000 AUD on these transactions. The Australian Competition and Consumer Commission is the regulatory authority which monitors claims under the act. As per the Competition and Consumer Act, 2010 refered in this assignment on common law if an unfair term is included in the contract then the same would be liable to be construed as an invalid term as laid down the case Australian Competition and Consumer Commission v Valve Corporation (No 3)13 . An unfair term would be one which causes a detriment to either party to the contract or harms the balance of equities.

Application:

  1. Avinash visits the café in question for his morning coffee and thus multiple transactions with the same place can be inferred from the given set of circumstances in the scenario. The café maintains a ticket system and the same contains an exclusion clause stating that in case the person consuming their products faces any detrimental effects to the same then it would not bind any responsibility to the café. This clause can be deemed to be incorporated as Avinash was a regular customer and thus would be deemed to have incorporated such a clause through previous course of dealings and thus would contain that essential to an exclusion clause. However such clause discussed in this assignment on common law being detrimental to the consumer rights of the customer of such a café the same would be deemed to be in contravention of consumer laws. Moreover, following the judgment laid down in Houghton v Trafalgar Insurance Co. Ltd14 this would be a vague exclusion clause due to the fact that the ambit of the same is not well defined and can be deemed to be unlimited thus the same would not operate as a valid exclusion clause. This would also be followed keeping in mind the rule of contra proferentum.
  2. As stated above in this common law system assignment consumer transactions within the territories of the Australian Commonwealth are covered by the prescriptions of the Competition and Consumer Act, 2010. As per the act a term of a contract which is unfair or is detrimental to the interests of either or both of the parties to such a contract it would be deemed to be a contravention of the rights of the consumer as laid down in the landmark judgment in Australian Competition and Consumer Commission v Valve Corporation (No 3)15 . Thus the exclusion clause included in the contract between Avinash and the café would not be vaild.

Conclusion

  1. It can be concluded in this section of common law system assignment that the exclusion clause contained in the ticket would not be a valid exclusion clause.
  2. Avinash’s consumer rights under the consumer laws of the Australian Commonwealth would be upheld and thus the café would not be able to rely on such a clause.

Answer 2: The terms of a contract define what may be construed as a valid contractual obligation or a mere representation. Thus a representation is not a term and thus does not lead to contractual liabilities unless the same can be inferred to be a term16 . The contractual liabilities of a person are determined under the various terms incorporated into the contract by the parties to the same. Thus a contractual obligation that is explicitly incorporated to a contract is termed as an express term. These are easily inferable as they are directly incorporated into the contract. This means that a contract that has a term which is directly incorporated into the contract and leaves no ambiguity in meaning the same would be an express term. The other type of term available in a contract is known as an implied term17 . These terms are obligations of the parties which are not directly incorporated into a contract however the same can be inferred from the terms which are directly incorporated into the contract. An implied term of a contract may be inferred from two ways, an implication by a statute or implied by courts18 . Thus these are terms which are included in a contract due to the operation of law19 . Thus if a specific statute prohibits or proposes the existence of such a term then it would be implied that the statue would have to be followed as observed in the case Chapelton v Barry Urban District Council20 . If the same is implied through a judicial interpretation of a legal proposition the same would mean that it is an implied term of any contracts of that nature. An example of such a statute would be Unfair Contract Terms Act, 1977 where such terms are implied to be invalid and void. In the Australian Commonwealth the Competition and Consumer Act, 2010 prohibits the operation of such unfair terms in consumer disputes21 . In the present scenario, Avinash entered into a contract with a café concerning the purchase of consumables. In this contract the ticket obtained specified the price to be paid by Avinash for the products and this can be considered to be an express term of the same. The café has an obligation to deliver the goods to Avinash but the same is not mentioned in the ticket however it is inferred and thus is an implied term. The café must also not include unfair terms into such a contract as required under the provisions of the Competition and Consumer Act, 2010 which is also an implied term of the contract between the two as a term implied by statute.

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Bibliography
Statues: Competition and Consumer Act, 2010.
Unfair Contract Terms Act, 1977.

Case laws: Australian Competition and Consumer Commission v Valve Corporation (No 3) [2016] FCA 196.

Balfour v Balfour [1919] 2 KB 571.
Chapelton v Barry Urban District Council [1940] 1 KB 532.
Dunlop v Selfridge Ltd [1915] AC 847.
George Mitchell (Chesterhall) Ltd v Finney Lock Seeds [1983] 2 AC 803.
Houghton v Trafalgar Insurance Co. Ltd [1954] 1 QB 247.
Hyde v Wrench [1840] EWHC Ch J90.

Articles: Ayres, Ian, and Alan Schwartz. "The no-reading problem in consumer contract law." Stan. L. Rev. 66 (2014): 545.

Beale, Hugh, et al., eds. Cases, materials and text on contract law. Bloomsbury Publishing, 2018.

Cifrino, Christopher J. "Virtual property, virtual rights: Why contract law, not property law, must be the governing paradigm in the law of virtual worlds." BCL Rev. 55 (2014): 235.

Lawson, Richard G. Exclusion clauses and unfair contract terms. Sweet & Maxwell, 2011

McKendrick, Ewan. Contract law: text, cases, and materials. Oxford University Press (UK), 2014.

Savelyev, Alexander. "Contract law 2.0:‘Smart’contracts as the beginning of the end of classic contract law." Information & Communications Technology Law 26.2 (2017): 116-134.

Simon, Sidney I. "The dilemma of war and military exclusion clauses in insurance contracts." Am. Bus. LJ 19 (1981): 31.

Stone, Richard, and James Devenney. The modern law of contract. Routledge, 2017.

Turner, Chris. Unlocking contract law. Routledge, 2014.

References
1. [1840] EWHC Ch J90.

2. [1919] 2 KB 571.
3. [1915] AC 847.
4. [1840] EWHC Ch J90.

5. McKendrick, Ewan. Contract law: text, cases, and materials. Oxford University Press (UK), 2014.

6. Beale, Hugh, et al., eds. Cases, materials and text on contract law. Bloomsbury Publishing, 2018.
7. 1915] AC 847.
8. [1940] 1 KB 532.
9. [1983] 2 AC 803.

10. [1983] 2 AC 803.
11 [1954] 1 QB 247.
12 . Lawson, Richard G. Exclusion clauses and unfair contract terms. Sweet & Maxwell, 2011.
13. 2016] FCA 196.
14. [1954] 1 QB 247.
15. [2016] FCA 196.
16. Savelyev, Alexander. "Contract law 2.0:‘Smart’contracts as the beginning of the end of classic contract law." Information & Communications Technology Law 26.2 (2017): 116-134.
17. Turner, Chris. Unlocking contract law. Routledge, 2014.

18. Cifrino, Christopher J. "Virtual property, virtual rights: Why contract law, not property law, must be the governing paradigm in the law of virtual worlds." BCL Rev. 55 (2014): 235.

19. Stone, Richard, and James Devenney. The modern law of contract. Routledge, 2017.
20. [1940] 1 KB 532.

21. Ayres, Ian, and Alan Schwartz. "The no-reading problem in consumer contract law." Stan. L. Rev. 66 (2014): 545.

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