Contract Law Assignment Exploring Business Cases

Question

Task: Assignment consisting of two main questions. (Question 2 has two sub-parts).
Question 1 (10 marks)
‘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’.
• In addition, include as an example in your discussion, reference to the types of terms indicated in the facts of question 2.
Question 2 (20 marks)
The local coffee shop “Kaffee Shoppe” near VU does a great trade and see lots of students (and lecturers) come for coffee and food.
Caitlyn regularly goes to Kaffee Shoppe for her daily Kombucha. She likes that it has a selfservice 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 choose your order, you only have 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 front counter where the staff can view it on their own screens.
The self-service process was implemented by the coffee shop to save time during rush hour and is very popular. The coffee shop sees most customers using it for takeaways, whilst the rest eat in. Customers choose “Eat in” or “Takeaway” when they place their order. 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. When Caitlyn reached the front counter, she paid $2.50 for the green tea she had ordered and then took a seat waiting for staff to bring it over.
The week after, Caitlyn returned and ordered her usual Kombucha, and as a splurge, ordered a vegan poké bowl via the self- service facility. The total cost was $20.00 which she happily paid. As Caitlyn sat in Kaffee Shoppe, choosing the best Instagram filter to post the photo of her poké bowl, and sipping her Kombucha, she took a bite of her tofu struck something hard, breaking a tooth. She examined the chewed remains and found a piece of metal that had somehow been lodged in her tofu.
Caitlyn alerted the manager Karen to this incident and demanded compensation for her anticipated dental repair. Karen, the manager, expressed regret and directed Caitlyn to the ticket she had received which on its reverse side, contained a clause stating:
Kaffee Shoppe accepts no responsibility or liability for any injury caused to customers by consumption of food or drink sold.
Caitlyn, outraged said, ‘I’m a consumer and I have rights!’
Question 2:
Required
(a) Explain how the contracts Kaffee Shoppe made with Caitlyn were formed.
• 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 Caitlyn with its products. Refer to relevant case law. In this part, do not discuss the impact, if any, of consumer protection laws.
• You may, but are not obliged to use the IRAC format for this part, given that each step or event must be analysed separately.
(b) Explain whether Kaffee Shoppe is legally entitled to rely on the clause printed on the ticket to avoid liability in relation to Caitlyn’s mishap.
• For the purposes of this part you should consider both common law as well as consumer protection legislation (confirming whether Caitlyn qualifies as a ‘consumer’).
• Please use IRAC format for this part.

Answer

Question 1
Introduction : It is discussed in the contract law assignment that the terms of the contract are determined by the rights and responsibilities of the individuals involved in contract. These terms could be express as well as implied. Express terms mentioned in this contract law assignment can be said as the ones which are clearly communicative either in written or oral manner. Implied terms can be a result of a code of conduct that is expected by the parties under normal circumstances[1].

Difference between express terms and implied terms-
In order to assess contractual terms as discussed in the contract law assignment, it is essential to consider the negotiations made before the contract and the conduct that is expected after the contract. It gives rise to non-contractual rights along with the concluded terms of the contract. Express terms refers to those conditions which are mentioned in the contract like-

Pre-contractual statements,
Terms of delivery of the contract,
The course of dealing,
Effect of the contract
Primary duties of both the parties

The express terms also include terms of the breach, collateral contracts that arise from the main contract. Implied terms are implied into the contract by the prevailing law concerning the fact that they are not discussed explicitly by the parties to the contract. For instance, the law may imply a particular term which requires on the part of the parties to take appropriate steps to enable the contract to be performed[2]. These terms mentioned in the contract law assignment are implied by the law based onthe actual intention of the parties. There are certain factors to be considered for implied terms-

It is evident herein contract law assignment that such terms give efficacy to bond; as it holds effective without these terms; no conditions can be implied in this situation. For the terms to hold the nature of implied, they must be apparent.

It is necessary that terms should be capable of being clearly expressed; it must not be in contrast with any of the express terms. When a term is ambiguous and uncertain, which can have more than one meaning, their commercial result and situations in which the contract was made are considered by the court[3]. The present debate in Australia is that whether the circumstances must be considered only at the time of ambiguity or it must also be considered to determine the terms of the contract.

Case Law: Codelfa Construction Pty Ltd v State Rail Authority of NSW [1982]
In order to understand the concept of implied terms we can consider the case of Codelfa Construction Pty Ltd v State Rail Authority of NSW [1982] HCA 24; (1982) 149 CLR 337 (11 May 1982) to prepare this contract law assignment. This case of contract law assignment was a well-known one which serves as a basis for a contemporary approach to present-day construction contracts. The case explored in the contract law assignment is of a widely known construction company whose work was held up by way of injunction. The contract law address the question of frustration, construction and parole evidence rule. The construction company was hired by the state rail authority for constructing Eastern Suburbs railway Line to be completed in a time of 130 weeks. However, due to the noise it created, the construction was stopped by the residents by way of injunction and the court restricted all the work after 10pm. On Sundays, The parties started the process of arbitration to find out whether Codelfa can recuperate the additional costs because of the implied term (quantum meruit). The negotiation taking places had no jurisdiction related to aggravation of contract, and the issue was dealt with by the implied term of the contract. It was alleged by Codelfa Construction that the contract has been frustrated and that an implied term has not been met which was to pay them for the work performed.

The court commented that the company was bound to complete the work and the contract has not been frustrated. The work could not complete due to an injunction granted. The court rejected the payment term to be implied into the contract for the reason that it was not possible to make the conditions with clarity and exactness of term of interim payments was not so evident without saying, and it does not affect the efficacy of the contract[4]. The implied term cannot benefit one party and cause a burden to another.

Example of Implied and Express terms concerning facts provided in question two
The next question of the assignment related to consumer law; wherein each service provider and the consumer are bound by some implied terms. The Australian Consumer Law, “Fitness To Purpose”, states that the goods service provided to the consumer must be fit to be consumed or for the purpose intended. The metal piece in tofu makes it unfit for consumption which is its primary purpose in the Kaffee. However, the consumer can only seek compensation in the case considered herein contract law assignment where any loss has occurred[5]. Moreover, the implied term is in contrast with the express term stated that “Kaffee Shoppe state that he does not have any responsibility or liability for any injury caused to customers due to consumption of food or drink provided by restaurant”.

Conclusion
Thus from the above discussions, it is clear that there is vital difference between the express and implied terms of the contract. The implied term is presumed by the parties and would have created consent. However, there have been cases where the express terms are omitted which should have been included in the contract, and in these cases; these terms may not be considered implied. Still, they can be executed with mutual understanding, and it can be rectified to make explicit provision for that. For example, in contracts of sale of goods, there might not be express provision for the good to be fit for use for their intended purpose. Thus this may be considered as an implied term.

Question 2
Part A
Issue: Analysis of manner in which contract of Kafee Shoppe made with Caitlyn formed.

Rule: A contract legally enforces agreement made between two parties. The essential variants of a contract are legal capacity, offer and acceptance, consideration and objective to create legal relations[6]. Existence of any false statement, undue influence and unconscionable dealing can make contract illegal and void.

Essential elements of contract
Offer and acceptance: A contract is developed while an offer provided by an individual and same is accepted by other parties. An offer is deemed enforceable when it can be distinguished from the mere will of an individual, i.e. further negotiation of other details. It is possible to make offer to a class of people or the whole world, and it is not necessary to be made to a specific person. In legal terms, offer is a definite promise which bounds another person to comply with terms ofthe offer provided the terms are accepted by other parties[7]. In other words, it can be stated in this context of contract law assignment that acceptance must exist for a specific offer to bind other people.

Legal capacity: Every individual is not free to enter in a valid contract. The specified persons, i.e. with mental impairment, bankrupts, prisoners, corporation (who act on behalf of the company), prisoners might have issues relating to consent and legal capacity. It has been provided in English Law that person with mental impairment or temporarily impaired cannot make valid contract unless the person can genuinely consent its making[8].

Consideration: Consideration refers to the value paid by an individual to another party with whom contract has been made against a promise. The price must be something of value even though not in money[9]. It can be right, the detriment of loss, interest or benefit for one party etc.

Objective to create the legal relationship: The agreement between two parties can be enforceable only when both the parties have the intention to create a legal relationship. In case parties are entering a commercial arrangement which is accomplished at arm’s-length, it will be assumed that parties have intended to create legal relations to make a binding contract[10].

Analysis
A contract must be indeed or carried by consideration. The description of consideration has been adequately provided through the decision of the case of Dunlop Pneumatic Tyre Co Ltd v Selfridge & Co Ltd. It has been provided in the case of contract law assignment that it is not necessary consideration should be in money form, and promise of action or act or forbearance can be given as consideration for enforceability of the contract. In existing scenario of case study,the customer has accepted the offer and responded on the same through selecting the menu on the virtual board. Further payment has been made following the menu. It means that offer, as well as consent and consideration, is available in the contract of Kafee Shoppe made with Caitlyn formed. For instance, in the case of McDonald v Attorney General considered in this section of contract law assignment, judge Holland specifically provided that Wheat Board did not have intentions to enter in a contractual relationship to buy wheat from Mr McDonald until it was delivered[11]. The case specified in the contract law assignment represents the situation of estoppels. However, in the present case of a contract among Kafee Shoppe made with Caitlyn, adequate order was made and adequately accepted by Kafee Shoppe through a virtual machine. Thus, it would be appropriate to state that essential element of objective to be legally bound does exist in the present case.

Conclusion
Through the above analysis on contract law assignment, it can be concluded that as all essentials of a valid contract are available in case of Kafee Shoppe made with Caitlyn. Thus it would be appropriate to state that contract formed between Kafee Shoppe and Caitlyn is valid and enforceable.

Part B
Issue: Finding a foreign object in food: The issue addressed in this question of contract law assignment is the liability of a cafe owner towards its consumer who was served tofu which had a piece of metal in it.

Rule: The Act of Negligence: As per schedule 2 of the Competition and Consumer Act 2010 (Cth)- the ACL is the main law in Australia which regulates consumer protection and obligation of manufacturers, contractor and distributors of consumer products relating to loss or damages caused due to products[12]. The rule provided in Australia Consumer Act applies to this case study of contract law assignment is that if there is a problem with the foods and beverages the customer holds each right to ask for damage compensation if the supplier had foreseen the problem? Consumer protection law specifies provision regarding protection to assure that products purchased by the customer are safe. Even consumer rights provided in Australian consumer protection law specifies that it can complain and take legal action against the third party in case safe products are not provided to the customer[13].

Analysis: This section of contract law assignment illustrates that finding a foreign object in food which makes it unfit for consumption define the act of negligence on the part of the restaurant. All the restaurants and cafes are governed by Federal and State and Territory legislation[14].These organisations put certain obligations on the owners to provide food which is suitable to eat. At the Federal level, this case will be guided by the organisations which oversee the businesses related to food that is Food Standards Australia New Zealand Act 1991, Food Standards Australia New Zealand Regulations 1994.

Catalyn wished for filing complaint against the cafe for incorrect food handling. However, the readings considered in this section of contract law assignment also signifies that she has to establish that she suffered some type of harm as a result of the cafe’s negligence. Just by finding a foreign object, does not make her in a position to sue the restaurant. The Kafee in which Catlyn is a regular customer should have taken necessary steps to compensate her. They could have made the order free or brought her a fresh order. However, the cafe has made an explicit term in their ticket to not pay for any damages that occur because of their food and beverages. It means there is an explicit denial of the cafe for any damages[15].

Possible damages: The possible damages that the metal piece would have caused to Catalyn might have broken her teeth, or it would have resulted in choking and breaking a tooth. At the same time, eating can not only be painful but create embarrassment on the part of the consumer. Accidental choking may have caused unintentional death. If the restaurant is found guilty that the choking occurs because of the food they served, this may cause legal trouble for the cafe[16]. The cafe might be responsible for violating health regulations.

Case Law Donoghue v Stevenson (1932) – also known as the Snail in my bottle case
The above case specified in this contract law assignment is landmark judgement related to the act of negligence in which Mary Donoghue discovers remains of a disintegrating snail in a ginger beer bottle[17]. After which she dealt a rigorous problem of gastritis. She took legal action against the manufacturer of the drink, specifying that the manufacturer had responsibility to ensure that no snails enter the bottles and assess bottle before packing[18]. The court provided that manufacturer had not complied with his duties to his customers. This case paves the manner for claiming negligence acts in England and Australia.

Conclusion
From the overall evaluation done in this contract law assignment, it can be concluded that the court states the cafe owners owe a duty of care towards their customers. By failing in providing safe food, they are risking the life of their consumers, and it is a breach of duty. For this purpose, the court might consider the probability of the metal piece likely to risk the health. Metal can be severe if swallowed. However, Catalyn was lucky enough to identify and intimate this to the manager. Since no injury occurred, there will be no compensations made. The court might consider the act of negligence on the part of the cafe.

Bibliography
Allen and Overy. BASIC PRINCIPLES OF ENGLISH CONTRACT LAW. Contract law assignment (2017). a4id org. <http://www.a4id.org/wp-content/uploads/2016/10/A4ID-english-contract-law-at-a-glance.pdf>.

Ash, David. “Implied terms of fact: Counsel’s last resort.” Bar News: The Journal of the NSW Bar Association Autumn 2018 (2018): 66.

Australian Consumer Law-guide. (2016).Consumer law.gov.au. <https://consumerlaw.gov.au/sites/consumer/files/2016/05/0553FT_ACL-guides_PSafety_web.pdf>

Bruce, Alex. “Present & Future Jurisprudence of Consumer Protection and Food Law in Australia.” International Food Law and Policy. Springer, Cham, 2016. 971-1000.

Chaar, Maha. “Construction of contracts: The ambiguity gateway and the current state of the law.” UW Austl. L. Rev. 44 (2019): 65.

Eldridge, John Anthony. Codifying Contract Law in Australia: Issues and Obstacles. Diss. 2019.

Eldridge, John. “‘Surrounding circumstances’ in contractual interpretation: Where are we now?.” Commercial Law Quarterly 32.3 (2018): 3-11.

Goldberger, Jeffrey. “Contract law in the cases: 2017 in the review.” Commercial Law Quarterly: The Journal of the Commercial Law Association of Australia 32.1 (2018): 32.

Goldberger, Jeffrey. “Implied contracts and implied terms-part 2 of 3.” Commercial Law Quarterly: The Journal of the Commercial Law Association of Australia 33.3 (2019): 12.

Goudkamp, J. L. M., J. Edelman, and Simone Degeling. Contract law assignment “Contemporary problems in the law of contract.” Australian Bar Review (2016).

Howells, Geraint, and Iain Ramsay, eds. Handbook of research on international consumer law. Edward Elgar Publishing, 2018.

Khoury, El, Chantal.Bucket Intell-O-gence: Can You Sue For Finding A Foreign Object In Your Food?. (21 June 2017). bucketorange.com. <http://bucketorange.com.au/sue-foreign-object-smashed-avo/>

Pearson, Gail. “Enforcement and Effectiveness of Consumer Law in Australia.” Enforcement and Effectiveness of Consumer Law. Springer, Cham, 2018. 75-97.

Rajapakse, Pelma Jacinth. “Contamination of food and drinks: Product liability in Australia.” Deakin L. Rev. 21 (2016): 45.

Rights of Consumer. (2019).accc.gov.au. <https://www.accc.gov.au/consumers/complaints-problems/make-a-consumer-complaint>

Robertson, Andrew. “The foundations of implied terms: logic, efficacy and purpose.” Contract in Commercial Law (Sydney, LawBook Co, 2016) (2016).

Siliquini-Cinelli, Luca, and Andrew Hutchison. More Constitutional Dimensions of Contract Law. Contract law assignment Springer International Publishing, 2019.

[1]EdelmanJ. L. M., J. Goudkamp and DegelingSimone. "Contemporary problems in the law of contract." Australian Bar Review (2016).

[2]JohnEldridge. "'Surrounding circumstances' in contractual interpretation: Where are we now?." Commercial Law Quarterly 32.3 (2018).

[3]MahaChaar. "Construction of contracts: The ambiguity gateway and the current state of the law." UW Austl. L. Rev. 44 (2019).

[4]Jeffrey Goldberger. "Contract law in the cases: 2017 in review." Commercial Law Quarterly: The Journal of the Commercial Law Association of Australia 32.1 (2018)

[5]JeffreyGoldberger. "Implied contracts and implied terms-part 2 of 3." Commercial Law Quarterly: The Journal of the Commercial Law Association of Australia 33.3 (2019).

[6]David Ash. "Implied terms of fact: Counsel's last resort." Bar News: The Journal of the NSW Bar Association Autumn 2018 (2018).

[7]John AnthonyEldridge,. Codifying Contract Law in Australia: Issues and Obstacles. Diss. 2019.

[8]JeffreyGoldberger. "Contract law in the cases: 2017 in review." Commercial Law Quarterly: The Journal of the Commercial Law Association of Australia 32.1 (2018).

[9]AndrewRobertson. "The foundations of implied terms: logic, efficacy and purpose." Contract in Commercial Law (Sydney, LawBook Co, 2016) (2016).

[10]LucaSiliquini-Cinelli and HutchisonAndrew. More Constitutional Dimensions of Contract Law. Springer International Publishing, 2019.

[11]Australian Consumer Law-guide. (2016). Consumer law.gov.au .<https://consumerlaw.gov.au/sites/consumer/files/2016/05/0553FT_ACL-guides_PSafety_web.pdf>

[12]Allen and Overy. BASIC PRINCIPLES OF ENGLISH CONTRACT LAW .(2017). a4id org. <http://www.a4id.org/wp-content/uploads/2016/10/A4ID-english-contract-law-at-a-glance.pdf

[13]Rights of Consumer. (2019).accc.gov.au. <https://www.accc.gov.au/consumers/complaints-problems/make-a-consumer-complaint>

[14]JacinthPelmaRajapakse,. "Contamination of food and drinks: Product liability in Australia." Deakin L. Rev. 21 (2016): 45.

[15]Geraint Howells, and RamsayIain, Handbook of research on international consumer law. Edward Elgar Publishing, 2018.

[16]Alex Bruce. "Present & Future Jurisprudence of Consumer Protection and Food Law in Australia." International Food Law and Policy. Springer, Cham, 2016.

[17]Chantal El Khoury .Bucket Intell-O-gence: Can You Sue For Finding A Foreign Object In Your Food?. (21 June 2017). bucketorange.com. <http://bucketorange.com.au/sue-foreign-object-smashed-avo/>

[18]GailPearson,. "Enforcement and Effectiveness of Consumer Law in Australia." Enforcement and Effectiveness of Consumer Law. Springer, Cham, 2018.

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