Issue
Justin had placed an advertisement in the newspaper and on the internet, regarding the prospective sale of residential units constructed by him. Upon reading this advertisement, Georgina became interested and signed a document with Justin for the sale of three ground floor units. The issue in this case is whether the signed agreement was a contract, pursuant to valid offer or sale, or not.
Rule
A contract is often said to be a signed document, which contains a promise to undertake certain work or activity, for a consideration in return. Such a form of written document is also known as a written contract (Clarke and Clarke, 2016). The contracts can also be drawn in an oral manner, whereby the terms upon which the whole agreement is being drawn, are exchanged in an oral manner. Despite the type of contract, if it is formed with proper elements, it will be valid and binding (Andrews, 2015). In order to form a contract, it is crucial that it possesses the elements, which are deemed as necessary, in it, for it to be lawfully valid. These elements include offer and acceptance, consideration, intention, clarity and capacity (Elliot, 2011).
The first element for initiating a contract is an offer. The offer is different from invitation to treat and there is a clear need for differentiation between the two. The invitation to treat demonstrates that the parties are willing to negotiate upon the terms of the contact; whilst the offer demonstrates that the party is willing to initiate a contract (Abbott, Pendlebury and Wardman, 2007). Usually, the advertisements given in the magazines or newspapers are not taken to an offer, and instead are treated as an invitation to treat. In such cases, the individual giving the advertisement in the newspaper is not bound to complete the same. Partridge v Crittenden [1968] 1 WLR 1204 is one of such cases where the advertisement given in the newspaper was held to be an invitation to treat, instead of an offer and so the individual was not required to go through with the sale (Swarb, 2016).
However, there are cases where the advertisements in the newspapers are considered as an offer, instead of an invitation to treat. These are the cases where unilateral offer is made by the advertising party, which can be accepted by any individual (Latimer, 2012). A leading case in this matter is the case of Carlill v Carbolic Smoke Ball Company [1893] 1 QB 256, where the advertisement was a unilateral offer and could be accepted by anyone through performance of the same. The performance was related to contracting influenza even after using the smoke ball. As it was deemed as a contract, the damages had to be paid to the plaintiff (British and Irish Legal Information Institute, 2017).
Once an offer is properly made, the same has to be accepted by the other party. The offer has to be accepted as it was made, and if any term or condition is amended or modified, the same is considered as a counter offer (Ogilvie, 2011). And an acceptance on such counter offer is then required, as was established in the case of Hyde v Wrench [1840] 49 ER 132 (Marson and Ferris, 2015).
The third element in contract making is the consideration. The amount of consideration can be anything, which the parties mutually decide, for performing the promise, but has to have an economic value (Lambiris and Griffin, 2016). This economic value depends upon the facts of the case. For instance, in Chappell & Co Ltd v Nestle Co Ltd [1960] AC 87, three wrappers were accepted by Lord Somervell as valid consideration, due to the reasons that the wrappers were a precedent stipulation (E-Law Resources, 2017a). There are certain other elements which have to be present and this relate to a clarity regarding the terms of the contract, the parties having the contractual obligation in form of legal age and sound mind, and the intent of creating legal relationship (Gibson and Fraser, 2014).
In case a part or whole of contract is not performed by the parties to the contract, the aggrieved or the non-breaching party can initiate legal actions against the breaching party for both equitable and monetary remedies (Ayres and Klass, 2012). The purpose of awarding remedies stems from the ruling given in Addis v Gramophone [1909] AC 488, which states that by awarding the remedies, the individual would be brought in that position where the contract was performed (E-Law Resources, 2017b).
Application
In this case, the advertisement given in the newspaper could not be fulfilled with mere performance and was not a unilateral offer, so the case of Carlill v Carbolic Smoke Ball Company would not apply. So, as per Partridge v Crittenden, this was an invitation to treat. Pursuant to this invitation, Georgina discussed the terms of the contract with Justin and the consideration was decided as $800,000. So, an offer was made by Georgina to Justin to purchase one of the ground floor units. And this offer was accepted by Justin, and a consideration was also fixed, as a result of which a document was signed.
However a contract was not formed in this case. This is because there was a lack of clarity in the terms of the contract. This is evident from the wordings of the offer, whereby Georgina made an offer to buy one of the ground floor units. So, there was no clarity in which unit Georgina would be purchasing. This lack of clarity is evidence to the fact that there was no contract.
A point could be raised in this case regarding the signed document being a contract. But firstly, there was an absence of clarity, and secondly, it was clearly stated on the signed document, that the same was subjected to a proper contract which would be drawn later on by the solicitor of Justin. This stated condition confirms that a written contract was not formed. An oral contract could also not be established due to lack of clarity. In absence of clarity, a claim for damages cannot be made.
Conclusion
To conclude, there was an absence of clarity regarding the terms pertaining to which unit would be bought by Georgia and so, a valid contract was not formed in this case.
ACL or the Australian Consumer Law is the key legislation in Australia for protection of consumers and for fair trading by the businesses. The provisions of ACL are contained in the Schedule 2 of the Competition and Consumer Act 2010 (Consumer Law, 2017). This act offers the protection to the consumers from misleading and deceptive conduct, false representations, unconscionable conduct, unfair contractual terms, and a number of other unfair practices in connection to the supply of goods, services and land (Corones, 2012). In the following parts, the various aspects of misleading or deceptive, along with the false representations made by Justin have been elucidated.
As per section 18 of the ACL, the individuals engaged in trade or commerce are prohibited from engaging in such conduct which can be deemed, as or is, misleading or deceptive (Kolivos and Kuperman, 2012). Such conduct is deemed as unfair business practices through the Act. This section can also be used by the individuals who have been induced by the other party, into entering of contract, due to the misrepresentation made during the negotiations, which lead to the formation of the contract. In such cases, the aggrieved party can obtain appropriate relief on the basis of misleading or deceptive conduct amounting from the misrepresentations (Federal Register of Legislation, 2013).
In the case of Australian Competition and Consumer Commission v Internet Pty Ltd (2013) FCAFC 37, the advertisement given in the newspaper by TPA were held to be both misleading and deceptive by the court of law, as this advertisement displayed a single price for the services which were advertised. Though, in reality, there were a range of other costs which were involved, and these were withheld by TPA. Hence, the court ruled in favor of ACCC and held that TPA was engaged in misleading and deceptive conduct, which was a breach of ACL (High Court of Australia, 2013).
In the matter of De Bortoli Wines Pty Ltd v HIH Insurance Ltd (in liquidation) & Others [2012] FCAFC 28, the court held that there is a need to establish that reliance was made on the misleading or deceptive conduct, to contravene the section of Trade Practices Act 1974, which was act applicable before ACL. Only when reliance can be established, can the remedies be awarded (Czoch and Whalebelly, 2012).
Section 29(1) (i) of the ACL provides the provisions relating to false or misleading representation. An individual is deemed to have been indulged in unfair practices, when such an individual is engaged in the supply of goods or services, during the course of trade or commerce, and for the promotion of their goods or services, the individual makes a false or misleading representation relation to the standard, value, or such other aspect relating to the offered services or products. Section 30(1) contains the provisions regarding false or misleading representation made regarding the sale of interest in land or for the grant of same (Federal Register of Legislation, 2013).
In the case of Australian Competition and Consumer Commission v Jetstar Airways Pty Ltd [2015] FCA 1263, the court held that both Jetstar and Virgin had failed deliberately in making a disclosure regarding the additional Booking and Service Fee. In addition to this, the disclosure regarding the fee was made only after the consumer had moved through certain stages of the booking process. Hence, Jetstar and Virgin were considered to have breached the provisions of ACL by false or misleading representations made, by engaging in misleading dip pricing practice (Jade, 2015).
The provisions of ACL and the case laws highlighted above show the legal implications upon Justin for the breach of sections of ACL. The advertisement given by Justin, in the newspaper showed photos of luxurious tropical palms and this picture was taken in Bali. Moreover, the picture of 50 meter Olympic size swimming pool was taken in North Sydney pool. This shows that both the pictures did not actually represent the property being advertised for, which was a block of residential units located in Parramatta.
Both these photographs amount to false or misleading conduct. This can be evidenced from the case of Australian Competition and Consumer Commission v Internet Pty Ltd, where the advertisement regarding the price was taken as misleading or deceptive conduct. Here, the advertisement mislead regarding the swimming pool and tropical palms offered with the residential units. Hence, there is a clear breach of section 18 of the ACL.
Justin also breached the other highlighted sections of ACL. This is evident from the false representation made by him, regarding the tropical palms being present, along with an Olympic size swimming pool, when in reality, low lying Australian shrubs, along with a mere twenty five meter two lane pool was being constructed. So, as per Australian Competition and Consumer Commission v Jetstar Airways Pty Ltd, there was a breach. Moreover, Georgia had relied upon the advertisements and the assurances of Justin and then signed the document. This further affirms the liability of Justin with regards to ACL breach.
The business implications in this regard stem from the amount of damages which Justin would have to pay to Georgia for the breach of ACL sections. Along with this, a company which breaches the consumer law also has to face ethical implications, in the form of negative business image and a decline in the brand image or brand value of the company. The actions of Justin have made him liable to pay the damages to Georgia, which could have otherwise been used for the purposes of business. Furthermore, his actions have created a negative image in the minds of the consumers, who would be apprehensive about purchasing the land from him in the future.
To summarize the entire discussion, by falsely representing the facts associated with the residential apartments, Justin breached the legal provisions of the ACL, in line with false representation, and misleading and deceptive conduct. This has given rise to business implications in form of paying the damages to Georgia. And this has also created an image of Justin being an unethical person, resulting in the loss of faith in him, and an overall negated impact on his business.
References
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Ayres, I., and Klass, G. (2012). Studies in Contract Law. 8th ed. New York: Foundation Press.
Clarke, P., and Clarke, J (2016) Contract Law: Commentaries, Cases and Perspectives. 3rd ed. South Melbourne: Oxford University Press.
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Czoch, K., and Whalebelly, R. (2012) Australia: D&O: Shareholder reliance on misleading and deceptive conduct. [Online] Mondaq. Available from: https://www.mondaq.com/australia/x/182340/Arbitration+Dispute+Resolution/DO+Shareholder+reliance+on+misleading+and+deceptive+conduct [Accessed on: 17/04/17]
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Gibson, A., and Fraser, D. (2014) Business Law 2014. 8th ed. Melbourne, Pearson Education Australia.
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