Question 1
Issue
Zot seeks services from web designer Wizard Web Pty. Ltd to develop a website that has rapid availability of many stunning images. However, Wizard produces pictures that are only available slowly, contrary to the agreement. Based on the information provided, the parties entered into a contract because Wizard made an offer in form of writing, and Zot signed it. The issue here is whether the exclusion clause 8 restricts Zot from suing Wizard for damages.
Rule
An exclusion clause is an element in the terms of a contract that disclaims liability for a specified eventuality in the course of a contract (McMillan and Stone, 2012). For example, in the case of L'Estrange v Graucob, the claimant had purchased a cigarette machine and signed the contractual agreement without reading its content. The agreement contained a disclaimer which excluded any warranty or condition. Later, the machine failed. The court decided in favour of the defendants because the exclusion clause protected the company from any liability for the breach of contract. The judge stated that as long as the parties have signed the agreement, and there was no fraud and misrepresentation, the plaintiff will be bound by the exclusion clause whether he read it or not.
In another case, Darlington Futures Ltd v Delco Australia Pty Ltd, Delco Australia agreed with Darlington for the provision of brokerage services. The agreement signed by both parties contained several exclusion clauses including exemption from any liability for damages and losses of projects undertaken by the brokerage company on behalf of the client. The company invested in deals that caused financial losses to the client; and the client claimed for damages. The court ruled that in case the meaning of the clause is not straightforward, the judges would interpret it contra proferentem; that is, against the person who drafted the exclusion clause. Therefore, the claimant succeeded. The exclusion clause was invalid because it included liabilities of trades made on behalf of the client, yet the investments were made without the claimant’s consent.
In Baldry v Marshall, the plaintiff asked for a car that was good for touring, but the defendant delivered a vehicle that did not meet the buyer’s purpose. The respondent relied on a clause which excluded liability for any warranty. The Court of Appeal suggested that an exclusion clause that does not exclude liability from a condition is invalid. Therefore, clause 8 is inconsequential because the requirement that the website should have rapidly available stunning images was a condition.
Application
Zot gives money as consideration for the web design services offered by Wizard. By signing the contract, Zot accepts the offer. Therefore, the agreement between Wizard and Zot is a valid contract, and any party who breaches will be liable for damages. Zot did not receive the services he anticipated, including rapidly available stunning images. Instead, Wizard delivered slowly available images. A material breach existed because one of the main terms of the contract was not carried out, leading to losses because Zot’s customers were deterred from using the website created by Wizard. However, Wizard relied upon an exclusion clause which exonerated him from any liability in case a programming error occurred.
Zot may rely on the outcome of Darlington Futures Ltd v Delco Australia Pty Ltd to claim for liability on the ground that the exclusion clause 8 was ambiguous. Indeed, there was no way a reasonable client would establish whether the poor quality of images on the website was caused by programming errors or negligence. Therefore, the terms of the exclusion clause is ambiguous and the court should interpret it contra proferentem. After all, the defendant would use the clause to conceal the fact that he is not able to deliver the promises he made on the contract.
Conclusion
The failure of Wizard to design a website that was fit for Zot’s purpose cannot be attributed with certainty to errors in programming. Therefore, Zot is legally entitled to get compensation from Wizard due to breach of contract; and clause 8 cannot prevent the claim because the exclusion clause is ambiguous and the plaintiff expected no programming error to cause material breach of contract.
Question 2
Issue
In the second case, Mick and the Company entered into a contract to lay the foundation for a hotel and shopping centre. The issue in this case is whether the Company is entitled to get compensation from Mick for failing to fulfil their obligations under the terms of agreement in the signed contract.
Rule
The law of contract has three key elements that must be fulfilled for it to be valid: offer, acceptance, and consideration (McMillan and Stone, 2012). An offer shows the willingness of a party to engage in a contact. The offer has to be communicated. Acceptance refers to the words or actions of an offeree that indicates his or her assent to the terms of contract (Carter, 2013). A party to a contract can successfully sue for the breach of contract if he or she can prove that the contract was valid, and that the other party did not carry out their obligations as expected. The breach has several remedies under the Australia’s contract laws. Material breach of contract occurs when one or more parties to a contract fails perform a duty that is a condition in the agreement (McMillan and Stone, 2012). Such a breach allows the other parties to claim for damages or legally compel performance.
Some of the remedies for breach of contract in Australia include: damages, equitable remedies, and liquidated claims (Carter, 2013). Damages and liquidated claims are provided under the common law, and the courts consider such remedies as substitutes for performance; hence they put the claimant in the position they would be if the contract was performed as agreed (McMillan and Stone, 2012). Punitive damages are not awarded, and the non-breaching party should do everything reasonable to reduce the damages. Furthermore, the courts do not allow the plaintiff to claim losses that are too remote from the breached contract. Equitable remedies occur when the courts require the breaching party to perform their obligations or give injunctions to stop a party from doing something that hinders performance (McMillan and Stone, 2012). The courts also direct the breaching party to compensate the other party for damages or losses incurred due to non-performance or breach of contract.
In the case of Shevill v Builders Licensing Board, the landlord (Shevill) terminated the contract with a tenant for failing to pay the money on time. The court ruled that the landlord would be entitled to claims of damages suffered from the breach of lease contract, including unpaid interests and rent. In Rockingham County v. Luten Bridge, the defendant failed to complete the construction of a bridge, and the plaintiff completed it. The court ruled that the claimant was only entitled to the losses incurred up to the time of breach; including material and labour losses, and profits from the contract.
Application
Mick refused to complete the work stated in the contract with the Company. Therefore, the failure to perform the obligations stated in the agreement led to breach of the contract. The breach of contract is fundamental and material because it affected the condition of the contract, and led to complete stoppage of the project. The company relied only on the expertise of Mick, and there was no available builder in Sydney at the time.
Due to the breach, the Company is entitled to compensation for the damages caused. The court may award damages for expenses incurred for the time leading to the breach of contract, damages caused in looking for a new contractor, and the reimbursement for profits lost in the contract. However, the court is not obliged to award the Company for losses caused by changes in environmental or market conditions. The lack of builders in the city is an unavoidable market condition that should not be awarded.
Conclusion
Mick breaches the contract before it is complete, and the Company suffers losses as a result. Based on the law of contract of Australia, the Company is legally entitled to compensation from Mick because the breach was material. However, the compensation should be limited to the amount of losses suffered as a result of the breach, not including losses incurred while looking for a new contractor.
Question 3
Issue
Soft ‘N Cuddly Pty. Ltd is distributing soft toys in Australia; but an American Company, Soft ‘N Fluffy, accused them of imitating their brand. The Australian Competition and Consumer Commission (ACCC) also found out that the skins used to make the Soft ‘N Cuddly’s products were imported from China but they were presented as products of Australia. The issue in this case is whether the company has breached any consumer laws by using the name Soft ‘N Cuddly, selling products similar to those of Soft ‘Fluffy, and using labelling its products as ‘Product of Australia’.
Rule
The Australian consumer laws are provided under schedule 2 of the Competition and Consumer Act 2010 (Malbon " Nottage, 2013). Section 18 of the Act regulates that an individual should not engage in deceptive or misleading behaviour in commerce. Section 29 also states that a person should not provide false or misleading representations about the products supplied; including the standard, value, grade, style or model, and history of the product (Commonwealth Consolidation Act, 2010). Section 54 also requires a person who supplies goods in trade to ensure that the products provided to consumers are of acceptable quality, including (in subsection 3) matters related to statements made about the commodity on the label. Section 136 also states that manufacturers should not supply particular goods if there is an existing information standard for the goods, otherwise the person will face a pecuniary penalty in court (Commonwealth Consolidation Act, 2010). Section 254 of the Act also suggests that the representation of the country of origin should not contravene the regulations provided in sections 18 and 29 of the Act, including representation on labels.
In ACCC v P " N Pty. Ltd, the Australian Competition and Consumer Commission alleged that the three respondents in the case had made misleading misrepresentations contrary to Section 19 of the Competition and Consumer Act 2010 by suggesting that the solar panels sold by the companies were made in Australia. The ACCC sought injunctions, declarations, and pecuniary penalties. The court granted declarations; restrains; and pecuniary penalties worth $50,000, $25,000, and $20,000 for the three defendants, P " N, P " N NSW. and t because the r company, the its the products any, Soft '
Application
Unregistered trademarks in the U.S. are protected under schedule 2 of the Consumer Act which requires businesses to avoid misleading and deceptive conduct in business (Commonwealth Consolidation Act, 2010). In the case of Soft and Cuddly, the business has used deceptive and misleading conduct in trade by using a similar business name with an existing company, and misrepresenting information about the country of origin on the labels of its products. Although the business name is not completely similar to the existing company, Soft ‘N Fluffy, the court may apply section 18 of the Consumers Act to rule against Soft and Cuddly. The first two names of the company are likely to mislead customers to think that they are buying products from the original company.
Furthermore, the products sold by the two firms are similar; hence Soft ‘N Cuddly has exhibited deceptive and misleading conduct, contrary to Australia’s consumer Act. The use of similar name and product with another company, Soft ‘N Cuddly contravenes section 29 of the Consumer Act because the conduct is a misleading representation of goods supplied in relation to style or model, history, and standard. However, the company does not have to change the product line, but to present original and true information about the company’s products that will look uniquely different from the products of Soft ‘N Fluffy.
Conclusion
Soft ‘N Cuddly Pty. Ltd has breached consumer laws, particularly sections 18, 29, and 254 of the Competition and Consumer Act 2010. Therefore, the ACCC should be granted relief through declarations, restrains, and pecuniary penalties on Soft ‘N Cuddly.
References
Australian Competition and Consumer Commission v P " N Pty Ltd [2014] FCA 6.
Baldry v Marshall [1925] 1 KB 260.
Carter, J.W. (2013). Contract law in Australia. Chatswood, NSW: LexisNexis Butterworths.
Commonwealth Consolidation Act (2010). Competition and Consumer Act 2010 - Schedule 2 The Australian Consumer Law. [Online] Available at http://www6.austlii.edu.au/cgi-bin/viewdoc/au/legis/cth/consol_act/caca2010265/sch2.html [Accessed on Feb 1, 2018].
Darlington Futures Ltd v Delco Australia Pty Ltd
(1986) 161 CLR 500.
L'Estrange v Graucob [1934] 2 KB 394.
Malbon, J., " Nottage, L. (2013). Consumer law " policy in Australia " New Zealand. Annandale, N.S.W: Federation Press.
McMillan, C. and Stone, R. (2012). Elements of the law of contract. London: University of London.
Rockingham County v. Luten Bridge
Co. 35 F.2d 301 (4th Cir. 1929).
Shevill v Builders Licensing Board (1982) 149 CLR 620.
