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PART A
Question One
i. Identification of the legal issue
The legal issue is whether the parties involved have reached a valid agreement for the
formation of an enforceable contract.
ii. Explanations of the relevant principles of law (with reference to
cases/legislation)
The formation of an enforceable contract requires a valid agreement (consensus),
consisting of both offer and acceptance (Lambiris 2011, 39). In the event of a
negotiation, the initial offer by the offerer may be responded to in the form of a counter-
offer by the offeree. Counter-offers usually entail a revision of the terms of the contract,
and can be responded to by another counter-offer, thereby resulting in a negotiation
prior to acceptance. The acceptance of any offer signals that the parties are ready to
contract (Lambiris 2011, 38). The courts rely on the assistance of presumptions when
deciding the legality of an offer or counter-offer, and whether the acceptance of that
offer has successfully occurred.
Where products are advertised by sellers, the court presumes that the party selling the
product does not intend the advertisement to be a legal offer. Even when an
advertisement seems to contain all the information necessary for a workable
transaction the courts tend to presume, as a matter of policy, that advertisements are
not intended to signal a readiness to be bound. They are more likely to be construed as
an invitation, asking potential customers to make an offer to buy (Lambiris 2011, 39).
In the matter of Partridge v Crittenden [1968] 2 All ER 421, Partridge placed an
advertisement in a magazine which stated Bramblefinch cocks and hens, 25/- each.
The RSPCA subsequently prosecuted Partridge for unlawfully offering wild birds for
sale: a statutory offence. The issue for the court was whether the advertisement was a
legal offer (and thereby capable of acceptance by any party of interest) or an
invitation to treat (whereby an interested party had been invited to make an offer). The
court applied the presumption that Partridge had made an invitation to negotiate with
potential buyers of the advertised birds. Lord Parker CJ, the judge who heard the case,
stated that unless they [advertisements] indeed come from manufacturers, there is
business sense in their being construed as invitations to treat and not offers for sale
(Partridge v Crittenden).

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In the case of Pharmaceutical Society of Great Britain v Boots Cash Chemists
(Southern) Ltd [1953] 1 QB 401, the Boots Cash Chemists shop (BCCS) had placed
on their shelves various medicines and drugs along with their respective prices, some of
which contained dangerous substances and could only be sold under the supervision of
a registered pharmacist as per legislation. Customers could select the drugs and/or
medicines they wanted, and take them to the cashiers at the two exits to the shop,
which were both supervised by registered pharmacists. The Pharmaceutical Society of
Great Britain claimed that BCCS were selling regulated drugs without appropriate
supervision. The issue for the court was whether the displayed drugs and medicines
were sold to customers prior to the customer taking them to the cashier. The court held
that no sale of drugs in fact took place without supervision, as the customers were the
ones who were making offers to purchase, and that the displayed products were merely
invitations to treat.
An example of the rebuttal of this presumption may be found in the matter of Carlill v
Carbolic Smoke Ball Co [1893] 1 QB 256. In this case, the Carbolic Smoke Ball
Company (CSBC) manufactured smoke balls that they claimed could effectively
prevent influenza. Such was the confidence placed in their product that CSBC
deposited 1000 into a bank, from which they offered to pay 100 rewards to anybody
who used their smoke balls as per the instructions, but caught influenza anyhow.
Elizabeth Carlill used the smoke ball and still caught influenza. Upon wanting to claim
the reward, CSBC denied the existence of an enforceable contract between the two
parties. One of the issues for the court was whether an offer made to the world at large
was capable of being accepted by any member of the public who discovered it. The
court held that, given the circumstances, the advertisement could indeed be construed
as a legal offer capable of acceptance by any member of the public who read it. In
particular, the reward offered by CSBC amounted to sufficient consideration on behalf
of the company, while the actions of buying and using the smoke ball served as
consideration from Carlill.
Where the offerees acceptance is successfully communicated to the offerer, the court
presumes that a legally enforceable contract has been formed. This is inclusive of
acceptance via email: communication between the parties can be through email if in
terms of the legislation the person to whom the communication was sent has
designated an information system for the purposes of communications (Lambiris 2011,
40).
Electronic communication must be in accordance with the Electronic Transactions Act
1999 (Cth). Section 14A Sub-section 1 of this legislation states that the time of receipt
of the electronic communication is the time when the electronic communication
becomes capable of being retrieved by the addressee at an electronic address
designated by the addressee. Moreover, it is stated that unless otherwise agreed
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between the originator and the addressee of the electronic communication, it is to be
assumed that the electronic communication is capable of being retrieved by the
addressee when it reaches the addressees electronic address. If the court faces the
issue of offer and acceptance via email, it will be held that, given the parties involved
have agreed upon electronic communication (emails) as the standard of communication
for negotiation, acceptance of an offer via email takes place as soon as the offerees
email of acceptance enters the email inbox of the offerer and is capable of being
retrieved, thereby forming a legally enforceable contract.
The legislation also applies to the rejection of an offer: rejection will have taken place as
soon as the email outlining withdrawal from negotiation of the offeree has entered the
inbox of the offerer, resulting in no enforceable contract formation.
iii. Application of the law to the facts
As an agreement is only valid if both offer and acceptance have taken place, an
objective assessment of the circumstances surrounding Peter, Burt and Sally must
occur.
The question is whether, given the circumstances of the situation, it could be inferred by
a reasonable person that there is in fact a valid agreement between Sally and Peter,
and between Sally and Burt respectively.
The Cadel Evans GF bicycle has been advertised on tourbikes.com.au (tourbikes).
Given that the advertisement mentions no specific exchange of considerations and
invites offers to enter into negotiations for the bicycle, the courts will rely on the
presumption that the advertisement is in fact an invitation to treat. As such, Burt and
Peter are the offerers that make the initial offers to tourbikes and enter into negotiations,
and Sally from tourbikes is the offeree to these initial offers.
Peters email to Sally outlining his offer for the bicycle of $4,000 is accepted by Sally
from tourbikes via an email reply. Given that Peter and Sally have agreed upon the use
of information systems as the basis of communication (via their actions), the courts will
rely on the presumption that the formation of a legally enforceable contract took place
when Sallys (the offerees) acceptance email entered Peters (the offerers) inbox and
was capable of being retrieved. The courts will not take into consideration Peters
absence due to orientation camp and his failure to check his inbox and convey his
change in mind in time, as acceptance had already occurred, nullifying any further
negotiations.
Burts email to Sally outlining his offer for the bicycle of $5,000 is met with a counter-
offer by Sally from tourbikes via an email reply, calling for $5,500. Burt then withdraws
from negotiation and declares he is no longer interested. Given that Burt and Sally have
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agreed upon the use of information systems as the basis of communication (via their
actions), the courts will rely on the presumption that no formation of a contract took
place. Specifically, negotiation ended when Burts (the offeree to the counter offer)
email of withdrawal of interest entered Sallys (the counter-offerers) inbox.
iv. Possible Conclusions
To conclude, it is likely that there is indeed a valid agreement (and hence an
enforceable contract) between Peter and Sally, but not between Burt and Sally. Sally
can enforce the agreement with Peter, but not with Burt.
Question Two
i. Identification of the legal issue
The legal issue is the clarification of expressly agreed terms in the contract regarding
the sale of the bicycle, between Peter and Sally.
ii. Explanations of the relevant principles of law (with reference to
cases/legislation)
When clarifying the terms of a contract, two types of statements must be considered:
statements which form part of the contract and statements which do not form any part of
the contract. The courts rely on the assistance of presumptions when clarifying the
terms of the contract and deciding what kind of statements apply.
Due to the nature of the legal issue, only express terms shall be discussed.
Specific terms that are agreed upon by the parties involved prior to the formation of the
contract fall into the first type of statements as abovementioned. Some of these terms
are classified as conditions: fundamental terms of the contract without which the
parties would not have opted to contract (Lambiris 2011, 44). Others are classified as
warranties: terms of lesser importance (Lambiris 201, 44).
In the case of Associated Newspapers Ltd v Bancks [1951] 83 CLR 322, Bancks the
cartoonist agreed to make full-page cartoons weekly for Associated Newspapers Ltd
(the newspaper) to be published on the front page of the comics section. However,
due to paper shortages, Bancks cartoons were published on page 3 of the comic
section instead. The issue for the court was whether the promise to publish Bancks
cartoons on the first page of the comic section was an essential term of the contract
between the two parties (a breach of which would hence justify the termination of the
contract). The court held the presumption that the term was in fact essential: a
condition of the contract without which Bancks would not have opted to contract with
the newspaper.
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In the case of Bettini v Gye [1876] 1 QBD 183, Bettini the singer contracted to sing for
Gye the promoter at various events, and it was a term that Bettini arrive 6 days prior to
the first engagement to rehearse. Bettini arrived late, missing four days of rehearsal due
to illness, and Gye wanted to terminate the contract. The issue for the court was
whether the six-day attendance term was a condition or a mere warranty. It was held
that the term was a warranty, seeing as the attendance of initial rehearsals would not
have affected Bettinis performances over a large period of time nor the whole contract
in general.
A statement made during the formation of a contract becomes a binding termif the
statement is a promise intended to be legally binding (Lambiris 2011, 44). In the case
of Handbury v Nolan (1977) 13 ALR 339, the Glen Nola (a cow) was offered by an
auctioneer with the promise that it had tested positive in a pregnancy test. When this
turned out to be untrue (and the cow turned out to be infertile also), the issue for the
court was whether the auctioneers initial statement was an express term of the
contract. The court held that it indeed was, as the statement made was intended to be a
legally binding promise given the circumstances surrounding the auction and its nature.
An agreement to exclude or limit liability may be present in the contract, although it is
worth considering that courts are reluctant to give such clauses any more effect than is
necessary[and] will therefore interpret such clauses strictly and, in the case of any
ambiguity or doubt, interpret them contrary to the interests of the person who stands to
benefit from the exclusion or limitation of liability (Lambiris 2011, 47).
In the case of Causer v Browne [1952] VLR 1, Causer gave his wifes dress to Browne
for dry cleaning, and received in return a docket which had a statement to limit liability
printed on it. Causer did not read this statement, and upon finding out his wifes dress
was stained, claimed damages. The issue for the court was whether the statement to
exclude/limit liability on the docket was a term of the contract. It was held that, given the
circumstances, the statement was not a term of the contract as firstly, the docket did not
appear to be a document that would contain contractual terms. Secondly, Causers
attention was not turned to the statement.
iii. Application of the law to the facts
As a contract is only breached if express terms and conditions are breached, an
objective assessment of the terms of the contract between Peter and Sally must be
made.
The question is whether, given the circumstances, a reasonable person would regard
the terms of the contract between Peter and Sally as express and therefore binding (or
not, for that matter).
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The Cadel Evans GF bicycle is described to have new tyres and a new chain. Given
that the bicycle would fail to function properly and could be unusable if it did not have
these components, the courts will rely on the presumption that this statement indicates
express terms of the contract. The bicycles tyres are not new but rather re-treads as
per the facts, and hence Peter could sue Sally from tourbikes on these grounds for
breach of contract.
In their telephone conversation, Sally clarifies the statement restored and refurbished
in the advertisement for the bike to Peter as entailing the refurbishment of the gears
and replacement of any damaged spokes. Given the circumstances, refurbished gears
are required for the bicycle to function properly. As such, the courts will rely on the
presumption that this statement made during the formation of the contract between
Peter and Sally is intended to be legally binding. Peter discovers that it was clear that
the gears had not been [refurbished], and can hence sue Sally from tourbikes on these
grounds for breach of contract also.
In the advertisement, the bicycle is described to be dashing green in colour. Given the
circumstances, the colour of the bicycle will not affect its performance, and hence the
courts will rely on the presumption that this promissory statement is in fact a warranty.
Peter will not be able to use this as grounds to sue Sally.
At the bottom of the purchase agreement is a statement to exclude/limit liability. Given
that Sally had not informed Peter of the inclusion of this clause on the purchasing
document during negotiation, and stands to benefit significantly from this exclusion, the
courts will presume that the statement is not a term of the contract. Despite the
statement being a written inclusion prior to the signature clause and Peters signature of
the document, ultimately Sallys benefit from it and Peters loss would sway the court in
favor of a decision against its standing as a term.
iv. Possible Conclusions
In conclusion, it is likely that Peter can sue Sally on the grounds of the bicycles re-
treaded tyres and faulty gears as they are conditions, but not on the colour of the
bicycle as it is a warranty. Additionally, Sally is unlikely to be excluded from liability
despite the inclusion of an exclusion clause prior to the signature clause.




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PART B
Judges can indeed look outside an Act of Parliament for assistance in interpreting
legislation.
There are three methods of interpreting legislation: the literal approach, the golden rule
approach and the purposive approach.
The literal approach is when legislation is literally defined, using methods such as a
good dictionary (Lambiris 2011, 23).
The golden rule approach is when words in an Act will be given their ordinary meaning
unless doing so would result in an objective absurdity (Lambiris 2011, 23). It is used
when the literal approach effectively leads to absurd definitions.
The purposive approach is bipartite and made up of intrinsic and extrinsic evidence.
Intrinsic evidence is evidence found in the Act itself (Lambiris 2011, 23): all
information found inside the Act such as divisions, headings, sections et cetera.
Extrinsic evidence is evidence found in relevant materials outside of the Act
(Lambiris 2011, 23). This includes draft bills, records of parliamentary debates, a
Ministers second reading speech (given the legislature is bicameral in nature) or the
Reform Commission.
Reference List
Associated Newspapers Ltd v Bancks [1951] 83 CLR 322
Bettini v Gye [1876] 1 QBD 183
Carlill v Carbolic Smoke Ball Co [1893] 1 QB 256
Causer v Browne [1952] VLR 1
Electronic Transactions Act 1999 (Cth)
Handbury v Nolan (1977) 13 ALR 339
Lambiris, Michael. 2011. First Principles of Business Law: Interactive
Tutorials and Source Book. Sydney: CCH Australia
Partridge v Crittenden [1968] 2 All ER 421
Pharmaceutical Society of Great Britain v Boots Cash Chemists (Southern) Ltd
[1953] 1 QB 401