CASE STUDY ON BUSINESS LAW

1. Margaret owned an antique store that specialized in rare dolls. When she
opened the business in 1989, it was at a shop in an eastern suburb of Melbourne. In 1999
she started to advertise on the Internet and by 2006 the business had grown to the point
where she needed help to keep the business going. After a family discussion one night at
the kitchen table in July 2006, it was agreed that Margaret would probably keep the
business going for another couple of years and then retire. Emily, her youngest daughter
and aged 16, would work in the shop as long as was needed and in return, she would
receive any unsold dolls. When Margaret retired at the end of 2009, she decided that she
would give the unsold stock to charity and they could auction it and keep the proceeds.
Advise

Emily.
2. Richard, an university student, and his millionaire father enter into an
arrangement where Richard agrees that he will keep the front- and backyards of the
family property mowed, and he will ‘do a bit’ to keep the gardens looking tidy. In return,
his father agrees to pay him a weekly allowance of $200. His father had previously used a
garden contractor to do the job and paid him $350. They live on a one-hectare property,
and the mowing alone takes half a day a week. After four weeks, Richard’s father tells him
that he can’t afford to pay $200 a week. He says that Richard should be doing the work
for nothing, as it is the responsibility of the whole family to look after the property;
besides, he says, Richard is getting free board and lodging. Advise Richard.
3. Jenny received a circular from Beauty and the Beast Hair Salon advertising massages and
trims for $10. Realizing that this was an exceptionally good deal, but not surprised
because she knew that they had only just opened and were running a number of good
opening specials, she rang and made a booking. When Jenny arrived at the salon she was
told that there had been a mistake on the circular and it should have said $100. The
manager of the salon explained that this was still a good price because normally a
massage and trim would have cost $150. Jenny was furious, as it had taken her 30
minutes to get to the shop by car and if she had known it would cost $100, she would
never have made the booking. Advise Jenny. Would your advice have been any different if
Jenny had the massage and trim before being told that the cost was $100? Would
she have to pay the full price?
4. Bruce, while he was so drunk that he didn’t know what he was doing, bid successfully at
an auction for the purchase of a house. It was clear to the auctioneer that Bruce didn’t
know what he was doing. However, after Bruce sobered up he confirmed the contract
with the auctioneer. He then subsequently refused to complete the contract. Is Bruce be bound your
assignment

SOLUTION

1. Issues: There was an oral agreement between Margret and Emily but at the time of entering
into agreement Emily was a minor i.e. under the age of 18 years. Basically there are two
issues involved in it, first whether Emily can confirm the agreement between them as a
contract after attaining majority? Second whether Emily has the right to bind Margret under
the agreement between them.

Law: A contract with a Minor can be valid, void or voidable at the option of the minor. The contract
entered by the minor for the benefits of service paid by him is a valid contract. A minor has a right to
reject contract after attaining the age of majority and escape from the liability or can reaffirm that.
Application: Here, Margaret agreed to give Emily the unsold stocks against the service provided by
her but at the time of retirement she announces to give the unsold stocks in charity.  Emily can make
Margret to comply with the terms of agreement as it was a legally enforceable agreement. It is only
Emily who can make the contract void after attaining the age of majority.  But this option can be
exercised by her only during her minority once she attained the age of majority. Once she does
nothing during her minority to reject the contract, she cannot make it void after that.

Conclusion: Therefore in this situation, in 2009 the agreement became legally enforceable and Emily
has all the rights as a party to the contract, so she can bring a suit in the court of Law against
Margret to take all the benefits.

Issues: The agreement between Richard and his father comes under the category of social or
domestic contracts. Issue involved here is about the validity of contract between Richard and his
Father and Richard claim his money from him?

Law: For any agreement to be legally binding the parties must have the intention to create a legal
relationship. This is an essential ingredient of a valid contract. But the Law presumes that the
domestic or social agreements do not have this intent to legal bind it. However it can be presented
before the court that there exists the intention of legally binding each other but it is very difficult to
reverse the presumption of law. It is also presumed that the domestic contract between parent and
child is not intended to be legally binding.

But the situation will be different when parties express their clear intention of making the contract
legally binding enter into the contract.

Application: Richard agreed to mow the front land and garden of his house and in return his father
will give him $ 200. This amount may be treated as the consideration of the contract between them.
The work needed much time and labor. Richard relying on the statement of his father started doing
the work. In contractual terms he was performing his part of contract and after four weeks of his
labor his father refused to pay the agreed amount of $200. As held by many the honorable courts in
many contractual cases related to performance of the contract that the person who proceeded with
his part of performance must not be deprived from getting his reward.

Conclusion: Therefore Richard is entitled for the payment for his labor of four weeks, he can move to
the court of law to enforce his right against his father.

In the case of Jenny, the circular which she got was an advertisement of the salon which was
distributed to a large number of people not only to Jenny. Now the question is whether Jenny can
bind the salon for misrepresentation? Or can she claim compensation for her loss as she moved
from her place relying on the offer made by the salon.

Law: An advertisement of this kind where attractive services or goods are to be provided at a cheap
price is not an offer to the person to just accept it and make the contract binding. This kind of
agreement is the invitation to treat. This means an open invitation to public to make offers and the
service provider or shopkeeper will accept it. It is also not necessary that the person making such
advertisement is bound to sell the product on the same price mentioned. The circular by the salon
comes under the same category where the prices were also mentioned.
Application of Law: Jenny relying on the price listed in the circular made the appointment and after
reaching to the salon after driving her car for almost 30 minutes was told that it was not the right
price for which she was asking. It was mistakenly mentioned and the correct price is $100.
According to the Law Jenny cannot force them to provide that service for the low price mentioned in
the circular, she can only make the claim for loss she suffered in reaching the salon as it took almost
30 mins. The principle relating to the cancellation of offer is that an offer can be revoked at any

Conclusion: Hence, Jenny can revoke the offer made by her and no need to pay any charges to the
Salon but if she had taken their service and then after it was disclosed by the salon that the original
price is $100 and not $10, Jenny would have the legal right to sue them for Damages on the grounds
of misrepresentation and non-disclosure of essential facts.

Issue: Here in this case the issue is about the validity of contract made by a drunken person who is
not in his senses at the time of entering into it.

Law: The general rule about contract is that any person can enter into a contract but he has to have
the mental capacity and enough maturity to understand the terms and conditions of the contract. The
reason behind the principle is that law does not want that one party can take advantage of the
mental inability of the other party. Generally courts do not enforce the contract made by the person
who is voluntarily drunk and in capable to understand the contract and he can escape from the
liability of the contract.

Application of Law: Bruce was so drunk that he did not knew that he was actually bidding at the
auction. The auctioneer also knew this. He would have escaped the liability of the auction contract
by simply disavowing it as soon as he sobs but he did not do this in fact he approves the contract
with the auctioneer.

Conclusion: Therefore the contract will be a valid contract and Bruce will be bound by the contract
with auctioneer. Further he will have all the liabilities under an auction contract.