lOMoARcPSD|4995664 Contracts assessment - Distinction response to problem q Contracts (University of Technology Sydney) StuDocu is not sponsored or endorsed by any college or university Downloaded by John Johnathon (ptijori@gmail.com) lOMoARcPSD|4995664 INTRODUCTION Whether Linda is obliged to pay an additional $350 to compensate for 7 months of training heavily rests upon the validity of clause 5 as set out in Attachment 6 of the document. Additionally, identifying when the contract was formed is important to determine whether the agreement is binding. Furthermore, the issue arises of whether Gazette is obliged to pay interest on the late payments and is contingent upon whether Spike gave Linda valid notice of this term. FORMATION OF CONTRACT A When did the parties enter into a contract? 1 Offer An offer is an expression of willingness to enter into a contract on specified terms and must be communicated to the offeree. An objective test is applied to determine that an offer was intended to be binding upon acceptance from the perspective of a reasonable person. In this case Spike requests to formalise the arrangement between Junior Gazette and Spike Fitness in Attachment 2 with an offer of $900 a month for 12 months or $1000 a month with an option to terminate. Subsequently, Linda responded with a contract that reflected the terms in her email in Attachment 4 and added that either party can terminate with one month’s notice. By adding a term to the original proposal from Spike, this acts as a counteroffer and thus rejects the original offer. Spike responded to Linda’s proposed contract with another counteroffer as he changed the price of his service and edited clause 5 in Attachment 6. Consequently, Linda’s counteroffer was rejected and his counteroffer was open for acceptance. Therefore, a reasonable person would construe that the counteroffer made by Spike was intended to be binding upon acceptance as Spike requested to formalise the arrangement and a written contract was sent for acceptance. 2 Acceptance Acceptance is an unqualified assent to the terms of an offer made in the manner indicated by the offeror and must be communicated to be effective. An objective approach has been preferred by the courts to determine whether the offeror intended to accept the offer proposed to them. In this case Linda responds in Attachment 7 to Spike’s counteroffer in Attachment 6 saying ‘[t]hat all looks good’ which acts as acceptance of his proposal. Therefore, to a reasonable person it would appear that Linda intended to accept Spike’s proposal in Attachment 7 as she said the contract looked good and gave a thumbs up. 3 Formation of Contract The formation of the contractual agreement occurred in Attachment 7 as Linda said Spike’s counteroffer ‘look[e]d good’ with a thumbs up which constitutes acceptance and binds both parties to the contract in Attachment 6. EXPRESS TERMS B Is clause 5 as set out in Attachment 6 term of the contract? 1 Signature rule Downloaded by John Johnathon (ptijori@gmail.com) lOMoARcPSD|4995664 The signature rule was established in L’estrange v F Graucoub (1934) which stipulates that a person who signs a document will be bound by the terms in the contract, regardless of whether he/she has read them. In this case however, there was no physical copy of the contract and instead the contracting was done through electronic communication. a) Electronic signature Under the Electronic Transactions Act 2000 NSW s9 a signature through electronic transactions are valid if the parties are identified, consent is apparent and in the context of the transaction the signature is reliable and appropriate. In this scenario, the parties are able to be identified through the email addresses in Attachment 7 as it is their preferred address to receive emails and there is no evidence of consent being vitiated. However, the way in which the offer was accepted may not be an appropriate signature as there was no name printed on the document. Furthermore, Linda provides a scanned version of her actual signature in her purchase orders and thus Linda’s acceptance in Attachment 7 may not constitute a valid signature. In the event the signature is proven to be valid, Linda will be bound by clause 5 in Attachment 6 as per the signature rule as no actual knowledge of the terms is required. In this case Linda may be able to argue misrepresentation which is an exception to the signature rule as Spike had not notified Linda he had edited clause 5. 2 Unsigned Document a) Incorporated by terms of notice The email provided by Linda in Attachment 7 will most likely not be deemed a valid signature as there was no name printed on the document. Thus, Spike’s document in Attachment 6 must abide by the rules set out in incorporation of terms by notice. (i) The party bound must have actual knowledge of terms or be given reasonable notice In this case Linda was given reasonable notice of the terms as Spike had sent the contract for acceptance in Attachment 6. Linda had opened this attachment and skimmed over the document quickly before accepting the contract. (ii) The document would be expected to contain terms of a contract This is evident as Attachment 5 states that the ‘contract terms and conditions are set out in the attached document’ which was Attachment 6 containing a written contract. (iii) Onerous or harsh terms There is an absence of effort made by Spike to notify Linda of the edit he made of clause 5 which was particularly harsh as it involved compensation based off termination. Furthermore, he only informs Linda that he changed the price of his services to $950 in the contract and does not raise the fact he edited clause 5. Therefore, Spike fails to give Linda reasonable notice on the term he is seeking to rely upon. (iv) All terms must be available before or at the time of making the contract All the terms were available at the time of making contract as Linda had the opportunity to read all the terms before accepting the contract. Downloaded by John Johnathon (ptijori@gmail.com) lOMoARcPSD|4995664 Therefore, clause 5 set out in Attachment 6 would not be a part of the contract as Spike did not make an effort to notify Linda that he edited the clause as the terms was particularly harsh given the circumstances. EXPRESS TERMS C Is it a term of the contract that Gazette is obliged to pay interest on the late payments? The term of Gazette being obliged to pay interest on late payments was not stipulated anywhere in the emails between both parties and was not a term in the written contract. However, the invoice in Attachment 1 since in 2018 to Linda contained the term that ‘late payments will be charged interest at 20% per day late’. The invoice format in Attachment 1 was used for all invoices in 2019 and thus the term obliging Gazette to pay interest for late payments would be on those documents. Incorporation of terms by previous course of dealings is unable to be used to prove this term is a part of the contract as their previous dealings did not have a contractual document present. However, it may be able to be incorporated by terms of notice. 1 Unsigned Document a) Incorporated by terms of notice (i) The party bound must have actual knowledge of terms or be given reasonable notice There is no evidence showing Linda had actual knowledge of the terms and there was not any reasonable notice given of this term at the time of making the contract or prior to that. (ii) The document would be expected to contain terms of a contract An invoice is a document that typically would not contain terms and conditions of a contract as it is a bill for goods sent or services provided, not a contractual document. (iii) If not apparently contractual the party needs to take reasonable steps to bring the terms to the attention of the other party Spike had not taken any reasonable steps to bring this term to the attention of Linda as it was not discussed during their exchange of emails and was not put into the contract formed between them. (iv) Onerous and harsh terms This term was is particularly harsh at it charges interest at 20% per day late and there was no extra effort made by Spike to notify Linda of this information. (v) All terms must be available before or at the time of making the contract This term was not available before making the contract as it was not discussed and at the time of making the contract as the term was not written in the document. Therefore, paying interest on late payments is not a term of the contract as Spike failed to give reasonable notice to Linda in order to incorporate the term in the contract. CONCLUSION Linda will not be obliged to pay Spike $1000 a month for his services as her email in Attachment 7 would not constitute as a valid signature. Furthermore, Spike failed to make an effort to notify Linda that he had edited clause 5 in his email. Gazette will also not be obliged to pay interest on late payments as the term cannot be incorporated through previous course of dealings as their previous Downloaded by John Johnathon (ptijori@gmail.com) lOMoARcPSD|4995664 arrangement was non-contractual. Spike also failed to give reasonable notice to Linda with regards to the payment of interest as the term was on an invoice which is a non-contractual document and there was no reasonable steps taken to bring Linda’s attention to the term. Downloaded by John Johnathon (ptijori@gmail.com)
