Exam Preparation
Business Law exam is an open-book exam.
How do you prepare for an open-book exam?
 Prepare a set of detailed revision notes which
include materials from lectures, tutorials and
textbooks
These notes should include: each topic of the law studied in the subject
 definitions of key concepts
 brief outline of the key principles/rules of law
 relevant cases (include key facts, decision and
reasoning)
 past exam questions on each topic
 possible answers to these questions prepared by
you under exam conditions
 flowcharts
 make sure your notes and text are easily
accessible:
* colour-code
* tab each topic
* use headings, sub-headings
* index clearly
2
During the exam:
 read the questions carefully;
 make sure you understand what the
questions are requiring you to do;
 check all marks allotted to each question
and allocate your time accordingly;
 attempt to identify the issues in the
questions;
 if you run out of time on a question, map
out a plan of the answer.
3
Example of Flow Chart
Agreement
Does an agreement exist between the parties?
Is this an invitation
To treat? (announces
availability for sale
to public at large)
Is this an offer?
How was the offer made?
By instantaneous
communication
In writing
Was an offer made in response?
Was offer communicated?
Was the offer
accepted?
Was a counter
offer made?
Was it a mere
request for
information?
Yes
Agreement
How was acceptance to occur?
No
No agreement
Same form as
offer or as
stipulated or in
equally advantageous
manner
In writing
invoking Postal
Rule*
When does acceptance occur?
General Rule
On receipt of
acceptance by offerer
unless Notice of
Revocation received
before acceptance
Postal Rule
At day, date and
time of posting of
acceptance unless
Notice of
Revocation received
before posting
* Note that the Postal Rule only applies to acceptance. Offer, revocation of offer or
rejection of offer all must be communicated.
You should now add any relevant cases in support of ‘agreement’.
4
An example of how your notes could look after summarising a topic ready for
exams.
page 5
ELEMENTS OF CONTRACT -- INTENTION (from Parker & Box)
(After noting definitions of PRESUMPTION; REBUTTAL; DOMESTIC; COMMERCIAL)
[Aim: To take the cases as set out (in any textbook) and reclassify them so that your
notes make a series of statements or law that you can apply / copy in an exam situation
with the case names noted after each proposition of law. (In the exam it is rare that you
will need to state the facts of the case.) However, you may wish to put a short reminder
note in brackets to jog your own memory and understanding of the rule - as is done in
square brackets below.]
A.
DOMESTIC / SOCIAL AGREEMENTS:
PRESUMPTION: THAT THE PARTIES DID NOT INTEND TO CREATE A LEGALLY
ENFORCEABLE AGREEMENT - Domestic assumption applies in these
circumstances:
1.
HUSBAND and WIFE -a) If living together in harmony at the time agreement made
= Social presumption applied (Balfour v Balfour) [holiday - money
agreement - later separated] (Cohen v Cohen) [dress allowance]
BUT
b) If separated at time agreement made = Social presumption
rebutted [particularly maintenance agreements] (Merritt v Merritt)
2.
FAMILY ARRANGEMENTS -- [even in the use of family assets left under
administration under a will] (Murphy v Simpson) = Social presumption applied
3.
CLUBS; SOCIETIES; [prises awarded] = Social resumption applied
C/f. (means contrary result) (Clarke v Dunraven) [Club Rules may be
contractual].
4.
FRIENDS (agreements between) = Social presumption applies
Motor Insurers Bureau) [lift to work and sharing expenses].
(Coward v
page 6
PRESUMPTION IS REBUTTED (In this context rebutted means that the usual
presumption no longer applies and the alternative presumption applies) - A
Domestic/Social presumption will usually be rebutted if the consequences of breaking
the agreement create a hardship for one of the parties.
A DOMESTIC/SOCIAL
(i) FAMILY
1. HUSBAND/WIFE agreements where separated at time of agreement
(particularly maintenance agreements) (Mc Gregor v Mc Gregor) [wife
compromised her rights] (Merritt v Merritt) [transfer of property];
5
- Property arrangements (Popiw v Popiw)
2. FAMILY SITUATIONS where one member has agreed, on request of
another, to give up their established situation (i.e. jobs, house) and move
(country to country) to look after a relative in return for property or inheritance.
Then the arrangement breaks down after the move and promises not kept.
(Wakeling v Ripley; Riches v Hogben; Todd v Nicol) also (Parker v Clarke)
[geriatric care arrangement].
(ii) FRIENDS
3. Joint agreements to enter competitions, eg. TATS, footy pools - where one
party purchases / applies for / enters - and all contribute financially - in some
way (Simpkins v Pays)
B
COMMERCIAL ARRANGEMENTS
PRESUMPTION IS THAT THE AGREEMENT IS TO BE LEGALLY BINDING ON
BOTH PARTIES i.e. THAT A CONTRACT IS INTENDED
A)
Commercial Presumption applied:
1. Advertisements offering a reward for failure of a product may not
be
just mere advertising “puff” but could be a legally binding
contract - i.e.
intention implied (Carlill v Carbolic Smoke Ball Co).
2.
B)
Offers made in jest or joke may be found to have no intention to be bound
- if offer is commercially ridiculous (Keller v Holderman) [sell watch for
little money]; c/f (however) a court could hold otherwise (Nyulasy v
Rowan) [share offer at ridiculous price] - Held -Commercial nature, hence
presumption (of intention) applies.
Commercial Presumption - REBUTTED
1.
Agreements where “no intention to be legally bound” is stated in
rules (Jones v Vernon Pools) [soccer pools case].
2.
Honour Clauses = clause in agreement contains a clause “no intention to have legal consequences” (Rose and Frank v Crompton)
Note: It is against “Public Policy” (i.e. the law) to oust the
jurisdiction of the court (an agreement cannot claim to be a contract
and refuse the court the right of adjudication upon its
terms - a court always
has that right).
3.
Government or Administrative offers / schemes for assistance /
subsidies are not necessarily contracts unless an Act of Parliament
eg
(The Administration of the Territory of Papua and New Guiney v Leahy) [tick
eradication scheme] (Australian Woollen Mills v Commonwealth) = wool
subsidy.
6
4.
“Ex Gratia” Payments [voluntary payment, not in return for work
done]. May be enforceable if the promisee (person to whom
monetary
promise made) gave up a right or something of value in return (Edwards v
Skyways) [premature retirements].
The following are the notes on INTENTION (above) written out with an index.
This is how your indexed notes could look ready to take into the exam room.
(Imagine that the following is the index to your set of notes - But note also that the
following is just the headings from the notes. The explanations and case references
should be written out in full at the pages indicated in the margin.)
_______________________________________________________________
PAGE
INTENTION
5
A DOMESTIC / SOCIAL AGREEMENTS :
PRESUMPTION : THAT THE PARTIES DID NOT INTEND TO CREATE
A LEGALLY ENFORCEABLE AGREEMENT
1.
HUSBAND and WIFE -a) If living together in harmony
BUT b) If separated at time agreement = rebutted = intended to
contract
2.
3.
4.
6
FAMILY ARRANGEMENTS
CLUBS; SOCIETIES
FRIENDS
PRESUMPTION IS REBUTTED A DOMESTIC/SOCIAL
(i) FAMILY
1. HUSBAND/WIFE
- Property arrangements (Popiw v Popiw)
2. FAMILY SITUATIONS
(ii) FRIENDS
3. Joint agreements to enter competitions
B
7
COMMERCIAL ARRANGEMENTS
PRESUMPTION IS THAT CONTRACT IS INTENDED in the following
situations:1.
2.
Advertisements
Offers made in jest or joke
c/f (however) a court could hold otherwise (Nyulasy v Rowan)
3.
Agreements where “no intention to be legally bound” is stated
4. Honour Clauses
7
The Paper
The paper comprises 6 questions. All are compulsory.
Questions
Questions 1 - 5 are typical problem questions, similar in
complexity and length to questions to be found in past
examination papers.
You should look at old exam papers to see what kind of
questions have been asked in the past.
Question 6 is the traditional “short answer” question
Questions may be taken from all areas of the syllabus other
than the above topics.
FAQs – Problem Based
These include
Formation of Contract, including offer, acceptance,
revocation, counter-offer, postal rule of acceptance, and so on);
Conditional Acceptance (preliminary agreements, requiring
analysis of the case of Masters v Cameron);
Intention (to create legal relations);
Consideration – (often, but not always, in the context of
discharge of a contractual obligation);
Exclusion clauses;
Capacity to contract;
Terms v Misrepresentations (as in Oscar Chess Ltd v
Williams and related cases)
Mistake;
Misrepresentation;
Discharge of contract, especially discharge by frustration;
Remedies for Breach of Contract, especially damages.
Examiner’s Exclusion Clause
The above list of FAQs is a guide only.
It is not necessarily an exhaustive list of the possibilities.
8
It is important to apply the following
format when answering a problem
question:
decide what the issues are (that is,
the matters over which there is or
may be some dispute);
(a)
decide what rules of law are
applicable to those issues;
(b)
(c)
cite the authority for the rule (that is,
a case or statute);
(d)
apply the rule to the facts;
(e)
come to a conclusion;
(f)
state the remedy.
9
A sample exam question:
On 15 September, Arthur offers to sell his
antique desk to Harry for $5,000. Harry
subsequently inspects the desk and says to
Arthur 'The desk is in excellent condition
and I'd like to have it. There's no doubt that
I could afford to buy this desk if I could pay
for it in three installments. Nothing further is
said concerning the desk. On 18
September, Harry sends a letter to Arthur in
which he accepts Arthur's original offer. On
19 September, Harry learns that Arthur has
sold the desk to Richard for $6,000 On 20
September Arthur receives Harry's letter of
acceptance.
Advise Harry whether he has an action
against Arthur for breach of contract.
Give detailed reasons for your answer.
10
To get a clear picture of related events, it is useful
to draw a diagram:
A
1. A offer
H
H
2.
A
H will buy if can
pay in instalments
3.
18 September H accepts
offer
4.
19 September H learns A
sold desk to R
5. 20 September A receives
H’s acceptance
11
Next step:
 isolate areas of dispute which may occur
 these are the issues
 an issue is a fact of a situation that could
have more than one legal interpretation.
That is, more than one law could apply
to it.
 The statement: ‘I’d like to have it …’
(one fact) could be interpreted in more
than one way legally. It could be:
* an acceptance of the offer
* a request for more information
* a counter offer
 A questioning attitude is important
12
The issues are indicated by elliptical circles in the
following diagram:
Areas of possible dispute
A
1. A offer
H
H
2. Counter offer?
Request for more
Information?
A
H will buy
if can pay in
instalments
3.
18 September - H
accepts offer
4. Revocation of
Offer
19 September H
learns A sold
desk to R
5. 20 September
A receives H’s
acceptance
which occurred
first – acceptance
or revocation?
13
Plan of Answer
A offered H desk ($5000)
H’s reply
Counter offer?
(Hyde v Wrench)
Request for more
information?
(Stevenson, Jaques v
McLean)
H rejected A’s offer open
(H intended to add
new terms)
A’s offer still,
could be accepted
therefore no contract/no breach
Acceptance occurred
when?
Postal rule apply?
Yes
acceptance before
revocation
No
acceptance after
revocation
contract exists/
breach
no contract/
therefore no
breach
14
Answer
An offer has clearly been made by Arthur to sell his antique desk to Harry for $5000.
The first question is whether Harry’s reply was a counter offer or a request for further
information. If it was a counter offer then, as was held in Hyde v Wrench, it
amounted to a rejection of Arthur’s offer. Arthur’s offer would therefore have
terminated, and hence could not be accepted, and there would have been no
contract. If it was a request for further information, as in Stevenson, Jacques v
McLean, the offer was still open and could have been accepted.
To be an offer (whether an original offer or a counter offer), a statement must contain
a promise or promises and not just a fact or information, as was indicated in Harvey
v Facey. So the question becomes did Harry intend his statement to be a promise to
buy the desk on condition that he could pay for it in three instalments? If he did,
then it was a counter offer and he could not sue for breach of contract.
Alternatively, Harry could just have been commenting on his own ability to pay
thereby seeking further information from Arthur about what method of payment
would be acceptable to him. In my opinion, Harry’s statement contained no
promises. He did not promise to buy it on condition he could pay by instalments. He
merely stated a fact about his financial circumstances and the method of payment he
could manage. He was talking around the offer, perhaps seeking a response from
Arthur, before deciding how to respond to Arthur’s offer. Therefore Harry made no
counter offer and Arthur’s offer remained open.
It is now necessary to determine if and when Harry accepted the offer. If the Postal
Rule applied then acceptance occurred on the 18th (that is at the time of posting –
Nunin Holdings Pty Ltd v Tullamarine Estates Pty Ltd). There is probably not
sufficient evidence to decide the issue absolutely. It is not disclosed how Arthur’s
offer was made. Whether the Postal Rule applies depends on whether the offeror
has contemplated and expressly or impliedly approved the post as a mode of
acceptance. If the offer was made verbally, then probably the Postal Rule did not
apply. Therefore acceptance did not occur until the 20th, when Arthur received the
letter. If the offer was made by post then acceptance would probably have occurred
on the 18th (that is when Harry posted the letter). If the latter applies then Harry has
an action for breach of contract. If the former applies then the result depends on
whether Arthur revoked his offer prior to the 20th.
By selling the desk to Richard, Arthur clearly intended to revoke his offer. However,
as decided in Byrne v Van Tienhoven, the revocation must be communicated to the
offeree. However the revocation does not have to be communicated by the offeror in
person. It may be made by any other person provided it is reasonable in the
circumstances for the offeree to rely upon that other person. In Dickinson v Dodds
the court decided that revocation is effective if it is communicated to the offeree by a
reasonably reliable source. It seems clear that this has happened in this case, and
hence, Harry cannot accept Arthur’s offer because it no longer exists.
In my opinion Harry has little chance of success because either:
a)
there was a counter offer, or
b)
the Postal Rule does not apply and revocation occurred prior to
acceptance.
15
Introductory Sentences
Issue
This question raises two issues, firstly .............. and secondly, ..................
The issues' raised in this question are .......,..,.....,.........
There are two issues raised in this question. They are .........
Two issues are evident in this question. They are .,............
Two issues need to be addressed in this question. They are ..............
Two issues require discussion in this question. They are .................
Law
The law in this area states that ..,...............,
In this area the law states that ....,.....,.,.....
The law states that ..................
The law requires that ................,
The law stipulates that ...................
The law says that .....................
We can say that the relevant law is ...................
Cases
It was held in the case of ............ v ............. that ....................
The case of ...........,, v .................. demonstrates this area of law,
The law is demonstrated in the case of .......... v .,.,.,.,..,
In the case of ............. v ............... the law is upheld.
The law is refuted in the case of ,.......,.,.. v
The case of ..........,.,v ................demonstrates, illustrates, clarified,
highlights, shows, explains, manifests, exhibits, exemplifies ..............
This (the law) has occurred in cases such as ...,..„ v ……….. and .......
.,.............,...,..
v......
where
Apply
If we apply the law to the present problem we see that .........
In applying the law to the present problem we see that .........
When applying the law to this problem it can be seen that ......
Applying these principles of law to the subject question we can see that ................
It is necessary now to apply the law to the present problem fact situation. In this instance ...................
I t c o u l d b e a g u e d t h a t … … … … … … … . . H o w e v e r , i t is not an acceptable argument
because ………………………
Conclusion
My advice to .............. is that he could succeed in his action against .............
In conclusion,
.............
can take action against
..........
Our conclusion in the present case, therefore, is that .........
To conclude, ........... can sue ........... for .......,.......
Consequences
Consequently, ........... can claim that he is entitled to ..........
hence he will .......,...,....,.
The consequences would be that ............. would get .... ............ , hence .....,............
16
BLO1105
Business Law
Question 6.
6.1 Explain briefly the distinction between a warranty in a
contract and a condition in a contract. Why is this
distinction important?
(2 Marks)
6.2
Summarise briefly the presumptions applied by courts in
deciding whether or not parties to an agreement intend
legal obligations to flow from their arrangement.
(2 marks)
6.3
Define briefly a "condition precedent" and a "condition
subsequent". Explain when they operate by giving an
example of each.
(2 Marks)
6.4
Although damages are the typical remedy for breach of
contract under the common law, equity has developed
two significant remedies which can apply in breach of
contract cases. Explain the two equitable remedies.
(2 Marks)
6.5 A person under the legal age of majority is said to be a
“minor”. In what circumstances (if any) may a minor enter
into a valid and legally enforceable contract?
(2 Marks)
(5x2 Marks = 10 Marks)
17
Short Answer Questions
There will be five short answer questions worth two
marks each. These questions are straightforward
and are an easy way to pick up marks.
They usually require you to give definitions or
explanations of legal principles or concepts.
Example of a 2 mark Question -
What is the difference between `void' contracts and
`voidable' contracts? Give an example of each.
Void contracts are a nullity. They have never existed
and never had any legal effect. For example, if a
mistake is proven to have occurred, then the court
will declare that the contract was void for mistake,
that is, the contract never existed at all.
Voidable contracts are formed through the
wrongdoing of one of the parties. Voidable
contracts are perfectly valid contracts and are
effective until the wronged party takes action to
avoid the contract by exercising their right to
rescind the contract. If one party to a contract
misrepresents an important detail, then the innocent
party can avoid or rescind the contract. The contract
then cannot be enforced by the guilty party, making
it voidable.
18
Examples of a bare pass and a substantive answer for
a 5 mark question.
Facts:
“Florence is a trained nurse, working and
living in New York. She is employed there
on most favourable terms because of her
specialised knowledge and she also owns
her own apartment in Manhattan. She
receives a letter from her parents, pleading
with her to return to Melbourne as they are
both ill, asking her to return and care for
them in their old age. They assure her that
they will leave to her in their respective
wills, their beach house at Portsea in
appreciation of her services. She sells her
Manhattan property, relinquishes her job
and returns to Melbourne to look after
them. After their deaths five years later,
she discovers that the Portsea house has
been left in her parents’ will to the Lost
Dogs Home, their favourite charity. Can
she claim the Portsea house from their
Estates?”
19
This question is worth 5 marks. This would justify a
15 minute answer.
The question could be answered to a bare pass
standard in the following way:‘Florence can sue the estates in contract if she
can prove all of the elements of a contract.
They are offer, acceptance, intention and
consideration. They all appear to exist, the
only suspect one being intention. The facts are
remarkably similar to the case of Todd v
Nichol, where the Court decided that although
there was a domestic relationship between the
parties, there was intention to create a legal
obligation, and therefore, there was a binding
contract between the parties. By using that
case as a precedent, Florence would succeed
if she sued the estates.’
20
A plan for the answer, using a 4 step procedure, would be as follows:Issue/ - Intention
Law and cases - Intention is component of every legal contract
- Proof of intention?
- Presumptions - commercial Edwards v Skyways
- rebuttal - Roe & Frank v Crompton
- domestic - Balfour v Balfour
- rebuttal - Merritt v Merritt
Application - Elements of both social and commercial (Todd v Nichol)
Conclusion and Consequences - She probably wins and can successfully sue
the estates for the house.
A plan of this nature can be prepared in 5 minutes, leaving 10 minutes to write
the answer. A ‘planned’ answer is much quicker to write than an unplanned
one, follows a more logical sequence, and covers all the relevant points.
Realistically, the answer would have to be limited to about a page, given the
time restrictions. An answer which would attract 5 marks would be as follows:“The issue raised by this question is whether or not the parties intended to be
legally bound by their agreement. The law of contract requires that, in order
for a binding contract to exist, there must be such intention, together with
offer, acceptance and consideration. The existence of intention is tested by
using two established presumptions. First, if the agreement is commercial in
nature, there is a presumption that they intended to be legally bound.
(Edwards v Skyways Ltd.) This presumption can be rebutted by clear
evidence of an opposite intention. (Rose & Frank v Crompton) Conversely,
with social or domestic agreements, the presumption is that no intention to be
legally bound attaches to the arrangement (Balfour v Balfour). Again, this
presumption can be rebutted by clear contrary evidence (Merritt v Merritt). By
applying the law to the facts, we see that the agreement has both commercial
and domestic elements, so that the presumptions do not really provide us with
an answer. However, this dilemma arose in the case of Todd v Nichol, when
the court decided in similar facts, that, despite the fact that the parties were
related, thus suggesting a domestic or social agreement, the fact that they
relinquished property interests and jobs in Scotland was evidence that they
intended to be legally bound. The conclusion, therefore, is that, by relying on
Todd v Nichol, Florence can prove all the elements of a contract and can sue
the estates of her parents to enforce those rights as against the Lost Dogs
Home. Such an action would have excellent prospects of success.’
If the same problem arose as the sole issue in a question worth 10 marks
instead of 5, a more detailed answer would be justified. This could be
achieved in the planning stage by going into detail about the cases referred to
in the answer.
21
BAO/BL01105
BUSINESS LAW
SEMESTER 1, 1994
---------------------------------------------------------------------------------------------------------QUESTION 3
Tina is a champion badminton player, and is to compete in the forthcoming
world badminton championships representing Australia.
She decides to update all of her badminton equipment, including her
racquets. She purchases four new badminton racquets without strings, and
takes them to an expert in badminton racquets in Melbourne to have the
racquets strung at the correct ' tension.
When she enters the expert's shop, she does not notice a sign which is
placed on the wall behind the counter which says, in medium-sized print:
.
‘Whilst all possible care is taken with stringing and restringing work
entrusted to us we cannot accept responsibility for any defective work or
defective products used by us, and we will not be liable for any loss or
losses to customers, even if demonstrably caused by negligent
workmanship on our part’.
Tina could not have read the notice, even if she had seen it, since she wears
contact lenses which she did not have with her at the time.
She left her racquet for restringing and was given a docket she placed in her
purse, assuming that it identified her racquets so that she could collect the right
racquets on her return. The same words which appeared on the notice behind
the counter were also printed on the docked in very fine, but legible, print on the
bottom of the docket.
A few days later, Tina collected her racquets which appeared to be correctly
strung, paid the costs of restringing, packed the racquets with her other gear
and left for the world championships overseas.
Whilst competing in the first round of competition, the strings in Tina’s racquet
broke. She selected two replacement racquets in turn and the strings also
broke. She was eliminated form the first round of the championships. Valuable
endorsements totalling $20,000 which Tina would have received if she had
played in the finals were thus lost and all observers agreed that Tina’s poor
performance was directly attributable to her faulty racquets, which had been
strung with defective material. Subsequent testing of the strings showed that
they were suitable for squash racquets, but not for badminton racquets, and
they should never have been used by the person stringing the racquets for
Tina.
Tina seeks your advice. Can she successfully sue the racquet stringer for the
$20,000 which she has clearly lost as a result of his faulty work? Advise Tina.
(10 marks) (30 minutes)
22
Exclusion Clauses
Issue Can Tina successfully sue the racquet restringer for damages, or can he rely upon the
exclusion clause displayed on the premises and printed on the docket to defeat Tina's
claim?
Law & Cases
Courts adopt a hostile attitude to exclusion clauses and, where possible, interpret them
'contra proferentum', but they nevertheless acknowledge that parties are free to enter into
contracts upon whatever terms they choose. It follows that, if a person enters knowingly
into a contract which contains an exclusion clause which potentially defeats that person's
contractual rights on breach of the contract, then he must suffer the consequences of his
action. The key word in this summary is 'knowingly', since the question of knowledge will
be tested objectively by reference to a 'reasonable person'. The question thus becomes
'should he have known of the clause?', not 'did he actually know of the" clause?' This
highlights the distinction between actual and constructive knowledge.
The law relating to exclusion clauses is well defined, but is governed by the question of
whether we are considering a case of a signed contract or a case where nothing has been
signed by the victim. In the latter case, the offending clause is usually printed on a ticket or
docket handed to the victim, and/or displayed upon the business premises.
Dealing first with tickets or dockets, the court will apply two tests. These are the 'nature of
the document' test, and the 'reasonable notice' test. The nature of the document test
means that the court will look at the piece of paper upon which the exclusion clause is
printed and ask whether, objectively tested, it is a contractual document? Is it a piece of
paper upon which a reasonable person would expect to find contractual terms, or does it
have some other .-function, such as a receipt (Chapleton v Barry Urban District Council.)
or proof of ownership (Causer v Brown). If it does have some other function, it is not a
contractual document, and cannot be relied upon. If it is a contractual document, then (and
only then) the court will ask whether reasonable steps have been taken to bring the
existence of the clause to the notice of the customer. (Parker v South Eastern Railway Co;
Thornton v Shoe Lane Parking; Thompson v London, Midland & Scottish Railway
Co.).
If the clause is displayed on the premises, it will be effective if prominently displayed
(Balmain New Ferry Co v Robertson), even if the actual customer has not seen it, or could
not read it if he had seen it (Thompson v LM&S Railway Co.).
In either case (ticket or notice), the clause must be accessible to the customer at or prior to
the time of entering into the contract, not introduced afterwards, since one party to a contract
cannot unilaterally introduce new terms (especially exclusion clauses) after the contract is
made. (Olley v Marlborough Court Ltd).
Application.
Tina could successfully argue that the docket she was given would be regarded by a
reasonable person only as proof of ownership of the racquets, as occurred in Causer v
Brown. She would not therefore be bound by the clause printed on the docket. However,
she will be bound by the clause displayed on the shop premises, provided it is prominently
displayed (Balmain New Ferry Co v Robertson), despite the fact that she has not noticed it
and could not have read it even if she had.
Conclusion
The business proprietor will be able to rely upon the exclusion clause, as displayed on his
premises, to defeat Tina's claim. Tina's victory on the ticket aspect of the case is therefore
academic.
Consequences
It would be pointless for Tina to sue.
23
Another question and the methodology to answer.
Ben decides to sell his car. He has owned it for 3 years,
having bought it second-hand from a care dealer. When he
bought the car, Ben was told that it had only one previous
owner, who had carefully maintained the vehicle and always
had it regularly services by the same dealer from whom Ben
had bought it. It had never been in an accident. And the
mileage shown on the odometer was genuine, Ben was
assured.
Ben knew that. some of the statements made to him by the
dealer from whom he bought the car were wrong, since his
own mechanic had told him the car had been in a serious
accident and had travelled many more kilometres than the
odometer indicated.. Nevertheless, Ben thought that - since
he had been deceived by the dealer from whom he bought it
- it was reasonable for him to also deceive anyone who
bought the car from Ben, and he advertised it as in excellent
condition, accident free and so on.
When Jane came to inspect -the car in response to Ben's
advertisement, Ben repeated that the car had no accident
history, and the odometer reading was genuine.
Jane buys the car from Ben at the price requested by Ben.
After owning the car for only a short time, Jane discovers
that some of the statements made to her by Ben were
untrue, and she consults you for advice as to her legal
rights. Assume that it can be proven that the car as
described - by Ben and bought by Jane for $24,000 is worth
that price, but that it’s true value (given the accident history
and increased mileage) is $17,000.
Advise Jane -.
• What action (if any) can she now take against Ben?
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• Isolate areas of dispute which may occur
 these are the issues
• an issue is a fact of a situation that could
have more than one legal interpretation.
That is, more than one law could apply
to it
• the statements made by Ben to Jane.
could be interpreted in more than one
way legally.
They could:
be a term of a contract or a mere
representation
be a misrepresentation
• A questioning attitude is important
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Step 2
 Are the statements a term of the contract?
 If they are a term of the contract are they a
condition or a warranty?
- a condition is a major term of the contract that is
the substance of the contract.
- A breach of a condition entitles the injured party to
rescind the contract and sue for damages.
- A breach of a warranty, a minor term of the
contract, entitles the injured party to an award of
damages only. Rescission is not available.
- Rescission is restoring the parties to their original
precontractual position.
-However, there are a number of factors that can
make claiming rescission impossible.
 Apply discussion of law to facts Come to a
conclusion
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Step 3
• Are statements a misrepresentation?
• Are they an innocent or fraudulent misrepresentation?
- an innocent misrepresentation is a false
representation, made by a person who, at the time of
making it, believed it to be true
remedy is rescission of contract
-a fraudulent misrepresentation is a representation
made by a person who, when they were making it, had
no honest belief in its truth.
- elements required to establish fraudulent
misrepresentation
• statement must be fact
• statement must be false
• person who makes statement must have no belief
in the truth of the statement
• the statement must be intended to persuade the
other party to enter the contract and have that
effect
remedy is rescission and damages
• Apply discussion of law to facts
• Come to a conclusion
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Step 4
Of major consideration is what the parties
want? If Jane wants to hand car back and
get damages, then she may argue
fraudulent misrepresentation or a breach
of a condition of a term of the contract and
claim rescission and damages. If she
wants to keep the car, she may claim
damages for losses suffered as a result of
the overpayment. Thus, she may argue
that the false statements were a breach of
a warranty of a term of the contract.
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