Posted: December 8th, 2022

PROBLEM-BASED QUESTIONS

PROBLEM-BASED QUESTIONS

Summary
This paper looks into a scenario where Johnny, the owner of the Lame Duck Restaurant informs a customer (Li) that his restaurant cannot host the wedding that he booked; the main reason that Johnny gives is that the quotation was made in error. Summer, a sales and marketing representative was appointed to formulate and a new website, and in the course of her work, Li had booked a wedding utilizing the menu he found in one of the tables. Summer had accepted the booking by mistake, and had initiated processes aimed at fulfilling the terms of the contract of providing wedding premises and a banquet. Li reiterates that a contract exists, and as such, Lame Duck must deliver. That said, this paper seeks to advise Johnny as to whether the contract exists. An analysis of this case reveals that a contract really exists as the actions of Li and Lame Duck fulfils the various requirements of a contract, i.e., offer, acceptance, consideration, competence and legality. The paper further establishes if a mistake was committed in this case scenario and it is discovered that a unilateral mistake occurred, but it is not unconscionable to void the contract. Taylor v Johnson (1983) 151 CLR 422 and Webster v Cecil (1861) 30 Beav 62 cases are used to demonstrate unconscionable situations that void a contract. Lastly, the paper explains what will happen if Lame Duck refuses to fulfil the terms of the contract. In this regard, the restaurant can be held accountable for breach of contract, and therefore, Li can sue it for damages.

Advise Johnny, whether the contract exists
The contract exists. Simply put, contracts in Australia denote to agreements between 2 or more parties, the main basis being the acceptance of an offer. Nonetheless, it should be noted that a contract is deemed to exist if it satisfies several elements. One element is known as an offer. According to Gooley, Radan & Vickovich (2013), an offer refers to an expression to the other party of a readiness to be bound by certain terms. That said, for a contract to exist, one party must have made a clear offer. This is true for this case as there was an offer. Li used the restaurant’s menu to book the wedding. He made the offer to buy Lame Duck’s services (hosting his wedding and provision of a banquet), and communicated it to the restaurant through the online platform. Another element is known as acceptance. Acceptance is said to have occurred when the offerree agrees to the offer terms (Gooley, Radan & Vickovich, 2013). This can be done by way of actions or words. In that regard, acceptance occurred in this case. Summer accepted the booking and her actions of directing Abu from accounts to accept Li’s deposit and finalize the invoice further served to show that she accepted Li’s offer on behalf of the restaurant. Notably, Summer’s actions indicated that the restaurant intended to be bound by Li’s terms who was the buyer by offering the services he wanted.
Consideration is yet another component of a contract. Consideration in relation to Australian contracts refers to the price that is paid in exchange for a promise. This means payment should be made for things that are valuable, although the payment does not need to be compared to the promise’s value. Consideration can thus be in form of money, interests in property, etc (Paterson, Robertson, & Duke, 2015). Looking at this description, it is evident that consideration also exists in this scenario. Li exchanged money for services. This is demonstrated when he paid the deposit and hoped that Lame Duck would host his wedding and provide banquet services during this period.
Competence is a vital component of a contract as well. Under this element, the contract is deemed to exist if the parties involved are above 18 years of age and they are of sound mind meaning that they are able to comprehend the nature of transaction (Mitchell & Mitchell, 2016). In this case, competence was present. The people who entered into this contract were adults (i.e. Li and Summer) and they fully comprehended the terms of the contract they entered into. Another element pertains to legality. For a contract to exist, every party must demonstrate lawful intent, and this means that they plan for the consequences of their agreement to be totally lawful. Therefore, the contract between Li and the restaurant was legal. Furthermore, the Lame Duck restaurant is a legal entity, and therefore, its activities are lawful. Lastly, not all contracts should be in writing. In this regard, even though Li and Lame Duck did not put the contract into writing, the contract is still valid. This is because all their actions indicate that they entered into a contract.
Was there a mistake? If yes, what kind of mistake?
There was indeed a mistake in the contract. That said, a unilateral mistake occurred. A unilateral mistake is referred to as an error that is only held by one party and not shared by the other party. Alternatively, a unilateral mistake is said to have taken place when only one party is mistaken as to the subject matter or the contract agreement terms (MacMillan, 2011). In this occasion, Summer mistakenly accepted Li’s offer and this influenced Li to enter into the agreement, even prompting him to pay the needed fees for the services that the restaurant would provide. Even though this was a unilateral mistake case, it does not make the contract between Li and the restaurant invalid. Nonetheless, if one party enters a contract under a mistake that is serious in relation to a basic term, the contract will be rendered invalid if the other party was aware of conditions that signify the 1st party is mistaken, and intentionally sets out to make sure that the 1st party did not realize their mistake until it was too late (MacMillan, 2011). In such circumstances, it is against good science for the party who intentionally overlooked the signs and acted to avert the unearthing of the mistake to hold the mistaken party to the contract. This is demonstrated in Taylor v Johnson (1983) 151 CLR 422. In this case, Johnson had offered to sell to Taylor ten acres of land for 15000 dollars. Taylor must have been aware that the price was too good to be true but he kept silent and speedily accepted the offer. Later, Johnson stated that she had been mistaken about the offer terms, and as such, had meant to sell the land for 15000 dollars per acre, and not 15000 dollars for the entire ten acres. The contract between these two individuals would thus be termed void due to the unilateral mistake because the mistake was unconscionable as indicated by the terms which were extremely unfair. In yet another case, i.e., Webster v Cecil (1861) 30 Beav 62, the contract was declared void due to a unilateral mistake as the terms involved were very unfair to one party. In this situation, Cecil had written to Webster offering to sell him a particular land for 1250 dollars. Webster knew very well that this was a mistake and Cecil meant to sell the land at 12500 dollars; he accepted the offer (McKendrick, & Liu, 2015). Cecil later stated that he would not conduct the contract under that price. The court ruled that the mistake was unconscionable and this made the contract invalid.
Evidently, it is vital to cancel a contract at the juncture when a unilateral mistake offers an unfair advantage to 1 party and negative effects for the other. In relationships that need a situation that is balanced between the 2, these mistakes can lead to serious issues later in the relationship (McKendrick, & Liu, 2015). At the juncture when an error is either impossible to circumvent or causes problems for one or both parties, it is vital to cancel this contract.
Explain what will happen if the Lame Duck Restaurant is obliged to provide the premises for the wedding, but refuses to do so.
If Lame Duck Restaurant refuses to provide the premises for the wedding, it will be held accountable for breach in contract. In particular, the restaurant would be committing a material breach. Overall, a material breach of a contract entails one of the main components of the contract not being undertaken or provided as initially agreed (Cohen & McKendrick, 2015). In Forklift Engineering Australia Pty Ltd v Powerlift (Nissan) Pty Ltd [2000] VSC 443 the court stated that: “a contract’s material breach does not seem to be a notion that is known by the contract law. It is thus a question of establishing the intention of the parties of the utilization of “material breach” in the agreement. In so doing, the court identified the usual sense of the words utilized unless such application leads to irrationality or irregularity is a breach of the basic term of the contract.” From this statement, it is clear that material breach in Australian contract law is also known as a violation of a vital or basic term of the contract. Notably, the courts in Australia have described a basic term to mean: Tramways Advertising Pty Ltd v Luna Park (NSW) Ltd (1938) 38 SR (NSW) 632, “a contract term which is so fundamental to a contract’s substance or was so vital to its very nature that failure to perform it may literally be perceived by the other party as a significant failure to carry out the contract at all.” The basis of the contract between Li and Lame Duck Restaurant is the provision of premises for the wedding and offering a banquet, and therefore, Li would term the restaurant’s actions of refusing to fulfill these obligations, as a considerable failure to conduct the contract at all.
In this regard, Li has various options under the Australian contract law. One, Li can seek the Helpance of authorities. For instance, he can obtain a court order prohibiting the restaurant from violating the contract. This way, Lame Duck will have no other option but to fulfill the terms of the contract. Secondly, Li can sue for damages. Under the Australian law, damages for the violation of the terms of a contract are compensatory in nature, and their purpose is not to punish the defendant (Cohen & McKendrick, 2015). An award for damages will compensate Li for the loss suffered (to place Li in the same situation), in so far as the finances can accomplish as if the contract had been carried out. Notably, an award in damages cannot place Li in a better position that he would have been in had the restaurant fulfilled its part of the contract. It is, however, important to note that Li has to prove the loss. This entails proving a situation that he would be in if the contract had been carried out. There is then the need to compare this with Li’s real circumstance, in consequence of the restaurant failing to perform the contract. Lastly, Li can sue the restaurant for expectation damages. In this case, the court may award these damages to Li to safeguard his expectation of receiving Lame Duck’s performance.

References
Cohen, N, & McKendrick, E, 2015. Comparative Remedies for Breach of Contract. Hart
Publishing.
Gooley, J V, Radan, P, & Vickovich, I, 2013. Principles of Australian Contract Law. New
York, NY: Springer Publishing Company.
MacMillan, C, 2011. Mistakes in Contract Law. Hart Pub.
McKendrick, E, & Liu, Q, 2015. Contract Law: Australian Edition. London, United
Kingdom: Macmillan International Higher Education.
Mitchell, C, & Mitchell, P, 2016. Landmark Cases in the Law of Contract. Hart Publishing.
Paterson, J, Robertson, A, & Duke, A, 2015. Principles of Contract Law. Jones & Bartlett
Learning.

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