Introduction to Commercial Law
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Questions and Answers

What is a contract?

  • Any kind of agreement between two parties
  • A legally binding document
  • An understanding without obligations
  • An agreement that is enforceable in courts (correct)

    • Not every agreement is a contract.

    True

    What distinguishes a contract from other agreements?

    The possibility of enforcement.

    What are the essential elements for a contract formation?

    <p>Offer, acceptance, intention, consideration</p> Signup and view all the answers

    A contract must have ______ and intention of the parties to create legal relations.

    <p>offer</p> Signup and view all the answers

    Which of the following is considered a function of contract law?

    <p>To promote certainty</p> Signup and view all the answers

    Contracts require a specific form to be enforceable.

    <p>False</p> Signup and view all the answers

    What is law?

    <p>A body of enforceable rules made by the state that are enforceable by the state.</p> Signup and view all the answers

    What are some functions of law? (Select all that apply)

    <p>Promotes equality and the rule of law</p> Signup and view all the answers

    The rule of law means that the same laws apply to everyone, regardless of differences.

    <p>False</p> Signup and view all the answers

    What role does the Australian legal system play for businesses?

    <p>It helps manage legal risks and seize business opportunities.</p> Signup and view all the answers

    When did Australia emerge as its own country?

    <p>1 January 1901</p> Signup and view all the answers

    The Australian Constitution established a ______ system of government.

    <p>federal</p> Signup and view all the answers

    What are the three branches of government in each jurisdiction?

    <p>Parliament, Executive, Judiciary</p> Signup and view all the answers

    Legislative powers are divided equally between State and Commonwealth Parliaments.

    <p>False</p> Signup and view all the answers

    What are primary sources of law?

    <p>Sources that contain the law.</p> Signup and view all the answers

    Secondary sources of law ______ the law but do not contain it.

    <p>describe</p> Signup and view all the answers

    What does the Acts Interpretation Act 1901 (Cth) s 15AA state about interpreting a provision of an Act?

    <p>The interpretation that best achieves the purpose or object of the Act is preferred.</p> Signup and view all the answers

    An agreement between parties will always constitute a contract.

    <p>False</p> Signup and view all the answers

    What does the court consider in the event of a dispute about an agreement?

    <p>Whether a reasonable person would say that an agreement has been made.</p> Signup and view all the answers

    Which of the following statements about consideration is true?

    <p>Consideration must be present in every simple contract.</p> Signup and view all the answers

    What type of contract explicitly states the intentions of the parties?

    <p>Express contract</p> Signup and view all the answers

    Match each type of contract to its definition.

    <p>Valid contract = Enforceable against both parties Voidable contract = A contract that a party may avoid if they wish Void contract = A contract that never existed Unenforceable contract = A contract that cannot be enforced due to a technical defect</p> Signup and view all the answers

    A unilateral contract requires a promise in return for a performance.

    <p>False</p> Signup and view all the answers

    Which of the following is an example of an offer?

    <p>An advertisement that provides a reward</p> Signup and view all the answers

    What is required for an agreement to be formed?

    <p>Offer + Acceptance + Certainty</p> Signup and view all the answers

    Invitations to treat are considered offers.

    <p>False</p> Signup and view all the answers

    In the case 'Carlill v Carbolic Smoke Ball Co', what did the court decide?

    <p>The advertisement constituted a valid offer.</p> Signup and view all the answers

    In 'Leonard v PepsiCo', what was the key reason the court ruled against Leonard?

    <p>A reasonable person would not conclude that a jet was offered.</p> Signup and view all the answers

    A void contract has legal effect between the parties.

    <p>False</p> Signup and view all the answers

    What did Gibson argue regarding the letter?

    <p>The letter was an offer and his response was an acceptance of that offer.</p> Signup and view all the answers

    What was the Council's argument regarding the letter?

    <p>The letter was an invitation to treat and Gibson's response was an offer that had not been accepted.</p> Signup and view all the answers

    The letter in question was determined to be an offer.

    <p>False</p> Signup and view all the answers

    What phrase in the letter suggested it was only an invitation to treat?

    <p>May be prepared to sell</p> Signup and view all the answers

    What did the window displays and catalogues generally represent?

    <p>They are considered invitations to treat and not offers.</p> Signup and view all the answers

    Who opened the first self-service pharmacy in England?

    <p>Boots.</p> Signup and view all the answers

    The Society objected to the self-service method of retailing pharmaceuticals.

    <p>True</p> Signup and view all the answers

    What was the Society's argument in the legal case?

    <p>An offer was made when drugs were placed on shelves and accepted when customers took them.</p> Signup and view all the answers

    Boots' argument was ultimately rejected.

    <p>False</p> Signup and view all the answers

    What was the outcome of the Crittenden case?

    <p>Both A and B.</p> Signup and view all the answers

    An advertisement may be regarded as an offer if it is sufficiently ______ in its terms.

    <p>definite</p> Signup and view all the answers

    What is the effect of the Australian Consumer Law 2010 on representations?

    <p>It may consider representations that were once deemed as puffery to be misleading or deceptive.</p> Signup and view all the answers

    When the auctioneer calls for bids, this is an invitation to treat.

    <p>True</p> Signup and view all the answers

    When bidders call out their bids, this is considered an offer.

    <p>True</p> Signup and view all the answers

    What happens when the seller/auctioneer 'knocks down' the property to the successful bidder?

    <p>This is the acceptance of the bid</p> Signup and view all the answers

    What is created when there is acceptance in an auction?

    <p>A binding contract</p> Signup and view all the answers

    In which case was it held that an advertisement is merely an invitation to treat?

    <p>Harris v Nickerson</p> Signup and view all the answers

    The auctioneer is obligated to accept the highest bid in auctions 'without reserve.'

    <p>True</p> Signup and view all the answers

    What was the main issue in Barry v Davies?

    <p>Whether the auctioneer was bound to accept the highest bid</p> Signup and view all the answers

    In Smythe v Thomas, the seller argued that no contract was formed between him and the highest bidder.

    <p>True</p> Signup and view all the answers

    What must happen for an offer to be accepted?

    <p>The offer must be communicated to the person to whom it is made.</p> Signup and view all the answers

    An advertisement calling for tenders is considered an offer.

    <p>False</p> Signup and view all the answers

    Which of the following states that there is no contract until acceptance?

    <p>Submission of a tender</p> Signup and view all the answers

    In R v Clarke, what was the reason Clarke could not claim the reward?

    <p>Clarke did not act in reliance upon the offer.</p> Signup and view all the answers

    What happens to an offer upon revocation?

    <p>It is 'killed off' and cannot be accepted</p> Signup and view all the answers

    Which case involved a question of whether revocation or acceptance happened first?

    <p>Byrne &amp; Co v Leon Van Tienhoven &amp; Co</p> Signup and view all the answers

    What was the outcome regarding the revocation of the offer?

    <p>The revocation of the offer was ineffective.</p> Signup and view all the answers

    A valid option contract allows revocation of an offer before the stated time.

    <p>False</p> Signup and view all the answers

    What does the price of an option entail?

    <p>The price of the option is neither refundable nor included in the sale price as a deposit.</p> Signup and view all the answers

    Under what circumstances can an offer not be accepted?

    <p>All of the above</p> Signup and view all the answers

    What does a counteroffer signify?

    <p>A counteroffer functions as both a rejection of an offer and a new offer that changes the terms.</p> Signup and view all the answers

    The Court ordered __________ performance, forcing Quinn to transfer title to the land.

    <p>specific</p> Signup and view all the answers

    What was the initial response of Hyde when Wrench offered to sell land for $1200?

    <p>Hyde rejected the offer</p> Signup and view all the answers

    Wrench was obligated to accept Hyde's counteroffer.

    <p>False</p> Signup and view all the answers

    What did Stevenson Jaques inquire about concerning McLean's offer?

    <p>Stevenson Jaques asked whether McLean would accept delivery over two months or the longest limit he would provide.</p> Signup and view all the answers

    Jaques' response was considered a counteroffer.

    <p>False</p> Signup and view all the answers

    What must be communicated in acceptance unless waived or unless postal rule applies?

    <p>All of the above</p> Signup and view all the answers

    Acceptance can be imposed by silence.

    <p>False</p> Signup and view all the answers

    What indicates assent to an offer?

    <p>Saying 'yes'</p> Signup and view all the answers

    When is an agreement concluded?

    <p>When the offeree communicates a clear and unconditional acceptance of the offer to the offeror.</p> Signup and view all the answers

    In Brinkibon Ltd v Stahag Stahl GmbH, the contract was formed in ______.

    <p>Vienna</p> Signup and view all the answers

    What does the court decide in the case of instantaneous communication regarding contract formation?

    <p>The contract is formed in the place where the acceptance is received.</p> Signup and view all the answers

    Who did Empirnall hire to obtain permits for a property development?

    <p>Machon</p> Signup and view all the answers

    The director of Empirnall was known to sign contracts.

    <p>False</p> Signup and view all the answers

    What misunderstanding did Machon express to Empirnall after the demands for payment?

    <p>That the conditions of the contract were accepted by Empirnall.</p> Signup and view all the answers

    McLean was in breach and liable in damages for its non-delivery of the ______.

    <p>iron</p> Signup and view all the answers

    Study Notes

    Introduction to Commercial Law

    • Law consists of enforceable rules established by the state, including parliaments and courts.
    • Key features of law include its source from parliaments and courts and the enforceability by the state.

    Functions of Law

    • Provides a framework for dispute resolution within society.
    • Reinforces fundamental community values and norms.
    • Promotes societal stability and cohesion.
    • Ensures equality and upholds the rule of law.
    • Acts as a regulatory mechanism on permissible and mandatory actions.

    Rule of Law

    • A principle that mandates everyone, including the government, to be subject to the law.
    • The content of the law should enable people to understand and comply willingly.
    • Strong adherence to the rule of law is crucial for orderly business operations and general societal conduct.
    • Law may differ in application based on individual circumstances.
    • All businesses, including foreign entities, must navigate the Australian legal framework.
    • Understanding the legal landscape aids in managing risks and leveraging opportunities for sound decision-making.
    • The legal system is subject to continuous change, impacting both Australian society and international business practices.
    • The Australian Constitution, enforced on January 1, 1901, became the foundation of the nation's legal framework.

    Constitution of Australia

    • Passed by the Imperial Parliament in 1900, it established Australia as a constitutional monarchy.
    • Introduced a federal system of governance, comprising State, Territory, and central (Commonwealth) governments.
    • Each jurisdiction possesses its own legislative and judicial authority, with responsibilities allocated by the Constitution.

    Separation of Powers

    • Government operates through three distinct branches: Parliament, Executive, and Judiciary.
    • Each branch has specific functions, acting as a system of checks and balances.
    • Legislative powers include exclusive, concurrent, and residual powers, determining how law-making authority is shared among different governments.

    Legislative Conflicts

    • Section 109 of the Constitution resolves disputes between state and Commonwealth laws, stating Commonwealth law prevails in cases of inconsistency.
    • Amendments to the Constitution are outlined in Section 128.

    Impact of Separation of Powers on Business

    • The Parliament creates laws that directly influence business conduct and practices.
    • Executive decisions affect the enforcement and implementation of laws, impacting business operations.
    • Judiciary interprets laws, adjudicates disputes involving businesses, and sets legal precedents for future reference.

    Sources of Law

    • Primary sources include statutes, acts, and legislation from Parliament and common law established by courts.
    • Secondary sources provide commentary and interpretation but do not contain the law.
    • Statutes can create new laws, repeal old ones, and codify existing laws, with flexibility for amendments.

    Statutory Interpretation

    • The Australian Consumer Law (s 18(1)) prohibits misleading or deceptive conduct in trade or commerce.
    • Case law establishes definitions of misleading conduct that influence future legal cases.
    • Interpretation of laws is guided by statutory and common law principles.
    • Acts Interpretation Act 1901 prioritizes interpretations that serve the intended purposes of the law.

    Materials for Interpretation

    • Intrinsic materials (within the Act) and extrinsic materials (outside the Act), such as preambles and explanatory memoranda, inform the legislative intent and assist in court interpretations.### Sources of Law
    • Common law, case law, and judge-made law arise from court rulings and precedents.
    • Contract law, a significant area of business activity, is still governed by common law despite prevailing legislation.
    • Courts shape law by resolving disputes involving individuals and businesses in real contexts.
    • Court hierarchies and understanding key concepts like ratio decidendi, obiter dicta, binding, and persuasive precedent are essential.
    • Judge-made law can influence both future and past cases.

    Australian Courts

    • Defined hierarchy and structure exist within Australian legal systems impacting case law and the judicial process.

    Understanding Case Law and Business

    • Actual legal disputes drive the creation of case law, illustrating its relevance to real parties, including businesses.
    • Most business disputes are settled outside of court due to the high costs and complexities of litigation.
    • Key aspects to comprehend include the nature of the dispute, legal issues, arguments presented, and court decisions.
    • Appeals may arise, with either party potentially initiating the process.
    • Laws are categorized into public law vs. private law, substantive law vs. procedural law, and civil law vs. criminal law.
    • Distinctions also exist between domestic law and international law.
    • Understanding the roles of solicitors and barristers, including their interactions with business, is crucial.
    • Alternative dispute resolution methods such as arbitration, mediation, and negotiation play important roles in resolving business conflicts.

    Business Ethics

    • Justice and ethics are subjective, and actions can be legal, ethical, both, or neither.
    • Good business decisions may require considering ethical implications beyond mere legal compliance.

    Australian Law and Business Impact

    • Real-world legal cases, like BrewDog's promotions and the ACCC’s settlements, underline the law's influence on business operations.
    • Legal outcomes do not always require court involvement, showcasing the various dimensions of business conduct.

    Contract Formation

    • A contract is not just an agreement but one that creates legal rights and obligations enforceable by courts.
    • Key elements distinguish contracts from other agreements, focusing on enforceability and legal recognition.

    Functions of Contract Law

    • Promotes certainty in business dealings by ensuring contractual promises are honored.
    • Facilitates planning and sets market value for goods and services.
    • Offers formal dispute resolution channels and assigns risks to parties entering contracts.

    Essential Elements of a Contract

    • Contracts require an offer and acceptance, indicating mutual agreement.
    • Parties must intend to create legal relations, provide valuable consideration, and have legal capacity.
    • Genuine consent and legality of the agreement's object are crucial; absence of any element may render an agreement unenforceable.

    Classification of Contracts

    • Contracts can be oral, written, or implied; written contracts must be signed and witnessed.
    • Express contracts clearly state terms; implied contracts infer terms from conduct.
    • Bilateral contracts involve mutual promises; unilateral contracts invite acceptance through performance.
    • Contracts can be valid, voidable, void, or unenforceable, each with distinct legal implications.

    Offer and Acceptance

    • The offeror expresses a willingness to enter into a legally binding agreement, which the offeree accepts to form a contract.### Agreement Formation
    • Agreement Equation: Offer + Acceptance + Certainty = Agreement
    • Role of Offeror: The offeror can act as either the buyer or seller in a transaction.
    • Acceptance: An agreement forms upon acceptance of an offer, potentially leading to a contract.
    • Nature of Offers: Offers are essential for legally binding contracts; only offers can be legally accepted.

    Characteristics of Offers

    • Audience: Offers can be made to individuals, groups, or the public as a whole.
    • Distinction from Other Communications: Must differ from mere puffery, invitations to treat, or informational statements.
    • Content Requirement: All significant terms must be included in the offer.
    • Conditional Offers: Offers may outline specific conditions that must be adhered to.
    • Communication: Offers must be communicated to the offeree to be valid.
    • Revocation: Offers can be revoked or may expire over time.

    Puffery

    • Puffery refers to exaggerated claims or statements, which do not constitute legitimate offers.

    Case Law Examples

    Carlill v Carbolic Smoke Ball Co

    • Facts: Advertisement claimed product prevented influenza, offered £100 for influenza cases despite usage.
    • Legal Issue: Determining if the advertisement was an offer or mere puffery.
    • Outcome: Court ruled it was a legitimate offer; Carlill could claim £100 since the conditions were satisfied.

    Leonard v PepsiCo

    • Facts: Pepsi advertisement featured a campaign for collecting "Pepsi Points," humorously advertised a Harrier jet as purchasable.
    • Legal Issue: Whether consumers would reasonably conclude it was a real offer.
    • Outcome: Court ruled the commercial was not a genuine offer, but a mere puff.

    Gibson v Manchester City Council

    • Facts: Council stated it "may be prepared to sell" property, prompting tenant Gibson to apply for purchase.
    • Legal Issue: Determining if the Council's correspondence constituted an offer.
    • Outcome: Court held the letter was an invitation to treat, not an offer.

    Common Misunderstandings of Offers

    • Advertisements, window displays, and product listings are typically considered invitations to treat rather than formal offers.

    Pharmaceutical Society of Great Britain v Boots Cash Chemists

    • Facts: Boots introduced a self-service pharmacy where drugs were displayed on shelves.
    • Legal Issue: Whether the display of items constituted an offer.
    • Outcome: The court ruled Boots' display was an invitation to treat, where the customer made an offer upon reaching the cashier, which could then be accepted by the pharmacist.
    • Invitations to Treat: Do not possess contractual significance but may lead to an offer.
    • Contract Formation: Legally binding contracts emerge once an offer is accepted under agreed conditions.

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