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Research Project Starbucks Assignment

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Business and Company Law

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Question 1

a.     Advice to Avinash and Magda regarding binding contract

Magda is a professional photographer who sells photographic portraits through her website as well as personal visits to the design studio. On 19th of February, Avinash, who happened to visit the website and chose to buy a limited edition portrait of a sportsperson Paris Stilton, which had only 3 copies out of which two were already sold. As such Avinash went for a negotiation with the owner that is Magda through emails. However, before the payment, he wished to consult with his wife who stays abroad and finally confirms the deal by 21st February. This was further assured by an email by Magda affirming that the offer will remain open to him till 11:59 pm on 21 February. Meanwhile, on 20th of February Elton visited the studio and bought the portrait at $2000 and Magda sent the updates to Avinash.

Essential elements of the contract

The elements of the contracts that are essential and requisite includes the offer, the acceptance of the offer, the consideration and the mutuality of the obligation forms the essential parts of the contract. The competency and the legal relationship between both the two contract people are checked. The consideration mainly the money factors are to be deduced as the important essential parts of the contract.  

According to the Australian Consumer Law for the protection of consumers, as in this case, the essential elements that are required to be mentioned is that in case of a negotiation that had taken place there is a specific period also known as cooling off period (accc.gov.au, 2018). This phase which is granted to the consumer and during this phase the consumer is able to cancel the contract.  In such case, no penalty will be incurred on the consumer. As in the case of Avinash and Magda, the cooling off period was between 19th of February to 21st February. However, there was a breach of the contract by the seller as in this case it is Magda. As per the rule established in the case of Hadley v Baxendale (1854), which is considered as one of the most important as well, as cited cases of Australia regarding the breach of conduct (artslaw.com.au, 2018). This also includes the refinement that is made by the Supreme Court. The rule states that the test regarding remoteness in a contract is equal to contemplation. As such the cases lead to the losses which induce the fact that it arises out of natural course of things, and subject within the range of contemplation of both the parties, in the time of contraction (australiancontractlaw.com, 2018). The rule suggests that for a contract made between two parties if one who the party breaks the contract and in such case if the loss of profits is not considerable, then estimating the damages are not required (Conradie and Lamprecht, 2015, p.23).

b.    Advice to Elton regarding Australian Consumer Law (ACL)

Issue

In this case, Elton had visited Magda's website and bought a portrait at $2000. On receiving the portrait he found that it was not printed on a good quality paper of photography. As such the portrait was already found to show degradation in the quality of its colour which would not have been possible in case it was printed on a high-quality photographic paper. Moreover, he even did not have the knowledge of the fact that the portrait that he had bought was at a higher price from the website. Further, the portrait was stated to be of the limited edition which was already sold off and it amounted to around ten of the total number of copies that were sold. This proves that the information provided by the seller as in this case it is Magda was incorrect and faulty. The case as which was supposedly stated as to attract more customers to buy the portraits at a higher price than usual and gain indefinite profits through forgery and false claims.

Rules

The Australian Consumer Law is a single law for the protection of consumers and fair trading which is based on the existing law for consumer provisions that is Trade Practices Act (Dietrich, 2015, p.345). According to Farrell, (2014), the ACL states the laws related to unfair terms in a contract, regulatory system for the protection of products that even consists of reforms that are designed in order to enhance the operations of the laws that are existing in the state as well as the territory laws. The terms of the Australian Consumer Law (ACL) related to the misleading or deceptive conduct of business (legal.thomsonreuters.com.au, 2018). The law for the protection of consumers is meant for protecting the consumers from business conducts which are misleading (Sjåfjell and Taylor, 2015, p.234). This includes the business conduct which has been made intentionally in order to create a misleading impression for the intended audience or the targeted customers. The misleading in the respect of business is relative to the price, quality and the value of the goods or products or even services for the consumers (Stewart, 2015, p.112). As per the law, the term conduct is referred to actions as well as statements which include advertisements, quotations, representations or even promotions and statements (Thompson, 2018).

Qualification as a consumer

As per the act of ACL, Elton has been satisfied as a consumer. There exchange of goods in terms of money shows that Elton has made goods exchange in money terms and this has helped in determined that Elton has qualified as a consumer.

Application

In the case of Australian Competition and Consumer Commission v Reckitt Benckiser (Australia) Pty Ltd (No 4) [2015] FCA 1408, the Australian Competition and Consumer Commission took up actions against the company, Reckitt Benckiser Pty Ltd in Australia (Timebase.com.au, 2016). It was regarding the claims that were made from the side of the company about its Nurofen products that were produced and sold with the main aim of reliving certain specific pains. The judgment that was provided by the commission as per the case was that it had contravened the sections namely 18 as well as 33 of the consumer laws of Australia (wipo.int, 2018). This is due to the fact that the company had falsified the description of the certain range of products supplied of Nurofen products.

As per the proceedings of the case, ACCC v A Whistle & Co (1979) Pty Ltd [2015] FCA 1447: Federal Court Fines Electrodry for Fake Testimonials, the Federal Court had previously ordered the franchisers to the business of paying around $215,000 as sum for the penalty (Wallace et al. 2015, p.59). The judgment was related to the fact that the actions had contravened the section of the Australian laws of consumers that is namely section 29(1)(e) (Howells and Weatherill, 2017, p.34). The Court had further stated that A Whistle & Co had attempted had authorised an agent as to publish or present the testimonial that was false and tried to induce the franchisees to do the same (O'Connor, 2017, p.106).

Conclusion

In the case of Elton who bought a portrait of a sports person from Magda at a price without going for ant bargains, he was given the information of the portrait being of a higher quality and that it was a limited edition.

Breach of contract

Breach of contract is seen in the case study, as the proposed quality of the portrait has not been maintained and furthers the quality breach and untimely presentation has been seen.

However, in real time, the portrait that was delivered to Elton was printed on low-quality photographic paper and that it had already been sold to ten of the buyers which meant it was not a limited edition work.

 Material misstatements

This case identifies itself as being truly a case of falsification of data and misleading representations. The falsification of data along with improper presentation of the statements has lead to the misstatements of data.

Elton has breached the contract and further has presented false. However; it is found that Elton is not at fault as his actions were based on the information provided to him that is on the website. Hence by law, Elton proves to be a consumer on his own terms. Moreover, it is Magda who has breached terms of a contractual negotiation and even made misstatements.

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