Business Law Contract Between Winnie and ERH

Question: Describe about the Case Study for Business Law for Contract Between Winnie and ERH. Answer: Introduction In the given case, a contract between Winnie and ERH was drawn, for hosting Winnies wedding. Some of the terms were stated, and others were not. Eva was the events planner for ERH, and the terms of the contract were discussed between Winnie and Eva. Due to the events that occurred at the wedding, Winnie wants to sue ERH. Her legal rights in this matter have been discussed below. Facts of the Case In the given case, the terms of the contract were detailed by Eva, on behalf of ERH. So, the terms discussed between Eva and Winnie, form the base of this contract. During the discussions between them, Eva had warned Winnie about the occasional tropical storms, which Winnie had failed to listen. Winnie chose a dish called Asian Finger Feast, based on its photographs and description. The description of this dish stated that the dish contained prawns, sushi, salmon, spring rolls, teriyaki skewers and tropical fruit. A band, named Trolls, was decided between them, for the wedding. Eva failed to inform Winnie about her relationship with the member of the band, and that the band was a death metal band. On the other hand, Winnie failed to inform Eva that apart from a wedding ceremony, she would be showcasing her designer off-the-shelf wedding dresses. She was expecting to make a profit out of this, of over $50000. The contract, containing six clauses, was finally drawn on September 13, 2015. The wedding turned bad, as everything did not go according to the plans. A tropical storm occurred, and as a result, the guests had to be moved to a shed at the back of the hotel, as the Great Dining Hall was not available. Further, this resulted in the delayed start of the party from the scheduled time of 5 PM to 7 PM. The drinks and dishes were not up to the mark. Formation of Contract Issue: Was a contract formed in this case? Rule: A contract is a promise between two or more parties, to carry out certain things, in exchange for a consideration (Treitel Peel 2015). A contract is a legally enforceable document. The parties entering the contract have to be of sound mental capacity. They have to enter the contract out of free will, and without any undue influence. Intent to enter into a contract is a necessity to form a legally binding contract. (Clarke Clarke 2016). A contract can be either written or oral. In a written contract, all the terms are laid down on paper, and signed by the parties involved. In the case of a verbal contract, an offer is spoken, and the acceptance is attained in a spoken manner. It is advisable to enter into written contracts as against verbal contracts (Department of State Development 2016). Even though there is an ease of formation in the verbal contracts but in the case of disputes, a written contract can resolve the points of dispute. There are five main elements of a contract, namely, an offer, acceptance, consideration, intent, and certainty (The Law Handbook 2015). To form a contract, an offer has to be made by the party. This offer has to be accepted by the party, to whom the offer was made. The offer should involve a consideration which has economic value. The parties should have the intention to enter into a contract. And lastly, a certainty is essential regarding the terms of the contract (Carter 2007). The terms and conditions which are important in nature but do not form the part of the main body of the contract are stated in the fine print. Reading and understand the fine parts is a crucial element for entering into a contract. Usually, such items are included in the main contract, which the issuing parties do not want the receiving parties to know, even though these are essential for the receiving party. Such terms are valid as per the law. When one party fails to disclose material information relating to a contract, it is known as misrepresentation. A contract is voidable at the option of the aggrieved party in cases of misrepresentation. Further, the Australian Consumer Law Winnie provides certain consumer rights to seek necessary redressal from the adequate forum (Keyes Wilson 2016). Also, specific performance or an injunction can also be acquired as means of remedy. The Civil Liability Act, 2002 states that a person is held responsible for the harm done to other person and would be considered as negligence if the risk was known to the person (Australian Law Reform Commission 2016). A landmark decision regarding the negligence in tort law and consumer protection came from the case of Donoghue v Stevenson (Smith Burns 1983). A standard of care has to be maintained by the parties who are aware of the risks. Application: As stated above, to form a contract, certain key elements are essential (McKendrick Liu 2015). In this case, an offer was made by ERH to host the wedding of Winnie, and the offer was accepted by Winnie. The terms were in writing and signed by the parties involved. The terms of consideration were set out in the contract, which required Winnie to pay half the amount in advance and the rest had to be paid one week before the wedding was scheduled to take place. The consideration of $20,000 was duly paid in the manner stated in the contract. There was a clear presence of intent between the parties to enter into a contract (Gillies 1988). Here, the point of dispute arises on the terms of the contract. Certainty, about the terms of the contract, is an essential element of any contract. The first clause of the contract stated that the venue would be provided for 100 guests, on the wedding night of February 1, 2016, from 5 PM to midnight. But due to a tropical storm, the party could not start until 7 pm on that day. By including this clause in the contract, the period of the contract was declared. After the passage of midnight of February 1, 2016, this contract would have reached its end, on the basis of both the tenure of the contract and the discharge of performance. The second clause of the contract stated that the 100 guests would be served the Asian Finger Feast. At the end of the contract, in the fine print, it was written that at the discretion of the hotel, substitutes could be used. The Asian Finger Feast dish served was different from the photographs and description that Winnie had seen. But as per the contract, ERH had the discretion to change the dish. So, on the basis of clause 2, Winnie has no legal right to sue. The clause 3 of the contract stated that a drink named Tropical Punch would be served by ERH for first two hours, and afterward the drinks had to be purchased by the guests from the bar at reasonable prices. Again, in the fine print, it was written that the recipe of the said drink is confidential and could not be disclosed. At the wedding day, a drink with ingredients containing a lukewarm non-alcoholic mixture of tinned pineapple and orange juice was served. The contents of the drink were never discussed, so a contention on this matter cannot be made by Winnie. The point on which legal action can be taken by Willie is the price of the drinks served. The contract clearly stated that the drinks had to be served at reasonable prices but in reality, they were served for prices which were three times the cost of equivalent Melbourne prices. Winnie has consumer rights here and can seek necessary redressal from the adequate forum. Clause 3 further stated that the entertainment would be provided by the band Trolls. It also stated that the bridal dance would be the song Wild Thing. The band had Evas son as a member. It was the duty of Eva to disclose this fact to Winnie. Further, she had to inform Winnie that the band was a death metal band. By not disclosing these issues, Eva failed on the fiduciary relationship of the trust and confidence. Hence, there was a misrepresentation (Elliot 2011). The clause 4 of the contract contained the compensation part which was discussed and paid adequately. The 5th clauses stated that on cancellation by Winnie, the deposit paid by Winnie would be forfeited. These clauses have been rightly included in the contract as they contain an essential element of a contract, i.e., consideration (The Law Handbook 2015). The last clause which was the 6th clause stated that ERH was not liable for any harm or damage caused, even by if such damage was caused by ERHs negligence. During the discussion of the contract, Eva had clearly warned Winnie about the probability of storm. Here, Eva was aware of the risk of tropical storm, and since the venue was a beach, this was an inherent risk of the business. Beyond communicating the risk factor (which was unheard by Winnie) Eva or ERH did nothing. Hence, they committed a tort (Trindade, Cane Lunney 2007). But, the clause 6 covered the disclaimer. And so, a tort was not committed by the reasons of proper disclosure. Conclusion: By analyzing the clauses of the contract, it can be concluded that a contract was formed in this case. Further, by these clauses, Winnie has various rights to seek redressal. Validity of the Contract terms Issue: Whether the terms of this contract are valid? Rule: After oral discussions, when an agreement is written down and appears to be entire, it is assumed that the written terms contain all the terms that were discussed. Further, any evidence regarding the oral discussion would not be accepted which would result in a change in conditions of the agreement. This concept is known as Parol Evidence Rule (PER). A contract is voidable at the option of the aggrieved party in cases of misrepresentation. Under no circumstances, should the terms of a contract be illegal or such that they may breach the law. Only the lawful terms, in a contract, are considered valid. Exclusion clauses are often found in the contracts and are valid. For an exclusion clause to be valid, the terms have to be clear and precise. Further, such terms have to be brought to the attention of the other party. In cases where the exclusion clause (EC) is vague, such clauses are interpreted against the interest of the party relying upon it. It was held in the case of LEstrange v Graucob that when the parties sign a contract and where there was no case of a fraud or misrepresentation to sign than the parties are bound by the contract irrespective of the fact that the contract was not read (Swarb 2015). Application: In the given case, after oral discussions, the contract was written down and signed. Some clauses in the contract were standard, and others contained misrepresentation clauses. The first clause is correct in terms that it contains the tenure of the contract. The second clause is also correct as the terms included the discretion concept as explained above. The third clauses contained two parts. The first correctly stated the terms of the drinks. The second clause contained a misrepresentation clause as Eva failed to declare her relationship with the band. This information was crucial to the contract as Eva had favored from the terms. Further, withholding the information about the band being a death band, confirmed that Eva failed to disclose material information and hence, a case of misrepresentation was present in the contract. So, by this clause, the contract is voidable. The fourth clause stated the compensation of the contract, and it is an essential element of any contract (Frey Frey 2005). Hence, the validity of the contract cannot be challenged on this ground. The fifth clause stated the terms of termination of a contract in case of a cancellation by Winnie. This is also one of the standard terms of a contract and hence, forms a part of a valid contract. The last part contained an exclusion clause on the part of ERH. In this case, the EC was very clear in its wordings and Winnie had signed the contract. Even though the oral warning about the tropical storm was unheard by Winnie, but the contract clearly stated the EC. Applying the verdict of LEstrange v Graucob in the present case, the clause 6 of this contract was valid. Further, all these clauses are legal and do not breach the law. And so, the terms of this contract are valid. Conclusion: From the above analysis, it can be concluded that this contract was indeed a valid contract and the terms of this contract, were also valid. Vitiating Factors of the Contract Issue: Whether there are any vitiating factors in this contract? Rule: Vitiating factors are those terms in a contract that make the contract void or voidable. Some of the vitiating factors include misrepresentation, illegality, mistake, undue influence and duress (Paterson, Robertson Duke 2012). Application: The first vitiating factor is present in clause 3 of the contract. According to this clause, the drinks had to be provided at reasonable prices in the bar of ERH. But in reality, the drinks were provided at three times high rates. This was a misrepresentation by ERH and hence amounts to vitiating factor. Further, this clause also stated the band as Trolls, which had a material relationship with Eva, who was the representative of ERH, and that the band was a death metal band. Failing to inform Winnie about these factors gave rise to a misrepresentation. Hence, this was also a vitiating factor in this contract. A major vitiating factor in this contract was a result of misrepresentation on the part of Winnie. Winnie had failed to disclose to Eva, that on the wedding day, Winnie was going to showcase her new range of designer off-the-shelf wedding dresses, for her business. Winnie stood to make a profit of over $50000 from this. This was a commercial/ business activity. The contract was formed for hosting a wedding and not a business activity. Hence, this misrepresentation by Winnie is also a vitiating factor of this case. Conclusion: So, there were vitiating factors in the given case. In the clause 3, there was a vitiating factor in the form of misrepresentation. Further, a vitiating factor was also present from the side of Winnie, as she failed to disclose material information about this contract and hence, was a vitiating factor in the form of misrepresentation. To conclude, there was a presence of vitiating factor, by misrepresentation, from both the parties. Remedies and Damages Available To Winnie Issue: Whether any remedies or damages are available to Winnie? Rule: Remedies and damages are provided to a party in cases of breach of contract. Damage is awarded with the aim of restoring the parties to the position as if the breach had not taken place. Damage or remedy is not a punishment, but a means to rectify the situation. Damages are usually provided for distress (Australian Law Reform Commission 2016). And remedies are provided for a breach of contract. A noticeable case in the matter of claims for damages, by distress and disappointment is Baltic Shipping Co v Dillon (Goldring et al. 1998). In this case, the passenger had sued for distress and disappointment, and was awarded damages for such distress and disappointment. As per section 20 of the Australian Consumer Law (ACL) (Corones 2011), a person engaged in trade or commerce, must not do something which is unconscionable within the meaning of the unwritten law. Further, section 21 of the Australian Consumer Law, states that a person should not be engaged in unconscionable acts, in the course of trade or commerce, which relates to the supply of goods and services. Relief is provided for contravention of these sections through damages (under section 236) or compensation (under section 237). Application: From the events stated in the facts, it can be deduced that Winnie suffered disappointment and distress. Her wedding was ruined, and her feelings were injured. A clear damage of emotional nature can be established here. So, Winnie can claim for damages on the basis of distress and disappointment. Winnie also undertook a business activity on the wedding day. But due to the problems faced on the wedding day, her business activity was hampered. The dresses she showcased became a laughing stock. Further, a fashion blog article mocked the events of the wedding. As a result of all this, no customers bought her dresses. Because of this, she could not convert her expected profit of $50000 (approximately) to actual profits. The major point here is that Winnie made a misrepresentation by not disclosing the fact that her wedding would hold a business event. This holds her liable for a breach of contract (Monahan 2001). She cannot claim any damage for the loss she incurred because of the commercial activity. Also, Eva withheld material information from Winnie about her relationship with the band member. Further, by failing to disclose information about the band being a death band, again material information was withheld. These were important information in this dealing and hence, by not disclosing them, the misrepresentation was made. Winnie can sue for a breach of contract in this case. And so, Winnie is entitled to receive damages for the breach of contract (Ayres Klass 2012). The magnitude of the damages resulting from the breach of contract would be decided by the loss was borne by Winnie. If the loss claimed is too remote, then damages would not be awarded to Winnie. In this case, the breach of contract (through clause 3), ruined her wedding. Plus, by serving the drinks at prices which were three times the reasonable prices, the damage was clearly established as not remote. So, she can claim damages for high prices that were charged. Further, she can claim for specific performance or get an injunction so that ERH does not continue the overpricing of drinks. In this case, by overcharging the drinks, ERH contravened both the sections 20 as well as 21 of the ACL. In such a case, Winnie can seek adequate relief under the ACL. Conclusion: So, to summarize, Winnie can claim a specific performance or injunction as a remedy for overpricing the drinks. It is also her right to gain damages for the breach of contract (Bonell 2009). Winnie is also eligible to damages/ compensation as per Australian Consumer Law (Coorey 2015). Lastly, as the emotional distress has been established, Winnie can sue for damages in the nature of duress. References Andrews, N 2015, Contract law, 2nd edn, Cambridge University Press, UK. 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