Decline of the customers despite Lisa’s Promise that they would Increase
Carl and Lisa’s contract was based on the supply of eco-friendly detergents by Lisa’s company to Carl’s car-wash business based on Lisa’s promise that the product would enable Carl’s business to grow. In this case, the issues to be considered are:
- Does the promise for the business to increase after using Lisa’s detergent constitute a business contract?
- Did Carl decide to enter the contract as a result of Lisa’s promise his sales would increase as a result of using the detergent?
- Is Lisa liable for the failure of the detergent to cause the business to increase?
The rule that is to be used for this case is the Trade Practices Act of 1974 that concerns the use of a misleading conduct to cause another to enter into a contract. The validity and enforceability of a contract are determined by its consideration of both party’s views, clarity of the maters agreed on, and the lack of undetermined factors. The rule indicates the process of entering the agreement is a vital part and the role played by the negotiating parties important in determining its validity
Carl’s contract fulfilled all the elements for validity, as it described the terms with clarity. However, Lisa’s claims could have been a significant factor that caused Carl to enter the contract. In ACCC v Gary Peer & Associates Pty Ltd., the Court sought to establish the reliance by Sundberg on Gary Peer & Associates Pty Ltd’s misleading conduct to enter into the contract. In this case, Lisa made claims about her product and indicated that it would cause Carl’s business to increase. There is a significant influence of Lisa’s words as Carl’s was facing difficulties in his business, and only considered Lisa’s detergent after she promised that it would help his business to rise. In the contract, Lisa’s claims were a significant factor in Carl’s decision meaning that the performance of the product is a vital part of the agreement.
Therefore, the promise constituted a valid contract in regards to the first issue of the case.
In regards to the second issue, it is evident that Carl decided to enter the contract based on the promise made by Lisa. Precisely, he did not know about the detergent or Lisa but he met her as she had come to introduce her product and convince him that it would cause his business to grow.
In regards to the third issue, Lisa is liable for the loss incurred by Carl as a result of entering the contract and the failure of the detergent to please his customers.
Lisa’s Refusal to end the Contract as she had Promises
The refusal of Lisa to end the contract upon Carl’s request raises some significant issues. In the negotiation process, she had promised to end it if Carl wished. The specific issues are;
- Did the promise by Lisa to end the contract if Carl requested it based on the performance of her product a significant matter in Carl’s decision to make the contract?
- Was Lisa’s promise a valid part of the contract?
The rule that is to be used for this case is the Trade Practices Act of 1974 that recognizes the impact of the negotiation process, including any promises, in making the contract. The validity and enforceability of a contract are determined by its consideration of both party’s views, clarity of the maters agreed on, and the lack of undetermined factors. Furthermore, any promises made during the process can have some effect on the validity of it.
Clearly, Carl, was convinced by Lisa to buy the product so as to improve his business. However, he was not tied to making a three year contract which Lisa had claimed to be her standard. Notably, he expressed the desire for a shorter term, but Lisa convinced him that she would consider reducing it at his request. The promise in this case does not constitute an influence over his decision to make the contract because he already had made the decision to enter it. His signing the 3 year period was based on his ignorance, and not on Lisa’s persuasion because the signing is a legal statement that he was willing to engage in the contract for the period. Therefore, Lisa is into obligated to reduce it at his request.
Carl should end the contract and stop making any payments to Lisa until it is reviewed and validated. Unfortunately, Carl is not entitled to compensation for the money that he has already spent in the invalid contract.
Lack of Date in the Lease Contract
The issue that should be determined in this case, is if the contract that did not have a date indicated by the applicant is valid. Furthermore, it is necessary to establish if it constituted negligence of Carl’s part. Finally it will be essential to determine if Carl deserves compensation for money spent in the contract before he discovered that it had no date.
The rule that applies to this case is Competition and Consumer Act of 2010 that concerns the impact of an applicant’s negligence and its implication on the person’s liabilities. Furthermore, the Trade Practices Act of 1974 that recognizes the impact of the negotiation process will be useful in the case.
The contract to for the lease of Lisa’s equipment for cleaning cars was made hurriedly and Carl signed it without considering the date. He only realized later that the contract had no date, and he asked Lisa for a review of the contract and include a date to which she ignored his request and continued to lease the equipment. In Argy v Blunts and Lane Cove Real Estate  FCA 51, Argy was found to have been negligent in protecting his own interests and his complaint that he was unfairly induced was not valid. Similarly, Carl’s action constituted negligence in accordance to the Competition and Consumer Act of 2010 because he signed it without considering the date. Precisely, he should have read through the entire document to ascertain its content and sign it after ensuring that he has indicated all the necessary terms including the date. The fact that he was conscious of his actions and he signed the document meant that he agreed with its content including the time. The validity of the contract further means that all payments that he had made in it was valid.
In this regard, the contract is deemed valid and he is obligated to abide by it. Because of his negligence, Carl is not entitled to any compensation for the money that he has spent.
Lack of Contract between Carl and Dom
Dom approached Carl with a suggestion to sell him the “Dominator” drone that could perform some car windscreen washing tasks remotely through the use of a mobile phone app. However, the price of the drone was too high for Carl, who was not willing to seek for a financier to purchase the equipment. Carl has not bothered to seek for a financier of his “Dominator” drone from Dom in spite of the latter’s insistence that he does so.
In this regard, the major issues in the case are:
- Does Dom’s suggestion to sell Carl the “Dominator” constitute a valid contract?
- Does the same suggestion constitute a letter of intent?
- Is Carl obligated to look for a financier to enable him to purchase the product?
The rule that applies to this case is the letter of intent (Loi), which is a formal agreement to settle an agreement at a later date ending some action.
Carl had not shown any indication that he wanted to buy Dom’s drone because of its price that was too high for him. Although he showed a liking for the product and regarded it as an essential tool to enhance his business, he was not willing to buy it without his own cash. Dom suggested that he seeks a financier for it, but his statement did not lead to a negotiation and an agreement.
Therefore, it was not a binding statement and did not constitute a letter of intent. Precisely, a letter of intent is made prior to a contract to express the intention to enter into one, but is not a binding document. The White v Bluett case of 1953 demonstrates a similar situation where Bluett’s son’s promise to stop complaining was not accepted as a consideration to absolve him from having to repay the loan. Precisely, the son had requested the court to absolve him of the requirement on the basis that he stops complaining of how his dada distributed his wealth. The court rule that the son had no right to complain as his father had the right to use his property and distribute it as he wills. Similarly, Carl had the right not to engage in the contract based on its non-binding nature.
The statement by Dom requesting Carl to look for a financier was not a letter of intent as it did not involve a negotiation. Therefore, it was not binding and Carl has no obligation to ente3r the contract to buy the product.
ACCC v Gary Peer & Associates Pty Ltd  FCA 404
Argy v Blunts and Lane Cove Real Estate  FCA 51
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Gibson, Andy, and Douglas Fraser, Nutshell (Thomson Reuters (Professional) Australia Pty Limited, 2011)
Musumeci v. Winadell Pty Ltd, 34 N.S.W.L.R. 723 (1994).
Sharma, N. K, Modern Business Law (Paradise Publishers, 2008)
Willmott, Lindy, Sharon Christensen and Des Butler, Contract Law 5E Ebook (OUPANZ, 2018)
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White v. Bluett, 2 C.L.R. 301, 23 LJEx 36 (1853).