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LAW111G Business Law

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LAW111G Business Law

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LAW111G Business Law

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Course Code: LAW111G
University: Vesalius College

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Country: Belgium

Question
1. Frank, wishing to sell his car, put a sign in its window and parked it on the street outside his house. The sign said:
Car for Sale — $2,000; Enquire at 3 Wood Street, Padstowing 0412 000 000

Bill walks by at 8:30 am and immediately calls Frank and offers him $1,600 for the car. Frank tells Bill he will think about it and let him know
Mark drove by around 9:00 am and took a picture of the car and sign so he could show it to his daughter. That afternoon he posted a cheque for $1,950 with a note saying he would pick up the car on Friday at 6:00
John was walking his dog at around 10:00 am and saw the car and the sign. Using his mobile phone, he searches for Frank’s contact details and then emails him: “I accept your offer of $2,000. I’ll bring cash Thursday evening and pick up the car”. John’s email was sent at 10:23
Meanwhile at work, Tom, a work colleague, offers Frank $1,700 for the car. Frank promises him he’ll accept it if he doesn’t get any better offers by the weekend.

On Thursday whilst Frank was working from home, he received the letter and cheque from Mark and went to the bank and deposited the cheque. He then emailed Tom to say that he got a better offer. While sending the email, Frank noticed John’s email and read it. He wants to sell the car to John as he was the only person who met his price.
With whom, if any, does Frank have an agreement? Explain your answer in relation to each party involved.                                                                         
2. Graphic Advertising Pty Ltd, a small advertising business, employed Renee, a single mother of two, on a three year contract as a photo retoucher at a salary of $900 per week. Renee’s work has improved the quality of the advertising materials sold to their clients, thus improving Graphic Advertising’s market share as well as improving their profits. Her contract will expire at the end of 2017.
In February 2017, Cool Adverts Ltd approached Renee offering her $1,100 per week to do their retouching work. Renee was very tempted to accept the offer because she had been struggling to cover her rent and childcare expenses on her current salary. However, she was concerned about leaving Graphic Advertising as she knew February to March was a very busy time. Being a loyal employee, Renee approached Julius, the CEO of Graphic Advertising and advised him of Cool’s offer. She was grateful to Julius for employing her.
Julius said: “I am disappointed but how can you take Cool Advert’s offer when you are under contract with us?”
Renee replied that she really needed the extra money they were promising.
Julius was concerned that if Renee left, they would be in a difficult position because for the next 3 weeks there were photo shoots scheduled to meet their client’s needs. After a few moments he said to her:
“You are a valued employee and we need your expertise for the next few months. If you stay with us, we will give you a salary increase of $150 per week so that your total salary will be $1,050 per week. We will also backdate this increase to 1 December and give this back pay to you in a lump sum.”
Whilst this did not match Cool Advert’s offer Renee was happy to stay and was delighted by the promise of the lump sum. Renee declined Cool Advert’s offer.
When Renee received her next pay, the promised increase and back pay were not included. Assuming there was an administrative delay in implementing her new salary package, Renee did not worry. However, when her next pay remained unchanged, she sought an explanation from Julius. He informed her that his comments had been “somewhat foolish and ill conceived in the heat of the moment” and they were under no obligation to pay either the increased amount or the back pay and did not intend to do so.
This refusal to honour its promise has meant that Renee continues to struggle on an inadequate salary. Unfortunately, Cool Adverts has declined to enter into further negotiations with her.
Advise Renee whether Graphic Advertising Pty Ltd is liable to pay her the promised increase in salary, and the back pay.

Answer:
1. Issue
The key issue is whether Frank entered into an agreement with any of the parties?
Rule
A contract forms a binding agreement between two or more parties which can be enforceable by the law. Certain elements must be fulfilled by the parties to form a contract. Following are different elements which must be present while forming a contract.

Offer

Firstly, an offer must be made which has the power to bind the offeror, person making the offer, to its terms as given in Harvey v Facey [1893] UKPC 1. It is important for parties to differentiate between an offer and an invitation to treat because a contract cannot be formed by accepting an invitation to treat. In Partridge v Crittenden [1968] 2 All ER 435 case, it was held that advertisements are also generally considered as invitations to treat (McKendrick, 2014). However, in Carlill v Carbolic Smoke Ball Co [1893] 1 QB 256 case, the court provided that the advertisement was a unilateral contract. The key feature of this contract is that it can be accepted by anyone who complies with its terms.

Acceptance

Another element of a contract is acceptance of the offeree; without a valid acceptance, a contract cannot be formed. The offeree must communicate the acceptance which is similar to the terms of the offer and it is certain. In Felthouse v Bindley [1862] EWHC CP J35 case, it was held that silence of a party does not generally amount to an acceptance.

Capacity

The parties to a contract must be the capacity to bind each other in a legal relationship. It is necessary that parties are competent to enter into a contract. A minor, insolvent or unsound mind person is not competent to form a legal contract (Mason, 2016).

Intention of parties

While forming a contract, parties must have valid intention in order to enforce themselves by the terms and conditions of the contract. On the other hand, not every agreement is enforceable by the court, for example, social and domestic agreements are not legally enforceable because of lack of intention of parties (Jones v Padavatton [1969] 1 WLR 328).

Consideration

With a valid consideration, a contract cannot be formed. It is referred to the bargain of the contract. One party suffer a detriment, and another receives a benefit which is referred to the consideration. In Thomas v Thomas [1842] 2 QB 851 case, it was held that a consideration which did not have a value as per the law is not valid (Chen-Wishart, 2012).
Application
In this case, the sign put by Frank is not an offer; instead, it is an invitation to treat. Thus, parties cannot accept the invitation to treat of Frank, and they are required to make an offer to purchase Frank’s car.

In the first scenario, Bill calls Frank and offers him $1,600 for his car. An offer is made by Bill that is not yet accepted by Frank. No contract has formed between parties.
Mark made an offer to Frank that he would pick up his car on Friday and he also sent him a cheque for $1,950. Although, Frank deposited the cheque of Mark, however, a contract has not formed between the parties because Frank did not communicate his acceptance and he did not comply with the agreement’s conditions. Mark can file a suit against Frank to recover his money; however, they did not enter into a contract.
John told Frank that he accepted his offer; however, Frank is not bound because the sign was an invitation to treat. However, Frank has not entered into a contract with any other party; thus, he has the right to sell his car to John for $2,000 by accepting his offer.
Tom offered to pay $1,700 for Frank’s car, and Frank told him that he would sell his car if he does not receive a better offer by weekend. It is a social agreement which cannot be enforceable by the law. Furthermore, Frank also rejected the offer from Tom by email because he got a better offer.

Conclusion
In conclusion, Frank did not enter into a contract with any of the parties. The sign put up by him is an invitation to offer which cannot be accepted by parties. Thus, Frank has the right to accept the offer of any party. He did not enter into a contract with Bill, and his agreement with Tom was social which is not enforceable. Furthermore, Frank has not provided his acceptance by depositing Mark’s cheque; thus, he is free to accept the offer of John.
2. Issue
The key issue is whether Graphic Advertising Pty Ltd can be held liable by Renee to pay her promised increase and the back pay?
Rule
Promissory estoppel is referred to an equitable doctrine. The importance of this doctrine was given in Crabb v Arun DC [1976] 1 Ch 1790 case, in which the court provided that this remedy stops a person from insisting on his strict legal right in case where it is inequitable for him to do so. In simple words, this doctrine can stop a person in some instances from going back on a promise which is not supported by consideration (Gan, 2013). This principle was developed by Denning J in the obiter statement of Central London Property Trust Ltd v High Trees Ltd [1947] KB 130. In order to rely on the doctrine of promissory estoppel, certain requirements are necessary to be fulfilled by the parties.

Pre-existing contract must be modified

Firstly, a pre-existing contract must exist between parties and its terms must be changed. The Combe v Combe [1951] 2 KB 215 case is relevant in this contract. In this case, a promised was made by husband to his wife regarding maintenance payment, but, he did not fulfil his promise. The wife filed a suited against the husband that was rejected by the court by providing that no pre-existing agreement exists between the parties which were later modified by a promise (Rankin, 2011).

Clear and unambiguous promise

Another key requirement is that the promise made by the party must be clear and unambiguous. The promise can either be expressed or implied.

Change of position

It is necessary that the promise made by the party must change their position in the contract. In the case of Alan v El Nasr [1972] 2 WLR 800, Lord Denning provided that while determining the doctrine of promissory estoppel, the concept of detrimental reliance is not relevant. The only key factor which is necessary is that the contracting position is changed by the promisor.

Inequitable to go back to the promise

Finally, it is necessary that it must be inequitable for the court to all the promisor to go back to his/her promise. In D & C Builders v Rees [1966] 2 WLR 28 case, it was held by the court that the promise must cause detriment to the promisee (Young, 2016).
Application
In the present scenario, Renee can rely on the doctrine of promissory estoppel in order to held Graphic Advertising Pty Ltd liable to pay her increase salary along with the back pay. Firstly, it is necessary to ensure that all the necessary elements of promissory estoppel are fulfilled in this case. Renee is the employee of Graphic Advertising Pty Ltd, thus, a pre-existing contract exists between the parties which were modified by Julius by promising Renee that he will increase his salary (Combe v Combe). The promise made by Julius was clear and unambiguous, and he clearly provided that he will increase the salary of Renee by $150 and also backdate this increase by 1 December.
Due to this promise, the position of parties changed in the contract because Renee declined the offer of Cool Advert right after Julius promised to increase her salary (Alan v El Nasr). Finally, Renee was struggling to cover her rent and childcare expenses at her current salary. She got an offer from Cool Advert for $1,100 per week which would have covered her expenses; however, she declined such offer based on the promise of Julius. Thus, it is inequitable to let Julius go back to his promise because it will be unjust for Renee. Based on these elements, Renee can hold Julius liable to act on his promise and increase her salary. She can also claim the back pay in lump sum from Julius as per his promise.
Conclusion
In conclusion, Julius is liable to increase the salary of Renee based on the doctrine of promissory estoppel. All the elements of promissory estoppel are fulfilled in this case based on which Julius is liable to act on his promise. Furthermore, Renee can also claim back pay from Julius as per his promise.
References
Alan v El Nasr [1972] 2 WLR 800
Carlill v Carbolic Smoke Ball Co [1893] 1 QB 256
Central London Property Trust Ltd v High Trees Ltd [1947] KB 130
Chen-Wishart, M. (2012) Contract law. Oxford: Oxford University Press.
Combe v Combe [1951] 2 KB 215
Crabb v Arun DC [1976] 1 Ch 1790
D & C Builders v Rees [1966] 2 WLR 28
Felthouse v Bindley [1862] EWHC CP J35
Gan, O. (2013) Promissory Estoppel: A Call for a More Inclusive Contract Law. J. Gender Race & Just., 16, p.47.
Harvey v Facey [1893] UKPC 1
Jones v Padavatton [1969] 1 WLR 328
Mason, K. (2016) Mason and Carter’s restitution law in Australia. London: LexisNexis Butterworths.
McKendrick, E. (2014) Contract law: text, cases, and materials. Oxford: Oxford University Press.
Partridge v Crittenden [1968] 2 All ER 435
Rankin, W.D. (2011) Concerning an Expectancy Based Remedial Theory of Promissory Estoppel. U. Toronto Fac. L. Rev., 69, p.116.
Thomas v Thomas [1842] 2 QB 851
Young, P. (2016) Unconscionability and promissory estoppel. Australian Law Journal, 90(12), pp.878-888.

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