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Issues involved
University of Sydney. They see a market for providing home-owners with household fittings, cushions and wallpapers etc. They locate premises in the northern suburbs of Sydney. After some careful research they conclude that they would need $ 100 000 to open a shop there. Agatha contributes $ 70 000 and Christie $ 30 000. They use the money to fit out the premises and to buy stock. They also open a bank account in the name of “A&C Designs’. The shop starts making sales, and profits are deposited into the A&C Designs Bank account. Nothing is written between Agatha and Christie, but they orally agree that Agatha can draw 70% and Christie 30% of the amounts deposited into the account.
Agatha and Christie start to argue about the market they should target. Agatha wanted to stock a range of expensive wallpaper, costing $ 60 per metre, but Christie disagreed. A few weeks later, when Christie was away at a trade fair in Adelaide, Agatha placed an order for 100 metres of this wallpaper. When Christie arrived back she was furious, and refused to pay the bill, contacting the supplier to say that she was returning the wallpaper. However the supplier has refused to take back the paper saying “A deal is a deal” and has said he will sue to obtain payment of the $ 6 000.
In addition, a customer suffered a broken ankle after tripping over a loose piece of carpeting in the shop which Christie knew about but had failed to attend to, and has said that he will be lodging a claim for $ 10 000 in damages.
The assets of the shop are worth only $ 50 000.
First let us determine the legal issues that are integral to this question; one of the issues that will have to be clarified in this case scenario is whether the verbal agreement entered between Agatha and Christie constitute a valid contract in the absence of a written contract. For all purposes and intent it would seem that Agatha and Christie did indeed enter into a form of contract willingly that was verbal and we shall see in a short while what the law has to say about this.
Secondly there is the issue of the cancelled contract between the supplier of the wall paper and the business establishment or Agatha whichever is the case and which is a distinction that we shall be making as we address this issue. Finally, there is the issue of negligence which we see to be the cause of one customer suffering bodily injury that results to a broken ankle after tripping on the carpet while at the shop. Now, let us address these issues one by one.
Application of law
According to Turner a contract is an agreement that outlines specific details of an issue between different parties regarding a certain matter which is usually a written document, although it can also be verbal and is enforceable in a court of law (2008, p. 23). So it doesn’t have to be specifically written down; this would mean that Agatha and Christie do indeed have a formal and legal contract that can be enforced in a court of law. In fact based on the principles of contract law, a contract can take two other forms besides agreement; that is based on promise or legal relationship (Benzvi, 2009).
So this legal principle also reaffirms to us that Agatha and Christie have a valid contract in place because their agreement is based on promise. In any case, the law does not necessarily require the details of a contract to be expressly stated since they can be implied as was the case in the historical ruling of Carlill v Carbolic Smoke Ball Company [1892] case where the court determined that all the elements of a contract existed despite the absence of a written contract (Turner, 2008, p. 126).
In fact, based on the specifics of the agreement between Agatha and Christie, there doesn’t appear to be any reason why this contract should not be valid. This is because for a contract to be considered valid it must contain five important elements: consideration, lawful subject matter, agreement, genuine consent and capacity to enter into contract (Turner, 2008, p. 15). However, the condition of intention to be bound is debatable especially when it comes to verbal contracts and so is consideration; this is because the law classifies agreements into two major categories, domestic contracts and commercial contracts (Gibson, Rigby and Tamsitt, 2005, p. 54).
For domestic contracts the law presumes that parties to an agreement had no intention of being legally bound and the courts are generally reluctant to enforce such agreements. But this is not the case for commercial contracts which it presumes the parties had intention to be bound. Because this is a form of a commercial contract we must assume therefore that the parties, Agatha and Christie originally intended to be bound. So now we have determined there is valid agreement that can be enforced in a court of law, so let us now address the second issue.
The second issue pertain the cancelled business deal of 100 units of wallpaper that Agatha had ordered as new stock for the business establishment. An important distinction that we need to make in this case is whether Agatha was making the order for herself or for the shop. Because we know it was for the shop then it means that the contract for supply of the wallpaper was between the supplier and the business establishment.
The implication is that neither can Agatha nor Christie cancel the delivery of the wallpaper at a whim without having to breach the contract that they had originally been entered with the supplier. And because Agatha is a direct owner of the establishment it will mean he had the capacity to effect such a transaction on behalf of the business establishment which means that the supplier can indeed sue and get awarded for the unpaid wallpaper.
But before awarding the supplier the amount of payment being claimed the court will first have to determine that the nature of the agreement between Agatha and supplier contains the five essential features of a valid contract that we have already mentioned; consideration, lawful subject matter, intention to be legally bound genuine consent and capacity to enter into contract (Gibson et al, 2005, p. 54).
Finally, let us address the third issue of a customer being injured in the business establishment. There are two fundamental issues at the centre of this issue; right of the shopper to be awarded damages and whether the principle of res ipsa loquitur should apply under these circumstances given that this situation has elements of negligence. These two issues are interrelated in that the principle of res ipsa loquitur will determine if indeed the shopper should be financially compensated by the owners of the cottage. In fact, breach of duty of care is an important element that must be established before any negligence claim can be instituted
The principle of res ipsa loquitur holds that negligence can be determined to have occurred in an accident through inference alone and without necessarily being directly linked to the cause of the accident (Lillywhite, 2011). In order to determine whether res ipsa loquitur is a factor to the accident, the court will rely on a set of four conditions that must be satisfied to have been present at the time of the accident.
One, that the accident wouldn’t have occurred without the element of negligence, two, that negligence is the probable cause, three, that an instrument controlled by the defendant resulted to the accident and finally that the plaintiff did not contribute at all to the accident (Lillywhite, 2011). Once an accident has satisfied the above conditions then res ipsa loquitur must be entered and the plaintiff should be awarded damages subject to two other factors; existence of suffering, and two suffering that is expressly as a result of the accident in question (Lillywhite, 2011).
Based on these legal principles and circumstances of the accident let us now determine if indeed res ipsa loquitur applies in this case. First, we can determine that there was an element of negligence by the owners of the establishment which was attributable to the accident in question because Christie was aware of the loose carpeting that had tripped the customer; we also know that this is the direct cause of the accident which means the second condition is certified.
Thirdly, we know that the owners of the establishment have the sole responsibility of maintaining a hazard free environment in their establishment in every aspect which also included the carpeting. Finally, there is no indication that the customer might have contributed in any way to that accident. This would therefore mean that there was an element of negligence in this situation and the court is obliged to award damages to the customer if and when a suit is instituted.
References
Benzvi, K. 2009. Contract Law 101 (Part IV): Breach of Contract and Remedies. Web.
Gibson, A., Rigby, S. and Tamsitt, G., (2005). Commercial Law: In Principle. 3rd edition, Sydney: Thomson Law Book Co.
Lillywhite, B. (2011). The Extent of Res Ipsa Loquitur. The Modern Law Review, 22(1): 82-83.
Rodzi, H. (2008). Nature of a Company. Web.
Turner, C. (2008). Australian Commercial Law, 27th edn. Victoria: Thomson Reuters.
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