Assessment 3

Problem Solving and Case Note Question

1. Course Code: LAW2447

2. Name: Ly Anh Tuan
3. Student number: s3818425
4. Group: HN-Tuesday
5. Lecturer: Hoe Loh Ing
6. Words: 1913 (excluding title, footnote)
Contents
1. Problem Solving Question...................................................................................................................3
A. Ellis vs. Home Depot.......................................................................................................................3
B. Ellis vs. Bailey Engineering Pty Ltd................................................................................................3
C. Ellis v Bailey Engineering Pty Ltd..................................................................................................6
2. Case note question...............................................................................................................................8
 1. Problem Solving Question

A. Ellis vs. Home Depot

1. Issue:

Whether Ellis can sue Home Depot for a breach of contract because of breaking the promise?

2. Rules

A contract is formed by satisfying three factors: agreement, consideration, and intention to be

bound. An agreement includes an offer and an acceptance under the case of Smith v Hughes1. An
offer can be revoked by the offeror anytime before acceptance (Dickinson v Dodds)2 , and it
must be communicated to the offeree (Dickinson v Dodds). Acceptance is a willingness to enter
immediately into a legally enforceable contract with the offeror on the terms offered (Crown v
Clarke).3 It must be identical to the offer (Hyde v Wrench).4

3. Application

Home Depot (offeror) offered to sell the machine to Ellis (offeree). Ellis asked for two days to
consider, and the offeror promised to keep it for him. The defendant revoked the offer before the
deadline, but it was still effective because the offeror did not discuss the offeree (Dickinson v
Dodds). The offeree was unwilling to enter the contract because he was unsure about buying the
generator, meaning it was not an acceptance (Crown v Clarke). It was different from the offer
(Hyde v Wrench), leading to no acceptance and no contract.

4. Conclusion

In conclusion, Ellis could not sue Home Depot for violating the contract because of no contract
between them.

B. Ellis vs. Bailey Engineering Pty Ltd

1. Issue

1
Smith v Hughes [1871] LR 6 QB 597
2
Dickinson v Dodds (1876) 2 Ch D 463
3
Crown v Clarke (1927) 40 CLR 227
4
Hyde v Wrench (1840) 49 ER 132.
Whether Ellis can sue Bailey Engineering Pty Ltd for breaching a contact because of not
installing requested batteries?

Whether Ellis can sue the company for breaching collateral contract because of not providing
bulbs?

2. Rules

+Incorporating Verbal statement: A verbal statement might be incorporated into a written

contract to be a term if:
 It is a promise or guarantee (Chandelor v Lopus -1603).5
 It is independently verifiable (Handbury v Nolan -1977).6
 Reasonable notice of the outside statement was given to the other party (Causer v
Browne [1952] VLR 1) and before forming contract (Thornton v Shoe Lane Parking-
1971; Olley v Marlborough Court Hotel -1949).7

+ Parol Evidence Rule: If the outside evidence is crucial to the agreement, the court may
conclude that it is a term of the contract (Van den Esschert v Chappell).8

+Collateral contract: A collateral contract is formed when one party promises; hence the other
party enters the main contract (De Lasalle v Guildford).9

+Condition or Warranty: "Essentiality test" is applied to know the defendant's breach condition
or warranty.
 If he/she would not enter the contract - it is a condition.
 If he/she would still enter the contract - it is a warranty (Tramways Advertising v Luna
Park).10

5
Chandelor v Lopus (1603) Cro.Jac 4
6
Handbury v Nolan (1977) 13 ALR 339
7
Thornton v Shoe Lane Parking (1971) 2 WLR 585; Olley v Marlborough Court Hotel [1949] 1 KB 532 Ltd
8
Van den Esschert v Chappell [1960].
9
De Lasalle v Guildford [1901] 2 KB 215
10
Tramways Advertising v Luna Park (1938) 61 CLR 286
+Rescission: The contract can be terminated if the term breached is a condition (Poussard v
Spiers and Pond).11

+Disclaimer: A disclaimer is effective if these two conditions are satisfied:

 The disclaimer is part of the contract (L'Estrange v F Graucob Ltd).12

 The breach falls within the scope of the disclaimer

+Damage: Monetary compensation is available for a breach of a collateral contract or a breach of

a term (Koufos v. Czarnikow; The Heron).13
3. Application
+ Incorporating Verbal statement: Bailey guaranteed batteries originated in Germany (Chandelor
v Lopus), and his statement is independently verifiable (Handbury v Nolan). The information
was given to Bailey (Causer v Browne) two days prior to signing the contract (Thornton v Shoe
Lane Parking; Olley v Marlborough Court Hotel).

+Parol Evidence Rule: The oral statements were vital to Ellis because he emphasized: "must be."
Consequently, exception one satisfied PER, incorporating the statements as an express term (Van
den Esschert v Chappell). The term was broken when installed the Chinese batteries.

+Condition or Warranty: Applied "Essentiality test," Ellis would not have signed the contract if
he knew that the company would not install the Germany batteries (Tramways Advertising v
Luna Park). Therefore, making it a condition.

+Collateral contract: Ellis would have received ten bulbs if he purchased the machine, which
made those as a secondary contract, contributing to get the plaintiff entering the contract (De
Lasalle v Guildford). The promise was broken because of no Phillip bulbs,

11
Poussard v Spiers and Pond [1876] 1 QBD 410
12
L’Estrange v F Graucob Ltd
13
Koufos v. Czarnikow; The Heron II [1969] 1 AC 530
+ Rescission: Ellis could terminate the contract because his condition was not implemented
(Poussard v Spiers and Pond)

+ Disclaimer: The statement about not responsible for any function and damage made by Borsch
Germany batteries is the disclaimer. It was ineffective because the exploded Chinese batteries
caused the damage, so it did not fall within the scope of the disclaimer.

+Damage: If Bailey Engineering did the term, the plaintiff would not have used $30,000 for
repairing (Koufos v. Czarnikow; The Heron). Secondly, if the company would have performed
the collateral contract, the plaintiff would have saved lots of energy (Koufos v. Czarnikow; The
Heron).
4. Conclusion
Ellis can sue the Bailey company for breaching a term in the contract and breaching a collateral
contract. He can terminate the contract, receive $30,000, and money equal to the costs of the
energy-saving.

C. Ellis v Bailey Engineering Pty Ltd

1. Issue

Whether Ellis can sue Bailey Engineering Pty Ltd under Australian Consumer Law?

2. Rules

+ Consumer: A person is a consumer if he/she acquires goods or services for $40,000 or less.14

+ General protection: Consumer is protected against

 Misleading or deceptive conduct.15: If an ordinary reasonable person would be led into

error or caused to believe in what is false, the conduct is misleading or deceptive.16
 Unconscionable conduct.17 : One party has a special weakness or disadvantage, and the
other party is aware, or should be aware, of that and takes unfair advantage.

14
ACL s3
15
ACL s18
16
Taco Company of Australia Inc. v Taco Bell Pty Ltd (1982)
17
ACL s20 and s21
+ Guarantees for consumer goods:

 Goods must be of acceptable quality.18

 Goods must be fit for any disclosed purpose.19

 Goods must match the description.20

+ Guarantees for Consumer Services Contracts

 the services will be carried out with due care and skill.21
+Contravention of General Protections:
 Award damages.22
 Terminate the contract.23
+ Contravention of Consumer Guarantees
 If the failure is a major failure, the consumer may immediately reject the goods, require a
refund, and/or sue the supplier to recover any reasonable loss.24

3. Application
+Consumer: 'consumer' was Mr. Ellis because he purchased a $19,800 hybrid power system 25 ,
so the ACL can protect him.

+General protection: Applied the Taco test, the statement about installing Germany batteries was
deceptive because the defendant lied to induce the plaintiff in purchasing the system. 26 Therefore,
breaching section 18. Secondly, the business had unconscionable conduct since they were
experts at engineering, while the plaintiff was a farmer's first-time buying system. Consequently,
they may know about his background and expected him not to find out about the wrong
installation. Thus, it violated section 20.

18
ACL s54
19
ACL s55
20
ACL s56
21
ACL S60
22
ACL s236(1)
23
ACL s237
24
ACL s259(3), s259(4)
25
Ibid [14]
26
Ibid [16]
+ Guarantees for consumer goods: The batteries' quality was not acceptable because it exploded,
damaging the plaintiff's roof.27 He expressed the demand for Germany batteries, and the
defendant guaranteed. However, the received batteries were not like his purpose 28 and the
defendant's description.29 It violated section 54,55, 56.

+ Guarantees for Consumer Services Contracts: After installation, the system worked for a few
hours before shutting down by itself, and it did not produce any power while running, violating
s60.30

+Contravention of General Protections: The plaintiff may terminate the contract31 and get
$30,000 as a damage for the roof.32

+Contravention of Consumer Guarantees: If the plaintiff knew about the defendant's intention, he
would not buy the system, leading to a major failure. Hence, he can require a refund, which was
$11,900 his deposit.33

4. Conclusion

Ellis could sue The Bailey because of breaching the general protection and consumer guarantee.
He can terminate the contract and get damages.

2. Case note question

1. Introduction

The case Ross Hereford v Automobile Direct Wholesale Pty Ltd was judged by G.J. Sarginson,
General Member on 10 April 2015. Three sectors will be analyzed: legal issues, analysis of the
judge's application, and a conclusion.

27
Ibid [18]
28
Ibid [19]
29
Ibid [20]
30
Ibid [21]
31
Ibid [22]
32
Ibid [23]
33
Ibid [25]
 2. Issues

The applicant is Ross Hereford, and the respondent is Automobile Direct Wholesale Pty Ltd. The
plaintiff purchased an old model Honda Legend from the defendant on 5 September 2014 for
$15,500.00. The internet advertisement for the car said its condition was excellent for its age and
kilometers. Still, when driving back to his house, he found a faulty timing belt tensioner and a
water leak from the cylinder heads. He stated the motor had a "major fault." Moreover, he lost
faith in the respondent because the respondent disagreed about the warranties and not meeting
the inspector. Therefore, he wanted to return the car and receive a full refund.

The legal issue s is whether he could sue the company for a breach of general protection because
the advisement of the car was not correct? Whether Ross could sue Automobile Pty Ltd for a
breach of Consumer Guarantees because providing unacceptable vehicle? Whether the applicant
can get a refund because of the "major failure" in good?

3. Application

According to Campbell v Backoffice Investment Pty Ltd34, Poulet Frais Pty Ltd v The Silver Fox
Company Pty Ltd35, misleading or deceptive conduct is the advertisement that must make the
other party rely on the conduct. In this case, Ross independently made a pre-purchase inspection
created by a mechanic. Hence, the online advertisement could not be misleading or deceptive
conduct because instead of relying on it, he used his inspection report stating the car's condition
was good before purchase. I agree with the judge that under ACL section 18 36, there is not a
breach of general protection because the advertisement did not mislead or deceive him into
purchasing this car.

Under ACL section 337, Ross was a consumer because he purchased a vehicle, an old $15,500.00
Honda Legend car. Hence, he could be protected by ACL.

34
Campell v Backoffice Investments Pty Ltd (2009) 238 CLR 304 at [26]
35
Poulet Frais Pty Ltd v The silver Fox Company Pty Ltd (2005) 220 ALR 211 at [77]
36
Ibid [15]
37
Ibid [14]
Section 54 was implemented to determine whether the respondent did not satisfy the acceptable
quality of the good.38 Goods were not of acceptable quality if the purchaser takes the goods
examines before buying, and the examination showed they were not acceptable (section 54(7)).
The applicant had obtained an examination, and it revealed that the overall condition of the
engine was good and the condition of the cooling system. It also stated there was no water leak at
the time of inspecting. Therefore, a breach of Consumer Guarantees was not verified because the
car's condition was acceptable when sold.

Under section 260 of the ACL39, "major failure" happens when a reasonable consumer who is
fully aware of the nature and extent of the failure would not acquire the goods. The failure in the
scenario is the vehicle's condition, which had an internal water leak from the cylinder heads.
However, Mr. Lang's report only demonstrated the water leak and the fee for repairing, meaning
the applicant did not know the reason for its leak because Mr. Lang did not explain and what
damage it can cause to the motor. The extent of the damage could not be determined if cylinder
heads were not removed. According to Section 262(1) (c)40 of the ACL, the applicant was not
allowed to reject the goods because before purchasing, the car's condition was good.
Consequently, the possibilities are the leak caused by the trip rather than because of an inherent
defect. Therefore, I agreed with the judge the car did not have a "major failure."
Lastly, I agree with the judge that the respondent did not breach the remedy under Section 259. 41
First, they discussed fixing the vehicle. Later, he demanded an extended guarantee, and the
respondent showed a disagreement. The condition of the car was not a major failure, so he could
not ask for an immediate refund and return the car. By contrast, it was a minor failure, so the
supplier was only capable of remedying the vehicle and not extending the warranties. Hence, the
respondent refusing the applicant's demand did not breach the remedy.
4. Conclusion
The case was precisely judged by G. J Sarginson General Member.

38
Ibid [18]
39
ACL s260
40
ACL s262(1) ©
41
Ibid [24]