Quang Anh

S3926813
Business Law
Ms. Estela

Assessment 3: Individual Written Assignment

Problem Solving Question: Ellis (plaintiff) -v- Bailey (defendant)

* 1238 words (excluding citations) *

A. Contract Law/ Common Law

Written Contract:
There is a written contract between two parties as Mr. Ellis hired Bailey Engineering to
install a hybrid power system on his property.

Key Legal Issue:

The key legal issue is whether Mr. Bailey had breached any terms from the contract with
Mr. Ellis. It was understood that Mr. Ellis had signed the contract without being aware of the
clause in the agreement. The clause stated that: “The batteries supplied are manufactured by
Bosch Germany. Hence, Bailey Engineering Pty Ltd will not be responsible for their functioning
and/or damages caused by them.” However, in order to cut fees, Bailey Engineering decided to
use batteries manufactured by Amperex in China. This comes to show that Mr. Bailey had
indeed breached the contract as the batteries weren’t from Bosch Germany as promised.

First Subordinate Legal Issue:

The first subordinate legal issue is whether there was a breach of incorporated terms.
Statements from outside can still be incorporated into the contract as express terms. Mr. Bailey
had verbally ensured Mr. Ellis that the batteries used for the hybrid power system will be made
in Germany and can charge up to at least 220voltage. This can be seen as a promise1 made by
Bailey Engineering. However, the product Mr. Ellis received wasn’t the same as the product
promised; hence Mr. Bailey had also breached the incorporated term.
Second Subordinate Legal Issue:
For the second subordinate legal issue, we must establish whether the term is a
condition2 or a warranty3. Mr. Ellis expressed that the batteries used must be made in Germany
and can maintain at least 220voltage. If the batteries don’t match the requirements, then Mr. Ellis
wouldn’t enter the contract; meaning the term is a condition. This gives the plaintiff (Mr. Ellis)
full rights to terminate the contract and claim damages for any loss.

Third Subordinate Legal Issue:

The third and final subordinate legal issue is whether the Parole Evidence Rule4 (PEV)
is applied and if there are exceptions to the actual written contract itself. For this rule to work,
any incorporated terms wouldn’t count as only the written terms in the contract itself count as
conditions. However, the written clause states that the batteries are made by Bosch Germany.
This isn’t true as Mr. Bailey used batteries produced by Amperex China, hence showing that he
breached a crucial condition in the contract; giving Mr. Ellis full rights to terminate with or
without the PEV.

Misrepresentation:
The key legal issue is whether Mr. Ellis can sue Mr. Bailey for contract
misrepresentation. Since Mr. Bailey made false statements5 about the origin of the batteries, it
clearly demonstrates an example of misrepresentation towards the client (Mr. Ellis), giving him
full rights to sue Mr. Bailey.

Disclaimer:
The key legal issue is whether the disclaimer statement made by Mr. Bailey was
effective. Since the email of advice on maintaining the hybrid power system sent out to Mr. Ellis
can be seen as contractual document6; Mr. Bailey made sure to include his disclaimer by
stating that “the batteries are produced Bosch Germany, meaning Bailey Engineering isn’t
responsible for their function and/or damages”. However, the actual batteries installed in the
power system was produced by Amperex China, rendering the disclaimer ineffective. Despite not
reading the disclaimer, Mr. Ellis can still terminate the contract due to the ineffectiveness of the
disclaimer.

Collateral Contract:
The key legal issue is whether Mr. Ellis had breached the collateral contract after he
refused to pay Mr. Bailey the extra $5,000. A collateral contract was formed when Mr. Ellis
agreed to pay an extra fee of $5,000 for Mr. Bailey to fix the batteries that exploded the power
system. Mr. Bailey followed through the agreement by fixing the batteries. However, they
overheated and exploded again 5 days later which destroyed Mr. Ellis’s roof, costing him
$30,000 in repair fees. This was because the new batteries that were installed could only charge
up to 210voltage as suppose to the 220voltage promised. Due to this, Mr. Ellis isn’t liable to pay
the extra $5,000 as his hybrid power system wasn’t properly fixed.

1 Chandelor v Lopus (1603) Cro.

Jac 4
2 Handbury v Nolan (1977) 13 ALR
339
3 Tramways Advertising v Luna
Park (1938) 61 CLR 286
4 Poussard v Spiers and Pond [1876]
1 QBD 410
1 Chandelor v Lopus (1603) Cro.
Jac 4
2 Handbury v Nolan (1977) 13 ALR
339
3 Tramways Advertising v Luna
Park (1938) 61 CLR 286
4 Poussard v Spiers and Pond [1876]
1 QBD 410
1 Chandelor v Lopus (1603) Cro.
Jac 4
2 Handbury v Nolan (1977) 13 ALR
339
3 Tramways Advertising v Luna
Park (1938) 61 CLR 286
4 Poussard v Spiers and Pond [1876]
1 QBD 410
1 Chandelor v Lopus (1603) Cro.
Jac 4
2 Handbury v Nolan (1977) 13 ALR
339
3 Tramways Advertising v Luna
Park (1938) 61 CLR 286
4 Poussard v Spiers and Pond [1876]
1 QBD 410
1 Chandelor v Lopus (1603) Cro.
Jac 4
2 Handbury v Nolan (1977) 13 ALR
339
3 Tramways Advertising v Luna
Park (1938) 61 CLR 286
4 Poussard v Spiers and Pond [1876]
1 QBD 410
1 Chandelor v Lopus (1603) Cro.
Jac 4
2 Handbury v Nolan (1977) 13 ALR
339
3 Tramways Advertising v Luna
Park (1938) 61 CLR 286
4 Poussard v Spiers and Pond [1876]
1 QBD 410
1 Chandelor v Lopus (1603) Cro.
Jac 4
2 Handbury v Nolan (1977) 13 ALR
339
3 Tramways Advertising v Luna
Park (1938) 61 CLR 286
4 Poussard v Spiers and Pond [1876]
1 QBD 410
1 Chandelor v Lopus (1603) Cro.
Jac 4
2 Handbury v Nolan (1977) 13 ALR
339
3 Tramways Advertising v Luna
Park (1938) 61 CLR 286
4 Poussard v Spiers and Pond [1876]
1 QBD 410
1 Chandelor -v- Lopus (1603) Cro. Jac 4
2 Handbury -v- Nolan (1977) 13 ALR 339
3 Tramways Advertising -v- Luna Park (1938) 61 CLR 286
4 Poussard -v- Spiers and Pond (1876) 1 QBD 410
5 De Lasalle -v- Guildford (1901) 2 KB 215
6 Van Den Esschart -v- Chappell (1960) 2 WLR 581

B. Australian Consumer Law (ACL)

Mr. Ellis is a consumer under section 37 of the ACL who was misled by Mr. Bailey
whom breached section 518 of the ACL.

General Protections

Misleading Conduct:
Mr. Bailey breached section 189 of the ACL as his company conducted a misleading act
in selling Mr. Ellis wrong batteries for his hybrid power system. The defendant made a false
promise in order to satisfy the plaintiff’s demand with batteries’ manufacture and function
deception.

Unconscionable Conduct:
Mr. Bailey breached section 2010 of the ACL as he was aware that Mr. Ellis would have
no way of knowing whether the batteries he received were from the right manufactures or not.
Bailey Engineering had used this opportunity to cut the fees and replace with cheap batteries
from Amperex China.
Remedies: Mr. Ellis can terminate the contract as Mr. Bailey had breached section 20 of the
ACL.
Unfair terms:
According to section 2411 of the ACL, if a term causes significant imbalance in the
parties’ rights and obligations then it would be seen as unfair. However, there weren’t any terms
in the contract that was in this nature therefore no one breached section 24.

Consumer Guarantees

Carried out with Due Care and Skill:

Mr. Bailey failed to carry out with due care and skill as the hybrid power system he
installed on Mr. Ellis’ property exploded; causing $30,000 worth of repair fees.

Fitness for Disclosed Purpose:

Mr. Ellis’ demands weren’t met by Mr. Bailey as the hybrid power system didn’t function
properly. Hence the product provided by Bailey Engineering did not meet the disclosed purpose
of the consumer.

Reasonable Time for Supply:

The hybrid power system was delivered on time as 1 day after Mr. Ellis signed the
purchase form, the system was installed by Mr. Bailey (Oct 23rd, 2012).

7 Australian Consumer Law section 3

8 Australian Consumer Law section 51
9 Australian Consumer Law section 18
10 Australian Consumer Law section 20
11 Australian Consumer Law section 24
 C. Conclusion

Mr. Bailey had breached the contract via misrepresentation, incorporated term and
condition & warranty. The disclaimers set out by Bailey and PEV couldn’t defend him as he had
breached the clause written in the contract by not delivering the correct batteries as promised.
This gives Mr. Ellis rights to sue for damages via ACL and terminate his contract via Contract
Law.

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