Problem Based Exercise – Law

Published 15 Feb 2017

Table of content

Question One

Arthur had a right not to pay for Victor’s expenses amounting to $1000 as agreed since he did not honor his agreement of buying any Pro Hart landscape style painting at the auction sale. There was a contract between Arthur and Victor that stated that Arthur was to pay Victor’s expenses and a fee of $1000 if Victor succeeded in acquiring a Pro Hart Landscape Style painting. A contract is an agreement between two or more persons which is intended to create legally binding obligations. The word binding is used for there are some contracts which are valid and yet they are not enforceable. For this case, according to the contract, Arthur was to pay Victor’s expense of attending an auction sale and a fee of $1000 if he bought any Pro Hart landscape style painting.

Arthur was not entitled to pay Victor the agreed some of money since he did not buy any Pro Hart landscape style painting as agreed as he instead bought one of Pro’s Hart’s child. Victor breached the contract. A contract may be breached by discharge or failure of one of the parties to a contract to perform his obligation under the contract. Although every breach of contract provides remedies to the innocent party, this does not necessarily discharge the contract. Thus, if a party breaks a term of contract going to its root, known as a condition, the other party will be released from his obligations under the contract, known as warranty; the innocent party will therefore not be released from performance and can only claim damages. But for this case, Arthur will only be released from his obligation under the contract.

On the issue that Victor bought the painting believing to have been one of Pro Hart painting is under misrepresentation. The circumstance under which a contract, which is apparently complete and valid is vitiated are: mistake; misrepresentation; duress and undue influence. The presence of one of these factors in a contract renders the contract void or voidable. For example, a contract entered into due to a mistake of fact is void, while a contract effected by misrepresentation, duress or undue influence is voidable whereby it is set aside by one of the parties subject to certain conditions.

The preliminary negotiations before a formal offer is made include statements of two kinds: those which become part of the contract, and are known as the terms of the contract and those which do not become terms of the contract, but nevertheless play an important role in including the parties entering into a contract. Such terms are known as mere representation if the representation is untrue. Misrepresentation does not render the contract void, but the party misled will be able to avoid the contract by proving that misrepresentation was of fundamental fact, not of law. A representation of law is not actionable merely because it turns out to be misleading or wrong. Where A tells B that a contract of guarantee, which subsequently proves unenforceable, B cannot sue A for fraudulent misrepresentation, as misrepresentation of law is not actionable.

Misrepresentation occurs when a party to a contract is induced to contract with another by a misleading statement made by the second party. The false representation is not restricted to words, and may be made by the conduct of the parties. Misled person relies on his own judgment if the person on whom the fraud was practiced was not in actual fact deceived and acted on his own judgment, he has no legal ground to plead that he relied on the misrepresentation, even though he had been negligent. He can still get the contract set aside and claim damages. A relevant case studied is that of With vs. O’Flanagan of 1936. “In this case, With was induced to buy F’s medical practice on the representation that it was worth £2000 a year. The representation was made in January, but the contract was completed in May. In the meantime, due to F’s illness, his income from the practice was not more than £5 a week. It was held that the contract could have been avoided owing to F’s failure to disclose the substantial reduction in his practice.”

As for the Arthur, he should give back the painting to the auctioneers since they misrepresented the painting to be that of Pro Harts and it actually turned out to be of his children.

Question Two

In the case between Carlill vs. Carbolic Smoke Ball Co. of 1893, the company had advertised for a reward of £100 to anyone who was to contract influenza after using their smoke ball for a fortnight. Mrs. Carlill won the case since she bought the smoke and used them as prescribed and still contracted influenza. In this case, Carbolic Smoke Ball Company may argue that the advertisement was merely an advertising puff but not an offer. This was merely a way of advertising for their products and wanted just to induce people to buy their product by showing them that they were willing to pay that much in anyone contracted influenza after using their product. The reward in question was a very high amount and it was unreasonable for one to believe that he would be given such amount as advertised.

Question Three

On the case where Hedley sold his accountancy consultancy firm, there was a contract that was entered between Hedley and Dither. For this case, both parties were to honor their promise as per the contract failure to which the defaulting party can be sued for breach of contract. A contract which was intended to creating a legally binding obligation ought to be binding, failure to which, the contract will be enforceable by a court of law. When Hedley entered into an agreement with Dither during the sale of his business, there was an intention of creating a legal relation between them. For this case, they agreed that Hedley should not practice his accounting consultancy within a radius of 300 kilometers from Clare for a period of 4 years. Hedley breached this contract since he open a similar business in Gawler, approximately 70 kilometers from Clare. For this case, he ought to have open a similar office within that radius after 4 years had expired after the sale if his business. Dither should sue him for breach of contract and he will be entitled for remedies for breach of contract.

In such circumstance the court will rule on an injunction since Hedley should not start a business with a radius of 300 kilometers from Clare since he was to interfere with the business he had sold to Dither. A relevant case on injunction was that of Warner Brothers vs. Nelson of 1937. “In this case N, a film actress was contracted to work for the plaintiff for one year, agreeing not to work for anyone else during that period. She made a breach of contract and worked for a rival company. The court refused to force N to work for the plaintiff, but an injunction was granted to prevent her from working with someone else.” The court will not, however enforce contract by injunction if damages are a more suitable remedy since it can always award damages in lieu of an injunction. The best remedy available to Dither is an injunction so as to restrain Hedley from putting up a similar business with a radius of 300 kilometers as per the contract.


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