Richard is restoring an old jeep. It requires a special type of shock-absorber to enable it to travel over rough ground. Richard phones Shocks Are Us. He says to Emma, the manager: “I need four shock absorbers which can be used for off-road driving” Emma consults a brochure published by the shock absorber manufacturer and “Says the D200 shock absorber can be used for off-road driving.”. Richard then agrees to buy four D200 shock absorbers for $ 120 each. When he installs them on the jeep and takes it for a test drive over rough country, the shock absorbers give way and the jeep crashes down, causing $ 2 000 worth of damage to its body. It turns out that when Emma gave Richard the information over the phone, she had been looking at the wrong page of the brochure. Had she looked at the correct page, she would have seen that the D200 is not suitable for off-road driving.
Richard operates his business from a premises which he has leased from George for $ 5 000 per month since January 2016. The lease specifies that the rent is to be paid to George every six months and that it will increase every year by 10%. Richard pays George $ 30 000 in June 2016 and December 2016, but then tells George that he is having financial difficulties and needs every dollar he can to buy equipment. George says “OK, I will let you off paying the increase this year”. Richard is pleased with this, and uses the money he would have had to spend on the rent increase to buy new tools. In June 2017, Richard pays $ 30 000 to George, but George contacts him demanding an additional $ 3 000. When Richard refers to their earlier conversation, George says “Whatever I said, the lease you signed specifies that the rent will go up by 10% each year”.
Tom is a collector of vintage cars. He sees that Richard has a 1979 Mercedes 450SEL for sale on his website, priced at $ 20 000. Tom sends Richard an email saying “I offer to buy the 1979 Mercedes 450SEL for $ 18 500”. Richard sends an email back saying “Sorry, that is not enough, but I will sell it to you for $ 19 000”. Tom sends an email back saying “No, I can’t pay that”. Richard then sends an email saying “OK, I accept your original offer of $ 18 500”, but when he brings the car to Tom’s house, Tom refuses to accept it or to pay the money.
When Richard goes on holiday, Martin looks after his car lot. Martin doesn’t have a car. However, a friend of Martin’s is about to visit town and he wants to be able to drive her around. Martin goes to Richard and says “Can I hire one of your cars?” Richard says “The usual price is $ 50 per day, but because you looked after my car lot in August, you can hire it at no cost. You can pick it up on Monday”. Martin is very pleased and readily agrees, but when he comes to pick up the car, Richard says that he has hired it out to a customer. Martin says that Richard has breached their agreement.
Advise Richard of his legal position in relation to each of these four scenarios. You should assume that all facts given would be provable if the matters came to court. You should also assume that when any of the people mentioned conduct business, they do so as sole traders, not through corporations.
Whether, R can sue E for the damage so sustained by him;
Whether, R is bound by the lease agreement between him and G;
Whether, R can sue T for taking the car;
Whether, R breached the agreement as against M.
For the second issue, the law deals in examining the very intention of the parties in the language they used in communicating and in so doing the Court looks in to the very fact as to whether, the parties could be made bound by the terms they said or used while communicating.
For the third issue, the law is based on the issues arising out of offers, and the counter offers which cause the extinguishment of the original offer so made.
The fourth or the final issue, is determined in law, based on the gratuitous promise, which is without a consideration, and renders the consequence of nudum pactum, when the aggrieved party tries to enforce that.
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There are situations when the parties negotiating reach some agreement in good faith, and the Court considered this in (Masters v Cameron , 1954)and also in (Baulkham Hills Private Hospital Pty Ltd v GR Securities Pty Ltd, 1986) and held that, intention is important for agreeing on the terms, with no departure from it and that intention must be get bound immediately, then that would be considered to be binding on the parties. But, in the present case, the formal lease agreement was already sought, and the R seek to negotiate terms with G, which was though accepted but then was refused, so at this instance R cannot go behind the lease and must fulfill according to the terms agreed upon.
The display in the website of R is not an offer but an invitation to treat as was held and described in landmark decision of (Carlil v Carbolic Smoke Ball Company, 1892) and in (Pharmaceutical Society of Great Britain v Boots , 1953) and also in (Australian Woollen Mills Pty Ltd v Cth, 1954), so when T offered to purchase from R and was refused by R with a new amount, then the offer so made by T already had extinguished, and then again when R agreed to sell in the price as mentioned by T, then it becomes a new offer, and as T have not accepted that, then there was no contract between them, hence R cannot claim anything from T.
The fact that R promised to M for letting me ride and hire the car for free and then cannot keep is promise, since it was lent out to some customer, cannot be enforced by M, since there was no existence of valid consideration, is in the line the Court took in (Dickinson v Dodds, 1875) and in (Bristol Cardiff & Swansea Aerated Bread Co v Maggs , 1890), and was upheld in (Goldsbrough, Mort and Co Ltd v Quinn, 1910), so based on that as there was no contract between M and R, so no question of enforcing it comes in question.
Baulkham Hills Private Hospital Pty Ltd v GR Securities Pty Ltd, (1986) 40 NSWLR 622 (1986).
Bristol Cardiff & Swansea Aerated Bread Co v Maggs , (1890) LR 44 Ch D 616 at 625 (1890).
Carlil v Carbolic Smoke Ball Company,  1 QB 256 (England and Wales Court of Appeal (Civil Division) Decisions December 6, 1892).
Derry v Peak , (1889) 12 App Cas 337 (House of Lords 1889).
Dickinson v Dodds, (1875-76) LR 2 Ch D 463 at 472 (1875).
Goldsbrough, Mort and Co Ltd v Quinn, (1910) 10 CLR 674 (HIGH COURT OF AUSTRALIA 1910).
Hedley Byrne & Co v Heller & Partners ,  AC 465 (UKHL 1964).
Masters v Cameron ,  HCA 72; 91 CLR 353; 40 NSWLR 622; 28 ALJR 438; 4 BPR 9315 (HCA 1954).
Mutual Life & Citizens’ Assurance Co Ltd v Evatt , (1968) 122 CLR 556 (HCA 1968).
Pharmaceutical Society of Great Britain v Boots ,  1 QB 401 (Court of Appeal 1953).
San Sebastian Pty Ltd v Minister Administering the Environmental Planning and Assessment Act 1979 (NSW) , (1988) 162 CLR 340 (HCA 1988).