Business Law assessment one – study period 1 2020
Problem question – worth 20 marks
Abigail Anderson is a registered travel agent who owns and operates a small Perth-based business called ‘VC Discovery Tours’ (VC). VC specializes in 14-day ‘all-inclusive’ package tours to Vietnam and Cambodia. The advertised highlights of this tour include visits to ancient temples in Cambodia, a food and music festival in Hanoi, and a three-day Mekong river cruise. Most VC’s customers are below 35 years of age and live in either Australia or New Zealand.
When customers book and pay for the tour, the advertised highlights are included in the itinerary VC prepares for (and emails too) each traveler. All of VCs contracts with travelers contain clauses that remind the travelers to take out travel insurance and to organize their visas and recommended/required vaccinations if any.
Nick is a resident of New Zealand. He is worried about entering into a contract with an Australian travel agent but decided to book VC’s 14-day tour online, as it was the best deal available. Based on the common law rules relating to the formation of a contract, please discuss whether the law of Australia or the law of New Zealand would be the relevant law, should a dispute arise between CV and Nick.
Part A
Area of Law
The area of law relevant to this question is the conflict of laws.
Principles of Law
The area of law responsible for most dealings between parties involving individual entities popularly referred to as Private International Law. Treaties, domestic common law, domestic legislation, and customs govern the laws that aid in regulating big business entities. Therefore any conflict of laws is said to have occurred on an international perspective as countries are sovereign and thus have the freedom to make and also modify their domestic laws. Thus, the laws of states may be different from one country to another. Two subjects are used to determine the resolution of the conflict of laws.
First and foremost, it is essential to note which court has the authority to listen and also determine the matter. Considering a domestic level, the applicant will complain and seek remedy from the court that has the jurisdiction to resolve the case at hand. On the other hand, if the defendant does not find this course of action suitable, the court will require ascertaining if it has the power to listen and make a decision on the matter. And, this mainly requires a link involving the court’s geographical control and the issue under the row. Also, if the domestic court has decided that it has an appropriate medium, it needs to consider which national law is most suitable for the settlement of the dispute.
If both parties to the contract did not expect a dispute and it arises, it is crucial, short of conformity between both parties at that time, for the appropriate law to be settled on by a court, before resolution may be attained. Courts mostly employ one of the tests below:
1 The place where the contract was formed (the nation where the recipient party accepted the giving party’s offer. It means that the law which will be applicable will be of the nation where the bid was agreed to). If a court, by any chance, adopts this type of test, the appropriate law will be that of the nation where both parties agreed to the terms. It is mainly the most common application.
- However, in the cases that both parties can fulfill all their contractual obligations. And the creation and also performance of agreement happen to take place in different countries; the nearest relationship, according to the contract, is the nation in which the dispute is being resolved.
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Mercury Bell v Amosin (1986) 27 DLR (4th) 641
Facts: The Mercury Bell was a consignment ship which was registered in the country of Liberia. However, the crew members were all citizens from the Philippines. While in the port in Canada, they got themselves into an industrial disagreement with the people they were working for. The Canadian Federal Court was tasked with determining if it could listen to the case and also it would apply the law of which nation.
Decision: The court came into the conclusion that it was appropriate, and its law should apply. The Canadian court, therefore, had the jurisdiction as the dispute involved wage disputes, which had happened while the employees were in Canada, and the issue had to be resolved using the Canadian industrial law. Thus the decision, at the same time as based on principles of law, gives the result to commercial viability.
- In the case of property, its location is mainly considered, such as buildings, fixtures, and land. Transfer of all these cases of features is to be governed using the laws of the nation where they are found.
- Considering the intentions of both parties i.e., the courts must consider the purpose of the parties who decided to be restricted by the law of a specific nation.
- The judgment of the court. The court will sustain a choice of law according to parties involved in the contract. On the contrary, if the option is likely to result in an unjust decision or injustice, the court will resolve with a proper selection of law.
Once a court has made a resolve on which nation’s law shall oversee a specific dispute, it will then need to prioritize the various sources of law that
may apply, according to the relevant domestic regime.
The Australian hierarchy of laws, in descending arrangement, is set out beneath. Please note, however, that the main treaty studied in this unit, the Vienna Sales Convention, purposely provides that the amalgamation of custom can override several of its terms into a contract (e.g., adoption of an Incoterm, covered in topic 4). In the same way, an express clause in a contract may, for example, modify a general rule at common law. In practice, this means that specific terms of an agreement may be out of action if the parties to the contract have made substitute binding arrangements.
Application
According to this case, the laws of Australia will be most suitable in the event a dispute occurs. And this is mainly attributed to the fact that Australia serves as the area in which Abigail and also her travel company are based. Therefore it is evident that the court in Australia has jurisdiction over the case.
Conclusion
(…)
Part B
Fatima from Fremantle booked the January 2020 tour, but the Hanoi festival had to be canceled due to bad weather. Please discuss whether the itinerary highlights are terms of the contract between VC and the travelers, or whether they are mere representations. Also, consider if Fatima would be able to obtain a remedy to compensate her for the cancellation of the festival.
Area of Law
The area of law appropriate to this case is terms and non-contractual representations in a contract.
Principles of Law
A contract in law is a conformity involving private parties creating general obligations which are enforceable by law. There are essential elements that are required so that the agreement can be a legally binding contract such as mutual consent, which is expressed through a valid offer and also acceptance; legality; capacity; and adequate consideration.
Parties sometimes enter into valid contracts but still have disputes concerning sometimes the meaning or also terms which they have agreed to. Therefore it is essential to note that in most cases, not all the things that done or talked about are put in the contract. Thus necessitating a need to differentiate between:
Mere representations; and also
Terms of a contract
Mere representations are general alterations made to make the other enter into the contract but do not create any reliable obligations. Whether the term deployed is mere or not, it heavily depends on the intention of both parties. The test of purpose is always very objective. And this means that the court will have to determine if the reasonable person will have understood what the other party meant through creating an enforceable obligation, should a contract have been entered into.
However, courts look at a variety of parties before understanding the primary intention of both parties:
- Timing
A statement that happens at the beginning of the negotiation stages is mostly a mere representation. On the contrary, what happens towards the formation of the contract mainly becomes part of the agreement.
- Reduction into writing
If parties start engaging their agreements into writing, it is understood they have become increasingly severe, therefore incorporating their terms into a written document. Any additional terms that happen not to be in the written report are forfeited and hence do not become part of what is described as the contract. This is referred to as “parol evidence rule.” Though a party may wish to rely upon a term that may have been omitted in the document, a perfect example is through inadvertence may do so by giving evidence of their intention to be bound by the terms which are not contained in the written document.
- The significance of the declaration in the brains of the parties
If anyone of the parties wants assurances from the other with regards to the existence of specific facts, then the guarantee is given become the terms of the contract. But in the case when an individual fails to provide the accuracy of a particular statement or possibly gives a disclaimer, the proclamation becomes non-contractual.
Terms, on the other hand, are obligations that are very binding and also enforceable. Therefore the terms of a contract may be created using many ways such as through a court, the parties themselves, or implied by statutes.
In international dealing transactions, terms may find their way into an agreement by the express or also indirect intention of both parties or may be implied by law. There are categories of terms such as:
(a) Express Term
These are the terms that negotiated and also subsequently agreed to by both parties.
(b) Implied terms
Terms may be directed into an agreement by an Act of Parliament or even a treaty. For example, the Sale of Goods Act 1895 (WA), The Trade Practices Act 1974 (Cth) ( soon to be replaced by the Competition and Consumer Act 2010 (Cth) which imposes customer guarantees) and the Vienna Sales Conventionimpose several requirements on traders of products, including the obligation that the product must be of reasonable quality. A merchant who transports supplies that are not of merchantable value will be in breach of contract, even though the parties may not have also considered this.
(c) Terms expressly incorporated into the contract
3.4. Discharge of a Contract
A contract is discharged, meaning it comes to an end once their promises do not bound the parties. These circumstances include:
(c) Frustration
This mainly occurs when the circumstances that cannot be controlled by both parties who are into an agreement frustrate the contract making it impossible or different from the initial promise. And these events may include supervening illegality (the deal turns illegal, but during its formation it was legal), the subject matter of the contract being destroyed and futility. And this situation nullifies any future obligations the parties are required to perform.
It is, therefore, crucial to note that those circumstances that are unforeseen are not solemnly responsible for the frustration of a contract. Parties should include a force majeure clause in their commitment to protecting unexpected problems. The main aim of the clause is to ensure that the parties easily escape liability if they are not able to perform as per the contract in a situation that is specified in the clause.