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1. SAMPLE QUESTION
Annie (‘A’) runs a courier service, A Pty Ltd. She reads in a newspaper that a local business, KwikCo, is looking for a courier service which they can use exclusively to deliver parcels and documents to their clients. The advertisement calls for expressions of interest, stating that “those parties wishing to be considered for the courier contract with KwikCo should submit an application in writing to be received in KwikCo’s office by
5pm on Friday, 25 April, 2008.”
On Monday, 21 April 2008, A sends a letter to KwikCo giving information about her company and its experience as a courier service. She states that the company would be prepared to take on the work for KwikCo for a fee of between $12,000 and $20,000 per month. She further states in the letter that, rather than working exclusively for KwikCo,
the company would prefer to also take on other small jobs on the understanding that KwikCo’s work would always receive priority. KwikCo receives this letter on Tuesday, 22 April 2008.
On Thursday, 24 April 2008 KwikCo sends A a letter stating: “Your offer to work as KwikCo’s exclusive courier is accepted subject to the conclusion of the enclosed contract. To avoid delay, please complete the contract and return it to us by express mail.” Due to delays at the post office, A receives this letter on Monday, 28 April 2008.
A signs the enclosed contract and faxes it through to KwikCo on the same day. However, due to a fault in A’s fax machine, this fax never reaches KwikCo. On Tuesday, 29 April 2008 A also mails the original document back to KwikCo.
Included in the terms of the contract are the following provisions:
“KwikCo agrees it will use only A Pty Ltd for its courier requirements. The agreed payment for these services is $11,500 per month excluding expenses.
A Pty Ltd undertakes to use all due care and consideration in carrying out its courier duties. However, it does not accept liability for loss or damage to any documents or goods given into its care for the purposes of delivery, regardless of how such loss or damage might be caused.”
A Pty Ltd starts working for KwikCo, which is very satisfied with A’s performance. A Pty Ltd also does small courier jobs for other clients although it always ensures that KwikCo’s work receives priority. One afternoon, the manager of KwikCo calls A Pty Ltd to ask if it could take him across the city to an important meeting he must attend. One of the drivers picks up the manager to take him to the meeting. As the car goes over the Anzac Bridge, a gust of wind blows through the open window and blows all the manager’s important documents out of the car and down into the water. As a result, the manager is unable to conclude a lucrative agreement with the other parties attending the meeting and KwikCo loses a significant financial advantage which it had been relying upon.
Can KwikCo sue A Pty Ltd under the law of contract? If so, what damages is KwikCo likely to claim?
Introduction
KwikCo (“K) is attempting to sue A Co. Ltd (“A”) for financial loss arising out of the accident outlined in the Question. K’s action will most likely rely on the terms of its contract with A.
In order to advise A it is necessary to examine the key facts, then consider what law applies to the facts and apply the law to the facts to determine if a contract exists. The next step will be to identify the terms of the contract and examine the terms of the contract against the facts of the case. As the question asks what damages can be claimed, your answer should also discuss the extent of any damage resulting from any
breach.
a) Is there a contract?
In order for K to sue A under the contract it must be determined if such a contract is legally enforceable. In order for oral or written contracts to be enforceable they must contain the following elements: offer, acceptance, consideration and an intention to be legally bound. Legal capacity, genuine consent and legality are also requisite elements of contract but do not appear to be a relevant issue here.
While it is possible for offers to be “made to the world” 1 , K’s advertisement is an “invitation to treat” 2 . It cannot be construed as an offer as it shows no intention on K’s part to be bound by its terms, in contrast to the wording of the advertisement in Carlill v Carbolic Smoke Ba// Co 3 .
1 See Carhill v Carbolic Smoke Ball Co (1893) 1 QB 256
2 Boots Cash Chemist (1953) 1 QB 401
3 See above n.11710
Therefore, A’s letter to K dated 21 April is the first possibility of an offer. However the
terms of this letter are too vague to be construed as an offer. This is because an offer
must contain all the terms necessary for the contract to come into existence 4 . Offering to
work for a fee “between $12000-$20000” is not certain enough to constitute an offer and
the letter is more appropriately seen as a supply of information only 5 .
K’s letter to A on 24 April appears to be contrary to K’s belief, merely an offer, not an
acceptance. The nature of K’s letter implies a clear intention to be bound by the terms of
the enclosed contract and the letter sets out the method by which the signed contract is
to be returned. As this is an offer, not acceptance, A is considered to have received the
offer on 28 April.
This raises a question as to whether:
(a) the offer is the letter itself, with the “contract” document to be signed
constituting an event that does nothing more than put the already agreed
terms in writing; or
(b) the enclosed contract is itself the offer made by K.
These issues are similar to those dealt with by the High Court in Masters v Cameron 6 .
However that case dealt with the issue of what constituted acceptance and so is not a
direct precedent for the issue in this case.
In any event K directs A to sign and return the contract “by express mail”. A attempts to
first fax the contract and then mails it. We must determine if such actions constitute an
effective acceptance.
In order for acceptance to be effective it must be unqualified 7 and communicated 8 .
Unless there is evidence to the contrary communication will be determined objectively by
4 G. Scammell & Nephew Ltd v H.C and J.G Ouston [1941] AC 251: but cf. Hillas & Co. Arcos Ltd [1932] All ER 494
5 Harvey v Facey (1893) AC 552
6 (1954) 91 CLR 353
7 Ibid
8 Felthouse v Bindley (1862) 11 CB (NS) 869
the courts 9 . There is no issue of conditional acceptance in this case as A merely signs
the contract and attempts to return it.
However A’s first attempt to communicate acceptance is by fax. The courts have held
that whether such acceptance has been communicated is to be decided by determining
the time at which the fax is received by the offerer 10 . In this case, no fax is in fact
received by K due to A’s faulty fax machine. Thus there has been no acceptance
communicated by this action.
It is well established that an offeror can stipulate the means of acceptance by the
offeree 11 . In this case the letter, though it mentions the avoidance of delay does not set a
time period in which acceptance must take place. It does however stipulate “express
mail”. The facts are unclear whether A uses normal or express mail. In the event that
she has not her acceptance may not be effective.
In the event that A uses express mail, or the courts find that using normal mail is a
means of acceptance that is not more disadvantageous than the stipulated means 12 the
postal acceptance rule will result in the acceptance having been effectively
communicated on 28 April, the date of posting 13 .1710 BUSINESS AND THE LAW代写
On the other hand, following Brogden v Metropolitan Ry Co 14 and Empirnall Holdings v
Machon Paull 15 , an unsigned contract may still create contractual obligations if the
parties act consistently with its terms. In this case this argument is even stronger
because not only have both parties acted consistently with the terms of the document
but K has drafted it and A (and possibly K) have signed it.
Therefore, the facts indicate both an effective offer and acceptance. The requirement for
consideration also appears to be satisfied as A is providing its services in return for an
agreed monthly fee of $11,500 to be paid by K. Thus consideration passes from both
parties 16 and is of a precise nature 17 . The fact that this conduct occurs in a business
9 R v Clarke (1927) 40 CLR 227
10 Entores Ltd v Far Eastern Corp (19550 All ER 493 & 495
11 Manchester Diocesian Council for Education v Commercial and General Investments Ltd [1969] 3 All ER 1593
12 Eliason v Henshaw 4 Wheaton 225 (1819)
13 Adams v Linsell (1818) 2 B & Ald 681
14 (1887) 2 AC 666
15 (1988) 14 NSWLR 523
16 Dunlop Pneumatic Tyre Co v Selfridge & Co Ltd [1915] AC 847
17 White v Bluett (1853) 23 LJ Ex 36
setting between two parties acting at arms length also creates a presumption that there
is a common intention to create legal relations, a presumption that is not rebutted by any
contrary facts 18 .
b) The Terms of the Contract
In order to determine the terms of the contract it is important to have regard to the terms
of the offer only. The only terms that could arise out of the previous negotiations are
those referred to in the offer itself or that the courts would imply as necessary to give the
contract “business efficacy” 19 . This is particularly the case if the signed contract is seen
as the basis of the agreement, which is likely. In this case the parol evidence rule will
generally preclude any evidence of intention inconsistent with the signed document 20 .
There is nothing in the offer letter or contract sent by K to A which imports any of the
previous negotiations. Thus once the offer is accepted the contractual term is that the
monthly fee is $11,500 per month, irrespective of A’s earlier letter.
Even if the contract was formed before A signed the document the terms in the
contractual document which limit A’s liability were clearly brought to the attention of both
parties before A accepted (either by signing or by her actions) and are thus effective
terms of the contract 21 .
There is, however, one area of uncertainty in the terms of the contract. This is the
reference in Ks letter to “exclusive courier”. This could be interpreted as meaning A will
be the only courier K will use or, as suggested in the original advertisement, that K will
be A’s only customer. In order to determine this issue it would be necessary to examine
the wording of the contract more closely. In any event nothing in relation to A’s alleged
liability for the accident turns on this point.
18 Cf Edwards v Skyways (1964) 1 WLR 349
19 BP Refinery (Westernport) Pty Ltd v Shire of Hastings (1977) 16 ALR 363; The Moorcock (1899) 14 PD 64
20 L’Estrange v Gracoub Ltd (1934) 2 KB 394
21 cf Causer v Browne 1952 VLR 1
c) Is there a breach of the contract?
In order to determine whether a breach of the contract has occurred it is necessary to
closely examine the wording of the terms. The contract states that A undertakes to use
all due care and consideration in carrying out its “courier duties” but excludes liability for
documents or goods “given into its care”.
The facts in this case concern the transport of K’s manager. One assumes that as the
manager is in the car himself he keeps the documents in his own care. Thus the
exclusion clause would not apply to this situation unless A could prove the unlikely event
that the manager while in the car had given the care of his important documents to A’s
driver.
As a result it seems that the exclusion clause is ineffective to shield A from liability. But
this liability can only arise in contract if the transporting of the manager with his
documents falls within the meaning of “courier duties”. Generally, couriers are distinct
from taxis and therefore A could run a strong case that the loss suffered by K is not due
to an action by A that is in breach of the contract, but in fact a gratuitous action that
occurred outside of any contractual obligations.
d) Damages
In the unlikely event that such a breach has occurred the amount of damages K can
recover will be determined by the use of the foreseeability tests set out in Hadley v
Baxendale 22 . Under these tests damage will be limited to that damage that a reasonable
person would foresee as a likely result of the natural consequences of the breach,
unless that eventuality was specifically in the mind of the parties at the time of
contracting.
d) Summary/Tentative Conclusion
It is unlikely that K could argue that the requesting of a lift for K’s manager is a new
contract. K does not appear to provide any new consideration for this. In addition, at the
22 (1894) 9 Exch 341 and see also Victoria Laundry (1942) 2 KB 528
time of contracting for the courier duties, giving lifts to K’s manager in order for him to
attend crucial business opportunity meetings was never brought to A’s attention.
The only possibility is to argue that the loss suffered by K is a natural consequence of
the accident. This is unlikely to succeed.
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