Sarah is an Australian supermodel who began an intensive fitness program to prepare for her appearance in a TV Commercial for gym equipment. She knew that she needed to be very fit. In addition to her fitness program, she decided to consult a dietician about what sort of food she should eat. The dietician suggested that she have at least one protein smoothie every day. Sarah researched a range of blenders that might suit her needs. At her local electrical store, she found that the only blenders for sale there did not meet her needs as they were not powerful enough to produce smoothies.

Sarah kept looking. She had heard good things about the Homeware Store so she decided to go there to purchase a blender that met her needs. She was very happy to find that a blender was on sale at the Homeware Store. A sign advertising the blender stated:

It is high quality, superb, safe and durable. You won't regret it.

She purchased the blender and kept her receipt. Once home, she unpackaged the blender and as soon as she plugged it in, the upper lid came off and the sharp blades flew out, badly injuring her right hand.

At the hospital, a doctor explained to Sarah that she would need stitches in her hand, and she would be unable to use her hand for four weeks unless the cut had healed, so the stitches could be removed. Sarah was very upset when she realised that she would not be able to participate in the planned TV Commercial and that another supermodel would have to take her place. This also meant she would lose the $12,000 fee that she would have received for the commercial.

QUESTION 2 (10 Marks)

Use the IRAC method to advise Sarah if the contract is voidable or void. You will need to address the elements of a valid contract including capacity, legality, genuine consent, mistake, misrepresentation, duress, undue influence and unconscionability.

while answering mention these study material too

Capacity Determining validity - Do the parties to the contract have full contractual capacity? Only a sane, sober, adult person has FULL capacity to make a contract. Means that they have the ability to understand what it is that they are entering into.

Capacity - Mentally Unsound/Intoxicated At the time of making a contract, a person is suffering from mental instability or drunkenness: to the extent that they are incapable of understanding its nature, AND the other party knew (or ought to have known) this, the contract is voidable - O'Connor v. Hart [1985] If the contract is for the supply of necessaries, the person who is mentally unsound or the drunken person will have to pay a reasonable amount for them.

Misrepresentation A representation is a statement of fact made by one party to another, either before or at the time of contracting, relating to an existing fact or a past event, which induces the contract. 3 Types of Misrepresentation - Fraudulent Misrepresentation - Innocent Misrepresentation - Negligent Misrepresentation

Fraudulent Misrepresentation There must be an intentional deceit. There must be: - a false statement of fact - the representation must be untrue - the representor knew it was false, or did not believe it was true, or made it recklessly - it was intended it would be acted upon - it was acted upon - and the innocent party suffered loss. A contract induced by fraud is voidable at the option of the innocent party. It remain

Innocent Misrepresentation A misstatement of a material fact, not known to be false, made by one party to another, which induces the other to enter into a contract It is distinguished from fraudulent misrepresentation by the lack of intentional deceit and the right to recover damages

Negligent Misrepresentation This requires a false statement of fact The statement was designed to induce someone to enter into a contract At the time the statement was made it was made negligently An innocent but negligent misrepresentation can give rise to an action where a 'special relationship' can be shown to exist between the parties: Hedley Byrne & Co Ltd v. Heller & Partners Ltd [1964] & Esso Petroleum Co Ltd v. Mardon [1976]

Negligent Misrepresentation (con't) Guidelines for negligent misrepresentation A special relationship exists between parties such that the person providing the information or advice must exercise a duty of care; Subject matter is of a serious or business nature; Person providing the advice realises that the recipient intends to act upon that advice or information; It was reasonable for recipient to rely on the advice or information; and Damage was suffered by the recipie

Duress Duress involves use of violence or illegal threats against a person, their goods or economic interest to force them to enter into a contract against their will. lack of voluntary agreement. It only has to be one of the reasons for a person to enter into a contract and the effect on the contract is that it will be voidable at the option of the injured party: Barton v. Armstrong (19

Undue Influence Involves the improper use of a position of influence or power possessed by one person over another in order to induce that other person to act for their benefit. Lack of genuine consent to the agreement. Action based in equity and the usual remedy is rescission. Action must commence within a reasonable time or right to rescission may be lost: Allcard v. Skinner (1887)

Unconscionability The plaintiff has to establish: They were in a position of 'special disadvantage' Which substantially affected their ability to protect themselves; The defendant knew, or ought to have known, of the plaintiff's disability and not taken advantage of it; AND Actions of defendant were unconscionable: Commercial Bank of Australia vs. Amadio

Form of Contract The law may require that to be valid, certain contracts must be in a particular form, i.e. in writing Consider - are there any statutory procedural requirements that need to be satisfied? A lack of compliance with the required formalities may make the contract void or unenforceable.