Topic 6: Australian Consumer Law

Topic 7(1): Contract Law - Part 1

Question 1

Chan owns a popular Chinese restaurant called the Jade Palace located in a busy shopping area in

Adelaide. There are also some other competing Chinese restaurants in the same street. Chan's

restaurant had been operating for 12 months, and to attract more customers to his restaurant he

recently placed a large sign in the window of his restaurant advertising his food as follows:

Adelaide's Best Traditional Chinese Food

All Made with Locally Sourced Ingredients.

Lee, the proprietor of the Chinese restaurant called the Silver Dragon in the same street as the

Jade Palace, believes that Chan's sign contains inaccurate information, particularly where it

states 'locally sourced ingredients'. Lee says it was not possible to obtain many of the traditional

ingredients used in Chinese food from local sources. For example, many of the sauces and spices

are often imported. Also many dried foods such as mushrooms, prawns and other seafoods

cannot be obtained locally because there is no industry in Adelaide that makes them there.

Near Chan's restaurant is a wholesale business called "All Chinese Imports". Lee knows that Chan

often obtains many of the ingredients that he uses in his Chinese food from All Chinese Imports.

However, whenever possible, Chan also buys the vegetables he uses in the restaurant from local

growers. As far as Chan is concerned, if he tries to buy his vegetables from local growers he is

supporting local industry and therefore entitled to use the words 'locally sourced ingredients' in

his advertising.

2LAWS 1018 Business Law Assignment April 2021

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Lee is threatening to report Chan to the 'consumer complaints watchdog' since he believes that

Chan's sign is false, and that Chan is trying to deceive members of the public and so is breaching

the Australian Consumer Law (ACL).

(1) Explain whether Lee and his Silver Dragon restaurant are entitled to take an action against

Chan and his Jade Palace restaurant for misleading or deceptive conduct.

[1 mark]

(2) In support of Lee's argument that Chan has engaged in misleading or deceptive conduct refer

to the specific wording of section 18 of the ACL and apply it to the actions of Chan and the Jade

Palace.

[3 marks]

(3)

With reference to the legal principles outlined by the Federal Court in Taco Company of

Australia v Taco Bell Pty Ltd [1982] ATPR 40-303 discuss whether or not Lee is correct in claiming

that Chan's advertisement is in breach of the ACL.

[2 marks]

(4)

If Lee succeeds in any legal action against Chan, what remedy or remedies will he seek?

[1 mark]

Total: 7 marks

Question 2

In January 2021 Kate, who is from Adelaide, went to Melbourne, Victoria, to attend a convention

on international trade. While she was there she met Ben, who was also attending the

convention. On one occasion Ben casually mentioned to Kate that he was thinking of selling his

car, a 2016 Honda Civic.

Kate was thinking of replacing her old car with a car which was more new, so after she returned

to Adelaide Kate wrote to Ben on February 15 asking if he would consider selling his car to her for

$13,000.

When he did not reply Kate wrote to Ben again on March 1, this time saying that she was

prepared to buy the Honda from Ben for $14,000.

Ben then wrote back stating that he was not prepared to sell it for anything less than $15,000.

Ben then proceeded to advertise the car for sale on the Internet website 'Gumtree' for $15,000.

However the responses he received were disappointing, and the highest offer he received wasLAWS 1018 Business Law Assignment April 2021

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only $13,500. Ben then decided that perhaps he should sell the car to Kate after all, so on March

10 he posted a letter to Kate in which he told her she could have the car for $14,000.

When Kate received Ben's letter on March 12 she immediately went to her local post office and

posted a letter of acceptance to Ben agreeing to buy the car for $14,000. The next day (March

13) Ben received a phone call from Max who had seen the advertisement for the sale of the car

on 'Gumtree'. Max offered to buy the car for $15,000, which Ben promptly accepted. Ben then

immediately telephoned Kate informing her that the car was no longer for sale. Kate was then

very angry and insisted that Ben must sell it to her for $14,000.

(5)

Apply the rules for offer and acceptance to explain the legal effect of the various

negotiations that took place between Ben and Kate.

[3 marks]

(6)

Explain whether or not Ben is required to sell the car to Kate and at what price.

[3 marks]

Total: 6 marks

Question 3

Jasmin was a passionate about the healing power of natural therapies, and so enrolled in a 12-

month full-time Diploma of Natural Health course offered by 'House of Herbs', a popular health

foods franchise. While she was studying the diploma Jasmin also worked 6 evenings each week

as a petrol station attendant in order to earn sufficient money to support herself and pay for the

$20,000 course fees.

Despite her demanding work schedule at the petrol station Jasmin was still able to achieve

excellent results for her assessments in the diploma and her instructors were impressed with her

positive work ethic.

One day while she was browsing in 'Flower Power', a nursery that specialises in selling herbs, she

talked to the manager about her interest in natural therapies. The manager was so impressed

with her knowledge and enthusiasm that he offered her a full-time position as a sales assistant at

Flower Power. Jasmin was very interested in this offer, as it would give her practical experience

in the cultivation and use of the healing power of herbs.

Furthermore, although Jasmin was enjoying her diploma course immensely at the House of

Herbs, the long hours that she was forced to work at the petrol station in order to support

herself was starting to affect her health. Therefore she decided it would be best for her to leave

the diploma course at 'House of Herbs' and take up the sales assistant position she was offered

at 'Flower Power'. LAWS 1018 Business Law Assignment April 2021

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When Jasmin told the principal of 'House of Herbs' that she was thinking about discontinuing her

studies for financial reasons, the principal told her that since she was a good student with a

promising future she need now only pay half of the remaining fees for the course. This meant

that Jasmin would not have to work as many shifts at the petrol station and would still be able to

complete her diploma, so she readily accepted. Jasmin therefore decided to continue studying

the diploma at the House of Herbs until the end of the course and did not accept the offer to

work as a sales assistant at 'Flower Power'.

Shortly after finally completing all of the study for the diploma course Jasmin received an account

from House of Herbs in which it claimed 9 months arrears in fees for the period of time for which

she had only paid half of the fees. Jasmin was shocked to receive this, and contacted the

accounts officer, who then informed her that she would not receive her diploma until the arrears

had been paid in full.

When she protested that she was told by the principal that she was only required to pay half

fees, the accounts officer said that a special arrangement like that was made only in exceptional

cases of hardship for unemployed students, and this did not apply to Jasmin. Instead the

accounts officer said that what House of Herbs had given Jasmin was just a 'loan agreement' for

the payment of the fees, and she now had to repay the loan in full.

The accounts officer further informed Jasmin that, if she refused to pay the outstanding amount

still owing of $10,000, the 'House of Herbs' would also have no choice but to initiate a civil claims

action against her in the Magistrates Court to enforce her payment of this amount. They would

also ask the court to make orders that Jasmin would also have to pay their legal costs.

Jasmin would have discontinued her diploma and taken up the sales assistant position at 'Flower

Power' if she had known that the arrangement with 'House of Herbs' to pay half fees was in fact

just a 'loan agreement'. Jasmin now does not have enough money to pay the amount demanded

by House of Herbs since she barely earns enough to support herself, and instead she says that

the 'House of Herbs' has treated her unfairly.

(7)

Advise Jasmin whether or not she is legally bound to pay 'House of Herbs' the amount

they have demanded by using the legal principles found in the following:

(a) the common law requirements for consideration in contracts;

[3 marks]

and alternatively:

(b) the Doctrine of Promissory Estoppel,

[4 marks]