Understanding Contract Law And Australian Consumer Law Guarantees

Elements to make a simple contract valid

Can Vincenzo Franco for the violation of the contractual term that was established amid the two. If yes, then on what basis the contract can be rescinded by Vincenzo Franco?

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An agreement is the combination of a valid legal offer complied with valid acceptable. This agreement is combined with other contract components makes a valid contract. Thus, to form any contract which is enforceable in law the main requirements include:

An offer is a communication of the intention of the offeror which he expects to be fulfilled by an offeree. An offer is required to reach the offeree to make it complete and binding and is held in Carlill v. Carbolic Smoke Ball Co.  

When the offeree have given his conformation to the offer communicated to him, then, it is an acceptance in law. In RA Brierley Investments Ltd v Landmark Corp Ltd¸an offer  must reciprocate to the terms of the offer.

An offer and acceptance results in agreement formation. But, it is held in Rose and Frank Co v JR Crompton & Bros Ltd, that the ignition must be legal and not gratuitous promises.

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The promises should also be supported with consideration which is something of value in the eyes of law .

The parties must also be of sound mind and should not be barred by any law.

Now, when the parties gave their legal consent to the terms of the contract then the same must be given with free will and the consent must be genuine. But, at times the consent is not free and the contract that is made without valid consent makes the contract invalid. The various elements that make a contract deprive from valid consent are:

  1. When one party to the contract makes a factual statement which is untrue knowingly in order to induce and lure the other party so that a contract can be formed which the other party would have not formed if is aware of the truth of the statement, then, a misrepresentation is incurred by the party who is making the statement and is held in Museprime Properties v Adhill Properties.
  2. When the parties are sharing a fiduciary relationship wherein one party (relying) party is making his decision on the sense of judgment of the other (stronger). But, the stronger party misuses his position to his own gain and betrays the trust of the relying party and this act of the stronger party is called undue influence. Any consent under undue influence is not free and thus the contract is not valid and is analyzed in of Johnson v Buttress.
  3. When the actions of the dominate party is against the good conscious of a person and thus results in bringing gain to himself at the cost of the weaker party, then, the transaction suffers from unconscionable conduct and is held in Louth v Diprose.

Now, it is first important to understand whether there is a contract that is made amid Vincenzo and George.  

Vincenzo Franco along with his family went to Australia. They want to book their rooms at Scenic Views and thus Vincenzo Franco meet the marketing manager of Scenic Views, Mr George Smith. During the conversation of Vincenzo and George, George quotes $350 for one night inclusive other things.

So, George has made an offer to Vincenzo. Vincenzo without bringing ant variation confirm the offer of George and thus an acceptance is made resulting in an agreement amid the two. The offer and acceptance is made with a consideration that $350 per night is paid by Vincenzo to George in exchange of the room provided by George to Vincenzo. Both George and Vincenzo are capable and have legal intention, thus, there is a valid contract amid the two.

Construction of a contract

But, Vincenzo has the power to cancel the contract made with George because the consent that is given by Vincenzo to George is not free because:

  1. George declares before the contract formation that guest suits with open fire space are provided. Most importantly, panoramic views are provided from the balcony. But, these representations that are provided by George are not true as there were no private balconies that were provided with any views. Thus, a false representation is made to lure Vincenzo so that a contract can be made. So there is clear misrepresentation on the part of George;
  2. Also, Vincenzo trusted the sense of judgment of George as Vincenzo hardly understand English. George is aware that Vincenzo is not able to understand the terms properly but has made no attempt to clarify the doubts of Vincenzo. Thus, George took advantage of the situation and acted not in good conscious as he even did not tell Vincenzo that if any cancellation is done then it will include accommodation of three nights. Thus,  George is indulged in unconscionable conduct;
  3. Further, George is at dominant part as Vincenzo is trusted his knowledge before making any decision. This trust is breached by George and influenced Vincenzo to enter into a contract. Thus, there is clear undue influence on the part of George.


So, thus a valid contract is made between George and Vincenzo but such contract is suffering from misrepresentation, unconscionable conduct and undue influence. So, Vincenzo can state that the contract suffers from the element of free consent.

Whether Vincenzo has any remedies available because the consent of Vincenzo is not free and independent?

The contract is the formation a deed which is made amid two private parties by comply the contractual principle of offer, acceptance, legal intention, consideration and capacity. Once a contract is made then the terms of the contract should be comply with. But, at times the consent given by the parties suffers from some kind of misrepresentation, unconscionable conduct or undue influence on account of one party to the contract, then, the non defaulting party has the right to seek remedies as the contract was not considered to be valid in law.

The remedies comprises of:

  1. Rescission of contract;
  2. Damages;
  3. Compensation;
  4. Injunction;
  5. Specific performance.

But, the aggrieved party has the right to sue the defaulting party only when the loss that is suffered by the aggrieved party is because of the acts of the defaulting party and is called the element of causation. If the cause of the loss is not the acts of the defaulting party then he is not liable for such loss. Also, the loss shook be such that it is not remote in nature, that is, the loss is expected by the defaulting party if any breach is incurred.

Now, George has made statements that were found to be based on misrepresentation, unconscionable conduct or undue influence. It was stated by him that a panoramic view will be provided to Vincenzo from his private balcony which was totally false. Now, the loss that is caused to Vincenzo is not remote as the same was expected by George as he is aware that the statement made by him will certainly result in the loss of expectations of Vincenzo. Also, the loss that is incurred by Vincenzo is because of the acts of George and hence there is presence of causation.

So, Vincenzo has the right to cancel the contract and seek damages that are suffered by him along with compensation.


Since the loss that is suffered by Vincenzo is because of the acts of George thus there is clear presence of causation and the loss that is incurred is also not remote. So, Vincenzo can sue George for damages ad cancel the contract.

Remedies available if a contract is breached

What are the compensation that are breaded for the formation of a contract?

The contract is the formation a deed which is made amid two private parties by comply the contractual principle of offer, acceptance, legal intention, consideration and capacity. Once a contract is made then the terms of the contract should be comply with.

Now, the terms are made part of the contract after the parties to the contract enters into negotiations. The negotiations took place before the formation of the contract.  These terms can be segregated into:

  1. Mere representations are those negations that took place amid the parties before the contract formation but are never intent by the parties to be made part of the contract. thus, the parties cannot enforce such representations;
  2. But, those representations that are exchanged amid the parties before contract formation but are made part of contract so that the parties can enforce the same, then, such are called contract terms and is held in Toll(Fgct) Pty Limited v.Alphapharm Pty Limited & Ors.
  3. Collateral terms – But there are also terms which are orally exchanged amid the parties with an intention to abide by the same but are never made part of the contract, then, such terms are binding provided they are not in violation of the express terms of the contract and are promissory when made and is held in J J Savageand Sons Pty Ltd v Blakney and Shepperd v The Council of the Municipality of Ryde.

Now, the terms of the contract are also constructed depending the importance they hold in a contract, that is, the terms which are contract essential and are relevant for the proper function of the contract are conditions. If these terms are breached then the contract can be cancelled and damages can be attained and is rightly held in Poussard v Spiers and Pond . But, the terms which are secondary to condition are called warranties and are not capable to make the contract ineffective if not performed and thus only damages can be sought and is rightly held in Bettini v Gye .

It is no submitted that there are various terms that are exchanged amid George and Vincenzo before the formation of the contract, that is, a panoramic view will be provided from private balcony, there will be fire space, TV, cable, spa, however. But, these are terms which are made by George and his company with an intention to abide by the same. Mainly the term of providing panoramic view was promisee by the parties and is indenting to be abode by the same. Though it is not made part of the contract but it is considered as a collateral term and thus is binding upon both George and Vincenzo.

This term is the main essence of the contract and the reason why Vincenzo made a contract and is thus treated as a condition. Since a condition is breached, so, Vincenzo can terminate the contract and seek damages.


The term of providing panoramic view was violated by George which is a collateral terms and is a condition. So, Vincenzo can sue for damages can cancel the contract.

2. In Australia, apart from the law of contract, there is yet another law that is considered to be very promising and grants protection to the consumers from the hands of the suppler and manufacturers of the goods and services, that is, Australian Consumer law (ACL).

Australian Consumer Law Guarantees

It is now important to understand whether Vincenzo has any right under the ACL.  

The ACL is the law that is formulated for the benefit of those consumers who has taken the services and goods of worth up to $40,000 and for their own use and not for any commercial use.

So, Vincenzo can be considered as consumer because he has taken the room from George @$350 per night for 7 days for personal use.

There are implied guarantees that must be honor by the manufacture. A manufacturer is defined under section 7 of ACL and includes the supplier of the goods and services. Thus, George is considered to be the manufacturer under section 7 as he is provided services to Vincenzo. Thus, George must comply with the implied guarantees that are made part of the contract amid him and Vincenzo.

Section 18 of ACL submits that no manufacturer while dealing in his trade and commerce should act in a manner that is misleading and deceptive in nature. But, George while acting in his business course has made statements to Vincenzo which were misleading, that is, they will provide panoramic views from their private balconies. This statement was not true and is made by George to Vincenzo with an intention to deceive.

Also, as per section 29 of the ACL, if representations are made by the supplier which are misleading and false relating to the quality, durability, and novelty of the services or goods then it is breach of section 29. George has made misleading statements regarding the kind and quality of the services that will be provided to Vincenzo and thus he is in breach of section 29 of ACL.

As per section 60, the supplier must take care and diligence while providing services. As per section 61, if specific reasons are attributed by the consumer before taking the services then the services that are provided should fit the reason. As per section 62 if any services are to be provided then the same must be provided within reasonable time.

Now, George has negligence in providing the services and thus section 61 is violated. Also, the services were not as mentioned by Vincenzo thus section 62 is breached. Further, the services were later not provided within reasonable time and thus section 63 if breached.

Thus, Vincenzo has the right to seek remedies but the remedies depend upon the kind of breach that is incurred by George.

Implied guarantees the supplier must honor

Any breach by the supplier is considered be major in nature when section 54-57 are violated and if section 61-63 are breached and is held under section 260 of ACL. If the goods does not match with what is expected then there is violation. But, if the breach is not major then the same is considered to be minor as per section 259 of ACL. Now, if any breach is incurred then the aggrieved party has the right to seek compensation which is up to $220,000. The aggrieved party can also seek damages, anticipated loss and can also reject the goods if found inappropriate.

Now, George has not complied with the services that he is required to be provided to Vincenzo. There is clear breach of section 18 and section 29 on the part of Vincenzo and thus the implied guarantees that were imposed on George is not met. Also, the services that George must provide to Vincenzo is not comply with due care and diligence and is also not provided within reasonable time.

Thus, there is major breach that is incurred by George and thus Vincenzo has the right to seek personal damages, compensation and ay expected loss.



 Cartwright, John , Formation and Variation of Contracts: The Agreement, Formalities, Consideration and Promissory Estoppel, Sweet & Maxwell, 2014.

Eggers, Peter,  Vitiation of Contractual Consent, CRC Press, 13-Sep-2016.

Graw, Stephen,  An Introduction to the Law of Contract. 2012, Thomson Reuters (Professional) Australia.

Latimer, Paul , Australian Business Law 2012, CCH Australia Limited, 2011.

Stone, Richard and Devenney, James, The Modern Law of Contract, Routledge, 14-Jul-2017.

Case laws

Bettini v Gye (1876);

Carlill v. Carbolic Smoke Ball Co (1891).

Currie v Misa (1975).

Clements v London and North Western Rly Co [1894] 2 QB 482;

Gates v. City Mutual Life Assurance Society Ltd (1986)

Johnson v Buttress (1936).

J J Savage and Sons Pty Ltd v Blakney – [1970] HCA 6.

Louth v Diprose (1992).

Kailash center for personal development Inc, v Yoga Malik Pty limited (2003).

Museprime Properties v Adhill Properties [1990] 36 EG 114.

Poussard v Spiers and Pond (1876).

Ricochet Pty Ltd v Equity Trustees Executor & Agency Co Ltd (1993);

RA Brierley Investments Ltd v Landmark Corp Ltd (1966)

Rose and Frank Co v JR Crompton & Bros Ltd (1924)

Shepperd v The Council of the Municipality of Ryde (1952) 85 CLR 1.

Toll (Fgct) Pty Limited v.Alphapharm Pty Limited & Ors  [2004] HCA 52.

Voli v Inglewood SC (1963)

Online material

Hall M, Equitable fraud: Material exploitation in domestic settings’ in Elder Law Review, 2006. <https://www.austlii.edu.au/au/journals/ElderLawRw/2006/7.html>.

Julie Clarke. Australian Contract law, 2010, < <https://www.australiancontractlaw.com/law/formation.html>.