LEGAL ADVICE FOR BRAD AND JANE: BASED ON AUSTRALIAN LAW

Question 3

Brad and Jane operate a pizza business. The wood-fired oven has just blown up and it needs to be replaced. Brad and Jane immediately contact an oven wholesaler, Angie, and tell her that they require a wood-fired oven installed right away because they need it to make pizzas, their core business. Angie tells them it will be delivered and installed within 24 hours, by Friday before a long weekend. Angie then goes to a long lunch with lots of wine and forgets about Brad and Jane's urgent phone call. When they call in on Tuesday, Angie is very apologetic and sends the oven around to be installed. Brad and Jane have had to close their business for four days and nights, losing a great deal of money. They want to sue Angie for their loss. Advise Brad and Jane.

LEGAL ADVICE FOR BRAD AND JANE: BASED ON AUSTRALIAN LAW

The given case scenario shows that Brad and Jane, owners of a pizza business, did incur financial losses due to Angie’s inability to meet up with their agreement over the installation of a firewood oven, as Angie failed to install the agreed oven within the specified timeframe. Due to this, Brad and Jane were forced to close their business for four (4) days, and this meant that they had to incur significant losses in profit. Therefore, there are different legal issues raised from this case scenario, which include deceptive or misleading conduct and potential breach of contract when viewed under the lens of the Australian Consumer Law (ACL), and there are available remedies that Brad and Jane can seek. Thus, to critically review this case scenario, the IRAC (Issue, Rules, Application, Conclusion) framework is applied from a legal point of view.

1.      Issues

In this case, the major legal issue is to determine whether Angie’s inability to deliver the oven within the agreed timeframe does constitute a breach of contract, and if that is the case, one also needs to determine whether there are damages for loss of profit that Brad and Jane can enjoy. Thus, the following specific questions emerge from this case:

a)             Whether there is an actual breach of contract. That is, whether the failure of Angie to deliver the oven within the timeframe agreed can be said to constitute a breach of contract that entitles Brad and Jane to certain form of compensation.

b)             Whether there is an actual deceptive or misleading conduct. That is to say, whether the fact that Angie promised to deliver the firewood oven within 24 hours and failed to do so amounts to deceptive or misleading conduct when viewed under the lens of Section 18 of the Australian Consumer Law

c)             Whether are as a result of the two issues above, there are remedies available. That is to say, if the case of breach of contract and deceptive or misleading conduct is proven, whether Brad and Jane are entitled to remedies under Australian law.

2.      Rules

2.1. Breach of contract: Australian contract law

In line with Australian contract law, a binding contract is said to have been established when there is an a) offer – terms of agreement are proposed by one party, b) acceptance – the other party agrees to the proposed terms, c) consideration – both parties exchange something of value, and d) intention to go into legal relations – there is an intention between the parties that they want the agreement to be legally enforceable (Davis, 2023).

A contract is said to have been formed once these elements are present, and the failure of any part of the contract to perform the contract obligation implies that there could be a possible breach of contract, as held in the case of Koompahtoo Local Aboriginal Land Council v Sanpine Pty Ltd (2007) 233 CLR 115 (Hobson, 2008). Once one part fails to fulfil the contractual duties, a breach is said to have occurred, and the affected party has the right to seek redress. If the said breach is discovered to be serious (repudiatory or fundamental), the part that has been so affected can make claims for losses or damages that are considered reasonably enforceable at the time of forming such contract, as held in the case of Hadley v Baxendale & Ors (1854) EWHC J70 (Law Teacher, 2021).

2.2. Deceptive or misleading conduct: Australian consumer law

In any trade or commerce within the Australian jurisdiction, deceptive or misleading conduct is prohibited as provided in Section 18 of the Australian Consumer Law (ACL) [Schedule 2 of the Competition and Consumer Act 2010 (Cth)]. Included in this prohibition is a scenario where one party makes misleading or false representation which induces another party into a transaction, as held in the case of Henjo Investments Pty Ltd v Collins Marrickville Pty Ltd (1988) 39 FCR 546) (Australian Contract Law, n.d.).

However, the grounds for conduct to be considered misleading are that there must be a) creation of a false impression (about the said product, service, or agreement), b) the created false impression should lead to the affected person taking action, and c) the action taken must result in harm or loss. Thus, a business does not need to have the intention to mislead before one can establish deceptive and misleading conduct under Section 18 of the ACL.

2.3. Available remedies for breach of contract and misleading conduct

In the event that a breach of contract or deceptive conduct is proven, the following redress can be sought by Brad and Jane: a) damages in compensatory form – that is, monetary compensation for the losses they incurred as a result of Angie’s inability to live up to the terms of their agreement, b) reliance damages – compensation for any cost incurred because of them relying on the promises made by Angie, and/or c) damages from misleading conduct – as enshrined in Section 236 of the ACL.

3.      Application

3.1. Breach of contract

Clearly, the inability of Angie to deliver the firewood oven within the agreed 24-hour timeframe does constitute a breach of contract. This is because Brad and Jane made it explicitly clear that the oven is the main element for their pizza business and they needed it to be fixed urgently, and Angie agreed to this condition with a promise that the oven will be immediately delivered. Therefore, since there was a consideration (in the form of payment for the oven), a legally binding contract was created and so exists.

This breach is also considered fundamental, as it prevented Brad and Jane from running their core business operations, and this meant that they had to incur financial losses. In view of the ratio decidendi in the case of Hadley v Baxendale (supra), in the event that the supplier is aware of the buyer’s business needs, a loss of profit is considered a reasonably foreseeable consequence for breaching a contract. Therefore, since Angie had prior information concerning the overall essence of the oven in their business operations, it is clear that the financial impact of the delay was forceable and, as such, redressable through claims for damages.

3.2. Deceptive or misleading conduct

Additionally, the promise made by Angie to deliver the oven within 24 hours could also constitute deceptive or misleading conduct as enshrined in Section 18 of the ACL. This is because Brad and Jane relied on this promise to make plans for their business operations. If it was clear to them that they would not get the oven delivered within the agreed timeframe, they could have sought alternative solutions to continue floating their business operations pending the installation of a new oven.

On the same note, Angie was negligent by forgetting that agreement existed after drinking wine, and this further supports the claim for misleading conduct. Considering that having an intention to deceive or mislead is not necessary, under Section 18, the fact that Angie failed to deliver the provided service within the agreed time is considered misleading.

3.3. Available remedies

In view of the above discussions, the following remedies are available for Brad and Jane: a) damages for loss of profit – they can claim compensatory damages for the four (4) days they had to close their business due to the breach, and b) claims under ACL – they can also rely on Section 236 of the ACL to make further claims for losses that were suffered as a result of deceptive or misleading conduct. Therefore, it is clear that Brad and Jane have strong legal grounds to seek redress (compensation).

4.      Conclusion

Based on the discussions above, Brad and Jane can take legal actions against Angie on the grounds of breach of contract and deceptive or misleading conduct as enshrined in the ACL. The grounds for such action are: a) Angie failed to deliver the oven within the agreed timeframe, and this breach her contract with Brad and Jane, leading to foreseeable financial losses; b) Angie misled Brad and Jane by promising to deliver the oven agreed upon, knowing fully that their core business operations depend on the said oven; and c) as a result of these issues, Brad and Jane can seek compensatory damages for the loss of profit incurred due to the issues raised and make further claims for damages as a result of misleading conduct as enshrined in the ACL.

In order to enforce these claims, Brad and Jane should take the following steps: a) they need to send a formal demand letter to Angie, requesting compensation due to the losses they incurred as a result of her breach of contract; b) in the event that Angie refuses to settle with them, they will need to take the next step by filing a claim in the small claims tribunal as a way of pursuing legal action; and finally, c) since there is a possible case of misleading conduct, they need to report the matter to the Australian Competition and Consumer Commission (ACCC), which is the right consumer protection agency that will have to intervene in their cause.

In conclusion, considering the clear breach of contractual agreement and violation of consumer law, it is very likely that Brad and Jane will succeed in their claim, essentially securing compensation for the losses they incurred in the process.

References

Australian Contract Law. (n.d.). Misleading conduct. Australian Contract Law. https://www.australiancontractlaw.info/law/misleading-conduct

Davis, W. (2023, October 8). Contract law 101 – The essential elements. Stonegate Legal. https://stonegatelegal.com.au/contract-law-101-the-essential-elements/

Hobson, B. (2008). A case note on Koompahtoo Local Aboriginal Land Council v Sanpine Pty Limited. University of Notre Dame Australia Law Review, 10, 139–148. https://classic.austlii.edu.au/au/journals/UNDAULawRw/2008/7.pdf

Law Teacher. (2021, September 28). Hadley v Baxendale - 1854: Case summary. LawTeacher. https://www.lawteacher.net/cases/hadley-v-baxendale.php