Pharmaceutical society of great britain v boots cash chemist ltd

Business Law Assignment

Assignment 2

Given name

Pham Diep Anh

Surname

Dong

Student number

19553247

Email

19553247@learning.curtin.edu.sg

Unit name

Business Law 100

Unit code

11011

Assignment title

Four step process

Date submitted

03/09/2018

Student’s comment to tutor

Marker’s comments

Recorded mark

Marker

Comments

[Word count: 2342]

Question 1:

Step 1: Identify the legal issue

The legal issue of law is that for the formation of a legally valid contract, there must be existence of agreement as an element to be bound by both parties.

Step 2: Explain the rule(s) of law with reference to relevant to authority.

To form a legally enforceable contract, there are three main elements must be established including intention, agreement and consideration. However, the only one requirement needs discussing here which is agreement that made by both parties in order to arrive at a legally binding contract.

An agreement is the most basic element that enforces a valid contract. The element of agreement occurs when both parties are in sound mind, intend to carry out promise as well as what they promise to do or should not do under law. It involves two components namely offer and acceptance. Offer is signified as a statement that willingness to contract and acceptance is a statement approving to the terms of offer.

Regarding to the requirements of the first element of an agreement - offer, it must be satisfied by being sufficient complete and promissory. In other words, the purpose and the terms of the offer must be clarified. Additionally, to implement the contract’s terms, the promise between offeror and offeree must be bound within law if the offer is accepted. In the case of Havey v Facey [1893] AC 552, Havey asked Facey for the lowest price of Bumper Hall Pen. After Facey’ s response, Havey sent back a telegraph to agree with Facey’ s price offer and willing to buy it. However, Facey did not want to sell so Havey intended to sue Facey. The issue is that whether Facey’s response was just an answer for Havey’s question or a promise to a transaction. The court decided that Facey’s reply was merely a statement providing information and it was not legally enforceable agreement so Havey could not sue Facey.

Moreover, an offer is required to be intended to result in a contract if it is accepted. In Partridege v Crittenden [1968] 2 All ER 421 case, Partridege advertised his live wild birds for sales on a magazine. The Royal Society for the Prevention of Cruelty to Animals prosecuted Partridege for the offence of unlawful sales. The court held that Patridege’s advertisement was merely an invitation to treat but not an offer because his advertisement did not aim to any specific buyer. Nevertheless, a buyer who purchased Partridege’s birds would be bound by an agreement of a contract with him.

Furthermore, displaying items for sales seems as not an offer but rather than an invitation to treat. It was expressed by the case of Pharmaceutical Society of Great Britain v Boots Cash Chemists (Southern) Ltd [1953] 1 QB 401. Boots Cash Chemist – a self-service pharmacy showed up some drugs and medicines were known as poisons that requiring the supervision for the sale. The Pharmaceutical Society of Great Britain claimed that displaying poison products are unlawful. The legal issue was whether the customers intended to be legally bound by a contract when they selected these items or when they already paid for. The court emphasized that the defendant was not breach the law. Indeed, displaying products on the shelves was not an offer that was accepted by the customers when they were choosing it, however, the contract was bound between the cashier and customers since they paid for the item.

On the other hand, in a particular case, advertisement is indicated as an offer rather than an invitation to treat. This was seen in the case of Carlill v Carbolic Smoke Ball Co. [1893] 1 QB 256. In this case, the company stated that they would pay £100 for whom still got sick with influenza after using its product. Since she saw the advertisement, Carlill purchased a Carbolic smoke ball. Unluckily, her disease with influenza remained but the company refused to compensate. The issue is that whether the company and Carlill was bound in a legal contract. The judgment of the court was that the company must take responsibility for this case because the company’s statement was an offer in the world at large of a unilateral contract between the company and anyone who satisfied the conditions in the advertisement.

To reach an enforceable contract, the second element of agreement is acceptance. Acceptance is identified as an agreement on the terms of an offer without conditional and must be communicated to the offeror. The acceptance is effective by the time and the place, where and when it is communicated to the offeror. To be specific, if the communication is instantaneous such as telex, facsimile and email, acceptance is effective when these media spread is received by the offer. According to the case of NM Superannuation Pty Ltd v Baker (1992), the court held that if the offeror accepted the offeree’s response by fax, it seemed that the offeror had been prepared for an agreement. Therefore, once the fax was delivered, the contract was legally bound, even the offer could receive the confirmation immediately or not. However, for the postal acceptance rule, if the confirmation is a letter, the valid contract is formed by the time and the place when the properly addressed letter of acceptance is posted in the post office, not when the offeror receives.

Step 3: The rules of law explained must be specifically applied to the facts so a solution can be found.

A contract is legal validation once the both parties are reached by the requirement of element of agreement. The fact of case study above is applied to conclude the element of agreement required for the formation of a legally enforceable contract in the case of Jaeger purchased a flight ticket and an accommodation for his Europe trip from Ben.

In this case, Ben sent a facsimile noticing the trip’s plan, the price offer ($10500 for air flight ticket and accommodation including taxes and transfer on the continent) and the time Jaeger should response to confirm (before Wednesday 12pm). He was willing to sell the offer to a specific person – Jaeger by replying Jaeger via fax and requiring him to confirm if he accepted. Therefore, the offer requirements of sufficient complete and promissory are met. Besides, it is certainly an offer because it was not invitation to treat on any advertisement, Ben and Jaeger directly communicated. In addition, Ben recommended Jaeger to purchase flight tickets and accommodations to other countries (Rome, Sicily, Great Britain and France) during the time he will be at Rome. Indeed, it is not an offer but rather than invitation to treat. These characteristics above highlights that offer given by Ben was legally bound regarding to Ben is an offeror and Jaeger is an offeree.

In terms of the acceptance – Jaeger is in the same term as offer - Ben. Ben made a specific offer to Jaeger within Jaeger’s appeal. Jaeger replied Ben’s fax before the due time (Wednesday 11.30am – before Wednesday 12pm) to confirm trip package. Therefore, the contract was legally bound since the time Jaeger’s facsimile arrived to Ben’s fax machine even though Ben could not see the fax.

Step 4: A logical conclusion should flow from the above steps

In conclusion, Ben and Jaeger intend to be legally bound by the element of agreement to enforce a contract. Hence, Jaeger has the rights to enforce a contract against Ben.

Question 2:

Step 1: Identify the legal issue

The principle of law is that whether the elements of intention and consideration between both parties, Ben and Jaeger are met for the valid formation of a contract.

Step 2: Explain the rule(s) of law with reference to relevant to authority.

According to the definition of a contract, there are three essential elements needed to apply involving intention to be legally bound, agreement and consideration. However, in this question, the elements of intention and consideration between both parties are required to undertaken for an existence of the contract.

Firstly, there must be existence of element of intention to enter a legally enforceable contract. The intention must be judged objectively and proved by both parties. Besides, the court will examine the situation and the time both parties intend to bind a contract. There are two different sorts of agreement: purely domestic or social agreement and commercial relationship agreement. In general, whether the parties are in a purely domestic or social relationship, the presumption is that enforceable binding contract is not valid. However, in business or commercial relationship, both parties definitely intend to legally binding contract by their agreement.

In the case of Esso Petroleum Ltd v Commissioners of Customs and Excise [1976] 1 All ER 117, to promote the sales, the company gave customers “free coin” for every four gallons of Esso petrol purchased. The court held that whether Esso gave free coin, they have intention to be legally bound with the motorists. The reason is that the coin is a specific gift Esso only gave to its customers as well as producing for general sale so it is presumed to purchase tax in the commercial situation.

An example of where the parties are in a business relationship, the presumption is that they intend to create a legally enforceable contract, is Ermogenous v Greek Orthodox Community of SA Inc [2002] HCA 8; (2002) 209 CLR 95. In this case, Emorgenous worked for Greek Orthodox Church in Australia as an archbishop, then, the community refused to pay him for the accumulated leave. The legal issue is that whether the contract between Ermogenous and the community was a religious contract, it intended to be legally bound. The court decided that Greek Orthodox Community must pay for Ermogenous’ s accumulated leave under the contract of employment.

Secondly, the other element sponsors for a legally binding contract is consideration. Consideration is basically amounts of promises exchangeable. Consideration needs providing by both parties – promisor and promisee if they intend to bind a contract.

To be valid, consideration needs not be adequate, but it must be sufficient under law, even for a small amount. In the case of Thomas v Thomas (1842) QB 851, Mr Thomas and his wife was in the promise that he would let his wife inherit the house after he died. However, due to this promise was not written into his willing, Mr Thomas’ s executors required Mrs Thomas paid £1 per year for the occupied rental house. The issue is that whether the consideration provided by the executors and Mrs Thomas was sufficient to make the agreement valid. The court held that it was satisfactory, even it was small amount so the contract including consideration would be legally enforceable.

Consideration is also a practice to prove the promisor’s obligation under the agreement. This principle was viewed in the case of Carlill v Carbolic Smoke Ball Co. [1893] 1 QB 256. Though Carlill followed the instruction of using smoke ball to prevent influenza, she was still in sick. Therefore, the legal issue is that the reward £100 that company promised to pay for the influenza persistence customer was a consideration to validate the contract in this case. The court held that this reward was a consideration of a contract that Carlill could have the rights to claim the company for £100.

Besides, consideration must be provided in response to the promisor’s promise in the current circumstance. Performance of a pre-existing responsibility is not a legal consideration. In the matter of Stylk v Myrick (1809) 2 Camp 317; 170 ER 1168, Stylk worked for Myrick in the voyage under an enforceable contract. Then, two men in the team deserted, the captain said to the rest of the team members if they did extra work of the two deserters, Myrick would pay extra money. The issue is after the ship was back, he refused to pay the extra salary. The court determined that there was no consideration in this case so the contract of paying extra money was not valid. The reason is that the crew did not give any valuable exchangeable thing for the captain’s promise. Hence, the captain did not take obligation to create a legal contract.

Step 3: The rules of law explained must be specifically applied to the facts so a solution can be found

The case study above will be investigated to apply to the case of Ben and Jaeger to find out whether the formation of legally enforceable contract was created regarding to the element of intention and consideration.

In terms of element of intention, it is obvious that Ben and Jaeger was in the commercial relationship because Ben was running Europe Express Pty Ltd in Perth, even though they are cousin. Thus, the element of intention existed as well as the contract was legally bound.

Moreover, in this circumstance, Ben was a promisor who gave specific offer to Jaeger as a promisee. Their valuable thing in exchange was the cost of the travel package - $10500. Besides, Jaeger had already booked and paid for two other tours during his trip to Rome. It meant that the exchangeable value of the trip was boosted. Therefore, the element of consideration was certainly met in the formation of a legally valid contract between Ben and Jaeger.

However, to solve the problem, Ben offered Jaeger another Europe package for reduced price of $11900 next year because of they are cousin. It is just an excuse from Ben and it is not a legally enforceable contract because the element of intention, consideration and agreement does not meet. The offer is uncertain accepted by Jaeger as well as the exchangeable value is not in the current situation (next year). In addition, the element of intention does not exist because Ben offered the price as a cousin, not in business relationship.

Step 4: A logical conclusion should flow from the above steps

To conclude, the contract between Ben and Jaeger is legal validation since the element of intention and consideration was met. Therefore, Ben must take responsibility for solving this matter to Jaeger.

REFERENCE

List of case referred to:

Carlill v Carbolic Smoke Ball Co. [1893] 1 QB 256

Ermogenous v Greek Orthodox Community of SA Inc [2002] HCA 8; (2002) 209 CLR 95

Esso Petroleum Ltd v Commissioners of Customs and Excise [1976] 1 All ER 117

Havey v Facey [1893] AC 552

NM Superannuation Pty Ltd v Baker (1992)

Partridege v Crittenden [1968] 2 All ER 421

Pharmaceutical Society of Great Britain v Boots Cash Chemists (Southern) Ltd [1953] 1 QB 401

Stylk v Myrick (1809) 2 Camp 317; 170 ER 1168

Thomas v Thomas (1842) QB 851

List of other sources:

Graw, S., Parker, D., Whitford, K., Sangkuhl, E., & Do, C. (2017). Understanding Business Law (Custom publication for Curtin University: Business Law) (3rd ed.).

Vilee, M. (2018). Learning Module 3 – Making a contract.

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