The importance of contracts, especially in trade, is a  subject that spurs a lot of interest among individuals and governments. Importantly, valid contracts facilitate trade and commitment by creating a binding and enforceable agreement among various parties. Simply put, a contract is an agreement between two parties in which one of them commits to giving a consideration when the other fulfills a specific engagement. In the formation of a contract, parties must use terms that do not infringe on the rights of the other party. In addition, the contract must be made in such a way that the terms used do not lead to misinterpretation of the contract itself. Importantly, the parties in a contract must check on the enforceability of the contract. In this case, they must check on the vitiating factors in the establishment of the contract. Finally, these individuals should establish means of settling damages in case they arise. This paper will analyze the case of Winnie v ERF and Eva.
The Formation of the Contract
Issue: is the agreement between Eva and Winnie go with an Invitation to Treat
In the agreement between Eva and Winnie, the display of the hotel premises and services was in itself an invitation to treat; it was not an offer. Basically, an invitation to treat is a disclosure of parties willingness to enter into a contract. In the case between Pharmaceutical Society of Great Britain v Boots, Court of Appeal (1953), it was held that an offer is made once the seller accepts the consideration offered by the buyer. Otherwise, the mere display of products is not an offer. In this case, a pharmaceutical company allowed shoppers to pick medicines at the counter, such as in a supermarket. Later on, a pharmacist would approve the medicines and the cashier would charge the customer. In essence, an offer to sell medicine was made only when the pharmacists accepted that the medicines were appropriate for the customer and payments were made. When ERF displayed the products that it serves its customers on its website, it was making an invitation to treat. This is similar to a supermarket display its products on the counter. It was at the point when Winnie approached Eva requiring for her services that she started to make a contract. Therefore, a mere display of services offered by ERF in itself is not an offer; it was simply an invitation to treat.
Agreement
An agreement is the first procedure in making a contract. It was witnessed in the contract between Evan and Winnie through a meeting of the minds. It is characterized by an offer and acceptance. An offer is an agreement made by one party to pay a consideration to the other when he/she performs a certain engagement. There was an offer when Winnie decided to pay Eva $20,000 for the provision of wedding services. Noteworthy, an offer is limited by various factors such as time, death, and failure. In this case, most offers are limited to a specifically defined time. Additionally, an offer fails to occur when one party dies or fails to fulfill a specific condition. Basically, an offer can be presented in the form of a letter, e-mail, behavior, or a fax.
In Carlill vs Carbollic Smoke Ball Company, the judge said that an offer was made when the latter promised to reward anybody who became infected with influenza after using its Carbolic Smoke Ball. In a similar situation, Eva made an offer to Winnie when she told her she would offer the wedding services for $20,000 if she agreed to pay a down payment of $10,000.
Time
The contract between ERF and Winnie was from 5 pm until midnight on the wedding day. The use of specific time when the contract was running made it valid. As aforementioned, the formation of a contract is always limited by time. In this case, a contract is usually expected to be in existence within the reasonable time, or as per the contract’s agreed timelines. In the Carlill v Carbollic Smoke Ball Co. case, the court ruled that time is an important aspect in the formation of a contract. Further, the court also clarified that where there is no set deadline, a contract is said to be in operational for a reasonable time. Therefore, although the event did not start as early as expected, the 7 pm time when it started was within the contract’s requirements. In light of this
Acceptance
For an agreement to be valid there must be acceptance of the offer. In this case, an acceptance occurs through an unequivocal statement that is oral, written, or through conduct. Through her conduct of making payments to ERF according to clause 4, Winnie demonstrated her an unequivocal acceptance of the offer. In the Carlill v Carbollic Smoke Ball Co. the court said that conduct is a sufficient indicator of acceptance. In this case, the plaintiff did not have to tell through writing or orally that she had accepted the offer. Her conduct of taking the Carbollic Smoke Ball was sufficient acceptance. Further, an offer is only accepted by the person to whom it is directed. In the Crown vs Clarke case, the court clarified that acceptance to a contract can only be made by a person to whom it is directed. In addition, the silent enjoyment of the benefits of a contract implies acceptance. In a case between Empirnall Holdings Pty Ltd v Machon Paull Partners Pty Ltd (1988), the court ruled that since the former enjoyed the services offered by the latter silently, it could not imply that it had rejected the offer. In this regard, Winnie cannot claim she enjoyed the services silently without agreeing to the offer.
Certainty
Even if the contract between ERF and Winnie had elements of uncertainty, such is in clause 3 of the contract, this did not invalidate the entire contract. The law requires that a contract must be certain and understandable. However, the presence of uncertainty cannot invalidate the whole contract. In the case between Council of the Upper Hunter County District v Australian Chilling & Freezing Co Ltd [1968] HCA 8; (1968), judge Barwick observed that the presence of uncertainty cannot invalidate the whole contract. In a similar ruling on a case between The Life Insurance Co of Australia v Phillips (1925), a single issue of uncertainty did not invalidate the whole contract. In contracts that have uncertainty, only the vague part is unenforceable.
The Validity of the Contract Terms
            The terms used in a contract are important in assessing if the contract between Winnie and Eva was able to create a legal relationship, if there was an offer, acceptance, a consideration, and if the parties had the legal capacity to make a binding agreement.
Clause 6: ERH is not liable for any damage or harm caused, even by its own negligence.
Issue: Limitation of Liability in the clause 6?
In the contract between Eva and Winnie, Eva acted as the supplier. As a result, she had the obligation to provide a full guarantee on the provision of high-quality service on the wedding day. The Australian consumer law requires a business to provide a guarantee for all the services and products that it offers (Competition and Consumer Act, Schedule 2, Sec 64). In a case settled in July 2013, Hewlett-Packard was fined for false and misleading representations to its consumers and retailers concerning consumer guarantee rights (ACCC v Hewlett-Packard, 2013). With regards to this example, the limitation on guarantee, even to damages caused by Emerald Reef Hotel (ERF), is illegal and unenforceable.
Clause 2: ERH will serve the “Asian Finger Feast” to 100 guests.  Why?
Issue: what is the acceptable quality of clause 2? (good identification)
In the contract between Eva and Winnie, ERF displayed a delicious-looking meal of tray fingers on its website. Further, the menu had descriptions that included sushi, prawns, salmons, teriyaki skewers, a tropical fruit, and prawns. However, the meal served at the wedding did not fit this description. In fact, it was sourced from a discount supermarket. Under the Australian Consumer Law, a supplier should provide services that are of acceptable quality. Simply, acceptable quality refers to the ability of a product to be used for the purpose it is supplied while still ensuring it is free from defects and assuring of its safety. In this regard, if an individual requests for a high grade, he/she must get a high grade. The supply of a second grade, even if it is able to serve the customer’s needs, it is of an acceptable quality since it does not match the order. In a case between Nesbit v Porter, the court ruled that the defendant had not supplied products of acceptable quality based on the order. Similarly, the types of food that Winnie was offered by ERF were of a different quality from the one she had ordered. Therefore, it should pay for this misrepresentation.
 
Clause 3: ERH will serve Tropical Punch to the guests for the first 2 hours, thereafter the guests may purchase drinks from ERH’s bar at reasonable prices.[1]
Issue: whether there is an Uncertainty in Clause 3a?
The terms used in the contract that ERF would sell its drinks to Winnie’s guest at a discount were uncertain. In particular, they did not state the discount rates, such as at 70% of their current prices. As a result, this clause is unenforceable. In a case between The Life Insurance Co of Australia v Phillips (1925), the former made a contract with Philip that provided for a facility to access a loan besides granting him the right to enjoy the insurance services. However, the facility of the house loan was uncertain since it did not state the amount of loan that Philip could access. The court ruled that this statement was uncertain, however, the remaining section of the law could be enforced. As a result, the contract was binding. Similarly, the use of the terms “reasonable price” is uncertain. Nonetheless, this statement does nullify the entire contract.
Fit of Purpose
Issue: what is the Fit of Purpose of Clause 3b?
In the event, Eva misled Winnie by recommending her son’s band The Trolls to perform in her wedding show while she was fully aware that it was incapable of singing romantic wedding songs. Consequently, the event turned out to be terrible. The Australian law requires suppliers to offer services or products that fit the required purpose. In this case, a supplier has the fiducial duty of providing commodities that meet the needs of the customer. Evidently, the Troll band was not suitable for this event. In a case of Campbell v Lane (No 2) (2013), the court found the defendant guilty when he sold the plaintiff a horse that could not perform in shows while he knew the intention of the buyer was to use the horse in these shows.
Time: Clause 1
Contracts are binding within their specified timelines. In this case, ERF had an obligation of ensuring that all the events in regards to the wedding were perfect from 5 pm until midnight on the wedding day. Specifically, this case was emphasized in the Carlill v Carbolic Smoke Ball Co. case. Generally, the presence of time was important in showing the period within which the contract was enforceable (Hadley v. Baxendale).
Issue: what is the Termination of Contract in Clause 5?
            The clause on termination of the contract was important in indicating how the losses would be shared in case Winnie decided to frustrate it. According to the Australian law, parties that have entered into a contract should not breach its terms. In the event of a breach, such as frustration, which may occur if the groom decides he will not wed Winnie, the losses lie where they fall. In the Taylor v Caldwell (1863), a fire broke out and burnt down a cinema hall that the plaintiff had hired. In this case, the judges ruled that since no party had foreseen of such an eventuality, the losses would lie where they fell. In the contract between ERF and Winnie, the losses would fall on Winnie if she decided to revoke the contract once it was operational. In this case, she would lose her deposit. In general, a breach of contract gives the non-breaching party the right to terminate the contract without any cost. Further, if there is a frustration, the parties in a contract have to absorb the losses that they have each suffered without any claim.
Vitiating Factors of the Contract
A valid contract, such as the one between Eva and Winnie may be avoided due to the presence of possible vitiating factors in the contract. Most of these factors involve some unfair and unjust means.
Misleading or Deceptive Conduct
The contract between Eva and Winnie had various issues of misrepresentation from both parties. There was misrepresentation through silence when Winnie failed to disclose that besides holding a wedding, the wedding would also be showcasing her wedding dresses. On Eva’s side, she failed to disclose that the Troll was her son’s band, which played rock and metal music and not romantic wedding songs. Noteworthy, in misrepresentation, the party that misrepresents always stands to gain from this act. For instance, it is likely that Winnie would have been charged more fees if she had (need a case) disclosed that her wedding would also be displaying her dresses. Therefore, by misrepresentation through silence, she stood to benefit. On Eva’s side, if she had disclosed that her son’s band does not play romantic wedding songs, it would have been denied the opportunity to perform in the wedding.
In a case of Caffey v Leatt-Hayter (No.3) (2013), the defendant misrepresented facts in the pre-contractual negotiations. In this case, Mrs. Leatt-Hayter (Vendor) entered into a contract with the Caffey’s (Purchasers) for $1.9 million. In the advertisement of the business, the vendor had said that the Australian government would be issuing more funds to libraries due to the increase in population. Moreover, the business was in good condition and its main competitor Adelaide Library Service (ALS) was having operational difficulties. However, court findings disclosed that the Vendor was aware of the government’s plan to reduce funding to libraries, which would have resulted in a reduction in the price of the library business. In addition, ALS was performing much better than Mrs. Leatt-Hayter library. Specifically, the failure to disclose all relevant information such as the reduction in funding made the vendors lose the case. Similarly, Eva and Winnie had issues with misrepresentation through non-disclosure of important information.
Unfair Terms of Contract
There were various clauses in the contract between Eva and Winnie that resulted in unfair terms of the contract. In particular, ERF used statements such as:

  • In small writing at the end of the contract: “Substitutes may be used at the hotel’s discretion.” (For the “Asian Finger Feast.”){ hotel’s discretion}
  • In small writing at the end of the contract: “Tropical Punch is a secret recipe and its contents cannot be disclosed.” {secrete receipt}
  • ERH is not liable for any damage or harm caused, even by its own negligence. {not liable}

In the Australian Consumer Law, section 23 provides that a contract is unfair if  the terms used in it are unfair, a contract is a standard form, the contract can continue to be binding without the use of the unfair terms, and the agreement is a consumer contract. Section 24 emboldens this law by giving an in-depth interpretation of the meaning of the words unfair. In this case, an unfair consumer contract refers to an agreement that results in a significant imbalance between the parties, it is detrimental to one party if it is applied, and it is not necessary for the agreement.
The terms used by ERF are unfair since they give the hotel the right to adjust the customer’s menu, and contract without consulting him/her. Further, they also limit their liability, notwithstanding their unlawful acts. In a case of ACCC v ByteCard Pty Limited (2013), the court ruled that ByteCard Pty Limited had used unfair terms of contract with its customers. Similarly, the right to alter the menu that the client had ordered and lack of any liability on the part of ERF for any wrong doing was the use of unfair terms in the contract.
Mistake
The contract between Winnie and Eva did not have an element of mistake. In general, mistakes occur when one or both parties are unable to understand the terms of the contract. Mistakes are usually classified as common mistakes, mutual mistakes, and unilateral mistakes (McRae v Commonwealth Disposals Commission). In general, parties to a contract are bound by what they agree, however, under non est factum rule, if an individual can prove that he/she did not understand the contents of the document that he/she signed, he may not be bound by it. In this regard, an individual may prove that he/she was a minor, illiterate, or mentally incapacitated at the time he signed the document. In Cooper v Phibbs (1867), the court ruled that in cases where there are mutual mistakes and apprehensions, the agreement should be set aside since it proceeded from a common mistake. When Winnie signed the contract with Eva, she believed that they were talking about the same music band, “Troggs,” which was capable of playing a romantic wedding song. On the contrary, Eva was talking about the “Trolls,” her son’s music band. Therefore, Winnie made a mistake and she has a right to retract from this agreement. Specifically, if she had paid any extra charges for the music band, she should be refunded.
Remedies and Damages Available to Winnie
Misleading and Deceptive Conduct
Eva should compensate Winnie for the losses that she suffered by providing her with an incompetent music band. The provision of an incompetent band made Winnie’s wedding not to be attractive. Primarily, it damaged the most important element of the contract, which was organizing a colorful wedding. Therefore, ERF is bound to compensate for the provision of a poor quality band while it was fully aware that Winnie wanted a band that could sing in a wedding. In a case of Campbell v Lane, the court found the defendant guilty when he sold the plaintiff a horse that could not perform in shows while he knew the intention of the buyer was to use the horse in these events. In its ruling, the judges made the defendant pay the plaintiff for the losses he had suffered.
Winnie made a misrepresentation to Eva when she failed to disclose material information that her wedding would also be showcasing her clothes. Ordinarily, such a disclosure would have resulted in her been charged more fees. Therefore, through her non-disclosure, she was able to have some financial gains. In light of this, ERF cannot compensate Winnie due to her nondisclosure of material facts. In a case between Commercial Bank of Australia v Amadio, the court ruled that the non-disclosure of material facts by the former had resulted in Amadio making a guarantee, which he could not ordinarily make. Therefore, the bank could not claim the guarantee from Amadio.
Unfair Terms and Illegality of the Contract
Despite the presence of unfair terms of the contract that exonerate ERF from liability, the hotel would still be bound to pay Winnie for the damages. According to the Australian law, all suppliers have a duty of providing a warranty of the condition of goods and services that they offer. Therefore, the clause that the hotel is not liable for any loss is illegal. In a case settled in July 2013, Hewlett-Packard, a computer hardware company, was ordered by the Federal Court to pay $3 million as a civil pecuniary penalty since it had made false and misleading representations to its consumers and retailers concerning consumer guarantee rights (ACCC v Hewlett-Packard, 2013). Further, the Australian Consumer Law required suppliers to provide high-quality goods o their customer. As ruled in the case between Australian Competition and Consumer Commission (ACCC) v Reckitt Benckiser (Australia) Pty Ltd (Reckitt Benckiser), the court said that all suppliers have a duty of selling goods that are of acceptable quality.
Further, the Australian law protects consumers against unfair terms used in contracts. In particular, the use of unfair terms makes a contract void (ACL, Competition and Consumer Act, Schedule 2, Part 2-3). However, since Winnie was unaware of the illegality caused by the use of these terms, she is not bound by them. In this case, the court will expunge the unfair terms of the contract. In a case of ACCC v Bytecard Pty Limited (2013), the court fined Bytecard Pty Limited for using unfair terms of trade. By this act, it is clear that ERF would have to compensate Winnie for the poor quality of food, drinks, and overall service that they offered on her wedding day.
In the calculation of damages, the court will have to make a balance on the cost of damage that each party in the contract suffered. In addition, it will ignore the unfair parts of the contract. The court will penalize ERF for offering low and poor quality meals that did not meet the acceptable standards. Further, ERF will also pay for the provision of a poor quality music band, the Trolls, who were unfit to perform in a wedding. On these two incidences, it will pay the entire cost suffered by Winnie. On the damage caused by relocating the wedding to the backyard, ERF will pay damages for making a shoddy and unfit venue in the backyard. Generally, since the storm has ever hit the hotel before, this was an event that the hotel could anticipate and plan itself accordingly. Since Eva had warned Winnie of this possible mishap, she will not be fined for relocating the venue. In addition, the occurrence of the storm is a natural event that the hotel could not stop.
On Winnie’s issues, she will have to pay the losses that ERF suffered for the non-disclosure of her agenda of using the wedding to promote her business. Notably, if the wedding had happened as planned she would have made a lot of money by fraudulently using the wedding grounds to promote her business. Therefore, she cannot use the excuse of a poor wedding presentation by ERF as an excuse for nonpayment. In this case, the penalty will be the difference between the fee she would have paid if she had disclosed this motive and the one she actually paid.
To sum up, all parties in a contract have a duty of avoiding misrepresentation of facts. In addition, service providers and manufacturer should use fair terms of trade to protect the interest of their customers. Moreover, individuals entering into a contract should ensure that the terms in the contract are legally enforceable. In this manner, parties in a contract are able to engage in it with the full assurance that their interests are safeguarded.
 
 
 
 
 
Bibliography
ACCC v Bytecard Pty Limited (Federal Court, 24 July 2013, VID301/2013).
ACCC v Hewlett-Packard [2013] FCA 653.
Australian Competition and Consumer Commission v Reckitt Benckiser (Australia) Pty Ltd (No 4) [2015] FCA 1408.
Caffey v Leatt-Hayter [No.3] [2013] WASC 348.
Campbell v Lane (No 2) [2013] QCATA 307
Carlill v Carbolic Smoke Ball Co. Court of Appeal [1893] 1 QB 256; [1892] EWCA Civ 1.
Crown v Clarke (1927) 40 CLR 227.
Commercial Bank of Australia v Amadio (1983) 151 CLR 447; [1983] HCA 14Cooper v Phibbs (1867) LR 2 HL 149
Council of the Upper Hunter County District v Australian Chilling & Freezing Co Ltd [1968] HCA 8; (1968) 118 CLR 429.
Empirnall Holdings Pty Ltd v Machon Paull Partners Pty Ltd (1988) 14 NSWLR 527.
Hadley v. Baxendale, 156 ER 145 (1854)
H B F Dalgety Ltd v Morton [1987] 1 NZLR 411 Jurisdiction: New Zealand Court: High Court 26th June 1987
Nesbit v Porter [2000] 2 NZLR 465 (CA)
Pharmaceutical Society of Great Britain v Boots, Court of Appeal [1953] 1 QB 401; [1953] EWCA Civ 6; [1953] 1 All ER 482, [1953] 2 WLR 427.
Taylor v Caldwell [1863] EWHC J1 (QB), 122 ER 309, 3 B & S 826 (6 May 1863), King’s Bench
The Life Insurance Co of Australia v Phillips (1925) 36 CLR 60.
[1] In small writing at the end of the contract: “Tropical Punch is a secret recipe and its contents cannot be disclosed.”