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Australian Consumer Law: Offer, Acceptance and Invitation to Treat Essay Example

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Australian Consumer Law: Offer, Acceptance and Invitation to Treat

Offer, Acceptance and Invitation to Treat

Case Background Analysis

In order to determine the existence of an agreement between two parties, an offer -acceptance analysis was used to approach this case. In this case, Lindsay shows the willingness to enter into an agreement with Herman, in which he has some terms; pay a total of $25000 after refuting the $20,000 deal, owing to the fact that he held the Holden dear to him. This made Herman not to let go of Holden, making the bid void again. Therefore, the bid was no offer due to the meager price statement that was made by Herman. Thus, further concessions should be made for a property worth a monetary exchange (Pearson & Batten 2010, p. 117). Auctioneers are mere agents of the owners of the property, and are less favored concerning offers which are made towards the concerned parties. For acceptance to take place during an auction, it is depicted by the fall of auctioneer’s hammer. Herman never dropped the hammer on his final bid, but alternatively accepted to change the ownership of the Holden at a more increased price. Therefore, there existed no legal binding between the two parties since Herman refused to accept his last bid. Thus, the auctioneer had breached the contract with the highest bidder. The contract is hence void because it is unfair, and lest does not continue to operate.

In tradition, we required both offer and acceptance in order to enter any form of contract. An offer is an induction of one party’s willingness to enter into a binding contract with the party to whom it is addressed, as soon as the latter accepts its terms. On the other side, acceptance is an agreement to the terms of the offer. In our case, we are presented with a case where the owner of the car, Herman (offeror), offers to sell his car to Lindsay as quoted price $25,000, but Lindsay declines acceptance, although she is willing to buy the car at a lower price quoted at $ 20,000. Initially, Lindsay does not agree to the terms of the offer; in this case, there is no binding contract as this buyer is reluctant to enter into a contract with Herman, suggesting more time to make up her mind (Pearson & Batten 2010, p. 46). Thereafter, Lindsay accepts the offer, this is evident in her action of proved through writing a letter, only to withdraw her intension by retrieving the letter, since she is sure of getting a similar car thereafter in the form of a gift.

Lindsay in her action has accepted the offer requirements. This suggests that the contract remains binding, unless unexpressed willing to negotiate with Herman. Under this circumstance, Lindsay has the obligation to respond to her commitment, as Herman is aware of her interests in purchasing his car (Pearson & Batten 2010). In identifying whether the contract has been formed, we do not have to focus on the parties’ actual intensions. But rather, focus on what each party’s intention reasonably appeared to be to the other party. In our case, we view the intensions of Lindsay toward the offer presented by Herman.

It is evident that Lindsay was willing to pay the $ 25,000, indicating that she would then collect the car during the week that followed. This in contract law is binding, as Herman had placed an offer initially; Lindsay failed to give in to the terms of the contract, but later on she accepts Herman’s offer in buying the car. This is reflected in her intentions of writing a letter of acceptance, which ultimately does not reach Herman physically, but rather her offer -acceptance message, ultimately are delivered to Herman. This makes it binding unless the two parties come to renegotiate terms of the offer. In working out whether there is a valid offer and acceptance, the court will take in to account factors other than the apparent intension of the parties (Pearson & Batten 2010, p. 22).

Lessons from the Case

It is evident that there are conceptual reasons as to why a contract may involve aspects of offer and acceptance. This is normally a legal concept that we invent to aid in explaining terms of the offer and acceptance (Pearson & Batten 2010, p. 155). More importantly, we are able to look at the wider aspects of the contract other than party’s intent, in determining what duties and rights, if any; they should have under the law of contact.

In addition, it is important that offer and acceptance terms be used as a way of analyzing the frequent witnessed situations and presence of the same, sufficiently to establish a contract. On the contrary, it might not be required in a contract; we do not fit all situations in the offer and acceptance to use it as a tool of evaluating whether there is a valid contract (Pearson & Batten 2010, p. 193). A more general lesson is that there is nothing wrong with taking into account other factors than the parties’ intent, when working to establish whether it should be termed as a contract, and what rights and responsibilities have to be considered as an ‘offer acceptance contract’ .

There are various contracts that exist in the business world, though some of them are bound to fail. Therefore, for the survival of a simple contract, one of the associates must make an offer, and the other associate acknowledge the offer or reject the same. Thus, a bid is characterized by equivocal expressions to the other party, to show a tendency of having a binding agreement on the terms relayed to the other party, that is, the offeree (Pearson & Batten 2010, p. 44). The offer could be made to a specific party, for instance, in this case Lindsay who finds herself in a dilemma, whereby she has to abandon a tough deal for a soft free deal anticipated to be a gift. Usually, during an agreement, it indicates that the structure which acceptance is enabled and the time limit for the bid. In this event, this will be a self-terminating pact. In the case of Lindsay, it has no time limit. In this event, according to the court, one may offer an expiration date after some duration, eventhough the offerer may not have revoked the bid (Pearson & Batten 2010, p. 78).

An unfair contract term is a term that grounds a party to a defined contract. More often, this term involves trading practices that work to the disadvantage, yet the term does not reasonably promote protection interests of the other involved party; in this case, we refer to supplying business. Normally, unfair term is written in a standard form before the contract term arrangement. Unfair agreement terms often have been identified to be causing a significant disparity in the parties’ rights and obligations under contracts. This is specifically evident in standard form contracts (Pearson & Batten 2010, p. 288). For instance, term specifying that a business may alter other terms of contract without notifying the consumer is one example of this unfair contract term.

A standard form contract is an agreement created by the business entity earlier in advance of the agreement being made, as the terms of the contract are not negotiated separately with each purchaser. In assessment, a negotiated term has to be agreed upon by the business and each buying party. Standard form agreement includes rental car agreements, among many other contracts (Pearson & Batten 2010, p. 221).

Initiatives created to safeguard the involvement of Consumers in trading activities, has been increased through provisions that has significantly expanded under the newly proposed laws, rapidly influencing revising actions in Australia’s practiced laws. Borrowing from Pearson and Batten (2010, p. 292) arguments, amendments featured where expected to come into cause, provides that unfair terms in contracts are declared invalid and unenforceable. Most of business ventures contract with clients using standard form agreement, and prefer to be affected by the new laws, and may need to reassess the terms of their contract in addition to the risk management practices.

Unfair Contract Terms

In mid June 2009, the trade practice modification bill of the Australian consumer law introduced by legislation, had an objective of inserting new schedule into the trade practice laws. In the bill, the Australian consumers are further protected by the improved consumer provisions. This improved measure so far, expands the existing consumer protection in the earlier TPA laws. The newly adopted laws are an imitation of the already existing unfair contract acts in Victoria. The critical element of the changes made in this newly adopted consumer law terms that are deemed to be unfair remains enforceable. On the contrary to the existing contract terms, these unfair contract provisions only apply contract arrangements that deal with consumer contracts (Pearson & Batten 2010, p. 189). In Australia, consumer contract laws are deeded binding if they fall in either:

  1. A supply of goods or service

  2. Sale, grant of interest in land

These can be to an individual whose acquisition of goods, service or investment interest is wholly achieved for personal use. Under this circumstance, there is no minimum or maximum value of contract cut-off point, when determining whether the contract falls under consumer contract or not. Introduction of a consumer contract is deemed invalid, if the term applied is unfair and the contract is standard form. The contract will continue to be binding for both parties if only; the agreement gives room for the parties to operate without unfair terms.

Justification of the Regulatory On Unfair Contract Terms

The proposed laws would work in accordance to the global laws governing consumer-seller practices. The prohibition proposed relates to the unfair contract terms that have been in place for a reasonable period in United Kingdom and in Victoria, which are parts of this region where the acts have served previously. Take for instance, the 1993 act of the European Union directive (93/13EEC), the unfair terms included in consumer contracts (Pearson & Batten 2010, p. 294). This act was considered by the Australian productivity commission in its review of country’s consumer policy framework, an idea that saw the provision by the commission recommending increased changes to address issues of unfair contract terms along the line. This was aimed to boost fair trading terms as provided in the Victorian fair trade act. The regulatory intervention is only justified if there is an identifiable problem that the intervention will address. In standard form contract, straining the concept of offer and acceptance to a point that conventional concepts of the contract law and the freedom of the contract become artificial; under this kind of contractual terms, the consumer has no opportunity but to read and understand, or even negotiate terms laid on the standard form agreement they are involved in.

This is part of the example of the terms found in standard form contracts seem to be unfair on how they allocate risks to consumers rather than the suppliers as they limit customers rights in a way that is deemed unbalanced. Often the legal remedies and protections available to consumers against terms of the contract that they deemed to have agreed to, are very limited terms (Pearson & Batten 2010, p. 183). The newly adopted provisions are able to significantly change the prevailing landscape in which property owners and developers negotiate contract terms with individuals at any term in a standard form agreement that is deemed unfair is invalid, and it is automatically un-enforceable. In light with new unfair contract terms regulations, businesses have to be prepared in adjusting the way in which they deal with individual consumers. This may include;

  1. Take note of whether consumers are making purchases for investment reasons, or for personal use.

  2. They have to show the willingness to negotiate the terms of the contract with their consumers, while keeping a detailed negotiation record.

  3. Obtain acknowledgement from their consumers that they are aware of terms of the agreement, and fully understands them; this explains cases where the contract seem to favor one side over the other party.

  4. It remains important for business standard for consumer contracts to be reviewed prior to its effective use, so as to ensure that the terms are not at risk.

Enforcement and remedies

The ACL provides that consumer law enforcement agencies with improved powers to the act following contraventions or suspension were largely left to the courts. This has since changed as the newly adopted law enforcement power allows them to issue court-enforceable undertakings. Courts too are provided with a range of statutory remedies for this kind of breaches of provisions under ACL (Pearson & Batten 2010, p. 315). This provides consumers with the rights in a comprehensive legislation with a greater enforcement and penalties to business. The law provides enforcement measure needed; this means that sellers and agents will not only ensure that there is no misrepresentation made, but also there is no unconscionable conduct, and if their contracts are either not considered to be standard form. In cases where they are, then unfair measures are not incorporated (Pearson & Batten 2010, p. 254).

The business has to be aware that due to the increased risk posed in the standard form contract terms, the proposed laws introduces the potential of increasing insurance premiums as well as compliance costs in general (Pearson & Batten 2010, p. 145). This kind of cost will ultimately be bared with the consumers. With an increased upfront price which is payable by consumers under the standard form agreements, the proposed law helps both consumers and regulators to impose challenges and increased scrutiny measures against standard form terms of the contract. This makes it more difficult for business operators to enforce their trading terms.


Pearson, G & Batten, R 2010, Understanding Australian Consumer Credit Law: A Practical

Guide to the National Consumer Credit Reforms. CCH Australia Limited, Australia.