Answer all 4 questions.
1. Margaret owned an antique store that specialised in rare porcelain dolls. When she
opened the business in 1989, it was at a shop in an eastern suburb of Melbourne. In 1999
she started to advertise on the Internet and by 2006 the business had grown to the point
where she needed help to keep the business going. After a family discussion one night at
the kitchen table in July 2006, it was agreed that Margaret would probably keep the
business going for another couple of years and then retire. Emily, her youngest daughter
and aged 16, would work in the shop as long as was needed and in return, she would
receive any unsold dolls. When Margaret retired at the end of 2009, she decided that she
would give the unsold stock to charity and they could auction it and keep the proceeds.
Advise Emily.

2. Richard, an impoverished university student, and his millionaire father enter into an
arrangement where Richard agrees that he will keep the front- and backyards of the
family property mowed, and he will ‘do a bit’ to keep the gardens looking tidy. In return,
his father agrees to pay him a weekly allowance of $200. His father had previously used a
garden contractor to do the job and paid him $350. They live on a one-hectare property,
and the mowing alone takes half a day a week. After four weeks, Richard’s father tells him
that he can’t afford to pay $200 a week. He says that Richard should be doing the work
for nothing, as it is the responsibility of the whole family to look after the property;
besides, he says, Richard is getting free board and lodging. Advise Richard.

3. Jenny received a circular from Beauty and the Beast Hair Salon advertising massages and
manicures for $10. Realising that this was an exceptionally good deal, but not surprised
because she knew that they had only just opened and were running a number of good
opening specials, she rang and made a booking. When Jenny arrived at the salon she was
told that there had been a mistake on the circular and it should have said $100. The
manager of the salon explained that this was still a good price because normally a
massage and manicure would have cost $150. Jenny was furious, as it had taken her 30
minutes to get to the shop by car and if she had known it would cost $100, she would
never have made the booking. Advise Jenny. Would your advice have been any different if
Jenny had the massage and manicure before being told that the cost was $100? Would
she have to pay the full price?

4. Bruce, while he was so drunk that he didn’t know what he was doing, bid successfully at
an auction for the purchase of a house. It was clear to the auctioneer that Bruce didn’t
know what he was doing. However, after Bruce sobered up he confirmed the contract
with the auctioneer. He then subsequently refused to complete the contract. Is Bruce
HA2022 Business Law, Tri 3, 2011



  1. 1.     Facts of the case:

Margaret owned antique stores of porcelain dolls from 1989. As the business started growing she wanted to take in assistance from her family for which she had her daughter Emily join the business, who would be receiving the unused dolls in return for her work at the place. Latter when Margaret decided to retire she decided to give unsold stock to charity. This decision was taken with Emily still working for her. We need to advice Emily as to what should be her further step.


As per business law it can be understood that Margaret being the sole owner of the shop has the right to give in her shop for charity at her will and wish. But the question in contradiction is her promise to Emily for helping her. Before advising Emily her further steps we check through the relationship of Margaret and Emily in the business and it can be understood that the business if of employment because Emily was promised to receive the unsold dolls in return for her work in the Shop. The law states that the person in status of an employee can take refuge in law if the employer breaches the terms of the contract of their employment. It can be understood here that Margaret in order to reduce her hectic work had taken help of her daughter and promised to give unsold dolls in return i.e., the dolls which she is planning to give in for charity were the dolls she had promised to give Emily. Thus, Emily can be advised to approach this issue with reference to Law of breach of contract or agreement whether it is oral or written.

Application of the Law:

Emily as per the acceptance based on which she had joined the shop to help her mother can file a suite under the law of contract and the laws relating to the breach of promise her mother made with her. Under the breach of contract law it can be noted that the employee has all the freedom to approach any court whether local or the district if the employer is default in the payment of the promise made (Carroll & O’Dea). In the given scenario Margaret had promised to give Emily the unsold dolls but latter she decides to give it for charity thus; she had breached the contract which she had made with Emily.


We advise Emily to file a suit against her mother for default in giving her the unsold dolls and planning to give them for charity or make an out of court settlement by dividing the sale proceeds between the charity and her compensation (Benson Benjamin, 1990). It can be concluded that charity is a good deed but it would be a pitfall if it enters family business (Small Business Reports) and in the current scenario it had affected Margaret as she decided to give the unsold dolls on Charity which she had promised to give her daughter for the work she had done in her shop. In a way Margaret is depriving Emily from her right of compensation for the work she had done in her shop.

  1. 2.     Facts of the case:

As per the facts of the case it can be noted that Richard a student enters into an arrangement with his father for mowing the front and backyards of the property and keep the garden tidy, in course of completing this work his father would give him weekly allowance of $200, which his father denies after 4 weeks of the work which took Richard half a day every week. On the other hand Richard’s father gave $350 for the same work to the contractor. Richard’s father not only denied the payment but stated that Richard should continue the work of keeping the property clean as it is the duty of all the family members to keep the house and the property surrounding it clean. Being a family member Richard was bound to do the same.


As per the given facts of the case it can be understood that there was only an oral promise between the father and son relating to the mowing of the yard and also the payment. Richard in the current scenario can claim his remuneration from his father because an agreement or an arrangement is legal even if it is verbally made. As per the facts it can be understood that the father had agreed to make payment and had made it for 4 weeks thus he cannot deny the payment by just saying that Richard is a family member and that he has to take care of the house property. Under sec 1341 of the law of contract it can be noted that a contract between the father and son cannot be simply modified if the father is in the capacity of fulfilling the contract.

Application of Law:

As stated Sec 1341 of the law of contract is applicable in the current scenario where the father has to abide by the contract he had made with his son, he cannot just deny payment because he had accepted the work of the son for 4 weeks and even made payment for the same which shows that there was mutual assent between both father and son in the current scenario. Also, the point regarding the payment of additional $150 to the contractor can also be considered for the argument because when the father is ready to give $350 to the contractor, how could he deny the same with his son for just $200.


We advise Richard to demand his pay from his father or file a suit against him even if the arrangement made between them was oral. Also it can advised that the arrangement between the father and son became a valid contract when the work of the son was accepted by the father and in turn father had given weekly allowance for 4 weeks. Thus, as per the law of contract under the business law of Australia the son in the current scenario has the right to claim his compensation as the father has the capacity to pay the money demanded for.

  1. 3.     Facts of the case:

Jenny received a circular from Beauty and Beast hair saloon advertising for massages and manicures for $10. Feeling it to be a best deal she rang the place and made a booking. Later when she arrived at the saloon she understands from the manager of the salon that it was $100 and not $10 and the manager also explains her that it was still a good price because massage and manicures would have cost $150. Jenny felt cheated and also gets frustrated because she had to drive 30 minutes to this place and if she would have known the price to be $100 she would have never come in the first place.


From the facts of the case it can be concluded that it is an issue under the law of miscommunication, the fault lies both with the manager of the salon and also Jenny because neither of them discussed the cost of the massages and manicures when the booking took place. This case falls under the brackets of Mistake of facts, because Jenny had mistaken the value as per the circular and approached the saloon for booking. Under Sec 11 and 12 of the Law of Contract it can be understood that the value of the massage and manicure of the saloon was mistaken to be $10 by Jenny. This mistake can be termed to be the mistake of reliance that is mistake of facts or the mistake of the anticipated facts.



Application of Law:

As stated earlier sec 11 and 12 of the law of contract is applicable in this scenario. But a counter argument can be made if the circular sent to Jenny did contain $10 but the manager argued it to be $100 because in such circumstances Jenny had the proof of the circular such that she can demand back certain compensation. But the facts state that she directly booked the saloon thinking it to be $10 seeing the circular.


In the given case there are two different situations addressed, i.e., advising Jenny what to do when she got to know the cost to be $100 and not $10 and secondly what would be the situation if she would have come to know the price after completion of the massage and manicure. We advise Jenny that she cannot claim any compensation as there is a proven mistake of facts and the anticipated facts, on the other hand if she would have come to know the cost after the completion of massage and manicure then she would be advised to make the full payment. If as argued earlier the circular did say $10 but the manager argued it to be $100 then making the circular as evidence Jenny can be advised to claim back the amount in case she came to know the price after she had got the massage or manicure done and secondly she can claim certain compensation for travelling 30 minutes to the salon referring the value to be $10 as per the circular. But as the facts say the situation of Jenny can be termed as mistake of facts and thus she is advised not to claim anything.

  1. 4.     Facts of the case:

In the given facts Bruce in a drunken situation bid at an auction successfully for purchasing a house. It was clear in the auction that he did not know what he was actually doing. Once he sobered he confirmed the contract with the auctioneer. He subsequently refuses to complete the contract. Is Bruce bound to make the payment?


As per the given facts of the case it can be understood that Bruce had made the auction when he was not in the capacity to the contract, i.e., he was in a drunken situation. As per law of contract it is understood that a drunken person does not have the capacity to enter into any contract because they would be in a position not understanding what they are actually doing. But the issue here is Bruce accepted the auction when he sobered thus he is bound to make the payment to the auctioneer. Only if Bruce would have not accepted the auction after becoming sober he would not have been bound to the contract. In the current scenario law of contract and the parties capacity to the contract is to be considered.

Application of Law:

Under the regulations of Law of contract we understand that a contract made by a minor, drunken person or insane person is void thus as per the given facts in the first scenario we can considered this auction by Bruce to be void because he was in a drunken stage and even the auctioneer knew that Bruce had no knowledge of what he is actually doing, but this law cannot be applied as per the later stated facts because after becoming sober Bruce accepted the contract with the auctioneer and thus made it a valid contract. As per the law of contract a contract becomes valid if the acceptance for the offer is made without coercion or during incapacity. We know that the auction was made by Bruce when he was not in a capacity to understand what he was making and thus his acceptance to the offer was also not valid, but the acceptance made after becoming sober and having knowledge of what he doing, Bruce has bound himself to the performance of the contract as he had given his acceptance in state of soberness.


As per the facts of the case it can be concluded that Bruce is bound and liable to make the payment to the auctioneer because he re-accepted the auction when he was sober and thus he was in the capacity to enter into the contract and the contract is a valid contract and thus, Bruce is bound to make the payment.




o   Herbert William, Laws of Contract, Sec. 11. (I) Causes Of Misreliance: Mistake Of Fact And Mistake Of Law; Sec. 12. Same : Mistake Of Anticipated Fact;

o   Law of Contract – Business Law Australia.

o   Alferitz v. Ingalls, 83 Fed. 964.


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