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Question 1A Issue The legal issue is whether a valid contract was formed between Gary and Brenda and the effect of the communication between the two parties Relevant Law/ Rule Invitation to treat Generally, an advertisement is not an offer but an invitation to potential customers to make an offer to purchase or enter into a contract. An invitation to treat is a statement supplying information about a product and the price. The supplier of the information invites other parties to make an offer to form a contract. An invitation to treat essentially means that potential customers are invited to make an offer. The invitation to treat translates into an offer once the potential customer communicates the offer to the advertiser. The potential customer becomes the offeror by making an offer to enter into a contract. The advertiser becomes the offeree. The offeree's acceptance of the offer made forms a valid agreement. The four essential elements of a contract are offer, acceptance, consideration, and the intention to be bound. Offer An offer is a party's expression to enter into a contract. Without an offer, there would be no contract. When one party makes an offer, the other contracting party can either accept, reject, or give a counter offer. The main elements of an offer are communication, commitment, and specific terms. Revocation of an offer Revocation is the offeror's withdrawal of an offer made. After making an offer, the offeree may change his mind not to proceed with the contract. The decision may be due to a change of circumstances, new interests, or other personal reasons. Once an offeror decides to withdraw the offer, he must communicate the withdrawal before the offeree accepts the offer. The revocation of an offer takes effect as soon as it is known to the offeree. The revocation can be done personally or made by a reliable third party. If a revocation is not communicated, it is ineffective. A late revocation is not effective and cannot terminate the offer. A revocation terminates the offer. The general rule is that an offeror is free to revoke an offer any time before the offeree has accepted the offer. Acceptance Acceptance of an offer is when the contracting party accepts the offer made. The acceptance must be expressed in communication or conduct and should not have conditions. Any negotiations that are done after the initial offer are considered as counter offers and not acceptance. An offer can be accepted by communication or conduct. An offeree must accept the offer as per its precise terms if it is to form an agreement. Acceptance takes legal effect once it is communicated to the offeror or action is taken to fulfill performance. Acceptance would be taking legal effect once Jackson signifies his acceptance of the winning bid. Analysis Gary advertised his commercial fishing vessel for sale for $100,000. Brenda made an offer through a phone call to buy the fishing vessel at the advertised price. Gary made an offer to sell the commercial fishing vessel for $120,000. Brenda made a new offer to Gary to buy the commercial fishing vessel at $110,000. Gary did not accept or reject Brenda's offer to buy the commercial fishing vessel for $110,000 but said he would think about it. Brenda did not withdraw the offer before Gary accepted. When Gary called Brenda to accept the offer, Breda had changed her mind but had not communicated her revocation of the offer to Gary. In this case, Gary's advertisement was an invitation to potential customers to make an offer. Brenda made an offer. Gary accepted Brenda's offer before she withdrew it. A valid agreement was formed when Gary accepted to sell the commercial fishing vessel for $110,000 to Brenda as per her offer. Conclusion Based on the above analysis there was a valid agreement between Brenda and Gary. Brenda's contractual liability is to buy the commercial fishing vessel for $110,000. Gary's contractual liability is to transfer ownership of the commercial fishing vessel to Brenda once the payment has been of $110,000. Breda is liable for breach of contract if she fails to buy the commercial fishing vessel from Gary. Question 1B Issues The legal issue is whether there was a valid contract between Gary and Sam for the lease of the fishing vessel at an annual rent of $ 10,000 for ten years. Whether the new promise to charge $ 5,000 annually instead of the agreed $ 10,000 annual charge is valid and whether Sam is obligated to pay the $15,000 that he had foregone for the previous three years that Gary claimed. Relevant Law Consideration Under contract law, a promise must be supported by legal consideration and all the essential elements to a valid agreement to be enforceable. A legally binding contract must have an exchange of value between the contracting parties. The contracting parties must also have intentions to be legally bound by the agreement. Consideration is the exchange of something of value in return for something else, whether it is an action, a promise to act, or a promise to abstain from doing something. It is the price that a party pays to buy the other's promise or action. The following constitutes valid consideration; Consideration must not be adequate. If there is an agreement, parties are free to determine the appropriate consideration. The contracting parties must each receive a benefit, and each suffered a detriment. The exchange of consideration creates a benefit and a burden for each party entering into a contract. Under contract law, a contract may not be enforceable without a valid consideration. For an agreement to be validly modified, the following aspects must be present; Modification of a contract requires new consideration, which is an exchange of value to solidify the agreement. The two parties must mutually agree to amend the original contract and do it in writing. A variation of an existing contract is enforceable if it is mutually beneficial between the two parties. The new agreement should be an amendment to the original contract specifying the new terms that apply. Since the original contract terms were specified, it is crucial to sign an agreement after mutually agreeing to make the modifications. An existing contractual duty is not valid consideration unless there is a new promise. When the existing contractual duty is owed, it may not be used as valid consideration for a new promise unless a party promises a superior performance of the requirement, which might be sufficient. When a contractual duty to do an act exists, it can not be used as consideration for a new promise unless it confers a practical advantage. A variation of an existing contract is only enforceable if it is mutually beneficial between the two parties. Application A new promise must be supported by a new consideration to be enforceable. When a contractual duty to do an act exists, it can not be used as consideration for a new promise unless it confers a practical advantage. By making the new promise, Gary was not gaining any practical advantage beyond the standard of performance specified in the existing contract. There was an existing contractual obligation for Sam to pay $10,000 annually to Gary for the fishing vessel The agreement to pay the extra $5,000 annually did not have a new consideration. In this case, the variation of terms of the contract would not mutually benefit both parties since Gary did not receive anything in return for reducing the annual charge to $5,000.Although Garry signed the new agreement, the original contract was not modified and there was no valid consideration for the new promise. Conclusion Based on the above analysis, there was no valid consideration for the new promise of the reduction of the annual charge to $5,0000. Gary and Sam had an existing contractual obligation that was not modified. The new promise lacked a fresh consideration for it to be enforceable. The original contract remained enforceable. Sam cannot enforceGary's promise because it lacks a valid consideration. Sam has no right to enforce Gary's promise for the rent reduction since Sam did not offer a new consideration for the promise. Sam must therefore pay the $ 15,000 claimed by Gary. Question 1C Issue The legal issue is whether the Port Adelaide Boat provided reasonable notice to Gary about the exemption clause and whether the exemption clause can be part of the contract with Gary. Rule An exemption clause is a contract term that seeks to exclude or limit the liability of one of its parties. It is usually included by a party that aims to reduce or disclaim its liability under a contract. Exemption clauses are binding upon the parties under the following circumstances; Through incorporation in the contract Incorporation of an exclusion clause can either be incorporated by signature, incorporation by notice, or incorporated by course of dealings. Incorporation by signature The clause is only enforceable if incorporated into the relevant contract and signed by both parties. If an exclusion is within a contract, its enforceability takes effect when the contracting parties agree to the terms thereof by signing the contract. In that case, the liability of a party may be excluded entirely. Incorporation notice A party's standard terms are included if they have been reasonably and fairly brought to the other party's attention. For an exclusion clause to be enforceable, the party entering into the contract must be notified about the existence of the exclusion clause. The terms should be sufficiently brought to Jack's notice beforehand. When a customer is unaware of the exclusion clause, and no reasonable steps were taken to bring it to his attention before the contract, the exclusion clause will not be binding. If the terms are brought to his attention after entering the contract, the exclusion clause is not binding. The contract should not be concluded by the time the party is informed about the clause. Once acceptance has taken place and consideration received, the agreement is deemed validly concluded. There should be no new terms introduced after a contract is completed. Incorporation by course of dealings If the contracting parties have had previous dealings in which the court had enforced the exclusion clause, the clause may be binding. This means that the parties are familiar with the contract term due to their consistency in using the same. In that case, the term may be found to be incorporated by the course of dealings. If there has been a previous consistent court of dealing between the contracting parties, a term may be incorporated into a contract through the previous trade terms. The Judge considers the current contract, the exclusion clause, and the above requirements to determine whether the term has been incorporated into the contract and whether it can be relied upon. The clause is not rendered Unenforceable by the Unfair Contract Terms Act 1977 For an exclusion clause to