CA foundation - Business Law prac questions

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Topic2 Contract Law: Formation of contract Applying the IRAC Formula. Read the following hypothetical fact situation (HFS) and apply the IRAC formula by answering the following questions. Only submit them when you are satisfied with your answers. HFS 1 Advise Mrs Smoke. In advising Mrs Smoke, use the IRAC formula to apply the law to the facts. Please note that the first FOUR questions are based on the above facts (HFS1), however the last question (Question Five) is based on a slightly different set of facts (HFS2). Question 1) Which of the following statements accurately state the legal ISSUE/S in the case above? The broad legal issue is whether the medicine was too expensive given it did not work properly. The expense of the medicine is not a legal issue on these facts. We are not told anything about the expense of the medicine. The broad legal issue is whether the contract was breached between Mrs Smoke and Carlill Cough because the offer was not accepted by Mrs Smoke. This response is incorrect. The broad legal issue was whether a legally binding contract was formed. The breach issue would only become relevant after the contract is formed. In addition, Mrs Smoke did accept the offer on these facts. The broad legal issue is whether there was a contract formed between Mrs Smoke and Carlill Cough company The broad legal issue is whether there was a contract formed between Mrs Smoke and Carlill Cough company. This is a correct response The specific legal issue is whether the reward formed the basis of a contractual promise because the company believed in its medicine. The specific legal issue in relation to the reward being a promise is relevant, however whether the company believed in it's medicine is not relevant on these facts. The specific legal issue is whether the advert was a counter-offer, which is capable of acceptance by Mrs Smoke, simply by her following the instructions. The specific legal issue is stated incorrectly. A counter-offer, although capable of acceptance, is not an issue on these facts. The specific legal issue is whether the advert was an offer to the world, capable of acceptance by Mrs Smoke, simply by her following the instructions . The specific legal issue is whether the advert was an offer to the world, capable of acceptance by Mrs Smoke, simply by her following the instructions. This is a correct response. Mrs Smoke read an advertisement in a magazine about a new health product (Carlill's Cough Ointment) that claimed to 'cure any type of cough within two weeks'. The instructions stated that 'users should apply the ointment three times daily to the throat region', and 'within two weeks the cough will completely disappear'. The advert also claimed it would fully refund the cost of the medicine as well as pay $500 to anyone who followed the instructions and continued to have a cough after a two-week period. The advert also stated that the company had deposited $10,000 with its bank, 'showing sincerity in the matter'. Mrs Smoke took the ointment three times daily for two weeks as per the instructions but continued to have a severe raspy cough. When she approached the Carlill Cough company to claim a refund and the $500, they refused to give her the money, claiming their advert was a mere puff and an invitation to treat, not an offer.
Question 2 Which of the following are relevant RULE/S, defined and cited correctly, relating to the case above? In order to form a legally binding contract, there must be an offer and acceptance. In order to form a legally binding contract, there must be an offer and acceptance. This is correct and relevant. This is a broad legal RULE that is relevant to these facts, because it needs to be determined whether there is an offer and acceptance before a legally binding contract is formed. This links with the legal ISSUE from the first part of the IRAC answer to this HFS. In order to form a legally binding contract, there must be an invitation to treat. This is not correct. A legally binding contract does not require there to be an invitation to treat. An invitation to treat has no legal effect in the formation of a contract, it is merely a negotiating step prior to an offer and acceptance. An advertisement is usually an invitation to treat ( Pharmaceutical Society of Great Britain v Boots Cash Chemists (Southern) Ltd [1952] 2 QB 795). However, an advertisement may also amount to an offer to the world (a unilateral offer) if there is evidence in the advertisement of sincerity to perform a promise upon acceptance. If the evidence is present, that offeror will be bound by contract ( Carlill v Carbolic Smoke Ball Co. [1893] 1 QB 256). An advertisement is usually an invitation to treat ( Pharmaceutical Society of Great Britain v Boots Cash Chemists (Southern) Ltd [1952] 2 QB 795), however an advertisement may also amount to an offer to the world (a unilateral offer), which provided there is evidence in the advertisement of sincerity to perform a promise upon acceptance, then that offeror will be bound by contract ( Carlill v Carbolic Smoke Ball Co. [1893] 1 QB 256). This is correct and relevant. These are the specific RULE/s with both cases cited correctly and in full, and the rule from the relevant cases defined correctly. An advertisement is an offer (Pharmaceutical Society of Great Britain v Boots Cash Chemists) which upon acceptance will form a contract between the advertiser and the offeror. When an offeree remains silent after an offer is made, there will be no acceptance (Felthouse v Bindley). Although the first case is relevant, the definition of the RULE from the case is stated incorrectly. An advertisement is not always an offer, in fact it is usually an invitation to treat (as per the cited case). The second rule is not relevant to these facts, so this case should not be cited. Note also that both cases are not cited in full and not italicised. Where there is a unilateral offer, provided the offeree responds to the offer in the same way (orally, or in writing), then the offeror will be bound in contract ( Hyde v Wrench [1840] 49 ER 132). This rule defining unilateral offer is incorrect, because a unilateral offer only requires the offeree to perform the conditions of the offer to form a contract (like the reward cases). The case is also cited incorrectly for the stated rule. Moreover, the case is not relevant to this HFS, because this case is related to counter-offers, which is not at issue in this HFS. A legally binding contract requires consideration. Where there is no consideration provided by one party to the contract, the court will consider intention to create legal relations, because if there is intention then consideration does not matter (Roscorla v Thomas). Yes, a legally binding contract requires consideration, however the rule is stated incorrectly, because consideration is always required despite intention, unless the contract is made by deed. The case is not relevant, because it is related to past consideration, which is not at issue in this HFS. The case cited does not match the rule, which is incorrect in any event. The case is also not cited in full.
Question3 Which of the following is a correct and relevant ANALYSIS/APPLICATION of the RULES, relating to the case above? The facts of this HFS are almost identical to the case of Pharmaceutical Society of Great Britain v Boots Cash Chemists (Southern) Ltd [1952] 2 QB 795. Option One Feedback This response is not correct. This case is relevant to the issue of whether an a The facts of this HFS are almost identical to the case of Carlill v Carbolic Smoke Ball Co. [1893] 1 QB 256. Option Two Feedback The facts of this HFS are almost identical to the case of Carlill v Carbolic Smoke Mrs Smoke, like Mrs Carlill, purchased the medicine from the seller based on the advertisement, which evidenced an intention to be bound by contract because of the deposit of monies into a bank account. Option Three Feedback Mrs Smoke, like Mrs Carlill, purchased the medicine from the seller based on the advertisement, which evidenced an intention to be bound by contract because of the deposit of monies into a bank account. This is a correct response. Mrs Smoke, unlike Mrs Carlill, did not take the medicine as instructed, so on this basis, the facts can be distinguished from that case. Option Four Feedback This is incorrect, Mrs Smoke did take the medicine as instructed. Applying the rule of precedent, the court will not follow the decision in Carlill v Carbolic Smoke Ball Co. [1893] 1 QB 256, and Mrs Smoke will not be able to claim the $500 and receive a refund for the medicine, because a cough is different from the flu. Option Five Feedback This is incorrect, because the issue of whether it was a cough or a flu does not effect the application of this case. The case will still be of substantial precedential weight in deciding whether the Carlill Company will be liable to Mrs Smoke. Applying the rule of precedent, the court will follow the decision in Carlill v Carbolic Smoke Ball Co. [1893] 1 QB 256, and Mrs Smoke will be able to claim the $500 and receive a refund for the medicine. Option Six Feedback Applying the rule of precedent, the court will follow the decision in Carlill v Carbolic Smoke Ball Co. [1893] 1 QB 256, and Mrs Smoke will be able to claim the $500 and receive a refund for the medicine. This is a correct response. Question4 Which of the following is a correct and relevant CONCLUSION upon application of the relevant rules, relating to the case above? There is a contract formed between Mrs Smoke and the Carlill Cough company. Option One Feedback There is a contract formed between Mrs Smoke and the Carlill Cough company. This is a correct response. There is no contract formed between Mrs Smoke and Carlill Cough company. Option Two Feedback
This is incorrect. Applying the case of Carlill v Carbolic Smoke Ball Co. [1893] 1 QB 256, there is almost certainly a contract formed between Mrs Smoke and the Carlill Cough company. The Carlill Cough company will not be required to refund the money and pay the reward as per the promise in the advertisement. Option Three Feedback This is incorrect. The Carlill Cough company will be required to refund the money and pay the reward as per the promise in the advertisement, following the case of Carlill v Carbolic Smoke Ball Co. [1893] 1 QB 256. The Carlill Cough company will be required to refund the money and pay the reward as per the promise in the advertisement. Option Four Feedback The Carlill Cough company will be required to refund the money and pay the reward as per the promise in the advertisement. This is a correct response. Complete Answer for HFS Upon completion of this assessment task, you should have a working understanding of how to apply the IRAC formula to answer HFS legal problem questions (case studies) in Business Law. In correctly advising Mrs Smoke in HFS1, a complete answer would look something like this: ISSUE The broad legal issue is whether there was a contract formed between Mrs Smoke and Carlill Cough company. The specific legal issue is whether the advert was an offer to the world, capable of acceptance by Mrs Smoke, simply by her following the instructions. RULE In order to form a legally binding contract, there must be an offer and acceptance. An advertisement is usually an invitation to treat ( Pharmaceutical Society of Great Britain v Boots Cash Chemists (Southern) Ltd [1952] 2 QB 795), however an advertisement may also amount to an offer to the world (a unilateral offer), which provided there is evidence in the advertisement of sincerity to perform a promise upon acceptance, then that offeror will be bound by contract ( Carlill v Carbolic Smoke Ball Co. [1893] 1 QB 256). APPLY The facts of this HFS are almost identical to the case of Carlill v Carbolic Smoke Ball Co. [1893] 1 QB 256. Mrs Smoke, like Mrs Carlill, purchased the medicine from the seller based on the advertisement, which evidenced an intention to be bound by contract because of the deposit of monies into a bank account. Applying the rule of precedent, the court will be bound by the decision in Carlill v Carbolic Smoke Ball Co. [1893] 1 QB 256, and Mrs Smoke will be able to claim the $500 and receive a refund for the medicine.
CONCLUDE There is a contract formed between Mrs Smoke and the Carlill Cough company. The Carlill Cough company will be bound to refund the money and pay the reward as per the promise in the advertisement.
Question 5 Applying the IRAC Formula. Read the following HFS and apply the IRAC formula by answering the following questions. HFS 2 ( Note: these facts are different to the facts from the previous four questions ) Advise Mrs Smoke. ( These facts ARE NOT identical to the previous four questions ) In advising Mrs Smoke, use the IRAC formula to apply the law to the facts. Which of the following is correct and relevant to the case above? The broad legal ISSUE for this case is whether or Option One Feedback Mrs Smoke read an advertisement in a magazine about a new health product (Carlill's Cough Ointment) that claimed to 'cure any type of cough within two weeks'. The instructions stated that 'users should apply the ointment three times daily to the throat region', and 'within two weeks the cough will completely disappear'. The advert also claimed it would fully refund the cost of the medicine as well as pay $500 to anyone who followed the instructions and continued to have a cough after a two-week period. Mrs Smoke applied the ointment three times daily for only one week (she did not follow the instructions) but continued to have a severe raspy cough after two weeks. When she approached the Carlill Cough company to claim a refund and the $500, they refused to give her the money, claiming their advert was a mere puff and an invitation to treat, not an offer.
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