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Business Law - Answer to Question 1


What are the legal rights and application of Mr Ryan as a consumer and MG fitness centre as a service provider?

Whether Ryan's claim for compensation for the medical injuries he suffered is a valid claim under the statute.

Whether the argument given by MG fitness centre that Ryan as a consumer did not read the clause of the agreement before taking fitness services.


  • Statutory Guarantees under the Competition and Consumer Act
  • Section 60 : Guarantee as to Due-care and skill of The Australian Consumer Law
  • Section 267 Action against suppliers of services of The Australian Consumer Law
  • Civil Liability Acts


The contract to provide fitness services was between Ryan and MG fitness centre, the fitness services comes under the ambit of contract of services. The contract holds the governing power and defines the relationship between the parties. In the given scenario the contract contains express conditions for utilisation of fitness equipment. The Australian Consumer Law imposes a statutory guarantee on the service provider that they must provide services with due care and skill under section 60[1]. MG fitness centre fails to maintain equipment, in an inspection it was found that centre allegedly purchased second and cheap quality equipment and benches. In case where service provider fails to provide service with due care skill is liable to compensate a client for loss and damages incurred due to physical injury, there is serious breach of the statutory guarantee.

In the given situation MG fitness included exclusion clause or disclaimers clause which limits the liability as a service provider in case of personal injury of the client. Ryan performed according to the contract as he takes due care while exercise, but due to default in services i.e. the obligation to provide good quality equipment, the failure to comply with the quality standard resulted authority to raise the action against Service provider for the breach of contract. An important fact is considered under common law, in the contract of services there is implied promise to take reasonable care and skill while performing and giving services until or less such explicitly excluded by the terms.[2]

The Statutory Guarantee under ACL provides any claim for the damages or injury arises due to breach of the implied terms to take due care and skill will require proof of negligence, in order to get remedy under Civil Liability Acts also. In the given situation the use of substandard equipment is a valid instance to be concluded as proof of utter Negligence.

Ryan have the authority to sue MG fitness centre for negligently injured while providing fitness related activities , purposely failed to comply with statutory guarantee contained in ACL , combined with in the tort of Negligence, or the breach of contract under section 3.2.

Ryan can seek damages under Section 267 of the ACL[3], as there defendant fails to comply with statutory guarantee under section 60 of the ACL, to neglect the quality of equipment was serious misconduct as it was reasonably foreseeable that consumer may suffer serious injury or loss, or in extreme case consumer may lose his life. If there is mechanic carelessness which may causes injury and if it is foreseeable that such negligence may cause consequential personal injury would be recoverable under s 267 ACL[4].

The clause presented by the MG fitness centre in their defence shall be considered as unfair term[5] of contract because of following reasons:-

  • It causes a significant imbalance in the rights and obligations of the parties,
  • The term is not reasonably necessary to protect the defendant in this particular case, as the Ryan take due care while using the equipment.
  • The application of such clause will be detrimental to the plaintiff’s right to due care by service provider.


 MG fitness is legally liable to pay compensation for medical injuries as well as full refund of the membership fees. He fails to comply due care and skill while providing services which causes serious injuries to Ryan. The sheer misconduct of using substandard fitness equipment shall also breach in the tort of the negligence under Civil Liability Act. Ryan has right to claim the compensation and the disclaimer clause presented by the defendant should be considered as the unfair term of the contract and shall not affect the legal rights and obligations of the parties of the contract.

Business Law - Answer to Question 2


Whether the essential elements to constitute a valid contract was present in the contract.

Whether the transfer of the farmland can be legally challenged.


The law of contract defines the circumstances when a promise or promises are enforceable. To be legally enforced in the courts of law as contract there are certain elements must be present:

  • A valid Offer and Acceptance resulting in Agreement.
  • Consideration
  • An Intention to be in a legal relationship


The contract between Tom and Bob have sufficient elements to prove it as a valid contract .The parties agreed on the fact to transfer of said farm land between them. Their intention was to create the legal relationship between them, and at last consideration was paid. The inadequate consideration is valid as long as it is not illusionary in the eyes of the law[6].

In the given scenario, the transfer can legally be challenged by Bob only, for that he has to prove that the contract was entered by him was result of unilateral mistake , he was not aware of the crucial fact of the agreement, further he has to prove the breach of equity is resulted while enforcing the contract. And the other party was aware of such fact and knows which may cause detriment to another party.


From the above discussion the transfer of farm land was valid transfer as the essential ingredients of the valid contract was present in the contract. Though the consideration was inadequate but this shall not repudiate the legality of the contract alone[7]. The ultimate power to challenge the transfer rest with the Bob as he can bargain that the contract arises due to unilateral mistake of the fact of the agreement, he was not aware of the price of the farm on the sale deed was considerably less as compare to the market value. Further he has to prove that there was breach of equity.

Business Law - Answer to Question 3


What is the stand of Frank and Mr. Smithers about their legal rights in connection with the payment of this additional $10,000?

Whether Mr. Smithers have any rights and obligations as the consumer under ACL.


  • Breach of Contract under Contract Laws
  • Consumers rights in Australian consumer Laws.


Mr Frank and Mr. Smithers entered into a contract to renovate the said property. They fixed the consideration of $50, 000 the contract sets out conditions which requires to be fulfilled by the parties to the contract. One of the party presented an express term for additional consideration to be paid for the renovation work. Mr. Smithers gives his consent over the additional the amount. The additional charge was consented over written contract, by the parties. After the completion of the contract Mr. Smithers allegedly denied to pay the additional $10,000 the acts resulted in breach of contract. The subsidiary contract for paying $ 10,000 is a valid contract, though one of the party was reluctant to enter in it at first instance it does not invalidate the intention to fulfil the obligation to perform their part[8].

The aggrieved party has the option to sought remedies for breach of contract.

As Mr. Smithers agreed to pay the additional amount and accepted the same by signing the document, once the party agrees have the legal liability to act accordingly, if the party doesn’t comply the conditions commit the breach of the terms of the contract.

The following remedies available to Frank for breach of the contract as follows:

  • Plea for Punitive damages for the losses suffered due to denial for the payment;
  • The Court may order to defaulting party to carry out his obligation;
  • A Court Order forbidding the party from breaching the contract; and
  • The Court may order to terminate the contract and may direct the party to put the innocent party in the position as was before the agreement was entered into.

In the given situation the Frank can plea for Punitive damages.

The following Compensation and settlement can also be sought in the given scenario.

Frank have the right to Sue for damages

In the given situation by not paying the additional amount of $ 10,000 by Mr. Smithers resulted in breach of the contract, the Court may awards damages to compensate the Mr. Frank for the loss suffered due to the breach of contract by Smithers. Frank has to prove that lass is a substantial in nature, if he fails to do so them nominal damages shall be awarded after recognition of the legal right has been infringed.

Mr. Frank can claim Liquidated damages: The terms of the contract may comprise of liquidated damages. In the case of the breach of contract is resulted due to failure of performance either of the parties to the agreement. The damages, then the amount must either be liquidated or become penalty damages. Liquidated damages are an estimated value of the amount that may compensate for the breach. In the event of a breach of contract, the Court has the authority to award this amount as compensation as it was mentioned that a particular amount needs to be rendered by the party at fault in the event.

The legal rights of Mr. Smithers

When a service is sold to a customer who does not meet one or more guarantees, then he/she is eligible for remedy like refund or service to rectify the problem which has to be provided by the service provider.

If the problem is fixable, then the customer cannot demand a refund immediately and should provide the service provider with an opportunity to rectify the situation. If the repair takes too long, then he/she can get it done by someone else and demand a reimbursement or cancel the service request and get a refund.

If the problem is not fixable, then the customer can choose to:

  • terminate the contract and get a refund, or
  • Ask for compensation on the difference between the values of the services provided vs the price paid.

A purchased service has a significant problem if:

  • it has issues which are known to the customer and will prevent them from purchasing such services
  • it does not meet requirements to comply with its common purpose and is not fixable in a reasonable amount of time
  • It does not do what it was supposed to do and cannot be fixed within a reasonable time frame.
  • Creates an unsafe situation.

The rights comes with some obligation.

Mr. Smither’s rights are not unlimited and the consumer guarantees do not require you to provide a remedy unless one of the guarantees has not been met.


Once the parties are bound by legal obligation by entering into the contract, they have to perform, and they are abided by the terms of the agreement provided all the essential elements were present in the contract. In the current situation, Mr. Smithers denied to pay the additional amount of repairs which has been promised by him through a written and signed agreement, and it resulted in the breach of the contract. Further, it is provided that such breach gives the aggrieved party to claim damages as discussed above.

Bibolgraphy for Civil Liability Acts

Articles/ Books / Reports

Brian Coote, ‘Consideration and Benefit in Fact and in Law’ (1990) 3 Journal of Contract Law 23.


Henderson v Merrett Syndicates [1994] UKHL 5; [1995] 2 AC 145 at 193-194 per Lord Goff of Chieveley; approved in Astley v Austrust Ltd [1999] HCA 6; (1999) 197 CLR 1 at 22 [46]-[47] per Gleeson CJ, McHugh,

Gummow and Hayne JJ.

Biotechnology Australia Pty Ltd v Pace (1988) 15 NSWLR 130

Crawford v Mayne Nickless Ltd (t/as MSS Alarm Service) (1992) 59 SASR 490

Masters v Cameron (1954) 91 CLR 353.


Competition and Consumer Act 2010 (Cth)

Civil Liability Acts



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