Reference no: EM131358605

This part has two questions worth 15 marks each. Answer these questions in the answer booklets provided.

Question One

Sports Supporter Products Pty Ltd ('SSP') supplies retailers with a range of sports-related products. Tim owns a store called FootyMad that specialises in football merchandise. On 20 November 2014 Tim ordered a range of cigarette lighters from SSP. The lighters resemble rugby league footballs but are small enough to fit inside a pocket or purse. The range includes one type of lighter for each Rugby League team. Tim thinks these lighters will sell well in his store, particularly during the 2015 Rugby League season. Tim spoke with SSP's sales assistant, Anna, on the telephone when placing his order, and managed to negotiate a special price with her. The lighters were originally priced at $5 each, but Tim negotiated an arrangement with Anna to pay $3 per lighter on condition that he ordered 1,000 of them. Before finalising the deal over the telephone, Tim remembered that some lighters have been banned by Product Safety Australia. He asked Anna about this and she tells him there are no bans that apply to these particular lighters. Anna emails a sales order, which states the price per unit ($3.00 per unit) the number ordered (1000) and that the lighters will be delivered 'on or before' February 14, 2015. The order form is very simple and, apart from the SSP company logo and the product code for the lighters, it does not contain any other information. Tim signs the order form and faxes it back to Anna.

Unfortunately, there was a problem at the manufacturers and the lighters were not delivered until September 2015, when the Rugby League season was almost over. Further, only 750 lighters were delivered, and Anna has told Tim he will have to pay $5 each for them because the number is smaller than they agreed. However, Tim does not want to accept delivery, or to pay for the lighters at all, as he does not think they will sell now because the season is nearly over. More seriously, he has discovered that the lighters are in fact of a kind that is banned by Product Safety Australia because they look too much like toys and are therefore a risk to children. Anna says she knew about that ban, but did not think it applied to these lighters.

Is Tim required, as a matter of contract law, to accept the lighters and pay for them? Why or why not? In your answer you should consider the following:

a. Whether a binding contract has been formed (ie, identify the steps of contract formation in the above facts);

b. What terms were agreed to;

c. Whether SSP has performed their obligations under the agreement; and

d. Whether Tim has any grounds to avoid performing his part of the agreement (ie, by accepting delivery and paying for the lighters).