Alpha Pty Ltd and Betabond Ltd Case Study
Introduction
Business law plays an integral part in the litigation of
issues that affect businesses. Businesspersons usually
enter into contracts in the course of their businesses,
and thus they should be cautious when entering into
contracts because business contracts are only valid if
they adhere to certain legal requirements that vary from
one legal jurisdiction to another.
Essentially, business contracts are very complex and
delicate, as they should comply with varied laws and
regulations, which are essential for them to be
enforceable and valid in courts. In this case, Gillies
(2004) defines a contract as “An agreement between
two or more persons, which is legally enforceable” (p.
137).
Hence, for a contract to be enforceable, it must meet
several terms and conditions that are critical for its
validity. Contract law ensures that parties involved in
businesses do not breach the terms and conditions of
the agreement in a bid to promote justice. Therefore,
this essay seeks to examine a case study of a contract
and argue how it is enforceable using illustrations from
relevant case law.
Case Study: Alpha Pty Ltd (Alpha) and Betabond
Ltd
The case study illustrates how Alpha Pty Ltd (Alpha)
and Betabond Ltd entered into a contract as a seller and
a buyer respectively. Since Alpha is a company that
deals with photocopier machines, it sent a quotation on
24 July 2011 to Betabond, a potential customer, as an
offer to sell photocopier machines worth $150,000,
while promising to deliver them within two months.
Among other conditions, the quotation had a price
variation clause, which stated that the prices for the
photocopier machines are subject to the prevailing
market prices at the time of delivery but not at the time
of placing an order. Additionally, the quotation
restricted Betabond from canceling the contract due to
late delivery.
In response to the quotation from Alpha, Betabond
ordered the photocopier machines on 27 July the same
year. Since Betabond did not consent to the terms and
conditions of the quotation, it placed its terms and
conditions that contradicted those in the earlier
quotations by Alpha. Specifically, the terms and
conditions in the order enabled Betabond to cancel the
contract in case of late delivery. Additionally, the terms
and conditions did not provide for the clause of price
variation.
Betabond also requested for an acknowledgment from
Alpha and added a condition at the bottom of the
document stating, “We accept your order on the term
and condition state thereon”. Alpha received the order
and acknowledged it on 31 July by signing it and
returning it to Beta bond. However, Alpha responded
with an additional letter insisting that the acceptance of
the order is subject to earlier terms and conditions in
the quotation dated 24 July 2011.
Case Law
The relevant battle of forms case law for this case study
is the Butler Machine Tool Company Ltd v. Ex-Cell-O
Corporation (1979). On 23 May 1969, Butler
Company offered to sell and supply a miller machine at
the cost of 75, 535 Euros to Ex-Cell-O Corporation.
The quotation document provided terms and conditions
for sale including price variation clause and specific
period of delivery. After examining the quotation plus
its terms and conditions, Ex-Cell¬-O placed an order
by filling the order form on 27 May 1969.
In the order form, terms and conditions differed from
those in the quotation form of the Butler Company. As
an emphasis of the difference, Ex-Cell-O stated in the
order form, “Please supply on terms and conditions as
below and overleaf” (Pathak 2010, p.106). Moreover,
Ex-Cell-O provided a tear-off slip for Butler to fill and
acknowledge acceptance of the order form as per new
terms and conditions.
However, differences in contractual terms and
conditions emerged when Butler Company
acknowledged the order form by assenting to it but
added a letter, which stated that acceptance of the order
form is subject to earlier terms and conditions in the
quotation document dated 23 May 1969.
When Butler Company delivered the machine at a
different price, Ex-Cell-O disputed that the price
variation clause was not part of the terms and
conditions in the order form. In contrast, Butler
Company asserted that the price variation clause was in
the quotation documents under which its terms and
conditions of the contract lie. In this instance, the
litigation process was necessary to resolve the contract.
This case analysis shows that although Butler Company
sent a quotation on 23 May 1969 to Ex-Cell-O as an
offer to sell and supply miller machines, the terms and
conditions were not final because they were subject to
approval by Ex-Cell-O. When Ex-Cell-O responded to
the quotation document by replying with the order form
on 27 May 1969, it provided new terms and conditions
of the contract that suited its needs. Hence, Ex-Cell-O
provided a counter-offer as a response to the offer made
by Butler Company.
In this case, the terms and conditions that Ex-Cell-O
stated in the order document annulled the terms and
conditions in the quotation offer made by Butler
Company. Pathak (2010) states, “By signing the
acknowledgment and returning it to the buyer, the seller
accepts the counter-offer of the buyer” (p. 106).
Insisting on original terms in the quotation documents
is a counter-offer that is subject to acceptance or
rejection on the part of Ex-Cell-O. Hence, it was
enforceable for Butler to supply the miller machine as
per the terms and conditions stated in the acknowledged
order document of the Ex-Cell-O.
Enforceable Contracts between Alpha and
Betabond
For a contract to be enforceable, it must comply with
several legal requirements. According to Latimer
(2012), whether a contract is written or oral, a contract
must satisfy six prerequisites for it to be enforceable.
An agreement is one of the six prerequisites that are
essential for a contract to be valid and enforceable.
Parties involved in a contract must reach an agreement,
which comprises offer and acceptance.
In the case study, Alpha made an offer to sell
photocopier machines to Betabond, while Betabond
responded with a counter-offer that Alpha
acknowledged. The case law, Butler Machine Tool
Company Ltd v. Ex-Cell-O Corporation
(1979) confirms that the terms and conditions of the
counter-offer negate the terms and conditions of the
offer (Pathak 2010). This aspect shows that the two
companies made an agreement, which comprised of
offer and acceptance. Hence, the contract is enforceable
in the aspect of an agreement.
The second legal prerequisite for the contract to be
enforceable is a consideration. Latimer (2012) states
that a consideration “is one promise paid for by
something for something in which the parties involved
have promised to undertake” (p.295). In the case study,
Alpha had promised to sell and deliver photocopier
machines at the cost of $150,000 on condition that
delivery is within two months.
Betabond also accepted the promise and placed an
order, which Alpha acknowledged by signing. The
interaction between Alpha and Betabond shows that
there is a bargain. Pathak (2010) argues that
negotiations between parties involve a bargain of terms
while settling for different terms at different times. In
this view, the contract meets the legal prerequisite of
consideration and is thus enforceable.
The legal capacity of the involved parties in the
contract is a third legal prerequisite that is critical for a
contract to be enforceable. Latimer (2012) asserts that
people participating in a contract should not be a minor,
insane, or under the influence of substances that impair
judgment, for agreements under such conditions are not
enforceable in Australian courts. The case study shows
that Alpha and Betabond, which are undertaking the
contract, have the legal capacity because they are not
minors, insane people, or intoxicated parties. Hence,
the court can regard their engagement in a contract as
having the legal capacity to make informed decisions
without undue influence from external or internal
factors. Therefore, the contract is enforceable because
it meets the legal capacity, which is a critical
prerequisite for a contract.
The fourth legal prerequisite is that parties involved in
a contract should understand or contemplate
participating in a formal agreement, which is legally
binding. Gillies (2004) asserts, “The parties must each
intend, at the time of entering into the contract, to be
legally bound by it, viz. to contemplate that it should be
enforceable in a court of law” (p. 140). In this case,
Alpha and Betabond intended to enter into a legal
contract because the terms and conditions outlined in
both the quotation and order form underscored the legal
aspects of a contract.
Incompliance with stated terms and conditions in the
quotation and order form would amount to a breach of
contract, which requires a litigation process to resolve.
This aspect is evident in the law case, Butler Machine
Tool Company Ltd v. Ex-Cell-O Corporation (1979),
where the matter of price variation clause was subject
to contractual terms and conditions.
The fifth and sixth legal prerequisites of a contract are
genuine consent and legality of objects respectively.
For a contract to be enforceable, the consent that parties
make should be genuine. According to Latimer (2012),
for consent to be genuine, it must show the existence of
goods or services agreed upon by the parties. Hence, in
the case study, Alpha is willing to sell and deliver
photocopier machines, while Betabond is willing to buy
the same at the stated price, which indicates that there
is genuine consent between parties involved.
Moreover, the acceptance and acknowledgment of the
order form by Alpha show the extent of their consent in
the contract. The precedent set by Butler Machine Tool
Company Ltd v. Ex-Cell-O Corporation (1979) is that
the last terms and conditions in a contract override the
original terms and conditions (Pathak 2010). Hence, the
contract is enforceable in compelling Alpha to comply
with terms and conditions in the acknowledged order
form. In the prerequisite of the legality of objects, the
photocopier machines are legal because Alpha is the
producer and supplier of the same.
Conclusion
Contracts are important in business because they form
part of the legal documents, which are binding to the
involved parties. The case study of Alpha and Betabond
shows how companies can make offers and counter-
offers with different terms and conditions with a view
of reaching a point of agreement.
Due to disputes associated with differences in terms
and conditions in the offer and counter-offer
documents, Butler Machine Tool Company Ltd v. Ex-
Cell-O Corporation (1979) case law set the precedent
that the terms and conditions in counter-offers have an
overriding effect on the original terms and conditions.
Thus, Alpha has a legal responsibility to comply with
the acknowledged terms and conditions in the order
form.
Reference List
Gillies, P 2004, Business Law, The Federation Press,
Sydney.
Latimer, P 2012, Australia Business Law, CCH
Australia Ltd, Sydney.
Pathak, A 2010, Legal Aspects of Business, Tata
McGraw Hill, New Delhi.
