Jack owns a cafe in Ultimo. Last week Jack purchased a 'Coffee-2000' espresso machine for $75,000 from Coffee Co Pty Ltd to use in his business. The machine seemed perfect for Jack's cafe, with the ability to make 4 shots of coffee at once, and two milk-frothing nozzles for cappuccinos. The final sale agreement included Jack paying an immediate $10,000 deposit, with ongoing weekly payments of $2,500 required for six months.

When buying the machine, Jack told the sales person [Margaret] that he needed it for his cafe, and that it was important the machine was reliable. Jack explained how many staff worked at the cafe, how many customers were served each day, and that the cafe was open for business seven days per week, from 5am to 8pm. Margaret assured Jack the Coffee-2000 was the ideal machine for his cafe, good stocks are on hand, and immediate delivery & installation can be arranged.

Finalising the sale, Margaret prepared the Coffee Co order form, which Jack signed. Immediately above the signature field was a printed statement in bold text which said:

"This agreement is subject to the terms and conditions on the reverse side of this page."

Jack was very busy and did not read the terms and conditions. Margaret told Jack that the form was their 'standard sales order form' for all sales of coffee machines. Among the various terms and conditions on the reverse side of the page was Clause 4 which said:

"Clause 4. Coffee Co Pty Ltd accepts no liability for any loss or damage, whether physical or economic, due to breach of contract, failure to perform, or any other reason whatsoever."

The machine is delivered to Jack's cafe and installed. A few days later, customers start complaining about a bitter aftertaste in their coffee. Consulting a coffee machine technician, Jack learns that the Coffee-2000 has filters that require cleaning after 4 hours of operation. Each filter takes over an hour to remove, clean, and replace, and the machine cannot produce coffee during this time. Jack is furious that his expensive purchase is not suited to his business.

Researching the Coffee-2000, Jack also learns the manufacturer recommends the Coffee-2000 be used in cafes for the morning 'coffee rush' period only, to allow for daily cleaning of the filters, and to limit use to 5 days per week preferably in small cafes, to extend the life of the internal plumbing and mechanical parts. The Coffee- 2000 is only expected to last one year in a high-volume cafe, and will then require an expensive refit. The manufacturer also sells a Coffee-4000 model for use in high volume cafes, with a completely different filter design and mechanical lifespan.

The manager at Coffee Co Pty Ltd refuses to provide Jack a refund because his machine has been used and also refuses to trade it in on a Coffee-4000 model which is priced slightly higher at $105,000. The manager shows Jack the terms and conditions from the sale, which Jack claims not to have known about. Jack insists Clause 4 is not part of their agreement. They argue, with Jack threatening not to make any payments and the manager threatening to take legal action to recover the payments from Jack, together with interest.

Required: 1. Discuss the contract law issues in relation to Jack's situation, including the

remedies available and the likely outcome.

2. Discuss the Australian Consumer Law (ACL) issues in relation to Jack's situation, including remedies available and the likely outcome.

Answer rating: 100% (QA)

1 Contract Law Issues and Remedies a Formation of the Contract Offer and Acceptance Jack made an offer to purchase the Coffee2000 espresso machine and Coffee Co Pty Ltd accepted the offer by deliverin... View the full answer