Question

Objective: Answer the following questions with reference to the relevant common law and equity principles operating in Australia concerning contracts plus related and other transactions. Do not consider the effects of legislation potentially applicable other than that specifica lly identified. Students may make whatever additional factual and/or legal assumptions are necessary or convenien Question: Graphic Advertising Pty L td , a small advertising business, employed Renee , a single mother of two, on a three year contract as a photo retoucher at a salary of $9 00 per week. Renee’s work has improved the quality of the advertising materials sold to their clients, thus improving Graphic Advertising’s market share as well as improv ing their profits. Her contract will expire at the end of 2017. In February 2017, Cool Adverts Ltd approached Renee offer ing her $1,100 per week to do their retouching work . Renee was very tempted to accept the offer because she had been struggling to cover her rent and childcare expenses on her current salary. However, she was concerned about leaving Graphic Advertising as she k new February to March was a very bus y time. B eing a loyal e mployee, Renee approached Julius , the CEO of Graphic Advertising a nd advised him of Cool's offer. She was grateful to Julius for employing her. Ju lius said: “ I am disappointed but h ow can you take Cool Advert ’s offer when you are under contract with us?” Renee replied that she really needed the extra money they we re promising. Ju lius was concerned that if Renee left, they would be in a difficult position because for the next 3 weeks there were photo shoots scheduled to meet their client’s needs. After a few mome nts he said to her: “You are a valued employee and we need your expertise for the next few months . If you stay with us, we will g ive you a salary increase of $15 0 per week so that your total salary will be $1 ,05 0 per week. We will also backdate this increase to 1 December and give this back pay to you in a lump sum.” Whil st this did not match Cool Advert ’s offer Renee was happy to stay and was delighted by the promise of the lump sum. Renee declined Cool Advert ’s offer. When Renee received her next pay , the promised increase and back pay were not included. Assuming there was an administrative delay in implementing her new salary package, Renee did not worry. However, when her next pay remained unchanged, she sought an explanation from Ju lius . He informe d her that his comments had been “somewhat foolish and ill conceived in the heat of the moment” and they were under no obligation to pay either the increased amount or the back pay and did not intend to do so. This refusal to honour its promise has mea nt that Renee continues to struggle on an inadequate salary. Unfortunately, Cool Adverts has declined to enter into further negotiations with her. Advise Renee whether Graphic Advertising Pty Ltd is liable to pay her the promised increase in salary , and t he back pay.

Answer 1

In Australia a verbal agreement can be equally enforceable as a written agreement as long as it involves offer and acceptance of that offer for which money will be exchanged.

In this case the offer is of a revised pay of $1,050 per week by Graphic Advertising and Renee accepted the offer. Money will be exchanged in future in the form of Renee’s revised salary and the lump sum payment that she was offered.

Secondly consideration was also present in this case as Renee started working during the busy months of February and March under the notion that she will receive her revised salary. Thirdly the courts in Australia will assume that both the parties here intend to be bound as something of value has been exchanged (in the form of work done by Renee).

Keeping the above factors in mind Graphic Advertising will be liable to pay Renee the promised increase in salary as well as the back pay.