The case is based on business law on the issues of elements of a contact and their application. Fiona took her favourite Chanel suede jacket to Black Tie Dry cleaning. She paid a premium price to have the jacket individually dry-cleaned. At the store she was handed with a docket that had the terms and conditions but she did not see them. The paper gives advice to Fiona on the situation and the possibilities that Black Tie Dry cleaning has. It also analyses the situation given Fiona was a regular customer which is supported on reasons on the stand given.
Analysis
Fiona and Black Tie Dry cleaning were in a contract when the dry cleaner agreed to clean the jacket and she agreed her jacket be cleaned. By the time Fiona took the docket that had terms and conditions a contract was fully realised. A contract is basically an agreement between two or more parties’ coupled by other elements that makes it valid (Dillavou & Howard 1948). An offer was made to Fiona where she had the chance of not accepting the offer. However, by the time she took the docket she become part of an agreement although she did not see the terms and conditions available on the wall. An offer constitutes the willingness by the offerer to the offeree to “act or refrain from acting along certain lines” (Dillavou & Howard 1948). The offer needs to be communicated to the offeree through a means that is understandable to the intended party. When an offer is made to the public, it is communicated through the use of public notice or through the use of posted notices from which the offeree learns them before entering to the contract. In the case of Fiona and Black tie Dry cleaning, an offer was made with terms and conditions which were communicated to the offeree (Fiona) through a public notice which was the wall of the premise. This qualified the contract as viable and legally binding to both parties. The terms and conditions were that the company was not liable for any damage arising or a delay made. However, Fiona did not see the notice sign now the issue that arises is whether Black Tie dry cleaning should be liable to the damages made or it can escape the liability of the damages.
Based on the case two important determinants of the case are whether the claims made by the Fiona were genuine or she was ignorant to notice note to read the terms and conditions sign on the premise of the dry cleaner. Supposing that the offeree (Fiona) claim is genuine then company is not liable to the payment of any compensation on any damages that arose. It is assumed that through an acceptance of an agreement an offeree has agreed to the terms and the conditions offered in the contract. Field (2010) note that any individual who signs an agreement that he/she deems to be a contract and “does not read the terms and conditions that person will be bound by the contract and will not be entitled to plead mistake.” This means that Fiona does not have the right to complain and the company cannot be liable to the damages that occurred because Fiona did not read the terms and conditions. Fiona took the docket and assumed its contents thus skipping the terms and conditions that applied. The contract agreements were binding as all the terms and conditions were given. The same stand applies given that Fiona ignored to read the docket that was handled to her and was not able to see the notice. ‘Ignorance of the law is no an excuse’ meaning that one has to take liability of their actions even when they have ignored the law.
The allegation by Fiona that she did not see the notice is merely an ignorance which is not an excuse to the consequences that befall her. The contract was legally binding because it had an agreement through the issuance of a docket, and the involved parties were competent and in sound mind. In no part of the scenario does it occur that Fiona was mentally unstable, illiterate or blind. If these were applicable then the contract would be void and Black Tie dry cleaning would be liable for the damages that were inflicted on Fiona jacket. The assent of the involved parties was genuine since Fiona took the docket that explained everything and by its acceptance without complains, makes it genuine. A contract should be supported by considerations to make it genuine (US Legal Inc 2010). By consideration it means that a contract can have benefit to the promisor or be detrimental to the promise. Based on the case, the promisor (Black Tie Dry cleaning) benefited by getting the premium pay while on the other hand the promisee (Fiona) whose jacket is damaged. The subject of the matter was legally binding because all the terms and conditions were sufficiently stated and understandable by the parties involved as no terms that were omitted or assumed by the parties. The elements of a contract were all present in the contract that was between the Black Tie Dry cleaning and Fiona and based on the arguments and explanations the company is not liable to any damages that were made.
Given that Fiona was a frequent customer to the Black Tie Dry cleaning, the same would apply. Being a frequent customer does not make one excusable by the law and be compensated for a damage that occurred. In fact, this makes it more binding and genuinely for the company not to pay for any damages. Being a regular customer means that Fiona had all the time to read the terms and conditions on different occasions but she did not see them. It also means that Fiona had been assuming the docket thus not able to read and comply with the terms and conditions. Lastly, it is of sheer knowledge that Fiona had more than one chance to read the terms and the conditions but did not read them making her ignorant of the law. This is because if she had at once read the docket she would have seen the terms and conditions and either accepted the offer or rejected it.
Conclusion
In conclusion, if all the necessary elements are contained in a contract that makes it legally binding. Based on the arguments and explanations, it can be concluded that Fiona ignored the contents in the docket issued and assumed its contents. This makes her liable for the damages and Black Tie Dry cleaning cannot be held accountable for the damage that occurred as it had maintained its end of the bargain through considerations. It also provided terms and conditions that Fiona ignored either genuinely or by choice.
“Choice of Law in Contract under the Rome Convention” – Author: Jonathan Hill
The article examines substantial body of case law in the UK on the interpretation of Articles 3 and 4 of the Rome Convention on the law applicable to contractual obligations which emerged in 2000. In this article Jonathan Hill points out that, although the cases show that the courts have had few problems in practice with Article 3, they have struggled with nearly all the difficult questions thrown up by Article 4, in particular the relationship between Article 4(2) and Article 4(5) (Jonathan Hill, 2004).
The article further tells us that, the decisions of the courts reveal certain weaknesses, but the situation is unlikely to improve until the Rome Convention is amended (in the context of its translation into an EC Regulation) and/or the Court of Justice acquires jurisdiction to interpret its provisions (Jonathan Hill, 2004).
“Choice of Law in Contract” Author: Simon Atrill
In this work Simon Atrill tells us how Article 4 of the Rome Convention determines the law governing a contract in the absence of choice by the parties (Simon Atrill, 2004). The author points that despite its practical importance, and several decisions of the Court of Appeal, the correct construction of Article 4 remains unclear (Simon Atrill, 2004). This paper considers the existing approaches and the Commission’s proposal for reform, ventures to suggest an alternative, and analyses the recent cases in this light (Simon Atrill, 2004).
“Contractual Freedom in the Conflict of Laws” – Jonathan Harris
In this article Jonathan Harris examines how in the Conflict of Laws, the validity of a contract with one or more foreign law elements will be decided by reference to the so-called “proper law” of the contract (Jonathan Harris, 2000).
The article also examines how the Contracts (Applicable Law) Act 1990 formally incorporates the Convention on the Law Applicable to Contractual Obligations the “Rome Convention”) opened for signature in Rome on 19th June 1980 and signed by the United Kingdom on 7th December 1981 (Jonathan Harris, 2000).
It further explores the Convention on the Accession of the Hellenic Republic to the Rome Convention (the “Luxembourg Convention”) signed by the United Kingdom in Luxembourg on 10th April 1984 (Jonathan Harris, 2000). Additionally gives insights on the first Protocol on the Interpretation of the Rome Convention by the European Court (the “Brussels Protocol”) signed by the United Kingdom in Brussels on 19th December 1988 (Jonathan Harris, 2000).
From the above examination of the three articles the article which is best is the one by Author: Jonathan Hill that is “Choice of Law in Contract under the Rome Convention”. This is because it gives more insights on the challenges faced by individuals in international transactions while undertaking contracts with respect to Rome Convention.
References
Journal: The International and Comparative Law Quarterly Publication: Oxford: Apr 2004. Vol. 53, Iss. 2; p. 325.
Journal: Oxford Journal of Legal Studies Publication: Oxford: 2000. Vol. 20, Iss. 2; p. 247.
Journal: The International and Comparative Law Quarterly Publication: Oxford: Jul 2004. Vol. 53, Iss. 3; p. 549.
Each nation, territory or country possesses its own set of laws. The laws clarify and distinguish certain jurisdictions, especially in case of application of laws to certain situations and persons, i.e., conflicts of law. It becomes the basis of court cases especially when it comes to making decisions in terms of its outcomes. It would be beneficial and advantageous if these laws can be harmonizing. In International business and work several harmonizing process of international laws took place like consumer contracts, contracts of employment, material validity, formal validity, transfer obligation, etc. This creates few problems and complexity in international affairs. The applicability of certain laws therefore becomes the basis of a legal system and how this can be utilized in the greater complexity of certain involvements and participations. The harmonization of these different laws has been addressed through private international law or systems of conflict of laws. The need to harmonize these laws, as mentioned, can be seen in the fact that increasing globalization has led to more international transactions in which the participating parties are also protected by their respective national laws.
The European Union, together with some other nations, ratified a unification system for the application of contractual obligations that would be followed for the European Economic Community and its members. Many countries of Europe signed the Rome Convention after the preparation of it. The Rome Convention, as it came to be known, is the Applicable Law to Contractual Obligations and was convened to create at least a harmonized, if not a unified, body of law within the scope of the European Union. This article shows a comparison and indicates the preference to solve the problems. From the research of this article it is found that “Law in Contract under the Rome Convention” is preferable than any other. This is because it gives more insights on the challenges faced by individuals in international transactions while undertaking contracts with respect to Rome Convention. The crux matter of the study is international private law and it is shown the utilization and enforcement of the arena of international business as well as in international relations. The study also showed the keen interest on the harmonization of private international laws and the challenges of the harmonizing process. Lastly, conflicts of law and harmonization process of international laws is the lifeblood of the research.
A contract intends to make formal agreements between two or more parties. The parties could be individuals or legal entities. As such, the most basic element of a contract is its nature to be mutual. A legally binding contract therefore should not be borne out of coercion. Contracts also ought to have an offer and acceptance element. Another major element of a contract is the mutual exchange of something of value in terms of either critical information or payment. In this sense, the client is obligated to offer critical information with regard to the contract. This paper will critically analyze a case study of a contract between Huang, a Malaysian businessperson, and Bill, an Australian builder. The main purpose of seeking compensation of damages resulting from a breach is to put the innocent party in its initial position if the breach had not occurred in the first place. The motivation for the study is to offer Huang advice on his legal and contractual rights.
An overview of contracts of business issues
Traditionally, it was a normal practice that consequential losses, as in the present of Huang, were equated to the second facet of Hadley v Baxendale. This was the case in the English cases of Millar’s Machinery Co Ltd v David Way and Sons (1935)1. The case of British Sugar Plc v NEI Power Projects Ltd (1997)2 and Hotel Services Ltd v Hilton International Hotels (UK) Ltd [2000]3. In Australia, there has been a departure from this legal norm. Courts in Victoria and New South Wales have been of the view that it is wrong to equate consequential damages to the second facet of Hadley v Baxendale. In the recent case of Environmental Systems Pty Ltd v Peerless Holdings Pty Ltd [2008]:4
The court held that consequential loss ought to imply ‘anything beyond the normal measure, such as profits lost or expenses incurred through breach’.
The words expressing the contract ought to take ‘ordinary and natural meaning’ though regard may be given to contextualisation
Facts of the Contract
Huang submits a tender to a manufacturing firm and his tender is accepted. He is also given a 1st November deadline to have completed the garage and the workshop. Huang contracts, Bill, a builder in Melbourne, to construct the workshop and the garage. He explains to Bill that he needs the garage and the workshop complete by 1st of November. However, he does not disclose exactly why he needs it ready by the said date. Due to delays on Bill’s part, the garage and the workshop are not completed by the 1st of November. Thus, Huang loses the supply contract and suffers a loss of 150,000 Australian Dollars. Huang contemplates suing Bill for breach of contract and claiming the lost sum of money from Bill.
Issues of Concern
Legal provisions that govern contracts with builders afford Huang a range of rights and privileges. The law provides that once Bill had entered into the contract with Huang, he was obliged to carry out the said works with reasonable care and skill and to complete the work in a reasonable time. The timeline of completing the project would be subject to any time limits provided for in the contract. In the present case, Mr. Huang had clearly explained to Bill that he needed the workshop and the garage ready by the 1st of November. From the outset, therefore, Bill was aware of the deadline. However, the issue of concern is whether the indicated timeline alone without the provision of information on the damages could accrue in case of a delay is binding. Bill had failed to disclose the real information on why he needed the garage and the workshop completed by the 1st of November.
In a similar case, Astley V Austrust Limited, Austrust Limited5 had sued Astley, a partner that had acted for it, for negligence in the provision of legal advice. The trial judge in this case determined that both partners had been negligent and the negligence by the parties had in effect contributed to the losses accrued. In another instance, Crouch developments Pty Ltd v D & M Pty Ltd(2008 ) and the plaintiff Crouch Developments Pty Limited entered into a contract with the Defendant D & M Pty Ltd to construct 27 housing units. However, the time limits of contracts were delayed. Both parties traded accusations as to who occasioned the delay. The Chief Justice Martin, in making the decision, rejected the relief sought by the plaintiff and observed that the plaintiff had to make a strong case in terms of the reliefs she sought from the court. Therefore, the failure to clearly disclose the real reason for completing the workshop and the garage by Huang by the deadline given opened a window for assumptions by the builder.
In the case of Tyco Fire & Integrated Solutions Limited v Rolls Royce Motors Cars Limited, English Court ruled in favor of Rolls Royce. It observed that, under the construction contract, the contractor is bound to indemnify the employer when damages arise due to lack of diligence on the part of the contractor. In Campbell v C.J Cordony & Sons PTY Limited6, the supreme court of New South Wales confirmed that the damages for breach by a builder include costs and consequential losses. Justice Hammerschalg, in his determination, held that Campbell was entitled to claim damages for breach of contract for defective works done as well as the consequential damages. His Honours also observed that even if he were to infer that the Campbell continues with another builder at a reasonable price as the defendant had sought, the following would not be clear: the costs of construction, the new terms of engagement, and the capability of the new builder fully conforming to the contract requirements. In the above instance, it is clear that when the terms are clearly stipulated by the contract and enough evidence of breach adduced in court, it is possible to claim compensation.
The law of contracts provides that one deserves compensation when the work or works carried out with reasonable care and skill or do not meet the stipulated time lines. Also, compensation is allowed when the there is prove that through the builder’s negligence the employer incurs consequential losses and when anticipated remedies of breach are not forth coming or do not meet the required standards.
Another issue of concern is that the agreement between Huang and Bill did not in way stipulate any consequences, whether legal or otherwise, if the contract was not executed in the manner that was desired. This should not in any way worry Mr Huang since absence of any clauses providing for compensation of damages resulting from breach of the contract does in any way impede him from seeking damages in a legal suit if enough proof can be adduced in court to the effect that he suffered the loss as a result of breach in part of Bill. The Construction Contracts Act 2005 sets out the criteria for successful claims in instances of breach of contracts. According to the Act the contractual agreements need not to be particular in the sought of compensation that they would require in case the contracts are breached7. As such, Mr Huang agitation for compensation in damages cannot be disallowed because of the absence of a damages clause in the contract.
It is also imperative to observe that, in most legal cases on breach of contract the defense is deemed affirmative. In essence, this means that the defendant bears the burden of proving innocence at trial. Affirmative defenses do not in any way object to the primary claims by the plaintiff but rather, are geared at presenting attendance or intervening factors that can render the plaintiff’s claims moot.
Affirmative defenses raise a number of issues that could affect Mr. Huang. Firstly, it becomes pertinent as to whether the contract Huang had entered with Bill was a written agreement or otherwise. As such, if the agreement were oral it can become difficult for the firm to prove the existence of a contract. By invoking a statute of fraud the defendant may argue that state laws were breached and as such render Mr. Huang’s claims moot.
It is also critical that Mr. Huang first ascertains the facts of the contract in detail. In case the details of a contract were not clearly agreed upon, the defense could raise the concern that the contract was indefinite. Of concern here, is whether the contract entered by Huang was conclusive or partial. In the light of the above, a contract may be found indefinite when it is not conclusive in its intentions. Huang’s failure to inform Bill on why the garage and workshop ought to have been complete by 1st of November could open an opportunity for the defense to raise issues of an indefinite contract though the court also evaluates the question of whether the parties had acted in good faith when they entered into a contract.
By not disclosing why the garage and the workshop ought to have been completed by the 1st of November or the damages that he could incur, Huang exposed himself to accusations of fraudulently induced contract. This happens when a contract is obtained through lies or duress. As such, Mr. Huang may have to defend his act of withholding the information from Bill raising the stakes of the case that he seeks to present.
Also available to Mr. Huang is the option to seek arbitration between him and Bill to establish how they can mutually agree on the issues of contention. This is very necessary to Huang because instituting legal proceedings and sustaining legal suits till a court decision is arrived at can be an expensive undertaking. Court cases, many times to take longer determine further hurting Huang situation. In this case, Mr. Huang may find it necessary to establish whether Bill is a member of any trade association with conciliation, Mediation or arbitration service that can hear his complaint. In this instance where Huang seeks compensation, it will be appropriate to pursue arbitration since the decision would be binding legally and will avoid legal suits except in case of enforcing an award. It is critical that Mr. Huang approaches this avenue some level of Open-mindedness and consider any alternative offers that the builder may be willing to extend to him since going to court may not necessarily guarantee him improved offers.
Conclusion
As was earlier observed in the introduction, compensation for breach is intended to return an aggrieved party to the initial position. However, a successful claim for compensation in Australia going by the recent court precedents, one has to prove that the damages suffered out of the breach are beyond what the courts have termed ‘normal’ that is beyond profits lost and other expenses that one may have incurred as a result of the breach. For instance, in Environmental Systems Pty Ltd v Peerless Holdings Pty Ltd [2008], the court held that ‘consequential loss’ excludes any loss emanating from ‘immediate or eventual, flowing from a contract breach’ in essence therefore I would advise Huang to seek arbitration as opposed to instituting legal Proceedings against the bill. The stakes of the case as has been evidenced by court precedents are high and the burden of proof squarely lies on Huang to prove that he indeed suffered ‘consequential losses’ as defined by the courts in the recent court cases.
Bibliography
Campbell v C.J Cordony & Sons PTY Limited [2009] NWSC 63.
Hadley v Baxendale [1854] EWHC J70.
Millars Machinery Co Ltd -v- David Way & Son; [1935] 1935.
British Sugar Plc v NEI Power Projects Ltd [1997] 87 BLR 42.
Hotel Services Ltd -v- Hilton International Hotels (Uk) Ltd, CA, Cited, (Bailii, [2000] EWCA Civ 74, [2000] BLR 235).
Environmental Systems Pty Ltd v Peerless Holdings Pty Ltd (Peerless) [2008] VSCA 26.
Construction Contracts Act 2005.
Footnotes
Millars Machinery Co Ltd -v- David Way & Son [1935] CA.
British Sugar Plc v NEI Power Projects Ltd [1997] 87 BLR 42.
Hotel Services Ltd -v- Hilton International Hotels (Uk) Ltd, CA, Cited, (Bailii, [2000] EWCA Civ 74, [2000] BLR 235).
Environmental Systems Pty Ltd v Peerless Holdings Pty Ltd (Peerless) [2008] VSCA 26.
Astley v Austrust Limited. High Court of Australia (2000) 197 CLR 1.
Campbell v C.J Cordony & Sons PTY Limited of [2009] NWSC 63.
Moe’s legal position vis-à-vis Burn and Company under Australian law
There are several factors that determine a valid contract. What transpired between Moe and Burn and Company (via their former Managing Director, Lisa) could be seen as a promise, or offer to enter into a contract, and not a contract per se. “Offers to purchase real property are bilateral, i.e. containing the exchange of mutual promises.” 1
There has been no contract, written or oral, only a promise on the part of Burn and Co. to take up the lease at a future contingent date.
Again, it is seen in this case that the matching of offer and acceptance is incomplete. Although Lisa may have made an offer, there was no mention of purchase consideration and period of the offer. and it, therefore, lacks definiteness of purpose. She had made an offer to treat, that is, an expression of willingness to set off negotiations but that has not seen the light of day during her tenure. In the leading case of Storer v. Manchester Citi Council, it was reaffirmed that although the Council may have not signed and delivered the documents, whereupon the customer had signed and delivered the documents for onward transmission to the buyer, the contract had consummated and the rights and liabilities of the parties had begun, in as far as the customers are concerned. (Agreement: Do the parties meet the requirement of agreement: P.69: 3.2.2.1 General principles: P. 3) (Provided by customer)
The issues of MOE with Burn & Co are as follows
The former MD of Burn & Co. had made a promise to treat Moe to transact real estate lease with them. The purchase consideration or time frame was not discussed, nor concrete measures are taken to fulfill the deal.
Before the deal could be through, the management of the proposed lessor company changed hands, and a new MD, Bart took over the reins of the company. His entry proved fateful for Moe, since he categorically refuted the role of Burn and Company as a proposed lessor, stating that alternative arrangements have been made. In real terms, Moe’s proposed contract with Burn & Co was deemed by the professed lessors to be nullified.
It would be necessary for Moe’s attorneys to consider the aspect of promissory estoppel in this case, as decided by Mason CJ and Wilson J in the epoch-making Waltons Stores (Interstate) Ltd v Maher (HPH 219) Case. The fact of proprietary estoppel could not only be seen in the context of Burn & Co having reneged on its proposed deal with Moe but more significantly, on the fact that this withdrawal had caused detriment to the other party, Moe, in this case.
The facts and circumstances of this case differ only in degree and intensity with the one in discussion – the fundamental premise being almost the same. One party relying on the other in terms of contractual promise to perform a deed. Certain misconstrued notions and supervening circumstances giving rise to cancellation of contractual commitments, and finally the aggrieved party taking the other to court for breach of promise or damages.
In the event of promissory estoppel, it is not enough that a breach of promise has taken place. It is also necessary that the other party had relied on the statements made by the promise, and had suffered economic, or other disadvantages as a direct result of such breach, or tort.
In this case, the learned judges had ruled in favor of Maher on the grounds that certain benefits had accrued to the Company as a result of avoiding the contractual obligation with Meher. This resulted in a state of detrimental reliance, or in other words that the trust place by Meher on the Company proved prejudicial to his economic interests, in that the Company rescinded the contract after a large portion of the work was already completed. Moreover, there was an element of urgency in the Company’s needs which Meher complied with, and also the Company did not choose to inform Maher of the cancellation at an earlier stage of work progression. (Promises binding in the absence of consideration – estoppel: Waltons Stores (Interstate) Ltd v Maher (HPH 219)).
Now it had become urgent for Moe to seek out some other lessees, in order to keep business afloat. In the meantime they also appointed a Subcontractor for overseeing business operations for their Chinese plant.
Moe’s against Burns and Co under Chinese Law
Under Article 14 of Chinese Contract Act, an offer is a party’s expression of intention to enter into a contract with the other party, which shall comply with the following:
Its terms are specific and definite;
It indicates that upon acceptance by the offeree, the offeror will be bound thereby. 4
However, in this case it is seen that the terms of agreement between Moe and Burn and Co (later Bart) does not have specific terms and thereby, it is not compatible with Article 14. Therefore, under Chinese law, it cannot be validated.
Moe’s against Burns and Co under German Law
Brinkibon Ltd v. Stahag Stahl und Stahlwarenhandels GmbH (1983) opined that in cases of immediate communication (specifically face-to-face conversation, and telephone) acceptance takes effect when and where it is actually brought to the attention of the offeror. (Agreement: Do the parties meet the requirement of agreement:: 3.2.2.1 General principles: P. 87) (Provided by customer)
Again coming to the German law of contract it could be said that under Section 280
“If the debtor fails to comply with a duty arising under the contract, the creditor is entitled to claim compensation for the loss caused by such breach of his duty. This does not apply if the debtor is not responsible for the breach of duty.” 5
It is seen that the Federal Court of Justice follows a fairly straightforward and transparent method with regard to dealing with contracts where the assent of the parties are required for fulfilling the contractual obligations. It is also seen that it follows the 3 Step methods by which the contested value of collaterals are assessed. The three step method is as follows:
Whether the collateral agreement places such a financial burden on the defendant debtor and renders the covenant financially unviable- as in the present case where the weather and presence of rock has increased cost and time overruns
The defendant entered into the contract not on his own volition or may be through some influence, undue or otherwise from the other party- in this case it is seen that King Kong may have been influenced by Moe to accept the contract on incomplete one sided terms
Whether the particular situation would warrant such collateral agreement as this one.
Laws in Germany are not autocratic and are designed to safeguard the interests of the proletariat or common man who may be inveigled into entering into unscrupulous agreements. (Peer Zumbassen: Chapter 6: The law of contracts: provided by customer)
In the case of Moe’s legal position vis-a –vis King Kong Constructions,
It could be seen that the contractual agreement is the ultimate document in contractual agreements and is binding upon the signatories thereto.
In this case it is seen that Moe had entered into covenant with King Kong Constructions which is a standard form agreement, in that no alternations or concessions could be made on it, save and except, what are mentioned on main contract.
The law states that in the presence of a written covenant between the parties it needs to be honoured, save and except, changes or modifications made through mutual consent and benefits. In this case it could be said that it contains, interalia, the following features:
It does not envisage variations to the contract based on unexpected site conditions, such as rock formation which could cause delay in the construction process.
Makes no allowance for delays caused by wet weather since work cannot be carried out during rainy time.
In the case of Moorcock (1889), it was held by the Courts that though there was no clause in the contract that the ship would not be damaged; it formed part of the implied clauses of contract. 3
Moe v. Lisa & Bart
It is now proposed to consider the aspects of contractual obligation between Moe and Bart. There is an element of Tort, since it was incumbent on the part of the new MD to honour the previous promises made by the earlier MD, since she had acted not on her personal capacity, but her official capacity as MD of Burn & Co.
Vicarious liability
The aspect of vicarious liability needs to be examined in this context, in that whether Burn & Co. are liable for the actions of their director. Lisa and must honour or ratify the commitments made by her during the currency of her directorship with Burn & Co. It is normally believed that acts of company officers bind the company, since the acts have been carried out in the ordinary course of for furthering the business of the company. The question of liability or vicarious liability arises under the following circumstances. “When an employer is vicariously liable for negligent acts or omissions by his employee in the course of employment whether or not such act or omission was specifically authorised by the employer.” (Vicarious Liability).
To avoid vicarious liability it is seen that Burn and Co must prove
That the employee was not negligent in taking the decision or,
Or that the employee was acting in his own right rather than on the employer’s business.
In this case, even a person of ordinary prudence could surmise that Lisa’s act of promising the future lease would have met the board’s approval at that time and would have even been ratified by them had Lisa been around when the lease period was due. However, supervening situations made this situation impossible. Under such circumstances, it was incumbent for Lisa to have clarified the Board’s stand on Burn & Co before her departure; this would have saved a lot of trouble for Burns & Company.
Legal crux of this issue
It is believed that the primary issue here is not whether Lisa’s action was correct or not. She had played her part. The contract was promised by the Company, and Lisa was just a via media. There is nothing in this case to even suggest that this was a contract in which Lisa had personal interests, which could set off aspect of vicarious liability. As far as Moe is concerned, the time of fruition is more important and that was the time when Bart stepped in as the new Managing director. It was necessary for Moe to convince Bart in his new role to honour the commitment made by his company to Moe. And this forms the crux of this issue.
Legal action needs to be taken against Burn & Company and not against the individual directors, whether Lisa or Bart since they were only acting in the best interest of the Company.
In the celebrated case of Saloman v. Saloman, (1897) it was held that an individual owner of the company is different from the corporate and thus his individual liabilities cannot be forced on the company since they have different identities. 6 Coming now to the aspects of tort laws, it is necessary to examine tort laws as practices in Australia, China and Germany. All these counties are having valid and robust tort laws that aim at reducing the malpractices and undesirable aspects in commercial and other businesses. However as laid down in the landmark case of Hadley v. Baxadale (1854) 9 Exch 341.
It is also necessary to consider that penalties for infringements should be reasonable and relevant to the level and intensity of the fault. 7 It is now necessary to consider the aspect of sub-contracting business between Moe and King Kong. The terms are one sided and much like what MNC Companies contract with their franchisees, offering no liberties, or concessions whatsoever. In this contract, all the conditions are favourable to the issuing party,
“A type of contract, a legally binding agreement between two parties to do a certain thing, in which one side has all the bargaining power and uses it to write the contract primarily to his or her advantage. 8 In the 1957 case of Oscar Chess Ltd, v. William (1957) 1 WLR 370, a person sold a 1938 model car stating it to be a 1948 Morris. “Held defendant was not liable to plaintiffs in damages for breach of warranty because, having regard particularly to the fact that defendant had no personal knowledge (as the plaintiffs knew) of the date of manufacture of the car and the date was a matter on which plaintiffs might well also form their own opinion. 9 It was held that the expert car dealer should have exercised enough discretion to know the difference and thus avoid the purchase.
In the Australian context, in the case of contracts impinged by legislation, which is comparable in the Statute of Frauds, there is no requirement for written contract to be in writing, although there must be written evidence of the contract, which may even come into existence after the contract has been formed…. It must contain all material terms of the contract, the subject matter and the parties to the contract. 10
However, it is seen, in this case that all the terms of the contract are not mentioned on the face of the covenant and therefore it could be avoidable, at option of the contracting party. Moreover, it is not known whether the subcontractor Moe has contested the disputes with regarding to weather and presence of rocks and sediments, for which more costs would be incurred by the sub-contractor.
Therefore, it is necessary that law of sub –contracting needs to be invoked in the country context in order to arrive at a just and equitable solution. Again in the case of contracts it is seen that the terms of the contract bind the parties, and in the event of any clause, like “exclusion clause”, the other party cannot offer lack of knowledge, or not having read the terms and conditions as an excuse for non-performance. This was enunciated in the leading case of L’estrange v. Graucob (1934) 2KB 394 where the operating defective in a cigarette vending machine for which the manufacturer had previously disowned liability could not be enforced against them, since there was a disclaimer clause in the contract. 11
In the case of Photo Production Ltd v Securicor Transport Ltd [1980] AC 827 the House of Lords (HOL) took the view that the principles enunciated in Morris’s case could be applied in this case. The plaintiffs had contracted with defendants for the provision of a night patrol service for their factory. Fire and theft were the perils the parties had in mind. A security person intentionally lit a fire which burned down the factory. It was an unresolved issue whether his motive was to start a fire or a conflagration. The Courts held that the Company, Securicor, was responsible for the attendant losses. (Bussines, 2008).
Again, in the leading case of Commercial Bank of Australia v Amadio (1983) HCA 14; (1983) 151 CLR 447 (12 May 1983), the full Bench of the Supreme Court of South Australia held that the unusual transactions between the bank officials and unknowing parents of the defendant were unreasonable and not in best commercial practices. The Hon Court ordered that memorandum of mortgage made by the plaintiffs (the present respondents) on or about 25 March 1977 in name of the appellant bank be revoked and also made certain auxiliary orders. 12 The contract between Moe and King Kong could be said to be unconscionable, if the party so determine.
However, it is seen that dialogue with the company also needs to be pursued to increase the time limits of completion of the contract, if not increase in rates since it is bound by contractual obligations. As is often the case, the subcontractor faces time lags and difficulties in finishing the works due to impositions by the main contractor, through no fault of the subcontractor. In this case it has been acts of God, due to inclement weather, which was a factor that could have been previously forecasted and suitable controlled by the party involved.
However the second factor of rocks and cement needs special treatment. It is seen that the decision of Moorcock (1889) could have been applied to this case also if Moe had constructive notice of the presence of rock and cement in the construction bed.
Applying the reasoning available in Moorcock (1889), it could reasonably be said that the employer (Moe) was aware of the hazards posed by rocks and cement and needed to have taken this into consideration, while drafting the sub-contractors agreement. Therefore, King Kong could be eligible for damages under such circumstances. (Lexis Nexis: P.3-4: Reasonable and equitable :
Position governing real situation
The Company Moe Power is an United Kingdom (Glasgow) based company having power plant equipment business throughout the world. For this purpose, it also has a power plant unit at Shanghai, China which caters to needs of the eastern Bloc countries. Considering the immense growth potential in the Chinese region, it has contracted with King Kong sub- contractors, for building business dealings in this region.
The place of execution of contract has been at the Registered Office at Glasgow since it is company policy that all contracts and legal matters relating to global business dealings needs to be examined and approved by the corporate attorneys, pending ratification by the Board of Directors situated at Glasgow.
The place of performance is at their power plant located at China.
The place of the residence or business of party would be the Chinese address.
It is seen that the subject of sub-contracting envisages several aspects, Including area of jurisdiction of legal matters. It is seen that in the case of Subcontracting business, the Courts of China would be the deciding Authority and they would have the power to intercede in any kind of disputes occurring within their jurisdictional areas in this country.
Chinese laws regarding contracting
In this case it is seen that the company operates a plant in People’s Republic of China as a branch and is thus subject to administrative controls exercised over foreign branches operating in PRC. (University library, 2004).
It is therefore necessary that the foreign company establishing a Branch in PRC, duly retains a caretaker to carry on business, and make necessary distribution of funds that are necessary for conduct of business of the branch.
The branch shall be liable for all civil liabilities incurred by it. Further under the provisions of Article 196 of Company law, it cannot be construed to be a Chinese legal person under law. (University library, 2004).
References
Alderson. (1996). Hadley v. Baxendale. Paul Todd. Web.
Baker., & Mckenzie. (2002). Construction law practice group. Construction Law Update. P.1-6. Web.
Boone, Kevin. (2006). L’estrange v Graucob (1934). The K-Zone: Wasting your internet bandwidth since 1994. Web.
Boone, Kevin. (2006). The morock (1889). The K-Zone: Wasting the Internet Bandwidth Since 1994. Web.
Bussiness. (2008). United Kingdom Parliament. Web.
Contract law of the people’s republic of china. (1999). Novexcn. Web.
Farlex. (2008). Adhesion contract. The Free Dictionary. Web.
Frascati, Luigi. (2008). Fundamentals of contract law. Ezine Articles. Web.
Gibbs., et al. (2008). High court of Australia. Australian Legal Information Institute: A Joint Facility of UTS and UNSW Faculties of Law. Web.
Handouts. (2008). Lingua Inglex Guiridica. Web.
Issues papers 17 (2000) guaranteeing someone else’s debts. (2008). Law Reform Commission: New South Wales. Web.
Legislative council: Legislative assembly. (n.d). Parliament of New South Wales. Web.
Stahl, W. (n.d). 60th Legislature: House bill no.192. Legislative Services Division. Web.
The building and construction industry security act 1999 nsw. (2007). Adjudicate Today: Resolving Building and Construction Disputes. Web.
UK law and essay dissertation writing Services. (2008). Law Teacher. Web.
Zinmermann, Reinhard. (2002). The reform of the German law of obligations. Breach of Contract and Remedies under the New German Law of Obligations. Vol.48. P.1-51. Web.
University library. (2004). Usq Australia. Web.
Promises binding in the absence of consideration – estoppel: Waltons Stores (Interstate) Ltd v Maher (HPH 219). Web.
The law of contracts deals with keep of promises; when agreements between two or more people form a contract that is legally enforceable. The parties to a contract have the rules to the contract (Dawson, 2011). Each party is expected to fulfill part of the contract, when not might cause damages to the other party. It is not always that promises are honored; the situation of the case determines whether the injured party is to be compensated for the damages or not (Sweeney, O’Reilly & Coleman, 2010). This paper analyzes different aspects of contract law using John and Chen’s case study outlined in the appendixes.
The Case Analyzed
John agrees to build an extension to Chen’s house. At the time they enter the agreement, the price of building materials is increased week by week. John is reluctant to set a price for the work until he knows how much it is going to cost. Chen agrees in the contract that he will pay John “the purchase price of materials as at the date of completion plus $6000 for labor”. The parties also agree that the work must be completed by the end of June, as Chen’s family is coming to visit him at that time. Before the work begins, there is an unexpected increase in labor costs and an equally unexpected drop in the price of building materials. John tells Chen that he will need to increase the labor component to $10,000 or not do the job at all. Chen is anxious that the work be completed by the end of June so reluctantly agrees to the change. John builds the extension but does not finish it until the middle of July. Because of this, Chen had to pay for his family to stay in a hotel for three weeks at a total cost of $1500. Chen is now refusing to pay John more than the price of materials plus $6000 for labor. In addition, he wants John to compensate him for the money he had to pay for the hotel.:
What Arguments Could Chen Use to Support His Refusal to Pay John More Than the Original Agreed Price?
For contact to be enforceable in court, the parties to the contract should accept to the term and requirements of the contact with no external influence from the other person. The promises to the contract and the considerations that the parties had considered when making the contract are important aspects to determine the way forward on a contract. Looking at the way and point of view that Chen accepted the $10,000 increase in labor cost, some undue influence from John can be seen. In the first, the time for the completion of the work had started coming to reach. On the second, John had threatened not to do the work if the cost was not increased. Looking at the two situations, Chen was under undue pressure (indirect) from John to accept the increase in labor cost. Although the conditions of the market were evident that labor costs had increased, John is likely to have used the weapon of knowing that Chen’s family was nearing arrival thus used the force to force Chen to increase the prices (Carvan, 2005). Note the statement “Chen is anxious that the work be completed by the end of June so reluctantly agrees to the change,” the statement shows that Chen accepted the contract not at free will but from the influence of John and the situation (Sieg, 2011).
When signing the contract, Chen was thinking that his family was using the house when they visit Chen, this is called consideration that made Chen not like to accept the increase in the labor cost. The fact that he accepted an increase in the price dismissed the original contract where the labor cost was $6000 to now of $10,000. For contact to be enforceable, each party must fulfill their part according to the requirements of the contract this is the reason for thinking if it was done. In this case, John failed to fulfill his share of the contact thus Chen has this as a basis of not paying the high labor cost, the case says “John builds the extension but does not finish it until the middle of July,” looking at the considerations of the contract, Chen was keen on the timing of the extension and had made John aware of the same. With this in mind, Chen has the ability to refuse to pay for the extra labor cost (Tang, 2010).
Looking at the matter from a different perspective or to thinking another way, the reason why Chen accepted the increase in labor is in consideration of his family coming to visit him and probably the happiness they will get from the facility. This was however not fulfilled because of the negligence that John made. Under the duty of good faith, John would have considered the situation and ensured that the home is completed by end of June as they had agreed with Chen, this never happened (Whittaker, 2011).
Depending on the agreement for the $10,000, Chen can have an arguing point if the new contract was not written there or here; in the contracting law, a written contract cannot be nullified by a contact made by the word of mouth. If the parties never signed a new contract document, then Chen can still rely on the old document and enforce the costs that are documented therein (Deeksha, Elsje & Minette, 2009).
Looking at the fact of the case, Chen accepted the new deal as a consideration for the completion of the extension before his family jetted in the country. In the event that John had alerted him that the work would not be completed within the time framework, he probably would not have entered into the contract. The fact that John was a professional in construction and created an impression that despite delays in starting up the project, the project would still be completed in good time is the conduct of misrepresentation. John as a professional was at the upper hand to know that the house would not be completed within the time frame and advised Chen accordingly, however, he misguided him to sign the contract. With the basis, Chen has the legal baking not to pay the extra cost of labor (Randy, 2003).
What Arguments Could Chen Use to Support His Claim for Compensation?
The contact was to think of completing the premises so that Chen’s family can come and stay there; the idea and the reason was the one that had made the contact last until the end of June. When Chen was accepting the conditions set out in the contract, his main thinking was the fact that his family will have a place to live in when they get into the country. John failed to honor his promise of finishing the work in the allocated time; it was him that had signed and accepted the contract for monetary consideration and promised to finish the work before Chen’s family got into the country. John failed to do his promise; because of the dishonored promise, Chen had to incur some costs on hotel accommodation for his family totaling $1500 (Kendrick, 2005).
When looking at the case, had John finished the house within the allocated time as per the contract document, Chen would not have incurred the cost of hotel accommodation. It is true to say that it was because of John’s failure to honor his promise that Chen incurred the cost. Thus Chen has the legal backing of demanding compensation damages incurred from John. In the two contracts, one thing remains constant the time for completion of the building was before the end of June, John actually in the second set of contact accepted the contact with an increased amount despite having spent some time before starting the work. All along it is evident that John knew that the extension was made in anticipation of Chen’s family visit by June, however, he never made the effort of completing the work within the agreed framework (Riachards, 2005).
Another thinking that Chen can use to get payments is misrepresentation aspects of contract law; the fact that John was a professional in construction and created an impression that despite delays in starting up the project, the project would still be completed in good time is the conduct of misrepresentation (Lunenburg, 2011). John as a professional was at the upper hand to know that the house would not be completed within the time frame and advised Chen accordingly, however, he misguided him to sign the contract. It was through the misrepresentation that Chen accepted the contract that eventually lead him to suffer more damages of $!500 in hotel costs. From the start, John can be seen to have used his knowledge, professionalism and experience to misguide Chen into the contact and thus the much damage on Chen. Chen should thus seek compensation from John as the extra expense that he incurred on his family’s stay in the hotel was incidental or as a result of misrepresentation by John (McKendrick, 2005).
What Arguments Could John Use to Support His Claim to the $10,000 He Wants Chen to Pay?
John can argue that when the parties set for a price of $10,000, it was based on good faith and undertaking of the business environment of which the two parties seemed to understand well. The adjusted price nullified the previous contract that the two had thus the previous contract that called for payment of $6000 was not in existence. With the argument, the contract that the two parties were acting upon was the new $10000 labor cost contract.
John can think that the two parties accepted the changed terms thus Chen was under the obligation of honoring the new contract. The fact that Chen is refusing to pay for the agreed amount because the family got into the country before the extension was complete can be argued not to have been the main consideration that the two parties had considered when entering into the contract. John can argue that the contract was for the completion of the extension thus the fact that the completion date failed to adhere was secondary to the main consideration (Gillies, 2004).
The fact that Chen accepted the contract when fearing or shaking should not be taken as an undue influence from John, it was the situation and his timing that made him fear that the family will find the extension not completed as well. On the other hand, Chen was negligent in that if he had known that the family was coming that soon, he would have contracted for the extension early enough.
When another argument that John can use is the fact that when the second contact was made (the $10000), he had not started the work and had offered the chance to council the contract. At this point, he had not said he will do his work him to doing work but Chen accepted the increased labor cost (Fafinski & Emily, 2009).
However, as much as the house was not completed for the time of visit, the increase in the cost of labor was not to be for the fast completion; there was no matching to complete and pay. To increase the cost was because of increase in cost was from the increased labor cost thus it had no relationship with fast completion. When thinking in the other words, the amount was not to facilitate fast completion, however, it was part of the main contract which involved completion of the expansion. Chen was thus under good doing to make his promise alive and pay the increased cost.
References
Carvan, J. (2005). Understanding The Australian Legal System. (5th Ed.). Sydney, NSW: Law Book Company.
Dawson, F. (2011). CONTRACT AS ASSUMPTION AND CONSIDERATION THEORY: A REASSESSMENT OF WILLIAMS V ROFFEY BROS. Victoria University Of Wellington Law Review, 42(1), 135-158.
Deeksha, B., Elsje, B.,& Minette, N.(2009). Student’s guide to the law of contract. New York: Kluwer.
Fafinski, S.,& Emily F. (2009). Contract Law. London: Sage.
Gillies, P.,2004. Business law. Sydney: Federation Press.
Kendrick, E.,2005. Contract Law. Oxford: New Delhi: Oxford University Press.
Lunenburg, F. C. (2011). The Law of Contracts: What Constitutes a Contract?. FOCUS On Colleges, Universities & Schools, 6(1), 1-4.
McKendrick, E. (2005). Contract Law – Text, Cases and Materials. Oxford: Oxford University Press.
Riachards, P.,2005. Law of contract. New York: Wiley.
Randy, E.(2003). Contracts. New York: Aspen Publishers.
Richardo, S., 2010. Contract Law Q&A 2005-2006 6/e. New Jersey: Wiley.
Sieg, J. J. (2011). TORT, NOT CONTRACT: AN ARGUMENT FOR REEVALUATING THE ECONOMIC LOSS RULE AND CLASSIFYING BUILDING DAMAGE AS “OTHER PROPERTY” WHEN IT IS CAUSED BY DEFECTIVE CONSTRUCTION MATERIALS. William & Mary Law Review, 53(1), 275-303.
Sweeney, B., O’Reilly, J. And Coleman, A. (2010). Law In Commerce. 4th Ed. Chatswood: LexisNexis
Tang, Z. (2010). REVIEW ARTICLE PRIVATE INTERNATIONAL LAW IN CONSUMER CONTRACTS: A EUROPEAN PERSPECTIVE. Journal Of Private International Law, 6(1), 225-248.
Whittaker, S. (2011). The Optional Instrument of European Contract Law and Freedom of Contract. European Review Of Contract Law, 7(3), 371-398.
Businesses are normally guided by diverse business laws, one of them being the law of contract. The Law of contract usually binds two or more parties. Formal contracts are always made relevant by the provision of formal documents such as deeds. However, for the contract to be binding the consideration must have some value and merits on both the buyer and the seller; the parties which are involved in the process. James and The Kitchen Wizard have been involved in a transaction the implications of which created some level of conflict between him and the company. James feels aggrieved concerning the transaction because some of the items which were supposed to be part of the kitchen set such as the oven and the marble top bench were not included in the final prefabricated kitchen set that he had ordered.
Law of contracts
The seller in the course of the transaction uses a contract to stipulate the terms in which he specifies that the company would not be held accountable for, in failure of the installers to fit the cupboards within the defined space of the kitchen. The contract that James was made to sign was meant to solidify the trust between James and the Kitchen Wizard and as such should have been taken as a source of cordial relations between the parties involved in this transaction. The concept of consideration on both the buyer and the seller is vital for any transaction to be carried out because this is likely to impact greatly on how the two parties relate with one another.
This concept stipulates that the seller measures up to the expectations of the buyer of the goods and that the buyer replicates the gesture by being able to pay for the goods and services availed to him by the seller.
In business law, therefore, James and Kitchen Wizard have an obligation to meet their promises regarding the transaction that they are engaging in to ensure that neither of the parties is negatively impacted by the failure of one of the parties to live up to their obligations. The seller and James had an obligation to execute their promises as stated within the initial agreement when the transaction that enabled the exchange of goods between them was taking place. The selling company had given James a promise in form of both a written contract and an oral commitment that the price paid for the transaction was valid and was commensurate to the goods and services James had sought to obtain from the company for this purpose. The salesperson that was charged with the responsibility of selling the goods, who James interacted with within the course of that business transaction made promises to James, and as such since the salesperson was acting on behalf of Kitchen Wizard the promises made to James were valid and should have been met by the seller.
The salesperson had promised James that the oven would be included together with the marble top bench in the final delivery of the goods that he was to receive from the company as part of the new kitchen set that he had wanted. Even though this was not included in the contract, the fact that James was made to believe that he was purchasing the items that he had wanted by the salesperson gives validity to the feelings of injustice that were done against him by the seller. The promise made to James has legal validity in essence and therefore whether the written contract that he was made to sign by the seller can make him not have any grounds for legal recourse do not have any merit because the salesperson made promises upon which James was made to pay for the goods obtained. Since the two parties had both entered into a mutually beneficial business transaction, there was a duty on both parties to honor the spirit of the agreement to eliminate any feelings of mistrust and resentment afterward.
The consideration by the seller should have been adequate so as to meet the expectation of James who had made payments expecting all that was promised both in the contract and by the company’s salespersons would be met. The seller is morally obligated to provide all the goods that were supposed to be delivered to James to ensure that he adequately gets what he thought he paid for before the goods were obtained. This would ensure that the performance of the seller concerning the goods that were to be delivered to James is beyond reproach and as such James would be satisfied with the treatment and competence showed by the seller in meeting its end of the bargain. The concept of ‘Promissory Estoppel’ can be applied regarding the transaction undertaken by both parties and the promises which both parties committed to uphold before the transaction was carried out. James relied on a promise created by the salesperson that the payments being made would cover the cost of the oven and the marble top bench.
James had placed his hopes on acquiring the kitchen goods from the seller as had been promised by the salesperson and the failure to deliver these goods exposed him to distress because he was of the assumption that the transaction would go on as smoothly as he had anticipated. The salesperson had made a promise which made James as the buyer to assume that everything that had been said to him would be carried out and he would receive all the goods that he had wanted before he made any payments for them. The seller cannot rely entirely on the written contract as a basis of its defense because the salesperson had made a promise to James that he would receive all the products and the services that he had requested.
Analysis of the Case
James made the decision to buy the fabricated kitchen from The Kitchen Wizard after consultation with the sales representative. At first, James was wary of getting into this contract because of a number of issues. The first issue was that in the contract, there was an exclusion clause. James did not like the fact that this firm exempted itself from any damages that would occur the moment the item was sold off. According to James, he wanted a new fabricated kitchen fitted in his kitchen. This was his intent when he visited this store. Upon realization that the firm had exempted itself from the process of fitting this fabricated kitchen, James developed some reluctance towards the purchase.
Another factor that caused this reluctance was the fact that in the contract, there was no mention of an oven. This was one of the most important gadgets required in his new kitchen. As he was keen to ensure that this new kitchen was furnished with all modern gadgets, the lack of the oven in the contract meant that this was not the right place to buy the item. He asked the salesperson about this, and he received a reassuring answer. The salesperson told him that although this item was not included in the contract, it would be availed to him during the delivery of this purchase.
He was still not convinced. Upon realizing this, the salesperson further informed him that the package would include a marble top instead of a Formica top bench. It is this that made James sign this contract. According to Gibson and Fraser (2011, p. 36), James entered a binding deal with this firm upon signing the document. In his knowledge, he knew that the contract he was signing included other items that though were not included in this contract, would be availed as was promised. It was also his expectation that the fitting of the fabricated kitchen would be a success and that at the end of this process he would have what he desired.
However, the fitting was done very poorly. According to Burma (2009, p. 89), James was duly informed in the contract that the firm would not take part in the fitting of the fabricated kitchen, and therefore would not be liable if anything went wrong. Something did go wrong in this process and James feel aggrieved. Unfortunately, the law of contract does not favor him because the contract was clear on this. He may therefore fail to get a favorable ruling from a court of law.
The purchase lacked two very important items that James was promised, a marble top bench and an oven. These items were not in the contract, but upon deliberations with the salesperson, there was a mutual agreement between the two parties. Gibson and Fraser (2011, 25) say that an employee of a firm is part of that firm and therefore any statement from such an employee has binding consequences. The contract that was signed by James did not include such items as a marble top bench or an oven. However, this contract went hand in hand with the promise made by the salesperson as this was the statement that made him accept the offer. Any deviation from it will be directly interpreted as a deviation from the contract signed. Kitchen Wizards will therefore have a case to answer in a court of law over this. James should therefore take this direction of the case and avoid the case about the poor fitting of the kitchen.
List of References
Busma, G 2009, Contract Law, McMillan, Publishers, London.
Gibson, A, & Fraser, D 2011, Business Law, 5th Ed. Pearson, Melbourne.
A contract is a mutual agreement of obligation between two people or parties reaching consent. In most cases, such commitments are enforced by the law. The arrangement involves one side making an offer, which the other party accepts. A contract consists of such elements as offer and acceptance, appropriate consideration, and legality (Eisenberg, 2018). The parties involved should also have the contractual capacity to commit to the pact. Applying the law in contracting means that there are consequences if any participant forfeits the rules pertaining to the engagement. Therefore, breach of contract necessitates legal measures for failing to honor the deal or hindering the execution of the promise by the other party. This negligence is a case of punitive damage for which the complainant requires compensation for money and time wastage.
The scenario presented involves two individuals, Johnny, who is not a merchant under the Uniform Commercial Code, and his neighbor Mark, from whom he offers to buy a car for $30,000. The latter requires some time to consider the offer to which Johnny agrees and puts down in writing that his proposition is going to remain open for fourteen days. After a week, Johnny sees another car that fascinates him, buys it and informs Mark of his intention to revoke the initial offer. In response, Mark insists that Johnny’s proposal was in writing and still holds it. Johnny apologizes, saying he cannot keep the agreement but promises to give mark $10,000 for the assistance that he had received from him in the previous year around the house. Appeased, Mark accepts only for Johnny to annul his second pledge after a week. The former decides to sue Johnny for breach of contract on the two commitments, buying the car and the $10,000 offer.
There was a valid contract between the two, but Johnny dissipated both Marks’s time and money. He Hastily offers to buy the car instead of informing him that he hasn’t made a final decision and needs to check more cars before settling on one. Johnny also made the mistake of writing down his promise to Mark. Purchasing a car requires a lot of research and inquiries instead of choosing the first option due to the availability of more varieties that might even be cheaper in the market. After being approached by Mark, Johnny should have told him that he had not made a final decision because he still wanted to look around; therefore, he was unwilling to commit. The promising note written by Johnny caused the car to be withheld from other customers willing to purchase it. Mark, the car owner, had the opportunity to sell the machine, but he had the integrity to hold it. Johnny’s actions concerning the car are wrong, and he deserves to pay for them.
There is evidence of an oral contract between Mark and Johnny, although it is related to the first agreement, which Johnny also broke. He acknowledges Mark’s help on his property and offers to compensate him, making the latter cancel his initial disappointment on the car contract. This agreement makes Johnny legally liable to atone for all the words he fails to honor.
Breach of a contract is concluded when a party involved fails to perform their role and doesn’t give a valid excuse. In this view, the elements of a contract are not fully satisfied; therefore, Mark has an entitlement to take legal action against Johnny (Luntz et al., 2017). Having kept his part of the agreement, Mark deserves compensation for indemnity.
References
Eisenberg, M. A. (2018). The Theory of Efficient Breach. In Foundational principles of contract law. Oxford University Press.
Luntz, H., Hambly, D., Burns, K., Dietrich, J., Foster, N., Harder, S., & Grant, G. (2017). Torts: Cases and commentary (8th ed.). LexisNexis Butterworths.
A contract is a legal binding agreement that can be enforceable and confers obligations to the parties involved. Parties to the contract are those who are given responsibilities by the contractual terms or those who make promises in exchange of consideration.” (koffman and Macdonald, 2007, p. 475). The question is will the obligation to the contract be assigned?
In general, an obligation under a contract cannot be assigned without the consent of the other contracting party. In Tolhurst v Associated Portland Cement Ltd, it was held that the liabilities of a contract cannot be shifted off the shoulders of the contractor on to those of another without the consent of the contractee. A debtor cannot be relieved of his liability to his creditor by assigning it to someone else, except by the consent of all the three. However, a transfer of liabilities may occur in the following ways:
By novation: It is the recession of the original contract and the substitution of a new one in which the obligations under the original contract are undertaken by new parties voluntarily. In this case the old contract is discharged and there is a substitution of anew contract (Macdonald and Koffman, 2007, p. 476)
By vicarious performance: It is open to the parties to have their contract performed vicariously by another person, provided the contract does not expressly or implicitly insist on the performance of the contract by the promisor himself. In the absence of any such condition in the contract, the promisee must accept the work done by a third party if it has been carried out in accordance with the terms of the contract. But even in such cases, the promisor remains liable under the contract because vicarious performance in its application is similar to the law of agency i.e. the principal remains liable to the third party, and the agent does not incur any liability. In this type of arrangement, the original parties remain liable to each other for all practical purposes. The vicarious performance is not permissible where the contract is to render personal services or personal performance by the promisor is the essence of the contract (Redfern, 2004, p. 278).
Sand Diego Case
A third party can be defined as a legal entity that is other than the principal parties to a contract or transaction or an agreement. Sec 1 of the Contracts (Rights of Third Parties) Act 1999 provides definition of a third party though the rights that have been assigned to him under a contractual term.
“…a person who is not a party to a contract (a “third party”) may in his own right enforce a term of the contract if—
the contract expressly provides that he may, or
Subject to subsection (2), the term purports to confer a benefit on him.
…
The third party must be expressly identified in the contract by name, as a member of a class or as answering a particular description but need not be in existence when the contract is entered into.
This section does not confer a right on a third party to enforce a term of a contract otherwise than subject to and in accordance with any other relevant terms of the contract.
For the purpose of exercising his right to enforce a term of the contract, there shall be available to the third party any remedy that would have been available to him in an action for breach of contract if he had been a party to the contract (and the rules relating to damages, injunctions, specific performance and other relief shall apply accordingly).
Where a term of a contract excludes or limits liability in relation to any matter references in this Act to the third party enforcing the term shall be construed as references to his availing himself of the exclusion or limitation.”
….[(Rights of Third Parties) Act, 1999]
In the case of Robson and Sharpe v Drummond, 1831, Sharpe was contracted to paint a hired coach by Drummond. When Sharpe retired he transferred the rights to paint the coach to Robson but Drummond refused to accept the arrangement. It was held that Drummond was entitled to refuse the arrangement and Sharpe could not assign liabilities under the contract without Drummond consent (Chen-Wishart, 2007 p. 652).
From the above discussion it can be noted that the benefits and liabilities of a contract could not be assigned without the consent of the contracting parties. If some rights and benefits under a contract are assigned, then the assignee can demand performance from the other party. Where the other party fails to perform his obligations, the assignee can sue him in his own name. However, in this case under study, Park objected to transfer of the contractual rights thus the contract can not be assigned.
Case Study Two
In the case of assignment of a debt the law requires it to be in writing, should be signed by the ‘assignor, Written notice of assignment must be given to the debtor and should be absolute and not by the way of charge. After such a notice has been given, any payment to the original party will not discharge the debtor from being liable into the assignee. In other words, the debtor can assert no equity against the assignee arising out of transaction with the assignor after notice of assignment (Chen-Wishart, 2007 p. 651).
In this case it means that since Andy was not informed in a written notice, he is not liable to Carl. Even if Bill assigns this right to Carl, he can demand payment from Andy. But if Andy can prove that he has already paid, then Carl can not demand. This is when Andy has been informed in writing. Thus, in an act of contract there are certain constraints or difficulties that a third party has to face.
Carl has legal rights against Bill since Bill did not inform Andy to pay Carl and he has already collected the amount from Andy.
Conclusion
The doctrine of “privity of contract”, though it has been regarded as one of the most controversial issues in case of contractual agreements but there is no denial of the fact that in case of third party agreement this doctrine has contributed to a great extent in case of legal development. As third party contract mostly introduce some kind of complications that is why it is generally tough for a third party member to come under contractual terms with any other organizations or those third parties often find it quite difficult for them to act as an organ or agent to contract on behalf of an organization.
There are certain legal restrictions as those have been imposed over a third party in undertaking such a crucial role in undertaking special roles in an act of contract. One major barrier is that a third party to a contact needs to prove the issue of contractual promise. Thus, liability of proving the issue of such contractual promise rests upon the third party who wishes to act as an organ or agent to a contract (Chen-Wishart, 2007 p. 652).
Though the Contracts (Rights of Third Parties) Act 1999 prohibits principal parties to contract from imposing any kind of burdens over a third party but such rule is not followed always. There are two types of burdens that principal parties to contract can impose over a third party, namely,
imposing positive burdens on a third party (i.e. to do something) and
Depriving a third party of some right or restricting his freedom of action (i.e. not to do something). (Chen-Wishart, 2007, p. 650).
Work Cited
Chen-Wishart, Contract Law. London: Oxford University Press (Oxford), 2007.
Contracts (Rights of Third Parties) Act 1999. Web.
Macdonald, Elizabeth and Koffman, Lawrence. The Law of Contract, London: Oxford University Press, 2007.
Redfern, Alan. Law And Practice Of International Commercial Arbitration. New York): Sweet & Maxwell, 2004.
The analysis of offer and acceptance can be regarded as a traditional approach used in contract law to establish the existence of an agreement between two parties (Austin-Baker, 2004). An agreement is established when one party (offeror) indicates to the other party (offeree) his/her willingness to enter into a contract on agreed terms without negotiating further (Caterini, 2005). Normally, a contract is established when the offeree and the offeror agree to the terms of their negotiation.
This paper seeks to use the United States Contract law to establish whether the agreements that were made in a case scenario were legally binding. In this case, Carrie offered to sell legal encyclopedias to Antonio. Antonio responded by saying that he would think about it and give a reply the following day. Norvel heard their conversation, approached Carrie and agreed to the offer. Antonio came the following day and told Carrie that he had agreed to the offer, knowing that the books had already been sold to Norvel.
This paper will specifically seek to establish whether Carrie was obligated to sell the encyclopedias to Norvel or not and whether she breached a valid contract with Antonio. The paper will include a discussion on who can accept an offer, and whether or not Carrie can revoke her offer by selling the books to Antonio.
Whether or not Carrie was obligated to sell the books to Antonio
In the above case, Carrie made an offer to sell a set of encyclopedias to Antonio. Antonio requested more time to consider the offer. They both did not reach any formal agreement at this stage. Furthermore, they did not write anything regarding their intention to transact the deal, this does not, however, rule out the legality of their contract.
The transaction was still at the negotiation stage. Negotiation can be defined as the “conduction of communications or conferences with a view of reaching settlement or agreement” (Caterini, 2005, p. 15). Normally, obligations between parties are legally established when a contract is entered. It’s difficult to determine obligations during the negotiation period (Caterini, 2005). The intent to enter into a contract must be clear for all negotiating parties.
The manifestation of mutual assent is vital in the establishment of a valid contract. The offerer must make an offer that will be accepted by the offeree. A legally binding acceptance should be “effective and unequivocal”, and it should not add other conditions to the offer (Rau, Windfhr, & Burnett, 2012, pp. 5).
An acceptance that adds limitations to the offer is regarded as a counteroffer. In the current case, Antonio did not reject Carrie’s proposal, he made a counteroffer in which he requested more time to consider her proposal. Carrie seemed to have agreed to the counteroffer and, therefore, she somehow owed a duty of care to Antonio. Duty care is often defined as a duty owed by one person to another that requires him/her to take reasonable care not to cause any physical, psychiatric or economic loss (Caterini, 2005).
The duty of care requires both parties to transact a business in good faith and fairness. Several factors are often considered when analyzing whether or not one party has failed his/her duty of care (Austin-Baker, 2004). First, the conduct of the party must qualify as wrongful and this has to be proven by the plaintiff. Secondly, the plaintiff must prove that the defendant owes him/her a duty of care and that his/her conduct fell below the standard of a reasonable person.
Thirdly, the damage caused must be foreseeable. If the damage is not foreseeable, then the defendant owes no duty of care to the plaintiff. In the current case, it can be said that it was wrong for Carrie to sell the books to Norvel when she had a pending negotiation with Antonio. However, one cannot say that her conduct fell below that of a reasonable person as it was not clear that Antonio would accept her offer. Furthermore, the damage was not foreseeable as Antonio might have rejected the offer in Carrie’s view.
This analysis shows that Carrie was not obliged to sell the books to Antonio because he made a counteroffer that complicated the situation. The fact that the damage was not foreseeable also implies that she did not owe him a duty of care.
Whether or not Carrie breached a valid contract with Antonio
According to the above analysis, Carrie did negotiate with Antonio in regards to the sale of encyclopedias. They, however, did not finish the negotiations due to the counteroffer made by Antonio. Carrie’s decision to sell the books to Norvel might have been in bad faith, in Antonio’s view but this was not foreseeable by Carrie.
Therefore, it can be concluded that Carrie did not breach a valid contract with Antonio when she decided to sell the books to Norvel. Norvel, who overheard the conversation, took advantage of the situation and entered into a valid contract with Carrie by accepting the offer. Therefore, Carrie cannot revoke the contract by selling the books to Antonio.
References
Austin-Baker, R. (2004). Gilmore and the Strange Case of the Failure of Contract to Die After All. journal of contract law , 118(4)1224.
Caterini, F. (2005). Pre-contractual obligations in France and the United States: A comparative Analysis. Georgia: University of Georgia.
Rau, A. S., Windfhr, R., & Burnett, A. (2012). Contract law in the United States: An overview. Web.