Suppliers of Precision Equipment in India to Its Customer in the UK - Assignment Example

? School Number Business Laws Discuss the contention that contract is the basis of all commercial relationships by reference to illustrations from the following areas: A contract is a legally enforceable agreement between 2 or more parties and is a set of promises made by one party to another, for a certain consideration for the promises kept by the other party. In a contractual agreement, each party would be having a certain set of rights and a certain set of responsibilities or obligations. Under rights, the party would be entitled for a certain sum of money on completion of a certain task. Under obligations, one party is to perform certain services or sell certain products, for the consideration that the party has received. In a contractual relationship, both parties can create their rights and obligations. In other words, either party can discuss the tasks to be completed, the services or products to be provided, and the consideration that would be exchanged. Hence, a contract is a mean of structuring relationships. As there needs to be a consideration present in a contract, and not much elaboration is present on the value of the consideration, there are a lot of flexibilities in the manner in which contracts are developed (Smithies, 2007). Contracts can hence help structure commercial relationships, as in many commercial transactions the several characteristics are noted:- The payment mechanism would vary and be subjected to negotiations between both the parties The deal needs to be explained and contracts can help to explain this The legal enforcement provisions would vary – for example for land purchases the statutes applicable would vary from what applies for employment agreement The applicable law in case of disputes Contracts tries to keep several parts as informal as possible, as for daily functioning, it would be difficult to have a contract that is formal and speaks in terms of strong legal language. The applicability of contract can be used for almost any kind of transactions, provided the same is for a legal motive, the parties are capable of entering into a contract, and thirdly that there is some kind of consideration involved. Damages and remedies can be prescribed and per the appropriately of the transaction and also the intentions of both the parties. The laws applicable and the primary court of jurisdiction can be inscribed as per the convenience of both the parties Dealings in contracts of the commercial nature require communication of a daily basis. Using modern technology, contractual documents and official business related testimonials can be sent across through email. A contractual agreement would respect the validity of such documents, as contracts also consider electronic documents of a legal nature For the convenience of commercial transactions, contracts can also be in an electronic form and would be legally valid with digital-signatures of both the parties A contractual agreement can bind a company for taking up a business transaction The intention of a contract agreement is not to create a legal relationship. Many of the commercial contracts try to ensure that legal terminologies are kept out as much as possible. A contract should not create a legal relationship, but the enforcement of the contract is such that it should be capable of legal enforcement in case one party is unable to keep up with the promises meant for the other party. In case one party defaults, the other party can look for enforceability of their rights through legal mechanisms in order to ensure smooth conductance of business. Besides, when consumers buy goods or use services, in order to ensure that the quality of goods or services is maintained, the same guarantee can be provided through a contractual agreement. A breach of contract would arise when the terms and conditions of the contract are not met by one party. For contractual disputes to be settled common law, statutory law, constitutional mechanisms, international trade agreements or conventions, consumer law, etc, can be utilized (Goode, 2003). The manner of the commercial complexities of contracts needs to be understood:- • The employment of workers – An employment relationship is a relationship between the employer and the employee for conductance of business. The employer is the owner of the enterprise whose assets would be used for the purposes of business. He would direct the employees to perform certain activities for conductance of business. The main clause in the contract for employment is the directive principle which means that the employer would direct and control the functioning of the employee. The employment relationship is a mutually beneficial relationship. There is a distinction between many of the employment contracts and the commercial contracts. Since the employer would be controlling and managing the functions of the employee, the employee would not be responsible for the productivity or the results that is provided. The employer in turn would be vicariously liable for the acts of the employee, even though the employee would be exerting a certain amount of skill, knowledge, hard work, etc, in performing his tasks. On the other hand, commercial contracts for performing tasks would include having a commercial contractor doing a particular tasks and being responsible for certain actions. Here if the task is not completed, the independent contractor can be held responsible for non-completion as he does not work under the direction of the employer (Joyce, 2004). • The relationship between suppliers of precision equipment in India to its customer in the UK – This is a commercial contract with international conventions that need to be applied. Usually any contract for the international sale of goods, between organizations in countries that have ratified the UN Convention for the International Sale of Goods, 2010, would fall within the CISG purview. These are accepted set of rules that govern the manner in which contracts between parties across nations would be organized. However, in this case, since India and the UK have not ratified the CISG, it would not apply in this particular instance. To ensure that the trade between various parties and companies from both these two countries do not suffer, India and the UK have signed mutual trade agreements for the international sale of goods and services. The Bilateral Investment Promotion and Protection Agreement, 1994 between the UK and India would apply in this circumstance for investors who contract with investors in these countries. This contract would be applicable in case of commercial agreements and would ensure that either party is being afforded fair and equitable treatment. Most of the disputes have to be settled through negotiations though conciliation, arbitration and litigations can also be used (BIPP Agreement, 1994). • Frustration of a contract for personal services – This is a contract that would not have commercial implications as most often applied in employment contracts. Frustration of a contract is a situation in which the situation is such that the law would make it impossible for the performance of the contract. Both parties are innocent in relation to the event that has caused frustration. Frustration can occur by means of operation of the law or destruction of the subject matter of the contract (force majeure). When the contract is considered impossible to be performed due to the turn of events, frustration may be utilized as a tool to end the contract, and dispose of both parties of their liabilities. However, there are certain terms and conditions for the doctrine of frustration to be utilized. Firstly, either party should not doubt the likelihood of such an event to occur which would cause the contract impossible to perform. If there is likelihood of such an event occur and the parties had an idea that such an event was likely to occur, then frustration clause cannot be applied, and instead the contract would be declared to be breached. Secondly, frustration should not be induced by either of the contracting parties. Impossibility of performance of the contract would not only include physical impossibilities (such as fires, accidents, epidemics, wars, etc), but also commercial and economic impossibilities (such as sudden rise in costs, sudden downturn of the market, sudden trade embargoes imposed between nations, etc). For contract of personal services, based on the doctrine of Supervening Impossibility of performance several events may be classified and frustrating events including death of the employee, Illness or incapability, imprisonment, physical destruction of the subject matter, changes affecting the condition of employment (e.g. statutory changes considering a particular office as abolished), etc (Lawnet Lanka, 2011). • A serious ankle injury sustained by a visitor to the premises of a company, where a faulty stair treads has been reported by a cleaner three weeks before – In any visit to a premise of a company, the intention of the visit is likely to be business, as a part of the business dealing. Hence in such a situation, as there is a commercial contract in place and provision of certain promises as per the agreement, in case of negligence or unintentional tort by the company owner, he has to pay for the damages sustained by the visitor to the premises. The visitor has to be authorized to enter the premises of the company, and to permit such authorization, the likely permitting source would be the commercial contract. The company owner would have to remove all hazards in their premises, as part of commercial transactions, business partners would explicitly or implicitly be required to visit the company. The owner has to exercise reasonable amount of caution to remove all the foreseeable risks to the customers. This includes placing signboards. Besides, the landowner has to identify any hidden risks that may be present and remove such risks. An exception to the above rules includes any risk that may be obvious to the customer (such as banging into a door rather than opening it). The company owner can have rules to restrict visitors in hazardous areas or can even educate the visitors of the risks that may be present in his premises. Damages have to be paid to the visitor only if injury occurs, and in case injury does not occur, damages need not be paid (Miller, 2009). • The significance of the Articles of Association in a limited company – When the article of association of a limited company is registered, then the company would be binding on the shareholders. This would mean that the articles are binging between the company and the shareholders, even if the shareholders have not signed the document of the Articles, by investing in the company, they have read the documents of the company and are making a declaration to follow the regulations that apply. Since the company is allowing the shareholders to invest in the company, they are binding on the contract with the shareholders through the Articles of Association. This is mentioned under Section 14(1) of the Companies Act 1985. The document of Articles of Association would be considered as a valid contract by the court. The articles of association are given as a statutory contract that holds a special nature. However, the Articles of Association would be binding on the company and its relationship with the shareholders merely as stakeholders or investors, and not on a personal basis. If the articles of association have to be changed, then it can be done only through a special resolution. The articles of Association would mention the duties, rights, responsibilities of the governing board of the company and also the company, the internal arrangements within the company, and also the rights and responsibilities of the shareholders. Since the articles of association only apply to people who invest in the company, it is of a commercial significance and promotes a commercial relationship (Gillhams Solicitors, 2005). Specific problem 1. The purported contract Since the Convention on the International Sale of Goods, 2010, will not be applicable since UK is not the signatory to the same, the Principles of European Contract Law 1994 (termed as Principles) would apply. The Principles are supposed to be applied as general rules for all contracts in the European Union including sale of goods and services. Even when the parties have not specified which law would apply, the Principles would be applicable. Under the Principles any party can enter into a contract and fulfill the requirements of fair dealing and good faith whilst dealing with others in the contract. Under Article 1:301, electronic mail can be considered as a valid mean of communication (PECL, 2011). In the contract there was a clear offer or proposal from Smith (who was acting on behalf of Spurious) along with a specified price that would be given to Jones, the time to be taken, the clear details of the work and the deadline date for completion. There may be some doubt in whether Jones actually accepted the Contract, as he did not agree to the same expressively, but acceptance was provided by conductance or behavior (Article 2:204) (PECL, 2011). Besides, the acceptance was provided within a reasonable amount of time. Hence there was a valid contract existing between Spurious and Jones. In the case Fe Felthouse v Bindley (1862) EWHC CP J 35, acceptance of a contract had to done expressively and silence cannot be dictated as a method of acceptance. 2. The IP in the ‘novel software’ process Under the EU, patents are not given for software or computer programs or computer programs that provide business processes, as these are not technical contributions. This is provided under Article 52 of the European Patent Convention. Any computer software program that solves a business problem rather than a technical problem is deemed to be not patentable as the non-obviousness requirement cannot be met. Under UK law, computer programs that are able to solve an industrial process and have a technical innovation are capable of patentability. The EPC has granted patents for software programs which as part of a device is able to drive the device such as a robot arm, display graphics, etc. However, several software programs that run business processes such as online retailing or inventions that are trivial in nature are not granted patents in the EU. The Software program written by Jones is for a video game. It is likely that the same does not hold any technical innovation as there seems to be no industrial process involved having a technical innovation. Hence, there is a likelihood of the software process not getting patented under British or EU law. However, Jones can seek protection of his invention through other means including copyrights. A software program can be protected as a literal work in a copyright (European Patent Office, 2009). In this case it has been discussed that Spurious is claiming the IP over Jones work. However, Spurious are not accepting the contractual responsibilities for providing Jones the consideration for which work. Hence, Spurious have breached the contractual agreement signed by Smith on behalf of the company. There is also no clear manner in which the IP can be shared between both the parties. However, since the company have breached the contract and have asked Jones to cease all work mentioned in the contractual agreement without paying him, Jones can claim the IP for his work (mainly copyrights) and later when the contractual agreement and his patent gets sorted out, assign the work to Spurious. 3. Jones’ claim for money for the work done As per the contractual agreement between Jones and Spurious, when Smith was the director of client services for Spurious, Jones had received an email mentioning the offer which included the timeline, work to be done, details of the work, presence of any interim report, and the details of amount to be paid for the work done. Jones completes the contract as per the agreement along with meeting the various clauses such as provision of interim report, completion within the deadline, etc. Under the UK law, any contract that has been signed by the Director of the company within his authority and duties would be considered as a valid contract, and would be binding upon the company. This was likely not to be a pre-incorporation contract. Hence, even Smith has been dismissed; the company has to respect the contract that would be present with Jones. Though the work has still not been received by Spurious, the contract is enforceable as part of the work has been done (interim reports) and Jones has spent certain amount of effort in completing the work. If Spurious fail to pay Jones for his work, then it would be a breach of contract (Outlaw UK, 2011). Spurious decide to terminate the contract all of a sudden once they terminate the services of Smith. However as per the Principles termination of the contract would not destroy the rights and liabilities of both the parties that are present up to the time of termination. Besides, Jones is free to settle any of the disputes, as termination would not destroy the right to sue for breach. Under Article 8:108 of the Principles, the aggrieved party is entitled for damages caused by non-performance from the opposing party (PECL, 1999). 4. The defamation claim According to the Harvard University, Defamation is a communication to the public that is intended to hurt the reputation of a person or a company and can include oral comments as well as written comments. Under UK law, the defamatory statement proposed by the Defendant (In this case Jones) is said to be false, unless proved by in court by the defendant. Hence, Jones have to demonstrate the email communication that he has received from Mr. Smith regarding the offer, his acceptance of the offer, performance of tasks, the non-provision of consideration by Spurious and also the claiming of IP by Spurious. Under UK law, the plaintiff is presumed to be innocent and the defendant has to demonstrate the truth present in his statement through evidences. In the famous case McDonald vs. Morris and Steel, McDonald sued Greenpeace for spoiling the company name claiming several environmental injustices done by the company against animals. However, the British court did not view any of the evidences presented by Greenpeace and instead awarded McDonalds Pounds 40,000 as damages. However, there was a huge outcry and public support for Greenpeace and criticism of McDonalds that they did not want to collect the sum of damages, because, the people found clues of the environmental injustices done by the company. Hence, in this case Jones has to prove the abuses meted out by the company and Smith to him and has to demonstrate the same from the emails sent to him by Smith for working the contract (Global Campaign for Free Expression, 2000). References Commission on European Contract Law (1999). THE PRINCIPLES OF EUROPEAN CONTRACT LAW, Retrieved on December 1, 2011, from Web site: http://frontpage.cbs.dk/law/commission_on_european_contract_law/PECL%20engelsk/engelsk_partI_og_II.htm European Patent Office (2009). Patents for Software?, Retrieved on December 1, 2011, from Web site: http://www.google.co.in/url?sa=t&rct=j&q=epc%20for%20requesting%20a%20program%20source%20code%20from%20the%20applicant.%20nor%20is%20it%20the%20policy%20of%20the%20epo%20to%20require%20or%20examine%20source%20codes%20or%20to%20publish%20them%20as%20annexes%20to%20patent%20application%20documents%20(which%20consist%20of%20the%20request%20for%20grant%2C%20the%20claims%2C%20the%20description%2C%20the%20drawings%20and%20the%20abstract).%20the%20source%20code%20is%20neither%20necessary%20nor%20appro%20priate%20for%20sufficient%20disclosure%20of%20a%20computer-implemented%20invention.%20for%20examination%20and%20publication%20purposes%20the%20inventive%20concept%20must%20be%20disclosed%20in%20the%20application%20in%20a%20manner%20sufficiently%20clear%20and%20complete&source=web&cd=1&ved=0CBwQFjAA&url=http%3A%2F%2Fgroups.ist.utl.pt%2Funidades%2Ftt%2Ffiles%2FPI-Pack-INPI-E-Patents-for-Software-EPO.pdf&ei=H0HZTqbFMIjorQe62Nn6DQ&usg=AFQjCNGNFfmT0n_WUgngYpBIRczCqP9JAA Gillhams Solicitors (2005). Briefing Note - Background, Nature and Effect of Articles of Association under UK Company Law, Retrieved on December 1, 2011, from Web site: http://www.gillhams.com/articles/134.cfm Global Campaign for Free Expression (2000). Defining Defamation - Principles on Freedom of Expression and Protection of Reputation, Retrieved on December 1, 2011, from Web site: http://www.article19.org/data/files/pdfs/standards/definingdefamation.pdf Government of India (2011). AGREEMENT BETWEEN THE GOVERNMENT OF THE REPUBLIC OF INDIA AND THE GOVERNMENT OF THE UNITED KINGDOM OF GREAT BRITAIN AND NORTHERN IRELAND FOR THE PROMOTION AND PROTECTION OF INVESTMENTS, Retrieved on December 1, 2011, from Web site: http://finmin.nic.in/bipa/United%20Kingdom.pdf Goode, R. (2003). ‘Contract and Commercial Law: The Logic and Limits of Harmonisation’, EJCL, 7(4). http://www.ejcl.org/74/art74-1.html Joyce, P. J., & Skillman, G. L. (2004). Labor markets and employment relationships: a comprehensive approach, John Wiley & Sons, London. http://books.google.co.in/books?id=bLnYXBdGBCoC&dq=contract+in+employment+commercial+basis+of+relationship&source=gbs_navlinks_s Lawnet Lanka (2011). FRUSTRATION OF CONTRACT (TERMINATION OF SERVICE BY OPERATION OF LAW AND IMPOSSIBILITY OF PERFORMANCE) THE LEGAL CONSEQUNCES, Retrieved on December 1, 2011, from Web site: http://www.lawnet.lk/docs/articles/sri_lankan/HTML/CV18.html Miller, R.L., & Jentz, G. A. (2009). Fundamentals of Business law: Excerpted Cases, Cengage Learning, London. http://books.google.co.in/books?id=mgruQIq3wQ4C&pg=PA96&lpg=PA96&dq=damages+suffered+to+customer+company+premises&source=bl&ots=UC17ReJejl&sig=qw6n062_MYilMZ8UZNoQz7JAhMs&hl=en&ei=EnDYTuf_KojqrAfxlbzgDQ&sa=X&oi=book_result&ct=result&resnum=1&ved=0CB0Q6AEwAA#v=onepage&q&f=false Outlaw (2011). Formation of contracts, Retrieved on December 1, 2011, from Web site: http://www.out-law.com/page-396 Smithies, D. (2007). Contract - Elements of a Contract, Retrieved on December 1, 2011, from Web site: http://tutor2u.net/law/notes/contract-elements.html Read More