Contract between Winnie and ERH - Essay Example

Running header: Contract law Contract law Author’s Name Institutional Affiliation Date of submission Introduction The issues to be addressed in this case include whether a valid contract has been formed between Winnie and ERH as the parities to the contract, the validity of the contract terms, any vitiating factors of the contract and any remedies and damages that will be available to Winnie. 1. Has a contract been formed between Winnie and ERH? In exploring the rights available to Winnie, we need to examine whether a contract has been formed between her and ERH. Issue and Rules A major issue that arises in this case is whether a contract has been formed between the two parties. Hence, the law regarding formation of contracts is analyzed. One element of a valid contract is that the contracting parties must have had intention to create legal relations. This is because not all agreements lead to a binding contract enforceable by law. This can be derived from the conduct of the contracting parties as well as from whether the agreement involved is of domestic or commercial nature. In domestic agreements, the law presumes that the parties do not intend to create legal relations as was held in Jones v Padavatton1. On the other hand, agreements made in a commercial context the law presumes that the contracting parties intended to create legal relations as held in Esso Petroleum v Commissioners of customs Excise2. Another element of valid contract formation is the existence of mutual agreement in the name of offer and acceptance. This can also be derived from the conduct of the contracting parties. In this case, the offeror makes an offer which once accepted by the offeree creates a binding contract. For there to be an offer, it has to be shown that the offeror had the intention to bound as held in Carlill v Carbolic Smoke Ball co3. For there to be a contractual agreement, there has to be valid acceptance by the offeree. For the acceptance to be valid, the terms of the acceptance have to exactly match the terms by the offer and the agreement must be certain. In this case, acceptance could be by conduct as held in Brogden v Metropolitan Railway co4.Formation of a contract must also involve consideration. This is the price asked by the promisor for the promise he/she offers as held in Coulls v Bagots5. A valid contract also must be evidenced by real and genuine consent and must avoid mistakes and misrepresentations. There must be free will by the parties entering the contract and a proper understanding of what each of the contracting parties are doing. No details regarding what will actually be offered by the promisor should be concealed or misrepresentation of what will actually be offered in the contract. Another element of a valid contract is the legal capacity of all parties. Finally, the contract has to be legal as held in Amoco Australia Pty Ltd v Rocca Bros Motor Engineering Co Pty Ltd6 . Application and conclusion Given that ERH is involved in hotel business and has even employed an event’s organizer (Eva), it is clear that the agreement between Winnie and ERH is commercial in nature. The fact that they have advertised themselves and Winnie travelling to ERH to meet the event’s organizer is evidence of intention to create legal relations. In addition, the two parties make a written agreement that details the terms of the contract further showing that they had intention to enter into legal relations. Offer and acceptance involves Winnie traveling to Emerald with an intention to find out the suitability of ERH to host her wedding. After seeing the venue and arising from her discussion with Eva, she is impressed and she gives Eva (ERH) the details of what she would like to be included in her wedding function. ERH thus gives her their offer to host her wedding with the offer describing the food and drinks to be offered at the wedding, the exact venue, the band as well as the song to be performed during the wedding. ERH is to offer its venue and services during Winnie’s wedding at a price of $20,000 of which a 50% deposit has to be paid a week before the wedding. The conduct of the parties indicate mutual agreement. This is seen in the discussion that Eva (ERH) has with Winnie and the fact that the offer is put into writing in an agreement. Winnie is seen to have accepted the offer by paying the deposit on time and arriving for her wedding at the venue at the agreed dates and time. As such, it can be concluded that there existed mutual agreement as to what the obligations of each party to the contract were at the time the agreement was made. Regarding consideration, it has been agreed that the consideration to be paid for the promise is $20,000 of which 50% is to be paid in advance. In this case, Winnie has paid consideration for the promise by paying $10,000 in advance with the balance being paid on the wedding day thus indicating acceptance of ERH’s offer. Regarding the real and genuine consent, avoidance of mistakes and misrepresentations, though there is free will by the parties entering the contract, there seems not to be proper understanding of what each of the contracting parties are doing. This is because some details regarding what will actually be offered by the promisor are concealed while there have been misrepresentation of what will actually be offered during the wedding. As such, it can be argued that there has not been genuine consent by the contracting parties which is likely to affect the validity of the contract between Winnie and ERH. On the legal capacity of the parties and the legality of the contract, it can be argued that given that ERH is a hotel that has been involved in events organizing as evidenced by the presence of an event organizer and the fact that Winnie is planning for her wedding as well as the conduct of the parties, it can be argued that the contracting parties have the legal capacity to enter into legal agreements. Furthermore, the contract involves the wedding venue which is legal making the contract legal. Given that all the elements of contract formation have been observed in the agreement between Winnie and ERH, it is concluded that a contract has been formed between the two parties. 2. Are the contract terms valid? The contract terms have to be valid if the contract is to be valid and hence enforceable by law. Thus, the validity of the terms of contract between Winnie and ERH are examined. Issue and Rules Another issue to be determined regards the validity the terms of contract enter into by Winnie and ERH and thus whether the contract is valid. The law provides that valid contract terms should include proper offer and proper acceptance. This means there should be a lawful offer by one party and lawful acceptance by the other party. Valid contract terms also include the intention to create legal relationship as stated above. Valid contractual terms also include lawful consideration or the price for which the promise of another is fulfilled. For a contract to be valid, it should involve competent parties with ability to contract. For instance, the parties should not be minors, people of unsound mind or people disqualified by law to contract. Validity of contract terms also include free consent implying that the parties must agree upon the same thing in the same sense. This means that it should not be caused by coercion, undue influence, fraud, misrepresentation or mistake implying that there is no meeting of minds regarding the agreement. The agreement must also involve lawful object and the contract terms must be certain or capable of being certain. In addition, the condition for a contract should be capable of performance if the contract is to be valid. Application and conclusion The discussion above has revealed the elements of a valid contract that are present in the contract between ERH and Winnie. It has been revealed that there was a valid intention to enter into legal relations by the two parties to the contract. There has been a valid offer and a valid acceptance of the offer by the offeror and the offeree respectively. However, the validity of the agreement is brought to question by the fact that what is finally offered to Winnie is not what she thought would be offered when accepting the offer. This is despite the fact that she has honored her end of the bargain by paying the consideration as requested by the promisor (ERH). In other words, is what is offered by ERH what has been agreed upon by the parties? It can be concluded that this is not the case. This is seen in a number of factors. The contract terms state that ERH will provide their venue ‘Edge of the ocean’ for the entertainment of 100 guests on the wedding night on February 1 2016 from 5pm to midnight. Yet a different venue is provided and does not become available until 7p.m. The guests are moved to a disused shed at the back of the hotel since the great dining hall is unavailable. Winnie understands that there will be no interruptions yet the event is interrupted by a tropical hurricane. ERH has offered to serve “The Asian finger feast” which is Winnie’s understanding based on the photos she is shown by ERH. However, what is provided is sourced from the freezer of a discount supermarket and is totally different from what Winnie had in mind7. ERH served the tropical punch to the guests in accordance to the offer but it turns out to be below Winnie’s expectations despite the fact that its contents had been concealed from her and hence she did not have the chance to ask for a change. ERH’s drinks at the bar are priced at 3 times the cost of equivalent Melbourne prices yet the offer stipulated that they are reasonable priced. The pricing does not appear reasonable. The agreement stipulates that the entertainment is to be provided by the trolls with the bridal dance being the song “wild Thing”. However, it turns out that The Trolls is not the original band neither does it play the original song. When accepting the offer, Winnie has in mind the original band The Trolls playing the original Wild Thing but at the event an unromantic death metal song is played. The other terms of the agreement seek to punish Winnie in case of cancellation by forfeiting the deposit while ERH has absolved itself of any damage even if caused by ERH’s negligence. The fact that what is promised is not what the promise expected means there was no meeting of minds concerning the agreement. This puts the consent as well as the validity of the terms of contract to question. It means that Winnie is right in contemplating suing ERH as the contract cannot be termed as valid when the consent and hence the agreement is questionable since there appears to be a lot of misrepresentation regarding what is promised and what is finally offered. 3. The vitiating factors of the contract These are factors whose presence will undermine the contract. Issue and Rules As discussed above, though the contracting parties had reached agreement, questions have arose regarding whether the fact that what Winnie had thought would be offered to her is completely different from what is actually offered destroys the basis upon which the agreement was reached so that it is vitiated in some way. The issue is whether there are vitiating factors that might undermine the contract between Winnie and ERH. The law of contract identifies a number of vitiating factors including misrepresentation, mistake, duress, undue influence and illegality. In this case, the vitiating factors referred to include misrepresentation and mistake. Misrepresentation refers to a false statement of fact or law as to induce the other party into entering into the agreement. The law requires that the statement be made prior to entering into the contract and the statement must purport to be statement of fact and must have induced the other party to enter into the contract. The statement must have been a false one. According to s 18 of Australian consumer law, misrepresentation gives rise to other rights and remedies8. Mistakes on the other hand refers to the party’s understanding of contract terms. The law provides that common mistake will nullify the agreement where it refers to the existence of the subject matter or if it is mistake as to the quality thus rendering the contract impossible to perform or rendering it radically different. Mutual mistake occurs where both contracting parties are at across purpose thus preventing the contract from arising since there is no consensus ad idem. Unilateral mistake on the other hand occurs when one party is aware of the others mistake and will render the contract void if it relates to contract terms. Application and conclusion It is clear that Winnie makes up her decision after relying on Eva’s representation that hosting her wending at ERH would give her the best experience but she is not adequately informed that a tropical hurricane could destroy the event. On visiting ERH, Winnie is highly impressed with the magnificent water’s edge patio (‘Edge of the Ocean’), Great Dining Hall and bridal suite which informs her decision to choose the venue. Eva assures her of the availability of the venue and this is even put in the agreement but on the wedding day it turns out not to be available. Similarly, the food, the drinks and the band do not turn out to be what is stated in the agreement. Furthermore, although the offer clearly states that ERH drinks from the bar are priced reasonably, the actual price does not turn out to be reasonable. Thus, it can be concluded that the offer as represented to Winnie especially with regard to the venue and the band induced her into entering the contract as held in Oscar Chess v Williams9 .This is despite the fact that the terms of the offer were false and misleading and Eva (ERH) in making the offer ought to have known the facts but chose to misrepresent facts in a bid to induce Winnie into choosing ERH to host her wedding and hence accepting the offer. In addition, there was a unilateral mistake since Winnie was mistaken as to the terms contained in the contract agreement. She entered into the contract under serious mistake as to the existence of fundamental terms with ERH being fully aware of the mistake hence making the contract void ab initio as was held in Taylor v Johnson10. In this regard, it is clear that Eva recommended the band “The Trolls” with full knowledge that the band was composed of his son and his friends who were a death metal band. She also recommended the bridal dance song “Wild Thing” knowing well that the song in this case was not the original song but an unromantic death metal song. Winnie also understood reasonable prices for drinks to be the normal price which was not the case. In all these cases, Eva(ERH) had full understanding of what they were to offer .However, Winnie had mistaken all these terms thinking that something different would be offered and hence her disappointment at the wedding day. Thus, it can be concluded that Winnie entered the contract under serious vitiating factors of misrepresentation and mistake which should render the contract voidable. 4. The remedies and damages available to Winnie Issue and Rules Having established that the contract is voidable at Winnie’s option, the issue is the kind of remedies and damages that she could be awarded. The law of contract terms damages to include an award of money that the innocent party could be compensated. Damages are aimed at placing the injured party in the position they would have been if the contract had been performed. Under the rules of remoteness, the aggrieved party may only recover losses that may reasonably be considered as arising from the breach. The damages to be awarded may include reliance loss arising from the aggrieved party’s reliance on the contract. The party could also receive disappointment damages where enjoyment is part of the contract. Another damage is inconvenience if the aggrieved party has been put to physical inconvenience. The party could also be awarded diminution of future prospects where the party’s future prospects have been affected by the breach. The two parties may also agree on liquidated damages to be given to the aggrieved party. Remedies include repudiation which involves bringing to an end the contract. Another remedy is rescission which seeks to place the parties in their pre-contractual position. The court could also order specific performance to compel one party to perform their contractual obligations. Application and conclusion Winnie could sue for damages owing to the breach. Remedies available to her would include an award of money to compensate her hence placing her in the position she would have been in had the contract been performed as agreed as held in Addis v Gramophone11. In this case, Winnie may be able to recover losses that may reasonably be considered as arising naturally from the breach or those that she and ERH would have contemplated when making the contract as held in Hadley v Baxendale12. Winnie can be able to claim various types of damages including reliance loss. In other words, it may be difficult to quantify the position Winnie would have been had the breach not occurred but she may recover the expenses she incurred in reliance to the contract as held in Anglia TV v Reed13. She may also claim damages to reflect the discomfort and disappointment given the nature of event a wedding is and since enjoyment is part of events of that nature. This is because the event did not meet the standard that Winnie was led to believe that the participants would enjoy as held in Jarvis v Swann Tours14. Winnie can also be able to claim that the failure by ERH to ensure the event meets her standards adversely affected her future earnings prospects. This is despite the fact that she had not disclosed that she would be showcasing her dresses during the event. The fact that the blog had broadcast how bad her event was is a threat to her future earnings prospects. She may also sue for a restitutionary award aimed at stripping ERH of the benefit they earned by breaching the contract and bringing her back to her original position. Conclusion It is clear that the validity of the contract between Winnie and ERH has been brought to question by the presence of the vitiating factors identified. As such, Winnie is right in wanting to seek legal redress and hence recover the remedies and damages described above as the court may deem appropriate. References: Australiancontractlaw.com, 2016, Jones v Padavatton (1969) 2 All ER 616, Retrieved on 16th September 2016, from; http://www.australiancontractlaw.com/cases/jones.html Lawteacher.net, 2016, Intention lecture, Retrieved on 16th September 2016, from; http://www.lawteacher.net/lecture-notes/contract-law/intention-lecture.php Australiacontractlaw.com, 2016, Carlill v Carbolic Smoke Ball co. Court of Appeal (1983) 1 QB 256; (1892) EWCA Civ 1, Retrieved on 16th September 2016, from; http://www.australiancontractlaw.com/cases/carlill.html Lawteacher.net, 2016, Cases on formation of a contract offer, Retrieved on 16th September 2016, from; http://www.lawteacher.net/cases/contract-law/agreement-cases.php Coote, B2008, Consideration and the joint promise, The Cambridge Law Journal, Retrieved on 16th September 2016, from; https://www.jstor.org/stable/4506103?seq=1#page_scan_tab_contents Australiancompetitionlaw.org, 2016, Restraint of trade, Retrieved on 16th September 2016, from; http://www.australiancompetitionlaw.org/law/rot/index.html Paterson, J2015, Principles of contract law, Sydney, Prentice Hall consumerlaw.gov.au, 2016, Australian consumer law review, Retrieved on 16th September 2016, from; http://consumerlaw.gov.au/ e-lawresources.co.uk, 2016, Oscar Chess Ltd v Williams (1957) 1 WLR 370 Court of Appeal, Retrieved on 16th September 2016, from; http://www.e-lawresources.co.uk/Oscar-Chess-Ltd-v-Williams.php Casebriefs.com, 2016, Taylor v. Johnson, Retrieved on 16th September 2016, from; http://www.casebriefs.com/blog/law/contracts/contracts-keyed-to-murphy/breach-of- contract-and-permissible-remedial-responses/taylor-v-johnson-2/ E-lawresources.co.uk, 2016, Addis v Gramophone (1909) AC 488 House of Lords, Retrieved on 16th September 2016, from; http://e-lawresources.co.uk/cases/Addis-v-Gramophone.php Australiancontractlaw.com, 2016, Hadley v Baxendale (1854)9 Ex 341, Retrieved on 16th September 2O16, from; http://www.australiancontractlaw.com/cases/hadley.html e-lawresources.co.uk, 2016, Anglia Television v Reed (1971) 3 All ER 690, Retrieved on 16th September 2016, from; http://www.e-lawresources.co.uk/cases/Anglia-Television-v-Reed.php e-lawresources.co.uk, 2016, Jarvis v Swan Tours (1972) 3 WLR 954 Court of Appeal, Retrieved on 16th September 2016, from; http://www.e-lawresources.co.uk/cases/Jarvis-v-Swan-Tours-1972.php Read More