Contracts and Agreements - Essay Example

?International Business Law A. Contracts and Agreements The ment that “A contract is an agreement but an agreement may not necessarily be a contract” is true. This is because one is essentially a legal term whilst the other is a generic expression. Even if an agreement is rendered legal, it is not quite the same as a contract unless it meets all the requirements necessary to constitute one. The differences between these two terms can thus be summarised into legal enforceability, scope, constitution, manner of termination, and remedies for breach, among others. A contract and an agreement do not have equal status in the eyes of the law because the former is used in a legal context whilst the other is normally employed in a generic, non-legal sense. A contract is a term used to refer to the coming together of the minds (in other words, an agreement) of two or more parties, the terms of which are binding upon them, and is enforceable in a court of law. It necessarily denotes accompanying obligations and duties of the parties. An agreement, on the other hand, is not legally enforceable and does not create binding obligations on the part of the parties.1 The word “contract” indicates a much deeper and broader implication than an agreement because of the requirement of certain essential and formal elements to constitute, features not required in an agreement. To legally constitute a contract, the elements of offer and acceptance, consideration, legality of subject, intention to create legal relations, form, and definite terms, among others, must be present.2 An agreement, which necessarily refers to offer and acceptance, is only a part of a contract, but does not make up all of it. An agreement does not need consideration, definite terms, relevant form, and an intention to create legal relations for its formation. The legality of the subject matter is not even essential to an agreement because two parties may agree to do something illegal and it would still be called an agreement. Moreover, offer and acceptance are necessary to establish the commencement of the contract. A contract can only be terminated in ways indicated by law3 whilst agreement, which is not governed by law, can be ended entirely dependent upon the will of the parties. Moreover, the implication of a contract’s legal enforceability is that whenever one of the parties to it have breached any of its terms, the other can seek recourse in a court of law to recover remedies in accordance with law. Thus, an injured party to a contract can apply for damages, discharge, specific performance, injunction, rescission and reformation.”4 Since agreements are not legally enforceable, the aforesaid remedies are not available to it. B. Kingsley Limited Paul’s dilemma falls into fitness of the goods for the purpose for which they were bought. This topic is dealt both by the Convention on International Sale of Goods (CISG hereinafter) and the Sales of Goods Act 1976 (SOGA hereinafter). The CISG, however, is applicable to contracts of sale of goods that take place internationally, or between a buyer and seller who live in different countries, which are contracting states of the Convention.5 The condition stated in the present problem does not seem to contemplate multi-jurisdictions, but is purely domestic, which makes the CISG inapplicable. Nonetheless, the relevant CISG is discussed without taking into consideration this particular aspect. Article 35(2) of the CISG enumerates the four specific instances when a seller delivers good, which do not conform to CISG. It is understood that non-conformity occurs under the following conditions: the goods are not fit for the purposes of their ordinary use; the goods do not fit the purpose made known to the seller by the buyer at the time the contract was concluded, except when the buyer did not rely, or it was not reasonable for him to rely, on the judgment or skill of the seller; the goods do not possess the qualities they are supposed to have as indicated by the seller, and; they are not adequately packed to ensure their preservation.6 In the present case, the problem is that the sparkling bricks turned out to be unfit for the purpose for which they were bought. Paul, however, failed to inform the store the precise use of the bricks he is buying, only stating that he needed it for external use, and neither did the store apprised him of the limits of the sparkling bricks. Nonetheless, Paul has recourse under this law considering that the sparkling bricks were not fit for ordinary, external construction purposes. Compressed-paper bricks are mainly used as fuel and an environmentally friendly alternative to firewood. The store should have indicated to Paul that they are not used in the same way that bricks are ordinarily used. Thus, it has been held in one case that ceramic ovenware were not suitable for ordinary purpose because it cannot stand the high oven temperature and, therefore, did not conform to the standard quality set out by the CISG.7 Knowledge on the part of the seller is sufficient if the purpose of the goods is reasonably recognisable from the circumstances.8 This is not applicable, however, if at the time of the transaction the buyer is already aware that the goods is not suited or do not conform to the purpose for which it is purchased. The purpose of the goods can be assessed or be recognisable by the seller by the nature of the of the trade sector to which the buyer belongs as well as the type of goods. A goods’ ordinary purpose, for instance, may be recognisable from its nature: for consumption; for utility purposes, or; for retail.9 In the present case, the ordinary use of bricks is for construction and the use of fuel by the paper-compressed type bricks is isolated to a certain type of bricks alone. The seller should have apprised Paul that the sparkling bricks were not the usual bricks type for construction. On the other hand, SOGA 1979 deals with implied terms about quality of fitness under s. 14 of Part II. There are 8 main subsections in this section, but §2B and 2C should be of particular interest because of their applicability. Initially, however, §2 sets the general principle that an implied term exists in a contract of sale that warrants the satisfactory quality of goods being sold. Subsection 2B enumerates instances of quality of goods, which include, among others, (a) fitness for all purposes for which they are commonly used and (d) durability. On the other hand, §C provides the exceptions to the general principle of implied term and enumerates the following: the buyer was informed of the unsatisfactory aspect of the goods before the contract was concluded; a prior examination of the goods would reveal any such unsatisfactory quality and the buyer had the opportunity to examine them, and; a sale by sample reveals the apparent unsatisfactory quality of the goods. This law is more applicable to the present problem because of its domestic nature, but the logic outlined in the relevant CISG provisions discussed in the preceding pages is similar. In the case of Slater v Finning Ltd,10 the Court rejected the buyer’s position that the seller violated the SOGA implied term provision when the camshafts he bought for his vessel wore out easily because the “failure of the goods to meet the intended purpose arises from an abnormal feature or idiosyncrasy, not made known to the seller, in the buyer or in the circumstances of the use of the goods by the buyer.”11 The problem at hand presents a contradictory circumstance to the Slater case, since the idiosyncratic use of the goods is not on the way it was used by the construction company, but by the nature of the goods, which was not made known to the buyer by the seller at the time the contract of sale was concluded between them. On the other hand, the Court in Wormell v RHM Agricultural (East) Ltd 12 sustained the claim of a farmer who invoked SOGA for failure of the goods to meet its intended purposes when the inadequate instruction on the packet of the weedkiller made it unfit for use. The Court held that the packaging is part of the goods. Although this case may not fall squarely with the present problem, it can be deduced, by implication, that when the goods are considered foreign material, they must be accompanied by sufficient instructions for their use. In the present case, the paper-compressed bricks are not real bricks used in the ordinary sense of the word and created confusion not only because of the “bricks” word attach to it, but also because the seller displayed it alongside with the standard bricks that have separate and distinct use. References: Convention on International Sale of Goods Kruisinga S, (Non-)conformity in the 1980 UN Convention on Contracts for the International Sale of Goods: a uniform concept? (New York: Intersentia nv, 2004) Marsh SB and Soulsby J, Business Law (8th Edition, United Kingdom: Nelson Thornes, 2002). Rao P, Mercantile Law (New Delhi: PHI Learning Pvt. Ltd. 2011). Sales of Goods Act 1976. Schlechtriem P and Butler S, UN Law on International Sales: the UN Convention on the International Sale of Goods (Heidelberg: Springer, 2008). Slater v Finning Ltd [1996] UKHL 59. Whincup M, Contract Law and Practice: The English System With Scottish, Commonwealth, and Continental Comparisons (5th Edition,The Netherlands: Kluwer Law International, 2006). Wood P, Conflict of Laws and International Finance (London: Sweet & Maxwell, 2007). Read More