Notion of Contract in Contract Law - Coursework Example

Law Contract Law Introduction A contract is defined as an agreement between two parties or corporations that creates legally bindingobligations and rights as pertains to the concerned entities. Contracts form the bulwark of communication, understanding and conducting business between two entities: individuals, or Business Corporation. Parties to a contract need to be very sure of the requirements of the contract and their stake in the endeavor, otherwise, they stand to lose financially extensively. This therefore means that for a contract to be sound: it has to involve two parties, there has to have been an agreement reached by the two parties and the contract must create legally binding rights and obligations. With this genesis, this paper will review course work 2 and apply contract law to legally advice Arju on the best way to solve her current legal crisis. Arguments will be given on how Arju can defend litigations presented in court and the counter arguments that Arju may encounter. This will be done with reference to cases that have been citied in contract law and the rulings arrived at in these cases (Topic 1). Discussion 1. The power washer purchased by Arju turns out to be totally unsuitable for the purpose. Arju’s position with regard to: A1. A fellow passing by customer who recommends AK 47 Water squirt as the best power washer in the market Litigation against a fellow passing by customer is invalid. To begin with, there is no contract arrived at by Arju and the fellow customer. Law defines their agreement as idem (mind agreement) but not a contract that is legally binding to both parties. This translates that litigation against the fellow customer is null and void. This is since the customers’ information is not reliable and also the fellow customer has no duty of care towards Arju, this shield him from any litigation as a result of the information rendered to Arju and the consequences thereafter (Topic 9). Secondly, Arju cannot succeed in suing the fellow customer for compensation on the basis of caveat emptor (buyer beware). This is affirmed in a court ruling involving Smith v Hughes1 involving the sale of oats between the litigating parties. The plaintiff exhibited oats for the defendant to sample prior to the actual purchase and the defendant never complained. However, upon delivering the oats to the defendant, the defendant rejected them on the prospect that they were old and the plaintiff sued the defendant for compensation. In an appeal hearing, it was ruled that the seller acted in the best of interest and the buyer should have been aware of the shortfalls of contracts and not blame it on the seller. The court therefore revoked the litigation by the buyer. On this basis, by the fellow customer merely suggesting that Arju purchases the AK 47 water squirt as the ideal power washer, the liability for its non performance did not befall him. Arju should have been more careful and have adequate information on the best power washer and also be aware of the shortcomings of the power washer he was compelled to buy. It is evident that litigation against the fellow customer by Arju would not be successful2. A2. A sales assistant from the home decorating department who assures Arju that the store sells quality equipment, yet he has received over 200 faulty equipments in the past four hours Arju would successfully file litigation against the home decorating department assistant on the basis of misrepresentation. This is since the misrepresentation by the home decorating assistant has the four qualifications for a successful compensation to Arju as will be outlined. To begin with, the misrepresentation was a statement. This statement is classified as a half truth as held by Lord Justice James in Arkwright v Newbold3 where he asserted that even if everything previously said is true but some information id left out, it qualifies to a false statement and consequently to misrepresentation. Even where the participants in the negotiations have no direct relationship with each other, the court assumes that in his capacity, he was bound to tell the whole truth and not half truth. This is especially if the information with held would have contributed to the contract not being made. With reference to the sales assistant, he with held information that he had received 200 faulty goods in 4 hours after asserting that the company only has quality goods. If this information has been disclosed to Arju, she would not have purchased the power washer from there. This therefore evidences that litigation against the home decorator for compensation would be successful4. Secondly, the misrepresentation is material and Arju would have to prove this as held in Hamilton v Allied Domecq plc5 where the pursuer has to provide evidence on the basis of time, place and context for compensation to take place. Arju would have to prove that while in the shop, the home decorator assistant gave a false statement on the company selling only quality goods yet he had been receiving over 200 faulty goods. This would make the accusations by Arju qualify for compensation on the basis of misrepresentation6. Finally, for misrepresentation to be successful in litigation proceedings, it must be proved that the misrepresentation induced the formation of the contract. This is evidenced in a ruling made in Peekay Intermark Ltd v Australia and New Zealand Banking Group Ltd7. The court obtained enough evidence that the claimant had been induced to sign the contract on the presumption that what was written reflected what he had been earlier (incorrectly) told. In this case scenario if Arju can prove that misrepresentation by the home decorator sales representative inclined her decision to purchase the power machine then litigation can be successful. In his capacity as a representative of the company, Arju was inclined to believe his word that they only sold quality goods yet he had withheld some information that would have nullified the contract. This makes Arju qualify for compensation by the company as a result of negligence by its employees8. A3. A sales assistant from power washer department who assures Arju that the M16 Aqua blast is the best in the market and will be going up by 100 pounds in the next week The principle of actual undue influence will serve as the basis of a litigation action by Arju against the assistant from the power washer department. Undue influence entails pressure that does not necessarily translate to duress but in a great extent influences the decision making of the influence. It is undue influence if it translates to improper pressure as affirmed by a ruling in House of Lords case of Bank of Scotland plc v Etridge9 where undue influence means misused influence. In this case of Arju and the sales assistant, the assistant having been deployed in the power washer department meant that the assistant was unduly competent and would offer coherent advice. Actual undue influence is elaborated when the assistant inform Arju that M16 Aqua blast is the best and it translated to be below par. Concurrently, influence was misused when the sale assistant informed Arju that the power washers’ price would go up by 100 pounds the following week, influencing Arju to purchase it. The machine having not met the standards as stipulated by the assistant, Arju’s litigation is valid since the convictions of the assistant made Arju buy the power machine10. Subsequently, actual undue influence cuts across all relationships and there is no limit of the relationships that are needed to validate the contract. This entails that the assistant as a representative of the shop where Arju was procuring her power washing machine the relationship between Arju and the sales assistant was valid. This can be affirmed in a spiritual relationship that qualified to serve as actual undue influence in the case of Morley v Loughman11. Executors responsible for administering the deceased property were able to successfully claim that members of a religious sect used undue influence compelling the deceased to make payments to them. Through this relationship, the executors were able to claim back the money. In this context, Arju’s professional relationship with the sales assistant qualifies to serve as a contract since the sales assistant was in a position where she earns the customers trust and confidence. On this basis, Arju can competently claim compensation for the losses encountered as a result of influence from the sales assistant12. Having reviewed the possible litigations that would be successful if ensued by Arju in case 1, it is of essence to review the compensation mechanisms that the court would rule to compensate Arju. The first compensation mechanism would be restution in integrum. This entails a situation where the parties are compensated to their original stature as prior to the formation of the contract that led to the losses. However, this right to rescission can be denied if they is delay in seeking for compensation and the ability to return the parties to their original position prior to the formation of the contract becomes difficult. This is the case in Leaf v International Galleries13 where the plaintiff delayed for 5 years in suing that the paint sold was not genuine. The court ruled that the delay was long and hence rescission as a remedy was denied, the period is stipulated to run from date of contract in case of negligent misrepresentation. However in the case of fraudulent misrepresentation, the period runs from when the fraud was discovered by the plaintiff. In this case scenario, rescission will only be possible if Arju files a case against the home decorator when she discovers that he had withheld pertinent information and consequently when the equipment failed to meet the set standards14. Damage is another compensation mechanism that the court may rule in favor of Arju. This ruling is usually made especially if the misrepresentation was small and it will not be fair to both parties to rescind the contract. In this case, the court finds it note worthy to pass damages where the plaintiff gets compensated for any losses occurred but the contract is still binding to the parties involved, in this case scenario, the company would compensate Arju for the damages caused as a result of relying on the quality assurance of the assistant and the equipment turning not to be effective and efficient as it was purported to be (Topic 9). 2. Arju’s position in regard to ‘Grumpies’: who have a sign prominently posted that they are not responsible for any death or injury regardless of how caused when she breaks her wrist as a result of uneven piece of carpeting Contract between Arju and Grumpies, is on the basis of a notice and there is no written acknowledgement though it is documented that the notice is prominently placed. To determine the outcome of the case filed by Arju against Grumpies, assessment of the notice has to be carried out. To start with, the notice has to be evaluated if it is a contractual document. This is evidenced in Chapleton v Barry UDC15 where upon hiring a deck chair, the hirer took a receipt from the attendant that contained a disclaimer that they would not be held responsible for losses as a result of hiring the deck chair. Court of appeal ruled that it was merely a receipt and hence was not a contractual document. In our case scenario, Arju had gone to take a meal and would not have paid much attention to the notice as it was not contained with the menu or attendants asked to sign, hence it did not qualify to be a contractual document16. Secondly, the court would have to assess if Arju knew that the notice contained the disclaimer and that but knowing their existence, she entered into contractual terms with Grumpies. In this case, the court assumes that the plaintiff knew of the rules and hence should not hold the defendant liable for misfortunes that befall them. See Parker v South Easter Railway17 where it is the accepted position of the defendants that rule despite the impression or knowledge of the aggrieved party. In the case scenario of Arju and Grumpies, the rule would rule after gaining insight if Arju was aware of the requirements of the notice. If she was, then Grumpies would not be held liable, however if she wasn’t aware, Grumpies would be held liable18. If the notice at Grumpies fulfills the above two conditions, the next question would be if the Arju had been made of the existence of the terms in the notice. If Arju had not been made aware of the existence of the notice, then there would be no contract formed between Grumpies and Arju. However, a ruling made in Wilkes v Jessop19 that the photograph outlining the limited liability of the store was prominent and easy to read, can be used as defense by Grumpies. This is since they can prove that the notice outlining their limited liability was prominent and easy to read, and there is no way that Arju would have failed to see. This would mean that a litigation action by Arju against Grumpies would not be successful20. However, thought the prominence of the notice might not work in favor of Arju, she may rely on the duty of care clause as her litigation. As delineated in the case scenario, her fall and consequently breaking her wrist was as a result of uneven piece of carpeting. It is the duty of Grumpies to make sure that the customers are in a safe environment to conduct business in. however, due to negligence, their negligence led to Arju tripping over and breaking her wrist. Under the rule of undue care and negligence, litigation against Grumpies by Arju may be successful (Topic 10). 3. Arju’s position in regard to the concert hall who is suing her for breach of contract for non- performance ensuing from her broken wrist Concert hall is suing Arju for breach of contract since she did not hold the end of the deal or contract made, bearing in mind that the parties to a contract have to abide to the rights and obligations of the contract. In case of breach of contract, the aggrieved party has to prove to the court the terms of the contract that the other party has failed to comply with. The terms not being met can be either express or implied terms and the plaintiff has to be in a position to stipulate the terms that are not being complied with. In this case scenario, concert hall has to prove to the court the terms that Arju did not meet and the contract they were in required her to fulfill them. The court will then hear out why Arju breached the contract and form the basis of assessing if the concert hall should be compensated or not (Topic 12). This falls under impossibility in the breach of contract. This is as a result of illness or even death of one of the parties that makes the completion of the contract impossible. This has been documented to hold water only when the recital of the contract is envisioned by the party aggrieved. An example of impossibility as a result of illness is stipulated in Robinson v Davidson21 where the concert was frustrated as a result of illness of the pianist on the day of the concert hence he did not play the piano. In the case scenario or Arju, she broke her wrist and hence could not play the piano hence the law of breach of contract as a result of impossibility cushions her from litigation filed against her22. Impracticability of the contract translating to breach of contract is another avenue through which Arju can defend herself against the litigation filed against her. This falls under the category of frustration where the impracticability of an event or of one of the parties leads to the termination of the contract between the two parties. The law requires that parties to a contract be aware of the inherent risks that they expose themselves to when they agree to be legally bound by law as pertain the agreement arrived at. In Krell v Henry23 the contract involved the hire of rooms that would be used to view the procession of the King. However, the king fell ill and the procession did not take place hence the rooms were not hired. The court of Appeal thereafter ruled that the contract had been frustrated by the King falling ill and hence the hire of the rooms though being the centre of the contract, could not take place. With reference to the hall concert that is suing Arju, she can defend herself on the basis of impracticability of the contract hence breach of contract. This is since as a pianist, she needed to use her hand and her wrist was broken frustrating the core of the contract which was her presentation at the hall. The hall should have borne in mind the possibility of impracticability of performance of the pianist had something happened to her. This shields Arju from compensating the hall concert as a result of losses incurred by her non performance24. This may seem unfair to the concert hall who must have had losses as a result of non- performance of Arju. However in cases where a contract is terminated on the basis of impracticability translating to frustration, the court does not offer any compensation to the aggrieved party. The court requires that the party who terminated the contract to do what would have been done prior to the frustration but what can be done after the termination of the contract is not covered by the court. In the case scenario, Arju may be compelled by the court to do what she would have done had she not have had her wrist broken but no compensation is given to the concert hall. The court requires that aggrieved parties make provisions for such unforeseen frustrations to the contract (Topic 11). Consequently, Arju may defend herself on the basis of mitigation of losses. This was defined in British Westinghouse Electric and Manufacturing v Underground Electric Railways Company of London25 as any step that a reasonable man would take in the course of business to mitigate his losses. The pursuer in this case has a heavy burden on his shoulders since the court expects that upon breach of contract by the other party, he had to come up with strategies aimed at limiting his liabilities. The concert hall is bound by the court to prove that it tried to mitigate the losses. Arju can argue that the concert hall could have hired a different pianist to play the piano in her absentia. In addition, Arju can prove to the court that after informing the concert hall of her sickness, they did not cancel her performance or notify her audience. If it is proved beyond any reasonable doubt that the concert hall did not mitigate its losses, then no compensation will be required to compensate the concert hall for losses that it might have encountered as a result of Arju breaching their contract26. 4. Arju’s position against Deadheads Department Store as a result of their misprice Scotland contract law in the advertisement sub heading provides that when services or goods are offered to the public, the law treats it as an invitation to treat and consequently not an offer to sell to those who reply. According to this law, when goods are displayed in a shop for sale, this serves as an invitation to treat and the shopkeeper only accepts the contract when the buyer presents the goods at the pay point. This is conferred in a ruling at the court of appeal pertaining to Pharmaceutical Society of Great Britain v Boots Cash Chemists (Southern) Ltd27. The court ruled that a contract was not arrived at between the plaintiff and the defendant by the plaintiff simply picking the drugs from the shelf. However, closer scrutiny was done at the sale point where supervision was done and therefore invalidates a contract purported by the plaintiff. Basing on this case, Arju would not succeed in suing Deadheads department since a contract would only be reached at the pay point and not at the shelf28. However, there are exceptions that provide some situations where the display of goods qualifies to act as an offer and not merely an invitation to treat. This is conferred in a ruling where an attachment of price to displayed deck chairs was perceived as an offer and not merely an invitation to treat in Chapleton v Barry Urban District Council29. In this case it was ruled in favor of the plaintiff that an offer was presented to him in the self service station and by putting the petrol in his tank, this concluded the contract. This outdid the validity of the pay point as the final sealing of the contract. On the basis of this law, Arju can proceed with litigation against Deadhead Department store where their display of price despite it being mispriced, was an invitation to offer and not merely an invitation to treat. They should therefore hold to the end of the bargain and own up to the misprice of their goods displayed. On this basis, the litigation against Deadhead Department stores would be ruled in favor of Arju30. Also, in bid to defend their misprice, Deadhead department stores can prove that they revoked the offer before it was accepted by Arju hence no contract arrived at by them and Arju. Revocation of an offer is stipulated in Henthorn v Fraser31 as the need to withdraw the offer being brought to the attention of the other party to whom the offer was made. Though Arju may pursue the litigation on the basis of an offer to treat, Deadhead department stores can use the basis of revocation that occurred at the counter prior to Arju having purchased the clubs. For revocation to be effective it has to be timely and no matter how far the negotiations had gone, if the contract has not been terminated, revocation is allowed. In the context of Arju and the Deadhead department store, the person at the cash point can defend himself on the basis of revocation. This is since even though Arju had picked the clubs, the cash point employee was quick enough to note that the price had been mispriced and consequently revoked the offer. This entails that litigation against the redheaded store by Arju might not be successful as the actual sale had not taken place hence no contract had been breached by failure to sell to Arju at 150 which was the misprice and hence revocation is allowable32. Conclusion A contract is only valid if it involves two parties, there is an agreement and the contract creates legally binding rights and obligations. Case scenarios of Arju have highlighted various concepts as pertains to contract law. They have emphasized issues like: caveat emptor, duty of care, misrepresentation, actual undue influence, impossibility, negligence, invitation to treat, and invitation to offer. Consequently, compensations available in the law of contract: mitigation of losses, rescission, and damages has been reviewed. Prior to engaging to a contract it is important that parties understand the obligations and engagements to avid undue losses and litigations that arise due to breach of contract. Work cited Legal system and contract law: Topics 5, 7, 8, 9, 10, 11, 12. Read More