The Law of International Trade: Nike Shoes - Case Study Example

? Analysis of Nike Shoes Case Study SITUATION ISSUE Rights for claiming damages under the Sale of Goods Act 1979 for the defective product supplied. RULES Defective products victim can claim compensation either under SOGA or under CPA or under the Law of Contract (LOC) or under the Law of Negligence (LON) or a mixture of these or under the Unfair Contract Terms Act 1977. APPLICATION AND ANALYSIS In a sale of contract, not only explicit conditions will have to be taken into account but also implicit conditions arising out of such contract will also be taken into account by a court. Conditions or terms of a contract may be either express, i.e. either orally introduced or written. In the following three scenarios, the terms may be inferred from a contract. (i) In fact- where the contract consists of no specific term but the signatories to contract must have in mind to be included in the same (ii) By law – the provisions contained in Sale of Goods Act 1979 (SOGA). (iii) BY customs followed by the contracting parties. Thus , there exists an implied term of any sale of product contract between a consumer and a commercial seller or between two commercial sellers themselves , that as per S.14 of SOGA , products sold are of reasonably suitable for their purpose and of satisfactory quality and as per S.1 of SOGA, products adhere with any available sample or any description. It is to be observed that a seller will be held accountable for infringement of these implicit terms. (Popat 2010: 319). Under SOGA, if a defective product has been supplied, then it would result in the basic infringement of contract and hence, the buyer can either seek damages or repayment of purchase price or to reject the product itself. As per s.14 of SOGA, the product should of satisfactory quality. In “KG Bominflot Bunkergesellschaft Fur Mineralore mbh & Co KG v Petroplus Marketing AG [2009] EWJC 1008”, it was held that products sold should be of agreeable quality not only both under SOGA and under common law not only at the time of delivery of the product but for a realistic time thereafter.(Insite Law 2009). In “Beer v Walker”, it was held that the products sold should be of merchantable. In “Wallis v Pratt”, it was held that a warranty should not rule out the implicit statutory stipulation of SOGA that products must match up to their description. In “Camell Laird & Co v The Manganese Bronze and Brass Co [1934] 402,” it was held that for supply of defective products, the seller was accountable under S.14 (1) of SOGA. (Popat 2010:391). In “Abouzaid v Mothercare (UK) Ltd”, claim for defective product was successful as the Court of Appeal held that product supplied was below the standard of safety of the public and hence was entitled to claim damages under CPA. However, in this case, the claim under tort of negligence was failed because it was not rationally predictable that the product would have caused such a harm or injury. (Rush & Ottley 2006:291). A consumer may bring a claim against supply of a defective product against the seller who sold the goods and in normal parlance, the seller of the products will claim from the manufacturer or the distributor. A single consumer can initiate such a claim individually and where a large number of consumers are affected, then group claim can be made. Normally, as there is no direct contractual remedy is available against the manufacturer for a consumer as there is no direct privity of contract between a consumer and the distributor or the manufacturer. Unless, if there is a contract of guarantee issued by the manufacturer, the consumer has no direct contractual remedy from a manufacturer or a distributor. If a manufacturer gives a guarantee, then it will be considered as a separate contract and will be implemented against the manufacturer. Further, the Sale and Supply of Goods to Consumers Regulations 2002 regulate any such guarantees. (Popat 2010:319). CONCLUSION It is advised that Matt’s parent has the right to demand damages or refund of money paid for Nike shoes from the retailer under S.14 of SOGA. The retailer is bound to refund the money paid for the defective shoe supplied to Matt. In this case study, it is explained that Nike recommended to return the product to the retailer where a replacement or refund will be offered. SITUATION 2 ISSUE Whether Matt can claim any damages for his foot rot due to defective Nike Shoes from the retail shop for negligence under tort law? RULES Matt has the opportunity to claim damages under Tort law for the damages suffered due to his foot rot due to rotten Nike shoes from the manufacturer viz. NIKE. Matt can also claim damages under the Consumer Protection Act 1987 (CPA). Matt can sue the defendant Nike and (Nike’s retailer can be added as a party to the case along with the manufacturer). APPLICATION AND ANALYSIS The main objective of awarding damages for negligence under Tort law is to place the injured party in the same status if he would have been in, had the incident not happened at all and hence damages in tort are necessarily speculative in nature. In “Donoghue v Stevenson [1932] A.C. 562”, Lord Atkin was of the view that a manufacturer will owe a duty of care to the consumer if the product supplied turned to be defective, and if they result in injury to the customer life.(Popat 2010 :99). Consumer Protection Act 1987 (CPA) implements an EU directive that facilitates the consumers to initiate a claim against defective products supplied, and personal injuries sustained. Under CPA, a consumer has to demonstrate that products supplied were of defective, and he sustained injury due to it. It is for the defendant to refute the allegations and to prove that it is covered under one of the available defences available in the legislation. Else, the manufacturer has to pay damages to the consumer which is footed on the tort of infringement of statutory duty instead of tort of negligence. (Rush & Ottley 2006:291). In “Abouzaid v Mothercare (UK) Ltd”, the claim under tort of negligence was failed because it was not rationally predictable that the product would have caused such a harm or injury. (Rush & Ottley 2006:291). In “H West & Son v Shephard (1964)”, due to negligence of the defendant, a woman sustained head injuries and reduced life expectancy and the House of Lords held that she was entitled to receive sizeable damages for” loss of amenity”. In “Lim Poh Choo v Camden and Islington Health Authority (1980)”, it was held that only future will substantiate the award to be substantial or meagre. The Court will also take into account what might have occurred had the injury had not suffered; for instance, would some prospects have been available to the plaintiff had he remained healthy and fit? In this case, had not Matt used the rotten Nike shoe, he might have played some significant football matches that would have been another milestone in his career. (Mitchell 2008:318). CONCLUSION The main objective of awarding damages for negligence under Tort law is to place the injured party in the same status if he would have been in had the incident not happened at all and hence damages in tort are necessarily speculative in nature. Hence, Matt can sue Nike claiming damages for negligence under Tort, and he will succeed to get damages for his rotten foot as held in “H West & Son v Shephard (1964)”. Matt also can file a suit under CPA and he has to demonstrate that products supplied were of defective and he sustained injury due to it. SITUATION 3 ISSUES Whether there exists a valid contract between Matt and Mike Retailer shop and when such contract is binding and why? RULE A legally binding contract is one where there is a valid offer and acceptance and backed by adequate consideration. APPLICATION AND ANALYSIS A contract is said to be legally binding agreement entered into between two or more parties. If there is a valid offer, acceptance together with the adequate consideration, then it will amount to legally binding contract. From 1989 onwards, all contracts should be in writing under English law. In this case, Matt has purchased a Nike shoe from a retailer, and he might have obtained a bill or invoice for the sale of such shoes to him from the retailer on payment of price by Matt. This makes the transaction as a legally binding contract between the Nike retailer and Matt as there is a valid offer, acceptance and reasonable consideration. A Seller of a product can be held accountable under the “Consumer Protection Act 1987(CPA)”,”if the products traded do not match up with their depiction, or description or if they do not adhere to the quality stipulations. There is no necessity to establish defect on the side of the seller”. Defective products’ victim can claim compensation either under SOGA or under CPA or under the Law of Contract (LOC) or under the Law of Negligence (LON) or a mixture of these. A claim for defective product has to be made within the following time limitation. Consumer Protection Act Law of Negligence Basis of Claim Defective Product Poor Conduct (breach of duty) Type of liability Strict Based on product fault Time limit for initiating legal action Before the earlier event : 1.tenyears from the period of supply of the product 2.As in negligence Before three years from the buyer’s point of knowledge. Who is accountable? Manufacturer and those involved in the supply chain Those who are in the sequence of supply ; manufacturer ;” licensing officials.” (Leung 2000:10) Normally, sellers will endeavour to limit or to avoid their liability for defective goods in the contract of supply. Nonetheless, the Unfair Contract Terms Act 1977 bars such a limitation or exclusion of some implied or express terms and subjects the same to reasonableness test. In “Hadley v Baxendale”, the liability for damages for infringement of contract covers all losses that may reasonably be regarded to happen naturally. (Popat2010:320). In this case, the defect of the product was inherent and was not happened due to normal wear and tear and defect not came into existence after the product was put into market or circulation. In “Baird Textile Holdings v Marks and Spencer [2001] Court of Appeal 28 February”, it was held that in the absence of a legitimate acceptance and offer, there is no accord and hence, a legally binding contract cannot come into existence. In “DMA Financial Solutions Ltd v Baan UK Ltd [2000] Ch.D. 28 March “ , it was held that in the nonexistence of a need to make a agreement in word ahead of it turn into an enforceable agreement no sooner the parties to contract to arrive an accord on all aspects of the contract , a contract comes into existence. Thus, a court can deduce the existence of a contract if the acceptance is made through conduct or by implicit. In” May & Butcher v R (1929) 151 L.T. 246”, it was held that where time, quantity and price of the products had not been settled yet, there is no legally binding contract between parties. (Spurin 2004:2). CONCLUSION As held in Hadley v Baxendale and in DMA Financial Solutions Ltd v Baan UK Ltd, there exists a legally binding contract between Matt and the Nike’s retail store. The contract is binding immediately after he bought the shoe from the retailer, and he has to make a claim to the retailer that he had suffered injuries due to bad quality of the shoe. The contract is binding once he paid the cost of shoes to the retailer and obtained the valid bill or invoice from him. List of References Insite Law (2009) Section 14(2) of the Sale of Goods Act 1979 [online] available from [22 December 2011] Leung, W. (2000) Law for Doctors. London: Wiley-Blackwell Mitchell, A. (2008) AS LAW. London: Taylor & Francis Popat. (2010) International Product Law Manual .London: Kluwer Law International Rush, J & Ottley, M. (2006) Business Law. London: Cengage Learning Spurin CH (2004) The Law of International Trade and Carriage of Goods. Nationwide Mediation Academy. [online] available from www.nadr.co.uk/articles/published/.../001CHAPTERONETRADE.pdf [22 December 2011] Read More