Business Law - Contractual and Tortious Liability - Essay Example

?Instructions: Peter Piper owns an electrical store called Everyday Electrics which is situated in Portsmouth High Street. One day in early September, Paris Sheraton visits Everyday Electrics and falls in love with the bright pink vacuum cleaner that is displayed in the shop window. Paris approaches Peter and says that she’d like to buy the vacuum. Peter explains that  the vacuum cleaner is not for sale as it is a display model on loan from the manufacturer. Paris gets very angry and tells Peter that she will sue Everyday Electrics if he refuses to sell the vacuum cleaner to her.  Since his business is doing so well, Peter decides to sell his Ford Fiesta and invest in a new car. He meets Britney Arrows at a Chamber of Commerce Lunch on 2 October and offers to sell her his Ford Fiesta for ?2,000. Britney says that she will consider his offer and get back to him. Britney thinks about Peter’s offer for two weeks and then decides that she would like to buy the car. On 16 October, she sends a letter of acceptance to Peter at the address written on the business card which he gave to her at the lunch. As a result of the postal strike, Peter does not receive the letter until 20 October. Unfortunately, he sold the car to Samantha Snake on 18 October because he thought that Britney must have decided that she did not want it. Britney is furious when she discovers what has happened and says that Peter has broken their contract.  In November, Peter is visited by the sales representative of a company called Microwave Madness Ltd.  Following their discussions, Peter agrees to order 10 microwaves and signs the sales agreement without reading it. The agreement contains a statement that says, “Microwave Madness Ltd accepts no liability in relation to the quality of the goods supplied, or their fitness for purpose and all liability for damage or personal injury is not accepted.  Peter decides to take one of the microwaves home to see whether he can get it to work. While he is trying to warm up a sweet and sour chicken ready meal, the microwave explodes and Peter is badly burnt as the microwave catches fire. The fire investigator confirms the fire was caused by the defective microwave.  Peter has a son, Andre who is 21 years old and who for the past 9 months has worked as a barman behind the bar at a Portsmouth pub. Last night upon arrival at work, Andre was told by the manager he would not be allowed to work and that he was dismissed with immediate effect. On asking why, Andre was told that the till he operated was ?10 short. Andre became very angry at hearing this and swore at the manager and the owner and threatened both with violence. He had to be forcibly removed from the pub.  1. Advise Peter in relation to any contractual and tortious liability arising from these facts. You should address the following issues in your answer. Peter’s potential contractual liability to Paris. Peter’s potential contractual liability to Britney. Microwave Madness Ltd’s liability to Peter under the law of contract AND tort.  (85 marks)  2. Advise Andre as to whether or not he will have any rights against the pub.  1. The first proposition relates to contract law and whether Peter has any contractual liability towards Paris. The first issue is whether a contract existed between Paris and Peter for the former to enforce any contractual rights against the latter. A contract is formed when there has been an unequivocal offer to enter into a contract by one party and that offer has been duly accepted and that acceptance has been communicated to the offerer. Therefore, an offer and an acceptance are two integral parts of a contract, in absence of either the contract would not be deemed existing. An offer is defined as an expression of willingness to enter into a binding contract. However, not all statements are offers: a communication that is not an offer could be a statement of intention (Harris v Nickerson), supply of information (Harvey v Farcey) or an invitation to treat. In a statement of intention the party makes clear that he intends to do something, not necessarily that he will, whereas in a supply of information there is no binding obligation either. Lastly, an offer must be distinguished from an invitation to treat and this distinction is a very fine one. An invitation to treat is an expression of willingness to enter into negotiations that may in future materialize in a form of a contract. Therefore, an invitation to treat is the preliminary step that precedes a contract, and that may or may not form into a contract. The case of Gibson v Manchester City Council (1979) is illustrative in this regard: Mr Gibson received a letter from the MCC about some property that it “may be prepared to sell”. Gibson signed that document and sent it to the Council. Mr Gibson alleged that the letter of intention from the Council amounted to an offer that was accepted upon Gibson’s signature and returning the document. The House of Lords held that the letter from the Council was merely an invitation to treat that required Mr Gibson to make an offer to buy, after which the council would have accepted it and a legal contract would have been created. As the distinction have now become clear between an offer and invitation to treat – the question whether display of goods in a shop, like the vaccum cleaner at Everyday Electronics that Paris likes, amounts to an offer or an invitation to treat. It has been clearly held in the case of Pharmaceutical Society of Great Britain v Boots (1953) that a display of goods in a shop amounts to an invitation to treat only, and the prospective buyer must make an offer which would be open for the shopkeeper to accept or decline. Similarly, in Fisher v Bell (1960), where the issue was whether display of ammunitions in a shop amounted to an offer or an invitation to treat, the court decided in favor of the latter. Therefore, there has been no contract between Paris and Peter because display of the vacuum cleaner in the shop amounted only to an invitation to treat and that required Paris to make an offer to Peter of whether he wanted to sell. She made an offer but was given a negative response which clearly means that in absence of any communication of an offer and an acceptance no contract has been made, and Peter has no contractual liability towards her. The second proposition relates to the doctrine of postal rule under contract law. The first issue is whether there was an unequivocal exchange of an offer and an acceptance between Britney and Peter. It is clear from the facts of the case that the Peter clearly made an offer rather than an invitation to treat which required an acceptance or a declination from Britney. An offer is defined as an expression of willingness to enter into a contract, whereas an invitation to treat is only an expression of willingness to enter into negotiations. Peter’s communication with Britney was clearly the former. However, the second issue is whether there has been acceptance from Britney. Under Contract Law an acceptance is an expression of agreement of each of the terms of the offeror’s offer – it must be the mirror image of the offer. An acceptance can be made by conduct, words or in writing. And an acceptance can clearly made by post. However, according to the postal rule enshrined in the seminal case of Adams v. Lindsell (1818) an acceptance sent by post is effective the moment it is sent by the offeree, regardless of any circumstances and regardless of the fact that offeror might never have received it. This rule was also applied and devised in the case of Household Fire Insurance v Grant (1879). It must be remembered that Postal Rule is an exception to the general rule of their being a clear and sound communication of acceptance for there to be a binding contract. Therefore, to make things easier, the courts have waived off the general rule and created this exception. Hence, the offer that was made on October 2nd by Peter has been accepted by Britney on October 16th. The fact that Peter sold the car to another in the meanwhile is clearly a breach of the contract. Therefore, the contract has been made between Peter and Britney and it is likely that courts would find the former in breach of his contractual liability. The third proposition relates to law of Contract and Law of Tort. In contract law, Peter’s claim lies in The Unfair Contract Terms Act (UCTA) 1977 and additionally under Unfair Terms in Consumer Contracts Reguations (UTCCR) 1999. UCTA, according to McKendrick, is a ‘complex and technical piece of legislation’ that primarily deals with regulating the use of exclusion clauses. An exclusion clause as defined by Yates (1982) is a “clause in a contract or a term in a notice which appears to exclude or restrict liability or a legal duty which would otherwise arise”. Therefore, the clause in the contract that Peter signed without reading would qualify to be an exclusion clause, that purported to exclude liability for death and personal injury arising from the use of the machinery provided by Microwave Madness Ltd. Peter’s claim against MM Ltd would lie in asserting that that clause under UCTA and UTCCR is void and MM does owe him a liability in damages regarding his personal injury. Under UCTA the claim would lie under Section 2(1) of the act that purports to render all clauses that purport exclude liability for death or personal injury arising out of negligence. This section clearly renders an exclusion clause to that null and void. Negligence is defined in Section 1(1) of UCTA: the breach of any duty to take reasonable care due to an express or implied term of the contract or breach of duty arising out of common law duty to take reasonable care. It is likely that it was MM’s negligence that caused the fire because it did not take reasonable care in ensuring that the equipment it was manufacturing was safe to use. Another point to note about Section 2 is that it only applies to ‘business liability’. Business liability is defined under Section 1(3)(a) as “that liability for breach of obligations or duties arising from things done or to be done by a person in the course of a business (whether his own business or another’s)”. It is clear from the facts of the case that the contract entered in to by both parties was a business contract – the one that was entered into during normal course of business. Lastly, personal injury is defined under Section 14 of the Act as “any disease or impairment of any physical or mental condition”. It is clear that burns suffered by Peter would clearly suffice to as personal injury under the act. As a general rule all clauses excluding or restricting liability are void, however under Section 2(2) they are only valid if they pass the test of reasonableness. Now it depends entirely on the court to determine if the clause in question was reasonable or not. However, it is likely that the court will hold it not to be reasonable. Under the UTCCR, Peter’s additional claim would lie under Regulation 5(1) that renders a term unfair if it causes significant imbalance in the rights and responsibilities of the parties. Specially, under Paragraph 1A Schedule 2 a term excluding liability for personal injury of death is held to be unfair. Therefore, this could greatly help Peter’s case in establishing MM’s liability in Contract. Under the law of Tort, Peter’s potential claim could lie under the doctrine of Product liability. Product liability has been developed by the seminal case of Donoghue v Stevenson (1932) whereby the court established that producers of defective equipment owe a duty of care to the end consumer of the product. Since it will be a claim under negligence, and normal rules of negligence require existence of duty of care, breach of that existing duty, causation between the breach of duty and the damage that occurred and lastly, proof of damage. Therefore, cases for personal injury or death are clearly compensated for in this kind of negligence claim and product liability cases in tort are subject to ordinary rules of negligence. The burden of proof is on the claimant to prove that the damage was caused by the defective machine: in this case, Peter can clearly use the Fire Department’s testimony against Microwave Madness Ltd that the fire and hence the personal injuries were indeed caused by the defect in the microwave that the manufacturer had not taken reasonable care in abating. An instructive case in this regard is that of Grant v Australian Knitting Mills (1936) where the claimant could not point but the specific defect in the garment that caused him dermatitis but could prove that it did not exist prior to wearing that garment. The court held in his favor and said that the manufacturer had not taken reasonable care and skill in executing his duty of care. Therefore, when all requirements of a claim in negligence are being fulfilled it is likely that the court will grant a claim in Tortious product liability, if by any reason, the contractual claim cannot succeed. 2. The last proposition demands legal advice for Andre who has been unfairly dismissed by his employer. This falls under the ambit of Employment Law. It is likely that Andre has a claim against his employer on the basis of unfair or constructive dismissal. Unfair dismissal is when the employer does not have sufficient reason to have dismissed, he did not follow the proper course of action or the employee was dismissed for an automatic unfair reason, for example, maternity leave. Constructive dismissal covers situations such as harassing, victimization, change of job location, emotion or falsely accusing an employee of misconduct. A case under employment law would only be heard in an Employment tribunal and not ordinary courts. Under Section 94 of the Employment Rights Act (ERA) 1996 Andre does qualify to bring an action, however, an employee must have been employed for a year to bring a claim, but it is likely that the court would consider that 9 months is long enough a time to bring a claim. Therefore, Andre’s case is that of unfair dismissal where his employer has ended the contract without offering a proper explanation or carrying out inspection as to whether it was Andre who could be accused of monetary embezzlement. Moreover, Ander’s employer violated the standard disciplinary and dismissal procedure contained in EA 2002 Part 1 Chap 1 and Sch. 2, whereby the employer must state the misconduct in writing and call a meeting where explanations may be offered. However, the modified dismissal and disciplinary procedure is contained in Part 1 Chap 2 Sch 2 of the Act where the employer dismisses his employee ‘summarily’ that is ‘on the spot’ for gross misconduct. Whichever case Andre’s case falls in, it is likely that the court will hold his employer responsible under EA 2002 and ERA 1996. Words: 2,149 Bibliography: The Unfair Contract Terms Act (UCTA) 1977 The Unfair Terms in Consumer Contracts Reguations (UTCCR) 1999 Employment Rights Act 1996 Employment Act 2002 Harvey v Facey [1893] UKPC 1, [1893] AC 552  Harris v Nickerson (1873) LR 8 QB 286  Gibson v Manchester City Council [1979] UKHL 6 Pharmaceutical Society of Great Britain v Boots [1952] 2 QB 795 Fisher v Bell [1961] 1 QB 394 Adams v Lindsell [1818] EWHC KB J59 The Household Fire and Carriage Accident Insurance Company (Limited) v Grant(1878-79) LR 4 Ex D 216  Donoghue v Stevenson [1932] UKHL 100  Grant v. Australian Knitting Mills, (1936] A. C. 85 (P. C.) Contract Law, Ewan McKendrick, 7th Edition Tort Law, Catherine Elliot and Frances Quinn, 4th Edition Employment Law 2008, James Holland and Stuart Burnett, OUP http://www.lawontheweb.co.uk/Employment_Law/Unfair_Dismissal Read More