Contract Law - Max-Eco Ltd - Essay Example

? Contract Law Task: Contract Introduction A contract engages two or more parties in establishing a mutual and volunteer agreement between them or intends to establish a legal obligation that seeks to, fairly, bind their interests and that may have its elements presented in writing. However, sometimes contracts may be established orally in other words without documentation of the binding agreement. In cases of breached contracts, a situation where one party fails to hold up to its part of the deal, there are compensations made to cater for the damages. In equity, injunctions may be administered or sometimes exact contract performance. Both solutions offer the party that has incurred losses an upper hand in terms of the bargaining benefits or in other words expectation damages that may be of higher value as compared to just reliance damages with regard to promissory estoppels. Generally, one may define a contract in nonprofessional’s language as a promise or responsibility that is legally enforceable to oversee the occurrence or no occurrence of something. However, a contract may not be equalized to a legal promise especially when the agreement larks consideration. Several elements validate a contract as stated below (Richard, 2007). Elements of a contract 1. An offer: This is the willingness expressed by the offering party, on a given set of terms, with a motive that in any case the other party accepts that offer; a contract will bind him or her. It is optional in that it may be written, or it can be orally done. 2. Acceptance This is the willingness expressed by a party, to absolutely and unconditionally, accepts all the terms that have been set out in the offer. It can either be done orally or written, and the approval must be a reflection of the initial offer that was made. 3. Consideration A consideration is a valuable offering exchanged between the promisee and the promissor with a reciprocal as an assurance. An act or a payment may be regarded as the valuable thing also an act of forbearance is acceptable. 4. Mutual assent Mutual assent is normally achieved by offer and acceptance under common law, in that, here an unqualified party and that accept an offer causes no variance to the terms of the offer. A counter-offer A counter-offer cannot be equalized to an acceptance. It extinguishes the initial offer. In this case, one is not eligible to accept the initial offer after making a counter-offer. However, asking for more information or clarification may not be regarded as a counter-offer and thus does not render the offer extinguished but the party is still eligible to accept if it so desires. Max-Eco Ltd case study In this project, I will assess Max-Eco Ltd, which has been involved in a business deal with Jack’s company to supply timber according to Fred’s set standards. Fred is the director of Max-Eco Ltd. However, after six months, Fred discovers that Jack was not meeting the standards set in their previous deal and feels like the other party had breached the contract they set together. According to the agreement, Jack was supposed to supply Max-Eco Ltd with timber only from the U.K and that they must be treated with only plant-based varnish. Instead, Jack decided to treat the timber, which sometimes he ordered from South America due to its unavailability in the U.K, with chemical-based varnish. Now Fred wants compensation from Jack for failing to meet the set standards. Contract terms Prior to making a contract agreement, often variety of statements are made by either party with an aim of enticing or encouraging the partnering party to sign into the contract. The two parties are required to agree as to which of the made statements qualifies to be a part or a term of that particular contract agreement. At the same time, they must identify which statements should be considered as not a part or a term that make up the contract and should be regarded as just pre-contract talks. Therefore, terms server a pivotal role in the establishment of a contract as they bind the two parties in question and make them answerable to the contract. These contract terms separate any statements that may be considered peripheral from what may be considered objective to the two parties. Courts are mandated to look at proofs of intention from either of the two parties to substantiate whether or not the statement ought to be considered as part of that contract. For instance, the more the period between the initial process of bargaining and the establishment of the final contract agreement the lower the chances that that statement qualifies to be a part or a term of the same contract. In cases where the party that makes the statement posses special skills unlike the partner party may automatically qualify the statement as a term. If an agreement has been made in written with no inclusion of the statement, there are limited chances that it may be considered as a term. A contract term in simple words is a provision adding up to part of a given contract. Every term creates an obligation within the contract hence violation of any of the terms may lead to litigation. It is also important to note that some terms in the contract are not expressly stated and that some term like especially those considered as peripheral may carry lesser legal weight compared to the objective terms. Terms are divided into two main categories; implied and express terms. a) Express terms Express terms amount to the specific terms mentioned by the two parties and agreed upon during the establishment of the contract. It can be done orally or written. b) Implied terms Implied terms are unmentioned terms by any of the parties but ought to be included in the contract either way. This is because the contract may not make any commercial sense if these words are omitted. These terms are categorized into two main types. The terms that the statute imply The terms that the courts imply Contract Representations A representation seeks to induce a contract as it provides knowledge useful to the contracting party to determine whether it is ready to proceed with the contract. Either express or implied, a statement made to one party by another with regard to the contract initially or during the establishment and acceptance of the contract in relation to the previous or present fact amounts to a representation for instance if a seller represents that he or she did not receive any notice regarding patent infringement. Initially a representation did not make part of the contract. Any damages claimed due to misrepresentation would generally amount to a rejection. If, in any case, a representation forms part of a contract, it immediately takes the role of a condition or a warranty (Elliot & Quinn 1999). A misrepresentation- is when one party makes a statement falsely considering that the other party with which they are signatories of the same contract relies upon this statement of a fact. In cases like this, a remedy of rescission or damages is awarded. Here, is an example to show a contract representation and contract terms Take for instance, buying a motorbike from bike dealer who has specialized in second-hand bikes. According to him, all his motorbikes have alloy wheels. After buying you later on, find out that, they are not alloy like the one he said and that they have started to rust. In this case, if the fact that the bikes having alloy wheels amounts to a term that forms part of the contract, then you are eligible to sue him since he has breached the contract. On the other hand, if it were a representation then suing him would be difficult. A number of factors differentiate terms and representations. I am going to use the case of Max-Eco Ltd to highlight these factors. I. Relative knowledge This one seeks to establish whether one of the parties had expert knowledge regarding the subject matter. In the case of Max-Eco Ltd whatever Jack tells Fred concerning the wood amounts to a term but In case Fred makes a statement concerning the wood then it amounts to a representation II. Reliance This factor seeks to establish whether one party relied on the statements made during the establishment of the contract. For instance, if Fred was categorical about wanting wood specifically from U.K and which is treated with plant-based varnish, and if he made it clear to Jack that he was buying the wood mainly because of its place of origin and the type of varnish used to treat it, then it follows that the statement will amount to a term of that contract. III. The strength of the statement This factor seeks to measure the strength of the statement made. If the statement made has high strength then it may be considered to a term not unless the two parties had a comprehension that it was not. For instance, Jack agrees and promises that his business will be able to meet Fred’s requirements. The court can consider this a very strong statement as a term. IV. Timing This factor seeks to determine the time between the making of the statement and the establishment of the contract. If the period is extremely short, the higher the chances that it may be considered a term for instance Jack immediately agrees to Fred’s requirements thus making the statement have high chances of becoming a term (Routledge-Caven, 2008). Conditions Conditions are terms that are considered pivotal and most objective in the establishment of a contract agreement. These terms have a characteristic tendency of going to a given contract's very root. They form the skeletal structure that supports the contract. These terms either attract or repel the other party before the deal commences; in other words, a party cannot get into a deal without these terms. Consequently, a party is mandated to repudiate or treat the contract as void in case these conditions are breached or falsely made. Warranties Warranties can be generally described as the promises that appear or decorate the face of a contract. They form an integral part of any contract and thus ought to be strictly complied to. Just like promises, warranties may include representations or agreement that must be factual at the time the contract is being established and maintain its truth in the future A warranty, by the contracting party, guarantees something worthwhile in the proceedings of the contract assuring that the product does not differ from the promise. One can categorize warranties as affirmative, for instance, those that assure the truths of certain facts or acts performed during the establishment of the contract and in the future normally referred to as promissory warranties. Damages are established based on the comparison between the contract value according to the agreement and the contract value with regard to the given facts after the breach. Warranties protect commonly consumer products but extended warranties go beyond protecting the buyer's agreement with the seller though these laws vary from state to state. (Fried, 1981). Deference between warranties and conditions 1. In case a condition is violated, a party is entitled to repudiate or withdraw from that contract; whereas in the event of a breach of a warranty, the party that has been affected can demand compensation benefits or monetary damages but does not amount to complete termination of the entire contract. 2. A condition insinuates the existence of obligation where as warranty insinuates the obligations performance. 3. A condition ought to be formulated to amount to part of an obligation where as for a warrant it is not a mandatory to be formulated to add up to a part of the obligation as provided by the law 4. A condition may make part of the obligation of the seller for him or her transfer ownership and sometime deliver possession where as a warranty is concerned with the subject matter. 5. Conditions are considered more important in a contract compared to the warranties. My conclusion For the case of Max-Eco Ltd, their contract can be broken down into small segments. The agreement in the written contract binding Fred and Jack only stated that supply contract would last for a period of five years; it also included the starting date and the dates of delivery. It stated the amounts of wood to be supplied and the type. This statement amounted to the condition terms of the contract agreement. In their initial meeting, Fred explains to Jack on Max-Eco Ltd.’s dependence on its reputation, as an ethical builder in the market place, and insisted on the importance of maintaining it. Fred further states that Jack was only allowed to supply Fred's company with hardwood timber grown in the U.K and that the wood should be treated with plant-based varnish, which are not manufactured from chemicals. Jack accepts the agreement and promises to meet all the set standards. This prompts Fred to get into a trial contract with Jack of which he meets all the set requirements. This statement though, was not written down as part of the contract. It may be regarded as a warranty (McKendrick 2005). Before a court makes a ruling, merits in both cases are looked at and evaluated incisively. All the surrounding circumstances are considered up to and including the magnitude of the consequences in case the contract is non-binding as well as the parties’ motives during the establishment of the contract. In this case, a warranty has been breached in that there is evidence that the two parties had collateral agreement that Jack adhered to during the trial period but later decided to deviate from after he was awarded a permanent contract. In cases of breached warranties, the affected party is entitled to compensation or monetary benefits from the other party. However, it does not amount to complete termination of the entire contract. For Fred, he should seek monetary compensation through the court or arbitration since during the establishment of the contract; he did not include what he regards as most important statement as part of the condition terms. References Elliot, C & Quinn, F 1999, Contract Law: Elliot and Quinn series, Trans-Atlantic Publishers, United Kingdom. Richard, P 2007, Law of Contract foundation in the law series, Pearson Longman Publishers, United Kingdom. McKendrick, E 2005, Contract Law: Text, Cases, and Materials, oxford university press, Clarendone Street. Routledge-Caven 2008, Contract Lawcards series, Taylor and Francis publishers, New York. Fried, C 1981, Contract as Promise, Harvard University Press, United States. Read More