Carlill v Carbolic Smoke Ball Company - Essay Example

? Business Law By Due Part A Q1 Identification of the issue of law The issue of law is that for a valid contract to be formed there must be a valid offer and acceptance. Explanation of the rules of law relevant to the issue of law identified in step one with reference to authority. For the formation of a legally binding contract, a valid offer is required. A valid offer must be sufficiently complete. All the terms of the intended contract must be clearly stated and no material information should be held back. An offer must be addressed to a particular person or persons i.e. it can be specific or general. A general offer is open for more than one person and can be accepted by anyone who is able to accept it validly. In Carlill v Carbolic Smoke Ball Company, the defendant made a product called “smoke ball” which was a cure for influenza and promised to pay ?100 to anyone who used the product according to the instructions set out by the defendant and got sick with influenza. The defendant used the product and got sick with influenza and claimed ?100 from the defendant. It was held that the defendant was liable. An offer lapses in the event of a counter-offer. When an offer is made by an offeror and the offeree presents his own terms of acceptance, the original offer is revoked. If the original offeror accepts the terms of the offeree, a new contract is formed which is different from the contract that would have formed if the original offer was accepted. A valid acceptance is also essential for a legally binding contract. An acceptance is valid if it is made on the same terms as the offer. The parties to a legally binding contract must agree to the same thing in the same sense. Acceptance must be made when offer is open for acceptance. An acceptance would not be effective if the offeror has revoked his offer. Acceptance must be made by the person to whom the offer was intended and conveyed to the person who made the offer. A person to whom the offer is not open for acceptance cannot accept the offer. The effectiveness of acceptance varies according to the different modes of communication. When both the parties are in an instantaneous interpersonal communication, the acceptance becomes effective when it is received by the offeror. The relevant issue here is of acceptance by email. In communication via email, it is of paramount importance whether the offeror has designated an information system for the purpose of receiving communication. If he has, an acceptance is deemed to have been received when the email reaches the information system. Application of the law A counter-offer revokes the original offer. When Burt said that he would pay $5000 for the bike, he made a counter-offer. Sally’s offer of selling the bike for $6000 was revoked. She made a fresh offer by sending the message that she would sell the bike for $5500 to Burt. Burt rejected this offer. Once the offer was rejected, Burt was not able to accept the offer of purchasing the bike for $5500. Sally also was not able to accept the offer of selling the bike to Burt for $5000 because she had rejected his counter-offer. Therefore, there is no contract between Sally and Burt. When Peter asked for additional information from Sally, he was not accepting her offer to purchase the bike. At that time, the offer was still open for acceptance. Peter also made a counter offer when he asked whether the bike could have been sold for $4000. Sally did not reply Peter for some time and it might reasonably be expected that she was not willing to sell the bike for $4000 at that time but she did not communicate her intentions to Peter. Peter’s counter-offer was open for acceptance during the business hours which is reasonable time for acceptance. Sally accepted the counter-offer of Peter which would result in a legally binding contract. She replied Peter via email which was sent to an information system that can be deemed to have been designated by Peter because it was the only mode through which Sally could have contacted Peter. The email came to the notice of Peter after 3 days but as against Sally, the acceptance was complete. She accepted Peter’s offer in good time, arranged for a timely delivery and communicated her acceptance. The fact that Burt and Peter sent emails to Sally at a similar time is of no consequence because none of the emails was a valid acceptance. Both the emails were counter-offers and Sally was at liberty to accept any of them. Conclusion The time and manner of acceptance is extremely important for the formation of a legally binding contract. Sally accepted Peter’s counter-offer in time Peter is bound to take delivery of the bike. However, there is no contract between Sally and Burt. Q.2 Identification of the issue of law The principle issue of law is the recognition of express terms that are agreed upon in relation to the contract. Explanation of the rules of law relevant to the issue of law identified in step one with reference to authority. The terms of a written contract are proved by reference to the written contract alone. In LG Thorne & Co v Thomas Borthwick & Sons, the seller was not happy with the oil because it was not in confirmation with the sample. The contract was in written form but it was in so much detail that the implied terms did not form a part of it. The “parol evidence rule” was applied. However, when there is evidence that the written contract is only a part of the agreement, the “parol evidence rule” is not strictly applied. Contracts in which the parties interact via email can provide with such evidence. There are statements that do not necessarily form a part of the contract. Such statements include those exaggerated remarks that are made to attract the attention of the buyers. There can be representations made of various kinds but they become terms of the contract only when it can be inferred from the circumstances that the statement was intended to be a binding promise. In Handbury v Nolan, the auctioneer while selling a cow said that it was pregnant. The buyer bought the cow and found out that it was not pregnant. The buyer won the case even when the auctioneer had not put his statement in writing. The statement of the auctioneer was intended to be a binding promise. In Oscar Chess Ltd v Williams, the buyer purchased a car believing it to be of a newer model. It was actually not but the seller had made the statement in good faith and he was not an expert. It was held that the statement did not form a part of the contract. Terms of fundamental importance in an agreement are conditions and that of lesser importance are warranties. The intentions of the parties determine whether a term is a condition or a warranty. In Associated Newspapers Ltd v. Bancks, a newspaper promised the plaintiff to publish his comics on the first page of the newspaper. Due to shortage of paper, the comics ended up on page 3. It was held that there was a breach of condition and the plaintiff had a right to terminate the contract. The plaintiff would not have entered into a contract if his comics were to be published on any other page. In Bettini v Gye, a singer agreed to arrive 6 days before the concert for rehearsal. She got sick and arrived 2 days before the concert. The concert promoter cancelled the contract. It was held that the term was just a warranty because it was not of great importance. The parties to a contract may look to restrict their liability by agreement. Exclusion clauses serve this purpose and they become a term to the contract but it is important that these clauses are unambiguous, clear and brought to the notice of the other party before the contract is made. In Olley v Marlborough Court Ltd, the customer of a hotel had her fur coat stolen. The hotel management referred to an exclusion clause on a notice behind a door in the bedroom which said that the management was not responsible for such loss. It was held that the management was responsible because it had failed to bring the clause to the attention of the customer before the contract was made. In written contracts, an exclusion clause is binding because when a party signs a written document, it is deemed that it has read all the contents of the document. Application of the Law As the parties communicated with each other via email, sufficient evidence is available outside the written contract so the “parol evidence rule” would not be applied. The statement about the color of the seat is not essential to the contract. It can easily be regarded as a warranty. A breach of warranty entitles Peter to claim damages but he cannot cancel the contract. The statement about bike’s rare availability has a two-fold effect. Sally might have made this representation in good faith which would not make her liable. If she had made a false representation deliberately, she would be held liable. Peter’s main concern about purchasing the bike was whether it was in a usable condition and he made inquiries about its being “restored and refurbished”. He found out that Sally’s explanation was not accurate because the gears were not fixed. From the conduct of the parties, it can reasonably be believed that a good condition of the gears was a condition and its breach gives Peter a right to treat the contract as repudiated. It is because the representations were made by an expert who deals in the business of bikes. Also, Peter would not have entered the contract and purchased the bike if he had known that the gears were out of order. Sally works under the trade name of “tourbikes” and that makes her an expert. She expressly mentioned that the gears of the bike were refurbished and that made it a condition. Peter would not have entered into the contract if he knew that the gears were not repaired. The gears stopped functioning and the bike became useless after 6 weeks. But Peter had found the defects well before that and he could have treated the contract as repudiated during the first 30 days of receiving the bike. Sally made it clear in her exemption clause that faults in the bike are to be reported during the first 30 days. Peter signed the purchase agreement which means that he was aware of the exemption clause. He is now too late to cancel the contract. Conclusion There is breach of condition by Sally but Peter has been too slow to react. The exemption clause inserted by Sally is a valid one because it was clear and was brought to Peter’s notice before the contract was signed. Peter cannot cancel the contract and return the bike. Part B Judges can look outside an Act of Parliament for assistance. Whenever a case is decided, it adds into the archives of precedents which, under the principle of “stare decisis”, bind the courts of similar or lower level to follow the same decision in a similar set of circumstances. Also, the precedents of other jurisdictions can also be used for guidance. Apart from precedents, the judges may also look at the two types of evidence, intrinsic and extrinsic. Intrinsic evidence is the evidence found from the facts of a given case. It is mostly provided in a written form. Extrinsic evidence is the evidence that is found from other sources which are not the part of the intrinsic evidence. An example of extrinsic evidence is the evidence of a similar past conduct by a particular party. It can help the court in deriving the intentions of that particular party in a new case. It is not necessary that extrinsic evidence would be contradictory to the intrinsic evidence. It might reinforce the opinion formed through the intrinsic evidence. The common law keeps on expanding itself through its primary and secondary sources but it also thrives on the good sense of the judges involved. References Associated Newspapers Ltd v. Bancks [1951] 83 CLR 322 Bettini v Gye [1876] 1 QBD 183 Carlill v Carbolic Smoke Ball Company [1893] 1 QB 256 Handbury v Nolan [1977] 13 ALR 339 LG Thorne & Co v Thomas Borthwick & Sons [1955] 56 SR (NSW) 81 Olley v Marlborough Court Ltd [1949] 1 All ER 304 Oscar Chess Ltd v Williams [1957] 1 All ER 325 Read More