Terms of Contract and Dodgy Developers Film - Essay Example

Background A firm d 'Dodgy Developers" took up an urgently scheduled hall refurbishment work targeting a completion 1st December. Considering the urgency, they requested 'Office Supplies', their usual supplier, over phone, for supplying required workstations on or by 28th November. Accepting the request, the supplier sent their 'Terms of Contract' to Dodgy Developers. However, the supplier delayed and finally managed to deliver the workstations on 30th November through an independent agent, which negligently damaged 20 workstations while unloading. Owing to this delay and damages, the firm suffered losses for not being able to complete the job in time. Dodgy Developers then decided to holdback payments of bills and in addition intended to claim losses from the supplier. In reply, Office Supplies asked for full payment and indicated that reimbursement of any losses is not a binding as per their 'Terms & Conditions 'of contract which state as below: "Office supplies, their servants, agents and independent contracts will not be liable for losses or damage howsoever caused." Following these developments, Dodgy Developers desired to seek expert advises on the applicability of the above clause in particular. The following sections attempt to analyze and assess the situation for Dodgy Developers under the ambit of the 'English Contract Law' and advice appropriate line of action. The Contract - Validity Here the purchaser or buyer is 'Dodgy Developers' and is essentially a business consumer [1] who desperately required goods. The supplier or trader is 'Office Supplies' who further appointed an independent agent called 'Shifty Shifters' for transporting and delivering goods (workstations) to the buyer. The urgency of the project required Dodgy developers to call on their known supplier (had earlier business relations) 'Office Supplies' for supply of required workstations positively by 28th November. Office Supplies promptly expressed their acceptance by sending standard 'Terms & Conditions' of contracts. Under these circumstances this is a combination of oral and written contract and as both the supplier and buyer intended to conduct business, it is a valid contract [2]. The point here is that this is more of a unilateral contract on the supplier's terms and conditions and here 'time is the essence of contract' [3]. Another important point is that the supplier and purchaser having done such business before, are known to each other and under the eye of the law this is undoubtedly a "special relationship" validating the 'duty of care' [4] where both parties are required to proceed with a caring attitude of business dealings (For example see-Hedley Byrne & Co v Heller and Partners (1964). Here, the buyer was only prudent to rely on Office Supplies, his special sourcing point as he did on many previous occasions and under this condition the supplier is also expected, though not compulsorily, to extend a mutually risk-free and friendly term of contract. Esthetically, trust should not be responded by mistrust or by any terms protecting or camouflaging negligent conduct. The Applicable Laws & Legislations The principal laws governing contract in the UK are- the sale of goods Act, 1979, the supply of goods and services Act, 1982, Unfair contract terms Act, 1977 and the Unfair Terms in consumer contracts Regulations, 1994 [1]. However, in case of business-contract (as in this case), the supplier and the buyer can mutually and knowingly declare to impose some restriction clauses or provisions as 'Terms and Conditions' of contracts. Importantly, a trader dealing with a consumer, or dealing with any customer on his own written standard terms of business, cannot exclude or restrict his liability for breach of contract or allow himself to provide an inadequate service unless he can show that the clause satisfies the "test of reasonableness" [5]. Thus, even tough the case is legal; the supplier may not breach any common law duty in the form of protection clauses or terms and conditions without proving that the terms are reasonable and just (for instance see, Interfoto Picture Library Ltd. v Stiletto Visual Programmes Ltd.[1988] 1 All ER 348). In fact, this 'test of reasonableness' is an implied and irrevocable protocol for any business dealings which can be used as a tool for differentiating good contracts from the bad contracts or frauds. Involvements of the Buyer, Supplier & the Agent Office Supplies sent their usual 'Terms & Conditions' in reply to Dodgy Developer's telephonic request for supplying workstations within the time limit of 28th November. The workstations have been delivered late through an independent agent who damaged 20 stations while unloading the goods. Thus, the buyer finally received 20 damaged workstations and that too with a delay of 02 days eventually suffering losses owing to time over-run. Dodgy Developer informing the supplier regarding the delays and losses made clear their intention of not paying the bills and instead recovering the losses from them. Citing shortage of staffs as reason for delays, the supplier asked for full payment of the bill and also stated that no claims for losses shall be entertained as they already have included a damage and delay liability saving term in their contract offer. The action of the supplier can be directly linked to the delay and passively linked to the damage done by his agent. Already having the inclination for a liability protection term in his contracts, it makes sense to apprehend that Office Supplies must also have such term in its contract with the delivery agent, Shifty Shifters. In this case the supplier always has a scope for recovering the cost of damage from the agent and if so the 'special relationship' status, which exists between the buyer and supplier, definitely calls for passing over the recovery to his client (buyer) and thus solve the problem. Evidences & Analysis The contract modalities followed in this case is common and there are various similar cases taken up by the court of law. Here some relevant cases having the same modalities of contract are referred to get a practical direction to this problem. The Butler Machine Tool Co-v- Ex-Cell-O-Corp (1979) 1 All ER 965 In resolving the confusion regarding the contract terms the courts have often adopted what has been called the "last shot principle" as established in the case of the Butler Machine Tool Co-v- Ex-Cell-O-Corp (1979) 1 All ER 965. The courts may look at the last offer, which had been accepted without qualification, and this would then determine the conditions of contract. In this case the supplier quoted a price along with price variations terms & conditions for supply of a machine tool to which the buyer replied with different contract conditions of his own. The order was to be taken acknowledging by returning an enclosed tear-off slip. The delivery was delayed ultimately and the supplier charged extra for price variations during that delay period as per his original quotation. The court declined this claim and commented that "a counter-offer will revoke an original offer, which cannot then be accepted. The original offeror can accept a counter-offer". In the Dodgy Developers case, the buyer did not respond with any written acceptance and instead waited for the consignment to be delivered against his payment of bills and this intention was very much clear. Here the buyer's initial silence cannot necessarily be deemed as natural acceptance of the terms and conditions of the supplier. Another interesting case is that of the Midland Veneers Ltd. -v- Unilock HCP Ltd (1998) for supply of Veneers heater casting panels, which have been billed sometime during October 1993 and November 1994. A dispute surfaced over payment with Unilock pointing out that the panels were delivered late and were also defective. Initially, the court decided that there had been no concluded agreements save as to price however, the court of appeal concluded that the only agreement between the parties was as to price pending final agreement. Clearly there is the risk that a party may have concluded a contract not on its own terms but on the terms of the other party. A vital interpretation of good faith was provided by Bingham L J in the Interfoto Picture Library Ltd. v Stiletto Visual Programmes Ltd. [1988] 1 All ER 348 in which he stated that it meant more than that the parties should not deceive one another and that it was in fact a principle of fair and open dealing. On this basis he decided that as the term in issue was particularly onerous or unusual, it required to be prominently disclosed to the other party. There exist evidences of typical cases where formation of the contracts were not spelt out clearly or endorsed by any of the parties leading to confusions over terms and conditions, mistakes and other contract problems. Some directionally relevant cases include Phillips v Brooks [1919] 2 KB 243; Shogun Finance Ltd v Hudson [2004] 1 All ER 215; Hector v Lyons (1988) P & CR 156, etc. Thus on many occasions we see the court of law also stressing for good faith in business-contracts. Conclusions: Assessing all the developments, the facts that emerged out happen to favor the buyer who expressed to carryout a repeat business with his known supplier on trust and with good intentions. The inclusion of such negligence saving terms in the contract by the supplier does not merit considerations as expected in such contracts between 'known' business entities. Thus here, the exclusion term of liability protection cannot be defended by the Office Supplies (supplier) in the court of law under such circumstances and more so, when the supplier wants to evade delay and damage liability which surfaced due to shortages of staffs and appointment of careless agent from his end. Moreover, there are reasons for the court to believe that the damage costs stands recoverable from the agent which then can be passed on to the buyer finally. Taking all these into account the best option appears to be a mutual or out-of court settlement between the buyer and supplier where the supplier promise to recover the loss to the buyer invoking his valid term for damage compensation with his agent and at the same time the buyer, even though have an advantage, show his good intentions again by agreeing to this settlement. --------------------- References 1. The Law Relating to the Supply of Goods and Services, Department of Trade and Industry, Govt. of UK, April 2005, http://www.dti.gov.uk. 2. Law of contract by Paul Richards, 5th edition. 3. "http://en.wikipedia.org/wiki/Offer_and_acceptance". 4. UK Contract Articles, Kendall Freeman, November 2005. Brian St.J Collins, "Unfair Terms in Consumer Contracts Regulations 1994", 1995. 5. International Federation of Consulting Engineers, "Conditions Of Contract For Construction", May 2005. 6. N.E. Nedzel, "A Comparative Study of Good Faith, Fair Dealing, And Precontractual Liability" (1997) 12 Tul. Eur. & Civ. L.F. 97 at 155. Read More