Validity of the Contract Law - Case Study Example

RUNNING HEAD: CONTRACT LAW WORK Contract Law work School Contract Law work Background Information A Contract is a legally binding agreement made between two distinct parties. Having been established between these two parties by mutual consent, the contract becomes binding in that certain rights and responsibilities are expected and become enforceable by the courts. In such a case if one party, without the mutual consent of the subsequent party, fails to perform his obligation, the aggrieved party has the right to seek redress for the breach of the contract through normal enforcement procedures - civil court. There are two major types of contracts: contracts by deed and simple contracts. In the case in question simple contract applies as there was no formal legal document executed between the two parties; rather, this case belongs to the later, a simple contract as "Contracts which are not deeds are known as simple contracts. They are informal contracts and may be made in any way - in writing, orally or they may be implied from conduct" (Introduction to, n.d., n.p.). Another distinction in this particular case is that it can further be classified as a Unilateral Contract. This is demonstrated through "A's" booking of hotel accommodations from the Scarborough Hotel (Hotel) via there website with the understanding that the two-week stay booked by "A" would be at a price of 200 pounds a night. The first area of contention arises at this point as "A" was unable to complete the transaction online and instead printed a copy of the booking and posted it. This point will be thoroughly discussed in subsequent paragraphs. The first area need to be considered is that of validity - ensuring all the requisite elements are present to ascertain if, in fact, there was a legally binding contract. Validity of the Contract Offer and Acceptance The first test of validity lies in determining if there was an offer and acceptance. The first of this two-pronged question is to ascertain if there was an unconditional offer of acceptance. When "A" inquired from the Hotel as to room availability at 300 pounds per night, Hotel responded via e-mail that they would make a room available to "A" during the timeframe request at 200 pounds per night. The question here is an online e-mail, which is a valid form of communication with regard to contractual law. Although there has been no legal ruling as to the validity of email correspondence in contractual law: "In Standard Bank Ltd. v. Bank of Tokyo [1995] 2 Lloyds Rep 169, Waller J. had to consider whether three letters of credit issued by tested telex at the instigation of a fraudster who had somehow got access to the issuing bank's tested telex department, were binding upon the issuer." (Nash, 1998) The finding here was that the use of a telex even though electronic in nature did meet the test of validity for a valid offer. That being said it would stand that the electronic offer made by the Hotel was an unconditional offer. Therefore, the first point was valid an offer had been made. "The general rule under English law is that an offer is not accepted until acceptance is communicated to the offeror." (Baker & McKenzie, n.d., n.p.) However, in this case "A" was unable to unable to send on-line booking form. Instead he filled in all the details, including the 200 pound price per night, printed the document, and posted it. Baker and McKenzie however went to on to state that "The major exception to the above general rule on acceptance concerns acceptance by post. In this case, acceptance takes place when the acceptance is posted and not when it is received by the offeror. The "postal" rule means that, even if a postal acceptance does not reach the offeror, the contract will already have been made and the offeror will be bound to perform its obligations, provided the other party can prove that it posted its letter of acceptance." (n.p., n.d.) Yates v Dalton 1938 ELD 177; (1) Cape Explosive Works Ltd v SA Oil and Fat Industries Ltd (2) Cape Explosive Works Ltd v Lever Bros (SA) Ltd 1921 CPD 244 states that "where an offeror expressly or tacitly authorises his offeree to make use of postal communications, the principle is accepted that the contract comes into existence the moment the letter is posted or the telegram of acceptance is handed in at the post office." (Pistorius & Hurter, n.d., n.p.) In this case, the offer meets the validity test for acceptance if "A" can substantiate his claim that he had, in fact, posted the on-line registration form to the Hotel. In the case study provided there was no mention as to whether "A" had sent the letter via Registered mail which documents the time and date of the posting. In this case, provisionally the test is met, but the burden of proof will be on "A" to show he had posted the registration form. Terms and Liability The second area of validity to consider is contract terms and liability. The terms were established in Hotel's communication to "A" that during the two-week period that "A" had requested hotel accommodations, Hotel agreed, via their communication to him, to provide him hotel accommodations at the cost of 200 pounds per night. The law is liberal with respect to terms agreed upon. The Supply of Goods and Services Act 1982 states "If a supplier provides services, there will be an implied term that the services will be provided with "reasonable skill and care" and within a reasonable time frame". (Baker & McKenzie, n.d., n.p.) The terms of the contract in this study were valid. Liability now comes into question. The Unfair Contract Terms Act 1977 (UCTA) states that "with respect to consumers, these terms cannot be excluded, subject to one important exceptionliability when dealing on the supplier's standard terms and conditions - a supplier can, in its standard terms and conditions, only exclude liability to its customers where it is reasonable to do so." (Baker & McKenzie, n.d., n.p.) The question that arises at this point would it be fair and reasonable for "A" to assume that Hotel would not honor its offer of 200 pounds per night rate; in this study, it is not reasonable to assume such. "Also, the onus of proving that a particular exclusion or limitation clause is reasonable will fall on the supplier." (Baker & McKenzie, n.d., n.p.) Consideration and Capacity to Contract Consideration is the next area that must be met for the contract to be valid. It must be established that 'quid pro quo' the parties are entering into the contract in order to obtain something from the other. In this case "A" was receiving a hotel room for two-weeks from Hotel at 200 pounds a night. In return, Hotel was receiving the payment from "A" for services of the room. In Currie v Misa [1875] consideration was defined as "a valuable consideration, in the sense of the law, may consist either in some right, interest, profit, or benefit accruing to the one party, or some forbearance, detriment, loss, or responsibility, given, suffered or undertaken by the other"(n..p.) "This is summarized in two maxims of the law of contract: Consideration must move from promisee. Consideration must move from promisee; and, In addition to the element mutuality consideration must of value as recognised by the law of contract. Two rules pertain to the issue of consideration being of value. Consideration need not be adequate but must be capable of being identified with precision and consideration must be sufficient."(Webguru, n.d., n.p.) This case does, therefore, show consideration. The next area that must be considered to ascertain validity is the capacity of both parties. Basically this question can be answered by looking at several qualifiers. The age of majority must have been reached at the time both parties entered into the contract; both parties must be otherwise competent to enter into an agreement; and lastly, the agreement or contract the parties enter into must not be illegal. This case requires the reader at this point to make an assumption that the first two have been met by the parties involved, "A" and Hotel. As to the third area, no illegality is noted. Free consent The last area of validity to consider is free consent. To ascertain this it must be established that there was not undue coercion, fraud, or misrepresentation. Although the facts provide does not offer enough data to preclude this aspect. It is assumed that there was, in fact, no preconceived misrepresentation by either party, nor, from the facts, as established in the study, was there fraud or coercion involved. In Summarizing, all the validity tests had been met between the two parties. The only issue that had any possible grounds for negating the validity would be the Hotel's claim that, in fact, as they never received the posted booking form from "A", there was no contract and they were my no means responsible for guaranteeing "A" a room at 200 pounds per night. However, Dunlop v Higgins (1849) 1 H. L. C. 38 found that "if the letter of acceptance is posted in due time, the acceptor is not responsible for any casualties in the post office." Thus, there is a contract created. Citing this case, Hotel would in fact be liable for supplying "A" with a room for the two-week period at 200 pounds a night as per their legal binding contract. However, the question now becomes determining whether "A" in accepting a room at 250 pounds a night with the agreement that he would not sue Hotel for not providing a room at 200 pounds per night discharged the original contract. Discharge of Contract There are four methods by which a contract can be discharged. "A contract may be discharged by performance, agreement, breach, or frustration." (Discharge, n.d., n.p.) To determine whether "A" has rights to compensatory damage will be dependent upon how the contract was discharged. In this case "A" is claiming damages from Hotel for breach of contract, that is not providing him a hotel room at 200 pounds a night as agreed. Hotel is claiming that the contract was void as they did not receive the registration via the post. That argument has already been refuted. Their other ground for their countersuit is that "A" had, by agreeing to accept a hotel room for 250 pounds a night instead of the usual rate of 350 pounds a night had, in fact, my agreement discharged the original contract. Further, they are countering that by filing a law suit "A" was in violation of their new contract. The question now is was in fact the breach of the original contract the discharge of the contract. Breach of Contract "A breach of contract does not, of itself, discharge the contract. A breach of warranty gives rise to a claim in damages only. A breach of condition gives rise to an election on the part of the victim to either affirm the contract and sue in damages or to treat the contract as having been repudiated by the other party, accept the repudiation, treat the contract as at an end and claim for losses (if any) in damages." (Rochez, 2003, 4) Merely by the fact that, Hotel offered "A" a hotel room at a higher rate and "A" accepted the room does not discharge the contract. Further, Waiver - Charles Rickards v Oppenheim [1950] 1 KB 616 found that "For contracts other than sale of goods contracts, a victim, with full knowledge of the breach, is said to affirm the contract where he elects to go on with it. The right to repudiate in such a case is then lost. The victim may, of course, still bring an action in damages for the breach and repudiate the contract for all future breaches." This case shows that even if "A" accepts the hotel room at the higher rate, he has not lost his right to bring suit to recover the the difference between the 250 pounds per day he paid and the 200 pounds per day that was made in the contract between himself and hotel. This was upheld in Fercometal SARL v MSC Mediterranean Shipping Co SA [1989] AC 788 which stated that "Where the contract is not discharged by the breach both parties remain liable to perform the contract." (Rochez, 2003, 4) Conclusion In this case, although somewhat convoluted at least initially, especially in regard to ascertaining that in fact the contract was valid upon A's mailing of the on-line booking form to Hotel. The law clearly sides with "A" and he should be awarded compensatory damages in the amount of 50 pounds per day for a total of two-weeks, yielding a total award of 700 pounds. Hotel was clearly in breach of the contract and having a room available they should have afforded it to "A" at the agreed upon rate of 200 pounds. References Baker & McKenzie. Undated. Online Contract Law. ECom Legal Guide. APEC. Retrieved December 8, 2005 from http://www.bakerinfo.com/apec/ukeuapec.htm#Offer%20and Cape Explosive Works Ltd v SA Oil and Fat Industries Ltd Cape Explosive Works Ltd v Lever Bros (SA) Ltd 1921 CPD 244 Currie v Misa [1875] Dunlop v Higgins (1849) 1 H. L. C. 38 "Discharge of Contract." Undated. Law Teacher.net. Retrieved December 8, 2005, from http://www.lawteacher.net/Contract/Introduction.html Fercometal SARL v MSC Mediterranean Shipping Co SA [1989] AC 788 "Introduction to the Law of Contract". Undated. Law Teacher.net. Retrieved December 8, 2005, from http://www.lawteacher.net/Contract/Introduction.html Nash, J. February 10, 1998. "Recent Development in Contract Law" Para 3. Retrieved December 8, 2005, from http://www.3vb.com/pgs-articles/jn-recent-devs-contract.shtml Pistorius, T. & Hurter, E. Undated. "Contracting on the Internet: The Formation of Contracts, Trade Practices and Online Dispute Resolution" Retrieved December 8, 2005, from http://www.doc.gov.za/Ecomm-Debate/myweb/greenpaper/academics/pistorious.html Rochez, S. P. (2003). "Discharge of Contract: Performance and Agreement". Retrieved December 8, 2005, from p://72.14.203.104/searchq=cache:BuRm6llew_sJ:www.spr-consilio.com/lawinabox/pdf/LLB_Contract_Ch13.pdf+Christy+v+Row+(1808)+1+Taunt+300&hl=enSupply of Goods and Services Act 1982 Standard Bank Ltd. v. Bank of Tokyo [1995] 2 Lloyds Rep 169 The Supply of Goods and Services Act 1982 The Unfair Contract Terms Act 1977 (UCTA) Yates v Dalton 1938 ELD 177; (1 Database. Undated. [Currie v Misa (1875)] Retrieved December 8, 2005, from http://www.webguru.uk.net/personal/caselaw/CaseLaw.htm Waiver - Charles Rickards v Oppenheim [1950] 1 KB 616 Webguru Case Law Database. Undated. [Hadley v Baxendale (1845)] Retrieved December 8, 2005, from http://www.webguru.uk.net/personal/caselaw/CaseLaw.htm Read More