Analysis of Contract Law Cases - Assignment Example

Contract law Assignment Ans Trietel distinguishes the obligations arising out of a contract on the basis of mutual agreement between parties Mrs. Lowrie has concluded a contract with Jerry & Co through the formal agreement she has signed in duplicate on April 4th. The “consideration” which Stone defines as “what one party to an agreement is giving, or promising in exchange for what is being given or promised from the other side”2 is150,000 pounds, paid in installments and with 6000 pounds withheld. Although “silence cannot be regarded as evidence of acceptance when this would involve forcing a contract upon an unwilling party,”3 nevertheless, since Jerry &Co has commenced performing the terms through construction, they are deemed to have accepted the contract4 with the additional provisions inserted by Mrs. Lowrie. When the record of a transaction is contained in a document – oral evidence is excludedas in this case, the parol evidence rule has generally excluded oral evidence, so parties are bound by the writing alone5. However oral representations made by Jerry& Co have induced Lowrie to enter into the contract.6 Most importantly, it must be noted that as per Clause 5 of written contract, Jerry& Co provide no warranty on materials used in construction.7 Ans 2 (a): The document signed by Mrs Lowrie and Jerry &Co does not represent the entire agreement between the parties. For one thing, there are additional terms and provisions which are relevant in the context of the contract – which are spelt out in the standard form building contract.8 Mrs Lowrie may not have entered into the contract without the oral representations on completion time and materials.9 (b) The oral statements made on March 4th and April 3rd do not form a part of the formal written contract between the parties. However, these statements may be classed as representations – which are statements of fact made by one party that form the basis upon which the other party is induced to enter into the contract. When such statements/representations are not reduced into writing, the Court may draw the conclusion that the parties did not intended them to be contractual terms10 and therefore, an injured party may not be able to hold the other party to those representations. The important distinction between a contractual term and a representation is that while contractual terms are enforceable in the event of a dispute, representations may not be. Ans 3: If the oral statements were deemed to be representations and not contractual terms, then Jerry and Co could be liable if it can be established that Mrs Lowrie would not have entered into the contract at all without those representations/statements that were made.11 An oral statement can also become a contractual term if the time interval between the statement and conclusion of contract is less.12 Therefore in Mrs Lowrie’s case, since the statements were made on March 4th and April 3rd and Mrs Lowrie entered the final contract on April 4th, they may be considered contractual terms. Furthermore, the fact that Mrs Lowrie sold her house by September will demonstrate that she had relied upon the representations about completion time, hence Mr. Jerry’s statement may be considered important enough to have been a pivotal factor in finalizing the contract. His specialized knowledge in construction and recommendation of plastic pipes could also make the representation a contractual term.13 In such a case, Jerry’s failure to adhere to his representations could be construed a breach of contract and make him liable to pay damages to Mrs Lowrie for faulty materials used. However, it appears unlikely that he will be liable for any damages arising out of delay in completion of the building, since this aspect is covered under Clause 6 of the contract, which releases him from any liability resulting from delays. Ans 4: In some cases, certain warranties or guarantees may not actually be written into a contract, yet those contractual terms are implied by statute. For example, the Supply of Goods and Services Act of 1982 makes it clear that when a sale is made, there is an implied condition that the goods that have been supplied are of satisfactory quality.14 In the case of Reardon Smith v Hansen Tangen15, Lord Diplock stated: “Ultimately the test is ……failure [of the goods] to correspond with that part of what was said about them in the contract [which] makes them goods … different … from those he had agreed to buy.”16 Moreover, in some cases, a contract with exclusions clauses16a will not be binding upon a customer.17 Section 52 of the Trade Practices Act of 1974 is also meant to impute strict liability for any form of misrepresentation.Therefore, implied in the contract between Jerry and Lowrie is pipe quality that “a reasonable person would regard as satisfactory,”18 equivalent to the original pipes specified in the architect design which Mrs. Lowrie had intended to buy. Ans 5: There is no simple agreed upon definition of what exactly constitutes an “illegal contract, although included within the framework of illegality are those contracts that involve the commission of a legal wrong or are contrary to public policy.19 The breach of a statutory prohibition, such as an EU Directive20 could involve illegality in a transaction, which voids a contract. In the case of the contract between Lowrie and Jerry, there has been a failure to adhere to the building regulations, therefore illegality could be an issue. Ans 6: In so far as the defective guttering is concerned, it must be noted that Sloghit Enterprises is not legally liable to Mrs. Lowrie. (a) The contract is between Jerry &Co and HardKnutt – hence Mrs. Lowrie would be a third party to the contract between them. The doctrine of Privity states that in general excludes rights and obligations of third parties.21 Secondly, taking into account the terms of this contract, it must be noted that exclusion Clause 3 of Hard Knutt’s terms and conditions of sale specifically absolves Hard Knutt of any liability on the condition of the goods and will be invalidated only if it is unreasonable.22 However, the validity of exclusion clauses has been upheld by the Courts in the case of dealing between businesses who are parties of equal bargaining power23. Lastly, it may be noted that Jerry &Co has been periodically engaged in business with Hard Knutt plc, wherefore it must be inferred that the terms and conditions of sale have been found to be accepted through subsequent performance.24 Therefore, Jerry & Co is not now in a position to contest it. Ans 7: Clause 5 is an exclusion clause, specifically indemnifying Jerry &Co against the condition of the materials that are used in the construction. While there is a statutory implication in the contractual terms that goods provided will be of good quality25 only unreasonableness in terms will set it aside. Where risk is involved in use of a product, the Courts have held in favor of increased responsibility placed upon the supplier to prevent misrepresentation about its products by seeking the escape route of exclusion clauses, as spelt out in the case of Pegler v Wang26, which is regarded as the “high water mark of judicial intervention in limitation provisions.”27 It is only unreasonable exclusion clauses that will be exploitative28 if damaging effects from defective products are foreseeable, otherwise, the fact that the other party has agreed to them will render them valid. In Mrs Lowrie’s case, the nature of the damage has not proved life threatening and the element of foreseeability also is weak. Mrs Lowrie’s affixing her signature to this document implies her agreement with this exclusion clause, therefore it may hold good in limiting the liability of Jerry & Co for the damages that have been caused to Mrs. Lowrie’s carpet. Ans 8: The difference between a condition and a warranty in a contract will determine whether or not a party can repudiate a contract. Where a condition is breached, the injured party can opt to repudiate or to continue the contract and receive damages.29 A warranty on the other hand, is more of an assurance, a breach will only entitle the injured party to damages but not to be repudiate the contract altogether.30 In the event the statement about completion date had been included in the contract, it would have been deemed to be in the nature of a warranty rather than a condition. The reason is that construction projects cannot be placed on par with other agreements because delays commence right at the inception stage of the project itself.31 Moreover, the Courts have also held that if substantial losses are caused to one party as a result of construction delays, they will only be enforceable if the breach is the “effective cause” of its loss.32 In Mrs Lowrie’s case, this will not apply, since Clause 6 of its agreement with Mrs Lowrie for the building of her house. Ans 9: Jerry & Co could certainly contest their contract with Hard Knutt and recover damages from them under statutory provisions of the Sale of Goods Act of 1982 and the responsibility on a seller to supply satisfactory products32a. Clause 3 of Hard Knutt’s terms of sale is in the nature of an exclusion clause. While exclusion clauses are generally upheld by the Courts where two businesses are concerned 33 Mrs Lowrie’s success in her claim could make it possible to invoke the provisions of the Unfair Contract Terms Act of 1977 which is only relevant in the case of ordinary customers and not for businesses. They may be able to recover any damages they have paid to Mrs Lowrie, since these can be shown to be the direct consequence of the defective guttering supplied by hard Knutt. The defense that Hard Knutt can employ rests with in the written provisions of the terms and agreement of sale which has not been contested, refuted or modified by Jerry and Co, despite the earlier history of transactions. Therefore, it can contest any claim by eschewing liability under the exclusion clause included in its terms of sale. Since Jerry & Co has agreed to this, it may be the free will of the parties that will be allowed precedence in the Courts, especially since there is no unconscionability involved in the transaction, rather it is a question of ordinary business risks sustained by Jerry & Co. Moreover Jerry & Co did not attempt to protect itself against such losses earlier by revising the sale terms, therefore it may be deemed to have accepted the risk as well. Ans 10: Mrs Lowrie will not be able to repudiate her contract because injuries caused are the result of breach of warranties rather than contractual conditions. Clause 5 in the agreement is an exclusion clause that specifically indemnifies Jerry & Co of liability for unsatisfactory materials used in the construction. But since there is a breach of the statutory implications under the Sale of Goods Act of 1982 to provide satisfactory materials, Jerry & Co may have to compensate Mrs Lowrie for the damages that have been caused to her property and to her carpet. Further more, Jerry & Co have also violated the building regulations, and since Mrs Lowrie relied upon Jerry’s oral representations in this matter, which was also a factor in her entering into the contract, the Court may also hold that Jerry & Co carry out necessary modifications to the building to bring it into compliance with the regulations and this may have to be done at the Company’s cost rather than at Mrs Lowrie’s. The breach in contract occurs mainly through violation in implied terms and oral representations, rather than being actionable as a tortious wrong. Hence the Court is likely to allocate only damages for actual losses incurred and no punitive damages. This may include (a) cost of replacing defective guttering (b) cost of carrying out other modifications to bring the building in compliance with regulations (c) reimbursement of the cost of Mrs. Lowrie’s Chinese carpet, minus the 6000 pounds withheld from Jerry. 2000 words . Bibliography Books/Journal Articles: * Barker, D, 2001. A Return to Freedom of Contract, 151, New Law Journal, 344 at 348 * Chitty on Contracts (1994) (27th edn) * Halson R, 2001. Contract Law. Longman: 154 * Stone, R. Modern law of Contract, 5th edn. Cavendish Publishing: * Thal, SA, 1998. The inequality of bargaining power doctrine: The problem of defining contractual fairness 8 Oxford Journal of legal Studies 17 * Trietal, G.H.,1999. The Law of Contract, 9th edition. Sweet and Maxwell. * Yates, J.K. and Epstein, Alan, 2006. “Avoiding and minimizing construction delay claim disputes in relational contracting.” Journal of Professional Issues in Engineering, Education and Practice, 132(2): 168-179. (April 2006) Case law: * Bannerman v White (1861) CB(NS) 844 * Bettini v Gye (1876) 1 QBD 183. * Birch v Paramount Estates (1956) 167 * Brogden v metropolitan railway (1877) 2 App Cas 666 (HL) * Couchman v Hill [1947] 1 All ER 103 * Heskell v Continental Express Limited (1995) 1 All Eng 1033 at 1047A * Oscar Chess v Williams [1957] 1 All ER 325 * Pegler v Wang (2000) 70 Con L.R. 68 * Poussard v Spiers (1876) 1 QBD 183 * Reardon Smith v Hansen Tangen (1976) 1 WLR 989 HL * Routledge v McKay [1954] 1 WLR 615 * Schawel v Reade [1913] 2 IR 64. * Tweedle v Atkinson (1861) 1 B&S 393 * Watford Electronics Ltd v Sanderson CFL Ltd (2001) 1 All ER (Comm) 696 Statutes: * Sale and Supply of Goods Act of 1994 * Supply of Goods and Services Act of 1982 * Unfair Contract terms Act of 1977 Read More