Introduction to Law of Financial Services - Assignment Example

Introduction to Law of Financial Services Q The interaction between Lindsey and the website constituted a condition of offer and acceptance. Whenone party indicates that he is willing to be bound as soon as the other party agrees to his terms, he has made an offer. An offer should be clearly distinguished from an invitation to treat. If a party is merely asking people to make him an offer or and open negotiations with him, he is making an invitation to treat, not an offer. Some examples of invitations and treat include advertisements in newspapers, circulars and catalogues. In Cartridge V. Crittenden (1968), it was held that a person who advertised a bird for sale in a magazine was guilty of offering the bird for sale, an offence under the protection of birds Act 1954, because the advertisements was not an offer but an invitation to treat. Also displaying goods in a shop window or on a supermarket shelf is an invitation to treat as held in Fisher v Bell (1960) where a shopkeeper was found not guilty of the offence of offering an offensive weapon for sale by just displaying a flick knife in a shop window. (Emanuel, 2004) However, if there is a definite promise to be bound, an advertisement is an offer. In Carlil V. Carbolic Smoke Ball Co, the case contained a definite promise to be bound if certain conditions were performed. The dependants were the makers of patent medics called a smoke ball which they claimed could cure and prevent a number of illnesses including influenza. They promised a reward of 100 to anyone who used to smoke ball as directed and caught influenza and said that to show their good faith, they had put 1000 into bank to pay any claims. Mrs. Carl used to smoke ball as directed and caught influenza but they refused to pay to reward claiming. Among other arguments that there was no contract because it was impossible to have a contract with the whole world. It was held that though one cannot contract with everyone-: “the entire world”, such was an offer mad to the entire world and it could ripen into a contract with anybody who could cure forward and perform to condition. On that basis, most websites seem to be making advertisement e.g. in this case, the company had the rare French cuisine cookery books at a price significantly lower than the rest of the market. However, because it contained terms and conditions for delivery and other details, the advertisement ceases to be an invitation to treat and is an offer, i.e. there is a definite promise to be bound if certain conditions were performed. It is an offer made to the entire world and anyone who could meet the conditions i.e. paying the 500, e.g. Lindsey could enter into contract with the company. Such contracts are called unilateral contracts. By sending the cheque, Lindsey accepted the offer of the website, to buy the cuisine books at 500. By returning her cheque, the company revoked their offer. An offer can be revoked any time before acceptance, but the offeree must be informed of the revocation and until he knows the offer has been revoked, he is free to accept the offer. In this case, Lindsey accepted the offer on its terms before it was revoked. Acceptance is valid as soon as it is put in the post. Revocation which received after the offeree has posted his/her acceptance is too late to have any effect. Revocation is valid when it is actually received not when it is put in the post. In this case, revocation was communicated after two days meaning that the company had received Lindsey’s acceptance the previous day and such revocation after acceptance is not valid as the contract was already formed when the acceptance was sent. In the case of Errington V. Errington (1952), the court held that an offer cannot be revoked one the offeree has started to perform the act requested in the offer. (Emanuel, 2004) Based on these arguments, Lindrey contend the revocation by arguing that she had already communicated her acceptance by the fact she had sent it. This bound the company in a contract with her and their refusal to sell her the rare French cuisine; books would constitute breach of contract. She had given her consideration and could sue for specific performance. Q2. Levern runs a drinks business. She contacts drinks supplier Andy, who makes her extremely generous offer by fax. Levern faxes back to the business and it arrives at night when there is no one there. The drinks are sold to John. Andy, the supplier made an offer to Levern. This means that Andy indicated his willingness to be bound on the terms of his generous should Levern have accepted it. Andy was therefore inferior and Levern the offeree. An offer can be made orally, in writing or even by conduct. In this case, the offer was communicated by fax. It was therefore certain and communicated to a definite person. Levern accepted the offer, and communicated her acceptance by fax. In Entores v. Miles Far East Corporation (1955), it was held that an acceptance sent by telex is valid and the contract is made when and where it is received, provided that it is within normal business hours and the same would apply to acceptance made by telephone presumably fax. In this case, leverns acceptance arrived at Andy’s business at night, past business hours. In this case, it may be argued that acceptance was not communicated. A contract is not made until the offerer has actually received it except in cases of acceptance by post, where the contract is made as soon as the letter is posted. The issue here is, if Levern acceptance was valid as it arrived past business hours and if it then constituted a contract and if it did, did Andy’s business breach the contract by selling the drinks to John? The kind of contract that would be formed by Levern and Andy’s business would be a contract of sale of goods. This is a contract whereby a seller transfers or agrees to transfer the property in goods (ownership) to the buyer for a money consideration/her price. Their interaction could also be considered to be an agreement to sell. This is where there is a transfer of property at a future time or subject to certain conditions to be fulfilled later. Should Andy’s business have been aware of Levern’s acceptance fax before selling to drinks to John, they would be acting in breach of contract Levern would in that case sue Andy’s business for specific performance. Levern could argue that she accepted the offer within reasonable time. An offer should be open for reasonable time if no stipulated time is given. Reasonable time for an offer to stay open will be decided by the curt on the facts of the case, which will include nature of subject matter. In the case of shares, prices can change quickly and so the offer would be open for fairly short time, but in this case, the price of drinks does not necessarily change fast and offer would be open for a reasonably fair time. 1 That was also no express or implied conduct by the offeror Andy to revoke the offer to Levern any time before Levern accepted it. It would therefore be reasonably assured that the offer to Levern had not been withdrawn and therefore was still open until otherwise communicated. Assuming that Levern communicated/faxed on acceptance on the terms of the offer and did not make a counter offer, then the offer was not rejected. This goes to show that the offer was still valid by the fire Levern decided to accept the offer. However, the issue at hand that Levern should be aware of is that despite the fact that the offer was valid and acceptance by fax is valid; her acceptance arrived well past business hours and is therefore questionable. If Levern can prove that Andy’s business was aware of her acceptance before selling the drinks to Jo John, then she will be able to validate their sale of goods contract and she can therefore hold the business in breach of contract. Q. 3 Maria is good at business and is thinking of buying the firm ‘commercial’. They tell her the business has a turnover of 2m per annum. She is offered the firms accounts, but does not look at them whilst inspecting the business. Subsequently they are sent to her through the post but again do not read ten but decided to by the business. The accounts clearly show ‘commercial’s turnover is 1m per annum. The transaction between Maria and the firm constitutes a contract. Maria accepted to buy the business while being ignorant of some essential facts. As a general rule, acceptance is assured as accepting all the terms of an offer even if the person accepting is ignored of some facts unless such facts are not apparent on the face of the contract and no effort has been made to attract for attention to such facts. In this case however, the clearly trend to bring the attention of Maria to inspect the accounts but she did not. It can therefore be assured that she accepted the offer on all its terms. The firm had earlier told Maria, probably orally, that the business has a turnover of 2m per annum. This is a misrepresentation. This would technically invalidate the contract if this is one of the factors that influenced Maria to accept and enter into contract with the firm. Most likely it was either negligent misrepresentation. If one of the business representatives gave such a statement without due care i.e. without putting serious consideration/thought into what he/she was saying. It could also be an innocent misrepresentation. If someone made the statement without due care i.e. without putting serious consideration/thought into what he/she was saying. It could also be an innocent misrepresentation, if someone made the statement with reasonable grounds of believing it to be true. Either way, it may have been intended to induce Maria to enter into contract. In Howard Maria and Dredging Co. Ltd. v. A. Ogden & Sons (Excavations) Ltd 1978, the defendant hired a barge from the plaintiffs. The plaintiffs Manager told him how much they barge could carry basing his figure on that given in Lloyd’s Register. However, the register was wrong and the correct figure was given in the shipping documents relating to the barge, which the manager had seen. The dependants discovered the inaccuracy and stopped paying to hire fees and the plaintiff’s sued. The courts held that the dependants had made a negligent misrepresentation. The manager had no reasonable ground for relying on the Lloyd’s figure rather than those in the shipping documents. If Maria claims misrepresentation, she must prove that the misrepresentation was of facts material to the contract and that it was meant to induce her to enter into contract with the firm. (Jertz and Miller, 2004) Maria could also argue the case from the point of mistake i.e. mistake as to the nature of transaction. This would mean that she signed a document believing it to be something fundamentally different from what it actually was. However she must be able to prove that; the contract was made by a signed document, that she signed believing that document to be fundamentally different and that she was not negligent in signing it. The latter part would be held for Maria to prove since she did not bother to read the firms accounts. Had she read the accounts she would be in a position o know that the annual turnover of the firm was actually 1m instead of the said 2m. If this kind of the firms’ performance was material for her to enter into contract, then she would have rejected to offer and not signed the contra. The courts normally hold that it is careless to sign a document without reading it if physically capable of doing so. This would also mean that the parties concerned in this case Maria should have lead all the material concerning the contract even the firm’s accounts like in Saunders v. Anglie Building Society (1971) an old woman who had lost her reading glasses signed a document believing it was a deed of gift to her nephew while it wasn’t. Later she argued she signed it by mistake but it was held she had been careless in signing hence the contract was not void. (Jertz and Miller, 2004) Maria acted negligently by avoiding reading the accounts of the firm ‘commercial’. The contract is therefore not void and if she suffered any disadvantage or loss it was due to her own carelessness. Q. 4 Claudia provides a delivery service. She tells Trenta, one of her customers, that they must pay 50% more for the service. A public holiday is approaching and Trenta cannot find an alternative delivery service to get goods to the shops. Trenta agree, the goods are delivered and Trenta make a larger prompt. In this case, Claudia was the offeror and Trenta the offeree. Claudia offers to provide the service at 50% above the normal rates and Trenta agrees. It is likely that Claudia is taking advantage of the situation i.e. the upcoming public holiday that has led to scarcity of the service and probable increase in demand. It could well be a business strategy for Claudia at the expense of other business such as Trenta. Claudia’s offer was certain and out of lack of choice, Trenta accepted the offer on its exploitative terms. Their contract had consideration, which was legal (money). Consideration need not be adequate but it must have some value. This means that courts are not interested whether or not a person has made a bad bargain. Legally there is nothing wrong with a contract to enhance a car for a pint of beer although the inequality may be evidence that the contract was procured by fraud, duress or one party lacked capacity. However, in this case we are aware that there was no fraud, or duress or incapacity to contract. 2 However, there are some regulations that try to regulate business and protect consumes. In this case we could assume that Trenta is the consumer of the service that Claudia provided. The unfair terms in consumer contracts regulations 1999 apply to any term in a contract term between a seller or supplier and a consumer, which has not been individually negotiated. This is where the term has been drafted in advance and the consumer has not been able to influence the substance of the term. They apply to contracts where the buyer or recipient of the service is acting for purposes outside his trade, business or profession. (Emerson, 2003) Any term that is covered by the regulations which is unfair will be avoidable at the instance of the consumer, that is, they can avoid it if they wish to. The rest of the contract will remain valid if it can stand without the unfair term. The director general of fair trading has a duty and consider complaints about unfair terms in contracts drawn up for general use and may apply for an injunction from court to prevent the continued use of that and any similar terms. Terms will be considered unfair if, contrary to the requirement of good faith, they cause a significant imbalance in the parties’ rights and obligation under the contract, to the detriment of the consumer. In assessing the unfairness of a term, all the circumstances at the time the contract is concluded should be considered. Some of these terms include those that provide for excessive compensation of the consumer fails to fulfil his obligations and those that bind the consumer to terms which he has had no real opportunity to become acquainted with before the contract is concluded. (Penrose, 2005) In our case, Trenta entered into the contract out of lack of choice, there was no alternative delivery service available. The terms of Claudia’s offer were unfair and Trenta was in no position to bargain. In most cases like this, there is statutory position taken to protect consumers from exploitative businesses. Trenta should look into current regulations that protect concluder rights e.g. unfair terms in consumer contracts regulations (UTCCR) and although the contract has been concluded, they can be able to correct the unfairness. In order for the regulations to be applicable, the other statement in price must be part of the contract i.e. it is part of a signed contract or Trenta had received constructive notice of it. It may be avoidable under UTCCR if the consumer (Trenta) is likely to have suffered because of a significant imbalance between his rights and obligations and those of the seller or supplier. Those regulations apply to unfair terms including exclusion clauses, which are of the types mentioned in schedule 2. References Emanuel, S. L. (2004): Fundamental of Business Law, 4th Edn, Sydney, Educational Publisher Emerson R. W (2003): Business Law, 5th Edn, Sydney, Educational Publisher Jertz, A., Miller L. R, (2004): Fundamentals of Business Law, 3rd Edn, London, Macmillan Publisher Kronman, A.T (1985); Contract Law and the State of Nature, Journal of Law, Economics, & Organization, Vol. 1, No. 1 (spring, 1985), pp. 5-32 Penrose, R (2005): Road to Reality: A Complete Guide to the Laws of the Universe, Sydney, Longman Publisher Read More