Business Law Questions - Assignment Example

Business Law Questions In the case of the agreement for supply of servers, the quotation from Hard Water Co for 15,000 pounds and delivery inthree months constitutes the offer. One of the first requirements in order to a valid contract to exist is that there must be an offer and an acceptance of that offer.1 The acceptance must be a final and unqualified acceptance of the terms of an offer, so that the contract will be valid with be a definite offer mirrored by a definite acceptance.”2 In order to constitute a valid acceptance, the offerree must accept all the terms of the offer. In accepting an offer, if an offerree introduces new terms or varies the terms of the offer, this will not constitute a valid acceptance, but will be viewed as a counter offer. For example, in the case of Hyde v Wrench3 the defendant’s offer to sell was not unconditionally accepted, the plaintiff responded with a counter offer, hence a contract did not come into existence and there was no obligation of any sort between the parties. In this case, Doors Software placed an order on 5 May 2003, with additional items included, such as installation of the servers at 10,000 pounds rather than the 15,000 pounds suggested by Hard Water Co and a change in the delivery time frame. This is likely to be viewed as a counter offer, rather than an acceptance of terms. On this basis, the original offer put forward by Hard Water Co. which included the price variation clause will be deemed to have been rejected, applying the precedent of Hyde v Wrench. According to Lord Denning no contract will come into existence unless and until the acceptance has been communicated to the offerer4. In this case, the counter offer by Doors Software has been communicated to Hard Water Co as the order form. This order form does not contain a price variation clause, however Hard Water Co has completed and signed the form and returned it to Doors Software without insisting on the price variation clause. On this basis, Hard Water Co will be held to have accepted the contract on the terms set out in the order form of the Doors Software Company. The question of contracts that are generated through standard business documents, like the order form, etc was examined in the case of Butler Machine Tool v Excell-O-Corp5 which is very similar to the instant case. Plaintiffs sent a letter of offer to defendants on their standard form, stating that these terms and conditions were to prevail over buyer’s order form. The defendants however returned an order form with different terms and conditions and with a tear off slip. The Court held in this case that when there is such a battle over forms6, a contract will fall into place when the last of the forms is sent and received without objection being taken to it, especially when action is taken in accordance with the last received form. Applying this to this particular instance, Doors’ Software’s order form containing revised terms and the tear off slip was signed by Hard Water Co without the price variation clause. Moreover the Company also took steps to ac ton the contract by getting the servers ready for delivery. The new revised contract which will be enforceable will be on the basis of Doors’ order form, where no price variation provision exists. Therefore, Hard Water may not be able to claim the extra 1500 pounds. Moreover, although Doors has received the servers late, i.e, in September, this is still within the revised time frame of 3-5 months mentioned in Doors’ order. Therefore, Hard Water Company may not have grounds to claim the price rise which has resulted due to the delay, since the price variation clause is not a part of the final enforceable contract at all. 2. The legal conditions pertaining to the sale of goods are governed by the Sale of Goods Act of 1979, hence the issue of quality of the goods must be examined under the provisions of this Act. Section 14(2) of the Act states that “where the seller sells goods in the course of a business, there is an implied term that the goods supplied under the Act are of satisfactory quality”7 unless existing defects are specifically bought to the buyer’s attention before the purchase or the buyer has the opportunity to examine the goods before purchase. In this case the Islington District Council has not had the opportunity to examine the goods, in the sense that it has not been able to carry out a practice run with the software, but there is an implied condition in the Sale of Goods Act that the goods are in merchantable condition. In further defining what constitutes a “satisfactory quality” of the goods as defined under the Act, Section 14 (2A) of the Act states that “for the purposes of this Act, the quality of goods includes their state and condition and the following (among others) are in appropriate cases aspects of the quality of goods: (a)fitness for the purposes for which goods of the kind in question are commonly supplied (b) appearance and finish (c)freedom from minor defects (d)safety and (e) durability.”8 The Sale and Supply of Goods to Consumer regulations 2002 also requires that in defining quality, factors to be taken into consideration also include “public statements on the specific characteristics of the goods made about them by the seller…..particularly in advertising.”9 In this case, the Doors company has made some representations about its software, such as that the offer was a package which 100 other local authorities had accepted. the implications about merchantability of the goods are set out under Section 13(1) of the sale of Goods Act of 1979 as follows: “Where there is a contract for the sale of goods by description, there is an implied condition that the goods correspond with the description.”10 The description of the good is to be taken into account when determining whether the goods are of a satisfactory quality. In the case of Varley v Whipp11, it was held that in every case where the buyer has not had the opportunity to see the goods before purchase, the goods will be deemed to have been bought by description. The Council has purchased the good and used it to generate the number, on the basis of the description provided by Doors, which appears to vouch for its product, hence there is a further requirement of quality obligation on the part of the seller in supply of the goods. This implication of quality allows a buyer to reject the goods if they are not of satisfactory quality because of the implied condition about quality which is a part of the Sale of Goods Act. The price of the goods is particularly relevant in the context of assessing quality obligations on the basis of the statements that have been made12. The stringent requirement of quality may not be applied so strictly on goods that are being sold at a price far below the normal price for such goods, but in this case, the goods are highly priced, so the quality obligation may apply. The important aspect to be considered is whether the goods are satisfactory because they satisfy the purpose for which such goods are commonly supplied13, in this case they have not. In the recent case of Jewson Ltd v Kelly14 there was great importance attributed to the expectations of the buyer in determining whether the goods are of satisfactory quality. When assessed in the context of the amended provisions of Section 14(2) of the SOGA which states that the goods must not have defects and must be of a reasonable quality, it may be noted that buyer expectations, in this case Chris’ expectations, are not satisfied, therefore the goods supplied by Doors may be held to be of unsatisfactory quality because (a) it did not serve the purpose for which it was acquired (b) it did not conform to its description in terms of performance and (c) it did not satisfy the expectations of the buyer. 3. An exclusion clause inserted into a contract is one which seeks to limit the liability of a seller for a breach of contract or negligence. In general, when one party signs the exclusion clause proffered by the other party he will be deemed to have accepted it. In the case of L’Estrange v Graucob15it was held that the party signing the exemption clause is bound by it, thus on this basis, the Council will also be bound by the exemption clause restricting the liability of Doors and must accept it. In assessing whether or not an exclusion clause is reasonable, the Court will be guided by the circumstances and the situation of the parties. In this case the Council has received clear notice f the existence of the exclusion clause, and has accepted it, therefore this will not be a grounds for rejection of the exclusion clause as it was in Thornton v Shoe Lane Parking.16 Despite these precedents, the passage of the Unfair Contract Terms Act of 1977 may function to the benefit of the Council, since it was acting as a customer. Section 4 of the Unfair Contract terms Act holds that unreasonable indemnity clauses will not be enforced, while Section 5 states that a seller cannot exclude or restrict his liability for loss or damages arising from defects in the goods which are supplied. This would apply in the caves of the Council, since the losses have arisen out of a basic defect in the goods, i.e, the software, hence liability cannot be excluded. Among two businesses, when determining whether a clause is reasonable, Section 11(2) of the Act states that the bargaining strengths of the parties relative to each other will be examined. In this instance, although the Council received other tenders, Doors has exerted some force in not only getting the contract but also in influencing the contractual terms in its favor. Restricting its liability to a mere 100,000 pounds when there has been ten times the damage caused may not be adjudged to be fair and reasonable. Applying the principle of Smith v Eric Bush17Doors may have a duty of care to supply goods of quality to the Council. Moreover, the resources available to cover the liability will also be taken into consideration18 and in this instance, the damage caused is much greater than the limit set in the exclusion clause. In the case of George Mitchell v Finney Lock Seeds19the Court held that the terms of the exclusion clause limiting seller liability were unreasonable, especially since the damages occurred due to the seller’s negligence. This is also the case in the losses arising for the Council, which were caused by the failure of the software to perform according to the directions. In the case of Stewart Gill v Horatio Myer20 it was held that the exclusion clause was too wide and was not reasonable. Applying all these case precedents, it is possible that the Council may also be able to contest the reasonableness of the exclusion clause, and Doors may still be liable for the entire loss suffered by the Council despite the limit of 100,000 pounds set by the clause. Bibliography Books/Articles: * Campbell, Christian, 2006, “International Product Liability”, Lulu * McKendrick, Ewan, 2000. “Contract Law” (4th edn) Basingstoke: Macmillan * Morgan-Taylor, Martin, 2004. “The Sale and Supply of Goods to Consumers regulations”, Journal of Business Law * Sale and Supply of Goods Act 1994, Retrieved April 26, 2008 from: http://www.opsi.gov.uk/acts/acts1994/Ukpga_19940035_en_1.htm Cases cited: * Ailsa Craig Fishing Co v Malvern Fishing Co (1983) 1 All ER 101 * British Road Services v Arthur Crutchley Ltd (1968) 1 All ER 811 * Butler Machine Tool v Excell-O-Corp (1979) 1 All ER 965 * Entores v Miles Far East Corporation [1955] 2 QB 327 * George Mitchell v Finney Lock Seeds Ltd (1983) 2 All ER 737 * Hyde v Wrench (1840) 3 Beau 334 * Jewson Ltd v Kelly (2002) WLR 1654944 QBD. * L’Estrange v Graucob (1934) 2 KB 394 * Smith v Eric Bush (1989) 2 All ER 514 * Stewart Gill v Horatio Myer (1992) 2 All ER 257 * Thornton v Shoe Lane Parking (1971) 1 All ER 686 * Varley v Whipp (1990) 1 QB 513 Read More