Common Law Cases Analysis - Essay Example

HND Common Law You are employed by Infoprovidor, a company that specialises in the provision of business information to the members of the local Chamber of Commerce. One of the members, Viacomm Ltd, has recently experienced some difficulties in relation to contracts. They have provided information on those problems and are seeking advice. Viacomm Ltd are a company which specialise in renovating old factories and workshops into flats. Recently they have successfully tendered to renovate a canal side warehouse for Wiggin Council to be completed by 15 November 2008. The following is a statement of events which have occurred………………….. 1. Joe, a sales manager of Building Security Systems Ltd wrote a letter to Viacomm Ltd on 13 June offering to install computerised security equipment at the canal side warehouse Viacomm Ltd was renovating for Wiggin Council for a total price of £200,000 payable upon completion of the work. The offer was to remain open until 20 July. Sam, a purchasing director of Viacomm Ltd, phoned Joe on 19 June to ask if the offer included the VAT. He then posted a letter of acceptance to Joe on 27 June in which he accepted the offer on behalf of Viacomm Ltd. Building Security Systems received this letter on 29 June. In the meantime Joe has started negotiating with Infoprovidor Ltd and sold the same equipment to them on 28 June for £250,000. He immediately wrote a letter to Sam to say that having not yet received confirmation that Viacomm wants to purchase the equipment that the offer was now withdrawn. Viacomm Ltd received this letter on 1 July. 2. Joiners-R-Us Ltd entered into a contract with Viacomm Ltd, who hold the main building contract with Wiggin Council to renovate a canal side warehouse. Joiners-R-Us are contracted to carry out carpentry work in a block of 47 flats for an agreed price of £200,000. Joiners-R-Us Ltd got into financial difficulty and have told Viacomm Ltd that their joiners are refusing to work because the company is not able to pay their wages. The main contract with Wiggin Council contains a time penalty clause which states that the building must be completed by 15 November 2008. Viacomm Ltd, is worried that if Joiners-R-Us Ltd did not complete the carpentry work on time he will have to recompense Wiggin Council under that clause. Consequently on 15 October Viacomm Ltd wrote to Joiners-R-Us Ltd to offer them an additional sum to pay the joiners wages of £4000 provided Joiners-R-Us Ltd would have all the carpentry work completed before 15 November. On the basis of this letter Joiners-R-Us Ltd managed to persuade their staff to continue working which re-commenced on 18 October. Joiners-R-Us Ltd then posted back their acceptance to Viacomm Ltd, but due to a postal strike it was never received. At around the same time as posting Viacomm Ltd send an email to Joiners-R-Us Ltd saying they will only pay £2000 to have the work completed on time and that this revokes any earlier offers made to Joiners-R-Us Ltd. Approximately four weeks later, when the Joiners-R-Us Ltd had completed the flats Viacomm Ltd paid the company £200,000, which was the agreed contract price. Joiners-R-Us Ltd have written to Viacomm Ltd claiming Viacom owes a further £4000. 3. Viocomm have also purchased new furniture for the boardroom from Ideal Office Supplies and arranged over the phone with A2Z Transport Ltd for transportation of the furniture to her company’s offices. Unfortunately, due to the driver’s error, the vehicle crashed and the furniture was badly damaged. A2Z Transport has advised Sam that it intends to rely on the following exclusion clause: ‘A2Z Transport Ltd will not accept any liability for loss or damage caused to customers’ property during transportation, no matter how the loss or damage was caused’. This clause appears in a notice prominently displayed outside the entrance to offices of A2ZTransport and is reproduced on the back of all invoices and receipts issued by A2ZTransport. Viacomm’ s problems can be summarised as…….. 1. Do they have a valid contract with Building Security Systems Ltd and …. 2. Do they have to pay the additional monies to Joiners-R-Us Ltd and … 3. Is the exclusion clause capable of defeating any claim made by Viocomm for the loss of the furniture. In order to be able to advise Viacomm the following areas require consideration, the effect of counter offers, the postal rule, economic duress and the effect of exclusion clauses. Having considered each of the above it should then be possible to advise on the validity of the contract, whether additional monies must be paid to Joiners-R-Us Ltd and whether the exclusion clause prevents Viacomm for claiming for the loss of the furniture. When considering the start date of a contract the court will need proof to show that the contract has been fully constituted. Contract law dictates that there must be an offer1, followed by acceptance2 in order for the contract to be regarded as valid. Payment of the consideration makes the contract binding on both parties. The courts experience problems in determining whether a contract is valid when the parties are still in the process of negotiation, and counter offers are being made. The traditional view is that the contract will not become valid until both parties agree on the price. It could be argued in the above that the parties were still in negotiation as Viacomm had made an enquiry as to whether the quoted price included VAT, however, there have been cases where the courts have held that a mere enquiry as to whether the offeror will sell the items for a lesser amount will not necessarily be regarded as a rejection of the original offer3. The courts will examine the conduct and communication between the parties to determine whether the actions amount to an outright rejection of the offer or a counter offer for the item4. In the case above Viacomm have only enquired as to whether the price includes VAT. They have not requested a reduction in the price or a variation of the contract, and there subsequent action of posting their acceptance suggests that they wish to purchase at the offered price regardless of whether this is inclusive of VAT or not. It is likely under these circumstances that the court would not consider the enquiry with regard to the VAT as a counter offer, and that there had been an agreement between the parties on the same terms5. As mentioned above, it is necessary to consider the postal rule in order to determine whether the contract should be regarded as valid. The postal rule was first established in Adams v Lindsell6 in which the court was asked to decided when a contract is deemed to have been formed if acceptance is communicated by post. The court experienced difficulties in this case due to postal delays and the parties not being simultaneously aware of the communications. In Adams the court stated “Where the circumstances are such that it must have been within the contemplation of the parties that, according to the ordinary usages of mankind, the post might be used as a means of communicating the acceptance of an offer, the acceptance is complete as soon as it is posted7”. Using this as an authority, that would mean that the action of posting the letter by Viacomm on the 27th amounted to an acceptance of the offer from that date. Even though the acceptance was not received by Building Security Systems Ltd until the 29th the court are likely to uphold the postal rule and deem that the contract was valid from the date that the acceptance was posted. This would especially be the case in the situation above as Viacomm have accepted the goods at the quoted price and have not asked for any reduction, as part of the agreement. If Viacomm had stated that acceptance was on the basis that the price quoted was inclusive of VAT then the courts might consider this to be a counter offer, which would mean that the contract would not be regarded as valid as the parties would still be negotiating on the price. As the goods have already been sold to someone else, specific performance is unlikely to be possible and therefore Viacomm would only be entitled to damages for loss of chance. Had the goods not been sold, the courts would have been likely to order specific performance. With regard to additional monies owed to Joiners-R-Us Ltd it is necessary to consider the law in relation to economic duress as well as whether the email sent by Viacomm cancelling their offer to pay extra can be regarded as valid. It could be argued in the above that Viacomm should not have to pay the additional amount as this would be regarded as economic duress. Economic duress has been defined as wrongful or unlawful conduct that creates fear of economic hardship which prevents the exercise of free will in engaging in a business transaction8. Un determining whether a plaintiff has been subjected to economic duress the court will consider whether the circumstances are part of the ‘rough and tumble of the pressures of normal commercial bargaining9’. The court will consider whether the action of Joiners-R-Us Ltd with regard to the joiners refusing to work amounts to economic duress. This was considered by Dyson J in DSND Subsea Limited v Petroleum Geo-Services ASA10 where he determined that there was no economic duress. In making his decision Dyson J found that the suspension of the work by DSND was not equivalent to illegitimate pressure, but due to financial difficulties being experienced by DSND. This can be contrasted with Carillion Construction Limited v Felix (UK) Limited11 in which the judge found economic duress to be averred. In this case the defendants had managed to force the plaintiff to sign an agreement in relation to the defendant’s final account by refusing to deliver the cladding as arranged. Dyson J held that the threat to withhold delivery amounted to a threat to commit a breach and should be recognised as constituting illegitimate pressure and economic duress. Dyson was of the opinon that the defendants would have been aware that the delay would lead to the plaintiff incurring penalties for non completion and that by refusing to deliver they were using economic duress to increase the amount payable. The courts have held that commercial pressure can amount to economic duress12 as was decided in the case of The Sibeon and The Sibotre13. In this case, Kerr J stated that there must be some other factor within the contract which could be regarded as a coercion of his will so as to vitiate his consent. In the subsequent case of North Ocean Shipping v Hyundai Construction (The Atlantic Baron)14 the court held that fear of economic hardship can by regarded as economic duress as such a fear could demonstrate coercion by forcing the party to perform rather then risk financial hardship. This sentiment was echoed by Lord Wilberforce and Lord Simon of Glaisdale in Barton v Armstrong15, where they stated that in determining whether there was a coercion of will such that there was no true consent, it is material to enquire whether the person alleged to have been coerced did or did not protest; whether at the time he was allegedly coerced into making the contract, he did or did not have an alternative course open to him such as an adequate legal remedy; whether he was independently advised; and whether after entering the contract he took steps to avoid it. It could be argued that Viacomm were forced to offer the additional monies to Joiners-R-Us Ltd as they would incur penalty charges themselves if the work was not completed by the agreed date. In North Ocean Shipping Co Ltd v Hyundai Construction Co Ltd16 Mocatta J stated that the pressure must be such that the victim’s consent to the contract was not a voluntary act on his part. The judge went onto say that such evidence of economic duress may render a contract voidable. The court could rule that the new contract between Joiners-R-Us Ltd and Viacomm is voidable due to economic duress. If the court did not find that there had been economic duress in the above situation, then the posting of the acceptance of the offer to pat the extra money would be binding on Viacomm despite the fact that the acceptance had not been received by them due to the postal strike. As discussed above, the postal rule regards the acceptance to be valid from the date of the posting of the offer. The subsequent email sent by Viacomm would not be regarded as an alteration of the terms, unless they could show that the email was sent before the acceptance was posted17. If this was the case then the offer to pay the extra money would effectively be cancelled and Joiners-R-Us Ltd would not be able to rely on the posting of the acceptance to claim the extra money. Communications by electronic means such as emails and faxes are generally accepted as though the acceptance has been communicated by telephone. The courts are generally of the opinion that, although the parties are not in close proximity to each other electronic communications are ‘substantially instantaneous as a two-way communication.’ Article 15 of the UNICTRAL makes the point that an electronic record is deemed to be sent when it is properly addressed or directed to a recipient and when it us out of the control of the sender. The courts generally hold the date of sending as being the effective date for the acceptance to have been communicated to the vendor. Using this, it could be argued that the email sent by Viacomm is sufficient for the court to find that the offer to increase the amount has been negated, and therefore the other party is not at liberty to accept the increased amount. From the above it is likely that the court will hold that Viacomm were under economic duress when the made the offer to pay the extra amount, and as such the contract should be regarded as voidable. If the court do not hold that economic duress can be averred then Viacomm might still be able to avoid paying the extra money if they can prove that the email was sent before the acceptance was posted. In the final part of the problem it is necessary to consider the effect of the exclusion clause and whether the clause prevents Viacomm for being able to claim for the damage to the goods. It will also be necessary to consider case law in this area to determine the point when ownership has been transferred to the buyer. Exclusion clauses are governed by the Unfair Contract Terms Act 1977 s5 and s6. Under this Act a seller cannot exclude liability for the goods that they sell. If the goods sold are proven to be defective the consumer still has the right to reject the goods despite any exclusion. This has been applied to exclusion clauses in relation to the transportation of goods. In the recent case of Scheps v Fine Art Logisitic Ltd [2007]18 the court held that the defendant could not avoid liability by the inclusion of a limitation clause. It was stated by the court in this case that the plaintiff had a right to expect that the goods would be safely transported to their required destination. Similarly in Sterling Hydraulics Ltd v Dichtomatik [2006]19 an attempt by the defendant to include limitations which had the effect of absolving them for liability for the quality of the goods supplied was rejected by the courts. Viacomm could also argue that the seller should be responsible for the goods until the point of delivery. This was held to be the case in Lotus Cars Ltd v Southampton Cargo Handling Plc (The Rigoletto)20 where the court held that the defendants had a responsibility to ensure the storage of the cars up until the time when these were shipped for delivery. In this case one of the cars were stolen from the compound and the defendants were held to be liable for its loss. Using the above it is possible that the court would rule that the exclusion clause should be regarded as unfair, which would mean that Viacomm would be entitled to reject the damaged goods. Difficulties might arise in determining the exclusion clause to be invalid if there have been previous dealings between the parties. If it can be proven that the plaintiff has done business with the respondent on a number of occasions and that the standard terms have always been incorporated into the contract, the court are likely to infer that the plaintiff ought to have known about the exclusion clause21. This would mean that Viacomm would not be entitled to reject the furniture even though it has been damaged. Bibliography Beale, HD, Bishop, WD, Furmston, MP, Contract Cases and Materials, 3rd Ed, 1995, Butterworths Bixby M.B., Beck-Dudley C., Cihon P.J. The Legal Environment of Business, (2002). Civil Procedure Volume 1 2002, Sweet & Maxwell Civil Procedure Volume 2, The White Book Service, 2002, Sweet and Maxwell Dignam, Alan J., “Company Law”, 4th ed. / Alan Dignam, John Lowry, Oxford Oxford University Press, 2006 Goode, R M, “Commercial law ”, 3rd Edition, London, Penguin 2004. Harvey, b & Marston , J . Cases & Commentary on Tort, 1998, 3rd Ed, Pitman Publishing Keenan, D and Riches, S, Business Law, 7th Ed, 2005, Longman Mozeley & Whiteley’s, Law Dictionary, 1993, 11th Ed, Butterworths Rose, FD, Statutes on Contract, Tort & Restitution, 10th Ed, 2000, Blackstone’s Treitel, G H. Law of Contract, 1999, 10th Ed, Sweet & Maxwell Cases Adams v Lindsell [1818] 1 B &Ald 681 Barton v Armstrong [1976] AC 104 Carillion Construction Limited v Felix (UK) Limited [2001] BLR 1 Carlill v Carbolic Smoke Ball Company [1892] EWCA Civ 1 DSND Subsea Limited v Petroleum Geo-Services ASA [2000]) ("DSND") BLR 530 Grainger & Sons v Gough [1896] AC 235 Hartley v Ponsonby ( 1857) 119ER 1471,QB Henthorn v Fraser [1892] 2 Ch 27 at 33 Hussey v Horne-Payne (1878) 4 App Cas 311 Lacis v Cashmarts Ltd [1969] 2 QB 400 Lotus Cars Ltd v Southampton Cargo Handling Plc (The Rigoletto) [2000] 2 All E.R. (Comm) 705; [2000] 2 Lloyd's Rep. 532; [2001] C.L.C. 25 McCutcheon v David MacBrayne Ltd[ [1964] 1 WLR 125 North Ocean Shipping Co Ltd v Hyundai Construction Co Ltd [1978] 3 All ER 1170 North Ocean Shipping v Hyundai Construction (The Atlantic Baron) [1979] QB 705 Pharmaceutical Society of Great Britain v Boots Cash Chemists Ltd [1952] 2 QB 401 Scheps v Fine Art Logisitic Ltd [2007] EWHC 541 (QB) Scotson v Pegg 1861 Sterling Hydraulics Ltd v Dichtomatik [2006] [2006] EWHC 2004 (QB); [2007] 1 Lloyd's Rep. 8 Stevenson, Jaques & Co v Mclean (1880) 5 QBD 346 Stilk v Marrick ( 1809) 170ER 1168,KB The Frotanorte [1996] 2 Lloyd’s Rep 461 The Sibeon and The Sibotre [1976] 1 Lloyd's Rep 293. Wiliams v Roffey Bros 1990 1 All ER 512,CA Zambia Steel & Building Supplies Ltd v James Clark & Eaton Ltd [1986] 2 Lloyd’s Rep 225 Read More