Issues on Contract in Business - Essay Example

CONTRACT IN BUSINESS For Simon to know whether or not he had a binding contract with Huddersford Bookshop, it is first important that he understands the basic provisions of what makes up a contract and what does not make up a contract. In the first place, The Law Society of New South Wales (2009) notes that “contract is a legally binding agreement between two or more persons.” There are a number of aspects of the definition given by the Law Society of New South Wales that implies usefully to simon’s case and which when well understood will held simon to appreciate whether or not he had a binding contract with Huddersford. In the first place, it would be noted that a contract does not necessarily have to be a written document. It is against this backdrop that the society goes on further to mention examples of contract to include “purchase any goods, buy a house, engage a builder to carry out work on your house, borrow money, order goods or machinery from a manufacturer, or sign up for a telephone plan.” Indeed, in most of these cases, there is no signing of a written document but there still exists a contract. To Simon therefore, he could still have had a contract without having a written documentation. The second and most important aspect also has to do with the fact that a contract but be legally binding between two people. What this means is that all two people or two parties involved must have the word of the other that they are going to deliver their sides of the agreement without fail. However, in the case of Simon, when he sent the order for the purchase, he received no confirmation from Huddersford confirming that Huddersford had put himself in the deal and so would have to fulfil his part of the agreement. In simple terms, there was no binding contract between the two parties. Building on from the last point on the need for a contract to be a legal agreement between two or more parties, it would indeed have been a lot of difference if John had sent the letter of acceptance. If for nothing at all, the letter of acceptance would have constituted the Johns part of the agreement on behave of the bookshop and this would have given Simon much ground to argue for a breach of contract. Having said this, it is important to emphasise that Simon’s only quest for a bidding contract has to do with the single purchase of the “Fly fishing in the Wye” by J.R. Marple and not the bookshop’s failure to deliver a book to him. If as part of the mailing list that Simon received there was any assurance that any one who placed an order for the book or for any book listed in the catalogue would have it, then Simon would have used that part of the mail to hold the bookshop accountable. Until then, it would have only taken John’s acceptance letter for Simon to have a point to proof that John or the bookshop as an entity has failed on its part of the contract. The general idea that this message sends is that third party evidence is very important in any contract and so the letter of acceptance would have been evidence that John had a part in the agreement (Otsuka, 2011). Given a service delivery and customer relation contract issues of this nature, if there was a breach of contract, the most likely remedy that John would have had was for him to be asked by a court to carry out his obligations. This is particularly possible as the product in question is non-perishable and could easily be taken from one person to the other. But in this case, there would have to be enough evidence to suggest that Simon was the genuine and original winner of the bid instead of the person who was given the product. In case John had received the payment, it could also be asked by the court to pay for damages in the form of cash, constituting an amount huge enough to cover the original amount paid, any interests that would have been accrued as well as any deserving compensations (Otsuka, 2011). 2. Section 12 Section 12 of the Sale of Goods Act implies terms in contract where the seller must have the right to sell the goods. The general indication that section 12 gives is that there could be cases where the seller may not have the legitimate right to sell goods being traded. The commonest scenario of situations where sellers may not have the right to sell good could be cited as situations of theft. But this is not always the case where the seller does not have the right to sell the goods. Selling under false pretence, selling at prohibited sites, selling of illegal goods and selling within a location where a person has no right to sell all constitutes provisions under section 12 of the Sale of Goods Act. A case example of section 12 of the Sales of Goods Act is Roland v Divall [1923]. In the case, the defendant had sold a car to the claimant for £334 who further painted and sold the car for £400. After the car was impounded as a stolen care, both the claimant and defendant were found guilty under section 12 of the Sale of Goods Act. It was held that the defendant had no right of selling a car because he did not obtain good title from the thief (e-law Resource, 2012). Section 13 Section 13 of the Sale of Goods Act implies directly in cases where good sold by description must correspond with the descriptions given out in the contract. In this situation, the use of the term contract refers to any means by which the seller makes his or her intentions of the specifications of the goods known to the buyer. This may include description in an advertisement or any other means of contractual description of the goods. In Harlington & Leinster v Christopher Hull Fine Art [1991] 1 QB 564, the claimant had purchased a German painting from London based seller. The painting was first described in a sales catalogue and was valued to worth £6,000. Upon the auction, the buyer made a group of experts in German painting go and inspect the painting. After purchasing the painting, it was realised that the painting was fake and was worth less than £100. The court held that since the claimant filed the case under section 13 of the Sale of Goods Act, the defendant was not guilty because by going to inspect the painting, the situation no longer fitted for section 13, which only deals with goods sold by description. Section 14 Section 14 of the Sale of Goods Act only applies in cases where the sale is undertaken in the course of a business (London, 1989). In such instance, goods must be sold under satisfactory quality. The judgment of quality is somewhat made subjective as the Act states that the quality must be based on what any reasonable person would consider as satisfactory. This encompasses description, prices and other circumstances of the goods (Fowler, 1993). By combing price with description for instance, a reasonable person must agree to accept the goods at the quoted price should they be aware of any known defects on the goods. A case example of this is Shine v General Guarantee Corp [1988] 1 All ER 911 where the claimant bought a second hand sports car, which after a while was giving him so much problems. Upon careful scrutiny, it was discovered that the car had been involved in an accident. Under section 14(2), it was held that the purchaser would not have bought the car at the price he did if he was aware it had been involved in an accident and been totally submerged in water. Section 15 Section 15 of the Sale of Goods Act is transcending in the sense that it applies to all cases of sale by sample whether in business sale, private sale or consumer sale. In case there is a sample out of a bulk product, the remaining quantity in the bulk would have the same quality as the sample. Ultimately, once a seller displays a sample of a bulk product or good, the quality as perceived by the buyer in the sample must be the same as in the rest of the product of which the buyer does not have privilege to test of quality. In Markus v Fringy ltd [1995] 2 WLR 1233 Court of Appeal, it was found that the complainant had purchased pieces of cloths based on the sample that was put forth by the defendant as sample. After opening the entire consignment, the complainant found that most of the cloths did not bear the colour of the sample though he made the purchase based on the colour of the pieces of cloths. It was held that since section 15 only caters for quality and not aspects of the goods like colour, the defendant was not guilty. 3. Once there is breach of contract, remedies are prescribed by appropriate quarters, mainly the court against the guilty party. Damages are the commonest form of remedies and come in a number of types. The first type that is discussed is restitution. This may also be referred to as corrective justice because it is structured around the idea of preventing the defendant from gaining unjust enrichment (Mihashi, 2007). A typical scenario could be given with the case example of Peevyhouse v Garland where Peevyhouse was the plaintiff and Garland was the defendant. The case has it that Garland received full payment for the sale of market land to the plaintiff. It was agreed that the parcel of land would be made available to the plaintiff after two years of instalment payments. After two years however, the land was not made available to the plaintiff. It was held that Garland pay an amount of $9,500 Peevyhouse as restitution to cover the cost of the land and the amount enriched to Garland unjustifiably. Reliance is another form of damage or remedy awarded to innocent clients in the events of breach of contract. Reliance is instituted as a means of preventing harm to the victim involved in the case (London, 1989). Where the plaintiff is also made to rely on the contract agreed upon, there is a recovery of costs for the plaintiff against costs that might have been incurred as a reason of reliance. One very peculiar nature of reliance is that judges would often award reliance damage together with restitution. But this takes place when there is enough evidence that the defendant had an unjust gain. In Radford v De Froberville, Radford came into the case as seller of a portion of land, making him the plaintiff. The defendant was the purchase of the land, who was De Froberville. It was agreed that after purchasing the land, the defendant would build an expensive stone wall between the land and that of the plaintiff. The defendant however refused to put up such expensive stone wall arguing that the plaintiff was only entitled to nominal damages because the wall did not hold fortunes of increasing the market value of the land. But for the fact that the plaintiff relied on the part of the defendant’s agreement in selling out the land, it was held that the defendant was liable for the cost of the wall according to the value of it if it had been constructed. The last form of remedy to be looked at is expectation damages, which is a form of distributive justice. The term distributive justice is used to depict the description of damage given over a distributed period of time. In determining the damage to incur for a distributive justice, the associate value of the entity involved over the said period of distributive elasticity is considered (Fowler, 1993). A case example that depicts expectation damages has to do with the case of Victory Motors Ltd v Bayda where Victory Motors came into the case as plaintiff who attempted to sell a vehicle to Bayda and Bayda came in as defendant who was the purchaser of the vehicle. After a period of three months elapse, the defendant backs out of the purchase, refusing to pay the amount due to the plaintiff. It was however held that the plaintiff was entitled to expectation damage because in the law of supply and demand, the supply premise exceeded the demand premise in this scenario and so the value of the vehicle would have been higher if sold three months earlier. 4. In English law, three forms of mistakes are commonly recognised in contracts. These are common mistake, unilateral mistake and mutual mistake. In common mistake, the premise is that the mistake is committed by both parties of the contract. Common mistakes are also committed as the same form of mistake coming from both parties of the contract. It is for instance common that both parties will belief that the subject matter existed at the beginning of the contract when in reality the subject matter does not exist. This will case Res extincta, which was in the case of Scott v Coulson [1903] 2 Ch 439. There was a life insurance covered for a third party. At the point of entering the contract, both parties thought that the person who was to benefit from the insurance was alive and was as such supposed to receive benefits for the contract. It was however found that the insurer was dead at the time of the contract and so it was held that the contract was void for mistake. The second form of mistake is mutual mistake, in which case the case undertakes an objective assessment of the contract to ascertain if both parties are at a cross purpose. The application of an objective assessment comes in as the court would commonly subject the contract and its attendant evidence to objective test by a reasonable person to judge if correspondence existing between the parties involved could be understood as having a single meaning. The emphasis of the mistake is thus positioned on the sense of judgment given to the correspondence that takes place between the parties (Fowler, 1993). Once the reasonable person is not able to determine the meaning, the contract is ruled as void for mutual mistake. In the case Raffles v Wichelhaus (1864) 2 H & C 906 Court of Exchequer, the two parities entered into contract for the sale of cotton to be shipped from Bombay. The ship that was to undertake the trip does its sailing in October and December. Whiles the defendant believed the agreement was for the October sailing, the claimant believed it was for December. It was held that a reasonable person would not have been in a position to determine with certainty the month on which the contract was agreed with. The contract was thus ruled as void. There is the final type of mistake, which is the unilateral mistake where two major forms of unilateral mistakes could be identified. Generally though, unilateral mistakes are committed by only one party in the contract but this may either be mistake relating to identity or mistake relating to the contract. In the case example of Hartog v Colin & Shields [1939] 3 All ER 566, the defendant offered a very large volume of hare skin to the claimant at the same price that the hare skin would have cost per pound. Invariably, the claimant did the purchasing at one-third the original price of the hare skin. It was held by the court however that since hare skin is traded per piece, the claimant should have known that it was a mistake that such a quantum of hare skin was being sold at the quoted amount. This was a typical example of unilateral mistake by contract. REFERENCE LIST e-law Resource, 2012, Sale of Good Act 1974. Online] http://www.e-lawresources.co.uk/Statutory-implied-terms.php [26th January, 2013] Fowler, E. Minorities in a "Homogeneous" State: The Case of Japan. In What Is a Rim? Critical Perspectives on the Pacific Region Idea. 1993. Arif Dirlik, Boulder, CO: Westview Press. London, J. 1989. Tales of the Pacific Laws. New York: Pengium. Mihashi, O. 2007, The Symbolism of Social Discrimination Law: A Decoding of Discriminatory Language. Current Anthropology 28(4): 19-29. Otsuka, J. 2011. The Mistakes in the Attic Contract Laws. New York: Kindle Books. The Law Society of New South Wales 2009. What is a Contract [Online] http://www.lawsociety.com.au/community/publicationsandfaqs/legalquestions/Whatisacontract/index.htm [26th January, 2013] Read More