Whether a Legally Binding Contract Has Come into Existence between Christina and Diane - Coursework Example

Contract Law By Due Problem Issue The issue in this problem is whether a legally binding contract has come into existence between Christina and Diane. Rule For the creation of a legally binding contract, the first essential is that there has to be an offer. Once this offer is accepted, an agreement is created. But there are certain essentials as to what constitutes a valid offer. There is a fine line that separates a valid offer from an invitation to treat. An invitation to treat is merely an indication of willingness to trade or begin negotiations. In Fisher v Bell1, a flick knife was displayed in the defendant’s shop. It was placed next to a ticket bearing the words "Ejector knife – 4s." Sale of such knives was prohibited u/s 1(1) of Restriction of Offensive Weapons Act 1959. The plaintiff being a chief inspector of police force alleged that the defendant had violated this section by offering the knife for sale. It was held that the display of knife in the defendant’s shop was not an offer but an invitation to treat. Hence, no liability arose. Application The placing of dress with a price tag of £200 in the shop window by Christina was not an offer but an invitation to treat. Diane could not have accepted this invitation and there is no agreement. Conclusion Christina is not legally obliged to sell the dress to Diane because she never made an offer but merely an invitation to treat. Problem 2 Issue The issue is whether Christina’s advertisement amounted to a valid offer and whether David’s acceptance has created a legal and binding relation between the parties. Rule Advertisements are generally regarded as invitation to treat and are not considered as valid offers. However, advertisements can also amount to a general offer which can be accepted by anyone. It depends on the words used in the advertisement whether it is to be treated as an offer or an invitation to treat. In Carlill v Carbolic Smoke Ball Company2, the defendants made a product called “smoke ball” which was claimed to be a cure for influenza. The defendants published an advertisement in various newspapers in which they claimed to pay £100 to anyone who used their product according to the instructions but still contracted influenza. The plaintiff saw this advertisement and bought one of the balls. She used it three times daily for almost two months but contracted the flu. She claimed £100 from the defendants. The defendants rejected her claim arguing that there was no legally binding contracted between them and the plaintiff. The courts held that the advertisement was not a unilateral offer to the whole world but it was open for acceptance for anyone who fulfilled the condition of using the product according to the instructions. The satisfaction of conditions constituted acceptance of this offer. Further, the purchase and use of the smoke ball constituted good consideration. Therefore, the defendants were held liable to pay £100 to the plaintiff since there was a legally binding contract. Application Christina’s advertisement was a unilateral offer to anyone who fulfilled the condition of spending £50 or more in Elegante. Anyone who fulfilled this condition accepted this offer and was entitled to the voucher. David spent £60 in Elegante before 31/01/14 hence accepting the offer made by Christina. Since he spent money in her store, there was good consideration and there is now a legally binding contract. Conclusion Christina would be held liable to give David a £50 voucher towards further purchases in the shop because she is legally obliged to do so. There is a contract between David and her, and she has to honour it. Problem 3 Issue The issue is whether there is a legally binding contract between Christina and Alex since Alex is a minor. Rule As a general rule, minors are regarded as persons that are incapable of entering into a contract. This rule regarding their incapacity also extends to contracts of sale. However, s3 (2) 3of Sale of Goods Act 1979 provides, “Where necessaries are sold and delivered to a minor or to a person who by reason of mental incapacity or drunkenness is incompetent to contract, he must pay a reasonable price for them.” In Nash v. Inman4, the plaintiff supplied the defendant, a minor, 13 waistcoats and other things of that kind. The defendant refused to pay for the goods. It was held that the burden of proof that the goods supplied were ‘necessities’ was on the plaintiff and he had failed to prove it. Since the contract was not for supply of necessities, it was void ab-initio and the defendant was not liable to pay for them to the plaintiff. Even if the plaintiff had succeeded in proving otherwise, he would have had a claim against the defendant’s estate and not the defendant himself. Application The burden of proof that the kilt sold by Christina to Alex was a supply of ‘necessity’ lies on Christina. She would have to prove that Alex does not already possess sufficient items of this clothing. If she succeeds in doing so, the contract would be regarded as valid and Alex would not be able to rescind it. However, it seems unlikely that Christina would be able to do so because the kilt is of a good quality and can be regarded as a luxury item rather than a necessity. Conclusion Since it is likely that Christina would not be able to prove that the sale of kilt to Alex was a supply of necessity to a minor, she would have to cancel the sale. There is no contract since Alex is a minor and the kilt is not a necessity. Therefore, the transaction has to be reversed. Problem 4 Issue The issue is whether there has been a breach of condition by Christina and whether Kimberly is entitled to treat the contract as repudiated. Rule In contracts of sale, there are certain implied conditions that are annexed impliedly by the operation of law. S13 (1)5 of Sale of Goods Act 1979 states that, “Where there is a contract for the sale of goods by description, there is an implied condition that the goods will correspond with the description.” In Harlington & Leinster v Christopher Hull Fine Art6, the plaintiffs purchased a painting from the defendants for £6,000. In an auction catalogue, this painting was described as being by German impressionist artist Gabrielle Munter. The defendants were not experts on German paintings unlike the plaintiffs. The experts of the plaintiffs inspected the painting before the purchase. After the sale the plaintiffs discovered that the painting was not original and was worth less than £100. They invoked s.13 of Sale of Goods Act and brought an action against the defendants claiming that the painting was not as described. It was held that the sale had ceased to be one by description when the plaintiffs’ experts were sent to examine the painting. Therefore, the plaintiffs had no protection. The implied term under S 13 is only breached when the buyer relies on the description. Application The sale of the flapper dress by Christina to Kimberly was a sale by description. Kimberly had relied on this description and Christina never brought it to her attention that this dress was not a genuine 1920s article. Kimberly would not have bought this dress had she known that it was a fake. Since Kimberly relied on this description, there was an implied condition that dress would be a genuine 1920s article under S 13. As this dress was not as it was described, there has been a breach of condition by Christina. Conclusion Kimberly has a right to treat the contract as repudiated and get her money back from Christina. She also has the option of treating this breach of condition as a breach of warranty and claim damages from Christina. However, the facts suggest that Kimberly has decided to cancel the contract. Problem 5 Issue The issues are: Whether the breach of a term of the contract by Christina gave a right to the hotel management to cancel the contract; Whether Christina is entitled to recover the difference in cost between the two hotels and damages for her emotional upsetting. Rule The terms of a contract may be regarded as conditions, warranties or innominate terms. The innominate term approach was introduced in Hong Kong Fir Shipping v Kawasaki Kisen Kaisha7. In this case, a ship was chartered to the defendants for 2 years with the agreement including a term that the ship would remain seaworthy for the whole of the stipulated time. Some problems developed in the ship which made it unable to be used for 20 weeks. The defendants ended the contract treating the unavailability of the ship as a breach of condition. The plaintiffs brought a suit for wrongful repudiation. It was held that the defendants were liable for wrongful repudiation. The courts looked at the effect of the breach instead of classifying the term as a condition or a warranty. The courts looked whether the breach had deprived the defendants of the whole benefit of the contract. It was further seen in Schuler v Wickman Tools 8 that the courts held a term as a warranty which was regarded as a condition by the parties in their contract because this term was trivial. In Hadley v Baxendale9, two rules were laid down regarding the damages for a breach of contract. The courts ruled that the loss suffered by the aggrieved party must be such that can reasonably be considered either; as arising naturally, or is such that it is in the knowledge of the parties at the time of making the contract as to what the effects of a breach would be. The object of damages is to put the aggrieved party in such a position in which it would have been if there was no breach of contract. Application The hotel cancelled their contract with Christina because she failed to inform them of the time of her arrival just like they had agreed in their contract. However, this term was not such that its breach would have deprived the hotel of the whole benefit of the contract. This term was very trivial. Christina would succeed in her action against the hotel for wrongful repudiation. The hotel would have known how much it would have cost Christina if she had to book another hotel on such a short notice. It is because the alternate hotel is in the same city as theirs i.e. Aberdeen. Christina would be able to recover the difference in the cost between the two hotels. However, she would not be able to recover damages for her emotional upsetting because it could not have been reasonably foreseen by the hotel. This is a remote damage. At best, the courts would make the hotel liable to pay nominal damages the purpose of which is to discourage such wrongful repudiation in the future. Conclusion Christina would be entitled to recover the difference in the cost between the two hotels due to wrongful repudiation by the original hotel. This would put her in the same position if there had been no such breach in the first place. References Carlill v Carbolic Smoke Ball Company [1892] EWCA Civ 1 Fisher v Bell [1961] 1 QB 394 Hadley v Baxendale [1854] 9 Exch 341 Harlington & Leinster v Christopher Hull Fine Art [1991] 1 QB 564 Hong Kong Fir Shipping v Kawasaki Kisen Kaisha [1962] 2 QB 26 Nash v. Inman [1908] 2 KB 1 Sale of Goods Act, 1979. (UK) s 13 (1). Sale of Goods Act, 1979. (UK) s 3 (2). Schuler v Wickman Tools [1974] AC 235 Read More