Contract Law Concepts - Assignment Example

Contract Law Questions A. The Law: The Law that will apply in this case is the representations and terms of contract. In assessing the question of the clause in the contract that prevents B from setting up in the bookstore trade, the law that will apply will be conditions and/or warranties in contract. The legislation that will apply is the Sale of Goods Act of 1982. Whether a misrepresentation in contractual terms has occurred: A representation is a statement made by one party that induces the other party to enter into the contract. In determining whether an oral statement made before the finalization of the written document serves as a contractual term, the Courts seek to determine the importance of that statement as a factor influencing the other party’s decision to enter the contract and whether without such representation, the party might not have entered into the contract at all. (Bannerman v White). If the maker of the statement had specialized knowledge of the subject matter, or was in a better position to verify the statement’s accuracy, then the statement will be held to be a contractual term and therefore enforceable.(Dick Bentley Productions v Harold Motors). A breach of a contractual condition will entitle the injured party to repudiate the contract and seek damages (Poussard v Spiers). Was the turnover a contractual term? In this case A has been induced to enter into the contract for sale of the bookshop in Leeds on the basis of the shop’s turnover, as represented by B. However, when the contract was signed and the sale concluded, A found this to be 25% less than what was represented. In this case, it must be noted that the turnover would have been the most important factor in A’s decision to enter into the contract, therefore it is likely that it will be held to be a contractual term. Moreover, since B is acquainted with the daily running of the shop, he is in the position of a specialist with the knowledge about the shop’s turnover and was therefore in a position to know the truth of his representations. B was therefore obliged to correct his earlier statement at the time of signing of the contract, since A could have still chosen to buy the property but at a lower price.(Oscar Chess v Williams). Therefore it is likely that B’s earlier statement about turnover will be held to be a contractual term and B will be liable for misrepresentation in contract. Despite the fact that the drop in turnover has occurred due to a recession, B’s obligation to divulge this fact cannot be denied, especially because the turnover was the basis upon which A entered into the contract and formulated the offer. Therefore, B will be held to the original representation that was made about turnover and he may have to pay damages to A. This has been the case especially in cases where the person making the representation had specialized knowledge (Harling v Eddy). Will the condition preventing B from setting up shop be enforceable in contract? A condition in a contract may be distinguished from a warranty in that a warranty is merely an assurance provided from one party to another, therefore in the event of a breach, an injured party may seek damages but cannot repudiate the contract. (Bettini v Gye). However, in this case of the contract between A and B, the question of B not setting up shop within a specified area has been made a contractual term, therefore it is akin to a condition that will become enforceable in the event B chooses to breach the term. This is referred to as a condition precedent, which is one of the conditions on the basis of which the contract has been made since it is set out within the contractual terms (McKendrick, 2005). Therefore, in the event B should choose to set up shop as a competitor in the area specified in the contract, A can not only seek damages but can also repudiate the contract entirely. B(i) The Law: The law that will apply in M’s case is the discharge of contract. The general rule of performance is that the parties must ensure their precise performance of all contractual terms in order to fully discharge their obligations under the contract (Re Moore and Landauer) Whether the contract has been substantially performed? The strict rule for entire performance of contractual terms may be modified when the contract has been substantially performed, i.e, the party has more or less fulfilled his promise but for some minor defects. (Dakin v Lee). In such a case the party will be entitled to recover his dues with reduction to the extent of the defect. In M’s case, the contractual terms specified that M play for one hour each on two successive days. On the first day, he played for the entire hour and the second day, he played 15 minutes less and no one even noticed. This is akin to a minor defect and therefore, M may be able to recover the 2000 pounds, with some reduction for the 15 minutes less that he has played, thereby discharging his contract in an incomplete manner. The time factor in the contractual terms: The common law of contract treats time as a vital factor in contractual law therefore any breach will be actionable. Therefore, since M has breached the contractual terms by not playing for the specified duration, the University may be justified in repudiating the entire contract. (Re Moore and Landaueur). However, this has been modified by Section 41 of the Law of Property Act which states that equitable principles shall prevail over the common law rule. Therefore, while M may have breached the strict contractual terms, nevertheless, since he has substantially fulfilled his promise, he will be entitled to recover monies proportionately, especially since the University has received the benefit of the performance. Hence to leave M with no right to recovery at all will be unfair and inequitable and may not stand in the Courts. B (ii). The Law: The law in this case is exclusion Clauses in contract, which is covered under Section 16(1) the Supply of Goods and Services Act of 1982. Exclusion Clauses limit or exclude the rights or liability of one or the other party when there is a breach of terms of a contract and are a good defense in the event of a breach (Smith v Eric S. Bush). Whether an exclusion Clause limits liability for negligence: An exclusion Clause may limit or exclude contractual duty but not the common law duty of care under tort. Therefore, an exclusion clause limiting liability for loss will also cover a liability in negligence (Aldersdale v Hendon Laundry Ltd). If this exclusion clause is to be deemed to be invalid for any reason, it will be because it is unreasonable in its terms and conditions, as spelt out in Section 5 of the SOGA 1982. A contract that is deemed to be unfair due to the inclusion of an unreasonable exclusion clause will not be binding upon a customer, as per the Unfair Contract Terms Act of 1977. (Photo Production Securicor Ltd). However, the validity of exclusion clauses have been upheld by the Courts in the case of dealing between businesses (Waterford Electronics Ltd v Sanderson CFL Ltd). Will G be liable for the loss of H’s and J’s film? A distinction exists between J and H, in that H is an individual customer who has lost personal film of his wedding while J is a business dealing in restoration of historical buildings. G’s contract with J restricts liability to the cost of replacement of film with new film. In making a determination about whether or not a contract was unfair, the Courts are guided by the parity between the parties and when they have “equal bargaining power”, the Court may hesitate to infer that the contract is not a fair one(Waterford Electronics Ltd v Sanderson CFL Ltd at para 54). Therefore, in all probability, the clause may stand in J’s case, since the liability due to negligence (Aldersdale v Hendon Laundry Ltd) will also be covered through the exclusion clause. If the contract is to be held to be invalid for any reason, it must be unreasonable in its terms and conditions. The UCTA 1977 generally provides more scope for an ordinary customer to contest a contract as being unfair, especially in terms of its exclusion Clauses, since an ordinary customer will be deemed to be in an inferior bargaining position as compared to a business and therefore redress will be offered to compensate (Lloyds Bank v Bundy). In making a decision about whether or not a contract in unfair in terms of its exclusion clauses, the UCTA 1977 specifies that a “requirement of reasonableness” (Mcdonald, 1999) must be satisfied, per Section 11(1) of the UCTA 1977. Moreover, liability under the exclusion clause will accrue only when loss is the result of the seller’s negligence.(Hollier v Rambler Motors). In H’s case, the loss is undoubtedly the result of G’s negligence, and even assuming this is covered under the exclusion clause, G may be liable to pay damages to H. This is because in those instances where even a Company is dealing as an individual customer, an exclusion clause does not negate the liability of the defendant for breach of contract.(R & B Customs Brokers Co Ltd v United Dominion Trust Ltd The fact that H signed a standard contract offered by G wherein the terms were imposed on him rather than negotiated with minimal purchaser options will work in H’s favor. (Sections 5 and 6 of the UCTA 1977). Moreover, the nature of the material lost is irreplaceable – valuable wedding photographs, therefore damages may have to be paid by G. Bibliography Cases: * Aldersdale v Hendon laundry Ltd (1945) KB 189; (1945) 1 All ER 244 * Bannerman v White (1861) CB (NS) 844 * Bettini v Gye (1876) 1 QBD 183 * Dakin v Lee (1916) 1 KB 566 * Dick Bentley Productions v Harold Motors (1965) 2 All ER 65 * Harling v Eddy (1951) 2 KB 739 * Lloyds Bank v Bundy (1975) QB 326 * Oscar Chess v Williams (1957) 1 All ER 325 * Photo Production Securicor Ltd (1980) AC 827 * Poussard v Spiers (1876) 1 QBD 410 * Re Moore and Landaueur (1921) 2 KB 519 * R & B Customs Brokers Co Ltd v United Dominion Trust Ltd [1988] 1 WLR 321; [1988] 1 All ER 847. * Smith v Eric S Bush (1990) 1 AC 831; (1989) 2 All ER 514 * Watford Electronics Ltd v Sanderson CFL Ltd (2001) 1 All ER (Comm) 696 Books: * Macdonald, E, 1999. Exemption Clauses and Unfair Terms London: Butterworths * McKendrick, Ewan, 2005. “Contract Law – text, Cases and Materials” Oxford University Press Read More