The Law of Contract - Essay Example

The Law of Contract Introduction There are essentially two legal issues in the law of contract arising out of Bianca’s business associations with Janus Jewelers and Darling Waters Shopping Centre. The question for consideration in respect of the agreement for repairs and cleaning of the article of jeweler between Bianca and Janus Jewelers turns on whether or not Janus can escape liability by virtue of an exemption clause. If the exemption clause can be applied without exception Bianca will not be able to claim damages for the loss of the jewelry. The legal issue in respect of Darling Waters Shopping Centre begs the question of whether or not negotiations between Bianca and Darling Waters went beyond a mere gratuitous exchange of bargains. If the negotiations on the facts of the case represent no more than a gratuitous exchange of bargains, then no legally binding contract exist between Bianca and Darling Waters. Discussion Darling Waters Shopping Centre The primary question for determination in respect of the negotiations between Bianca and Darling Waters is whether or not there was a meeting of minds and a full understanding of the agreement between the parties.1 In other words if there was an offer and acceptance unambiguously communicated a legally binding contract exist between Darling and Bianca. Ascertaining whether or not an offer is made is the starting point of any valid contract. An offer for the purpose of contract law is identifiable if it becomes a contract once accepted. The Privy Council ruled in Harvey v Facey [1893] AC 552 that an offer for the purposes of a contract must go beyond the mere statement of a price. It must be clear from the nature of the communication made via the offer that the offeror is willing to enter into a contract.2 In determining whether or not the offeror is making a valid offer capable of forming a contract once accepted the courts will typically apply an objective test.3This test involves two questions the first of which seeks to determine whether or not the offeror’s conduct was such as to induce a reasonable person to conclude that an offer is being made. The second question determines whether the offeree actually believes that a genuine offer is being made.4 On the facts of the case for discussion, Donnie, Darling Waters’ manager took the time to show Bianca vacant shops at the shopping centre and once Bianca settled for a particular shop he offered to lease it to her on certain terms and conditions. Moreover, Donnie took the time to write a letter to Bianca confirming the terms and conditions discussed and referred to their discussion as an agreement between them. It is obvious from Donnie’s conduct that his communication to Bianca was not limited to mere prices for the lease of the shop. Therefore once Bianca accepted the offer made by Darling Waters a legally binding contract was formed. The mirror principle applies in that the acceptance must not only by in response to the offer being made but must also mirror the offer otherwise it will amount to a counter-offer.5 The next step is determining whether or not Bianca adequately communicated her acceptance of the offer. It is essential that an acceptance be communicated to the offeror and it was held in Latec Finance Pty Ltd v Knight [1969] 2 NSWR 79 that an acceptance can be effectively communicated by conduct.6 On the facts of the case for discussion Bianca left no doubt that she had accepted Darling Waters’ offer to lease the shop on the terms and conditions offered. She responded that the offer was “perfect” and set about making arrangements for the lease of the shop. She even discussed her plans with Donnie and he commented positively on the paint samples Bianca showed him for the repainting of the shop. The communication was obvious and therefore the application of any prescribed form of communication of acceptance does not arise since it was clearly communicated and there is not evidence that Darling Waters insisted upon a prescribed form for the communication of acceptance of their offer. The letter dated August 14, 2007 confirms that an offer was made and duly accepted. Obviously Darling Waters revoked the offer, but in general an offer can not be withdrawn or revoked once it has been accepted.7 In any event in order for the withdrawal of an offer to be effective the withdrawal must be communicated to the offeree.8 No such communication took place and Bianca found out purely by accident. Therefore, on the facts of the case for discussion a valid offer and acceptance was made between Bianca and Darling Waters and the latter breached the contract by improperly revoking the offer. Notwithstanding the proper formation of a contract by virtue of offer and acceptance a legally binding contract will not be implied in the absence of valuable consideration. Valuable consideration was defined in the early case of Currie v Misa (1875) LR 10 Exch 153 in the following terms: “A valuable consideration, in the sense of the law, may consist either in some right, interest, profit, or benefit accruing to one party, or some forbearance, detriment, loss or responsibility given suffered or undertaken by the other.”9 Certainly Bianca suffered a detriment in that she went to the expense of purchasing paints and other incidentals spending $800. She also took preparatory steps for the installation of counters and shelves. Therefore there was valuable consideration. The exchange of promises between Bianca and Darling Waters contains the essential contractual elements of offer, acceptance and valuable consideration and she can successfully claim damages and/or specific performance of the contract for the lease of the shop. Janus Jewelers Typically a contract for the sale of goods and/or services can validly include an exclusion of liability clause in the same manner as Janus Jewelers did in the contract issued to Bianca upon accepting her article of jewelry for repairs and cleaning. However there is one major exception to this general rule and that is that the party seeking to rely upon the exclusion of liability clause must take adequate steps to bring the exclusion clause to the attention of the other party to the contract.10 The leading authority for the exception of the application of an exclusion clause is found in the case of Thornton v Shoe Lane Parking Ltd. (1971) 1 All ER 686. In this case the plaintiff entered into the defendant’s parking garage where there were signs indicating that persons using the car park were doing so at their own risk. The plaintiff upon entering the car park was issued a ticket from an automatic dispenser. On the reverse side of the ticket was a disclaimer wherein the defendant stated that it would not be liable for any injury to persons using the car park. The plaintiff was subsequently injured and took legal action. The defendant responded by attempting to rely upon the exclusion of liability clause on the reverse side of the ticket.11 Lord Denning emphatically held that such an exclusion clause if required to be brought to the plaintiff’s attention. He said of exclusion clauses: “All I say is that it is so wide and so destructive of rights that the court should not hold any man bound by it unless it is drawn to his attention in the most explicit way.”12 The courts have been fairly consistent in the position taken against the blanket application of the exclusion of liability clauses. Lord Dunedin said in Hood v. Anchor Line Ltd. ([1918] AC at 846 that: “Accordingly it is in each case a question of circumstance whether the sort of restriction that is expressed in any writing (which, of course, includes printed matter) is a thing that is usual, and whether, being usual, it has been fairly brought before the notice of the accepting party.” 13  In determining whether of not Janus Jewelers acted reasonably in bringing the terms of the exclusion clause to Bianca’s attention it is necessary to consider what steps were taken to do so at the time of entering into the service agreement prior to the formation of the service contract. According to the authorities, if it is determined that the contract was already formed prior to bringing the exclusion clause to the plaintiff’s attention the clause would not operate to exclude liability.14 On the facts of the case for discussion the agreement was made prior to the signing of the contract and nothing was said by Janus Jewelers that would have given rise to a reasonable expectation on Bianca’s part that Janus would not take responsibility for any loss or damages to her jewelry once she handed it them. Janus Jewelers were therefore under a residual duty to notify Bianca of the risk she was assuming by leaving her jewelry in their possession. Section 74 of the Trade Practices Act 1974 by implication prevents a service provider excluding liability when he or she accepts the consumer’s property for the purpose of providing a specific service. Section 74 provides as follows: “In every contract for the supply by a corporation in the course of a business of services to a consumer there is an implied warranty that the services will be rendered with due care and skill and that any materials supplied in connexion with those services will be reasonably fit for the purpose for which they are supplied.”15 As a result Janus Jewelers cannot avail itself of the exclusion clause on the back of the contract. Both statutory and case law limit and restricts the use of the exclusion clause. The exclusion clause seeks to exclude liability in respect of any damage or loss “howsoever caused” and according to Section 74 of the Trade Practices Act 1974 Janus Jewelers cannot contract out of its statutorily implied warranty to provide quality service. To permit the exclusion clause would be tantamount to permitting Janus to provide negligent service. As discussed previously, even if the clause was not prohibited by statute Janus took no steps to bring the clause to Bianca’s attention prior to or at the time of forming the contract and cannot now rely on it to escape liability. In the circumstances Bianca can claim damages for the replacement value of antique diamond bracelet. Bibliography Brierly Investments Ltd v Landmark Corp Ltd. [1966] 120 CLR 224 Byrne v Van Tienhoven (1880) LR 5 CPD 344 Currie v Misa (1875) LR 10 Exch 153 Dickinson v Dodds (1876) 2 Ch 463 Harvey v Facey [1893] AC 552 Hood v. Anchor Line Ltd. ([1918] AC 846 Khoury, D and Yamouni, Y.S. 2007. Understanding Contract Law. Butterworths, Sydney. Latec Finance Pty Ltd v Knight [1969] 2 NSWR 79 Thornton v Shoe Lane Parking Ltd. (1971) 1 All ER 686 Trade Practices Act 1974 Read More