Analysis of Contract Law Cases - Case Study Example

Case Study Contract law is governed by the Statute of Frauds and the Law of Obligations. A contract for sale of goods is regulated by the Sale of Goods 1979. Rights of third parties are covered under the Contracts (Rights of third parties) 1999 and unfairness in contracts is actionable under the Unfair Contract terms Act 1977.The law of contract in English law is mostly uncodified and it is derived from case precedents which have been set over the years. The advertisement placed by Tech Games Trading Ltd is an offer that expresses a willingness to be bound by the offer to pay 50 pounds when an offerree accepts it. Hence it will be equivalent to a contract only when an offerree, in this case all the people who view the advertisement, shows a final and unqualified acceptance of the terms of the offer. In the case of Carlill v Carbolic Smoke Ball Co1 the placing of an ad where there was a promise to pay 100 pounds on the fulfillment of certain conditions was held to be an offer because the words of the advertisement showed that there was an intention to be bound if anyone accepted. On the same basis, TGT’s ad will be equivalent to an offer. However, the offer of payment will amount to a contract only if there is a final and unqualified acceptance of the terms of offer. As McKendrick states, for a contract to be valid, “there must be a definite offer mirrored by a definite acceptance.”2 The time factor in this case is part of the offer, since TGT has specified a definite time and if offerree’s fail to accept the offer within the specified time, it will automatically expire.3 In the case of Joseph, TGT has received his review only after the stipulated time period of the offer, i.e, the 25th has expired. An acceptance will be said to occur when the offeree’s words or conduct can give rise to an objective reference that he/she has assented to the terms offered.4 Therefore, Joseph’s communication of the review to TGT may be deemed to be an acceptance because he is acting in accordance with the requirements of the offer, i.e, preparing a review and sending it to TGT. However, the Courts may not hold TGT liable for paying the 50 pounds to Joseph for his review, the reason being that they did not receive the review in time. According to Lord Denning no contract will come into existence unless and until the acceptance has been communicated to the offerer5. An offer cannot be accepted by the offeree unless and until the offer is communicated to him/her and silence cannot be construed to be acceptance.6 Therefore, while it may be possible to argue that Joseph has accepted the offer, a contractual obligation will come into existence only when such acceptance of the offer is communicated to TGT. When an offer is communicated through instant means such as telephone or fax, it will be held to be communicated only when the recipient actually receives it and the postal rule will not apply in such cases7. In this instance, the offer was actually communicated to TGT only on the 27th when it received the review. Therefore, actual communication of the acceptance occurred only on the 27th, when the stipulated time period had expired; as a result TGT may not be obliged to pay Joseph. In the case of Anton, he has sent in his review without being aware of the offer at all. Nevertheless, his review was sent by email on 23rd September, therefore it was communicated to TGT well before the expiry time stipulated in the contract, i.e, 25th September. As a result, he is entitled to make a claim on the offer that TGT has made, since such an offer has been made by advertisement and therefore, has been made to the world at large and any offerree who fulfils the offer conditions will be eligible to receive the payment promised, i.e, the 50 pounds. Therefore, in so far as the reward of 50 pounds is concerned, Anton is legally entitled to receive the amount and the Courts are likely to require TGT to pay the amount. However, in this instance TGT has promised to pay Anton a sum of 75 pounds for his review, although there is no written contract that exists between the parties, specifying that such a sum is to be paid. In the case of Gibson v Manchester City Council8 Lord Denning held that the Court should look into all correspondence between the parties and their conduct in order to determine whether a valid contract exists. For example in the case of Felthouse v Bindley9 the defendant had the intent to offer his horse to the plaintiff, but had not done anything to communicate his intent to the plaintiff and had sold the horse elsewhere, therefore it was held that a valid contract did not exist at all. But where Anton is concerned, he is an employee at TGT. The Company is obligated to pay him his wages because he has entered into an employment contract with them. Similarly, TGT will be obliged to pay Anton the sum of 50 pounds because he has fulfilled the conditions spelt out in TGT’s offer and a valid contract exists which TGT may be obliged to fulfil. In the case of the 75 pounds though, the communication has been made orally and there is no written intimation that TGT intends to carry it out. For example, in the case of Powell v Lee10 the plaintiff applied for a job as headmaster and one of the managers told him orally that he had been accepted, while later the managers decided to appoint someone else. In this instance, the Court held that there was no valid contract in place since there had been no authorized communication made to the Plaintiff about the intention to enter into a contract. As a result, the plaintiff did not succeed because he could not demonstrate that there had been a legal intent to enter into a contract of appointment on the part of the managers. This may also be the case with Anton. While he is a TGT employee and undoubtedly is legally authorized to receive his wages, the question of payment of 75 pounds will depend upon the conditions and circumstances under which the offer to pay 75 pounds has been made, especially because such intent has not been set out by TGT in writing. The Courts will examine whether an authorized person at TGT has made the offer and will also look into exactly how and when such an offer to pay 75 pounds was communicated to Anton. Depending upon those circumstances, the Court may decide on whether or not TGT is liable to pay 75 pounds to Anton. In the case of Jamil, he has accepted the offer by sending in his review by post on the 20th September. In the case of offers accepted by post, an acceptance is deemed to occur as soon as the letter is posted.11 In the case of Adams v Lindsell, an acceptance of offer was communicated by post on 5th September, but received on 8th September by which the defendant had sold the goods to another party. But the Court held the defendant to be in breach of contract, since the valid acceptance had been communicated on the 5th. Therefore, Jamil’s acceptance has been communicated to TGT and is valid as soon as the letter was posted, i.e, on the 20th. In the case of Household Fire Insurance v Grant (1879)12 a postal acceptance of shares to defendant was never received, yet the Court held that the postal communication was valid and that the defendant was liable. In this case also, TGT never received Jamil’s review, which was sent by post. However, although the Courts have held that acceptance will be complete when posted, this will still be subject to the general rule regarding acceptance, which is the requirement of actual communication.13 In the case of Holwell Securities v Hughes, the plaintiff was required to communicate acceptance in writing, therefore when the acceptance sent by post was lost, the Courts held that the defendants were not liable because they had never received the intimation at all. In a similar way, TGT’s advertisement stipulates that the written review is to reach TGT before 30/25th September, hence a contract will come into existence only when it receives the reviews. Since TGT never received Jamil’s review because it was lost in the post, it has not been communicated to TGT, therefore a contract will not be held to have come into existence and TGT may not be held liable to pay 50 pounds to Jamil. In the case of Sobia, TGT may not be obliged to pay her 50 pounds for her review. Her review reached TGT on 29th. Although the original offer had an expiry date of 30th September, this was replaced by TGT’s notice on their website and their stores stating that reviews after 25th would not be accepted. TGT has the prerogative to withdraw its earlier offer, since it has been made by general advertisement and can be withdrawn the same way. This was also the principle laid out in the case of Shuey v United States14where the Plaintiff was unable to claim a cash reward that had been promised because the stipulated time had been changed in the interim. The fact that Plaintiff was unaware that the original terms had changed was not held to be acceptable grounds on his behalf, since he should have realized that an offer made through public advertisement could be withdrawn the same way. As a general rule, an offer can be withdrawn at any time before it has been accepted, any purported acceptance after such withdrawal will be deemed to be ineffective15. In the case of Routledge v Grant16, the Court made it clear that just as one party has the right to accept an offer within a certain period, the other party also has the right to withdraw an offer within the same period. Therefore TGT has withdrawn the offer on 25th September and Sobia’s review has reached on the 29th, which is past the time limit. Therefore she will not be entitled to claim the reward and the Courts are likely to rule in TGT’s favor. In the case of Robin however, his written review constitutes an acceptance of the offer and this offer was also communicated to TGT on the 25th because Robin has hand delivered it to TGT. Therefore a contract has come into existence through the communication of the acceptance of the offer. Moreover, this acceptance has been communicated on the 25th, the last day for receipt of such reviews, therefore it is also within the time frame stipulated by the contractual terms. As a result, a valid contract is in place and TGT may be liable to pay Robin the 50 pounds for the review which has been communicated to them on time. On the basis of the above arguments, it may thus be concluded that TGT may not be contractually bound to pay a sum of 50 pounds to Joseph, Jamil or Sobia. However, it appears likely that the Courts may find in favor of Anton and Robin and decree that TGT must pay them 50 pounds for their reviews, in accordance with the terms of the offer they have made through their advertisement. However, while it appears that the Courts will find in favor of Anton for the payment of 50 pounds, the outcome for the payment of 75 pounds is not so certain. While an oral promise may also be held to be equivalent to a contractual promise in some cases, this will depend upon the circumstances under which such an assurance/promise has been given to Anton. It appears that TGT will be held liable for payment of 75 pounds to Anton only if an authorized person from TGT has made such an assurance to Anton. 2. In the case of WR Games, this is a business, therefore at the outset where there is a question of any business agreement between them, it will automatically be assumed that the parties intend to enter into legal relations, unless this is specifically repudiated through contractual provisions.17 Although there is no formal written contract between TGT and WR Games Ltd, the Courts may still find that a contract exists between the two parties. For example, in the case of Tretham v Luxfer18 the defendant supplied work on industrial units to the Plaintiff, which was completed and paid for. The Plaintiff them claimed damages from the defendant for a defective product, but defendant argued that while there had been letters and phone calls between the two parties, there had been no offer and matching acceptance and hence no contract actually existed. The Court however held that in this case, it was irrelevant whether or not a formal, written contract existed. The existence of a contract could be concluded by the conduct of the parties. The course of the dealings and exchanges between them all pointed out the legal intent to enter into business relations, which amounted to a valid working contract. Applying this in TGT’s case, it may be noted that the Company has been dealing with EG Games for a period of ten years during which time ERG has been regularly designing about 4 to 10 games for TGT. Therefore the conduct of the parties is such that the existence of a valid contract may be inferred. While a contract can be repudiated, TGT’s repudiation of the contract would have been deemed to be accepted by WR Games if they had remained silent about the notice to terminate the business relationship. In the case of Vitol SA v Norelf Ltd19 the House of Lords held that even if a contract had bene repudiated wrongfully, silence or inaction would amount to an acceptance of that repudiation. In the case of WR Games, they have not been silent, but have protested the end of the long standing relationship. It may also be noted that 70% of WRG’s business comes from TGT, therefore the Courts are likely to support WRG’s position about the detrimental effects to WRG from TGT’s cancellation of contract without adequate notice. The Court may question the reasonableness of TGT’s move, as was the case in White and Carter v McGregor.20 In this case, the Plaintiff agreed with the defendant garage owner to display advertisements for three years but immediately repudiated the agreement. The defendant however performed his end of the contract and the House of Lords held by a majority that the defendants were entitled to the contract price. Similarly in the case of Panchard Freres SA v Establissments General Grain Co21, a repudiation of contract was held to be non acceptable by estoppel. In view of the long standing relationship between TGT and WR games, it appears likely that the Courts may not support such a repudiation of contract without adequate notice being provided to WR Games and TGT may be estopped from doing so. On grounds of simple justice, it appears likely that the Courts may apply estoppel in this case.22 As Lord Denning has stated, estoppel is a “principle of justice and of equity” and when a man had led another by his conduct or words to have certain beliefs that he may act on the faith of such assurances, then the other “will not be allowed to go back on what he has said or done”, especially when it would produce an unjust or inequitable outcome.23 This principle was also reiterated by the House of Lords in the case of Hughes v Metropolitan Co24 where it was held that if the parties have “entered into definite and distinct terms involving certain legal results”, then a party who supposes that the strict legal rights under the contract will not be enforced will be estopped from actions leading to that conclusion, especially where “it would be inequitable having regard to the dealings which have thus taken place between the parties.” On this basis therefore, it may be noted that firstly, TGT has been dealing with WR Games for ten years and has been regularly purchasing games from them. Secondly, they are attempting to repudiate the arrangement immediately without providing advance notice of cancellation to WRG. Lastly, WRG depends on TGT for its business to an extent of 70% of its business activities. Therefore TGT’s sudden cancellation would cause losses for WRG, which would be large scale and therefore there would be an inequitable result that would occur. Taking all these factors into consideration, it appears likely that the Court may estop TGT from immediately ending its contract with WR Games. On the grounds of justice and equity, it may hold that such sudden repudiation which will cause large scale losses to WER Games would produce an inequitable result, therefore despite the absence of a formal, written contract, TGT may be held estopped from ending the contract. TGT has not provided any indication to WR Games so far that they are likely to consider repudiation of the contract, so that the Company can make alternative arrangements to sustain its losses and acquire business from elsewhere. The Court may require some notice period to be given to WR Games before TGT will be entitled to exercise an option to repudiate the contractual arrangement it has with WR Games. While TGT is not obligated to continue doing business with WR Games if its business is not productive, nevertheless, in the interests of justice and equity the Court may hold that sudden repudiation of the contract would be unacceptable in this case and TGT must provide some notice period to WRG before it can exercise its option to repudiate the contract. Bibliography Books: * Halson R, 2001, “Contract Law”. Longman * Lord Denning, 1979. “The Discipline of Law”, Butterworths * McKendrick, Ewan, 2000. “Contract Law” (4th edn) Basingstoke: Macmillan Cases cited: * Adams v Lindsell (1818) 1 B&Ald 681 * Carlill v Carbolic Smoke Ball Co (1893) 1 QB 256 CA * Cave v Mills (1862) 7 Hurl & N 913 at 927-8; 158 Eng Rep 740 * Entores v Miles Far East Corporation [1955] 2 QB 327 * Felthouse v Bindley(1862) 11 CBNS 869 * Gibson v Manchester City Council (1978) 2 All ER 972; (1979) 1 WLR 294 * Holwell Securities v Hughes (1974) 1 All ER 16 * Household Fire Insurance v Grant (1879) 4 Sc D 216 * Hughes v Metropolitan Railway Co (1877) 2 App Cas 439 * Panchard Freres SA v Establissments General Grain Co (1970) 1 Lloyd’s Rep 53 * Powell v Lee (1908) pp LT 284 * Ramsgate Victoria Hotel v Montefiore (1866) LR 1 Exch 109. * Re London & Northern Bank [1900] 1 Ch 220 * Rose and Frank Co v Crompton Bros Ltd (1925) AC 445 * Routledge v Grant (1828) 130 ER 920 * Shuey v United States (1875) 92 US 73, Supreme Court of USA * Trentham v Kuxfer (1993) 1 Lloyd’s Rep 25 CA 119 * Vitol SA v Norelf Ltd (1996) 3 All ER 193 * White and Carter v McGregor (1961) 3 All ER 1178 Read More