Business Claims - Case Study Example

Situation One The success of Helen’s claim against Eric Tylfot & Sons will depend upon the validity of certain elements of a contract. In Helen’s case, the essential elements are offer, acceptance together with the doctrince of consideration. Offer and acceptance together with consideration will determine whether or not a legally enforceable contract existed between Helen and Tylfots. Specific performance is essential for the determination of liability. First and foremost a contract contains a legally binding agreement between parties which reflects the extent of the agreed bargain and its terms and conditions. The typical starting place is offer and acceptance.1 An offer is regarded as a definite promise which by its terms and conditions provide the responding party with an option to either accept or decline the offer.2 Only after a court disposed of the matter is satisfied that offer and acceptance exist it will then look for consideration. Lush LJ described consideration as: “…some right, interest, profit or benefit accruing to one party, or some forebearance, detriment, loss or responsibility given, suffered or undertaken by the other.”3 In the context of this definition of consideration Scant Securities via Helen suffered a detriment by virtue of the cost incurred and time lost in driving to the aution. Therefore, it is reasonable to conclude that there was indeed consideration. The communication from Eric Tylfot & Sons to Scant constituted an offer for the auction of commercial vehicles and vans that were of interest to Scant. It is assumed that the communication contained a specific date and time for the conduct of the auction. On the facts provided the communication provided a specific invitation to Scant to attend the auction. There is no doubt that Eric Tylfot & Sons extended a specific and unambiguous offer to Scant. The only question is whether or not Scant accepted that offer. For an offer to be legally accepted the offer must follow the essentila terms of the offer made.4 An offer can be accepted either by conduct or by written or oral communication.5 For present purposes, conduct since an acceptance of an offer is required to be communicated to the party making the offer.6 Scant did however, via Helen’s email confirm acceptance of the Tylfot’s offer to participate in the auction. Helen stated that she would be attending the auction. While she asked for confirmation that the auction was going to indeed take place she did not indicate that her acceptance of the offer was conditional upon a specific reply. In Gibson v Manchester County Council [1979] 1 WKR 294 it was held by the House of Lords that an inquiry by a prospective purchaser was “merely exploratory” and would not function as a refusal to accept the offer.7 This request will not in anyway function to nullify her acceptance of the offer, it will be regarded as merely exploratory in nature. Since silence will not function to constitute an acceptance of an offer8, it therefore follows that failure to respond to Helen’s email will not constitute a withdrawal of the offer by the Tylfots. Moreover when communication of an acceptance is made via an instantaneous method such as an email communication, the offer is effective at the time of receipt.9 Once an offer has been accepted, a binding contract is formed and the offer ends. It is not known whether or not the Tylfots read the details of the acceptance transmitted via email notification and even if it was clear that they had not this fact will not operate to negate communication of the offer. The Tylfots are deemed to have received notice of the acceptance of their offer since it has been effectively communicated to them.10 Whether or not Helen’s communication amounted to a legally binding acceptance is an objective test. Much will depend on what a reasonable person in the same situation would conclude.11 A reasonable person would obviously conclude that Helen’s stated intention to attend the auction might very well be carried out if the Tylfots did not warn her that the event had been cancelled. Obviously the fact that the auction had been cancelled is an indication that the offer made to Scant was revoked. Both an offer and acceptance can be withdrawn at anytime prior to the completion of a contract. The rationale behind this rule is that freedom of contract recognizes that parties negotiating the specific terms of a contract are at liberty to change their minds provided that the specific contractual arrangements have not yet been complteted.12 Early on in the case of Byrne v Van Tienhoven [1880] 5 CPD 344 it was established that in order for the revocation of an offer to be effective it must be communicated to the offeree.13 In other words, once the Tylfots decided to cancel the auction and by extension revoke the offer specifically communicated to Scant they were under a residual duty to communicat the cancellation and the revocation to Scant. In Byrne v Van Tienhoven [1880] 5 CPD 344 an offer was mailed to the offeree for an order containing 1000 boxes of plates. In a week following the posting of the offer another letter was posted in which the initial offer was revoked. Shortly after the second letter was posted the offeree received the first offer and subsequently replied accepting the offer. Another five days passed at which time the revocation had been received. The court ruled that the revocation had been too late since the acceptance of the first offer had effectively concluded the contract. 14 Clearly in this case, the revocation came too late. The offer was withdrawn by the cancellation of the auction which had never been communciated to Scant and by the time they had discovered that the auction had been cancelled they had suffered time and expense in anticipation that the auction would be conducted as promised and offered. It may be possible for the Tylfots to argue that the brochure with the accompanying letter represented a mere advertisement and as such was merely an invitation to treat rather than an offer designed to create legal relations. In a typical case an advertisement will be regarded as an invitation to treat.15 However, if the advertisement goes beyond a mere invitation to treat and can be considered an offer, acceptance of it would constitute a binding contract.16 It was held in Partridge v Crittenden [1968] 1 WLR 1204 that an advertisement appearing in print form which states the price for the sale of certain goods it will only be considered an invitation to treat.17 Once a customer makes an offer to purchase the advertised goods and that offer is accepted by the vendor a legally binding contract is formed.18 Helen’s subsequent email functioned as a specific acceptance of the offer particularly since she listed the particular vehicles that her company was interested in purchasing. The response mirrored the terms of the offer made by the Tylfots and takes it beyond the ordinary invitation to treat scenario. In the circumstances of the case for discussion there was a valid offer which was validly accepted. The fact that there was consideration to the extent that Scant suffered a detriment the parties had a legally binding contract. Therefore Scan is entitled to obtain damages incurred pursuant to the offer and acceptance. Situation Two There are two legal elements arising out of the crash with the BMW. Those elements are vicarious liability and the legal consequences of exemption clauses. Genrally, employers are liable for the neglicant conduct of their employees under the doctrine of vicarious liability Vicarious liability however will only arise in the event the conduct complained off occurred in the course of employment. To this end the “control test” was developed to aid in the determination of what constitutes employment. In Yewens v Noakes (1880) 6 QBD 530 it was held that an employee was an individual who was under the directions and command of another. The person excercising directions and command over the employee was an employer.19 It is obvious that the employee directing traffic was acting in the course of his employment with Scant at Hull’s car park. In order for Scant to escape liability for an employee they will have to show that the employee’s conduct was carried out while off on a frolic of his own. A frolic is conduct which is not authorized by the company and does not in anyway relate to the manner in which the employee carries out his authorized duties.20 If while performing his work, the employee does an act which is strictly prohibited by the terms of his employement, he is still said to be acting in the course of his employment and not off on a frolic of his own. In one case a milkman, while making deliveries permitted some children to ride on his milk truck. His employers were found to be liable for the injuries sustained by the children while riding on the back of the milk truck. The court’s rationale was that in permitting children to ride on the milk truck, the milk man’s conduct related to the manner in which the milk man carried out his authorized duties.21 In light of these authorities the employee directing traffic, although negligent was acting in the course of his duties and was not off on a frolic of his own. Scant is therefore liable for the damages incurred as a result of his negligence. The only question left to be determined is whether or not Scant is jointly liable with Hull. The contract with Hull excludes Hull from liability in respect of damages sustained by Scant or its employees. Broadly speaking parties agreeing to the terms of a contract are bound by exclusion of liability clauses contained in the contract.22 It will not matter whether or not notice of the exclusion clause is actually received or read.23 Courts will generally attempt to balance the doctrine of freedom of contract against the necessity of protecting weaker parties in contracts.24 It is difficult to imagine how Scant, a company can be regarded as a weaker party in relation to Hull, a business entity with which Scant is conducting business with. It is important however to note that although an exclusion clause will generally bind parties to a contract, there are certain factors that can operate to negate its validity. For instance, in order for an exclusion clause to bind the parties, the party to whose detriment it is directed is required to have adequate notice of the terms of the clause either before or during the time of entering into the contract. Whether the exclusion is read or not is of no moment.25 The exclusion clause is contained in a contract, the terms of which are presumed to have been negotiated by both Hull and Scant. Therefore in the circumstances, it appears that Scant is deemed to have effective notice of the exclusion clause and its terms. The ruling in the case of Chapelton v Barry UDC (1940) 1 KB 532 provides an important exception to the common law’s general application with respect to the effectiveness of an exclusion clause. In this case the plaintiff was on a beach resort where a number of chairs contained a notice which essentially read: “…hire of chares 2d per session of 3 hours – Public requested to obtain ticker from attendant.”26 The plaintiff helped himself to a chair and availed himself of the ticket which stated that: “the council will not be liable for any accident or damage arising from hire of the chair.”27 It was held on appeal that the restriction was not contained on the notice to obtain a ticket (which may not have been obtained simultaneously with the hiring of the chair) and could not operate to alter the terms of the contract.28 Applying the reasoning in this case the users of the car park and particularly the two owners of the vehicles involved in the accident are not bound by the exclusion clause since it is present at the place and time of entering into the contract. It is not certain whether or not the staff member was parked there in her capacity as employee of Scant. If she was then her right to sue for damages are constrained by the exclusion clause in the contract between her employers and Hull. She may only sue Scant for damages in respect of their liability under the doctrine of vicarious liability for the negligence of the car park director. The owner of the BMW may sue either Hull or Scant or both jointly. The right to sue for damages are impacted by another factor arising out of the common law regulating the effectiveness of exemption clauses which includes the doctrine referred to as “in the course of dealing”.29 The court is at liberty to conclude that a consumer has adequate notice of an exclusion clause since he is a regular patron of the business in question.30 In other words, if it is found that the staff member was off on a frolic or her own and is a regular consumer on the day in question, and that she and the owner of the BMW regularly use Hull’s car park they will be deemed to be aware of the exclusion clause and will be bound by it. As a result they will not be able to claim and/or recover damages in respect of the accident in Hull’s car park. In Baldry v Marshall (1925) 1 KB 260 however, it was ruled that in certain circumstances and exclusion clause, despite proper notice may not be binding.31 In this case the court warned that the exclusion clause must be clear and concise and it will be very strict in this regard in cases where such a clause seeks to restrict or exclude damages in respect of personal injuries.32 Moreover the Unfair Contract Terms Act 1977 will operate to impose liability for personal injuries on Hull. By virtue of Section 2(1) of the 1977 Act Hull cannot exclude liability for damages resulting from personal injuries as a result of negligence. Under S2(1) no one acting in the course of a business can exclude or restrict his liability in negligence for death or personal injury by means of a term in a contract or by way of notice.33 Section 2(2) of the Unfair Contract Terms Act 1977 makes provision for enforcement of exemption clauses in respect of other types of damages including loss of property.34 Therefore based on the provisions contained in Section 2 of the 1977 Act Ben and Tom can claim damages for personal injuries but not for the lost and/or stolen property. It is also important to note that by virtue of S4 of the 1977 Act, an exclusion clause is not generally enforceable when one of the parties to the contract is a consumer, unless the clause is reasonable.35 This section is founded on principles of inequality of bargaining position.36The ‘good faith’ doctrine is primarily reliant upon the strength of the respective bargaining position of the parties and determines whether or not it is fair and reasonable in the circumstances to validate the exclusion clause.37 Privity of Contract is also applicable to the effectiveness of the exclusion clause. The doctrine of privity conveys that a contract cannot grant rights nor can it impose obligations on persons who are not parties to a contract. The courts have consistently held that a third party is not protected by terms of the exclusion clause. Employees have been held to be third parties.38 In other words the employee directing traffic can be viewed as a third party and his negligence cannot preclude a suit for negligence. The doctrine of privity of contract will also arise to protect the rights of the owners of the vehicles. Section 1(5) of the Contracts (Rights of Third Parties) Act 1999 also arises to grant the owners of the vehicles the right to sue the employee supervising the car park on the day in question as a third party. The right to sue arises under the tort of negligence.39 Be that as it may, Scant will invaribly be held liable for damages sustained as a result of their car park supervisor’s negligence..40 As previously noted by virtue of the doctrine of vicarious liability an employer is liable for the negligent acts of an employee while acting in the course of his or her employment.41 In all the circumstances, the owners of the vehilces involved in the accident are at liberty to maintain a claim against both Scant and Hull in respect of the damages sustained in the car park owned by Hull. It would appear from the authorities that both Hull and Scant are equally liable for the damages sustained. If Scant cannot obtain an undertaking from Hull to share the damages they may take legal action for recovery of one half of the damages. In the event the car owners file suit against Scant alone, Scant may issue third party proceedings against Hull naming them as a defendant in the action with a view to sharing any award of damages ordered by the court. Bibliography Adler v Dickinson [1954] 3 All ER 396 Baldry v Marshall (1925) 1 KB 260. Brogden v Metropolitan Rail Co (1877) 2 APP CAS 666 Byrne v Van Tienhoven [1880] 5 CPD 344 Currie v Misa (1875) LR 10 Exch 153 Entores Ltd v Miles For East Corporation [1955 ] 2 QB 3 27 Felthouse v Bindley (1862) 11 CB (NS) 869; 142 ER 1037 Gibson v Manchester County Council [1979] 1 WKR 294 Grainger & Son v Gough [1896] AC 325 Ignazio Messina & Co v Polskie Linie Oceaniczne (1995) 2 Lloyd’s Rep 566 Keenan, D. (2006) Smith and Keenan’s Law for Business. Longman, Pearson Higher Education McEntive, E. . (2005) Business LawL ongman, Pearson Higher Education Offord v Davies [1862] 12 CBNS 748 Partridge v Crittenden [1968] 1 WLR 1204 Pharmaceutical Society of Great Britain v Boots Cash Chemists (Southern) Ltd [1951] 2 QB 795 Re Mount Tomah Blue Metals Ltd (in liq) [1963] ALR 436. R v Clarke (1927) 40 CLR 227 Rose v Plenty (1976) 1 WLR 141 Shuey v United States [1875] 92 US 73 Spurling (J) Ltd v Bradshaw (1956) 1 WLR 461 Storey v. Ashton (1869) LR 4 QB 476 Thomas v LM & S Ry (1930) 1 KB 41 Unfair Contracts Terms Act 1977 Yewens v Noakes (1880) 6 QBD 530 Read More