The Law of Contract - Essay Example

Legal Advice The first question to be considered in this case is whether there is a valid contract in place between Ivar and Henri? This can be noted by determining whether the five elements of contract are present. These are (a) offer (b) acceptance (c) communication of acceptance (d) payment of consideration and (e) the intent to enter into legal relations.1 In the case of Henri and Ivar, the agreed consideration was for 7500 pounds, while the written down terms on the back of the envelope were also accepted by Ivar, who commenced the work without disputing any of the terms. On this basis, it may be concluded that Ivar and Henri had a contract in place and intended to enter into legal relations. The next issue that is important to consider is whether there was an implied warranty on the condition of the goods supplied by Ivar? The legal conditions pertaining to the sale of goods are governed by the Sale of Goods Act of 1979. Section 14(2) of the Act states that “where the seller sells goods in the course of a business, there is an implied term that the goods supplied under the Act are of satisfactory quality”2 unless existing defects are specifically bought to the buyer’s attention before the purchase or the buyer has the opportunity to examine the goods before purchase. In this instance, Henri had no chance to inspect the wardrobe beforehand, hence there is an implied term about quality of the goods being supplied. In further defining what constitutes a “satisfactory quality” of the goods as defined under the Act, Section 14 (2A) of the Act states that “for the purposes of this Act, the quality of goods includes their state and condition and the following (among others) are in appropriate cases aspects of the quality of goods: (a)fitness for the purposes for which goods of the kind in question are commonly supplied (b) appearance and finish (c)freedom from minor defects (d)safety and (e) durability.”3 Since the bookcase has been designed badly, it is not free from defects and may not satisfy the requirements of implied quality under the Sale of Goods Act, which spells out the need to maintain quality of the goods in terms of fitness for purpose for which is to be used and being free from defects. This implication of quality allows a buyer to reject the goods if they are not of satisfactory quality because of the implied condition about quality which is a part of the Sale of Goods Act. It must be noted however that in the case of Arcos v E A Ronaasen and Son4 the buyer was able to get out of a bad bargain on the grounds of a technical breach, and Henri may be able to utilize the same grounds, because Ivar’s installation of defective equipment is also in effect a bad bargain due to the defects in the piece he has purchased. Thus, one of the important questions that arises in this case is whether Ivan has performed the contract in accordance with the terms. If all obligations under the contract are to be discharged, the parties must precisely perform the terms of the contract. For instance, in the case of Moore v Landauer5 the precise terms of the contract stated that 3000 tins of canned fruit were to be packed in 30 tins. But solely because they were packed differently, despite their market value not being affected, the buyer was allowed to rescind the entire contract. This could be a case precedent Henri might rely on, however in his case, a complete recession of the contract may not be possible, since under recession, a contract is treated as if it had never been6. But in the case of Henri and Ivar, some amounts have already been paid, which may be held to be compensation which cannot be withdrawn. A buyer’s right to rescind the contract due to a failure to meet the criterion of satisfactory quality would not be applicable only when the breach in question is “so slight that it would be unreasonable” for the buyer to reject the goods in question7. In this case however, since Ivar has supplied a defective product, the breach in question cannot be said to be “slight”, so there may be a good case for Henri to rescind part of the contract by part payment rather than payment of the amount that was agreed to. Henri may also be able to dispute the additional payment Ivar is claiming, because he has been provided with a defective product for his fine selection of rare old books, on the grounds of failure to perform as per the quality obligation, as set out earlier. Ivan is a furniture designer and interior decorator by profession; hence there is an implied representation about his services that is made with the performance of every service.8 Being a seller or provider of services in the normal course of the business, he would be expected to adhere to the quality obligations required of sellers.9 Therefore, the question of whether the goods supplied were of satisfactory quality will be an important issue in any decision made by the courts in this case. Another aspect that must be considered is whether Henri’s refusal to pay constitutes a repudiation of the contract? Ivar has acknowledged that the wardrobe was not of good quality and that one bookcase was too short, as a result of which the book case has to be altered, but that this work amounts to only 500 pounds in value. The rule of substantial performance may apply in this case. In this instance, Ivar claims that he has performed most of the contract but subject to some minor defects; hence he has substantially performed the contract and should be allowed to recover the contract price subject to the reduction of 500 pounds where he fell short. In the case of Dakin v Lee10 the defendants built a house which was not exactly to specifications; however the Court held that defendant was entitled to recover dues to the extent he had done the work, despite the breach of contract. In the case of Bolton v Mahadeva11 however, the rule of substantial performance did not apply because the nature of the defect was more serious. In this case, the question of whether or not Henri will have to pay 2950 pounds will be determined by the Courts in accordance with the extent to which the Court determines whether Ivar has substantially performed the contract. Ivar may be able to contend that Henri has breached the contract by refusing to pay him the entire contracted amount of 7500 pounds. The question of whether or not the Court accepts this will also depend upon the extent to which the quality obligation is imputed upon Henri and his failure to provide goods of satisfactory quality is held to be actionable under the Sal of Goods Act. Conclusions: Since this case involves a civil, contractual issue, it is likely to be adjudicated in a civil court and since the amount in question which is being disputed is less than 3000 pounds after Ivar’s acceptance of 500 pounds less, the matter can be settled in a County court through a Small Claims Procedure12. This will involve a quick hearing before a District Judge without the necessity for lawyers to be present, although both the parties will also have the option to appeal to a circuit Judge if they are dissatisfied with the verdict. On the balance of probabilities, there appear to be good grounds to support Henri’s case and he has a 50:50 chance of being able to partly repudiate the contract. The factor which will work in Ivar’s favor is his substantial performance of the contract. However, under the stricter requirements for quality that have been imputed under the Sale of Goods Act, is appears likely that Ivar’s failure to meet the quality obligation required of every seller of goods may play a significant role in this case. There is no doubt that the parties have entered into a contract and agreed upon a consideration of 7500 pounds. Ivar can undoubtedly contest Henri’s refusal to pay the full amount, and his willingness to reduce an amount of 500 pounds also indicates a willingness to settle the issue. On this basis, it may be better for Henri to first consider negotiating the matter further with Ivar, to see if they can come to some kind of negotiated agreement on balances payable, since Ivar has performed his part of the contract, albeit not to required quality. In the event that Ivar is not willing to settle on a further reduced amount, then Henri may take his chances in court. It must be mentioned however, that there is also the possibility that the Judge may require Henri to pay the entire amount that is left, as well as damages for breach of contract; therefore this is a decision the client himself has to take. Bibliography * Conditions and warranties: http://www.kevinboone.com/lawglos_ConditionsAndWarranties.html * “Formation of contracts”, Retrieved April 8, 2008 from: http://www.out-law.com/page-396 * Morgan-Taylor, Martin and Willett, Chris, 2005. “The Quality obligation and online market places” 21, Journal of Contract Law at p 158 * Sale and Supply of Goods Act 1994, Retrieved February 24, 2008 from: http://www.opsi.gov.uk/acts/acts1994/Ukpga_19940035_en_1.htm * Termination of contract on the grounds of frustration: Retrieved April 8, 2008 from: law.anu.edu.au/colin/Lectures/frust.htm * Trietel, “The Law of Contract” at pp 801-2 Cases cited: * Arcos v E A Ronaasen and Son (1993) AC 470 * Bolton v Mahadeva (1972) 2 All ER 1322 * Dakin v Lee (1918) 1 KB 566 * Moore v Landauer (1921) 2 KB 519 Read More