Contractual and Commercial Disputes - Assignment Example

QUESTION ONE: Rohit wrote to Johan expressing his intention to buy the latter’s company. In that letter he had offered to pay £25, 000 for the shop, stock and goodwill. This letter constitutes a counter offer and not a letter of acceptance, in respect of Johan’s offer to sell his company. In order to be valid an acceptance should be unconditional and definite. Since, these requirements are lacking, Rohit has made a counter offer. However, in his reply by facsimile, Johan specified an amount of £30,000 and he also specified the day and method of acceptance by Rohit. The latter replied by facsimile on the same day and not in writing, therefore Rohit did not confirm acceptance by the method specified by Johan. Moreover, Rohit stated that he would pay half the amount by the day specified and the rest within two months. This changes the terms of Johan’s offer drastically, hence it constitutes a counter offer and not acceptance. As such there is no binding contract between these two parties. In order to constitute a contract, the offer must be accepted by the offeree. The offeror can prescribe the manner in which the acceptance should be made and the offeree has to follow that prescribed manner, while indicating his acceptance. Acceptance can be an expression by words or conduct that are in accordance with the terms of the offer. Acceptance must be along the lines of the original offer. Inclusion of new terms makes the offer a counter offer. In the event of instantaneous communication methods such as in person, by fax, phone or email being used to make an offer by the offeror, the offer comes into force upon the receipt of the same by the offeree. Similarly, revocation of offer comes into effect immediately on receipt of the communication by the offeree. When the offeror receives acceptance or rejection of acceptance from the offeree, then the same will be effective from the moment of its receipt. (Domb and Another v Isoz, 1980). The postal rule specifies that acceptance comes into force from the moment the letter of acceptance is posted to the offeror. In Household Fire Insurance Company v. Grant, the defendant made an offer which was accepted by the plaintiff. However, the letter of acceptance posted by the plaintiff to the defendant failed to reach him. The Appellate Court held that the contract was deemed to be concluded the moment the plaintiff posted his acceptance letter, and the defendant was held liable (Household Fire and Carriage Insurance Co v Grant, 1879). The acceptance will become effective only when the offeree sends or posts his acceptance. At the same time it is also very important that the revocation of offer must be communicated to the offeree by the offeror (Byrne v. Van Tienhoven, 1880). The inclusion of new terms in the offer makes it a counter offer. Moreover, the offeror can revoke the offer before the offeree accepts the offer. Revocation of an offer is possible only till such time as it has not been accepted by the offeree. Furthermore, the offeror is under a duty to intimate the revocation of his offer to the offeree. The offeror has to explicitly declare the mode of acceptance to the offeree, who has to indicate his acceptance in the manner prescribed to the offeror. The acceptance of an offer can be either express or implied. When the offeree performs in accordance with the terms of the offer, it can be deemed that he had accepted the offer and that there is a legal binding contract (Carlill v. Carbolic Smoke Ball Co, 1892). On Thursday, Johan informed Rohit that he had concluded the sale of his company to some other party. Nevertheless, Rohit, prior to receiving this letter from Johan, posted a letter to the latter, in which he agreed to pay £15, 000 by Friday and the rest of the amount within two months. This act of Rohit cannot be construed as acceptance, because the sale transaction had already been completed, by the time Rohit sent this letter. There is no binding contract between Johan and Rohit, in respect of the sale of the former’s company. QUESTION TWO: In general, agreements between friends and family members cannot be considered to be contracts. For an agreement to become a legally binding contract the intention of the parties making the agreement should be taken into account. Moreover, the terms of the offer have to be unambiguous. Rohit had offered to pay Shazia for the amount of petrol required to transport him from the railway station to the town. Shazia had transported Rohit to town, even though she was not going to town, and Rohit had promised her to pay the cost of the petrol consumed, in the process. Thus, Shazia had completed her part of their agreement; hence, Rohit has to pay her the cost of petrol. The amount to be paid to Shazia can be determined by ascertaining the mileage given by her car, the cost of petrol per litre and the distance between the railway station and town. In order to form a contract, there should be an offeror who makes the offer and an offeree who accepts such an offer. There should be a mutual assent between the offeror and the offeree with regard to the offer and acceptance. If such mutual consent is absent, then the contract cannot be legally binding contract (Kelly & Hayward, 2005. P.118). Notwithstanding the fact that all contracts are agreements, it cannot be stated that all agreements are contracts. This is the fundamental principle of contract law, which states that only contracts are legally enforceable. This is because some agreements can be either social or domestic in nature, and per se do not constitute contracts. An agreement is rendered incomplete if there is disagreement regarding additional matters, or some important term is not agreed upon. In practice, agreements are always deemed to be incomplete if there is a condition that states subject to contract. Contracts can be based on the conduct and verbal statements of parties. In such contracts, it is very difficult to ascertain the terms that bind the parties to them. In those situations, the courts take the history of such statements for consideration and the performance of the parties to the contract with regard to those statements (Business & Commercial Contract Disputes). In Balfour v, Balfour, a husband went to work in Sri Lanka and agreed to send his wife a certain amount of money every month. Subsequently, the couple separated and the wife attempted to legally enforce the agreement. The Appellate Court held that the contract was not legally binding in the absence of an intention to that effect. It was therefore held that the wife could not enforce the agreement (Balfour v. Balfour, 1919). According to the law, a contract must have four legal elements to enforce it legally in a court of law. There should be an offer, acceptance, consideration and an intention in the contract for its enforceability. These elements must contribute to create legal relations between the parties. It is very difficult to define consideration in a contract, which is its most important element. There can be agreements without consideration. (Lydiate, 1993). An offer should always be clear, unambiguous, firm and final. Unclear or vague offers do not constitute proper offers. Moreover, an offer should not lack vital information regarding the contract, such as price. The parties entering into contracts must have an intention to make the contract a legally binding contract. If one party fails to carry out his part of the contractual duty then the other party can initiate legal action against him in a court of law (Horton, 2005). The offer of the additional £20, made by Rohit, can be construed to be a statement made out of gratitude for the timely help rendered by Shazia. Such statements do not constitute contracts. Therefore, Rohit need not pay the additional £20 to Shazia. QUESTION THREE: The standard terms on the booking form stated that Fickle Flights was not liable for any failure to provide accommodation on a particular flight or for any luggage lost or damaged. However, the booking clerk misguided Rohit by assuring him that he would be provided with a seat on the flight of his choice. In Levison v. Patent Steam Carpet Cleaning Co, there was a contract for cleaning carpets. The terms of the contract specifically included a clause, which stated that All merchandise is expressly accepted at the owner’s risk. The carpet was subsequently stolen and the plaintiff sued the defendants. The Court of Appeal held that the burden of proof lay upon the defendants and hence they were liable (Levison v. Patent Steam Carpet Cleaning Co, 1977). According to Lord Denning M.R., a bailee is required to prove the circumstances that had contributed to the loss or damage that had occurred to the other party. If there is no explanation from the bailee then it can be construed that the loss or damage had occurred due to the fundamental violation of the contractual agreement. Therefore, theft or delivery to the wrong address would be held to be breach of contract if the party failed to prove contributory circumstances for such occurrences. Furthermore, the defendants in this case had been in the best position to prove the circumstances and they had failed to discharge their part of the contractual agreement (Lawson, 2005. Pp.79 – 80). In Woolmer v. Delmer Price Ltd, the defendant had consented to store a fur coat at the risk of the customer. Subsequently, the coat was lost, however, the court held that the defendant was liable because of failure meet their duty of explaining the circumstance that had contributed to the loss of the coat. In addition, the defendants had also failed to establish that the coat was not lost due to their fundamental breach (Woolmer v. Delmer Price Ltd, 1955). In Spurling v Bradshaw, Lord Denning opined that certain exclusion clauses were to be printed conspicuously and in red ink on the relevant document. Therefore, courts grant much importance to some exclusion clauses on the basis of their gravity and significance (Spurling Ltd v Bradshaw , 1956). Rohit had not been given any such information by the Fickle Flights booking clerk. Moreover, he had been asked to consider the terms and conditions, mentioned in the booking order as mere formalities that were not of much significance. In Thornton v. Shoe Lane Parking, the plaintiff Thornton had parked his car in a car park maintained by the defendants. Thornton had received injuries while parking the car in the parking lot. The defendant had argued that he was not liable for the injury caused to the plaintiff, since there was an exclusion clause printed on the reverse of the parking ticket. It was held that the contract was formed during the time when the plaintiff had entered the parking place, and hence, prior to the issue of the ticket. Consequently, the court held the defendant liable (Thornton v. Shoe Lane Parking, 1971). Exclusion clauses and their use are governed by legislation, such as the Unfair Contract Terms Act 1977 or UCTA and the Unfair Terms of the Consumer Contract Regulations 1999 or UTCCR. “The UCTA makes a business liable for not fulfilling obligations or duties that are consequent to what has been done or is to be done in the normal course of business” (Section 1(3), Unfair Contract Terms Act 1977). In accordance with the case law mentioned above, under certain circumstances, exemption clauses in contracts intend to exclude liability of one of the parties. According to the Act, no contractual exclusion term can exclude liability or limit liability, in any manner, in cases involving negligence that resulted in injury or the death of an individual. Moreover, if there is other loss or damage, liability for negligence cannot be excluded or restricted; if the term of notice is unreasonable (Section 2, Unfair Contract Terms Act 1977). As such Fickle Flights cannot rely on standard terms to evade liability for the loss caused by their negligence to Rohit. Moreover, the booking clerk had assured Rohit that the exclusion clauses in the booking form were not to be accorded much importance. Therefore Rohit can claim damages for loss of his luggage as well as for failure to obtain a very lucrative business contract. Bibliography Balfour v. Balfour, 2 KB 571 (1919). Business & Commercial Contract Disputes. (n.d.). Retrieved July 08, 2008, from http://www.gillhams.com/articles/325.cfm Byrne v. Van Tienhoven, 5 C.P.D. 344 (1880). Carlill v. Carbolic Smoke Ball Co, 2 QB 484 (1892). Domb and Another v Isoz, 2 WLR 565 (1980). Horton, R. (2005, April). What is a Contract? Retrieved July 08, 2008, from http://www.communitylegaladvice.org.uk/media/808/FB/advicenow_contract.pdf Household Fire and Carriage Insurance Co v Grant, 4 ExD 219 (1879). Kelly, D., & Hayward, R. (2005. P.118). Business Law. Routledge Cavendish. ISBN: 1859419623. Lawson, R. (2005. Pp.79 – 80). Exclusion Clauses and Unfair Contract Terms. Sweet & Maxwell. ISBN: 0421894407. Levison v. Patent Steam Carpet Cleaning Co, 3 All E.R. 498 (1977). Lydiate, H. (1993). Contracts. Retrieved July 08, 2008, from http://www.artquest.org.uk/artlaw/contracts/28534.htm Section 1(3), Unfair Contract Terms Act 1977. (n.d.). Section 2, Unfair Contract Terms Act 1977. (n.d.). Spurling Ltd v Bradshaw , 1 WLR 461 (1956). Thornton v. Shoe Lane Parking, 1 All E.R. 686 (1971). Woolmer v. Delmer Price Ltd, 1 All E.R. 377 (1955). Read More