Legal Environment of Business and Employment - Case Study Example

Legal Environment of Business and Employment QUESTION ONE Winston saw a diamond ring in Brudders Field Jewellery shop, which he desired to buy. He placed a note in the shop’s letter box, stating his intention to purchase that ring for the price specified on the tag. The liability of Winston, with regard to breach of contract can be assessed, by examining whether there is a legally binding agreement between him and the shop owner. An agreement can be a statement or actions between two parties. Whenever, two parties come to an agreement regarding some matter that is to their mutual benefit; and negotiate dealings to that end, it can be concluded that these parties’ actions are in accordance with some undetected agreement between them. If such conditions are present, then one of the parties should have agreed to the terms stipulated by the other party, without any reservations (Furmston, Cheshire, Simpson, Herbert, & Fifoot 2006: 427). The formation of a contract entails the presence of an offeror or a person who make an offer; and the offeree or the person who accepts that offer. Moreover, there has to be mutual and complete agreement, in respect of the offer and its acceptance. In addition, the terms of the offer should be unambiguous (Kelly, Hayward, & Holmes 2005: 109). If these conditions fail to hold good, then there is no legally binding contract. As such, in order to form a contract, it is essential for the offer to be accepted, in the manner specified by the offeror. Moreover, such acceptance can be in the form of an expression by words or conduct that indicates acceptance of the terms of the offer. In addition, the acceptance has to agree with the offer. The display of the diamond ring in the shop window constitutes an invitation to treat. An invitation to treat takes place whenever there is a suggestion from one person to another, which could result in further negotiations and finally formal trade. An invitation does not have a legally binding nature. It differs from an offer, which is legally binding (Clark 2001: 176). Advertisements and shop window displays constitute an invitation to treat. This was the ruling in the Carlill v. Carbolic Smoke Ball Company case. In this case, Carlill had acted upon the offer, which had been advertised in the newspaper. The Court held that there was binding contract between her and the Carbolic Smoke Ball Company ( Carlill v Carbolic Smoke Ball Company, 1893 ). The conviction by the lower court, in Partridge v Crittenden, was set aside by the divisional court. Thus the divisional court held that there was an invitation to treat, but not an offer (Partridge v. Crittenden, 1968). Winston had placed a note in the letter box of the Brudders Field Jewellers, as it was his intention to purchase the diamond ring, displayed in the shop window. This note communicated his offer to purchase the diamond ring, to the shop owner. As such, Winston had made an offer to the jewellery shop owner, stating that he wished to buy the diamond ring at the specified price, and that he would make the payment the next day, in the evening. Thus, Winston had made the offer, and this was on Wednesday. In response, to this offer, the shop owner placed a placard in the shop window, indicating that the ring was sold. Due to this implication, the shop owner displayed acceptance of Winston’s offer. In the Carbolic case it was held that the acceptance of an offer was to be communicated to the offeror. Notification of acceptance is crucial for consensus between the offeror and the offeree. In the context of English law, consensus is obligatory, if a contract is to be formed. As such, notification regarding the acceptance of an offer is vital for the benefit of the offeror. Furthermore, the offeror has the choice, at his disposal, of revoking the offer before its acceptance by the offeree. Till such time as the offeree does not accept the offer, it is possible to revoke the offer. In addition, the offeror is duty bound to inform the offeree of his revocation of the latter’s offer. The offeror is required to specifically state the manner, in which acceptance is to be conveyed to him by the offeree. Thereafter, the offeree has to indicate his acceptance in the manner thus indicated. The acceptance of an offer can be either express or implied(Carlill v. Carbolic Smoke Ball Co, 1893). If the offeree acts in accordance with the terms of the offer, it can be construed that he has accepted the offer and that there is a legal binding contract. Winston changed his mind on Thursday evening, and he decided to revoke his offer, by placing a note indicating cancellation, in the jewellery shop’s letter box. The acceptance or rejection of an offer takes effect, only on the receipt of such communication by the offeror. In Byrne v. Van Tienhoven, the court ruled that it was imperative for the revocation of an offer to be communicated to the offeree (Byrne v. Van Tienhoven , 1880 ). It is possible for an offer to be revoked by the offeror; but such revocation has to be prior to the acceptance of the offer by the offeree. Moreover, the offeree has to be informed about the revocation of the offer. On Thursday morning, Winston’s mother visited the jewellery shop, in order to examine the ring to be purchased by her son. At that time she noticed that it was labelled as sold. This constitutes communication of acceptance to Winston by the shop keeper, through his mother. Communication made to a family member is a valid notice of acceptance. In English law, a valid contract is deemed to have been formed, if an offer made by one party is accepted by the other party. Moreover, the offeror has to be expressly informed of such acceptance; and this could be directly or indirectly (Spindler & Börner 2002: 252). In our case, Winston’s mother noticed that there was a placard indicating sale of the diamond ring. This clearly indicated that the jeweler had accepted her son’s offer. In other words, this constitutes acceptance by implication. The offeror cannot revoke the offer, if the offeree had effected changes that were disadvantageous to his position. This is based on the principle of promissory estoppels or detrimental reliance (Miller & Jentz 2009: 181). The jeweller had displayed a placard stating that the diamond ring had been sold. This was on the basis of Winston’s offer to purchase the ring. This constitutes acceptance of Winston’s offer by the jeweller. In addition, this acceptance was communicated to Winston’s mother, who had visited the jeweller’s shop, on Thursday morning. On account of this act, the jeweller was no longer in a position to sell that ring to anyone other than Winston. An offer cannot be revoked after the communication of acceptance to the offeror. A legally binding contract was formed, as soon as the acceptance was communicated to Winston through his mother. Consequently, Winston is liable for breach of contract; because he changed his mind on Thursday night, and placed a cancellation note in the shop’s letter box. Although, he communicated revocation of his offer to the jeweller; this was subsequent to the communication of acceptance, of his offer, by the jeweller. Consequently, Winston is liable for the loss caused to the owner of the jewellery shop for breach of contract. In Denton v. Great Northern Railway Company, the plaintiff relied, in good faith, on the statement of the defendants to perform an explicit act. A contract is formed if intention to accept the offeror’s offer is communicated by the offeree to the offeror; otherwise, some overt act, pertaining to the contract should have been performed. The covert performance of an act, relating to the contract, is insufficient to render a contract binding (Denton v. Great Northern Railway Company , 1865). Similarly, in our case, the jeweller had placed sold placard near the diamond ring. This indicates that he had accepted the offer made by Winston. The contract was completed, when Winston’s mother visited the jewellery shop and noticed that the ring had been sold. Since, Winston attempted to revoke his offer, after it had been accepted by the shop owner; he is liable for breach of contract, under the provisions of contract law. He is also liable for damages for the disadvantage caused to the jewellery shop. 2. Ricky informed Solly that she would type his dissertation. The latter promised to pay her £250, in anticipation of obtaining employment. As this did not materialise, Solly was in no position to pay Ricky. On the basis of the intention of these parties, it is to be determined, whether there is a legally binding contract between them. Fundamentally, a valid agreement is formed, only when there is a concurrence of wills of both the parties. Consequently, such concurrence of wills is indispensable in a binding agreement. Therefore, any deficiency, in this regard, makes the agreement invalid. This holds good, even in cases where one of the parties’ conduct is genuine and unilateral; but the other party is unwilling to accept such action. In such instances, no agreement is held to exist between the parties, chiefly for the reason that there is no concurrence of wills (Furmston, Cheshire, Simpson, Herbert, & Fifoot 2006: 427). A major issue of great importance is that of the intention of the parties to an agreement. An agreement that had been entered into by the parties, with the intention of making it legally binding upon them, is a contract. As such, domestic agreements and arrangements lack any intention to make them legally enforceable. On the other hand, the intention behind commercial agreements is to make them legally binding (Thorpe & Bailey 1996: 11 – 12). There are four requirements, under the law for any contract. These are consideration, intention of the parties, offer, and acceptance. Taken together, a legal relation between the parties to the contract is established by these elements (Contracts, 2009). Although all contracts are agreements, every agreement does not constitute a contract. It is only the contracts that are legally binding. There are many agreements that have a domestic or social character. For instance, in Balfour v Balfour, a husband had come to an agreement with his wife, whereby he promised to send her some money every month, while working abroad. After the passage of some time, the husband stopped sending money to her. The court held that their agreement was merely a domestic agreement, and that it was not legally binding. (Balfour v. Balfour, 1919). In the court’s opinion, there had been no intention to form a legally binding agreement. This ruling had considerable influence on the subsequent case law, and played a major role in determining that agreements, in respect of domestic relationships, did not possess the intention to make them legally binding. Nevertheless, there are two factors that have to be addressed, in this regard. First, domestic agreements have to be viewed in the context of the nature of the agreement rather than the relationship between the parties to the agreements. Second, this tenet is a mere presumption, which can be refuted. For instance in Merritt v. Merritt, a husband and wife had come to an arrangement, which was similar to that in Balfour v Balfour. However, as this case entailed the dissolution of their marriage, the Court ruled that the agreement was legally binding (Stone 2005: 116 – 117). 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. In the context of social arrangements between friends, it was deemed that they constitute domestic agreements. Therefore, social arrangements between friends are not legally binding. In the same fashion, household arrangements between cohabitating couples are domestic agreements, and these arrangements have no binding effect on such couples. In Coward v. Motor Insurers Bureau, a specific number of workers agreed to share their transportation cost. In this case, it was opined by the court that such agreements were not legally binding (Coward v. Motor Insurers’ Bureau). At times, it becomes extremely difficult to ascertain the intention of the parties. However, this difficulty is circumvented, in instances where the parties had expressly stated their intentions. Therefore, any agreement that unambiguously declares that it is binding on the parties, is adequate to render that agreement legally binding. Any party that contends that the agreement lacked an intention to make it legally binding, has to prove this in a court of law (Thorpe & Bailey 1996: 11 – 12). An offer should always be clear, firm and final; if it is to be deemed a proper offer. In addition, the offer should not be lacking in essential information relating to the contract. The parties to a contract should possess the intention to render their agreement a legally binding contract (Horton, 2005). If a party to a contract fails to carry out his contractual obligations, then the other party is at liberty to commence legal action against the former. Now, Ricky and Solly are good friends, and the offer made to Solly by Ricky, was the outcome of such friendship. As such, there can be no binding contract between them. This was in accordance with the decision in the Balfour case. Finally, on the basis of decided cases it is evident that there is no legally binding contract between Ricky and Solly. Since, there was no intention between Ricky and Solly to form a legally binding contract, Solly is not liable for any damages caused to Ricky. The offer of £250, made by Solly to Ricky, constitutes a statement that had been issued, out of gratitude for the timely help rendered by Ricky to him. Such statements cannot be deemed to be legally binding contracts. Therefore, Solly is under no obligation to pay £250 to Ricky. List of References Carlill v Carbolic Smoke Ball Company, 1 QB 256 (Queens Bench 1893 ). Balfour v. Balfour, 2 KB 571 (King 1919). Byrne v. Van Tienhoven , 5 CPD 344 (1880 ). Clark, J. O. (2001). Dictionary of International Business Terms. Lessons Professional Publishing. Contracts. (2009). Retrieved November 10, 2009, from Reference for Business: http://www.referenceforbusiness.com/small/Co-Di/Contracts.html Coward v. Motor Insurers Bureau , 1 QB 259 (Court of Appeal 1963). Denton v. Great Northern Railway Company , 5 E. & B. 860 (1865). Furmston, M., Cheshire, G. C., Simpson, W. B., Herbert, C., & Fifoot, S. (2006). Law of Contract. Oxford University Press. Horton, R. (2005, April). Whats a Contract? Retrieved November 10, 2009, from Advice Services Alliance: http://www.communitylegaladvice.org.uk/media/808/FB/advicenow_contract.pdf Kelly, D., Hayward, R., & Holmes, A. E. (2005). Business Law. Routledge Cavendish. Miller, R. L., & Jentz, G. A. (2009). Fundamentals of Business Law: Excerpted Cases. Cengage Learning. Partridge v. Crittenden, 1 WLR 1204 (1968). Spindler, G., & Börner, F. (2002). E-commerce law in Europe and the USA By Gerald Spindler. Springer. Stone, R. (2005). Contract law. Routledge Cavendish. Thorpe, C. P., & Bailey, J. C. (1996). Commercial contracts: a practical guide to deals, contracts, agreements and promises. Woodhead Publishing. Read More