Formation of a Valid Contract - Assignment Example

Task The key elements in the formation of a contract are an offer1, followed by acceptance of the offer2, and then payment of the agreed consideration. In order for a contract to be regarded as valid all three elements must be present. The court will require proof that the parties have reached an agreement on the same terms3Where there is evidence that the sale price or terms of the contract are still under negotiation the court will not deem the contract to be valid until an agreement on the same terms has been reached4. The offeror has a duty to pay the agreed consideration once the offer has been accepted. Failure to do this will result in a breach of the contract occurring, which would entitle the offeree to bring an action for that breach. In business there are many different forms of contracts that will be established. Contracts might be made for the sale of specific items, but there are also likely to be employment contracts, partnership agreements, indemnity agreements and a whole host of other agreements between various parties. The 3 key elements of a contract are consistent throughout these business agreements. For an employment contract the employer offers the employee the post advertised, with an agreement that if the employment offer is accepted the employer will pay an agreed amount to the employee for his services. Once the employee accepts the post, the consideration occurs when the employer pays wages to the employee. An employer is not allowed to change the terms of the contract without an agreement with the employee. In Managers (Holborn) v Hohne [1977]5 the employee successfully brought a claim for constructive dismissal when she was forced to resign as a result of the pay reduction and relocation to a branch significantly further away from her present place of employment. In determining whether a contract has been fully constituted, the courts will consider the intention of the parties privy to the contract. To determine whether a breach of a contract has occurred, the court will examine the terms and conditions of the contract as well as the conduct of the parties. By doing this they can establish whether both parties intended to be bound by the agreed terms, and from there can determine whether the actions of either of the parties amounts to a breach. This is achieved by examining all the communications between the parties6. In general terms the final document in a series of communications will determine the terms under which the contract has been agreed7. Where a business is involved in the selling of goods to consumers, warranty agreements might form a part of the contract for the sale of the items. Some warranties might require the buyer to make an additional payment, however, most goods will have a warranty period in which the goods can be returned without any further remuneration having to be paid by the customer. Warranties of this nature are simply guarantees issued by the retailer that the goods will be replaced or money be returned to the customer if the goods are found to be defective. Task 2 To Whom It May Concern: Dear Sir / Madam With regard to your legal position in relation to your right to cancel the contract with Beta Supermarkets it is important to draw your attention to the following. In law a contract is deemed to have been fully constituted once an offer has been made8 and the person to whom that offer has been made has accepted the offer9, following which the agreed consideration will be payable. Where acceptance is to be communicated using the postal system or electronic forms of communication, the time when the acceptance has been communicated to the other party will be determined applying the postal rule. The postal rule was established in Adams v Lindsell10¸in which the court had to decide the date from which a contract would be regarded as having been accepted when the notice of acceptance had been posted to the offeror. The main point of contention was whether the court would hold that the deadline had not been exceeded where the acceptance was received after the deadline but had clearly been posted before the deadline. In this case the court stated …the acceptance is complete as soon as it is posted11. In this instance, this would mean that the acceptance posted by Beta Supermarkets would have been valid from the date that the acceptance was posted12. An offeror, however, is entitled to retract the offer before acceptance has occurred. In order for the retraction to be valid it must be communicated to the other party. In this instance this was done by way of a fax. Faxes communications are treated as though the information was conveyed by telephone, with the courts holding that electronic communications are ‘substantially instantaneous as a two-way communication’. In previously decided cases, communications have been deemed to be valid even if the message has not been received due to faulty equipment13. My advice in this matter, therefore, is that it might be possible for the contract between yourselves and Beta to be regarded as void, as the withdrawal of the offer was made before the acceptance, even though Beta Supermarkets did not receive this message before submitting their acceptance. Your Sincerely A Lawyer Task 3 Briefing Note to Graham Edge In relation to the contract with William the contract might not be valid as William would be regarded as a minor. Under contract law contracts entered into by minors are not legally binding as they lack the capacity to enter into such a contract. This would essentially mean that William would be entitled to quit his apprenticeship Since the Family Law Reform Act 1969 came into force, the age of majority was reduced from 21 to 18. The capacity of a minor to enter into a contract is governed by the Minors Contracts Act 1987. The general principle established by this Act is that any contract entered into between a minor and an adult will be binding on the adult but not binding on the minor. Once the minor reaches the age of majority he is able to ratify the contract made by him as a minor, which will then make the contract binding on both parties. Contracts with minors can be binding if the contract involves the purchase of necessaries14. Under s3 SGA 1979 a minor can only be liable for the payment of necessaries if the price is a reasonable price and the goods have been ‘sold and delivered’ to him. It is important to note that in Roberts v Gray [1913]15 the minor was held liable for failing to perform a tour contract with the plaintiff. In this case the contract was for the instruction of the minor and was deemed to have been binding from the moment the contract was signed as it was a beneficial contract of service. Where the benefit for the minor is likely to result in future employment for the minor, the contract is likely to be regarded as valid16. Using this in the above is likely to mean that the contract would be regarded as valid. Standard form contracts have the advantage of simplifying the contractual relationship between the parties, but can be a disadvantage to employers or employees depending on the wording of the contract. In some cases, the clauses contained will have been written in such a manner that benefits the employer, whilst some standard form contracts might have been written for the benefit of the employee. It is therefore advisable that in most circumstances standard form contracts not be used, since the employer will then be free to include clauses that are relevant to the individual employee. Using standard form contracts means not having to negotiate with the other party over each individual term of the contract. Those signing standard form contracts have the advantage of knowing that onerous clauses will not be inserted into the contract. Such contracts are often referred to as boilerplate contracts as the terms are standardised throughout the contract form. Conditions are distinct from warranties because conditions are stipulations which are essential to the main purpose of the contract. Warranties are collateral to the main contract. If a condition of the contract has been breached the aggrieved party can repudiate the contract and sue for damages, whereas breach of a warranty only entitles the aggrieved to sue for damages. A condition breach can sometimes amount to a breach of a warranty, but a warranty breach will never be regarded as a breach of a condition. Task 4 It could be argued that taking the ticket from the machine amounted to an acceptance of an offer to park the vehicle at the car park. However, this does not necessarily mean that the owners of the car park are guaranteeing the safety of the vehicles parked there. It is likely that the owners would argue that the sign has the effect of excluding them from liability for any damage caused. It is important to consider whether such a claim is able to be substantiated or whether a claimant might be able to rely on a provision within the Unfair Contract Terms Act 1977. When considering the validity of exclusion clauses the court will examine the bargaining power of both parties. It is generally assumed that both parties will have equal bargaining power, however, there are many occasions when this is not the case. In such cases the one with the stronger bargaining power might abuse that power. In order to conclude whether the exclusion clause should be regarded as valid the court will need proof that proper notice has been given to the other party of the existence of the clause. Where notice has been given the clause might be regarded as valid as happened in Coyle v The London, Midland and Scottish Railway Company [1930]17. In this case the plaintiff was not entitled to claim as specific notice of the clause had been drawn to his attention. Conversely in Lyons & Co v Caledonian Railway Co Inc [1909]18 the respondents were liable for the loss as the exclusion clause was on the reverse of the ticket and they could not prove that the plaintiff had read the clause. In Hood v Anchor Line (Henderson Brother) [1918]19 the court stated that the respondents could have avoided liability if they had obtained a signature off the plaintiff accepting the terms contained on the reverse of the ticket. The respondent will have to show that they have taken all reasonable steps to make the other party aware of the exclusion clause in order to avoid liability20. If there have been previous dealings between the parties the court can sometimes conclude that the plaintiff ought to have been aware of the clause through previous dealings with the respondent. If the sign in the car park had been obscured, then Vicky might be entitled to claim against the owners of the car park. Similarly, if she had sustained an injury in the car park she would be entitled to claim since liability cannot be excluded in personal injury cases21. Liability for personal injury could not be avoided in Adler v Dickson & another [1955]22. The principles in this case have been adopted into the UCTA 1977 s2. Depending on whether the court feels that adequate notice was given to Vicky about the exclusion clause, the outcome of any claim for the damage will be affected. If she had been injured the owners would have been unable to avoid liability. Bibliography Beale, HD, Bishop, WD, Furmston, MP, (1995), Contract Cases and Materials, 3rd Ed, Butterworths Bixby M.B., Beck-Dudley C., Cihon P.J. (2002), The Legal Environment of Business, Prentice Hall, New Jersey. Civil Litigation Study Manual, (2008), BPP Learning Media Dignam, A J., (2006), Company Law, 4th ed. Oxford University Press, London Elliott, C and Quinn, F, (2005) Contract Law, 5th Ed, Pearson Longman Goode, R M, (2004), Commercial Law , 3rd Edition, London, Penguin. Keenan, D and Riches, S, (2005), Business Law, 7th Ed, Longman Treitel, G H.(1999), Law of Contract, 10th Ed, Sweet & Maxwell Newdick, C, (1987), ‘The Future of Negligence in Product Liability’ 103 LQR288,291 Newdick, C, (1988), The Development Risk Defence of the Consumer Protection Act 1987 47 CLJ 455 Rose, FD, (2000), Statutes on Contract, Tort & Restitution, 10th Ed, Blackstone’s Whittaker, S, (1985), ‘The EEC Directive on Product Liability’ 5 YEL 233,242 Read More