This essay describes the way in which the courts approach questions as to the formation of contracts. This paper outlines a rigid format applied to the formation of a contract, expectations, future date of the contract…
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Within the contract, it was stipulated that the contract could only be terminated by the supplier if the distributor failed to order at least the minimum quantity. The contract gave the defendant the exclusive right to distribute the booties within the UK. Several years after the contract was entered into, the plaintiff asked the defendant to extend the product range and include booties for children over the age of 2. The defendant stated that the range would only be extended under a license agreement, and so the plaintiff began manufacturing its own range of booties for older children. The defendant argued that the plaintiff was marketing the shoes in a manner that traded on the goodwill of their company and they sought to terminate the contract for the provision of the baby booties. Initially, the claim by the defendant was overruled, however, on appeal, the court determined that the defendant was allowed to terminate the contract as there was an obligation on both parties to perform the contract on good faith. The court, in this case, felt that the actions of the plaintiff in marketing their own product in this manner, breach the obligation of good faith. Lord Steyn was concerned that the rigid offer and acceptance format …are intolerant of such issues as indefiniteness, agreement to agree, and agreements to negotiate in good faith. Lord Steyn felt that the contract entered into by the parties could not remain binding for an indeterminate period of time and that the right to terminate should not be limited to only being available if the minimum order requirement of the contract was not met. Lord Wilberforce agreed with this approach and challenged the traditional contract formation of offer, acceptance, and consideration, holding that such rigidity did not allow a duty of good faith to be imported into the terms of the contract. The basis for the rigidity of the formation of a contract was to give certainty to the contracting parties.
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