Legal Position of the Cases - Case Study Example

Legal Position of the Cases  There are two cases referred for advice. Case Case Study Facts of the case Ahmed, Belinda and Carlos are partners in a firm, Floppy Disc Co, which deals exclusively in computer software. In April 2004, Hardnose Ltd. Wrote to floppy Disc as follows: 1 April Dear Sirs, Re: “Nucleus 10 gigabytes hard discs” We are pleased to announce an unrepeatable offer – Nucleus hard discs at just $10 each. And provided we receive an order from you for at least 100 before noon on 6th April, we will sell at just $8 per disc. Carlos received the letter on 2 April, but was unable to make contact with the other partners about the letter from Hardnose plc. Because of the short space of time before the offer closed, Carlos wrote to Hardnose as follows: 3 April Dear Sirs, Re: Nucleus hard discs Thank you for your letter of the 1 April. I have not spoken to my partners concerning your excellent offer, but can state that we accept your offer. We would like 200 discs, delivery by registered post please, preferably before the 10 April. This letter was posted by Carlos that day, but did not reach Hardnose until the afternoon post at 1.00pm on the 6 April. In the meantime Hardnose had sent out letters to prospective buyers, including Floppy Disc Co. as follows: 5 April Dear Sirs, Re: Nucleus hard discs Referring to our letter of the 1 April. Please note that we are no longer willing to make the special offer on Nucleus discs. We are however prepared to sell at the original offer price of $10 per disc. This letter was received at the firm’s office on the morning of 6 April. Ahmed read the latter, but being unaware of Carlos’ dealing with Hardnose, simply threw the letter in the waste paper basket. Meanwhile, on the morning of the 6 April, Carlos, not having heard from Hardnose in response to his letter of the 3 April wrote to them as follows. 6 April Dear Sirs, Re: Nucleus hard discs Could you please note that we accept your offer and confirm purchase of 200 discs. The letter was posted at 10.00am that day, and arrived at the office of Hardnose at 9.00am on the 7 April. On the 8 April 200 discs were sent by Hardnose to floppy disc with an invoice for $2,000. Carlos is now insisting that the invoice price should be $1,600. Belinda and Ahmed both claim that there was not a concluded contract, and even if a contract was concluded with Carlos, it is void since it was made without knowledge or consent. Analysis: The offer as per the letter dt.1st April made by Hardnose Ltd. is with the intent to create a legal relationship, definite, specific and communicated properly to the Floppy Disc Co. with a view to obtaining the consent of the offeree.  Therefore, it is a valid offer.  According to Sir William Anson “Acceptance is to offer what a lighted match is to a train of gun powder”.   In this case Carlos, a partner of the Floppy Disc Co. has posted a letter on 3rd April communicating his acceptance. The acceptance is absolute and unqualified and communicated properly.  The offer becomes a contract as soon as it is accepted.  Once an offer is accepted it becomes a promise and cannot be withdrawn or revoked. Where a proposal is accepted by a letter sent by the post, the communication of acceptance will be complete as against the proposer.  The proposer will be bound by the acceptance, even if the letter of acceptance is delayed in post or lost in transit.  The proposal prescribed minimum order quantity, price, description of the product and the time limit.  The acceptance has complied with all the stipulations and accepted in a reasonable manner without stipulating any conditions, that is, the acceptance is not conditional. On 5th April, that is before the time and date specified in their letter, Hardnose by another letter informed Floppy Disc Co “Please note that we are no longer willing to make the special offer on Nucleus discs.”  The contract can not be unilaterally revoked by the proposer, Hardnose Ltd. In this case revocation is not justified. On 6th April Floppy Disc Co reconfirm their acceptance made as per their letter dt. 3rd April., though it is not required.  The letter was posted at 10.00am that day, and arrived at the office of Hardnose at 9.00am on the 7 April, though it is not stated as to when the letter dt. 3rd April of Floppy Disc Co. has reached Hardnose Ltd.  If there is no delivery of the letter, the acceptance could be treated as having been completed from the viewpoint of proposer, but not from the view point of acceptor.  However, we presume that the letter has reached Hardnose, and he has not refuted it. On the 8 April 200 discs were sent by Hardnose to floppy disc with an invoice for $2,000.  There was no acceptance of offer or contract for the supply @ $ 10 each, and Carlos is right on insisting that the invoice price should be $1,600. The offer was accepted by Carlos during the course of business in his capacity as a partner.  This can not vitiate the validity of the contract as far as Hardnose Ltd. is concerned, who should proceed on the assumption that Carlos as a partner can enter into a valid contract that would be binding on the company. Within the partnership firm the answer to the question ‘whether Carlos is authorized to enter into contract with the third parties’ should be found in the Partnership deed.  Even the restrictions, if any placed in the deed would not govern the legality of the contract of the case under consideration, unless the suppliers and other parties with whom the firm has business relationship have been informed about the limitations of authorities of the partners.  ‘Type of business organization in which two or more individuals pool money, skills, and other resources, and share profit and loss in accordance with terms of the partnership agreement. In absence of such agreement, a partnership is assumed to exit where the participants in an enterprise agree to proportionately share the associated risks and rewards,’ Partnership, www.businessdictionary.com ‘Legally binding partnership that may arise where, in fact, no formal partnership agreement is in effect. A person who by conduct or words represents, or allows him/herself to be represented, as a partner in a firm is liable for the credit or loans obtained by firm on the basis of such representation. Also called presumption of partnership, Partnership by estoppels,’ www.businessdictionary.com/definition/partnership-by-estoppel.html In fact the concept of presumption extends further and in Moline Wagon Co. v. Rummell it was upheld that ‘Persons or corporations dealing with a partnership once existing have a right to presume that the persons once composing the firm continue doing business in the firm name, find that the firm continues to exist; and nothing short of public or personal notice that the firm has been dissolved, will relieve the parties of their liability as partners.’ Partnership – Presumption of continuance, Circuit Court, W. D. Mi88ouri, W. D. October. 1.880 Federal Reporter, Conclusion Advice to Hardnose Ltd The offer was properly accepted and communicated, and it is valid legally.  The offer was not conditional, and it was accepted by a partner and the words ‘I have not spoken to my partners concerning your excellent offer, but can state that we accept your offer’ do not import any meaning to the contrary.  The intention of Hardnose with regard to performance is questionable by his letter dt. 5th April that is before the time limit specified in his offer. After receiving the 2nd letter on 7th April, Hardnose has dispatched the consignment with an invoice for an amount not as per the contract.  This is the legal position of Hardnose in this case. The case for Hardnose Limited is not only weak, but with several negative factors.  The company is bound by the contract, and it is advisable to revise the invoice as per the contract and complete the performance.  They cannot enforce the Floppy Disc Co. to take delivery and make payment against the consignment for which there is no contract at all. Floppy Disc Co. From the information given, it could be inferred that the no formal partnership agreement is in effect.  In such cases, a person who by conduct or words represents, or allows him/herself to be represented, as a partner in a firm is liable for the credit or loans obtained by firm on the basis of such representation. It is called presumption of partnership, Partnership by estoppels.    The concept of presumption extends further, and a persons or corporations dealing with a partnership once existing have a right to presume that the persons once composing the firm continue doing business in the firm name, find that the firm continues to exist; and nothing short of public or personal notice that the firm has been dissolved, will relieve the parties of their liability as partners.  Even the restrictions, if any placed in the deed would not govern the legality of the contract of the case under consideration, unless the suppliers and other parties with whom the firm has business relationship have been informed about the limitations of authorities of the partners.     Therefore, the partners of the Floppy Disc Co. should enter into a formal partnership agreement, clearly defining the role, authorities, limitations, etc., and give proper notice to all the customers, suppliers, banks and other third parties related to the business in this regard.    Case 2: Case Study Facts of the case Bob is an employee of the Uptown County Council (UCC). His job involves installing road signs on roads in the County. A month ago Bob drove a UCC vehicle, containing bulk yellow paint, into Straight Street in order to install double yellow lines along both sides of the road. Bob completed the morning session, and decided to go for his lunch in the UCC vehicle to a café, “Syd’s Place” at the end of Straight Street. As he neared the café, Bob inadvertently pulled a lever causing the entire container of paint to spill onto the road. The paint poured over a car belonging to Samantha. A section of the street had to be cordoned off for the rest of the day so that the spillage could be cleared. As a result Syd was not able to operate his business, and cancelled his order for bread and cakes from Don’s Bakery telling them “this daily contract is frustrated”. Samantha feels that she has a legal claim in connection with the damage to her car, whilst Don’s Bakery feels they have a claim against Syd for breach of contract. Analysis The statement, we assume that was accepted by the employee of the Uptown County Council (UCC) states ‘Bob inadvertently pulled a lever causing the entire container of paint to spill onto the road.’ Constitute ‘negligence in duty’ on the part of the employee.’ Inadvertence means ‘an unintentional omission resulting from failure to notice something [syn: oversight] (http://dictionary.die.net/inadvertence)  Negligence is a type of tort or delict (also known as a civil wrong). "Negligence" is not the same as "carelessness", because someone might be exercising as much care as they are capable of, yet still fall below the level of competence expected of them. It is the opposite of "diligence". It can be generally defined as conduct that is culpable because it falls short of what a reasonable person would do to protect another individual from foreseeable risks of harm. In the words of Lord Blackburn, "those who go personally or bring property where they know that they or it may come into collision with the persons or property of others have by law a duty cast upon them to use reasonable care and skill to avoid such a collision." In England the more recent case of Caparo v. Dickman [1990] introduced a threefold test for a duty of care. Harm must be (1) reasonably foreseeable (2) there must be a relationship of proximity between the plaintiff and defendant and (3) it must be fair, just and reasonable to impose liability. However, these act as guidelines for the courts in establishing a duty of care; much of the principle is still at the discretion of judges. Accidents can occur for many reasons, and Additional evidence favorable to the victim may be lost without prompt action by victims and their family.  Barry G. Doyle, P.C., Trucking Accidents, http://www.accidentlawillinois.com/practice_areas/trucking-accidents1.cfm Negligence can be conceived of as having just five elements, duty, breach, actual cause, proximate cause, and damages. "The broad agreement on the conceptual model," writes Professor Robertson of the University of Texas, "entails recognition that the five elements are best defined with care and kept separate. But in practice," he goes on to warn, "several varieties of confusion or conceptual mistakes have sometimes occurred." In view of the above discussion, ‘inadvertence’ on the part of the employee does not constitute ‘negligence’.  This view is strengthened by the fact that ‘his job involve installing road signs in roads in the County, as he can’t be an expert in driving vehicles, though with reasonable skill, as is expected generally for driving the vehicle. Position of Uptown County Council The Uptown County Council has dual role in this case, as an employer to the employee and as an owner of the truck to third parties.  Vicarious Liability: Common circumstances include the following types of accidents, where a vehicle owner can be vicariously liable for an accident ‘When an employer asks an employee to use a car for a business reason When the owner knows that a driver is incompetent, reckless or unlicensed and lets him or her drive anyway When the owner knows that the vehicle is defective but lets the driver use the car’ An owner of a motor vehicle who is also an employer can be liable for his or her employee’s negligence in causing a car accident if: The employee was driving the owners vehicle while doing something related to his or her job, or the employee is unlicensed, incompetent, or reckless http://personal-injury.lawyers.com/auto-accidents/Liability-Law-and-Loaning-Your-Car.html The Uptown may consider taking disciplinary action against Bob, for the accident caused as an employer.  However, it should be noted that it has not been clearly stated that the accident was caused due to ‘negligence’ on the part of the employee. The statement, ‘Bob is an employee of the Uptown County Council (UCC). His job involves installing road signs on roads in the County. A month ago Bob drove a UCC vehicle, containing bulk yellow paint, into Straight Street in order to install double yellow lines along both sides of the road’, reveals that Bob is not a ‘driver’ by profession.  His primary duty is painting. Health and Safety at Work Act 1974: ‘The Act applies across industry and commerce, creating duties upon employers to protect against, for example, slips, trips, manual handling injuries, falls from height and working with moving parts of equipment and machinery. Section 2 states that employers have a duty to “take such steps as are reasonably practicable to ensure the health, safety and welfare of employees”.  What is “reasonably practicable” will, of course, depend on individual circumstances.  Section 7 of the 1974 Act lays the duty on an employee to “take reasonable care for their own safety and others and others who may be affected by his acts or omissions”… … It is still the case that most employers’ policies or procedures either say nothing about the employees’ duty of care or simply pay lip service to it.  Even if such rules do exist, it is rare for employers to invoke their disciplinary procedures when there may have been a failure.  It is recommended that employers introduce and implement effective policies to improve workplace safety. … …Perhaps surprisingly, considerably less effort is directed towards the employee’s duty to take reasonable care for his own and other employees’ safety when carrying out his job.” Employee Accident Claims and Employment Law, Morton Fraser Solicitors,’ 25 Feb 20101, www.morton-fraser.com/publications/articles/531_employee_accident_claims_and_employment_law The action that might be taken on Bob has a direct bearing on UCC’s liability or implication on the course of action of Syd.  Because, it if is proved that the accident occurred on account of negligence, it will be in a disadvantageous position in the case against third parties.  Therefore, on practical point of view the UCC should take into account this aspect while taking disciplinary action on Bob keeping also in view, his rights as an employee. Remedial action for Samantha It is stated ‘The paint poured over a car belonging to Samantha’.  Here, irrespective of the negligence or otherwise on the part of the employee of UCC, Samantha has remedy by way of ‘third party insurance.’ In 1930, the UK government introduced a law that required every person who used a vehicle on the road to have at least third party personal injury insurance. Today UK law is defined by the Road Traffic Act 1988, which was last modified in 1991. The Act requires that motorists either be insured, have a security, or have made a specified deposit (£500,000 as of 1991) with the Accountant General of the Supreme Court, against their liability for injuries to others (including passengers) and for damage to other persons property resulting from use of a vehicle on a public road or in other public places. There are various types of covers available.  ‘But, third party cover is a legal requirement.  This level of cover ensures that compensation is available in respect of injury to other people (including your passengers) or damage to other peoples property resulting from an accident caused by you. It doesnt cover any costs incurred by you as the result of an accident.  Most insurance companies offer additional levels of insurance cover that go beyond the legal requirement. The precise nature of cover will vary from company to company….you should report the accident to the police as soon as possible within 24 hours. You must also report the accident to your insurer, even if youre not intending to make a claim’, Motor Insurance, www.direct.gov.uk/en/Motoring/OwningAVehicle/Motorinsurance/DG_067630. It is not clear whether UCC has insured the vehicle for third party insurance, in view of exemption available. “Vehicles which are exempted by the act, from the requirement to be covered, include those owned by certain councils and local authorities, national park authorities, education authorities, police authorities, fire authorities, health service bodies and security services.” Even if the vehicle is not covered under ‘third party insurance’, remedy would be in line with the outcome had the vehicle been insured.  Position of Syd The action that might be taken on Bob has a direct bearing and implications on the course of action of the other parties.  Because, it if is proved that the accident occurred on account of negligence, Uptown County Council  will be in a disadvantageous position in the case against third parties.  Factual causation or remoteness:  For a defendant to be held liable, it must be shown that the particular acts or omissions were the cause of the loss or damage sustained. Although the notion sounds simple, the causation between ones breach of duty and the harm that results to another can at times be very complicated. Legal causation: Sometimes factual causation is distinguished from legal causation to avert the danger of defendants being exposed to, in the words of Cardozo, J, "liability in an indeterminate amount for an indeterminate time to an indeterminate class." It is said a new question arises of how remote a consequence a persons harm is from anothers negligence. We say that ones negligence is too remote (in England) or not a proximate cause (in the U.S.) of anothers harm if one would never reasonably foresee it happening. In the present case Syd must show that the act of Bob was the cause of the loss or damage sustained.  The accident has happened near Syd’s place.  As in the case of Samantha, Syd can claim for the damages sustained, if he is able to prove damages to his business, as a third party claim from the insurers. Claim of Don’s Bakery The claim proposed is with reference to the contractual obligation of Syd. Syd has cancelled his order with Don’s Bakery, thereby failed to meet the contractual obligation on his part. In this case, Syd had to close down his business for all his customers and suppliers and exclusively for Don’s Bakery. The facts clearly state, “As a result of the accident, Syd was not able to operate his business, and cancelled his order for bread and cakes from Don’s Bakery telling them “this daily contract is frustrated”. Michael Coyle writes, ‘Frustration of a Contract: Frustration of a contract occurs when a contract becomes impossible to perform, or is capable of performance only in a manner substantially different from that originally envisaged. Under these circumstances and in the absence of any express provision by the parties to the contract, further performance is excused under the common law doctrine of frustration. … Reliance on this doctrine may be in neither party’s interests, for a number of reasons:  (a)   The doctrine of frustration only operates where the frustrating circumstances are not due to the fault of either party. However, it does not follow that in all contracts any act of negligence will deprive a party of the defence of frustration.  (b)   If the contract is frustrated, a party may still be entitled to compensation for work that it has undertaken prior to the termination, and to retain any payments previously made under the contract.  (c)   Termination of the contract may not be in either party’s interests. They may prefer the contract merely to be suspended for the duration of the frustrating event. Also to mitigate ones loss it would be sensible to take this approach.  (d)   Because there is no definite list of frustrating events, and since the doctrine has developed on a case-by-case basis, it is not always possible for a party to know whether an event would be considered by the court to be a frustrating event!’ Michael Coyle, Frustration of a Contract, 19 August 2005. In this case the frustrating circumstances are not due to the fault of either party, and the contract may remain suspended for the period for which Syd’s place is closed. Comments on ‘non performance’ in ‘Principles of European Contract Law’ states, ‘The word "non-performance" is used as a general term covering any failure to perform, for whatever cause. Even a failure in performance which is excused under Article 8:108 falls within the definition of non-performance, for such an excuse deprives the aggrieved party only of the remedies of specific performance and damages, not other remedies set out in Chapter 9 (see Article 8:101(2)). The definition embraces all forms of failure in performance, whether the failure consists of total inactivity (i.e. no step towards performance) or of conduct in or towards performance which in some way fails to conform to the contract, e.g. because it is late, incomplete or otherwise defective. Non-performance also includes failure to fulfill the duty imposed by Article 1:202 to co-operate in order to give full effect to the contract. See Comment and Illustrations to that Article’, PRINCIPLES OF EUROPEAN CONTRACT LAW, http://www.cisg.law.pace.edu/cisg/text/nonperf.html Several legal systems use the concept of non-performance both for the excused and the non-excused non-performance. Jonathan Riley says, ‘Implied Terms’. Other than those terms implied into contracts by legislation, for any term to be implied into a contract it must be: reasonable and equitable; necessary to achieve business efficacy; obvious – i.e. it goes without saying; capable of close expression; and it must not contradict an express term. A recent Privy Council case, A-G of Belize v Belize Telecom (2009), boiled it down to a simple statement: the test as to whether a term needs to be implied into a contract to reflect the parties intentions is whether that term would spell out in express words what the contract, read against the relevant background, would reasonably be understood to mean.’ It could be implied from the circumstances that Syd was forced to close, consequently the performance is impaired. Force Majeure: J. Riley also states, ‘The consequence of a force majeure event is to excuse the affected party from performance – he neither has to perform nor be liable for a failure to perform – for as long as the event continues. There is no legal definition of force majeure and accordingly the definition given to this term in the contract can be very important. In Channel Island Ferries Ltd v Sealink (1988), the Court of Appeal said that a force majeure clause which included language referring to events beyond the control of the relevant party could only be relied on if that party had taken all reasonable steps to avoid its operation or mitigate its results. So the party seeking to claim the benefit of this protection cannot simply throw his hands up in the air upon the occurrence of an event.’ Liquidated Damages: J. Riley further states ‘Certain types of contracts, such as outsourcing contracts, may well be accompanied by a separate service level agreement with a service credits regime. Service credits are a form of liquidated damages, i.e. a fixed payment which the parties agree will be payable to the customer to compensate it for the loss or damage that it will suffer if the supplier fails to perform its services to the contracted standards.’ J. Riley comments, ‘the law does not give the innocent party the automatic right to terminate for material breach. If the parties want this right to arise, they must provide in their contract for an express right of termination in the event that a material breach occurs. However, what is a material breach in any given situation may ultimately need to be decided by the Court, and the Courts themselves have sometimes expressed different and conflicting views.’ Jonathan Riley, Lawrence Graham LLP: Commerce & Technology, United Kingdom: Securing Performance In Commercial Contracts - How To Ensure Contractual Performance, 14 September 2009. We do not have the details of the contract, if any exists between the parties. It is assumed that the contract came into existence in the normal course of doing the business by placing the order and acceptance of it. Conclusion Advice to Samantha The paint poured over a car belonging to Samantha, for the damages incurred in this connection, she can initiate action to claim for the damages from the Insurance Company through her Attorney. Advice to Syd In the present case Syd must show that the act of Bob was the cause of the loss or damage sustained.  The accident has happened near Syd’s place.  As in the case of Samantha, Syd can claim for the damages sustained, if he is able to prove damages to his business, as a third party claim from the insurers. Regarding Don’s Bakery’s claim on Syd, under the doctrine of frustration he is not liable to Don’s Bakery. Whether there is any force majeure clause incorporated in the contract is not clear. The fact of the case clearly states that, ‘Syd was not able to operate his business.’ Therfore, force majeure is implied. However, it should be remembered there is no definite list of frustrating events, and since the doctrine has developed on a case-by-case basis, it is not always possible for a party to know whether an event would be considered by the court to be a frustrating event. Advice to Don’s Bakery It is assumed that the contract came into existence in the normal course of doing the business by placing the order and acceptance of it. Regarding Don’s Bakery’s claim on Syd, it is not clear, whether there is any formal contract with force majeure clause incorporated. The fact of the case clearly states that, ‘Syd was not able to operate his business.’ Therfore, force majeure is implied. However, it should be remembered there is no definite list of frustrating events, and since the doctrine has developed on a case-by-case basis, it is not always possible for a party to know whether an event would be considered by the court to be a frustrating event. If the relationship between Don’s Bakery and Syd is of ‘Franchisee type’ dealing exclusively the products of Don’s Bakery, it can try to establish a case of factual causation, and join hands with Syd against UCC. For UCC to be held liable, it must be shown that the particular acts or omissions were the cause of the loss or damage sustained by Syd and Don’s Bakery. Although the notion sounds simple, the causation between ones breach of duty and the harm that results to another can at times be very complicated. It also depends upon Syd’s claim being successful. References www.businessdictionary.com/definition/partnership-by-estoppel.html Partnership – Presumption of continuance, Circuit Court, W. D. Mi88ouri, W. D. October. 1.880 Federal Reporter, Employee Accident Claims and Employment Law, Morton Fraser Solicitors, www.morton-fraser.com/publications/articles/531_employee_accident_claims_and_employment_law Barry G. Doyle , P.C., Trucking Accidents, http://www.accidentlawillinois.com/practice_areas/trucking-accidents1.cfm Motor Insurance www.direct.gov.uk/en/Motoring/OwningAVehicle/Motorinsurance/DG_067630 Car Accident Case,www.onlinelawyersource.com/personal_injury/car/case.html Accidents in the workplace, Employees health and safety responsibilities. http://www.direct.gov.uk/en/Employment/HealthAndSafetyAtWork/DG_4016683 Accidents in the workplace, Employers health and safety responsibilities, www.direct.gov.uk/en/Employment/HealthAndSafetyAtWork/DG_4016686 Michael Coyle, Frustration of a Contract, 19 August 2005, PRINCIPLES OF EUROPEAN CONTRACT LAW, http://www.cisg.law.pace.edu/cisg/text/nonperf.html Jonathan Riley, Lawrence Graham LLP: Commerce & Technology, United Kingdom: Securing Performance In Commercial Contracts - How To Ensure Contractual Performance, 14 September 2009 Read More