Aspects of Contract and Negligence for Business - Essay Example

Unit 5: Aspects of Contract and Negligence for Business By Due Response to Inquiry Regarding Legal Action Against Daley Motor Company Dear Mr. Cleese, Thank you for seeking advice regarding your dealing with Daley Motor Company. I have studied the facts of your case and it looks like you can take a successful legal action against Arthur Daley Motor Company. I am going to explain your case in the light of the law. Firstly, it is worthwhile to analyse whether you had a valid contract with them. For the formation of a legally binding contract, there must be a valid offer and a valid acceptance. A valid offer is one that is specific, legal in substance, free from ambiguity and is properly communicated to the offeree. An offer might be too vague to comprise a valid offer as seen in Guthing v Lynn. In this case, the buyer of a horse promised to pay the seller an extra £ 5 if the horse proved lucky. He did not specify that in what way the horse had to be lucky. It was held that this statement was too vague to be enforceable and did not qualify as an offer. Also, early steps in negotiations must not be confused with a valid offer. In Harvey v Facey, the plaintiff was interested in buying land which had not been advertised for sale by the defendant. The plaintiff sent a telegram to the defendant asking for the lowest price that the defendant would accept. The defendant replied with a price and the plaintiff attempted to accept it. It was held that the defendant’s statement was a mere step in negotiations and was not a valid offer. Hence, it could not have been accepted. When you made an offer to buy the BMW 5 series for £5,300 as long as it came with a new MOT, 6 months Road Tax, two new tyres and was cleaned, you made a valid offer as it was free from ambiguity and was not a mere step in negotiations. It showed your intention to be legally bound had a contract been formed. By accepting an offer, the offeree agrees to be bound by all the terms of the offer. An offer once accepted, becomes a promise. A valid acceptance is the mirror image of an offer, is firm and is communicated to the offeror. Both parties must have consensus ad idem which means that they must agree to the same thing in the same sense. An offeree cannot accept an offer on his own terms. In Jones v Daniel, the offeree responded to an offer by submitting a draft contract which had new terms in it. It was held that it was not an acceptance but a counter offer which would have formed a new contract if it had been accepted by the original offeror. Your offer was validly accepted by Mr Daley as he did not include any new terms in his acceptance and you had a verbal agreement. A contract cannot be formed without consideration. There are, however, some exceptions to this rule but none of them applies here. Your agreement had consideration for both Mr Daley and you. Consideration has been defined as a benefit to one party or a detriment to the other in Currie v Misa and also as the price of a promise in Dunlop Rubber Co Ltd v Selfridge. The considerations for both parties in your case were valid because they were not past, they were sufficient and legal. Your consideration was the BMW and Mr Daley’s consideration was the price. Finally, there must be an intention to create legal relations. A contract must not be a sport of an idle hour or mere matters of badinage which is not intended to have a serious effect (Dalrymple v Dalrymple). Both Mr Daley and you had an intention to be legally bound. You had struck a deal in business capacity and it was not a social agreement. Both of you were serious in the performance of this contract. Therefore, you had entered in a legally binding contract with each other. Initially, your negotiations and the dealing with Mr Daley were verbal hence forming a verbal agreement. As per common law, a verbal agreement is as good as a written agreement. As long as the element of an intention to be legally bound exists, a contract is legally binding without regards to the fact whether it is in writing. Both of you had an intention to be legally bound under the agreement. The contract had been created at the time when both of you orally agreed to the terms. However, it is advisable to put contracts into writing because it is easy to prove and enforce a contract in a court when it is in writing. However, it is very important to read the contents of the contract in written form before signing it. You should have been careful in this regard because it is possible for Mr Daley to have inserted an exemption clause to exclude or limit his liability in case of a breach. There is a rule called “sufficiency rule” according to which a contracting party must have sufficient notice of the exclusion clause before the contract is made. You did not have any notice of any exemption clause but it seems that “sufficiency rule” cannot protect you. In L’estrange v Graucob, the plaintiff signed a sales agreement for a vending machine without reading it. He was held to be bound by an exemption clause in the agreement. However, in your case, Curtis v Chemical Cleaning And Dyeing Co is more applicable. In this case, the plaintiff had signed a note which had an exemption clause. Upon a breach, she sued the defendants who referred to the exemption clause. It was held that the exemption clause was not effective because the plaintiff was misled about its scope and the defendant was liable. Your case is quite similar in circumstances as you signed the written contract because you were assured by Mr Daley that it contained everything that was verbally agreed upon. Your contract entailed very important conditions. Terms that are crucial to the existence of a contract are called conditions and the terms which are trivial are called warranties. The terms may be expressed or implied. In your case, there were some expressed terms which were conditions because they were crucial to the existence of your contract. These terms were that the car must come with a new MOT, 6 months Road Tax, two new tyres and be cleaned. As the seller, Mr. Daley was bound to comply with these conditions. A breach of condition gives the buyer a right to treat the contract as repudiated. You received the BMW from Mr Daley but its outside was not clean and one of its front tyres was not replaced. Also, you found out later that there was no new MOT certificate with the car. There has been a breach of condition and you are entitled to treat the contract as repudiated, return the car, get refund and sue for damages. However, you also have a choice of treating the breach of condition as a breach of warranty. When you asked for a rebate of £50, you exercised your right under S 53(1a) of Sale of Goods Act 1979 which states that, “Where the buyer elects (or is compelled) to treat any breach of a condition on the part of the seller as a breach of warranty, the buyer is not by reason only of such breach of warranty entitled to reject the goods; but he may set up against the seller the breach of warranty in diminution or extinction of the price...” Your decision to ask for a diminution in price does not necessarily need to be communicated to Mr Daley as George showed himself as an agent of Mr Daley. A communication to the agent is deemed to be a communication to the principal. Therefore, your communication with George was sufficient. However, if you decide to treat the breach of condition as a breach of warranty, it would be deemed that you have accepted the car but you can still sue for damages under S 53(1b) of SGA. In addition to the express terms of a contract, there are also some implied conditions that are annexed to a contract by operation of SGA when the seller is acting in a course of business. In your case S 13(1) of SGA is applicable which states that, “Where there is a contract for the sale of goods by description, there is an implied condition that the goods will correspond with the description.” Therefore, if the BMW did not meet the criterion set by your description, Mr Daley is in a breach of the aforementioned implied condition as he is dealing in the course of business. It is up to the courts to decide whether a term is a condition or a warranty. It depends on the magnitude of the impact of a breach. In your case, the court might regard the dirtiness of the car as a breach of warranty. The breach by not putting new tyres might also be regarded as a breach of warranty and you would be entitled to claim damages from Mr Daley for new tyres or you can ask for a diminution in price. The breach regarding the MOT certificate is a serious one and it would be regarded as a breach of condition. This breach entitles you to repudiate the contract and claim your money back in addition to damages. However, you can opt to treat this breach of condition as a breach of warranty and claim damages from Mr Daley. These damages would be sufficient for you to get a new MOT certificate. You can also sue for specific performance. As Mr Daley was bound to get a new MOT certificate for you, upon a suit for specific performance, he would be made to get a new MOT certificate for you by the court. Mr Daley might look to defend himself by mentioning the fact that you had examined the car before accepting it and he had performed his duty under S 34(1) of SGA. You can counter it by mentioning that the car could not have been taxed without a new MOT certificate. This defect in performance of contract by Mr Daley could not have been revealed upon reasonable examination of the car. I hope that this information regarding your case has been helpful to you. You are advised to take legal action against Mr Daley and the decision whether you want to treat the contract as repudiated or want to treat the breach of condition as a breach of warranty is entirely at your disposal. References Currie v Misa [1875] LR 10 Ex Curtis v Chemical Cleaning And Dyeing Co [1951] 1 All ER 631 Dalrymple v Dalrymple [1811] 2 Hag.Com 54 Dunlop Rubber Co Ltd v Selfridge [1915] AC 847 Guthing v Lynn [1831] 2 B&AD 231 Harvey v Facey [1893] AC 552 Jones v Daniel [1894] 2 Ch 332 L’estrange v Graucob [1934] 2 KB 394 Sale of Goods Act, 1979. (UK) s 13(1) Sale of Goods Act, 1979. (UK) s 34(1) Sale of Goods Act, 1979. (UK) s 53(1a) Sale of Goods Act, 1979. (UK) s 53(1b) Read More