Contract Law: Advice to Furniture World Ltd - Assignment Example

Running Head: CONTRACT LAW Contract Law: Advice to FW No: Contract Law: Advice to FW The company, Furniture World Ltd (FW) agreed to a number of contracts with different companies for getting products to prepare 10,000 chairs, so that they can have a profit based business by selling the chairs. The first erroneous claim was made by Fireproof Ltd, which claimed, “All schools will be required to have furniture covered with this (fire-retardant) material by the end of next year. We think you should be able to sell 10,000 chairs if they are covered with this material”. This claim appeared to be wrong when it was discovered that schools did not require such chairs made of fire-retardant material. On the basis of this wrong claim, FW made its first purchase of 10,000 square metres of the fire-retardant material for £15,000. Cotton Suppliers Ltd (CS) made another wrong claim that the cotton rolls sold to FW were 100 meters long each, while in actuality, they were 100 yards long only. Glue Guys Ltd made a false claim that their glue will sustain any temperature, which proved to be wrong when FW processed the glue with an unusual high temperature. Consequently, the furniture and equipment of FW got damaged and faced a loss of 12,000 pounds. The companies involved in making contracts with FW misrepresented information and the contracts were based on wrong information. FW should consider the legislation involved in making contracts for having some redress to its situation, as in actuality, FW appears to be wronged by the other companies. A valid contract can be described as an agreement that is able to meet the requirements set by both the parties involved in contracting terms. There is a relationship of acceptance and offer made. One is the offeror while other is the acceptor. In the given scenario, FW is the acceptor while Fireproof Ltd, Cotton Suppliers Ltd, and Glue Guys Ltd are all parties offering a contract for their products. For a contract, there must be a bargain between the parties. It means that valuable products that are required by one party should be given in exchange to other party as promised in a contract. The contract that is formed should have conditions and definite statements describing the offer and acceptance of both parties, so that the court is able to enforce law as required by the contract1. Contract law defines various conditions the concerned parties in terms of the contract being void or not void. According to contract law, the parties involved in a contract can make mistakes that can be defined as flawed convictions regarding the information given at the time of getting involved in a contract. The conducted mistakes can be reconsidered in the form of defences and if a defence appears to be correct and applicable, the contract that highlights an agreement between two parties can be made void. In addition, the courts can provide reasonable remedy to the affected party. Mistakes in a contract can be unilateral, mutual or common mistake. Unilateral mistake is a mistake involving one of the parties of the contract that can be intentional or unintentional, mutual mistake is from both the parties, while common mistake is a mistake of understanding2. Mistakes can be of two kinds that are mistake of law and mistake of fact. Mistake of law can be described as a mistake that is based on lack of understanding of the law applicable in a country. However, based on the mistake of law, a contract cannot be termed as void because the concerned parties are required to know about the law of the land before getting into a contract. To be ignorant of the law is no justification for making a contract void, so mistake of law is unable to make a contract void. However, in case of pressure to get into a contract without knowledge of the law can be challenged by the victim3. Mistake of fact can be described as a mistake that is done by both the parties involved in an agreement by understanding or stating the factual information that should be part of the agreement. Any opinion or statement that is wrong or erroneous in terms of value of products and services involved in the agreement comes under the category of mistake of fact4. After acceptance of presence of a contract by the court, the next step comes about the enforcement of the contract. A court considers many reasons for not enforcing or enforcing a contract. When a court considers reasons for not enforcing a contract, it can do so because of certain defences applicable on the contract. The defences that are found in contracts are there to save people from wrongness in the process of bargaining or the consideration of the contract itself. In case of legitimate defence in relation to a contract, the victimized party is eligible to rescind the contract on the basis of injustice and the contract can be regarded as void. Considering the extremity of unfairness in a contract, the court keeps the right of entitling the contract as void. In addition, the court can straightforwardly announce no existence of contract at all based on its unfairness as a defence5. Defence of misrepresentation is a form of defence that gives attention towards fraudulence conditions and information concerning bargaining in a contract. Misrepresentation can be described in many ways such as incorrect declaration of facts, intentional concealment of information that needs to be made known, or any action that hides some factual information. Therefore, defence of misrepresentation in contract allows the court to declare the contract as void6. In the case of Cundy v Lindsay [1878], the defendant concealed factual information about his reality as a rogue. He made the plaintiff to believe that his firm is a trustworthy firm due to which, plaintiff provided him with goods. The plaintiff did not get any payment. As per the court’s decision, the agreement or contract cannot take place due to misrepresentation of information and the contract was based on fraudulent statements, so the plaintiff had the right to own the goods7. The case of Bisset v Wilkinson [1927] is also mentionable here as in this case, the defendant made an opinionated statement about his blocks of land containing capacity of carrying two thousand sheep. However, the defendant never used the land for sheep farming, so the plaintiff accused him of giving misrepresented information due to which, the contract between the plaintiff and defendant needs to be cancelled. However, the court stated that opinions could not be stated as misrepresented facts; therefore, the plaintiff’s request was rejected8. The case of Esso Petroleum v Mardon [1976] shows misrepresentation of information as Esso, the defendant informed Mardon, the plaintiff that a specific site kept the capability of throughput of petrol to nearly 200,000 gallons in the third functional year. Considering it profitable, the plaintiff got the land and entered a contract of tenancy for three years. However, the statement was quite wrong as the land reached the maximum throughput of sixty to seventy thousand gallons only. Mardon faced heavy loss. Esso wanted its land back and the remaining money due on Mardon. However, Mardon accused Esso of misrepresenting the information9. In the case of Attwood v Small [1838], the vendors misrepresented the factual information about the earning capability of a mine. Wrong statements were created and own expert agents were employed for giving a correct report. The plaintiffs found out that the information was misrepresented and was untrue after a period of six months, after which, the plaintiff claimed for rescind of contract10. The case of Doyle v Olby (Ironmongers) Ltd [1969] is a case of misrepresentation of information as the plaintiff was given wrong information about the ironmonger business. Due to wrong information, the plaintiff faced loss. The court declared that the defendant “is bound to make reparation for all the actual damage”11. FW was given wrong information about the profits, the quality of products and the amounts of products due to which, FW faced a heavy loss. Considering the losses that FW faced, the contracts that the company agreed to can be regarded as void and should be rescinded. Fireproof Ltd wrongly claimed about all schools’ purchase of chairs made of fire-retardant material and their information shows that they wanted to sell their material. For their own benefit, they misrepresented information and became a reason for the loss that FW faced. Therefore, they are bound to provide redress to FW. Cotton Suppliers Ltd on the other hand, agreed to provide 5,000 rolls of 100 meters to FW, but in actuality, the provided rolls were only 100 yards long, which is again a wrong claim made by CS. Hence, the contract with CS can be made void. Glue Guys Ltd claimed erroneously that their glue can sustain any temperature as when FW heated the glue on an extraordinary high temperature, it exploded resulting in heavy loss of furniture and equipment. Therefore, the wrong claim and misrepresentation of information by GG makes them liable as per law and their contract with FW can also be challenged and can be made void. Therefore, as per advice to FW, the contracts with CS, GG and Fireproof Ltd need to be challenged, as they can be made void keeping the defence of misrepresentation in view. Bibliography Attwood v Small [1838] 6 CI&F 232 Bisset v Wilkinson [1927] AC 177 Cundy v Lindsay [1878] 3 AC 459 Doyle v Olby (Ironmongers) Ltd [1969] 2 QB 158 E McKendrick, Contract law: text, cases, and materials (OUP 2012) Esso Petroleum v Mardon [1976] QB 801 H Collins, The law of contract (CUP 2003) Read More