Legal Memorandum - Business Law - Case Study Example

To: Citizen Advice Bureau From: [Your Name] [Date] Subject The sequel presents, a discussion that analyses the various factors associated with the interpretation of contractual terms. Summary It is the aim of the author of this work to scrutinise the different issues that relate to Andrew’s attempt to establish breach of contract against the Book for All company. Project Description According to the law, a contract must consist of four elements, in order to be enforceable in a court of law. There should be an offer, acceptance, consideration and intention in the contract. These elements must create a legal relation between the parties (Ryan and Cooper 2008, p. 251). The formation of a contract necessarily requires the offer made by the offeror to be accepted by the offeree. It is up to the offeror to prescribe the manner, in which the acceptance is to be made. Thereafter, the offeree has to strictly adhere to the method prescribed by the offeror, in respect of indicating his acceptance. This acceptance can be an expression by words or conduct that conforms to the terms of the offer (Kelly and Hayward 2005, p. 118). In Grainger Son v Gough, a wine list had been displayed at the premises of a wine seller; as the wine seller could not be expected to provide an unlimited quantity of wine to a customer, the court ruled that this wine list constituted an invitation to treat and not an offer (Grainger Son v Gough 1896). In Fisher v Bell, it was held that the display of an item for sale in a shop window was not an offer, but merely an invitation to treat (Fisher v Bell 1961). This was confirmed in British Pharmaceutical Society v Boots Cash Chemists Ltd; wherein the defendant had introduced a system in their shop, according to which the customers were required to collect the medicines required by them from the drugs displayed. The court ruled that the display of medicines was not the offer, but that the offer was made by the customer, when he presented the drugs with the necessary money, to the pharmacist (British Pharmaceutical Society v Boots Cash Chemists Ltd 1952). Therefore, the Book for All company’s letter cannot be assumed as an offer but only an invitation to treat. The making of an offer, implies that the offeror promises to be explicitly bound. In addition, it should be possible to accept this offer; and the offer, per se, specifies the contractual terms (Kelly, Holmes, and Hayward 2005, p. 109). The advent of the notion of offer and acceptance was first witnessed, in an unambiguous manner in Adams v Lindsell. Its importance was in establishing the moment of formation of a contract, where the agreement had been arrived at by correspondence. This case gave rise to the postal rule, according to which the acceptance of an offer is completed the moment the letter of acceptance is posted. This was the ruling of the court in this case (Adams v Lindsell 1818). Soon, it emerged as the central principle of contracts; and its application was extended to even unilateral contracts. However, in the Carbolic Smoke Ball case, it was held that an advertisement can be deemed to be an offer, in instances, wherein, a party had relied on the advertisement and complied with all its conditions. In this case, the defendant advertised that a person using its smoke ball medication would not contract influenza. In addition, the defendant offered to pay a substantial amount of money to any individual who was infected with influenza, despite having used the smoke ball. The court held that this advertisement was not an invitation to treat but an offer (Carlill v Carbolic Smoke Ball Co1892). Since, Andrew had joined the book club, depending on the letter sent to him by the book company, the letter constitutes an offer. The acceptance of an offer should conform to the terms of the offer. In R v Clarke, the defendant had divulged information about a murder, without attaching much importance to the reward promised by the government for such information. The court ruled that it could not assumed that Clarke had relied on the offer, while providing the information (R v Clarke 1927). Moreover, it should be unconditional; and the introduction of modifications or new terms, would change it into a counter offer, which would effectively annul the previous offer (Masters v Cameron 1954). In Storer v Manchester City Council, the Appellate Court ruled that the contract was completed, as soon as the plaintiff had signed and returned the agreement to the Council (Storer v Manchester City Council 1974). Therefore, the sale of the dwelling to the plaintiff by the defendant could not be discontinued. In Denton v Great Northern Railway Company, the plaintiff relied on the time table published by the defendant, regarding its trains, and purchased a ticket. Subsequently, the plaintiff found that the train had been cancelled from quite some time. The court ruled that the time table was the offer, and that the purchase of the ticket by the plaintiff the acceptance. Hence, the defendant was held to be liable for breach of contract (Denton v Great Northern Railway Company 1856). Merely performing an act in respect of a contract, in a secretive manner is not sufficient to make the contract binding. In our case Andrew’s joining the club can be construed as acceptance of the offer, by conduct. Consideration is mutual between the promisor and the promisee. In the absence of providing something in exchange for the promisor’s promise, the promise cannot compel enforcement of the promise. Consequently, a promise is enforceable only if there is consideration (Oughton and Davis 2000, p. 98). It is the presence and not the equitable nature of a bargain that has primary importance in English law. The latter insists upon the presence of consideration in contracts, save for those that are by deed. Consideration was defined as a benefit to the promisor or a detriment to the promisee. As long as consideration has value, from the perspective of the law, it will be deemed to be valid. There is no necessity for it to be adequate (The making of contracts (2) – consideration). As consideration did not move from the book company to Andrew, the contract can be deemed to have been breached by the company. In general, the courts follow the language employed by the parties, whilst determining their intention. In general, courts will neither construct nor reconstruct a new contract. They will not interpret the language of the contract, on the basis of intention at the time of forming the contract. Specifically, the following rules are taken into account, by the courts, while ascertaining the existence of a contract (Miller and Jentz, 2009, p. 170). Issues relating to separate negotiations are to be given greater importance than general issues. If there is ambiguity in the language of the contract, then the contract will be interpreted against the party that had drafted the contract (Miller and Jentz, 2009, p. 171). The necessity for a meeting of minds has been accorded considerable significance by the courts. This is also termed as the consensus ad idem for forming a contract. In such situations, what had been actually been intended to be conveyed by conduct or words, by a party to a contract, is not of that much importance. The meaning that any reasonable person, placed in the other party’s position would have assumed, in this context, carries greater import. This process of objective interpretation was evidenced in Hartog v Colin and Shields, the defendants made a genuine mistake while offering to sell some skins to the plaintiff. The latter, with mala fide intent, attempted to get the contract enforced, as he would benefit enormously from it. The court held that the unilateral mistake, which was obvious to the plaintiff, rendered the contract void (Hartog v Colin and Shields 1939). Similarly, in Centrovincial Estates v Merchant Investors, the court held that in the absence of detrimental reliance there was no contract (Centrovincial Estates v Merchant Investors 1983). Subsequently, it came to be recognised that for a binding contract to exist, there should exist an intention to form legal relations. This principle had previously been decried by common law, as it entailed judging the latent intention of a party to a contract. However, this thought had been extant in continental law, under different guises. Its entrance into case law was via the decisions in Carbolic Smoke Ball and Heilbut, Symons& Co v Buckleton (Furmston, Cheshire, and Fifoot 2007, p. 15). For establishing the construction of a contract, the meeting of the minds of the parties is an important element. The book club, while sending the letter to Andrew, may not have intended to bind itself legally. However, in accordance, with the decision in the Carbolic Smoke Ball case, if an overt act was performed, by relying on the statement of the book company, then such advertisement would be deemed to be an offer (Carlill v Carbolic Smoke Ball Co, 1892). Acceptance, per se, was completed, on the admission of Andrew to this club. At the time of forming a contract, if a false statement of fact is made by one of the parties to the contract, then that statement constitutes a misrepresentation. A party to a contract that undergoes loss, on account of such misrepresentation, can either claim damages or revocation of the contract. In Derry v Peek, the House of Lords held that it was sufficient for the plaintiff to prove that the defendant either believed or knew his statement to be counterfactual. As such, the fraudulent misrepresentation made by the Books for All company induced Andrew to become a member of the former’s book club and to purchase a book from it. This resulted in significant loss to Andrew, as the book had been sold to him for a price that was greater than its cost in the book shops. Andrew can claim damages for the losses caused by the false description and inducement made by the Books for All company, under Section 2 of the Misrepresentation Act, 1967. Some of the terms of a contract can permit rescinding of the contract and presenting a claim for damages. A breach of warranty permits a claim for damages, whilst the infringement of an inanimate term may allow the rescinding of the contract. On the other hand, implied terms, related to quality of goods permit either a claim for damages or rejection of the goods. In sales to a non – consumer sales, it is disallowed to reject the goods, on unreasonable grounds. However, sales to a consumer always provide for the automatic remedies of rejection or claim for damages (Howells and Weatherill 2005, p.188). Conclusion The contract was formed, when Andrew signed the application form. The benefits promised to him by the club, such as discounts and wide choice of books constitute the consideration. However, Andrew was not provided with any of these benefits by the book company. When he got the list of books, it consisted of only a small number of books of his choice. Moreover, the book bought by him for his sister was costlier, when compared to the price being charged in book shops. Thus, the book company had breached the terms of the contract. The company breached the innominate terms of the contract. Hence, Andrew can either repudiate the contract or claim for damages. Andrew can ask for the repudiation of the contract, and damages for the losses caused to him by the book company, on account of the higher cost of the book. He can also claim damages for the very few books offered to him by the book company. The Book for All is liable to Andrew for breach of terms of the contract. They will also have to pay damages for the losses caused to Andrew due to their misrepresentation regarding the cost of the books, and unlimited choice. References Adams v Lindsell, EWHC KB J59 (1818). British Pharmaceutical Society v Boots Cash Chemists Ltd, 2 All ER (1952). Carlill v Carbolic Smoke Ball Co, 2 QB 484 (1892). Centrovincial Estates plc. v Merchant Investors Assurance Co Ltd , Com LR 158 (1983). Denton v. Great Northern Railway Co , 5 El. & B. 860 (1856). Derry v Peek, LR 14 App Cas 337 (House of Lords 1889). Fisher v Bell, 1 QB 394 (1961 ). Furmston, M. P., Cheshire, G. C., and Fifoot, C. H. (2007). Cheshire, Fifoot & Furmston's Law of contract. Oxford University Press. Grainger & Sons v Gough, AC 325 (1896). Hartog v Colin & Shields , 3 All ER 566 (1939). Heilbut, Symons & Co v Buckleton , AC 30 (1913). Howells, G. G., and Weatherill, S. (2005). Consumer protection law. Ashgate Publishing, Ltd. Kelly, D., Holmes, A. E., and Hayward, R. (2005). Business Law. Routledge Cavendish. Masters v Cameron , 91 CLR 353 (1954). Miller, Roger LeRoy and Jentz, Gaylord A. (2009). Fundamentals of Business Law: Excerpted Cases. Cengage Learning. Misrepresentation Act 1967. (n.d.). Misrepresentation Act 1967, chapter 7. London, United Kindgom: Her Majesty's Stationery Office. Oughton, D. W., and Davis, M. (2000). Sourcebook on Contract Law. Routledge . Pharmaceutical Society of Great Britain v. Boots Cash Chemists (Southern) Ltd, 1 QB 401 (1953). R v Clarke, 40 CLR 227 (1927 ). Ryan, Kevin and Cooper, James M. (2008). Those Who Can, Teach. Cengage Learning. Saint John Tug Boat Co. v. Irving Refinery Ltd , S.C.R. 614 (1964). Storer v Manchester City Council, 1 WLR 1403 (1974). The making of contracts (2) – consideration. (n.d.). Retrieved February 25, 2010, from http://www.londonexternal.ac.uk/current_students/programme_resources/lse/lse_pdf/foundation_units/intro_com_law/intcomlaw_ch3.pdf Read More