Legislative Supervision of Business Activity - Assignment Example

1) Traditionally, business has been governed primarily by common law, in which the government’s role was mostly limited to the enforcement of contracts. The assumption underlying this tradition was that individuals (human and corporate) are free and competent to make whatever business arrangements suit them, as long as these arrangements do not involve illegal activity. The government’s role in this system is to maintain a stable and predictable environment, in which individuals can enter into legal relationships on the safe assumption that their contractual rights can be enforced, and that governmental initiatives will not interfere with their legitimate commercial activities. Increasingly, however, legislation has been enacted to regulate business conduct. Such regulations involve restrictions on what kinds of contractual obligations may and may not be enforced, as well as restrictions on business conduct outside the realm of contract law. Clearly, there are costs to such legislation, since—from a purely commercial standpoint—any restriction on business activity reduces the opportunity to make profits. However, it is clear that in several areas an unrestricted business environment would have heavy social costs; and thus a reasonable degree of legislative regulation of business is a necessary evil. One of the fundamental assumptions of the traditional view of contract law is that both parties entering into a contractual relationship are fully competent to understand the terms of their agreement, and that they are in a position of roughly equal power such that an unreasonable agreement cannot be imposed by the stronger (or more sophisticated) party upon the weaker party. To the extent that this assumption was ever accurate, it certainly is not accurate today: private consumers and small businesses, in particular, are frequently confronted with standardized “contracts of adhesion” which they have little possibility of understanding fully, and almost no possibility of negotiating. Since banks and other businesses routinely present consumers with non-negotiable contracts the terms of which are highly disadvantageous to the consumer, governments have frequently supplemented the discretion of the courts, e.g. by limiting the enforceability of limitation-of-liability clauses. As Liam Brown (2004, n/a) argues, such legislative intervention, as long as it is not overly broad, does not adversely impact the ability of businesses to conduct their affairs. Another fundamental, implicit assumption of the traditional view is that commercial and legal relations between contracting parties are of direct interest only to the parties themselves, who alone will bear the consequences of their dealings. However, just as the development of large and sophisticated businesses has rendered invalid the assumption that all contracting parties negotiate as competent equals, the development of industrial technology has brought about a situation in which otherwise legitimate business activity may adversely impact the general public—for example, by polluting the environment or by creating noncompetitive monopolies. It is clear that common law, by itself, is not able to prevent such negative consequences of modern technology and business practice; and thus legislative oversight is required if society is to avoid the problems of unbridled capitalism. Of course, legislative supervision of business activity has its risks as well; in particular, legislators and regulators are prone to overreact, to cater to popular whim, or simply to legislate incompetently. A degree of legislative and judicial restraint can prevent good intentions from doing too much damage to the commercial environment, while still protecting society from the excesses of the profit motive. 2) If George has accepted Derek’s offer to sell a case of 1987 Grange Hermitage wine at $10,000, then George is indeed obligated to follow through and complete the purchase—assuming, of course, that his acceptance is among the first ten “winning” orders placed. Since George has since had second thoughts and wishes to rescind his order, we can assume that Derek would prefer to sell the ten cases of wine to more willing purchasers if more than ten orders are received, and thus avoid a legal dispute; but if fewer than ten other customers appear, Derek feels that George has indeed accepted his offer, creating a valid and enforceable contract between them. The potential dispute, should this come to pass, depends entirely on whether George has in fact accepted Derek’s offer. George has made three attempts to accept Derek’s offer: He has faxed his order (albeit to Derek’s home fax, since Derek’s business fax was malfunctioning); he has mailed it (albeit to a somewhat erroneous address); and he has emailed his intentions and credit-card information (which is not one of the notification methods laid out in Derek’s advertisement). The only basis on which George can claim that a contract does not exist between him and Derek is that all three of these acceptances were invalid, and thus that he never in fact accepted Derek’s offer. In his first attempt to order a case of Grange Hermitage, George was unable to send the required fax to Derek’s business fax number; he sent it instead to Derek’s home fax number only after this attempt failed, and in the process he created a third-party witness to his intention to purchase the wine when he asked a mutual friend for Derek’s home fax number. The next day George mailed his order, but made a mistake in addressing it—which may or may not have prevented its timely delivery. He also emailed Derek the relevant information, and while this was not one of the prescribed methods of acceptance, we can assume that the email did arrive in Derek’s in-box. In all three cases, it appears probable that Derek will in fact receive George’s acceptance within a reasonable time; and any one of these messages, if received, would be sufficient clearly to indicate George’s intention to accept Derek’s offer. If he argues that the “defects” in his attempts to accept Derek’s offer render his acceptance non-binding, George is on very shaky ground. Derek is entirely within his rights to state that since George expressed (and repeated) a clear commitment to purchase a case of Grange Hermitage, that commitment is binding regardless of the physical route that the acceptances took to reach him. The legal “technicalities” governing long-distance acceptance—for example, the Adams v Linsell (1818) stipulation that an acceptance carefully addressed and sent by post will be deemed as having been made at the time of posting, even if the Post Office is slow in delivering it—exist in order to ensure that otherwise valid acceptances are not invalidated by faults of the communications infrastructure that are beyond the control of the contracting parties; they are not intended to invalidate otherwise valid acceptances that do in fact reach their intended destination at an appropriate time. Accordingly, if Derek in fact receives one or more of George’s acceptances, and wishes to complete the sale of a case of wine to George, he can do so; and a court will affirm that George has entered into a binding contract to buy the case of wine despite his change of heart. 3) Regarding his first two customers, Derek acted correctly in filling their orders even though in so doing he incurred a $20,000 loss; had he not done so, these customers could have successfully sued him to force him to perform under his contract with them. Since it is possible for Derek to provide them with the wine they have ordered, their contracts with him are valid even if he must now take a loss in fulfilling them. Derek’s third customer presents a somewhat more complicated problem, since it is no longer possible to fill his order at any price. In this case, a good deal depends on whether this customer has paid for the wine in question, or merely executed an agreement for its purchase. In the former case, Derek has become the bailee for the wine, and is thus responsible for providing a satisfactory replacement for it. This may involve finding and purchasing a substitute that his customer will find acceptable, even at a substantially higher cost to Derek than the price of the stolen wine; or Derek may have to compensate his customer monetarily for the loss of his property while it was under Derek’s care. In either case, Derek’s loss may be substantially greater than the cost of the irreplaceable wine that was stolen. On the other hand, if Derek’s customer has not paid for this wine, Derek can claim that their contract has been discharged by “frustration”—that is, since there is no way to fill the customer’s order, the contract will simply become void and neither party will have any obligation to the other. (Derek can cite Taylor v. Caldwell to support his contention that since the unavailability of the wine in question is not Derek’s fault, his contract with his customer has an implicit condition that it becomes void if it is no longer physically possible for him to sell the wine in question.) In this case, Derek still has lost what he paid for the stolen wine, but his loss will not extend beyond that, as his customer has no further claim against him. Derek would like to recover his losses from SuperShield, which was obviously negligent in providing him with security services. However, he may have some difficulty in doing so, because the contract he signed included a fairly inclusive exclusion-of-liability clause which absolves SuperShield of any responsibility for losses incurred due to “breach of this contract or otherwise”. In general, courts interpret such exclusion clauses narrowly, particularly if they involve contracts between businesses and private consumers, or if the existence and nature of the exclusion clause was not made clear in advance. In this case, however, Derek cannot claim to be an unsophisticated private consumer: he is the owner of a business dealing in substantial sums of money and valuable property. Further, the contract he signed made clear reference to the existence of its “terms and conditions”, which were printed on the back of the same form; thus he cannot claim that he was unaware of the “terms and conditions” even if he failed to read them. A court is thus likely to consider these “terms and conditions”, including the exclusion of liability, as a valid part of the contract between Derek and SuperShield. Nevertheless, Derek does have some hope of retrieving damages from SuperShield for the theft of his wine, based on two factors: First, since the exclusion clause does not specifically mention losses due to negligence or malfeasance on the part of SuperShield, Derek can argue that according to the contra proferentem rule SuperShield’s failure adequately to perform goes beyond any reasonable interpretation of “breach of this contract or otherwise”; and second, Derek may be able to persuade a court that SuperShield’s conduct (along with its exclusion of liability) was “unconscionable” under Section 51AC of the Trade Practices Act 1974, and thus that SuperShield should be held liable for Derek’s losses without regard to the exclusion clause. In support of this claim, Derek can cite the decision in Hurley v McDonald’s Australia Ltd, in which the court described “unconscionable” conduct as “serious misconduct or something clearly unfair or unreasonable”—which would seem to be an accurate description of SuperShield’s conduct in this matter. (See also Brown, 2004, section VII/B/2.) Even if the court rules against Derek regarding SuperShield’s liability for the consequential damages caused by their negligence, Derek should be able to recover the value of the wine Blane drank, as well as any fee he paid SuperShield for their services on the night in question. If Derek can persuade the court that the exclusion clause does not apply in this matter, or that the exclusion clause and SuperShield’s negligence constitute “unconscionable” practice under 51AC, he may well be able to recover his losses in full from SuperShield; if the court accepts an “unconscionability” argument, he may be granted punitive damages as well. References Brown, Liam: “The Impact of Section 51AC of the Trade Practices Act 1974 (CTH) on Commercial Certainty”, Melbourne University Law Review, 2004, http://www.austlii.edu.au/au/journals/MULR/2004/20.html Read More