Problem Solving for Legal Issue - Hi Q Manufacturers Ltd - Case Study Example

Problem solving legal issue PART A The issues are whether there is a contact and also conditional acceptance. Inorder to determine if there is a legally binding contract between Sportswear World Ltd and HI Q Manufacturers Ltd all the components that constitute a contract need to be proved. These elements are: a. Offer. b. Acceptance. c. Consideration. d. Capacity. e. Intention to create legal relations. An offer is very important in the formation, it is a statement of willingness from one of the parties to enter into a legally binding contract. An invitation to treat is not considered an offer for the purposes of law of contract. This is illustrated in the case of Pharmaceutical Society of Great Britain\ v Boots Cash Ltd. The defendants in this case had organized their pharmacy shop in a self service basis. The customers would pick the drugs from the shelves and take them to the cashier. The Pharmacy board instituted a suit against them, since they didn’t exercise any form of control of the drug sale. The Court of Appeal held that the display on the shelves amounted to an invitation to treat and the offer happened at the cash desk (Treitel 2007). Acceptance on the other hand is an objective inference on the terms of the contract. The offeree ought to accept the terms of the contract without any alteration. A failure to do this will amount to a counter offer which brings to an end any offer that had been made by a party. This is illustrated in the case of Hyde v Wrench the defendants in this case offered to sell their land to the claimant for £ 1000. In reply the claimants offered to buy the piece of land for £950 which the defendants adamantly rejected. Later on the claimants purported to accept the original offer of £1000. The court held that the claimant’s offer of £950 was a counter offer which killed the original offer made by the defendants (Mc Kendrick 2009). In any contract as between the companies there is an implied presumption that they have the legal capacity to contract. In any exchange of goods, the Sale of Goods Act implies many conditions which should be observed by both contracting parties. The case of Sportswear Ltd falls under the category of conditional acceptance. This is very common in contracts involving land and immovable transaction. Where a ‘subject to’ provision is inserted in a contract, whether or not there is a binding contract depends on the parties conduct, communication , real intention of the parties and an arrival of objective conclusion of the agreed terms of the contract. The case law in this area is not consistent. In the case of Ellis v Stotzky the defendants and the claimants had entered into a pre-contract for sale of land. A deposit of 10% of the sale price was paid for the purchase of the land. The parties signed a provisional agreement which was expressed to be subject to execution of a new formal agreement. The court held in the favour of the claimants that no formal contract had been arrived at until all the documents had fully been executed (Atiyah 2006). A dissenting view is however held in the case of Branca v Cobarro here the parties agreed to a lease agreement of a mushroom farm. The agreement had a provisional clause that purported that the provisional agreement was conditional to an execution of a legalized agreement drawn by a solicitor. The court held that the provisional document was still binding until it was superseded by another formal document. The persuasion to this view was contributed by three main factors; first that there was a third party who witnessed the agreement, second a deposit had been paid and finally the provision that the balance of the purchase price was to be paid three days after the making of the provisional agreement (Cheshire et al 2007). This position has been echoed in the case of RTS v Muller the parties had agreed on a provisional contract to sell automated machinery which was necessary by Muller in their yoghurt manufacturing business. The parties contracted on a draft provisional agreement that required each party to execute their own counter copy before their agreement was made effective. In the course of the supply agreement a dispute arose among the parties and Muller refused to honour their promise of paying RTS Ltd. The matter went all the way to the Supreme Court. The court held that an objective approach was to be used in deciding the case. The court had to consider in too the parties conduct, communication and full intention. Taking all issues into consideration the court held that the ‘draft’ provisional agreement should be construed as a binding contract of the parties. Regardless of the ‘subject to contract’ clause the parties by their conduct had inferred their desire to be legally bound by the contract (Atiyah 2006). The conduct and the intention of the Sportswear Ltd will be considered. If the parties had started transacting for a period of time then the court is likely to construe the presence of a contractual agreement. Therefore is setting up the clauses the seller and the buyer must act in good faith. The court will also consider any losses and inconveniences caused or likely to be caused and incurred by HI Q Manufacturers before reaching its decision. In fact the words of Lord Clarke should be taken into account that subject to contract illustrate the major perils of starting an endeavor without agreement, when a deadlock arises the parties must bear the consequences of their failure of inconclusiveness. It is very likely that the court of law will find Sportswear World Ltd to be in breach of contract. This is illustrated in a recent case of Immingham Storage v Clear plc (February 2011) the claimants were a company that dealt with storage facilities, while Clear was a fuel trader. The parties entered into a provisional storage agreement, through which the claimants would store for clear some fuel of 4000 cubic meters. The contract was subject to the approval of the board of directors and the presence of the tanks. Clear failed to source any fuel and while in the meantime Immingham had procured some tanks and the contract approved by the board. The Court of Appeal held that there was a contract, and Immingham were in order to claim payment for breach of contract (Treitel 2007). The presence or absence of the clause ‘subject to contract’ is in most cases not the guiding factor but the real intention of the parties. Taking this into account it will be hard for Sportswear to discharge the burden that there was no contract between them and Hi Q Manufacturers Ltd. From the facts Hi Q has a cause of action against Sportswear Ltd for breach of contract. A breach of contract is remedied through damages or specific performance. PART B The issues that arise from the second part is a breach of Hi Q Manufacturer Ltd on the implied condition of merchantability and fitness for purpose under the 1895 Australian sale of Goods Act and also an element of negligence (Terry 2005). A breach of implied condition for fitness of purpose can be illustrated in a similar case of Grant v Australian Knitting Mills Ltd the appellant was a buyer who contracted dermatitis after buying some woolen underwears. The condition was caused due to the excessive sulpher in the manufacture of the products. The manufacturer was held to be in breach of the implied conditions and warranty enshrined in the 1895 Australian Sale of Goods Act. Section 14 provides that the sellers must provide products that are fit for purpose. This had been evidently breached by the company. Similarly there was a duty of care between the manufacturers and the appellants (Chapin 2007). The law of negligence which happens to be at the core of happenings between Hi Q Manufacturers and the public was first established in the case of Brown v Kendall where the court established a rule that there should be liability for anyone who causes harm to another person. The rubrics of the law of negligence in tort were established in the case of Donughue v Stevensonwhere the manufacturer manufactured some ginger beer. On the other hand an innocent consumer found some pieces of a decayed snail inside the opaque ginger beer. She sued the company. The House of Lords held that inorder for one to succeed in establishing negligence one had to prove that (Heering 2006); a. There was a duty of care. b. That duty was breached by the party. c. As a result of the breach some damages have been incurred. d. The breach was the proximate cause of the damage. These are the four major considerations that the public should establish in making Hi Q Manufacturer liable. A duty of care simply means that a party has an obligation towards the other person. In a society where there are diverse customs and personality, the rule of neighborliness established in the case of Donughue v Stevenson is very important. Lord Wilberforce held that anyone who in the process of conducting an activity is in your contemplation, you owe them a duty of care. Thus Hi Q Manufacturer owes a duty of care to the general public for selling swimwear products that are infected with chemicals. In any foreseeable case scenario, any party who fails to take all due diligence and care should be held liable. This duty of care has recently been extended even to professionals who fail to take due diligence. In the case of Arthur J.S Hall v Simons the court held that the immunity that the solicitors enjoyed when representing their clients, could be denied in a case of professional misconduct. Lawyers as well as doctors owe a duty of care to their clients and patients respectively. Until recently in the case of Simons barristers were held not to be liable to clients for any misconduct. Though a contractual agreement is usually between the barristers and the solicitors, the fact that a client is someone in contemplation, makes a barrister have a duty of care to such a client (Winfield 2002). Breach of duty: according to the leading case of Blythe v Birmingham Waterworks Ltd the court held that negligence arises wherever there is a conduct or omission of a conduct which is expected of a reasonable person in the same set of circumstances. Thus the standards to be used while determining if there is any breach of duty will be that of a reasonable bystander; objective test. This position was supported by Lord Macmillan in the case of Glasgow Corporation v Muir (Terry 2005). It is expected that Hi Q ltd should manufacture products that are merchantable and fit for the purpose for which they are made. The facts illustrate that by manufacture of swimwear that have chemicals they have breached the duty which they owe to the general public. A reasonable person would essentially expect that any products, especially of swimwear nature, are well manufactured and would not cause any skin care infection. The public has also to prove that the chemicals in the swimwear have caused them some damages. In the case of Donughue v Stevenson the lady got ill. The presence of damages was very key in establishing the liability of the ginger manufacturer. So with the Hi Q Ltd, they should prove that they have skin infection. This is known as causation. The plaintiff must establish a cause and effect rule in order to recover in a court of law. An example is a speeding car that strikes a pedestrian. In order for the pedestrian to succeed in a court of law they must establish that ‘but for’ the speeding of the car the pedestrian would not have been injured. The discharge of this burden is a Herculean task especially when it involves professionals. Another important factor to be considered is the issue of proximate cause. There must be a factual link and connection between the defendant breach of duty and the injury caused to the plaintiff. The close connection between the two must be discharged by the plaintiff. If the breach was very remote then liability will be very elusive. The proximate cause is very connected to the issue of causation (Chapin 2007). Hi Q Manufacturers Ltd owes a duty of care to the general public. This duty of care is breached the moment they sell some swimwear that have excess chemicals, therefore not merchantable and fit for the purpose they are intended. The breach of this duty causes injury, the skin infection to the general public. The swimwear is the proximate cause of the injury. Without a shadow of doubt then they are liable in tort for negligence. REFERENCES Atiyah, 2006, An Introduction to the Law of Contract, 6th Edition, Clarendon Press, New York Chapin, HG 2007, Handbook on the Law of Torts, 105, Prince Hall, Roxbury, MA Cheshire, Fifoot &Furmston, 2007, The Law of Contract, 15th Edition, OUP, New York Heering, HJ 2006, The Law of Negligence, Oxford University Press, New York Mc Kendrick, 2009, The Law of Contract, Palgrave Macmillan, Basingstoke, UK. Terry, HT 2005, Negligence, 29 Hard. L. Rev. 40, 41. Treitel, 2007, The Law of Contract, 12th Edition, Sweet & Maxwell, London Winfield, PH 2002, The History of Negligence in the Law of Tort, 42 L.Q. REV. 184. Read More