Liability under Contract - Lovely Lighting Ltd - Case Study Example

Liability under Contract Poppy Facts Poppy informed Bart, the owner of the antique shop Artybarti, about her intention to purchase a painting displayed in the shop window. She threatened Bart with legal action, when he refused to sell it to her. For advising Bart regarding his potential contractual liability to Poppy, the following issues need to be considered. Issues Whether the display of the painting in the shop window constituted an offer. Whether any binding contract was formed between Bart and Poppy. Law In general, advertisements are an invitation to treat and not an offer. However, in some cases, advertisements tend to be offers.1 On occasion, an offer may be made under circumstances that indicate the intention of the offeror to be bound by some act by the offeree or individual from a class of persons to whom that offer has been made. In such instances, the consideration provided by the offeree is the performance of the act. 2 Application In Partridge v Crittenden,3 the court ruled that the advertisement in question was an invitation to treat and not an offer. However, in Carlill v The Carbolic Smoke Ball Co,4 the defendants had promised to pay a £100 reward to any person who developed influenza, after properly using their smoke ball. The claimant smoked these balls, as instructed by the defendant company. However, she developed influenza. The court held that the advertisement was an offer.5 All the same, in our problem, the shop window display was only an invitation to treat as per the above discussion. Hence, it cannot be deemed an offer. Conclusion No binding contract was formed between Bart and Poppy, due to the absence of an offer and its acceptance. Lovely Lighting Ltd Facts Bart made an agreement with Lovely Lighting Ltd for the purchase of a signboard. The installed signboard had defective spelling and went up in flames when Bart tried to operate it. Lovely Plastics Ltd, denied responsibility for these losses, relying upon an exclusion clause in the agreement. Issue For assessing Lovely Lighting Ltd’s liability to Bart, under tort and contract law, the following issues need to be considered. Whether Lovely Plastics Ltd can rely on the exclusion clause, in order to circumvent liability. Whether Bart has any remedy for the losses arising from the negligent conduct of Lovely Plastics Ltd. Law The Unfair Contract Terms Act 1977,6 constitutes the principal statute that places restrictions on the use of exclusion clauses. The said Act at Section 6(2) (a) disallows any attempt to limit or exclude liability for infringement of the implied terms in the Sale of Goods Act 1979. Sections 13 to 15 of the Sale of Goods Act 1979 pertain to the conformity of the goods to their sample and description, the fitness of the goods for the purpose for which they had been bought and the necessity for the goods to be of satisfactory quality. 7 Application In Donoghue v Stevenson,8 a theoretical significance was attached to the notion of foresight of the claimant, in order to determine liability. 9 Their Lordships ruled that the manufacturer owed a duty of care towards the claimant, as it was reasonably foreseeable that failure to ensure the safety of the ginger beer would injure consumers. 10 In our problem, the manufacturers owed a duty of care towards consumers. The primary provisions of the Unfair Contract Terms Act 1977Act are; first, no business can restrict or exclude its liability for personal injury or death resulting from negligence. In the event of other loss or damage resulting from negligence, the exclusion clause comes into operation, only when it is reasonable. 11 Second, no business can exclude or limit liability for breaching a consumer or standard form contract, with the exception of instances, wherein the exclusion clause is reasonable.12 Third, in consumer sales, liability for breach of the implied conditions, stipulated in the Sale of Goods Act 1979, 13 arises with respect to title, description, fitness for the purpose, sale by sample and satisfactory quality. In non – consumer sales the implied condition related to title cannot be excluded. However, the other implied conditions can be excluded if the exclusion clause is reasonable. 14 In our problem, the signboard installed by Lovely Plastics Ltd was defective and unfit for the purpose it was supplied. Hence, it breached the implied terms of quality and fitness under the provisions of the Sale of Goods Act 1979. The Unfair Terms in Consumer Contracts Regulations 1999,15 was enacted, in order to implement the European Unfair Contract Terms Directive.16 These regulations were designed to apply in tandem with the provisions of the Unfair Contract Terms Act 1977. These regulations were to apply to the contractual terms of a contract between a supplier or seller and a consumer, wherein these terms had not been negotiated individually. 17 In addition, the Unfair Terms in Consumer Contracts Regulations 1999 include the requirement that contracts should be formed in language that is unambiguous and intelligible.18 For example, in Parker v South Eastern Railway Co,19 the court ruled that a term would be incorporated in a contract, only if notice regarding that term had been provided. Moreover, such notice had to be reasonably adequate under all the circumstances of the case.20 In Thornton Shoe Lane Parking Ltd,21 the court ruled that an unnaturally extensive or burdensome term necessitated a prominent notice.22 In our problem, Lovely Plastics Ltd cannot rely on the exclusion clause, as it had not been specifically brought to Bart’s notice. Moreover, it was in breach of the provisions of the Unfair Contract Terms Act 1977. Conclusion In our problem, the exclusion clause was unreasonable, and it had not been noticed by Bart nor brought to his notice at the time of making the contract. Hence, it was invalid according to the above discussion. In addition, the signboard supplied by Lovely Plastics Ltd was unsuited to the purpose for which it had been supplied. Consequently, Bart can revoke the contact and claim damages for breach of contract and the losses suffered by him, due to the negligence of Lovely Plastics Ltd, under the provisions of contract law. Rosie Facts In another calamity, Bart lost his pet dog. He placed a sign in his shop window offering £50 to the person who would return the dog. Rosie found this dog and handed over the same to Bart. Afterwards, she perceived the reward notice, and asked Bart for the reward, which he refused. In order to evaluate Bart’s potential contractual liability to Rosie, the following issues need to be considered. Issues Whether the return of the dog by Rosie, constitutes acceptance of the offer made by Bart. Whether Bart is bound to pay the reward to Rosie. Law A statement, whose objective is to form a contract, constitutes an offer, when it includes all the terms of the contract or adequate information to render it the object of acceptance. Moreover, such statement should imply or state the intention of the offeror to be bound, in the event of its acceptance.23 On the other hand, a statement that does not fulfil the above conditions or does not address any specific person, and is merely a communication for advertisement purposes does not constitute an offer. Such statements cannot be accepted. These statements are invitations to make an offer. However, if such statements include a promise in favour of the individual performing some specific action or disclosing the existence of some given situation, then these statements constitute promises to the public. 24 In our problem, Rosy handed over the dog to Bart without having knowledge of the reward. Hence, her action does not constitute acceptance of an offer. Application The offeree’s act in response to an offer denotes acceptance, as well as performance of the consideration. For example, in England v Davidson,25 Davidson refused to pay the £50 reward, which he had offered for information leading to the conviction of those who had broken and entered his house, to the police officer who had provided that information. The court held that the provision of information was adequate consideration. Hence, Davidson was ordered to pay the reward amount to the police officer. 26 When there is an acceptance of an offer, then a contract is formed. However, the acceptance should be in close agreement with the terms of the offer. Furthermore, an offer cannot be accepted in the absence of knowledge regarding its existence. 27 However, the motive behind accepting an offer is unimportant, which was the ruling in Williams v Carwardine.28 In our problem since, Rosie was unaware of the reward, at the time of returning the dog to Bart, she cannot claim the reward, according to the case law discussed above. Conclusion According to the above discussion and the case law, Bart need not pay the reward amount to Rosie for her having brought back the dog, as she had no knowledge of the reward or offer. There can be no acceptance without knowledge of the offer; hence, no valid contract was formed between Bart and Rosie. 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