Law of Contract - Michaels Situation - Case Study Example

Running Head: Law of Contract Law of Contract Institution: Tutor: Course: Date: Introduction Law of contract Michaels’ case is related to the contact law. As defined in law, a contract is a legally binding agreement, between two or more parties (Quinn and Elliot, 2009). A contract is said to be legally binding if it contains elements of a valid legal requirement, is enforceable by law or by a binding arbitration. A common case used when it comes to legal intentions is that of Balfour v. Balfour where Mr. Balfour promised to give his wife $30 as monthly maintenance while he was away in n Sri Lanka. He failed to honor the promise, his wife sue. The court held that there was no enforceable agreement to suggest that they were intending to be legally bound. The court also said that that was a domestic agreement which is not legally binding (Richards, 2009). This case is used in conjunction with Merritt v Merritt who at the time of the agreement were estranged though married again. According to the court, the agreement was legally binding. When we talk about a legally enforceable contract, we mean that there are promises exchanged and these promises have a specific remedy if breached (Mulcahy, 2008). There are several types of remedies. For example, there is the compensatory remedy where the defaulting party is asked to pay monies that would otherwise been exchanged if the contract got honored. The other type of remedy is that of an equitable remedy whereby the person who entered into the contract is required to perform the specific action they were to carry out. In Michaels’ case, there was a promise that whoever makes a test drive within the first 12 hours of the advertisement will become an eligible candidate in a draw for a new car. Therefore this is a legally binding contract and any breach should be reported to the legal authority for a legal action (Hurley and Martin, 2001). The court is to decide what remedy is to be given if it finds the advertiser guilty. For an agreement to be reached there has to be an offer and an acceptance. These two constitute an agreement (Hurley and Martin, 2001). An agreement can either be written or oral. An oral agreement constitutes a legal binding contract as long as it’s legal. Also a contract can be implied meaning some of the words are not expressed in words. In our case, the advertisement made by the car manufacturing company was an offer and Michael is deemed to have made an acceptance the moment he saw the advertisement and decided to honor the conditions state. The conditions are that a test drive was to be undertaken by any member of the public within the first 12 hours of the advertisement. There is a difference between an invitation to treat and an offer (Mulcahy, 2008). An invitation to treat is just an advertisement, shop display or a poster displayed with a mere intention of attracting customers since there is no guarantee that the seller can provide the items for everyone. This was decided in a criminal case of partridge v. Crittenden which involved a newspaper advertisement offering for cocks and hens. The court held that the advertisement in the newspaper was an invitation to treat since the intention was not to offer the world. Therefore, the defendant was found guilty. There was another similar case of Fisher v. Bell which involved a shop display offering the sale of prohibited kind of knives. The courts decision was that the defendant was not guilty because that was not an offer but an invitation to treat (Hurley and Martin, 2001). An offer could only exist if the buyer goes into the shop to ask for the purchase of the knife while an acceptance would come into existence if the shopkeeper accepts to sell the item. There is one famous case which misinterpreted an offer for an invitation to treat. The case is the carlill v. carbolic smoke ball which was decided in the nineteenth-century in England. It involved an advertisement by a medical firm about the existence of a new wonder drug called smoke ball. The drug was designed to prevent flu and if the buyers who use the drug and fail to heal an amount of $100 would be given to them. On top of that, the firm said that it had a deposit of $1000 in the ban to prove their good faith. Mrs. Carlill who used the drug and failed to be cured claimed for the amount of $100. The company dismissed that claim by saying that it was just an invitation to treat (Hurley and Martin, 2001). Therefore carlill sued. The court ruled in favor of Mrs. Carlill on the basis that the advertisement constituted an offer to the world and satisfying the conditions for using the product led to an acceptance (Quinn and Elliot, 2009). The court also ruled out that the purchase of the smoke ball medicine resulted to a consideration. In our case, the car company made an advertisement regarding one of its best cars in the world giving out conditions on that whoever test drives within the 12 hours of the advert, will qualify for the draw of the new car. Therefore the car company made an offer to the world and the fact that Michael adhered to the condition by undertaking a test drive amounted to an acceptance. Following this basis, a contract seems to exist and no invitation to tender. Because an agreement was established by the offer and the acceptance, Michael should go ahead and sue the responsible party. The other element of a contract is that the parties should have the required capacity to contract (Hurley and Martin, 2001). For natural persons, they are said to have a contractual capacity if the of domicile or residence applies. Therefore Michael should be a residence of that country, not a minor, sober and not an alien in order to be deemed to have a contractual capacity. For companies, they are deemed to have a contractual capacity if the law of incorporation is followed. If the car company was legally incorporated then it has a contractual capacity. If Michael proves that these two criterions have been met then he has the right to sue. Another key requirement of the formation of a contract is the existence of a consideration which is the price of a contract (Quinn and Elliot, 2009). This means that a party who conferred to the contract should prove he benefited or suffered loss as a result of the promise. Michael took an executive jet to travel 1200km which cost him over $10,000. Therefore we can say that he suffered a loss and the loss is the consideration. A consideration should not be past meaning that should not be a price relating to an activity which took place before a contract came into existence (Mulcahy, 2008). In eastwood v. Kenyon, a guardian borrowed a loan so as to educate a young girl. After school the girl got married and the husband promised to repay the loan. The husband failed to honor the promise and the guardian sued. The court ruled out that that promise came into existence after the consideration making it past. In Michaels’ case, he suffered the loss after making an acceptance to comply with the advertised conditions; therefore the loss which is the consideration is not past. The consideration must be move from the promise. According to the doctrine of privity of contracts, only parties who contract are bound by the agreement (Richards, 2009). In our case, the car manufacturing company is the promise and the car dealer is just but a third party and not involved in the contract. However, if the third party has a contractual obligation against the person who promises, then the party who suffers loss can sue for breach of contract. We do not know whether the car dealer had any contractual obligations with the car manufacture. If the car dealer has any contractual obligations against the car manufacturer, then he bound by the contract (Brown and Chandler, 2007-2008). Therefore, Michael can go ahead and sue him. If there were no contractual agreements, then Michael can only sue the manufacturer as the car dealer is protected by the doctrine of privity of contracts (Mulcahy, 2008). Michael made the test drive within the 12 hours following the advertisement after which he asked for the full details of the competition. The car dealer replied by saying that the completion was not real. Therefore we can say that the advert was false and any false statement ort promise that induces another party to contract amounts to a misrepresentation, (Mulcahy, 2008). In law, there are two types of misrepresentation; the fraud in inducement and fraud in the factum. Fraud in inducement is focused on misrepresentation attempting or inducing the party to contract while fraud in factum is focused to determine whether the party knew he was entering into a contract. Michaels’ case is a difficult one because it’s heard to determine whether he knew that he was entering into a contract when he decided to comply with the conditions (Brown and Chandler, 2007-2008). In our case, he did not know the truth about the advert because if he was then he would not have attempted to comply. This is a fraud in inducement and it’s voidable and Michael should go ahead and get a legal remedy by suing whoever is responsible. Conclusion We have established the facts of Michael’s case concerning the legal actions he can take to either the car manufacture or the car dealer based on the elements of the contract law. These elements are the existence of a contractual capacity, an agreement, legality in form, consideration, intention to create a legal relation and vitiating factors such as misrepresentation (Quinn and Elliot, 2009).Following this entire basis, Michael can go ahead and sue the car manufacture for not honoring the contract. We have established that he can only sue the car dealer under the doctrine of privity of contracts which was established to protect third parties. References Paul Richards, (2009). Law of contract. The Foundation Studies in Law. Pearson Longman. Linda Mulcahy, (2008). Contract law in perspective. Routledge.. Martin A. Frey, Phyllis Hurley Frey (2001). Essentials of contract law. Cengage Learning. Routledge Cavendish (2006). Contract law. Routledge. Adrian Chandler and Ian Brown, (2007-2008). Law of contract. Oxford University Press. Catherine Elliot and Frances Quinn (2009). Contract Law. Pearson Longman 1. Read More