Creation of a Contract - Essay Example

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Index page Topic: Page number Formation of Contract........................................................................................................... 2 2- Intention to create legal relations and Certainty....................................................................5 3- Exclusion clauses..................................................................................................................6 4- Applicability of Exclusion clauses..........................................................................................8 5- Vicarious Liability...................................................................................................................9 6- Occupiers Liability................................................................................................................10 7- Strict Liability........................................................................................................................12 8- Negligence and Vicarious Liability.......................................................................................13 9- Bibliography.........................................................................................................................15 Total words: 3725. Task 1: 1-a: Formation of a contract This question is about contract, the problem in this question requires a discussion of offer, invitation to treat, counter-offer, acceptance and in particular the postal rule. Each of these elements will be discussed in turn and an evaluation of the facts would be made thereafter. Contracts and its formation and giving legal effect to them is a matter which has been scrutinized critically by case law and statutes. The contract being formed is dependent upon an offer, which in turn requires an acceptance upon the conclusion of which question of consideration is concerned (Mackendrick, 2009). As per Professor Atiyah, the issue of offer and acceptance has been determined by courts in two ways, that is ‘reason forwards’ and ‘reason backwards’, the former is where existence of offer and acceptance are determined first and then the conclusion on the dispute is made; the latter is where the courts can reason from the appropriate solution back to the legal concepts of offer and acceptance (Atiyah et al, 2006). Offer has been defined as an intent of readiness on the part of one party who is called an offeror, so as to be bound by the terms that he states, subject to the fact that such an offer is accepted by the offeree (the person to whom the offer is made) unconcditionally. There has been a distinction drawn between an invitation to treat and offer and the former is said to be intent of readiness of a party so as to start negotiations and is therefore not unconditional (Fisher v Bell)1. The two main cases in this respect are Gibson v Manchester City Council2 and Storer v Manchester City Council3. In Gibson, the treasurer issued a letter to G whereby it was stated that the Council may sell the house to him, was construed to be an invitation to treat, this was affirmed by the situation that G was requested to have a formal application for purchase to be made.. The approach taken by the court was that they took the correspondence between the parties into consideration when determining the outcome. Contrary to that the courts, in Storer said there was a contract which was present as the matter had moved beyond the phase of negotiations. An offer should be differentiated from a mere statement of price that is an enquiry as to the price (Harvey v. Facey)4 (Mackendrick, 2009). The courts have found advertisements to be an invitation to treat (Partridge v Crittenden)5, however, interpretation of courts has led to certain exceptions and the reasons cited for it are the intention to be bound and certainty (Carlill v Carbolic Smoke Ball Co.)6. Display of goods in shops are generally held to be invitation to treat (Fisher v. Bell) (Furmston et al. 2007). In respect of Doris placing the vase on her shop it would be held to be an invitation to treat. Even though the advertisement says that it is an offer, it would not constitute to be an offer because of public policy which the courts have followed that is there could be many acceptance of the same offer. The next issue that is considered is that of acceptance. Acceptance generally requires that the offer is accepted unconditionally and there must be communication of the offeror (Holwell Securities v. Hughes7). Any imposition of new terms would lead to the destruction of the original offer and the new offer with the new terms would be in place, this is known as counter offer (Hyde v. Wrench)8. As for communication the courts have laid down exceptions which includes the postal rule. In respect of the postal rule it has been stated that acceptance comes into place when the letter is posted validly. (Adams v. Lindsell) (Peel et al, 2007). As far as Eddie’s act of posting the letter is concerned, it is important to refer to the postal rule, which in fact applies to acceptance and not to an offer. Therefore since Doris merely made an invitation to treat, Eddie’s offer needs to be communicated which in turn has to be accepted by Dorris. As for Frank, he gives Doris an offer which in turn leads to a counter offer from Doris and then subsequently Frank makes the counter offer, thus the original offer of Doris was killed and therefore posting the letter by Frank is merely an offer which has to be considered by Doris when communicated to him. The next element is that of doctrine of consideration which gives a ‘badge of enforceability’ to contracts. The definition was laid down in Currie v. Misa9 as considerable which is valuable in law may be a right, interest or profit which is given to one party or some detriment being suffered by the other. The amount of consideration for a contract is left for the parties to decide and even the smallest of consideration has been held to suffice (Thomas v. Thomas)10 (Mackendrick, 2009). In respect of the facts at hand there is consideration involved by way of the money that would be paid for the vase and therefore there would be no problems in respect of consideration. 1b: Intentions to create legal relations and Certainty The issue in this question requires a discussion of the intent of create legal relation and the capacity of the parties to contract. The main concern that the court look into is fact that the parties intended to create legal relations by way of their agreement and therefore allowed recourse to some sort of adjudication if the terms of the agreement were not complied with. The main area where such intent is need is in respect of domestic and social agreement. The main differentiation is between domestic and commercial agreements. The leading case of domestic agreements is Balfour v. Balfour wherein the husband promised to pay his wife his money, however, after separation he did not which was held not to be enforceable. Furthermore in Jones v. Padavattan an agreement between a mother and her adult son was held not to enforceable. The presumption has been rebutted in cases (Merritt v. Merritt) where an enforceable agreement was found (Peel et al, 2007). In respect of commercial agreement, there is a presumption by the courts of an intention to create legal relations (Esso Petroleum Ltd. V. Commissioners of Customs and Excise). However, there are exceptions for example sale of land is subject to contract (Furmston et al, 2007). In respect of the current situation of Doris, Frank and Eddie, it was a commercial arrangement, as there was a display of goods on a shop which had a price attached to it therefore any contract would have an intention to create legal relations. As far as capacity of contract is concerned the only element that is considered is whether a person is a minor or of insane mind. The contracts made by these are therefore not legally binding. There are certain exceptions like contracts for necessaries. Furthermore, the Minor Contracts Act 1987 deals with contracts made by minors. In respect of the facts of the aforementioned question, there does not appear to be lack of capacity and thus contracts, if made, would be enforceable (Mackendrick, 2009). Task 2: 2a: Exclusion clauses The issue in this question requires an analysis of the exclusion clauses and its application by courts and statute. The first and foremost point that needs to be considered is the point of incorporation that requires analysis of the fact that a clause is properly incorporated or not which can be done by inclusion of a clause in a contractual document which is signed by the other party (L’Estrange v. Graucob). The other way by which a clause being incorporated is by way of document which has not be been signed but does provide reasonable notice before or at the time of contracting. The final way by which incorporation is undertaken is that of regular course of dealing that is the parties have dealt before and therefore were aware of the existence of the exclusion clause and therefore the clause has been incorporated (Mackendrick, 2009). The next step that is undertaken after incorporation is that of construction whereby the courts looked into the fact that the exclusion clause that had been incorporated covers the specific breach that has occurred in the instance (Peel et al, 2007). Finally there was the concept of fundamental breach for which liability could not in the beginning be excluded. A fundamental breach was that which was either central to the contract (Karsales (Harrow) Ltd. V. Wallis) or where the result of breach was exceptionally serious. The approach was changed by the House of Lords (Peel et al, 2007). The Unfair Contract Terms Act 1977 is operational concurrent to the common law.. In respect of exclusion clauses to avoid contractual liability, the provision that comes into play is that of section 3 which applies either when one party deals as a consumer or where one party deals with the other’s ‘written standard terms of businesses. However, by virtue of the second category, s.3(2) makes attempt to exclude liability subject to test of reasonableness. The test of reasonableness has been provided for in section 11 and schedule 2 of the Act, which provides that the inclusion of such a clause should fair and reasonable taking into account the circumstances which should have been considered by the parties when the contract was made. The said approach was confirmed in Stewart Gill Ltd. V. Horatio Myer & Co. Ltd. The possibility of insurance has also been covered by the Act (Mackendrick, 2009). The House of Lord in Smith v. Eric S Bush stated that the bargaining power of the parties, availability of alternative sources, and the difficulty of task for which liability is being excluded and practical results of allowing such exclusion should be considered (Furmston et al, 2007). Furthermore Unfair Terms in Consumer Contracts Regulations 1999 provides further protection in respect of consumer contracts and to all clauses except which have been individually negotiated. Schedule 2 provides a list of unfair clauses. Regulation 7 also provides for a requirement that the clauses must be in ‘plain, intelligible language’ (Mackendrick, 2009). 2b: Applicability of exclusion clauses The issue in this question requires an analysis of whether the exclusion clause would be enforceable or not. In respect of the common law rules as aforementioned, the first and foremost point that would be considered is the fact of incorporation and whether the exclusion clause had been properly incorporated. The document that was signed by Bob was a sale document, now even though he has signed, it cannot be said to have been incorporated on the basis of that he signed, however, his negligence of not reading it can also not exclude that. The only thing for incorporation would be reasonable notice. Thus it would not be difficult to prove that there had been incorporation. The next step would that of construction whereby the courts would look into the covering of the exclusion clause of the situation. Clearly due to the broad nature of the clause, it can be said that the exclusion clause put by Mix-o-Crete covers every defect and thus there would be construction. (Mackendrick, 2009) The next element that would be considered is that of fundamental breach, the position of which, has significantly changed, after the introduction of the Unfair Contract Terms Act (UCTA) whereby the consumer is protected. (Furmston et al, 2007) As far as UCTA is concerned clearly Bob dealt as a customer and the test of reasonableness would have to be satisfied. The test of reasonableness cannot be satisfied as the clause cannot be said to be fair, just and reasonable and therefore cannot be said to have a proper exclusion clause. Thus the exclusion clause would not be effective and Mix-o-Crete cannot rely upon the clause. (Mackendrick, 2009) Task 3: 3a: Vicarious liability Vicarious liability is a form of liability under which the employer who has an employee, who in turn commits a tort in the course of employment leads to the employer being held liable to the third party against whom the tort is committed by the employee. Thus the employer would be held liable even though he himself would not be the one at fault. The important reason for asserting such liability is to allow the third party to claim from a party who has better means of giving compensation to the third party. Apart from such reasons there are various other public policy aspects which lead to such liability being imposed. Even though the employer and employee are join tortfeasors the burden is usually more upon the employer (Markesinis et al, 2007). The first and fundamental aspect of vicarious liability is the determination that a person is an employee and not an independent contractor as both lead to different results. When determining whether a person is an employee, the matter of fact as well as law is considered. As far as the differentiation between the employee and the independent contractor is concerned the important element is the degree of control that is exercised over them, which is necessary to be ascertained and fulfilled. (WHPT Housing Association Ltd. V. Secretary of State for Social Services11. In respect of workers and employee the contract is also looked into so as to evaluate what the person is. It is important to mention here that that the tests and the criterions that have been laid down are not conclusive. In Ready Mixed Concrete (South-East) Ltd v. Minister of Pensions and National Insurance12 the contract of service was defined and described by the courts. The second element that is looked into is the fact that there has been commission of a tort by the employee (Stavely Iron and Chemical Co. Ltd. V. Jones)13.Therefore if a tort has been committed by the employee then only can the employer be held liable (Rogers et al, 2006). Another criterion that needs to be fulfilled is the fact that the employee must have committed the tort in the course of his employment. An important point that needs to be raised is that vicarious liability being imposed for the reasons stipulated above has also led the employers to restrict and limit the risks so as to ensure the avoidance of any liability (Markesinis et al, 2007). Authorised and unauthorised acts along with the intentional torts are important. Furthermore, the employer has to ensure that certain non delegable duties are kept intact with itself. The House of Lords in Lloyd v. Grace Smith & Co.14 has made liable the employer for the deceit committed by his employee (Markesinis et al, 2007). 3b: Occupiers liability The issue in this question requires an analysis of Occupiers Liability Act 1957 and 1984. Each of these will be discussed in turned and the duty that is applied by the courts would be discussed. Both the Acts have not defined what the meaning of an occupier is, the decisive criteria for determining the occupier is the element which is called the control of the premises. The court in Wheat v Lacon15 made a detailed discussion of who an occupier is. The Occupiers Liability Act 1957 is an Act which tends to focus on lawful visitors who have been described in s.1(2) under which a common duty of care is owed to such lawful visitors. The status of the entrant is quite easily that of a lawful visitor where it is due to an express provision. It has been held by Scrutton LG that if someone is invited so as to use the stair he is not invited so as use the banisters so as to slide down. In respect of the common duty of care section 2 of the OLA 1957 provides that a duty that is owed by the occupier of a premises to all his visitors except in the situation where he freely extends or modifies such a right by way of an agreement and such a common duty of care which requires taking care in situation which is reasonable to ascertain that the visitors are reasonably safe when using the premises for the intended purpose they were invited for by the occupier. (Markesinis et al, 2007). The duty was described by Lord Denning in Wheat as a duty which is simply owed by one person to his neighbour. (Markesinis et al, 2007). The defences that are available in accordance with relevance would be that of section 2(3) whereby there is a defence of contributory negligence. A further defence is that of warning which if duly posted would lead discharge of duty of care or contributory negligence would come into play. In London Graving Dock Co. v. Horton16 it was held by the House of Lords where the significance of warning was recognized by the visitor then the liability of occupier would be absolved. However, s.2(4)(a) stated that all circumstances should be taken into consideration and a warning in itself should not be used to automatically exclude liability (Phipps v. Rochester Corporation)17. Where there is existent an excessive amount of danger then additional precautions should also be undertaken by the occupier (Rogers et al, 2006). The next would Occupiers Liability Act 1984 which would now be discussed. The Act deals with people who enter as trespassers. A duty would fall on the occupier if three requirements as laid down under s.1(3) of the Act are satisfied. Firstly there must be awareness of danger by the occupier or reasonable ground to believe of its existence. Second, knowledge or reasonable grounds to believe that entrant is within vicinity of the danger or that he may enter into vicinity, finally, ‘the risk is one against which in all the circumstances of the case, and he may reasonably be expected to offer the other some protection’. The position in respect of the requirement remains unclear and the decision in White v. St Albans has not helped either. The first two requirements can be said to be objective while the third one can be seen as objective (Rogers et al, 2006). 3c: Strict liability Strict liability is liability that is imposed upon a person without the fact of fault on his part being considered and thus if the actions/omissions are present then the person is held liable. The main aspect of strict liability is that it is a non fault based approach whereby certain actions/omission which if indulged into construes ab initio liability subject to any defences available (Rogers et al 2006). One of the forms of strict liability is the Animals Act 1971 whereby the keeper of a dangerous animal is held liable. Furthermore, if any damages is caused which includes personal injury he is held liable subject to defences. However, the fault of the keeper is not looked into (Markesinis et al, 2007). The main differentiation between strict liability and fault based approach is the fact that in respect of fault based approach if there has been any action/omission then the fault or mental element of the person is also looked into which includes intention or recklessness and then defences are looked into. However, in respect of strict liability if an act has been committed then the mental element is not looked into and thus the move is straight towards the defences if any (Markesinis et al,2007). Task 4: Negligence and vicarious liability The problem requires an analysis on the law of negligence and vicarious liability and whether Mike and Jerry would be liable. In respect of vicarious liability as aforementioned the firs element that would be looked into is the fact that whether Mike and Jerry are employee or not. As far as Mike is concerned it has been expressly stipulated in the fact that he was employed as a cleaner. The next point is to look into the fact that Mike was in the course of employment. This would be a debate as Tony had asked him to do the task and thus whether he was under instructions to seek orders from Tony is not evident. Thus whether Mike was in the course of employment is not evident on that basis, however, it is important to point out that the courts require adequate measures to be undertaken by the employer and therefore it is going to be construed as in the course of employment. Since there would be joint liability and the fact that there can be liability for injury cause to fellow employees, there is going to be fault on the factory owners as they failed to take adequate care and therefore would be held liable. Thus a claim can be made by Seamus (Markesinis et al, 2007). As far as Jerry is concerned the concern would be in respect of him being an employee or an independent contractor. Another issue would be the fact that since he had already dropped the last delivery he was not in the course of employment, which can be said to be a valid point. Therefore the test of negligence that is of duty of care which is three tier test as laid down in Murphy v. Brentwood District Council will be discussed whereby the foreseeability of harm, proximate relationship between the parties and the fact that it must be fair, just and reasonable must be adopted so as to impose liability. As far as Mike is concerned he can be said to owe a duty of care to his fellow employees however since it was the employer who asked him to perform the task liability or duty would be said to be on the factory owners (Markesinis et al, 2007). As far as Jerry is concerned the three tier test would be established as a pedestrian is owed a duty of care by the drive and thus a duty is owed and since Jerry was negligent, the duty has been breached. Furthermore, there was no break in chain of causation. Finally there was on the facts no defence available and so Jerry would be held liable. Bibliography: 1. MACKENDRICK, E. (2009). Contract law. Basingstoke, Palgrave Macmillan. 2. ATIYAH, P. S., & SMITH, S. A. (2006). Atiyah's introduction to the law of contract. Oxford [u.a.], Clarendon Press 3. PEEL, E., & TREITEL, G. H. (2007). Treitel on the law of contract. London, Sweet & Maxwell 4. FURMSTON, M. P., CHESHIRE, G. C., FIFOOT, C. H., & SIMPSON, A. W. B. (2007). Cheshire, Fifoot and Furmston's law of contract. Historical introduction / A. W. B. Simpson. Oxford [u.a.], Oxford Univ. Press 5. MARKESINIS, B. S., JOHNSTON, A. C., & DEAKIN, S. F. (2007). Markesinis and Deakin's tort law. Oxford, Oxford University Press 6. ROGERS, W. V. H., JOLOWICZ, J. A., & WINFIELD, P. H. (2006). Winfield and Jolowicz on tort. London, Sweet & Maxwell. Read More