General Principles of Law - Essay Example

of the of the Lecturer: of the General Principles of Law. The Law of Contract. The rules of contract law could be so designed that it brings about rectifactory justice, distributive justice or both. In general both these types of justice cannot be obtained in the same case. The primary basis for legal enforcement is reliance since; the other credible bases are not that strong to be enforced. Further, protection of mere expectation of promises is not a strong basis and is merely an insignificant harm, which is undeserving of legal protection (Mather). This reliance is detrimental if their costs exceed their benefits. Though mistakes cause disappointment, they do not constitute grounds for relief from contractual burdens. In the contract law, mistakes are classified as non est factum, unilateral and bilateral. Non est factum relates to written contracts, where a party to the contract, claims that the contract document is not the document that it had signed. Mistakes constitute a very difficult and complicated area of the law of contract and relate to the time of formation of the contract. There are two types of mistakes, agreement mistakes take place when either the parties are at cross purposes or one party is mistaken and this is known to the other party. In Smith v. Hughes, 1871, the plaintiff sold oats to the defendant who believed, mistakenly, that these were old. The court upheld the defendant's decision not to accept these oats. The other type of mistake is the common mistake, in this both parties contract on the basis of a mutual mistake and the courts in certain circumstances set aside the contract. In Bell v. Lever Brothers, 1932, The Lever Bros Ltd appointed Bell as the managing director with the service condition that he could not make any secret profits. Bell breached this agreement and made secret profits; in the meanwhile, the company made Bell redundant and paid for the same. Later on the company came to know that Bell had made secret profits and proceeded legally to recover the redundancy payment. The Court of Appeal accepted the Company's plea but the House of Lords held that the company was not entitled to have this amount returned as the mistake was not sufficiently fundamental. Under common law mistakes are voidable contracts. Unilateral mistakes are those in which one party is mistaken and the other party is aware of this. Bilateral mistakes are those in which both parties are mistaken. The forms of bilateral mistakes are mutual, when both the parties to the contract are mistaken about different things. On the other hand bilateral mistakes are termed as common when both the parties are mistaken about the same thing. Mistakes as to the terms of a contract imply that the presence of a mistake in respect of the terms of a contract makes the contract void. The essential ingredients of such mistakes are that one party is mistaken and this is known to the other party. Such contracts are deemed to be void. In the case Webster V. Cecil, 1861, the defendant rejected an offer of 2000 and subsequently sent an offer letter to the plaintiff in which, he mistakenly offered to sell the property for 1250 instead of 2250. The plaintiff was aware of this mistake and when he tried to enforce the contract the court rejected his claim stating that the contract was void due to mistake of terms. Mistake as to identity are those in which a party to a contract impersonates another person in order to obtain goods or services, preferentially. There are two situations where the law recognizes the mistake as to identity. First, situations where the parties are face to face while making the contract and second, situations where the parties are not face to face and are at a distance while making the contract. In such situations the contract will be deemed to be void for mistake, if the plaintiff is able to establish that the other party's identity was vital to the contract and if the party can establish that it was dealing with a different party which actually exists. In this manner though mistakes cause disappointment, they cannot be made grounds for reliefs. John went to Peter's house for dinner. He developed an intense liking for a pair of candlesticks that he saw there. He offered to buy these antique from Peter, who claimed that they were Georgian, for 7000 and Peter gladly accepted this offer. Subsequently, John came to know that these candlesticks were Victorian and worth only 1000. This contract will be governed by the provisions of misrepresentation. If a statement is made in pre - contractual negotiations and if that statement induces the other person to enter into the contract, it is termed as misrepresentation. A misrepresentation is a false statement of fact made by one party to another during negotiating the contract. A party suffering a loss due to a false statement by the other party to the contract can seek rescission of the contract and damages. Misrepresentation is governed by common law, equity and statute. Such misrepresentation is of three types, first, fraudulent representation where a false statement is made for pecuniary gain - in Derry V. Peek, 1889, the House of Lords laid down that "(1)in an action for deceit it was unnecessary to prove mens rea and in order to prove it the plaintiff had to show either that the defendant knew or believed the statement in question to be false, or(2) that he did not believe it to be true or(3) he made it in reckless ignorance of whether it was true or false. " - and is either made knowingly, without belief in its veracity or is a statement made without bothering about whether it is true or false. The remedy available for this type of misrepresentation is claim for damages based on common law tort of deceit. Second, negligent misrepresentation is described in section 2(1) of the misrepresentation act of 1967. The presumption in law is that all misrepresentations are negligent. The onus of proving that it is a misrepresentation rests on the person making the representation. The remedies for the loss incurred due to such type of representations are rescission of the contract at the choice of the deceived party and claim for damages (Halsbury's Laws of England). In the case Hedley Byrne v. Heller, the House of Lords held that in certain circumstances, damages could be recovered in tort for negligent misstatement causing financial loss. This constitutes negligent misrepresentation under common law. Section 2(1) of the Misrepresentation Act, 1967 states that a party may recover damages even when the representation is not fraudulent, unless the other party can prove that at the time of making the statement he believed it to be true and had reasonable grounds for that belief. Although, the misrepresentation was made without fraudulent intention, the person making such a misrepresentation shall be held liable for damages. In the case Watts V. Spence, one of the joint owners of a piece of land contracted for the sale of this land without the knowledge of the other owners. This joint owner was held guilty of fraudulent misrepresentation. Innocent misrepresentation entails a statement which was believed to be true at the time of contracting. The burden of proof in this case rests on the person making such a misrepresentation. The remedies available in law are rescission of the contract and claim for damages. The applicable sources of law in such cases are the general law and the Trade Practices Act section 52. Based on the above discussion it is evident that Peter misrepresented the fact that the candlesticks were of the Victorian Period by stating that they belonged to the Georgian Period and in this manner he made John enter a contract with him wherein he would have to pay 6000 more for these candlesticks. Further, a mistake as to terms also took place, because John offered 7000 for what was worth only 1000. It is to be noted that Peter knowingly accepted the higher amount. Peter though fully aware that John was offering 6000 over and above the value of the candlesticks, preferred to remain silent, in addition he had misrepresented by stating that these candlesticks belonged to the Georgian Period which made them more valuable, and hence John was deceived. This is tantamount to fraudulent misrepresentation. Therefore, John can seek rescission of the contract and he can also claim damages. The under mentioned cases also reveal the fact that the statements influencing a party to a contract will be construed as misrepresentation if this party is misled by these statements: Redgrave V. Hurd, 1881. Pan Atlantic Insurance V. Pine Top Insurance, 1994. A person sold his chemists and druggists shop located in Torquay to High Street Chemists Limited. While conducting this sale he entered into an agreement with the buyer stating that he would not engage in the same or similar trade within a distance of 15 miles from any of the branches of the High Street Chemists Limited for a period of two years. However, after six months the seller started a chemists shop in Taunton, a mile and a half away from the High Street Chemists Ltd's Taunton branch. The point in law which is relevant here is whether the High Street Chemists Ltd can obtain an injunction on the ground that the seller had violated the terms of the contract in restraint of trade. In the common law of the United Kingdom a contract that restrain a party's freedom to carry on business or otherwise earn his or her living, in other words a contract in restraint of trade, is void for illegality unless the restriction is essential for the protection of the parties' interests and also that it is in the public interest. Interests that have been held to justify such protection include trade secrets and goodwill. Transactions in which they generally occur are employment, joint ventures and distribution. There are two types of such contracts; first, contracts between employees and employers in which there are restraints and which the employees accept these constraints of employment, and second, the restraints accepted by the vendor of a business which are contracts of business. In Nordenfelt V. Maxim Nordenfelt Guns & Ammunition Co, 1894, it was held that: "All interference with individual liberty of action in trading, and all restraints of trade of themselves, if there is nothing more, are contrary to public policy, and therefore void. That is the general rule. But there are exceptions: restraints of trade and interference with individual liberty of action may be justified by the special circumstances of a particular case. It is a sufficient justification, and indeed it is the only justification, if the restriction is reasonable - reasonable, that is, in reference to the interests of the parties concerned and reasonable in reference to the interests of the public, so framed and so guarded as to afford adequate protection to the party in whose favour it is imposed, while at the same time it is in no way injurious to the public. " To enable the application of this policy, recourse is made to the principles developed over the years by the courts and set out lucidly by Lord Caplan in Maiden Timber Limited v. McLeish. Some of these principles are, a covenant in restraint of trade is void unless it is reasonable and in the interest of the parties and in the public interest. Covenants between an employer and employee are to be viewed more strictly by the court than covenants where some consideration has passed. A restraint to be reasonable must afford no more than adequate protection. The problem of the chemist shop comes under the contract of business. The restrictions of the contract were that seller should not engage in the same or similar trade within a radius of 15 miles from any branch of the purchaser for a period of 2 years. However, the seller opened a chemists shop six months later 1 miles away from one of the branches of the purchaser. It remains to be determined as to whether the restrictions in the contract on the seller were reasonable or not. For this purpose the duration and area of the restraint have to be examined for reasonableness. Two years in a business is a fairly long interval of time and similarly a distance restriction of 15miles is also unreasonable. From this it is evident that the purchaser wants to ensure that the seller is prevented from conducting this business, which competes with his own business by resorting to these unreasonable restraints. Hence, the purchaser cannot obtain an injunction from a court of law. In the common law tradition the developments in contractual remedies are important. Even during the classical period these were subject to judicial control and this explains the non - drastic nature of changes in this portion of the contract law. A very important aspect of these remedies is the greater availability of specific performance and the reduction in the formal rules that limit its application (Beatson and Friedman, 1997). Works Cited. Beatson, Jack. E and Friedman, Daniel. E, Good Faith and Fault in Contract Law, Clarendon Press, Oxford, (1997). Bell v. Lever Brothers, (1932) AC 161. Derry v Peek, (1889). 14 App Cas 337. Halsbury's Laws of England, 4th Edition. Hedley Bryrne v. Heller, (1964). Maiden Timber Limited v. McLeish, (1992). SLT 727. Mather, Henry. Contract Law and Morality. Westport: Greenwood Press, 1999. Misrepresentation Act, 1967. Nordenfelt v Maxim Nordenfelt Guns & Ammunition Co, (1894). AC 535 Pan Atlantic Insurance v. Pine Top Insurance, (1994). 3 All ER 961. Redgrave v. Hurd, (1881). 20 Ch D 1, CA. Smith v. Hughes. (1871). LR 6 QB 597. Watts v. Spence, (1976). Ch 165, (1975) 2 All ER 528. Webster v Cecil, (1861). 30 Beav 62. Read More