Cases of Contract Law - Case Study Example

INTRODUCTION For a contract to be valid and enforceable, ALL the following elements must be present. They are the offer, the acceptance, the object of the contract, the consideration, the legality of the subject matter, the contractual capacity of the parties involved, and the contractual intent of the parties (Halfwits, J, 1995). If one of the elements is missing, then the contract is not valid. The contract may be avoidable, void or unenforceable. According to the Principles of European Contract Law, particularly Article 2.301 (ex art. 5.301) – Negotiations Contrary to Good Faith section 3 that “ it is contrary to good faith And fair dealing, in particular, for a party to enter into or continue negotiations with no real intention of reaching an agreement with the other party.” (Mercatoria, L., 2006) This revised European contract law clearly states that it is not good business practice to enter into a contract with the fraudulent intention of not performing the contractual obligations that were agreed upon. The courts will decide on the amount of damages and other penalties that the defendant will have to incur in return for the breach of contract. In case one of the parties to the contract do not fulfill their part as agreed before signing, then the offended party can ask for redress of grievance from the courts. BODY Bob’s remedy is to exhaust all extra judicial means to collect the remaining 4,000 pounds that was offered by Arthur and accepted by Bob. If the extra judicial means are not successful, then Bob can file civil charges for the collection of the remaining 4,000 pounds. Since the offer of Arthur to give the additional 4,000 pounds is accepted by Bob, there is a new contract that supersedes the prior contract. The prior contract is that Arthur Will pay Bob 25,000 pounds if Bob finishes the repair job on Arthur’s aunt’s house on the first week of December 2005. The contract is now 29,000 pounds and the new deadline is Dec 25, 2005. Bob has accomplished his part of the contract, now he can ask the courts to force Arthur to pay him the balance of $4,000 pounds. Bob should NOT pay the remaining 2,000 pounds to Eric. Bob does not have to pay the balance of 2,000 pounds to Eric because the law states since Bob did his part of the contract by paying by end of November, then Eric must do his part by collecting only his offer by receiving only the 3,000 pounds if payment was done within November. It is true that one of the requirements of a valid contract is the consent of the party being offered a contract. In this case, because Bob admitted that due to financial difficulty he couldn’t pay the 5,000 pounds to Eric within November 2005, Eric offered a contract to reduce the amount he will receive to only 3,000 pounds. Bob “accepted” the offer of Eric by his ACTION of paying his liability within the time period offered by Eric. Therefore now that Bob has done his part, Bob demands that it is Eric’s turn to push through with his contract offer to receive only 3,000 pounds. One reason for Bob’s paying on time is because of the enticing 2,000 pound discount offered by Eric. One of the requirements of a valid contract is the intention of the parties. Eric’s intention was that he offered to receive only 3,000 pounds if Bob pays during November 2005. Bob’s actual payment on November 2005 shows that his intention was to pay Eric within the November payment period in order to avail of Eric’s 2,000 discount. This is tantamount to “silent” acceptance of Eric’s 2,000 pounds discount terms. Circumstantial evidence shows that Bob is eager to beat the deadline because he has no money. The contract offered by Eric is a unilateral contract. A unilateral contract occurs when another party offers to do or not to do an act if the other party does what the offer giver or in this case Eric, the receiver of the 3,000 pounds, wants in returns. In Eric’s case, he wants early and prompt payment. When Bob paid Eric within the November time period, then he has “accepted|” by action Eric’s offer and converted the contract from a unilateral contract to a bilateral one. Eric must now do his part of the new transposed bilateral contract agreement and accept only the 3,000 pounds paid by Eric. In a Unilateral contract, performance by the offeree of the act requested by the offerror is equivalent to ACCEPTANCE. Another interpretation of the law is that if one party offers, in this case Eric offers to receive only 3,000 pounds if Bob pays in November, the silence of the other party, namely Bob, is interpolated as YES to the offer when the offer was solicited by the offeree. Bob solicited the offer (solicited offer) from Eric by saying the Bob may not be able to pay the 5,000 pounds on November 2005. Eric then lowered the liability of Bob to only 3,000 if payment will be on November 2005. The Eric –Bob case is an implied valid contract of reducing the liability from 5,000 pounds to 3,000 pounds. (Bowers, Mallor, Barnes, Phillips, Langvardt, 1995) In the case of “Investors Compensation Scheme Ltd v West Bromwich Building Society and others Lord Hoffmann famously said that a literal approach should not be taken to contractual interpretation: ‘Interpretation is the ascertainment of the meaning which the document would convey to a reasonable person having all the background knowledge which would reasonably have been available to the parties in the situation in which they were at the time of the contract.’ ”(Kendall Freeman, 2006) This refers to the interpretation of contracts and the intentions of the parties involved. Substance will be preferred over the form of the contract entered into. In the case of Beazer Homes Ltd v Stroude, it interestingly shows that, “although evidence of negotiations is not admissible as an aid to contractual interpretation, it is admissible as evidence in relation to claims to rectify a contract to reflect the true mutual intentions of the parties.” (Freeman, K., 2006) Evidence in negotiation, in the case of Eric and Bob, is the circumstantial situation that Bob exerted extra effort to pay Eric within the time frame offered by Eric to avail of the 2,000 pounds discount. In the article Law Reporter, February, 1999, entitled, Faulty Construction, Repair on house; Breach of warranties, contract: “Violation of consumer protection act: Property Damage: Verdict” Swann v. Bezaleel Master builders, Inc. Va. Fairfax County Contracted to repair a house. Due to the many disagreements between the parties in a contract, such as the homeowners’ poor evaluation of the building contractor’s performance specifically the poor quality work done on the new buildings, Swanns decided to sue the contracting company.” The plaintiffs filed a civil case because of the breach of contract done by of the builders. There was inadequate inspection during repair. People can file for breach of contract due to lack inspection, no researching, and monitoring. This was filed under “Virginia Consumer Protection Act, VA. Code Ann. Sec 59-1-198 because it did not implement I had memorized inside the rum”. The court of England awarded $37,000 to the complainants. (No author, 1998) So here is a classic example of one party not fulfilling its obligations to give its best to satisfy what was the minimum performance requirement. The law will, in most cases, grant rewards such as damages to deter other individuals to do the same poor performance. CONCLUSION: The above two cases are valid contracts because they have all the necessary elements to make a contract valid. One element is the offer by one party. Arthur offered to pay 29,000 pounds to Bob. In the second case, Eric offered to receive only the lower amount of 3,000 pounds. The next element is acceptance of the offer. Bob accepted the offer to repair the house on or before December 25, 2005. And Bob, by soliciting the offer, “accepted” a unilateral contract by his action of performing the payment within the time period requested by the offerer. The next element is the consideration of the contract or Purpose of the contract. In this case the consideration is the money payment. The legality of the subject matter is the next element. The two contracts mentioned here are not against any of the United Kingdom’s laws. The contractual capacity of the parties involved is the next element. The parties must be of legal age to enter into contracts. The two cases do not mention of the ages of the players in both cases, therefore it is assumed that they are of legal age. The contractual intentions of the parties are the last element. This is what is called substance over form. If the contract is signed as a sale but the parties intended the contract to be a loan, then the intentions of the parties (substance) will prevail over the paper contract signed (form). Therefore, the contract will be revised to show the true intentions of all parties concerned. Eric intended to receive only 3,000 pounds when he offered to receive such lesser amount if Bob will pay on time. Therefore, this will result to new valid 3,000 pounds contract. If one party does not deliver what is expected, then the aggrieved party can ask that the poorly done work be undone and even ask for damages for the unfulfilled obligations. BIBLIOGRAPHY Helewitz, J., Basic Contract Law for Paralegals, Little, Brown & Co., London, 1995 Bowers, Mallor, Barnes, Phillips & Langvardt, , Law of Commercial Transactions, London, 1995 Freeman, K., Legal 500 (http://www.legal500.com/devs/uk/co/ukco_029.htm) Freeman, K., Legal 500 (http://www.legal500.com/devs/uk/co/ukco_023.htm) Mercatoria. L (http://www.jus.uio.no/lm/eu.contract.principles.1998/doc.html#136) Faulty construction, repair on house: Breach of warranties, contract: Violation of consumer protection act: property damage: verdict. Law Reporter, Feb, 1999 Read More