Contract Law and Violation - Essay Example

Contract Law Human beings live in permanent cooperation and contacts with the fellow beings which involve agreements and contracts of various types. They are general phenomena that take place in most of our lives. In everyday situations, most of the people come to agreements and bonds for one reason or the other. “A contract may be defined as a legally binding agreement… The agreement will create rights and obligations that may be enforced in the courts. The normal method of enforcement is an action for damages for breach of contract, though in some cases the court may order performance by the party in default.”1 According to Sir Frederick Pollock, contract is “A promise or set of promises which the law will enforce2 In the general conclusion of a contract, we can understand that various elements are essential in the creation of a contract which includes an agreement, consideration, and intention to create legal relations, form, capacity, legality and other such. “A valid contract requires: (1) an agreement; (2) an intention to create legal relations; and (3) consideration (unless the Contract is made by deed). Whilst each of these three requirements receives separate treatment, they must in reality be looked at together.3 When all these are in existence, we understand that a contract is in operation. “In addition, a contract consists of various terms, both express and implied. A term may be inserted into the contract to exclude or limit one partys liability (the so-called “small print”). A term may also be regarded as unfair. A contract may be invalidated by a mistake and where the contract has been induced by misrepresentation the innocent party may have the right to set it aside.” 4 This is an enforceable law the violation of which is considered serious offence and, thereby, requiring penalty and consequences. “If one party has made a statement to the other about the subject matter of the contract, in some systems he may become liable for breach of contract (non-performance) if what he says turns out to be incorrect.” 5 Therefore the party that violates the contract is normally bound to receive its consequences. “A non-performance which is not excused may give the aggrieved party the right to claim performance, recovery of money due, or specific performance, to claim damages, to withhold his own performance, to terminate the contract and to reduce his own performance.” 6 In this background let us consider the two cases given for discussion. To consider the first case of contract violation and to give the most appropriate advice to Bob, who suffered due to the violation of the prevalent convention and even an apparent violation of the contract law, we need to examine the case closely and make the appropriate conclusions. In the particular case presented, Peter has cleverly entered into the written contract which says that Peter is liable to provide Bob with 1000 bottles of Riesling wine from the Mosella area and that he would not be liable for any loss due to the imperfection of the wine provided. The normal understanding of a contract is that it is “an agreement; a promise made upon sufficient consideration to do or to refrain from doing a particular thing.” 7 While you cannot clearly prove the violation of the contract in the case of the number of wine bottles that was implicitly included in the contract, you can very well identify the violation of the law in the case of the quality wine promised by the written contract. The general tendency among people is to diminish the risk in the written contract so that there is not much possibility for the law to be imposed upon and it may be noted that there exists issues of various types resulting out of this attempt to reduce the likelihood of violating the contract terms. “It is commonplace for a party drawing up a contract to seek to minimise the amount of liability that may be incurred in the performance of that contract.” 8 Bob needs to understand that the drafting of the contract and the language used is of great significance. “Creating the contract language gives you a tremendous advantage in shaping the negotiations, as you can include clauses that you want and structure the deal in a favourable way for your business.” 9 Peter, in the given case, has made the same attempt and has almost achieved some benefits in the contract law. The contract is highly premeditated and gives a greater advantage to Peter. It specifically makes it clear that Peter cannot be treated legally responsible for any loss suffered as a result of the sold item being defective. The real issue with the violation of the contract law, however, results from the first provision in the contract which says that Peter sells to Bob 1000 bottles of 2004 Riesling wine from the Moselle area. Accordingly, Bob can expect the observance of two types of contract issues. The first liability of Peter is that he provides with 1000 bottles of 2004 Riesling wine from the Moselle area. There is an implicit and conventional meaning to the contract, according to which Bob expects 1200 bottles of wine for the 1000 bottles provisioned in the written contract. It is likely to make out the case being considered as an example of the implied contract which means “a contract inferred from the actions of the parties, whether implied in fact or implied in law.” 10 To get a clearer idea let us put it this way. “Implied contracts, usually referred to as “implied in fact,” are contracts that are formed by the behaviour of the parties in the absence of directly negotiating the specifics of the transaction.” 11 This case reflects the implied term in a contract which “arises from the custom in a particular trade or a particular locality. For example, in Smith v Wilson (1832) the tenant of a farm given notice to quit was held to be entitled to compensation for the seeds he had used in the course of farming the land. Although there was no such term in the agreement between landlord and tenant, it was the custom in that locality.”12 However, Bob cannot, for all, demand or challenge in the court of law for the convention that is not specified in the written contract. The primary consideration is that he needed to be observant in the writing down of the contract. “Protect yourself by spelling out in writing the terms and conditions of your business relationship. Without a formal agreement you could be left holding the bag.” 13 There are arguments that go in favour of Bob’s claim for the observance of the convention in that is not specified in the written contract. “Although it is easy to overlook the significance of context and convention in determining whether or not a contract has been made, the relevance of these factors cannot be ignored when the question of the content of the contractual obligations comes to be considered by the legal system. The perennial issue is whether the written document exhausts the obligations of the parties or whether the recorded agreement is supplemented and qualified by implicit undertaking.” 14 As far as the written contract is concerned, Bob cannot legally demand the observance of the implied contract by Peter as there is a serious lapse in the formation of the contract by ignoring the implied meaning to be entered in the contract. On the contrary, Bob very well can challenge the behaviour of Peter in promising 1000 bottles of 2004 Riesling wine, but providing with 1000 bottles of 2003 Riesling wine from the Moselle area. It is of pertinent consideration that “an agreement made between two parties creates legitimate expectations in both that the terms of the arrangement will be carried out and that they will receive whatever benefit that is expected from the agreement. 15 In the case illustrated Peter, though not legally responsible for the 200 additional bottles Bob expected, is liable to deliver 2004 Riesling wine itself and thereby need to face the consequences of the contract violation as per the law permits. In the case of Bob, he has observed the contract Peter has not and “it is simply unfair that if one party is ready to perform, or indeed has performed, their part of the bargain the other party should escape or avoid his obligations without some means of redress for the injured party”16. It is of significance to mention that “If a party shows beyond doubt that they do not intend to perform their obligations under the contract, the common law allows the other party to treat the contract as at an end and to claim damages before the time for performance has elapsed - this is known as anticipatory breach.” And, it is evident that there is breach of contract law in this case. 17 Unlike the case Carlill v Carbolic Smoke Ball Co(1892) (HPH 37), a classic authority on the concept of unilateral law, the Ben v Peter case is an example of bilateral contract in which both the parties are liable to execute their promise. It is, therefore, clear that it is not a unilateral contract which involves an obligation on one side only. 18 Therefore, Bob can approach the court of law to get the contract violation issues resolved. The violation of the promise in the contract is fairly evident and there exists no case of a “freedom of contract.” “In its most obvious sense, the expression “freedom of contract” is used to refer to the general principle that the law does not restrict the terms on which the parties may contract: it will not give relief merely because the terms of the contract are harsh or unfair to one party.” 19 Thus, Bob can look for every protection of the law for the damage suffered. “The injured party receives a sum in compensation for the loss suffered. When the breach is of a fundamental term of the contract - a condition - in some cases the injured party is entitled to rescind the contract, to treat is as concluded. The injured party must be sure that s/he is entitled to rescission as withdrawal from the contract when rescission is not warranted will put the injured party in breach of contract. The general rule is that each party is obliged to perform the terms of the contract even if the other party is in breach.” 20 Now, to turn our discussion to the second case, it must be made clear at the start that the case is exactly an example of a non-performance of the contract due to some impediments that are beyond the control of the people engaged. The contract is in the form of letters and there involves various elements that affect the formulation and performance of the contract. Thus, in the case Michael first writes to Susan offering his bicycle for £50 to which she initially wants the payment to be in instalments. The agreement between the two is a contract which “involves an offer (or more than one offer) to another party, who accepts the offer. 21 The question that arises is regarding the existence of a contract between the two. In the case Gibson v MCC (1979), “Lord Denning said that one must look at the correspondence as a whole and the conduct of the parties to see if they have come to an agreement.” 22 However, by the time Susan agrees to pay the money instantly in order to get the purchase realised, Michael has sold the item to another. There is a deficiency in the written agreement of the contract. By the time the gap in the agreement is filled, the new deal is realised and also the external factor or impediment in the formulation of the contract intervenes. In another context, the case Blackpool Aero Club v Blackpool Borough Council (1990) was judged in favour of the party who resembles Susan. The latter invited tenders to activate an airport, to be submitted by noon on a fixed date. The former delivered the tender by hand and put in the Town Hall letter box at 11am. When the tender was recorded as having been received late and was not considered, at the plea of the plaintiff for violation of an alleged warranty that a tender received by the deadline would be considered, the court order turned in favour of the plaintiff. 23 However, in the case of Susan such a situation does not exist. Let it be remembered that, in the Statute of Frauds, it is important “to satisfy the requirements of the statute, the writing must identify the contracting parties, recite the subject matter of the contract such that it can reasonably be identified, and present the essential terms and conditions of the parties’ agreement.” 24 Due to various factors the contract law is not complete and as per the existing offer made by Michael he is liable to meet the consequences of the violation. It may also be considered that a particular situation remains in this case unlike in the case Adams v Lindsell (1818). Here, the defendant wrote to the plaintiff offering to sell goods asking for a reply via post on 2 Sept and the plaintiff sent a letter of acceptance at receiving the letter on 5 Sept. The defendant received the plaintiffs acceptance on 9 Sept but had sold the goods to a third party on 8 Sept. At the court, it was held that “a binding contract was made when the plaintiff posted the letter of acceptance on 5 Sept, so the defendant was in breach of contract.” 25 However, the case between Susan and Michael reflects Force Majeure clause. “The Force Majeure clause in a contract excuses a party from not performing its contractual obligations due to unforeseen events beyond its control… Force Majeure clauses are meant to excuse a party provided the failure to perform could not be avoided by the exercise of due diligence and care.” 26 In analysing the case presented, we need to conclude that there has been uncontrollable outside event in the form of postal strike that made the issue more complicated. In the negotiation of the case, it may also be considered that the clause applies equally to both the parties concerned. The part of Michael can be justified on the basis of the outside intervention which may be termed “greater force” affecting the implementation of the contract. Thus, it is of pertinent importance the case is treated on this basis. In the case of such a violation of the contract what can the affected party, here Susan, hope for? “A non-performance which is excused due to an impediment does not give the aggrieved party the right to claim specific performance or to claim damages. However, the other remedies…may be available to the aggrieved party. In the normal situation an impediment which is excused because of force majeure will not eliminate the contract but will give the aggrieved party a right to terminate the contract, see Arts. 3.101 and 3.108. A non-performance which is caused by the oblige will not give him any remedies. Thus, an oblige who does not fulfil his duty to co-operate in the performance of the contract will have no remedies. The obligor may treat his lack of co-operation as a non-performance and may make use of the remedies. 27 There is, however, a specific situation about the offer made. The case Byrne v Van Tienhoven [1880] 5 CPD 344 demonstrates the principle that an offer to contract cannot be considered withdrawn until the offeree has received it. 28 Yet, there remains a question regarding whether the agreement or the offer was complete in the particular case. In the case Lord Denning in Entores v Miles Far East Corp (1955), it was held that “if a man shouts an offer to a man across a river but the reply is not heard because of a plane flying overhead, there is no contract. The offeree must wait and then shout back his acceptance so that the offeror can hear it.” 29 We may conclude that the agreement was not complete due to the postal strike Therefore, Susan cannot claim great support of the law and the case is a perfect example for how external interference in a contract affects the implementation of the contract. In conclusion, let us remark that contracts that are enforceable by law has vital role in today’s world. “Modern business could not exist without such contracts. Most business transactions involve commitments to furnish goods, services, or real property; these commitments are usually in the form of contracts.” 30 Therefore, contract law has a great role in the legal system as it affects a large number of people. The violation of these agreements invites consequences of various forms. The two cases studied in this discussion provide us with some considerable matters regarding the contract laws and their violation. Bibliography All Business, What Is a Force Majeure Clause? 2008, retrieved 15 January 2008, . All business, Nine Tips to Create Better Contracts, 2008, retrieved 15 January 2008, . Beale, H, Contract Law, Hart Publishing, 2002, p. 406. 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An Outline of the Law of Contracts, 5th edn, Butterworths, 1995. The English Law of Contract, Breach of Contract, 2008, retrieved 15 January 2008, . The English Law of Contract, 2008, retrieved 15 January 2008, . The article writer. Why Written Contracts Make Perfect Sense, Late Payments = Money Trouble, retrieved 15 January 2008, . The k-zone, Implied term by custom, 2006, retrieved 22 January 2008, . The k-zone, Byrne v Van Tienhoven (1880), 2006, retrieved 22 January 2008, . Tufal, A, Introduction to the Law of Contract, retrieved 15 January 2008, . Read More