Mercantile and Industrial Law and Law of Contract - Essay Example

LAW OF CONTRACT Before embarking upon the question regarding Edward Grayson and Frances Gurney on the one hand, and Charles Woodward and Drusilla Woodward on the other, in respect of giving Charles Woodward legal advice regarding payment against the interior decoration made by the former, it would be quite appropriate to define some terms of the Law of Contract related to the case above mentioned in order to make the situation clearer: Offer: [Section 2(a)] “When one person signifies to another his willingness to do or to abstain from doing anything with a view to obtaining the assent of that other to such act or abstinence, he is said to make a proposal.” Acceptance: [Section 2(b)] “When the person to whom the proposal is made signifies his assent thereto, the proposal is said to be accepted.” Agreement: [Section 2(e)] “Every promise or every set of promises forming the consideration for each other” The five essentials of a valid agreement include: The persons or parties must be competent to entering into a contract The agreement is out of the free consent of the parties The consideration is lawful The object is lawful Neither the consideration nor the object has been declared as void. Hence, the agreement must be enforceable at Law. Consideration: [Section 2(d)] “When at the desire of the promisor, the promise or any other person has done or abstained from doing, or does or abstains from doing, or promises to do or abstain from doing something, such an act or abstinence or promise is called a consideration for the promise.” Consideration is also one of the essential elements in a contract. And it should be lawful, and should be according to the principle of morality. The Law of Contract defines contract in these words: Contract: [Sec 2(h)] “An agreement enforceable at law is a contract.” Sir William Anson has defined the term contract in these words: “A contract is an agreement enforceable at law made between two or more persons by which rights are acquired by one or more to acts or forbearance on the part of the other or others.” (Quoted in ReportBD.com) Hence, a legal contract contains the following elements: Two or more persons or parties The persons or parties must be competent to entering into a contract There must be some agreement The agreement must be enforceable at Law. There should be some lawful consideration. The proposal and acceptance must be made in a proper mode The acceptance must be made within appropriate period of time from the making of a proposal Both the proposal and acceptance must be communicated in a prescribed way In the case above described, Charles and Edward are the plaintiff and the defendant respectively. Here the following points appear: Since both the plaintiff and defendant maintained social relationship, the agreement between them was a bit social in nature, as there was no intention of either of the parties to enter into any legal remedies against non-compliance of either of the parties to the contract. There are two types of agreements i.e. 1) Social agreements and 2) Legal agreements. Social agreements are the agreements which are just promises between two or more persons or parties, but do not enjoy the status of contract. For example one person invites another at his office to have dinner with him, but if he fails to host the promised dinner, no legal remedy can be demanded, as it is social agreement in nature. Such promises do not bind the parties, to fulfil the promise, thus no legal rights between the parties are created, as in the case of Balfour and Balfour (1919) 2 KB 571: “When a husband failed to pay a promised allowance, the wife sued. The court announced the judgement in these words: "There are agreements between parties which do not result in contracts within the meaning of that term in our law. The ordinary example is where two parties agree to take a walk together (or) arrangements which are made between husband and wife. They are not contracts because the parties did not intend that they should be attended by legal consequences. Each house is a domain into which the Kings writ does not seek to run.” (Quoted in Duhaimes Canadian Contract Law Centre) On the other hand, there are some contracts, which are legal in nature, and the parties are bound to execute the promise and agreements. In case of not complying with which, legal rights and obligations are created. Since Charles has a close relationship with Edward, he has allowed Edward and his wife to stay at Charles’ house, against which Edward regularly paid the rent £ 650 per month for the last three months, which was happily accepted by the plaintiff; thus it fulfilled the conditions of an implied contract. There are two types of agreements i.e.: a) Express Agreement: If an agreement is made in words spoken or written, it is called an express agreement. b) Implied Agreement: When an agreement is made other than the words, it would be an implied agreement. Conduct may convey as clearly as words. Hence, when an agreement is made through conduct, it is called the implied conduct. In the case above-mentioned, Charles and Edward had not signed any agreement that could create legal relationship as landlord and tenant between the two under Rent Restriction Act. Nor any of the parties contained any intention of attend any type of legal consequences. Thus, the nature of the relationship between the parties above-mentioned could be stated as a social binding in nature. Since Edward agreed to use Charles’s house against £ 650 per month, and Charles agreed to receive the same amount as the consideration against the Edward’s stay in his house, there must have been a legal relationship, though its nature was of a social agreement. “in case of arrangements regulating social relations it follows almost as a matter of course that the parties do not intend legal consequences, to follow.” (Singh, 2000: p 8) But it does not mean that the agreements between the family members are null and void altogether. On the contrary, the family matters are also legally binding matters, where legal remedy could be claimed in the same pattern as described by the statute of law in business cases. For instance, the Supreme Court of India has observed in Chandarkant Manilal Shah vs. CIT (1992) that a contract of any kind including that of partnership between undivided Hindu families is quite possible. While discussing the case described above, Charles has neither asked Mr. & Mrs. Edward regarding any decoration in his house, so he is not bound to pay against the performance they gave both in respect of physical labour as well as financial expenditure. Anyway, he admired their efforts regarding the decoration of his house and was determined to pay the couple against their services they rendered to decorate the house as a gesture of goodwill and a sign of gratitude. Here appears the question of Oral and Written agreements: (i) Oral Agreements: Oral agreement is the agreement that has not been written or intended to be made in black and white. Oral agreements are usually made for business purpose on daily basis. The agreements under Law of Contract are mostly written with the determination of performance and responsibilities of the parties to the contract as well as the consideration decided in this regards (ii) Written Agreements: Written agreements are usually made in order to keep the record on the one hand as the proof, and in order to enter into legal consequences in case of non-compliance of either or both the parties to the contract on the other. Written agreements enjoy better status especially in civil suits under the Law of Contract. Since the decoration of the house made by Edward and Frances without prior permission of the landlord Charles Woodward and they spent £ 600 on decoration, which they expected to be paid back from Charles, it can be stated as the bad consideration. There are many kinds of consideration including: a) Executed Consideration: The consideration made at the time of entering into a contract is called executed consideration. b) Executory Consideration: The consideration which is delayed for the future instead of being made at the time of entering into a contract is called executory consideration. c) Past Consideration: If a party had performed something for the other in past, and claims some consideration against that performance or abstinence, such consideration would be regarded as the past consideration. Since such type of performance has been exercised without previous permission of the second party, and the consideration claimed against it is not in the knowledge of the second party, it is aptly regarded as the bad consideration. The same is the situation in the case above-described. d) Doubtful Consideration: If in an agreement, the consideration has not been decided explicitly, the consideration would be doubtful one even costing the very validity of the contract itself. e) Unlawful Consideration: The consideration that aims to take or offer bribe or any undue favour, against the statutes of the prevailing set of law, is stated as the unlawful consideration. f) Consideration against Ethics and Morality: If a party agrees with the other to enter into extra-marital sexual relationship between them against some specific consideration, it would be against the moral values and provisions of law as well. And the consideration will be immoral challenging the validity of the contract itself. Since Edward paid the rent of the house regularly for the last three months, and Charles has free consent to accept the same consideration, neither Edward nor Charles maintained any intention of demanding the legal remedies in case of non-compliance, Edward decorated the house with good intention, and Charles accepted his services and determined to pay £ 600 as the token of gratitude to Mr. and Mrs. Edward against their services. Thus, the parties did not aim to sue the case at the court of law. Yet, the plaintiff Charles can seek no legal remedy based on the very facts that neither any promise, nor an agreement nor a legal contract or the mode and time of payment has been made or decided between the parties above-mentioned. But because of his oral promise made before Edward and Frances, he is liable to pay Edward the compensation against the decoration made by the later, on the basis of his oral promise to pay the same, though the parties never entered into any contract in respect of the decoration made by Edward. In the same way, Edward has no right to stop the monthly payment as the monthly rent he is liable to pay. As the family lawyer, I would like to advise Charles to keep his promise of paying the amount of decoration to Edward and Frances on the one hand, and will advise Edward never to stop the rent payable at his part in favour of Charles. Since Edward has stopped the payment he had been spaying regularly, Edward will have to bear all the damages spent while entering into legal consequences at the court of law. The plaintiff i.e. Charles can sue the case at any civil court having jurisdiction of hearing the case. Even Arbitration Council can hear the case under discussion. The jurisdiction and powers of the court can be measured on the basis of: Area where the breach of an agreement has taken place The residence of either or bother the parties to the contract The value of the amount to be claimed as remedy The usual as well as special powers bestowed upon the court by High Court and Supreme Court BIBLIOGRAPHY Anson, Sir William. Law of Contract (Retrieved in http://www.reportbd.com/articles/38/1/Contracts/Page1.html) Federal Trade Commission—Facts for Business Sachdeva & Gupta. Mercantile and Industrial Law Ajanta Prakashan Publishers, Delhi 1999 28-31 Singh, Avtar Law of Contract Sixth Edition Mansoor Book Publishers Urdu Bazaar Delhi. 2005 4-11 The Lectric Law Librarys Lexicon Understanding the Magnuson-Moss  Warranty Act www pkykwong.com Read More