Consumer and the Law - Essay Example

I. Motoring World There are two issues arising out of the contract for hire between Robin and Seema and Motoring World (MW). Those issues are misrepresentation and the validity of an exemption clause. On the facts of the case for discussion, John, the owner of MW, aware of the purpose for which the car was being hired assured Seema and Robin that the vehicle was fit for those purposes. Relying on this representation of the facts, Seema and Robin hired the vehicle only to later find out that the car was not fit for the road trip. Complicating matters for Seema and Robin, MW billed them for roadside repairs claiming that an insurance note paid for by Seema and Robin contained an exclusion clause exempting liability for such repairs a) Misrepresentation Under the law of contract misrepresentation refers to communication of false facts which induces the recipient to enter into a contract.1 In this regard, misrepresentations can be made either negligently, fraudulently or innocently and the resulting remedies largely depend on the type of misrepresentation made.2 In a typical misrepresentation case, the innocent party can rescind the contract and/or seek damages.3 On the facts of the case for discussion it is difficult to determine whether or not John’s representation that the vehicle was fit for its intended use was an innocent misrepresentation of false facts, negligent or indeed fraudulent. Seema and Robin discovered that the car had some mechanical difficulty after half an hour of driving. The problem was discovered by a garage in Oxford. Assuming that MW has their vehicles examined before offering them for hire, the problem with the steering and the gear should have been discovered by MW’s mechanics. In the event the vehicle’s problems had been discovered, John’s statement constitutes fraudulent misrepresentation. If no such examination was made, John’s statement that the car was fit for its intended purpose was, at the very least negligent. In any event, Robin and Seema will be required to prove that they relied on John’s misrepresentation or was at the very least, induced to enter into the contract for hire by John’s misrepresentation.4 If they did not rely on the misrepresentation and had relied on their own information and judgment then they cannot claim to have relied on the misrepresentation.5 There is no evidence that Robin or Seema exercised independent judgment. It therefore follows that they relied on John’s misrepresentation. In fact, even if John had offered the pair an opportunity to inspect the vehicle and they had declined, they could still claim to have been influenced by John’s misrepresentation.6 In the event that John’s misrepresentation was made either innocently or negligently, it will not bar a claim against MW for damages. By virtue of Section 2(2) of the Misrepresentation Act 1967, a party’s remedy for misrepresentation made other than fraudulently, is usually rescission.7 However, if the contract has already come to an end, the innocent party may be entitled to damages in lieu of rescission.8 Obviously, the moment Seema and Robin hired a second car and left MW’s vehicle for repairs and return to MW, the contract for hire had come to an end. Therefore, if the misrepresentation made by John was innocent, Seema and Robin will be entitled to damages for the cost of having to hire a second car, the time lost, and the damages suffered as a result of late check-in at Middlesex Hotel. (See discussion below in part II) In order to successfully substantiate a claim in misrepresentation at all, Seema and Robin will be required to prove that the statement of false fact was a material statement.9 John’s statement formed a crucial part of the negotiations with Seema and Robin in advance of the contract for hire. It was obviously a material statement since it directly related to the purpose for which the car was being hired. Although Robin selected the car himself, the contract had not been concluded until such time as the deposit was paid, representing consideration a necessary element for conclusion of a contract.10 Robin did not pay the deposit until after John misrepresented the car’s condition, describing it as both trouble free and ideal for the trip. Based on the facts and the surrounding circumstances, particularly the fact that MW is a motor vehicle company, it is highly likely that John’s misrepresentation was fraudulently made. The House of Lords defined fraudulent misrepresentation in Derek v Peek [1889] 14 AC in the following terms: “..fraud is proved when it  is shewn  that  a false representation has been made (1) knowingly,  or (2) without  belief  in  its truth, or (3) recklessly, careless whether it be true or false….To prevent a false statement being fraudulent, there must, I think, always be an honest belief in its truth…”11 Based on this definition it is difficult to imagine that a motor vehicle company could honestly believe that a car with steering and gear problems was trouble free and ideal for a long road trip. It is equally difficult to believe that the motor vehicle company would not know that a car under their active care and control had these mechanical problems. If Seema and Robin seek to plead fraudulent misrepresentation the onus will be on them to prove the existence of fraud in the terms described by the House of Lords.12 If they plead negligent misrepresentation the onus will be on MW to prove that John had reasonable grounds for believing that the car was trouble free and ideal for the long road trip.13 Seema and Robin will therefore be advised to plead negligent misrepresentation since it is easier to prove than fraudulent misrepresentation. They can expect to recover damages incurred as a result of the negligent misrepresentation.14 b) Exclusionary Clauses The exemption or exclusion of liability clause in respect of roadside repairs depends upon the validity and strength of notice. As a general principle a contracting party is bound by exclusion clauses forming a part of a contract.15 If notice is adequately displayed it does not matter if notice s actually received or read.16 The court’s task is to strike a fair balance between the doctrine of freedom of contract and the protection of weaker contracting parties.17 If the exclusionary clause is not adequately displayed, whether it is read or not is immaterial.18 The exclusion clause is contained in the bundle of documents that Robin signed. It was in very fine print and displayed on the back of a form. Robin maintains that even with advance notice of its existence and meaning he found it difficult to understand. It was held in Baldry v Marshall (1925) 1 KB 260 that the exclusion clause must be clear and concise and it will be very strict in this regard in cases where such a clause seeks to restrict or exclude damages in respect of personal injuries. 19 Moreover, by virtue of S4 of the Unfair Contract Terms Act 1977, an exclusion clause is not generally enforceable when one of the parties to the contract is a consumer, unless the clause is reasonable.20 This section is founded on principles of inequality of bargaining position.21The ‘good faith’ doctrine is primarily reliant upon the strength of the respective bargaining position of the parties and determines whether or not it is fair and reasonable in the circumstances to validate the exclusion clause.22 Accordingly, Seema and Robin are not bound by the exemption clause since it does not rise to the level of adequate notice and based on the method of conspicuous display cannot be deemed fair and reasonable. It is certainly unfair and unreasonable for MW to expect that Seema and Robin should pay for repairs to MW’s car. Repairs should have been carried out by MW prior to hiring the car to Seema and Robin. II. Middlesex Hotel The issue arising out of the contract with Middlesex hotel is primarily one of contractual obligations and whether or not one party or another breached the terms of the contract. On the facts of the case for discussion, Seema and Robin negotiated and paid for a suite inclusive of theatre tickets, champagne and sandwiches. Although the suite was obtained a day late, the other conditions were not met. The hotel claims to have been inconvenienced by Seema and Robin’s late check-in and justifies the introduction of higher fees for services never received as a justification for those increased payments. The hotel also claims that they have a general policy which is published in their brochure that permits management to change bookings at will. The primary question is whether or not Middlesex Hotel has a binding contract with Seema and Robin and what are the specific terms and conditions of that contract. The doctrinal basis of contract law is the determination of the bargain between the parties. The answers to these questions will be found by reference to offer and acceptance.23 Once offer and acceptance is identified the question of valuable consideration will arise to determine whether or not the parties have a binding contract. Lush LJ described consideration as: “…some right, interest, profit or benefit accruing to one party, or some forebearance, detriment, loss or responsibility given, suffered or undertaken by the other.”24 Another useful definition of consideration is offered in Thomas v Thomas (1842) 2 QB 851 by Patterson J who defines consideration in the following terms: “…something which is of some value in the eye of the law, moving from the plaintiff; it may be some detriment to the plaintiff or some benefit to the defendant.”25 Based on the definitions provided for by both Lush LJ and Patterson J, it is fair to conclude that upon payment of the sum of 775 pounds following the negotiations between Seema and Robin with Middlesex Hotel, there is valuable consideration. The funds represent a detriment to Seema and Robin and provides a benefit for the Middlesex Hotel as recipients/beneficiaries of those funds. In other words, Seema and Robin having paid the funds had a right to anticipate an exchange of bargains on the basis of the negotiations which were founded on a series of offers and acceptance. The advertisement in the National Press which offers an opportunity to get away from the strain an stress of modern living is no more than an invitation to treat and as such cannot form the basis of the exchange of bargains. The advertisement merely provides information from which an offer can be made.26 The advertisement however contained a specific offer to obtain theatre tickets for its guests. The theatre tickets will be regarded as a mere invitation to treat until such time as an offer is made to purchase them and said offer is accepted.27 Having read the advertisement, Seema and Robin contacted the hotel and made an offer to hire a suite, the theatre tickets as well as champagne and sandwiches. The offer was accepted by Middlesex Hotel in exchange for payment of the sum of 775 pounds. Once the sums were paid, a legally binding contract based on the exchange of promises was formed. The payment of the funds moved the exchange of promises between the hotel and Seema and Robin beyond a gratuitous exchange of promises binding the hotel to its promises and the acceptance of the offers made by Seema and Robin to pay for a specific service and product. In other words, Seema and Robin offered to pay for a suite inclusive of champagne and sandwiches and for theatre tickets as advertised. The hotel accepted this offer in exchange of the sum of 775 pounds. Once those funds were paid, the hotel has an obligation to provide the services and products paid for. The fact that they failed to provide the services paid for, constitutes a breach of their obligations under a duly completed contract. The hotel’s attempt to rely on the management’s discretion to change the hotel reservation is disingenuous since the evidence suggest that the hotel had misplaced Seema’s payment. Ultimately this amounts to a unilateral variation of the contract. In order for a variation of a contract’s terms and conditions to be effective it must be provided for in the contract between the parties.28 According to the hotel management, the hotel’s right to vary the terms of the reservations was contained in a brochure which is not part of the contract itself. Moreover, the brochure was not a part of the negotiations and did not form a part of the offer and acceptance terms exchanged between the parties. Therefore the discretion to change the hotel reservations will not form the basis for a valid unilateral variation of the contract terms between the parties. Another attempt at variation took place when the hotel offered Seema and Robin a complimentary breakfast in lieu of the fact that the suite was not yet ready as previously promised. The mere fact that Seema and Robin accepted the breakfast will not bar a claim for recovery of the funds paid for the suite that they did not obtain the previous night or the following morning. The court will generally take into account the pressure the parties are under when a contract’s terms are varied without the innocent parties’ consent.29 The fact is there was no accord and no consideration for the variation of the contract, a requirement for the variation of a contract’s terms and conditions.30 In other words, Seema and Robin would obtain a detriment with no benefit, since they had already paid for better service and were received a reduced level of service. Whether or not Middlesex Hotel is entitled to charge a higher rate for the inconvenience of late check-ins will depend upon the terms and conditions of the contract. There is no evidence of such an agreement between the parties. It might be possible for the hotel to argue that inconvenience fees for late check-ins are implied terms of the contract. In order for this argument to succeed the hotel will have to prove that it was a necessary term without which the contract would be nugatory.31 It is difficult to imagine how the absence of an inconvenience fee would render the contract nugatory. Assuming however, that the hotel succeeds, any inconvenience is offset by the fact that the hotel was not inconvenienced since it did not provide the suite at the time of the late check-in and in fact inconvenienced Seema and Robin by providing the suite late and in an untidy condition, necessitating a longer wait on their part. In the event the hotel is able to prove that the inconvenience fee is a valid implied term of the contract, Seema and Robin may wish to add MW as a second defendant to any claim pursued in the courts for breach of contract against the hotel. Moreover, the hotel is not entitled to receive payment for services that were not rendered. Therefore there is no legal basis by which the hotel can demand payment for telephone room service that was not obtained by Seema and Robin. If anything, Seema and Robin are entitled to be reimbursed part of the sum paid in advance of arrival at the hotel since the hotel breached the contract by failing to provide the theatre tickets, champagne and sandwiches and did not have the suite ready for at least another day. Each of these failings constitutes breaches of the fundamental terms of the contract. Seema and Robin are entitled to some measure of compensatory damages for the hotel’s failure to live up to their respective promises. Bibliography Attwood v Small (1838) 6 CI & F 232. Baldry v Marshall (1925) 1 KB 260. Currie v Misa (1875) LR 10 Exch 153. D & C Builders Ltd. Rees [1965] 3 All ER 837. Derek v Peek [1889] 14 AC 337. Edgington v Fitzmaurice (1885) 29 Ch D 459. Furmston, M.P., Fifoot, C.H.S. and Cheshire, G.C. (2001) Cheshire, Fifoot and Furmston’s Law of Contract. (14th Edition) U.K.: Lexixnexus. Harvey v Facey [1983] AC 552. Howard Marine & Dredging Co v Ogden & Sons [1978] QB 574. Liverpool City Council v Irwin [1976] 2 WLR 562. McEntive, E. Business Law. (2005) Longman, Pearson Higher Education. Misrepresentation Act 1967. Museprime Properties v Adhill Properties [1990] 2 ALL ER 196. Pharmaceutical Society of Great Britain v Boots Cash Chemists (Southern) Ltd. [1953] 1 QB 401. Redgrave v Hurd (1881) 20 Ch D 1. Robertson, A. (2004) The Law of Obligations: Connections and Boundaries. Cavendish Publishing Limited. Stone, R. (2005) The Modern Law of Contract. Cavendish Publishing. Thomas v LM & S Ry (1930) 1 KB 41. Thomas v Thomas (1842) 2 QB 851. Unfair Contract Terms Act 1977. Read More