Contract Law: Sadbury and Buywise - Essay Example

Contract Law Part I Legal issues The legal issues concerning the contract between Sadbury and Buywise referring to the weekly supplying with a big number of chocolate bars per week for a 2 year period are the following: a. Can Sadbury be held liable for creating a false representation about its product? b. Is there a possibility for Buywise to terminate the contract with Sadbury due to the fact that the offered product does not correspond to the statements made by Sadbury in the pre-contractual negotiations? c. Is Buywise entitled to obtain a remedy from Sadbury? 2. Relevant law The contractual relations between Sadbury and Buywise are regulated by: Supply of Goods and Services Act 1982, Sale of Goods Act 1979, Misrepresentation Act 1967. 3. Application of the law Buywise has entered into a contract with Sadbury only because of the latter’s affirmation that Sudbury were “ethical traders” and that no child labour was used in the growth and production of their cocoa and chocolate. Moreover, Buywise has specified that they were not interested in the chocolate bars unless they were made without using child labour. Again, Sudbury confirmed that child labour was not used and at the same time stated that their chocolate contained 95% cocoa solids and was “the best in the world”. These statements have convinced Buywise to enter into a contract with Sadbury, not being aware of the fact that these statements do not correspond to the reality and they are simple lies. Buywise would not have entered into a contract with Sadbury unless it would have been assured by the latter regarding the quality and non-usage of child labor. According to Richards P. (217) “A misrepresentation may be defined… as a false statement of fact that induces another to enter into a contract.”1 It is obvious that Sadbury has made a false statement regarding its products in order to induce Buywise to enter into a contract with it. Moreover, this statement was practically the reason that convinced Buywise to sign the contract. In the case of Derry v Peek (1880) the House of Lords concluded that “Fraud is established where it is proved that a false statement is made: (a) knowingly; or (b) without belief in its truth; or (c) recklessly, careless as to whether it be true or false.”2 Therefore, I believe that Sadbury can be held liable for fraudulent misrepresentation Once the fact of fraudulent misrepresentation has been established, Buywise has the right to rescind the contract. The Misrepresentation Act expressly stipulates that “Where a person has entered into a contract after a misrepresentation has been made to him by another party thereto and as a result thereof he has suffered loss, then, if the person making the misrepresentation would be liable to damages in respect thereof had the misrepresentation been made fraudulently, that person shall be so liable notwithstanding that the misrepresentation was not made fraudulently, unless he proves that he had reasonable ground to believe and did believe up to the time the contract was made the facts represented were true.”3Therefore, the contract should be set aside ab initio and the parties are restored to their pre-contractual position (restitutio in integrum). Considering the fact that Buywise’s reputation has suffered because of the poor quality of the product (the customers complained about it) and because of the fact that it advertised a product as being produced with no child labour involved, Buywise has the right to ask Sadbury to pay damages. However, restitution in integrum may not be possible in this case, as a substantial part of the Sadbury chocolates have been already sold by Buywise to its customers. (interference of a third party - Phillips v Brooks [1919] 2 KB 243) In conclusion, because of the fact that a third party has acquired rights of property, the contract between Sadbury and Buywise may not be rescinded, but terminated starting with the moment when Buywise became aware of the misrepresentation and damages can be asked from Sadbury for the suffered loss. Part II 1. Legal issues The case of Cheryl and her being injured in the car park of the Buywise supermarket raises the following legal issues: a. Does the exclusion clause written on the entrance of the car park represent a fair motive to limit Buywise’s liability for Cheryl’s injuries and losses? b. To what damages, if any, is Cheryl entitled to request from Buywise? 2. Relevant law The relations between Cheryl and Buywise are regulated by the Unfair Contract Terms Act 1977, the Unfair Terms in Consumer Contracts Regulations 1999 and the case law Olley v Marlborough Court Hotel [1949] 1 KB 532 and Thornton v Shoe Lane Parking Ltd [1971] 2 QB 163. 3. Application of the law According to Section 2 of the Unfair Contract Terms Act 1977 “A person cannot by reference to any contract term or to a notice given to persons generally or to particular persons exclude or restrict his liability for death or personal injury resulting from negligence.”4 ‘Negligence’ is defined under Section 1 of this Act as a breach of a contractual obligation to exercise reasonable care and skill, or breach of a common law duty, or breach of a duty of care arising out of the Occupier’s Liability Act 1957. Cheryl was seriously injured when she tripped on the stairs in one of the car parks which were poorly lit due to some light bulbs not having been replaced. It was Buywise’s obligation to replace the bulbs and assure a good visibility in the car park. It is obvious that Buywise was negligent in this situation, and by not replacing the light bulbs, it indirectly accepted the possibility of an accident happening to its customers, but it carelessly relied on the limiting liability notice. Moreover, Section 5 of the Unfair Terms in Consumer Contracts Regulations 1999 specifically stipulates that “A contractual term which has not been individually negotiated shall be regarded as unfair if, contrary to the requirement of good faith, it causes a significant imbalance in the parties rights and obligations arising under the contract, to the detriment of the consumer. A term shall always be regarded as not having been individually negotiated where it has been drafted in advance and the consumer has therefore not been able to influence the substance of the term.”5 This term, regarding the limited liability of the supermarket in case of the clients’ injuries has not been negotiated with any of the store’s customers, including Cheryl and therefore, the bargaining powers are not equal in this case. Section 1, Schedule 2 of the Unfair Terms in Consumer Contracts Regulations 1999 states that “Terms which have the object or effect of- (a) excluding or limiting the legal liability of a seller or supplier in the event of the death of a consumer or personal injury to the latter resulting from an act or omission of that seller or supplier...”6 (which is the case of Buywise’s notice of limited liability) are to be regarded as unfair. Regulation 8 provides that an unfair term "shall not be binding upon the consumer". The case law is in Cheryl’s favor, as well. For example, in Olley v Marlborough Court Hotel [1949] 1 KB 532 the judge held that that ”a notice in these terms would not exempt the hotel company from liability for negligence… It is unnecessary to go further and to construe the notice as a contractual exemption of the hotel company from their common law liability for negligence.” The case of Thornton v Shoe Lane Parking Ltd [1971] 2 QB 163 is another leading case, where the judge held that “The important thing to notice is that the company seek by this condition to exempt themselves from liability, not only for damage to the car, but also for injury to the customer howsoever caused. The condition talks about insurance. It is well known that the customer is usually insured against damage to the car. But he is not insured against damage to himself. If the condition is incorporated into the contract of parking, it means that Mr. Thornton will be unable to recover any damages for his personal injuries which were caused by the negligence of the company.” In both these cases and in a number of similar cases, too, the Court held the companies that tried to impose exemption clauses on their clients liable for the caused injuries. In conclusion, the notice in the entrance does not limit Buywise’s liability and it should be held responsible for the injuries suffered by Cheryl. Moreover, considering the material losses that she has suffered because of the incident, Buywise should pay Cheryl damages that would cover those losses. References: 1. Derry v Peek (1880) 14 App Cas 334 2. Misrepresentation Act 1967 3. Richards P. Law of contract.8thedition. Edinburgh gate: Pearson Education Limited, 2007. 4. Unfair Contract Terms Act 1977 5. Unfair Terms in Consumer Contracts Regulations 1999 Read More