The Law of Contract, Its Cases, and Materials - Essay Example

Freddy Five is a disc Jockey. He agreed to work last Wednesday night at the Red Lion Club. The Club agreed to provide Freddy with all the necessary equipment for his show including a selection of 50 records. The Club also agreed to pay Freddy £60-00 for his performance on Wednesday and to pay Bill, Freddy’s mate, £20 for Bills work in setting up the equipment before Freddy went on stage and taking it down afterwards. Bill was not a party to the contract between the Club and Freddy. On Wednesday Bill arrived at the Red Lion early and set up the equipment for Freddy. However, when Freddy arrived he found that there was only a selection of 35 records available. He there upon informed Richard, the manager of the Red Lion, that he could not perform under these circumstances and left the pub immediately. Richard was furious, he told Bill to leave the equipment set up and began telephoning around to find another DJ. He eventually found a DJ called Sally who agreed to perform at that Red Lion for £150-00. Richard agreed to pay this fee; but when she arrived she found that Bill had taken down all the equipment and had gone home shortly having done so. Richard was forced to pay two local boys £35 each to set up the equipment for Sally. Freddy and Bill are demanding their fees of £60 and £20 from the Red Lion Club. Richard has refused to pay them and is threatening legal action by the Red Lion which is an incorporated company against Freddy for Breach of Contract. Advise the parties In the above, it is necessary to discuss whether either party can sustain a claim for breach of contract. In order to do this it is necessary to discuss the formation of a contract and the issue of privity of contract with regard to any potential claim Bill might have. From this is should be possible to advise the parties with regard to any monies they might be entitled to. The formation of a contract requires there to be an offer1, followed by acceptance2, and then consideration. If all three elements are present the court will generally rule that the contract has been fully constituted. In the above, the contract has been created between Richard and Freddy, with Freddy offering the services of Bill to assemble the equipment, and Richard acting on behalf of the Red Lion Club. When considering privity of contract it is important to note in this case that privity exists between Richard and Freddy. Privity can be horizontal or vertical. Horizontal privity would occur in the case of Bill as he will be getting the benefits from the contract made between Richard and Freddy. It is likely that the court would hold the privity between Freddy and the Red Lion Club to be vertical, as this occurs when there is a contract between one of the parties and a company, where a representative is acting as an agent of the company. In general, only those persons that are parties to the contract would be entitled to the rights contained within the contract, and any obligations arising from the contract (Treitel, 1995). This was emphasised in Dunlop Tyre Co v Selfridge [1915]3, in which the plaintiffs had sold some tyres to distributors with a stipulation that the distributors would get an undertaking from the retailers not to sell the tyres below the list price supplied by the plaintiffs. One of the retailers that received the tyres from the distributor sold the tyres below the list price, and the plaintiffs attempted to obtain an injunction and damages. The action failed because the court ruled that there was no privity of contract between the retailer and the plaintiff. Lord Haldane made the observation in this case, that ‘only a person who is party to the contract can sue on it’. From this it would appear that this would mean that Bill would have no right to sue for the £20 he is owed, and the Red Lion Club would not be entitled to sue Freddy for failing to perform his obligation as a DJ. There are, however, exceptions that might assist in order to prevent any unfairness that might be created by the application of privity of contract. In some instances the courts have accepted that a collateral contract has been created between the parties, as was the case in Shanklin Pier v Detel Products [1951]4. In this case the plaintiffs had employed contractors to paint the pier and specifically instructed the contractors to buy paint from the defendants, as they has made representations guaranteeing that the paint would last for 7 years. When the paint only lasted 3 months the plaintiffs brought an action against the defendants on the basis that a collateral contract had been created between the parties. The court ruled that because consideration had been made to the defendant’s as a result of the promise with regard to the durability of the paint, a collateral contract had been created. In order for this argument to be supported in the courts there must be proof that there was an intention to create a collateral contract. A further exception occurs where someone is acting as an agent for another. In the above, it is likely that the court would take the view that Richard was acting as an agent for the Red Lions Club when he entered into the contract with Freddy and Bill. This was argued in the case of Scruttons Ltd v Midland Silicones Ltd [1962]5 in which the plaintiffs were unaware of the contract between the stevedores and the shipping company. The court held that it was possible to find a contractual relationship between the stevedores and the plaintiffs if the bill of lading made it clear that the carrier was acting as an agent of the stevedore and that the stevedore had given authority for the company to act as it agent. This was held to be the case in New Zealand Shipping v Satterthwaite (The Eurymedon) [1975]6. In some instances the courts have concluded that a trust has been created between the parties to the contract and a third party, as happened in Les Affreteurs Reunis v Leopold Walford [1919]7. In this case the court held that the broker who negotiated the charterparty with the shipowner was a trustee of the charterer as he had promised to pay the broker a commission for his services. The trust exclusion is no longer recognised by the courts on the basis that there has to be a specific declaration made by the trustee that it is their intention to create a trust. If Bill can demonstrate that there was either a collateral contract between himself and Richard, or that Freddy was acting as his agent, then he would be entitled to claim for the £20 owing to him. Freddy would be unlikely to be able to recover the money on behalf of Bill using the principle established in Jackson v Horizon Holidays [1975]8, as the subsequent decision in Woodar Investment Development v Wimpey Construction [1980]9, made it clear that booking family holidays or ordering meals in a restaurant required special treatment. In the above, it is likely that the court would conclude that a collateral agreement had occurred between Bill and Richard which would mean that he would be entitled to pay for his services. Richard might be able to avoid paying Bill on the grounds that he took the equipment down before the performance was over. The Red Lion Club are likely to succeed in proving that Richard was acting as their agent, and therefore would be able to sue Freddy for failing to complete his part of the contract. Freddy could however counter this argument by arguing that the failure of Richard to supply 50 records amounted to a breach. If he can prove this it is likely that the court would regard the contract has having being rescinded, which would mean that neither party would be entitled to sue for the breach. Bibliography Treitel, G H, (1995) The Law of Contract, 9th Ed, Sweet and Maxwell Beale, HD, Bishop, WD, Furmston, MP, (1995), Contract Cases and Materials, 3rd Ed, Butterworths Civil Procedure Volume 2, (2002), The White Book Service, Sweet and Maxwell Rose, FD, (2000), Statutes on Contract, Tort & Restitution, 10th Ed, Blackstone’s Civil Procedure Volume 1 (2002),The White Book Service, Sweet & Maxwell Harvey, b & Marston , J . (1998), Cases & Commentary on Tort, 3rd Ed, Pitman Publishing Mozeley & Whiteley’s, (1993), Law Dictionary, 11th Ed, Butterworths Treitel, G H. (1999), Law of Contract, 10th Ed, Sweet & Maxwell Read More